SECURITY AGREEMENT
Exhibit 10.35
SECURITY AGREEMENT, dated as of September 16, 2005 (this “Agreement”), between
Brillian Corporation, a Delaware corporation (the “Company” or the “Debtor”) and
Syntax Groups Corporation, a California corporation or its permitted transferees or assigns (the
“Secured Party”).
(a) “Collateral” means the collateral in which the Secured Party is granted a security
interest by this Agreement and which shall include the following personal property of the Debtor,
whether presently owned or existing or hereafter acquired or coming into existence, wherever
situated, and all additions and accessions thereto and all substitutions and replacements thereof,
and all proceeds, products and accounts thereof, including, without limitation, all proceeds from
the sale or transfer of the Collateral and of insurance covering the same and of any tort claims in
connection therewith:
(i) All goods, including, without limitations, (A) all machinery, equipment, computers, motor
vehicles, trucks, tanks, boats, ships, appliances, furniture, special and general tools, fixtures,
test and quality control devices and other equipment of every kind and nature and wherever
situated, together with all documents of title and documents representing the same, all additions
and accessions thereto, replacements therefor, all parts therefor, and all substitutes for any of
the foregoing and all other items used and useful in connection with Debtor’s businesses and all
improvements thereto; and (B) all inventory;
(ii) All Inventory and Intellectual Property of the Debtor;
(iii) All contract rights and other general intangibles, including, without limitation, all
partnership interests, membership interests, stock or other securities, rights under any of the
Organizational Documents, licenses, distribution and other agreements, computer software (whether
“off-the-shelf”, licensed from any third party or developed by Debtor), computer software
development rights, leases, franchises, customer lists, quality control procedures, grants and
rights, goodwill, trademarks, service marks, trade styles, trade names, patents, patent
applications, copyrights, and income tax refunds (collectively, the “General Intangibles”);
(iv) All documents, letter-of-credit rights, instruments and chattel paper;
(v) All commercial tort claims;
(vi) All deposit accounts and all cash (whether or not deposited in such deposit accounts);
(vii) All supporting obligations;
(viii) All files, records, books of account, business papers, and computer programs; and
(ix) the products and proceeds of all of the foregoing Collateral set forth in clauses
(i)-(viii) above.
Notwithstanding the foregoing, nothing herein shall be deemed to constitute an assignment of
any asset which, in the event of an assignment, becomes void by operation of applicable law or the
assignment of which is otherwise prohibited by applicable law (in each case to the extent that such
applicable law is not overridden by Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar
applicable law); provided, however, that to the extent permitted by applicable law, this Agreement
shall create a valid security interest in such asset and, to the extent permitted by applicable
law, this Agreement shall create a valid security interest in the proceeds of such asset.
(b) “Intellectual Property” means the collective reference to all rights, priorities
and privileges relating to intellectual property, whether arising under United States,
multinational or foreign laws or otherwise, including, without limitation, (i) all copyrights
arising under the laws of the United States, any other country or any political subdivision
thereof, whether registered or unregistered and whether published or unpublished, all registrations
and recordings thereof, and all applications in connection therewith, including, without
limitation, all registrations, recordings and applications in the United States Copyright Office,
(ii) all letters patent of the United States, any other country or any political subdivision
thereof, all reissues and extensions thereof, and all applications for letters patent of the United
States or any other country and all divisions, continuations and continuations-in-part thereof,
(iii) all trademarks, trade names, corporate names, company names, business names, fictitious
business names, trade dress, service marks, logos, domain names and other source or business
identifiers, and all goodwill associated therewith, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in connection therewith, whether in the
United States
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Patent and Trademark Office or in any similar office or agency of the United States,
any State thereof or any other country or any political subdivision thereof, or otherwise, and all
common law rights related thereto, (iv) all trade secrets arising under the laws of the United
States, any other country or any political subdivision thereof, (v) all rights to obtain any
reissues, renewals or extensions of the foregoing, (vi) all licenses for any of the foregoing, and
(vii) all causes of action for infringement of the foregoing.
(c) “Obligations” means all of the Debtor’s obligations under this Agreement, the
Purchase Agreement, and the Note, and any other instruments, agreements or other documents executed
or delivered in connection herewith or with the Purchase Agreement or the Note, in each case,
whether now or hereafter existing, 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 the Secured Party as a preference,
fraudulent transfer or otherwise as such obligations may be amended, supplemented, converted,
extended or modified from time to time. Without limiting the generality of the foregoing, the term
“Obligations” shall include, without limitation: (i) principal of, and interest on the Note and the
loans extended pursuant thereto; (ii) any and all other fees, indemnities, costs, obligations and
liabilities of the Debtor from time to time under or in connection with this Agreement or the Note;
and (iii) all amounts (including but not limited to post-petition interest) in respect of the
foregoing that would be payable but for the fact that the obligations to pay such amounts are
unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar
proceeding involving Debtor.
(d) “Organizational Documents” means with respect to Debtor, the documents by which
Debtor was organized (such as a certificate of incorporation, certificate of limited partnership or
articles of organization, and including, without limitation, any certificates of designation for
preferred stock or other forms of preferred equity) and which relate to the internal governance of
Debtor (such as bylaws, a partnership agreement or an operating, limited liability or members
agreement).
(e) “UCC” means the Uniform Commercial Code of the State of Arizona and or any other
applicable law of any state or states which has jurisdiction with respect to all, or any portion
of, the Collateral or this Agreement, from time to time. It is the intent of the parties that
defined terms in the UCC should be construed in their broadest sense so that the term “Collateral”
will be construed in its broadest sense. Accordingly if there are, from time to time, changes to
defined terms in the UCC that broaden the definitions, they are incorporated herein and if existing
definitions in the UCC are broader than the amended definitions, the existing ones shall be
controlling.
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and to, the Collateral, subject to and junior in right to the security interests granted prior to the date of this
Agreement to existing creditors of the Company (the “Security Interest”).
(a) Debtor has the requisite corporate, partnership, limited liability company or other power
and authority to enter into this Agreement and otherwise to carry out its obligations hereunder.
The execution, delivery and performance by Debtor of this Agreement and the filings contemplated
therein have been duly authorized by all necessary action on the part of Debtor and no further
action is required by Debtor. This Agreement has been duly executed by Debtor. This Agreement
constitutes the legal, valid and binding obligation of Debtor, enforceable against Debtor in
accordance with its terms except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization and similar laws of general application relating to or affecting the
rights and remedies of creditors and by general principles of equity.
(b) The Debtor has no place of business or offices where its books of account and records are
kept (other than temporarily at the offices of its attorneys or accountants) or places where
Collateral is stored or located, except as set forth on Schedule A attached hereto.
(c) Except for Permitted Liens (as defined in the Note) and except as set forth on
Schedule B attached hereto, the Debtor is the sole owner of the Collateral (except for
non-exclusive licenses granted by Debtor in the ordinary course of business), free and clear of any
liens, security interests, encumbrances, rights or claims, and are fully authorized to grant the
Security Interest. Except as set forth on Schedule B, there is not on file in any
governmental or regulatory authority, agency or recording office an effective financing statement,
security agreement, license or transfer or any notice of any of the foregoing (other than those
that will be filed in favor of the Secured Party pursuant to this Agreement) covering or affecting
any of the Collateral.
(d) No written claim has been received that any Collateral or Debtor’s use of any Collateral
violates the rights of any third party. There has been no adverse decision to Debtor’s claim of
ownership rights in or exclusive rights to use the Collateral in any jurisdiction or to Debtor’s
right to keep and maintain such Collateral in full force and effect, and there is no proceeding
involving said rights pending or, to the best knowledge of Debtor, threatened before any court, judicial body, administrative or regulatory agency, arbitrator or other
governmental authority.
(e) Debtor shall at all times maintain its books of account and records relating to the
Collateral at its principal place of business and its Collateral at the locations set forth on
Schedule A and may not relocate such books of account and records or tangible Collateral
unless it delivers to the Secured Party at least 30 days prior to such relocation (i) written
notice of such
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relocation and the new location thereof (which must be within the United States) and
(ii) evidence that appropriate financing statements under the UCC and other necessary documents
have been filed and recorded and other steps have been taken to create in favor of the Secured
Party a valid, continuing lien in the Collateral.
(f) This Agreement creates in favor of the Secured Party a valid security interest in the
Collateral, subject only to Permitted Liens (as defined in the Note), securing the payment and
performance of the Obligations. Except for the filing of the Uniform Commercial Code financing
statements referred to in the immediately following paragraph, the recordation of the Intellectual
Property Security Agreement (as defined below) with respect to copyrights and copyright
applications in the United States Copyright Office referred to in paragraph (n), the execution and
delivery of deposit account control agreements satisfying the requirements of Section 9-104(a)(2)
of the UCC with respect to each deposit account of the Debtor, and the delivery of the certificates
and other instruments provided in Section 3, no action is necessary to create or protect the
security interests created hereunder. Without limiting the generality of the foregoing, except for
the filing of said financing statements, the recordation of said Intellectual Property Security
Agreement, the execution and delivery of said deposit account control agreements, and the Required
Approvals (as defined in the Purchase Agreement), no consent of any third parties and no
authorization, approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required for (i) the execution, delivery and performance of this
Agreement, (ii) the creation of the Security Interests created hereunder in the Collateral or (iii)
the enforcement of the rights of the Secured Party hereunder.
(g) Debtor hereby authorizes the Secured Party to file one or more financing statements under
the UCC, with respect to the Security Interest with the proper filing and recording agencies in any
jurisdiction deemed proper by them.
(h) The execution, delivery and performance of this Agreement by the Debtor does not (i)
violate any of the provisions of any Organizational Documents of Debtor or any judgment, decree,
order or award of any court, governmental body or arbitrator or any applicable law, rule or
regulation applicable to Debtor or (ii) conflict with, or constitute a default (or an event that
with notice or lapse of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice, lapse of time or
both) of, any agreement, credit facility, debt or other instrument (evidencing Debtor’s debt or
otherwise) or other understanding to which Debtor is a party or by which any property or asset of
Debtor is bound or affected. Except for the Required Approvals, no consent (including, without
limitation, from stockholders or creditors of Debtor) is required for Debtor to enter into and
perform its obligations hereunder.
(i) Debtor shall at all times maintain the liens and Security Interest provided for hereunder
as valid liens and security interests in the Collateral in favor of the Secured Party until this
Agreement and the Security Interest hereunder shall be terminated pursuant to Section 12. Debtor
hereby agrees to defend the same against the claims of any and all persons and entities. Debtor
shall safeguard and protect all Collateral for the account of the Secured Party. At the request of
the Secured Party, Debtor will sign and deliver to the Secured Party at any time or from time to
time one or more financing statements pursuant to the UCC in form reasonably satisfactory to the
Secured Party and will pay the cost of filing the same in all public offices
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wherever filing is, or
is deemed by the Secured Party to be, necessary or desirable to effect the rights and obligations
provided for herein. Without limiting the generality of the foregoing, Debtor shall pay all fees,
taxes and other amounts necessary to maintain the Collateral and the Security Interest hereunder.
(j) Debtor will not transfer, pledge, hypothecate, encumber, license, sell or otherwise
dispose of any of the Collateral (except for non-exclusive licenses granted by Debtor in its
ordinary course of business and sales of inventory by Debtor in its ordinary course of business)
without the prior written consent of the Secured Party, subject to the rights of the holders of
Senior Indebtedness (as defined in the Note).
(k) Debtor shall keep and preserve its equipment, inventory and other tangible Collateral in
good condition, repair and order and shall not operate or locate any such Collateral (or cause to
be operated or located) in any area excluded from insurance coverage.
(l) Debtor shall maintain with financially sound and reputable insurers, insurance with
respect to the Collateral against loss or damage of the kinds and in the amounts customarily
insured against by entities of established reputation having similar properties similarly situated
and in such amounts as are customarily carried under similar circumstances by other such entities
and otherwise as is prudent for entities engaged in similar businesses but in any event sufficient
to cover the full replacement cost thereof.
(m) Debtor shall, within ten days of obtaining knowledge thereof, advise the Secured Party
promptly, in sufficient detail, of any substantial change in the Collateral, and of the occurrence
of any event which would have a material adverse effect on the value of the Collateral or on the
Secured Party’s security interest therein.
(n) Debtor shall promptly execute and deliver to the Secured Party such further deeds,
mortgages, assignments, security agreements, financing statements or other instruments, documents,
certificates and assurances and take such further action as the Secured Party may from time to time
request and may in its sole discretion deem necessary to protect or enforce its security interest
in the Collateral including, without limitation, if applicable, the execution and delivery of a
separate security agreement with respect to Debtor’s Intellectual Property (“Intellectual
Property Security Agreement”) in which the Secured Party has been granted a security interest
hereunder, substantially in a form acceptable to the Secured Party, which Intellectual Property
Security Agreement, other than as stated therein, shall be subject to all of the terms and
conditions hereof.
(o) Debtor shall permit the Secured Party and its representatives and agents to inspect the
Collateral at any time, and to make copies of records pertaining to the Collateral as may be
requested by the Secured Party from time to time.
(p) Debtor shall take all steps reasonably necessary to diligently pursue and seek to
preserve, enforce and collect any rights, claims, and causes of action in respect of the
Collateral.
(q) Debtor shall promptly notify the Secured Party in sufficient detail upon becoming aware of
any attachment, garnishment, execution or other legal process levied against
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any Collateral and of any other information received by Debtor that may materially affect the value of the Collateral,
the Security Interest or the rights and remedies of the Secured Party hereunder.
(r) All information heretofore, herein or hereafter supplied to the Secured Party by or on
behalf of Debtor with respect to the Collateral is accurate and complete in all material respects
as of the date furnished.
(s) Debtor shall at all times preserve and keep in full force and effect their respective
valid existence and good standing and any rights and franchises material to its business.
(t) Debtor will not change its name, type of organization, jurisdiction of organization,
organizational identification number (if it has one), legal or corporate structure, or identity, or
add any new fictitious name unless it provides at least 30 days’ prior written notice to the
Secured Party of such change and, at the time of such written notification, Debtor provides any
financing statements or fixture filings necessary to continue the Security Interest granted and
evidenced by this Agreement.
(u) Debtor may not relocate its chief executive office to a new location without providing 30
days’ prior written notification thereof to the Secured Party and so long as, at the time of such
written notification, Debtor provides any financing statements or fixture filings necessary to
continue the Security Interest granted and evidenced by this Agreement.
(v) Debtor was organized and remains organized solely under the laws of the state set forth
next to Debtor’s name in the first paragraph of this Agreement.
(w) The actual name of Debtor is the name set forth in the preamble above, and Debtor has not
used any name other than that stated in the preamble hereto for the preceding five years. No
entity has merged into Debtor or been acquired by Debtor within the past five years except as set
forth on Schedule C.
(x) At any time and from time to time that any Collateral consists of instruments or other
items that require or permit possession by the secured party to perfect the security interest
created hereby, Debtor shall deliver such Collateral to the Secured Party, subject to the rights of
the holders of Senior Indebtedness.
(y) Debtor shall cause all tangible chattel paper constituting Collateral to be delivered to
the Secured Party, or, if such delivery is not possible, then to cause such tangible chattel paper
to contain a legend noting that it is subject to the security interest created by this Agreement,
subject to the rights of the holders of Senior Indebtedness. To the extent any Collateral consists
of electronic chattel paper, Debtor shall cause the underlying chattel paper to be “marked” within
the meaning of Section 9-105 of the UCC (or successor section thereto), subject to the rights of
the holders of Senior Indebtedness.
(z) To the extent any Collateral consists of letter-of-credit rights, Debtor shall cause the
issuer of each underlying letter of credit to consent to an assignment of the proceeds thereof to
the Secured Party, subject to the rights of the holders of Senior Indebtedness.
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(aa) Debtor will from time to time, at its own cost and expense, promptly execute and deliver
all such further instruments and documents, and take all such further action as may be necessary or
desirable, or as the Secured Party may reasonably request, in order to perfect and protect any
security interest granted or purported to be granted hereby or to enable the Secured Party to
exercise and enforce its rights and remedies hereunder and with respect to any Collateral or to
otherwise carry out the purposes of this Agreement.
(bb) Schedule D attached hereto lists all of the patents, patent applications,
trademarks, trademark applications, registered copyrights, and domain names owned by Debtor as of
the date hereof. Schedule D lists all material licenses in favor of Debtor for the use of
any patents, trademarks, copyrights and domain names as of the date hereof. All material patents
and trademarks of the Debtor have been duly recorded at the United States Patent and Trademark
Office and all material copyrights of the Debtor has been duly recorded at the United States
Copyright Office.
(a) The occurrence of an Event of Default (as defined in the Note) under the Note;
(b) Any representation or warranty of Debtor in this Agreement shall prove to have been
incorrect in any material respect when made;
(c) The failure by Debtor to observe or perform any of its obligations hereunder for five days
after delivery to Debtor of notice of such failure by or on behalf of the Secured Party unless such
default is capable of cure but cannot be cured within such time frame and Debtor is using best
efforts to cure same in a timely fashion; or
(d) If any provision of this Agreement shall at any time for any reason be declared to be null
and void, or the validity or enforceability thereof shall be contested by Debtor, or a proceeding
shall be commenced by Debtor, or by any governmental authority having jurisdiction over Debtor,
seeking to establish the invalidity or unenforceability thereof, or Debtor shall deny that Debtor
has any liability or obligation purported to be created under this Agreement.
(a) Upon the occurrence of any Event of Default and at any time thereafter, the Secured Party
shall have the right to exercise all of the remedies conferred hereunder and
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under the Note, and the Secured Party shall have all the rights and remedies of a secured party under the UCC, subject
at all times to the rights of the holders of Senior Indebtedness.
(b) The Secured Party may comply with any applicable law in connection with a disposition of
Collateral and such compliance will not be considered adversely to affect the commercial
reasonableness of any sale of the Collateral. The Secured Party may sell the Collateral without
giving any warranties and may specifically disclaim such warranties. If the Secured Party sells
any of the Collateral on credit, the Debtor will only be credited with payments actually made by
the purchaser. In addition, Debtor waives any and all rights it may have to a judicial hearing in
advance of the enforcement of any of the Secured Party’s rights and remedies hereunder, including,
without limitation, its right following an Event of Default to take immediate possession of the
Collateral and to exercise its rights and remedies with respect thereto.
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diminished by reason of the loss, destruction,
damage or theft of any of the Collateral or its unavailability for any reason. Without limiting
the generality of the foregoing, (a) the Secured Party (i) has no duty (either before or after an
Event of Default) to collect any amounts in respect of the Collateral or to preserve any rights
relating to the Collateral, or (ii) has no obligation to clean-up or otherwise prepare the
Collateral for sale, and (b) Debtor shall remain obligated and liable under each contract or
agreement included in the Collateral to be observed or performed by Debtor thereunder. The Secured
Party shall not have any obligation or liability under any such contract or agreement by reason of
or arising out of this Agreement or the receipt by the Secured Party of any payment relating to any
of the Collateral, nor shall the Secured Party be obligated in any manner to perform any of the
obligations of Debtor under or pursuant to any such contract or agreement, to make inquiry as to
the nature or sufficiency of any payment received by the Secured Party in respect of the Collateral
or as to the sufficiency of any performance by any party under any such contract or agreement, to
present or file any claim, to take any action to enforce any performance or to collect the payment
of any amounts which may have been assigned to the Secured Party or to which the Secured Party may
be entitled at any time or times.
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(a) No course of dealing between the Debtor and the Secured Party, nor any failure to
exercise, nor any delay in exercising, on the part of the Secured Party, any right, power or
privilege hereunder or under the Note shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder or thereunder preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
(b) All of the rights and remedies of the Secured Party with respect to the Collateral,
whether established hereby or by the Note or by any other agreements, instruments or documents or
by law shall be cumulative and may be exercised singly or concurrently.
(c) This Agreement constitutes the entire agreement of the parties with respect to the subject
matter hereof and is intended to supersede all prior negotiations, understandings and agreements
with respect thereto. Except as specifically set forth in this Agreement, no provision of this
Agreement may be modified or amended except by a written agreement specifically referring to this
Agreement and signed by the parties hereto.
(d) In the event any provision of this Agreement is held to be invalid, prohibited or
unenforceable in any jurisdiction for any reason, unless such provision is narrowed by judicial
construction, this Agreement shall, as to such jurisdiction, be construed as if such invalid,
prohibited or unenforceable provision had been more narrowly drawn so as not to be invalid,
prohibited or unenforceable. If, notwithstanding the foregoing, any provision of this Agreement is
held to be invalid, prohibited or unenforceable in any jurisdiction, such provision, as to such
jurisdiction, shall be ineffective to the extent of such invalidity, prohibition or
unenforceability without invalidating the remaining portion of such provision or the other
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provisions of this Agreement and without affecting the validity or enforceability of such provision
or the other provisions of this Agreement in any other jurisdiction.
(e) No waiver of any breach or default or any right under this Agreement shall be considered
valid unless in writing and signed by the party giving such waiver, and no such waiver shall be
deemed a waiver of any subsequent breach or default or right, whether of the same or similar nature
or otherwise.
(f) This Agreement shall be binding upon and inure to the benefit of each party hereto and its
successors and assigns.
(g) Each party shall take such further action and execute and deliver such further documents
as may be necessary or appropriate in order to carry out the provisions and purposes of this
Agreement.
(h) All questions concerning the construction, validity, enforcement and interpretation of
this Agreement shall be governed by and construed and enforced in accordance with the internal laws
of the State of Arizona, without regard to the principles of conflicts of law thereof. If any
party shall commence a proceeding to enforce any provisions of this Agreement, then the prevailing
party in such proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees
and other costs and expenses incurred with the investigation, preparation and prosecution of such
proceeding.
(i) This Agreement may be executed in any number of counterparts, each of which when so
executed shall be deemed to be an original and, all of which taken together shall constitute one
and the same Agreement. In the event that any signature is delivered by facsimile transmission,
such signature shall create a valid binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and effect as if such facsimile signature
were the original thereof.
(j) Nothing in this Agreement shall be construed to subject Secured Party to liability as a
partner in Debtor or any if its direct or indirect subsidiaries that is a partnership or as a
member in Debtor or any of its direct or indirect subsidiaries that is a limited liability company,
nor shall Secured Party be deemed to have assumed any obligations under any partnership agreement
or limited liability company agreement, as applicable, of Debtor or any if its direct or indirect
subsidiaries or otherwise, unless and until Secured Party exercises its right to be substituted for
Debtor as a partner or member, as applicable, pursuant hereto.
(k) To the extent that the grant of the security interest in the Collateral and the
enforcement of the terms hereof require the consent, approval or action of any partner or member,
as applicable, of Debtor or any direct or indirect subsidiary of Debtor or compliance with any
provisions of any of the Organizational Documents, the Debtor hereby grants such consent and
approval and waive any such noncompliance with the terms of said documents.
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IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be duly executed
on the day and year first above written.
| BRILLIAN CORPORATION | ||||
| By: | /s/ Xxxxx Xxxxx | |||
| Xxxxx Xxxxx, VP & CFO | ||||
| SYNTAX GROUPS CORPORATION | ||||
| By: | Xxxxx Xxxxx Xxx Xx | |||
| Xxxxx Xxxxx Hua Li, CEO | ||||
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