SECURITY
AGREEMENT, dated as of September 16, 2005 (this “
Agreement ”), between Brillian Corporation, a Delaware
corporation (the “ Company ” or the “
Debtor ”) and Syntax Groups Corporation, a California
corporation or its permitted transferees or assigns (the “
Secured Party ”).
WHEREAS, pursuant
to a Note and Warrant Purchase Agreement between the Company and
the Secured Party dated as of the date hereof (the “
Purchase Agreement ”), the Secured Party has agreed to
extend a loan to the Company evidenced by that certain junior
secured subordinated promissory note (the “ Note
”); and
WHEREAS, in order
to induce the Secured Party to extend the loan evidenced by the
Note, Debtor has agreed to execute and deliver to the Secured Party
this Agreement and to grant the Secured Party a security interest
in certain property of Debtor to secure the prompt payment,
performance and discharge in full of all of the Company’s
obligations under the Note.
NOW, THEREFORE, in
consideration of the agreements herein contained and for other good
and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as
follows:
1.
Certain Definitions . As used in this Agreement, the
following terms shall have the meanings set forth in this
Section 1. Terms used but not otherwise defined in this
Agreement that are defined in Article 9 of the UCC (such as
“account”, “chattel paper”,
“commercial tort claim”, “deposit account”,
“document”, “equipment”,
“fixtures”, “general intangibles”,
“goods”, “instruments”,
“inventory”, “investment property”,
“letter-of-credit rights”, “proceeds” and
“supporting obligations”) shall have the respective
meanings given such terms in Article 9 of the UCC.
(a) “
Collateral ” means the collateral in which the Secured
Party is granted a security interest by this Agreement and which
shall include the following personal property of the Debtor,
whether presently owned or existing or hereafter acquired or coming
into existence, wherever situated, and all additions and accessions
thereto and all substitutions and replacements thereof, and all
proceeds, products and accounts thereof, including, without
limitation, all proceeds from the sale or transfer of the
Collateral and of insurance covering the same and of any tort
claims in connection therewith:
(i) All
goods, including, without limitations, (A) all machinery,
equipment, computers, motor vehicles, trucks, tanks, boats, ships,
appliances, furniture, special and general tools, fixtures, test
and quality control devices and other equipment of every kind and
nature and wherever situated, together with all documents of title
and documents representing the same, all additions and accessions
thereto, replacements therefor, all parts therefor, and all
substitutes for any of the foregoing and all other items used and
useful in connection with Debtor’s businesses and all
improvements thereto; and (B) all inventory;
(ii) All
Inventory and Intellectual Property of the Debtor;
(iii) All
contract rights and other general intangibles, including, without
limitation, all partnership interests, membership interests, stock
or other securities, rights under any of the Organizational
Documents, licenses, distribution and other agreements, computer
software (whether “off-the-shelf”, licensed from any
third party or developed by Debtor), computer software development
rights, leases, franchises, customer lists, quality control
procedures, grants and rights, goodwill, trademarks, service marks,
trade styles, trade names, patents, patent applications,
copyrights, and income tax refunds (collectively, the “
General Intangibles ”);
(iv) All
documents, letter-of-credit rights, instruments and chattel
paper;
(v) All
commercial tort claims;
(vi) All
deposit accounts and all cash (whether or not deposited in such
deposit accounts);
(vii) All
supporting obligations;
(viii) All
files, records, books of account, business papers, and computer
programs; and
(ix) the
products and proceeds of all of the foregoing Collateral set forth
in clauses (i)-(viii) above.
Notwithstanding
the foregoing, nothing herein shall be deemed to constitute an
assignment of any asset which, in the event of an assignment,
becomes void by operation of applicable law or the assignment of
which is otherwise prohibited by applicable law (in each case to
the extent that such applicable law is not overridden by
Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar
applicable law); provided, however, that to the extent permitted by
applicable law, this Agreement shall create a valid security
interest in such asset and, to the extent permitted by applicable
law, this Agreement shall create a valid security interest in the
proceeds of such asset.
(b) “
Intellectual Property ” means the collective reference
to all rights, priorities and privileges relating to intellectual
property, whether arising under United States, multinational or
foreign laws or otherwise, including, without limitation,
(i) all copyrights arising under the laws of the United
States, any other country or any political subdivision thereof,
whether registered or unregistered and whether published or
unpublished, all registrations and recordings thereof, and all
applications in connection therewith, including, without
limitation, all registrations, recordings and applications in the
United States Copyright Office, (ii) all letters patent of the
United States, any other country or any political subdivision
thereof, all reissues and extensions thereof, and all applications
for letters patent of the United States or any other country and
all divisions, continuations and continuations-in-part thereof,
(iii) all trademarks, trade names, corporate names, company
names, business names, fictitious business names, trade dress,
service marks, logos, domain names and other source or business
identifiers, and all goodwill associated therewith, now existing or
hereafter adopted or acquired, all registrations and recordings
thereof, and all applications in connection therewith, whether in
the United States
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Patent and
Trademark Office or in any similar office or agency of the United
States, any State thereof or any other country or any political
subdivision thereof, or otherwise, and all common law rights
related thereto, (iv) all trade secrets arising under the laws
of the United States, any other country or any political
subdivision thereof, (v) all rights to obtain any reissues,
renewals or extensions of the foregoing, (vi) all licenses for
any of the foregoing, and (vii) all causes of action for
infringement of the foregoing.
(c) “
Obligations ” means all of the Debtor’s
obligations under this Agreement, the Purchase Agreement, and the
Note, and any other instruments, agreements or other documents
executed or delivered in connection herewith or with the Purchase
Agreement or the Note, in each case, whether now or hereafter
existing, 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 the Secured Party as a preference,
fraudulent transfer or otherwise as such obligations may be
amended, supplemented, converted, extended or modified from time to
time. Without limiting the generality of the foregoing, the term
“Obligations” shall include, without limitation:
(i) principal of, and interest on the Note and the loans
extended pursuant thereto; (ii) any and all other fees,
indemnities, costs, obligations and liabilities of the Debtor from
time to time under or in connection with this Agreement or the
Note; and (iii) all amounts (including but not limited to
post-petition interest) in respect of the foregoing that would be
payable but for the fact that the obligations to pay such amounts
are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving
Debtor.
(d) “
Organizational Documents ” means with respect to
Debtor, the documents by which Debtor was organized (such as a
certificate of incorporation, certificate of limited partnership or
articles of organization, and including, without limitation, any
certificates of designation for preferred stock or other forms of
preferred equity) and which relate to the internal governance of
Debtor (such as bylaws, a partnership agreement or an operating,
limited liability or members agreement).
(e) “
UCC ” means the Uniform Commercial Code of the State
of Arizona and or any other applicable law of any state or states
which has jurisdiction with respect to all, or any portion of, the
Collateral or this Agreement, from time to time. It is the intent
of the parties that defined terms in the UCC should be construed in
their broadest sense so that the term “Collateral” will
be construed in its broadest sense. Accordingly if there are, from
time to time, changes to defined terms in the UCC that broaden the
definitions, they are incorporated herein and if existing
definitions in the UCC are broader than the amended definitions,
the existing ones shall be controlling.
2. Grant
of Security Interest . As an inducement for the Secured Party
to extend the loans as evidenced by the Note and to secure the
complete and timely payment, performance and discharge in full, as
the case may be, of all of the Obligations, Debtor hereby
unconditionally and irrevocably pledges, grants and hypothecates to
the Secured Party a continuing security interest in and to, a lien
upon all of its right, title and interest of whatsoever kind and
nature in
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and to, the
Collateral, subject to and junior in right to the security
interests granted prior to the date of this Agreement to existing
creditors of the Company (the “ Security Interest
”).
3.
Delivery of Certain Collateral . Contemporaneously or prior
to the execution of this Agreement, Debtor shall deliver or cause
to be delivered to the Secured Party any and all certificates and
other instruments or documents representing any of the other
Collateral.
4.
Representations, Warranties, Covenants and Agreements of the
Debtor . Debtor represents and warrants to, and covenants and
agrees with, the Secured Party as follows:
(a) Debtor
has the requisite corporate, partnership, limited liability company
or other power and authority to enter into this Agreement and
otherwise to carry out its obligations hereunder. The execution,
delivery and performance by Debtor of this Agreement and the
filings contemplated therein have been duly authorized by all
necessary action on the part of Debtor and no further action is
required by Debtor. This Agreement has been duly executed by
Debtor. This Agreement constitutes the legal, valid and binding
obligation of Debtor, enforceable against Debtor in accordance with
its terms except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization and similar laws
of general application relating to or affecting the rights and
remedies of creditors and by general principles of
equity.
(b) The
Debtor has no place of business or offices where its books of
account and records are kept (other than temporarily at the offices
of its attorneys or accountants) or places where Collateral is
stored or located, except as set forth on Schedule A
attached hereto.
(c) Except
for Permitted Liens (as defined in the Note) and except as set
forth on Schedule B attached hereto, the Debtor is the
sole owner of the Collateral (except for non-exclusive licenses
granted by Debtor in the ordinary course of business), free and
clear of any liens, security interests, encumbrances, rights or
claims, and are fully authorized to grant the Security Interest.
Except as set forth on Schedule B , there is not on
file in any governmental or regulatory authority, agency or
recording office an effective financing statement, security
agreement, license or transfer or any notice of any of the
foregoing (other than those that will be filed in favor of the
Secured Party pursuant to this Agreement) covering or affecting any
of the Collateral.
(d) No
written claim has been received that any Collateral or
Debtor’s use of any Collateral violates the rights of any
third party. There has been no adverse decision to Debtor’s
claim of ownership rights in or exclusive rights to use the
Collateral in any jurisdiction or to Debtor’s right to keep
and maintain such Collateral in full force and effect, and there is
no proceeding involving said rights pending or, to the best
knowledge of Debtor, threatened before any court, judicial body,
administrative or regulatory agency, arbitrator or other
governmental authority.
(e) Debtor
shall at all times maintain its books of account and records
relating to the Collateral at its principal place of business and
its Collateral at the locations set forth on Schedule A
and may not relocate such books of account and records or tangible
Collateral unless it delivers to the Secured Party at least
30 days prior to such relocation (i) written notice of
such
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relocation and
the new location thereof (which must be within the United States)
and (ii) evidence that appropriate financing statements under
the UCC and other necessary documents have been filed and recorded
and other steps have been taken to create in favor of the Secured
Party a valid, continuing lien in the Collateral.
(f) This
Agreement creates in favor of the Secured Party a valid security
interest in the Collateral, subject only to Permitted Liens (as
defined in the Note), securing the payment and performance of the
Obligations. Except for the filing of the Uniform Commercial Code
financing statements referred to in the immediately following
paragraph, the recordation of the Intellectual Property Security
Agreement (as defined below) with respect to copyrights and
copyright applications in the United States Copyright Office
referred to in paragraph (n), the execution and delivery of deposit
account control agreements satisfying the requirements of
Section 9-104(a)(2) of the UCC with respect to each deposit
account of the Debtor, and the delivery of the certificates and
other instruments provided in Section 3, no action is
necessary to create or protect the security interests created
hereunder. Without limiting the generality of the foregoing, except
for the filing of said financing statements, the recordation of
said Intellectual Property Security Agreement, the execution and
delivery of said deposit account control agreements, and the
Required Approvals (as defined in the Purchase Agreement), no
consent of any third parties and no authorization, approval or
other action by, and no notice to or filing with, any governmental
authority or regulatory body is required for (i) the
execution, delivery and performance of this Agreement,
(ii) the creation of the Security Interests created hereunder
in the Collateral or (iii) the enforcement of the rights of the
Secured Party hereunder.
(g) Debtor
hereby authorizes the Secured Party to file one or more financing
statements under the UCC, with respect to the Security Interest
with the proper filing and recording agencies in any jurisdiction
deemed proper by them.
(h) The
execution, delivery and performance of this Agreement by the Debtor
does not (i) violate any of the provisions of any Organizational
Documents of Debtor or any judgment, decree, order or award of any
court, governmental body or arbitrator or any applicable law, rule
or regulation applicable to Debtor or (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time
or both would become a default) under, or give to others any rights
of termination, amendment, acceleration or cancellation (with or
without notice, lapse of time or both) of, any agreement, credit
facility, debt or other instrument (evidencing Debtor’s debt
or otherwise) or other understanding to which Debtor is a party or
by which any property or as
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