SECURITY AGREEMENT
This Security Agreement is entered into as of August 20, 1997, between
Ditech Corporation, a California corporation ("Grantor"), and BankBoston, N.A.
("Secured Party").
PRELIMINARY STATEMENTS
A. Grantor and Secured Party have entered into a Credit Agreement dated
as of even date herewith (said Credit Agreement, as it may hereafter be amended,
supplemented or otherwise modified from time to time, being the "Credit
Agreement", the terms defined therein and not otherwise defined herein being
used herein as therein defined), pursuant to which Secured Party has made
certain commitments, subject to the terms and conditions set forth in the Credit
Agreement, to extend certain credit facilities to Company.
B. It is a condition precedent to the initial extensions of credit by
Secured Party under the Credit Agreement that Grantor shall have granted the
security interests and undertaken the obligations contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
Secured Party to make the Loans under the Credit Agreement and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Grantor hereby agrees with Secured Party as follows:
SECTION 1. GRANT OF SECURITY. Grantor hereby assigns to Secured Party,
and hereby grants to Secured Party a security interest in, all of Grantor's
right, title and interest in and to the following, in each case whether now or
hereafter existing or in which Grantor now has or hereafter acquires an interest
and wherever the same may be located (the "Collateral"):
(a) all deposit accounts, including without limitation all deposit
accounts maintained with Secured Party;
(b) all accounts, contract rights, chattel paper, documents,
instruments, general intangibles and other rights and obligations of any kind
and all rights in, to and under all security agreements, leases and other
contracts securing or otherwise relating to any such accounts, contract rights,
chattel paper, documents, instruments, general intangibles or other obligations
(any and all such accounts, contract rights, chattel paper, documents,
instruments, general intangibles and other obligations being the "Accounts", and
any and all such security agreements, leases and other contracts being the
"Related Contracts");
(c) all inventory in all of its forms (including, but not limited to,
(i) all goods held by Grantor for sale or lease or to be furnished under
contracts of service or so leased or furnished, (ii) all raw materials, work in
process, finished goods, and materials used or consumed in the manufacture,
packing, shipping, advertising, selling, leasing, furnishing or production of
such inventory or otherwise used or consumed in Grantor's business, (iii) all
goods in which Grantor has an interest in mass or a joint or other interest or
right of any kind, (iv) all goods
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which are returned to or repossessed by Grantor and all accessions thereto and
products thereof (all such inventory, accessions and products being the
"Inventory");
(d) all equipment in all of its forms, all parts thereof and all
accessions thereto (any and all such equipment, parts and accessions being the
"Equipment");
(e) all trademarks, trade names, trade secrets, business names,
patents, patent applications, licenses, copyrights, registrations and franchise
rights, and all goodwill associated with any of the foregoing;
(f) to the extent not included in any other paragraph of this Section
1, all other general intangibles (including, without limitation, tax refunds,
rights to payment or performance, choses in action and judgments taken on any
rights or claims included in the Collateral);
(g) all plant fixtures, business fixtures and other fixtures and
storage and office facilities, and all accessions thereto and products thereof;
(h) all books, records, ledger cards, files, correspondence, computer
programs, tapes, disks and related data processing software that at any time
evidence or contain information relating to any of the Collateral or are
otherwise necessary or helpful in the collection thereof or realization
thereupon;
(i) all proceeds, products, rents and profits of or from any and all
of the foregoing Collateral and, to the extent not otherwise included, all
payments under insurance (whether or not Secured Party is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing Collateral. For
purposes of this Agreement, the term "proceeds" includes whatever is receivable
or received when Collateral or proceeds are sold, exchanged, collected or
otherwise disposed of, whether such disposition is voluntary or involuntary.
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures, and the
Collateral is collateral security for, the prompt payment or performance in full
when due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise, of all obligations and liabilities of every
nature of Grantor now or hereafter existing, under or arising out of or in
connection with the Credit Agreement or the other Loan Documents, and all
extensions or renewals thereof, whether for principal, interest, fees, expenses,
indemnities or otherwise, whether voluntary or involuntary, direct or indirect,
absolute or contingent, liquidated or unliquidated, whether or not jointly owed
with others, and whether or not from time to time decreased or extinguished and
later increased, created or incurred, and all or any portion of such obligations
or liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Secured Party as a preference,
fraudulent transfer or otherwise (all such obligations and liabilities being the
"Underlying Debt"), and all obligations of every nature of Grantor now or
hereafter existing under this Agreement (all such obligations of Grantor,
together with the Underlying Debt, being the "Secured Obligations").
SECTION 3. GRANTOR REMAINS LIABLE. Anything contained herein to the
contrary
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notwithstanding, (a) Grantor shall remain liable under any contracts and
agreements included in the Collateral, to the extent set forth therein, to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by Secured Party of any
of its rights hereunder shall not release Grantor from any of its duties or
obligations under the contracts and agreements included in the Collateral, and
(c) Secured Party shall not have any obligation or liability under any contracts
and agreements included in the Collateral by reason of this Agreement, nor shall
Secured Party be obligated to perform any of the obligations or duties of
Grantor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Grantor represents and
warrants as follows:
(a) OWNERSHIP OF COLLATERAL. Except for the security interest
created by this Agreement, Grantor owns the Collateral free and clear of any
lien, mortgage, security interest or other encumbrance. Except such as may have
been filed in favor of Secured Party relating to this Agreement, no effective
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any filing or recording office.
(b) LOCATION OF EQUIPMENT AND INVENTORY. All of the Equipment and
Inventory (as such terms are defined in Section 1) is, as of the date hereof,
located at the places specified in Schedule 1 annexed hereto.
(c) OFFICE LOCATIONS. The chief place of business, the chief
executive office and the office where Grantor keeps its records regarding the
Accounts is, and has been for the four month period preceding the date hereof,
located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
(d) FICTITIOUS NAMES. Grantor does not do business under any
trade-name or fictitious business name.
(e) DELIVERY OF CERTAIN COLLATERAL. All notes and other instruments
(excluding checks) comprising any and all items of Collateral have been
delivered to Secured Party duly endorsed and accompanied by duly executed
instruments of transfer or assignment in blank.
(f) GOVERNMENTAL AUTHORIZATIONS. No authorization, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for either (i) the grant by Grantor of the security
interest granted hereby or for the execution, delivery or performance of this
Agreement by Grantor or (ii) the perfection of or the exercise by Secured Party
of its rights and remedies hereunder (except as may have been or will be taken
by or at the direction of Grantor).
(g) PERFECTION. This Agreement, together with the filing of a UCC-1
financing statement with the Secretary of State of California creates a valid,
perfected and, first priority security interest in the Collateral in which a
security interest may be perfected by such a filing, securing the payment of the
Secured Obligations.
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(h) OTHER INFORMATION All information heretofore, herein or
hereafter supplied to Secured Party by or on behalf of Grantor with respect to
the Collateral is accurate and complete in all respects.
SECTION 5. FURTHER ASSURANCES.
(a) Grantor agrees that from time to time, at the expense of Grantor,
Grantor will promptly execute and deliver all further instruments and documents,
and take all further action that may be necessary or desirable, or that Secured
Party may request, in order to perfect and protect any security interest granted
or purported to be granted hereby or to enable Secured Party to exercise and
enforce its rights and remedies hereunder with respect to any Collateral.
Without limiting the generality of the foregoing, Grantor will: (i) if any
Account shall be evidenced by a promissory note or other instrument (excluding
checks), deliver and pledge to Secured Party hereunder such note or instrument,
duly endorsed and accompanied by duly executed instruments of transfer or
assignment, all in form and substance satisfactory to Secured Party;
(ii) execute and file such financing or continuation statements, or amendments
thereto, and such other instruments or notices, as may be necessary or
desirable, or as Secured Party may request, in order to perfect and preserve the
security interests granted or purported to be granted hereby; (iii) at any
reasonable time, upon demand by Secured Party and reasonable prior notice to
Grantor, exhibit the Collateral to and allow inspection of the Collateral by
Secured Party, or persons designated by Secured Party; and (iv) at Secured
Party's request, appear in and defend any action or proceeding that may affect
Grantor's title to or Secured Party's security interest in all or any part of
the Collateral.
(b) Grantor hereby authorizes Secured Party to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of Grantor. Grantor agrees
that a carbon, photographic or other reproduction of this Agreement or of a
financing statement signed by Grantor shall be sufficient as a financing
statement and may be filed as a financing statement in any and all
jurisdictions.
(c) Grantor will furnish to Secured Party from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as Secured Party may
reasonably request, all in reasonable detail.
SECTION 6. COVENANTS OF GRANTOR. Grantor shall:
(a) not use or permit any Collateral to be used unlawfully or in
violation of any provision of this Agreement or any applicable statute,
regulation or ordinance or any policy of insurance covering the Collateral;
(b) notify Secured Party of any change in Grantor's name, identity or
corporate structure within 15 days of such change;
(c) give Secured Party 30 days' prior written notice of any change in
Grantor's chief place of business, chief executive office or residence;
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(d) if Secured Party gives value to enable Grantor to acquire rights
in or the use of any Collateral, use such value for such purposes; and
(e) pay promptly when due all property and other taxes, assessments
and governmental charges or levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the Collateral, except to the
extent the validity thereof is being contested in good faith; PROVIDED that
Grantor shall in any event pay such taxes, assessments, charges, levies or
claims not later than five days prior to the date of any proposed sale under any
judgement, writ or warrant of attachment entered or filed against Grantor or any
of the Collateral as a result of the failure to make such payment.
SECTION 7. SPECIAL COVENANTS WITH RESPECT TO EQUIPMENT AND INVENTORY.
Grantor shall:
(a) keep the Equipment and Inventory (other than Inventory sold in
the ordinary course of business) at the places there for specified on Schedule 1
annexed hereto or, upon 30 days' prior written notice to Secured Party, at such
other places in jurisdictions where all action that may be necessary or
desirable, or that Secured Party may request, in order to perfect and protect
any security interest granted or purported to be granted hereby, or to enable
Secured Party to exercise and enforce its rights and remedies hereunder, with
respect to such Equipment and Inventory shall have been taken;
(b) cause the Equipment to be maintained and preserved in the same
condition, repair and working order as when new, ordinary wear and tear
excepted, and in accordance with any manufacturer's manual, and shall forthwith,
or, in the case of any loss or damage to any of the Equipment when subsection
(c) of Section 8 is not applicable, as quickly as practicable after the
occurrence thereof, make or cause to be made all repairs, replacements and other
improvements in connection therewith that are necessary or desirable to such
end. Grantor shall promptly furnish to Secured Party a statement respecting any
material loss or damage to any of the Equipment;
(c) keep correct and accurate records of the Inventory, itemizing and
describing the kind, type and quantity of Inventory, Grantor's cost there for
and (where applicable) the current list prices for the Inventory; and
(d) if any Inventory is in possession or control of any of Grantor's
agents or processors if the aggregate book value of all such Inventory exceeds
$100,000, and in any event upon the occurrence of an Event of Default, instruct
such agent or processor to hold all such Inventory for the account of Secured
Party and subject to the instructions of Secured Party.
SECTION 8. INSURANCE.
(a) Grantor shall, at its own expense, maintain insurance with
respect to the Equipment and Inventory in such amounts, against such risks, in
such form and with such insurers as shall be satisfactory to Secured Party from
time to time. Such insurance shall include, without limitation, property damage
insurance and liability insurance. Each policy for property
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damage insurance shall provide for all losses to be paid directly to Secured
Party. Each policy shall in addition name Grantor and Secured Party as insured
parties thereunder (without any representation or warranty by or obligation upon
Secured Party) as their interests may appear and have attached thereto a loss
payable clause acceptable to Secured Party that shall (i) contain an agreement
by the insurer that any loss thereunder shall be payable to Secured Party
notwithstanding any action, inaction or breach of representation or warranty by
Grantor, (ii) provide that there shall be no recourse against Secured Party for
payment of premiums or other amounts with respect thereto, and (iii) provide
that at least 30 days' prior written notice of cancellation, material amendment,
reduction in scope or limits of coverage or of lapse shall be given to Secured
Party by the insurer. Grantor shall, if so requested by Secured Party, deliver
to Secured Party original or duplicate policies of such insurance and, as often
as Secured Party may reasonably request, a report of a reputable insurance
broker with respect to such insurance. Further, Grantor shall, at the request
of Secured Party, duly execute and deliver instruments of assignment of such
insurance policies to comply with the requirements of Section 5(a) and cause the
respective insurers to acknowledge notice of such assignment.
(b) Reimbursement under any liability insurance maintained by Grantor
pursuant to this Section 8 may be paid directly to the Person who shall have
incurred liability covered by such insurance. In case of any loss involving
damage to Equipment or Inventory when subsection (c) of this Section 8 is not
applicable, Grantor shall make or cause to be made the necessary repairs to or
replacements of such Equipment or Inventory, and any proceeds of insurance
maintained by Grantor pursuant to this Section 8 shall be paid to Grantor as
reimbursement for the costs of such repairs or replacements.
(c) Upon (i) the occurrence and during the continuation of any Event
of Default or (ii) the actual or constructive loss (in excess of $100,000 per
occurrence) of any Equipment or Inventory, all insurance payments in respect of
such Equipment or Inventory shall be paid to and applied by Secured Party as
specified in Section 17.
SECTION 9. SPECIAL COVENANTS WITH RESPECT TO ACCOUNTS AND RELATED
CONTRACTS.
(a) Grantor shall keep its chief place of business and chief
executive office and the office where it keeps its records concerning the
Accounts and Related Contracts at the location there for specified in Section 4
or, upon 30 days' prior written notice to Secured Party, at such other location
in a jurisdiction where all action that may be necessary or desirable, or that
Secured Party may request, in order to perfect and protect any security interest
granted or purported to be granted hereby, or to enable Secured Party to
exercise and enforce its rights and remedies hereunder, with respect to such
Accounts and Related Contracts shall have been taken. Grantor will hold and
preserve such records and, subject to Section 6.1(f) of the Credit Agreement,
will permit representatives of Secured Party at any time during normal business
hours to inspect and make abstracts from such records, and Grantor agrees to
render to Secured Party, at Grantor's cost and expense, such clerical and other
assistance as may be reasonably requested with regard thereto. Promptly upon
the request of Secured Party, Grantor shall deliver to Secured Party complete
and correct copies of each Related Contract.
(b) Grantor shall, for not less than 5 years from the date on which
such
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Account arose, maintain (i) complete records of each Account, including records
of all payments received, credits granted and merchandise returned, and (ii) all
documentation relating thereto.
(c) Except as otherwise provided in this subsection (c), Grantor
shall continue to collect, at its own expense, all amounts due or to become due
Grantor under the Accounts and Related Contracts. In connection with such
collections, Grantor may take (and, at Secured Party's direction, shall take)
such action as Grantor or Secured Party may deem necessary or advisable to
enforce collection of amounts due or to become due under the Accounts; PROVIDED,
HOWEVER, that Secured Party shall have the right at any time, upon the
occurrence and during the continuation of an Event of Default or an event which
with the giving of notice or the lapse of time, or both, would constitute an
Event of Default, and upon written notice to Grantor of its intention to do so,
to notify the account debtors or obligors under any Accounts of the assignment
of such Accounts to Secured Party, and to direct such account debtors or
obligors to make payment of all amounts due or to become due to Grantor
thereunder directly to Secured Party, to notify each person maintaining a
lockbox or similar arrangement to which account debtors or obligors under any
Accounts have been directed to make payment to remit all amounts representing
collections on checks and other payment items from time to time sent to or
deposited in such lock box or other arrangement directly to Secured Party and,
upon such notification and at the expense of Grantor, to enforce collection of
any such Accounts and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as Grantor might have done.
After receipt by Grantor of the notice from Secured Party referred to in the
PROVISO to the preceding sentence, (i) all amounts and proceeds (including
checks and other instruments) received by Grantor in respect of the Accounts and
the Related Contracts shall be received in trust for the benefit of Secured
Party hereunder, shall be segregated from other funds of Grantor and shall be
forthwith paid over or delivered to Secured Party in the same form as so
received (with any necessary endorsement) to be held as cash Collateral and
applied as provided by Section 17, and (ii) Grantor shall not adjust, settle or
compromise the amount or payment of any Account, or release wholly or partly any
account debtor or obligor thereof, or allow any credit or discount thereon.
SECTION 10. DEPOSIT ACCOUNTS. Upon the occurrence and during the
continuation of an Event of Default, Secured Party may exercise dominion and
control over, and refuse to permit further withdrawals (whether of money,
securities, instruments or other property) from any deposit accounts maintained
with Secured Party constituting part of the Collateral.
SECTION 11. LICENSE OF PATENTS, TRADEMARKS, COPYRIGHTS, ETC. Grantor
hereby assigns, transfers and conveys to Secured Party, effective upon the
occurrence and during the continuation of any Event of Default, the nonexclusive
right and license to use all trademarks, trade names, copyrights, patents or
technical processes owned or used by Grantor that relate to the Collateral and
any other collateral granted by Grantor as security for the Secured Obligations,
together with any goodwill associated therewith, all to the extent necessary to
enable Secured Party to use, possess and realize on the Collateral and to enable
any successor or assign to enjoy the benefits of the Collateral. This right and
license shall inure to the benefit of all successors, assigns and transferees of
Secured Party and its successors, assigns and transferees, whether by voluntary
conveyance, operation of law, assignment, transfer, foreclosure, deed in lieu of
foreclosure or otherwise. Such right and license is granted free of charge,
without requirement
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that any monetary payment whatsoever be made to Grantor.
SECTION 12. TRANSFERS AND OTHER LIENS. Grantor shall not:
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral except as permitted by the Credit Agreement; or
(b) except for the security interest created by this Agreement and
Permitted Liens, create or suffer to exist any Lien upon or with respect to any
of the Collateral to secure the indebtedness or other obligations of any person.
SECTION 13. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Grantor hereby
irrevocably appoints Secured Party as Grantor's attorney-in-fact, with full
authority in the place and stead of Grantor and in the name of Grantor,
Secured Party or otherwise, from time to time upon the occurrence and during
the continuation of an Event of Default in Secured Party's discretion to take
any action and to execute any instrument that Secured Party may deem
necessary or advisable to accomplish the purposes of this Agreement,
including, without limitation: (a) to sign and file on behalf of Grantor any
financing or continuation statements, and amendments thereto, relative to all
or any part of the Collateral, regardless of whether an Event of Default has
occurred or is continuing; (b) to obtain and adjust insurance required to be
maintained by Grantor or paid to Secured Party pursuant to Section 8; (c) to
ask, demand, collect, ▇▇▇ for, recover, compound, receive and give
acquittance and receipts for monies due and to become due under or in respect
of any of the Collateral; (d) to receive, endorse and collect any drafts or
other instruments, documents and chattel paper in connection with clauses (a)
and (b) above; (e) to file any claims or take any action or institute any
proceedings that Secured Party may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
Secured Party with respect to any of the Collateral; (f) to pay or discharge
taxes or liens levied or placed upon or threatened against the Collateral,
the legality or validity thereof and the amounts necessary to discharge the
same to be determined by Secured Party in its sole discretion, any such
payments made by Secured Party to become obligations of Grantor to Secured
Party, due and payable immediately without demand; (g) to sign and endorse
any invoices, freight or express bills, bills of lading, storage or warehouse
receipts, drafts against debtors, assignments, verifications and notices in
connection with Accounts and other documents relating to the Collateral; and
(h) generally to sell, transfer, pledge, make any agreement with respect to
or otherwise deal with any of the Collateral as fully and completely as
though Secured Party were the absolute owner thereof for all purposes, and to
do, at Secured Party's option and Grantor's expense, all acts and things that
Secured Party deems necessary to protect, preserve or realize upon the
Collateral and Secured Party's security interest therein in order to effect
the intent of this Agreement, all as fully and effectively as Grantor might do.
SECTION 14. SECURED PARTY MAY PERFORM. If Grantor fails to perform any
agreement contained herein, Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of Secured Party incurred in
connection therewith shall be payable by Grantor under Section 18.
SECTION 15. STANDARD OF CARE. The powers conferred on Secured Party
hereunder are
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solely to protect its interest in the Collateral and shall not impose any duty
upon it to exercise any such powers. Except for the exercise of reasonable care
in the custody of any Collateral in its possession and the accounting for moneys
actually received by it hereunder, Secured Party shall have no duty as to any
Collateral or as to the taking of any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Collateral. Secured Party
shall be deemed to have exercised reasonable care in the custody and
preservation of Collateral in its possession if such Collateral is accorded
treatment substantially equal to that which Secured Party accords its own
property.
SECTION 16. REMEDIES. If any Event of Default shall have occurred and be
continuing Secured Party may exercise in respect of the Collateral, in addition
to all other rights and remedies provided for herein or otherwise available to
it, all the rights and remedies of a secured party on default under the Uniform
Commercial Code as in effect in any relevant jurisdiction (the "Code") (whether
or not the Code applies to the affected Collateral), and also may (a) require
Grantor to, and Grantor hereby agrees that it will at its expense and upon
request of Secured Party forthwith, assemble all or part of the Collateral as
directed by Secured Party and make it available to Secured Party at a place to
be designated by Secured Party that is reasonably convenient to both parties,
(b) enter onto the property where any Collateral is located and take possession
thereof with or without judicial process, (c) prior to the disposition of the
Collateral, store, process, repair or recondition the Collateral or otherwise
prepare the Collateral for disposition in any manner to the extent Secured Party
deems appropriate, (d) take possession of Grantor's premises or place custodians
in exclusive control thereof, remain on such premises and use the same and any
of Grantor's equipment for the purpose of completing any work in process, taking
any actions described in the preceding clause (c) and collecting any Secured
Obligation, and (e) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any of Secured Party's offices or elsewhere, for cash, on credit or for
future delivery, at such time or times and at such price or prices and upon such
other terms as Secured Party may deem commercially reasonable. Secured Party
may be the purchaser of any or all of the Collateral at any such sale and
Secured Party shall be entitled, for the purpose of bidding and making
settlement or payment of the purchase price for all or any portion of the
Collateral sold at any such public sale, to use nd apply any of the Secured
Obligations as a credit on account of the purchase price for any Collateral
payable by Secured Party at such sale. Each purchaser at any such sale shall
hold the property sold absolutely free from any claim or right on the part of
Grantor, and Grantor hereby waives (to the extent permitted by applicable law)
all rights of redemption, stay and/or appraisal which it now has or may at any
time in the future have under any rule of law or statute now existing or
hereafter enacted. Grantor agrees that, to the extent notice of sale shall be
required by law, at least ten days' notice to Grantor of the time and place of
any public sale or the time after which any private sale is to be made shall
constitute reasonable notification. Secured Party shall not be obligated to
make any sale of Collateral regardless of notice of sale having been given.
Secured Party may adjourn any public or private sale from time to time by
announcement at the time and place fixed there for, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
Grantor hereby waives any claims against Secured Party arising by reason of the
fact that the price at which any Collateral may have been sold at such a private
sale was less than the price which might have been obtained at a public sale,
even if Secured Party accepts the first offer received and does not offer such
Collateral to more than one offeree. If the proceeds of any sale
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or other disposition of the Collateral are insufficient to pay all the Secured
Obligations, Grantor shall be liable for the deficiency and the fees of any
attorneys employed by Secured Party to collect such deficiency.
SECTION 17. APPLICATION OF PROCEEDS. Except as expressly provided
elsewhere in this Agreement, all proceeds received by Secured Party in respect
of any sale of, collection from, or other realization upon all or any part of
the Collateral may in the discretion of Secured Party, be held by Secured Party
as Collateral for, and/or then, or at any other time thereafter, applied in full
or in part by Secured Party against, the Secured Obligations in the following
order of priority:
FIRST: To the payment of all costs and expenses of such sale, collection
or other realization, including reasonable compensation to Secured Party and its
agents and counsel, and all other expenses, liabilities and advances made or
incurred by Secured Party in connection therewith, and all amounts for which
Secured Party is entitled to indemnification hereunder and all advances made by
Secured Party hereunder for the account of Grantor, and to the payment of all
costs and expenses paid or incurred by Secured Party in connection with the
exercise of any right or remedy hereunder, all in accordance with Section 18;
SECOND: To the payment of all other Secured Obligations in such order as
Secured Party shall elect; and
THIRD: To the payment to or upon the order of Grantor, or to whosoever may
be lawfully entitled to receive the same or as a court of competent jurisdiction
may direct, of any surplus then remaining from such proceeds.
SECTION 18. INDEMNITY AND EXPENSES.
(a) Grantor agrees to indemnify Secured Party from and against any
and all claims, losses and liabilities in any way relating to, growing out of or
resulting from this Agreement and the transactions contemplated hereby
(including, without limitation, enforcement of this Agreement), except to the
extent such claims, losses or liabilities result solely from Secured Party's
gross negligence or willful misconduct.
(b) Grantor will pay to Secured Party upon demand the amount of any
and all costs and expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, that Secured Party may incur in
connection with (i) the administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of Secured Party hereunder, or (iv) the failure by Grantor to
perform or observe any of the provisions hereof.
SECTION 19. CONTINUING SECURITY INTEREST: TRANSFER OF SECURED OBLIGATIONS.
This Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until the indefeasible payment in full
of the Secured Obligations, and the cancellation or termination of the Credit
Agreement, (b) be binding upon Grantor, its successors and assigns, and
(c) inure, together with the rights and remedies of Secured Party hereunder, to
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the benefit of Secured Party and its successors, transferees and assigns.
Without limiting the generality of the foregoing clause (c), Secured Party may
assign or otherwise transfer any Secured Obligations held by it to any other
Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to Secured Party herein or otherwise. Upon
the indefeasible payment in full of all Secured Obligations, the cancellation or
termination of the Credit Agreement, the security interest granted hereby shall
terminate and all rights to the Collateral shall revert to Grantor. Upon any
such termination, Secured Party will, at Grantor's expense, execute and deliver
to Grantor such documents as Grantor shall reasonably request to evidence such
termination.
SECTION 20. AMENDMENTS, ETC. No amendment or waiver of any provision of
this Agreement, or consent to any departure by Grantor here from, shall in any
event be effective unless the same shall be in writing and signed by Secured
Party, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it was given.
SECTION 21. NOTICES. Except as otherwise set forth in this Agreement, all
notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex or facsimile communication) and mailed or
telegraphed or telexed or sent by facsimile or delivered, if to the Grantor, at
its address set forth on the signature page hereof; and if to the Secured Party,
at its address set forth on the signature page hereof; or, as to each party, at
such other address as shall be designated by such party in a written notice to
the other parties. All such notices and communications shall be effective three
(3) Business Days after deposit in the U.S mail, postage prepaid, when sent by
telex or sent by facsimile, or when delivered, respectively.
SECTION 22. FAILURE OR INDULGENCE NOT WAIVER. REMEDIES CUMULATIVE. No
failure or delay on the part of Secured Party in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude any
other or further exercise thereof or of any other power, right or privilege.
All rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 23. SEVERABILITY. In case any provision in or obligation under
this Agreement shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
SECTION 24. HEADINGS. Section and subsection headings in this Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
SECTION 25. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED BY,
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF CALIFORNIA, EXCEPT AS REQUIRED BY MANDATORY PROVISION OF LAW AND EXCEPT
TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST
HEREUNDER, OR
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REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE
LAWS OF A JURISDICTION OTHER THAN THE STATE OF CALIFORNIA. Unless otherwise
defined herein or in the Credit Agreement, terms used in Article 9 of the
Uniform Commercial Code in the State of California are used herein as therein
defined.
SECTION 26. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST GRANTOR ARISING OUT OF OR RELATING TO THIS AGREEMENT
MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE
STATE OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT GRANTOR
ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY
ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. In any action
against the Grantor or the Secured Party, service of process may be made upon
the Grantor or the Secured Party by registered or certified mail, return receipt
requested, to its address indicated in the applicable signature page hereto,
which service shall be deemed sufficient for personal jurisdiction and shall be
deemed effective ten (10) days after mailing.
SECTION 27. WAIVER OF JURY TRIAL. GRANTOR AND SECURED PARTY HEREBY AGREE
TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS AGREEMENT. THE SCOPE OF THIS WAIVER IS
INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY
COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING
WITHOUT LIMITATION CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW AND STATUTORY CLAIMS. GRANTOR AND SECURED PARTY EACH
ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT FOR GRANTOR AND SECURED
PARTY TO ENTER INTO A BUSINESS RELATIONSHIP, THAT GRANTOR AND SECURED PARTY HAVE
ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH WILL
CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. GRANTOR AND
SECURED PARTY FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT. In the event of litigation, this Agreement
may he filed as a written consent to a trial by the court.
SECTION 28. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall
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constitute but one and the same instrument; signature pages may be detached from
multiple separate counterparts and attached to a single counterpart so that all
signature pages are physically attached to the same document.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Grantor and Secured Party have caused this Agreement to
be duly executed and delivered by their respective officers there unto duly
authorized as of the date first written above.
DITECH CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------
Title: VP/CFO
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Notice Address:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
BANKBOSTON, N.A.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------
Title: Director
----------------------------------
Notice Address:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ #▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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SCHEDULE 1
TO SECURITY AGREEMENT
Locations of Equipment: Ditech Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Locations of Inventory: Ditech Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
UMAI
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
South Bay Circuits, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ Industries
▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Pro Dev MFG
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
15
