EXHIBIT 10.11
SECURITY AGREEMENT
(PLEDGE)
Date: February 18, 2004
SCHOOLPOP, INC., a Delaware corporation, whose address is 3100 Five Forks
Trickum Road SW, Suite 401, Lilburn, Georgia 30047 (the "Borrower"), and XXXXXX
XXXXXXXX, whose address is 0000 Xxxxx 000 Xxxx, Xxxxxxxxxxxx, Xxxxxxx 00000 (the
"Lender"), agree as follows:
1. SECURITY INTEREST. In consideration of any extension of credit
heretofore or hereafter made by Lender to Borrower, as evidenced by that certain
promissory note by Borrower payable to the Lender of even date herewith in the
original principal amount of One Million Two Hundred and 00/100 Dollars
($1,000,200.00) (the "Note"), the Borrower hereby pledges to the Lender and
gives the Lender a continuing and unconditional security interest (the "Security
Interest") in the following described property (the "Collateral"):
SEE EXHIBITA "A" ATTACHED HERETO
2. INDEBTEDNESS SECURED. The borrowing relationship between Borrower
and Lender is to be a continuing one and is intended to cover numerous types of
extensions of credit, loans, overdraft payments, or advances made directly or
indirectly to Borrower. This Agreement and the Security Interest created by it
secures payment of the Note and all obligations of any kind owing by Borrower to
Lender pursuant to the Note, including any modifications, renewals and/or
extensions thereof, and also including, without limitation, any sums advanced
and any expenses or obligations incurred by Lender pursuant to this Agreement or
any other agreement concerning, evidencing or securing obligations of Borrower
to Lender pursuant to the Note, (the "Indebtedness").
3. BORROWER'S REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants that Borrower has full right, power and authority to enter into this
Agreement and to pledge the Collateral to Lender.
4. BORROWER'S WAIVERS. Borrower waives all requirements of presentment,
protest, demand and notice of dishonor or nonpayment to Borrower, or any other
party to the Indebtedness or the Collateral.
5. BORROWER'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE
COLLATERAL. With respect to the Collateral, Borrower represents promises to
Lender that:
Perfection of Security Agreement. Borrower agrees to execute financing
statements and to take whatever other actions are requested by Lender
to perfect and continue Lender's security interest in the Collateral.
Upon request of Lender, Borrower will deliver to Lender any and all of
the documents evidencing or constituting the Collateral, and Borrower
will note Lender's interest upon any and all chattel paper if not
delivered to Lender for possession by Lender. This is a continuing
Security Agreement and will continue in effect even though for a period
of time Borrower may not be indebted to Lender.
No Violation. The execution and delivery of this Agreement will not
violate any law or agreement governing Borrower or to which Borrower is
a party, and its certificate or articles of incorporation and bylaws do
not prohibit any term or condition of this Agreement.
Enforceability of Collateral. To the extent that Collateral consists of
accounts, chattel paper, or general intangibles, as defined by the
Uniform Commercial Code, the Collateral is enforceable in accordance
with its terms, is genuine, and fully complies with all applicable laws
and regulations concerning form, content and manner of preparation and
execution, and all persons appearing to be obligated on the Collateral
have authority and capacity to contract are in fact obligated as they
appear to be on the Collateral. At the time any trade account, account
receivable or other receivable, or other right to payment for goods
sold or services rendered owing to Borrower (collectively, an
"Account") becomes subject to a security interest in favor of Lender,
the Account shall be a good and valid account representing an
undisputed, bona fide indebtedness incurred by the account debtor, for
merchandise held subject to delivery instructions or previously shipped
or delivered pursuant to a contract of sale, or for services previously
performed by Borrower with or for the account debtor. So long as this
Agreement remains in effect, Borrower shall not, without Lender's prior
written consent, compromise, settle, adjust, or extend payment under or
with regard to any such accounts. There shall be no setoffs or
counterclaims against any of the Collateral, and no Agreement shall
have been made under which any deductions or discounts may be claimed
concerning the Collateral except those disclosed to Lender in writing.
Location of the Collateral. Except in the ordinary course of Borrower's
business, Borrower agrees to keep the Collateral (or to the extent the
Collateral consists of intangible property such as accounts or general
intangibles, the records concerning the Collateral at Borrower's
address shown above or at such other locations as are acceptable to
Lender. Upon Lender's request, Borrower will deliver to Lender in form
satisfactory to Lender's schedule of real properties and Collateral
locations relating to Borrower's operations, including without
limitation the following: (1) all real property Borrower owns or is
purchasing; (2) all real property Borrower is renting or leasing; (3)
all storage facilities Borrower owns, rents, leases or uses; and (4)
all other properties where Collateral is or may be located.
Removal of the Collateral. Except in the ordinary course of Borrower's
business, including the sale of inventory, Borrower shall not remove
the Collateral from its existing location without Lender's prior
written consent. Borrower shall, whenever requested advise Lender of
the exact location of the Collateral.
Transactions Involving Collateral. Except for inventory sold or
accounts collected in the ordinary course of Borrower's business, or as
otherwise provided for in this Agreement, Borrower shall not sell,
offer to sell, or otherwise transfer or dispose of the Collateral.
While Borrower is not in default under this Agreement, Borrower may
sell inventory, but only in the ordinary course of its business and
only to buyers who qualify as a buyer in the ordinary course of
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business. A sale in the ordinary course of Borrower's business does not
include a transfer in partial or total satisfaction of a debt or any
bulk sale. Borrower shall not pledge, mortgage, encumber or otherwise
permit the Collateral to be subject to any lien, security interest,
encumbrance, or charge, other than the security interest provided for
in this Agreement, without the prior written consent of Lender. This
includes security interests even if junior in right to the security
interest granted under the Agreement. Unless waived by Lender, all
proceeds from any disposition of the Collateral (for whatever reason)
shall be held in trust for Lender and shall not be commingled with any
other funds; provided, however, this requirement shall not constitute
consent by Lender to any sale or other disposition. Upon receipt,
Borrower shall immediately deliver any such proceeds to Lender.
Title. Borrower represents and warrants to Lender that Borrower holds
good and marketable title to the Collateral, free and clear from all
liens and encumbrances except for the lien of this Agreement. No
financing statement converting any of the Collateral is on file in any
public office other than those which reflect the security interest
created by this Agreement or to which Lender has specifically
consented. Borrower shall defend Lender's rights in the Collateral
against the claims and demands of all other persons.
Repairs and Maintenance. Borrower agrees to keep and maintain, and to
cause others to keep and maintain, the Collateral in good order, repair
and condition at all times while this Agreement remains in effect.
Borrower further agrees to pay when due all claims for work done on, or
services rendered or material furnished in connection with, the
Collateral so that no lien or encumbrance may ever attach to or be
filed against the Collateral.
Inspection of Collateral. Lender and Lender's designated
representatives and agents shall have the right at all reasonable times
to examine and inspect the Collateral whenever located.
Taxes, Assessments and Liens. Borrower will pay when due, all taxes,
assessments, and liens upon the Collateral, the use of operation, upon
this Agreement, upon any promissory note or notes evidencing the
Indebtedness, or upon any of the other Related Documents. Borrower may
withhold any such payment or may elect to contest any lien if Borrower
is in good faith conducting an appropriate proceeding to contest the
obligation to pay and so long as Lender's interest in the Collateral is
not jeopardized in Lender's sole opinion. If the Collateral is
subjected to a lien which is not discharged within fifteen (15) days,
Borrower shall deposit with Lender cash, a sufficient corporate surety
bond or other security satisfactory to Lender in an amount adequate to
provide for the discharge of the lien plus any interest, costs,
reasonable attorneys fees or other charges that could accrue as a
result of foreclosure or sale of the Collateral. In any contest,
Borrower shall defend itself and Lender shall satisfy any final adverse
judgment before enforcement against the Collateral. Borrower shall name
Lender as an additional obligor under any surety bond furnished in the
contest proceedings. Borrower further agrees to furnish Lender with
evidence that such taxes, assessments, and government and other charges
have been paid in full and in a timely manner. Borrower may withhold
any such payment or may elect to contest any lien if Borrower is in
good faith conducting an appropriate proceeding to contest the
obligation to pay and so long as Lender's interest in the Collateral is
not jeopardized.
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Compliance with Government Requirements. Borrower shall comply promptly
with all laws, ordinances, rules and regulations of all governmental
authorities, now or hereinafter in effect, applicable to the ownership,
production, disposition, or use of the Collateral, including all laws
or regulations relating to the undue erosion of highly-erodible land or
relating to the conversion of wetlands for the production of an
agricultural product or commodity. Borrower may contest in good faith
any such law, evidence or regulation and withhold compliance during any
proceeding, including appropriate appeals, so long as Lender's interest
in the Collateral, in Lender's opinion is not jeopardized.
Hazardous Substances. Borrower represents and warrants that the
Collateral never has been, and never will be so long as this Agreement
remains a lien on the Collateral, used in violation of any state,
federal and local statutes, regulations and ordinances relating to the
protection of human health or the environment ("Environmental Laws") or
for the generation, manufacture, storage, transportation, treatment,
disposal, release or threatened release of any materials that, because
of their quantity, concentration or physical, chemical or infectious
characteristics, may cause or pose a present or potential hazard to
human health or the environment when improperly used, treated, stored
disposed of, generated, manufactured, transported or otherwise handled
("Hazardous Substance"). The representations and warranties contained
herein are based on Borrower's due diligence in investigating the
Collateral for Hazardous Substance. Borrower hereby (1) releases and
waives any future claims against Lender for Indemnity or contribution
in the event Borrower becomes liable for cleanup or other costs under
any future claims against Lender for indemnity or contribution in the
event Borrower becomes liable for cleanup or other costs under any
Environmental Laws, and (2) agrees to indemnify and hold harmless
Lender against any and all claims and losses resulting from a breach of
this provision of this Agreement. This obligation to indemnify shall
survive the payment of the Indebtedness and the satisfaction of this
Agreement.
Maintenance of Casualty Insurance. Borrower shall procure and maintain
all risks insurance including, without limitation fire, theft and
liability coverage together with such other insurances as Lender may
require with respect to the Collateral in form, amounts, coverages and
basis reasonably acceptable to Lender and issued by a company or
companies reasonable acceptable to Lender. Borrower, upon request of
Lender, will deliver to Lender, from time to time the policies or
certificates of insurance in form satisfactory to Lender, including
stipulations that coverage will not be cancelled or diminished without
at least ten (10) days prior written notice to Lender and not including
any disclaimer of the insurer's liability for failure to give such
notice. Each insurance policy also shall include an endorsement
providing that coverage in favor of Lender will not be impaired in any
way by any act, omission or default of Borrower or any other person. In
connection with all policies covering assets in which Lender holds or
is offered a security interest, Borrower will provide Lender with such
loss payable or other endorsements as Lender may require. If Borrower
at any time fails to obtain or maintain any insurance as required under
this Agreement, Lender may (but shall not be obligated to) obtain such
insurance as Lender deeds appropriate, including if Lender so chooses
"single interest insurance" which will cover only Lender's interest in
the Collateral.
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Application of Insurance Proceeds. Borrower shall promptly notify
Lender of any loss or damage to the Collateral. Lender may make proof
of loss if Borrower fails to do so within fifteen (15) days of the
casualty. All proceeds of any insurance on the Collateral, including
accrued proceeds thereon, shall be held by Lender as part of the
Collateral. If Lender consents to repair or replacement of the damaged
or destroyed Collateral, Lender shall, upon satisfactory proof of
expenditures, pay or reimburse Borrower from the proceeds for the
reasonable cost of repair or restoration. If Lender does not consent to
repair or replacement of the Collateral, Lender shall retain a
sufficient amount of the proceeds to pay all of the Indebtedness, and
shall pay the balance to Borrower. Any proceeds which have not been
disbursed within six (6) months after their receipt and which Borrower
has not committed to the repair of restoration of the Collateral shall
be used to prepay the Indebtedness.
Insurance Reserves. Lender may require Borrower to maintain with Lender
reserves for payment of insurance premiums, which reserves shall be
created by monthly payments from Borrower of a sum estimated by Lender
to be sufficient to produce, at least fifteen (15) days before the
premium due dates, amounts at least equal to the insurance premiums to
be paid. If fifteen (15) days before payment is due, the reserve funds
are insufficient, Borrower shall upon demand pay any deficiency to
Lender. The reserve funds shall be held by Lender as a general deposit
and shall constitute a non-interest bearing account which Lender may
satisfy by payment of the insurance premiums required to be paid by
Borrower as they become due. Lender does not hold the reserve funds in
trust for Borrower, and Lender is not the agent of Borrower for payment
on the insurance premium required to be paid by Borrower. The
responsibility for the payment of premiums shall remain Borrower's sole
responsibility.
Insurance Reports. Borrower, upon request of Lender, shall furnish to
Lender reports on each existing policy of insurance showing such
information as Lender may reasonably request including the following:
(i) the name of the insurer; (ii) the risks insured; (iii) the amount
of the policy; (iv) the property insured; (v) the then current value on
the basis of which insurance has been obtained and the manner of
determining that value; and (vi) the expiration date of the policy. In
addition, Borrower shall upon request by Lender (however not more often
than annually) have an independent appraiser satisfactory to Lender
determine, as applicable, the cash value or replacement costs of the
Collateral.
Financing Statements. Borrower authorizes Lender to file a UCC-1
financing statement, or alternatively, a copy of this Agreement to
perfect Lender's security interest. At Lender's request, Borrower
additionally agrees to sign all other documents that are necessary to
perfect, protect, and continue Lender's security interest in the
Property. Borrower will pay all filing fees, title, transfer fees, and
other fees and costs involved unless prohibited by law or unless Lender
is required by law to pay such fees and costs. Borrower irrevocably
appoints Lender to execute financing statements and documents of title
in Borrower's name and to execute all documents necessary to transfer
title if there is a default. Lender may file a copy of this Agreement
as a financing statement. If Borrower changes Borrower's name or
address, or the name or address of any person granting a security
interest under this Agreement changes, Borrower will promptly notify
the Lender of such change.
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6. BORROWER'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until
default and except as otherwise provided below with respect to accounts,
Borrower may have possession of the tangible personal property and beneficial
use of all of the Collateral and may use it in any lawful manner not
inconsistent with this Agreement or the Related Documents (as defined in
Paragraph 8), provided that Borrower's right to possession and beneficial use
shall not apply to any Collateral where possession of the Collateral by Lender
is required by law to perfect Lender's security interest in such Collateral.
Until otherwise notified by Lender, Borrower may collect any of the Collateral
consisting of accounts. At any time and even though no Event of Default exists,
Lender may exercise the right to collect the accounts and to notify the account
debtors to make payments directly to Lender for application to the Indebtedness.
If Lender at any time has possession of any Collateral, whether before or after
an Event of Default, Lender shall be deemed to have exercised reasonable care in
the custody and preservation of the Collateral if Lender takes such action for
that purpose as Borrower shall request or as Lender, in Lender's sole
discretion, shall deem appropriate under the circumstances, but failure to honor
any request by Borrower shall not of itself be deemed to be a failure to
exercise reasonable care. Lender shall not be required to take any steps
necessary to preserve all rights in the Collateral against prior parties, nor to
protect, preserve or maintain any security interest given to secure the
Indebtedness.
7. LENDER'S EXPENDITURES. If any action or proceeding is commenced that
would materially affect Lender's interest in the Collateral or if Borrower fails
to comply with any provision of this Agreement or any Related Documents,
including but not limited to Borrower's failure to discharge or pay when due any
amounts Borrower is required to discharge or pay under this Agreement or any
Related Documents, Lender on Borrower's behalf may (but shall not be obligated
to) take any action that Lender deems appropriate, including, but not limited to
discharge or paying all taxes, liens, security interest, encumbrances and other
claims, at any time levied or placed on the Collateral and paying all costs for
insuring, maintaining, and preserving the Collateral. All such expenditures
incurred or paid by Lender for such purposes will then bear interest at the rate
charged under the Note from the date incurred or paid by Lender to the date of
repayment by Borrower. All such expenses will become part of the indebtedness
and, at Lender's option, will (i) be payable on demand; (ii) be added to the
balance of the Note and be apportioned among and be payable with any installment
payments to become due during either (a) the term of any applicable insurance
policy; or (b) the remaining term of the Note; or (iii) be treated as a balloon
payment which will be due and payable at the Note's maturity. The Agreement also
will secure payment of these amounts. Such right shall be in addition to all
other rights and remedies to which Lender may be entitled upon Default.
8. DEFAULT. Each of the following shall constitute an event of default
("Event of Default") under this Agreement:
Payment Default. Borrower fails to make any payment when due under the
Indebtedness.
Other Defaults. Borrower fails to comply with or to perform any other
term, obligation, covenant or condition contained in this Agreement or
any notes, credit agreements, loan agreements, guarantees, security
agreements, mortgages, deeds of trust, security deeds, collateral
mortgages, and all other instruments, agreements and documents, whether
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now or hereafter existing, executed in connection with the Indebtedness
(the "Related Documents").
Default in Favor of Third Parties. Borrower defaults under any loan,
extension of credit, security agreement, purchase or sales agreement,
or any other agreement, in favor of any other creditor or person that
may materially affect any of Borrower's property or Borrower's ability
to repay the Indebtedness or perform its obligations under this
Agreement or any other Related Documents.
False Statements. Any warranty, representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf under this
Agreement or the Related Documents is false or misleading in any
material respect, either now or at any time made or furnished or
becomes false or misleading at any time thereafter.
Defective Collateralization. This Agreement or any Related Document
ceases to be in full force and effect including failure of any
collateral document to create a valid and perfected security interest
or lien) at any time for any reason.
Insolvency. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a
receiver for any part of Borrower's property, any assignment for the
benefit of creditors, any type of creditor workout, or the commencement
of any proceeding under any bankruptcy or insolvency laws by or against
Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other methods, by any creditor of Borrower or by
any governmental agency, against any collateral securing the
Indebtedness. However, this Event of Default shall not apply if there
is a good faith dispute by Borrower as to the validity or
reasonableness of the claim which is the basis of the creditor or
forfeiture proceeding and if Borrower gives Lender written notice of
the creditor or forfeiture proceeding and deposits with Lender monies
or a surety bond for the creditor or forfeiture proceeding, in any
amount determined by Lender, in his sole discretion, as being an
adequate reserve or bond for the dispute.
Events Affecting Guarantor. Any of the proceeding events occurs with
respect to any Guarantor of any of the Indebtedness or any Guarantor
dies or becomes incompetent, or revokes or disputes the validity of, or
liability under, any guaranty of the Indebtedness.
Adverse Change. A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or
performance of this Note is impaired.
Insecurity. Lender in good faith believes itself insecure.
9. RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under
this Agreement, at any time thereafter, Lender shall have all the rights of a
Lender under the Delaware Uniform Commercial Code. In addition and without
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limitation, Lender may exercise any one or more of the following rights and
remedies:
Accelerate Indebtedness. Lender may declare the entire Indebtedness,
including any prepayment penalty which the Borrower would be required
to pay immediately due and payable, without notice of any kind to
Borrower.
Assemble Collateral. Lender may require Borrower to deliver all or any
portion of the Collateral and any and all certificates of title and
other documents relating to the Collateral. Lender may require Borrower
to assemble the Collateral and make it available to Lender at a place
to be designated by Lender. Lender also shall have full power to enter
upon the property of Borrower to take possession of and remove
Collateral. If the Collateral contains other goods not covered by this
Agreement at the time of repossession, Borrower agrees Lender may take
such other goods, provided that Lender make reasonable efforts to
return them to Borrower after repossession.
Sell the Collateral. Sell the Collateral. Lender shall have full power
to sell, lease, transfer, or otherwise deal with the Collateral or
proceeds thereof in Lender's own name or that of Borrower. Lender may
sell the Collateral at public auction or private sale. Unless the
Collateral continues to decline steadily in value or is of a type
customarily sold on a recognized market, Lender will give Borrower, and
other persons as required by law, reasonable notice of the time and
place of any public sale, or the time after which any private sale or
any other disposition of the Collateral is to be made. However, no
notice need be provided to any person who, after Event of Default
occurs, enter into and authenticates an agreement waiving that person's
right to notification of sale. The requirements of reasonable notice
shall be met if such notice is given at least ten (10) days before the
time of the sale or disposition. All expenses relating to the
disposition of the Collateral, including without limitation, the
expenses of retaking, holding, insuring, preparing for sale and selling
the Collateral, shall become a part of the Indebtedness required by the
Agreement and shall be payable on demand, with interest at the Note
rate from date of expenditure until repaid.
Appoint Receiver. Lender shall have the right to have a receiver
appointed to take possession of all or any part of the Collateral, with
the power to protect and preserve the Collateral, to operate the
Collateral proceeding foreclosure or sale, and to collect the rents
from the Collateral and apply the procedures, over and above the cost
of the receivership, against the Indebtedness. The receiver may serve
without bond if permitted by law. Lender's right to the appointment of
a receiver shall exist whether or not the apparent value of the
Collateral exceeds the Indebtedness by a substantial amount. Employment
by Lender shall not disqualify a person from serving as a receiver.
Collect Revenues. Lender, either itself or though a receiver, may
collect the payments, rents, income, and revenues from the Collateral.
Lender may at any time in Lender's discretion transfer any Collateral
into Lender's own name or that of Lender's nominee and receive the
payments, rents, income and revenue therefrom and hold the same as
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security for the Indebtedness or apply it to payment of the
Indebtedness in such order of preference as Lender may determine,
insofar as the Collateral consists of accounts, general intangibles,
insurance policies, instruments, chattel paper, choaos in action, or
similar property, Lender may demand, collect, receipt for, settle,
compromise, adjust, xxx for, foreclose or realize on the Collateral as
Lender may determine whether or not Indebtedness or Collateral is then
due. For these purposes, Lender may, on behalf of and in the name of
Borrower, receive open and dispose of mail addressed to Borrower,
change any address to which mail and payments are to be sent and
endorse notes, checks, drafts, money orders, documents of title,
instruments and items pertaining to payment, shipment or storage of any
Collateral. To facilitate collection, Lender may notify account
Borrowers and obligors on any Collateral to make payment directly to
Lender.
Obtain Deficiency. If Lender chooses to sell any or all of the
Collateral, Lender may obtain a judgment against Borrower for any
deficiency remaining on the Indebtedness due to Lender after
application of all amounts received from the exercise of the rights
provided in this Agreement. Borrower shall be liable for a deficiency
even if the transaction described in this subsection is a sale of
assets or chattel paper.
Other Rights and Remedies. Lender shall have the rights and remedies of
a secured creditor under the provisions of the Uniform Commercial Code,
as may be amended from time to time.
Election of Remedies. Except as may be prohibited by applicable law,
all of Lender's rights and remedies, whether evidenced by this
Agreement, the Related Documents, or by any other writing, shall be
cumulative and may be exercised singularly or concurrently. Election by
Lender to pursue any remedy shall not exclude pursuit of any other
remedy, and an election to make expenditures or to take action to
perform an obligation of Borrower under this Agreement after Borrower's
failure to perform shall not affect Lender's right to declare a default
and exercise its remedies.
10. MISCELLANEOUS PROVISIONS. The following miscellaneous provisions
are a part of this Agreement:
Amendment. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to
the matters set forth in this Agreement. No alternation of or amendment
to this Agreement shall be effective unless given in writing and signed
by the party or parties sought to be charged or bound by the alteration
or amendment.
Attorneys' Fees; Expenses: Borrower agrees to pay upon demand all of
Lender's costs and expenses, including Lender's reasonable attorneys'
fees and Lender's legal expenses, incurred in connection with the
enforcement of this Agreement. Lender may hire or pay someone also to
help enforce this Agreement, and Borrower shall pay the costs and
expenses of such enforcement. Costs and expenses include Lender's
reasonable attorneys' fees and legal expenses whether or not there is a
lawsuit, including reasonable attorneys' fees and legal expenses for
bankruptcy proceedings including efforts to modify or vacate any
automatic stay or injunction, appeals and any anticipated post judgment
collection services. Lender may also recover from Borrower all court,
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alternative dispute resolution or other collection costs (including,
without limitation, fees and charges of collection agencies) actually
incurred by Lender.
Caption Headings. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or define
the provisions of this Agreement.
Governing Law. This Agreement will be governed by, construed and
enforced in accordance with federal law and the laws of the State of
Delaware.
No Waiver by Lender. Lender shall not be deemed to have waived any
rights under this Agreement unless such waiver is given in writing and
signed by Lender. No delay or omission on the part of Lender in
exercising any right shall operate as a waiver of such right or any
other right. A waiver by Lender of a provision of this Agreement shall
not prejudice or constitute a waiver of Lender's right otherwise to
demand strict compliance with that provision or any other provision of
this Agreement. No prior waiver by Lender, nor any course of dealing
between Lender and Borrower, shall constitute a waiver of any of
Lender's rights or of any of Borrower's obligations as to any future
transactions. Whenever the consent of Lender is required under this
Agreement, the granting of such consent by Lender is any instance shall
not constitute continuing consent to subsequent instances where such
consent is required and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
Notices. Any notice required to be given under this Agreement shall be
given in writing, and shall be effective when actually delivered, when
actually received by telefacsimile (unless otherwise required by law),
when deposited with a nationally recognized overnight courier, or, if
mailed, when deposited in the United States mail, as first class,
certified or registered mail posted prepaid, delivered to the address
shown near the beginning of this Agreement. Any party may change the
address for notice under this Agreement by giving formal written notice
to the other parties, specifying that the purpose of the notice is to
change the party's address. For notice purposes, Borrower agrees to
keep Lender informed at all times of Borrower's current address. Unless
otherwise provided or required by law, if there is more than one
Borrower, any notice given by Lender to any Borrower is deemed to be
notice given to all Borrowers.
Power of Attorney. Borrower hereby appoints Lender as Borrower's
irrevocable attorney-in-fact for the purposes of executing any
documents necessary to protect, amend, or to continue the security
interest granted in this Agreement or to demand termination of filings
of other secured parties. Lender may at any time, and without further
authorization from Borrower, file a carbon, photographic or other
reproduction of any financing statement or of this Agreement for use as
a financing statement. Borrower will reimburse Lender for all expenses
for the perfection and continuation of the perfection of Lender's
security interest in the Collateral.
Severability. If a court of competent jurisdiction finds any provision
of this Agreement to be illegal, invalid, or unenforceable as to any
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circumstance, that finding shall not make the offending provision
illegal, invalid or enforceable as to any other circumstance. If
feasible, the offending provision shall be considered modified so that
it becomes legal, valid and enforceable. If the offending provision
cannot be so modified, it shall be considered deleted from this
Agreement. Unless otherwise required by law, the illegality,
invalidity, or unenforceablility of any provision of this Agreement
shall not effect the legality, validity or enforceability of any other
provision of this Agreement.
Successors and Assigns. Subject any limitations stated in this
Agreement on transfer of Borrower's interest, this Agreement shall be
binding upon and insures to the benefit of the parties, their
successors and assigns. If ownership of the Collateral becomes vested
in a person other than Borrower, Lender, without notice to Borrower,
may deal with Borrower's successors with reference to this Agreement
and the indebtedness by way of forebearance or extension without
releasing Borrower from the obligations of this Agreement or liability
under theIindebtedness.
Survival of Representations and Warranties. All representations,
warranties, and agreements made by Borrower in this Agreement shall
survive the execution and delivery of this Agreement, shall be
continuing in nature, and shall remain in full force and affect until
such time as Borrower's Indebtedness shall be paid in full.
Time Is of the Essence. Time is of the essence in the performance of
this Agreement.
Waive Jury. All parties to this Agreement waive the right to any jury
trial in any action, proceeding, or counterclaim brought by any party
against any other party.
Shelby County Bank Loan. This Security Agreement and the security
interest of Lender granted hereunder shall be subject to that certain
loan in the amount of $430,000 and related security interest in the
assets of the Borrower in favor of Shelby County Bank dated as of
January 30, 2004.
LENDER:
/s/ XXXXXX XXXXXXXX
---------------------------------------
XXXXXX XXXXXXXX
BORROWER:
SCHOOLPOP, INC., a Delaware corporation
By: /s/ Xxxx Xxxxxxxx
------------------------------------------
Xxxx Xxxxxxxx, Its Chief Executive Officer
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SCHEDULE "A"
COLLATERAL
The "Collateral" shall include all of the following, whether now owned
or hereafter acquired, whether now existing or hereafter arising:
1. All inventory, chattel paper, accounts, equipment and general
intangibles.
2. All accessions, attachments, accessories, tools, parts,
supplies, replacements and additions to any of the collateral
described herein.
3. All products and produce of any of the collateral described
herein.
4. All proceeds (including insurance proceeds) from the sale,
destruction, loss or other disposition of any of the
collateral described herein, and sums from the third party who
has damaged or destroyed the collateral or from that party's
insurer, whether due to judgment, settlement or other process.
5. All records and data relating to any of the collateral
described herein, whether in the form of a writing,
photograph, microfilm, microfiche or electronic media,
together with all Borrower's right title and interest in and
to all computer software required to utilize, create, maintain
and process any such records or data on electronic media.
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