EXECUTION COPY
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement"), dated as of December 31,
2003, is by and among COMMERCE ONE OPERATIONS, INC., a Delaware corporation
maintaining its principal place of business located at Xxx Xxxxxx Xxxxxx,
Xxxxxxx Xxxxx, Xxxxx 0000, Xxx Xxxxxxxxx, XX 00000 ("Operations"), COMMERCE ONE,
INC., a Delaware corporation maintaining its principal place of business located
at Xxx Xxxxxx Xxxxxx, Xxxxxxx Xxxxx, Xxxxx 0000, Xxx Xxxxxxxxx, XX 00000
("Commerce One" and together with Operations, the "Debtors"), and COMVEST
INVESTMENT PARTNERS II LLC, a Delaware limited liability company, as
administrative agent and purchaser ("ComVest," the "Administrative Agent" or
"Secured Party") for ComVest and DCC Ventures, LLC, a Nevada limited liability
company ("DCC" or together with ComVest, the "Purchasers") of Commerce One's
Senior Secured Non-Convertible Promissory Notes and Warrants under the terms of
that certain Note and Warrant Purchase Agreement dated on or about the date
hereof (the "Purchase Agreement"). Any capitalized term used but not defined
herein shall have the meaning ascribed thereto in the Purchase Agreement.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Commerce One has offered for sale to the Purchasers, and the
Purchasers have purchased from Commerce One, (i) Senior Secured Non-Convertible
Promissory Notes of Commerce One in the aggregate principal amount of Five
Million Dollars ($5,000,000) (the "Notes") and (ii) Warrants to purchase shares
of common stock, par value $.0001 per share, of Commerce One (the "Warrants")
under the terms of the Purchase Agreement;
WHEREAS, under the terms and conditions of the Purchase Agreement, the
Purchasers have purchased the Notes and Warrants dated the date hereof and as
set forth in Exhibits A and B, respectively, annexed hereto and made a part
hereof, with payment of the Notes and any other obligations of Commerce One to
the Purchasers, and each of them, to be secured as provided for in the Purchase
Agreement;
WHEREAS, under the terms and conditions of the Purchase Agreement, in
order to induce the Purchasers to purchase the Notes and Warrant, (i) Operations
agreed to execute and deliver to the Secured Party a Guaranty as of even date
herewith (the "Guaranty"), pursuant to which Operations has agreed to guarantee
the full repayment of the Notes and all other obligations of Commerce One under
the Purchase Agreement and (ii) the Debtors agreed to execute and deliver to the
Secured Party this Security Agreement granting the Secured Party a first
perfected priority lien and security interest in the Collateral (as described
below) to secure the Debtors' respective payment and other obligations under
the Purchase Agreement, the Notes and other Closing Documents;
WHEREAS, the Purchasers have appointed ComVest as Administrative Agent
to act on behalf of the Purchasers pursuant to the terms and conditions set
forth in detail in the Purchase Agreement and below, and expressly agree that
the Administrative Agent will be deemed the
Secured Party for purposes of administering the security interests granted to
the Purchasers pursuant to the terms and conditions set forth in detail below;
NOW, THEREFORE, in consideration of the premises and agreements
hereinafter set forth, the parties hereto agree as follows:
1. Creation of Security Interest; Term.
In order to induce the Purchasers to enter into the Purchase
Agreement and purchase the Notes and Warrants, the Debtors hereby
unconditionally and irrevocably grant to the Secured Party a first perfected
priority lien and security interest in the Collateral described in Section 2
hereof (the "Collateral") to secure Debtors' prompt payment (alone, the
"Indebtedness"), performance and discharge in full of all of their respective
obligations under the Purchase Agreement, the Notes, the Guaranty, the Pledge
Agreement, this Agreement and any other instruments entered into in connection
with and any further amounts which, pursuant to the Purchase Agreement and/or
any other security documents relating to the Notes, may be deemed to be a part
of and/or added to such obligations (together with the Indebtedness, the
"Obligations"). Upon the earlier of (i) the payment, performance and discharge
in full of all Obligations, (ii) Conversion of the Notes or (iii) sale of the
SRM Assets and/or the Perfect Commerce Note in accordance with Section 8 of this
Agreement, the security interest granted herein shall expire and so shall this
Agreement. The Secured Party's security interest shall have priority and be
superior to all other interests in the Collateral and shall rank senior in lien
priority to any existing or future indebtedness of the Debtor, other than the
Permitted Liens and the CambridgePark Indebtedness. For purposes hereof,
"CambridgePark Indebtedness" shall mean the payments due by Commerce One to
CambridgePark Investors Limited Partnership ("CambridgePark") in the aggregate
amount of Seven Hundred and Fifty Thousand Dollars ($750,000), the repayment of
which is secured by a security interest in certain accounts receivable of
Commerce One, in accordance with the Settlement Agreement, dated as of June 6,
2003, by and between Commerce One and CambridgePark. For the purposes hereof,
"Permitted Liens" shall mean (i) liens for taxes, fees, assessments or other
government charges or levies, either not delinquent or being contested in good
faith and for which Debtors maintain adequate reserves, (ii) carriers',
warehousemen's, mechanics', materialmen's, repairmen's or other like liens
arising in the ordinary course of Debtors' respective business which are not
overdue for a period of more than thirty (30) days of which are being contested
in good faith and by appropriate proceedings if adequate reserves with respect
thereto are maintained by Debtors; (iii) liens to secure payment of workers'
compensation, employment insurance, old age pensions, social security or other
like obligations incurred in the ordinary course of Debtors' respective
businesses; (iv) deposits to secure performance of bids, trade contracts (other
than for borrowed money), contracts for the purchase or property, leases,
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature, in each case, incurred in the ordinary course of
the Debtors' respective businesses and not representing an obligation for
borrowed money; (v) easements, rights-of-way, restrictions and other similar
encumbrances affecting real property which, in the aggregate, are not
substantial in amount, and which do not in any case materially detract from the
value of the property subject thereto or materially interfere with the ordinary
conduct of the Debtors' respective businesses; (vi) liens arising by virtue of
any contractual (which shall be subject to standard and customary terms used in
the banking industry), statutory or common law provision relating to banker's
liens, rights or set-off
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or similar rights and remedies as to deposit accounts or other funds maintained
with a creditor depository institution ; (vii) licenses and sublicenses granted
in the ordinary course of business, (viii) liens (including with respect to
capital leases) on property (including accessions, additions, parts,
replacements, fixtures, improvements and attachments thereto, and the proceeds
thereof) acquired or held by either or both Debtors or their respective
subsidiaries incurred for financing equipment, so long as such lien is confined
to such equipment (including accessions, additions, parts, replacements,
fixtures, improvements and attachments thereto and the proceeds thereof), and
(ix) the liens securing the CambridgePark Indebtedness.
2. Collateral. The Collateral shall consist of the following:
(a) all tangible and intangible assets of both Debtors used in
connection with the development, operation and maintenance of that portion of
the Debtors' business that provides supplier relationship management (SRM)
business process applications (the "SRM Business"), including but not limited to
(i) inventory, both now owned and hereafter acquired, including raw materials,
work in process, finished goods, supplies and other tangible personal property
held for sale or lease or furnished or to be furnished under contracts of
service or used or consumed in the SRM Business, and any additions and accession
thereto and substitutions and replacements for any thereof, wherever located,
(ii) Debtors' intangible personal property, cash on hand and cash in and
deposits with banks or other financial institutions, whether now owned or
hereafter acquired, including, without limitation, all accounts, contract
rights, goods, chattel paper, documents, instruments and general intangibles;
all tax refunds to which either Debtor may be or become entitled in connection
with the SRM Business; (iii) all existing and future accounts receivable of the
Debtors and their respective direct and indirect subsidiaries in connection with
the SRM Business; (iv) all contracts, shares of stock, bonds, notes, evidences
of indebtedness and other securities, bills, notes, interests in life insurance
policies, copyrights, goodwill, trade names, trademarks, trademark applications,
patents, patent applications, copyrights, blue prints, drawings, claims,
credits, choses in action, licenses, permits, franchises and grants, any and all
tangible and intangible products, discoveries, developments, designs,
improvements, inventions, formulas, processes, techniques, know-how, data and
software source code whether or not registrable or patentable under statute,
whenever made, conceived, reduced to practice, learned or developed by or for
the Debtors in connection with the SRM Business; and (v) all other real,
personal and mixed (tangible and intangible) property and rights related
thereto, of every character and wherever situated, now owned and hereafter
acquired by the Debtors, including, without limitation, equipment, machinery,
vehicles, tools, furniture, fixtures, all attachments, accessions and other
property used in connection with the SRM Business, all additions, enlargements,
extensions, modifications, repairs, substitutions and replacements thereof,
wherever located (collectively, the "SRM Assets");
(b) all rights and obligations of Operations under the
promissory notes, dated January 24, 2003, issued by eScout LLC and eScout
Acquisition LLC (a/k/a Perfect Commerce) in favor of Operations, in the
aggregate principal amount of Two Million One Hundred Eighty-Two Dollars
($2,000,182) (together, the "Perfect Commerce Note");
(c) all present and future books of account of the Debtors of
every kind or nature, invoices, purchase and sale agreements, ledger cards,
bills or lading and other
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shipping evidence, statements, correspondence, memoranda, credit files and other
data relating to the SRM Business or the Perfect Commerce Note, together with
tapes, disks, diskettes and other data and software storage media and devices,
file cabinets or containers in which the foregoing are stored; and
(d) all products and proceeds of the foregoing, in any form,
including, without limitation, insurance proceeds for property damage or
personal injury related to the SRM Business and all claims against third parties
for loss or damage to or destruction of any of the foregoing.
Notwithstanding the foregoing, the security interest granted herein does not
extend to, and the term "Collateral" does not include, (i) any license or
contract rights to the extent the granting of a security interest in it would be
contrary to applicable law or that such rights are nonassignable by their terms
(but only to the extent such prohibition is enforceable under applicable law)
without the consent of the licensor or other party (but only to the extent such
consent has not been obtained) (ii) the assets identified on the Disclosure
Letter attached hereto and hereby made a part hereof and (iii) that portion (if
any) of the capital stock (or other equity interests of such subsidiary) owned
by Debtors with a jurisdiction of formation located outside of the United States
that is in excess of Sixty-Five Percent (65%) of the aggregate issued and
outstanding capital stock (or other equity interests of such subsidiary) .
3. Payment Obligations of the Debtors.
(a) The Debtors shall, to the extent applicable to each of
them, pay to the Purchasers any sum or sums due or which may become due pursuant
to the Note, the Guaranty, the Pledge Agreement or this Agreement, payable to
the order of each of the Purchasers in the principal amount, together with
accrued interest thereon, in accordance with the terms of the Notes. The Debtors
shall also perform and discharge in full of all of their other respective
Obligations.
(b) Debtors shall account fully and faithfully to the Secured
Party for proceeds from disposition of the Collateral in any manner, as
reasonably requested by the Secured Party, and, following an Event of Default
(as defined below) hereunder, shall pay or turn over promptly in cash,
negotiable instruments, drafts, assigned accounts or chattel paper all the
proceeds from each sale to be applied to Debtors' respective Obligations to the
Secured Party, subject, if other than cash, to final payment or collection. The
manner in which such proceeds are applied to the Obligations shall be in the
sole discretion of the Secured Party, provided such application of proceeds is
made by the Secured Party in good faith and in accordance with Section 7 hereof.
(c) Following an Event of Default hereunder, the Debtors shall
pay to the Secured Party on demand all reasonable expenses and expenditures
(including, but not limited to, reasonable fees and expenses of legal counsel)
incurred or paid by the Secured Party in exercising or protecting its interests,
rights and remedies under this Agreement, plus penalties thereon at the lesser
of (i) the per diem rates described in the Note or (ii) the highest rate of
interest then allowed by law.
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(d) If requested by the Secured Party, the Debtors shall pay
immediately the entire unpaid principal amounts of the Note, together with
accrued interest thereon, to the Purchasers whether created or incurred pursuant
to this Agreement or otherwise, upon the occurrence and during the continuance
of an Event of Default hereunder.
4. Representations, Warranties and Covenants of the Debtors. Each of
the Debtors hereby represents and warrants to, and covenants with, the
Purchasers and the Secured Party that:
(a) All information supplied and statements made by such
Debtor in any financial, credit or accounting statement or provided to the
Purchasers and/or the Secured Party prior to, contemporaneously with or
subsequent to the execution of this Agreement are and shall be true, correct,
complete, valid and genuine in all material respects as of the date made.
(b) Subject to Section 8 hereof and as otherwise set forth in
the Pledge Agreement, the Collateral shall remain in such Debtor's possession or
control at all times at such Debtor's risk of loss until (i) sold, licensed or
otherwise disposed of in the ordinary course of business or as otherwise
contemplated by the Purchase Agreement and Note, provided that the Secured Party
shall be granted a security interest in the proceeds and other consideration
received for such Collateral in accordance with Section 2 hereof, or (ii) as
authorized in writing by the Secured Party.
(c) Subject to Section 8 hereof, until an Event of Default,
such Debtor may use the Collateral in any lawful manner not inconsistent with
this Agreement or with the terms or conditions of any policy of insurance
thereon and may also sell, license or otherwise dispose of the Collateral in the
ordinary course of business or as otherwise contemplated by the Purchase
Agreement and Note. The Secured Party's security interest shall attach to all
proceeds of sales, licenses and other dispositions of the Collateral in
accordance with Section 2 hereof.
(d) Such Debtor shall promptly notify the Secured Party in
writing of any change in the location of its chief executive office and
principal place of business as set forth in the introduction to this Agreement.
(e) Such Debtor shall pay prior to delinquency all material
taxes, charges, liens and assessments against the Collateral, except those that
such Debtor is contesting in good faith and for which adequate accruals have
been made, and upon such Debtor's failure to do so after ten (10) days' prior
written notice, the Secured Party at its option may pay any of them and shall be
the sole judge of the legality or validity thereof and the amount necessary to
discharge the same. Such payment shall become part of the Obligations secured by
this Agreement and shall be paid to the Purchasers by such Debtor immediately
and without demand, with interest thereon at the rate set forth in Section 3(c)
hereof.
(f) Such Debtor shall have and maintain insurance at all times
with respect to all Collateral against risks of fire, theft and such other risks
as is reasonable for its business and as the Secured Party may reasonably
require (but in no event shall such Debtor be obligated to insure such
Collateral in an amount greater than the replacement value thereof), including
extended coverage. Within ten (10) days after the date hereof, such Debtor shall
amend such insurance policies to contain a standard mortgagee's endorsement
providing for payment of any
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loss to the Secured Party and to provide for twenty (20) days' written minimum
cancellation notice to the Secured Party. Following an Event of Default, subject
to the provisions of Section 7 hereof, the Secured Party may act as attorney for
such Debtor in obtaining, adjusting, settling and canceling such insurance and
endorsing any drafts drawn by insurers of the Collateral. The Secured Party may
apply any proceeds of such insurance which may be received by it in payment on
account of the obligations secured hereby, whether due or not.
(g) Such Debtor shall, at its own expense, do, make, procure,
execute and deliver all acts, things, writings and assurances as the Secured
Party may at any time reasonably request to protect, assure or enforce its
interests, rights and remedies created by, provided in or emanating from this
Agreement, including with respect to filings with the Patent and Trademark
Office. Such Debtor shall execute financing statements and take whatever other
actions are reasonably requested by the Secured Party to perfect and continue
the Secured Party's security interests in the Collateral. In addition, such
Debtor shall use its best efforts to take all appropriate action (including but
not limited to all appropriate action requested by the Secured Party) to perfect
the Secured Party's security interest for any liens which may not be perfected
by the filing of a Form UCC-1 (including but not limited to filings with the
U.S. Patent and Trademark Office). Prior to an Event of Default and upon the
reasonable request of the Secured Party for purposes of perfection only, such
Debtor shall deliver to the Secured Party any and all of the documents
evidencing or constituting the Collateral, and such Debtor shall note the
Secured Party's interests upon any and all of such documents if not delivered to
the Secured Party for possession by it. Further, such Debtor hereby agrees not
to take any action or, to its knowledge, omit to any action, that would cause
the security interests granted hereby to be or become unperfected. Upon the
occurrence and during the continuance of an Event of Default and upon the
reasonable request of the Secured Party for purposes of enforcing the Secured
Party's rights hereunder, such Debtor shall deliver to the Secured Party any and
all of the documents evidencing or constituting the Collateral. Such Debtor
hereby agrees that a carbon, photographic, photostatic or other reproduction of
this Agreement or of a financing statement is sufficient as a financing
statement where permitted by law.
(h) Except in the ordinary course of business, as provided for
in this Agreement, the Purchase Agreement or the Note or as otherwise authorized
by the Secured Party in writing by a Majority Vote (as defined in Section 9
hereof), such Debtor shall not sell, lend, license, rent, lease or otherwise
dispose of the Collateral or any interest therein, and such Debtor shall keep
the Collateral, including the proceeds thereof, free from unpaid charges,
including taxes, and from liens, encumbrances and security interests other than
the security interests created by this Agreement in favor of the Secured Party
(and Permitted Liens) .
(i) Such Debtor shall keep accurate and complete records of
the Collateral and its proceeds.
(j) Such Debtor has good and valid rights in and title to the
Collateral and has the full power and authority to grant to the Secured Party
the security interests in the Collateral created by this Agreement and to
execute, deliver and perform its obligations in accordance with the terms of
this Agreement, without the consent or approval of any other person other than
any consent or approval that has been obtained.
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(k) Except as set forth on Schedule 4(k) hereof, such Debtor
is the owner of the Collateral free of all liens, claims and encumbrances,
except (i) the security interest created by this Security Agreement and granted
in favor of the Secured Party and (ii) the Permitted Liens.
(l) Except as set forth on Schedule 4(l), with respect to any
and all Collateral, such Debtor has not obtained and is not in the process of
applying for any patents, trademarks or copyrights in the United States
Copyright Office, the Patent and Trademark Office (or other foreign
jurisdictions related to such filings). Such Debtor shall notify the Secured
Party at least thirty (30) days prior to the filing of any initial patent,
trademark or copyright applications with respect to the Collateral and will
provide the Secured Party with all information necessary to assist the Secured
Party in perfecting its security interest in the Collateral prior to the filing
of any patent, copyright or trademark applications.
(m) Such Debtor agrees that the Secured Party holds the
Collateral as agent for the Purchasers, and is hereby authorized to and may turn
over to the Purchasers upon request therefor any such Collateral after all
obligations and indebtedness of Debtors to the Secured Party have been fully
paid and performed. Notwithstanding the foregoing, the Debtors hereby
acknowledge and agree that in terms of payments in respect of the Notes and from
the proceeds of any Collateral, each Purchaser shall be treated ratably in
accordance with its pro rata share of the Notes based upon the ratio of the then
outstanding principal amount of Purchaser's Note to the outstanding principal
balance of all of the Notes ("Pro Rata Share") and the Debtors shall execute and
deliver such additional documents and take such additional action as may be
necessary or desirable in the reasonable opinion of the Secured Party to
effectuate the provisions and purposes of the provisions of Section 7 hereof.
(n) As to that portion of the Collateral which is accounts,
such Debtor represents, warrants and agrees with respect to each such account
that:
(i) The account arose from the performance of
services by such Debtor which have been performed or from the
lease or the absolute sale of goods or provision of services
by such Debtor in which such Debtor had the sole and complete
ownership, and the goods or services have been delivered or
provided to, as the case may be, the account debtor.
(ii) The account is not subject to any prior
or subsequent assignment, claim, lien or security interest
other than (i) the security interest created by this Security
Agreement and granted in favor of the Secured Party and (ii)
the Permitted Liens.
(iii) The account arose in the ordinary
course of such Debtor's business, and no notice of bankruptcy,
insolvency or financial embarrassment of the account debtor
has been received by such Debtor.
(o) The assets listed on the Disclosure Letter attached hereto
are not used primarily in the SRM Business.
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(p) Upon the occurrence of an Event of Default, and upon the
request of the Secured Party, the Debtors shall use their best efforts (with the
cooperation of the Secured Party) to obtain the consent of eScout LLC and eScout
Acquisitions LLC to transfer the Perfect Commerce Note to the Secured Party.
5. Events of Default. The Debtors shall be in default under this
Agreement upon the happening of any condition or event set forth below (each, an
"Event of Default"):
(a) The occurrence of any Event of Default (as defined in the
Notes) that is not cured within any applicable cure period;
(b) Failure of Operations to pay any amounts due under the
Guaranty as and when due;
(c) Application for, or consent to, the appointment of a
receiver, trustee or liquidator for Operations or any of its properties;
(d) Filing by Operations of a voluntary petition in bankruptcy
or a petition or an answer seeking reorganization or an arrangement with
creditors;
(e) The entry against Operations of a court order approving a
petition filed against it under the federal bankruptcy laws, which order shall
not have been vacated or set aside or otherwise terminated within sixty (60)
days;
(f) With respect to any instrument or agreement for borrowed
money to which Operations is a party, (i) an event of default has occurred and
has been declared by any third party to such instrument or agreement, the amount
of the declared default exceeds Fifty Thousand Dollars ($50,000), and such third
party has accelerated any payments due under such instrument or agreement or
(ii) an event of default has occurred and has been declared by any third party
to such instrument or agreement, the amount of the declared default exceeds
Three Hundred Thousand Dollars ($300,000), and Operations is not actively
disputing such declaration of default after making a good faith determination,
with advise of its legal counsel, that such amount is not due and that
Operations has valid and reasonable defenses against non-payment of such amount;
(g) Operations agrees to pay in full settlement of any
litigation, proceeding or action, or a judgment is entered by a court of
competent jurisdiction with respect to any litigation, proceeding or action
involving Operations (other than any settlement entered into or judgment entered
with respect to obligations incurred by Operations in the ordinary course of
business and which were accrued for on the balance sheet of Operations in the
ordinary course of business), of at least Five Hundred Thousand Dollars
($500,000) in any one instance or One Million One Hundred Thousand Dollars
($1,100,000) in the aggregate, in each case that is not covered by any insurance
maintained by Operations
(h) The security interest created hereunder shall cease to be
a valid
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first priority security interest in the Collateral (subject to the Permitted
Liens);
(i) Any material provision of this Agreement, the Purchase
Agreement or any other
Closing Documents for any reason ceases to be valid, binding and enforceable in
accordance with its terms (or Commerce One or Debtor shall challenge the
enforceability of any such document); or
(k) The creation of any liens (other than (i) the security
interest created by this Agreement and granted in favor of the Secured Party or
(ii) the Permitted Liens) without the prior written consent of the Secured Party
in accordance with Section 9 hereof.
6. Secured Parties' Rights and Remedies.
(a) Rights Exclusive of Default. Until the termination of this
Agreement, upon reasonable notice to the Debtors:
(i) The Secured Party may enter each Debtor's
premises at any reasonable time during such Debtor's usual
business hours without interruption of such Debtor's business
and without any breach of the peace to inspect the Collateral
and such Debtor's books and records pertaining to the
Collateral, and such Debtor shall assist the Secured Party in
making any such inspection; and
(ii) At its option, the Secured Party may (x) agree
to discharge taxes, liens or security interests or other
encumbrances at any time levied or placed on the Collateral;
(y) pay for the insurance on the Collateral; and (z) pay for
the maintenance and preservation of the Collateral. Such
Debtor agrees to reimburse the Secured Party on demand for any
payment made, or expense incurred by the Secured Party
pursuant to the foregoing authorization, plus interest thereon
at the rate set forth in Section 3(c) hereof, and will
indemnify and hold the Secured Party harmless from and against
liability in connection therewith.
(b) Rights in Event of Default. In addition to any other
rights which the Secured Party may have at law or hereunder, upon the occurrence
and during the continuation of an Event of Default, and at any time thereafter
that such Event of Default remains uncured, the Secured Party may:
(i) Declare all obligations secured hereby
immediately due and payable and shall have the rights and
remedies of a "secured party" under the UCC in effect in the
local jurisdiction where the Collateral is located, including,
without limitation, the right to sell, lease or otherwise
dispose of any or all of the Collateral and the right to take
possession of the Collateral, and for that purpose the Secured
Party may enter any premises on which the Collateral or any
part thereof may be situated and remove the same therefrom, so
long as the same may be accomplished without a breach of the
peace. The Secured Party may require the Debtors to assemble
the Collateral and, to the extent reasonably practicable, make
it available to the Secured Party at a place to be designated
by the Secured Party which is reasonably convenient to the
parties and thereafter hold the
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Collateral absolutely free from any claim or right whatsoever,
and such demand, notice and right or equity being hereby
expressly waived and released. Unless the Collateral threatens
to decline speedily in value or is of a type customarily sold
on a recognized market, the Secured Party will send the
Debtors reasonable notice of the time and place of any public
sale thereof or of the time after which any private sale or
other disposition thereof is to be made. The requirement of
sending reasonable notice shall be met if such notice is given
to the Debtors at least ten (10) days before the time of the
sale or disposition. Expenses of retaking, holding, preparing
for sale, selling or the like shall include the Secured
Party's reasonable fees and expenses (including, but not
limited to, reasonable fees and expenses of legal counsel),
and the Debtors agree to pay such reasonable fees and
expenses, plus interest thereon at the rate set forth in
Section 3(c) hereof. The Debtors shall remain jointly and
severally liable for any deficiency hereunder or under the
Note;
(ii) Execute, sign, endorse, transfer or deliver in
the name of the Debtors, notes, checks, drafts or other
instruments for the payment of money and receipts,
certificates of origin, applications for certificates of title
or any other documents, necessary to evidence, perfect or
realize upon the security interest and obligations created by
this Agreement.
(iii) With respect to any such asset constituting
Collateral, notify the account of debtors or obligors of any
accounts, chattel paper, negotiable instruments or other
evidences of indebtedness remitted by the Debtors to the
Secured Party as proceeds to pay the Secured Party directly;
(iv) Demand, xxx for, collect or make any compromise
or settlement with reference to the Collateral as the Secured
Party, in its sole discretion, chooses; and
(v) Remedy any default and may waive any default
without waiving or being deemed to have waived any other prior
or subsequent default.
(c) Private Sale. The Secured Party shall not incur any
liability as a result of a private sale of the Collateral, or any part thereof,
at any sale pursuant to Section 6(b) hereof conducted in good faith. The Debtors
hereby waive any claims against the Secured Party arising by the reason of the
fact that the price at which the Collateral, as the case may be, may have been
sold at such private sale was less than the price that might have been obtained
at a public sale or was less than the aggregate amount of the Obligations, even
if the Secured Party accepts the first offer received and does not offer the
Collateral to more than one offeree.
(d) Deficiency. If the proceeds of sale, collection or other
realization of or upon the Collateral pursuant to this Section 6 are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Obligations, the Debtor shall remain liable for any deficiency.
7. Intercreditor Arrangement.
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(a) ComVest Investment Partners II LLC, as the "Administrative
Agent" agrees, as to the certain rights and priorities of each with respect to
the Obligations and with respect to their respective liens upon and security
interest in the Collateral, to provide for the orderly sharing among the Secured
Party of the proceeds of such Collateral upon any foreclosure thereon or other
disposition thereof, to the intercreditor arrangement set forth in this Section
7.
(b) Payments Held in Trust/Turnover; Application of Payments.
(i) In the event that any payment or distribution of
assets of the Debtors, whether in cash, property or
securities, which is prohibited by this Agreement, the Notes,
the Warrants, the Purchase Agreement, the Registration Rights
Agreement, the Guaranty, the Pledge Agreement or the other
Closing Documents, shall be received by a Purchaser in
contravention of such Closing Documents such payment or
distribution shall be held in trust for the benefit of and
shall be paid over to or delivered to the other Secured Party
for application in accordance with the terms hereof.
(ii) All payments of principal, interest, fees and
expenses after the issuance of the Notes, and proceeds of the
Collateral shall be apportioned ratably among the Secured
Party, in accordance with each Purchaser's Pro Rata Share.
(c) Permitted Liens and Relative Priorities. As among the
Purchasers, and notwithstanding the terms (including the description of
Collateral), dating, execution, or delivery of any document, instrument, or
agreement; the time, order, method, or manner of granting, attachment or
perfection of any security interest or lien; the time of filing or recording of
any financing statements, assignments, deeds of trust, mortgages, or any other
documents, instruments, or agreements under the UCC or any other applicable law,
and any provision of the UCC or any other applicable law to the contrary, the
Purchasers agree that the Administrative Agent not individually, but on behalf
of all of the Purchasers, shall have a security interest in and lien upon the
Collateral. For purposes of the foregoing allocation of priorities, any claim of
a right to a setoff shall be treated in all respects as a security interest and
no claimed right of setoff shall be asserted to defeat or diminish the rights or
priorities provided for herein.
(d) No Alteration of Priority. The lien and security interest
priorities provided in Section 7(c) hereof shall not be altered or otherwise
affected by any amendment, modification, supplement, extension, renewal,
restatement or refinancing of any of the Obligations nor by any action or
inaction which the Administrative Agent may take or fail to take in respect of
the Collateral.
(e) Nonavoidability and Perfection. The provisions of this
Section 7 are intended solely to govern the respective priorities as among the
Purchasers. Each Purchaser agrees that it will not directly or indirectly take
any action to contest or challenge the validity, legality, perfection, priority,
availability, or enforceability of the liens of the other Purchasers or the
Administrative Agent upon the Collateral or seek to have the same avoided,
disallowed, set aside, or otherwise invalidated in any judicial proceeding or
otherwise. In the event that any other Purchaser (either individually or
together with others) breaches or causes to be breached the terms of the
preceding sentence, resulting (directly or indirectly) in the avoidance or
11
imperfection of the Administrative Agent's lien or security interest held on
behalf of all of the Purchasers in some or all of the Collateral, then the
priority of the lien or security interest of the Secured Party in any such
affected Collateral shall continue to be governed by the terms of Section 7(c)
hereof irrespective of the avoidance or imperfection of the Administrative
Agent's lien or security interest held on behalf of all of the Purchasers.
(f) Management of Collateral. Notwithstanding anything to the
contrary contained in any of the Notes (with respect to provisions addressing
management of Collateral only):
(i) Until the Notes have been paid in full and
subject to the remaining provisions of this Section 7: (i) the
Administrative Agent, on behalf of the Purchasers, shall have
the exclusive right to manage, perform, and enforce the terms
of the Closing Documents with respect to the Collateral and to
exercise and enforce all privileges and rights thereunder in
its reasonable discretion and its exercise of its business
judgment, including, without limitation, the exclusive right
to enforce or settle insurance claims with respect to
Collateral, take or retake control or possession of Collateral
and to hold, prepare for sale, process, sell, lease, dispose
of, or liquidate Collateral; (ii) none of the Purchasers shall
exercise or take any action in furtherance of the sale,
foreclosure, realization upon, or the repossession or
liquidation of any of the Collateral, including, without
limitation: (A) the exercise of any remedies or rights of a
"Secured Creditor" under Article 9 of the UCC, such as,
without limitation, the notification of account debtors; (B)
the exercise of any remedies or rights as a mortgagee or
beneficiary (or by the trustee on behalf of the beneficiary),
including, without limitation, the appointment of a receiver,
or the commencement of any foreclosure proceedings or the
exercise of any power of sale, including, without limitation,
the placing of any advertisement for the sale of any
Collateral; (C) the exercise of any remedies available to a
judgment creditor; or (D) any other remedy available in
respect of the Collateral available to such Secured Creditor
under any of the Closing Documents (the "Secured Party
Remedies") with respect to Collateral; and (iii) any and all
proceeds of Collateral which shall come into the possession,
control, or custody of the Secured Party will be deemed to
have been received for the account of the Administrative Agent
and all other Purchasers, and shall be immediately paid over
to the Administrative Agent for application in accordance with
the provisions hereof. Each Purchaser waives any and all
rights to affect the method or challenge the appropriateness
of any action by the Administrative Agent with respect to the
Collateral other than actions arising out of the gross
negligence or willful misconduct of the Administrative Agent,
and waives any claims or defenses they may have against the
Administrative Agent, including any such claims or defenses
based on any actions or omissions of any such person in
connection with the perfection, maintenance, enforcement,
foreclosure, sale, liquidation or release of any lien or
security interest therein, or any modification or waiver of
the Closing Documents specifically relating to the management
of the Collateral other than those arising out of the gross
negligence or willful misconduct of the Administrative Agent.
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(ii) The rights and priorities set forth in this Section 7
shall remain binding irrespective of the terms of any plan of
reorganization in any proceeding commenced by or against the
Debtor under any provision of the United States Bankruptcy
Code (11 U.S.C. ss. 101, et seq.), as amended, and any
successor statute (the "Bankruptcy Code") or under any other
federal or state bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal
moratoria, compositions, extensions generally with its
creditors, or proceedings seeking reorganization, arrangement,
or other similar relief, and all converted or succeeding cases
in respect thereof (the "Bankruptcy Case") or other provisions
of the Bankruptcy Code or any similar federal or state
statute.
(g) Sale of Collateral. Until the Notes have been paid in
full, only the Administrative Agent on behalf of the Purchasers shall have the
right to restrict or permit, or approve or disapprove, the sale, transfer or
other disposition of the Collateral; provided, that the proceeds of any given
sale shall be applied to the Obligations of each Purchaser in accordance with
its Pro Rata Share and no such sale, transfer or other disposition shall be
consented to by the Administrative Agent with respect to all or substantially
all of the Collateral without the consent of the Secured Party by a Majority
Vote (as defined in Section 9 hereof).
(h) Sections 9-504 and 9-505 Notice and Waiver of Marshalling.
Each Purchaser hereby acknowledges that this Agreement shall constitute notice
of the other Purchaser's respective interests in the Collateral as provided by
Sections 9-504 and 9-505 of the UCC and each of the Purchasers waives any right
to compel the other Purchaser to marshal any of the Collateral or to seek
payment from any particular assets of Debtors or from any third party.
(i) Bankruptcy Issues.
(i) Except as provided in this Section 7(j), this
Section 7 shall continue in full force and effect after the
commencement of a Bankruptcy Case and shall apply with full
force and effect with respect to all Collateral acquired by
Debtors, and to all Indebtedness incurred by the Debtors,
subsequent to such commencement to the extent consented to by
the Purchasers.
(ii) If either Debtor shall become subject to a
Bankruptcy Case, and if the Administrative Agent shall desire
to permit the use of cash collateral or to provide
post-petition financing to such Debtor, the Administrative
Agent shall obtain the prior written consent of the Purchasers
by a Majority Vote (as defined in Section 9 hereof) for such
use of cash collateral or post-petition financing. No
objection will be raised by the Purchasers to the
Administrative Agent's motion for relief from the automatic
stay in any proceeding under the Bankruptcy Code to foreclose
on and sell the Collateral.
(iii) In any Bankruptcy Case by or against the
Debtor,
(A) the Administrative Agent may, and is
hereby irrevocably authorized and empowered (in its
own name or in the name of the
13
Purchasers or otherwise), but shall have no
obligation, to, (1) demand, xxx for, collect and
receive every payment or distribution in respect of
the Indebtedness and give acquittance therefor and
(2) file claims and proofs of claim in respect of all
of the Indebtedness and take such other action
(including, without limitation, voting all of the
Indebtedness or enforcing any security interest or
other lien securing payment of all of the
Indebtedness) as the Administrative Agent may
reasonably deem necessary or advisable for the
exercise or enforcement of any of the rights or
interests of the Administrative Agent and the
Purchasers; provided, that if the Administrative
Agent elects not to do any of the foregoing it shall
notify each Purchaser in writing in a manner such
that such notice is received by the Purchasers on a
date no less than ten (10) business days prior to the
date any such action is required to be taken under
applicable law and regulation and each Purchaser may
take all actions necessary thereunder consistent with
the terms of this Security Agreement; and
(B) the Purchasers will duly and promptly
take such action as the Administrative Agent may
reasonably request (1) to collect the Indebtedness
and to file appropriate claims or proofs of claim
with respect thereto, (2) to execute and deliver to
the Administrative Agent such powers of attorney,
assignments or other instruments as the
Administrative Agent may request in order to enable
it to enforce any and all claims with respect to, and
any security interests and other liens securing
payment of, the Indebtedness, and (3) to collect and
receive any and all payments or distributions which
may be payable or deliverable upon or with respect to
the Indebtedness for application to the Purchasers in
accordance with this Security Agreement.
(j) Notice of Default and Certain Events. Each Purchaser shall
send written notice to the other Purchasers upon the occurrence of any of the
following as applicable: (a) a request to the Administrative Agent that the
Administrative Agent declare any default under such Closing Document, (b) a
request to the Administrative Agent that the Administrative Agent accelerate any
Indebtedness, or (c) the intention of such Purchaser to exercise any of its
enforcement rights or remedies. Each such notice shall be sent to the other
Purchasers contemporaneously with the sending of such notice to Debtors if and
when sent under the applicable Closing Document. The failure of any Purchaser to
give such notice shall not affect the relative lien or security interest
priorities or the other privileges of such Purchaser as provided in this
Security Agreement or give rise to any liability.
(k) Bailment. With respect to any Collateral in which a
security interest may be perfected under the UCC or other relevant law only by
possession ("Possessory Collateral"), the Administrative Agent will act as
pledgeholder for the Purchasers until the payment in full in cash of the
Indebtedness. Each Purchaser acknowledges and agrees that: (i) the
Administrative Agent makes no representation or warranty whatsoever as to the
nature, extent, description, validity or priority of any Possessory Collateral
or the security interests in or liens upon any Possessory Collateral; (ii) while
any Possessory Collateral is held by the Administrative Agent, the
Administrative Agent shall not have any liability to, and shall be held harmless
by, the
14
Purchasers, for any losses, damages, claim, or liability of any kind to the
extent arising out of the holding of such Possessory Collateral, other than
losses, damages, claims, or liabilities arising out of the Administrative
Agent's gross negligence or willful misconduct; (iii) the Administrative Agent
need not act as a pledgeholder for the Purchasers with respect to any Collateral
in which a security interest may be perfected by means other than possession;
(iv) the Purchasers shall immediately deliver to the Administrative Agent any
Possessory Collateral that is now or in the future comes into their possession
to be held by the Administrative Agent pursuant to the terms hereof; and (v) the
claim of each of the Purchasers in the security interests in and liens upon the
Possessory Collateral shall be governed by the terms of this Security Agreement.
(l) Authority of Agents/Trustees. Each of the Purchasers
agrees that any assignment or transfer of an interest in any of the Indebtedness
held by it shall be made expressly subject to the terms and conditions of this
Security Agreement.
(m) Successor Administrative Agent. The Administrative Agent
may resign and be discharged from all further duties and obligations hereunder
by giving each of the Purchasers thirty (30) days prior written notice or such
shorter notice period as may be agreed between the Administrative Agent and the
Purchasers. In addition, the Administrative Agent may be removed at any time by
the Purchasers by a Majority Vote (as defined in Section 9 hereof). Upon the
resignation or removal of the Administrative Agent, a successor Administrative
Agent shall be elected by the Purchasers by a Majority Vote (as defined in
Section 8 hereof). Upon the appointment of a successor Administrative Agent, all
of the resigning or removed Administrative Agent's liens or security interests
held on behalf of all of the Purchasers in some or all of the Collateral shall
be assigned to the successor Administrative Agent, and the resigning or removed
Administrative Agent shall do all acts necessary or appropriate to accomplish
the above to vest in the successor Administrative Agent all of the powers of the
resigning or removed Administrative Agent.
Section 8. Termination of Security Interests; Release of Collateral.
(a) Upon the earliest to occur of (i) a termination event set
forth in Section 4(b) of the Notes, (ii) the Conversion of the Note, or (iii)
payment in full of all Obligations, the security interest created hereunder
shall terminate and all rights in the Collateral, except to the extent applied
in payment of the Obligations, shall revert to the Debtors.
(b) Upon any such termination of the security interests or
release of Collateral, the Secured Party will, at the Debtors' expense, execute
and deliver to the Debtors such documents as the Debtors shall reasonably
request to evidence the termination of the security interest and/or the release
of such Collateral, as the case may be.
(c) The Secured Party further agrees to execute without fee or
charge (other than reasonable attorney's fees) any releases, acknowledgements or
waivers reasonably requested by the Debtors in connection with the sale or
encumbrance by Debtors of any asset that does not constitute Collateral.
15
9. Modification of Agreement. Except as otherwise expressly provided by
this Agreement, the Administrative Agent is hereby authorized to take all
actions as the Secured Party under this Agreement (including, without
limitation, issuing any consents or approvals), and the Debtors are entitled to
rely on any certification, notice or other communications from the
Administrative Agent which the Debtors believe to be genuine and correct and to
have been signed or sent by or on behalf of the Administrative Agent; provided,
however, that no modification, amendment or waiver of any provision of, this
Agreement, nor any consent to any departure by the Debtors herefrom, shall in
any event be effective unless the same shall be in writing by the Administrative
Agent at the direction of a majority in aggregate principal amount of
then-outstanding Notes under the Purchase Agreement (the "Majority Vote") and
then such modification, amendment, waiver or consent shall be effective only in
the specific instance and for the purpose given; provided, further, however,
that, without the written consent of each Purchaser affected thereby, no such
action shall (i) reduce the amount of principal or required principal payments
due to each holder of Notes beyond one (1) year; (ii) reduce the rate of
interest payable to the Purchasers; or (iii) postpone any date fixed for payment
of principal. No notice to or demand on the Debtors in any case shall entitle
the Debtors to any other or further notice or demand in the same, similar or
other circumstances. When any amendment, modification or waiver to this
Agreement, the Notes, the Warrants, or the Purchase Agreement, the Guaranty, the
Registration Rights Agreement, the Pledge Agreement or other Closing Documents
is made in accordance with the terms of this Section 9, such amendment,
modification or waiver shall be enforceable against each Purchaser or the
Purchasers, as applicable, as if such Purchaser or Purchasers, as applicable,
had signed such amendment, modification or waiver. The terms of this Agreement
may be amended, modified or waived only in a written instrument signed by the
party against whom enforcement may be sought.
10. Remedies Cumulative, etc. No right, power or remedy herein
conferred upon or reserved to the Administrative Agent or the Purchasers is
intended to be exclusive of any other right, power or remedy or remedies, and
each and every right, power and remedy of the Administrative Agent or the
Purchasers pursuant to the Closing Documents or now or hereafter existing at law
or in equity or by statute or otherwise shall, to the extent permitted by law,
be cumulative and concurrent and shall be in addition to every other right,
power or remedy pursuant to this Agreement or the Notes, now or hereafter
existing at law or in equity or by statute or otherwise, and the exercise or
beginning of the exercise by the Administrative Agent or the Purchasers of any
one or more of such rights, powers or remedies shall not preclude the
simultaneous or later exercise by the Administrative Agent and the Purchasers of
any or all such other rights, powers or remedies.
11. No Waiver, etc. To the fullest extent permitted by law, no failure
or delay by the Administrative Agent or the Purchasers to insist upon the strict
performance of any term, condition, covenant or agreement of this Agreement, the
Purchase Agreement, the Notes, the Warrants, the Guaranty, the Pledge Agreement,
the Registration Rights Agreement, or the other Closing Documents, or to
exercise any right, power or remedy hereunder or thereunder or consequent upon a
breach hereof or thereof, shall constitute a waiver of any such term, condition
covenant, agreement, right, power or remedy or of any such breach, or preclude
the Administrative Agent or the Purchasers from exercising any such right, power
or remedy at any later time or times.
16
12. Notices. All notices, demands, requests, consents, approval or
instructions hereunder shall be in writing and delivered personally, sent by
registered or certified mail, postage prepaid, by nationally recognized
overnight courier service, or by telecopy (or like transmission), as follows:
(1) if to the Debtor:
Xxx Xxxxxx Xxxxxx
Xxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attn: General Counsel
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attn: N. Xxxxxxx Xxxxxxxx, Esq.
(2) if to the Secured Party
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxxxxx
with a copy to:
Xxxxxxxxx Traurig, LLP
The MetLife Building
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Annex, Esq.
Any notice personally delivered shall be deemed to be given upon delivery. Any
notice so addressed and mailed shall be deemed to be given when so mailed. Any
notices addressed and otherwise delivered shall be deemed to be given when
actually received by the addressee. Any of the above addresses and telecopy
numbers may be changed at any time by notice given as provided above; provided,
however, that any such notice of change of address shall be effective only upon
receipt.
13. Survival of Agreement. Each representation, warranty, covenant and
agreement herein contained, shall survive the making by the Purchasers of the
purchase of the Notes and Warrants and the execution and delivery to the
Purchasers of the Notes and Warrants, notwithstanding any investigation at any
time made by or on behalf of any party, and shall continue in full force and
effect so long as any obligation is outstanding and unpaid.
17
14. Entire Agreement. This Agreement (including those documents and
instruments referred to herein) contains the entire agreement with respect to
the transactions contemplated hereby, and supersedes all prior understandings,
arrangements and agreements with respect to the subject matter hereof.
15. Transferability; Benefit of Agreement. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and may be assigned
only in accordance with Section 14(a) of the Purchase Agreement The Purchasers
shall expressly be third-party beneficiaries of this Agreement.
16. Governing Law. This Agreement shall be governed by, construed under
and interpreted and enforced in accordance with laws of the State of New York,
without giving effect to principles of choice of law. The Uniform Commercial
Code as in effect in New York shall govern this Agreement. Any action or
proceeding arising out of or relating to this Agreement shall be commenced in a
federal or state court having competent jurisdiction in the State of New York,
and for the purpose of any such action or proceeding, each of the parties and
any assignees thereof submits to the personal jurisdiction of the State of New
York. The parties hereby irrevocably consent to the exclusive personal
jurisdiction of any state or federal court for New York County in the State of
New York or the Southern District of New York. The parties hereby waive any
objection to venue and any objection based on a more convenient form in any
action instituted under this Agreement.
17. Further Assurances. All property acquired by the Debtor after the
date hereof, which by the terms hereof is required or intended to be subjected
to the lien of this Agreement, shall, immediately upon the acquisition thereof
and without further mortgage, conveyance or assignment, become subject to the
lien of this Agreement as fully as though now owned by Debtor and specifically
described herein. Nevertheless, the parties will do all such further acts and
execute, acknowledge and deliver all such further conveyances, mortgages,
financing statements and assurances as the other shall reasonably require for
accomplishing the purposes of this Agreement.
18. Captions. The captions appearing herein are for the convenience of
the parties only and shall not be construed to affect the meaning of the
provisions of this Agreement.
19. Severability. In the event that one or more of the provisions of
this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, but this Agreement
shall be construed as if such invalid, illegal or unenforceable provision and
never been contained herein.
20. Counterparts. This Agreement may be signed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one agreement.
[The remainder of this page intentionally left blank]
18
IN WITNESS WHEREOF, the undersigned have executed this Security
Agreement as of the date first above written.
DEBTORS:
COMMERCE ONE OPERATIONS, INC.
By /s/ Xxxx X. Xxxxxxx
-------------------------------
Name: Xxxx X. Xxxxxxx
Title: Chief Executive Officer
COMMERCE ONE, INC.
By /s/ Xxxx X. Xxxxxxx
-------------------------------
Name: Xxxx X. Xxxxxxx
Title: Chief Executive Officer
19
IN WITNESS WHEREOF, the undersigned have executed this Security
Agreement as of the date first above written.
SECURED PARTY
COMVEST INVESTMENT PARTNERS II
LLC, as Administrative Agent
By:/s/ Xxxxxx Blue
-------------------------------
Name: Xxxxxx Blue
Title: President
