Document:

a50196192ex10_6.htm

Exhibit 10.6

 

 

PLEDGE AND SECURITY AGREEMENT

 

AMONG

 

NEUTRON ENERGY, INC.

 

AND

 

URANIUM RESOURCES, INC.

 

 

DATED AS OF MARCH 1, 2012

 

  

  

  

 

TABLE OF CONTENTS

 

Page

 

	
ARTICLE 1.

	
DEFINITIONS; GRANT OF SECURITY; CONTINUING PERFECTION AND PRIORITY

	
1

	
Section 1.1

	
Credit Agreement

	
1

	
Section 1.2

	
UCC

	
1

	
Section 1.3

	
Other Defined Terms

	
2

	
Section 1.4

	
Other Definitions; Interpretation

	
5

	
ARTICLE 2.

	
GRANT OF SECURITY

	
5

	
Section 2.1

	
Grant of Security

	
5

	
Section 2.2

	
Security for Secured Obligations

	
7

	
Section 2.3

	
No Assumption of Liability

	
7

	
ARTICLE 3.

	
REPRESENTATIONS AND WARRANTIES AND COVENANTS

	
7

	
Section 3.1

	
Generally

	
7

	
Section 3.2

	
Equipment and Inventory

	
9

	
Section 3.3

	
Receivables

	
10

	
Section 3.4

	
Investment-Related Property

	
11

	
Section 3.5

	
Letter-of-Credit Rights

	
14

	
Section 3.6

	
Commercial Tort Claims

	
14

	
Section 3.7

	
Financing Statements

	
14

	
ARTICLE 4.

	
FURTHER ASSURANCES; FILING AUTHORIZATION

	
15

	
Section 4.1

	
Further Assurances

	
15

	
Section 4.2

	
Filings

	
15

	
ARTICLE 5.

	
REMEDIES UPON DEFAULT

	
15

	
Section 5.1

	
Remedies Generally

	
15

	
Section 5.2

	
Application of Proceeds of Collateral

	
17

	
Section 5.3

	
Investment-Related Property

	
18

	
Section 5.4

	
Registration, etc

	
18

	
Section 5.5

	
Deficiency

	
19

	
ARTICLE 6.

	
CONCERNING THE LENDER

	
19

	
Section 6.1

	
In General

	
19

	
Section 6.2

	
Lender Appointed Attorney-in-Fact

	
19

	
Section 6.3

	
Reimbursement of Lender

	
20

	
ARTICLE 7.

	
WAIVERS; AMENDMENTS

	
21

	
ARTICLE 8.

	
SECURITY INTEREST ABSOLUTE

	
21

 

 

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ARTICLE 9.

	
TERMINATION; RELEASE

	
21

	
Section 9.1

	
Termination

	
21

	
Section 9.2

	
Other Releases of Collateral

	
22

	
ARTICLE 10.

	
NOTICES

	
22

	
ARTICLE 11.

	
BINDING EFFECT; SEVERAL AGREEMENT; ASSIGNMENTS

	
22

	
ARTICLE 12.

	
SURVIVAL OF AGREEMENT; SEVERABILITY

	
23

	
ARTICLE 13.

	
MISCELLANEOUS

	
23

	
Section 13.1

	
GOVERNING LAW

	
23

	
Section 13.2

	
Counterparts; Integration

	
23

	
Section 13.3

	
Headings

	
23

	
Section 13.4

	
Jurisdiction; Venue; Consent to Service of Process

	
23

	
Section 13.5

	
WAIVER OF JURY TRIAL

	
24

	
Section 13.6

	
Reinstatement

	
24

	
Section 13.7

	
Intercreditor Agreement

	
24

 

  

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SCHEDULES:

 

	
Schedule 3.2(a)

	
Collateral Locations

	
Schedule 3.4

	
List of Investment-Related Property

	
Schedule 3.5

	
Letter-of-Credit Rights

	
Schedule 3.6

	
Commercial Tort Claims

	
Schedule 3.7(a)

	
Financing Statements

	
Schedule 3.7(b)

	
Applicable Filing Offices

  

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This PLEDGE AND SECURITY AGREEMENT, dated as of March 1, 2012, is by and between NEUTRON ENERGY, INC., a Nevada corporation (the “Borrower”), and URANIUM RESOURCES, INC., a Delaware corporation (the “Lender”), under the Credit Agreement referred to in the next paragraph (as amended, supplemented or otherwise modified from time to time, the “Security Agreement”).

 

RECITALS

 

A.           Reference is made to the Credit and Funding Agreement even dated herewith among the Borrower, Cibola Resources LLC and the Lender (as the same may be amended, supplemented or otherwise modified from time to time, the “Credit Agreement”).

 

B.           The Lender has agreed to make Funding Loans to the Borrower or for the joint account of the Borrower and one or more Subsidiaries pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreement.  The Borrower acknowledges that it and its Subsidiaries’ business is a mutual and collective enterprise and that the Funding Loans and other financial accommodations made under the Loan Documents will enhance the credit availability to the Borrower and facilitate its loan relationship with the Lender, all to the advantage of the Borrower.

 

C.           The Borrower acknowledges that it will derive substantial direct and indirect benefit from the making of the Funding Loans.

 

D.           This Security Agreement is given by the Borrower in favor of the Lender for the benefit of the Secured Parties (as hereinafter defined) to secure the payment and performance of all of the Secured Obligations (as hereinafter defined).

 

E.           The execution and delivery by the Borrower of this Security Agreement is a condition precedent to the effectiveness of the Credit Agreement, and the Lender would not have entered into the Credit Agreement if the Borrower had not executed and delivered this Security Agreement.

 

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, each of the Borrower and the Lender, on behalf of itself and each other Secured Party (and each of their respective successors or assigns), hereby agree as follows:

 

ARTICLE 1.               

 

DEFINITIONS; GRANT OF SECURITY; CONTINUING PERFECTION AND PRIORITY

 

Section 1.1 Credit Agreement.  Capitalized terms used in this Security Agreement and not otherwise defined herein have the meanings set forth in the Credit Agreement.

 

Section 1.2 UCC.  Unless otherwise defined herein or in the Credit Agreement, capitalized terms used herein that are defined in the UCC (as defined below) have the meanings assigned to them in the UCC, including the following: “Accounts”; “Chattel Paper”; “Documents”; “Fixtures”; “General Intangibles”; “Goods”; “Instruments”; “Inventory”; “Investment Property”; Letter-of-Credit Rights”; “Letters of Credit”; “Proceeds”; “Records”; “Security”; “Security Certificate” and “Supporting Obligations”.

 

  

  

  

 

Section 1.3 Other Defined Terms.  As used in this Security Agreement, the following terms have the meanings specified below:

 

“Account Debtor” means each Person who is obligated in respect of any Receivable or any Supporting Obligation or Collateral Support relating thereto.

 

“Applicable Date” means the date hereof.

 

“Applicable Filing Offices” means the filing offices set forth on Schedule 3.7(b).

 

“Authorization” means, collectively, any license, approval, permit or other authorization issued by any Governmental Authority.

 

“Borrower” has the meaning assigned to such term in the Preamble.

 

“Claim Proceeds” means, with respect to any Commercial Tort Claim or any Collateral Support or Supporting Obligation relating thereto, all Proceeds thereof, including all insurance proceeds and other amounts and recoveries resulting or arising from the settlement or other resolution thereof, in each case regardless of whether characterized as a “commercial tort claim” under Article 9 of the UCC or “proceeds” under the UCC.

 

“Collateral” has the meaning assigned to such term in Section 2.1.

 

“Collateral Records” means all books, instruments, certificates, Records, ledger cards, files, correspondence, customer lists, blueprints, models, drawings, technical specifications, manuals, warranties and other documents, and all computer software, computer printouts, tapes, disks and related data processing software and similar items, in each case that at any time represent, cover or otherwise 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 of the 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 all “commercial tort claims” as defined in Article 9 of the UCC and all Claim Proceeds; including all claims described on Schedule 3.6 hereto.

 

“Credit Agreement” has the meaning assigned to such term in the Recitals.

 

“Equipment” means any “equipment,” as such term is defined in the UCC and, in any event, shall include, Motor Vehicles.

 

“Equity Interests” means (a) shares of corporate stock, partnership interests, membership interests and any other interest that convers on a Person the right to receive a share of the profits and losses of, or a distribution of the assets of, the issuing person and (b) all warrants, options or other rights to acquire any Equity Interest set forth in clause (a) of this defined term.

 

“Excluded Accounts” means zero balance, payroll, payroll taxes, withholding tax, employee wage and benefit payments and other tax and employee fiduciary accounts.

 

  

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“Federal Securities Laws” has the meaning assigned to such term in Section 5.3.

 

“Financing Statements” means the UCC-1 Financing Statements in the forms attached hereto as Schedule 3.7(a) in the Applicable Filing Offices.

 

“Insurance” means all insurance policies covering any or all of the Collateral (regardless of whether the Lender or any other Secured Party is the loss payee thereof) and all business interruption insurance policies.

 

“Investment-Related Property” means (a) all Pledged Collateral and (b) all other Investment Property owned or held by or on behalf of the Borrower.

 

“Material Commercial Tort Claims” means, with respect to the Borrower, (a) all Commercial Tort Claims asserted by it, or on its behalf, in writing, and (b) each Commercial Tort Claim in excess of $25,000 individually, or $150,000 in the aggregate, to which it has any right, title or interest and of which it is aware.

 

“Motor Vehicles” shall mean motor vehicles, tractors, trailers and other like property, whether or not the title thereto is governed by a certificate of title or ownership.

 

“Person” means any corporation, limited liability company, trust, joint venture, association, company, partnership or other entity.

 

“Pledged Collateral” means, collectively, the Pledged Debt and the Pledged Equity Interests.

 

“Pledged Debt” means all debt owed or owing to the Borrower, including all such debt described on Part C of Schedule 3.4, all Pledged Debt Securities and all interest, cash, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such debt. Notwithstanding the foregoing, the parties acknowledge and agree that while Receivables with respect to Accounts constitute “Pledged Debt” as defined herein, such Receivables shall not be required to be included on Part C of Schedule 3.4.  The parties further agree that the exclusion of Receivables from Part C of Schedule 3.4 in no way excludes such debt owed from the definition of “Pledged Debt.”

 

“Pledged Debt Securities” means, collectively, (a) all debt Securities held by the Borrower, whether now owned or hereafter acquired (including all such debt Securities listed in Part C of Schedule 3.4), and (b) all promissory notes and any other instruments evidencing such Debt Securities.

 

“Pledged Equity Interests” means, collectively, all Equity Interests owned by the Borrower in each, in each case whether now owned or hereafter created or acquired, together with all Security Certificates evidencing such Equity Interests, including (i) in the case of certificated Equity Interests constituting Securities, the Equity Interests listed in Part A of Schedule 3.4 and (ii) in the case of Equity Interests constituting Uncertificated Securities, Uncertificated Limited Liability Company Interests and Uncertificated Partnership Interests, the Equity Interests listed in Part B of Schedule 3.4.

 

“Receivables” means all rights to payment, whether or not earned by performance, for goods or other property sold, leased, licensed, assigned or otherwise disposed of, or services rendered or to be rendered, including all such rights constituting or evidenced by any Account, Chattel Paper, Instrument or other document, General Intangible or Investment-Related Property, together with all of the Borrower’s rights, if any, in any goods or other property giving rise to such right to payment, and all Collateral Support and Supporting Obligations relating thereto and all Receivables Records.

 

  

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“Receivables Records” means (a) all originals of all documents, instruments or other writings or electronic records or other Records evidencing any Receivable, (b) all books, correspondence, credit or other files, Records, ledger sheets or cards, invoices, and other papers relating to any Receivable, including all tapes, cards, computer tapes, computer discs, computer runs, record keeping systems and other papers and documents relating to any Receivable, whether in the possession or under the control of the Borrower or any computer bureau or agent from time to time acting for the Borrower or otherwise, (c) all evidences of the filing of Financing Statements and the registration of other instruments in connection therewith, and amendments, supplements or other modifications thereto, notices to other creditors or secured parties, and certificates, acknowledgments, or other writings, including lien search reports, from filing or other registration officers, (d) all credit information, reports and memoranda relating thereto, and (e) all other written forms of information related in any way to the foregoing or any Receivable.

 

“Secured Obligations” means, collectively, (a) the unpaid principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Funding Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (b) all other monetary obligations, fees, commissions, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Borrower to the Secured Parties, or that are otherwise payable to the Lender, in each case under the Loan Documents and (c) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Borrower or any other party (other than the Lender) under or pursuant to the Loan Documents.

 

“Secured Parties” means (a) the Lender, (b) the beneficiaries of each indemnification obligation undertaken by or on behalf of the Borrower under any Loan Document, and (c) the successors and assigns of each of the foregoing.

 

“Security Interest” has the meaning assigned to such term in Section 2.1.

 

“Supporting Obligations” means (a) all “supporting obligations” as defined in Article 9 of the UCC and (b) all Guarantees and other secondary obligations supporting any of the Collateral, in each case regardless of whether characterized as a “supporting obligation” under the UCC.

 

“UCC” shall mean the Uniform Commercial Code as in effect from time to time in the State of Nevada; provided, however, that, at any time, if by reason of mandatory provisions of law, any or all of the perfection or priority of the Lender’s and the Secured Parties’ security interest in any item or portion of the Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of Nevada, the term “UCC” shall mean the Uniform Commercial Code as in effect, at such time, in such other jurisdiction for purposes of the provisions hereof relating to such perfection or priority and for purposes of definitions relating to such provisions.

 

“Uncertificated Equity Interests” means, collectively, Uncertificated Limited Liability Company Interests, Uncertificated Partnership Interests and Uncertificated Securities.

 

  

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“Uncertificated Limited Liability Company Interest” means a limited liability company membership interest at any time owned by the Borrower in any Subsidiary which is a limited liability company and which limited liability company membership interest is not a Security and not represented by a Security Certificate.

 

“Uncertificated Partnership Interest” means a general partnership interest or limited partnership interest at any time owned by the Borrower in any Subsidiary which is a limited partnership and which general partnership interest or limited partnership interest is not a Security and not represented by a Security Certificate.

 

“Uncertificated Security” means an Equity Interest constituting a Security at any time owned by the Borrower in any Subsidiary, which Equity Interest is not represented by a Security Certificate.

 

Section 1.4 Other Definitions; Interpretation.

 

(a) Rules of Interpretation.  The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.  The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.”  The word “will” shall be construed to have the same meaning and effect as the word “shall.”  Unless the context requires otherwise (a) 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 herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein,” “hereof” and “hereunder,” and words of similar import, shall be construed to refer to this Security Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Security Agreement, (e) any reference to any law or regulation herein shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (f) 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. All references herein to provisions of the UCC shall include all successor provisions under any subsequent version or amendment to any Article of the UCC.

 

(b) Resolution of Drafting Ambiguities.  The Borrower acknowledges and agrees that it was represented by counsel in connection with the execution and delivery of this Security Agreement, that it and its counsel reviewed and participated in the preparation and negotiation of this Security Agreement and that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be employed in the interpretation hereof.

 

ARTICLE 2.

 

GRANT OF SECURITY

 

Section 2.1 Grant of Security.

 

  

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(a) As security for the payment or performance, as applicable, in full when due (whether at the stated maturity, by acceleration or otherwise) of the Secured Obligations, the Borrower hereby bargains, sells, conveys, assigns, sets over, mortgages, pledges, hypothecates and transfers to the Lender (and its successors and assigns), and hereby grants to the Lender (and its successors and assigns) a security interest (the “Security Interest”) in, all personal property and fixtures of the Borrower, including all of the Borrower’s right, title and interest in, to and under the following, in each case whether now owned or existing or hereafter acquired or arising and wherever located (all of which being hereinafter collectively referred to as the “Collateral”):

 

(i) all Accounts,

 

(ii) all Chattel Paper (whether tangible or electronic),

 

(iii) all Commercial Tort Claims,

 

(iv) all Documents,

 

(v) all Equipment,

 

(vi) all Fixtures,

 

(vii) all General Intangibles,

 

(viii) all Goods, not covered by the other clauses of this Section 2.1(a),

 

(ix) all Instruments, including the Pledged Debt Securities,

 

(x) all Insurance,

 

(xi) all Inventory,

 

(xii) all Investment-Related Property,

 

(xiii) all cash and cash equivalents,

 

(xiv) all Letters of Credit and Letter-of-Credit Rights,

 

(xv) all Proceeds of Authorizations and, subject to the provisions of Section 2.1(c), all Authorizations and the goodwill associated with all Authorizations,

 

(xvi) all Receivables and Receivables Records,

 

(xvii) all other goods and other personal property of the Borrower,

 

(xviii) to the extent not otherwise included in clauses (i) through (xvii) of this Section, all Collateral Records, Collateral Support and Supporting Obligations in respect of any of the foregoing, and

 

(xix) to the extent not otherwise included in clauses (i) through (xvii) of this Section, all Proceeds, products, substitutions, accessions, rents and profits of or in respect of any of the foregoing, whether cash or non-cash, immediate or remote, and any indemnities, warranties and guaranties payable by reason of loss or damage to or otherwise with respect to any of the foregoing.

 

  

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(b) Revisions to UCC.  For the avoidance of doubt, it is expressly understood and agreed that, to the extent the UCC is revised after the date hereof such that the definition of any of the foregoing terms included in the description or definition of the Collateral is changed, the parties hereto desire that any property which is included in such changed definitions, but which would not otherwise be included in the Security Interest on the date hereof, nevertheless be included in the Security Interest upon the effective date of such revision. Notwithstanding the immediately preceding sentence, the Security Interest is intended to apply immediately on the Applicable Date to all of the Collateral to the fullest extent permitted by applicable law, regardless of whether any particular item of the Collateral was then subject to the UCC.

 

(c) Certain Limited Exclusions.  Notwithstanding anything in this Section 2.1 to the contrary, in no event shall the Collateral include, and the Borrower shall be deemed to not have granted a Security Interest in, (i) any right under any Authorization, lease, license or other contract or agreement, but only to the extent that the granting of a security interest therein or an assignment thereof would violate any applicable law or would result in an invalidation thereof or constitute a breach or violation of such lease, license or other contract or agreement, as applicable (other than any contractual prohibition on the assignment of accounts or payment intangibles that is unenforceable under Section 9-406, 9-407, 9-408, or 9-409 of the UCC or any other section under the UCC or any other applicable law), provided that to the extent such security interest at any time hereafter shall no longer be prohibited by law or agreement, and/or immediately upon such provision no longer being enforceable, as the case may be, the Collateral shall automatically and without any further action include, and the Borrowers shall be deemed to have granted automatically and without any further action a Security Interest in, such right as if such law or agreement had never existed or such provision had never been enforceable, as the case may be, (ii) any margin stock, (iii) any assets as to which the Lender and the Borrower agree in writing that (A) the cost of obtaining a security interest is excessive in relation to the value of the security to be afforded thereby or (B) obtaining such security interest is not commercially practical, (iv) Excluded Accounts and (v) any Investment Property, or any General Intangibles to the extent, in each case, that (1) a security interest may not be granted by the Borrower in such directly held investment property or general intangibles as a matter of law, or under the terms of the governing document applicable thereto, without the consent of one or more applicable parties thereto and (2) such consent has not been obtained.

 

Section 2.2 Security for Secured Obligations.  This Security Agreement secures, and the Collateral is collateral security for, the prompt and complete payment or performance in full 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 Title 11 of the United States Code, or any similar provision of any other bankruptcy, insolvency, receivership or other similar law), of all Secured Obligations.

 

Section 2.3 No Assumption of Liability.  Notwithstanding anything to the contrary herein, the Security Interest is granted as security only and shall not subject the Lender or any other Secured Party to, or in any way alter or modify, any obligation or liability of the Borrower with respect to or arising out of the Collateral.

 

  

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ARTICLE 3.

 

REPRESENTATIONS AND WARRANTIES AND COVENANTS

 

Section 3.1 Generally.

 

(a) Representations and Warranties.  The Borrower represents and warrants to the Lender and the other Secured Parties that:

 

(i) The Borrower has good and valid rights in or title to the Collateral with respect to which it has purported to grant the Security Interest, except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such Collateral for its intended purposes, and except for Permitted Encumbrances.  Except in connection with the Existing Senior Loan Documents and the other Loan Documents, the Borrower has not filed or consented to the filing of (A) any Financing Statement or analogous document under the UCC or any other applicable laws covering any such Collateral or any assignment in which it assigns any such Collateral or any security agreement or similar instrument covering any such Collateral with any foreign governmental, municipal or other office, in each case which Financing Statement, analogous document, assignment or other instrument, as applicable, is still in effect, except for Permitted Encumbrances.

 

(ii) No individual lease, license or other contract or agreement as to which no security interest is granted by virtue of Section 2.1(c) is material to the business (when taken as a whole) of the Borrower; provided however, that this representation and warranty is limited to those leases, licenses and other contracts and agreements that, on their face, prohibit the granting of a security interest therein.  This representation and warranty does not apply to any leases, licenses and other contracts and agreements in which the granting of a security interest therein or an assignment thereof is prohibited by applicable law.

 

(b) Covenants and Agreements.  The Borrower hereby covenants and agrees as follows:

 

(i) It shall maintain, at its own cost and expense, such complete and accurate Records with respect to the Collateral owned or held by it or on its behalf as is consistent with its current practices and in accordance with such prudent and standard practices used in industries that are the same as or similar to those in which it is engaged, but in any event to include complete accounting Records indicating in all material respects all payments and proceeds received with respect to any part of such Collateral, and, at such time or times as the Lender may reasonably request, promptly to prepare and deliver to the Lender a duly certified schedule or schedules in form and detail satisfactory to the Lender showing the identity and amount of any and all such Collateral.

 

(ii) It shall, at its own cost and expense, take any and all actions reasonably necessary to defend title to the Collateral owned or rights in Collateral held by it or on its behalf against all Persons and to defend the Security Interest in such Collateral and the priority thereof against any Lien or other interest not expressly permitted by the Loan Documents or the Existing Senior Loan Documents, and in furtherance thereof, it shall not take, or permit to be taken, any action not otherwise expressly permitted by the Loan Documents or the Existing Senior Loan Documents that could impair the Security Interest or the priority thereof or any Secured Party’s rights in or to such Collateral.

 

  

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(iii) During normal business hours, the Lender and such Persons as the Lender may reasonably designate shall, as often as reasonably requested have the right to inspect all of its Records (and to make extracts and copies from such Records), to discuss its affairs with its officers and independent accountants and to verify under reasonable procedures the validity, amount, quality, quantity, value, condition and status of, or any other matter relating to, the Collateral owned or rights in Collateral held by or on behalf of the Borrower; provided, that, in the case of Receivables, Pledged Debt, General Intangibles, Commercial Tort Claims or Collateral in the possession of any third person, the Lender shall not, unless an Event of Default has occurred and is continuing, contact Account Debtors, contract parties or other obligors thereon or any third person possessing such Collateral for the purpose of making such a verification.  The Lender shall have the absolute right to share on a confidential basis any information it gains from such inspection or verification with any Secured Party.

 

(iv) At its option, the Lender may discharge past due taxes, assessments, charges, fees, Liens, security interests or other encumbrances at any time levied or placed on the Collateral owned or held by or on behalf of the Borrower, and not permitted by the Loan Documents or the Existing Senior Loan Documents, and may pay for the maintenance and preservation of such Collateral to the extent the Borrower fails to do so as required by the Loan Documents, and the Borrower agrees to reimburse the Lender on demand for any payment made or any expense incurred by the Lender pursuant to the foregoing authorization; provided, however, that nothing in this paragraph shall be interpreted as excusing the Borrower from the performance of, or imposing any obligation on the Lender or any other Secured Party to cure or perform, any covenants or other promises of the Borrower with respect to taxes, assessments, charges, fees, Liens, security interests or other encumbrances and maintenance as set forth herein or in the other Loan Documents.

 

(v) It shall remain liable for the failure to observe and perform all the conditions and obligations to be observed and performed by it under each contract, agreement or instrument relating to the Collateral owned or held by it or on its behalf, all in accordance with the terms and conditions thereof, and it agrees to indemnify and hold harmless the Lender and the other Secured Parties from and against any and all liability for such performance.

 

(vi) It shall not make, or permit to be made, an assignment, pledge or hypothecation of the Collateral owned or held by it or on its behalf, or grant any other Lien in respect of such Collateral, except as expressly permitted by the Loan Documents or the Existing Senior Loan Documents. Except for Liens or transfers expressly permitted by the Loan Documents and the Existing Senior Loan Documents, it shall not make or permit to be made any transfer of such Collateral, and it shall remain at all times in possession of such Collateral and the direct owner, beneficially and of record, of the Pledged Equity Interests included in such Collateral, except that (A) Inventory may be sold in the ordinary course of business and (B) unless and until the Lender shall notify it that an Event of Default shall have occurred and be continuing and that, during the continuance thereof, it shall not sell, convey, lease, assign, transfer or otherwise dispose of any such Collateral (which notice may be given by telephone if promptly confirmed in writing), it may use and dispose of such Collateral in any lawful manner not inconsistent with the provisions of this Security Agreement, any other Loan Document or the Existing Senior Loan Documents.

 

(vii) It shall, at its own cost and expense, maintain or cause to be maintained insurance covering physical loss or damage to the Collateral owned or held by it or on its behalf against all risks and liability arising from the use or intended use, or otherwise attributable or relating to, such Collateral, in each case in accordance with Section 6.9 of the Credit Agreement.  The Borrower irrevocably makes, constitutes and appoints the Lender (and all officers, employees or agents designated by the Lender) as the Borrower’s true and lawful agent (and attorney-in-fact) for the purpose, during the continuance of an Event of Default, of making, settling and adjusting claims in respect of such Collateral under policies of insurance, endorsing the name of the Borrower on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance and for making all determinations and decisions with respect thereto.

 

  

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(viii) It will not (A) change its state of organization, maintain its place of business (if it has only one) or its chief executive office (if it has more than one place of business) at a location other than as same exists on the Applicable Date, (B) reincorporate or reorganize itself under the laws of any jurisdiction other than the jurisdiction in which it is incorporated or organized on the Applicable Date or (C) change its name, identity, state organization number or taxpayer identification number, unless the Borrower shall have given the Lender not less than 15 days’ prior written notice of such event or occurrence and the Lender shall have either (x) determined that such event or occurrence will not adversely affect the validity, perfection or priority of the Lender’s security interest in the Collateral, or (y) taken such steps (with the cooperation of the Borrower to the extent necessary or advisable) as are necessary or advisable to properly maintain the validity, perfection and priority of the Lender’s security interest in the Collateral.

 

(ix) The Borrower acknowledges that it is not authorized to file any Financing Statement with respect to the Collateral (in each case, except for Financing Statements related to Liens permitted under the Loan Documents or the Existing Senior Loan Documents) or amendment or termination statement with respect to any such Financing Statement (in each case, except for Financing Statements related to Liens permitted under the Loan Documents or in connection with the Existing Senior Loan Documents) without the prior written consent of the Lender and agrees that it will not do so without the prior written consent of the Lender, subject to the Borrower’s rights under Section 9-509(d)(2) of the UCC.

 

Section 3.2 Equipment and Inventory.

 

(a) Representations and Warranties.  The Borrower represents and warrants to the Lender and the other Secured Parties that, as of the Applicable Date, all of the Equipment and Inventory included in the Collateral owned or held by it or on its behalf (other than mobile goods, Inventory and Equipment in transit, Motor Vehicles and other Collateral in which possession is not maintained in the ordinary course of its business) is kept only at the locations specified in Schedule 3.2(a) hereto, which sets forth with respect to the Borrower, where Equipment and Inventory is (i) maintained at the premises owned by the Borrower, (ii) maintained at leased premises, (iii) in the possession of a warehouseman or other bailee and (iv) on consignment.

 

(b) Covenants and Agreements.  The Borrower covenants and agrees that it shall not permit any Equipment or Inventory owned or held by it or on its behalf to be in the possession or control of any warehouseman, bailee, agent or processor for a period of greater than thirty (30) consecutive days, unless such warehouseman, bailee, agent or processor shall have been notified of the Security Interest and, at the request of the Lender, shall have agreed in writing to hold such Equipment or Inventory subject to the Security Interest and the instructions of the Lender.  The Borrower shall, promptly upon the request of the Lender, cause the Lender to be listed as lienholder on each certificate of title or ownership covering any items of Equipment, including Motor Vehicles (but only if the aggregate value of such Motor Vehicles is in excess of $50,000).

 

Section 3.3 Receivables.

 

  

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(a) Representations and Warranties. The Borrower represents and warrants to the Lender and the other Secured Parties that no Receivable included in the Collateral owned or held by it or on its behalf is evidenced by an Instrument or Chattel Paper that has not been delivered to the Lender or the Senior Lender.

 

(b) Covenants and Agreements. The Borrower hereby covenants and agrees that:

 

(i) At the request of the Lender, the Borrower shall mark conspicuously, in form and manner reasonably satisfactory to the Lender, all Chattel Paper, Instruments and other evidence of any Receivables included in the Collateral owned or held by it or on its behalf (other than any delivered to the Lender as provided herein), as well as the related Receivables Records, with an appropriate reference to the fact that the Lender has a security interest therein.

 

(ii) It will not, without the Lender’s prior written consent (which consent shall not be unreasonably withheld), grant any extension of the time of payment of any such Receivable, compromise, compound or settle the same for less than the full amount thereof, release, wholly or partly, any Supporting Obligation or Collateral Support relating thereto, or allow any credit or discount whatsoever thereon, other than extensions, credits, discounts, releases, compromises or settlements granted or made in the ordinary course of business and consistent with its current practices or in accordance with such practices reasonably believed by the Borrower to be prudent.

 

(iii) Except as otherwise provided in this Section, it shall continue to collect all amounts due or to become due to it under all such Receivables and any Supporting Obligations or Collateral Support relating thereto, and diligently exercise each material right it may have thereunder, in each case at its own cost and expense, and in connection with such collections and exercise, it shall, upon the occurrence and during the continuance of an Event of Default, take such action as it or the Lender may reasonably deem necessary. Notwithstanding the foregoing, the Lender shall have the right at any time after the occurrence and during the continuance of an Event of Default to notify, or require the Borrower to notify, any Account Debtor with respect to any such Receivable, Supporting Obligation or Collateral Support of the Lender’s security interest therein, and in addition, at any time during the continuation of an Event of Default, the Lender may: (A) direct such Account Debtor to make payment of all amounts due or to become due to the Borrower thereunder directly to the Lender and (B) enforce, at the cost and expense of the Borrower, collection thereof and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as the Borrower would be able to have done.  If the Lender notifies the Borrower that it has elected to collect any such Receivable, Supporting Obligation or Collateral Support in accordance with the preceding sentence, any payments thereof received by the Borrower shall not be commingled with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the benefit of the Lender hereunder and shall be forthwith delivered to the Lender in the same form as so received (with any necessary endorsement), and the Borrower shall not grant any extension of the time of payment thereof, compromise, compound or settle the same for less than the full amount thereof, release the same, wholly or partly, or allow any credit or discount whatsoever thereon.

 

(iv) During the continuance of an Event of Default, at the request of the Lender, it shall direct each Account Debtor to make payment on each Receivable to an account designated by the Lender.

 

Section 3.4 Investment-Related Property.

 

  

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(a) Representations and Warranties.  The Borrower represents and warrants to the Lender and the other Secured Parties that:

 

(i) Schedule 3.4 sets forth, as of the Applicable Date, all of the Pledged Collateral.

 

(ii) Part A and Part B of Schedule 3.4 correctly set forth the percentage of the issued and outstanding shares of each class of the Equity Interests of the issuer thereof represented by the Pledged Equity Interests and includes all Pledged Equity Interests required to be pledged hereunder.  The Pledged Equity Interests are fully paid and nonassessable.  Part C of Schedule 3.4 correctly sets forth Pledged Debt and includes all Pledged Debt required to be pledged hereunder.

 

(iii) Other than Uncertificated Equity Interests (set forth in Part B of Schedule 3.4), there is no Investment-Related Property other than Securities represented by Security Certificates or Instruments in the possession of the Lender or the Senior Lender.

 

(iv) All Pledged Equity Interests included in the Collateral owned or held by it or on its behalf have been duly authorized and validly issued and are fully paid and non-assessable, and the Borrower is the direct owner, beneficially and of record, thereof, free and clear of all Liens (other than Liens expressly permitted by the Loan Documents or the Existing Senior Loan Documents).

 

(v) All Pledged Debt included in the Collateral owned or held by it or on its behalf has been duly authorized, issued and delivered and, where necessary, authenticated, and, to the knowledge of the Borrower, constitutes the legal, valid and binding obligation of the obligor with respect thereto, enforceable in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally.

 

(vi) (A) To the knowledge of the Borrower, none of the Pledged Collateral owned by it has been issued or transferred in violation of the securities registration, securities disclosure or similar laws of any jurisdiction to which such issuance or transfer may be subject, (B) except as set forth on Schedule 3.4, there are existing no options, warrants, calls or commitments of any character whatsoever relating to such Pledged Collateral or which obligate the issuer of any Equity Interest included in the Pledged Collateral to issue additional Equity Interests, and (C) no consent, approval, authorization, or other action by, and no giving of notice to or filing with, any governmental authority or any other Person is required for the pledge by the Borrower of such Pledged Collateral pursuant to this Security Agreement or for the execution, delivery and performance of this Security Agreement by the Borrower, or for the exercise by the Lender of the voting or other rights provided for in this Security Agreement or for the remedies in respect of the Pledged Collateral pursuant to this Security Agreement, except as may be required in connection with such disposition by laws affecting the offering and sale of securities generally.

 

(vii) No Person other than the Lender or the Senior Lender has “control” (within the meaning of Article 8 of the UCC) over any Investment-Related Property of the Borrower.

 

(b) Registration in Nominee Name; Denominations.  The Borrower hereby agrees that (i) the Lender, on behalf of the Secured Parties, shall have the right (in its sole and absolute discretion) to hold, where applicable, Investment-Related Property included in the Collateral owned or held by it or on its behalf in the name of the Borrower, endorsed or assigned, where applicable, in blank or in favor of the Lender, (ii) at the Lender’s request, the Borrower will promptly give to the Lender copies of any material notices or other written communications received by it with respect to any Investment-Related Property included in the Collateral owned or held by it or on its behalf registered in its name and (iii) the Lender shall at all times have the right to exchange any certificates, instruments or other documents representing or evidencing any Investment-Related Property included in the Collateral owned or held by or on behalf of the Borrower for certificates, instruments or other documents of smaller or larger denominations for any reasonable purpose consistent with this Security Agreement.

 

  

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(c) Voting and Distributions.

 

(i) Unless and until an Event of Default shall have occurred and be continuing:

 

(A) The Borrower shall be entitled to exercise any and all voting and/or other consensual rights and powers inuring to an owner of the Investment-Related Property included in the Collateral owned or held by it or on its behalf, or any part thereof, for any purpose consistent with the terms of this Security Agreement and the other Loan Documents and the Existing Senior Loan Documents; provided, however, that the Borrower will not be entitled to exercise any such right if the result thereof could materially and adversely affect the rights inuring to a holder of the Investment-Related Property or the rights and remedies of any of the Secured Parties under this Security Agreement or any other Loan Document or the ability of any of the Secured Parties to exercise the same.

 

(B) The Lender shall execute and deliver to the Borrower, or cause to be executed and delivered to the Borrower, all such proxies, powers of attorney and other instruments as the Borrower may reasonably request for the purpose of enabling it to exercise the voting and/or consensual rights and powers it is entitled to exercise pursuant to subsection (c)(i)(A) and to receive the cash payments it is entitled to receive pursuant to subsection (c)(i)(C).

 

(C) The Borrower shall be entitled to receive, retain and use any and all cash dividends, interest and principal paid on the Investment-Related Property included in the Collateral owned or held by it or on its behalf to the extent and only to the extent that such cash dividends, interest and principal are not prohibited by, and not otherwise paid in a manner that violates the terms and conditions of the Credit Agreement, the other Loan Documents and applicable laws.  All non-cash dividends, interest and principal, and all dividends, interest and principal paid or payable in cash or otherwise in connection with a partial or total liquidation or dissolution, return of capital, capital surplus or paid in surplus, and all other distributions (other than distributions referred to in the preceding sentence) made on or in respect of the Investment-Related Property included in the Collateral owned or held by it or on its behalf, whether resulting from a subdivision, combination or reclassification of the outstanding Equity Interests in any issuer or received in exchange for any Investment-Related Property, or any part thereof, or in redemption thereof, or as a result of any merger, consolidation, acquisition or other exchange of assets to which such issuer may be a party or otherwise, shall be and become part of the Collateral, and, if received by the Borrower, shall not be commingled with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the benefit of the Lender hereunder and shall to the extent certificated be forthwith delivered to the Lender in the same form as so received (with any necessary endorsement).

 

(ii) Without limiting the generality of the foregoing, upon the occurrence and during the continuance of an Event of Default:

 

  

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(A) all rights of the Borrower to dividends, interest or principal that it is authorized to receive pursuant to subsection (c)(i)(C) shall cease, and all such rights shall thereupon become vested in the Lender, which shall have the sole and exclusive right and authority to receive and retain such dividends, interest or principal, as applicable. All dividends, interest and principal received by or on behalf of the Borrower contrary to the provisions of this Section shall be held in trust for the benefit of the Lender, shall be segregated from other property or funds of the Borrower and shall be forthwith delivered to the Lender upon demand in the same form as so received (with any necessary endorsement).  Any and all money and other property paid over to or received by the Lender pursuant to the provisions of this subsection (c)(ii)(A) shall be retained by the Lender in an account to be established in the name of the Lender, for the benefit of Lender and the other Secured Parties, upon receipt of such money or other property and shall be applied in accordance with the provisions of Section 5.2.  Subject to the provisions of this subsection (c)(ii)(A), such account shall at all times be under the sole dominion and control of the Lender, and the Lender shall at all times have the sole right to make withdrawals therefrom and to exercise all rights with respect to the funds and other property from time to time therein or credited thereto as set forth in the Loan Documents. After all Events of Default have been cured or waived, the Lender shall, within five Business Days after all such Events of Default have been cured or waived, repay to the Borrower all cash dividends, interest and principal (without interest) that the Borrower would otherwise be permitted to retain pursuant to the terms of subsection (c)(i)(C) and which remain in such account.

 

(B) all rights of the Borrower to exercise the voting and consensual rights and powers it is entitled to exercise pursuant to subsection (c)(i)(A), and the obligations of the Lender under subsection (c)(i)(B), shall cease, and all such rights shall thereupon become vested in the Lender, which shall have the sole and exclusive right and authority to exercise such voting and consensual rights and powers, provided that the Lender shall have the right from time to time following and during the continuance of an Event of Default to permit the Borrower to exercise such rights.  After all Events of Default have been cured or waived, the Borrower will have the right to exercise the voting and consensual rights and powers that it would otherwise be entitled to exercise pursuant to the terms of subsection (c)(i)(A).

 

(d) Covenants and Agreements.  The Borrower hereby covenants and agrees as follows:

 

(i) The Borrower hereby agrees that all certificates or Instruments representing or evidencing Investment-Related Property acquired by the Borrower after the Applicable Date shall be delivered either to the Lender pursuant to the Credit Agreement or the Senior Lender pursuant to the Existing Senior Loan Documents.

 

(ii) At the request of the Lender, the Borrower as pledgor of Uncertificated Securities shall deliver to the Lender an agreement among the issuer thereof, the Lender and the Borrower, in form and substance reasonably satisfactory to the Lender, pursuant to which such issuer agrees to comply, upon notice by Lender that an Event of Default has occurred and is continuing, with any and all instructions originated by the Lender without further consent by the Borrower and not to comply with instructions regarding such Uncertificated Equity Interests originated by any other person other than a court of competent jurisdiction.  The Lender agrees with the Borrower that the Lender shall not give any such notice, instructions or directions to any such issuer unless an Event of Default has occurred and is continuing.

 

  

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(e) Limited Liability Company and Partnership Interests.  The Borrower acknowledges and agrees that (i) each interest in any limited liability company or limited partnership which is a Subsidiary, pledged hereunder and represented by a certificate shall be a Security and shall be governed by Article 8 of the UCC and (ii) each such interest shall at all times hereafter be represented by a certificate.  The Borrower has taken or will, prior to the pledge of any such certificated interest, will take, all steps necessary to cause the Organizational Documents of such limited liability company or limited partnership to provide that it is a Security governed by Article 8 of the UCC.  The Borrower further acknowledges and agrees that (A) each interest in any limited liability company or limited partnership which is a Subsidiary, pledged hereunder and not represented by a certificate shall not be a Security and shall not be governed by Article 8 of the UCC, and (B) the Borrower shall at no time elect to treat any such interest as a Security or issue any certificate representing such interest, unless the Borrower provides prior written notification to the Lender of such election and promptly delivers any such certificate to the Lender pursuant to the terms hereof together with appropriate undated stock powers or instruments of transfer executed in blank.

 

Section 3.5 Letter-of-Credit Rights.  The Borrower represents and warrants to the Lender and the other Secured Parties that Schedule 3.5 hereto sets forth, as of the Applicable Date, each letter of credit giving rise to a Letter-of-Credit Right included in the Collateral owned or held by or on behalf of the Borrower.

 

Section 3.6 Commercial Tort Claims.

 

(a) Representations and Warranties.  The Borrower represents and warrants to the Lender and the other Secured Parties that Schedule 3.6 hereto sets forth, as of the Applicable Date, all Material Commercial Tort Claims.

 

(b) Covenants and Agreements.  The Borrower hereby covenants and agrees that it shall provide the Lender with prompt written notice of each Material Commercial Tort Claim, and any judgment, settlement or other disposition thereof and will take such action as the Lender may request to grant and perfect a security interest therein in favor of the Lender and the other Secured Parties.

 

Section 3.7 Financing Statements.  The Borrower represents and warrants to the Lender and the other Secured Parties that:

 

(a) Financing statements in substantially the form of Schedule 3.7(a) hereto have been prepared by the Borrower and such form of financing statements contain: (i) the true and correct name of the Borrower, (ii) the true and correct mailing address of the Borrower, (iii) the true and correct jurisdiction of organization of the Borrower, and (iv) the true and correct organizational identification number of the Borrower, if any.

 

(b) Attached hereto as Schedule 3.7(b) is a schedule setting forth, with respect to the filings described in Section 3.7(a) above, the filing office in the jurisdiction in which the Borrower is incorporated.

 

  

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ARTICLE 4.

 

FURTHER ASSURANCES; FILING AUTHORIZATION

 

Section 4.1 Further Assurances.  The Borrower hereby covenants and agrees, at its own cost and expense, to execute, acknowledge, deliver and/or cause to be duly filed all such further agreements, instruments and other documents (including favorable legal opinions in connection with the acquisition of any material assets or the acquisition or creation of a subsidiary by the Borrower) if reasonably required by the Lender and take all such further actions, that the Lender may from time to time reasonably request to preserve, protect and perfect the Security Interest granted by it and the rights and remedies created hereby, including the payment of any fees and taxes required in connection with its execution and delivery of this Security Agreement, the granting by it of the Security Interest and the filing of any Financing Statements or other documents in connection herewith or therewith, transferring Collateral to the Lender’s possession (if a security interest in such Collateral can be perfected by possession), placing the interest of the Lender as lienholder on the certificate of title of any Motor Vehicle (subject to the limitations in Section 3.2(b) hereof) and, to the extent reasonably required by the Lender using commercially reasonable efforts to obtain waivers of Liens from landlords and mortgagees on forms reasonably satisfactory to the Lender.

 

Section 4.2 Filings.  The Borrower hereby irrevocably authorizes the Lender at any time and from time to time to file in any relevant jurisdiction any Financing Statements and amendments thereto that contain the information required by Article 9 of the Uniform Commercial Code of each applicable jurisdiction for the filing of any Financing Statement or amendment relating to the Collateral, including (i) whether the Borrower is an organization, the type of organization and any organizational identification number issued to the Borrower, (ii) 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, (iii) any financing or continuation statements or other documents without the signature of the Borrower where permitted by law, including the filing of a Financing Statement describing the Collateral as (A) “all assets now owned or hereafter acquired by the Borrower or in which Borrower otherwise has rights” or any similar phrase, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the UCC, or as being of an equal or lesser scope or with greater detail, 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.  The Borrower agrees to provide all information described in the immediately preceding sentence to the Lender promptly upon the reasonable request by the Lender.  The Borrower also ratifies its authorization for the Lender to have filed in any Uniform Commercial Code jurisdiction any like Financing Statements or amendments thereto if filed prior to the date hereof.

 

ARTICLE 5.

 

REMEDIES UPON DEFAULT

 

Section 5.1 Remedies Generally.

 

(a) General Rights.  Upon the occurrence and during the continuance of an Event of Default, the Borrower agrees to deliver each item of Collateral owned or held by it or on its behalf to the Lender on demand, and it is agreed that the Lender shall have the right to take any of or all the following actions at the same or different times: (i) with respect to any Collateral consisting of Commercial Tort Claims, on demand, to cause the Security Interest to become an assignment, transfer and conveyance of any such Collateral by the Borrower to the Lender, or, (ii) with or without legal process and with or without prior notice or demand for performance, to take possession of the Collateral owned or held by it or on its behalf and without liability for trespass to enter any premises where such Collateral may be located for the purpose of taking possession of or removing such Collateral and, generally, to exercise any and all rights afforded to a secured party under the UCC or other applicable law, and (iii) appoint a receiver for all or any portion of the Collateral.  Without limiting the generality of the foregoing, the Borrower agrees that the Lender shall have the right, upon the occurrence and during the continuance of an Event of Default, subject to the mandatory requirements of applicable law, to sell or otherwise dispose of any of the Collateral owned or held by or on behalf of the Borrower, at public or private sale or at any broker’s board or on any securities exchange, for cash, upon credit or for future delivery as the Lender shall deem appropriate. The Lender shall be irrevocably authorized at any such sale of such Collateral constituting securities (if it deems it advisable to do so) to restrict the prospective bidders or purchasers to Persons who will represent and agree that they are purchasing such Collateral for their own account for investment and not with a view to the distribution or sale thereof, and upon consummation of any such sale, the Lender shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold.  Each such purchaser at any such sale shall hold the property sold absolutely, free from any claim or right on the part of the Borrower, and the Borrower hereby waives (to the extent permitted by law) all rights of redemption, stay, valuation and appraisal which the Borrower now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted.

 

  

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(b) Sale of Collateral.  The Lender shall give the Borrower ten days’ written notice (which the Borrower agrees is reasonable notice within the meaning of Section 9-611 of the UCC as in effect in the State of Colorado or its equivalent in other jurisdictions (or any successor provisions)) of the Lender’s intention to make any sale of any of the Collateral owned or held by or on behalf of the Borrower.  Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a broker’s board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which such Collateral will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Lender may fix and state in the notice (if any) of such sale.  At any such sale, the Collateral to be sold may be sold in one lot as an entirety or in separate parcels, as the Lender may (in its sole and absolute discretion) determine. The Lender shall not be obligated to make any sale of any Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such Collateral shall have been given.  The Lender may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned.  In case any sale of any of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Lender until the sale price is paid by the purchaser or purchasers thereof, but the Lender shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may be sold again upon like notice. At any public (or, to the extent permitted by applicable law, private) sale made pursuant to this Section, any Secured Party may bid for or purchase, free (to the extent permitted by applicable law) from any right of redemption, stay, valuation or appraisal on the part of the Borrower (all said rights being also hereby waived and released to the extent permitted by law), any of the Collateral offered for sale and may make payment on account thereof by using any claim then due and payable to such Secured Party from the Borrower as a credit against the purchase price, and such Secured Party may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to the Borrower therefor.  For purposes hereof, (i) a written agreement to purchase any of the Collateral shall be treated as a sale thereof, (ii) the Lender shall be free to carry out such sale pursuant to such agreement, and (iii) the Borrower shall not be entitled to the return of any of the Collateral subject thereto, notwithstanding the fact that after the Lender shall have entered into such an agreement all Events of Default shall have been remedied and the Secured Obligations paid in full. As an alternative to exercising the power of sale herein conferred upon it, the Lender may proceed by a suit or suits at law or in equity to foreclose upon any of the Collateral and to sell any of the Collateral pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver.  Any sale pursuant to the provisions of this Article shall be deemed to conform to the commercially reasonable standards as provided in Part 6 of Article 9 of the UCC as in effect in the State of Colorado or its equivalent in other jurisdictions (or any successor provisions).  Without limiting the generality of the foregoing, the Borrower agrees as follows: (A) if the proceeds of any sale of the Collateral owned or held by it or on its behalf pursuant to this Article are insufficient to pay all the Secured Obligations, it shall be liable for the resulting deficiency and the fees, charges and disbursements of any counsel employed by the Lender or any other Secured Party to collect such deficiency, (B) it hereby waives any claims against the Lender arising by reason of the fact that the price at which any such Collateral may have been sold at any private sale pursuant to this Article was less than the price that might have been obtained at a public sale, even if the Lender accepts the first offer received and does not offer such Collateral to more than one offeree, (C) there is no adequate remedy at law for failure by it to comply with the provisions of this Section and that such failure would not be adequately compensable in damages, and therefore agrees that its agreements in this Section may be specifically enforced, (D) the Lender may sell any such Collateral without giving any warranties as to such Collateral, and the Lender may specifically disclaim any warranties of title or the like, and (E) the Lender shall have no obligation to marshal any such Collateral.

 

  

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Section 5.2 Application of Proceeds of Collateral.

 

(a) Except as expressly provided elsewhere in this Security Agreement and in Section 8.3 of the Credit Agreement, all proceeds received by the Lender in respect of any sale, any collection from, or other realization upon all or any part of the Collateral as well as any Collateral consisting of cash shall be applied in full or in part by the Lender against, the Secured Obligations in the following order of priority:

 

FIRST, to the payment of all reasonable and documented out-of-pocket costs and expenses incurred by the Lender (in its capacity as such hereunder or under any other Loan Document) in connection with such collection or sale or otherwise in connection with this Security Agreement, any other Loan Document or any of the Secured Obligations, including all reasonable and documented out-of-pocket court costs and the reasonable and documented fees and expenses of its agents and legal counsel, all amounts for which the Lender is entitled to indemnification under the Credit Agreement, the repayment of all advances made by the Lender hereunder or under any other Loan Document on behalf of the Borrower and any other reasonable and documented out-of-pocket costs or expenses incurred in connection with the exercise of any right or remedy hereunder or under any other Loan Document;

 

SECOND, to the extent of any excess of such proceeds, to the payment in full of the Secured Obligations; and

 

THIRD, to the extent of any excess of such proceeds to the Borrower, its successors or assigns, or as a court of competent jurisdiction may otherwise direct.

 

The Lender shall have sole and absolute discretion as to the time of application of any such proceeds, monies or balances in accordance with this Security Agreement.  Upon any sale of the Collateral by the Lender (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the purchase money by the Lender or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Lender or such officer or be answerable in any way for the misapplication thereof.

 

  

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Section 5.3 Investment-Related Property.  In view of the position of the Borrower in relation to the Investment-Related Property, or because of other current or future circumstances, a question may arise under the Securities Act of 1933, as now or hereafter in effect, or any similar statute hereafter enacted analogous in purpose or effect (such Act and any such similar statute as from time to time in effect being called the “Federal Securities Laws”) with respect to any disposition of the Investment-Related Property permitted hereunder. The Borrower understands that compliance with the Federal Securities Laws might very strictly limit the course of conduct of the Lender if the Lender were to attempt to dispose of all or any part of the Investment-Related Property, and might also limit the extent to which or the manner in which any subsequent transferee of any Investment-Related Property could dispose of the same. Similarly, there may be other legal restrictions or limitations affecting the Lender in any attempt to dispose of all or part of the Investment-Related Property under applicable Blue Sky or other state securities laws or similar laws analogous in purpose or effect.  The Borrower recognizes that in light of such restrictions and limitations the Lender may, with respect to any sale of Investment-Related Property that is subject to such restrictions and limitations, limit the purchasers to those who will agree, among other things, to acquire such Investment-Related Property for their own account, for investment, and not with a view to the distribution or resale thereof.  The Borrower acknowledges and agrees that in light of such restrictions and limitations, the Lender, upon and during the continuance of any Event of Default, in its sole and absolute discretion, (i) may proceed to make such a sale whether or not a registration statement for the purpose of registering such Investment-Related Property that is subject to such restrictions and limitations, or any part thereof, shall have been filed under the Federal Securities Laws and (ii) may approach and negotiate with a single potential purchaser to effect such sale.  The Borrower acknowledges and agrees that any such sale might result in prices and other terms less favorable to the seller than if such sale were a public sale without such restrictions. In the event of any such sale, the Lender shall incur no responsibility or liability for selling all or any part of the Investment-Related Property at a price that the Lender, in its sole and absolute discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might have been realized if the sale were deferred until after registration as aforesaid or if more than a single purchaser were approached.  The provisions of this Section will apply notwithstanding the existence of a public or private market upon which the quotations or sales prices may exceed substantially the price at which the Lender sells any such Investment-Related Property.

 

Section 5.4 Registration, etc.  The Borrower agrees that, upon the occurrence and during the continuance of an Event of Default, if for any reason the Lender desires to sell any of the Pledged Collateral owned or held by or on behalf of the Borrower at a public sale, it will, at any time and from time to time, upon the written request of the Lender, use its commercially reasonable efforts to take or to cause, where applicable, the issuer of such Pledged Collateral to take such action and prepare, distribute and/or file such documents, as are required or advisable in the reasonable opinion of counsel for the Lender to permit the public sale of such Pledged Collateral.  The Borrower further agrees to indemnify, defend and hold harmless the Lender, each other Secured Party, any underwriter and their respective officers, directors, affiliates and controlling Persons from and against all loss, liability, expenses, costs of counsel (including reasonable fees and expenses of legal counsel), and claims (including the costs of investigation) that they may incur, insofar as such loss, liability, expense or claim, as applicable, relates to the Borrower or any of its property, and arises out of or is based upon any alleged untrue statement of a material fact contained in any prospectus (or any amendment or supplement thereto) or in any notification or offering circular, or arises out of or is based upon any alleged omission to state a material fact required to be stated therein or necessary to make the statements in any thereof not misleading, except insofar as the same may have been caused by any untrue statement or omission based upon information furnished in writing to the Borrower or the issuer of such Pledged Collateral, as applicable, by the Lender or any other Secured Party expressly for use therein.  The Borrower further agrees, upon such written request referred to above, to use its commercially reasonable efforts to qualify, file or register, or cause, where applicable, the issuer of such Pledged Collateral to qualify, file or register, any of the Pledged Collateral owned or held by or on behalf of the Borrower under the Blue Sky or other securities laws of such states as may be requested by the Lender and keep effective, or cause to be kept effective, all such qualifications, filings or registrations.  The Borrower will bear all costs and expenses of carrying out its obligations under this Section.  The Borrower acknowledges that there is no adequate remedy at law for failure by it to comply with the provisions of this Section and that such failure would not be adequately compensable in damages, and therefore agrees that its agreements contained in this Section may be specifically enforced.

 

  

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Section 5.5 Deficiency.  The Borrower shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay its Secured Obligations and the reasonable and documented out-of-pocket fees and disbursements of any attorneys employed by the Lender to collect such deficiency.

 

ARTICLE 6.

 

CONCERNING THE LENDER

 

Section 6.1 In General.  The Lender shall have the right hereunder to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking action (including the release or substitution of the Collateral), in accordance with this Security Agreement and the Credit Agreement.  The Lender may employ agents and attorneys-in-fact in connection herewith and shall not be liable for the negligence or misconduct of any such agents or attorneys-in-fact selected by it in good faith except for gross negligence or willful misconduct.

 

Section 6.2 Lender Appointed Attorney-in-Fact.  The Borrower hereby appoints the Lender and any officer or agent thereof, as its true and lawful agent and attorney-in-fact for the purpose of carrying out the provisions of this Security Agreement and taking any action and executing any instrument that the Lender may deem necessary or advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest, and without limiting the generality of the foregoing, the Lender shall have the right, with power of substitution for the Borrower and in the Borrower’s name or otherwise, for the use and benefit of the Lender and the other Secured Parties, upon the occurrence and during the continuance of an Event of Default, (i) to receive, endorse, assign and/or deliver any and all notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the Collateral owned or held by it or on its behalf or any part thereof; (ii) to demand, collect, receive payment of, give receipt for, and give discharges and releases of, any of such Collateral; (iii) to sign the name of the Borrower on any invoice or bill of lading relating to any of such Collateral; (iv) to send verifications of Receivables included in the Collateral owned or held by it or on its behalf to any Account Debtor; (v) to commence and prosecute any and all suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect or otherwise realize on any of the Collateral owned or held by it or on its behalf or to enforce any rights in respect of any of such Collateral; (vi) to settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to any of such Collateral; (vii) to notify, or to require the Borrower to notify, Account Debtors and other obligors to make payment directly to the Lender, (viii) to use, sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal with any of such Collateral, and (ix) to do all other acts and things necessary to carry out the purposes of this Security Agreement, as fully and completely as though the Lender were the absolute owner of such Collateral for all purposes; provided, however, that nothing herein contained shall be construed as requiring or obligating the Lender or any other Secured Party to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Lender or any other Secured Party, or to present or file any claim or notice, or to take any action with respect to any of the Collateral or the monies due or to become due in respect thereof or any property covered thereby, and no action taken or omitted to be taken by the Lender or any other Secured Party with respect to any of the Collateral shall give rise to any defense, counterclaim or offset in favor of the Borrower or to any claim or action against the Lender or any other Secured Party. The provisions of this Article shall in no event relieve the Borrower of any of its obligations hereunder or under the other Loan Documents with respect to any of the Collateral or impose any obligation on the Lender or any other Secured Party to proceed in any particular manner with respect to any of the Collateral, or in any way limit the exercise by the Lender or any other Secured Party of any other or further right that it may have on the date of this Security Agreement or hereafter, whether hereunder, under any other Loan Document, by law or otherwise. Any sale pursuant to the provisions of this paragraph shall be deemed to conform to the commercially reasonable standards as provided in Section 9-611 of the UCC as in effect in the State of Colorado or its equivalent in other jurisdictions (or any successor provisions).

 

  

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Section 6.3 Reimbursement of Lender.  The Borrower agrees to pay to the Lender the amount of any and all reasonable out-of-pocket expenses, including the reasonable fees, other charges and disbursements of counsel and of any experts or agents, that the Lender may incur in connection with (i) the administration of this Security Agreement relating to the Borrower or any of its property, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Collateral owned or held by or on behalf of the Borrower, (iii) the exercise, enforcement or protection of any of the rights of the Lender hereunder relating to the Borrower or any of its property, or (iv) the failure by the Borrower to perform or observe any of the provisions hereof. Without limitation of its indemnification obligations under the other Loan Documents, the Borrower agrees to indemnify the Lender and the other Indemnitees against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related out-of-pocket expenses, including reasonable counsel fees, other charges and disbursements, incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (a) the execution or delivery by the Borrower of this Security Agreement or any other Loan Document or any agreement or instrument contemplated hereby or thereby, or the performance by the Borrower of its obligations under the Loan Documents and the other transactions contemplated thereby or (b) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto, provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee. Any amounts payable as provided hereunder shall be additional Secured Obligations secured hereby and by the other Security Documents.  The provisions of this Section shall remain operative and in full force and effect regardless of the termination of this Security Agreement or any other Loan Document, the consummation of the transactions contemplated hereby or thereby, the repayment of any of the Secured Obligations, the invalidity or unenforceability of any term or provision of this Security Agreement or any other Loan Document or any investigation made by or on behalf of the Lender or any other Secured Party.  All amounts due under this Section shall be payable within ten days of written demand therefor and shall bear interest at the rate specified in Section 3.1 of the Credit Agreement.

 

  

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ARTICLE 7.

 

WAIVERS; AMENDMENTS

 

No failure or delay of the Lender in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power.  The rights and remedies of the Lender and the other Secured Parties hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have.  No waiver of any provision of this Security Agreement or any other Loan Document or consent to any departure by the Borrower therefrom shall in any event be effective unless the same shall be permitted by this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given.  No notice or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances. Neither this Security Agreement nor any provision hereof may be waived, amended, supplemented or otherwise modified, or any departure therefrom consented to, except pursuant to an agreement or agreements in writing entered into by, between or among the Lender and the Borrower with respect to which such waiver, amendment, other modification or consent is to apply, subject to any consent required in accordance with Section 10.2 of the Credit Agreement.

 

ARTICLE 8.

 

SECURITY INTEREST ABSOLUTE

 

In each case to the extent permitted by law, all rights of the Lender hereunder, the Security Interest and all obligations of the Borrower hereunder shall be absolute and unconditional irrespective of (i) any lack of validity or enforceability of the Credit Agreement, any other Loan Document, any agreement with respect to any of the Secured Obligations, or any other agreement or instrument relating to any of the foregoing, (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other waiver, amendment, supplement or other modification of, or any consent to any departure from, the Credit Agreement, any other Loan Document or any other agreement or instrument relating to any of the foregoing, (iii) except as otherwise expressly permitted under the Loan Documents or effected pursuant thereto, any exchange, release or non-perfection of any Lien on any other collateral, or any release or waiver, amendment, supplement or other modification of, or consent under, or departure from, any guaranty, securing or guaranteeing all or any of the Secured Obligations, or (iv) any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower in respect of the Secured Obligations or in respect of this Security Agreement or any other Loan Document.

 

ARTICLE 9.

 

TERMINATION; RELEASE

 

Section 9.1 Termination.  At such time as the Funding Loans and the other Secured Obligations shall have been paid in full in cash, and the Funding Commitments shall have expired or been shall be outstanding, the Collateral shall be released from the Security Interest created hereby, and this Security Agreement and all obligations (other than those expressly stated to survive such termination) of the Lender and the Borrower hereunder shall terminate, all without delivery of any instrument or performance of any act by any party, and all rights to the Collateral shall revert to the Borrower.  At the request and sole expense of the Borrower following any such termination, the Lender shall deliver to Borrower any Collateral held by the Lender hereunder, and execute and deliver to the Lender such documents as the Lender shall reasonably request to evidence such termination.

 

  

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Section 9.2 Other Releases of Collateral.

 

(a) Upon the effectiveness of any written consent to the release of the Security Interest in any Collateral pursuant to Section 10.2 of the Credit Agreement, the Security Interest in such Collateral shall be automatically released.

 

(b) Upon any sale, transfer or other disposition of Collateral permitted by the Loan Documents (other than to the Borrower), the Security Interest in such Collateral shall be automatically released (other than to the extent any such sale, transfer or other disposition of such Collateral would, immediately after giving effect thereto, result in the receipt by the Borrower of any other property (whether in the form of Proceeds or otherwise) that would, but for the release of the Security Interest therein pursuant to this clause, constitute Collateral, in which event the Lien created hereunder shall continue in such property).

 

(c) If any of the Pledged Equity Interests in any Subsidiary are sold, transferred or otherwise disposed of pursuant to a transaction permitted by the Loan Documents and, immediately after giving effect thereto, such Subsidiary would no longer be a Subsidiary, then the obligations of such Subsidiary under this Security Agreement and the Security Interest in the Collateral owned or rights in Collateral held by or on behalf of such Subsidiary shall be automatically released.

 

In connection with any termination or release pursuant to this Section, the Lender shall execute and deliver to the Borrower, at the Borrower’s own cost and expense, all Uniform Commercial Code termination statements, certificates for terminating the Liens on the Motor Vehicles (if any) and other similar documents that the Borrower may reasonably request to evidence such termination or release.  Any execution and delivery of documents pursuant to this Article shall be without recourse to or warranty by the Lender or any other Secured Party.

 

ARTICLE 10.

 

NOTICES

 

All communications and notices hereunder shall be in writing and given as provided in Section 10.1 of the Credit Agreement.  All communications and notices hereunder to the Lender or the Borrower shall be given to it at its address for notices set forth in such Section.

 

ARTICLE 11.

 

BINDING EFFECT; SEVERAL AGREEMENT; ASSIGNMENTS

 

Whenever in this Security Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party, and all covenants, promises and agreements by or on behalf of the Borrower that are contained in this Security Agreement shall bind and inure to the benefit of each party hereto and its successors and assigns.  This Security Agreement shall become effective as to the Borrower when a counterpart hereof executed on behalf of the Borrower shall have been delivered to the Lender and a counterpart hereof shall have been executed on behalf of the Lender, and thereafter shall be binding upon the Borrower and the Lender and their respective successors and assigns, and shall inure to the benefit of the Borrower, the Lender and the other Secured Parties, and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights or obligations hereunder or any interest herein or in any of the Collateral (and any such attempted assignment shall be void), except as expressly contemplated or permitted by this Security Agreement or the other Loan Documents.

 

  

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ARTICLE 12.

 

SURVIVAL OF AGREEMENT; SEVERABILITY

 

All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Security Agreement or any other Loan Document shall be considered to have been relied upon by the Lender and the other Secured Parties and shall survive the execution and delivery of any Loan Document and the making of any Funding Loan, regardless of any investigation made by the Secured Parties or on their behalf, and shall continue in full force and effect until this Security Agreement shall terminate. In the event any one or more of the provisions contained in this Security Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein or therein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of such invalid, illegal or unenforceable provisions.

 

ARTICLE 13.

 

MISCELLANEOUS

 

Section 13.1 GOVERNING LAW.  THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF COLORADO, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICT OF LAWS.

 

Section 13.2 Counterparts; Integration.  This Security Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which, when taken together, shall constitute but one contract (subject to Article 12), and shall become effective as provided in Article 12.  This Security Agreement constitutes the entire contract among the parties relating to the subject matter hereof and supersedes any and all previous agreements and understandings, oral or written, relating to the subject matter hereof.  Delivery of an executed counterpart of this Security Agreement by facsimile transmission or by email in .pdf format shall be as effective as delivery of a manually executed counterpart of this Security Agreement.

 

Section 13.3 Headings.  Article and Section headings used herein are for convenience of reference only, are not part of this Security Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Security Agreement.

 

Section 13.4 Jurisdiction; Venue; Consent to Service of Process.  The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the courts of the State of Colorado, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Security Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that, to the extent permitted by applicable law, all claims in respect of any such action or proceeding may be heard and determined in such Colorado court or, to the extent permitted by applicable law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Security Agreement shall affect any right that the Lender or any other Secured Party may otherwise have to bring any action or proceeding relating to this Security Agreement or the other Loan Documents against the Borrower or any of its property in the courts of any jurisdiction. The Borrower hereby irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Security Agreement or the other Loan Documents in any foregoing court referred to in this Article. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. Each of the parties hereto irrevocably consents to service of process in the manner provided for notices in Article 10. Nothing in this Security Agreement will affect the right of any party hereto to serve process in any other manner permitted by law.

 

  

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Section 13.5 WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS SECURITY AGREEMENT. EACH PARTY HERETO HEREBY (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS SECURITY AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS ARTICLE.

 

Section 13.6 Reinstatement.  To the extent that any payment made or received with respect to the Secured Obligations is subsequently set aside, defeased or required to be repaid to any Person for any reason, then such Secured Obligations, and the Liens corresponding thereto, shall be automatically revived as if such payment had not been received and this Security Agreement shall continue to be in full force and effect or reinstated, as the case may be.

 

Section 13.7 Intercreditor Agreement.  Notwithstanding anything herein to the contrary, the lien and security interest granted to the Lender pursuant to this Security Agreement and the exercise of any right or remedy by the Lender hereunder are subject to the provisions of the Intercreditor Agreement, dated as of March 1, 2012 (as amended, restated, supplemented or otherwise modified from time to time, the “Intercreditor Agreement”), among the Senior Lender, the Lender, the Borrower, the Subsidiary Guarantor and RMB Resources, Inc., a Delaware corporation, in its capacity as administrative agent under the Existing Senior Facility Agreement, and certain other persons party or that may become party thereto from time to time. In the event of any conflict between the terms of the Intercreditor Agreement and this Security Agreement, the terms of the Intercreditor Agreement shall govern and control.

 

  

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IN WITNESS WHEREOF, the parties hereto have duly executed this Pledge and Security Agreement as of the day and year first above written.

 

	 	
BORROWER

	 	 	 	 
	 	
NEUTRON ENERGY, INC., a Nevada corporation

	 	 	 	 
	 	 	 	 
	 	By:	 	 
	 	Name:	 	 
	 	Title:	 	 
	 	 	 	 
	 	 	 	 
	 	
LENDER

	 	 	 	 
	 	
URANIUM RESOURCES, INC., a Delaware corporation

	 	 	 	 
	 	 	 	 
	 	By:	 	 
	 	Name:	 	 
	 	
Title:

	 	 

                                                                           

  

  

  

                                                                           

Schedule 3.2(a)

Collateral Locations

Corporate Headquarters – Englewood, Colorado

9000 E. Nichols Ave, Suite 225

Englewood, CO 80112

Field Office – Albuquerque, New Mexico

2511 Broadbent Parkway, Suite A

Albuquerque, NM 87107

Juan Tafoya Field Locations

Surface properties under Lease from Juan Tafoya Land Corporation

Cebolleta Field Locations

Surface properties under Lease from La Merced del Pueblo de Cebolleta

 

  

  

  

 

Schedule 3.4

 

Part A – Certificated Equity Interests:

 

None.

 

Part B – Uncertificated Equity Interests:

 

	
Subsidiary

	
Jurisdiction of Organization

	
Ownership Interest

	
Percentage of Class

	
Cibola Resources LLC

	
Delaware

	
Membership interests

	
100%

 

Part C – Pledged Debt

 

 

	A.	Arizona Business Bank Certificate of Deposit in the amount of $81,250.00 (No. 210009187) in support of an Irrevocable Standby Letter of Credit No. 1479, dated March 24, 2009, between Arizona Business Bank and Neutron Energy, Inc.
	B.	Arizona Business Bank Certificate of Deposit in the amount of $33,780.00 (No. 210009179) in support of an Irrevocable Standby Letter of Credit No. 1480, dated March 24, 2009, between Arizona Business Bank and Neutron Energy, Inc.
	C.	Arizona Business Bank Certificate of Deposit in the amount of $52,000.00 (No. 210009438) in support of an Irrevocable Standby Letter of Credit No. 1505, dated August 25, 2009, between Arizona Business Bank and Neutron Energy, Inc.
	
D.

	Arizona Business Bank Certificate of Deposit in the amount of $18,270.00 (No. 210009411) in support of an Irrevocable Standby Letter of Credit No. 1506, dated August 25, 2009, between Arizona Business Bank and Neutron Energy, Inc.
	
E.

	Arizona Business Bank Certificate of Deposit in the amount of $41,625.00 (No. 100040292) in support of an Irrevocable Standby Letter of Credit No. 1575, dated January 6, 2009, between Arizona Business Bank and Neutron Energy, Inc.
	F.	Arizona Business Bank Certificate of Deposit in the amount of $46,980.00 (No. 100040306) in support of an Irrevocable Standby Letter of Credit No. 1576, dated January 6, 2009, between Arizona Business Bank and Neutron Energy, Inc.
	G.	Arizona Business Bank Certificate of Deposit in the amount of $25,000.00 (No. 210010398) in support of an Irrevocable Standby Letter of Credit No. 148, dated April 17, 2008, between Arizona Business Bank and Neutron Energy, Inc.

  

  

  

  

Schedule 3.5

Letter-of-Credit Rights

None.

 

  

  

  

 

Section 3.6

Commercial Tort Claims

None.

 

  

  

  

 

Schedule 3.7(a)

 

Financing Statements

 

[Attached.]

 

  

  

  

 

Schedule 3.7(b)

 

Applicable Filing Offices

	
Borrower

	
Applicable Filing Office

	
Neutron Energy, Inc.

	
Secretary of State of the State of NevadaUnassociated Document

Exhibit 10.7

 

FORBEARANCE AND DEBT CONVERSION AGREEMENT

This Forbearance  and Debt Conversion Agreement (the “Agreement”) is made effective March 1, 2012, by and among RMB Australia Holdings, Ltd., a banking corporation organized under the laws of Australia (“RMBAH” or “First Lien Creditor”), RMB Resources, Inc. a Delaware corporation (“RMB”) in its capacity as Agent for the First Lien Creditor (in such capacity, together with its successors in such capacity, the “First Lien Collateral Agent), Uranium Resources Inc., a Delaware corporation (“URI” or “Company”), Neutron Energy, Inc., a Nevada corporation (“Neutron” or “Borrower”) and Cibola Resources, LLC, a Delaware limited liability corporation, (“CRL” or the “Subsidiary Guarantor,” and together with Neutron, the “Borrower Parties).

WHEREAS, RMB and RMBAH, pursuant to a Facility Agreement dated April 5, 2010 (as so amended and as further amended, restated, supplemented, modified, replaced or refinanced from time to time, the “First Lien Facility Agreement”), made loans and credit available to Neutron, in an outstanding amount as of December 31, 2011 $26,787,157.00 ($24 Million in principal plus accrued interest as of that date) (the “Existing RMB Loan”);

WHEREAS, RMB, RMBAH and the Borrower Parties also entered into the Securities (as defined in the First Lien Facility Agreement), pursuant to which the Borrower Parties granted security interests over substantially all their assets in order to secure the Existing RMB Loan (the “First Lien Security Documents”);

WHEREAS, certain parties including the Company and Neutron have executed an Agreement and Plan of Merger of even date herewith (the “Merger Agreement”) and related agreements pursuant to which Neutron would merge with a subsidiary of URI and become a wholly-owned subsidiary of URI (the “Merger”);

WHEREAS, in the Transaction Agreements, the Resource Capital Fund V. L.P. (the “Fund”) proposes to take an equity position in the Company, resulting in payment of the Existing RMB Loan and discharge of the obligations the Borrower Parties owe RMBAH and RMB under the First Lien Facility Agreement, as set forth in the Transaction Agreements including an Investment Agreement, Registration Rights Agreement, and Stockholders’ Agreement, all of even date herewith, between URI and the Fund;

WHEREAS, the Existing RMB Loan is to be repaid as contemplated by the Transaction Agreements by means of $20,000,000.00 in cash that URI will receive from the Fund on the Closing Date and then in turn pay to RMB, along with 8,361,327 shares of Common Stock to be issued to RMBAH (the “RMB Conversion Shares”) as further described in this Agreement;

WHEREAS, RMB and RMBAH have agreed to extend the term of the First Lien Facility Agreement up to and including the earlier of March 1, 2012; the date on which the Transaction Agreements are duly executed by all parties to them; or the date on which the Fund, URI or Neutron indicates that it will not proceed with the transactions contemplated by the Transaction Agreements, in order to facilitate and accommodate the Merger and transactions described herein;

 

  

1

  

 

WHEREAS, though Borrower is current on its obligations as they have been extended under the First Lien Facility Agreement, unless payment in full is received within the deadlines stated above, an Event of Default as defined in the First Lien Facility Agreement shall occur;

WHEREAS, each Borrower Party’s entry into the Transaction Agreements to which it is a party will, without waiver by RMB, result in the breach of additional covenants under the First Lien Facility Agreement, including Section 9.10(c), 9.17(a), and 9.19(b) thereof.

WHEREAS, the execution and performance of the Merger Agreement by all the parties thereto are material conditions to the assent by RMB and RMBAH to the terms and conditions of this Agreement;

WHEREAS, URI has proposed to provide working capital to Neutron in order to finance operations of Neutron through the Closing Date specified in the Merger Agreement, pursuant to, inter alia, the Credit and Funding Agreement and Promissory Note of even date herewith (the “Second Lien Loan Documents”).  URI proposes to secure these loans through second-priority liens over substantially all the assets of the Borrower Parties through a Security Agreement and certain mortgages (the “Second Lien Security Documents”).  The Lenders also contemplate executing concurrently herewith an Intercreditor Agreement that vests enforcement rights in RMB pertaining to any exercise of remedies pursuant to the First Lien Security Documents and/or the Second Lien Security Documents (the “Intercreditor Agreement”);

WHEREAS, the parties desire to enter a legally binding agreement whereby RMBAH and RMB will agree to accept the payment and discharge of the Existing RMB Loan and all other obligations the Borrower Parties owe RMBAH and RMB under the First Lien Facility Agreement and First Lien Security Documents, and whereby RMBAH and RMB will agree to forbear from the exercise of any creditors remedies otherwise available to them under the First Lien Security Documents or Second Lien Security Documents for a term up to and including the earlier of (i) the Closing Date and (ii) the termination of the Merger Agreement;

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, in addition to other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

I.           Definitions.

 

Capitalized terms used herein shall have the meaning given in this Agreement, unless reference is made to another agreement defining the term.

 

Additional Holders shall mean (a) any Affiliate of any Holder who acquires Common Stock or Other Securities and (b) the Permitted Assignees of Registrable Securities who, from time to time, acquire Registrable Securities from a Holder or Holders and own Registrable Securities at the relevant time, agree to be bound by the terms hereof and become Holders for purposes of this Agreement.

 

  

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Affiliate of a Person shall mean any Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such other Person.  For purposes of this definition, “control” shall mean the ability of one Person to direct the management and policies of another Person.

 

Agreement shall have the meaning ascribed thereto in the Preamble hereof.

 

Borrower shall have the meaning ascribed thereto in the Preamble hereof.

 

Borrower Parties shall have the meaning ascribed thereto in the Preamble hereof.

 

Business Day shall mean any day that is not a Saturday, a Sunday or a day on which banks are required or permitted to be closed in the State of New York.

 

Closing shall have the meaning assigned to such term in the Merger Agreement.

 

Closing Date shall have the meaning assigned to such term in the Merger Agreement.

 

Collateral shall mean any assets of the Borrower Parties subject to a security interest granted by any Borrower Party pursuant to the Credit Documents.

 

Commission shall mean the Securities and Exchange Commission or any other federal agency then administering the Securities Act and other federal securities laws.

 

Common Stock shall mean the shares of common stock, $0.001 par value per share, of Company, as adjusted from time to time to reflect any merger, consolidation, recapitalization, reclassification, split-up, stock dividend, rights offering, stock split or reverse stock split made, declared or effected with respect to the Common Stock.

 

Company shall have the meaning ascribed thereto in the Preamble hereof.

 

Credit Documents shall mean the First Lien Facility Agreement and all the Securities and Transaction Documents as defined therein, the Second Lien Credit and Funding Agreement of even date herewith between URI and Neutron and all  Loan Documents as defined therein (including all Security Documents) and any document executed by a Borrower Party relating to a loan or extension of credit, or security for a loan or extension of credit, arranged by or administered by RMBAH or RMB, including documents administered by RMB pursuant to the Intercreditor Agreement.  “Credit Documents” shall include the Intercreditor Agreement.  This Agreement shall be deemed a “Transaction Document” within the meaning of the First Lien Facility Agreement.

 

Event of Default shall mean any of the events described in Section X.

 

Exchange Act shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time.

 

Fund shall have the meaning ascribed thereto in the Recitals.

 

  

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Exchange Act shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time.

 

Existing RMB Loan shall have the meaning ascribed thereto in the Recitals.

 

First Lien Facility Agreement shall have the meaning ascribed thereto in the Recitals.

 

Forbearance Period shall mean the period of time defined in Section II(b) of this Agreement.

 

Holder shall mean (i) RMBAH, (ii) RMB, (iii) any other Person who owns Registrable Securities at the relevant time and is a party to this Agreement or (iv) any Additional Holder.

 

Intercreditor Agreement shall have the meaning ascribed thereto in the Recitals.

 

Investment Agreement shall have the meaning ascribed thereto in the Recitals.

 

Lenders shall mean RMB, RMBAH, URI, and any party who provides loans or credit pursuant to any Credit Document.

 

Liens shall mean any security interest over any real or personal property granted by any Borrower Party to any Lender.

 

Material Adverse Effect shall mean, with respect to the Company or Neutron, any fact, circumstance, change, event, occurrence or effect that is or would reasonably be expected to be materially adverse to the business, condition (financial or otherwise), properties, assets, liabilities, obligations (whether absolute, accrued, conditional or otherwise), businesses, operations, prospects or results of operations of such party, its subsidiaries and its material joint ventures, taken as a whole.

 

Merger shall have the meaning ascribed thereto in the Recitals.

 

Merger Agreement shall have the meaning ascribed thereto in the Recitals.

 

Neutron Budget shall mean a detailed 8-month budget for Neutron for the period beginning January 1, 2012, which covers with specificity the exploration, development, management and operation of Neutron’s properties and the detailed budget relating to such activities prepared by Neutron and approved by the Fund and Company.

 

Offering shall mean the distribution of the RMB Conversion Shares to RMBAH.

 

Permitted Assignee shall mean (a) any Affiliate of any Holder who acquires Registrable Securities from such Holder, or its Affiliates, or (b) any other Person who acquires any Registrable Securities of any Holder or Holders who is designated as a Permitted Assignee by such Holder in a written notice to Company; provided, however, that the rights of any Person designated as a Permitted Assignee referred to in the foregoing clause (b) shall be limited if, and to the extent, provided in such notice.

 

  

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Person shall mean any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.

 

Properties shall mean the real property legally or beneficially owned or leased by a Borrower Party in which a security interest has been granted to a Lender in any Credit Document.

 

RCF Investment Agreement shall have the meaning assigned to such term in the Merger Agreement.

 

RCF Shares shall mean the shares of Common Stock issued to the Fund pursuant to the RCF Investment Agreement.

 

Resale Registration means a registration effected pursuant to Section VI.1(a) hereof.

 

Resale Registration Statement means a registration statement of Company relating to a Resale offering in accordance with Rule 415 of the Securities Act, or any similar rule that may be adopted by the Commission, pursuant to the provisions of Section VI.1(a) hereof which covers all of the Registrable Securities held by the Holders, on an appropriate form under the Securities Act, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the prospectus contained therein, all exhibits thereto and all material incorporated by reference therein.

 

RMB Conversion Shares shall have the meaning ascribed thereto in the Recitals.

 

RMB Closing Costs shall have the meaning given in Section III(b) hereof.

 

Registrable Securities shall mean the Common Stock of Company owned by the Holders as of the date hereof and at any time in the future; and, if as a result of any reclassifica­tion, stock dividends or stock splits or in connection with a combination of shares, recapitalization, merger, consolidation, sale of all or substantially all of the assets of Company or other reorganization or other transaction or event, any capital stock, evidence of indebtedness, warrants, options, rights or other securities (collectively “Other Securities ”) are issued or transferred to a Holder in respect of Registrable Securities held by the Holder, references herein to Registrable Securities shall be deemed to include such Other Securities.  Shares of Common Stock and Other Securities that are Registrable Securities shall cease to be Registrable Securities at the earlier of (i) such time as they may be sold under Rule 144(b)(1) under the Securities Act without volume or other limitation or (ii) the date they are sold pursuant to Rule 144 or an effective registration statement.

 

Secured Obligations shall mean the obligations of any Borrower Party to repay loans or credit arranged by or administered by RMBAH or RMB pursuant to the First Lien Facility Agreement, the First Lien Security Documents or the Intercreditor Agreement, and for the avoidance of doubt includes the “Secured Moneys” (as defined in the First Lien Facility Agreement).

 

  

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Securities Act shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time.

 

Transaction Agreements shall have the meaning given in the Merger Agreement and shall include inter alia the Merger Agreement, the Registration Rights Agreement between URI and the Fund, and the Investment Agreement among URI, the Fund, and Neutron.

 

II.          Forbearance by RMBAH and RMB.

 

a.           Generally. In consideration of the representations, warranties, and agreements of the Borrower Parties contained herein, and those given by URI and the Fund in the Merger Agreement and Transaction Agreements, and except as otherwise expressly provided herein, RMBAH and RMB, for themselves and each of the Lenders, agree that during the Forbearance Period, the Lenders will not declare a default, commence any legal proceeding or take any other action against any of the Borrower Parties to collect the Secured Obligations or other amounts due under the First Lien Loan Documents or Second Lien Loan Documents, or to exercise creditors remedies or foreclose any Liens on the Properties, or to enforce against any of the Borrower Parties any of its other rights and remedies under the  Credit Documents.

 

b.           Forbearance Period. The Forbearance Period shall have a term commencing on the execution of this Agreement and ending on the Closing Date, subject to earlier termination pursuant to the terms of Section II(c). The Forbearance Period may be extended from time to time by written agreement executed by all of the signatories to this Agreement.

 

c.           Early Termination of the Forbearance Period.  Notwithstanding any provision of this Agreement to the contrary, RMB, in its sole discretion, or upon the direction of the Lenders, may declare the Forbearance Period to be terminated if any of the following events shall have occurred:

 

	
i.

	 	
Any of the Borrower Parties or URI shall fail to comply with any of the material agreements, covenants, or other terms set forth in this Agreement.

	 	 	 
	
ii.

	 	
Termination of the Merger Agreement pursuant to Section 7.1 thereof or the Closing does not occur for any reason;

	 	 	 
	
iii.

	 	
Any Borrower Party shall commence, have commenced against it, or acquiesce in the commencement of any proceeding relating to its bankruptcy, insolvency, liquidation, or reorganization, or for the adjustment of its debts, or for the appointment of a receiver, trustee, or similar custodian or it or for any substantial portion of its property, or it shall make an assignment for the benefit of creditors.

	 	 	 
	
iv.

	 	
The terms of the Merger Agreement are amended without the prior written consent of RMB in any case where such amendment would have an adverse effect on RMB.

 

  

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d.                 Enforcement Unaffected.  Upon the expiration date of the Forbearance Period as provided herein or the earlier termination thereof pursuant to Section II(c), and subject to the terms of the Intercreditor Agreement, RMB and the Lenders shall be entitled at any time and from time to time to enforce all of their rights and remedies in respect of any default under any Credit Document then or thereafter in existence, to the same extent as if RMB and RMBAH had not agreed to forbear from doing so during the Forbearance Period. RMB and the Lenders do not hereby waive any default under any Credit Document that now exists or that may occur at any time hereafter. The fact of RMB’s and the Lenders’ forbearance during the Forbearance Period shall not be construed as a waiver of any of RMB’s or the Lenders’ rights or remedies, nor shall it be the basis to deem RMB or any Lender estopped from taking any action after the expiration or termination of the Forbearance Period. All statutes of limitation applicable to actions that RMB or any Lender may be entitled to bring to enforce its rights and remedies against any obligor or the Collateral shall be tolled during the Forbearance Period, and each time period provided in each such statute of limitations shall be extended by a period of time equal to the duration of the Forbearance Period.

 

III.       Covenants, Representations and Warranties of Borrower Parties

 

a.           Taxes.  The Borrower Parties shall pay or cause to be paid in full when due, and in any event before they become past due, all taxes due and owing with respect to the Properties for the tax year that commenced January 1, 2010. This obligation under this clause shall survive the termination of the Forbearance Period in accordance with the terms of this Agreement.

 

b.           Payment of Costs and Fees. The Borrower Parties shall pay to RMB all of RMB’s out-of-pocket costs and expenses (including the fees and expenses of RMB’s counsel) incurred in connection with the preparation, review, execution, delivery, administration, modification, amendment or enforcement of this Agreement, any Transaction Agreement, or any of the Credit Documents, which shall not exceed $50,000.00  in aggregate (collectively, the “RMB Closing Costs”).

 

c.           Sublease of Property.  The Borrower Parties shall not lease or sublease the Properties, grant any other rights of occupancy or use of and of the Properties, or assign or consent to the assignment of any such lease, sublease or other rights, without the prior written consent of RMB.

 

d.           Information Requests.  The Borrower Parties shall deliver to RMB such information as RMB may request from time to time as provided in the First Lien Facility Agreement regarding the operating budget of Neutron, the Properties, the Borrower Parties or the transactions that are contemplated by this Agreement or the Credit Documents according to the terms thereof.

 

e.           Approval Rights.  RMB shall continue to exercise approval rights over any and all transfers of funds from any account owned or held for the benefit of Neutron, as provided in the First Lien Facility Agreement or in any Credit Document, including the Proceeds Account under the First Lien Facility Agreement; provided that RMB approval shall be given with respect to any funds received from Company pursuant to the Second Lien Loan Documents and expended in accordance with the Neutron Budget.

 

  

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f.           Covenants of First Lien Facility Agreement.  Borrower Parties shall comply with all the covenants of the First Lien Facility Agreement and the Credit Documents, specifically excluding Sections 9.10(c), 9.17(a), and 9.19(b) of the First Lien Facility Agreement, and in each case only to the extent necessary to permit execution, entry, delivery, and performance by the Borrower Parties of the Transaction Agreements and the Credit Documents and not in any other respect or with respect to any other transaction.  Anything to the contrary herein or in the First Lien Facility Agreement or any Credit Document notwithstanding, Borrower Parties may use any funds received from Company pursuant to the Second Lien Loan Documents in accordance with the Neutron Budget.

 

g.           Representations and Warranties of First Lien Facility Agreement.  Borrower Parties restate as of the date hereof, and incorporate herein as though set forth anew in full in this Agreement, all the representations and warranties of the First Lien Facility Agreement and all Credit Documents specifically excluding the representations and warranties of Section 8.1(o) and 8.1(p) of the First Lien Facility Agreement, and in each case only to the extent necessary to permit execution, entry, delivery, and performance by the Borrower Parties of the Transaction Agreements and the Credit Documents and not in any other respect or with respect to any other transaction.

 

h.           Liens.  Each Borrower Party agrees that it will not create or permit to exist any Lien on the Property except (A) any Liens created or permitted by the Credit Documents, (B) the liens disclosed on Schedule A to the extent junior to the Liens described in clause (A), and (C) other mechanics’ and materialmen’s liens created after the date hereof in respect of work performed or materials delivered, none of which secures individually an obligation in excess of $100,000.00, and which are junior to the liens described in clause (A) and (B).

 

IV.        Credit Documents Affirmed.

 

Except to the extent expressly provided herein, the Credit Documents are not affected hereby and continue in full force and effect in accordance with their original terms. RMB and the Lenders have agreed to the terms of this Agreement in their sole discretion, and such agreement in no way obligates RMB or any Lender to agree to any further modification of or forbearance under the First Lien Facility Agreement or other Credit Documents at any time in the future, regardless of any similarity of circumstances.

 

V.        Payments of Existing RMB Loan on Closing Date.

 

Notwithstanding any provision of the First Lien Facility Agreement or any Credit Document to the contrary:

 

a.           On or by the Closing Date:

 

	
i.

	 	
The Fund will pay to URI $20,000,000.00 in cash in accordance with the terms and conditions of the RCF Investment Agreement for the purpose of partial repayment of the Existing RMB Loan (the “Fund Contribution”);

 

  

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ii.

	 	
URI will pay the Fund Contribution in cash to RMB in partial repayment of the Existing RMB Loan;

	  	 	  
	
iii.

	 	
The remainder of the Existing RMB Loan (including all interest accrued through the Closing Date) after payment of the Fund Contribution shall be satisfied by conversion into the RMB Conversion Shares subject to Section VI and VII herein, which shall be delivered to RMB on the Closing Date;

	  	 	  
	
iv.

	 	
The RMB Conversion Shares shall be issued to RMBAH as described more fully in Sections VI and VII below;

	  	 	  
	
v.

	 	
The RMB Closing Costs shall be paid on the Closing Date by Neutron;

	  	 	  
	
vi.

	 	
The Closing shall have occurred.

 

b.           Upon satisfaction of all conditions stated in Section V(a) of this Agreement, the Existing RMB Loan shall be deemed fully repaid, discharged, and satisfied.

 

c.           Contemporaneously with the Closing and satisfaction of the conditions stated in Section V(a) of this Agreement, RMB shall issue a payoff letter and/or other reasonable documentation of the satisfaction of the Existing RMB Loan as Neutron shall reasonably request.  At such time, RMB shall also file releases or terminations of the First Lien Security Documents, as applicable, in the appropriate governmental offices within 10 Business Days.

 

d.           Contemporaneously with the Closing and satisfaction of the conditions stated in Section V(a) of this Agreement, RMB and RMBAH shall cancel all the warrants to purchase common stock of Neutron that were issued to it or them pursuant to the First Lien Facility Agreement and shall cancel all their rights under the First Lien Facility Agreement to receive further warrants or shares of Neutron.

 

e.           Should any condition stated or described in Section V(a) of this Agreement fail to occur for any reason by the Closing Date, the obligations of the First Lien Facility Agreement and all Credit Documents shall be reinstated and in full force and effect as though this Agreement had never been made, without further action by RMB or any of the Transaction Parties as defined in the First Lien Facility Agreement.

 

VI.        Registration Rights Pertaining to RMB Conversion Shares.

 

1.           Required Registration by Company.

 

a.           Company shall use its reasonable best efforts to cause a Resale Registration Statement covering all the Registrable Securities to be filed and declared effective by the Commission as soon as practicable following the Closing Date, and in any event by the dates set forth below.  The Resale Registration shall be on Form S-3 or such other appropriate form permitting registration of the Registrable Securities for resale by Holders in the manner designated by them, including, without limitation, one or more underwritten offerings.  The Company shall not permit any securities other than the Registrable Securities and the RCF Shares to be included in the Resale Registration.

 

  

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(i)           The parties agree that the Holders will suffer damages if the Company fails to fulfill its obligations under this Section VI(1)(a), and that it would not be feasible to ascertain the extent of such damages with precision.  Accordingly, the Company agrees to pay liquidated damages under the circumstances and to the extent set forth below (each, a “Registration Default”):

 

(A)           if the Resale Registration is not filed on or prior to 30 days after the Closing Date (the “Filing Date”) , then commencing on the day after the Filing Date, liquidated damages shall accrue at a rate of [0.4%] of US$6,000,000 per annum calculated daily;

 

(B)           if the Resale Registration is not declared effective by the Commission on or prior to 180 days after the Closing Date (the “Effectiveness Date”), then commencing on the Effectiveness Date, liquidated damages will accrue at a rate of 0.4% of US $6,000,000 per annum calculated daily; and

 

(C)           if the Resale Registration has been declared effective and ceases to be effective at any time during the period in which it is required to remain effective (other than as permitted hereunder), liquidated damages shall accrue at a rate of 0.4% of US$6,000,000 per annum calculated daily;

 

provided, however, that at no time shall the aggregate rate of liquidated damages accruing exceed in the aggregate 2.00% per annum; provided, further, that upon cure of the applicable Registration Default, liquidated damages shall cease to accrue.

 

(D)           The Company shall notify Holders within two Business Days of each Registration Default, and all amounts of liquidated damages shall be paid in cash quarterly on January 1, April 1, July 1 and October 1 of each relevant period, commencing with the first such date occurring after any Registration Default.

 

(ii)           Each Holder as to which any Resale Registration is being effected agrees to furnish to Company all information with respect to such Holder required for the Resale Registration.  Company agrees to use its reasonable best efforts to keep the Resale Registration Statement continuously effective for as long as any Holder holds Registrable Securities.  Company further agrees, if necessary, to promptly supplement or amend the Resale Registration Statement, if required by the rules, regulations or instructions applicable to the registration form used by Company for such Resale Registration Statement or by the Securities Act or by any other rules and regulations thereunder for Resale Registrations, and Company agrees to furnish to the Holders of Registrable Securities copies of any such supplement or amendment promptly after its being used or filed with the Commission.  In addition, after the Commission has declared a Resale Registration Statement effective, so long as such Resale Registration Statement is effective, (A) the Company shall promptly file with the Commission any amendment or supplement to the Resale Registration Statement as required by the Securities Act and Exchange Act and the policies, rules and regulations of the Commission, as announced from time to time, in order to keep the Resale Registration Statement effective, and (B) no Holder may sell any Common Stock pursuant to the Resale Registration Statement until the Commission has declared effective the Resale Registration Statement, as amended.

 

  

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2.           Registration Procedures.  Company is required by the provisions of Section VI(1) to use its reasonable best efforts to effect the registration of any of its securities under the Securities Act, and Company will, as expeditiously as possible:

 

a.           Prepare and file with the Commission a Resale Registration Statement with respect to such securities and use its reasonable best efforts to cause such Resale Registration Statement to become and remain effective until all the Registrable Securities have been sold thereunder or have ceased to have the status of Registrable Securities;

 

b.           Prepare and file with the Commission such amendments and supplements to such Resale Registration Statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all securities covered by such Resale Registration Statement;

 

c.           Furnish to such selling security holders such number of copies of a summary prospectus or other prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents, as such selling security holders may reasonably request;

 

d.           Use its reasonable best efforts to register or qualify the securities covered by such Resale Registration Statement under such other securities or blue sky laws of such jurisdictions within the United States as each Holder of such securities shall request (provided, however, that Company shall not be obligated to qualify as a foreign corporation to do business under the laws of any jurisdiction in which it is not then qualified or to file any general consent to service of process), and do such other reasonable acts and things as may be required of it to enable such holder to consummate the disposition in such jurisdiction of the securities covered by such Resale Registration Statement;

 

e.           Promptly notify each Holder whose Registrable Securities are intended to be covered by such Resale Registration Statement and each underwriter and, if requested by any such Person, confirm such notice in writing (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed and, with respect to a Resale Registration Statement or any post-effective amendment, when the same has become effective, (ii) of the issuance by any state securities or other regulatory authority of any order suspending the qualification or exemption from qualification of any of the Registrable Securities under state securities or “blue sky” laws or the initiation of any proceedings for that purpose, (iii) any request by the Commission for the amending or supplementing of such Resale Registration Statement or prospectus or for additional information; and (iv) of the happening of any event which makes any statement made in a Resale Registration Statement or related prospectus untrue or which requires the making of any changes in such Resale Registration Statement, prospectus or documents so that they will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and, as promptly as reasonably practicable thereafter, prepare and file with the Commission, and furnish to Holders, a supplement or amendment to such prospectus so that, as thereafter deliverable to the purchasers of such Registrable Securities, such prospectus will not contain any untrue statement of a material fact or omit a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and the time period during which such Resale Registration Statement is required to remain effective shall be extended for the time period during which such prospectus is so suspended;

 

  

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f.           Furnish, at the request of any Holder of Registrable Securities pursuant to Section VI(1), on the date that the Resale Registration Statement with respect to such shares of Registrable Securities becomes effective, (1) an opinion, dated such date, of the independent counsel representing Company for the purposes of such registration, addressed to the Holders, in customary form and covering matters of the type customarily covered in such legal opinions; and (2) a comfort letter dated such date, from the independent certified public accountants of Company, addressed to the Holders making such request and, if such accountants refuse to deliver such letter to such Holders, then to Company, in a customary form and covering matters of the type customarily covered by such comfort letters and such Holders shall reasonably request.  Such opinion of counsel shall additionally cover such other legal matters with respect to the registration in respect of which such opinion is being given as such Holders may reasonably request.  Such letter from the independent certified public accountants shall additionally cover such other financial matters (including information as to the period ending not more than five (5) Business Days prior to the date of such letter) with respect to the registration in respect of which such letter is being given as the Holders of a majority of the Registrable Securities being so registered may reasonably request;

 

g.           Enter into customary agreements (including an underwriting agreement in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities; and

 

h.           Otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, but not later than 18 months after the effective date of the Resale Registration Statement, an earnings statement covering the period of at least twelve (12) months beginning with the first full month of the Company’s fiscal quarter commencing after the effective date of such Resale Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act.

 

i.           It shall be a condition precedent to the obligation of Company to take any action pursuant to this Agreement in respect of the securities which are to be registered at the request of any Holder that such Holder shall furnish to Company such information regarding the securities held by such Holder and the intended method of disposition thereof as Company shall reasonably request and as shall be required in connection with the action taken by Company.

 

  

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j.           Each Holder agrees that, upon receipt of any notice from Company of the happening of any event of the kind described in Section VI(2)(e)(iv), such Holder shall immediately discontinue such Holder’s disposition of Registrable Securities pursuant to the Resale Registration Statement relating to such Registrable Securities until such Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by Section VI(2)(e)(iv).

 

3.           Expenses.  All expenses incurred in complying with this Agreement, including, without limitation, all registration and filing fees (including all expenses incident to filing with any stock exchange), printing expenses, fees and disbursements of counsel for Company, the reasonable fees and reasonable expenses of one counsel for the selling security holders (selected by those holding a majority of the shares being registered), expenses of any special audits incident to or required by any such registration and expenses of complying with the securities or blue sky laws of any jurisdiction pursuant to Section VI(2)(d), shall be paid by Company, except that Company shall not be liable for any fees, discounts or commissions to any underwriter or any fees or disbursements of counsel for any underwriter in respect of the securities sold by such Holder.

 

4.           Indemnification and Contribution.

 

a.           In the event of any registration of any Registrable Securities under the Securities Act pursuant to this Agreement, Company shall indemnify and hold harmless to the fullest extent permitted by law the Holder of such Registrable Securities, such Holder’s directors and officers, and each other person, if any, who controls such Holder or such participating person within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such Holder or any such director or officer or participating person or controlling person may become subject under the Securities Act or any other statute or at common law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any alleged untrue statement of any material fact contained in any Resale Registration Statement under which such securities were registered under the Securities Act, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, or (ii) any alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse such Holder or such director, officer or participating person or controlling person for any legal or any other expenses reasonably incurred by such Holder or such director, officer or participating person or controlling person in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that Company shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any actual or alleged untrue statement or actual or alleged omission made in such Resale Registration Statement, preliminary prospectus, prospectus or amendment or supplement in reliance upon and in conformity with written information furnished to Company by such Holder specifically for use therein.  Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Holder or such director, officer or participating person or controlling person, and shall survive the transfer of such securities by such Holder.

 

  

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b.           Each Holder, by acceptance hereof, agrees to indemnify and hold harmless to the fullest extent permitted by law Company, its directors and officers and each other person, if any, who controls Company within the meaning of the Securities Act against any losses, claims, damages or liabilities, joint or several, to which Company or any such director or officer or any such person may become subject under the Securities Act or any other statute or at common law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any actual or alleged untrue statement or actual or alleged omission made in any information provided in writing to Company by such Holder specifically for use in the Resale Registration Statement and contained in any Resale Registration Statement under which securities were registered under the Securities Act at the request of such Holder, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto.  Notwithstanding the provisions of this paragraph (b) or paragraph (d) below, no Holder shall be required to indemnify any person pursuant to this Section VI(4) or to contribute pursuant to paragraph (d) below in an amount in excess of the amount of the aggregate net proceeds received by such Holder in connection with any such registration under the Securities Act.

 

c.           Any Person entitled to indemnification hereunder will (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that the failure to give such notice shall not limit the rights of such Person, except to the extent the indemnifying party is actually prejudiced thereby) and (ii) unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided, however, that any person entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such Person unless (A) the indemnifying party has agreed to pay such fees or expenses or (B) the indemnifying party shall have failed to assume the defense of such claim and employ counsel reasonably satisfactory to such Person.  If such defense is not assumed by the indemnifying party as permitted hereunder, the indemnifying party will not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent will not be unreasonably withheld or delayed).  If such defense is assumed by the indemnifying party pursuant to the provisions hereof, such indemnifying party shall not settle or otherwise compromise the applicable claim unless (i) such settlement or compromise contains a full and unconditional release of the indemnified party or (ii) the indemnified party otherwise consents in writing, which consent shall not be unreasonably withheld or delayed.  An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party, a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim, in which event the indemnifying party shall be obligated to pay the reasonable fees and disbursements of such additional counsel or counsels.

 

  

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d.           If the indemnification provided for in this Section VI(4) from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations.  The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action.  The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding.

 

e.           The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section VI(4)(d) were determined by pro - rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph.  No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

 

5.           Certain Limitations on Registration Rights.  Notwithstanding the other provisions of this Agreement:

 

a.           Company shall have the right to delay the filing or effectiveness of a Resale Registration Statement required pursuant to Section VI(1) hereof during one or more periods aggregating not more than ninety (90) days in any twelve (12) month period in the event that (i) Company would, in accordance with the advice of its counsel, be required to disclose in the prospectus information not otherwise then required by law to be publicly disclosed and (ii) in the judgment of Company’s board of directors, there is a reasonable likelihood that such disclosure, or any other action to be taken in connection with the prospectus, would materially and adversely affect any existing or prospective material business situation, transaction or negotiation or otherwise materially and adversely affect Company.

 

b.           In the event that, in the judgment of Company, it is advisable to suspend use of a prospectus included in a Resale Registration Statement filed pursuant to this Agreement, due to pending material developments or other events that have not yet been publicly disclosed and as to which (i) Company would, in accordance with the advice of its counsel, be required to disclose in the prospectus information not otherwise then required by law to be publicly disclosed and (ii) in the judgment of Company’s board of directors, there is a reasonable likelihood that such disclosure would materially and adversely affect any existing or prospective material business situation, transaction or negotiation or otherwise materially and adversely affect Company, then Company shall notify all Holders to such effect, and, upon receipt of such notice, each such Holder shall immediately discontinue any sales of Registrable Securities pursuant to such Resale Registration Statement until such Holder has received copies of a supplemented or amended prospectus or until such Holder is advised in writing by Company that the then current prospectus may be used and has received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in such prospectus.  Notwithstanding anything to the contrary herein, Company shall not exercise its rights under this Section VI(5)(b) to suspend sales of Registrable Securities for a period or periods aggregating more than ninety (90) days in any twelve (12) month period.

 

  

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VII.      Representations and Warranties of Company as to the RMB Conversion Shares

 

Company represents and warrants as follows with respect to the RMB Conversion Shares.

 

a.           The RMB Conversion Shares and the issuance thereof have been duly authorized, subject to the receipt of the Company Stockholder Approval, and, when issued and delivered in accordance with the terms of this Agreement will have been validly issued and will be fully paid and nonassessable.  The RMB Conversion Shares are issued free and clear of any lien or other encumbrance, and the issuance of the RMB Conversion Shares will not be subject to any preemptive or other similar right.

 

b.           The Company agrees that the representations, warranties and covenants made by the Company and the Merger Corp. to Neutron in the Merger Agreement are repeated herein to and for the benefit of RMB and RMBAH as if fully set forth herein.  RMB and RMBAH may rely on such representations, warranties and covenants as fully as if they were set forth herein.  Such representations, warranties and covenants shall form an integral part of this Agreement and shall survive the Closing Date.

 

c.           The Company has all necessary power and authority to execute and deliver this Agreement and to perform its obligations hereunder and subject to shareholder approval with respect to the RMB Conversion Shares, and to consummate the transactions contemplated hereby.  The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of the Company, and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions so contemplated.  This Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery by RMB and RMBAH, constitutes a valid, legal and binding obligation of the Company, enforceable against the Company in accordance with its terms, except that such enforcement may be subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws, now or hereafter in effect, affecting creditors’ rights generally.

 

  

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d.           The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby, do not and will not (i) contravene, conflict with or result in a violation or breach of any provision of the Company’s Certificate of Incorporation and bylaws or the organizational documents of any of the Company’s subsidiaries, (ii) contravene, conflict with or result in a violation or breach of any provisions of any law applicable to the Company or any of its subsidiaries or by which its or any of their respective properties is bound or affected, (iii) require any consent or other action by any Person under, constitute a default (or an event that, with or without notice or lapse of time or both, would constitute a default) under, or cause or permit the termination, amendment, acceleration, triggering or cancellation or other change of any right or obligation or the loss of any benefit to which the Company or any of its subsidiaries is entitled under any provision of any contract binding upon the Company or any of its subsidiaries, or (iv) result in the creation or imposition of any lien on any asset of the Company or any of its subsidiaries, other than such exceptions in the case of clause (ii) or (iii) as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect with respect to the Company.

 

e.           The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby do not, and shall not, require any approval, action by or in respect of, filing with or notification to, any governmental entity, to be made or obtained by the Company or its subsidiaries, except for (i) the filing with the Commission and the mailing to the holders of  Common Stock of the Company of a proxy information statement, and the filing with the Commission of any reports that might be required pursuant to the Exchange Act in connection with the Merger and the offerings and the transactions contemplated hereby, [(ii) the filing with the Commission of the Resale Registration Statement,] (ii) such other filings, authorizations, decisions or orders as may be required by the rules and regulations of NASDAQ or any state securities or blue sky laws and (iii) any other approvals or permits, which, if not obtained, would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect with respect to the Company.

 

f.           The Company and its subsidiaries have not incurred, nor will they incur, directly or indirectly, any liability for brokerage or finders’ fees or agent’s commissions or any similar charges in connection with the Transaction Agreements or this Agreement or any transaction contemplated hereby.

 

g.           Neither the Company nor its subsidiaries nor any agent acting on behalf of the Company or its subsidiaries has taken or will take any action which might cause the Transaction Agreements or this Agreement to violate applicable laws, as in effect on the Closing Date.  All offers and sales of capital stock, securities and notes of the Company in the page two (2) years have been conducted and completed by the Company in compliance with applicable laws in all material respects.

 

h.           Except as set forth in the Company’s filings made with the Commission pursuant to the Exchange Act, there is no action, suit, proceeding, judgment, claim or investigation pending or threatened against the Company or any of its subsidiaries which could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company or its subsidiaries or which in any manner challenges or seeks to prevent, enjoin, alter or materially delay any of the transactions contemplated by the Transaction Agreements or this Agreement, and to the knowledge of the Company there is no basis for the assertion of any of the foregoing.  Neither the Company nor any subsidiary is subject to any order which would reasonably be expected to have a Material Adverse Effect on the Company.

 

  

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i.           The Company and its Affiliates have not taken, and will not take, directly or indirectly, any action designed to, or that might reasonably be expected to, cause or result in stabilization or manipulation of the price of the Common Stock to facilitate the sale or resale of the RMB Conversion Shares or affect the price at which the RMB Conversion Shares may be issued or resold.

 

j.           The Company’s executive officers and directors understand the nature of the RMB Conversion Shares being sold hereby and recognize that the issuance of the Shares will have a potential dilutive effect on the equity holdings of other holders of the Company’s equity or rights to receive equity of the Company.  The board of directors of the Company has concluded in its good faith business judgment that the issuance of the RMB Conversion Shares is in the best interests of the Company.  The Company specifically acknowledges that its obligation to issue the RMB Conversion Shares is binding upon the Company and enforceable regardless of the dilution such issuance may have on the ownership interests of other shareholders of the Company or parties entitled to receive equity of the Company.

 

k.           There are no material disagreements of any kind presently existing between the Company and the accountants and lawyers presently employed by the Company, including but not limited to disputes or conflicts over payment owed to such accountants and lawyers, nor have there been any such disagreements during the two years prior to the Closing Date.

 

l.           Neither the Company, nor to the knowledge of the Company, any director, officer, employee, agent, representative or other person acting on behalf of the Company, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses or payments related to foreign, domestic or tribal political activity, (ii) made, authorized, offered or promised any unlawful payment to foreign, domestic or tribal government officials, employees or representatives or to any foreign, domestic or tribal political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company (or made by any person acting on its behalf of which the Company is aware) which is  in violation of law, or (iv) violated in any respect any provision of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder.

 

VIII.     Powers of First Lien Collateral Agent.

 

a.           Release of RMB by Borrower.  Borrower Parties agree that the actions described in this Agreement fully comply with the First Lien Facility Agreement and are necessary to cure what would otherwise be an Event of Default as defined therein.  The Borrower Parties, and each of them, on behalf of themselves, their affiliates, shareholders, representatives, agents, employees, heirs, and assigns, indemnify, hold harmless, and release, RMB and the Lenders from any demand or claim whatsoever, in contract, tort, or any other legal theory, arising from or relating in any way to each and all of the actions, powers, rights and duties described herein.

 

  

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b.           Power of Attorney.  Borrower Parties hereby irrevocably constitute and appoint RMB, with full power of substitution, as their and each of their true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of any or all Borrower Parties or in RMB's own name, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments that may be necessary or useful to accomplish the purposes of this Agreement and, without limiting the generality of the foregoing, hereby gives said attorneys the power and right, on behalf of the Borrower Parties, without notice to or assent by any Borrower Party, to do the following upon the occurrence and during the continuance of an Event of Default:

 

	
i.

	 	
Generally to sell, transfer, pledge, make any agreement with respect to or otherwise dispose of or deal with any of the Collateral in such manner as is consistent with the Uniform Commercial Code and as fully and completely as though RMB were the absolute owner thereof for all purposes;

	  	 	  
	
ii.

	 	
To do, at the Borrower Parties’ expense, at any time, or from time to time, all acts and things which RMB deems necessary or useful to protect, preserve or realize upon the Collateral and RMB's security interest therein, in order to effect the intent of this Agreement, all at least as fully and effectively as the Borrower Parties might do, including, without limitation, (1) upon written notice to the Borrower Parties, the exercise of voting rights with respect to voting securities, which rights may be exercised, if RMB so elects, with a view to causing the liquidation of assets of the issuer of any such securities, and (2) the execution, delivery and recording, in connection with any sale or other disposition of any Collateral, of the endorsements, assignments or other instruments of conveyance or transfer with respect to such Collateral.

 

IX.       Agreement to Execute Further Documents.

 

Borrower Parties, and each of them, agree that any or all of them shall, upon request by RMB at any time after the expiration of the Forbearance Period, and without regard to whether an event of default has occurred or is occurring, execute the following documents on presentation by RMB.

 

a.           Admission of Default.  Upon presentation by RMB, Neutron and/or CRL shall execute a document admitting default under the First Lien Facility Agreement and/or the Credit Documents, and shall agree not to oppose the introduction into evidence of such admissions in any proceeding before a court of competent jurisdiction, including proceedings in foreclosure.

 

b.           Demand Guarantor Promissory Note.  CRL shall execute a Demand Note making the entire amount of the guarantee payable to RMB on demand.

 

X.         Events of Default.

 

Each of the following shall be an Event of Default under this Agreement

 

  

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a.

	
Any event listed under Section II(c) (Early Termination).

 

	
  

	
b.

	
Failure to execute any document presented by RMB pursuant to Section IX above;

 

	
  

	
c.

	
Any material breach of this Agreement by the Company or Neutron;

 

	
  

	
d.

	
Failure to execute, or any defect in the execution of this Agreement or any Transaction Agreement by any party thereto.

 

XI.        Creditor’s Remedies of RMB.

 

a.           Foreclosure.  On the occurrence of and during any Event of Default, RMB may initiate foreclosure proceedings against any Borrower Party pertaining to any Lien.  Borrower Parties hereby waive any defense, agree not to respond, and permit judgment to be taken against either or both of them in any such proceeding.

 

b.           Confession of Judgment.  For purposes of securing the Borrower Parties’ performance under this Agreement and the Credit Documents, Borrower Parties, and each of them, agrees, as an essential part of this Agreement, that in the event the Merger does not close, or if RMB does not receive the Fund Contribution and RMB Conversion Shares as described in Section V(a) above, or if the Existing RMB Loan is not otherwise paid or discharged in full, they shall confess judgment, jointly and severally, in favor of RMB or any Lender in the amount of $26,787,157.00, being the amount of principal and interest accrued as of December 31, 2011, plus interest accruing thereafter at the rate of ten percent (10%) per annum, compounded annually from December 31, 2011, until the judgment is paid in full.  Borrower Parties authorize that judgment be entered against them, jointly and severally, in those sums, as well as for such additional sums as are set forth below for attorneys’ fees and costs.

 

c.           Power of Attorney.  To implement subparagraph XI(b) above, in the event the Merger does not close, or if RMB does not receive the Fund Contribution and RMB Conversion Shares as described in Section V(a) above, or if the Existing RMB Loan is not otherwise paid or discharged in full, Borrower Parties hereby agree to waive the issuance and service of process or other notice, to confess judgment for the principal balance due under the Credit Documents in the amount stated above, together with interest, cost of suit, and attorneys’ fees as provided herein, and to release all errors and waive all right of appeal.  If any action is brought for the enforcement of this Agreement or any Credit Document, and if RMB shall recover judgment in any sum, RMB shall recover as reasonable attorneys’ fees ten percent (10%) of the amount decreed for principal and interest, which attorneys’ fees shall be entered, allowed, and paid as part of the judgment in the action.

 

d.           Cumulative Remedies.  RMB’s remedies under this Agreement shall be cumulative and not exclusive, may be pursued individually or collectively as RMB sees fit.  Borrower Parties waive the defense of election of remedies or any similar defense to any remedy selected by RMB.

 

XII.     General Provisions.

 

  

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a.           Corporate Authority.  Company and Borrower Parties, and each of them, hereby represent and warrant to RMB that each has full power and authority to enter into this Agreement and that its execution, delivery and performance of this Agreement has been fully authorized and approved, and that no further corporate approvals or consents are required to bind such party.

 

b.           Time is of the Essence.  Time is of the essence for each and every provision of this Agreement.

 

c.           Choice of Law.  This Agreement shall be governed by the internal laws of the State of Colorado, without regard to conflict of law principles.  The parties attorn to the non-exclusive jurisdiction of the federal and state courts of Colorado as a forum for the resolution of any dispute connected herewith or arising here from.

 

d.           Complete Agreement.  This Agreement states the final and complete agreement of the parties as to the matters set out herein, and supersedes all prior negotiations, representations, and discussions.

 

e.           Waiver of jury trial.  THE PARTIES HEREBY KNOWINGLY AND IRREVOCABLY WAIVE ANY RIGHT THEY MAY HAVE TO TRIAL BY JURY OF ANY ISSUES OR DISPUTES ARISING FROM OR RELATING TO THIS AGREEMENT.

 

f.           Amendments in Writing.  This Agreement may not be amended, altered, or waived except in a writing of equal formality to this document and executed by all parties hereto including full representations and warranties of corporate and signatory authority as to the document.  Unless otherwise specified and agreed, one-time waiver of any right or obligation under this Agreement by either party shall not be interpreted as waiver of such right or obligation on any occasion that arises after such initial waiver.  This Agreement may not be amended, altered or waived without the express consent of  RMB.  Each party agrees that any amendment, alteration or waiver made in breach of this provision will not be effective.

 

g.           Disclaimer of Partnership.  This Agreement has been negotiated at arms-length and the parties specifically disclaim any partnership or joint venture arrangement arising from this document.  This Agreement shall not be construed to create, expressly or by implication, a joint venture, mining partnership, commercial partnership, or other partnership relationship between or among RMB, the Company, or any Borrower Party.

 

h.           Notices.  All notices, designations or other docu­ments required or authorized by the terms of this Agreement shall be in writing and shall be personally delivered, or mailed by regis­tered or certified mail, first class postage prepaid, return receipt requested, or transmitted by facsimile machine in a man­ner which confirms transmission to the recipient, addressed as follows:

 

RMB:

 

Attn:  Rick Winters

President

RMB Resources Inc.

3500 S Wadsworth Blvd, Suite 405

Lakewood, Colorado 80235 USA

 

  

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With a copy which shall not constitute notice to:

 

Christopher Kamper

Carver Schwarz McNab & Bailey LLC

1600 Stout Street Ste. 1700

Denver, Colorado 80202

Fax no. (303) 893-1829

 

 

URI:

 

Uranium Resources Inc.

405 State Highway 121 Bypass,

Building A, Suite 110

Lewisville, Texas 75067

Attn.:

With a copy which shall not constitute notice to:

Baker & Hostetler LLP

303 East 17th Avenue, Suite 1100

Denver, Colorado 80203-1264

Attention:  Alfred C. Chidester

Fax no. (303) 861-7805

Neutron:

 

Neutron Energy Inc.

9000 E. Nichols Avenue

Suite 225

Englewood, Colorado 80112

Attn.: Edward M. Topham

Fax: 303-531-0519

With a copy which shall not constitute notice to:

Hogan Lovells US LLP

One Tabor Center, Suite 1500

1200 Seventeenth Street

Denver, Colorado 80202

Attention:  Paul Hilton

Fax no. (303) 899-7333

i.           Remedies.  Each Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under Section VI of this Agreement.  Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of Section VI of this Agreement and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.

 

  

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j.           Fees in the Event of Litigation.  In any action or proceeding brought in a court of law to enforce any provision of this Agreement or where any provision hereof is validly asserted as a defense, the successful party shall be entitled to recover reasonable attorneys’ fees in addition to any other available remedy.

 

k.           Rule 144.  So long as Company is subject to the reporting requirements under the Exchange Act, it shall comply with such requirements so as to permit sales of Registrable Securities by the holders thereof pursuant to Rule 144 under the Securities Act.

 

l.           Nonliability.  Any provision of this Agreement notwithstanding, in the event the Closing does not occur other than as a result of a material breach by Company of any of its representations, warranties, covenants or agreements, Company shall not have any liability to RMB, RMBAH or any of their  respective Affiliates for any claim of any nature.

 

m.           Successors and Assigns.  This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties hereto and their respective heirs, executors, administrators, personal representatives, beneficiaries, successors, and assigns, including any Person to whom Registrable Securities are transferred (other than in sales pursuant to a prospectus or Rule 144), who shall become an Additional Holder in accordance with this Agreement.

 

n.           Headings.  The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

 

o.           Termination.  Company’s obligations under Section VI of this Agreement shall cease with respect to any Person when such Person ceases to be a Holder.  Notwithstanding the foregoing, Company’s obligations under Section VI(4) and Section VI(5) shall survive in accordance with their terms.

 

p.           Counterparts.  This Agreement may be executed in counterparts and signatures may be delivered by electronic scanning (such as pdf) or facsimile, and such signatures taken together shall constitute a single original instrument dated as of the date first shown above.

 

REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK;

SIGNATURES FOLLOW

 

  

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IN WITNESS WHEREOF, the parties have executed this Forbearance and Debt Conversion Agreement effective the date first written above.

 

First Lien Creditor

 

RMB Australia Holdings, Ltd.

 

By: _____________________

 

Its: ______________________

 

By: _____________________

 

Its: ______________________

 

 

First Lien Collateral Agent

 

RMB Resources, Inc.

 

By: ______________________

 

Its: _______________________

 

 

Borrower:

 

Neutron Energy, Inc.

 

By: ___________________________

 

Its: ____________________________

 

 

Subsidiary Guarantor:

 

Cibola Resources, LLC

 

By: ______________________________

 

Its: _______________________________

 

 

Company:

 

Uranium Resources, Inc.

 

By: _______________________________

 

Its: __________________________________

 

 

24

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