SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Security Agreement") is entered
into as of January 29, 2001, by and between EBIZ ENTERPRISES, INC., a Utah
corporation (the "Company"), and THE CANOPY GROUP, INC., a Utah corporation
("Secured Party").
RECITALS
A. Company has borrowed funds from Secured Party pursuant to a Secured
Convertible Promissory Note (the "Note") and a Loan Agreement (the "Loan
Agreement," both of even date herewith (collectively and together with this
Agreement the "Loan Documents").
B. As security for its repayment obligations under the Note, Company
has agreed to grant Secured Party a security interest in all of its assets on
the terms set forth in this Security Agreement.
NOW, THEREFORE, to that end and in consideration of the
premises, covenants and agreements set forth below, and the mutual benefits to
be derived from this Security Agreement, and other good and valuable
consideration, the parties hereto agree as follows:
1. Security Interest. To secure the "Obligation" (as defined
below), Company hereby transfers, conveys, assigns, and grants to Secured Party
a security interest in all of Company's assets, which may include one or more of
the following items (hereinafter, collectively, the "Collateral"):
(a) General Intangibles. All of Company's General
Intangibles, now existing or hereafter arising or acquired, together with the
proceeds therefrom. As used herein, the term "General Intangibles" means all
personal property (including things in action) other than goods, accounts,
chattel paper, documents, instruments, and money, and includes, but is not
limited to, business records, deposit accounts, inventions, intellectual
property, designs, patents, patent applications, trademarks, trademark
applications, trademark registrations, service marks, service xxxx applications,
service xxxx registrations, trade names, goodwill, technology, know-how,
confidential information, trade secrets, customer lists, supplier lists,
copyrights, copyright applications, copyright registrations, licenses, permits,
franchises, tax refund claims, and any letters of credit, guarantee claims,
security interests, or other security held by the Company to secure any
"Accounts" (as hereinafter defined).
(b) Accounts (including Accounts Receivable). All of
Company's Accounts, whether now existing or hereafter arising or acquired,
together with the proceeds therefrom. As used herein, the term "Accounts" means
any right of Company to receive payment from another person or entity, including
payment for goods sold or leased, or for services rendered, no matter how
evidenced or arising, and regardless of whether yet earned by performance. It
includes, but is not limited to, accounts, accounts receivable, contract rights,
contracts receivable, purchase orders, notes, drafts, acceptances, all rights to
payment earned or unearned under a charter or other contract involving the use
or hire of a vessel and all rights incident to the charter or contract, and
other forms of obligations and receivables.
(c) Inventory. All of Company's Inventory, whether
now owned or hereafter acquired, together with the products and proceeds
therefrom and all packaging, manuals, and instructions related thereto. As used
herein, the term "Inventory" means all goods, merchandise, and personal property
held for sale or leased or furnished or to be furnished under contracts of
service, and all raw materials, work in process, or materials used or consumed
in Company's business, wherever located and whether in the possession of
Company, a warehouseman, a bailee, or any other person.
(d) Equipment. All of Company's Equipment, now owned
or hereafter acquired, together with the products and proceeds therefrom, and
all substitutes and replacements therefor. As used herein, the term "Equipment"
includes all equipment, machinery, tools, office equipment, supplies,
furnishings, furniture, or other items used or useful, directly or indirectly,
in Company's business, all accessions, attachments, and other additions thereto,
all parts used in connection therewith, all packaging, manuals, and instructions
related thereto, and all leasehold or equitable interests therein.
(e) Fixtures. All of Company's interest in and to all
fixtures and furnishings, now owned or hereafter acquired, together with the
products and proceeds therefrom, all substitutes and replacements therefor, all
accessories, attachments, and other additions thereto, all tools, parts, and
supplies used in connection therewith, and all packaging, manuals, and
instructions related thereto, located on or attached to Company's business
premises located at 00000 X. 00xx Xxx, Xxxxxxxxxx. Xxxxxxx 00000.
(f) Chattel Paper, Documents and Instruments. All of
Company's right, title, and interest in any chattel paper, documents, or
instruments, now owned or hereafter acquired or arising, or now or hereafter
coming into the possession, control, or custody of either Company or Secured
Party, together with all proceeds therefrom. The terms "chattel paper,"
"documents," and "instruments" shall have those meanings ascribed to them in the
Utah Uniform Commercial Code.
2. Obligation. This security interest is given as security for
all indebtedness and obligations owed by Company to Secured Party, whether now
existing or hereafter incurred, under this Security Agreement or the Note,
together with all extensions, modifications, or renewals thereof (hereinafter
referred to, collectively, as the "Obligation").
3. Proceeds. As used in this Security Agreement, the term
"proceeds" means all products of the Collateral and all additions and accessions
to, replacements of, insurance or condemnation proceeds of, and documents
covering any of the Collateral, all property received wholly or partly in trade
or exchange for any of the Collateral, all leases of any of the Collateral, and
all rents, revenues, issues, profits, and proceeds arising from the sale, lease,
license, encumbrance, collection, or any other temporary or permanent
disposition, of any of the Collateral or any interest therein.
4. Title; Filing. Company warrants that, it is the owner of
the Collateral free and clear of all liens, claims, security interests and
encumbrances except liens, claims, security interests and encumbrances granted
prior to the date of this Security Agreement. Company covenants that so long as
any portion of the Obligation remains unpaid, Company will not execute or file a
financing statement or security agreement covering the Collateral to anyone
other than Secured Party, except in the ordinary course of business or as
otherwise allowed. Company agrees to sign and deliver one or more financing
statements or supplements thereto or other instruments as Secured Party may from
time to time require to comply with the Uniform Commercial Code or other
applicable law to preserve, protect and enforce the security interest of Secured
Party and to pay all costs of filing such statements or instruments. In
addition, Company shall promptly file a financing statement to perfect Secured
Party's interest in the Collateral.
5. Care of Collateral. Company will keep in effect all
licenses, permits and franchises required by law or contract relating to
Company's business (if applicable), property, or the Collateral; maintain
insurance on the Collateral; keep the Collateral in good repair and be
responsible for any loss or damage to it; at all times warrant and defend
Company's ownership and possession of the Collateral; keep the Collateral free
from all liens, claims, encumbrances and security interests; pay when due all
taxes, license fees, and other charges upon the Collateral or upon Company's
business, property or the income therefrom; and not misuse, conceal or in any
way use or dispose of the Collateral unlawfully or contrary to the provisions of
this Security Agreement or of any insurance coverage. Loss of, damage to, or
uncollectability of the Collateral or any part thereof will not release Company
from any of its obligations hereunder.
6. Default. Ten (10) days after written notice from Secured
Party to Company for monetary defaults and thirty (30) days after written notice
from Secured Party to Company for non-monetary defaults, if such defaults are
not cured within such ten (10) day or thirty day (30) periods, respectively,
each of the following shall constitute an event of default ("Event of Default")
under this Agreement:
a. Default in Payment. If Company fails to make any payment
due and payable under the terms of the Note, this Security Agreement or
the Loan Agreement.
b. Representations and Warranties. If any of the
representations and warranties made by Company shall be false or
misleading in any material respect when made.
c. Covenants. If Company shall be in material default under
any of the material terms, covenants, conditions, or obligations under
any Loan Document or any other agreement with the Lender.
d. Dissolution. If Company is dissolved or terminated.
e. Receiver. If a receiver, trustee, or custodian is appointed
for any part of the Collateral, or any part of the Collateral is
assigned for the benefit of creditors.
f. Impairment to Lien. If at any time any Loan Document
creating a lien on any of the Collateral may be impaired by any
material lien, encumbrance or other defect granted or created after the
date of this Security Agreement.
g. Bankruptcy. If a petition in bankruptcy is filed against
Company, and such petition is not dismissed within ninety (90) days of
filing, a petition in bankruptcy is filed by Company or a receiver,
trustee or custodian of any part of the Collateral is appointed; or if
Company files a petition for reorganization under any of the provisions
of the Bankruptcy Act or any law, State or Federal, or makes an
assignment for the benefit of creditors or is adjudged insolvent by any
State or Federal Court of competent jurisdiction.
h. Judgment or Attachment. If a final judgment is entered
against Company or any attachment be made for an amount in excess of
$100,000.00 and such judgment or attachment is not paid or otherwise
fully satisfied within thirty (30) days of the date it is entered.
Waiver of any Default will not constitute a waiver of any
other or subsequent Default.
7. Remedies. Upon the occurrence of an Event of Default
hereunder at any time thereafter, all of the Obligation will, at the election of
Secured Party and without notice of such election, or demand for payment, become
immediately due and payable and Secured Party will have the remedies of a
secured party under the Utah Uniform Commercial Code or other applicable law.
8. General. The waiver by Secured Party of any breach of any
provision of this Security Agreement or warranty or representation herein set
forth will not be construed as a waiver of any subsequent breach. The failure to
exercise any right hereunder by Secured Party will not operate as a waiver of
such right. All rights and remedies herein provided are cumulative. Company may
not assign its rights or delegate its duties hereunder without Secured Party's
written consent. This Security Agreement may not be altered or amended except by
a writing signed by all the parties hereto. This Security Agreement will be
governed by and construed and interpreted in accordance with the laws of the
State of Utah. Any provision hereof found to be invalid will not invalidate the
remainder. All words used herein will be construed to be of such gender and
number as the circumstances require. This Security Agreement binds Company, its
successors and assigns, and inures to the benefit of Secured Party, its
successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Security
Agreement as of the date first written above.
COMPANY: EBIZ ENTERPRISES, INC.,
a Nevada corporation
By: ____________________________
Xxxxx Xxxx, Chief Executive Officer
SECURED PARTY: THE CANOPY GROUP, INC.,
a Utah corporation
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By:
Its:
