EXHIBIT 10.56
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement") is entered into as of this
25th day of June, 2001, by and between Telenetics Corporation, a California
corporation ("Debtor"), and Xxxxx & Xxxxxx, LLP, a California limited liability
partnership ("Secured Party").
R E C I T A L S:
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A. Debtor is indebted to Secured Party in the principal sum of
$474,852.32, pursuant to that certain 6% Convertible Subordinated Secured
Promissory Note Due 2003 (the "Secured Note") of even date herewith.
B. This Security Agreement is intended by the parties hereto to create
a security interest in the collateral described herein in favor of Secured Party
to secure all of the obligations of Debtor under the Secured Note.
C. The parties hereto understand and agree that the security interest
created by this Agreement is junior in status, at least with respect to the
assets of Debtor which secure Debtor's payment obligations in accordance with
(i) the security interest created by that certain Loan and Security Agreement by
and among Debtor and Celtic Capital Corporation, dated as of April 2, 1999
(including any replacements thereof), (ii) the security interest created by that
certain Amendment to Security Agreement by and between Debtor and Xxxxx
Xxxxxxxx, doing business as SMC Group, a sole proprietorship, dated as of March
31, 1998, which amended and replaced that certain Security Agreement by and
between Debtor and Shashani, dated February 7, 1992, and (iii) the security
interest created by that certain Security Agreement by and between Debtor and
SMC Communications Group, Inc., dated as of December 31, 1997 (collectively, the
"Senior Security Agreements").
A G R E E M E N T:
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IN CONSIDERATION of the foregoing recitals, the mutual covenants herein
contained and for other valuable consideration, the receipt and sufficiency of
which is hereby acknowledged by each of the parties hereto, the parties hereto
do hereby agree as follows:
1. SECURITY INTEREST. As security for the performance of the
obligations and indebtedness represented by the Secured Note, including
renewals, extensions, amendments and replacements thereto, Debtor hereby grants
to Secured Party a security interest in the following collateral and in other
collateral of the same class, whether now owned or hereinafter acquired by
Debtor (the "Collateral"):
All tangible and intangible assets of Debtor, including, but not
limited to, all existing and future inventory, accounts receivable,
furniture, fixtures, equipment, patents, patent applications,
trademarks, copyrights, trade secrets, and any other property interest
or proprietary right, as well as any document, instrument or drawings
embodying the same, and all additions and accessions thereto,
substitutions and replacements therefor, and all proceeds thereof.
Debtor and Secured Party agree that the security interest created
hereby has attached to the Collateral to the extent permitted by law, and that
it will attach to additional portions of the Collateral hereinafter acquired by
Debtor, as the requirements for attachment are otherwise met. The parties hereto
agree that all of the Collateral is personal property.
2. POSSESSION AND LOCATION OF COLLATERAL. Unless and until any default
occurs hereunder as set forth in Section 7 hereof, Debtor shall have possession
of the Collateral for its use and enjoyment in any lawful manner not
inconsistent with this Agreement or the Secured Note. The Collateral will be
kept at Debtor's place of business with respect to such assets and will not be
moved therefrom without the prior written consent of Secured Party, except that
Debtor may make sales of inventory items in the ordinary course of business.
Debtor shall not replace or make material alterations in the Collateral without
the prior written consent of Secured Party. The consent of Secured Party
required hereby shall not be unreasonably withheld.
3. FINANCING STATEMENTS. Debtor shall join with Secured Party in
executing one or more financing statements or other documents pursuant to the
provisions of the California Uniform Commercial Code, or any other applicable
law, relating to the perfection of the Secured Party's security interest in the
Collateral, in form reasonably satisfactory to Secured Party.
4. TRANSFER, TAXES, LIENS AND ENCUMBRANCES. Debtor has title to the
Collateral free and clear of any lien, security interest or encumbrance, except
for the security interests created by this Agreement and the Senior Security
Agreements. Title to the Collateral will remain in and continue to be vested in
Debtor. Debtor will defend the Collateral and will not sell, offer to sell or
otherwise transfer the Collateral, any portion thereof, or any interest therein,
without the prior written consent of Secured Party, except that Debtor may make
sales of inventory items in the ordinary course of business. The consent of
Secured Party required hereby shall not be unreasonably withheld. Debtor shall
pay all taxes, assessments and other charges made against the Collateral. In
addition, unless Secured Party shall consent otherwise in writing, Debtor will
keep the Collateral free from any lien, security interest or encumbrance, except
for the security interests created by this Agreement and the Senior Security
Agreements.
5. RISK OF LOSS AND INSPECTION OF COLLATERAL. Debtor shall have all
risk of loss of the Collateral, and Debtor will keep the Collateral in good
order and repair. Secured Party shall have the right, at any reasonable time, to
enter upon the premises where the Collateral is located to examine and inspect
the Collateral in person or by agent. Any refusal to permit such entry shall be
a breach of this Agreement.
6. INSURANCE. Debtor shall keep the Collateral insured, at its own
expense, in an amount not less than its full insurable value, against loss by
fire, theft, vandalism and malicious mischief, storm, earthquake and extended
coverage, and Debtor shall cause Secured Party to be named loss payee in such
insurance, and furnish to Secured Party written evidence thereof.
7. EVENTS OF DEFAULT. The occurrence of any of the following events or
conditions shall constitute an Event of Default:
(a) The failure of Debtor to perform any obligation or covenant
set forth herein or in the Secured Note.
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(b) The failure of Debtor to pay principal and interest under the
terms of the Secured Note.
(c) Debtor ceases operations, is dissolved, terminates its
existence, does or fails to do anything that allows the obligations under the
Secured Note to become due before their stated maturity, or becomes insolvent,
appoints a receiver for its property, makes an assignment for the benefit of
creditors, commences any proceeding under any bankruptcy law, or is unable to
meet its debts as they mature.
(d) The occurrence of any "Event of Default" as that term is
defined in the Secured Note.
8. REMEDIES UPON DEFAULT. Upon the occurrence of any Event of Default
hereunder, and if, upon written notice of such default delivered to the Debtor,
the specified default is not cured within thirty (30) days of receipt of such
notice, Secured Party may, at its option, declare all amounts secured hereby
immediately due and payable and shall have the right to conduct a public or
private sale of the Collateral pursuant to and in accordance with the California
Commercial Code. Upon Debtor's default pursuant to this Section 8, the parties
hereto shall have all of the rights and remedies available to them under the
California Uniform Commercial Code.
Secured Party may require Debtor to assemble the Collateral and make it
available to Secured Party at a place to be designated by Secured Party which is
reasonably convenient to both parties. All rights and remedies of Secured Party
shall be cumulative and may be exercised successively or concurrently and
without impairing Secured Party's interest in the Collateral.
9. NOTICE. All written notices required or permitted pursuant to this
Agreement shall be sent by certified mail, return receipt requested, or
delivered by hand to the parties hereto at the following address, or at any such
other address which any party hereto may, by written notice, have designated
pursuant to this section:
"Debtor": Telenetics Corporation
00000 Xxxxxx Xxxxx
Xxxx Xxxxxx, Xxxxxxxxxx 00000
Attention: President
"Secured Party": Xxxxx & Xxxxxx, LLP
000 Xxxxx Xxxxxxxxx, 00xx Xxxxx
Xxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
10. APPLICABLE LAW. This Agreement is to be construed and interpreted
in accordance with the laws of the State of California.
11. ASSIGNMENT AND WAIVER. Secured Party may assign its rights or
interest under this Agreement and, upon any such assignment, Debtor shall be
obligated to render performance to Secured Party's assignee. Debtor waives any
and all claims or defenses assertable against Secured Party and assignees
thereof, except defenses which cannot be waived under the California Uniform
Commercial Code.
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12. INUREMENT. This Agreement shall be binding upon, and shall inure to
the benefit of, the parties hereto, their successors and assigns, and may be
altered, amended or changed only by an instrument in writing signed by the
parties hereto.
13. SEVERABILITY. In the event any provision of this Agreement shall be
determined to be invalid, illegal, or unenforceable under applicable law, such
provision shall, insofar as possible, be construed or applied in such manner as
will permit enforcement; otherwise this Agreement shall be construed as though
such provision had never been made a part hereof, and the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
14. BINDING AUTHORITY. Xxxxx Xxxxx is the duly elected Chief Financial
Officer of Debtor and has the authority to bind the Debtor to the terms and
provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year set forth above.
DEBTOR: TELENETICS CORPORATION,
a California corporation
By: /s/ XXXXX XXXXX
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Xxxxx Xxxxx, Chief Financial Officer
SECURED PARTY: XXXXX & XXXXXX, LLP
By: /s/ XXXXX XXXXXXX
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Xxxxx X. Xxxxxxx, Partner
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