EXHIBIT 4.8
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is dated as of September 17, 2002 between ZIX
CORPORATION, a Texas corporation with its headquarters located at 0000 X.
Xxxxxxx Xxxxxx, Xxxxx 0000, XX00, Xxxxxx Xxxxx, 00000 ("DEBTOR"), and PROMETHEAN
ASSET MANAGEMENT L.L.C., a Delaware limited liability company, in its capacity
as collateral agent for the Funds identified below (in such capacity, the
"SECURED PARTY").
WITNESSETH
WHEREAS, Debtor has executed and delivered to each of the Funds those
certain secured convertible notes each made by Debtor and dated as of the date
hereof (as the same may be amended and in effect from time to time, individually
a "NOTE" and collectively the "NOTES"). The Notes were issued pursuant to a
certain Securities Purchase Agreement dated as of September 17, 2002 (as the
same has been and hereafter may be amended, modified, supplemented or restated,
the "SECURITIES PURCHASE AGREEMENT") by and among, inter alia, HFTP Investment
L.L.C., a Delaware limited liability company, Gaia Offshore Master Fund, LTD., a
Cayman Islands exempt company, and Caerus Fund Ltd., a Cayman Islands exempt
company (collectively, the "FUNDS"), and pursuant to which the Funds have made
loans to Debtor in the original aggregate principal amount of $8,000,000; and
WHEREAS, it is a condition under the Notes and the Securities Purchase
Agreement that Debtor shall grant the security interests contemplated by this
Agreement to Secured Party as collateral agent on behalf of the Funds for
purposes of maintaining, administering, perfecting and enforcing such security
interests, in order to secure the payment and performance of Debtor's
indebtedness and obligations under the Notes;
NOW, THEREFORE, in consideration of the premises and in order to induce the
Funds to purchase the Notes and enter into the Securities Purchase Agreement,
and for other good and valuable consideration, Debtor hereby agrees with Secured
Party, for its benefit and the benefit of the Funds, as follows:
SECTION 1. Definitions
1.1 Certain Defined Terms. Terms defined in the Notes and not otherwise
defined herein shall have the respective meanings provided for in the Notes or,
to the extent not defined therein, in the Securities Purchase Agreement. The
following terms shall have the respective meanings provided for in the UCC (as
defined below): "ACCOUNTS", "ACCOUNT DEBTOR", "BUYER IN ORDINARY COURSE OF
BUSINESS", "CHATTEL PAPER", "COMMERCIAL TORT CLAIM", "DEPOSIT ACCOUNT",
"DOCUMENTS", "ELECTRONIC CHATTEL PAPER", "EQUIPMENT", "GENERAL INTANGIBLES",
"GOODS", "INSTRUMENTS", "INVENTORY", "INVESTMENT PROPERTY", "LETTER OF CREDIT",
"LETTER-OF-CREDIT RIGHTS", "LICENSEE IN ORDINARY COURSE OF BUSINESS",
"PROCEEDS", "RECORD", "SOFTWARE", "SUPPORTING OBLIGATIONS", "SECURITIES
ACCOUNT", "SECURITY ENTITLEMENT" and
"TANGIBLE CHATTEL PAPER". The following terms, as used herein, have the meanings
set forth below:
"COLLATERAL" has the meaning assigned to that term in Section 2.
"CONTROL" means the manner in which "control" is achieved under the UCC
with respect to a particular item of Collateral.
"EXCLUDED ACCOUNT" means Account # [omitted] at Bank of America Merchants
Services, Inc., A Bank of America Company, in the name of XxxXxxx.xxx, Inc.;
provided that the balance in such account at no time exceeds $300,000.
"EXCLUDED ASSETS" means Debtor's interest in Maptuit Corporation, an
Ontario corporation, and CStone Consulting, Inc., a California corporation, as
such interests exist on the date of this Agreement, and any securities issued in
exchange therefore or replacement thereof (provided that no additional
consideration is paid by Debtor in connection with such exchange or
replacement).
"INTELLECTUAL PROPERTY" means collectively all of the following: Patents
and Trademarks.
"LOAN DOCUMENT" means, collectively, this Agreement, the Notes, the
Securities Purchase Agreement and any subordination agreement entered into
pursuant to the requirements of the Notes or Securities Purchase Agreement.
"OBLIGATIONS" means all obligations, liabilities and indebtedness of every
nature of Debtor from time to time owed to Secured Party and/or any Fund under
the Notes, including the principal amount of all debts, claims and indebtedness,
accrued and unpaid interest and all fees, costs and expenses whether primary,
secondary, direct, contingent, fixed or otherwise, heretofore, now and/or from
time to time hereafter owing due or payable whether before or after the filing
of a proceeding under the Bankruptcy Law by or against Debtor.
"PATENTS" means collectively all of the following: (a) all patents and
patent applications and the inventions and improvements described and claimed
therein, and patentable inventions; (b) the reissues, divisions, continuations,
renewals, extensions and continuations-in-part of any of the foregoing; (c) all
income, royalties, damages and payments now or hereafter due and/or payable
under any of the foregoing or with respect to any of the foregoing, including,
without limitation, damages and payments for past, present and future
infringements of any of the foregoing; (d) the right to xxx for past, present
and future infringements of any of the foregoing; and (e) all rights
corresponding to any of the foregoing throughout the world.
"PLEDGED ACCOUNTS" has the meaning assigned to that term in Section 7.
"SECURED OBLIGATIONS" has the meaning assigned to that term in Section 3.
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"SECURITY INTERESTS" means the security interests granted or provided for
hereunder.
"TRADEMARKS" means collectively all of the following: (a) all trademarks,
trade names, corporate names, company names, business names, fictitious business
names, trade styles, service marks, logos, other business identifiers, prints
and labels on which any of the foregoing have appeared or appear, all
registrations and recordings thereof, and all applications in connection
therewith; (b) all renewals thereof; (c) all income, royalties, damages and
payments now or hereafter due and/or payable under any of the foregoing or with
respect to any of the foregoing including damages and payments for past, present
and future infringements of any of the foregoing; (d) the right to xxx for past,
present and future infringements of any of the foregoing; (e) all rights
corresponding to any of the foregoing throughout the world; and (f) all goodwill
associated with and symbolized by any of the foregoing.
"UCC" means the Uniform Commercial Code as in effect from time to time in
the State of New York.
1.2 Other Definition Provisions. References to "Sections," "subsections"
and "Schedules" shall be to Sections, subsections and Schedules, respectively,
of this Agreement unless otherwise specifically provided. For purposes hereof,
"including" is not limiting and "or" is not exclusive. Any of the terms defined
in subsection 1.1 may, unless the context otherwise requires, be used in the
singular or the plural depending on the reference. All references to statutes
and related regulations shall include (unless otherwise specifically provided
herein) any amendments of same and any successor statutes and regulations.
SECTION 2. Grant of Security Interests; Agreement to Release
To secure the payment, performance and observance of the Secured
Obligations, Debtor hereby assigns, pledges, hypothecates, delivers, sets over
and transfers to Secured Party and grants to Secured Party, for the benefit of
the Funds, a continuing security interest in, right of setoff against, and an
assignment to Secured Party of all of Debtor's personal property and rights to
personal property, in each case, whether now owned or existing or hereafter
acquired or arising and regardless of where located and shall include the
following (all being collectively referred to herein as the "COLLATERAL;"
provided, however, that in no event shall the Collateral include the Excluded
Account or the Excluded Assets):
(a) Accounts;
(b) Chattel Paper;
(c) Commercial Tort Claims;
(d) Deposit Accounts and Securities Accounts, all cash, and other
property deposited therein from time to time and other monies and
property in the possession or under the control of Secured Party
or any affiliate, representative, agent or correspondent of
Secured Party;
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(e) Documents;
(f) Equipment;
(g) General Intangibles;
(h) Goods;
(i) Instruments;
(j) Inventory;
(k) Investment Property and Securities Entitlements;
(l) Letter-of-Credit Rights;
(m) Supporting Obligations;
(n) All other personal property whether or not subject to the UCC;
(o) All other financial assets of Debtor, whether or not subject to
the UCC;
(p) All books, records, ledger cards, files, correspondence, computer
programs, tapes, disks and related data processing Software that
at any time evidence or contain information relating to any of
the property described in subparts (a) - (o) above or are
otherwise necessary or helpful in the collection thereof or
realization thereon; and
(q) Proceeds and products of all or any of the property described in
subparts (a) - (p) above.
Those items of Collateral described in clauses (d), (i), (k), (m) and (o) above
(and clauses (p) and (q) to the extent applicable thereto) constitute and are
hereinafter referred to as the "PRIMARY COLLATERAL". Those items of Collateral
not consisting of Primary Collateral are hereinafter referred to as the
"ADDITIONAL COLLATERAL".
Secured Party hereby agrees to terminate and release all or any portion of
the liens and security interests granted hereunder in the Additional Collateral
within three (3) Business Days of receipt by Secured Party of written notice
from the Debtor requesting such termination and release and stating that in
Debtor's good faith reasonable determination the existence of the Secured
Party's lien on the Additional Collateral (or designated portion thereof) would
interfere materially with a substantive business transaction or relationship
currently being contemplated by Debtor.
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SECTION 3. Security for Obligations
This Agreement secures the payment and performance of the Obligations and
all indebtedness, liabilities and obligations of Debtor now existing or
hereafter created or arising under this Agreement and all renewals, extensions,
restructurings and refinancings of any of the above including, without
limitation, (i) any additional indebtedness which may be extended to Debtor
pursuant to any restructuring or refinancing of Debtor's indebtedness under the
Notes, (ii) any fees, costs or expenses from time to time hereafter owing, due
or payable under this Agreement whether before or after the filing of a
proceeding under the Bankruptcy Law by or against Debtor, and (iii) any
post-petition interest accruing during any bankruptcy, reorganization or other
similar proceeding (all such indebtedness, liabilities and obligations of Debtor
being collectively referred to herein as the "SECURED OBLIGATIONS").
SECTION 4. Debtor Remains Liable
Anything herein to the contrary notwithstanding: (a) Debtor shall remain
liable under the 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 the rights hereunder shall not release Debtor from
any of its duties or obligations under the contracts and agreements included in
the Collateral; (c) neither Secured Party nor any Fund shall have any obligation
or liability under the contracts and agreements included in the Collateral by
reason of this Agreement, nor shall Secured Party or any Fund be obligated to
perform any of the obligations or duties of Debtor thereunder or to take any
action to collect or enforce any claim for payment assigned hereunder; and (d)
neither Secured Party nor any Fund shall have any liability in contract or tort
for Debtor's acts or omissions.
SECTION 5. Representations and Warranties
In order to induce Secured Party to enter into this Agreement, Debtor
represents and warrants to Secured Party as follows:
5.1 Binding Obligation. This Agreement is the legally valid and binding
obligation of Debtor, enforceable against it in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar laws or equitable principles relating to or limiting
creditor's rights generally.
5.2 State of Organization. Debtor was organized and remains organized
solely under the laws of the State of Texas. Schedule I sets forth the Debtor's
organizational identification number or states that one does not exist.
5.3 Location of Primary Collateral. There is no Primary Collateral other
than the accounts identified on Schedule I, except as otherwise specified on
Schedule I. Schedule I includes all Securities Accounts and Deposit Accounts
maintained by or on behalf of Debtor. All hereafter acquired Primary Collateral
will be either located at the address set forth in the
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preamble or at the places, or deposited in an account, identified on Schedule I,
except as otherwise permitted hereunder.
5.4 Ownership of Collateral; Bailees. Debtor owns the Collateral and will
own all after-acquired Collateral. Except for the Security Interests, Debtor
owns the Primary Collateral, and will own all after-acquired Primary Collateral,
free and clear of any lien or security interest. No effective financing
statement or other form of lien notice covering all or any part of the
Collateral is on file in any recording office, except for those in favor of
Secured Party. None of the Primary Collateral is in the possession of any
consignee, bailee, warehouseman, agent or processor. No other Person has Control
of any of the Collateral.
5.5 Office Locations; Fictitious Names. The mailing address, principal
place of business, chief executive office and office where Debtor keeps its
books and records relating to the Accounts, Chattel Paper, Documents, General
Intangibles, Instruments and Investment Property is located at the address set
forth in the preamble. Debtor has no other places of business except those
separately specified on Schedule I. Debtor does not do business and has not done
business during the past five years under any name, tradename or fictitious
business name except as disclosed on Schedule II.
5.6 Perfection. Secured Party has a valid, perfected and first priority
security interest in the Primary Collateral, securing the payment of the Secured
Obligations, and such Security Interests are entitled to all of the rights,
priorities and benefits afforded by the UCC or other applicable law as enacted
in any relevant jurisdiction which relates to perfected security interests.
5.7 Governmental Authorizations; Consents. No authorization, approval or
other action by, and no notice to or filing with, any domestic or foreign
governmental authority or regulatory body or consent of any other Person is
required for (a) the grant by Debtor of the Security Interests granted hereby or
for the execution, delivery or performance of this Agreement by Debtor; (b) the
perfection of the Security Interests granted hereby (except for filing UCC
financing statements with the appropriate jurisdiction and filing the Security
Agreement with the U.S. Patent and Trademark Office, as applicable); or (c) the
exercise by Secured Party of its rights and remedies hereunder (except as may
have been taken by or at the direction of Debtor or Secured Party).
5.8 Accounts. To Debtor's knowledge, each existing Account constitutes, and
each hereafter arising Account will constitute, the legally valid and binding
obligation of the applicable Account Debtor.
5.9 Chattel Paper. Debtor does not hold Chattel Paper in the ordinary
course of its business.
5.10 Commercial Tort Claims. Debtor does not currently own any Commercial
Tort Claims.
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5.11 Intellectual Property. To Debtor's knowledge, all Patents and
Trademarks owned by Debtor are valid, subsisting and enforceable and all filings
necessary to maintain the effectiveness of such registrations have been made.
5.12 Inventory. All Inventory is not subject to any licensing, patent,
trademark, trade name or copyright agreement with any Person that restricts
Debtor's ability to manufacture and/or sell the Inventory.
5.13 Accurate Information. All information heretofore, herein or hereafter
supplied to Secured Party by or on behalf of Debtor with respect to the
Collateral is and will be accurate and complete in all material respects.
SECTION 6. Further Assurances; Covenants
6.1 Other Documents and Actions. Debtor will, from time to time, at its
expense, 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 create, perfect and protect any Security
Interests or to enable Secured Party to exercise and enforce its rights and
remedies hereunder or under the Notes with respect to any Collateral. Without
limiting the generality of the foregoing, Debtor will: (a) execute and file such
financing or continuation statements, or amendments thereto, and such other
instruments, documents or notices, as may be necessary or desirable, or as
Secured Party may request, in order to create, perfect and protect the Security
Interests; (b) at any reasonable time, upon demand by Secured Party, exhibit the
Collateral to allow inspection of the Collateral by Secured Party or Persons
designated by Secured Party and to examine and make copies of the records of
Debtor related thereto, and to discuss the Collateral and the records of Debtor
with respect thereto with, and to be advised as to the same by, Debtor's
officers and employees and, after the occurrence and during the continuance of a
Triggering Event or an Event of Default, with any other Person which is or may
be obligated with respect to any Collateral; and (c) upon Secured Party's
request, appear in and defend any action or proceeding that may affect Debtor's
title to or Secured Party's security interest in the Collateral.
6.2 Secured Party Authorized. Debtor hereby authorizes Secured Party to
file one or more financing or continuation statements, and amendments thereto
(or similar documents required by any laws of any applicable jurisdiction),
relating to all or any part of the Collateral without the signature of Debtor.
6.3 Corporate or Name Change. Debtor will give Secured Party at least ten
(10) business days prior written notice of any change in Debtor's name,
identity, mailing address, jurisdiction of organization or corporate structure;
provided that such information is publicly disclosed prior to or simultaneously
with such notice. With respect to any such change, Debtor will promptly execute
and deliver such instruments, documents and notices and take such actions, as
Secured Party deems necessary or desirable to create, perfect and protect the
security interests of Secured Party in the Collateral.
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6.4 Business Locations. Subject to the next sentence, Debtor will keep the
Primary Collateral (other than Collateral in the possession of Secured Party and
cash on deposit in permitted Deposit Accounts) at the locations specified in the
preamble or on Schedule I. Debtor will give Secured Party at least ten (10)
business days prior written notice of any change in Debtor's chief executive
office and principal place of business or of any new location of business or any
new location for any of the Collateral; provided that such information is
publicly disclosed prior to or simultaneously with such notice. With respect to
any new location (which in any event shall be within the continental United
States), Debtor will execute and deliver such instruments, documents and notices
and take such actions, as Secured Party deems necessary to create, perfect and
protect the security interests of Secured Party in the Collateral.
6.5 Bailees. No Primary Collateral shall at any time be in the possession
or control of any bailee or any of Debtor's agents without Secured Party's prior
written consent and unless, if Secured Party has so requested, such bailee or
agent holds all such Primary Collateral for Secured Party's benefit.
6.6 Instruments. Debtor will deliver to Secured Party all Instruments duly
endorsed and, if requested, accompanied by duly executed instruments of transfer
or assignment, all in form and substance satisfactory to Secured Party. Debtor
will also deliver to Secured Party all security agreements securing any
Instruments and execute UCC financing statement amendments assigning to Secured
Party any UCC financing statements filed by Debtor in connection with such
security agreements.
6.7 Chattel Paper. Debtor will deliver to Secured Party all Tangible
Chattel Paper duly endorsed and, if requested, accompanied by duly executed
instruments of transfer or assignment, all in form and substance satisfactory to
Secured Party. Debtor will provide Secured Party with Control of all Electronic
Chattel Paper, if requested, by having Secured Party identified as the assignee
of the Records(s) pertaining to the single authoritative copy thereof and
otherwise complying with the applicable elements of Control set forth in the
UCC. Debtor will also, if requested, deliver to Secured Party all security
agreements securing any Chattel Paper and execute UCC financing statement
amendments assigning to Secured Party any UCC financing statements filed by
Debtor in connection with such security agreements. Debtor will xxxx
conspicuously all Chattel Paper with a legend, in form and substance
satisfactory to Secured Party, indicating that such Chattel Paper is subject to
the Security Interests.
6.8 Letters of Credit. If requested, Debtor will deliver to Secured Party
all Letters of Credit duly endorsed and accompanied by duly executed instruments
of transfer or assignment, all in form and substance satisfactory to Secured
Party. If requested, Debtor will also deliver to Secured Party all security
agreements securing any Letters of Credit and execute UCC financing statement
amendments assigning to Secured Party any UCC financing statements filed by
Debtor in connection with such security agreements.
6.9 Filing Requirements. None of the Collateral is of a type in which
security interests or liens may be registered, recorded or filed under, or
notice thereof given under, any federal statute or regulation (other than the
Company's Patents and Trademarks). Debtor shall
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promptly notify Secured Party in writing upon acquiring any interest hereafter
in Collateral that is of a type where a security interest or lien may be
registered, recorded of filed under, or notice thereof given under, any federal
statute or regulation.
6.10 Investment Property. Debtor will take any and all actions necessary
(or required or requested by Secured Party), from time to time, to (a) cause
Secured Party to obtain exclusive Control of any Investment Property (including
Securities Accounts and Securities Entitlements) owned by Debtor in a manner
acceptable to Secured Party and (b) obtain from any issuers of Investment
Property and such other Persons, for the benefit of Secured Party, written
confirmation of Secured Party's Control over such Investment Property upon terms
and conditions acceptable to Secured Party. For purposes of this subsection
6.10, Secured Party shall have exclusive Control of Investment Property if (i)
such Investment Property consists of certificated securities and Debtor delivers
such certificated securities to Secured Party (with appropriate endorsements if
such certificated securities are in registered form); (ii) such Investment
Property consists of uncertificated securities and either (x) Debtor delivers
such uncertificated securities to Secured Party or (y) the issuer thereof
agrees, pursuant to documentation in form and substance satisfactory to Secured
Party, that it will comply with instructions originated by Secured Party without
further consent by Debtor; and (iii) such Investment Property consists of
security entitlements and either (x) Secured Party becomes the entitlement
holder thereof or (y) the appropriate securities intermediary agrees, pursuant
to documentation in form and substance satisfactory to Secured Party, that it
will comply with entitlement orders originated by Secured Party without further
consent by Debtor.
6.11 Accounts. Except as otherwise provided in this subsection 6.11, Debtor
shall continue to collect, at its own expense, all amounts due or to become due
Debtor under the Accounts and apply such amounts as are so collected to the
outstanding balances thereof. Secured Party shall have the right at any time
after the occurrence and during the continuance of an Event of Default or a
Triggering Event to: (a) notify the Account Debtor under any Accounts (or any
other Person obligated thereon) of the assignment of such Accounts to Secured
Party and to direct such Account Debtors and other Persons to make payment of
all amounts due or to become due or otherwise render performance directly to
Secured Party; (b) exercise the rights of Debtor with respect to the obligation
of the Account Debtor to make payment or otherwise render performance to Debtor
and with respect to any property that secures the obligations of the Account
Debtor or any other Person obligated on the Collateral; and (c) adjust, settle
or compromise the amount or payment of such Accounts. After the occurrence and
during the continuance of an Event of Default or a Triggering Event (i) all
amounts and Proceeds received by Debtor with respect to the Accounts shall be
received in trust for the benefit of Secured Party shall be segregated from
other funds of Debtor and shall be forthwith paid over to Secured Party in the
same form as so received (with any necessary endorsement) to be held in the
Pledged Accounts pursuant to Section 7 or applied pursuant to Section 14.
6.12 Commercial Tort Claims. Debtor shall advise Secured Party promptly
upon Debtor becoming aware that it owns any additional Commercial Tort Claims.
With respect to any new Commercial Tort Claim, Debtor will execute and deliver
such documents as Secured
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Party deems necessary to create, perfect and protect Secured Party's security
interest in such Commercial Tort Claim.
6.13 Protection of Collateral. Debtor will do nothing to impair the rights
of Secured Party in the Collateral; provided that Debtor is permitted to use its
cash and cash equivalents so long as such use is not in violation of the Loan
Documents. Debtor assumes all liability and responsibility in connection with
the Collateral acquired by it, and the liability of Debtor to pay the Secured
Obligations shall in no way be affected or diminished by reason of the fact that
such Collateral may be lost, stolen, damaged, or for any reason whatsoever
unavailable to Debtor.
6.14 Taxes and Claims. Debtor will pay when due all property and other
taxes, assessments and governmental charges imposed upon, and all claims
against, the Collateral (including claims for labor, materials and supplies);
provided that no such tax, assessment or charge need be paid if Debtor is
contesting the same in good faith by appropriate proceedings promptly instituted
and diligently conducted and if Debtor has established such reserve or other
appropriate provision, if any, as shall be required in conformity with GAAP; and
provided further that the same can be contested without risk of loss or
forfeiture or material impairment of the Collateral or the use thereof.
6.15 Collateral Description. Debtor will furnish to Secured Party, from
time to time upon request, statements and schedules further identifying,
updating, and describing the Collateral and such other information, reports and
evidence concerning the Collateral as Secured Party may reasonably request, all
in reasonable detail.
6.16 Use of Collateral. Debtor will not use or permit any Primary
Collateral to be used unlawfully or in violation of any provision of applicable
law, or any policy of insurance covering any of the Primary Collateral.
6.17 Records of Collateral. Debtor shall keep full and accurate books and
records relating to the Collateral and shall stamp or otherwise xxxx such books
and records in such manner as Secured Party may reasonably request indicating
that the Collateral is subject to the Security Interests.
SECTION 7. Bank Accounts; Collection of Accounts and Payments
Upon request by Secured Party, Debtor shall enter into a bank agency and
control agreement ("CONTROL AGREEMENT"), in a form specified by Secured Party,
with each financial institution with which Debtor maintains from time to time
any Deposit Accounts or Securities Accounts. Each Deposit Account or Securities
Account (which shall in no event include the Excluded Account) for which Debtor
has entered into a Control Agreement with the applicable financial institution
is referred to as a "PLEDGED ACCOUNT." Debtor hereby grants to Secured Party,
for the benefit of Secured Party and the Funds, a continuing lien upon, and
security interest in, all such accounts and all funds and other financial assets
at any time paid, deposited, credited or held in such accounts (whether for
collection, provisionally or otherwise) or otherwise in the possession of such
financial institutions, Securities Intermediaries and each such
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financial institution or Securities Intermediary shall act as Secured Party's
agent in connection therewith. Debtor shall not establish any Deposit Account or
Securities Account with any financial institution unless prior thereto Secured
Party and Debtor shall have entered into a Control Agreement with such financial
institution, unless otherwise consented to in writing by Secured Party. If
Secured Party delivers a Notice of Sole Control (as defined in the Control
Agreement) to any financial institution pursuant to the terms of any Control
Agreement, Secured Party shall promptly provide notice thereof to Debtor. If the
amount of the Secured Obligations is less than $5,000,000, then Secured Party
agrees that, upon the request of Debtor, it will reasonably cooperate with
Debtor to deliver any notices required under Section 2(f) of the Control
Agreement with Deutsche Bank Alex. Xxxxx to reduce the Minimum Balance (as
defined in such Control Agreement) to an amount that is not less than the amount
of the Secured Obligations.
SECTION 8. Secured Party Appointed Attorney-in-Fact
Debtor hereby irrevocably appoints Secured Party as Debtor's
attorney-in-fact, with full authority in the place and stead of Debtor and in
the name of Debtor, Secured Party or otherwise, from time to time in Secured
Party's discretion (but in the case of clauses (b), (d), (e), (f) and (g) below,
solely during the continuance of any Triggering Event or Event of Default) 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 obtain and adjust insurance required to be paid to Secured
Party;
(b) to ask, demand, collect, xxx for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(c) to receive, endorse, and collect any drafts or other Instruments,
Documents and Chattel Paper, in connection with clauses (a) and (b) above;
(d) to file any claims or take any action or institute any proceedings
that Secured Party may deem necessary or desirable for the collection of,
or to preserve the value of, any of the Collateral or otherwise to enforce
the rights of Secured Party with respect to any of the Collateral;
(e) to pay or discharge taxes, liens or security interests 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, and such payments made by Secured
Party to become obligations of Debtor to Secured Party, due and payable
immediately without demand;
(f) to sign and endorse any invoices, freight or express bills, bills
of lading, storage or warehouse receipts, assignments, verifications and
notices in connection with Accounts, Chattel Paper and other documents
relating to the Collateral; and
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(g) generally to take any act required of Debtor by Section 6 and 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 Debtor'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.
Debtor hereby approves all acts of Secured Party made or taken pursuant to this
Section 8. Neither Secured Party nor any Person designated by Secured Party
shall be liable for any acts or omissions or for any error of judgment or
mistake of fact or law. This power, being coupled with an interest, is
irrevocable so long as this Agreement shall remain in force.
SECTION 9. Transfers and Other Liens
Except as otherwise permitted herein or by the Notes, Debtor shall not:
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of, or grant any option with respect to, any of the Collateral,
except in the ordinary course of its business and except that Debtor may
use its cash and cash equivalents so long as such use is not in violation
of the Loan Documents; or
(b) create or suffer to exist any lien, security interest or other
charge or encumbrance upon or with respect to any of the Collateral to
secure indebtedness of any Person except for the security interest created
by this Agreement.
SECTION 10. Remedies
(a) If any Triggering Event or 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 UCC
(whether or not the UCC applies to the affected Collateral) and also may: (i)
require Debtor to, and Debtor 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 any place
or places designated by Secured Party which is reasonably convenient to Secured
Party and Debtor in which event Debtor shall at its own expense (A) forthwith
cause the same to be moved to the place or places so designated by Secured Party
and thereby delivered to Secured Party, (B) store and keep any Collateral so
delivered to Secured Party at such place or places pending further action by
Secured Party, and (C) while Collateral shall be so stored and kept, provide
such guards and maintenance services as shall be necessary to protect the same
and to preserve and maintain the Collateral in good condition; (ii) withdraw all
cash in the Pledged Accounts and apply such monies in payment of the Secured
Obligations; and (iii) without notice except as specified below, sell, lease,
license or otherwise dispose of the Collateral or any part thereof by one or
more contracts, in one or more parcels at public or private sale, and without
the necessity
12
of gathering at the place of sale of the property to be sold, at any of the
Secured Party's offices or elsewhere, at such time or times, for cash, on credit
or for future delivery, and at such price or prices and upon such other terms as
Secured Party may deem commercially reasonable.
(b) Debtor agrees that, to the extent notice of sale shall be required by
law, a reasonable authenticated notification of disposition shall be a
notification given at least ten (10) days prior to any such sale and such notice
shall (i) describe Secured Party and Debtor, (ii) describe the Collateral that
is the subject of the intended disposition, (iii) state the method of intended
disposition, (iv) state that the Debtor is entitled to an accounting of the
Secured Obligations and stating the charge, if any, for an accounting, and (v)
state the time and place of any public disposition or the time after which any
private sale is to be made. At any sale of the Collateral, if permitted by law,
Secured Party may bid (which bid may be, in whole or in part, in the form of
cancellation of indebtedness) for the purchase, lease, license or other
disposition of the Collateral or any portion thereof for the account of Secured
Party. Secured Party shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. Secured Party may disclaim any
warranties that might arise in connection with the sale, lease, license or other
disposition of the Collateral and have no obligation to provide any warranties
at such time. Secured Party may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. To the extent permitted by law, Debtor hereby specifically waives all
rights of redemption, stay or appraisal which it has or may have under any law
now existing or hereafter enacted.
(c) Upon the occurrence and during the continuance of a Triggering Event or
an Event of Default, Secured Party or its agents or attorneys shall have the
right without notice or demand or legal process (unless the same shall be
required by applicable law), personally, or by agents or attorneys, (i) to enter
upon, occupy and use any premises owned or leased by Debtor or where the
Collateral is located (or is believed to be located) until the Secured
Obligations are paid in full without any obligation to pay rent to Debtor, to
render the Collateral useable or saleable and to remove the Collateral or any
part thereof therefrom to the premises of Secured Party or any agent of Secured
Party for such time as Secured Party may desire in order to effectively collect
or liquidate the Collateral and use in connection with such removal any and all
services, supplies and other facilities of Debtor; and (ii) to take possession
of Debtor's original books and records, to obtain access to Debtor's data
processing equipment, computer hardware and Software relating to the Collateral
and to use all of the foregoing and the information contained therein in any
manner Secured Party deems appropriate.
(d) Debtor acknowledges and agrees that a breach of any of the covenants
contained in Sections 6, 7 and 9 hereof will cause irreparable injury to Secured
Party and that Secured Party has no adequate remedy at law in respect of such
breaches and therefore agrees, without limiting the right of Secured Party to
seek and obtain specific performance of other obligations of Debtor contained in
this Agreement, that the covenants of Debtor contained in the Sections referred
to in this Section shall be specifically enforceable against Debtor.
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SECTION 11. Assignment of Intellectual Property
Debtor hereby assigns, transfers and conveys, effective upon the occurrence
of any Triggering Event or Event of Default, to Secured Party all Intellectual
Property owned or used by Debtor to the extent necessary to enable Secured Party
to realize on the Collateral and any successor or assign to enjoy the benefits
of the Collateral. This right and assignment shall inure to the benefit 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 assignment is granted free of charge,
without requirement that any monetary payment whatsoever including, without
limitation, any royalty or license fee, be made to Debtor or any other Person by
Secured Party.
SECTION 12. Assigned Agreements
If a Triggering Event or an Event of Default has occurred and is
continuing, Debtor hereby irrevocably authorizes and empowers Secured Party,
without limiting any other authorizations or empowerments contained in any of
the other Loan Documents, to assert, either directly or on behalf of Debtor, any
claims Debtor may have, from time to time, against any other party to any of the
agreements to which Debtor is a party or to otherwise exercise any right or
remedy of Debtor under any such agreements (including, without limitation, the
right to enforce directly against any party to any such agreement all of
Debtor's rights thereunder, to make all demands and give all notices and to make
all requests required or permitted to be made by Debtor thereunder).
SECTION 13. Limitation on Duty of Secured Party with Respect to Collateral
Beyond the safe custody thereof, Secured Party shall have no duties
concerning the custody and preservation of any Collateral in its possession (or
in the possession of any agent or bailee) or with respect to any income thereon
or the preservation of rights against prior parties or any other rights
pertaining thereto. Secured Party shall be deemed to have exercised reasonable
care in the custody and preservation of the Collateral in its possession if the
Collateral is accorded treatment substantially equal to that which it accords
its own property. Subject to the standards of the previous sentence, Secured
Party shall not be liable or responsible for any loss or damage to any of the
Collateral, or for any diminution in the value thereof, by reason of the act or
omission of any warehouseman, carrier, forwarding agency, consignee or other
agent or bailee selected by Secured Party in good faith.
SECTION 14. Application of Proceeds
Upon the occurrence and during the continuance of an Event of Default or
Triggering Event, the proceeds of any collection, enforcement, sale or other
disposition of, or other realization upon, all or any part of the Collateral and
any cash held in the Pledged Accounts shall be applied as follows. first, to all
expenses and fees due and owing to Secured Party or any Fund; second, to all
accrued and unpaid interest on the Notes; and third, to principal of the Notes
and any other remaining secured obligations.
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SECTION 15. Expenses
Debtor shall pay all costs, fees and expenses of Secured Party or any Fund
(a) protecting, storing, warehousing, appraising, insuring, handling,
maintaining and shipping the Collateral, (b) creating, perfecting and enforcing
the Security Interests (other than the initial expenses incurred by Secured
Party or any Fund in connection with creating and perfecting the Security
Interests in the Collateral existing as of the date hereof), (c) maintaining the
Security Interests to the extent circumstances affecting the Security Interests
change after the date hereof and (d) collecting, enforcing, retaking, holding,
preparing for disposition, processing and disposing of the Collateral. Debtor
shall also pay any and all excise, property, sales and use taxes imposed by any
federal, state, local or foreign authority on any of the Collateral, or with
respect to periodic appraisals and inspections of the Collateral, or with
respect to the sale or other disposition thereof. If Debtor fails to promptly
pay any portion of the above costs, fees and expenses when due or to perform any
other obligation of Debtor under this Agreement, Secured Party may, at its
option, but shall not be required to, pay or perform the same and charge
Debtor's account for all fees, costs and expenses incurred therefor, and Debtor
agrees to reimburse Secured Party or such Fund therefor on demand. All sums so
paid or incurred by Secured Party or any Fund for any of the foregoing, any and
all other sums for which Debtor may become liable hereunder and all fees, costs
and expenses (including attorneys' fees, legal expenses and court costs)
incurred by Secured Party or any Fund in enforcing or protecting the Security
Interests or any of their rights or remedies under this Agreement shall be
payable on demand, shall constitute Secured Obligations, shall bear interest
until paid at the highest rate provided in the Notes and shall be secured by the
Collateral.
SECTION 16. Termination of Security Interests; Release of Collateral
Upon payment in full of all Secured Obligations, the Security Interests
shall terminate and all rights to the Collateral shall revert to Debtor. Upon
such termination of the Security Interests or release of any Collateral, Secured
Party will, at the expense of Debtor, execute and deliver to Debtor such
documents (including the delivery of any termination notices for any Pledged
Account) as Debtor shall reasonably request to evidence the termination of the
Security Interests or the release of such Collateral, as the case may be.
SECTION 17. Notices
All notices, approvals, requests, demands and other communications
hereunder shall be given in accordance with Section 9(f) of the Securities
Purchase Agreement.
SECTION 18. Successors and Assigns
This Agreement is for the benefit of Secured Party and the Funds and their
respective successors and assigns, and in the event of an assignment of all or
any of the Secured Obligations, the rights hereunder, to the extent applicable
to the Secured Obligations so assigned, may be transferred with such Secured
Obligations. This Agreement shall be binding on Debtor
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and its successors and assigns; provided that Debtor may not delegate its
obligations under this Agreement without Secured Party's prior written consent.
SECTION 19. Changes in Writing
No amendment, modification, termination or waiver of any provision of this
Agreement shall be effective unless the same shall be in writing signed by
Secured Party.
SECTION 20. Applicable Law
THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
CONFLICT OF LAWS PRINCIPLES.
SECTION 21. Failure or Indulgence Not Waiver; Remedies Cumulative
No failure or delay on the part of Secured Party or any Fund 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 other or further exercise thereof or any other right, power
or privilege. All rights and remedies existing under this Agreement are
cumulative to, and not exclusive of, any rights or remedies otherwise available.
SECTION 22. 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 23. Counterparts
This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one and the same instrument and any of the
parties hereto may execute this Agreement by signing any such counterpart;
provided that a facsimile signature shall be considered due execution and shall
be binding upon the signatory thereto with the same force and effect as if the
signature were an original and not a facsimile thereof.
SECTION 24. Survival
All representations and warranties of Debtor contained in this Agreement
shall survive the execution and delivery of this Agreement.
Balance of Page Intentionally Left Blank
Signature Page Follows
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Witness the due execution of this Security Agreement by the respective duly
authorized officers of the undersigned as of the date first written above.
Debtor:
ZIX CORPORATION, a Texas corporation
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------------
Title: S.V.P.
----------------------------------
Secured Party:
PROMETHEAN ASSET MANAGEMENT
L.L.C., a Delaware limited liability
company, in its capacity as collateral
agent for the Funds
By: /s/ Xxxxx X. X'Xxxxx
-------------------------------------
Title: Xxxxx X. X'Xxxxx, Managing Member
----------------------------------
