EX-10.7



 





Exhibit 10.7




SECURITY AGREEMENT




     This Security Agreement (this “Agreement”) is executed as of July 28, 2004
(“Effective Date”), by USM Systems, Ltd. (“Debtor”), in favor of Integrated
Business System & Services, Inc. (the “Secured Party”).



     WHEREAS, pursuant to that certain promissory note dated May 10, 2004 by
Debtor, as maker, for the benefit of the Secured Party (the “Promissory Note”),
the Secured Party loaned Debtor certain amounts for use by Debtor as working
capital for its business operations in connection with the letter of intent
between Debtor and the Secured Party dated as of May 10, 2004;



     WHEREAS, Debtor and The Chester Przygoda, Jr. Revocable Trust UAD 06/03/04
(the “Trust”) entered into that certain exclusive license agreement dated July
8, 2004 pursuant to which the Trust grants to Debtor the exclusive right to use
the patents and related utility and design features including all improvements,
enhancements and modifications thereto set forth on the attached Exhibit A
(collectively, the “Patents”) in connection with the manufacture, sale and
distribution of any products within the purview of, or using any of, the
Patents;



     NOW, THEREFORE, for the consideration set forth in this Agreement and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, Debtor agrees to the following:



     1. Granting of Security Interest. To secure the prompt payment and
performance of all of Debtor’s debts, duties, liabilities and obligations to
the Secured Party under the Promissory Note and all renewals, modifications and
extensions thereof (collectively, “USMS Obligations”), Debtor hereby grants to
the Secured Party a first priority security interest in (a) all accounts,
general intangibles, instruments, rents, monies, payments and all other rights,
now or hereafter acquired, arising out of the sale, lease, license or other
disposition of any goods or related software generated from the Patents and all
proceeds thereof; and (b) all payment intangibles resulting from the Reseller
Agreement dated April 11, 2000 between Debtor and the Secured Party and all
proceeds thereof (collectively, the “Collateral”). The Collateral shall remain
subject to the Secured Party’s security interest until all of the USMS
Obligations are paid and satisfied in full or until otherwise cancelled or
terminated by the Secured Party in accordance with the terms of this Agreement.
The security interest on the Collateral shall be subordinate and otherwise
subject to the rights of Midwest Guaranty Bank (the “Bank”) under that certain
commercial security agreement between the Bank and Debtor dated as of February
8, 2002 for those amounts outstanding under such security agreement as of the
date hereof (the “Bank Lien”).



     2. Representations and Warranties. Debtor represents and warrants to the
Secured Party that: (a) Debtor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Michigan; (b)
Debtor has full power and authority to execute, deliver and perform this
Agreement; (c) Debtor now has and shall at all subsequent times shall have,
exclusive, good and marketable title to the Collateral, free and clear of all



 









 





claims, security interests, liens and encumbrances whatsoever, except the
security interest evidenced by this Agreement and the Bank Lien; and (d) the
security interest granted to the Secured Party in this Agreement shall
constitute at all times a valid, enforceable, duly-perfected, first-priority
security interest in the Collateral, except the Bank Lien. Debtor shall not
grant any security interest in or permit any lien or encumbrance on any of the
Collateral in favor of any person or entity.




     3. Additional Documents. Debtor hereby authorizes the Secured Party to
file all financing statements and continuation statements necessary or
desirable to perfect and maintain the Secured Party’s security interest in the
Collateral.



     4. Default. Debtor’s failure to pay or to pay or perform as and when due
any of the USMS Obligations or Debtor’s failure to comply with any of the terms
and conditions of this Agreement shall constitute an event of default under
this Agreement. Upon the occurrence of any event of default: (a) the Secured
Party may, at its sole election, without notice to Debtor, declare all of the
USMS Obligations immediately due and payable; and (b) the Secured Party may
pursue all of its other rights and remedies under this Agreement and applicable
law. Debtor shall pay to the Secured Party promptly all of the Secured Party’s
attorneys’ fees and costs relating to the enforcement of this Agreement and the
Secured Party’s rights in the Collateral, and all of those fees and costs shall
be secured by the Secured Party’s security interest in the Collateral. Debtor
waives all notices and demands which either may be entitled to receive with
respect to the Collateral or this Agreement under applicable law. If
applicable law requires the Secured Party to give Debtor notice of a proposed
disposition of the Collateral, notice given by the Secured Party five days
before the proposed disposition shall be deemed reasonable.



     5. Nonwaiver. The Secured Party’s failure at any time or times after the
Effective Date to require strict performance of this Agreement shall not waive
any right of the Secured Party at any time to demand strict performance of this
Agreement, and any waiver by the Secured Party of any default shall not waive
or affect any other default.



     6. Notice. Any notice permitted or required under this Agreement shall be
deemed given if in writing and delivered personally or by facsimile or mailed
by registered or certified mail, return receipt requested, to the respective
addresses listed below or such subsequent addresses of which the parties give
each other written notice:



	 	 	 
	To Debtor:

	 	To the Secured Party:
	 
	 	 
	USM Systems, Ltd.

	 	Integrated Business System & Services, Inc.
	2998 Eleven Mile Road, Suite 200

	 	1601 Shop Road, Suite E
	Berkley, Michigan 48072

	 	Columbia, SC 29201







     7. Miscellaneous. This Agreement shall be binding on, and shall enure to
the benefit of, the parties and their respective successors, heirs and assigns.
This Agreement and any controversy relating to the Collateral or this
Agreement shall be governed by South Carolina law, excluding its conflict of
law principles. This Agreement contains the entire agreement of the



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parties relating to the subject matter and may be modified only by written
Agreement, signed by both parties, expressly modifying this Agreement.




IN WITNESS WHEREOF, the parties hereby execute this Agreement under seal, as is
their intention, as of the Effective Date.




	 	 	 	 	 
	 	 	USM Systems, Ltd.
	 
	 	 	 	 
	

	 	By:
	 	/s/ Chester T. Przygoda, Jr.
	

	 	 	 	
 
	 
	 	 	 	 
	

	 	Name:
	 	Chester T. Przygoda, Jr.
	 
	 	 	 	 
	

	 	Title:
	 	President







3









 






EXHIBIT A




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Country
	 	Atty.Doc. No.
	 	Type
	 	Status
	 	Filing Date
	 	Appl. No.
	 	Patent No.
	 	Issue Date

	U.S.

	 	68127-001
	 	ORD
	 	Granted
	 	April 21, 2000
	 	 	09/558751	 	 	 	6373389	 	 	April 16, 2002
	WO

	 	68127-002
	 	ORD
	 	NATL’S
	 	April 19, 2001
	 	 	01/12671	 	 	 	 	 	 	 
	U.S.

	 	68127-017
	 	CIP
	 	Granted
	 	March 5, 2002
	 	 	10/091858	 	 	 	6717517	 	 	April 6, 2004
	Japan

	 	68127-018
	 	PCT
	 	Published
	 	April 21, 2000
	 	 	579262	 	 	 	 	 	 	 
	European

	 	68127-019
	 	PCT
	 	Published
	 	April 21, 2000
	 	 	01927184.0	 	 	 	 	 	 	 
	Canada

	 	68127-020
	 	PCT
	 	Pending
	 	April 19, 2001
	 	 	2406735	 	 	 	 	 	 	 
	U.S.

	 	68127-022
	 	CON
	 	Pending
	 	January 28, 2004
	 	 	10/766203	 	 	 	 	 	 	 








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