PLEDGE AND SECURITY AGREEMENT
This Pledge and Security Agreement (this "Agreement") dated as of July 31,
2003 between Laurus Master Fund, Ltd. ("Pledgee") and CrossingGuard, Inc., a
Delaware corporation ("Pledgor").
BACKGROUND
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Pledgee and Pledgor's ultimate parent corporation, Xxxxxx, Inc. have
entered or are entering into a Securities Purchase Agreement dated as of July
31, 2003 (as amended, modified, restated or supplemented from time to time, the
"Purchase Agreement") pursuant to which Pledgee provides or will provide certain
financial accommodations to Pledgor's ultimate parent corporation.
In order to induce Pledgee to enter into the transactions contemplated by
the Purchase Agreement, Pledgor has agreed to pledge and grant a security
interest in the collateral described herein to Pledgee on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration the receipt of which is hereby acknowledged, the parties
hereto agree as follows:
1. Definitions. All capitalized terms used herein which are not defined shall
have the meanings given to them in the Purchase Agreement.
2. Pledge and Grant of Security Interest.
To secure the full and punctual payment and performance of (a) all
indebtedness obligations and liabilities of Pledgor's ultimate parent to
Pledgee under the Purchase Agreement and (b) all indebtedness, obligations
and liabilities of Pledgor's parent to Pledgee whether now existing or
hereafter arising, direct or indirect, liquidated or unliquidated, absolute
or contingent, due or not due and whether under, pursuant to or evidenced
by the Purchase Agreement or any other note, agreement, guaranty,
instrument or otherwise (collectively, the "Indebtedness"), Pledgor hereby
assigns, transfers and pledges, assigns, hypothecates, transfers and grants
to Pledgee a continuing security interest in all of the property described
on Schedule A annexed hereto, now owned or at any time hereafter racquired
by us, or in which we now have or at any time in the future may acquire any
right, title or interest (collectively, the "Collateral").
3. Representations and Warranties of Pledgor. Pledgor represents and warrants
to Pledgee (which representations and warranties shall be deemed to
continue to be made until all of the Indebtedness has been paid in full)
that:
(a) The execution, delivery and performance by Pledgor of this Agreement
and the pledge of the Collateral hereunder do not and will not result
in any violation of any agreement, indenture, instrument, license,
judgment, decree, order, law, statute, ordinance or other governmental
rule or regulation applicable to Pledgor.
(b) This Agreement constitutes the valid and binding obligation of Pledgor
enforceable against Pledgor in accordance with its terms.
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(c) Other than a deposit account control agreement to be executed on or
prior to the date hereof in favor of and on terms satisfactory to
Pledgee by the financial institution at which the Pledged Account (as
defined in Schedule A hereto) is maintained, no consent or approval of
any person, corporation, governmental body, regulatory authority or
other entity, is or will be necessary for the execution, delivery and
performance of this Agreement or, the exercise by Pledgee of any
rights with respect to the Collateral or for the pledge and assignment
of, and the grant of a security interest in, the Collateral hereunder.
(d) There are no pending or, to the best of Pledgor's knowledge,
threatened actions or proceedings before any court, judicial body,
administrative agency or arbitrator which may materially adversely
affect the Collateral.
(e) Pledgor has the requisite power and authority to enter into this
Agreement and to pledge and assign the Collateral to Pledgee in
accordance with the terms of this Agreement.
(f) Pledgor owns each item of the Collateral and, except for the pledge
and security interest granted to Pledgee hereunder, the Collateral is
free and clear of any other security interest, pledge, claim, lien,
charge, hypothecation, assignment, offset or encumbrance whatsoever
(collectively, "Liens").
(g) The pledge and assignment of the Collateral and the grant of a
security interest under this Agreement vest in Pledgee all rights of
Pledgor in the Collateral as contemplated by this Agreement.
4. Affirmative Covenants. Until such time as all of the Indebtedness has been
paid in full, Pledgor shall:
(a) Defend the Collateral against the claims and demands of all other
parties and keep the Collateral free from all Liens, except for the
Liens granted to Pledgee under this Agreement.
(b) In the event Pledgor comes into possession of any portion of the
Collateral in violation of the terms of this Agreement, hold the same
in trust for Pledgee and deliver to Pledgee such Collateral in the
form received no later than one (1) business day following Pledgor's
receipt thereof.
(c) In the event any portion of the Collateral is held by a third party,
take all action that Pledgee may request so as to maintain the
validity, enforceability, perfection and priority of Pledgee's
security interest in the Collateral.
(d) Within five (5) business days of receipt thereof by Pledgor, deliver
to Pledgee all notices and statements relating to the Collateral
received by Pledgor or any third party holding the Collateral.
(e) Notify Pledgee promptly of (a) any adverse event relating to the
Collateral or any adverse change in the value of the Collateral and
(b) Pledgee's intention to commence a voluntary case under any state
or federal bankruptcy laws (as now or hereafter in effect).
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(f) At the written request of Pledgee at any time and from time to time,
at Pledgor's sole expense, promptly take such action and execute and
deliver such financing statements, control agreements and further
instruments and documents as Pledgee may reasonably request in order
to more fully perfect, evidence or effectuate the pledge and
assignment hereunder and the security interest granted hereby and to
enable Pledgee to exercise and enforce its rights and remedies
hereunder. Pledgee is hereby authorized to file one or more financing
or continuation statements under the applicable Uniform Commercial
Code (as in effect from time to time, the "UCC") relating to the
Collateral, naming Pledgee as "secured party."
(g) Furnish to Pledgee such other information relating to the Collateral
as Pledgee may from time to time reasonably request.
5. Negative Covenants. Until such time as the Indebtedness has been
irrevocably paid in full, Pledgor shall not: sell, convey, or otherwise
dispose of any of the Collateral or any interest therein or incur or permit
to exist any Lien with respect to any of the Collateral or the proceeds
thereof other than the Lien granted to Pledgee under this Agreement.nor
shall it change the ownership of the Pledged Account, other than with the
prior written consent of Pledgee. Notwithstanding the immediately foregoing
sentence, if no Event of Default under the Note shall have occurred and be
continuing Pledgee may have access to funds on deposit in the Pledged
Account, make or cause to be made any transfers from the Pledged Account,
and/or make or cause to be made any withdrawals from the Pledged Account.
6. Events of Default.
The term "Event of Default" wherever used herein shall mean the occurrence
of any one of the following events:
(a) An "Event of Default" under the Note Agreement shall have occurred and
shall not have been cured during any applicable cure or grace period;
(b) Pledgor's failure to comply with or perform any of its undertakings or
obligations under any agreement between Pledgor and Pledgee,
including, without limitation, this Agreement, and such failure shall
not be cured for a period of twenty (20) business days after written
notice thereof is received by the Pledgor from Pledgee;
(c) Any representation, warranty, statement or covenant made or furnished
to Pledgee by or on behalf of Pledgor in connection with this
Agreement and/or the Purchase Agreement proves to have been false in
any material respect when made or furnished or is breached, violated
or not complied with and such breach, violation or noncompliance shall
not be cured for a period of twenty (20) business days after written
notice thereof is received by the Pledgor from Pledgee;
(d) Pledgor shall (i) apply for, consent to, or suffer to exist the
appointment of, or the taking of possession by, a receiver, custodian,
trustee, liquidator or other fiduciary of itself or of all or a
substantial part of its property, (ii) make a general assignment for
the benefit of creditors, (iii) commence or inform Pledgee of its
intention to commence a voluntary case under any state or federal
bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a
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bankrupt or insolvent, (v) file a petition seeking to take advantage
of any other law providing for the relief of debtors, (vi) acquiesce
to, or fail to have dismissed, within ninety (90) days, any petition
filed against it in any involuntary case under such bankruptcy laws,
or (vii) take any action for the purpose of effecting any of the
foregoing; or
(e) The Collateral is subjected to levy of execution, attachment,
distraint or other judicial process; or the Collateral is the subject
of a claim (other than by Pledgee) of a Lien or other right or
interest in or to the Collateral and such levy or claim shall not be
cured, disputed or stayed within a period of thirty (30) days after
written notice thereof.
7. Remedies.
Upon the occurrence of an Event of Default, Pledgee may:
(i) Demand, collect, receipt for, settle, compromise, adjust, xxx
for, foreclose, realize upon the Collateral (or any part thereof)
or debit the Pledged Account (as defined in Schedule A hereto),
in each case as Pledgee may determine in its sole discretion;
(ii) Transfer the Collateral into its name or into the name of its
nominee or nominees;
(iii)Subject to the requirements of applicable law, sell, assign and
deliver the whole or, from time to time any part of the
Collateral, with or without demand, advertisement or notice of
the time or place of sale or adjournment thereof or otherwise
(all of which are hereby waived, except such notice as is
required by applicable law and cannot be waived), for such price
or prices and on such terms as Pledgee in its sole discretion may
determine.
Pledgor acknowledges and agrees that ten (10) days' prior written notice of
the time and place of any public sale of any of the Collateral or any other
intended disposition thereof shall be reasonable and sufficient notice to
Pledgor within the meaning of the UCC. Pledgor hereby waives and releases
any and all right or equity of redemption, whether before or after sale
hereunder. In addition to the foregoing, Pledgee shall have all of the
rights and remedies of a secured party under applicable law and the UCC.
8. Proceeds of Collateral Agreement. The proceeds of any disposition of the
Collateral under this Agreement shall be applied as follows:
(a) First, to the payment of all costs, expenses and charges of Pledgee
and to the reimbursement of Pledgee for the prior payment of such
costs, expenses and charges incurred in connection with the care and
safekeeping of the Collateral (including, without limitation, the
expenses of any sale or any other disposition of any of the
Collateral), the expenses of any taking, attorneys' fees and expenses,
court costs, any other fees or expenses incurred or expenditures or
advances made by Pledgee in the protection, enforcement or exercise of
its rights, powers or remedies hereunder, with interest on any such
reimbursement at the rate prescribed in the Note from the date of
payment;
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(b) Second, to the payment of the Obligations, in whole or in part, in
such order as Pledgee may elect, whether or not such Obligation is
then due;
(c) Third, to such persons, firms corporations or other entities as
required by applicable law including, without limitation the UCC; and
(d) Fourth, to the extent of any surplus to Pledgor or as a court of
competent jurisdiction may direct.
In the event that the proceeds of any collection, recovery, receipt,
appropriation, realization or sale are insufficient to satisfy the
Indebtedness, Pledgor shall be liable for the deficiency together with
interest thereon at the rate prescribed in the Note plus the reasonable
costs and fees of any attorneys employed by Pledgee to collect such
deficiency.
9. Waiver of Marshaling. Pledgor hereby waives any right to compel any
marshaling of any of the Collateral.
10. No Waiver. Any and all of Pledgee's rights with respect to the Liens
granted under this Agreement shall continue unimpaired, and Pledgor shall
be and remain obligated in accordance with the terms hereof,
notwithstanding (a) the bankruptcy, insolvency or reorganization of
Pledgor, (b) the release or substitution of any item of the Collateral at
any time, or of any rights or interests therein, or (c) any delay,
extension of time, renewal, compromise or other indulgence granted by
Pledgee in reference to any of the Indebtedness. Pledgor hereby waives all
notice of any such delay, extension, release, substitution, renewal,
compromise or other indulgence, and hereby consents to be bound hereby as
fully and effectively as if Pledgor had expressly agreed thereto in
advance. No delay or extension of time by Pledgee in exercising any power
of sale, option or other right or remedy hereunder, and no failure by
Pledgee to give notice or make demand, shall constitute a waiver thereof,
or limit, impair or prejudice Pledgee's right to take any action against
Pledgor or to exercise any other power of sale, option or any other right
or remedy.
11. Expenses. The Collateral shall secure, and Pledgor shall pay to Pledgee on
demand, from time to time, all costs and expenses, (including but not
limited to, reasonable attorneys' fees and costs, taxes, and all transfer,
recording, filing and other charges) of, or incidental to, the custody,
care, transfer, administration of the Collateral or any other collateral,
or in any way relating to the enforcement, protection or preservation of
the rights or remedies of Pledgee under this Agreement or with respect to
any of the Indebtedness.
12. Pledgee Appointed Attorney-In-Fact and Performance by Pledgee. Upon the
occurrence and continuance of an Event of Default, Pledgor hereby
irrevocably constitutes and appoints Pledgee as Pledgor's true and lawful
attorney-in-fact, with full power of substitution, to execute, acknowledge
and deliver any instruments and to do in Pledgor's name, place and stead,
all such acts, things and deeds for and on behalf of and in the name of
Pledgor, which Pledgor could or might do or which Pledgee may deem
necessary, desirable or convenient to accomplish the purposes of this
Agreement, including, without limitation, to execute such instruments of
assignment or transfer or orders and to register, convey or otherwise
transfer title to the Collateral into Pledgee's name. Pledgor hereby
ratifies and confirms all that said attorney-in-fact may so do and hereby
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declares this power of attorney to be coupled with an interest and
irrevocable. If Pledgor fails to perform any agreement herein contained,
Pledgee may itself perform or cause performance thereof, and any costs and
expenses of Pledgee incurred in connection therewith shall be paid by
Pledgor as provided in Section 11 hereof.
13. Captions. All captions in this Agreement are included herein for
convenience of reference only and shall not constitute part of this
Agreement for any other purpose.
14. Miscellaneous.
(a) This Agreement constitutes the entire and final agreement among the
parties with respect to the subject matter hereof and may not be
changed, terminated or otherwise varied except by a writing duly
executed by the parties hereto.
(b) No waiver of any term or condition of this Agreement, whether by
delay, omission or otherwise, shall be effective unless in writing and
signed by the party sought to be charged, and then such waiver shall
be effective only in the specific instance and for the purpose for
which given.
(c) In the event that any provision of this Agreement or the application
thereof to Pledgor or any circumstance in any jurisdiction governing
this Agreement shall, to any extent, be invalid or unenforceable under
any applicable statute, regulation, or rule of law, such provision
shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform to such statute,
regulation or rule of law, and the remainder of this Agreement and the
application of any such invalid or unenforceable provision to parties,
jurisdictions, or circumstances other than to whom or to which it is
held invalid or unenforceable shall not be affected thereby, nor shall
same affect the validity or enforceability of any other provision of
this Agreement.
(d) This Agreement shall be binding upon Pledgor, and Pledgor's successors
and assigns, and shall inure to the benefit of Pledgee and its
successors and assigns.
(e) Any notice or other communication required or permitted pursuant to
this Agreement shall be given in accordance with the notice provisions
of the Purchase Agreement.
(f) This Agreement shall be governed by and construed and enforced in all
respects in accordance with the laws of the State of New York applied
to contracts to be performed wholly within the State of New York.
(g) EACH PARTY HERETO HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS
AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY
OTHER AGREEMENT EXECUTED OR DELIVERED BY THEM IN CONNECTION HEREWITH,
OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR
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TORT OR OTHERWISE AND EACH PARTY HERETO HEREBY AGREES AND CONSENTS
THAT ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY
COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF EACH PARTY TO THE WAIVER OF ITS RIGHT TO
TRIAL BY JURY.
(h) PLEDGOR EXPRESSLY CONSENTS TO THE JURISDICTION AND VENUE OF EACH COURT
OF COMPETENT JURISDICTION LOCATED IN THE STATE OF NEW YORK FOR ALL
PURPOSES IN CONNECTION WITH THIS AGREEMENT. ANY JUDICIAL PROCEEDING BY
PLEDGOR AGAINST PLEDGEE INVOLVING, DIRECTLY OR INDIRECTLY ANY MATTER
OR CLAIM IN ANY WAY ARISING OUT OF, RELATED TO OR CONNECTED WITH THIS
AGREEMENT SHALL BE BROUGHT ONLY IN A STATE COURT LOCATED IN THE COUNTY
OF NEW YORK, STATE OF NEW YORK. PLEDGOR FURTHER CONSENTS THAT ANY
SUMMONS, SUBPOENA OR OTHER PROCESS OR PAPERS (INCLUDING, WITHOUT
LIMITATION, ANY NOTICE OR MOTION OR OTHER APPLICATION TO EITHER OF THE
AFOREMENTIONED COURTS OR A JUDGE THEREOF) OR ANY NOTICE IN CONNECTION
WITH ANY PROCEEDINGS HEREUNDER, MAY BE SERVED INSIDE OR OUTSIDE OF THE
STATE OF NEW YORK OR THE SOUTHERN DISTRICT OF NEW YORK BY REGISTERED
OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, OR BY PERSONAL SERVICE
PROVIDED A REASONABLE TIME FOR APPEARANCE IS PERMITTED, OR IN SUCH
OTHER MANNER AS MAY BE PERMISSIBLE UNDER THE RULES OF SAID COURTS.
PLEDGOR WAIVES ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION
INSTITUTED HEREON AND SHALL NOT ASSERT ANY DEFENSE BASED ON LACK OF
JURISDICTION OR VENUE OR BASED UPON FORUM NON CONVENIENS.
(i) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which when taken together
shall constitute one and the same agreement. Any signature delivered
by a party by facsimile transmission shall be deemed an original
signature hereto.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first written above.
CROSSINGGUARD, INC.
By: /s/ Xxxxx X. Xxxxxxx
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Name: Xxxxx X. Xxxxxxx
Its: President
LAURUS MASTER FUND, LTD.
By: /s/ Xxxxx Grin
---------------------------------
Name: Xxxxx Grin
Its: Partner
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SCHEDULE A
Description of Collateral
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All of Pledgor's right, title and interest in and to deposit account (the
"Pledged Account") number 7915666874maintained with Commerce Bank ("Bank"), all
contract rights, claims and privileges in respect of the Pledged Account, all
cash, checks, money orders and other items of value of Pledgor now or hereafter
paid to, deposited in, credited to, held (whether for collection, provisionally
or otherwise) for deposit in or otherwise in the possession or under the control
of, or in transit to, Bank or any agent, bailee or custodial thereof for deposit
in the Pledged Account, and all interest and income received therefrom, all
substitutions therefor and all proceeds thereof in any form.
All of Pledgor's accounts, inventory, equipment, goods, documents,
instruments (including, without limitation, promissory notes), contract rights,
general intangibles (including, without limitation, payment intangibles and an
absolute right to license on terms no less favorable than those current in
effect among our affiliates, but not own intellectual property), chattel paper,
supporting obligations, investment property, letter-of-credit rights, trademarks
and tradestyles in which we now have or hereafter may acquire any right, title
or interest, all proceeds and products thereof (including, without limitation,
proceeds of insurance) and all additions, accessions and substitutions thereto
or therefor.
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