SECURITY AGREEMENT
Exhibit
10.2
This
Security Agreement (“Agreement”)
is
made and entered into as of the 15th day of July, 2008 by and between ZVUE
CORPORATION (“Debtor”),
a
Delaware corporation, in favor of XXXX XXXX (“Secured
Party”).
The
parties hereby agree as follows:
1. Definitions.
All
capitalized terms used herein shall, unless otherwise defined herein, have
the
meanings set forth below or set forth in the Loan Agreement defined
below.
(a) “Collateral”
means
all of the following:
(i) Debtor’s
inventory of Products (defined below) in all its forms, wherever located,
whether now owned or hereafter acquired, including, but not limited to, all
goods, wares, merchandise, parts, supplies, finished products, other tangible
personal property, including such inventory as is temporarily out of Company’s
custody or possession and including any returns upon any accounts or other
proceeds, and all accessions thereto and products thereof and documents therefor
(any and all such inventory, accessions, products and documents being the
“Product
Inventory”);
(ii) All
accounts and other receivables of Debtor arising from the sale of the Products,
and other receivables, instruments or other forms of obligations and rights
to
payment of the Company and all other obligations due or to become due to Debtor
in connection with the sale of the Products (the “Product
Receivables”),
together with the proceeds thereof, all goods represented by such Product
Receivables and all such goods that may be returned by Debtor’s customers, and
all proceeds of any insurance thereon, and all guarantees, securities and lines
which the Company may hold for the payment of such Product Receivables
including, without limitation, all rights of stoppage in transit, replevin
and
reclamation and as an unpaid vendor and/or lienor; and
(iii) All
proceeds and products of any and all of the foregoing Collateral and, including
but not limited to, all payments under insurance or in connection with any
indemnity, warranty or guarantee payable by reason of loss or damage to or
otherwise with respect to any of the foregoing Collateral.
(b) “Event
of Default”
means
an event described in Section 5.
(c) “Obligations”
shall
have the meaning ascribed to that term in the Loan Agreement.
(d) “Loan
Agreement”
shall
mean that certain Loan Agreement entered into between Debtor and Secured Party
dated as of the date hereof. “Loan
Documents”
mean
the Loan Documents defined in the Loan Agreement.
(e) “Lien”
means
any voluntary or involuntary security interest, mortgage, pledge, claim, charge,
encumbrance, title retention agreement, or third party interest covering all
or
any part of the property of Debtor or any other Person.
(f) “Products”
mean
the Products defined in the Loan Agreement and specifically identified in
Schedule
1
thereof,
and any other Products that are the subject of an Approved Purchase
Order.
(g) “Secured
Promissory Note”
shall
have the meaning ascribed to it in the Loan Agreement.
(h) “Person”
means
any individual or entity.
(i) “Remittance
Account”
shall
have the meaning ascribed to it in Section 3, below.
(j) “Senior
Lender”
means
YA Global Investments, L.P., its successors and assigns.
2. Grant
of Security Interest.
Debtor
hereby assigns, conveys, mortgages, pledges, hypothecates and transfers to
Secured Party, and hereby grants to Secured Party a first-priority security
interest in all of Debtor’s right, title and interest in, to and under the
Collateral, whether now owned or hereafter acquired, to secure the full, prompt,
complete and final performance and payment of the Obligations when due (whether
at stated maturity, by acceleration or otherwise).
3. Remittance
Account.
Debtor
shall instruct Retailer to deposit and Debtor shall deposit all proceeds from
the sale of the Products to a remittance account (the “Remittance
Account”)
identified in writing by Secured Party and controlled by Secured Party. Funds
deposited into the Remittance Account shall be applied by Secured Party as
follows:
First,
to
Secured Party in an amount sufficient to pay in full Secured Party’s costs and
professionals’ and advisors’ fees and expenses as described in Section 8.3(a) of
the Loan Agreement;
Second,
to
Secured Party in an amount equal to the then unpaid amount of the Obligations
(including principal, interest, and the Transaction Fees), in such order and
priority as Secured Party may choose in its sole discretion; and
Finally,
after
the full, final, and indefeasible payment in cash of all of the Obligations,
to
Debtor or its representatives or as a court of competent jurisdiction may
direct.
Secured
Party shall utilize its commercially reasonable best efforts to distribute
all
funds from the Remittance Account that are payable to Debtor within one (1)
business day after deposit.
4. Representations,
Warranties and Covenants.
Debtor
hereby represents, warrants, covenants and agrees as follows:
(a) Except
for the security interest granted hereby, Debtor is or will be the only owner
of
all of the Collateral free from any adverse lien, security interest or
encumbrance and Debtor will defend the Collateral against all claims and demands
of all persons other than Secured Party. Debtor has obtained necessary
authorization and all consents required to permit granting and perfecting of
Secured Party’s first-priority security interest in the Collateral. Upon filing
of the amendment to Senior Lender’s UCC-1 filing referred to in Section 3.6 of
the Loan Agreement, or upon execution of the intercreditor or subordination
agreement referred to therein, no effective security agreement, financing
statement, equivalent security or lien instrument or continuation statement
covering all or any part of the Collateral shall exist. Debtor shall not,
directly or indirectly, create, permit or suffer to exist, and shall defend
the
Collateral against and take such other action as is necessary to remove, any
Lien on the Collateral.
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(b) Except
for the sale of Products by Debtor to Retailer, Debtor, its agents, servants
or
employees will not sell, assign, encumber or offer to sell, assign, encumber
or
otherwise transfer any Collateral either in whole or in part.
(c) Debtor
will maintain the Product Inventory in good condition and repair, reasonable
wear and tear excepted, and will pay and discharge prior to delinquency all
taxes, levies and other impositions levied on or against the Product Inventory.
Prior to the transfer of the Product Inventory to Retailer, Secured Party may
examine and inspect the Product Inventory at any time wherever
located.
(d) Debtor
will insure the Collateral against such risks and casualties and in such amounts
as may be required to satisfy in full all Obligations to Secured Party. Each
such policy shall name Secured Party as an additional insured. Policies or
certificates evidencing such insurance shall be furnished to Secured Party.
(e) Debtor
agrees to execute and deliver to Secured Party, at Debtor’s expense, such UCC 1
Financing Statements and other documents in forms reasonably acceptable to
Secured Party as Secured Party may from time to time reasonably request or
as
are necessary in the opinion of Secured Party to establish and maintain a valid,
perfected first-priority security interest in the Collateral. Debtor authorizes
Secured Party to file or record, as the case may be, any such UCC-1 Financing
Statements or other documents without signature of Debtor.
(f) Debtor
will at all times keep accurate and complete records of any proceeds received
from the Collateral and the payment and performance of the respective account
debtors and all other parties obligated on the Product Receivables.
(g) This
Security Agreement creates a legal and valid security interest on and in all
of
the Collateral in which Debtor now has rights and will create a legal and valid
security interest in the Collateral in which Debtor later acquires
rights.
(h) Debtor
shall not change its jurisdiction of organization, relocate its chief executive
office, principal place of business or its records without 30 days prior written
notice to Secured Party.
(i) At
any
time and from time to time, upon the written request of Secured Party, and
at
the sole expense of Debtor, Debtor shall promptly and duly execute and deliver
any and all such further instruments and documents and take such further action
as Secured Party may reasonably deem necessary or desirable to obtain the full
benefits of this Security Agreement, including, without limitation, (a) using
its best efforts to secure all consents and approvals necessary or appropriate
for the grant of a security interest to Secured Party in any item of Collateral
held by Debtor or in which Debtor has any right or interest, (b) transferring
the Collateral to Secured Party’s possession (if a security interest in such
Collateral can be perfected only by possession), (c) at Secured Party’s
reasonable request, executing and delivering or causing to be delivered written
notice to insurers of Secured Party’s security interest in, or claim in or
under, any policy of insurance (including unearned premiums) and (d) at Secured
Party’s reasonable request, using its best efforts to obtain acknowledgments
from bailees having possession of any Collateral and waivers of liens from
landlords and mortgagees of any location where any of the Collateral may from
time to time be stored or located. If any amount payable under or in connection
with any of the Collateral is or shall become evidenced by any Instrument,
such
Instrument, other than checks and notes received in the ordinary course of
business and any Instrument in the outstanding or stated amount of less than
$10,000, shall be duly endorsed in a manner reasonably satisfactory to Secured
Party and delivered to Secured Party promptly and in any event within five
(5)
business days of Debtor’s receipt thereof.
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5. Default.
Debtor
shall be in default under this Agreement upon the happening of any of the
following events or conditions (“Events
of Default”):
(a) The
occurrence of any Event of Default defined in the Loan Agreement;
(b) The
material breach of any covenant, representation or warranty made by the Debtor
herein, or the determination by the Secured Party that any representation or
warranty made by the Debtor herein was incorrect in any material respect when
given; and
(c) Loss,
theft, damage or destruction to or of a material portion of the
Collateral.
6. Rights
and Remedies Upon Default.
(a) Upon
occurrence and during the continuance of an Event of Default, Secured Party
may
at its option accelerate Debtor’s payment obligations under the Secured
Promissory Note and shall have, in addition to all other rights and remedies
under the Loan Documents and applicable law, the rights and remedies of a
secured party under the California Commercial Code, including, without
limitation, the right to take possession of and/or sell the Collateral. Without
limiting the generality of the foregoing, Debtor expressly agrees that in any
such event Secured Party, without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified below of time
and place of public or private sale) to or upon Debtor or any other person
(all
and each of which demands, advertisements and notices are hereby expressly
waived to the maximum extent permitted by the UCC and other applicable law),
may
(i) reclaim, take possession, recover, store, maintain, finish, repair, prepare
for sale or lease, shop, advertise for sale or lease and sell or lease (in
the
manner provided herein) the Collateral, and in connection with the liquidation
of the Collateral and collection of the accounts receivable pledged as
Collateral, use any trademark, copyright, or process used or owned by Debtor
and
(ii) forthwith collect, receive, appropriate and realize upon the Collateral,
or
any part thereof, and may forthwith sell, lease, assign, give an option or
options to purchase or sell or otherwise dispose of and deliver said Collateral
(or contract to do so), or any part thereof, in one or more parcels at public
or
private sale or sales, at any exchange or broker’s board or at any of Secured
Party’s offices or elsewhere at such prices as it may deem best, for cash or on
credit or for future delivery without assumption of any credit risk. For that
purpose, Secured Party may, so far as Debtor can give authority therefor, enter
upon any premises on which the Collateral may be located or situated in and
remove the same therefrom without liability for rent, storage or other costs.
Upon request, Debtor shall assemble and make the Collateral available to Secured
Party at a place to be designated by Secured Party, which is reasonably
convenient to Secured Party.
(b) Upon
the
occurrence and during the continuance of an Event of Default, Secured Party
may
sell all or any part of the Collateral, at public or private sales, at such
price or prices as Secured Party may deem commercially reasonable. To the extent
permitted by law, Debtor specifically waives all rights of redemption and any
rights of stay or appraisal which it has or may have under any applicable law
in
effect from time to time. Any such public or private sales shall be held at
such
times and at such place(s) as Secured Party may determine. Secured Party may,
instead of exercising its power of sale, proceed to enforce its security
interest in the Collateral by seeking a judgment or decree of a court of
competent jurisdiction. To the maximum extent permitted by applicable law,
Debtor waives all claims, damages, and demands against Secured Party arising
out
of the repossession, retention or sale of the Collateral. Debtor agrees that
Secured Party need not give more than ten (10) days’ notice of the time and
place of any public sale or of the time after which a private sale may take
place and that such notice is reasonable notification of such matters. Debtor
shall remain liable for any deficiency if the proceeds of any sale or
disposition of the Collateral are insufficient to pay all amounts to which
Secured Party is entitled from Debtor, Debtor also being liable for the attorney
costs of any attorneys employed by Secured Party to collect such deficiency.
Debtor agrees that in any sale of any of such Collateral, whether at a
foreclosure sale or otherwise, Secured Party is hereby authorized to comply
with
any limitation or restriction in connection with such sale as it may be advised
by counsel is necessary in order to avoid any violation of applicable law
(including compliance with such procedures as may restrict the number of
prospective bidders and purchasers, require that such prospective bidders and
purchasers have certain qualifications and restrict such prospective bidders
and
purchasers to persons who will represent and agree that they are purchasing
for
their own account for investment and not with a view to the distribution or
resale of such Collateral), or in order to obtain any required approval of
the
sale or of the purchaser by any governmental authority, and Debtor further
agrees that such compliance shall not result in such sale being considered
or
deemed not to have been made in a commercially reasonable manner, nor shall
Secured Party be liable nor accountable to Debtor for any discount allowed
by
the reason of the fact that such Collateral is sold in compliance with any
such
limitation or restriction.
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(c) In
addition to the remedies described above, Debtor shall, upon request of Secured
Party, and Secured Party itself may, in the name of Secured Party or Debtor,
at
any time after an Event of Default notify the account debtor or other obligor
on
any Product Receivable of Secured Party’s security interest. Secured Party may,
in its own name or the name of the Debtor, at any time after the occurrence
and
during the continuation of an Event of Default hereunder, demand, xxx for,
collect or receive any money or property payable or receivable on any Product
Receivable and settle, release, compromise, adjust, xxx upon, foreclose, realize
upon or otherwise enforce any Product Receivable as Secured Party may determine.
(d) For
the
purpose of protecting and preserving the Collateral and Secured Party’s rights
under this Agreement, Debtor hereby irrevocably appoints Secured Party, with
full power of substitution, as its attorney-in-fact with full power of
authority, after the occurrence and during the continuance of any Event of
Default, to do any act which Debtor is obligated to do hereunder. Debtor hereby
ratifies all that Secured Party shall lawfully do or cause to be done by virtue
of this appointment.
(e) Debtor
also agrees to pay all fees, costs and expenses of Secured Party, including,
without limitation, attorneys’ fees, incurred in connection with the enforcement
of any of its rights and remedies hereunder.
(f) Debtor
hereby waives presentment, demand, protest or any notice (to the maximum extent
permitted by applicable law) of any kind in connection with this Security
Agreement or any Collateral.
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(g) The
proceeds of any sale, disposition or other realization upon all or any part
of
the Collateral shall be distributed by Secured Party in the following order
of
priorities:
First,
to
Secured Party in an amount sufficient to pay in full Secured Party’s costs and
professionals’ and advisors’ fees and expenses as described in Section 8.3(a) of
the Loan Agreement;
Second,
to
Secured Party in an amount equal to the then unpaid amount of the Obligations
(including principal, interest, and the Transaction Fees), in such order and
priority as Secured Party may choose in its sole discretion; and
Finally,
after
the full, final, and indefeasible payment in cash of all of the Obligations,
to
any creditor holding a junior lien on the Collateral, or to Debtor or its
representatives or as a court of competent jurisdiction may direct.
(h) Secured
Party shall be deemed to have acted reasonably in the custody, preservation
and
disposition of any of the Collateral if it takes such action as Debtor requests
in writing except during an Event of Default, but failure of Secured Party
to
comply with any such request shall not in itself be deemed a failure to act
reasonably, and no failure of Secured Party to do any act not so requested
shall
be deemed a failure to act reasonably.
7. Indemnity.
Debtor
agrees to defend, indemnify and hold harmless Secured Party and its officers,
employees, and agents against (a) all obligations, demands, claims, and
liabilities claimed or asserted by any other party in connection with the
transactions contemplated by this Security Agreement and (b) all losses or
expenses in any way suffered, incurred, or paid by Secured Party as a result
of
or in any way arising out of, following or consequential to transactions between
Secured Party and Debtor, whether under this Security Agreement or otherwise
(including without limitation, reasonable attorneys fees and expenses), except
for losses arising from or out of Secured Party’s gross negligence or willful
misconduct.
8. Notices.
Any
notice to any party hereto shall be given in accordance with the terms of
Section 8.12 of the Loan Agreement.
9. Governing
Law.
This
Agreement shall be governed and interpreted in accordance with the laws of
the
State of California, including without limitation the California Commercial
Code.
10. Counterparts.
This
Agreement may be signed in one or more counterparts, each of which shall be
deemed an original but all of which together shall constitute one and the same
instrument.
11. Binding
Effect.
This
Agreement shall be binding upon Debtor, its successors, representatives and
assigns, and shall inure to the benefit of Secured Party and its successors
and
assigns.
12. Rights
Cumulative.
All
rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any other rights and remedies available under contract or
applicable law.
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13. Unenforceable
Provisions.
Any
provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall be so only as to such jurisdiction and only to the extent
of
such prohibition or unenforceability, but all of the remaining provisions of
this Agreement shall remain valid and enforceable.
14. Termination.
After
expiration of the Maturity Date (as defined in the Loan Documents) and upon
the
payment in full and satisfaction of all of the Obligations, the security
interest granted hereby shall terminate and all rights to the Collateral shall
revert to Debtor. Upon any such termination, Secured Party shall, at Debtor’s
expense, execute and deliver to Debtor such documents as Debtor shall reasonably
request to evidence such termination.
15. Non-Waiver.
Waiver
of or acquiescence in any default by Debtor, or failure of Secured Party to
insist upon strict performance by Debtor of any representation, warranty or
covenant set forth in this Agreement or any of the Loan Documents shall not
constitute a waiver of any subsequent or other default or failure.
16. Entire
Agreement.
This
Agreement is intended by Debtor and Secured Party as the final expression of
Debtor’s obligations to Secured Party in connection with the Collateral and
supersedes all prior understandings and agreements concerning the subject matter
hereof. This Agreement may be amended only by a writing signed by Debtor and
Secured Party.
17. Reinstatement.
This
Security Agreement shall remain in full force and effect and continue to be
effective should any petition be filed by or against Debtor for liquidation
or
reorganization, should Debtor become insolvent or make an assignment for the
benefit of creditors or should a receiver or trustee be appointed for all or
any
significant part of Debtor’s property and assets, and shall continue to be
effective or be reinstated, as the case may be, if at any time payment and
performance of the Obligations, or any part thereof, is, pursuant to applicable
law, rescinded or reduced in amount, or must otherwise be restored or returned
by any obligee of the Obligations, whether as a “voidable preference,”
“fraudulent conveyance,” or otherwise, all as though such payment or performance
had not been made. In the event that any payment, or any part thereof, is
rescinded, reduced, restored or returned, the Obligations shall be reinstated
and deemed reduced only by such amount paid and not so rescinded, reduced,
restored or returned.
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IN
WITNESS WHEREOF the
parties hereto have executed this Agreement as of the date first above written.
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Secured
Party:
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Debtor:
ZVUE
CORPORATION
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By:
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/s/
Xxxx Oscodar
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/s/
Xxxx Xxxx
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Its:
President
& CEO
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XXXX
XXXX
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