EXHIBIT 10.2
EXECUTION VERSION
SECURITY AGREEMENT
SECURITY AGREEMENT dated as of July 2, 2004 by and among XXXXXX
TECHNOLOGIES, INC., a Delaware corporation (the "DEBTOR"), the subsidiaries of
the Debtor listed on the signature pages hereto (the "Subsidiaries") and XXXXXXX
CAPITAL II, L.P., a Delaware limited partnership (the "SECURED PARTY") as
collateral agent for itself and STRATEGIC ENTREPRENEUR FUND II, L.P., a Delaware
limited partnership ("SEF").
RECITALS
WHEREAS, the Debtor is a party to that certain Subordinated Bridge Loan
Agreement dated as of May 7, 2004 (as amended and in effect from time to time,
the "LOAN AGREEMENT"), by and among the Debtor, as borrower, and the Secured
Party and SEF, as lenders. Pursuant to the Loan Agreement, the Secured Party and
SEF have agreed to make loans and otherwise extend credit to the Debtor.
NOW, THEREFORE, in consideration of the covenants and agreements
contained herein and in the Loan Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE 1 - GRANT OF SECURITY
Section 1.1. GRANT OF SECURITY. The Debtor and the Subsidiaries hereby
grant to the Secured Party a continuing security interest (the "SECURITY
INTEREST") in and to all properties and assets of the Debtor and the
Subsidiaries, whether now or hereafter existing or now or hereafter acquired and
wherever located, including, without limitation, all of the following:
(a) all debts, obligations and liabilities in whatever form
owing from any Person to the Debtor or any Subsidiaries, including (i)
all accounts and accounts receivable, (ii) notes, bills, drafts,
acceptances, instruments, documents and chattel paper, (iii) claims
arising out of the use of a credit or charge card, (iv) guaranties and
security therefor, (v) all right, title and interest in the property or
services that gave rise thereto (including rights to reclamation and
stoppage in transit and all rights of an unpaid seller of goods or
services) and (vi) anything constituting an Account, Chattel Paper,
Document, Instrument, Letter of Credit Right or Supporting Obligation
(all hereinafter referred to as "RECEIVABLES");
(b) all inventory including (i) raw materials, work in process
and finished goods, (ii) other tangible personal property held for sale
or lease to be furnished under contracts of service or used or consumed
in the business of the Debtor or any Subsidiaries, (iii) inventory
returned to or repossessed by the Debtor or any Subsidiaries and (iv)
anything constituting inventory under the Uniform Commercial Code (all
hereinafter referred to as "INVENTORY");
(c) all equipment and goods, including (i) machinery,
computers, molds, tools, dies, motor vehicles and parts and supplies
therefor, (ii) all right, title and interest in and to any goods now or
hereafter held or used by the Debtor or any of the Subsidiaries under
any lease, lease-purchase, conditional sales, use or similar
agreements, and (iii) anything other than Inventory constituting Goods
(all hereinafter referred to as "EQUIPMENT");
(d) all General Intangibles;
(e) money, cash, bank accounts, certificates of deposit and
anything constituting a Deposit Account (all hereinafter "DEPOSITS");
(f) Investment Property;
(g) Commercial Tort Claims as more particularly described on
EXHIBIT A; and
(h) any additions, substitutions, accessions, products and
proceeds of the foregoing, including insurance proceeds and
condemnation awards (hereinafter referred to as "PROCEEDS").
All of the foregoing is hereinafter referred to as the "COLLATERAL".
Section 1.2. SECURITY FOR OBLIGATIONS. The Security Interest shall
secure the payment and performance of the Obligations.
ARTICLE 2 - GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
The Debtor and the Subsidiaries jointly and severally represent,
warrant and covenant to the Secured Party as follows:
Section 2.1. ORGANIZATION. The Debtor and each Subsidiary is a
corporation or other entity duly organized, validly existing and in good
standing in the jurisdiction of organization set forth on the signature pages
hereto and in any other jurisdiction in which it carries on its business.
Section 2.2. NO LIENS; PRIORITY. The Debtor and the Subsidiaries are,
and with respect to Collateral acquired after the date hereof will be, the
owners of all Collateral free from any Lien other than (i) Liens permitted under
the Loan Agreement and (ii) the rights of Silicon Valley Bank ("SVB") under the
Export-Import Bank Loan and Security Agreement dated February 24, 2004 among the
Debtor, the Subsidiaries and SVB (the "SVB Lien"). The Debtor and the
Subsidiaries shall defend the Collateral against all claims and demands of all
Persons at any time claiming any interest therein adverse to the Secured Party,
other than claims (a) by holders of such permitted Liens, (b) by SVB in respect
of the SVB Lien or (c) in respect of purchase money security interests in
existing or hereinafter acquired Equipment; PROVIDED that any such security
interest is limited to the specific items of such Equipment and then only to the
extent of the obligations of the Debtor and the Subsidiaries that underlie such
2
security interest. This Agreement creates in favor of the Secured Party a valid
and perfected security interest in the Collateral, securing the payment of the
Obligations, second in priority only to the SVB Lien and then only for so long
as the SVB Lien shall exist, pursuant to the terms of the Subordination
Agreement dated May 7, 2004 among the Debtor, the Secured Party, SEF and SVB
(the "SUBORDINATION AGREEMENT").
Section 2.3. PRINCIPAL EXECUTIVE OFFICE; RECORDS. As of the date
hereof, the principal executive offices of the Debtor and the Subsidiaries are
located at the addresses indicated on EXHIBIT A hereto. A complete set of books
of account and records of the Debtor and the Subsidiaries relating to the
Collateral is, and will continue to be, kept at such principal executive office.
The Debtor shall not establish a new principal executive officer or fail to keep
books of account and such records at its principal executive office unless (a)
it shall have given to the Secured Party not less than 15 days' prior written
notice of its intention to do so, clearly describing such new location and
providing such other information in connection therewith as the Secured Party
may reasonably request and (b) with respect to such new location, it shall have
taken all action reasonably satisfactory to the Secured Party to maintain the
security interest of the Secured Party in the Collateral that is granted hereby
at all times fully perfected and in full force and effect.
Section 2.4. LOCATION OF INVENTORY AND EQUIPMENT. As of the date
hereof, all Inventory and Equipment held by the Debtor and the Subsidiaries is
located at one of the locations shown on EXHIBIT A hereto, in possession of an
employee of the Debtor or the Subsidiaries or located in the co-location space
pursuant to the Inflow Master Services Agreement between the Debtor and Inflow.
The Debtor and the Subsidiaries agree that all Inventory and Equipment
subsequently acquired by any of them shall be kept at (or shall be in transport
to) the locations shown on EXHIBIT A hereto, in possession of an employee of the
Debtor or the Subsidiaries or located in the co-location space pursuant to an
agreement with Inflow. The Debtor and the Subsidiaries shall not locate
Inventory and Equipment at a location other than a location where Inventory and
Equipment is located on the date hereof unless (a) they shall have given to the
Secured Party not less than 15 days' prior written notice of their intention so
to do, clearly describing such new location and providing such other information
in connection therewith as the Secured Party may reasonably request and (b) with
respect to such new location, they shall have taken all action reasonably
satisfactory to the Secured Party to maintain the security interest of the
Secured Party in the Collateral that is granted hereby at all times fully
perfected and in full force and effect.
Section 2.5. BANK AND SECURITIES ACCOUNTS. As of the date hereof, the
Debtor and the Subsidiaries do not have any deposit or securities accounts
except as described on EXHIBIT A hereto. Neither the Debtor nor any Subsidiary
shall establish any new deposit account or securities account unless (a) it
shall have given to the Secured Party prior written notice of its intention to
do so, clearly describing such new account and its location, and providing such
other information in connection therewith as the Secured Party may reasonably
request and (b) with respect to such new account, the Debtor or the applicable
Subsidiary shall have taken all actions reasonably requested by the Secured
Party to maintain the security interest of the Secured Party in such account
that is granted hereby at all times fully perfected and in full force and
effect.
Section 2.6. COMMERCIAL TORT CLAIMS. As of the date hereof, the Debtor
and the Subsidiaries do not have any Commercial Tort Claims except as described
on EXHIBIT A hereto. If the Debtor or any Subsidiary acquires any Commercial
3
Tort Claim, it shall notify the Secured Party immediately in writing providing a
description of such claim. If requested by the Secured Party, the Debtor or the
applicable Subsidiary shall take all actions reasonably requested by the Secured
Party to maintain or create a security interest in such a claim.
Section 2.7. LETTER OF CREDIT RIGHTS. As of the date hereof, neither the Debtor
nor any Subsidiary is a beneficiary under any letter of credit except as
described on EXHIBIT A hereto. If the Debtor or any Subsidiary becomes a
beneficiary of any letter of credit or otherwise obtains Letter of Credit Rights
at any time, it shall notify the Secured Party immediately in writing and
provide a copy of such letter of credit. If requested by the Secured Party, the
Debtor or the applicable Subsidiary shall (a) deliver the original letter of
credit to the Secured Party and (b) arrange for the issuer and any confirming
bank of the letter of credit to consent to a drawing under the letter of credit
by the Secured Party and to the delivery of any Proceeds of drawing under the
letter of credit to the Secured Party in a form reasonably satisfactory to the
Secured Party.
ARTICLE 3 - SPECIAL PROVISIONS CONCERNING RECEIVABLES
The Debtor and the Subsidiaries jointly and severally represent,
warrant and covenant to the Secured Party as follows:
Section 3.1. MAINTENANCE OF RECORDS. The Debtor and the Subsidiaries
will keep and maintain records of their Receivables and will make the same
available on the premises of the Debtor to the Secured Party for inspection at
any and all reasonable times upon reasonable prior notice. Upon the request of
the Secured Party following the occurrence and during the continuance of an
Event of Default, subject to the terms of the Subordination Agreement, the
Debtor and the Subsidiaries shall, at their own cost and expense, deliver all
tangible evidence of their Receivables (including all contracts and other
documents evidencing the Receivables) and their books and records to the Secured
Party or to the Secured Party's representatives (copies of which evidence and
books and records may be retained by the Debtor and the Subsidiaries).
Section 3.2. DIRECTION TO ACCOUNT DEBTORS; CONTRACTING PARTIES. Upon
the occurrence and during the continuance of an Event of Default, subject to the
terms of the Subordination Agreement, the Debtor and the Subsidiaries agree (a)
if the Secured Party so directs, the Debtor and the Subsidiaries shall cause all
payments on account of the Receivables to be made directly to a cash collateral
account established at the direction of the Secured Party, (b) the Secured Party
may directly notify the obligors with respect to any Receivables to make
payments with respect thereto to such cash collateral account and (c) the
Secured Party may enforce collection of any such Receivables and may adjust,
settle or compromise the amount of payment thereof, in the same manner and to
the same extent as the Debtor and the Subsidiaries. Without notice to or assent
by the Debtor or any of the Subsidiaries, the Secured Party may apply any or all
amounts in such cash collateral account in the manner provided in this
Agreement. After the Secured Party directs that any Receivable be paid to such
cash collateral account, any proceeds of such Receivable received by the Debtor
or any of the Subsidiaries shall be received in trust for the benefit of the
Secured Party and shall forthwith be delivered to the Secured Party.
4
ARTICLE 4 - PROVISIONS CONCERNING ALL COLLATERAL
The Debtor and the Subsidiaries jointly and severally represent,
warrant and covenant to the Secured Party as follows:
Section 4.1. PROTECTION OF THE SECURED PARTY'S SECURITY. The Debtor and
each Subsidiary will at all times keep its Equipment insured at the Debtor's and
each Subsidiary's own expense. Upon written request, certificates with respect
to such policies shall be delivered to the Secured Party. If the Debtor or any
Subsidiary shall fail to insure its Equipment in accordance with the preceding
sentence, the Secured Party shall have the right (but shall be under no
obligation), upon prior written notice to the Debtor or the applicable
Subsidiary, to procure such insurance and the Debtor and each Subsidiary agrees
to promptly reimburse the Secured Party for all costs and expenses of procuring
such insurance. The Debtor and each Subsidiary assumes all liability and
responsibility in connection with the Collateral acquired by it, and the
liability of the Debtor to pay the Obligations shall in no way be affected or
diminished by the fact that such Collateral may be lost, destroyed, stolen,
damaged or for any reason whatsoever unavailable to the Debtor or any
Subsidiary.
Section 4.2. FURTHER ACTIONS. The Debtor and each Subsidiary shall, at
its own expense, make, execute, endorse, acknowledge, file and deliver to the
Secured Party from time to time such lists, descriptions and designations of its
Collateral, warehouse receipts, receipts in the nature of warehouse receipts,
bills of lading, documents of title, vouchers, invoices, schedules, confirmatory
assignments, conveyances, financing statements, transfer endorsements, powers of
attorney, certificates, reports and other assurances or instruments and take
such further steps relating to the Collateral and other property or rights
covered by the security interest hereby granted that the Secured Party deem
reasonably appropriate or advisable to perfect, preserve, protect or enforce its
rights and remedies with respect to its security interest in the Collateral.
Without limiting the foregoing, the Debtor and the Subsidiaries shall cooperate
with the Secured Party in obtaining control with respect to the Collateral,
including deposit accounts, investment property, Letter-of-Credit Rights and
electronic chattel paper.
ARTICLE 5 - REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
The Debtor and the Subsidiaries jointly and severally covenant and
agree with the Secured Party as follows Section 5.1. REMEDIES; OBTAINING THE
COLLATERAL UPON DEFAULT. The Debtor and each Subsidiary agrees that, if an Event
of Default shall have occurred or be continuing, the Notes shall immediately
become due and payable upon written notice to the Debtor (except in the case of
an Event of Default under subsections (e) or (f) of the definition of Event of
Default, in which event such Notes shall automatically become due and payable).
In addition, the Secured Party shall have all rights of a secured
creditor under the Uniform Commercial Code and, subject to the terms of the
Subordination Agreement, may:
(a) personally, or by agents or attorneys, immediately take
possession of the Collateral or any part thereof, from the Debtor or
any Subsidiary or any other Person who then has possession of any part
5
thereof, with or without notice or process of law, and for that purpose
may enter upon the Debtor's or any Subsidiary's premises in a manner
not in violation of applicable law where any of the Collateral is
located and remove the same and use in connection with such removal any
and all services, supplies, aids and other facilities of the Debtor or
any Subsidiary;
(b) occupy any premises owned or leased by the Debtor or any
Subsidiary where documents and things embodying the Collateral or any
part thereof are assembled or located for a reasonable period in order
to effectuate its rights and remedies hereunder or under law, without
obligation to the Debtor or any Subsidiary in respect of such
occupation;
(c) instruct the obligor or obligors on any agreement,
instrument or other obligation (including the Receivables) constituting
Collateral to make any payment required by the terms of such agreement,
instrument or other obligation directly to the Secured Party;
(d) sell, assign or otherwise liquidate any or all of the
Collateral or any part thereof, or direct the Debtor or the
Subsidiaries to sell, assign or otherwise liquidate any or all of the
Collateral or any part thereof, and, in each case, take possession of
the proceeds of any such sale or liquidation;
(e) take possession of the Collateral or any part thereof, by
directing the Debtor or the Subsidiaries in writing to deliver the same
to the Secured Party at any place or places reasonably designated by
the Secured Party, in which event the Debtor or any applicable
Subsidiary shall at its own expense:
(i) cause the same to be moved to the place or places
so designated by the Secured Party;
(ii) store and keep any Collateral so delivered to
the Secured Party at such place or places pending further
action by the Secured Party; and
(iii) while the Collateral shall be so stored and
kept, provide such guards and maintenance services as shall be
necessary to protect the same and to preserve and maintain
them in good condition;
(f) license or sublicense, whether on an exclusive or
nonexclusive basis, any Marks, Patents or Copyrights included in the
Collateral for such term and on such conditions and in such manner as
the Secured Party shall in its reasonable judgment determine;
(g) commence a proceeding in a court of competent jurisdiction
for the appointment of a receiver (which term shall include a
receiver-manager) and the Debtor and each Subsidiary consents to such
appointment; and
(h) exercise any other right available under applicable law;
6
IT BEING UNDERSTOOD that the Debtor's and any applicable Subsidiary's obligation
to deliver the Collateral is of the essence of this Agreement and that,
accordingly, upon application to any court of competent jurisdiction, the
Secured Party shall be entitled to a decree requiring specific performance by
the Debtor and the Subsidiaries, or any of them, of said obligation.
Section 5.2. REMEDIES: DISPOSITION OF THE COLLATERAL. Any Collateral,
whether or not in the possession of the Secured Party, may be sold, assigned,
leased or otherwise disposed of under one or more contracts or as an entirety,
and without the necessity of gathering the property to be sold at the place of
such sale or other disposition, and in general in such manner, at such time or
times, at such place or places and on such terms as the Secured Party may, in
compliance with any mandatory requirements of applicable law, determine to be
commercially reasonable. Any sale or disposition, subject to the provisions of
applicable law, may be made by private or public proceedings. Except as required
by applicable law, any sale or other disposition may be made without advertising
or notice of any kind. Where notification of time, place or other terms of a
sale or other disposition is required by law, ten (10) days' notice shall be
deemed reasonable. To the extent permitted by applicable law, the Secured Party
may bid for and become the purchaser of the Collateral or any item thereof
offered for sale without accountability to the Debtor or any applicable
Subsidiary.
Section 5.3. SECURED PARTY MAY PERFORM. If the Debtor or any applicable
Subsidiary fails to perform any agreement contained herein, the Secured Party
may, upon fifteen (15) days' notice to the Debtor or any applicable Subsidiary,
perform, or cause performance of, such agreement, and the reasonable expenses of
the Secured Party incurred in connection therewith shall be borne by the Debtor
or a Subsidiary, as applicable.
Section 5.4. USE OF PROPERTY; POWER OF ATTORNEY. The Debtor and each
Subsidiary grants to the Secured Party the following (which the Secured Party
shall not exercise except after and during the continuance of an Event of
Default in accordance with the terms of the Subordination Agreement):
(a) the right to use all premises or places of business that
the Debtor and the Subsidiaries presently have or may hereafter have
without charge for purposes of protecting and liquidating Collateral;
(b) a royalty free license to use any Marks, Patents,
Copyrights, Trade Secrets or Proprietary Right for purposes of
manufacturing, selling and otherwise liquidating Collateral;
(c) the right to collect any mail; and
(d) a power of attorney to (i) to receive, endorse in the name
of the Debtor and the Subsidiaries and collect any notes, checks,
drafts, money orders or other instruments of payment or any invoice,
freight xxxx, xxxx of lading, warehouse receipt or the like that comes
into the possession of the Secured Party, (ii) to direct the United
States Post Office to change the address to which mail is delivered and
(iii) any and all other acts as the Secured Party deems necessary to
protect and liquidate the Collateral.
7
Section 5.5. WAIVER OF CLAIMs. SUBJECT TO THE TERMS HEREOF, THE DEBTOR
AND EACH SUBSIDIARY HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE SECURED PARTY'S TAKING
POSSESSION OR THE SECURED PARTY'S DISPOSITION OF ANY OF THE COLLATERAL,
INCLUDING ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR
REMEDIES AND ANY SUCH RIGHT THAT THE DEBTOR AND EACH SUBSIDIARY WOULD OTHERWISE
HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE,
and the Debtor and each Subsidiary hereby further waives, to the extent
permitted by law,
(a) all damages occasioned by such taking of possession except
any damages that are determined by a final, non-appealable court order
to have been caused by the Secured Party's gross negligence or willful
misconduct;
(b) all other requirements as to the time, place and terms of
sale or other requirements with respect to the enforcement of the
Secured Party's rights hereunder; and
(c) all rights of redemption, appraisement, valuation, stay,
extension or moratorium now or hereafter in force under any applicable
law in order to prevent or delay the enforcement of this Agreement or
the absolute sale of the Collateral or any portion thereof, and the
Debtor and each Subsidiary, for themselves and all who may claim under
them, insofar as they now or hereafter lawfully may, hereby waives the
benefit of all such laws.
Any sale of, or the grant of options to purchase, or any other realization upon,
any Collateral shall operate to divest all right, title, interest, claim and
demand, either at law or in equity, of the Debtor or the applicable Subsidiary
therein and thereto, and shall be a perpetual bar both at law and in equity
against the Debtor or the applicable Subsidiary and against any and all Persons
claiming or attempting to claim the Collateral so sold, optioned or realized
upon, or any part thereof, from, through and under the Debtor or any applicable
Subsidiary.
Section 5.6. REMEDIES CUMULATIVE. Each and every right, power and
remedy hereby specifically given to the Secured Party under this Agreement shall
be in addition to every other right, power and remedy given under the Loan
Documents or now or hereafter existing at law, in equity or by statute and each
and every right, power and remedy whether specifically herein given or otherwise
existing may be exercised from time to time or simultaneously and as often and
in such order as may be deemed expedient by the Secured Party. All such rights,
powers and remedies shall be cumulative and the exercise or the beginning of the
exercise of one shall not be deemed a waiver of the right to exercise any other.
No delay or omission of the Secured Party in the exercise of any such right,
power or remedy and no renewal or extension of any of the Obligations shall
impair any such right, power or remedy or shall be construed to be a waiver of
any Default or Event of Default or an acquiescence therein. No notice to or
demand on the Debtor or any Subsidiary in any case shall entitle the Debtor or
such Subsidiary to any other or further notice or demand in similar or other
circumstances or constitute a waiver of any of the rights of the Secured Party
8
to any other or further action in any circumstances without notice or demand. If
the Secured Party shall bring any suit to enforce any of its rights hereunder
and shall be entitled to judgment, then in such suit the Secured Party may
recover reasonable expenses, including reasonable attorneys' fees, and the
amounts thereof shall be included in such judgment.
ARTICLE 6 - DEFINITIONS
All capitalized terms used herein without definition shall have the
respective meanings provided therefor in the Loan Agreement. In addition to
terms defined elsewhere herein, the following terms shall have the meanings
herein specified. Such definitions shall be equally applicable to the singular
and plural forms of the terms defined. When used herein, the word "including"
shall be deemed to be followed by the words "without limitation".
"ACCOUNT" shall have the meaning provided in the Uniform Commercial
Code.
"AGREEMENT" shall mean this Security Agreement as the same may be
modified, supplemented or amended from time to time in accordance with its
terms.
"CHATTEL PAPER" shall have the meaning provided in the Uniform
Commercial Code.
"COLLATERAL" shall have the meaning set forth in Section 1.1 hereof.
"COMMERCIAL TORT CLAIM" shall have the meaning provided in the Uniform
Commercial Code.
"DEBTOR" shall have the meaning ascribed thereto in the first paragraph
of this Agreement.
"DEFAULT" shall mean any event that, with notice or lapse of time, or
both, would constitute an Event of Default.
"DEPOSIT ACCOUNT" shall have the meaning provided in the Uniform
Commercial Code.
"DOCUMENT" shall have the meaning provided in the Uniform Commercial
Code.
"EQUIPMENT" shall have the meaning provided in the Uniform Commercial
Code.
"EVENT OF DEFAULT" shall mean any of the following events:
(a) if a default occurs in the payment of any installment of
the principal of, interest on, or other obligation with respect to, the Notes,
whether at the due date thereof or upon acceleration thereof and such default is
not cured within ten (10) days' written notice thereof;
(b) if a default occurs in the due observance or performance
of any covenant, condition or agreement on the part of the Debtor or any
Subsidiary to be observed or performed pursuant to any of the provisions of this
Agreement or any Loan Document and such default is not cured within thirty (30)
days' written notice thereof;
9
(c) if any warranty, representation or other statement by or
on behalf of the Debtor or any Subsidiary contained in or made pursuant to the
Loan Agreement or this Agreement or any document, agreement or instrument
relating thereto is false, erroneous or misleading in any material respect when
made;
(d) if the payment of any other indebtedness of the Debtor or
any of the Subsidiaries for borrowed money in an aggregate amount in excess of
$100,000 (including any senior debt) is accelerated prior to the stated maturity
thereof and is not paid off within ten (10) days of such acceleration;
(e) if the Debtor or any Subsidiary shall (i) discontinue its
business, (ii) apply for or consent to the appointment of a receiver, trustee,
custodian or liquidator of it or any of its property, (iii) make a general
assignment for the benefit of creditors or (iv) file a voluntary petition in
bankruptcy, or a petition or an answer seeking reorganization or an arrangement
with creditors, or to take advantage of any bankruptcy, reorganization,
insolvency, readjustment of debt, dissolution or liquidation laws or statutes,
or an answer admitting the material allegations of a petition filed against it
in any proceeding under any such law, or if corporate action shall be taken for
the purpose of effecting any of the foregoing; or
(f) if there shall be filed against the Debtor or any
Subsidiary an involuntary petition seeking reorganization of the Debtor or such
Subsidiary, or the appointment of a receiver, trustee, custodian or liquidator
of the Debtor or any Subsidiary or a substantial part of its assets, or an
involuntary petition under any bankruptcy, reorganization or insolvency law of
any jurisdiction, whether now or hereafter in effect (any of the foregoing
petitions being hereinafter referred to as an "INVOLUNTARY PETITION").
"GENERAL INTANGIBLES" shall have the meaning provided in the Uniform
Commercial Code.
"GOODS" shall have the meaning provided in the Uniform Commercial Code.
"INSTRUMENT" shall have the meaning provided in the Uniform Commercial
Code.
"INVENTORY" shall have the meaning provided in the Uniform Commercial
Code. "INVESTMENT PROPERTY" shall have the meaning provided in the
Uniform Commercial Code.
"LETTER-OF-CREDIT RIGHT" shall have the meaning provided in the Uniform
Commercial Code.
"LIENS" shall mean any security interest, mortgage, pledge, lien,
claim, charge, encumbrance, title retention agreement, lessor's interest in a
financing lease or analogous instrument in respect of any property of the Debtor
or any Subsidiary.
"LOAN AGREEMENT" shall have the meaning ascribed thereto in the
recitals to this Agreement.
10
"LOAN DOCUMENTS" shall mean the Loan Agreement, the Notes and the Note
Purchase Agreement.
"OBLIGATIONS" shall mean, with respect to the Debtor (a) the full and
prompt payment when due (whether at the stated maturity, by acceleration or
otherwise) of all obligations now existing or hereafter incurred under, arising
out of or in connection with any Loan Document and the due performance and
compliance by the Debtor with the terms of each such Loan Document, (b) the
repayment on terms prescribed by the Secured Party of any and all sums advanced
by the Secured Party in order to preserve the Collateral or preserve its
security interest in the Collateral, (c) in the event of any proceeding for the
collection or enforcement of any obligations or liabilities, after an Event of
Default shall have occurred and be continuing, the reasonable expenses of the
Secured Party's of re-taking, holding, preparing for sale or lease, selling or
otherwise disposing of or realizing on the Collateral, or of any exercise by the
Secured Party of its rights hereunder, together with reasonable attorneys' fees
and court costs and (d) all amounts paid by any Indemnitee as to which such
Indemnitee has the right to reimbursement under this Agreement.
"PERSON" shall mean any individual, corporation, joint venture, trust,
unincorporated association, limited liability company, partnership, governmental
authority and any other person or entity.
"PROCEEDS" shall have the meaning provided in Section 1.1.
"SECURITY INTEREST" shall have the meaning ascribed thereto in Section
1.1.
"SUBORDINATION AGREEMENT" shall have the meaning ascribed thereto in
Section 2.2.
"SUPPORTING OBLIGATION" shall have the meaning provided in the Uniform
Commercial Code.
"SVB LIEN" shall have the meaning ascribed thereto in Section 2.2.
"UNIFORM COMMERCIAL CODE" shall mean Revised Article 9 as in effect
under the law governing this Agreement as in effect on the date hereof.
"TERMINATION DATE" shall have the meaning provided in Section 7.8 of
this Agreement.
ARTICLE 7 - MISCELLANEOUS
Section 7.1. NOTICES. Except as otherwise specified herein, all
notices, requests, demands or other communications to or upon the respective
parties hereto shall be made as set forth in the Loan Agreement. All such
communications to or upon any of the Subsidiaries shall be made to or upon the
Debtor.
Section 7.2. WAIVER; AMENDMENT. None of the terms and conditions of
this Agreement may be changed, waived, modified or varied in any manner
whatsoever unless in writing duly signed by the Debtor or the Subsidiary
directly affected thereby and the Secured Party. No failure on the part of the
11
Secured Party to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right preclude any other or further exercise thereof or the exercise of any
other right.
Section 7.3. SUCCESSORS AND ASSIGNS; RELIANCE. Neither the Debtor nor
any Subsidiary may assign, sell or otherwise transfer this Agreement or any of
their respective rights or obligations hereunder to any Person without the prior
written consent of the Secured Party. The Secured Party may assign, sell or
otherwise transfer this Agreement and its rights and obligations hereunder to
any other Person without the consent of the Debtor or any of the Subsidiaries.
Subject to the foregoing, this Agreement shall be binding upon each of the
parties hereto and each of their successors and assigns. All agreements,
statements, representations and warranties made by the Debtor or the
Subsidiaries herein or in any certificate or other instrument delivered by the
Debtor or the Subsidiaries or on their behalf under this Agreement shall be
considered to have been relied upon by the Secured Party and shall survive the
execution and delivery of this Agreement and the other Loan Documents regardless
of any investigation made by the Secured Party or on its behalf.
Section 7.4. HEADINGS DESCRIPTIVE. The headings of the sections of this
Agreement are inserted for convenience only and shall not in any way affect the
meaning or construction of any provision of this Agreement.
Section 7.5. GOVERNING LAW. This agreement and the rights and
obligations of the parties hereunder shall be construed in accordance with and
be governed by the law of the State of New York.
Section 7.6. INDEMNITY. The Debtor and the Subsidiaries hereby agree as
follows:
(a) The Debtor and the Subsidiaries shall indemnify the
Secured Party from and against any and all claims, losses and
liabilities arising out of or resulting from this Agreement (including
enforcement of this Agreement), except claims, losses or liabilities
resulting from the Secured Party's gross negligence or willful
misconduct as determined by a final non-appealable judgment of a court
of competent jurisdiction.
(b) The Debtor and the Subsidiaries shall, upon demand, pay to
the Secured Party the amount of any and all reasonable expenses,
including the reasonable fees and expenses of its counsel and of any
experts and agents, that the Secured Party may incur in connection with
(i) the preparation, negotiation and administration of this Agreement;
PROVIDED that in no event shall the fees and expenses of counsel to the
Secured Party exceed $15,000 in connection with the preparation and
negotiation of this Agreement, (ii) the custody, preservation, use, or
operation of, or the sale of, collection from or other realization
upon, any of the Collateral, (iii) the exercise or enforcement of any
of the rights of the Secured Party hereunder or (iv) the failure by the
Debtor or any of the Subsidiaries to perform or observe any of the
provisions hereof.
Section 7.7. DUTIES OF THE DEBTOR AND THE SUBSIDIARIES. Notwithstanding
anything to the contrary contained herein, the Debtor and the Subsidiaries shall
remain liable to perform all of the obligations, if any, assumed by them with
respect to the Collateral and the Secured Party shall not have any obligations
12
or liabilities with respect to any Collateral by reason of or arising out of
this Agreement except as provided under applicable law. The Secured Party shall
not be required or obligated in any manner to perform or fulfill any of the
obligations of the Debtor and the Subsidiaries under or with respect to any
Collateral, and the exercise by the Secured Party of any of the rights or
remedies hereunder shall not release the Debtor or any Subsidiary from any
duties or obligations assumed by the Secured Party with respect to the
Collateral of the Debtor and the Subsidiaries.
Section 7.8. TERMINATION; RELEASE. This Agreement shall terminate
(provided that all indemnities set forth in the Loan Agreement shall survive
such termination) on the Termination Date, and the Secured Party, at the request
and expense of the Debtor, shall promptly execute and deliver to the Debtor and
the Subsidiaries a proper instrument or instruments acknowledging the
satisfaction and termination of this Agreement, authority to file termination
statements under the Uniform Commercial Code and will duly assign, transfer and
deliver to the Debtor and the Subsidiaries (without recourse and without any
representation or warranty) such of the Collateral as may be in the possession
of the Secured Party and has not theretofore been sold or otherwise applied or
released pursuant to this Agreement. As used in this Agreement, "TERMINATION
DATE" shall mean the date upon which all Obligations have been paid in full, all
commitments with respect thereto have terminated, no Note is outstanding (and
all loans under the Loan Agreement have been repaid in full), and all other
Obligations then due and payable have been paid in full. The Debtor and the
Subsidiaries shall have no authority to file termination, release or other
amendments to financing statements without specific written authorization from
the Secured Party.
Section 7.9. WAIVER OF JURY TRIAL; VENUE. THE DEBTOR AND THE
SUBSIDIARIES (BY ACCEPTANCE OF THIS AGREEMENT) HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR ANY OTHER LOAN
DOCUMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER ORAL
OR WRITTEN) OR ACTIONS OF ANY PARTY, INCLUDING ANY COURSE OF CONDUCT, COURSE OF
DEALINGS, STATEMENTS OR ACTIONS OF THE SECURED PARTY RELATING TO THE
ADMINISTRATION OR ENFORCEMENT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS, AND AGREES THAT NO PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION
WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.
EXCEPT AS PROHIBITED BY LAW, THE DEBTOR AND THE SUBSIDIARIES HEREBY WAIVE ANY
RIGHT THEY MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES. THE DEBTOR AND THE SUBSIDIARIES CERTIFY THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF THE SECURED PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT THE SECURED PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER. THIS WAIVER CONSTITUTES A
MATERIAL INDUCEMENT FOR THE SECURED PARTY TO ENTER INTO THIS AGREEMENT. THE
DEBTOR AND THE SUBSIDIARIES AGREE THAT ANY SUIT FOR THE ENFORCEMENT OF THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE
13
STATE OF NEW YORK OR ANY FEDERAL COURT SITTING THEREIN AND CONSENT TO THE
NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT
BEING MADE UPON THE DEBTOR AND THE SUBSIDIARIES BY MAIL AT THE ADDRESS SET FORTH
IN THE LOAN AGREEMENT. THE DEBTOR AND THE SUBSIDIARIES HEREBY WAIVE ANY
OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR
ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT FORUM.
Section 7.10. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument.
Section 7.11. THE SECURED PARTY. The Secured Party will hold in
accordance with this Agreement all items of the Collateral at any time received
under this Agreement. The powers conferred on the Secured Party hereunder are
solely to protect its interests in the Collateral and shall not impose any duty
upon them to exercise any such powers. It is expressly understood and agreed
that any obligations of the Secured Party with respect to the Collateral, are
limited to those expressly set forth in this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
DEBTOR:
XXXXXX TECHNOLOGIES, INC., a Delaware corporation
By: /s/ XXXX X. XXXXXX
------------------------------------------------------
Name: Xxxx X. Xxxxxx
Title: VP & General Counsel
SUBSIDIARIES:
XXXXXX IAC, LLC, a Delaware limited liability company
By: /s/ XXXXXX QUICK
------------------------------------------------------
Name: Xxxxxx Quick
Title: Manager
DSI, INC., a Delaware corporation
By: /s/ XXXX X. XXXXXX
------------------------------------------------------
Name: Xxxx X. Xxxxxx
Title: VP & General Counsel
XXXXXX SOLUTIONS, INC., a Delaware corporation
By: /s/ XXXX X. XXXXXX
------------------------------------------------------
Name: Xxxx X. Xxxxxx
Title: VP & General Counsel
15
SECURED PARTY:
XXXXXXX CAPITAL II, L.P.
By: Xxxxxxx Brothers, L.L.C.,
its general partner
By: /s/ XXXXX X. XXXXXXX
------------------------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Managing Member
16
EXHIBIT A
Commercial Tort Claims: None
Address:
Xxxxxx Technologies, Inc., Xxxxxx IAC, LLP and DSI, Inc.
000 Xxxxx Xxxxx Xxxx, Xxxxx 000
Xxxx Xxxxx, XX 00000
Xxxxxx Solutions, Inc.
00000 Xxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxxxx, XX 00000
Deposit or securities accounts:
Xxxxxx Technologies, Inc. - Silicon Valley Bank
3300291045 and 330291098 and 886-00504 (mutual fund account)
Xxxxxx Solutions, Inc. - Silicon Valley Bank, 3300378587
