Unassociated Document


     

    EXHIBIT
10.2

    


    SECURITY
AGREEMENT

     

    THIS
SECURITY AGREEMENT (this “Agreement”) is entered into as
of June 8, 2009, by and between Vu1 Corporation, a California corporation (the “Company”), and
Full Spectrum Capital, LLC, a Washington limited liability company (“Lender”).

    


    A.           Pursuant
to that certain Term Sheet dated as of June 5, 2009 between the Company and
Lender (the “Term
Sheet”), Lender has agreed to provide for debt financing to the Company
in an amount of up to $7,000,000, on the terms and subject to the conditions
therein (the “Loan”).

    


    B.           Lender
desires to make an initial advance to the Company under the Loan in the amount
of $500,000, pursuant to a secured promissory note of even date herewith (the
“Secured Promissory
Note”), and the Company has agreed, for the purpose of securing payment
of the Loan, to grant Lender a first priority security interest in the Company’s
assets.

    


    For good
and valuable consideration, receipt and adequacy of which are hereby admitted
and acknowledged, the parties hereto agree as follows:

    


    
      	
              1.

            	
              Grant
      of Security Interest.

            


    

    


    In order
to secure the payment of any monies due to Lender under the Secured Promissory
Note (the “Obligations”), the Company
hereby grants to Lender and its successors and assigns, a first priority
security interest in all of the Collateral (defined below). This security
interest shall be subject to the terms and conditions of this Security
Agreement.

    


    
      	
              2.

            	
              Collateral

            


    

    


    The
“Collateral” subject to this Security Agreement means all of the Company’s
right, title and interest in, to and under all of the Company’s assets, whether
now owned or existing or hereafter acquired or arising, and wherever located
including, but not limited to the following.  all cash and cash
equivalents, accounts, deposit accounts, documents, inventory, equipment, goods,
documents, instruments (including, without limitation, promissory notes),
contract rights, general intangibles, chattel paper, supporting obligations,
investment property (including, without limitation, all equity interests owned
by the Company), letter-of-credit rights, trademarks, trademark applications,
tradestyles, patents, patent applications, copyrights, copyright applications
and other intellectual property in which the Company now has or hereafter may
acquire any right, title or interest, all proceeds and products thereof
(including, without limitation, proceeds of insurance) and all additions,
accessions and substitutions thereto or therefor.

     

    
      
        
        

      

      
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              3.

            	
              Perfection;
      Recordation

            


    

    


    The first
priority security interest granted herein shall be perfected by the filing of
appropriate Uniform Commercial Code Forms UCC-1 with the appropriate government
filing offices.  The parties agree to take all necessary actions to
record the security interest in the Company’s patents and trademarks by making
all necessary filings with the United States Patent and Trademark
Office.

    


    
      	
              4.

            	
              Rights
      and Remedies upon Event of Default.

            


    

    


    (a)           Upon
the occurrence, and during the continuation, of an Event of Default (as defined
in the Secured Promissory Note), Lender (at its election but without notice of
its election and without demand) may, except to the extent otherwise expressly
provided or required below, do any one or more of the following, all of which
are authorized by the Company.  For purposes of this Agreement,
references to the Uniform Commercial Code means the Uniform Commercial Code as
in effect in the State of Washington,

    


    (i)           Proceed
directly and at once, without notice, against the Company to collect and recover
the full amount or any portion of the Obligations, or against any security or
collateral for the Obligations

    


    (ii)           Without
notice to the Company (such notice being expressly waived), and without
constituting a retention of any collateral in satisfaction of an obligation
(within the meaning of Section 9505 of the Uniform Commercial Code), set off and
apply to the Obligations any and all (i) balances and deposits of the Company
held by Lender, or (ii) indebtedness at any time owing to or for the credit or
the account of the Company held by Lender;

    


    (iii)           Hold
or cause to be held, as cash collateral, any and all balances and deposits of
the Company held by Lender to secure the full and final repayment in cash of all
of the Obligations;

    


    (iv)           May
exercise in respect of the Collateral, in addition to other rights and remedies
provided for herein and in the Note or otherwise available to it, all the rights
and remedies available to it at law (including those of a secured party under
the Uniform Commercial Code) or in equity.

    


    (v)           Without
notice or demand, make such payments and do such acts as Lender considers
necessary or reasonable to protect its security interest in the
Collateral.  The Company agrees to assemble the Collateral if Lender
so requires, and to make the Collateral available to Lender as Lender may
designate.  The Company authorizes Lender to enter the premises where
the Collateral is located, to take and maintain possession of the Collateral, or
any part of it, and to pay, purchase, contest, or compromise any encumbrance,
charge, or lien which is prior or superior to its security interest and to pay
all expenses incurred in connection therewith.

     

    
      
        
        

      

      
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    (vi)           Sell
all or any part of the Collateral at either a public or private sale, or both,
by way of one or more contracts or transactions, for cash or on terms, in such
manner and at such places (including the Company’s premises) as is commercially
reasonable. It is not necessary that the Collateral be present at any such sale.
The Company hereby agrees that 30 days’ notice of any intended sale or
disposition of the Collateral is reasonable. 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 the Collateral
so sold, free of any right or equity of redemption in the Company, which right
or equity is hereby waived or released to the extent permitted by
law;

    


    Except as
required by law, Lender may take any or all of the foregoing action without
demand, presentment, protest, advertisement or notice of any kind to or upon the
Company or any other person. The rights and remedies of Lender under this
Agreement, the Note, and all other agreements shall be cumulative. Lender shall
have all other rights and remedies not inconsistent herewith as provided under
the Uniform Commercial Code, by law, or in equity. No exercise by Lender of one
right or remedy shall be deemed an election, and no waiver by Lender of any
Event of Default on the Company’s part shall be deemed a continuing waiver. No
delay by Lender shall constitute a waiver, election, or acquiescence by
it.

    


    (b)           Application
of Collateral Proceeds.  The proceeds and/or avails of the Collateral,
or any part thereof, and the proceeds and the avails of any remedy hereunder (as
well as any other amounts of any kind held by Lender at the time of, or received
by Lender after, the occurrence of an Event of Default) shall be paid to and
applied as follows:

    


    (i)           First,
to the payment of reasonable costs and expenses of foreclosure or suit, if any,
and of such sale and the exercise of any other rights or remedies, reasonable
legal expenses and attorneys’ fees, incurred or made hereunder by
Lender;

    


    (ii)           Second,
to the payment to Lender of the Obligations (to be applied first to accrued
interest and second to outstanding principal); and

    


    (iii)           Third,
to the payment of the surplus, if any, to Company, its successors and assigns,
or to whomsoever may be lawfully entitled to receive the same.

    


    
      	
              5.

            	
              Lender’s
      Appointment as Attorney-in-Fact

            


    

    


    The Company appoints Lender, any of its
officers, as its attorney-in-fact, with power and authority in the place and
stead of the Company and in the name of the Company to execute such documents
and to supply any omitted information and correct patent errors in any documents
executed by the Company; to file financing statements against the Company
covering the Collateral (and, in connection with the filing of any such
financing statements, describe the Collateral as "all right, title and interest
in, to and under all of the Company’s assets and all personal property, whether
now owned and/or hereafter acquired” (or any similar variation thereof)); to
sign the Company’s name on public records; and to do all other things Lender
deems necessary to carry out this Security Agreement.  The Company
hereby ratifies and approves all acts of the attorney and neither Lender nor the
attorney will be liable for any acts of commission or omission, nor for any
error of judgment or mistake of fact or law other than gross negligence or
willful misconduct.  This power being coupled with an interest is
irrevocable so long as any Obligations remains unpaid.

     

    
      
        
        

      

      
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              6.

            	
              No
      Waiver; Cumulative Remedies.

            


    

    


    The
failure of Lender or the Company at any time to demand strict performance by the
other of any terms, covenants or conditions set forth herein, shall not be
construed as a continuing waiver or relinquishment thereof, and either party
may, at any time, demand strict and complete performance by the other of said
terms, covenants or conditions.  The rights and remedies provided in
this Agreement are cumulative, may be exercised singly or concurrently and are
not exclusive of any rights or remedies provided by law.

    


    
      	
              7.

            	
              Inspection.

            


    

    


    Lender (through any of its officers,
employees, or agents) shall have the right, from time to time hereafter to
inspect the Company’s books and records and to check, test, and appraise the
Collateral in order to verify the Company’s financial condition or the amount,
quality, value, condition of, or any other matter relating to, the
Collateral.

    


    
      	
              8.

            	
              Liens
      and Encumbrances.

            


    

    


    The
Company represents and warrants that the Company has good and marketable title
to the Collateral, free and clear of any mortgage, pledge, lien, encumbrance,
charge, or other security interest other.

     

    
      	
              9.

            	
              Covenants.

            


    

    


    (a)           The
Company shall not sell, lease, transfer or otherwise dispose of any of the
Collateral, or attempt or contract to do so, other than (a) the sale of
inventory, (b) the granting of non-exclusive licenses in the ordinary course of
business, or (c) the disposal of surplus, worn-out or obsolete
equipment.

     

    (b)           The
Company shall not change its jurisdiction of organization, relocate its chief
executive office, principal place of business or its records, or allow the
relocation of any Collateral (other than to another location in Washington after
providing advance notice to the Lender) from such address(es) listed on the
signature page hereto without thirty (30) days prior written notice to
Lender.

     

    (c)           The
Company shall pay promptly when due all property and other taxes, assessments
and government charges or levies imposed upon, and all claims (including claims
for labor, materials and supplies) against, the Collateral, except to the extent
the validity thereof is being contested in good faith and adequate reserves are
being maintained in connection therewith.

     

    
      
        
        

      

      
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              10.

            	
              Miscellaneous.

            


    

    


    (a)           Notices.  Unless
otherwise provided, any notice required to be given hereunder shall be given in
writing and shall be deemed effectively delivered (i) upon personal
delivery to the party to be notified, (ii) upon confirmation of receipt by
fax by the party to be notified, (iii) one business day after deposit with
a reputable overnight courier, prepaid for overnight delivery, or
(iv) three days after deposit with the United States Post Office, postage
prepaid, registered or certified with return receipt requested.  The
address for any such party shall be the address of such party as set forth on
the signature page below or at such other address as such party may designate by
ten days advance written notice to the other party given in the foregoing
manner.

    


    (b)           Headings.  The
subject headings of the paragraphs of this Agreement are included for purposes
of convenience only and shall not affect the construction of interpretation of
any of its provisions.

    


    (c)           Severability.  In
the event that any of the terms of this Agreement are held to be partially or
wholly invalid or unenforceable for any reason whatsoever, such holdings shall
not affect, alter, modify or impair in any manner whatsoever, any of the other
terms, or the remaining portion of any term, held to be partially invalid or
unenforceable.

    


    (d)           Entire Agreement;
Amendments.  This Agreement, together with the Term Sheet, the
Secured Promissory Note, and any document or agreement entered into in
connection with or contemplated by the Term Sheet, constitute the entire
agreement between the parties, and contains all of the agreements between the
parties with respect to the subject matter hereof.  No change or
modification of this Agreement shall be valid unless the same shall be in
writing and signed by Lender and the Company.  No waiver of any
provision of this Agreement shall be valid unless in writing and signed by the
person or party against whom charged.

    


    (e)           Attorneys’
Fees.  In the event of any action brought by either party
against the other arising out of this Agreement, or for the purposes of
enforcing this Agreement or collection of any damages alleged to have resulted
to one of the parties by reason of the breach or failure of performance of the
other, the party prevailing in any such action shall be entitled to recover
reasonable attorneys’ fees and cost of suit as may be determined by the
court.

    


    (f)           Governing Law;
Venue.  This Agreement shall be governed by and construed under
the laws of the state of Washington without regard to principles of conflict of
laws.  The parties irrevocably consent to the jurisdiction and venue
of the state and federal courts located in King County, Washington in connection
with any action relating to this Agreement.

    


    (g)           Counterparts.  This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original but all of which together shall constitute one and the same
instrument.

     

    [Remainder
of Page Intentionally Left Blank; Signature Page Follows]

     

    
      
        
        

      

      
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    EXECUTED
by the parties hereto as of the day and year first above written.

     

    
      
        	
                COMPANY:

              	 
      
	 
      	
                VU1
      CORPORATION

              
	 
      	 
      
	 
      	 
      
	 
      	
                By:

              	
                /s/
      Richard Herring

              
	 
      	
                Name:

              	
                Richard Herring

              
	 
      	
                Title:

              	
                Chief Technology Officer

              
	 
      	 
      	 
      
	 
      	
                Address:

              	
                557
      Roy Street, Suite 125

              
	 
      	 
      	
                Seattle,
      WA  98109

              
	 
      	
                Fax
      No.:

              	
                (____)
      ________________

              
	 
      	 
      	 
      
	
                LENDER:

              	 
      	 
      
	 
      	 
      	 
      
	 
      	
                FULL
      SPECTRUM CAPITAL, LLC

              
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                By:

              	
                /s/ R. Cale Sellers

              
	 
      	
                Name:

              	
                R.
      Cale Sellers

              
	 
      	
                Title:

              	
                Manager

              
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                Address:

              	
                24 Roy St. # 421

              
	 
      	 
      	
                Seattle, WA 98109

              
	 
      	
                Fax
      No.:

              	
                (____)
      ________________

              


      

    

     

    
      
        
        

      

      
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