SECURITY AGREEMENT

Security Interest. To secure Borrower's payment and performance obligations to SFSI and its affiliates or Funders under the Loan Agreement (the "Loan Agreement"), Borrower hereby grants to SFSI a security interest in (a) all accounts, chattel paper, cash, deposit accounts, documents, equipment, general intangibles, instruments, inventory, or investment property, as those terms are defined in Article 9 of the Uniform Commercial Code of the State of California as amended (the "UCC"), now or hereafter owned or acquired by Borrower; and (b) all proceeds, as that term is defined in Article 9 of the UCC (a and b collectively, the "Collateral").

Cross-Collateral. To secure Guarantor's payment and performance obligations to SFSI (and its Funders) under this Security Agreement and Guaranty (the "Agreement"),

Guarantor hereby grants SFSI, for itself and its Funders, a security interest in ADVANCED INNOVATIVE RECOVERY TECHNOLOGIES, INC. (d/b/a AIRTech) (the "Additional Collateral"). Guarantor understands that SFSI will have a security interest in the aforesaid Additional Collateral upon execution of this Agreement. Borrower and Guarantor each acknowledge and agree that any security interest granted to SFSI under any other agreement between Borrower or Guarantor and SFSI (the "Cross- Collateral") will secure the obligations hereunder and under the Loan Agreement. Borrower and Guarantor each agrees to execute any documents or take any action in connection with this Agreement as SFSI deems necessary to perfect or maintain SFSI's first priority security interest in the Collateral, the Additional Collateral and the Cross-Collateral, including the execution of any account control agreements.

Borrower and Guarantor each hereby authorizes SFSI to file any financing statements deemed necessary by SFSI to perfect or maintain SFSI's security interest, which financing statement may contain notification that Borrower and Guarantor have granted a negative pledge to SFSI with respect to the Collateral, the Additional Collateral and the Cross-Collateral, and that any subsequent lender or lienor may be tortiously interfering with SFSI's rights. Borrower and Guarantor shall be liable for and SFSI may charge and collect all costs and expenses, including but not limited to attorney's fees, which may be incurred by SFSI in protecting, preserving and enforcing SFSI's security interest and rights.

Negative Pledge. Borrower and Guarantor each agrees not to create, incur, assume, or permit to exist, directly or indirectly, any additional cash advances, loans, lien on or with respect to any of the Collateral , the Additional Collateral or the Cross-Collateral, as applicable without written permission of SFSI..

Consent to Enter Premises and Assign Lease. SFSI shall have the right to cure Borrower's default in the payment of rent on the following terms. In the event Borrower is served with papers in an action against Borrower for nonpayment of rent or for summary eviction, SFSI may execute its rights and remedies under the Assignment of Lease. Borrower also agrees that SFSI may enter into an agreement with Borrower's landlord giving SFSI the right: (a) to enter Borrower's premises and to take possession of the fixtures and equipment therein for the purpose of protecting and preserving same; and (b) to assign Borrower's lease to another qualified Borrower capable of operating a business comparable to Borrower's at such premises.

Remedies. Upon any Event of Default, SFSI may pursue any remedy available at law (including those available under the provisions of the UCC), or in equity to collect, enforce, or satisfy any obligations then owing, whether by acceleration or otherwise.

GUARANTY

Personal Guaranty. The undersigned Guarantor(s) hereby guarantees to SFSI, and its affiliates or Funders, Borrower's payment and performance of all of the representations, warranties, covenants made by Borrower in this Agreement and the Loan Agreement, as each agreement may be renewed, amended, extended or otherwise modified (the "Guaranteed Obligations"). Guarantor's obligations are due (i) at the time of any breach by Borrower of any representation, warranty, or covenant made by Borrower in this Agreement and the Loan Agreement, and (ii) at the time Borrower admits its inability to pay its debts, or makes a general assignment for the benefit of creditors, or any proceeding shall be instituted by or against Borrower seeking to adjudicate it bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, or composition of it or its debts.

Guarantor Waivers. In the event that Borrower fails to make a payment or perform any obligation when due under the Loan Agreement, SFSI may enforce its rights under this Agreement without first seeking to obtain payment from Borrower, any other guarantor, or any Collateral, Additional Collateral or Cross-Collateral SFSI may hold pursuant to this Agreement or any other guaranty.

SFSI does not have to notify Guarantor of any of the following events and Guarantor will not be released from its obligations under this Agreement if it is not notified of: (i) Borrower's failure to pay timely any amount owed under the Loan Agreement; (ii) any adverse change in Borrower's financial condition or business; (iii) any sale or other disposition of any collateral securing the Guaranteed Obligations or any other guarantee of the Guaranteed Obligations; (iv) SFSI's acceptance of this Agreement ; and (v) any renewal, extension or other modification of the Loan Agreement or Borrower's other obligations to SFSI. In addition, SFSI may take any of the following actions without releasing Guarantor from any of its obligations under this Agreement : (i) renew, extend or otherwise modify the Loan Agreement or Borrower's other obligations to SFSI; (ii) release Borrower from its obligations to SFSI; (iii) sell, release, impair, waive or otherwise fail to realize upon any collateral securing the Guaranteed Obligations or any other guarantee of the Guaranteed Obligations; and (iv) foreclose on any collateral securing the Guaranteed Obligations or any other guarantee of the Guaranteed Obligations in a manner that impairs or precludes the right of Guarantor to obtain reimbursement for payment under this Agreement. Until the Loan Amount plus any accrued but unpaid interest and Borrower's other obligations to SFSI under the Loan Agreement and this Agreement are paid in full, Guarantor shall not seek reimbursement from Borrower or any other guarantor for any amounts paid by it under this Agreement. Guarantor permanently waives and shall not seek to exercise any of the following rights that it may have against Borrower, any other guarantor, or any collateral provided by Borrower or any other guarantor, for any amounts paid by it, or acts performed by it, under this Agreement: (i) subrogation ; (ii) reimbursement; (iii) performance; (iv) indemnification; or (v) contribution. In the event that SFSI must return any amount paid by Borrower or any other guarantor of the Guaranteed Obligations because that person has become subject to a proceeding under the United States Bankruptcy Code or any similar law, Guarantor's obligations under this Agreement shall include that amount.

 

Guarantor Acknowledgement. Guarantor acknowledges that: (i) He/She understands the seriousness of the provisions of this Agreement ; (ii) He/She has had a full opportunity to consult with counsel of his/her choice; and (iii) He/She has consulted with counsel of its choice or has decided not to avail himself/herself of that opportunity.

 

MERCHANT #1
By Robert Switzer O1_SIG
(Print Name and Title)		(Signature)
MERCHANT #2
By O2_SIG
(Print Name and Title)		(Signature)
OWNER/GUARANTOR #1
By Robert Switzer O1_SIG
(Print Name and Title)		(Signature)
OWNER/GUARANTOR #2
By O2_SIG
(Print Name and Title)		(Signature)