SECURITY AGREEMENT
EXHIBIT
10.2
THIS
SECURITY AGREEMENT (“Agreement”), dated as of September 9, 2008, is made by
TELKONET, INC. and Ethostream, LLC. (the “Debtor” or “Borrower”) in favor of
THERMO CREDIT, L.L.C. (“Lender”), who agree as follows:
RECITALS
A. Borrower
is or will be indebted unto the Lender for loans made or to be made from time to
time pursuant to that certain Commercial Business Loan Agreement for Telkonet,
Inc. Line of Credit between the Borrower and Lender (as amended, supplemented,
replaced or restated from time to time, the “Loan Agreement”).
B. In
order to secure the full and punctual payment and performance of the
Indebtedness (as hereinafter defined) of Borrower to Lender, Debtor has agreed
to execute and deliver this Agreement and to grant a continuing security
interest in and to the Collateral (as hereafter defined).
AGREEMENT
ARTICLE
1
GENERAL
TERMS
Section
1.1 Terms
Defined Above or Elsewhere. As used in this Agreement, the
terms defined above shall have the meanings indicated.
Section
1.2 Certain
Definitions. As used in this Agreement, the following
additional terms shall have the meanings indicated:
“Accounts”
means all “accounts” (as defined in the UCC) now owned or hereafter acquired by
Debtor, and shall also mean and include all accounts receivable, notes, notes
receivable, drafts, acceptances, book debts and similar documents and other
monies, obligations or indebtedness owing or to become owing to Debtor arising
from the sale, lease or exchange of goods or other property by Debtor or the
performance of services by Debtor or under any contracts for any of the
foregoing (whether or not yet earned by performance on the part of Debtor), in
each case whether now in existence or hereafter arising or
acquired.
“Chattel
Paper” means all “chattel Paper” (as defined in the UCC) now owned or hereafter
acquired by the Debtor, whether paper or electronic.
“Collateral”
has the meaning set forth in Section 2 of this Agreement.
“Collateral
Documents” means collectively all mortgages, pledges, security agreements and
other documents by which Debtor grants liens and security interests in immovable
or movable property to the Lender.
“Documents”
means all “documents” (as defined in the UCC) or other receipts covering,
evidencing or representing goods, now owned or hereafter acquired by
Debtor.
“Equipment”
means all equipment (as defined in the UCC) now owned or hereafter acquired by
Debtor, wherever located, together with all additions, accessories,
parts, attachments, special tools and accessions now and hereafter affixed
thereto or used in connection therewith, and all replacements thereof and
substitutions therefor.
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“Event of
Default” has the meaning set forth in the Loan Agreement.
“General
Intangibles” means all general intangibles (as defined in the UCC) now owned or
hereafter acquired by Debtor, including without limitation, (i) all contractual
rights and obligations or indebtedness owing to Debtor from whatever source
arising; (ii) all things in action, rights represented by judgments and claims
arising out of tort and other claims relating to the Collateral (including the
right to assert and otherwise be the proper party of interest to commence and
prosecute actions); (iii) all goodwill, patents, patent licenses, trademarks,
trademark licenses, trade names, service marks, trade secrets, rights in
intellectual property, copyrights, permits and licenses; (iv) all rights or
claims in respect of refunds for taxes paid; (v) all rights in respect of any
pension plan or similar arrangement maintained for employees of Debtor, and (vi)
all deposit accounts of Debtor maintained with the Lender.
“Indebtedness”
means all debts, obligations, indebtedness and liabilities of every kind and
character of the Debtor, whether individual, joint and several (solidary),
contingent or otherwise, now or hereafter existing in favor of the Lender,
including, without limitation, all liabilities, interest, costs and fees,
arising under or from any note, open account, overdraft, credit card, lease,
Rate Management Transaction, letter of credit application, endorsement, surety
agreement, guaranty, acceptance, foreign exchange contract or depository service
contract, whether payable to the Lender or to a third party and subsequently
acquired by the Lender, any monetary obligations (including interest) incurred
or accrued during the pendency of any bankruptcy, insolvency, receivership or
other similar proceedings, regardless of whether allowed or allowable in such
proceeding, and all renewals, extensions, modifications, consolidations,
rearrangements, restatements, replacements or substitutions of any of the
foregoing. The term “Rate Management Transaction” in this Agreement
means any transaction (including an agreement with respect thereto) that is a
rate swap, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, forward transaction, currency swap transaction,
cross-currency rate swap transaction, currency option, derivative transaction or
any other similar transaction (including any option with respect to any of these
transactions) or any combination thereof, whether linked to one or more interest
rates, foreign currencies, commodity prices, equity prices or other financial
measures.
“Instruments”
means all “instruments” (as defined in the UCC) now owned or hereafter acquired
by Debtor, including without limitation, all promissory notes, bills of exchange
and trade acceptances, now owned or hereafter acquired by Debtor.
“Inventory”
means all goods held for sale or lease, or furnished or to be furnished under
contracts of service, or consumed in the Debtor's business, including without
limitation raw materials, intermediates, work in process, packaging materials,
finished goods, semi-finished inventory, scrap inventory, manufacturing supplies
and spare parts, all such goods that have been returned to or repossessed by or
on behalf of the Debtor, and all such goods released to the Debtor or to third
parties under trust receipts or similar documents.
“Lien”
means any interest in property securing an obligation owed to, or a claim by, a
Person other than the owner of the property, whether such interest is based on
jurisprudence, statute or contract, and including but not limited to the lien or
security interest arising from a mortgage, encumbrance, pledge, security
agreement, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes. The term “Lien” shall include reservations,
exceptions, encroachments, easements, servitudes, usufructs, rights-of-way,
covenants, conditions, restrictions, leases and other title exceptions and
encumbrances affecting property. For the purposes of this Agreement,
Debtor shall be deemed to be the owner of any property which it has acquired or
holds subject to a conditional sale agreement, financing lease or other
arrangement pursuant to which title to the property has been retained by or
vested in some other Person for security purposes.
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“Permitted
Liens” means the Security Interests and any other Liens in favor of the Lender
or permitted by the Lender in writing to be created or assumed or to otherwise
exist on the Collateral, including any and all liens created pursuant to the
Security Agreement by and between Borrower and YA Global Investments, L.P. as of
May 30, 2008.
“Person”
means any individual, corporation, partnership, limited liability company, joint
venture, association, joint stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof, or any other form of
entity.
“Proceeds”
means all cash and non-cash proceeds of, and all other profits, rentals or
receipts, in whatever form, arising from the collection, sale, lease, exchange,
assignment, licensing or other disposition of, or realization upon, Collateral,
all rights arising out of Collateral, and all additions to, substitutions for or
accessions of any Collateral, including without limitation proceeds from the
sale or other disposition of the business of the Debtor generally (including its
goodwill, trade names, trademarks, customer lists, etc.) and/or from the sale or
other disposition of all or substantially all of the assets of the Debtor other
than in the ordinary course of business, all claims of Debtor against third
parties for loss or nonconformity of, or interference with the use of, defects
or infringement of rights in, or damage to or destruction of any Collateral and
all claims of Debtor against third parties for proceeds payable under, or
unearned premiums with respect to, policies of insurance in respect of, any
Collateral, and any condemnation or requisition payments with respect to any
Collateral, and including proceeds of all such proceeds, in each case whether
now existing or hereafter arising.
“Security
Interests” means the security interests in the Collateral and Proceeds granted
hereunder securing the Indebtedness.
“UCC”
means the Uniform Commercial Code, Commercial Laws - Secured Transactions
(Louisiana Revised Statutes 10:9-101 through 9-710) in the State of Louisiana,
as amended from time to time; provided that if by
reason of mandatory provisions of law, the perfection or the effect of
perfection or non-perfection of the Security Interests in any Collateral or the
priority of security interests in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than Louisiana, “UCC” means
the Uniform Commercial Code as in effect in such other jurisdiction for purposes
of the provisions hereof relating to such perfection or effect of perfection or
non-perfection or priority.
ARTICLE
2
SECURITY
INTEREST
Section
2.1 The
Security Interests. In order to secure the full and punctual
payment and performance of all present and future Indebtedness, Debtor hereby
grants to the Lender a continuing security interest in and to all rights, title
and interest of Debtor in, to or under the following property, whether now owned
or existing or hereafter acquired or arising and regardless of where located,
together with all additions thereto, substitutions therefor and replacements
thereof:
(i)
the Inventory;
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(ii)
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all
books and records, including without limitation computer lists, credit
files, computer programs, tapes, disks, punch cards, date processing
software, transaction files, master files, printouts (and other computer
materials and records) of Debtor pertaining to any of the
Collateral;
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(iii)
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all
Proceeds and products of all or any of the Collateral described in clauses
(i) through (ii) hereof.
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The term
“Collateral” means each and all of the items and property rights described in
clauses (i) through (iii) above.
Section
2.2 No
Liability. The Security Interests are granted as security only
and shall not subject the Lender to, or transfer or in any way affect or modify,
any obligation or liability of Debtor with respect to any of the Collateral or
any transaction in connection therewith.
Section
2.3 Intercreditor Agreement;
Acknowledgement of Existing Security Interest. Lender
acknowledges the validity of the Convertible Debenture and Security Agreement
between Debtor and YA Global Investments, L.P. (“YA”). The rights and
obligations set forth herein are subject to the letter agreement of even date
herewith by and between the Lender, Borrower and YA.
ARTICLE
3
REPRESENTATIONS
AND WARRANTIES
Debtor
represents and warrants to the Lender that:
Section
3.1 No
Liens. Other than financing statements or other similar or
equivalent documents or instruments with respect to the Security Interests and
Permitted Liens, no financing statement, mortgage, deed of trust, security
agreement or other record covering all or any part of the Collateral is on file
or of record in any jurisdiction in which such filing or recording would be
effective to perfect a Lien on such Collateral. No Collateral is in
the possession of any Person (other than Debtor) asserting any claim thereto or
security interest therein, except that the Lender or its designee may have
possession of Collateral as contemplated hereby. No Person other than
the Lender has control of any part of the Collateral.
Section
3.2 Name. The
name of the Debtor as it appears in its articles of organization is as it
appears on page 1 of this Agreement.
Section
3.3 Organization Identification
Numbers. The organization identification numbers of the
Debtors are:
Debtor State of
Incorporation/Organization Organizational ID
#
Telkonet,
Inc. Utah
00-0000000
Ethostream
LLC Wisconsin 00-0000000
Section
3.4 Chief Executive
Office. The principal office of the Debtor is
located at 00000 Xxxxxx Xxxxxxx Xxxxxxx, Xxxxxxxxxx, XX 00000
Section
3.5 No Inconsistent
Agreements. The Debtor has not performed any acts or signed
any agreements which might prevent the Lender from enforcing any of the terms of
this Agreement or which would limit the Lender in any such
enforcement.
Section
3.6 Title. Debtor
has good and merchantable title to the Collateral free of Liens. Debtor has not
heretofore conveyed or agreed to sell, lease, transfer, exchange, license or
otherwise dispose of or encumber any Collateral in any way, except in favor of
the Lender.
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Section
3.9 Special
Collateral. No part of the Collateral consists or will consist
of consumer goods, crops, farm products, timber, mobile goods, or minerals and
the like (including oil and gas) or accounts resulting from the sale thereof, or
motor vehicles.
ARTICLE
4
COVENANTS
Section
4.1 Notice of
Changes. Without limiting the generality of any covenant with
respect thereto set forth in the Loan Agreement, Debtor will not change its
name, identity, organization identification number in any manner unless it shall
have given the Lender at least 30 days’ prior written notice
thereof.
Section
4.2 Filing. Debtor
hereby authorizes the Lender to file financing statements from time to time,
without authentication by Debtor, in jurisdictions deemed appropriate by the
Lender describing the Collateral. Debtor shall pay all costs of, or
incidental to, the recording or filing of any financing, correction, amendment,
continuation, termination or other statements concerning the
Collateral. Debtor shall not file any termination statements relative
to the financing statements filed in connection with this Agreement, unless and
until all rights and obligations of Debtor under this facility have been
satisfied. Debtor shall notify the Lender in writing
immediately upon filing any correction statements relating to the financing
statements filed in connection with this Agreement; provided, that Debtor
acknowledges that the filing by Debtor of any such correction statement will
result in an Event of Default if the substance thereof contradicts the terms of
this Agreement.
Section
4.3 Condition of Equipment and
Inventory. Debtor will maintain, preserve and keep the
Equipment at all times in thorough repair and good working order and condition
(normal wear and tear excepted), and from time to time make all needful repairs,
renewals and additions so that its value and the Security Interests shall at no
time become impaired. Debtor will not do or permit anything to be
done to the Collateral that may violate the terms of any insurance covering the
Collateral or any part thereof.
Section
4.4 Insurance. Reference
is hereby made to the Loan Agreement, which contains the agreement between
Debtor and the Lender as to insurance required to be maintained on the
Collateral and the related covenants of Debtor in connection
therewith.
Section
4.5 Transfer and Other
Liens. Debtor will not encumber the Collateral, or any part
thereof, without the prior written consent of the Lender and will not permit any
Lien to attach to the Collateral, or any part thereof, other than Permitted
Liens, except that Debtor may, in the ordinary course of its business and in the
absence of an Event of Default, collect its Accounts, and General Intangibles,
dispose of obsolete or unusable items of Equipment and otherwise dispose of
Collateral.
Section
4.6 Right
of Inspection and Information. Reference is hereby made to the
Loan Agreement, which contains the agreement between Debtor and the Lender as to
inspection rights of the Lender. Without limiting the generality of
the forgoing, Debtor will furnish to the Lender promptly upon request and in the
form and content specified by the Lender such data and information concerning
the Collateral as the Lender may from time to time specify.
Section
4.7 Taxes. Debtor
will pay as and when due and payable all taxes, levies, license fees,
assessments, and other impositions levied on the Collateral or any part thereof
before its use and operation or which otherwise, if unpaid, might become a Lien
upon any Collateral; provided, that Debtor
shall not be required to pay any such tax, levee, fee, assessment or imposition
if the amount, applicability or validity thereof shall currently be contested in
good faith by appropriate proceedings diligently conducted and if Debtor shall
have set up reserves therefor adequate under generally accepted accounting
principles (provided that such reserves may be set up under generally accepted
accounting principles); provided, further, that any
such contest shall prevent the sale of the Collateral under special execution or
otherwise for the payment of any such tax, levee, fee, assessment or imposition,
or other forfeiture or loss of title to the Collateral.
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Section
4.8 Further
Assurances. On request of the Lender, Debtor will promptly (i)
correct any defect, error or omission which may be discovered in the contents of
this Agreement or any financing statement relating thereto or in the execution
or acknowledgment of this Agreement or any financing statement; (ii) execute,
acknowledge, deliver and record such further instruments (including, without
limitation, further security agreements, financing statements, continuation
statements, correction statements and assignments of accounts, contract rights,
general intangibles and proceeds) and do such further acts as may be reasonably
necessary, desirable or proper to carry out more effectively the purposes of
this Agreement and to more fully identify and subject to the Security Interests
hereof any property intended to be covered hereby, including without limitation
any renewals, additions, substitutions, replacements or accessions to the
Collateral; (iii) execute, acknowledge, deliver and record any document or
instrument (including specifically any financing statement) necessary, desirable
or proper to protect the Liens and Security Interests hereunder against the
rights or interests of third persons; and (iv) cause other Persons
(including without limitation those in possession of any Collateral) to execute
and deliver in favor of the Lender acknowledgments, consents and control
agreements necessary, desirable or appropriate in furtherance of the purposes of
this Agreement. All matters shall be in form and substance
satisfactory to the Lender. Debtor shall pay all costs connected with
any of the foregoing.
Section
4.9 Collateral
Indemnity. If the validity or priority of this Agreement or
any rights, security interests or other interests created or evidenced hereby
shall be attacked, endangered or questioned or if any legal proceedings are
instituted with respect thereto, Debtor will give prompt written notice thereof
to the Lender and at Debtor’s own cost and expense will diligently endeavor to
cure any defect that may be developed or claimed, and will take all necessary
and proper steps for the defense of such legal proceedings, and the Lender
(whether or not named as a party to legal proceedings with respect thereto) is
hereby authorized and empowered to take such additional steps as in its judgment
and discretion may be necessary or proper for the defense of any such legal
proceedings or the protection of the validity or priority of this Agreement and
the rights, security interests and other interests created or evidenced hereby,
and all expenses so incurred of every kind and character shall be a demand
obligation owing by Debtor to the Lender, accruing interest at the default rate
of the Indebtedness in accordance with the Loan Agreement, all of which shall be
a part of the Indebtedness.
Section
4.10 Compliance with
Laws. Debtor will observe and comply with all laws, statutes,
ordinances, rules, regulations, judgments, decrees, franchises, permits,
licenses, certificates and requirements of all federal, state, parish, county,
municipal and other governmental agencies, departments, commissions, boards,
courts and authorities applicable to Debtor or to the Collateral.
Section
4.11 Non-Liability. Debtor
hereby agrees to indemnify and hold the Lender (and the Affiliates
thereof) and their directors, officers, employees, consultants and agents
(collectively, the “indemnified parties”) harmless from and against any and all
liability, loss or damage which any of the indemnified parties may incur under
or by reason of this Agreement, and from any and all claims, costs, expenses and
demands whatsoever which may be asserted against any indemnified party by reason
of any act of any indemnified party under this Agreement or otherwise incurred
by any indemnified party in connection with the enforcement of their rights
under this Agreement, other than as, and to the extent of, the result of the
gross negligence or willful misconduct of any indemnified
party.
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ARTICLE
5
DEFAULT
Section
5.1 General
Authority. Debtor hereby irrevocably appoints the Lender its
agent and attorney in fact, with full power of substitution, in the name of
Debtor or the Lender, for the sole use and benefit of the Lender, but at
Debtor’s expense, to exercise, at any time and from time to time while an Event
of Default has occurred and is continuing, all or any of the following powers
with respect to all or any of the Collateral to:
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(i)
settle, compromise, compound, prosecute or defend any action or proceeding
with respect to any of the
Collateral,and
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(ii)
enforce all supporting obligations with respect to any
Collateral.
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The
aforesaid mandate and power of attorney, being coupled with an interest, is
irrevocable so long as any of the Indebtedness remains outstanding.
Section
5.4 Sale. Upon
the occurrence of an Event of Default, the Lender may exercise all rights of a
Lender under the UCC and other applicable law (including without limitation such
rights under the UCC or other applicable law authorizing the taking of self-help
remedies by a Lender in protecting its rights in, to and under collateral) and,
in addition, the Lender may, without being required to give any notice, except
as herein provided or as may be required by mandatory provisions of law, sell
the Collateral or any part thereof at public or private sale, for cash, upon
credit or for future delivery, and at such price or prices as the Lender may
deem satisfactory, The Lender may be the purchaser of any or all of the
Collateral so sold at any public sale (or, if the Collateral is of a type
customarily sold in a recognized market or is of a type which is the subject of
widely distributed standard price quotations, at any private
sale). Debtor will execute and deliver such documents and take such
other action as the Lender deems necessary or advisable in order that any such
sale may be made in compliance with law. Upon any such sale the
Lender shall have the right to deliver, assign and transfer to the purchaser
thereof the Collateral so sold. Each purchaser at any such sale shall
hold the Collateral so sold to it absolutely and free from any claim or right of
whatsoever kind, including any equity or right of redemption of Debtor which may
be waived, and Debtor, to the extent permitted by law, hereby specifically
waives all rights of redemption, stay or appraisal which it has or may have
under any law now existing or hereafter adopted. Debtor agrees that
ten (10) days prior written notice of the time and place of any sale or other
intended disposition of any of the Collateral constitutes “reasonable
notification” within the meaning of Section 9-612 of the UCC (or, if applicable,
the comparable section of the UCC under the laws of another jurisdiction),
except that shorter or no notice shall be reasonable as to any Collateral which
is perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market. The notice (if any) of such
sale shall (l) in case of a public sale, state the time and place fixed for such
sale, and (2) in the case of a private sale, state the day after which such sale
may be consummated. Any such public sale shall be held at such time
or times within ordinary business hours and at such place or places as the
Lender may fix in the notice of such sale. At any such sale the
Collateral may be sold in one lot as an entirety or in separate parcels or
portions, as the Lender may determine. The Lender shall not be
obligated to make any such sale pursuant to any such notice. The
Lender may, without notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at the time and
place fixed for the sale, and such sale may be made at any time or place to
which the same may be so adjourned. In case of any sale of all or any
part of the Collateral on credit or for future delivery, the Collateral so sold
may be retained by the Lender until the selling price is paid by the purchaser
thereof, but the Lender shall not incur any liability in case of the failure of
such purchaser to take up and pay for the Collateral so sold and, in case of any
such failure, such Collateral may again be sold upon like notice. The
Lender may specifically modify or disclaim, in its sole discretion, any
warranties or the like as to any Collateral and this procedure shall not be
considered adversely to affect the commercial reasonableness of any such
sale. The Lender may comply with any applicable state or federal law
requirements in connection with a disposition of the Collateral and compliance
will not be considered adversely to affect the commercial reasonableness of any
sale of the Collateral. Leasing and licensing of Collateral by the
Lender to third Persons are types of sales permitted hereunder.
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Section
5.5 Foreclosure in
Louisiana. The provisions of this Section shall, without
limiting the generality of any other provision of this Agreement, be applicable
in the event any foreclosure shall take place in Louisiana on any Collateral or,
in connection with any foreclosure hereunder, Louisiana law shall otherwise be
applicable. The Lender, instead of exercising the power of sale
herein conferred upon it, may proceed by a suit or suits at law or in equity to
foreclose the Security Interests and sell the Collateral, or any portion
thereof, under a judgment or decree of a court or courts of competent
jurisdiction. For the purposes of Louisiana executory process
procedures, Debtor does hereby acknowledge the Indebtedness and confess judgment
in favor of the Lender (and applicable Affiliates thereof) for the
full amount of the Indebtedness. Debtor does by these presents
consent and agree that upon the occurrence of an Event of Default it shall be
lawful for the Lender to cause all and singular the Collateral to be seized and
sold under executory or ordinary process, at the Lender’s sole option, without
appraisement, appraisement being hereby expressly waived, in one lot as an
entirety or in separate parcels or portions as the Lender may determine, to the
highest bidder, and otherwise exercise the rights, powers and remedies afforded
herein and under applicable Louisiana law. Any and all declarations
of fact made by authentic act before a Notary Public in the presence of two
witnesses by a person declaring that such facts lie within his knowledge shall
constitute authentic evidence of such facts for the purpose of executory
process. Debtor hereby waives in favor of the Lender (and
applicable Affiliates thereof): (a) the benefit of appraisement as
provided in Louisiana Code of Civil Procedure Articles 2332, 2336, 2723 and
2724, and all other laws conferring the same; (b) the demand and three days
delay accorded by Louisiana Code of Civil Procedure Article 2721; (c) the notice
of seizure required by Louisiana Code of Civil Procedure Articles 2293 and 2721;
(d) the three days delay provided by Louisiana Code of Civil Procedure Articles
2331 and 2722; and (e) the benefit of the other provisions of Louisiana Code of
Civil Procedure Articles 2331, 2722 and 2723, not specifically mentioned
above. In the event the Collateral or any part thereof is seized as
an incident to an action for the recognition or enforcement of this Agreement by
executory process, ordinary process, sequestration, writ of fieri facias, or
otherwise, Debtor and the Lender agree that the court issuing any such order
shall, if petitioned for by the Lender, direct the applicable sheriff to appoint
as a keeper of the Collateral, the Lender or any agent designated by the Lender
or any person named by the Lender at the time such seizure is
effected. This designation is pursuant to Louisiana Revised Statutes
9:5136-9:5140.2 and the Lender shall be entitled to all the rights and benefits
afforded thereunder as the same may be amended. It is hereby agreed
that the keeper shall be entitled to receive a reasonable compensation in excess
of its reasonable costs and expenses incurred in the administration or
preservation of the Collateral, payable on a monthly basis. The
designation of keeper made herein shall not be deemed to require the Lender to
provoke the appointment of such a keeper.
Section
5.6 Assemble
Collateral. For the purpose of enforcing any and all rights
and remedies under this Agreement the Lender may (i) require Debtor to, and
Debtor agrees that it will, at its expense and upon the request of the Lender,
forthwith assemble all or any part of the Collateral as directed by the Lender
and make it available at a place designated by the Lender which is, in its
opinion, reasonably convenient to the Lender and Debtor, whether at the premises
of Debtor or otherwise, and the Lender shall be entitled to specific performance
of this obligation, (ii) to the extent permitted by applicable law of this or
any other state, enter, with or without process of law and without breach of the
peace, any premise where any of the Collateral is or may be located, and without
charge or liability to it seize and remove such Collateral from such premises,
(iii) have access to and use Debtor’s books and records relating to the
Collateral and (iv) prior to the disposition of the Collateral, store or
transfer it without charge in or by means of any storage or transportation
facility owned or leased by Debtor, process, repair or recondition it or
otherwise prepare it for disposition in any manner and to the extent the Lender
deems appropriate and, in connection with such preparation and disposition, use
without charge any trademark, trade name, copyright, patent or technical process
used by Debtor.
Section
5.7 Limitation on Duty of
Lender. Beyond the exercise of reasonable care in the custody
thereof, the Lender shall have no duty as to any Collateral in its possession or
control or in the possession or control of any agent or bailee or any income
thereon. The Lender shall be deemed to have exercised reasonable care
in the custody of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which it accords its own property, and
shall not be liable or responsible for any loss or damage to any of the
Collateral, or for any diminution in the value thereof, by reason of the act or
omission of any warehouseman, carrier, forwarding agency, consignee or other
agent or bailee selected by the Lender in good faith. Debtor agrees
that the Lender shall not be obligated to preserve rights against prior parties
obligated on any Chattel Paper or Instruments.
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Section
5.8 Appointment of
Agent. At any time or times, in order to comply with any legal
requirement in any jurisdiction, the Lender may appoint a bank or trust company
or one or more other Persons with such power and authority as may be necessary
for the effectual operation of the provisions hereof and may be specified in the
instrument of appointment.
Section
5.9 Expenses. In
the event that Debtor fails to comply with any provisions of this Agreement or
the Collateral Documents, such that the value of any Collateral or the validity,
perfection, rank or value of any Security Interest hereunder is thereby
diminished or potentially diminished or put at risk, the Lender may, but shall
not be required to, effect such compliance on behalf of Debtor, and Debtor shall
reimburse the Lender for the costs thereof on demand. All insurance
expenses and all expenses of protecting, storing, warehousing, appraising,
preparing for sale, handling, maintaining and shipping the Collateral, any and
all excise, property, sales, and use taxes imposed by any federal, state or
local authority on any of the Collateral, all expenses in respect of periodic
appraisals and inspections of the Collateral to the extent the same may be
requested from time to time, and all expenses in respect of the sale or other
disposition thereof shall be borne and paid by Debtor; and if Debtor fails to
promptly pay any portion thereof when due, the Lender may, at its or
their option, but shall not be required to, pay the same and charge Debtor’s
account therefor, and Debtor agrees to reimburse the Lender therefor
on demand. All sums so paid or incurred by the Lender for
any of the foregoing and any and all other sums for which Debtor may become
liable hereunder and all costs and expenses (including reasonable attorneys’
fees, legal expenses and court costs) incurred by the Lender in
enforcing or protecting the Security Interests or any of the rights or remedies
under this Agreement or the other Collateral Documents, together with interest
thereon until paid at the default rate specified in the Loan Agreement, shall be
additional Indebtedness hereunder and Debtor agrees to pay all of the foregoing
sums promptly on demand.
ARTICLE
6
MISCELLANEOUS
Section
6.1 Notices. Any
notice or demand which, by provision of this Agreement, is required or permitted
to be given or served by the Lender to or on the Debtor shall be deemed to have
been sufficiently given and served for all purposes by giving same to the Lender
in accordance with the provisions of the Loan Agreement.
Section
6.2 Amendment. Neither
this Agreement nor any provisions thereof may be changed, waived, discharged or
terminated orally or in any manner other than by an instrument in writing signed
by the party against whom enforcement of the change, waiver, discharge or
termination is sought.
Section
6.3 Waivers. No
course of dealing on the part of the Lender, its officers, employees,
consultants or agents, nor any failure or delay by the Lender with respect to
exercising any of its rights, powers or privileges under this Agreement shall
operate as a waiver thereof.
Section
6.4 Cumulative
Rights. The rights and remedies of the Lender under this
Agreement and any other collateral documents shall be cumulative, and the
exercise or partial exercise of any such right or remedy shall not preclude the
exercise of any other right or remedy.
Section
6.5 Titles of Articles, Sections
and Subsections. All titles or headings to articles, sections,
subsections or other divisions of this Agreement or the exhibits hereto are only
for the convenience of the parties and shall not be construed to have any effect
or meaning with respect to the other content of such articles, sections,
subsections or other divisions, such other content being controlling as to the
agreement between the parties hereto.
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Section
6.6 Singular and
Plural. Words used herein in the singular, where the context
so permits, shall be deemed to include the plural and vice versa. The
definitions of words in the singular herein shall apply to such words when used
in the plural where the context so permits and vice versa.
Section
6.7 Governing
Law. This Agreement is a contract made under and shall be
construed in accordance with and governed by the laws of the United States of
America and the State of Louisiana.
Section
6.8 Successors and
Assigns. (a) All covenants and agreements contained by or on
behalf of the Debtor in this Agreement shall bind its successors and assigns and
shall inure to the benefit of the Lender and its successors and
assigns.
(b) This
Agreement is for the benefit of the Lender and for such other Person or Persons
as may from time to time become or be the holders of any of the Indebtedness,
and this Agreement shall be transferable and negotiable, with the same force and
effect and to the same extent as the Indebtedness may be transferable, it being
understood that, upon the transfer or assignment by the Lender of any of the
Indebtedness, the legal holder of such Indebtedness shall have all of the rights
granted to the Lender under this Agreement.
(c) The
Debtor hereby recognizes and agrees that the Lender may, from time to time, one
or more times, transfer all or any portion of the Indebtedness to one or more
third parties. Such transfers may include, but are not limited to,
sales of participation interests in such Indebtedness in favor of one or more
third party lenders. Upon any transfer of all or any portion of the
Indebtedness, the Lender may transfer and deliver any or all of the Proceeds to
the transferee of such Obligation and such Proceeds shall secure any and all of
the Obligation in favor of such a transferee then existing and thereafter
arising, and after any such transfer has taken place, the Lender shall be fully
discharged from any and all future liability and responsibility to Debtor with
respect to such Proceeds, and the transferee thereafter shall be vested with all
the powers, rights and duties with respect to such Proceeds.
Section
6.9 Counterparts. This
Agreement may be executed in two or more counterparts, and it shall not be
necessary that the signatures of all parties hereto be contained on any one
counterpart hereof; each counterpart shall be deemed an original, but all of
which together shall constitute one and the same instrument.
THE
NEXT PAGE IS THE SIGNATURE PAGE
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IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.
DEBTOR:
TELKONET, INC.
By:
______________________________________________
Name: ______________________________________________
Title:
______________________________________________
ETHOSTREAM LLC
By:
______________________________________________
Name: ______________________________________________
Title:
______________________________________________
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