EXHIBIT 10.5
SECURITY AGREEMENT
This SECURITY AGREEMENT (this "Agreement") dated as of
December 9, 2004, is made by EASYLINK SERVICES INTERNATIONAL, INC., a Delaware
corporation (the "Debtor"), in favor of XXXXX FARGO FOOTHILL, INC., a California
corporation (together with its successors and assigns, the "Lender").
R E C I T A L S:
WHEREAS, the Debtor and certain of its Affiliates
(individually a "Borrower" and collectively, "Borrowers"), are parties with the
Lender to that certain Credit Agreement of even date herewith (as the same may
be amended, restated, supplemented or modified from time to time, the "Credit
Agreement"), which provides for, among other things, the ability of Borrowers to
obtain certain loans (the "Loans") from the Lender upon the terms and provisions
and subject to the conditions set forth in the Credit Agreement. Capitalized
terms used but not defined herein shall have the meanings ascribed to such terms
in the Credit Agreement; and
WHEREAS, the Debtor desires to secure its obligations under
the Credit Agreement by granting to Lender, for the benefit of the Lender and
the Bank Product Providers, security interests in the Collateral as set forth
herein.
NOW, THEREFORE, in consideration of the premises set forth
above, the terms and conditions contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
each intending to be bound hereby, Lender and the Debtor agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. All capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to them in the Credit
Agreement. As used in this Agreement, the following terms shall have the
following definitions:
"Account" means any "account" (as that term is defined in the
Code), and any and all supporting obligations in respect thereof.
"Agreement" means this Security Agreement and any extensions,
riders, supplements, notes, amendments, or modifications to or in connection
with this Security Agreement.
"Bankruptcy Code" means the United States Bankruptcy Code (11
U.S.C. ss. 101 et seq.), as amended, and any successor statute.
"Books" means the Debtor's now owned or hereafter acquired
books and records (including all of its Records indicating, summarizing, or
evidencing its assets (including the Collateral) or liabilities, all of its
Records relating to its business operations or financial condition, and all of
its goods or General Intangibles related to such information).
"Borrower" and "Borrowers" shall have the respective meanings
set forth in the recitals to this Agreement.
"Code" means the New York Uniform Commercial Code as in effect
from time to time.
"Collateral" means, with respect to the Debtor, all of the
Debtor's now owned or hereafter acquired right, title, and interest in and to
each of the following: all of its Accounts; its Books; all of its commercial
tort claims; all of its Deposit Accounts; all of its Equipment; all of its
General Intangibles; all of its Inventory; all of its Investment Property
(including all securities and Securities Accounts); all of its Negotiable
Collateral; any money, or other assets of the Debtor which now or hereafter come
into the possession, custody, or control of Lender; and the proceeds and
products, whether tangible or intangible, of any of the foregoing, including
proceeds of insurance covering any or all of the foregoing, and any and all
Accounts, Books, Deposit Accounts, Equipment, General Intangibles, Inventory,
Investment Property, Negotiable Collateral, money, or other tangible or
intangible property resulting from the sale, exchange, collection, or other
disposition of any of the foregoing, or any portion thereof or interest therein,
and the proceeds thereof.
"Control Agreement" means a control agreement, in form and
substance reasonably satisfactory to Lender, executed and delivered by the
Debtor, Lender, and the applicable securities intermediary with respect to a
Securities Account or bank with respect to a Deposit Account.
"Credit Agreement" has the meaning set forth in the recitals
to this Agreement.
"Debtor" has the meaning set forth in the preamble to this
Agreement.
"Deposit Account" means any "deposit account" (as that term is
defined in the Code).
"Equipment" means "equipment" (as that term is defined in the
Code), and includes machinery, machine tools, motors, furniture, furnishings,
fixtures, vehicles (including motor vehicles), computer, hardware, tools, parts,
goods (other than consumer goods, farm products, or Inventory), wherever
located, including all attachments, accessories, accessions, replacements,
substitutions, additions, and improvements to any of the foregoing.
"General Intangibles" means "general intangibles" (as that
term is defined in the Code), (including payment intangibles, contract rights,
rights to payment, rights arising under common law, statutes, or regulations,
choses or things in action, goodwill, patents, trade names, trade secrets,
trademarks, servicemarks, copyrights, blueprints, drawings, purchase orders,
customer lists, monies due or recoverable from pension funds, route lists,
rights to payment and other rights under any royalty or licensing agreements,
infringement claims, computer programs, information contained on computer disks
or tapes, software, literature, reports, catalogs, insurance premium rebates,
tax refunds, and tax refund claims), and any and all supporting obligations in
respect thereof, and any other personal property other than Accounts, Deposit
Accounts, goods, Investment Property, and Negotiable Collateral.
-2-
"Inventory" means "inventory" (as that term is defined in the
Code).
"Investment Property" means "investment property" (as that
term is defined in the Code), and any and all supporting obligations in respect
thereof.
"Lender" has the meaning set forth in the recitals to this
Agreement.
"Lender's Liens" means the Liens granted by the Debtor to
Lender under this Agreement or the other Loan Documents to which the Debtor is a
party.
"Negotiable Collateral" means letters of credit, letter of
credit rights, instruments, promissory notes, drafts, documents, and chattel
paper (including electronic chattel paper and tangible chattel paper), and any
and all supporting obligations in respect thereof.
"Secured Obligations" shall mean, with respect to the Debtor,
all liabilities, obligations, or undertakings owing by the Debtor to the Lender
and/or the Bank Product Providers of any kind or description arising out of or
outstanding under, advanced or issued pursuant to, or evidenced by the Credit
Agreement, this Agreement, or any of the other Loan Documents, irrespective of
whether for the payment of money, whether direct or indirect, absolute or
contingent, due or to become due, voluntary or involuntary, whether now existing
or hereafter arising, and including all interest, costs, fees (including
reasonable attorneys fees), and expenses (including interest, costs, fees, and
expenses that, but for the provisions of the Bankruptcy Code, would have accrued
irrespective of whether a claim thereof is allowed) and any and all other
amounts which the Debtor is required to pay pursuant to any of the foregoing, by
law, or otherwise.
"Voidable Transfer" has the meaning set forth in Section 8.8
to this Agreement.
1.2 CODE. Any terms used in this Agreement which are
defined in the Code shall be construed and defined as set forth in the Code
unless otherwise defined herein.
1.3 CONSTRUCTION. Unless the context of this Agreement
clearly requires otherwise, references to the plural include the singular,
references to the singular include the plural, the term "including" is not
limiting, and the term "or" has, except where otherwise indicated, the inclusive
meaning represented by the phrase "and/or." The words "hereof," "herein,"
"hereby," "hereunder," and similar terms in this Agreement refer to this
Agreement as a whole and not to any particular provision of this Agreement.
Section, subsection, clause, schedule, and exhibit references are to this
Agreement unless otherwise specified. Any reference in this Agreement or in any
of the other Loan Documents to this Agreement or any of the other Loan Documents
shall include all alterations, amendments, changes, extensions, modifications,
renewals, replacements, substitutions, and supplements, thereto and thereof, as
applicable. In the event of a direct conflict between the terms and provisions
of this Agreement and the Credit Agreement, it is the intention of the parties
hereto that both such documents shall be read together and construed, to the
fullest extent possible, to be in concert with each other. In the event of any
actual, irreconcilable conflict that cannot be resolved as aforesaid, the terms
and provisions of the Credit Agreement shall control and govern; provided,
however, that the inclusion herein of additional obligations on the part of the
Debtor and supplemental rights and remedies in favor of Lender, in each case in
respect of the Collateral, shall not be deemed a conflict with the Credit
Agreement.
-3-
1.4 SCHEDULES AND EXHIBITS. All of the schedules and
exhibits attached to this Agreement shall be deemed incorporated herein by
reference.
2. CREATION OF SECURITY INTEREST.
2.1 GRANT OF SECURITY INTEREST. The Debtor hereby grants to
Lender, for the benefit of the Lender and the Bank Product Providers, a security
interest in all of its right, title, and interest in all currently existing and
hereafter acquired or arising Collateral in order to secure prompt repayment of
any and all of the Secured Obligations in accordance with the terms and
conditions of the Loan Documents and in order to secure prompt performance by
the Debtor of the Debtor's covenants and duties under the Loan Documents.
Lender's Liens in and to the Collateral shall attach to all Collateral without
further act on the part of Lender or the Debtor. Anything contained in this
Agreement or any other Loan Document to the contrary notwithstanding, except for
Permitted Dispositions, the Debtor has no authority, express or implied, to
dispose of any item or portion of the Collateral.
2.2 NEGOTIABLE COLLATERAL. In the event that any
Collateral, including proceeds, is evidenced by or consists of Negotiable
Collateral, and if and to the extent that perfection or priority of Lender's
security interest is dependent on or enhanced by possession, the Debtor,
promptly upon the request of Lender, shall endorse and assign such Negotiable
Collateral to Lender and deliver physical possession of such Negotiable
Collateral to Lender.
2.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, NEGOTIABLE
COLLATERAL. At any time after the occurrence and during the continuation of an
Event of Default, Lender or its designee may (a) notify Account Debtors of the
Debtor that the Accounts, chattel paper, or General Intangibles have been
assigned to Lender or that Lender has a security interest therein, or (b)
collect the Accounts, chattel paper, or General Intangibles directly and charge
the reasonable collection costs and expenses to the Loan Account.
-4-
2.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED.
(a) The Debtor authorizes Lender to file any financing
statement necessary or desirable to effectuate the transactions contemplated by
the Loan Documents, and any continuation statement or amendment with respect
thereto, in any appropriate filing office without the signature of the Debtor
where permitted by applicable law and describing the Collateral in the same
manner as described herein.
(b) At any time upon the request of Lender, the Debtor
shall execute and deliver to Lender, any and all financing statements, original
financing statements in lieu of continuation statements, fixture filings,
security agreements, pledges, assignments, endorsements of certificates of
title, and all other documents (the "Additional Documents") that Lender may
request in its Permitted Discretion, in form and substance reasonably
satisfactory to Lender, to perfect and continue perfection or better perfect the
Lender's Liens in the Collateral (whether now owned or hereafter arising or
acquired), and in order to fully consummate all of the transactions contemplated
hereby and under the other Loan Documents. If Debtor or its Subsidiaries acquire
any material commercial tort claims after the date hereof, Debtor shall promptly
(but in any event within 3 Business Days after such acquisition) deliver to
Secured Party a written description of such material commercial tort claim and
shall deliver a written agreement, in form and substance satisfactory to Secured
Party, pursuant to which the Debtor or its Subsidiary shall pledge and
collaterally assign all of its right, title and interest in and to such material
commercial tort claim to Secured Party, as security for the Secured Obligations.
2.5 POWER OF ATTORNEY. The Debtor hereby irrevocably
appoints Lender (and any of Lender's officers, employees, or agents designated
by Lender) as the Debtor's attorney-in-fact, with power to: (a) if the Debtor
refuses to, or fails timely to execute and deliver any of the documents
described in Section 2.4, sign the name of the Debtor on any of the documents
described in Section 2.4; (b) at any time that an Event of Default has occurred
and is continuing, sign the Debtor's name on any invoice or xxxx of lading
relating to the Collateral, drafts against Account Debtors, or notices to
Account Debtors; (c) send requests for verification of Accounts; (d) endorse the
Debtor's name on any Collection item that may come into Lender's possession; (e)
at any time that an Event of Default has occurred and is continuing, make,
settle, and adjust all claims under the Debtor's policies of insurance and make
all determinations and decisions with respect to such policies of insurance
(other than workers' compensation); and (f) at any time that an Event of Default
has occurred and is continuing, settle and adjust disputes and claims respecting
the Accounts, chattel paper, or General Intangibles directly with Account
Debtors, for amounts and upon terms which Lender determines to be reasonable,
and Lender may cause to be executed and delivered any documents and releases
which Lender determines to be necessary. The appointment of Lender as the
Debtor's attorney, and each and every one of Lender's rights and powers, being
coupled with an interest, is irrevocable until, and shall terminate when, all of
the Secured Obligations have been fully and finally repaid and performed and
Lender's obligation to extend credit under the Credit Agreement is terminated.
-5-
2.6 INTENTIONALLY OMITTED.
2.7 CONTROL AGREEMENT. The Debtor agrees that it will not
transfer assets out of any Securities Account or Deposit Account other than as
permitted under the Credit Agreement. No arrangement contemplated hereby or by
any Control Agreement in respect of any Securities Account, Deposit Account, or
other Investment Property shall be modified by the Debtor without the prior
written consent of Lender. Upon the occurrence and during the continuance of an
Event of Default, Lender may notify any bank or securities intermediary to
liquidate the applicable Deposit Account or Securities Account or any related
Investment Property maintained or held thereby and remit the proceeds thereof to
the Lender's Account.
2.8 RELEASE OF SECURITY INTEREST. Upon the payment in full
of all Secured Obligations or the cancellation or termination of the commitments
and any other contingent obligation included in the Secured Obligations, the
security interest granted hereby shall terminate hereunder and all rights to the
Collateral shall revert and be deemed reassigned to the Debtor. Upon any such
termination, the Lender shall, at the Debtor's request and expense, execute and
deliver to the Debtor such documents as the Debtor shall reasonably request to
evidence such termination and/or reassignment, without recourse, representation
or warranty of any kind.
3. LENDER'S RIGHTS AND REMEDIES.
3.1 RIGHTS AND REMEDIES. Upon the occurrence and during the
continuance of an Event of Default, the security hereby constituted shall become
enforceable and, in addition to all other rights and remedies available to
Lender as provided hereafter, Lender may, at its election, without notice of its
election and without demand, do any one or more of the following, all of which
are authorized by the Debtor:
(a) Proceed directly and at once, without notice,
against the Debtor to collect and recover the full amount or any portion of the
Secured Obligations, without first proceeding against any other Borrower, or
against any security or collateral for the Secured Obligations;
(b) Without notice to the Debtor and regardless of the
acceptance of any security or collateral for the payment hereof, appropriate and
apply toward the payment of the Secured Obligations (i) any indebtedness due or
to become due from Lender to the Debtor and (ii) any moneys, credits or other
property belonging to the Debtor at any time held by or coming into the
possession of Lender;
(c) Exercise in respect of the Collateral, in addition
to other rights and remedies provided for herein or otherwise available to it,
all the rights and remedies available to it at law (including those of a secured
party under the Code) or in equity;
-6-
(d) Settle or adjust disputes and claims directly with
Account Debtors for amounts and upon terms which Lender considers advisable, and
in such cases, Lender will credit the Loan Account with only the net amounts
received by Lender in payment of such disputed Accounts after deducting all
Lender Expenses incurred or expended in connection therewith;
(e) Without notice or demand upon the Debtor, make such
payments and do such acts as Lender considers necessary or reasonable to protect
its security interest in the Collateral. The Debtor agrees to make the
Collateral available to Lender as Lender may designate. The Debtor authorizes
Lender to enter the premises where the Collateral is located, to take and
maintain possession of the Collateral, or any part of it, and to pay, purchase,
contest, or compromise any encumbrance, charge, or lien which in Lender's
determination appears to be prior or superior to its security interest and to
pay all expenses incurred in connection therewith. With respect to any of the
Debtor' owned premises, the Debtor hereby grants Lender a license to enter into
possession of such premises and to occupy the same, without charge, in order to
exercise any of Lender's rights or remedies provided herein, at law, in equity,
or otherwise;
(f) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner provided
for herein) the Collateral. Lender is hereby granted a license or other right to
use, without charge, the Debtor's labels, patents, copyrights, rights of use of
any name, trade secrets, trade names, trademarks, service marks, and advertising
matter, or any property of a similar nature, as it pertains to the Collateral,
in completing production of advertising for sale and selling any Collateral, and
the Debtor's rights under all licenses and all franchise agreements shall inure
to Lender's benefit;
(g) Sell all or any part of the Collateral at either a
public or private sale, or both, by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such places (including
the Debtor's premises) as Lender determines is commercially reasonable. It is
not necessary that the Collateral be present at any such sale;
(h) Lender shall give notice of the disposition of the
Collateral as follows:
(i) Lender shall give the Debtor a notice in
writing of the time and place of public sale, or, if the sale is a private sale
or some other disposition other than a public sale is to be made of the
Collateral, then the time on or after which the private sale or other
disposition is to be made; and
(ii) The notice shall be personally delivered or
mailed, postage prepaid, to the Debtor as provided in Section 6, at least ten
(10) days before the earliest time of disposition set forth in the notice; no
notice needs to be given prior to the disposition of any portion of the
Collateral that is perishable or threatens to decline speedily in value or that
is of a type customarily sold on a recognized market;
-7-
(i) Lender may credit bid and purchase at any public
sale;
(j) Lender may seek the appointment of a receiver or
keeper to take possession of all or any portion of the Collateral or to operate
same and, to the maximum extent permitted by law, may seek the appointment of
such a receiver or keeper without the requirement of prior notice or a hearing;
(k) Lender, on behalf of the Lender and the Bank
Product Providers, shall have all other rights and remedies available at law or
in equity or pursuant to any other Loan Document; and
(l) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by the Debtor. Any excess
will be returned, without interest and subject to the rights of third Persons,
by Lender to the Debtor.
3.2 REMEDIES CUMULATIVE. Lender's and the Bank Product
Providers' rights and remedies under this Agreement, the other Loan Documents,
and all other agreements shall be cumulative. The Lender and the Bank Product
Providers shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Lender of one
right or remedy shall be deemed an election, and no waiver by the Lender or the
Bank Product Providers of any Event of Default on the Debtor's part shall be
deemed a continuing waiver. No delay by the Lender or the Bank Product Providers
shall constitute a waiver, election, or acquiescence by it.
4. INTENTIONALLY OMITTED.
5. WAIVERS; INDEMNIFICATION.
5.1 DEMAND; PROTEST; ETC. Except as otherwise specifically
and explicitly set forth in this Agreement, the Credit Agreement, or the other
Loan Documents, and to the extent permitted by law, the Debtor waives demand,
protest, notice of protest, notice of default or dishonor, notice of payment and
nonpayment, notice of any default, nonpayment at maturity, release, compromise,
settlement, extension, or renewal of accounts, documents, instruments, chattel
paper, and guarantees at any time held by the Lender or the Bank Product
Providers, on which the Debtor may in any way be liable.
5.2 LIABILITY FOR COLLATERAL. So long as the Lender and the
Bank Product Providers comply with their obligations under the Code and no
willful misconduct or gross negligence occurs, Lender shall not in any way or
manner be liable or responsible for: (a) the safekeeping of the Collateral; (b)
any loss or damage thereto occurring or arising in any manner or fashion from
any cause; (c) any diminution in the value thereof; or (d) any act or default of
any carrier, warehouseman, bailee, forwarding agency, or other Person. All risk
of loss, damage, or destruction of the Collateral shall be borne by the Debtor.
-8-
5.3 INDEMNIFICATION. The Debtor agrees to defend,
indemnify, save, and hold the Lender-Related Persons, each Participant, and each
of their respective officers, employees, and agents (each an "Indemnified
Person") harmless (to the fullest extent permitted by law) against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
Person, and (b) all losses (including reasonable attorneys fees and
disbursements) in any way suffered, incurred, or paid by the Lender or the Bank
Product Providers as a result of or in any way arising out of this Agreement,
the other Loan Documents or otherwise (all of the foregoing, collectively, the
"Indemnified Liabilities"). Notwithstanding the foregoing, the Debtor shall not
have any obligation under this Section 5.3 with respect to any Indemnified
Liability that a court of competent jurisdiction finally determines to have
resulted from the gross negligence or willful misconduct of such Indemnified
Person. This provision shall survive the termination of this Agreement.
6. NOTICES. All notices and other communications hereunder to
Lender shall be in writing and shall be mailed, sent or delivered in accordance
with the Credit Agreement and all notices and other communications hereunder to
the Debtor shall be in writing and shall be mailed, sent or delivered in care of
Administrative Borrower in accordance with the Credit Agreement.
7. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. DEBTOR AND
LENDER AGREE THAT THE PROVISIONS IN THE CREDIT AGREEMENT WITH RESPECT TO CHOICE
OF LAW AND VENUE AND JURY TRIAL WAIVER ARE APPLICABLE TO THIS AGREEMENT AS IF
FULLY SET FORTH HEREIN.
8. GENERAL PROVISIONS.
8.1 EFFECTIVENESS. This Agreement shall be binding and
deemed effective when executed by the Debtor and accepted and executed by
Lender.
8.2 SUCCESSORS AND ASSIGNS. This Agreement shall bind and
inure to the benefit of the respective successors and assigns of each of the
parties; provided, however, that the Debtor may not assign this Agreement or any
rights or duties hereunder without Lender's prior written consent and any
prohibited assignment shall be absolutely void. No consent to an assignment by
Lender shall release the Debtor from its Secured Obligations. Subject to the
terms contained in Section 13 of the Credit Agreement, Lender may assign this
Agreement and its rights and duties hereunder.
8.3 SECTION HEADINGS. Headings and numbers have been set
forth herein for convenience only. Unless the contrary is compelled by the
context, everything contained in each section applies equally to this entire
Agreement.
-9-
8.4 INTERPRETATION. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or interpreted against the
Lender, the Bank Product Providers or the Debtor, whether under any rule of
construction or otherwise. On the contrary, this Agreement has been reviewed by
all parties and shall be construed and interpreted according to the ordinary
meaning of the words used so as to fairly accomplish the purposes and intentions
of all parties hereto.
8.5 SEVERABILITY OF PROVISIONS. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific provision.
8.6 AMENDMENTS IN WRITING. This Agreement can only be
amended by a writing signed by Lender and the Debtor.
8.7 COUNTERPARTS; TELEFACSIMILE EXECUTION. This Agreement
may be executed in any number of counterparts and by different parties on
separate counterparts, each of which, when executed and delivered, shall be
deemed to be an original, and all of which, when taken together, shall
constitute but one and the same Agreement. Delivery of an executed counterpart
of this Agreement by telefacsimile shall be equally as effective as delivery of
an original executed counterpart of this Agreement. Any party delivering an
executed counterpart of this Agreement by telefacsimile also shall deliver an
original executed counterpart of this Agreement but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability, and
binding effect of this Agreement.
8.8 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the
incurrence or payment of the Secured Obligations by the Debtor or the transfer
by the Debtor to Lender of any property of the Debtor should for any reason
subsequently be declared to be void or voidable under any state or federal law
relating to creditors' rights, including provisions of the Bankruptcy Code
relating to fraudulent conveyances, preferences, and other voidable or
recoverable payments of money or transfers of property (collectively, a
"Voidable Transfer"), and if Lender is required to repay or restore, in whole or
in part, any such Voidable Transfer, or elects to do so upon the reasonable
advice of its counsel, then, as to any such Voidable Transfer, or the amount
thereof that Lender is required or elects to repay or restore, and as to all
reasonable costs, expenses, and attorneys' fees of Lender related thereto, the
liability of the Debtor automatically shall be revived, reinstated, and restored
and shall exist as though such Voidable Transfer had never been made.
-10-
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
EASYLINK SERVICES INTERNATIONAL, INC.,
a Delaware corporation
By: s/Xxxxxx X. Xxxxxxxx
--------------------
Name: Xxxxxx X. Xxxxxxxx
Its: President & Chief Executive Officer
XXXXX FARGO FOOTHILL, INC.,
a California corporation
By: s/Xxxxx Xxxx
----------------
Name: Xxxxx Xxxx
Title: Vice President
