This Security Agreement is entered into
January 23, 2002 to be effective as of
January 10, 2002 (References to the date of
this Security Agreement contained herein
shall be deemed to mean January 10, 2002.)
SECURITY AGREEMENT
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LENDER/SECURED PARTY: DEBTOR(S)/PLEDGOR(S):
BLUWAT ▇▇ ▇▇▇▇▇▇ TECHNOLOGIES, INC.
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇ - ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇-SALEM, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SWITZERLAND
ATTN: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
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Debtor/Pledgor is: [ ] Individual [X] Corporation [ ] Partnership [ ] Other
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Address is Debtor's/Pledgor's: [ ] Residence [X] Place of Business [ ] Chief Executive Office if more than one place
of business Collateral (hereinafter defined) is located at: [X] Debtor's/Pledgor's address shown above [ ]the following address:
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Reference is made to that certain Loan Agreement entered into January 23, 2002
to be effective as of January 10, 2002 (the "Loan Agreement") between Lender and
Debtor. Capitalized terms used herein and not otherwise defined herein shall
have the meaning ascribed to them in the Loan Agreement.
1. SECURITY INTEREST. For good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Debtor/Pledgor
(hereinafter referred to as "Debtor") assigns and grants to
Lender (also known as "Secured Party"), a security interest and
lien in the Collateral (hereinafter defined) to secure the
payment and the performance of the Obligation (hereinafter
defined).
2. COLLATERAL. A security interest is granted in the following collateral
described in this Item 2 (the "Collateral'):
A. TYPES OF COLLATERAL (check as applicable)
[X] ACCOUNTS: Any and all accounts and other rights of Debtor to the
payment for goods sold or leased or for services rendered whether or not earned
by performance, contract rights, book debts, checks, notes, drafts, instruments,
chattel, paper acceptances, and any and all amounts due to Debtor from a factor
or other forms of obligations and receivables now existing or hereafter arising
out of the business of Debtor.
[X] INVENTORY: Any and all of Debtor's goods held as inventory
whether now owned or hereafter acquired, including without limitation, any and
all such goods held for sale or lease or being processed for sale or lease in
Debtor's business, as now or hereafter conducted including all materials goods
and work in process, finished goods and other tangible property held for sale or
lease or furnished or to be furnished under contracts of service or used or
consumed in Debtor's business, along with all documents (including documents of
title) covering such inventory.
[X] EQUIPMENT: Any and all of Debtor's goods held as equipment
including, without limitation, all machinery, tools, dies, furnishings, or
fixtures wherever located whether now owned or hereafter acquired, together with
all increases, parts, fittings, accessories, equipment, and special tools now or
hereafter affixed to any part thereof or used in connection therewith.
[X] FIXTURES:
[X] Specific Fixtures: Limited to any and all of Debtor's goods held as
fixtures which are specifically described in the space below to the extent that
granting a security interest shall not constitute a violation of law or default
under any agreement or contract applicable to Debtor.
whether now existing or hereafter acquired. These goods are or will become
fixtures on the following described real estate in Forsyth County, North
Carolina, owned by: Debtor more particularly described as follows: as described
in Exhibit A attached hereto.
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[X] GENERAL INTANGIBLES:
Any and all of Debtor's general intangible property, including, without
limitation, all patents, trademarks, service marks and exclusive licenses
(whether issued or pending), and all processes and systems related thereto.
B. SUBSTITUTIONS, PROCEEDS AND RELATED ITEMS. Any and all
substitutes and replacements for, accessions, attachments and
other additions to, tools, parts and equipment now or
hereafter added to or used in connection with, and all cash or
non-cash proceeds and products of, the Collateral (including,
without limitation all income benefits and property
receivable, received or distributed which results from any of
the Collateral, such as dividends payable or distributable in
cash property or stock; insurance distributions of any kind
related to the Collateral, including, without limitation,
returned premiums interest premium and principal payments;
redemption proceeds and subscription rights; and shares or
other proceeds of conversions or splits of any securities in
the Collateral) any and all choses in action and causes of
action of Debtor, whether now existing or hereafter arising,
relating directly or indirectly to the Collateral (whether
arising in contract, tort or otherwise and whether or not
currently in litigation); all certificates of title,
manufacturer's statements of origin, other documents, accounts
and chattel paper, whether now existing or hereafter arising
directly or indirectly from or related to the Collateral; all
warranties, wrapping, packaging, advertising and shipping
materials used or to be used in connection with or related to
the Collateral; all of Debtors books, records, data, plans,
manuals, computer software, computer tapes, computer systems,
computer disks, computer programs, source codes and object
codes containing any information, pertaining directly or
indirectly to the Collateral and all rights of Debtor to
retrieve data and other information pertaining directly or
indirectly to the Collateral from third parties, whether now
existing or hereafter arising; and all returned refused,
stopped in transit, or repossessed Collateral, any of which,
received by Debtor, upon request shall be delivered
immediately to Lender.
3. DESCRIPTION OF OBLIGATION(S). The following obligations ("Obligation"
or "Obligations") are secured by this Agreement: (a) All debts,
obligations liabilities and agreements of Debtor to Lender, now
or hereafter existing, arising under the Loan Agreement, and all
renewals, extensions or rearrangement of any of the above; (b)
All costs incurred by Lender to obtain, preserve, perfect and
enforce this Agreement and maintain, preserve, collect and
realize upon the Collateral; (c) All other reasonable costs and
reasonable attorney's fees incurred by Lender for which Debtor is
obligated to reimburse Lender in accordance with the terms of the
Loan Documents, together with interest at the maximum rate
allowed by law or if none, Prime Rate plus 3.75% per annum. If
Debtor is not the obligor of the Obligation, and in the event any
amount paid to Lender on any Obligation is subsequently recovered
from Lender in or as a result of any bankruptcy, insolvency or
fraudulent conveyance proceeding, Debtor shall be liable to
Lender for the amounts so recovered up to the fair market value
of the Collateral whether or not the Collateral has been released
or the security interest terminated. In the event the Collateral
has been released or the security interest terminated the fair
market value of the Collateral shall be determined, at Lender's
option, as of the date the Collateral was released, the security
interest terminated, or said amounts were recovered.
4. DEBTOR'S WARRANTIES. Debtor hereby represents and warrants to Lender as
follows:
A. FINANCING STATEMENTS. Except as may be noted by schedule
attached hereto and incorporated herein by reference, no
financing statement covering the Collateral is or will be on
file in any public office, except the financing statements
relating to this security interest, and no security interest,
other than the one herein created, has attached or been
perfected in the Collateral or any part thereof.
B. OWNERSHIP. Debtor owns, or will use the proceeds of any loans
by Lender to become the owner of, the Collateral free from any
setoff, claim, restriction, lien, security interest or
encumbrance, except Permitted Liens and the security interest
hereunder.
C. FIXTURES AND ACCESSIONS. No material part of the Collateral is
affixed to real estate or is an accession to any goods, or
will become a fixture or accession, except as expressly set
out herein.
D. CLAIMS OF DEBTORS ON THE COLLATERAL. As of the date of this
Agreement, all account debtors and other obligors whose debts
or obligations are part of the Collateral have no right to
setoffs, counterclaims or adjustments, and no defenses in
connection therewith, except defenses, adjustments, setoffs
and counterclaims that arise in the ordinary course of
business.
E. ENVIRONMENTAL COMPLIANCE. To the best of Debtor's knowledge,
the conduct of Debtor's business operations and the condition
of Debtor's property does not and will not violate any federal
laws, rules or ordinances for environmental protection,
regulations of the Environmental Protection Agency and any
applicable local or state law rule, regulation or rule of
common law and any judicial interpretation thereof relating
primarily to the environment or any materials defined as
hazardous materials or substances under any local, state or
federal environmental laws, rules or regulations, and
petroleum, petroleum products, oil and asbestos ("Hazardous
Materials"), except violations which are not likely to have a
Material Adverse Effect.
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F. POWER AND AUTHORITY. Debtor has full power and authority to
make this Agreement, and all necessary consents and approvals
of any persons, entities, governmental or regulatory
authorities and securities exchanges have been obtained to
effectuate the validity of this Agreement.
5. DEBTOR'S COVENANTS. Until full payment and performance of all of the
Obligations and termination or expiration of any obligation or
commitment of Lender to make advances or loans to Debtor, unless
Lender otherwise consents in writing:
A. OBLIGATION AND THIS AGREEMENT. Debtor shall perform all of its
agreements herein and in any other material agreements between
it and Lender.
B. OWNERSHIP AND MAINTENANCE OF THE COLLATERAL. Debtor shall keep
all tangible Collateral (except Collateral that is obsolete or
no longer used in the ordinary course of business) in good
condition. Debtor shall defend the Collateral against all
claims and demands of all persons at any time claiming any
interest therein adverse to Lender. Debtor shall keep the
Collateral free from all liens and security interests except
Permitted Liens and the security interest hereby created.
C. INSURANCE. Debtor shall insure the Collateral with companies
reasonably acceptable to Lender. Such insurance shall be in an
amount not less than the fair market value of the Collateral
and shall be against such casualties with such deductible
amounts as Lender shall approve. All insurance policies shall
be written for the benefit of Debtor and Lender as their
interests may appear, payable to Lender as loss payee, or in
other form satisfactory to Lender, and such policies or
certificates evidencing the same shall be furnished to Lender.
All policies of insurance shall provide for written notice to
Lender at least thirty (30) days prior to cancellation. Risk
of loss or damage is Debtor's to the extent of any deficiency
in any effective insurance coverage.
D. LENDER'S COSTS. Debtor shall pay all reasonable costs
necessary to obtain, preserve, perfect, defend and enforce the
security interest created by this Agreement, collect the
Obligation, and preserve, defend, enforce and collect the
Collateral, including but not limited to taxes, assessments,
insurance premiums, repairs, rent, storage costs and expenses
of sales legal expenses, reasonable attorney's fees and other
fees or expenses for which Debtor is obligated to reimburse
Lender in accordance with the terms of the Loan Documents.
Whether the Collateral is or is not in Lender's possession,
and without any obligation to do so and without waiving
Debtor's default for failure to make any such payment, Lender
at its option may pay any such costs and expenses, discharge
encumbrances on the Collateral, and pay for insurance of the
Collateral, and such payments shall be a part of the
Obligation and bear interest at the rate set out in the
Obligation. Debtor agrees to reimburse Lender on demand for
any costs so incurred.
E. INFORMATION AND INSPECTION. Debtor shall (i) promptly furnish
Lender any information with respect to the Collateral
reasonably requested by Lender; (ii) allow Lender or its
representatives to inspect the Collateral, during business
hours and wherever located, and to inspect and copy, or
furnish Lender or its representatives with copies of, all
records relating to the Collateral and the Obligation; (iii)
promptly furnish Lender or its representatives such
information as Lender may request to identify the Collateral,
at the time and in the form requested by Lender; and (iv)
deliver upon request to Lender shipping and delivery receipts
evidencing the shipment of goods and invoices evidencing the
receipt of, and the payment for, the Collateral.
F. ADDITIONAL DOCUMENTS. Debtor shall sign and deliver any papers
deemed reasonably necessary or desirable in the judgment of
Lender to obtain, maintain, and perfect the security interest
hereunder and to enable Lender to comply with any federal or
state law in order to obtain or perfect Lender's interest in
the Collateral or to obtain proceeds of the Collateral.
G. PARTIES LIABLE ON THE COLLATERAL. Debtor shall preserve the
liability of all obligors on any Collateral, shall preserve
the priority of all security therefor. Lender shall have no
duty to preserve such liability or security, but may do so at
the expense of Debtor, without waiving Debtor's default.
H. RECORDS OF THE COLLATERAL. Debtor at all times shall maintain
accurate books and records covering the Collateral. Debtor
immediately will ▇▇▇▇ all books and records with an entry
showing the absolute assignment of all Collateral to Lender,
and Lender is hereby given the right to audit the books and
records of Debtor relating to the Collateral at any time and
from time to time. The amounts shown as owed to Debtor on
Debtor's books and on any assignment schedule will be the
undisputed amounts owing and unpaid.
I. DISPOSITION OF THE COLLATERAL. If disposition of any
Collateral gives rise to an account, chattel paper or
instrument, Debtor immediately shall notify Lender, and upon
request of Lender shall assign or indorse the same to Lender.
No Collateral may be sold, leased, manufactured, processed or
otherwise disposed of by Debtor in any manner without the
prior written consent of Lender, except: (1) the Collateral
sold, leased, manufactured, processed or consumed in the
ordinary course of business, and (2) dispositions of
Collateral that is obsolete or no longer used in Debtor's
business.
J. ACCOUNTS. Each account held as Collateral will represent the
valid and legally enforceable obligation of third parties and
shall not be evidenced by any instrument or chattel paper.
-3-
K. NOTICE/LOCATION OF THE COLLATERAL. Debtor shall give Lender
written notice of each office of Debtor in which records of
Debtor pertaining to accounts held as Collateral are kept and
each location at which the Collateral is or will be kept, and
of any change of any such location. If no such notice is
given, all records of Debtor pertaining to the Collateral and
all Collateral of Debtor are and shall be kept at the address
marked by Debtor above.
L. CHANGE OF NAME/STATUS AND NOTICE OF CHANGES. Without the
written consent of Lender, Debtor shall not change its name,
change its corporate status, use any trade name or engage in
any business not reasonably related to its business as
presently conducted. Debtor shall notify Lender immediately of
(i) any material change in the Collateral, (ii) a change in
Debtor's residence or location, (iii) a change in any matter
warranted or represented by Debtor in this Agreement, or in
any of the Loan Documents or furnished to Lender pursuant to
this Agreement, and (iv) the occurrence of an Event of Default
(hereinafter defined).
M. USE AND REMOVAL OF THE COLLATERAL. Debtor shall not use the
Collateral illegally. Debtor shall not, unless previously
indicated as a fixture, permit the Collateral to be affixed to
real or personal property without the prior written consent of
Lender. Debtor shall not permit any of the Collateral to be
removed from the locations specified herein without the prior
written consent of Lender, except for the sale of inventory in
the ordinary course of business.
N. POSSESSION OF THE COLLATERAL. Debtor shall deliver all
investment securities and other instruments, documents and
chattel paper which are part of the Collateral and in Debtor's
possession to Lender immediately upon request, or if hereafter
acquired, immediately following acquisition and such request,
appropriately endorsed to Lender s order, or with appropriate
, duly executed powers. Debtor waives presentment, notice of
acceleration, demand, notice of dishonor, protest, and all
other notices with respect thereto.
O. CONSUMER CREDIT. If any Collateral or proceeds includes
obligations of third parties to Debtor, the transactions
giving rise to the Collateral shall conform in all material
respects to the applicable state or federal law including but
not limited to consumer credit law. Debtor shall hold harmless
and indemnify Lender against any cost, loss or expense arising
from Debtor's breach of this covenant.
P. POWER OF ATTORNEY. Debtor appoints Lender and any officer
thereof effective upon the occurrence and during the
continuance of an Event of Default as Debtor's
attorney-in-fact with full power in Debtor's name and behalf
to do every act which Debtor is obligated to do or may be
required to do hereunder; however, nothing in this paragraph
shall be construed to obligate Lender to take any action
hereunder nor shall Lender be liable to Debtor for failure to
take any act on hereunder. This appointment shall be deemed a
power coupled with an interest and shall not be terminable as
long as the Obligation is outstanding and shall not terminate
on the disability or incompetence of Debtor.
Q. WAIVERS BY DEBTOR. Debtor waives notice of the creation,
advance, increase, existence, extension or renewal of and of
any indulgence with respect to, the Obligation; waives
presentment, demand, notice of dishonor, and protest; waives
notice of the amount of the Obligation outstanding at any
time, notice of any change in financial condition of any
person liable for the Obligation or any part thereof, and all
other notices respecting the Obligation except for notices to
be provided under the Loan Agreement. Debtor waives any right
to require that any action be brought against any other person
or to require that resort be had to any other security or to
any balance of any deposit account. Debtor further waives any
right of subrogation or to enforce any right of action against
any other Debtor until the Obligation is paid in full.
R. OTHER PARTIES AND OTHER COLLATERAL. No renewal or extension of
or any other indulgence with respect to the Obligation or any
part thereof, no release of any security, no release of any
person (including any maker, indorser, guarantor or surety)
liable on the Obligation, no delay in enforcement of payment,
and no delay or omission or lack of diligence or care in
exercising any right or power with respect to the Obligation
or any security therefor or guaranty thereof or under this
Agreement shall in any manner impair or affect the rights of
Lender under the law, hereunder, or under any other agreement
pertaining to the Collateral. Lender need not file suit or
assert a claim for personal judgment against any person for
any part of the Obligation or seek to realize upon any other
security for the Obligation, before foreclosing or otherwise
realizing upon the Collateral Debtor waives any, right to the
benefit of or to require or control application of any other
security or proceeds thereof, and agrees that Lender shall
have no duty or obligation to Debtor to apply to the
Obligation any such other security or proceeds thereof.
S. COLLECTION AND SEGREGATION OF ACCOUNTS AND RIGHT TO NOTIFY.
Lender hereby authorizes Debtor to collect the Collateral,
subject to the direction and control of Lender, but following
the occurrence and during the continuance of an Event of
Default, Lender may without cause or notice, curtail or
terminate said authority at any time. Upon notice by Lender,
whether oral or in writing to Debtor, Debtor shall forthwith
upon receipt of all checks, drafts, cash, and other
remittances in payment of or on account following the
occurrence and during the continuance of an Event of Default
of the Collateral, deposit the same in one or more special
accounts maintained with Lender over which Lender alone shall
have power of withdrawal. The remittance of the proceeds of
such Collateral shall not, however, constitute payment or
liquidation of such Collateral until Lender shall receive good
funds for such proceeds. Funds placed in such special accounts
shall be held by Lender as security for all Obligations
secured hereunder. These
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proceeds shall be deposited in precisely the form received
except for the endorsement of Debtor where necessary to permit
collection of items, which indorsement Debtor agrees to make
and which indorsement Lender is also hereby authorized, as
attorney-in-fact, to make on behalf of Debtor. In the event
Lender has notified Debtor to make deposits to a special
account, pending such deposit, Debtor agrees that it will not
commingle any such checks, drafts, cash or other remittances
with any funds or other property of Debtor, but will hold them
separate and apart therefrom, and upon an express trust for
Lender until deposit thereof is made in the special account.
Lender will, from time to time, apply the whole or any part of
the Collateral funds on deposit in this special account
against such Obligations as are secured hereby as Lender may
in its sole discretion elect. At the sole election of Lender,
any portion of said funds on deposit in the special account
which Lender shall elect not to apply to the Obligations, may
be paid over by Lender to Debtor. At any time, following the
occurrence and during the continuance of an Event of Default,
Lender may notify persons obligated on any Collateral to make
payments directly to Lender and Lender may take control of all
proceeds of any Collateral. Until Lender elects to exercise
such rights, Debtor as agent of Lender, shall collect and
enforce all payments owed on the Collateral.
T. COMPLIANCE WITH STATE AND FEDERAL LAWS. Debtor will maintain
its existence, good standing and qualification to do business,
where the failure to do so would result in a Material Adverse
Effect, and comply in all material respects with all laws,
regulations and governmental requirements, including without
limitation, environmental laws applicable to it or any of its
property, business operations and transactions.
U. ENVIRONMENTAL COVENANTS. Debtor shall immediately advise
Lender in writing of (i) any and all material enforcement,
cleanup, remedial, removal, or other governmental or
regulatory actions instituted, completed or threatened
pursuant to any applicable federal, state, or local laws,
ordinances or regulations relating to any Hazardous Materials
affecting Debtor's business operations; and (ii) all material
claims made or threatened by any third party against Debtor
relating to damages, contribution, cost recovery,
compensation, loss or injury resulting from any Hazardous
Materials. Debtor shall immediately notify Lender of any
material remedial action taken by Debtor with respect to
Debtor's business operations. Debtor will not use or permit
any other party to use any Hazardous Materials at any of
Debtor's places of business or at any other property owned by
Debtor except such materials as are incidental to Debtor's
normal course of business, maintenance and repairs and which
are handled in material compliance with all applicable
environmental laws. Debtor agrees to permit Lender, its
agents, contractors and employees to enter and inspect any of
Debtor's places of business or any other property of Debtor at
any reasonable times upon three (3) days prior notice for the
purposes of conducting, at Lender's expense, an environmental
investigation and audit (including taking physical samples) to
insure that Debtor is complying with this covenant.
6. RIGHTS AND POWERS OF LENDER.
A. GENERAL. Lender, following the occurrence and during the
continuance of an Event of Default may obtain from any person
information regarding Debtor or Debtor's business, which
information any such person also may furnish without liability
to Debtor; require Debtor to give possession or control of any
Collateral to Lender; indorse as Debtor's agent any
instruments, documents or chattel paper in the Collateral or
representing proceeds of the Collateral; contact account
debtors directly to verify information furnished by Debtor;
take control of proceeds, Including stock received as
dividends or by reason of stock splits; release the Collateral
in its possession to any Debtor, temporarily or otherwise;
require additional Collateral; reject as unsatisfactory any
property hereafter offered by Debtor as Collateral; set
standards from time to time to govern what may be used as
after acquired Collateral; designate, from time to time, a
certain percent of the Collateral as the loan value and
require Debtor to maintain the Obligation at or below such
figure; take control of funds generated by the Collateral,
such as cash dividends, interest and proceeds or refunds from
insurance, and use same to reduce any part of the Obligation
and exercise all other rights which an owner of such
Collateral may exercise, except the right to vote or dispose
of the Collateral before an Event of Default; at any time
transfer any of the Collateral or evidence thereof into its
own name or that of its nominee; and demand, collect, convert,
redeem receipt for, settle, compromise, adjust, ▇▇▇ for,
foreclose or realize upon the Collateral, in its own name or
in the name of Debtor, as Lender may determine. Lender shall
not be liable for failure to collect any account or
instruments, or for any act or omission on the part of Lender,
its officers, agents or employees, except for its or their own
willful misconduct or gross negligence. The foregoing rights
and powers of Lender will be in addition to, and not a
limitation upon, any rights and powers of Lender given by law,
elsewhere in this Agreement, or otherwise. If Debtor fails to
maintain any required insurance to the extent permitted by
applicable law Lender may (but is not obligated to) following
10 days prior written notice to Debtor purchase single
interest insurance coverage for the Collateral which insurance
may at Lender's option (i) protect only Lender and not provide
any remuneration or protection for Debtor directly and (ii)
provide coverage only after the Obligation has been declared
due as herein provided. The premiums for any such insurance
purchased by Lender shall be a part of the Obligation and
shall bear interest as provided in 3(c) hereof.
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7. DEFAULT.
A. EVENT OF DEFAULT. An event of default ("Event of Default")
shall occur if: (i) there is a loss, theft, damage or
destruction of any material portion of the Collateral for
which there is no insurance coverage or for which, in the
opinion of Lender, there is insufficient insurance coverage;
or (ii) the occurrence of a "Default" under the Loan
Agreement.
B. RIGHTS AND REMEDIES. If any Event of Default shall occur then
in each and every such case, Lender may without presentment,
demand, or protest; notice of default, dishonor, demand,
non-payment, or protest; notice of intent to accelerate all or
any part of the Obligation; notice of acceleration of all or
any part of the Obligation; or notice of any other kind, all
of which Debtor hereby expressly waives, (except for any
notice required under this Agreement, any other Loan Document
or applicable law); at any time thereafter exercise and/or
enforce any of the following rights and remedies of Lender's
option:
i. ACCELERATION. The Obligation shall at Lender's
option, become immediately due and payable, and the
obligation, If any, of Lender to permit further
borrowings under the Obligation shall at Lender's
option immediately cease and terminate.
ii. POSSESSION AND COLLECTION OF THE COLLATERAL. At its
option: (a) take possession or control of, store,
lease, operate, manage, sell, or instruct any Agent
or Broker to sell or otherwise dispose of, all or any
part of the Collateral; (b) notify all parties under
any account or contract right forming all or any part
of the Collateral to make any payments otherwise due
to Debtor directly to Lender; (c) in Lender's own
name, or in the name of Debtor, demand, collect,
receive, ▇▇▇ for, and give receipts and releases for,
any and all amounts due under such accounts and
contract rights; (d) indorse as the agent of Debtor
any check, note, chattel paper, documents or
instruments forming all or any part of the
Collateral; (e) make formal application for transfer
to Lender (or to any assignee of Lender or to any
purchaser of any of the Collateral) of all of
Debtor's permits, licenses, approvals, agreements and
the like relating to the Collateral or to Debtor's
business; (f) take any other action which Lender
deems necessary or desirable to protect and realize
upon its security interest in the Collateral; and (g)
in addition to the foregoing, and not in substitution
therefor, exercise any one or more of the rights and
remedies exercisable by Lender under any other
provision of this Agreement, under any of the other
Loan Documents, or as provided by applicable law
(including, without limitation, the Uniform
Commercial Code as in effect in NORTH CAROLINA
(hereinafter referred to as the "UCC")). In taking
possession of the Collateral Lender may enter
Debtor's premises and otherwise proceed without legal
process, if this can be done without breach of the
peace. Debtor shall, upon Lender's demand, promptly
make the Collateral or other security available to
Lender at a place designated by Lender, which place
shall be reasonably convenient to both parties.
Lender shall not be liable for nor be prejudiced by, any loss, depreciation or
other damages to the Collateral, unless caused by Lender's willful and malicious
act. Lender shall have no duty to take any action to preserve or collect the
Collateral.
iii. RECEIVER. Obtain the appointment of a receiver for
all or any of the Collateral, Debtor hereby
consenting to the appointment of such a receiver and
agreeing not to oppose any such appointment.
iv. RIGHT OF SET OFF. Without notice or demand to Debtor,
set off and apply against any and all of the
Obligation any and all deposits (general or special,
time or demand provisional or final) and any other
indebtedness, at any time held or owing by Lender or
any of Lender's agents or affiliates to or for the
credit of the account of Debtor or any guarantor or
indorser of Debtor's Obligation.
Lender shall be entitled to immediate possession of all books and records
evidencing any Collateral or pertaining to chattel paper covered by this
Agreement and it or its representatives shall have the authority to enter upon
any premises upon which any of the same, or any Collateral, may be situated and
remove the same therefrom without liability. Lender may surrender any insurance
policies in the Collateral and receive the unearned premium thereon. Debtor
shall be entitled to any surplus and shall be liable to Lender for any
deficiency. The proceeds of any disposition after default available to satisfy
the Obligation shall be applied to the Obligation in such order and in such
manner as Lender in its discretion shall decide.
Debtor specifically understands and agrees that any sale by Lender of all or
part of the Collateral pursuant to the terms of this Agreement may be effected
by the Lender at times and in manners which could result in the proceeds of such
sale as being significantly and materially less than might have been received if
such sale had occurred at different times or in different manners, and Debtor
hereby releases Lender and its officers and representatives from and against any
and all obligations and liabilities arising out of or related to the timing or
manner of any such date; provided that any such sale is in accordance with
applicable law and conducted in a commercially reasonable manner.
8. GENERAL.
A. PARTIES BOUND. Lender's rights hereunder shall inure to the
benefit of its successors and assigns. In the event of any
assignment or transfer by Lender of any of the Obligation or
the Collateral, Lender thereafter shall be fully
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discharged from any responsibility with respect to the
Collateral so assigned or transferred, but Lender shall retain
all rights and powers hereby given with respect to any of the
Obligation or the Collateral not so assigned or transferred.
All representations, warranties and agreements of Debtor if
more than one are joint and several and all shall be binding
upon the personal representatives, heirs, successors and
assigns of Debtor.
B. WAIVER. No delay of Lender in exercising any power or right
shall operate as a waiver thereof; nor shall any single or
partial exercise of any power or right preclude other or
further exercise thereof or the exercise of any other power or
right. No waiver by Lender of any right hereunder or of any
default by Debtor shall be binding upon Lender unless in
writing, and no failure by Lender to exercise any power or
right hereunder or waiver of any default by Debtor shall
operate as a waiver of any other or further exercise of such
right or power or of any further default. Each right, power
and remedy of Lender as provided for herein or in any of the
Loan Documents, or which shall now or thereafter exist at law
or in equity or by statue or otherwise, shall be cumulative
and concurrent and shall be in addition to every other such
right, power or remedy. The exercise or beginning of the
exercise by Lender of any one or more of such rights, powers
or remedies shall not preclude the simultaneous or later
exercise by Lender or any or all other such rights, powers or
remedies.
C. AGREEMENT CONTINUING. This Agreement shall constitute a
continuing agreement, applying to all future as well as
existing transactions, whether or not of the character
contemplated at the date of this Agreement, and if all
transactions between Lender and Debtor shall be closed at any
time, shall be equally applicable to any new transactions
thereafter. Provisions of this Agreement, unless by their
terms exclusive, shall be in addition to other agreements
between the parties. Time is of the essence of this Agreement.
D. DEFINITIONS. Unless the context indicates otherwise,
definitions in the UCC apply to words and phrases in this
Agreement; if UCC definitions conflict, Article 9 definitions
apply.
E. NOTICES. Notice shall be deemed reasonable if mailed postage
prepaid at least five (5) days before the related action (or
if the UCC elsewhere specifies a longer period, such longer
period) to the address of Debtor given above, or to such other
address as any party may designate by written notice to the
other party. Each notice request and demand shall be deemed
given or made, if sent by mail, upon the earlier of the date
of receipt of five (5) days after deposit in the U.S. Mail,
first class postage prepaid, or if sent by any other means,
upon delivery.
F. MODIFICATIONS. No provision hereof shall be modified or
limited except by written agreement expressly referring hereto
and to the provisions so modified or limited and signed by
Debtor and Lender. The provisions of this Agreement shall not
be modified or limited by course of conduct or usage of trade.
G. APPLICABLE LAW AND PARTIAL INVALIDITY. This Agreement has been
delivered in the State of NORTH CAROLINA and shall be
construed in accordance with the laws of that State. Wherever
possible each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Agreement. The
invalidity or unenforceability of any provision of any Loan
Document to any person or circumstances shall not affect the
enforceability or validity of such provision as it may apply
to other persons or circumstances.
H. FINANCING STATEMENT. To the extent permitted by applicable
law, a carbon, photographic or other reproduction of this
Agreement or any financing statement covering the Collateral
shall be sufficient as a financing statement.
I. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE
PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT
OF OR RELATING TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT OR
ANY RELATED INSTRUMENTS, AGREEMENTS OR DOCUMENTS, INCLUDING
ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL BE
DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE
FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE, THE APPLICABLE
STATE LAW), THE RULES OF PRACTICE AND PROCEDURE FOR THE
ARBITRATION OF COMMERCIAL DISPUTES OF AMERICAN ARBITRATION
ASSOCIATION OR ANY SUCCESSOR THEREOF ("A.A.A."), AND THE
"SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF ANY
INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON
ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING
JURISDICTION. ANY PARTY TO THIS INSTRUMENT, AGREEMENT OR
DOCUMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED
PROCEEDING, TO COMPEL ARBITRATION OF ANY INCONSISTENCY OR
CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING
JURISDICTION OVER SUCH ACTION.
i. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN FORSYTH
COUNTY, NORTH CAROLINA AND ADMINISTERED BY A.A.A. WHO WILL APPOINT AN
ARBITRATOR. ALL ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90 DAYS OF THE
DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF
CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN
ADDITIONAL 60 DAYS.
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ii. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION
SHALL BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE
STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS INSTRUMENT,
AGREEMENT OR DOCUMENT; OR (II) LIMIT THE RIGHT OF LENDER HERETO (A) TO EXERCISE
SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO FORECLOSE
AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A COURT
PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE
RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER. LENDER MAY EXERCISE
SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL
OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY ARBITRATION
PROCEEDING BROUGHT PURSUANT TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER
THIS EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN
ACTION FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A
WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO
ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH
REMEDIES.
J. CONTROLLING DOCUMENT. To the extent that this Security
Agreement conflicts with or is in any way incompatible with
any other Loan Document concerning the Obligation, any
promissory note shall control over any other document, and if
such note does not address an issue, then each other document
shall control to the extent that it deals most specifically
with an issue.
K. EXECUTION UNDER SEAL. This Agreement is being executed under
seal by Debtor(s).
L. NOTICE OF FINAL AGREEMENT. THIS WRITTEN SECURITY AGREEMENT AND
THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be
duly executed under seal by their duly authorized representatives as of the date
first above written.
BLUWAT ▇▇ ▇▇▇▇▇▇ TECHNOLOGIES, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------- -----------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------- -----------------------------
Title: Director Title: Chairman and CEO
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Attest (If Applicable) /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
[Corporate Seal]
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