EXHIBIT 10.3
SECURITY AGREEMENT
This SECURITY AGREEMENT ("SECURITY AGREEMENT") is made this 21st day of
May, 2003, by, between and among, ADVANCED MEDIA, INC, a Delaware corporation
("DEBTOR"), on the one hand, and XXXXX XXXXX, an individual, ("SECURED PARTY"),
on the other hand, with respect to the following:
RECITALS
A. DEBTOR has borrowed the sum of up to Five Hundred Thousand
($500,000) from Secured Party (the "DEBT");
B. DEBTOR and SECURED PARTY now mutually desire for DEBTOR to secure
the Loan in the principal sum of up to Five Hundred Thousand ($500,000) as
evidenced by a SECURED PROMISSORY NOTE, dated of even date herewith, and signed
by DEBTOR in favor of SECURED PARTY (the "NOTE") in said amount (the "DEBT") and
for DEBTOR to pledge the personal property listed on attached Exhibit "A"
security\collateral or the epayment of the DEBT (the "COLLATERAL") on the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of and reliance on the mutual
covenants, conditions, promises, and representations contained herein, the
parties hereto agree as follows:
1. RECITALS. The recitals stated above are incorporated herein by this
reference as if set forth in full at this point.
2. DEFINITIONS. As used in this SECURITY AGREEMENT, the following terms
shall have the following meanings:
a. "COLLATERAL" and "SECURITY" mean the personal property set
forth and fully described in attached Exhibit "A".
b. "DEBTOR" means ADVANCED MEDIA, INC., a Delaware
corporation.
c. "DEBT", "INDEBTEDNESS" and "LOAN" mean DEBTOR'S obligations
represented by the NOTE executed by DEBTOR and payable to the SECURED PARTY as
Holder.
d. "LIEN" means any security interest, mortgage, pledge, lien,
attachment, claim, charge, encumbrance, agreement retaining title, or other
interests in, to or covering the COLLATERAL.
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EXHIBIT 10.3
e. "OBLIGATIONS" mean any and all existing and future duties,
obligations, indebtedness and liabilities of DEBTOR to SECURED PARTY, including
attorneys' fees incurred in enforcing this SECURITY AGREEMENT or collecting
payment due under the NOTE.
f. "BREACH" and "DEFAULT" mean an event or omission that is or
would be a breach or default under this SECURITY AGREEMENT or any other document
evidencing, creating or relating to the security for and performance of the
OBLIGATIONS.
g. "NOTE" means the SECURED PROMISSORY NOTE, of even date
herewith executed by DEBTOR for the benefit of SECURED PARTY, a true and correct
copy of which is attached hereto and marked as Exhibit "B".
h. Terms defined in the California Uniform Commercial Code not
otherwise defined in this Security Agreement are used in this Security Agreement
as defined in that Code on the date of this agreement.
i. "SECURED PARTY" and "HOLDER" mean XXXXX XXXXX, or his
nominee or order.
3. GRANT OF SECURITY INTEREST. For the purpose of providing SECURED
PARTY with security for the DEBTOR's payment of the NOTE, DEBTOR hereby grants
SECURED PARTY a security interest in and to the COLLATERAL, which is more
specifically described and set forth in attached Exhibit "A" and which is
incorporated herein by this reference. Further, DEBTOR shall execute any and all
other documents necessary to grant, perfect and otherwise effect notice that
SECURED PARTY has a first priority secured interest in the COLLATERAL. In this
regard, DEBTOR grants SECURED PARTY the limited power of attorney to sign such
documents on behalf of DEBTOR in the event DEBTOR is unable to or refuses to
sign such documents. Said documents include, without limitation, a UCC-1
Financing Statement to be filed with the California Secretary of State.
4. DEBTOR'S COVENANTS. DEBTOR shall:
a. make all payments to the SECURED PARTY as set forth in the
NOTE;
b. pay all expenses, including attorneys' fees, incurred by
SECURED PARTY in the perfection, preservation, realization, enforcement, and
exercise of its rights under this SECURITY AGREEMENT;
c. indemnify SECURED PARTY against loss of any kind, including
reasonable attorneys' fees, caused to SECURED PARTY by reason of its interest in
the COLLATERAL;
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EXHIBIT 10.3
d. not sell, lease, transfer, or otherwise dispose of or
hypothecate the COLLATERAL, without the express prior written consent of the
SECURED PARTY;
e. not permit liens on the COLLATERAL, except the lien created
by this SECURITY AGREEMENT;
f. not use the COLLATERAL for any unlawful purpose or in any
way that would void any effective insurance;
g. perform all acts necessary to maintain, preserve, and
protect the COLLATERAL;
h. notify SECURED PARTY promptly in writing of any default,
potential default, or any development that might have a material adverse effect
on the COLLATERAL;
5. DEBTOR'S REPRESENTATIONS AND WARRANTIES. DEBTOR covenants, warrants,
and represents as follows:
a. DEBTOR, has the full corporate capacity to understand and
enter into this SECURITY AGREEMENT and possesses all the necessary corporate
authority to conduct its businesses in the fashion now conducted and as
contemplated herein, wherever conducted;
b. The SECURITY AGREEMENT is a valid and binding obligation of
DEBTOR. This SECURITY AGREEMENT creates a perfected, first priority security
interest enforceable against the COLLATERAL in which DEBTOR'S rights will be
effected as this SECURITY AGREEMENT creates a perfected, first priority security
interest for the benefit of SECURED PARTY, which is enforceable against the
COLLATERAL;
c. Neither the execution and delivery of this SECURITY
AGREEMENT, nor the taking of any action in compliance with it, will (1) violate
or breach any law, regulation, rule, order, or judicial action binding on
DEBTOR, any agreement to which DEBTOR is a party, if such exist; or (2) result
in the creation of a lien against the COLLATERAL except that created by this
SECURITY AGREEMENT;
d. No default or potential default exists; and,
e. DEBTOR owns the COLLATERAL, subject only to those liens and
adverse claims created by this SECURITY AGREEMENT.
6. TERMINATION. This SECURITY AGREEMENT shall continue in effect even
though from time to time there may be no outstanding obligations or commitments
under this SECURITY AGREEMENT and/or the NOTE. This SECURITY AGREEMENT shall
terminate when (a) DEBTOR'S complete performance of all obligations to SECURED
PARTY, including without limitation the payment of all INDEBTEDNESS by DEBTOR to
SECURED
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EXHIBIT 10.3
PARTY; (b) SECURED PARTY has no commitment that could give rise to an
obligation; and (c) DEBTOR has notified SECURED PARTY in writing of the
termination.
7. DEFAULT. DEBTOR shall be in default under this SECURITY AGREEMENT
if:
a. DEBTOR fails to make the payment, or any payment when due,
or the entire indebtedness to SECURED PARTY when due;
b. DEBTOR fails to make any remittances required by this
SECURITY AGREEMENT;
c. DEBTOR commits any breach of this SECURITY AGREEMENT, or
any present or future rider or supplement to this SECURITY 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 SECURITY AGREEMENT, is false;
e. The COLLATERAL is lost, stolen, or damaged; or,
f. There is a seizure or attachment of, or a levy on, the
COLLATERAL.
8. REMEDIES.
8.1 Upon an event of default, SECURED PARTY may, at its option,
to:
a. Declare the obligations immediately due and payable without
demand, presentment, protest, or notice to DEBTOR, all of which DEBTOR expressly
waives;
b. Terminate any obligations or to make future advances, if
any;
c. 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;
d. Perform any of DEBTOR's obligations under this SECURITY
AGREEMENT for DEBTOR's account; and,
e. SECURED PARTY'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.
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EXHIBIT 10.3
f. 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
SECURITY AGREEMENT.
8.2 Upon an event of a notice of default by the SECURED PARTY,
DEBTOR shall:
a. Assemble the COLLATERAL and make it and all records
relating to it available to SECURED PARTY as SECURED PARTY directs; and,
b. 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.
9. ATTORNEY'S FEES. In the event that SECURED PARTY is forced to engage
attorneys to enforce its rights under the SECURITY AGREEMENT and the NOTE,
including to collect payments due under the NOTE, DEBTOR shall be responsible
for the payment of his, her or its costs and expenses of collection, including
reasonable attorneys' fees.
10. SURVIVAL OF DEBTOR'S REPRESENTATIONS AND WARRANTIES. DEBTOR's
representations and warranties made in this SECURITY AGREEMENT shall survive its
execution, delivery, and termination.
11. ASSIGNMENT. This SECURITY AGREEMENT shall bind and enure to the
benefit of the parties successors, heirs and assigns. However, DEBTOR may not
assign its rights, duties and obligations under this SECURITY AGREEMENT or the
NOTE without SECURED PARTY's prior written consent.
12. NOTICES. Any communication to be given to any party to this
SECURITY AGREEMENT shall be in writing and deemed delivered when delivered in
person, sent by fax, or five (5) days after such is deposited in the United
States Mail, postage prepaid, certified, return receipt requested and addressed
to the party at its address set forth below:
If to DEBTOR:
Advanced Media, Inc.
00000 Xxxxxxx Xxxx. Xxxxx 000
Xxxxxx, XX 00000
If to SECURED PARTY:
Xxxxx Xxxxx
00000 XxXxxxxxx Xxxxxx
Xxxxxx, XX 00000
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EXHIBIT 10.3
13. BINDING EFFECT. The parties hereto hereby represent and warrant,
each for themselves, that they have the capacity to and are authorized to enter
into this SECURITY AGREEMENT on behalf of their respective party and that this
SECURITY AGREEMENT, when duly executed, will constitute a legal, valid, and
binding agreement, enforceable against each of the parties in accordance with
the terms hereof.
14. SEVERABILITY. In the event that any covenant, condition or other
provision herein contained is held to be invalid, void, or illegal by any court
of competent jurisdiction, the same shall be deemed severable from the remainder
of this SECURITY AGREEMENT and shall in no way affect, impair or invalidate any
other covenant, condition or other provision herein contained. If such
condition, covenant or other provision shall be deemed invalid due to its scope
or breadth, such covenant, condition, or other provision shall be deemed valid
to the extent of the scope or breadth permitted by law.
15. WAIVER, AMENDMENT AND MODIFICATION. No breach of any provision
hereof can be waived unless in writing. Waiver of any one breach of any
provision hereof shall not be deemed to be a waiver of any other breach of the
same or any other provision hereof. This SECURITY AGREEMENT may only be amended
or modified by an instrument in writing executed by each of the parties hereto.
16. CONSTRUCTION. This SECURITY AGREEMENT shall not be construed
against the party preparing it, and shall be construed without regard to the
identity of the person who drafted it or the party who caused it to be drafted
and shall be construed as if all parties had jointly prepared this SECURITY
AGREEMENT and it shall be deemed their joint work product, and each and every
provision of this SECURITY AGREEMENT shall be construed as though all of the
parties hereto participated equally in the drafting hereof; and any uncertainty
or ambiguity shall not be interpreted against any one party. As a result of the
foregoing, any rule of construction that a document is to be construed against
the drafting party shall not be applicable.
17. GOVERNING LAW. This SECURITY AGREEMENT shall be governed in all
respects, including validity, interpretation, effect and enforcement, by the
laws of the State of California.
18. COUNTERPARTS. This SECURITY AGREEMENT may be executed in
counterparts, each of which, when so executed and delivered, shall be an
original; however, such counterparts together shall constitute but one and the
same SECURITY AGREEMENT.
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EXHIBIT 10.3
19. HEADINGS. The headings used herein are for convenience of reference
only and do not constitute a part of this SECURITY AGREEMENT and shall not be
deemed to limit or effect any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this SECURITY
AGREEMENT effective as of the day and year above first written.
"DEBTOR":
ADVANCED MEDIA, INC., a Delaware corporation
By: /s/ L. Xxxxxxx Xxxxxxxx
--------------------------------
L. XXXXXXX XXXXXXXX, Secretary and Director
"SECURED PARTY":
/s/ Xxxxx Xxxxx
--------------------------------
XXXXX XXXXX
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