EXHIBIT 10.12
 
SECURITY AGREEMENT
 
Security Agreement (the “Agreement”) dated October 5, 2007 made by Zealous
Trading Group, Inc., a Nevada corporation (“Debtor”), in favor of
_______________ a ______ limited partnership (the “Secured Party”).
 
Debtor hereby agrees in favor of Secured Party as follows:
 
1.    In consideration for loan made or to be made to Debtor by Secured Party
evidenced by the Senior Secured Promissory Note (the “Note”) dated the date
hereof of Debtor in the principal amount of One Hundred Thousand Dollars
($100,000.00), payable to the order of Secured Party (such note, as amended,
modified, supplemented, replaced or substituted from time to time, being herein
referred to as the “Note”), Debtor hereby grants to Secured Party a continuing
security interest in, lien upon and a right of setoff against, and Debtor hereby
assigns to Secured Party, all of Debtor's right, title and interest in and to
the Collateral described in Section 2, to secure the full and prompt payment,
performance and observance of all present and future indebtedness, obligations,
liabilities and agreements of any kind of Debtor to Secured Party, now existing
under or in connection with the Note or this Security Agreement (all of the
foregoing being herein referred to as the “Obligations”).
 
2.    “Collateral” means all of Debtor’s personal property, including without
limitation all Accounts, Letter-of-Credit Rights, Supporting Obligations,
Electronic Chattel Paper, Tangible Chattel Paper and Instruments, as these terms
are defined in the Uniform Commercial Code, together with all Inventory,
Equipment, and Additional Collateral and all products and proceeds of the
foregoing including, without limitation, proceeds of any insurance policies
insuring any of the foregoing, all as more fully described on Schedule A annexed
hereto.
 
3.    Debtor hereby warrants, represents, covenants and agrees (as of the date
hereof and so long as any Obligations remains outstanding) that:  (a) the chief
executive office and other places of business of Debtor, the books and records
relating to the Collateral (except for such records as are in the possession or
control of Secured Party) and the Collateral are located at the address set
forth below and Debtor will not change any of the same, or merge or consolidate,
except the current merger with Zealous Holdings, Inc., with any person or change
its name or conduct its business under any trade, assumed or fictitious name,
without prior written notice to and consent of Secured Party; (b) the Collateral
is and will be used in the business of Debtor and not for personal, family,
household or farming use; (c) Debtor will not abandon or assign, or lease, other
than in the ordinary course of Debtor's business, nor will Debtor suffer or
permit any of the same to occur with respect to, any Collateral, without prior
written notice to and consent of Secured Party; (d) Debtor will make payment or
will provide for the payment, when due, of all taxes, assessments or
contributions or other public or private charges which have been or may be
levied or assessed against Debtor, whether with respect to the Collateral, to
any wages or salaries paid by Debtor, or otherwise, will deliver to Secured
Party, on demand, certificates or other evidence satisfactory to Secured Party
attesting thereto; (e) Debtor will use the Collateral for lawful purposes only,
with all reasonable care and caution and in conformity in all material respects
with all applicable laws, ordinances and regulations; (f) Debtor will, at
Debtor's sole cost and expense, keep the Collateral in good order, repair,
running condition and in substantially the same condition as on the date hereof,
reasonable wear and tear excepted, and Debtor will not, without the prior
written consent of Secured Party, alter or remove any identifying symbol or
number upon any of the Collateral; (g) Secured Party shall during the business
hours of the Debtor have free access to and right of inspection of any
Collateral and any papers, instruments and records pertaining thereto (and the
right to make extracts from and to receive from Debtor originals or true copies
of such records, papers and instruments upon request therefor) and Debtor hereby
grants to Secured Party a security interest in all such records, papers and
instruments to secure the payment, performance and observance of the
Obligations; (h) Debtor will, at its sole cost and expense, perform all acts and
execute all documents requested by Secured Party from time to time to evidence,
perfect, maintain or enforce Secured Party's security interest granted herein or
otherwise in furtherance of the provisions of this Security Agreement; (i) at
any time and from time to time, Debtor shall, at its sole cost
 

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and expense, execute and deliver to Secured Party such financing statements
pursuant to the Uniform Commercial Code (“UCC”), applications for certificate of
title and other papers, documents or instruments as may be requested by Secured
Party in connection with this Security Agreement, and to the extent permitted by
applicable law, Debtor hereby authorizes Secured Party to execute and file at
any time and from time to time one or more financing statements or copies
thereof or of this Security Agreement with respect to the Collateral signed only
by Secured Party; (j) Debtor assumes all responsibility and liability arising
from the Collateral; (k) the Secured Party may, only upon giving Debtor forty
five calendar days’ notice, upon the occurrence and during the continuance of a
Default (as hereinafter defined), in its name or Debtor's or otherwise, notify
any account debtor or obligor of any Account, Contract, Document, Instrument,
Chattel paper or general intangible included in the Collateral to make payment
to Secured Party; (l) in its discretion, Secured Party may, only upon giving
Debtor  twenty (20) calendar days’ notice, upon the occurrence and during the
continuance of a Default, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in exchange for, or
make any compromise or settlement deemed desirable by Secured Party with respect
to, any Collateral, and/or extend the time of payment, arrange for payment in
installments, or otherwise modify the terms of, or release, any of the
Obligations and/or the Collateral, or any obligor, maker, endorser, acceptor,
surety or guarantor of, or any party to, any of the Obligations or the
Collateral; (m) upon giving Debtor twenty (20) calendar days’ notice, Secured
Party may, at any time and from time to time, for the account of Debtor, pay any
amount or do any act required of Debtor hereunder and which Debtor fails to do
or pay, and any such payment shall be deemed an advance by Secured Party to
Debtor payable on demand together with interest at the highest rate then payable
on any of the Obligations; (n) upon the occurrence and during the continuance of
a Default, any proceeds of the Collateral received by Debtor shall not be
commingled with other property of Debtor, but shall be segregated, held by
Debtor in trust for Secured Party, and immediately delivered to Secured Party in
the form received, duly endorsed in blank where appropriate to effectuate the
provisions hereof, the same to be held by Secured Party as additional Collateral
hereunder or, at Secured Party's option, to be applied to payment of the
Obligations, whether or not due and in any order; and (o) in its sole
discretion, Secured Party may, at any time and from time to time, assign,
transfer or deliver to any transferee of any Obligations, any Collateral,
whereupon Secured Party shall be fully discharged from all responsibility and
the transferee shall be vested with all powers and rights of Secured Party
hereunder with respect thereto, but Secured Party shall retain all rights and
powers with respect to any Collateral not assigned, transferred or delivered.

4.    The term Default as used in this Security Agreement shall mean any “Event
of Default”, as such term is defined in the Note.
 
5.           Upon the occurrence and during the continuance of any Default,
Secured Party may, upon giving ten (10) days’ notice or demand to Debtor,
declare any Obligations immediately due and payable and Secured Party shall have
the following rights and remedies (to the extent permitted by applicable law) in
addition to all rights and remedies of a Secured party under the UCC or of
Secured Party under the Obligations, all such rights and remedies being
cumulative, not exclusive and enforceable alternatively, successively or
concurrently:
 
Secured Party may, only upon giving Debtor forty five (45) days’ notice, with or
without judicial process or the aid and assistance of others, (i) enter upon any
premises in which any Collateral may be located and, without resistance or
interference by Debtor, take possession of the Collateral, and (ii) sell,
resell, lease, assign and deliver, grant options for or otherwise dispose of any
part or all of the Collateral in its then condition or following any
commercially reasonable preparation or processing, at public sale or proceedings
or otherwise, by one or more contracts, in one or more parcels, at the same or
different times, with or without having the Collateral at the place of sale or
other disposition, for cash and/or credit, and upon any terms, at reasonable
place(s) and time(s), and by otherwise complying with applicable statutes
requiring reasonable notice of sale or other disposition to Debtor. Debtor
hereby agrees that the sending of fifteen days' notice by ordinary mail, postage
prepaid, to any address of Debtor set forth in this Security Agreement shall be
deemed reasonable notice thereof. If any Collateral is sold by Secured Party
upon credit or for future delivery, Secured Party shall not be liable for the
failure of the purchaser to pay for same and in such event Secured Party may
resell or otherwise dispose of such Collateral.  Secured Party may buy any part
or all of the Collateral at any public sale. Secured Party may apply the cash
proceeds actually received from any sale or other disposition to the Obligations
in such order and as to principal or interest as Secured Party may desire; and
Debtor shall remain liable and will pay Secured Party on demand any deficiency
remaining, together with interest thereon at the highest rate then payable on
the Obligations, with any surplus to be paid to Debtor, subject to any duty of
Secured Party imposed by law to the holder of any subordinate security interest
in the Collateral known to Secured Party.
 
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6.           Secured Party's prior recourse to any Collateral shall not
constitute a condition of any demand, suit or proceeding for payment or
collection of the Obligations nor shall any demand, suit or proceeding for
payment or collection of the Obligations constitute a condition of any recourse
by Secured Party to the Collateral.  Any suit or proceeding by Secured Party to
recover any of the Obligations shall not be deemed a waiver of, or bar against,
subsequent proceedings by Secured Party with respect to any other Obligations
and/or with respect to the Collateral.  No act, omission or delay by Secured
Party shall constitute a waiver of its rights and remedies hereunder or
otherwise.  No single or partial waiver by Secured Party of any covenant,
warranty, representation, Default or right or remedy which he may have shall
operate as a waiver of any other covenant, warranty, representation, Default,
right or remedy or of the same covenant, warranty, representation, Default,
right or remedy on a future occasion.  Debtor hereby waives presentment, notice
of dishonor and protest of all instruments included in or evidencing any
Obligations or Collateral, and all other notices and demands whatsoever (except
as expressly provided herein).
 
7.    Secured Party may assign its rights and obligation hereunder to any
Affiliate of Secured Party provided that such Affiliate assumes all of the
liabilities or obligations of Secured Party hereunder and Debtor has consented
in writing to such assignment.  For purposes of this section, “Affiliate” of any
person means any other person or entity which, directly or indirectly, controls
or is controlled by that person, or is under common control with that person or
entity. “Control” (including, with correlative meaning, the terms “controlled
by” and “under common control with”), as used with respect to any person or
entity, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such person or entity,
whether through the ownership of voting securities, by contract or otherwise.
 
8.    All terms herein shall have the meanings as defined in the UCC, unless the
context otherwise requires.  No provision hereof shall be modified, altered,
waived, released, terminated or limited except by a written instrument expressly
referring to this Security Agreement and to such provision, and executed by the
party to be charged.  This Security Agreement and all Obligations shall be
binding upon the successors and assigns of Debtor and shall, together with the
rights and remedies of Secured Party hereunder, inure to the benefit of Secured
Party, its executors, administrators, successors, endorsees and assigns.  This
Security Agreement and the Obligations shall be governed in all respects by the
laws of the State of New York applicable to contracts executed and to be
performed in such state.  If any term of this Security Agreement shall be held
to be invalid, illegal or unenforceable, the validity of all other terms hereof
shall in no way be affected thereby.  Secured Party is authorized to annex
hereto any schedules referred to herein.  Debtor acknowledges receipt of a copy
of this Security Agreement.

[Signature page follows.]

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IN WITNESS WHEREOF, the undersigned has executed or caused this security
agreement to be executed in the State of California on the date first above set
forth.
 

 
ZEALOUS TRADING GROUP, INC.

 
By:________________________________
Name: Milton C. Ault, III
Title: Chief Executive Officer

BY:

By:________________________________
Name:
Title:

Location of books and records relating to Collateral:

3275 West Jones Boulevard, #106, Las Vegas, Nevada, 89146

All locations of Collateral:

3275 West Jones Boulevard, #106, Las Vegas, Nevada, 89146
 
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SCHEDULE A

Accounts means “Accounts” as defined in the Uniform Commercial Code.

Additional Collateral means (a) all “Securities Entitlements,” “Investment
Property,” “Financial Assets,” Commercial Tort Claims and “Documents” as those
terms are defined in the Uniform Commercial Code as of the date hereof, (b) all
securities, bills of lading, dock warrants, dock receipts, warehouse receipts or
orders for the delivery of goods, and any other documents which in the regular
course of business or financing are treated as adequately evidencing that the
persons in possession of them are entitled to receive, hold, and dispose of the
goods they cover; (c) all motor vehicles, and all accessions and additions
thereto, replacements therefor, and substitutions therefor; (d) all “General
Intangibles” as that term is defined in the Uniform Commercial Code as of the
date hereof, including, without limitation, Payment Intangibles and Software (as
those terms are defined in the Uniform Commercial Code), all choses in action,
causes of action, and all other intangible personal property of the Debtor,
including, without limitation, corporate or other business records, inventions,
designs, patents, patent applications, trademarks, servicemarks, tradenames,
trade secrets, goodwill, copyrights, registrations, licenses, franchises,
customer lists, tax refund claims, credit files, computer programs, printouts
and other computer materials and records, guaranty claims, security interests or
other property held by or granted to Debtor to secure payment of any obligation
of any obligor of Debtor and any and all of the rights of Debtor of whatever
nature under any and all contracts, agreements, or leases (whether of real or
personal property) to which the Debtor is or may become a party, including
without limitation all of the rights of Debtor to enforce all of the provisions
of, and to obtain payments or other performance due under, all contracts,
agreements, or leases; (e) all of Debtor’s rights (including rights as licensee
and lessee) with respect to all patents, trademarks, copyrights and other
intellectual property rights, know-how, technology, computer hardware and
software and all rights with respect thereto including, any and all licenses,
options, warranties, service contracts, program services, test rights,
maintenance rights, support rights, improvement rights, renewal rights and
indemnifications, and any substitutions, replacements, additions or model
conversions of any of the foregoing, and further including (i) computer and
other electronic data processing hardware, including all integrated computer
systems, central processing units, memory units, display  terminals, printers,
computer elements, card readers, tape drives, hard and soft disk drives, cables,
electrical supply hardware, generators, power equalizers, accessories,
peripheral devices and other related computer hardware, (ii) all Software and
all software programs designed for use on the computers and electronic data
processing hardware described in clause (i) above, including all operating
system software, utilities and application programs in any form (source code and
object code in magnetic tape, disk or hard copy format or any other listings
whatsoever (iii) any firmware associated with any of the foregoing; and (iv) any
documentation for hardware, Software and firmware described in clauses (i), (ii)
and (iii) above, including flow charts, logic diagrams, manuals, specifications,
training materials, charts and pseudo codes, (f) all monies, securities and
other property of the Debtor, and the proceeds thereof, now or hereafter held or
received by or in transit to the Investor whether for safekeeping, custody,
pledge, transmission, collection or otherwise, and also in and to any and all
deposits, general or special, and credits of the Debtor with, and any and all
claims of the Debtor against, the Bank now or at any time hereafter existing,
and (g) intellectual property rights.
 
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Electronic Chattel Paper means “Electronic Chattel Paper” as defined in the
Uniform Commercial Code.

Equipment means all Equipment, as that term is defined in the Uniform Commercial
Code as of the date hereof, of Debtor, including, without limitation, machinery,
furniture, furnishings, and fixtures, and any and all goods used or bought for
use in or being used or for use in the conduct of Debtor’s business and all
goods used or bought for use in Debtor’s business which are not included within
the definition of Inventory, and all accessions and additions thereto,
replacements therefor, and substitutions therefor, supplies and motor vehicles,
by the Debtor of whatsoever name, nature, kind or description, wherever located,
and all additions and accessions thereto and replacements or substitutions
therefor, and all pro­ceeds thereof and all proceeds of any insurance thereon.

Inventory means all “Inventory” as that term is defined in the Uniform
Commercial Code as of the date hereof, including, without limitation, any and
all goods, merchandise or other personal property, wherever located and whether
or not in transit which is or may at any time be held for sale or lease, or
furnished or to be furnished under any contract of service or held as raw
materials, work in process, supplies or materials used or consumed in the
Debtor’s business, and all such property the sale or other disposition of which
has given rise to Accounts, Chattel Paper, Documents, or Instruments and which
has been returned to or repossessed or stopped in transit by the Debtor.

Letter-of-Credit Rights means “Letter-of-Credit Rights” as defined in the
Uniform Commercial Code.

Supporting Obligations means “Supporting Obligations” as defined in the Uniform
Commercial Code.

Tangible Chattel Paper means “Tangible Chattel Paper” as defined in the Uniform
Commercial Code.
 
 
 
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