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EXHIBIT 10.31
AMENDED AND RESTATED SECURITY AND PLEDGE AGREEMENT
This AMENDED AND RESTATED SECURITY AND PLEDGE AGREEMENT, dated
as of March 30, 1999 (as the same may be amended, supplemented or otherwise
modified from time to time, the "Agreement"), is made by NEXTERA ENTERPRISES,
INC., a Delaware corporation (the "Grantor"), in favor of NEXTERA FUNDING, INC.,
a Delaware corporation (in its individual capacity, "Funding"), as agent (in
such capacity, the "Agent") for the benefit of itself and Knowledge Universe,
Inc., a Delaware corporation ("KU", together with Funding, the "Secured
Parties", and individually, each a "Secured Party").
RECITALS:
WHEREAS, Funding entered into a Securities Purchase Agreement
dated as of August 31, 1998 (as the same may be amended, supplemented or other-
wise modified from time to time, the "Securities Purchase Agreement") with
Nextera Enterprises, L.L.C. ("Nextera LLC").
WHEREAS, Nextera LLC and Funding entered into the Security and
Pledge Agreement, dated as of August 31, 1998 (the "Original Security and Pledge
Agreement"), pursuant to which Nextera LLC pledged and granted to Funding a
security interest in and lien on the Collateral (as defined therein).
WHEREAS, in connection with the dissolution of Nextera LLC
pursuant to the Share Exchange Agreement dated as of August 31, 1998 by and
among Nextera LLC, the Grantor, the shareholders of SC2, Inc., the shareholders
of Sibson & Company, Inc. and certain shareholders of Sibson Acquisition Co.,
the ownership interests in Nextera LLC were transferred to the Grantor on
December 31, 1998.
WHEREAS, the Grantor is the owner of the shares (the "Pledged
Shares") of stock described in Part I of Schedule I hereto and issued by the
corporations named therein and of the indebtedness (the "Pledged Debt")
described in Part II of said Schedule I and issued by the obligors named
therein.
WHEREAS, in connection with the execution of the Consent and
Amendment, dated as of December 31, 1998 (as the same may be amended, supple-
mented or otherwise modified from time to time) among Nextera LLC, Funding, the
Grantor and KU and the Assignment Agreement, dated as of December 31, 1998 (as
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the same may be amended, supplemented or otherwise modified from time to time)
by and between Funding and KU and in order to induce KU to purchase certain
Notes pursuant to the Securities Purchase Agreement, the Grantor (formerly
Nextera LLC) and Funding would like to amend and restate the Original Security
and Pledge Agreement in its entirety.
NOW, THEREFORE, in consideration of the premises and of other
good and valuable consideration, the receipt of which is hereby acknowledged,
the Original Security and Pledge Agreement is hereby amended and restated in its
entirety as follows:
SECTION 1. Definitions. As used herein, capitalized terms
defined in the Securities Purchase Agreement and not otherwise defined herein
are used herein as so defined. The following terms shall have the following
meanings:
"Account Debtor" shall mean the person who is obligated on a
Receivable.
"Accounts" shall mean "accounts" as such term is defined in
Section 9-106 of the UCC.
"Agent" shall mean Nextera Funding, Inc. in its capacity as
agent for the benefit of the Secured Parties, or its successor.
"Agreement" shall mean this Pledge and Security Agreement, as
the same may from time to time be amended, supplemented or otherwise
modified.
"Chattel Paper" shall mean "chattel paper" as such term is
defined in Section 9-105(1)(b) of the UCC.
"Collateral" shall have the meaning assigned to it in Section 2
hereof.
"Collateral Records" shall mean books, records, computer
software, computer printouts, customer lists, blueprints, technical
specifications, manuals, and similar items which relate to any Collat-
eral other than such items obtained under license or franchise agree-
ments which prohibit assignment or disclosure of such items.
"Contracts" shall mean all contracts to which the Grantor now
is, or hereafter will be, bound, or a party, beneficiary or assignee,
and
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all other instruments, agreements and documents executed and delivered
with respect to such contracts, and all revenues, rentals, Proceeds and
other sums of money due and to become due from any of the foregoing, as
the same may be modified, supplemented or amended from time to time in
accordance with their terms.
"Deposit Accounts" shall mean any deposit account, including
without limitation, "deposit accounts" as such term is defined in
Section 9-105(1)(e) of the UCC and any other deposit account, together
with any funds, instruments or other items credited to any such account
from time to time, and all interest thereon.
"Documents" shall mean "documents" as such term is defined in
Section 9-105(1)(f) of the UCC.
"Equipment" shall mean "equipment" as such term is defined in
Section 9-109(2) of the UCC, including, without limitation, machinery,
manufacturing equipment, data processing equipment, computers, office
equipment, furniture, appliances, tools, furnishings, fixtures,
vehicles, motor vehicles, and any manuals, instructions, blueprints,
computer software and similar items which relate to the above, and any
and all additions, substitutions and replacements of any of the
foregoing, wherever located, together with all improvements thereon and
all attachments, components, parts, equipment and accessories installed
thereon or affixed thereto.
"Fixtures" shall mean "fixtures" as such term is defined in Sec-
tion 9-313 of the UCC.
"Funding" shall mean Nextera Funding, Inc., a Delaware
corporation, in its individual capacity, and its successors and assigns.
"General Intangibles" shall mean "general intangibles" as such
term is defined in Section 9-106 of the UCC, including, without
limitation, all trademarks, trademark applications, trademark registra-
tions, tradenames, fictitious business names, business names, company
names, business identifiers, prints, labels, trade styles and service
marks (whether or not registered), including logos and/or designs,
copyrights, patents, patent applications, goodwill of the Grantor's
business symbolized by any of the foregoing, trade secrets, license
rights, license agreements, permits, franchises, and any rights
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to tax refunds to which the Grantor is now or hereafter may be entitled.
"Hedging Agreements" shall mean interest rate or currency
protection or hedging arrangements, including without limitation, caps,
collars, floors, forwards and any other similar or dissimilar interest
rate or currency exchange agreements or other interest rate or currency
hedging arrangements.
"Instruments" shall mean "instruments" as such term is defined
in Section 9-105(1)(i) of the UCC.
"Insurance Policies" shall mean insurance policies, including
without limitation the insurance policies listed on Schedule II attached
hereto.
"Inventory" shall mean "inventory" as such term is defined in
Section 9-109(4) of the UCC, including without limitation, all goods
(whether such goods are in the possession of the Grantor or of a bailee
or other Person for sale, lease, storage, transit, processing, use or
otherwise and whether consisting of whole goods, spare parts, compo-
nents, supplies, materials or consigned or returned or repossessed
goods), including without limitation, all such goods whether raw, in
process or finished, all materials usable in processing the same and all
documents of title covering any inventory, including but not limited to
work in process, materials used or consumed in Grantor's business, now
owned or hereafter acquired or manufactured by the Grantor and held for
sale in the ordinary course of its business; all present and future
substitutions therefor, parts and accessories thereof and all additions
thereto; and all proceeds thereof and products of such inventory in any
form whatsoever.
"KU" shall mean Knowledge Universe, Inc., a Delaware
corporation, and its successors and assigns.
"Money" shall mean "money" as such term is defined in Section
1-201(24) of the UCC.
"Motor Vehicles" shall mean motor vehicles, tractors, trailers
and other like property, if title thereto is governed by a certificate
of title ownership.
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"Person" shall mean and include any individual, partnership,
joint venture, firm, corporation, association, trust or other enterprise
or any government or political subdivision or agency, department or
instrumentality thereof.
"Pledged Debt" shall have the meaning specified in the second
recital to this Agreement.
"Pledged Shares" shall have the meaning specified in the second
recital to this Agreement.
"Proceeds" shall mean "proceeds" as such term is defined in
Section 9-306(1) of the UCC.
"Receivables" shall mean all rights to payment for goods sold or
leased or services rendered, whether or not earned by performance and
all rights in respect of the Account Debtor, including without
limitation, all such rights in which the Grantor has any right, title or
interest by reason of the purchase thereof by the Grantor, and includ-
ing without limitation all such rights constituting or evidenced by any
Account, Chattel Paper, Instrument, General Intangible, note, contract,
invoice, purchase order, draft, acceptance, intercompany account,
security agreement, or other evidence of indebtedness or security,
together with (a) any collateral assigned, hypothecated or held to
secure any of the foregoing and the rights under any security agreement
granting a security interest in such collateral, (b) all goods, the sale
of which gave rise to any of the foregoing, including, without
limitation, all rights in any returned or repossessed goods and unpaid
seller's rights, (c) all guarantees, endorsements and indemnifications
on, or of, any of the foregoing, and (d) all powers of attorney for the
execution of any evidence of indebtedness or security or other writing
in connection therewith.
"Receivables Records" shall mean (a) all original copies of all
documents, instruments or other writings evidencing the Receivables, (b)
all books, correspondence, credit or other files, records, ledger sheets
or cards, invoices, and other papers relating to Receivables, including
without limitation all tapes, cards, computer tapes, computer discs,
computer runs, record keeping systems and other papers and documents
relating to the Receivables, whether in the possession or under the
control of the Grantor or any computer bureau or agent from time to time
acting for the Grantor or otherwise, (c) all evidences
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of the filing of financing statements and the registration of other
instruments in connection therewith and amendments, supplements or other
modifications thereto, notices to other creditors or secured parties,
and certificates, acknowledgments, or other writings, including without
limitation lien search reports, from filing or other registration
officers, (d) all credit information, reports and memoranda relating
thereto, and (e) all other written or non-written forms of information
related in any way to the foregoing or any Receivable.
"Secured Obligations" shall mean (a) all obligations,
liabilities (including, without limitation, contingent obligations) and
indebtedness of every nature of the Grantor, now existing or hereafter
incurred, arising under or in connection with the Securities Purchase
Agreement, any Note, any other Financing Document or this Agreement and
(b) in the case of Funding only, all other obligations, liabilities of
every kind, nature or description, direct or indirect, primary or
secondary, joint or several, absolute or contingent of the Grantor to
the Agent or any Secured Party whether due or to become due and whether
now existing or hereafter incurred and whether similar or dissimilar to
the obligations described in clause (a) hereof, and including without
limitation all consumer or commercial transactions, all purchase money
and nonpurchase money transactions, all overdrafts, all letters of
credit, all lines of credit and all other extensions of credit,
regardless of how they may be evidenced.
"Secured Parties" shall mean, collectively, Funding and KU; and
"Secured Party" shall mean, individually, each of Funding and KU.
"Securities Purchase Agreement" shall have the meaning specified
in the first recital to this Agreement.
"Security Collateral" shall mean:
(i) the Pledged Shares and the certificates representing the
Pledged Shares, and all dividends, cash, instruments and other property
from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Pledged Shares;
(ii) the Pledged Debt and the instruments evidencing the
Pledged Debt, and all interest, cash, instruments and other property
from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Pledged Debt;
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(iii) all additional shares of stock from time to time
acquired by the Grantor in any manner, and the certificates representing
such additional shares, and all dividends, cash, instruments and other
property from time to time received, receivable or otherwise distrib-
uted in respect of or in exchange for any or all of such shares; and
(iv) all additional indebtedness from time to time owed to
the Grantor and the instruments evidencing such indebtedness, and all
interest, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in ex-
change for any or all of such indebtedness.
"UCC" shall mean the Uniform Commercial Code as in effect from
time to time in the State of New York.
SECTION 2. Grant of Security Interests. As security for the
prompt and complete payment and performance in full of all the Secured Obliga-
tions, the Grantor hereby confirms and grants to the Agent for the benefit of
the Secured Parties a security interest in and lien on all of the Grantor's
right, title and interest in, to and under the following, in each case, whether
now owned or existing or hereafter acquired or arising, and wherever located
(all of which being hereinafter collectively called the "Collateral"):
(a) all Accounts;
(b) all Chattel Paper;
(c) all Contracts;
(d) all Collateral Records;
(e) all Deposit Accounts;
(f) all Documents;
(g) all Equipment;
(h) all Fixtures;
(i) all General Intangibles;
(j) all Hedging Agreements;
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(k) all Instruments;
(l) all Insurance Policies;
(m) all Inventory;
(n) all Money;
(o) all Motor Vehicles;
(p) all Receivables;
(q) all Receivables Records;
(r) all other tangible and intangible personal property;
(s) all of the Security Collateral; and
(t) all accessions and additions to any or all of the
foregoing, all substitutions and replacements for any or all of the
foregoing and all Proceeds or products of any or all of the foregoing.
SECTION 3. Grantor Remains Liable. Anything herein to the
contrary notwithstanding, (a) the Grantor shall remain liable under the
contracts and agreements included in the Collateral to the extent set forth
therein to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by the Agent
for the benefit of the Secured Parties of any of the rights hereunder shall not
release the Grantor from any of its duties or obligations under the contracts
and agreements included in the Collateral, and (c) neither the Agent nor any
Secured Party shall have any obligation or liability under the contracts and
agreements included in the Collateral by reason of this Agreement and shall be
obligated to perform any of the obligations or duties of the Grantor thereunder
or to take any action to collect or enforce any claim for payment assigned
hereunder.
SECTION 4. Delivery of Security Collateral. All certificates or
instruments representing or evidencing the Security Collateral shall be
delivered to and held by or on behalf of the Agent for the benefit of the
Secured Parties pursuant hereto and shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to the Agent. If
any Event of Default shall have occurred and be continuing, the Agent shall have
the right, at any time in its discretion and without
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notice to the Grantor, to transfer to or to register in the name of the Agent
for the benefit of the Secured Parties or any of its nominees any or all of the
Security Collateral, subject only to the revocable rights specified in Section
10(a). In addition, the Agent shall have the right at any time to exchange
certificates or instruments representing or evidencing Security Collateral for
certificates or instruments of smaller or larger denominations.
SECTION 5. Representations and Warranties. The Grantor repre-
sents and warrants as follows:
(a) All of the Equipment and Inventory are located at the
places specified in Schedule III hereto. The chief place of business and chief
executive office of the Grantor and the office where the Grantor keeps its
records concerning the Receivables and the originals of all chattel paper that
evidence Receivables, are located at its address specified in Section 19. The
originals of all chattel paper that evidence Receivables have been delivered to
the Agent for the benefit of the Secured Parties. Except for Receivables listed
on Schedule IV attached hereto, none of the Receivables is evidenced by a
promissory note or other instrument.
(b) The Grantor is the legal and beneficial owner of the
Collateral free and clear of any lien, security interest, option or other charge
or encumbrance except for the security interest created by this Agreement and
except for Permitted Liens. No effective financing statement or other document
similar in effect covering all or any part of the Collateral is on file in any
recording office, except such as may have been filed in favor of the Agent for
the benefit of the Secured Parties relating to this Agreement and except as set
forth on Schedule 6.11 to the Securities Purchase Agreement. The Grantor has the
trade names listed on Schedule V attached hereto.
(c) The Grantor has exclusive possession and control of the
Equipment and Inventory.
(d) The Pledged Shares have been duly authorized and validly
issued and are fully paid and non-assessable. The Pledged Debt has been duly
authorized, authenticated or issued and delivered, and is the legal, valid and
binding obligation of the issuers thereof, and is not in default.
(e) The Pledged Shares constitute the percentage of the
issued and outstanding shares of stock of the respective issuers thereof
indicated on Schedule I. The Pledged Debt is outstanding in the principal
amount indicated on Schedule I.
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(f) This Agreement and the pledge of the Security Collateral
pursuant hereto create a valid and perfected security interest in the
Collateral, securing the payment of the Secured Obligations, and all filings and
other actions necessary or desirable to perfect and protect such security
interest have been duly taken.
(g) No consent of any other person or entity and no
authorization, approval or other action by, and no notice to or filing with,
any governmental authority or regulatory body is required (i) for the pledge by
the Grantor of the Security Collateral pursuant to this Agreement, for the grant
by the Grantor of the security interest granted hereby or for the execution,
delivery or performance of this Agreement by the Grantor, (ii) for the
perfection or maintenance of the pledge and security interest created hereby or
(iii) for the exercise by the Agent for the benefit of the Secured Parties of
the voting or other rights provided for in this Agreement or the remedies in
respect of the Collateral pursuant to this Agreement (except as may be required
in connection with the disposition of any portion of the Security Collateral by
laws affecting the offering and sale of securities generally).
(h) The Inventory has been produced by the Grantor in
compliance with all requirements of the Fair Labor Standards Act.
(i) There are no conditions precedent to the effectiveness
of this Agreement that have not been satisfied or waived.
(j) The Grantor has, independently and without reliance upon
the Agent and based on such documents and information as it has deemed appropri-
ate, made its own credit analysis and decision to enter into this Agreement.
SECTION 6. Further Assurances. (a) The Grantor agrees that from
time to time, at the expense of the Grantor, the Grantor will promptly execute
and deliver all further instruments and documents, and take all further action,
that may be necessary or desirable, or that the Agent may reasonably request, in
order to perfect and protect any pledge or security interest granted or
purported to be granted hereby or to enable the Agent to exercise and enforce
its rights and remedies hereunder with respect to any Collateral. Without
limiting the generality of the foregoing, the Grantor will: (i) as reasonably
requested by the Agent, xxxx conspicuously each document included in the
Inventory and each chattel paper included in the Receivables, each Contract
and, at the request of the Agent, each of its records pertaining to the
Collateral with a legend, in form and substance satisfactory to the Agent,
indicating that such document, chattel paper, Contract or Collateral is subject
to the pledge and security interest granted hereby; (ii) if any Collateral shall
be evidenced by a promissory note or other instrument or chattel paper, deliver
and pledge to the Agent
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for the benefit of the Secured Parties hereunder such note or instrument or
chattel paper duly indorsed and accompanied by duly executed instruments of
transfer, all in form and substance satisfactory to the Agent; and (iii) execute
and file such financing or continuation statements, or amendments thereto, and
such other instruments or notices, as may be necessary or desirable, or as the
Agent may request, in order to perfect and preserve the pledge and security
interest granted or purported to be granted hereby.
(b) The Grantor hereby authorizes the Agent to file one or
more financing or continuation statements, and amendments thereto, relating to
all or any part of the Collateral without the signature of the Grantor where
permitted by law. A photocopy or other reproduction of this Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
(c) The Grantor will furnish to the Agent from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the Agent may reasonably
request, all in reasonable detail.
SECTION 7. As to Equipment and Inventory.
(a) The Grantor shall keep the Equipment and Inventory
(other than Inventory sold in the ordinary course of business or movement of
other Equipment valued not greater than $300,000 in the ordinary course of
business in connection with rendering services to Grantor's clients) at the
places therefor specified in Section 5(a) or, upon 30 days' prior written
notice to the Agent, at such other places in jurisdiction where all action
required by Section 6 shall have been taken with respect to the Equipment and
Inventory.
(b) The Grantor shall cause the Equipment to be maintained
and preserved in the same condition, repair and working order as when new,
ordinary wear and tear excepted, and in accordance with any manufacturer's
manual, and shall forthwith, or in the case of any loss or damage to any of the
Equipment as quickly as practicable after the occurrence thereof, make or cause
to be made all repairs, replacements, and other improvements in connection
therewith which are necessary or desirable to such end. The Grantor shall
promptly furnish to the Agent a statement respecting any loss or damage to any
of the Equipment in excess of $500,000.
(c) The Grantor shall pay promptly when due all property and
other taxes, assessments and governmental charges or levies imposed upon, and
all claims (including claims for labor, materials and supplies) against, the
Equipment
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and Inventory. In producing the Inventory, the Grantor shall comply with all
requirements of the Fair Labor Standards Act.
SECTION 8. Insurance. (a) The Grantor shall, at its own expense,
maintain insurance with respect to the Equipment and Inventory in such amounts,
against such risks, in such form and with such insurers, as shall be
satisfactory to the Agent from time to time. Each policy for liability insurance
shall provide for all losses to be paid on behalf of the Agent for the benefit
of the Secured Parties and the Grantor as their respective interests may appear
and each policy for property damage insurance shall provide for all losses
(except for losses of less than $50,000 per occurrence) to be paid directly to
the Agent for the benefit of the Secured Parties. Each such policy shall in
addition (i) name the Grantor and the Agent for the benefit of the Secured
Parties as insured parties thereunder (without any representation or warranty by
or obligation upon the Agent) as their interests may appear, (ii) contain the
agreement by the insurer that any loss thereunder shall be payable to the Agent
for the benefit of the Secured Parties notwithstanding any action, inaction or
breach of representation or warranty by the Grantor, (iii) provide that there
shall be no recourse against the Agent for payment of premiums or other amounts
with respect thereto and (iv) provide that at least 10 days' prior written
notice of cancellation or of lapse shall be given to the Agent by the insurer.
The Grantor shall, if so requested by the Agent, deliver to the Agent original
or duplicate policies of such insurance and, as often as the Agent may
reasonably request, a report of a reputable insurance broker with respect to
such insurance.
(b) Reimbursement under any liability insurance maintained
by the Grantor pursuant to this Section 8 may be paid directly to the person who
shall have incurred liability covered by such insurance. In case of any loss
involving damage to Equipment or Inventory when subsection (c) of this Section 8
is not applicable, the Grantor shall make or cause to be made the necessary
repairs to or replacements of such Equipment or Inventory, and any proceeds of
insurance maintained by the Grantor pursuant to this Section 8 shall be paid to
the Grantor as reimbursement for the costs of such repairs or replacements.
(c) Upon (i) the occurrence and during the continuance of
any Event of Default, or (ii) the actual or constructive total loss (in excess
of $50,000 per occurrence) of any Equipment or Inventory, all insurance payments
in respect of such Equipment or Inventory shall be paid to and applied by the
Agent for the benefit of the Secured Parties as specified in Section 15(b).
SECTION 9. Place of Perfection; Records; Collection of
Receivables. (a) The Grantor shall keep its chief place of business and chief
executive office and the office where it keeps its records concerning the
Receivables, and the originals of
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all chattel paper that evidenced Receivables, at the location therefor specified
in Section 5(a) or, upon 30 days' prior written notice to the Agent, at any
other locations in a jurisdiction where all actions required by Section 6 shall
have been taken with respect to the Receivables. The Grantor will hold and
preserve such records and chattel paper and will permit representatives of the
Agent at any time during normal business hours to inspect and make abstracts
from such records and chattel paper.
(b) Except as otherwise provided in this subsection (b), the
Grantor shall continue to collect, at its own expense, all amounts due or to
become due the Grantor under the Receivables. In connection with such
collections, the Grantor may take and, at the Agent's direction, shall take such
action as the Grantor or the Agent may deem reasonably necessary or advisable to
enforce collection of the Receivables; provided, however, that, upon the
occurrence and during the continuance of any Event of Default, the Agent shall
have the right at any time, upon written notice to the Grantor of its intention
to do so, to direct such account debtors or obligors to make payment of all
amounts due or to become due to the Grantor thereunder directly to the Agent for
the benefit of the Secured Parties and, upon such notification and at the
expense of the Grantor, to enforce collection of any such Receivables, and to
adjust, settle or compromise the amount or payment thereof, in the same manner
and to the same extent as the Grantor might have done. After receipt by the
Grantor of the notice from the Agent referred to in the proviso to the preceding
sentence, (i) all amounts and proceeds (including instruments) received by the
Grantor in respect of the Receivables shall be received in trust for the Agent
for the benefit of the Secured Parties hereunder, shall be segregated from other
funds of the Grantor and shall be forthwith paid over to the Agent for the
benefit of the Secured Parties in the same form as so received (with any
necessary indorsement) to be held as cash collateral and either (A) released to
the Grantor so long as no Event of Default shall have occurred and be continuing
or (B) if any Event of Default shall have occurred and be continuing, applied as
provided by Section 15(b), and (ii) the Grantor shall not adjust, settle or
compromise the amount or payment of any Receivable, release wholly or partly
any account debtor or obligor thereof, or allow any credit or discount thereon.
SECTION 10. Voting Rights; Dividends; Etc. (a) So long as no
Event of Default or event which, with the giving of notice or the lapse of time,
or both, would become an Event of Default shall have occurred and be continuing:
(i) The Grantor shall be entitled to exercise or
refrain from exercising any and all voting and other consensual rights
pertaining to the Security Collateral or any part thereof for any
purpose not inconsistent with the terms of this Agreement or the
Securities Purchase Agreement; provided, however, that the Grantor
shall not exer-
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cise or refrain from exercising any such right if, in the Agent's
judgment, such action would have a material adverse effect on the value
of the Security Collateral or any part thereof, and, provided, further,
that the Grantor shall give the Agent at least five days' written notice
of the manner in which it intends to exercise, or the reasons for
refraining from exercising, any such right.
(ii) The Grantor shall be entitled to receive and
retain any and all dividends and interest paid in respect of the
Security Collateral, provided, however, that any and all
(A) dividends and interest paid or payable
other than in cash in respect of, and instruments and other
property received, receivable or otherwise distributed in
respect of, or in exchange for, any Security Collateral,
(B) dividends and other distributions paid
or payable in cash in respect of any Security Collateral in
connection with a partial or total liquidation or dissolution or
in connection with a reduction of capital, capital surplus or
paid-in-surplus, and
(C) cash paid, payable or otherwise
distributed in respect of principal of, or in redemption of, or
in exchange for, any Security Collateral,
shall be, and shall be forthwith delivered to the Agent to hold as,
Security Collateral and shall, if received by the Grantor, be received
in trust for the Agent for the benefit of the Secured Parties, be
segregated from the other property or funds of the Grantor, and be
forthwith delivered to the Agent as Security Collateral in the same form
as so received (with any necessary indorsement or assignment).
(iii) The Agent shall execute and deliver (or cause to
be executed and delivered) to the Grantor all such proxies and other
instruments as the Grantor may reasonably request for the purpose of
enabling the Grantor to exercise the voting and other rights which it is
entitled to exercise pursuant to paragraph (i) above and to receive the
dividends or interest payments which it is authorized to receive and
retain pursuant to paragraph (ii) above.
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(b) Upon the occurrence and during the continuance of an
Event of Default or an event which, with the giving of notice or the lapse of
time, or both, would become an Event of Default:
(i) All rights of the Grantor (x) to exercise or
refrain from exercising the voting and other consensual rights which it
would otherwise be entitled to exercise pursuant to Section 10(a)(i)
shall, upon notice to the Grantor by the Agent, cease and (y) to receive
the dividends and interest payments which it would otherwise be
authorized to receive and retain pursuant to Section 10(a)(ii) shall
automatically cease, and all such rights shall thereupon become vested
in the Agent for the benefit of the Secured Parties who shall thereupon
have the sole right to exercise or refrain from exercising such voting
and other consensual rights and to receive and hold as Security
Collateral such dividends and interest payments.
(ii) All dividends and interest payments which are
received by the Grantor contrary to the provisions of paragraph (i) of
this Section 10(b) shall be received in trust for the Agent for the
benefit of the Secured Parties, shall be segregated from other funds of
the Grantor and shall be forthwith paid over to the Agent as Security
Collateral in the same form as so received (with any necessary in-
dorsement).
SECTION 11. Transfers and Other Liens; Additional Shares.
(a) The Grantor shall not (i) sell, assign (by operation of
law or otherwise) or otherwise dispose of, or grant any option with respect to,
any of the Collateral, except Inventory in the ordinary course of business and
Equipment that is obsolete or no longer used in the Grantor's business, or (ii)
create or permit to exist any lien, security interest, option or other charge or
encumbrance upon or with respect to any of the Collateral, except for the
security interest under this Agreement and except for Permitted Liens.
(b) The Grantor agrees that it will (i) cause each issuer of
the Pledged Shares not to issue any stock or other securities in addition to or
in substitution for the Pledged Shares issued by such issuer, except to the
Grantor and (ii) pledge hereunder, immediately upon its acquisition (directly or
indirectly) thereof, any and all additional shares of stock or other securities
of each issuer of the Pledged Shares.
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SECTION 12. Agent Appointed Attorney-in-Fact. The Grantor hereby
irrevocably appoints the Agent the Grantor's attorney-in-fact, with full
authority in the place and stead of the Grantor and in the name of the Grantor
or otherwise, from time to time in the Agent's discretion, upon the occurrence
and during the continuance of any Event of Default, to take any action and to
execute any instrument which the Agent may deem necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation:
(a) to obtain and adjust insurance required to be paid to
the Agent for the benefit of the Secured Parties pursuant to Section 8,
(b) to ask, demand, collect, xxx for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become due under
or in connection with the Collateral,
(c) to receive, indorse, and collect any drafts or other
instruments, documents and chattel paper, in connection therewith, and
(d) to file any claims or take any action or institute any
proceedings which the Agent may deem necessary or desirable for the collection
of any of the Collateral or otherwise to enforce the rights of the Agent for the
benefit of the Secured Parties with respect to any of the Collateral.
SECTION 13. Agent May Perform. If the Grantor fails to perform
any agreement contained herein, the Agent may itself perform, or cause
performance of, such agreement, and the expenses of the Agent incurred in
connection therewith shall be payable by the Grantor under Section l7(b).
SECTION 14. The Agent's Duties. The powers conferred on the
Agent hereunder are solely to protect the interests of the Secured Parties in
the Collateral and shall not impose any duty upon it to exercise any such
powers. Except for the safe custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, neither the Agent nor
any Secured Party shall have any duty as to any Collateral, as to ascertaining
or taking action with respect to calls, conversions, exchanges, maturities,
tenders or other matters relative to any Security Collateral, whether or not the
Agent or any Secured Party has or is deemed to have knowledge of such matters,
or as to the taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral. The Agent and each
Secured Party shall be deemed to have exercised reasonable care in the custody
and preservation of any Collateral in its possession if such Collateral is ac-
corded treatment substantially equal to that which the Agent and each Secured
Party, as applicable, accord its own property.
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SECTION 15. Remedies. If any Event of Default shall have
occurred and be continuing:
(a) The Agent for the benefit of the Secured Parties may
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 of
a secured party on default under the Uniform Commercial Code in effect in the
State of New York at that time (the "Code") (whether or not the Code applies to
the affected Collateral), and also may (i) require the Grantor to, and the
Grantor hereby agrees that it will at its expense and upon request of the Agent
forthwith, assemble all or part of the Collateral as directed by the Agent and
make it available to Agent for the benefit of the Secured Parties at a place to
be designated by the Agent which is reasonably convenient to both parties and
(ii) without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any of the Agent's
offices or elsewhere, for cash, on credit or for future delivery, and upon such
other terms as the Agent may deem commercially reasonable. The Grantor agrees
that, to the extent notice of sale shall be required by law, at least ten days'
notice to the Grantor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable notification.
The Agent shall not be obligated to make any sale of Collateral regardless of
notice of sale having been given. The Agent may adjourn any public or private
sale from time to time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time and place to which it
was so adjourned.
(b) Any cash held by the Agent as Collateral and all cash
proceeds received by Agent for the benefit of the Secured Parties in respect of
any sale of, collection from, or other realization upon all or any part of the
Collateral may, in the discretion of the Agent, be held by the Agent as
collateral for, and/or then or at any time thereafter be applied (after payment
of any amounts payable to Agent for the benefit of the Secured Parties pursuant
to Section 17) in whole or in part by the Agent for the benefit of the Secured
Parties, all or any part of the Secured Obligations in such order as the Agent
shall elect. Any surplus of such cash or cash proceeds held by the Agent and
remaining after payment in full of all the Secured Obligations shall be paid
over to the Grantor or to whomsoever may be lawfully entitled to receive such
surplus.
(c) The Agent for the benefit of the Secured Parties may
exercise any and all rights and remedies of the Grantor in connection with the
Collateral.
(d) All payments received by the Grantor in connection with
the Collateral shall be received in trust for the Agent for the benefit of the
Secured
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Parties, shall be segregated from other funds of the Grantor and shall be
forthwith paid over to the Agent for the benefit of the Secured Parties in the
same form as so received (with any necessary indorsement).
SECTION 16. Registration Rights. If the Agent shall determine to
exercise its right to sell all or any of the Security Collateral pursuant to
Section 15, the Grantor agrees that, upon request of the Agent, the Grantor
will, at its own expense:
(a) execute and deliver, and cause each issuer of the
Security Collateral contemplated to be sold and the directors and officers
thereof to execute and deliver, all such instruments and documents, and do or
cause to be done all such other acts and things, as may be necessary or, in the
opinion of the Agent, advisable to register such Security Collateral under the
provisions of the Securities Act of 1933, as from time to time amended (the
"Securities Act"), and to cause the registration statement relating thereto to
become effective and to remain effective for such period as prospectuses are
required by law to be furnished, and to make all amendments and supplements
thereto and to the related prospectus which, in the opinion of the Agent, are
necessary or advisable, all in conformity with the requirements of the
Securities Act and the rules and regulations of the Securities and Exchange
Commission applicable thereto;
(b) use its best efforts to qualify the Security Collateral
under the state securities or "Blue Sky" laws and to obtain all necessary
governmental approvals for the sale of the Security Collateral, as requested by
the Agent;
(c) cause each such issuer to make available to its security
holders, as soon as practicable, an earning statement which will satisfy the
provisions of Section 11(a) of the Securities Act; and
(d) do or cause to be done all such other acts and things as
may be necessary to make such sale of the Security Collateral or any part
thereof valid and binding and in compliance with applicable law. The Grantor
further acknowledges the impossibility of ascertaining the amount of damages
which would be suffered by the Agent or any Secured Party by reason of the
failure by the Grantor to perform any of the covenants contained in this Section
and, consequently, agrees that, if the Grantor shall fail to perform any of such
covenants, it shall pay, as liquidated damages and not as a penalty, an amount
equal to the value of the Security Collateral on the date the Agent for the
benefit of the Secured Parties shall demand compliance with this Section.
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SECTION 17. Indemnity and Expenses. (a) The Grantor agrees to
indemnify the Agent and the Secured Parties from and against any and all claims,
losses and liabilities (including reasonable attorneys' fees) growing out of or
resulting from this Agreement (including, without limitation, enforcement of
this Agreement), except claims, losses or liabilities resulting from the Agent's
or the Secured Parties' gross negligence or willful misconduct.
(b) The Grantor will upon demand pay to the Agent 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 Agent may incur in
connection with (i) the administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of the Agent for the benefit of the Secured Parties hereunder
or (iv) the failure by the Grantor to perform or observe any of the provisions
hereof.
SECTION 18. Amendments; Etc. No amendment or waiver of any
provision of this Agreement, and no consent to any departure by the Grantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Agent, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
SECTION 19. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing (including telecopier,
telegraphic, telex or cable communication) and mailed, telecopied, telegraphed,
telexed, cabled or delivered to it, if to the Grantor, at its address at Xxx
Xxxxxxxxx Xxxx, Xxxxxxxxx, XX 00000, Attention: Xxxxxxx Xxxxxxxxx, and if to the
Agent, at the address specified for Funding in the Securities Purchase
Agreement, or, as to either party, at such other address as shall be designated
by such party in a written notice to the other party. All such notices and other
communications shall, when mailed, telecopied, telegraphed, telexed or cabled,
be effective when deposited in the mails, telecopied, delivered to the telegraph
company, confirmed by telex answerback or delivered to the cable company,
respectively.
SECTION 20. Continuing Security Interest; Assignments under
Securities Purchase Agreement. This Agreement shall create a continuing security
interest in the Collateral and shall (i) remain in full force and effect until
the later of (x) the payment in full of the principal of and all accrued
interests on the Notes and all fees in connection therewith and (y) the
expiration or termination of the Commitments, (ii) be binding upon the Grantor,
its successors and assigns, and (iii) inure to the benefit of, and be
enforceable by, the Agent for the benefit of the Secured Parties, and their
respective successors, transferees and assigns. Without limiting the
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generality of the foregoing clause (iii), each of Funding and KU may assign or
otherwise transfer all or any portion of its rights and obligations under the
Securities Purchase Agreement (including, without limitation, all or any portion
of its Commitment, amounts owing to it and any Note held by it) to any other
person or entity, and such other person or entity shall thereupon assume and
become vested, to the extent set forth in the agreement evidencing such
assignment or transfer, with all the benefits and obligations in respect thereof
assumed by or granted to Funding or KU, as the case may be, herein or otherwise.
Upon the later of (i) the payment in full of the principal of and all accrued
interests on the Notes and all fees in connection therewith and (ii) the
expiration or termination of the Commitments, the security interest granted
hereby shall terminate and all rights to the Collateral shall revert to the
Grantor. Upon any such termination, the Agent will, at the Grantor's expense,
execute and deliver to the Grantor such documents as the Grantor shall
reasonably request to evidence such termination.
SECTION 21. Governing Law; Terms. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York,
except to the extent that the validity or perfection of the security interest
hereunder, or remedies hereunder, in respect of any particular Collateral are
governed by the laws of a jurisdiction other than the State of New York. Unless
otherwise defined herein or in the Securities Purchase Agreement, terms used in
Article 9 of the Code are used herein as therein defined.
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IN WITNESS WHEREOF, the Grantor has caused this Agreement to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first above written.
NEXTERA ENTERPRISES, INC.
By /s/ XXXXXXX XXXXXXXXX
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Name: Xxxxxxx Xxxxxxxxx
Title: CFO
