[ARTICLE] 5
[LEGEND]
This schedule contains the Security Agreement dated November 25, 1996 by and
between Advanced Environmental Systems, Inc. and Xxxxxxx X. Xxxx.
SECURITY AGREEMENT
THIS SECURITY AGREEMENT made as of this 25th day of November, 1996
by and between Advanced Environmental Systems, Inc. ("Borrower") and
Xxxxxxx X. Xxxx ("Lender").
RECITALS
A. Pursuant to that certain Loan Agreement of even date herewith (the
"Loan Agreement") executed by and between Borrower and Lender, Lender agreed
to make a Loan (this and all other capitalized terms not otherwise defined in
this Security Agreement and defined in the Loan Agreement shall have the
meanings ascribed to them in the Loan Agreement) to Borrower of $425,000,
subject to the terms and conditions set forth in the Loan Agreement.
B. One of the conditions precedent to the consummation of the
transactions contemplated by the Loan Agreement is the execution by Borrower
of this Security Agreement.
NOW, THEREFORE, in consideration of the Recitals and for other good and
valuable consideration, the receipt and sufficiency of which hereby is
acknowledged, Borrower and Lender agree as follows:
1. Collateral. As used herein, "Collateral" shall mean the claims for
the Tax Refunds and all proceeds thereof and all books and records of
Borrower relating thereto, whether now owned or hereafter acquired by
Borrower.
2. Grant of Security Interest. To secure payment and performance of
the Obligations, Borrower hereby pledges and grants to Lender a security
interest in the Collateral, which pledge and security interest Borrower
acknowledges are coupled with an interest.
3. Representations and Warranties. Borrower hereby represents and
warrants to Lender that:
a. Borrower is the legal and beneficial owner of such Collateral;
b. This Security Agreement creates a valid first priority
security interest in the Collateral in favor of Lender;
c. None of the Collateral is subject to any security interest of
any kind whatsoever, except for the security interest in such Collateral
granted to Lender hereby; and
d. Until the termination of this Agreement,Borrower:
(1) will not create or permit to exist any security
interest uponor with respect to such Collateral, except for the security
interest thereon granted to Lender by this Security Agreement; and
(2) will not sell, transfer, convey, assign, or otherwise
divest its interests in such Collateral, or any part thereof, to any other
person.
4. Default and Remedies.
4.1 The breach by Borrower of any of its representations and
warranties set forth in Section 3 of this Agreement or the occurrence and
continuation of an Event of Default together with an Acceleration under the
Note shall constitute an Event of Default hereunder.
4.2 If an Event of Default shall occur and be continuing
hereunder, Lender shall have all rights of a secured party under the Uniform
Commercial Code as in effect in Colorado from time to time.
Following an Event of Default, subject to applicable law, Borrower hereby
irrevocably constitutes and appoints Lender its attorney-in-fact with full
power of substitution and acknowledges that the constitution and appointment
of such attorney-in-fact is coupled with an interest and is irrevocable.
5. Termination of Security Agreement. This Security Agreement shall
terminate upon the payment and performance in full of the Obligations.
6. Miscellaneous.
6.1 Subject to the terms of the Loan Agreement, Borrower further
agrees that if an Event of Default hereunder has occurred and is continuing,
Lender may exercise its rights and remedies hereunder. The obligations of
Borrower under this Security Agreement shall be absolute and unconditional
and shall remain in full force and effect without regard to, and shall not be
released or discharged or in any way affected, by:
6.1.1 Any amendment or modification of or supplement to any
of the Loan Documents;
6.1.2 The granting of any postponements or extensions for
time of payment or other indulgences to Borrower or any other person, or the
settlement or adjustment of any claim or the release or discharge or
substitution of any person primarily or secondarily liable with respect to
any of the Obligations;
6.1.3 The institution of any bankruptcy, insolvency, debt
agreement, readjustment, composition, receivership or liquidation proceedings
by or against Borrower or Guarantor; or
6.1.4 Any other circumstance which otherwise might
constitute a defense to, or a discharge of Borrower with respect to the
Obligations.
6.2 Each and every right, remedy and power granted to Lender
hereunder shall be cumulative and in addition to any other right, remedy or
power specifically granted herein or now or hereafter existing in equity, at
law, by virtue of statute or otherwise and may be exercised by Lender, from
time to time, concurrently or independently and as often and in such order as
Lender may deem expedient. Any failure or delay on the part of Lender in
exercising any such right, remedy or power, or abandonment or discontinuance
of steps to enforce the same, shall not operate as a waiver thereof or affect
Lender's right thereafter to exercise the same, and any single or partial
exercise of any such right, remedy or power shall not preclude any other
right, remedy or power, and no such failure, delay, abandonment or single or
partial exercise of Lender's rights hereunder shall be deemed to establish a
custom or course of dealing or performance between the parties hereto.
6.3 Any modification or waiver of any provision of this Security
Agreement, or any consent to any departure by Borrower therefrom, shall not
be effective in any event unless the same is in writing and signed by Lender,
and then such modification, waiver or consent shall be effective only in the
specific instance and for the specific purpose given. Any notice to or
demand on Borrower in any event not specifically required of Lender hereunder
shall not entitle Borrower to any other or further notice or demand in the
same, similar or other circumstances unless specifically required hereunder.
6.4 Borrower agrees that at any time, and from time to time, after
the execution and delivery of this Security Agreement, upon the request of
Lender and at its own expense, it promptly will execute and deliver such
further documents and do such further acts and things as Lender may
reasonably request in order to effect fully the purposes of this Security
Agreement and to subject to the security interest created hereby any property
intended by the provisions hereof to be covered hereby.
6.5 Borrower agrees that it will warrant, preserve, maintain and
defend, at the expense of Borrower, the right, title and interest of Lender
in and to the Collateral and all right, title and interest represented
thereby against all claims, charges and demands of all persons, other than
such claims, charges and demands which arise out of acts of Lender or are
permitted pursuant to the Loan Agreement.
6.6 All notices and communications under this Loan Agreement shall
be in writing and shall be delivered in accordance with the Loan Agreement.
6.7 In the event that any provision of this Security Agreement is
deemed to be invalid by reason of the operation of any law, or by reason of
the interpretation placed thereon by an court or other governmental body,
this Security Agreement shall be construed as not containing such provision
and the invalidity of such provision shall not affect the validity of any
other provision hereof, and any and all other provisions hereof which
otherwise are lawful and valid shall remain in full force and effect.
6.8 This Security Agreement shall inure to the benefit of and shall
be binding upon the successors and assigns of the Parties.
6.9 The validity, construction and performance of this Security
Agreement shall be governed in all respects by the laws of the State of
Colorado.
6.10 Time for the performance of Borrower's obligations under this
Security Agreement is of the essence of this Security Agreement.
6.11 This Security Agreement may be signed, including by facsimile
signatures, in counterparts which, together, shall constitute one and the
same original.
IN WITNESS WHEREOF, Borrower and Lender have caused this Security
Agreement to be executed as of the date first written above.
BORROWER:
ADVANCED ENVIRONMENTAL SYSTEMS, INC.
By: /s/ Xxxx X. Xxxxxxx
Authorized Officer
LENDER:
/s/ Xxxxxxx X. Xxxx
Xxxxxxx X. Xxxx, individually
