EXHIBIT 10.10
SECURITY AGREEMENT
This SECURITY AGREEMENT is made as of the 18th day of August, 1998
by SEPRAGEN CORPORATION., a California corporation, with its principal
place of business at 00000 Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxx 00000
("Debtor"), in favor of K. XXXXXXX XXXXX, with an address at 000 Xxxxx
Xxxx Xxxxxxx, Xxx Xxxx, XX 00000, c/o Smart Machines (the "Secured
Party").
1. DEFINITIONS.
As used in this Agreement,
"Agreement" means this Security Agreement, as it may be amended,
modified or supplemented from time to time.
"Business Day" means a day other than Saturday or Sunday on which
banks are open for business in California.
"Collateral" means all personal property and interests in personal
property now owned or hereafter acquired by Debtor in or upon which a
security interest, lien or mortgage has been, or is now or hereafter,
granted to Secured Party, whether under this Agreement or under any of
the other Loan Documents.
"Default" means the occurrence or existence of any of the events
listed in Section 4 of this Agreement.
"Lien" means any mortgage, pledge, lien, hypothecation, security
interest or other charge, encumbrance or preferential arrangement,
including, without limitation, the retained security title of a
conditional vendor or lessor.
"Loan Documents" means, collectively, this Agreement; the Note; the
Subscription Agreement between Debtor and Secured Party (the
"Subscription Agreement"); the Patent Mortgage; and Form UCC-1, each
executed of even date herewith, and all other agreements, instruments
and documents now or hereafter executed and/or delivered by Debtor to
the Secured Party, in order to evidence or secure the Obligations, as
each may be amended, modified or supplemented from time to time.
"Note" means the Convertible Promissory Note, dated as of August
18, 1998, executed by Debtor as may be amended, modified or supplemented
or modified from time to time.
"Obligations" means all of Debtor s liabilities, obligations and
indebtedness to the Secured Party of any and every kind and nature,
whether heretofore, now or hereafter owing, arising, due or payable and
howsoever evidenced, created, incurred, acquired, or owing, whether
primary, secondary, direct, contingent, fixed or otherwise (including,
without limitation, obligations of performance) and whether arising or
existing under written agreement, oral agreement or by operation of law,
including, without limitation, all Debtor s indebtedness and obligations
to the Secured Party under (i) the Subscription Agreement; (ii) the
Note; (iii) the other Loan Documents. The term includes, without
limitation, all interest, charges, expenses, fees, reasonable attorneys
fees and disbursements and any other sum chargeable under this
Agreement, the Note, and the other Loan Documents.
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms. Terms used in this
Agreement and not defined herein or in the Note shall have the meanings
given such terms in the Code, as defined in Section 2.1 below.
2. SECURITY INTEREST.
2.1 Grant of Security Interest. To secure payment and performance
of the Obligations, Debtor hereby grants to the Secured Party a right of
setoff against and a continuing security interest in and to all of
Debtor s now existing or owned and hereafter arising or acquired: (a)
all accounts (including, without limitation, all accounts receivable),
chattel paper, claims, contract rights, leases and rental income
thereunder, leasehold interests, letters of credit, instruments and
documents ("Accounts"), and all goods sold, leased or otherwise disposed
of by Debtor which have given rise to Accounts and which have been
returned to or repossessed or stopped in transit by Debtor; (b) all
patents, copyrights and trademarks, and all applications for and
registrations of the foregoing, all franchise rights, trade names,
goodwill, beneficial interests, rights to tax refunds and all other
general intangibles of any kind or nature whatsoever ("General
Intangibles"); (c) all inventory and goods of the Debtor, wherever
located, whether in transit, held by others for the Debtor s account,
covered by warehouse receipts, purchase orders or contracts, or in the
possession of any carriers, forwarding agents, truckers, warehousemen,
vendors or other persons, including, without limitation, all raw
materials, work-in-process, finished merchandise, supplies, goods,
incidentals, office supplies, packaging materials and all materials used
or consumed in Debtor s business ("Inventory"); (d) goods (other than
Inventory), including all returned, reconsigned and repossessed goods,
machinery, equipment, vehicles, appliances, furniture, furnishings and
fixtures ("Equipment"); (e) monies, reserves, deposits, certificates of
deposit and deposit accounts and interest or dividends thereon,
guaranties, securities, cash, cash equivalents and other property
whether or not in the possession or under the control of, Secured Party
or their respective bailee; (f) all books, records, computer records,
ledger cards, programs and other computer materials, customer and
supplier lists, invoices, orders and other property and general
intangibles at any time evidencing or relating to the contents thereof
("Records"); (g) all accessions to any of the foregoing and all
substitutions, renewals, improvements and replacements of and additions
thereto; (h) all other property of Debtor, real and personal; and (i)
all products and proceeds of the foregoing (whether such proceeds are in
the form of cash, cash equivalents, proceeds of insurance policies,
Accounts, General Intangibles, Inventory, Equipment, Records or
otherwise). Debtor further assigns to Secured Party the Debtor s right
of stoppage in transit and Debtor s right to reclaim goods from
customers and Account Debtors (as hereinafter defined) under Section 2-
702 of the Illinois Uniform Commercial Code, as amended (the "Code").
Debtor and the Secured Party hereby acknowledge their mutual intention
that the security interest granted herein will attach to Collateral when
Debtor executes and delivers this Agreement or, in the case of any
Collateral acquired by Debtor after the execution and delivery hereof,
upon Debtor first acquiring rights therein. Debtor hereby acknowledges
and agrees, subject hereto, that Debtor has rights in the Collateral and
that value has been given.
2.2 Preservation of Collateral and Perfection of Security
Interests Therein. Until all of the Obligations of Debtor shall have
been indefeasibly paid and satisfied in cash, the Secured Party shall be
entitled to retain its security interests in and to all existing
Collateral, and all proceeds and products thereof. Debtor agrees that it
shall execute and deliver to the Secured Party, concurrently with the
execution of this Agreement, and at any time or times hereafter at the
request of the Secured Party, all financing statements or other
documents (and pay the cost of filing or recording the same in all
public offices deemed necessary by the Secured Party) as Secured Party
may request, in a form satisfactory to Secured Party, to perfect and
keep perfected the security interests in the Collateral or to otherwise
protect and preserve the Collateral and Secured Party s security
interests therein. Should Debtor fail to do so, Secured Party is
authorized to sign any such financing statements as Debtor s agent.
Debtor further agrees that a carbon, photographic, photostatic or other
reproduction of this Agreement or of a financing statement is sufficient
as a financing statement. Notwithstanding anything herein to the
contrary, Debtor may sell or license collateral in the ordinary course
of business.
2.3 Loss of Value of Collateral. Debtor agrees to notify Secured
Party promptly of any material loss or depreciation in the value of the
Collateral, other than loss or depreciation occurring in the ordinary
course of Debtor s business.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS.
3.1 Recordkeeping. Debtor covenants with Secured Party that Debtor
shall at all times hereafter keep accurate and complete records of its
finances, in accordance with sound accounting practices and generally
accepted accounting principles, all of which records shall be available
for inspection during Debtor s usual business hours at the request of
Secured Party.
3.2 Asset Warranties. Debtor represents and warrants to Secured
Party that the Collateral is located at the premises of Debtor as
provided for in the first paragraph hereof is not in transit. None of
the Collateral will be removed from such locations without prior written
notice to Secured Party, except for use or sale in the ordinary course
of business. Except for the security interest held by Pitney Xxxxx
Credit Corporation ("Pitney Xxxxx"), the Collateral is not subject to
any lien, encumbrance, mortgage or security interest whatsoever except
for the security interests granted to Secured Party. Debtor shall not
permit any lien, encumbrance, mortgage or security interest whatsoever
to attach to any of the Collateral, except in favor of Secured Party.
3.3 Verification of Accounts. After the occurrence of a Default
hereunder, Secured Party shall have the right, at any time or times
hereafter, in Secured Party s or in Debtor s name, to verify the
validity, amount or any other matter relating to any Accounts, by mail,
telephone, telegraph or otherwise.
3.4 Appointment of Secured Party as Debtor s Attorney-in-Fact.
Debtor hereby irrevocably designates, makes, constitutes and appoints
Secured Party (and all persons designated by Secured Party in writing to
Debtor) as Debtor s true and lawful attorney-in-fact, and authorizes
Secured Party, in Debtor s or Secured Party s name, to do the following:
at any time after the occurrence of a Default, (i) demand payment of
Accounts of Debtor; (ii) enforce payment of accounts of Debtor by legal
proceedings or otherwise; (iii) exercise all of Debtor s rights and
remedies with respect to proceedings brought to collect any Account;
(iv) sell or assign any Account of Debtor upon such terms, for such
amount and at such time or times as Secured Party deems advisable; (v)
settle, adjust, compromise, extend or renew any Account of Debtor; (vi)
discharge and release any Account of Debtor; (vii) prepare, file and
sign Debtor s name on any proof of claim in bankruptcy or other similar
document against any Account Debtor; (viii) have access to any postal
box of Debtor and notify the post office authorities to change the
address for delivery of Debtor s mail to an address designated by
Secured Party; and (ix) do all other acts and things which are
necessary, in Secured Party s discretion, to fulfill Debtor s
Obligations under this Agreement. Secured Party shall not exercise its
rights arising as a result hereof until after the occurrence of a
Default hereunder.
3.5 Notice to Account Debtors. Following the occurrence of a
Default under this Agreement, Secured Party may, in its sole discretion,
at any time or times, without prior notice to Debtor, notify any or all
Account Debtors that the Accounts of Debtor have been assigned to
Secured Party, that Secured Party has a security interest therein, and
that all payments upon such Accounts be made directly to Secured Party
or as otherwise specified by Secured Party.
3.6 Safekeeping of Assets and Asset Covenants. Secured Party shall
not be responsible for: (a) the safekeeping of the Collateral; (b) any
loss or damage to all or any part of the Collateral; (c) any diminution
in the value of all or any part of the Collateral; or (d) any act or
default of any carrier, warehouseman processor, bailee, forwarding
agency or any other person with respect to all or any part of the
Collateral. All risk of loss, damage, destruction or diminution in value
of all or any part of the Collateral of Debtor shall be borne by Debtor.
3.7 Insurance. Debtor shall insure the Collateral at all times
against all hazards specified by Secured Party, including, without
limitation, fire, theft and risks covered by extended coverage
insurance, and such policies shall be payable to Secured Party as its
interest may appear. Such policies of insurance shall be satisfactory to
Secured Party as to form, amount and insurer. Debtor shall furnish
certificates, policies or endorsements to Secured Party as proof of such
insurance, and if Debtor fails to do so, Secured Party is authorized but
not required to obtain such insurance at Debtor s expense. All policies
shall provide for at least thirty (30) days prior written notice to
Secured Party of cancellation or non-renewal. Secured Party may act as
attorney-in-fact for Debtor in making, adjusting and settling any claims
under any such insurance policies. Debtor hereby assigns to Secured
Party all of its right, title and interest to any insurance policies
insuring the Collateral, including, without limitation, all rights to
receive the proceeds of insurance, and directs all insurers to pay all
such proceeds directly to Secured Party and authorizes Secured Party to
endorse Debtor s name on any instrument for such payment.
3.8 Transfer of Collateral. Debtor shall not sell, lease,
transfer, assign or otherwise dispose of any of the Collateral or any
interest therein without the prior written consent of Secured Party in
each instance, except Inventory sold to buyers in the ordinary course of
business.
3.9 Damage to Collateral. Debtor shall immediately notify Secured
Party in writing of any destruction of, or any substantial damage to,
any of the Collateral.
3.10 Change of Place of Business. Debtor shall immediately notify
Xxxxx in writing of any change in any of its place of business or the
opening of any new place of business.
3.11 Inspection. With reasonable prior notice, Debtor shall at all
times during normal business hours allow Secured Party or its agents to
examine and inspect the Collateral wherever located as well as Debtor s
books and records, and to make extracts and copies of them, it being
understood that Secured Party shall use reasonable efforts in the normal
course of its operations to keep confidential all such information that
(a) is not in the public domain, and (b) is not required to be disclosed
by any court, agency or authority of competent jurisdiction, provided,
however, that the requirement to keep such information confidential
shall not apply to the extent necessary in order for Secured Party to
foreclose on or otherwise deal with the Collateral in the Secured
Party s best interests upon the occurrence of a Default.
3.12 Mergers, Etc. Debtor shall not become a party to any
consolidation, merger, liquidation or dissolution or organize, purchase,
assume or acquire any subsidiary or joint venture or partnership
interest or interest in any other business entity, without the prior
written consent of Secured Party.
3.13 Change of Name. Debtor shall notify Secured Party of any
intended change of Debtor s name, and will notify Secured Party when
such change becomes effective.
3.14 Organization. Debtor is a corporation duly organized, validly
existing and in good standing under the laws of the State of California.
Debtor is duly qualified and in good standing in each state in which the
failure to so qualify would have a material adverse effect on its
business.
3.15 Authority. Debtor has full corporate right and power to enter
into and perform its obligations under this Agreement and the other Loan
Documents to which Debtor is a party. The execution, delivery and
performance of this Agreement and the other Loan Documents to which
Debtor is a party have been duly authorized by all necessary corporate
action of Debtor, and this Agreement and the other Loan Documents to
which Debtor is a party constitute valid and binding obligations of
Debtor enforceable against Debtor in accordance with their respective
terms, subject to applicable bankruptcy, reorganization, insolvency or
similar laws affecting the enforcement of creditor s rights generally.
3.16 No Conflicts. The execution, delivery and performance by
Debtor of this Agreement and each of the other Loan Documents do not and
shall not:
(a) contravene or constitute a default (or an event that, with due
notice or the lapse of time, or both, would constitute a default) under
or result in any breach of, or cause or permit the acceleration of the
maturity of any debt or obligation pursuant to, Debtor s Articles of
Incorporation or any document, commitment or other agreement to which
Debtor is a party or by which any of Debtor s property is bound; or (b)
violate any statute or law or any judgment, decree, order, regulation or
rule of any court or governmental authority applicable to Debtor.
3.17 Actions or Proceedings. There are no actions or proceedings
which are pending or threatened against Debtor which might result in any
material and adverse change in its financial condition or materially
affect the Collateral pledged hereunder.
3.18 Violation of Law. Debtor is not in violation of any applicable
federal, state, municipal or county statue, regulation or ordinance
which may materially and adversely affect its business, property,
assets, operations or conditions, financial or otherwise. Except with
respect to certain employment taxes and FICA obligations, Debtor agrees
that, so long as any Obligations shall remain unpaid or outstanding,
Debtor shall comply with all applicable laws, rules, regulations, and
orders, such compliance to include, without limitation, paying before
the same become delinquent all taxes~ assessments, and governmental
charges imposed upon Debtor or upon Debtor s property.
3.19 Consents. All authorizations, consents, approvals,
registrations, exemptions and licenses required to be obtained by Debtor
or which are necessary for the borrowing contemplated by the Note and
the other Loan Documents and the execution and delivery by Debtor of the
Note and the Loan Documents to which Debtor is a party, and the
performance by Debtor of each of Debtor s obligations hereunder and
thereunder, if any, have been obtained and are in full force and effect.
3.20 Use of Proceeds. Debtor will use the proceeds of the Note for
purposes specified in the Subscription Agreement.
3.21 Accuracy of Information. All factual information heretofore or
contemporaneously furnished by or on behalf of Debtor to Secured Party
for purposes of or in connection with the Note or any transaction
contemplated hereby is, and all other factual information hereafter
furnished by or on behalf of Debtor to Secured Party will be, true and
accurate in every material respect on the date as of which such
information is dated or certified, and Debtor has not omitted and will
not omit any material fact necessary to prevent such information from
being false or misleading. Debtor has disclosed to Secured Party in
writing all facts which might materially and adversely affect the
credit, financial condition, affairs or prospects of Debtor, or Debtor s
ability to perform Debtor s obligations under the Note.
3.22 Liens. Debtor shall not, without the prior written consent of
Secured Party, create, incur, assume or suffer to exist any lien,
security interest, encumbrance or other claim of any nature whatsoever
on any of its assets, including, without limitation, the Collateral,
other than the security interest granted in favor of Secured Party or
Pitney Xxxxx.
4. DEFAULTS: RIGHTS AND REMEDIES OF SECURED PARTY.
4.1 Defaults. Each of the following occurrences shall constitute a
"Default" under this Agreement:
(a) Debtor s failure to pay when due any of the payment
obligations under this Agreement or under the Note.
(b) The occurrence of any material default by Debtor, or Debtor s
failure or neglect to perform, keep or observe any of the covenants,
conditions, promises or agreements contained in one or more of the Loan
Documents.
(c) Any representation or warranty made or deemed made by Debtor
to Secured Party herein or in any of the other Loan Documents or in any
written statement or certificate at any time given pursuant to any of
the Loan Documents is false or misleading in any material respect on the
date made.
(d) A judgment or order is rendered against Debtor the effect of
which is reasonably likely to reduce the Company ~s ability to repay
principal or interest under the Note when due.
(e) A notice of lien, levy, or assessment is filed or recorded
with respect to all or a material part of the assets of Debtor or the
Collateral by the United States, or any department, agency or
instrumentality thereof, or by any state, county, municipality or other
governmental agency or any taxes or debts owing at any time or times
hereafter to any one or more of them become a lien upon all or a
material part of the Collateral the effect of which is reasonably likely
to reduce the Company s ability to repay principal or interest under the
Note when due.
(f) All or any part of the Collateral in an amount exceeding
$10,000.00 is attached, seized, subjected to a writ or distress warrant,
or is levied upon, or comes within the possession of any receiver,
trustee, custodian or assignee for the benefit of creditors.
(g) A proceeding under any bankruptcy, reorganization, arrangement
of debt, insolvency, readjustment of debt or receivership law or statute
is filed against Debtor, which proceeding is either consented to by
Debtor or not dismissed, vacated or stayed within thirty (30) days after
the filing thereof, or a proceeding under any bankruptcy,
reorganization, arrangement of debt, insolvency, readjustment of debt or
receivership law or statute is filed by Debtor, or Debtor makes an
assignment for the benefit of creditors, or Debtor takes any corporate
action to authorize any of the foregoing.
(h) Debtor voluntarily or involuntarily dissolves or is dissolved.
(i) Debtor is enjoined, restrained, or in any way prevented by the
order of any court or any administrative or regulatory agency from
conducting all or any material part of its business affairs the effect
of which is reasonably likely to reduce the Company s ability to repay
principal or interest under the Note when due.
4.2 Rights and Remedies.
(a) Rights and Remedies Generally. Upon the occurrence of a
Default, Secured Party shall issue a Notice of Default to Debtor. Debtor
shall have thirty (30) days from receipt of such Notice of Default to
cure the Default; provided however, if an event of default was caused by
an Act of God, Company shall have sixty (60) days from the date of
receipt of the Notice of Default to cure the default (the "Cure
Period"). If Debtor fails to completely cure the Default within the Cure
Period, all of the Obligations of Debtor shall immediately and
automatically, without any additional notice of any kind, be immediately
due and payable in cash. In addition, upon the occurrence of a Default
and expiration of the Cure Period without a complete cure, Secured Party
shall have, in addition to any other rights and remedies contained in
this Agreement, the Note or in any of the other Loan Documents, all of
the rights and remedies of a secured party under the Uniform Commercial
Code, as then in effect in California, or other applicable laws, all of
which rights and remedies shall be cumulative, and non-exclusive, to the
extent permitted by law. In addition to all such rights and remedies,
the sale, lease or other disposition of the Collateral, or any part
thereof, by Secured Party after Default and expiration of the Cure
Period without a complete cure, may be for cash, credit or any
combination thereof, and Secured Party may purchase all or any part of
the Collateral at public or, if permitted by law, private sale, and in
lieu of actual payment of such purchase price, may set-off the amount of
such purchase price against the Obligations then owing. Any sales of
such Collateral may be adjourned from time to time with or without
notice. Secured Party may, in its sole discretion, cause the Collateral
to remain on the premises of Debtor, at Debtor s expense, pending sale
or other disposition of such Collateral. At such times, Secured Party
shall have the right to repair, process, preserve, protect and maintain
the Collateral and make such replacements thereof and additions thereto
as Secured Party may deem advisable. Secured Party shall have the right
to conduct such sales on the premises of Debtor, at Debtor s expense, or
elsewhere, on such occasion or occasions as Secured Party may see fit.
(b) Entry Upon Premises and Access to Information. Upon the
occurrence of a Default, Secured Party shall have the right to enter
upon (to the exclusion of Debtor) the premises of Debtor where the
Collateral is located (or is believed to be located) without any
obligation to pay rent to Debtor, or any other place or places where
such Collateral is believed to be located and kept, and remove such
Collateral therefrom to the premises of Secured Party or any agent of
Secured Party, for such time as Secured Party may desire, in order
effectively to collect or liquidate such Collateral or to retain such
Collateral in satisfaction of the Obligations, and/or Secured Party may
require Debtor to assemble such Collateral and make it available to
Secured Party at a place or places to be designated by Secured Party.
Upon the occurrence of a Default, Secured Party shall have the right to
obtain access to Debtor s data processing equipment, computer hardware
and software relating to the Collateral and to use all of the foregoing
and the information contained therein in any manner Secured Party deems
appropriate; and Secured Party shall have the right to notify post
office authorities to change the address for delivery of Debtor s mail
to an address designated by Secured Party and to receive, open and
process all mail addressed to Debtor.
(c) Sale or Other Disposition of Collateral by Secured Party.
Any notice required to be given by Secured Party of a sale, lease or
other disposition or other intended action by Secured Party, with
respect to any of the Collateral, which is deposited in the United
States mails, postage prepaid and duly addressed to Debtor at the
address specified below, at least ten (10) days prior to such proposed
action shall constitute fair and reasonable notice to Debtor of any such
action. The net proceeds realized by Secured Party upon any such sale or
other disposition, after deduction for the expense of retaking, holding,
preparing for sale, selling or the like and the reasonable attorneys
and paralegals fees and legal expenses incurred by Secured Party in
connection therewith, shall be applied as provided herein toward
satisfaction of the Obligations. Secured Party shall account to Debtor
for any surplus realized upon such sale or other disposition, and Debtor
shall remain liable for any deficiency. The commencement of any action,
legal or equitable, or the rendering of any judgment or decree for any
deficiency shall not affect Secured Party s security interest in the
Collateral until the Obligations are fully paid. Secured Party shall
have the right to commence, continue or defend proceedings in any court
of competent jurisdiction in the name of Secured Party, the "Receiver"
(as hereinafter defined) or Debtor for the purpose of exercising any of
the rights, powers and remedies set out in this Section 4.2, including,
without limitation, the institution of proceedings for the appointment
of a Receiver. Debtor agrees that Secured Party has no obligation to
preserve rights to the Collateral against any other Person. Secured
Party is hereby granted a license or other right to use, without charge,
Debtor s labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, tradestyles, trademarks, service marks and
advertising matter, or any property of a similar nature, as it pertains
to the Collateral, in completing production of, advertising for sale and
selling any such Collateral, and Debtor s rights under all licenses and
all franchise agreements shall inure to Secured Party s benefit until
the Obligations are paid.
(d) Appointment of Receiver. Upon the occurrence of a Default,
Secured Party shall have the right to appoint any Person to be an agent
or any Person to be a receiver, manager or receiver and manager (the
"Receiver") of the Collateral and to remove any Receiver so appointed
and to appoint another if Secured Party so desires; it being agreed that
any Receiver appointed pursuant to the provisions of this Agreement will
have all of the powers of Secured Party hereunder, and in addition, will
have the power to carry on the business of Debtor. The Receiver will be
deemed to be the agent of Debtor for the purpose of establishing
liability for the acts or omissions of the Receiver and Secured Party
will not be liable for such acts or omissions and, without restricting
the generality of the foregoing, Debtor hereby irrevocably authorizes
Secured Party to give instructions to the Receiver relating to the
performance of its duties as set forth herein.
(e) Advice of Counsel. Debtor acknowledges that it has been
advised by its counsel with respect to this transaction and this
Agreement, including without limitation any waivers contained herein, or
has voluntarily chosen not to consult counsel.
5. MISCELLANEOUS.
5.1 Waiver. Secured Party s failure, at any time or times
hereafter, to require strict performance by Debtor of any provision of
this Agreement shall not waive, affect or diminish any right of Secured
Party thereafter to demand strict compliance and performance therewith.
Any suspension or waiver by Secured Party of a Default under this
Agreement or a default under any of the other Loan Documents shall not
suspend, waive or affect any other Default under this Agreement or any
other default under any of the other Loan Documents, whether the same is
prior or subsequent thereto and whether of the same or of a different
kind or character. None of the undertakings, agreements, warranties,
covenants and representations of Debtor contained in this Agreement or
any of the other Loan Documents, and no Default under this Agreement or
default under any of the other Loan Documents, shall be deemed to have
been suspended or waived by Secured Party unless such suspension or
waiver is in writing signed by an officer of Secured Party, and directed
to Debtor specifying such suspension or waiver.
5.2 Costs and Attorneys Fees. If at any time or times hereafter
Secured Party employs counsel in connection with protecting or
perfecting Secured Party s security interest in the Collateral or in
connection with any matters contemplated by or arising out of this
Agreement, whether (a) to commence, defend, or intervene in any
litigation or to file a petition, complaint, answer, motion or other
pleading, (b) to take any other action in or with respect to any suit or
proceeding (bankruptcy or otherwise), (c) to consult with officers of
Secured Party to advise Secured Party with respect to this Agreement or
the other Loan Documents or the Collateral, (d) to protect, collect,
lease, sell, take possession of, or liquidate any of the Collateral, or
(e) to attempt to enforce or to enforce any security interest in any of
the Collateral, to attempt to enforce or to enforce any rights of
Secured Party to collect any of the Obligations, then in any of such
events, all of the reasonable attorneys fees arising from such
services, and any expenses, costs and charges relating thereto,
including without limitation all reasonable fees of the paralegals and
other staff employed by such attorneys, together with interest at the
rate prescribed in the Note and shall be part of the Obligations,
payable on demand and secured by the Collateral. Such interest shall
accrue at the times, and in the manner, provided for in the Note.
5.3 Expenditures by Secured Party. If Debtor shall fail to pay
taxes, insurance, assessments, costs or expenses which Debtor is, under
any of the terms hereof or of any of the other Loan Documents, required
to pay, or fails to keep the Collateral free from other security
interests, liens or encumbrances, except as permitted herein, Secured
Party may, in its sole discretion, after notice to Debtor, make
expenditures for any or all of such purposes, and the amount so
expended, together with interest thereon at the rate prescribed in the
Note and shall be part of the Obligations, payable on demand and secured
by the Collateral.
5.4 Custody and Preservation of Collateral. Secured Party shall be
deemed to have exercised reasonable care in the custody and preservation
of any of the Collateral in its possession if it takes such action for
that purpose as Debtor shall request in writing, but failure by Secured
Party to comply with any such request shall not of itself be deemed a
failure to exercise reasonable care, and no failure by Secured Party to
preserve or protect any right with respect to such Collateral against
prior parties, or to do any act with respect to the preservation of such
Collateral not so requested by Debtor, shall of itself be deemed a
failure to exercise reasonable care in the custody or preservation of
such Collateral.
5.5 Assignability; Parties. This Agreement may not be assigned by
Debtor without the prior written consent of Secured Party. Secured Party
shall not assign this Agreement without prior written consent of Debtor,
except for estate planning purposes or through law of decent and
distribution. Whenever in this Agreement there is reference made to any
of the parties hereto, such reference shall be deemed to include,
wherever applicable, a reference to the successors and permitted assigns
of Debtor and the successors and assigns of Secured Party.
5.6 Applicable Law of Severability. THIS AGREEMENT SHALL BE
CONSTRUED IN ALL RESPECTS IN ACCORDANCE WITH, AND GOVERNED BY, THE
INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PRINCIPLES) AND DECISIONS
OF THE STATE OF CALIFORNIA. Whenever 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 only to the extent of such prohibition or invalidity,
without invalidating the remainder of such provisions or the remaining
provisions of this Agreement.
5.7 Application of Payments. Notwithstanding any contrary
provision contained in this Agreement or in any of the other Loan
Documents, Debtor irrevocably waives the right to direct the application
of any and all payments at any time or times hereafter received by
Secured Party from Debtor or with respect to any of the Collateral, and
Debtor does hereby irrevocably agree that Secured Party shall have the
continuing exclusive right to apply and reapply any and all payments
received at any time or times hereafter, whether with respect to the
Collateral or otherwise, against the Obligations in such manner as
Secured Party may deem advisable, notwithstanding any entry by Secured
Party upon any of its books and records.
5.8 Marshaling; Payments Set Aside. Secured Party shall be under
no obligation to xxxxxxxx any assets in favor of Debtor or any other
Person or against or in payment of any or all of the Obligations. To the
extent that Debtor makes a payment or payments to Secured Party or
Secured Party enforces its security interests or exercises its rights of
setoff, and such payment or payments or the proceeds of such enforcement
or setoff or any part thereof are subsequently invalidated, declared to
be fraudulent or preferential, set aside and/or required to be repaid to
a trustee, receiver or any other party under any bankruptcy law, state,
federal or foreign law, common law or equitable cause, then to the
extent of such recovery, the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made. or such enforcement or
setoff had not occurred.
5.9 Section Titles. The section and subsection titles contained in
this Agreement shall be without substantive meaning or content of any
kind whatsoever and are not a part of the agreement between the parties.
5.10 Continuing Effect. This Agreement, Secured Party s security
interests in the Collateral of Debtor, and all of the other Loan
Documents shall continue in full force and effect so long as any
Obligations of Debtor shall be owed to Secured Party.
5.11 Notices. Except as otherwise expressly provided herein, any
notice required or desired to be served, given or delivered hereunder
shall be in writing, and shall be deemed to have been validly served,
given or delivered upon the earlier of (a) personal delivery to the
address set forth below (b) delivery by facsimile or similar means of
delivery and (c) in the case of mailed notice, three (3) days after
deposit in the United States mails, with proper postage for certified
mail, return receipt requested, prepaid, or in the case of notice by
Federal Express or other reputable overnight courier service, one (1)
Business Day after delivery to such courier service, addressed to the
party to be notified as follows:
(i) If to Secured Party at:
K. Xxxxxxx Xxxxx
c/o Smart Machines
000 Xxxxx Xxxx Xxxxxxx
Xxx Xxxx, XX 00000
Telephone No.: (408) 324-1234 ext. 104
Facsimile No.: (000) 000-0000
(ii) If to Debtor at:
Sepragen Corporation
00000 Xxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: President
Telephone No: (5l0)-476-0690
Facsimile No: (000)-000-0000
or to such other address as each party designates to the other in
the manner herein prescribed.
5.12 Equitable Relief. Debtor recognizes that, in the event Debtor
fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, any remedy at law may prove to be
inadequate relief to Secured Party; therefore, Debtor agrees that
Secured Party, if Secured Party so requests, shall be entitled to
temporary and permanent injunctive relief.
5.13 Entire Agreement. This Agreement, together with the Loan
Documents executed in connection herewith, constitutes the entire
Agreement among the parties with respect to the subject matter hereof,
and supersedes all prior written or oral understandings with respect
thereto. This Agreement may be amended only by mutual agreement of the
parties evidenced in writing and signed by the party to be charged
therewith.
5.14 Indemnity. Debtor agrees to defend, protect, indemnify and
hold harmless Secured Party and each and all of its respective officers,
directors, employees, attorneys and agents ("Indemnified Parties") from
and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including, without
limitation, the fees and disbursements of counsel for the Indemnified
Parties in connection with any investigative, administrative or judicial
proceeding, whether or not the Indemnified Parties shall be designated
by a party thereto), which may be imposed on, incurred by, or asserted
against any Indemnified Party (whether direct, indirect or consequential
and whether based on any federal, state, local or foreign laws or other
statutory regulations, including without limitation securities,
environmental and commercial laws and regulations, under common law or
at equitable cause, or on contract or otherwise) in any manner relating
to or arising out of this Agreement or the other Loan Documents, or any
act, event or transaction related or attendant thereto (including any
liability under federal, state, local or foreign environmental laws or
regulations); provided, that Debtor shall not have any obligation to any
Indemnified Party hereunder with respect to matters caused by or
resulting from the willful misconduct or gross negligence of such
Indemnified Party. To the extent that the undertaking to indemnify, pay
and hold harmless set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy,
Debtor shall contribute the maximum portion which it is permitted to pay
and satisfy under applicable law, to the payment and satisfaction of all
matters incurred by the Indemnified Parties. Any liability, obligation,
loss, damage, penalty, cost or expense incurred by the Indemnified
Parties shall be paid to the Indemnified Parties on demand, together
with interest thereon at the rate prescribed for in the Note from the
date incurred by the Indemnified Parties until paid by Debtor, be added
to the Obligations and be secured by the Collateral. The provisions of
and undertakings and indemnifications set out in this Section 5.14 shall
survive the satisfaction and payment of the Obligations.
5.15 Representations and Warranties. Notwithstanding anything to
the contrary contained herein, each representation or warranty contained
in this Agreement or any of the other Loan Documents shall survive the
execution and delivery of this Agreement and the other Loan Documents
and the repayment of the Obligations.
5.16 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
5.17 Conflict. To the extent that any provision or term of the
Subscription Agreement or the Note conflict with any provision or term
herein, the term or provision of this Agreement shall govern.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
day and year above written.
SEPRAGEN CORPORATION
By: /s/ Xxxxx Xxxxxx
Its: President
/s/ K. Xxxxxxx Xxxxx
K. XXXXXXX XXXXX
EXHIBIT A TO UCC-1 FINANCING STATEMENT
Debtor: Secured Party:
Sepragen Corporation K. Xxxxxxx Xxxxx
00000 Xxxxxxxx Xxxxxx c/o Smart Machines Inc.
Xxxxxxx, XX 00000 000 Xxxxx Xxxx Xxxxxxx
Xxx Xxxx, XX 00000
This Financing Statement covers all of Debtor's right, title and
interest in and to the following types of property, whether currently
existing or owned or hereafter arising or acquired, wheresoever located
(collectively, the "Collateral"):
(a) accounts (including, without limitation, all accounts
receivable), chattel paper, claims, contract rights, leases and
rental income thereunder, leasehold interests, letters of credit,
instruments and documents ("Accounts"), and all goods sold, leased
or otherwise disposed of by Debtor which have given rise to
Accounts and which have been returned to or repossessed or stopped
in transit by Debtor;
(b) all patents, copyrights and trademarks, and all applications
for and registrations of the foregoing, all franchise rights, trade
names, goodwill, beneficial interests, rights to tax refunds and
all other general intangibles of any kind or nature whatsoever
("General Intangibles");
(c) all inventory and goods of the Debtor, wherever located,
whether in transit, held by others for the Debtor's account,
covered by warehouse receipts, purchase orders or contracts, or in
the possession of any carriers, forwarding agents, truckers,
warehousemen, vendors or other persons, including, without
limitation, all raw materials, work-in-process, finished
merchandise, supplies, goods, incidentals, office supplies,
packaging materials and all materials used or consumed in Debtor's
business ("Inventory");
(d) goods (other than Inventory), including all returned,
reconsigned and repossessed goods, machinery, equipment, vehicles,
appliances, furniture, furnishings and fixtures ("Equipment");
(e) monies, reserves, deposits, certificates of deposit and
deposit accounts and interest or dividends thereon, guaranties,
securities, cash, cash equivalents and other property whether or
not in the possession or under -the control of Agent, any Secured
Party or their respective bailee;
(f) all books, records, computer records, ledger cards, programs
and other computer materials, customer and supplier lists,
invoices, orders and other property and general intangibles at any
time evidencing or relating to the contents thereof ("Records");
(g) all accessions to any of the foregoing and all substitutions,
renewals, improvements and replacements of and additions thereto;
(h) all other property of Debtor, real and personal; and
(i) all products and proceeds of the foregoing (whether such
proceeds are in the form of cash, cash equivalents, proceeds of
insurance policies, Accounts, General Intangibles, Inventory,
Equipment, Records or otherwise).
