SECURITY AGREEMENT

Date:

 

Effective Date:

 

Debtor:

575 Anton Blvd., Suite 300
Costa Mesa, Orange County CA 92626

PACIFIC DECISION SCIENCE CORPORATION, a Delaware Corporation

490 Villaume Avenue
South St. Paul, MN 55075-2443
Attention: General Counsel
(or any other place that Secured Party may designate in writing).

a loan (the “Loan”) to be made by Secured Party to Debtor pursuant to a Secured Promissory Note (the “Note”) of even date herewith in the original principal sum of One Million Eight Hundred Thousand Dollars ($1,800,000.00);

“Collateral” . The Collateral shall consist of all of the personal property of Debtor, wherever located, and now owned or hereafter acquired including but not limited to :

Accounts, including Accounts Receivable;

Chattel paper;

Equipment;

Instruments, including Promissory Notes;

Deposit accounts,

Fixtures;

Inventory;

Goods;

Documents;

Investment property;

Debtor’s claims against third parties;

Letter-of-credit rights;

General intangibles, including payment intangibles;

Supporting obligations;

All tangible and intangible assets set forth in paragraph 5. to Exhibit A of the Asset Purchase Agreement between the Debtor and the Secured Party, dated the date hereof (the “Purchase Agreement”);

Licenses described on Schedule 1 attached to the Purchase Agreement; and

To the extent not listed above as original collateral, proceeds and products of the foregoing and all books and records related to the foregoing.

“Obligations” . This Security Agreement secures the following:

Debtor’s obligations under the Note and this Security Agreement;

the repayment of: (a) any amounts that Secured Party may advance or spend for the maintenance or preservation of the Collateral following a Default by Debtor and (b) any other expenditures that Secured Party may make under the provisions of this Security Agreement for the benefit of Debtor; and

all amounts owed under any modifications, renewals or extensions of any of the foregoing obligations.

“UCC” . Any term used in the Uniform Commercial Code (“UCC”) and not defined in this Security Agreement has the meaning given to the term in the UCC.

Debtor grants a security interest in the Collateral to Secured Party to secure the payment or performance of the Obligations.

Filing of financing statement .

Debtor authorizes Secured Party to file a financing statement (the “Financing Statement”) describing the Collateral. Additionally, Debtor agrees to execute and deliver to Secured Party such additional documents as Secured Party may reasonably request in order to perfect Secured Party’s interest in the Collateral, provided that such documents shall be prepared at Secured Party’s sole cost and expense.

Possession .

Debtor shall have possession of the Collateral. If any Collateral is in the possession of a third party, Debtor will join with Secured Party in notifying the third party of Secured Party’s security interest and obtaining an acknowledgment from the third party that it is holding the Collateral for the benefit of Secured Party.

Inspection . Secured Party may inspect any Collateral, at any time upon reasonable written notice of not less than five (5) business days given after an Event of Default as that term is defined in Section 7 below.

Secured Party’s Collection Rights . Secured Party shall have the right at any time to enforce Debtor’s rights against the account debtors and obligors, upon an Event of Default and upon ten (10) days’ written notice.

Limitations on Obligations Concerning Maintenance of Collateral .

Risk of Loss. Debtor has the complete risk of loss of the Collateral;

No Collection Obligation. Secured Party has no duty to collect any income accruing on the Collateral or to preserve any rights relating to the Collateral.

Title to and transfer of Collateral . It has rights in or the power to transf