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EXHIBIT 10.4
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Security Agreement") made as of this 1st day of
August 2002, between EZENIA! INC., F/K/A VIDEOSERVER, INC. with offices located
at 154 Middlesex Turnpike, Burlington, Massachusetts 01803 (hereinafter referred
to as the "Borrower") and TANDBERG TELECOM AS, with offices located at PHILIP
Pedersen's Vei 22, N-1234, Lysaker, Norway (hereinafter referred to as the
"Lender");
WITNESSETH
WHEREAS, Borrower executed and delivered to Lender a certain Secured
Promissory Note of even date herewith in the total principal amount of ONE
MILLION TWO HUNDRED FIFTY THOUSAND U.S. DOLLARS (US$ 1,250,000.00) (the "Secured
Note");
WHEREAS, to induce the Lender to extend accommodations to Borrower, the
Borrower has agreed to grant Lender a security interest in the Collateral (as
hereinafter defined) which grant has been duly authorized by the Board of
Directors of the Borrower;
NOW, THEREFORE, in consideration of the provisions made herein and the
exchange of other good and valuable consideration, the nature, sufficiency and
receipt whereof being hereby expressly acknowledged, the parties hereto, each
intending to be legally bound hereby, agree as follows:
I.. DEFINITIONS. As used herein the following terms have the meanings
indicated:
1.1 "Collateral" means any and all of the following whether
now owned or hereafter acquired and related in any way to the business of the
Borrower: (i) all United States patents and patent applications set forth in
Schedule 1 attached hereto and all foreign counterparts thereto (including
international applications), together with all reissuances, continuations in
existence as of the Closing Date (as defined in the Asset Purchase Agreement
executed between the parties and of even date herewith), continuations-in-part
in existence as of the Closing Date, revisions, extensions, and reexaminations
thereof ("Patents"), (ii) all supporting documentation for the patents and
patent applications identified above, including relevant portions of laboratory
notebooks, invention disclosure forms, patent prosecution files, and
correspondence, opinions of counsel or advice from counsel, and similar
documents ("Documentation"), and (iii) all Proceeds of the foregoing.
1.2 "Interest Rate" means the rate as set forth in the Secured
Note.
1.3 "Liabilities" means the obligation of Borrower:
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1.3.1 To pay the principal of and interest of the
Secured Note, any Loan, or other credit accommodation in accordance with its
terms and the terms of the relevant documents and to satisfy all of its other
liabilities to Lender, whether hereunder or otherwise, whether now existing or
hereafter incurred, matured or unmatured, direct or contingent, primary or
secondary, joint or several, including any extensions, modifications, renewals
thereof and substitutions therefore and liabilities which Lender may have
obtained by assignment, subrogation, or otherwise, and all liabilities of
Borrower as guarantor, surety or endorser of the obligations of any third party
or parties to Lender;
1.3.2 To repay to Lender all amounts advanced by Lender
hereunder or otherwise on behalf of Borrower, including, but without limitation,
advances for principal or interest, payments to prior secured parties,
mortgagees, or lienors, or for taxes, levies, insurance, securities,
registration fees, or agency fees for any of the Collateral;
1.3.3 To reimburse Lender, on demand, for all of
Lender's expenses and costs, including the reasonable fees and expenses of its
counsel, in connection with the administration, amendment, modification, or
enforcement of this Security Agreement and the Collateral and other agreements,
documents and instruments required hereunder or thereunder, including, without
limitation, any proceeding brought or threatened to enforce payment of any of
the obligations referred to in the foregoing paragraphs 1.3.1 and 1.3.2.
1.4 "Proceeds" means whatever is received when Collateral is
licensed, sold, exchanged, presented, collected, drawn upon or otherwise
disposed of, including, without limitation, any Account arising when a right to
payment is earned under a Contract Right and all cash and other proceeds of
insurance.
1.5 "Schedule" shall mean the Schedule, if any, attached
hereto and made a part hereof.
1.6 The terms "Account", "Document of Title", "General
Intangibles", "Contract Right", and "Instrument" shall have the meanings
assigned to them under the Uniform Commercial Code as enacted and as may be
subsequently amended in the State of Delaware, unless the context otherwise
requires, shall mean Borrower's Accounts, Contract Rights, Documents of Title,
General Intangibles, and Instruments, respectively.
1.7 Capitalized terms not otherwise defined in this Security
Agreement shall be as defined in the related documents, including but not
limited to the Secured Note, which documents are hereby incorporated into this
Security Agreement by reference and made a part hereof. The Secured Note,
together with the Asset Purchase Agreement executed between the parties and of
even date herewith, are referred to as the "Documents".
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2. GRANT OF SECURITY. To secure the payment, promptly when due, of
all the Liabilities, Borrower hereby pledges, assigns, and grants to Lender a
first priority lien upon and security interest in all of the Collateral.
3. MAINTENANCE OF COLLATERAL.
3.1 With respect to the Documentation, Borrower shall maintain
possession or control thereof at all times, provided that a) Lender may retain
any or all of the Documentation which comes into Lender's possession and b) upon
the occurrence of an Event of Default, Lender shall have a right to take
possession of any or all of the Documentation at any time.
3.2 With respect to the Documentation, Borrower will take good
care of all of the Documentation; will afford the Documentation maintenance and
will pay all costs of maintenance of the Documentation.
3.3 With respect to the Patents, Borrower shall prosecute the
patent applications diligently and provide Lender with notice of all office
actions and response deadlines for any Patents. Borrower shall maintain the
Patents in full force and effect and shall pay when due, all issuance fees,
maintenance fees and annuities. In the event Borrower fails to take such actions
or pay such fees when due Lender shall have the right to do so on behalf of
Borrower and such costs that may be incurred by Lender shall be promptly repaid
to Lender by Borrower together with interest thereon at the Interest Rate at the
time of payment by Lender, and Borrower's liability to Lender for such repayment
with interest shall be included in the Liabilities. Further, if Lender
determines that any filings, responses, appeals, or other actions should be
taken to obtain or retain rights to patents in any country for inventions
disclosed in any Patent, then Lender may, in its sole discretion, take such
action on behalf of and in the name of the Borrower.
3.4 Borrower will adopt and conscientiously adhere to a well
designed internal control system with respect to the Patents and Documentation
capable of permitting Borrower and Lender to identify readily at any time the
location of the Documentation and status of each and every Patent and the due
dates for all office actions, prosecutions deadlines, issuance, maintenance and
annuity payment due dates therefor.
3.5 Borrower will defend its title to the Collateral, subject
to the rights of Lender, against the claims and demands of all persons.
3.6 Without the prior written consent of Lender in each case,
but excepting the grant of licenses of the Patents in the ordinary course of the
Borrower's business consistent with past practices, and limited to customers of
Borrower for use and assembly of
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equipment sold by Borrower, Borrower will not sell, exchange, lease, lend,
license or otherwise dispose of any item or unit of the Collateral or any of
Borrower's rights therein. Any attempt to engage in any such prohibited
transaction shall be null and void AB INITIO.
3.7 Borrower will not encumber, pledge, assign, or place or
permit to exist any lien upon or security interest in or otherwise dispose of
any of the Collateral, except for the security interest of Lender therein
created hereby.
Upon any breach of the foregoing covenants against
encumbrances, Lender may, at its sole election, but without obligation to do so,
discharge the encumbrance for the account of and without notice to Borrower, and
all expenses incurred by Lender in so doing, together with interest thereon at
the Interest Rate, shall be added to the Liabilities and shall be payable by
Borrower on demand.
4. TAXES; FEES. Borrower will pay all fees, taxes, assessments and
charges imposed upon it or its property or which it is required to withhold and
pay over, except where contested in good faith and where adequate reserves have
been set aside. Lender will have sole discretion to determine whether reserves
for any particular contested matter are, in fact, adequate. Borrower shall
furnish to Lender from time to time, upon Lender's request, proof satisfactory
to Lender of the making of all payments or deposits required by applicable laws
to be made with respect to amounts withheld by Borrower from wages and salaries
of employees and amounts contributed by Borrower on account of federal, state or
other income or wage taxes and amounts due under foreign, Federal or state tax
laws. Borrower will notify Lender immediately in the event there ever arises
against any of the Collateral any lien, assessment, or tax or other liability,
whether or not entitled to priority over Lender's interests hereunder.
5. BOOKS, RECORDS AND CERTIFICATIONS.
5.1 Borrower shall keep complete and accurate books and
records containing all necessary entries to reflect the transactions and facts
giving rise to its Accounts, Contract Rights, and General Intangibles, to
reflect the quantities, costs, current values, and locations of all the
Collateral and all payments, credits and adjustments applicable to any of its
Collateral.
5.2 Borrower shall keep Lender fully and accurately informed
as to the locations of all such books and records and shall permit Lender's
agents to have access to them and to any other records pertaining to Borrower's
business which Lender may request and, if requested by Lender, shall permit
Lender to remove them from Borrower's place of business or from any other place
where the same may be found for the purpose of examining, auditing and copying
the same. Any of Borrower's books and records so removed by Lender's agents
shall be returned to Borrower as soon as Lender shall have completed its
inspection, audit or copying thereof. Lender's right to take possession of such
books and records shall be
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enforceable by action of replevin or by any other appropriate remedy at law or
in equity, and Borrower consents to the entry of judicial orders or injunctions
enforcing such right.
6. SIGNIFICANT LOCATIONS. Borrower warrants that all of its offices
where it keeps its records concerning its Collateral, and all locations at which
it maintains a place of business, are accurately set forth in Schedule 6.
Borrower will promptly notify Lender in writing of any change in any such office
or location and of the establishment of any new place of business of Borrower
and will reimburse Lender for the costs of any additional Uniform Commercial
Code or other filings required by Lender as a result thereof.
7. CONTINUITY OF BUSINESS. Borrower will make no material changes
with respect to its customer billing policy, and will not divert orders,
business, billings or accounts to any subsidiary, affiliate or related company
or any other third party.
8. ADDITIONAL DOCUMENTS.
8.1 Borrower will from time to time furnish to Lender such
financial and other information concerning Borrower as Lender may reasonably
request, including, without limitation, control balances, internal accounting
reports and management audit and other auditors' reports.
8.2 Borrower will execute and deliver to Lender from time to
time all such other agreements, instruments and other documents and do all such
other and further acts and things as Lender may reasonably request in order to
further evidence or carry out the intent of this Security Agreement or to
perfect or protect the liens, encumbrances, and security interests created
hereby or intended so to be.
8.3 Borrower will:
8.3.1 Join with Lender in executing such financing
statements prior to the delivery of the Secured Note or in the future (including
amendments thereto and continuation statements thereof) in form satisfactory to
Lender as Lender may specify;
8.3.2 Pay or reimburse Lender prior to the delivery of
the Secured Note or in the future at Lender's request for all costs and taxes of
filing or recording the same in such public offices as Lender may designate; and
8.3.3 Assist Lender, if it deems such to be necessary,
in the filing of financing statements and carbon, photographic or other copies
of (i) Borrower's previously executed financing statements or (ii) executed
copies of this Security Agreement.
9. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants
to
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Lender as set forth in this paragraph:
9.1 Borrower hereby acknowledges and affirms that this
Security Agreement has been duly authorized by the Board of Directors at a duly
convened meeting of said Board of Directors.
9.2 The liens, encumbrances, and security interests granted to
Lender hereunder are first and prior except for liens, security interests or
encumbrances in favor of Lender or existing on the date hereof and reported to
Lender by virtue of being included on Schdule 9.2 hereof.
9.3 Borrower has the power and authority to grant the lien,
encumbrances and security interests set forth herein. Throughout the term of
this Security Agreement the foregoing shall be deemed to be continuing
representations and warranties.
9.4 The Patents represent all of the patents owned or
controlled by Borrower concerning the manufacture or use of videoconferencing
interface components and telecommunications bridging equipment to facilitate
multipoint audio and video conferencing.
10. DEFAULT AND REMEDIES.
10.1 It shall be an Event of Default hereunder upon the
occurrence of any of the following:
10.1.1 an Event of Default under the Secured Note;
10.1.2 Borrower's breach or failure to perform any of its
agreements herein or in any agreement, document or instrument delivered pursuant
hereto or thereto; or
10.1.3 if Lender shall determine that any representation
or warranty herein, the Secured Note, or in the Documents or any other
instrument, agreement or document delivered to Lender in connection herewith or
therewith is incorrect or untrue in any material respect.
10.1.4 any breach by Borrower of the License Agreement or
Asset Purchase Agreement executed concurrently herewith by the parties hereto,
that, if applicable, is not cured by Borrower within the time period allotted
for such cure.
10.2 Upon the occurrence of any Event of Default which shall be
continuing, (i) unless Lender shall elect otherwise the entire unpaid amount of
such of the Liabilities as are not then otherwise due and payable shall become
immediately due and payable without notice to or demand on Borrower and all
Liabilities evidenced by the Secured
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Note shall thenceforth bear interest, payable at the times and in the manner
specified in the Secured Note, at the Interest Rate, and (ii) Lender may at its
option exercise from time to time any and all rights and remedies available to
it under the Uniform Commercial Code or otherwise, including the right to
collect, receipt for, settle, compromise, adjust, sue for or foreclose or
otherwise realize upon any of the Collateral and to dispose of any of the
Collateral at one or more public or private sales or other proceedings, and
Borrower agrees that Lender or its nominee may become the purchaser at any such
sale or sales. Borrower agrees that ten (10) days shall be reasonable prior
notice of the date of any public sale or other disposition of all or any part of
the Collateral, or of the date on or after which any private sale or other
disposition of the same may be made.
10.3 All rights and remedies granted Lender hereunder or under
any other agreement between Lender and Borrower shall be deemed concurrent and
cumulative and not alternative, and Lender may proceed with any number of
remedies at the same time or at different times until all the Liabilities are
fully satisfied. The exercise of any one right or remedy shall not be deemed a
waiver or release of or an election against any other right or remedy, and
Lender may proceed against any one or more of obligors, whether primary or
secondary, and the Collateral and any other collateral granted by Borrower to
Lender under any other agreement, in any order and through any available
remedies. A waiver on any one occasion shall not be construed as a waiver or bar
on any future occasion.
10.4 All property of any kind held at any time by Lender as
Collateral shall stand as one general continuing collateral security for all the
Liabilities and may be retained by Lender as security until all the Liabilities
are fully satisfied.
10.5 Borrower will pay to Lender on demand any and all expenses
(including reasonable attorneys' fees and legal expenses) which may have been
incurred by Lender, with interest at the Interest Rate at the time incurred by
Lender, (i) to enforce any Contract Right or the payment of any Account, to
collect or otherwise realize upon or in respect of any General Intangible or to
enforce any of the Liabilities, whether as against an account debtor, an
obligor, any guarantor or surety of any account debtor, or any other third
party; or (ii) in the prosecution or defense of any action growing out of or
connected with the subject matter of this Security Agreement, the Liabilities,
the Collateral or any of Lender's rights therein or thereto; or (iii) in
connection with the custody, preservation, use, operation, preparation for sale
or sale of any of the Collateral, the incurring of all of which are hereby
authorized to the extent Lender deems the same advisable.
10.6 The Proceeds of any Collateral received by Lender at any
time before or after default, whether from a sale or other disposition of
Collateral or otherwise, or the Collateral itself, may be applied to the payment
in full or in part of such of the Liabilities and in such order and manner as
Lender may elect.
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10.7 Borrower to the extent of its rights in the Collateral
waives and releases any right to require Lender to collect any of the
Liabilities from any other of the Collateral under any theory of marshalling of
assets or otherwise.
11. POWER OF ATTORNEY. Borrower hereby irrevocably appoints any agent
of Lender as Borrower's true and lawful attorney-in-fact with power to (i)
endorse Borrower's name upon any notes, checks, drafts, money orders or other
Instruments of payment or other Collateral that may come into Lender's
possession; (ii) sign and endorse Borrower's name upon any Documents of Title,
invoices, freight or express bills, drafts against account debtors, assignments,
verifications and notices in connection with Accounts, and any Instruments or
documents relating thereto or to Borrower's rights therein; (iii) give written
notice to the United States Post Office to effect any required change or changes
of address so that all mail addressed to Borrower may be delivered directly to
Lender, Lender agreeing to return all mail not related to the Liabilities or the
Collateral; (iv) execute in Borrower's name and file one or more financing
statements covering the Collateral and perform all other acts Lender deems
appropriate to perfect and continue its security interest in, and to protect and
preserve the Collateral and (v) take such action on behalf of Borrower as
described in Section 3.3 above. Any such attorney of Borrower shall have full
power to do any and all things necessary to be done with respect to the above
transactions as fully and effectually as Borrower might do, and Borrower hereby
ratifies all that said attorney shall lawfully do or cause to be done by virtue
hereof.
12. MISCELLANEOUS.
12.1 No modification or waiver of any provision hereof shall be
effective unless the same is in writing signed by the party against whom its
enforcement is sought. This Security Agreement and all rights and obligations of
the parties hereunder shall bind and inure to the benefit of the parties hereto
and their respective heirs, executors, administrators, personal representatives,
successors and assigns, except that Borrower may not assign any of Borrower's
rights hereunder without Lender's prior written consent.
12.2 If after the discharge of all Liabilities Borrower shall
subsequently incur additional Liabilities, this Security Agreement shall
automatically be renewed and thereafter continue in full force and effect until
such time as Borrower, having no Liabilities outstanding and not then being
permitted to incur additional Liabilities, shall give written notice to Lender
of its election to terminate this Security Agreement.
12.3 The representations, warranties, covenants and agreements
contained herein are all material and continuing, and any breach of any of them
shall constitute a material breach of this Security Agreement.
12.4 All notices, demands and other communications hereunder
shall
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be deemed duly given if delivered in the manner and to the addresses set forth
in the Documents.
12.5 Singular words used herein shall include the plural and
vice versa, whenever the same is necessary to produce a fair and meaningful
construction.
12.6 This Agreement may be executed in two or more counterparts
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
12.7 Captions in this Security Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Security Agreement for any other purpose. Any provision of this Security
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without affecting the validity or enforceability of the
remainder of this Security Agreement, the Secured Note or the validity or
enforceability of such provision in any other jurisdiction.
12.8 Each of the parties have been represented by counsel and
has had the opportunity to negotiate, review, revise and comment on the terms
set forth herein. As a result, the parties acknowledge and agree that in
interpreting the provisions of this contract no weight shall be given to which
party drafted or revised any provision of this Agreement, each provision
considered to have been the joint work product of both parties.
12.9 All issues arising hereunder shall be governed by the
substantive laws of Delaware, without reference to its conflict of laws. Lender
and Borrower hereby consent to the exclusive jurisdiction of the Chancery Courts
of the State of Delaware or the United States District Courts for the District
of Delaware in any action or proceeding which may be brought against it under or
in connection with this Security Agreement, the Documents, the Secured Note or
any transaction contemplated hereby or to enforce any agreement contained herein
or in such documents, and in the event any such action or proceeding shall be
brought against it, Lender and Borrower agree not to raise any objection to such
jurisdiction or to the laying of venue in the State of Delaware.
12.10 The Security Agreement may be assigned without notice to
Borrower.
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IN WITNESS WHEREOF, this Security Agreement has been duly executed under
authorization and seal this 1st day of August 2002.
WITNESS: EZENIA! INC., Borrower
/s/ Laura M. Alessio By: /s/ Khoa D. Nguyen
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Khoa D. Nguyen, President
TANDBERG TELECOM AS, Lender
By: /s/ Bengt Thuresson
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By: /s/ Robert Bernsten
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