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EXHIBIT 10.4
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of September 30, 1999 (as amended from
time to time, this "Agreement "), by and among GENERAL AUTOMATION, INC., a
Delaware corporation (the "Borrower"), and PACIFIC MEZZANINE FUND, L.P., a
California limited partnership ("PMF") (together with any subsequent Lender
pursuant to Section 1.2.6 hereof, each a "Secured Party" and collectively, the
"Secured Parties").
R E C I T A L S
A. Borrower and the Secured Parties have entered into that certain
Loan Agreement dated as of September 30, 1999 (as amended from time to time, the
"Loan Agreement") pursuant to which the Secured Parties have agreed to make a
Loan to the Borrower.
B. It is a condition to the closing of the Loan Agreement that the
Borrower execute this Agreement granting to the Secured Parties a security
interest in the collateral described herein, as set forth herein.
A G R E E M E N T
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS AND RELATED MATTERS
Section 1.1. Definitions. Terms with initial capital letters not
otherwise defined in this Agreement have the meanings set forth in the Loan
Agreement (except as otherwise provided herein). In addition, the following
terms with initial capital letters have the following meanings:
"Account Debtor" means any Person who is or may become obligated to the
Borrower on any Receivable.
"Accounts" is defined in Section 2.1.1.
"Agreement" is defined in the Preamble.
"Approvals" is defined in Section 2.1.10.5.
"Bank" shall mean Comerica Bank.
"Borrower" is defined in the Preamble.
"Charges" means all federal, state, county, city, municipal or other
taxes, liens, assessments or charges that, if not paid when due, may result in a
Lien of any Government Authority.
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"Chattel Paper" is defined in Section 2.1.3.
"Collateral" is defined in Section 2.1.
"Documents" is defined in Section 2.1.8.
"Equipment" is defined in Section 2.1.6.
"Event of Default" is defined in Section 5.1.
"Fixtures" is defined in section 2.1.7.
"GAAP" means generally accepted accounting principles consistently
applied.
"General Intangibles" is defined in Section 2. 1. 10.
"Intercreditor Agreement" means that certain Intercreditor Agreement by
and among the Secured Parties and acknowledged by the Borrower.
"Inventory" is defined in Section 2.1.5.
"Notes Receivable" is defined in Section 2.1.2.
"Pledged Collateral" is defined in Section 4.8.
"Proceeds" is defined in Section 2.1.14.
"Receivables" means Accounts, Notes Receivable, Chattel Paper and other
rights to the payment of money.
"Secured Documents" means, collectively, the Loan Agreement, the Notes,
the Collateral Documents, and any other instrument or other writing executed or
delivered by the Borrower in connection therewith, and all amendments,
appendices, exhibits and schedules to any of the foregoing, other than the
Warrants, the Investors' Rights Agreement, and the Investment Unit Pricing
Agreement.
"Secured Obligations" is defined in Section 2.2.
"Securities" is defined in Section 2.1.9.
"Security Interest" is defined in Section 2.1.
"Senior Lender" shall mean any Lender whose rights are senior to the
Secured Parties in accordance with the terms of the Loan Agreement, including
the Bank and the holders of the first and second deeds of trust on the Company's
headquarters and any transferee or assignee thereof in accordance with the terms
hereof.
"Special Depository Account" shall mean the bank account established
pursuant to the Special Depository Account Agreement.
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"Special Depository Account Agreement" shall mean that certain Special
Depository Account Agreement dated as of the date hereof between the Borrower,
the Secured Parties and the Bank.
"Supplemental Documentation" means financing statements, continuation
statements, warehouse receipts, bills of lading, assignments of accounts,
patents, trademarks or copyrights, schedules of Collateral, mortgages and other
instruments or documents necessary or requested by the Secured Parties (i) to
create, perfect and maintain perfected the Security Interest in any Collateral
or (ii) to enable the Secured Parties to receive all interest, dividends and
distributions from time to time paid with respect to, and all Proceeds of, all
Collateral which the Secured Parties is entitled to receive hereunder.
"UCC" means the Uniform Commercial Code (as amended from time to time)
of the State of California.
Section 1.2. Related Matters.
1.2.1. Terms Used in the UCC. Unless the context clearly
otherwise requires, all lower-case terms used and not otherwise defined herein
that are used or defined in Division 9 (or any equivalent subpart) of the UCC
have the same meanings herein.
1.2.2. Constructions. Unless the context of this Agreement
clearly requires otherwise, references to the plural include the singular, the
singular includes the plural, the part includes the whole, "including" is not
limiting and "or" has inclusive meaning represented by the phrase "and/or". The
words "hereof," "herein," "hereby," "hereunder" and similar terms in this
Agreement refer to this Agreement as a whole (including the Preamble, the
Recitals and all Schedules and Exhibits attached hereto) and not to any
particular provision of this Agreement. Article, Section, subsection, Exhibit,
Recital, Preamble and Schedule references in this Agreement are to this
Agreement unless otherwise specified. References in this Agreement to any
agreement, other document or law "as amended" or "as amended from time to time,"
or to amendments of any document or law, shall include any amendments,
supplements, replacements, renewals or other modifications not prohibited by the
Loan Documents.
1.2.3. Governing Law. Except to the extent otherwise required
by Applicable Law, the UCC shall govern the attachment, perfection, priority and
enforcement of the Security Interest and all other matters to which the UCC
applies pursuant to the terms thereof. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California.
1.2.4. Headings. The Article and Section headings used in this
Agreement are for convenience of reference only and shall not affect the
construction hereof.
1.2.5. Severability. If any provision of this Agreement or any
Lien or other right hereunder shall be held to be invalid, illegal or
unenforceable under Applicable Law in any jurisdiction, such provision, Lien or
other right shall be ineffective only to the extent of such invalidity,
illegality or unenforceability, which shall not affect any other provisions
herein or any other Lien or right granted hereby or the validity, legality or
enforceability of such provision, Lien or right in any other jurisdiction.
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1.2.6. Additional Secured Parties. The parties acknowledge and
agree that additional parties may lend funds to Borrower under the Loan
Agreement. Such additional lenders shall execute this Agreement together with
such additional documents as PMF may reasonably require in form and content
satisfactory to PMF prior to making such loan.
ARTICLE 2
THE SECURITY INTEREST; SECURED OBLIGATIONS
Section 2.1. Security Interest.
To secure the payment and performance of the Secured Obligations as and
when due, the Borrower hereby grants, conveys, pledges, assigns and transfers to
the Secured Parties a security interest (the "Security Interest") in, all right,
title, claim, estate and interest of the Borrower in and to all property,
wherever located, and interests of the Borrower, tangible or intangible, whether
now owned and existing or hereafter acquired or arising (such property and
interests in property being collectively referred to herein as the
"Collateral"), including the following:
2.1.1. Any and all rights to payment for goods sold or leased
or for services rendered, including any such rights evidenced by Chattel Paper,
whether due or to become due and whether or not earned by performance (excluding
any such rights evidenced by Notes Receivable) (the "Accounts");
2.1.2. Any and all negotiable instruments, promissory notes,
acceptances, drafts, checks, letters of credit, certificates of deposit and
other writings that evidence a right to the payment of money by any other
Person, including (the "Notes Receivable");
2.1.3. Any and all chattel paper, including writings that
evidence both a monetary obligation and a security interest in or lease of
specific goods (the "Chattel Paper");
2.1.4. Any and all rights to payment of money not listed above
and any and all rights, titles, interests, securities, Liens and guaranties
evidencing, securing, guaranteeing payment of or in any way relating to any
Receivables;
2.1.5. Any and all goods that may at any time be held for sale
or lease or furnished under any contract of service, or are sold, leased or
furnished under any contract of service, or constitute raw materials,
work-in-process, parts, supplies or materials that are or might be used or
consumed in a business or in connection with the manufacture, selling or leasing
of such goods ("Inventory");
2.1.6. Any and all equipment and other goods (excluding
Inventory), including the following personal property: machinery, machine tools,
office machinery (including computers, typewriters and duplicating machines),
motor vehicles, trailers, rolling stock, motors, pumps, controls, tools, parts,
works of art, furniture, furnishings and trade fixtures, all athletic equipment
and supplies and all molds, dies, drawings, blueprints, reports, catalogs and
computer programs related to any of the above (together with all related
property described in Section 2.1.12, the "Equipment");
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2.1.7. Any and all fixtures, including machinery, equipment or
appliances for generating, storing or distributing air, water, heat,
electricity, light, fuel or refrigeration, for ventilating or sanitary purposes,
elevators, safes, laundry, kitchen and athletic equipment, trade fixtures, and
telephone, television and other communications equipment (the "Fixtures");
2.1.8. Any and all documents, whether or not negotiable,
including bills of lading, warehouse receipts, trust receipts and the like (the
"Documents");
2.1.9. Any and all stocks, bonds, general and limited
partnership interests, limited liability company interests, joint venture
interests and other securities, subscription rights, options, warrants, puts,
calls and other rights with respect thereto, and investment and brokerage
accounts (the "Securities");
2.1.10. Any and all general intangibles, contract rights and
other property described below (together with any property listed under Section
2.1.4 above, the "General Intangibles"), including the following:
2.1.10.1. deposit and other accounts, including demand,
time savings, passbook and like accounts maintained with any bank, savings and
loan association, credit union, brokerage or other institution (including the
deposit accounts listed on Schedule 2.1.10.1), the Special Depository Account
and any and all money, instruments and other property from time to time
deposited therein or credited thereto, or received, receivable or otherwise
distributed therefrom, in respect thereof or in exchange therefor, including all
interest accruing thereon;
2.1.10.2. insurance policies and all rights and claims
therein or thereunder (including prepaid and unearned premiums), including
insurance against casualty (including by fire or earthquake) or liability
(including against environmental cleanup costs), title insurance, business
interruption insurance and builders risk insurance, whether covering personal or
real property;
2.1.10.3. any rights, claims, judgments, awards, orders
or decrees arising out of or in connection with any judicial action, litigation,
arbitration, mediation or other proceedings;
2.1.10.4. any and all leases of real or personal
property, licensing agreements and other contracts, and all guarantees,
warranties, royalties, license fees and rights under such contracts;
2.1.10.5. any and all Governmental Approvals, including
permits, licenses, certificates of use and occupancy (or their equivalents) and
zoning and other approvals, and tax and other refunds, compensation, awards,
payments and relief given or made by any Governmental Authority (including
condemnation awards) (the "Approvals");
2.1.10.6. deposits, surety and other bonds, and choses
and things in action;
2.1.10.7. computer programs, computer software
(including all source and object codes, all media of any type or nature on which
such source or object codes are
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reproduced, copied, stored or maintained), technology processes, proprietary
information, patents, patent applications, copyrights, copyright applications,
trademarks, trademark applications, service marks, trade and other names, trade
secrets, customer lists, the entire goodwill of or associated with the business
now or hereafter conducted by the Borrower, and other Proprietary Rights,
including the intellectual property rights listed on Schedule 2.1.10.8 (the
"Intellectual Property Collateral").
2.1.11. Any and all books and records (including
ledgers, correspondence, credit files, computer software, computer storage media
and electronically recorded data) pertaining to the Borrower or any of the
foregoing and all equipment receptacles, containers and cabinets therefor;
2.1.12. Any and all accessions, appurtenances,
components, repairs, repair parts, spare parts, renewals, improvements,
replacements, substitutions and additions to, of or with respect to any of the
foregoing;
2.1.13. Any and all rights, remedies, powers and
privileges of the Borrower with respect to any of the foregoing; and
2.1.14. Any and all proceeds and products of any of the
foregoing, whether now held and existing or hereafter acquired or arising
(collectively, the "Proceeds"). "Proceeds" shall include (i) whatever is now or
hereafter received by the Borrower upon the sale, lease, license, exchange,
collection, other disposition or operation of any item of Collateral, whether
such proceeds constitute accounts, general intangibles, instruments, securities,
documents, letters of credit, chattel paper, deposit accounts, money, goods or
other personal property, (ii) any items that are now or hereafter acquired by
the Borrower with any Proceeds of Collateral, (iii) any amounts now or hereafter
payable under any insurance policy by reason of any loss of or damage to any
Collateral or the business of the Borrower, (iv) all rights to payment for the
sale of services or products in connection with the business of the Borrower,
(v) all royalties, rights to payment, accounts receivable and proceeds of
infringement suits in connection with the Intellectual Property Collateral, and
(vi) the right to further transfer, including by pledge, mortgage, license,
assignment or sale, any of the foregoing.
Section 2.2. Secured Obligations.
The Security Interest shall secure the due and punctual payment and
performance by the Borrower of any and all present and future obligations of the
Borrower under the Secured Documents, including without limitation, all
obligations and liabilities of the Borrower of every type or description to the
Secured Parties, or any Person entitled to indemnification under the Loan
Agreement, and any other Secured Document:
2.2.1. arising under or in connection with the Loan Agreement
or the Notes whether for principal of or premium (if any) or interest on the
Loan, expenses, indemnities or other amounts (including attorneys' fees and
expenses); or
2.2.2. arising under or in connection with the Loan Agreement,
this Agreement or any other Secured Document, including for reimbursement of
amounts permitted to be
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advanced or expended by the Secured Parties (i) to satisfy amounts required to
be paid by the Borrower under this Agreement or any other Secured Document for
claims and Charges, together with interest thereon to the extent provided, or
(ii) to maintain or preserve any Collateral or to create, perfect, continue or
protect any Collateral or the Security Interest therein, or their priority;
in each case whether due or not due, direct or indirect, joint and/or several,
absolute or contingent, voluntary or involuntary, liquidated or unliquidated,
determined or undetermined, now or hereafter existing, renewed or restructured,
whether or not from time to time decreased or extinguished and later increased,
created or incurred, whether or not arising after the commencement of a
proceeding under the Bankruptcy Code (including post-petition interest) and
whether or not recovery of any such obligation or liability may be barred by a
statute of limitations or such obligation or liability may otherwise be
unenforceable (all obligations and liabilities described in this Section 2.2.
are collectively referred to as the "Secured Obligations").
ARTICLE 3
WARRANTIES AND REPRESENTATIONS
The Borrower represents and warrants that all representations and
warranties made with respect to it, its assets and its obligations in the Loan
Agreement are true and correct and makes the following additional
representations and warranties, all of which shall survive until the termination
of this Agreement pursuant to Section 6.7.
Section 3.1. Filings. Etc.
3.1.1. Duly executed financing statements containing a correct
description of the Collateral have been delivered to the Secured Parties for
filing in every governmental office in every state, county and other
jurisdiction in which the principal or any other place of business or the chief
executive office of the Borrower, or any portion of the Collateral, is located
and in each jurisdiction in which such action is necessary to establish a valid
and perfected Lien in favor of the Secured Parties in all Collateral in which a
Lien may be perfected by filing, and no further or subsequent filing, recording
or registration is necessary in any such jurisdiction, except as provided under
Applicable Law with respect to the filing of continuation statements.
3.1.2. In the event that any filing is made with the United
States Patent and Trademark Office (the "PTO") or the United States Copyright
Office (the "Copyright Office") with respect to the Collateral, Borrower shall
make file such documents or instruments with the PTO or Copyright Office, as the
case may be, as are reasonably necessary to perfect the Security Interest with
respect to such Collateral, junior only to the Senior Lenders.
Section 3.2. Locations of Collateral, Offices and Names.
(i) The Borrower's chief executive office and principal place of
business is located at the address set forth on Schedule 3.2, (ii) all other
places of business of the Borrower and all other locations at which any tangible
Collateral or books and records related to any Collateral are (or during the
past four months were) located are set forth on Schedule 3.2, and (iii) there
are no
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prior or current trade or legal names used to identify the Borrower in its
business or in the ownership of its properties other than those set forth on
Schedule 3.2.
Section 3.3. Title to Collateral; Validity and Perfection of Security
Interest; Absence of Other Liens.
3.3.1. The Borrower has good and marketable title to, or valid
and subsisting leasehold interests in, all Collateral reflected on its financial
statements as being owned or leased by it and "rights" in all other Collateral
within the meaning of Section 9203 of the UCC. For any Intellectual Property
Collateral for which the Borrower is a licensee pursuant to a license or
licensing agreement regarding such Intellectual Property Collateral, each such
license or licensing agreement is in full force and effect; the Borrower is not
in default of any of its obligations thereunder; and all such licenses material
to the operation of the Borrower's business arise under agreements included as
General Intangibles.
3.3.2. The Security Interest constitutes a valid and, upon the
filing of financing statements covering the Collateral and other documents
referred to in Section 3.1 with the appropriate Governmental Authorities or
other Persons referred to in such Section, perfected Lien in all of the
Collateral securing payment and performance of the Secured Obligations. The
Collateral is free and clear of all Liens other than the Security Interest and
the security interests of the Senior Lenders permitted under the Loan Agreement.
3.3.3. Except for financing statements in favor of the Secured
Parties and the Permitted Liens (as defined in the Loan Agreement), the Borrower
has filed no now-effective financing statement covering the Collateral or any
part thereof.
Section 3.4. Notes Receivable.
Schedule 2.1.2. lists all Notes Receivable of the Borrower. There are no
setoffs or counterclaims or disputes existing or asserted with respect to any
such Notes Receivable.
Section 3.5. Patents, Trademarks and Copyrights.
3.5.1. Schedule 2.1.10.8 lists all Proprietary Rights in which
the Borrower has an interest. Except as disclosed on Schedule 2.1.10.8, all
Proprietary Rights are valid and enforceable and the Borrower is the sole and
exclusive owner of each of the Proprietary Rights, free and clear of any Liens
(other than Liens in favor of the Secured Parties).
3.5.2. Except for filings or recordations in favor of the
Secured Parties and the Senior Lenders, the Borrower has filed or recorded no
now-effective mortgages, transfers or assignments covering the Proprietary
Rights or any part thereof.
3.5.3. Except as set forth on Schedule 2.1.10.8, the Borrower
(directly or through any Subsidiary) does not own, possess or use under any
licensing arrangement any copyrights, patents, trademarks or service marks, nor
is there currently pending before any Governmental Authority any copyright
registration or any application for registration of any patent, trademark or
servicemark.
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3.5.4. All of the Borrower's Proprietary Rights are subsisting
and have not been adjudged invalid or unenforceable in whole or in part.
3.5.5. All maintenance fees required to be paid on account of
any of the Borrower's patents or patent applications (or any related Collateral)
have been timely paid for maintaining such Collateral in force, and, to the
Borrower's Best Knowledge, each of its patents is valid and enforceable and the
Borrower has notified the Secured Parties in writing of all prior art (including
public uses and sales) of which it is aware.
3.5.6. To the Borrower's Best Knowledge, no material
infringement or unauthorized use is being made of any Intellectual Property
Collateral by any Person.
3.5.7. The past present and contemplated future use of the
Intellectual Property Collateral by the Borrower has not, does not, and will not
infringe or violate any right, privilege or license agreement of or with any
other Person.
3.5.8. The Borrower owns, has material rights under, is a party
to, or an assignee of a party to, all material licenses, patents, patent
applications, copyrights, service marks, servicemark applications, trademarks,
trademark applications, trade names, and all other Intellectual Property
Collateral necessary to continue to conduct its business as heretofore
conducted.
3.5.9. The Borrower has taken and will continue to take all
reasonable steps to protect and preserve the secrecy of all trade secrets
relating to any of its unpublished Intellectual Property Collateral and
Proprietary Rights.
Section 3.6. Investment Property
The names and addresses of all securities intermediaries (as such term
is defined in Section 8102(a)(14) of the UCC) with whom the Borrower maintains
any investment property (as such term is defined in Section 9115(l)(f) of the
UCC), and the account numbers and account names of any securities accounts (as
such term is defined in Section 8501 of the UCC) holding any investment
property, are set forth in Schedule 3.6. Except as set forth in Schedule 3.6,
the Borrower does not have any right, title or interest in or to any investment
property.
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ARTICLE 4
COVENANTS AND AGREEMENTS
Section 4.1. Further Assurances.
The Borrower shall, at its own expense, perform such acts as may be
necessary, or that the Secured Parties may request in writing at any time, to
assure the attachment and perfection of the Security Interest to exercise the
rights and remedies of the Secured Parties hereunder or to carry out the intent
of this Agreement. The Security Interest shall be junior only to the security
interests of the Senior Lenders. Without limitation, the Borrower shall execute
and deliver (or cause any third party to execute and deliver) to the Secured
Parties, at any time and from time to time, all Supplemental Documentation in
form and substance acceptable to the Secured Parties.
Section 4.2. Inspection and Verification.
The Borrower shall keep or cause to be kept accurate and complete
records of the Collateral at the Borrower's chief executive office. The Secured
Parties and their employees and agents shall have the right, at all times during
the Borrower's usual business hours upon reasonable written notice, but in no
event less than two (2) Business Days' notice (or such shorter period as may be
necessary during the continuance of an Event of Default), to (i) inspect, and
verify the quality, quantity, value and condition of, or any other matter
relating to, the Collateral, (ii) inspect all records relating thereto and to
make (or require the Borrower to provide) copies of such records, and (iii)
enter upon all premises upon which any of the Collateral is located.
Notwithstanding the foregoing, the Secured Parties shall not contact third
parties in making such inspection or verification (and then only after notice to
the Borrower) unless an Event of Default shall then exist.
Section 4.3. Power of Attorney.
The Borrower hereby irrevocably appoints the Secured Parties and their
employees and agents as the Borrower's true and lawful attorneys-in-fact, with
full power of substitution, (i) to do all things required to be done by the
Borrower under this Agreement or the other Loan Documents and (ii) to do all
things that the Secured Parties may deem necessary or advisable to assure the
attachment, perfection and priority of the Security Interest or otherwise to
exercise the rights and remedies of the Secured Parties hereunder or carry out
the intent of this Agreement, provided that the Secured Parties shall not
exercise any of their rights under the foregoing power of attorney unless a
Default or an Event of Default shall have occurred and be continuing. Without
limitation, the Secured Parties and their officers and agents shall be entitled
to do all of the following, as fully as the Borrower might:
4.3.1. to sign the name of the Borrower on any Supplemental
Documentation and to deliver and file such Supplemental Documentation to or with
such Persons as the Secured Parties, in their discretion, may elect;
4.3.2. to sign any certificate of ownership, registration card,
application therefor, affidavits or documents necessary to transfer title to any
of the Collateral, to receive and receipt for all licenses, registration cards
and certificates of ownership;
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4.3.3. to affix, by facsimile signature or otherwise, the
general or special endorsement of the Borrower, in such manner as the Secured
Parties shall deem advisable, to any Pledged Collateral that has been delivered
to or obtained by the Secured Parties without appropriate endorsement or
assignment; and
4.3.4. during the existence of an Event of Default, upon not
less than three (3) business days written notice to the Borrower and at such
time or times as the Secured Parties in their discretion may determine, in the
Borrower's or in the Secured Parties' name:
4.3.4.1. to collect any and all amounts due to the
Borrower from Account Debtors with respect to Receivables by legal proceedings
or otherwise;
4.3.4.2. to make, settle and adjust any claims under
insurance policies, and make any decisions with respect thereto;
4.3.4.3. to attend and vote at any and all meetings of
the holders of Securities and to execute any and all written consents of such
holders with the same effect as if the Borrower had personally attended and
voted at such meetings or had personally signed such consents; and
4.3.4.4. to execute any and all applications, documents,
papers and instruments necessary for the Secured Parties to use the Intellectual
Property Collateral and to grant or issue any exclusive or non-exclusive license
or sublicense with respect to any Intellectual Property Collateral.
The Secured Parties shall be under no obligation whatsoever to take any
of the foregoing actions, and absent bad faith, gross negligence or willful
misconduct, the Secured Parties and their Affiliates, shareholders, directors,
officers, employees and agents shall have no liability or responsibility for any
act taken or omitted with respect thereto. A copy of this Agreement and, if
applicable, a written statement by the Secured Parties that an Event of Default
exists shall be conclusive evidence of the Secured Parties' right to act under
this Section 4.3 as against all third parties.
Section 4.4. Changes of Locations of Collateral, Offices, Name or
Structure.
The Borrower shall not remove any Collateral, books or records related
to, or keep any Collateral, books or records related thereto or do business at,
a location not set forth on Schedule 3.2, adopt a trade name or change its name,
chief executive office, principal place of business, identity or corporate
structure (other than the changes in structure contemplated by the Loan
Documents) without the prior written consent of the Secured Parties which won't
be unreasonably withheld, delayed or conditioned, except sales in the ordinary
course of business.
Section 4.5. Payment of Charges and Claims.
The Borrower shall pay (i) all Charges lawfully imposed upon any
Collateral and (ii) all claims (including claims for labor, services and
materials) that have become due and payable and, under Applicable Law, have or
may become Liens upon any Collateral, in each case before any material penalty
shall be incurred with respect thereto; provided that, unless foreclosure,
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levy or similar proceedings shall have commenced, the Borrower need not pay or
discharge any such Charges or claims so long as adequate reserves therefor have
been established in accordance with GAAP. If the Borrower fails to pay or obtain
the discharge of any Charge, claim or Lien required to be paid or discharged
under this Section 4.5, the Secured Parties may, at any time and from time to
time, in their discretion and without waiving or releasing any obligation of the
Borrower under this Agreement or the other Loan Documents or waiving any Default
or Event of Default, make such payment, obtain such discharge or take such other
action with respect thereto as the Secured Parties deems advisable.
Section 4.6. Continuing Obligations of the Borrower; Indemnity.
4.6.1. The Borrower shall remain liable to observe and perform
all agreements and other obligations relating to or included in the Collateral
(the "Contractual Obligations") in accordance with their respective terms. The
Secured Parties shall not have any duty, obligation or liability under or with
respect to any such Contractual Obligations, whether by reason or arising out of
this Agreement, the receipt by the Secured Parties of any payment relating to
any such Contractual Obligation or otherwise, and the Borrower agrees to
indemnify and hold harmless the Secured Parties from any and all such
obligations and liabilities.
4.6.2. The Secured Parties shall not have any duty of care with
respect to the Collateral, other than an obligation to exercise reasonable care
with respect to Collateral in their possession or under their control; provided
that (i) the Secured Parties shall be deemed to have exercised reasonable care
if Collateral in their possession is accorded treatment substantially comparable
to that which such the Secured Parties accords their own property, and (ii) the
Secured Parties shall have no obligation to take any actions to preserve rights
against other parties or property with respect to any Collateral. Without
limitation, the Secured Parties shall (a) bear no risk or expense with respect
to any Collateral and (b) have no duty with respect to calls, conversions,
presentments, maturities, notices or other matters relating to Pledged
Collateral, or to maximize interest or other returns with respect thereto.
4.6.3. The Secured Parties may at any time deliver or redeliver
the Collateral or any part thereof to the Borrower and the receipt of any of the
same by the Borrower shall be complete and full acquittance for the Collateral
so delivered, and the Secured Parties thereafter shall be discharged from any
liability or responsibility therefor.
4.6.4. The Borrower hereby agrees to indemnify and hold
harmless the Secured Parties and their Affiliates, shareholders, directors,
officers, employees and agents against any and all claims, actions, liabilities,
costs and expenses of any kind or nature whatsoever (including reasonable fees
and disbursements of counsel) that may be imposed on, incurred by, or asserted
against any of them, in any way relating to or arising out of this Agreement or
any action taken or omitted by them hereunder, except to the extent a court
holds in a final and nonappealable judgment that they resulted from the gross
negligence or willful misconduct of such Persons.
4.6.5. The Secured Parties agrees not to disclose any
proprietary information of the Borrower that is by its nature confidential,
including, but not limited to, information concerning technology, software,
source codes, financial information, and other confidential or proprietary
business information. This Section 4.6.5 shall not apply to information that is
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demonstrably in the knowledge of the Secured Parties prior to their receipt from
the Borrower, that is in the public domain on the date of its disclosure without
any breach of this Section 4.6.5 or unauthorized disclosure of such information,
that is rightfully received by the Secured Parties from a third party without
confidentiality limitations, that is required to be disclosed by law or in
connection with a judicial or arbitration proceeding, or that is necessary or
required to be disclosed by the Secured Parties in connection with the exercise
of their remedies hereunder or under any other Loan Document. In addition, this
Section 4.6.5 shall not apply to information that the Secured Parties furnishes
to participants, successors or assigns, or potential participants, successors or
assigns, provided that no information shall be furnished without the written
undertaking of the recipient to keep such information confidential in accordance
with this Section 4.6.5.
Section 4.7. Sale of Collateral; Further Encumbrances.
The Borrower shall not (i) except for dispositions of Inventory, and
other dispositions of Collateral in the ordinary course of the Borrower's
business not prohibited by the Loan Documents (collectively, "Permitted Sales"),
sell, assign, lease, license, sublicense, or otherwise dispose of any
Collateral, or any interest therein, or (ii) except for Liens permitted under
the Loan Agreement, grant or suffer to exist any Lien in or on any Collateral,
or (iii) except as permitted under the Loan Agreement or any other Loan
Document, sign or authorize the filing of any financing statement or the filing
or recordation of any mortgage, transfer or assignment or the delivery of any
notice with respect to any of the Collateral. Concurrently with any Permitted
Sale, the Security Interest shall automatically be released from the Collateral
so disposed of; provided, however, that the Security Interest shall continue in
the Proceeds thereof. If any Collateral, or any interest therein, is disposed of
in violation of these provisions, the Security Interest shall continue in such
Collateral or interest notwithstanding such disposition, the Person to which the
Collateral or interest is being transferred shall be bound by this Agreement and
the Borrower shall deliver all Proceeds thereof to the Secured Parties to be
held as Collateral hereunder.
Section 4.8. Protection of Security; Notice of Levy.
The Borrower shall, at its own cost and expense, take any and all
actions necessary to defend title to the Collateral against all Persons and
against all claims and demands and to preserve, protect and defend the Security
Interest and the priority thereof, against any adverse Liens (other than those
of the Senior Lenders). The Borrower will promptly notify the Secured Parties of
any attachment or other legal process levied against any Collateral.
Section 4.9. Equipment and Fixtures.
The Borrower, at its expense, shall cause the Equipment and Fixtures to
be maintained and preserved in substantially the same condition, repair and
working order as when new, ordinary wear and tear excepted. Notwithstanding the
foregoing sentence, the Borrower shall not be required to maintain and repair
Equipment and Fixtures to the extent that they are either obsolete or the cost
of maintaining them exceeds their fair market value. In the case of any loss or
damage to any of the Equipment or Fixtures, the Borrower shall, as promptly as
practicable after the occurrence thereof, make or cause to be made all repairs,
replacements and other
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improvements in connection therewith that are necessary or desirable to such end
and promptly furnish to the Secured Parties a written report with respect to any
loss or damage in excess of $5,000 to any Equipment or Fixtures.
Section 4.10. Securities.
4.10.1. Subject to the rights of the Senior Lenders, the
Borrower shall immediately notify the Secured Parties upon being issued a
Security (including an interest in a general or limited partnership or in a
limited liability company that by its terms is a security governed by Division 8
of the UCC) and shall, at its own cost and expense, take such actions as are
necessary, or that the Secured Parties requests, to cause the Secured Parties to
have "control" over that Security (within the meaning of Section 9115(l)(e) of
the UCC).
4.10.2. Without limiting the foregoing, in the event that any
securities intermediary (other than the Senior Lenders) receives or holds any
investment property in favor of the Borrower as an entitlement holder, the
Borrower will execute and deliver and cause such securities intermediary to
execute and deliver to the Secured Parties a control agreement in form and
substance satisfactory to the Secured Parties in order (among other things) to
establish and maintain control over and to acknowledge the priority of the
Security Interest in such investment property in favor of the Secured Parties.
Without the prior written consent of the Secured Parties, the Borrower shall not
deliver any investment property to any Person other than the Secured Parties,
the Senior Lenders or a securities intermediary that has executed and delivered
a control agreement in favor of the Secured Parties.
Section 4.11. Intellectual Property Collateral.
4.11.1. If any of the Borrower's Intellectual Property
Collateral, including any source code or other Proprietary Rights and including
any Intellectual Property Collateral for which the Borrower is a licensee, is or
shall become subject to any escrow agreement, the Borrower shall give such
notices and obtain such acknowledgments and waivers from such escrow holder and
any other Person who is a beneficiary of any such escrow agreement as the
Secured Parties may request in order to perfect, preserve and protect the
interest and priority of the Secured Parties in such Intellectual Property
Collateral, and each such escrow agreement shall be included as a General
Intangible.
4.11.2. The Borrower will not (without the prior consent of the
Secured Parties) (i) enter into any agreement (including any license or royalty
agreement) pertaining to any Intellectual Property Collateral except in the
ordinary course of the Borrower's business or (ii) allow or suffer any
Intellectual Property Collateral to become abandoned, nor any registration
thereof to be terminated, forfeited, expired or dedicated to the public.
4.11.3. The Borrower will diligently prosecute all applications
for patents, copyrights and trademarks, and file and prosecute any and all
continuations, continuations-in-part, applications for reissue, applications for
certificate of correction and like matters as shall be reasonable and
appropriate in accordance with prudent business practice, and promptly and
timely pay any and all maintenance, license, registration and other fees, taxes
and expenses incurred in connection with any Intellectual Property Collateral.
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4.11.4. Without limiting the foregoing, the Borrower shall at
its expense do any and all acts reasonably necessary or desirable to preserve,
renew and maintain all rights in all copyrights, registrations and copyright
rights. The Borrower promptly shall give the Secured Parties written notice at
least once each calendar year of any such work or such rights of material value
to the Borrower or the operation of its business. If the Company files an
application for any registration for any copyright, the Borrower shall execute,
deliver and record in all places where this Agreement or any memorandum hereof
may be recorded and such other places as the Secured Parties may reasonably
request an appropriate security agreement, with appropriate modifications, in
form and substance satisfactory to the Secured Parties, pursuant to which the
Borrower shall grant and reaffirm its grant of a Security Interest to the extent
of its interest in such registration as provided herein to the Secured Parties.
4.11.5. Except as provided in Article 5, and notwithstanding
Article 2, the Borrower shall have the right and obligation to commence and
diligently prosecute in its own name, as real party in interest, for its own
benefit and at its own expense, such suits, proceedings or other actions for
infringement or other damage as are reasonably necessary to protect the
Intellectual Property Collateral (or any material portion thereof) or any of the
Borrower's material rights therein. The Secured Parties may be joined as parties
to such proceedings if in their sole discretion it is satisfied that it will not
incur any risk of liability or loss as a consequence thereof, and the Borrower
shall provide at its expense representation acceptable to the Secured Parties
for the common interest of the Borrower and the Secured Parties with respect to
such proceedings. The Borrower shall, promptly upon its becoming aware thereof,
notify the Secured Parties in writing of the written threat of, institution of,
or any adverse determination in, any proceeding, application, suit or action of
any kind regarding the Borrower's claim of ownership in or rights to any of the
Intellectual Property Collateral, its right to register any of the same, or its
right to keep and maintain such registration, whether before the Copyright
Office, the PTO or any United States or foreign court or governmental agency.
The Borrower shall provide promptly to the Secured Parties any information with
respect thereto reasonably requested from time to time by the Secured Parties.
Section 4.12. Subordination.
Subject to and under the circumstances set forth in the Loan Agreement,
the Secured Parties agrees to subordinate the lien created pursuant to this
Agreement in favor of one or more Senior Lenders. The rights of the Lenders
granted hereby shall be subject to the rights of the Senior Lenders. If any
conditions hereof or any rights granted hereby conflict with any conditions of
the security interests granted the Senior Lenders, or any of their rights, then
the Senior Lenders' rights and the conditions of their security interests shall
control.
ARTICLE 5
EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
Section 5.1. Event of Default.
The occurrence of one or more "Events of Default" (as defined in the
Loan Agreement) shall constitute an "Event of Default" hereunder.
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Section 5.2. Remedies.
If an Event of Default occurs and so long as such Event of Default is
continuing, then, whether or not all the Secured Obligations shall have become
immediately due and payable:
5.2.1. In addition to all their other rights, powers and
remedies under this Agreement and Applicable Law, the Secured Parties shall
have, and may exercise, any and all of the rights, powers and remedies of a
Secured Parties under the UCC, all of which rights, powers and remedies shall be
cumulative and not exclusive, to the extent permitted by Applicable Law.
5.2.2. The Secured Parties shall have the right, all at the
Secured Parties' sole option and as the Secured Parties in their discretion may
deem necessary or advisable, to do any or all of the following:
5.2.2.1. to foreclose the Security Interest by any
available judicial procedure or without judicial process;
5.2.2.2. to enter upon the premises of the Borrower or
any other place or places where Collateral is located through self-help and
without judicial process, without giving the Borrower notice and opportunity for
a hearing on the validity of the Secured Parties' claim and without any
obligation to pay rent;
5.2.2.3. to inspect and appraise the Collateral and to
prepare, repair, assemble or process the Collateral for sale, lease or other
disposition;
5.2.2.4. to remove Collateral to the premises of the
Secured Parties or any other location selected by the Secured Parties, for such
time as the Secured Parties may desire, for any purpose not prohibited hereby;
5.2.2.5. to apply any Collateral or any other assets of
the Borrower in the possession of the Secured Parties to the Secured
Obligations;
5.2.2.6. to notify Account Debtors and other obligors on
the Collateral in writing that the Collateral has been assigned to the Secured
Parties and that all payments thereon are to be made directly and exclusively to
or as specified by the Secured Parties in writing;
5.2.2.7. to collect by legal proceedings or otherwise
all dividends, distributions, interest, principal or other sums now or hereafter
payable upon or on account of the Collateral;
5.2.2.8. to enter into any extension or reorganization
agreement or any other agreement relating to or affecting the Collateral and, in
connection therewith, deposit or surrender control of any Collateral or accept
other property in exchange therefor;
5.2.2.9. to settle, compromise or release, on terms
acceptable to the Secured Parties, in whole or in part, any amounts owing on the
Collateral or any insurance thereof or relating thereto or any disputes with
respect thereto or such insurance;
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5.2.2.10. to receive, open and dispose of all mail
addressed to the Borrower and notify postal authorities to change the address
for delivery thereof to such address as the Secured Parties may designate,
provided that the Secured Parties agrees that it will promptly deliver over to
the Borrower any such opened mail as does not relate to the Collateral;
5.2.2.11. to exercise all rights and powers under
Contractual Obligations included in the Collateral, including any right of
termination;
5.2.2.12. to use or transfer any of the Borrower's
rights and interests in any Intellectual Property Collateral, by license, by
sublicense (to the extent permitted by an applicable license) or otherwise, on
such conditions and in such manner as the Secured Parties may determine;
5.2.2.13. to exercise any and all other rights, powers,
privileges and remedies of an owner of the Collateral; and
5.2.2.14. to apply (on one or more occasions) any or all
of the funds in the Special Depository Account toward full or partial prepayment
of the Loan and/or payment of any of the other Secured Obligations in such order
as the Secured Parties may determine.
5.2.3. The Borrower shall, at the Secured Parties' written
request, assemble the Collateral and make it available to the Secured Parties at
a place in the State of California to be designated by the Secured Parties in
writing. The Borrower shall make available to the Secured Parties in the State
of California all computer and other equipment of the Borrower containing books
and records pertaining to the Collateral (and the assistance of the employees of
the Borrower having responsibility for such equipment) and to use such computer
and other equipment at no charge for the purpose of obtaining information
pertaining to the Collateral, including by making copies of computer and other
files and records.
5.2.4. Until the Secured Parties is able to effect a sale,
lease or other disposition of Collateral or any part thereof, the Secured
Parties shall have the right to use, process or operate the Collateral or any
part thereof to the extent that it deems appropriate for the purpose of
preserving Collateral or its value or for any other purpose deemed appropriate
by the Secured Parties. The Secured Parties shall have the right, without notice
or demand, either in person or by agent, and without regard to the adequacy of
any security for the Secured Obligations, to take possession of the Collateral
or any part thereof and to collect and receive the rents, issues, profits,
income and proceeds thereof. Taking possession of the Collateral shall not cure,
waive or affect an Event of Default or notice thereof or invalidate any act done
pursuant to such notice.
5.2.5. The Secured Parties may, if it so elects, as a matter of
strict right and without regard to the then fair market value of the Collateral,
seek the appointment of a receiver or keeper to take possession of Collateral
and to enforce any of the Secured Parties' remedies with respect to such
appointment without prior notice or hearing. The rights, remedies and powers of
any receiver appointed by a court shall be as ordered by the court.
5.2.6. The Secured Parties shall have the right to sell, lease
or otherwise dispose of all or any Collateral in its then existing condition, or
after any further assembly, manufacturing or processing thereof, at public or
private sale or sales, with such notice as may be
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required by Section 5.4, in lots or in bulk, for cash or on credit, with or
without representations or warranties, all as the Secured Parties, in their
discretion, may deem advisable. The Secured Parties shall not be obligated to
make any sale of the Collateral regardless of notice of sale having been given.
If 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
thereof 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. The
Secured Parties shall have the right to conduct such sales on the Borrower's
premises or elsewhere and shall have the right to use the Borrower's premises
without charge for such sales for such duration as the Secured Parties deem
necessary or advisable. The Collateral need not be present at any such sale. To
the extent necessary or desirable, in the judgment of the Secured Parties, to
enable the Secured Parties to dispose of Collateral following an Event of
Default, the Secured Parties is authorized, without any obligation for rent,
license fees or other charge, to use the supplies, equipment, facilities and
space at the Borrower's place of business and is hereby granted a license or
other right to use, without charge, the Proprietary Rights, trade secrets,
names, trade names, customer lists, labels, advertising matter, and all property
of a similar nature that the Borrower owns or is entitled to use, as it pertains
to any Collateral, in preparing, repairing, assembling, processing, advertising
for sale or lease or otherwise in connection with the disposition of any
Collateral, and the Borrower's rights under all licenses and all franchise
agreements shall to such extent and for such purpose inure to the Secured
Parties' benefit. The Secured Parties may purchase all or any part of the
Collateral at public or, if permitted by Applicable Law, private sale, and in
lieu of actual payment of the purchase price, the Secured Parties may apply
against such purchase price any amount of the Secured Obligations. The Borrower
agrees that any sale of Collateral conducted by the Secured Parties in
accordance with the foregoing provisions of this Section and Section 5.3 shall
be deemed to be a commercially reasonable sale under Section 9504 of the UCC.
5.2.7. For the purpose of enabling the Secured Parties to
exercise their rights and remedies under this Article 5 or otherwise in
connection with this Agreement, the Borrower hereby grants to the Secured
Parties an irrevocable, nonexclusive and assignable license (exercisable without
payment or royalty or other compensation to the Borrower) to use, license or
sublicense any Intellectual Property Collateral and any other Collateral. The
Secured Parties agrees not to exercise such license except following the
occurrence of an Event of Default.
Section 5.3. Application of Proceeds.
5.3.1. Any cash proceeds received by the Secured Parties in
respect of any sale of, collection from, or other realization upon, all or any
part of the Collateral following the occurrence of an Event of Default
(including insurance proceeds) shall be applied as follows:
5.3.1.1. first, to the Secured Parties to pay all
advances, charges, costs and expenses payable to the Secured Parties pursuant to
Section 6.1; and
5.3.1.2. second, to pay the Secured Obligations in the
order determined by the Secured Parties.
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5.3.2. The Borrower shall pay to the Secured Parties on written
demand any deficiency with regard to the Secured Obligations that may remain
after such sale, collection or realization of, from or upon the Collateral.
5.3.3. Payments received from any third party on account of any
Collateral shall not reduce the Secured Obligations until paid in cash to the
Secured Parties. The application of proceeds by the Secured Parties shall be
without prejudice to the Secured Parties' rights as against the Borrower or
other Persons with respect to any Secured Obligations that may then be or remain
unpaid.
5.3.4. If at any time after an Event of Default the Borrower
receives any collections upon or other Proceeds of any Collateral, whether in
the form of cash, Notes Receivable or otherwise, such Proceeds shall be received
in trust for the Secured Parties and the Borrower shall keep all such Proceeds
separate and apart from all other funds and property so as to be capable of
identification as the property of the Secured Parties and, except as otherwise
provided in the Special Depository Account Agreement, promptly deliver such
Proceeds to the Secured Parties in the identical form received.
Section 5.4. Notice of Sale.
Unless the Collateral is perishable or threatens to decline speedily in
value or is of a type customarily sold on a recognized market, the Secured
Parties will send or otherwise make available to the Borrower reasonable written
notice of the time and place of any public sale or of the time on or after which
any private sale of any Collateral is to be made. The Borrower agrees that any
notice required to be given by the Secured Parties of a sale or other
disposition of collateral, or any other intended action by the Secured Parties,
that is received in accordance with the provisions set forth in Section 6.4 ten
(10) days prior to such proposed action, shall constitute commercially
reasonable and fair notice thereof to the Borrower. The Secured Parties may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor and such sale may, without further notice, be made at
the time and place to which it was so adjourned. The Borrower hereby waives any
right to receive notice of any public or private sale of any Collateral or other
security for the Secured Obligations except as expressly provided for in this
Section 5.4.
ARTICLE 6
GENERAL
Section 6.1. The Secured Parties' Expenses, Including Attorneys' Fees.
Regardless of the occurrence of an Event of Default, the Borrower agrees
to pay to the Secured Parties any and all advances, charges, costs and expenses,
including the reasonable fees and expenses of counsel and any experts or agents,
that the Secured Parties may reasonably incur in connection with (i) the
protection of the perfection, continuation or priority of the Security Interest
or protection of the Collateral, including the discharging of any prior or
junior Lien or adverse claim against the Collateral or any part thereof, (ii)
the custody, preservation or sale of, collection from, or other realization
upon, any of the Collateral, (iii) the exercise or enforcement
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of any of the rights, powers or remedies of the Secured Parties under this
Agreement or under Applicable Law (including reasonable attorneys' fees and
expenses incurred by the Secured Parties in the collection of Collateral
deposited with the Secured Parties and amounts incurred in connection with the
operation, maintenance or foreclosure of the Security Interest) or any
bankruptcy proceeding, or (iv) the failure by the Borrower to perform or observe
any of the provisions hereof All such amounts and all other amounts payable
hereunder shall be payable on written demand, together with interest for the
period from the date of demand at a rate of interest equal to the lesser of (x)
the Post-Default Rate or (y) the maximum rate allowed by Applicable Law, from
and including the due date to and excluding the date of payment.
Section 6.2. Amendments and Other Modifications.
No amendment of any provision of this Agreement (including a waiver
thereof or consent relating thereto) shall be effective unless the same shall be
in writing and signed by the Borrower and PMF. Any waiver or consent relating to
any provision of this Agreement shall be effective only in the specific instance
and for the specific purpose for which given. No notice to or demand on the
Borrower in any case shall entitle the Borrower to any other or further notice
or demand in similar circumstances.
Section 6.3. Cumulative Remedies; Failure or Delay.
The rights and remedies provided for under this Agreement are cumulative
and are not exclusive of any rights and remedies that may be available to the
Secured Parties under Applicable Law, the other Loan Documents or otherwise. No
failure or delay on the part of the Secured Parties in the exercise of any
power, right or remedy under this Agreement shall impair such power, right or
remedy or shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or remedy preclude other or further exercise
of such or any other power, right or remedy.
Section 6.4. Notices, Etc.
All notices and other communications under this Agreement shall be in
writing and shall be personally delivered or sent by prepaid overnight courier,
by registered or certified mail (postage prepaid), or by telecopy, and shall be
deemed given when received by the intended recipient thereof. Unless otherwise
specified in a notice given in accordance with the foregoing provisions of this
Section 6.4. notices and other communications shall be given to the parties
hereto at their respective addresses (or to their respective telecopier numbers)
indicated on the signature pages of the Loan Agreement.
Section 6.5. Successors and Assigns.
This Agreement shall be binding upon and, subject to the next sentence,
inure to the benefit of the Borrower and the Secured Parties and their
respective successors and assigns. The Borrower shall not assign or transfer any
of its rights or obligations hereunder without the prior written consent of the
Secured Parties. The benefits of this Agreement shall pass automatically with
any assignment of the Secured Obligations (or any portion thereof), to the
extent of such assignment.
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Section 6.6. Payments Set Aside.
Notwithstanding anything to the contrary herein contained, this
Agreement, the Secured Obligations and the Security Interest shall continue to
be effective or be reinstated, as the case may be, if at any time any payment,
or any part thereof, of any or all of the Secured Obligations is rescinded,
invalidated, declared to be fraudulent or preferential or otherwise required by
Applicable Law to be restored or returned by the Secured Parties in connection
with any bankruptcy, reorganization or similar proceeding involving the
Borrower, any other party liable with respect to the Secured Obligations or
otherwise, if the proceeds of any Collateral are required by Applicable Law to
be returned by the Secured Parties under any such circumstances, or if the
Secured Parties elects to return any such payment or proceeds or any part
thereof in their discretion, all as though such payment had not been made or
such proceeds not been received. Without limiting the generality of the
foregoing, if prior to any such rescission, invalidation, declaration,
restoration or return, this Agreement shall have been canceled or surrendered or
the Security Interest or any Collateral shall have been released or terminated
in connection with such cancellation or surrender, this Agreement and the
Security Interest and such Collateral shall be reinstated in full force and
effect, and such prior cancellation or surrender shall not diminish, discharge
or otherwise affect the obligations of the Borrower in respect of the amount of
the affected payment or application of proceeds, the Security Interest or such
Collateral.
Section 6.7. Continuing Security Interest; Termination.
This Agreement shall create a continuing security interest in the
Collateral and, except as provided below, the Security Interest and all
agreements, representations and warranties made herein shall survive until, and
this Agreement shall terminate only upon, the indefeasible payment and
performance in full of the Secured Obligations. Any investigation at any time
made by or on behalf of the Secured Parties shall not diminish the right of the
Secured Parties to rely on any agreements, representations or warranties herein.
Notwithstanding anything in this Agreement or Applicable Law to the
contrary, the agreements of the Borrower set forth in Sections 4.6.1, 4.6.4,
4.6.5 and 6.1 shall survive the payment of all other Secured Obligations and the
termination of this Agreement.
Section 6.8. Waiver and Estoppel.
Except as otherwise provided in this Agreement, the Borrower hereby
waives: (i) presentment protest, notice of dishonor, release, compromise,
settlement, extension or renewal and any other notice of or with respect to the
Secured Obligations and hereby ratifies and confirms whatever the Secured
Parties may do in this regard absent gross negligence or willful misconduct;
(ii) notice prior to taking possession or control of any Collateral or any bond
or security that might be required by any court prior to allowing the Secured
Parties to exercise any of their rights, powers or remedies; (iii) the benefit
of all valuation, appraisement, redemption and exemption laws; (iv) any rights
to require marshaling of the Collateral upon any sale or otherwise to direct the
order in which the Collateral shall be sold; (v) any set-off and (vi) any rights
to require the Secured Parties to proceed against any Person, proceed against or
exhaust any Collateral or any other security interests or guaranties or pursue
any other remedy in the
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Secured Parties' power, or to pursue any of such rights in any particular order
or manner, or any defenses arising by reason of any disability or defense of any
Person.
Section 6.9. Appointment of PMF as Agent.
The parties acknowledge that PMF has been appointed Agent for the
Secured Parties. Subject to the terms of the Intercreditor Agreement, PMF may
exercise all of the Secured Parties' rights hereunder. The parties agree that
Borrower may rely on any waiver, consent or approval granted by PMF hereunder.
Section 6.10. Execution in Counterparts.
This Agreement may be executed in any number of counterparts, each of
which counterparts, when so executed and delivered, shall be deemed to be an
original and all of which counterparts, taken together, shall constitute but one
and the same Agreement.
Section 6.11. Complete Agreement.
This Agreement, together with the Exhibits and Schedules hereto and the
other Loan Documents, is intended by the parties as a final expression of their
agreement regarding the subject matter hereof and as a complete and exclusive
statement of the terms and conditions of such agreement.
Section 6.12. Limitation of Liability.
No claim shall be made by the Borrower against the Secured Parties or
the Affiliates, shareholders, directors, officers, employees, agents or
attorneys of the Secured Parties for any special, indirect, consequential or
punitive damages in respect of any claim for breach of contract or under any
other theory of liability arising out of or related to the transactions
contemplated by this Agreement, the Loan Agreement and the other Transaction
Documents, or any act, omission or event occurring in connection therewith; and
the Borrower hereby waives, releases and agrees not to xxx upon any claim for
any such damages, whether or not accrued and whether or not known or suspected
to exist in its favor. The foregoing provisions of this Section 6.11 are not
intended to preclude Borrower from bringing a legal action against the Secured
Parties for Borrower's direct, actual damages.
Section 6.13. DISPUTE RESOLUTION.
THE PARTIES HEREBY ACKNOWLEDGE THAT THE PROVISIONS OF SECTION 8.11 AND
8.12 OF THE LOAN AGREEMENT SHALL APPLY TO THE RESOLUTION OF ANY DISPUTES
HEREUNDER OR ANY OF THE DOCUMENTS ATTACHED AS SCHEDULES HERETO.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first set forth above.
BORROWER
GENERAL AUTOMATION, INC.
a Delaware corporation
By: _____________________________________
Its: ____________________________________
THE SECURED PARTIES:
PACIFIC MEZZANINE FUND, L.P.,
a California limited partnership
By: Pacific Private Capital, its General
Partner
By: _____________________________________
Its: ____________________________________
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