Exhibit 10.1
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of May 25, 1999, executed by GATEFIELD
CORPORATION, a Delaware corporation ("DEBTOR"), in favor of ACTEL
CORPORATION, a California corporation ("SECURED PARTY").
RECITALS
A. Debtor and Secured Party have entered into a Convertible Promissory
Note (the "NOTE"), dated the date hereof, in favor of Secured Party.
B. In order to induce Secured Party to extend credit pursuant to the
Note, Debtor has agreed to enter into this Security Agreement and to grant
the security interest in the Collateral described below.
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 with Secured Party as follows:
1. DEFINITIONS AND INTERPRETATION. When used in this security
agreement, the following terms shall have the following respective meanings:
"ADDITIONAL LOAN ELECTION" shall mean Debtor's election, at least ninety
(90) days prior to the date Debtor in good faith estimates that Debtor's
balances of cash and cash equivalents will be less than $1,000,000, but not
earlier than January 1, 2000, to request that Secured Party, in its sole and
absolute discretion, make an additional loan in a principal amount requested
by Debtor not to exceed $4,000,000, on the same terms as the Note, (which
loan shall be secured by the Collateral and may, at Secured Party's option,
be convertible into capital stock of Debtor on the same terms as the Note,
and if Secured Party elects that such loan be convertible, Secured Party's
obligation to make such loan shall be subject to the requirement that there
are a sufficient number of authorized and unissued shares of Debtor's capital
stock available for such conversion at the time such loan is to be made).
"COLLATERAL" shall have the meaning given to that term in Section 2
hereof.
"EMBEDDED PRODUCTS" shall have the meaning given to that term in Section
1.14 of that certain Product Marketing Agreement dated as of August 14, 1998
between Debtor and Secured Party.
"INVENTORY" shall have the meaning given to that term in Attachment 1
hereto.
"LIEN" shall mean, with respect to the Collateral, any security
interest, mortgage, pledge, lien, claim, charge or other encumbrance in, of,
or on the Collateral or the income therefrom, including, without limitation,
the interest of a vendor or lessor under a conditional sale agreement,
capital lease or other title retention agreement, or any agreement to provide
any of the foregoing, and the filing of any financing statement or similar
instrument under the Uniform Commercial Code or comparable law of any
jurisdiction.
"OBLIGATIONS" shall mean and include all loans, advances, debts,
liabilities and obligations, howsoever arising, owed by Debtor to Secured
Party of every kind and description (whether or not
evidenced by any note or instrument and whether or not for the payment of
money), now existing or hereafter arising under or pursuant to the terms of
the Note or this Security Agreement, including, all interest, fees, charges,
expenses, reasonable attorneys' fees and costs chargeable to and payable by
Debtor hereunder and thereunder, in each case, whether direct or indirect,
absolute or contingent, due or to become due, and whether or not arising
after the commencement of a proceeding under Title 11 of the United States
Code (11 U.S.C. Section 101 ET SEQ.), as amended from time to time (including
post-petition interest) and whether or not allowed or allowable as a claim in
any such proceeding.
"PERMITTED LIENS" shall mean (i) Liens for taxes or other governmental
charges not at the time delinquent or thereafter payable without penalty or
being contested in good faith, provided provision is made to the reasonable
satisfaction of Secured Party for the eventual payment thereof if
subsequently found payable; (ii) Liens of carriers, warehousemen, mechanics,
materialmen, vendors, and landlords incurred in the ordinary course of
business for sums not overdue or being contested in good faith, provided
provision is made to the reasonable satisfaction of Secured Party for the
eventual payment thereof if subsequently found payable; (iii) Liens existing
as of the date hereof and identified in item 9 of Attachment 2 to this
Security Agreement; (iv) in the event Debtor requests that Secured Party make
an additional loan to Debtor pursuant to an Additional Loan Election, but
Secured Party elects not to make such additional loan, Liens in favor of any
single third party lender securing indebtedness in an aggregate amount not to
exceed the principal amount of $4,000,000 at any time outstanding; (v) Liens
in favor of Secured Party; (vi) Liens on leased equipment granted in
connection with the leasing of such equipment in favor of the lessor of such
equipment; (vii) Liens created by or resulting from any litigation or legal
proceeding which is currently being contested in good faith by appropriate
proceedings; and (viii) Liens created by or resulting from purchase money
financings.
"RECEIVABLES" shall have the meaning given to that term in Attachment 1
hereto.
"UCC" shall mean the Uniform Commercial Code as in effect in the State
of California from time to time.
All capitalized terms not otherwise defined herein shall have the
respective meanings given in the Note. Unless otherwise defined herein, all
terms defined in the UCC shall have the respective meanings given to those
terms in the UCC.
2. GRANT OF SECURITY INTEREST. As security for the Obligations,
Debtor hereby pledges and assigns to Secured Party and grants to Secured
Party a security interest in all right, title and interest of Debtor in and
to the property described in Attachment 1 hereto (collectively and severally,
the "COLLATERAL"), which Attachment 1 is incorporated herein by this
reference.
3. REPRESENTATIONS AND WARRANTIES OF DEBTOR. Debtor represents and
warrants to Secured Party that (a) Debtor is the owner of the Collateral (or,
in the case of after-acquired Collateral, at the time Debtor acquires rights
in the Collateral, will be the owner thereof) and that no other person has
(or, in the case of after-acquired Collateral, at the time Debtor acquires
rights therein, will have) any right, title, claim or interest (by way of
Lien or otherwise) in, against or to the Collateral, except for Permitted
Liens; (b) upon filing of a UCC-1 financing statement, Secured Party has (or
in the case of after-acquired Collateral with respect to which a Security
interest may be perfected in the State of California by filing under Article
9 of the California Uniform Commercial Code, at the time Debtor acquires
rights therein, will have) a perfected security interest in the Collateral,
subject to no Liens other than Permitted Liens, and additional filings have
been made or will be made with the United States Copyright Office and/or
Patent Trademark Office as are necessary to perfect the Secured Party's
security interest in ownership rights and interests of Debtor in all
copyrights, patents, and trademarks constituting Collateral; (c) all
Inventory has been (or, in the case of hereafter produced Inventory, will be)
produced in compliance in all material
respects with applicable laws; (d) each Receivable represents a valid
obligation of the customers of Debtor arising from bona fide transactions
entered into in the ordinary course of business; and (e) all information set
forth in Attachment 2 hereto is true and correct.
4. REPRESENTATIVES AND WARRANTIES OF SECURED PARTY. Secured Party has
been advised that neither the Note nor the Convertible Securities issuable
upon conversion of the Note nor the Common Stock issuable upon conversion of
the Convertible Securities (collectively, the "Securities") have been
registered under the Securities Act of 1933, as amended (the "Securities
Act"), or any state securities laws and, therefore, cannot be resold unless
registered under the Securities Act and applicable state securities laws or
unless an exemption from such registration requirements is available.
Secured Party also understands that the Securities are being offered and sold
pursuant to an exemption from registration contained in the Securities Act
based in part upon Secured Party's representations contained herein. Secured
Party is aware that Debtor is under no obligation to effect any such
registration with respect to the Securities or to file for or comply with any
exemption from registration. Secured Party also understands that there is no
assurance that any exemption from registration under the Securities Act will
be available and that, even if available, such exemption may not allow
Secured Party to transfer all or any portion of the Securities under the
circumstances, in the amounts or at the times Secured Party might propose.
Secured Party is purchasing the Securities for its own account for
investment, not as a nominee or agent, and not with a view to, or for resale
in connection with, the distribution thereof. Secured Party has such
knowledge and experience in financial and business matters that Secured Party
is capable of evaluating the merits and risks of such investment, is able to
incur a complete loss of such investment and is able to bear the economic
risk of such investment for an indefinite period of time. Secured Party is
an accredited investor as such term is defined in Rule 501 of Regulation D
under the Securities Act.
5. COVENANTS RELATING TO COLLATERAL. Debtor hereby agrees (a) to
perform all acts that may be necessary to maintain, preserve, protect and
perfect the Collateral (ordinary wear and tear excepted), the Lien granted to
Secured Party therein and the first priority of such Lien, except for
Permitted Liens; (b) not to use or permit any Collateral to be used (i) in
violation of any provision herein, (ii) in any material violation of any
applicable law, rule or regulation, or (iii) in violation of any policy of
insurance covering the Collateral; (c) to pay when due all taxes and other
governmental charges, all Liens and all other charges now or hereafter
imposed upon or affecting any Collateral which, if unpaid, might become a
Lien upon the Collateral or any part thereof; (d) not to change Debtor's name
without 15 days' prior written notice to Secured Party, or Debtor's residence
or the office in which Debtor's records relating to Receivables are kept
without 15 days prior written notice to Secured Party; (e) not to keep
Collateral consisting of Inventory at any location other than the locations
set forth in item 4 of Attachment 2 hereto, except that upon at least 15 days
prior written notice to Secured Party, Debtor may move Collateral to other
locations within the United States; (f) to procure, execute and deliver from
time to time any endorsements, assignments, financing statements and other
writings reasonably deemed necessary or appropriate by Secured Party to
perfect, maintain and protect its Lien hereunder and the priority thereof;
(g) to appear in and defend any action or proceeding which may affect its
title to or Secured Party's interest in the Collateral; (h) to comply with
all material requirements of law relating to the production, possession,
operation, maintenance and control of the Collateral except for such
non-compliance as could not reasonably be expected to have a material adverse
effect on the value of any such Collateral; (i) to keep accurate and complete
records of the Collateral and to provide Secured Party with such records and
information relating to the Collateral as Secured Party may reasonably
request from time to time; (j) not to surrender or lose possession of (other
than to Secured Party), sell or otherwise dispose of or transfer any
Collateral or right or interest therein, other than (i) the sale of Inventory
and the disposal of worn-out or obsolete equipment, all in the ordinary
course of Debtor's business and (ii) the granting of licenses in Embedded
Products, and to keep the Collateral free of all Liens except Permitted
Liens; and (k) to collect, enforce and receive delivery of the Receivables in
accordance with past practice until otherwise notified by Secured Party.
6. SUBORDINATION. In the event that (a) Debtor has requested that
Secured Party make an additional loan to Debtor pursuant to an Additional
Loan Election, (b) Secured Party has elected not to make such additional loan
(and Secured Party shall deemed to have elected not to make such additional
Loan to Debtor unless Secured Party notifies Debtor of its election to make
such additional loan in writing no later than ten (10) days after Secured
Party's receipt of the Additional Loan Election); and (c) Debtor has obtained
a loan from a third party lender in an aggregate principal amount not to
exceed $4,000,000, which loan is secured by a Lien described in clause (iv)
of the definition of "Permitted Lien," then Secured Party agrees to execute a
subordination agreement in favor of such third party lender, subordinating
the Lien in the Collateral provided for in this Security Agreement to such
Permitted Lien in favor of such third party lender, and which subordination
agreement shall contain such other terms and provisions as are reasonably
acceptable to Secured Party.
7. AUTHORIZED ACTION BY AGENT. Debtor hereby irrevocably appoints
Secured Party as its attorney-in-fact and agrees that Secured Party may
perform (but Secured Party shall not be obligated to and shall incur no
liability to Debtor or any third party for failure so to do) any act which
Debtor is obligated by this Security Agreement to perform, and to exercise
such rights and powers as Debtor might exercise with respect to the
Collateral, including the right to (a) collect by legal proceedings or
otherwise and endorse, receive and receipt for all dividends, interest,
payments, proceeds and other sums and property now or hereafter payable on or
on account of the Collateral; (b) enter into any extension, reorganization,
deposit, merger, consolidation or other agreement pertaining to, or deposit,
surrender, accept, hold or apply other property in exchange for the
Collateral; (c) insure, process and preserve the Collateral; (d) make any
compromise or settlement, and take any action it deems advisable, with
respect to the Collateral; (e) pay any indebtedness of Debtor relating to the
Collateral; and (f) execute UCC financing statements and other documents,
instruments and agreements required hereunder; PROVIDED, HOWEVER, that
Secured Party shall not exercise any such powers prior to the occurrence of
an Event of Default and shall only exercise such powers during the
continuance of an Event of Default. Debtor agrees to reimburse Secured Party
upon demand for any reasonable costs and expenses, including attorneys' fees,
Secured Party may incur while acting as Debtor's attorney-in-fact hereunder,
all of which costs and expenses are included in the Obligations. It is
further agreed and understood between the parties hereto that such care as
Secured Party gives to the safekeeping of its own property of like kind shall
constitute reasonable care of the Collateral when in Secured Party's
possession; PROVIDED, HOWEVER, that Secured Party shall not be required to
make any presentment, demand or protest, or give any notice and need not take
any action to preserve any rights against any prior party or any other person
in connection with the Obligations or with respect to the Collateral.
8. DEFAULT AND REMEDIES. Debtor shall be deemed in default under this
Security Agreement upon the occurrence of any of the following, each of which
shall be deemed an "Event of Default":
(a) If any Event of Default, under and as defined in the Note,
shall occur (giving effect to any grace or cure period provided for therein);
(b) If Debtor shall fail to perform any covenant to be performed
by it under this Security Agreement and such failure shall continue
unremedied or unwaived by Secured Party for a period of thirty (30) days;
(c) If this Security Agreement shall in any respect cease to be,
or Debtor shall assert that this Security Agreement or the Note is not, a
legal, valid and binding obligation of Debtor enforceable in accordance with
its terms.
Upon the occurrence and during the continuance of any such Event of
Default, Secured Party shall have the rights of a secured creditor under the
UCC and applicable federal law, all rights granted by this Security Agreement
and by law, including the right to require Debtor to assemble the Collateral
and make it available to Secured Party at the location of such Collateral set
forth in item 4 of Attachment 2 and use any trademark, trade name, copyright,
patent or technical process used by Debtor in connection with any disposition
of such Collateral. Debtor hereby agrees that ten (10) days' notice of any
intended sale or disposition of any Collateral is reasonable. In furtherance
of Secured Party's rights hereunder, Debtor hereby grants to Secured Party,
an irrevocable, non-exclusive license (exercisable without royalty or other
payment by Secured Party, but only in connection with the exercise of
remedies hereunder) to use, license or sublicense any patent, trademark,
trade name, copyright or other intellectual property in which Debtor now or
hereafter has any right, title or interest together with the right of access
to all media in which any of the foregoing may be recorded or stored.
9. EMBEDDED PRODUCTS. Debtor and secured party hereby acknowledge and
agree that nothing contained herein shall prohibit or otherwise restrict
debtor from licensing the embedded products to third parties and no such
licensing shall be deemed to be an event of default hereunder.
10. MISCELLANEOUS.
(a) NOTICES. Except as otherwise provided herein, all notices,
requests, demands, consents, instructions or other communications to or upon
Debtor or Secured Party under this Security Agreement shall be by telecopy or
in writing and telecopied, mailed or delivered to each party at telecopier
number or its address set forth below (or to such other telecopy number or
address as the recipient of any notice shall have notified the other in
writing). All such notices and communications shall be effective (a) when
sent by Federal Express or other overnight service of recognized standing, on
the business day following the deposit with such service; (b) when mailed, by
registered or certified mail, first class postage prepaid and addressed as
aforesaid through the United States Postal Service, upon receipt; (c) when
delivered by hand, upon delivery; and (d) when telecopied, upon confirmation
of receipt.
SECURED PARTY:
ACTEL CORPORATION
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: President
Telephone:
Telecopy:
DEBTOR:
GATEFIELD CORPORATION
00000 Xxxxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: President
Telephone: 000-000-0000
Telecopy: 000-000-0000
(b) NONWAIVER. No failure or delay on Secured Party's part in
exercising any right hereunder shall operate as a waiver thereof or of any
other right nor shall any single or partial exercise of any such right
preclude any other further exercise thereof or of any other right.
(c) AMENDMENTS AND WAIVERS. This Security Agreement may not be
amended or modified, nor may any of its terms be waived, except by written
instruments signed by Debtor and Secured Party. Each waiver or consent under
any provision hereof shall be effective only in the specific instances for
the purpose for which given.
(d) ASSIGNMENTS. This Security Agreement shall be binding upon
and inure to the benefit of Secured Party and Debtor and their respective
successors and assigns; PROVIDED, HOWEVER, that Debtor may not sell, assign
or delegate rights and obligations hereunder without the prior written
consent of Secured Party, and PROVIDED, FURTHER, that Secured Party may only
sell, assign or delegate its rights and obligations hereunder without the
prior written consent of Debtor to the extent permitted by the Note.
(e) CUMULATIVE RIGHTS, ETC. The rights, powers and remedies of
Secured Party under this Security Agreement shall be in addition to all
rights, powers and remedies given to Secured Party by virtue of any
applicable law, rule or regulation of any governmental authority, all of
which rights, powers, and remedies shall be cumulative and may be exercised
successively or concurrently without impairing Secured Party's rights
hereunder. Debtor waives any right to require Secured Party to proceed
against any person or to exhaust any Collateral or to pursue any remedy in
Secured Party's power.
(f) PARTIAL INVALIDITY. If at any time any provision of this
Security Agreement is or becomes illegal, invalid or unenforceable in any
respect under the law or any jurisdiction, neither the legality, validity or
enforceability of the remaining provisions of this Security Agreement nor the
legality, validity or enforceability of such provision under the law of any
other jurisdiction shall in any way be affected or impaired thereby.
(g) EXPENSES. Debtor shall pay on demand all reasonable fees and
expenses, including reasonable attorneys' fees and expenses, incurred by
Secured Party in connection with custody, preservation or sale of, or other
realization on, any of the Collateral or the enforcement or attempt to
enforce any of the Obligations which is not performed as and when required by
this Security Agreement.
(h) GOVERNING LAW. This Security Agreement shall be governed by
and construed in accordance with the laws of the State of California without
reference to conflicts of law rules (except to the extent governed by the
UCC).
(i) TERMINATION. This Security Agreement shall terminate upon
the conversion, repayment or performance in full of the Note.
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IN WITNESS WHEREOF, Debtor has caused this Security Agreement to be executed as
of the day and year first above written.
GATEFIELD CORPORATION, A DELAWARE
CORPORATION, as Debtor
By: /s/ Xxxxxxx Xxxx
-----------------------------
Name: Xxxxxxx Xxxx, President and CEO
AGREED:
ACTEL CORPORATION, A CALIFORNIA CORPORATION,
as Secured Party
By: /s/ Xxxxx X. Xxxxx
-------------------------------
Name: Xxxxx X. Xxxxx
Title: Senior VP Technology and Operations
