Exhibit 10.2

 

SECURITY AGREEMENT (ALL ASSETS)

 

This Security Agreement (All Assets) (as amended, this “Agreement”) is entered
into as of October 21, 2020 by and between each of the undersigned (individually
and collectively, “Guarantor”) and TECH CAPITAL, LLC, a California limited
liability company (“Lender”), at San Jose, California.

 

RECITALS

 

A. Lender has provided or will provide financial accommodations to Taronis
Fuels, Inc., a Delaware corporation (“Parent”), MagneGas Welding Supply –
Southeast, LLC, a Florida limited liability company (“MagneGas Southeast”),
MagneGas Welding Supply – South, LLC, a Texas limited liability company
(“MagneGas South”), MagneGas Welding Supply – West, LLC, a California limited
liability company (“MagneGas West”), Tech-Gas Solutions, LLC, a Texas limited
liability company (“TGS”), Taronis - TAS, LLC, a Florida limited liability
company (“Taronis-TAS”), and Taronis – TAH, LLC, a Florida limited liability
company (“Taronis-TAH”, together with Parent, MagneGas Southeast, MagneGas
South, MagneGas West, TGS, and Taronis-TAS, individually and collectively,
“Borrower”) pursuant to (a) that certain Loan and Security Agreement, entered
into in connection herewith (as amended, the “Loan and Security Agreement”), and
(b) the Loan Documents (as defined hereinafter).

 

B. Guarantor has executed that certain General Continuing Guaranty (as amended,
the “Guaranty”) in favor of Lender, whereby Guarantor agrees to guarantee the
obligations owing by Borrower to Lender, as set forth more completely in the
Guaranty.

 

C. This Agreement is being executed by Guarantor in favor of Lender to secure
the Obligations as defined hereinafter.

 

AGREEMENT

 

1. Incorporation by Reference. The foregoing Recitals and the agreements
referred to in such Recitals are incorporated herein by this reference as though
set forth in full herein.

 

2. Definitions.

 

All other terms contained in this Agreement which are not specifically defined
herein, shall have the meanings provided in the Code. All references herein to
the singular or plural shall also mean the plural or the singular, respectively.
The term “including” is not limiting, and the term “or” has, except where
otherwise indicated, the inclusive meaning represented by the phrase “and/or.”
The words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this
Agreement refer to this Agreement as a whole and not to any particular provision
of this Agreement. Any section, subsection, clause, schedule, and exhibit
references are to this Agreement unless otherwise specified. Any reference in
this Agreement or in the Loan Documents to this Agreement or any of the Loan
Documents shall include all alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, and supplements, thereto
and thereof, as applicable. As used herein, the following terms shall have the
following meanings:

 

“Accounts” means all currently existing and hereafter arising accounts as
defined in the Code, as such definition may be amended from time to time, and
shall include, but not be limited to, a right to payment of a monetary
obligation for property sold or services rendered, and any and all credit
insurance, guaranties, or security therefor.

 

“Agreement” has the meaning given in the preamble hereto.

 

“Borrower” has the meaning given in Recital A hereof.

 

“Chattel Paper” has the meaning given in the Code, as such definition may be
amended from time to time, and shall include, but not be limited to, as a record
or records that evidence both (a) a monetary obligation; and (b) one of the
following: (i) a security interest in specific goods; (ii) a security interest
in specific goods and software used in the goods; (iii) a security interest in
specific goods and license of software used in the goods; or (iv) a lease of
specific goods and license of Software used in the goods.

 

 

 

 

“Code” means the California Uniform Commercial Code or any successor statute, as
same may be amended from time to time hereafter.

 

“Collateral” means all of the personal property now owned or hereafter acquired
by Guarantor whether now existing or hereafter arising and wherever located,
including without limitation: (a.) all Accounts; (b.) all Chattel Paper
including without limitation Electronic Chattel Paper; (c.) all Inventory; (d.)
all Equipment; (e.) all Trade Fixtures; (f.) all Fixtures, but only if related
to Real Property Collateral; (g.) all Instruments; (h.) all Financial Assets,
including without limitation, Investment Property; (i.) all Documents; (j.) all
Deposit Accounts; (k.) all Letter of Credit Rights; (l.) all General Intangibles
including without limitation copyrights, trademarks, and patents, Payment
Intangibles and Software; (m.) all Supporting Obligations; (n.) any Commercial
Tort Claim listed on any schedule provided herewith or hereafter; (o.) all
returned or repossessed goods arising from or relating to any Accounts or
Chattel Paper; (p.) all certificates of title and certificates of origin or
manufacturers statements of origin relating to any of the foregoing, now owned
or hereafter acquired; (q.) all property similar to any of the foregoing
hereafter acquired by Guarantor; (r.) all ledger sheets, files, records,
documents, instruments, and other books and records (including without
limitation related electronic data processing Software) evidencing an interest
in or relating to the above; (s.) all money, cash or cash equivalents; and (t.)
to the extent not otherwise included in the foregoing, all proceeds, products,
insurance claims, and other rights to payment and all accessions to,
replacements for, attachments to, substitutions for, and rents and profits of,
and noncash proceeds of, each of the foregoing, including, without limitation,
cash or other property which were proceeds and are recovered by a bankruptcy
trustee or otherwise as a preferential transfer by Guarantor. Notwithstanding
any contrary term of this Agreement, “Collateral” shall not include any waste or
other materials that have been or may be designated as a Hazardous Substance or
a Hazardous Waste.

 

“Commercial Tort Claim” has the meaning given in the Code, as such definition
may be amended from time to time, and shall include, but not be limited to, a
claim arising in tort with respect to which the claimant is an organization or
if the claimant is an individual, the claim arose in (a.) the course of the
claimant’s business or professions; and (b.) does not include damages arising
out of personal injury to or death of an individual.

 

“Deposit Account(s)” has the meaning given in the Code, as such definition may
be amended from time to time, and shall include, but not be limited to, a
demand, time, savings, passbook, or similar account maintained with a bank.

 

“Documents” has the meaning given in the Code, as such definition may be changed
from time to time, and shall include, but not be limited to, a document of title
or a receipt of the type described in Subdivision 2 of Section 7201 regarding
warehouse receipts.

 

“Electronic Chattel Paper” has the meaning given in the Code, as such definition
may be amended from time to time, and shall include, but not be limited to,
Chattel Paper evidenced by a record or records consisting of information stored
in an electronic medium.

 

“Environmental Laws” means all federal, state, local and foreign statutes, laws,
regulations, ordinances, rules, judgments, orders, decrees, permits,
concessions, grants, franchises, licenses, agreements or other governmental
restrictions relating to the environment or to emissions, discharges or releases
of pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes into the environment,
including ambient air, surface water, ground water, or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, petroleum or
petroleum products, chemicals, or industrial, toxic or hazardous substances or
wastes or the clean-up or other remediation thereof, including without
limitation 42 U.S.C. 9601 (14), Comprehensive Environmental Response,
Compensation and Liability Act of 1980 set forth at 42 U.S.C. 9601 et seq.
(“CERCLA”), or the Resource Conservation and Recovery Act of 1986 set forth at
42 U.S.C. 9601 et seq. (“RCRA”) and all successor statutes and amendments
thereto.

 

 

 

 

“Equipment” means all of Guarantor now owned and hereafter acquired Equipment as
defined in the Code, as such definition may be amended from time to time, and
wherever located, and shall include, but not be limited to, all goods (other
than Inventory, farm products, or consumer goods) including without limitation
machinery, computers and computer hardware and software (whether owned or
licensed), vehicles, tools, furniture, Trade Fixtures (but not including
Fixtures unless Real Property Collateral has been pledged to Lender), all
attachments, accessions and property now or hereafter affixed thereto or used in
connection therewith, and substitutions and replacements thereof, wherever
located.

 

“Financial Assets” has the meaning given in the Code, as such definition may be
amended from time to time, and shall include, but not be limited to, any of the
following: (a) a security; (b) an obligation of a person or a share,
participation, or other interest in a person or in property or an enterprise of
a person, that is, or is of a type, dealt in or traded on financial markets or
that is recognized in any area in which it is issued or dealt in as a medium for
investment; and (c) any property that is held by a securities intermediary for
another person in a securities account that has expressly agreed with the other
person that the property is to be treated as a financial asset.

 

“Fixtures” has the meaning given in the Code, as such definition may be amended
from time to time, and shall include, but not be limited to, goods that have
become so related to particular real property that an interest in them arises
under real property law, but shall not include Trade Fixtures.

 

“General Intangibles” means general intangibles as defined in the Code, as such
definition may be amended from time to time, and shall include, but not be
limited to, registered and unregistered patents, trademarks, service marks,
copyrights, trade names, applications for the foregoing, trade secrets,
goodwill, processes, drawings, blueprints, customer lists, licenses, whether as
licensor or licensee, choses in action and other claims and existing and future
leasehold interests in Equipment, Payment Intangibles and Software), all whether
arising under the laws of the United States of America or any other country.

 

“Guarantor’s Books” means all of Guarantor’s books and records including without
limitation, all ledgers, records indicating, summarizing, or evidencing
Guarantor’s properties or assets (including, without limitation, the Collateral)
or liabilities, all information relating to Guarantor’s business operations or
financial condition, and all computer programs, disc or tape files, printouts,
runs, or other computer prepared information, and the Equipment containing such
information.

 

“Guaranty” has the meaning given in Recital B hereof.

 

“Hazardous Substance(s)” and “Hazardous Waste(s)” means all or any of the
following:

 

(a) substances that are defined or listed in, or otherwise classified pursuant
to, any applicable laws or regulations as “hazardous substances,” “hazardous
materials,” “hazardous wastes,” “toxic substances,” or any other formulation
intended to define, list, or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity, carcinogenicity,
reproductive toxicity, or “EP toxicity”;

 

(b) oil, petroleum, or petroleum derived substances, natural gas, natural gas
liquids, synthetic gas, drilling fluids, produced waters, and other wastes
associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources;

 

(c) any flammable substances or explosives or any radioactive materials; and

 

(d) asbestos in any form or electrical equipment which contains any oil or
dielectric fluid containing levels of polychlorinated biphenyls in excess of
fifty (50) parts per million.

 

“Instrument(s)” has the meaning given in the Code, as such definition may be
amended from time to time, and shall include, but not be limited to, a
negotiable instrument or any other writing that evidences a right to payment of
a monetary obligation, is not itself a security agreement or lease, and is of a
type that in the ordinary course of business is transferred by delivery with any
necessary endorsement or assignment. The term “Instrument” shall include but not
be limited to promissory notes.

 

 

 

 

“Inventory” means all present and future Inventory, as defined in the Code, as
such definition may be amended from time to time, wherever located, and shall
include but not be limited to, goods held for sale or lease or to be furnished
under a contract of service and all present and future raw materials, work in
process, finished goods, and packing and shipping materials, wherever located,
and any documents of title representing any of the above.

 

“Investment Property” has the meaning given in the Code, as such definition may
be amended from time to time, and shall include, but not be limited to,
securities, security accounts, commodity contracts, or commodity accounts.

 

“Lender” has the meaning given in the preamble hereto.

 

“Letter of Credit Rights” has the meaning given in the Code, as such definition
may be amended from time to time, and shall include, but not be limited to, a
right to payment or performance under a letter of credit, whether or not
beneficiary has demanded or is at the time entitled to demand payment or
performance.

 

“Loan Documents” means collectively, this Agreement, the Guaranty, the Loan and
Security Agreement, any term notes, and all other notes, other guarantees,
security agreements, subordination agreements, and other agreements, documents
and instruments now or at any time hereafter executed and/or delivered by
Guarantor, Borrower or any obligor in connection with this Agreement or
otherwise, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.

 

“Material Event of Default” has the meaning given in Section 6.1.

 

“Obligations” shall be used in its most comprehensive sense and shall include,
without limitation, any loan and any and all advances, debts, obligations, and
liabilities of Guarantor to Lender, heretofore, now, or hereafter made,
incurred, or created, whether voluntarily or involuntarily, and however arising,
including, without limitation, (i) Obligations owing by Guarantor to third
parties which have granted Lender a security interest in the accounts, chattel
paper and/or general intangibles of said third party; (ii) any and all
reasonable attorneys’ fees and costs of outside legal counsel, expenses, costs,
premiums, charges and/or interest owed by Guarantor to Lender, whether under the
Agreement, or otherwise, whether due or not due, absolute or contingent,
liquidated or unliquidated, determined or undetermined, whether Guarantor may be
liable individually or jointly with others, whether recovery upon such
Obligations may be or hereafter becomes barred by any statute of limitations or
whether such Obligations may be or hereafter becomes otherwise unenforceable,
and includes Guarantor’s prompt, full and faithful performance, observance and
discharge of each and every term, condition, agreement, representation, warranty
undertaking and provision to be performed by Guarantor under this Agreement, the
Guaranty or under any of the Loan Documents to which Guarantor is a party; (iii)
any and all obligations or liabilities of Guarantor to Lender arising out of any
other agreement by Guarantor including without limitation any agreement to
indemnify Lender for environmental liability or to clean up hazardous waste;
(iv) any and all Obligations for which Guarantor would otherwise be liable to
Lender were it not for the invalidity, irregularity or unenforceability of them
by reason of any bankruptcy, insolvency or other law or order of any kind,
including from and after the filing by or against Guarantor of a bankruptcy
petition, whether an involuntary or voluntary bankruptcy case, and all
reasonable attorneys’ fees and costs of outside legal counsel related thereto;
and (v) any and all amendments, modifications, renewals and/or extensions of any
of the above, including without limit amendments, modifications, renewals and/or
extensions which are evidenced by new or additional instruments, documents or
agreements, all costs incurred by Lender in establishing, determining,
continuing, or defending the validity or priority of its security interest, or
in pursuing its rights and remedies under this Agreement or under any other
agreement between Lender and Guarantor or in connection with any proceeding
involving Lender as a result of any financial accommodation made by Lender to
Guarantor; and all other costs of collecting Obligations, including without
limitation reasonable attorneys’ fees and costs of outside legal counsel.

 

“Payment Intangibles” has the meaning given in the Code, as such definition may
be amended from time to time, and shall include, but not be limited to, a
General Intangible under which the account debtor’s principal obligation is a
monetary obligation.

 

 

 

 

“Permitted Liens” means liens and security interests held by Lender or agreed to
in writing by Lender.

 

“Real Property Collateral” means any item(s) of real property pledged to Lender
by Guarantor.

 

“Software” has the meaning given in the Code, as such definition may be amended
from time to time hereafter, and shall include, but not be limited to, a
computer program and any supporting information provided in connection with a
transaction relating to the program.

 

“Supporting Obligations” has the meaning given in the Code, as such definition
may be amended from time to time, and shall include, but not be limited to, a
letter-of-credit right or secondary obligation that supports the payment or
performance of an Account, Chattel Paper, a Document, a General Intangible, an
Instrument, or a Financial Asset, including without limitation, Investment
Property.

 

“Trade Fixtures” means Equipment and furnishings which are used in Guarantor’s
business or operations which become affixed to the premises (a) at which
Guarantor has its chief executive office or any other office, or (b) which are
owned or operated by Guarantor.

 

3. Security Interest in the Collateral.

 

3.1. Grant of Security Interest.

 

Guarantor hereby grants to Lender a continuing security interest in the
Collateral to secure payment when due, whether by stated maturity, demand,
acceleration or otherwise, of all Obligations.

 

3.2. Express Authority of Lender to Execute UCC Financing Statement(s).

 

Notwithstanding any provision hereof, Lender is hereby expressly authorized to
execute and file on behalf of Guarantor, UCC Financing Statement(s), including
but not limited to corrections, amendments, and modifications thereof,
including, without limitation, the use of an abbreviated description of any
Collateral such as “All Assets of the Debtor” on any and all of the foregoing.

 

3.3. Delivery of Additional Documentation.

 

At any time that Lender so reasonably requests, Guarantor shall hereby authorize
the preparation and filing by Lender and/or shall execute and deliver to Lender
such additional financing statements, continuation financing statements, control
agreements, fixture filings, security agreements, chattel mortgages, pledges,
assignments, endorsements of certificates of title, applications for title,
affidavits, reports, notices, schedules of Accounts, letters of authority, and
all other documents that Lender may request, in form satisfactory to Lender, to
perfect and continue the perfection of Lender’s security interests in the
Collateral, and in order to fully consummate all of the transactions
contemplated by this Agreement, the Guaranty and the Loan Documents to which
Guarantor is a party.

 

4. Warranties, Covenants, and Agreements. Guarantor warrants, covenants and
agrees as follows:

 

4.1. Guarantor shall furnish to Lender, in form and at intervals as Lender may
reasonably request, any information Lender may request that is reasonably
related to the Loan and Security Agreement or Loan Documents and allow Lender to
examine, inspect, and copy any of Guarantor’s books and records during normal
business hours with advanced written notice. Guarantor shall, at the request of
Lender, mark its records and the Collateral to clearly indicate the security
interest of Lender under this Agreement. Lender agrees to give Guarantor notice
of its intent to examine, inspect, and copy any of Guarantor’s records.
Notwithstanding the foregoing, after the occurrence of and during the
continuation of a Material Event of Default, as defined below, no such prior
notice shall be required. In that regard (i) any fraud, defalcation or
conversion on the part of Guarantor shall be deemed to be a Material Event of
Default; and (ii) there shall be no requirement that such fraud, defalcation or
conversion be continuing in order to permit Lender to exercise any rights or
remedies available to Lender under this Agreement, the Guaranty, the Loan
Documents to which Guarantor is a party, or applicable law.

 

 

 

 

4.2. At the time any Collateral becomes, or is represented to be, subject to a
security interest in favor of Lender, Guarantor shall be deemed to have
warranted that (a) Guarantor is the lawful owner of the Collateral and has the
right and authority to subject it to a security interest granted to Lender; (b)
none of the Collateral is subject to any security interest other than that of
Lender or Permitted Liens;(c) there are no financing statements on file unknown
to Lender, other than in favor of Lender or the holders of Permitted Liens; and
(d) Guarantor acquired its rights in the Collateral in the ordinary course of
its business.

 

4.3. Guarantor shall keep the Collateral free at all times from all claims,
liens, security interests, and encumbrances other than (a) those in favor of
Lender; (b) the holders of Permitted Liens, or (c) those that are of the same
types of liens, security interests or encumbrances listed in the “Permitted
Liens” definition of the Loan and Security Agreement without regard to any
“Permitted Indebtedness” limitations set forth in such “Permitted Liens”
definition. Guarantor shall not, without the prior written consent of Lender,
sell, transfer or lease, or permit to be sold, transferred or leased, any or all
of the Collateral, and will not return any Inventory to its supplier. Lender or
its representatives may at all times during normal business hours and with
advanced written notice inspect the Collateral and may enter upon all premises
where the Collateral is kept or might be located; provided, however, that Lender
agrees to give Guarantor notice of its intent to inspect the Collateral and
enter upon the premises where the Collateral is kept or might be located.
Notwithstanding the foregoing, after the occurrence of and during the
continuation of a Material Event of Default, no such prior notice shall be
required. In that regard (i) any fraud, defalcation, or conversion on the part
of Guarantor shall be deemed to be a Material Event of Default; and (ii) there
shall be no requirement that such fraud, defalcation or conversion be continuing
in order to permit Lender to exercise any rights or remedies available to Lender
under this Agreement, the Guaranty, the Loan Documents to which Guarantor is a
party, or applicable law.

 

4.4. Guarantor shall do all acts and or cause to be executed all writings
requested by Lender to establish, maintain and continue a perfected and first
security interest of Lender in the Collateral except as otherwise specifically
agreed by Lender. Guarantor agrees that Lender has no obligation to acquire or
perfect any lien on or security interest in any asset(s), whether real property
or personal property, to secure payment of the Obligations.

 

4.5. Guarantor shall pay within the time that they can be paid without interest
or penalty, all taxes, assessments and similar charges which at any time are or
may become a lien, charge, or encumbrance upon any Collateral. If Guarantor
fails to pay any of these taxes, assessments, or other charges in the time
provided above, Lender has the option (but not the obligation) to do so and
Guarantor agrees to repay all amounts so expended by Lender immediately upon
demand.

 

4.6. Guarantor shall keep the Collateral in good condition and will protect it
from loss, damage, or deterioration from any cause, excepting only normal wear
and tear in the ordinary course of Guarantor’s business. Guarantor has and will
maintain at all times (a) with respect to the Collateral, insurance under an
“all risk” policy against fire and other risks customarily insured against; and
(b) public liability insurance and other insurance as may be required by law or
required by Lender, all of which insurance shall be in amount, form and content,
and written by companies as may be satisfactory to Lender, containing a lender’s
loss payable endorsement acceptable to lender. Guarantor will deliver to Lender
immediately upon demand evidence satisfactory to Lender that the required
insurance has been procured. If Guarantor fails to maintain satisfactory
insurance, Lender has the option (but not the obligation) to do so and Guarantor
agrees to repay all amounts so expended by Lender immediately upon demand.

 

4.7. If Guarantor owns Accounts, then on each occasion on which Guarantor
evidences to Lender the account balances on and the nature and extent of the
Accounts, Guarantor shall be deemed to have warranted at that time that except
as otherwise indicated (and subject to the obligation on the part of Guarantor
to immediately advise Lender if any such warranty is or has become incorrect due
to Guarantor having (i) learned additional facts; or (ii) developments outside
of Guarantor’s control) (a) each of those Accounts is then valid and enforceable
without performance by Guarantor of any act; (b) each of those Accounts balances
is in fact owing; (c) there are no setoffs, recoupments, credits, contra
accounts, counterclaims or defenses against any of those Accounts of which
Guarantor is aware; (d) as to any Accounts represented by a note, trade
acceptance, draft or other instrument or by any chattel paper or document, the
same have been endorsed and/or delivered by Guarantor to Lender; (e) Guarantor
has not received with respect to any Accounts, any notice of the death of the
related account debtor, nor the dissolution, liquidation, termination of
existence, insolvency, business failure, appointment of a receiver for,
assignment for the benefit of creditors by, or filing of a petition in
bankruptcy by or against, the account debtor; and (f) as to any Accounts, the
account debtor is not an affiliate of Guarantor, the United States of America or
any department, agency or instrumentality of it, or a citizen or resident of any
jurisdiction outside of the United States. Guarantor will do all acts and will
execute all writings requested by Lender to perform, enforce performance of, and
collect all Accounts. Guarantor shall neither make nor permit any modification,
compromise, or substitution for any Accounts in any amount without the prior
written consent of Lender. Guarantor shall, at Lender’s request, arrange for
verification of Accounts directly with the account debtors of Guarantor or by
other methods acceptable to lender.

 

 

 

 

4.8. Guarantor at all times shall be in compliance with all applicable laws,
including, without limitation, any Environmental Laws.

 

4.9. Intentionally Omitted.

 

4.10. If Lender, acting in its sole discretion, redelivers any Collateral to
Guarantor or Guarantor’s designee for the purpose of (a) the ultimate sale or
exchange thereof; (b) presentation, collection, renewal, or registration of
transfer thereof; or (c) loading, unloading, storing, shipping, transshipping,
manufacturing, processing or otherwise dealing with it preliminary to sale or
exchange; such redelivery shall be in trust for the benefit of Lender and shall
not constitute a release of Lender’s security interest in it or in the proceeds
or products of it unless Lender specifically so agrees in writing. If Guarantor
requests any such redelivery approved by Lender in its sole discretion,
Guarantor will deliver with such request a proposed form of financing statement
in form and substance satisfactory to Lender, which financing statement will be
field by Lender. Any proceeds of Collateral coming into Guarantor’s possession
as a result of any such redelivery shall be held in trust for Lender and
immediately delivered to Lender for application on the Obligations. Lender may
(in its sole discretion) deliver any or all of the Collateral to Guarantor, and
such delivery by Lender shall discharge Lender from all liability or
responsibility for such Collateral. Lender, at its option, may require delivery
of any Collateral to Lender at any time with such endorsements or assignments of
the Collateral as Lender may request.

 

4.11. Upon the occurrence of a Material Event of Default, Lender may, as to
Collateral (a) cause any or all of such Collateral to be transferred to its name
or to the name of its nominees; (b) receive or collect by legal proceedings or
otherwise all dividends, interest, principal payments and other sums and all
other distributions at any time payable or receivable on account of such
Collateral, and hold the same as Collateral, or apply the same to the
Obligations, the manner and distribution of the application to be in the sole
discretion of Lender; (c) enter into any extension, subordination,
reorganization, deposit, merger or consolidation agreement or any other
agreement relating to or affecting such Collateral, and deposit or surrender
control of such Collateral, and accept other property in exchange for such
Collateral and hold or apply the property or money so received pursuant to this
Agreement.

 

4.12. Lender may assign any of the Obligations and deliver any or all the
Collateral to its assignee, which then shall have with respect to Collateral so
delivered all the rights and powers of Lender under this Agreement, and after
that Lender shall be fully discharged from all liability and responsibility with
respect to Collateral so delivered.

 

4.13. Guarantor delivers this Agreement based solely on Guarantor’s independent
investigation of (or decision not to investigate) the financial condition of
Borrower and is not relying on any information furnished by Lender. Guarantor
assumes full responsibility for obtaining any further information concerning
Borrower’s financial condition, the status of the Obligations or any other
matter that the undersigned may deem necessary or appropriate now or later.
Guarantor waives any duty on the part of Lender, and agrees that Guarantor is
not relying upon nor expecting Lender to disclose to Guarantor any fact now or
later known by Lender, whether relating to the operations or condition of
Borrower, the existence, liabilities or financial condition of any guarantor of
the Obligations, the occurrence of any default with respect to the Obligations,
or otherwise, notwithstanding any effect such fact may have upon Guarantor’s
risk or Guarantor’s rights against Borrower. Guarantor knowingly accepts the
full range of risk encompassed in this Agreement, which risk includes without
limitation the possibility that Borrower may incur Obligations to Lender after
the financial condition of Borrower or Borrower’s ability to pay debts as they
mature, has deteriorated.

 

 

 

 

4.14. Guarantor shall defend, indemnify and hold harmless Lender, its employees,
agents, shareholders, officers, and directors from and against any and all
claims, damages, fines, expenses, liabilities or causes of action of whatever
kind, including without limitation consultant fees, legal expenses, and
reasonable attorneys’ fees and costs of outside legal counsel, suffered by any
of them as a direct or indirect result of any actual or asserted violation of
any law, including, without limitation, Environmental Laws, or of any
remediation relating to any property required by any law, including without
limitation, Environmental Laws.

 

4.15. Guarantor agrees to pay Lender all such costs and expenses incurred by
Lender relating to this Agreement, the Guaranty, the Loan Documents to which
Guarantor is a party, the Collateral or the Obligations, immediately upon
demand, and until paid all costs shall bear interest at the highest interest
rate applicable to Borrower under the Loan and Security Agreement, but not in
excess of the maximum rate permitted by law. Any reference in this Agreement to
reasonable attorneys’ fees shall be deemed a reference to the reasonable
attorneys’ fees, costs, and expenses of outside counsel, whether or not a suit
or action is instituted, and to court costs if a suit or action is instituted,
and whether such reasonable attorneys’ fees, court costs or expenses are
incurred at the trial court level, on appeal, in a bankruptcy, administrative or
probate proceeding or otherwise.

 

5. Collection of Proceeds.

 

5.1. Guarantor agrees to collect and enforce payment of all Collateral until
such time as Lender shall direct Guarantor to the contrary. Immediately upon
notice to Guarantor by Lender and at all times after that, Guarantor agrees to
fully and promptly cooperate and assist Lender in the collection and enforcement
of all Collateral and to hold in trust for Lender all payments received in
connection with Collateral and from the sale, lease or other disposition of any
Collateral, all rights by way of suretyship or guaranty and all rights in the
nature of a lien or security interest which Guarantor now or later has regarding
Collateral. Immediately upon and after such notice, Guarantor agrees to (a)
endorse to Lender and immediately deliver to Lender all payments received on
Collateral or from the sale, lease or other disposition of any Collateral or
arising from any other rights or interests of Guarantor in the Collateral, in
the form received by Guarantor without commingling with any other funds, and (b)
immediately deliver to Lender all property in Guarantor’s possession or later
coming into Guarantor’s possession through enforcement of Guarantor’s rights or
interests in the Collateral. Guarantor irrevocably authorizes Lender or any
Lender employee or agent to endorse the name of Guarantor upon any checks or
other items that are received in payment for any Collateral, and to do any and
all things necessary in order to reduce these items to money. Lender shall have
no duty as to the collection or protection of Collateral or the proceeds of it,
nor as to the preservation of any related rights. Guarantor agrees to take all
steps necessary to preserve rights against prior parties with respect to the
Collateral. Nothing in this Section 5.1 shall be deemed to constitute consent by
Lender to any sale, lease, or other disposition of any Collateral.

 

5.2. If Guarantor owns Accounts, Guarantor agrees that immediately upon Lender’s
request (whether or not a Material Event of Default exists) Guarantor shall at
its sole expense establish and maintain (or Lender, at Lender’s option, may
establish and maintain at Guarantor’s expense): (a) a United States Post Office
lock box which shall be titled as designated by Lender (the “Lock Box”), to
which Lender shall have exclusive access and control, with Guarantor expressly
irrevocably authorizing Lender, from time to time, to remove contents from the
Lock Box, and with Guarantor agreeing to notify all account debtors and other
parties obligated to Guarantor that all payments made to Guarantor shall be
remitted, for the credit of Guarantor, to the Lock Box, and Guarantor, at
Lender’s request, shall include a like statement on all invoices; and/or (b) a
non-interest bearing deposit account with Lender or a bank acceptable to Lender
which shall be titled as designated by Lender (the “Cash Collateral Account”) to
which Lender shall have exclusive access and control, with Guarantor expressly
irrevocably authorizing Lender, from time to time, to remove proceeds from the
Cash Collateral Account, and with Guarantor agreeing to notify all account
debtors and other parties obligated to Guarantor that all payments made to
Guarantor shall be remitted, for the credit of Guarantor, to the Cash Collateral
Account, and Guarantor, at Lender’s request, shall include a like statement on
all invoices. Guarantor shall execute all documents and authorizations as may be
required by Lender to establish and maintain the Lock Box and the Cash
Collateral Account.

 

 

 

 

5.3. All items or amounts which are remitted to the Lock Box, the Cash
Collateral Account or otherwise delivered by or for the benefit of Guarantor to
Lender on account of partial or full payment of, or with respect to, any
Collateral shall, at Lender’s option, be (i) applied to the payment of the
Obligations, whether then due or not, in such order or at such time of
application as Lender may determine in its sole discretion; (ii) maintained in
the Cash Collateral Account, or (iii) remitted to Guarantor or to such other
person(s) as may be entitled to such items or amounts under applicable law.
Guarantor agrees that Lender shall not be liable for any loss or damage which
Guarantor may suffer as a result of Lender’s processing of items or its exercise
of any other rights or remedies under this Agreement, including without
limitation indirect, special or consequential damages, loss of revenues or
profits, or any claim, demand or action by any third party arising out of or in
connection with the processing of items or the exercise of any other rights or
remedies under this Agreement. Guarantor agrees to indemnify and hold Lender
harmless from and against all such third party claims, demands, or actions, and
all related expenses or liabilities, including, without limitation, reasonable
attorneys’ fees and costs of outside legal counsel.

 

6. Default, Enforcement of Rights and Application of Proceeds.

 

6.1. Guarantor shall be in default under this Agreement upon the occurrence of
any of the following events which have not been cured during any applicable cure
period, if any (each, a “Material Event of Default”):

 

6.1.1. Any failure by Guarantor to pay the Obligations when due, or such portion
of it as may be due, by acceleration or otherwise;

 

6.1.2. Any failure or neglect to comply with, or breach of, or default under,
any term of this Agreement, or any other agreement or commitment between
Guarantor and Lender;

 

6.1.3. Any warranty, representation, financial statement, or other information
made, given or furnished to Lender by or on behalf of Guarantor shall be, or
shall prove to have been, false, misleading or intentionally misleading when
made, given, or furnished;

 

6.1.4. Any loss, theft, substantial damage or destruction to or of any
Collateral, or the issuance or filing of any attachment, levy, garnishment or
the commencement of any proceeding in connection with any Collateral or of any
other judicial process of, upon or in respect of Guarantor, or any Collateral;

 

6.1.5. Sale or other disposition by Guarantor of any portion of its assets or
property outside the ordinary course of business or voluntary suspension of the
transaction of business by Guarantor, or death, dissolution, termination of
existence, merger or consolidation with an unaffiliated third party, a foreign
affiliate or with any domestic affiliated party that has not provided Lender
with an all assets secured guaranty of Borrower’s obligations under the Loan and
Security Agreement and Loans Documents, insolvency proceeding, business failure,
or assignment for the benefit of creditors of or by Guarantor; or commencement
of any proceedings under any state or federal bankruptcy or insolvency law by or
against Guarantor; or the appointment of a receiver, trustee, court appointee,
sequestrator or otherwise, for all or any part of the property of Guarantor;

 

6.1.6. Lender, upon thorough review of the financial position of the Guarantor,
deems itself insecure believing that the prospect of payment of the Obligations
or performance of this Agreement is impaired or shall fear deterioration,
removal, or waste of Collateral; or

 

6.1.7. Any breach or default under this Agreement, the Guaranty, the Loan
Documents to which Guarantor is a party or any other present or future agreement
between Guarantor and Lender shall become a Material Event of Default if
Guarantor has not cured said breach or default within the time period (if any)
specified by Lender in its sole discretion in any notice of default.

 

6.2. Upon the occurrence of a Material Event of Default, Lender may at its sole
discretion and without prior notice, declare any or all of the Obligations to be
immediately due and payable, and shall have and may exercise any one or more of
the following rights and remedies:

 

6.2.1. exercise all the rights and remedies upon default, in foreclosure and
otherwise, available to secured parties under the provisions of the Code and
other applicable law;

 

 

 

 

6.2.2. institute legal proceedings to foreclose upon the lien and security
interest granted by this Agreement, to recover judgment for all amounts then due
and owing as Obligations, and to collect the same out of any Collateral or the
proceeds of any sale of Collateral;

 

6.2.3. institute legal proceedings for the sale, under the judgment or decree of
any court, of any or all Collateral; and/or

 

6.2.4. personally or by agents, attorneys, or appointment of a receiver, enter
upon any premises where Collateral may then be located, and take possession of
all or any of it and/or render it unusable; and without being responsible for
loss or damage to such Collateral, hold, operate, sell, lease, or dispose of all
or any Collateral at one or more public or private sales, leasings or other
dispositions, at places and times and on terms and conditions as Lender may deem
fit, without any previous demand or advertisement; and except as provided in
this Agreement, all notice of sale, lease or other disposition, and
advertisement, and other notice or demand, any right or equity of redemption,
and any obligation of a prospective purchaser or lessee to inquire as to the
power and authority of Lender to sell, lease, or otherwise dispose of the
Collateral or as to the application by Lender of the proceeds of sale or
otherwise, which would otherwise be required by, or available to Guarantor
under, applicable law are hereby expressly waived by Guarantor to the fullest
extent permitted.

 

At any sale pursuant to this Section 6.2, whether under the power of sale, by
virtue of judicial proceedings or otherwise, it shall not be necessary for
Lender or a public officer under order of a court to have present physical or
constructive possession of Collateral to be sold. The recitals contained in any
conveyances and receipts made and given by Lender or the public officer to any
purchase at any sale made pursuant to this Agreement shall conclusively
establish the truth and accuracy of the matters stated therein (including,
without limitation, as to the amounts of the principal of and interest on the
Obligations, the accrual and nonpayment of it and advertisement and conduct of
the sale); and all prerequisites to the sale shall be presumed to have been
satisfied and performed. Upon any sale of any Collateral, the receipt of the
officer making the sale under judicial proceedings or of Lender shall be
sufficient discharge to the purchaser for the purchase money, and the purchaser
shall not be obligated to see to the application of the money. Any sale of any
Collateral under this Agreement shall be a perpetual bar against Guarantor with
respect to such Collateral.

 

6.3. Guarantor shall at the request of Lender, notify the account debtors or
obligors of Lender’s security interest in the Collateral, including, without
limitation, the Accounts and Inventory and all proceeds, and advise such account
debtors or obligors to direct all payments thereof to Lender. Lender may,
itself, upon (a) the occurrence of any Material Event of Default; or (b) in any
event, if Lender believes it is necessary to do so, so notify and direct any
account debtor or obligor.

 

6.4. The proceeds of any sale or other disposition of Collateral authorized by
this Agreement shall be applied by Lender as follows: first, to all expenses
authorized by the Code and all reasonable attorneys’ fees and legal expenses
incurred by Lender and costs of outside legal counsel; second, to interest
incurred on the Obligations, third, to principal; and fourth, to remaining
Obligations, with the surplus, if any, to be paid over to Guarantor or to such
other person(s) as may be entitled to it under applicable law. Guarantor shall
remain liable for any deficiency, which it shall pay to Lender immediately upon
demand.

 

6.5. Nothing in this Agreement is intended, nor shall it be construed, to
preclude Lender from pursuing any other remedy provided by law for the
collection of the Obligations or for the recovery of any other sum to which
Lender may be entitled for the breach of this Agreement by Guarantor, or for
Lender’s realization upon the Collateral. Nothing in this Agreement shall reduce
or release in any way any rights or security interests of Lender contained in
any existing agreement between Guarantor and Lender.

 

6.6. No (a) waiver of default or forbearance; or (b) consent to any act of
Guarantor by Lender shall be effective unless in writing and signed by an
authorized officer of Lender. No (a) waiver of any default; or (b) forbearance
on the part of Lender in enforcing any of its rights under this Agreement shall
operate as a waiver by Lender of any other default or of the same default on a
future occasion or of any rights.

 

 

 

 

6.7. Guarantor irrevocably appoints Lender or any agent of Lender (which
appointment is coupled with an interest) the true and lawful attorney of
Guarantor (with full power of substitution) in the name, place, and stead of,
and at the expense of, Guarantor:

 

6.7.1. to demand, receive, sue for, and give receipts or acquittances for any
monies due or to become due on any Collateral and to endorse any item
representing any payment on or proceeds of the Collateral;

 

6.7.2. to execute and file in the name of and on behalf of Guarantor all
financing statements or other filings deemed necessary or desirable by Lender to
evidence, perfect, or continue the security interests granted in this Agreement;

 

6.7.3. to qualify Guarantor to do business in any jurisdiction if Guarantor
shall fail to do so promptly following request by Lender; and

 

6.7.4. to do and perform any act on behalf of Guarantor permitted or required
under this Agreement.

 

Upon the occurrence and during the continuance of a Material Event of Default,
Guarantor also agrees, upon the request of Lender, to assemble the Collateral
and make it available to Lender at any place designated by Lender.

 

7. General Terms.

 

7.1. Address for Notices. Until Lender is advised in writing by Guarantor to the
contrary, all notices, requests and demands required under this Agreement or by
law shall be given to, or made upon, Guarantor and Lender at the addresses
indicated in Section 7.18 below.

 

7.2. Notice of Changes. Guarantor will give Lender not less than ninety (90)
days’ prior written notice of all contemplated changes in Guarantor’s name,
chief executive office location, and/or location of any Collateral.

 

7.3. No Assumption of Guarantor’s Duties. Lender assumes no duty of performance
or other responsibility under any contracts contained within the Collateral.

 

7.4. Lender’s Right to Assign. Lender has the right to sell, assign, transfer,
negotiate, or grant participations or any interest in, any or all of the
Obligations and any related obligations, including without limitation this
Agreement. In connection with the above, but without limiting its ability to
make other disclosures to the full extent allowable, Lender may disclose all
Loan Documents and information which Lender now or later has relating to
Guarantor, the Obligations or this Agreement, however obtained. Guarantor
further agree(s) that Lender may provide information relating to this Agreement
or relating to Guarantor to Lender’s parent, affiliates, subsidiaries, and
service providers.

 

7.5. Right of Settoff. In addition to Lender’s other rights, any obligations
owing from Lender to Guarantor can be set off and applied by Lender against any
Obligations at any time(s) either before or after maturity or demand without
notice to anyone.

 

7.6. Guarantor Waivers. Guarantor waives any right to require Lender to: (a)
proceed against any person or property; (b) give notice of the terms, time and
place of any public or private sale of personal property security held from
Borrower or any other person, or otherwise comply with the provisions of
Sections 9-609 et seq of the Code; or (c) pursue any other remedy in Lender’s
power. Guarantor waives notice of acceptance of this Agreement and presentment,
demand, protest, notice of protest, dishonor, notice of dishonor, notice of
default, notice of intent to accelerate or demand payment of any Obligations,
any and all other notices to which the undersigned might otherwise be entitled,
and diligence in collecting any Obligations, and agree(s) that Lender may, once
or any number or times, modify the terms of any Obligations, compromise, extend,
increase, accelerate, renew or forbear to enforce payment of any or all
Obligations, or permit Borrower to incur additional Obligations, all without
notice to Guarantor and without affecting in any manner the unconditional
obligation of Guarantor under this Agreement. Guarantor unconditionally and
irrevocably waives each and every defense and setoff of any nature which, under
principles of guaranty or otherwise, would operate to impair or diminish in any
way the obligations of Guarantor under this Agreement and acknowledges that such
waiver is by this reference incorporated into each security agreement,
collateral assignment, pledge and/or other document from Guarantor now or later
securing the Obligations, and acknowledges that as of the date of this Agreement
no such defense or setoff exists.

 

 

 

 

7.7. Waiver of Guarantor Rights. Until Lender has been paid in full with no
agreement or obligation to extend any further financial accommodations to
Borrower, Guarantor waives any and all rights (whether by subrogation,
indemnity, reimbursement, or otherwise) to recover from Borrower any amounts
paid or the value of any Collateral given by Guarantor pursuant to this
Agreement.

 

7.8. Timing of Required Notices. In the event that applicable law shall obligate
Lender to give prior notice to Guarantor of any enforcement action to be taken
under this Agreement, Guarantor agrees that a written notice given to Guarantor
at least ten (10) days before the date of the act shall be reasonable notice of
the intended action and, specifically, reasonable notification of the time and
place of any public sale or of the time after which any private sale, lease, or
other disposition is to be made, unless a shorter notice period is reasonable
under the circumstances. Such notice shall be deemed to be given under this
Agreement when delivered to Guarantor or when placed in an envelope addressed to
Guarantor and deposited, with postage prepaid, in a post office or official
depository under the exclusive care and custody of the United States Postal
Service or delivered to an overnight courier. The mailing shall be by overnight
courier, certified mail, or first-class mail.

 

7.9. Reinstatement of Obligations. Notwithstanding any prior revocation,
termination, surrender, or discharge of this Agreement in whole or in part, the
effectiveness of this Agreement shall automatically continue or be reinstated in
the event that any payment received or credit given by Lender in respect of the
Obligations is returned, disgorged, or rescinded under any applicable law,
including, without limitation, any bankruptcy or insolvency laws, in which case
this Agreement, shall be enforceable against Guarantor as if the returned,
disgorged, or rescinded payment or credit had not been received or given by
Lender, and whether or not Lender relied upon this payment or credit or changed
its position as a consequence of it. In the event of continuation or
reinstatement of this Agreement, Guarantor agrees upon demand by Lender to
execute and deliver to Lender those Loan Documents which Lender determines are
appropriate to further evidence (in the public records or otherwise) this
continuation or reinstatement, although the failure of Guarantor to do so shall
not affect in any way the reinstatement or continuation.

 

7.10. Successors and Assigns. This Agreement and all the rights and remedies of
Lender under this Agreement shall inure to the benefit of Lender’s successors
and assigns and to any other holder who derives from Lender title to or an
interest in the Obligations or any portion of it, and shall bind Guarantor and
the heirs, legal representatives, successors, and assigns of Guarantor. Nothing
in this Section 7.10 is or shall be deemed to constitute consent by Lender to
any assignment by Guarantor with any such assignment by Guarantor to be void ab
initio.

 

7.11. Multiple Guarantors. If there is more than one Guarantor, all
undertakings, warranties and covenants made by Guarantor and all rights, powers
and authorities given to or conferred upon Lender are made or given jointly and
severally.

 

7.12. Meaning of Certain Terms. Except as otherwise provided in this Agreement,
all terms in this Agreement which are defined in the Code have the meanings
assigned to them in Division 9 (or, absent definition in Division 9, in any
other division) of the Code.

 

7.13. No Prejudice to Lender’s Rights; Amendments to Agreement. No single or
partial exercise, or delay in the exercise, of any right or power under this
Agreement, shall preclude other or further exercise of the rights and powers
under this Agreement. The unenforceability of any provision of this Agreement
shall not affect the enforceability of the remainder of this Agreement. This
Agreement constitutes the entire agreement of Guarantor and Lender with respect
to the subject matter of this Agreement. No amendment or modification of this
Agreement shall be effective unless the same shall be in writing and signed by
Guarantor and an authorized officer of Lender.

 

 

 

 

7.14. Governing Law; Venue. This Agreement shall in all respects be governed by
and construed in accordance with the internal laws of the State of California
without regard to conflict of laws principles. The parties hereto agree that all
actions or proceedings arising in connection with this Agreement, the Guarantor
or the Obligations shall be tried and litigated only in the State and Federal
courts located in the County of Santa Clara, State of California, or, at the
sole option of Lender, in any other court in which Lender shall initial legal or
equitable proceedings and which has subject matter jurisdiction over the matter
at issue. Borrower and Lender waives, any right each may have to assert the
doctrine of forum non conveniens or to object to venue to the extent any
proceeding is brought in accordance with this Section.

 

7.15. Payable Upon Demand Obligations. To the extent that any of the Obligations
is payable upon demand, nothing contained in this Agreement shall modify the
terms and conditions of that portion of the Obligations nor shall anything
contained in this Agreement prevent Lender from making demand, without notice
and with or without reason, for immediate payment of any or all of that portion
of the Obligations at any time(s), whether or not a Material Event of Default
has occurred or continues.

 

7.16. Chief Executive Office; Other Locations. Guarantor’s chief executive
office is located and shall be maintained at the address indicated below its
signature. If Collateral is located at other than the chief executive office,
such Collateral is located and shall be maintained at the following locations:
(see attached).

 

7.17. Termination of Agreement. This Agreement shall be terminated only by the
filing of a termination statement in accordance with the applicable provisions
of the Code, but any Obligations which by their terms survive termination of the
Agreement including, without limitation, the obligations contained in Sections
4.14, 5.3 and 7.9 of this Agreement shall survive termination.

 

7.18. Notices. Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement shall be in writing and (except
for financial statements and other informational documents which may be sent by
first-class mail, postage prepaid) shall be personally delivered or sent by
overnight mail, registered or certified mail, postage prepaid, return receipt
requested, or by electronic mail or telefacsimile to Guarantor or to Lender, as
the case may be, at its address set forth below:

 

If to Guarantor: See contact information below Guarantor’s signature.     If to
Lender: TECH CAPITAL, LLC   2010 North First Street, Suite 300   San Jose,
California 95131 Attn: Hank Noon, Senior Vice President & Head of Asset Based
Lending Telephone No.: 408-487-7577 Facsimile No.: 408-467-2393 E-mail:
hnoon@techcapitalLLC.com;

 

The parties hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the other. All
notices or demands sent in accordance with this Section, other than notices by
Lender in connection with Sections 9610, 9611, 9615, 9617, 9618, 9620, 9621, or
9624 of the Code, shall be deemed received on the earlier of the date of actual
receipt or three (3) days after the deposit thereof in the mail. Guarantor
acknowledges and agrees that notices sent by Lender in connection with the
foregoing described Sections of the Code shall be deemed sent when deposited in
the mail or transmitted by telefacsimile or other similar method set forth
above.

 

7.19. Further Assurances. Guarantor shall execute such other and further
agreements, documents and instruments and take such further actions as Lender
may require in order to implement the provisions of this Agreement and to
perfect and protect the security interests granted to Lender pursuant to this
Agreement.

 

7.20. Counterparts; Electronic Execution. This Agreement may be executed in any
number of counterparts, each of which shall be an original, with the same effect
as if all original signatures were on the same copy of the signature page of
this Agreement. Delivery of an executed counterpart of the signature page to
this Agreement by telefacsimile or other electronic means shall be effective as
delivery of a manually executed counterpart of this Agreement, and any party
delivering such an executed counterpart of this Agreement to any party shall
thereafter promptly deliver a manually executed counterpart to such party,
provided that the failure to deliver such manually executed counterpart shall
not affect the validity, enforceability or binding effect of this Agreement.

 

 

 

 

7.21. Integration. This Agreement embodies the entire agreement and
understanding of the parties with respect to the subject matter hereof, and
supersedes all prior or contemporaneous agreements and understanding between
said parties, verbal or written, express or implied, relating to the subject
matter hereof. No course of dealing, course of perfection or trade usage and no
parol evidence of any nature shall be used to supplement or modify any terms of
this Agreement.

 

7.22. Indemnification. Except with respect to any liability arising out of the
gross negligence or willful misconduct on the part of the Lender or any of its
officers, employees and agents, Guarantor shall indemnify, defend (with
attorneys selected by Lender) and hold Lender and its agents, contacts,
employees, and officers harmless from any and all liability with respect to: (i)
any stamp or other taxes which may be determined to be payable in connection
with the execution of this Agreement, the Guaranty, the Loan Documents to which
Guarantor is a party, or any action of Lender with respect to the Collateral,
including, without limitation, the transfer of the Collateral to Lender’s name
or that of Lender’s nominee or any purchaser at a foreclosure sale; and (ii)
obligations, demands, claims, and liabilities arising out of or relating to (1)
the transactions contemplated by this Agreement, the Guaranty, any of the other
Loan Documents to which Guarantor is a party, or any action of Lender with
respect to the Collateral, (2) any actions filed by any customers against Lender
or its officers, agents or employees in connection with any Accounts, (3) any
breach of this Agreement by Guarantor or any default or event of default
hereunder, (4) any claims by third parties arising from Lender’s efforts to
collect or attempt to collect any Collateral, and/or (5) any willful or
negligent acts or omissions by Guarantor or its agents or employees. This
provision shall survive the termination of this Agreement.

 

8. WAIVER OF JURY TRIAL; REFERENCE PROCEEDING. GUARANTOR AND LENDER ACKNOWLEDGE
THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE
WAIVED. EACH PARTY AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT)
WITH COUNSEL OF ITS CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THE MUTUAL
BENEFIT OF THE PARTIES WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF
LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED
TO, THIS AGREEMENT OR THE OBLIGATIONS.

 

WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial
by jury is not enforceable, the parties hereto agree that any and all disputes
or controversies of any nature between them arising at any time shall be decided
by a reference to a private judge, mutually selected by the parties (or, if they
cannot agree, by the Presiding Judge of the Santa Clara County, California
Superior Court) appointed in accordance with California Code of Civil Procedure
Section 638 (or pursuant to comparable provisions of federal law if the dispute
falls within the exclusive jurisdiction of the federal courts), sitting without
a jury, in Santa Clara County, California; and the parties hereby submit to the
jurisdiction of such court. The reference proceedings shall be conducted
pursuant to and in accordance with the provisions of California Code of Civil
Procedure §§ 638 through 645.1, inclusive. The private judge shall have the
power, among others, to grant provisional relief, including without limitation,
entering temporary restraining orders, issuing preliminary and permanent
injunctions and appointing receivers. All such proceedings shall be closed to
the public and confidential and all records relating thereto shall be
permanently sealed. If during the course of any dispute, a party desires to seek
provisional relief, but a judge has not been appointed at that point pursuant to
the judicial reference procedures, then such party may apply to the Santa Clara
County, California Superior Court for such relief. The proceeding before the
private judge shall be conducted in the same manner as it would be before a
court under the rules of evidence applicable to judicial proceedings. The
parties shall be entitled to discovery that shall be conducted in the same
manner as it would be before a court under the rules of discovery applicable to
judicial proceedings. The private judge shall oversee discovery and may enforce
all discovery rules and order applicable to judicial proceedings in the same
manner as a trial court judge. The parties agree that the selected or appointed
private judge shall have the power to decide all issues in the action or
proceeding, whether of fact or of law, and shall report a statement of decision
thereon pursuant to the California Code of Civil Procedure § 644(a). Nothing in
this paragraph shall limit the right of any party at any time to exercise
self-help remedies, foreclose against collateral, or obtain provisional
remedies. The private judge shall also determine all issues relating to the
applicability, interpretation, and enforceability of this paragraph. In the
event of any challenge to the legality or enforceability of this Section, the
prevailing party shall be entitled to recover the costs and expenses, including
reasonable attorneys’ fees, incurred by it in connection therewith.

 

[Remainder of Page Intentionally Left Blank; Signatures Commence on Next Page]

 

 

 

 

IN WITNESS WHEREOF, the parties have executed this Security Agreement (All
Assets) as of the date first set forth above.

 

Guarantor:

 

MAGNEGAS IP, LLC,   a Delaware limited liability company       /s/ Scott Mahoney
  By: Scott Mahoney   Its: Manager  

 

Chief Executive Office and Contact Information:

24980 N. 83rd Avenue, Suite 100

Peoria, Arizona 85383

Attn: Tyler Wilson, Esq.

Telephone No.:  

Facsimile No.:

E-Mail:  

 

MAGNEGAS PRODUCTION, LLC,   a Delaware limited liability company       /s/ Scott
Mahoney   By: Scott Mahoney   Its: Manager  

 

Chief Executive Office and Contact Information:

24980 N. 83rd Avenue, Suite 100

Peoria, Arizona 85383

Attn: Tyler Wilson, Esq.

Telephone No.:  

Facsimile No.:

E-Mail:  

 

MAGNEGAS REAL ESTATE HOLDINGS, LLC,   a Delaware limited liability company      
/s/ Scott Mahoney   By: Scott Mahoney   Its: Manager  

 

Chief Executive Office and Contact Information:

24980 N. 83rd Avenue, Suite 100

Peoria, Arizona 85383

Attn: Tyler Wilson, Esq.

Telephone No.:  

Facsimile No.:

E-Mail:  

 

[Signatures Continued on Next Page]

 

 

 

 

TARONIS – TGS, LLC,   a Delaware limited liability company       /s/ Scott
Mahoney   By: Scott Mahoney   Its: Manager  

 

Chief Executive Office and Contact Information:

24980 N. 83rd Avenue, Suite 100

Peoria, Arizona 85383

Attn: Tyler Wilson, Esq.

Telephone No.:  

Facsimile No.:

E-Mail:  

 

MAGNEGAS IRELAND LIMITED,   an Irish private limited company       /s/ Scott
Mahoney   By: Scott Mahoney   Its: Director  

 

Chief Executive Office and Contact Information:

24980 N. 83rd Avenue, Suite 100

Peoria, Arizona 85383

Attn: Tyler Wilson, Esq.

Telephone No.:  

Facsimile No.:

E-Mail:  

 

MAGNEGAS LIMITED,   an English private limited company       /s/ Scott Mahoney  
By: Scott Mahoney   Its: Director  

 

Chief Executive Office and Contact Information:

24980 N. 83rd Avenue, Suite 100

Peoria, Arizona 85383

Attn: Tyler Wilson, Esq.

Telephone No.:  

Facsimile No.:

E-Mail:  

 

[Signatures Continued on Next Page]

 

 

 

 

TARONIS NETHERLANDS B.V.,   A Dutch private limited liability company       /s/
Scott Mahoney   By: Scott Mahoney   Its: Director  

 

Chief Executive Office and Contact Information:

24980 N. 83rd Avenue, Suite 100

Peoria, Arizona 85383

Attn: Tyler Wilson, Esq.

Telephone No.:  

Facsimile No.:

E-Mail:  

 

Lender:

 

TECH CAPITAL, LLC,   a California limited liability company       By: /s/ Hank
Noon     Hank Noon   Title: Senior Vice President & Head of Asset Based Lending
 

 

 

 

 

Addendum A to Security Agreement (All Assets)

 

Pursuant to this Addendum A to Security Agreement (All Assets) (this
“Addendum”), the foregoing Security Agreement (All Assets) (the “Agreement”) by
and between TECH CAPITAL, LLC, a California limited liability company (“Lender”)
and the above-signed Guarantors (individually ad collectively “Guarantor”) is
hereby amended and/or supplemented by the following terms and conditions, which
are incorporated by this reference in the Agreement, as the following additional
sections of the Agreement:

 

9. Intentionally left blank.

 

 

 

 

Schedule to Section 7.16

 

(Other Locations)