SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement"), is entered into and made
effective as of February ___, 2007, by and between GS CARBON CORP., a Delaware
corporation with its principal place of business located at Xxx Xxxx Xxxxx,
Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000 (the "Parent"), and the each subsidiary of
the Parent listed on Schedule I attached hereto (each a "Subsidiary," and
collectively and together with the Parent, the "Company"), in favor of Cornell
Capital Partners, L.P. ("Cornell") and Highgate House Funds, Ltd. ("Highgate,"
and collectively with Cornell, the "Secured Party").
WHEREAS, Highgate is the holder of a convertible debentures in the original
principal amount of $1,062,329 issued by the Parent to Highgate (the "Highgate
Debentures"), Cornell is the holder of a convertible debenture in the original
principal amount of $150,000 issued by the Parent to Cornell (the "Cornell
Debenture"), and the Parent shall issue and sell to Cornell, as provided in the
Securities Purchase Agreement of even date herewith (the "Securities Purchase
Agreement"), and Cornell shall purchase secured convertible debentures (the
"February Debenture" and collectively along with the Highgate Debentures and the
Cornell Debenture, the "Convertible Debentures"), which Convertible Debentures
are or shall be convertible into shares of the Parent's common stock, par value
$0.001;
WHEREAS, to induce Cornell and Highgate to enter into the transactions
contemplated by the Securities Purchase Agreement and all related documents
entered into in connection therewith (collectively along with the Convertible
Debentures referred to as the "Transaction Documents"), each Company hereby
grants to the Secured Party a security interest in and to the pledged property
of each Company identified on Exhibit A hereto (collectively referred to as the
"Pledged Property") to secure all of the Obligations (as defined below).
NOW, THEREFORE, in consideration of the promises and the mutual covenants
herein contained, and for other good and valuable consideration, the adequacy
and receipt of which are hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE 1.
DEFINITIONS AND INTERPRETATIONS
Section 1.1. Recitals.
The above recitals are true and correct and are incorporated herein, in
their entirety, by this reference.
Section 1.2. Interpretations.
Nothing herein expressed or implied is intended or shall be construed to
confer upon any person other than the Secured Party any right, remedy or claim
under or by reason hereof.
Section 1.3. Obligations Secured.
The security interest created hereby in the Pledged Property constitutes
continuing collateral security for all of the obligations of the Parent now
existing or hereinafter incurred to the Secured Party, whether oral or written
and whether arising before, on or after the date hereof including, without
limitation following obligations (collectively, the "Obligations"):
(a) The payment by the Parent, as and when due and payable (by scheduled
maturity, acceleration, demand or otherwise), of all amounts from time
to time owing by it in respect of the Convertible Debentures; and
(b) for so long as the Convertible Debentures are outstanding, the due
performance and observance by the Parent of all of its other
obligations from time to time existing in respect of any of the
Transaction Documents, including without limitation, the Parent's
obligations with respect to any conversion or redemption rights of the
Secured Party under the Convertible Debentures.
ARTICLE 2.
PLEDGED PROPERTY; EVENT OF DEFAULT
Section 2.1. Pledged Property.
(a) As collateral security for all of the Obligations, the Company hereby
pledges to the Secured Party, and creates in the Secured Party for its
benefit, a continuing security interest in and to all of the Pledged
Property whether now owned or hereafter acquired.
(b) Simultaneously with the execution and delivery of this Agreement, the
Company shall make, execute, acknowledge, file, record and deliver to
the Secured Party any documents reasonably requested by the Secured
Party to perfect its security interest in the Pledged Property.
Simultaneously with the execution and delivery of this Agreement, the
Company shall make, execute, acknowledge and deliver to the Secured
Party such documents and instruments, including, without limitation,
financing statements, certificates, affidavits and forms as may, in
the Secured Party's reasonable judgment, be necessary to effectuate,
complete or perfect, or to continue and preserve, the security
interest of the Secured Party in the Pledged Property, and the Secured
Party shall hold such documents and instruments as secured party,
subject to the terms and conditions contained herein.
Section 2.2. Event of Default
An "Event of Default" shall be deemed to have occurred under this Agreement
upon an Event of Default under and as defined in the Convertible Debentures.
ARTICLE 3.
ATTORNEY-IN-FACT; PERFORMANCE
Section 3.1. Secured Party Appointed Attorney-In-Fact.
Upon the occurrence and during the continuance of an Event of Default: (a)
the Company hereby appoints the Secured Party as its attorney-in-fact, with full
authority in the place and stead of the Company and in the name of the Company
or otherwise, from time to time in the Secured Party's discretion to take any
action and to execute any instrument which the Secured Party may reasonably deem
necessary to accomplish the purposes of this Agreement, including, without
limitation, to receive and collect all instruments made payable to the Company
representing any payments in respect of the Pledged Property or any part thereof
and to give full discharge for the same; (b) the Secured Party may demand,
collect, receipt for, settle, compromise, adjust, xxx for, foreclose, or realize
on the Pledged Property as and when the Secured Party may determine, and (c) to
facilitate collection, the Secured Party may notify account debtors and obligors
on any Pledged Property to make payments directly to the Secured Party.
Section 3.2. Secured Party May Perform.
If the Company fails to perform any agreement contained herein, the Secured
Party, at its option, may itself perform, or cause performance of, such
agreement, and the expenses of the Secured Party incurred in connection
therewith shall be included in the Obligations secured hereby and payable by the
Company under Section 8.3.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
Section 4.1. Authorization; Enforceability.
Each of the parties hereto represents and warrants that it has taken all
action necessary to authorize the execution, delivery and performance of this
Agreement and the transactions contemplated hereby; and upon execution and
delivery, this Agreement shall constitute a valid and binding obligation of the
respective party, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights or by the principles
governing the availability of equitable remedies.
Section 4.2. Ownership of Pledged Property.
The Company represents and warrants that it is the legal and beneficial
owner of the Pledged Property free and clear of any lien, security interest,
option or other charge or encumbrance (each, a "Lien") except for the security
interest created by this Agreement, any prior security interest granted to the
Secured Party, and other Permitted Liens. For purposes of this Agreement,
"Permitted Liens" means: (1) the security interest created by this Agreement,
(2) existing Liens disclosed by the Company to the Secured Party; (3) inchoate
Liens for taxes, assessments or governmental charges or levies not yet due, as
to which the grace period, if any, related thereto has not yet expired, or being
contested in good faith and by appropriate proceedings for which adequate
reserves have been established in accordance with GAAP; (4) Liens of carriers,
materialmen, warehousemen, mechanics and landlords and other similar Liens which
secure amounts which are not yet overdue by more than 60 days or which are being
contested in good faith by appropriate proceedings; (5) licenses, sublicenses,
leases or subleases granted to other Persons not materially interfering with the
conduct of the business of the Company; (6) Liens securing capitalized lease
obligations and purchase money indebtedness incurred solely for the purpose of
financing an acquisition or lease; (7) easements, rights-of-way, restrictions,
encroachments, municipal zoning ordinances and other similar charges or
encumbrances, and minor title deficiencies, in each case not securing debt and
not materially interfering with the conduct of the business of the Company and
not materially detracting from the value of the property subject thereto; (8)
Liens arising out of the existence of judgments or awards which judgments or
awards do not constitute an Event of Default; (9) Liens incurred in the ordinary
course of business in connection with workers compensation claims, unemployment
insurance, pension liabilities and social security benefits and Liens securing
the performance of bids, tenders, leases and contracts in the ordinary course of
business, statutory obligations, surety bonds, performance bonds and other
obligations of a like nature (other than appeal bonds) incurred in the ordinary
course of business (exclusive of obligations in respect of the payment for
borrowed money); (10) Liens in favor of a banking institution arising by
operation of law encumbering deposits (including the right of set-off) and
contractual set-off rights held by such banking institution and which are within
the general parameters customary in the banking industry and only burdening
deposit accounts or other funds maintained with a creditor depository
institution; (11) usual and customary set-off rights in leases and other
contracts; and (12) escrows in connection with acquisitions and dispositions.
ARTICLE 5.
DEFAULT; REMEDIES; SUBSTITUTE COLLATERAL
Section 5.1 Method of Realizing Upon the Pledged Property:
Other Remedies.
If any Event of Default shall have occurred and be continuing:
(a) The Secured Party may exercise in respect of the Pledged Property, in
addition to any other rights and remedies provided for herein or
otherwise available to it, all of the rights and remedies of a secured
party upon default under the Uniform Commercial Code (whether or not
the Uniform Commercial Code applies to the affected Pledged Property),
and also may (i) take absolute control of the Pledged Property,
including, without limitation, transfer into the Secured Party's name
or into the name of its nominee or nominees (to the extent the Secured
Party has not theretofore done so) and thereafter receive, for the
benefit of the Secured Party, all payments made thereon, give all
consents, waivers and ratifications in respect thereof and otherwise
act with respect thereto as though it were the outright owner thereof,
(ii) require the Company to assemble all or part of the Pledged
Property as directed by the Secured Party and make it available to the
Secured Party at a place or places to be designated by the Secured
Party that is reasonably convenient to both parties, and the Secured
Party may enter into and occupy any premises owned or leased by the
Company where the Pledged Property or any part thereof is located or
assembled for a reasonable period in order to effectuate the Secured
Party's rights and remedies hereunder or under law, without obligation
to the Company in respect of such occupation, and (iii) without notice
except as specified below and without any obligation to prepare or
process the Pledged Property for sale, (A) sell the Pledged Property
or any part thereof in one or more parcels at public or private sale,
at any of the Secured Party's offices or elsewhere, for cash, on
credit or for future delivery, and at such price or prices and upon
such other terms as the Secured Party may deem commercially reasonable
and/or (B) lease, license or dispose of the Pledged Property or any
part thereof upon such terms as the Secured Party may deem
commercially reasonable. The Company agrees that, to the extent notice
of sale or any other disposition of the Pledged Property shall be
required by law, at least ten (10) days' notice to the Company of the
time and place of any public sale or the time after which any private
sale or other disposition of the Pledged Property is to be made shall
constitute reasonable notification. The Secured Party shall not be
obligated to make any sale or other disposition of any Pledged
Property regardless of notice of sale having been given. The Secured
Party may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was
so adjourned. The Company hereby waives any claims against the Secured
Party arising by reason of the fact that the price at which the
Pledged Property may have been sold at 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 Obligations, even if the Secured
Party accepts the first offer received and does not offer such Pledged
Property to more than one offeree, and waives all rights that the
Company may have to require that all or any part of such Pledged
Property be marshaled upon any sale (public or private) thereof. The
Company hereby acknowledges that (i) any such sale of the Pledged
Property by the Secured Party may be made without warranty, (ii) the
Secured Party may specifically disclaim any warranties of title,
possession, quiet enjoyment or the like, and (iii) such actions set
forth in clauses (i) and (ii) above shall not adversely affect the
commercial reasonableness of any such sale of Pledged Property.
(b) Any cash held by the Secured Party as Pledged Property and all cash
proceeds received by the Secured Party in respect of any sale of or
collection from, or other realization upon, all or any part of the
Pledged Property shall be applied (after payment of any amounts
payable to the Secured Party pursuant to Section 8.3 hereof) by the
Secured Party against, all or any part of the Obligations in such
order as the Secured Party shall elect, consistent with the provisions
of the Securities Purchase Agreement. Any surplus of such cash or cash
proceeds held by the Secured Party and remaining after the
indefeasible payment in full in cash of all of the Obligations shall
be paid over to whomsoever shall be lawfully entitled to receive the
same or as a court of competent jurisdiction shall direct.
(c) In the event that the proceeds of any such sale, collection or
realization are insufficient to pay all amounts to which the Secured
Party is legally entitled, the Company shall be liable for the
deficiency, together with interest thereon at the rate specified in
the Convertible Debentures for interest on overdue principal thereof
or such other rate as shall be fixed by applicable law, together with
the costs of collection and the reasonable fees, costs, expenses and
other client charges of any attorneys employed by the Secured Party to
collect such deficiency.
(d) The Company hereby acknowledges that if the Secured Party complies
with any applicable state, provincial, or federal law requirements in
connection with a disposition of the Pledged Property, such compliance
will not adversely affect the commercial reasonableness of any sale or
other disposition of the Pledged Property.
(e) The Secured Party shall not be required to marshal any present or
future collateral security (including, but not limited to, this
Agreement and the Pledged Property) for, or other assurances of
payment of, the Obligations or any of them or to resort to such
collateral security or other assurances of payment in any particular
order, and all of the Secured Party's rights hereunder and in respect
of such collateral security and other assurances of payment shall be
cumulative and in addition to all other rights, however existing or
arising. To the extent that the Company lawfully may, the Company
hereby agrees that it will not invoke any law relating to the
marshaling of collateral which might cause delay in or impede the
enforcement of the Secured Party's rights under this Agreement or
under any other instrument creating or evidencing any of the
Obligations or under which any of the Obligations is outstanding or by
which any of the Obligations is secured or payment thereof is
otherwise assured, and, to the extent that it lawfully may, the
Company hereby irrevocably waives the benefits of all such laws.
Section 5.2 Duties Regarding Pledged Property.
The Secured Party shall have no duty as to the collection or protection of
the Pledged Property or any income thereon or as to the preservation of any
rights pertaining thereto, beyond the safe custody and reasonable care of any of
the Pledged Property actually in the Secured Party's possession.
ARTICLE 6.
AFFIRMATIVE COVENANTS
The Company covenants and agrees that, from the date hereof and until the
Obligations have been fully paid and satisfied or the Convertible Debentures
have been fully converted, unless the Secured Party shall consent otherwise in
writing (as provided in Section 8.4 hereof):
Section 6.1. Existence, Properties, Etc.
(a) The Company shall do, or cause to be done, all things, or proceed with
due diligence with any actions or courses of action, that may be
reasonably necessary (i) to maintain Company's due organization, valid
existence and good standing under the laws of its state of
incorporation, and (ii) to preserve and keep in full force and effect
all qualifications, licenses and registrations in those jurisdictions
in which the failure to do so could have a Material Adverse Effect (as
defined below); and (b) the Company shall not do, or cause to be done,
any act impairing the Company's corporate power or authority (i) to
carry on the Company's business as now conducted, and (ii) to execute
or deliver this Agreement or any other document delivered in
connection herewith, including, without limitation, any UCC-1
Financing Statements required by the Secured Party (which other loan
instruments collectively shall be referred to as the "Loan
Instruments") to which it is or will be a party, or perform any of its
obligations hereunder or thereunder. For purpose of this Agreement,
the term "Material Adverse Effect" shall mean any material and adverse
affect as determined by Secured Party in its reasonable discretion,
whether individually or in the aggregate, upon (a) the Company's
assets, business, operations, properties or condition, financial or
otherwise; (b) the Company's ability to make payment as and when due
of all or any part of the Obligations; or (c) the Pledged Property.
Section 6.2. Financial Statements and Reports.
The Company shall furnish to the Secured Party within a reasonable time
such financial data as the Secured Party may reasonably request.
Section 6.3. Accounts and Reports.
The Company shall maintain a standard system of accounting in accordance
with generally accepted accounting principles consistently applied ("GAAP") and
provide, at its sole expense, to the Secured Party the following:
(a) as soon as available, a copy of any notice or other communication
alleging any nonpayment or other material breach or default, or any
foreclosure or other action respecting any material portion of its
assets and properties, received respecting any of the indebtedness of
the Company in excess of $500,000 (other than the Obligations), or any
demand or other request for payment under any guaranty, assumption,
purchase agreement or similar agreement or arrangement respecting the
indebtedness or obligations of others in excess of $500,000; and
(b) within fifteen (15) days after the making of each submission or
filing, a copy of any report, financial statement, notice or other
document, whether periodic or otherwise, submitted to the shareholders
of the Company, or submitted to or filed by the Company with any
governmental authority involving or affecting (i) the Company that
could reasonably be expected to have a Material Adverse Effect; (ii)
the Obligations; (iii) any part of the Pledged Property; or (iv) any
of the transactions contemplated in this Agreement or the Loan
Instruments (except, in each case, to the extent any such submission,
filing, report, financial statement, notice or other document is
posted on XXXXX Online).
Section 6.4. Maintenance of Books and Records; Inspection.
The Company shall maintain its books, accounts and records in accordance
with GAAP, and permit the Secured Party, its officers and employees and any
professionals designated by the Secured Party in writing, at any time during
normal business hours and upon reasonable notice to visit and inspect any of its
properties (including but not limited to the collateral security described in
the Transaction Documents and/or the Loan Instruments), corporate books and
financial records, and to discuss its accounts, affairs and finances with any
employee, officer or director thereof (it being agreed that, unless an Event of
Default shall have occurred and be continuing, there shall be no more than two
(2) such visits and inspections in any Fiscal Year).
Section 6.5. Maintenance and Insurance.
(a) The Company shall maintain or cause to be maintained, at its own
expense, all of its material assets and properties in good working
order and condition, ordinary wear and tear excepted, making all
necessary repairs thereto and renewals and replacements thereof.
(b) The Company shall maintain or cause to be maintained, at its own
expense, insurance in form, substance and amounts (including
deductibles), which the Company deems reasonably necessary to the
Company's business, (i) adequate to insure all assets and properties
of the Company of a character usually insured by persons engaged in
the same or similar business against loss or damage resulting from
fire or other risks included in an extended coverage policy; (ii)
against public liability and other tort claims that may be incurred by
the Company; (iii) as may be required by the Transaction Documents
and/or applicable law and (iv) as may be reasonably requested by
Secured Party, all with financially sound and reputable insurers.
Section 6.6. Contracts and Other Collateral.
The Company shall perform all of its obligations under or with respect to
each instrument, receivable, contract and other intangible included in the
Pledged Property to which the Company is now or hereafter will be party on a
timely basis and in the manner therein required, including, without limitation,
this Agreement, except to the extent the failure to so perform such obligations
would not reasonably be expected to have a Material Adverse Effect.
Section 6.7. Defense of Collateral, Etc.
The Company shall defend and enforce its right, title and interest in and
to any part of: (a) the Pledged Property; and (b) if not included within the
Pledged Property, those assets and properties whose loss would reasonably be
expected to have a Material Adverse Effect, each against all manner of claims
and demands on a timely basis to the full extent permitted by applicable law
(other than any such claims and demands by holders of Permitted Liens).
Section 6.8. Taxes and Assessments.
The Company shall (a) file all material tax returns and appropriate
schedules thereto that are required to be filed under applicable law, prior to
the date of delinquency (taking into account any extensions of the original due
date), (b) pay and discharge all material taxes, assessments and governmental
charges or levies imposed upon the Company, upon its income and profits or upon
any properties belonging to it, prior to the date on which penalties attach
thereto, and (c) pay all material taxes, assessments and governmental charges or
levies that, if unpaid, might become a lien or charge upon any of its
properties; provided, however, that the Company in good faith may contest any
such tax, assessment, governmental charge or levy described in the foregoing
clauses (b) and (c) so long as appropriate reserves are maintained with respect
thereto if and to the extent required by GAAP.
Section 6.9. Compliance with Law and Other Agreements.
The Company shall maintain its business operations and property owned or
used in connection therewith in compliance with (a) all applicable federal,
state and local laws, regulations and ordinances governing such business
operations and the use and ownership of such property, and (b) all agreements,
licenses, franchises, indentures and mortgages to which the Company is a party
or by which the Company or any of its properties is bound, except where the
failure to so comply would not reasonably be expected to have a Material Adverse
Effect.
Section 6.10. Notice of Default.
The Company shall give written notice to the Secured Party of the
occurrence of any Event of Default.
Section 6.11. Notice of Litigation.
The Company shall give notice, in writing, to the Secured Party of (a) any
actions, suits or proceedings wherein the amount at issue is in excess of
$250,000, instituted by any persons against the Company, or affecting any of the
assets of the Company, and (b) any dispute, not resolved within fifteen (15)
days of the commencement thereof, between the Company on the one hand and any
governmental or regulatory body on the other hand, which might reasonably be
expected to have a Material Adverse Effect on the business operations or
financial condition of the Company.
Section 6.13. Future Subsidiaries.
If the Company shall hereafter create or acquire any subsidiary,
simultaneously with the creation or acquisition of such subsidiary, the Company
shall cause such subsidiary to grant to the Secured Party a security interest of
the same tenor as created under this Agreement.
ARTICLE 7.
NEGATIVE COVENANTS
The Company covenants and agrees that, from the date hereof until the
Obligations have been fully paid and satisfied, the Company shall not, unless
the Secured Party shall consent otherwise in writing:
Section 7.1. Liens and Encumbrances.
Directly or indirectly make, create, incur, assume or permit to exist
any Lien in, to or against any part of the Pledged Property other than Permitted
Liens.
Section 7.2. Restriction on Redemption and Cash Dividends
Directly or indirectly, redeem, repurchase or declare or pay any cash
dividend or distribution on its capital stock without the prior express written
consent of the Secured Party.
Section 7.3. Incurrence of Indebtedness.
Directly or indirectly, incur or guarantee, assume or suffer to exist any
indebtedness, other than the indebtedness evidenced by the Convertible
Debentures and other Permitted Indebtedness. "Permitted Indebtedness" means: (i)
indebtedness evidenced by Convertible Debentures; (ii) indebtedness described on
the Disclosure Schedule to the Securities Purchase Agreement; (iii) indebtedness
incurred solely for the purpose of financing the acquisition or lease of any
equipment by the Company, including capital lease obligations with no recourse
other than to such equipment; (iv) indebtedness (A) the repayment of which has
been subordinated to the payment of the Convertible Debentures on terms and
conditions acceptable to the Secured Party, including with regard to interest
payments and repayment of principal, (B) which does not mature or otherwise
require or permit redemption or repayment prior to or on the 91st day after the
maturity date of any Convertible Debentures then outstanding; and (C) which is
not secured by any assets of the Company; (v) indebtedness solely between the
Company and/or one of its domestic subsidiaries, on the one hand, and the
Company and/or one of its domestic subsidiaries, on the other which indebtedness
is not secured by any assets of the Company or any of its subsidiaries, provided
that (x) in each case a majority of the equity of any such domestic subsidiary
is directly or indirectly owned by the Company, such domestic subsidiary is
controlled by the Company and such domestic subsidiary has executed a security
agreement in the form of this Agreement and (y) any such loan shall be evidenced
by an intercompany note that is pledged by the Company or its subsidiary, as
applicable, as collateral pursuant to this Agreement; (vi) reimbursement
obligations in respect of letters of credit issued for the account of the
Company or any of its subsidiaries for the purpose of securing performance
obligations of the Company or its subsidiaries incurred in the ordinary course
of business so long as the aggregate face amount of all such letters of credit
does not exceed $500,000 at any one time; and (vii) renewals, extensions and
refinancing of any indebtedness described in clauses (i) or (iii) of this
subsection.
Section 7.4. Places of Business.
Change the location of its chief place of business, chief executive office
or any place of business disclosed to the Secured Party, unless such change in
location is to a different location within the United States and the Company
provides notice to the Secured Party of new location within 10 days' of such
change in location.
ARTICLE 8.
MISCELLANEOUS
Section 8.1. Notices.
All notices or other communications required or permitted to be given
pursuant to this Agreement shall be in writing and shall be considered as duly
given on: (a) the date of delivery, if delivered in person or by nationally
recognized overnight delivery service or (b) five (5) days after mailing if
mailed from within the continental United States by certified mail, return
receipt requested to the party entitled to receive the same:
If to the Secured Party: Cornell Capital Partners, LP
000 Xxxxxx Xxxxxx-Xxxxx 0000
Xxxxxx Xxxx, Xxx Xxxxxx 00000
Attention: Xxxx Xxxxxx
Portfolio Manager
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxx Xxxxx, Esq.
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
And if to the Company: GS Carbon Corp.
Xxx Xxxx Xxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxxxxx. Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Sonageri & Fallon
000 Xxxxxxxxxx Xxx
Xxxxxxxxxx, Xxx Xxxxxx
Attention: Xxxxx Xxxxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
Any party may change its address by giving notice to the other party
stating its new address. Commencing on the tenth (10th) day after the giving of
such notice, such newly designated address shall be such party's address for the
purpose of all notices or other communications required or permitted to be given
pursuant to this Agreement.
Section 8.2. Severability.
If any provision of this Agreement shall be held invalid or unenforceable,
such invalidity or unenforceability shall attach only to such provision and
shall not in any manner affect or render invalid or unenforceable any other
severable provision of this Agreement, and this Agreement shall be carried out
as if any such invalid or unenforceable provision were not contained herein.
Section 8.3. Expenses.
In the event of an Event of Default, the Company will pay to the Secured
Party the amount of any and all reasonable out-of-pocket expenses, including the
reasonable fees and expenses of its counsel, which the Secured Party may incur
in connection with: (i) the custody or preservation of, or the sale, collection
from, or other realization upon, any of the Pledged Property; (ii) the exercise
or enforcement of any of the rights of the Secured Party hereunder or (iii) the
failure by the Company to perform or observe any of the provisions hereof.
Section 8.4. Waivers, Amendments, Etc.
The Secured Party's delay or failure at any time or times hereafter to
require strict performance by Company of any undertakings, agreements or
covenants shall not waive, affect, or diminish any right of the Secured Party
under this Agreement to demand strict compliance and performance herewith. Any
waiver by the Secured Party of any Event of Default shall not waive or affect
any other Event of Default, whether such Event of Default is prior or subsequent
thereto and whether of the same or a different type. None of the undertakings,
agreements and covenants of the Company contained in this Agreement, and no
Event of Default, shall be deemed to have been waived by the Secured Party, nor
may this Agreement be amended, changed or modified, unless such waiver,
amendment, change or modification is evidenced by an instrument in writing
specifying such waiver, amendment, change or modification and signed by the
Secured Party in the case of any such waiver, and signed by the Secured Party
and the Company in the case of any such amendment, change or modification.
Section 8.5. Continuing Security Interest; Partial Release.
(a) This Agreement shall create a continuing security interest in the
Pledged Property and shall: (i) remain in full force and effect until
payment or conversion in full of the Convertible Debentures; (ii) be
binding upon the Company and its successors and assigns; and (iii)
inure to the benefit of the Secured Party and its successors and
assigns. Upon the payment or satisfaction in full or conversion in
full of the Convertible Debentures, this Agreement and the security
interest created hereby shall terminate, and, in connection therewith,
the Company shall be entitled to the return, at its expense, of such
of the Pledged Property as shall not have been sold in accordance with
Section 5.2 hereof or otherwise applied pursuant to the terms hereof
and the Secured Party shall deliver to the Company such documents as
the Company shall reasonably request to evidence such termination.
(b) Effective upon the closing of a disposition of any Pledged Property,
provided the Secured Party consents in writing prior to such
disposition or such disposition is made in the ordinary course of
business, the security interest granted hereunder in the Pledged
Property so disposed of shall terminate and the Secured Party shall
deliver such documents as the Company shall reasonably request to
evidence such termination; provided, however, the security interest
granted hereunder in all remaining Pledged Property shall remain in
full force and effect.
Section 8.6. Independent Representation.
Each party hereto acknowledges and agrees that it has received or has had
the opportunity to receive independent legal counsel of its own choice and that
it has been sufficiently apprised of its rights and responsibilities with regard
to the substance of this Agreement.
Section 8.7. Applicable Law: Jurisdiction.
This Agreement shall be governed by and interpreted in accordance with the
laws of the State of New Jersey without regard to the principles of conflict of
laws. The parties further agree that any action between them shall be heard in
Xxxxxx County, New Jersey, and expressly consent to the jurisdiction and venue
of the Superior Court of New Jersey, sitting in Xxxxxx County and the United
States District Court for the District of New Jersey sitting in Newark, New
Jersey for the adjudication of any civil action asserted pursuant to this
Paragraph.
Section 8.8. Waiver of Jury Trial.
AS A FURTHER INDUCEMENT FOR THE SECURED PARTY TO ENTER INTO THIS AGREEMENT
AND TO MAKE THE FINANCIAL ACCOMMODATIONS TO THE COMPANY, THE COMPANY HEREBY
WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO
THIS AGREEMENT AND/OR ANY AND ALL OTHER DOCUMENTS RELATED TO THIS TRANSACTION.
Section 8.9. Entire Agreement.
This Agreement constitutes the entire agreement among the parties and
supersedes any prior agreement or understanding among them with respect to the
subject matter hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have executed this Security
Agreement as of the date first above written.
COMPANY:
GS CARBON CORP.
By:
---------------------------------
Name: Xxxxx Xxxxxxxx
Title: Chief Executive Officer
IN WITNESS WHEREOF, the parties hereto have executed this Security
Agreement as of the date first above written.
COMPANY:
GS Advanced Applications, Inc.
By:
Name:
Title:
IN WITNESS WHEREOF, the parties hereto have executed this Security
Agreement as of the date first above written.
SECURED PARTY:
CORNELL CAPITAL PARTNERS, LP
By: Yorkville Advisors, LLC
Its: Investment Manager
By:
-----------------------------------
Name: Xxxx Xxxxxx
Title: Portfolio Manager
SCHEDULE I
LEGAL NAMES; ORGANIZATIONAL IDENTIFICATION NUMBERS; STATES OF ORGANIZATION
--------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
State of OrganizationEmployer ID Organizational ID
Company's Name
-------------------------------------------------------------------------------------------------------------
GS Advanced Applications, Inc. Delaware
-------------------------------------------------------------------------------------------------------------
EXHIBIT A
DEFINITION OF PLEDGED PROPERTY
For the purpose of securing prompt and complete payment and performance by
the Company of all of the Obligations, the Company unconditionally and
irrevocably hereby grants to the Secured Party a continuing security interest in
and to, and lien upon, the following Pledged Property of the Company:
(a) all goods of the Company, including, without limitation, machinery,
equipment, furniture, furnishings, fixtures, signs, lights, tools,
parts, supplies and motor vehicles of every kind and description, now
or hereafter owned by the Company or in which the Company may have or
may hereafter acquire any interest, and all replacements, additions,
accessions, substitutions and proceeds thereof, arising from the sale
or disposition thereof, and where applicable, the proceeds of
insurance and of any tort claims involving any of the foregoing;
(b) all inventory of the Company, including, but not limited to, all
goods, wares, merchandise, parts, supplies, finished products, other
tangible personal property, including such inventory as is temporarily
out of Company's custody or possession and including any returns upon
any accounts or other proceeds, including insurance proceeds,
resulting from the sale or disposition of any of the foregoing;
(c) all contract rights and general intangibles of the Company, including,
without limitation, goodwill, trademarks, trade styles, trade names,
leasehold interests, partnership or joint venture interests, patents
and patent applications, copyrights, deposit accounts whether now
owned or hereafter created;
(d) all documents, warehouse receipts, instruments and chattel paper of
the Company whether now owned or hereafter created;
(e) all accounts and other receivables, instruments or other forms of
obligations and rights to payment of the Company (herein collectively
referred to as "Accounts"), together with the proceeds thereof, all
goods represented by such Accounts and all such goods that may be
returned by the Company's customers, and all proceeds of any insurance
thereon, and all guarantees, securities and liens which the Company
may hold for the payment of any such Accounts including, without
limitation, all rights of stoppage in transit, replevin and
reclamation and as an unpaid vendor and/or lienor;
(f) to the extent assignable, all of the Company's rights under all
present and future authorizations, permits, licenses and franchises
issued or granted in connection with the operations of any of its
facilities;
(g) all equity interests, securities or other instruments in other
companies, including, without limitation, any subsidiaries,
investments or other entities (whether or not controlled); and
(h) all products and proceeds (including, without limitation, insurance
proceeds) from the above-described Pledged Property.
