SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") made as of the
1st day of April, 1996 is given by Ozo Diversified Automation,
Inc., a Colorado corporation ("Debtor"), to Xxxxxx X. Xxxxxxx,
Xxxxxx Xxxx, Xxxxx X. Xxxxxx, Xxxxx X. Xxxxxx and Xxxx Xxxxxxx
(collectively, the "Secured Parties").
R E C I T A L S:
A. Debtor has borrowed the principal amount of One Hundred
Thousand Dollars ($100,000.00) in the aggregate from Secured
Parties, which is evidenced by a series of Promissory Notes of
even date herewith from Debtor to each of Secured Parties
(collectively, the "Notes").
B. In order to induce Secured Parties to make said loan to
Debtor, Debtor has agreed to grant to each of Secured Parties a
security interest in any and all of Debtor's right, title and
interest in and to any and all Accounts as defined in the Uniform
Commercial Code as in effect from time to time in the State of
Florida including but not limited to any and all accounts
receivable now or hereafter existing (the "Collateral").
NOW, THEREFORE, with reference to the above recitals, and in
reliance thereon, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Creation of Security Interest. Debtor hereby grants to
each of Secured Parties a security interest in, and does hereby
collaterally assign, hypothecate, pledge, mortgage, convey and
set over unto Secured Parties, the Collateral and all of Debtor's
present and hereafter acquired right, title and interest in and
to the Collateral, for the purpose of securing payment of the
principal of and interest on and all other amounts and payments
due on account of the Notes (the "Indebtedness") and the
performance of all agreements, covenants, terms and conditions
contained in the Notes and this Security Agreement. The security
interest of each of the Secured Parties ranks equally and ratably
without priority over one another.
2. Warranties, Representations and Covenants of Debtor.
Debtor hereby warrants, represents and covenants to Secured
Parties as follows:
(a) Debtor is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Colorado. Debtor has full corporate power and authority to
conduct its business as it is currently conducted or proposed to
be conducted, to own all of its properties and to execute,
deliver and perform this Agreement and the Notes and to perform
its obligations hereunder and thereunder.
(b) The execution and delivery of this Agreement and the
Notes and the performance of Debtor's obligations hereunder and
thereunder have been duly authorized by all requisite corporate
action on the part of Debtor. This Agreement and the Notes have
been duly executed and delivered by Debtor and constitute the
legal and valid obligations of Debtor, enforceable against Debtor
in accordance with their respective terms. The execution,
delivery and performance of this Agreement and the Notes, and the
taking of any and all actions contemplated thereby, will not
constitute a breach or default under, or be in conflict with, any
contractual or other obligations to which Debtor or by which the
Collateral is bound.
(c) Except for the security interest granted hereby, a
security interest granted to Ariel Electronics, Inc. (for which a
Subordination Agreement has been signed), and a security interest
granted to Professional Bank, Debtor is and will be the sole
owner of the Collateral, free and clear from any lien, security
interest, encumbrance or adverse claim of any kind. Debtor will
not permit any financing statement (other than the financing
statement filed by Professional Bank) to be filed with respect to
the Collateral or any portion thereof except in favor of Secured
Parties. Debtor will notify Secured Parties of, and will defend
the Collateral against, all claims and demands of all persons at
any time claiming the same or any interest therein.
(d) The security interest granted to Professional Bank was
granted to secure a line of credit pursuant to which the Company
may borrow up to $30,000. As of the date of this Agreement, the
Company had borrowed under the line of credit a total of $30,000.
In addition, the Company has executed a short term note in favor
of Professional Bank in the amount of $50,000. The Company
covenants and agrees that until the Notes have been paid in full,
the Company will not borrow in excess of $30,000 under the line
of credit and will not increase the amount available to the
Company pursuant to the line of credit. The Company covenants
and agrees that it will pay in full the short term note to
Professional Bank by May 8, 1996. Moreover, until the Notes have
been paid in full, the Company will not borrow any additional
monies from Professional Bank.
(e) The chief executive offices of Debtor are at 0000 Xxxx
Xxxxxx Xxxxxx, Xxxxx X, Xxxxxx, Xxxxxxxx 00000. Debtor will not
change the address of its chief executive offices without at
least thirty (30) days' advance notice to Secured Parties.
(f) A financing statement covering certain of the
Collateral is on file with the State of Colorado for Professional
Bank. Debtor will at its own cost and expense, upon demand,
furnish to Secured Parties such further information and will
execute and deliver to Secured Parties such financing statements
and other documents in form satisfactory to Secured Parties and
will do all such acts as Secured Parties may at any time or from
time to time request or as may be necessary or appropriate to
establish and maintain a perfected security interest in the
Collateral as security for the Notes, subject to no other liens
or encumbrances, other than liens or encumbrances benefiting
Professional Bank; and Debtor will pay the cost of filing or
recording such financing statements or other documents, in all
public offices wherever filing or recording is deemed desirable
by Secured Parties.
(g) Debtor shall furnish promptly to Secured Parties such
information concerning the Collateral as Secured Parties may from
time to time reasonably request. Debtor shall permit and hereby
authorizes Secured Parties to examine and inspect the Collateral
and any portion thereof wherever the same may be located. Debtor
shall, at the request of Secured Parties, assemble the Collateral
or such portion thereof as may be designated by Secured Parties,
together with all documents and records pertaining thereto, at
such place as Secured Parties may designate.
3. Default. If any one or more of the following events
("Events of Default") shall occur:
(a) Debtor shall fail to pay the principal or interest under the
Notes when due;
(b) Debtor fails to observe or perform any covenant, condition
or agreement required to be observed or performed by Debtor
hereunder;
(c) any representation or warranty made by Debtor herein is
false or incorrect in any material respect; or
(d) any breach, violation or failure to perform any covenant,
condition or agreement contained in the Subordination Agreement.
then Xxxxxx X. Xxxxxxx, as representative of the Secured Parties,
may, in addition to exercising the remedies specified in the
Notes and otherwise available to Secured Parties at law or in
equity, exercise the rights and remedies provided in this
Agreement.
4. Remedies upon Default. Upon the occurrence of an Event
of Default, Xxxxxx X. Xxxxxxx, as representative of the Secured
Parties, may, without further notice, and to the extent permitted
by law, pursue any one or more of the following remedies
concurrently or successively, it being the intent hereof that
none of such remedies shall be to the exclusion of any others:
(a) make such payments and do such acts as Xxxxxx X. Xxxxxxx may
deem necessary to protect the security interest of the Secured
Parties in the Collateral, including without limitation, paying,
purchasing, contesting or compromising any encumbrance, charge,
claim or lien which is prior to or superior to the security
interest granted hereunder and, in exercising any such powers or
authority, pay all expenses incurred in connection therewith, and
all funds expended by Secured Parties in protecting its security
interest shall be deemed additional indebtedness secured by this
Agreement;
(b) require Debtor to assemble the Collateral, or any portion
thereof, at any place or places designated by Xxxxxx X. Xxxxxxx,
and promptly to deliver such Collateral to Xxxxxx X. Xxxxxxx, or
another agent or representative designated by them;
(c) publicly or privately sell, or otherwise dispose of the
Collateral, upon terms and in such manner as Secured Parties may
determine. Secured Parties may be a purchaser of the Collateral
at any public sale. Xxxxxx X. Xxxxxxx will give Debtor
reasonable notice of the time and place of any public sale
thereof or of the time after which any private sale or any other
intended disposition thereof is to be made, and such notice, if
given to Debtor pursuant to the provisions of Section 6 hereof at
least five (5) days prior to the date of any public sale or
disposition or the date after which any private sale or
disposition may occur, shall constitute reasonable notice of such
sale, lease or other disposition. Xxxxxx X. Xxxxxxx, on behalf
of the Secured Parties, may postpone or adjourn any such sale of
the Collateral from time to time by an announcement at the time
and place of sale or by announcement at the time and place of
such postponed or adjourned sale, without being required to give
a new notice of sale. Further, Debtor waives and releases any
cause of action and claim against Secured Parties as a result of
Secured Parties' possession, collection or sale of the
Collateral, any liability or penalty for failure of Secured
Parties to comply with any requirement imposed on Secured Parties
relating to notice of sale, holding of sale or reporting of sale
of the Collateral, and, to the extent permitted by law, any right
of redemption from such sale;
(d) notify any account debtor or any other party obligated on or
with respect to any of the Collateral to make payment to Secured
Parties or its nominee of any amounts due or to become due
thereunder or with respect thereto and otherwise perform its
obligations with respect to the Collateral on behalf of and for
the benefit of the Secured Parties. Xxxxxx X. Xxxxxxx, as
representative of the Secured Parties, may enforce collection and
performance with respect to any of the Collateral by suit or
otherwise, in its own name or in the name of Debtor or a nominee,
and surrender, release, or exchange all or any part thereof; and
compromise, extend or renew (whether or not for longer than the
original period) or transfer, assign or endorse for collection or
otherwise, any indebtedness or obligation with respect to the
Collateral, or evidence thereof, and upon request of Xxxxxx X.
Xxxxxxx, as representative of the Secured Parties, Debtor will,
at its own expense, notify any person obligated on or with
respect to any of the Collateral to make payment and performance
directly to, in the name of, and on behalf of Secured Parties of
any amounts or performance due or to become due thereunder or
with respect thereto; and
(e) exercise any remedies of a secured party under the Uniform
Commercial Code or any other applicable law.
To effectuate the foregoing, Debtor hereby agrees that if
Xxxxxx X. Xxxxxxx, as representative of the Secured Parties,
demands or attempts to take possession of the Collateral or any
portion thereof in exercise of its rights and remedies hereunder,
Debtor will immediately turn over and deliver possession thereof
to Secured Parties, and Debtor authorizes, to the extent Debtor
may now or hereafter lawfully grant such authority, Secured
Parties, their employees and agents, and potential bidders or
purchasers to enter upon any or all of the premises where the
Collateral or any portion thereof may at the time be located (or
believed to be located) and Xxxxxx X. Xxxxxxx, on behalf of the
Secured Parties, may (i) remove the same therefrom, (ii) manage
the Collateral or any portion thereof, (iii) maintain the
Collateral or any portion thereof, (iv) view, inspect and prepare
for sale, the Collateral or any portion thereof, (v) sell,
dispose of or consume the same or bid thereon. In the event
Xxxxxx X. Xxxxxxx, as representative of the Secured Parties,
seeks possession of the Collateral through replevin or other
court process, Debtor hereby irrevocably waives (a) any bond,
surety or security required as an incident to such possession,
and (b) any demand for possession of the Collateral prior to
commencement of any suit or action to recover possession thereof.
Debtor hereby indemnifies, defends, protects and holds
harmless Secured Parties from and against any and all damages,
liabilities, claims and obligations which may be incurred,
asserted or imposed upon Secured Parties as a result of or in
connection with any of the Collateral or as a result of Secured
Parties' seeking to obtain performance of any of the obligations
due with respect to the Collateral, except from such damages,
liabilities, claims or obligations as result from gross
negligence or intentional misconduct of Secured Parties.
Xxxxxx X. Xxxxxxx, as representative of the Secured Parties,
shall have the right to enforce one or more remedies hereunder,
successively or concurrently, and such action shall not operate
to estop or prevent the Secured Parties from pursuing any further
remedy which it may have, and any repossession or retaking or
sale of the Collateral pursuant to the terms hereof shall not
operate to release Debtor until full payment of any deficiency
has been made in cash.
5. Application of Proceeds. The proceeds of disposition
of the Collateral shall be applied in the following order to:
(a) the reasonable expenses of retaking, holding, preparing for
sale, selling and the like, including reasonable attorneys' fees
and legal expenses incurred by Secured Parties; and
(b) the Notes.
Secured Parties shall account to Debtor for any surplus, and
Debtor shall remain liable for any deficiency.
6. Notices. Any notice, demand or other communication
which Debtor or Secured Parties may desire or may be required to
give to the other shall be in writing, and shall be deemed given
if and when personally delivered, or on the first business day
following delivery to a nationally recognized courier service for
next business day delivery, charges billed to or prepaid by
shipper, or the second business day after being deposited in
United States registered or certified mail, postage prepaid,
addressed to the party for whom it is intended at its or his
address set forth below, or to such other address as Debtor or
Secured Parties may have designated by written notice given in
accordance herewith:
If to the Secured Parties:
c/x Xxxxxx & Xxxxxxx Incorporated
0000 Xxxx Xxxxxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
If to Debtor: Ozo Diversified Automation, Inc.
0000 Xxxx Xxxxxx Xxxxxx
Xxxxx X
Xxxxxx, Xxxxxxxx 00000
Attention: Xx. Xxxxxxxx Xxxxxxx-Xxxxxxx,
President
Except as otherwise specifically required herein, notice of the
exercise of any right, option or power granted to Secured Parties
by this Agreement is not required to be given.
7. Waiver. By exercising or failing to exercise any of
its rights, options or elections hereunder, Secured Parties shall
not be deemed to have waived any breach or default on the part of
Debtor or to have released Debtor from any of its obligations
hereunder, unless such waiver or release is in writing and signed
by Secured Parties. In addition, the waiver by Secured Parties
of any breach hereof or default in payment of any amounts due
under the Notes shall not be deemed to constitute a waiver of any
succeeding breach or default.
8. Binding Agreement. This Agreement and all provisions
hereof shall be binding upon Debtor, its successors and assigns
and all other persons or entities claiming under or through
Debtor, and the word "Debtor," when used herein, shall include
all such persons or entities and any others liable for the
payment of the indebtedness secured hereby or any part thereof,
whether or not they have executed this Agreement. The word
"Secured Parties," when used herein, shall include the
successors, endorsees and assigns of Secured Parties.
9. Governing Law; Interpretation. This Agreement shall be
governed by the laws of the State of Florida, without application
of the principles of conflicts of law; except that the perfection
of the security interest granted by Debtor to Secured Parties
pursuant to this Agreement shall be governed by the laws of the
State of Colorado. Wherever possible each provision of this
Agreement shall be interpreted in such a manner as to be
effective and valid under applicable law, but if any provision of
this Agreement shall be prohibited by or invalid under such law,
such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
Time is of the essence in this Agreement.
10. Miscellaneous. Neither this Agreement nor any
provision hereof may be amended, modified, waived, discharged or
terminated nor may any of the Collateral be released, except by
an instrument in writing duly signed by or on behalf of Secured
Parties hereunder. The section headings are used herein for
convenience of reference only and shall not define or limit the
provisions of this Agreement. As used in this Agreement, the
singular shall include the plural, and the plural shall include
the singular, and masculine, feminine, and neuter pronouns shall
be fully interchangeable, where the context so requires.
IN WITNESS WHEREOF, Debtor has caused this Agreement to be
executed by its officers thereunto duly authorized as of the day
and year first above written.
DEBTOR:
OZO DIVERSIFIED AUTOMATION,
INC., a Colorado corporation
By:
Xxxxxxxx Xxxxxxx-Xxxxxxx,
President
Xxxxxx X. Xxxxxxx
Xxxxxx Xxxx
Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxx
Xxxx Xxxxxxx
