SECURITY AGREEMENT

Exhibit 4.4

SECURITY AGREEMENT

THIS SECURITY AGREEMENT (as amended, restated, supplemented or otherwise modified from time to time, this “ Agreement ”) dated as of July __, 2009 among EVOLUTION RESOURCES, INC., a Nevada corporation (the “ Company ”), EVOLUTION RESOURCES, INC. , a Delaware corporation (“ ER Sub ”), LIQUAFACTION CORPORATION , a Washington corporation (“ Liquafaction ”), LIQUA ETHANOL, LLC , a Washington limited liability company (“ Liqua ”, Liqua, ER Sub, Liquafaction and the Company, together with each other Person who becomes a party to this Agreement by execution of a joinder in the form of Exhibit A attached hereto, is hereinafter sometimes referred to individually as a “ Debtor ” and, collectively, as the “ Debtors ”) and HARBORVIEW MASTER FUND, L.P. , a British Virgin Islands limited partnership, in its capacity as Collateral Agent (as set forth in Section 5.12 hereof, together with its successors and assigns in such capacity, the “ Secured Party ”) for the benefit of itself and each of the Buyers (as hereinafter defined).

W I T N E S S E T H:

WHEREAS, on the date hereof, Harborview Master Fund, L.P., a British Virgin Islands limited partnership (“ Harborview ”; Harborview, together with its successors and assigns and each other holder of a Note (as defined below) and their respective successors and assigns, individually and collectively, the “ Buyers ”) has made loans and certain other financial accommodations to the Company, as evidenced by those certain secured senior notes in an original aggregate principal amount of $215,000 (such notes, together with any promissory notes or other securities issued in exchange or substitution therefor or replacement thereof, and as any of the same may be amended, supplemented, restated or modified and in effect from time to time, the “ Notes ”);

WHEREAS, the Notes are being acquired by the Buyers and the Buyers have made certain financial accommodations to the Company pursuant to a Securities Purchase Agreement of even date herewith among the Company and the Buyers (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “ Purchase Agreement ”);

 

WHEREAS, each Debtor (other than the Company) from time to time party hereto is a direct or indirect subsidiary of the Company and, as such, will derive substantial benefit and advantage from the financial accommodations to the Company set forth in the Purchase Agreement and the Notes, and it will be to each such Debtor’s direct interest and economic benefit to assist the Company in procuring said financial accommodations from the Buyers; and

WHEREAS, to induce the Buyers to enter into the Purchase Agreement and purchase the Notes, (i) each Debtor (other than the Company) has agreed to guaranty the Liabilities (as hereinafter defined) of the Company pursuant to the terms of a guaranty (such guaranty(ies), as they may be amended, restated, modified or supplemented and in effect from time to time, individually and collectively, the “ Guaranty ”) by each such

 

 

 

Debtor in favor of the Secured Party (on its behalf and on behalf of the Buyers) and (ii) each Debtor has agreed to pledge and grant a security interest in all of its right, title and interest in and to the Collateral (as hereinafter defined) as security for its Liabilities for the benefit of the Secured Party, the Buyers and their respective successors and assigns.

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

Section 1.   Definitions .  Capitalized terms used herein without definition and defined in the Purchase Agreement are used herein as defined therein.  In addition, as used herein:

“ Accounts ” means any “account,” as such term is defined in the Uniform Commercial Code, and, in any event, shall include, without limitation, “supporting obligations” as defined in the Uniform Commercial Code.

“ As-extracted Collateral ” means any “as-extracted collateral,” as such term is defined in the Uniform Commercial Code.

“ Chattel Paper ” means any “chattel paper,” as such term is defined in the Uniform Commercial Code.

“ Collateral ” shall have the meaning ascribed thereto in Section 3 hereof.

“ Commercial Tort Claims ” means “commercial tort claims”, as such term is defined in the Uniform Commercial Code.

“ Contracts ” means all contracts, undertakings, or other agreements (other than rights evidenced by Chattel Paper, Documents or Instruments) in or under which a Debtor may now or hereafter have any right, title or interest, including, without limitation, with respect to an Account, any agreement relating to the terms of payment or the terms of performance thereof.

“ Copyrights ” means any copyrights, rights and interests in copyrights, works protectable by copyrights, copyright registrations and copyright applications, including, without limitation, the copyright registrations and applications listed on Schedule III attached hereto (if any), and all renewals of any of the foregoing, all income, royalties, damages and payments now and hereafter due and/or payable under or with respect to any of the foregoing, including, without limitation, damages and payments for past, present and future infringements of any of the foregoing and the right to sue for past, present and future infringements of any of the foregoing.  

“ Deposit Accounts ” means all “deposit accounts” as such term is defined in the Uniform Commercial Code, now or hereafter held in the name of a Debtor.

 

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“ Documents ” means any “documents,” as such term is defined in the Uniform Commercial Code, and shall include, without limitation, all documents of title (as defined in the Uniform Commercial Code), bills of lading or other receipts evidencing or representing Inventory or Equipment.

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

“ Event of Default ” shall have the meaning set forth in the Notes.

 “ General Intangibles ” means any “general intangibles,” as such term is defined in the Uniform Commercial Code, and, in any event, shall include, without limitation, all right, title and interest in or under any Contract, models, drawings, materials and records, claims, literary rights, goodwill, rights of performance, Copyrights, Trademarks, Patents, warranties, rights under insurance policies and rights of indemnification.

“ Goods ” means any “goods”, as such term is defined in the Uniform Commercial Code, including, without limitation, fixtures and embedded Software to the extent included in “goods” as defined in the Uniform Commercial Code.

“ Governmental Authority ” means the government of the United States of America or any other nation, or any political subdivision thereof, whether state or local, or any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administration powers or functions of or pertaining to government over any Debtor or any of its Subsidiaries, or any of their respective properties, assets or undertakings.

“ Instruments ” means any “instrument,” as such term is defined in the Uniform Commercial Code, and shall include, without limitation, promissory notes, drafts, bills of exchange, trade acceptances, letters of credit, letter of credit rights (as defined in the Uniform Commercial Code), and Chattel Paper.

“ Inventory ” means any “inventory,” as such term is defined in the Uniform Commercial Code.

“ Investment Property ” means any “investment property”, as such term is defined in the Uniform Commercial Code.

“ Liabilities ” shall mean all obligations, liabilities and indebtedness of every nature of the Debtors from time to time owed or owing under or in respect of this Agreement, the Purchase Agreement, the Notes, the Warrants, the Guaranty, any of the other Security Documents and any of the other Transaction Documents, as the case may be, including, without limitation, the principal amount of all debts, claims and indebtedness, accrued and unpaid interest and all fees, costs and expenses, whether primary, secondary, direct, contingent, fixed or otherwise, heretofore, now and/or from time to time hereafter owing, due or

 

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payable whether before or after the filing of a bankruptcy, insolvency or similar proceeding under applicable federal, state, foreign or other law and whether or not an allowed claim in any such proceeding.

“ Lien ” shall have the meaning set forth in the Purchase Agreement.

“ 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.

“ Patents ” means any patents and patent applications, including, without limitation, the inventions and improvements described and claimed therein, all patentable inventions and those patents and patent applications listed on Schedule IV attached hereto (if any), and the reissues, divisions, continuations, renewals, extensions and continuations-in-part of any of the foregoing, and all income, royalties, damages and payments now or hereafter due and/or payable under or with respect to any of the foregoing, including, without limitation, damages and payments for past, present and future infringements of any of the foregoing and the right to sue for past, present and future infringements of any of the foregoing.

“ Permitted Lien ” shall have the meaning set forth in the Purchase Agreement.

“ Proceeds ” means “proceeds,” as such term is defined in the Uniform Commercial Code and, in any event, includes, without limitation, (a) any and all proceeds of any insurance, indemnity, warranty or guaranty payable with respect to any of the Collateral, (b) any and all payments (in any form whatsoever) made or due and payable from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any governmental body, authority, bureau or agency (or any person acting under color of governmental authority), and (c) any and all other amounts from time to time paid or payable under, in respect of or in connection with any of the Collateral.

“ Representative ” means any Person acting as agent, representative or trustee on behalf of the Secured Party from time to time.

“ Requisite Buyers ” means buyers having more than 66.67% of the sum of the aggregate outstanding principal balance of the Notes.

“ Software ” means all “software” as such term is defined in the Uniform Commercial Code, now owned or hereafter acquired by a Debtor, other than software embedded in any category of Goods, including, without limitation, all computer programs and all supporting information provided in connection with a transaction related to any program.

 

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“ Trademarks ” means any trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos, other business identifiers, prints and labels on which any of the foregoing have appeared or appear, all registrations and recordings thereof, and all applications in connection therewith, including, without limitation, the trademarks and applications listed in Schedule V attached hereto (if any) and renewals thereof, and all income, royalties, damages and payments now or hereafter due and/or payable under or with respect to any of the foregoing, including, without limitation, damages and payments for past, present and future infringements of any of the foregoing and the right to sue for past, present and future infringements of any of the foregoing.

“ Uniform Commercial Code ” shall mean the Uniform Commercial Code as in effect from time to time in the State of New York; provided, that to the extent that the Uniform Commercial Code is used to define any term herein and such term is defined differently in different Articles or Divisions of the Uniform Commercial Code, the definition of such term contained in Article or Division 9 shall govern.

Section 2.   Representations, Warranties and Covenants of the Debtors .  Each Debtor represents and warrants to, and covenants with, the Secured Party as follows:

(a)

Such Debtor has rights in and the power to transfer the Collateral in which it purports to grant a security interest pursuant to Section 3 hereof (subject, with respect to after acquired Collateral, to such Debtor acquiring the same) and no Lien other than Permitted Liens exists or will exist upon such Collateral at any time.

(b)

This Agreement is effective to create in favor of the Secured Party a valid security interest in and Lien upon all of such Debtor’s right, title and interest in and to the Collateral, and upon (i) the filing of appropriate Uniform Commercial Code financing statements in the jurisdictions listed on Schedule I attached hereto, and (ii) each Deposit Account being subject to an Account Control Agreement (as hereinafter defined) between the applicable Debtor and depository institution and the Secured Party on behalf of the Buyers, such security interest will be a duly perfected first priority security interest in all of the Collateral (other than Instruments not constituting Chattel Paper), and upon delivery of the Instruments to the Secured Party or its Representative, duly endorsed by such Debtor or accompanied by appropriate instruments of transfer duly executed by such Debtor, the security interest in the Instruments will be duly perfected.

(c)

All of the Equipment, Inventory and Goods owned by such Debtor is located at the places as specified on Schedule I attached hereto.  Except as disclosed on Schedule I , none of the Collateral is in the possession of any bailee, warehousemen, processor or consignee.   Schedule I discloses such Debtor’s name as of the date hereof as it appears in official filings in the state or province, as

 

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applicable, of its incorporation, formation or organization, the type of entity of such Debtor (including corporation, partnership, limited partnership or limited liability company), organizational identification number issued by such Debtor’s state of incorporation, formation or organization (or a statement that no such number has been issued), such Debtor’s state or province, as applicable, of incorporation, formation or organization and the chief place of business, chief executive officer and the office where such Debtor keeps its books and records and the states in which such Debtor conducts its business.  Such Debtor has only one state or province, as applicable, of incorporation, formation or organization. Such Debtor does not do business and has not done business during the past five (5) years under any trade name or fictitious business name except as disclosed on Schedule II attached hereto.

(d)

No Copyrights, Patents or Trademarks listed on Schedules III, IV and V , respectively, if any, have been adjudged invalid or unenforceable or have been canceled, in whole or in part, or are not presently subsisting.  Each of such Copyrights, Patents and Trademarks (if any) is valid and enforceable.  Such Debtor is the sole and exclusive owner of the entire and unencumbered right, title and interest in and to each of such Copyrights, Patents and Trademarks, identified on Schedules III, IV and V , as applicable, as being owned by such Debtor, free and clear of any liens, charges and encumbrances, including, without limitation, licenses, shop rights and covenants by such Debtor not to sue third persons.  Such Debtor has adopted, used and is currently using, or has a current bona fide intention to use, all of such Copyrights, Patents and Trademarks.  Such Debtor has no notice of any suits or actions commenced or threatened with reference to the Copyrights, Patents or Trademarks owned by it.

(e)

Such Debtor shall deliver to the Secured Party an updated Schedule I, II, III, IV and/or V within five (5) Business Days of any change thereto showing any such changes.

(f)

All depositary and other accounts including, without limitation, Deposit Accounts, securities accounts, brokerage accounts and other similar accounts, maintained by such Debtor are described on Schedule VI hereto, which description includes for each such account the name of the Debtor maintaining such account, the name, address and telephone and telecopy numbers of the financial institution at which such account is maintained, the account number and the account officer, if any, of such account. Such Debtor shall not open any new Deposit Accounts, securities accounts, brokerage accounts or other accounts unless such Debtor shall have given the Secured Party ten (10) Business Days’ prior written notice of its intention to open any such new accounts. Such Debtor shall deliver to the Secured Party an updated Schedule VI within five (5) Business Days of any change thereto showing any such changes. Such Debtor hereby authorizes the financial institutions at which such Debtor maintains an account to provide the Secured Party with such information with respect to such account as the Secured Party may from time to time reasonably request, and such Debtor hereby consents to such information being provided to the Secured Party.  In

 

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addition, all of such Debtor’s depositary, security, brokerage and other accounts including, without limitation, Deposit Accounts shall be subject to the provisions of Section 4.5 hereof.

(g)

Such Debtor does not own any Commercial Tort Claim except for those disclosed on Schedule VII hereto (if any).

(h)

Such Debtor does not have any interest in real property except as disclosed on Schedule VIII  (if any).  Such Debtor shall deliver to the Secured Party an updated Schedule VIII within five (5) Business Days of any change thereto showing any such changes.  Except as otherwise agreed to by the Secured Party, all such interests in real property are subject to a mortgage or deed of trust (in form and substance satisfactory to the Secured Party) in favor of the Secured Party (hereinafter, a “ Mortgage ”).   

(i)

All Equipment (including, without limitation, Motor Vehicles) owned by such Debtor and subject to a certificate of title or ownership statute is described on Schedule IX hereto.

 

Section 3.   Collateral .  As collateral security for the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of the Liabilities, each Debtor hereby pledges and grants to the Secured Party, for the benefit of itself and the Buyers, a Lien on and security interest in and to all of such Debtor’s right, title and interest in the personal property and assets of such Debtor, whether now owned by such Debtor or hereafter acquired and whether now existing or hereafter coming into existence and wherever located (all being collectively referred to herein as “ Collateral ”), including, without limitation:

(a)

all Instruments, together with all payments thereon or thereunder:

(b)

all Accounts;

(c)

all Inventory;

(d)

all General Intangibles (including payment intangibles (as defined in the Uniform Commercial Code) and Software);

(e)

all Equipment;

(f)

all Documents;

(g)

all Contracts;

(h)

all Goods;

(i)

all Investment Property;

 

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(j)

all Deposit Accounts, including, without limitation, the balance from time to time in all bank accounts maintained by such Debtor;

(k)

all Commercial Tort Claims specified on Schedule VII ;

(l)

all As-extracted Collateral;

(m)

all Trademarks, Patents and Copyrights; and

(n)

all other tangible and intangible property of such Debtor, including, without limitation, all interests in real property, Proceeds, tort claims, products, accessions, rents, profits, income, benefits, substitutions, additions and replacements of and to any of the property of such Debtor described in the preceding clauses of this Section 3 (including, without limitation, any proceeds of insurance thereon, insurance claims and all rights, claims and benefits against any Person relating thereto), other rights to payments not otherwise included in the foregoing, and all books, correspondence, files, records, invoices and other papers, including without limitation all tapes, cards, computer runs, computer programs, computer files and other papers, documents and records in the possession or under the control of such Debtor, any computer bureau or service company from time to time acting for such Debtor.

Section 4.   Covenants; Remedies .  In furtherance of the grant of the pledge and security interest pursuant to Section 3 hereof, each Debtor hereby agrees with the Secured Party as follows:

4.1.   Delivery and Other Perfection; Maintenance, etc .

(a)

Delivery of Instruments, Documents, Etc .  Each Debtor shall deliver and pledge to the Secured Party or its Representative any and all Instruments, negotiable Documents, Chattel Paper and certificated securities (accompanied by stock powers executed in blank) duly endorsed and/or accompanied by such instruments of assignment and transfer executed by such Debtor in such form and substance as the Secured Party or its Representative may request; provided , that so long as no Event of Default shall have occurred and be continuing, each Debtor may retain for collection in the ordinary course of business any Instruments, negotiable Documents and Chattel Paper received by such Debtor in the ordinary course of business, and the Secured Party or its Representative shall, promptly upon request of a Debtor, make appropriate arrangements for making any other Instruments, negotiable Documents and Chattel Paper pledged by such Debtor available to such Debtor for purposes of presentation, collection or renewal (any such arrangement to be effected, to the extent deemed appropriate by the Secured Party or its Representative, against trust receipt or like document). If a Debtor retains possession of any Chattel Paper, negotiable Documents or Instruments pursuant to the terms hereof, such Chattel Paper, negotiable Documents and Instruments shall be marked with the following legend: “This writing and the obligations evidenced or secured hereby are subject

 

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to the security interest of Harborview Master Fund, L.P., in its capacity as collateral agent for the benefit of the Buyers, as secured party.”

(b)

Other Documents and Actions .  Each Debtor shall give, execute, deliver, file and/or record any financing statement, registration, notice, instrument, document, agreement, Mortgage or other papers that may be necessary or desirable (in the reasonable judgment of the Secured Party or its Representative) to create, preserve, perfect or validate the security interest granted pursuant hereto (or any security interest or mortgage contemplated or required hereunder, including with respect to Section 2(h) of this Agreement) or to enable the Secured Party or its Representative to exercise and enforce the rights of the Secured Party hereunder with respect to such pledge and security interest, provided that notices to account debtors in respect of any Accounts or Instruments shall be subject to the provisions of clause (e) below.  Notwithstanding the foregoing, each Debtor hereby irrevocably authorizes the Secured Party at any time and from time to time to file in any filing office in any jurisdiction any Uniform Commercial Code initial financing statements (and other similar filings or registrations under other applicable laws and regulations pertaining to the creation, attachment, or perfection of security interests) and amendments thereto that (a) indicate the Collateral (i) as all assets of such Debtor or words of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the Uniform Commercial Code of the State of New York or such jurisdiction, or (ii) as being of an equal or lesser scope or with greater detail, and (b) contain any other information required by part 5 of Article 9 of the Uniform Commercial Code of the State of New York or any other State for the sufficiency or filing office acceptance of any financing statement or amendment, including (i) whether such Debtor is an organization, the type of organization and any organization identification number issued to such Debtor, and (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.  Each Debtor agrees to furnish any such information to the Secured Party promptly upon request.  Each Debtor also ratifies its authorization for the Secured Party to have filed in any jurisdiction any like initial financing statements or amendments thereto if filed prior to the date hereof.  

(c)

Books and Records .  Each Debtor (or the Company on behalf of a Debtor) shall maintain at its own cost and expense complete and accurate books and records of the Collateral, including, without limitation, a record of all payments received and all credits granted with respect to the Collateral and all other dealings with the Collateral.  Upon the occurrence and during the continuation of any Event of Default, each Debtor shall deliver and turn over any such books and records (or true and correct copies thereof) to the Secured Party or its Representative at any time on demand.  Each Debtor shall permit any Representative of the Secured Party to inspect such books and records at any time during reasonable business hours and will provide photocopies thereof at such Debtor’s expense to the Secured Party upon request of the Secured Party.

 

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(d)

Motor Vehicles .  Each Debtor shall, promptly upon acquiring same, cause the Secured Party to be listed as the lienholder on each certificate of title or ownership covering any items of Equipment, including Motor Vehicles, having a value in excess of $10,000 in the aggregate for all such items of Equipment of the Debtor, or otherwise comply with the certificate of title or ownership laws of the relevant jurisdiction issuing such certificate of title or ownership in order to properly evidence and perfect the Secured Party’s security interest in the assets represented by such certificate of title or ownership.

(e)

Notice to Account Debtors; Verification .  (i) Upon the occurrence and during the continuance of any Event of Default (or if any rights of set-off (other than set-offs against an Account arising under the Contract giving rise to the same Account) or contra accounts may be asserted), upon request of the Secured Party or its Representative, each Debtor shall promptly notify (and each Debtor hereby authorizes the Secured Party and its Representative so to notify) each account debtor in respect of any Accounts or Instruments or other Persons obligated on the Collateral that such Collateral has been assigned to the Secured Party hereunder, and that any payments due or to become due in respect of such Collateral are to be made directly to the Secured Party, and (ii) the Secured Party and its Representative shall have the right at any time or times to make direct verification with the account debtors or other Persons obligated on any and all of the Accounts or other Collateral.

(f)

Intellectual Property .  Each Debtor represents and warrants that the Copyrights, Patents and Trademarks listed on Schedules III, IV and V , respectively (if any), constitute all of the registered Copyrights and all of the Patents and Trademarks now owned by such Debtor.  If such Debtor shall (i) obtain rights to any new patentable inventions, any registered Copyrights or any Patents or Trademarks, or (ii) become entitled to the benefit of any registered Copyrights or any Patents or Trademarks or any improvement on any Patent, the provisions of this Agreement above shall automatically apply thereto and such Debtor shall give to the Secured Party prompt written notice thereof.  Each Debtor hereby authorizes the Secured Party to modify this Agreement by amending Schedules III, IV and V , as applicable, to include any such registered Copyrights or any such Patents and Trademarks.  Each Debtor shall have the duty (i) to prosecute diligently any patent, trademark, or service mark applications pending as of the date hereof or hereafter, (ii) to make application on unpatented but patentable inventions and on trademarks, copyrights and service marks, as appropriate, (iii) to preserve and maintain all rights in the Copyrights, Patents and Trademarks, to the extent material to the operations of the business of such Debtor and (iv) to ensure that the Copyrights, Patents and Trademarks are and remain enforceable, to the extent material to the operations of the business of such Debtor.  Any expenses incurred in connection with such Debtor’s obligations under this Section 4.1(f) shall be borne by such Debtor.  Except for any such items that a Debtor reasonably believes (using prudent industry customs and practices) are no longer necessary for the on-going operations of its business, no Debtor shall abandon any right to file a patent, trademark or service mark

 

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application, or abandon any pending patent, trademark or service mark application or any other Copyright, Patent or Trademark without the written consent of the Secured Party, which consent shall not be unreasonably withheld.

(g)

Further Identification of Collateral .  Each Debtor will, when and as often as requested by the Secured Party or its Representative, furnish to the Secured Party or its Representative, statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Secured Party or its Representative may reasonably request, all in reasonable detail.

(h)

Investment Property .  Each Debtor will take any and all actions required or requested by the Secured Party, from time to time, to (i) cause the Secured Party to obtain exclusive control of any Investment Property owned by such Debtor in a manner acceptable to the Secured Party and (ii) obtain from any issuers of Investment Property and such other Persons, for the benefit of the Secured Party, written confirmation of the Secured Party’s control over such Investment Property.  For purposes of this Section 4.1(h) , the Secured Party shall have exclusive control of Investment Property if (i) such Investment Property consists of certificated securities and a Debtor delivers such certificated securities to the Secured Party (with appropriate endorsements if such certificated securities are in registered form); (ii) such Investment Property consists of uncertificated securities and either (x) a Debtor delivers such uncertificated securities to the Secured Party or (y) the issuer thereof agrees, pursuant to documentation in form and substance satisfactory to the Secured Party, that it will comply with instructions originated by the Secured Party without further consent by such Debtor, and (iii) such Investment Property consists of security entitlements and either (x) the Secured Party becomes the entitlement holder thereof or (y) the appropriate securities intermediary agrees, pursuant to the documentation in form and substance satisfactory to the Secured Party, that it will comply with entitlement orders originated by the Secured Party without further consent by any Debtor.

(i)

Reserved .  

(j)

Commercial Tort Claims .  Each Debtor shall promptly notify the Secured Party of any Commercial Tort Claim acquired by it that concerns a claim in excess of $10,000 and unless otherwise consented to by the Secured Party, such Debtor shall enter into a supplement to this Agreement granting to the Secured Party a Lien on and security interest in such Commercial Tort Claim.

4.2   Other Liens .  The Debtors will not create, permit or suffer to exist, and will defend the Collateral against and take such other action as is necessary to remove, any Lien on the Collateral except Permitted Liens, and will defend the right, title and interest of the Secured Party in and to the Collateral and in and to all Proceeds thereof against the claims and demands of all Persons whatsoever.

 

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4.3   Preservation of Rights .  Whether or not any Event of Default has occurred or is continuing, the Secured Party and its Representative may, but shall not be required to, take any steps the Secured Party or its Representative deems necessary or appropriate to preserve any Collateral or any rights against third parties to any of the Collateral, including obtaining insurance for the Collateral at any time when such Debtor has failed to do so, and the Debtors shall promptly pay, or reimburse the Secured Party for, all expenses incurred in connection therewith.

4.4   Formation of Subsidiaries; Name Change; Location; Bailees .

(a)

No Debtor shall form or acquire any subsidiary unless (i) such Debtor pledges all of the stock of such subsidiary to the Secured Party (in the case of the Company, pursuant to the existing pledge agreement by the Company in favor of the Secured Party or, with respect to a Debtor other than Company, pursuant to a pledge agreement in form and substance acceptable to the Secured Party), (ii) such subsidiary becomes a party to this Agreement and all other applicable Security Documents and (iii) the formation or acquisition of such Subsidiary is not prohibited by the terms of the Transaction Documents.

(b