Exhibit
10.3


 


SECURITY
AGREEMENT


 


THIS SECURITY AGREEMENT
(the “Security Agreement”) is entered into as of March 3, 2004, by
and between Zaykowski Partners, LP (“Lender”) and TRESTLE HOLDINGS, INC., a
Delaware corporation (“Debtor”).


 


RECITALS


 


A.                                   Debtor
has issued to Lender a Convertible Promissory Note (such Note, as the same may
be modified, amended, supplemented or restated from time to time, the “Note”)
in the aggregate principal amount of $420,000. 
All terms not otherwise defined herein shall have the meaning set forth
in the Note.


 


B.                                     As
security for the payment and performance of its obligations to the Lender under
the Note, it is the intent of Debtor to grant to Lender a security interest in
all of the Collateral, on the terms and conditions provided herein.


 


AGREEMENT


 


NOW, THEREFORE, in
consideration of the above Recitals and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged,
Debtor hereby agrees as follows:


 


1.               Grant of
Security Interest.  Debtor hereby
pledges and grants to Lender, a security interest in the Collateral (as defined
in Section 2) to secure payment and performance of the Obligations (as
defined in Section 3).


 


2.               Collateral.  The collateral shall consist of all right,
title and interest of Debtor as of the date hereof in and to the following
properties, assets and rights of the Debtor, wherever located (all of the same
being hereinafter called, the “Collateral”):
all personal and fixture property of every kind and nature including, without
limitation, all goods (including, without limitation, inventory, equipment
(including, without limitation, computer hardware and software, furniture,
furnishings and fixtures), instruments (including, without limitation,
promissory notes), documents, accounts, chattel paper (whether tangible or
electronic), deposit accounts, letter-of-credit rights, securities and all
other investment property, supporting obligations, any other contract rights or
rights to the payment of money, insurance claims and proceeds, patents and
patent applications, copyrights and copyrighted works, trademarks, service
marks and logos, computer software programs, and all general intangibles
(including all payment intangibles). 
For the avoidance of doubt, the Collateral specifically excludes any and
all personal property of Debtor acquired after the date hereof.


 


3.               Obligations.  The obligations of Debtor secured by this
Security Agreement shall consist of any and all debts, obligations and
liabilities of Debtor to Lender, whether now existing or hereafter arising,
voluntary or involuntary, whether or not jointly owed with others, direct or
indirect, absolute or contingent, liquidated or unliquidated, and whether or
not from time to time decreased or extinguished and later increased, which are
created or incurred, arising out of,


 

















 


connected with or related
to the Note, including, without limitation, this Security Agreement and all
amendments of the Note (collectively, the “Obligations”).


 


4.               Representations
and Warranties.  Debtor hereby
represents and warrants to Lender as of the date hereof, that: (a) except
for the liens listed on Schedule A attached to the Note, and the
liens granted to Lender hereunder, Debtor is the owner of the Collateral with
the right, power and authority to grant a security interest in its right, title
and interest therein to Lender and no other person has any right, title, claim,
license or interest (by way of security interest or other lien, charge or
otherwise) in, against or to the Collateral; (b) Debtor has full power and
authority to execute this Security Agreement and perform its obligations
hereunder, and to subject the Collateral to the security interest created
hereby; (c) this Security Agreement is effective to create a valid security
interest and, upon the filing of the appropriate financing statements, a
perfected security interest in favor of Lender in the Collateral, and
(d) all action by Debtor necessary to protect and perfect such security
interest has been duly taken.


 


5.               Covenants of Debtor.  Debtor hereby agrees (a) to do all acts
that may be necessary to maintain, preserve and protect the Collateral and not
to fail to renew and not to abandon any Collateral; (b) to pay promptly
prior to delinquency all taxes, assessments, charges, encumbrances and liens
now or hereafter imposed upon or affecting any Collateral; (c) to notify
Lender promptly of any change in Debtor’s name or place of business, or, if
Debtor has more than one place of business, its chief executive office; (d) to
procure, execute and deliver from time to time any endorsements, assignments,
financing statements and other writings reasonably necessary to perfect,
maintain and protect Lender’s security interest hereunder and the priority
thereof; (e) to permit Lender to inspect the Collateral at any reasonable
time, wherever located; (f) not to sell, encumber or otherwise dispose of
or transfer any Collateral or right or interest therein except as hereinafter
provided, and to keep the Collateral free of all security interests (other than
those security interests set forth on Schedule A attached to the
Notes), other liens or charges, except those approved in writing by Lender;
(g) to keep the Collateral in good order and repair; (h) to keep the
Collateral and the records concerning the Collateral at the location(s) set
forth in Section 16 and not to remove the Collateral from such location(s)
without fifteen (15) days notice to Lender; and (i) to comply with all
laws, regulations and ordinances relating to the possession and control of the
Collateral.


 


6.               Authorized
Action by Lender.  In the event any
principal of the Note is not paid when due, Debtor hereby designates and
appoints Lender as attorney-in-fact of Debtor irrevocably and with power of
substitution, with authority to execute and deliver for and on behalf of Debtor
any and all instruments, documents, agreements and other writings necessary or
advisable for the exercise on behalf of Debtor of any rights, benefits or
options created or existing under or pursuant to this Security Agreement; provided,
that Lender shall deliver to the Debtor a copy of any such instruments,
documents, agreements and other writings. 
This power of attorney being coupled with an interest is irrevocable
while any of the Obligations shall remain unpaid.  It is further agreed and understood between the parties hereto
that such care as Lender gives to the safekeeping of its own property of like
kind shall constitute reasonable care of the Collateral when in Lender’s
control.


 


7.               Default and
Remedies.  In the event any
principal of the Notes is not paid when due, Lender may, at its option, do any
one or more of the following: 
(a) foreclose or otherwise enforce


 


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Lender’s security
interest in any manner permitted by law, or provided for in this Security
Agreement; (b) sell, lease or otherwise dispose of any Collateral at one
or more public or private sales, whether or not such Collateral is present at
the place of sale, for cash or credit or future delivery, on such terms and in
such manner as Lender may determine; (c) recover from Debtor all costs and
expenses, including, without limitation, reasonable attorneys’ fees, incurred
or paid by Lender in exercising any right, power or remedy provided by this
Security Agreement or by law; and (d) enter onto property where any
Collateral is located and take possession thereof with or without judicial
process.  In the event any principal of
the Note is not paid when due, Debtor agrees to execute any and all documents
reasonably requested by Lender to enable it to exercise its rights hereunder.


 


8.               Cumulative
Rights.  The rights, powers and
remedies of Lender under this Security Agreement shall be in addition to all
rights, powers and remedies given to Lender by virtue of any statute or rule of
law, the Note or any other agreement, all of which rights, powers and remedies
shall be cumulative and may be exercised successively or concurrently without
impairing Lender’s security interest in the Collateral.


 


9.               Waiver.  Any forbearance or failure to delay by
Lender in exercising any right, power or remedy shall not preclude the further
exercise thereof, and every right, power or remedy of Lender shall continue in
full force and effect until such right, power or remedy is specifically waived
in a writing executed by Lender.


 


10.         Successors and
Assigns; Amendment. This Security Agreement and all rights and obligations
hereunder shall be binding upon Debtor and its successors and assigns, and
shall inure to the benefit of Lender and its respective successors and
assigns.  Neither this Security
Agreement nor any term hereof may be changed, waived, discharged or terminated
except by a written instrument expressly referring to this Security Agreement
and to the provisions so modified or limited, and executed by the parties
hereto.


 


11.         Entire Agreement;
Severability.  This Security
Agreement and the Note contain the entire agreement between Lender and Debtor
with regard to the subject matter hereof. 
If any of the provisions of this Security Agreement shall be held
invalid or unenforceable, this Security Agreement shall be construed as if not
containing those provisions and the rights and obligations of the parties
hereto shall be construed and enforced accordingly.


 


12.         Choice of Law.  THIS SECURITY AGREEMENT AND ALL AMENDMENTS,
SUPPLEMENTS, WAIVERS AND CONSENTS RELATING HERETO SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE  WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
OF LAW.  Where applicable and except as
otherwise defined herein, terms used herein shall have the meanings given them
in the Delaware Uniform Commercial Code.


 


13.         Residence; Trade Name;
Collateral Location Records.  Debtor
represents and warrants that its chief executive office is located at the
address set forth on the signature page to this Security Agreement.


 


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14.         Notice.  All notices and other communications
required to be delivered to any party (a) must be in writing, (b) must be
personally delivered, transmitted by a recognized courier service or
transmitted by facsimile, and (c) must be directed to such party at its address
or facsimile number set forth on the signature pages to this Security
Agreement.  All notices will be deemed
to have been duly given and received on the date of delivery if delivered
personally, three (3) days after delivery to the courier if transmitted by
courier, or the date of transmission with confirmation if transmitted by
facsimile, whichever occurs first.  Any
party may change its address or facsimile number for purposes hereof by notice
to all other parties.


 


15.         Miscellaneous.  This Security Agreement may be executed in
two or more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument. This Security
Agreement may only be amended by a writing duly executed by the parties
hereto.  The headings contained herein
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Security Agreement.


 


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IN WITNESS WHEREOF, the
parties hereto have caused their duly authorized representatives to execute
this Security Agreement as of the date first set forth above.


 


	
  “Debtor”

  	
  “Lender”

  
	
  TRESTLE HOLDINGS, INC.,

  	
  Zaykowski Partners, LP

  
	
  a Delaware corporation

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ GARY FREEMAN

  	
   

  	
  By:

  	
  /s/ PAUL Zaykowski

  	
   

  
	
  Name:

  	
  Gary Freeman

  	
   

  	
  Name:

  	
    Paul Zaykowski

  	
   

  
	
  Title:

  	
  CFO

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Address:

  	
  Address:

  
	
   

  	
   

  
	
  11835 W. Olympic Blvd,
  Suite 550

  Los Angeles, CA 90064

  Attn: Chief Executive Officer

  	
  Attn:

  
	
  Facsimile: (310)

  	
   

  	
   

  	
  Facsimile:

  
														



 


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