EXHIBIT 10.2
SECURITY INTEREST AGREEMENT
SECURITY INTEREST AGREEMENT ("Security Interest Agreement"), dated as of
April 5, 2005, by and among DOUBLE U MASTER FUND, L.P., a BVI limited
partnership having its principal executive offices at x/x Xxxxxx Xxxx Xxxxxxxx,
Xxxxxxx Xxxxx, Xxxxxxxxxx Drive, Road Town, Tortola, British Virgin Islands (the
"Secured Party"), AMEDIA NETWORKS, INC., a Delaware corporation having its
principal executive offices at 000 Xxxxxxxxx Xxxxxx Xxxx, Xxxxxxx, Xxx Xxxxxx
00000 (the "Company" or the "Debtor"), and XXXXXXX & XXXXXX, LLP, as agent for
the Secured. Party (the "Agent").
RECITALS
A. Reference is made to (i) that certain Bridge Loan Agreement of
even date herewith (the "Bridge Loan Agreement") to which the Debtor and the
Secured Party are parties, and (ii) the Transaction Agreements, including,
without limitation, the Note. Capitalized terms not otherwise defined herein
shall have the meanings ascribed to them in the relevant Transaction Agreements.
B. Pursuant to the Note, the Debtor has certain obligations to the
Secured Party (all such obligations, the "Obligations").
C. In order to induce the Secured Party to execute and deliver the
Transaction Agreements and to make the advances to the Debtor contemplated
thereby, and as contemplated by the Bridge Loan Agreement and the Note, the
Debtor has agreed to grant to the Secured Party a security interest in the
Collateral (as defined below) to secure the due and punctual fulfillment of the
Obligations. The Secured Party is willing to enter into the Bridge Loan
Agreement and the other Transaction Agreements only upon receiving the Debtor's
execution of this Security Interest Agreement.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and conditions contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. GRANT OF SECURITY INTEREST.
(a) In order to secure the due and punctual fulfillment of the
Obligations, the Debtor hereby grants, conveys, transfers and assigns to the
Secured Party a continuing security interest in the Collateral.
(b) For purposes of this Agreement, the following terms shall have
the meanings indicated:
"COLLATERAL" is all right, title and interest of Debtor in and to all of
the following, whether now owned or hereafter arising or acquired and
wherever located: all Equipment; all Intellectual Property; and any and
all claims, rights and interests in any of the above, and all guaranties
and security for any of the above, and all substitutions and
replacements for, additions, accessions, attachments, accessories, and
improvements to, and proceeds (including proceeds of any insurance
policies, proceeds of proceeds and claims against third parties) of, any
and all of the above, and all Debtor's books relating to any and all of
the above and includes, without limiting the generality of the above,
the Equipment (and related IP) listed in Exhibit B.
"CODE" is the Uniform Commercial Code, in effect in the State of New
York as in effect from time to time.
"COPYRIGHTS" are all copyrights, copyright rights, applications or
registrations and like protections in each work or authorship or
derivative work, whether published or not (whether or not it is a trade
secret) now or later existing, created, acquired or held.
"EQUIPMENT" has the meaning set forth in the Code and includes all
present and future machinery, equipment, tenant improvements, furniture,
fixtures, vehicles, tools, parts and attachments in which Debtor has any
interest.
"INTELLECTUAL PROPERTY" is all present and future (a) Copyrights, (b)
trade secret rights, including all rights to unpatented inventions and
know-how, and confidential information; (c) mask work or similar rights
available for the protection of semiconductor chips; (d) Patents; (e)
Trademarks; (f) computer software and computer software products; (g)
designs and design rights; (h) technology; (i) all claims for damages by
way of past, present and future infringement of any of the rights
included above; (j) all licenses or other rights to use any property or
rights of a type described above.
"PATENTS" are patents, patent applications and like protections,
including improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same.
"TRADEMARKS" are trademarks, servicemarks, trade styles, and trade
names, whether or not any of the foregoing are registered, and all
applications to register and registrations of the same and like
protections, and the entire goodwill of the business of Debtor connected
with and symbolized by any such trademarks.
(b) The security interests granted pursuant to this Section 1 (the
"Security Interests") are granted as security only and shall not subject the
Secured Party to, or transfer or in any way affect or modify, any obligation or
liability of the Debtor under any of the Collateral or any transaction which
gave rise thereto.
SECTION 2. FILING; FURTHER ASSURANCES.
(a) The Debtor will, at its expense, cause to be searched the public
records with respect to the Collateral and will execute, deliver, file and
record (in such manner and form as the Secured Party may require), or permit the
Secured Party to file and record, as its attorney in fact, any financing
statements, any carbon, photographic or other reproduction of a financing
statement or this Security Agreement (which shall be sufficient as a financing
statement hereunder), any specific assignments or other paper that may be
reasonably necessary or desirable, or that the Secured Party may request, in
order to create, preserve, perfect or validate any Security Interest or to
enable the Secured Party to exercise and enforce its rights hereunder with
respect to any of the Collateral. The Debtor hereby appoints Secured Party as
Debtor's attorney-in-fact to execute in the name and behalf of Debtor such
additional financing statements as Secured Party may request.
(b) Each Secured Party has designated an Agent as provided in
Section 13 hereof. Among other things, such Agent shall be agent of the Secured
Party for execution of and identification on any financing statement or similar
instrument referring to or describing the Collateral.
(c) The Agent is authorized to execute and file any and all
financing statements desired to be filed by the Secured Party to reflect the
security interest in the Collateral in any and all jurisdictions. For such
purposes, the Debtor irrevocably appoints the Agent (acting by Xxxxxx X. Xxxxxxx
or Xxxxxx
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Xxxxxxxx, or either one of them), with full power of substitution to execute and
file such financing statements naming the Debtor as debtor thereon.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF DEBTOR. The Debtor
hereby represents and warrants to the Secured Party (a) that, except as set
forth in Exhibit A attached hereto, the Debtor is, or to the extent that certain
of the Collateral is to be acquired after the date hereof, will be, the owner of
the Collateral free from any adverse lien, security interest or encumbrance; (b)
that except for such financing statements as may be described on Exhibit A
attached hereto and made a part hereof, no financing statement covering the
Collateral is on file in any public office, other than the financing statements
filed pursuant to this Security Agreement; and (c) that all additional
information, representations and warranties contained in Exhibit B attached
hereto and made a part hereof are true, accurate and complete on the date
hereof.
SECTION 4. COVENANTS OF DEBTOR. The Debtor hereby covenants and
agrees with the Secured Party that the Debtor (a) will, at the Debtor's sole
cost and expense, defend the Collateral against all claims and demands of all
persons at any time claiming any interest therein junior to the Secured Party's
interest; (b) will provide the Secured Party with prompt written notice of (i)
any change in the chief executive officer of the Debtor or the office where the
Debtor maintains its books and records pertaining to the Collateral; (ii) the
movement or location of all or a material part of the Collateral to or at any
address other than as set forth in said Exhibit B; and (iii) any facts which
constitute a Debtor Event of Default (as such term is defined below), or which,
with the giving of notice and/or the passage of time, could or would constitute
a Debtor Event of Default, pursuant to Section 7 below; (c) will promptly pay
any and all taxes, assessments and governmental charges upon the Collateral
prior to the date penalties are attached thereto, except to the extent that such
taxes, assessments and charges shall be contested in good faith by the Debtor;
(d) will immediately notify the Secured Party of any event causing a substantial
loss or diminution in the value of all or any material part of the Collateral
and the amount or an estimate of the amount of such loss or diminution; (e) will
have and maintain adequate insurance at all times with respect to the
Collateral, for such other risks as are customary in the Debtor's industry for
the respective items included in the Collateral, such insurance to be payable to
the Secured Party and the Debtor as their respective interests may appear, and
shall provide for a minimum of ten (10) days prior written notice of
cancellation to the Secured Party, and Debtor shall furnish the Secured Party
with certificates or other evidence satisfactory to the Secured Party of
compliance with the foregoing insurance provisions; (f) will not sell or offer
to sell or otherwise assign, transfer or dispose of the Collateral or any
interest therein, without the prior written consent of the Secured Party, except
in the ordinary course of business; (g) will keep the Collateral free from any
adverse lien, security interest or encumbrance (except for encumbrances
specified in Exhibit A attached hereto) and in good order and repair, reasonable
wear and tear excepted, and will not waste or destroy the Collateral or any part
thereof; and (h) will not use the Collateral in material violation of any
statute or ordinance the violation of which could materially and adversely
affect the Debtor's business.
SECTION 5. RECORDS RELATING TO COLLATERAL. The Debtor will keep its
records concerning the Collateral at its offices designated in the caption of
this Security Interest Agreement or at such other place or places of business of
which the Secured Party shall have been notified in writing no less than ten
(10) days prior thereto. The Debtor will hold and preserve such records and
chattel paper and will permit representatives of the Secured Party at any time
during normal business hours upon reasonable notice to examine and inspect the
Collateral and to make abstracts from such records and chattel paper, and will
furnish to the Secured Party such information and reports regarding the
Collateral as the Secured Party may from time to time reasonably request.
SECTION 6. GENERAL AUTHORITY. From and during the term of any Debtor
Event of Default, the Debtor hereby appoints the Secured Party the Debtor's
lawful attorney, with full power of substitution, in
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the name of the Debtor, for the sole use and benefit of the Secured Party, but
at the Debtor's expense, to exercise, all or any of the following powers with
respect to all or any of the Collateral:
(a) to demand, xxx for, collect, receive and give acquittance for
any and all monies due or to become due;
(b) to receive, take, endorse, assign and deliver all checks, notes,
drafts, documents and other negotiable and non- negotiable instruments and
chattel paper taken or received by the Secured Party;
(c) to settle, compromise, prosecute or defend any action or
proceeding with respect thereto;
(d) to sell, transfer, assign or otherwise deal in or with the same
or the proceeds thereof or the related goods securing the Collateral, as fully
and effectually as if the Secured Party were the sole and absolute owner
thereof;
(e) to extend the time of payment of any or all thereof and to make
any allowance and other adjustments with reference thereto; and
(f) to discharge any taxes, liens, security interests or other
encumbrances at any time placed thereon;
provided that the Secured Party shall give the Debtor not less than ten (10)
business days prior written notice of the time and place of any sale or other
intended disposition of any of the Collateral.
The exercise by Secured Party of or failure to so exercise any authority
granted herein shall in no manner affect Debtor's liability to Secured Party,
and provided, further, that Secured Party shall be under no obligation or duty
to exercise any of the powers hereby conferred upon them and they shall be
without liability for any act or failure to act in connection with the
collection of, or the preservation of, any rights under any of the Collateral.
SECTION 7. DEBTOR EVENTS OF DEFAULT. The Debtor shall be in default
under this Security Agreement upon the occurrence of an Event of Default (as
defined in the Note) by the Debtor (a "Debtor Event of Default").
SECTION 8. REMEDIES UPON DEBTOR EVENT OF DEFAULT. If any Debtor
Event of Default shall have occurred, the Secured Party may exercise all the
rights and remedies of a secured party under the Uniform Commercial Code. The
Secured Party may require the Debtor to assemble all or any part of the
Collateral and make it available to the Secured Party at a place to be
designated by the Secured Party which is reasonably convenient. The Secured
Party shall give the Debtor ten (10) business days prior written notice of the
Secured Party's intention to make any public or private sale or sale at a
broker's board or on a securities exchange of the Collateral. At any such sale
the Collateral may be sold in one lot as an entirety or in separate parcels, as
the Secured Party, in its sole discretion, may determine. The Secured Party
shall not be obligated to make any such sale pursuant to any such notice. The
Secured Party may, without notice or publication, adjourn any public or private
sale or cause the same to be adjourned from time to time by announcement at the
time and place fixed for the sale, and such sale may be made at any time or
place to which the same may be adjourned. The Secured Party, instead of
exercising the power of sale herein conferred upon it, may proceed by a suit or
suits at law or in equity to foreclose the Security Interests and sell the
Collateral, or any portion thereof, under a judgment or decree of a court or
courts of competent jurisdiction.
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SECTION 9. APPLICATION OF COLLATERAL AND PROCEEDS. The proceeds of
any sale of, or other realization upon, all or any part of the Collateral shall
be applied in the following order of priorities: (a) first, to pay the
reasonable expenses of such sale or other realization, including, without
limitation, reasonable attorneys' fees, and all expenses, liabilities and
advances reasonably incurred or made by the Secured Party in connection
therewith, and any other unreimbursed expenses for which the Secured Party is to
be reimbursed pursuant to Section 10; (b) second, to the payment of the
Obligations in such order of priority as the Secured Party, in its sole
discretion, shall determine; and (c) finally, to pay to the Debtor, or its
successors or assigns, or as a court of competent jurisdiction may direct, any
surplus then remaining from such proceeds.
SECTION 10. EXPENSES; SECURED PARTY'S LIEN. If any Debtor Event of
Default shall have occurred, the Debtor will forthwith upon demand pay to the
Secured Party: (a) the amount which the Secured Party may have been required to
pay to free any of the Collateral from any lien thereon; and (b) the amount of
any and all reasonable out-of-pocket expenses, including, without limitation,
the reasonable fees and disbursements of its counsel, and of any agents not
regularly in its employ, which the Secured Party may incur in connection with
the collection, sale or other disposition of any of the Collateral.
SECTION 11. TERMINATION OF SECURITY INTERESTS; RELEASE OF
COLLATERAL. Upon the payment, performance or other satisfaction in full of all
the Obligations, the Security Interests shall terminate and all rights to the
Collateral shall revert to the Debtor. Upon any such termination of the Security
Interests or release of Collateral, the Secured Party will, at the Debtor's
expense, to the extent permitted by law, execute and deliver to the Debtor such
documents as the Debtor shall reasonably request to evidence the termination of
the Security Interests or the release of such Collateral, as the case may be.
The Debtor further covenants and agrees that it will not grant any other
security interest or other lien or rights in the Collateral (however
denominated) as long as any of the Obligations remains outstanding.
SECTION 12. NOTICES. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (a) personally served,
(b) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (c) delivered by reputable air courier service with charges
prepaid, or (d) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice given in accordance herewith. Any notice or
other communication required or permitted to be given hereunder shall be deemed
effective (i) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (ii) on the second business day
following the date of mailing by express courier service or on the fifth
business day after deposited in the mail, in each case, fully prepaid, addressed
to such address, or upon actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall be for (i) the Debtor as
provided in the Bridge Loan Agreement for notices to the Company, (ii) for the
Secured Party as provided in the Bridge Loan Agreement for notices to the Lender
and (iii) for the Agent as provided in the Bridge Loan Agreement for notices to
the Escrow Agent. Any party hereto may from time to time change its address or
facsimile number for notices under this Section 12 in the manner contemplated by
the Bridge Loan Agreement.
SECTION 13. AGENT.
(a) Anything in the other provisions of this Security Interest
Agreement to the contrary notwithstanding, the Secured Party may designate
another entity to act as agent (the "Agent") for the Secured Party with respect
to any one or more of the rights of Secured Party hereunder, including, but not
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necessarily limited to, the right to hold the security interest and/or be named
as secured party (as agent for the Secured Party) in any filed financing
statement and to take action in the name and stead of the Secured Party
hereunder. Such designation may be made with or without power of substitution,
Such designation shall remain in effect until canceled by the Secured Party, as
provided herein; provided, however, that such cancellation shall not affect the
validity of any action theretofore taken by such agent pursuant to this Security
Interest Agreement. The Debtor acknowledges and agrees to honor such designation
and acknowledges that the Agent is acting as the agent of the Secured Party and
not as a principal.
(b) Each Secured Party hereby confirms that the Secured Party has
designated Xxxxxxx & Xxxxxx, LLP (acting by Xxxxxx X. Xxxxxxx or Xxxxxx
Xxxxxxxx, or either one of them), as its initial Agent, with full right of
substitution.
(c) [Intentionally omitted.]
(d) Reference is made to the provisions of Sections 2 through 15,
inclusive, of the Joint Escrow Instructions. All such provisions are
incorporated herein by reference, as if set forth herein in full, except that,
for such purposes, the references therein to (i) the "Escrow Agent" shall be
deemed to be references to the "Agent" under this Security Interest Agreement,
(ii) the "Company" shall be deemed to be references to the Debtor under this
Security Interest Agreement, and (iii) the "Lender" shall be deemed to be
references to the Secured Party under this Security Interest Agreement.
SECTION 14. MISCELLANEOUS.
(a) No failure on the part of the Secured Party to exercise, and no
delay in exercising, and no course of dealing with respect to, any right, power
or remedy under this Security Interest Agreement shall operate as a waiver
thereof; nor shall any single or partial exercise by the Secured Party of any
right, power or remedy under this Security Interest Agreement preclude the
exercise, in whole or in part, of any other right, power or remedy. The remedies
in this Security Interest Agreement are cumulative and are not exclusive of any
other remedies provided by law. Neither this Security Interest Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally but
only by a statement in writing signed by the party against which enforcement of
the change, waiver, discharge or termination is sought.
(b) The execution and delivery by Debtor of this Security Interest
Agreement and all documents delivered in connection herewith have been duly and
validly authorized by all necessary corporate action of Debtor and this
Agreement and all documents delivered in connection herewith have been duly and
validly executed and delivered by Debtor. The execution and delivery by Debtor
of this Security Interest Agreement and all documents delivered in connection
herewith will not result in a breach or default of or under the Certificate of
Incorporation, By-laws or any agreement, contract or indenture of Debtor. This
Security Interest Agreement and all documents delivered in connection therewith
are legal, valid and binding obligations of Debtor enforceable against Debtor in
accordance with their terms.
(c) In the event that any action is taken by Debtor or Secured Party
in connection with the this Security Interest Agreement, or any related document
or matter, the losing party in such legal action, in addition to such other
damages as he or it may be required to pay, shall pay reasonable attorneys' fees
to the prevailing party.
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SECTION 15. SEPARABILITY. If any provision hereof shall prove
invalid or unenforceable in any jurisdiction whose laws shall be deemed
applicable, the other provisions hereof shall remain in full force and effect in
such jurisdiction and shall be liberally construed in favor of the Secured
Party.
SECTION 16. GOVERNING LAW.
(a) This Security Interest Agreement shall be governed by and
construed in accordance with the laws of the State of New York for contracts to
be wholly performed in such state and without giving effect to the principles
thereof regarding the conflict of laws. Each of the parties consents to the
exclusive jurisdiction of the federal courts whose districts encompass any part
of the County of New York or the state courts of the State of New York sitting
in the County of New York in connection with any dispute arising under this
Security Interest Agreement and hereby waives, to the maximum extent permitted
by law, any objection, including any objection based on FORUM NON COVENIENS, to
the bringing of any such proceeding in such jurisdictions or to any claim that
such venue of the suit, action or proceeding is improper. To the extent
determined by such court, the Debtor shall reimburse the Secured Party for any
reasonable legal fees and disbursements incurred by the Secured Party in
enforcement of or protection of any of its rights under this Security Interest
Agreement. Nothing in this Section shall affect or limit any right to serve
process in any other manner permitted by law.
(b) The Debtor and the Secured Party acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Security Interest Agreement were not performed in accordance with their specific
terms or were otherwise breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent or cure breaches of
the provisions of this Security Interest Agreement and to enforce specifically
the terms and provisions hereof, this being in addition to any other remedy to
which any of them may be entitled by law or equity.
SECTION 16. JURY TRIAL WAIVER. The Debtor and the Secured Party
hereby waive a trial by jury in any action, proceeding or counterclaim brought
by either of the parties hereto against the other in respect of any matter
arising out of or in connection with the Note or this Security Interest
Agreement.
SECTION 17. ASSIGNMENT. Only in connection with the transfer of all
of the rights under the Transaction Agreements in accordance with their terms,
the Secured Party may assign or transfer the whole of its security interest
granted hereunder. Any transferee of the Collateral shall be vested with all of
the rights and powers of the assigning Secured Party hereunder with respect to
the Collateral.
[Balance of page intentionally left blank]
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SECTION 18. WAIVER. The Debtor waives any right that it may have to
require Secured Party to proceed against any other person, or proceed against or
exhaust any other security, or pursue any other remedy Secured Party may have.
IN WITNESS WHEREOF, the Parties have executed this Security Interest
Agreement as of the day, month and year first above written.
SECURED PARTY:
DOUBLE U MASTER FUND, L.P.
By: Xxxxxxx & Xxxxxx LLP, as its agent
By: /s/ Xxxxxx Xxxxxxxx
DEBTOR:
AMEDIA NETWORKS, INC.
By: /s/ Xxxxx Xxxxxxx
President
AGENT:
XXXXXXX & PRAGER, LLP
By:/s/ Xxxxxx Xxxxxxxx
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EXHIBIT A
EXCEPTIONS TO REPRESENTATIONS
The Company may grant a security interest in the Collateral, provided that such
interest is junior in all respects to the security interest of the Secured
Party.
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EXHIBIT B
ADDITIONAL INFORMATION RE COLLATERAL, ETC.
* QOSTREAM(TM) PG1000: a premises gateway product that resides with the
subscriber and is designed to perform data, telephony, video and local Ethernet
switching functions (the "QoStream PG1000"). This product links to the network,
and can be set-up to deliver the right kind of bandwidth to each device that a
subscriber connects to it.
* QOSTREAM AS5000 AGGREGATOR SWITCH: a distributed Ethernet switch designed to
route data to and from the premises gateways at distances of up to 00xx xxxx
(xxx "XxXxxxxx XX0000").
* QOSTREAM(TM) DIRECTOR: a web-based Network Management System that provides
complete operations capability for remotely managing the QoStream product line
from a Network Operations Center (NOC).
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EXHIBIT C
COPYRIGHTS
NONE
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EXHIBIT D
COPYRIGHT APPLICATIONS
NONE
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