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 March 26, 2003,
made by P-COM, INC., a Delaware corporation (the "Grantor"), in favor of DMG
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
$1,500,000 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
March 26, 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 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
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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.
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
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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
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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.
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 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
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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 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
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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 the Secured Parties hereunder or (iv) the failure of Grantor to
perform or observe any of the provisions hereof.
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(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
12
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.
(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 Xxxxxxx
--------------------------------
Name: Xxxxxx Xxxxxxx
Title: Chief Executive Officer
DMG LEGACY INSTITUTIONAL FUND LLC, as Agent
By: /s/ Xxxxxx Xxxxxx
-----------------------------------
Name: Xxxxxx Xxxxxx
Title: Chief Financial Officer
EXHIBIT A
Secured Parties
DMG Legacy Fund LLC
c/o DMG Advisors LLC
00 Xxxxxx Xxxxxx, Xxxxxx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxx
Fax No.: (000) 000-0000
DMG Legacy Institutional Fund LLC
c/o DMG Advisors LLC
00 Xxxxxx Xxxxxx, Xxxxxx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxx
Fax No.: (000) 000-0000
DMG Legacy International Ltd.
c/o DMG Advisors LLC
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.
