Exhibit 10.1
EXECUTION COPY
PLEDGE AND SECURITY AGREEMENT
This PLEDGE AND SECURITY AGREEMENT, dated as of December 20, 2007, (this
"Agreement"), is entered into by and among, Global Aircraft Solutions Inc., a
Nevada corporation (the "Parent"), ▇▇▇▇▇▇▇▇ Aerospace Technologies, Inc., a
Delaware corporation ("▇▇▇▇▇▇▇▇"), World Jet Corporation, a Nevada corporation
("World Jet"), and ▇▇▇▇▇▇▇▇ Aerospace Mexico S.A. de C.V. a Mexican corporation
("▇▇▇▇▇▇▇▇ Mexico"), as subsidiaries of the Parent (each, including the Parent a
"Company" and together with the Parent, the "Companies") and each Person other
than the Companies which is a party hereto or which becomes a party hereto
pursuant to the joinder provisions of Section 18 hereof (hereinafter the
Companies and such other Persons are collectively referred to as the "Obligors"
or individually referred to as an "Obligor"), and Victory Park Master Fund, Ltd.
("Victory Park") and the Holders of the Debentures (together the "Secured
Parties").
W I T N E S S E T H:
WHEREAS, pursuant to those certain Senior Secured Debentures due December
19, 2008 (or other date as set forth therein) in the original aggregate
principal amount of $10,000,000, as the same may be amended from time to time
(the "Debentures"), issued by the Obligors to the Secured Parties in connection
with that certain Securities Purchase Agreement entered into by and among the
Obligors and the Secured Parties dated as of even dates herewith (the
"Securities Purchase Agreement"), the Secured Parties have agreed to purchase
the Debentures from the Obligors;
WHEREAS, to secure the payment of the Companies under the Debentures and as
an inducement to the Holders to purchase the Debentures, the Companies have
agreed to enter into this Pledge and Security Agreement for the benefit of the
Secured Parties; and
WHEREAS, all things necessary to make this Agreement a legal, valid, and
binding obligation of Obligors and Lead Secured Party and Secured Parties, for
the uses and purposes herein set forth, in accordance with its terms, have been
done and performed and have occurred.
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
shall have the respective meanings given such terms in Article 9 of the UCC, and
capitalized terms not otherwise defined herein shall have the meaning given to
them in the Debentures or Securities Purchase Agreement, as applicable,
described above.
(a) "Collateral" means the collateral in which the Secured
Parties are granted a Security Interest by this Agreement and which shall
include the following, whether presently owned or existing or hereafter acquired
or coming into existence, 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:
(i) all Accounts, Deposit Accounts, Instruments, Documents,
Chattel Paper (whether Tangible Chattel Paper or Electronic Chattel Paper),
Goods (including Inventory, Equipment, Fixtures and Motor Vehicles), Payment
Intangibles, Software and other General Intangibles and all Letter-of-Credit
Rights;
(ii) the shares of common stock and preferred stock of, or
partnership, membership and other ownership interests in any subsidiary, whether
or not wholly owned, organized under the laws of the United States or any
political subdivision thereof, now or hereafter owned by the Obligors, limited
in the case of ▇▇▇▇▇▇▇▇ Mexico, which is a subsidiary not organized under the
laws of the United States or any political subdivision thereof, to shares of
common stock, preferred stock or other ownership interests representing no more
than 66% of the total combined voting power of all classes of stock entitled to
vote and all certificates evidencing the same (collectively, the "Pledged
Equity"), together with, in each case:
(1) all shares, securities, monies or property
representing a dividend on any of the Pledged Equity, or
representing a distribution or return of capital upon or in
respect of the Pledged Equity, or resulting from a split up,
revision, reclassification or other like change of the
Pledged Equity or otherwise received in exchange therefor,
and any subscription warrants, rights or options issued to
the holders of, or otherwise in respect of, the Pledged
Equity, and
(2) without affecting the obligations of the Obligors
under any provision prohibiting such action hereunder or
under any other Transaction Document, in the event of any
consolidation or merger or similar transaction in which a
subsidiary of any of the Obligors is not the surviving
corporation, all ownership interests of any class or
character of the successor corporation (unless such
successor corporation is an Obligor itself), formed by or
resulting from such consolidation or merger (the Pledged
Equity, together with all other certificates, shares,
securities, properties, ownership interests, or moneys,
dividends distributions, returns of capital subscription,
warrants, rights or options as may from time to time be
pledged hereunder pursuant to this clause (2) and clause (1)
above being herein collectively called the "Equity
Collateral");
(iii) all Investment Property, Financial Assets and
Securities Accounts not covered by the foregoing clauses (i) and (ii);
(iv) all Intellectual Property;
(v) all commercial tort claims described on Schedule C
hereto;
(vi) all other tangible and intangible property of the
Obligors, including all books, correspondence, credit files, records, invoices,
tapes, cards, computer runs and other papers and documents in the possession or
under the control of the Obligors or any computer bureau or service company from
time to time acting for the Obligors;
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(vii) all Proceeds and products in whatever form of all or
any part of the other Collateral, including all rents, profits, income and
benefits and all proceeds of insurance and all condemnation awards and all other
compensation for any event of loss with respect to all or any part of the other
Collateral (together with all rights to recover and proceed with respect to the
same), and all accessions to, substitutions for and replacements of all or any
part of the other Collateral; and
(b) "Controlled Account" mean the bank account of the Companies
set forth in Schedule F hereto.
(c) "First Lien Indebtedness" means all indebtedness,
liabilities, obligations, covenant and duties of the Obligor to the Holders of
the Senior Debt of every kind, nature and description, direct or indirect,
absolute or contingent, due or not due, contractual or tortious, liquidated or
unliquidated arising by operation of law or otherwise, now existing or
hereinafter arising, in each case under or in connection with the First Lien
Indebtedness, whether for principal, interest, fees, expenses or otherwise,
together with all costs of collection or enforcement, including without
limitation, reasonable attorneys' fees incurred in any collection efforts or in
any action or proceeding.
(d) "Holder of Junior Debt" has the meaning given to such term in
the Letter Agreement.
(e) "Holder of the Senior Debt" has the meaning given to such
term in the Letter Agreement.
(f) "Letter Agreement" means that certain Letter Agreement
addressed to Victory Park and acknowledged by Sandhurst Asset Management, LLC
dated as of the date hereof.
(g) "Obligations" means all obligations of the Obligors owed to
the Secured Parties 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 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.
(h) "Second Lien Indebtedness" means all indebtedness,
liabilities, obligations, covenant and duties of the Obligor to the Holders of
Junior Debt of every kind, nature and description, direct or indirect, absolute
or contingent, due or not due, contractual or tortious, liquidated or
unliquidated, arising by operation of law or otherwise, now existing or
hereinafter arising, in each case under or in connection with the Second Lien
Indebtedness, whether for principal, interest, fees, expenses or otherwise,
together with all costs of collection or enforcement, including without
limitation, reasonable attorneys' fees incurred in any collection efforts or in
any action or proceeding.
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(i) "Standstill Period" shall mean the first ninety (90)
days after the occurrence of any Event of Default, but in no event longer than
sixty (60) days after the Maturity Date.
(2) GRANT OF SECURITY INTEREST.
(a) As an inducement for the Secured Parties to purchase 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 Obligor
hereby unconditionally and irrevocably pledges, grants and hypothecates to the
Secured Parties, their successors and assigns (i) a first priority Lien on and
security interest in, all of its right, title and interest in, to and under the
Collateral to secure the payment of the First Lien Obligations ("First Lien
Security Interest"), and (ii) a Lien on and security interest in, all of its
right, title and interest in, to and under the Collateral to secure the payment
of the Second Lien Obligations ("Second Lien Security Interest," and together
with the First Lien Security Interest, the "Security Interest").
(3) REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE
OBLIGOR. Each Obligor represents and warrants to, and covenants and agrees with,
the Secured Parties as follows:
(a) Such Obligor has the requisite corporate power and authority
to enter into this Agreement and otherwise to carry out its obligations
hereunder. The execution, delivery and performance by such Obligor of this
Agreement and the filings contemplated therein have been duly authorized by all
necessary action on the part of such Obligor and no further action is required
by such Obligor.
(b) Such Obligor represents and warrants that it has no place of
business or offices where its 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.
(c) Such Obligor is the sole owner of the Collateral (except for
non-exclusive licenses granted by such Obligor in the ordinary course of
business), free and clear of any liens, security interests, encumbrances, rights
or claims, and is fully authorized to grant the Security Interest in and to
pledge the Collateral. 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 filed in favor of the Secured Parties) covering or affecting any of the
Collateral. So long as this Agreement shall be in effect, such Obligor shall not
execute and shall not knowingly permit to be on file in any such office or
agency any such financing statement or other document or instrument (except to
the extent filed or recorded in favor of the Secured Parties pursuant to the
terms of this Agreement).
(d) No part of the Collateral has been judged invalid or
unenforceable. No written claim has been received that any Collateral or such
Obligor's use of any Collateral violates the rights of any third party. There
has been no adverse decision to such Obligor's claim of ownership rights in or
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exclusive rights to use the Collateral in any jurisdiction or to such Obligor'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 such
Obligor, threatened before any court, judicial body, administrative or
regulatory agency, arbitrator or other governmental authority.
(e) Such Obligor 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 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) 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 each 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 a
valid security interest in the Collateral securing the payment and performance
of the Obligations and, upon making the filings described in the immediately
following sentence, a perfected first priority security interest in such
Collateral.
(g) Such Obligor hereby authorizes each of the Secured Parties 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 them.
(h) The execution, delivery and performance of this Agreement by
such Obligor does not 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 such Obligor's debt or otherwise) or other
understanding to which such Obligor is a party or by which any property or asset
of such Obligor is bound or affected. No consent (including, without limitation,
from stockholders or creditors of such Obligor) is required for such Obligor to
enter into and perform its obligations hereunder.
(i) Such Obligor 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 Secured Parties
until this Agreement and the Security Interest hereunder shall be terminated
pursuant to Section 11 hereof. Such Obligor hereby agrees to defend the same
against any and all persons. Such Obligor shall safeguard and protect all
Collateral for the account of the Secured Parties. Such Obligor irrevocably
authorizes the Secured Parties at any time and from time to time to file in any
filing office in any jurisdiction any initial financing statement or amendment
thereto that indicates the collateral as "all assets" or "all personal property"
of such Obligor or words of similar effect and will pay the cost of filing the
same in all public offices wherever filing is, or is deemed by the Secured
Parties to be, necessary or desirable to effect the rights and obligations
provided for herein. Without limiting the generality of the foregoing, such
Obligor shall pay all fees, taxes and other amounts necessary to maintain the
Collateral and the Security Interest hereunder, and such Obligor shall obtain
and furnish to the Secured Parties from time to time, upon demand, such releases
and/or subordinations of claims and liens which may be required to maintain the
priority of the Security Interest hereunder.
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(j) Such Obligor will not transfer, pledge, hypothecate,
encumber, license (except for sales of inventory in the ordinary course of
business), sell or otherwise dispose of any of the Collateral without the prior
written consent of the Secured Parties which consent shall not be unreasonably
withheld or delayed.
(k) Such Obligor 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.
(l) Such Obligor shall, within three (3) days of obtaining
knowledge thereof, advise the Secured Parties promptly, in sufficient detail, of
any substantial 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 therein.
(m) Such Obligor shall promptly execute and deliver to the
Secured Parties such further deeds, mortgages, fixture filings, assignments,
security agreements, financing statements or other instruments, documents,
certificates and assurances and take such further action as any Secured Party
may from time to time request and may in its sole discretion deem necessary to
perfect, protect or enforce its security interest in the Collateral or any
additional collateral, including, without limitation, the execution and delivery
of separate mortgages and fixture filings, which shall be satisfactory to the
Secured Parties in their sole discretion for real or personal property interest.
(n) Such Obligor shall permit the Secured Parties and their
representatives and agents to inspect the Collateral at any time, and to make
copies of records pertaining to the Collateral as may be requested by the
Secured Parties from time to time at the Obligor's expense (i) so long as such
inspections do not exceed four (4) inspections in any twelve (12) months period,
or (ii) upon the occurrence and during the continuance of an Event of Default;
otherwise such inspections shall be made at the Secured Parties' own cost and
expense.
(o) Such Obligor 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.
(p) Such Obligor shall within three (3) Business Days notify the
Secured Parties in sufficient detail upon becoming aware of any attachment,
garnishment, execution or other legal process levied against any Collateral and
of any other information received by such Obligor that may materially affect the
value of the Collateral, the Security Interest or the rights and remedies of the
Secured Parties hereunder.
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(q) All information heretofore, herein or hereafter supplied to
the Secured Parties by or on behalf of such Obligor with respect to the
Collateral is accurate and complete in all material respects as of the date
furnished.
(r) Such Obligor shall, and cause it subsidiaries to, 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 their
businesses.
(s) Such Obligor will not change its name, corporate structure,
or identity, or add any new fictitious name unless it provides at least thirty
(30) Business Days prior written notice to the Secured Parties of such change
and, at the time of such written notification, such Obligor provides any
financing statements or fixture filings necessary to perfect and continue
perfected the perfected first priority Security Interest granted and evidenced
by the Security Documents.
(t) Such Obligor may not 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 Secured Parties which shall
not be unreasonably withheld.
(u) Such Obligor may not relocate its chief executive office to a
new location without providing thirty (30) days prior written notification
thereof to the Secured Parties and so long as, at the time of such written
notification, such Obligor provides any financing statements or fixture filings
necessary to perfect and continue perfected the perfected first priority
Security Interest granted and evidenced by the Security Documents.
(v) Such Obligor's exact legal name and jurisdiction of
organization is set forth in the introduction paragraph of this Agreement.
(w) (A) Subject to Section 6 below, with respect to the Pledged
Companies (as set forth in Schedule D):
(i) The Obligors shall deliver, or cause to be delivered,
all certificates or instruments representing or evidencing the Pledged Equity of
the Pledged Companies to and held by or on behalf of the Lead Secured Party (as
defined below) pursuant hereto, which shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to the Lead Secured
Party, and each Obligor agrees to execute and deliver, or cause to be executed
and delivered, to the Lead Secured Party a Pledge Instruction, in the form
attached hereto as Exhibit A and by this reference made a part hereof. The Lead
Secured Party shall have the right, at any time in its discretion and without
notice to any Obligor, after the occurrence and during the continuance of any
Event of Default, to transfer to or to register in the name of the Lead Secured
Party or any of its nominees any or all of the Pledged Equity with respect to
the Pledged Companies. The Lead Secured Party shall also have the right at any
time, in connection with exercising its rights hereunder, to exchange
certificates or instruments, if any, representing or evidencing Pledged
Companies for certificates or instruments of smaller or larger denominations;
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(ii) in addition, all other steps necessary or advisable
under any applicable law to be taken in order to perfect the first priority
Security Interest or second priority Security Interest, as applicable granted
free from adverse claims hereunder shall be taken by or on behalf of each
Obligor, including without limitation, any notation on any certificate or
instrument representing the Pledged Equity of the Pledged Companies and any
notation on any share register or similar document or Instrument;
(iii) upon the proper filing of UCC financing statements,
which have been delivered to the Lead Secured Party for filing with the
Secretary of State of the jurisdiction of such Obligor's organization or
formation, and/or upon delivery to the Lead Secured Party of certificates
representing the Pledged Equity of the Pledged Companies and the taking of any
other steps that may be required in accordance with this Section 3(w)(A) or
otherwise, the pledge of Pledged Equity of the Pledged Companies pursuant to
this Agreement creates a valid and perfected first priority Security Interest
free from adverse claims in the Pledged Collateral in respect of the Pledged
Companies securing the payment of the Secured Obligations for the benefit of the
Lead Secured Party and the Secured Parties; and
(iv) Schedules D and E to this Agreement with respect to the
Pledged Companies are true and correct and complete in all material respects;
and without limiting the generality of the foregoing, the Pledged Equity set
forth opposite such Obligor's name on Schedule E hereto, constitutes, as of the
date hereof, the number of the issued and outstanding equity interests of each
Pledged Company indicated on Schedule D hereto, the percentage of each Pledged
Company indicated on Schedule E hereto and the Pledged Equity constitutes all of
the Equity Securities of any such Pledged Company owned by such Obligor;
provided that each Obligor's representations and warranties in this Section
3(w)(A) shall only apply to the extent that the information set forth in
Schedule E applies to such Obligor.
(B) with respect to the Pledged Corporations (as set forth
in Schedule D):
(i) the Obligors shall deliver, or cause to be delivered,
all certificates or Instruments representing or evidencing the Pledged Equity of
the Pledged Corporations to and held by or on behalf of the Lead Secured Party
pursuant hereto and shall be in suitable form for transfer by delivery, or shall
be accompanied by duly executed instruments of transfer or assignment in blank,
all in form and substance satisfactory to the Lead Secured Party;
(ii) in addition, all other steps necessary or advisable
under any Applicable Law to be taken in order to perfect the first priority Lien
and security interest granted free from adverse claims hereunder shall be taken
by or on behalf of each Obligor, including without limitation, any notation on
any certificate or instrument representing the Pledged Equity and any notation
on any share register or similar document or instrument;
(iii) upon the delivery to the Lead Secured Party of
certificates representing the Pledged Equity and the taking of any other steps
that may be required in accordance with this Section 3(w)(B) or otherwise, the
pledge of the Pledged Equity of the Pledged Corporations pursuant to this
Agreement creates a valid and perfected first priority Security Interest free
from adverse claims in the Pledged Collateral of the Pledged Corporations
securing the payment of the Secured Obligations for the benefit of the Lead
Secured Party and the Secured Parties; and
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(iv) Schedules D and E to this Agreement with respect to the
Pledged Corporations are true and correct and complete in all material respects;
and without limiting the generality of the foregoing, the Pledged Equity of the
Pledged Corporations set forth opposite such Obligor's name on Schedule E
hereto, constitute, as of the date hereof, the percentage of the authorized,
issued and outstanding capital stock of each Pledged Corporation indicated on
Schedule E hereto and constitutes the percentage of the voting shares of each
Pledged Corporation indicated on Schedule E hereto; provided that each Obligor's
representations and warranties in this Section 3(w)(B) shall only apply to the
extent that the information set forth in Schedule E applies to such Obligor.
(x) (A) So long as no Event of Default shall have occurred and be
continuing, each applicable Obligor shall be entitled to exercise any and all
voting and other rights pertaining to the Pledged Companies or the Pledged
Corporations, as applicable, or any part thereof for any purpose not
inconsistent with the terms of this Agreement and the Transaction Documents;
provided, however, that such Obligor shall not exercise or shall refrain from
exercising any such right if such action or inaction would have a material
adverse effect on the value of the Pledged Companies or the Pledged Corporations
or any part thereof or be inconsistent with or violate any provisions of this
Agreement and the Transaction Documents.
(B) So long as no Event of Default shall have occurred and
be continuing, each applicable Obligor shall be entitled to receive all
dividends, distributions and payments paid from time to time in respect of the
Pledged Companies or the Pledged Corporations to the extent permitted by the
Transaction Documents.
(C) Any and all (i) dividends and other distributions paid
or payable in cash in respect of any (A) Pledged Companies in connection with a
partial or total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in-surplus, and (ii) cash paid, payable or
otherwise distributed in redemption of, or in exchange for, any Pledged
Companies, shall be in each case forthwith delivered to the Lead Secured Party,
if required pursuant to the Transaction Documents, to hold as Pledged Companies
and shall, if received by an Obligor, be received in trust for the benefit of
the Lead Secured Party and the Secured Parties, be segregated from the other
property or funds of such Obligor, and be forthwith delivered to the Lead
Secured Party as Pledged Companies in the same form as so received (with any
necessary endorsement), if required pursuant to the Securities Purchase
Agreement; and (B) any and all (i) dividends and other distributions paid or
payable in cash in respect of any Pledged Companies in connection with a partial
or total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in-surplus, and (ii) cash paid, payable or
otherwise distributed in redemption of, or in exchange for, any Pledged
Companies, shall be in each case forthwith delivered only if required pursuant
to the terms of the Debentures.
(D) The Lead Secured Party shall execute and deliver (or
cause to be executed and delivered) to the applicable Obligor all such proxies
and other Instruments as such Obligor may reasonably request for the purpose of
enabling such Obligor to exercise the voting and other rights which it is
entitled to exercise pursuant to Section 3(x)(A) above.
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(E) All dividends or other distributions which are received
by an Obligor contrary to the provisions of this Section 3(x) shall be received
in trust for the benefit of the Lead Secured Party and the Secured Parties,
shall be segregated from other funds of such Obligor and shall be forthwith paid
over to the Lead Secured Party as Pledged Companies or the Pledged Corporations,
as applicable, in the same form as so received (with any necessary endorsement).
(F) Subject to the provisions of Section 5 hereof, upon the
occurrence and during the continuance of an Event of Default, (i) all voting and
other rights of an Obligor to exercise the rights which it would otherwise be
entitled to exercise pursuant to Section 3(x)(A) shall cease, and all such
rights shall thereupon (unless expressly waived by the Lead Secured Party)
become vested in the Lead Secured Party for the benefit of itself and the
Secured Parties, which shall (unless expressly waived by the Lead Secured Party)
thereupon have the sole right to exercise such rights in accordance with Article
5 hereof, and (ii) all cash dividends or other distributions payable in respect
of the Pledged Companies or the Pledged Corporations shall be paid to the Lead
Secured Party, for the benefit of itself and the Secured Parties and such
Obligor's right to receive such cash payments pursuant to Sections 3(x)(B) and
3(x)(C) hereof shall immediately cease.
(y) Such Obligor shall maintain an administrative back office,
which provides reporting, financial and accounting services. All established
office procedures will be followed regarding insufficient funds issues,
verification of checks and compliance.
(4) DEFAULTS. The following events shall be considered as "Events of
Default":
(a) The occurrence of an Event of Default (as defined in any of
the Debentures) under any Debenture;
(b) Any representation or warranty of an Obligor in this
Agreement shall prove to have been incorrect in any material respect when made;
(c) The failure by an Obligor to observe or perform any of its
obligations hereunder for five (5) Business Days after delivery to such Obligor
of notice of such failure by or on behalf of a Secured Party;
(d) Any representation or warranty made or furnished by or on
behalf of any of the Obligors to the Lead Secured Party or any Secured Party in
or in connection with this Agreement or any of the Security Documents, shall be
false, incorrect, incomplete or misleading in any material respect when made or
furnished;
(e) Any Security Document or any material term thereof shall
cease to be, or be asserted by any Obligor not to be, a legal, valid and binding
obligation of any Obligor enforceable in accordance with its terms except as
limited by Applicable Laws relating to or affecting the enforcement of
creditors' rights generally and general principles of equity; or
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(f) Any Lien against the Collateral intended to be created by any
Security Document shall at any time be invalidated, subordinated or otherwise
cease to be in full force and effect, for whatever reason, or any security
interest purported to be created by any Security Document shall cease to be, or
shall be asserted by any Obligor not to be, a valid, first priority perfected
Lien (to the extent that this Agreement obligates the parties to provide such a
perfected first priority Lien, and except to the extent Permitted Liens have
priority) in the Collateral (except as expressly otherwise provided under and in
accordance with the terms of this Agreement or such Security Documents); or
(g) If any provision of this Agreement shall at any time for any
reason be declared to be null and void, or the validity or enforceability hereof
shall be contested by an Obligor, or a proceeding shall be commenced by an
Obligor, or by any governmental authority having jurisdiction over such Obligor,
seeking to establish the invalidity or unenforceability thereof, or an Obligor
shall deny that such Obligor has any liability or obligation purported to be
created under this Agreement.
(5) DUTY TO HOLD IN TRUST. Upon the occurrence of any Event of Default
and at any time thereafter, the Obligors shall, upon receipt of any revenue,
income or other sums subject to the Security Interest, 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 Secured Parties (pro rata in
accordance with the principal amount of Debentures held by each) for application
to the satisfaction of the Obligations.
(6) RIGHTS AND REMEDIES UPON DEFAULT. Upon the occurrence of any Event
of Default and at any time thereafter, each Secured Party shall have the right
to exercise all of the remedies conferred hereunder and under the Debentures,
and each Secured Party shall have all the rights and remedies of a secured party
under the UCC; provided that during the Standstill Period, the Secured Party
shall be obligated to exercise remedies only against that portion of the
Collateral not constituting Pledged Equity; and provided further that the
Obligors shall have the right to cure any Event of Default during the Standstill
Period subject to the Secured Parties' prior exercise of remedies and
disposition of some or all of the Collateral (other than the Pledged Equity
which is subject to the Standstill Period), in partial or full satisfaction of
he Secured Obligations. Without limitation, each Secured Party shall have the
following rights and powers:
(a) The Lead Secured Party 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 the Obligors shall
assemble the Collateral and make it available to the Lead Secured Party at
places which the Lead Secured Party shall reasonably select, whether at the
Obligors' premises or elsewhere, and make available to the Lead Secured Party,
without rent, all of the Obligors' respective premises and facilities for the
purpose of the Lead Secured Party taking possession of, removing or putting the
Collateral in saleable or disposable form.
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(b) The Lead Secured Party shall have the right to operate the
business of the Obligors 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 Lead Secured Party 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 the
Obligors or right of redemption of the Obligors, which are hereby expressly
waived. Upon each such sale, lease, assignment or other transfer of Collateral,
the Lead Secured Party 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 the
Obligors, which are hereby waived and released.
(7) 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, second, to the
attorneys' fees and expenses incurred by the Lead Secured Party in enforcing its
rights hereunder and in connection with collecting, storing and disposing of the
Collateral, and then to satisfaction of the Obligations to each Secured Party,
and to the payment of any other amounts required by applicable law, after which
the Secured Parties shall pay to the Obligor 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 Obligors will be liable for the deficiency, together with interest
thereon, at the rate of 25% per annum or the lesser amount permitted by
applicable law (the "Default Rate"), and the reasonable fees of any attorneys
employed by the Lead Secured Party to collect such deficiency. To the extent
permitted by applicable law, each Obligor waives all claims, damages and demands
against the Secured Parties arising out of the repossession, removal, retention
or sale of the Collateral, unless due to the gross negligence or willful
misconduct of the Secured Parties. All proceeds hereof or payments under any of
the Transaction Documents shall apply to the Secured Parties on a pro-rata
basis, in accordance with principal amount of the Debentures outstanding at the
time of such payment.
(8) COSTS AND EXPENSES. The Obligors agree 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 any Secured Party. The Obligors shall also pay all other
claims and charges which in the reasonable opinion of the Lead Secured Party
might prejudice, imperil or otherwise affect the Collateral or the Security
Interest therein. The Obligors will also, upon demand, pay to the Lead Secured
Party 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 Lead
Secured Party 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.
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(9) RESPONSIBILITY FOR COLLATERAL. The Obligors 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.
(10) SECURITY INTEREST ABSOLUTE. All rights of each Secured Party and
all Obligations of the Obligors hereunder, shall be absolute and unconditional,
irrespective of: (a) any lack of validity or enforceability of this Agreement,
the Debentures or any agreement entered into in connection with the foregoing,
or any portion hereof or thereof; (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 guaranty, or any other security, for all or any of the
Obligations; (d) any action by the Lead Secured Party 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 the
Obligors, or a discharge of all or any part of the Security Interest granted
hereby. Until the Obligations shall have been paid and performed in full, the
rights of each Secured Party shall continue even if the Obligations are barred
for any reason, including, without limitation, the running of the statute of
limitations or bankruptcy. Each Obligor expressly waives presentment, protest,
notice of protest, demand, notice of nonpayment and demand for performance. In
the event that at any time any transfer of any Collateral or any payment
received by any Secured Party 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 any Secured Party,
then, in any such event, the Obligors' 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 Obligor waives all right to require a Secured Party to
proceed against any other person or to apply any Collateral which such Secured
Party may hold at any time, or to marshal assets, or to pursue any other remedy.
Each Obligor waives any defense arising by reason of the application of the
statute of limitations to any obligation secured hereby.
(11) TERM OF AGREEMENT. This Agreement and the Security Interest shall
terminate on the date on which all payments under the Debentures have been made
in full or have been satisfied and all other Obligations have been paid or
discharged. Upon such termination, each Secured Party, at the request and at the
expense of the Obligors, will join in executing any termination statement with
respect to any financing statement executed and filed pursuant to this
Agreement.
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(12) POWER OF ATTORNEY, FURTHER ASSURANCES.
(a) Each Obligor authorizes the Lead Secured Party, and does
hereby make, constitute and appoint the Lead Secured Party and its respective
officers, agents, successors or assigns with full power of substitution, as such
Obligor's true and lawful attorney-in-fact, with power, in the name of the Lead
Secured Party or such Obligor, after the occurrence and during the continuance
of an Event of Default, (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 Secured Party; (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 Obligors, 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; and (v) generally, to do,
at the option of the Lead Secured Party, and at the expense of such Obligor, at
any time, or from time to time, all acts and things which the Lead Secured Party
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 all as fully and effectually as such Obligor might
or could do; and such Obligor 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.
(b) On a continuing basis, each Obligor 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 B attached hereto, all such
instruments, and take all such action as may reasonably be deemed necessary or
advisable, or as reasonably requested by the Lead Secured Party, 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 Lead Secured
Party the grant or perfection of a perfected first priority security interest in
all the Collateral under the UCC.
(c) Each Obligor hereby irrevocably appoints the Lead Secured
Party as such Obligor's attorney-in-fact, with full authority in the place and
stead of such Obligor and in the name of such Obligor, from time to time in the
Lead Secured Party's discretion, to take any action and to execute any
instrument which the Lead Secured Party 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 Obligor
where permitted by law.
(13) NOTICES. All notices, requests, demands and other communications
hereunder shall be subject to the notice provision of the applicable Securities
Purchase Agreement.
14
(14) 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 Lead Secured Party 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 Secured Party's rights
and remedies hereunder.
(15) BEST EFFORT FOR LICENSED COLLATERAL. Notwithstanding any other
provision contained herein or any of the other Transaction Documents, upon the
occurrence of an Event of Default, each Obligor hereby agrees that with respect
to any part of the Collateral which may require the consent of any third party
or third parties in order for such Obligor to transfer and/or convey its
interest in and to such Collateral to the Lead Secured Party, as may be required
in accordance herewith, such Obligor agrees to and shall use its best efforts to
obtain such consents or approvals in as expedient manner as possible.
(16) AGENCY.
(a) Appointment. The Secured Parties by their acceptance of the
benefits of this Agreement, hereby designate Victory Park Master Fund, Ltd.
("Lead Secured Party") as the Lead Secured Party to act as specified herein.
Each Secured Party shall be deemed irrevocably to authorize the Lead Secured
Party 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 Securities
Purchase Agreement) and to exercise such powers and to perform such duties
hereunder and thereunder as are specifically delegated to or required of the
Lead Secured Party by the terms hereof and thereof and such other powers as are
reasonably incidental thereto. The Lead Secured Party may perform any of its
duties hereunder by or through its agents or employees.
(b) Nature of Duties. The Lead Secured Party shall have no duties
or responsibilities except those expressly set forth herein. Neither the Lead
Secured Party 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 hereunder or in connection herewith, 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 Lead Secured Party shall be mechanical
and administrative in nature; the Lead Secured Party shall not have by reason of
this Agreement or any other Transaction Document a fiduciary relationship in
respect of any Obligor or any Secured Party; and nothing in this Agreement or
any other Transaction Document, expressed or implied, is intended to or shall be
so construed as to impose upon the Lead Secured Party any obligations in respect
of this Agreement or any other Transaction Document except as expressly set
forth herein and therein.
(c) Lack of Reliance on the Lead Secured Party. Independently and
without reliance upon the Lead Secured Party, 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
15
and its subsidiaries in connection with such Secured Party's investment in the
Company, 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 Obligors and their subsidiaries, and of the value of the
Collateral from time to time, and the Lead Secured Party 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 Lead Secured Party shall not be responsible to any
Obligor 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 any Obligor 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 Obligors, 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.
(d) Certain Rights of the Lead Secured Party. Subject to this
Agreement, the Lead Secured Party 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 Lead Secured Party 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 that are the Required Holders; if such
instructions are not provided despite the Lead Secured Party's request therefor,
the Lead Secured Party 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 Lead Secured Party; and the Lead Secured Party 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 Lead
Secured Party as a result of the Lead Secured Party acting or refraining from
acting hereunder in accordance with the terms of the Agreement or any other
Transaction Document, and the Obligors shall have no right to question or
challenge the authority of, or the instructions given to, the Lead Secured Party
pursuant to the foregoing and (b) the Lead Secured Party shall not be required
to take any action which the Lead Secured Party 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.
(e) Reliance. The Lead Secured Party 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 Lead Secured Party shall have no obligation whatsoever to
any Secured Party to assure that the Collateral exists or is owned by the
Obligors 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.
16
(f) Indemnification. To the extent that the Lead Secured Party is
not reimbursed and indemnified by the Obligors, the Secured Parties will jointly
and severally reimburse and indemnify the Lead Secured Party, in proportion to
principal amounts of Debentures outstanding held at such time, 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 Lead
Secured Party 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 Lead Secured Party's own gross
negligence or willful misconduct. Prior to taking any action hereunder as Lead
Secured Party, the Lead Secured Party may require each Secured Party to deposit
with it sufficient sums as it determines in good faith is necessary to protect
the Lead Secured Party for costs and expenses associated with taking such
action.
(g) Resignation by the Lead Secured Party.
(i) The Lead Secured Party 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
this Agreement) to the Obligors and the Secured Parties. Such resignation shall
take effect upon the appointment of a successor Lead Secured Party pursuant to
clauses (ii) and (iii) below.
(ii) Upon any such notice of resignation, the Secured
Parties, acting by the Required Holders, shall appoint a successor Lead Secured
Party hereunder.
(iii) If a successor Lead Secured Party shall not have been
so appointed within said thirty (30) day notice period, the Lead Secured Party
shall then appoint a successor Lead Secured Party who shall serve as Lead
Secured Party until such time, if any, as the Secured Parties appoint a
successor Lead Secured Party as provided above. If a successor Lead Secured
Party has not been appointed within such thirty (30) day notice period, the Lead
Secured Party may petition any court of competent jurisdiction or may interplead
the Obligors and the Secured Parties in a proceeding for the appointment of a
successor Lead Secured Party, 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 Obligors on demand.
(h) Rights with respect to Collateral. Each Secured Party agrees
with all other Secured Parties and the Lead Secured Party (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 Lead Secured Party or any of the other Secured Parties in respect of the
17
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 Lead
Secured Party hereunder by a successor Lead Secured Party, such successor Lead
Secured Party shall thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Lead Secured Party and the
retiring Lead Secured Party shall be discharged from its duties and obligations
under the Agreement. After any retiring Lead Secured Party's resignation or
removal hereunder as Lead Secured Party, the provisions of the Agreement shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Lead Secured Party.
(i) The Lead Secured Party in its Individual Capacity. The Lead
Secured Party and its affiliates may purchase debentures from, make loans to,
issue letters of credit for the account of, accept deposits from and generally
engage in any kind of lending or other business with the any party and its
affiliates as though the Lead Secured Party was not the Lead Secured Party
hereunder. With respect to any loans, purchases of debentures or issuances of
credit, if any, made by the Lead Secured Party in its capacity as a Holder, the
Lead Secured Party in its capacity as a Secured Party shall have the same rights
and powers under this Agreement and the other Security Documents as any other
Secured Parties and may exercise the same as though it were not the Lead Secured
Party, and the terms "Secured Party" or "Secured Parties" shall include the Lead
Secured Party in its capacity as a Secured Party.
(j) All proceeds from the sale of Collateral hereunder shall be
paid (i) first, to the Holders of Senior Debt on a pro-rata basis per the
principal amounts outstanding under the Debentures until the Obligations owing
to the Holders of Senior Debt are paid in cash in full; and (ii) then to the
Holder of the Junior Debt for the repayment of the Obligations owing to the
Holder of Junior Debt.
(17) MISCELLANEOUS.
(a) No course of dealing between the Obligors and any Secured
Party, nor any failure to exercise, nor any delay in exercising, on the part of
any Secured Party, 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 each Secured Party with
respect to the Collateral, whether established hereby or by the Debentures 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 parties hereto.
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(d) In the event any provision of this Agreement is held to be
invalid, prohibited or unenforceable in any jurisdiction for any reason, unless
such provision is narrowed by judicial construction, this Agreement shall, as to
such jurisdiction, be construed as if such invalid, prohibited or unenforceable
provision had been more narrowly drawn so as not to be invalid, prohibited or
unenforceable. If, notwithstanding the foregoing, any provision of this
Agreement is held to be invalid, prohibited or unenforceable in any
jurisdiction, such provision, as to such jurisdiction, shall be ineffective to
the extent of such invalidity, prohibition or unenforceability without
invalidating the remaining portion of such provision or the other provisions of
this Agreement and without affecting the validity or enforceability of such
provision or the other provisions of this Agreement in any other jurisdiction.
(e) No waiver of any breach or default or any right under this
Agreement shall be considered valid unless in writing and signed by the party
giving such waiver, and no such waiver shall be deemed a waiver of any
subsequent breach or default or right, whether of the same or similar nature or
otherwise.
(f) This Agreement shall be binding upon and inure to the benefit
of each party hereto and its successors and assigns.
(g) Each party shall take such further action and execute and
deliver such further documents as may be necessary or appropriate in order to
carry out the provisions and purposes of this Agreement.
(h) This Agreement shall be construed and enforced in accordance
with, and all questions concerning the construction, validity, interpretation
and performance of this Agreement and all disputes arising hereunder shall be
governed by, the laws of the State of New York, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of New
York or any other jurisdictions) that would cause the application of the laws of
any jurisdictions other than the State of New York. The parties hereto (a) agree
that any legal action or proceeding with respect to this Agreement or any other
agreement, document, or other instrument executed in connection herewith or
therewith, shall be brought in any state or federal court located within the
City of New York in the State of New York, (b) irrevocably waive any objections
which either may now or hereafter have to the venue of any suit, action or
proceeding arising out of or relating to the Security Documents, or any other
agreement, document, or other instrument executed in connection herewith or
therewith, brought in the aforementioned courts, and (c) further irrevocably
waive any claim that any such suit, action, or proceeding brought in any such
court has been brought in an inconvenient forum.
(i) OBLIGORS AND SECURED PARTIES IRREVOCABLY WAIVE THE RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING BROUGHT TO ENFORCE ANY PROVISION OF
THIS AGREEMENT, THE DEBENTURE, OR ANY TRANSACTION DOCUMENT.
19
(j) 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.
(18) JOINDER. In the event a party becomes an Obligor (the "New
Obligor") pursuant to the Joinder Agreement, upon such execution the New Obligor
shall be bound by all the terms and conditions hereof to the same extent as
though such New Obligor had originally executed this Agreement. The addition of
the New Obligor shall not in any manner affect the obligations of the other
Obligors hereunder. Each Company hereto acknowledges that the schedules and
exhibits hereto may be amended or modified in connection with the addition of
any New Obligor to reflect information relating to such New Company.
(19) PLEDGED EQUITY HELD IN SAFETY DEPOSIT BOX. The Secured Parties
shall hold any Collateral constituting certificated Pledged Equity delivered to
such Secured Parties in a safety deposit box in an institution of the Secured
Parties' choosing until such time the Secured Parties exercise remedies pursuant
to the terms hereof in respect of such Collateral or return such Collateral upon
satisfaction of the Secured Obligations.
(20) SUBORDINATION. The relative rights of the Parties hereto are
governed by the Letter Agreement.
[signature page follows]
20
IN WITNESS WHEREOF, the parties hereto have caused the Security Agreement
to be duly executed on the day and year first above written.
OBLIGOR [PARENT] AND COMPANY: Address for Notice and Delivery:
--------------------------------
GLOBAL AIRCRAFT SOLUTIONS INC. Global Aircraft Solutions Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
OBLIGOR AND COMPANY: Address for Notice and Delivery:
--------------------------------
▇▇▇▇▇▇▇▇ AEROSPACE TECHNOLOGIES ▇▇▇▇▇▇▇▇ Aerospace Technologies, Inc.
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
OBLIGOR AND COMPANY: Address for Notice and Delivery:
--------------------------------
WORLD JET CORPORATION World Jet Corporation
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
OBLIGOR AND COMPANY: Address for Notice and Delivery:
--------------------------------
▇▇▇▇▇▇▇▇ AEROSPACE MEXICO S.A. DE ▇.▇. ▇▇▇▇▇▇▇▇ Aerospace Mexico S.A. de ▇.▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
LEAD SECURED PARTY: Address for Notice and Delivery:
--------------------------------
VICTORY PARK MASTER FUND, LTD. ▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇
By: Victory Park Capital Advisors, LLC, Its investment manager
By: Jacob Capital, LLC, Its Manager
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇
Title: Sole Member
SECURED PARTY: Address for Notice and Delivery:
--------------------------------
SANDHURST ASSET MANAGEMENT, LLC Sandhurst Asset Management, LLC
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Westin Lovy
By: /s/ Westin Lovy
---------------------------------
Name: Westin Lovy
Title: Managing Director
SCHEDULE A
Principal Place of Business of Obligors:
----------------------------------------
1) Global Aircraft Solutions, Inc. - ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
2) ▇▇▇▇▇▇▇▇ Aerospace Technologies, Inc. - ▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇., ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇
3) World Jet Corporation - ▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇., ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
4) ▇▇▇▇▇▇▇▇ Aerospace S.A. de C.V. - ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Locations Where Collateral is Located or Stored:
-----------------------------------------------
1) ▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇., ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
2) Aircraft and Aircraft Engines
AIRCRAFT ENGINES LOCATION
N306DL, 23078
N308DL, 23080 ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, 23084 709118 ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
709130
709154
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇.
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
709155
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
709178
N302DL, 23074 709179 ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, 23077 709151 Tucson, Arizona 85706
709169
709149
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SCHEDULE B
Recording Jurisdiction
Global Aircraft Solutions, Inc. - Nevada and Arizona
▇▇▇▇▇▇▇▇ Aerospace Technologies, Inc. - Delaware and Arizona
World Jet Corporation - Nevada and Arizona
▇▇▇▇▇▇▇▇ Aerospace S.A. de C.V. - Tijuana, Mexico
SCHEDULE C
Commercial Tort Claims
NONE
SCHEDULE D
Pledged Companies
1) 40% Membership Interest in Global Aircraft Leasing Partners, LLC, a Delaware
limited liability company
Pledged Corporations
1) ▇▇▇▇▇▇▇▇ Aerospace Technologies, Inc.
2) World Jet Corporation
3) ▇▇▇▇▇▇▇▇ Aerospace S.A. de C.V.
SCHEDULE E
Pledged Equity
Percent of Certificate No. Pledged Interests as % of
Pledged of Pledged Total Pledged Interests
Obligor Pledged Company/Corporation Interests Interests Issued and Outstanding
------- --------------------------- --------- --------- ----------------------
Global Aircraft ▇▇▇▇▇▇▇▇ Aerospace 100% of 1,000 2 100%
Solutions, Inc. Technologies, Inc. Shares
Global Aircraft World Jet Corporation 100% of 25,000 3 100%
Solutions, Inc. shares
Global Aircraft ▇▇▇▇▇▇▇▇ Aerospace S.A. de 2% of 50 shares 2%
Solutions, Inc. ▇.▇.
▇▇▇▇▇▇▇▇ Aerospace ▇▇▇▇▇▇▇▇ Aerospace S.A. de 98% of 50 98%
Technologies, Inc. C.V. shares
SCHEDULE F
Controlled Account