Document:

RVISION, INC.

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (the “Agreement”) is made as of May 7, 2007 by and between RVision, Inc., a Nevada corporation (the “Company”) and each purchaser identified on the signature pages hereto (each, including its successors and assigns, a “Purchaser” and collectively the “Purchasers”).

 

RECITALS

 

Subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Rule 506 promulgated thereunder, the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company as more fully described in this Agreement.

 

AGREEMENT

 

In consideration of the mutual promises contained herein and other good and valuable consideration, receipt of which is hereby acknowledged, the parties to this Agreement agree as follows:

 

	
             
 	
            1.
 	
            Purchase and Sale of Units.
 

 

(a)          Sale and Issuance of Units. Subject to the terms and conditions of this Agreement, each Purchaser agrees to purchase at the Closing (as defined below) and upon payment of the Purchase Price (as defined below) the Company agrees to sell and issue to each Purchaser Units, each Unit consists of the following securities:

 

(i)           a second position secured convertible promissory note in substantially the form attached to this Agreement as Exhibit A (the “Note”), with a term of six (6) months;

 

(ii)          two thousand five hundred (2,500) shares of common stock (the “Shares”).

 

(b)          Registration Rights. Effective upon the consummation of the sale of the Units to the Purchasers, the Company grants the Purchasers the rights for registration of the Shares as set forth in the Registration Rights Agreement dated as of November 1, 2006 as set forth in Exhibit B hereto (the “Registration Rights Agreement”), and shall treat the Shares as Registrable Securities as defined by the Registration Rights Agreement. Each Purchaser agrees, as a condition to receiving the rights and benefits provided by the Company in the Registration Rights Agreement, to accept and perform all obligations and
duties as a Purchaser under the Registration Rights Agreement.

 

 

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(c)          Separate Agreements and Sales. The Company’s agreements with each of the Purchasers are separate agreements, and the sales of the Units to each of the Purchasers are separate sales. The Shares and the Notes and the securities issuable upon conversion or exercise thereof are collectively referred to herein as the “Units.”

 

(d)          Purchase Price; Minimum and Maximum. The Purchase Price per Unit is $25,000 (the “Purchase Price”). For each Unit purchased, the Purchaser shall receive: (i) a Note in the principal amount of $25,000; and (ii) two thousand five hundred (2,500) shares of common stock of the Company. The Company is offering a minimum of twenty-four (24) Units for gross proceeds of $600,000 and a maximum of forty (40) Units for gross proceeds of $1,000,000.

 

(e)          Payment of Purchase Price. Payment of the Purchase Price must be transmitted to the Company in care of its escrow agent Terrell W. Smith. Payment may be made by check payable to “Terrell W. Smith Attorney at Law Trust Account” to:

 

Terrell W. Smith, Attorney at Law, LLC

136 East South Temple, Suite 2112

Salt Lake City, Utah  84111

Tel: (801) 521-7070

Fax: (801) 521-6325

Or by wire transfer to:

Terrell W. Smith Attorney at Law Trust Account

Wells Fargo Bank

ABA no. 121000248

Account no. 0406533075

Reference: RVision, Inc.

 

	
             
 	
            (f)
 	
            Closing; Delivery.
 

 

(i)           The purchase and sale of the Units shall take place at the offices of Terrell W. Smith, Attorney at Law, 136 East South Temple, Suite 2112, Salt Lake City, Utah 84111 at 10 a.m., on May 8, 2007, or at such other time and place as the Company and the Purchasers mutually agree upon, orally or in writing (which time and place are designated as the “Initial Closing”). The Initial Closing shall take place after the Company sells at least 24 Units for gross proceeds of $600,000. In the event there is more than one closing, the term “Closing” shall apply to each such closing, unless otherwise specified herein.

 

(ii)          At each Closing, the Company shall deliver to each Purchaser (x) a share certificate representing the Shares due to the Purchaser and (y) a Note, to be purchased by such Purchaser against (1) payment of the Purchase Price therefor by check payable to the Company or by wire transfer to Terrell W. Smith’s attorney at law trust account set forth above, and (2) delivery of counterpart signature pages to this Agreement, the Security Agreement (as defined below) and the Note.

 

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(iii)        Until the earlier of (A) such time as the aggregate amount of principal indebtedness evidenced by the Notes equals a total of $1,000,000, or (B) the date twenty (20) days from the date hereof, the Company may sell additional Notes to such persons or entities as determined by the Company, or to any Purchaser who desires to acquire additional Units. All such sales shall be made on the terms and conditions set forth in this Agreement. For purposes of this Agreement, and all other agreements contemplated hereby, any additional purchaser so acquiring Units shall be deemed to be a “Purchaser” for purposes of this Agreement, and any securities so acquired by such additional purchaser shall be deemed to be “Shares” and “Notes” as applicable. 

 

(g)          Use of Proceeds. The net proceeds received by the Company for the sale of the Units shall be used primarily for costs and expenses related to the production, manufacturing and shipping of products by the Company (including required improvements to such products) and overhead related thereto. 

 

2.            Purchase Agreement. Each Purchaser understands and agrees that the conversion of the Units into securities of the Company in its next round of capital financing, at the option of the Purchaser, as provided for by the Notes will require such Purchaser’s execution of certain agreements relating to the purchase and sale of such securities as well as any rights relating to such securities (including, without limitation, any registration rights).

 

3.            Security Interest. The indebtedness represented by the Notes shall be secured by certain of the assets of the Company in accordance with the provisions of a security agreement among the Company and the Purchasers in the form attached to this Agreement as Exhibit C (the “Security Agreement”).

 

4.            Representations and Warranties of the Company. The Company hereby represents and warrants to each Purchaser that:

 

(a)          Organization, Good Standing and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada and has all requisite corporate power and authority to carry on its business as now conducted and as proposed to be conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure so to qualify would have a material adverse effect on its business or properties.

 

(b)          Authorization. All corporate action on the part of the Company, its officers and directors necessary for the authorization, execution and delivery of this Agreement and the authorization, sale, issuance and delivery of the Units, and the performance of all obligations of the Company hereunder and thereunder has been taken or will be taken prior to the Closing. The Agreement and Notes, when executed and delivered by the Company, shall constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their respective terms except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, 

 

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fraudulent conveyance, and other laws of general application affecting enforcement of creditors’ rights generally, and as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.

 

	
             
 	
            (c)
 	
            Capitalization. The authorized capital of the Company consists of:
 

 

(i)           100,000,000 shares of Common Stock, $0.001 par value, and 5,000,000 shares of preferred stock, $0.001 par value. As of May 7, 2007, 16,898,695 shares of common stock are issued and outstanding and no shares of preferred stock are issued and outstanding. All of the outstanding shares of Common Stock have been duly authorized, are fully paid and nonassessable and were issued in compliance with all applicable federal and state securities laws.

 

(ii)          As of May 7, 2007, there are 5,003,000 shares of common stock reserved for issuance on exercise of options, warrants and other convertible securities.

 

(d)          Minimum. The Company will not accept any purchase of Units unless there is an aggregate purchase of at least twenty-four (24) Units for $600,000 in gross proceeds.

 

5.            Representations and Warranties of the Purchasers. Each Purchaser hereby represents and warrants to the Company that:

 

(a)          Authorization. Such Purchaser has full power and authority to enter into this Agreement. Each of this Agreement, the Security Agreement and Registration Rights Agreement when executed and delivered by the Purchaser, will constitute a valid and legally binding obligation of the Purchaser, enforceable in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and any other laws of general application affecting enforcement of creditors’ rights generally, and as limited by laws relating to the availability of a specific performance, injunctive relief, or other equitable remedies.

 

(b)          Purchase Entirely for Own Account. This Agreement is made with the Purchaser in reliance upon the Purchaser’s representation to the Company, which by the Purchaser’s execution of this Agreement, the Purchaser hereby confirms, that the Units to be acquired by the Purchaser will be acquired for investment for the Purchaser’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, the Purchaser further represents that the Purchaser does not presently have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Units. The Purchaser has not been formed for the specific purpose of acquiring any of the Units.

 

 

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(c)          Knowledge. Purchaser acknowledges that he has been provided with a copy of the Company’s registration statement on Form SB-2 filed with the Securities and Exchange Commission, as amended, and has reviewed in particular the risk factors for investors contained in that filing. Purchaser further acknowledges that the Company has continued to sustain operating losses since the last financial statements filed. The Purchaser is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities.

 

(d)          Restricted Securities. The Purchaser understands that the Units (and the securities issued thereunder) have not been, and will only be, registered under the Securities Act pursuant to the Registration Rights Agreement. Unless registered, the Purchaser may only sell or transfer the Units (and the securities issued thereunder) pursuant to a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Purchaser’s representations as expressed herein. The Purchaser understands that the Units are “restricted securities” under applicable U.S. federal and state securities laws and
that, pursuant to these laws, the Purchaser must hold the Units indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Purchaser further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Units, and on requirements relating to the Company which are outside of the Purchaser’s control, and which the Company is under no obligation and may not be able to satisfy.

 

(e)          No Public Market. The Purchaser understands that there is no public trading market the Company’s securities and that there is no guarantee that a public trading market will ever be developed for the Company’s securities.

 

(f)           Legends. The Purchaser understands that the Units, and any securities issued in respect thereof or exchange therefor, may bear one or all of the following legends:

 

(i)           “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE AFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”

 

 

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(ii)          Any legend required by the Blue Sky laws of any state to the extent such laws are applicable to the shares represented by the certificate so legended.

 

(g)          Accredited Investor. The Purchaser is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act, a copy of which is attached here to as Exhibit D.

 

6.            Conditions of the Purchasers’ Obligations at Closing. The obligations of each Purchaser to the Company under this Agreement are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived:

 

(a)          Representations and Warranties. The representations and warranties of the Company contained in Section 4 shall be true on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the date of the Closing.

 

(b)          Qualifications. All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Securities pursuant to this Agreement shall be obtained and effective as of the Closing.

 

(c)          Security Agreement. The Company and the Purchasers shall have executed the Security Agreement.

 

7.            Conditions of the Company’s Obligations at Closing. The obligations of the Company to each Purchaser under this Agreement are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived:

 

(a)          Representations and Warranties. The representations and warranties of each Purchaser contained in Section 5 shall be true on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the Closing.

 

(b)          Qualifications; Waivers/Consents. All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Securities pursuant to this Agreement shall be obtained and effective as of the Closing. In addition, all third party waivers or consents reasonably required in order to issue and sell the Securities hereunder, or enter into any agreement contemplated hereby, shall be obtained and effective as of the Closing.

 

(c)          Minimum Offering. The Company, upon the Closing, will have sold at least twenty-four (24) Units and received at least $600,000 in gross proceeds.

 

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            8.
 	
            Miscellaneous.
 

 

(a)          Successors and Assigns. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

 

(b)          Governing Law. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law.

 

(c)          Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

 

(d)          Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

 

(e)          Notices. Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient upon receipt, when delivered personally or by courier, overnight delivery service or confirmed facsimile, or forty-eight (48) hours after being deposited in the U.S. mail as certified or registered mail with postage prepaid, if such notice is addressed to the party to be notified at such party’s address or facsimile number as set forth below or as subsequently modified by written notice.

 

(f)           Amendments and Waivers. Any term of this Agreement may only be amended or waived with the written consent of the Company and the holders of at least a majority in interest of the Notes. Any amendment or waiver effected in accordance with this Section 8(f) shall be binding upon each Purchaser and each transferee of the Securities, each future holder of all such Securities, and the Company.

 

(g)          Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith, in order to maintain the economic position enjoyed by each party as close as possible to that under the provision rendered unenforceable. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with its terms.

 

 

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(h)          Entire Agreement. This Agreement, and the documents referred to herein constitute the entire agreement between the parties hereto pertaining to the subject matter hereof, and any and all other written or oral agreements existing between the parties hereto are expressly canceled.

 

(i)           Exculpation Among Purchasers. Each Purchaser acknowledges that it is not relying upon any person, firm or corporation, other than the Company and its officers and directors, in making its investment or decision to invest in the Company. Each Purchaser agrees that no Purchaser nor the respective controlling persons, officers, directors, partners, agents, or employees of any Purchaser shall be liable for any action heretofore or hereafter taken or omitted to be taken by any of them in connection with the Securities.

 

(j)           Corporate Securities Law. THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON THE QUALIFICATION BEING OBTAINED UNLESS THE SALE IS SO EXEMPT.

 

IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

 

	
             
 	
            COMPANY:
 
	
             
 	
             
 
	
             
 	
            RVISION, INC.
 
	
             
 	
            By: /s/ Gregory E. Johnston
 
	
             
 	
            Gregory E. Johnston
 
	
             
 	
            Chief Executive Officer
 
	
             
 	
            Address:  2365 A Paragon Drive
 
	
             
 	
            San Jose, CA 95131
 
	
             
 	
            Facsimile Number:  (408) 437-9923
 

 

 

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

 

 

 

 

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            Name of Purchaser:
 	
            SEE ATTACHED SCHEDULE
 
	
            Signature of Authorized Signatory of Purchaser:
 	
             
 
	
            Name of Authorized Signatory:
 	
             
 
	
            Title of Authorized Signatory:
 	
             
 
	
            Email Address of Purchaser
 	
             
 
	
            Fax Number of Purchaser:
 	
             
 
	
            Address for Notice of Purchaser:
 	
             
 
	
             
 	
             
 
	
            Address for Delivery of Securities for Purchaser (if not same as above):
 	
             
 
	
             
 	
             
 
	
            Subscription Amount:
 	
            $
 
	
            Number of Units Purchased:
 	
             
 
	
            Principal Amount of Note:
 	
            $
 
	
            Common Stock:
 	
             
 
	
            (i.e. 2,500 shares per each $25,000 of Investment)
 
	
            EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]
 

 

 

SCHEDULE OF PURCHASERS

 

	
            Name of Purchaser
 	
            Subscription Amount
 	
            Number of Units Purchased
 
	
            ASRL LLC

 
 	
            250,000
 	
            10
 
	
            Stephen D. Lipkin

 
 	
            25,000
 	
            1
 
	
            RTAC Corporation

 
 	
            250,000
 	
            10
 
	
            Robert A. Fink

 
 	
            25,000
 	
            1
 
	
            Chachas Land Co., Inc.

 
 	
            50,000
 	
            2
 
	
            Byron Barkley

 
 	
            25,000
 	
            1
 
	
            TOTAL
 	
            625,000
 	
            25
 

 

 

 

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EXHIBIT A TO THE SECURITIES PURCHASE AGREEMENT

SECURED CONVERTIBLE PROMISSORY NOTE

 

 

 

 

Secured Convertible Promissory Note dated May 7, 2007,

is incorporated by reference from this Amendment No. 3

to the registration statement on Form SB-2/A, 

SEC File No. 333-135182, listed as Exhibit 10.34

 

 

 

 

EXHIBIT B TO THE SECURITIES PURCHASE AGREEMENT

REGISTRATION RIGHTS AGREEMENT

 

 

 

 

Registration Rights Agreement, dated November 1, 2006,

is incorporated by reference from Amendment No. 1

to the registration statement on Form SB-2/A, 

filed February 13, 2007, SEC File No. 333-135182,

listed as Exhibit 10.33

 

 

 

 

 

EXHIBIT C TO THE SECURITIES PURCHASE AGREEMENT

SECURITY AGREEMENT

 

 

 

 

Security Agreement dated May 7, 2007,

is incorporated by reference from this Amendment No. 3

to the registration statement on Form SB-2/A, 

SEC File No. 333-135182, listed as Exhibit 10.36

 

 

 

 

EXHIBIT D TO THE SECURITIES PURCHASE AGREEMENT

RULE 501(A) OF REGULATION D

 

As used in Regulation D [§§ 230.501-230.508], the following terms shall have the meaning indicated:

 

(a)  Accredited investor. “Accredited investor” shall mean any person who comes within any of the following categories, or who the issuer reasonably believes comes within any of the following categories, at the time of the sale of the securities to that person:

 

(1)  Any bank as defined in section 3(a)(2) of the Act, or any savings and loan association or other institution as defined in section 3(a)(5)(A) of the Act whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934; any insurance company as defined in section 2(13) of the Act; any investment company registered under the Investment Company Act of 1940 or a business development company as defined in section 2(a)(48) of that Act; any Small Business Investment Company licensed by the U.S. Small Business Administration u under section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of
$5,000,000; any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors;

 

(2)  Any private business development company as defined in section 202(a)(22) of the Investment Advisers Act of 1940;

 

(3)  Any organization described in section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000;

 

(4)  Any director, executive officer, or general partner of the issuer of the securities being offered or sold, or any director, executive officer, or general partner of a general partner of that issuer;

 

(5)  Any natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of his purchase exceeds $1,000,000;

 

(6)  Any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year;

 

(7)  Any trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in § 230.506(b)(2)(ii); and

 

(8)  Any entity in which all of the equity owners are accredited investors.RVISION, INC.

 

SECURITY AGREEMENT

 

This Security Agreement (the “Agreement”) is made and entered into as of May 7, 2007, by and between RVision, Inc., a Nevada corporation (the “Debtor”), in favor of each of the secured parties listed on Exhibit A attached to this Agreement (each a “Secured Party” and together the “Secured Parties”). 

RECITALS

 

The Debtor and each of the Secured Parties are parties to a Securities Purchase Agreement of even date with this Agreement (the “Purchase Agreement”) pursuant to which the Secured Parties shall purchase Units, consisting of Notes and Shares (all as defined in the Purchase Agreement) from the Debtor. The parties intend that the Debtor’s obligations to repay the Notes be secured with a second position interest in all of the assets of the Debtor, junior to the existing interest of the $800,000 Senior Secured Promissory Notes issued by the Debtor on November 1, 2006 (the “First Position Security Interest”).

 

AGREEMENT

 

In consideration of the purchase of the Units by the Secured Parties and for other good and valuable consideration, the Debtor hereby agrees with the Secured Parties as follows: 

 

	
             
 	
            1.
 	
            Grant of Second Position Security Interest.
 

 

(a)          To secure the Debtor’s full and timely performance of all of the Debtor’s obligations and liabilities to the Secured Parties pursuant to the Notes (including, without limitation, Debtor’s obligations to convert the Notes into New Securities (as defined in the Notes) and to timely pay the principal amount of, and interest on, the Notes and any other amounts payable with respect to the Note) (the “Obligations”), the Debtor hereby grants to the Secured Parties a continuing lien on and security interest (“Second Position Security Interest,” together with the First Position Security Interest, the “Security
Interests”), junior to the First Position Security Interest, in all of the Debtor’s right, title and interest in and to its personal property and assets (both tangible and intangible), including, without limitation, the following, whether now owned or hereafter acquired and wherever located: (a) all Receivables; (b) all Equipment; (c) all Fixtures; (d) all General Intangibles; (e) all Inventory; (f) all Investment Property; (g) all Deposit Accounts; (h) all Cash; (i) all other Goods of the Debtor; (j) all patents and (k) all Proceeds of each of the foregoing and all accessions to, and replacements for, each of the foregoing (the “Collateral”). The Security Interest shall be a first and prior interest in all of the Collateral, subject only to the First Position Security Interest.

 

(b)          The following terms shall have the following meanings for purposes of this Agreement:

 

 

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“Account” means any “account,” as such term is defined in the UCC (as defined below), now owned or hereafter acquired by Debtor or in which Debtor now holds or hereafter acquires any interest and, in any event, shall include, without limitation, all accounts receivable, book debts, rights to payment and other forms of obligations (other than forms of obligations evidenced by Chattel Paper, Documents or Instruments) now owned or hereafter received or acquired by or belonging or owing to Debtor whether or not arising out of goods or software sold or services rendered by Debtor or from any other transaction, whether or not the same involves the sale of goods or services by Debtor and all of Debtor’s rights in, to and under all purchase orders or receipts now owned or hereafter acquired by it for goods or services, and all of Debtor’s
rights to any goods represented by any of the foregoing, and all monies due or to become due to Debtor under all purchase orders and contracts for the sale of goods or the performance of services or both by Debtor or in connection with any other transaction (whether or not yet earned by performance on the part of Debtor), now in existence or hereafter occurring, including, without limitation, the right to receive the proceeds of said purchase orders and contracts, and all collateral security and guarantees of any kind given by any Person with respect to any of the foregoing.

 

“Cash” means all cash, money, currency, and liquid funds, wherever held, in which Debtor now or hereafter acquires any right, title, or interest.

 

“Chattel Paper” means any “chattel paper,” as such term is defined in the UCC, now owned or hereafter acquired by Debtor or in which Debtor now holds or hereafter acquires any interest.

 

“Deposit Accounts” means any “deposit accounts,” as such term is defined in the UCC, and includes any checking account, savings account, or certificate of deposit, now owned or hereafter acquired by Debtor or in which Debtor now holds or hereafter acquires any interest.

 

“Documents” means any “documents,” as such term is defined in the UCC, now owned or hereafter acquired by Debtor or in which Debtor now holds or hereafter acquires any interest.

 

“Equipment” means any “equipment,” as such term is defined in the UCC, now owned or hereafter acquired by Debtor or in which Debtor now holds or hereafter acquires any interest and any and all additions, upgrades, substitutions and replacements of any of the foregoing, together with all attachments, components, parts, equipment and accessories installed thereon or affixed thereto, now owned or hereafter acquired by Debtor or in which Debtor now holds or hereafter acquires interest.

 

“Fixtures” means any “fixtures,” as such term is defined in the UCC, together with all right, title and interest of Debtor in and to all extensions, improvements, betterments, accessions, renewals, substitutes, and replacements of, and all additions and appurtenances to any of the foregoing property, and all conversions of the security constituted thereby, immediately upon any acquisition or release thereof or any such conversion, as the case may be, now owned or hereafter acquired by Debtor or in which Debtor now holds or hereafter acquires any interest.

 

 

	
             
 	
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“General Intangibles” means any “general intangibles,” as such term is defined in the UCC, now owned or hereafter acquired by Debtor or in which Debtor now holds or hereafter acquires any interest and, in any event, shall include, without limitation, all right, title and interest that Debtor may now or hereafter have in or under any contracts, rights to payment, payment intangibles, confidential information, interests in partnerships, limited liability companies, corporations, joint ventures and other business associations, permits, goodwill, claims in or under insurance policies, including unearned premiums and premium adjustments, uncertificated securities, deposit, checking and other bank accounts.

 

“Goods” means any “goods,” as such term is defined in the UCC, now owned or hereafter acquired by Debtor or in which Debtor now holds or hereafter acquires any interest.

 

“Instruments” means any “instrument,” as such term is defined in the UCC, now owned or hereafter acquired by Debtor or in which Debtor now holds or hereafter acquires any interest.

 

“Inventory” means any “inventory,” as such term is defined in the UCC, now owned or hereafter acquired by Debtor or in which Debtor now holds or hereafter acquires any interest, and, in any event, shall include, without limitation, all inventory, goods and other personal property that are held by or on behalf of Debtor for sale or lease or are furnished or are to be furnished under a contract of service or that constitute raw materials, work in process or materials used or consumed or to be used or consumed in Debtor’s business, or the processing, packaging, promotion, delivery or shipping of the same, and all finished goods, whether or not the same is in transit or in the constructive, actual or exclusive possession of Debtor or is held by others for Debtor’s account, including, without limitation, all goods covered by purchase
orders and contracts with suppliers and all goods billed and held by suppliers and all such property that may be in the possession or custody of any carriers, forwarding agents, truckers, warehousemen, vendors, selling agents or other Persons.

 

“Investment Property” means any “investment property,” as such term is defined in the UCC, and includes certificated securities, uncertificated securities, money market funds and U.S. Treasury bills or notes, now owned or hereafter acquired by Debtor or in which Debtor now holds or hereafter acquires any interest.

 

“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment for security, security interest, encumbrance, levy, lien or charge of any kind, whether voluntarily incurred or arising by operation of law or otherwise, against any property, any conditional sale or other title retention agreement, any lease in the nature of a security interest, and the filing of any financing statement (other than a precautionary financing statement with respect to a lease that is not in the nature of a security interest) under the UCC or comparable law of any jurisdiction.

 

“Majority Secured Parties” those Secured Parties holding a majority of the Participating Interest in the Collateral.

 

“Participating Interest” means, with respect to each Secured Party, the percentage that is set forth opposite such Secured Party’s name on Exhibit A.

 

 

	
             
 	
            3
 

 

 

 

 

“Permitted Lien” means any of (i) the First Position Security Interest, (ii) the Second Position Security Interest, (iii) Liens subordinate to the foregoing, (iv) statutory Liens and Liens for taxes, fees, assessments or other governmental charges or levies and (v) Liens that arise in the ordinary course of business and do not materially impair Debtor’s ownership or use of the Collateral or the value thereof.

 

“Person” means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution, public benefit corporation, other entity or government (whether federal, state, county, city, municipal, local, foreign, or otherwise, including any instrumentality, division, agency, body or department thereof).

 

“Proceeds” means “proceeds,” as such term is defined in the UCC and, in any event, shall include, without limitation, (a) any and all Accounts, Chattel Paper, Instruments, cash or other forms of money or currency or other proceeds payable to Debtor from time to time in respect of the Collateral, (b) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to Debtor from time to time with respect to any of the Collateral, (c) any and all payments (in any form whatsoever) made or due and payable to Debtor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any governmental authority (or any Person acting under color of governmental authority), (d) the proceeds, damages, or recovery based on any claim of Debtor
against third parties (i) for past, present or future infringement of any copyright, patent or patent license or (ii) for past, present or future infringement or dilution of any trademark or trademark license or for injury to the goodwill associated with any trademark, trademark registration or trademark licensed under any trademark license and (e) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral.

 

“Receivables” means all of Debtor’s Accounts, Instruments, Documents, Chattel Paper, Supporting Obligations, and letters of credit and Letter of Credit Rights.

 

“Supporting Obligations” means any “supporting obligations,” as such term is defined in the UCC, now owned or hereafter acquired by Debtor or in which Debtor now holds or hereafter acquires any interest.

 

“UCC” means the Uniform Commercial Code as the same may, from time to time, be in effect in the State of California; provided, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of, or remedies with respect to, Secured Party’s Lien on any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State of California, the term “UCC” shall mean the Uniform Commercial Code as enacted and in effect, from time to time, in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions. Unless otherwise defined herein, terms that are defined in the UCC
and used herein shall have the meanings given to them in the UCC.

 

 

	
             
 	
            4
 

 

 

 

 

2.            Representations and Warranties. The Debtor hereby represents and warrants to the Secured Party that:

 

(a)          Ownership of Collateral. The Debtor has rights in or the power to transfer the Collateral free and clear of any adverse lien, security interest or encumbrance other than Permitted Liens. No financing statements covering any Collateral or any proceeds thereof are on file in any public office (other than filings listing the holders of the First Position Security Interest and the Secured Parties as the secured parties).

 

(b)          Valid Security Interest. The Second Position Security Interest granted pursuant to this Agreement will constitute a valid and continuing perfected security interest in favor of the Secured Parties in the Collateral. Such Second Position Security Interest will be prior to all other liens on the Collateral other than Permitted Liens.

 

(c)          Organization and Good Standing. The Debtor has been duly incorporated, and is validly existing and in good standing, under the laws of the State of Nevada and has a Nevada corporate identification number of C1936-1997.

 

(d)          Location, State of Incorporation and Name of Debtor. Debtor’s chief executive office is located at 2365 A Paragon Drive, San Jose, CA 95134. Debtor’s state of incorporation is Nevada and the exact legal name of the organization is as set forth in the first paragraph of this Agreement.

 

	
             
 	
            3.
 	
            Rights and Obligations of Secured Parties.
 

 

(a)          Ratable Sharing of Collateral. Each Secured Party acknowledges and it is the intent of the Secured Parties that the Second Position Security Interest granted by Debtor is evidenced by a single Security Agreement and each Secured Party hereby agrees (and each Secured Party hereby irrevocably advises and instructs Debtor to recognize) that each Secured Party shall participate in the percentage of the total amount of any Collateral and proceeds of the Collateral calculated by multiplying the Debtor’s total Obligations by each Secured Party’s Participating Interest.

 

(b)          Event of Default. If an Event of Default shall have occurred and is continuing, the Majority Secured Parties shall notify Terrell W. Smith, Attorney at Law (the “Secured Party Representative”) of such default and direct the Secured Party Representative with the course of action to take in enforcing the Secured Parties’ rights and remedies under this Agreement against the Debtor and Collateral including foreclosing on the Collateral if necessary. The Secured Parties may also direct Secured Party Representative to exercise any further rights or remedies under this Agreement, the Purchase Agreement, or Notes. Any proceeds received from any such foreclosure, remedial action,
redemption or receivership proceeding related to the Collateral shall be first used to satisfy the obligations to the holders of the First Position Security Interest, and the remaining proceeds distributed in accordance with Section 9.

 

 

	
             
 	
            5
 

 

 

 

 

(c)          Secured Party Representative Fees. In the event that the Secured Party Representative is required to take any action on behalf of the Secured Parties in enforcing the Secured Parties’ rights and remedies under this Agreement, the Secured Parties shall pay the Secured Party Representative a fee of two percent (2%) of all amounts collected by the Secured Party Representative (the “Representative Fee”). The Representative Fee shall be in addition to all third party fees and costs, including attorney fees and costs, incurred by Secured Party Representative in connection with the exercise of such remedies. 

 

(d)          Actions by Secured Parties; Settlement of Claims. All actions by Secured Party Representative or the Secured Parties effecting the rights of the Secured Parties (including any settlement of claims the Secured Parties may have against Debtor) shall be taken only as determined by the Majority Secured Parties. 

 

4.            Covenants. The Debtor covenants and agrees with the Secured Parties that, from and after the date of this Agreement until the Obligations are paid in full: 

 

(a)          Other Liens. Except as otherwise permitted under Section 4(i), the Debtor will (i) maintain its rights in and power to transfer the Collateral and its title thereto, free from any adverse lien, security interest or encumbrance other than Permitted Liens, and (ii) defend the Collateral against the claims and demands of all persons at any time claiming the same or any interest therein.

 

(b)          Further Documentation. At any time and from time to time, upon the written request of the Secured Party Representative, and at the sole expense of the Debtor, the Debtor will promptly and duly authenticate and deliver such further instruments and documents and take such further action as the Secured Party Representative may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted (with the exception of filing any financing or continuation statements under the UCC in effect with respect to the Liens created hereby, which shall be the responsibility of the Secured Party Representative), including, without limitation, obtaining acknowledgment (as
reasonably acceptable to the Secured Party Representative) of any bailee having possession of any Collateral that it holds the Collateral for the benefit of the Secured Party Representative or Secured Parties. The Debtor also hereby authorizes the Secured Party Representative to file any such financing or continuation statement without the authentication of the Debtor to the extent permitted by applicable law, and to describe the collateral covered by any such statements as “all assets of the Debtor,” “all personal property of the Debtor” or words of similar effect. A reproduction of this Agreement shall be sufficient as a financing statement (or as an exhibit to a financing statement on form UCC-1) for filing by the Secured Party Representative in any jurisdiction.

 

(c)          Indemnification. The Debtor agrees to defend, indemnify and hold harmless the Secured Parties against any and all liabilities, costs and expenses (including, without limitation, legal fees and expenses) (“Liabilities”): (i) with respect to, or resulting from, any delay in paying, any and all excise, sales or other taxes which may be payable 

 

	
             
 	
            6
 

 

 

 

or determined to be payable with respect to any of the Collateral, (ii) with respect to, or resulting from, any delay in complying with any law, rule, regulation or order of any governmental authority applicable to any of the Collateral or (iii) in connection with any of the transactions contemplated by this Agreement. However, Debtor shall have no obligation hereunder to indemnify or hold harmless the Secured Parties for any Liabilities that have arisen as a result of the Secured Parties’ willful misconduct or gross negligence.

 

(d)          Maintenance of Records. The Debtor will keep and maintain at its own expense complete and satisfactory records of the Collateral.

 

(e)          Inspection Rights. The Secured Party Representative shall have full access during normal business hours, and upon reasonable prior notice, to all the books, correspondence and other records of the Debtor relating to the Collateral. The Secured Party Representative or its representatives may examine such records and make photocopies or otherwise take extracts from such records. The Debtor agrees to render to the Secured Party Representative, at the Debtor’s expense, such clerical and other assistance as may be reasonably requested with regard to the exercise of its rights pursuant to this paragraph.

 

(f)           Compliance with Laws, etc. The Debtor will comply in all material respects with all laws, rules, regulations and orders of any governmental authority applicable to any part of the Collateral or to the operation of the Debtor’s business; provided, however, that the Debtor may contest any such law, rule, regulation or order in any reasonable manner which does not, in the reasonable opinion of the Debtor, adversely affect the Secured Parties’ rights or the priority of its liens on the Collateral.

 

(g)          Payment of Obligations. The Debtor will pay promptly when due all taxes, assessments and governmental charges or levies imposed upon the Collateral or with respect to any its income or profits derived from the Collateral, as well as all claims of any kind (including, without limitation, claims for labor, materials and supplies) against or with respect to the Collateral, except that no such charge need be paid if (i) the validity of such charge is being contested in good faith by appropriate proceedings, (ii) such proceedings do not involve any material danger of the sale, forfeiture or loss of any of the Collateral or any interest in the Collateral and (iii) such charge is adequately reserved against on the Debtor’s
books in accordance with generally accepted accounting principles.

 

(h)          Limitation on Liens on Collateral. The Debtor will not create, incur or permit to exist, will defend the Collateral against, and will take such other action as is necessary to remove, any lien or claim on or to the Collateral, other than Permitted Liens.

 

(i)           Limitations on Dispositions of Collateral. The Debtor will not sell, transfer, lease, or otherwise dispose of any of the Collateral, or attempt, offer or contract to do so other than in the ordinary course of Debtor’s business.

 

 

	
             
 	
            7
 

 

 

 

 

(j)           Further Identification of Collateral. The Debtor will furnish to the Secured Parties from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Secured Parties may reasonably request, all in reasonable detail. If Debtor shall obtain rights to any new Collateral, the provisions of this Agreement shall automatically apply thereto. Debtor shall give prompt notice in writing to Secured Parties with respect to any such new Collateral.

 

(k)          Notice of Change of State of Incorporation. The Debtor will provide written notice to the Secured Parties at least thirty (30) days prior to a change of the Debtor’s state of incorporation. The Debtor will provide written notice to the Secured Parties at least thirty (30) days prior to a change in the location of its chief executive office.

 

(l)           No Merger. The Debtor will not merge or consolidate into or, subject to Section 4(i), transfer any of the Collateral to any other Person without the prior written consent of the Secured Parties.

 

(m)         Change of Debtor’s Name. The Debtor will provide written notice to the Secured Parties at least twenty (20) days prior to a change in the Debtor’s name.

 

	
             
 	
            5.
 	
            Event of Default; Secured Party’s Appointment as Attorney-in-Fact.
 

 

(a)          Event of Default. For purposes of this Agreement, the occurrence of any one of the following events (each, an “Event of Default”) shall constitute a default hereunder and under the Note:

 

(i)           The Debtor’s failure to pay or discharge the Obligations in full in accordance with the terms of the Note, if such failure shall continue for five days after notice of such failure is delivered to Debtor;

 

(ii)          A material breach of a representation or warranty made by the Debtor under the Purchase Agreement as of the date thereof;

 

(iii)        The insolvency of the Debtor, the commission of any act of bankruptcy by the Debtor, the execution by the Debtor of a general assignment for the benefit of creditors, the filing by or against the Debtor of a petition in bankruptcy or any petition for relief under the federal bankruptcy act or the continuation of such petition without dismissal for a period of ninety (90) days or more, or the appointment of a receiver or trustee to take possession of the property or assets of the Debtor; or

 

(iv)         If any amendment to or termination of a financing statement naming the Debtor as debtor and the Secured Parties as secured party, or any correction statement with respect thereto, is filed in any jurisdiction by Debtor, without the prior written consent of the Secured Parties.

 

 

	
             
 	
            8
 

 

 

 

 

(b)          Powers. The Debtor hereby appoints the Secured Party Representative and any officer or agent of the Secured Party Representative, with full power of substitution, as its attorney-in-fact with full irrevocable power and authority in the place of the Debtor and in the name of the Debtor or its own name, from time to time in the Secured Party Representative’s discretion so long as an Event of Default has occurred and is continuing, for the purpose of carrying out the terms of this Agreement, to take any appropriate action and to authenticate any instrument which may be necessary or desirable to accomplish the purposes of this Agreement. Without limiting the foregoing, so long as an Event of Default has occurred and is continuing, the
Secured Party Representative shall have the right, without notice to, or the consent of, the Debtor, to do any of the following on the Debtor’s behalf:

 

(i)           to pay or discharge any taxes or liens levied or placed on or threatened against the Collateral;

 

(ii)          to direct any party liable for any payment under any of the Collateral to make payment of any and all amounts due or to become due thereunder directly to the Secured Party Representative or as the Secured Party Representative directs;

 

(iii)        to ask for or demand, collect, and receive payment of and receipt for, any payments due or to become due at any time in respect of or arising out of any Collateral;

 

(iv)         to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to enforce any right in respect of any Collateral;

 

(v)          to defend any suit, action or proceeding brought against the Debtor with respect to any Collateral;

 

(vi)         to settle, compromise or adjust any suit, action or proceeding described in subsection (v) above and to give such discharges or releases in connection therewith as the Secured Parties may deem appropriate; 

 

(vii)       to assign any patent right included in the Collateral of Debtor (along with the goodwill of the business to which the patent right pertains) throughout the world for such term or terms, on such conditions, and in such manner, as the Secured Party Representative shall in its sole discretion determine; and 

 

(viii)      generally, to sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral and to take, at the Secured Party Representative’s option and the Debtor’s expense, any actions which the Secured Party Representative deems necessary to protect, preserve or realize upon 

 

	
             
 	
            9
 

 

 

 

the Collateral and the Secured Parties’ liens on the Collateral and to carry out the intent of this Agreement, in each case to the same extent as if the Secured Party Representative were the absolute owner of the Collateral for all purposes.

 

The Debtor hereby ratifies whatever actions the Secured Party Representative shall lawfully do or cause to be done in accordance with this Section 5. This power of attorney shall be a power coupled with an interest and shall be irrevocable.

 

(c)          No Duty on Secured Parties’ Part. The powers conferred on the Secured Party Representative by this Section 5 are solely to protect the Secured Parties’ interests in the Collateral and shall not impose any duty upon it to exercise any such powers. The Secured Party Representative shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither the Secured Party Representative nor any of its officers, directors, employees or agents shall, in the absence of willful misconduct or gross negligence, be responsible to the Debtor for any act or failure to act pursuant to this Section 5.

 

6.            Performance by Secured Parties of Debtor’s Obligations. If the Debtor fails to perform or comply with any of its agreements or covenants contained in this Agreement and the Secured Party Representative performs or complies, or otherwise causes performance or compliance, with such agreement or covenant in accordance with the terms of this Agreement, then the reasonable expenses of the Secured Party Representative incurred in connection with such performance or compliance shall be payable by the Debtor to the Secured Party Representative on demand and shall constitute Obligations secured by this Agreement.

 

7.            Remedies. If an Event of Default has occurred and is continuing, the Secured Party Representative may exercise, in addition to all other rights and remedies granted to it in this Agreement and in any other instrument or agreement relating to the Obligations, all rights and remedies of a secured party under the UCC. Without limiting the foregoing, the Secured Party Representative, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law) to or upon the Debtor or any other person (all of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances collect, receive, appropriate and realize upon any or all of the Collateral,
and/or may sell, lease, assign, give an option or options to purchase, or otherwise dispose of and deliver any or all of the Collateral (or contract to do any of the foregoing), in one or more parcels at a public or private sale or sales, at any exchange, broker’s board or office of the Secured Party Representative or elsewhere upon such terms and conditions as the Secured Party Representative may deem advisable, for cash or on credit or for future delivery without assumption of any credit risk. The Secured Parties 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 all or any part of the Collateral so sold, free of any right or equity of redemption in the Debtor, which right or equity is hereby waived or released. To the extent permitted by applicable law, the Debtor waives all claims, damages and demands it may acquire against the Secured Party Representative and the Secured Parties
arising out of the exercise by the Secured Parties or Secured Party Representative of any of its rights hereunder. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable 

 

	
             
 	
            10
 

 

 

 

and proper if given at least five (5) days before such sale or other disposition. The Debtor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay the Obligations and the fees and disbursements of any attorneys employed by the Secured Parties to collect such deficiency.

 

	
             
 	
            8.
 	
            Private Sale and Compliance with Law.
 

 

(a)          Secured Parties shall not incur any liability as a result of the sale of Collateral, or any part thereof, at any private sale conducted in a commercially reasonable manner. Debtor hereby waives any claim against Secured Parties arising by reason of the fact that the price at which Collateral may have been sold at such a private sale conducted in a commercially reasonable manner was less than the price which might have been obtained at a public sale or was less than the aggregate amount of the Obligations, even if Secured Parties accept the first offer received and does not offer Collateral to more than one offeree.

 

(b)          Debtor agrees that in any sale of any of the Collateral whenever an event of default hereunder shall have occurred and be continuing, Lender is hereby authorized to comply with any limitation or restriction in connection with such sale as it may be advised by counsel is necessary in order to avoid any violation of applicable law or in order to obtain any required approval of the sale or of the purchaser by any governmental regulatory authority or official, and Debtor further agrees that such compliance shall not result in such sale being considered or deemed not to have been made in a commercially reasonable manner, nor shall Secured Parties be liable or accountable to Debtor for any discount allowed by reason of the fact that such Collateral is sold in compliance with
any such limitation or restriction.

 

9.            Application of Payments with Respect to the Collateral. In the event of any foreclosure, sale or other disposition of or realization in any manner upon any of the Collateral, all monies or other property collected or received by the Secured Parties or their representatives or counsel with respect to the Collateral, in excess of the amount paid to discharge liens upon the Collateral (if any), shall be distributed by the Secured Party Representative as follows:

 

(a)          First: to the pari passu payment of any advances made by any of the Secured Parties to satisfy any lien or other claim that may impair the Collateral, ratably according to the total amounts owing to the respective Secured Party as a result of such advances;

 

(b)          Second: to the Secured Parties and their representatives and counsel in the amount of, and to apply to, the payment of reasonable costs and expenses incurred by Secured Parties representatives and counsel in connection with the administration and enforcement of the foreclosed upon Collateral, including the reasonable fees and out-of-pocket expenses of counsel employed by the Secured Parties to the extent that such fees, advances, costs and expenses, shall not previously have been paid or reimbursed to the Secured Parties; 

 

 

	
             
 	
            11
 

 

 

 

 

(c)          Third: to each Secured Party, pari passu, in a manner proportionate to its Participating Interests until all indebtedness and other obligations owed by Debtor under the Notes have been satisfied in full; and

 

	
             
 	
            (d)
 	
            Fourth: to Debtor.
 

 

10.        Limitation on Duties Regarding Preservation of Collateral. The Secured Parties’ sole duty with respect to the custody, safekeeping and preservation of the Collateral, under Section 9-207 of the UCC or otherwise, shall be to deal with it in the same manner as the Secured Parties deal with similar property for their own account. Neither the Secured Parties nor any of their directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon all or any part of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Debtor or otherwise.

 

11.          Powers Coupled with an Interest. All authorizations and agencies contained in this Agreement with respect to the Collateral are irrevocable and are powers coupled with an interest.

 

12.          No Waiver; Cumulative Remedies. The Secured Parties shall not by any act (except by a written instrument pursuant to Section 14(f) hereof), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any default under the Notes or in any breach of any of the terms and conditions of this Agreement. No failure to exercise, nor any delay in exercising, on the part of the Secured Parties, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Secured Parties of any right or
remedy under this Agreement on any one occasion shall not be construed as a bar to any right or remedy which the Secured Parties would otherwise have on any subsequent occasion. 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.

 

13.          Termination of Security Interest. Upon satisfaction of the Debtor’s obligations pursuant to the Note, or conversion of the Notes into Next Securities pursuant to the terms of the Notes, the security interest granted herein automatically shall terminate and all rights to the Collateral shall revert to the Debtor without further action by any party. Upon any such termination, the Secured Parties shall authenticate and deliver to the Debtor such documents as the Debtor may reasonably request to evidence such termination.

 

	
             
 	
            14.
 	
            Miscellaneous.
 

 

(a)          Successors and Assigns. The terms and conditions of this Agreement shall be binding upon the Debtor and its successors and assigns, as well as all persons who become bound as a debtor to this Agreement and inure to the benefit of the Secured Parties and their successors and assigns. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective 

 

	
             
 	
            12
 

 

 

 

successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

 

(b)          Governing Law. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law that would result in the application of the laws of any other state.

 

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

 

(d)          Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

 

(e)          Notices. Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient upon receipt, when delivered personally or by courier, overnight delivery service or confirmed facsimile, or forty-eight (48) hours after being deposited in the U.S. mail as certified or registered mail with postage prepaid, if such notice is addressed to the party to be notified at such party’s address or facsimile number as set forth below or as subsequently modified by written notice.

 

(f)           Amendments and Waivers. Any term of this Agreement may be amended with the written consent of the Debtor and the Majority Secured Parties or their respective successors and assigns. Any amendment or waiver effected in accordance with this Section 14(f) shall be binding upon the parties and their respective successors and assigns.

 

(g)          Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith, in order to maintain the economic position enjoyed by each party as close as possible to that under the provision rendered unenforceable. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with its terms.

 

(h)          Entire Agreement. This Agreement, and the documents referred to herein constitute the entire agreement between the parties hereto pertaining to the subject matter hereof, and any and all other written or oral agreements existing between the parties hereto concerning such subject matter are expressly canceled.

 

 

	
             
 	
            13
 

 

 

 

 

IN WITNESS WHEREOF, the parties have executed this Security Agreement as of the date first written above.

 

	
             
 	
            DEBTOR:
 
	
             
 	
             
 
	
             
 	
            RVISION, INC.
 
	
             
 	
             
 
	
             
 	
            By: /s/ Gregory E. Johnston
 
	
             
 	
            Name:  Gregory E. Johnston
 
	
             
 	
            Title:  Chief Executive Officer
 
	
             
 	
            Address:  2365 A Paragon Drive
 
	
             
 	
            San Jose, CA 95131
 
	
             
 	
            Facsimile Number:   (408) 437-9923
 

 

IN WITNESS WHEREOF, the parties have executed this Security Agreement as of the date first written above.

 

	
             
 	
            SECURED PARTIES:
 
	
             
 	
             
 
	
             
 	
            /s/ SEE ATTACHED SCHEDULE
 
	
             
 	
            (Secured Party)
 
	
             
 	
            By:
 
	
             
 	
            Name:
 
	
             
 	
            Title:
 
	
             
 	
            ADDRESS FOR NOTICE
 
	
             
 	
            c/o: 
 
	
             
 	
            Street: 
 
	
             
 	
            City/State/Zip: 
 
	
             
 	
            Attention:
 
	
             
 	
            Tel:
 
	
             
 	
            Fax:
 
	
             
 	
            Email:
 

 

 

14

 

 

 

EXHIBIT A

 

SCHEDULE OF SECURED PARTIES

 

 

	
            Name of Secured Party
 	
            Original Principal

Amount of Note
 	
            Participating Interest

in Collateral in %
 
	
            ASRL LLC

 
 	
            $250,000
 	
            40%
 
	
            Stephen D. Lipkin

 
 	
            $25,000
 	
            4%
 
	
            RTAC Corporation

 
 	
            $250,000
 	
            40%
 
	
            Robert A. Fink

 
 	
            $25,000
 	
            4%
 
	
            Chachas Land Co., Inc.

 
 	
            $50,000
 	
            8%
 
	
            Byron Barkley

 
 	
            $25,000
 	
            4%
 
	
            TOTAL
 	
            625,000
 	
            100%
 

 

 

 

 

	
             
 	
            15
 

pa-1149047

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