Exhibit 10.11
PLEDGE
AND SECURITY AGREEMENT, dated as of February 23, 2009 (as amended,
supplemented or modified from time to time, this “
Agreement ”), made by Cornerworld Corporation (“
Parent ”), Cornerworld Inc. (“ CW
”) and Enversa Companies LLC (“ Enversa ”)
in favor of IU Investments, LLC (“ Secured Party
”). Parent, CW and Enversa are collectively referred to
herein as “ Grantor ”. Capitalized terms used
but not defined herein shall have the meanings given such terms in
the Promissory Notes (as defined below).
RECITALS
Pursuant
to (i) the Subscription Agreement dated as of February 23, 2009 (as
amended, supplemented or modified from time to time, the “
Subscription Agreement ”) by and among Cornerworld
Corporation (“ Parent ”) and Secured Party and
(ii) the Promissory Note dated as of February 23, 2009 (as amended,
supplemented or modified from time to time, the “
Promissory Notes ”) issued by Parent to Secured Party;
Secured Party has made the loans to Parent.
In
order to induce the Secured Party to make such loans, Grantor has
agreed to grant a continuing lien on the Collateral to secure the
Obligations (as hereinafter defined). Accordingly, Grantor hereby
agrees as follows:
1.
Security Interest .
(a)
Grant of Security . As security for the Obligations (as
hereinafter defined), Grantor hereby delivers, assigns, pledges,
sets over and grants to Secured Party a first priority security
interest in all of its right, title and interest, whether now
existing or hereafter arising or acquired, in and to any and all
items of its personal property described on Exhibit A-1
hereto with respect to Parent, on Exhibit A-2 hereto with
respect to CW and Exhibit A-3 hereto with respect to
Enversa, which Exhibits A-1 , A-2 and A-3 are
executed by an authorized person of the applicable Grantor,
together with all substitutions and replacements thereof and any
products and proceeds thereof (the “ Collateral
”) subject to Section 1(d).
(b)
Security for Obligations . This Agreement secures the
payment of all now existing or hereafter arising obligations of
Parent to Secured Party, whether primary or secondary, direct or
indirect, absolute or contingent, joint or several, secured or
unsecured, due or not, liquidated or unliquidated, arising by
operation of law or otherwise under the Subscription Agreement, the
Promissory Notes or any other related document, whether for
principal, interest, fees, expenses or otherwise, together with all
costs of collection or enforcement, including, without limitation,
reasonable attorneys’ fees incurred in any collection efforts
or in any action or proceeding (all such obligations being the
“ Obligations ”).
(c)
Subordination . The liens granted hereunder on certain of
the personal property of CW (as more fully described in the Letter
Agreement) are subordinate and junior in all respects to the liens
granted to the holders of individual notes in accordance with the
Letter Agreement dated as of the date hereof by and among the
Secured Party, the holders of the individual notes and Ned B.
Timmer (the “ Letter Agreement ”).
(d)
Parent Remains Liable . This Agreement shall not affect
Parent’s liability to perform all of its duties and
obligations under the transactions giving rise to the Obligations.
The exercise by Secured Party of any of the rights hereunder shall
not release Parent from any of its duties or obligations under the
transactions giving rise to the Obligations, which shall remain
unchanged as if this Agreement had not been executed. Secured Party
shall not have any obligation or liability under the transactions
giving rise to the Obligations by reason of this Agreement, nor
shall Secured Party be
obligated to perform any of the
obligations or duties of Parent thereunder or to take any action to
collect or enforce any claim for payment assigned
hereunder.
(e)
Continuing Agreement . This Agreement shall create a
continuing security interest in the Collateral and shall remain in
full force and effect until payment in full of the
Obligations.
(f)
Percentage of Shares/Membership Interests . Parent
represents and warrants that (i) the common stock of CW being
pledged pursuant hereto, as described on Exhibit A-1 hereto,
represents 100% of the issued and outstanding shares of CW, (ii)
the member units of Enversa being pledged hereto, as described on
Exhibit A-1 hereto, represents 100% of the issued and
outstanding shares of Enversa and (iii) the stock certificate of
Woodland Holdings, Corp. being pledged pursuant hereto, as
described on Exhibit A-1 hereto, represents 50% of the
issued and outstanding shares of Woodland Holdings,
Corp.
2.
Title; Liens and Encumbrances . Grantor represents and
warrants that it is (or to the extent that this Agreement states
that the Collateral is to be acquired after the date hereof, will
be) the record and beneficial owner of, having (or to the extent
that this Agreement states that the Collateral is to be acquired
after the date hereof, will have) good and marketable title to, the
Collateral pledged by it hereunder, free of any and all liens or
options in favor of, or claims of, any other person, except the
liens created by this Agreement and the subordinate liens created
in connection with the Subordination Letter Agreement dated as of
the date hereof between the Secured Party and Internet University,
Inc. and Grantor will promptly notify Secured Party of any such
other lien or claim made or asserted against the Collateral and
will defend the Collateral against any such lien or other
claim.
3.
State of Organization or Residence; Legal Name . Grantor
represents and warrants to Secured Party as follows:
(a)
Grantor does not have a state of organization, except as set forth
in Schedule I hereto. Grantor’s chief executive office
or principal office, if it is not a registered organization, as
such term is defined under the Uniform Commercial Code as in effect
in the State of New York as it may be amended, supplemented or
modified from time to time (the “ UCC ”), is set
forth on Schedule I hereto. Grantor shall promptly notify
Secured Party of any change in the foregoing
representations.
(b)
Grantor’s registered or legal name is as set forth on
Schedule I hereto. Grantor currently uses, and during the
last five years has used, no other names including business or
trade names, except as set forth on Schedule I hereto.
Grantor shall not change such name without providing Secured Party
30 days prior written notice.
(c)
Grantor’s organizational identification number is as set
forth on Schedule I hereto. Grantor currently uses, and
during the last five years has used, no other organizational
identification numbers including any used by predecessors to
Grantor, except as set forth on Schedule I hereto. Grantor
shall not change such organizational identification number without
providing Secured Party 30 days prior written notice.
(d)
The grant of the security interest in the Collateral, combined with
the filing of financing statements, the execution of control
agreements, the execution of Assignments, and/or possession of the
Collateral, each as appropriate, is effective to vest in Secured
Party a valid and perfected first priority security interest,
superior to the rights of any person in and to the Collateral as
set forth herein.
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4.
Perfection of Security Interest . Grantor authorizes Secured
Party to file all such financing statements and amendments thereto
pursuant to the UCC or other notices appropriate under applicable
law, as Secured Party may require, each in form satisfactory to
Secured Party. Secured Party may transfer, withdraw or redeem any
funds or other property in each deposit account or securities
account constituting Collateral without further consent by Grantor;
provided however , that Secured Party will not
exercise any of such rights other than during an Event of Default.
Grantor also shall pay all filing or recording costs with respect
thereto, and all costs of filing or recording this Agreement or any
other agreement or document executed and delivered pursuant hereto
or to the Obligations (including the cost of all federal, state or
local mortgage, documentary, stamp or other taxes), in each case,
in all public offices where filing or recording is deemed by
Secured Party to be necessary or desirable. Grantor authorizes
Secured Party to take all other action which Secured Party may deem
necessary or desirable to perfect or otherwise protect the liens
created hereunder and to obtain the benefits of this
Agreement.
5.
Covenants Relating to Collateral . Subject to any
requirements under the Letter Agreement, until the Obligations
shall have been paid in full, and the Subscription Agreement and
Promissory Notes shall have terminated, Grantor covenants and
agrees that if Grantor shall become entitled to receive or shall
receive any certificate or instrument (including, without
limitation, any certificate representing a dividend or a
distribution in connection with any reclassification, increase or
reduction of capital or any certificate issued in connection with
any reorganization), option or rights in respect of the Collateral,
whether in addition to, in substitution of, as a conversion of, or
in exchange for, any shares of the Collateral, or otherwise in
respect thereof, Grantor shall accept the same as the agent of
Secured Party, hold the same in trust for Secured Party and deliver
the same forthwith to Secured Party in the exact form received,
duly indorsed by Grantor to Secured Party, if required, together
with an undated assignment covering such certificate or instrument
duly executed in blank by Grantor and with, if Secured Party so
requests, signature guaranteed, to be held by Secured Party,
subject to the terms thereof, as additional collateral security for
the Obligations. If any of the foregoing property so distributed in
respect of the Collateral shall be received by Grantor, Grantor
shall, until such property is paid or delivered to Secured Party,
hold such property in trust for Secured Party, segregated from
other funds or property of Grantor, as additional collateral
security for the Obligations.
6.
Stock Powers . Concurrently with the delivery to the Secured
Party of each certificate representing the shares of pledged stock
of the pledged subsidiaries, the Grantor in respect of such
certificates shall deliver an undated stock power covering such
certificate, duly executed by the Grantor in blank.
7.
Collections; Other Rights .
(a)
Except as provided herein, Grantor may receive all cash interest,
dividends and distributions paid in respect of the Collateral, and
to exercise all voting rights with respect to the Collateral;
provided , however , that no vote shall be cast or
right exercised or other action taken which, in Secured
Party’s reasonable judgment, would impair the Collateral or
which would be inconsistent with or result in any violation of any
provision of this Agreement or any other relating
document.
(b)
All of the foregoing amounts set forth in paragraph (a) of this
Section 7 so collected after the occurrence of and during the
continuation of an Event of Default, subject to any requirements
under the Letter Agreement, shall be held in trust by Grantor for
and as the property of Secured Party, and shall not be commingled
with other funds, money or property of Grantor.
(c)
Subject to any requirements under Letter Agreement, after the
occurrence and during the continuation of an Event of Default,
Grantor will immediately upon receipt of all such checks, cash or
other remittances constituting part of the Collateral or in payment
for any Collateral sold,
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transferred, leased or otherwise
disposed of, deliver any such items to Secured Party accompanied by
a remittance report in form supplied or approved by Secured Party.
Grantor shall deliver such items in the same form received,
endorsed or otherwise assigned by Grantor where necessary to permit
collection of such items.
8.
Events of Default . The occurrence of any one or more Events
of Default by Parent under the Promissory Notes shall constitute an
event of default (“ Event of Default ”) under
this Agreement.
9.
Rights and Remedies .
(a)
In the event of the occurrence and continuation of any Event of
Default: (i) Secured Party may exercise exclusive control over
the Collateral; (ii) Secured Party shall have the right, with
or without (to the extent permitted by applicable law) notice to
Grantor, as to any or all of the Collateral, by any available
judicial procedure or without judicial process, to take possession
of the Collateral and without liability for trespass to enter any
premises where the Collateral may be located for the purpose of
taking possession of or removing the Collateral, and generally to
exercise any and all rights afforded to a secured party under the
UCC or other applicable law; (iii) Secured Party shall have
the right to sell, lease, or otherwise dispose of all or any part
of the Collateral, whether in its then condition or after further
preparation or processing, either at public or private sale or at
any broker’s board, in lots or in bulk, for cash or for
credit, with or without warranties or representations, and upon
such terms and conditions, all as Secured Party in its sole
discretion may deem advisable; (iv) at Secured Party’s
request, Grantor shall assemble the Collateral and make it
available to Secured Party at places which Secured Party shall
select, whether at Grantor’s premises or elsewhere, and make
available to Secured Party, without rent, all of Grantor’s
premises and facilities for the purpose of Secured Party’s
taking possession of, removing or putting the Collateral in
saleable or disposable form; (v) Secured Party shall have the
right to receive any and all cash interest, dividends,
distributions, payments or other proceeds paid in respect of the
Collateral and made application thereof to the Obligations in such
order as Secured Party may determine; and (vi) any or all of
the Collateral may be registered in the name of Secured Party or
its nominee and they may thereafter exercise (x) all voting,
corporate and other rights pertaining to such Collateral and
(y) any and all rights of conversion, exchange and
subscription and any other rights, privileges or options pertaining
to such Collateral as if it were the absolute owner thereof
(including, without limitation, the right to exchange at its
discretion any and all securities or securities entitlements upon
any merger, consolidation, reorganization, recapitalization or
other fundamental change, or upon the exercise of Grantor or
Secured Party of any right, privilege or option pertaining to such
securities or securities entitlements, and in connection therewith,
the right to deposit and deliver any and all of the securities or
securities entitlements with any committee, depositary, transfer
agent, registrar or other designated agency upon such terms and
conditions as Secured Party may determine), all without liability
except to account for property actually received by it, but Secured
Party shall have no duty to Grantor to exercise any such right,
privilege or option and shall not be responsible for any failure to
do so or delay in so doing.
(b)
Any such sale, lease or other disposition of Collateral may be made
without demand for performance or any notice of advertisement
whatsoever except that where an applicable statute requires
reasonable notice of sale or other disposition, Grantor agrees that
the sending of five days notice by ordinary mail, postage prepaid,
to Grantor of the place and time of any public sale or of the time
at which any private sale or other intended disposition is to be
made, shall be deemed reasonable notice thereof. Notwithstanding
the foregoing, if any of the Collateral may be materially
diminished in value during such five-day period, Secured Party
shall provide Grantor with such shorter notice as it deems
reasonable under the circumstances.
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(c)
The proceeds of any such sale, lease or other disposition of the
Collateral shall be applied first to the expenses of retaking,
holding, storing, processing and preparing for sale, selling, and
the like, and to the reasonable attorneys’ fees and legal
expenses incurred by Secured Party, and then to satisfaction of the
Obligations (in any order as Secured Party may decide in its sole
discretion), and to the payment of any other amounts required by
applicable law. If, upon the sale, lease or other disposition of
the Collateral, the proceeds thereof are insufficient to pay all
amounts to which Secured Party is legally entitled, Grantor will be
liable for the deficiency, together with interest thereon, at the
rate prescribed in the agreements giving rise to the Obligations,
and the reasonable fees of any attorneys employed by Secured Party
to collect such deficiency. To the extent permitt
