SECURITY AGREEMENT
This Security Agreement is made on 8-1-04,
between AmeriChip Tool and Abrasives,
LLC, a wholly owned subsidiary of AmeriChip
International, Inc. of Detroit,
Michigan ("Debtor"), and National Abrasive
Systems, Co., a Michigan Corporation
of Detroit, Michigan ("Secured Party").
1. Grant of Security
Interest. Debtor grants to Secured Party a continuing
security interest in all items listed in
Attachment "A".
2. Indebtedness Secured.
The foregoing security interest is given to
secure payment and performance of all
indebtedness and obligations of Debtor to
Secured Party under this Agreement and the
indebtedness and obligations owing to
Secured Party by Debtor pursuant to a
Promissory Note of even date, including
any and all modifications, extensions, and
renewals.
The
indebtedness and obligations that are secured by this security
interest are collectively called the
"indebtedness."
3. Warranties,
Representatives, and Agreements. Debtor warrants and
represents to Secured party, and agrees, as
follows:
(a) Debtor
is a limited liability company and is organized and is in good
standing
under the laws of the state of Michigan; Debtor has full power
and
authority to enter into and perform its obligations under this
agreement;
the execution, delivery, and performance of this agreement have
been duly
authorized by all necessary action of Debtor's members and
managers
and will not violate Debtor's articles of organization or
operating
agreement; this agreement is the valid and binding obligation
of
Debtor,
enforceable in accordance with its terms.
(b) All
information that Debtor has furnished or in the future
furnishes
to Secured
Party concerning Debtor or the Collateral, including without
limitation, all financial statements and all information concerning
the
condition,
quality or value of the Collateral, is and will be correct and
complete.
(c)
Debtor's exact legal name is set forth in the first paragraph of
this
Agreement.
(d) Debtor
is the owner of the collateral, and none of the collateral is
subject to
any lien, security interest, encumbrance, or claim in favor of
any third
party, and no financing statement is on file in any public
office
covering any of the collateral.
4. Agreements of Debtor. Debtor agrees
that:
(a) Debtor
will not cause or permit any lien, security interest or
encumbrance to be placed on any collateral, except in favor of
Secured
Party and
Debtor will not sell, assign, or transfer any collateral or
permit any
collateral to be transferred by operation of law.
(b) Debtor
will maintain all records concerning the collateral at Debtor's
address
appearing on the first page of this agreement and will keep all
collateral
at the present location or locations of the collateral.
(c) Debtor
will furnish Secured Party with the information regarding the
collateral
that Secured Party shall from time to time request and will
allow
Secured Party at any reasonable time to inspect the collateral
and
Debtor's
records regarding the collateral.
(d) Debtor
will execute, file, record, or procure from third persons the
financing
statements, subordination agreements, and other documents and
take all
other action that Secured party necessary to perfect, to
continue
perfection
of, or to maintain first priority of Secured Party's security
interest
in the collateral.
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(e)
Secured Party may file a photography of this agreement as a
financing
statement
evidencing Secured Party's security interest in the collateral.
(f) Debtor
will immediately notify Secured Party in writing of any change
in
Debtor's business structure, and of any change in the location
of
Debtor's
place of business and of the location of each additional place
of
business
established by Debtor.
(g) Debtor
will indemnify Secured Party with respect to all losses,
damages,
liabilities, and expenses (including attorney fees) incurred by
Secured
Party by reason of any failure of Debtor to comply with any of
Debtor's
obligations under this agreement or by reason of any warranty
or
representation made by Debtor to
Secured Party in this agreement being
false in
any material respect.
(h) Debtor
will maintain all collateral in good condition and repair and
maintain
fire and extended coverage insurance covering all tangible
collateral
in the amounts and against the risks that are customarily
maintained
by similar businesses, or as Secured Party may reasonably
request.
Each insurance policy will contain a standard lender's loss
payable
endorsement and will provide that its proceeds will be payable
to
Secured
Party to the extent of Secured Party's interest in the
collateral
and that
the policy will not be canceled, and the coverage will not be
reduced,
without at least 10 days' prior written notice by the insurer
to
Secured
Party and will be in the form and substance satisfactory to
Secured
Party. Debtor will provide Secured Party with evidence of the
insurance
coverage. On Secured Party's request, Deb
