EXHIBIT 10.6
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement") dated as of August 19, 2004 among
Galaxy Energy Corporation, a Colorado corporation ("Borrower"), Dolphin Energy
Corporation, a Nevada corporation, Pannonian International, Ltd, a Colorado
corporation, (each such corporation, including Borrower, and together with each
other Person who becomes a party to this Agreement by execution of a joinder in
the form of Exhibit A attached hereto, is referred to individually as a "Debtor"
and, collectively, as the "Debtors") and, Promethean Asset Management L.L.C. a
Delaware limited liability company, in its capacity as collateral agent for the
Lenders on Schedule B attached hereto (together with its successors and assigns,
the "Secured Party").
W I T N E S S E T H:
WHEREAS, on the date hereof, Secured Party has made loans and certain
other financial accommodations to Borrower (collectively, the "Loans"), as
evidenced by those certain Senior Secured Convertible Notes of even date
herewith made by Borrower payable to Secured Party in the original aggregate
principal amount of up to $20,000,000 (such notes, together with any promissory
notes or other securities issued in exchange or substitution therefor or
replacement thereof, and as any of the same may be amended, restated, modified
or supplemented and in effect from time to time, being herein referred to as the
"Notes"); and
WHEREAS, the Notes are being acquired by Secured Party pursuant to a
Securities Purchase Agreement with Borrower, dated as of August 19, 2004 (the
"Purchase Agreement"); and
WHEREAS, Debtors (other than Borrower) are Subsidiaries of Borrower and,
as such, will derive substantial benefit and advantage from the Loans, and it
will be to each such Debtor's direct interest and economic benefit to assist the
Borrower in procuring such Loans; and
WHEREAS, to induce the Secured Party to make the Loans, (i) each Debtor
(other than Borrower) has agreed to guaranty the Liabilities (as hereinafter
defined) of Borrower pursuant to that certain Guaranty of even date herewith by
such Debtors to Secured Party (the same, as it may be amended, restated,
modified or supplemented and in effect from time to time, the "Guaranty") and
(ii) each Debtor has agreed to pledge and grant a security interest in the
Collateral (as hereinafter defined) as security for its Liabilities;
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
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Section 1. Definitions. Capitalized terms used herein without definition
and defined in the Purchase Agreement are used herein as defined therein. In
addition, as used herein:
"Accounts" means any "account," as such term is defined in the
Uniform Commercial Code, and, in any event, shall include, without
limitation, "supporting obligations" as defined in the Uniform Commercial
Code.
"As-extracted Collateral" means any "as-extracted collateral," as
such term is defined in the Uniform Commercial Code.
"Chattel Paper" means any "chattel paper," as such term is defined
in the Uniform Commercial Code.
"Collateral" shall have the meaning ascribed thereto in Section 3
hereof.
"Commercial Tort Claims" means "commercial tort claims", as such
term is defined in the Uniform Commercial Code.
"Contracts" means all contracts, undertakings, or other agreements
(other than rights evidenced by Chattel Paper, Documents or Instruments)
in or under which a Debtor may now or hereafter have any right, title or
interest, including, without limitation, with respect to an Account, any
agreement relating to the terms of payment or the terms of performance
thereof.
"Copyrights" means any copyrights, rights and interests in
copyrights, works protectable by copyrights, copyright registrations and
copyright applications, including, without limitation, the copyright
registrations and applications listed on Schedule III attached hereto, and
all renewals of any of the foregoing, all income, royalties, damages and
payments now and hereafter due and/or payable under or with respect to any
of the foregoing, including, without limitation, damages and payments for
past, present and future infringements of any of the foregoing and the
right to xxx for past, present and future infringements of any of the
foregoing.
"Deposit Accounts" means all "deposit accounts" as such term is
defined in the Uniform Commercial Code, now or hereafter held in the name
of a Debtor.
"Documents" means any "documents," as such term is defined in the
Uniform Commercial Code, and shall include, without limitation, all
documents of title (as defined in the Uniform Commercial Code), bills of
lading or other receipts evidencing or representing Inventory or
Equipment.
"Equipment" means any "equipment," as such term is defined in the
Uniform Commercial Code and, in any event, shall include, Motor Vehicles.
"Event of Default" shall have the meaning set forth in the Notes.
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"General Intangibles" means any "general intangibles," as such term
is defined in the Uniform Commercial Code, and, in any event, shall
include, without limitation, all right, title and interest in or under any
Contract, models, drawings, materials and records, claims, literary
rights, goodwill, rights of performance, Copyrights, Trademarks, Patents,
warranties, rights under insurance policies and rights of indemnification.
"Goods" means any "goods", as such term is defined in the Uniform
Commercial Code, including, without limitation, fixtures and embedded
Software to the extent included in "goods" as defined in the Uniform
Commercial Code .
"Instruments" means any "instrument," as such term is defined in the
Uniform Commercial Code, and shall include, without limitation, promissory
notes, drafts, bills of exchange, trade acceptances, letters of credit,
letter of credit rights (as defined in the Uniform Commercial Code), and
Chattel Paper.
"Inventory" means any "inventory," as such term is defined in the
Uniform Commercial Code.
"Investment Property" means any "investment property", as such term
is defined in the Uniform Commercial Code.
"Liabilities" shall mean all obligations, liabilities and
indebtedness of every nature of Debtors from time to time owed or owing
under or in respect of this Agreement, the Purchase Agreement, the Notes,
the Warrants, the Registration Right Agreement, the Guaranty and any of
the other Security Documents, as the case may be, including, without
limitation, the principal amount of all debts, claims and indebtedness,
accrued and unpaid interest and all fees, costs and expenses, whether
primary, secondary, direct, contingent, fixed or otherwise, heretofore,
now and/or from time to time hereafter owing, due or payable whether
before or after the filing of a bankruptcy, insolvency or similar
proceeding under applicable federal, state, foreign or other law,.
"Motor Vehicles" shall mean motor vehicles, tractors, trailers and
other like property, whether or not the title thereto is governed by a
certificate of title or ownership.
"Patents" means any patents and patent applications, including,
without limitation, the inventions and improvements described and claimed
therein, all patentable inventions and those patents and patent
applications listed on Schedule IV attached hereto, and the reissues,
divisions, continuations, renewals, extensions and continuations-in-part
of any of the foregoing, and all income, royalties, damages and payments
now or hereafter due and/or payable under or with respect to any of the
foregoing, including, without limitation, damages and payments for past,
present and future infringements of any of the foregoing and the right to
xxx for past, present and future infringements of any of the foregoing.
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"Proceeds" means "proceeds," as such term is defined in the Uniform
Commercial Code and, in any event, includes, without limitation, (a) any
and all proceeds of any insurance, indemnity, warranty or guaranty payable
with respect to any of the Collateral, (b) any and all payments (in any
form whatsoever) made or due and payable from time to time in connection
with any requisition, confiscation, condemnation, seizure or forfeiture of
all or any part of the Collateral by any governmental body, authority,
bureau or agency (or any person acting under color of governmental
authority), and (c) any and all other amounts from time to time paid or
payable under, in respect of or in connection with any of the Collateral.
"Representative" means any Person acting as agent, representative or
trustee on behalf of the Secured Party from time to time.
"Software" means all "software" as such term is defined in the
Uniform Commercial Code, now owned or hereafter acquired by a Debtor,
other than software embedded in any category of Goods, including, without
limitation, all computer programs and all supporting information provided
in connection with a transaction related to any program.
"Trademarks" means any trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles,
service marks, logos, other business identifiers, prints and labels on
which any of the foregoing have appeared or appear, all registrations and
recordings thereof, and all applications in connection therewith,
including, without limitation, the trademarks and applications listed in
Schedule V attached hereto and renewals thereof, and all income,
royalties, damages and payments now or hereafter due and/or payable under
or with respect to any of the foregoing, including, without limitation,
damages and payments for past, present and future infringements of any of
the foregoing and the right to xxx for past, present and future
infringements of any of the foregoing.
"Triggering Event" shall have the meaning set forth in the Notes.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as
in effect from time to time in the State of New York; provided, that to
the extent that the Uniform Commercial Code is used to define any term
herein and such term is defined differently in different Articles or
Divisions of the Uniform Commercial Code, the definition of such term
contained in Article or Division 9 shall govern.
Section 2. Representations, Warranties and Covenants of Debtors. Each
Debtor represents and warrants to, and covenants with, the Secured Party as
follows:
(a) Such Debtor has rights in and the power to transfer the
Collateral in which it purports to grant a security interest pursuant to
Section 3 hereof
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(subject, with respect to after acquired Collateral, to such Debtor
acquiring the same) and no Lien exists or will exist upon such Collateral
at any time;
(b) This Agreement is effective to create in favor of Secured
Party a valid security interest in and Lien upon all of such Debtor's
right, title and interest in and to the Collateral, and, upon the filing
of appropriate Uniform Commercial Code financing statements in the
jurisdictions listed on Schedule I attached hereto, such security interest
will be duly first priority perfected security interest in all the
Collateral (other than Instruments not constituting Chattel Paper), and
upon delivery of the Instruments to the Secured Party or its
Representative, duly endorsed by such Debtor or accompanied by appropriate
instruments of transfer duly executed by such Debtor, the security
interest in the Instruments will be duly perfected;
(c) All of the Equipment, Inventory and Goods owned by such Debtor
is located at the places as specified on Schedule I attached hereto.
Except as disclosed on Schedule I, none of the Collateral is in the
possession of any bailee, warehousemen, processor or consignee. Schedule I
discloses such Debtor's name as of the date hereof as it appears in
official filings in the state of its incorporation, formation or
organization, the type of entity of such Debtor (including corporation,
partnership, limited partnership or limited liability company),
organizational identification number issued by such Debtor's state of
incorporation, formation or organization (or a statement that no such
number has been issued), such Debtor's state of incorporation, formation
or organization and the chief place of business, chief executive office
and the office where such Debtor keeps its books and records. Such Debtor
has only one state of incorporation, formation or organization. Such
Debtor (including any Person acquired by such Debtor) does not do business
and has not done business during the past five (5) years under any trade
name or fictitious business name except as disclosed on Schedule II
attached hereto;
(d) No Copyrights, Patents or Trademarks listed on Schedules III,
IV and V, respectively, if any, have been adjudged invalid or
unenforceable or have been canceled, in whole or in part, or are not
presently subsisting. Each of such Copyrights, Patents and Trademarks is
valid and enforceable. Such Debtor is the sole and exclusive owner of the
entire and unencumbered right, title and interest in and to each of such
Copyrights, Patents and Trademarks, identified on Schedules III, IV and V,
as applicable, as being owned by such Debtor, free and clear of any liens,
charges and encumbrances, including without limitation licenses, shop
rights and covenants by such Debtor not to xxx third persons. Such Debtor
has adopted, used and is currently using, or has a current bona fide
intention to use, all of such Trademarks and Copyrights. Such Debtor has
no notice of any suits or actions commenced or threatened with reference
to the Copyrights, Patents or Trademarks owned by it;
(e) Each Debtor agrees to deliver to the Secured Party an updated
Schedule I, II, III, IV and/or V within five (5) days of any change
thereto;
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(f) All depositary and other accounts including, without
limitation, Deposit Accounts, maintained by each Debtor are described on
Schedule VI hereto, which description includes for each such account the
name of the Debtor maintaining such account, the name, address and
telephone and telecopy numbers of the financial institution at which such
account is maintained, the account number and the account officer, if any,
of such account. No Debtor shall open any new Deposit Accounts or other
accounts unless such Debtor shall have given Secured Party ten (10)
Business Days' prior written notice of its intention to open any such new
accounts. Each Debtor shall deliver to Secured Party a revised version of
Schedule VI showing any changes thereto within five (5) Business Days of
any such change. Each Debtor hereby authorizes the financial institutions
at which such Debtor maintains an account to provide Secured Party with
such information with respect to such account as Secured Party from time
to time reasonably may request, and each Debtor hereby consents to such
information being provided to Secured Party. In addition, all of Debtor's
depositary and other accounts including, without limitation, Deposit
Accounts shall be subject to the provisions of Section 4.5 hereof; and
(g) Such Debtor does not own any Commercial Tort Claim except for
those disclosed on Schedule VII hereto.
(h) Such Debtor does not have any interest in real property or
mining rights with respect to real property except as disclosed on Schedule
VIII. Each Debtor shall deliver to Secured Party a revised version of Schedule
VIII showing any changes thereto within five (5) Business Days of any such
change. Except as otherwise agreed to by Secured Party, all such interests in
real property or mining rights with respect to such real property are subject to
a mortgage, deed of trust and assignment of production proceeds (in form and
substance satisfactory to Secured Party) in favor of Secured Party (hereinafter,
a "MORTGAGE"). Each debtor acknowledges that each such Mortgage contains an
Exhibit A (or other applicable Exhibit) listing the properties in which Debtor
has an interest, and to the extent that Schedule VIII is updated pursuant to the
this Section 2(h), the applicable Debtor shall be obligated to execute an
amendment to the applicable Exhibit to the applicable Mortgage such that, after
giving effect to such Mortgage amendment, Secured party will have a first
priority perfected security interest in such new real property or mining rights.
Section 3. Collateral. As collateral security for the prompt payment in
full when due (whether at stated maturity, by acceleration or otherwise) of the
Liabilities, each Debtor hereby pledges and grants to the Secured Party a Lien
on and security interest in and to all of such Debtor's right, title and
interest in the personal property and assets of such Debtor, whether now owned
by such Debtor or hereafter acquired and whether now existing or hereafter
coming into existence and wherever located (all being collectively referred to
herein as "Collateral"), including, without limitation:
(a) the Instruments, together with all payments thereon or
thereunder:
(b) all Accounts;
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(c) all Inventory;
(d) all General Intangibles (including payment intangibles (as
defined in the Uniform Commercial Code) and Software);
(e) all Equipment;
(f) all Documents;
(g) all Contracts;
(h) all Goods;
(i) all Investment Property;
(j) all Deposit Accounts, including, without limitation, the
balance from time to time in all bank accounts maintained by such Debtor;
(k) Commercial Tort Claims specified on Schedule VII;
(l) all As-extracted Collateral;
(m) all Trademarks, Patents and Copyrights; and
(n) all other tangible and intangible property of such Debtor,
including, without limitation, all Proceeds, tort claims, products,
accessions, rents, profits, income, benefits, substitutions, additions and
replacements of and to any of the property of such Debtor described in the
preceding clauses of this Section 3 (including, without limitation, any
proceeds of insurance thereon, insurance claims and all rights, claims and
benefits against any Person relating thereto), other rights to payments
not otherwise included in the foregoing, and all books, correspondence,
files, records, invoices and other papers, including without limitation
all tapes, cards, computer runs, computer programs, computer files and
other papers, documents and records in the possession or under the control
of such Debtor or any computer bureau or service company from time to time
acting for such Debtor.
Section 4. Covenants; Remedies. In furtherance of the grant of the pledge
and security interest pursuant to Section 3 hereof, each Debtor hereby agrees
with the Secured Party as follows:
4.1. Delivery and Other Perfection; Maintenance, etc.
(a) Delivery of Instruments, Documents, Etc. Each Debtor shall
deliver and pledge to the Secured Party or its Representative any and all
Instruments, negotiable Documents, Chattel Paper and certificated
securities (accompanied by stock powers executed in blank) duly endorsed
and/or accompanied by such instruments of assignment and transfer executed
by such
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Debtor in such form and substance as the Secured Party or its
Representative may request; provided, that so long as no Event of Default
or Triggering Event shall have occurred and be continuing, each Debtor may
retain for collection in the ordinary course of business any Instruments,
negotiable Documents and Chattel Paper received by such Debtor in the
ordinary course of business, and the Secured Party or its Representative
shall, promptly upon request of a Debtor, make appropriate arrangements
for making any other Instruments, negotiable Documents and Chattel Paper
pledged by such Debtor available to such Debtor for purposes of
presentation, collection or renewal (any such arrangement to be effected,
to the extent deemed appropriate by the Secured Party or its
Representative, against trust receipt or like document). If a Debtor
retains possession of any Chattel Paper, negotiable Documents or
Instruments pursuant to the terms hereof, such Chattel Paper, negotiable
Documents and Instruments shall be marked with the following legend: "This
writing and the obligations evidenced or secured hereby are subject to the
security interest of Promethean Asset Management L.L.C., in its capacity
as collateral agent for the benefit of the Lenders, as secured party."
(b) Other Documents and Actions. Each Debtor shall give, execute,
deliver, file and/or record any financing statement, notice, instrument,
document, agreement or other papers that may be necessary or desirable (in
the reasonable judgment of the Secured Party or its Representative) to
create, preserve, perfect or validate the security interest granted
pursuant hereto or to enable the Secured Party or its Representative to
exercise and enforce the rights of the Secured Party hereunder with
respect to such pledge and security interest, provided that notices to
account debtors in respect of any Accounts or Instruments shall be subject
to the provisions of clause (e) below. Notwithstanding the foregoing each
Debtor hereby irrevocably authorizes the Secured Party at any time and
from time to time to file in any filing office in any jurisdiction any
initial financing statements and amendments thereto that (a) indicate the
Collateral (i) as all assets of such Debtor or words of similar effect,
regardless of whether any particular asset comprised in the Collateral
falls within the scope of Article 9 of the Uniform Commercial Code of the
State of New York or such jurisdiction, or (ii) as being of an equal or
lesser scope or with greater detail, and (b) contain any other information
required by part 5 of Article 9 of the Uniform Commercial Code of the
State of New York or any other State for the sufficiency or filing office
acceptance of any financing statement or amendment, including (i) whether
such Debtor is an organization, the type of organization and any
organization identification number issued to such Debtor, and (ii) in the
case of a financing statement filed as a fixture filing or indicating
Collateral as As-extracted Collateral or timber to be cut, a sufficient
description of real property to which the Collateral relates. Each Debtor
agrees to furnish any such information to the Secured Party promptly upon
request. Each Debtor also ratifies its authorization for the Secured Party
to have filed in any jurisdiction any like initial financing statements or
amendments thereto if filed prior to the date hereof.
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(c) Books and Records. Each Debtor shall maintain at its own cost
and expense complete and accurate books and records of the Collateral,
including, without limitation, a record of all payments received and all
credits granted with respect to the Collateral and all other dealings with
the Collateral. Upon the occurrence and during the continuation of any
Event of Default or Triggering Event, each Debtor shall deliver and turn
over any such books and records (or true and correct copies thereof) to
the Secured Party or its Representative at any time on demand. Each Debtor
shall permit any representative of the Secured Party to inspect such books
and records at any time during reasonable business hours and will provide
photocopies thereof at such Debtor's expense to the Secured Party upon
request of the Secured Party.
(d) Motor Vehicles. Each Debtor shall, promptly upon the request
of the Secured Party or its Representative, cause the Secured Party to be
listed as the lienholder on each certificate of title or ownership
covering any items of Equipment, including Motor Vehicles.
(e) Notice to Account Debtors; Verification. (i) Upon the
occurrence and during the continuance of any Event of Default or
Triggering Event (or if any rights of set-off (other than set-offs against
an Account arising under the Contract giving rise to the same Account) or
contra accounts may be asserted), upon request of the Secured Party or its
Representative, each Debtor shall promptly notify (and each Debtor hereby
authorizes the Secured Party and its Representative so to notify) each
account debtor in respect of any Accounts or Instruments or other Persons
obligated on the Collateral that such Collateral has been assigned to the
Secured Party hereunder, and that any payments due or to become due in
respect of such Collateral are to be made directly to the Secured Party,
and (ii) the Secured Party and its Representative shall have the right at
any time or times to make direct verification with the account debtors or
other Persons obligated on the Collateral of any and all of the Accounts
or other such Collateral.
(f) Intellectual Property. Each Debtor represents and warrants
that the Copyrights, Patents and Trademarks listed on Schedules III, IV
and V, respectively, constitute all of the registered Copyrights and all
of the Patents and Trademarks now owned by such Debtor. If such Debtor
shall (i) obtain rights to any new patentable inventions, any registered
Copyrights or any Patents or Trademarks, or (ii) become entitled to the
benefit of any registered Copyrights or any Patents or Trademarks or any
improvement on any Patent, the provisions of this Agreement above shall
automatically apply thereto and such Debtor shall give to Secured Party
prompt written notice thereof. Each Debtor hereby authorizes Secured Party
to modify this Agreement by amending Schedules III, IV and V, as
applicable, to include any such registered Copyrights or any such Patents
and Trademarks. Each Debtor shall have the duty (i) to prosecute
diligently any patent, trademark, or service xxxx applications pending as
of the date hereof or hereafter, (ii) to make application on unpatented
but patentable inventions and on trademarks, copyrights and service marks,
as appropriate, (iii) to preserve and maintain all rights in the
Copyrights, Patents and Trademarks, to the extent
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material to the operations of the business of such Debtor and (iv) to
ensure that the Copyrights, Patents and Trademarks are and remain
enforceable, to the extent material to the operations of the business of
such Debtor. Any expenses incurred in connection with such Debtor's
obligations under this Section 4.1(f) shall be borne by such Debtor. No
Debtor shall abandon any right to file a patent, trademark or service xxxx
application, or abandon any pending patent, application or any other
Copyright, Patent or Trademark without the written consent of Secured
Party, which consent shall not be unreasonably withheld.
(g) Further Identification of Collateral. Each Debtor will, when
and as often as requested by the Secured Party or its Representative,
furnish to the Secured Party or such Representative, statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as the Secured Party or its
Representative may reasonably request, all in reasonable detail.
(h) Investment Property. Each Debtor will take any and all actions
required or requested by the Secured Party, from time to time, to (i)
cause the Secured Party to obtain exclusive control of any Investment
Property owned by such Debtor in a manner acceptable to the Secured Party
and (ii) obtain from any issuers of Investment Property and such other
Persons, for the benefit of the Secured Party, written confirmation of the
Secured Party's control over such Investment Property. For purposes of
this Section 4.1(h), the Secured Party shall have exclusive control of
Investment Property if (i) such Investment Property consists of
certificated securities and a Debtor delivers such certificated securities
to the Secured Party (with appropriate endorsements if such certificated
securities are in registered form); (ii) such Investment Property consists
of uncertificated securities and either (x) a Debtor delivers such
uncertificated securities to the Secured Party or (y) the issuer thereof
agrees, pursuant to documentation in form and substance satisfactory to
the Secured Party, that it will comply with instructions originated by the
Secured Party without further consent by such Debtor, and (iii) such
Investment Property consists of security entitlements and either (x) the
Secured Party becomes the entitlement holder thereof or (y) the
appropriate securities intermediary agrees, pursuant to the documentation
in form and substance satisfactory to the Secured Party, that it will
comply with entitlement orders originated by the Secured Party without
further consent by any Debtor.
(i) Reserved.
(j) Commercial Tort Claims. Each Debtor shall promptly notify
Secured Party of any Commercial Tort Claim (as defined in the Uniform
Commercial Code) acquired by it and unless otherwise consented to by
Secured Party, such Debtor shall enter into a supplement to this Agreement
granting to Secured Party a Lien on and security interest in such
Commercial Tort Claim.
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4.2 Other Liens. Debtors will not create, permit or suffer to exist, and
will defend the Collateral against and take such other action as is necessary to
remove, any Lien on the Collateral, and will defend the right, title and
interest of the Secured Party in and to the Collateral and in and to all
Proceeds thereof against the claims and demands of all Persons whatsoever.
4.3 Preservation of Rights. Whether or not any Event of Default or
Triggering Event has occurred or is continuing, the Secured Party and its
Representative may, but shall not be required to, take any steps the Secured
Party or its Representative deems necessary or appropriate to preserve any
Collateral or any rights against third parties to any of the Collateral,
including obtaining insurance of Collateral at any time when a Debtor has failed
to do so, and Debtors shall promptly pay, or reimburse the Secured Party for,
all expenses incurred in connection therewith.
4.4 Formation of Subsidiaries; Name Change; Location; Bailees.
(a) No Debtor shall form any subsidiary unless (i) such Debtor
pledges all of the stock of such subsidiary to the Secured Party pursuant
to the existing pledge agreement in favor of the Secured Party, and (ii)
such subsidiary becomes a party to this Agreement and all other applicable
Security Documents.
(b) No Debtor shall (i) reincorporate or reorganize itself under
the laws of any jurisdiction other than the jurisdiction in which it is
incorporated or organized as of the date hereof without the prior written
consent of Secured Party, or (ii) otherwise change its name, identity or
corporate structure. Each Debtor will notify Secured Party promptly in
writing prior to any such change in the proposed use by such Debtor of any
tradename or fictitious business name other than any such name set forth
on Schedule II attached hereto.
(c) Except for the sale of Inventory in the ordinary course of
business and except as expressly permitted in the Notes, each Debtor will
keep the Collateral at the locations specified in Schedule I. Each Debtor
will give Secured Party thirty (30) day's prior written notice of any
change in such Debtor's chief place of business or of any new location for
any of the Collateral.
(d) If any Collateral is at any time in the possession or control
of any warehousemen, bailee, consignee or processor, such Debtor shall,
upon the request of Secured Party or its Representative, notify such
warehousemen, bailee, consignee or processor of the Lien and security
interest created hereby and shall instruct such Person to hold all such
Collateral for Secured Party's account subject to Secured Party's
instructions.
(e) Each Debtor acknowledges that it is not authorized to file any
financing statement or amendment or termination statement with respect to
any financing statement without the prior written consent of Secured Party
and agrees that it will not do so without the prior written consent of
Secured Party, subject to such Debtor's rights under Section 9-509(d)(2)
to the Uniform Commercial Code.
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(f) No Debtor shall enter into any Contract that restricts or
prohibits the grant to Secured Party of a security interest in Accounts,
Chattel Paper, Instruments or payment intangibles or the proceeds of the
foregoing to the Uniform Commercial Code.
4.5 Bank Accounts and Securities Accounts.
(a) On or prior to the date hereof, the Secured Party and each
Debtor shall enter into an account control agreement or securities account
control agreement, as applicable, (each an "Account Control Agreement"),
in a form specified by the Secured Party, with each financial institution
with which such Debtor maintains from time to time any Deposit Accounts
(general or special), which financial institutions are set forth on
Schedule VI attached hereto. Pursuant to the Account Control Agreements
and pursuant hereto, each Debtor grants and shall grant to the Secured
Party a continuing lien upon, and security interest in, all such accounts
and all funds at any time paid, deposited, credited or held in such
accounts (whether for collection, provisionally or otherwise) or otherwise
in the possession of such financial institutions, and each such financial
institution shall act as the Secured Party's agent in connection
therewith. Following the Closing Date, no Debtor shall establish any
Deposit Account with any financial institution unless prior thereto, the
Secured Party and such Debtor shall have entered into an Account Control
Agreement with such financial institution. Other than xxxxx cash not
exceeding $10,000 in the aggregate for all Debtors, each Debtor shall
deposit and keep on deposit all of its funds into a Deposit Account which
is subject to an Account Control Agreement.
(b) Upon the Secured Party's request, each Debtor shall establish
lock-box or blocked accounts (collectively, "Blocked Accounts") in such
Debtor's name with such banks as are acceptable to the Secured Party
("Collecting Banks"), subject to irrevocable instructions in a form
specified by the Secured Party, to which the obligors of all Accounts
shall directly remit all payments on Accounts and in which such Debtor
will immediately deposit all cash payments for Inventory or other cash
payments constituting proceeds of Collateral in the identical form in
which such payment was made, whether by cash or check. In addition, the
Secured Party may establish one or more depository accounts at each
Collecting Bank or at a centrally located bank (collectively, the
"Depository Account"). All amounts held or deposited in the Blocked
Accounts held by such Collecting Bank shall be transferred to the
Depository Account without any further notice or action required by
Secured Party. Subject to the foregoing, each Debtor hereby agrees that
all payments received by the Secured Party whether by cash, check, wire
transfer or any other instrument, made to such Blocked Accounts or
otherwise received by the Secured Party and whether in respect of the
Accounts or as proceeds of other Collateral or otherwise will be the sole
and exclusive property of the Secured Party. Each Debtor, and any of its
Affiliates, employees, agents and other Persons acting for or in concert
with such Debtor shall, acting as trustee for the Secured Party, receive,
as the sole and exclusive property of the Secured Party, any moneys,
checks, notes, drafts or other
12
payments relating to and/or proceeds of Accounts or other Collateral which
come into the possession or under the control of such Debtor or any
Affiliates, employees, agent or other Persons acting for or in concert
with such Debtor, and immediately upon receipt thereof, such Debtor or
Persons shall deposit the same or cause the same to be deposited in kind,
in a Blocked Account.
4.6 Events of Default, Triggering Events, Etc. During the period during
which an Event of Default or Triggering Event shall have occurred and be
continuing:
(a) Each Debtor shall, at the request of the Secured Party or its
Representative, assemble the Collateral and make it available to Secured
Party or its Representative at a place or places designated by the Secured
Party or its Representative which are reasonably convenient to Secured
Party or its Representative, as applicable, and such Debtor;
(b) The Secured Party or its Representative may make any
reasonable compromise or settlement deemed desirable with respect to any
of the Collateral and may extend the time of payment, arrange for payment
in installments, or otherwise modify the terms of, any of the Collateral;
(c) The Secured Party shall have all of the rights and remedies
with respect to the Collateral of a secured party under the Uniform
Commercial Code (whether or not said Uniform Commercial Code is in effect
in the jurisdiction where the rights and remedies are asserted) and such
additional rights and remedies to which a secured party is entitled under
the laws in effect in any jurisdiction where any rights and remedies
hereunder may be asserted, including, without limitation, the right, to
the maximum extent permitted by law, to: (i) exercise all voting,
consensual and other powers of ownership pertaining to the Collateral as
if the Secured Party were the sole and absolute owner thereof (and each
Debtor agrees to take all such action as may be appropriate to give effect
to such right) and (ii) to the appointment of a receiver or receivers for
all or any part of the Collateral, whether such receivership be incident
to a proposed sale or sales of such Collateral or otherwise and without
regard to the value of the Collateral or the solvency of any person or
persons liable for the payment of the Liabilities secured by such
Collateral. Each Debtor hereby consents to the appointment of such
receiver or receivers, waives any and all defenses to such appointment and
agrees that such appointment shall in no manner impair, prejudice or
otherwise affect the rights of Secured Party under this Agreement. Each
Debtor hereby expressly waives notice of a hearing for appointment of a
receiver and the necessity for bond or an accounting by the receiver;
(d) The Secured Party or its Representative in their discretion
may, in the name of the Secured Party or in the name of a Debtor or
otherwise, demand, xxx for, collect or receive any money or property at
any time payable or receivable on account of or in exchange for any of the
Collateral, but shall be under no obligation to do so;
13
(e) The Secured Party or its Representative may take immediate
possession and occupancy of any premises owned, used or leased by a Debtor
and exercise all other rights and remedies of an assignee which may be
available to the Secured Party; and
(f) The Secured Party may, upon ten (10) Business Days' prior
written notice to Debtors of the time and place (which notice Debtors
hereby agree is commercially reasonable notification for purposes hereof),
with respect to the Collateral or any part thereof which shall then be or
shall thereafter come into the possession, custody or control of the
Secured Party or its Representative, sell, lease, license, assign or
otherwise dispose of all or any part of such Collateral, at such place or
places as the Secured Party deems best, and for cash or for credit or for
future delivery (without thereby assuming any credit risk), at public or
private sale, without demand of performance or notice of intention to
effect any such disposition or of the time or place thereof (except such
notice as is required above or by applicable statute and cannot be
waived), and the Secured Party or anyone else may be the purchaser,
lessee, licensee, assignee or recipient of any or all of the Collateral so
disposed of at any public sale (or, to the extent permitted by law, at any
private sale) and thereafter hold the same absolutely, free from any claim
or right of whatsoever kind, including any right or equity of redemption
(statutory or otherwise), of Debtors, any such demand, notice and right or
equity being hereby expressly waived and released. The Secured Party may,
without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and
place fixed for the sale, and such sale may be made at any time or place
to which the sale may be so adjourned.
The proceeds of each collection, sale or other disposition under this Section
4.6 shall be applied in accordance with Section 4.9 hereof.
4.7 Deficiency. If the proceeds of sale, collection or other realization
of or upon the Collateral are insufficient to cover the costs and expenses of
such realization and the payment in full of the Liabilities, Debtors shall
remain liable for any deficiency.
4.8 Private Sale. Each Debtor recognizes that the Secured Party may be
unable to effect a public sale of any or all of the Collateral consisting of
securities by reason of certain prohibitions contained in the Securities Act of
1933, as amended (the "Act"), and applicable state securities laws, but may be
compelled to resort to one or more private sales thereof to a restricted group
of purchasers who will be obliged to agree, among other things, to acquire such
Collateral for their own account for investment and not with a view to the
distribution or resale thereof. Each Debtor acknowledges and agrees that any
such private sale may result in prices and other terms less favorable to the
seller than if such sale were a public sale and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have been
made in a commercially reasonable manner. The Secured Party shall be under no
obligation to delay a sale of any of the Collateral to permit a Debtor to
register such Collateral for public sale under the Act, or under applicable
state securities laws, even if Debtors would agree to do so. The Secured
14
Party shall not incur any liability as a result of the sale of any such
Collateral, or any part thereof, at any private sale provided for in this
Agreement conducted in a commercially reasonable manner, and each Debtor hereby
waives any claims against the Secured Party arising by reason of the fact that
the price at which the Collateral may have been sold at such a private sale was
less than the price which might have been obtained at a public sale or was less
than the aggregate amount of the Liabilities, even if the Secured Party accepts
the first offer received and does not offer the Collateral to more than one
offeree.
Each Debtor further agrees to do or cause to be done all such other acts
and things as may be necessary to make such sale or sales of any portion or all
of any such Collateral valid and binding and in compliance with any and all
applicable laws, regulations, orders, writs, injunctions, decrees or awards of
any and all courts, arbitrators or governmental instrumentalities, domestic or
foreign, having jurisdiction over any such sale or sales, all at such Debtor's
expense, provided that Debtors shall be under no obligation to take any action
to enable any or all of such Collateral to be registered under the provisions of
the Act. Each Debtor further agrees that a breach of any of the covenants
contained in this Section 4.8 will cause irreparable injury to the Secured
Party, that the Secured Party has no adequate remedy at law in respect of such
breach and, as a consequence, agrees that each and every covenant contained in
this Section 4.8 shall be specifically enforceable against Debtors, and each
Debtor hereby waives and agrees not to assert any defenses against an action for
specific performance of such covenants except for a defense that no Event of
Default or Triggering Event has occurred and is continuing.
4.9 Application of Proceeds. The proceeds of any collection, sale or other
realization of all or any part of the Collateral, and any other cash at the time
held by the Secured Party under this Agreement, shall be applied in the manner
set forth in the Notes (or, if not so set forth, in a manner acceptable to, and
at the election on, the Secured Party).
4.10 Attorney-in-Fact. Each Debtor hereby irrevocably constitutes and
appoints the Secured Party, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of such Debtor and in the name of such Debtor or in its own name, from
time to time in the discretion of the Secured Party, for the purpose of carrying
out the terms of this Agreement, to take any and all appropriate action and to
execute and deliver any and all documents and instruments which may be necessary
or desirable to accomplish the purposes of this Agreement and, without limiting
the generality of the foregoing, hereby gives the Secured Party the power and
right, on behalf of such Debtor, without notice to or assent by such Debtor, to
do the following upon the occurrence and during the continuation of any Event of
Default or Triggering Event:
(a) to ask, demand, collect, receive and give acquittance and
receipts for any and all moneys due and to become due under any Collateral
and, in the name of such Debtor or its own name or otherwise, to take
possession of and endorse and collect any checks, drafts, notes,
acceptances or other Instruments for the payment of moneys due under any
Collateral and to file any claim or to take
15
any other action or proceeding in any court of law or equity or otherwise
deemed appropriate by the Secured Party for the purpose of collecting any
and all such moneys due under any Collateral whenever payable and to file
any claim or to take any other action or proceeding in any court of law or
equity or otherwise deemed appropriate by the Secured Party for the
purpose of collecting any and all such moneys due under any Collateral
whenever payable;
(b) to pay or discharge charges or liens levied or placed on or
threatened against the Collateral, to effect any insurance called for by
the terms of this Agreement and to pay all or any part of the premiums
therefor;
(c) to direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due, and to become due
thereunder, directly to the Secured Party or as the Secured Party shall
direct, and to receive payment of and receipt for any and all moneys,
claims and other amounts due, and to become due at any time, in respect of
or arising out of any Collateral;
(d) to sign and indorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with accounts and
other Documents constituting or relating to the Collateral;
(e) to commence and prosecute any suits, actions or proceedings at
law or in equity in any court of competent jurisdiction to collect the
Collateral or any part thereof and to enforce any other right in respect
of any Collateral;
(f) to defend any suit, action or proceeding brought against a
Debtor with respect to any Collateral;
(g) to settle, compromise or adjust any suit, action or proceeding
described above and, in connection therewith, to give such discharges or
releases as the Secured Party may deem appropriate;
(h) to the extent that a Debtor's authorization given to Section
4.1(b) of this Agreement is not sufficient to file such financing
statements with respect to this Agreement, with or without such Debtor's
signature, or to file a photocopy of this Agreement in substitution for a
financing statement, as the Secured Party may deem appropriate and to
execute in such Debtor's name such financing statements and amendments
thereto and continuation statements which may require such Debtor's
signature; and
(i) generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and
completely as though the Secured Party were the absolute owners thereof
for all purposes, and to do, at the Secured Party's option and at such
Debtor's expense, at any time, or from time to time, all acts and things
which the Secured Party reasonably deems necessary to protect, preserve or
realize upon the Collateral and the Secured Party's lien
16
therein, in order to effect the intent of this Agreement, all as fully and
effectively as such Debtor might do.
Each Debtor hereby ratifies, to the extent permitted by law, all that such
attorneys lawfully do or cause to be done by virtue hereof. The power of
attorney granted hereunder is a power coupled with an interest and shall be
irrevocable until the Liabilities are indefeasibly paid in full in cash.
Each Debtor also authorizes the Secured Party, at any time from and after
the occurrence and during the continuation of any Event of Default or Triggering
Event, (x) to communicate in its own name with any party to any Contract with
regard to the assignment of the right, title and interest of such Debtor in and
under the Contracts hereunder and other matters relating thereto and (y) to
execute, in connection with any sale of Collateral provided for in Section 4.5
hereof, any endorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral.
4.11 Perfection. Prior to or concurrently with the execution and delivery
of this Agreement, each Debtor shall:
(a) file such financing statements, assignments for security and
other documents in such offices as may be necessary or as the Secured
Party or the Representative may request to perfect the security interests
granted by Section 3 of this Agreement;
(b) at Secured Party's request, deliver to the Secured Party or its
Representative the originals of all Instruments together with, in the case
of Instruments constituting promissory notes, allonges attached thereto
showing such promissory notes to be payable to the order of a blank payee;
and
(c) at Secured Party's request, deliver to the Secured Party or its
Representative the originals of all Motor Vehicle titles, duly endorsed
indicating the Secured Party's interest therein as lienholder.
4.12 Termination. This Agreement and the Liens and security interests
granted hereunder shall not terminate until the termination of the Purchase
Agreement and the Notes and the full and complete performance and indefeasible
satisfaction of all the Liabilities, whereupon the Secured Party shall forthwith
cause to be assigned, transferred and delivered, against receipt but without any
recourse, warranty or representation whatsoever, any remaining Collateral to or
on the order of Debtors. The Secured Party shall also execute and deliver to
Debtors upon such termination such Uniform Commercial Code termination
statements, certificates for terminating the liens on the Motor Vehicles (if
any) and such other documentation as shall be reasonably requested by Debtors to
effect the termination and release of the Liens and security interests in favor
of the Secured Party affecting the Collateral.
4.13 Further Assurances. (a) At any time and from time to time, upon the
written request of the Secured Party or its Representative, and at the sole
expense of Debtors, Debtors will promptly and duly execute and deliver any and
all such further instruments,
17
documents and agreements and take such further actions as the Secured Party or
its Representative may reasonably require in order for the Secured Party to
obtain the full benefits of this Agreement and of the rights and powers herein
granted in favor of the Secured Party, including, without limitation, using
Debtors' best efforts to secure all consents and approvals necessary or
appropriate for the assignment to the Secured Party of any Collateral held by
Debtors or in which a Debtor has any rights not heretofore assigned, the filing
of any financing or continuation statements under the Uniform Commercial Code
with respect to the liens and security interests granted hereby, transferring
Collateral to the Secured Party's possession (if a security interest in such
Collateral can be perfected by possession), placing the interest of the Secured
Party as lienholder on the certificate of title of any Motor Vehicle and
obtaining waivers of liens from landlords and mortgagees. Each Debtor also
hereby authorizes the Secured Party and its Representative to file any such
financing or continuation statement without the signature of such Debtor to the
extent permitted by applicable law.
(b) Upon the request of the Secured Party, each Debtor shall procure
insurers' acknowledgments of any assignments of key man life insurance policies
which may be assigned to the Secured Party as additional security for the
Liabilities (if any) and will take all such further action as required by any
insurer or the Secured Party in connection with any such assignment.
4.14 Limitation on Duty of Secured Party. The powers conferred on the
Secured Party under this Agreement are solely to protect the Secured Party's
interest in the Collateral and shall not impose any duty upon it to exercise any
such powers. The Secured Party shall be accountable only for amounts that it
actually receives as a result of the exercise of such powers and neither the
Secured Party nor its Representative nor any of their respective officers,
directors, employees or agents shall be responsible to Debtors for any act or
failure to act, except for willful misconduct. Without limiting the foregoing,
the Secured Party and any Representative shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral in their
possession if such Collateral is accorded treatment substantially equivalent to
that which the relevant Secured Party or any Representative, in its individual
capacity, accords its own property consisting of the type of Collateral
involved, it being understood and agreed that neither the Secured Party nor any
Representative shall have any responsibility for taking any necessary steps
(other than steps taken in accordance with the standard of care set forth above)
to preserve rights against any Person with respect to any Collateral.
Also without limiting the generality of the foregoing, neither the Secured
Party nor any Representative shall have any obligation or liability under any
Contract or license by reason of or arising out of this Agreement or the
granting to the Secured Party of a security interest therein or assignment
thereof or the receipt by the Secured Party or any Representative of any payment
relating to any Contract or license pursuant hereto, nor shall the Secured Party
or any Representative be required or obligated in any manner to perform or
fulfill any of the obligations of Debtors under or pursuant to any Contract or
license, or to make any payment, or to make any inquiry as to the nature or the
sufficiency of any payment received by it or the sufficiency of any performance
by any party under any Contract or license, or to present or file any claim, or
to take any action
18
to collect or enforce any performance or the payment of any amounts which may
have been assigned to it or to which it may be entitled at any time or times.
Section 5. Miscellaneous.
5.1 No Waiver. No failure on the part of the Secured Party or any of its
Representatives to exercise, and no course of dealing with respect to, and no
delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by the Secured Party or
any of its Representatives of any right, power or remedy hereunder preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. The rights and remedies hereunder provided are cumulative and may be
exercised singly or concurrently, and are not exclusive of any rights and
remedies provided by law.
5.2 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws and decisions of the State of New York,
without regard to conflict of law principles thereof.
5.3 Notices. All notices, approvals, requests, demands and other
communications hereunder shall be delivered or made in the manner set forth in,
and shall be effective in accordance with the terms of, the Purchase Agreement;
provided, that, to the extent any such communication is being made or sent to a
Debtor that is not the Borrower, such communication shall be effective as to
such Debtor if made or sent to the Borrower in accordance with the foregoing.
5.4 Amendments, Etc. The terms of this Agreement may be waived, altered or
amended only by an instrument in writing duly executed by the Debtor sought to
be charged or benefitted thereby and the Secured Party. Any such amendment or
waiver shall be binding upon the Secured Party and the Debtor sought to be
charged or benefitted thereby and their respective successors and assigns.
5.5 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the respective successors and assigns of each of the parties
hereto, provided, that no Debtor shall assign or transfer its rights hereunder
without the prior written consent of the Secured Party. Secured Party may assign
its rights hereunder without the consent of Debtors, in which event such
assignee shall be deemed to be Secured Party hereunder with respect to such
assigned rights.
5.6 Counterparts; Headings. This Agreement may be authenticated in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may authenticate this Agreement by
signing any such counterpart. This Agreement may be authenticated by manual
signature, facsimile or, if approved in writing by Secured Party, electronic
means, all of which shall be equally valid. The headings in this Agreement are
for convenience of reference only and shall not alter or otherwise affect the
meaning hereof.
5.7 Severability. If any provision hereof is invalid and unenforceable in
any jurisdiction, then, to the fullest extent permitted by law, (a) the other
provisions hereof
19
shall remain in full force and effect in such jurisdiction and shall be
liberally construed in favor of the Secured Party and its Representative in
order to carry out the intentions of the parties hereto as nearly as may be
possible and (b) the invalidity or unenforceability of any provision hereof in
any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
5.9 SUBMISSION TO JURISDICTION; WAIVER OF VENUE. (A) EACH DEBTOR HEREBY
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES
FEDERAL OR NEW YORK STATE COURT SITTING IN THE CITY OF NEW YORK, BOROUGH OF
MANHATTAN IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND EACH DEBTOR HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT
OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND
IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT
IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF SECURED PARTY
TO BRING PROCEEDINGS AGAINST ANY DEBTOR IN THE COURTS OF ANY OTHER JURISDICTION.
ANY JUDICIAL PROCEEDING BY A DEBTOR AGAINST SECURED PARTY OR ANY AFFILIATE
THEREOF INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTION WITH THIS AGREEMENT SHALL BE BROUGHT ONLY IN A COURT
IN NEW YORK, NEW YORK.
(B) EACH DEBTOR DESIGNATES AND APPOINTS CT CORPORATION SYSTEM AND SUCH
OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY IT (AFTER PRIOR WRITTEN NOTICE TO
SECURED PARTY) WHICH IRREVOCABLY AGREES IN WRITING TO SO SERVE AS ITS AGENT TO
RECEIVE ON ITS BEHALF SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH
COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY EACH DEBTOR TO BE EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT. A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE
MAILED BY REGISTERED MAIL TO SUCH DEBTOR AT ITS ADDRESS PROVIDED IN THIS
AGREEMENT EXCEPT THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE
TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY
AGENT APPOINTED BY A DEBTOR REFUSES TO ACCEPT SERVICE, SUCH DEBTOR HEREBY AGREES
THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN
SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
5.10 WAIVER OF RIGHT TO TRIAL BY JURY. EACH DEBTOR AND SECURED PARTY EACH
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
20
CONTEMPLATED HEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH
RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH DEBTOR AND SECURED
PARTY EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A
COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER
AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF
THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN
WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT
OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
5.11 Joint and Several. The obligations, covenants and agreements of
Debtors hereunder shall be the joint and several obligations, covenants and
agreements of each Debtor, whether or not specifically stated herein.
5.12 Collateral Agent. Each of the Lenders hereby irrevocably appoints and
authorizes the Secured Party, to act as collateral agent (the "Collateral
Agent"), to enter into each of the instruments, documents and agreements,
including any pledge agreement, guaranty, financing statements, mortgage,
Account Control Agreement or any other Security Documents (the "FINANCING
DOCUMENTS"), to which it is a party on its behalf (other than this Agreement)
and to take such actions as Collateral Agent on its behalf and to exercise such
powers under the Financing Documents as are delegated to Collateral Agent or
secured party (as applicable) by the terms thereof, together with all such
powers as are reasonably incidental thereto. Secured Party is authorized and
empowered to amend, modify, or waive any provisions of this Agreement or the
other Financing Documents on behalf of the Funds.
5.13 No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
5.14 Entire Agreement; Amendments. This Agreement supersedes all other
prior oral or written agreements between each Debtor, Secured Party, the Lenders
and their affiliates and persons acting on their behalf with respect to the
matters discussed herein, and this Agreement and the Transaction Documents and
instruments referenced herein and therein contain the entire understanding of
the parties with respect to the matters covered herein and therein.
21
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement
to be duly executed and delivered as of the day and year first above written.
DEBTORS:
GALAXY ENERGY CORPORATION, a
Colorado corporation
By:/s/Xxxxx X. Xxxxx
------------------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Operating Officer
FEIN: 00-0000000
DOLPHIN ENERGY CORPORATION, a
Nevada corporation
By:/s/Xxxxxxx X. Xxxxxxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
Title: Secretary
FEIN: 00-0000000
PANNONIAN INTERNATIONAL, LTD., a
Colorado corporation
By:/s/Xxxxxxx X. Xxxxxxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
Title: Secretary
FEIN: 00-000-0000
SECURED PARTY:
PROMETHEAN ASSET MANAGEMENT L.L.C.,
in its capacity as agent for the Lenders
By:/s/Xxxxxx X. Xxxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Authorized Signatory
LENDERS:
Solely for the purposes of Section 5.12
HFTP INVESTMENT L.L.C.
By: Promethean Asset Management L.L.C.
Its: Investment Manager
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Authorized Signatory
GAIA OFFSHORE MASTER FUND, LTD.
By: Promethean Asset Management L.L.C.
Its: Investment Manager
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Authorized Signatory
CAERUS FUND LTD.
By: Promethean Asset Management L.L.C.
Its: Investment Manager
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Authorized Signatory
AG DOMESTIC CONVERTIBLES, L.P
By: AG Domestic Convertibles GP, L.L.C.
Its: General Partner
By: Xxxxxx, Xxxxxx & Co., L.P.
Its: Managing Member
By: /s/ Xxxxxx X. Xxxxxxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxxxxxx
Title: Chief Financial Officer
AG OFFSHORE CONVERTIBLES, LTD.
By: Xxxxxx, Xxxxxx & Co., L.P.
Its: Director
By: /s/ Xxxxxx X. Xxxxxxxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxxxxxxx
Title: Chief Financial Officer
EXHIBIT A
Form of Joinder
Joinder to Subsidiary Security Agreement
The undersigned, ______________________________, hereby joins in the
execution of that certain Security Agreement dated as of August 19, 2004 (the
"Security Agreement") by Galaxy Energy Corporation, a Colorado corporation,
Dolphin Energy Corporation, a Nevada corporation, Pannonian International, Ltd.
a Colorado corporation, and _______________________ , the Lenders (as defined
therein), and each other Person that becomes a Debtor thereunder after the date
hereof and pursuant to the terms thereof, to and in favor of Promethean Asset
Management L.L.C., in its capacity as agent for the Lenders. By executing this
Joinder, the undersigned hereby agrees that it is a Debtor thereunder and agrees
to be bound by all of the terms and provisions of the Security Agreement.
The undersigned represents and warrants to Secured Party that:
(a) all of the Equipment, Inventory and Goods owned by such Debtor is
located at the places as specified on Schedule I attached hereto;
(b) except as disclosed on Schedule I, none of such Collateral is in the
possession of any bailee, warehousemen, processor or consignee;
(c) the chief place of business, chief executive office and the office
where such Debtor keeps its books and records are located at the place specified
on Schedule I;
(d) such Debtor (including any Person acquired by such Debtor) does not do
business or has not done business during the past five years under any tradename
or fictitious business name, except as disclosed on Schedule II; and
(e) all Copyrights, Patents and Trademarks owned by the undersigned are
listed in Schedules III, IV and V, respectively.
________________, a _____ corporation
By:______________________________
Title:___________________________
FEIN:____________________________
SCHEDULE B
LENDER'S ADDRESS
LENDER'S NAME AND FACSIMILE NUMBER
------------- --------------------
HFTP Investment L.L.C. c/oPromethean Asset Management L.L.C.
000 Xxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Gaia Offshore Master Fund, Ltd. c/oPromethean Asset Management L.L.C.
000 Xxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Caerus Fund Ltd. c/oPromethean Asset Management L.L.C.
000 Xxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
AG Domestic Convertibles, L.P c/o Xxxxxx, Xxxxxx & Co.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
AG Offshore Convertibles, Ltd. c/o Xxxxxx, Xxxxxx & Co.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
SCHEDULE I
TO
SECURITY AGREEMENT
UCC Financing Statements; Location of Equipment, Inventory, Goods and Books and
Records; Goods in Possession of Consignees, Bailees, Warehousemen, Agents and
Processors; Debtors' Legal Names; State of Incorporation; Organizational
Identification Number; Chief Executive Office.
I. DEBTOR: Galaxy Energy Corporation, a Colorado corporation
1 Legal Name of Debtor: Galaxy Energy Corporation
2 State of Incorporation: Colorado
3 Organizational Identification 19991237368
Number:
4 Chief Executive Office: 0000 - 00xx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
5 Location of Books and Records: 0000 - 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
6 Locations of Equipment, 0000 - 00xx Xxxxxx, Xxxxx 0000
Inventory and Goods: Xxxxxx, Xxxxxxxx 00000
0000 Xxxxxxxx Xxx Xxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000
7 Locations of Goods in None
Possession of Consignees,
Bailees, Warehousemen, Agents
and Processors (including
names of such consignees,
bailees, etc.):
8 Jurisdictions For UCC Filings: Colorado
SCHEDULE I
TO
SECURITY AGREEMENT
UCC Financing Statements; Location of Equipment, Inventory, Goods and Books and
Records; Goods in Possession of Consignees, Bailees, Warehousemen, Agents and
Processors; Debtors' Legal Names; State of Incorporation; Organizational
Identification Number; Chief Executive Office.
I. DEBTOR: Dolphin Energy Corporation, a Nevada corporation
1 Legal Name of Debtor: Dolphin Energy Corporation
2 State of Incorporation: Nevada
3 Organizational Identification C15414-2002
Number:
4 Chief Executive Office: 0000 - 00xx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
5 Location of Books and Records: 0000 - 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
6 Locations of Equipment, 0000 - 00xx Xxxxxx, Xxxxx 0000
Inventory and Goods: Xxxxxx, Xxxxxxxx 00000
0000 Xxxxxxxx Xxx Xxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000
7 Locations of Goods in None
Possession of Consignees,
Bailees, Warehousemen, Agents
and Processors (including
names of such consignees,
bailees, etc.):
8 Jurisdictions For UCC Filings: Nevada
SCHEDULE I
TO
SECURITY AGREEMENT
UCC Financing Statements; Location of Equipment, Inventory, Goods and Books and
Records; Goods in Possession of Consignees, Bailees, Warehousemen, Agents and
Processors; Debtors' Legal Names; State of Incorporation; Organizational
Identification Number; Chief Executive Office.
I. DEBTOR: Pannonian International, Ltd., a Colorado corporation
1 Legal Name of Debtor: Pannonian International, Ltd.
2 State of Incorporation: Colorado
3 Organizational Identification 20001009742
Number:
4 Chief Executive Office: 0000 - 00xx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
5 Location of Books and Records: 0000 - 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
6 Locations of Equipment, 0000 - 00xx Xxxxxx, Xxxxx 0000
Inventory and Goods: Xxxxxx, Xxxxxxxx 00000
7 Locations of Goods in None
Possession of Consignees,
Bailees, Warehousemen, Agents
and Processors (including
names of such consignees,
bailees, etc.):
8 Jurisdictions For UCC Filings: Colorado
SCHEDULE II
TO
SECURITY AGREEMENT
Tradenames and Fictitious Names
(Present and Past Five Years)
None. All business conducted under legal names of Debtors.
SCHEDULE III
TO
SECURITY AGREEMENT
U.S. Copyright Registrations; Foreign Copyright Registrations; U.S. Copyright
Applications; Foreign Copyright Applications; Copyright Licenses
U.S. COPYRIGHT REGISTRATIONS - NONE
REGISTRATION REGISTRATION
XXXXXX XXXX NUMBER DATE
------ ---- ------------ ------------
FOREIGN COPYRIGHT REGISTRATIONS - NONE
REGISTRATION REGISTRATION
XXXXXX XXXX COUNTRY NUMBER DATE
------ ---- ------- ------------ ------------
U.S. COPYRIGHT APPLICATIONS - NONE
APPLICATION APPLICATION
XXXXXX XXXX NUMBER DATE
------ ---- ----------- -----------
FOREIGN COPYRIGHT APPLICATIONS - NONE
APPLICATION APPLICATION
XXXXXX XXXX COUNTRY NUMBER DATE
------ ---- ------- ----------- -----------
COPYRIGHT LICENSES - NONE
NAME OF DATE OF
LICENSED MARKS AGREEMENT PARTIES AGREEMENT
-------------- --------- ------- ---------
SCHEDULE IV
TO
SECURITY AGREEMENT
U.S. Patent Registrations; Foreign Patent Registrations; U.S. Patent
Applications; Foreign Patent Applications; Patent Licenses
U.S. PATENT REGISTRATIONS - NONE
REGISTRATION REGISTRATION
HOLDER PATENT NUMBER DATE
------ ------ ------------ ------------
FOREIGN PATENT REGISTRATIONS - NONE
REGISTRATION REGISTRATION
HOLDER PATENT COUNTRY NUMBER DATE
------ ------ ------- ------------ ------------
U.S. PATENT APPLICATIONS - NONE
APPLICATION APPLICATION
HOLDER PATENT NUMBER DATE
------ ------ ----------- -----------
FOREIGN PATENT APPLICATIONS - NONE
APPLICATION APPLICATION
HOLDER PATENT COUNTRY NUMBER DATE
------ ------ ------- ----------- -----------
PATENT LICENSES - NONE
NAME OF DATE OF
LICENSED MARKS AGREEMENT PARTIES AGREEMENT
-------------- --------- ------- ---------
SCHEDULE V
TO
SECURITY AGREEMENT
U.S. Trademark Registrations; Foreign Trademark Registrations; U.S. Trademark
Applications; Foreign Trademark Applications; Trademark Licenses
U.S. TRADEMARK REGISTRATIONS - NONE
REGISTRATION REGISTRATION
XXXXXX XXXX NUMBER DATE
------ ---- ------------ ------------
FOREIGN TRADEMARK REGISTRATIONS - NONE
REGISTRATION REGISTRATION
XXXXXX XXXX COUNTRY NUMBER DATE
------ ---- ------- ------------ ------------
U.S. TRADEMARK APPLICATIONS - NONE
APPLICATION APPLICATION
XXXXXX XXXX NUMBER DATE
------ ---- ----------- -----------
FOREIGN TRADEMARK APPLICATIONS - NONE
APPLICATION APPLICATION
XXXXXX XXXX COUNTRY NUMBER DATE
------ ---- ------- ----------- -----------
TRADEMARK LICENSES - NONE
NAME OF DATE OF
LICENSED MARKS AGREEMENT PARTIES AGREEMENT
-------------- --------- ------- ---------
SCHEDULE VI
TO
SECURITY AGREEMENT
Depository Accounts and Other Accounts
Name of Account Type of Account (with Account
Holder Bank general description) Number
-------------------------- ----------------------------- ------------------------------------ ---------------
Galaxy Energy Corporation US Bancorp Investments, Inc.* Asset Management Account 00000000
Galaxy Energy Corporation US Bancorp Investments, Inc.* Business Checking,
(-0- Balance Account Linked to Asset 1 943 1387 1221
Management Account)
Dolphin Energy Corporation US Bancorp Investments, Inc.* Asset Management Account 00000000
Dolphin Energy Corporation US Bancorp Investments, Inc.* Business Checking,
(-0- Balance Account Linked to Asset 1 943 1387 1239
Management Account)
----------
*0000 Xxxx Xxxxxx Xxxxxx, Xxxxxxxxx, XX 00000
(000) 000-0000 telephone
(000) 000-0000 fax
Account officer - Xxxx X. Xxxxxx
SCHEDULE VII
TO
SECURITY AGREEMENT
Commercial Tort Claims
NONE
SCHEDULE VIII
TO
SECURITY AGREEMENT
Real Property
Reference is made to Exhibit A to each Mortgage, Deed of Trust, Assignment of
Production, Security Agreement, Fixture Filing and Financing Statement from
Dolphin Energy Corporation to Trustee for the Benefit of Promethean Asset
Management L.L.C.
Reference is made to Exhibit A to each Mortgage, Deed of Trust, Assignment of
Production, Security Agreement, Fixture Filing and Financing Statement from
Galaxy Energy Corporation to Trustee for the Benefit of Promethean Asset
Management L.L.C.
