EXHIBIT 10.10
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement") is made and entered into as of
the 2d day of October, 2000, by and between Blue Sky Communications, Inc., a
Georgia corporation ("Borrower"), and interWAVE Communications International,
Ltd., a Bermuda limited liability company (the "Lender").
R E C I T A L S
A. On even date herewith, for valuable consideration, Borrower
made, executed, and delivered to Lender a secured convertible promissory note in
the principal face amount of Four Million Dollars (US$4,000,000) (the "Note"),
which evidences an obligation (the "Loan") of Borrower to Lender.
B. As security for the payment and performance of all debts,
liabilities, obligations, covenants, and duties owing to Lender by Borrower,
however evidenced, under the Note or otherwise, as the same may be amended,
supplemented, modified, renewed, or extended from time to time, Borrower desires
to grant to Lender a security interest in all of Borrower's assets.
NOW, THEREFORE, in consideration of the foregoing Recitals, and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Lender and Borrower agree as follows:
1. DEFINITIONS. In addition to any terms defined elsewhere in
this Agreement, the following terms have the following meanings ascribed to them
for purposes of this Agreement:
"AFFILIATE" means, with respect to any Person, any Person
directly or indirectly controlling, controlled by or under common control with
such Person.
"AGREEMENT" means this Security Agreement, as amended from
time to time.
"BORROWER" means Blue Sky Communications, Inc., a Georgia
corporation.
"COLLATERAL" means all of the following: (a) all of Borrower's
Equipment now owned or hereafter acquired; (b) all of Borrower's Documents of
Title now owned or hereafter acquired in respect of such Equipment; and (c) all
Products and Proceeds of all of the foregoing, including all Proceeds of other
Proceeds.
"EQUIPMENT" means all "equipment" (as defined in the UCC) now
owned or hereafter acquired by Borrower, which Borrower acquired from Lender
under the Supply Agreement or otherwise, including, without limitation, all
machinery, computers, computer equipment, motor vehicles, trucks, trailers,
vessels, aircraft, and rolling stock, and all parts thereof and all additions
and accessions thereto and replacements therefor.
"EVENT OF DEFAULT" has the meaning set forth in section 5 of
this Agreement.
"FINANCING STATEMENT" means the form of financing statement
that will be necessary to perfect, upon filing, a security interest in the
Collateral in each jurisdiction in which such Collateral is located or in which
a filing is required under the UCC to perfect such security interest.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, which are applicable to the circumstances as of the
date of determination.
"GOVERNMENTAL AUTHORITY" means any nation or government, any
state, province or other political subdivision thereof, or any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"GOVERNMENTAL REQUIREMENTS" means all legal requirements in
effect from time to time including all laws, statutes, codes, acts, ordinances,
orders, judgments, decrees, injunctions, rules, regulations, permits, licenses,
authorizations, certificates, orders, franchises, determinations, approvals,
consents, notices, demand letters, directions, and requirements of all
governments, departments, commissions, boards, courts, authorities, agencies,
officials, and officers, foreseen or unforeseen, ordinary or extraordinary,
including but not limited to any change in any law or regulation, or the
interpretation thereof, by any foreign or domestic governmental or other
authority (whether or not having the force of law), relating now or at any time
heretofore or hereafter to the business or operations of Borrower or to any of
the property owned, leased, or used by Borrower, including, without limitation,
the development, design, construction, acquisition, start-up, ownership, and
operation and maintenance of property.
"INCIPIENT DEFAULT" means an event which, upon the lapse of
time or the giving of notice, or both, would constitute an Event of Default.
"INDEBTEDNESS" of any Person means all liabilities,
obligations and reserves, contingent or otherwise, of such Person.
"LENDER" means interWAVE Communications International, Ltd., a
Bermuda limited liability company.
"LIEN" means any lien, mortgage, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and any agreement to give
any security interest).
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
(a) the business, assets, operations or financial condition of Borrower, (b) the
ability of Borrower to pay the Obligations in accordance with their terms, or
(c) the perfection or priority of Lender's first lien on and security interest
in the Collateral (as defined in this Agreement) or the value of such
Collateral.
"OBLIGATIONS" means all debts, liabilities, obligations,
covenants, and duties owing to Lender by Borrower, however evidenced, under the
Note, this Agreement, or otherwise, as the same may be amended, supplemented,
modified, renewed, or extended from time to time.
"PERSON" means any individual, corporation, partnership,
trust, association or other entity or organization, including any government,
political subdivision, agency or instrumentality thereof.
"PROCEEDS" means all proceeds of, and all other profits,
rentals, or receipts, in whatever form, arising from the collection, sale,
lease, exchange, assignment, licensing, or other disposition of, or realization
upon, any Collateral including, without limitation, all claims of Borrower
against third parties for loss of, damage to, or destruction of, or for proceeds
payable for loss of, damage to, or destruction of, or for proceeds payable
under, or unearned premiums with respect to, policies of insurance with respect
to any Collateral, and any condemnation or requisition payments with respect to
any Collateral, in each case whether now existing or hereafter arising.
"SUPPLY AGREEMENT" means that certain Master GSM Products
Supply Agreement dated September 27, 2000, between Borrower and Lender, as the
same may be amended, supplemented, modified, renewed, or extended from time to
time.
"UCC" means the California Uniform Commercial Code, as amended
from time to time, and any successor statute; provided, however, that if by
reason of mandatory provisions of law, the perfection or the effect of
perfection or non-perfection of the security interest in any Collateral is
governed by the Uniform Commercial Code, or other applicable statute, law, or
provision relating to the perfection or the effect of perfection or
non-perfection of any such security interest, as in effect on or after the date
hereof in any other jurisdiction, then "UCC" will mean the Uniform Commercial
Code or such other statute, law, or provision as in effect in such other
jurisdiction for purposes of the provision hereof relating to such perfection or
the effect of perfection or non-perfection.
Any accounting term not defined in this Agreement will have
the meaning given to it under GAAP.
2. SECURITY INTEREST.
2.1 GRANT OF SECURITY INTEREST. Borrower hereby grants
to Lender a continuing security interest in and to all right, title, and
interest of Borrower in the Collateral, whether now owned or existing or
hereafter acquired or arising, regardless of where located, to secure payment
and performance of the Obligations. The security interest granted hereby secures
the payment and performance of the obligations, liabilities, and indebtedness of
every nature of Borrower to Lender now or hereafter existing and however
evidenced, under the Note, this Agreement, or otherwise, and all renewals,
extensions, restructurings, and refinancings of the same.
2.2 AFFIRMATIVE COVENANTS OF BORROWER. Borrower will:
(a) do all acts that may be necessary to maintain, preserve, and protect the
Collateral; (b) pay promptly when due all taxes, assessments, charges,
encumbrances, and liens now or hereafter imposed upon or affecting the
Collateral; (c) procure, execute, and deliver from time to time any
endorsements, assignments, financing statements, and other writings necessary or
appropriate to perfect, maintain, and protect Lender's security interest
hereunder and the priority thereof, and to deliver promptly to Lender all
records of (1) Collateral or (2) insurance proceeds; (d) appear in and defend
any action or proceeding which may affect its title to or Lender's interest in
the Collateral; (e) keep separate, accurate, and complete records of the
Collateral and provide Lender with such books, records, and such other reports
and information relating to the Collateral as Lender may reasonably request from
time to time; (f) when an Event of Default under this Agreement has occurred and
after demand, account fully for and immediately deliver to Lender in the form
received, all Collateral and all proceeds, endorsed to Lender as appropriate,
and unless so delivered all Collateral and all such proceeds will be held by
Borrower in trust for Lender, separate from all other property of Borrower and
identified as the property of Lender; (g) keep the Collateral in good condition
and repair; (h) at any reasonable
time, upon demand by Lender, exhibit to and allow inspection by Lender (or
persons designated by Lender) of all Collateral; (i) keep the books and
records concerning the Collateral at Borrower's principal place of business;
(j) keep the Collateral at the location(s) identified in a writing from
Borrower to Lender that Borrower provides simultaneously with its purchase
order for the relevant Equipment; (k) not remove the Collateral from such
location(s) without (1) the prior written consent of Lender (which consent
will not be unreasonably withheld) or (2) creating a similar security
interest at the new location(s) of the Collateral; (l) give thirty (30) days'
prior written notice of any change in Borrower's chief place of business or
trade name(s) or style(s) set forth therein; (m) comply with all laws,
regulations, and ordinances relating to the possession, operation,
maintenance, and control of the Collateral; (n) execute and file such
financing or continuation statements, or amendments thereto, and such other
instruments or notices as may be necessary or desirable, or as Lender may
request, in order to perfect and preserve the security interest granted or
intended to be granted hereby under the laws of any applicable jurisdiction;
and (o) upon Lender's reasonable request, appear in and defend any action or
proceeding that may affect Borrower's title to or Lender's security interest
in the Collateral.
2.3 NEGATIVE COVENANTS OF BORROWER. Borrower will not,
without the prior written consent of Lender: (a) use or permit the Collateral to
be used unlawfully or in violation of any provision of this Agreement, or any
applicable statute, regulation, or ordinance or any policy of insurance covering
the Collateral; or (b) cause any waste or unusual or unreasonable depreciation
of the Collateral.
2.4 INSURANCE. Upon execution of this Agreement,
Borrower will insure the Collateral, with Lender named as a loss payee, in
reasonable form and amounts, with companies reasonably acceptable to Lender, and
against normal risks and liabilities. Borrower will deliver copies of such
policies to Lender at Lender's request. In the event of loss of insured
Collateral, Lender may make any claim thereunder, and until the Collateral is
promptly replaced by Borrower from the segregated proceeds of the insurance,
Lender may collect and receive payment of and endorse any instrument in payment
of loss, and apply such amounts received, at Lender's election, to replacement
of Collateral or to the Obligations. Lender will not by the fact of approving,
disapproving, accepting, preventing, obtaining or failing to obtain any
insurance, incur any liability for or with respect to the amount of insurance
carried, the form or legal sufficiency of insurance contracts, solvency of
insurance companies, or payment or defense of lawsuits. Borrower hereby
expressly assumes full responsibility therefor and all liability, if any, with
respect thereto.
2.5 PERFECTION. Borrower represents and warrants to
Lender that subject to the timely filing of such UCC-1 Financing Statements as
are necessary to perfect the security interest in the Collateral granted by
Borrower to Lender pursuant to the terms of this Agreement, this Agreement
creates a valid, perfected, and first priority lien against and security
interest in the Collateral, securing the payment of the Obligations, and all
filings and other actions necessary or desirable to perfect and protect such
interest have been duly taken. Borrower further represents and warrants to
Lender that neither the Collateral nor any portion thereof is subject to (or
will be subject to) any lien, encumbrance, or security interest in favor of any
third party that is senior in priority to the lien against and security interest
in the Collateral granted by Borrower to Lender pursuant to the terms of this
Agreement. Borrower represents and warrants to Lender that with respect to any
and all Collateral that Lender sells to Borrower, Lender will have a valid and
perfected first priority lien against and purchase money security interest in
such Collateral.
2.6 EXPENSES. Lender may incur expenses in connection
with the retaking, holding or preparing for sale of the Collateral including,
with limitation, reasonable attorneys'
fees, appraisal fees, auction fees and advertising costs, and in connection
with protecting or enforcing its rights under this Agreement, including but
not limited to reasonable attorneys' fees and actual out-of-pocket costs,
which expenses Borrower will pay and are Obligations secured hereby.
2.7 WAIVERS. Borrower waives every right it may have to
require Lender to proceed against any person or to exhaust any Collateral or to
pursue any remedy available to Lender. Borrower waives every defense it may have
arising from Lender's failure to perfect or maintain a perfected security
interest in the Collateral.
2.8 TERMINATION OF SECURITY INTERESTS; RELEASE OF
COLLATERAL. Upon payment in full of all Obligations, the security interest
created hereby will terminate. Upon such termination of the security interest or
release of any Collateral, Lender will execute and deliver to Borrower such
documents as Borrower reasonably requests to evidence the termination of the
security interest or the release of such Collateral.
2.9 CUMULATIVE RIGHTS. All rights and remedies of
Lender under this Agreement are in addition to all rights and remedies given to
Lender contained in any other agreement, instrument or document or available to
Lender at law or in equity. All such rights and remedies are cumulative and not
exclusive and may be exercised successively or concurrently. No exercise of any
right or remedy will be deemed an election of remedies and preclude exercise of
any other right or remedy.
3. COVENANTS. Borrower covenants and agrees that it will comply
with the following provisions so long as the Obligations are outstanding:
3.1 ACCOUNTING RECORDS. Borrower will maintain adequate
books and accounts in accordance with GAAP consistently applied. Borrower will
deliver to Lender any financial information regarding the Business or the
finances of Borrower as Lender may reasonably request.
3.2 CORPORATE EXISTENCE. Borrower will preserve and
maintain its existence as a corporation in good standing in the jurisdiction of
its formation and all of its licenses, privileges, and franchises and other
rights necessary or desirable in the ordinary course of its business, except to
the extent that the failure to do so would not have a Material Adverse Effect.
3.3 QUALIFICATION TO DO BUSINESS. Borrower is qualified
to do business and is and will remain in good standing in each jurisdiction in
which the nature of its business requires it to be so qualified, except to the
extent that the failure to be so qualified and in good standing would not have a
Material Adverse Effect.
3.4 COMPLIANCE WITH LAWS. Borrower will observe and
comply in all material respects with all laws, ordinances, orders, judgments,
rules, regulations, certifications, franchises, permits, licenses, directions
and requirements of all Governmental Authorities, which now or at any time may
be applicable to Borrower, a violation of which could be reasonably expected to
have a Material Adverse Effect.
3.5 TAXES AND OTHER LIABILITIES. Borrower will pay and
discharge prior to the date on which penalties attach thereto all taxes,
assessments and governmental charges, license fees and levies upon or with
respect to Borrower, and upon the income, profits and property of Borrower,
unless and to the extent that such taxes, assessments, charges, license fees and
levies are being contested in good faith and by appropriate proceedings
diligently
conducted by Borrower, and provided that such reserve or other appropriate
provisions as are required in accordance with GAAP will have been made
therefor.
3.6 INSURANCE. Borrower will maintain insurance with
insurance carriers which Borrower reasonably believes are financially sound on
such property, against such risks, and in such amounts as is customarily
maintained by similar businesses, and file with Lender within five (5) days
after Lender's written request therefor a detailed list of such insurance then
in effect, stating the names of the carriers, the policy numbers, the insureds
thereunder, the amounts of insurance, the dates of expiration thereof, and the
property and risks covered thereby.
3.7 MAINTENANCE OF COLLATERAL. Borrower will (a)
maintain, keep and preserve all of the Collateral in good repair, working order
and condition and from time to time make all necessary and proper repairs,
renewals, replacements, and improvements thereto, and (b) maintain, preserve and
protect all franchises, licenses, copyrights, patents and trademarks material to
its Business, so that the Business carried on in connection therewith may be
properly and advantageously conducted at all times.
3.8 CONDUCT OF BUSINESS. Borrower will comply with all
Governmental Requirements.
3.9 AUTHORIZATIONS. Borrower will obtain, make and keep
in full force and effect all authorizations from and registrations with
Governmental Authorities that may be required for the validity and
enforceability of this Agreement, the Note, and all other documents and
instruments executed in connection therewith against Borrower.
3.10 NOTIFICATION OF EVENTS OF DEFAULT AND ADVERSE
DEVELOPMENTS. Borrower will promptly notify Lender of the occurrence of (a) any
Incipient Default or Event of Default hereunder; (b) any event, development, or
circumstance whereby any financial statements most recently furnished to Lender
fail in any material respect to present fairly, in accordance with GAAP, the
financial condition and operating results of Borrower as of the date of such
financial statements; (c) any material litigation or proceedings that are
instituted or threatened (to the knowledge of Borrower) against Borrower and all
or any part of the Collateral; and (d) each and every event which would be an
Event of Default under any material Indebtedness of Borrower, such notice to
include the names and addresses of the holders of such Indebtedness and the
respective amounts thereof.
3.11 FURTHER ASSURANCES. Borrower will execute,
acknowledge and deliver any and all such further assurances and other agreements
or instruments, and take or cause to be taken all such other action, as may be
reasonably requested by Lender from time to time in order to give full effect to
this Agreement and the Note and to maintain, preserve, safeguard, and continue
at all times all of the rights, remedies, powers, and privileges of Lender under
this Agreement and the Note.
3.12 FURTHER IDENTIFICATION OF COLLATERAL. If so
requested by Lender, Borrower will furnish to Lender, as often as Lender
reasonably requests, statements and schedules further identifying and describing
the Collateral, all in reasonable detail.
4. NEGATIVE COVENANTS. Borrower covenants and agrees that
unless it obtains Lender's prior written consent (which consent Lender
covenants and agrees will not be unreasonably withheld), so long as any of
the Obligations remain outstanding, Borrower will not:
4.1 MERGER OR ACQUISITION. Consolidate or merge into or
with any Person or acquire all or substantially all of the stock, property or
assets of any Person.
4.2 SALE AND EXCHANGE OF ASSETS. Sell, lease, assign,
or transfer to any Person, exchange with any Person, or otherwise dispose of any
material asset (except in the ordinary course of business or to the extent such
asset is obsolete or is no longer used or useful in the business of Borrower),
or sell, exchange, lease, assign, transfer, or otherwise dispose of all or
substantially all of its assets.
4.3 RESTRICTED PAYMENTS. Make any distributions to its
shareholders, declare or pay any dividends, or apply any of its property to the
voluntary purchase, redemption or other retirement of, or set apart any sum for
the voluntary payment of any dividends on, or make any other distribution by
reduction of capital or otherwise in respect of, any shares of its present or
future issues of stock (each, a "Restricted Payment").
4.4 TRANSACTIONS WITH AFFILIATES. Directly or
indirectly enter into or permit to exist any material transaction (including,
without limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with any Affiliate of Borrower, except for
transactions in the ordinary course of and pursuant to the reasonable
requirements of the business of Borrower and upon fair and reasonable terms
which are fairly disclosed to Lender.
5. DEFAULT.
5.1 EVENTS OF DEFAULT. Each of the following will
constitute an Event of Default under this Agreement:
(a) Borrower fails to pay when due any
payment of principal or interest or any other sum payable under the Note, and
such failure continues without cure for five (5) calendar days after the date
that such payment was due.
(b) Borrower fails to comply with any
agreement contained in section 4 of this Agreement, and with respect to any
failure which by its nature can be cured, such failure continues without cure
for fifteen (15) calendar days after Lender notifies Borrower in writing of
the occurrence thereof.
(c) Borrower defaults in the performance of
any of its material obligations under any provision of this Agreement, and
with respect to any failure which by its nature can be cured, such failure
continues without cure for fifteen (15) calendar days after Lender notifies
Borrower in writing of the occurrence thereof.
(d) Any warranty or representation made by
Borrower in this Agreement or in the Note is untrue in any material respect,
in any case on any date as of which the facts set forth are stated or
certified.
(e) Borrower institutes a voluntary case
seeking liquidation or reorganization under chapter 7 or chapter 11,
respectively, of the United States Bankruptcy Code (the "Code"), or under any
other applicable insolvency, bankruptcy, reorganization, composition,
arrangement, moratorium or liquidation laws of any state or country
(collectively with the Code, the "Insolvency Laws"), or consents to the
institution of an involuntary case against it under any of the Insolvency
Laws; or Borrower files a petition initiating or otherwise institutes any
similar proceeding under any of the Insolvency Laws, or consents thereto; or
Borrower applies for, or by consent or acquiescence there is an appointment
of or order entered by a court of competent jurisdiction appointing a
receiver, liquidator, sequestrator, trustee or other officer with similar
powers; or Borrower makes an assignment for the benefit of creditors; or
Borrower admits in writing its inability to pay its debts generally as they
become due; or, if an involuntary case is commenced seeking the liquidation
or reorganization of Borrower under chapter 7 or chapter 11, respectively, of
the Code, or any similar proceeding is commenced against Borrower under any
of the Insolvency Laws, and (1) the petition commencing such case is not
timely controverted; or (2) the petition commencing such case is not
dismissed within thirty (30) days of its filing; or (3) a trustee (interim or
otherwise) is appointed to take possession of all or a portion of the
Borrower's assets, or to operate all or any part of the business of Borrower;
or (4) an order for relief is issued or entered therein.
(f) One or more judgments against Borrower
or attachments against its property, which in the aggregate exceed $10,000,
or the operation or result of which could be to interfere materially and
adversely with the conduct of the Business, remain unpaid, unstayed on
appeal, undischarged, unbonded, and undismissed for a period of thirty (30)
days.
(g) Any obligation (other than the
Obligations) of Borrower for the payment of commercial or investment
financial accommodation or any other indebtedness in excess of US$10,000
becomes or is declared to be due and payable prior to the expressed maturity
thereof.
(h) Any of Borrower's representations and
warranties set forth above in section 2.5 ceases to be true.
(i) An event of default (other than one
specified above in section 5.1(a)) occurs under the Note, and with respect to
any failure which by its nature can be cured, such failure continues without
cure for fifteen (15) calendar days after Lender notifies Borrower in writing
of the occurrence thereof.
5.2 TERMINATION OF OBLIGATIONS AND ACCELERATION. If any
Event of Default described above in section 5.1 occurs, all Obligations will
become due and payable immediately, without any further notice to Borrower.
5.3 OTHER REMEDIES. If any Event of Default occurs:
(a) Lender may exercise in respect of the
Collateral, in addition to all other rights and remedies provided for in this
Agreement or otherwise available to it, all the rights and remedies of a
secured party upon default under the UCC (whether or not the UCC applies to
the affected Collateral) and may also: (1) require Borrower to, and Borrower
hereby agrees that it will, at its expense and upon Lender's request,
immediately assemble all or part of the Collateral as directed by Lender and
make it available to Lender at a place to be designated by Lender which is
reasonably convenient to the parties; (2) with five (5) days written notice,
enter upon any premises of Borrower and take possession of the Collateral;
and (3) 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
Lender's offices or elsewhere, at such time or times, for cash, on credit, or
for future delivery, and at such price or prices and upon such other terms as
Lender may deem commercially reasonable. Borrower agrees that, to the extent
notice of sale will be required by law, at least ten days' notice to Borrower
of the time and place of any public sale or the time after which any private
sale is to be made will constitute reasonable notification. At any sale of
the Collateral, if permitted by law, Lender may bid (which bid may be, in
whole or in part, in the form of cancellation of indebtedness) for the
purchase of the Collateral or any portion thereof for the account of Lender.
Lender will not be obligated to make any sale of Collateral regardless of
notice of sale having been given. Lender may adjourn any public or private
sale from time to time by announcement at the time and place fixed therefor,
and such sale may, without further notice, be made at the time and place to
which it was so adjourned. To the extent permitted by law, Borrower hereby
specifically waives all rights of redemption, stay, or appraisal which it has
or may have under any law now existing or hereafter enacted.
(b) For the purposes of this Agreement,
Borrower acknowledges and agrees that after an Event of Default, it will be
liable to Lender for all attorneys' fees, consultant's fees, accountants'
fees, expert witness fees, and all actual out-of-pocket expenses incurred by
Lender in connection with any and all of the following: (1) any action taken
by Lender to (A) enforce any of its rights under this Agreement, (B) protect,
preserve, collect, assemble, lease, sell, take possession of, or liquidate
any of the Collateral, or (C) enforce or foreclose upon its security interest
in any of the Collateral; (2) any negotiation and/or documentation of a work
out, refinancing, restructuring, or settlement agreement with Borrower; and
(3) the commencement or defense of, or appearance or intervention in, any
litigation, arbitration proceeding, administrative proceeding, or bankruptcy
case (including but not limited to any adversary proceeding in such case) in
or to which Borrower is a party or party in interest.
Beyond the safe custody thereof, Lender will have no duty with respect to any
Collateral in its possession or control (or in the possession or control of any
agent or bailee) or with respect to
any income thereon or the preservation of rights against prior parties or any
other rights pertaining thereto. Lender will be deemed to have exercised
reasonable care in the custody and preservation of the Collateral in its
possession if the Collateral is accorded treatment substantially equal to
that which it accords its own property. Lender will not be liable or
responsible for any loss or damage to any of the Collateral, or for any
diminution in the value thereof, by reason of the act or omission of any
warehouseman, carrier, forwarding agency, consignee or other agent or bailee
selected in good faith by Lender.
5.4 APPLICATION OF PROCEEDS. Upon the occurrence and
during the continuance of an Event of Default, the proceeds of any sale of, or
other realization upon, all or any part of the Collateral by Lender will be
applied: first, to all fees, costs and expenses incurred by Lender with respect
to the enforcement of this Agreement; second, to accrued and unpaid interest on
the Obligations; and third, to the principal amount of the Obligations
outstanding. Lender acknowledges and agrees that it will not retain any proceeds
in excess of the amounts necessary to pay in full all of the items described in
the preceding sentence, and will remit promptly to Borrower all of such excess
proceeds, if any.
6. MISCELLANEOUS.
6.1 SUCCESSORS AND ASSIGNS. This Agreement inures to
the benefit of and binds the parties to this Agreement and their respective
heirs, executors, administrators, legal representatives, successors, assigns,
agents, representatives, spouses, and all persons claiming by or through them,
including without limitation any chapter 7 or chapter 11 trustee in bankruptcy,
and the words "Lender" and "Borrower," whenever occurring in this Agreement,
will be deemed to include such respective heirs, executors, administrators,
legal representatives, successors, assigns, agents, representatives, spouses,
and all persons claiming by or through them.
6.2 TIME. The parties to this Agreement agree that time
is of the essence with respect to all of the provisions of this Agreement.
6.3 COUNTERPART ORIGINALS. This Agreement may be
executed in two counterparts, each of which will be deemed to be an original as
against the party whose "ink original" or facsimile signature appears thereon,
and both of such counterparts will together constitute one and the same
instrument. Each party to this Agreement who delivers a facsimile signature will
promptly thereafter deliver to each of the other parties to this Agreement a
counterpart original of this Agreement bearing an "ink original" signature.
6.4 CAPTIONS. The captions or headings of the sections
of this Agreement are for convenience only and will not control or affect the
meaning or construction of any of the terms or provisions of this Agreement.
6.5 GENDER; NUMBER. Words used in this Agreement,
regardless of the number or gender specifically used, will be deemed and
construed to include any other number, singular or plural, and any other gender,
masculine, feminine or neuter, as the context requires.
6.6 ADDITIONAL ACTIONS. Each of the parties to this
Agreement covenants and agrees that it will take promptly such additional
actions and will execute such additional documents and instruments as are
reasonably necessary to effectuate the transactions contemplated by this
Agreement.
6.7 NO THIRD PARTY BENEFICIARIES. The rights and
benefits of this Agreement will not inure to the benefit of any party that is
not a party to this Agreement. Nothing contained in this Agreement will be
construed to create any rights, claims, or causes of action in favor of any
third party against any party to this Agreement.
6.8 NOTICES. All notices and communications under this
Agreement will be in writing and will be: (a) delivered in person; or (b) sent
by fax; or (c) mailed, postage prepaid, either by certified mail, return receipt
requested, or by overnight express carrier, addressed in each case as follows:
To Borrower: Blue Sky Communications, Inc.
Attn: Xxxx Xxxxxx, CEO
000 Xxxxxxxxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000
A courtesy copy of any notice under this
Agreement that is sent to Borrower must be
sent to:
Xxxxxxx X. Xxxxx, General Counsel
Blue Sky Communications, Inc.
000 Xxxxxxxxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000
and to:
Xx. Xxxxxx Xxxxxxx
Long Xxxxxxxx Xxxxxx LLP
000 Xxxxxxxxx Xx. XX
Xxxxxxx, XX 00000
Fax: (000) 000-0000
To Lender: interWAVE Communications International, Ltd.
Attn: Xxxxxx X. Xxxxx, Executive Vice President and CFO
Clarendon House
2 Church Street
Xxxxxxxx, HMDX, Bermuda
A courtesy copy of any notice under this
Agreement that is sent to Lender must be
sent to:
Xx. Xxxxx Xxxx
Vice President and General Counsel
interWAVE Communications, Inc.
000 Xxxxxxxxxxxx Xxxxx
Xxxxx Xxxx, XX 00000
Fax: (000) 000-0000
and to:
Xx. Xxxxxx X. Xxxxxxxx
Xxxxx & XxXxxxxx
Two Xxxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Fax: (000) 000-0000
All notices sent pursuant to the terms of this section 6.8 will be deemed
received upon actual receipt. A copy of any notice sent by fax must be sent by
regular mail as well on the same day that such fax is sent. Lender and Borrower
may change the name of its representative to whom (and/or the address to which)
notices (and/or courtesy copies of such notices) should be directed, provided
that such party complies with the provisions of this section 6.8 regarding the
methods for providing such notice.
6.9 INTERPRETATION. Each of the parties to this
Agreement has been represented by independent counsel in the preparation and
negotiation of this Agreement, and this Agreement will be construed according to
the fair meaning of its language. The rule of construction to the effect that
ambiguities are to be resolved against the drafting party will not be employed
in interpreting this Agreement.
6.10 REPRESENTATIONS AND WARRANTIES. Each of the parties
to this Agreement represents and warrants to the other party to this Agreement
that it has full power, authority and legal right to execute, deliver and comply
with this Agreement and any other document or instrument relating to this
Agreement to be executed by it. All individual, corporate, or other appropriate
actions of each of the parties to this Agreement that are necessary or
appropriate for the execution and delivery of and compliance with this Agreement
and such other documents and instruments have been taken. Upon its execution and
delivery, this Agreement will constitute the valid and legally binding
obligation of each of the parties to this Agreement, enforceable against each of
them in accordance with its terms, subject only to bankruptcy, insolvency,
reorganization, moratorium and other laws applicable to creditors' rights or the
collection of debtors' obligations generally. Borrower acknowledges that Lender
has entered into this Agreement in reliance upon each of the representations and
warranties made by Borrower which are contained in this Agreement.
6.11 INTEGRATION CLAUSE. This Agreement constitutes the
entire agreement between the parties to this Agreement with respect to the
subject matter of this Agreement, and there are no other terms, obligations,
covenants, representations, statements or conditions except as set forth in this
Agreement. No change or amendment to this Agreement will be effective unless it
is contained in a document entitled "Amendment to Security Agreement," and is
executed by each of the parties to this Agreement. Failure to insist upon strict
compliance with any term or provision of this Agreement will not be deemed to be
a waiver of any rights under a subsequent act or failure to act. Each of the
parties to this Agreement acknowledges and agrees that in the event of any
subsequent litigation, arbitration proceeding, controversy or dispute concerning
this Agreement, neither of them will be permitted to offer or introduce into
evidence any oral testimony concerning any oral promises or oral agreements
between them that relate to the subject matter of this Agreement that are not
included or referred to in this Agreement and that are not evidenced by a
writing entitled "Amendment to Security Agreement" which is signed by each of
the parties to this Agreement.
6.12 GOVERNING LAW; ARBITRATION; VENUE; EQUITABLE RELIEF.
(a) GOVERNING LAW. This Agreement will be
governed by and construed and enforced in accordance with the laws of the
State of California, without regard to principles of conflicts of laws. Each
party to this Agreement agrees that all disputes, claims and controversies
among the parties to this Agreement concerning the interpretation or
enforcement of this Agreement, or any other matter arising out of or relating
to this Agreement, will be arbitrated pursuant to the provisions of this
section 6.12.
(b) INITIATION OF ARBITRATION PROCEEDING.
Either party to this Agreement may initiate an arbitration proceeding by
making a written demand for arbitration and serving a notice of said demand
upon the adverse party in the manner provided in this Agreement, and upon the
San Francisco regional office of JAMS. A written response to the demand must
be served upon the initiating party and JAMS within ten (10) days of the
adverse party's receipt of the demand.
(c) SELECTION OF ARBITRATOR. The arbitration
will be conducted by a single arbitrator who is a retired judge associated
with the San Francisco regional office of JAMS. The arbitrator will be
selected in accordance with the JAMS Financial Services Arbitration Rules &
Procedure then in effect (the "JAMS Rules") within fourteen (14) days of the
service of the written demand for arbitration. If the parties to this
Agreement cannot so agree upon the selection of the arbitrator within the
fourteen (14) day period, then the arbitration will be conducted by a single
arbitrator who will be a retired judge associated with the San Francisco
regional office of JAMS, and who will be selected by JAMS within five (5)
days of the service of a written request that JAMS select the arbitrator.
(d) VENUE. Each party to this Agreement
covenants and agrees that any arbitration proceeding instituted under the
provisions of this Agreement will be conducted in San Francisco through the
San Francisco regional office of JAMS. LENDER AND BORROWER ACKNOWLEDGE TO
EACH OTHER THAT THE AGREEMENT TO ABIDE BY THE SPECIFIC PROVISIONS OF THIS
SECTION 6.12 IS A MATERIAL INDUCEMENT TO IT TO ENTER INTO THIS AGREEMENT, AND
EACH PARTY IS REASONABLY RELYING UPON THE OTHER PARTY'S REPRESENTATION TO DO
SO.
(e) ARBITRATION HEARING AND AWARD. The
arbitration hearing will be conducted within thirty (30) days of the
appointment of the arbitrator. The arbitration will be conducted in
accordance with the JAMS Rules. The arbitrator's award will be conclusive and
binding on each of the parties to this Agreement. The arbitrator's award will
provide, among other things, that the prevailing party in the arbitration is
entitled to recover from the adverse party its costs and expenses incurred in
connection therewith including, without limitation, attorneys' fees as
determined by the arbitrator, the costs of the arbitration, and actual
out-of-pocket expenses including, without limitation, expert witness and
consultants' fees. Judgment upon the arbitrator's award may be entered in any
court of competent jurisdiction.
(f) EQUITABLE RELIEF. The Arbitrator has the
authority to grant either party to this Agreement equitable relief on such
terms and conditions as it deems reasonably necessary or appropriate.
6.13 BENEFIT OF COUNSEL; INFORMED REVIEW. EACH PARTY TO THIS
AGREEMENT ACKNOWLEDGES AND REPRESENTS TO THE OTHER PARTY TO THIS AGREEMENT THAT:
(a) THE PROVISIONS OF THIS AGREEMENT AND THEIR LEGAL EFFECT HAVE BEEN FULLY
EXPLAINED TO IT BY ITS OWN COUNSEL; (b) IT HAS RECEIVED INDEPENDENT LEGAL ADVICE
FROM COUNSEL OF ITS OWN SELECTION; (c) IT FULLY UNDERSTANDS THE FACTS AND HAS
BEEN FULLY INFORMED AS TO ITS LEGAL RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT;
(d) THIS AGREEMENT IS BEING ENTERED INTO AND SIGNED BY IT KNOWINGLY, FREELY, AND
VOLUNTARILY, AFTER HAVING RECEIVED SUCH LEGAL ADVICE AND WITH SUCH KNOWLEDGE;
AND (e) ITS EXECUTION AND DELIVERY OF THIS AGREEMENT IS NOT THE RESULT OF ANY
DURESS OR UNDUE INFLUENCE. BY EXECUTING THIS AGREEMENT, EACH PARTY TO THIS
AGREEMENT ACKNOWLEDGES AND REPRESENTS TO THE OTHER PARTY TO THIS AGREEMENT THAT
IT HAS READ THE ENTIRE AGREEMENT.
IN WITNESS WHEREOF, the parties to this Agreement have executed and
delivered this Agreement as of the date and year first above written.
BLUE SKY COMMUNICATIONS, INC. INTERWAVE COMMUNICATIONS INTERNATIONAL,
LTD.
By: By:
------------------------------ -----------------------------------
Xxxx Xxxxxx Name: Xxxxxxxxx Xx
Chief Executive Officer -----------------------------
Title:Chief Executive Officer
-----------------------------
