Exhibit 10.5
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of March 31, 2006 (this "Agreement"),
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among Trinity Learning Corporation, a Utah corporation (the "Company") and all
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of the Subsidiaries of the Company (such subsidiaries, the "Guarantors") (the
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Company and Guarantors are collectively referred to as the "Debtors") and the
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holder or holders of the Company's 15% Senior Secured Convertible Debenture due
March 31, 2010 in the original aggregate principal amount of up to $8,500,000
(the "Debenture"), signatory hereto, their endorsees, transferees and assigns
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(collectively referred to as, the "Secured Parties").
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W I T N E S S E T H:
WHEREAS, pursuant to the Debenture, the Secured Parties have
severally agreed to extend the loans to the Company evidenced by the Debenture;
WHEREAS, pursuant to a certain Subsidiary Guarantee dated as of the
date hereof (the "Guaranty"), the Guarantors have jointly and severally agreed
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to guaranty and act as surety for payment of such loans; and
WHEREAS, in order to induce the Secured Parties to extend the loans
evidenced by the Debentures, each Debtor has agreed to execute and deliver to
the Secured Parties this Agreement and to grant the Secured Parties, pari passu
with each other Secured Party, a perfected security interest in certain property
of such Debtor to secure the prompt payment, performance and discharge in full
of all of the Company's obligations under the Debenture and the other Debtor's
obligations under the Guaranty.
NOW, THEREFORE, in consideration of the agreements herein contained
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto hereby agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following
terms shall have the meanings set forth in this Section 1. Terms used but not
otherwise defined in this Agreement that are defined in Article 9 of the UCC
(such as "account", "chattel paper", "commercial tort claim", "deposit account",
"document", "equipment", "fixtures", "general intangibles", "goods",
"instruments", "inventory", "investment property", "letter-of-credit rights",
"proceeds" and "supporting obligations") shall have the respective meanings
given such terms in Article 9 of the UCC.
(a) "Collateral" means the collateral in which the Secured Parties are
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granted a security interest by this Agreement and which shall include the
following personal property of the Debtors, whether presently owned or existing
or hereafter acquired or coming into existence, wherever situated, and all
additions and accessions thereto and all substitutions and replacements thereof,
and all proceeds, products and accounts thereof, including, without limitation,
all proceeds from the sale or transfer of the Collateral and of insurance
covering the same and of any tort claims in connection therewith, and all
dividends, interest, cash, notes, securities, equity interest or other property
at any time and from time to time acquired, receivable or otherwise distributed
in respect of, or in exchange for, any or all of the Pledged Securities (as
defined below):
(i) All goods, including, without limitations, (A) all machinery,
equipment, computers, motor vehicles, trucks, tanks, boats, ships, appliances,
furniture, special and general tools, fixtures, test and quality control devices
and other equipment of every kind and nature and wherever situated, together
with all documents of title and documents representing the same, all additions
and accessions thereto, replacements therefor, all parts therefor, and all
substitutes for any of the foregoing and all other items used and useful in
connection with any Debtor's businesses and all improvements thereto; and (B)
all inventory;
(ii) All contract rights and other general intangibles, including,
without limitation, all partnership interests, membership interests, stock or
other securities, rights under any of the Organizational Documents, agreements
related to the Pledged Securities,licenses, distribution and other agreements,
computer software (whether "off-the-shelf", licensed from any third party or
developed by any Debtor), computer software development rights, leases,
franchises, customer lists, quality control procedures, grants and rights,
goodwill, trademarks, service marks, trade styles, trade names, patents, patent
applications, copyrights, and income tax refunds;
(iii) All accounts, together with all instruments, all documents of
title representing any of the foregoing, all rights in any merchandising, goods,
equipment, motor vehicles and trucks which any of the same may represent, and
all right, title, security and guaranties with respect to each account,
including any right of stoppage in transit;
(iv) All documents, letter-of-credit rights, instruments and chattel
paper;
(v) All commercial tort claims;
(vi) All deposit accounts and all cash (whether or not deposited in
such deposit accounts);
(vii) All investment property;
(viii) All supporting obligations; and
(ix) All files, records, books of account, business papers, and
computer programs; and
(x) the products and proceeds of all of the foregoing Collateral set
forth in clauses (i)-(ix) above.
Without limiting the generality of the foregoing, the "Collateral" shall
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include all investment property and general intangibles respecting ownership
and/or other equity interests in each Guarantor, including, without limitation,
the shares of capital stock and the other equity interests listed on Schedule H
hereto (as the same may be modified from time to time pursuant to the terms
hereof), and any other shares of capital stock and/or other equity interests of
any other direct or indirect subsidiary of any Debtor obtained in the future,
and, in each case, all certificates representing such shares and/or equity
interests and, in each case, all rights, options, warrants, stock, other
securities and/or equity interests that may hereafter be received, receivable or
distributed in respect of, or exchanged for, any of the foregoing (all of the
foregoing being referred to herein as the "Pledged Securities") and all rights
arising under or in connection with the Pledged Securities, including, but not
limited to, all dividends, interest and cash.
Notwithstanding the foregoing, nothing herein shall be deemed to constitute
an assignment of any asset which, in the event of an assignment, becomes void by
operation of applicable law or the assignment of which is otherwise prohibited
by applicable law (in each case to the extent that such applicable law is not
overridden by Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar
applicable law); provided, however, that to the extent permitted by applicable
law, this Agreement shall create a valid security interest in such asset and, to
the extent permitted by applicable law, this Agreement shall create a valid
security interest in the proceeds of such asset.
(b) "Intellectual Property" means the collective reference to all
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rights, priorities and privileges relating to intellectual property, whether
arising under United States, multinational or foreign laws or otherwise,
including, without limitation, (i) all copyrights arising under the laws of the
United States, any other country or any political subdivision thereof, whether
registered or unregistered and whether published or unpublished, all
registrations and recordings thereof, and all applications in connection
therewith, including, without limitation, all registrations, recordings and
applications in the United States Copyright Office, (ii) all letters patent of
the United States, any other country or any political subdivision thereof, all
reissues and extensions thereof, and all applications for letters patent of the
United States or any other country and all divisions, continuations and
continuations-in-part thereof, (iii) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade dress,
service marks, logos, domain names and other source or business identifiers, and
all goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and Trademark Office
or in any similar office or agency of the United States, any State thereof or
any other country or any political subdivision thereof, or otherwise, and all
common law rights related thereto, (iv) all trade secrets arising under the laws
of the United States, any other country or any political subdivision thereof,
(v) all rights to obtain any reissues, renewals or extensions of the foregoing,
(vi) all licenses for any of the foregoing, and (vii) all causes of action for
infringement of the foregoing.
(c) "Majority in Interest" shall mean, at any time of determination,
the majority in interest (based on then-outstanding principal amounts of
Debentures at the time of such determination) of the Secured Parties.
(d) "Necessary Endorsement" shall mean undated stock powers endorsed in
blank or other proper instruments of assignment duly executed and such other
instruments or documents as the Agent (as that term is defined below) may
reasonably request.
(e) "Obligations" means all obligations under this Agreement, the
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Debentures, the Guaranty and any other instruments, agreements or other
documents executed and/or delivered in connection herewith or therewith, in each
case, whether now or hereafter existing, voluntary or involuntary, direct or
indirect, absolute or contingent, liquidated or unliquidated, whether or not
jointly owed with others, and whether or not from time to time decreased or
extinguished and later increased, created or incurred, and all or any portion of
such obligations or liabilities that are paid, to the extent all or any part of
such payment is avoided or recovered directly or indirectly from any of the
Secured Parties as a preference, fraudulent transfer or otherwise as such
obligations may be amended, supplemented, converted, extended or modified from
time to time. Without limiting the generality of the foregoing, the term
"Obligations" shall include, without limitation: (i) principal of, and interest
on the Debentures and the loans extended pursuant thereto; (ii) any and all
other fees, indemnities, costs, obligations and liabilities of the Debtors from
time to time under or in connection with this Agreement, the Debentures, the
Guaranty and any other instruments, agreements or other documents executed
and/or delivered in connection herewith or therewith; and (iii) all amounts
(including but not limited to post-petition interest) in respect of the
foregoing that would be payable but for the fact that the obligations to pay
such amounts are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving any Debtor.
(f) "Organizational Documents" means with respect to any Debtor, the
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documents by which such Debtor was organized (such as a certificate of
incorporation, certificate of limited partnership or articles of organization,
and including, without limitation, any certificates of designation for preferred
stock or other forms of preferred equity) and which relate to the internal
governance of such Debtor (such as bylaws, a partnership agreement or an
operating, limited liability or members agreement).
(g) "UCC" means the Uniform Commercial Code of the State of New York
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and or any other applicable law of any state or states which has jurisdiction
with respect to all, or any portion of, the Collateral or this Agreement, from
time to time. It is the intent of the parties that defined terms in the UCC
should be construed in their broadest sense so that the term "Collateral" will
be construed in its broadest sense. Accordingly if there are, from time to
time, changes to defined terms in the UCC that broaden the definitions, they are
incorporated herein and if existing definitions in the UCC are broader than the
amended definitions, the existing ones shall be controlling.
2. GRANT OF PERFECTED FIRST PRIORITY SECURITY INTEREST. As an
inducement for the Secured Parties to extend the loans as evidenced by the
Debentures and to secure the complete and timely payment, performance and
discharge in full, as the case may be, of all of the Obligations, each Debtor
hereby unconditionally and irrevocably pledges, grants and hypothecates to the
Secured Parties a continuing and perfected security interest in and to, a lien
upon and a right of set-off against all of their respective right, title and
interest of whatsoever kind and nature in and to, the Collateral (the "Security
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Interest").
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3. DELIVERY OF CERTAIN COLLATERAL. Contemporaneously or prior to the
execution of this Agreement, each Debtor shall deliver or cause to be delivered
to the Agent (a) any and all certificates and other instruments representing or
evidencing the Pledged Securities, and (b) any and all certificates and other
instruments or documents representing any of the other Collateral, in each case,
together with all Necessary Endorsements. The Debtors are, contemporaneously
with the execution hereof, delivering to Agent, or have previously delivered to
Agent, a true and correct copy of each Organizational Document governing any of
the Pledged Securities.
4. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE
DEBTORS. Each Debtor represents and warrants to, and covenants and agrees with,
the Secured Parties as follows:
(a) Each Debtor has the requisite corporate, partnership, limited
liability company or other power and authority to enter into this Agreement and
otherwise to carry out its obligations hereunder. The execution, delivery and
performance by each Debtor of this Agreement and the filings contemplated
therein have been duly authorized by all necessary action on the part of such
Debtor and no further action is required by such Debtor. This Agreement has
been duly executed by each Debtor. This Agreement constitutes the legal, valid
and binding obligation of each Debtor, enforceable against each Debtor in
accordance with its terms except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization and similar laws of general
application relating to or affecting the rights and remedies of creditors and by
general principles of equity.
(b) The Debtors have no place of business or offices where their
respective books of account and records are kept (other than temporarily at the
offices of its attorneys or accountants) or places where Collateral is stored or
located, except as set forth on Schedule A attached hereto. Except as
specifically set forth on Schedule A, each Debtor is the record owner of the
real property where such Collateral is located, and there exist no mortgages or
other liens on any such real property except for Permitted Liens (as defined in
the Debentures). Except as disclosed on Schedule A, none of such Collateral is
in the possession of any consignee, bailee, warehouseman, agent or processor.
(c) Except for Permitted Liens (as defined in the Debentures) and
except as set forth on Schedule B attached hereto, the Debtors are the sole
owner of the Collateral (except for non-exclusive licenses granted by any Debtor
in the ordinary course of business), free and clear of any liens, security
interests, encumbrances, rights or claims, and are fully authorized to grant the
Security Interest. There is not on file in any governmental or regulatory
authority, agency or recording office an effective financing statement, security
agreement, license or transfer or any notice of any of the foregoing (other than
those that will be filed in favor of the Secured Parties pursuant to this
Agreement) covering or affecting any of the Collateral. So long as this
Agreement shall be in effect, the Debtors shall not execute and shall not
knowingly permit to be on file in any such office or agency any such financing
statement or other document or instrument (except to the extent filed or
recorded in favor of the Secured Parties pursuant to the terms of this
Agreement).
(d) No written claim has been received that any Collateral or Debtor's
use of any Collateral violates the rights of any third party. There has been no
adverse decision to any Debtor's claim of ownership rights in or exclusive
rights to use the Collateral in any jurisdiction or to any Debtor's right to
keep and maintain such Collateral in full force and effect, and there is no
proceeding involving said rights pending or, to the best knowledge of any
Debtor, threatened before any court, judicial body, administrative or regulatory
agency, arbitrator or other governmental authority.
(e) Each Debtor shall at all times maintain its books of account and
records relating to the Collateral at its principal place of business and its
Collateral at the locations set forth on Schedule A attached hereto and may not
relocate such books of account and records or tangible Collateral unless it
delivers to the Secured Parties at least 30 days prior to such relocation (i)
written notice of such relocation and the new location thereof (which must be
within the United States) and (ii) evidence that appropriate financing
statements under the UCC and other necessary documents have been filed and
recorded and other steps have been taken to perfect the Security Interest to
create in favor of the Secured Parties a valid, perfected and continuing
perfected first priority lien in the Collateral.
(f) This Agreement creates in favor of the Secured Parties a valid,
security interest in the Collateral, subject only to Permitted Liens (as defined
in the Debentures) securing the payment and performance of the Obligations.
Upon making the filings described in the immediately following paragraph, all
security interests created hereunder in any Collateral which may be perfected by
filing Uniform Commercial Code financing statements shall have been duly
perfected. Except for the filing of the Uniform Commercial Code financing
statements referred to in the immediately following paragraph, the recordation
of the Intellectual Property Security Agreement (as defined below) with respect
to copyrights and copyright applications in the United States Copyright Office
referred to in paragraph (m), the execution and delivery of deposit account
control agreements satisfying the requirements of Section 9-104(a)(2) of the UCC
with respect to each deposit account of the Debtors, and the delivery of the
certificates and other instruments provided in Section 3, no action is necessary
to create, perfect or protect the security interests created hereunder. Without
limiting the generality of the foregoing, except for the filing of said
financing statements, the recordation of said Intellectual Property Security
Agreement, and the execution and delivery of said deposit account control
agreements, no consent of any third parties and no authorization, approval or
other action by, and no notice to or filing with, any governmental authority or
regulatory body is required for (i) the execution, delivery and performance of
this Agreement, (ii) the creation or perfection of the Security Interests
created hereunder in the Collateral or (iii) the enforcement of the rights of
the Secured Parties hereunder.
(g) Each Debtor hereby authorizes the Secured Parties, or any of them,
to file one or more financing statements under the UCC, with respect to the
Security Interest with the proper filing and recording agencies in any
jurisdiction deemed proper by them.
(h) The execution, delivery and performance of this Agreement by the
Debtors does not (i) violate any of the provisions of any Organizational
Documents of any Debtor or any judgment, decree, order or award of any court,
governmental body or arbitrator or any applicable law, rule or regulation
applicable to any Debtor or (ii) conflict with, or constitute a default (or an
event that with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any agreement,
credit facility, debt or other instrument (evidencing any Debtor's debt or
otherwise) or other understanding to which any Debtor is a party or by which any
property or asset of any Debtor is bound or affected. No consent (including,
without limitation, from stockholders or creditors of any Debtor) is required
for any Debtor to enter into and perform its obligations hereunder.
(i) The capital stock and other equity interests listed onSchedule H
hereto represent all of the capital stock and other equity interests of the
Guarantors, and represent all capital stock and other equity interests owned,
directly or indirectly, by the Company. All of the Pledged Securities are
validly issued, fully paid and nonassessable, and the Company is the legal and
beneficial owner of the Pledged Securities, free and clear of any lien, security
interest or other encumbrance except for the security interests created by this
Agreement and other Permitted Liens (as defined in the Debenture).
(j) The ownership and other equity interests in partnerships and
limited liability companies (if any) included in the Collateral (the "Pledged
Interests") by their express terms do not provide that they are securities
governed by Article 8 of the UCC and are not held in a securities account or by
any financial intermediary.
(k) Each Debtor shall at all times maintain the liens and Security
Interest provided for hereunder as valid and perfected first priority liens and
security interests in the Collateral in favor of the Secured Parties until this
Agreement and the Security Interest hereunder shall be terminated pursuant to
Section 11 hereof. Each Debtor hereby agrees to defend the same against the
claims of any and all persons and entities. Each Debtor shall safeguard and
protect all Collateral for the account of the Secured Parties. At the request
of the Secured Parties, each Debtor will sign and deliver to the Secured Parties
at any time or from time to time one or more financing statements pursuant to
the UCC in form reasonably satisfactory to the Secured Parties and will pay the
cost of filing the same in all public offices wherever filing is, or is deemed
by the Secured Parties to be, necessary or desirable to effect the rights and
obligations provided for herein. Without limiting the generality of the
foregoing, each Debtor shall pay all fees, taxes and other amounts necessary to
maintain the Collateral and the Security Interest hereunder, and each Debtor
shall obtain and furnish to the Secured Parties from time to time, upon demand,
such releases and/or subordinations of claims and liens which may be required to
maintain the priority of the Security Interest hereunder.
(l) No Debtor will transfer, pledge, hypothecate, encumber, license,
sell or otherwise dispose of any of the Collateral (except for non-exclusive
licenses granted by a Debtor in its ordinary course of business and sales of
inventory by a Debtor in its ordinary course of business) without the prior
written consent of a Majority in Interest.
(m) Each Debtor shall keep and preserve its equipment, inventory and
other tangible Collateral in good condition, repair and order and shall not
operate or locate any such Collateral (or cause to be operated or located) in
any area excluded from insurance coverage.
(n) Each Debtor shall maintain with financially sound and reputable
insurers, insurance with respect to the Collateral against loss or damage of the
kinds and in the amounts customarily insured against by entities of established
reputation having similar properties similarly situated and in such amounts as
are customarily carried under similar circumstances by other such entities and
otherwise as is prudent for entities engaged in similar businesses but in any
event sufficient to cover the full replacement cost thereof. Each Debtor shall
cause each insurance policy issued in connection herewith to provide, and the
insurer issuing such policy to certify to the Agent that (a) the Agent will be
named as lender loss payee and additional insured under each such insurance
policy; (b) if such insurance be proposed to be cancelled or materially changed
for any reason whatsoever, such insurer will promptly notify the Agent and such
cancellation or change shall not be effective as to the Agent for at least
thirty (30) days after receipt by the Agent of such notice, unless the effect of
such change is to extend or increase coverage under the policy; and (c) the
Agent will have the right (but no obligation) at its election to remedy any
default in the payment of premiums within thirty (30) days of notice from the
insurer of such default. If no Event of Default (as defined in the Debenture)
exists and if the proceeds arising out of any claim or series of related claims
do not exceed $100,000, loss payments in each instance will be applied by the
applicable Debtor to the repair and/or replacement of property with respect to
which the loss was incurred to the extent reasonably feasible, and any loss
payments or the balance thereof remaining, to the extent not so applied, shall
be payable to the applicable Debtor, provided, however, that payments received
by any Debtor after an Event of Default occurs and is continuing or in excess of
$100,000 for any occurrence or series of related occurrences shall be paid to
the Agent and, if received by such Debtor, shall be held in trust for and
immediately paid over to the Agent unless otherwise directed in writing by the
Agent. Copies of such policies or the related certificates, in each case,
naming the Agent as lender loss payee and additional insured shall be delivered
to the Agent at least annually and at the time any new policy of insurance is
issued.
(o) Each Debtor shall, within ten (10) days of obtaining knowledge
thereof, advise the Secured Parties promptly, in sufficient detail, of any
substantial change in the Collateral, and of the occurrence of any event which
would have a material adverse effect on the value of the Collateral or on the
Secured Parties' security interest therein.
(p) Each Debtor shall promptly execute and deliver to the Secured
Parties such further deeds, mortgages, assignments, security agreements,
financing statements or other instruments, documents, certificates and
assurances and take such further action as the Secured Parties may from time to
time request and may in its sole discretion deem necessary to perfect, protect
or enforce its security interest in the Collateral including, without
limitation, if applicable, the execution and delivery of a separate security
agreement with respect to each Debtor's Intellectual Property ("Intellectual
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Property Security Agreement") in which the Secured Parties have been granted a
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security interest hereunder, substantially in a form acceptable to the Secured
Parties, which Intellectual Property Security Agreement, other than as stated
therein, shall be subject to all of the terms and conditions hereof.
(q) Each Debtor shall permit the Secured Parties and their
representatives and agents to inspect the Collateral at any time, and to make
copies of records pertaining to the Collateral as may be requested by a Secured
Party from time to time.
(r) Each Debtor shall take all steps reasonably necessary to diligently
pursue and seek to preserve, enforce and collect any rights, claims, causes of
action and accounts receivable in respect of the Collateral.
(s) Each Debtor shall promptly notify the Secured Parties in sufficient
detail upon becoming aware of any attachment, garnishment, execution or other
legal process levied against any Collateral and of any other information
received by such Debtor that may materially affect the value of the Collateral,
the Security Interest or the rights and remedies of the Secured Parties
hereunder.
(t) All information heretofore, herein or hereafter supplied to the
Secured Parties by or on behalf of any Debtor with respect to the Collateral is
accurate and complete in all material respects as of the date furnished.
(u) The Debtors shall at all times preserve and keep in full force and
effect their respective valid existence and good standing and any rights and
franchises material to its business.
(v) No Debtor will change its name, type of organization, jurisdiction
of organization, organizational identification number (if it has one), legal or
corporate structure, or identity, or add any new fictitious name unless it
provides at least 30 days prior written notice to the Secured Parties of such
change and, at the time of such written notification, such Debtor provides any
financing statements or fixture filings necessary to perfect and continue
perfected the perfected security Interest granted and evidenced by this
Agreement.
(w) No Debtor may consign any of its Inventory or sell any of its
Inventory on xxxx and hold, sale or return, sale on approval, or other
conditional terms of sale without the consent of a Majority in Interest which
shall not be unreasonably withheld, except to the extent such consignment or
sale does not exceed 15% of the total value of all of the Company's finished
goods in Inventory.
(x) No Debtor may relocate its chief executive office to a new location
without providing 30 days prior written notification thereof to the Secured
Parties and so long as, at the time of such written notification, such Debtor
provides any financing statements or fixture filings necessary to perfect and
continue perfected the perfected security Interest granted and evidenced by this
Agreement.
(y) Each Debtor was organized and remains organized solely under the
laws of the state set forth next to such Debtor's name in the first paragraph of
this Agreement. Schedule D attached hereto sets forth each Debtor's
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organizational identification number or, if any Debtor does not have one, states
that one does not exist.
(z) (i) The actual name of each Debtor is the name set forth in the
preamble above; (ii) no Debtor has any trade names except as set forth on
Schedule E attached hereto; (iii) no Debtor has used any name other than that
stated in the preamble hereto or as set forth on Schedule E for the preceding
five years; and (iv) no entity has merged into any Debtor or been acquired by
any Debtor within the past five years except as set forth on Schedule E.
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(aa) At any time and from time to time that any Collateral consists of
instruments, certificated securities or other items that require or permit
possession by the secured party to perfect the security interest created hereby,
the applicable Debtor shall deliver such Collateral to the Agent.
(bb) Each Debtor, in its capacity as issuer, hereby agrees to comply
with any and all orders and instructions of Agent regarding the Pledged
Interests consistent with the terms of this Agreement without the further
consent of any Debtor as contemplated by Section 8-106 (or any successor
section) of the UCC. Further, each Debtor agrees that it shall not enter into a
similar agreement (or one that would confer "control" within the meaning of
Article 8 of the UCC) with any other person or entity.
(cc) Each Debtor shall cause all tangible chattel paper constituting
Collateral to be delivered to the Agent, or, if such delivery is not possible,
then to cause such tangible chattel paper to contain a legend noting that it is
subject to the security interest created by this Agreement. To the extent that
any Collateral consists of electronic chattel paper, the applicable Debtor shall
cause the underlying chattel paper to be "marked" within the meaning of Section
9-105 of the UCC (or successor section thereto).
(dd) If there is any investment property or deposit account included as
Collateral that can be perfected by "control" through an account control
agreement, the applicable Debtor shall cause such an account control agreement,
in form and substance in each case satisfactory to the Secured Parties, to be
entered into and delivered to the Secured Parties.
(ee) To the extent that any Collateral consists of letter-of-credit
rights, the applicable Debtor shall cause the issuer of each underlying letter
of credit to consent to an assignment of the proceeds thereof to the Secured
Parties.
(ff) To the extent that any Collateral is in the possession of any
third party, the applicable Debtor shall join with the Secured Parties in
notifying such third party of the Secured Parties' security interest in such
Collateral and shall use its best efforts to obtain an acknowledgement and
agreement from such third party with respect to the Collateral, in form and
substance satisfactory to the Secured Parties.
(gg) If any Debtor shall at any time hold or acquire a commercial tort
claim, such Debtor shall promptly notify the Secured Parties in a writing signed
by such Debtor of the particulars thereof and grant to the Secured Parties in
such writing a security interest therein and in the proceeds thereof, all upon
the terms of this Agreement, with such writing to be in form and substance
satisfactory to the Secured Parties.
(hh) Each Debtor shall immediately provide written notice to the
Secured Parties of any and all accounts which arise out of contracts with any
governmental authority and, to the extent necessary to perfect or continue the
perfected status of the Security Interest in such accounts and proceeds thereof,
shall execute and deliver to the Secured Parties an assignment of claims for
such accounts and cooperate with the Secured Parties in taking any other steps
required, in their judgment, under the Federal Assignment of Claims Act or any
similar federal, state or local statute or rule to perfect or continue the
perfected status of the Security Interest in such accounts and proceeds thereof.
(ii) Each Debtor shall cause each subsidiary of such Debtor to
immediately become a party hereto (an "Additional Debtor"), by executing and
delivering an Additional Debtor Joinder in substantially the form of Annex A
attached hereto and comply with the provisions hereof applicable to the Debtors.
Concurrent therewith, the Additional Debtor shall deliver replacement schedules
for, or supplements to all other Schedules to (or referred to in) this
Agreement, as applicable, which replacement schedules shall supersede, or
supplements shall modify, the Schedules then in effect. The Additional Debtor
shall also deliver such opinions of counsel, authorizing resolutions, good
standing certificates, incumbency certificates, organizational documents,
financing statements and other information and documentation as the Secured
Parties may reasonably request. Upon delivery of the foregoing to the Secured
Parties, the Additional Debtor shall be and become a party to this Agreement
with the same rights and obligations as the Debtors, for all purposes hereof as
fully and to the same extent as if it were an original signatory hereto and
shall be deemed to have made the representations, warranties and covenants set
forth herein as of the date of execution and delivery of such Additional Debtor
Joinder, and all references herein to the "Debtors" shall be deemed to include
each Additional Debtor.
(jj) Each Debtor shall vote the Pledged Securities to comply with the
covenants and agreements set forth herein and in the Debentures.
(kk) Each Debtor shall register the pledge of the applicable Pledged
Securities on the books of such Debtor. Each Debtor shall notify each issuer of
Pledged Securities to register the pledge of the applicable Pledged Securities
in the name of the Secured Parties on the books of such issuer. Further, except
with respect to certificated securities delivered to the Agent, the applicable
Debtor shall deliver to Agent an acknowledgement of pledge (which, where
appropriate, shall comply with the requirements of the relevant UCC with respect
to perfection by registration) signed by the issuer of the applicable Pledged
Securities, which acknowledgement shall confirm that: (a) it has registered the
pledge on its books and records; and (b) at any time directed by Agent during
the continuation of an Event of Default, such issuer will transfer the record
ownership of such Pledged Securities into the name of any designee of Agent,
will take such steps as may be necessary to effect the transfer, and will comply
with all other instructions of Agent regarding such Pledged Securities without
the further consent of the applicable Debtor.
(ll) In the event that, upon an occurrence of an Event of Default,
Agent shall sell all or any of the Pledged Securities to another party or
parties (herein called the "Transferee") or shall purchase or retain all or any
of the Pledged Securities, each Debtor shall, to the extent applicable: (i)
deliver to Agent or the Transferee, as the case may be, the articles of
incorporation, bylaws, minute books, stock certificate books, corporate seals,
deeds, leases, indentures, agreements, evidences of indebtedness, books of
account, financial records and all other Organizational Documents and records of
the Debtors and their direct and indirect subsidiaries; (ii) use its best
efforts to obtain resignations of the persons then serving as officers and
directors of the Debtors and their direct and indirect subsidiaries, if so
requested; and (iii) use its best efforts to obtain any approvals that are
required by any governmental or regulatory body in order to permit the sale of
the Pledged Securities to the Transferee or the purchase or retention of the
Pledged Securities by Agent and allow the Transferee or Agent to continue the
business of the Debtors and their direct and indirect subsidiaries.
(mm) Without limiting the generality of the other obligations of the
Debtors hereunder, each Debtor shall promptly (i) cause to be registered at the
United States Copyright Office all of its material copyrights, (ii) cause the
security interest contemplated hereby with respect to all Intellectual Property
registered at the United States Copyright Office or United States Patent and
Trademark Office to be duly recorded at the applicable office, and (iii) give
the Agent notice whenever it acquires (whether absolutely or by license) or
creates any additional material Intellectual Property.
(nn) Each Debtor will from time to time, at the joint and several
expense of the Debtors, promptly execute and deliver all such further
instruments and documents, and take all such further action as may be necessary
or desirable, or as the Secured Parties may reasonably request, in order to
perfect and protect any security interest granted or purported to be granted
hereby or to enable the Secured Parties to exercise and enforce their rights and
remedies hereunder and with respect to any Collateral or to otherwise carry out
the purposes of this Agreement.
(oo) Schedule F attached hereto lists all of the patents, patent
applications, trademarks, trademark applications, registered copyrights, and
domain names owned by any of the Debtors as of the date hereof. Schedule F
lists all material licenses in favor of any Debtor for the use of any patents,
trademarks, copyrights and domain names as of the date hereof. All material
patents and trademarks of the Debtors have been duly recorded at the United
States Patent and Trademark Office and all material copyrights of the Debtors
have been duly recorded at the United States Copyright Office.
(pp) Except as set forth on Schedule G attached hereto, none of the
account debtors or other persons or entities obligated on any of the Collateral
is a governmental authority covered by the Federal Assignment of Claims Act or
any similar federal, state or local statute or rule in respect of such
Collateral.
5. EFFECT OF PLEDGE ON CERTAIN RIGHTS.If any of the Collateral subject
to this Agreement consists of nonvoting equity or ownership interests
(regardless of class, designation, preference or rights) that may be converted
into voting equity or ownership interests upon the occurrence of certain events
(including, without limitation, upon the transfer of all or any of the other
stock or assets of the issuer), it is agreed that the pledge of such equity or
ownership interests pursuant to this Agreement or the enforcement of any of
Agent's rights hereunder shall not be deemed to be the type of event which would
trigger such conversion rights notwithstanding any provisions in the
Organizational Documents or agreements to which any Debtor is subject or to
which any Debtor is party.
6. DEFAULTS. The following events shall be "Events of Default":
(a) The occurrence of an Event of Default (as defined in the Debenture)
under the Debenture;
(b) Any representation or warranty of any Debtor in this Agreement shall
prove to have been incorrect in any material respect when made;
(c) The failure by any Debtor to observe or perform any of its obligations
hereunder for five (5) days after delivery to such Debtor of notice of such
failure by or on behalf of a Secured Party unless such default is capable of
cure but cannot be cured within such time frame and such Debtor is using best
efforts to cure same in a timely fashion; or
(d) If any provision of this Agreement shall at any time for any reason be
declared to be null and void, or the validity or enforceability thereof shall be
contested by any Debtor, or a proceeding shall be commenced by any Debtor, or by
any governmental authority having jurisdiction over any Debtor, seeking to
establish the invalidity or unenforceability thereof, or any Debtor shall deny
that any Debtor has any liability or obligation purported to be created under
this Agreement.
7. DUTY TO HOLD IN TRUST.
(a) Upon the occurrence of any Event of Default and at any time
thereafter, each Debtor shall, upon receipt of any revenue, income, dividend,
interest or other sums subject to the Security Interest, whether payable
pursuant to the Debenture or otherwise, or of any check, draft, note, trade
acceptance or other instrument evidencing an obligation to pay any such sum,
hold the same in trust for the Secured Parties and shall forthwith endorse and
transfer any such sums or instruments, or both, to the Secured Parties, pro-rata
in proportion to their initial purchases of Debentures for application to the
satisfaction of the Obligations (and if any Debenture is not outstanding,
pro-rata in proportion to the initial purchases of the remaining Debentures).
(b) If any Debtor shall become entitled to receive or shall receive any
securities or other property (including, without limitation, shares of Pledged
Securities or instruments representing Pledged Securities acquired after the
date hereof, or any options, warrants, rights or other similar property or
certificates representing a dividend, or any distribution in connection with any
recapitalization, reclassification or increase or reduction of capital, or
issued in connection with any reorganization of such Debtor or any of its direct
or indirect subsidiaries) in respect of the Pledged Securities (whether as an
addition to, in substitution of, or in exchange for, such Pledged Securities or
otherwise), such Debtor agrees to (i) accept the same as the agent of the
Secured Parties; (ii) hold the same in trust on behalf of and for the benefit of
the Secured Parties; and (iii) to deliver any and all certificates or
instruments evidencing the same to Agent on or before the close of business on
the fifth business day following the receipt thereof by such Debtor, in the
exact form received together with the Necessary Endorsements, to be held by
Agent subject to the terms of this Agreement as Collateral.
8. RIGHTS AND REMEDIES UPON DEFAULT.
(a) Upon the occurrence of any Event of Default and at any time
thereafter, the Secured Parties, acting through any agent appointed by them for
such purpose, shall have the right to exercise all of the remedies conferred
hereunder and under the Debentures, and the Secured Parties shall have all the
rights and remedies of a secured party under the UCC. Without limitation, the
Secured Parties shall have the following rights and powers:
(i) The Secured Parties shall have the right to take possession of the
Collateral and, for that purpose, enter, with the aid and assistance of any
person, any premises where the Collateral, or any part thereof, is or may be
placed and remove the same, and each Debtor shall assemble the Collateral and
make it available to the Secured Parties at places which the Secured Parties
shall reasonably select, whether at such Debtor's premises or elsewhere, and
make available to the Secured Parties, without rent, all of such Debtor's
respective premises and facilities for the purpose of the Secured Parties taking
possession of, removing or putting the Collateral in saleable or disposable
form.
(ii) Upon notice to the Debtors by Agent, all rights of each Debtor to
exercise the voting and other consensual rights which it would otherwise be
entitled to exercise and all rights of each Debtor to receive the dividends and
interest which it would otherwise be authorized to receive and retain, shall
cease. Upon such notice, Agent shall have the right to receive any interest,
cash dividends or other payments on the Collateral and, at the option of Agent,
to exercise in such Agent's discretion all voting rights pertaining thereto.
Without limiting the generality of the foregoing, Agent shall have the right
(but not the obligation) to exercise all rights with respect to the Collateral
as it were the sole and absolute owners thereof, including, without limitation,
to vote and/or to exchange, at its sole discretion, any or all of the Collateral
in connection with a merger, reorganization, consolidation, recapitalization or
other readjustment concerning or involving the Collateral or any Debtor or any
of its direct or indirect subsidiaries.
(iii) The Secured Parties shall have the right to operate the business
of each Debtor using the Collateral and shall have the right to assign, sell,
lease or otherwise dispose of and deliver all or any part of the Collateral, at
public or private sale or otherwise, either with or without special conditions
or stipulations, for cash or on credit or for future delivery, in such parcel or
parcels and at such time or times and at such place or places, and upon such
terms and conditions as the Secured Parties may deem commercially reasonable,
all without (except as shall be required by applicable statute and cannot be
waived) advertisement or demand upon or notice to any Debtor or right of
redemption of a Debtor, which are hereby expressly waived. Upon each such sale,
lease, assignment or other transfer of Collateral, the Secured Parties may,
unless prohibited by applicable law which cannot be waived, purchase all or any
part of the Collateral being sold, free from and discharged of all trusts,
claims, right of redemption and equities of any Debtor, which are hereby waived
and released.
(iv) The Secured Parties shall have the right (but not the obligation)
to notify any account debtors and any obligors under instruments or accounts to
make payments directly to the Secured Parties and to enforce the Debtors' rights
against such account debtors and obligors.
(v) The Secured Parties may (but are not obligated to) direct any
financial intermediary or any other person or entity holding any investment
property to transfer the same to the Secured Parties or their designee.
(vi) The Secured Parties may (but are not obligated to) transfer any or
all Intellectual Property registered in the name of any Debtor at the United
States Patent and Trademark Office and/or Copyright Office into the name of the
Secured Parties or any designee or any purchaser of any Collateral.
(b) The Agent may comply with any applicable law in connection with a
disposition of Collateral and such compliance will not be considered adversely
to affect the commercial reasonableness of any sale of the Collateral. The
Agent may sell the Collateral without giving any warranties and may specifically
disclaim such warranties. If the Agent sells any of the Collateral on credit,
the Debtors will only be credited with payments actually made by the purchaser.
In addition, each Debtor waives any and all rights that it may have to a
judicial hearing in advance of the enforcement of any of the Agent's rights and
remedies hereunder, including, without limitation, its right following an Event
of Default to take immediate possession of the Collateral and to exercise its
rights and remedies with respect thereto.
(c) For the purpose of enabling the Agent to further exercise rights
and remedies under this Section 8 or elsewhere provided by agreement or
applicable law, each Debtor hereby grants to the Agent, for the benefit of the
Agent and the Secured Parties, an irrevocable, nonexclusive license (exercisable
without payment of royalty or other compensation to such Debtor) to use, license
or sublicense following an Event of Default, any Intellectual Property now owned
or hereafter acquired by such Debtor, and wherever the same may be located, and
including in such license access to all media in which any of the licensed items
may be recorded or stored and to all computer software and programs used for the
compilation or printout thereof.
9. APPLICATIONS OF PROCEEDS. The proceeds of any such sale,
lease or other disposition of the Collateral hereunder shall be applied first,
to the expenses of retaking, holding, storing, processing and preparing for
sale, selling, and the like (including, without limitation, any taxes, fees and
other costs incurred in connection therewith) of the Collateral, to the
reasonable attorneys' fees and expenses incurred by the Secured Parties in
enforcing their rights hereunder and in connection with collecting, storing and
disposing of the Collateral, and then to satisfaction of the Obligations pro
rata among the Secured Parties (based on then-outstanding principal amounts of
Debentures at the time of any such determination), and to the payment of any
other amounts required by applicable law, after which the Secured Parties shall
pay to the applicable Debtor any surplus proceeds. If, upon the sale, license or
other disposition of the Collateral, the proceeds thereof are insufficient to
pay all amounts to which the Secured Parties are legally entitled, the Debtors
will be liable for the deficiency, together with interest thereon, at the rate
of 10% per annum or the lesser amount permitted by applicable law (the "Default
Rate"), and the reasonable fees of any attorneys employed by the Secured Parties
to collect such deficiency. To the extent permitted by applicable law, each
Debtor waives all claims, damages and demands against the Secured Parties
arising out of the repossession, removal, retention or sale of the Collateral,
unless due solely to the gross negligence or willful misconduct of the Secured
Parties as determined by a final judgment (not subject to further appeal) of a
court of competent jurisdiction.
10. SECURITIES LAW PROVISION. Each Debtor recognizes that Agent may be
limited in its ability to effect a sale to the public of all or part of the
Pledged Securities by reason of certain prohibitions in the Securities Act of
1933, as amended, or other federal or state securities laws (collectively, the
"Securities Laws"), and may be compelled to resort to one or more sales to a
restricted group of purchasers who may be required to agree to acquire the
Pledged Securities for their own account, for investment and not with a view to
the distribution or resale thereof. Each Debtor agrees that sales so made may
be at prices and on terms less favorable than if the Pledged Securities were
sold to the public, and that Agent has no obligation to delay the sale of any
Pledged Securities for the period of time necessary to register the Pledged
Securities for sale to the public under the Securities Laws. Each Debtor shall
cooperate with Agent in its attempt to satisfy any requirements under the
Securities Laws (including, without limitation, registration thereunder if
requested by Agent) applicable to the sale of the Pledged Securities by Agent.
11. COSTS AND EXPENSES. Each Debtor agrees to pay all reasonable
out-of-pocket fees, costs and expenses incurred in connection with any filing
required hereunder, including without limitation, any financing statements
pursuant to the UCC, continuation statements, partial releases and/or
termination statements related thereto or any expenses of any searches
reasonably required by the Secured Parties. The Debtors shall also pay all
other claims and charges which in the reasonable opinion of the Secured Parties
might prejudice, imperil or otherwise affect the Collateral or the Security
Interest therein. The Debtors will also, upon demand, pay to the Secured
Parties the amount of any and all reasonable expenses, including the reasonable
fees and expenses of its counsel and of any experts and agents, which the
Secured Parties may incur in connection with (i) the enforcement of this
Agreement, (ii) the custody or preservation of, or the sale of, collection from,
or other realization upon, any of the Collateral, or (iii) the exercise or
enforcement of any of the rights of the Secured Parties under the Debentures.
Until so paid, any fees payable hereunder shall be added to the principal amount
of the Debentures and shall bear interest at the Default Rate.
12. RESPONSIBILITY FOR COLLATERAL. The Debtors assume all
liabilities and responsibility in connection with all Collateral, and the
Obligations shall in no way be affected or diminished by reason of the loss,
destruction, damage or theft of any of the Collateral or its unavailability for
any reason. Without limiting the generality of the foregoing, (a) neither the
Agent nor any Secured Party (i) has any duty (either before or after an Event of
Default) to collect any amounts in respect of the Collateral or to preserve any
rights relating to the Collateral, or (ii) has any obligation to clean-up or
otherwise prepare the Collateral for sale, and (b) each Debtor shall remain
obligated and liable under each contract or agreement included in the Collateral
to be observed or performed by such Debtor thereunder. Neither the Agent nor
any Secured Party shall have any obligation or liability under any such contract
or agreement by reason of or arising out of this Agreement or the receipt by the
Agent or any Secured Party of any payment relating to any of the Collateral, nor
shall the Agent or any Secured Party be obligated in any manner to perform any
of the obligations of any Debtor under or pursuant to any such contract or
agreement, to make inquiry as to the nature or sufficiency of any payment
received by the Agent or any Secured Party in respect of the Collateral or as to
the sufficiency of any performance by any party under any such contract or
agreement, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to the Agent or to which the Agent or any Secured Party may be entitled
at any time or times.
13. SECURITY INTEREST ABSOLUTE. All rights of the Secured Parties and
all obligations of the Debtors hereunder, shall be absolute and unconditional,
irrespective of: (a) any lack of validity or enforceability of this Agreement,
the Debentures or any agreement entered into in connection with the foregoing,
or any portion hereof or thereof; (b) any change in the time, manner or place of
payment or performance of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to any departure
from the Debentures or any other agreement entered into in connection with the
foregoing; (c) any exchange, release or nonperfection of any of the Collateral,
or any release or amendment or waiver of or consent to departure from any other
collateral for, or any guaranty, or any other security, for all or any of the
Obligations; (d) any action by the Secured Parties to obtain, adjust, settle and
cancel in its sole discretion any insurance claims or matters made or arising in
connection with the Collateral; or (e) any other circumstance which might
otherwise constitute any legal or equitable defense available to a Debtor, or a
discharge of all or any part of the Security Interest granted hereby. Until the
Obligations shall have been paid and performed in full, the rights of the
Secured Parties shall continue even if the Obligations are barred for any
reason, including, without limitation, the running of the statute of limitations
or bankruptcy. Each Debtor expressly waives presentment, protest, notice of
protest, demand, notice of nonpayment and demand for performance. In the event
that at any time any transfer of any Collateral or any payment received by the
Secured Parties hereunder shall be deemed by final order of a court of competent
jurisdiction to have been a voidable preference or fraudulent conveyance under
the bankruptcy or insolvency laws of the United States, or shall be deemed to be
otherwise due to any party other than the Secured Parties, then, in any such
event, each Debtor's obligations hereunder shall survive cancellation of this
Agreement, and shall not be discharged or satisfied by any prior payment thereof
and/or cancellation of this Agreement, but shall remain a valid and binding
obligation enforceable in accordance with the terms and provisions hereof. Each
Debtor waives all right to require the Secured Parties to proceed against any
other person or entity orto apply any Collateral which the Secured Parties may
hold at any time, or to marshal assets, or to pursue any other remedy. Each
Debtor waives any defense arising by reason of the application of the statute of
limitations to any obligation secured hereby.
14. TERM OF AGREEMENT. This Agreement and the Security Interest
shall terminate on the date on which all payments under the Debentures have been
indefeasibly paid in full and all other Obligations have been paid or
discharged; provided, however, that all indemnities of the Debtors contained in
this Agreement (including, without limitation, Annex B hereto) shall survive and
remain operative and in full force and effect regardless of the termination of
this Agreement.
15. POWER OF ATTORNEY; FURTHER ASSURANCES.
(a) Each Debtor authorizes the Secured Parties, and does hereby make,
constitute and appoint the Secured Parties and their respective officers,
agents, successors or assigns with full power of substitution, as such Debtor's
true and lawful attorney-in-fact, with power, in the name of the various Secured
Parties or such Debtor, to, after the occurrence and during the continuance of
an Event of Default, (i) endorse any note, checks, drafts, money orders or other
instruments of payment (including payments payable under or in respect of any
policy of insurance) in respect of the Collateral that may come into possession
of the Secured Parties; (ii) to sign and endorse any financing statement
pursuant to the UCC or any invoice, freight or express xxxx, xxxx of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts, and other documents
relating to the Collateral; (iii) to pay or discharge taxes, liens, security
interests or other encumbrances at any time levied or placed on or threatened
against the Collateral; (iv) to demand, collect, receipt for, compromise, settle
and xxx for monies due in respect of the Collateral; (v) to transfer any
Intellectual Property or provide licenses respecting any Intellectual Property;
and (vi) generally, at the option of the Secured Parties, and at the expense of
the Debtors, at any time, or from time to time, to execute and deliver any and
all documents and instruments and to do all acts and things which the Secured
Parties deem necessary to protect, preserve and realize upon the Collateral and
the Security Interest granted therein in order to effect the intent of this
Agreement and the Debentures all as fully and effectually as the Debtors might
or could do; and each Debtor hereby ratifies all that said attorney shall
lawfully do or cause to be done by virtue hereof. This power of attorney is
coupled with an interest and shall be irrevocable for the term of this Agreement
and thereafter as long as any of the Obligations shall be outstanding. The
designation set forth herein shall be deemed to amend and supersede any
inconsistent provision in the Organizational Documents or other documents or
agreements to which any Debtor is subject or to which any Debtor is a
party.Without limiting the generality of the foregoing, after the occurrence and
during the continuance of an Event of Default, each Secured Party is
specifically authorized to execute and file any applications for or instruments
of transfer and assignment of any patents, trademarks, copyrights or other
Intellectual Property with the United States Patent and Trademark Office and the
United States Copyright Office.
(b) On a continuing basis, each Debtor will make, execute, acknowledge,
deliver, file and record, as the case may be, with the proper filing and
recording agencies in any jurisdiction, including, without limitation, the
jurisdictions indicated on Schedule C attached hereto, all such instruments, and
take all such action as may reasonably be deemed necessary or advisable, or as
reasonably requested by the Secured Parties, to perfect the Security Interest
granted hereunder and otherwise to carry out the intent and purposes of this
Agreement, or for assuring and confirming to the Secured Parties the grant or
perfection of a perfected security interest in all the Collateral under the UCC.
(c) Each Debtor hereby irrevocably appoints the Secured Parties as such
Debtor's attorney-in-fact, with full authority in the place and instead of such
Debtor and in the name of such Debtor, from time to time in the Secured Parties'
discretion, to take any action and to execute any instrument which the Secured
Parties may deem necessary or advisable to accomplish the purposes of this
Agreement, including the filing, in its sole discretion, of one or more
financing or continuation statements and amendments thereto, relative to any of
the Collateral without the signature of such Debtor where permitted by law,
which financing statements may (but need not) describe the Collateral as "all
assets" or "all personal property" or words of like import, and ratifies all
such actions taken by the Secured Parties. This power of attorney is coupled
with an interest and shall be irrevocable for the term of this Agreement and
thereafter as long as any of the Obligations shall be outstanding.
16. NOTICES. All notices, requests, demands and other
communications hereunder shall be subject to the notice provision of the
Purchase Agreement (as such term is defined in the Debentures).
17. OTHER SECURITY. To the extent that the Obligations are now
or hereafter secured by property other than the Collateral or by the guarantee,
endorsement or property of any other person, firm, corporation or other entity,
then the Secured Parties shall have the right, in its sole discretion, to
pursue, relinquish, subordinate, modify or take any other action with respect
thereto, without in any way modifying or affecting any of the Secured Parties'
rights and remedies hereunder.
18. APPOINTMENT OF AGENT. The Secured Parties hereby appoint
Palisades Master Fund, LP to act as their agent ("Palisades" or "Agent") for
purposes of exercising any and all rights and remedies of the Secured Parties
hereunder. Such appointment shall continue until revoked in writing by a
Majority in Interest, at which time a Majority in Interest shall appoint
a new Agent; provided, that Palisades may not be removed. The Agent shall
have the rights, responsibilities and immunities set forth in Annex B
hereto.
19. MISCELLANEOUS.
(a) No course of dealing between the Debtors and the Secured Parties,
nor any failure to exercise, nor any delay in exercising, on the part of the
Secured Parties, any right, power or privilege hereunder or under the Debentures
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, power or privilege hereunder or thereunder preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
(b) All of the rights and remedies of the Secured Parties with respect
to the Collateral, whether established hereby or by the Debentures or by any
other agreements, instruments or documents or by law shall be cumulative and may
be exercised singly or concurrently.
(c) This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof and is intended to supersede all prior
negotiations, understandings and agreements with respect thereto. Except as
specifically set forth in this Agreement, no provision of this Agreement may be
modified or amended except by a written agreement specifically referring to this
Agreement and signed by the parties hereto.
(d) In the event any provision of this Agreement is held to be invalid,
prohibited or unenforceable in any jurisdiction for any reason, unless such
provision is narrowed by judicial construction, this Agreement shall, as to such
jurisdiction, be construed as if such invalid, prohibited or unenforceable
provision had been more narrowly drawn so as not to be invalid, prohibited or
unenforceable. If, notwithstanding the foregoing, any provision of this
Agreement is held to be invalid, prohibited or unenforceable in any
jurisdiction, such provision, as to such jurisdiction, shall be ineffective to
the extent of such invalidity, prohibition or unenforceability without
invalidating the remaining portion of such provision or the other provisions of
this Agreement and without affecting the validity or enforceability of such
provision or the other provisions of this Agreement in any other jurisdiction.
(e) No waiver of any breach or default or any right under this Agreement
shall be considered valid unless in writing and signed by the party giving such
waiver, and no such waiver shall be deemed a waiver of any subsequent breach or
default or right, whether of the same or similar nature or otherwise.
(f)This Agreement shall be binding upon and inure to the benefit of each
party hereto and its successors and assigns.
(g) Each party shall take such further action and execute and deliver such
further documents as may be necessary or appropriate in order to carry out the
provisions and purposes of this Agreement.
(h) All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof. Each Debtor agrees that all
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and the Debenture (whether brought
against a party hereto or its respective affiliates, directors, officers,
shareholders, partners, members, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of New York,
Borough of Manhattan. Each Debtor hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
Borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such proceeding is improper. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby. If any party shall
commence a proceeding to enforce any provisions of this Agreement, then the
prevailing party in such proceeding shall be reimbursed by the other party for
its reasonable attorney's fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such proceeding.
(i) This Agreement may be executed in any number of counterparts, each
of which when so executed shall be deemed to be an original and, all of which
taken together shall constitute one and the same Agreement. In the event that
any signature is delivered by facsimile transmission, such signature shall
create a valid binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.
(j) All Debtors shall jointly and severally be liable for the obligations
of each Debtor to the Secured Parties hereunder.
(k) Each Debtor shall indemnify, reimburse and hold harmless the Secured
Parties and their respective partners, members, shareholders, officers,
directors, employees and agents (collectively, "Indemnitees") from and against
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any and all losses, claims, liabilities, damages, penalties, suits, costs and
expenses, of any kind or nature, (including fees relating to the cost of
investigating and defending any of the foregoing) imposed on, incurred by or
asserted against such Indemnitee in any way related to or arising from or
alleged to arise from this Agreement or the Collateral, except any such losses,
claims, liabilities, damages, penalties, suits, costs and expenses which result
from the gross negligence or willful misconduct of the Indemnitee as determined
by a final, nonappealable decision of a court of competent jurisdiction. This
indemnification provision is in addition to, and not in limitation of, any other
indemnification provision in the Debentures, the Purchase Agreement (as such
term is defined in the Debentures) or any other agreement, instrument or other
document executed or delivered in connection herewith or therewith.
(l) Nothing in this Agreement shall be construed to subject Agent or any
Secured Party to liability as a partner in any Debtor or any if its direct or
indirect subsidiaries that is a partnership or as a member in any Debtor or any
of its direct or indirect subsidiaries that is a limited liability company, nor
shall Agent or any Secured Party be deemed to have assumed any obligations under
any partnership agreement or limited liability company agreement, as applicable,
of any such Debtor or any if its direct or indirect subsidiaries or otherwise,
unless and until any such Secured Party exercises its right to be substituted
for such Debtor as a partner or member, as applicable, pursuant hereto.
(m) To the extent that the grant of the security interest in the
Collateral and the enforcement of the terms hereof require the consent, approval
or action of any partner or member, as applicable, of any Debtor or any direct
or indirect subsidiary of any Debtor or compliance with any provisions of any of
the Organizational Documents, the Debtors hereby grant such consent and approval
and waive any such noncompliance with the terms of said documents.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed on the day and year first above written.
TRINITY LEARNING CORPORATION
By:/s/ Xxx Xxxxx
-------------
Name: Xxx Xxxxx
Title: Chief Financial Officer
TRINITY WORKPLACE LEARNING CORPORATION
By:/s/ Xxx Xxxxx
-------------
Name: Xxx Xxxxx
Title: Chief Financial Officer
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
[SIGNATURE PAGE OF HOLDERS TO TTYL SA]
Name of Investing Entity: __________________________
Signature of Authorized Signatory of Investing entity:
_________________________
Name of Authorized Signatory: _________________________
Title of Authorized Signatory: __________________________
ANNEX A
TO
SECURITY
AGREEMENT
FORM OF ADDITIONAL DEBTOR JOINDER
Security Agreement dated as of [_____ ___, 200__ made by
[_____________
and its subsidiaries party thereto from time to time, as Debtors
to and in favor of
the Secured Parties identified therein (the "Security Agreement")
------------------
Reference is made to the Security Agreement as defined above; capitalized
terms used herein and not otherwise defined herein shall have the meanings given
to such terms in, or by reference in, the Security Agreement.
The undersigned hereby agrees that upon delivery of this Additional Debtor
Joinder to the Secured Parties referred to above, the undersigned shall (a) be
an Additional Debtor under the Security Agreement, (b) have all the rights and
obligations of the Debtors under the Security Agreement as fully and to the same
extent as if the undersigned was an original signatory thereto and (c) be deemed
to have made the representations and warranties set forth in Section ___ therein
as of the date of execution and delivery of this Additional Debtor Joinder.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY
GRANTS TO THE SECURED PARTIES A SECURITY INTEREST IN THE COLLATERAL AS MORE
FULLY SET FORTH IN THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE
WAIVER OF JURY TRIAL PROVISIONS SET FORTH THEREIN.
Attached hereto are supplemental and/or replacement Schedules to the
Security Agreement, as applicable.
An executed copy of this Joinder shall be delivered to the Secured Parties,
and the Secured Parties may rely on the matters set forth herein on or after the
date hereof. This Joinder shall not be modified, amended or terminated without
the prior written consent of the Secured Parties.
IN WITNESS WHEREOF, the undersigned has caused this Joinder to be executed
in the name and on behalf of the undersigned.
[Name of Additional Debtor]
By:
Name:
Title:
Address:
Dated:
[ANNEX B
TO
SECURITY
AGREEMENT
THE AGENT
1. APPOINTMENT. The Secured Parties (all capitalized terms used herein
and not otherwise defined shall have the respective meanings provided in the
Security Agreement to which this Annex B is attached (the "Agreement")), by
---------
their acceptance of the benefits of the Agreement, hereby designate Palisades
Master Fund, LP ("Palisades" or "Agent") as the Agent to act as specified herein
-----
and in the Agreement. Each Secured Party shall be deemed irrevocably to
authorize the Agent to take such action on its behalf under the provisions of
the Agreement and any other Transaction Document (as such term is defined in the
Debentures) and to exercise such powers and to perform such duties hereunder and
thereunder as are specifically delegated to or required of the Agent by the
terms hereof and thereof and such other powers as are reasonably incidental
thereto. The Agent may perform any of its duties hereunder by or through its
agents or employees.
2. NATURE OF DUTIES. The Agent shall have no duties or responsibilities
except those expressly set forth in the Agreement. Neither the Agent nor any of
its partners, members, shareholders, officers, directors, employees or agents
shall be liable for any action taken or omitted by it as such under the
Agreement or hereunder or in connection herewith or therewith, be responsible
for the consequence of any oversight or error of judgment or answerable for any
loss, unless caused solely by its or their gross negligence or willful conduct
as determined by a final judgment (not subject to further appeal) of a court of
competent jurisdiction. The duties of the Agent shall be mechanical and
administrative in nature; the Agent shall not have by reason of the Agreement or
any other Transaction Document a fiduciary relationship in respect of any Debtor
or any Secured Party; and nothing in the Agreement or any other Transaction
Document, expressed or implied, is intended to or shall be so construed as to
impose upon the Agent any obligations in respect of the Agreement or any other
Transaction Document except as expressly set forth herein and therein.
3. LACK OF RELIANCE ON THE AGENT. Independently and without reliance upon
the Agent, each Secured Party, to the extent it deems appropriate, has made and
shall continue to make (i) its own independent investigation of the financial
condition and affairs of the Company and its subsidiaries in connection with
such Secured Party's investment in the Debtors, the creation and continuance of
the Obligations, the transactions contemplated by the Transaction Documents, and
the taking or not taking of any action in connection therewith, and (ii) its own
appraisal of the creditworthiness of the Company and its subsidiaries, and of
the value of the Collateral from time to time, and the Agent shall have no duty
or responsibility, either initially or on a continuing basis, to provide any
Secured Party with any credit, market or other information with respect thereto,
whether coming into its possession before any Obligations are incurred or at any
time or times thereafter. The Agent shall not be responsible to the Debtors or
any Secured Party for any recitals, statements, information, representations or
warranties herein or in any document, certificate or other writing delivered in
connection herewith, or for the execution, effectiveness, genuineness, validity,
enforceability, perfection, collectibility, priority or sufficiency of the
Agreement or any other Transaction Document, or for the financial condition of
the Debtors or the value of any of the Collateral, or be required to make any
inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of the Agreement or any other Transaction Document, or
the financial condition of the Debtors, or the value of any of the Collateral,
or the existence or possible existence of any default or Event of Default under
the Agreement, the Debentures or any of the other Transaction Documents.
4. CERTAIN RIGHTS OF THE AGENT. The Agent shall have the right to take any
action with respect to the Collateral, on behalf of all of the Secured Parties.
To the extent practical, the Agent shall request instructions from the Secured
Parties with respect to any material act or action (including failure to act) in
connection with the Agreement or any other Transaction Document, and shall be
entitled to act or refrain from acting in accordance with the instructions of
Secured Parties holding a majority in principal amount of Debentures (based on
then-outstanding principal amounts of Debentures at the time of any such
determination); if such instructions are not provided despite the Agent's
request therefor, the Agent shall be entitled to refrain from such act or taking
such action, and if such action is taken, shall be entitled to appropriate
indemnification from the Secured Parties in respect of actions to be taken by
the Agent; and the Agent shall not incur liability to any person or entity by
reason of so refraining. Without limiting the foregoing, (a) no Secured Party
shall have any right of action whatsoever against the Agent as a result of the
Agent acting or refraining from acting hereunder in accordance with the terms of
the Agreement or any other Transaction Document, and the Debtors shall have no
right to question or challenge the authority of, or the instructions given to,
the Agent pursuant to the foregoing and (b) the Agent shall not be required to
take any action which the Agent believes (i) could reasonably be expected to
expose it to personal liability or (ii) is contrary to this Agreement, the
Transaction Documents or applicable law.
5. RELIANCE. The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, radiogram, order
or other document or telephone message signed, sent or made by the proper person
or entity, and, with respect to all legal matters pertaining to the Agreement
and the other Transaction Documents and its duties thereunder, upon advice of
counsel selected by it and upon all other matters pertaining to this Agreement
and the other Transaction Documents and its duties thereunder, upon advice of
other experts selected by it.
6. INDEMNIFICATION. To the extent that the Agent is not reimbursed and
indemnified by the Debtors, the Secured Parties will jointly and severally
reimburse and indemnify the Agent, in proportion to their initially purchased
respective principal amounts of Debentures, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against the Agent in performing its duties
hereunder or under the Agreement or any other Transaction Document, or in any
way relating to or arising out of the Agreement or any other Transaction
Document except for those determined by a final judgment (not subject to further
appeal) of a court of competent jurisdiction to have resulted solely from the
Agent's own gross negligence or willful misconduct. Prior to taking any action
hereunder as Agent, the Agent may require each Secured Party to deposit with it
sufficient sums as it determines in good faith is necessary to protect the Agent
for costs and expenses associated with taking such action.
7. RESIGNATION BY THE AGENT.
(a) The Agent may resign from the performance of all its functions and
duties under the Agreement and the other Transaction Documents at any time by
giving 30 days' prior written notice (as provided in the Agreement) to the
Debtors and the Secured Parties. Such resignation shall take effect upon the
appointment of a successor Agent pursuant to clauses (b) and (c) below.
(b) Upon any such notice of resignation, the Secured Parties, acting by a
Majority in Interest, shall appoint a successor Agent hereunder.
(c) If a successor Agent shall not have been so appointed within said
30-day period, the Agent shall then appoint a successor Agent who shall serve as
Agent until such time, if any, as the Secured Parties appoint a successor Agent
as provided above. If a successor Agent has not been appointed within such
30-day period, the Agent may petition any court of competent jurisdiction or may
interplead the Debtors and the Secured Parties in a proceeding for the
appointment of a successor Agent, and all fees, including, but not limited to,
extraordinary fees associated with the filing of interpleader and expenses
associated therewith, shall be payable by the Debtors on demand.
8. RIGHTS WITH RESPECT TO COLLATERAL. Each Secured Party agrees with all
other Secured Parties and the Agent (i) that it shall not, and shall not attempt
to, exercise any rights with respect to its security interest in the Collateral,
whether pursuant to any other agreement or otherwise (other than pursuant to
this Agreement), or take or institute any action against the Agent or any of the
other Secured Parties in respect of the Collateral or its rights hereunder
(other than any such action arising from the breach of this Agreement) and (ii)
that such Secured Party has no other rights with respect to the Collateral other
than as set forth in this Agreement and the other Transaction Documents.
