DEPOSIT ACCOUNT CONTROL AGREEMENT

 

 

 

                           DEPOSIT ACCOUNT CONTROL AGREEMENT

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                                (No Notification)

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This DEPOSIT ACCOUNT CONTROL AGREEMENT ("Agreement") is made and entered into as

of this ____ day of February 2005 by and among WACHOVIA BANK, NATIONAL

ASSOCIATION as depositary bank (the "Bank"), the Bank's depositor customer, XRG,

INC., a Florida Corporation (the "Company"), and CAPCO FINANCIAL, a Washington

Corporation "Secured Party").

 

                               Statement of Facts

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The Bank acknowledges that, as of the date hereof, it maintains in the name of

the Company the deposit account(s) identified on Exhibit A attached hereto and

made a part hereof (each an "Account" and, collectively, the "Accounts"). One or

more of the Accounts may be served by one or more lockboxes operated by the

Bank, which lockboxes (if any) also are listed on Exhibit A (each a "Lockbox"

and, collectively, the "Lockboxes"). The Account(s) and any Lockbox(es) are

governed by the terms and conditions of the Company's commercial deposit account

agreement published by the Bank from time to time and, with respect to any

Lockbox, also may be governed by a lockbox service description between the Bank

and the Company (collectively, with all applicable services descriptions and/or

agreements, the "Deposit Agreement").

 

The Secured Party has provided financing to Company pursuant to one or more

written agreements (the "Financing Documents"). In connection therewith, the

Company hereby confirms to the Bank that the Company has granted to the Secured

Party a security interest in its property including but not limited to its

deposit accounts, cash, accounts, accounts receivable and proceeds thereof, as

set forth in the Financing Documents (collectively, the "Account Collateral"),

which includes: (a) Account(s), (b) the Lockbox(es) and (c) the Items

Collateral. The term "Items Collateral" means, collectively, all checks, drafts,

instruments, cash and other items at any time received in any Lockbox or for

deposit in any Account (subject to specific Lockbox instructions in effect for

processing items), wire transfers of funds, automated clearing house ("ACH")

entries, credits from merchant card transactions and other electronic funds

transfers or other funds deposited in, credited to, or held for deposit in or

credit to, any Account.

 

The parties desire to enter into this Agreement in order to provide for control

by Secured Party of the Account Collateral and to perfect the security interest

of the Secured Party in the Account Collateral. In consideration of the mutual

covenants herein as well as other good and valuable consideration, the receipt

and sufficiency of which are hereby acknowledged, the parties agree as follows:

 

1. Control of the Accounts

 

(a) The Statement of Facts is incorporated herein by reference. The Bank

represents that it is a "bank". The Company and the Bank acknowledge that each

Account is a "deposit account". Each party to this Agreement acknowledges that

this Agreement is an "authenticated" record and that the arrangements

established under this Agreement constitute "control" of each Account. Each of

these terms is used in this Agreement as defined in Article 9 of the Uniform

Commercial Code as adopted by the State of Florida (the "Florida UCC").

 

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(b) The Company represents and warrants to the Secured Party that Exhibit A

contains a complete and accurate list of all Accounts and Lockboxes maintained

by the Company with the Bank and subject to this Agreement. The Company

covenants for the benefit of the Secured Party that the Company shall not open

or maintain any deposit account with the Bank other than the Account(s). Nothing

in this Agreement shall impose upon the Bank any duty to monitor or assure the

Company's compliance with this Section 1(b).

 

(c) The Bank confirms that, as of the date of this Agreement, the Company and

the Bank have not entered into any agreement (other than the Deposit Agreement)

with any person pursuant to which the Bank is obligated to comply with

instructions from such person as to the disposition of funds in any Account or

of Items Collateral. During the term of this Agreement the Bank will not enter

into any agreement with any person other than the Secured Party pursuant to

which the Bank will be obligated to comply with instructions from such person as

to the disposition of funds in any Account or of Items Collateral.

 

(d) The Company authorizes and directs the Bank to comply with all instructions

given by the Secured Party in accordance with this Agreement and permissible

under the Deposit Agreement, including directing the disposition of funds in any

Account or as to any other matter relating to any Account or other Account

Collateral, without further consent by the Company. The Bank shall neither

accept nor comply with any instruction from the Company withdrawing any funds or

other property from the Account or deliver any of the funds or property of the

Account to the Company without the specific prior written consent of the Secured

Party.

 

(e) The Secured Party hereby authorizes and instructs the Bank to act solely

upon the instructions of the Secured Party concerning the Account Collateral,

including the Lockbox(es) and the Account(s), which instructions may include,

but are not limited to, instructions to: (i) direct disposition of funds in the

Account(s) (including, but not limited to, dispositions to or for the benefit of

the Secured Party and/or the Bank), (ii) withdraw any amount from the

Account(s), and (iii) otherwise exercise any authority or power with respect to

the Lockbox(es), the Account(s) and other Account Collateral, which instructions

shall be delivered to the Bank in accordance with the provisions of Section 7 of

this Agreement. The Secured Party's right to give instructions to the Bank

regarding any Account Collateral also shall include the right to give "stop

payment orders" to the Bank for any item presented to it against any Account

even if it results in dishonor of the item presented against the Account.

 

(f) Effective as of the date of this Agreement, all Items Collateral received by

the Bank in a Lockbox (subject to specific Lockbox instructions for processing

the contents of mail received in the Lockbox) shall be deposited to the Account

listed opposite such Lockbox in Exhibit A; all other Items Collateral received

directly by the Bank for credit to an Account shall be credited to such Account,

and; all available funds in an Account shall automatically and without further

direction on each banking day (defined in Section 7) be remitted solely to the

deposit account of the Secured Party set forth in Exhibit B attached hereto and

made a part hereof. The Bank shall not permit any of the officers, agents or

other representatives of the Company or any of its affiliates to direct the

disposition of funds in any Account or to otherwise exercise any authority or

power with respect to any Lockbox, Account or other Account Collateral.

 

(g) Federal Reserve Regulations and Operating Circulars, ACH or other clearing

house rules and other applicable law (including, without limitation, the Uniform

Commercial Code as adopted by the State in which the respective Account

 

 

 

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identified on Exhibit A is located (hereinafter, the "Applicable UCC")) and the

Deposit Agreement shall also apply to the Secured Party's exercise of control

over the Account(s) and the Account Collateral and to the performance of

services hereunder by the Bank. Each of the Company and the Secured Party

authorizes and instructs the Bank to supply the Company's or the Secured Party's

endorsement, as appropriate, to any Items Collateral that the Bank shall receive

for deposit to any Account.

 

2. Statements and Other Information If so requested of the Bank by the Secured

Party in writing, the Bank will send to the Secured Party (in a manner

consistent with the Bank's standard practices) at the Secured Party's address

specified in Section 7, copies of all Account statements and communications (but

not canceled checks) that the Bank is required to send to the Company under the

Deposit Agreement. The Bank also shall provide to each of the Company and the

Secured Party when requested (as a service under this Agreement and/or the

Deposit Agreement) copies of Account statements and other deposit account

information, including Account balances, by telephone and by computer

communication, to the extent practicable when requested by the Company or by the

Secured Party. The Company consents to the Bank's release of such Account

information to the Secured Party. The Bank's liability for its failure to comply

with this Section 2 shall not exceed its cost of providing such information.

 

3. Setoff; Returned Items and Charges

 

(a) The Bank will not exercise any security interest (except for the security

interest provided in Section 4-210, "Security Interest of Collecting Bank in

Items, Accompanying Documents and Proceeds", of the Applicable UCC), lien, right

of setoff, deduction, recoupment or banker's lien or any other interest in or

against any Account or any other Account Collateral, and the Bank hereby

subordinates to the Secured Party any such security interest (except for the

security interest provided in such Section 4-210 of the Applicable UCC), lien or

right which the Bank may have against any Account or other Account Collateral.

The Secured Party, Company and Bank agree that the Bank at all times (including

following commencement of any bankruptcy or insolvency proceeding by or against

the Company) may set off and/or charge for Permitted Debits, as defined below,

only in accordance with the terms of subsections 3(b) and 3(c) herein. The term

"Permitted Debits" means the following items (regardless of any agreement by the

Company to compensate the Bank by means of balances in the Account), as

permitted by the Deposit Agreement: (i) the face amount of each Returned Item

(hereinafter defined), (ii) usual and customary service charges and fees, (iii)

account maintenance fees, (iv) transfer fees, (v) out-of-pocket fees and

expenses (including attorneys' reasonable fees) incurred by the Bank (including

those in connection with the negotiation, administration or enforcement of this

Agreement), and (vi) adjustments or corrections of posting or encoding errors;

whether any Permitted Debit shall have accrued or been incurred before or after

the date of this Agreement. "Returned Item" means any (i) Items Collateral

deposited into or credited to an Account before or after the date of this

Agreement and returned unpaid or otherwise uncollected or subject to an

adjustment entry, whether for insufficient funds or any other reason, and

without regard to the timeliness of such return or adjustment or the occurrence

or timeliness of any other party's notice of nonpayment or adjustment; (ii)

Items Collateral subject to a claim against the Bank for breach of transfer,

presentment, encoding, retention or other warranty under Federal Reserve

Regulations or Operating Circulars, ACH or other clearing house rules, or

applicable law (including, without limitation, Articles 3, 4 and 4A of the

Applicable UCC); and (iii) demand for chargeback in connection with a merchant

card transaction.

 

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(b) All Permitted Debits shall be charged against Company's general account

number 2000021178524 with the Bank (the "General Account"). In the event: (i)

the Bank were unable to set off or charge any Permitted Debit against the

Company's General Account because of insufficient funds in the General Account,

or (ii) the Bank in good faith were to believe that any legal process or

applicable law prohibited such setoff or charge against the General Account, or

(iii) the General Account were closed, then: (A) the Bank may charge such

Permitted Debits to and set off same against any other account of the Company

excluding the Account(s) which are set forth on Exhibit A hereof; and (B) if

there were insufficient funds in the account(s) (excluding the Account(s) as set

forth in Exhibit A hereof) against which to charge or set off such Permitted

Debits, then the Bank shall demand (unless the Bank shall believe in good faith

that any legal process or applicable law prohibits such demand) that the Company

pay, and the Company shall pay, to the Bank promptly upon the Company's receipt

of the Bank's written demand therefor, the full amount of all unpaid Permitted

Debits.

 

(c) If there were insufficient funds in the account(s) of the Company, excluding

the Account(s) set forth on Exhibit A hereof, against which the Bank could

charge or set off Permitted Debits pursuant to subsections (a) and (b) of this

Section 3 and the Company shall have failed to pay the Bank the full amount of

unpaid Permitted Debits as described in paragraph (b) of this Section 3, then

the Bank may demand that the Secured Party pay, and the Secured Party shall pay,

to the Bank within five (5) business days of the Secured Party's receipt of the

Bank's written demand therefor, the full amount of unpaid Permitted Debits;

provided, however, as to unpaid Permitted Debits that are service charges, fees

or expenses, the Secured Party shall be required to pay to the Bank only those

service charges, fees or expenses attributable to any Account that: (i) shall

have been incurred in connection with any Account on or after the date of this

Agreement and on or before the date of termination of this Agreement; and, (ii)

to the extent such expenses include attorneys' fees and costs, they relate to

disputes, claims or actions directly involving the Secured Party.

 

4. Exculpation of Bank

 

(a) At all times the Bank shall be entitled to rely upon any communication it

receives from the Secured Party in connection with this Agreement or that the

Bank shall believe in good faith to be a communication received from the Secured

Party in connection with this Agreement, and the Bank shall have no obligation

to investigate or verify the authenticity or correctness of any such

communication. The Bank shall have no liability to the Company or the Secured

Party for (i) honoring or following any instruction the Bank shall receive from

(or shall believe in good faith to be from)