PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT (as it may be amended, restated, supplemented or otherwise modified from time to time, the “Security Agreement”) is entered into as of May 18, 2023 by and among CLIMB GLOBAL SOLUTIONS, INC., a Delaware corporation (the “Company”), PROGRAMMER’S PARADISE, INC., a Delaware corporation (“Paradise”), CLIMB CHANNEL SOLUTIONS, INC., a Delaware corporation (“Solutions”), TECHXTEND, INC., a Delaware corporation (“Tech”), ISP INTERNATIONAL SOFTWARE PARTNERS, INC., a Delaware corporation (“International”), INTERWORK TECHNOLOGIES INC., a Delaware corporation (“Interwork”), and any additional entities that become parties to this Security Agreement by executing a Security Agreement Supplement hereto in substantially the form of Annex I hereto (such additional entities, together with the Company, Paradise, Solutions, Tech, International and Interwork, each a “Grantor”, and collectively, the “Grantors”), and JPMorgan Chase Bank, N.A., in its capacity as administrative agent (the “Administrative Agent”) for the lenders party to the Credit Agreement referred to below.
PRELIMINARY STATEMENT
The Grantors, the Administrative Agent, the other Loan Parties party thereto from time to time and the Lenders are entering into a Credit Agreement dated as of the date hereof (as it may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”). Each Grantor is entering into this Security Agreement in order to induce the Lenders to enter into and extend credit to the Borrowers under the Credit Agreement and to secure the Secured Obligations that it has agreed to guarantee pursuant to Article X of the Credit Agreement.
ACCORDINGLY, the Grantors and the Administrative Agent, on behalf of the Secured Parties, hereby agree as follows:
DEFINITIONS
“Accounts” shall have the meaning set forth in Article 9 of the UCC.
“Applicable IP Office” means the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency within or, solely in the case of Section 4.7, outside the United States.
“Article” means a numbered article of this Security Agreement, unless another document is specifically referenced.
“Cash Dominion Period” means the period (a) commencing on any day that (i) Availability is less than the greater of (x) $6,250,000 and (y) an amount equal to 15% of the Line Cap or (ii) an Event of Default has occurred, and (b) continuing until no Event of Default has existed and Availability has been greater than or equal
to the greater of (x) $6,250,000 and (y) an amount equal to 15% of the Line Cap, in each case, at all times for sixty (60) consecutive calendar days.
“Chattel Paper” shall have the meaning set forth in Article 9 of the UCC.
“Collateral” shall have the meaning set forth in Article II.
“Collateral Access Agreement” means any landlord waiver or other agreement, in form and substance satisfactory to the Administrative Agent in its Permitted Discretion, between the Administrative Agent and any third party (including any bailee, processor, consignee, customs broker, or other similar Person) in possession of any Collateral or any landlord of any real property where any Collateral is located, as such landlord waiver or other agreement may be amended, restated, supplemented or otherwise modified from time to time.
“Collateral Deposit Account” shall have the meaning set forth in Section 7.1(a).
“Collateral Report” means any certificate (including any Borrowing Base Certificate), report or other document delivered by any Grantor to the Administrative Agent or any Lender with respect to the Collateral pursuant to any Loan Document.
“Collection Account” shall have the meaning set forth in Section 7.1(b).
“Commercial Tort Claims” means the commercial tort claims of the Grantors described in Exhibit J.
“Confirmatory Grant” shall have the meaning set forth in Section 3.10(e).
“Control” shall have the meaning set forth in Article 8 of the UCC or, if applicable, in Section 9-104, 9-105, 9-106 or 9-107 of Article 9 of the UCC.
“Copyrights” means all rights, title and interests (and all related IP Ancillary Rights) arising under any Requirement of Law in or relating to copyrights and all mask works, database and design rights, whether or not registered or published, all registrations and recordations thereof and all applications in connection therewith.
“Default” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.
“Deposit Account Control Agreement” means an agreement, in form and substance satisfactory to the Administrative Agent in its Permitted Discretion, among any Grantor, a banking institution holding such Grantor’s funds, and the Administrative Agent with respect to collection and control of all deposits and balances held in a deposit account maintained by such Grantor with such banking institution.
“Deposit Accounts” shall have the meaning set forth in Article 9 of the UCC.
“Documents” shall have the meaning set forth in Article 9 of the UCC.
“Equipment” shall have the meaning set forth in Article 9 of the UCC.
“Event of Default” means an event described in Section 5.1.
“Excluded Property” means, collectively, (a) the voting Equity Interests (within the meaning of Treasury Reg. Section 1.956 2(c)(2)) of a Foreign Subsidiary solely to the extent that such Equity Interests represent more than 65% (or such greater percentage that would not reasonably be expected to cause any material adverse tax consequences to the Loan Parties) of the outstanding voting Equity Interests of such Foreign Subsidiary, (b) any United States intent to use trademark or service mark applications to the extent that, and solely during the period in which, the grant of a security interest therein would impair the validity or enforceability of a registration issuing
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from such intent-to-use trademark or service mark applications under applicable federal law, provided that upon submission and acceptance by the United States Patent and Trademark Office of an amendment to allege use pursuant to 15 U.S.C. Section 1051(c) or a statement of use pursuant to 15 U.S.C. Section 1051(d) (or any successor provisions), such intent-to-use trademark or service mark application shall be considered Collateral, (c) any fee-owned real property or any real property leases or other leasehold rights and interests in real property except to the extent a security interest therein can be perfected by the filing of a UCC financing statement (with no requirement to obtain landlord waivers, estoppels and collateral access letters), (d) motor vehicles, aircraft and other assets subject to certificates of title, except to the extent a security interest therein can be perfected by the filing of a UCC financing statement, (e) governmental licenses or state or local franchises, charters and authorizations and any other property and assets to the extent that the Administrative Agent may not validly possess a security interest therein under applicable laws (including, without limitation, rules and regulations of any Governmental Authority or agency) or the pledge or creation of a security interest in which would require governmental consent, approval, license or authorization, other than to the extent such prohibition or limitation is rendered ineffective under the UCC or other applicable law notwithstanding such prohibition or to the extent such consent has been obtained, (f) any fixed assets subject to a purchase money security interest, capital lease obligations or similar arrangement, in each case, to the extent permitted under the Credit Agreement and to the extent the grant of a security interest therein would violate or invalidate such purchase money security interest, capital lease or similar arrangements or would give rise to a termination right in favor of any other party thereto after giving effect to the applicable anti-assignment provisions of the UCC or other applicable laws, but excluding the proceeds and receivables thereof, (g) (A) payroll and other employee wage and benefit accounts, (B) tax accounts, including, without limitation, payroll tax accounts, sales and use tax accounts, any other accounts for withholding taxes and any tax benefits accounts, (C) escrow accounts permitted under the Credit Agreement, (D) fiduciary or trust accounts permitted under the Credit Agreement, and (E) the Deposit Account maintained at Xxxxxxx & Company, LLC with account number ending in 3051 so long as the aggregate amount held in such account at any one time does not exceed $200,000, and, in the case of clauses (A) through (D), the funds or other property held in or maintained in any such account solely to the extent used for such purpose, and (h) any rights or interest in any contract, lease, permit, license, or license agreement covering personal property of any Grantor if under the terms of such contract, lease, permit, license, or license agreement, or applicable law with respect thereto, the grant of a security interest or lien therein is prohibited by any Requirement of Law or under the terms of such contract, lease, permit, license, or license agreement and such prohibition or restriction has not been waived or the consent of the other party to such contract, lease, permit, license, or license agreement has not been obtained (provided, that, (i) the foregoing exclusions of this clause (h) shall in no way be construed (A) to apply to the extent that any described prohibition or restriction is ineffective under Section 9-406, 9-407, 9-408, or 9-409 of any applicable UCC or other applicable law, or (B) to apply to the extent that any consent or waiver has been obtained that would permit Administrative Agent’s security interest or lien to attach notwithstanding the prohibition or restriction on the pledge of such contract, lease, permit, license, or license agreement and (ii) the foregoing exclusions of clauses (a), (e) and this clause (h) shall in no way be construed to limit, impair, or otherwise affect any of Administrative Agent’s continuing security interests in and liens upon any rights or interests of any Grantor in or to (A) monies due or to become due under or in connection with any described contract, lease, permit, license, license agreement, property, or equity interests (including any accounts or equity interests), or (B) any Proceeds from the sale, license, lease, or other dispositions of any such contract, lease, permit, license, license agreement, property, or equity interests); provided, however, “Excluded Property” shall not include any proceeds, products, substitutions or replacements of Excluded Property (unless such proceeds, products, substitutions, or replacements would otherwise constitute Excluded Property).
“Exhibit” refers to a specific exhibit to this Security Agreement, unless another document is specifically referenced.
“Farm Products” shall have the meaning set forth in Article 9 of the UCC.
“Fixtures” shall have the meaning set forth in Article 9 of the UCC.
“General Intangibles” shall have the meaning set forth in Article 9 of the UCC.
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“Goods” shall have the meaning set forth in Article 9 of the UCC.
“Industrial Designs” means all right, title and interest (and all related IP Ancillary Rights) arising under any Requirement of Law in or relating to registered industrial designs and industrial design applications.
“Instruments” shall have the meaning set forth in Article 9 of the UCC.
“Intellectual Property” means all rights, title and interests in or relating to intellectual property and industrial property arising under any Requirement of Law and all IP Ancillary Rights relating thereto, including all Copyrights, Patents, Industrial Designs, Software, Trademarks, Internet Domain Names, Trade Secrets and IP Licenses.
“Internet Domain Name” means all right, title and interest (and all related IP Ancillary Rights) arising under any Requirement of Law in or relating to internet domain names.
“Inventory” shall have the meaning set forth in Article 9 of the UCC.
“Investment Property” shall have the meaning set forth in Article 9 of the UCC.
“IP Ancillary Rights” means, with respect to any Intellectual Property, as applicable, all foreign counterparts to, and all divisionals, reversions, continuations, continuations-in-part, reissues, reexaminations, renewals and extensions of, such Intellectual Property and all income, royalties, proceeds and Liabilities at any time due or payable or asserted under or with respect to any of the foregoing or otherwise with respect to such Intellectual Property throughout the world, including all rights to sue or recover at law or in equity for any past, present or future infringement, misappropriation, dilution, violation or other impairment thereof, and, in each case, all rights to obtain any other IP Ancillary Right throughout the world.
“IP License” means all contractual obligations (and all related IP Ancillary Rights), whether written or oral, granting any right, title and interest in or relating to any Intellectual Property.
“Lenders” means the lenders party to the Credit Agreement and their successors and assigns.
“Letter of Credit Rights” shall have the meaning set forth in Article 9 of the UCC.
“Liabilities” means all claims (including intraparty claims), actions, suits, judgments, demands, damages, losses, liability, obligations, responsibilities, fines, penalties, sanctions, costs, fees, Taxes, commissions, charges, disbursements and expenses (including those incurred upon any appeal or in connection with the preparation for and/or response to any subpoena or request for document production relating thereto), in each case of any kind or nature (including interest accrued thereon or as a result thereto and fees, charges and disbursements of financial, legal and other advisors and consultants), whether joint or several, whether or not indirect, contingent, consequential, actual, punitive, treble or otherwise.
“Lock Boxes” shall have the meaning set forth in Section 7.1(a).
“Lock Box Agreements” shall have the meaning set forth in Section 7.1(a).
“Material Intellectual Property” means Intellectual Property that is owned by or licensed to any Grantor and material to the conduct of such Grantor’s business.
“Patents” means all rights, title and interests (and all related IP Ancillary Rights) arising under any Requirement of Law in or relating to letters patent and applications therefor.
“Pledged Collateral” means all Instruments, Securities and other Investment Property of the Grantors, whether or not physically delivered to the Administrative Agent pursuant to this Security Agreement.
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“Receivables” means the Accounts, Chattel Paper, Documents, Investment Property, Instruments and any other rights or claims to receive money which are General Intangibles or which are otherwise included as Collateral.
“Required Secured Parties” means (a) prior to an acceleration of the Obligations under the Credit Agreement, the Required Lenders, (b) after an acceleration of the Obligations under the Credit Agreement but prior to the date upon which the Credit Agreement has terminated by its terms and all of the obligations thereunder have been Paid in Full, Lenders holding in the aggregate at least a majority of the total of the Aggregate Revolving Exposure, and (c) after the Credit Agreement has terminated by its terms and all of the Obligations thereunder have been Paid in Full (whether or not the Obligations under the Credit Agreement were ever accelerated), the Secured Parties holding in the aggregate at least a majority of the aggregate net early termination payments and all other amounts then due and unpaid from any Grantor to the Secured Parties in respect of the Secured Obligations, as determined by the Administrative Agent in its reasonable discretion.
“Section” means a numbered section of this Security Agreement, unless another document is specifically referenced.
“Securities Account Control Agreement” means an agreement, in form and substance satisfactory to the Administrative Agent in its Permitted Discretion, among any Grantor, a financial institution, securities intermediary or other Person holding such Grantor’s securities or maintaining a securities account for such Grantor, and the Administrative Agent with respect to collection and control of all securities, balances and other assets held in a securities account maintained by such Grantor with such securities intermediary.
“Security” shall have the meaning set forth in Article 8 of the UCC.
“Security Agreement Supplement” shall mean any Security Agreement Supplement to this Security Agreement in substantially the form of Xxxxx X hereto executed by an entity that becomes a Grantor under this Security Agreement after the date hereof.
“Software” means (a) all computer programs, including source code and object code versions, (b) all data, databases and compilations of data, whether machine readable or otherwise, and (c) all documentation, training materials and configurations related to any of the foregoing.
“Stock Rights” means all dividends, instruments or other distributions and any other right or property which the Grantors shall receive or shall become entitled to receive for any reason whatsoever with respect to, in substitution for or in exchange for any Equity Interest constituting Collateral, any right to receive an Equity Interest and any right to receive earnings, in which the Grantors now have or hereafter acquire any right, issued by an issuer of such Equity Interest.
“Supporting Obligations” shall have the meaning set forth in Article 9 of the UCC.
“Trade Secrets” mean all right, title and interest (and all related IP Ancillary Rights) arising under any Requirement of Law in or relating to proprietary, confidential and/or non-public information, however documented, including but not limited to confidential ideas, know-how, concepts, methods, processes, formulae, reports, data, customer lists, mailing lists, business plans and all other trade secrets.
“Trademarks” means all rights, title and interests (and all related IP Ancillary Rights) arising under any Requirement of Law in or relating to trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos and other source or business identifiers and, in each case, all goodwill associated therewith, all registrations and recordations thereof and all applications in connection therewith.
“UCC” means the Uniform Commercial Code, as in effect from time to time, of the State of New York or of any other state the laws of which are required as a result thereof to be applied in connection with the
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attachment, perfection or priority of, or remedies with respect to, Administrative Agent’s or any other Secured Party’s Lien on any Collateral.
The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms.
GRANT OF SECURITY INTEREST
To secure the prompt and complete payment and performance of the Secured Obligations, each Grantor hereby pledges, assigns and grants to the Administrative Agent, on behalf of and for the ratable benefit of the Secured Parties, a security interest in all of its right, title and interest in, to and under all personal property and other assets, whether now owned by or owing to, or hereafter acquired by or arising in favor of such Grantor (including under any trade name or derivations thereof), and whether owned or consigned by or to, or leased from or to, such Grantor, and regardless of where located (all of which will be collectively referred to as the “Collateral”), including:
(i) | all Accounts; |
(ii) | all Chattel Paper; |
(iii) | all Copyrights, Patents and Trademarks; |
(iv) | all Documents; |
(v) | all Equipment; |
(vi) | all Fixtures; |
(vii) | all General Intangibles; |
(viii) | all Goods; |
(ix) | all Instruments; |
(x) | all Inventory; |
(xi) | all Investment Property; |
(xii) | all cash or cash equivalents; |
(xiii) | all letters of credit, Letter-of-Credit Rights and Supporting Obligations; |
(xiv) | all Deposit Accounts with any bank, financial institution or other Person; |
(xv) | all Commercial Tort Claims; |
(xvi) | all Farm Products; and |
(xvii) | all accessions to, substitutions for and replacements, proceeds (including Stock Rights), insurance proceeds and products of the foregoing, together with all books and records, customer lists, credit files, computer files, programs, printouts and other computer materials and records related thereto and any General Intangibles at any time evidencing or relating to any of the foregoing. |
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Notwithstanding anything contained in this Security Agreement to the contrary, the term “Collateral” and the foregoing grant shall not include, or the security interest shall not attach to, any Excluded Property; provided, that if and when any property shall cease to be Excluded Property, such property shall be deemed at all times from and after such date to constitute Collateral to the extent subject to the grant clause in this Article II.
REPRESENTATIONS AND WARRANTIES
Each Grantor represents and warrants, and each Grantor that becomes a party to this Security Agreement pursuant to the execution of a Security Agreement Supplement represents and warrants (after giving effect to supplements, if any, to each of the Exhibits hereto with respect to such Grantor as attached to such Security Agreement Supplement), to the Administrative Agent and the Secured Parties that:
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COVENANTS
From the date of this Security Agreement and thereafter until this Security Agreement is terminated pursuant to the terms hereof, each Grantor party hereto as of the date hereof agrees, and from and after the effective date of any Security Agreement Supplement applicable to any Grantor (and after giving effect to supplements, if any, to each of the Exhibits hereto with respect to such subsequent Grantor as attached to such Security Agreement Supplement) and thereafter until this Security Agreement is terminated pursuant to the terms hereof, each such additional Grantor agrees that:
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EVENTS OF DEFAULT AND REMEDIES
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ACCOUNT VERIFICATION; ATTORNEY IN FACT; PROXY
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COLLECTION AND APPLICATION OF COLLATERAL PROCEEDS; DEPOSIT ACCOUNTS
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GENERAL PROVISIONS
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NOTICES
THE ADMINISTRATIVE AGENT
JPMorgan Chase Bank, N.A. has been appointed Administrative Agent for the other Secured Parties hereunder pursuant to Article VIII of the Credit Agreement. It is expressly understood and agreed by the parties to this Security Agreement that any authority conferred upon the Administrative Agent hereunder is subject to the terms of the delegation of authority made by the Secured Parties to the Administrative Agent pursuant to Article VIII of the Credit Agreement, and that the Administrative Agent has agreed to act (and any successor Administrative Agent shall act) as such hereunder only on the express conditions contained in such Article VIII of the Credit Agreement. Any successor Administrative Agent appointed pursuant to Article VIII of the Credit Agreement shall be entitled to all the rights, interests and benefits of the Administrative Agent hereunder.
[Signature Pages Follow]
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IN WITNESS WHEREOF, the Grantors and the Administrative Agent have executed this Security Agreement as of the date first above written.
GRANTORS:
CLIMB GLOBAL SOLUTIONS, INC.,
a Delaware corporation
By /s/ Xxxx Xxxxxx____________________
Name: Xxxx Xxxxxx
Title: Chief Executive Officer
PROGRAMMER’S PARADISE, INC.,
a Delaware corporation
By /s/ Xxxx Xxxxxx____________________
Name: Xxxx Xxxxxx
Title: President
CLIMB CHANNEL SOLUTIONS, INC.,
a Delaware corporation
By /s/ Xxxx Xxxxxx____________________
Name: Xxxx Xxxxxx
Title: President
TECHXTEND, INC.,
a Delaware corporation
By /s/ Xxxx Xxxxxx____________________
Name: Xxxx Xxxxxx
Title: President
ISP INTERNATIONAL SOFTWARE PARTNERS, INC.,
a Delaware corporation
By /s/ Xxxx Xxxxxx____________________
Name: Xxxx Xxxxxx
Title: President
[Climb – Signature Page to Security Agreement]
INTERWORK TECHNOLOGIES INC.,
a Delaware corporation
By /s/ Xxxx Xxxxxx____________________
Name: Xxxx Xxxxxx
Title: President
[Climb – Signature Page to Security Agreement]
JPMORGAN CHASE BANK, N.A.,
as Administrative Agent
By /s/ Xxxx X. Xxx__________________
Name: Xxxx X. Xxx
Title: Authorized Signatory
[Climb – Signature Page to Security Agreement]