SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement"), is entered into and made effective as
of March 6, 2007, by and between GS AGRIFUELS CORPORATION, a Delaware
corporation with its principal place of business located at Xxx Xxxx Xxxxx,
Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000 (the "Company"), in favor of
____________________________________ (the "Secured Party").
WHEREAS, Secured Party is the holder of that certain Expansion Debenture in the
original principal amount of $_____________________________, and those certain
Term Debentures in the aggregate original principal amount of
$_________________________, each of which debentures were issued on even date
herewith by the Company (the "Convertible Debentures"), which Convertible
Debentures are or shall be convertible into shares of the Company's common
stock, par value $0.001, and were issued pursuant to that certain Share Purchase
Agreement by and between the Company and the Secured Party of even date herewith
(the "Share Purchase Agreement";
WHEREAS, to induce Secured Party to enter into the transactions
contemplated by the Share Purchase Agreement and all related documents entered
into in connection therewith (collectively along with the Convertible Debentures
referred to as the "Transaction Documents"), the Company hereby grants to the
Secured Party a security interest in and to the pledged property 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 Company 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 Company, 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 Expansion Debenture;
(b) The payment by the Company, 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 Term Debentures;
(c) for so long as the Convertible Debentures are outstanding, the due
performance and observance by the Company of all of its other
obligations from time to time existing in respect of any of the
Transaction Documents, including without limitation, the Company'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.
(c) The Secured Party hereby agrees to subordinate its security interests
granted herein to those of any current or future creditor of the
Company from whom the Company obtains an asset-backed or other loan,
debenture or other credit agreement in its ordinary course of business
(including, without limitation, any secured credit agreements
specifically obtained for the purpose of completing the Expansion).
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.
PERFORMANCE
Section 3.1. 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.
ARTICLE 5.
DEFAULT; REMEDIES
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).
(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 Share 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 returned to the Company.
(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.
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 that may actually be in the Secured Party's possession.
ARTICLE 6.
MISCELLANEOUS
Section 6.1. 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 Company, to: GS AgriFuels Corporation
Xxx Xxxx Xxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxx Xxxxxxxxxx, Chief Executive Officer
If to the Holder: [ENTER NAME]
[ENTER ADDRESS]
[ENTER ADDRESS]
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 6.2. 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 6.3. 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 6.4. 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 6.5. 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 6.6. 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 6.7. Applicable Law: Jurisdiction.
This Agreement shall be governed by the laws of the State of New York and
the United States of America (regardless of the laws that might be applicable
under principles of conflicts of law or international law) as to all matters
including, but not limited to, matters of validity, construction, effect and
performance.
Section 6.8. 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 6.9. 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.
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IN WITNESS WHEREOF, the parties hereto have executed this Security Agreement as
of the date first above written.
GS AGRIFUELS CORPORATION
By: __________________________
Name: Xxx Xxxxxxxxxx
Title: President and Chief Executive Officer
[ENTER NAMER]
By: __________________________
[ENTER NAME]
Individually
EXHIBIT A
DEFINITION OF PLEDGED PROPERTY
_____________________________________________________________(_________________)
shares of Sustainable Systems, Inc. common stock held by GS AgriFuels
Corporation.
