The following free Security Agreement is a very thorough document outlining the security for a promissory note. Please use the promissory note (secured) also on this site in combination with this document. This agreement and contract is being provided as a sample and example for information and research purposes only, however it is a valid legal contract and agreement. Always consult an Attorney or Lawyer. This Agreement can apply in most states including California, and with some modifications New York, Florida, Nevada and others. Help improve this agreement by leaving a comment.
THIS SECURITY AGREEMENT (the “Agreement”) is made and entered into as of __________________, between __________________, LLC, a California limited liability company (the “Debtor”), and __________________, LLC, a California limited liability company (the “Secured Party”). This Agreement is made with reference to the following facts:
STATEMENTS OF FACT:
A. Debtor intends to open and operate a__________________ store located in __________________, to be known as “__________________” or whatever name the members decide.
B. Debtor desires to borrow from Secured Party from time to time such amounts as may be needed to purchase inventory and to open and operate the store, and Secured Party is willing to make a loan to Borrower for such purposes.
C. Accordingly, concurrently herewith, Debtor is obtaining a loan from Secured Party as evidenced by that certain Promissory Note (“Secured”) dated even date herewith from Debtor, as Borrower, in favor of Secured Party, as Lender, under which the Secured Party may advance to Borrower from time to time amounts of up to the maximum principal sum of __________________Dollars ($__________________), together with interest thereon (the “Note”).
D. As a condition to Secured Party making the loan to and accepting the Note from Debtor, Secured Party requires that the payment and performance of Debtor under the Note be secured.
E. In order to secure the repayment, performance and all other obligations of Debtor under the Note, Debtor has agreed to grant to Secured Party a first position general security interest in and to the Collateral (as defined herein), all in accordance with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and conditions contained herein, and with the intention of being legally bound hereby, the parties hereto agree as follows:
(a) The term “Obligations” as used in this Agreement means and includes all loans, advanced, disbursements, debts, liabilities, obligations, covenants and duties owing by Debtor to Secured Party under the Note and this Agreement, whether direct or indirect, due or to become due, now existing or hereafter arising, including without limitation all accrued interest and the Costs which Debtor is required to pay or reimburse by this Agreement, by law or otherwise.
(b) The term “Collateral” as used in this Agreement means:
(1) All of Debtor’s furniture, fixtures and equipment (the “Property”);
(2) All of Debtor’s accounts, accounts receivable, contract rights, instruments, documents, chattel paper and general intangibles as such terms are defined in the UCC (defined below);
(3) All forms of obligations owing to the Debtor;
(4) All tax refunds and tax refund claims;
(5) All guaranties, security and liens for which the Debtor may hold for the payment or performance of any item of Collateral and/or the Property;
(6) Letters of credit payable to the Debtor and all proceeds therefrom;
(7) All rights to goods represented by any item of Collateral and/or the Property, or the sale of which goods gave rise to any item of Collateral and/or the Property;
(8) Debtor’s trade names, trademarks, service marks, whether registered or unregistered, and good will;
(9) All of Debtor’s inventory (as defined in the UCC) whenever acquired and wherever located, whether in the Debtor’s or some other person’s possession, including all materials and supplies of any kind used in connection with the Debtor’s business or for packaging or shipping such inventory upon its return to replevin or repossession by the Debtor after sale (the “Inventory”);
(10) All instruments of title or documents relating to any of the Collateral and/or the Property (the “Documents”);
(11) All of Debtor’s equipment (as defined in the UCC), and all substitutions, creations, replacements and additions thereto and all components and auxiliary parts used in connection therewith, including all furniture, fixtures and equipment;
(12) All Debtor’s Books, records and lists in whatever form maintained related to any item of Collateral and/or the Property;
(13) Any other property which now or hereafter serves as security for the Obligations;
(14) Any other property, whether tangible or intangible, real or personal, of the Debtor of any kind or nature (including, without limitation, monies on deposit and credit balances in any form) coming into the Secured Party’s actual or constructive possession, custody or control or in transit to the Secured Party or its agents for whatever purpose; and
(15) All proceeds of any item of Collateral, including the liquidation of the Inventory and the Property, and all proceeds of such proceeds (including, without limitation, all payments under any indemnity, warranty or guarantee payable with respect to the Collateral), and all proceeds of insurance and proceeds derived from any condemnation of the Collateral and/or the Property.
(c) The term “Costs” as used in this Agreement means and includes the costs incurred for all filing, recording, publication and search fees paid by Secured Party in connection with any breach hereof by Debtor; reasonable costs incurred by Secured Party in gaining possession of, maintaining, handling, preserving, collecting, storing, shipping, selling, preparing for sale and advertising to sell the Collateral, whether or not a sale is consummated; reasonable costs of suit incurred by Secured Party in enforcing or defending this Agreement or any portion thereof; reasonable attorneys’ fees and expenses incurred by Secured Party in enforcing this Agreement, whether or not suit is brought; and interest on any sum owed to Secured Party pursuant to this Agreement or pursuant to any other note, agreement or other document or instrument under which any of the Obligations may be owed, at the highest rate permissible by law from the date that such sum is first owed until paid in full.
(d) The term “Debtor’s Books” as used in this Agreement means and includes all of Debtor’s Books and records, including but not limited to, minute books, ledgers or records, computer programs, computer discs or tape files, computer printouts, Internet or web sites, and other computer-prepared information and equipment of any kind, and wherever located indicating, summarizing or evidencing the Collateral and other of Debtor’s assets, Inventory, business operations or financial condition.
(e) Any and all terms used in this Agreement shall be construed and defined in accordance with the meaning and definition of such terms under and pursuant to the California Uniform Commercial Code (sometimes hereinafter the “Code” and “UCC”).
2. Creation and Grant of Security Interest. Debtor hereby grants to Secured Party a security interest in and to the Collateral, wherever located and in whatever form, to secure the repayment and performance of each and all of Debtor’s Obligations as described in this Agreement and otherwise created. Secured Party shall have all of the rights of a secured party under the UCC and other applicable law with respect to the Collateral. Secured Party’s security interest in the Collateral shall attach to all such Collateral without further act on the part of Secured Party.
3. Perfection of Security Interest. Concurrently with the execution of this Agreement, Debtor shall execute and deliver to Secured Party, or its agent, a form or forms of UCC-1, National Financing Statement (California) as further evidence of the granting and perfection of the security interest in the Collateral granted to the Secured Party hereunder. Secured Party shall, immediately upon execution of this Agreement, shall cause the UCC-1, National Financing Statement, to be recorded with the Secretary of State of the State of California and, if necessary or appropriate, with the Los Angeles County Recorder to perfect its security interest in the Collateral.
Debtor shall execute and deliver to the Secured Party, at any time or times hereafter until all Obligations are fully paid and performed, all further financing statements, continuation financing statements, assignments, certificates of title, registration or licensing, notices, letters of authority, and all other documents and instruments that the Secured Party may request, in form satisfactory to the Secured Party, to perfect and maintain the Secured Party’s security interest in the Collateral and in order to consummate fully all of the transactions contemplated under this Agreement. Debtor hereby irrevocably makes, constitutes and appoints the Secured Party as Debtor’s true and lawful attorney with power to sign the name of Debtor if Debtor fails or refuses to do so, on any financing statements, continuation financing statements, assignment, certificate of title, affidavit, letter of authority, notice or other similar document to be executed and/or filed in order to perfect or continue as perfected the Secured Party’s security interest in the Collateral; and Secured Party agrees to provide copies thereof to Debtor.
4. Term; Termination.
(a) This Agreement shall continue for so long as any Obligations now existing or hereafter created remain outstanding, it being understood that Secured Party is under no obligation to make any further financial accommodations to the Debtor.
(b) Secured Party may terminate this Agreement at any time by mailing of a registered or certified letter of notice addressed to Debtor at the address set forth herein, and the termination shall be effective as of the date fixed in such notice.
5. Reassignment of Collateral. After termination, or when Secured Party has received payment in full of Debtor’s Obligations to the Secured Party, Secured Party shall reassign to Debtor all Collateral held by Secured Party, and shall execute a termination of all security agreements and security interests given by Debtor to Secured Party.
6. Debtor’s Representations, Warranties and Covenants. As long as Debtor has outstanding Obligations to Secured Party, Debtor hereby represents, warrants and covenants with Secured Party that:
(a) Debtor is a limited liability company duly organized and validly existing under the laws of the State of California, and it will at all times take or cause to be taken all actions as may from time to time be necessary to maintain in good standing, preserve and renew its company existence and rights in all jurisdictions where it is conducting business.
(b) Debtor and its officers signing this Agreement has the power and authority to enter into and perform this Agreement and has taken all action necessary to authorize the execution, delivery and performance of this Agreement and any related agreements or documents. This Agreement is a legal, valid and binding obligation of the Debtor, enforceable in accordance with its terms; and the Debtor’s execution, delivery and performance of this Agreement does not conflict with or violate the Debtor’s Articles of Organization, Operating Agreement, licensing, or any law, regulation, order, judgment, rule or agreement to which the Debtor is a party or by which it is bound.
(c) All documents and instruments evidencing or constituting the Collateral, and all signatures and endorsements thereon, are and will at all times be complete, valid and genuine.
(d) All of the Collateral is and shall at all times remain free and clear of any and all liens, claims or encumbrances other than as contemplated by this Agreement or hereafter imposed with the Secured Party’s prior written consent, and Debtor has not granted and will not grant any security interest in the Collateral to any other party.
(e) The Debtor has and will have good and indefeasible title to, and is and will be the true owner of, and have the exclusive right to, the Collateral.
(f) Except in the ordinary course of business, Debtor shall not lease or otherwise dispose of, remove, move, relocate or transfer, or permit the removal, movement, relocation or transfer, whether by sale or otherwise, any of the Collateral, and shall keep the Collateral only at the __________________ Store located at ____________________________________, or at any other location owned or leased by Debtor, unless and until Debtor provides Secured Party with written notice that the Collateral is being moved to such location, specifying the exact address of such location and the exact Collateral to be moved, at least thirty (30) days prior to moving the Collateral to such location.
(g) The Collateral will not be used for any unlawful purpose, nor be used in any that will void, suspend or terminate any registration, warranty or insurance required to be carried in connection therewith.
(h) The execution of and performance by Debtor of all of the terms and provisions contained in this Agreement do not and will not constitute, or would not constitute following any notice or lapse of time, an event of default under any agreement to which Debtor is now or hereafter become a party.
(i) It will punctually pay or cause to be paid all payments of principal, interest and fees to become due in respect of the Note according to the terms thereof.
(j) Debtor will at all times keep the Collateral in good condition and repair.
(k) Debtor will keep, at all times, true and complete books of account and financial records in accordance with generally accepted accounting principles.
(l) Debtor will furnish to Secured Party, within seventy-five (75) days after the end of each fiscal year of Debtor, a statement of changes in financial position and statements of profit and loss and of surplus of Debtor for such year.
(m) Without the prior written consent of Secured Party, which consent will not be unreasonably withheld having due regard for all of the debts and Obligations owed by the Debtor to Secured Party, the Debtor will not: change its company name or operate under a fictitious business name; liquidate or dissolve or institute proceedings for the liquidation or dissolution of Debtor; merge with or consolidate into any other corporation; sell or otherwise dispose of all or substantially all of its assets; or grant to any other party a security interest in or otherwise create a mortgage or lien upon the Collateral.
(n) Within ten (10) days after written notice from Secured Party, Debtor shall reimburse Secured Party for all sums expended by Secured Party in connection with the filing of any third party claim as to the Collateral or any part thereof which Secured Party may deem reasonably necessary or desirable, or in connection with any action brought by Secured Party to correct any default or enforce any provision of this Agreement, including reasonable attorneys’ fees and expenses and court costs; Debtor authorizes and approves all reasonable advances and payments by Secured Party for items described in this Agreement as Costs.
7. Events of Default. Any one or more of the following events shall constitute an event of default by Debtor under this Agreement:
(a) If any event of default occurs under the terms of the Note, and such default continues and remains uncured beyond the grace period specified therein, if any; or
(b) If Debtor fails or neglects to perform, keep or observe any term, provision, condition, covenant, agreement, warranty or representation contained in the Note, this Agreement, or otherwise incorporated by reference into this Agreement and such default continues and remains uncured beyond the grace period specified therein, if any; or
(c) If Debtor applies for or acquiesces in the appointment of, or has appointed against it, a receiver, custodian, trustee, sequestrator or similar officer for it or all or any part of its property or the Collateral; or
(d) If Debtor commences, has commenced against it, or acquiesces in the commencement of any action or proceeding in bankruptcy or seeking reorganization, arrangement, readjustment of debts, or any other relief under the United States Bankruptcy Code, as amended, or under any other bankruptcy or insolvency law, state or federal, now or hereafter existing, whether or now an order for relief has been entered therein; or
(e) If Debtor files a certificate of dissolution under applicable state law, is liquidated, or takes any action or has any action taken against it in furtherance of dissolution of liquidation; or
(f) If Debtor makes any transfer of the Collateral which constitutes a fraudulent transfer under federal or state law; or
(g) If Debtor makes an assignment of the Collateral for the benefit of creditors; or
(h) If Debtor is generally unable to pay its debts as they become due; or
(i) If a tax lien by or in favor of any federal, state or municipal authority is filed or attaches against the Debtor or any of its properties, other than a lien for taxes which the Debtor is contesting in good faith by proper proceedings diligently pursued where a stay of enforcement is in effect; or
(j) If any material adverse change occurs in the Debtor’s business, operations, assets (including, without limitation, the Collateral) or its financial condition.
8. Secured Party’s Rights and Remedies.
(a) Upon the occurrence of any event of default pursuant to Paragraph 7 above, all Obligations not then due shall forthwith become due and payable without notice at the option of the Secured Party. In addition to all other rights provided herein by law, the Secured Party shall have all of the rights and remedies of a secured creditor under the UCC and may, at its election, without notice or demand, do any one or more of the following, all of which are hereby authorized by Debtor:
(1) Declare Debtor’s Obligations, however evidenced, immediately due and payable in full.
(2) Make such payments and do such acts as Secured Party considers necessary or reasonable to protect its security interest in the Collateral. Debtor authorizes Secured Party to enter the premises where the Collateral is located; to take possession of the Collateral or any part of it; to pay, purchase, contest or compromise any encumbrance, charge or lien which in the opinion of Secured Party appears to be prior or superior to its security interest; and to pay all expenses incurred in connection therewith.
(3) Ship, reclaim, recover, store, maintain, repair, prepare for sale, advertise for sale and sell (in the manner provided below), or take possession of the Collateral without judicial process, in accordance with the UCC, and the Debtor or its agents shall not resist or interfere with the Secured Party’s exercise of such right.
(4) Without demand, advertisement or notice, all of which the Debtor hereby waives, at any time or times, sell the Collateral at either a public or private sale, or both, by way of one or more contracts or transactions, for cash or on terms, in such manner and at such places (including Debtor’s premises) as are commercially reasonable. It is not necessary that the Collateral be present at any such sale. Secured Party shall (unless notice has been waived after default pursuant to the provisions of the Code) give notice of the disposition of the Collateral in a commercially reasonable manner. Secured Party may purchase any of the Collateral at any public sale.
(5) Do such acts or take such action as Secured Party believes are necessary in order to take possession of and collect any accounts receivable of Debtor (as part of the Collateral) up to the amount of the Obligations secured hereby in accordance with this Agreement.
(b) Debtor shall pay all Costs incurred in connection with Secured Party’s enforcement and exercise of any of its rights and remedies as herein provided, whether or not suit is commenced by Secured Party.
(c) Any deficiency which exists after disposition of the Collateral as provided above will be paid immediately by Debtor. Any excess will be returned to Debtor by Secured Party.
(d) Secured Party’s rights and remedies under this Agreement and all other agreements shall be cumulative. Secured Party shall have all other rights and remedies as provided by law or in equity. No exercise by Secured Party of one right or remedy shall be deemed an election and no waiver by Secured Party of any default on Debtor’s part shall be deemed a continuing waiver. No delay by Secured Party shall constitute a waiver, election or acquiescence by it.
9. Administration of the Collateral.
(a) Debtor shall maintain at its expense satisfactory and complete books and records of all Collateral, all payments received or credits granted thereon, and all other dealings therewith. The Debtor will place proper notations upon Debtor’s Books to disclose the assignment of and grant of a security interest in all Collateral to the Secured Party. From time to time upon the Secured Party’s request, Debtor will provide the Secured Party with schedules describing each item of Collateral and will execute and deliver written assignments of such Collateral to the Secured Party; provided, however, that the Debtor’s failure to execute and deliver such schedules or assignments, or both, will not affect or limit the Secured Party’s security interests or other rights in the Collateral. Such schedules shall include or be accompanied by the most recent accounts aging. Upon the Secured Party’s request, Debtor will furnish the Secured Party with all documents creating, evidencing or relating to the Collateral, including, without limitation, copies of contracts, security agreements or instruments, orders customers’ invoices or the equivalent, bills of lading,, warehouse receipts, original shipping or delivery receipts, credit memos, remittance advices and reports, and deposit slips. Debtor represents and warrants that all such documents are an will be genuine and complete. If the Debtor becomes aware of any matter affecting any part of the Collateral, including information about any account debtor’s credit-worthiness, it will promptly advise the Secured Party.
(b) The Debtor, at its expense, shall perform any and all steps requested by the Secured Party to perfect and protect the Secured Party’s interest in the Collateral and its rights hereunder. Such steps shall include, without limitation, leasing warehouses to the Secured Party or its designee, placing and maintaining signs, appointing custodians, maintaining records, transferring Collateral to warehouses, and delivering to the Secured Party documents in the Security Party’s name, and delivering to the Secured Party all letters of credit on which the Debtor is named beneficiary. The Debtor shall promptly notify the Secured Party of any loss or damage to the Collateral or arising from its use. Debtor shall conduct a physical count of any of the Collateral, including Inventory, at least every twelve (12) months and at such other intervals as the Secured Party requests. The Secured Party or its designee may be present at any such physical count. The Debtor shall deliver an accurate report of each such physical count to the Secured Party, in a form and substance satisfactory to the Secured Party and its counsel. The Debtor shall not dispose of any of the Collateral, including any goods or Inventory, on a bill-and-hold, guaranteed sale, sale and return, sale on approval, consignment, or similar basis without the Secured Party’s prior written consent, and shall not acquire any Collateral from any person on such a basis without prior written notice thereof to the Secured Party. All or any Collateral returned to or replevied or repossessed by the Debtor shall be subject to the Secured Party’s security interest hereunder and shall be held in accordance herewith.
(c) The Secured Party or its designee may at any time notify account debtors of the Secured Party’s security interest in the Collateral and the proceeds. Without prior notice or consent from the Debtor, the Secured Party may verify the Collateral, including accounts, or any part thereof at any time. If an event of default exists, or if the Secured Party at any time and for any reason deems itself insecure or deems the risk of nonpayment or nonperformance of the Obligations to be increased, then the Secured Party may:
(1) Collect any accounts and instruments as part of the Collateral directly and charge the collection costs and expenses to the Debtor;
(2) Take possession of the Debtor’s Books or require the Debtor to deliver Debtor’s Books to it;
(3) At the Debtor’s expense, use such of Secured Party’s personnel, supplies and premises and may be reasonably necessary; and
(4) Without notice to or consent from the Debtor, sue upon (in the Secured Party’s or the Debtor’s name) or otherwise collect, or extend the time for payment of, modify or amend the terms of, or compromise or settle for cash or otherwise upon any terms and upon any of the accounts or instruments or any agreement, securities or insurance allocable thereto, or otherwise constituting the Collateral, or release the obligor thereon.
The Secured Party shall not be required to take any action to collect upon the Collateral, including accounts, or to preserve the Collateral or instruments or to preserve any rights with respect thereto. The Secured Party will credit the Obligations with only the net amounts received by it in payment of the accounts or other Collateral, after deducting all costs and legal expenses. The Debtor hereby waives presentment, demand, protest and notice thereof as to any instrument representing or received in payment of the accounts.
(d) The Debtor hereby irrevocably appoints the Secured Party, or any other person whom the Secured Party may designate, as the Debtor’s attorney, with power of substitution to endorse the Debtor’s name on any checks, notes, acceptances, money orders, drafts or other forms of payment or security that may come into the Secured Party’s possession, to sign the Debtor’s name on any invoice or bill of lading relating to any Collateral, on drafts against customers, on documents of title, on schedules and assignments of Collateral, financing statements and other public notices, on verifications of Collateral, and on notices to account debtors, at any time when the Secured Party is entitled to collect such accounts as set forth in this Paragraph 9; to notify the post office authorities to change the address for delivery of the Debtor’s mail to an address designated by the Secured Party, and to receive, open and distribute mail relating to the Collateral and forwarding all other mail to the Debtor; to execute proofs of claim and loss; to institute, prosecute and settle any claim, action or proceeding necessary for the recovery or collection of any monies or damages due in respect of the Collateral, including, without limitation, under insurance policies, to execute release; and to do all things necessary to enforce and carry out its rights under this Agreement. The Debtor ratifies and approves all acts of such attorney and neither the Secured Party, nor its designees shall be liable for any acts or omissions, nor any error of judgment or mistake of fact or law, other than as a result of its willful misconduct. This power, being coupled with an interest, is irrevocable until the Obligations have been fully paid and performed and this Agreement has been terminated.
(e) If any Collateral is in the possession or control of warehousemen, bailees or any of the Debtor’s agents or processors, the Debtor will notify such persons of the Secured Party’s interest therein and, upon the Secured Party’s request, instruct them to hold all such Collateral for the Secured Party’s account and subject to its further instructions. The Debtor shall pay all costs of protecting, storing, warehousing, insuring, handling and shipping the Collateral, and shall bear all risks with respect thereto. The Debtor shall comply with all laws, ordinances and regulations, and with the terms of all leases and conveyance instruments, applicable to any premises where the Collateral is located. At the Secured Party’s request, the Debtor shall obtain from each person from whom the Debtor leases any premises a subordination and waiver of such lessor’s statutory or nonstatutory liens in a form and substance satisfactory to the Secured Party and its counsel. The Debtor shall deliver all documents or instruments to the Secured Party. Until all Obligations are paid in full, the Secured Party shall have the right to hold all Collateral subject to its continuing security interest and the right to take possession of the Collateral or any part thereof, and to maintain such possession on the Debtor’s premises or to remove any or all of the Collateral to such other place or places as the Secured Party desires in its sole discretion. If the Secured Party exercises its right to take possession of the Collateral, the Debtor upon the Secured Party’s demand, will assemble the Collateral and make it available to the Secured Party at a place reasonably convenient to the Secured Party. If any event of default exists or if the Secured Party at any time and for any reason deems itself insecure or deems the risk of nonpayment or nonperformance of the Obligations to be increased, then the Secured Party may, and in its own name or the Debtor’s name, demand, sue for, collect and relieve any money or property due without respect to any of the Collateral (including, without limitation, with respect to insurance) and may make any compromise or settlement in connection therewith that it deems desirable in its discretion. The Debtor hereby grants the Secured Party a license and right to use, without charge, the Debtor’s name, trade names, trade styles, labels, patents, patent rights, copyrights, trade secrets and advertising matter, and all other similar property in connection with advertising and selling the Collateral. All the Debtor’s rights under licenses or other regulatory agreements shall inure to the Secured Party’s benefit. The Secured Party may in its discretion maintain a custodian or other representative on the Debtor’s premises and charge the cost thereof to the Debtor.
(f) No action that the Secured Party takes under this Paragraph 9 shall discharge or otherwise affect the Obligations, the Secured Party’s security interests, or the Secured Party’s other rights and remedies. The Secured Party shall not be responsible or liable for any shortage, discrepancy, damage, loss or destruction of any part of the Collateral wherever the same may be located, whether or not in the Secured Party’s possession, and regardless of the cause thereof, unless caused by the Secured Party’s willful misconduct. The Secured Party shall not have any liability for any error, omission or delay of any kind occurring in the settlement, collection or payment of any account or other Collateral or other debt or claim due to the Debtor or any instrument received in payment thereof or for any damage resulting therefrom, unless caused by the Secured Party’s willful misconduct. The Secured Party does not, by anything contained herein or in any assignment or otherwise, assume any obligations of the Debtor under any contract or agreement assigned to the Secured Party or in which the Secured Party has a security interest or otherwise relating to the Collateral, and the Secured Party shall not be responsible in any way for the performance by the Debtor of any of the terms and conditions thereof. The Debtor assumes all responsibility and liability arising from the sale, lease and use of the Collateral. The Secured Party shall not be liable or responsible for any act or default of any employee or affiliate of the Debtor, or warehousemen, carrier, forwarding agent or other person whomsoever, all of whom shall act with respect to the Collateral at the Debtor’s sole risk.
10. Secured Party’s Right to Cure. So long as any of the Obligations remain unpaid or unsatisfied, the Secured Party may, at its sole option, perform any act required of the Debtor hereunder which the Debtor has failed to perform and incur and pay any costs and expenses which the Secured Party considers necessary or desirable for the maintenance and preservation of the Collateral and its security interests therein, including, without limitation, paying service bureau charges, insurance premiums and discharging any taxes, liens, security interests and other encumbrances at any time levied or placed on the Collateral. Any payments made and costs and expenses incurred by the Secured Party pursuant hereto, including, without limitation, all attorneys fees, shall be charged to the Debtor and shall be payable to the Secured Party on demand, with interest at the highest rate permissible by law and applicable to the Obligations, from the date such payments, costs or expenses are paid or incurred. If the Secured Party takes any action pursuant hereto on any one occasion, such action will not obligate the Secured Party in any way to take such action on any other occasion. Any action taken pursuant hereto shall not be deemed a waiver of any event of default.
11. Waivers by Debtor. In addition to any other waivers given hereunder, Debtor hereby expressly agrees to and waives its rights with respect to each of the following:
(a) Debtor agrees that all checks and other instruments received by Secured Party in payment or on account of Debtor’s Obligations constitute only conditional payment until such items are actually paid to Secured Party, and, after default by Debtor as set forth herein, Debtor waives the right to direct the application of any and all payments at any time or times hereafter received by Secured Party on account of Debtor’s Obligations and agree that Secured Party shall have the continuing exclusive right to apply and reapply such payments in any manner as they may deem advisable.
(b) Except as herein expressly set forth or as expressly set forth in any other document or agreement between Debtor and Secured Party, Debtor waives demand; protest; and notice of protest, dishonor, payment, nonpayment, default, release, compromise, settlement, extension or renewal of any or all commercial paper, accounts, documents, instruments, chattel paper and guarantees at any time held by Secured Party on which Debtor may in any way be liable.
(a) Except as otherwise provided herein, the Debtor waives presentment, demand and protest, and notice of demand, dishonor, and protest as to any instrument, as well as any and all other notices to which it may be entitled. Except as otherwise provided herein, no notice to or demand on the Debtor which the Secured Party elects to give shall entitle the Debtor to any other or further notice or demand in the same, similar or other circumstances.
12. Notices. Any notice, consent, request, demand, approval, waiver, offer or other communication desired or required to be given hereunder shall be in writing and may be either (i) personally delivered, which shall be deemed received at the time of actual receipt thereof; or (ii) sent by registered or certified mail, with postage and charges prepaid, which shall be deemed delivered seventy two (72) hours after deposit in the United States mail; or (iii) delivered by facsimile transmission, which shall be deemed received on the date and at the time of electronic confirmation of such transmission, provided an original mechanical signed copy of such notice or other communication is also immediately deposited in the United States mail with first class postage and charges prepaid; or (iv) delivered by messenger, FedEx or other trackable courier service, which shall be deemed delivered on the date and at the time as tracked and confirmed by such courier service; and in each case, addressed or delivered to the party to whom the same is directed at such party’s address and/or facsimile number set forth below, or at such other address and/or facsimile number as that party may specify by written notice given to the other parties in accordance with this paragraph:
If to Secured Party: __________________
With Courtesy Copies to: __________________
If to Debtor: __________________
13. No Release or Discharge of Obligations. Debtor’s Obligations under this Agreement are absolute and unconditional and shall not be released, discharged or otherwise affected by any action or inaction of the Secured Party in enforcing its rights hereunder, by any bankruptcy, insolvency or similar proceeding, or by any other matter which might vary the Debtor’s risk, or operate to discharge the Debtor as a matter of law. The Debtor authorizes the Secured Party, without notice or demand and without affecting the Debtor’s Obligations hereunder, from to time:
(a) To exchange, enforce or release any collateral or any part thereof (other than the Collateral) taken from any party for payment of the Obligations or any part thereof;
(b) To release, substitute or modify any obligation of any endorser, guarantor or other party in any way obligated to pay the Obligations or any part thereof, or any party who has given any security, mortgage or other interest in any other collateral as security for the payment of the Obligations or any part thereof;
(c) Upon the occurrence of any event of default as provided in this Agreement to direct the order or manner of disposition of the Collateral and any and all other collateral and the enforcement of any and all endorsements, guaranties and other obligations relating to the Obligations or any part thereof, as the Secured Party, in its sole discretion, may determine; and
(d) To determine how, when and what application of payments and credits, if any, shall be made on the Obligations or any part thereof.
14. Recourse. The Secured Party may proceed directly against the Debtor for payment and performance of the Obligations without prior recourse of the Collateral or to any other person liable therefor or any other property secured the Obligations.
15 Binding Effect; Assignability. This Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of the parties hereto; provided, however, Debtor may not assign this Agreement or any rights or Obligations hereunder without Secured Party’s prior written consent, which consent will not be unreasonably withheld, and any prohibited assignment shall be absolutely void. No consent to any assignment by Secured Party shall release Debtor from its Obligations to Secured Party.
16 Entire Agreement. Except for the Note and all related documents, agreements and instruments described or defined therein which are executed or to be executed in connection with this Agreement, all negotiations concerning the Collateral are merged into this Agreement. This Agreement constitutes the final, complete and exclusive statement of the terms of the Agreement. There are no oral or other written representations or agreements between the parties concerning the subject matter of this Agreement.
17 Amendment; Modification. This Agreement may not be modified, supplemented or amended, or any of its provisions waived before or after the execution of this Agreement, except by a writing signed by the Debtor and the Secured Party. Any oral representations or modifications concerning this Agreement shall be of no force and effect.
18 Survival. All covenants, representations and warranties of the Debtor made in this Agreement or in any other written agreement, statement or certificate delivered by the Debtor to the Secured Party at any time in connection herewith shall survive the execution and delivery of this Agreement, notwithstanding the Secured Party’s investigations.
19 Severability. If any provision of this Agreement as applied to a party or to any circumstance shall be adjudged by a court of competent jurisdiction to be void and unenforceable, the same shall in no way affect any other provision herein, the application of such provision in any other circumstance, or the validity or enforceability of this Agreement as a whole.
20 Waiver. Except as otherwise provided herein, the failure of any party to enforce at any time, or for any period, the provisions of this Agreement, shall not be construed as a waiver of such provisions or of the right of such party thereafter to enforce each and every such provision or performance thereunder. No waiver of any type shall be binding unless evidenced in writing by the party making any such waiver.
21 Binding Arbitration. Except for any remedies provided to Secured Party in the event of a default hereunder, any controversy, dispute or claim arising out of the interpretation, performance or breach of this Agreement shall be resolved by binding arbitration, at the request of either party, in accordance with the rules of the American Arbitration Association then in effect. The arbitrators shall have the power to grant all legal and equitable remedies and award compensatory damages provided by California law, but specifically shall not have the power to award punitive damages. The award may be limited to a statement that one party pay the other a sum of money. The decision of the arbitrators shall be final except for errors of law which are subject to judicial review.
22 Attorneys’ Fees. Any actions or proceedings, including arbitration, brought by either party with respect to this Agreement, the court or arbitrator in such action or proceeding shall award to the prevailing party, in addition to any other relief granted, (i) the actual attorneys’ which the prevailing party has paid or is obligated to pay; and (ii) all costs and expenses, not merely recoverable costs, which the prevailing party has paid or is obligated to pay. The court may reduce such actual attorneys’ fees, costs and expenses only to the extent that the court determines that such amounts were unnecessarily incurred. In addition, the parties agree that if any dispute between the parties results in a judgment in favor of either party, such party shall be entitled to recover from the other all attorneys’ fees and costs incurred by it in enforcing such judgment. This provision is intended to be severable from any other provision of this Agreement and is not to be deemed merged in the judgment.
23 Time is of the Essence. TIME IS EXPRESSLY DECLARED TO BE OF THE ESSENCE of each Obligation of the Debtor hereunder and in all matters concerning this Agreement, including all acts or things to be done or performed in connection herewith, and specifically of every provision of this Agreement and the Note in which time is an element.
24 Governing Law. This Agreement and any amendments or attachments hereto, and the rights of the parties hereunder, shall be interpreted in accordance with, and governed by, the laws of the State of California without giving effect to any conflict of law provision.
25 Jurisdiction. Any action brought upon or relating to this Agreement shall be instituted and prosecuted in the California, County of Los Angeles, and each party hereto waives the right to change the venue. The parties hereto further consent to the service of process by certified mail, return receipt requested, directed to a party at the addresses set forth herein or as hereafter provided from time to time in writing in accordance with Paragraph 12 hereof.
26 Counterparts; Execution. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original Agreement, and all of which shall constitute one Agreement to be effective as of the date of execution of this Agreement.
IN WITNESS WHEREOF, the parties hereto, or their duly authorized representatives, have caused this SECURITY AGREEMENT to be dated, executed and delivered as of the day and year first above written.
A __________________Limited Liability Company
A __________________ Limited Liability Company
__________________, Its __________________
A __________________ Limited Liability Company
__________________, Its __________________