Prepared by MerrillDirect







Exhibit 10.5


 


SECURITY AGREEMENT


 


             THIS
SECURITY AGREEMENT (the "Security Agreement") is made and entered
into this 22nd day of March, 2001, by SWITCHBOARD APPARATUS, INC., a Delaware corporation  ("Borrower"), to and for the
benefit of American National Bank and Trust Company of Chicago
("Bank").


R
E C I T A L S


             A.         Pursuant
to that certain Loan Agreement of even date herewith, by and among Bank,
Borrower and Electric City Corp., a Delaware corporation (“ECC”), as amended
from time to time (the "Loan Agreement"), Bank has agreed to make
available to Borrower and ECC a revolving line of credit (the "Revolving
Credit") in the maximum principal amount of $2,000,000.00 and a term loan
(the “Term Loan”) in the original principal amount of $500,000.00 on the terms
and conditions set forth in the Loan Agreement.  Capitalized terms not defined herein shall have the meanings
ascribed to such terms in the Loan Agreement.


             B.          As
evidence of the indebtedness under the Revolving Credit and the Term Loan,
Borrower and ECC have executed and delivered to Bank that certain Revolving
Note of even date herewith (the “Revolving Note”) and that certain Term Note of
even date herewith (the “Term Note”).


             C.          As
a condition to Bank entering into certain Loan Agreement, Bank requires that
Borrower grant to Bank a first lien on and first security interest in all of
Borrower's property as security for the payment of the Revolving Note and the
Term Note and performance of Borrower's and ECC’s obligations under the Loan
Agreement, and all other documents evidencing, securing or otherwise in
connection with the Revolving Credit and the Term Loan (collectively,
"Loan Documents").


             NOW,
THEREFORE, Borrower, to secure (i) further the payment of the principal sums of
money evidenced by the Revolving Note and the Term Note together with all
interest and other amounts, if any, due in accordance with the terms,
provisions and limitations of the Revolving Note and the Term Note; (ii) the
performance of the covenants and agreements by the Borrower and ECC contained
herein or in the Revolving Note, the Term Note, the Loan Agreement and the
other Loan Documents; and (iii) payments, advances or expenditures made by Bank
to Borrower and other future indebtedness, extended pursuant to the Loan
Agreement, the Revolving Note, the Term Note and the other Loan Documents, as
the same may be amended from time to time, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
hereby grants to Bank a security interest in, and collaterally assigns,
transfers, conveys, confirms, pledges and sets over unto Bank and its
successors and assigns, all of Borrower's tangible and intangible assets and
property whether now or hereafter existing and whether now or hereafter owned,
licensed or acquired by Borrower including, without limitation, all of
Borrower's (a) accounts, chattel paper, contract rights, leases, leasehold
interests, letters of credit, instruments, documents, patents, copyrights,
trademarks, trade names, beneficial interests and general intangibles, (b)
certificated or uncertificated securities, (c) goods, including, without
limitation, all of Borrower's consumer goods, equipment, fixtures and
inventory, (d) documents and instruments, (e) monies, reserves, deposits,
deposit accounts and interest or dividends thereon, cash and cash equivalents,
(f) all books, records and computer records in any way relating to the
foregoing, (g) property now or at any time or times hereafter in the possession
or under the control of Bank or its bailee, (h) liens, guaranties and other
rights and privileges pertaining to any of the foregoing, (i) all accessions to
the foregoing and all substitutions, renewals, improvements and replacements of
and additions to the foregoing, and (j) and all proceeds and products of any of
the foregoing, including, without limitation, proceeds of insurance policies of
the foregoing (all of the property described in this paragraph being
hereinafter referred to as the "Collateral").





             It
is hereby understood and agreed by Borrower as follows:


             1.  Use and Possession of Collateral.  Borrower may retain possession of the
Collateral and, at its expense, keep and use the same in a manner consistent
with applicable law and with any policy of insurance related thereto until an
Event of Default shall occur.


             2.  Transfers; Location of Collateral; Name
Changes.  Borrower agrees that it
will not sell or attempt to sell or assign, lease, mortgage, encumber or
otherwise transfer the Collateral or any interest therein other than (i) sales
of inventory in the ordinary course of business and sales and dispositions
permitted under the Loan Agreement and (ii) the lien and security interest
granted to Bank hereunder and liens and security interests permitted under the
Loan Agreement.  Borrower agrees that it
will maintain the Collateral at and will not remove or permit the removal of
the Collateral from 2820 South 19th Avenue, Broadview, IL 60163,
except such property as shall be sold in the ordinary course of Borrower's business
or renewed or replaced in accordance with Paragraph 4 of this Security
Agreement.  Borrower will not change its
name or any name under which it does business and will not assume any name or
take any action which could necessitate the amending of any financing
statements or other filings by Bank without the prior written consent of Bank
or otherwise affect the perfection or priority of Bank's security interest in
the Collateral.


             3.  Payment of Taxes.  So long as any part of the indebtedness
hereby secured shall remain unpaid, Borrower will pay all personal property
taxes and other governmental charges levied or assessed against the Collateral
or any part thereof, or for its use or operation, or upon this Security
Agreement, before the same become delinquent, and on demand will promptly
furnish the Bank with receipts showing such payment.  Borrower will not permit the Collateral, or any part thereof, to
be levied upon or sold for any tax or assessment whatsoever, nor will it permit
to be done to, in, upon or about the Collateral, anything that may in any way
impair the value thereof, or the security intended to be afforded by this
Security Agreement.


             4.  Maintenance of Collateral.  Borrower will maintain, preserve and keep
the Collateral in good repair and condition subject to normal wear and tear
incurred during the normal course of business, and from time to time will
promptly make needed and proper repairs, replacements, renewals, additions, and
betterments which may be required by reason of use, wear, obsolescence, damage
or destruction, however caused, to the ends that the value of the Collateral
shall be preserved.  All after acquired
property covered hereby and all additions or replacements acquired pursuant to
the provisions of this Paragraph shall immediately be and become, without any
other act, conveyance or mortgage on the part of the Borrower, subject to the
security interest and lien of this Security Agreement, which shall be prior to
any other security interest or lien on such addition or replacement.





             5.  Insurance.  Borrower will insure and keep insured, with insurance companies
acceptable to Bank, all Collateral which is of a character usually insured by
companies similarly situated and operating like properties and as may otherwise
be required by Bank; and will insure such other hazards and risks with
insurance companies acceptable to Bank to the extent usually insured by
companies similarly situated and conducting similar businesses and as may
otherwise be required by Bank.  Borrower
will cause Bank to be named as an additional insured and lender's loss payee on
all such insurance policies and shall cause all such policies to contain a
prohibition against cancellation, modifica­tion or amendment without 30 days
prior written notice to Bank.  Bank
shall apply the insurance proceeds to any outstanding balance of the Loans
pursuant to the Loan Documents.  In the
event that there is no outstanding balance on the Loans and an Event of Default
has not occurred, the insurance proceeds shall be delivered to Borrowers.  Borrower will from time to time upon request
of Bank furnish a certificate setting forth in summary form the nature and
extent of the insurance maintained pursuant to this Paragraph 5.


             6.  Inspections.  Following reasonable notice by Bank,
Borrower will permit Bank, its agents and representatives, to inspect the
Collateral at any reasonable time from time to time during the term of this
Security Agreement.


             7.  Liens and Encumbrances.  Borrower shall not create, incur or permit
to exist any mortgage, pledge, title retention, lien, encumbrance, lease,
easement, or security interest with respect to the Collateral
("Liens"), except for Liens (i) in favor of Bank or (ii) otherwise
consented to in writing by Bank.


             8.  Action by Bank.  If an Event of Default has occurred, Bank
may, but need not, make any payment or perform any act herein required of
Borrower in any form and manner deemed expedient by it, and may, but need not,
purchase, discharge, compromise or settle any tax lien or other lien, security
interest, or other encumbrance at any time levied or placed on the
Collateral.  All monies paid for any of
the purposes herein authorized and expenses paid or incurred in connection
therewith, including reasonable attorneys' fees, and any other monies advanced
by Bank to protect the Collateral and the security interest and lien hereof,
shall be additional indebtedness secured hereby and shall become immediately
due and payable without notice and with interest thereon at the rate set forth
in the Revolving Note.  Inaction of Bank
shall never be considered a waiver of any right accruing to it on account of
any default on the part of Borrower.





             9.  Event of Default.  The occurrence of any Event of Default
specified in the Loan Agreement which is incorporated by this reference as
fully and with the same effect as if set forth herein shall constitute an
"Event of Default" hereunder.


             Upon
the occurrence of an Event of Default, all sums secured hereby shall, at the
option of Bank, become immediately due and payable, without further notice to
Borrower, together with interest thereon from the date of the first of any such
default, at the default rate set forth in the Revolving Note.  After the indebtedness secured by this
Security Agreement shall have become due and payable, whether by lapse of time
or by acceleration, or otherwise, then and in any such event, Bank shall have
the remedies for such default of a "secured party" under the Uniform
Commercial Code as from time to time in effect in Illinois or otherwise
available to it under applicable law including, without limitation, the right
to take immediate and exclusive possession and control of the Collateral or any
part thereof and Bank may enter on Borrower's premises, with judicial process,
to take possession and control of the Collateral and, at its option, remove the
same from Borrower's premises.  Bank
shall be entitled to hold, maintain and preserve and prepare the Collateral for
sale, until disposed of or may propose to retain the Collateral pursuant to
applicable law.  Bank may require
Borrower to assemble the Collateral and make it available to Bank at a place to
be designated by Bank which is reasonably convenient to Borrower and Bank.  Unless the Collateral is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, Bank will give Borrower reasonable notice of the time and
place of any public sale thereof or of the time after which any private sale or
any other intended disposition thereof is to be made.  The requirements of reasonable notice shall be met if such notice
is given to Borrower at least 10 days before the time of the sale or
disposition.


             10.  Fees and Expenses.  In case of any suit or foreclosure at law or
in equity by any person whomsoever relating to or affecting the Collateral, or
any part thereof, or the title thereto, wherein Bank shall be a party, the
reasonable and necessary costs, charges and attorneys' and paralegals' fees and
expenses of Bank therein shall be allowed to Bank, and shall be additional
indebtedness secured hereby and shall be paid out of the proceeds of sale of
the Collateral if not otherwise paid by Borrower.


             11.  Successors and Assigns.  The terms used to designate any of the
parties herein shall be deemed to include their respective successors and
assigns, and the term "Bank" shall also include any lawful owner,
holder or pledgee of the Revolving Note, the Term Note or the indebtedness
secured hereby.  All representations,
warranties, covenants, powers and rights herein contained shall be binding
upon, and shall inure to the benefit of, Borrower and Bank and their respective
legal representatives, successors and assigns.


             12.  Waiver.  No waiver of any default shall operate as a waiver of any other
default or of the same default on a future occasion.  All rights and remedies of Bank hereunder shall be cumulative and
shall be in addition to any other right and remedy given hereunder or now or
hereafter existing at law or in equity or by statute.


             13.  Defense of Collateral.  Borrower, at its sole cost and expense, will
protect and defend the Collateral or any part thereof against all claims
therein or thereto, or any interest therein, and will keep the Collateral free
from any other lien, security interest or encumbrance except as permitted
hereby or unless Borrower is contesting such lien and has delivered a bond or
other security to Bank which is satisfactory to Bank.  Borrower will pay all other claims and charges which, in the
reasonable opinion of Bank, could prejudice, imperil or otherwise adversely
affect the Collateral or its security interest therein.


             14.  Further Assurances.  Borrower will join with Bank in executing
such documents, instruments, financing statements, continuation statements,
partial releases and termination statements as Bank may deem necessary or
appropriate to perfect Bank in the Collateral, pursuant to the Uniform
Commercial Code as from time to time in effect in the State of Illinois.  A photographic, carbon or other reproduction
of this Security Agreement shall be sufficient as a financing statement.





             15.  Receipt of Insurance Proceeds.  In the event of loss to the Collateral
covered herein by insurance, Borrower shall immediately notify Bank of such
loss in writing, and Borrower hereby authorizes and directs each and every
insurance company concerned to make payments for such loss directly and solely
to Bank. Bank is hereby authorized (but not required) to make proof of loss and
to adjust claims in its reasonable discretion, and to collect and receipt for
all proceeds, and Borrower shall sign, upon demand by Bank, all receipts,
vouchers and releases required by the insurance companies.  All references herein to insurance proceeds
shall be deemed to include any interest earned on such proceeds.


             16.  Severability.  If any term, covenant, restriction or
provision of this Security Agreement is determined to be void or unenforceable,
the remainder of the terms, covenants, restrictions and provisions of this
Security Agreement shall remain in full force and effect and shall in no way be
affected, impaired or restricted, and this Security Agreement shall be
enforceable to the fullest extent permitted by applicable law.


             17.  Governing Law.  This Security Agreement shall be governed by
and construed in accordance with the laws of the State of Illinois.


             18.  Beneficiaries.  It is expressly intended, understood and
agreed that this Security Agreement, the Revolving Note, the Term Note, the
Loan Agreement and the other Loan Documents, are made and entered into for the
sole protection and benefits of Borrower and Bank, and their respective
successors and assigns and no other person or persons shall have any right at
any time to action hereon or rights to the proceeds of the Revolving Credit or the
Term Loan; that such proceeds do not constitute a trust fund for the benefit of
any third party; that no third party shall under any circumstances be entitled
to any equitable lien on any such undisbursed loan proceeds at any time and
that Bank shall have a lien upon and right to direct application of any such
undisbursed loan proceeds as provided herein and in the Loan Agreement and the
other Loan Documents.


             19.  Termination.  This Security Agreement is made for
Collateral purposes only and the duties and obligations of Borrower under this
Security Agreement shall terminate when the Revolving Note, the Term Note and
other obligations secured hereby are repaid in full and satisfied.


             20.  Illinois Collateral Protection Act.  Unless Borrower
and ECC provide Bank with evidence of the insurance coverage required by this
Security Agreement, the Bank may purchase insurance at Borrower’s and ECC’s
expense to protect Bank’s interest in the Collateral.  This insurance may, but need not, protect Borrower’s and ECC’s
interests.  The coverage that Bank
purchases may not pay any claim that Borrower or ECC makes or any claim that is
made against Borrower or ECC in connection with the Collateral.  Borrower and ECC may later cancel any
insurance purchased by Bank, but only after providing Bank with evidence that
Borrower and ECC have obtained insurance as required by this Security
Agreement.  If Bank purchases insurance
for the Collateral, Borrower and ECC will be responsible for the costs of that
insurance, including interest and any other charges Bank may impose in
connection with the placement of the insurance, until the effective date of the
cancellation or expiration of the insurance. 
The costs of the insurance may be added to Borrower’s and ECC’s total
outstanding balance or obligation.  The
costs of the insurance may be more than the cost of insurance Borrower and ECC
may be able to obtain on their own.


             21.  Waiver of Jury Trial.  BORROWER WAIVES ANY RIGHT TO TRIAL BY JURY ON ANY
ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (I) UNDER THIS SECURITY
AGREEMENT, THE REVOLVING NOTE, THE TERM NOTE, THE LOAN AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT WHICH
MAY BE DELIVERED IN THE FUTURE IN CONNECTION WITH THE REVOLVING CREDIT OR THE
TERM LOAN OR (II) ARISING FROM THE TRANSACTIONS CONTEMPLATED BY THE REVOLVING
NOTE, THE TERM NOTE, THE LOAN AGREEMENT, THIS SECURITY AGREEMENT OR THE OTHER
LOAN DOCUMENTS AND ANY BANKING RELATIONSHIP BETWEEN BORROWER AND BANK, AND AGREES
THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE
A JURY.


             22.        Jurisdiction
and Venue.  BORROWER IRREVOCABLY AGREES THAT ALL ACTIONS OR
PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO
THE REVOLVING NOTE, THE TERM NOTE, THE LOAN AGREEMENT, THIS SECURITY AGREEMENT
OR ANY OF THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED ONLY IN COURTS HAVING
SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS.  BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY
LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID CITY AND STATE.  BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE
TO TRANSFER OR CHANGE VENUE OF ANY SUCH ACTION OR PROCEEDING.





             23.        Notices.  Any
notice, demand, request or other
communication which any party hereto may be required or may desire to give
hereunder shall be deemed to have been given if made in accordance with the
terms of the Loan Agreement.


             IN
WITNESS WHEREOF, Borrower has executed this Security Agreement as of the date
first set forth above.


 


	 
  	 
  	 
  	 
  	 
  	
  SWITCHBOARD APPARATUS, INC.
  



 




	
  By:
  	
  /s/
  Jeffrey Mistarz


  

  
	
  Name:
  	
  Jeffrey
  Mistarz


  

  
	
  Its:
  	
  Treasurer