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EXHIBIT 10.31
SECURITY AGREEMENT
This Security Agreement (this "Agreement") is entered into as of August
31, 1998, between Jaycor Networks, Inc., a Delaware corporation ("Grantor"),
and Jaycor, Inc., a California corporation ("Secured Party").
PRELIMINARY STATEMENTS
A. Grantor and Secured Party have entered into a Revolving Loan Agreement
effective as of February 1, 1997 (said Revolving Loan Agreement, as it may
hereafter be amended, supplemented or otherwise modified from time to time,
being the "Credit Agreement", the terms defined therein and not otherwise
defined herein being used herein as therein defined), pursuant to which Secured
Party has made certain commitments, subject to the terms and conditions set
forth in the Credit Agreement, to extend certain credit facilities to Grantor.
B. It is a condition precedent to the extensions of credit by Secured
Party under the Credit Agreement that Grantor shall have granted the security
interests and undertaken the obligations contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
Secured Party to make the loans under the Credit Agreement and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Grantor hereby agrees with Secured Party as follows:
SECTION 1. Grant of Security. Grantor hereby assigns to Secured Party, and
hereby grants to Secured Party a security interest in, all of Grantor's right,
title and interest in and to the property described on Exhibit A attached
hereto, whether now or hereafter existing or in which Grantor now has or
hereafter acquires an interest and wherever the same may be located (the
"Collateral").
SECTION 2. Security for Obligations. This Agreement secures, and the
Collateral is collateral security for, the prompt payment or performance in full
when due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise, of all obligations and liabilities of every
nature of Grantor now or hereafter existing, under or arising out of or in
connection with the Credit Agreement or otherwise, and all extensions or
renewals thereof, whether for principal, interest, fees, expenses, indemnities
or otherwise, whether voluntary or involuntary, direct or indirect, absolute or
contingent, liquidated or unliquidated, whether or not jointly owed with others,
and whether or not from time to time decreased or extinguished and later
increased, created or incurred, and all or any portion of such obligations or
liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Secured Party as a preference,
fraudulent transfer or otherwise (all such obligations and liabilities being the
"Underlying Debt"), and all obligations of every nature of Grantor now or
hereafter existing under this Agreement (all such obligations of Grantor,
together with the Underlying Debt, being the "Secured Obligations").
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SECTION 3. Grantor Remains Liable. Anything contained herein to the
contrary notwithstanding, (a) Grantor shall remain liable under any contracts
and agreements 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, (b) the exercise by Secured Party of any
of its rights hereunder shall not release Grantor from any of its duties or
obligations under the contracts and agreements included in the Collateral, and
(c) Secured Party shall not have any obligation or liability under any contracts
and agreements included in the Collateral by reason of this Agreement, nor shall
Secured Party be obligated to perform any of the obligations or duties of
Grantor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.
SECTION 4. Representations and Warranties. Grantor represents and warrants
as follows:
(a) Ownership of Collateral. Except for the security interest
created by this Agreement, Grantor owns the Collateral free and clear of any
lien, mortgage, security interest or other encumbrance. Except such as may have
been filed in favor of Secured Party relating to this Agreement, no effective
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any filing or recording office.
(b) Location of Equipment and Inventory. All of the Equipment and
Inventory (as such terms are defined in Exhibit A) is, as of the date hereof,
located at the places specified in Schedule 1 annexed hereto.
(c) Office Locations. The chief place of business, the chief
executive office and the office where Grantor keeps its records regarding the
Accounts is, and has been for the four month period preceding the date hereof,
located at 0000 Xxxxx Xxxxxx Xxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000.
(d) Fictitious Names. Grantor does not do business under any
trade-name or fictitious business name.
(e) Delivery of Certain Collateral. All notes and other instruments
(excluding checks) comprising any and all items of Collateral have been
delivered to Secured Party duly endorsed and accompanied by duly executed
instruments of transfer or assignment in blank.
(f) Governmental Authorizations. No authorization, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for either (i) the grant by Grantor of the security
interest granted hereby or for the execution, delivery or performance of this
Agreement by Grantor or (ii) the perfection of or the exercise by Secured Party
of its rights and remedies hereunder (except as may have been taken by or at the
direction of Grantor).
(g) Perfection. This Agreement, together with the filing of a UCC-1
financing statement with the Secretary of State of California creates a valid,
perfected and, first priority security interest in the Collateral, securing the
payment of the Secured Obligations, and all
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filings and other actions necessary or desirable to perfect and protect such
security interest have been duly made or taken.
(h) Other Information All information heretofore, herein or
hereafter supplied to Secured Party by or on behalf of Grantor with respect to
the Collateral is accurate and complete in all respects.
SECTION 5. Further Assurances.
(a) Grantor agrees that from time to time, at the expense of
Grantor, Grantor will promptly execute and deliver all further instruments and
documents, and take all further action that may be necessary or desirable, or
that Secured Party may request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable Secured Party to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral. Without limiting the generality of the foregoing, Grantor will: (i)
if any Account shall be evidenced by a promissory note or other instrument
(excluding checks), deliver and pledge to Secured Party hereunder such note or
instrument, duly endorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance satisfactory to Secured Party;
(ii) execute and file such financing or continuation statements, or amendments
thereto, and such other instruments or notices, as may be necessary or
desirable, or as Secured Party may request, in order to perfect and preserve the
security interests granted or purported to be granted hereby; (iii) at any
reasonable time, upon demand by Secured Party, exhibit the Collateral to and
allow inspection of the Collateral by Secured Party, or persons designated by
Secured Party; and (iv) at Secured Party's request, appear in and defend any
action or proceeding that may affect Grantor's title to or Secured Party's
security interest in all or any part of the Collateral.
(b) Grantor hereby authorizes Secured Party to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of Grantor. Grantor agrees that
a carbon, photographic or other reproduction of this Agreement or of a financing
statement signed by Grantor shall be sufficient as a financing statement and may
be filed as a financing statement in any and all jurisdictions.
(c) Grantor will furnish to Secured Party from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as Secured Party may
reasonably request, all in reasonable detail.
SECTION 6. Covenants of Grantor. Grantor shall:
(a) not use or permit any Collateral to be used unlawfully or in
violation of any provision of this Agreement or any applicable statute,
regulation or ordinance or any policy of insurance covering the Collateral;
(b) notify Secured Party of any change in Grantor's name, identity
or corporate structure within 15 days of such change;
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(c) give Secured Party 30 days' prior written notice of any change
in Grantor's chief place of business, chief executive office or residence;
(d) if Secured Party gives value to enable Grantor to acquire rights
in or the use of any Collateral, use such value for such purposes; and
(e) pay promptly when due all property and other taxes, assessments
and governmental charges or levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the Collateral, except to the
extent the validity thereof is being contested in good faith; provided that
Grantor shall in any event pay such taxes, assessments, charges, levies or
claims not later than five days prior to the date of any proposed sale under any
judgment, writ or warrant of attachment entered or filed against Grantor or any
of the Collateral as a result of the failure to make such payment.
SECTION 7. Special Covenants with Respect to Equipment and Inventory.
Grantor shall:
(a) keep the Equipment and Inventory (other than Inventory sold in
the ordinary course of business) at the places there for specified on Schedule 1
annexed hereto or, upon 30 days' prior written notice to Secured Party, at such
other places in jurisdictions where all action that may be necessary or
desirable, or that Secured Party may request, in order to perfect and protect
any security interest granted or purported to be granted hereby, or to enable
Secured Party to exercise and enforce its rights and remedies hereunder, with
respect to such Equipment and Inventory shall have been taken;
(b) cause the Equipment to be maintained and preserved in the same
condition, repair and working order as when new, ordinary wear and tear
excepted, and in accordance with any manufacturer's manual, and shall forthwith,
or, in the case of any loss or damage to any of the Equipment when subsection
(c) of Section SECTION 8 is not applicable, as quickly as practicable after the
occurrence thereof, make or cause to be made all repairs, replacements and other
improvements in connection therewith that are necessary or desirable to such
end. Grantor shall promptly furnish to Secured Party a statement respecting any
material loss or damage to any of the Equipment;
(c) keep correct and accurate records of the Inventory, itemizing
and describing the kind, type and quantity of Inventory, Grantor's cost there
for and (where applicable) the current list prices for the Inventory; and
(d) if any Inventory is in possession or control of any of Grantor's
agents or processors if the aggregate book value of all such Inventory exceeds
$50,000, and in any event upon the occurrence of a default under the Credit
Agreement (an "Event of Default"), instruct such agent or processor to hold all
such Inventory for the account of Secured Party and subject to the instructions
of Secured Party.
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SECTION 8. Insurance.
(a) Grantor shall, at its own expense, maintain insurance with
respect to the Equipment and Inventory in such amounts, against such risks, in
such form and with such insurers as shall be satisfactory to Secured Party from
time to time. Such insurance shall include, without limitation, property damage
insurance and liability insurance. Each policy for property damage insurance
shall provide for all losses to be paid directly to Secured Party. Each policy
shall in addition name Grantor and Secured Party as insured parties thereunder
(without any representation or warranty by or obligation upon Secured Party) as
their interests may appear and have attached thereto a loss payable clause
acceptable to Secured Party that shall (i) contain an agreement by the insurer
that any loss thereunder shall be payable to Secured Party notwithstanding any
action, inaction or breach of representation or warranty by Grantor, (ii)
provide that there shall be no recourse against Secured Party for payment of
premiums or other amounts with respect thereto, and (iii) provide that at least
30 days' prior written notice of cancellation, material amendment, reduction in
scope or limits of coverage or of lapse shall be given to Secured Party by the
insurer. Grantor shall, if so requested by Secured Party, deliver to Secured
Party original or duplicate policies of such insurance and, as often as Secured
Party may reasonably request, a report of a reputable insurance broker with
respect to such insurance. Further, Grantor shall, at the request of Secured
Party, duly execute and deliver instruments of assignment of such insurance
policies to comply with the requirements of Section SECTION 5((a)) and cause the
respective insurers to acknowledge notice of such assignment.
(b) Reimbursement under any liability insurance maintained by
Grantor pursuant to this Section SECTION 8 may be paid directly to the Person
who shall have incurred liability covered by such insurance. In case of any loss
involving damage to Equipment or Inventory when subsection (c) of this Section 8
is not applicable, Grantor shall make or cause to be made the necessary repairs
to or replacements of such Equipment or Inventory, and any proceeds of insurance
maintained by Grantor pursuant to this Section SECTION 8 shall be paid to
Grantor as reimbursement for the costs of such repairs or replacements.
(c) Upon (i) the occurrence and during the continuation of any Event
of Default or (ii) the actual or constructive loss (in excess of $100,000 per
occurrence) of any Equipment or Inventory, all insurance payments in respect of
such Equipment or Inventory shall be paid to and applied by Secured Party as
specified in Section SECTION 17.
SECTION 9. Special Covenants with respect to Accounts and Related
Contracts.
(a) Grantor shall keep its chief place of business and chief
executive office and the office where it keeps its records concerning the
Accounts and Related Contracts at the location there for specified in Section
SECTION 4 or, upon 30 days' prior written notice to Secured Party, at such other
location in a jurisdiction where all action that may be necessary or desirable,
or that Secured Party may request, in order to perfect and protect any security
interest granted or purported to be granted hereby, or to enable Secured Party
to exercise and enforce its rights and remedies hereunder, with respect to such
Accounts and Related Contracts shall have been taken. Grantor will hold and
preserve such records and will permit representatives of
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Secured Party at any time during normal business hours to inspect and make
abstracts from such records, and Grantor agrees to render to Secured Party, at
Grantor's cost and expense, such clerical and other assistance as may be
reasonably requested with regard thereto. Promptly upon the request of Secured
Party, Grantor shall deliver to Secured Party complete and correct copies of
each Related Contract.
(b) Grantor shall, for not less than 5 years from the date on which
such Account arose, maintain (i) complete records of each Account, including
records of all payments received, credits granted and merchandise returned, and
(ii) all documentation relating thereto.
(c) Except as otherwise provided in this subsection ((c)), Grantor
shall continue to collect, at its own expense, all amounts due or to become due
Grantor under the Accounts and Related Contracts. In connection with such
collections, Grantor may take (and, at Secured Party's direction, shall take)
such action as Grantor or Secured Party may deem necessary or advisable to
enforce collection of amounts due or to become due under the Accounts; provided,
however, that Secured Party shall have the right at any time, upon the
occurrence and during the continuation of an Event of Default or an event which
with the giving of notice or the lapse of time, or both, would constitute an
Event of Default, and upon written notice to Grantor of its intention to do so,
to notify the account debtors or obligors under any Accounts of the assignment
of such Accounts to Secured Party, and to direct such account debtors or
obligors to make payment of all amounts due or to become due to Grantor
thereunder directly to Secured Party, to notify each person maintaining a
lockbox or similar arrangement to which account debtors or obligors under any
Accounts have been directed to make payment to remit all amounts representing
collections on checks and other payment items from time to time sent to or
deposited in such lock box or other arrangement directly to Secured Party and,
upon such notification and at the expense of Grantor, to enforce collection of
any such Accounts and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as Grantor might have done.
After receipt by Grantor of the notice from Secured Party referred to in the
proviso to the preceding sentence, (i) all amounts and proceeds (including
checks and other instruments) received by Grantor in respect of the Accounts and
the Related Contracts shall be received in trust for the benefit of Secured
Party hereunder, shall be segregated from other funds of Grantor and shall be
forthwith paid over or delivered to Secured Party in the same form as so
received (with any necessary endorsement) to be held as cash Collateral and
applied as provided by Section SECTION 17, and (ii) Grantor shall not adjust,
settle or compromise the amount or payment of any Account, or release wholly or
partly any account debtor or obligor thereof, or allow any credit or discount
thereon.
SECTION 10. Deposit Accounts.
(a) Accurate lists of all deposit and brokerage accounts of Grantor
existing on the date hereof have been provided to Secured Party. Grantor shall
notify Secured Party within five (5) days of the opening or creating of any new
deposit or brokerage accounts, and shall provide Secured Party with such
information as Secured Party may require in order to perfect or protect its
security interest in such deposit or brokerage accounts.
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(b) Upon the occurrence and during the continuation of a default
under the Credit Agreement, Secured Party may exercise dominion and control
over, and refuse to permit further withdrawals (whether of money, securities,
instruments or other property) from any deposit accounts maintained with Secured
Party constituting part of the Collateral.
SECTION 11. License of Patents, Trademarks, Copyrights, etc. Grantor
hereby assigns, transfers and conveys to Secured Party, effective upon the
occurrence of any Event of Default, the nonexclusive right and license to use
all trademarks, trade names, copyrights, patents or technical processes owned or
used by Grantor that relate to the Collateral and any other collateral granted
by Grantor as security for the Secured Obligations, together with any goodwill
associated therewith, all to the extent necessary to enable Secured Party to
use, possess and realize on the Collateral and to enable any successor or assign
to enjoy the benefits of the Collateral. This right and license shall inure to
the benefit of all successors, assigns and transferees of Secured Party and its
successors, assigns and transferees, whether by voluntary conveyance, operation
of law, assignment, transfer, foreclosure, deed in lieu of foreclosure or
otherwise. Such right and license is granted free of charge, without requirement
that any monetary payment whatsoever be made to Grantor.
SECTION 12. Transfers and Other Liens. Grantor shall not:
(a) except to the extent permitted in the Credit Agreement, sell,
assign (by operation of law or otherwise) or otherwise dispose of any of the
Collateral; or
(b) except for the security interest created by this Agreement, and
except to the extent permitted in the Credit Agreement, create or suffer to
exist any Lien upon or with respect to any of the Collateral to secure the
indebtedness or other obligations of any person.
SECTION 13. Secured Party Appointed Attorney-in-Fact. Grantor hereby
irrevocably appoints Secured Party as Grantor's attorney-in-fact, with full
authority in the place and stead of Grantor and in the name of Grantor, Secured
Party or otherwise, from time to time in Secured Party's discretion to take any
action and to execute any instrument that Secured Party may deem necessary or
advisable to accomplish the purposes of this Agreement, including, without
limitation: (a) to sign and file on behalf of Grantor any financing or
continuation statements, and amendments thereto, relative to all or any part of
the Collateral; (b) to obtain and adjust insurance required to be maintained by
Grantor or paid to Secured Party pursuant to Section SECTION 8; (c) to ask,
demand, collect, xxx for, recover, compound, receive and give acquittance and
receipts for monies due and to become due under or in respect of any of the
Collateral; (d) to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection with clauses (a) and (b) above; (e) to
file any claims or take any action or institute any proceedings that Secured
Party may deem necessary or desirable for the collection of any of the
Collateral or otherwise to enforce the rights of Secured Party with respect to
any of the Collateral; (f) to pay or discharge taxes or liens levied or placed
upon or threatened against the Collateral, the legality or validity thereof and
the amounts necessary to discharge the same to be determined by Secured Party in
its sole discretion, any such payments made by Secured Party to become
obligations of Grantor to Secured Party, due and payable immediately
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without demand; (g) to sign and endorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with Accounts and other
documents relating to the Collateral; and (h) upon the occurrence and during the
continuation of an Event of Default, generally to sell, transfer, pledge, make
any agreement with respect to or otherwise deal with any of the Collateral as
fully and completely as though Secured Party were the absolute owner thereof for
all purposes, and to do, at Secured Party's option and Grantor's expense, at any
time or from time to time, all acts and things that Secured Party deems
necessary to protect, preserve or realize upon the Collateral and Secured
Party's security interest therein in order to effect the intent of this
Agreement, all as fully and effectively as Grantor might do.
SECTION 14. Secured Party May Perform. If Grantor fails to perform any
agreement contained herein, Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of Secured Party incurred in
connection therewith shall be payable by Grantor under Section SECTION 18.
SECTION 15. Standard of Care. The powers conferred on Secured Party
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the exercise of
reasonable care in the custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, and other non-waivable
duties imposed by applicable law, Secured Party shall have no duty as to any
Collateral or as to the taking of any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Collateral. Secured Party
shall be deemed to have exercised reasonable care in the custody and
preservation of Collateral in its possession if such Collateral is accorded
treatment substantially equal to that which Secured Party accords its own
property.
SECTION 16. Remedies. If any Event of Default shall have occurred and be
continuing Secured Party may exercise in respect of the Collateral, in addition
to all other rights and remedies provided for herein or otherwise available to
it, all the rights and remedies of a secured party on default under the Uniform
Commercial Code as in effect in any relevant jurisdiction (the "Code") (whether
or not the Code applies to the affected Collateral), and also may (a) require
Grantor to, and Grantor hereby agrees that it will at its expense and upon
request of Secured Party forthwith, assemble all or part of the Collateral as
directed by Secured Party and make it available to Secured Party at a place to
be designated by Secured Party that is reasonably convenient to both parties,
(b) enter onto the property where any Collateral is located and take possession
thereof with or without judicial process, (c) prior to the disposition of the
Collateral, store, process, repair or recondition the Collateral or otherwise
prepare the Collateral for disposition in any manner to the extent Secured Party
deems appropriate, (d) take possession of Grantor's premises or place custodians
in exclusive control thereof, remain on such premises and use the same and any
of Grantor's equipment for the purpose of completing any work in process, taking
any actions described in the preceding clause (c) and collecting any Secured
Obligation, and (e) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any of Secured Party's offices or elsewhere, for cash, on credit or for
future delivery, at such time or times and at such price or prices and upon such
other terms as Secured Party may deem commercially reasonable. Secured Party may
be the purchaser
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of any or all of the Collateral at any such sale and Secured Party shall be
entitled, for the purpose of bidding and making settlement or payment of the
purchase price for all or any portion of the Collateral sold at any such public
sale, to use and apply any of the Secured Obligations as a credit on account of
the purchase price for any Collateral payable by Secured Party at such sale.
Each purchaser at any such sale shall hold the property sold absolutely free
from any claim or right on the part of Grantor, and Grantor hereby waives (to
the extent permitted by applicable law) all rights of redemption, stay and/or
appraisal which it now has or may at any time in the future have under any rule
of law or statute now existing or hereafter enacted. Grantor agrees that, to the
extent notice of sale shall be required by law, at least ten days' notice to
Grantor of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification. Secured
Party shall not be obligated to make any sale of Collateral regardless of notice
of sale having been given. Secured Party may adjourn any public or private sale
from time to time by announcement at the time and place fixed there for, and
such sale may, without further notice, be made at the time and place to which it
was so adjourned. Grantor hereby waives any claims against Secured Party arising
by reason of the fact that the price at which any Collateral may have been sold
at such a private sale was less than the price which might have been obtained at
a public sale, even if Secured Party accepts the first offer received and does
not offer such Collateral to more than one offeree. If the proceeds of any sale
or other disposition of the Collateral are insufficient to pay all the Secured
Obligations, Grantor shall be liable for the deficiency and the fees of any
attorneys employed by Secured Party to collect such deficiency.
SECTION 17. Application of Proceeds. Except as expressly provided
elsewhere in this Agreement, all proceeds received by Secured Party in respect
of any sale of, collection from, or other realization upon all or any part of
the Collateral may in the discretion of Secured Party, be held by Secured Party
as Collateral for, and/or then, or at any other time thereafter, applied in full
or in part by Secured Party against, the Secured Obligations in the following
order of priority:
FIRST: To the payment of all costs and expenses of such sale, collection
or other realization, including reasonable compensation to Secured Party and its
agents and counsel, and all other expenses, liabilities and advances made or
incurred by Secured Party in connection therewith, and all amounts for which
Secured Party is entitled to indemnification hereunder and all advances made by
Secured Party hereunder for the account of Grantor, and to the payment of all
costs and expenses paid or incurred by Secured Party in connection with the
exercise of any right or remedy hereunder, all in accordance with Section
SECTION 18;
SECOND: To the payment of all other Secured Obligations in such order
as Secured Party shall elect; and
THIRD: To the payment to or upon the order of Grantor, or to whosoever may
be lawfully entitled to receive the same or as a court of competent jurisdiction
may direct, of any surplus then remaining from such proceeds.
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SECTION 18. Indemnity and Expenses.
(a) Grantor agrees to indemnify Secured Party from and against any
and all claims, losses and liabilities in any way relating to, growing out of or
resulting from this Agreement and the transactions contemplated hereby
(including, without limitation, enforcement of this Agreement), except to the
extent such claims, losses or liabilities result solely from Secured Party's
gross negligence or willful misconduct as finally determined by a court of
competent jurisdiction.
(b) Grantor will pay to Secured Party upon demand the amount of any
and all costs and expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, that Secured Party may incur in
connection with (i) the administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of Secured Party hereunder, or (iv) the failure by Grantor to
perform or observe any of the provisions hereof.
SECTION 19. Continuing Security Interest: Transfer of Secured Obligations.
This Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until the indefeasible payment in full
of the Secured Obligations, the cancellation or termination of the Credit
Agreement, (b) be binding upon Grantor, its successors and assigns, and (c)
inure, together with the rights and remedies of Secured Party hereunder, to the
benefit of Secured Party and its successors, transferees and assigns. Without
limiting the generality of the foregoing clause (c), Secured Party may assign or
otherwise transfer any Secured Obligations held by it to any other Person, and
such other Person shall thereupon become vested with all the benefits in respect
thereof granted to Secured Party herein or otherwise. Upon the indefeasible
payment in full of all Secured Obligations, the cancellation or termination of
the Credit Agreement, the security interest granted hereby shall terminate and
all rights to the Collateral shall revert to Grantor. Upon any such termination,
Secured Party will, at Grantor's expense, execute and deliver to Grantor such
documents as Grantor shall reasonably request to evidence such termination.
SECTION 20. Amendments, etc. No amendment or waiver of any provision of
this Agreement, or consent to any departure by Grantor here from, shall in any
event be effective unless the same shall be in writing and signed by Secured
Party, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it was given.
SECTION 21. Notices. Any notice or other communication herein required or
permitted to be given shall be in writing and may be personally served,
telecopied, telexed or sent by United States mail or courier service and shall
be deemed to have been given when delivered in person or by courier service,
upon receipt of telecopy or telex, or four Business Days after depositing it in
the United States mail registered or certified, with postage prepaid and
properly addressed. For the purposes hereof, the address of each party hereto
shall be as set forth under such party's name on the signature pages hereof or,
as to either party, such other address as shall be designated by such party in a
written notice delivered to the other party hereto.
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SECTION 22. Failure or Indulgence Not Waiver. Remedies Cumulative. No
failure or delay on the part of Secured Party in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude any
other or further exercise thereof or of any other power, right or privilege. All
rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 23. Severability. In case any provision in or obligation under
this Agreement shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
SECTION 24. Headings. Section and subsection headings in this Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
SECTION 25. Governing Law; Terms. THIS AGREEMENT SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF CALIFORNIA, EXCEPT AS REQUIRED BY MANDATORY PROVISION OF LAW AND EXCEPT
TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST
HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF CALIFORNIA.
Unless otherwise defined herein or in the Credit Agreement, terms used in
Article 9 of the Uniform Commercial Code in the State of California are used
herein as therein defined.
SECTION 26. Consent to Jurisdiction and Service of Process. All judicial
proceedings brought against the Grantor with respect to this Agreement and the
Loan Documents may be brought in any state or federal court of competent
jurisdiction in the State of California and by execution and delivery of this
Agreement, the Grantor accepts for itself and in connection with its properties,
generally and unconditionally, the nonexclusive jurisdiction of the aforesaid
courts, and irrevocably agrees to be bound by any judgment rendered thereby in
connection with this Agreement. The Grantor irrevocably waives any right it 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. In any action
against the Grantor, service of process may be made upon the Grantor by
registered or certified mail, return receipt requested, to its address indicated
in the applicable signature page hereto, which service shall be deemed
sufficient for personal jurisdiction and shall be deemed effective ten (10) days
after mailing.
SECTION 27. Waiver of Jury Trial. GRANTOR AND SECURED PARTY HEREBY AGREE
TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS AGREEMENT. THE SCOPE OF THIS WAIVER IS
INTENDED TO BE ALL ENCOMPASSING OF ANY AND
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ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT
MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.
GRANTOR AND SECURED PARTY EACH ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL
INDUCEMENT FOR GRANTOR AND SECURED PARTY TO ENTER INTO A BUSINESS RELATIONSHIP,
THAT GRANTOR AND SECURED PARTY HAVE ALREADY RELIED ON THIS WAIVER IN ENTERING
INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR
RELATED FUTURE DEALINGS. GRANTOR AND SECURED PARTY FURTHER WARRANT AND REPRESENT
THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
In the event of litigation, this Agreement may he filed as a written consent to
a trial by the court.
SECTION 28. Counterparts. This Agreement may be executed in one or more
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Grantor and Secured Party have caused this Agreement
to be duly executed and delivered by their respective officers there unto duly
authorized as of the date first written above.
JAYCOR NETWORKS, INC.
By: /s/ XXXXX X. XXXXXXXX
----------------------------------
Title: President
-------------------------------
Notice Address:
0000 Xxxxx Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000
Attn: Chief Financial Officer
JAYCOR, INC.
By: /s/ XXXXX XXXXXXX
----------------------------------
Title: Chief Financial Officer
-------------------------------
Notice Address:
0000 Xxxxx Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000
Attn: Chief Financial Officer
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EXHIBIT A
The Collateral shall consist of all right, title and interest of Grantor
in and to the following:
(a) All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located (any and all such
equipment, parts and accessions being the "Equipment");
(b) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Grantor's custody or possession or in transit
and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above (all such
inventory, accessions and products being the "Inventory");
(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, service marks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, tax
refunds, payments of insurance, rights to receive dividends, distributions,
cash, instruments and other property in respect of or exchange for pledged
shares or other equity interests, and rights to payment of any kind;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Grantor
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Grantor, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Grantor and Grantor's books relating
to any of the foregoing (any and all such accounts, contract rights, royalties,
license rights and other forms of obligations being the "Accounts," and any and
all such credit insurance, guaranties and security agreements being the "Related
Contracts");
(e) All documents, cash, deposit accounts, securities, securities
entitlements, securities accounts, investment property, letters of credit,
certificates of deposit, instruments and chattel paper now owned or hereafter
acquired;
(f) All copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work thereof,
whether published or unpublished, now owned or hereafter acquired; all trade
secret rights, including all rights to unpatented inventions, know-how,
operating manuals, license rights and agreements and
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confidential information, now owned or hereafter acquired; all mask work or
similar rights available for the protection of semiconductor chips, now owned or
hereafter acquired; all claims for damages by way of any past, present and
future infringement of any of the foregoing; and
(g) Grantor's books relating to any of the foregoing, and all claims,
rights and interests in any of the above and all substitutions for, additions
and accessions to and proceeds thereof.
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SCHEDULE 1
TO SECURITY AGREEMENT
Locations of Equipment:
Locations of Inventory:
S-1
