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EXECUTION COPY
SECURITY AGREEMENT
This Security Agreement is made as of July 6, 2000 between iBaby,
Inc., a Delaware corporation ("Pledgee"), and Babygear.com, Inc. a Delaware
corporation ("Pledgor").
Recitals
WHEREAS, pursuant to Pledgor's desire to purchase all of the rights,
title and interests of Pledgee in and to Assets pursuant to the Asset Purchase
Agreement dated as of July 6, 2000 (as amended, supplemented or otherwise
modified from time to time, the "Purchase Agreement"), between Pledgor, Pledgee
and iVillage Inc., a Delaware corporation, and the agreement between Pledgee and
Pledgor that the consideration to be paid for such Assets shall be in the form
of a US$9,898,627.11 convertible promissory note (the "Note"); and
WHEREAS, Pledgee requires, and Pledgor is willing, as a condition to
the consummation of the transactions contemplated by the Purchase Agreement, to
grant to the Pledgee, for the benefit of Pledgee, a security interest in 100% of
the inventory being transferred as part of the Assets on the date hereof, as
will be set forth on Schedules I and II of Disclosure Schedule Section 2.1 of
the Purchase Agreement and as may be adjusted by the Inventory Schedule prepared
pursuant to Section 2.3 of the Purchase Agreement (the "Closing Inventory"),
except for any intellectual property, including without limitation customer
lists, goodwill, know-how and other trade secrets, software, patents,
copyrights, trademarks and domain names, if any, as partial security for the
payment and performance by Pledgor of all of the obligations of Pledgor now or
hereafter existing under the Note (the "Secured Obligations") by executing and
delivering this Agreement; provided, however, that the Closing Inventory shall,
when in the possession of Pledgor, be held separate and apart from the other
inventory of Pledgor and shall be clearly marked and identified as security for
the benefit of Pledgee.
NOW, THEREFORE, in consideration of the mutual premises and
covenants herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Pledgor hereby agrees with the
Pledgee as follows:
1. Definitions.
"Agreement" shall mean this Security Agreement, including all
amendments, modifications and supplements to the extent executed in accordance
with the provisions hereof, and shall refer to this Agreement as the same may be
in effect at the time such reference becomes operative.
Unless otherwise defined herein, capitalized terms used herein shall have
the meanings ascribed to them in the Purchase Agreement. Except as otherwise
specifically provided in this Agreement, the singular of any term shall include
the plural, and vice versa, the use of any term shall be equally applicable to
any gender, "or" shall not be exclusive, and "including" shall not be limiting
or exclusive, and any reference to a "Section" shall refer to the relevant
Section of this Agreement.
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2. Creation and Description of Security Interest. Pledgor hereby
pledges to the Pledgee, and grants to the Pledgee a security interest in
Pledgor's right, title and interest in and to the Closing Inventory
(collectively, the "Pledged Collateral") until the termination of this
Agreement; provided, however that the Pledgee shall acquire a security interest
only in such Pledged Collateral in an amount equal to the total cost of the
Closing Inventory as of the date hereof and as listed under the columns titled
(i) "total cost" on Schedule I of Disclosure Schedule Section 2.1 of the
Purchase Agreement and (ii) "ext.cost" on Schedule II of Disclosure Schedule
Section 2.1 of the Purchase Agreement and as may be adjusted by the Inventory
Schedule prepared pursuant to Section 2.3 of the Purchase Agreement, provided,
however, that the Closing Inventory shall, when in the possession of Pledgor, be
held separate and apart from the other inventory of Pledgor and shall be clearly
marked and identified as security for the benefit of Pledgee and that there
shall be no encumbrance on any other inventory of Pledgor. Until the termination
of this Agreement pursuant to Section 8 hereof, this Agreement and the Pledged
Collateral secure the prompt payment and performance when due of each and every
obligation that constitutes a part of the Secured Obligations of Pledgor.
3. Pledgor's Representations and Covenants. To induce Pledgee to
enter into this Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:
(a) Payment of Indebtedness. Pledgor will pay the principal
sum of the Note secured hereby, together with interest thereon, at the time and
in the manner provided in the Note.
(b) Encumbrances. Assuming that the Pledgor takes possession
of the Closing Inventory free and clear of all Encumbrances, Pledgor is the sole
owner of the Pledged Collateral and the Pledged Collateral is free of all
Encumbrances (other than the Encumbrances hereunder or Encumbrances otherwise
created by the Pledgee) and Pledgor will not further encumber the Pledged
Collateral without the prior written consent of Pledgee.
(c) Authorization. Pledgor has the corporate right and
capacity to pledge the Pledged Collateral to the Pledgee as provided herein.
(d) Binding Obligation. This Agreement has been duly executed
and delivered by Pledgor and constitutes the legal, valid and binding obligation
of Pledgor, enforceable in accordance with its terms except as the
enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or similar laws affecting creditors'
rights generally and general equitable principles (whether considered in a
proceeding in equity or at law).
The representations and warranties set forth in this Section 3 shall
survive the execution and delivery of this Agreement.
4. Pledgor covenants and agrees that as of the date hereof and until
the Termination Date:
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(a) Transfer and Other Liens. Prior to the repayment in full
in cash of $2,474,656.78 (or, if an adjustment occurs pursuant to Section 2.3 of
the Purchase Agreement, one quarter of the outstanding principal amount of the
Note as of July 6, 2000) of the Note, unless the Pledgee gives its prior written
consent, Pledgor will not (a) sell, assign (by operation of law or otherwise),
transfer or otherwise dispose of, or grant any option with respect to, any of
the Pledged Collateral, or (b) create or suffer to exist any Encumbrance or
grant a security interest in or upon or with respect to, or otherwise encumber
any of its rights in or to, any of the Pledged Collateral; provided, however,
that Pledgor may sell, assign, transfer or dispose of all or any part of the
Pledged Collateral consistent with Pledgor's current practices or Pledgee's
prior practice of selling its inventory without Pledgee's consent if the gross
proceeds received from such sale, assignment, transfer or disposition of Closing
Inventory set forth on Schedule I of Disclosure Schedule Section 2.1 less the
total cost of any such Closing Inventory sold, assigned, transferred or
otherwise disposed of as listed under the column titled "total cost" of Schedule
I of Disclosure Schedule Section 2.1 of the Purchase Agreement (as may be
adjusted under Section 2.3 of the Purchase Agreement) are used by the Pledgor to
prepay the Note in accordance with Section 4(b) below.
(b) Release of Pledged Collateral Upon Sale. Pledged
Collateral that is required to be released by Pledgee from the pledge and
security interest created by this Agreement in order to permit the Pledgor to
consummate any such permitted sale, assignment, transfer or disposition shall be
so released by the Pledgee at such times and to the extent necessary to permit
the Pledgor to consummate such permitted transactions. Pledgor shall on the
tenth day of each month provide to Pledgee a written report of each permitted
transaction that occurred in the prior month stating the type and amount of
Pledged Collateral sold, the total consideration received, the total cost of the
Pledged Collateral sold as calculated using the amounts listed under the column
titled "total cost" of Schedule I of Disclosure Schedule Section 2.1 of the
Purchase Agreement and as may be adjusted by the Inventory Schedule prepared
pursuant to Section 2.3 of the Purchase Agreement and the amount to be remitted
to Pledgee pursuant to clause (a) above. In addition, on the tenth day of each
month, Pledgor shall pay to Pledgee the amount due to Pledgee as set forth in
the report delivered to Pledgee by Pledgor pursuant to this clause (b). All
payments made pursuant to the terms of this clause (b) shall be paid by check in
U.S. dollars and shall be delivered to Pledgee at its address specified in
Section 13 of this Agreement. The Pledgee shall execute and deliver to the
Pledgor any documents requested to be executed by it by the Pledgor that are
reasonably necessary to release the Pledged Collateral of record pursuant to any
permitted transaction described in clause (a) above.
(c) Further Assurances; Creation and Preservation of Lien.
Pledgor will, at its expense, promptly execute, acknowledge and deliver all such
instruments and take all such action as the Pledgee, from time to time, may
reasonably request in order to ensure to the Pledgee the benefits of the liens
in and to the Pledged Collateral intended to be created by this Agreement and to
protect any pledge or security interest granted or purported to be granted
hereby or to enable the Pledgee to exercise and enforce its rights and remedies
hereunder with respect to the Pledged Collateral.
(d) Title. Pledgor has and will defend the title to the
Pledged Collateral and the liens of the Pledgee thereon against the claim of any
Person and will maintain
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and preserve such liens until such liens are realized in accordance with the
terms hereof or until the Termination Date.
5. Default. Pledgor shall be deemed to be in Default of the Note and
of this Agreement in the event:
(a) Payment of principal or interest on the Note shall be
delinquent for a period of ten (10) days or more; or
(b) Pledgor fails to perform any of the covenants set forth in
the Note or contained in this Agreement for a period of thirty (30) days after
written notice thereof from Pledgee.
Upon the occurrence and during the continuance of an event of
Default, as set forth above, (i) Pledgee shall have the right to accelerate
payment of the Note upon notice to Pledgor and (ii) Pledgee shall thereafter be
entitled to pursue its remedies as a secured party under the New York Commercial
Code and Pledgee is hereby authorized and empowered to transfer and register in
its name or in the name of its nominee the whole or any part of the Pledged
Collateral, and to the extent such Default is a payment default under the Note
to sell the Pledged Collateral in one or more sales after at least ten (10)
days' written notice of the time and place of any public sale or of the time
after which a private sale is to take place (which notice Pledgor agrees is
commercially reasonable), in each case subject to any limitations or
restrictions imposed by applicable law. Subject to the limitations previously
set forth in this Section 5, any sale of the Pledged Collateral shall be made at
a public or private sale at a place to be named in the notice of sale, either
for cash or upon credit or for future delivery at such price as the Pledgee may
deem fair, and, to the extent permitted by applicable law, the Pledgee may be
the purchaser of the whole or any part of the Pledged Collateral so sold, and
hold the same thereafter in their own right free from any claim of Pledgor or
any right of redemption. The Pledgee reserves the right to reject any and all
bids at such sale which, in its reasonable discretion, it shall deem inadequate.
Demands of performance, notices of sale, advertisements and the presence of
property at sale are hereby waived, and any sale hereunder may be conducted by
an auctioneer or any officer or agent of the Pledgee.
If, at the original time or times appointed for the sale of the
whole or any part of the Pledged Collateral, the highest bid shall be inadequate
to discharge in full the Recoverable Amount if there be but one sale, or if the
Pledged Collateral be offered for sale in lots, if at any of such sales the
highest bid for the lot offered for sale would indicate to the Pledgee, in its
reasonable discretion, the unlikelihood of the proceeds of the sales of the
whole of the Pledged Collateral being sufficient to discharge in full the
Recoverable Amount, the Pledgee may, on one or more occasions and in its
reasonable discretion, postpone any of said sales by public announcement at the
time of sale or the time of previous postponement of sale, and no other notice
of such postponement or postponements of sale need be given, any other notice
being hereby waived. For purposes hereof, "Recoverable Amount" means the
difference between (x) $2,474,656.78 (or, if an adjustment occurs pursuant to
Section 2.3 of the Purchase Agreement, one quarter of the outstanding principal
amount of the Note as of July 6, 2000) plus the amount of any accrued and unpaid
interest due on such principal amount of the Note and (y) all previously paid
cash prepayments of the Note paid by Pledgor; provided, however, that
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Recoverable Amount shall not include any fees, costs, expenses incurred by
Pledgee pursuant to this Section 5 and Section12.
In the event of any sales under this Section 5, the Pledgee shall,
after deducting all costs and expenses of every kind (including reasonable
attorneys' fees and disbursements) for care, safekeeping, collection, sale,
delivery or otherwise, apply the residue of the proceeds of the sales up to the
Recoverable Amount to the payment or reduction, either in whole or in part, of
the Secured Obligations in accordance with Section 6 and the agreements and
instruments governing and evidencing such Secured Obligations, returning the
surplus, if any, to Pledgor.
The Pledgor waives notice of the creation, advance, increase,
existence, extension, or renewal of, or of any indulgence with respect to, the
Secured Obligations; waives presentment, demand, notice of dishonor, and
protest; waives notice of the amount of the Secured Obligations outstanding at
any time, notice of any Default, and all other notices respecting the Secured
Obligations (except for any such notices that are required to be given to the
Pledgor pursuant to the other provisions of this Agreement, the Purchase
Agreement, the Note or by applicable law); and agrees that maturity of the
Secured Obligations and any part thereof may be accelerated, extended, or
renewed one or more times by the Pledgee, in its discretion, without notice to
the Pledgor (except for any such notices that are required to be given to the
Pledgor pursuant to the other provisions of this Agreement, the Purchase
Agreement, the Note or by applicable law). The Pledgor waives (a) any claim
that, as to any part of the Pledged Collateral, a public sale, should the
Pledgee elect so to proceed, is, in and of itself, not a commercially reasonable
method of sale for such Pledged Collateral, (b) except as otherwise provided in
this Agreement, to the fullest extent not prohibited by applicable laws, notice
or judicial hearing in connection with the Pledgee's disposition of any of the
Pledged Collateral including any and all prior notice and hearing for any
pre-judgment remedy or remedies and any such right that the Pledgor would
otherwise have under the Constitution or any statute of the United States or of
any state, and all other requirements as to the time, place and terms of sale or
other requirements with respect to the enforcement of the Pledgee's rights
hereunder and (c) all rights of redemption, appraisal or valuation.
To the extent permitted by law, Pledgor agrees that it will not
interfere with any right, power or remedy of the Pledgee provided for in this
Agreement or now or hereafter existing at law or in equity or by statute or
otherwise, or the exercise or beginning of the exercise by the Pledgee of any
one or more of such rights, powers or remedies. No failure or delay on the part
of the Pledgee to exercise any such right, power or remedy, and no notice or
demand which may be given to or made upon Pledgor by the Pledgee with respect
thereto, shall operate as a waiver thereof, or limit or impair the Pledgee's
right to take any action or to exercise any right, power or remedy hereunder,
without notice or demand, or prejudice their rights against Pledgor in any
respect.
6. Application of Proceeds.
After a Default, all cash proceeds received by the Pledgee in respect of
any sale of, liquidation of or other realization upon all or any part of the
Pledged Collateral shall first be applied by the Pledgee to the payment of the
costs and expenses of such sale, including reasonable fees and expenses of the
Pledgee's agents and counsel, and all reasonable expenses,
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liabilities and advances made or incurred by the Pledgee in connection
therewith. All remaining cash proceeds received by the Pledgee up to the
Recoverable Amount in respect of any sale of, liquidation of or other
realization upon all or any part of the Pledged Collateral shall be applied by
the Pledgee as follows:
(a) First, to the payment of that portion of the Secured
Obligations consisting of accrued and unpaid interest, if any, on $2,474,656.78
of the principal amount of the Note (or, if an adjustment occurs pursuant to
Section 2.3 of the Purchase Agreement, one quarter of the outstanding principal
amount of the Note as of July 6, 2000);
(b) Next, to the payment of up to the Recoverable Amount of
the Secured Obligations consisting of principal; and
(c) Next, to the payment of that remaining portion of the
Secured Obligations consisting of principal.
All cash proceeds received by the Pledgee in respect of any sale of,
liquidation of or other realization upon all or any part of the Pledged
Collateral and remaining after the application of the proceeds as set forth
above, shall be paid to Pledgor, or to such person as the Pledgor may direct.
7. Release of Collateral. There shall be released from this pledge a
portion of the Pledged Collateral hereunder upon payments of the principal of
the Note (or a written promise to pay all or a portion of the principal of the
Note with the after-tax net proceeds of a sale of such Pledged Collateral). The
amount of the Pledged Collateral which shall be released shall be the amount of
Pledged Collateral which bears the same proportion to the initial amount of
Pledged Collateral pledged hereunder as the payment of principal bears to the
initial full principal amount of the Note.
8. Term. This Agreement shall terminate (except as otherwise
provided herein) on the earlier of (i) conversion of the Note pursuant to the
terms of Paragraph 7(b) of the Note and (ii) the payment in cash of an aggregate
of $2,474,656.78 (or, if an adjustment occurs pursuant to Section 2.3 of the
Purchase Agreement, one quarter of the outstanding principal amount of the Note
as of July 6, 2000) under the Note and upon the occurrence of such event, the
Pledged Collateral shall be released from the liens and Encumbrances created
hereby and Pledgor shall be entitled to the return of, and the Pledgee, upon
such conversion or payment, shall return all of the Pledged Collateral at the
time subject to this Agreement which may be in the Pledgee's custody hereunder
and all instruments of assignment executed in connection therewith to Pledgor or
such Person as the Pledgor may direct and all of Pledgor's liabilities hereunder
shall at such time terminate. At the request and expense of Pledgor following
any such termination, Pledgee shall execute and deliver to Pledgor such
documents as Pledgor shall reasonably request to evidence such termination.
9. Insolvency. Upon the occurrence of an Event of Default described
in Paragraphs 4(f) or (g) of the Note, the Note shall accelerate pursuant to the
terms of the Note and Pledgee may proceed under this Agreement as provided in
the case of Default.
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10. Pledgee Liability. In the absence of bad faith, willful
misconduct or negligence on the part of Pledgee, Pledgee shall not be liable to
any party for any of his acts, or omissions to act, as Pledgee. Notwithstanding
anything to the contrary in this Agreement, Pledgee's liability under this
Agreement shall not exceed the lesser of (i) the sum of the Secured Obligations
plus any reimbursements pursuant to Section 12 and (ii) the net proceeds
received by the Pledgee upon any sale or other disposition of all or any part of
the Pledged Collateral other than in the case of liabilities arising out of or
related to bad faith, willful misconduct or negligence on the part of the
Pledgee.
11. Use of Agents. The Pledgee may execute any of its rights
hereunder through an agent or other designee and shall be entitled to advice of
counsel concerning all matters pertaining to its duties hereunder.
12. Reimbursement. The Pledgor agrees to reimburse the Pledgee
promptly for all reasonable expenses, including reasonable counsel fees,
incurred by the Pledgee in connection with the enforcement of this Agreement
upon an occurrence of a Default. Other than as set forth in the preceding
sentence, neither the Pledgor nor any affiliate of Pledgor shall have any
liability with respect to the expenses or fees of the Pledgee. This Section 12
shall survive any termination of this Agreement until such time as the amounts
due under this Section 12 are paid in full in cash.
13. Notices. All notices, requests, demands or other communications
required or permitted under this Agreement shall be sent by courier or by
facsimile transmission, to the parties hereto at their respective addresses set
forth below, and notice shall be deemed given as of the date the notice is
received if sent by courier or when transmitted if sent by facsimile:
(a) If to Pledgee:
iVillage Inc.
212 Fifth Avenue
New York, New York 10010
Attention: Steven A. Elkes
Telecopy No.: (212) 689-9513
Telephone No.: (212) 206-3106
with a copy to:
iVillage Inc.
212 Fifth Avenue
New York, New York 10010
Attention: Michael A. Gilbert
Telecopy No.: (212) 689-9834
Telephone No.: (212) 206-3167
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(b) if to Pledgor:
Babygear.com, Inc.
10 West 33rd Street, Suite 400
New York, New York 10001
Attention: Preston Bealle, President and CEO
Telecopy No.: (212) 736-3578
Telephone No.: (212) 736-2600
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: John C. Kennedy, Esq.
Telecopy No.: (212) 757-3990
Telephone No.: (212) 373-3000
Each of the above addressees may change its address for purposes of
this Section 13 by giving to all other parties written notice of such new
address in conformance with this paragraph.
14. Invalidity of Particular Provisions. Pledgor and Pledgee agree
that the enforceability or invalidity of any provision or provisions of this
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
15. Successors or Assigns. Pledgor and Pledgee agree that all of the
terms of this Agreement shall be binding on their respective successors and
assigns, and that the terms "Pledgor" and "Pledgee" as used herein shall be
deemed to include, for all purposes, the respective designees, successors,
assigns, heirs, executors and administrators.
16. Governing Law. This Agreement shall be interpreted and governed
under the internal substantive laws, but not the choice of law rules, of New
York.
17. Section Titles. The Section titles contained in this Agreement
are and shall be without substantive meaning or content of any kind whatsoever
and are not a part of the agreement between the parties hereto.
18. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which when
taken together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
"PLEDGOR" Babygear.com, Inc.,
a Delaware corporation
/s/ Preston Bealle
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Signature
Preston Bealle
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Print Name
President and Chief Executive Officer
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Title
"PLEDGEE" iBaby, Inc.,
a Delaware corporation
/s/ Steven Elkes
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Signature
Steven A. Elkes
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Print Name
Chief Executive Officer
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Title
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