SECURITY AGREEMENT
Exhibit
10.5
The
parties to this security agreement are:
SECURED
PARTY; PC Products Inc.
DEBTOR;
Market Development Specialists, Inc.
1.
Definitions
As
used
in this security agreement,
a.
“Collateral” means the receivables and their proceeds/the receivables, the
inventory, and their proceeds.
b.
“Debtor” means the owner of the collateral.
c.
“Indebtedness” means debtor’s obligations, obligations representing the purchase
price of property other than accounts payable arising in connection with the
purchase of inventory on terms customary in the trade, and obligations under
leases that would be capitalized in accordance with generally accepted
accounting principles.
d.
“Lien”
means any security interest, mortgage, pledge, lien, attachment, claim, charge,
encumbrance, agreement retaining title, or lessor’s interest covering the
collateral.
e.
“Obligations” means existing and future indebtedness and liability of debtor to
secured party, including attorneys’ fees incurred by secured party in enforcing
this security agreement or collecting payment under it, except obligations
subject to the disclosure requirements of the Consumer Credit Protection
Act.
f.
“Potential default” means an event or omission that would be a default under
this security agreement or any other document evidencing or creating security
for the obligation, except for the passage of time or the giving of
notice.
g.
“Accounts” means a right to payment for goods sold or leased, or services
rendered, by debtor.
h.
“Inventory” means all raw materials, work in process, finished goods, and goods
held for sale or lease or furnished under contracts of service in which debtor
has or later acquires a right (held by debtor or by others), including but
not
limited to the following: materials and software to manufacture
computers.
i.
“Receivables” means accounts, instruments, documents, chattel paper, and general
intangibles (including but not limited to the accounts subject to this security
agreement) in which debtor has or later acquires rights, including repossessions
and returns, except obligations subject to the disclosure requirements of the
Consumer Credit Protection Act.
2.
Debtor
grants secured party a security interest in the collateral to secure payment
of
the obligations.
All
inventory now owned or later acquired by debtor, wherever located, and including
without limitation the following: materials and software to manufacture
computers.
3.
Debtor
promises:
a.
To pay
the obligations to secured party when they are due.
b.
To pay
all expenses, including attorneys’ fees, incurred by secured party in the
perfection, preservation, realization, enforcement, and exercise of its rights
under this agreement.
c.
To
indemnify secured party against loss of any kind, including reasonable
attorneys’ fees, caused to secured party by reason of its interest in the
collateral.
d.
To
conduct debtor’s business efficiently and without voluntary
interruption.
e.
To
preserve all rights, privileges, and franchises held by debtor’s
business.
f.
To
keep debtor’s business property in good repair.
g.
To pay
all taxes when due.
h.
To
give secured party notice of any litigation that may have a material adverse
effect on the business.
i.
Not to
change the name or place of business, or to use a fictitious business name,
without first notifying secured party in writing.
j.
Not to
sell, lease, transfer, or otherwise dispose of the collateral except, before
the
occurrence of a default, for sales of inventory in the ordinary course of
business.
k.
Not to
permit liens on the collateral, except existing liens, current tax liens, and
purchase-money liens.
I.
To
maintain fire and extended coverage insurance on the collateral in the amounts
and under policies acceptable to secured party, naming secured party under
a
lender’s loss payable clause, and to provide secured party with the original
policies and certificates at secured party’s request.
m.
Not to
use the collateral for any unlawful purpose or in any way that would void any
effective insurance.
n.
To
permit secured party, its representatives, and its agents to inspect the
collateral at any time, and to make copies of records pertaining to it, at
reasonable times at secured party’s request.
o.
To
perform all acts necessary to maintain, preserve, and protect the
collateral.
p.
Not to
move the collateral from the following locations without first obtaining secured
party’s agreement in writing: A separate secure location for all of PC Products,
Inc. inventory.
q.
To
notify secured party promptly in writing of any default, potential default,
or
any development that might have a material adverse effect on the
collateral.
r.
To
execute and deliver to secured party all financing statements and other
documents that secured party requests, in order to maintain a first perfected
security interest in the collateral.
s.
To
furnish secured party the reports relating to the collateral at secured party’s
request.
t.
Not to
make or agree to make any reduction in the original amount owing on a
receivable, or to accept less than the original amount in satisfaction of a
receivable, except before default or potential default, when debtor may do
so in
the ordinary course of business and in accordance with its present
policies.
u.
To
deliver to secured party (1) duplicate invoices for each account, bearing the
language of assignment as secured party specifies; (2) the originals of all
instruments and documents constituting collateral, endorsed and assigned as
secured party requests; and (3) proceeds (except cash proceeds collected in
the
ordinary course of business, unless debtor is in default).
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4.
Debtor
will be in default under this agreement if:
a. Debtor fails to pay any installment when due, or its entire indebtedness
to
secured party when due, at stated maturity, on accelerated maturity, or
otherwise.
b. Debtor fails to make any remittances required by this agreement.
c. Debtor commits any breach of this agreement, or any present or future rider
or supplement to this agreement, or any other agreement between debtor and
secured party evidencing the obligation or securing it.
d. Any warranty, representation, or statement, made by or on behalf of debtor
in
or with respect to the agreement, is false.
e. The collateral is lost, stolen, or damaged.
f. There is a seizure or attachment of, or a levy on, the
collateral.
g. Debtor ceases operations, is dissolved, terminates its existence, does or
fails to do anything that allows obligations to become due before their stated
maturity, or becomes insolvent or unable to meet its debts as they
mature.
h. Secured party for any reason deems itself insecure.
5.
When
an event of default occurs:
a. Secured creditor may:
| (1) |
Declare
the obligations immediately due and payable— without demand, presentment,
protest, or notice to debtor, all of which debtor expressly
waives.
|
(2)
Terminate any obligation to make future advances.
(3)
Exercise all rights and remedies available to a secured creditor after
default, including but not limited to the rights and remedies of secured
creditors under the California Uniform Commercial Code.
(4)
Perform any of debtor’s obligations under this agreement for debtor’s
account. Any money expended or obligations incurred in doing so, including
reasonable attorneys’ fees and interest at the highest rate permitted by law,
will be charged to debtor and added to the obligation secured by this
agreement.
b. Secured creditor’s notice of the time and place of public sale of the
collateral, or the time on or after which a private sale or other disposition
of
the collateral will be made, is reasonable if sent to debtor in the manner
for
giving notice at least five days before the public or private sale.
c. Debtor must:
(1) Assemble
the collateral and
make it and all records relating to it available to secured party as secured
party directs.
| (2) |
Allow
secured party, its representatives, and its agents to enter the premises
where all or any part of the collateral, the records, or both may
be, and
remove any or all of it.
|
6.
Debtor
will pay all costs and expenses of collection, including reasonable attorneys’
fees.
7.
No
waiver by secured party of any breach or default will be a waiver of any breach
or default occurring later. A waiver will be valid only if it is in writing
and
signed by secured party.
8.
Debtor’s representations and warranties made in this security agreement will
survive its execution, delivery, and termination.
9.
This
security agreement will bind and benefit the successors and assignees of the
parties, but debtor may not assign its rights under the agreement without
secured party’s prior written consent.
10.
This
contract will be governed by the law of California.
11.
This
security agreement is the entire agreement, and supersedes any prior agreement
or understandings, between secured party and debtor relating to the
collateral.
12.
Notices under this security agreement are considered to be served three days
after they are deposited in the United States mail, with prepaid first-class
postage, addressed as follows:
DEBTOR
SECURED
PARTY
____________________________ ______________________________
_____________________________ ______________________________
Either
party may change its address for service of notice, by notice to the
other.
Dated:__________
Signed:______________________
Market
Development Specialists, Inc.
Dated:___________
Signed:______________________
PC
Products, Inc.
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