SECURITY AGREEMENT
SECURITY AGREEMENT (this "Agreement") dated _______, 2003, made by
TEGAL CORPORATION, a Delaware corporation, and the other Grantors listed on the
signature pages hereto, each with its principal offices as set forth on the
signature pages hereto (the "Grantors"), and XXXX XXXXXXXXX, having an office at
0000 Xxxx 00xx Xxxxxx, Xxxxxxxx, Xxx Xxxx 00000 ("Secured Party"), as agent for
the Holders (the "Holders") of the Debentures (as defined herein).
PRELIMINARY STATEMENT:
Tegal Corporation has issued to the Holders certain convertible
debentures dated as of the date hereof (together with any other convertible
debentures issued after the date hereof as contemplated in such convertible
debentures, collectively, the "Debentures"). The parties hereto desire to
provide security for the obligations of Tegal Corporation to the Holders under
the Debentures.
NOW, THEREFORE, in consideration of the premises, and in order to
induce the Holders to purchase the Debentures, the parties hereby agree as
follows:
Section 1. GRANT OF SECURITY. Each Grantor hereby grants to Secured
Party, for its benefit and for the ratable benefit of each Holder, a continuing
security interest in all of such Grantor's right, title and interest in and to
the following, whether now owned or hereafter acquired and wherever located
(collectively, the "Collateral"):
(1) any and all copyrights (whether registered or
unregistered), copyright rights, copyright applications, copyright
registrations, including, without limitation, the registered copyrights and
copyright applications shown in the attached EXHIBIT A, and all mask works, mask
work applications and like protections in each work or authorship and derivative
work thereof, whether published or unpublished and whether or not the same also
constitutes a trade secret (collectively the "Copyrights");
(2) any and all trade secrets, know-how, customer lists,
franchise, systems, inventions, designs, blueprints, engineering drawings,
proprietary products, technology, proprietary rights and any and all
intellectual property rights in computer software, computer programs and
computer software products, including, without limitation, source code on any
proprietary or licensed software (collectively, the "Trade Secrets");
(3) any and all patents and patent applications, including,
without limitation, the patents and patent applications shown in the attached
EXHIBIT A, and all registrations, applications and recordings thereof,
including, without limitation, all reissues, divisions, continuations, renewals,
extensions and continuations-in-part thereof, and all applications,
registrations and recordings in the United States Patent and Trademark Office or
in any similar office or agency of the United States, or any State thereof, or
any foreign country (collectively, the "Patents");
(4) any and all trademarks (whether registered or
unregistered) and trademark applications, including, without limitation, the
registered trademarks and pending applications shown in the attached EXHIBIT A,
trade names, fictitious business names, service marks (whether registered or
unregistered), service xxxx applications and all registrations, applications,
and recordings thereof, including, without limitation, applications,
registrations and recordings in the United States Patent and Trademark Office or
in any similar office or agency of the United States, any State thereof, or any
foreign country, together in each case with the goodwill of the business
asociated with such trademarks, provided, however, that the Collateral shall not
include any application to register a trademark or servicemark prior to the
filing of a verified statement of use with respect thereto (collectively, the
"Trademarks");
(5) any and all license agreements with respect to any
Copyright, Patent or Trademark (collectively, the "Licenses"); and
(6) All products and proceeds of any and all of the foregoing.
Section 2. SECURITY FOR OBLIGATIONS. This Agreement secures the payment
and performance when due of all obligations of each Grantor now or hereafter
existing under this Agreement, the Debentures, and, if applicable, such
Grantor's Subsidiary Guaranty (as defined in the Debentures) whether for
principal, interest, fees, expenses, or otherwise (all such obligations of each
Grantor being the "Obligations"). Without limiting the generality of the
foregoing, this Agreement secures the payment of all amounts which constitute
part of the Obligations and would be owed by any Grantor to the Holders under
the Debentures or the Subsidiary Guaranty but for the fact that they are
unenforceable or not allowable owing to the existence of bankruptcy,
reorganization, or similar proceedings involving the Grantor.
Section 3. GRANTORS REMAINS LIABLE. Anything herein to the contrary
notwithstanding, the exercise by the Holders or Secured Party of any rights
hereunder shall not release any Grantor from any of its duties or obligations
under the contracts and agreements included in the Collateral.
Section 4. COLLATERAL ASSIGNMENT OF COLLATERAL.
(1) Concurrently and in connection with the security interest
in the Collateral granted by the Grantors to Secured Party (for itself and as
agent for the Holders), each Grantor also assigns and conveys to Secured Party
all of such Grantor's right, title and interest in, to and under the Collateral,
PROVIDED, HOWEVER, that Secured Party (for itself and as agent for the Holders)
and each Grantor acknowledge and agree that the interest in the Collateral being
assigned hereby shall not be construed as a current assignment, but as a
collateral assignment only, in order to secure the Grantors' Obligations.
(2) The assignment and security interest granted hereby (the
"Assignment") constitutes a valid security interest in and lien on all of the
Collateral subject to no equal or prior lien other than the lien in favor of
California Trade and Commerce Agency on the Collateral of Sputtered Films, Inc.
(the "Prior Lien")or any subordinate lien other than the lien in favor of
Silicon Valley Bank (the "Subordinate Lienholder") with respect to the
obligations relating to that certain Loan and Security Agreement dated June 26,
2002 (such lien, the "Subordinate Lien").
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(3) Each Grantor authorizes and requests that the Register of
Copyrights and the Commissioner of Patents and Trademarks record the Agreement.
Without limitation on any other representation or warranty of the Grantors set
forth in this Agreement, each Grantor represents, warrants, covenants and agrees
as follows:
(a) Performance of this Assignment does not conflict
with or result in a breach of any agreement to which such Grantor is party or by
which such Grantor is bound, except to the extent that certain intellectual
property agreements (the "Limited Agreements") by their terms prohibit the
assignment of the rights thereunder to a third party without the licensor's or
other party's consent and this Assignment constitutes an assignment, provided
that Grantor further represents and warrants that the Limited Agreements do not
include any Licenses the loss of which could materially adversely affect the
business, operations, results of operations or prospects of the Grantors;
(b) During the term of this Agreement, such Grantor
will not transfer or otherwise encumber any interest in the Collateral, except
for (I) licenses granted by such Grantor in the ordinary course of business or
as set forth in this Agreement, (II) the Prior Lien, and (III) the Subordinate
Lien in favor of the Subordinate Lienholder, which lien shall be subordinate to
the lien hereof at all times pursuant to the terms of that certain Subordination
Agreement, dated as of the date hereof, among Secured Party, Subordinate
Lienholder and the Grantors in the form attached hereto as EXHIBIT B (as amended
or otherwise modified from time to time in accordance with the terms thereof,
the "Lien Subordination Agreement");
(c) Such Grantor shall use commercially reasonable
efforts to: (i) protect, defend and maintain the validity and enforceability of
the Collateral, (ii) promptly advise Secured Party in writing of material
infringements detected; and (iii) not allow any of the Collateral to be
abandoned, forfeited or dedicated to the public without the written consent of
the Secured Party, which shall not be unreasonably withheld, unless such Grantor
determines that reasonable business practices suggest that abandonment is
appropriate.
(d) Such Grantor shall register as such Grantor
ordinarily would in the ordinary course of business the most recent version of
any of such Grantor's Copyrights, if not so already registered, and shall, from
time to time, execute and file such other instruments, and take such further
actions as Secured Party may reasonably request from time to time to perfect or
continue the perfection of the Secured Party' interest in the Collateral;
(e) Upon making appropriate filings with the United
States Patent and Trademark Office, the Registrar of Copyrights and the Delaware
Secretary of State, this Assignment creates in favor of the Secured Party a
valid and perfected security interest in the Collateral in the United States,
securing the payment and performance of the Obligations evidenced by the
Debentures.
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(f) Such Grantor shall not enter into any agreement
that would materially impair or conflict with such Grantor's obligations
hereunder without the Secured Party's prior written consent, which consent shall
not be unreasonably withheld. Such Grantor shall not permit the inclusion in any
material contract to which it becomes a party of any provisions that could or
might in any way prevent the creation of a security interest in such Grantor's
rights and interests in any property included within the definition of the
Collateral acquired under such contracts. Without limitation on the foregoing,
such Grantor shall not grant any license or similar right to any of the
Collateral other than on an arms length basis on terms no worse than the fair
market value of such license or similar right.
(g) Upon any executive officer of such Grantor
obtaining actual knowledge thereof,
such Grantor will promptly notify the Secured Party in writing of any event that
materially adversely affects the value of any Collateral, the ability of such
Grantor to dispose of any Collateral or the rights and remedies of the Secured
Party in relation thereto, including the levy of any legal process against any
of the Collateral.
Section 5. REPRESENTATIONS, WARRANTIES AND COVENANTS. Each Grantor
represents, warrants and covenants as follows:
(1) Such Grantor will notify the Secured Party immediately in
writing of any change in its name, its jurisdiction of formation or its address.
(2) Such Grantor is the legal and beneficial owner of the
Collateral pledged by it free and clear of any Lien except for the security
interest created by this Agreement, the Prior Lien and the Subordinate Lien. No
effective financing statement or other document similar in effect covering all
or any part of the Collateral is on file in any recording office except in
respect of this Agreement, the Prior Lien or the Subordinate Lien.
(3) Such Grantor is a corporation duly incorporated, validly
existing, and in good standing under the laws of the jurisdiction of its
organization; has the corporate power and authority to own its assets and to
transact its business and enter into this Agreement, and is duly qualified and
in good standing under the laws of each jurisdiction in which qualification is
required.
(4) The execution and performance by such Grantor of this
Agreement have been duly authorized by all necessary corporate action and do not
and will not (a) require any consent or approval of the stockholders of such
corporation; (b) contravene such corporation's charter or bylaws; (c) violate
any provision of any law, rule, or regulation; or (d) result in a breach of or
constitute a default under, any indenture or loan or credit agreement or any
other agreement, lease, or instrument to which such corporation is a party or by
which it or its properties may be bound or affected.
(5) This Agreement is the legal, valid, and binding obligation
of such Grantor, enforceable in accordance with its terms, except to the extent
that such enforcement may be limited by applicable bankruptcy, insolvency, and
other similar laws affecting creditor's rights generally.
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(6) Except for the filing of appropriate financing statements
under the Uniform Commercial Code, and the recordation of this Agreement in the
United States Copyright Office and the United States Patent and Trademark Office
and any similar offices in any foreign countries, no consent of any other person
or entity and no authorization, approval, or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required (a)
for the grant by such Grantor of the assignment and security interest granted
hereby or for the execution, delivery, or performance of this Agreement by such
Grantor; (b) for the perfection or maintenance of the assignment, and security
interest created hereby (including the priority of such assignment and security
interest); or (c) for the exercise by the Secured Party of the rights provided
for in this Agreement or the remedies in respect of the Collateral pursuant to
this Agreement.
(7) There are no conditions precedent to the effectiveness of
this Agreement that have not been satisfied or waived.
(8) Such Grantor shall not pledge, sell, assign, transfer,
create or suffer to exist any security interest in or other lien or encumbrance
on any part of the Collateral to anyone other than the Secured Party, California
Trade and Commerce Agency in respect of the Prior Lienor, subject to the terms
of the Lien Subordination Agreement, the Subordinate Lienholder in respect of
the Subordinate Lien, without Secured Party's prior written consent. Such
Grantor hereby agrees to defend the same against any and all persons whatsoever.
Section 6. FURTHER ASSURANCES.
(1) Each Grantor, at its sole expense, will take any and all
actions as may be necessary or appropriate to facilitate the perfection and
preservation of the security interest granted herein, or to enable the Secured
Party to exercise and enforce its rights and remedies hereunder with respect to
any Collateral.
(2) Each Grantor hereby authorizes the Secured Party to file
one or more financing or continuation statements, and amendments thereto,
relating to all or any part of the Collateral without the signature of any
Grantor where permitted by law. A photocopy or other reproduction of this
Agreement or any financing statement covering the Collateral or any part thereof
shall be sufficient as a financing statement where permitted by law.
(3) Each Grantor will furnish to the Secured Party from time
to time statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as Secured
Party may reasonably request, all in reasonable detail.
(4) Each Grantor, upon acquiring or organizing a Subsidiary,
shall cause such Subsidiary to execute and deliver to the Secured Party a
Guaranty Agreement in substantially the same form executed by other Grantors and
an agreement to become bound as a Grantor under this Agreement. "Subsidiary"
shall mean any corporation or other entity of which stock or other interest
having ordinary power to elect a majority of the board of directors (or other
governing
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body) of such entity (regardless of whether or not at the time stock or
interests of any other class or classes of such corporation shall have or may
have voting power by reason of the happening of any contingency) is at the time
directly or indirectly owned by a Grantor or by one or more Subsidiaries.
Section 7. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Each Grantor
hereby irrevocably appoints the Secured Party as such Grantor's
attorney-in-fact, with full authority in the place and stead of such Grantor and
in the name of such Grantor or otherwise, from time to time in the Secured
Party's discretion, to take any action and to execute any instrument which the
Secured Party may deem necessary or advisable to accomplish the purposes of this
Agreement.
Section 8. THE SECURED PARTY'S DUTIES. The powers conferred on the
Secured Party hereunder are solely to protect the Holders' interest in the
Collateral and shall not impose any duty upon the Secured Party to exercise any
such powers. Except for the safe custody of any Collateral in his possession and
the accounting for moneys actually received by him hereunder, the Secured Party
shall have no duty as to any Collateral, as to ascertaining or taking action
with respect to any Collateral, whether or not the Secured Party has or is
deemed to have knowledge of such matters, or as to the taking of any necessary
steps to preserve rights against prior parties or any other rights pertaining to
any Collateral. The Secured Party shall be deemed to have exercised reasonable
care in the custody and preservation of any Collateral in their possession if
such Collateral is accorded treatment substantially equal to that which it
accords its own property.
Section 9. EVENTS OF DEFAULT. It shall be an event of default (an
"Event of Default") hereunder if any Event of Default under the Debentures
occurs and is continuing.
Section 10. REMEDIES. If any Event of Default shall have occurred and
be continuing, the Secured Party may exercise in respect of the Collateral, in
addition to any other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default under
the Uniform Commercial Code (the "Code") (whether or not the Code applies to the
affected Collateral), and also may (a) require each Grantor to, and each Grantor
hereby agrees that it will, at its expense and upon request of the Secured Party
forthwith, assemble all or part of the Collateral as directed by the Secured
Party and make it available to the Secured Party at a place to be designated by
the Secured Party which is convenient to the parties and (b) without notice
except as specified below, sell the Collateral or any part thereof in one or
more parcels at public or private sale, at any of the Secured Party' offices or
elsewhere, for cash, on credit or for future delivery, and upon such other terms
as the Secured Party may deem commercially reasonable. Each Grantor agrees that,
to the extent notice of sale shall be required by law, at least ten (10) days
notice to each applicable Grantor of the time and place of any public sale or
the time after which any private sale is to be made shall constitute reasonable
notification. The Secured Party shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. The Secured Party 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 adjourned. All proceeds of the sale or other
disposition of all or any portion of the Collateral shall be applied FIRST, to
the payment of the reasonable fees, costs and expenses of or from time to time
incurred by the
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Secured Party of the type described in clauses (b) and (c) of Section 11(2)
hereof, including, without limitation, reasonable fees and expenses of counsel
and any agents or experts, SECOND, to the payment, pro rata by outstanding
principal amount of each Debenture, of all Obligations until paid in full, and
THIRD, the remainder if any to the applicable Grantor or such other person or
persons lawfully entitled thereto.
Section 11. INDEMNITY AND EXPENSES.
(1) Each Grantor agrees to indemnify the Secured Party and the
Holders from and against any and all reasonable claims, losses, and liabilities
(including, without limitation, reasonable attorney fees) growing out of or
resulting from this Agreement (including, without limitation, enforcement of
this Agreement), except claims, losses, or liabilities resulting from the gross
negligence or willful misconduct of the Holders or Secured Party.
(2) Each Grantor will upon demand pay the amount of any and
all reasonable expenses, including, without limitation, the reasonable fees and
expenses of counsel and of any experts and agents, which the Holders or Secured
Party may incur in connection with (a) the preparation and administration of
this Agreement, the Debentures and the Subsidiary Guaranty; (b) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any of the Collateral; (c) the exercise or enforcement of any
of the rights of the Holders or Secured Party hereunder; or (d) the failure by
any Grantor to perform or observe any of the provisions hereof.
(3) Each Holder agrees to protect, defend, indemnify and hold
harmless the Secured Party from all liabilities, costs, damages or expenses
(including without limitation legal fees and expenses) arising out of or in
connection with his acts or omissions of any kind in his capacity as Secured
Party, unless caused by the gross negligence or willful misconduct of the
Secured Party.
Section 12. AMENDMENTS; ETC. No amendment, modification, termination,
or waiver of any provision of this Agreement, and no consent to any departure by
any Grantor here from, shall in any event be effective unless the same shall be
in writing and signed by Secured Party and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
Section 13. ADDRESSES FOR NOTICES. All notices and other communications
provided for hereunder shall be given in accordance with the provisions of
Section 10 of the Debentures, mailed or transmitted or delivered to the address
for each such party set forth above or, as to either party, at such other
address as shall be designated by such party in a written notice to the other
party.
Section 14. WAIVER OF RIGHTS. Each Grantor waives the right to assert
against any of the Holders or Secured Party or other holder any defense,
counterclaim or set-off which it could assert against such person in any action
brought by such person upon any Grantor's obligations hereunder.
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Section 15. CONTINUING SECURITY INTEREST; ASSIGNMENTS UNDER THE
DEBENTURES. This Agreement shall create a continuing security interest in the
Collateral and shall: (1) remain in full force and effect until the sooner to
occur of (a) the payment and performance in full of the Obligations and all
other amounts payable under this Agreement, the Debentures and the Subsidiary
Guaranty or (b) the conversion of all the Debentures; (2) be binding upon each
Grantor, its successors and assigns; and (3) inure to the benefit of, and be
enforceable by, the Secured Party and Holders and their respective successors,
transferees, and assigns. Without limiting the generality of the foregoing
clause (3) the Secured Party and Holders may assign or otherwise transfer all or
any portion of their rights and Obligations to any other person or entity, and
such other person or entity shall thereupon become vested with all the benefits
in respect thereof granted to the respective Secured Party or Holder therein or
otherwise. Upon the payment and performance in full of the Obligations and all
other amounts payable under this Agreement and the Debentures, the security
interest granted hereby shall terminate and all rights to the Collateral shall
revert to the Grantors. Upon any such termination, the Secured Party will, at
the Grantors' expense, execute and deliver to the Grantors such documents as the
Grantor shall reasonably request to evidence such termination.
Section 16. GOVERNING LAW; TERMS. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York without
regard to principles of conflicts of law, except to the extent that the validity
or perfection of the security interest hereunder, or remedies hereunder, in
respect of any particular Collateral are governed by the laws of a jurisdiction
other than the State of New York. Each party hereby irrevocably consents and
submits to the jurisdiction of any New York State or United States Federal Court
sitting in the State of New York, County of New York, over any action or
proceeding arising out of or relating to this Agreement and irrevocably consents
to the service of any and all process in any such action or proceeding by
registered mail addressed to such party at its address specified herein (or as
otherwise noticed to the other party). Each party further waives any objection
to venue in New York and any objection to an action or proceeding in such state
and county on the basis of FORUM NON CONVENIENS. Each party also waives any
right to trial by jury.
Section 17. SUBMISSION TO JURISDICTION. Each Grantor hereby submits to
the non-exclusive jurisdiction of the United States District Court for the
Southern District of New York and of any State court sitting in New York County
for purposes of all legal proceedings which may arise hereunder or under the
Debenture. Each Grantor irrevocably waives to the fullest extent permitted by
law, any objection which it may have or hereafter have to the laying of the
venue of any such proceeding brought in such a court, and any claim that any
such proceeding brought in such a court has been brought in an inconvenient
forum and trial by jury. Each Grantor hereby consents to process being served in
any such proceeding by the mailing of a copy thereof by registered or certified
mail, postage prepaid, to its address specified above or in any other manner
permitted by law.
THE SECURED PARTY AND THE GRANTORS HEREBY WAIVE TRIAL BY JURY IN ANY ACTION,
PROCEEDING, CLAIM OR COUNTERCLAIM, WHETHER IN CONTRACT OR TORT, AT LAW OR IN
EQUITY, ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT. NO OFFICER OF
THE SECURED PARTY HAS AUTHORITY TO WAIVE, CONDITION, OR MODIFY THIS PROVISION.
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Section 18. ACTION BY SECURED PARTY. The Secured Party shall provide prompt
notice of any material action under this Agreement to the Holders.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Grantors and the Secured Party have caused this
Agreement to be duly executed and delivered by their respective duly authorized
representatives as of the date first above written.
THE GRANTORS:
TEGAL CORPORATION
By:
--------------------------------
Name:
Title:
Address:
Tegal Corporation
0000 Xxxxx XxXxxxxx Xxxxxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: President
Fax Number: (000) 000-0000
Email: xxxxxxx@xxxxx.xxx
with a copy to:
Xxxxxx & Xxxxxxx LLP
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Taitt Sato, Esq.
Fax Number: (000) 000-0000
Email: xxxxx.xxxx@xx.xxx
SPUTTERED FILMS, INC.
By:
--------------------------------
Name:
Title:
Address:
Sputtered Films, Inc.
000 Xxxxx Xxxxxx
Xxxxx Xxxxxxx, Xxxxxxxxxx 00000
00
XXXXX XXXXXXX
By:
--------------------------------
Name:
Title:
Address:
c/o Tegal Corporation
0000 Xxxxx XxXxxxxx Xxxxxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: President
Fax Number: (000) 000-0000
Email: xxxxxxx@xxxxx.xxx
TEGAL JAPAN, INC.
By:
--------------------------------
Name:
Title:
Address:
c/o Tegal Corporation
0000 Xxxxx XxXxxxxx Xxxxxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: President
Fax Number: (000) 000-0000
Email: xxxxxxx@xxxxx.xxx
TEGAL ITALY, SRL
By:
--------------------------------
Name:
Title:
Address:
c/o Tegal Corporation
0000 Xxxxx XxXxxxxx Xxxxxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: President
Fax Number: (000) 000-0000
Email: xxxxxxx@xxxxx.xxx
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In each case with a copy to:
Xxxxxx & Xxxxxxx LLP
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Taitt Sato, Esq.
Fax Number: (000) 000-0000
Email: xxxxx.xxxx@xx.xxx
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THE SECURED PARTY:
-----------------------
Xxxx Xxxxxxxxx
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ACKNOWLEDGEMENT PAGE
SECURITY AGREEMENT
TEGAL CORPORATION
_______, 2003
The undersigned Holder hereby acknowledges the execution of this
Agreement by Xxxx Xxxxxxxxx as the collateral agent of the Holders, consents to
the terms hereof and agrees to be bound by Section 11(3) hereof.
[ ]
By:
---------------------
Name:
Title:
Address:
Fax:
Email:
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EXHIBIT A
[Schedule all patents (by number), patent applications (by number), trademarks,
URL's, copyrights, etc.]
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EXHIBIT B
FORM OF LIEN SUBORDINATION AGREEMENT
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