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Exhibit 10.2
 

(comerica logo) [t75278a001_v1.jpg] 
Security Agreement
(Comprehensive)

 
As of December 20, 2012, for value received, the undersigned (“Debtor”) pledges,
assigns and grants to Comerica Bank (“Bank”), whose address is P. O. Box 650282,
Dallas, Texas 75265-0282, Attention:  Commercial Lending Services, Mail Code
6514, a continuing security interest and lien (any pledge, assignment, security
interest or other lien arising hereunder is sometimes referred to herein as a
“security interest”) in the Collateral (as defined below) to secure payment when
due, whether by stated maturity, demand, acceleration or otherwise, of all
existing and future indebtedness (“Indebtedness”) to the Bank of UNIVERSAL POWER
GROUP, INC. (“Borrower”) and/or Debtor.  Indebtedness includes without limit any
and all obligations or liabilities of the Borrower and/or Debtor to the Bank,
whether absolute or contingent, direct or indirect, voluntary or involuntary,
liquidated or unliquidated, joint or several, known or unknown, originally
payable to the Bank or to a third party and subsequently acquired by the Bank
including, without limitation, any late charges, loan fees or charges, and
overdraft indebtedness, any and all obligations or liabilities for which the
Borrower and/or Debtor would otherwise be liable to the Bank were it not for the
invalidity or unenforceability of them by reason of any bankruptcy, insolvency
or other law, or for any other reason; any and all amendments, modifications,
renewals and/or extensions of any of the above; all costs incurred by Bank in
establishing, determining, continuing, or defending the validity or priority of
any security interest, or in pursuing its rights and remedies under this
Agreement or under any other agreement between Bank and Borrower and/or Debtor
or in connection with any proceeding involving Bank as a result of any financial
accommodation to Borrower and/or Debtor; and all other costs of collecting
Indebtedness, including without limit attorneys’ fees.  Debtor agrees to pay
Bank all such costs incurred by the Bank, immediately upon demand, and until
paid all costs shall bear interest at the highest per annum rate applicable to
any of the Indebtedness, but not in excess of the maximum rate permitted by
law.  Any reference in this Agreement to attorneys’ fees shall be deemed a
reference to reasonable fees, costs, and expenses of both in-house and outside
counsel and paralegals, whether inside or outside counsel is used, whether or
not a suit or action is instituted, and to court costs if a suit or action is
instituted, and whether attorneys’ fees or court costs are incurred at the trial
court level, on appeal, in a bankruptcy, administrative or probate proceeding or
otherwise.  Debtor further covenants, agrees, represents and warrants as
follows:
 
1.
Collateral shall mean all personal property of Debtor including, without
limitation, all of the following property Debtor now or later owns or has an
interest in, wherever located:

 
 
(a)
all Accounts Receivable (for purposes of this Agreement, “Accounts Receivable”
consists of all accounts, general intangibles, chattel paper (including without
limit electronic chattel paper and tangible chattel paper), contract rights,
deposit accounts, documents, instruments and rights to payment evidenced by
chattel paper, documents or instruments, health care insurance receivables,
commercial tort claims, letters of credit, letter of credit rights, supporting
obligations, and rights to payment for money or funds advanced or sold),

 
 
(b)
all Inventory,

 
 
(c)
all Equipment and Fixtures (excluding, however, equipment subject to purchase
money indebtedness financing with third parties when done in accordance with the
limitations of Section 5.3 of the Credit Agreement dated as of December 20,
2012, between Debtor and Bank, as amended from time to time)

 
 
(d)
all Software (for purposes of this Agreement “Software” consists of all
(i) computer programs and supporting information provided in connection with a
transaction relating to the program, and (ii) computer programs embedded in
goods and any supporting information provided in connection with a transaction
relating to the program whether or not  the program is associated with the goods
in such a manner that it customarily is considered part of the goods, and
whether or not, by becoming the owner of the goods, a person acquires a right to
use the program in connection with the goods, and whether or not the program is
embedded in goods that consist solely of the medium in which the program is
embedded),

 
 
(e)
all investment property (including, without limit, securities, securities
entitlements, and financial assets),

 
 
(f)
all goods, instruments (including, without limit, promissory notes), documents
(including, without limit, negotiable documents), policies and certificates of
insurance, deposit accounts, and money, investment property or other property
(except real property which is not a fixture) which are now or later in
possession or control of Bank, or as to which Bank now or later controls
possession by documents or otherwise, and

 
 
 

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(g)
all additions, attachments, accessions, parts, replacements, substitutions,
renewals, interest, dividends, distributions, rights of any kind (including but
not limited to stock splits, stock rights, voting and preferential rights),
products, and proceeds of or pertaining to the above including, without limit,
cash or other property which were proceeds and are recovered by a bankruptcy
trustee or otherwise as a preferential transfer by Debtor.

 
In the definition of Collateral, a reference to a type of collateral shall not
be limited by a separate reference to a more specific or narrower type of that
collateral.
 
2.
Warranties, Covenants and Agreements.  Debtor warrants, covenants and agrees as
follows:

 
 
2.1
Debtor shall furnish to Bank, in form and at intervals as Bank may request, any
information Bank may reasonably request and allow Bank to examine, inspect, and
copy any of Debtor’s books and records.  Debtor shall, at the request of Bank,
mark its records and the Collateral to clearly indicate the security interest of
Bank under this Agreement.

 
 
2.2
At the time any Collateral becomes, or is represented to be, subject to a
security interest in favor of Bank, Debtor shall be deemed to have warranted
that (a) Debtor is the lawful owner of the Collateral and has the right and
authority to subject it to a security interest granted to Bank; (b) none of the
Collateral is subject to any security interest other than that in favor of Bank;
(c) there are no financing statements on file, other than in favor of Bank;
(d) no person, other than Bank, has possession or control (as defined in the
Uniform Commercial Code) of any Collateral of such nature that perfection of a
security interest may be accomplished by control; and (e) Debtor acquired its
rights in the Collateral in the ordinary course of its business.

 
 
2.3
Debtor will keep the Collateral free at all times from all claims, liens,
security interests and encumbrances other than those in favor of Bank. Debtor
will not, without the prior written consent of Bank, sell, transfer or lease, or
permit to be sold, transferred or leased, any or all of the Collateral, except
for Inventory in the ordinary course of its business and will not return any
Inventory to its supplier. Bank or its representatives may at all reasonable
times inspect the Collateral and may enter upon all premises where the
Collateral is kept or might be located.

 
 
2.4
Debtor will do all acts and will execute or cause to be executed all writings
requested by Bank to establish, maintain and continue an exclusive, perfected
and first security interest of Bank in the Collateral.  Debtor agrees that Bank
has no obligation to acquire or perfect any lien on or security interest in any
asset(s), whether realty or personalty, to secure payment of the Indebtedness,
and Debtor is not relying upon assets in which the Bank may have a lien or
security interest for payment of the Indebtedness.

 
 
2.5
Debtor will pay within the time that they can be paid without interest or
penalty all taxes, assessments and similar charges which at any time are or may
become a lien, charge, or encumbrance upon any Collateral, except to the extent
contested in good faith and bonded in a manner satisfactory to Bank.  If Debtor
fails to pay any of these taxes, assessments, or other charges in the time
provided above, Bank has the option (but not the obligation) to do so, and
Debtor agrees to repay all amounts so expended by Bank immediately upon demand,
together with interest at the highest lawful default rate which could be charged
by Bank on any Indebtedness.

 
 
2.6
Debtor will keep the Collateral in good condition and will protect it from loss,
damage, or deterioration from any cause, normal wear and tear excepted.  Debtor
has and will maintain at all times (a) with respect to the Collateral, insurance
under an “all risk” policy against fire and other risks customarily insured
against, and (b) public liability insurance and other insurance as may be
required by law or reasonably required by Bank, all of which insurance shall be
in amount, form and content, and written by companies as may be reasonably
satisfactory to Bank, containing a lender’s loss payable endorsement acceptable
to Bank.  Debtor will deliver to Bank immediately upon demand evidence
satisfactory to Bank that the required insurance has been procured.  If Debtor
fails to maintain satisfactory insurance, Bank has the option (but not the
obligation) to do so and Debtor agrees to repay all amounts so expended by Bank
immediately upon demand, together with interest at the highest lawful default
rate which could be charged by Bank on any Indebtedness.  TEXAS FINANCE CODE
§ 307.052 COLLATERAL PROTECTION INSURANCE NOTICE:  (A) DEBTOR IS REQUIRED
TO:  (i) KEEP THE COLLATERAL INSURED AGAINST DAMAGE IN THE AMOUNT EQUAL TO THE
DEBTOR’S INDEBTEDNESS TO BANK; (ii) PURCHASE THE INSURANCE FROM AN INSURER THAT
IS AUTHORIZED TO DO BUSINESS IN THE STATE OF TEXAS OR AN ELIGIBLE SURPLUS LINES
INSURER; AND (iii) NAME THE BANK AS THE PERSON TO BE PAID UNDER THE POLICY IN
THE EVENT OF LOSS; (B) DEBTOR MUST, IF REQUIRED BY BANK, DELIVER TO BANK A COPY
OF THE POLICY AND PROOF OF THE PAYMENT OF PREMIUMS; AND (C) IF DEBTOR FAILS TO
MEET ANY REQUIREMENT LISTED IN CLAUSE (A) OR (B) ABOVE, THE BANK MAY OBTAIN
COLLATERAL PROTECTION INSURANCE ON BEHALF OF THE DEBTOR AT THE DEBTOR’S EXPENSE.

 
 
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2.7
On each occasion on which Debtor evidences to Bank the account balances on and
the nature and extent of the Accounts Receivable, Debtor shall be deemed to have
warranted that except as otherwise indicated (a) each of those Accounts
Receivable is valid and enforceable without performance by Debtor of any act;
(b) each of those account balances are in fact owing, (c) there are no setoffs,
recoupments, credits, contra accounts, counterclaims or defenses against any of
those Accounts Receivable, (d) as to any Accounts Receivable represented by a
note, trade acceptance, draft or other instrument or by any chattel paper or
document, the same have been endorsed and/or delivered by Debtor to Bank,
(e) Debtor has not received with respect to any Account Receivable, any notice
of the death of the related account debtor, or of the dissolution, liquidation,
termination of existence, insolvency, business failure, appointment of a
receiver for, assignment for the benefit of creditors by, or filing of a
petition in bankruptcy by or against, the account debtor, and (f) as to each
Account Receivable, except as may be expressly permitted by Bank to the contrary
in another document, the account debtor is not an affiliate of Debtor, the
United States of America or any department, agency or instrumentality of it, or
a citizen or resident of any jurisdiction outside of the United States.  Debtor
will do all acts and will execute all writings requested by Bank to perform,
enforce performance of, and collect all Accounts Receivable.  Debtor shall
neither make nor permit any modification, compromise or substitution for any
Account Receivable without the prior written consent of Bank.  Debtor shall, at
Bank’s request, arrange for verification of Accounts Receivable directly with
account debtors or by other methods acceptable to Bank.

 
 
2.8
Debtor at all times shall be in material compliance with all applicable laws,
including without limit any laws, ordinances, directives, orders, statutes, or
regulations an object of which is to regulate or improve health, safety, or the
environment (“Environmental Laws”).

 
 
2.9
If Bank, acting in its sole discretion, redelivers Collateral to Debtor or
Debtor’s designee for the purpose of (a) the ultimate sale or exchange thereof;
or (b) presentation, collection, renewal, or registration of transfer thereof;
or (c) loading, unloading, storing, shipping, transshipping, manufacturing,
processing or otherwise dealing with it preliminary to sale or exchange; such
redelivery shall be in trust for the benefit of Bank and shall not constitute a
release of Bank’s security interest in it or in the proceeds or products of it
unless Bank specifically so agrees in writing.  If Debtor requests any such
redelivery, Debtor will deliver with such request a duly executed financing
statement in form and substance satisfactory to Bank.  Any proceeds of
Collateral coming into Debtor’s possession as a result of any such redelivery
shall be held in trust for Bank and immediately delivered to Bank for
application on the Indebtedness.  Bank may (in its sole discretion) deliver any
or all of the Collateral to Debtor, and such delivery by Bank shall discharge
Bank from all liability or responsibility for such Collateral.  Bank, at its
option, may require delivery of any Collateral to Bank at any time with such
endorsements or assignments of the Collateral as Bank may request.

 
 
2.10
At any time and without notice, Bank may (a) cause any or all of the Collateral
to be transferred to its name or to the name of its nominees; (b) receive or
collect by legal proceedings or otherwise all dividends, interest, principal
payments and other sums and all other distributions at any time payable or
receivable on account of the Collateral, and hold the same as Collateral, or
apply the same to the Indebtedness, the manner and distribution of the
application to be in the sole discretion of Bank; (c) enter into any extension,
subordination, reorganization, deposit, merger or consolidation agreement or any
other agreement relating to or affecting the Collateral, and deposit or
surrender control of the Collateral, and accept other property in exchange for
the Collateral and hold or apply the property or money so received pursuant to
this Agreement; and (d) take such actions in its own name or in Debtor’s name as
Bank, in its sole discretion, deems necessary or appropriate to establish
exclusive control (as defined in the Uniform Commercial Code) over any
Collateral of such nature that perfection of the Bank’s security interest may be
accomplished by control.

 
 
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2.11
Bank may assign any of the Indebtedness and deliver any or all of the Collateral
to its assignee, who then shall have with respect to Collateral so delivered all
the rights and powers of Bank under this Agreement, and after that Bank shall be
fully discharged from all liability and responsibility with respect to
Collateral so delivered.

 
 
2.12
Debtor delivers this Agreement based solely on Debtor’s independent
investigation of (or decision not to investigate) the financial condition of
Borrower and is not relying on any information furnished by Bank.  Debtor
assumes full responsibility for obtaining any further information concerning the
Borrower’s financial condition, the status of the Indebtedness or any other
matter which the undersigned may deem necessary or appropriate now or
later.  Debtor waives any duty on the part of Bank, and agrees that Debtor is
not relying upon nor expecting Bank to disclose to Debtor any fact now or later
known by Bank, whether relating to the operations or condition of Borrower, the
existence, liabilities or financial condition of any guarantor of the
Indebtedness, the occurrence of any default with respect to the Indebtedness, or
otherwise, notwithstanding any effect such fact may have upon Debtor’s risk or
Debtor’s rights against Borrower.  Debtor knowingly accepts the full range of
risk encompassed in this Agreement, which risk includes without limit the
possibility that Borrower may incur Indebtedness to Bank after the financial
condition of Borrower, or Borrower’s ability to pay debts as they mature, has
deteriorated.

 
 
2.13
Debtor shall defend, indemnify and hold harmless Bank, its employees, agents,
shareholders, affiliates, officers, and directors from and against any and all
claims, damages, fines, expenses, liabilities or causes of action of whatever
kind, including without limit consultant fees, legal expenses, and attorneys’
fees, suffered by any of them as a direct or indirect result of any actual or
asserted violation of any law, including, without limit, Environmental Laws, or
of any remediation relating to any property required by any law, including
without limit Environmental Laws, INCLUDING ANY CLAIMS, DAMAGES, FINES,
EXPENSES, LIABILITIES OR CAUSES OF ACTION OF WHATEVER KIND RESULTING FROM BANK’S
OWN NEGLIGENCE, except and to the extent (but only to the extent) caused by
Bank’s gross negligence or willful misconduct.

 
3.
Collection of Proceeds.

 
 
3.1
Debtor agrees to collect and enforce payment of all Collateral until Bank shall
direct Debtor to the contrary.  Immediately upon notice to Debtor by Bank and at
all times after that, Debtor agrees to fully and promptly cooperate and assist
Bank in the collection and enforcement of all Collateral and to hold in trust
for Bank all payments received in connection with Collateral and from the sale,
lease or other disposition of any Collateral, all rights by way of suretyship or
guaranty and all rights in the nature of a lien or security interest which
Debtor now or later has regarding Collateral.  Immediately upon and after such
notice, Debtor agrees to (a) endorse to Bank and immediately deliver to Bank all
payments received on Collateral or from the sale, lease or other disposition of
any Collateral or arising from any other rights or interests of Debtor in the
Collateral, in the form received by Debtor without commingling with any other
funds, and (b) immediately deliver to Bank all property in Debtor’s possession
or later coming into Debtor’s possession through enforcement of Debtor’s rights
or interests in the Collateral.  Debtor irrevocably authorizes Bank or any Bank
employee or agent to endorse the name of Debtor upon any checks or other items
which are received in payment for any Collateral, and to do any and all things
necessary in order to reduce these items to money.  Bank shall have no duty as
to the collection or protection of Collateral or the proceeds of it, or as to
the preservation of any related rights, beyond the use of reasonable care in the
custody and preservation of Collateral in the possession of Bank.  Debtor agrees
to take all steps necessary to preserve rights against prior parties with
respect to the Collateral.  Nothing in this Section 3.1 shall be deemed a
consent by Bank to any sale, lease or other disposition of any Collateral.

 
 
3.2
Debtor agrees that immediately upon Bank’s request (whether or not any Event of
Default exists) the Indebtedness shall be on a “remittance basis” as
follows:  Debtor shall at its sole expense establish and maintain (and Bank, at
Bank’s option may establish and maintain at Debtor’s expense):  (a) an United
States Post Office lock box (the “Lock Box”), to which Bank shall have exclusive
access and control.  Debtor expressly authorizes Bank, from time to time, to
remove contents from the Lock Box, for disposition in accordance with this
Agreement.  Debtor agrees to notify all account debtors and other parties
obligated to Debtor that all payments made to Debtor (other than payments by
electronic funds transfer) shall be remitted, for the credit of Debtor, to the
Lock Box, and Debtor shall include a like statement on all invoices; and (b) a
non-interest bearing deposit account with Bank which shall be titled as
designated by Bank (the “Cash Collateral Account”) to which Bank shall have
exclusive access and control.  Debtor agrees to notify all account debtors and
other parties obligated to Debtor that all payments made to Debtor by electronic
funds transfer shall be remitted to the Cash Collateral Account, and Debtor, at
Bank’s request, shall include a like statement on all invoices.  Debtor shall
execute all documents and authorizations as required by Bank to establish and
maintain the Lock Box and the Cash Collateral Account.

 
 
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3.3
All items or amounts which are remitted to the Lock Box, to the Cash Collateral
Account, or otherwise delivered by or for the benefit of Debtor to Bank on
account of partial or full payment of, or with respect to, any Collateral shall,
at Bank’s option, (a) be applied to the payment of the Indebtedness, whether
then due or not, in such order or at such time of application as Bank may
determine in its sole discretion, or, (b) be deposited to the Cash Collateral
Account.  Debtor agrees that Bank shall not be liable for any loss or damage
which Debtor may suffer as a result of Bank’s processing of items or its
exercise of any other rights or remedies under this Agreement, including without
limitation indirect, special or consequential damages, loss of revenues or
profits, or any claim, demand or action by any third party arising out of or in
connection with the processing of items or the exercise of any other rights or
remedies under this Agreement.  Debtor agrees to indemnify and hold Bank
harmless from and against all such third party claims, demands or actions, and
all related expenses or liabilities, including, without limitation, attorneys’
fees and INCLUDING CLAIMS, DAMAGES, FINES, EXPENSES, LIABILITIES OR CAUSES OF
ACTION OF WHATEVER KIND RESULTING FROM BANK’S OWN NEGLIGENCE except to the
extent (but only to the extent) caused by Bank’s gross negligence or willful
misconduct.

 
4.
Defaults, Enforcement and Application of Proceeds.

 
 
4.1
Upon the occurrence of any of the following events (each an “Event of Default”),
Debtor shall be in default under this Agreement:

 
 
(a)
Any failure to pay the Indebtedness or any other indebtedness when due, or such
portion of it as may be due, by acceleration or otherwise; or

 
 
(b)
Any failure or neglect to comply with, or breach of or default under, any term
of this Agreement, or any other agreement or commitment between Borrower,
Debtor, or any guarantor of any of the Indebtedness (“Guarantor”) and Bank; or

 
 
(c)
Any warranty, representation, financial statement, or other information made,
given or furnished to Bank by or on behalf of Borrower, Debtor, or any Guarantor
shall be, or shall prove to have been, false or materially misleading when made,
given, or furnished; or

 
 
(d)
Any loss, theft, substantial damage or destruction to or of any Collateral, or
the issuance or filing of any attachment, levy, garnishment or the commencement
of any proceeding in connection with any Collateral or of any other judicial
process of, upon or in respect of Borrower, Debtor, any Guarantor, or any
Collateral; or

 
 
(e)
Sale or other disposition by Borrower, Debtor, or any Guarantor of any
substantial portion of its assets or property or voluntary suspension of the
transaction of business by Borrower, Debtor, or any Guarantor, or death,
dissolution, termination of existence, merger, consolidation, insolvency,
business failure, or assignment for the benefit of creditors of or by Borrower,
Debtor, or any Guarantor; or commencement of any proceedings under any state or
federal bankruptcy or insolvency laws or laws for the relief of debtors by or
against Borrower, Debtor, or any Guarantor; or the appointment of a receiver,
trustee, court appointee, sequestrator or otherwise, for all or any part of the
property of Borrower, Debtor, or any Guarantor; or

 
 
(f)
An event of default shall occur under any instrument, agreement or other
document evidencing, securing or otherwise relating to any of the Indebtedness.

 
 
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4.2
Upon the occurrence of any Event of Default, Bank may at its discretion and
without prior notice to Debtor declare any or all of the Indebtedness to be
immediately due and payable, and shall have and may exercise any right or remedy
available to it including, without limitation, any one or more of the following
rights and remedies:

 
 
(a)
Exercise all the rights and remedies upon default, in foreclosure and otherwise,
available to secured parties under the provisions of the Uniform Commercial Code
and other applicable law;

 
 
(b)
Institute legal proceedings to foreclose upon the lien and security interest
granted by this Agreement, to recover judgment for all amounts then due and
owing as Indebtedness, and to collect the same out of any Collateral or the
proceeds of any sale of it;

 
 
(c)
Institute legal proceedings for the sale, under the judgment or decree of any
court of competent jurisdiction, of any or all Collateral; and/or

 
 
(d)
Personally or by agents, attorneys, or appointment of a receiver, enter upon any
premises where Collateral may then be located, and take possession of all or any
of it and/or render it unusable; and without being responsible for loss or
damage to such Collateral, hold, operate, sell, lease, or dispose of all or any
Collateral at one or more public or private sales, leasings or other
dispositions, at places and times and on terms and conditions as Bank may deem
fit, without any previous demand or advertisement; and except as provided in
this Agreement, all notice of sale, lease or other disposition, and
advertisement, and other notice or demand, any right or equity of redemption,
and any obligation of a prospective purchaser or lessee to inquire as to the
power and authority of Bank to sell, lease, or otherwise dispose of the
Collateral or as to the application by Bank of the proceeds of sale or
otherwise, which would otherwise be required by, or available to Debtor under,
applicable law are expressly waived by Debtor to the fullest extent permitted.

 
At any sale pursuant to this Section 4.2, whether under the power of sale, by
virtue of judicial proceedings or otherwise, it shall not be necessary for Bank
or a public officer under order of a court to have present physical or
constructive possession of Collateral to be sold.  The recitals contained in any
conveyances and receipts made and given by Bank or the public officer to any
purchaser at any sale made pursuant to this Agreement shall, to the extent
permitted by applicable law, conclusively establish the truth and accuracy of
the matters stated (including, without limit, as to the amounts of the principal
of and interest on the Indebtedness, the accrual and nonpayment of it and
advertisement and conduct of the sale); and all prerequisites to the sale shall
be presumed to have been satisfied and performed.  Upon any sale of any
Collateral, the receipt of the officer making the sale under judicial
proceedings or of Bank shall be sufficient discharge to the purchaser for the
purchase money, and the purchaser shall not be obligated to see to the
application of the money.  Any sale of any Collateral under this Agreement shall
be a perpetual bar against Debtor with respect to that Collateral.  At any sale
or other disposition of the Collateral pursuant to this Section 4.2, Bank
disclaims all warranties which would otherwise be given under the Uniform
Commercial Code, including without limit a disclaimer of any warranty relating
to title, possession, quiet enjoyment or the like, and Bank may communicate
these disclaimers to a purchaser at such disposition.  This disclaimer of
warranties will not render the sale commercially unreasonable.
 
 
4.3
Debtor shall at the request of Bank, notify the account debtors or obligors of
Bank’s security interest in the Collateral and direct payment of it to
Bank.  Bank may, itself, upon the occurrence of any Event of Default so notify
and direct any account debtor or obligor.  At the request of Bank, whether or
not an Event of Default shall have occurred, Debtor shall immediately take such
actions as the Bank shall request to establish exclusive control (as defined in
the Uniform Commercial Code) by Bank over any Collateral which is of such a
nature that perfection of a security interest may be accomplished by control.

 
 
4.4
The proceeds of any sale or other disposition of Collateral authorized by this
Agreement shall be applied by Bank in such order as the Bank, in its discretion,
deems appropriate including, without limitation, the following order: first upon
all expenses authorized by the Uniform Commercial Code and all reasonable
attorneys’ fees and legal expenses incurred by Bank; the balance of the proceeds
of the sale or other disposition may be applied in the payment of the
Indebtedness, first to interest, then to principal, then to remaining
Indebtedness and the surplus, if any, shall be paid over to Debtor or to such
other person(s) as may be entitled to it under applicable law.  Debtor shall
remain liable for any deficiency, which it shall pay to Bank immediately upon
demand.  Debtor agrees that Secured Party shall be under no obligation to accept
any noncash proceeds in connection with any sale or disposition of Collateral
unless failure to do so would be commercially unreasonable.  If Secured Party
agrees in its sole discretion to accept noncash proceeds (unless the failure to
do so would be commercially unreasonable), Secured Party may ascribe any
commercially reasonable value to such proceeds.  Without limiting the foregoing,
Secured Party may apply any discount factor in determining the present value of
proceeds to be received in the future or may elect to apply proceeds to be
received in the future only as and when such proceeds are actually received in
cash by Secured Party.

 
 
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4.5
Nothing in this Agreement is intended, nor shall it be construed, to preclude
Bank from pursuing any other remedy provided by law or in equity for the
collection of the Indebtedness or for the recovery of any other sum to which
Bank may be entitled for the breach of this Agreement by Debtor.  Nothing in
this Agreement shall reduce or release in any way any rights or security
interests of Bank contained in any existing agreement between Borrower, Debtor,
or any Guarantor and Bank.

 
 
4.6
No waiver of default or consent to any act by Debtor shall be effective unless
in writing and signed by an authorized officer of Bank.  No waiver of any
default or forbearance on the part of Bank in enforcing any of its rights under
this Agreement shall operate as a waiver of any other default or of the same
default on a future occasion or of any rights.

 
 
4.7
Debtor (a) irrevocably appoints Bank or any agent of Bank (which appointment is
coupled with an interest) the true and lawful attorney of Debtor (with full
power of substitution) to act in the name, place and stead of, and at the
expense of, Debtor and (b) authorizes Bank or any agent of Bank, in its own
name, at Debtor’s expense, to do any of the following, as Bank, in its sole
discretion, deems appropriate:

 
 
(i)
to demand, receive, sue for, and give receipts or acquittances for any moneys
due or to become due on any Collateral and to endorse any item representing any
payment on or proceeds of the Collateral;

 
 
(ii)
to execute and file in the name of and on behalf of Debtor all financing
statements or other filings deemed necessary or desirable by Bank to evidence,
perfect, or continue the security interests granted in this Agreement; and

 
 
(iii)
to do and perform any act on behalf of Debtor permitted or required under this
Agreement.

 
 
4.8
Upon the occurrence of an Event of Default, Debtor also agrees, upon request of
Bank, to assemble the Collateral and make it available to Bank at any place
designated by Bank which is reasonably convenient to Bank and Debtor.

 
 
4.9
The following shall be the basis for any finder of fact’s determination of the
value of any Collateral which is the subject matter of a disposition giving rise
to a calculation of any surplus or deficiency under Section 9.615(f) of the
Uniform Commercial Code (as in effect on or after July 1, 2001):  (a) the
Collateral which is the subject matter of the disposition  shall be valued in an
“as is” condition as of the date of the disposition, without any assumption or
expectation that such Collateral will be repaired or improved in any manner;
(b) the valuation shall be based upon an assumption that the transferee of such
Collateral desires a resale of the Collateral for cash promptly (but no later
than 30 days) following the disposition; (c) all reasonable closing costs
customarily borne by the seller in commercial sales transactions relating to
property similar to such Collateral shall be deducted including, without
limitation, brokerage commissions, tax prorations, attorneys’ fees, whether
inside or outside counsel is used, and marketing costs; (d) the value of the
Collateral which is the subject matter of the disposition shall be further
discounted to account for any estimated holding costs associated with
maintaining such Collateral pending sale (to the extent not accounted for in (c)
above), and other maintenance, operational and ownership expenses; and (e) any
expert opinion testimony given or considered in connection with a determination
of the value of such Collateral must be given by persons having at least 5 years
experience in appraising property similar to the Collateral and who have
conducted and prepared a complete written appraisal of such Collateral taking
into consideration the factors set forth above.  The “value” of any such
Collateral shall be a factor in determining the amount of proceeds which would
have been realized in a disposition to a transferee other than a secured party,
a person related to a secured party or a secondary obligor under
Section 9.615(f) of the Uniform Commercial Code.

 
 
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5.
Miscellaneous.

 
 
5.1
Until Bank is advised in writing by Debtor to the contrary, all notices,
requests and demands required under this Agreement or by law shall be given to,
or made upon, Debtor at the first address indicated in Section 6.15 below.

 
 
5.2
Debtor will give Bank not less than 30 days prior written notice of all
contemplated changes in Debtor’s name, location, chief executive office,
principal place of business, and/or location of any Collateral, but the giving
of this notice shall not cure any Event of Default caused by this change.

 
 
5.3
Bank assumes no duty of performance or other responsibility under any contracts
contained within the Collateral.

 
 
5.4
Bank has the right to sell, assign, transfer, negotiate or grant participations
or any interest in, any or all of the Indebtedness and any related obligations,
including without limit this Agreement.  In connection with the above, but
without limiting its ability to make other disclosures to the full extent
allowable, Bank may disclose all documents and information which Bank now or
later has relating to Debtor, the Indebtedness or this Agreement, however
obtained.  Debtor further agrees that Bank may provide information relating to
this Agreement or relating to Debtor or the Indebtedness to the Bank’s parent,
affiliates, subsidiaries, and service providers.

 
 
5.5
In addition to Bank’s other rights, any indebtedness owing from Bank to Debtor
can be set off and applied by Bank on any Indebtedness at any time(s) either
before or after maturity or demand without notice to anyone.  Any such action
shall not constitute acceptance of collateral in discharge of any portion of the
Indebtedness.

 
 
5.6
Debtor, to the extent not expressly prohibited by applicable law, waives any
right to require the Bank to:  (a) proceed against any person or property;
(b) give notice of the terms, time and place of any public or private sale of
personal property security held from Borrower or Debtor or any other person, or
otherwise comply with the provisions of Sections 9.611 or 9.621 of the Uniform
Commercial Code; or (c) pursue any other remedy in the Bank’s power.  Debtor
waives notice of acceptance of this Agreement and presentment, demand, protest,
notice of protest, dishonor, notice of dishonor, notice of default, notice of
intent to accelerate or demand payment or notice of acceleration of any
Indebtedness, any and all other notices to which the undersigned might otherwise
be entitled, and diligence in collecting any Indebtedness, and agree(s) that the
Bank may, once or any number of times, modify the terms of any Indebtedness,
compromise, extend, increase, accelerate, renew or forbear to enforce payment of
any or all Indebtedness, or permit Borrower to incur additional Indebtedness,
all without notice to Debtor and without affecting in any manner the
unconditional obligation of Debtor under this Agreement.  Debtor unconditionally
and irrevocably waives each and every defense and setoff of any nature which,
under principles of guaranty or otherwise, would operate to impair or diminish
in any way the obligation of Debtor under this Agreement, and acknowledges that
such waiver is by this reference incorporated into each security agreement,
collateral assignment, pledge and/or other document from Debtor now or later
securing the Indebtedness, and acknowledges that as of the date of this
Agreement no such defense or setoff exists.

 
 
5.7
Debtor waives any and all rights (whether by subrogation, indemnity,
reimbursement, or otherwise) to recover from Borrower any amounts paid or the
value of any Collateral given by Debtor pursuant to this Agreement until such
time as all of the Indebtedness has been fully paid.

 
 
5.8
In the event that applicable law shall obligate Bank to give prior notice to
Debtor of any action to be taken under this Agreement, Debtor agrees that a
written notice given to Debtor at least ten days before the date of the act
shall be reasonable notice of the act and, specifically, reasonable notification
of the time and place of any public sale or of the time after which any private
sale, lease, or other disposition is to be made, unless a shorter notice period
is reasonable under the circumstances.  A notice shall be deemed to be given
under this Agreement when delivered to Debtor or when placed in an envelope
addressed to Debtor and deposited, with postage prepaid, in a post office or
official depository under the exclusive care and custody of the United States
Postal Service or delivered to an overnight courier.  The mailing shall be by
overnight courier, certified, or first class mail.

 
 
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5.9
Notwithstanding any prior revocation, termination, surrender, or discharge of
this Agreement in whole or in part, the effectiveness of this Agreement shall
automatically continue or be reinstated in the event that any payment received
or credit given by Bank in respect of the Indebtedness is returned, disgorged,
or rescinded under any applicable law, including, without limitation, bankruptcy
or insolvency laws, in which case this Agreement, shall be enforceable against
Debtor as if the returned, disgorged, or rescinded payment or credit had not
been received or given by Bank, and whether or not Bank relied upon this payment
or credit or changed its position as a consequence of it.  In the event of
continuation or reinstatement of this Agreement, Debtor agrees upon demand by
Bank to execute and deliver to Bank those documents which Bank determines are
appropriate to further evidence (in the public records or otherwise) this
continuation or reinstatement, although the failure of Debtor to do so shall not
affect in any way the reinstatement or continuation.

 
 
5.10
This Agreement and all the rights and remedies of Bank under this Agreement
shall inure to the benefit of Bank’s successors and assigns and to any other
holder who derives from Bank title to or an interest in the Indebtedness or any
portion of it, and shall bind Debtor and the heirs, legal representatives,
successors, and assigns of Debtor.  Nothing in this Section 5.10 is deemed a
consent by Bank to any assignment by Debtor.

 
 
5.11
If there is more than one Debtor, all undertakings, warranties and covenants
made by Debtor and all rights, powers and authorities given to or conferred upon
Bank are made or given jointly and severally.

 
 
5.12
Except as otherwise provided in this Agreement, all terms in this Agreement have
the meanings assigned to them in Article 9 (or, absent definition in Article 9,
in any other Article) of the Uniform Commercial Code as those meanings may be
amended, revised or replaced from time to time.  “Uniform Commercial Code” means
the Texas Business and Commerce Code as amended, revised or replaced from time
to time.  Notwithstanding the foregoing, the parties intend that the terms used
herein which are defined in the Uniform Commercial Code have, at all times, the
broadest and most inclusive meanings possible.  Accordingly, if the Uniform
Commercial Code shall in the future be amended or held by a court to define any
term used herein more broadly or inclusively than the Uniform Commercial Code in
effect on the date of this Agreement, then such term, as used herein, shall be
given such broadened meaning.  If the Uniform Commercial Code shall in the
future be amended or held by a court to define any term used herein more
narrowly, or less inclusively, than the Uniform Commercial Code in effect on the
date of this Agreement, such amendment or holding shall be disregarded in
defining terms used in this Agreement.

 
 
5.13
No single or partial exercise, or delay in the exercise, of any right or power
under this Agreement, shall preclude other or further exercise of the rights and
powers under this Agreement.  The unenforceability of any provision of this
Agreement shall not affect the enforceability of the remainder of this
Agreement.  This Agreement constitutes the entire agreement of Debtor and Bank
with respect to the subject matter of this Agreement.  No amendment or
modification of this Agreement shall be effective unless the same shall be in
writing and signed by Debtor and an authorized officer of Bank.  THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF TEXAS, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.

 
 
5.14
To the extent that any of the Indebtedness is payable upon demand, nothing
contained in this Agreement shall modify the terms and conditions of that
Indebtedness nor shall anything contained in this Agreement prevent Bank from
making demand, without notice and with or without reason, for immediate payment
of any or all of that Indebtedness at any time(s), whether or not an Event of
Default has occurred.

 
 
5.15
Debtor represents and warrants that Debtor’s exact name is the name set forth in
this Agreement.  Debtor further represents and warrants the following and agrees
that Debtor’s principal place of business is, and at all times shall be, located
in the following place:  Texas.

 
Debtor is a registered organization which is organized under the laws of one of
the states comprising the United States (e.g. corporation, limited partnership,
registered limited liability partnership or limited liability company), and
Debtor is located (as determined pursuant to the Uniform Commercial Code) in the
state under the laws of which it was organized, which is:  Texas.
 
 
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The Collateral is located and shall be maintained at such location(s) as Bank
may approve in writing from time to time.
 
Collateral shall be maintained only at the locations identified in this
Section 5.15.
 
 
5.16
A carbon, photographic or other reproduction of this Agreement shall be
sufficient as a financing statement under the Uniform Commercial Code and may be
filed by Bank in any filing office.

 
 
5.17
This Agreement shall be terminated only by the filing of a termination statement
in accordance with the applicable provisions of the Uniform Commercial Code, but
the obligations contained in Section 2.17 of this Agreement shall survive
termination.

 
 
5.18
Debtor agrees to pay or reimburse to the Bank, on demand, any and all costs and
expenses of Bank (including, without limit, court costs, legal expenses and
reasonable attorneys’ fees, whether inside or outside counsel is used, whether
or not suit is instituted and, if suit is instituted, whether at the trial court
level, appellate level, in a bankruptcy, probate or administrative proceeding or
otherwise) incurred in connection with the preparation, execution, delivery,
amendment, administration, and performance of this Agreement and the related
documents, or incurred in enforcing or attempting to enforce this Agreement or
in exercising or attempting to exercise any right or remedy under this Agreement
or incurred in any other matter or proceeding relating to this Security
Agreement.

 
6.
DEBTOR AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL
ONE, BUT THAT IT MAY BE WAIVED.  EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE
OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY,
AND FOR THEIR MUTUAL BENEFIT WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF
LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED
TO, THIS AGREEMENT OR THE INDEBTEDNESS.

 
 
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7.
THIS WRITTEN LOAN AGREEMENT (AS DEFINED BY SECTION 26.02 OF THE TEXAS BUSINESS
AND COMMERCE CODE) REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.

 
8.
Special Provisions Applicable to this Agreement.  (*None, if left blank)

 

 
DEBTOR:
 
UNIVERSAL POWER GROUP, INC.
   
 
 
  By:            Its:           
BANK:
 
COMERICA BANK
 
 
 
  By:            Its:   

 
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