EXHIBIT 10.3
GENERAL SECURITY AGREEMENT
THIS GENERAL SECURITY AGREEMENT (as amended, modified, supplemented and
restated from time to time, the "Security Agreement") is made and entered into
as of January 28, 2005 by and between GIGABEAM CORPORATION, a Delaware
corporation (the "Borrower"), having its principal office at 000 Xxxxxxxxxx
Xxxxx, Xxxxxxx, Xxxxxxxx 00000, in favor of Xxxxxx X. Xxxxxx, in his capacity as
collateral agent for the ratable benefit of the Noteholders, as hereinafter
defined (in such capacity, the "Agent"), having an office at 000 Xxxxx Xxxxxx,
Xxx Xxxx, XX 00000.
WHEREAS, on the terms and subject to the conditions contained in that
certain Securities Purchase Agreement, dated as of January 28, 2005 by and among
the Borrower and the Noteholders (as amended, modified, supplemented or restated
from time to time, the "Securities Purchase Agreement"), the Borrower will issue
for purchase by various purchasers (each a "Noteholder" and collectively, the
"Noteholders") its 8% Senior Convertible Notes Due 2008 in an aggregate
principal amount of up to $2,500,000 (each, a "Note," and collectively, the
"Notes"), together with warrants to purchase a specified number of shares of its
common stock; and
WHEREAS, the Notes will be ratably secured by a perfected lien on and
first priority security interest in substantially all of the Borrower's personal
property, subject to certain exclusions and permitted encumbrances, as
hereinafter described; and
WHEREAS, the initial Noteholders have required, as a condition precedent
to their willingness to enter into the Securities Purchase Agreement and to
consummate the transactions contemplated to occur thereunder that the Borrower
(i) grant to the Agent, for the ratable benefit of the Noteholders, a security
interest in and to the Collateral (as hereinafter defined) and (ii) execute and
deliver this Security Agreement in order to secure the payment and performance
by the Borrower of the Obligations (as hereinafter defined).
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Borrower hereby agrees as follows:
SECTION 1. CREATION OF SECURITY INTEREST. The Borrower hereby
pledges, assigns and grants to the Agent, for the ratable benefit of the
Noteholders, a continuing perfected lien on and security interest in all of the
Borrower's right, title and interest in and to the personal property described
in Section 2(a) hereof (collectively the "Collateral") in order to secure the
payment and performance of the Notes (the "Obligations"). The Borrower hereby
authorizes the Agent to record, without the Borrower's signature, any and all
financing statements deemed necessary or appropriate by the Agent to the
perfection of its security interest in the Collateral.
SECTION 2. COLLATERAL.
(a) Personal Property. The Collateral is and consists of all
of the kinds and types of property described in subsections (i) through
(xiv) hereof, whether now owned or hereafter at any time arising, acquired
or created by the Borrower and wherever located, and includes all
replacements, additions, accessions, substitutions, and repairs, relating
thereto or therefrom, but excludes the personal property set forth on
Schedule A hereto (the "Excluded Property") and that described in
paragraph (b) below, none of which personal property shall constitute
"Collateral" or be subject to the Agent's security interest granted in
Section 1, except as otherwise specifically provided in such paragraph (b)
(all of the capitalized terms used in the following subsections, unless
otherwise defined herein, shall have the meanings ascribed to such terms
under the Uniform Commercial Code as in effect in the State of New York):
(i) Accounts; (ii) Payment Intangibles; (iii) Letter of Credit Rights;
(iv) Documents and Instruments; (v) Goods; (vi) Fixtures; (vii) Inventory;
(viii) Equipment; (ix) General Intangibles; (x) Investment Property; (xi)
Deposit Accounts; (xii) all cash and other monies and property in the
possession or under the control of the Agent; (xiii) all books, records,
ledger cards, files, correspondence, computer programs, tapes, disks and
related data processing software that at any time evidence or contain
information relating to any of the property described above or are
otherwise necessary or helpful in the collection thereof or realization
thereon; and (xiv) proceeds of all or any of the property described above,
including, without limitation, the proceeds of any insurance policies
covering any of the above described property.
(b) Excluded Collateral. Notwithstanding anything to the
contrary contained herein, the term "Collateral" shall not include any
personal property consisting of Equipment or Fixtures now owned or
hereafter acquired, to the extent that (x) any such Equipment or Fixture
is or shall be subject to a capitalized lease or purchase money
arrangement and (y) the terms of such arrangement restrict or prohibit the
Borrower from granting a security interest in such Equipment or Fixture
(collectively, with the Excluded Property, the "Excluded Collateral"),
provided, however, that in the event that any such restriction or
prohibition is terminated or expires, whether because such arrangement is
no longer in effect, or otherwise, then, in such event, automatically and
without any further action, the Borrower shall be deemed to have granted a
security interest to the Agent for the ratable benefit of the Noteholders
in and to the personal property which previously constituted Excluded
Collateral, and such personal property shall thereupon constitute
Collateral.
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SECTION 3. THE BORROWER'S REPRESENTATIONS AND WARRANTIES.
(a) Place of Business. The Borrower's primary place of
business is located at 000 Xxxxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000.
(b) Location of Collateral. The Collateral is located at the
Borrower's primary place of business or at other locations leased or
licensed by the Borrower in the ordinary course of its business.
(c) Restrictions on Asset Disposition. Unless the Agent shall
have given its prior consent thereto in writing (and provided that the
requisite number of Noteholders shall have first authorized the Agent to
give such consent, as set forth in the Securities Purchase Agreement), the
Borrower shall not sell, transfer or otherwise dispose of any Collateral,
other than (i) sales or leases of Inventory made in the ordinary course of
business, (ii) dispositions of assets deemed by the Borrower obsolete or
no longer useful in its business, (iii) replacements of certain assets
useful in the Borrower's business with other assets acquired for such
purpose, (iv) pursuant to sale, leaseback arrangements, capital lease
transactions or similar transactions, (v) the sale or financing of the
Borrower's Accounts arising from the sale of goods or rendition of
services, (vi) intercompany transfers of assets, and (vii) the license or
lease of Equipment made in the ordinary course of business.
(d) Due Organization, Etc. The Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite power and authority to own or
lease and operate its properties and to carry on its business as now
conducted and as proposed to be conducted. The Borrower is duly qualified
or licensed to do business as a foreign corporation or other entity in
good standing in all jurisdictions in which it owns or leases property or
in which the conduct of its business requires it to so qualify or be
licensed, except where the failure to be so qualified would not have a
material adverse effect on the business, condition (financial or
otherwise), operations, properties or performance of the Borrower (a
"Material Adverse Effect").
(e) Due Authorization and Execution, Etc. The execution,
delivery and performance by the Borrower of this Security Agreement are
within the Borrower's corporate powers, have been duly authorized by all
necessary corporate action and do not and will not (i) require any consent
or approval of the stockholders or any creditors of the Borrower, (ii)
contravene (A) the Borrower's charter or by-laws, or (B) to the Borrower's
knowledge any material law, rule or regulation, applicable to the Borrower
or any material contractual restriction binding on or affecting the
Borrower or any of its material properties, (iii) result in or require the
creation or imposition of any mortgage, deed of trust, pledge, lien,
security interest or other charge or encumbrance of any nature (other than
pursuant hereto) upon or with respect to any of the Borrower's properties,
and (iv) to the Borrower's knowledge result in a breach or violation of
any material agreement, instrument or document to which the Borrower is a
party or by which it or its property may be bound. To the Borrower's
knowledge, the Borrower is not in material default under any such law,
rule or regulation, or any such contractual restriction, which default
would have a Material Adverse Effect.
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(f) Government Consents. To the Borrower's knowledge, no
authorization, consent, approval or other action by, and no notice to or
filing by the Borrower with, any governmental authority or regulatory body
is required for the due execution, delivery or performance by the Borrower
of this Security Agreement.
(g) Legal, Valid and Binding Nature. This Security Agreement
is the legal, valid and binding obligation of the Borrower enforceable
against the Borrower in accordance with its terms, except that
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity and the
discretion of the court before which any proceedings therefor may be
brought.
(h) Absence of Litigation. There are no actions, suits,
investigations, litigation or proceedings pending or, to the knowledge of
the Borrower, threatened against or affecting the Borrower or the
properties of the Borrower before any court, arbitrator or governmental
department, commission, board, bureau, agency or instrumentality, domestic
or foreign, or that purports to affect any part of the transactions
contemplated hereby or by the Documents or the legality, validity or
enforceability of this Security Agreement.
(i) Absence of Liens. As of the date of this Security
Agreement, there are no liens or security interests of any nature
whatsoever on any properties or assets of the Borrower, except to the
extent described in Section 10 hereof.
SECTION 4. AFFIRMATIVE COVENANTS OF THE BORROWER.
The Borrower hereby covenants that so long as this Security Agreement
remains in effect, or any amount due hereunder or under the Notes remains
outstanding and unpaid, unless otherwise consented to in writing by the Agent
(which consent shall not be unreasonably withheld or delayed), the Borrower
shall do each of the following:
(a) Preserve Corporate Existence. Do all things necessary, in
the Borrower's commercially reasonable judgment, to preserve and keep in
full force and effect its corporate existence, including, without
limitation, all licenses or similar qualifications required by it to
engage in its business in each jurisdiction in which it is at the time so
engaged, except where the failure to so qualify would not be reasonably
likely to have a Material Adverse Effect, and continue to engage in
business of the same general type as conducted as of the date hereof, and
continue to conduct its business substantially as now conducted or as
otherwise permitted hereunder.
(b) Payment of Taxes and Charges. Pay and discharge promptly
when due all taxes, assessments and governmental charges or levies imposed
upon it or upon its income or profits or in respect of its property before
the same shall become delinquent or in default, which, if unpaid, could
reasonably be expected to give rise to liens or charges upon such
properties or any part thereof, unless, in each case, the validity or
amount thereof is being contested in good faith by appropriate proceedings
and the Borrower has maintained adequate reserves with respect thereto in
accordance with GAAP.
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(c) Compliance with Laws. Comply in all material respects with
all federal, state and local laws and regulations, orders, judgments,
decrees, injunctions, rules, regulations, permits, licenses,
authorizations and requirements applicable to it (collectively,
"Requirements") of all governmental bodies, departments, commissions, or
boards having jurisdiction over the Borrower or any of its properties,
except where the failure to so comply could not be reasonably expected to
have a Material Adverse Effect; provided, however, that nothing provided
herein shall prevent the Borrower from contesting the validity or the
application of any Requirements.
(d) Retention of Records. Keep proper records and books of
account with respect to its business activities, in which proper entries,
reflecting all of its financial transactions, are made in accordance with
GAAP. Such books and records shall be open during normal business hours,
on reasonable prior written notice from the Agent, to inspection by the
Agent.
(e) Notification of Litigation. Notify the Agent in writing,
promptly upon learning thereof, of any litigation or administrative
proceeding commenced or threatened in writing against the Borrower which,
if adversely determined, would be reasonably likely to have a Material
Adverse Effect.
(f) Physical Maintenance of Property. Maintain at all times,
preserve, protect and keep such of its property that the Borrower
determines to be used or useful in the conduct of its business in good
repair, working order and condition, ordinary wear and tear excepted, and
from time to time make all needful and proper repairs, renewals,
replacements and improvement thereof as shall be required in the conduct
of its business, as determined by the Borrower in its commercially
reasonable judgment.
(g) Maintenance of Insurance. To the extent determined
necessary by the Borrower in its commercially reasonable judgment for the
operation of its business, keep adequately insured by financially sound
reputable insurers, all property of a character usually insured by similar
businesses and carry such other insurance as is usually carried by similar
businesses.
(h) No Sales or Licensing Outside of Ordinary Course. Except
as otherwise provided under Section 3(c) hereof, retain possession of the
Collateral and not remove, sell, exchange, assign, loan, deliver, lease,
license, mortgage or otherwise dispose of same outside of the normal
course of business without the prior written consent of the Agent.
(i) Notification of Other Defaults. Promptly give notice in
writing to the Agent of the Borrower's receipt of notice that it is in
default under any material instrument or agreement to which it is a party
(other than this Security Agreement).
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(j) Defend Against Claims. The Borrower will use reasonable
efforts to defend the Collateral against all claims and demands of persons
at any time claiming the same or any interest therein unless the Borrower
determines that the claim or demand is not material and that,
consequently, such defense would not be consistent with good business
judgment. The Borrower will not permit any lien notices with respect to
the Collateral or any portion thereof to exist or be on file in any public
office except for Permitted Liens.
(k) Change in Name, Collateral Location. The Borrower will not
(i) change its corporate name or jurisdiction of incorporation or (ii)
change the location of its chief executive office unless in each case the
Borrower shall have given the Agent at least thirty (30) days prior
written notice thereof.
(l) Additional Financing Statements. Upon the reasonable
request of the Agent, the Borrower will execute and deliver or use its
reasonable efforts to procure any document, give any notices, authorize
the filing of any financing statements, mortgages or other documents, all
in form and substance reasonably satisfactory to the Agent, xxxx any
chattel paper, deliver any chattel paper or instruments to the Agent and
take any other actions that are necessary or, in the reasonable opinion of
the Agent, desirable to perfect or continue the perfection of the Agent's
security interest in the Collateral, to protect the Collateral against the
rights, claims, or interests of third persons, or to effect the purposes
of this Security Agreement. The Borrower will pay all reasonable
out-of-pocket costs incurred in connection with any of the foregoing.
(m) Additional Liens; Transfers. Without the prior written
consent of the Agent, the Borrower will not in any way hypothecate or
create or permit to exist any lien, security interest, charge or
encumbrance on or other interest in the Collateral, except for Permitted
Liens. If the Collateral, or any part thereof, is sold, transferred,
assigned, exchanged, or otherwise disposed of in violation of these
provisions, the security interest of the Agent shall continue in such
Collateral or part thereof notwithstanding such sale, transfer,
assignment, exchange or other disposition, and the Borrower will hold the
proceeds thereof for the benefit of the Agent, and promptly transfer such
proceeds to the Agent in kind.
(n) Contractual Obligations. The Borrower will not enter into
any contractual obligations which restrict or inhibit the Agent's rights
or ability to sell or otherwise dispose of the Collateral or any part
thereof after the occurrence and during the continuance of an Event of
Default, as hereinafter defined.
(o) Agent's Right to Protect Collateral. Upon the occurrence
and continuance of an Acceleration Event, the Agent shall have the right
at any time to make any payments and do any other acts the Agent may deem
reasonably necessary to protect its security interests in the Collateral,
including, without limitation, the rights to pay, purchase, contest or
compromise any encumbrance, charge or lien which, in the reasonable
judgment of the Agent, appears to be prior to or superior to the security
interests granted hereunder, and appear in and defend any action or
proceeding purporting to affect its security interests in, and/or the
value of, the Collateral. The Borrower hereby agrees to reimburse the
Agent for all reasonable payments made and reasonable out-of-pocket
expenses incurred under this Security Agreement, including reasonable
fees, expenses and disbursements of attorneys acting for the Agent,
including any of the foregoing payments under, or acts taken to protect
its security interests in, the Collateral, which amounts shall be secured
under this Security Agreement, and agrees it shall be bound by any payment
made or act taken by the Agent hereunder absent the Agent's gross
negligence or willful misconduct. The Agent shall have no obligation to
make any of the foregoing payments or perform any of the foregoing acts.
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SECTION 5. NEGATIVE COVENANTS OF THE BORROWER.
The Borrower hereby covenants that so long as this Security Agreement
remains in effect, or any amount due hereunder or under the Notes remains
outstanding and unpaid, unless otherwise consented to in writing by the Agent
(which consent shall not be unreasonably withheld or delayed), the Borrower
shall not do any of the following:
(a) Restrictions on Indebtedness. Create, incur, assume or
suffer to exist, any indebtedness for borrowed money (institutional or
otherwise) except (i) indebtedness in existence on the date hereof, (ii)
indebtedness under the Notes, (iii) indebtedness which is subordinate in
right of payment to the Notes and (iv) "Permitted Indebtedness", as
defined in the Notes.
(b) Restrictions on Encumbrances. Create, incur, assume or
suffer to exist, any encumbrance upon any of its property (tangible or
intangible) or assets, income or profits secured hereunder, whether now
owned or hereafter acquired, except for Permitted Liens and liens, the
enforcement of which, singly or in the aggregate, would not be reasonably
expected to have a Material Adverse Effect.
(c) Restrictions on Guarantees. Guarantee, assume or otherwise
become responsible for (directly or indirectly) the indebtedness for
borrowed funds, performance, obligations, of any person, or the agreement
by the Borrower or any of its subsidiaries to do any of the foregoing,
except (i) any such contingent liability or agreement incurred or in
effect on the date hereof, (ii) guarantees made in the ordinary course of
business up to an aggregate amount of $100,000, and (iii) endorsements of
checks and other negotiable instruments in the ordinary course of
business.
(d) Restrictions on Dividends. Except for the Borrower's
existing obligations with respect to its outstanding classes of preferred
stock, declare or pay, directly or indirectly, any dividends or make any
distributions, whether in cash, property (other than securities, the
distribution of which shall not be restricted hereunder) or a combination
thereof, with respect to (whether by reduction of capital or otherwise)
any shares of its capital stock, except for dividends payable in shares of
common stock or preferred stock.
(e) Restrictions on Investments. Purchase or acquire any
stock, obligations, assets or securities of, or any interest in, or make
any capital contribution or loan or advance of money, credit or property
to, any other person (excluding, for the purposes hereof, customary
advances made to the Borrower's officers, director and employees to cover
business expenses and loans or advances made in the ordinary course of its
business to subsidiaries or affiliates,), or make any other investments
(excluding for the purposes hereof, investments made in connection with
strategic alliances that the Borrower's Board of Directors reasonably and
in good faith believes will strategically benefit the Borrow and enhance
its business or operations), except that the Borrower may purchase or
acquire (i) all or a substantial portion of any other business, whether by
asset or stock acquisition or merger; (ii) existing subsidiaries or
subsidiaries formed for the purposes of facilitating acquisitions or
carrying out the ordinary business of the Borrower; (iii) certificates of
deposits of any commercial banks registered to do business in any state of
the United States having capital and surplus in excess of $50,000,000;
(iv) readily marketable, direct obligations of the United States
government or any agency thereof which are backed by the full faith and
credit of the United States; and (v) investments in prime commercial
paper; provided, however, that in each case mentioned in (iii), (iv) or
(v) above, such obligations shall mature not more than 180 days from the
date of acquisition thereof.
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(f) Restrictions on Transfer of Claims. Sell, transfer,
discount or otherwise dispose of any claim or debt owing to it, including,
without limitation, any notes, accounts receivable or other rights to
receive payment, except for consideration determined by the Borrower to be
reasonable, and in the ordinary course of Borrower's business.
SECTION 6. EVENTS OF DEFAULT.
(a) Events of Default. The occurrence of any of the following
events shall constitute an Event of Default hereunder:
(i) (A) the Borrower shall fail to pay when due and
payable any scheduled installment of interest on or principal of the
Notes (and such failure shall not have been cured within 20 days
after written notice thereof by the Agent to the Borrower) or (B) an
event of default shall occur and be continuing under indebtedness of
the Borrower for borrowed money, the unpaid principal amount of
which is more than $100,000 (other than the Notes) and the holders
of such indebtedness have declared the outstanding principal and
accrued interest thereon to be immediately due and payable; or
(ii) if the Borrower shall:
(1) admit in writing its inability to pay its
debts generally as they become due;
(2) file a petition or answer seeking
reorganization or arrangement under the Federal bankruptcy
laws or any other applicable law or statute of the United
States of America or any State, district or territory thereof;
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(3) make an assignment for the benefit of
creditors;
(4) consent to the appointment of a receiver of
the whole or any substantial part of its assets;
(5) have a petition in bankruptcy filed against
it, and such petition shall not have been dismissed within 120
days after the filing thereof;
(6) if a court of competent jurisdiction shall
enter an order, judgment, or decree appointing, without the
consent of the Borrower, a receiver of the whole or any
substantial part of the Borrower's assets, and such order,
judgment or decree shall not be vacated or set aside or stayed
within 120 days from the date of entry thereof;
(7) if, under the provisions of any other law for
the relief or aid of debtors, any court of competent
jurisdiction shall assume custody or control of the whole or
any substantial part of Borrower's assets and such custody or
control shall not be terminated or stayed within 90 days from
the date of assumption of such custody or control; or
(8) except as otherwise provided in paragraph (a)
(i) (A) hereof, the Borrower shall default in the performance
of any material covenant contained in this Agreement, the
Notes or the Securities Purchase Agreement, and such default
shall continue without cure for thirty (30) days or more after
written notice thereof by the Agent to the Borrower or any
material representation or warranty contained in this
Agreement, the Securities Purchase Agreement the Notes shall
be false or incorrect in any material respect when made.
(b) Acceleration. In addition to any other remedies provided
by the Notes or below in Section 7, upon the occurrence and during the
continuance of an Event of Default, the Noteholders, by the requisite
number provided in the Securities Purchase Agreement and/or the Agent on
behalf of such Noteholders may, by notice to the Borrower declare the
principal of and any accrued interest and all other amounts payable under
the Notes to be due and payable, whereupon the same shall become forthwith
due and payable without presentment, demand, protest or other notice of
any kind, all of which are hereby waived by the Borrower. In addition to
any other remedies provided by the Notes, upon the occurrence of the Event
of Default specified in paragraph (a) (ii) (2) without prejudice to the
rights and remedies specified above, the Notes and other obligations of
the Borrower pursuant to this Security Agreement shall automatically be
immediately due and payable with interest and other fees, if any, thereon
without notice, demand or any other act by the Agent or any Noteholder.
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SECTION 7. REMEDIES.
(a) Obtaining the Collateral Upon Acceleration. If any Event
of Default shall have occurred and be continuing and as a consequence
thereof the Noteholders, by the requisite number, shall have accelerated
the maturity of the Notes and shall not have rescinded such acceleration
(an "Acceleration Event"), then and in every such case, subject to any
mandatory requirements of applicable law then in effect, the Agent, in
addition to any rights now or hereafter existing under applicable law,
shall have all rights as a secured creditor under the Uniform Commercial
Code in all relevant jurisdictions and may:
(1) personally, or by agents or attorneys,
immediately retake possession of the Collateral or any part
thereof, from the Borrower or any other person who then has
possession of any part thereof, with or without notice or
process of law, and for that purpose may enter upon the
Borrower's premises where any of the Collateral is located and
remove the same and use in connection with such removal any
and all services, supplies, aids and other facilities of the
Borrower;
(2) instruct the obligor or obligors on any
agreement, instrument or other obligation (including, without
limitation, the Accounts) constituting the Collateral to make
any payment required by the terms of such instrument or
agreement directly to the Agent;
(3) withdraw all monies, securities and
instruments held pursuant to any pledge arrangement for
application to the Obligations;
(4) sell, assign or otherwise liquidate, or direct
the Borrower to sell, assign or otherwise liquidate, any or
all of the Collateral or any part thereof, and take possession
of the proceeds of any such sale or liquidation; and
(5) take possession of the Collateral or any part
thereof, by directing the Borrower in writing to deliver the
same to the Agent at any place or places designated by the
Agent, in which event the Borrower shall at its own expense:
(A) forthwith cause the same to be moved to the place or
places so designated by the Agent and there delivered to the Agent,
(B) store and keep any Collateral so delivered to the
Agent at such place or places pending further action by the Agent as
provided in subsection (b) below, and
(C) while the Collateral shall be so stored and kept,
provide such guards and maintenance services as shall be necessary
to protect the same and to preserve and maintain the Collateral in
good condition.
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(b) Disposition of the Collateral. Any Collateral repossessed
by the Agent under or pursuant to subsection (a) above and any other
Collateral (and the proceeds of all such Collateral) whether or not so
repossessed by the Agent, shall be applied against the Obligations first,
to the costs and expenses incurred by the Agent in connection with any
such disposition, second, ratably, to the accrued and unpaid interest
thereon, until paid in full, third, ratably, to the unpaid principal
balance thereof, until paid in full, and finally, to the Borrower, or as a
court of competent jurisdiction may otherwise direct. All Collateral may
be sold, assigned, leased or otherwise disposed of in any manner permitted
under the Uniform Commercial Code, under one or more contracts or as an
entirety, and without the necessity of gathering at the place of sale the
property to be sold, and in general in such manner, at such time or times,
at such place or places and on such terms as the Agent may, in compliance
with any mandatory requirements of applicable law, determine to be
commercially reasonable. Any of the Collateral may be sold, leased or
otherwise disposed of, in the condition in which the same existed when
taken by the Agent or after any overhaul or repair which the Agent shall
determine to be commercially reasonable. Any such disposition which shall
be a private sale or other private proceedings permitted by such
requirements shall be made upon not less than 20 days' written notice to
the Borrower specifying the time at which such disposition is to be made
and the intended sale price or other consideration therefor, and shall be
subject, for the 20 days after the giving of such notice, to the right of
the Borrower or any nominee of the Borrower to acquire the Collateral
involved at a price or for such other consideration at least equal to the
intended sale price or other consideration so specified. Any such
disposition which shall be a public sale permitted by such requirements
shall be made upon not less than 20 days' written notice to the Borrower
specifying the time and place of such sale and, in the absence of
applicable requirements of law, shall be by public auction (which may, at
the option of the Agent, be subject to reserve), after publication of
notice of such auction not less than 20 days prior thereto in two
newspapers in general circulation in the City of New York, as the Agent
may determine. To the extent permitted by any such requirement of law, the
Agent may bid for and become the purchaser of the Collateral or any item
thereof, offered for sale in accordance with this Section, but with
accountability to the Borrower.
(c) Power of Attorney. The Borrower hereby irrevocably
authorizes and appoints the Agent, or any person or entity the Agent may
designate, as the Borrower's attorney-in-fact, at the Borrower's cost and
expense, to exercise all of the following powers upon and at any time
after the occurrence and during the continuance of an Acceleration Event,
which powers, being coupled with an interest, shall be irrevocable until
all of the Obligations shall have been paid in satisfied in full:
(1) accelerate or extend the time of payment,
compromise, issue credits, bring suit or administer and
otherwise collect Accounts or proceeds of any Collateral;
(2) give customers indebted on Accounts notice of
the Agent's interest therein, and/or to instruct such
customers to make payment directly to the Agent for the
Borrower's account;
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(3) convey any item of Collateral to any purchaser
thereof; and
(4) give any notices or record any liens.
The Agent's authority under this subsection (c) shall include, without
limitation, the authority to execute and give receipt for any certificate of
ownership or any document, transfer title to any item of Collateral, sign the
Borrower's name on all financing statements or any other documents deemed
necessary or appropriate to preserve, protect or perfect the security interest
in the Collateral and to file the same, prepare, file and sign the Borrower's
name on any notice of lien, assignment or satisfaction of lien or similar
document in connection with any Account and prepare, file and sign the
Borrower's name on a proof of claim in bankruptcy or similar document against
any customer of the Borrower, and to take any other actions arising from or
incident to the rights, powers and remedies granted to the Agent in this
Security Agreement. This power of attorney is coupled with an interest and is
irrevocable by the Borrower.
SECTION 8. MISCELLANEOUS PROVISIONS.
(a) Notices. All notices, approvals, consents or other
communications required or desired to be given hereunder shall be
delivered to the respective addresses of the Borrower and the Agent set
forth on the signature page hereof.
(b) Headings. The headings in this Security Agreement are for
purposes of reference only and shall not affect the meaning or
construction of any provision of this Security Agreement.
(c) Severability. The provisions of this Security Agreement
are severable, and if any clause or provision shall be held invalid or
unenforceable in whole or in part in any jurisdiction, then such
invalidity or unenforceability shall affect, in that jurisdiction only,
such clause or provision, or part thereof, and shall not in any manner
affect such clause or provision in any other jurisdiction or any other
clause or provision of this Security Agreement in any jurisdiction.
(d) Amendments, Waivers and Consents. Any amendment or waiver
of any provision of this Security Agreement and any consent to any
departure by the Borrower from any provision of this Security Agreement
shall be effective only if made or given in writing signed by the Borrower
and the Agent.
(e) Interpretation of Agreement. Time is of the essence in
each provision of this Security Agreement of which time is an element. All
terms not defined herein shall have the meaning set forth in the Uniform
Commercial Code as in effect in the State of New York. Acceptance of or
acquiescence in a course of performance rendered under this Security
Agreement shall not be relevant in determining the meaning of this
Security Agreement even though the accepting or acquiescing party had
knowledge of the nature of the performance and opportunity for objection.
(f) Continuing Security Interest. This Security Agreement
shall create a continuing security interest in the Collateral and shall
(i) remain in full force and effect until indefeasible payment in full of
the Obligations, (ii) be binding upon the Borrower, and its successors and
assigns and (iii) inure to the benefit of the Agent, and its successors.
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(g) Survival of Provisions. All representations, warranties
and covenants of the Borrower contained herein shall survive the execution
and delivery of this Security Agreement, and shall terminate only upon the
full and final indefeasible payment and performance by the Borrower of the
Obligations secured hereby.
(h) Setoff. The Agent shall have all rights of setoff
available at law or in equity.
(i) Release; Termination of Agreement. This Security Agreement
shall terminate automatically upon full and final indefeasible payment and
performance of all the Obligations. At such time, the Agent shall, at the
request of the Borrower, promptly reassign and redeliver to the Borrower,
and terminate and release its security interest in, all of the Collateral
hereunder which has not been sold, disposed of, retained or applied by the
Agent in accordance with the terms hereof. Such reassignment and
redelivery shall be without warranty by or recourse to the Agent, except
as to the absence of any prior assignments by the Agent of its interest in
the Collateral, and shall be at the expense of the Borrower.
(j) Counterparts. This Security Agreement may be executed in
one or more counterparts, each of which shall be deemed an original but
all of which shall together constitute one and the same agreement.
(k) Governing Law, etc.. This Security Agreement shall be
governed by and construed under the laws of the State of New York as
applied to agreements among New York residents entered into and to be
performed entirely within New York. Each of Borrower and the Agent (1)
agrees that any legal suit, action or proceeding arising out of or
relating to this Security Agreement shall be instituted exclusively in New
York State Supreme Court, County of New York, or in the United States
District Court for the Southern District of New York, and (2) irrevocably
consents to the jurisdiction of the New York State Supreme Court, County
of New York, and the United States District Court for the Southern
District of New York in any such suit, action or proceeding. The Borrower
waives any objection which it may have now or hereafter to the venue of
any such suit, action or proceeding. Each of the Borrower and the Agent
further agrees to accept and acknowledge service of any and all process
which may be served in any such suit, action or proceeding in the New York
State Supreme Court, County of New York, or in the United States District
Court for the Southern District of New York and agrees that service of
process upon the Borrower mailed by certified mail to its address set
forth below shall be deemed in every respect effective service of process
upon it, in any such suit, action or proceeding. THE PARTIES HERETO AGREE
TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS SECURITY AGREEMENT.
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SECTION 9. RELEASE OR SUBORDINATION OF SECURITY INTEREST . In the
event that, after the date of this Security Agreement the Borrower enters into
(i) any capital and/or equipment leases with respect to any Equipment or Fixture
or (ii) financing arrangement pursuant to which all or a portion of the
Borrower's Accounts are sold or financed, and, in any such case, such
arrangement is permitted under the terms of the Securities Purchase Agreement or
the Notes, and, in connection therewith, the provider of such capital and/or
equipment lease or purchase money arrangement, or other financing arrangement,
as the case may be, conditions such arrangement upon the subordination or
release by the Agent of its security interest in the applicable Equipment or
Fixtures, or in the Accounts and/or Inventory, as the case may be, the Agent
agrees that, without any further inquiry on its part, and without obtaining any
specific consent or authorization from the Noteholders, or any one of them, it
shall promptly deliver to the Borrower any release or subordination of security
interests as may be reasonably necessary to effectuate the consummation of such
arrangement.
SECTION 10. PERMITTED LIENS. "Permitted Liens" means (i) liens,
security interests, charges and other encumbrances securing taxes or other
governmental charges, (ii) deposits or pledges made in connection with xxxxxxx'x
compensation, social security obligations, or other similar obligations arising
under statute, (iii) liens, security interests, charges and other encumbrances
of landlords, licensors, carriers, warehousemen, mechanics and materialmen and
other similar liens, security interests, charges and other encumbrances arising
in the ordinary course of Borrower's business, (iv) easements, rights of way,
zoning restrictions and similar minor liens which individually and in the
aggregate do not have a material adverse effect on the Borrower, (v) liens,
security interests, charges and other encumbrances securing Permitted
Indebtedness (as defined in the Notes), provided, that any Permitted Lien
granted in connection with Permitted Indebtedness incurred after the date of
this Security Agreement shall attach only to the specific assets that are the
subject of the financing pursuant to which such Permitted Indebtedness was
incurred and such other assets as are customarily the subject of financings of
that type, (vi) liens, security interests, charges and other encumbrances in
existence on the date of this Security Agreement and (vii) the security
interests in favor of equipment lessors or working capital lenders described in
Section 7 hereof.
[SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, each of the Borrower and the Agent has caused this
General Security Agreement to be duly executed and delivered as of the day and
year first above written.
BORROWER:
GIGABEAM CORPORATION
By: /s/ Xxxxx X. Xxxxxxxxx
-----------------------
Xxxxx X. Xxxxxxxxx,
Chairman
AGENT:
/s/ Xxxxxx X. Xxxxxx
---------------------------
XXXXXX X. XXXXXX
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SCHEDULE A
EXCLUDED PROPERTY
The FCC License held by Gigabeam Service Corporation as licensee (Call Sign:
W2BS629) and the FCC License held by GigaBeam Corporation as licensee (Call
Sign: WQAK751)
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