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COLLATERAL AGENT AGREEMENT
COLLATERAL
AGENT AGREEMENT (this “
Agreement ”)
dated as of September 12, 2007, among Eliezer Drew (the
“
Collateral Agent ”),
and the parties identified on Schedule A hereto (each,
individually, a “
Lender ”
and collectively, the “
Lenders ”),
who hold or will acquire promissory Notes issued or to be issued by
Franklin Towers Enterprises Inc. (“Parent”), a Nevada
corporation, at or about the date of this Agreement as described in
the Security Agreement referred to in Section 1(a) below
(collectively herein the “
Notes ”).
WHEREAS,
the Lenders have made, are making and will be making loans to
Parent to be secured by certain collateral; and
WHEREAS,
it is desirable to provide for the orderly administration of
such collateral by requiring each Lender to appoint the
Collateral Agent, and the Collateral Agent has agreed to
accept such appointment and to receive, hold and deliver such
collateral, all upon the terms and subject to the conditions
hereinafter set forth; and
WHEREAS,
it is desirable to allocate the enforcement of certain rights
of the Lenders under the Notes for the orderly administration
thereof.
NOW,
THEREFORE, in consideration of the premises set forth herein
and for other good and valuable consideration, the parties
hereto agree as follows:
1.
Collateral .
(a)
Contemporaneously
with the execution and delivery of this Agreement by the
Collateral Agent and the Lenders, (i) the Collateral Agent has
or will have entered into a Security Agreement (“
Security Agreement ”)
among the Collateral Agent, Parent, Chongqing Qiluo Textile Co.,
Ltd., a People’s Republic of China corporation
(“
Guarantor ”),
regarding the grant of a security interest in the Collatera
l to
the Collateral Agent, for the benefit of the Lenders, (ii) the
Guarantor will have executed and delivered a “
Guaranty ”
in favor of Lenders in connection with the Obligations (as defined
in the Security Agreement), and (iii) Parent is issuing the Notes
to the Lenders pursuant to a “Subscription Agreement”
dated at or about the date of this Agreement. Collectively, the
Security Agreement, the Notes, Guaranty and Subscription Agreement
and other agreements referred to therein are referred to herein as
“
Borrower Documents ”.
(b)
The
Collateral Agent hereby acknowledges that any Collateral held
by the Collateral Agent is held for the benefit of the Lenders
in accordance with this Agreement and the Borrower Documents.
No reference to the Borrower Documents or any other instrument
or document shall be deemed to incorporate any term or
provision thereof into this Agreement unless expressly so
provided.
(c)
The
Collateral Agent is to distribute in accordance with the
Borrower Documents any proceeds received from the Collateral
which are distributable to the Lenders in proportion to their
respective interests in the Obligations as defined in the
Security Agreement.
2.
Appointment of the Collateral Agent .
The
Lenders hereby appoint the Collateral Agent (and the
Collateral Agent hereby accepts such appointment) to take any
action including, without limitation, the registration of any
Collateral in the name of the Collateral Agent or its nominees
prior to or during the continuance of an Event of Default (as
defined in the Borrower Documents), the exercise of voting
rights upon the occurrence and during the continuance of an
Event of Default,
the
application of any cash collateral received by the Collateral
Agent to the payment of the Obligations, the making of any
demand under the Borrower Documents, the exercise of any
remedies given to the Collateral Agent pursuant to the
Borrower Documents and the exercise of any authority pursuant
to the appointment of the Collateral Agent as an
attorney-in-fact pursuant to the Security Agreement that the
Collateral Agent deems necessary or proper for the
administration of the Collateral pursuant to the Security
Agreements. Upon disposition of the Collateral in accordance
with the Borrower Documents, the Collateral Agent shall
promptly distribute any cash or Collateral in accordance with
Section 10.4 of the Security Agreement. Parent and Lenders
must notify Collateral Agent in writing of the issuance of
Notes to Lenders by Debtor. The Collateral Agent will not be
required to act hereunder in connection with Notes the
issuance of which was not disclosed in writing to the
Collateral Agent nor will the Collateral Agent be required to
act on behalf of any assignee of Notes without the written
consent of Collateral Agent.
3.
Action by the Majority in Interest .
(a)
Certain Actions .
Each of the Lenders covenants and agrees that only a Majority in
Interest shall have the right, but not the obligation, to undertake
the following actions (it being expressly understood that less than
a Majority in Interest hereby expressly waive the following rights
that they may otherwise have under the Borrower Documents
)
:
(i)
Acceleration .
If an Event of Default occurs, after the applicable cure period, if
any, a Majority in Interest may, on behalf of all the Lenders
(however each Lender may independently accelerate its own Note),
instruct the Collateral Agent to provide to Debtors notice to cure
such default and/or declare the unpaid principal amount of the
Notes to be due and payable, together with any and all accrued
interest thereon and all costs payable pursuant to such
Notes;
(ii)
Enforcement .
Upon the occurrence of any Event of Default after the applicable
cure period, if any, a Majority in Interest may instruct the
Collateral Agent to proceed to protect, exercise and enforce, on
behalf of all the Lenders, their rights and remedies under the
Borrower Documents against Debtors, and such other rights and
remedies as are provided by law or equity; and
(iii)
Waiver of Past Defaults .
A Majority in Interest may instruct the Collateral Agent to waive
any Event of Default by written notice to Debtors, and the other
Lenders, but not waive damages accrued or accruing until the
effective date of such waiver.
(b)
Permitted Subordination and Release .
A Majority in Interest may instruct the Collateral Agent to agree
to release in whole or in part or to subordinate any Collateral to
any claim or other actual or proposed security interest and may
enter into any agreement with Debtors to evidence such
subordination;
provided ,
however ,
that subsequent to any such release or subordination, each Note
shall remain
pari
passu with
the other Notes held by the Lenders.
(c)
Further Actions .
A Majority in Interest may instruct the Collateral Agent to take
any action that it may take under this Agreement by instructing the
Collateral Agent in writing to take such action on behalf of all
the Lenders.
(d)
Majority in Interest .
For so long as any obligations remain outstanding on the Notes,
Majority in Interest for the purposes of this Agreement and the
Borrower Documents shall mean Lenders who hold not less than
sixty-five percent (65%) of the outstanding principal amount of the
Notes.
4.
Power of Attorney .
(a)
To
effectuate the terms and provisions hereof, the Lenders hereby
appoint the Collateral Agent as their attorney-in-fact (and
the Collateral Agent hereby accepts such appointment) for the
purpose of carrying out the provisions of this Agreement
including, without limitation, taking any action on behalf of,
or at the instruction of, the Majority in Interest at the
written direction of the Majority in Interest and executing
any consent authorized pursuant to this Agreement and taking
any action and executing any instrument that the Collateral
Agent may deem necessary or advisable (and lawful) to
accomplish the purposes hereof.
(b)
All
acts done under the foregoing authorization are hereby
ratified and approved and neither the Collateral Agent nor any
designee nor agent thereof shall be liable for any acts of
commission or omission, for any error of judgment, for any
mistake of fact or law except for acts of gross negligence or
willful misconduct.
(c)
This
power of attorney, being coupled with an interest, is
irrevocable while this Agreement remains in
effect.
5.
Expenses of the Collateral Agent .
The Lenders shall pay any and all reasonable costs and expenses
incurred by the Collateral Agent, including, without limitation,
reasonable costs and expenses relating to all waivers, releases,
discharges, satisfactions, modifications and amendments of this
Agreement, the administration and holding of the Collateral,
insurance expenses, and the enforcement, protection and
adjudication of the parties’ rights hereunder by the
Collateral Agent, including, without limitation, the reasonable
disbursements, expenses and fees of the attorneys the Collateral
Agent may retain, if any, each of the foregoing in proportion to
their holdings of the Notes.
6.
Reliance on Documents and Experts .
The Collateral Agent shall be entitled to rely upon any notice,
consent, certificate, affidavit, statement, paper, document,
writing or communication (which may be by telegram, cable, telex,
telecopier, or telephone) reasonably believed by it to be genuine
and to have been signed, sent or made by the proper person or
persons, and upon opinions and advice of its own legal counsel,
independent public accountants and other experts selected by the
Collateral Agent.
7.
Duties of the Collateral Agent; Standard of Care
.
(a)
The
Collateral Agent’s only duties are those expressly set
forth in this Agreement, and the Collateral Agent hereby is
authorized to perform those duties in accordance with
commercially reasonable practices. The Collateral Agent may
exercise or otherwise enforce any of its rights, powers,
privileges, remedies
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