Exhibit 10.3

 

SECURITY AGREEMENT

 

This SECURITY AGREEMENT, dated as of October 24, 2017 (this “Agreement”), is
among Synthesis Energy Systems, Inc., a Delaware corporation (the “Company”),
all of the Domestic Subsidiaries (as defined below) of the Company from time to
time party hereto (such subsidiaries, the “Guarantors” and together with the
Company, the “Debtors”), and the holders of the Company’s 11% Senior Secured
Debentures due five (5) years following their issuance, in the original
aggregate principal amount of $8,000,000 (collectively, the “Debentures”)
signatory hereto, their endorsees, transferees and assigns (collectively, the
“Secured Parties”), and T.R. Winston & Company, LLC, as agent for the Secured
Parties (the “Agent”).

 

W I T N E S S E T H:

 

WHEREAS, pursuant to the Purchase Agreement (as defined in the Debentures), the
Secured Parties have severally agreed to extend the loans to the Company
evidenced by the Debentures;

 

WHEREAS, pursuant to a certain Subsidiary Guarantee, dated as of the date hereof
(the “Guarantee”), the Guarantors have jointly and severally agreed to guarantee
and act as surety for payment of such Debentures; and

 

WHEREAS, in order to induce the Secured Parties to extend the loans evidenced by
the Debentures, each Debtor has agreed to execute and deliver to the Secured
Parties this Agreement and to grant the Secured Parties, pari  passu with each
other Secured Party and through the Agent (as defined in Section 18 hereof), a
security interest in certain property of such Debtor to secure the prompt
payment, performance and discharge in full of all of the Obligations.

 

NOW, THEREFORE, in consideration of the agreements herein contained and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:

 

1.        Certain Definitions. As used in this Agreement, the following terms
shall have the meanings set forth in this Section 1. Terms used but not
otherwise defined in this Agreement (i) that are defined in Article 9 of the UCC
(such as “account”, “chattel paper”, “commercial tort claim”, “deposit account”,
“document”, “equipment”, “fixtures”, “general intangibles”, “goods”,
“instruments”, “inventory”, “investment property”, “letter-of-credit rights”,
“proceeds” and “supporting obligations”) shall have the respective meanings
given such terms in Article 9 of the UCC and (ii) that are not defined herein
shall have the respective meanings given such terms in the Debentures.

 

(a)        “Collateral” means the collateral in which the Secured Parties are
granted a security interest by this Agreement and which shall include the
following personal property of the Debtors, whether presently owned or existing
or hereafter acquired or coming into existence, wherever situated, and all
additions and accessions thereto and all substitutions and replacements thereof,
and all proceeds, products and accounts thereof, including, without limitation,
all proceeds from the sale or transfer of the Collateral and of insurance
covering the same and of any tort claims in connection therewith:

 

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(i) All goods, including, without limitation, (A) all machinery, equipment,
computers, appliances, furniture, special and general tools, fixtures, test and
quality control devices and other equipment of every kind and nature and
wherever situated, together with all documents of title and documents
representing the same, all additions and accessions thereto, replacements
therefor, all parts therefor, and all substitutes for any of the foregoing and
all other items used and useful in connection with any Debtor’s businesses and
all improvements thereto; and (B) all inventory;

 

(ii)        All contract rights and other general intangibles, including,
without limitation, all Pledged Interests, licenses, distribution and other
agreements, computer software (whether “off-the-shelf”, licensed from any third
party or developed by any Debtor), computer software development rights, leases,
franchises, customer lists, quality control procedures, grants and rights,
goodwill, Intellectual Property and income tax refunds;

 

(iii)        All accounts, together with all instruments, all documents of title
representing any of the foregoing, all rights in any merchandising, goods,
equipment, and all right, title, security and guaranties with respect to each
account, including any right of stoppage in transit;

 

(iv)        All documents, letter-of-credit rights, instruments and chattel
paper;

 

(v)       All commercial tort claims;

 

(vi)       All deposit accounts and all cash (whether or not deposited in such
deposit accounts);

 

(vii)       All investment property, including all Pledged Securities not
constituting Pledged Interests;

 

(viii)       All supporting obligations;

 

(ix)       All files, records, books of account, business papers, and computer
programs; and

 

(x)       The products and proceeds of all of the foregoing Collateral set forth
in clauses (i)-(ix) above;

 

provided, however, notwithstanding anything in this Agreement to the contrary,
“Collateral” shall not include, and this Agreement shall not constitute a lien
or security interest in, Excluded Property.

 

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(b)               “Domestic Subsidiary” means, with respect to any Debtor, any
Subsidiary incorporated or organized under the laws of the United States of
America, or any state or other political subdivision thereof or which is
considered to be a “disregarded entity” for United States federal income tax
purposes and which is not a “controlled foreign corporation” as defined under
Section 957 of the Internal Revenue Code, in each case provided such Subsidiary
is owned by a Debtor or a Domestic Subsidiary of such Debtor, and “Domestic
Subsidiaries” means any or all of them. Notwithstanding the preceding sentence,
the term “Domestic Subsidiary” shall not include and Subsidiary of one or more
“controlled foreign corporations” as defined under Section 957 of the Internal
Revenue Code.

 

(c)                “Equity Interest” means (i) in the case of any corporation,
all capital stock and any securities exchangeable for or convertible into
capital stock, (ii) in the case of an association or business entity, any and
all shares, interest, participation, rights or other equivalents of corporate
stock (however designated) in or to such association or entity (iii) in the case
of a partnership or limited liability company, partnership or membership
interest (whether general or limited) and (iv) any other interest or
participation that confers on a person the right to receive a share of the
profits and losses of, or distribution of assets of, the issuing person, and
including, in all of the foregoing cases described in clauses (i), (ii), (iii)
or (iv), any warrants, rights or other options to purchase or otherwise acquire
any of the interests described in any of the foregoing cases.

 

(d)               “Excluded Property” means:

 

(i)             any personal property or asset the pledge or assignment of which
becomes void by operation of law or which is prohibited by applicable law (in
each case to the extent that such applicable law is not overridden by Sections
9-406, 9-407 and/or 9-408 of the UCC or other similar applicable law), or would
require consent, license or approval from a governmental authority that has not
been obtained; provided, however, that to the extent permitted by applicable
law, this Agreement shall create a valid security interest in such asset and, to
the extent permitted by applicable law, this Agreement shall create a valid
security interest in the proceeds of such asset;

 

(ii)           any lease, license, permit, general intangible, contract,
property rights or agreement to which a Debtor is a party or any of its rights
or interests thereunder (or any property subject thereto, including, without
limitation, to the extent permitted under the Transaction Documents, any
property subject to a purchase money security interest, capital lease obligation
or similar arrangements) if and for so long as the grant of a security interest
therein would (A) require the consent, license or approval of any governmental
authority under any law that has not been obtained (other than any
Organizational Document of any Debtor) or (b) constitute or result in the
abandonment, termination pursuant to the terms of, or a breach or default under,
any such lease, license, permit, general intangible, contract, property right or
agreement;

 

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(iii)         any personal property or asset owned by any Debtor on the date
hereof or hereafter acquired and any proceeds thereof that are subject to a lien
securing a purchase money obligation or capital lease obligation permitted to be
incurred pursuant to the provisions of the Transaction Documents to the extent
and for so long as the contract or other agreement in which such lien is granted
(or the documentation providing for such purchase money obligation or capital
lease obligation) validly prohibits the creation of any other lien on such
assets and proceeds in favor of the Secured Parties;

 

(iv)         all Equity Interests issued by any Foreign Subsidiary, including,
for the avoidance of doubt all dividends, distributions, cash, warrants, rights,
options, instruments, securities and other property or proceeds from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of such Equity Interests;

 

(v)           any intent-to-use trademark application to the extent and for so
long as the grant of a lien therein or creation by a Debtor of a security
interest therein would impair the validity or enforceability of such
intent-to-use trademark application and/or result in the loss by such Debtor of
any material rights therein;

 

(vi)         vehicles, trucks, tanks, boats, ships or any other assets or
property subject to any certificate of title, vehicle titling, vehicle
registration or similar law of any jurisdiction to the extent that a lien on
such assets or property cannot be perfected by the filing of a financing
statement under the UCC; and

 

(vii)       any cash distribution on Equity Interests of the Debtors permitted
by the Transaction Documents.

 

(e)     “Foreign Subsidiary” means with respect to any Debtor, any Subsidiary of
such Debtor, other than a Domestic Subsidiary.

 

(f)     “Intellectual Property” means the collective reference to all rights,
priorities and privileges relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including,
without limitation, (i) all copyrights arising under the laws of the United
States, any other country or any political subdivision thereof, whether
registered or unregistered and whether published or unpublished, all
registrations and recordings thereof, and all applications in connection
therewith, including, without limitation, all registrations, recordings and
applications in the United States Copyright Office, (ii) all letters patent of
the United States, any other country or any political subdivision thereof, all
reissues and extensions thereof, and all applications for letters patent of the
United States or any other country and all divisions, continuations and
continuations-in-part thereof, (iii) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade dress,
service marks, logos, domain names and other source or business identifiers, and
all goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and Trademark Office
or in any similar office or agency of the United States, any State thereof or
any other country or any political subdivision thereof, or otherwise, and all
common law rights related thereto, (iv) all trade secrets arising under the laws
of the United States, any other country or any political subdivision thereof,
(v) all rights to obtain any reissues, renewals or extensions of the foregoing,
(vi) all licenses for any of the foregoing, and (vii) all causes of action for
infringement of the foregoing.

 

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(g)    “Majority in Interest” means, at any time of determination, the majority
in interest (based on then-outstanding principal amounts of Debentures at the
time of such determination) of the Secured Parties.

 

(h)    “Necessary Endorsement” means undated stock powers endorsed in blank or
other proper instruments of assignment duly executed and such other instruments
or documents as the Agent may reasonably request.

 

(i)      “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 to, of any
Debtor to the Secured Parties, including, without limitation, all obligations
under this Agreement, the Debentures, the Guarantee and any other instruments,
agreements or other documents executed and/or delivered in connection herewith
or therewith, 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 any of the Secured Parties as a preference, fraudulent transfer
or otherwise as such obligations may be amended, supplemented, converted,
extended or modified from time to time. Without limiting the generality of the
foregoing, the term “Obligations” shall include, without limitation: (i)
principal of, and interest on the Debentures and the loans extended pursuant
thereto; (ii) any and all other fees, indemnities, costs, obligations and
liabilities of the Debtors from time to time under or in connection with this
Agreement, the Debentures, the Guarantee and any other instruments, agreements
or other documents executed and/or delivered in connection herewith or
therewith; and (iii) all amounts (including but not limited to post-petition
interest) in respect of the foregoing that would be payable but for the fact
that the obligations to pay such amounts are unenforceable or not allowable due
to the existence of a bankruptcy, reorganization or similar proceeding involving
any Debtor.

 

(j)      “Organizational Documents” means with respect to any Debtor, the
documents by which such Debtor was organized (such as a certificate of
incorporation, certificate of limited partnership, certificate of formation 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 such Debtor (such as bylaws, a partnership
agreement or an operating, limited liability or members agreement).

 

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(k)    “Pledged Interests” shall have the meaning ascribed to such term in
Section 4(j).

 

(l)      “Pledged Securities” means all of the issued and outstanding Equity
Interests issued by the Guarantors and held by the Company and all of the issued
and outstanding Equity Interests of any direct Domestic Subsidiary of the
Company or any of the Guarantors and obtained in the future, and all dividends,
distributions, cash, warrants, rights, options, instruments, securities and
other property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such Equity
Interests; provided, however, notwithstanding anything herein to the contrary,
the Pledged Securities shall not include any Equity Interests issued by any
Foreign Subsidiary.

 

(m)  “Subsidiary(ies)” means any other corporation, association, joint stock
company, business trust, limited liability company, partnership or any other
business entity of which more than 50% of the Equity Interests, is owned either
directly or indirectly by any Person or one or more of its Subsidiaries, or the
management of which is otherwise controlled, directly or indirectly, by any
Person and/or its Subsidiaries.

 

(n)    “Transaction Documents” shall have the meaning set forth in the Purchase
Agreement.

 

(o)    “UCC” means the Uniform Commercial Code of the State of New York and or
any other applicable law of any state or states which has jurisdiction with
respect to all, or any portion of, the Collateral or this Agreement, from time
to time. It is the intent of the parties that defined terms in the UCC should be
construed in their broadest sense so that the term “Collateral” will be
construed in its broadest sense. Accordingly if there are, from time to time,
changes to defined terms in the UCC that broaden the definitions, they are
incorporated herein and if existing definitions in the UCC are broader than the
amended definitions, the existing ones shall be controlling.

 

2.        Grant of Security Interest in Collateral. As an inducement for the
Secured Parties to extend the loans as evidenced by the Debentures and to secure
the complete and timely payment, performance and discharge in full, as the case
may be, of all of the Obligations, each Debtor hereby unconditionally and
irrevocably pledges, grants and hypothecates to the Secured Parties a security
interest in and to, a lien upon and a right of set-off against all of their
respective right, title and interest of whatsoever kind and nature in and to,
the Collateral (a “Security Interest” and, collectively, the “Security
Interests”).

 

3.       Delivery of Certain Collateral. Contemporaneously or prior to the
execution of this Agreement, each Debtor shall deliver or cause to be delivered
to the Agent (a) any and all certificates and other instruments representing or
evidencing the Pledged Securities, and (b) any and all certificates and other
instruments or documents representing any of the other Collateral, in each case,
together with all Necessary Endorsements. The Debtors are, contemporaneously
with the execution hereof, delivering to the Agent, or have previously delivered
to Agent, a true and correct copy of each Organizational Document governing any
of the Pledged Securities.

 

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4.        Representations, Warranties, Covenants and Agreements of the Debtors.
Except as set forth under the corresponding section of the disclosure schedules
delivered to the Secured Parties and the Agent concurrently herewith (the
“Disclosure Schedules”), which Disclosure Schedules shall be deemed a part
hereof, each Debtor represents and warrants to, and covenants and agrees with,
the Agent and the Secured Parties as follows:

 

(a) Each Debtor has the requisite corporate, partnership, limited liability
company or other power and authority to enter into this Agreement and otherwise
to carry out its obligations hereunder. The execution, delivery and performance
by each Debtor of this Agreement and the filings contemplated herein have been
duly authorized by all necessary action on the part of such Debtor and no
further action is required by such Debtor. This Agreement has been duly executed
by each Debtor. This Agreement constitutes the legal, valid and binding
obligation of each Debtor, enforceable against each Debtor in accordance with
its 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.

 

(b)        The Debtors have no place of business or offices where their
respective books of account and records are kept (other than temporarily at the
offices of its attorneys or accountants) or places where Collateral is stored or
located, except as set forth on Schedule A attached hereto. Except as
specifically set forth on Schedule A, each Debtor is the record owner of the
real property where such Collateral is located, and there exist no mortgages or
other liens on any such real property except for Permitted Liens (as defined in
the Debentures). Except as disclosed on Schedule A, none of such Collateral is
in the possession of any consignee, bailee, warehouseman, agent or processor.

 

(c)        Except for Permitted Liens (as defined in the Debentures) and except
as set forth on Schedule B attached hereto, the Debtors are the sole owners of
the Collateral (except for non-exclusive licenses granted by any Debtor in the
ordinary course of business), free and clear of any liens, security interests,
encumbrances, rights or claims, and are fully authorized to grant the Security
Interests. Except as set forth on Schedule C attached hereto, there is not on
file in any governmental or regulatory authority, agency or recording office an
effective financing statement, security agreement, license or transfer or any
notice of any of the foregoing (other than those that will be filed in favor of
the Secured Parties pursuant to this Agreement) covering or affecting any of the
Collateral. Except as set forth on Schedule C attached hereto and except
pursuant to this Agreement, as long as this Agreement shall be in effect, the
Debtors shall not execute and shall not knowingly permit to be on file in any
such office or agency any other financing statement or other document or
instrument (except to the extent filed or recorded in favor of the Secured
Parties or otherwise be filed pursuant to the terms of the Transaction
Documents).

 

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(d)        No written claim has been received by the Debtors that any Collateral
or any Debtor's use of any Collateral violates the rights of any third party.
There is no pending proceeding involving Debtor's claim of ownership rights in
or exclusive rights to use the Collateral in any jurisdiction, and there is no
proceeding involving said rights pending or, to the best knowledge of any
Debtor, threatened before any court, judicial body, administrative or regulatory
agency, arbitrator or other governmental authority.

 

(e)        Each Debtor shall at all times maintain its books of account and
records relating to the Collateral at its principal place of business and its
Collateral at the locations set forth on Schedule A attached hereto and may not
relocate such books of account and records or tangible Collateral to any
location not set forth on Schedule A unless it delivers to the Agent at least 30
days prior to such relocation (i) written notice of such relocation and the new
location thereof (which must be within the United States). Upon the request of
the Agent, the Debtors shall take all steps necessary to ensure that appropriate
financing statements under the UCC and other necessary documents have been filed
and recorded and all other steps reasonably required by the Agent have been
taken to perfect the Security Interests to create in favor of the Secured
Parties a valid, perfected and continuing perfected first priority lien in the
Collateral.

 

(f)        This Agreement creates in favor of the Secured Parties a valid
security interest in the Collateral, subject only to Permitted Liens (as defined
in the Debentures) securing the payment and performance of the Obligations. Upon
making the filings described in the immediately following paragraph, the
Security Interests created hereunder in any Collateral which may be perfected by
filing Uniform Commercial Code financing statements shall have been duly
perfected. Except for the filing of the Uniform Commercial Code financing
statements referred to in the immediately following paragraph, the recordation
of the Intellectual Property Security Agreement (as defined in Section 4(p))
with respect to copyrights and copyright applications in the United States
Copyright Office and the United States Patent and Trademark Office, in each case
referred to in Section 4(kk), the execution and delivery of deposit account
control agreements satisfying the requirements of Section 9-104(a)(2) of the UCC
with respect to each deposit account of the Debtors, and the delivery of the
certificates and other instruments provided in Section 3, no action is necessary
to create or perfect the security interests created hereunder. Without limiting
the generality of the foregoing, except for the filing of said financing
statements, the recordation of said Intellectual Property Security Agreement,
and the execution and delivery of said deposit account control agreements, no
consent of any third parties and no authorization, approval or other action by,
and no notice to or filing with, any governmental authority or regulatory body
is required for (i) the execution, delivery and performance of this Agreement,
(ii) the creation or perfection of the Security Interests created hereunder in
the Collateral or (iii) the enforcement of the rights of the Agent and the
Secured Parties hereunder.

 

(g)        Each Debtor hereby authorizes the Agent and the Secured Parties to
file one or more financing statements under the UCC, in a form(s) delivered by
the Agent to the Debtors, with respect to the Security Interests, with the
proper filing and recording agencies in any jurisdiction deemed proper by it.
The Agent shall provide the Debtors with a filed copy of each such financing
statement.

 

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(h)        The execution, delivery and performance of this Agreement by the
Debtors does not (i) violate any of the provisions of any Organizational
Documents of any Debtor, (ii) any judgment, decree, order or award of any court,
governmental authority, regulatory body or arbitrator or any applicable law,
rule or regulation applicable to any Debtor or (iii) 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 material agreement, credit facility, debt or other instrument
(evidencing any Debtor's debt) to which any Debtor is a party or by which any
property or asset of any Debtor is bound or affected; except in the case of each
of clauses (ii) and (iii), such as could not reasonably be expected to result in
a Material Adverse Effect.

 

(i)        The Equity Interests listed on Schedule H hereto represent all of the
Equity Interests issued by the Guarantors, and represent all of the Equity
Interests owned directly by the Company. All of the Pledged Securities are
validly issued, fully paid and nonassessable, to the extent such concepts are
applicable, and the Company is the legal and beneficial owner of the Pledged
Securities, free and clear of any lien, security interest or other encumbrance
except for the Security Interests created by this Agreement, restrictions on
transfer arising under the Guarantor’s respective Organizational Documents and
applicable Securities Laws, and other Permitted Liens (as defined in the
Debentures).

 

(j)        The Equity Interests in partnerships and limited liability companies
(if any) included in the Collateral (the “Pledged Interests”) by their express
terms do not provide that they are securities governed by Article 8 of the UCC
and are not held in a securities account or by any financial intermediary.

 

(k)        Except for Permitted Liens (as defined in the Debentures), each
Debtor shall at all times maintain the liens and Security Interests provided for
hereunder as valid and perfected first priority liens and security interests in
the Collateral in favor of the Secured Parties until this Agreement and the
Security Interest hereunder shall be terminated pursuant to Section 14 hereof.
Each Debtor hereby agrees to defend the same against the claims of any and all
persons and entities. Each Debtor shall safeguard and protect all Collateral for
the account of the Secured Parties. At the request of the Agent, each Debtor
will sign and deliver to the Agent on behalf of the Secured Parties at any time
or from time to time one or more financing statements pursuant to the UCC in
form reasonably satisfactory to the Agent and will pay the cost of filing the
same in all public offices wherever filing is, or is deemed by the Agent to be,
necessary or desirable to effect the rights and obligations provided for herein.
Without limiting the generality of the foregoing, each Debtor shall pay all
fees, taxes and other amounts necessary to maintain the Collateral and the
Security Interests hereunder, and each Debtor shall use commercially reasonable
best efforts obtain and furnish to the Agent from time to time, upon demand,
such releases and/or subordinations of claims and liens which may be required to
maintain the priority of the Security Interests hereunder.

 

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(l)        No Debtor will transfer, pledge, hypothecate, encumber, license, sell
or otherwise dispose of any of the Collateral (except for Permitted Liens and
non-exclusive licenses granted by a Debtor in its ordinary course of business
and sales of inventory by a Debtor in its ordinary course of business) without
the prior written consent of a Majority in Interest.

 

(m)       Each Debtor shall keep and preserve its equipment, inventory and other
tangible Collateral in good condition, repair and order, ordinary wear and tear
excepted, and shall not operate or locate any such Collateral (or cause to be
operated or located) in any area excluded from insurance coverage.

 

(n)       Each Debtor 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. Each Debtor shall cause each insurance policy
issued in connection herewith to provide, and the insurer issuing such policy to
certify to the Agent, that (a) the Agent will be named as lender loss payee and
additional insured under each such insurance policy; (b) if such insurance be
proposed to be cancelled or materially changed for any reason whatsoever, such
insurer will promptly notify the Agent and such cancellation or change shall not
be effective as to the Agent for at least thirty (30) days after receipt by the
Agent of such notice, unless the effect of such change is to extend or increase
coverage under the policy; and (c) the Agent 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. If no Event
of Default (as defined in the Debentures) exists and is continuing, if the
proceeds arising out of any claim or series of related claims do not exceed
$100,000, loss payments in each instance will be applied by the applicable
Debtor to the repair and/or replacement of the Collateral with respect to which
the loss was incurred to the extent reasonably feasible, and any loss payments
or the balance thereof remaining, to the extent not so applied, shall be payable
to the applicable Debtor; provided, however, that payments received by any
Debtor after an Event of Default occurs and is continuing or in excess of
$100,000 for any occurrence or series of related occurrences shall be paid to
the Agent on behalf of the Secured Parties and, if received by such Debtor,
shall be held in trust for the Secured Parties and immediately paid over to the
Agent unless otherwise directed in writing by the Agent. Copies of such policies
or the related certificates, in each case, naming the Agent as lender loss payee
and additional insured shall be delivered to the Agent at least annually and at
the time any new policy of insurance is issued.

 

(o)        Each Debtor shall, within ten (10) days of obtaining knowledge
thereof, advise the Agent promptly, in sufficient detail, of any material
adverse change in the Collateral, and of the occurrence of any event which would
have a material adverse effect on the value of the Collateral or on the Secured
Parties’ Security Interest.

 

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(p)        Each Debtor shall promptly execute and deliver to the Agent such
further deeds, mortgages, assignments, security agreements, financing statements
or other instruments, documents, certificates and assurances and take such
further action as the Agent may from time to time request and may in its sole
discretion deem reasonably necessary to perfect, protect or enforce the Secured
Parties’ security interest in the Collateral including, without limitation, if
applicable, the execution and delivery of a separate security agreement with
respect to each Debtor’s Intellectual Property (each, an “Intellectual Property
Security Agreement”) in which the Secured Parties have been granted a Security
Interest hereunder, substantially in a form reasonably acceptable to the Agent,
which Intellectual Property Security Agreement, other than as stated therein,
shall be subject to all of the terms and conditions hereof.

 

(q)        Each Debtor shall permit the Agent and its representatives and agents
to inspect the Collateral during normal business hours and upon reasonable prior
notice, and to make copies of records pertaining to the Collateral as may be
reasonably requested by the Agent from time to time; provided, however, so long
as no Event of Default has occurred and is continuing, the Debtors shall not be
required to reimburse the Agent for such inspections more than one time in each
fiscal year.

 

(r)        Each Debtor shall take all steps reasonably necessary to diligently
pursue and seek to preserve, enforce and collect any rights, claims, causes of
action and accounts receivable in respect of the Collateral.

 

(s)        Each Debtor shall promptly notify the Secured Parties in sufficient
detail upon becoming aware of any attachment, garnishment, execution or other
legal process levied against any Collateral and of any other information
received by such Debtor that may materially affect the value of the Collateral,
the Security Interest or the rights and remedies of the Secured Parties
hereunder.

 

(t)        All information heretofore, herein or hereafter supplied to the
Secured Parties by or on behalf of any Debtor with respect to the Collateral is
accurate and complete in all material respects as of the date furnished.

 

(u)        The Debtors shall at all times preserve and keep in full force and
effect their respective valid existence and good standing in their respective
jurisdiction of incorporation or organization and any rights and franchises that
the Debtors deem material to their respective business.

 

(v)        No Debtor will change its name, type of organization, jurisdiction of
organization, organizational identification number (if it has one), legal or
corporate structure or identity, chief executive office or add any new
fictitious name unless it provides at least 30 days prior written notice to the
Secured Parties of such change and, at the time of such written notification.
Upon the request of the Agent, the Debtors shall take all steps necessary to
ensure that any financing statements or fixture filings necessary to perfect and
continue the perfection of the Security Interests granted and evidenced by this
Agreement have been filed and recorded.

 

11

 

(w)       Except in the ordinary course of business, no Debtor may consign any
of its inventory or sell any of its inventory on bill and hold, sale or return,
sale on approval, or other conditional terms of sale without the consent of the
Agent which shall not be unreasonably withheld.

 

(x)        [Reserved]

 

(y)       Each Debtor was organized and remains organized solely under the laws
of the state set forth next to such Debtor’s name in Schedule D attached hereto,
which Schedule D sets forth each Debtor’s organizational identification number
or, if any Debtor does not have one, states that one does not exist.

 

(z)        (i) The legal name of each Debtor is the name set forth in Schedule D
attached hereto; (ii) no Debtor presently operates under any trade names except
as set forth on Schedule E attached hereto; (iii) no Debtor has used any name
other than as set forth on Schedule E pursuant to clauses (i) and (ii) hereof
for the preceding five years; and (iv) no entity has merged into any Debtor or
been acquired by any Debtor within the past five years except as set forth on
Schedule E.

 

(aa)       At any time and from time to time that any Collateral consists of
instruments, certificated securities or other items that require or permit
possession by the secured party to perfect the security interest created hereby,
the applicable Debtor shall deliver such Collateral to the Agent.

 

(bb)        Each Debtor, in its capacity as issuer, hereby agrees to comply with
any and all orders and instructions of Agent regarding the Pledged Interests
consistent with the terms of this Agreement without the further consent of any
Debtor as contemplated by Section 8-106 (or any successor section) of the UCC.
Further, each Debtor agrees that it shall not enter into a similar agreement (or
one that would confer “control” within the meaning of Article 8 of the UCC) with
any other person or entity.

 

(cc)       Each Debtor shall cause all tangible chattel paper constituting
Collateral to be delivered to the Agent, or, if such delivery is not possible,
then to cause such tangible chattel paper to contain a legend noting that it is
subject to the security interest created by this Agreement. To the extent that
any Collateral consists of electronic chattel paper, the applicable Debtor shall
cause the underlying chattel paper to be “marked” within the meaning of Section
9-105 of the UCC (or successor section thereto).

 

(dd)       If there is any investment property or deposit account included as
Collateral that can be perfected by “control” through an account control
agreement, upon the request of the Agent, the applicable Debtor shall cause such
an account control agreement, in form and substance in each case satisfactory to
the Agent, to be entered into and delivered to the Agent for the benefit of the
Secured Parties.

 

12

 

(ee)        To the extent that any Collateral consists of letter-of-credit
rights, the applicable Debtor shall cause the issuer of each underlying letter
of credit to consent to an assignment of the proceeds thereof to the Secured
Parties.

 

(ff)        To the extent that any Collateral is in the possession of any third
party, the applicable Debtor shall join with the Agent in notifying such third
party of the Secured Parties’ Security Interest in such Collateral and shall use
its commercially reasonable best efforts to obtain an acknowledgement and
agreement from such third party with respect to the Secured Parties’ Security
Interest in such Collateral, in form and substance reasonably satisfactory to
the Agent.

 

(gg)       If any Debtor shall at any time hold or acquire a commercial tort
claim, such Debtor shall promptly notify the Agent in a writing signed by such
Debtor of the particulars thereof and grant to the Secured Parties in such
writing a security interest therein and in the proceeds thereof, all upon the
terms of this Agreement, with such writing to be in form and substance
satisfactory to the Agent.

 

(hh)       Each Debtor shall immediately provide written notice to the Agent of
any and all accounts which arise out of contracts with any governmental
authority and, to the extent necessary to perfect or continue the perfected
status of the Security Interests in such accounts and proceeds thereof, shall
use its commercially reasonable efforts to execute and deliver to the Secured
Parties an assignment of claims for such accounts and cooperate with the Agent
in taking any other steps required, in its judgment, under the Federal
Assignment of Claims Act or any similar federal, state or local statute or rule
to perfect or continue the perfected status of the Security Interests in such
accounts and proceeds thereof.

 

(ii)       Each Debtor shall cause each Domestic Subsidiary of such Debtor to
immediately become a party hereto (an “Additional Debtor”), by executing and
delivering an Additional Debtor Joinder in substantially the form of Annex A
attached hereto and comply with the provisions hereof applicable to the Debtors.
Concurrently therewith, the Additional Debtor shall deliver replacement
schedules for, or supplements to all other Disclosure Schedules to (or referred
to in) this Agreement, as applicable, which replacement schedules shall
supersede, or supplements shall modify, the Disclosure Schedules then in effect.
The Additional Debtor shall also deliver such opinions of counsel, authorizing
resolutions, good standing certificates, incumbency certificates, organizational
documents, financing statements and other information and documentation as the
Agent may reasonably request. Upon delivery of the foregoing to the Agent, the
Additional Debtor shall be and become a party to this Agreement with the same
rights and obligations as the Debtors, for all purposes hereof as fully and to
the same extent as if it were an original signatory hereto and shall be deemed
to have made the representations, warranties and covenants set forth herein as
of the date of execution and delivery of such Additional Debtor Joinder, and all
references herein to the “Debtors” shall be deemed to include each Additional
Debtor.

 

13

 

(jj) The Company shall not cast any vote with respect to the Pledged Securities
that authorizes or causes any Debtor to breach any of its covenants and
agreements set forth herein and in the Subsidiary Guaranty.

 

(kk) Each Debtor shall register the pledge of the applicable Pledged Securities
on the books of such Debtor. The Company shall notify each issuer of Pledged
Securities to register the pledge of the applicable Pledged Securities in the
name of the Secured Parties on the books of such issuer.

 

(ll) In the event that, upon an occurrence and the during the continuance of an
Event of Default, the Agent shall sell, on behalf of the Secured Parties, all or
any of the Pledged Securities to another party or parties (herein called the
“Transferee”) or shall purchase or retain all or any of the Pledged Securities,
each Debtor shall, to the extent applicable and upon the Agent’s written
request: (i) deliver to the Agent or the Transferee, as the case may be, the
Organizational Documents, minute books, stock certificate books, corporate
seals, deeds, leases, indentures, agreements, evidences of indebtedness, books
of account, financial records and all other Organizational Documents and records
of the Debtors and their direct and indirect subsidiaries; (ii) use its
commercially reasonable best efforts to obtain resignations of the persons then
serving as officers, managers and directors of the Debtors and their direct and
indirect Domestic Subsidiaries, if so requested; and (iii) use its commercially
reasonable best efforts to obtain any approvals that are required by any
governmental authority or regulatory body in order to permit the sale of the
Pledged Securities to the Transferee or the purchase or retention of the Pledged
Securities by the Agent, on behalf of the Secured Parties and allow the
Transferee or the Agent, on behalf of the Secured Parties, to continue the
business of the Debtors and their direct and indirect subsidiaries.

 

(mm) Without limiting the generality of the other obligations of the Debtors
hereunder, each Debtor shall promptly (i) cause to be registered at the United
States Copyright Office all of its material copyrights, (ii) cause the Security
Interest contemplated hereby with respect to all Intellectual Property
registered at the United States Copyright Office or United States Patent and
Trademark Office to be duly recorded at the applicable office, and (iii) give
the Agent notice whenever it acquires (whether absolutely or by license) or
creates any additional material Intellectual Property.

 

(nn)       [Reserved]

 

(oo)       Schedule F attached hereto lists all of the patents, patent
applications, trademarks, trademark applications, registered copyrights, and
domain names owned by any of the Debtors as of the date hereof. Schedule F lists
all material licenses in favor of any Debtor for the use of any patents,
trademarks, copyrights and domain names as of the date hereof. All material
patents and trademarks of the Debtors have been duly recorded at the United
States Patent and Trademark Office and all material copyrights of the Debtors
have been duly recorded at the United States Copyright Office.

 

(pp)       Except as set forth on Schedule G attached hereto, none of the
account debtors or other persons or entities obligated on any of the Collateral
is a governmental authority covered by the Federal Assignment of Claims Act or
any similar federal, state or local statute or rule in respect of such
Collateral.

 

14

 

(qq) Until the Obligations shall have been paid and performed in full (other
than contingent payment obligations for which no claim has been asserted), the
Company covenants that it shall promptly cause any direct or indirect Domestic
Subsidiary of the Company formed or acquired after the date hereof to enter into
a Subsidiary Guarantee in favor of the Secured Party, in the form of Exhibit F
to the Purchase Agreement.

 

5.       Effect of Pledge on Certain Rights. If any of the Collateral subject to
this Agreement consists of nonvoting Equity Interests (regardless of class,
designation, preference or rights) that may be converted into voting Equity
Interests upon the occurrence of certain events (including, without limitation,
upon the transfer of all or any of the other stock or assets of the issuer), it
is agreed that the pledge of such Equity Interests pursuant to this Agreement or
the enforcement of any of Secured Parties’ rights hereunder shall not be deemed
to be the type of event which would trigger such conversion rights
notwithstanding any provisions in the Organizational Documents or agreements to
which any Debtor is subject or to which any Debtor is party.

 

6.        Defaults. The following events shall be “Events of Default”:

 

(a) The occurrence and continuance of an Event of Default (as defined in the
Debentures) under the Debentures;

 

(b) Any representation or warranty of any Debtor in this Agreement shall prove
to have been incorrect in any material respect when made;

 

(c) The failure by any Debtor to observe or perform any of its obligations
hereunder for ten (10) days after delivery to such Debtor of notice of such
failure by or on behalf of a Secured Party unless such default is capable of
cure but cannot be cured within such time frame and such Debtor is using
commercially reasonable best efforts to cure same in a timely fashion; or

 

(d) If any provision of this Agreement shall at any time for any reason be
declared to be null and void, or the validity or enforceability thereof shall be
contested by any Debtor, or a proceeding shall be commenced by any Debtor, or by
any governmental authority having jurisdiction over any Debtor, seeking to
establish the invalidity or unenforceability thereof, or any Debtor shall deny
that any Debtor has any liability or obligation purported to be created under
this Agreement.

 

7.        Duty To Hold In Trust.

 

(a)       Upon the occurrence and during the continuance of any Event of Default
and at any time thereafter, each Debtor shall, upon receipt of any revenue,
income, dividend, interest or other sums subject to the Security Interests,
whether payable pursuant to the Debentures or otherwise, or of any check, draft,
note, trade acceptance or other instrument evidencing an obligation to pay any
such sum, hold the same in trust for the Secured Parties and shall forthwith
endorse and transfer any such sums or instruments, or both, to the Secured
Parties, pro-rata in proportion to their respective then-currently outstanding
principal amount of Debentures for application to the satisfaction of the
Obligations (and if any Debenture is not outstanding, pro-rata in proportion to
the initial purchases of the remaining Debentures).

 

15

 

(b)       If any Debtor shall become entitled to receive or shall receive any
securities or other property (including, without limitation, shares of Pledged
Securities or instruments representing Pledged Securities acquired after the
date hereof, or any options, warrants, rights or other similar property or
certificates representing a dividend, or any distribution in connection with any
recapitalization, reclassification or increase or reduction of capital, or
issued in connection with any reorganization of such Debtor or any of its direct
or indirect Subsidiaries) in respect of the Pledged Securities (whether as an
addition to, in substitution of, or in exchange for, such Pledged Securities or
otherwise), such Debtor agrees to (i) accept the same as the agent of the
Secured Parties; (ii) hold the same in trust on behalf of and for the benefit of
the Secured Parties; and (iii) to deliver any and all certificates or
instruments evidencing the same to Agent on or before the close of business on
the fifth Business Day following the receipt thereof by such Debtor, in the
exact form received together with the Necessary Endorsements, to be held by
Agent subject to the terms of this Agreement as Collateral.

 

8.        Rights and Remedies Upon Default.

 

(a)       Upon the occurrence and during the continuance of any Event of Default
and at any time thereafter, the Secured Parties, acting by Majority in Interest
and through the Agent, shall have the right to exercise all of the remedies
conferred hereunder and under the Debentures, and the Secured Parties, acting by
a Majority in Interest and through the Agent, shall have all the rights and
remedies of a secured party under the UCC. Without limitation, the Agent, for
the benefit of the Secured Parties upon the instruction of a Majority in
Interest, shall have the following rights and powers:

 

(i) The Agent, on behalf of the Secured Parties, shall have the right to take
possession of the Collateral and, for that purpose, enter, with the aid and
assistance of any person, any premises where the Collateral, or any part
thereof, is or may be placed and remove the same, and each Debtor shall assemble
the Collateral and make it available to the Agent at places which the Agent
shall reasonably select, whether at such Debtor's premises or elsewhere, and
make available to the Agent, without rent, all of such Debtor’s respective
premises and facilities for the purpose of the Agent taking possession of,
removing or putting the Collateral in saleable or disposable form.

 

(ii)       Upon notice to the Debtors by the Agent, all rights of each Debtor to
exercise the voting and other consensual rights which it would otherwise be
entitled to exercise and all rights of each Debtor to receive the dividends and
interest which it would otherwise be authorized to receive and retain, shall
cease. Upon such notice, the Agent shall have the right to receive, for the
benefit of the Secured Parties, any interest, cash dividends or other payments
on the Collateral and, at the option of Agent, to exercise in such the Agent’s
discretion all voting rights pertaining thereto. Without limiting the generality
of the foregoing, Agent shall have the right (but not the obligation) to
exercise all rights with respect to the Collateral as it were the sole and
absolute owner thereof, including, without limitation, to vote and/or to
exchange, at its sole discretion, any or all of the Collateral in connection
with a merger, reorganization, consolidation, recapitalization or other
readjustment concerning or involving the Collateral or any Debtor or any of its
direct or Domestic Subsidiaries.

 

16

 

(iii) The Agent, on behalf of the Secured Parties, shall have the right to
operate the business of each Debtor using the Collateral and shall have the
right to assign, sell, lease or otherwise dispose of and deliver all or any part
of the Collateral, at public or private sale or otherwise, either with or
without special conditions or stipulations, for cash or on credit or for future
delivery, in such parcel or parcels and at such time or times and at such place
or places, and upon such terms and conditions as the Agent may deem commercially
reasonable, all without (except as shall be required by applicable statute and
cannot be waived) advertisement or demand upon or notice to any Debtor or right
of redemption of a Debtor, which are hereby expressly waived, but in each case
subject to any non-waivable provisions of applicable law. Upon each such sale,
lease, assignment or other transfer of Collateral, the Agent, for the benefit of
the Secured Parties, may, unless prohibited by applicable law which cannot be
waived, purchase all or any part of the Collateral being sold, free from and
discharged of all trusts, claims, right of redemption and equities of any
Debtor, which are hereby waived and released.

 

(iv)       The Agent shall have the right (but not the obligation) to notify any
account debtors and any obligors under instruments or accounts to make payments
directly to the Agent, on behalf of the Secured Parties, and to enforce the
Debtors’ rights against such account debtors and obligors.

 

(v)       The Agent, for the benefit of the Secured Parties, may (but is not
obligated to) direct any financial intermediary or any other person or entity
holding any investment property to transfer the same to the Agent, on behalf of
the Secured Parties, or its designee.

 

(vi)       The Agent may (but is not obligated to) transfer any or all
Intellectual Property registered in the name of any Debtor at the United States
Patent and Trademark Office and/or Copyright Office into the name of the Secured
Parties or any designee or any purchaser of any Collateral.

 

(b)       The Agent shall comply with any applicable law in connection with a
disposition of Collateral and such compliance will not be considered adversely
to affect the commercial reasonableness of any sale of the Collateral. The Agent
may sell the Collateral without giving any warranties and may specifically
disclaim such warranties. If the Agent sells any of the Collateral on credit,
the Debtors will only be credited with payments actually made by the purchaser.

 

17

 

 

(c)       For the purpose of enabling the Agent to further exercise rights and
remedies under this Section 8 or elsewhere provided by agreement or applicable
law, each Debtor hereby grants to the Agent, for the benefit of the Agent and
the Secured Parties, an irrevocable, nonexclusive license (exercisable without
payment of royalty or other compensation to such Debtor) to use, license or
sublicense following the occurrence and continuance of an Event of Default, any
Intellectual Property now owned or hereafter acquired by such Debtor, and
wherever the same may be located, and including in such license access to all
media in which any of the licensed items may be recorded or stored and to all
computer software and programs used for the compilation or printout thereof.

 

9.        Applications of Proceeds. The proceeds of any such sale, lease or
other disposition of the Collateral hereunder or from payments made on account
of any insurance policy insuring any portion of the Collateral shall be applied
first, to the expenses of retaking, holding, storing, processing and preparing
for sale, selling, and the like (including, without limitation, any taxes, fees
and other costs incurred in connection therewith) of the Collateral, second, to
the reasonable attorneys’ fees and expenses incurred by the Agent in enforcing
the Secured Parties’ rights hereunder and in connection with collecting, storing
and disposing of the Collateral, third, to satisfaction of the Obligations pro
rata among the Secured Parties (based on then-outstanding principal amounts of
Debentures at the time of any such determination), and fourth, to the payment of
any other amounts required by applicable law, after which the Secured Parties
shall pay to the applicable Debtor any surplus proceeds. If, upon the sale,
license or other disposition of the Collateral, the proceeds thereof are
insufficient to pay all amounts to which the Secured Parties are legally
entitled, the Debtors will be liable for the deficiency, together with interest
thereon, at the rate of 18% per annum or the lesser amount permitted by
applicable law (the “Default Rate”), and the reasonable fees of any attorneys
employed by the Secured Parties to collect such deficiency. To the extent
permitted by applicable law, each Debtor waives all claims, damages and demands
against the Secured Parties arising out of the repossession, removal, retention
or sale of the Collateral, unless due solely to the gross negligence or willful
misconduct of the Secured Parties as determined by a final judgment (not subject
to further appeal) of a court of competent jurisdiction.

 

10.       Securities Law Provision. Each Debtor recognizes that the Agent may be
limited in its ability to effect a sale to the public of all or part of the
Pledged Securities by reason of certain prohibitions in the Securities Act of
1933, as amended, or other federal or state securities laws (collectively, the
“Securities Laws”), and may be compelled to resort to one or more sales to a
restricted group of purchasers who may be required to agree to acquire the
Pledged Securities for their own account, for investment and not with a view to
the distribution or resale thereof. Each Debtor agrees that sales so made may be
at prices and on terms less favorable than if the Pledged Securities were sold
to the public, and that the Agent has no obligation to delay the sale of any
Pledged Securities for the period of time necessary to register the Pledged
Securities for sale to the public under the Securities Laws. Each Debtor shall
cooperate with Agent in its attempt to satisfy any requirements under the
Securities Laws (including, without limitation, registration thereunder if
requested by Agent) applicable to the sale of the Pledged Securities by the
Agent on behalf of the Secured Parties.

 

18

 

11.        Costs and Expenses. Each Debtor agrees to pay all reasonable
out-of-pocket fees, costs and expenses incurred in connection with any filing
required hereunder, including without limitation, any financing statements
pursuant to the UCC, continuation statements, partial releases and/or
termination statements related thereto or any expenses of any searches
reasonably required by the Agent. The Debtors shall also pay all other claims
and charges which in the reasonable opinion of the Agent, are reasonably likely
to prejudice, imperil or otherwise affect the Collateral or the Security
Interests therein. The Debtors will also, upon demand, pay to the Agent (a) the
amount of any and all reasonable expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, which the Agent, for the
benefit of the Secured Parties, may incur in connection with the creation,
perfection, protection, satisfaction, foreclosure, collection or enforcement of
the Security Interest and the preparation, administration, continuance,
amendment or enforcement of this Agreement and (b) the amount of any and all
reasonable expenses, including the reasonable fees and expenses of its counsel
and of any experts and agents, which the Agent, for the benefit of the Secured
Parties, and the Secured Parties may incur in connection with (i) the
enforcement of this Agreement, (ii) the custody or preservation of, or the sale
of, collection from, or other realization upon, any of the Collateral, or (iii)
the exercise or enforcement of any of the rights of the Secured Parties under
the Debentures; provided, however, that the Debtors shall only be responsible
for the payment of the fees and expenses of one (1) counsel for all of the
Secured Parties. Until so paid, any fees payable hereunder shall be added to the
principal amount of the Debentures and shall bear interest at the Default Rate.

 

12.        Responsibility for Collateral. The Debtors assume all liabilities and
responsibility in connection with all Collateral, and the Obligations shall in
no way be affected or diminished by reason of the loss, destruction, damage or
theft of any of the Collateral or its unavailability for any reason. Without
limiting the generality of the foregoing, (a) neither the Agent nor any Secured
Party (i) has any duty (either before or after an Event of Default) to collect
any amounts in respect of the Collateral or to preserve any rights relating to
the Collateral, or (ii) has any obligation to clean-up or otherwise prepare the
Collateral for sale, and (b) each Debtor shall remain obligated and liable under
each contract or agreement included in the Collateral to be observed or
performed by such Debtor thereunder. Neither the Agent nor any Secured Party
shall have any obligation or liability under any such contract or agreement by
reason of or arising out of this Agreement or the receipt by the Agent or any
Secured Party of any payment relating to any of the Collateral, nor shall the
Agent or any Secured Party be obligated in any manner to perform any of the
obligations of any Debtor under or pursuant to any such contract or agreement,
to make inquiry as to the nature or sufficiency of any payment received by the
Agent or any Secured Party in respect of the Collateral or as to the sufficiency
of any performance by any party under any such contract or agreement, to present
or file any claim, to take any action to enforce any performance or to collect
the payment of any amounts which may have been assigned to the Agent or to which
the Agent or any Secured Party may be entitled at any time or times.

 

19

 

13.        Security Interests Absolute. All rights of the Secured Parties and
all obligations of the Debtors hereunder, shall be absolute and unconditional,
irrespective of: (a) any lack of validity or enforceability of this Agreement,
or the other Transaction Documents, or any portion hereof or thereof; (b) any
change in the time, manner or place of payment or performance of, or in any
other term of, all or any of the Obligations, or any other amendment or waiver
of or any consent to any departure from the Debentures or any other agreement
entered into in connection with the foregoing; (c) any exchange, release or
nonperfection of any of the Collateral, or any release or amendment or waiver of
or consent to departure from any other collateral for, or any guarantee, or any
other security, for all or any of the Obligations; (d) any action by the Agent
or Secured Parties to obtain, adjust, settle and cancel in its sole discretion
any insurance claims or matters made or arising in connection with the
Collateral; or (e) any other circumstance which might otherwise constitute any
legal or equitable defense available to a Debtor, or a discharge of all or any
part of the Security Interests granted hereby. Until the Obligations shall have
been paid and performed in full (other than contingent payment obligations for
which no claim has been asserted), the rights of the Secured Parties shall
continue even if the Obligations are barred for any reason, including, without
limitation, the running of the statute of limitations or bankruptcy. Each Debtor
expressly waives presentment, protest, notice of protest, demand, notice of
nonpayment and demand for performance. In the event that at any time any
transfer of any Collateral or any payment received by the Secured Parties
hereunder shall be deemed by final order of a court of competent jurisdiction to
have been a voidable preference or fraudulent conveyance under the bankruptcy or
insolvency laws of the United States, or shall be deemed to be otherwise due to
any party other than the Secured Parties, then, in any such event, each Debtor’s
obligations hereunder shall survive cancellation of this Agreement, and shall
not be discharged or satisfied by any prior payment thereof and/or cancellation
of this Agreement, but shall remain a valid and binding obligation enforceable
in accordance with the terms and provisions hereof. Each Debtor waives all right
to require the Secured Parties to proceed against any other person or entity or
to apply any Collateral which the Secured Parties may hold at any time, or to
marshal assets, or to pursue any other remedy. Each Debtor waives any defense
arising by reason of the application of the statute of limitations to any
obligation secured hereby.

 

14.        Term of Agreement. This Agreement and the Security Interests shall
automatically terminate, without any action on the part of the Secured Parties
or the Agent, on the date on which all payments under the Debentures have been
indefeasibly paid in full and all other Obligations have been paid or discharged
(other than contingent payment obligations for which no claim has been
asserted); provided, however, that all indemnities of the Debtors contained in
this Agreement (including, without limitation, Annex B hereto) shall survive and
remain operative and in full force and effect regardless of the termination of
this Agreement.

 

15.        Power of Attorney; Further Assurances.

 

(a)        Each Debtor authorizes the Agent, and does hereby make, constitute
and appoint the Agent and its officers, agents, successors or assigns with full
power of substitution, as such Debtor’s true and lawful attorney-in-fact, with
power, in the name of the Agent or such Debtor, to, after the occurrence and
during the continuance of an Event of Default, (i) endorse any note, checks,
drafts, money orders or other instruments of payment (including payments payable
under or in respect of any policy of insurance) in respect of the Collateral
that may come into possession of the Agent; (ii) sign and endorse any financing
statement pursuant to the UCC or any invoice, freight or express bill, bill of
lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts, and other documents
relating to the Collateral; (iii) pay or discharge taxes, liens, security
interests or other encumbrances at any time levied or placed on or threatened
against the Collateral; (iv) demand, collect, receipt for, compromise, settle
and sue for monies due in respect of the Collateral; (v) transfer any
Intellectual Property or provide licenses respecting any Intellectual Property;
and (vi) generally, at the option of the Agent, and at the expense of the
Debtors, at any time, or from time to time, to execute and deliver any and all
documents and instruments and to do all acts and things which the Agent
reasonably deems necessary to protect, preserve and realize upon the Collateral
and the Security Interests granted therein in order to effect the intent of this
Agreement and the Debentures all as fully and effectually as the Debtors might
or could do; and each Debtor hereby ratifies all that said attorney shall
lawfully do or cause to be done by virtue hereof. This power of attorney is
coupled with an interest and shall be irrevocable for the term of this Agreement
and thereafter as long as any of the Obligations shall be outstanding. The
designation set forth herein shall be deemed to amend and supersede any
inconsistent provision in the Organizational Documents or other documents or
agreements to which any Debtor is subject or to which any Debtor is a party.
Without limiting the generality of the foregoing, after the occurrence and
during the continuance of an Event of Default, each Secured Party is
specifically authorized to execute and file any applications for or instruments
of transfer and assignment of any patents, trademarks, copyrights or other
Intellectual Property with the United States Patent and Trademark Office and the
United States Copyright Office.

 

20

 

(b)        On a continuing basis, each Debtor will make, execute, acknowledge,
deliver, file and record, as the case may be, with the proper filing and
recording agencies in any jurisdiction, including, without limitation, the
jurisdictions indicated on Schedule C attached hereto, all such instruments, and
take all such action as may reasonably be deemed necessary or advisable, or as
reasonably requested by the Agent, to perfect the Security Interests granted
hereunder and otherwise to carry out the intent and purposes of this Agreement,
or for assuring and confirming to the Agent the grant or perfection of a
perfected security interest in all the Collateral under the UCC.

 

(c)        Each Debtor hereby irrevocably appoints the Agent as such Debtor’s
attorney-in-fact, with full authority in the place and instead of such Debtor
and in the name of such Debtor, from time to time in the Agent’s discretion, to
file, in its sole discretion, one or more financing or continuation statements
and amendments thereto, relative to any of the Collateral without the signature
of such Debtor where permitted by law, which financing statements may (but need
not) describe the Collateral as “all assets” or “all personal property” or words
of like import, and ratifies all such actions taken by the Agent. This power of
attorney is coupled with an interest and shall be irrevocable for the term of
this Agreement and thereafter as long as any of the Obligations shall be
outstanding.

 

16.        Notices. All notices, requests, demands and other communications
hereunder shall be subject to the notice provision of the Purchase Agreement (as
such term is defined in the Debentures).

 

21

 

17.        Other Security. To the extent that the Obligations are now or
hereafter secured by property other than the Collateral or by the guarantee,
endorsement or property of any other person, firm, corporation or other entity,
then the Agent shall have the right, in its sole discretion, to pursue,
relinquish, subordinate, modify or take any other action with respect thereto,
without in any way modifying or affecting any of the Secured Parties’ rights and
remedies hereunder.

 

18.        Appointment of Agent. Each of the Secured Parties hereby appoints
T.R. Winston & Company, LLC to act as its agent (“TR Winston” or “Agent”) for
purposes of exercising any and all rights and remedies of the Secured Parties
hereunder. The Agent shall have the rights, responsibilities and immunities set
forth in Annex B hereto.

 

19.        Miscellaneous.

 

(a)        No course of dealing between the Debtors and the Secured Parties, nor
any failure to exercise, nor any delay in exercising, on the part of the Secured
Parties, any right, power or privilege hereunder or under the Debentures shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder or thereunder preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.

 

(b)        All of the rights and remedies of the Secured Parties with respect to
the Collateral, whether established hereby or by the Debentures or by any other
agreements, instruments or documents or by law shall be cumulative and may be
exercised singly or concurrently.

 

(c)        This Agreement, together with the exhibits and schedules hereto,
contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or
written, with respect to such matters, which the parties acknowledge have been
merged into this Agreement and the exhibits and schedules hereto. No provision
of this Agreement may be waived, modified, supplemented or amended except in a
written instrument signed, in the case of an amendment, by the Debtors and a
Majority Interest, or, in the case of a waiver, by the party against whom
enforcement of any such waived provision is sought.

 

(d)        If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.

 

22

 

(e)        No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in the
future or a waiver of any subsequent default or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any such
right.

 

(f)        This Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. The Company and the
Guarantors may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Secured Party (other than by merger).
Any Secured Party may assign any or all of its rights under this Agreement to
any Person (as defined in the Purchase Agreement) to whom such Secured Party
assigns or transfers any Obligations; provided assignment or transfer is made in
accordance with the Purchase Agreement and such transferee agrees in writing to
be bound, with respect to the transferred Obligations, by the provisions of this
Agreement that apply to the “Secured Parties.”

 

(g)        Each party shall take such further action and execute and deliver
such further documents as may be necessary or appropriate in order to carry out
the provisions and purposes of this Agreement.

 

(h) Except to the extent mandatorily governed by the jurisdiction or situs where
the Collateral is located, all questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Except to
the extent mandatorily governed by the jurisdiction or situs where the
Collateral is located, each Debtor agrees that all proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and the Debentures (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, partners, members,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York, Borough of Manhattan. Except to the
extent mandatorily governed by the jurisdiction or situs where the Collateral is
located, each Debtor hereby irrevocably submits to the exclusive jurisdiction of
the state and federal courts sitting in the City of New York, Borough of
Manhattan for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such proceeding is improper. Each party hereto hereby irrevocably waives
personal service of process and consents to process being served in any such
proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. Each party hereto hereby irrevocably waives, to
the fullest extent permitted by applicable law, any and all right to trial by
jury in any legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.

 

23

 

(i)        This Agreement may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original and, all of which taken
together shall constitute one and the same Agreement. In the event that any
signature is delivered by portable document format (.pdf) or facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.

 

(j)       All Debtors shall jointly and severally be liable for the obligations
of each Debtor to the Secured Parties hereunder.

 

(k)       Each Debtor shall indemnify, reimburse and hold harmless the Agent and
the Secured Parties and their respective partners, members, shareholders,
officers, directors, employees and agents (and any other persons with other
titles that have similar functions) (collectively, “Indemnitees”) from and
against any and all losses, claims, liabilities, damages, penalties, suits,
costs and expenses, of any kind or nature, (including fees relating to the cost
of investigating and defending any of the foregoing) imposed on, incurred by or
asserted against such Indemnitee in any way related to or arising from or
alleged to arise from this Agreement or the Collateral, except any such losses,
claims, liabilities, damages, penalties, suits, costs and expenses which result
from the gross negligence or willful misconduct of the Indemnitee as determined
by a final, nonappealable decision of a court of competent jurisdiction. This
indemnification provision is in addition to, and not in limitation of, any other
indemnification provision in the Transaction Documents or any other agreement,
instrument or other document executed or delivered in connection herewith or
therewith.

 

(l)       Nothing in this Agreement shall be construed to subject Agent or any
Secured Party to liability as a partner in any Debtor or any if its direct or
indirect Subsidiaries that is a partnership or as a member in any Debtor or any
of its direct or indirect Subsidiaries that is a limited liability company, nor
shall Agent or any Secured Party be deemed to have assumed any obligations under
any partnership agreement or limited liability company agreement, as applicable,
of any such Debtor or any of its direct or indirect Subsidiaries or otherwise,
unless and until any such Secured Party exercises its right to be substituted
for such Debtor as a partner or member, as applicable, pursuant hereto.

 

(m)        To the extent that the grant of the Security Interest in the
Collateral and the enforcement of the terms hereof require the consent, approval
or action of any partner or member, as applicable, of any Debtor or any direct
or indirect Subsidiary of any Debtor or compliance with any provisions of any of
the Organizational Documents, the Debtors hereby grant such consent and approval
and waive any such noncompliance with the terms of said documents.

 

24

 

[SIGNATURE PAGES FOLLOW]

 

 

 

 

 

 

25

 

IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be
duly executed on the day and year first above written.

 

 

COMPANY:         SYNTHESIS ENERGY SYSTEMS, INC.         By:       Name:    
Title:  

 

 

GUARANTORS:         SYNTHESIS ENERGY HOLDINGS, INC.         By:       Name:    
Title:  

 

 

SYNTHESIS ENERGY SYSTEMS TECHNOLOGIES, LLC         By:       Name:     Title:  

 

 

SES RESOURCES, LLC         By:       Name:     Title:  

 

 

 

[SIGNATURE PAGE OF HOLDERS FOLLOWS]

Signature Page to Security Agreement

 

[SIGNATURE PAGE OF HOLDERS TO SYMX SA]

 

Name of Investing Entity: __________________________

Signature of Authorized Signatory of Investing entity: _________________________

Name of Authorized Signatory: _________________________

Title of Authorized Signatory: __________________________

 

[SIGNATURE PAGE OF HOLDERS FOLLOWS]

 

 

 

Signature Page to Security Agreement

 

AGENT:         T.R. WINSTON & COMPANY, LLC         By:       Name:     Title:  

 

 

 

 

 

 

Signature Page to Security Agreement

 

SCHEDULE A

 

 

Principal Place of Business of Debtors:

 

 

Locations Where Collateral is Located or Stored:

 

 

SCHEDULE B

 

 

 

 

SCHEDULE C

 

 

 

 

SCHEDULE D

Legal Names and Organizational Identification Numbers

 

 

 

 

SCHEDULE E

Names; Mergers and Acquisitions

 

 

 

SCHEDULE F

Intellectual Property

 

 

 

SCHEDULE G

Account Debtors

 

 

 

SCHEDULE H

Pledged Securities

 

1

 

ANNEX A

to

SECURITY

AGREEMENT

 

FORM OF ADDITIONAL DEBTOR JOINDER

 

Security Agreement dated as of October 24, 2017 made by

Synthesis Energy Systems, Inc.

and its Domestic Subsidiaries party thereto from time to time, as Debtors

to and in favor of the Agent and

the Secured Parties identified therein (the “Security Agreement”)

 

Reference is made to the Security Agreement as defined above; capitalized terms
used herein and not otherwise defined herein shall have the meanings given to
such terms in, or by reference in, the Security Agreement.

 

The undersigned hereby agrees that upon delivery of this Additional Debtor
Joinder to the Agent and the Secured Parties referred to above, the undersigned
shall (a) be an Additional Debtor under the Security Agreement, (b) have all the
rights and obligations of the Debtors under the Security Agreement as fully and
to the same extent as if the undersigned was an original signatory thereto and
(c) be deemed to have made the representations and warranties set forth therein
as of the date of execution and delivery of this Additional Debtor Joinder.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY
GRANTS TO THE SECURED PARTIES A SECURITY INTEREST IN THE COLLATERAL AS MORE
FULLY SET FORTH IN THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE
WAIVER OF JURY TRIAL PROVISIONS SET FORTH THEREIN.

 

Attached hereto are supplemental and/or replacement Schedules to the Security
Agreement, as applicable.

 

An executed copy of this Joinder shall be delivered to the Secured Parties, and
the Secured Parties may rely on the matters set forth herein on or after the
date hereof. This Joinder shall not be modified, amended or terminated without
the prior written consent of the Secured Parties.

 

 

1

 

IN WITNESS WHEREOF, the undersigned has caused this Joinder to be executed in
the name and on behalf of the undersigned.

 

 

  [Name of Additional Debtor       By:       Name:   Title:       Address:

 

 

 

 

 

 

 

Dated:

 

2

 

ANNEX B

to

SECURITY

AGREEMENT

 

THE AGENT

 

1. Appointment. The Secured Parties (all capitalized terms used herein and not
otherwise defined shall have the respective meanings provided in the Security
Agreement to which this Annex B is attached (the "Agreement")), by their
acceptance of the benefits of the Agreement, hereby designate T.R. Winston &
Company, LLC (“TR Winston” or “Agent”) as the Agent to act as specified herein
and in the Agreement. Each Secured Party shall be deemed irrevocably to
authorize the Agent to take such action on its behalf under the provisions of
the Agreement and any other Transaction Document (as such term is defined in the
Purchase Agreement) and to exercise such powers and to perform such duties
hereunder and thereunder as are specifically delegated to or required of the
Agent by the terms hereof and thereof and such other powers as are reasonably
incidental thereto. The Agent may perform any of its duties hereunder by or
through its agents or employees.

 

2. Nature of Duties. The Agent shall have no duties or responsibilities except
those expressly set forth in the Agreement. Neither the Agent nor any of its
partners, members, shareholders, officers, directors, employees or agents shall
be liable for any action taken or omitted by it as such under the Agreement or
hereunder or in connection herewith or therewith, be responsible for the
consequence of any oversight or error of judgment or answerable for any loss,
unless caused solely by its or their gross negligence or willful misconduct as
determined by a final judgment (not subject to further appeal) of a court of
competent jurisdiction. The duties of the Agent shall be mechanical and
administrative in nature; the Agent shall not have by reason of the Agreement or
any other Transaction Document a fiduciary relationship in respect of any Debtor
or any Secured Party; and nothing in the Agreement or any other Transaction
Document, expressed or implied, is intended to or shall be so construed as to
impose upon the Agent any obligations in respect of the Agreement or any other
Transaction Document except as expressly set forth herein and therein.

 

3. Lack of Reliance on the Agent. Independently and without reliance upon the
Agent, each Secured Party, to the extent it deems appropriate, has made and
shall continue to make (i) its own independent investigation of the financial
condition and affairs of the Company and its subsidiaries in connection with
such Secured Party’s investment in the Debtors, the creation and continuance of
the Obligations, the transactions contemplated by the Transaction Documents, and
the taking or not taking of any action in connection therewith, and (ii) its own
appraisal of the creditworthiness of the Company and its subsidiaries, and of
the value of the Collateral from time to time, and the Agent shall have no duty
or responsibility, either initially or on a continuing basis, to provide any
Secured Party with any credit, market or other information with respect thereto,
whether coming into its possession before any Obligations are incurred or at any
time or times thereafter. The Agent shall not be responsible to the Debtors or
any Secured Party for any recitals, statements, information, representations or
warranties herein or in any document, certificate or other writing delivered in
connection herewith, or for the execution, effectiveness, genuineness, validity,
enforceability, perfection, collectibility, priority or sufficiency of the
Agreement or any other Transaction Document, or for the financial condition of
the Debtors or the value of any of the Collateral, or be required to make any
inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of the Agreement or any other Transaction Document, or
the financial condition of the Debtors, or the value of any of the Collateral,
or the existence or possible existence of any default or Event of Default under
the Agreement, the Debentures or any of the other Transaction Documents.

 

1

 

4. Certain Rights of the Agent. The Agent shall have the right to take any
action with respect to the Collateral, on behalf of all of the Secured Parties.
To the extent practical, the Agent shall request instructions from the Secured
Parties with respect to any material act or action (including failure to act) in
connection with the Agreement or any other Transaction Document, and shall be
entitled to act or refrain from acting in accordance with the instructions of a
Majority in Interest; if such instructions are not provided despite the Agent’s
request therefor, the Agent shall be entitled to refrain from such act or taking
such action, and if such action is taken, shall be entitled to appropriate
indemnification from the Secured Parties in respect of actions to be taken by
the Agent; and the Agent shall not incur liability to any person or entity by
reason of so refraining. Without limiting the foregoing, (a) no Secured Party
shall have any right of action whatsoever against the Agent as a result of the
Agent acting or refraining from acting hereunder in accordance with the terms of
the Agreement or any other Transaction Document, and the Debtors shall have no
right to question or challenge the authority of, or the instructions given to,
the Agent pursuant to the foregoing and (b) the Agent shall not be required to
take any action which the Agent believes (i) could reasonably be expected to
expose it to personal liability or (ii) is contrary to this Agreement, the
Transaction Documents or applicable law.

 

5. Reliance. The Agent shall be entitled to rely, and shall be fully protected
in relying, upon any writing, resolution, notice, statement, certificate, telex,
teletype or telecopier message, order or other document or telephone message
signed, sent or made by the proper person or entity, and, with respect to all
legal matters pertaining to the Agreement and the other Transaction Documents
and its duties thereunder, upon advice of counsel selected by it and upon all
other matters pertaining to this Agreement and the other Transaction Documents
and its duties thereunder, upon advice of other experts selected by it. Anything
to the contrary notwithstanding, the Agent shall have no obligation whatsoever
to any Secured Party to assure that the Collateral exists or is owned by the
Debtors or is cared for, protected or insured or that the liens granted pursuant
to the Agreement have been properly or sufficiently or lawfully created,
perfected, or enforced or are entitled to any particular priority.

 

6. Indemnification. To the extent that the Agent is not reimbursed and
indemnified by the Debtors, the Secured Parties will jointly and severally
reimburse and indemnify the Agent, in proportion to their initially purchased
respective principal amounts of Debentures, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against the Agent in performing its duties
hereunder or under the Agreement or any other Transaction Document, or in any
way relating to or arising out of the Agreement or any other Transaction
Document except for those determined by a final judgment (not subject to further
appeal) of a court of competent jurisdiction to have resulted solely from the
Agent's own gross negligence or willful misconduct. Prior to taking any action
hereunder as Agent, the Agent may require each Secured Party to deposit with it
sufficient sums as it determines in good faith is necessary to protect the Agent
for costs and expenses associated with taking such action.

 

2

 

7. Resignation by the Agent.

 

(a) The Agent may resign from the performance of all its functions and duties
under the Agreement and the other Transaction Documents at any time by giving 30
days' prior written notice (as provided in the Agreement) to the Debtors and the
Secured Parties. Such resignation shall take effect upon the appointment of a
successor Agent pursuant to clauses (b) and (c) below.

 

(b) Upon any such notice of resignation, the Secured Parties, acting by a
Majority in Interest, shall appoint a successor Agent hereunder reasonably
acceptable to the Debtors.

 

(c) If a successor Agent shall not have been so appointed within said 30-day
period, the Agent shall then appoint a successor Agent reasonably acceptable to
the Debtors who shall serve as Agent until such time, if any, as the Secured
Parties appoint a successor Agent as provided above. If a successor Agent has
not been appointed within such 30-day period, the Agent may petition any court
of competent jurisdiction or may interplead the Debtors and the Secured Parties
in a proceeding for the appointment of a successor Agent, and all fees,
including, but not limited to, extraordinary fees associated with the filing of
interpleader and expenses associated therewith, shall be payable by the Debtors
on demand.

 

3

 

8. Rights with respect to Collateral. Each Secured Party agrees with all other
Secured Parties and the Agent (i) that it shall not, and shall not attempt to,
exercise any rights with respect to its Security Interest in the Collateral,
whether pursuant to any other agreement or otherwise (other than pursuant to
this Agreement), or take or institute any action against the Agent or any of the
other Secured Parties in respect of the Collateral or its rights hereunder
(other than any such action arising from the breach of this Agreement) and (ii)
that such Secured Party has no other rights with respect to the Collateral other
than as set forth in this Agreement and the other Transaction Documents. Upon
the acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent and the retiring
Agent shall be discharged from its duties and obligations under the Agreement. 
After any retiring Agent’s resignation or removal hereunder as Agent, the
provisions of the Agreement including this Annex B shall inure to its benefit as
to any actions taken or omitted to be taken by it while it was Agent.

 

 

 

 

 

 

4

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