EXHIBIT 99.2
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of October 15, 2001, is made by
GENERAL MAGIC, INC., a corporation organized under the laws of the State of
Delaware (the "DEBTOR"), with its principal offices located at 000 Xxxxx Xxxx
Xxxxxx, Xxxxxxxxx, Xxxxxxxxxx 00000, in favor of Halifax Fund, L.P. ("HALIFAX"),
Palladin Partners I, L.P., Palladin Overseas Fund, Ltd., XxXX Convertible
Arbitrage Fund, Ltd. and Lancer Securities (Cayman) Ltd. (collectively with
Halifax, the "SECURED PARTIES"), and Halifax as collateral agent (the
"COLLATERAL AGENT").
W I T N E S S E T H:
WHEREAS, the Debtor and the Secured Parties are entering into a
Conversion and Exchange Agreement dated as of the date hereof (the "EXCHANGE
AGREEMENT") pursuant to which, among other things, (a) the Debtor is issuing to
the Secured Parties an aggregate of $1,250,000 in principal amount of 5% Secured
Notes due April 15, 2003 in the form of Exhibit A to the Exchange Agreement (the
"NOTES"), in exchange for the Secured Parties surrendering an aggregate of
481,024 shares of its common stock, par value $.001 per share ("COMMON STOCK"),
held or to be held by the Secured Parties and Warrants held by the Secured
Parties, and (b) the Secured Parties have agreed to convert Preferred Shares (as
defined in the Exchange Agreement) into Common Stock; and
WHEREAS, pursuant to the Exchange Agreement, the Debtor has agreed that
all of the Debtor's obligations under the Exchange Agreement and the Notes
(collectively, the "SECURED OBLIGATIONS") shall be secured by a lien on all of
the assets of the Debtor and any subsidiaries pursuant to the terms of this
Security Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein and in order to induce the Secured Parties to enter into the
Exchange Agreement, the Debtor hereby agrees with the Collateral Agent and the
Secured Parties as follows:
SECTION 1: DEFINITIONS
1.1 DEFINITIONS. The following words shall have the following meanings
when used in this Security Agreement. All terms used herein not otherwise
defined in this Security Agreement shall have the meanings attributed to such
terms in the Exchange Agreement, and if not defined in the Exchange Agreement,
then the New York Uniform Commercial Code, as may be amended from time to time.
All references to dollar amounts shall mean amounts in lawful money of the
United States of America.
"Account Debtor" means any person who is or who may become obligated
under, with respect to, or on account of an Account.
"Accounts" means all presently existing and hereafter arising accounts,
contract rights, and all other forms of obligations owed or owing now or in the
future to the Debtor or any subsidiary, including, without limitation any
obligations arising out of the sale or lease of goods
or the rendition of services by such persons, or arising out of the sale or
lease of goods or the rendition of services by a person other than such persons
and acquired by such persons from such person by assignment or purchase,
including, without limitation, rights to payment with respect to accounts that
are sold or assigned to the Debtor, irrespective of whether earned by
performance, and any and all credit insurance, guarantees, or security therefor.
"Bankruptcy Code" means The Bankruptcy Reform Act of 1978, as
heretofore and hereinafter amended, and codified as 11 U.S.C. Sections 101 et
seq.
"Capitalized Lease Obligations" means any Debt represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with generally accepted accounting principles.
"Collateral" means all of the assets of the Debtor (whether currently
owned or hereafter acquired or owned by the Debtor) including, but not limited
to, each of the following: Accounts; Debtor's Books; Equipment; General
Intangibles; Goods; Inventory; Negotiable Collateral; deposit accounts,
investment property; any money or other assets of the Debtor that hereafter
comes into possession, custody or control of the Collateral Agent; and the
proceeds and any and all of the products, whether tangible or intangible, of any
of the foregoing including proceeds of insurance covering any or all of the
Collateral, and any and all Accounts, Equipment, General Intangibles, Goods,
Inventory, Negotiable Collateral, investment property, money, deposit accounts,
or other tangible or intangible, real or personal, property resulting from the
sale, exchange, collection, rent, lease, license, or other disposition of the
Collateral, or any portion thereof or interest therein, and the proceeds
thereof. The foregoing notwithstanding, the term "Collateral" shall not include
any Equipment or General Intangibles that is now held by Debtor as lessee,
licensee, or debtor under any purchase money documents in the event that: (i) as
a result of the grant of a security interest therein, Debtor's rights in or with
respect to such asset would be forfeited or Debtor would be deemed to have
breached or defaulted under the applicable lease, license, or applicable
purchase money document, and (ii) any such restriction described in clause (i)
is effective and enforceable under applicable law; provided, however, that the
term "Collateral" shall include such Equipment or General Intangibles, at any
time that the restrictions in the lease, license, or relevant purchase money
document are no longer effective and enforceable (including as a result of the
exercise of an option to purchase or the repayment of the financing) or at any
time that the applicable lessor's, licensor's, or purchase money financier's
consent is obtained to the grant of a security interest in and to such Equipment
or General Intangible. The Debtor represents that set forth on Schedule B
attached hereto is a reasonably detailed description of the material agreements
governing the Equipment and General Intangibles that is now held by the Debtor
as lessee, licensee, or debtor under purchase money documents which contains the
foregoing restrictions under clauses (i) and (ii) above.
"Debt" shall mean for any person: (i) obligations incurred by such
person for borrowed money (whether by loan, the issuance and sale of debt
securities or the sale of property to another person subject to an understanding
or agreement, contingent or otherwise, to repurchase such property from such
person), (ii) obligations evidenced by bonds, debentures, notes or other similar
instruments, (iii) obligations to pay the deferred purchase price of property or
services (excluding accounts payable arising in the ordinary course of business
consistent with past practices), (iv) the present value of obligations as lessee
under capital leases, and (v) obligations
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under direct or indirect guaranties (except the endorsement in the ordinary
course of business of negotiable instruments for deposit or collection) in
respect of, and obligations (contingent or otherwise) to purchase or otherwise
acquire, or otherwise to assure a creditor against loss in respect of,
indebtedness or obligations of others of the kinds referred to in clauses
(i)-(iv) above.
"Debtor's Books" means all of the Debtor's books and records including:
ledgers; records indicating, summarizing, or evidencing the Debtor's assets or
liabilities, or the Collateral; all information relating to the Debtor's
business operations or financial condition; and all computer programs, disc or
tape files, printouts, runs, or other computer prepared information, and the
equipment containing such information.
"Default" shall mean any condition, act or event which, with notice or
lapse of time or both, would constitute an Event of Default.
"Equipment" means all machinery, equipment, office machinery,
furniture, fixtures, conveyors, tools, materials, storage and handling
equipment, computer equipment and hardware including central processing units,
terminals, drives, memory units, printers, keyboards, screens, peripherals and
input or output devices, automotive equipment, trucks, molds, dies, stamps,
motor vehicles and other equipment of every kind and nature and wherever
situated now or hereafter directly or indirectly owned by the Debtor or in which
the Debtor has any interest together with all additions and accessions thereto,
all replacements and all accessories and parts therefor, all manuals,
blueprints, know-how, warranties and records in connection therewith, all rights
against suppliers, warrantors, manufacturers, sellers or others in connection
therewith, and together with all substitutions for any of the foregoing,
wherever located.
"Event of Default" means and includes any of the Events of Default set
forth in Section 3.
"General Intangibles" shall mean all "General Intangibles," as such
term is defined in Section 9 of the Uniform Commercial Code of the State of New
York, now or hereafter directly or indirectly owned by the Debtor, including,
without limitation, present and future trade secrets and other proprietary
information; trademarks, trade names and trademark applications, service marks,
business names, logos and the goodwill of the business relating thereto;
copyrights and copyright applications and all tangible property embodying the
copyrights; unpatented inventions (whether or not patentable); designs; research
and development results; patent applications and patents; customer contracts;
license agreements related to any of the foregoing and the income therefrom;
books, records, computer tapes or disks, flow diagrams, specification sheets,
source codes, object codes, and other physical manifestations of the foregoing.
"Immaterial Pledged Securities" is defined in Section 2.2(v).
"Indebtedness" means all amounts due and owing to the Secured Parties
pursuant to, and all payment obligations arising under, the Notes and the
Exchange Agreement together with all reasonable expenses relating to enforcement
thereof, including, without limitation, reasonable legal fees.
"Inventory" means all present and future inventory in which the Debtor
or any subsidiary has any interest, including goods held for sale or lease or to
be furnished under a contract of
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service and all of such persons' present and future raw materials, work in
process, finished goods, and packing and shipping materials, wherever located,
and any documents of title representing any of the above.
"Material Pledged Securities" means, as of any date of determination,
any certificated securities held by the Debtor other than Immaterial Pledged
Securities.
"Negotiable Collateral" means all of the Debtor's present and future
letters of credit, notes, drafts, instruments, certificated securities,
documents, personal property leases (wherein the Debtor is the lessor), chattel
paper, and Debtor's Books relating to any of the foregoing.
"Permitted Liens" means (i) liens in favor of the Debtor; (ii) liens on
property of a Person existing at the time such Person is merged into or
consolidated with the Debtor or any subsidiary of the Debtor, provided that such
liens were in existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those of the Person
merged into or consolidated with the Debtor; (iii) liens on property or assets
existing at the time of acquisition thereof or the acquisition of a Person owing
such property or assets by the Debtor or any subsidiary of the Debtor, provided
that such liens were in existence prior to the contemplation of such
acquisition; (iv) liens to secure the performance of statutory obligations
incurred in the ordinary course of business; (v) liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded, provided that any reserve or other appropriate provision
as shall be required in conformity with generally accepted accounting principals
("GAAP") shall have been made therefor; (vi) statutory liens of landlords and
liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen
and other liens imposed by law incurred in the ordinary course of business for
sums not yet delinquent or being contested in good faith, if such reserve or
other appropriate provision, if any, as shall be required by GAAP shall have
been made in respect thereof; (vii) easements, rights-of-way, zoning
restrictions and other similar charges or encumbrances in respect of real
property not interfering in any material respect with the ordinary conduct of
the business of the Debtor or any of its Subsidiaries; (viii) purchase money
Liens or the interests of lessors under capital leases to the extent that such
Liens or interests secure Purchase Money Indebtedness; (ix) liens granted in
connection with the incurrence of Permitted Senior Indebtedness; and (x) liens
incurred in the ordinary course of business of the Debtor or any Subsidiary of
the Debtor with respect to obligations that do not exceed One Million Dollars
($1,000,000) at any one time outstanding in the aggregate and that (a) are not
incurred in connection with the borrowing of money or the obtaining of advances
or credit (other than trade credit in the ordinary course of business) and (b)
do not in the aggregate materially detract from the value of the property or
materially impair the use thereof in the operation of business by the Debtor or
such Subsidiary. For clarification purposes, the Debtor may license its
intellectual property in the ordinary course of business.
"Permitted Senior Indebtedness" means, so long as (a) the provisions
thereof are consistent with an ordinary working capital credit facility in the
form typically provided by commercial banks, (b) the subordination provisons
applicable to the Debt are reasonably acceptable to a majority-in-interest of
the holders of the Notes, and (c) the maturity date of the working capital
credit facility shall not be earlier than the maturity date of the Notes, any
Debt, now existing or hereafter made or incurred in favor of a bank, trust
company, savings and loan
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association, insurance company, a capital investment concern engaged in the
business of providing such financing, or other similar entity, and any
extension, renewal or replacement of such Debt.
"Purchase Money Indebtedness" means any Debt (including Capitalized
Lease Obligations) owed to the seller of fixed assets incurred at the time of
the acquisition of such fixed assets for the sole purpose of financing all or
any part of the acquisition cost thereof.
"Security Agreement" means this Security Agreement, as this Security
Agreement may be amended or modified from time to time, together with all
exhibits and schedules attached to this Security Agreement from time to time.
"Secured Obligations" means all of the obligations of the Debtor,
including but not limited to, the Indebtedness under the Notes and Exchange
Agreement.
"subsidiary" means each subsidiary (as defined under U.S. generally
accepted accounting principles) of the Debtor.
"Transaction Documents" means the Exchange Agreement, the Notes and
this Security Agreement.
SECTION 2: GRANT OF SECURITY INTEREST; OBLIGATIONS OF THE DEBTOR
2.1 GRANT OF SECURITY INTEREST. (a) (a) As collateral security for all
of the Indebtedness, the Debtor hereby grants to the Collateral Agent, as
collateral agent for the Secured Parties, a continuing security interest in all
currently existing and hereafter acquired or arising Collateral to secure prompt
repayment of any and all Indebtedness and to secure prompt performance by the
Debtor of each of its covenants and duties under the Transaction Documents. The
Debtor agrees that the Collateral Agent and the Secured Parties shall have the
rights stated in this Security Agreement with respect to the Collateral in
addition to all other rights which the Secured Parties may have by law.
(b) Upon the issuance or receipt of any Material Pledged
Securities, the Debtor shall immediately deliver such Material Pledged
Securities to the Collateral Agent, together with stock powers duly executed in
blank and corporate resolutions authorizing the transfer of title of such stock
to the Secured Parties, the Collateral Agent or their respective designee or
designees upon the exercise of their rights in accordance with the terms of this
Security Agreement and applicable law.
(c) Schedule A attached hereto sets forth a description by
type of the Collateral existing as of the date hereof together with a reasonably
detailed list of the patents, trademarks, and those items of Collateral (if any)
the perfection of which is dependent upon the notation of Collateral Agent's
interest on the certificate of title issued to the Company upon the acquisition
thereof.
2.2 REPRESENTATIONS AND OBLIGATIONS OF THE DEBTOR. The Debtor warrants
and covenants to the Collateral Agent and the Secured Parties as follows:
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(a) Perfection of Security Interest. The Debtor agrees to
execute at any time and from time to time such financing statements and to take
whatever other actions are requested by the Collateral Agent which may be
necessary or desirable to create a security interest in favor of the Collateral
Agent in, and/or to perfect and continue the Collateral Agent's security
interest in, the Collateral, including without limitation the execution of any
collateral assignments, mortgages, control agreements and any documents required
to be filed with governmental agencies or authorities. In connection with the
foregoing, it is expressly agreed that (i) the Debtor shall not be required to
deliver a control agreement executed by Xxxxxx Xxxxxxx or any substitute
securities intermediary, and (ii) the Debtor need only use reasonable commercial
efforts to obtain a control agreement from Silicon Valley Bank and that the
failure by Silicon Valley Bank to deliver a control agreement in form and
substance satisfactory to Collateral Agent shall not be deemed an Event of
Default under the Transaction Documents so long as the Debtor shall have used
reasonable commercial efforts to obtain a control agreement in form and
substance reasonably satisfactory to the Collateral Agent. Upon request of the
Collateral Agent, the Debtor will deliver to the Collateral Agent any and all
documents evidencing or constituting the Collateral, possession of which is
required in order for the Collateral Agent to perfect its security interest
therein. The Collateral Agent may at any time and from time to time, and without
further authorization from the Debtor, file a carbon, photographic or other
reproduction of any financing statement or of this Security Agreement for use as
a financing statement. The Debtor will reimburse the Collateral Agent for all
reasonable expenses for the perfection and the continuation of the perfection of
Collateral Agent's security interest in the Collateral. The Debtor will promptly
notify the Collateral Agent of any change in its name (including any change to
the assumed business names of the Debtor) and any change in its jurisdiction of
organization (including without limitation through merger, consolidation,
transfer or otherwise). This is a continuing Security Agreement and will
continue in effect until all of the Indebtedness is paid in full. The Collateral
Agent shall release its interest in the Collateral upon the full and final
payment and satisfaction of the Indebtedness. If payment is made by the Debtor,
whether voluntarily or otherwise, or by any third party, on the Indebtedness and
thereafter a Secured Party is forced to remit the amount of that payment to the
Debtor's trustee in bankruptcy or to any similar person under any federal, state
or foreign bankruptcy law or other law for the relief of debtors, the
Indebtedness shall be considered unpaid for the purpose of enforcement of this
Security Agreement. If permitted or required under applicable law, the
Collateral Agent may file any financing statements with respect to the
Collateral without the signatures of the Debtor. Any financing statements may
state that the Collateral Agent has a lien in all of the Debtor's assets. Except
as set forth herein, the Debtor will make any necessary filings and take any
other necessary actions to provide a perfected security interest (subject only
to Permitted Liens) to the Collateral Agent with respect to any Collateral and
shall not undertake any actions that threaten the attachment of the security
interest granted by the Company to the Collateral Agent in the Collateral.
Evidence of such filings and action will be provided to the Collateral Agent on
a timely basis.
(b) Power of Attorney. The Debtor hereby irrevocably makes,
constitutes, and appoints the Collateral Agent (and all of such Collateral
Agent's general partners, officers, employees, or agents designated by such
Collateral Agent) as its true and lawful attorney, with power to: (i) if the
Debtor refuses to do so or unreasonably delays in doing so, sign the Debtor's
name on any of the documents described hereunder or on any other similar
documents to be executed, recorded, or filed in order to perfect or continue
perfected the Collateral Agent's
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security interest in the Collateral; (ii) at any time that an Event of Default
has occurred and is continuing, execute, sign and endorse the Debtor's name on
any invoice or xxxx of lading relating to any Account, drafts against Account
Debtors, schedules and assignments of Accounts, verifications of Accounts, and
notices to Account Debtors; (iii) at any time that an Event of Default has
occurred and is continuing, execute, sign and endorse such Debtor's name on any
checks, notices, instruments, acceptances, money orders, drafts, warrants or
other item of payment or security that may come into Collateral Agent's
possession; (iv) at any time that an Event of Default has occurred and is
continuing, demand, collect, receive, receipt for, xxx and recover all sums of
money or other property which may now or hereafter become due, owing or payable
from the Collateral; (v) at any time that an Event of Default has occurred and
is continuing, file any claim or claims or, following the occurrence and during
the continuance of an Event of Default, take any action or institute or take
part in any proceedings, either in its own name or in the name of such Debtor,
or otherwise, which in the discretion of the Collateral Agent may seem to be
necessary or advisable; (vi) at any time that an Event of Default has occurred
and is continuing and following the acceleration of the Indebtedness, direct the
Account Debtors to send all payments in connection with the Accounts owing by
any such Account Debtor to the Collateral Agent; (vii) at any time that an Event
of Default has occurred and is continuing, make, settle, and adjust all claims
under the Debtor's policies of insurance and make all determinations and
decisions with respect to such policies of insurance; and (viii) at any time
that an Event of Default has occurred and is continuing, settle and adjust
disputes and claims respecting the Accounts directly with Account Debtors, for
amounts and upon terms which the Collateral Agent determines to be reasonable,
and the Collateral Agent may cause to be executed and delivered any documents
and releases which the Collateral Agent determines to be necessary. The
appointment of the Collateral Agent as such Debtor's attorney, and each and
every one of the Collateral Agent's rights and powers, being coupled with an
interest, is irrevocable and shall remain in full force and effect until all of
the Indebtedness has been fully repaid and performed.
(c) No Violation. The execution and delivery of this Security
Agreement does not violate any law or material agreement governing any Debtor or
to which any Debtor is a party, and the Debtor's certificate or articles of
incorporation and bylaws or other organizational documents do not prohibit any
term or condition of this Security Agreement.
(d) Enforceability of Collateral. With respect to the Accounts
and to the best knowledge of the Debtor, the Collateral is enforceable in
accordance with its terms, is genuine, and complies in all material respects
with applicable laws concerning form, content and manner of preparation and
execution, and, to the best of the knowledge of the Debtor, all persons
appearing to be obligated on the Collateral have authority and capacity to
contract and are in fact obligated as they appear to be on the Collateral.
(e) Accounts. To the best knowledge of the Debtor, all
Accounts existing as of the date hereof are good and valid Accounts representing
an undisputed, bona fide indebtedness incurred by the Account Debtors, and there
exists no set-offs or counterclaims against any such Accounts and no agreements
under which any deductions or discounts may be claimed with any Account Debtor
except as disclosed to the Collateral Agent in writing.
(f) Removal of Collateral; Transactions Involving Collateral.
To the extent the Collateral consists of Accounts, General Intangibles,
Negotiable Collateral or Debtor's Books,
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the records and other documents pertaining to the Collateral shall be kept at
the principal office of the Debtor, or at such other locations as are reasonably
acceptable to the Collateral Agent. All Collateral is located within the United
States of America. Except for (i) transactions in the ordinary course of
business in accordance with past practice and on an arm's length basis for
reasonably equivalent value, and (ii) so long as the Debtor provides reasonable
prior notice thereof to the Collateral Agent, satisfies its obligations under
Section 2.2(a) hereof, and, if the Debtor has received aggregate net cash
proceeds from such non-ordinary course dispositions in excess of $500,000, the
Debtor delivers to the Collateral Agent an amount equal to 30% of the net cash
proceeds received by the Debtor in excess of $500,000, non-ordinary course
dispositions of Collateral on arm's length terms and for fair equivalent value,
the Debtor shall not sell, offer to sell, or otherwise transfer, dispose of or
encumber any Collateral (except for encumbrances constituting Permitted Liens).
The Debtor shall not pledge, mortgage, encumber or otherwise permit the
Collateral to be subject to any lien, security interest, encumbrance, or charge,
other than the security interest provided for in this Security Agreement and
Permitted Liens. Without the prior written consent of the Secured Parties, no
Collateral that is located in the United States shall be moved outside of the
United States.
(g) Title. As of the date hereof, the Debtor holds good and
marketable title to the Collateral, free and clear of all liens and encumbrances
except for the lien of this Security Agreement and Permitted Liens. No financing
statement or other evidence of a lien or transfer covering any of the Collateral
is on file in any public office in any jurisdiction other than those which
reflect the security interest created by this Security Agreement or Permitted
Liens. The Debtor shall defend the Collateral Agent's rights in the Collateral
against any and all claims and demands.
(h) Collateral Schedules and Locations; Jurisdiction of
Incorporation. The Debtor shall deliver to Collateral Agent a supplement to
Schedule A attached hereto promptly upon becoming aware of any material
inaccuracies with respect thereto. The Debtor represents and warrants to the
Collateral Agent and Secured Parties that Schedule A is true, accurate and
complete in all material respects. The Debtor represents that it is incorporated
in the State of Delaware.
(i) [Intentionally Omitted].
(j) Possession and Collection of Accounts. Following the
acceleration of the Indebtedness, the records and documents evidencing the
Accounts pledged as Collateral hereunder shall, upon the Collateral Agent's
request, be delivered to the Collateral Agent or their agent and held in
accordance with the terms of this Security Agreement.
(k) Maintenance and Inspection of Collateral. The Debtor shall
maintain or cause to be maintained all tangible Collateral in good condition and
repair except for ordinary wear and tear. The Debtor will not commit or permit
damage to or destruction of the Collateral or any part of the Collateral. The
Collateral Agent and its designated representatives and agents shall have the
right at all reasonable times, upon reasonable advance notice, to examine,
inspect, and audit the Collateral wherever located and the books, records or any
property which is otherwise used in connection with the Collateral. The Debtor
shall immediately notify the Collateral Agent of all material cases involving
the loss or damage of or to any Collateral; of any
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request for credit or adjustment or of any other dispute arising with respect to
the Collateral in any material respect; and generally of all happenings and
events materially adversely affecting the Collateral or the value or the amount
of the Collateral.
(l) Taxes, Assessments and Liens. The Debtor will pay prior to
delinquency all taxes, assessments and liens upon the Collateral, its use or
operation and upon the Transaction Documents. A Debtor may withhold any such
payment or may elect to contest any lien if such Debtor is in good faith
conducting an appropriate proceeding to contest the obligation to pay and so
long as the Collateral Agent's interest in the Collateral is not jeopardized in
the Collateral Agent's sole reasonable opinion. If any of the Collateral is
subjected to a lien which is not discharged or bonded, or the enforcement
thereof stayed (in either case without granting any security interests in any of
the assets of any Debtor) within thirty (30) days, the Debtor shall deposit with
the Collateral Agent cash, a sufficient corporate surety bond or other security
satisfactory to the Collateral Agent (in their discretion) in an amount adequate
to provide for the discharge of the lien plus any interest, reasonable costs,
attorneys' fees or other charges that could accrue as a result of foreclosure or
sale of the Collateral. In any contest the Debtor shall defend itself and its
subsidiaries and the Collateral Agent and shall satisfy any final adverse
judgment before enforcement against the Collateral. The Debtor shall name the
Collateral Agent as an additional obligee under any surety bond furnished in
such contest proceedings.
(m) Incorporation by Reference. The Debtor hereby restate and
affirm all representations, warranties and agreements contained in the Exchange
Agreement and Notes (as of each date and time such representations and
warranties are made under each of the Transaction Documents), the terms and
conditions of which are hereby incorporated herein by reference.
(n) Compliance With Governmental Requirements. The Debtor
shall comply in all material respects with all laws, ordinances and regulations
of all governmental authorities applicable to the production, disposition, or
use of the Collateral. The Debtor may contest in good faith any such law,
ordinance or regulation and withhold compliance during any proceeding, including
appropriate appeals, so long as the Collateral Agent's interest in the
Collateral, in the Collateral Agent's sole reasonable opinion, is not
jeopardized.
(o) Insurance. For so long as any Notes remain outstanding,
the Debtor shall, and shall cause each Subsidiary to, have in full force and
effect (a) insurance reasonably believed to be adequate on all assets and
activities of a type customarily insured, covering property damage and loss of
income by fire or other casualty, and (b) insurance reasonably believed to be
adequate protection against all liabilities, claims and risks against which it
is customary for companies similarly situated as the Debtor and the Subsidiaries
to insure.
(p) The Debtor's Right to Possession and to Collect Accounts.
Except as otherwise provided herein, until the occurrence and during the
continuance of an Event of Default or acceleration of Indebtedness, the Debtor
may have possession of the tangible personal property and beneficial use of all
the Collateral and may use it in any lawful manner not inconsistent with this
Security Agreement or the Transaction Documents, provided that the Debtor's
right to possession and beneficial use shall not apply to any material item of
Collateral where possession of the Collateral by the Collateral Agent is
required by law to perfect the
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Collateral Agent's security interest in such Collateral. At any time following
the acceleration of the Indebtedness, the Collateral Agent may exercise its
right to directly collect the Accounts and to notify Account Debtors to make
payments directly to the Collateral Agent for application to the Indebtedness,
and the Debtor hereby authorizes and directs the Account Debtors, if the
Collateral Agent exercises such right, to make payments on the Accounts to the
Collateral Agent. If the Collateral Agent at any time has possession of any
Collateral, whether before or after an Event of Default, the Collateral Agent
shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral if the Collateral Agent takes such action for
that purpose as the Debtor shall reasonably request or if the Collateral Agent
accords the Collateral treatment substantially similar to that which the
Collateral Agent accords its own property, but failure to honor any request by
the Debtor shall not of itself be deemed to be a failure to exercise reasonable
care. The Collateral Agent shall not be required to take any steps necessary to
preserve any rights in the Collateral against prior parties, nor to protect,
preserve or maintain any security interest given to secure the Collateral.
Following the occurrence and during the continuance of an Event of Default, the
Collateral Agent shall have the right to direct who shall collect and service
the Accounts.
(q) Transactions with Others. After the occurrence and during
the continuation of any Event of Default, the Collateral Agent may (i) extend
the time for payment or other performance, (ii) grant a renewal or change in
terms or conditions, or (iii) compromise, compound or release any obligation
with an Account Debtor as the Collateral Agent deems advisable, without
obtaining the prior written consent of the Debtor, and no such act or failure to
act shall affect the Collateral Agent's or Secured Parties' rights against the
Debtor or the Collateral.
(r) Expenditures by the Collateral Agent. If not discharged or
paid prior to delinquency, and provided that such items have not been contested
as permitted herein, the Collateral Agent may (but shall not be obligated to)
discharge or pay any amounts required to be discharged or paid by the Debtor
under this Security Agreement, including without limitation all taxes, liens,
security interests, encumbrances, and other claims, at any time levied or placed
on the Collateral. If the Debtor has not provided Collateral Agent with
reasonable and prompt assurrance that they have done so, the Collateral Agent
may (but shall not be obligated to) pay all reasonable costs for insuring,
maintaining and preserving the Collateral. All such expenditures incurred or
paid by the Collateral Agent for such purposes will then bear interest at the
then rate charged under the Notes from the date incurred or paid by the
Collateral Agent to the date of repayment by the Debtor. All such expenses shall
become a part of the Indebtedness and, at the Collateral Agent's option, will
(i) be payable on demand or (ii) be added to the balance of the Notes becoming a
part of the outstanding principal amount due and payable thereunder. This
Security Agreement also will secure payment of these amounts. Such right under
this subsection shall be in addition to all other rights and remedies to which
the Collateral Agent and Secured Parties may be entitled upon the occurrence of
an Event of Default.
(s) Asset Transfers. The Debtor shall not transfer, sell,
assign, convey or contribute any assets of the Debtor to any subsidiary of the
Debtor unless such subsidiary contemporaneously duly executes and delivers a
guarantee and security agreement to and in favor of the Secured Parties in form
and substance reasonably satisfactory to the Collateral Agent. Except for
dispositions of Collateral consummated in accordance with Section 2.2(f)
10
hereof, in the event that in the future, any Collateral is held by subsidiaries,
affiliates or joint ventures of the Debtor, then the Debtor shall cause such
entities to grant the Collateral Agent a lien in such Collateral, to cause such
entities to enter into security agreements reasonably satisfactory to the
Collateral Agent, and to take all actions necessary to perfect such security
interests.
(t) Debt. The Debtor and its subsidiaries have no Debt other
than Debt reported on the Debtor's most recent financial statements filed with
the SEC and Debt created under the Transaction Documents.
(u) Compliance Certificate. At such times as may be requested
by the Collateral Agent but no more frequently than once per quarter, the Debtor
shall deliver a certificate executed by the Chief Financial Officer of the
Debtor stating that no Default or Event of Default has occurred under this
Security Agreement or under the other Transaction Documents.
(v) Immaterial Pledged Securities. The Debtor does not have
(i) any subsidiaries except for Rocket Acquisition Corporation, a Delaware
corporation, which does not have assets with an aggregate fair market value in
excess of $100,000, or (ii) title to any certificated securities issued by a
single issuer with an aggregate fair market value in excess of $25,000 (all of
the foregoing securities together with any certificated securities issued by a
single issuer hereafter held by the Debtor with an aggregate fair market value
of less than $25,000 being referred to herein as "Immaterial Pledged
Securities").
(w) Real Property. Neither the Debtor nor any subsidiaries
owns any real property. The Debtor agrees that if the Debtor or any subsidiary
acquires any real property the Debtor shall execute and deliver, or cause such
subsidiary to execute and deliver, a mortgage on such property to and in favor
of the Secured Parties in form and substance reasonably satisfactory to the
Collateral Agent.
SECTION 3: EVENTS OF DEFAULT; REMEDIES
3.1 EVENTS OF DEFAULT. The occurrence of an "Event of Default" under
the Notes shall constitute an Event of Default hereunder.
3.2 RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs and
is continuing under this Security Agreement, the Collateral Agent and the
Secured Parties shall have all the rights of a secured party under the New York
Uniform Commercial Code. In addition and without limitation and so long as an
Event of Default has occurred and is continuing, the Collateral Agent and the
Secured Parties may exercise any one or more of the following rights and
remedies:
(a) Accelerate Indebtedness. The Collateral Agent may declare
the entire Indebtedness immediately due and payable, without notice.
(b) Assemble Collateral. The Collateral Agent may require the
Debtor to deliver to the Collateral Agent all or any portion of the Collateral
and other documents relating to the Collateral. The Collateral Agent may require
the Debtor to assemble the Collateral and make it available to the Collateral
Agent at a place to be designated by the Collateral Agent. The
11
Collateral Agent also shall have full power to enter upon the property of the
Debtor to take possession of and remove the Collateral. If the Collateral
contains other goods not covered by this Security Agreement at the time of
repossession, the Debtor agrees that the Collateral Agent may take such other
goods, provided that the Collateral Agent makes reasonable efforts to return
them to the Debtor after repossession.
(c) Sell the Collateral. The Collateral Agent shall have full
power to sell, lease, transfer, or otherwise deal with the Collateral or
proceeds thereof in its own name or that of the Debtor. The Collateral Agent may
sell the Collateral at public auction or private sale. Unless the Collateral
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, the Collateral Agent will give the Debtor reasonable notice
of the time after which any private sale or any other intended disposition of
the Collateral is to be made. The requirements of reasonable notice shall be met
if such notice is given at least ten (10) days before the time of the sale or
disposition. All reasonable expenses relating to the disposition of the
Collateral, including without limitation the expenses of retaking, holding,
insuring, preparing for sale and selling the Collateral, shall become a part of
the Indebtedness secured by this Security Agreement and shall be payable on
demand, with interest at the Default Rate (as defined in the Notes) from date of
expenditure until repaid.
(d) Foreclosure. Maintain a judicial suit for foreclosure and
sale of the Collateral.
(e) Appoint Receiver. To the extent permitted by applicable
law, the Collateral Agent shall have the following rights and remedies regarding
the appointment of a receiver: (i) the Collateral Agent may have a receiver
appointed as a matter of right, (ii) the receiver may be an employee of the
Collateral Agent and may serve without bond, and (iii) all fees of the receiver
and the receiver's attorney shall become part of the Indebtedness secured by
this Security Agreement and shall be payable on demand, with interest at the
Default Rate (as defined in the Notes) from date of expenditure until repaid.
(f) Transfer Title. Effect transfer of title upon sale of all
or part of the Collateral. For this purpose, the Debtor irrevocably appoint the
Collateral Agent, acting singly, as its attorneys-in-fact to execute
endorsements, assignments and instruments in the name of the Debtor as shall be
necessary or reasonable following any such sale to effect the transfer of title.
With respect to any such transfer of trademarks, the Debtor hereby transfers all
goodwill associated therewith.
(g) Collect Revenues, Apply Accounts. The Collateral Agent,
either itself or through a receiver, may collect the payments, rents, income,
and revenues from the Collateral. The Collateral Agent may at any time in its
discretion transfer any Collateral into its own names or that of its nominees
and receive the payments, rents, income, and revenues therefrom and hold the
same as security for the Indebtedness or apply it to payment of the Indebtedness
in such order of preference as the Collateral Agent may determine. For these
purposes, following the occurrence and during the continuance of an Event of
Default, the Collateral Agent may, on behalf of and in the name of the Debtor,
endorse, notes, checks, drafts, money orders, documents of title, instruments,
and items pertaining to payment, shipment or storage of any Collateral. The
Collateral Agent may demand, collect, receipt for, settle, compromise, adjust,
xxx for, foreclose,
12
or realize on the Collateral as the Collateral Agent may determine. To
facilitate collection, so long as an Event of Default has occurred and is
continuing, the Collateral Agent may notify Account Debtors and obligors on any
Collateral to make payments directly to the Collateral Agent.
(h) Obtain Deficiency. If the Collateral Agent chooses to sell
any or all of the Collateral and/or pursue any other remedy available hereunder,
under any other agreement, at law or in equity, the Collateral Agent may obtain
a judgment against the Debtor for any deficiency remaining on the Indebtedness
due to the Secured Parties after application of all amounts received from the
exercise of the rights provided in this Security Agreement. The Debtor shall be
liable for a deficiency even if the transaction described in this Subsection is
a sale of accounts or chattel paper.
(i) Application of Proceeds. The proceeds of any foreclosure
or realization upon the Collateral shall be applied:
(A) First, to the costs and expenses of collection;
(B) Second, to overdue interest;
(C) Third, to the outstanding principal amount of the
Indebtedness; and
(D) Fourth, any excess to the Debtor or other party
or parties in accordance with applicable law or court order.
(j) Other Rights and Remedies. The Collateral Agent shall have
all the rights and remedies of a secured creditor under the provisions of the
New York Uniform Commercial Code, as may be amended from time to time. In
addition, the Collateral Agent and the Secured Parties shall have and may
exercise any or all rights and remedies they may have available at law, in
equity, or otherwise.
3.3 CUMULATIVE REMEDIES. All of the Secured Parties' rights and
remedies, whether evidenced by this Security Agreement or the other Transaction
Documents or by any other writing, shall be cumulative and may be exercised
singularly or concurrently. Election by the Collateral Agent to pursue any
remedy shall not exclude pursuit of any other remedy, and an election to make
expenditures or to take action to perform an obligation of the Debtor under this
Security Agreement, after such Debtor's failure to perform, shall not affect the
Collateral Agent's right to declare a default and to exercise their remedies.
SECTION 3A. MATERIAL PLEDGED SECURITIES
(a) So long as no Event of Default shall have occurred and be
continuing:
(A) The Debtor shall be entitled to exercise any and
all voting and other consensual rights pertaining to the
Material Pledged Securities or any part thereof for any
purpose not inconsistent with the terms of this Security
Agreement or the Transaction Documents; provided, however,
that the Debtor shall not exercise or refrain from exercising
any such right if such action would have a
13
material adverse effect on the value of the Material Pledged
Securities or any part thereof; and provided further that the
Debtor shall give the Collateral Agent at least five days'
prior written notice of the manner in which it intends to
exercise, or the reasons for refraining from exercising, any
such right.
(B) The Debtor shall be entitled to receive and
retain any and all dividends and interest paid in respect of
the Pledge Securities; provided, however, that any and all
(i) dividends and interest paid or payable
other than in cash in respect of, and instruments and
other property received, receivable or otherwise
distributed in respect of, or in exchange for, any
Material Pledged Securities,
(ii) dividends and other distributions paid
or payable in cash in respect of any Material Pledged
Securities in connection with a partial or total
liquidation or dissolution or in connection with a
reduction of capital, capital surplus or
paid-in-surplus, and
(iii) cash paid, payable or otherwise
distributed in respect of principal of, or in
redemption of, or in exchange for, any Material
Pledged Securities,
shall be, and shall be forthwith delivered to the Collateral Agent to
hold as, Collateral and shall, if received by the Debtor, be received
in trust for the benefit of the Collateral Agent, be segregated from
the other property or funds of the Debtor and be forthwith delivered to
the Collateral Agent as Collateral in the same form as so received
(with any necessary endorsement) and such cash received by the
Collateral Agent will be deposited in an account held by the Collateral
Agent. The Debtor, promptly upon the request of the Collateral Agent,
shall execute such documents and do such acts as may be necessary or
desirable in the reasonable judgment of the Collateral Agent to give
effect to this clause (B).
(C) The Debtor shall deliver to the Collateral Agent
any distribution consisting of additional certificated
securities of an issuer of Material Pledged Securities
immediately upon receipt, together with executed stock powers
and corporate resolutions authorizing the transfer of title of
such shares after the occurrence and during the continuance of
an Event of Default pursuant to the terms of this Security
Agreement.
(D) The Collateral Agent shall execute and deliver
(or cause to be executed and delivered) to the Debtor all such
proxies and other instruments as Debtor may reasonably request
for the purpose of enabling the Debtor to exercise the voting
and other rights that it is entitled to exercise pursuant to
clause (A) above and to receive the dividends or interest
payments that it is authorized to receive and retain pursuant
to clause (B) above.
(b) Upon the occurrence and during the continuance of an Event
of Default:
14
(A) All rights of Debtor (x) to exercise or refrain
from exercising the voting and other consensual rights that it
would otherwise be entitled to exercise pursuant to Section
3A(a)(A) shall, upon notice to Debtor by the Collateral Agent,
cease and (y) to receive the dividends and interest payments
that it would otherwise be authorized to receive and retain
pursuant to Section 3A(a)(B) shall automatically cease, and
all such rights shall thereupon become vested in the
Collateral Agent, which shall thereupon have the sole right to
exercise or refrain from exercising such voting and other
consensual rights and to receive and hold as additional
Material Pledged Securities such dividends, interest payments
and other distributions. For the avoidance of doubt, the
Collateral Agent is hereby granted an irrevocable proxy
coupled with an interest to exercise all voting power with
respect to any additional certificated securities of an issuer
of Material Pledged Securities, effective upon the occurrence
and during the continuance of an Event of Default.
(B) All dividends, interest payments and other
distributions that are received by the Debtor contrary to the
provisions of clause (A) of this Section 3A(b) shall be
received in trust for the benefit of the Collateral Agent,
shall be segregated from other funds of Debtor and shall be
forthwith paid over to the Collateral Agent as Collateral in
the same form as so received (with any necessary endorsement).
SECTION 3B. THE COLLATERAL AGENT'S DUTIES.
(a) Other than as specified in this Security Agreement and any
amendment hereto, the Collateral Agent shall not be required to take or refrain
from taking any actions, to exercise or refrain from exercising any rights, or
to make or refrain from making any requests unless it shall first receive proper
instructions from the Secured Parties (or their respective successors or
assigns).
(b) The Collateral Agent shall hold all Collateral received by
it, and shall make disposition thereof, only in accordance with this Security
Agreement and applicable law. So long as Collateral Agent fulfills its
obligations under the New York Uniform Commercial Code, the Collateral Agent
shall have no duty as to any Collateral, as to ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any securities, whether or not the Collateral Agent or any
of the Secured Parties has or is deemed to have knowledge of such matters, or as
to the taking of any necessary steps to preserve rights against any parties or
any other rights pertaining to any Collateral.
(c) The Collateral Agent shall not be under any duty or
obligation to inspect, review or examine any document, instrument, certificate,
agreement or other papers to determine that they are enforceable or that they
are other than what they purport to be on their face. The Collateral Agent shall
hold any Collateral delivered to the Collateral Agent as the agent of the
Secured Parties.
(d) The duties and obligations of the Collateral Agent shall
be determined solely by the express provisions of this Security Agreement or any
amendment hereto or any
15
instructions permitted hereby. The Collateral Agent shall have no obligation
with respect to any other matters covered in any other document other than as
expressly provided herein, or any amendment hereto. The Collateral Agent shall
not be liable except for the performance of such duties and obligations as are
specifically set forth in this Security Agreement or as set forth in a written
amendment to this Security Agreement executed by the parties hereto or their
successors or assigns. No representations, warranties, covenants or obligations
of the Collateral Agent shall be implied with respect to this Security Agreement
or the Collateral Agent's services hereunder. Without limiting the generality of
the foregoing, the Collateral Agent:
(i) shall use the same degree of care and
skill as a reasonably prudent person would use in
similar circumstances (without limiting the
generality of the foregoing, the Collateral Agent
shall be deemed to have exercised reasonable care in
the custody and preservation of any Collateral in its
possession if such Collateral is accorded treatment
substantially equal to that which the Collateral
Agent accords its own property of like tenor);
(ii) shall not be obligated to take any
legal action hereunder that might in its reasonable
judgment involve any expense or liability unless it
has been furnished with reasonable indemnity;
(iii) may rely on and shall be protected in
acting in good faith upon any certificate,
instrument, opinion, notice, letter, telegram or
other document, or any security, delivered to it and
in good faith believed by it to be genuine and to
have been signed by the proper party or parties;
(iv) may rely on and shall be protected in
acting in good faith upon the written instructions of
the Secured Parties;
(v) may consult its own independent counsel
satisfactory to it and the opinion of such counsel
shall be full and complete authorization and
protection in respect of any action taken, suffered,
or omitted by it hereunder in good faith and in
furtherance of its duties hereunder, in accordance
with the opinion of such counsel;
(vi) may execute any of the powers hereunder
or perform any duties hereunder either directly or
through agents or attorneys; and
(vii) will be regarded as making no
representation and having no responsibilities (except
as expressly set forth herein) as to the validity,
sufficiency, value, genuineness, ownership or
transferability of any portion of the Collateral, and
will not be required to and will not make any
representations as to the validity, value or
genuineness of any portion of the Collateral.
(e) Neither the Collateral Agent nor any of its partners,
agents or employees, shall be liable for any error in judgment, for any mistake
of fact or for any action taken or omitted to be taken by it or them hereunder
or in connection herewith in good faith and believed
16
by it or them to be within the purview of this Security Agreement, except for
its or their own gross negligence, lack of good faith or willful misconduct. In
no event shall the Collateral Agent or its partners, officers, agents and
employees be held liable for any special, indirect or consequential damages
resulting from any action taken or omitted to be taken by it or them hereunder
in connection herewith even if advised of the possibility of such damages except
to the extent any such damages resulted from any such person's willful
misconduct or gross negligence.
(f) Whenever, in the administration of this Security
Agreement, the Collateral Agent reasonably shall deem it necessary that a matter
be proved or established prior to taking, suffering or omitting any action under
this Security Agreement, such matter (unless other evidence in respect thereof
be herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate of the Secured Parties, and such certificate shall
be full warranty to the Collateral Agent for any action taken, suffered or
omitted under the provisions of this Agreement, upon the faith thereof.
SECTION 4: MISCELLANEOUS PROVISIONS
4.1 ENTIRE AGREEMENT; AMENDMENTS. This Security Agreement, together
with the other Transaction Documents, constitute the entire understanding and
agreement of the parties as to the matters set forth in this Security Agreement.
No alteration of or amendment to this Security Agreement shall be effective
unless given in writing and signed by the party or parties sought to be charged
or bound by the alteration or amendment.
4.2 CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. THE VALIDITY OF THIS
SECURITY AGREEMENT, ITS CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT, AND THE
RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. THE
PARTIES IRREVOCABLY AND UNCONDITIONALLY AGREE (1) THAT ALL ACTIONS OR
PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND
LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE STATE OF NEW YORK,
NEW YORK COUNTY AND THAT THE PARTIES SHALL BE SUBJECT TO THE JURISDICTION OF
SUCH COURTS, AND (2) THAT SERVICE OF PROCESS BY CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, SHALL CONSTITUTE PERSONAL SERVICE. EACH DEBTOR, THE COLLATERAL AGENT
AND THE SECURED PARTIES WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW,
ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO
OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS
SECTION 4.2. EACH DEBTOR, THE COLLATERAL AGENT AND THE SECURED PARTIES HEREBY
WAIVES THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS SECURITY AGREEMENT OR ANY OF THE ACTIONS
CONTEMPLATED HEREIN, INCLUDING WITHOUT LIMITATION CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH
DEBTOR, THE COLLATERAL AGENT AND THE SECURED PARTIES REPRESENTS THAT EACH HAS
REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
17
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.
4.3 ATTORNEYS' FEES; EXPENSES. The Debtor agrees to pay promptly upon
demand, all of the Collateral Agent's costs and expenses, including without
limitation reasonable attorneys' fees and legal expenses, incurred in connection
with the enforcement of this Security Agreement. The Collateral Agent may pay
someone else to help enforce this Security Agreement, and the Debtor shall pay
the reasonable costs and expenses of such enforcement. Costs and expenses
include without limitation the Collateral Agent's reasonable attorneys' fees and
legal expenses whether or not there is a lawsuit, reasonable attorneys' fees and
legal expenses for bankruptcy proceedings (and including efforts to modify or
vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. The Debtor also shall pay all court costs and
such additional fees as may be directed by the court.
4.4 CAPTION HEADINGS. Caption headings in this Security Agreement are
for convenience purposes only and are not to be used to interpret or define the
provisions of this Security Agreement.
4.5 NOTICES. All notices required to be given under this Security
Agreement shall be given in writing and shall be effective when actually
delivered or two (2) days after being deposited in the United States mail, first
class, postage prepaid, addressed to the party to whom the notice is to be given
or, if via facsimile, when sent via facsimile transmission to the party to whom
the notice is to be given and confirmation of such transmission has been
received, at the address and/or facsimile number shown below:
18
if to the Collateral Agent and if to any Secured Party:
c/o The Palladin Group, L.P.
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attn: Xxxxxxx Xxxxxxx
With a copy to:
Kleinberg, Kaplan, Xxxxx & Xxxxx, P.C.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile No: (000) 000-0000
Attn: Xxxxx X. Xxxxxxx, Esq.
if to the Debtor:
General Magic, Inc.
000 Xxxxx Xxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attn: Xxxx Xxxxx, Esq.
with a copy to:
Xxxxxx, Xxxx & Xxxxxxxx LLP
0000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attn: Xxxxxxx Xxxxxx, Esq.
Any party may change its address for notices under this Security Agreement by
giving formal written notice to the other parties, specifying that the purpose
of the notice is to change the party's address. For notice purposes, the Debtor
agrees to keep the Collateral Agent informed at all times of the Debtor's
current addresses.
4.6 SEVERABILITY. The parties acknowledge and agree that the Collateral
Agent and Secured Parties are not agents or partners of each other, that all
representations, warranties, covenants and agreements of the Collateral Agent
and Secured Parties hereunder are several and not joint, that the Collateral
Agent and Secured Parties shall not have any responsibility or liability for the
representations, warrants, agreements, acts or omissions of any other the
19
Collateral Agent and Secured Parties, and that any rights granted to "the
Collateral Agent and Secured Parties" hereunder shall be enforceable by each of
the Collateral Agent and Secured Parties hereunder. If a court of competent
jurisdiction finds any provision of this Security Agreement to be invalid or
unenforceable as to any person or circumstance, such finding shall not render
that provision invalid or unenforceable as to any other persons or
circumstances. If feasible, any such offending provision shall be deemed to be
modified to be within the limits of enforceability or validity; however, if the
offending provision cannot be so modified, it shall be stricken, and all other
provisions of this Security Agreement in all other respects shall remain valid
and enforceable and such offending provision shall not be affected in any other
jurisdiction.
4.7 SUCCESSOR INTERESTS. Subject to the limitations set forth above on
transfer of the Collateral, this Security Agreement shall be binding upon and
inure to the benefit of the parties, their successors and assigns. The Debtor
shall not, however, have the right to assign this Security Agreement without the
prior written consent of the Secured Parties which may be withheld for any
reason in the Secured Parties' sole discretion.
4.8 WAIVER. The Collateral Agent and Secured Parties shall not be
deemed to have waived any rights under this Security Agreement unless such
waiver is given in writing and signed by the Debtor and Secured Parties. No
delay or omission on the part of the Collateral Agent and Secured Parties in
exercising any right shall operate as a waiver of such right or any other right.
A waiver by the Collateral Agent and Secured Parties of a provision of this
Security Agreement shall not prejudice or constitute a waiver of the Collateral
Agent's and Secured Parties' right otherwise to demand strict compliance with
that provision or any other provision of this Security Agreement. No prior
waiver by the Collateral Agent and Secured Parties, nor any course of dealing
between the Collateral Agent and Secured Parties and the Debtor, shall
constitute a waiver of any of the Collateral Agent's and Secured Parties' rights
or of any of the Debtor's obligations as to any future transactions. Whenever
the consent of the Collateral Agent and Secured Parties is required under this
Security Agreement, the granting of such consent by the Collateral Agent and
Secured Parties in any instance shall not constitute continuing consent to
subsequent instances where such consent is required and in all cases such
consent may be granted or withheld in the sole discretion of the Collateral
Agent and Secured Parties.
4.9 INDEMNITY. Except to the extent caused directly by the Collateral
Agent or a Secured Parties' gross negligence or willful misconduct, the Debtor
agrees to indemnify, pay and hold the Collateral Agent, each Secured Party and
the officers, partners, directors, employees, agents and affiliates thereof
(collectively, the "indemnitees") harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever
(including, without limitation, the reasonable fees and disbursements of
counsel) that may be imposed on, incurred by, or asserted against any
indemnitee, in any manner relating to or arising out of this Security Agreement
and any action undertaken or contemplated hereby or refraining from any action.
This indemnification shall survive the satisfaction and payment of the
Indebtedness and termination of this Security Agreement.
4.10 [INTENTIONALLY OMITTED].
20
4.11 FURTHER ASSURANCES. The Debtor shall execute and deliver any and
all further documents and take all further actions which may be required under
applicable law, or which the Collateral Agent may reasonably request, to grant,
preserve, protect and perfect the security interests created by this Security
Agreement in the Collateral.
[SIGNATURE PAGE FOLLOWS]
22
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be executed as of the date first written above.
COMPANY: GENERAL MAGIC, INC.
By: /s/ Xxxxx X. Russian
--------------------------------
Name: Xxxxx X. Russian
Title: Chief Financial Officer
SECURED PARTIES: HALIFAX FUND, L.P.
By: /s/ Xxxxxxx Xxxxxxx
-------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Counsel, The Palladin
Group, L.P.
PALLADIN PARTNERS I, L.P.
By: /s/ Xxxxxxx Xxxxxxx
-------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Counsel, The Palladin
Group, L.P.
PALLADIN OVERSEAS FUND, LTD.
By: /s/ Xxxxxxx Xxxxxxx
-------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Counsel, The Palladin
Group, X.X.
XxXX CONVERTIBLE ARBITRAGE FUND,
LTD.
By: /s/ Xxxxxxx Xxxxxxx
-------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Counsel, The Palladin
Group, L.P.
LANCER SECURITIES (CAYMAN) LTD.
By: /s/ Xxxxxxx Xxxxxxx
-------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Counsel, The Palladin
Group, L.P.
22
SCHEDULE A
IDENTIFICATION, OWNERSHIP AND LOCATION OF COLLATERAL
1. Accounts -- All Accounts, as defined in this Security
Agreement.
2. Debtor's Books -- All of Debtor's Books, as defined in this
Security Agreement, are located at Borrower's principal place of business.
3. General Intangibles -- All General Intangibles, as defined
in this Security Agreement. See Schedule of patents and trademarks attached.
4. Investment Property -- Investment Property, as defined in
the New York Uniform Commercial Code.
5. Inventory -- Inventory, as defined in the Security
Agreement.
6. Negotiable Collateral -- All Negotiable Collateral, as
defined in this Security Agreement.
7. Equipment and Fixed Assets -- All Equipment (as defined in
this Security Agreement), fixtures and fixed assets. If the Debtor has any
rights to any fixtures, such fixtures are located at 000 Xxxxx Xxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxxxxx 00000
8. Deposit Accounts -- Deposit Accounts, an defined in the New
York Uniform Commercial Code.
9. Certificates of Title -- Debtor does not own an motor
vehicles.
PLEASE SEE ATTACHMENTS.
23
PATENTS
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PATENT NUMBER ISSUE DATE DESCRIPTION
------------------------------------------------------------------------------------------------------------------
US6163794 12/19/2000 Network system extensible by users
US6021275 02/01/2000 Object code structure and method for translation
US6144938 11/07/2000 Voice user interface with personality
US6016393 01/18/2000 System and method for distributed computation based
upon the movement, execution
US5953392 09/14/1999 Method and apparatus for telephonically accessing
and navigating the Internet
US5938742 08/17/1999 Method for configuring an intelligent low power
serial bus
US5896133 04/20/1999 Graphical user interface for navigating xxxxxxx
xxxxxx, xxxxxxx, xxxx, xxx xxx
XX0000000 10/06/1998 Shadow mechanism for a modifiable object oriented
system
US5812796 09/22/1998 Support structures for an intelligent low power
serial bus
XX0000000 08/11/1998 Method for transmitting bus commands and data over
two wires of a serial bus
US5787298 07/28/1998 Bus interface circuit for an intelligent low power
serial bus
XX0000000 11/25/1997 Shadow mechanism having masterblocks for a
modifiable object oriented system
US5689669 11/18/1997 Graphical user interface for navigating between
levels displaying hallway
US5675811 10/07/1997 Method for transmitting information over an
intelligent low power serial bus
US5611031 03/11/1997 Graphical user interface for modifying
------------------------------------------------------------------------------------------------------------------
24
------------------------------------------------------------------------------------------------------------------
PATENT NUMBER ISSUE DATE DESCRIPTION
------------------------------------------------------------------------------------------------------------------
object characteristics using coupon
US5603031 02/11/1997 System and method for distributed computation based
upon the movement, execution
------------------------------------------------------------------------------------------------------------------
Together with all foreign applications or registrations with respect to any of
the above-referenced Patents.
25
TRADEMARKS
-----------------------------------------------------------------------------
REGISTRATION/APPLICATION
NUMBER XXXX
-----------------------------------------------------------------------------
2371337 MAGICTALK
2413644 GENERAL MAGIC (Stylized)
75-690972 GENERAL MAGIC (Stylized)
75-690971 GM (and Design)
2410075 GM (Stylized)
75-678290 THE TALK IS GENERAL MAGIC
75-672353 MYTALK
2407758 (Sound Xxxx)
75-601044 (Sound Xxxx)
2455728 MAGICTALK
75/384550 PORTICO
1947317 TELESCRIPT (and Design)
1981422 MAGICMAIL (and Design)
1978711 TELESCRIPT (and Design)
1865617 PORTICO
1803303 GENERAL MAGIC
1879117 GENERAL MAGIC
1879196 GENERAL MAGIC
-----------------------------------------------------------------------------
Together with all foreign applications or registrations with respect to any of
the above-referenced Trademarks.
26
SCHEDULE B
(COLLATERAL EXCEPTIONS)
Equipment lease documentation between Debtor and Hewlett Packard
Each intellectual property license set forth on the schedules attached
to the Debtor's most recently filed Form 10-K and any subsequent
Form 10-Q.
27
