SECURITY AGREEMENT
Dated as of April 19, 2022
between
TORCHLIGHT U.S. HOLDINGS, INC.
a Delaware corporation
as Grantor
and
NORTHERN DOMINION TRUST COMPANY
a national banking association
as Collateral Agent
________________________________________
Executed in connection with the Indenture dated as of April 19, 2022 among Torchlight Mining Corp. (as Issuer), the Guarantors party thereto, and Northern Dominion Trust Company (as Trustee and Collateral Agent), governing the 8.750% Senior Secured Notes due 2029 ($300,000,000 aggregate principal amount)
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SECURITY AGREEMENT
This SECURITY AGREEMENT (this "Agreement" or "Security Agreement") is dated as of April 19, 2022, and entered into by and between:
TORCHLIGHT U.S. HOLDINGS, INC., a corporation duly organized and existing under the laws of the State of Delaware, with its registered office at 1209 Orange Street, Wilmington, Delaware 19801, and Employer Identification Number 84-3921057 (the "Grantor"),
and
NORTHERN DOMINION TRUST COMPANY, a national banking association organized and existing under the laws of the United States of America, acting in its capacity as Collateral Agent, with its Corporate Trust Office at 101 Barclay Street, 7th Floor, New York, New York 10286 (together with its successors and assigns in such capacity, the "Collateral Agent").
RECITALS
WHEREAS:
A. Torchlight Mining Corp., a corporation incorporated under the Canada Business Corporations Act (the "Issuer"), Wolverine Lake Mining Ltd., a corporation incorporated under the laws of the Province of Ontario, Torchlight Milling & Processing Inc., a corporation incorporated under the laws of the Province of Ontario, and Torchlight U.S. Holdings, Inc., a corporation organized under the laws of the State of Delaware (collectively, the "Guarantors"), and Northern Dominion Trust Company, a national banking association, acting as trustee (in such capacity, the "Trustee") and as collateral agent (in such capacity, the "Collateral Agent"), have entered into that certain Indenture dated as of April 19, 2022 (as the same may be amended, restated, supplemented, or otherwise modified from time to time, the "Indenture"), governing the issuance by the Issuer of $300,000,000 in aggregate principal amount of 8.750% Senior Secured Notes due 2029 (the "Notes");
B. The Grantor is a wholly owned direct subsidiary of the Issuer and, in the ordinary course of its business, holds and administers U.S. offtake agreements, marketing contracts, and related commercial arrangements for the benefit of the Issuer and its subsidiaries, and the Grantor's operations are integral to the Issuer's consolidated business;
C. Pursuant to the Indenture and that certain Purchase Agreement dated as of March 29, 2022 (the "Purchase Agreement") among the Issuer, the Guarantors, and Kelvantis Capital Markets LLC, Prestige Barrington & Co., Inc., and Halcyon Securities Inc. (collectively, the "Initial Purchasers"), the Grantor has agreed to unconditionally guarantee, on a joint and several basis with the other Guarantors, all of the Issuer's obligations under the Notes and the Indenture on a senior secured basis (the "Guarantee");
D. It is a condition precedent to the issuance of the Notes under the Indenture and the purchase thereof by the Initial Purchasers under the Purchase Agreement that the Grantor execute and deliver this Security Agreement to the Collateral Agent, for the ratable benefit of the Holders of the Notes, granting a first-priority security interest in and lien upon substantially all of the assets of the Grantor to secure the Secured Obligations (as defined herein);
E. The Grantor will benefit directly and indirectly from the issuance of the Notes and the application of the net proceeds thereof, including (i) the funding of the Phase II expansion of the Wolverine Lake nickel-copper mine located in northern Ontario, Canada, (ii) the refinancing of existing indebtedness of the Issuer and its subsidiaries, (iii) the payment of fees and expenses incurred in connection with the offering of the Notes, and (iv) general corporate purposes, and the Grantor acknowledges that the execution and delivery of this Security Agreement is in its corporate interest and in the corporate interest of the Issuer and the consolidated group; and
F. Reference is made to the Collateral Agency Agreement dated as of April 19, 2022 (the "Collateral Agency Agreement") among the Issuer, the Guarantors, and Northern Dominion Trust Company, as Collateral Agent, which sets forth the terms and conditions governing the Collateral Agent's duties and responsibilities with respect to the Collateral and the enforcement of the security interests granted under this Agreement and the other Security Documents (as defined in the Indenture).
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises, the mutual covenants and agreements set forth herein, the issuance of the Notes, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Grantor, the Grantor hereby agrees with the Collateral Agent as follows:
ARTICLE I — DEFINITIONS AND INTERPRETATION
Section 1.01 — Defined Terms
All capitalized terms used and not otherwise defined in this Security Agreement shall have the respective meanings ascribed to such terms in the Indenture dated as of April 19, 2022 among the Issuer, the Guarantors, and the Trustee. In addition to the terms defined elsewhere in this Agreement, the following terms shall have the following meanings when used herein:
"Accounts" means all accounts (as such term is defined in Article 9 of the UCC), including all accounts receivable, payment rights, and rights to payment for goods sold, leased, licensed, assigned, or otherwise disposed of or for services rendered or to be rendered, whether or not earned by performance, including all offtake receivables and marketing contract receivables arising under offtake agreements and marketing contracts to which the Grantor is a party, and all rights associated with any of the foregoing, including rights to returned or repossessed goods and rights of stoppage in transit.
"Collateral" has the meaning set forth in Section 2.01 of this Agreement.
"Collateral Agent" means Northern Dominion Trust Company, a national banking association, in its capacity as collateral agent under this Agreement and under the Collateral Agency Agreement, together with its successors and assigns in such capacity.
"Deposit Accounts" means all deposit accounts (as such term is defined in Article 9 of the UCC) maintained by the Grantor at any bank, savings institution, credit union, or other financial institution, whether now existing or hereafter established.
"Documents" means all documents (as such term is defined in Article 9 of the UCC), including all bills of lading, dock warrants, dock receipts, warehouse receipts, and orders for the delivery of goods, and all other documents of title, whether negotiable or non-negotiable.
"Equipment" means all equipment (as such term is defined in Article 9 of the UCC), including all machinery, tools, vehicles, computer hardware, telecommunications equipment, furniture, fixtures, and other tangible personal property of every kind and description used or useful in the Grantor's business, together with all additions, accessions, attachments, components, parts, and accessories thereto and all replacements therefor.
"General Intangibles" means all general intangibles (as such term is defined in Article 9 of the UCC), including all payment intangibles, contract rights, options, warranties, indemnities, goodwill, customer and supplier lists, tax refunds, tax refund claims, rights and claims against any governmental authority, and any other intangible property of the Grantor of every kind and description.
"Goods" means all goods (as such term is defined in Article 9 of the UCC), including all Equipment, Inventory, fixtures, standing timber, unborn young of animals, crops grown, growing, or to be grown, and manufactured homes.
"Grantor" means Torchlight U.S. Holdings, Inc., a corporation organized and existing under the laws of the State of Delaware, with Employer Identification Number 84-3921057, and its successors and assigns.
"Indenture" means the Indenture dated as of April 19, 2022 among Torchlight Mining Corp. (as Issuer), the Guarantors party thereto, and Northern Dominion Trust Company (as Trustee and Collateral Agent), as the same may be amended, restated, supplemented, waived, or otherwise modified from time to time in accordance with its terms.
"intellectual Property" means, collectively, all Patents, Trademarks, Copyrights, Trade Secrets, and Licenses (each as defined in the Indenture or, if not defined therein, as commonly understood under applicable law), whether now owned or hereafter acquired by the Grantor, including all rights to sue for past, present, and future infringement, misappropriation, or other violation thereof, and all income, royalties, damages, and payments now or hereafter due and payable with respect thereto.
"Intercompany Notes" means all promissory notes, loan agreements, demand notes, revolving credit arrangements, and other instruments, agreements, or arrangements evidencing or giving rise to intercompany indebtedness owing to the Grantor by the Issuer or any affiliate or subsidiary of the Issuer, whether now existing or hereafter arising, together with all amendments, modifications, supplements, renewals, extensions, and replacements thereof.
"Inventory" means all inventory (as such term is defined in Article 9 of the UCC), including all raw materials, work in process, finished goods, goods in transit, goods held for sale or lease, returned goods, repossessed goods, and all materials used or consumed in the Grantor's business, including minerals, concentrates, and refined products.
"Investment Property" means all investment property (as such term is defined in Article 9 of the UCC), including all certificated and uncertificated securities, securities accounts, security entitlements, commodity contracts, commodity accounts, and all financial assets held in any securities account.
"Letter-of-Credit Rights" means all letter-of-credit rights (as such term is defined in Article 9 of the UCC), whether or not the Grantor is the beneficiary or nominated person under the related letter of credit.
"Notes" means the 8.750% Senior Secured Notes due 2029 in the aggregate principal amount of $300,000,000 issued by the Issuer under the Indenture, including (i) the Rule 144A Global Note (CUSIP: 891207 AA 3; ISIN: US891207AA38) and (ii) the Regulation S Global Note (CUSIP: C89120 AA 5; ISIN: USC89120AA58), and, in each case, any additional Notes issued under the Indenture from time to time.
"Permitted Liens" has the meaning given to such term in the Indenture.
"Pledged Equity" means 100% of the issued and outstanding equity interests (including common stock, preferred stock, membership interests, partnership interests, and all other ownership interests) in any subsidiary of the Grantor, whether now existing or hereafter acquired or formed, together with all distributions, dividends, cash, instruments, rights, options, warrants, 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 equity interests.
"Proceeds" means all proceeds (as such term is defined in Article 9 of the UCC), including (i) all cash proceeds and non-cash proceeds, (ii) all insurance proceeds payable by reason of loss or damage to or in respect of any Collateral, (iii) all distributions, dividends, interest, premiums, and other payments received on account of the Collateral, and (iv) all accessions to, substitutions and replacements for, and rents, profits, and products of, each item of Collateral.
"Secured Obligations" means, collectively, (i) all obligations of the Issuer under the Notes and the Indenture, (ii) all obligations of the Grantor under its Guarantee, (iii) all obligations of the Grantor under this Security Agreement, and (iv) all other obligations and liabilities of the Grantor to the Collateral Agent or the Holders of the Notes arising under or in connection with any Security Document, in each case including all principal, premium (if any), interest (including interest accruing after the filing of any petition in bankruptcy or the commencement of any insolvency, reorganization, or similar proceeding, regardless of whether such interest is an allowed claim in such proceeding), fees, charges, expenses, reimbursement obligations, indemnification obligations, and all other amounts payable thereunder or in respect thereof.
"Security Agreement" means this Security Agreement, as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with its terms.
"Supporting Obligations" means all supporting obligations (as such term is defined in Article 9 of the UCC), including all letters of credit, guarantees, suretyship agreements, and other credit support arrangements supporting or securing the payment or performance of any Collateral.
"UCC" means the Uniform Commercial Code as in effect from time to time in the State of New York; provided, however, that if the perfection or the effect of perfection or non-perfection or the priority of the Collateral Agent's security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, then "UCC" shall mean the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions hereof relating to such perfection, effect of perfection or non-perfection, or priority.
Section 1.02 — UCC Terms
Unless otherwise defined herein, terms used herein that are defined in Article 9 of the UCC (including "account debtor," "chattel paper," "commercial tort claim," "deposit account," "document," "electronic chattel paper," "equipment," "fixture," "general intangible," "goods," "instrument," "inventory," "investment property," "letter-of-credit right," "money," "proceeds," "securities account," "security entitlement," "software," and "supporting obligation") shall have the respective meanings given to such terms in Article 9 of the UCC.
Section 1.03 — Rules of Interpretation
In this Agreement, unless the context otherwise requires:
(a) References herein to the Indenture, the Purchase Agreement, the Collateral Agency Agreement, or any other agreement, instrument, or document shall mean such agreement, instrument, or document as the same may be amended, restated, supplemented, waived, or otherwise modified from time to time in accordance with its terms.
(b) The headings and captions of the Articles, Sections, Schedules, and Exhibits of this Agreement are inserted for convenience of reference only and shall not be deemed to constitute a part of this Agreement or to affect the construction or interpretation hereof.
(c) References to "Articles," "Sections," "Schedules," and "Exhibits" are to Articles, Sections, Schedules, and Exhibits of this Agreement, unless otherwise specified.
(d) Words importing the singular shall include the plural and vice versa, and words importing a gender shall include all genders.
(e) The word "including" (and correlative words such as "include" and "includes") shall mean "including without limitation" and shall not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it.
(f) References to any Person shall include such Person's successors and permitted assigns.
(g) References to "herein," "hereof," "hereunder," and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement.
(h) References to any law, statute, or regulation shall mean such law, statute, or regulation as amended, modified, codified, replaced, or reenacted, in whole or in part, and in effect from time to time, including rules, regulations, and orders promulgated thereunder.
ARTICLE II — GRANT OF SECURITY INTEREST
Section 2.01 — Grant
To secure the prompt and complete payment and performance of all Secured Obligations, the Grantor hereby pledges, assigns, hypothecates, and grants to the Collateral Agent, for the ratable benefit of the Holders of the Notes, a first-priority continuing security interest in and lien upon all of the Grantor's right, title, and interest in, to, and under the following property, in each case whether now owned or existing or hereafter acquired or arising and wherever located (collectively, the "Collateral"):
(a) Accounts. All Accounts, including all accounts receivable arising from or relating to offtake agreements, marketing contracts, and all other contracts, agreements, and arrangements to which the Grantor is a party, together with all rights, remedies, and privileges related thereto, including the right to make any demand, give any notice, or take any action in connection with the collection or enforcement thereof;
(b) Chattel Paper. All chattel paper, whether tangible chattel paper or electronic chattel paper (as such terms are defined in Article 9 of the UCC), including all right, title, and interest of the Grantor in and to each writing or group of writings that evidences both a monetary obligation and a security interest in or lease of specific goods;
(c) Deposit Accounts. All Deposit Accounts maintained by the Grantor, including all funds and amounts deposited therein, together with all interest, dividends, and other earnings thereon;
(d) Documents. All Documents, including all bills of lading, warehouse receipts, and other documents of title, whether negotiable or non-negotiable;
(e) Equipment. All Equipment, including all machinery, apparatus, tools, vehicles, computer hardware, telecommunications equipment, data processing equipment, furniture, furnishings, fixtures (to the extent constituting personal property), and other tangible personal property of every kind and description, together with all accessions, additions, attachments, improvements, substitutions, replacements, and components thereof;
(f) General Intangibles. All General Intangibles, including all payment intangibles, contract rights, choses in action, rights under warranties and indemnities, goodwill, customer and supplier lists, tax refunds, tax refund claims, claims against governmental authorities, and all other intangible property of every kind and description;
(g) Goods. All Goods, including all Equipment, Inventory, fixtures (to the extent constituting personal property), and other tangible property;
(h) Instruments. All instruments (as such term is defined in Article 9 of the UCC), including all promissory notes, drafts, bills of exchange, and all Intercompany Notes evidencing indebtedness owed to the Grantor by Torchlight Mining Corp. or any of its affiliates or subsidiaries;
(i) intellectual Property. All intellectual Property, including all Patents, Trademarks, service marks, trade dress, Copyrights, domain names, social media accounts, Trade Secrets, know-how, proprietary processes, and Licenses, whether registered or unregistered, together with all applications, registrations, renewals, and extensions thereof, and all rights to sue for and collect damages for past, present, or future infringement, misappropriation, or other violation thereof;
(j) Inventory. All Inventory, including all raw materials, work in process, finished goods, goods in transit, goods held for sale, lease, or furnishing under contracts of service, minerals, concentrates, refined products, and all packaging and shipping materials, together with all additions, accessions, and substitutions thereto;
(k) Investment Property. All Investment Property, including all Pledged Equity (being 100% of the issued and outstanding equity interests in any subsidiary of the Grantor, whether now existing or hereafter formed or acquired), all certificated and uncertificated securities, all securities accounts, all security entitlements, all commodity contracts, and all commodity accounts, together with all distributions, dividends, cash, instruments, rights, options, warrants, 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 Investment Property;
(l) Letter-of-Credit Rights. All Letter-of-Credit Rights, whether or not the Grantor is the beneficiary or nominated person under the related letter of credit;
(m) Money. All money, cash, and cash equivalents of the Grantor, in whatever form held;
(n) Commercial Tort Claims. All commercial tort claims described on Schedule 2.01(n) hereto, as such Schedule may be supplemented from time to time in accordance with the terms hereof;
(o) Supporting Obligations. All Supporting Obligations relating to any of the foregoing Collateral, including all guarantees, letters of credit, and other credit support;
(p) Books and Records. All books, records, ledger cards, files, correspondence, customer lists, blueprints, technical data, computer software (to the extent transferable), computer programs, tapes, disks, other data storage media, and other data and information relating to any of the foregoing Collateral; and
(q) Proceeds. All Proceeds of any and all of the foregoing Collateral (including Proceeds that constitute property of the types described in clauses (a) through (p) above), including all insurance proceeds receivable by reason of loss or damage to any of the foregoing Collateral, and all accessions to, substitutions and replacements for, and rents, profits, and products of, each of the foregoing.
Section 2.02 — Security for Obligations
The Collateral secures the prompt and complete payment and performance when due (whether at stated maturity, by required prepayment, by acceleration, by demand, or otherwise) of all Secured Obligations. Without limiting the generality of the foregoing, this Agreement secures the payment of all amounts that constitute part of the Secured Obligations and that would be owed by the Grantor or the Issuer to the Holders of the Notes or the Collateral Agent under the Indenture, the Notes, the Guarantee, or any other Security Document but for the fact that such amounts are unenforceable or not allowable due to the existence of a bankruptcy, reorganization, or similar proceeding involving the Grantor or the Issuer.
Section 2.03 — Grantor Remains Liable
Anything herein to the contrary notwithstanding:
(a) The Grantor shall remain liable under the contracts, agreements, and instruments included in the Collateral to the extent set forth therein, and the Grantor shall perform all of its duties and obligations under such contracts, agreements, and instruments to the same extent as if this Security Agreement had not been executed and delivered.
(b) The exercise by the Collateral Agent of any of the rights hereunder shall not release the Grantor from any of its duties or obligations under any contracts, agreements, or instruments included in the Collateral.
(c) Neither the Collateral Agent nor any Holder of the Notes shall have any obligation or liability under any contracts, agreements, or instruments included in the Collateral by reason of this Security Agreement, nor shall the Collateral Agent or any Holder of the Notes be obligated to perform any of the obligations or duties of the Grantor thereunder, or to take any action to collect or enforce any claim for payment assigned hereunder, or to make any inquiry as to the nature or sufficiency of any payment received by the Collateral Agent or any Holder of the Notes, or as to the sufficiency of any performance by any party under any such contract, agreement, or instrument.
ARTICLE III — PERFECTION OF SECURITY INTEREST
Section 3.01 — UCC Financing Statements
(a) The Grantor hereby irrevocably authorizes the Collateral Agent to file, at any time and from time to time, one or more UCC-1 financing statements (and continuation statements, amendments, and supplements thereto) in the appropriate filing offices in any jurisdiction (including the Office of the Secretary of State of the State of Delaware) describing the Collateral or any portion thereof. Such financing statements may describe the Collateral in the same terms as set forth in Section 2.01 hereof or may describe the Collateral as "all assets" or "all personal property" of the Grantor, whether now owned or hereafter acquired, or words to similar effect, to the extent permitted by applicable law. The Grantor agrees that a carbon, photographic, or other reproduction of this Security Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law.
(b) For purposes of such financing statements, the Grantor's exact legal name as it appears on its certificate of incorporation filed with the Secretary of State of the State of Delaware is "Torchlight U.S. Holdings, Inc." and its jurisdiction of organization is the State of Delaware.
(c) The Grantor shall pay all costs and expenses of filing and recording any financing statements, continuation statements, amendments, and supplements, and all other costs and expenses associated with perfecting and maintaining the perfection of the security interests granted hereunder.
Section 3.02 — Delivery of Certificated Collateral
(a) Concurrently with the execution and delivery of this Agreement, or promptly thereafter (and in any event within five (5) Business Days), the Grantor shall deliver to the Collateral Agent (or to its designated agent) all certificated securities and all instruments (including all Intercompany Notes) constituting Collateral, together with undated stock powers, endorsements, or instruments of transfer duly executed in blank by the Grantor in form and substance reasonably satisfactory to the Collateral Agent.
(b) If the Grantor shall at any time after the date hereof acquire any additional certificated securities, instruments (including Intercompany Notes), or tangible chattel paper constituting Collateral, the Grantor shall promptly (and in any event within five (5) Business Days following such acquisition) deliver such certificated securities, instruments, or tangible chattel paper to the Collateral Agent, together with appropriate undated stock powers, endorsements, or instruments of transfer duly executed in blank.
Section 3.03 — Control Agreements
(a) The Grantor shall, within thirty (30) days following the date hereof (or such longer period as the Collateral Agent may agree in writing), take all steps necessary to give the Collateral Agent "control" (as defined in Sections 8-106, 9-104, 9-105, 9-106, and 9-107 of the UCC, as applicable) over all Deposit Accounts, securities accounts, commodity accounts, and electronic chattel paper constituting Collateral. Such steps shall include, without limitation, the execution and delivery of deposit account control agreements, securities account control agreements, and commodity account control agreements, in each case in form and substance reasonably satisfactory to the Collateral Agent.
(b) The Grantor shall not establish any new Deposit Account, securities account, or commodity account unless the Grantor shall have given the Collateral Agent at least ten (10) Business Days' prior written notice thereof and shall have taken all steps necessary to give the Collateral Agent "control" over such account in accordance with this Section 3.03.
Section 3.04 — Intellectual Property Filings
(a) The Grantor shall execute and deliver to the Collateral Agent, concurrently with the execution and delivery of this Agreement (or promptly thereafter), such intellectual property security agreements, notices of grant of security interest, short-form assignments, and other documents and instruments as the Collateral Agent may reasonably request to perfect the security interest in the intellectual Property, including short-form security agreements suitable for filing with the United States Patent and Trademark Office and the United States Copyright Office, in each case in form and substance reasonably satisfactory to the Collateral Agent.
(b) The Grantor hereby irrevocably authorizes the Collateral Agent to file such documents and instruments with the United States Patent and Trademark Office, the United States Copyright Office, and any other applicable governmental or regulatory office, and to take such other actions as may be necessary or desirable to perfect, protect, and maintain the Collateral Agent's security interest in the intellectual Property.
Section 3.05 — Further Assurances
The Grantor shall, at its own cost and expense, execute and deliver such further instruments, agreements, and documents, and take such further actions, as the Collateral Agent may from time to time reasonably request to perfect, maintain, protect, and enforce the first-priority lien and security interest on and in the Collateral granted hereunder, including without limitation:
(a) filing UCC financing statement amendments and other filings necessary to reflect any change in the Grantor's name, jurisdiction of organization, organizational structure, or identity;
(b) executing and delivering such agreements, instruments, and documents as may be necessary or advisable to grant the Collateral Agent "control" over any Deposit Account, securities account, commodity account, electronic chattel paper, or letter-of-credit right;
(c) delivering to the Collateral Agent any certificated securities, instruments, or tangible chattel paper not previously delivered;
(d) making such filings and recordings as may be necessary or desirable under the laws of any applicable jurisdiction to evidence or perfect the security interest granted hereunder; and
(e) taking all other actions reasonably requested by the Collateral Agent to ensure that the security interest granted herein constitutes a valid first-priority perfected security interest in the Collateral, subject only to Permitted Liens.
ARTICLE IV — REPRESENTATIONS AND WARRANTIES
The Grantor represents and warrants to the Collateral Agent, for the benefit of the Holders of the Notes, as of the date hereof (and as of each date on which such representations and warranties are required to be repeated under the Indenture), as follows:
Section 4.01 — Organization and Good Standing
The Grantor is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware. The Grantor is duly qualified and authorized to do business and is in good standing in each jurisdiction where the character of its properties or the nature of its activities requires such qualification, except where the failure to be so qualified or in good standing would not reasonably be expected to have a Material Adverse Effect. The Grantor's Employer Identification Number is 84-3921057. The Grantor's registered office is located at 1209 Orange Street, Wilmington, Delaware 19801.
Section 4.02 — Authorization; No Conflicts
(a) The Grantor has full corporate power and authority to execute, deliver, and perform its obligations under this Security Agreement. The execution, delivery, and performance of this Security Agreement by the Grantor and the grant of the security interest hereunder have been duly authorized by all necessary corporate action on the part of the Grantor, including all necessary approvals of its board of directors (or equivalent governing body) and, to the extent required, its sole stockholder.
(b) The execution, delivery, and performance of this Security Agreement by the Grantor do not and will not (i) violate or conflict with the Grantor's certificate of incorporation, bylaws, or other organizational documents, (ii) violate or conflict with any law, statute, regulation, order, judgment, writ, injunction, or decree of any governmental authority applicable to the Grantor or its properties, (iii) result in a breach of, constitute a default under, or give rise to any right of termination, cancellation, or acceleration under, any material agreement, contract, instrument, mortgage, indenture, or other obligation to which the Grantor is a party or by which the Grantor or any of its properties may be bound, or (iv) result in the creation or imposition of any lien, charge, or encumbrance upon any property of the Grantor other than the security interest granted hereunder and Permitted Liens.
Section 4.03 — Enforceability
This Security Agreement has been duly executed and delivered by the Grantor and constitutes the legal, valid, and binding obligation of the Grantor, enforceable against the Grantor in accordance with its terms, subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and other similar laws of general applicability relating to or affecting creditors' rights generally and (ii) general equitable principles (whether considered in a proceeding in equity or at law).
Section 4.04 — Title to Collateral; No Liens
(a) The Grantor has good and marketable title to, or valid and subsisting rights in, all of the Collateral, free and clear of all liens, pledges, mortgages, hypothecations, security interests, charges, encumbrances, and other adverse claims of any nature whatsoever, other than Permitted Liens and the security interest created hereunder.
(b) Upon the filing of UCC-1 financing statements in the Office of the Secretary of State of the State of Delaware naming the Grantor as debtor and the Collateral Agent as secured party, the delivery of all certificated securities and instruments to the Collateral Agent, the entering into of control agreements as contemplated by Section 3.03, and the making of all filings described in Section 3.04, the Collateral Agent will have a first-priority perfected security interest in the Collateral (to the extent a security interest therein can be perfected by such filings, deliveries, and actions under the UCC), subject only to Permitted Liens.
Section 4.05 — Location of Collateral; Chief Executive Office
(a) The Grantor's chief executive office and principal place of business is located at 1209 Orange Street, Wilmington, Delaware 19801.
(b) All tangible Collateral (including all Equipment and Inventory) is located at the addresses set forth on Schedule 4.05 attached hereto.
(c) The Grantor will not change its chief executive office, principal place of business, or the locations of any material tangible Collateral without giving the Collateral Agent at least thirty (30) days' prior written notice thereof, and, in any event, the Grantor shall take all actions necessary or desirable to maintain the perfection and priority of the security interest granted hereunder, including the filing of any necessary UCC amendments.
Section 4.06 — Exact Legal Name; Jurisdiction of Organization
(a) The exact legal name of the Grantor as it appears on its certificate of incorporation filed with the Secretary of State of the State of Delaware is "Torchlight U.S. Holdings, Inc." The Grantor has not, during the five (5) years preceding the date hereof, had any other legal name, been known by any trade name, or been the surviving or resulting entity in any merger, consolidation, or reorganization, except as disclosed on Schedule 4.06 attached hereto.
(b) The Grantor's organizational identification number assigned by the Secretary of State of the State of Delaware is as set forth on Schedule 4.06. The Grantor's jurisdiction of organization is the State of Delaware. The Grantor's Employer Identification Number is 84-3921057.
(c) The Grantor will not change its legal name, identity, organizational structure, state or jurisdiction of organization, or Employer Identification Number without giving the Collateral Agent at least thirty (30) days' prior written notice thereof and, in any event, not until all UCC financing statements, continuation statements, and amendments have been filed in all applicable jurisdictions to maintain the perfection and priority of the security interest granted hereunder, all in form and substance reasonably satisfactory to the Collateral Agent.
Section 4.07 — Subsidiaries; Pledged Equity
(a) Schedule 4.07 attached hereto sets forth a complete and accurate list, as of the date hereof, of each subsidiary of the Grantor (if any), including the jurisdiction of organization, the authorized and outstanding equity interests of each class, and the percentage of each class of equity interests owned by the Grantor.
(b) All Pledged Equity is duly authorized, validly issued, fully paid, and non-assessable (to the extent applicable to the relevant type of equity interest), and the Grantor is the sole record and beneficial owner thereof, free and clear of all liens, encumbrances, restrictions, options, warrants, calls, rights, and other adverse claims of any nature whatsoever, other than Permitted Liens and the security interest created hereunder.
(c) No consent, approval, or authorization of, or declaration, filing, or registration with, any Person or governmental authority is required in connection with the pledge of the Pledged Equity hereunder or the exercise by the Collateral Agent of any rights or remedies with respect thereto (whether or not an Event of Default has occurred), except as may be required by applicable securities laws.
Section 4.08 — Accounts and Intercompany Notes
(a) Schedule 4.08 attached hereto sets forth a complete and accurate list, as of the date hereof, of all material Accounts, Intercompany Notes, and other receivables of the Grantor, including, with respect to each Intercompany Note, the identity of the obligor, the principal amount outstanding, the maturity date, and the applicable interest rate.
(b) Each Account and each Intercompany Note listed on Schedule 4.08 is genuine, valid, and enforceable in accordance with its terms, represents a bona fide transaction, and is not subject to any setoff, counterclaim, discount, defense, or other adverse condition, except as disclosed on Schedule 4.08. The amounts owing to the Grantor under such Accounts and Intercompany Notes are as stated on Schedule 4.08 (subject to adjustments in the ordinary course of business).
Section 4.09 — Intellectual Property
Schedule 4.09 attached hereto sets forth a complete and accurate list, as of the date hereof, of all material intellectual Property owned by the Grantor, including (i) all registrations and applications for registration of Patents with the United States Patent and Trademark Office, (ii) all registrations and applications for registration of Trademarks with the United States Patent and Trademark Office, (iii) all registrations and applications for registration of Copyrights with the United States Copyright Office, and (iv) all material domain names. To the Grantor's knowledge, all such registrations are valid and subsisting and in full force and effect, and the Grantor has taken all reasonable steps to maintain and protect such registrations.
Section 4.10 — Deposit Accounts
Schedule 4.10 attached hereto sets forth a complete and accurate list, as of the date hereof, of all Deposit Accounts maintained by the Grantor, including the name and address of each depository bank, the account number (or last four digits thereof), and the type of account (e.g., operating account, payroll account, money market account).
Section 4.11 — Commercial Tort Claims
(a) Schedule 2.01(n) attached hereto sets forth a complete and accurate list, as of the date hereof, of all commercial tort claims of the Grantor, including a brief description of each such claim, the parties thereto, and the estimated amount thereof.
(b) The Grantor shall promptly (and in any event within thirty (30) days) notify the Collateral Agent in writing of any new commercial tort claim acquired or arising after the date hereof that has a reasonably estimated value in excess of $250,000. Concurrently with the delivery of such notice, the Grantor shall execute and deliver such amendments, supplements, or other documents as the Collateral Agent may reasonably request to include such commercial tort claim in the Collateral and to grant to the Collateral Agent a first-priority perfected security interest therein.
Section 4.12 — No Financing Statements
Except for financing statements filed in connection with Permitted Liens and financing statements filed or to be filed pursuant to this Agreement, no effective UCC financing statement, security agreement, or other public filing or recording covering all or any part of the Collateral (or naming the Grantor as debtor or seller) is on file in any filing or recording office in any jurisdiction. The Grantor has not authorized any Person other than the Collateral Agent to file any financing statement naming the Grantor as debtor, except with respect to Permitted Liens.
ARTICLE V — COVENANTS
The Grantor covenants and agrees with the Collateral Agent, for the benefit of the Holders of the Notes, that, so long as any Secured Obligation remains outstanding and unpaid (other than contingent indemnification obligations for which no claim has been made), the Grantor shall comply with the following covenants:
Section 5.01 — Protection of Collateral
The Grantor shall:
(a) maintain and preserve the Collateral in good condition and repair (ordinary wear and tear excepted), and not permit any waste or destruction of the Collateral or any part thereof;
(b) maintain insurance with respect to the Collateral in accordance with the requirements of the Indenture, and, upon the request of the Collateral Agent, cause the Collateral Agent to be named as loss payee or additional insured (as applicable) under all applicable insurance policies;
(c) comply in all material respects with all laws, rules, regulations, orders, writs, judgments, injunctions, and decrees applicable to the Collateral or any part thereof;
(d) comply in all material respects with all contractual obligations relating to the Collateral, including all offtake agreements, marketing contracts, and Intercompany Notes;
(e) defend the Collateral against all claims and demands of all Persons at any time claiming any interest therein adverse to the Collateral Agent's security interest (other than holders of Permitted Liens); and
(f) pay and discharge, promptly when due, all taxes, assessments, and governmental charges or levies imposed upon the Collateral, except to the extent being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP.
Section 5.02 — Negative Covenants Regarding Collateral
The Grantor shall not, without the prior written consent of the Collateral Agent (acting at the direction of the requisite Holders pursuant to the Indenture and the Collateral Agency Agreement):
(a) sell, assign, transfer, exchange, convey, lease (as lessor), license (as licensor), or otherwise dispose of any Collateral, except as expressly permitted under the Indenture (including the covenant restricting asset sales set forth therein) and this Agreement;
(b) create, incur, assume, or suffer to exist any lien, pledge, mortgage, hypothecation, security interest, charge, encumbrance, or adverse claim of any nature whatsoever on or with respect to any Collateral, except for Permitted Liens;
(c) change its legal name, state of organization, organizational structure, organizational identification number, or Employer Identification Number without giving the Collateral Agent at least thirty (30) days' prior written notice thereof and taking all actions necessary to maintain the perfection and priority of the security interest granted hereunder;
(d) enter into any agreement, contract, or instrument that restricts or prohibits the grant, perfection, or enforcement of the security interest granted hereunder, or that is inconsistent with the rights of the Collateral Agent under this Agreement; or
(e) take any action that would impair the value of the Collateral or the rights of the Collateral Agent therein, or fail to take any action necessary to preserve and protect the value of the Collateral and the rights of the Collateral Agent therein.
Section 5.03 — Collection of Accounts
(a) Unless and until an Event of Default has occurred and is continuing, the Grantor may, in the ordinary course of its business and consistent with prudent business practices, collect and receive all payments on and proceeds of the Accounts and Intercompany Notes and use such payments and proceeds in the ordinary course of its business.
(b) Upon the occurrence and during the continuance of an Event of Default, (i) all rights of the Grantor to collect and receive payments on and proceeds of the Accounts and Intercompany Notes shall cease, (ii) the Collateral Agent may notify, and direct the Grantor to notify, each account debtor under any Account or obligor under any Intercompany Note to make all payments thereon directly to the Collateral Agent or to such other account as the Collateral Agent may designate, and (iii) the Grantor shall hold in trust for the Collateral Agent, and promptly remit to the Collateral Agent, all payments and proceeds received by the Grantor on account of any Accounts or Intercompany Notes.
Section 5.04 — Intercompany Notes
(a) The Grantor shall not amend, supplement, modify, restate, waive, forgive, release, cancel, terminate, extend, refinance, or restructure any Intercompany Note, or consent to any of the foregoing, in a manner that could reasonably be expected to materially and adversely affect the value of such Intercompany Note or the Collateral taken as a whole, without the prior written consent of the Collateral Agent.
(b) All Intercompany Notes (whether now existing or hereafter arising) shall bear a conspicuous legend substantially in the following form:
"This instrument and the indebtedness evidenced hereby are subject to a first-priority security interest in favor of Northern Dominion Trust Company, as Collateral Agent, pursuant to the Security Agreement dated as of April 19, 2022 by and between Torchlight U.S. Holdings, Inc. and Northern Dominion Trust Company. This instrument may not be transferred, assigned, or pledged without the prior written consent of the Collateral Agent."
(c) The Grantor shall enforce its rights under the Intercompany Notes in a commercially reasonable manner and shall not subordinate the Intercompany Notes to the obligations of the obligor thereunder to any other creditor without the prior written consent of the Collateral Agent.
Section 5.05 — Intellectual Property
The Grantor shall:
(a) maintain all material intellectual Property in full force and effect and take all actions necessary or desirable to preserve and protect the Grantor's rights therein, including making timely filings of renewal applications, affidavits of use, and other maintenance documents with the United States Patent and Trademark Office, the United States Copyright Office, and any other applicable governmental authority;
(b) not abandon, dedicate to the public, disclaim, or permit to lapse, expire, or become unenforceable any material intellectual Property without the prior written consent of the Collateral Agent, unless the Grantor determines in good faith that such intellectual Property is no longer material to its business;
(c) promptly notify the Collateral Agent in writing of any material adverse claim, infringement, misappropriation, dilution, or other violation of any material intellectual Property of which the Grantor becomes aware, and take commercially reasonable steps to defend and protect such intellectual Property; and
(d) not grant any exclusive license or assignment of any material intellectual Property without the prior written consent of the Collateral Agent, except as permitted under the Indenture.
Section 5.06 — Notices
The Grantor shall promptly (and in any event within ten (10) Business Days) notify the Collateral Agent in writing of:
(a) any material change in the nature, composition, or value of the Collateral;
(b) the occurrence of any event or circumstance that could reasonably be expected to materially and adversely affect the value of the Collateral taken as a whole or the Collateral Agent's security interest therein;
(c) the existence or creation of any lien, claim, charge, or encumbrance on any of the Collateral (other than Permitted Liens), or any claim or demand by any Person adverse to the Collateral Agent's security interest;
(d) any default or event of default, or any event that with the giving of notice or the lapse of time or both would constitute a default or event of default, under any material contract, agreement, or instrument included in the Collateral; and
(e) any litigation, arbitration, investigation, or other proceeding pending or, to the Grantor's knowledge, threatened against the Grantor relating to any material portion of the Collateral.
Section 5.07 — Books and Records; Inspection
(a) The Grantor shall maintain complete and accurate books and records relating to the Collateral, including books of account, ledger cards, and all computer programs and data storage media used in connection therewith.
(b) The Collateral Agent (and its officers, employees, agents, accountants, attorneys, and other representatives) shall have the right, upon reasonable prior written notice to the Grantor and during normal business hours, to visit and inspect the Grantor's properties, to examine and audit the Grantor's books and records relating to the Collateral, and to make copies of and abstracts from such books and records, all at the Grantor's expense. Following the occurrence and during the continuance of an Event of Default, the Collateral Agent (and its representatives) shall have such right of inspection and access at any time, without prior notice and without regard to normal business hours.
Section 5.08 — Compliance with Laws
The Grantor shall comply in all material respects with all applicable federal, state, and local laws, rules, regulations, ordinances, orders, writs, judgments, injunctions, and decrees (including all applicable provisions of the UCC) relating to the Collateral, the use thereof, and the conduct of the Grantor's business, except where the failure to so comply would not reasonably be expected to have a Material Adverse Effect.
ARTICLE VI — EVENTS OF DEFAULT AND REMEDIES
Section 6.01 — Events of Default
Each "Event of Default" as defined in and under the Indenture shall constitute an Event of Default under this Security Agreement. Without limiting the foregoing, an Event of Default shall be deemed to have occurred if the Trustee or the Collateral Agent delivers written notice to the Grantor that an Event of Default has occurred and is continuing under the Indenture.
Section 6.02 — Remedies upon Event of Default
(a) Upon the occurrence and during the continuance of an Event of Default, the Collateral Agent may (and, at the written direction of the requisite Holders delivered in accordance with the Indenture and the Collateral Agency Agreement, shall) exercise any one or more of the following remedies, without notice (except as required by applicable law or this Agreement), demand, presentment, protest, or other formality of any kind:
(i) exercise all rights and remedies available to a secured party under Article 9 of the UCC and under any other applicable law, including the right to take possession of the Collateral and, without judicial process, to enter any premises where Collateral may be found;
(ii) require the Grantor to assemble the Collateral and make it available to the Collateral Agent at a place to be designated by the Collateral Agent that is reasonably convenient to both the Collateral Agent and the Grantor;