Exhibit 10.5
SECURITY AND PLEDGE AGREEMENT
(Tasty Fries, Inc.)
1. Identification.
This Security and Pledge Agreement (the "Agreement"), dated as of January
___, 2005, is entered into by and between Tasty Fries, Inc., a Nevada
corporation ("Debtor"), and , as collateral agent acting in the manner and to
the extent described in the Collateral Agent Agreement defined below (the
"Collateral Agent"), for the benefit of the parties identified on Schedule A
hereto (collectively, the "Lenders").
2. Recitals.
2.1 The Lenders have made or are making loans and will make additional
loans to Debtor (the "Loans"). It is beneficial to Debtor that the Loans were
made, are being made and will be made.
2.2 The Loans are evidenced by certain variable interest rate convertible
promissory notes (each a "Convertible Note") issued by Debtor on or about the
date of this Agreement and issuable after the date of this Agreement, pursuant
to subscription agreements (each a "Subscription Agreement") to which Debtor and
Lenders are parties. The Notes are further identified on Schedule A hereto and
were and will be executed by Debtor as "Borrower" or "Debtor" for the benefit of
each Lender as the "Holder" or "Lender" thereof.
2.3 In consideration of the Loans made by Lenders to Debtor and for other
good and valuable consideration, and as security for the performance by Debtor
of its obligations under the Notes and as security for the repayment of the
Loans and all other sums due from Debtor to Lenders arising under the Notes
presently outstanding or to be outstanding in the future, Subscription
Agreements, and any other agreement between or among them (collectively, the
"Obligations"), Debtor, for good and valuable consideration, receipt of which is
acknowledged, has agreed to grant to the Collateral Agent, for the benefit of
the Lenders, a security interest in the Collateral (as such term is hereinafter
defined), on the terms and conditions hereinafter set forth. Obligations include
all future advances by Lenders to Debtor advanced on a pro rata basis by all
Lenders on substantially the same terms.
2.4 The Lenders have appointed as Collateral Agent pursuant to that
certain Collateral Agent Agreement dated at or about January ____, 2005
("Collateral Agent Agreement"), among the Lenders and Collateral Agent.
2.5 The following defined terms which are defined in the Uniform
Commercial Code in effect in the State of New York on the date hereof are used
herein as so defined: Accounts, Chattel Paper, Documents, Equipment, General
Intangibles, Instruments, Inventory and Proceeds.
3. Grant of General Security Interest in Collateral.
3.1 As security for the Obligations of Debtor, Debtor hereby grants the
Collateral Agent, for the benefit of the Lenders, a security interest in the
Collateral.
3.2 "Collateral" shall mean all of the following property of Debtor:
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(A) All now owned and hereafter acquired right, title and interest
of Debtor in, to and in respect of all Accounts, Goods, real or personal
property, all present and future books and records relating to the foregoing and
all products and Proceeds of the foregoing, and as set forth below:
(i) Accounts: All now owned and hereafter acquired right,
title and interest of Debtor in, to and in respect of all: Accounts, interests
in goods represented by Accounts, returned, reclaimed or repossessed goods with
respect thereto and rights as an unpaid vendor; contract rights; Chattel Paper;
investment property; General Intangibles (including but not limited to, tax and
duty claims and refunds, registered and unregistered patents, trademarks,
service marks, certificates, copyrights trade names, applications for the
foregoing, trade secrets, goodwill, processes, drawings, blueprints, customer
lists, licenses, whether as licensor or licensee, chooses in action and other
claims, and existing and future leasehold interests in equipment, real estate
and fixtures); Documents; Instruments; letters of credit, bankers' acceptances
or guaranties; cash moneys, deposits; securities, bank accounts, deposit
accounts, credits and other property now or hereafter owned or held in any
capacity by Debtor including the right to acquire any of the foregoing by way of
option, right, entitlement or agreement, as well as its affiliates, agreements
or property securing or relating to any of the items referred to above;
(ii) Goods: All now owned and hereafter acquired right, title
and interest of Debtor in, to and in respect of goods, including, but not
limited to:
(a) All Inventory, wherever located, whether now owned
or hereafter acquired, of whatever kind, nature or description, including all
raw materials, work-in-process, finished goods, and materials to be used or
consumed in Debtor' business; and all names or marks affixed to or to be affixed
thereto for purposes of selling same by the seller, manufacturer, lessor or
licensor thereof and all Inventory which may be returned to Debtor by its
customers or repossessed by Debtor and all of Debtor' right, title and interest
in and to the foregoing (including all of Debtor' rights as a seller of goods);
(b) All Equipment and fixtures, wherever located,
whether now owned or hereafter acquired, including, without limitation, all
machinery, motor vehicles, furniture and fixtures, and any and all additions,
substitutions, replacements (including spare parts), and accessions thereof and
thereto (including, but not limited to Debtor' rights to acquire any of the
foregoing, whether by exercise of a purchase option or otherwise);
(iii) Property: All now owned and hereafter acquired right,
title and interests of Debtor in, to and in respect of any real or other
personal property in or upon which Debtor has or may hereafter have a security
interest, lien or right of setoff;
(iv) Books and Records: All present and future books and
records relating to any of the above including, without limitation, all computer
programs, printed output and computer readable data in the possession or control
of the Debtor, any computer service bureau or other third party; and
(v) Products and Proceeds: All products and Proceeds of the
foregoing in whatever form and wherever located, including, without limitation,
all insurance proceeds and all claims against third parties for loss or
destruction of or damage to any of the foregoing.
(B) All now owned and hereafter acquired right, title and interest
of Debtor in, to and in respect of the following:
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(i) the shares of stock, partnership interests, member
interests or other equity interests at any time and from time to time acquired
by Debtor of any and all entities now or hereafter existing, all or a portion of
such stock or other equity interests which are acquired by such entities at any
time (such entities, together with the existing issuers, being hereinafter
referred to collectively as the "Pledged Issuers" and individually as a "Pledged
Issuer"), the certificates representing such shares, partnership interests,
member interests or other interests all options and other rights, contractual or
otherwise, in respect thereof and all dividends, distributions, cash,
instruments, investment property and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of such shares, partnership interests, member interests or other interests;
(ii) all additional shares of stock, partnership interests,
member interests or other equity interests from time to time acquired by Debtor,
of any Pledged Issuer, the certificates representing such additional shares, all
options and other rights, contractual or otherwise, in respect thereof and all
dividends, distributions, cash, instruments, investment property and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such additional shares, interests or
equity; and
(iii) all security entitlements of Debtor in, and all Proceeds
of any and all of the foregoing in each case, whether now owned or hereafter
acquired by Debtor and howsoever its interest therein may arise or appear
(whether by ownership, security interest, lien, claim or otherwise).
3.3 Collateral shall not include United States Patent Number 5,537,915.
3.4 The Collateral Agent is hereby specifically authorized, after the
Maturity Date (defined in the Notes) accelerated or otherwise, or after an Event
of Default (as defined herein) and the expiration of any applicable cure period,
to transfer any Collateral into the name of the Collateral Agent and to take any
and all action deemed advisable to the Collateral Agent to remove any transfer
restrictions affecting the Collateral.
4. Perfection of Security Interest.
4.1 Debtor shall prepare, execute and deliver to the Collateral Agent
UCC-1 Financing Statements. The Collateral Agent is instructed to prepare and
file at Debtor's cost and expense, financing statements in such jurisdictions
deemed advisable to the Collateral Agent, including but not limited to Nevada
and Pennsylvania. The Financing Statements are deemed to have been filed for the
benefit of the Collateral Agent and Lenders identified on Schedule A hereto.
4.2 All other certificates and instruments constituting Collateral from
time to time required to be pledged to Collateral Agent pursuant to the terms
hereof (the "Additional Collateral") shall be delivered to Collateral Agent
promptly upon receipt thereof by or on behalf of Debtor. All such certificates
and instruments shall be held by or on behalf of Collateral Agent pursuant
hereto and shall be delivered in suitable form for transfer by delivery, or
shall be accompanied by duly executed instruments of transfer or assignment or
undated stock powers executed in blank, all in form and substance satisfactory
to Collateral Agent. If any Collateral consists of uncertificated securities,
unless the immediately following sentence is applicable thereto, Debtor shall
cause Collateral Agent (or its custodian, nominee or other designee) to become
the registered holder thereof, or cause each issuer of such securities to agree
that it will comply with instructions originated by Collateral Agent with
respect to such securities without further consent by Debtor. If any Collateral
consists of security entitlements, Debtor shall transfer such security
entitlements to Collateral Agent (or its custodian, nominee or other designee)
or cause the applicable securities
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intermediary to agree that it will comply with entitlement orders by Collateral
Agent without further consent by Debtor.
4.3 Within five (5) days after the receipt by Debtor of any Additional
Collateral, a Pledge Amendment, duly executed by Debtor, in substantially the
form of Annex I hereto (a "Pledge Amendment"), shall be delivered to Collateral
Agent in respect of the Additional Collateral to be pledged pursuant to this
Agreement. Debtor hereby authorizes Collateral Agent to attach each Pledge
Amendment to this Agreement and agrees that all certificates or instruments
listed on any Pledge Amendment delivered to Collateral Agent shall for all
purposes hereunder constitute Collateral.
4.4 If Debtor shall receive, by virtue of Debtor's being or having been an
owner of any Collateral, any (i) stock certificate (including, without
limitation, any certificate representing a stock dividend or distribution in
connection with any increase or reduction of capital, reclassification, merger,
consolidation, sale of assets, combination of shares, stock split, spin-off or
split-off), promissory note or other instrument, (ii) option or right, whether
as an addition to, substitution for, or in exchange for, any Collateral, or
otherwise, (iii) dividends payable in cash (except such dividends permitted to
be retained by Debtor pursuant to Section 5.2 hereof) or in securities or other
property or (iv) dividends or other distributions in connection with a partial
or total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in surplus, Debtor shall receive such stock
certificate, promissory note, instrument, option, right, payment or distribution
in trust for the benefit of Collateral Agent, shall segregate it from Debtor's
other property and shall deliver it forthwith to Collateral Agent, in the exact
form received, with any necessary endorsement and/or appropriate stock powers
duly executed in blank, to be held by Collateral Agent as Collateral and as
further collateral security for the Obligations.
5. Distribution on Liquidation.
5.1 If any sum is paid as a liquidating distribution on or with respect to
the Collateral, Debtor shall deliver same to the Collateral Agent to be applied
to the Obligations, then due, in accordance with the terms of the Convertible
Notes.
5.2 So long as no Event of Default exists, Debtor shall be entitled (i) to
exercise all voting power pertaining to any of the Collateral, provided such
exercise is not contrary to the interests of the Lenders and does not impair the
Collateral and (ii) may receive and retain any and all dividends, interest
payments or other distributions paid in respect of the Collateral.
5.3. Upon the occurrence and during the continuation of an Event of
Default, all rights of Debtor, upon notice given by Collateral Agent, to
exercise the voting power and receive payments, which it would otherwise be
entitled to pursuant to Section 5.2, shall cease and all such rights shall
thereupon become vested in Collateral Agent, which shall thereupon have the sole
right to exercise such voting power and receive such payments.
5.4 All dividends, distributions, interest and other payments which are
received by Debtor contrary to the provisions of Section 5.3 shall be received
in trust for the benefit of Collateral Agent, shall be segregated from other
funds of Debtor, and shall be forthwith paid over to Collateral Agent as
Collateral in the exact form received with any necessary endorsement and/or
appropriate stock powers duly executed in blank, to be held by Collateral Agent
as Collateral and as further collateral security for the Obligations.
6. Further Action By Debtor; Covenants and Warranties.
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6.1 Collateral Agent at all times shall have a perfected security interest
in the Collateral. Subject to the security interests described herein, Debtor
has and will continue to have full title to the Collateral free from any liens,
leases, encumbrances, judgments or other claims. Collateral Agent's security
interest in the Collateral constitutes and will continue to constitute a first,
prior and indefeasible security interest in favor of Collateral Agent. Debtor
will do all acts and things, and will execute and file all instruments
(including, but not limited to, security agreements, financing statements,
continuation statements, etc.) reasonably requested by Collateral Agent to
establish, maintain and continue the perfected security interest of Collateral
Agent in the Collateral, and will promptly on demand, pay all costs and expenses
of filing and recording, including the costs of any searches reasonably deemed
necessary by Collateral Agent from time to time to establish and determine the
validity and the continuing priority of the security interest of Collateral
Agent, and also pay all other claims and charges that, in the opinion of
Collateral Agent, exercised in good faith, are reasonably likely to materially
prejudice, imperil or otherwise affect the Collateral or Collateral Agent's or
Lenders' security interests therein.
6.2 Other than in the ordinary course of business, and except for
Collateral which is substituted by assets of identical or greater value or which
has become obsolete or is of inconsequential in value, Debtor will not sell,
transfer, assign or pledge those items of Collateral (or allow any such items to
be sold, transferred, assigned or pledged), without the prior written consent of
Collateral Agent other than a transfer of the Collateral to a wholly-owned
subsidiary on prior notice to Collateral Agent, and provided the Collateral
remains subject to the security interest herein described. Although Proceeds of
Collateral are covered by this Agreement, this shall not be construed to mean
that Collateral Agent consents to any sale of the Collateral, except as provided
herein. Sales of Collateral in the ordinary course of business shall be free of
the security interest of Lenders and Collateral Agent and Lenders and Collateral
Agent shall promptly execute such documents (including without limitation
releases and termination statements) as may be required by Debtor to evidence or
effectuate the same.
6.3 Debtor will, at all reasonable times and upon reasonable notice, allow
Collateral Agent or its representatives free and complete access to the
Collateral and all of Debtor's records which in any way relate to the
Collateral, for such inspection and examination as Collateral Agent reasonably
deems necessary.
6.4 Debtor, at its sole cost and expense, will protect and defend this
Security Agreement, all of the rights of Collateral Agent and Lenders hereunder,
and the Collateral against the claims and demands of all other persons.
6.5 Debtor will promptly notify Collateral Agent of any levy, distraint or
other seizure by legal process or otherwise of any part of the Collateral, and
of any threatened or filed claims or proceedings that are reasonably likely to
affect or impair any of the rights of Collateral Agent under this Security
Agreement in any material respect.
6.6 Debtor, at its own expense, will obtain and maintain in force
insurance policies covering losses or damage to those items of Collateral which
constitute physical personal property. The insurance policies to be obtained by
Debtor shall be in form and amounts reasonably acceptable to Collateral Agent.
Debtor shall make the Collateral Agent first a loss payee thereon to the extent
of its interest in the Collateral. Collateral Agent is hereby irrevocably (until
the Obligations are paid in full) appointed Debtor' attorney-in-fact to endorse
any check or draft that may be payable to Debtor so that Collateral Agent may
collect the proceeds payable for any loss under such insurance. The proceeds of
such insurance (subject to the rights of senior secured parties), less any costs
and expenses incurred or paid by Collateral Agent in the collection thereof,
shall be applied either toward the cost of the repair or replacement of the
items damaged or destroyed, or on account of any sums secured hereby, whether or
not then due or payable.
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6.7 Collateral Agent may, at its option, and without any obligation to do
so, pay, perform and discharge any and all amounts, costs, expenses and
liabilities herein agreed to be paid or performed by Debtor. Upon Debtor's
failure to do so, all amounts expended by Collateral Agent in so doing shall
become part of the Obligations secured hereby, and shall be immediately due and
payable by Debtor to Collateral Agent upon demand and shall bear interest at the
lesser of 15% per annum or the highest legal amount from the dates of such
expenditures until paid.
6.8 Upon the request of Collateral Agent, Debtor will furnish to
Collateral Agent within five (5) business days thereafter, or to any proposed
assignee of this Security Agreement, a written statement in form reasonably
satisfactory to Collateral Agent, duly acknowledged, certifying the amount of
the principal and interest and any other sum then owing under the Obligations,
whether to its knowledge any claims, offsets or defenses exist against the
Obligations or against this Security Agreement, or any of the terms and
provisions of any other agreement of Debtor securing the Obligations. In
connection with any assignment by Collateral Agent of this Security Agreement,
Debtor hereby agrees to cause the insurance policies required hereby to be
carried by Debtor, if any, to be endorsed in form satisfactory to Collateral
Agent or to such assignee, with loss payable clauses in favor of such assignee,
and to cause such endorsements to be delivered to Collateral Agent within ten
(10) calendar days after request therefor by Collateral Agent.
6.9 Debtor will, at its own expense, make, execute, endorse, acknowledge,
file and/or deliver to the Collateral Agent from time to time such vouchers,
invoices, schedules, confirmatory assignments, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates, reports and
other reasonable assurances or instruments and take further steps relating to
the Collateral and other property or rights covered by the security interest
hereby granted, as the Collateral Agent may reasonably require to perfect its
security interest hereunder.
6.10 Debtor represents and warrants that it is the true and lawful
exclusive owner of the Collateral, free and clear of any liens and encumbrances.
6.11 Debtor hereby agrees not to divest itself of any right under the
Collateral except as permitted herein absent prior written approval of the
Collateral Agent, except to a subsidiary organized and located in the United
States on prior notice to Collateral Agent provided the Collateral remains
subject to the security interest herein described.
6.12 Debtor shall cause each Subsidiary of Debtor not in existence on the
date hereof to execute and deliver to Collateral Agent promptly and in any event
within 10 days after the formation, acquisition or change in status thereof (A)
a guaranty guaranteeing the Obligations and (B) a security and pledge agreement
substantially in the form of this Agreement together with (x) certificates
evidencing all of the capital stock of any entity owned by such Subsidiary, (y)
undated stock powers executed in blank with signature guaranteed, and (z) such
opinion of counsel and such approving certificate of such Subsidiary as
Collateral Agent may reasonably request in respect of complying with any legend
on any such certificate or any other matter relating to such shares and (E) such
other agreements, instruments, approvals, legal opinions or other documents
reasonably requested by Collateral Agent in order to create, perfect, establish
the first priority of or otherwise protect any lien purported to be covered by
any such pledge and security agreement or otherwise to effect the intent that
all property and assets of such Subsidiary shall become Collateral for the
Obligations. For purposes of this Agreement, "Subsidiary" means, with respect to
any entity at any date, any corporation, limited or general partnership, limited
liability company, trust, estate, association, joint venture or other business
entity) of which more than 50% of (A) the outstanding capital stock having (in
the absence of contingencies) ordinary voting power to elect a majority of the
board of directors or other managing body of such entity, (B) in the case of a
partnership
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or limited liability company, the interest in the capital or profits of such
partnership or limited liability company or (C) in the case of a trust, estate,
association, joint venture or other entity, the beneficial interest in such
trust, estate, association or other entity business is, at the time of
determination, owned or controlled directly or indirectly through one or more
intermediaries, by such entity.
7. Power of Attorney.
After the occurrence and during the uncured continuation of an Event of
Default as defined in Section 9 below, Debtor hereby irrevocably constitutes and
appoints the Collateral Agent as the true and lawful attorney of Debtor, with
full power of substitution, in the place and stead of Debtor and in the name of
Debtor or otherwise, at any time or times, in the discretion of the Collateral
Agent, to take any action and to execute any instrument or document which the
Collateral Agent may deem necessary or advisable to accomplish the purposes of
this Agreement. This power of attorney is coupled with an interest and is
irrevocable until the Obligations are satisfied.
8. Performance By The Collateral Agent.
If Debtor fails to perform any material covenant, agreement, duty or
obligation of Debtor under this Agreement, the Collateral Agent may, after any
applicable cure period, at any time or times in its discretion, take action to
effect performance of such obligation. All reasonable expenses of the Collateral
Agent incurred in connection with the foregoing authorization shall be payable
by Debtor as provided in Paragraph 12.1 hereof. No discretionary right, remedy
or power granted to the Collateral Agent under any part of this Agreement shall
be deemed to impose any obligation whatsoever on the Collateral Agent with
respect thereto, such rights, remedies and powers being solely for the
protection of the Collateral Agent.
9. Event of Default.
An event of default ("Event of Default") shall be deemed to have occurred
hereunder upon the occurrence of any event of default as defined and described
in this Agreement, in the Notes, Subscription Agreement, and any other agreement
to which Debtor and a Lender are parties. Upon and after any Event of Default,
after the applicable cure period, if any, any or all of the Obligations shall
become immediately due and payable at the option of the Collateral Agent, for
the benefit of the Lenders, and the Collateral Agent may dispose of Collateral
as provided below. A default by Debtor of any of its material obligations
pursuant to this Agreement shall be an Event of Default hereunder and an event
of default as defined in the Notes, and Subscription Agreement.
10. Disposition of Collateral.
Upon and after any Event of Default which is then continuing,
10.1 The Collateral Agent may exercise its rights with respect to each and
every component of the Collateral, without regard to the existence of any other
security or source of payment for the Obligations. In addition to other rights
and remedies provided for herein or otherwise available to it, the Collateral
Agent shall have all of the rights and remedies of a lender on default under the
Uniform Commercial Code then in effect in the State of New York.
10.2 If any notice to Debtor of the sale or other disposition of
Collateral is required by then applicable law, five business (5) days prior
written notice (which Debtor agrees is reasonable notice within the meaning of
Section 9.612(a) of the Uniform Commercial Code) shall be given to Debtor of the
time and place of any sale of Collateral which Debtor hereby agrees may be by
private sale. The rights granted
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in this Section are in addition to any and all rights available to Collateral
Agent under the Uniform Commercial Code.
10.3 The Collateral Agent is authorized, at any such sale, if the
Collateral Agent deems it advisable to do so, in order to comply with any
applicable securities laws, to restrict the prospective bidders or purchasers to
persons who will represent and agree, among other things, that they are
purchasing the Collateral for their own account for investment, and not with a
view to the distribution or resale thereof, or otherwise to restrict such sale
in such other manner as the Collateral Agent deems advisable to ensure such
compliance. Sales made subject to such restrictions shall be deemed to have been
made in a commercially reasonable manner.
10.4 All proceeds received by the Collateral Agent for the benefit of the
Lenders in respect of any sale, collection or other enforcement or disposition
of Collateral, shall be applied (after deduction of any amounts payable to the
Collateral Agent pursuant to Paragraph 12.1 hereof) against the Obligations pro
rata among the Lenders in proportion to their interests in the Obligations. Upon
payment in full of all Obligations, Debtor shall be entitled to the return of
all Collateral, including cash, which has not been used or applied toward the
payment of Obligations or used or applied to any and all costs or expenses of
the Collateral Agent incurred in connection with the liquidation of the
Collateral (unless another person is legally entitled thereto). Any assignment
of Collateral by the Collateral Agent to Debtor shall be without representation
or warranty of any nature whatsoever and wholly without recourse. To the extent
allowed by law, each Lender may purchase the Collateral and pay for such
purchase, in part, by offsetting up to such Lender's pro rata portion of the
proceeds of the Collateral.
11. Waiver of Automatic Stay. Debtor acknowledges and agrees that should a
proceeding under any bankruptcy or insolvency law be commenced by or against
Debtor, or if any of the Collateral should become the subject of any bankruptcy
or insolvency proceeding, then the Collateral Agent should be entitled to, among
other relief to which the Collateral Agent or Lenders may be entitled under the
Note, Subscription Agreement and any other agreement to which the Debtor,
Lenders or Collateral Agent are parties, (collectively "Loan Documents") and/or
applicable law, an order from the court granting immediate relief from the
automatic stay pursuant to 11 U.S.C. Section 362 to permit the Collateral Agent
to exercise all of its rights and remedies pursuant to the Loan Documents and/or
applicable law. Debtor EXPRESSLY WAIVES THE BENEFIT OF THE AUTOMATIC STAY
IMPOSED BY 11 U.S.C. SECTION 362. FURTHERMORE, Debtor EXPRESSLY ACKNOWLEDGES AND
AGREES THAT NEITHER 11 U.S.C. SECTION 362 NOR ANY OTHER SECTION OF THE
BANKRUPTCY CODE OR OTHER STATUTE OR RULE (INCLUDING, WITHOUT LIMITATION, 11
U.S.C. SECTION 105) SHALL STAY, INTERDICT, CONDITION, REDUCE OR INHIBIT IN ANY
WAY THE ABILITY OF THE COLLATERAL AGENT TO ENFORCE ANY OF ITS RIGHTS AND
REMEDIES UNDER THE LOAN DOCUMENTS AND/OR APPLICABLE LAW. Debtor hereby consents
to any motion for relief from stay which may be filed by the Collateral Agent in
any bankruptcy or insolvency proceeding initiated by or against Debtor, and
further agrees not to file any opposition to any motion for relief from stay
filed by the Collateral Agent. Debtor represents, acknowledges and agrees that
this provision is a specific and material aspect of this Agreement, and that the
Collateral Agent would not agree to the terms of this Agreement if this waiver
were not a part of this Agreement. Debtor further represents, acknowledges and
agrees that this waiver is knowingly, intelligently and voluntarily made, that
neither the Collateral Agent nor any person acting on behalf of the Collateral
Agent has made any representations to induce this waiver, that Debtor has been
represented (or has had the opportunity to be represented) in the signing of
this Agreement and in the making of this waiver by independent legal counsel
selected by Debtor and that Debtor has had the opportunity to discuss this
waiver with counsel. Debtor further agrees that any bankruptcy or insolvency
proceeding initiated by Debtor will only be brought in the Federal Court within
the Southern District of New York.
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12. Miscellaneous.
12.1 Expenses. Debtor shall pay to the Collateral Agent, on demand, the
amount of any and all reasonable expenses, including, without limitation,
attorneys' fees, legal expenses and brokers' fees, which the Collateral Agent
may incur in connection with (a) sale, collection or other enforcement or
disposition of Collateral; (b) exercise or enforcement of any the rights,
remedies or powers of the Collateral Agent hereunder or with respect to any or
all of the Obligations upon breach or threatened breach; or (c) failure by
Debtor to perform and observe any agreements of Debtor contained herein which
are performed by the Collateral Agent.
12.2 Waivers, Amendment and Remedies. No course of dealing by the
Collateral Agent and no failure by the Collateral Agent to exercise, or delay by
the Collateral Agent in exercising, any right, remedy or power hereunder shall
operate as a waiver thereof, and no single or partial exercise thereof shall
preclude any other or further exercise thereof or the exercise of any other
right, remedy or power of the Collateral Agent. No amendment, modification or
waiver of any provision of this Agreement and no consent to any departure by
Debtor therefrom, shall, in any event, be effective unless contained in a
writing signed by the Collateral Agent, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. The rights, remedies and powers of the Collateral Agent, not only
hereunder, but also under any instruments and agreements evidencing or securing
the Obligations and under applicable law are cumulative, and may be exercised by
the Collateral Agent from time to time in such order as the Collateral Agent may
elect.
12.3 Notices. All notices or other communications given or made hereunder
shall be in writing and shall be personally delivered or deemed delivered the
first business day after being faxed (provided that a copy is delivered by first
class mail) to the party to receive the same at its address set forth below or
to such other address as either party shall hereafter give to the other by
notice duly made under this Section:
To Debtor: Tasty Fries, Inc.
650 Sentry Parkway, Suite 1
Blue Bell, PA 19422
Attn: Edward Kelly, CEO
Fax: (610) 941-2108
With a copy by telecopier only to:
Louis Kelly, Esq.
650 Sentry Parkway, Suite 1
Blue Bell, PA 19422
Fax: (610) 941-2108
To Lenders: To the addresses and telecopier numbers
set forth on Schedule A
To the Collateral Agent:
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Any party may change its address by written notice in accordance with this
paragraph.
12.4 Term; Binding Effect. This Agreement shall (a) remain in full force
and effect until payment and satisfaction in full of all of the Obligations; (b)
be binding upon Debtor, and its successors and permitted assigns; and (c) inure
to the benefit of the Collateral Agent, for the benefit of the Lenders and their
respective successors and assigns. All the rights and benefits granted by Debtor
to the Collateral Agent and Lenders in the Loan Documents and other agreements
and documents delivered in connection therewith are deemed granted to both the
Collateral Agent and Lenders.
12.5 Captions. The captions of Paragraphs, Articles and Sections in this
Agreement have been included for convenience of reference only, and shall not
define or limit the provisions hereof and have no legal or other significance
whatsoever.
12.6 Governing Law; Venue; Severability. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York without
regard to conflicts of laws principles that would result in the application of
the substantive laws of another jurisdiction, except to the extent that the
perfection of the security interest granted hereby in respect of any item of
Collateral may be governed by the law of another jurisdiction. Any legal action
or proceeding against Debtor with respect to this Agreement may be brought in
the courts in the State of New York or of the United States for the Southern
District of New York, and, by execution and delivery of this Agreement, Debtor
hereby irrevocably accepts for itself and in respect of its property, generally
and unconditionally, the jurisdiction of the aforesaid courts. Debtor hereby
irrevocably waives any objection which they may now or hereafter have to the
laying of venue of any of the aforesaid actions or proceedings arising out of or
in connection with this Agreement brought in the aforesaid courts and hereby
further irrevocably waives and agrees not to plead or claim in any such court
that any such action or proceeding brought in any such court has been brought in
an inconvenient forum. If any provision of this Agreement, or the application
thereof to any person or circumstance, is held invalid, such invalidity shall
not affect any other provisions which can be given effect without the invalid
provision or application, and to this end the provisions hereof shall be
severable and the remaining, valid provisions shall remain of full force and
effect.
12.7 Counterparts/Execution. This Agreement may be executed in any number
of counterparts and by the different signatories hereto on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument. This
Agreement may be executed by facsimile signature and delivered by facsimile
transmission.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned have executed and delivered this
Security Agreement, as of the date first written above.
"DEBTOR" "THE COLLATERAL AGENT"
TASTY FRIES, INC.
a Nevada corporation
By: ________________________________ ____________________________________
Its: _______________________________
APPROVED BY "LENDERS":
____________________________________ ____________________________________
____________________________________ ____________________________________
This Security Agreement may be signed by facsimile signature and
delivered by confirmed facsimile transmission.
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SCHEDULE A TO SECURITY AND PLEDGE AGREEMENT
- --------------------------------------------------------------------------------
LENDER INITIAL CLOSING SECOND CLOSING NOTE
NOTE (INITIAL (SECOND CLOSING
CLOSING PURCHASE PURCHASE PRICE)
PRICE)
- --------------------------------------------------------------------------------
$350,000.00 $420,000.00
- --------------------------------------------------------------------------------
$125,000.00 $150,000.00
- --------------------------------------------------------------------------------
$25,000.00 $30,000.00
- --------------------------------------------------------------------------------
TOTALS $500,000.00 $600,000.00
- --------------------------------------------------------------------------------
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ANNEX I
TO
SECURITY AND PLEDGE AGREEMENT
PLEDGE AMENDMENT
This Pledge Amendment, dated _________ __ 200_, is delivered pursuant to
Section 4.3 of the Security and Pledge Agreement referred to below. The
undersigned hereby agrees that this Pledge Amendment may be attached to the
Security and Pledge Agreement, dated January ___, 2005, as it may heretofore
have been or hereafter may be amended, restated, supplemented or otherwise
modified from time to time and that the shares listed on this Pledge Amendment
shall be hereby pledged and assigned to Collateral Agent and become part of the
Collateral referred to in such Security and Pledge Agreement and shall secure
all of the Obligations referred to in such Security and Pledge Agreement.
- --------------------------------------------------------------------------------
Number Certificate
Name of Issuer of Shares Class Number(s)
- -------------- --------- ----- ---------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TASTY FRIES, INC.
By: _____________________________
Edward Kelly
President and CEO
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