Exhibit 10.1
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement"), dated as of June 11,
1999, is made between The Panda Project, Inc., a Florida
corporation ("Debtor") and Silicon Bandwidth, Inc., a Delaware
corporation ("Secured Party").
Debtor and Secured Party hereby agree as follows:
SECTION 1 Definitions; Interpretation.
(a) All capitalized terms used in this Agreement and
not otherwise defined herein shall have the meanings assigned to
them in the Note.
(b) As used in this Agreement, the following terms
shall have the following meanings:
"Collateral" has the meaning set forth in Section 2.
"Documents" means this Agreement, the Note, and all
other certificates, documents, agreements and instruments
delivered to Secured Party under the Note or in connection with
the Obligations.
"Lien" means any mortgage, deed of trust, pledge,
security interest, assignment, deposit arrangement, charge or
encumbrance, lien, or other type of preferential arrangement.
"Note" means that certain Secured Promissory Note dated
of even date herewith made by Debtor in favor of Secured Party,
as amended, modified, renewed, extended or replaced from time to
time.
"Obligations" means the indebtedness, liabilities and
other obligations of Debtor to Secured Party under or in
connection with this Agreement, the Note and the other Documents,
whether now existing or hereafter arising, and whether due or to
become due, absolute or contingent, liquidated or unliquidated,
determined or undetermined.
"Permitted Lien" means (i) any Lien in favor of Secured
Party; (ii) any Liens existing as of the date hereof and
disclosed in writing to Secured Party; (iii) Liens upon or in any
property acquired or held by Debtor or any of its subsidiaries to
secure the purchase price of such property or indebtedness
incurred solely for the purpose of financing the acquisition of
such property, provided that the Lien is confined solely to the
property so acquired and improvements thereon; and (iv) other
Liens which arise in the ordinary course of business and do not
materially impair Debtor's ownership or use of the Collateral or
the value thereof.
"Person" means an individual, corporation, partnership,
joint venture, trust, unincorporated organization, governmental
agency or authority, or any other entity of whatever nature.
"UCC" means the Uniform Commercial Code as the same
may, from time to time, be in effect in the State of New York;
provided, however, in the event that, by reason of mandatory
provisions of law, any or all of the attachment, perfection or
priority of the security interest in any Collateral is governed
by the Uniform Commercial Code as in effect in a jurisdiction
other than the State of New York, the term "UCC" shall mean the
Uniform Commercial Code as in effect in such other jurisdiction
for purposes of the provisions hereof relating to such
attachment, perfection or priority and for purposes of
definitions related to such provisions.
(c) Where applicable and except as otherwise
defined herein, terms used in this Agreement shall have the
meanings assigned to them in the UCC. In this Agreement, (i) the
meaning of defined terms shall be equally applicable to both the
singular and plural forms of the terms defined; and (ii) the
captions and headings are for convenience of reference only and
shall not affect the construction of this Agreement.
SECTION 2 Security Interest.
(a) As security for the payment and performance of
the Obligations, Debtor hereby pledges, assigns, transfers,
hypothecates and sets over to Secured Party, and hereby grants to
Secured Party a security interest in, all of Debtor's right,
title and interest in, to and under the following property,
wherever located and whether now existing or owned or hereafter
acquired or arising (collectively, the "Collateral"):
(i) all personal property of the Debtor including,
without limitation, all accounts, rights to payment, chattel
paper, contract rights, instruments, documents, money, investment
property, deposits and deposit accounts, goods, equipment,
inventory and general intangibles (including all patents,
trademarks, service marks, copyrights, mask works, registrations
or applications for registration of any of the foregoing and all
rights, licenses or agreements relating thereto);
(ii) all books, records and other written,
electronic or other documentation in whatever form maintained by
or for Debtor in connection with the ownership of its assets or
the conduct of its business or evidencing or containing
information relating to the Collateral; and
(iii) all products and proceeds, including
insurance proceeds, and proceeds of proceeds and products of
products of any and all of the foregoing.
(b) Anything herein to the contrary
notwithstanding, (i) Debtor shall remain liable under any
contracts, agreements and other documents included in the
Collateral, to the extent set forth therein, to perform all of
its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (ii) the exercise by
Secured Party of any of the rights hereunder shall not release
Debtor from any of its duties or obligations under such
contracts, agreements and other documents included in the
Collateral, and (iii) Secured Party shall not have any obligation
or liability under any contracts, agreements and other documents
included in the Collateral by reason of this Agreement, nor shall
Secured Party be obligated to perform any of the obligations or
duties of Debtor thereunder or to take any action to collect or
enforce any such contract, agreement or other document included
in the Collateral hereunder.
(c) This Agreement shall create a continuing
security interest in the Collateral which shall remain in effect
until terminated in accordance with Section 18 hereof.
SECTION 3 Financing Statements, Etc. Debtor shall
execute and deliver to Secured Party concurrently with the
execution of this Agreement, and at any time and from time to
time thereafter, all financing statements, assignments,
continuation financing statements, termination statements,
account control agreements, and other documents and instruments,
in form satisfactory to Secured Party, and take all other action,
as Secured Party may reasonably request, to perfect and continue
perfected, maintain the priority of or provide notice of the
security interest of Secured Party in the Collateral and to
accomplish the purposes of this Agreement.
SECTION 4 Representations and Warranties. Debtor
represents and warrants to Secured Party that:
(a) The execution, delivery and performance by the
Debtor of the Note, this Agreement and the other Documents have
been duly authorized by all necessary corporate action. The
Note, this Agreement and the other Documents have been duly
executed on behalf of the Debtor and constitute the legal, valid
and binding obligations of the Debtor enforceable in accordance
with their respective terms except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws
of general application relating to or concerning equitable
remedies. No consents, authorizations, approvals, licenses or
exemptions are necessary for the authorization, execution or
performance of the Note, this Agreement or the other Documents .
(b) The Debtor is a corporation duly organized,
validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite power to
perform its obligations under the Note, this Agreement and the
other Documents and to own and operate its assets and conduct its
business where currently conducted.
(c) None of the documents or materials relating to
the Debtor provided to the Secured Party in connection with the
Note, this Agreement or the other Documents contains any untrue
statement of material fact or omits to state any fact necessary
in order to make the statements contained therein not materially
misleading.
(d) Since March 31, 1999, there has been no
material adverse change in the business, operations or financial
condition of the Debtor and its subsidiaries taken as a whole.
(e) Debtor's chief executive office and principal
place of business is located at the address set forth in Schedule
1; all other locations where Debtor conducts business or
Collateral is kept are set forth in Schedule 1; and all trade
names and fictitious names under which Debtor at any time in the
past has conducted or presently conducts its business operations
are set forth in Schedule 1.
(f) Debtor is the sole and complete owner of the
Collateral, free from any Lien other than Permitted Liens.
(g) All of Debtor's U.S. and foreign patents and
patent applications, copyrights (whether or not registered),
applications for copyright, trademarks, service marks and trade
names (whether registered or unregistered), and applications for
registration of such trademarks, service marks and trade names,
are set forth in Schedule 2.
SECTION 5 Covenants. So long as any of the
Obligations remain unsatisfied, Debtor agrees that:
(a) Debtor shall appear in and defend any action,
suit or proceeding which may affect to a material extent its
title to, or right or interest in, or Secured Party's right or
interest in, the Collateral, and shall do and perform all
reasonable acts that may be necessary and appropriate to
maintain, preserve and protect the Collateral.
(b) Debtor shall comply in all material respects
with all laws, regulations and ordinances, and all policies of
insurance, relating in a material way to the possession,
operation, maintenance and control of the Collateral.
(c) Debtor shall give prompt written notice to
Secured Party (and in any event not later than 30 days following
any change described below in this subsection) of: (i) any
change in the location of Debtor's chief executive office or
principal place of business, (ii) any change in the locations set
forth in Schedule 1; (iii) any change in its name, (iv) any
changes in, additions to or other modifications of its trade
names and trade styles set forth in Schedule 1 or Schedule 2, and
(v) any changes in its identity or structure in any manner which
might make any financing statement filed hereunder incorrect or
misleading.
(d) Debtor shall carry and maintain in full force
and effect, at its own expense and with financially sound and
reputable insurance companies, insurance with respect to the
Collateral in such amounts, with such deductibles and covering
such risks as is customarily carried by companies engaged in the
same or similar businesses and owning similar properties in the
localities where Debtor operates.
(e) Debtor shall not surrender or lose possession
of (other than to Secured Party), sell, lease, rent, license or
otherwise dispose of or transfer any of the Collateral or any
right or interest therein, except in the ordinary course of
business; provided that no such disposition or transfer of
Collateral consisting of investment property or instruments shall
be permitted while any Event of Default exists.
(f) Debtor shall keep the Collateral free of all
Liens except Permitted Liens.
(g) Upon the request of Secured Party, Debtor shall
(i) immediately deliver to Secured Party, or an agent designated
by it, appropriately endorsed or accompanied by appropriate
instruments of transfer or assignment, all documents and
instruments, all certificated securities with respect to any
investment property, all letters of credit and all accounts and
other rights to payment at any time evidenced by promissory
notes, trade acceptances or other instruments, (ii) cause any
securities intermediaries to show on their books that Secured
Party is the entitlement holder with respect to any investment
property, and/or obtain account control agreements in favor of
Secured Party from such securities intermediaries, in form and
substance satisfactory to Secured Party, with respect to any
investment property, as requested by Secured Party, (iii) xxxx
all documents and chattel paper with such legends as Secured
Party shall reasonably specify, and (iv) obtain consents from any
letter of credit issuers with respect to the assignment to
Secured Party of any letter of credit proceeds.
(h) Debtor shall at any reasonable time and from
time to time permit Secured Party or any of its agents or
representatives to visit the premises of Debtor and inspect the
Collateral and to examine and make copies of and abstracts from
the records and books of account of Debtor.
(i) If and when Debtor shall obtain rights to any
new patents, trademarks, service marks, trade names or
copyrights, or otherwise acquire or become entitled to the
benefit of, or apply for registration of, any of the foregoing,
Debtor (i) shall promptly notify Secured Party thereof and (ii)
hereby authorizes Secured Party to modify, amend, or supplement
Schedule 2 and from time to time to include any of the foregoing
and make all necessary or appropriate filings with respect
thereto.
(j) Debtor shall not enter into any agreement
(including any license or royalty agreement) pertaining to any of
its patents, copyrights, trademarks, service marks and trade
names, except for non-exclusive licenses in the ordinary course
of business
(k) Debtor shall give Secured Party immediate
notice of the establishment of any new deposit account and any
new securities account with respect to any investment property.
SECTION 6 Authorization; Secured Party Appointed
Attorney-in-Fact. Secured Party shall have the right to, in the
name of Debtor, or in the name of Secured Party or otherwise,
without the requirement of assent by Debtor, and Debtor hereby
constitutes and appoints Secured Party (and any of Secured
Party's officers, employees or agents designated by Secured
Party) as Debtor's true and lawful attorney-in-fact, with full
power and authority to: (i) sign any of the financing statements
and other documents and instruments to be executed or filed to
perfect or continue perfected, maintain the priority of or
provide notice of Secured Party's security interest in the
Collateral (including any notices to or agreements with any
securities intermediary); (ii) assert, adjust, xxx for,
compromise or release any claims under any policies of insurance;
and (iii) execute any and all such other documents and
instruments, and do any and all acts and things for and on behalf
of Debtor, which Secured Party may deem reasonably necessary or
advisable to maintain, protect, realize upon and preserve the
Collateral and Secured Party's security interest therein and to
accomplish the purposes of this Agreement. Secured Party agrees
that, except upon and during the continuance of an Event of
Default, it shall not exercise the power of attorney, or any
rights granted to Secured Party, pursuant to clauses (ii) and
(iii). The foregoing power of attorney is coupled with an
interest and irrevocable so long as the Obligations have not been
paid and performed in full. Debtor hereby ratifies, to the
extent permitted by law, all that Secured Party shall lawfully
and in good faith do or cause to be done by virtue of and in
compliance with this Section 6.
SECTION 7 Remedies.
(a) Upon the occurrence and continuance of any
Event of Default, Secured Party may declare any of the
Obligations to be immediately due and payable and shall have, in
addition to all other rights and remedies granted to it in this
Agreement, the Note or any other Document, all rights and
remedies of a secured party under the UCC and other applicable
laws. Without limiting the generality of the foregoing, Secured
Party may sell, resell, lease, use, assign, license, sublicense,
transfer or otherwise dispose of any or all of the Collateral in
its then condition or following any commercially reasonable
preparation or processing (utilizing in connection therewith any
of Debtor's assets, without charge or liability to Secured Party
therefor) at public or private sale, by one or more contracts, in
one or more parcels, at the same or different times, for cash or
credit, or for future delivery without assumption of any credit
risk, all as Secured Party deems advisable; provided, however,
that Debtor shall be credited with the net proceeds of sale only
when such proceeds are finally collected by Secured Party.
Secured Party shall have the right upon any such public sale,
and, to the extent permitted by law, upon any such private sale,
to purchase the whole or any part of the Collateral so sold, free
of any right or equity of redemption, which right or equity of
redemption Debtor hereby releases, to the extent permitted by
law. Debtor hereby agrees that the sending of notice by ordinary
mail, postage prepaid, to the address of Debtor set forth herein,
of the place and time of any public sale or of the time after
which any private sale or other intended disposition is to be
made, shall be deemed reasonable notice thereof if such notice is
sent ten days prior to the date of such sale or other disposition
or the date on or after which such sale or other disposition may
occur, provided that Secured Party may provide Debtor shorter
notice or no notice, to the extent permitted by the UCC or other
applicable law.
(b) For the purpose of enabling Secured Party to
exercise its rights and remedies under this Section 7 or
otherwise in connection with this Agreement, Debtor hereby grants
to Secured Party an irrevocable, non-exclusive and assignable
license (exercisable without payment or royalty or other
compensation to Debtor) to use, license or sublicense any
intellectual property Collateral.
(c) The cash proceeds actually received from the
sale or other disposition or collection of Collateral, and any
other amounts received in respect of the Collateral the
application of which is not otherwise provided for herein, shall
be applied first, to the payment of the reasonable costs and
expenses of Secured Party in exercising or enforcing its rights
hereunder and in collecting or attempting to collect any of the
Collateral, and to the payment of all other amounts payable to
Secured Party pursuant to Section 11 hereof; and second, to the
payment of the Obligations. Any surplus thereof which exists
after payment and performance in full of the Obligations shall be
paid over to Debtor or otherwise disposed of in accordance with
the UCC or other applicable law. Debtor shall remain liable to
Secured Party for any deficiency which exists after any sale or
other disposition or collection of Collateral.
SECTION 8 Certain Waivers. Debtor waives, to the
fullest extent permitted by law, (i) any right of redemption with
respect to the Collateral, whether before or after sale
hereunder, and all rights, if any, of marshalling of the
Collateral or other collateral or security for the Obligations;
(ii) any right to require Secured Party (A) to proceed against
any Person, (B) to exhaust any other collateral or security for
any of the Obligations, (C) to pursue any remedy in Secured
Party s power, or (D) to make or give any presentments, demands
for performance, notices of nonperformance, protests, notices of
protests or notices of dishonor in connection with any of the
Collateral; and (iii) all claims, damages, and demands against
Secured Party arising out of the repossession, retention, sale or
application of the proceeds of any sale of the Collateral
SECTION 9 Notices. All notices or other
communications hereunder shall be given in accordance with the
notice provisions in the Note.
SECTION 10 No Waiver; Cumulative Remedies. No
failure on the part of Secured Party to exercise, and no delay in
exercising, any right, remedy, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial
exercise of any such right, remedy, power or privilege preclude
any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. The rights and remedies
under this Agreement are cumulative and not exclusive of any
rights, remedies, powers and privileges that may otherwise be
available to Secured Party.
SECTION 11 Costs and Expenses.
(a) Debtor agrees to pay on demand:
(i) all title, appraisal, survey, audit,
consulting, search, recording, filing and similar costs, fees and
expenses incurred or sustained by Secured Party in connection
with this Agreement or the Collateral; and
(ii) all costs and expenses of Secured Party, and
the fees and disbursements of counsel, in connection with the
enforcement or attempted enforcement of, and preservation of any
rights or interests under, this Agreement and the Note, including
in any out-of-court workout or other refinancing or restructuring
or in any bankruptcy case, and the protection, sale or collection
of, or other realization upon, any of the Collateral, including
all expenses of taking, collecting, holding, sorting, handling,
preparing for sale, selling, or the like, and other such expenses
of sales and collections of Collateral.
(b) Any amounts payable to Secured Party under this
Section 11 or otherwise under this Agreement if not paid upon
demand shall bear interest from the date of such demand until
paid in full, at the default rate of interest set forth in the
Note.
SECTION 12 Binding Effect. This Agreement shall be
binding upon, inure to the benefit of and be enforceable by
Debtor, Secured Party and their respective successors and
assigns.
SECTION 13 Governing Law. This Agreement shall be
governed by, and construed in accordance with, the law of the
State of New York, except as required by mandatory provisions of
law and to the extent the validity or perfection of the security
interests hereunder, or the remedies hereunder, in respect of any
Collateral are governed by the law of a jurisdiction other than
New York.
SECTION 14 Waiver of Jury Trial. The parties
hereby agree to waive their respective rights to a trial by jury
of any claim or cause of action based upon or arising out of or
related to this Agreement, the Note or the other Documents or the
transactions contemplated hereby or thereby in any action,
proceeding or other litigation of any type brought by any of the
parties against any other party or parties. The parties hereby
agree that any such claim or cause of action shall be tried by a
court trial without a jury. Without in any way limiting the
foregoing, the parties further agree that their respective right
to a trial by jury is waived by operation of this section as to
any action, counterclaim or other proceeding which seeks, in
whole or in part, to challenge the validity or enforceability of
this Agreement, the Note or any other Document or any provision
thereof.
SECTION 15 Entire Agreement; Amendment. This
Agreement contains the entire agreement of the parties with
respect to the subject matter hereof and shall not be amended
except by the written agreement of the parties.
SECTION 16 Severability. Whenever possible, each
provision of this Agreement shall be interpreted in such manner
as to be effective and valid under all applicable laws and
regulations. If, however, any provision of this Agreement shall
be prohibited by or invalid under any such law or regulation in
any jurisdiction, it shall, as to such jurisdiction, be deemed
modified to conform to the minimum requirements of such law or
regulation, or, if for any reason it is not deemed so modified,
it shall be ineffective and invalid only to the extent of such
prohibition or invalidity without affecting the remaining
provisions of this Agreement, or the validity or effectiveness of
such provision in any other jurisdiction.
SECTION 17 Counterparts. This Agreement may be
executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together
shall constitute but one and the same agreement.
SECTION 18 Termination. Upon irrevocable payment
and performance in full of all Obligations, this Agreement shall
terminate and Secured Party shall promptly, at the cost of the
Debtor, execute and deliver to Debtor such documents and
instruments reasonably requested by Debtor as shall be necessary
to evidence termination of all security interests given by Debtor
to Secured Party hereunder; provided, however, that the
obligations of Debtor under Section 11 hereof shall survive such
termination.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, as of the date first above written.
THE PANDA PROJECT, INC.
By /s/ Xxxxxxx X. Xxxxx
----------------------
Title: Acting Chief
Financial Officer
SILICON BANDWIDTH, INC.
By /s/ Xxxx Xxxxxxx
----------------------
Title: Chairman
