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EXHIBIT 10(z) TO FRONTSTEP, INC. ANNUAL REPORT ON FORM 10-K
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PLEDGE AND SECURITY AGREEMENT (DOMESTIC)
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PLEDGE AND SECURITY AGREEMENT dated July 17, 2001 (this
"AGREEMENT"), made by Frontstep, Inc., an Ohio corporation (the "PARENT"), and
Frontstep Solutions Group, Inc., an Ohio corporation ("SOLUTIONS" and, together
with the Parent, individually a "PLEDGOR" and collectively the "PLEDGORS"), in
favor of Foothill Capital Corporation, as agent for the Lenders party to the
Loan Agreement referred to below (in such capacity, the "Agent").
WITNESSETH:
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WHEREAS, the Pledgors, brightwhite solutions, inc., Frontstep
Canada, Inc. (together with the Pledgors, the "BORROWERS"), the lenders from
time to time party thereto (the "LENDERS") and the Agent, are parties to a Loan
and Security Agreement, dated as of July 17, 2001 (such Agreement, as amended,
restated or otherwise modified from time to time, being hereinafter referred to
as the "LOAN AGREEMENT");
WHEREAS, pursuant to the Loan Agreement, the Lenders have
agreed to make loans (each a "LOAN" and collectively the "LOANS") to the
Borrowers in an aggregate principal amount at any one time outstanding not to
exceed the Maximum Revolver Amount (as defined in the Loan Agreement);
WHEREAS, it is a condition precedent to the making of any Loan
pursuant to the Loan Agreement that each Pledgor shall have executed and
delivered to the Agent a pledge and security agreement providing for the pledge
to the Agent for the benefit of the Lenders of, and the grant to the Agent for
the benefit of the Lenders of a security interest in, certain indebtedness from
time to time owing to any Pledgor and certain of the outstanding shares of
capital stock from time to time owned by each Pledgor of each Subsidiary and
other corporation now or hereafter existing and in which such Pledgor has any
interest at any time;
WHEREAS, the Pledgors are mutually dependent on each other in
the conduct of their respective businesses as an integrated operation, with the
credit needed from time to time by each Pledgor often being provided through
financing obtained by the other Pledgor and the ability to obtain such financing
being dependent on the successful operations of all of the Pledgors as a whole;
and
WHEREAS, each Pledgor has determined that the execution,
delivery and performance of this Agreement directly benefits, and are in the
best interest of such Pledgor;
NOW, THEREFORE, in consideration of the premises and the
agreements herein and in order to induce the Lenders to make and maintain the
Loans pursuant to the Loan Agreement, the Pledgors hereby jointly and severally
agree with the Agent as follows:
SECTION 1. DEFINITIONS. All terms used in this Agreement which
are defined in the Loan Agreement or in Article 8 or Article 9 of the Uniform
Commercial Code (the
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"CODE") currently in effect in the State of New York and which are not otherwise
defined herein shall have the same meanings herein as set forth therein.
SECTION 2. PLEDGE AND GRANT OF SECURITY INTEREST. As
collateral security for all of the Obligations (as defined in Section 3 hereof),
each Pledgor hereby pledges and assigns to the Agent, and grants to the Agent
for the benefit of the Lenders a continuing security interest in, the following
(the "PLEDGED COLLATERAL"):
(a) the indebtedness described in Schedule I hereto and all
indebtedness from time to time required to be pledged to the Agent pursuant to
the terms of the Loan Agreement (the "PLEDGED DEBT"), the promissory notes and
other instruments evidencing the Pledged Debt and all interest, cash,
instruments, investment property and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of the Pledged Debt;
(b) the shares of stock and other equity interests described
in Schedule II hereto (the "PLEDGED SHARES") whether or not evidenced or
represented by any stock certificate, certificated security or other instrument,
issued by the corporations, limited partnerships and limited liability companies
described in such Schedule II (the "EXISTING SUBSIDIARIES"), the certificates
(if any) representing the Pledged Shares, all options and other rights,
contractual or otherwise, in respect thereof and all dividends, distributions,
cash, instruments, investment property and other property (including but not
limited to, any stock dividend and any distribution in connection with a stock
split) from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Pledged Shares;
(c) the shares of stock, partnership interests, member
interests and other equity interests and all other shares of stock, partnership
interests, member interests and other equity interests now or hereafter owned by
any Pledgor and issued by any Subsidiary of a Pledgor that is organized under
the laws of any state of the United States of America and by any other
corporation, partnership, limited liability company, trust or any other Person
organized under the laws of any state of the United States of America (together
with the Existing Subsidiaries, collectively, the "ISSUERS"), whether or not
evidenced or represented by any stock certificate, certificated security or
other instrument and whether now or hereafter owned by a Pledgor (together with
the Pledged Shares, collectively, the "PLEDGED SECURITIES"), the certificates
(if any) representing the Pledged Securities, shares or other interests, all
options and other rights, contractual or otherwise, in respect thereof and all
dividends, distributions, cash, instruments, investment property and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Pledged Securities and such
other shares and interests;
(d) all additional shares of stock or other equity interests,
from time to time acquired by any Pledgor, of any Issuer, the certificates (if
any) representing such additional shares, all options and other rights,
contractual or otherwise, in respect thereof and all dividends, distributions,
cash, instruments, investment property and other property from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of such additional shares;
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(e) all security entitlements of any Pledgor in any and all of
the foregoing; and
(f) all proceeds of any and all of the foregoing;
in each case, whether now owned or hereafter acquired by any Pledgor and
howsoever its interest therein may arise or appear (whether by ownership,
security interest, claim or otherwise).
SECTION 3. SECURITY FOR OBLIGATIONS. The security interest
created hereby in the Pledged Collateral constitutes continuing collateral
security for all of the following obligations, whether now existing or hereafter
incurred (the "OBLIGATIONS"):
(a) the prompt payment by each Pledgor, as and when due and
payable (by scheduled maturity, required prepayment, acceleration, demand or
otherwise), of all amounts from time to time owing by it in respect of the Loan
Agreement and the other Loan Documents, including, without limitation, principal
of and interest on the Loans (including, without limitation, all interest that
accrues after the commencement of any case, proceeding or other action relating
to the bankruptcy, insolvency or reorganization of any Pledgor, whether or not
the payment of such interest is unenforceable or is not allowable due to the
existence of such case, proceeding or other action), all fees, commissions,
expense reimbursements, indemnifications and all other amounts due or to become
due under any Loan Document; and
(b) the due performance and observance by each Pledgor of all
of its other obligations from time to time existing in respect of the Loan
Agreement and all other Loan Documents.
SECTION 4. DELIVERY OF THE PLEDGED COLLATERAL.
(a) (i) All promissory notes currently evidencing the Pledged
Debt and all certificates currently representing the Pledged Securities shall be
delivered to the Agent on or prior to the execution and delivery of this
Agreement. All other promissory notes, certificates and instruments constituting
Pledged Collateral from time to time or required to be pledged to the Agent
pursuant to the terms of this Agreement or the Loan Agreement (the "ADDITIONAL
COLLATERAL") shall be delivered to the Agent promptly upon the receipt thereof
by or on behalf of a Pledgor. All such promissory notes, certificates and
instruments shall be held by or on behalf of the Agent pursuant hereto and shall
be delivered in suitable form for transfer by delivery or shall be accompanied
by duly executed instruments of transfer or assignment in blank, all in form and
substance reasonably satisfactory to the Agent. If any Pledged Collateral
consists of uncertificated securities, the relevant Pledgor shall cause the
Agent (or its designated custodian or nominee) to become the registered holder
thereof, or cause each issuer of such securities to agree that it will comply
with instructions originated by the Agent with respect to such securities
without further consent by such Pledgor. If any Pledged Collateral consists of
security entitlements, the relevant Pledgor shall transfer such security
entitlements to the Agent (or its custodian, nominee or other designee ), or
cause the applicable securities intermediary to agree that it will comply with
entitlement orders by the Agent without further consent by such Pledgor.
(ii) Within 5 Business Days of the receipt by a
Pledgor of any Additional Collateral, a Pledge Amendment, duly executed by such
Pledgor, in substantially the form of
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Schedule III hereto (a "PLEDGE AMENDMENT") shall be delivered to the Agent, in
respect of the Additional Collateral which must be pledged pursuant to this
Agreement and the Loan Agreement, which Pledge Amendment shall from and after
delivery thereof constitute part of Schedules I or II hereto, as the case may
be. Each Pledgor hereby authorizes the Agent to attach each Pledge Amendment to
this Agreement and agrees that all promissory notes, certificates or instruments
listed on any Pledge Amendment delivered to the Agent shall for all purposes
hereunder constitute Pledged Collateral and such Pledgor shall be deemed upon
delivery thereof to have made the representations and warranties set forth in
Section 5 with respect to such Additional Collateral.
(b) If any Pledgor shall receive, by virtue of its being or
having been an owner of any Pledged Collateral, any (i) stock certificate
(including, without limitation, any certificate representing a stock dividend or
distribution in connection with any increase or reduction of capital,
reclassification, merger, consolidation, sale of assets, combination of shares,
stock split, spin-off or split-off), promissory note or other instrument, (ii)
option or right, whether as an addition to, substitution for, or in exchange
for, any Pledged Collateral, or otherwise, (iii) dividends payable in cash
(except such dividends permitted to be retained by a Pledgor pursuant to Section
7 hereof) or in securities or other property or (iv) dividends or other
distributions in connection with a partial or total liquidation or dissolution
or in connection with a reduction of capital, capital surplus or paid-in
surplus, such Pledgor shall receive such stock certificate, promissory note,
instrument, option, right, payment or distribution in trust for the benefit of
the Agent, shall segregate it from such Pledgor's other property and shall
deliver it forthwith to the Agent in the exact form received, with any necessary
indorsement and/or appropriate stock powers duly executed in blank, to be held
by the Agent for the benefit of the Lenders as Pledged Collateral and as further
collateral security for the Obligations.
SECTION 5. REPRESENTATIONS AND WARRANTIES. Each Pledgor
jointly and severally represents and warrants as follows:
(a) The Pledged Securities have been duly authorized and
validly issued, are fully paid and nonassessable and, except as noted in
Schedule II hereto, constitute 100% of the issued shares of capital stock of the
applicable Issuer as of the date hereof. All other shares of stock constituting
Pledged Collateral will be, when issued, duly authorized and validly issued,
fully paid and nonassessable.
(b) The promissory notes currently evidencing the Pledged Debt
have been, and all other promissory notes from time to time evidencing Pledged
Debt, when executed and delivered, will have been, duly authorized, executed and
delivered by the respective makers thereof, and all such promissory notes are or
will be, as the case may be, legal, valid and binding obligations of such
makers, enforceable against such makers in accordance with their respective
terms, except as may be limited by equitable principles or by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws.
(c) The Pledgors are and will be at all times the legal and
beneficial owners of the Pledged Collateral free and clear of any Lien, security
interest, option or other charge or encumbrance except for the security interest
created by this Agreement and other Permitted Liens.
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(d) The exercise by the Agent of any of its rights and
remedies hereunder will not contravene any law or any contractual restriction
binding on or affecting any Pledgor or any of its properties and will not result
in or require the creation of any Lien, security interest or other charge or
encumbrance upon or with respect to any of its properties other than pursuant to
this Agreement.
(e) No authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority is required to be obtained
or made for (i) the due execution, delivery and performance by any Pledgor of
this Agreement, (ii) the grant by any Pledgor, or the perfection, of the
security interest purported to be created hereby in the Pledged Collateral or
(iii) the exercise by the Agent of any of its rights and remedies hereunder,
except as may be required in connection with any sale of any Pledged Collateral
by laws affecting the offering and sale of securities generally.
(f) This Agreement creates a valid security interest in favor
of the Agent in the Pledged Collateral, as security for the Obligations. The
Agent's having possession of the promissory notes evidencing the Pledged Debt,
the certificates representing the Pledged Securities and all other certificates,
instruments and cash constituting Pledged Collateral from time to time results
in the perfection of such security interest. Such security interest is, or in
the case of Pledged Collateral constituting certificates, instruments and/or
cash in which the Pledgor obtains rights after the date hereof, will be, a
perfected, first priority security interest. All action necessary or desirable
to perfect and protect such security interest has been duly taken, except for
the Agent's having possession of certificates, instruments and cash constituting
Pledged Collateral after the date hereof.
SECTION 6. COVENANTS AS TO THE PLEDGED COLLATERAL. So long as
any of the Obligations shall remain outstanding or any Commitment shall have not
been terminated, each Pledgor will, unless the Agent shall otherwise consent in
writing:
(a) keep adequate records concerning the Pledged Collateral
and permit the Agent or any agents or representatives thereof from time to time
as permitted by the Loan Agreement to examine and make copies of and abstracts
from such records;
(b) at its expense, promptly deliver to the Agent a copy of
each material notice or other material communication received by it in respect
of the Pledged Collateral;
(c) at its expense, defend the Agent's right, title and
security interest in and to the Pledged Collateral against the claims of any
Person;
(d) at its expense, at any time and from time to time,
promptly execute and deliver all further instruments and documents and take all
further action that may be reasonably necessary or desirable or that the Agent
may reasonably request in order to (i) perfect and protect the security interest
purported to be created hereby, (ii) enable the Agent to exercise and enforce
its rights and remedies hereunder in respect of the Pledged Collateral or (iii)
otherwise effect the purposes of this Agreement, including, without limitation,
delivering to the Agent irrevocable proxies in respect of the Pledged
Collateral;
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(e) not sell, assign (by operation of law or otherwise),
exchange or otherwise dispose of any Pledged Collateral or any interest therein
except as permitted by Section 7(a)(i) hereof and by the Loan Agreement;
(f) not create or suffer to exist any Lien, security interest
or other charge or encumbrance upon or with respect to any Pledged Collateral
except for the security interest created hereby or other Permitted Liens;
(g) not make or consent to any amendment or other modification
or waiver with respect to any Pledged Collateral or enter into any agreement or
permit to exist any restriction with respect to any Pledged Collateral except
pursuant to or as otherwise permitted under the Loan Documents;
(h) except as otherwise permitted under the Loan Agreement,
not permit the issuance by any Subsidiary of (i) any additional shares of any
class of capital stock of any Issuer that is a Subsidiary, (ii) any securities
convertible voluntarily by the holder thereof or automatically upon the
occurrence or non-occurrence of any event or condition into, or exchangeable
for, any such shares of capital stock or (iii) any warrants, options, contracts
or other commitments entitling any Person to purchase or otherwise acquire any
such shares of capital stock; and
(i) not take or fail to take any action which would in any
manner impair the enforceability of the Agent's security interest in any Pledged
Collateral.
SECTION 7. VOTING RIGHTS, DIVIDENDS, ETC. IN RESPECT OF THE
PLEDGED COLLATERAL.
(a) So long as no Event of Default shall have occurred and be
continuing:
(i) the Pledgors may exercise any and all voting and other
consensual rights pertaining to any Pledged Collateral for any purpose not
inconsistent with the terms of this Agreement, the Loan Agreement or the other
Loan Documents; PROVIDED, HOWEVER, that (A) no Pledgor will exercise or refrain
from exercising any such right, as the case may be, if the Agent gives a Pledgor
notice that, in the Agent's reasonable judgment, such action is reasonably
likely to have a Material Adverse Effect unless the Parent's Board of Directors
has authorized such right and (B) each Pledgor will give the Agent at least 5
Business Days' notice of the manner in which it intends to exercise, or the
reasons for refraining from exercising, any such right which is reasonably
likely to have a Material Adverse Effect;
(ii) the Pledgors may receive and retain any and all
dividends, interest or other distributions paid in respect of the Pledged
Collateral to the extent permitted by the Loan Agreement; PROVIDED, HOWEVER,
that any and all (A) dividends and interest paid or payable other than in cash
in respect of, and instruments and other property received, receivable or
otherwise distributed in respect of or in exchange for, any Pledged Collateral,
(B) dividends and other distributions paid or payable in cash in respect of any
Pledged Collateral in connection with a partial or total liquidation or
dissolution or in connection with a reduction of capital, capital surplus or
paid-in surplus, and (C) cash paid, payable or otherwise distributed in
redemption of, or in exchange for, any Pledged Collateral, together with any
dividend, distribution or interest
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payment which at the time of such dividend, distribution or interest payment was
not permitted by the Loan Agreement shall be, and shall forthwith be delivered
to the Agent to hold as, Pledged Collateral and shall, if received by a Pledgor,
be received in trust for the benefit of the Agent, shall be segregated from the
other property or funds of such Pledgor, and shall be forthwith delivered to the
Agent in the exact form received with any necessary indorsement and/or
appropriate stock powers duly executed in blank, to be held by the Agent as
Pledged Collateral and as further collateral security for the Obligations; and
(iii) the Agent will execute and deliver (or cause to be
executed and delivered) to a Pledgor all such proxies and other instruments as
such Pledgor may reasonably request for the purpose of enabling such Pledgor to
exercise the voting and other rights which it is entitled to exercise pursuant
to paragraph (i) of this Section 7(a) and to receive the dividends which it is
authorized to receive and retain pursuant to paragraph (ii) of this Section
7(a).
(b) Upon the occurrence and during the continuance of an Event
of Default:
(i) all rights of the Pledgor to exercise the voting and
other consensual rights which it would otherwise be entitled to exercise
pursuant to paragraph (i) of subsection (a) of this Section 7, and to receive
the dividends and interest payments which it would otherwise be authorized to
receive and retain pursuant to paragraph (ii) of subsection (a) of this Section
7, shall cease, and all such rights shall thereupon become vested in the Agent
which shall thereupon have the sole right to exercise such voting and other
consensual rights and to receive and hold as Pledged Collateral such dividends
and interest payments;
(ii) the Agent is authorized to notify each debtor with
respect to the Pledged Debt to make payment directly to the Agent and may
collect any and all monies due or to become due to any Pledgor in respect of the
Pledged Debt and each Pledgor hereby authorizes each such debtor to make such
payment directly to the Agent without any duty of inquiry;
(iii) without limiting the generality of the foregoing,
the Agent may at its option exercise any and all rights of conversion, exchange,
subscription or any other rights, privileges or options pertaining to any of the
Pledged Collateral as if it were the absolute owner thereof, including, without
limitation, the right to exchange, in its discretion, any and all of the Pledged
Collateral upon the merger, consolidation, reorganization, recapitalization or
other adjustment of any Issuer, or upon the exercise by any Issuer of any right,
privilege or option pertaining to any Pledged Collateral, and, in connection
therewith, to deposit and deliver any and all of the Pledged Collateral with any
committee, depository, transfer agent, registrar or other designated agent upon
such terms and conditions as it may determine; and
(iv) all dividends, distributions, interest and other
payments which are received by any Pledgor contrary to the provisions of
paragraph (i) of this Section 7(b) shall be received in trust for the benefit of
the Agent, shall be segregated from other funds of such Pledgor, and shall be
forthwith paid over to the Agent as Pledged Collateral in the exact form
received with any necessary indorsement and/or appropriate stock powers duly
executed in blank, to be held by the Agent as Pledged Collateral and as further
collateral security for the Obligations.
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SECTION 8. ADDITIONAL PROVISIONS CONCERNING THE PLEDGED
COLLATERAL.
(a) Each Pledgor hereby authorizes the Agent to file, without
the signature of any Pledgor where permitted by law, one or more financing or
continuation statements, and amendments thereto, relating to the Pledged
Collateral.
(b) Each Pledgor hereby irrevocably appoints the Agent as its
attorney-in-fact and proxy, with full authority in the place and stead of such
Pledgor and in the name of such Pledgor or otherwise, from time to time in the
Agent's discretion after the occurrence and during the continuance of an Event
of Default, to take any action and to execute any instrument which the Agent may
deem reasonably necessary or advisable to accomplish the purposes of this
Agreement (subject to the rights of such Pledgor under Section 7(a) hereof),
including, without limitation, to receive, indorse and collect all instruments
made payable to the Pledgor representing any dividend, interest payment or other
distribution in respect of any Pledged Collateral and to give full discharge for
the same. This power is coupled with an interest and is irrevocable until all of
the Obligations are paid in full after all Commitments have been terminated.
(c) If any Pledgor fails to perform any agreement or
obligation contained herein, the Agent itself may perform, or cause performance
of, such agreement or obligation, and the expenses of the Agent incurred in
connection therewith shall be jointly and severally payable by the Pledgors
pursuant to Section 10 hereof and shall be secured by the Pledged Collateral.
(d) Other than the exercise of reasonable care to assure the
safe custody of the Pledged Collateral while held hereunder, the Agent shall
have no duty or liability to preserve rights pertaining thereto and shall be
relieved of all responsibility for the Pledged Collateral upon surrendering it
or tendering surrender of it to the Pledgor. The Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if the Pledged Collateral is accorded treatment
substantially equal to that which the Agent accords its own property, it being
understood that the Agent shall not have responsibility for (i) ascertaining or
taking action with respect to calls, conversions, exchanges, maturities, tenders
or other matters relating to any Pledged Collateral, whether or not the Agent
has or is deemed to have knowledge of such matters, or (ii) taking any necessary
steps to preserve rights against any parties with respect to any Pledged
Collateral.
(e) The powers conferred on the Agent hereunder are solely to
protect its interest in the Pledged Collateral and shall not impose any duty
upon it to exercise any such powers. Except for the safe custody of any Pledged
Collateral in its possession and the accounting for moneys actually received by
it hereunder, the Agent shall have no duty as to any Pledged Collateral or as to
the taking of any necessary steps to preserve rights against prior parties or
any other rights pertaining to any Pledged Collateral.
(f) The Agent may at any time in its discretion after the
occurrence and during the continuance of an Event of Default (i) without notice
to any Pledgor, transfer or register in the name of the Agent or any of its
nominees any or all of the Pledged Collateral, subject only to the revocable
rights of the Pledgors under Section 7(a) hereof, and (ii) exchange
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certificates or instruments constituting Pledged Collateral for certificates or
instruments of smaller or larger denominations.
SECTION 9. REMEDIES UPON DEFAULT. If any Event of Default
shall have occurred and be continuing:
(a) The Agent may exercise in respect of the Pledged
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all of the rights and remedies of a secured party on
default under the Code then in effect in the State of New York; and without
limiting the generality of the foregoing and without notice except as specified
below, sell the Pledged Collateral or any part thereof in one or more parcels at
public or private sale, at any exchange or broker's board or elsewhere, at such
price or prices and on such other terms as the Agent may deem commercially
reasonable. Each Pledgor agrees that, to the extent notice of sale shall be
required by law, at least 10 days' notice to such Pledgor of the time and place
of any public sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Agent shall not be obligated to make any
sale of Pledged Collateral regardless of notice of sale having been given. The
Agent may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned.
(b) Each Pledgor recognizes that it may be impracticable to
effect a public sale of all or any part of the Pledged Securities or any other
securities constituting Pledged Collateral and that the Agent may, therefore,
determine to make one or more private sales of any such securities to a
restricted group of purchasers who will be obligated to agree, among other
things, to acquire such securities for their own account, for investment and not
with a view to the distribution or resale thereof. Each Pledgor acknowledges
that any such private sale may be at prices and on terms less favorable to the
seller than the prices and other terms which might have been obtained at a
public sale and, notwithstanding the foregoing, agrees that such private sales
shall be deemed to have been made in a commercially reasonable manner and that
the Agent shall have no obligation to delay sale of any such securities for the
period of time necessary to permit the issuer of such securities to register
such securities for public sale under the Securities Act of 1933, as amended
(the "SECURITIES ACT"). Each Pledgor further acknowledges and agrees that any
offer to sell such securities which has been (i) publicly advertised on a bona
fide basis in a newspaper or other publication of general circulation in the
financial community of New York, New York (to the extent that such an offer may
be so advertised without prior registration under the Securities Act) or (ii)
made privately in the manner described above to not less than fifteen BONA FIDE
offerees shall be deemed to involve a "public disposition" for the purposes of
Section 9-610 of the Code (or any successor or similar, applicable statutory
provision) as then in effect in the State of New York, notwithstanding that such
sale may not constitute a "public offering" under the Securities Act, and that
the Agent may, in such event, bid for the purchase of such securities.
(c) Any cash held by the Agent as Pledged Collateral and all
cash proceeds received by the Agent in respect of any sale of, collection from,
or other realization upon, all or any part of the Pledged Collateral may, in the
discretion of the Agent, be held by the Agent as collateral for, and/or then or
at any time thereafter applied (after payment of any amounts payable to the
Agent pursuant to Section 10 hereof) in whole or in part by the Agent against,
all
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or any part of the Obligations in accordance with Section 2.4(b) of the Loan
Agreement. Any surplus of such cash or cash proceeds held by the Agent and
remaining after payment in full of all of the Obligations after all Commitments
have been terminated shall be paid over to the Pledgors or to such Person as may
be lawfully entitled to receive such surplus.
(d) In the event that the proceeds of any such sale,
collection or realization are insufficient to pay all amounts to which the Agent
and the Lenders are legally entitled, the Pledgors shall be jointly and
severally liable for the deficiency, together with interest thereon at the
highest rate specified in the Loan Agreement for interest on overdue principal
thereof or such other rate as shall be fixed by applicable law, together with
the costs of collection and the reasonable fees, costs and expenses of any
attorneys employed by the Agent to collect such deficiency.
SECTION 10. INDEMNITY AND EXPENSES.
(a) Each Pledgor jointly and severally agrees to indemnify and
hold the Agent harmless from and against any and all claims, damages, losses,
liabilities, obligations, penalties, reasonable costs and expenses (including,
without limitation, reasonable legal fees and disbursements of the Agent's
counsel) to the extent that they arise out of or otherwise result from this
Agreement (including, without limitation, enforcement of this Agreement), except
claims, losses or liabilities resulting solely and directly from the Agent's
gross negligence or willful misconduct as determined by a final judgment of a
court of competent jurisdiction.
(b) The Pledgors jointly and severally agree that upon demand
the Pledgors will pay to the Agent the amount of any and all reasonable
out-of-pocket costs and expenses, including the reasonable fees and
disbursements of the Agent's counsel and of any experts and agents, which the
Agent may incur in connection with (i) the preparation, negotiation, execution,
delivery, recordation, administration, amendment, waiver or other modification
or termination of this Agreement, (ii) the custody, preservation, use or
operation of, or the sale of, collection from, or other realization upon, any
Pledged Collateral, (iii) the exercise or enforcement of any of the rights of
the Agent hereunder, or (iv) the failure by any Pledgor to perform or observe
any of the provisions hereof.
SECTION 11. NOTICES, ETC. All notices and other communications
provided for hereunder shall be in writing and shall be mailed (by certified
mail, postage prepaid and return receipt requested), telecopied or delivered, if
to a Pledgor or to the Agent, to such Person at its address specified in the
Loan Agreement; or as to any such Person at such other address as shall be
designated by such Person in a written notice to such other Persons complying as
to delivery with the terms of this Section 11. All such notices and other
communications shall be effective (i) if sent by certified mail, return receipt
requested, when received or 3 Business Days after mailing, whichever first
occurs, (ii) if telecopied, when transmitted and confirmation is received, if
transmitted on a Business Day and, if not, on the next Business Day or (iii) if
delivered, upon delivery, if delivered on a Business Day and, if not, on the
next Business Day.
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SECTION 12. MISCELLANEOUS.
(a) No amendment of any provision of this Agreement shall be
effective unless it is in writing and signed by each Pledgor and the Agent, and
no waiver of any provision of this Agreement, and no consent to any departure by
any Pledgor therefrom, shall be effective unless it is in writing and signed by
the Agent, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
(b) No failure on the part of the Agent to exercise, and no
delay in exercising, any right hereunder or under any other Loan Document shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right preclude any other or further exercise thereof or the exercise of any
other right. The rights and remedies of the Agent or any Lender provided herein
and in the other Loan Documents are cumulative and are in addition to, and not
exclusive of, any rights or remedies provided by law. The rights of the Agent
under any Loan Document against any party thereto are not conditional or
contingent on any attempt by the Agent to exercise any of its rights under any
other Loan Document against such party or against any other Person, including
but not limited to, any Pledgor.
(c) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining portions hereof or thereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
(d) This Agreement shall create a continuing security interest
in the Pledged Collateral and shall (i) remain in full force and effect until
the payment in full or release of the Obligations after all Commitments have
been terminated and (ii) be binding on each Pledgor and its successors and
assigns and shall inure, together with all rights and remedies of the Agent and
the Lenders hereunder, to the benefit of the Agent and the Lenders and their
respective successors, transferees and assigns. Without limiting the generality
of clause (ii) of the immediately preceding sentence, the Agent and the Lenders
may assign or otherwise transfer their rights and obligations under this
Agreement and any other Loan Document to any other Person in accordance with
Section 14.1 of the Loan Agreement, and such other Person shall thereupon become
vested with all of the benefits in respect thereof granted to the Agent and the
Lenders herein or otherwise. Upon any such assignment or transfer, all
references in this Agreement to the Agent or any Lender shall mean the assignee
of the Agent or such Lender. None of the rights or obligations of the Pledgor
hereunder may be assigned or otherwise transferred without the prior written
consent of the Agent, and any such assignment or transfer shall be null and
void.
(e) Upon the satisfaction in full of the Obligations after the
all Commitments have been terminated, (i) this Agreement and the security
interests created hereby shall terminate and all rights to the Pledged
Collateral shall revert to the Pledgors, and (ii) the Agent will, upon the
Pledgors' request and at the Pledgors' expense, (A) return to the Pledgors such
of the Pledged Collateral as shall not have been sold or otherwise disposed of
or applied pursuant to the terms hereof, and (B) execute and deliver to the
Pledgors, without recourse, representation or warranty, such documents as the
Pledgors shall reasonably request to evidence such termination.
-11-
13
(f) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, except as required by
mandatory provisions of law and except to the extent that the validity and
perfection or the perfection and the effect of perfection or non-perfection of
the security interest created hereby, or remedies hereunder, in respect of any
particular Pledged Collateral are governed by the law of a jurisdiction other
than the State of New York.
(g) This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which shall be deemed to be an original, but all of which taken together shall
constitute one and the same agreement.
(h) The Agent may, in its sole and absolute discretion,
enforce the provisions hereof against any of the Pledgors and shall not be
required to proceed against all Pledgors jointly or seek payment from the
Pledgors ratably. In addition, the Agent may, in its sole and absolute
discretion, select the Pledged Collateral of any one or more of the Pledgors for
sale or application to the Obligations, without regard to the ownership of such
Pledged Collateral, and shall not be required to make such selection ratably
from the Pledged Collateral owned by all of the Pledgors. The release or
discharge of any Pledgor by the Agent shall not release or discharge any other
Pledgor from the obligations of such Person hereunder.
SECTION 13. SUBMISSION TO JURISDICTION; WAIVERS. Each Pledgor
hereby irrevocably and unconditionally:
(a) Submits for itself and its property in any action, suit or
proceeding relating to this Pledge Agreement or any other Loan Document to which
it is a party, or for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction of the courts of the State of
New York, the courts of the United States of America for the Southern District
of New York, and appellate courts thereof;
(b) Agrees that any such action, suit or proceeding may be
brought in such courts and waives any objection that it may now or hereafter
have to the venue of any such action, suit or proceeding in any such court or
that such action, suit or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
(c) Irrevocably consents to the service of any and all process
in any such action, suit or proceeding by the mailing of copies of such process
by registered or certified mail (or any substantially similar form of mail),
postage prepaid, to such Pledgor, at its address set forth in Section 11 hereof
or at such other address of which the Agent shall have been notified pursuant
thereto;
(d) To the extent that such Pledgor has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal process
(whether through service or notice, attachment prior to judgment, attachment in
aid of execution, execution or otherwise) with respect to itself or its
property, such Pledgor hereby irrevocably waives such immunity in respect of its
obligations under this Agreement;
-12-
14
(e) Agrees that nothing herein shall affect the right of the
Agent to effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction; and
(f) Waives any right it may have to claim or recover in any
legal action or proceeding referred to in this Section any special, exemplary,
punitive or consequential damages.
SECTION 14. JURY TRIAL WAIVER. EACH PLEDGOR AND THE AGENT (BY
ITS ACCEPTANCE OF THIS AGREEMENT) HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE
ANY RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING
THIS AGREEMENT, ANY LOAN DOCUMENT OR ANY AMENDMENT, MODIFICATION OR OTHER
DOCUMENT NOW OR HEREAFTER DELIVERED IN CONNECTION WITH ANY OF THE FOREGOING, AND
AGREES THAT ANY SUCH ACTION, PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each Pledgor has caused this Agreement to
be executed and delivered by its officer thereunto duly authorized, as of the
date first above written.
Frontstep, Inc.
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Vice President & CFO
Frontstep Solutions Group, Inc.
By: Xxxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Vice President & CFO
ACCEPTED AND AGREED:
FOOTHILL CAPITAL CORPORATION,
as Agent
By: Xxxx X. Xxxxxx
------------------------------
Name: Xxxx X. Xxxxxx
Title: V.P.
16
SCHEDULE I TO PLEDGE AND SECURITY AGREEMENT
PLEDGED DEBT
Name of Maker Description Original Principal Amount
------------------ --------------------------------- --------------------------
Xxxxxxx X. Xxxxx Promissory Note dated February 15, $100,000
1997 issued to Symix Systems, Inc.
17
PROMISSORY NOTE
---------------
$100,000.00 Columbus, Ohio
FOR VALUE RECEIVED, the undersigned, Xxxxxxx X. Xxxxx ("Debtor"), an individual
residing in Franklin County, Ohio, promises to pay to the order of Symix
Systems, Inc., an Ohio corporation ("Symix"), or its successor(s) and assign(s)
(Symix and such successor(s) and assign(s) being hereinafter referred to
collectively and individually as "Payee"), at its corporate offices located at
0000 Xxxxxxxxx Xxxxxxxx Xxxxx, Xxxxxxxx, Xxxx 00000, or at such other address or
place as the holder hereof from time to time may designate in writing, the
principal amount of ONE HUNDRED THOUSAND AND 00/100 DOLLARS ($100,000.00),
together with interest thereon and payable as stated herein. Interest shall
accrue on the unpaid principal balance evidenced hereby at a rate of five
percent (5%) per annum.
Subject to the terms and conditions hereof, the total principal amount hereof,
plus accrued interest due hereunder, shall be due and payable on October 1, 2000
(the "Due Date"). The principal amount due hereunder shall be reduced on a
cumulative basis in accordance with the schedule set forth below after each
fiscal year of Symix specified in such schedule in the event Employee meets or
exceeds seventy-five percent (75%) of the annual sales quota for new license
revenue for Symix products assigned to him by Symix for such fiscal year:
PRINCIPAL AMOUNT SYMIX FISCAL YEAR
REDUCED CUMULATIVELY BY ENDED JUNE 30
------------------------- --------------------
$12,500.00 1997
$25,000.00 1998
$37,500.00 1999
$50,000.00 2000
The principal amount due hereunder shall be reduced to Fifty Thousand and
00/Dollars ($50,000.00) immediately in the event that Debtor's employment with
Symix and all subsidiaries of Symix is terminated by Symix and/or such
subsidiaries. In addition, the accrued interest due on this Promissory Note
shall be reduced proportionately and shall be determined based upon the actual
principal amount due on this Promissory Note at the time that the indebtedness
evidenced hereby becomes due and payable.
This Promissory Note may be prepaid, in whole or in part, at any time without
premium or penalty. All payments received by Payee hereunder shall be (a) in
lawful money of the United States, and (b) credited as of the time received in
cash or when finally collected by Xxxxx. Subject to the terms hereof, in the
event of (i) the termination of Debtor's employment with Symix and all
subsidiaries of Symix, for any reason, or (ii) the sale of Debtor's primary
residence located at 0000 Xxxxxx, New Albany, Ohio, or (iii) any default in the
payment of any amount due hereunder when due and payable or the performance of
any agreements or covenants to be performed by Debtor hereunder, then the whole
or any part of the unpaid indebtedness evidenced hereby and due hereunder shall
immediately become due and payable without notice or demand therefor, the same
being expressly waived by Debtor, at the option of Payee; except that if Debtor
voluntarily terminates his employment with Xxxxx and all subsidiaries of Symix
prior to the Due Date, then the unpaid indebtedness evidenced hereby shall
become due 120 days after such voluntary termination. A failure of Payee or any
subsequent holder hereof to insist upon strict compliance with the terms hereof
or to assert any right hereunder shall not be a waiver of any default and shall
not be deemed to constitute a modification of the terms hereof or to establish
any claim or defense. No delay or omission on the part of Payee or any
subsequent holder hereof in exercising any right hereunder shall operate as a
waiver of such right or of any other right under this Promissory Note. A waiver
by Payee on any one occasion shall not be construed as a bar to or a waiver of
any such right and/or remedy on any future occasion
Payment of the indebtedness evidenced hereby is secured by a Mortgage executed
on even date herewith encumbering real Property in the County of Franklin, State
of Ohio.
18
Debtor, for himself and all persons now or hereafter liable, primarily or
secondarily, for the payment of the indebtedness evidence hereby or any part
thereof, hereby expressly waives notice of default, notice of intent to
accelerate, notice of acceleration, presentment for payment, notice of dishonor,
protest and notice of protest, and Xxxxxx agrees that the time for payment or
payments of any part of the indebtedness evidenced hereby may be extended
without releasing or otherwise affecting his or their liability hereunder.
Debtor, for himself and all other persons now or hereafter liable hereunder,
primarily or secondarily, xxxxxx agrees that the local laws of the State of
Ohio, without regards to principles of conflict of laws, shall govern his and/or
their rights and duties hereunder and the construction and effect hereof.
However, if any provision hereof is or becomes invalid or unenforceable under
any law of mandatory application, it is the express intent of Debtor, Payee and
all persons primarily or secondarily liable hereunder that such provision will
be deemed severed and omitted herefrom, the remaining portions hereof to remain
in full force and effect as written.
IN WITNESS WHEREOF, Xxxxxx has executed this Promissory Note to be effective as
of the 15th day of February, 1997.
/s/ Xxxxxxx X. Xxxxx
-------------------------------
XXXXXXX X. XXXXX
19
ALLONGE
This allonge is attached to that certain Promissory Note dated
February 15, 1997 made by Xxxxxxx X. Xxxxx, an individual residing in Franklin
County, Ohio, payable to the order of Symix Systems, Inc. (now known as
Frontstep, Inc.).
Pay to the order of _______________________________, without
recourse or warranty.
Dated: _______________ ____, ________
FRONTSTEP, INC.
By: /s/Xxxxxx X. Xxxxxxx
---------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Vice President & CFO
20
SCHEDULE II TO PLEDGE AND SECURITY AGREEMENT
Pledged Shares
--------------
Record Number of Number of Certificate
Name of Issuer Owner Shares Pledged Shares Outstanding Class No.(s)
-------------- ----- -------------- ------------------ ----- ------
Frontstep Solutions Group, Inc. Frontstep, Inc. 101 101 Common 4
Frontstep xxxxxxxxxxxx.xxx, inc. Frontstep, Inc. 200 200 Common 2
brightwhite solutions, inc. Frontstep Solutions 144 150 Common 2
Group, Inc.
21
SCHEDULE III
TO
PLEDGE AND SECURITY AGREEMENT
PLEDGE AMENDMENT
----------------
This Pledge Amendment, dated ___________________________, is
delivered pursuant to Section 4 of the Pledge Agreement referred to below. The
undersigned hereby agrees that this Pledge Amendment may be attached to the
Pledge Agreement, dated as of _______, 2001, made by Frontstep, Inc. and
Frontstep Solutions Group, Inc., each an Ohio corporation, in favor of Foothill
Capital Corporation, as Agent for the Lenders party to the Loan Agreement
referred to in the Pledge Agreement, as it may heretofore have been or hereafter
may be amended or otherwise modified or supplemented from time to time and that
the promissory notes or shares listed on this Pledge Amendment shall be and
become part of the Pledged Collateral referred to in said Pledge Agreement and
shall secure all of the Obligations referred to in said Pledge Agreement.
Pledged Debt
------------
Name of Maker Description Original Principal Amount
------------- ----------- -------------------------
Pledged Shares
--------------
Name of Issuer Number of Shares Class Certificate No(s)
-------------- ---------------- ----- -----------------
[PLEDGOR]
By: ___________________________
Name:
Title:
