EXECUTION VERSION

 

SECURITY AGREEMENT

 

This SECURITY AGREEMENT (this “Agreement”), dated as of February 9, 2012,
between ASEN 2, CORP., a Delaware corporation (the “Company”) and PENTWATER
EQUITY OPPORTUNITIES MASTER FUND LTD., a Cayman Islands corporation
(“Opportunities”) and PWCM MASTER FUND LTD., a Cayman Islands corporation,
(“PWCM”; and together with each of their respective successors and assigns,
Opportunities and PWCM, collectively, the “Secured Party”).

 

WITNESSETH:

 

WHEREAS, the Secured Party has agreed to purchase from the Company that certain
Secured Convertible Promissory Note bearing even date herewith in the principal
amount of $20,000,000 (the “Note”) pursuant to that certain Note and Warrant
Purchase Agreement dated as of the date hereof (as amended, amended and
restated, supplemented, or otherwise modified from time to time, the “Purchase
Agreement”) by and among the Company, American Standard Energy Corporation, a
Delaware corporation, and the Secured Party, and

 

WHEREAS, in order to induce the Secured Party to enter into the Purchase
Agreement and other Transaction Documents and to purchase the Note pursuant to
the Purchase Agreement, the Company has agreed to grant to the Secured Party a
continuing security interest in and to the Collateral (as defined in this
Agreement) in order to secure the prompt and complete payment, observance and
performance of the Secured Obligations (as defined in this Agreement).

 

NOW, THEREFORE, for and in consideration of the recitals made above and other
good and valuable consideration, the receipt, sufficiency and adequacy of which
are hereby acknowledged, the parties hereto agree as follows:

 

1.          Defined Terms. All capitalized terms used herein (including in the
preamble and recitals hereof) without definition shall have the meanings
ascribed thereto in the Note, or if not expressly defined in the Note, then in
the Purchase Agreement; provided, however, that, for purposes of this Agreement,
“Transaction Documents” shall not include the Guaranty or any other Transaction
Document that the Company is not a party to. Any terms used in this Agreement
that are defined in the Code (whether or not capitalized) shall be construed and
defined as set forth in the Code unless otherwise defined herein or in Note or
the Purchase Agreement; provided, however, that if the Code is used to define
any term used herein and if such term is defined differently in different
Articles of the Code, the definition of such term contained in Article 9 of the
Code shall govern. In addition to those terms defined elsewhere in this
Agreement, as used in this Agreement, the following terms shall have the
following meanings:

 

“Account” means an account (as that term is defined in the Code).

 

 

 

“Account Debtor” means an account debtor (as that term is defined in the Code).

 

“Books” means books and records (including the Company’s Records indicating,
summarizing, or evidencing the Company’s assets (including the Collateral) or
liabilities, the Company’s Records relating to the Company’s business operations
or financial condition, and the Company’s goods or General Intangibles related
to such information).

 

“Chattel Paper” means chattel paper (as that term is defined in the Code) and
includes tangible chattel paper and electronic chattel paper.

 

“Code” means the New York Uniform Commercial Code, as in effect from time to
time; provided, however, that in the event that, by reason of mandatory
provisions of law, any or all of the attachment, perfection, priority, or
remedies with respect to the Secured Party’s Liens on any Collateral is governed
by the Uniform Commercial Code as enacted and in effect in a jurisdiction other
than the State of New York, the term “Code” shall mean the Uniform Commercial
Code as enacted and in effect in such other jurisdiction solely for purposes of
the provisions thereof relating to such attachment, perfection, priority, or
remedies.

 

“Collateral” has the meaning specified therefor in Section 2.

 

“Company” has the meaning specified therefor in the recitals to this Agreement.

 

“Equipment” means equipment (as that term is defined in the Code).

 

“Excluded Collateral” shall mean: (i) any non-material permit, lease, license or
contract held by the Company that prohibits, or requires the consent of any
Person as a condition to the creation by the Company of a Lien thereon and such
consent has not been obtained, or any non-material permit, lease, license or
contract held by the Company to the extent that any applicable law prohibits the
creation of a Lien thereon, but only, in each case, to the extent, and for so
long as, such prohibition is not terminated or rendered unenforceable or
otherwise deemed ineffective by the Code or any other applicable law; and (ii)
equipment owned by the Company that is subject to a Lien securing a purchase
money obligation or capitalized lease obligation if the contract or other
agreement in which such Lien is granted (or in the documentation providing for
such capital lease) prohibits or requires the consent of any Person as a
condition to the creation of any other Lien on such equipment and such consent
has not been obtained for so long as such restriction or prohibition is not
removed, terminated or rendered unenforceable or otherwise deemed ineffective by
the UCC or any other applicable law; provided, however, that the foregoing shall
cease to be Excluded Collateral (and shall constitute Collateral immediately at
such time as the contractual or legal prohibition or restriction shall no longer
be applicable, and, to the extent severable, such Lien shall attach to any
portion of such permit, lease, license or contract not subject to the
prohibitions specified in (i) or (ii) above; provided further, that Excluded
Collateral shall not include any proceeds of any such permit, lease, license or
contract.

 

 

 

“General Intangibles” means general intangibles (as that term is defined in the
Code), and, in any event, includes payment intangibles, contract rights, rights
to payment, rights arising under common law, statutes, or regulations, choses or
things in action, goodwill and domain names, industrial designs or rights
therein or applications therefor, whether under license or otherwise, programs,
programming materials, blueprints, drawings, purchase orders, customer lists,
monies due or recoverable from pension funds, route lists, rights to payment and
other rights under any royalty or licensing agreements, including infringement
claims, computer programs, information contained on computer disks or tapes,
software, literature, reports, catalogs, pension plan refunds, pension plan
refund claims, insurance premium rebates, tax refunds, and tax refund claims,
interests in a partnership or limited liability company which do not constitute
a security under Article 8 of the Code, and any other personal property other
than money, Accounts, Chattel Paper, goods, Negotiable Collateral, and oil, gas,
or other minerals before extraction.

 

“Governmental Authority” means any federal, state, local, or other governmental
or administrative body, instrumentality, board, department, or agency or any
court, tribunal, administrative hearing body, arbitration panel, commission, or
other similar dispute-resolving panel or body.

 

“Insolvency Proceeding” means any proceeding commenced by or against any Person
under any provision of title 11 of the United States Code, as in effect from
time to time, or under any other state or federal bankruptcy or insolvency law,
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extensions generally with creditors, or proceedings seeking
reorganization, arrangement or other similar relief.

 

“Inventory” means inventory (as that term is defined in the Code).

 

“Negotiable Collateral” means letters of credit, letter-of-credit rights,
instruments, promissory notes, drafts and documents.

 

“Organizational Documents” mean the documents by which the Company was organized
(such as a certificate of incorporation, certificate of limited partnership or
articles of organization, and including, without limitation, any certificates of
designation for preferred stock or other forms of preferred equity) and which
relate to the internal governance of the Company (such as bylaws, a partnership
agreement or an operating, limited liability or members agreement).

 

“Proceeds” has the meaning specified therefor in Section 2.

 

“Purchase Agreement” has the meaning specified therefor in the recitals to this
Agreement.

 

“Real Property” means the Oil and Gas Properties with respect to which the
Company has executed and delivered to the Secured Party Deeds of Trust.

 

“Records” means information that is inscribed on a tangible medium or which is
stored in an electronic or other medium and is retrievable in perceivable form.

 

“Security Interest” has the meaning specified therefor in Section 2.

 

 

 

“Secured Obligations” means all of the liabilities and obligations (primary,
secondary, direct, contingent, sole, joint or several) due or to become due, or
that are now or may be hereafter contracted or acquired, or owing, of the
Company to the Secured Party under this Agreement, the Note, the Purchase
Agreement and the other Transaction Documents to which the Company is a party,
in each case, whether now or hereafter existing, voluntary or involuntary,
direct or indirect, absolute or contingent, liquidated or unliquidated, whether
or not jointly owed with others, and whether or not from time to time decreased
or extinguished and later increased, created or incurred, and all or any portion
of such obligations or liabilities that are paid, to the extent all or any part
of such payment is avoided or recovered directly or indirectly from the Secured
Party as a preference, fraudulent transfer or otherwise as such obligations may
be amended, supplemented, converted, extended or modified from time to time.
Without limiting the generality of the foregoing, the term “Secured Obligations”
shall include, without limitation: (i) principal of, and interest on, the Note
and the advance extended pursuant thereto (including any interest that accrues
after the commencement of an Insolvency Proceeding regardless of whether allowed
or allowable in whole or in part as a claim in such Insolvency Proceeding); and
(ii) any and all other fees, legal fees and other expenses, indemnities, costs,
obligations and liabilities of the Company from time to time to the extent
payable by the Company to the Secured Party under or in connection with this
Agreement, the Note, the Purchase Agreement and the other Transaction Documents
to which the Company is a party.

 

“Secured Party’s Liens” means the Liens granted by the Company to the Secured
Party under the Transaction Documents.

 

“Supporting Obligations” means supporting obligations (as such term is defined
in the Code).

 

2.          Grant of Security. The Company hereby unconditionally grants,
assigns, and pledges to the Secured Party a continuing security interest (herein
referred to as the “Security Interest”) in all of the Company’s right, title,
and interest in and to the following, whether now owned or hereafter acquired or
arising and wherever located, but only to the extent directly relating to,
arising from or used in connection with the Company’s Real Property (the
“Collateral”):

 

(a)          all of the Company’s Accounts;

 

(b)          all of the Company’s Books;

 

(c)          all of the Company’s Chattel Paper;

 

(d)          all of the Company’s Equipment and fixtures;

 

(e)          all of the Company’s General Intangibles;

 

(f)          all of the Company’s Inventory;

 

(g)          all of the Company’s Negotiable Collateral;

 

 

 

(h)          all of the Company’s rights in respect of Supporting Obligations;

 

(i)          all of the Company’s money, cash equivalents, or other assets of
each the Company that now or hereafter come into the possession, custody, or
control of Secured Party;

 

(j)          all of the proceeds and products, whether tangible or intangible,
of any of the foregoing resulting from the sale, lease, license, exchange,
collection, or other disposition of any of the foregoing, the proceeds of any
award in condemnation with respect to any of the foregoing, any rebates or
refunds, whether for taxes or otherwise, and all proceeds of any such proceeds,
or any portion thereof or interest therein, and the proceeds thereof, and all
proceeds of any loss of, damage to, or destruction of the above, whether insured
or not insured, and, to the extent not otherwise included, any indemnity,
warranty, or guaranty payable by reason of loss or damage to, or otherwise with
respect to any of the foregoing (the “Proceeds”).

 

The foregoing notwithstanding, the Collateral shall not include any Excluded
Collateral.

 

3.          Security for Secured Obligations. This Agreement and the Security
Interest created hereby secures the payment and performance of the Secured
Obligations, whether now existing or arising hereafter.

 

4.          Company Remain Liable. Anything herein to the contrary
notwithstanding, (a) the Company shall remain liable under the contracts and
agreements included in the Collateral, to perform all of the duties and
obligations thereunder to the same extent as if this Agreement had not been
executed, (b) the exercise by the Secured Party of any of the rights hereunder
shall not release the Company from any of its duties or obligations under such
contracts and agreements included in the Collateral, and (c) the Secured Party
shall not have any obligation or liability under such contracts and agreements
included in the Collateral by reason of this Agreement, nor shall the Secured
Party be obligated to perform any of the obligations or duties of the Company
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder. Until an Event of Default shall occur and be continuing,
except as otherwise provided in this Agreement, the Note, the Purchase
Agreement, or the other Transaction Documents, the Company shall have the right
to possession and enjoyment of the Collateral for the purpose of conducting the
ordinary course of its business, subject to and upon the terms hereof and of the
Note, the Purchase Agreement and the other Transaction Documents.

 

5.          Representations and Warranties. The Company hereby represents and
warrants as follows:

 

(a)          The exact legal name, jurisdiction of incorporation, organization
or formation, organizational identification number, if any, and chief executive
office of the Company is set forth on Schedule 1 attached hereto. The Company
has not used any name other than that as set forth on Schedule 1 for the
preceding four months.

 

(b)          Schedule 2 attached hereto sets forth all Real Property.

 

 

 

(c)          The Company has the requisite corporate, partnership, limited
liability company or other power and authority to enter into this Agreement and
the other Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder. The execution, delivery and performance by the Company
of this Agreement and the filings contemplated herein and the other Transaction
Documents have been duly authorized by all necessary action on the part of the
Company and no further action is required by the Company. This Agreement and the
other Transaction Documents have been duly executed by the Company. This
Agreement and the other Transaction Documents constitute the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with their respective terms except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization and similar laws of general
application relating to or affecting the rights and remedies of creditors and by
general principles of equity.

 

(d)          No written claim has been received by the Company that any
Collateral or the Company’s use of any Collateral violates the rights of any
third party. There has been no adverse decision to the Company’s claim of
ownership rights in or exclusive rights to use the Collateral in any
jurisdiction or to the Company’s right to keep and maintain such Collateral in
full force and effect, and there is no proceeding involving said rights pending
or, to the best knowledge of the Company, threatened before any court, judicial
body, administrative or regulatory agency, arbitrator or other governmental
authority.

 

(e)          The Company shall at all times maintain its books of account and
records relating to the Collateral at its principal place of business (except
when temporarily kept at the offices of its attorneys or accountants) and its
Collateral at the locations set forth on Schedule 2 attached hereto and may not
relocate such books of account and records or tangible Collateral unless it
delivers to the Secured Party at least ten (10) Business Days prior to such
relocation (i) written notice of such relocation and the new location thereof
(which must be within the United States) and (ii) evidence that appropriate
financing statements under the Code and other necessary documents have been
filed and recorded and other steps have been taken to perfect the Security
Interests to create in favor of the Secured Party, subject to Permitted
Encumbrances, a valid, perfected and continuing perfected security interest in
the Collateral.

 

(f)          The execution, delivery and performance of this Agreement and the
other Transaction Documents by the Company do not (i) violate any of the
provisions of the Organizational Documents or any judgment, decree, order or
award of any court, governmental body or arbitrator or any applicable law, rule
or regulation applicable to the Company or (ii) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of,
any agreement, credit facility, debt or other instrument (evidencing the
Company’s debt or otherwise) or other understanding to which the Company is a
party or by which any property or asset of the Company is bound or affected,
except, in all cases, for such conflicts, defaults, terminations, amendments,
acceleration, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect. If any, all required consents
(including, without limitation, from stockholders or creditors of the Company)
necessary for the Company to enter into and perform its obligations hereunder
have been obtained.

 

 

 

(g)          This Agreement creates a valid security interest in the Collateral,
to the extent a security interest therein can be created under the Code,
securing the payment of the Secured Obligations. Except to the extent a security
interest in the Collateral cannot be perfected by the filing of a financing
statement under the Code, all filings and other actions necessary or desirable
to perfect and protect such security interest have been duly taken or will have
been taken upon the filing of financing statements listing the Company as a
debtor and the Secured Party as secured party in the jurisdictions listed next
to the Company’s name on Schedule 3 attached hereto. Upon the making of such
filings, the Secured Party shall have, subject to Permitted Encumbrances, a
perfected first priority security interest in the Collateral to the extent such
security interest can be perfected by the filing of a financing statement. All
action by the Company necessary to perfect such security interest on each item
of Collateral has been duly taken.

 

(h)          No consent, approval, authorization, or other order or other action
by, and no notice to or filing with, any Governmental Authority or any other
Person is required for the grant of a Security Interest by the Company in and to
the Collateral pursuant to this Agreement or for the execution, delivery, or
performance of this Agreement and the other Transaction Documents by the
Company, except such consents, approvals, authorizations, orders, actions,
notice or filings the absence of which could not, individually or in the
aggregate, have a Material Adverse Effect.

 

6.          Covenants. In, addition to the covenants in the Purchase Agreement,
the Company covenants and agrees with the Secured Party that from and after the
date of this Agreement and until the date of termination of this Agreement in
accordance with Section 20 hereof:

 

(a)           Possession of Collateral. In the event that any Collateral,
including Proceeds, is evidenced by or consists of Negotiable Collateral or
Chattel Paper, and if and to the extent that perfection or priority of the
Secured Party’s Security Interest is dependent on or enhanced by possession, the
applicable Company, promptly (and in any event within five (5) Business Day)
upon the request of the Secured Party, shall execute such other documents and
instruments as shall be reasonably requested by the Secured Party or, if
applicable, endorse and deliver physical possession of such Negotiable
Collateral or Chattel Paper to the Secured Party or its representative, together
with such undated powers endorsed in blank as shall be reasonably requested by
the Secured Party.

 

(b)           Chattel Paper.

 

(i)          The Company shall take all steps reasonably necessary to grant the
Secured Party control of all electronic Chattel Paper in accordance with the
Code and all “transferable records” as that term is defined in Section 16 of the
Uniform Electronic Transaction Act and Section 201 of the federal Electronic
Signatures in Global and National Commerce Act as in effect in any relevant
jurisdiction.

 

 

 

(ii)         If the Company retains possession of any Chattel Paper or
instruments (which retention of possession shall be subject to the extent
permitted hereby and by the Purchase Agreement), promptly upon the request of
the Secured Party, such Chattel Paper 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 Pentwater Equity Opportunities Master
Fund Ltd and PWCM Master Fund Ltd”.

 

(c)          Transfers and Other Liens. Except as otherwise expressly permitted
hereby or by the Purchase Agreement, Company shall not (i) sell, assign (by
operation of law or otherwise) or otherwise dispose of, or grant any option with
respect to, any of the Collateral, or (ii) create or permit to exist any Lien
upon or with respect to any of the Collateral, except for Permitted
Encumbrances. The inclusion of Proceeds in the Collateral shall not be deemed to
constitute the Secured Party’s consent to any sale or other disposition of any
of the Collateral except as expressly permitted in this Agreement or the
Purchase Agreement.

 

(d)          Other Actions as to Any and All Collateral. The Company shall
promptly (and in any event, within 5 Business Days of acquiring or obtaining
such Collateral) notify the Secured Party in writing upon (i) acquiring or
otherwise obtaining any Collateral after the date hereof consisting of Chattel
Paper (electronic, tangible or otherwise), documents (as defined in Article 9 of
the Code), promissory notes (as defined in the Code), or instruments (as defined
in the Code) or (ii) any amount payable under or in connection with any of the
Collateral being or becoming evidenced after the date hereof by any Chattel
Paper, documents, promissory notes, or instruments and, in each such case upon
the request of the Secured Party, promptly execute such other documents, or if
applicable, deliver such Chattel Paper other documents and do such other acts or
things deemed reasonably necessary or desirable by the Secured Party to protect
the Secured Party’s Liens therein.

 

(e)          Insurance. The Company shall maintain with financially sound and
reputable insurers, insurance with respect to the Collateral, including
Collateral hereafter acquired, against loss or damage of the kinds and in the
amounts customarily insured against by entities of established reputation having
similar properties similarly situated and in such amounts as are customarily
carried under similar circumstances by other such entities and otherwise as is
prudent for entities engaged in similar businesses but in any event sufficient
to cover the full replacement cost thereof. The Company shall cause each
insurance policy issued in connection herewith to provide, and the insurer
issuing such policy to certify to the Secured Party that (a) the Secured Party
will be named as lender loss payee (mortgagee, as applicable) and additional
insured under each such insurance policy; (b) if such insurance be proposed to
be cancelled for any reason whatsoever, such insurer will promptly notify
Secured Party and such cancellation shall not be effective as to the Secured
Party for at least thirty (30) days after receipt by the Secured Party of such
notice, unless the effect of such change is to extend or increase coverage under
the policy; and (c) the Secured Party will have the right (but no obligation) at
its election to remedy any default in the payment of premiums within thirty (30)
days of notice from the insurer of such default. Copies of such policies or the
related certificates, in each case, naming the Secured Party as lender loss
payee and additional insured shall be delivered to the Secured Party at least
annually and at the time any new policy of insurance is issued.

 

 

 

(f)          Inspection. The Company shall permit the Secured Party and its
representatives and agents reasonable access to inspect the Collateral during
normal business hours, upon reasonable prior notice and without undue
interference with the Company’ business operations, and to make copies of
records pertaining to the Collateral as may be reasonably requested by the
Secured Party from time to time.

 

7.          Relation to Other Security Documents. The provisions of this
Agreement shall be read and construed with the other Transaction Documents
referred to below in the manner so indicated.

 

(a)          Purchase Agreement. In the event of any conflict between any
provision in this Agreement and a provision in the Purchase Agreement, such
provision of the Purchase Agreement shall control.

 

(b)          Note. In the event of any conflict between any provision in this
Agreement and a provision in the Note, such provision of the Note shall control.

 

8.          Further Assurances.

 

(a)          The Company agrees that from time to time, at its own expense, the
Company will promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary or that the Secured Party may
reasonably request, in order to perfect and protect the Security Interest
granted or purported to be granted hereby or to enable the Secured Party to
exercise and enforce its rights and remedies hereunder with respect to any of
the Collateral.

 

(b)          Subject to Section 8(c), the Company authorizes the filing by the
Secured Party of financing or continuation statements, or amendments thereto,
and the Company will execute and deliver to the Secured Party such other
instruments or notices, as may be necessary or as Secured Party may reasonably
request, in order to perfect and preserve the Security Interest granted or
purported to be granted hereby.

 

(c)          The Company authorizes the Secured Party at any time and from time
to time to file, transmit, or communicate, as applicable, financing statements
and amendments with respect to the Collateral. The Company also hereby ratifies
any and all financing statements or amendments previously filed by the Secured
Party in any jurisdiction.

 

(d)          The Company acknowledges that it is not authorized to file any
financing statement or amendment or termination statement with respect to any
financing statement filed in connection with this Agreement without the prior
written consent of the Secured Party, subject to the Company’s rights under
Section 9-509(d)(2) of the Code.

 

9.          Secured Party’s Right to Perform Contracts, Exercise Rights, etc.
Upon the occurrence and during the continuance of an Event of Default, the
Secured Party (or its designee) may proceed to perform any and all of the
obligations of the Company contained in any contract, lease, or other agreement
and exercise any and all rights of the Company therein contained as fully as the
Company itself could.

 

 

 

10.         Secured Party Appointed Attorney-in-Fact. The Company hereby
irrevocably appoints the Secured Party its attorney-in-fact, with full authority
in the place and stead of the Company and in the name of the Company or
otherwise, at such time as an Event of Default has occurred and is continuing
under the Note, to take any action and to execute any instrument which the
Secured Party may reasonably deem necessary or advisable to accomplish the
purposes of this Agreement, including:

 

(a)          to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
connection with the Accounts or any Supporting Obligations in connection
therewith or any other Collateral;

 

(b)          to receive and open all mail addressed to the Company and to notify
postal authorities to change the address for the delivery of mail to the Company
to that of Secured Party;

 

(c)          to receive, indorse, and collect any drafts or other instruments,
documents, Negotiable Collateral or Chattel Paper;

 

(d)          to file any claims or take any action or institute any proceedings
which the Secured Party may deem necessary or desirable for the collection of
any of the Collateral or otherwise to enforce the rights of the Secured Party
with respect to any of the Collateral; and

 

(e)          to repair, alter, or supply goods, if any, necessary to fulfill in
whole or in part the purchase order of any Person obligated to the Company in
respect of any Account;

 

To the extent permitted by law, the Company hereby ratifies all that such
attorney-in-fact shall lawfully do or cause to be done by virtue hereof. This
power of attorney is coupled with an interest and shall be irrevocable until
this Agreement is terminated.

 

11.         Secured Party May Perform. If the Company fails to perform any
agreement contained herein, the Secured Party, after notice and a reasonable
opportunity for the Company to cure such lack of performance, may itself
perform, or cause performance of, such agreement, and the reasonable and
documented out-of-pocket expenses of the Secured Party incurred in connection
therewith shall be payable by the Company.

 

12.         Secured Party’s Duties. The powers conferred on the Secured Party
hereunder are solely to protect the Secured Party’s interest in the Collateral,
and shall not impose any duty upon the Secured Party to exercise any such
powers. Except for the safe custody of any Collateral in its actual possession
and the accounting for moneys actually received by it hereunder, the Secured
Party shall have no duty as to any Collateral or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral. The Secured Party shall be deemed to have
exercised reasonable care in the custody and preservation of any Collateral in
its actual possession if such Collateral is accorded treatment substantially
equal to that which the Secured Party accords its own property.

 

 

 

13.         Collection of Accounts, General Intangibles and Negotiable
Collateral. At any time upon the occurrence and during the continuance of an
Event of Default, the Secured Party or the Secured Party’s designee may (a)
notify Account Debtors that the Accounts, General Intangibles, Chattel Paper or
Negotiable Collateral have been assigned to the Secured Party or that the
Secured Party has a security interest therein, and (b) collect the Accounts,
General Intangibles and Negotiable Collateral directly, and any collection costs
and expenses shall constitute part of the Secured Obligations.

 

14.         Remedies. Upon the occurrence and during the continuance of an Event
of Default:

 

(a)          The Secured Party may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein, in the other
Transaction Documents, or otherwise available to it, all the rights and remedies
of a secured party on default under the Code or any other applicable law.
Without limiting the generality of the foregoing, the Company expressly agrees
that, in any such event, the Secured Party without demand of performance or
other demand, advertisement or notice of any kind (except a notice specified
below of time and place of public or private sale) to or upon any of Company or
any other Person (all and each of which demands, advertisements and notices are
hereby expressly waived to the maximum extent permitted by the Code or any other
applicable law), may take immediate possession of all or any portion of the
Collateral and (i) require Company to, and the Company hereby agrees that it
will at its own expense and upon request of the Secured Party forthwith,
assemble all or part of the Collateral as directed by Secured Party and make it
available to the Secured Party at one or more locations where the Company
regularly maintains Inventory, and (ii) without notice except as specified
below, sell or otherwise dispose of the Collateral or any part thereof in one or
more parcels at public or private sale or other disposition, at any of the
Secured Party’s offices or elsewhere, for cash, on credit, and upon such other
terms as the Secured Party may deem commercially reasonable. Without limiting
the generality of the foregoing, the Secured Party may disclaim any and all
representations and warranties in connection with any such sale or other
disposition. The Company agrees that, to the extent notice of sale 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 is to be made
shall constitute reasonable notification and specifically such notice shall
constitute a reasonable “authenticated notification of disposition” within the
meaning of Section 9-611 of the Code. The Secured Party shall not be obligated
to make any sale of Collateral 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.

 

(b)          Any cash held by the Secured Party as Collateral and all cash
proceeds received by the Secured Party in respect of any sale of, collection
from, or other realization upon all or any part of the Collateral shall be
applied against the Secured Obligations in the order set forth in the Purchase
Agreement. In the event the proceeds of Collateral are insufficient to satisfy
all of the Secured Obligations in full, the Company shall remain liable for any
such deficiency.

 

 

 

(c)          The Company hereby acknowledges that the Secured Obligations arose
out of a commercial transaction, and agrees that if an Event of Default shall
occur and be continuing the Secured Party shall have the right to an immediate
writ of possession and shall have the right to the appointment of a receiver for
the properties and assets of the Company.

 

15.         Remedies Cumulative. Each right, power, and remedy of the Secured
Party as provided for in this Agreement or in the other Transaction Documents or
now or hereafter existing at law or in equity or by statute or otherwise shall
be cumulative and concurrent and shall be in addition to every other right,
power, or remedy provided for in this Agreement or in the other Transaction
Documents or now or hereafter existing at law or in equity or by statute or
otherwise, and the exercise or beginning of the exercise by the Secured Party,
of any one or more of such rights, powers, or remedies shall not preclude the
simultaneous or later exercise by Secured Party of any or all such other rights,
powers, or remedies.

 

16.         Marshaling. The Secured Party shall not be required to marshal any
present or future collateral security (including but not limited to the
Collateral) for, or other assurances of payment of, the Secured Obligations or
any of them or to resort to such collateral security or other assurances of
payment in any particular order, and all of its rights and remedies hereunder
and in respect of such collateral security and other assurances of payment shall
be cumulative and in addition to all other rights and remedies, however existing
or arising. To the extent that it 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 and
remedies under this Agreement or under any other instrument creating or
evidencing any of the Secured Obligations or under which any of the Secured
Obligations is outstanding or by which any of the Secured 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.

 

17.         Indemnity and Expenses.

 

(a)          The Company agrees to indemnify the Secured Party from and against
all claims, lawsuits and liabilities (including reasonable and documented
attorneys fees) growing out of or resulting from this Agreement (including
enforcement of this Agreement) or any other Transaction Document, except claims,
losses or liabilities resulting from the gross negligence or willful misconduct
of the party seeking indemnification as determined by a final non-appealable
order of a court of competent jurisdiction. This provision shall survive the
termination of this Agreement and the repayment of the Secured Obligations.

 

(b)          The Company shall, upon demand, pay to the Secured Party all
reasonable and documented out-of-pocket fees, costs, charges and expenses which
the Secured Party may incur in connection with (i) the administration of this
Agreement, (ii) the custody, preservation, use or operation of, or, upon an
Event of Default, the sale of, collection from, or other realization upon, any
of the Collateral in accordance with this Agreement and the other Transaction
Documents, (iii) the exercise or enforcement of any of the rights of the Secured
Party hereunder or (iv) the failure by the Company to perform or observe any of
the provisions hereof.

 

 

 

18.         Merger, Amendments; Etc. THIS AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE
PARTIES. No waiver of any provision of this Agreement, and no consent to any
departure by the Company herefrom, shall in any event be effective unless the
same shall be in writing and signed by the Secured Party, and then such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given. No amendment of any provision of this Agreement shall
be effective unless the same shall be in writing and signed by the Secured Party
and the Company to which such amendment applies.

 

19.         Addresses for Notices. All notices and other communications provided
for hereunder shall be given in the form and manner and delivered to the Secured
Party at its address specified in the Purchase Agreement, and to the address of
the Company specified in the Purchase Agreement or, as to any party, at such
other address as shall be designated by such party in a written notice to the
other party.

 

20.         Continuing Security Interest: Assignments under Purchase Agreement.
This Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until the Secured Obligations have
been paid in full in cash in accordance with the provisions of the Note and the
Purchase Agreement, (b) be binding upon the Company and its successors and
permitted assigns, and (c) inure to the benefit of, and be enforceable by, the
Secured Party and its successors and permitted assigns. Without limiting the
generality of the foregoing clause (c), the Secured Party may, in accordance
with the provisions of the Note and the Purchase Agreement, assign or otherwise
transfer all or any portion of its rights and obligations under the Note and the
Purchase Agreement to any other Person, and such other Person shall thereupon
become vested with all the benefits in respect thereof granted to the Secured
Party herein or otherwise. Upon payment in full in cash of the Secured
Obligations in accordance with the provisions of the Note and the Purchase
Agreement, the Security Interest granted hereby shall terminate and all rights
to the Collateral shall revert to the Company or any other Person entitled
thereto. At such time, the Secured Party shall authorize the filing of
appropriate termination statements to terminate such Security Interests and
shall, at the expense of the Company, execute and deliver such other appropriate
documents as the Company may reasonably request to terminate such Security
Interests. No transfer or renewal, extension, assignment, or termination of this
Agreement or of the Note, the Purchase Agreement, any other Transaction
Document, or any other instrument or document executed and delivered by the
Company to the Secured Party nor any additional loans made by any Lender to the
Company, nor the taking of further security, nor the retaking or re-delivery of
the Collateral to the Company by the Secured Party, shall release the Company
from any obligation, except a release or discharge executed in writing by the
Secured Party in accordance with the provisions of the Note and the Purchase
Agreement. The Secured Party shall not by any act, delay, omission or otherwise,
be deemed to have waived any of its rights or remedies hereunder, unless such
waiver is in writing and signed by the Secured Party and then only to the extent
therein set forth. A waiver by the Secured Party of any right or remedy on any
occasion shall not be construed as a bar to the exercise of any such right or
remedy which the Secured Party would otherwise have had on any other occasion.

 

 

 

21.         Governing Law; Specific Performance; Consent to Jurisdiction; Venue.

 

(a)          THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY OF
THE CONFLICTS OF LAW PRINCIPLES WHICH WOULD RESULT IN THE APPLICATION OF THE
SUBSTANTIVE LAW OF ANOTHER JURISDICTION. THIS AGREEMENT SHALL NOT BE INTERPRETED
OR CONSTRUED WITH ANY PRESUMPTION AGAINST THE PARTY CAUSING THIS AGREEMENT TO BE
DRAFTED.

 

(b)          SUBJECT TO THE LAST SENTENCE OF THIS SECTION 21(b), ANY JUDICIAL
PROCEEDING BROUGHT BY OR AGAINST ANY PARTY WITH RESPECT TO THIS AGREEMENT, THE
OTHER TRANSACTION DOCUMENTS OR ANY RELATED AGREEMENT MAY BE BROUGHT IN ANY COURT
OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK, AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH PARTY TO THIS AGREEMENT ACCEPTS FOR ITSELF AND
IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE
BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. EACH
PARTY TO THIS AGREEMENT WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT
AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED MAIL
(RETURN RECEIPT REQUESTED) AT ITS ADDRESS SET FORTH IN SECTION 19 OF THIS
AGREEMENT AND SERVICE SO MADE SHALL BE DEEMED COMPLETED FIVE (5) DAYS AFTER THE
SAME SHALL HAVE BEEN SO DEPOSITED IN THE MAILS OF THE UNITED STATES OF AMERICA.
NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED
BY LAW OR SHALL LIMIT THE RIGHT OF THE INVESTOR TO BRING PROCEEDINGS AGAINST
EACH PARTY TO THIS AGREEMENT IN THE COURTS OF ANY OTHER JURISDICTION. EACH PARTY
TO THIS AGREEMENT HEREBY WAIVES ANY OBJECTION TO JURISDICTION AND VENUE OF ANY
ACTION INSTITUTED HEREUNDER AND SHALL NOT ASSERT ANY DEFENSE BASED ON LACK OF
JURISDICTION OR VENUE OR BASED UPON FORUM NON CONVENIENS. EACH PARTY TO THIS
AGREEMENT HEREBY WAIVES THE RIGHT TO REMOVE ANY JUDICIAL PROCEEDING BROUGHT
AGAINST IT IN ANY STATE COURT TO ANY FEDERAL COURT. ANY JUDICIAL PROCEEDING BY
ANY PARTY TO THIS AGREEMENT INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER OR
CLAIM IN ANY WAY ARISING OUT OF, RELATED TO OR CONNECTED WITH THIS AGREEMENT OR
ANY RELATED AGREEMENT, SHALL BE BROUGHT ONLY IN A FEDERAL OR STATE COURT LOCATED
IN THE COUNTY OF NEW YORK, STATE OF NEW YORK.

 

 

 

22.         Secured Party. Each reference herein to any right granted to,
benefit conferred upon or power exercisable by the “Secured Party” shall be a
reference to the Secured Party, its successors and permitted assigns, subject to
the limitation on assignment set forth in Section 7.7 of the Purchase Agreement.

 

23.         Miscellaneous.

 

(a)          This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, shall be deemed to be an original, and all of which, when taken
together, shall constitute but one and the same Agreement. Delivery of an
executed counterpart of this Agreement by telefacsimile or other electronic
method of transmission shall be equally as effective as delivery of an original
executed counterpart of this Agreement. Any party delivering an executed
counterpart of this Agreement by telefacsimile or other electronic method of
transmission also shall deliver an original executed counterpart of this
Agreement but the failure to deliver an original executed counterpart shall not
affect the validity, enforceability, and binding effect of this Agreement. The
foregoing shall apply to each other Transaction Document mutatis mutandis.

 

(b)          Any provision of this Agreement which is prohibited or
unenforceable shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof in that
jurisdiction or affecting the validity or enforceability of such provision in
any other jurisdiction.

 

(c)          Headings used in this Agreement are for convenience only and shall
not be used in connection with the interpretation of any provision hereof.

 

(d)          The pronouns used herein shall include, when appropriate, either
gender and both singular and plural, and the grammatical construction of
sentences shall conform thereto.

 

(e)          Unless the context of this Agreement or any other Transaction
Document clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the terms “includes”
and “including” are not limiting, and the term “or” has, except where otherwise
indicated, the inclusive meaning represented by the phrase “and/or.” The words
“hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement
or any other Transaction Document refer to this Agreement or such other
Transaction Document, as the case may be, as a whole and not to any particular
provision of this Agreement or such other Transaction Document, as the case may
be. Section, subsection, clause, schedule, and exhibit references herein are to
this Agreement unless otherwise specified. Any reference in this Agreement or in
any other Transaction Document to any agreement, instrument, or document shall
include all alterations, amendments, changes, extensions, modifications,
renewals, replacements, substitutions, joinders, and supplements, thereto and
thereof, as applicable (subject to any restrictions on such alterations,
amendments, changes, extensions, modifications, renewals, replacements,
substitutions, joinders, and supplements set forth herein or in the other
Transaction Documents). Any reference herein or in any other Transaction
Document to the satisfaction or repayment in full of the Secured Obligations
shall mean the repayment in full in cash (or cash collateralization in
accordance with the terms hereof) of all Secured Obligations other than
unasserted contingent indemnification obligations. Any reference herein to any
Person shall be construed to include such Person’s successors and assigns. Any
requirement of a writing contained herein or in any other Transaction Document
shall be satisfied by the transmission of a Record and any Record so transmitted
shall constitute a representation and warranty as to the accuracy and
completeness of the information contained therein.

 

[Signature Page Follows]

 

 

 

 

EXECUTION VERSION

 

IN WITNESS WHEREOF, the undersigned parties hereto have executed this Agreement
by and through their duly authorized officers, as of the day and year first
above written.

 

GRANTOR: ASEN 2, CORP.         By: /s/ Scott Feldhacker     Scott Feldhacker    
Chief Executive Officer       SECURED PARTY: PENTWATER EQUITY OPPORTUNITIES
MASTER FUND LTD.         By: /s/ David Zirin     David Zirin     Director      
  PWCM MASTER FUND LTD.         By: /s/ David Zirin     David Zirin     Director