SECURITY AGREEMENT
This
SECURITY AGREEMENT ("Security
Agreement")
as of
January 31, 2008 (the
"Effective
Date"),
is made
by and between
Well Chance Investments Limited, a company incorporated in the British Virgin
Islands (the "Company"),
and
RMK
Emerging Growth Opportunity Fund LP, a Delaware limited partnership (the
"Lender").
WHEREAS,
on the Effective Date, the Company entered into a Loan Agreement with the Lender
to evidence a bridge loan from the Lender to the Company in the aggregate amount
of $444,733, consisting of an Initial Loan of $244,733.15, and an Additional
Loan of $200,000 (collectively, the "RMK
Loan");
WHEREAS,
in order to induce Lender to make the RMK Loan to the Company, the Company
has
agreed to grant to Lender a security interest in all of its assets to secure
the
amounts currently owing, and any additional amounts which may be owing, by
the
Company pursuant to the Loan Agreement.
NOW,
THEREFORE, for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Defined
Terms.
Capitalized terms used herein and not defined herein have the meanings assigned
to them in the Loan Agreement. The following terms shall have the following
meanings, unless the context otherwise requires:
"Code"
shall
mean the Uniform Commercial Code as in effect in the State of California on
the
Initial Loan Closing Date.
"Collateral"
shall
have the meaning given such term in Section 2.
"Event
of Default"
shall
have the meaning given such term in the Note and the Loan
Agreement.
"Obligations"
shall
mean the unpaid RMK Loan including all remaining outstanding Loan Principal,
Initial Loan Premium and Additional Loan Fee (if applicable) amounts owed to
Lender (as such capitalized terms are defined in the Loan Agreement) pursuant
to
the Loan Agreement and Note or Notes, including costs of
collection.
2. Grant
of Security Interest.
As
collateral security for the prompt and complete payment and performance when
due
of all the Obligations, the Company hereby grants to the Lender a security
interest in all of the Company's right, title and interest in, to and under
the
following, whether now existing or hereafter acquired (all of which being
hereinafter collectively called the "Collateral"):
(a) Accounts.
All
present and future accounts owned by the Company, including and together with
any and all contract rights, accounts receivable, security deposits (where
not
otherwise prohibited by law or agreement), and other rights of any kind to
receive payments for services rendered and goods supplied by the Company,
together with agreements, customer lists, client lists, and accounts, invoices,
agings, verification reports and other records relating in any way to such
accounts.
(b) Contracts.
All
contracts, contract rights, royalties, license rights, leases, instruments,
undertakings, documents or other agreements in or under which the Company may
now or hereafter have any right, title or interest whether now existing or
hereinafter created and all forms of obligations owing to the Company arising
out of the sale or lease of goods, the licensing of technology or the rendering
of services by the Company, whether or not earned by performance, and any and
all credit insurance, guaranties, and other security therefor, as well as all
merchandise returned to or reclaimed by the Company.
(c) Equipment,
Furnishings and Miscellaneous Personal Property.
All
presently owned and hereafter acquired furniture, furnishings, equipment,
machinery, vehicles (including motor vehicles and trailers) computer hardware
and software, accounting or bookkeeping systems, client or customer lists and
information, data sheets and other records of any kind, wherever located, stored
or inventoried, which are used or which may be used in the Company’s business;
(d) Fixtures.
All
materials used by the Company in connection with its business operations,
including, but not limited to, supplies, trade equipment, appliances, apparatus
and any other items, now owned or hereafter acquired by the Company, and now
or
hereafter attached to, or installed in (temporarily or permanently) any real
property now or in the future owned or leased by the Company;
(e) General
Intangibles.
All
general intangibles and other personal property of the Company, now owned or
hereinafter acquired, including, without limitation, the following: (a) permits,
authorizations and approvals presently and hereafter issued by any federal,
state, municipal or local governmental or regulatory authority in favor of
the
Company; (b) all plans, specifications, renderings and other similar materials
presently owned or hereafter acquired by the Company; (c) all presently existing
and hereafter created contracts, leases, licenses and agreements to which the
Company is a party; (d) all presently and hereafter existing policies and
agreements of insurance in favor of the Company; (e) all presently and hereafter
existing equity contribution agreements and other equity financing arrangements
in favor of the Company; (f) all copyrights, chattel paper, electronic chattel
paper, licenses, money, insurance proceeds, contract rights, subscription lists,
mailing lists, licensing agreements, patents, trademarks, service marks, trade
styles, patents, patent applications, franchise agreements, blueprints,
drawings, purchase orders, customer lists, route lists, infringements, claims,
computer programs, computer discs, computer tapes, literature, reports,
catalogs, design rights, income tax refunds, payments of insurance and rights
to
payment of any kinds, trade names, refundable, returnable or reimbursable fees,
deposits or other funds or evidences of credit or indebtedness deposited by
or
on behalf of the Company with any governmental agencies, boards, corporations,
providers of utility services, public or private; (g) all presently existing
and
hereafter acquired computer programs, computer software and other electronic
systems and materials of any kind of the Company; (h) goodwill; and (i) all
other presently existing and hereafter acquired documents, accounts, general
intangibles and intangible personal property of any kind.
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(f) Documents.
All
documents, cash, deposit accounts, securities, securities entitlements,
securities accounts, investment property, financial assets, letters of credit,
certificates of deposit, instruments, chattel paper, and electronic chattel
paper now owned or hereafter acquired and the Company’s books relating to the
foregoing.
(g) Copyrights.
All
copyright rights, copyright applications, copyright registrations and like
protections in each work of authorship and derivative work thereof, whether
published or unpublished, now owned or hereafter acquired; all trade secret
rights, including all rights to unpatented inventions, know-how, operating
manuals, license rights and agreements and confidential information, now owned
or hereafter acquired; all mask work or similar rights available for the
protection of semiconductor chips, now owned or hereafter acquired; all claims
for damages by way of any past, present and future infringement of any of the
foregoing.
(h) Proceeds.
All of
the Company’s books and records relating to the foregoing and any and all
present and future accounts, general intangibles, chattel paper, electronic
chattel paper, products, accessions, replacements, betterments and substitutions
for any of the foregoing described property, and all proceeds arising from
or by
virtue of, or from the sale or disposition of, or collections with respect
to,
or insurance proceeds payable with respect to, or claims against any other
persons, corporations or other entities with respect to, all or any part of
the
foregoing described property and interests.
3. Rights
of Lender; Limitations on Lender’s Obligations.
It is
expressly agreed by the Company that, anything herein to the contrary
notwithstanding, the Company shall remain liable under each Contract and
Document to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with and pursuant
to
the terms and provisions of each such Contract or Document. No Lender shall
have
any obligation or liability under any Contract or Document by reason of or
arising out of this Security Agreement or the granting to such Lender of a
security interest therein or the receipt by Lender of any payment relating
to
any Contract or Document pursuant hereto, nor shall Lender be required or
obligated in any manner to perform or fulfill any of the obligations of the
Company under or pursuant to any Contract or Document, or to make any payment,
or to make any inquiry as to the nature or the sufficiency of any payment
received by it or the sufficiency of any performance by any party under any
Contract or Document, or to present or file any claim, or to take any action
to
collect or enforce any performance or the payment of any amounts which may
have
been assigned to it or to which it may be entitled at any time or times. In
the
event that any asset of the Company which, by the terms of any agreement in
existence on the date hereof, does not permit the granting of a security
interest, the Company hereby grants to each Lender a security interest in all
proceeds received by the Company generated by such assets. The Uniform
Commercial Code financing statement to be filed by each Lender in connection
with this Security Agreement shall contain a provision to the effect of the
immediately foregoing sentence.
4. Representations
and Warranties.
The
Company hereby represents and warrants that the chief executive office and
chief
place of business of the Company is 0xx
Xxxxx,
Xxxxxx Xxxxxxxx, Xxxx Xxxx, Xxxxxxx, Xxxxxxx Virgin Islands, and the Company
will not change such chief executive office and chief place of business or
remove such records unless the Company shall have given the Lender at least
10
Business Days’ prior written notice thereof.
3
5. Covenants.
The
Company covenants and agrees with the Lender that from and after the date of
this Security Agreement and until the Obligations are fully
satisfied:
(a) Further
Documentation.
At any
time and from time to time, upon the reasonable written request of the Lender,
and at the sole expense of the Company, the Company will promptly and duly
execute and deliver any and all such further documents and take such further
action as Lender may reasonably deem desirable in obtaining the full benefits
of
this Security Agreement and of the rights and powers herein granted, including,
without limitation, the filing of any financing or continuation statements
under
the Uniform Commercial Code in effect in any jurisdiction with respect to the
security interests granted hereby.
(b) Continuous
Perfection.
The
Company will not change its name, identity, jurisdiction of organization or
corporate structure in any manner unless the Company shall have given the Lender
at least 10 Business Days' prior written notice thereof and shall have taken
all
action (or made arrangements to take such action substantially simultaneously
with such change if it is impossible to take such action in advance) necessary
or reasonably requested by the Lender to amend any agreements in connection
with
the RMK Loan, any financing statement or any continuation statement filed with
respect to the Collateral so that the Lender continues to have the full
benefits, rights and powers granted pursuant to this Security
Agreement.
6. Remedies,
Rights Upon Default.
(a) In
addition to any other rights given to the Lender hereunder, if an Event of
Default shall occur and be continuing and the Lender shall have declared the
amounts owing under the Note to be due and payable (or such amounts shall have
automatically, become due and payable), all payments received by the Company
under or in connection with any of the Collateral shall be held by the Company
in trust for the Lender, shall be segregated from other funds of the Company
and
shall, if requested by the Lender forthwith upon receipt by the Company be
turned over to the Lender, in the same form as received by the Company (duly
endorsed by the Company to the Lender, if required).
4
(b) If
any
Event of Default shall occur and be continuing the Lender may exercise in
addition to all other rights and remedies granted to it in this Security
Agreement and in any other instrument or agreement securing, evidencing or
relating to the Obligations, all rights and remedies of a secured party under
the Code. Without limiting the generality of the foregoing, the Company
expressly agrees that in any such event, the Lender, without demand of
performance or other demand, (except the notice specified below of time and
place of public or private sale) to or upon the Company or any other person
may
forthwith collect, receive, appropriate and realize upon the Collateral, or
any
part thereof, and/or may forthwith sell, lease, assign, give option or options
to purchase, or sell or otherwise dispose of and deliver said Collateral (or
contract to do so), or any part thereof, in one or more parcels at public or
private sale or sales, at any exchange broker's board or at any of the Lender’
offices or elsewhere at such prices as it may deem best, for cash or on credit
or for future delivery without assumption of any credit risk. The Lender shall
have the right upon any such public sale or sales, and, to the extent permitted
by law, upon any such private sale or sales, to purchase the whole or any part
of said Collateral so sold, free of any right or equity of redemption, which
equity of redemption the Company hereby releases. The Company further agrees,
at
the Lender’ request, to assemble the Collateral, make it available to the Lender
at places which the Lender shall reasonably select, whether at the Company's
premises or elsewhere. The Lender shall apply the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, after
deducting all reasonable costs and expenses of every kind incurred therein
or
incidental to the care, safe keeping or otherwise of any or all of the
Collateral or in any way relating to the rights of the Lender hereunder,
including reasonable attorneys' fees and legal expenses, to the payment in
whole
or in part of the Obligations, the Company remaining liable for any deficiency
remaining unpaid after the application, and only after so paying over such
net
proceeds and after the payment by the Lender of any other amount required by
any
provision of law. To the extent permitted by applicable law, the Company waives
all claims, damages, and demands against the Lender arising out of the
repossession, retention or sale of the Collateral. The Company agrees that
the
Lender need not give more than 10 Business Days notice of the time and place
of
any public sale or of the time after which a private sale may take place and
that such notice is reasonable notification of such matters. The Company shall
remain liable for any deficiency if the proceeds of any sale or disposition
of
the Collateral are insufficient to pay all amounts to which Lender is
entitled.
(c) The
Company hereby waives presentment, demand, protest or any notice (to the extent
permitted by applicable law) of any kind in connection with this Security
Agreement or any Collateral.
7. Application
of Proceeds.
The
Proceeds of all sales and collections in respect of any Collateral shall be
applied as follows:
(a) First,
to
the reasonable payment of the costs and expenses of such sales and collections,
the expenses of Lender and the reasonable fees and expenses of its
counsel;
(b) Second,
any surplus then remaining to the payment of the Obligations in such order
and
manner as the Lender may in its sole discretion determine; and
(c) Third,
any surplus then remaining shall be paid to the Company.
8. Limitation
on Lender’s Duty in Respect of Collateral.
Beyond
the use of reasonable care in the custody thereof, the Lender shall not have
any
duty as to any Collateral in its possession or control or in the possession
or
control of any agent or nominee of it or any income thereon or as to the
preservation of rights against prior parties or any other rights pertaining
thereto.
9. Notices.
Any
notice, request or other communication required or permitted hereunder shall
be
in writing and shall be delivered personally or by facsimile (receipt confirmed
electronically) or shall be sent by a reputable express delivery service or
by
certified mail, postage prepaid with return receipt requested, addressed as
follows:
5
if
to
the Company, to:
Well
Chance Investments Limited
X/X
Xxxxxxx Xxxx
00X,
Xxxxx X, Xxxxxxxx Xx. 0 XX Xxxxxxxxxxxxx Center
Jia3
Yongandongli, Xxxxxxxxxxxxx Xxxxxx
Xxxxxxxx
Xxxxxxxx, Xxxxxxx 000000
People’s
Republic of China
Tel:
x00 00 0000 0000
Fax:
x00
00 0000 0000
if
to
Lender, to:
RMK
Emerging Growth Opportunity Fund LP
Attn:
Xx.
Xxxx X. Xxxxxxx
0000
Xxxxxx Xxxxx Xxxxxx Xxxx., Xxxxx 000
Xxxxxxx
Xxxxx, XX 00000
Tel:
(000) 000-0000
Fax:
(000) 000-0000
Either
party hereto may change the above specified recipient or mailing address by
notice to the other party given in the manner herein prescribed. All notices
shall be deemed given on the day when actually delivered as provided above
(if
delivered personally or by facsimile, provided that any such facsimile is
received during regular business hours at the recipient's location) or on the
day shown on the return receipt (if delivered by mail or delivery
service).
10. Severability.
Any
provision of this Security Agreement which is prohibited or unenforceable in
any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in
any
other jurisdiction.
11. No
Waiver; Cumulative Remedies.
The
Lender shall not by any act, delay, omission or otherwise be deemed to have
waived any of its rights or remedies hereunder and no waiver shall be valid
unless in writing, signed by the Lender, and then only to the extent therein
set
forth. A waiver by the Lender of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which the Lender
would otherwise have had on any future occasion. No failure to exercise nor
any
delay in exercising on the part of the Lender, any right, power or privilege
hereunder, shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or future
exercise thereof or the exercise or any other right, power or privilege. The
rights and remedies hereunder provided are cumulative and may be exercised
singly or concurrently, and are not exclusive of any rights and remedies
provided by law. None of the terms or provisions of this Security Agreement
may
be waived, altered, modified or amended except by an instrument in writing,
duly
executed by the Company and the Lender.
12. Successors
and Assigns.
This
Security Agreement and all obligations of the Company hereunder shall be binding
upon the successors and assigns of the Company, and shall, together with the
rights and remedies of the Lender hereunder, inure to the benefit of the Lender
and its successors and assigns. The Company may not assign any of its rights
or
obligations hereunder without the prior written consent of the Lender. This
Security Agreement may be assigned by the Lender provided that Lender complies
with all applicable federal and state securities laws. In the event of an
assignment by the Lender, each of the parties to this Agreement acknowledge
and
agree that the Lender’s assignee is assigned and takes over all rights,
obligations, responsibilities, duties, remedies, powers and privileges under
this Agreement from the assigning Lender
6
13. Governing
Law.
This
Security Agreement shall be governed by and construed in accordance with the
domestic laws of the State of California without giving effect to any choice
of
law or conflict of law provision or rule (whether of the State of California
or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of California.
14. Counterparts.
This
Security Agreement may be executed in separate counterparts each of which will
be an original and all of which taken together will constitute one and the
same
agreement.
15. Facsimile.
This
Security Agreement may be executed using facsimiles of signatures, and a
facsimile of a signature shall be deemed to be the same, and equally
enforceable, as an original of such signature.
16. Termination.
At such
time as the Obligations have been fully paid in cash or converted into shares
of
Company common stock, the security interest created hereby shall automatically
terminate, the Lender shall take all such actions as may be requested by the
Company to evidence such termination and to release the liens created hereby,
at
the Company's expense.
*
* * * *
*
7
IN
WITNESS WHEREOF, each of the parties hereto has caused this Security Agreement
to be executed and delivered by its duly authorized officer as of the first
set
forth above.
|
THE
COMPANY:
|
||
|
WELL
CHANCE INVESTMENTS LIMITED
|
||
|
By:
|
/s/
Xxxxxxx Dash
|
|
|
Xxxxxxx
Dash,
|
||
|
Chief
Executive Officer
|
||
|
LENDER:
|
||
|
RMK
EMERGING GROWTH OPPORTUNITY FUND LP
|
||
|
By:
|
/s/
Xxxx X. Xxxxxxx
|
|
|
Xxxx
X. Xxxxxxx, as authorized
|
||
|
signatory
for and on behalf of
|
||
|
ARC
EMERGING GROWTH PARTNERS, LLC, General Partner of RMK Emerging Growth
Opportunity Fund LP
|
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|
Amount
of Initial Loan: $ 244,733.15
|
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|
Amount
of Additional Loan: $200,000
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