Exhibit 10.5
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of ________ ___, 200_ (this "Agreement"),
among World Waste Technologies, Inc., a California corporation (the "Company")
and all of the Subsidiaries of the Company (other than the Immaterial
Subsidiaries (as defined herein)) (such Subsidiaries, the "Guarantors") (the
Company and Guarantors are collectively referred to as the "Debtors"), on the
one hand and the holders of the Company's 10% Secured Debentures issued in
__________, 200_ in the original aggregate principal amount of $_________
(collectively referred to as, the "Debentures")and the Company's Senior Secured
Promissory Notes issued in November, 2005 (collectively referred to as the
"November Notes") , listed on Annex C hereto, their endorsees, transferees and
assigns (collectively referred to as, the "Secured Parties").
W I T N E S S E T H:
WHEREAS, pursuant to the Debentures, the Secured Parties listed on Annex C
hereto have severally agreed to extend the loans to the Company evidenced by the
Debentures;
WHEREAS, pursuant to a certain Subsidiary Guarantee dated as of the date
hereof (the "Guaranty"), the Guarantors have jointly and severally agreed to
guaranty and act as surety for payment of such loans; and
WHEREAS, in order to induce the Secured Parties to extend the loans
evidenced by the Debentures, each Debtor has agreed to execute and deliver to
the Secured Parties this Agreement and to grant the Secured Parties, pari passu
with each other Secured Party and through the Agent, a perfected security
interest in certain property of such Debtor to secure the prompt payment,
performance and discharge in full of all of the Company's obligations under the
Debentures and the other Debtor's obligations under the Guaranty; and
WHEREAS, the holders of the November Notes entered into a Security
Agreement, dated November 1, 2005, with the Company (the "Prior Security
Agreement") which Prior Security Agreement provides that it may be amended with
the approval of the holders of at least 75% aggregate principal amount of the
November Notes;
WHEREAS, the holders of at least 75% aggregate principal amount of the November
Notes wish to amend and restate the Prior Security Agreement as set forth herein
and accordingly, the Prior Security Agreement shall be superseded and replaced
in its entirety by this Agreement.
NOW, THEREFORE, in consideration of the agreements herein contained and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto hereby agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
shall have the meanings set forth in this Section 1. Terms used but not
otherwise defined in this Agreement that are defined in Article 9 of the UCC
(such as "account", "chattel paper", "commercial tort claim", "deposit account",
"document", "equipment", "fixtures", "general intangibles", "goods",
"instruments", "inventory", "investment property", "letter-of-credit rights",
"proceeds" and "supporting obligations") shall have the respective meanings
given such terms in Article 9 of the UCC.
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(a) "Agent" shall have the meaning set forth in Section 18.
(b) "Collateral" means the collateral in which the Secured Parties,
through the Agent, are granted a security interest by this Agreement and
which shall include the following personal property of the Debtors,
whether presently owned or existing or hereafter acquired or coming into
existence, wherever situated, and all additions and accessions thereto and
all substitutions and replacements thereof, and all proceeds, products and
accounts thereof, including, without limitation, all proceeds from the
sale or transfer of the Collateral and of insurance covering the same and
of any tort claims in connection therewith, and all dividends, interest,
cash, notes, securities, equity interest or other property at any time and
from time to time acquired, receivable or otherwise distributed in respect
of, or in exchange for, any or all of the Pledged Securities (as defined
below):
(i) All goods, including, without limitations, (A) all
machinery, equipment, computers, motor vehicles, trucks, tanks,
boats, ships, appliances, furniture, special and general tools,
fixtures, test and quality control devices and other equipment of
every kind and nature and wherever situated, together with all
documents of title and documents representing the same, all
additions and accessions thereto, replacements therefor, all parts
therefor, and all substitutes for any of the foregoing and all other
items used and useful in connection with any Debtor's businesses and
all improvements thereto; and (B) all inventory;
(ii) All contract rights and other general intangibles,
including, without limitation, all partnership interests, membership
interests, stock or other securities, rights under any of the
Organizational Documents, agreements related to the Pledged
Securities (as defined in Section 4(i)), licenses, distribution and
other agreements, computer software (whether "off-the-shelf",
licensed from any third party or developed by any Debtor), computer
software development rights, leases, franchises, customer lists,
quality control procedures, grants and rights, goodwill, trademarks,
service marks, trade styles, trade names, patents, patent
applications, copyrights, and income tax refunds;
(iii) All accounts, together with all instruments, all
documents of title representing any of the foregoing, all rights in
any merchandising, goods, equipment, motor vehicles and trucks which
any of the same may represent, and all right, title, security and
guaranties with respect to each account, including any right of
stoppage in transit;
(iv) All documents, letter-of-credit rights, instruments and
chattel paper;
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(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; and
(x) the products and proceeds of all of the foregoing
Collateral set forth in clauses (i)-(ix) above.
Without limiting the generality of the foregoing, the
"Collateral" shall include all investment property and general
intangibles respecting ownership and/or other equity interests in
each Guarantor, including, without limitation, the shares of capital
stock and the other equity interests listed on Schedule H hereto (as
the same may be modified from time to time pursuant to the terms
hereof), and any other shares of capital stock and/or other equity
interests of any other direct or indirect subsidiary of any Debtor
obtained in the future, and, in each case, all certificates
representing such shares and/or equity interests and, in each case,
all rights, options, warrants, stock, other securities and/or equity
interests that may hereafter be received, receivable or distributed
in respect of, or exchanged for, any of the foregoing and all rights
arising under or in connection with the Pledged Securities,
including, but not limited to, all dividends, interest and cash.
Notwithstanding the foregoing, nothing herein shall be deemed
to constitute an assignment of any asset which, in the event of an
assignment, becomes void by operation of applicable law or the
assignment of which is otherwise prohibited by applicable law (in
each case to the extent that such applicable law is not overridden
by Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar
applicable law); provided, however, that to the extent permitted by
applicable law, this Agreement shall create a valid security
interest in such asset and, to the extent permitted by applicable
law, this Agreement shall create a valid security interest in the
proceeds of such asset.
(c) "Intellectual Property" means the collective reference to all
rights, priorities and privileges relating to intellectual property,
whether arising under United States, multinational or foreign laws or
otherwise, including, without limitation, (i) all copyrights arising under
the laws of the United States, any other country or any political
subdivision thereof, whether registered or unregistered and whether
published or unpublished, all registrations and recordings thereof, and
all applications in connection therewith, including, without limitation,
all registrations, recordings and applications in the United States
Copyright Office, (ii) all letters patent of the United States, any other
country or any political subdivision thereof, all reissues and extensions
thereof, and all applications for letters patent of the United States or
any other country and all divisions, continuations and
continuations-in-part thereof, (iii) all trademarks, trade names,
corporate names, company names, business names, fictitious business names,
trade dress, service marks, logos, domain names and other source or
business identifiers, and all goodwill associated therewith, now existing
or hereafter adopted or acquired, all registrations and recordings
thereof, and all applications in connection therewith, whether in the
United States Patent and Trademark Office or in any similar office or
agency of the United States, any State thereof or any other country or any
political subdivision thereof, or otherwise, and all common law rights
related thereto, (iv) all trade secrets arising under the laws of the
United States, any other country or any political subdivision thereof, (v)
all rights to obtain any reissues, renewals or extensions of the
foregoing, (vi) all licenses for any of the foregoing, and (vii) all
causes of action for infringement of the foregoing.
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(d) "Majority in Interest" shall mean, at any time of determination,
the majority in interest (based on then-outstanding principal amounts of
Debentures at the time of such determination) of the Secured Parties.
(e) "Necessary Endorsement" shall mean undated stock powers endorsed
in blank or other proper instruments of assignment duly executed and such
other instruments or documents as the Agent (as that term is defined
below) may reasonably request.
(f) "Obligations" means all of the liabilities and obligations
(primary, secondary, direct, contingent, sole, joint or several) due or to
become due, or that are now or may be hereafter contracted or acquired, or
owing to, of any Debtor to the Secured Parties, including, without
limitation, all obligations under this Agreement, the November Notes, the
Debentures, the Guaranty and any other instruments, agreements or other
documents executed and/or delivered in connection herewith or therewith,
in each case, whether now or hereafter existing, voluntary or involuntary,
direct or indirect, absolute or contingent, liquidated or unliquidated,
whether or not jointly owed with others, and whether or not from time to
time decreased or extinguished and later increased, created or incurred,
and all or any portion of such obligations or liabilities that are paid,
to the extent all or any part of such payment is avoided or recovered
directly or indirectly from any of the Secured Parties as a preference,
fraudulent transfer or otherwise as such obligations may be amended,
supplemented, converted, extended or modified from time to time. Without
limiting the generality of the foregoing, the term "Obligations" shall
include, without limitation: (i) principal of, and interest on the
Debentures and the November Notes and the loans extended pursuant thereto;
(ii) any and all other fees, indemnities, costs, obligations and
liabilities of the Debtors from time to time under or in connection with
this Agreement, the Debentures, the November Notes, the Guaranty and any
other instruments, agreements or other documents executed and/or delivered
in connection herewith or therewith; and (iii) all amounts (including but
not limited to post-petition interest) in respect of the foregoing that
would be payable but for the fact that the obligations to pay such amounts
are unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving any Debtor.
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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).
(h) "UCC" means the Uniform Commercial Code of the State of
California and or any other applicable law of any state or states which
has jurisdiction with respect to all, or any portion of, the Collateral or
this Agreement, from time to time. It is the intent of the parties that
defined terms in the UCC should be construed in their broadest sense so
that the term "Collateral" will be construed in its broadest sense.
Accordingly if there are, from time to time, changes to defined terms in
the UCC that broaden the definitions, they are incorporated herein and if
existing definitions in the UCC are broader than the amended definitions,
the existing ones shall be controlling.
2. Grant of Perfected First Priority Security Interest. As an inducement
for the Secured Parties to extend the loans as evidenced by the Debentures and
to secure the complete and timely payment, performance and discharge in full, as
the case may be, of all of the Obligations, each Debtor hereby unconditionally
and irrevocably pledges, grants and hypothecates to the Agent, for the benefit
of the Secured Parties, a continuing and perfected security interest in and to,
a lien upon and a right of set-off against all of their respective right, title
and interest of whatsoever kind and nature in and to, the Collateral (the
"Security Interest").
3. Delivery of Certain Collateral. Contemporaneously or prior to the
execution of this Agreement, each Debtor shall deliver or cause to be delivered
to the Agent (a) any and all certificates and other instruments representing or
evidencing the Pledged Securities, and (b) any and all certificates and other
instruments or documents representing any of the other Collateral, in each case,
together with all Necessary Endorsements. The Debtors are, contemporaneously
with the execution hereof, delivering to Agent, or have previously delivered to
Agent, a true and correct copy of each Organizational Document governing any of
the Pledged Securities.
4. Representations, Warranties, Covenants and Agreements of the Debtors.
Except as set forth under the corresponding section of the disclosure schedules
delivered to the Agent concurrently herewith (the "Disclosure Schedules") which
Disclosure Schedules shall be deemed a part hereof, each Debtor represents and
warrants to, and covenants and agrees with, the Secured Parties as follows:
(a) Each Debtor has the requisite corporate, partnership, limited
liability company or other power and authority to enter into this
Agreement and otherwise to carry out its obligations hereunder. The
execution, delivery and performance by each Debtor of this Agreement and
the filings contemplated therein have been duly authorized by all
necessary action on the part of such Debtor and no further action is
required by such Debtor. This Agreement has been duly executed by each
Debtor. This Agreement constitutes the legal, valid and binding obligation
of each Debtor, enforceable against each Debtor in accordance with its
terms except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization and similar laws of general
application relating to or affecting the rights and remedies of creditors
and by general principles of equity.
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(b) The Debtors have no place of business or offices where their
respective books of account and records are kept (other than temporarily
at the offices of its attorneys or accountants) or places where Collateral
is stored or located, except as set forth on Schedule A attached hereto.
Except as specifically set forth on Schedule A, each Debtor is the record
owner of the real property where such Collateral is located, and there
exist no mortgages or other liens on any such real property except for
Permitted Liens (as defined in the Debentures). Except as disclosed on
Schedule A, none of such Collateral is in the possession of any consignee,
bailee, warehouseman, agent or processor.
(c) Except for Permitted Liens (as defined in the Debentures) and
except as set forth on Schedule B attached hereto, the Debtors are the
sole owner of the Collateral (except for non-exclusive licenses granted by
any Debtor in the ordinary course of business), free and clear of any
liens, security interests, encumbrances, rights or claims, and are fully
authorized to grant the Security Interest. Except as set forth on Schedule
B, there is not on file in any governmental or regulatory authority,
agency or recording office an effective financing statement, security
agreement, license or transfer or any notice of any of the foregoing
(other than those that will be filed in favor of the Agent, for the
benefit of the Secured Parties pursuant to this Agreement) covering or
affecting any of the Collateral. So long as this Agreement shall be in
effect, the Debtors shall not execute and shall not knowingly permit to be
on file in any such office or agency any other financing statement or
other document or instrument (except to the extent filed or recorded in
favor of the Agent, for the benefit of the Secured Parties pursuant to the
terms of this Agreement).
(d) No written claim has been received that any material portion of
the Collateral or Debtor's use of any material portion of the Collateral
violates the rights of any third party. There has been no adverse decision
to any Debtor's claim of ownership rights in or exclusive rights to use
any material portion of the Collateral in any jurisdiction or to any
Debtor's right to keep and maintain such Collateral in full force and
effect, and there is no proceeding involving said rights pending or, to
the best knowledge of any Debtor, threatened before any court, judicial
body, administrative or regulatory agency, arbitrator or other
governmental authority.
(e) Each Debtor shall at all times maintain its books of account and
records relating to the Collateral at its principal place of business and
its Collateral at the locations set forth on Schedule A attached hereto
and may not relocate such books of account and records or tangible
Collateral unless it delivers to the Agent at least 30 days prior to such
relocation (i) written notice of such relocation and the new location
thereof (which must be within the United States) and (ii) evidence that
appropriate financing statements under the UCC and other necessary
documents have been filed and recorded and other steps have been taken to
perfect the Security Interest to create in favor of the Secured Parties,
through the Agent, a valid, perfected and continuing perfected lien in the
Collateral.
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(f) This Agreement creates in favor of the Agent, for the benefit of
the Secured Parties a valid security interest in the Collateral, subject
only to Permitted Liens (as defined in the Debentures) securing the
payment and performance of the Obligations. Upon making the filings
described in the immediately following paragraph, all security interests
created hereunder in any Collateral which may be perfected by filing
Uniform Commercial Code financing statements shall have been duly
perfected. Except for the filing of the Uniform Commercial Code financing
statements referred to in the immediately following paragraph, the
recordation of the Intellectual Property Security Agreement (as defined
below) with respect to copyrights and copyright applications in the United
States Copyright Office referred to in paragraph (m), the execution and
delivery of deposit account control agreements satisfying the requirements
of Section 9-104(a)(2) of the UCC with respect to each deposit account of
the Debtors, and the delivery of the certificates and other instruments
provided in Section 3, no action is necessary to create, perfect or
protect the security interests created hereunder. Without limiting the
generality of the foregoing, except for the filing of said financing
statements, the recordation of said Intellectual Property Security
Agreement, and the execution and delivery of said deposit account control
agreements, no consent of any third parties and no authorization, approval
or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required for (i) the execution, delivery
and performance of this Agreement, (ii) the creation or perfection of the
Security Interests created hereunder in the Collateral or (iii) the
enforcement of the rights of the Agent and the Secured Parties hereunder.
(g) Each Debtor hereby authorizes the Agent to file one or more
financing statements under the UCC, with respect to the Security Interest
with the proper filing and recording agencies in any jurisdiction deemed
proper by it.
(h) The execution, delivery and performance of this Agreement by the
Debtors does not (i) violate any of the provisions of any Organizational
Documents of any Debtor or any judgment, decree, order or award of any
court, governmental body or arbitrator or any applicable law, rule or
regulation applicable to any Debtor or (ii) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would
become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation (with or without notice, lapse of
time or both) of, any agreement, credit facility, debt or other instrument
(evidencing any Debtor's debt or otherwise) or other understanding to
which any Debtor is a party or by which any property or asset of any
Debtor is bound or affected. No consent (including, without limitation,
from stockholders or creditors of any Debtor) is required for any Debtor
to enter into and perform its obligations hereunder.
(i) The capital stock and other equity interests listed on Schedule
H hereto (the "Pledged Securities") represent all of the capital stock and
other equity interests of the Guarantors, and represent all capital stock
and other equity interests owned, directly or indirectly, by the Company
(other than the stock of the Immaterial Subsidiaries). All of the Pledged
Securities are validly issued, fully paid and nonassessable, and the
Company is the legal and beneficial owner of the Pledged Securities, free
and clear of any lien, security interest or other encumbrance except for
the security interests created by this Agreement and other Permitted Liens
(as defined in the Debentures).
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(j) The ownership and other equity interests in partnerships and
limited liability companies (if any) included in the Collateral (the
"Pledged Interests") by their express terms do not provide that they are
securities governed by Article 8 of the UCC and are not held in a
securities account or by any financial intermediary.
(k) Except for Permitted Liens (as defined in the Debentures), each
Debtor shall at all times maintain the liens and Security Interest
provided for hereunder as valid and perfected first priority liens and
security interests in the Collateral in favor of the Agent for the benefit
of the Secured Parties until this Agreement and the Security Interest
hereunder shall be terminated pursuant to Section 11 hereof. Each Debtor
hereby agrees to use commercially reasonable efforts to defend the same
against the claims of any and all persons and entities. Each Debtor shall
safeguard and protect all Collateral for the account of the Secured
Parties through the Agent. At the request of the Agent, each Debtor will
sign and deliver to the Agent on behalf of the Secured Parties at any time
or from time to time one or more financing statements pursuant to the UCC
in form reasonably satisfactory to the Agent and will pay the cost of
filing the same in all public offices wherever filing is, or is deemed by
the Agent to be, necessary or desirable to effect the rights and
obligations provided for herein. Without limiting the generality of the
foregoing, each Debtor shall pay all fees, taxes and other amounts
necessary to maintain the Collateral and the Security Interest hereunder,
and each Debtor shall obtain and furnish to the Agent from time to time,
upon demand, such releases and/or subordinations of claims and liens which
may be required to maintain the priority of the Security Interest
hereunder.
(l) No Debtor will transfer, pledge, hypothecate, encumber, license,
sell or otherwise dispose of any of the Collateral (except for
non-exclusive licenses granted by a Debtor in its ordinary course of
business and sales of inventory by a Debtor in its ordinary course of
business) without the prior written consent of a Majority in Interest.
(m) Each Debtor shall keep and preserve its equipment, inventory and
other tangible Collateral in good condition, repair and order and shall
not operate or locate any such Collateral (or cause to be operated or
located) in any area excluded from insurance coverage.
(n) Each Debtor shall maintain with financially sound and reputable
insurers, insurance with respect to the Collateral against loss or damage
of the kinds and in the amounts customarily insured against by entities of
established reputation having similar properties similarly situated and in
such amounts as are customarily carried under similar circumstances by
other such entities and otherwise as is prudent for entities engaged in
similar businesses but in any event sufficient to cover the full
replacement cost thereof. Each Debtor shall cause each insurance policy
issued in connection herewith to provide, and the insurer issuing such
policy to certify to the Agent that (a) the Agent will be named as lender
loss payee and additional insured under each such insurance policy; (b) if
such insurance be proposed to be cancelled or materially changed for any
reason whatsoever, such insurer will promptly notify the Agent and such
cancellation or change shall not be effective as to the Agent for at least
thirty (30) days after receipt by the Agent of such notice, unless the
effect of such change is to extend or increase coverage under the policy;
and (c) the Agent will have the right (but no obligation) at its election
to remedy any default in the payment of premiums within thirty (30) days
of notice from the insurer of such default. If no Event of Default (as
defined in the Debentures) exists, loss payments in each instance will be
applied by the applicable Debtor to the repair and/or replacement of
property with respect to which the loss was incurred to the extent
reasonably feasible, and any loss payments or the balance thereof
remaining, to the extent not so applied, shall be payable to the
applicable Debtor; provided, however, that payments received by any Debtor
after an Event of Default occurs and is continuing shall be paid to the
Agent on behalf of the Secured Parties and, if received by such Debtor,
shall be held in trust for the Secured Parties and immediately paid over
to the Agent unless otherwise directed in writing by the Agent. Copies of
such policies or the related certificates, in each case, naming the Agent
on behalf of the Secured Parties as lender loss payee and additional
insured shall be delivered to the Agent upon its request and at the time
any new policy of insurance is issued.
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(o) Each Debtor shall, within ten (10) days of obtaining knowledge
thereof, advise the Agent promptly, in sufficient detail, of any material
adverse change in the Collateral, and of the occurrence of any event which
would have a material adverse effect on the value of the Collateral or on
the Secured Parties' security interest, through the Agent, therein.
(p) Each Debtor shall promptly execute and deliver to the Agent such
further deeds, mortgages, assignments, security agreements, financing
statements or other instruments, documents, certificates and assurances
and take such further action as the Agent may from time to time request
and may in its sole discretion deem necessary to perfect, protect or
enforce the Secured Parties' security interest in the Collateral
including, without limitation, if applicable, the execution and delivery
of a separate security agreement with respect to each Debtor's
Intellectual Property ("Intellectual Property Security Agreement") in
which the Secured Parties, through he Agent, have been granted a security
interest hereunder, substantially in a form reasonably acceptable to the
Agent, which Intellectual Property Security Agreement, other than as
stated therein, shall be subject to all of the terms and conditions
hereof.
(q) Each Debtor shall permit the Agent and its representatives and
agents to inspect the Collateral during normal business hours and upon
reasonable prior notice, and to make copies of records pertaining to the
Collateral as may be reasonably requested by the Agent from time to time.
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(r) Each Debtor shall take all steps reasonably necessary to
diligently pursue and seek to preserve, enforce and collect any rights,
claims, causes of action and accounts receivable in respect of the
Collateral.
(s) Each Debtor shall promptly notify the Agent in sufficient detail
upon becoming aware of any attachment, garnishment, execution or other
legal process levied against any material portion of the Collateral and of
any other information received by such Debtor that may materially affect
the value of the Collateral, the Security Interest or the rights and
remedies of the Secured Parties hereunder.
(t) All information heretofore, herein or hereafter supplied to the
Secured Parties by or on behalf of any Debtor with respect to the
Collateral is accurate and complete in all material respects as of the
date furnished.
(u) The Debtors shall at all times preserve and keep in full force
and effect their respective valid existence and good standing and any
rights and franchises material to its business.
(v) No Debtor will change its name, type of organization,
jurisdiction of organization, organizational identification number (if it
has one), legal or corporate structure, or identity, or add any new
fictitious name unless it provides at least 30 days' prior written notice
to the Agent of such change and, at the time of such written notification,
such Debtor provides any financing statements or fixture filings necessary
to perfect and continue perfected the perfected security interest granted
and evidenced by this Agreement.
(w) Except in the ordinary course of business, no Debtor may consign
any of its Inventory or sell any of its Inventory on ▇▇▇▇ and hold, sale
or return, sale on approval, or other conditional terms of sale without
the consent of the Agent which shall not be unreasonably withheld.
(x) No Debtor may relocate its chief executive office to a new
location without providing 30 days' prior written notification thereof to
the Agent and so long as, at the time of such written notification, such
Debtor provides any financing statements or fixture filings necessary to
perfect and continue perfected the perfected security interest granted and
evidenced by this Agreement.
(y) Each Debtor was organized and remains organized solely under the
laws of the state set forth next to such Debtor's name in Schedule D
attached hereto, which Schedule D also sets forth each Debtor's
organizational identification number or, if any Debtor does not have one,
states that one does not exist.
(z) (i) The actual name of each Debtor is the name set forth in
Schedule D; (ii) no Debtor has any trade names except as set forth on
Schedule E attached hereto; (iii) no Debtor has used any name other than
that stated in the preamble hereto or as set forth on Schedule E for the
preceding five years; and (iv) no entity has merged into any Debtor or
been acquired by any Debtor within the past five years except as set forth
on Schedule E.
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(aa) At any time and from time to time that any Collateral consists
of instruments, certificated securities or other items that require
possession by the secured party to perfect the security interest created
hereby, the applicable Debtor shall deliver such Collateral to the Agent.
(bb) Each Debtor, in its capacity as issuer, hereby agrees to comply
with any and all orders and instructions of Agent regarding the Pledged
Interests consistent with the terms of this Agreement without the further
consent of any Debtor as contemplated by Section 8-106 (or any successor
section) of the UCC. Further, each Debtor agrees that it shall not enter
into a similar agreement (or one that would confer "control" within the
meaning of Article 8 of the UCC) with any other person or entity.
(cc) Each Debtor shall cause all tangible chattel paper constituting
Collateral to be delivered to the Agent, or, if such delivery is not
possible, then to cause such tangible chattel paper to contain a legend
noting that it is subject to the security interest created by this
Agreement. To the extent that any Collateral consists of electronic
chattel paper, the applicable Debtor shall cause the underlying chattel
paper to be "marked" within the meaning of Section 9-105 of the UCC (or
successor section thereto).
(dd) If there is any investment property or deposit account included
as Collateral that can be perfected by "control" through an account
control agreement, the applicable Debtor shall cause such an account
control agreement, in form and substance in each case satisfactory to the
Agent, to be entered into and delivered to the Agent.
(ee) To the extent that any Collateral consists of letter-of-credit
rights, the applicable Debtor shall cause the issuer of each underlying
letter of credit to consent to an assignment of the proceeds thereof to
the Agent for the benefit of the Secured Parties.
(ff) To the extent that any Collateral is in the possession of any
third party, the applicable Debtor shall join with the Agent in notifying
such third party of the Secured Parties' security interest, through the
Agent, in such Collateral and shall use its best efforts to obtain an
acknowledgement and agreement from such third party with respect to the
Collateral, in form and substance reasonably satisfactory to the Agent.
(gg) If any Debtor shall at any time hold or acquire a commercial
tort claim, such Debtor shall promptly notify the Agent in a writing
signed by such Debtor of the particulars thereof and grant to the Agent,
for the benefit of the Secured Parties, in such writing a security
interest therein and in the proceeds thereof, all upon the terms of this
Agreement, with such writing to be in form and substance reasonably
satisfactory to the Agent.
(hh) Each Debtor shall promptly provide written notice to the Agent
of any and all accounts which arise out of contracts with any governmental
authority and, to the extent necessary to perfect or continue the
perfected status of the Security Interest in such accounts and proceeds
thereof, shall execute and deliver to the Agent an assignment of claims
for such accounts and cooperate with the Agent in taking any other steps
required, in its reasonable judgment, under the Federal Assignment of
Claims Act or any similar federal, state or local statute or rule to
perfect or continue the perfected status of the Security Interest in such
accounts and proceeds thereof.
11
(ii) Other than any inactive subsidiaries which have no material
assets and which will be dissolved or merged with and into the Company or
a Subsidiary within 6 months from the date hereof (the "Immaterial
Subsidiaries"), each Debtor shall cause each subsidiary of such Debtor to
promptly become a party hereto (an "Additional Debtor"), by executing and
delivering an Additional Debtor Joinder in substantially the form of Annex
A attached hereto and comply with the provisions hereof applicable to the
Debtors. Concurrent therewith, the Additional Debtor shall deliver
replacement schedules for, or supplements to all other Schedules to (or
referred to in) this Agreement, as applicable, which replacement schedules
shall supersede, or supplements shall modify, the Schedules then in
effect. The Additional Debtor shall also deliver authorizing resolutions,
good standing certificates, incumbency certificates, organizational
documents, financing statements and other information and documentation as
the Agent may reasonably request. Upon delivery of the foregoing to the
Agent, the Additional Debtor shall be and become a party to this Agreement
with the same rights and obligations as the Debtors, for all purposes
hereof as fully and to the same extent as if it were an original signatory
hereto and shall be deemed to have made the representations, warranties
and covenants set forth herein as of the date of execution and delivery of
such Additional Debtor Joinder, and all references herein to the "Debtors"
shall be deemed to include each Additional Debtor.
(jj) Each Debtor shall vote the Pledged Securities to comply with
the covenants and agreements set forth herein and in the Debentures and
the November Notes.
(kk) Each Debtor shall register the pledge of the applicable Pledged
Securities on the books of such Debtor. Each Debtor shall notify each
issuer of Pledged Securities to register the pledge of the applicable
Pledged Securities in the name of the Agent, for the benefit of the
Secured Parties, on the books of such issuer. Further, except with respect
to certificated securities delivered to the Agent, the applicable Debtor
shall deliver to Agent an acknowledgement of pledge (which, where
appropriate, shall comply with the requirements of the relevant UCC with
respect to perfection by registration) signed by the issuer of the
applicable Pledged Securities, which acknowledgement shall confirm that:
(a) it has registered the pledge on its books and records; and (b) at any
time directed by Agent during the continuation of an Event of Default,
such issuer will transfer the record ownership of such Pledged Securities
into the name of any designee of Agent, will take such steps as may be
necessary to effect the transfer, and will comply with all other
instructions of Agent regarding such Pledged Securities without the
further consent of the applicable Debtor.
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(ll) In the event that, upon an occurrence of an Event of Default,
Agent shall sell all or any of the Pledged Securities to another party or
parties (herein called the "Transferee") or shall purchase or retain all
or any of the Pledged Securities, each Debtor shall, to the extent
applicable: (i) deliver to Agent or the Transferee, as the case may be,
the articles of incorporation, bylaws, minute books, stock certificate
books, corporate seals, deeds, leases, indentures, agreements, evidences
of indebtedness, books of account, financial records and all other
Organizational Documents and records of the Debtors and their direct and
indirect subsidiaries; (ii) use its commercially reasonable efforts to
obtain resignations of the persons then serving as officers and directors
of the Debtors and their direct and indirect subsidiaries, if so
requested; and (iii) use commercially reasonable efforts to obtain any
approvals that are required by any governmental or regulatory body in
order to permit the sale of the Pledged Securities to the Transferee or
the purchase or retention of the Pledged Securities by Agent and allow the
Transferee or Agent to continue the business of the Debtors and their
direct and indirect subsidiaries.
(mm) Without limiting the generality of the other obligations of the
Debtors hereunder, each Debtor shall promptly (i) cause to be registered
at the United States Copyright Office all of its material copyrights and
(ii) cause the security interest contemplated hereby with respect to all
Intellectual Property registered at the United States Copyright Office or
United States Patent and Trademark Office to be duly recorded at the
applicable office.
(nn) Each Debtor will from time to time, at the joint and several
expense of the Debtors, promptly execute and deliver all such further
instruments and documents, and take all such further action as may be
necessary or desirable, or as the Agent may reasonably request, in order
to perfect and protect any security interest granted or purported to be
granted hereby or to enable the Secured Parties, through the Agent, to
exercise and enforce their rights and remedies hereunder and with respect
to any Collateral or to otherwise carry out the purposes of this
Agreement.
(oo) Schedule F attached hereto lists all of the patents, patent
applications, trademarks, trademark applications, registered copyrights,
and domain names owned by any of the Debtors as of the date hereof.
Schedule F lists all material licenses in favor of any Debtor for the use
of any patents, trademarks, copyrights and domain names as of the date
hereof. All material patents and trademarks of the Debtors have been duly
recorded at the United States Patent and Trademark Office and all material
copyrights of the Debtors have been duly recorded at the United States
Copyright Office.
(pp) Except as set forth on Schedule G attached hereto, none of the
account debtors or other persons or entities obligated on any of the
Collateral is a governmental authority covered by the Federal Assignment
of Claims Act or any similar federal, state or local statute or rule in
respect of such Collateral.
5. Effect of Pledge on Certain Rights. If any of the Collateral subject to
this Agreement consists of nonvoting equity or ownership interests (regardless
of class, designation, preference or rights) that may be converted into voting
equity or ownership interests upon the occurrence of certain events (including,
without limitation, upon the transfer of all or any of the other stock or assets
of the issuer), it is agreed that the pledge of such equity or ownership
interests pursuant to this Agreement or the enforcement of any of Agent's rights
hereunder shall not be deemed to be the type of event which would trigger such
conversion rights notwithstanding any provisions in the Organizational Documents
or agreements to which any Debtor is subject or to which any Debtor is party.
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6. Defaults. The following events shall be "Events of Default":
(a) The occurrence of an Event of Default (as defined in the
Debentures) under the Debentures;
(b) Any representation or warranty of any Debtor in this Agreement
shall prove to have been incorrect in any material respect when made;
(c) The failure by any Debtor to observe or perform any of its
obligations hereunder for five (5) days after delivery to such Debtor of
notice of such failure by or on behalf of a Secured Party unless such
default is capable of cure but cannot be cured within such time frame and
such Debtor is using best efforts to cure same in a timely fashion; or
(d) If any material provision of this Agreement shall at any time
for any reason be declared to be null and void, or the validity or
enforceability thereof shall be contested by any Debtor, or a proceeding
shall be commenced by any Debtor, or by any governmental authority having
jurisdiction over any Debtor, seeking to establish the invalidity or
unenforceability thereof, or any Debtor shall deny that any Debtor has any
liability or obligation purported to be created under this Agreement.
7. Duty To Hold In Trust.
(a) Upon the occurrence of any Event of Default and at any time
thereafter, each Debtor shall, upon receipt of any revenue, income,
dividend, interest or other sums subject to the Security Interest, whether
payable pursuant to the Debentures, the November Notes or otherwise, or of
any check, draft, note, trade acceptance or other instrument evidencing an
obligation to pay any such sum, hold the same in trust for the Secured
Parties and shall forthwith endorse and transfer any such sums or
instruments, or both, to the Agent, for the benefit of the Secured
Parties, pro-rata in proportion to their initial purchases of Debentures
and November Notes for application to the satisfaction of the Obligations
(and if any Debenture or November Note is not outstanding, pro-rata in
proportion to the initial purchases of the remaining Debentures and
November Notes).
(b) If any Debtor shall become entitled to receive or shall receive
any securities or other property (including, without limitation, shares of
Pledged Securities or instruments representing Pledged Securities acquired
after the date hereof, or any options, warrants, rights or other similar
property or certificates representing a dividend, or any distribution in
connection with any recapitalization, reclassification or increase or
reduction of capital, or issued in connection with any reorganization of
such Debtor or any of its direct or indirect subsidiaries) in respect of
the Pledged Securities (whether as an addition to, in substitution of, or
in exchange for, such Pledged Securities or otherwise), such Debtor agrees
to (i) accept the same as the agent of the Secured Parties; (ii) hold the
same in trust on behalf of and for the benefit of the Secured Parties; and
(iii) to deliver any and all certificates or instruments evidencing the
same to Agent on or before the close of business on the fifth business day
following the receipt thereof by such Debtor, in the exact form received
together with the Necessary Endorsements, to be held by Agent subject to
the terms of this Agreement as Collateral.
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8. Rights and Remedies Upon Default.
(a) Upon the occurrence of any Event of Default declared by holders
of at least 30% aggregate principal amount of Debentures and at any time
thereafter, the Secured Parties, acting through the Agent, shall have the
right to exercise all of the remedies conferred hereunder and under the
Debentures, and the Secured Parties shall have all the rights and remedies
of a secured party under the UCC. Without limitation, the Agent, for the
benefit of the Secured Parties, shall have the following rights and
powers:
(i) The Agent shall have the right to take possession of the
Collateral and, for that purpose, enter, with the aid and assistance
of any person, any premises where the Collateral, or any part
thereof, is or may be placed and remove the same, and each Debtor
shall assemble the Collateral and make it available to the Agent at
places which the Agent shall reasonably select, whether at such
Debtor's premises or elsewhere, and make available to the Agent,
without rent, all of such Debtor's respective premises and
facilities for the purpose of the Agent taking possession of,
removing or putting the Collateral in saleable or disposable form.
(ii) Upon notice to the Debtors by Agent, all rights of each
Debtor to exercise the voting and other consensual rights which it
would otherwise be entitled to exercise and all rights of each
Debtor to receive the dividends and interest which it would
otherwise be authorized to receive and retain, shall cease. Upon
such notice, Agent shall have the right to receive, for the benefit
of the Secured Parties any interest, cash dividends or other
payments on the Collateral and, at the option of Agent, to exercise
in such Agent's discretion all voting rights pertaining thereto.
Without limiting the generality of the foregoing, Agent shall have
the right (but not the obligation) to exercise all rights with
respect to the Collateral as it were the sole and absolute owner
thereof, including, without limitation, to vote and/or to exchange,
at its sole discretion, any or all of the Collateral in connection
with a merger, reorganization, consolidation, recapitalization or
other readjustment concerning or involving the Collateral or any
Debtor or any of its direct or indirect subsidiaries.
15
(iii) The Agent shall have the right to operate the business
of each Debtor using the Collateral and shall have the right to
assign, sell, lease or otherwise dispose of and deliver all or any
part of the Collateral, at public or private sale or otherwise,
either with or without special conditions or stipulations, for cash
or on credit or for future delivery, in such parcel or parcels and
at such time or times and at such place or places, and upon such
terms and conditions as the Agent may deem commercially reasonable,
all without (except as shall be required by applicable statute and
cannot be waived) advertisement or demand upon or notice to any
Debtor or right of redemption of a Debtor, which are hereby
expressly waived. Upon each such sale, lease, assignment or other
transfer of Collateral, the Agent, for the benefit of the Secured
Parties, may, unless prohibited by applicable law which cannot be
waived, purchase all or any part of the Collateral being sold, free
from and discharged of all trusts, claims, right of redemption and
equities of any Debtor, which are hereby waived and released.
(iv) The Agent shall have the right (but not the obligation)
to notify any account debtors and any obligors under instruments or
accounts to make payments directly to the Agent, on behalf of the
Secured Parties, and to enforce the Debtors' rights against such
account debtors and obligors.
(v) The Agent, for the benefit of the Secured Parties, may
(but are not obligated to) direct any financial intermediary or any
other person or entity holding any investment property to transfer
the same to the Agent, on behalf of the Secured Parties, or their
designee.
(vi) The Agent may (but are not obligated to) transfer any or
all Intellectual Property registered in the name of any Debtor at
the United States Patent and Trademark Office and/or Copyright
Office into the name of the Secured Parties or any designee or any
purchaser of any Collateral.
(b) The Agent shall comply with any applicable law in connection
with a disposition of Collateral and such compliance will not be
considered adversely to affect the commercial reasonableness of any sale
of the Collateral. The Agent may sell the Collateral without giving any
warranties and may specifically disclaim such warranties. If the Agent
sells any of the Collateral on credit, the Debtors will only be credited
with payments actually made by the purchaser. In addition, each Debtor
waives any and all rights that it may have to a judicial hearing in
advance of the enforcement of any of the Agent's rights and remedies
hereunder, including, without limitation, its right following an Event of
Default to take immediate possession of the Collateral and to exercise its
rights and remedies with respect thereto.
(c) For the purpose of enabling the Agent to further exercise rights
and remedies under this Section 8 or elsewhere provided by agreement or
applicable law, each Debtor hereby grants to the Agent, for the benefit of
the Agent and the Secured Parties, an irrevocable, nonexclusive license
(exercisable without payment of royalty or other compensation to such
Debtor) to use, license or sublicense following an Event of Default, any
Intellectual Property now owned or hereafter acquired by such Debtor, and
wherever the same may be located, and including in such license access to
all media in which any of the licensed items may be recorded or stored and
to all computer software and programs used for the compilation or printout
thereof.
16
9. Applications of Proceeds. The proceeds of any such sale, lease or other
disposition of the Collateral hereunder shall be applied first, to the expenses
of retaking, holding, storing, processing and preparing for sale, selling, and
the like (including, without limitation, any taxes, fees and other costs
incurred in connection therewith) of the Collateral, to the reasonable
attorneys' fees and expenses incurred by the Agent in enforcing the Secured
Parties' rights hereunder and in connection with collecting, storing and
disposing of the Collateral, and then to satisfaction of the Obligations pro
rata among the Secured Parties (based on then-outstanding principal amounts of
Debentures and November Notes at the time of any such determination), and to the
payment of any other amounts required by applicable law, after which the Secured
Parties shall pay to the applicable Debtor any surplus proceeds. If, upon the
sale, license or other disposition of the Collateral, the proceeds thereof are
insufficient to pay all amounts to which the Secured Parties are legally
entitled, the Debtors will be liable for the deficiency, together with interest
thereon, at the rate of 10% per annum or the lesser amount permitted by
applicable law (the "Default Rate"), and the reasonable fees of any attorneys
employed by the Secured Parties to collect such deficiency. To the extent
permitted by applicable law, each Debtor waives all claims, damages and demands
against the Secured Parties arising out of the repossession, removal, retention
or sale of the Collateral, unless due solely to the gross negligence or willful
misconduct of the Secured Parties as determined by a final judgment (not subject
to further appeal) of a court of competent jurisdiction.
10. Securities Law Provision. Each Debtor recognizes that Agent may be
limited in its ability to effect a sale to the public of all or part of the
Pledged Securities by reason of certain prohibitions in the Securities Act of
1933, as amended, or other federal or state securities laws (collectively, the
"Securities Laws"), and may be compelled to resort to one or more sales to a
restricted group of purchasers who may be required to agree to acquire the
Pledged Securities for their own account, for investment and not with a view to
the distribution or resale thereof. Each Debtor agrees that sales so made may be
at prices and on terms less favorable than if the Pledged Securities were sold
to the public, and that Agent has no obligation to delay the sale of any Pledged
Securities for the period of time necessary to register the Pledged Securities
for sale to the public under the Securities Laws. Each Debtor shall provide
reasonable cooperation with Agent in its attempt to satisfy any requirements
under the Securities Laws applicable to the sale of the Pledged Securities by
Agent.
11. Costs and Expenses. Each Debtor agrees to pay all reasonable
out-of-pocket fees, costs and expenses incurred in connection with any filing
required hereunder, including without limitation, any financing statements
pursuant to the UCC, continuation statements, partial releases and/or
termination statements related thereto or any expenses of any searches
reasonably required by the Agent. The Debtors shall also pay all other claims
and charges which in the reasonable opinion of the Agent is reasonably likely to
prejudice, imperil or otherwise affect any material portion of the Collateral or
the Security Interest therein. The Debtors will also, upon demand, pay to the
Agent the amount of any and all reasonable expenses, including the reasonable
fees and expenses of its counsel and of any experts and agents, which the Agent,
for the benefit of the Secured Parties, may incur in connection with (i) the
enforcement of this Agreement, (ii) the custody or preservation of, or the sale
of, collection from, or other realization upon, any of the Collateral, or (iii)
the exercise or enforcement of any of the rights of the Secured Parties under
the Debentures or November Notes. Until so paid, any fees payable hereunder
shall be added to the principal amount of the Debentures or November Notes and
shall bear interest at the Default Rate.
17
12. Responsibility for Collateral. The Debtors assume all liabilities and
responsibility in connection with all Collateral, and the Obligations shall in
no way be affected or diminished by reason of the loss, destruction, damage or
theft of any of the Collateral or its unavailability for any reason. Without
limiting the generality of the foregoing, (a) neither the Agent nor any Secured
Party (i) has any duty (either before or after an Event of Default) to collect
any amounts in respect of the Collateral or to preserve any rights relating to
the Collateral, or (ii) has any obligation to clean-up or otherwise prepare the
Collateral for sale, and (b) each Debtor shall remain obligated and liable under
each contract or agreement included in the Collateral to be observed or
performed by such Debtor thereunder. Neither the Agent nor any Secured Party
shall have any obligation or liability under any such contract or agreement by
reason of or arising out of this Agreement or the receipt by the Agent or any
Secured Party of any payment relating to any of the Collateral, nor shall the
Agent or any Secured Party be obligated in any manner to perform any of the
obligations of any Debtor under or pursuant to any such contract or agreement,
to make inquiry as to the nature or sufficiency of any payment received by the
Agent or any Secured Party in respect of the Collateral or as to the sufficiency
of any performance by any party under any such contract or agreement, to present
or file any claim, to take any action to enforce any performance or to collect
the payment of any amounts which may have been assigned to the Agent or to which
the Agent or any Secured Party may be entitled at any time or times.
13. [RESERVED].
14. Term of Agreement. This Agreement and the Security Interest shall
terminate on the date on which all payments under the Debentures and November
Notes have been indefeasibly paid in full and all other Obligations have been
paid or discharged; provided, however, that all indemnities of the Debtors
contained in this Agreement (including, without limitation, Annex B hereto)
shall survive and remain operative and in full force and effect regardless of
the termination of this Agreement.
15. Power of Attorney; Further Assurances.
(a) Each Debtor authorizes the Agent, and does hereby make,
constitute and appoint the Agent and its respective officers, agents,
successors or assigns with full power of substitution, as such Debtor's
true and lawful attorney-in-fact, with power, in the name of the Agent or
such Debtor, to, after the occurrence and during the continuance of an
Event of Default, (i) endorse any note, checks, drafts, money orders or
other instruments of payment (including payments payable under or in
respect of any policy of insurance) in respect of the Collateral that may
come into possession of the Agent; (ii) to sign and endorse any financing
statement pursuant to the UCC or any invoice, freight or express ▇▇▇▇,
▇▇▇▇ 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 ▇▇▇ for monies due in respect
of the Collateral; (v) to transfer any Intellectual Property or provide
licenses respecting any Intellectual Property; and (vi) generally, at the
option of the Agent, and at the expense of the Debtors, at any time, or
from time to time, to execute and deliver any and all documents and
instruments and to do all acts and things which the Agent deem necessary
to protect, preserve and realize upon the Collateral and the Security
Interest granted therein in order to effect the intent of this Agreement
and the Debentures and November Notes all as fully and effectually as the
Debtors might or could do; and each Debtor hereby ratifies all that said
attorney shall lawfully do or cause to be done by virtue hereof. This
power of attorney is coupled with an interest and shall be irrevocable for
the term of this Agreement and thereafter as long as any of the
Obligations shall be outstanding. The designation set forth herein shall
be deemed to amend and supersede any inconsistent provision in the
Organizational Documents or other documents or agreements to which any
Debtor is subject or to which any Debtor is a party. Without limiting the
generality of the foregoing, after the occurrence and during the
continuance of an Event of Default, each Secured Party is specifically
authorized to execute and file any applications for or instruments of
transfer and assignment of any patents, trademarks, copyrights or other
Intellectual Property with the United States Patent and Trademark Office
and the United States Copyright Office.
18
(b) On a continuing basis, each Debtor will make, execute,
acknowledge, deliver, file and record, as the case may be, with the proper
filing and recording agencies in any jurisdiction, including, without
limitation, the jurisdictions indicated on Schedule C attached hereto, all
such instruments, and take all such action as may reasonably be deemed
necessary or advisable, or as reasonably requested by the Agent, to
perfect the Security Interest granted hereunder and otherwise to carry out
the intent and purposes of this Agreement, or for assuring and confirming
to the Agent the grant or perfection of a perfected security interest in
all the Collateral under the UCC.
(c) Each Debtor hereby irrevocably appoints the Agent as such
Debtor's attorney-in-fact, with full authority in the place and instead of
such Debtor and in the name of such Debtor, from time to time in the
Agent's discretion, to take any action and to execute any instrument which
the Agent may deem necessary or advisable to accomplish the purposes of
this Agreement, including the filing, in its sole discretion, of one or
more financing or continuation statements and amendments thereto, relative
to any of the Collateral without the signature of such Debtor where
permitted by law, which financing statements may (but need not) describe
the Collateral as "all assets" or "all personal property" or words of like
import, and ratifies all such actions taken by the Agent. This power of
attorney is coupled with an interest and shall be irrevocable for the term
of this Agreement and thereafter as long as any of the Obligations shall
be outstanding.
16. Notices. All notices, requests, demands and other communications
hereunder shall be subject to the notice provision of the Purchase Agreement (as
such term is defined in the Debentures).
19
17. Other Security. To the extent that the Obligations are now or
hereafter secured by property other than the Collateral or by the guarantee,
endorsement or property of any other person, firm, corporation or other entity,
then the Agent shall have the right, in its sole discretion, to pursue,
relinquish, subordinate, modify or take any other action with respect thereto,
without in any way modifying or affecting any of the Secured Parties' rights and
remedies hereunder.
18. Appointment of Agent. The Secured Parties hereby appoint Midsummer
Investment Ltd. to act as their agent ("Midsummer" or "Agent") for purposes of
exercising any and all rights and remedies of the Secured Parties hereunder.
Such appointment shall continue until revoked in writing by a Majority in
Interest, at which time a Majority in Interest shall appoint a new Agent;
provided, that Midsummer may not be removed as Agent unless Midsummer shall then
hold less than $50,000 principal amount of Debentures. The Agent shall have the
rights, responsibilities and immunities set forth in Annex B hereto.
19. Miscellaneous.
(a) No course of dealing between the Debtors and the Secured
Parties, nor any failure to exercise, nor any delay in exercising, on the
part of the Secured Parties, any right, power or privilege hereunder or
under the Debentures shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder or
thereunder preclude any other or further exercise thereof or the exercise
of any other right, power or privilege.
(b) All of the rights and remedies of the Secured Parties with
respect to the Collateral, whether established hereby or by the
Debentures, the November Notes or by any other agreements, instruments or
documents or by law shall be cumulative and may be exercised singly or
concurrently.
(c) This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof and is intended to supersede all
prior negotiations, understandings and agreements with respect thereto.
Except as specifically set forth in this Agreement, no provision of this
Agreement may be modified or amended except by a written agreement
specifically referring to this Agreement and signed by the Agent,
Qualified Purchasers (as defined in the Purchase Agreement) and the
Company.
(d) In the event any provision of this Agreement is held to be
invalid, prohibited or unenforceable in any jurisdiction for any reason,
unless such provision is narrowed by judicial construction, this Agreement
shall, as to such jurisdiction, be construed as if such invalid,
prohibited or unenforceable provision had been more narrowly drawn so as
not to be invalid, prohibited or unenforceable. If, notwithstanding the
foregoing, any provision of this Agreement is held to be invalid,
prohibited or unenforceable in any jurisdiction, such provision, as to
such jurisdiction, shall be ineffective to the extent of such invalidity,
prohibition or unenforceability without invalidating the remaining portion
of such provision or the other provisions of this Agreement and without
affecting the validity or enforceability of such provision or the other
provisions of this Agreement in any other jurisdiction.
20
(e) No waiver of any breach or default or any right under this
Agreement shall be considered valid unless in writing and signed by the
party giving such waiver, and no such waiver shall be deemed a waiver of
any subsequent breach or default or right, whether of the same or similar
nature or otherwise.
(f) This Agreement shall be binding upon and inure to the benefit of
each party hereto and its successors and assigns.
(g) Each party shall take such further action and execute and
deliver such further documents as may be necessary or appropriate in order
to carry out the provisions and purposes of this Agreement.
(h) All questions concerning the construction, validity, enforcement
and interpretation of this Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each
Debtor agrees that all proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement
and the Debentures (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, partners,
members, employees or agents) shall be commenced exclusively in the state
and federal courts sitting in the City of New York, Borough of Manhattan.
Each Debtor hereby irrevocably submits to the exclusive jurisdiction of
the state and federal courts sitting in the City of New York, Borough of
Manhattan for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein,
and hereby irrevocably waives, and agrees not to assert in any proceeding,
any claim that it is not personally subject to the jurisdiction of any
such court, that such proceeding is improper. Each party hereto hereby
irrevocably waives personal service of process and consents to process
being served in any such proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under
this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any
manner permitted by law. Each party hereto hereby irrevocably waives, to
the fullest extent permitted by applicable law, any and all right to trial
by jury in any legal proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby. If any party shall
commence a proceeding to enforce any provisions of this Agreement, then
the prevailing party in such proceeding shall be reimbursed by the other
party for its reasonable attorney's fees and other costs and expenses
incurred with the investigation, preparation and prosecution of such
proceeding.
(i) This Agreement may be executed in any number of counterparts,
each of which when so executed shall be deemed to be an original and, all
of which taken together shall constitute one and the same Agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing
(or on whose behalf such signature is executed) the same with the same
force and effect as if such facsimile signature were the original thereof.
21
(j) All Debtors shall jointly and severally be liable for the
obligations of each Debtor to the Secured Parties hereunder.
(k) Each Debtor shall indemnify, reimburse and hold harmless the
Agent and the Secured Parties and their respective partners, members,
shareholders, officers, directors, employees and agents (and any other
persons with other titles that have similar functions) (collectively,
"Indemnitees") from and against any and all losses, claims, liabilities,
damages, penalties, suits, costs and expenses, of any kind or nature,
(including reasonable fees relating to the cost of investigating and
defending any of the foregoing) imposed on, incurred by or asserted
against such Indemnitee in any way related to or arising from or alleged
to arise from this Agreement or the Collateral, except any such losses,
claims, liabilities, damages, penalties, suits, costs and expenses which
result from the gross negligence or willful misconduct of the Indemnitee
as determined by a final, nonappealable decision of a court of competent
jurisdiction. This indemnification provision is in addition to, and not in
limitation of, any other indemnification provision in the Debentures, the
November Notes, the Purchase Agreement or any other agreement, instrument
or other document executed or delivered in connection herewith or
therewith.
(l) Nothing in this Agreement shall be construed to subject Agent or
any Secured Party to liability as a partner in any Debtor or any if its
direct or indirect subsidiaries that is a partnership or as a member in
any Debtor or any of its direct or indirect subsidiaries that is a limited
liability company, nor shall Agent or any Secured Party be deemed to have
assumed any obligations under any partnership agreement or limited
liability company agreement, as applicable, of any such Debtor or any if
its direct or indirect subsidiaries or otherwise, unless and until any
such Secured Party exercises its right to be substituted for such Debtor
as a partner or member, as applicable, pursuant hereto.
(m) To the extent that the grant of the security interest in the
Collateral and the enforcement of the terms hereof require the consent,
approval or action of any partner or member, as applicable, of any Debtor
or any direct or indirect subsidiary of any Debtor or compliance with any
provisions of any of the Organizational Documents, the Debtors hereby
grant such consent and approval and waive any such noncompliance with the
terms of said documents.
(n) This Agreement supersedes and replaces any prior security
agreements or understandings regarding any of the Collateral entered into
between the Company and any of the Secured Parties, including the Prior
Security Agreement.
[SIGNATURE PAGES FOLLOW]
22
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement
to be duly executed on the day and year first above written.
WORLD WASTE TECHNOLOGIES, INC.
By:
---------------------------------
Name:
Title:
[SUBSIDIARY]
By:
---------------------------------
Name:
Title:
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
23
[SIGNATURE PAGE OF HOLDERS TO WDWT SA]
Name of Investing Entity: __________________________
Signature of Authorized Signatory of Investing entity: _________________________
Name of Authorized Signatory: _________________________
Title of Authorized Signatory: __________________________
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
24
ANNEX A
to
SECURITY
AGREEMENT
FORM OF ADDITIONAL DEBTOR JOINDER
Security Agreement dated as of [_____ ___, 200__ made by
[_______________
and its subsidiaries party thereto from time to time, as Debtors
to and in favor of
the Secured Parties identified therein (the "Security Agreement")
Reference is made to the Security Agreement as defined above; capitalized
terms used herein and not otherwise defined herein shall have the meanings given
to such terms in, or by reference in, the Security Agreement.
The undersigned hereby agrees that upon delivery of this Additional Debtor
Joinder to the Secured Parties referred to above, the undersigned shall (a) be
an Additional Debtor under the Security Agreement, (b) have all the rights and
obligations of the Debtors under the Security Agreement as fully and to the same
extent as if the undersigned was an original signatory thereto and (c) be deemed
to have made the representations and warranties set forth in Section 4 therein
as of the date of execution and delivery of this Additional Debtor Joinder.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY
GRANTS TO THE SECURED PARTIES A SECURITY INTEREST IN THE COLLATERAL AS MORE
FULLY SET FORTH IN THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE
WAIVER OF JURY TRIAL PROVISIONS SET FORTH THEREIN.
Attached hereto are supplemental and/or replacement Schedules to the
Security Agreement, as applicable.
An executed copy of this Joinder shall be delivered to the Agent on behalf
of the Secured Parties, and the Secured Parties may rely on the matters set
forth herein on or after the date hereof. This Joinder shall not be modified,
amended or terminated without the prior written consent of the Agent and the
Qualified Purchasers (as defined in the Purchase Agreement).
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 to which this Annex B is attached (the "Agreement")), by
their acceptance of the benefits of the Agreement, hereby designate Midsummer
Investment Ltd. ("Midsummer" or "Agent") as the Agent to act as specified herein
and in the Agreement. Each Secured Party shall be deemed irrevocably to
authorize the Agent to take such action on its behalf under the provisions of
the Agreement and any other Transaction Document (as such term is defined in the
Debentures) and to exercise such powers and to perform such duties hereunder and
thereunder as are specifically delegated to or required of the Agent by the
terms hereof and thereof and such other powers as are reasonably incidental
thereto. The Agent may perform any of its duties hereunder by or through its
agents or employees.
2. Nature of Duties. The Agent shall have no duties or
responsibilities except those expressly set forth in the Agreement. Neither the
Agent nor any of its partners, members, shareholders, officers, directors,
employees or agents shall be liable for any action taken or omitted by it as
such under the Agreement or hereunder or in connection herewith or therewith, be
responsible for the consequence of any oversight or error of judgment or
answerable for any loss, unless caused solely by its or their gross negligence
or willful conduct as determined by a final judgment (not subject to further
appeal) of a court of competent jurisdiction. The duties of the Agent shall be
mechanical and administrative in nature; the Agent shall not have by reason of
the Agreement or any other Transaction Document a fiduciary relationship in
respect of any Debtor or any Secured Party; and nothing in the Agreement or any
other Transaction Document, expressed or implied, is intended to or shall be so
construed as to impose upon the Agent any obligations in respect of the
Agreement or any other Transaction Document except as expressly set forth herein
and therein.
3. Lack of Reliance on the Agent. Independently and without reliance
upon the Agent, each Secured Party, to the extent it deems appropriate, has made
and shall continue to make (i) its own independent investigation of the
financial condition and affairs of the Company and its subsidiaries in
connection with such Secured Party's investment in the Debtors, the creation and
continuance of the Obligations, the transactions contemplated by the Transaction
Documents, and the taking or not taking of any action in connection therewith,
and (ii) its own appraisal of the creditworthiness of the Company and its
subsidiaries, and of the value of the Collateral from time to time, and the
Agent shall have no duty or responsibility, either initially or on a continuing
basis, to provide any Secured Party with any credit, market or other information
with respect thereto, whether coming into its possession before any Obligations
are incurred or at any time or times thereafter. The Agent shall not be
responsible to the Debtors or any Secured Party for any recitals, statements,
information, representations or warranties herein or in any document,
certificate or other writing delivered in connection herewith, or for the
execution, effectiveness, genuineness, validity, enforceability, perfection,
collectibility, priority or sufficiency of the Agreement or any other
Transaction Document, or for the financial condition of the Debtors or the value
of any of the Collateral, or be required to make any inquiry concerning either
the performance or observance of any of the terms, provisions or conditions of
the Agreement or any other Transaction Document, or the financial condition of
the Debtors, or the value of any of the Collateral, or the existence or possible
existence of any default or Event of Default under the Agreement, the Debentures
or any of the other Transaction Documents.
4. Certain Rights of the Agent. The Agent shall have the right to
take any action with respect to the Collateral, on behalf of all of the Secured
Parties. To the extent practical, the Agent shall request instructions from the
Secured Parties with respect to any material act or action (including failure to
act) in connection with the Agreement or any other Transaction Document, and
shall be entitled to act or refrain from acting in accordance with the
instructions of Secured Parties holding a majority in principal amount of
Debentures (based on then-outstanding principal amounts of Debentures at the
time of any such determination); if such instructions are not provided despite
the Agent's request therefor, the Agent shall be entitled to refrain from such
act or taking such action, and if such action is taken, shall be entitled to
appropriate indemnification from the Secured Parties in respect of actions to be
taken by the Agent; and the Agent shall not incur liability to any person or
entity by reason of so refraining. Without limiting the foregoing, (a) no
Secured Party shall have any right of action whatsoever against the Agent as a
result of the Agent acting or refraining from acting hereunder in accordance
with the terms of the Agreement or any other Transaction Document, and the
Debtors shall have no right to question or challenge the authority of, or the
instructions given to, the Agent pursuant to the foregoing and (b) the Agent
shall not be required to take any action which the Agent believes (i) could
reasonably be expected to expose it to personal liability or (ii) is contrary to
this Agreement, the Transaction Documents or applicable law.
5. Reliance. The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, radiogram, order
or other document or telephone message signed, sent or made by the proper person
or entity, and, with respect to all legal matters pertaining to the Agreement
and the other Transaction Documents and its duties thereunder, upon advice of
counsel selected by it and upon all other matters pertaining to this Agreement
and the other Transaction Documents and its duties thereunder, upon advice of
other experts selected by it.
6. Indemnification. To the extent that the Agent is not reimbursed
and indemnified by the Debtors, the Secured Parties will jointly and severally
reimburse and indemnify the Agent, in proportion to their initially purchased
respective principal amounts of Debentures, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against the Agent in performing its duties
hereunder or under the Agreement or any other Transaction Document, or in any
way relating to or arising out of the Agreement or any other Transaction
Document except for those determined by a final judgment (not subject to further
appeal) of a court of competent jurisdiction to have resulted solely from the
Agent's own gross negligence or willful misconduct. Prior to taking any action
hereunder as Agent, the Agent may require each Secured Party to deposit with it
sufficient sums as it determines in good faith is necessary to protect the Agent
for costs and expenses associated with taking such action.
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.