Exhibit 2(f)
CONDITIONAL ASSIGNMENT
AND
SECURITY AGREEMENT
CONDITIONAL ASSIGNMENT AND SECURITY AGREEMENT dated as of
the 6th day of July, 2000 made by Electronic Retailing Systems
International, Inc., a Delaware corporation (hereinafter
referred to as the "Parent"), and Electronic Retailing Systems
International, Inc., a Connecticut corporation and wholly-owned
subsidiary of the Parent (collectively, with each additional
subsidiary of the Parent becoming a party hereto in the manner
hereinafter set forth, hereinafter referred to as the
"Subsidiary Grantor" and, together with the Parent, hereinafter
referred to as the "Grantors"), in favor of United States Trust
Company of New York, as agent (hereinafter referred to as the
"Collateral Agent") for each of the Secured Parties hereinafter
identified.
W I T N E S S E T H:
WHEREAS, the Secured Parties have, respectively, acquired or
hold the Parent's 10% Promissory Notes in the original aggregate
principal amount of approximately $5,000,000 (together with all
further promissory notes subsequently issued pursuant thereto on
account of interest thereunder, and any additional notes executed
and delivered by the Parent in exchange or replacement of such
notes, hereinafter referred to as the "10% Notes"), and the
Parent's 8% Promissory Notes in the original aggregate principal
amount of approximately $5,000,000 (together with all further
promissory notes subsequently issued pursuant thereto on account
of interest thereunder, and any additional notes executed and
delivered by the Parent in exchange or replacement of such notes,
hereinafter referred to as the "8% Notes");
WHEREAS, the Subsidiary Grantor has entered into a Guaranty
Agreement (as may be modified, amended, supplemented and/or
restated from time to time, hereinafter referred to as the
"Guaranty Agreement") with respect to the 10% Notes and the 8%
Notes (hereinafter referred to as the "Notes"); and
WHEREAS, each of the Grantors, by appropriate corporate
action, has determined to create a security interest as
hereinafter set forth to induce the Secured Parties to acquire
the Notes and to secure to the Secured Parties the repayment of
all indebtedness of the Parent to the Secured Parties arising
thereunder, and all obligations of the Subsidiary Guarantor
under the Guaranty Agreement.
NOW THEREFORE, in consideration of the mutual covenants
contained herein, each of the Grantors hereby agrees with the
Collateral Agent, for the ratable benefit of the Secured
Parties, as follows:
SECTION I
DEFINITIONS
For purposes of this Agreement, capitalized terms utilized
herein and not otherwise defined herein shall have the respective
meanings assigned and ascribed thereto under the Uniform
Commercial Code (as hereinafter defined); and the following terms
shall have the respective meanings assigned and ascribed to them
under this Section I:
(i) The term "Accounts" shall mean any new existing and
future accounts (including all bank accounts, collection accounts
and concentration accounts, together with all funds or other
property held therein) and accounts receivable of the Grantors,
respectively, whether or not arising out of or in connection with
the sale or lease of goods or the rendering of services, and all
rights of the Grantors now or hereafter existing in and to all
security agreements, guaranties, leases and other contracts
securing or otherwise relating to any such accounts or accounts
receivable.
(ii) The term "Collateral" shall mean the Grantors'
respective right, title and interest in and to all of their
respective personal property and assets, including, without
limitation, all Accounts, Chattel Paper, Equipment, General
Intangibles, Goods, Instruments, Intellectual Property Collateral,
Inventory and all other property and rights of the Grantors, or
either of them, in which a security interest may be granted or
perfected in accordance with the Uniform Commercial Code,
including, without limitation, any shares of capital stock or
other ownership interests in any Subsidiary of either Grantor,
together with all products, offspring, rents, issues, profits,
returns, income and proceeds of and from any and all of the
foregoing Collateral (including all payments under insurance or
any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing
Collateral); excluding, however: (x) the NewCheck Securities and
(y) any shares of capital stock or other ownership interests in
any Subsidiary of either Grantor organized under the laws of any
jurisdiction outside of the United States to the extent
representing in excess of 65% of the total combined voting power
of all classes of capital stock or other ownership interests
therein entitled to vote in the election of directors, managers or
trustees thereof (but including any profits, income or proceeds
from any securities or other interests described under clauses (x)
or (y) preceding paid to the Grantors, or either of them, in cash
or other property [except for other NewCheck Securities or other
securities or ownership interests in such foreign Subsidiary]).
(iii) The term "Collateral Agent" shall have the meaning
assigned and ascribed to such term in the preamble of this
Agreement.
(iv) The term "Collateral Event of Default" shall mean: (i)
the existence of an Event of Default under the Notes, or any of
them (unless waived in accordance with the terms thereof); (ii)
the inaccuracy in any material respect when made of any
representation or warranty contained in Section 2.2 hereunder; or
(iii) any default in the performance or observance of any of the
covenants or agreements of the Grantors contained in this
Agreement (including, without limitation, the failure to perfect,
preserve and protect any security interest hereunder in the manner
provided by this Agreement), and the continuation of such default
without cure beyond a period of 30 days after the earlier of: (x)
written notice thereof by the Collateral Agent to the Grantor or
(y) actual knowledge obtained by a Responsible Officer of such
default, unless in each case under clauses (x) or (y) of this
clause (iv) such default is not reasonably susceptible to cure
during such period, in which event a Collateral Event of Default
shall be deemed not to have occurred unless the Grantors have not
commenced such cure within such 30-day period or thereafter fail
to continue diligently to pursue such cure.
(v) The term "Computer Hardware and Software Collateral"
shall mean:
(a) all computer and other electronic data processing
hardware, integrated computer systems, central processing
units, memory units, display terminals, printers, features,
computer elements, card readers, tape drivers, hard and soft
disk drives, cables, electrical supply hardware, generators,
power equalizers, accessories and all peripheral devices and
other related computer hardware of the Grantors,
respectively;
(b) all software programs (including both source code,
object code and all related applications and data files), of
the Grantors, respectively, designed for use on the computers
and electronic data processing hardware described in clause
(a) immediately preceding;
(c) all licenses and leases of software programs held
by the Grantors, respectively;
(d) all firmware associated therewith;
(e) all documentation (including flow charts, logic
diagrams, manuals, guides and specifications) with respect to
such hardware, software and firmware described in the
immediately preceding clauses (a) through (c); and
(f) all rights of the Grantors, respectively, in
connection with all of the foregoing, including any and all
copyrights, licenses, options, warranties, service contracts,
program services, test rights, maintenance rights, support
rights, improvement rights, renewal rights and
indemnifications and any substitutions, replacements,
additions or model conversions of any of the foregoing.
(vi) The term "Copyright Collateral" shall mean all
copyrights of the Grantors, respectively, whether statutory or
common law, registered or unregistered, now or hereafter in force
throughout the world including all of the Grantors' respective
right, title and interest in and to all copyrights registered in
the United States Copyright Office or anywhere else in the world,
and all applications for registration thereof whether pending or
in preparation, all copyright licenses, the right to xxx for past,
present and future infringement of any thereof, all rights
corresponding thereto throughout the world, all extensions and
renewals of any thereof and all proceeds of the foregoing,
including licenses, royalties, income, payments, claims, damages
and proceeds of suit.
(vii) The term "8% Notes" shall have the meaning assigned and
ascribed to such term in the preamble of this Agreement.
(viii) The term "Equipment" shall mean all equipment of
the Grantors, respectively, in all of its forms, wherever located,
including all machinery, components, parts and accessories
installed thereon or affixed thereto and all parts thereof, all
Fixtures and all accessions, additions, attachments, improvements,
substitutions and replacements thereto and therefor.
(ix) The term "Fixtures" shall mean all items of Equipment of
the Grantors, respectively, that become so related to particular
real estate that an interest in them arises under any real estate
law applicable thereto.
(x) The term "Grantors" shall have the meaning assigned and
ascribed to such term in the preamble of this Agreement.
(xi) The term "Guaranty Agreement" shall have the meaning
assigned and ascribed to such term in the preamble of this
Agreement.
(xii) The term "Indebtedness" shall mean the Parent's
obligations under the Notes.
(xiii) The term "Intellectual Property Collateral" shall
mean, collectively, the Computer Hardware and Software Collateral,
the Copyright Collateral, the Patent Collateral, the Trademark
Collateral and the Trade Secrets Collateral.
(xiv) The term "Inventory" shall mean all inventory of the
Grantors, respectively, in all of its forms, wherever located,
including:
(a) all merchandise, goods and other personal property
which are held for sale or lease, all raw materials and work
in process therefor, finished goods thereof, and materials
used or consumed in the manufacture or production thereof;
(b) all goods in which the Grantors have an interest in
mass or a joint or other interest or right of any kind
(including goods in which the Grantors have an interest or
right as consignee); and
(c) all goods which are returned to or repossessed by
the Grantors.
(xv) The term "NewCheck" shall mean NewCheck Corporation, a
Delaware corporation d/b/a Productivity Solutions, Inc. and any
successor thereto.
(xvi) The term "NewCheck Securities" shall mean any and all
securities issued by NewCheck, including, without limitation, any
and all shares of NewCheck's Series C Convertible Preferred Stock,
$.0001 par value, NewCheck's 8% Convertible Note due 2005 and
NewCheck's warrants (the "NewCheck Warrants") with respect to its
common stock, $.0001 par value, and any contractual rights in
connection therewith.
(xvii) The term "New Securities" shall mean the Notes and
the shares of Series A-1 Preferred Stock, $1.00 par value, of the
Parent issued contemporaneously with the initial Notes.
(xviii) The term "Notes" shall have the meaning assigned
and ascribed to such term in the preamble of this Agreement.
(xix) The term "Old Notes" shall mean the Parent's 13-
1/4% Senior Discount Notes due 2004 exchanged for the New
Securities.
(xx) The term "Parent" shall have the meaning assigned and
ascribed to such term in the preamble of this Agreement.
(xxi) The term "Patent Collateral" shall mean:
(a) all letters patent and applications for letters
patent throughout the world of the Grantors, respectively,
including all patent applications in preparation for filing
anywhere in the world;
(b) all patent licenses held by the Grantors,
respectively;
(c) all reissues, divisions, continuations,
continuations-in-part, extensions, renewals and re-
examinations of any of the items described in clauses (a) and
(b) immediately preceding; and
(d) all proceeds of, and rights associated with, the
foregoing (including license royalties and proceeds of
infringement suits), the right to xxx third parties for past,
present or future infringements of any patent or patent
application, and for breach or enforcement of any patent
license, and all rights corresponding thereto throughout the
world.
(xxii) The term "Person" shall mean an individual, a
corporation, a partnership, limited liability company, a trust, an
unincorporated organization and a government or any department,
agency or political subdivision thereof.
(xxiii) The term "Required Holders" shall mean those Secured
Parties representing: (x) the Required Holders (as defined under
the 10% Notes) or (y) the Required Holders (as defined under the
8% Notes).
(xxiv) The term "Responsible Officer" shall mean the chief
executive officer, the chief operating officer or the chief
operating officer of either of the Grantors.
(xxv) The term "Secured Parties" shall mean the registered
holders of the Notes from time to time.
(xxvi) The term "Subsidiary" shall mean, in respect of
either Grantor, any corporation, association, partnership, limited
liability company, or other business entity of which more than 50%
of the total voting power of its voting stock or other interests
(including partnership interests) entitled (without regard to the
occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by (i) such Grantor, (ii) such
Grantor and one or more Subsidiaries of such Grantor, or (iii) one
or more Subsidiaries of such Grantor, excluding, in each case,
dormant entities; and provided however, that in no event shall
NewCheck or any entity owned or controlled by NewCheck be deemed a
Subsidiary of either Grantor or any Subsidiary of either Grantor.
(xxvi) The Term "Subsidiary Grantor" shall have the
meaning assigned and ascribed to such term in the preamble of this
Agreement.
(xxvii) The term "Super-Required Holders" shall mean those
Secured Parties representing: (x) the Required Holders (as defined
under the 10% Notes) and (y) the Required Holders (as defined
under the 8% Notes).
(xxviii) The term "10% Notes" shall have the meaning assigned
and ascribed to such term in the preamble of this Agreement.
(xxix) The term "Trademark Collateral" means:
(a) all trademarks, trade names, corporate names,
company names, business names, fictitious business names,
trade styles, service marks, certificating marks, collective
marks, logos, other source of business identifiers, prints
and labels on which any of the foregoing have appeared or
appear and designs of a like nature (all of the foregoing
items in this clause (a) being collectively called a
"Trademark") of the Grantors, respectively, anywhere in the
world, whether currently in use or not, all registrations and
recordings thereof and all applications in connection
therewith (other than "intent to use" applications until a
verified statement of use is filed with respect to such
applications), whether pending or in preparation for filing,
including registrations, recordings and applications in the
United States Patent and Trademark Office or in any office or
agency of the United States of America or any State thereof
or any foreign country;
(b) all Trademark licenses held by the Grantors,
respectively;
(c) all reissues, extensions or renewals of any of the
items described in clauses (a) and (b) immediately preceding;
(d) all of the goodwill of the business connected with
the use of, and symbolized by the items described in clauses
(a) and (b) immediately preceding; and
(e) all proceeds of, and rights associated with, the
foregoing, including any claim against third parties for
past, present or future infringement or dilution of any
Trademark, Trademark registration or Trademark license, or
for any injury to the good will associated with the use of
any such Trademark or for breach of enforcement of any
Trademark license.
(xxx) The term "Trade Secrets Collateral" shall mean common
law and statutory trade secrets and all other confidential or
proprietary information and all know-how obtained by or used in or
contemplated at any time for use in the ordinary course of
business (all of the foregoing being collectively called a "Trade
Secret") of the Grantors, respectively, whether or not such Trade
Secret has been reduced to a writing or other tangible form,
including all documents and things embodying, incorporating or
referring in any way to such Trade Secret, all Trade Secret
licenses held by the Grantor's, respectively, and including the
right to xxx for and to enjoin and to collect damages for the
actual or threatened misappropriation of any such Trade Secret and
for the breach or enforcement of any such Trade Secret license.
(xxxi) The term "Uniform Commercial Code" shall mean the
Uniform Commercial Code as from time to time in effect in the
State of New York or, with respect to any Collateral located in
any state or jurisdiction other than the State of New York, the
Uniform Commercial Code as from time to time in effect in such
state or jurisdiction.
SECTION II
SECURITY
2.1 Grant of Security. To secure the prompt payment when
due of the Indebtedness, and the performance and observance by
the Parent of its other covenants, obligations and conditions
under the Notes, and the performance and observance by the
Subsidiary Guarantor of its covenants, obligations and
conditions under the Guaranty Agreement, in each case until the
satisfaction or discharge of the Notes, the Grantors hereby
assign and pledge to the Collateral Agent for its benefit and
the ratable benefit of each of the Secured Parties, and grant to
the Collateral Agent for its benefit and the ratable benefit of
each of the Secured Parties, a continuing first priority
security interest in all of the Grantors' respective right,
title and interest in and to the Collateral. Such security
interest shall be perfected in accordance with the provisions of
this Agreement. Notwithstanding the foregoing, such grant of
security interest shall not extend to, and the term "Collateral"
shall not include: (x) any asset or property not assignable or
capable of being encumbered as a matter of law or pursuant to
the terms on which the Grantors, or either of them, holds, owns
or uses such asset or property; or (y) any compensating balances
(which may include cash, cash equivalents, money-market
securities and other highly-liquid securities) maintained with
financial institutions to secure letters of credit, in all cases
issued in the ordinary course of business of a Grantor.
2.2 Certain Warranties. Each of the Grantors covenants
and warrants that the Grantors, respectively, are the owners of
the Collateral, and will be the owners of the Collateral to be
acquired after the date hereof, free from any lien, security
interest or encumbrance, except as permitted herein or by the
Notes. The Grantors further represent and warrant that: (a) each
has full power and authority to enter into this Agreement and
(in the case of the Parent) to issue the New Securities to be
issued in exchange for the Old Notes and (in the case of the
Subsidiary Guarantor) to enter into the Guaranty Agreement, and
that the issuance of the New Securities by the Parent and its
execution and delivery of this Agreement, and the execution and
delivery by the Subsidiary Guarantor of this Agreement and the
Guaranty Agreement, have been duly authorized by all necessary
corporate action; (b) the New Securities and this Agreement
constitute the valid and legally enforceable obligations of the
Parent, and this Agreement and the Guaranty Agreement constitute
the valid and legally enforceable obligations of the Subsidiary
Guarantor, enforceable against them, respectively, in accordance
with the terms thereof, except as may be limited by bankruptcy,
insolvency or other laws affecting generally the enforceability
of creditors' rights and by limitations on the availability of
equitable remedies; (c) none of the issuance of the New
Securities by the Parent nor its execution and delivery of this
Agreement, nor the execution and delivery of this Agreement or
the Guaranty Agreement by the Subsidiary Guarantor, violates any
provision of the certificate of incorporation or by-laws of the
Grantors, or either of them, or any law, rule, regulation, writ,
judgment, injunction, decree, determination, award or other
order of any court, government or governmental agency, binding
upon the Grantors, or either of them, or conflict with or result
in the breach of any contract or agreement to which the
Grantors, or either of them is a party; (d) the chief executive
offices and principal place of business of each of the Grantors
are located at 000 Xxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxxx, the sole
additional places of business of each of the Grantors (other
than where Collateral is leased or rented to customers in the
ordinary course of business) are at 000 Xxxxxx Xxxx Xxxx,
Xxxxxxxxxx, Xxxxxxxxxxxxx and 0 Xxx Xxxx, Xxxxxxxxxxx,
Xxxxxxxxxxx, and all of the Collateral consisting of Inventory
and Equipment (other than as leased or rented to customers in
the ordinary course of business and other than items without
material value) is held at such locations and at such other
locations as may be identified on Schedule 1 to this Agreement;
and (e) this Agreement creates a valid first priority security
interest in all Collateral in which a security interest may be
perfected under the Uniform Commercial Code (other than items
not material in value), and all filings and other actions
necessary to perfect such security interest in such Collateral
have been duly taken (including, without limitation, the filing
of appropriate financing statements describing the Collateral in
the State of Connecticut and the Common-wealth of Massachusetts
and appropriate filings with the U.S. Patent and Trademark
Office).
2.3 Certain Covenants. To protect the security afforded by
this Agreement, each of the Grantors agrees as follows:
(a) The Grantors will faithfully abide by, perform
and discharge each and every obligation, covenant, condition,
duty and agreement to be performed by the Grantors so as to
prevent the material impairment of the Collateral, taken as a
whole;
(b) The Grantors will not sell, exchange, assign,
loan, deliver, lease, mortgage, pledge, encumber or otherwise
dispose of any Collateral, except that (unless a Collateral
Event of Default has occurred and is continuing) the Grantors,
and either of them, shall have the right to sell, exchange,
assign, loan, deliver, lease, mortgage, pledge, encumber or
otherwise dispose of any Collateral (free of the lien
hereunder): (x) in the ordinary course of the Grantors'
respective businesses or (y) in a transaction which, taken as a
whole, shall be beneficial to the Grantors, as determined in
good faith by the Parent's board of directors taking into
account the interests of the Collateral Agent and the Secured
Parties hereunder and under the Notes, or as otherwise permitted
under the Notes. Notwithstanding the foregoing, the Grantors
will not sell, exchange, assign, loan, deliver, lease, mortgage,
pledge, encumber or otherwise dispose of any NewCheck
Securities, except that (unless a Collateral Event of Default
has occurred or is continuing) the Grantors, and either of them,
shall have the right, in accordance with the immediately
preceding sentence, to sell, exchange, assign, loan, deliver,
lease, mortgage, pledge or encumber or otherwise dispose of any
and all NewCheck Warrants to any employees, consultants or
officers of the Grantors, or either of them. Without limiting
the generality of the foregoing, no provision contained in this
Agreement shall be construed as interfering at any time with the
continued use of any Intellectual Property Collateral licensed
by the Grantors in accordance with the immediately preceding
sentence.
(c) At the Grantors' sole cost and expense, the
Grantors will appear in and defend or, in their discretion,
compromise or settle, if such compromise or settlement shall,
taken as a whole, be beneficial to the Grantors, any action or
proceeding arising under, growing out of or in any manner
connected with the Collateral.
(d) The Grantors shall, at their expense, maintain
the Collateral in a good condition and state of repair in all
material respects; and will pay and discharge when due all
taxes, liens and other impositions thereupon, as well as the
cost of repairs to, and maintenance of, the same, so as not
materially to impair the value thereof or the security interest
granted by this Agreement.
(e) The Grantors warrant that they will not change
their respective chief executive offices or principal places of
business nor acquire any additional place of business without
giving the Collateral Agent at least 30 days' prior written
notice thereof and taking such steps as are reasonably
appropriate or are required hereunder to perfect the first
priority security interest granted hereunder (other than with
respect to items not material in value).
(f) The Grantors shall carry such insurance upon the
Collateral as is required by the Notes.
(g) The Grantors will take all reasonably necessary
steps, including in any proceeding before the United States
Patent and Trademark Office or any similar office or agency in
any other country or any political subdivision thereof, to
maintain and pursue any application (and to obtain the relevant
registration) filed with respect to, and to maintain any
registration of, all of the Patent Collateral and the Trademarks
Collateral, including the filing of all applications for
renewal, affidavits of use, affidavits of incontestability and
opposition, interference and cancellation proceedings, in each
event if the Grantors determine that such registration would
reasonably be granted and if such registration would result in
significant commercial benefit to the Grantors.
(h) The Collateral Agent shall, upon reasonable prior
notice during customary business hours, have access to and the
right of inspection of any part or all of the Collateral and the
records of the Grantors with respect thereto (and the right to
make extracts from such records).
(i) Should either of the Grantors fail to make any
payment, do any act or refrain from any act which this Agreement
requires the Grantors to make, do or refrain from, respectively,
then the Collateral Agent may, upon prior written notice to the
Grantors, but shall have no obligation to (and shall not thereby
release the Grantors from any obligation hereunder), make, do or
prevent the same, respectively, in such manner and to such
extent as the Collateral Agent may deem necessary or advisable
to protect the security provided hereby, which rights of the
Collateral Agent shall specifically include, without limiting
the Collateral Agent's general powers herein granted, the right
to appear in and defend any action or proceeding purporting to
affect the security hereof and the rights or powers of the
Collateral Agent hereunder (or any of them), and also the right
to perform and discharge each and every one, or any one or more,
of the obligations, covenants, conditions, duties and agreements
of each of the Grantors concerning the Collateral; and in
exercising any such powers, the Collateral Agent may pay
necessary or advisable costs and expenses, employ counsel and
incur and pay reasonable attorneys' fees, and the Grantors will
reimburse the Collateral Agent for such reasonable costs,
expenses and fees.
2.4 Filings. The Grantors will, from time to time and at
the Grantors' expense, do and perform any other act or acts and
will execute, acknowledge, deliver, file, register, record and
deposit (and will refile, reregister, rerecord and redeposit
whenever required) any and all further instruments required by
law and reasonably requested by the Collateral Agent in order to
confirm, or further assure, the first priority perfected
security interest of the Collateral Agent for its benefit and
the ratable benefit of each of the Secured Parties hereunder,
including, but not limited to, filings on Uniform Commercial
Code forms and including filings with the United States Patent
and Trademark Office and the United States Copyright Office. The
Collateral Agent shall from time to time at the request of the
Grantors execute, acknowledge, deliver, file, register, record
and deposit such documentation, and perform such other act or
acts reasonably requested by the Grantors (including, without
limitation, the return of Collateral) in order to evidence the
release of the security interest hereunder in whole or in part,
once the Collateral Agent or the Secured Parties have
relinquished the security interest hereunder in particular
Collateral, and, in whole, upon the satisfaction or discharge of
the Notes.
2.5 Power of Attorney. The Grantors do hereby make,
constitute and appoint, with effect from and after a Collateral
Event of Default, the Collateral Agent and any officer or agent
of the Collateral Agent as the Grantors' true and lawful
attorney-in-fact, with power to endorse the name of the Grantors
upon any notes, checks, drafts, money orders, or other
instruments of payment with respect to the Collateral that may
come into possession of the Collateral Agent in full or part
payment of the Indebtedness; to sign and endorse the name of the
Grantors upon any invoice, freight or express xxxx, xxxx of
lading, storage or warehouse receipts, drafts against debtors,
assignments, certifications and notices in connection with the
Collateral, and any instruments or documents relating thereto or
to the Grantors' rights therein; to execute (in the name, place,
and stead of the Grantors) endorsements, assignments, and other
instruments of conveyance or transfer with respect to all or any
of the Collateral; to give written notice to such office and
officials of the United States Post Office to effect such change
or changes of address so that all mail addressed to the Grantors
may be delivered directly to the Collateral Agent; granting unto
the Grantors' said attorney full power to do any and all things
necessary to be done in and about the premises as fully and
effectually as the Grantors might or could do, and hereby
ratifying all that said attorney shall lawfully do or cause to
be done by virtue hereof. This power of attorney shall be
irrevocable for the term of this Agreement and all transactions
hereunder and thereafter as long as any Indebtedness is
outstanding.
2.6 Third Party Communication. The Grantors shall cause a
copy of each and every notice or communication received from any
other party notifying the Grantors of any default, event of
default, breach or other violation, on the part of the Grantors,
with respect to the Collateral to be promptly delivered to the
Collateral Agent, unless such notice or communication is
received by the Grantors in the ordinary course of business and
such default, event of default, breach or other violation will
not materially impair the Collateral.
SECTION III
REMEDIES UPON DEFAULT
3.1 Remedies. (a) Upon any Collateral Event of Default,
unless cured or waived, and the acceleration prior to the stated
maturity thereof of the 10% Notes or the 8% Notes, and without
further demand, the Grantors agree immediately to assemble the
Collateral and make it available to the Collateral Agent at the
place and time reasonably designated by the Collateral Agent.
The Collateral Agent shall thereupon be entitled to immediate
possession of the Collateral and the Collateral Agent may: (i)
enter any premises where any Collateral may be located for the
purpose of taking possession of and removing the same, and (ii)
sell, assign, lease or otherwise dispose of the Collateral or
any part thereof, either at public or private sale acceptable to
the Collateral Agent, all at the Collateral Agent's sole option
and as it, in its sole discretion, may deem advisable, and the
Collateral Agent or any Secured Party may bid or become
purchaser at any such sale if public, free from any right of
redemption which is hereby expressly waived by the Grantors.
Until sale, the Collateral Agent may store the Collateral on the
premises where it is located when seized, and if said premises
are the property of the Grantors, the Grantors agree not to
charge the Collateral Agent for storage thereof. Unless the
Collateral is perishable or threatens to decline speedily in
value or is of a type customarily sold in a recognized market,
the Collateral Agent will give the Grantors reasonable notice of
the time and place of any public sale or the time after which
any private sale or other intended disposition will be made. The
requirement of reasonable notice shall be met if such notice is
received by the Grantors at least ten days before the time of
the sale or disposition. The Collateral Agent may adjourn any
public or private sale or other disposition from time to time by
announcement at the time and place fixed therefor, and such sale
or other disposition may, without further notice, be made at the
time and place to which it was so adjourned.
(b) The net cash proceeds resulting from the collection,
liquidation, sale, or other disposition of the Collateral shall
be applied:
(x) first, to the expenses (including all reasonable
attorneys' fees) of preparing for sale, storing,
processing, selling, collecting, and liquidating the
Collateral and the like; and
(y) second, to the satisfaction of all Indebtedness
and other amounts due arising under the 10% Notes and/or
the Guaranty Agreement in relation thereto; and
(z) third, to the satisfaction of all Indebtedness
and other amounts due arising under the 8% Notes and/or the
Guaranty Agreement in relation thereto.
The Grantors shall be liable to the Secured Parties and shall
pay to the Collateral Agent on demand, any deficiency in the
Indebtedness then due and owing which may remain after such
sale, disposition, collection or liquidation of Collateral, and
the Collateral Agent in turn agrees to remit to the Grantors, or
other persons as their interest appear, any surplus remaining
after all such liabilities have been paid in full.
(c) To facilitate the exercise by the Collateral Agent of
the rights and remedies set forth in this Section III, the
Grantors hereby constitute the Collateral Agent or any other
person whom the Collateral Agent may designate, with effect from
and after the occurrence of a Collateral Event of Default, until
cured or waived, as attorney-in-fact for the Grantors, at the
Grantors' expense, to exercise all or any of the foregoing
powers, and other powers incidental to the foregoing, all of
which, being coupled with an interest, shall be irrevocable,
shall continue until all Indebtedness has been paid in full or
otherwise discharged and shall be in addition to any other
rights and remedies that the Collateral Agent may have.
3.2 License. For the purpose of enabling the Collateral
Agent to exercise its rights and remedies under this Section III
at such time as the Collateral Agent, without regard to this
Section 3.2, shall be lawfully entitled to exercise such rights
and remedies, and for no other purpose, each of the Grantors
grants to the Collateral Agent an irrevocable, non-exclusive
license (exercisable without payment of royalty or other
compensation to the Grantors) to use, license and sublicense any
Intellectual Property Collateral owned or hereafter acquired by
either of the Grantors, and wherever the same may be located,
and including in such license reasonable access to all media in
which any of the licensed items may be recorded or stored and to
all computer and automatic machinery software and programs used
for the compilation or printout thereof.
3.3 Additional Remedies. The Collateral Agent may at any
time or from time to time exercise in respect of the Collateral
in addition to all other rights, powers and remedies provided
for herein, in the Notes, or otherwise available to it, all the
rights and remedies of a secured party on default under the
Uniform Commercial Code (whether or not the Uniform Commercial
Code applies to the Collateral) and under any other applicable
law as in effect in any relevant jurisdiction.
3.4 No Claims. To the extent permitted by applicable law,
the Grantors waive all claims, damages and demands against the
Collateral Agent and the Secured Parties arising out of the
exercise of any rights under this Agreement, except to the
extent arising from the gross negligence or willful misconduct
of the Collateral Agent or the Secured Parties, as the case may
be.
3.5 Injunctive Relief. The Grantors recognize that during
the existence of a Collateral Event of Default, no remedy at law
will provide adequate relief to the Collateral Agent and the
Secured Parties, and the Grantors agree that the Collateral
Agent shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual
damages.
3.6 Cumulative Remedies. The rights and remedies provided
under this Agreement are cumulative and may be exercised singly
or concurrently, and are not exclusive of any rights and
remedies provided at law or in equity or in the Notes.
SECTION IV
CONTINUING LIABILITY
Each of the Grantors hereby agrees that, anything herein to
the contrary notwithstanding, the Grantors shall remain liable
under each contract, agreement, interest or obligation assigned,
or as to which a security interest has been granted, to the
Collateral Agent hereunder to observe and perform all the
covenants, conditions and obligations to be observed and
performed by the Grantors thereunder, all in accordance with and
pursuant to the terms and provisions thereof. The Collateral
Agent shall have no duty, responsibility, obligation or
liability under any such obligation by reason of or arising out
of this Agreement or the granting to the Collateral Agent of a
security interest therein or the receipt by the Collateral Agent
of any payment relating to any such obligation pursuant hereto,
nor shall the Collateral Agent be required or obligated in any
manner to perform or fulfill any of the obligations of the
Grantors thereunder or pursuant thereto, or to make any payment,
or to make any inquiry as to the nature or the sufficiency of
any payment received by it or the sufficiency of any performance
by any party under any such obligation, or to present or file
any claim, or to take any action to collect or enforce any
performance or the payment of any amounts which may have been
assigned to it, in which it has been granted a security interest
or to which it may be entitled at any time or times.
SECTION V
AGENCY
5.1 General Rights. (a) The Collateral Agent shall be
empowered to take all such actions on behalf of the Secured
Parties set forth under the provisions of this Agreement and
exercise such powers and perform such duties as are expressly
delegated to the Collateral Agent hereunder. Notwithstanding any
provision to the contrary elsewhere herein, the Collateral Agent
shall not have any duties or responsibilities, except those
expressly set forth in this Agreement, or any fiduciary
relationship with any Secured Party, and no implied covenants,
functions or responsibilities shall be read into this Agreement or
otherwise exist against the Collateral Agent. The Collateral Agent
shall not be liable for any action taken or omitted to be taken by
it hereunder or in connection herewith, or in connection with the
Collateral, unless caused by its gross negligence or willful
misconduct.
(b) The Collateral Agent will give notice to the Secured
Parties of any action taken hereunder; such notice shall be given
prior to the taking of such action unless the Collateral Agent
determines that to do so would be detrimental to the interests of
the Secured Parties, in which event such notice shall be given
promptly after the taking of such action.
(c) Notwithstanding anything to the contrary in this
Agreement, the Collateral Agent shall not be required to exercise
any rights or remedies hereunder or give any consent hereunder
unless it shall have been authorized or directed to do so by the
Required Holders consistent with the terms hereof.
5.2 Rights of Collateral Agent. (a) The Collateral Agent may
execute any of its duties under this Agreement by or through
agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The
Collateral Agent shall not be responsible for the negligence or
misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
(b) Neither the Collateral Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates
shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this
Agreement (except for its or such Person's own gross negligence or
willful misconduct), or (ii) responsible in any manner to any of
the Secured Parties for any recitals, statements, representations.
or warranties made by the Grantors or any representative thereof
contained in this Agreement or in any certificate, report,
statement or other document referred to or provided for in, or
received by the Collateral Agent under or in connection with this
Agreement or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or for any failure
of the Grantors to perform their obligations hereunder. The
Collateral Agent shall not be under any obligation to any Secured
Party to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions
of, this Agreement, or to inspect the properties, books or records
of the Grantors.
(c) (i) The Collateral Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing,
resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it
in good faith to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation,
counsel to the Grantors), independent accountants and other
experts selected by the Collateral Agent. The Collateral Agent
shall be fully justified in failing or refusing to take any action
under this Agreement (x) if such action would, in the opinion of
the Collateral Agent, be contrary to law or the terms of this
Agreement, or (y) if, in connection with the taking of any such
action that would constitute an exercise of remedies under this
Agreement, it shall not first be indemnified to its satisfaction
by the Secured Parties or the Grantors against any and all
liability and expense that may be incurred by it by reason of
taking or continuing to take any such action. The Collateral Agent
shall in all cases be fully protected in acting, or in refraining
from acting, under this Agreement in accordance with a request of
the Required Holders, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the
Secured Parties.
(ii) Absent actual knowledge, the Collateral Agent shall
not be deemed to have constructive, direct or indirect knowledge
or notice of the occurrence of any Collateral Event of Default
unless and until the Collateral Agent has received a notice or a
certificate stating that a Collateral Event of Default has
occurred from a Secured Party or the Grantors. The Collateral
Agent shall have no obligation whatsoever either prior to or after
receiving such notice or certificate to inquire whether a
Collateral Event of Default has in fact occurred and shall be
entitled to rely conclusively, and shall be fully protected in so
relying, on any notice or certificate so furnished to it. The
Collateral Agent may, but shall not be obligated to, take action
hereunder on the basis of the occurrence of a Collateral Event of
Default whether or not the Collateral Agent has received any
notice or certificate stating that a Collateral Event of Default
has occurred. No provision of this Agreement shall require the
Collateral Agent to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its
duties hereunder or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(f) The Grantors will upon demand pay to the Collateral
Agent the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel (and any local
counsel) and of any experts and agents, which the Collateral Agent
may incur in connection with (i) the administration of this
Agreement, (ii) the custody or preservation of, or the sale of,
collection from, or other realization upon, any of the Collateral,
(iii) the exercise or enforcement (whether through negotiations,
legal proceedings or otherwise) of any of the rights of the
Collateral Agent or the Secured Parties hereunder or under the
other Security Documents or (iv) the failure by the Grantors to
perform or observe any of the provisions hereof.
5.3 Lack of Reliance on the Collateral Agent. Neither the
Collateral Agent nor any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates has made any repre-
sentations or warranties to any Secured Party and no act by the
Collateral Agent hereinafter taken shall be deemed to constitute
any representation or warranty by the Collateral Agent to any
Secured Party. Except for notices and other documents expressly
required to be furnished to the Secured Parties by the Collateral
Agent hereunder, the Collateral Agent shall not have any duty or
responsibility to provide any Secured Party with any notice or
other document which may come into the possession of the
Collateral Agent or any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates.
5.4 Indemnification. The Grantors shall indemnify the
Collateral Agent in its capacity as such, and the Secured Parties,
and each of them, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind whatsoever
which may at any time be imposed on, incurred by or asserted
against the Collateral Agent in its capacity as such or the
Secured Parties, or any of them, in any way relating to or arising
out of this Agreement, or the performance of its duties as
Collateral Agent hereunder or any action taken or omitted by the
Collateral Agent in its capacity as such under or in connection
with any of the foregoing; provided that the Grantors shall not be
liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements to the Collateral Agent or
any Secured Party to the extent that any of the foregoing result
from the gross negligence or willful misconduct of such Collateral
Agent or such Secured Party, as finally judicially determined. The
agreements in this Section 5.4 shall survive the payment of the
Indebtedness.
5.5 Resignation or Removal of the Collateral Agent. The
Collateral Agent may resign as Collateral Agent upon ten days'
notice to the Secured Parties and may be removed at any time with
or without cause by the Super-Required Holders, with any such
resignation or removal to become effective only upon the
appointment of a successor Collateral Agent under this Section
5.5. If the Collateral Agent shall resign or be removed as
Collateral Agent under this Agreement, then the Super-Required
Holders shall (and if no such successor shall have been appointed
within 30 days of the Collateral Agent's resignation or removal,
the Collateral Agent may) appoint a successor agent for the
Secured Parties, which successor agent shall be reasonably
acceptable to the Grantors, whereupon such successor agent shall
succeed to the rights, powers and duties of the "Collateral
Agent", and the term "Collateral Agent" shall mean such successor
agent effective upon its appointment, and the former Collateral
Agent's rights, powers and duties as Collateral Agent shall be
terminated, without any other or further act or deed on the part
of such former Collateral Agent or any of the other Secured
Parties; provided, however, that the resigning Collateral Agent
shall deliver to the successor Collateral Agent all Collateral,
and copies of all filings, recordings and all other instruments
and documents, then in its possession, and shall take all further
action that the successor Collateral Agent may reasonably request.
After any retiring Collateral Agent's resignation or removal
hereunder as Collateral Agent, the provisions of this Section V
shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Collateral Agent under this Agreement.
SECTION VI
MISCELLANEOUS
6.1 Limitation by Law. All rights, remedies and powers
provided in this Agreement may be exercised only to the extent
that the exercise thereof does not violate any applicable
provision of law, and all the provisions of this Agreement are
intended to be subject to all applicable mandatory provisions of
law which may be controlling and to be limited to the extent
necessary so that they will not render this Agreement illegal,
invalid, unenforceable, in whole or in part, nor not entitled to
be recorded, registered, or filed under the provisions of any
applicable law.
6.2 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction the substantive
laws of which are held to be applicable hereto shall not
invalidate the remaining provisions hereof, and any such
prohibition or unenforceability in any such jurisdiction shall
not invalidate or render unenforceable such provision in any
other jurisdiction.
6.3 Amendments; Waivers. (a) This Agreement shall be
subject to amendment without notice to any of the Secured
Parties but with the written consent of the Super-Required
Holders, the Collateral Agent and the Grantors; provided,
however, that without the consent of each Secured Party, an
amendment may not:
(i) modify the definition of Required Holders or
Super-Required Holders; or
(ii) make any change in this Section 6.3.
It shall not be necessary for the consent of any Secured Party
under this Section 6.3 to approve the particular form of any
proposed amendment, but it shall be sufficient if such consent
approves the substance thereof. After an amendment under this
Section 6.3 becomes effective, the Collateral Agent shall mail
to the Secured Parties notice thereof. The failure to give such
notice, or any defect therein, shall not impair or affect the
validity of an amendment under this Section 6.3.
(b) The Super-Required Holders may further waive any
default or Collateral Event of Default under this Agreement, and
the consequences of any such default or Collateral Event of
Default, except: (i) a Collateral Event of Default consisting of
an Event of Default under the Notes not waived thereunder, or
(ii) a default or Collateral Event of Default arising from a
provision that under paragraph (a) of this Section 6.3 cannot be
amended without the consent of each Secured Party. When a
default or Collateral Event of Default is waived, it is deemed
cured, but no such waiver shall extend to any subsequent or
other default or Collateral Event of Default or impair any
consequent right.
6.4 Binding Effect; Successors and Assigns. This Agreement
shall be binding upon and inure to the benefit of the Grantors,
the Collateral Agent and the Secured Parties and shall inure to
the benefit of their respective successors and permitted
assigns, and nothing herein or in any of the Notes is intended
or shall be construed to give any person, other than such
successors or assigns, any right, remedy or claim under, to or
in respect of this Agreement or the Collateral.
6.5 Termination. This Agreement shall continue in full
force and effect so long as any Indebtedness remains
outstanding. This Agreement shall automatically terminate,
without further action by any party, upon a full cash payment of
the Indebtedness.
6.6 Note Register. The Collateral Agent shall have access
during reasonable business hours upon reasonable prior notice to
the Parent to each register of the Notes maintained by the
Parent.
6.7 Notices. All notices or other communications hereunder
shall be given in the manner and to the addresses determined
under the Notes, and, if to the Collateral Agent, shall be given
in such manner to the address hereinbelow set forth, and shall
be effective when received.
6.8 Applicable Law. This Agreement shall be governed by,
and be construed and interpreted in accordance with, the
internal laws of the State of New York without reference to
principles of conflict of laws, except as required by mandatory
provisions of law.
6.9 Grantors' Waivers. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, NO GRANTOR SHALL ASSERT, AND HEREBY WAIVES, ANY
CLAIM AGAINST THE COLLATERAL AGENT AND EACH SECURED PARTY ON ANY
THEORY OF LIABILITY FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR
PUNITIVE DAMAGES (AS OPPOSED TO DIRECT OR ACTUAL DAMAGES)
ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF, THIS
AGREEMENT OR ANY INSTRUMENT CONTEMPLATED HEREBY.
6.10 Attorneys' Fees. Upon any Collateral Event of Default,
the Collateral Agent's reasonable attorneys' fees and the legal
and other expenses for pursuing, searching for, receiving,
taking, keeping, storing, advertising, and selling the
Collateral shall be chargeable to the Grantors and shall be
deemed to be Indebtedness.
6.11 Submission To Jurisdiction. THE GRANTORS, AND EACH OF
THEM, HEREBY IRREVOCABLY SUBMIT AND CONSENT TO THE NONEXCLUSIVE
JURSIDICTION OF THE FEDERAL AND STATE COURTS LOCATED WITHIN THE
SOUTHERN DISTRICT OF THE STATE OF NEW YORK, BOROUGH OF MANHATTAN
(EXCEPT THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL
SHALL BE BROUGHT, AT THE OPTION OF THE COLLATERAL AGENT, IN THE
COURTS OF ANY OTHER JURISDICTION WHERE SUCH COLLATERAL MAY BE
FOUND) AND IRREVOCABLY AGREE THAT ALL ACTIONS OR PROCEEDINGS
RELATED TO THIS AGREEMENT MAY BE LITIGATED IN SUCH COURTS, AND
UNCONDITIONALLY WAIVE ANY OBJECTION WHICH IT MAY HAVE BASED UPON
IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY
PROCEEDINGS IN ANY SUCH COURT AND WAIVE PERSONAL SERVICE OF ANY
AND ALL PROCESS UPON IT, AND CONSENT THAT ALL SUCH SERVICE OF
PROCESS BE MADE BY DELIVERY TO THE GRANTORS, AND EACH OF THEM,
AS SET FORTH IN SECTION 6.7 HEREOF. NOTHING CONTAINED IN THIS
SECTION 6.11 SHALL AFFECT THE RIGHT OF THE COLLATERAL AGENT TO
SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
BRING ANY ACTION OR PROCEEDING IN THE COURTS OF ANY JURISDICTION
AGAINST THE MAKERS OR TO ENFORCE A JUDGMENT OBTAINED IN THE
COURTS OF ANY OTHER JURISDICTION.
6.12 Jury Trial. TO THE FULLEST EXTENT PERMITTED BY LAW,
THE GRANTORS, AND EACH OF THEM, HEREBY WAIVE ANY RIGHT THEY MAY
HAVE TO A TRIAL BY JURY IN ANY ACTION BROUGHT UNDER THIS
AGREEMENT.
6.13 Subsidiary Guarantor. This Agreement shall, upon
compliance with the applicable provisions of the Notes, be
deemed amended to include such additional Subsidiary or
Subsidiaries (as defined in the Notes) of the Parent required to
enter into this Agreement, as Subsidiary Guarantor.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered by their duly authorized
officers of the date first set forth above.
Attest: ELECTRONIC RETAILING SYSTEMS
INTERNATIONAL, INC., a Delaware
corporation
s/Xxxxx XxXxxxxxx
-------------------------
Assistant Secretary By s/Xxxxx X. Failing, Jr.
-----------------------------
Vice Chairman and CEO
Attest: ELECTRONIC RETAILING SYSTEMS
INTERNATIONAL, INC., a
Connecticut corporation
s/Xxxxx XxXxxxxxx
-------------------------- By s/Xxxxx X. Failing, Jr.
Assistant Secretary ------------------------------
President
ACCEPTED:
COLLATERAL AGENT:
UNITED STATES TRUST COMPANY
OF NEW YORK
By s/Xxxxx X. Xxxxx
-----------------------
Vice President
Address: 000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Schedule 1
1. 00 Xxxx Xxxxx Xxxxxx
Xxxx Xxxxx, Xxxxxxxxxxx 00000
2. 00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxx 00000
4
corp\ers\agreemnt\assignment and security
