EXHIBIT 10.3
SECURITY AGREEMENT
SECURITY AGREEMENT (as amended, restated, supplemented or otherwise
modified from time to time in accordance herewith and including all attachments,
exhibits and schedules hereto, the "AGREEMENT"), dated as of May 28, 2003, made
by P-COM, INC., a Delaware corporation (the "GRANTOR"), in favor of North Sound
Legacy Institutional Fund LLC (the "AGENT"), as collateral agent for each of the
Secured Parties whose names are set forth on Exhibit A hereto (collectively, the
"SECURED PARTIES").
WHEREAS, the Grantor has issued separate secured convertible promissory
notes to the Secured Parties (THE "NOTES") in the aggregate principal amount of
$300,000 pursuant to a Securities Purchase Agreement by and among the Grantor
and the Secured Parties dated the date hereof (the "PURCHASE AGREEMENT"); and
WHEREAS, it is a condition precedent to the Secured Parties making the
loan evidenced by the Notes to the Grantor that the Grantor execute and deliver
to the Secured Parties a security agreement providing for the grant to the
Secured Parties of a continuing security interest in all personal property and
assets of the Grantor, all in substantially the form hereof to secure all
Obligations (hereinafter defined); and
WHEREAS, all rights, remedies and obligations of the parties to this
Agreement are subject to (i) the provisions of that certain Subordination
Agreement by and among the Secured Parties and Silicon Valley Bank dated as of
May 28, 2003, and (ii) the rights of Silicon Valley Bank under the SVB Loan
Agreements.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I. DEFINITIONS
Section 1.1. DEFINITION OF TERMS USED HEREIN. All capitalized terms used herein
and not defined herein have the respective meanings provided therefor in the
Purchase Agreement. All terms defined in the Uniform Commercial Code
(hereinafter defined) as in effect from time to time and used herein and not
otherwise defined herein (whether or not such terms are capitalized) have the
same definitions herein as specified therein.
Section 1.2. DEFINITION OF CERTAIN TERMS USED HEREIN. As used herein, the
following terms have the following meanings:
"COLLATERAL" means all accounts receivable of the Grantor and all
personal and fixture property of every kind and nature, including, without
limitation, all furniture, fixtures, equipment, raw materials, inventory, or
other goods, accounts, contract rights, rights to the payment of money,
insurance refund claims and all other insurance claims and proceeds, tort
claims, chattel paper, documents, instruments, securities and other investment
property, deposit accounts, rights to proceeds of letters of credit and all
general intangibles including, without limitation, all tax refund claims,
license fees, patents, patent licenses, patent applications, trademarks,
trademark licenses, trademark applications, trade names, copyrights, copyright
licenses, copyright applications, rights to xxx and recover for past
infringement of patents,
trademarks and copyrights, computer programs, computer software, engineering
drawings, service marks, customer lists, goodwill, and all licenses, permits,
agreements of any kind or nature pursuant to which the Grantor possesses, uses
or has authority to possess or use property (whether tangible or intangible) of
others or others possess, use or have authority to possess or use property
(whether tangible or intangible) of the Grantor, and all recorded data of any
kind or nature, regardless of the medium of recording including, without
limitation, all books and records, software, writings, plans, specifications and
schematics; and all proceeds and products of each of the foregoing.
"DEFAULT" means any event or circumstance which, with the giving of
notice, the lapse of time, or both, would (if not cured, waived, or otherwise
remedied during such time) constitute an Event of Default.
"EVENT OF DEFAULT" has the meaning specified in the Notes.
"INDEMNITEES" has the meaning specified in Section 7.5(b).
"LIEN" means: (i) any interest in property securing an obligation owed
to, or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute, or contract, and including a
security interest, charge, claim, or lien arising from a mortgage, deed of
trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement,
agreement, security agreement, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes; (ii) to the extent not included
under CLAUSE (I), any reservation, exception, encroachment, easement,
right-of-way, covenant, condition, restriction, lease or other title exception
or encumbrance affecting property; and (iii) any contingent or other agreement
to provide any of the foregoing.
"NOTES" has the meaning assigned to such term in the first recital of
this Agreement.
"PERMITTED LIEN" has the meaning set forth in the SVB Loan Agreements
(as in effect on the date hereof), except that, with respect to clause (iv) of
such definition, such additional security interests and liens must also be
consented to in writing by the Collateral Agent, which consent may be withheld
in its good faith business judgment.
"OBLIGATIONS" means all indebtedness, liabilities, obligations,
covenants and duties of the Grantor to the Secured Parties of every kind, nature
and description, direct or indirect, absolute or contingent, due or not due,
contractual or tortious, liquidated or unliquidated, arising by operation of law
or otherwise, now existing of hereafter arising under or in connection with the
Notes, the Purchase Agreement, this Agreement or the other Transaction
Documents.
"SECURITY INTEREST" has the meaning specified in Section 2.1 of this
Agreement.
"SVB LOAN AGREEMENTS" means that certain Loan and Security Agreement by
and among the Grantor, P-Com Network Services, Inc. and Silicon Valley Bank,
dated September 20, 2002, and that certain Loan and Security Agreement (EXIM
Program) by and among the Grantor, P-Com Network Services, Inc. and Silicon
Valley Bank, dated September 20, 2002.
"UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code from time
to time in effect in the State of Delaware.
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ARTICLE II. SECURITY INTEREST
Section 2.1. SECURITY INTEREST. As security for the payment and performance, in
full of the Obligations, and any extensions, renewals, modifications or
refinancings of the Obligations, the Grantor hereby bargains, sells, conveys,
assigns, sets over, mortgages, pledges, hypothecates and transfers to the
Secured Parties, and hereby grants to the Secured Parties, their successors and
assigns, a security interest in, all of such Grantor's right, title and interest
in, to and under the Collateral (the "SECURITY INTEREST").
Section 2.2. NO ASSUMPTION OF LIABILITY. The Security Interest is granted as
security only and shall not subject the Secured Parties to, or in any way alter
or modify, any obligation or liability of the Grantor with respect to or arising
out of the Collateral.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
The Grantor represents and warrants to the Secured Parties that:
Section 3.1. TITLE AND AUTHORITY. The Grantor has good and valid rights in and
title to the Collateral with respect to which it has purported to grant a
security interest hereunder and has full power and authority to grant to the
Secured Parties the Security Interest and to execute, deliver and perform its
obligations in accordance with the terms of this Agreement, without the consent
or approval of any other Person other than any consent or approval which has
been obtained.
Section 3.2. FILINGS; ACTIONS TO ACHIEVE PERFECTION. Upon filing in each United
States governmental, municipal or other office specified in Schedule A, properly
completed Uniform Commercial Code financing statements (including fixture
filings, as applicable) containing a description of the Collateral are all the
filings, recordings and registrations that are necessary to publish notice of
and protect the validity of and to establish a legal, valid and perfected
security interest in favor of the Secured Parties in respect of all Collateral
in which the Security Interest may be perfected by filing, recording or
registration in the United States (or any political subdivision thereof) and its
territories and possessions, and no further or subsequent filing, refiling,
recording, rerecording, registration or reregistration is necessary in any such
jurisdiction, except as provided under applicable law with respect to the filing
of continuation statements or with respect to the filing of amendments or new
filings to reflect the change of the Grantor's name, location, identity or
corporate structure. The Grantor's name is listed in the preamble of this
Agreement identically to how it appears on its certificate of incorporation or
other organizational documents.
Section 3.3. VALIDITY AND PRIORITY OF SECURITY INTEREST. The Security Interest
constitutes (a) a legal and valid security interest in all the Collateral
securing the payment and performance of the Obligations, (b) subject only to the
filings described in Section 3.2 above and other previously perfected security
interests in the Collateral listed on Schedule 3.3 to this Agreement ("EXISTING
LIENS") and Permitted Liens, a perfected security interest in all Collateral in
which a security interest may be perfected by filing, recording or registration
in the United States pursuant to the Uniform Commercial Code or other applicable
law in the United States (or any political subdivision thereof) and its
territories and possessions or any other country, state or nation (or any
political subdivision thereof). The Security Interest is and shall be
subordinate to any other Existing Lien on any of the Collateral.
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Section 3.4. ABSENCE OF OTHER LIENS. The Collateral is owned by the Grantor free
and clear of any Lien other than Existing Liens and Permitted Liens. Without
limiting the foregoing and except as set forth on Schedule 3.4 to this
Agreement, the Grantor has not filed or consented to any filing described in
Section 3.2 in favor of any Person other than the Secured Parties, nor permitted
the granting or assignment of a security interest or permitted perfection of any
security interest in the Collateral in favor of any Person other than the
Secured Parties. The Secured Parties' having possession of all instruments and
cash constituting Collateral from time to time and the filing of financing
statements in the offices referred to in Schedule A hereto results in the
perfection of such security interest. Such security interest is, or in the case
of Collateral in which the Grantor obtain rights after the date hereof, will be,
a perfected security interest. Such notices, filings and all other action
necessary or desirable to perfect and protect such security interest have been
duly taken.
Section 3.5. VALID AND BINDING OBLIGATION. This Agreement constitutes the legal,
valid and binding obligation of the Grantor, enforceable against the Grantor in
accordance with its terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting enforcement of creditors' rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief, or
other equitable remedies, (iii) as limited by the Subordination Agreement by and
between the Secured Party and Silicon Valley Bank, and (iv) to the extent the
indemnification provisions contained in this Agreement may be limited by
applicable federal or state securities laws.
ARTICLE IV. COVENANTS
Section 4.1. Change of Name; Location of Collateral; Place of Business,
State of Formation or Organization.
(a) The Grantor shall notify the Agent in writing promptly of any
change (i) in its corporate name or in any trade name used to identify
it in the conduct of its business or in the ownership of its
properties, (ii) in the location of its chief executive office, its
principal place of business, any office in which it maintains books or
records relating to Collateral owned by it (including the
establishment of any such new office or facility), (iii) in its
identity or corporate structure such that a filed filing made under
the Uniform Commercial Code becomes misleading or (iv) in its Federal
Taxpayer Identification Number. In extension of the foregoing, the
Grantor shall not effect or permit any change referred to in the
preceding sentence unless all filings have been made under the Uniform
Commercial Code or otherwise that are required in order for the
Secured Parties to continue at all times following such change to have
a valid, legal and perfected security interest in all the Collateral.
(b) Without limiting Section 4.1(a), without the prior written
consent of the Agent in each instance, the Grantor shall not change
its state of incorporation, formation or organization.
Section 4.2. RECORDS. The Grantor shall maintain, at its own cost and
expense, such complete and accurate records with respect to the Collateral owned
by it as is consistent with its current practices and in accordance with such
prudent and standard practices used in industries that are the same as or
similar to those in which the Grantor is engaged, but in any event to include
complete accounting records indicating all payments and proceeds received with
respect
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to any part of the Collateral, and, at such time or times as the Agent may
reasonably request, promptly to prepare and deliver to the Agent a duly
certified schedule or schedules in form and detail satisfactory to the Agent
showing the identity, amount and location of any and all Collateral.
Section 4.3. PERIODIC CERTIFICATION; NOTICE OF CHANGES. In the event there
should at any time be any change in the information represented and warranted
herein or in the documents and instruments executed and delivered in connection
herewith, the Grantor shall immediately notify the Agent in writing of such
change (this notice requirement shall be in extension of and shall not limit or
relieve the Grantor of any other covenants hereunder).
Section 4.4. PROTECTION OF SECURITY. The Grantor shall, at its own cost and
expense, take any and all actions necessary to defend title to the Collateral
against all persons and to defend the Security Interest of the Secured Parties
in the Collateral and the priority thereof against any Lien other than Existing
Liens and Permitted Liens.
Section 4.5. INSPECTION AND VERIFICATION. The Agent and such persons as the
Agent may reasonably designate shall have the right to inspect the Collateral,
all records related thereto (and to make extracts and copies from such records)
and the premises upon which any of the Collateral is located, to discuss the
Grantor's affairs with the officers of the Grantor and its independent
accountants and to verify under reasonable procedures the validity, amount,
quality, quantity, value, condition and status of, or any other matter relating
to, the Collateral, including, in the case of collateral in the possession of
any third Person and upon an Event of Default, by contacting any account debtor
or third Person possessing such Collateral for the purpose of making such a
verification. Out-of-pocket expenses in connection with any inspections by
representatives of the Agent shall be (a) the obligations of the Grantor with
respect to any inspection after the Secured Parties' demand payment of the Notes
or (b) the obligation of the Secured Parties in any other case.
Section 4.6. TAXES; ENCUMBRANCES. At its option, the Agent (for the benefit of
the Secured Parties) may discharge Liens, other than Existing Liens and
Permitted Liens, at any time levied or placed on the Collateral and may pay for
the maintenance and preservation of the Collateral to the extent the Grantor
fails to do so and the Grantor shall reimburse the Agent Parties on demand for
any payment made or any expense incurred by the Agent pursuant to the foregoing
authorization; provided, however, that nothing in this Section shall be
interpreted as excusing the Grantor from the performance of, or imposing any
obligation on the Agent to cure or perform, any covenants or other obligation of
the Grantor with respect to any Lien or maintenance or preservation of
Collateral as set forth herein.
Section 4.7. USE AND DISPOSITION OF COLLATERAL. The Grantor shall not make or
permit to be made an assignment, pledge or hypothecation of any Collateral or
shall grant any other Lien in respect of the Collateral other than Existing
Liens and Permitted Liens without the prior written consent of the Secured
Parties. The Grantor shall not make or permit to be made any transfer of any
Collateral and the Grantor shall remain at all times in possession of the
Collateral owned by it, other than with respect to Existing Liens and other
liens approved by the Secured Parties.
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Section 4.8. INSURANCE/NOTICE OF LOSS. Within a reasonable period of time
following the date of this Agreement, Grantor, at its own expense, shall
maintain or cause to be maintained insurance covering physical loss or damage to
the Collateral. In extension of the foregoing and without limitation, the
Secured Parties shall be listed as an "additional insured" on Grantor's general
liability insurance. Such insurance shall not be terminated, cancelled or not
renewed for any reason, including non-payment of insurance premiums, unless the
insurer shall have provided the Secured Parties at least 30 days prior written
notice. Grantor irrevocably makes, constitutes and appoints the Secured Parties
(and all officers, employees or agents designated by the Secured Parties) as its
true and lawful agent and attorney-in-fact for the purpose, at any time
following the Secured Parties' demand for payment of the Notes, of making,
settling and adjusting claims in respect of Collateral under policies of
insurance, endorsing the name of Grantor on any check, draft, instrument or
other item of payment for the proceeds of such policies of insurance and for
making all determinations and decisions with respect thereto. In the event that
Grantor at any time or times shall fail to obtain or maintain any of the
policies of insurance required hereby or to pay any premium in whole or part
relating thereto, the Secured Parties may, without waiving or releasing any
obligation or liability of Grantor hereunder, in their sole discretion, obtain
and maintain such policies of insurance and pay such premium and take any other
actions with respect thereto as the Secured Parties deem advisable. All sums
disbursed by the Secured Parties in connection and in accordance with this
Section, including reasonable attorneys' fees, court costs, expenses and other
charges relating thereto, shall be payable upon demand, by Grantor to the
Secured Parties and shall be additional Obligations secured hereby. Grantor
shall promptly notify the Secured Parties if any material portion of the
Collateral owned or held by Grantor is damaged or destroyed. The proceeds of any
casualty insurance in respect of any casualty loss of any of the Collateral
shall (i) so long as the Secured Parties have not demanded payment of the Notes,
be disbursed to Grantor for direct application by Grantor solely to the repair
or replacement of Grantor's property so damaged or destroyed, and (ii) in all
other circumstances, be held by the Secured Parties as cash collateral for the
Obligations. The Secured Parties may, at their sole option, disburse from time
to time all or any part of such proceeds so held as cash collateral, upon such
terms and conditions as the Secured Parties may reasonably prescribe, for direct
application by the Secured Parties solely to the repair or replacement of
Grantor's property so damaged or destroyed, or Grantor may apply all or any part
of such proceeds to the Obligations.
Section 4.9. LEGEND. Grantor shall legend, in form and manner satisfactory to
the Secured Parties, its accounts and its books, records and documents
evidencing or pertaining thereto with an appropriate reference to the fact that
such accounts have been assigned to the Secured Parties and that the Secured
Parties have a security interest therein.
ARTICLE V. FURTHER ASSURANCES; POWER OF ATTORNEY
Section 5.1. FURTHER ASSURANCES. The Agent is hereby authorized to file Uniform
Commercial Code financing statements and/or any other appropriate filings,
recording or registrations evidencing the security interests granted herein.
Grantor shall, at its own expense, execute, acknowledge, deliver and cause to be
duly filed all such further instruments and documents and take all such actions
as the Secured Parties may from time to time reasonably request to better
assure, preserve, protect and perfect the Security Interest and the rights and
remedies created hereby, including the payment of any fees and taxes required in
connection with the execution and delivery of this Agreement, the granting of
the Security Interest and the filing of any financing statements (including
fixture filings) or other documents in connection herewith or therewith. If any
amount payable under or in connection with any of the Collateral shall be or
become evidenced by any promissory note or other instrument, such note or
instrument shall be immediately pledged and delivered to the Secured Parties,
duly endorsed in a manner satisfactory to the Secured Parties.
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Section 5.2. Power of Attorney.
(a) Grantor hereby irrevocably (as a power coupled with an interest)
constitutes and appoints the Agent (and all officers, employees or agents
designated by the Agent), its attorney-in-fact with full power of substitution,
for the benefit of the Secured Parties, at any time following the Secured
Parties' demand for payment of the Notes (i) to receive, endorse, assign and/or
deliver any and all notes, acceptances, checks, drafts, money orders or other
evidences of payment relating to the Collateral or any part thereof; (ii) to
demand, collect, receive payment of, give receipt for and give discharges and
releases of all or any of the Collateral; (iii) to sign the name of Grantor on
any invoice or xxxx of lading relating to any of the Collateral; (iv) to send
verifications of accounts to any account debtor or any other Person liable for
an account; (v) to commence and prosecute any and all suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
collect or otherwise realize on all or any of the Collateral or to enforce any
rights in respect of any Collateral; (vi) to settle, compromise, compound,
adjust or defend any actions, suits or proceeding relating to all or any of the
Collateral; and (vii) to use, sell, assign, transfer, pledge, make any agreement
with respect to or otherwise deal with all or any of the Collateral, and to do
all other acts and things necessary to carry out the purposes of this Agreement,
as fully and completely as though the Secured Parties were the absolute owner of
the Collateral for all purposes; PROVIDED, HOWEVER, that nothing herein
contained shall be construed as requiring or obligating the Secured Parties to
make any commitment or to make any inquiry as to the nature or sufficiency of
any payment received by the Secured Parties, or to present or file any claim or
notice, or to take any action with respect to the Collateral or any part thereof
or the moneys due or to become due in respect thereof or any property covered
thereby, and no action taken or omitted to be taken by the Secured Parties with
respect to the Collateral or any part thereof shall give rise to any defense,
counterclaim or offset in favor of Grantor or to any claim or action against the
Secured Parties.
(b) The provisions of this Article shall in no event relieve Grantor of any
of its obligations hereunder with respect to the Collateral or any part thereof
or impose any obligation on the Secured Parties to proceed in any particular
manner with respect to the Collateral or any part thereof, or in any way limit
the exercise by the Secured Parties of any other or further right which it may
have on the date of this Agreement or hereafter, whether hereunder, by law or
otherwise.
ARTICLE VI. REMEDIES
Section 6.1. Remedies upon Default.
(a) Upon the occurrence and during the continuance of an Event of Default,
Grantor agrees to deliver each item of its Collateral to the Secured Parties on
demand, and it is agreed that the Secured Parties shall have the right to take
any of or all the following actions at the same or different times (but at all
times subject to any Existing Liens): with or without legal process and with or
without prior notice or demand for performance, to take possession of
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the Collateral and without liability for trespass to enter any premises where
the Collateral may be located for the purpose of taking possession of or
removing the Collateral, exercise Grantor's right to xxxx and receive payment
for completed work and, generally, to exercise any and all rights afforded to a
secured party under the Uniform Commercial Code or other applicable law. Without
limiting the generality of the foregoing, Grantor agrees that the Secured
Parties shall have the right, subject to the mandatory requirements of
applicable law, to sell or otherwise dispose of all or any part of the
Collateral, at public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery as the Secured
Parties shall deem appropriate. The Secured Parties shall be authorized at any
such sale (if it deems it advisable to do so) to restrict the prospective
bidders or purchasers to persons who will represent and agree that they are
purchasing the Collateral for their own account for investment and not with a
view to the distribution or sale thereof, and upon consummation of any such sale
the Secured Parties shall have the right to assign, transfer and deliver to the
purchaser or purchasers thereof the Collateral so sold. Each such purchaser at
any such sale shall hold the property sold absolutely, free from any claim or
right on the part of Grantor, and Grantor hereby waives (to the extent permitted
by law) all rights of redemption, stay and appraisal which Grantor now has or
may at any time in the future have under any rule of law or statute now existing
or hereafter enacted.
(b) The Secured Parties shall give Grantor ten (10) days' written notice
(which Grantor agrees is reasonable notice within the meaning of Section
9-504(3) of the Uniform Commercial Code) of the Secured Parties' intention to
make any sale of Collateral. Such notice, in the case of a public sale, shall
state the time and place for such sale and, in the case of a sale at a broker's
board or on a securities exchange, shall state the board or exchange at which
such sale is to be made and the day on which the Collateral, or portion thereof,
will first be offered for sale at such board or exchange. Any such public sale
shall be held at such time or times within ordinary business hours and at such
place or places as the Secured Parties may fix and state in the notice (if any)
of such sale. At any such sale, the Collateral, or portion thereof, to be sold
may be sold in one lot as an entirety or in separate parcels, as the Secured
Parties may (in their sole and absolute discretion) determine. The Secured
Parties shall not be obligated to make any sale of any Collateral if it shall
determine not to do so, regardless of the fact that notice of sale of such
Collateral shall have been given. The Secured Parties may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without
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further notice, be made at the time and place to which the same was so
adjourned. In case any sale of all or any part of the Collateral is made on
credit or for future delivery, the Collateral so sold may be retained by the
Secured Parties until the sale price is paid by the purchaser or purchasers
thereof, but the Secured Parties shall not incur any liability in case any such
purchaser or purchasers shall fail to take up and pay for the Collateral so sold
and, in case of any such failure, such Collateral may be sold again upon like
notice. At any public (or, to the extent permitted by law, private) sale made
pursuant to this Section, the Secured Parties may bid for or purchase, free (to
the extent permitted by law) from any right of redemption, stay, valuation or
appraisal on the part of Grantor (all said rights being also hereby waived and
released to the extent permitted by law), the Collateral or any part thereof
offered for sale and may make payment on account thereof by using any claim then
due and payable to the Secured Parties from Grantor as a credit against the
purchase price, and the Secured Parties may, upon compliance with the terms of
sale, hold, retain and dispose of such property without further accountability
to Grantor therefor. For purposes hereof, a written agreement to purchase the
Collateral or any portion thereof shall be treated as a sale thereof; the
Secured Parties shall be free to carry out such sale pursuant to such agreement
and Grantor shall not be entitled to the return of the Collateral or any portion
thereof subject thereto, notwithstanding the fact that after the Secured Parties
shall have entered into such an agreement all Obligations have been paid in
full. As an alternative to exercising the power of sale herein conferred upon
it, the Secured Parties may proceed by a suit or suits at law or in equity to
foreclose this Agreement and to sell the Collateral or any portion thereof
pursuant to a judgment or decree of a court or courts having competent
jurisdiction or pursuant to a proceeding by a court-appointed receiver.
Section 6.2. APPLICATION OF PROCEEDS. The Secured Parties shall apply the
proceeds of any collection or sale of the Collateral, as well as any Collateral
consisting of cash, as follows:
(a) FIRST, to the payment of all costs and expenses incurred by the Secured
Parties in connection with such collection or sale or otherwise in connection
with this Agreement or any of the Obligations, including all court costs and the
fees and expenses of its agents and legal counsel, and any other costs or
expenses incurred in connection with the exercise of any right or remedy
hereunder, under the Purchase Agreement, the Notes and the other Transaction
Documents;
(b) SECOND, to the payment in full of the Obligations; and
(c) THIRD, to Grantor, its successors or assigns, or to whomsoever may be
lawfully entitled to receive the same, or as a court of competent jurisdiction
may otherwise direct.
Subject to the foregoing, the Secured Parties shall have absolute
discretion as to the time of application of such proceeds, moneys or balances in
accordance with this Agreement. Upon any sale of the Collateral by the Secured
Parties (including pursuant to a power of sale granted by statute or under a
judicial proceeding), the receipt of any such proceeds, moneys or balances by
the Secured Parties or of the officer making the sale shall be a sufficient
discharge to the purchaser or purchasers of the Collateral so sold and such
purchaser or purchasers shall not be obligated to see to the application of any
part of the purchase money paid over to the Secured Parties or such officer or
be answerable in any way for the misapplication thereof.
Section 6.3. GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY. For the purpose of
enabling the Secured Parties to exercise rights and remedies under this Article
at such time as the Secured Parties shall be lawfully entitled to exercise such
rights and remedies, to the extent not prohibited by any intellectual property
license, Grantor hereby grants to the Secured Parties an irrevocable,
non-exclusive license (exercisable without payment of royalty or other
compensation to Grantor) to use, license or sub-license any of the Collateral
consisting of intellectual property now owned or hereafter acquired by Grantor,
and wherever the same may be located, and including in such license reasonable
access to all media in which any of the licensed items may be recorded or stored
and to all computer software and programs used for the compilation or printout
thereof. The use of such license by the Secured Parties may be exercised, at the
option of the Secured Parties, only following the Secured Parties' demand for
payment of the Notes.
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ARTICLE VII. MISCELLANEOUS
Section 7.1. NOTICES. All communications and notices hereunder to the
Grantor and to the Secured Parties shall (except as otherwise expressly
permitted herein) be in writing and delivered to the Grantor or the Secured
Parties, as the case may be, as provided in the Purchase Agreement.
Section 7.2. SECURITY INTEREST ABSOLUTE. All rights of the Secured Parties
hereunder, the Security Interest and all obligations of Grantor hereunder shall
be absolute and unconditional irrespective of (a) any lack of validity or
enforceability of the Purchase Agreement, the Notes, any Loan Document or any
agreement with respect to any of the Obligations or any other agreement or
instrument relating to any of the foregoing, (b) any change in the time, manner
or place of payment of, or in any other term of, all or any of the Obligations,
or any other amendment or waiver of or any consent to any departure from the
Purchase Agreement, the Notes, any Loan Document or any other agreement or
instrument, (c) any exchange, release or non-perfection of any Lien on other
collateral, or any release or amendment or waiver of or consent under or
departure from any guarantee, securing or guaranteeing all or any of the
Obligations, or (d) any other circumstance that might otherwise constitute a
defense available to, or a discharge of, Grantor in respect of the Obligations
or this Agreement.
Section 7.3. SURVIVAL OF AGREEMENT. All covenants, agreements,
representations and warranties made by Grantor herein and in the certificates or
other instruments prepared or delivered in connection with or pursuant to this
Agreement shall be considered to have been relied upon by the Secured Parties
and shall survive the making of the loan and the execution and delivery to the
Secured Parties of the Notes, regardless of any investigation made by the
Secured Parties or on their behalf; and shall continue in full force and effect
until this Agreement shall terminate. The provisions of Section 7.5 hereof shall
survive termination of this Agreement.
Section 7.4. BINDING EFFECT; SEVERAL AGREEMENT; SUCCESSORS AND ASSIGNS.
This Agreement shall become effective as to Grantor when a counterpart hereof
executed on behalf of Grantor shall have been delivered to the Secured Parties
and a counterpart hereof shall have been executed on behalf of the Secured
Parties, and thereafter shall be binding upon Grantor and the Secured Parties
and their respective successors and assigns, and shall inure to the benefit of
Grantor, the Secured Parties and their respective successors and assigns, except
that Grantor shall not have the right to assign or transfer its rights or
obligations hereunder or any interest herein or in the Collateral (and any such
assignment or transfer shall be void) except as expressly contemplated by this
Agreement, the Purchase Agreement, the Notes or the other Transaction Documents.
Section 7.5. Secured Parties' Fees and Expense; Indemnification.
(a) Grantor agrees to pay upon demand, and to save the Agent and each of
the Secured Parties harmless from, the amount of any and all reasonable
expenses, including all reasonable fees, disbursements and other charges of its
counsel and of any experts or agents, which the Secured Parties may incur in
connection with (i) the administration of this Agreement (including the
customary fees and charges of the Secured Parties for any audits conducted by
them or on their behalf with respect to the accounts inventory), (ii) the
custody or preservation of, or the sale of, collection from or other realization
upon any of the Collateral, (iii) the exercise, enforcement or protection of any
of the rights of
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the Secured Parties hereunder or (iv) the failure of Grantor to perform or
observe any of the provisions hereof.
(b) Grantor agrees to indemnify the Agent and each of the Secured Parties
and any agents, contractors and employees of the Secured Parties (collectively,
the "INDEMNITEES") against, and hold each of them harmless from, any and all
losses, claims, damages, liabilities and related expenses, including reasonable
fees, disbursements and other charges of counsel, incurred by or asserted
against any of them arising out of, in any way connected with, or as a result
of, the execution, delivery, or performance of this Agreement or any agreement
or instrument contemplated hereby or any claim, litigation, investigation or
proceeding relating hereto or to the Collateral, whether or not any Indemnitee
is a party thereto; provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnitee.
(c) Any such amounts payable as provided hereunder shall be additional
Obligations secured hereby. The provisions of this Section shall remain
operative and in full force and effect regardless of the termination of this
Agreement, the Purchase Agreement, the Notes or the other Transaction Documents,
the consummation of the transactions contemplated hereby, the repayment of any
of the Obligations, the invalidity or unenforceability of any term or provision
of this Agreement, the Purchase Agreement, the Notes or the other Transaction
Documents, or any investigation made by or on behalf of the Secured Parties. All
amounts due under this Section shall be payable on written demand therefor.
Section 7.6. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE.
Section 7.7. Waivers; Amendment.
(a) No failure or delay of the Secured Parties in exercising any power or
right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of the Secured Parties hereunder and under the Purchase Agreement
are cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provisions of this Agreement, the Purchase
Agreement, the Notes or the other Transaction Documents or consent to any
departure by Grantor therefrom shall in any event be effective unless the same
shall be permitted by paragraph (b) below, and then such waiver or consent shall
be effective only in the specific instance and for the purpose for which given.
No notice to or demand on Grantor in any case shall entitle Grantor to any other
or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to an agreement or agreements, in writing entered
into by the Secured Parties and Grantor.
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Section 7.8. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT, THE PURCHASE AGREEMENT OR THE NOTES. EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT, THE PURCHASE AGREEMENT AND THE NOTES, AS APPLICABLE, BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
Section 7.9. SEVERABILITY. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired thereby
(it being understood that the invalidity of a particular provision in a
particular jurisdiction shall not in and of itself affect the validity of such
provision in any other jurisdiction). The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.
Section 7.10. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract. Each party shall be entitled
to rely on a facsimile signature of any other party hereunder as if it were an
original.
Section 7.11. Jurisdiction; Consent to Service of Process.
(a) Grantor hereby irrevocably and unconditionally submits, for itself
and its property, to the nonexclusive jurisdiction of any Delaware State
court or Federal court of the United States of America sitting in Delaware,
and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement, the Purchase Agreement or the
Notes, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all
claims in respect of any such action or proceeding may be heard and
determined in such Delaware State or, to the extent permitted by law, in
such Federal court. Each of the parties hereto agrees that a final judgment
in any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided
by law. Nothing in this Agreement shall affect any right that the Secured
Parties may otherwise have to bring any action or proceeding relating to
this Agreement, the Purchase Agreement, the Notes or the other Transaction
Documents against Grantor or its properties in the courts of any
jurisdiction.
(b) Grantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement, the Purchase
Agreement, the Notes or the other Transaction Documents in any Delaware
State or Federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any
such court.
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(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 7.1. Nothing in this
Agreement will affect the right of any party to this Agreement to process
in any other manner permitted by law.
Section 7.12. TERMINATION. This Agreement and the Security Interest shall
terminate when all the Obligations have been paid in full, at which time the
Secured Parties shall execute and deliver to Grantor, at Grantor's expense, all
Uniform Commercial Code termination statements and similar documents which
Grantor shall reasonably request to evidence such termination. Any execution and
delivery of termination statements or documents pursuant to this Section shall
be without recourse to or warranty by the Secured Parties.
Section 7.13. PREJUDGMENT REMEDY WAIVER. Grantor acknowledges that this
Agreement, the Purchase Agreement, the Notes and the other Transaction Documents
evidence a commercial transaction and that it could, under certain circumstances
have the right, to notice of and hearing on the right of the Secured Parties to
obtain a prejudgment remedy, such as attachment, garnishment and/or replevin,
upon commencing any litigation against Grantor. Notwithstanding, Grantor hereby
waives all rights to notice, judicial hearing or prior court order to which it
might otherwise have the right under any state or federal statute or
constitution in connection with the obtaining by the Secured Parties of any
prejudgment remedy by reason of this Agreement, the Purchase Agreement, the
Notes, the other Transaction Documents or by reason of the Obligations or any
renewals or extensions of the same. Grantor also waives any and all objection
which it might otherwise assert, now or in the future, to the exercise or use by
the Secured Parties of any right of setoff, repossession or self help as may
presently exist under statute or common law.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have duly executed this Security
Agreement as of the day and year first written above.
P-COM, INC.
By: /s/ XXXXXX X. XXXXXX
-------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President
NORTH SOUND LEGACY INSTITUTIONAL FUND LLC, as Agent
By: /S/ XXXXXX XXXXXX
Name: Xxxxxx Xxxxxx
Title: Chief Financial Officer
EXHIBIT A
SECURED PARTIES
North Sound Legacy Fund LLC
00 Xxxxxx Xxxxxx, Xxxxxx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxx
Fax No.: (000) 000-0000
North Sound Legacy Institutional Fund LLC
00 Xxxxxx Xxxxxx, Xxxxxx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxx
Fax No.: (000) 000-0000
North Sound Legacy International Ltd.
00 Xxxxxx Xxxxxx, Xxxxxx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxx
Fax No.: (000) 000-0000
SCHEDULE A
PLACES OF BUSINESS; CHIEF EXECUTIVE OFFICE; FILING LOCATIONS
STATE OF INCORPORATION:
Delaware
CHIEF EXECUTIVE OFFICE:
0000 Xxxxx Xxxxxxxxxx Xxxx.
Xxxxxxxx, XX 00000
FILING LOCATIONS:
Secretary of State of the State of Delaware
SCHEDULE 3.3
EXISTING LIENS
Silicon Valley Bank holds a blanket security interest in all of the Grantor's
assets pursuant to that certain Loan and Security Agreement by and among the
Grantor, P-Com Network Services, Inc. and Silicon Valley Bank, dated September
20, 2002, and that certain Loan and Security Agreement (EXIM Program) by and
among the Grantor, P-Com Network Services, Inc. and Silicon Valley Bank, dated
September 20, 2002.
SCHEDULE 3.4
ABSENCE OF OTHER LIENS
Silicon Valley Bank holds a blanket security interest in all of the Grantor's
assets pursuant to that certain Loan and Security Agreement by and among the
Grantor, P-Com Network Services, Inc. and Silicon Valley Bank, dated September
20, 2002, and that certain Loan and Security Agreement (EXIM Program) by and
among the Grantor, P-Com Network Services, Inc. and Silicon Valley Bank, dated
September 20, 2002.
The Grantor has executed and delivered that certain Senior Subordinated Secured
Promissory Note, dated November 1, 2002, in favor of BBT Fund LP in the original
principal amount $201,875.
