EXHIBIT 10.5
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is entered into as of the 27th day of March,
2003 by and between Prism Software Corporation ("Debtor") and the Xxxxxx xxx
Xxxxx Revocable Trust ("Secured Party");
R E C I T A L S:
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A. Debtor has executed a Promissory Note in favor of Secured Party in
the principal amount of $100,000, dated March 27, 2003 (the "Note") and a Credit
Agreement, dated March 15, 2003 (the "Credit Agreement");
B. Debtor desires to grant to Secured Party a security interest in its
assets to secure the Note and the Credit Agreement.
NOW, THEREFORE, the parties agree as follows:
1. CREATION OF SECURITY INTEREST. Debtor hereby pledges and grants to
Secured Party a security interest in all of its assets, including without
limitation, those described below, and all substitutions therefor and proceeds
(including insurance proceeds) thereof (the "Collateral"):
(i) All furniture fixtures and equipment;
(ii) All accounts receivable;
(iii) All contract rights; and
(iv) All software developed by Debtor, including source and object
codes related thereto.
2. DEBTOR'S REPRESENTATIONS AND WARRANTIES. Debtor represents and
warrants to Secured Party that (a) Debtor owns the Collateral free and clear of
all liens, charges, options, encumbrances, rights or interests of others of any
kind except those created by this Agreement, (b) Debtor has the absolute and
unrestricted right, power, authority and capacity to execute and deliver the
Note and the Credit Agreement and to grant a security interest in the Collateral
in accordance with the terms of this Agreement, (c) Debtor will do all acts
necessary to maintain, preserve and protect the Collateral and to keep it in
good condition and repair, and will pay, prior to delinquency, any taxes,
charges or liens imposed or assessed upon the Collateral, (d) Debtor will not
sell, assign or convey any interest in the Collateral or permit the Collateral
to be removed from the State of California without the prior written consent of
the Secured Party; and (e) Debtor will observe and comply with all applicable
laws, rules and regulations in its use of the Collateral.
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3. PURPOSE. The security interest created by this Agreement secures
payment in full when due of (a) all indebtedness of the Debtor to Secured Party
under the Note and the Credit Agreement, (b) the performance of all other
obligations of Debtor under the Note, the Credit Agreement and this Agreement
and (c) any amounts advanced and expenditures made by Secured Party for the
maintenance and preservation of the Collateral, or any part thereof.
4. TERM OF SECURITY AGREEMENT. This Agreement shall continue, and
Secured Party shall retain possession of and its security interest in the
Collateral, until (a) payment in full of all amounts due under or by virtue of
the Note, the Credit Agreement and any provision of this Agreement, and (b) the
full performance and discharge of all other obligations of Debtor under the
Note, the Credit Agreement and this Agreement.
5. DEFAULT. The occurrence of any one of the following events or
conditions shall constitute a default under this Agreement:
(a) failure of Debtor to make any payment of principal or
interest under the Note or the Credit Agreement when due, or any other
default under the terms of the Note or the Credit Agreement;
(b) failure of Debtor to timely perform or discharge any
covenant, obligation or condition under this Agreement;
(c) failure of any representation or warranty in this
Agreement to have been true and complete when made;
(d) appointment of a receiver or trustee for all or any
portion of Debtor's property;
(e) the entry of a decree or order by a court having
jurisdiction in the premises for relief in respect of Debtor under
Title 11 of the United States Code, as now constituted or hereafter
amended, or any other applicable Federal or state bankruptcy,
insolvency or similar law, or appointing a receiver, trustee, or
custodian of Debtor or for any substantial part of Debtor's property,
which decree or order is not stayed or set aside within 60 days
thereafter; or
(f) the filing by Debtor of a petition, answer or consent
seeking relief under Title 11 of the United States Code, as now
constituted or hereafter amended, or the consent by Debtor to the
institution of proceedings thereunder or to the appointment of a
receiver, trustee or custodian.
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6. SECURED PARTY'S REMEDIES. Upon default as specified in section 5,
Secured Party may, at his option, exercise any one or more of the following
rights:
(a) declare all unpaid principal and accrued interest under
the Note and the Credit Agreement immediately due and payable;
(b) exercise its rights and remedies under the California
Commercial Code as a secured creditor having a security interest in the
Collateral, and in particular, sell all or any part of the Collateral
at one or more public or private sales, on at least thirty days' prior
notice and otherwise in a commercially reasonable manner and upon
reasonable terms and conditions, taking into account all the
circumstances; and
(c) exercise any and all further rights or remedies of Secured
Party under the California Commercial Code or other applicable law.
To the extent permitted by law, Debtor hereby waives all
requirements for the exercise of any of Secured Party's remedies other than
those provided in this Agreement. Secured Party shall be entitled to enforce any
of the remedies in this section successively or concurrently. The enforcement of
any remedy provided in this section shall not prejudice the right of Secured
Party to pursue any other or further remedy which it may have.
7. DISPOSITION OF PROCEEDS OF SALE OF COLLATERAL. Secured Party may
retain from the proceeds of any sale of the Collateral provided for in section 6
an amount sufficient to pay any and all amounts due Secured Party under the
Note, the Credit Agreement or this Agreement, together with all costs and
expenses of preparing for, promoting, conducting and closing the sale, including
reasonable attorneys' fees. Secured Party shall then pay any balance of the
proceeds to Debtor, except as otherwise provided by law, subject to the rights
of the holder of any then existing lien of which Secured Party has notice.
8. ESTOPPEL OR WAIVER. No act or failure to act on the part of Secured
Party under this Agreement shall be deemed or construed to be a waiver of or an
election with respect to any right, power or remedy Secured Party has under this
Agreement or the Note or the Credit Agreement, or that may otherwise be
available to Secured Party.
9. FURTHER COOPERATION. Debtor agrees that upon reasonable request by
Secured Party, Debtor will promptly execute and deliver any documents, and take
all additional actions reasonably deemed necessary or desirable by Secured Party
to effect the purposes of this Agreement.
10. FINANCING STATEMENT.
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(a) Concurrently with the execution and delivery of this
Agreement, Secured Party shall file a financing statement on Form UCC-l
pertaining to the Collateral. Secured Party is hereby authorized to
file said financing statement with the Uniform Commercial Code Division
of the Office of the California Secretary of State. From time to time,
as reasonably requested by Secured Party, Debtor shall execute and
deliver to Secured Party such additional documents and instruments as
may be necessary to perfect and maintain Secured Party's security
interest in the Collateral.
(b) Upon termination of the security interest provided for
herein, Secured Party shall promptly execute and deliver to Debtor any
and all documents (including a termination statement in a form suitable
for filing under the Uniform Commercial Code of the State of
California) which Debtor may deem to be necessary or appropriate in
order to adequately evidence the termination of such security interest.
11. SEVERABILITY. If any provision of this Agreement is determined to
be invalid or unenforceable, all of its other provisions shall nevertheless
remain in full force and effect.
12. BINDING UPON SUCCESSORS. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of the parties.
13. ENTIRE AGREEMENT. This Agreement, together with the Notes and any
financing statement executed in connection with this Agreement, is intended by
the parties as the final, complete and exclusive expression of the terms and
conditions of their agreement, and supersedes all prior agreements and
representations.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
15. ATTORNEYS' FEES. If an action is brought to enforce or interpret
the provisions of this Agreement, the party prevailing in such action shall be
entitled to recover reasonable attorneys' fees and costs of collection.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
Prism Software Corporation
By: /S/ E. XXX XXXXXXX
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E. Xxx Xxxxxxx, President
/S/ XXXXXX XXX XXXXX
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Xxxxxx xxx Xxxxx, trustee for
the Xxxxxx xxx Xxxxx Revocable Trust
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