Exhibit 10.14
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement"), dated as of December 1, 2000,
is made by LEARNCOM, INC., an Illinois corporation ("Debtor") whose address is
000 Xxxxxxxxxx Xxxxx, Xxxxxxxxxxx, Xxxxxxxx 00000, in favor of THE XXXXXX
CAPITAL COLLATERALIZED BRIDGE FUND, L.P., a Delaware limited partnership
("Secured Party") whose address is 00 X. Xxxxxx Xx., Xxxxx 0000, Xxxxxxx,
Xxxxxxxx 00000.
For valuable consideration, Debtor agrees as follows:
1. DEFINITIONS. As used in this Agreement:
(a) unless otherwise defined herein, all terms that are defined in
the Uniform Commercial Code of Illinois shall have the same meanings herein
as in such Code.
(b) "Collateral" means any and all property of Debtor in which
Secured Party now has, by this Agreement acquires, or hereafter acquires a
security interest, including without limitation the property described in
Section 2 hereof.
(c) "Disclosed Liens" is defined in Section 4(d).
(d) "Event of Default" is defined in Section 8.
(e) "General Intangibles" means all general intangibles of Debtor,
whether now owned or hereafter created or acquired by Debtor, including,
without limitation, all causes in action, causes of action, corporate or
other business records, deposit accounts, investment property, inventions,
designs, drawings, blueprints, patents, patent applications, trademarks and
the good will of the business symbolized thereby, names, trade names, trade
secrets, goodwill, copyrights, registrations, licenses, franchises,
customer lists, security and other deposits, rights in all litigation
presently or hereafter pending for any cause or claim (whether in contract,
tort or otherwise), and all judgments now or thereafter arising therefrom,
rights as a licensor or licensee of any kind, royalties, telephone numbers,
proprietary information, purchase orders, and all insurance policies and
claims (including without limitation life insurance, key man insurance,
credit insurance, liability insurance, property insurance and other
insurance), tax refunds and claims, computer programs, discs, tapes and
tape files, claims under guaranties, security interests or other security
held by or granted to Debtor, all rights to indemnification and all other
intangible property of every kind of nature (other than receivables).
(f) "Inventory" means all of Debtor's now owned and hereafter
acquired goods merchandise or other personal property, wherever located, to
be furnished under any contract of service or held for sale or lease
(including without limitation all raw materials, work in process, finished
goods and goods in transit), and all materials and supplies of every kind,
nature and description which are or might be used or consumed in Debtor's
business or used or consumed in Debtor's business or used in connection
with the
manufacture, packing, shipping, advertising, selling or finishing of such
goods, merchandise or other personal property, and all warehouse receipts,
documents of title and other documents representing any of the foregoing.
(g) "Liabilities" is defined in Section 3.
(h) "Loan Agreement" means that certain Loan Agreement of even date
herewith between Debtor and Secured Party.
(i) "Note" is defined in Sections 3(a).
(j) "Senior Lender" means American National Bank and Trust Company of
Chicago as Senior Lender under that certain Loan and Security Agreement
between Senior Lender and Debtor, dated March 23, 1999 as same may be
amended.
2. SECURITY INTEREST. Debtor hereby grants to Secured Party a continuing
security interest in the following property or types of property now owned by
Debtor or hereafter created or acquired by Debtor, wherever located:
(a) Accounts (including without limitation all rights to payment for
services or the Inventory, however arising), leases, chattel paper,
contract rights, instruments, life insurance policies, and documents;
(b) General Intangibles;
(c) Inventory;
(d) Goods (other than Inventory), equipment, vehicles, and fixtures,
together with accessions thereto and replacement parts therefor;
(e) All monies, accounts, deposits, and property now or at any time
hereafter in the possession or under the control of Secured Party or its
bailee;
(f) All books and records, including without limitation customer
lists, credit files, computer programs, printouts, and other materials and
records, pertaining to any of the foregoing;
(g) All documents of title evidencing or issued with respect to any
of the foregoing;
(h) All other property owned by the Debtor or in which Debtor has or
hereafter requires any interest whenever located and of whatever kind or
nature, tangible or intangible, including without limitation investment
property; and
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(i) All proceeds and products of all of the foregoing, including
without limitation proceeds of insurance policies insuring the foregoing
and proceeds of any life insurance policies.
3. LIABILITIES. The Collateral shall secure the payment and performance
of the following, which are acknowledged by Debtor (the "Liabilities"):
(a) All obligations and liabilities of Debtor to Secured Party whether
now existing or hereafter arising and whether or not contemplated on the
date of this Agreement (i) evidenced by and under the Note (the "Note") in
the original principal amount of up to $1,000,000.00 executed by Debtor in
favor of Secured Party, as renewed, replaced, modified, waived or extended
from time to time; and (ii) under all other agreements relating to the Note
(including without limitation the Loan Agreement and this Agreement, as
each may be renewed, replaced, extended, modified or waived from time to
time) between Debtor and Secured Party.
(b) All other obligations and liabilities of the Debtor to the
Secured Party howsoever created, whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising.
4. WARRANTIES OF DEBTOR. Debtor warrants, represents and covenants that:
(a) Debtor is and will continue to be duly authorized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation. Debtor is and will continue to be qualified and licensed to
do business in all jurisdictions in which the nature of the business
transacted by it, or the ownership or leasing of its property, makes such
qualification or licensing necessary, and Debtor has and will continue to
have all requisite corporate power and authority to carry on its business
as it is now, or may hereafter be, conducted.
(b) Debtor is, and will continue to be, authorized to enter into, to
grant security interests in its property pursuant to, and to perform its
obligations under, this Agreement, and all other instruments and
transactions contemplated herein. The execution, delivery and performance
by Debtor of this Agreement, and all other instruments and transactions
contemplated herein have been validly authorized, are enforceable against
the Debtor in accordance with their terms (except as the enforceability of
rights or remedies may be limited by bankruptcy, insolvency or other laws
affecting creditors' rights and remedies heretofore or hereafter enacted),
and do not violate any law or any provision of, and are not grounds for
acceleration under, any agreement, indenture, note or instrument which is
binding upon Debtor, or any of its property, including, without limitation,
Debtor's Articles of Incorporation, Bylaws and any shareholder agreements.
(c) Debtor has set forth above its correct name. All prior names of
Debtor and all fictitious names, trade names and trade styles by which
Debtor has been, or is now, known are set forth on Exhibit B hereto. Debtor
shall provide Secured Party with fifteen
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(15) days' advance written notice prior to doing business under any other
name, fictitious name, trade name or trade style. Debtor has complied, and
will hereafter comply, with all laws relating to the conduct of business
under, the ownership of property in, and the renewal or continuation of the
right to use, a corporate, fictitious or trade name or trade style.
(d) Debtor is the lawful owner of all Collateral, free and clear of
all liens, pledges, charges, mortgages, and claims other than the security
interest hereunder, except liens for current taxes not delinquent and liens
disclosed in the Loan Agreement (collectively, the "Disclosed Liens").
(e) Except for the Disclosed Liens, no financing statement, mortgage,
notice of judgment, or any similar instrument (unless filed on behalf of
Secured Party) covering any of the Collateral is on file in any public
office.
(f) All Inventory is located at Debtor's chief executive office and
principal place of business which is at the address set forth under
Debtor's signature hereto, and is not in transit, except as promptly
disclosed to Secured Party from time to time in writing. All Inventory is
of good and merchantable quality and free from any defects that would
affect the market value of such Inventory. None of the Collateral now is or
will be affixed to any real property in such a manner, or with such intent,
as to constitute a fixture thereto. Debtor is not and will not become a
lessee under any real property lease pursuant to which the lessor may
obtain any rights in any of the Collateral and no such lease now prohibits,
restrains, impairs or will prohibit, restrain or impair Debtor's right to
remove any Collateral from the leased premises. Whenever any Collateral is
located upon premises in which any third party has an interest (whether as
owner, mortgagee, beneficiary under a deed of trust, lien or otherwise),
Debtor shall, whenever requested by Secured Party, use its best efforts to
cause such third party to execute and delivery to Secured Party, in form
acceptable to Secured Party, whatever waivers and subordinations that
Secured Party specifies, so as to ensure that Secured Party's rights in the
Collateral are, and will continue to be, superior to the rights of any such
third party. Debtor will keep in full force and effect, and will comply
with all the terms of, any lease of real property where any of the
Collateral now or in the future may be located.
(g) All accounts receivable of Debtor are genuine, are in all
respects what they purport to be, are not evidenced by a judgment, and
represent undisputed, bona fide transactions completed or to be completed
in accordance with the terms and conditions of any document related
thereto; except for the Disclosed Liens, none of the Collateral has been
sold or pledged to any other person or entity; and Debtor has no knowledge
of any fact or circumstance which would impair the validity or
collectibility of the Collateral listed in Section 2(a), (b), and (e) of
this Agreement.
(h) Debtor has filed or caused to be filed all federal, state, and
local tax returns that are required to be filed, and has paid or has caused
to be paid all taxes including any taxes shown on such returns or on any
assessment received by them to the extent that such taxes have become due.
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(i) Since the date that is five (5) years before the date hereof,
Debtor has not been known by any name other than its corporate name shown
above as of the date hereof. The proceeds of all the Liabilities will be
used for proper business purposes.
5. COVENANTS OF DEBTOR. Debtor agrees that, until payment in full of the
Liabilities, it will:
(a) Provide and maintain insurance with respect to the Collateral and
the operation of Debtor's business; provide and maintain "key-man" life
insurance policies carried by Debtor; all such insurance shall be in such
amounts and against such risks as shall be satisfactory in all respects to
Secured Party, with Secured Party named as additional insured and loss
payee (Debtor shall provide a certificate of insurance to such effect and
otherwise satisfactory to Secured Party simultaneously with the execution
hereof and from time to time thereafter as requested by Lender);
(b) Defend the Collateral against the claims and demands of all
persons other than Secured Party and Senior Lender and promptly pay all
taxes, assessments, and charges upon the Collateral, and not sign (or
permit to be signed) any financing statements or other documents creating
or perfecting a lien upon or security interest in any of the Collateral
except in favor of Secured Party and Senior Lender, or otherwise create,
suffer, or permit to exist any liens or security interests upon any
Collateral other than in favor of Secured Party and Senior Lender, except
tax liens, provided that such liens are removed before related taxes become
delinquent;
(c) Execute such financing statements and other documents (and pay
the cost of filing and recording the same in all public offices reasonably
deemed necessary by Secured Party) and do such other acts as Secured Party
may reasonably request to establish and maintain a valid and perfected
security interest in the Collateral free and clear of all other liens and
claims except Disclosed Liens;
(d) Subject to Senior Lender's rights, after the occurrence of an
Event of Default, deliver to Secured Party any certificates or other
documents of title representing or issued with respect to any of the
Collateral, with Secured Party's security interest and lien endorsed
thereon, and record such certificates or documents with all appropriate
regulatory agencies;
(e) Subject to Senior Lender's rights, after the occurrence of an
Event of Default, furnish to Secured Party, immediately upon the request of
Secured Party, any evidence of ownership of the Collateral, including
without limitation bills of sale, paid invoices, certificates of title, or
applications for title;
(f) Keep at its office at the address set forth under its signature
hereto its records concerning the Collateral, which records shall be of
such character as will enable Secured Party to determine at any time the
status of the Collateral; furnish to Secured Party such information
concerning Debtor, the Collateral, and the account debtors as
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Secured Party may from time to time reasonably request; and permit Secured
Party from time to time to inspect the Collateral and to inspect, audit,
and make copies of, and extracts from, all records and all other papers in
the possession of Debtor pertaining to the Collateral and the account
debtors. Secured Party shall have the right at any time or times to make
direct verification with the account debtors of any and all of the
accounts, all at Debtor's expense;
(g) Keep and maintain in good operating condition and repair and make
all replacements and renewals, as necessary in the ordinary course of
business, to the Collateral listed in Section 2(d) of this Agreement so
that the value and operating efficiency thereof shall at all times be
maintained and preserved, and keep such Collateral only at the address set
forth under its signature hereto;
(h) Make appropriate entries upon its financial statements and its
books and records disclosing Secured Party's security interest in the
Collateral;
(i) Subject to Senior Lender's rights, after the occurrence of an
Event of Default, if at any time any of the Collateral shall be or become
evidenced by any instrument, note, or other document, immediately deliver
such instrument, note, or document to Secured Party, endorsed or
accompanied by a proper instrument of transfer as requested by Secured
Party;
(j) Immediately notify Secured Party in reasonable detail (i) of any
event causing a material loss or depreciation in the value of the
Collateral and (ii) of the occurrence of any event, which after any notice
and passage of any cure period, would reasonably be expected to become an
Event of Default; and
(k) Other than in the ordinary course of its business and except as
permitted by Section 6, not sell, transfer, or otherwise dispose of any
Collateral having a value of $2,500.00 or more without Secured Party's
prior written consent; and
(l) Shall not, without Secured Party's prior written consent, store
any Inventory or other Collateral with any warehouseman or other third
party; and
(m) Shall not, without Secured Party's prior written consent, sell
any Inventory on a sale-or-return, guaranteed sale, consignment, or other
contingent basis.
6. USE OF THE INVENTORY.
(a) Until notice to the contrary is given by Secured Party after the
occurrence of an Event of Default, Debtor may use, consume, and sell
Inventory in carrying on its business in the ordinary course of business
substantially in the same manner as now conducted, but a sale in the
ordinary course of business shall not include any transfer or sale in
satisfaction, partial or complete, of a debt owed by Debtor.
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7. COLLECTIONS.
(a) Until notice to the contrary is given by Secured Party, Debtor
(i) shall collect the accounts for Secured Party at Debtor's own expense,
and (ii) may grant, in the ordinary course of business, to any party
obligated on any of the Collateral, any rebate, refund, or allowance to
which such party may be lawfully entitled and accept in connection
therewith the return of any goods the sale or lease of which shall have
given rise to such accounts.
(b) Subject to Senior Lender's rights, after the occurrence of an
Event of Default, Secured Party, at Debtor's expense, may or, upon request
of Secured Party, Debtor shall, notify any account debtors of the existence
of this Agreement and direct such account debtors to pay directly to
Secured Party the amounts due or to become due from such account debtors.
Each account debtor so notified and directed may accept the receipt of
Secured Party for any such payment as a full release of any amounts so
paid.
(c) Subject to Senior Lender's rights, after an Event of Default,
Secured Party may enforce collection of any or all of the Collateral by
suit or otherwise, and surrender, release, or exchange all or any part
thereof, or compromise or extend or renew for any period (whether or not
longer than the original period) any indebtedness thereunder.
(d) Subject to Senior Lender's rights, Secured Party may, upon the
happening of an Event of Default shall, apply all payments received from
account debtors to the Liabilities when due (whether by acceleration or
otherwise) and may credit any balance after such payment to the account of
Debtor.
8. EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an "Event of Default" under this Agreement:
(a) Failure to comply with or perform any agreement or covenant of
Debtor contained herein or any representation of Debtor to Secured Party
hereunder is false or misleading in any material respect; or
(b) Any default shall occur or continue under any instrument,
document, note, agreement, or guaranty delivered to Secured Party in
connection with the Liabilities including, without limitation the Loan
Agreement, or any such instrument, document, note, agreement, or guaranty
shall not be, or shall cease to be, enforceable in accordance with its
terms; or
(c) Debtor shall grant or any person shall obtain a security interest
in any of the Collateral except for the Disclosed Liens; Debtor or any
other person shall perfect (or attempt to perfect) such a security
interest; a court shall determine that Secured Party does not have a
security interest junior only to the Disclosed Liens in any of the
Collateral enforceable in accordance with the terms hereof; or any notice
of a federal tax lien against Debtor shall be filed with any public
recorder; or
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(d) There shall be any material loss or depreciation in the value of
the Collateral for any reason.
9. REMEDIES ON DEFAULT. Notwithstanding any provision of any document or
instrument evidencing or relating to any Liability, and subject to Senior
Lender's rights, (i) upon the occurrence of any Event of Default specified in
Sections 8(a), (c) and (d), Secured Party at its option may declare all of the
Liabilities immediately due and payable without notice or demand of any kind on
the part of Secured Party and (ii) upon the occurrence of an Event of Default
specified in Section 8(b), all of the Liabilities shall be due and payable in
accordance with the terms of the applicable instrument, document, note,
agreement or guaranty. Debtor expressly waives protest, notice, presentment,
dishonor, and demand of any kind. Secured Party may exercise from time to time
any rights and remedies available under the Uniform Commercial Code of Illinois,
including the right to have Debtor assemble the Collateral and deliver it to a
place designated by Secured Party. Debtor shall pay all related expenses,
including attorneys' fees and reasonable time charges of attorneys who may be
employees of Secured Party or any affiliate or parent of Secured Party. If any
notification of intended disposition of any of the Collateral is required by
law, such notification, if mailed, shall be deemed reasonably and properly given
if mailed at least ten days before such disposition, postage prepaid, addressed
to Debtor at the address of Debtor shown below. Secured Party shall, in addition
to and not in limitation of all rights of offset under applicable law, have the
right to appropriate and apply all of the Collateral in its possession to
payment of the Liabilities. Secured Party may proceed to sell or otherwise
dispose of the Collateral at public or private sale for cash or credit;
provided, however, that Debtor shall be credited with proceeds of such sale only
when the proceeds are actually received by Secured Party. Any proceeds of the
Collateral may be applied by Secured Party to the payment of expenses and costs
to exercise of Secured Party's rights hereunder, and any balance of such
proceeds shall be applied toward the Liabilities in such order as Secured Party
shall determine in its sole discretion. Any balance remaining shall be returned
to the Debtor.
10. RIGHTS OF SECURED PARTY. Subject to Senior Lender's rights, Secured
Party may, from time to time, at its option (but shall have no duty to), upon 2
days notice to Debtor:
(a) Perform any agreement of Debtor hereunder that Debtor shall have
failed to perform; and
(b) Take any other action which Secured Party deems necessary or
desirable for the preservation of the Collateral or Secured Party's
interest herein, including without limiting the generality of the
foregoing: (i) any action to collect or realize upon the Collateral; (ii)
the discharge of taxes, liens, security interests or other encumbrances at
any time levied or placed on the Collateral; (iii) with the mutual consent
of Xxxxx Xxxx, replace the management of the Debtor at its Bensenville
facility; or (iv) the discharge or keeping current of any obligation of
Debtor having effect on the Collateral; and
(c) File, or cause to be filed, photocopies or carbon copies of any
financing statement respecting any right of Secured Party in the
Collateral, and any such photocopy
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or carbon copy of the signature of Debtor on such photocopy or carbon copy
shall be deemed an original for purposes of such filing. Debtor hereby
authorizes Secured Party to sign financing statements on Debtor's behalf to
be filed in all jurisdictions in which such authorization is permitted.
Debtor hereby appoints Secured Party as its attorney in fact, effective
upon an Event of Default, which appointment is irrevocable and coupled with an
interest, for purposes of performing acts and signing and delivering any
agreement, document, or instrument, on behalf of Debtor in accordance with this
Section. Debtor immediately will reimburse Secured Party for all expenses so
incurred by Secured Party, together with interest thereon at 16% per annum.
11. GENERAL.
(a) NONWAIVER; CUMULATIVE REMEDIES. No delay or omission on the part
of Secured Party in the exercise of any right or remedy shall operate as a
waiver thereof, and no single or partial exercise by Secured Party of any
right or remedy shall preclude other or further exercise thereof or the
exercise of any other right or remedy. The rights and remedies herein
provided to Secured Party are cumulative and not exclusive of any rights or
remedies provided by law.
(b) NOTICES. All notices, requests, and demands to or upon Secured
Party or Debtor shall be deemed to have been given or made when deposited
in the mail, postage prepaid, addressed to Debtor at the address set forth
under its signature or to Secured Party at the address listed in the
heading of this Agreement.
(c) SUCCESSORS. This Agreement shall, upon execution and delivery by
the Debtor, become effective and shall be binding upon and inure to the
benefit of Debtor, Secured Party, and their respective personal
representatives, executors, heirs, successors, and assigns, except that the
Debtor may not transfer or assign any of its rights or interest hereunder
without the consent of Secured Party.
(d) SINGULAR AND PLURAL. Unless the context otherwise requires,
wherever used herein the singular shall include the plural and the plural
shall include the singular, and the use of one gender shall denote the
others where appropriate.
(e) COUNTERPARTS. This Agreement may be executed by Debtor on any
number of counterparts, and each of said counterparts shall be deemed to be
an original.
(f) ENFORCEMENT COSTS. Debtor agrees to pay or reimburse Secured
Party upon demand for all costs, expenses, and fees (including legal costs
and fees and reasonable time charges of attorney s) incurred by Secured
Party in enforcing or preserving its rights under, this Agreement or any
note, document, or other instrument executed in connection herewith.
(g) PROVISIONS SEVERABLE; REFERENCES. If any term or provision of
this Agreement shall be unenforceable or invalid, such unenforceability or
invalidity shall not
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render any other term or provision hereof unenforceable or invalid, and all
other terms and provisions of this Agreement shall be enforceable and
valid. References to Sections herein shall be to Sections of this Agreement
unless otherwise specified
(h) CONSTRUCTION; JURISDICTION; JURY WAIVER. This Agreement and the
rights and obligations of the parties hereunder and thereunder shall be
governed by, and construed and interpreted in accordance with, the laws of
Illinois. Debtor hereby irrevocably consents to the jurisdiction and venue
of any state or federal court sitting in Xxxx County, Illinois, and agrees
that any litigation involving this Agreement (including without limitation
ancillary claims) may be conducted in any such court at the sole option of
Secured Party. Debtor hereby waives any right or claim it may have to trial
by jury, to transfer or change the venue of any suit, action, or other
proceeding brought against Debtor by Secured Party in accordance with this
Section or to claim that any such proceeding has been brought in an
inconvenient forum.
LEARNCOM, INC.
By: /s/ XXXXX XXXXXX
----------------------------------
Its: President and CEO
Address: 000 Xxxxxxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxx 00000
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EXHIBIT A
to Financing Statement of
LEARNCOM, INC. ("Debtor")
in favor of
THE XXXXXX CAPITAL COLLATERALIZED BRIDGE FUND, L.P. ("Secured Party")
All of Debtor's right, title and interest in the following property or
types of property whether now existing or hereafter arising or acquired,
wherever located:
(a) Accounts (including without limitation all rights to payment for
services or the Inventory, however arising), leases, chattel paper, contract
rights, instruments, life insurance policies, and documents;
(b) General intangibles;
(c) Inventory;
(d) Goods (other than Inventory), equipment, vehicles, and fixtures,
together with accessions thereto and replacement parts therefor, but excluding
property used exclusively for personal, household, or family use;
(e) All monies, accounts, deposits, and property now or at any time
hereafter in the possession or under the control of Secured Party or its bailee;
(f) All books and records, including without limitation customer lists,
credit files, computer programs, printouts, and other materials and records,
pertaining to any of the foregoing;
(g) All documents of title evidencing or issued with respect to any of the
foregoing;
(h) All other property owned by the Debtor or in which Debtor has or
hereafter acquires any interest wherever located and of whatever kind or nature,
tangible or intangible, including without limitation investment property; and
(i) All proceeds and products of all of the foregoing, including without
limitation proceeds of insurance policies insuring the foregoing, and proceeds
of any life insurance policies.
Unless otherwise defined herein all terms that are defined in the Uniform
Commercial Code of Illinois shall have the same meanings herein as in such Code.
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EXHIBIT B
(NONE)
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