Exhibit 10.3
 
 
SECURITY AGREEMENT
 
BY
 
AEMETIS BIOGAS LLC,
 
as Grantor
 
IN FAVOR OF
 
THIRD EYE CAPITAL CORPORATION,
 
as agent
 
DATED AS OF DECEMBER 20, 2018
 
 
 
 

 

 
TABLE OF CONTENTS
 
Page
 
1
DEFINITIONS
1
1.1
Reference to Security Agreement
1
1.2
Principles of Construction
1
1.3
Definitions
1
2
GRANT OF SECURITY INTEREST
5
2.1
Security Interest
5
2.2
Grantor Remains Liable
6
2.3
Authorization to File Financing Statements
6
2.4
Limitation
6
3
REPRESENTATIONS AND WARRANTIES
6
3.1
Purchase Agreement
6
3.2
Title; Authorization; Enforceability; Perfection
6
3.3
Conflicting Legal Requirements and Contracts
6
3.4
Governmental Authority
6
3.5
Grantor Information
6
3.6
Property Locations
6
3.7
Litigation
6
3.8
No Financing Statements or Control Agreements
6
3.9
Maintenance of Collateral
6
3.10
Collateral
7
3.11
Deposit, Commodity, and Securities Accounts
7
3.12
Receivables
7
3.13
Letter of Credit Rights
7
3.14
Instruments; Chattel Paper; Collateral Notes; and Collateral Note Security
7
3.15
Investment Related Property
7
3.16
Intellectual Property
7
4
COVENANTS
8
4.1
Transaction Documents
8
4.2
General
8
4.3
Receivables
9
4.4
Equipment
9
4.5
Accounts
9
4.6
Intellectual Property
9
4.7
Collateral Notes and Collateral Note Security
10
4.8
Instruments; Chattel Paper; and Documents
10
4.9
Deposit, Commodity, and Securities Accounts
10
4.10
Commercial Tort Claims
10
4.11
Letters-of-Credit Rights
10

 
 

 
 
4.12
Fixtures
10
4.13
Federal, State or Municipal Claims
10
4.14
Collateral Access Agreements
10
4.15
Use and Operation of Collateral
10
4.16
Certain Proceeds
10
4.17
Further Assurances
11
5
REMEDIES UPON TRIGGER EVENT
11
5.1
Remedies
11
5.2
Grantor’s Obligations Upon Trigger Event
11
5.3
Condition of Collateral; Warranties
11
5.4
Collection of Receivables
11
5.5
Cash Collateral Account
12
5.6
Intellectual Property
12
5.7
Record Ownership of Securities
12
5.8
Investment Related Property
12
5.9
Sales on Credit
12
5.10
Application of Proceeds
12
5.11
Power of Attorney
12
6
GENERAL PROVISIONS
12
6.1
Recovered Payments
12
6.2
No Waiver
13
6.3
Agent Performance of Grantor’s Obligations; Authority of Agent
13
6.4
Waivers
13
6.5
Benefit of Agreement
13
6.6
Survival
13
6.7
Notices
13
6.8
Taxes and Expenses
13
6.9
Headings
13
6.10
Counterparts
13
6.11
Termination
13
6.12
GOVERNING LAW/VENUE
13
6.13
Indemnity
14
6.14
WAIVER OF JURY TRIAL
14
6.15
FINAL AGREEMENT
14

 
SCHEDULES
 
Schedule 3.5
Grantor Information
Schedule 3.6
Property Locations
Schedule 3.10
Collateral
Schedule 3.16
Intellectual Property
 
 

 

 
SECURITY AGREEMENT
 
THIS SECURITY AGREEMENT (as it may be amended, restated, supplemented, or
otherwise modified from time to time, this “Security Agreement”) is entered into
as of December 20, 2018, between Aemetis Biogas LLC, a Delaware limited
liability company (“Grantor”), and Third Eye Capital Corporation, as agent (in
such capacity, together with its successors and assigns, “Agent”) for the
Secured Parties (as defined below).
 
RECITALS
 
WHEREAS, Grantor, Agent and Protair-X Americas, Inc., a Delaware corporation
(“Purchaser”), have entered into a Series A Preferred Unit Purchase Agreement,
dated as of the date hereof (as it may be amended, restated, supplemented, or
otherwise modified from time to time, the “Purchase Agreement”).
 
WHEREAS, the execution and delivery of this Security Agreement is required by
the Purchase Agreement.
 
NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto hereby agree as follows:
 
1. DEFINITIONS.
 
1.1 Reference to Security Agreement. Unless otherwise specified, all references
herein to Sections, Recitals, and Schedules refer to Sections of, and Recitals
and Schedules to, this Security Agreement. All Schedules include amendments and
supplements thereto from time to time.
 
1.2 Principles of Construction. Words used herein, regardless of the number and
gender specifically used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine, feminine or
neutral, as the context indicates is appropriate. Whenever the words “include,”
“includes” or “including” are used in this Security Agreement, they shall be
deemed to be followed by the words “without limitation”. Any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth in the
Transaction Documents). Furthermore, any reference to any law shall include all
statutory and regulatory provisions consolidating, amending, replacing, or
interpreting such law and any reference to any law or regulation shall, unless
otherwise specified, refer to such law or regulation as amended, modified, or
supplemented from time to time. The words “asset” and “property” shall be
construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, securities,
accounts and contract rights. The words “hereof,” “herein”, “hereto” and
“hereunder” and words of similar import when used in this Security Agreement
shall refer to this Security Agreement as a whole and not to any particular
provision of this Security Agreement, and Section and Schedule references are to
this Security Agreement unless otherwise specified. The meanings given to terms
defined herein shall be equally applicable to both the singular and plural forms
of such terms. Where the context requires, terms relating to the Collateral or
any part thereof shall refer to Grantor’s Collateral or the relevant part
thereof.
 
1.3 Definitions. Unless otherwise defined herein, or the context hereof
otherwise requires, each term defined in either the Purchase Agreement or the
UCC is used in this Security Agreement with the same meaning; provided that, if
the definition given to such term in the Purchase Agreement conflicts with the
definition given to such term in the UCC, the Purchase Agreement definition
shall control to the extent legally allowable; and if any definition given to
such term in Article 9 of the UCC conflicts with the definition given to such
term in any other chapter of the UCC, the Article 9 definition shall prevail. As
used herein, the following terms have the meanings indicated:
 
“Account” means any “account,” as such term is defined in Section 9-102(a)(2) of
the UCC.
 
“Account Debtor” means any Person who is obligated on a Receivable.
 
“Agent” has the meaning set forth in the preamble of this Security Agreement.
 
“Cash Collateral Account” has the meaning set forth in Section 5.5.
 
“Chattel Paper” means any “chattel paper”, as such term is defined in
Section 9-102(a)(11) of the UCC, including all Electronic Chattel Paper and
Tangible Chattel Paper.
 
“Collateral” has the meaning set forth in Section 2.1.
 
“Collateral Access Agreement” means any landlord waiver or other agreement, in
form and substance satisfactory to Agent, between Agent and any third party
(including any bailee, consignee, customs broker, or other similar Person) in
possession of any Collateral or any landlord of any real property where any
Collateral is located, as such landlord waiver or other agreement may be
amended, restated, supplemented or otherwise modified from time to time.
 
 
1

 
 
“Collateral Note Security” means all rights, titles, interests, and Liens
Grantor may have, be, or become entitled to under all present and future loan
agreements, security agreements, pledge agreements, deeds of trust, mortgages,
guarantees, or other documents assuring or securing payment of or otherwise
evidencing the Collateral Notes, including those set forth on Schedule 3.10.
 
“Collateral Notes” means all rights, titles, and interests of Grantor in and to
all promissory notes and other Instruments payable to Grantor, including all
inter-company notes from the Affiliates of Grantor and those set forth on
Schedule 3.10.
 
“Collateral Records” means books, records, ledger cards, files, correspondence,
customer lists, blueprints, technical specifications, manuals, computer
software, computer printouts, tapes, disks and related data processing software
and similar items that at any time evidence or contain information relating to
any of the Collateral or are otherwise necessary or helpful in the collection
thereof or realization thereupon.
 
“Collateral Support” means all property (real or personal) assigned,
hypothecated or otherwise securing any Collateral and shall include any security
agreement or other agreement granting a Lien or security interest in such real
or personal property.
 
“Commercial Tort Claims” means any “commercial tort claim”, as such term is
defined in Section 9.102(a)(13) of the UCC, including all commercial tort claims
listed on Schedule 3.10.
 
“Commodity Account” means any “commodity account”, as such term is defined in
Section 9.102(a)(14) of the UCC, and all sub-accounts thereof.
 
“Contractual Obligations” means, as to any Person, any provision of any security
issued by such Person or of any agreement, undertaking, contract, indenture,
mortgage, deed of trust or other instrument, document or agreement to which such
Person is a party or by which it or any of its property is bound.
 
“Control” has the meaning set forth in Sections 7-106, 8-106, 9-104, 9-105,
9-106, or 9-107 of the UCC, as applicable.
 
“Copyright Licenses” means any and all agreements providing for the granting of
any right in or to Copyrights (whether a Grantor is licensee or licensor
thereunder), including each agreement referred to on Schedule 3.16.
 
“Copyrights” means all United States and foreign copyrights (including Community
designs), including copyrights in software and databases, and all Mask Works (as
defined under 17 U.S.C. § 901 of the U.S. Copyright Act), whether registered or
unregistered, and, with respect to any and all of the foregoing:  (a) all
registrations and applications therefor, including the registrations and
applications referred to on Schedule 3.16; (b) all extensions and renewals
thereof; (c) all rights corresponding thereto throughout the world; (d) all
rights to sue for past, present and future infringements thereof; and (e) all
products and Proceeds of the foregoing, including any income, royalties, and
awards and any claim by Grantor against third parties for past, present, or
future infringement of any Copyright or any Copyright licensed under any
Copyright License.
 
“Default Rate” means a per annum rate of interest equal to the rate of interest
specified in Section 6.9(c) of the Purchase Agreement plus ten percent (10%),
provided that in no event shall the Default Rate exceed the maximum rate of
interest permitted by applicable law.
 
“Deposit Accounts” means any “deposit account”, as such term is defined in
Section 9-102(a)(29) of the UCC, including those deposit accounts identified on
Schedule 3.10, and any account which is a replacement or substitute for any of
such accounts, together with all monies, Instruments, certificates, checks,
drafts, wire transfer receipts, and other property deposited therein and all
balances therein.
 
“Document” means any “document”, as such term is defined in Section 9-102(a)(30)
of the UCC.
 
“Electronic Chattel Paper” means any “electronic chattel paper”, as such term is
defined in Section 9-102(a)(31) of the UCC.
 
“Equipment” means: (a) any “equipment”, as such term is defined in
Section 9-102(a)(33) of the UCC; (b) all machinery, equipment, furnishings,
Fixtures, and Vehicles; and (c) any and all additions, substitutions, and
replacements of any of the foregoing, wherever located, together with all
attachments, components, parts, equipment, and accessories installed thereon or
affixed thereto (in each case, regardless of whether characterized as equipment
under the UCC).
 
“Equity Interests” means (a) shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other equity ownership interests in a Person, and any warrants, options
or other rights entitling the holder thereof to purchase or acquire any such
equity interest, and (b) all rights to receive dividends and distributions, all
voting rights, all management rights, and all economic right relating to any of
the foregoing.
 
“Farm Products” means any “farm products”, as such term is defined in Section
9-102(a)(34) of the UCC.
 
 
2

 
 
“Fixtures” means any “fixtures”, as such term is defined in Section 9-102(a)(41)
of the UCC.
 
“General Intangibles” means: (a) any “general intangibles”, as such term is
defined in Section 9-102(a)(42) of the UCC; and (b) all interest rate or
currency protection or hedging arrangements, computer software, computer
programs, all tax refunds and tax refund claims, all licenses, permits,
concessions and authorizations, all contract rights, all joint venture
interests, partnership interests, or membership interests that do not constitute
a Security, and all Intellectual Property (in each case, regardless of whether
characterized as general intangibles under the UCC).
 
“Goods” means: (a) “goods”, as that term is defined in Section 9-102(a)(44) of
the UCC; (b) all Inventory; and (c) all Equipment (in each case, regardless of
whether characterized as goods under the UCC).
 
“Grantor” has the meaning set forth in the preamble of this Security Agreement.
 
“Indemnified Party” has the meaning specified in Section 6.13.
 
“Instrument” means any “instrument”, as such term is defined in
Section 9-102(a)(47) of the UCC, including the Collateral Notes.
 
“Intellectual Property” means, collectively, the Copyrights, the Copyright
Licenses, the Patents, the Patent Licenses, the Trademarks, the Trademark
Licenses, the Trade Secrets, and the Trade Secret Licenses.
 
“Inventory” means: (a) any “inventory”, as such term is defined in
Section 9-102(a)(48) of the UCC; (b) all wrapping, packaging, advertising, and
shipping materials; (c) all goods that have been returned, repossessed, or
stopped in transit; (d) all Documents evidencing any of the foregoing; and
(e) all computer programs embedded in any goods and all accessions thereto and
products thereof (in each case, regardless of whether characterized as inventory
under the UCC).
 
“Investment Related Property” means: (a) any “investment property”, as such term
is defined in Section 9-102(a)(49) of the UCC; and (b) all Pledged Equity
Interests (regardless of whether such interest is classified as investment
property under the UCC).
 
“Letter-of-Credit Right” means any “letter-of-credit right”, as such term is
defined in Section 9-102(a)(51) of the UCC.
 
“Money” means “money” as defined in Section 1-201(b)(24) of the UCC.
 
“Obligations” has the meaning specified in the Purchase Agreement.
 
“Patent Licenses” means all agreements providing for the granting of any right
in or to Patents (whether a Grantor is licensee or licensor thereunder),
including each agreement referred to on Schedule 3.16.
 
“Patents” means all United States and foreign patents and certificates of
invention, or similar industrial property rights, and applications for any of
the foregoing, including: (a) each patent and patent application referred to on
Schedule 3.16; (b) all reissues, divisions, continuations,
continuations-in-part, extensions, renewals, and reexaminations thereof; (c) all
rights corresponding thereto throughout the world; (d) all inventions and
improvements described therein; (e) all rights to sue for past, present and
future infringements thereof; (f) all licenses, claims, damages, and Proceeds of
suit arising therefrom; and (g) all products and Proceeds of the foregoing,
including any income, royalties, and awards and any claim by Grantor against
third parties for past, present, or future infringement of any Patent or any
Patent licensed under any Patent License.
 
“Permitted Liens” means:
 
(a)           Liens for taxes not yet due or that are being contested in good
faith by appropriate proceedings, provided that adequate reserves with respect
thereto are maintained on the books of Grantor in conformity with GAAP
 
(b)           carriers', warehousemen's, mechanics', materialmen's, repairmen's
and other like Liens imposed by law, arising in the ordinary course of business
and securing obligations that are not overdue by more than thirty (30) days or
are being contested in good faith by appropriate proceedings;
 
(c)           pledges and deposits made in the ordinary course of business in
compliance with workers' compensation, unemployment insurance and other social
security laws or regulations; and
 
 
3

 
 
(d)           deposits to secure the performance of bids, trade contracts (other
than Indebtedness), leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature, in each case in the
ordinary course of business.
 
“Pledged Equity Interests” means all Equity Interests listed on Schedule 3.10,
together with any other shares, stock certificates, options or rights of any
nature whatsoever in respect of the Equity Interests of any Person that may be
issued or granted to, or held by, Grantor while this Security Agreement is in
effect.
 
“Proceeds” means any “proceeds,” as such term is defined in Section 9-102(a)(65)
of the UCC and, in any event, shall include, but not be limited to, (a) any and
all proceeds of any insurance, indemnity, warranty, or guaranty payable to a
Grantor from time to time with respect to any of the Collateral, (b) any and all
payments (in any form whatsoever) made or due and payable to a Grantor from time
to time in connection with any requisition, confiscation, condemnation, seizure,
or forfeiture of all or any part of the Collateral by any Governmental Authority
(or any Person acting under color of Governmental Authority), and (c) any and
all other amounts from time to time paid or payable under or in connection with
any of the Collateral.
 
“Receivables” means the Accounts, Chattel Paper, Documents, Investment Related
Property, Instruments, or Commercial Tort Claims, and any other rights or claims
to receive Money which are General Intangibles or which are otherwise included
as Collateral, together with all of the Grantor’s rights, if any, in all
Collateral Support and Supporting Obligations related thereto.
 
“Requirement of Law” means, as to any Person, any law (statutory or common),
ordinance, treaty, rule, regulation, order, policy, other legal requirement or
determination of an arbitrator or of a Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject.
 
“Secured Obligations” means:
 
(a)
all Obligations;
 
(b)
all costs and expenses, including all attorneys’ fees and legal expenses,
incurred by any of the Secured Parties or their Affiliates to preserve and
maintain the Collateral, collect the obligations herein described, and enforce
this Security Agreement or any rights under the other Transaction Documents;
 
(c)
the obligation to reimburse any amount that Agent (in its sole and absolute
discretion) elects to pay or advance on behalf of Grantor following the
occurrence of any Trigger Event;
 
(d)
all amounts owed under any extension, renewal, or modification of any of the
foregoing; and
 
(e)
any of the foregoing that arises after the filing of a petition by or against
Grantor under the Bankruptcy Code, even if the obligations due do not accrue
because of the automatic stay under Bankruptcy Code § 362 or otherwise;
 
in each case with respect to clauses (a) through (e) above, whether or not (i)
such Secured Obligations arise or accrue before or after the filing by or
against Grantor of a petition under the Bankruptcy Code, or any similar filing
by or against Grantor under the laws of any jurisdiction, or any bankruptcy,
insolvency, receivership or other similar proceeding, (ii) such Secured
Obligations are allowable under Section 502(b)(2) of the Bankruptcy Code or
under any other insolvency proceedings, (iii) the right of payment in respect of
such Secured Obligations is reduced to judgment, or (iv) such Secured
Obligations are liquidated, unliquidated, similar, dissimilar, related,
unrelated, direct, indirect, fixed, contingent, primary, secondary, joint,
several, or joint and several, matured, disputed, undisputed, legal, equitable,
secured, or unsecured.
 
“Secured Parties” means the collective reference to Agent, Purchaser, each
holder of Series A Preferred Units, and the Indemnified Parties.
 
“Securities Account” means any “securities account”, as such term is defined in
Section 8-501(a) of the UCC, and all sub-accounts thereof.
 
“Security” has the meaning set forth in Section 8-102(a)(15) of the UCC.
 
“Supporting Obligations” means all “supporting obligations” as defined in
Section 9-102(a)(78) of the UCC.
 
“Tangible Chattel Paper” means any “tangible chattel paper”, as such term is
defined in Section 9-102(a)(79) of the UCC.
 
“Trademark Licenses” means any and all agreements providing for the granting of
any right in or to Trademarks (whether a Grantor is licensee or licensor
thereunder), including each agreement referred to on Schedule 3.16.
 
“Trademarks” means all United States and foreign trademarks, trade names,
corporate names, company names, business names, fictitious business names,
Internet domain names, service marks, certification marks, collective marks,
logos, other source or business identifiers, designs and general intangibles of
a like nature, all registrations and applications for any of the foregoing,
including:  (a) the registrations and applications referred to on Schedule 3.16;
(b) all extensions or renewals of any of the foregoing; (c) all of the goodwill
of the business connected with the use of and symbolized by the foregoing;
(d) the right to sue for past, present and future infringement or dilution of
any of the foregoing or for any injury to goodwill; and (e) all products and
Proceeds of the foregoing, including any income, royalties, and awards and any
claim by Grantor against third parties for past, present, or future infringement
of any Trademark or any Trademark licensed under any Trademark License.
 
 
4

 
 
“Trade Secret Licenses” means any and all agreements providing for the granting
of any right in or to Trade Secrets (whether a Grantor is licensee or licensor
thereunder), including each agreement referred to on Schedule 3.16.
 
“Trade Secrets” means all trade secrets and all other confidential or
proprietary information and know-how, whether or not such Trade Secret has been
reduced to a writing or other tangible form, including all documents and things
embodying, incorporating, or referring in any way to such Trade Secret,
including: (a) the right to sue for past, present and future misappropriation or
other violation of any Trade Secret; and (b) all products and Proceeds of the
foregoing, including any income, royalties, and awards and any claim by Grantor
against third parties for past, present, or future infringement of any Trade
Secrets or any Trade Secrets licensed under any Trade Secret License.
 
“UCC” means the Uniform Commercial Code as from time to time in effect in the
State of Delaware.
 
“Vehicles” means all present and future automobiles, trucks, truck tractors,
trailers, semi-trailers, or other motor vehicles or rolling stock, now owned or
hereafter acquired by a Grantor.
 
2. GRANT OF SECURITY INTEREST.
 
2.1 Security Interest. To secure the prompt and complete payment and performance
of the Secured Obligations when due, whether at stated maturity, by required
prepayment, declaration, acceleration, demand or otherwise (including the
payment of amounts that would become due but for the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code or any similar provisions of
other applicable laws), Grantor hereby grants to Agent, for the benefit of the
Secured Parties, a continuing security interest in and a lien upon, and hereby
assigns to Agent, for the benefit of the Secured Parties, as security, all
personal property of Grantor, whether now owned or hereafter acquired or
existing, and wherever located (together with all other collateral security for
the Secured Obligations at any time granted to or held or acquired by Agent,
collectively, the “Collateral”), including:
 
(a) all Accounts;
 
(b) all Chattel Paper;
 
(c) all Commercial Tort Claims;
 
(d) all Deposit Accounts, Securities Accounts, and Commodity Accounts;
 
(e) all Documents;
 
(f) all Farm Products;
 
(g) all General Intangibles;
 
(h) all Goods;
 
(i) all Instruments;
 
(j) all Investment Related Property;
 
(k) all Letter of Credit Rights;
 
(l) all Money;
 
(m) all Fixtures;
 
(n) all Intellectual Property;
 
(o) all Vehicles;
 
 
5

 
 
(p) to the extent not otherwise included above, all Collateral Records,
Collateral Support, and Supporting Obligations relating to any of the foregoing;
and
 
(q) to the extent not otherwise included above, all accessions to, substitutions
for, and all replacements, products, Proceeds of the foregoing, including
Proceeds of and unearned premiums with respect to insurance policies, and claims
against any Person for loss, damage, or destruction of any Collateral.
 
2.2 Grantor Remains Liable. Notwithstanding anything to the contrary contained
herein, (a) Grantor shall remain liable under the contracts and agreements
included in the Collateral to the extent set forth therein to perform all of its
respective duties and obligations thereunder to the same extent as if this
Security Agreement had not been executed, (b) the exercise by Agent of any of
its rights hereunder shall not release Grantor from any of its duties or
obligations under the contracts and agreements included in the Collateral, and
(c) Agent shall not have any obligation or liability under any of the contracts
and agreements included in the Collateral by reason of this Security Agreement,
nor shall Agent be obligated to perform any of the obligations or duties of
Grantor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.
 
2.3 Authorization to File Financing Statements. Grantor hereby irrevocably
authorizes Agent at any time and from time to time to file in any jurisdiction
any financing statements and amendments thereto that (a) indicate the Collateral
(i) as all assets of Grantor or words of similar effect, regardless of whether
any particular asset comprised in the Collateral falls within the scope of
Article 9 of the UCC, or (ii) as being of an equal or lesser scope or with
greater detail, and (b) contain any other information required by Article 9 of
the UCC for the sufficiency or filing office acceptance of any financing
statement or amendment, including (A) whether Grantor is an organization, the
type of organization and any organization identification number issued to
Grantor and (B) in the case of a financing statement filed as a fixture filing
or indicating Collateral as as-extracted collateral or timber to be cut, a
sufficient description of real property to which the Collateral relates. Grantor
agrees to furnish any such information to Agent promptly upon request.
 
2.4 Limitation. The Obligations secured by this Agreement are limited by Section
6.17(d) of the Purchase Agreement.
 
3. REPRESENTATIONS AND WARRANTIES. Grantor represents and warrants to Agent on
the date hereof and on the date of each Purchase that:
 
3.1 Purchase Agreement. Certain representations and warranties in the Purchase
Agreement are applicable to Grantor or its assets or operations, and each such
representation and warranty is true and correct.
 
3.2 Title; Authorization; Enforceability; Perfection. (a) Grantor has good and
valid rights in and title to the Collateral free and clear of all Liens except
for Permitted Liens, and has full power and authority to grant to Agent the
security interest in the Collateral; (b) the execution and delivery by Grantor
of this Security Agreement has been duly authorized, and this Security Agreement
constitutes a legal, valid and binding obligation of Grantor and creates a
security interest in all now owned and hereafter acquired Collateral; and (c)(i)
upon the filing of all UCC financing statements naming Grantor as “debtor” and
Agent as “secured party” and describing the Collateral in the filing offices set
forth opposite Grantor’s name on Schedule 3.5 hereof, (ii) upon delivery of all
Instruments, Chattel Paper, certificated Pledged Equity Interests, and
Collateral Notes, (iii) upon sufficient identification of Commercial Tort
Claims, (iv) upon execution of a control agreement establishing Agent’s Control
with respect to any Deposit Account, Securities Account, or Commodity Account,
(v) upon consent of the issuer or any nominated Person with respect to Letter of
Credit Rights, and (vi) to the extent not subject to Article 9 of the UCC, upon
recordation of the security interests granted hereunder in Intellectual Property
in the applicable intellectual property registries, including the United States
Patent and Trademark Office and the United States Copyright Office, the security
interests granted to Agent hereunder constitute valid and perfected first
priority Liens (subject in the case of priority only to (1) Permitted Liens, and
(2) the rights of the United States government (including any agency or
department thereof) with respect to United States government Receivables).
 
3.3 Conflicting Legal Requirements and Contracts. Neither the execution and
delivery by Grantor of this Security Agreement, the creation and perfection of
the security interest in the Collateral granted hereunder, nor compliance with
the terms and provisions hereof will (a) violate (i) any Requirement of Law
binding on Grantor or its property, (ii) any of Grantor’s organizational
documents, or (iii) any Contractual Obligation by which Grantor, or its
property, is bound; or (b) conflict with or constitute a default under, or
result in the creation or imposition of any Lien pursuant to, the terms of any
such Contractual Obligation (other than any Lien of Agent).
 
3.4 Governmental Authority. No authorization, approval, or other action by, and
no notice to or filing with, any Governmental Authority is required either
(a) for the pledge by Grantor of the Collateral pursuant to this Security
Agreement or for the execution, delivery, or performance of this Security
Agreement by Grantor, or (b) for the exercise by Agent of the voting or other
rights provided for in this Security Agreement or the remedies in respect of the
Collateral pursuant to this Security Agreement (except as may be required in
connection with the disposition of the Pledged Equity Interests by legal
requirements affecting the offering and sale of securities generally).
 
3.5 Grantor Information. Grantor’s exact legal name, jurisdiction of
organization, type of entity, state issued organizational identification number
and the location of its principal place of business, or chief executive office
and of the books and records relating to the Receivables, are disclosed on
Schedule 3.5; Grantor does not have any other places of business except those
set forth on Schedule 3.5. Except as noted on Schedule 3.5 hereto, all such
books and records are in Grantor’s possession. Grantor has not done, and does
not, do business under any other name (including any trade-name or fictitious
business name) except for those names set forth on Schedule 3.5. Except as
provided on Schedule 3.5, Grantor has not changed its name, jurisdiction of
organization, principal place of business, or chief executive office or its
organizational structure in any way (e.g., by merger, consolidation, change in
corporate form or otherwise) since its formation.
 
3.6 Property Locations. The Equipment, and Fixtures are located solely at the
locations described on Schedule 3.6 and at the Digesters. All of such locations
are owned by a Grantor except for Digesters and locations which are leased by a
Grantor as lessee and designated in Part B of Schedule 3.6.
 
3.7 Litigation. There is no litigation, investigation, or governmental
proceeding threatened against Grantor or any of its properties which if
adversely determined could reasonably be expected to have a Material Adverse
Effect.
 
3.8 No Financing Statements or Control Agreements. Other than the financing
statements and control agreements in favor of Agent with respect to this
Security Agreement, there are no other outstanding financing statements or
control agreements covering any Collateral.
 
3.9 Maintenance of Collateral. All tangible Collateral which is necessary to
Grantor’s business is in good repair and condition (ordinary wear and tear
excepted), and none of the Collateral is a Fixture except as specifically
referred to herein on Schedule 3.6.
 
 
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3.10 Collateral. Schedule 3.10 accurately lists all Pledged Equity Interests,
Securities Accounts, Commodity Accounts, Deposit Accounts, Collateral Notes,
Collateral Note Security, Commercial Tort Claims, and all letters of credit, in
which Grantor has any right, title, or interest. All information supplied by
Grantor to Agent with respect to any of the Collateral is true, correct, and
complete in all material respects.
 
3.11 Deposit, Commodity, and Securities Accounts. Schedule 3.10 correctly
identifies all Deposit Accounts, Commodity Accounts, and Securities Accounts in
which a Grantor has an interest and the institutions holding such accounts.
Grantor is the sole account holder of each such account, and Grantor has not
consented to, and is not otherwise aware of, any Person (other than Agent)
having Control over, or any other interest in, any such account or the property
credited thereto.
 
3.12 Receivables.
 
(a) Each Receivable (i) is and will be the legal, valid and binding obligation
of the Account Debtor in respect thereof, representing an unsatisfied obligation
of such Account Debtor, (ii) is and will be enforceable in accordance with its
terms, (iii) is not and will not be subject to any setoffs, defenses, taxes,
counterclaims (except with respect to refunds, returns and allowances in the
ordinary course of business with respect to damaged merchandise), and (iv) is
and will be in compliance with all applicable laws, whether federal, state,
local or foreign.
 
(b) None of the Account Debtors in respect of any Receivable is the government
of the United States, any agency or instrumentality thereof, any state or
municipality or any foreign sovereign.
 
3.13 Letter of Credit Rights. All letters of credit to which Grantor has rights
are listed on Schedule 3.10, and Grantor has obtained the consent of each issuer
or the nominated Person of any letter of credit to the assignment of the
Proceeds of the letter of credit to Agent.
 
3.14 Instruments; Chattel Paper; Collateral Notes; and Collateral Note Security.
All Instruments and Chattel Paper, including the Collateral Notes, have been
delivered to Agent, together with corresponding endorsements duly executed by
Grantor in favor of Agent, and such endorsements have been duly and validly
executed and are binding and enforceable against Grantor in accordance with
their terms. Each Collateral Note and the documents evidencing the Collateral
Note Security are in full force and effect; there have been no renewals or
extensions of, or amendments, modifications, or supplements to, any thereof
about which Agent has not been advised in writing; and no “default” or
“potential default” has occurred and is continuing under any such Collateral
Note or documents evidencing the Collateral Note Security, except as disclosed
on Schedule 3.10.
 
3.15 Investment Related Property.
 
(a) Schedule 3.10 sets forth all of the Pledged Equity Interests owned by
Grantor and such Pledged Equity Interests constitute the percentage of issued
and outstanding shares of stock, percentage of membership interests, percentage
of partnership interests or percentage of beneficial interest of the respective
issuers thereof indicated on such Schedule.
 
(b) Except as set forth on Schedule 3.10, Grantor has not acquired any Equity
Interests of another Person or substantially all the assets of another Person
since the formation of Grantor.
 
(c) Grantor is the record and beneficial owner of the Pledged Equity Interests
owned by it free of all Liens, rights or claims of other persons other than
Permitted Liens, and there are no outstanding warrants, options or other rights
to purchase, or shareholder, voting trust or similar agreements outstanding with
respect to, or property that is convertible into, or that requires the issuance
or sale of, any Pledged Equity Interests.
 
(d) No consent of any Person, including any member of Grantor, is necessary or
desirable in connection with the creation, perfection or first priority status
of the security interest of Agent in any Pledged Equity Interests or the
exercise by Agent of the voting or other rights provided for in this Security
Agreement or the exercise of remedies in respect thereof.
 
(e) None of the Pledged Equity Interests are or represent interests in issuers
that (i) are registered as investment companies or (ii) are dealt in or traded
on securities exchanges or markets.
 
(f) (i) Grantor has delivered to Agent all certificates, instruments and
documents representing or evidencing the Pledged Equity Interests, together with
corresponding assignments or transfer powers duly executed in blank by Grantor,
and such powers have been duly and validly executed and are binding and
enforceable against Grantor in accordance with their terms and (ii) to the
extent such Pledged Equity Interests are uncertificated, Grantor has taken all
actions necessary or desirable to establish Agent’s Control over such Pledged
Equity Interests.
 
3.16 Intellectual Property.
 
(a) All of the Intellectual Property is subsisting, valid, and enforceable. The
information contained on Schedule 3.16 is true, correct, and complete. All
issued Patents, Patent Licenses, Trademarks, Trademark Licenses, Copyrights,
Copyright Licenses, Trade Secret, and Trade Secret Licenses of Grantor are
identified on Schedule 3.16.
 
 
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(b) Grantor is the sole and exclusive owner of the entire and unencumbered
right, title, and interest in and to the Intellectual Property purported to be
owned by Grantor free and clear of any Liens, including any pledges,
assignments, licenses, user agreements, and covenants by Grantor not to sue
third Persons, other than Permitted Liens.
 
(c) To the best of Grantor’s knowledge, no third party is infringing, or in
Grantor’s reasonable business judgment, may be infringing, any of Grantor’s
rights under the Intellectual Property.
 
(d) Grantor has performed and will continue to perform all acts and has paid and
will continue to pay all required fees and taxes to maintain each and every item
of the Intellectual Property in full force and effect throughout the world, as
applicable.
 
(e) Each of the Patents and Trademarks identified on Schedule 3.16 has been
properly registered with the United States Patent and Trademark Office and in
corresponding offices throughout the world (where appropriate) and each of the
Copyrights identified on Schedule 3.16 has been properly registered with the
United States Copyright Office and in corresponding offices throughout the world
(where appropriate).
 
(f) To the best of Grantor’s knowledge, no claims with respect to the
Intellectual Property have been asserted and are pending (i) to the effect that
the sale, licensing, pledge, or use of any of the products of Grantor’s business
infringes any other party’s valid copyright, trademark, service mark, trade
secret, or other intellectual property right, (ii) against the use by Grantor of
any Intellectual Property used in Grantor’s business as currently conducted, or
(iii) challenging the ownership or use by Grantor of any of the Intellectual
Property that Grantor purports to own or use, nor, to Grantor’s knowledge, is
there a valid basis for such a claim described in this Section 3.16.
 
4. COVENANTS. From the date of this Security Agreement, and thereafter until
this Security Agreement is terminated:
 
4.1 Transaction Documents. Grantor shall comply with, perform, and be bound by
all covenants and agreements in the Transaction Documents that are applicable to
it, its assets, or its operations.
 
4.2 General.
 
(a) Inspection. Grantor will permit Agent, by its representatives and agents
(i) to inspect the Collateral, (ii) to examine and make copies of the records of
Grantor relating to the Collateral, and (iii) to discuss the Collateral and the
related records of Grantor with, and to be advised as to the same by, Grantor’s
officers, employees, and accountants (and, in the case of any Receivable, with
any Account Debtor), all at such reasonable times and intervals as Agent may
determine, and all at Grantor’s expense.
 
(b) Records and Reports; Notification of Potential Trigger Event or Trigger
Event. Grantor will maintain true, complete, and accurate books and records with
respect to the Collateral, and furnish to Agent such reports relating to the
Collateral at such intervals as Agent shall from time to time request. Grantor
will give prompt notice in writing to Agent of the occurrence of any Trigger
Event or Potential Trigger Event and of any other development, financial or
otherwise, which might materially and adversely affect the Collateral. Grantor
shall mark its books and records to reflect the security interest of Agent under
this Security Agreement.
 
(c) Schedules. Grantor shall immediately update any Schedules hereto if any
information therein shall become inaccurate or incomplete. The failure of
property descriptions to be accurate or complete on any Schedule shall not
impair Agent’s security interest in such property.
 
(d) Financing Statements and Other Actions; Defense of Title. Grantor will
deliver to Agent all financing statements and execute and deliver control
agreements and other documents and take such other actions as may from time to
time be requested by Agent in order to maintain a first priority perfected
security interest in and, in the case of Investment Related Property, Deposit
Accounts, Letter-of-Credit-Rights, and Electronic Chattel Paper, Control of, the
Collateral. Grantor will take any and all actions necessary to defend title to
the Collateral against all Persons and to defend the security interest of Agent
in the Collateral and the priority thereof against any Lien not expressly
permitted hereunder.
 
(e) Disposition of Collateral. Grantor will not sell, lease, license or
otherwise dispose of the Collateral except (i) prior to the occurrence of a
Trigger Event, dispositions specifically permitted pursuant to the Purchase
Agreement, (ii) until such time following the occurrence of a Trigger Event, as
Grantor receives a notice from Agent instructing Grantor to cease such
transactions, sales or leases of Inventory in the ordinary course of business,
and (iii) until such time as Grantor receives a notice from Agent pursuant to
Section 5.4, Proceeds of Inventory and Accounts collected in the ordinary course
of business.
 
(f) Liens. Grantor will not create, incur, or suffer to exist any Lien on the
Collateral except (i) the security interest created by this Security Agreement,
and (ii) Permitted Liens.
 
(g) Change in Location, Jurisdiction of Organization or Name. Grantor will not
(i) store, place or hold any Inventory, Equipment, Fixtures, or Proceeds or
products thereof (other than Inventory and Proceeds thereof disposed of as
permitted by Section 4.2(e)) at a location other than a Digester or a location
specified on Schedule 3.6, (ii) maintain records relating to the Receivables at
a location other than at the location specified on Schedule 3.10, (iii) maintain
a place of business at a location other than a location specified on Schedule
3.6, (iv) change its name or taxpayer identification number, (v) change its
mailing address, or (vi) change its jurisdiction of organization, unless Grantor
shall have given Agent not less than thirty (30) days’ prior written notice
thereof, and Agent shall have determined that such change will not adversely
affect the validity, perfection or priority of Agent’s security interest in the
Collateral. Prior to making any of the foregoing changes, Grantor shall execute
and deliver all such additional documents and perform all additional acts as
Agent, in its sole discretion, may request in order to continue or maintain the
existence and priority of its security interest in all of the Collateral.
 
(h) Taxes and Other Obligations. Grantor will pay and discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, all taxes, assessments and governmental charges or levies imposed upon the
Collateral or in respect of income or profits therefrom, as well as all claims
of any kind (including, without limitation, claims for labor, materials and
supplies) against or with respect to the Collateral, except that no such charge
need be paid if the amount or validity thereof is currently being contested in
good faith by appropriate proceedings, reserves in conformity with GAAP with
respect thereto have been provided on the books of Grantor and such proceedings
could not reasonably be expected to result in the sale, forfeiture or loss of
any material portion of the Collateral or any interest therein.
 
 
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(i) Compliance with Agreements. Grantor shall comply with all Contractual
Obligations binding on it or affecting its properties or business.
 
(j) Compliance with Legal Requirements. Grantor shall comply with all applicable
Requirements of Law.
 
(k) Other Financing Statements. Grantor will not authorize any other financing
statement naming it as debtor covering all or any portion of the Collateral,
except with respect to Liens permitted by Section 4.2(f).
 
4.3 Receivables.
 
(a) Certain Agreements on Receivables. Other than in the ordinary course of
business consistent with its past practice, Grantor will not (i) grant any
extension of the time of payment of any Receivable, (ii) compromise or settle
any Receivable for less than the full amount thereof, (iii) release, wholly or
partially, any Person liable for the payment of any Receivable, (iv) allow any
credit or discount whatsoever on any Receivable or (v) amend, supplement or
modify any Receivable in any manner that could adversely affect the value
thereof.
 
(b) Collection of Receivables. Except as otherwise provided in this Security
Agreement, Grantor will, at Grantor’s sole expense, collect all amounts due or
hereafter due to Grantor under the Receivables and enforce Grantor’s rights
under all Collateral Support or Supporting Obligation with respect to the
Receivables.
 
4.4 Equipment.
 
(a) Maintenance of Equipment. Grantor will do all things necessary to maintain,
preserve, protect and keep the Equipment in good repair and working and saleable
condition (ordinary wear and tear excepted).
 
(b) Insurance. Grantor will (i) maintain fire and extended coverage insurance on
the Inventory and Equipment containing a lender’s loss payable clause in favor
of Agent, and providing that said insurance will not be terminated except after
at least thirty (30) days’ written notice from the insurance company to Agent,
(ii) maintain such other insurance on the Collateral for the benefit of Agent as
Agent shall from time to time request, (iii) furnish to Agent upon the request
of Agent from time to time the originals of all policies of insurance on the
Collateral and certificates with respect to such insurance, and (iv) maintain
general liability insurance naming Agent as an additional insured.
 
(c) Certificates of Title. With respect to any item of Equipment which is
covered by a certificate of title and indication of a security interest on such
certificate is required as a condition of perfection, upon the request of Agent,
the Grantor shall cause Agent’s security interest to be properly indicated
thereon.
 
4.5 Accounts. Agent shall have the right to make test verifications of the
Receivables in any manner and through any medium that it reasonably considers
advisable, and Grantor shall furnish all such assistance and information as
Agent may require in connection with such test verifications. At any time and
from time to time, upon the Agent’s request and at the expense of Grantor,
Grantor shall cause independent public accountants or others satisfactory to
Agent to furnish to Agent reports showing reconciliations, aging and test
verifications of, and trial balances for, the Receivables.
 
4.6 Intellectual Property.
 
(a) Prosecution of Applications. Grantor shall prosecute diligently all
applications in respect of Intellectual Property, now or hereafter pending.
 
(b) Federal Applications. Except to the extent not required in Grantor’s
reasonable business judgment, Grantor shall make federal applications on all of
its unpatented but patentable inventions and all of its registrable but
unregistered Copyrights and Trademarks.
 
(c) Maintenance of Rights. Grantor shall preserve and maintain all of its
material rights in the Intellectual Property and protect its Intellectual
Property from infringement, unfair competition, cancellation, or dilution by all
appropriate action necessary in Grantor’s reasonable business judgment,
including the commencement and prosecution of legal proceedings to recover
damages for infringement and to defend and preserve its rights in the
Intellectual Property.
 
(d) No Abandonment. Grantor shall not abandon any of the Intellectual Property
necessary to the conduct of its business in the exercise of Grantor’s reasonable
business judgment.
 
(e) Licenses. (i) Grantor shall not sell or assign any of its interest in any of
the Intellectual Property without the prior written consent of Agent; (ii)
Grantor shall not grant any license or sublicense with respect to any of its
Intellectual Property without the prior written consent of Agent; and (iii)
Grantor shall maintain the quality of any and all products and services with
respect to which the Intellectual Property is used.
 
(f) No Conflicting Agreements. Grantor shall not enter into any agreement,
including any licensing agreement, that is or may be inconsistent with Grantor’s
obligations under this Security Agreement or any of the other Transaction
Documents.
 
 
9

 
 
(g) Additional Intellectual Property. Grantor shall give Agent prompt written
notice if Grantor shall obtain rights to or become entitled to the benefit of
any Intellectual Property not identified on Schedule 3.16. Grantor shall execute
and deliver any and all Patent Security Agreements, Copyright Security
Agreements, or Trademark Security Agreements, each in form and substance
satisfactory to Agent, as Agent may request to evidence Agent’s Lien on such
Intellectual Property.
 
(h) Obligation upon Trigger Event. On and after the occurrence of a Trigger
Event, Grantor shall use its reasonable efforts to obtain any consents, waivers,
or agreements necessary to enable Agent to exercise its rights and remedies with
respect to the Intellectual Property.
 
4.7 Collateral Notes and Collateral Note Security. Without the prior written
consent of Agent, Grantor shall not (a) modify or substitute, or permit the
modification, or substitution of, any Collateral Note or any document evidencing
the Collateral Note Security or (b) release any Collateral Note Security unless
specifically required by the terms thereof.
 
4.8 Instruments; Chattel Paper; and Documents. Grantor will (a) deliver to Agent
immediately upon execution of this Security Agreement the originals of all
Chattel Paper and Instruments (if any then exists), (b) hold in trust for Agent
upon receipt and immediately thereafter deliver to Agent any Chattel Paper and
Instruments constituting Collateral, (c) mark conspicuously all Chattel Paper
and Instruments (other than any delivered to Agent) with an appropriate
reference to the security interest of Agent, and (d) upon Agent’s request,
deliver to Agent (and thereafter hold in trust for Agent upon receipt and
immediately deliver to Agent) any Document evidencing or constituting
Collateral.
 
4.9 Deposit, Commodity, and Securities Accounts. With respect to any Deposit
Account, Commodity Account, or Securities Account, Grantor shall (a) maintain
such accounts at the institutions described on Schedule 3.10 or such additional
institutions as have complied with clause (b) hereof; (b) upon the request of
the Agent, deliver to and obtain from each depository bank and security
intermediary a Control agreement in form and substance satisfactory to Agent
which provides that Agent shall have exclusive Control over such account; and
(c) deliver to Agent all certificates or Instruments, if any, now or hereafter
representing or evidencing such accounts, accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
reasonably satisfactory to Agent. If Agent has requested exclusive Control
thereof, Grantor shall not establish or maintain any Deposit Accounts, Commodity
Accounts or Securities Accounts, unless such accounts are subject to Agent’s
exclusive Control.
 
4.10 Commercial Tort Claims. If Grantor at any time holds or acquires a
Commercial Tort Claim, Grantor shall (a) immediately deliver to Agent written
notification of any and all Commercial Tort Claims, including any and all
actions, suits and proceedings before any court or Governmental Authority by or
affecting Grantor; and (b) execute and deliver such statements, documents and
notices and do and cause to be done all such things as may be required by Agent,
or required by law, including all things which may from time to time be
necessary under the UCC to fully create, preserve, perfect and protect the
priority of Agent’s security interest in any Commercial Tort Claims.
 
4.11 Letters-of-Credit Rights. If Grantor is at any time a beneficiary under a
letter of credit now or hereafter issued in favor of Grantor, Grantor shall
promptly notify Agent thereof in writing and, at Agent’s request, Grantor shall,
pursuant to an agreement in form and substance satisfactory to Agent, either
(a) arrange for the issuer or any confirmer of such letter of credit to consent
to an assignment to Agent of the Proceeds of any drawing under the letter of
credit or (b) arrange for Agent to become the transferee beneficiary of the
letter of credit, with Agent agreeing, in each case, that the Proceeds of any
drawing under the letter of credit are to be applied to the Secured Obligations
as provided in the Purchase Agreement.
 
4.12 Fixtures. With respect to any Collateral that is a Fixture or an accession
which has been attached to real estate or other goods prior to the perfection of
the security interest of Agent, the Grantor shall furnish Agent, upon reasonable
demand, a disclaimer of interest in each such Fixture or accession and a consent
in writing to the security interest of Agent therein, signed by all Persons
having any interest in such Fixture or accession by virtue of any interest in
the real estate or other goods to which such Fixture or accession has been
attached.
 
4.13 Federal, State or Municipal Claims. Grantor will notify Agent of any
Collateral which constitutes a claim against a Governmental Authority, or any
instrumentality or agency thereof, the assignment of which claim is restricted
by federal, state or municipal law.
 
4.14 Collateral Access Agreements. Grantor shall obtain a Collateral Access
Agreement from the lessor of each leased property, mortgagee of owned property
or bailee or consignee with respect to any warehouse, processor or facility or
other location where Collateral is stored or located, which Collateral Access
Agreement shall provide access rights, contain a waiver or subordination of all
Liens or claims that the landlord, mortgagee, bailee or consignee may assert
against the Collateral at that location, and shall otherwise be reasonably
satisfactory in form and substance to Agent.
 
4.15 Use and Operation of Collateral. Grantor agrees to promptly reimburse and
pay to Agent, at Agent’s request, the amount of all expenses (including the cost
of any insurance and payment of taxes or other charges) incurred by Agent in
connection with its custody and preservation of the Collateral, and all such
expenses, costs, taxes, and other charges shall bear interest at the Default
Rate until repaid and, together with such interest, shall be payable by Grantor
to Agent upon demand and shall become part of the Secured Obligations. All risk
of loss or damage to, or diminution in value of, the Collateral is on Grantor,
and Agent shall have no liability whatever for failure to obtain or maintain
insurance, nor to determine whether any insurance ever in force is adequate as
to amount or as to the risks insured. With respect to the Collateral that is in
the possession of Agent, Agent shall have no duty to preserve rights against
prior parties to such Collateral and shall never be liable for any failure to
use diligence to collect any amount payable in respect of such Collateral, but
shall be liable only to account to Grantor for what it may actually collect or
receive thereon. The provisions of this Section are applicable whether or not a
Trigger Event has occurred.
 
4.16 Certain Proceeds. Notwithstanding any contrary provision herein, if a
Trigger Event shall occur, any and all Proceeds of any Collateral consisting of
cash, checks and other non-cash items shall be part of the Collateral hereunder,
and shall, if received by Grantor, be held in trust for the benefit of Agent,
and shall forthwith be delivered to Agent (accompanied by any necessary
endorsements) to be held pursuant to this Security Agreement. Any cash Proceeds
of the Collateral which come into the possession of Agent on and after the
occurrence of a Trigger Event (including insurance Proceeds) may, at Agent’s
option, be applied in whole or in part to the Secured Obligations (to the extent
then due), be released in whole or in part to or on the written instructions of
Grantor for any general or specific purpose, or be retained in whole or in part
by Agent as additional Collateral. The provisions of this Section are applicable
whether or not a Trigger Event has occurred.
 
 
10

 
 
4.17 Further Assurances. At any time and from time to time, upon the request of
Agent, and at the sole expense of Grantor, Grantor shall promptly execute and
deliver all such further instruments, agreements and documents and take such
further actions as Agent may deem necessary or desirable (a) to assure Agent
that its security interests hereunder are perfected first priority security
interests, and (b) to carry out the provisions and purposes of this Security
Agreement, including (i) the filing of such financing statements as Agent may
require, (ii) executing control agreements with respect to the Collateral, in
each case naming Agent, as secured party, in form and substance satisfactory to
Agent, (iii) furnishing to Agent from time to time statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Agent may reasonably request, all
in reasonable detail, (iv) the deposit of all certificates of title issuable
with respect to any of the Collateral and noting thereon Agent’s security
interest hereunder, and (v) taking all other actions required by applicable
Requirements of Law. Grantor shall use its best efforts to obtain any required
consents from any Person other than Grantor and its Affiliates with respect to
any permit or license or any Contractual Obligation with such Person entered
into by Grantor that requires such consent as a condition to the creation by
Grantor of a Lien on any right, title or interest in such permit, license or
Contractual Obligation related thereto. A carbon, photographic, or other
reproduction of this Security Agreement or of any financing statement covering
the Collateral or any part thereof shall be sufficient as a financing statement
and may be filed as a financing statement.
 
5. REMEDIES UPON TRIGGER EVENT
 
5.1 Remedies. On and after the occurrence of a Trigger Event, Agent may exercise
any or all of the following rights and remedies:
 
(a) Contractual Remedies. Those rights and remedies provided in this Security
Agreement, the Purchase Agreement, or any other Transaction Document,
provided that this Section 5.1(a) shall not limit any rights or remedies
available to Agent prior to the occurrence of a Trigger Event.
 
(b) Legal Remedies. If a Trigger Event shall occur, Agent, on behalf of the
Secured Parties, may exercise, in addition to all other rights and remedies
granted to them in this Security Agreement and in any other instrument or
agreement securing, evidencing or relating to the Secured Obligations, all
rights and remedies of a secured party under the UCC or any other applicable
law.
 
(c) Disposition of Collateral. Without notice except as specifically provided in
Section 5.2(c) or elsewhere herein, sell, lease, assign, grant an option or
options to purchase or otherwise dispose of the Collateral or any part thereof
in one or more parcels at public or private sale, for cash, on credit or for
future delivery, and upon such other terms as Agent may deem commercially
reasonable. Neither Agent’s compliance with any applicable state or federal law
in the conduct of such sale, nor its disclaimer of any warranties relating to
the Collateral, shall be considered to affect the commercial reasonableness of
such sale. Grantor hereby waives (to the extent permitted by applicable law) all
rights of redemption, stay and/or appraisal which it now has or may at any time
in the future have under any rule of law or statute now existing or hereafter
enacted.
 
(d) Distributions. On and after the occurrence of a Trigger Event, all payments
and distributions made to Grantor upon or with respect to the Collateral shall
be paid or delivered to Agent, and Grantor agrees to take all such action as
Agent may deem necessary or appropriate to cause all such payments and
distributions to be made to Agent. Agent shall have the right, at any time after
the occurrence of any Trigger Event, to notify and direct any issuer to
thereafter make all payments, dividends, and any other distributions payable in
respect thereof directly to Agent. Such issuer shall be fully protected in
relying on the written statement of Agent that it then holds a security interest
which entitles it to receive such payments and distributions. Any and all Money
and other property paid over to or received by Agent hereunder shall be retained
by Agent as additional collateral hereunder and may be applied in accordance
with Section 5.10 hereof.
 
(e) Use of Premises. Agent shall be entitled to occupy and use any premises
owned or leased by Grantor where any of the Collateral or any records relating
to the Collateral are located until the Secured Obligations are paid or the
Collateral is removed therefrom, whichever first occurs, without any obligation
to pay Grantor for such use and occupancy.
 
5.2 Grantor’s Obligations Upon Trigger Event. Upon the request of Agent on and
after the occurrence of a Trigger Event, Grantor will:
 
(a) Assembly of Collateral. Assemble and make available to Agent the Collateral
and all records relating thereto at any place or places specified by Agent.
 
(b) Agent Access. Permit Agent, and Agent’s representatives and agents, to enter
any premises where all or any part of the Collateral, or the books and records
relating thereto, or both, are located, to take possession of all or any part of
the Collateral and to remove all or any part of the Collateral.
 
(c) Notice of Disposition of Collateral. Grantor hereby waives notice of the
time and place of any public sale or the time after which any private sale or
other disposition of all or any part of the Collateral may be made. To the
extent such notice may not be waived under applicable law, any notice made shall
be deemed reasonable if sent to Grantor, addressed as set forth in Section 6.7,
at least ten (10) days prior to (i) the date of any such public sale or (ii) the
time after which any such private sale or other disposition may be made. Agent
shall not be obligated to make any sale or other disposition of the Collateral
regardless of notice having been given. Subject to the provisions of applicable
law, Agent may postpone or cause the postponement of the sale of all or any
portion of the Collateral by announcement at the time and place of such sale,
and such sale may, without further notice, to the extent permitted by law, be
made at the time and place to which the sale was postponed, or Agent may further
postpone such sale by announcement made at such time and place.
 
5.3 Condition of Collateral; Warranties. Agent has no obligation to clean-up or
otherwise prepare the Collateral for sale. Agent may sell the Collateral without
giving any warranties as to the Collateral. Agent may disclaim any warranties of
title or the like. This procedure will not be considered adversely to affect the
commercial reasonableness of any sale of the Collateral.
 
5.4 Collection of Receivables. On and after the occurrence of a Trigger Event,
Agent may at any time in its sole discretion, by giving Grantor written notice,
elect to require that the Receivables be paid directly to Agent. In such event,
Grantor shall, and shall permit Agent to, promptly notify the Account Debtors
under the Receivables of Agent’s interest therein and direct such Account
Debtors to make payment of all amounts then or thereafter due under the
Receivables directly to Agent. Upon receipt of any such notice from Agent,
Grantor shall thereafter hold in trust for Agent, all amounts and Proceeds
received by it with respect to the Receivables and immediately and at all times
thereafter deliver to Agent all such amounts and Proceeds in the same form as so
received, whether by cash, check, draft or otherwise, with any necessary
endorsements. Agent shall hold and apply funds so received as provided by the
terms of Section 5.10. If after the occurrence of a Trigger Event, any Account
Debtor fails or refuses to make payment on any Collateral when due, Agent is
authorized, in its sole discretion, either in its own name or in the name of
Grantor, to take such action as Agent shall deem appropriate for the collection
of any amounts owed with respect to Collateral or upon which a delinquency
exists. Grantor agrees that Agent may at any time and from time to time, if a
Trigger Event has occurred, compromise with the obligor on any Receivable,
accept in full payment of any Receivable such amount as Agent in its sole
discretion shall determine or abandon any Receivable, and any such action by
Agent shall be commercially reasonable. Regardless of any other provision
hereof, however, Agent shall never be liable for its failure to collect, or for
its failure to exercise diligence in the collection of, any amounts owed with
respect to Collateral, nor shall it be under any duty whatsoever to anyone
except Grantor to account for funds that it shall actually receive hereunder.
 
 
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5.5 Cash Collateral Account. On and after the occurrence of a Trigger Event,
Agent shall have, and Grantor hereby grants to Agent, the right and authority to
transfer all funds on deposit in the Deposit Accounts to a “Cash Collateral
Account” (herein so called) maintained with a depository institution designated
by Agent and subject to the exclusive direction, dominion, and Control of Agent,
and no disbursements or withdrawals shall be permitted to be made by Grantor
from such Cash Collateral Account. Such Cash Collateral Account shall be subject
to the security interest in favor of Agent herein created, and Grantor hereby
grants a security interest to Agent in and to, such Cash Collateral Account and
all checks, drafts, and other items ever received by Grantor for deposit
therein. If a Trigger Event has occurred, Agent shall have the right, at any
time in its discretion without notice to Grantor, (a) to transfer to or to
register in the name of Agent or nominee any certificates of deposit or deposit
instruments constituting Deposit Accounts and shall have the right to exchange
such certificates or Instruments representing Deposit Accounts for certificates
or Instruments of smaller or larger denominations and (b) to take and apply
against the Secured Obligations any and all funds then or thereafter on deposit
in the Cash Collateral Account or otherwise constituting Deposit Accounts.
 
5.6 Intellectual Property. For purposes of enabling Agent to exercise its rights
and remedies under this Security Agreement and enabling Agent and its successors
and assigns to enjoy the full benefits of the Collateral, Grantor hereby grants
to Agent an irrevocable, nonexclusive license (exercisable without payment of
royalty or other compensation to Grantor) to use, license, or sublicense any of
the Intellectual Property. Grantor shall provide Agent with reasonable access to
all media in which any of the Intellectual Property may be recorded or stored
and all computer programs used for the completion or printout thereof. This
license shall also inure to the benefit of all successors, assigns, and
transferees of Agent. If no Trigger Event has occurred, Grantor shall have the
exclusive, non-transferable right and license to use the Intellectual Property
in the ordinary course of business and the exclusive right to grant to other
Persons licenses and sublicenses with respect to the Intellectual Property for
full and fair consideration.
 
5.7 Record Ownership of Securities. On and after the occurrence of a Trigger
Event, Agent at any time may have any Collateral that is Pledged Equity
Interests and that is in the possession of Agent, or its nominee or nominees,
registered in its name, or in the name of its nominee or nominees, as Agent;
and, as to any Collateral that is Pledged Equity Interests so registered, Agent
shall execute and deliver (or cause to be executed and delivered) to the Grantor
all such proxies, powers of attorney, dividend coupons or orders, and other
documents as Grantor may reasonably request for the purpose of enabling Grantor
to exercise the voting rights and powers which it is entitled to exercise under
this Security Agreement or to receive the dividends and other distributions and
payments in respect of such Collateral that is Pledged Equity Interests or
Proceeds thereof which it is authorized to receive and retain under this
Security Agreement.
 
5.8 Investment Related Property. Grantor recognizes that, by reason of certain
prohibitions contained in the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder (collectively, the “Securities Act”) and
applicable state securities laws, Agent may be compelled, with respect to any
sale of all or any part of the Investment Related Property conducted without
prior registration or qualification of such Investment Related Property under
the Securities Act and/or such state securities laws, to limit purchasers to
those who will agree, among other things, to acquire the Investment Related
Property for their own account, for investment and not with a view to the
distribution or resale thereof. Grantor acknowledges that any such private sale
may be at prices and on terms less favorable than those obtainable through a
public sale without such restrictions (including a public offering made pursuant
to a registration statement under the Securities Act) and, notwithstanding such
circumstances, Grantor agrees that any such private sale shall be deemed to have
been made in a commercially reasonable manner and that Agent shall have no
obligation to engage in public sales and no obligation to delay the sale of any
Investment Related Property for the period of time necessary to permit the
issuer thereof to register it for a form of public sale requiring registration
under the Securities Act or under applicable state securities laws, even if such
issuer would, or should, agree to so register it. If Agent determines to
exercise its right to sell any or all of the Investment Related Property, upon
written request, Grantor shall and shall cause each issuer of any Pledged Equity
Interests to from time to time to furnish to Agent all such information as Agent
may request in order to determine the number and nature of interest, and shares
included in the Investment Related Property which may be sold by Agent in exempt
transactions under the Securities Act and the rules and regulations of the
Securities and Exchange Commission thereunder. In case of any sale of all or any
part of the Investment Related Property on credit or for future delivery, such
Collateral so sold may be retained by Agent until the selling price is paid by
the purchaser thereof, but Agent shall not incur any liability in case of the
failure of such purchaser to take up and pay for such assets so sold and in case
of any such failure, such Collateral may again be sold upon like notice. Agent,
instead of exercising the power of sale herein conferred upon them, may proceed
by a suit or suits at law or in equity to foreclose security interests created
hereunder and sell the Investment Related Property, or any portion thereof,
under a judgment or decree of a court or courts of competent jurisdiction.
 
5.9 Sales on Credit. If Agent sells any of the Collateral upon credit, Grantor
will be credited only with payments actually made by the purchaser, received by
Agent, and applied to the indebtedness of the purchaser. In the event the
purchaser fails to pay for the Collateral, Agent may resell the Collateral and
Grantor shall be credited with the Proceeds of the sale.
 
5.10 Application of Proceeds. On and after the occurrence of a Trigger Event,
the Proceeds of the Collateral shall be applied by Agent to payment of the
Secured Obligations in such manner and order as Agent may elect in its sole
discretion. If the Proceeds of any sale or other disposition of the Collateral
are insufficient to pay all of the Secured Obligations, Grantor shall be liable
for the deficiency and the fees of any attorneys employed by Agent to collect
such deficiency.
 
5.11 Power of Attorney. Grantor hereby appoints Agent and Agent’s designee as
its attorney, with power: (a) to endorse Grantor’s name on any checks, notes,
acceptances, money orders, or other forms of payment or security that come into
Agent’s possession; (b) to sign Grantor’s name on any invoice, bill of lading,
warehouse receipt, or other negotiable or non-negotiable Document constituting
Collateral, on drafts against customers, on assignments of Accounts, on notices
of assignment, financing statements, and other public records, and to file any
such financing statements by electronic means with or without a signature as
authorized or required by applicable law or filing procedure; (c) to notify the
post office authorities to change the address for delivery of Grantor’s mail to
an address designated by Agent and to receive, open, and dispose of all mail
addressed to Grantor; (d) to send requests for verification of Accounts to
customers or Account Debtors; (e) to exercise all of Grantor's rights and
remedies with respect to the collection or enforcement of the Receivables and
any other Collateral; (f) to file such financing statements with respect to this
Security Agreement, with or without Grantor’s signature, or to file a photocopy
of this Security Agreement in substitution for a financing statement, as Agent
may deem appropriate and to execute in Grantor’s name such financing statements
and amendments thereto and continuation statements which may require Grantor’s
signature; (g) to discharge past due taxes, assessments, charges, fees or Liens
on the Collateral; (h) to settle, adjust, compromise, extend or renew the
Receivables; and (i) to take all actions necessary to carry out the terms and
provisions of the Purchase Agreement and this Security Agreement. Grantor
ratifies and approves all acts of such attorney. None of the Secured Parties nor
their attorneys will be liable for any acts or omissions or for any error of
judgment or mistake of fact or law except for their willful misconduct or gross
negligence as determined by a court of competent jurisdiction in final and
non-appealable judgment. This power, being coupled with an interest, is
irrevocable until this Security Agreement is terminated in accordance with
Section 6.11. Agent agrees that, except for the powers granted in paragraphs
(b), (d) and (f) of this Section, it shall not exercise any power or authority
granted to it unless a Trigger Event has occurred and is continuing. The powers
conferred on Agent, for the benefit of the Secured Parties, under this Section
5.11 are solely to protect Agent’s and the other Secured Parties’ interests in
the Collateral and shall not impose any duty upon Agent or any other Secured
Party to exercise any such powers.
 
6. GENERAL PROVISIONS.
 
6.1 Recovered Payments. The Secured Obligations shall be deemed not to have been
paid, observed or performed, and the Secured Obligations shall continue and not
be discharged, to the extent that any payment, observance or performance thereof
by Grantor is recovered from or paid over by or for the account of Agent for any
reason, including as a preference or fraudulent transfer or by virtue of any
subordination (whether present or future or contractual or otherwise) of the
Secured Obligations, whether such recovery or payment over is effected by any
judgment, decree or order of any court or governmental agency, by any plan of
reorganization or by settlement or compromise by Agent (whether or not consented
to by Grantor) of any claim for any such recovery or payment over. Grantor
hereby expressly waives the benefit of any applicable statute of limitations and
agrees that it shall be liable hereunder whenever such a recovery or payment
over occurs.
 
 
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6.2 No Waiver. No delay or omission of Agent to exercise any right or remedy
granted under this Security Agreement shall impair such right or remedy or be
construed to be a waiver of any Trigger Event, or an acquiescence therein, and
any single or partial exercise of any such right or remedy shall not preclude
any other or further exercise thereof or the exercise of any other right or
remedy. No waiver, amendment or other variation of the terms, conditions or
provisions of this Security Agreement whatsoever shall be valid unless in
writing signed by Agent and then only to the extent in such writing specifically
set forth. All rights and remedies contained in this Security Agreement or by
law afforded shall be cumulative and all shall be available to Agent until the
Secured Obligations have been paid in full.
 
6.3 Agent Performance of Grantor’s Obligations; Authority of Agent.
 
(a) Without having any obligation to do so, Agent may perform or pay any Secured
Obligation which Grantor has agreed to perform or pay in this Security Agreement
and Grantor shall reimburse Agent for any amounts paid by Agent pursuant to this
Section 6.3. Grantor’s Secured Obligation to reimburse Agent pursuant to the
preceding sentence shall be a Secured Obligation payable on demand.
 
(b) Grantor acknowledges that the rights and responsibilities of the Agent under
this Security Agreement with respect to any action taken by Agent or the
exercise or non-exercise by Agent of any option, voting right, request, judgment
or other right or remedy provided for herein or resulting or arising out of this
Security Agreement shall, as between Agent and the Secured Parties, be governed
by such agreements with respect thereto as may exist from time to time among
them, but, as between Agent and Grantor, Agent shall be conclusively presumed to
be acting as agent for the Secured Parties with full and valid authority so to
act or refrain from acting, and Grantor shall not be under any obligation, or
entitlement, to make any inquiry respecting such authority.
 
6.4 Waivers. Except to the extent expressly otherwise provided herein or in
other Transaction Documents and to the fullest extent permitted by applicable
law, Grantor waives (a) any right to require Agent to proceed against any other
Person, to exhaust its rights in Collateral, or to pursue any other right which
Agent or any other Secured Party may have; (b) with respect to the Secured
Obligations, presentment and demand for payment, protest, notice of protest and
nonpayment, notice of intent to accelerate, and notice of acceleration; and
(c) all rights of marshaling in respect of any and all of the Collateral.
 
6.5 Benefit of Agreement. The terms and provisions of this Security Agreement
shall be binding upon and inure to the benefit of Grantor, Agent and the other
Secured Parties and their respective successors and assigns, except that Grantor
shall not have the right to assign any of its rights or delegate any of its
Secured Obligations under this Security Agreement or any interest herein,
without the prior written consent of Agent.
 
6.6 Survival. All representations and warranties of Grantor contained in this
Security Agreement shall survive the execution and delivery of this Security
Agreement. Without prejudice to the survival of any other Secured Obligations,
the provisions of Section 6.8 and Section 6.13 shall survive the termination of
this Security Agreement.
 
6.7 Notices. All notices, requests and demands to or upon Agent or Grantor
hereunder shall be effected in the manner provided for in Section 8.6 of the
Purchase Agreement
 
6.8 Taxes and Expenses. Any taxes (including income taxes) payable or ruled
payable by federal or state authority in respect of this Security Agreement
shall be paid by Grantor, together with interest and penalties, if any. Grantor
shall reimburse Agent for any and all out-of-pocket expenses and internal
charges (including reasonable attorneys’, auditors’ and accountants’ fees and
reasonable time charges of attorneys, paralegals, auditors and accountants who
may be employees of Agent) paid or incurred by Agent in connection with the
preparation, execution, delivery, and administration, of this Security Agreement
and in the audit, analysis, administration, collection, preservation or sale of
the Collateral (including the expenses and charges associated with any periodic
or special audit of the Collateral). In addition, Grantor shall be obligated to
pay all of the costs and expenses incurred by Agent, including attorneys’ fees
and court costs, in obtaining or liquidating the Collateral, in enforcing
payment of the Secured Obligations, or in the prosecution or defense of any
action or proceeding by or against Agent or Grantor concerning any matter
arising out of or connected with this Security Agreement, any Collateral or the
Secured Obligations, including any of the foregoing arising in, arising under or
related to a case under any bankruptcy, insolvency or similar law. Any and all
costs and expenses incurred by Grantor in the performance of actions required
pursuant to the terms hereof shall be borne solely by Grantor.
 
6.9 Headings. The title of and section headings in this Security Agreement are
for convenience of reference only, and shall not govern the interpretation of
any of the terms and provisions of this Security Agreement.
 
6.10 Counterparts. This Security Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement, and
any of the parties hereto may execute this Security Agreement by signing any
such counterpart. Delivery of an executed counterpart of a signature page of
this Security Agreement by facsimile or other electronic transmission shall be
effective as delivery of a manually executed counterpart of this Security
Agreement.
 
6.11 Termination. This Security Agreement shall continue in effect until (a) all
obligations of Grantor to redeem Series A Preferred Units pursuant to the
Purchase Agreement have been indefeasibly paid in full in cash, (b) all
obligations of Purchaser to purchase Series A Preferred Units pursuant to the
Purchase Agreement have terminated or expired, and (c) all of the Secured
Obligations have been indefeasibly paid and performed in full in cash;
provided that the termination of this Security Agreement under this Section 6.11
is subject to Section 6.1.
 
6.12 GOVERNING LAW/VENUE.
 
(a) THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE.
 
 
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(b) Grantor hereby irrevocably and unconditionally:
 
(i) submits for itself and its property in any legal action or proceeding
relating to this Security Agreement and the other Transaction Documents to which
it is a party, or for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction of the Courts of the
Delaware, the courts of the United States of America sitting in the State of
Delaware, and appellate courts from any thereof;
 
(ii) consents that any such action or proceeding may be brought in such courts
and waives any objection that it may now or hereafter have to the venue of any
such action or proceeding in any such court or that such action or proceeding
was brought in an inconvenient court and agrees not to plead or claim the same;
 
(iii) agrees that service of process in any such action or proceeding may be
effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to such Grantor at its
address referred to in Section 6.7 or at such other address of which the Agent
shall have been notified pursuant thereto;
 
(iv) agrees that nothing herein shall affect the right to effect service of
process in any other manner permitted by law or shall limit the right to sue in
any other jurisdiction; and
 
(v) waives, to the maximum extent not prohibited by law, any right it may have
to claim or recover in any legal action or proceeding referred to in this
Section any special, exemplary, punitive or consequential damages.
 
6.13 Indemnity. GRANTOR DOES HEREBY ASSUME ALL LIABILITY FOR THE COLLATERAL, FOR
THE SECURITY INTEREST OF AGENT, AND FOR ANY USE, POSSESSION, MAINTENANCE, AND
MANAGEMENT OF, ALL OR ANY OF THE COLLATERAL, INCLUDING ANY TAXES ARISING AS A
RESULT OF, OR IN CONNECTION WITH, THE TRANSACTIONS CONTEMPLATED HEREIN, AND
AGREES TO ASSUME LIABILITY FOR, AND TO INDEMNIFY AND HOLD THE SECURED PARTIES
AND THEIR RESPECTIVE SUCCESSORS, ASSIGNS, AGENTS, ATTORNEYS, AND EMPLOYEES
HARMLESS FROM AND AGAINST, ANY AND ALL CLAIMS, CAUSES OF ACTION, OR LIABILITY,
FOR INJURIES TO OR DEATHS OF PERSONS AND DAMAGE TO PROPERTY, HOWSOEVER ARISING
FROM OR INCIDENT TO SUCH USE, POSSESSION, MAINTENANCE, AND MANAGEMENT, WHETHER
SUCH PERSONS BE AGENTS OR EMPLOYEES OF GRANTOR OR OF THIRD PARTIES, OR SUCH
DAMAGE BE TO PROPERTY OF GRANTOR OR OF OTHERS.
 
GRANTOR SHALL INDEMNIFY EACH SECURED PARTY AND EACH AFFILIATE THEREOF AND THEIR
RESPECTIVE OFFICERS, DIRECTORS, MANAGERS, EMPLOYEES, ATTORNEYS, AND AGENTS
(COLLECTIVELY, THE “INDEMNIFIED PARTIES” AND INDUVIDUALLY AN “INDEMNIFIED
PARTY”) FROM, AND HOLD EACH OF THEM HARMLESS AGAINST, ANY AND ALL LOSSES,
LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS, AND
EXPENSES (INCLUDING ATTORNEYS’ FEES) TO WHICH ANY OF THEM MAY BECOME SUBJECT
WHICH DIRECTLY OR INDIRECTLY ARISE FROM OR RELATE TO (A) ANY OF THE TRANSACTION
DOCUMENTS INCLUDING THE NEGOTIATION, EXECUTION, DELIVERY, PERFORMANCE,
ADMINISTRATION, OR ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS, (B) ANY OF
THE TRANSACTIONS CONTEMPLATED BY THE TRANSACTION DOCUMENTS, (C) ANY BREACH BY
GRANTOR OF ANY REPRESENTATION, WARRANTY, COVENANT, OR OTHER AGREEMENT CONTAINED
IN ANY OF THE TRANSACTION DOCUMENTS, (D) ANY ACTION TAKEN OR NOT TAKEN BY ANY
SECURED PARTY (OR ANY TRUSTEE UNDER ANY COLLATERAL DOCUMENT) THAT IS ALLOWED OR
PERMITTED UNDER ANY OF THE TRANSACTION DOCUMENTS, INCLUDING THE PROTECTION OR
ENFORCEMENT OF ANY LIEN, SECURITY INTEREST, OR OTHER RIGHT, REMEDY, OR RECOURSE
CREATED OR AFFORDED BY THE TRANSACTION DOCUMENTS OR AT LAW OR IN EQUITY, (E) THE
PRESENCE, RELEASE, THREATENED RELEASE, DISPOSAL, REMOVAL, OR CLEANUP OF ANY
HAZARDOUS SUBSTANCE LOCATED ON, ABOUT, WITHIN, OR AFFECTING ANY OF THE
PROPERTIES OR ASSETS OF GRANTOR, OR (F) ANY INVESTIGATION, LITIGATION, OR OTHER
PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY THREATENED INVESTIGATION,
LITIGATION, OR OTHER PROCEEDING, RELATING TO ANY OF THE FOREGOING INCLUDING
THOSE BROUGHT OR INITIATED BY GRANTOR. WITHOUT LIMITING ANY PROVISION OF THIS
SECURITY AGREEMENT OR OF ANY OTHER TRANSACTION DOCUMENT, IT IS THE EXPRESS
INTENTION OF THE PARTIES HERETO THAT THE INDEMNIFIED PARTIES BE INDEMNIFIED FROM
AND HELD HARMLESS AGAINST ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES,
PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS, AND EXPENSES (INCLUDING ATTORNEYS’
FEES) ARISING OUT OF OR RESULTING FROM THE STRICT LIABILITY, SOLE CONTRIBUTORY
OR ORDINARY NEGLIGENCE OF ANY OF THE INDEMNIFIED PARTIES, PROVIDED THAT THE
INDEMNITY SET FORTH IN THIS PARAGRAPH SHALL NOT APPLY TO ANY CLAIM CAUSED BY THE
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE INDEMNIFIED PARTY SEEKING
INDEMNIFICATION AS DETERMINED BY A COURT OF COMPETENT JURISDICTION IN A FINAL
NON-APPEALABLE JUDGMENT.
 
AGENT MAY EMPLOY AN ATTORNEY OR ATTORNEYS OF ITS OWN CHOOSING TO PROTECT OR
ENFORCE ITS RIGHTS, REMEDIES, AND RECOURSES, AND TO ADVISE AND DEFEND THE
INDEMNIFIED PARTIES WITH RESPECT TO THOSE ACTIONS AND OTHER MATTERS. GRANTOR
SHALL REIMBURSE AGENT FOR THE ATTORNEYS’ FEES AND EXPENSES (INCLUDING EXPENSES
AND COSTS FOR EXPERTS AND/OR CONSULTANTS) OF THE INDEMNIFIED PARTIES IMMEDIATELY
ON RECEIPT OF WRITTEN DEMAND FROM AGENT, WHETHER ON A MONTHLY OR OTHER TIME
INTERVAL, AND WHETHER OR NOT AN ACTION IS ACTUALLY COMMENCED OR CONCLUDED. ALL
OTHER REIMBURSEMENT AND INDEMNITY OBLIGATIONS UNDER THIS SECURITY AGREEMENT
SHALL BECOME DUE AND PAYABLE WHEN ACTUALLY INCURRED BY AGENT OR ANY OF THE OTHER
THE INDEMNIFIED PARTIES. ANY PAYMENTS NOT MADE WITHIN TEN (10) DAYS AFTER
WRITTEN DEMAND FROM AGENT SHALL BEAR INTEREST AT THE DEFAULT RATE FROM THE DATE
OF THAT DEMAND UNTIL FULLY PAID. THE PROVISIONS OF THIS SECTION 6.13 SHALL
SURVIVE REPAYMENT AND PERFORMANCE OF THE SECURED OBLIGATIONS, THE RELEASE OF ANY
LIENS SECURING THE SECURED OBLIGATIONS, ANY FORECLOSURE (OR ACTION IN LIEU OF
FORECLOSURE), THE TRANSFER BY GRANTOR OF ANY OF ITS RIGHTS, TITLE, AND INTERESTS
IN OR TO ANY COLLATERAL SECURING THE SECURED OBLIGATIONS, AND THE EXERCISE BY
ANY SECURED PARTY OF ANY OR ALL REMEDIES SET FORTH IN ANY TRANSACTION DOCUMENT.
 
6.14 WAIVER OF JURY TRIAL. THE PARTIES ACKNOWLEDGE THAT THE RIGHT TO A TRIAL BY
JURY IS A CONSTITUTIONAL ONE, BUT THAT SUCH RIGHT MAY BE WAIVED. AGENT AND
GRANTOR, AFTER CONSULTING (OR HAVING THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF
THEIR CHOICE, HEREBY KNOWINGLY, VOLUNTARILY, IRREVOCABLY, AND EXPRESSLY WAIVE TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ALL RIGHT TO A TRIAL BY JURY IN
ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR
OTHERWISE) ARISING OUT OF OR RELATING IN ANY WAY TO ANY OF THE TRANSACTION
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE CONDUCT, ACTS OR
OMISSIONS OF SECURED PARTY AND EACH GRANTOR IN THE NEGOTIATION, ADMINISTRATION,
OR ENFORCEMENT THEREOF. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE
THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO
HAVE BEEN INDUCED TO ENTER INTO THIS SECURITY AGREEMENT AND THE OTHER
TRANSACTION DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 6.14.
 
6.15 FINAL AGREEMENT. THIS SECURITY AGREEMENT REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
 
remainder of page intentionally left blank.

 
signature pages follow.
 
 
14

 
 
IN WITNESS WHEREOF, Grantor and Agent have executed and delivered this Security
Agreement as of the date first above written.
 
 
 
GRANTOR:
 
 
 
 
 
AEMETIS BIOGAS LLC
 
 
 
 
 
 
By:  
/s/ Eric McAfee  
 
 
 
Name: Eric McAfee  
 
 
 
Title: President  
 

 
Signature Page
Security Agreement
15

 
 
 
 
AGENT:
 
 
 
 
 
THIRD EYE CAPITAL CORPORATION, as Agent
 
 
 
 
 
 
By:  
/s/ Arif N. Bhalwani  
 
 
 
Name: Arif N. Bhalwani  
 
 
 
Title: Managing Director  
 

 
 
 
 
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