SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Security Agreement") is made and entered
into this 1st day of December, 1995 by and between INTEGRATED SENSOR
SOLUTIONS, INC., a California corporation (the "Debtor"), and SILICON
SYSTEMS, INC., a Delaware corporation (the "Secured Party").
RECITALS
A. Pursuant to a Credit Agreement dated December 1, 1995, between Debtor
and Secured Party (the "Credit Agreement"), Debtor has provided to Secured Party
that certain Secured Promissory Note of even date herewith in the principal
amount of $678,683.54 (the "Note"); and
B. As an inducement for the Secured party to accepting the Note, Debtor
has agreed to grant for the benefit of Secured Party a security interest as set
forth herein.
AGREEMENT
1. SECURITY INTEREST. Pursuant to the Uniform Commercial Code, Debtor
hereby grants to Secured Party a security interest in the personal property of
Debtor, whether now owned or hereinafter acquired (the "Collateral"). Such
Collateral, as more fully described at Paragraph 2 below, shall secure payment
and performance of the obligations of Debtor, as defined and described at
Paragraph 3 below.
2. COLLATERAL.
The Collateral of Debtor is described as follows:
(a) all inventory of Debtor, now owned or hereafter acquired, and all
raw materials, work in process, materials used or consumed in Debtor's business
and finished goods, together with all additions and accessions thereto and
replacements therefor, and products thereof;
(b) all equipment of Debtor, now owned or hereafter acquired,
including, without limitation, all machinery, tools, dies, blueprints,
catalogues, computer hardware and software, furniture, furnishings and fixtures;
(c) any "fixtures" as such term is defined in Division 9313(1)(a) of
the Uniform Commercial Code, now owned or hereafter acquired by Debtor; and
(d) all proceeds of the foregoing Collateral. For purposes of this
Agreement, the term "proceeds" includes whatever is receivable or received when
Collateral or proceeds is sold, collected, exchanged or otherwise disposed of,
whether such disposition is voluntary or
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involuntary, and includes, without limitation, all rights to payment, including
return premiums, with respect to any insurance relating thereto.
3. OBLIGATIONS SECURED. The obligations ("Obligations") secured by this
Security Agreement shall include (a) the performance by Debtor of the
obligations set forth in the Note, the Credit Agreement and this Security
Agreement; (b) all payments made or expenses incurred by Secured Party,
including, but not limited to, reasonably attorneys' fees and legal expenses in
the exercise, preservation or enforcement of any of the rights, powers or
remedies of Secured Party or in the enforcement of the obligations of Debtor
under this Agreement, the Credit Agreement or the Note; and (c) any obligations
of Debtor to Secured Party arising from amendments, modifications, renewals or
extensions of any of the foregoing obligations.
4. COLLATERAL ENCUMBRANCES; COVENANTS OF DEBTOR.
(a) Except as set forth on Schedule 1 hereto (the "Permitted
Encumbrances") Debtor owns the Collateral free and clear of any lien except for
the lien created by this Security Agreement, and no effective financing
statement or other instrument similar in effect, which covers all or any part of
the Collateral, is on file in any recording office.
(b) appropriate financing statements having been filed in the offices
of the Secretary of State of California and the [County Recorder of Santa Xxxxx
County], this Agreement is effect to create, in favor of Secured Party, a valid
and continuing lien on and perfected security interest in the Collateral with
respect to which a security interest may be perfected by filing pursuant to the
Uniform Commercial Code prior to all other liens and encumbrances on the
Collateral, except Permitted Encumbrances, and is enforceable as such as against
creditors of and purchasers from Debtor other than purchasers of Collateral to
the extent that sales of such Collateral to such purchasers are permitted by
this Agreement.
(c) As to the Collateral, Debtor covenants with Secured Party as
follows:
(i) Debtor will keep the Company free of all levies, liens,
encumbrances and other security interests, except as set forth on Schedule 1
hereto.
(ii) Debtor will comply with all laws, statutes and regulations
pertaining to the Collateral.
(iii) Debtor will pay when due all taxes, licenses, charges
and other impositions on or for the Collateral.
(iv) Debtor will execute, file and record such assignments,
statements, notices and agreement, take such action and obtain such certificates
and documents, in accordance with all applicable laws, statutes, and regulations
(whether state, federal or local), as necessary to perfect, evidence and
continue Secured Party's security interest in the Collateral.
(v) Debtor will deliver to Secured Party all instruments and
other items of Collateral for which possession is required for perfection.
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(vi) Debtor will, upon demand, give Secured Party such
information as reasonably requested concerning the Collateral and Debtor's
business, and permit Secured Party to inspect and copy the records thereof.
(vii) Debtor will keep or require all property which is
security for or represented by the Collateral to be insured in amounts, on
terms and with carriers as is customary and appropriate for the business in
which Debtor is engaged, and shall provide to Secured Party certificates of
insurance with respect thereto.
(viii) Debtor will, as appropriate, properly care for, house,
store and maintain the Collateral and any goods represented by the Collateral
in good condition, free of misuse, abuse, waste and deterioration, and
prepare the Collateral for sale or market according to approved methods, and
promptly and duly observe and perform any contract or agreement pertaining to
or part of the Collateral.
(ix) Debtor will not, without Secured Party's written
consent, exchange, lease, lend, use, operate, demonstrate, sell or dispose of
the Collateral or Debtor's rights therein other than in the ordinary course
of business or permit the Collateral to be or become so affixed to realty as
to be part of or become a fixture thereof; except, until otherwise notified
by Secured Party, equipment goods may be used if they will only be subject to
reasonable wear and tear of intended use, inventory goods of raw materials
may be used in the regular course of Debtor's business, and inventory goods
held for sale may be sold in the regular course of Debtor's business.
(x) Debtor will not, without Secured Party's written
consent, remove the Collateral from or outside of Debtor's chief place of
business, except as may be required in the regular course of Debtor's
business.
(xi) Debtor will not, without Secured Party's written consent,
permit anything to be done that may impair, or fail to do anything necessary or
advisable to preserve, the Collateral's value and the security and insurance
coverage.
(xii) Debtor will not create, permit or suffer to exist, and
will defend the Collateral against and take such other action as is necessary to
remove, any lien or encumbrance on the Collateral except the Permitted
Encumbrances, and will defend the right, title and interest of Secured Party in
and to the Collateral and in and to the proceeds thereof against the claims and
demands of all persons whomsoever.
(xiii) Debtor will advise Secured Party promptly, in
reasonable detail, (A) against any material lien, security interest, encumbrance
or claim made or asserted against any of the Collateral, (B) of any material
change in the composition of the Collateral, and (C) of the occurrence of any
other event that would have a material adverse effect on the aggregate value of
the Collateral or on the security interests created hereunder.
(xiv) Upon reasonable notice to Debtor (unless an Event of
Default has occurred and is continuing, in which case no notice is necessary),
Secured Party and their
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representatives shall also have the right to enter into and upon any premises
where any of the Collateral is located for the purpose of inspecting the same,
observing its use or otherwise protecting their interests therein.
5. DEFAULT.
(a) The occurrence of any (i) default under the Note, or (ii) breach
of this Security Agreement or the Credit Agreement, shall be deemed a default
for purposes of this Security Agreement.
(b) Upon the occurrence of an event of default pursuant to this
Section 5, Secured Party, in addition to all other rights, powers and privileges
enumerated in Section 6 below, may (1) declare the unpaid balance, in whole or
in part, of Debtor's Obligations immediately due and payable without demand or
notice and proceed to collect same; (2) waive or remedy any default without
waiving such default or any prior or subsequent default; and (3) terminate any
agreement for financial accommodation.
6. REMEDIES.
(a) Upon the occurrence of an event of default pursuant to Section 5
hereof, Secured Party, in its own or Debtor's name, without notice and at
Debtor's expense, may, but is not obligated to:
(i) as appropriate take possession of the Collateral with or
without legal process, require Debtor to assemble the Collateral and make it
available to Secured Party at a reasonably convenient place, which shall be
designated by Secured Party, or, whether or not the Collateral is present at the
place of sale, sell the Collateral at a public sale in the county where such
Collateral is located or where this Agreement was made, or sell the Collateral
at a private sale and bid at such private sale;
(ii) notify any obligor or account debtor on Collateral to make
payment to Secured Party;
(iii) collect, by legal proceedings or otherwise, and
endorse, receive and receipt for all dividends, interest, payments, proceeds and
other sums and property now or hereafter payable on or on account of Collateral;
(iv) enter into any extension, reorganization, deposit, merger,
consolidation or other agreement pertaining to, or deposit, surrender, accept,
hold or apply other property in exchange for, the Collateral;
(v) insure, process and preserve the Collateral;
(vi) transfer the Collateral to their own or their nominee's
name; and
(vii) make any compromise or settlement, and take any action
it deems advisable, and upon demand Debtor will pay the same to Secured Party
together with any
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deficiency or balance on Debtor's Obligations remaining after any sale or other
disposition of the Collateral by Secured Party, with interest at the applicable
rate set forth in the Credit Agreement or as otherwise agreed.
(b) Notwithstanding subparagraph (a) above and upon the occurrence of
any event of default under Section 5 hereof, Secured Party may exercise any
other rights or remedies that it may have as a secured party under applicable
law.
(c) Debtor also agrees to pay all costs of Secured Party, including,
without limitation, reasonable attorneys' fees, incurred in connection with the
enforcement of its rights and remedies hereunder.
7. SECURED PARTY'S APPOINTMENT AS ATTORNEY-IN-FACT.
(a) Debtor hereby irrevocably constitutes and appoints Secured
Party and any officer or agent thereof, with full power or substitution, as
its true and lawful attorney-in-fact with full irrevocable power and
authority in the place and stead of Debtor and in the name of Debtor or in
its own name, from time to time in Secured Party's discretion, for the
purpose of carrying out the terms of this Agreement, to take any and all
appropriate action and to execute and deliver any and all documents and
instruments that may be necessary or desirable to accomplish the purposes of
this Agreement.
(b) Secured Party agrees that, except as upon the occurrence and
during the continuation of an Event of Default, it will forebear from exercising
the power of attorney or any rights granted to Secured Party pursuant to this
Section 7. Debtor hereby ratifies, to the extent permitted by law, all that
said attorneys shall lawfully do or cause to be done by virtue hereof. The
power of attorney granted pursuant to this Section 7 is a power coupled with any
interest and shall be irrevocable until the Obligations are indefeasibly paid in
full.
(c) The powers conferred on Secured Party hereunder are solely to
protect Secured Party's interests in the Collateral and shall not impose any
duty upon it to exercise any such powers. Secured Party shall be accountable
only for amounts that it actually receives as a result of the exercise of such
powers and neither it nor any of its officers, directors, employees or agents
shall be responsible to Debtor for any act or failure to act, except for its own
gross negligence or willful misconduct.
(d) Debtor also authorizes Secured Party, at any time and from time
to time upon the occurrence and during the continuation of any Event of Default,
(i) to communicate in its own name with any party to any contract or agreement
which is part of the collateral hereunder with regard to the assignment of the
right, title and interest of Debtor in and under such contracts and agreements
and other matters relating thereto and (ii) to execute, in connection with the
sale provided for in Section 5 hereof, any endorsements, assignments or other
instruments of conveyance or transfer with respect to the Collateral.
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8. Termination.
(a) This Security Agreement and the security interest granted to
Secured Party by Debtor hereunder shall terminate upon satisfaction in full of
all of the Debtor's Obligations to Secured Party by payment or conversion or
otherwise.
(b) If applicable, and promptly upon termination of this Security
Agreement, Secured Party agrees to execute and file with the California
Secretary of State a termination statement on Form UCC-2 terminating Secured
Party's security interest in the Collateral. This subparagraph (b) is subject
to specific performance and injunctive relief for the benefit of Debtor in the
event of a failure by Secured Party to duly comply with a reasonable request for
such compliance.
9. GENERAL.
(a) Such care as Secured Party gives to the safekeeping of its own
property of like kinds shall constitute reasonable care of the Collateral when
in Secured Party's possession, but Secured Party is not required to make
presentment, demand or protest, or give notice and need not take action to
preserve any rights against prior parties in connection with any obligation or
evidence of indebtedness held as Collateral.
(b) Debtor shall give Secured Party prior written notice of (i) any
change of place of business and address thereof, (ii) any change in name of
Debtor, and (iii) any change in policies or certificates of insurance required
for Collateral. Debtor hereby assigns to Secured Party any return or unearned
premium that becomes dues on any insurance which covers the Collateral.
(c) This Security Agreement is a continuing agreement and shall apply
to all past, present and future Obligations of Debtor to Secured Party, whether
or not such Obligations continue, increase, decrease or create new indebtedness
after or before payment of any prior indebtedness, notwithstanding the
bankruptcy of, or other event or proceedings affecting the Debtor.
(d) Time is of the essence. Acceptance of partial or delinquent
payments or failure to exercise any right, power or remedy shall not waive any
Obligation of Debtor or modify this Security Agreement. Secured Party, and its
successors and assigns, have all rights, powers and remedies herein and as
provided by law, including the rights, powers and remedies of a secured party
under the Uniform Commercial Code, and may exercise the same and effect any
set-off and proceed against the Collateral or other security for Debtor's
Obligations at any time.
10. CUMULATIVE RIGHTS. The rights, powers and remedies of Secured Party
under this Security Agreement shall be in addition to all rights, powers and
remedies given to Secured Party by virtue of any statute or rule of law, or any
other agreement between Debtor and Secured Party or otherwise, all of which
rights, powers and remedies shall be cumulative and may be exercised
successively or concurrently without impairing Secured Party's security interest
in the Collateral.
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11. WAIVER. Any forbearance or failure or delay by Secured Party in
exercising any right, power or remedy shall not preclude the further exercise
thereof, and every right, power or remedy of Secured Party shall continue in
full force and effect until such right, power or remedy is specifically waived
in a writing executed by Secured Party. Debtor waives any right to require
Secured Party to proceed against any person or to exhaust any of the Collateral
or to pursue any remedy in Secured Party's power.
12. BINDING UPON SUCCESSORS. All rights of Secured Party under this
Security Agreement shall inure to the benefit of their successors and assigns,
and all obligations of Debtor shall bind its successors and assigns.
13. ENTIRE AGREEMENT; SEVERABILITY. This Security Agreement contains the
entire agreement between Secured Party and Debtor with respect to the subject
matter hereof. If any of the provisions of this Security Agreement shall be
held invalid or unenforceable, this Security Agreement shall be construed as if
not containing those provisions and the rights and obligations of the parties
hereto shall be construed and enforced accordingly.
14. CHOICE OF LAW. This Security Agreement shall be construed in
accordance with and governed by the internal laws of the State of California,
and where applicable and except as otherwise defined herein, terms used herein
shall have the meanings given them in the California Uniform Commercial Code.
15. PLACE OF BUSINESS; TRADE NAME; COLLATERAL LOCATION; RECORDS. Debtor
represents that its principal offices are located in 000 Xxxxx Xxxx Xxxxxxx, Xxx
Xxxx, Xxxxxxxxxx 00000 and that Integrated Sensor Solutions, Inc. is the only
trade name or style used by Debtor and that the Collateral described in
Paragraphs 2(a) through 2(d) hereof is located at the locations listed on
Schedule 2 hereto and that Debtor's records concerning the Collateral are kept
at Debtor's principal offices in San Jose, California.
16. NOTICE. Any written notice, consent or other communication provided
for in this Security Agreement shall be deemed given if delivered by hand, by
courier against receipt, by certified or registered mail, return receipt
requested, or by overnight delivery service providing evidence of receipt, at
the following addresses, or to such other address with respect to any party as
such party shall notify the other in writing:
Secured Party: Silicon Systems, Inc.
00000 Xxxxxx Xxxx
Xxxxxx, Xxxxxxxxxx 00000-0000
Attn: Corporate Counsel
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
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Debtor: Integrated Sensor Solutions, Inc.
000 Xxxxx Xxxx Xxxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Attn: President
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
17. ATTORNEYS' FEES. In the event of any controversy, claim or dispute
between or among the Debtor and Secured Party arising out of or relating to this
Security Agreement, or the breach hereof, the prevailing party shall be entitled
to recover from the losing party reasonable attorneys' fees, expenses and costs.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
DEBTOR
INTEGRATED SENSOR SOLUTIONS, INC.
By: /s/ M.D. NAIK
------------------------------------
SECURED PARTY
SILICON SYSTEMS, INC.
By: /s/ XXXXXXX XXXXXXX
------------------------------------
Its: Sr VP/CFO
-----------------------------------
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Schedule 1
to
Security Agreement
PRIOR LIENS
Lien of Silicon Valley Bank pursuant to a Business Loan Agreement dated
June 7, 1995, between Silicon Valley Bank and ISS, as evidenced by the UCC-1
Financing Statement No. 95 17160725 filed with the California Secretary of State
on June 19, 1995.
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Schedule 2
to
Security Agreement
LOCATION OF COLLATERAL
Integrated Sensor Solutions, Inc.
000 Xxxxx Xxxx Xxxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
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State of California
Uniform Commercial Code
Financial Statement
Form UCC-1
[COPY OF FORM PLACED HERE]
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SECURED PROMISSORY NOTE
$678,683.54 December 1, 0000
Xxx Xxxx, Xxxxxxxxxx
FOR VALUE RECEIVED, INTEGRATED SENSOR SOLUTIONS, INC., a California
corporation ("ISS"), hereby promises to pay to SILICON SYSTEMS, INC., a Delaware
corporation ("SSi"), at the registered office of SSi, the principal sum of Six
Hundred Seventy-Eight Thousand Six Hundred Eighty-Three Dollars and Fifty-Four
Cents ($678,683.54), in lawful money of the United States of America and in
immediately available funds, on or before the earlier of (i) December 1, 1996,
or (ii) the consummation of a public offering by ISS of its Common Stock, in
accordance with the terms and provisions of Credit Agreement dated December 1,
1995 between ISS and SSi (the "Credit Agreement"), and to pay interest on such
principal amount, at such office, until such amount shall be paid in full, at
the rates per annum and as provided for in the Credit Agreement.
Capitalized terms used in this Note have the respective meanings assigned
to them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the maturity of this
Note upon the occurrence of certain events. The obligations of ISS under this
Note are secured pursuant to a Security Agreement dated December 1, 1995,
between ISS and SSi (the "Security Agreement"), and all terms and conditions of
the Credit Agreement and Security Agreement are incorporated herein.
ISS waives presentment, demand, and notice of dishonor, protest and
nonpayment.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN
CALIFORNIA.
INTEGRATED SENSOR SOLUTIONS, INC.
By: /s/ M.D. Naik
-----------------------------
Name: M.D. Naik
Title: President
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