Exhibit 10.5
MEMBERSHIP INTEREST PLEDGE AGREEMENT
THIS MEMBERSHIP INTEREST PLEDGE AGREEMENT (this “Agreement”), dated as of
August 31, 2010, is by and between GT ACQUISITION SUB, INC., a Minnesota
corporation (“Pledgor”) and TCI BUSINESS CAPITAL, INC., a Minnesota corporation
(“Lender”).
RECITALS:
A. Pledgor’s affiliate, DESTRON FEARING CORPORATION, a Delaware corporation
(“Borrower”), and Lender are parties to a certain Credit and Security Agreement
dated on or about the date hereof (as the same maybe amended, restated, renewed,
supplemented or otherwise modified from time to time, the “Credit Agreement”),
pursuant to which Lender has made, or will make, certain loans and other
financial accommodations available to Borrower.
B. It is a condition precedent to the agreement of Lender to extend such loans
and provide such other financial accommodations that Pledgor shall have executed
and delivered this Agreement in favor of Lender.
AGREEMENTS:
NOW, THEREFORE, in consideration of the Recitals and in order to induce Lender
to extend credit under the Credit Agreement, Pledgor hereby agrees with Lender
as follows:
1. Collateral. In consideration of credit or other financial accommodations now
existing or hereafter made by Lender to or for the account or benefit of
Borrower, including but not limited to the financial accommodations described in
Paragraph 2 hereof, and as an inducement therefor, Pledgor hereby grants to
Lender a security interest in all of Pledgor’s now owned or hereafter acquired
right, title and interest in the following described property (hereinafter
called “Collateral”):
a. All of Pledgor’s now owned and hereafter acquired membership interest in
C-SCAN, LLC, a Minnesota limited liability company (“Issuer”), including but not
limited to all of Pledgor’s financial and governance rights and its right to
share in all profits and distributions (collectively, the “Pledged Membership
Interest”);
b. All certificates, options, rights, membership distributions (cash or
otherwise), splits, warrants and other distributions issued as an addition to,
in substitution or in exchange for or on account of the Pledged Membership
Interest; and
c. All property received upon the sale, exchange, collection or other
disposition of Collateral or proceeds therefrom, whether cash or non-cash
proceeds, and all products of the foregoing.

 

 

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2. Secured Obligations. The security interest granted hereby secures payment and
performance to Lender of all of Borrower’s indebtedness, liabilities and
obligations to Lender, whether now existing or hereafter arising, whether
otherwise secured or unsecured and howsoever evidenced, arising or created,
including but not limited to all of Borrower’s obligations arising under the
following:
a. the Credit Agreement, whether for principal, interest, fees, expenses,
indemnification or otherwise; and
b. any and all other agreements, documents and instruments evidencing, securing
or relating to the Credit Agreement, including any extensions, modifications,
substitutions, amendments and renewals thereof, whether for fees, expenses,
indemnification or otherwise.
Herein the indebtedness, liabilities and obligations secured by the Collateral
will be referred to collectively as the “Secured Obligations”.
3. Definitions. Unless the context otherwise requires, all terms used herein
which are defined in Articles 1, 8 and 9 of the Minnesota UCC (defined below)
have the meanings therein stated.
4. Covenants, Representations and Warranties. Pledgor hereby covenants,
represents and warrants that:
a. The names of all members of Issuer, and their respective percentage
membership interests, are as set forth on Exhibit A attached hereto and made a
part hereof.
b. Pledgor has title to and is the sole legal and beneficial owner of the
Collateral free of any liens, security interests, claims or other encumbrances
of any kind limiting the transferability of the Collateral, except as granted
herein.
c. The Collateral represents one hundred percent (100%) of the aggregate
outstanding membership interests in Issuer. Pledgor agrees that it will not
transfer, convey, sell, encumber, pledge, hypothecate or otherwise dispose of
any of its interest in the Collateral without the prior consent of Lender.
d. The pledge of Collateral pursuant to this Agreement is duly authorized under
the terms of all agreements limiting the transferability of the Collateral and
all necessary consents, if any, to the transfer of the Collateral pursuant to
this Agreement have been obtained. Without limiting the foregoing, Pledgor
specifically represents and warrants that the security interest granted hereby
is authorized under the terms of, and fully satisfies the requirements of, any
restriction on the assignment of financial or governance rights in Issuer
arising under the laws of Minnesota (including without limitation the Minnesota
Limited Liability Company Act), the articles of organization or operating
agreement of Issuer, any resolution adopted by the members or governors of
Issuer, any written action by members or governors of Issuer, or among them and
Issuer or otherwise.
e. To the extent the Pledged Membership Interest is now or at any time hereafter
certificated, Pledgor shall execute and deliver to Lender such in-blank
assignments separate from certificate covering the Pledged Membership Interest
in the form attached hereto as Exhibit B; and
f. At any time or times hereafter, Pledgor authorizes Lender to file such
financing statements and agrees to execute such other instruments and perform
such acts as Lender may request to establish and maintain in Lender a valid,
perfected security interest in the Collateral including, without limitation,
delivering all additional certificates, with appropriate endorsement or
assignment in-blank to Lender. Pledgor hereby agrees that Lender may, at
Lender’s option, hold any of the Collateral in the name of Lender or otherwise
indicate on any instrument or certificate representing the Collateral that
Lender has been granted a security interest therein.

 

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g. If, at any time while this Agreement is in effect, Pledgor shall become
entitled to receive or shall receive any certificate, option or rights, whether
as an addition to, in substitution of, or in exchange for any Collateral or
otherwise, Pledgor agrees to accept the same as Lender’s agent to hold the same
in trust for Lender and to deliver the same forthwith to Lender in the exact
form received, with the appropriate endorsement of Pledgor, to be held by Lender
as additional Collateral for the Secured Obligations, subject to the terms
hereof.
h. All sums of money and property paid or distributed in respect of the
Collateral, other than distributions made pursuant to the articles of
organization or operating agreement of Issuer and permitted under the terms of
the Credit Agreement (“Permitted Distributions”), shall be paid directly to
Lender for application against the Secured Obligations in any manner Lender may
determine; provided, however, unless and until an Event of Default (as defined
in the Credit Agreement) has occurred, Pledgor may receive any Permitted
Distributions on account of the Pledged Membership Interest. To the extent such
payments are paid to Lender, Pledgor agrees that the obligor thereunder shall
have no further liability to Pledgor for the same.
i. Pledgor will pay, when due, all taxes and other governmental charges levied
or assessed upon or against any Collateral. Lender at its option may pay and
discharge any taxes, governmental charges, liens, or encumbrances on the
Collateral which sums so advanced or paid by Lender shall be paid by Pledgor on
demand with interest at the highest rate permitted by applicable law and shall
become part of the Secured Obligations.
j. If Pledgor receives any payment or property from the Collateral in violation
of the terms of this Agreement, Pledgor will hold such payment or property in
trust for Lender and forthwith pay over or deliver the same to Lender in the
form received with appropriate endorsement or assignment in-blank to be applied
in accordance with the terms hereof.
k. Unless and until an Event of Default has occurred, Pledgor may exercise all
governance rights relating to the Pledged Membership Interest.
l. Upon the occurrence of an Event of Default, Pledgor agrees, upon Lender’s
request, to cooperate with Lender by doing all things necessary to enable Lender
to liquidate the Collateral in compliance with all applicable laws and
regulations. Pledgor understands and agrees that upon the occurrence of an Event
of Default, Lender has the right to liquidate the Collateral, either at or prior
to the maturity thereof, at the sole option of Lender, and apply the proceeds to
reduce the Secured Obligations.
m. Pledgor is not required to obtain any consent, approval or authorization
from, or to file any declaration or statement with, any governmental
instrumentality or other agency or any other individual or entity in connection
with or as a condition to the execution, delivery or performance hereof.
n. Issuer has not elected to have the Pledged Membership Interest treated as
securities governed by Article 8 of the Uniform Commercial Code as presently
enacted in the State of Minnesota (the “Minnesota UCC”) in its articles of
organization, operating agreement or any other document, and the Pledged
Membership Interest does not constitute “investment property”, as defined in
Article 9 of the Minnesota UCC.

 

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5. Duty of Care. Lender shall not be obligated to preserve any rights Pledgor
may have against prior parties or to realize on the Collateral at all or in any
particular manner or order. Lender shall have no liability or responsibility to
Pledgor for any action taken or omitted with respect to the Collateral or
otherwise on the direction of Pledgor.
6. Events of Default. The occurrence of any of the following events shall
constitute an Event of Default under this Agreement:
a. Either (i) Borrower shall fail to pay any of the Secured Obligations as and
when due; or (ii) Pledgor shall fail to perform any of its agreements contained
herein;
b. Any statement, representation or warranty of Pledgor made herein or any time
furnished to Lender shall be untrue in any material respect as of the date made;
c. An Event of Default (as defined in the Credit Agreement) shall occur under
the terms of the Credit Agreement; or
d. Any other default, however defined, shall occur under the terms of any
agreement, document or instrument evidencing, securing or relating to the
Secured Obligations.
7. Remedies Upon Default.
a. Upon the occurrence of an Event of Default and any time thereafter, Lender
may exercise any one or more of the following rights and remedies:
(1) Declare unmatured Secured Obligations to be immediately due and payable and
the same shall thereupon be immediately due and payable without presentment or
other notice or demand;
(2) Exercise and enforce any or all rights and remedies available upon default
to a secured party under the Minnesota UCC, including, but not limited to, the
right to exercise all rights as a holder of the Collateral and the right to
dispose of the Collateral in any manner permitted by the Minnesota UCC and
applicable securities laws including, without limitation, the right to offer and
sell the Collateral privately to purchasers who will agree to take the
Collateral for investment and not with the view to distribution and who will
agree to the imposition of restrictive legends on the certificates representing
the Collateral, and the right to arrange for a sale of the Collateral which
would otherwise qualify as exempt from registration under the Securities Act of
1933;
(3) Exercise its right to receive all cash payments on account of the Pledged
Membership Interest (including without limitation the Permitted Distributions)
for periods that the Collateral was held by Pledgor; and
(4) Exercise all governance rights of Pledgor with respect to the Pledged
Membership Interest.
Any transferee of Lender’s interest in the Collateral shall be entitled to
exercise all rights as holder of the Collateral, including voting rights.
b. If Lender disposes of any of the Collateral, the proceeds of any such
disposition shall be applied as set forth in the applicable provisions of
Article 9 of the Minnesota UCC. Pledgor specifically grants to Lender the right
to apply such proceeds to attorneys’ fees and legal expenses incurred by Lender
in connection with collection of the Secured Obligations, disposition of
Collateral or protection of Lender’s position. If any notification of intended
disposition of any of the Collateral is required by law, such notification shall
be deemed commercially reasonable if mailed at least ten (10) Business Days
before such disposition, postage prepaid, addressed to Pledgor at its notice
address set forth on the signature page to this Agreement.

 

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c. Pledgor recognizes that Lender may be unable to effect a public sale of the
Pledged Membership Interests by the reason of certain prohibitions contained in
the Securities Act of 1933, as amended (the “Securities Act”) or other
applicable state or federal laws, and Lender may therefore resort to one or more
private sales thereof to a restricted group of purchasers. Pledgor agrees that
any such private sales may be at prices and on other terms less favorable to the
seller than if sold at public sales and that such private sales shall not by
reason thereof be deemed not to have been made in a commercially reasonable
manner. Lender shall be under no obligation to delay a sale of any of the
Pledged Membership Interests for the period of time necessary to permit the
issuer of such securities to register such securities for public sale under the
Securities Act, or such other applicable laws, even if the issuer would agree to
do so. Subject to the foregoing, Lender agrees that any sale of the Pledged
Membership Interests shall be made in a commercially reasonable manner, and
Pledgor agrees to use its best efforts to cause the issuer or issuers of the
Pledged Membership Interests contemplated to be sold, to execute and deliver,
all at Pledgor’s expense, all such instruments and documents, and to do or cause
to be done all such other acts and things as may be necessary or, in the
reasonable opinion of Lender, advisable to exempt such Pledged Membership
Interests from registration under the provisions of the Securities Act, and to
make all amendments to such instruments and documents which, in the opinion of
Lender, 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, and other applicable law. Pledgor further agrees
to use its best efforts to cause the Pledged Membership Interests to comply with
the provisions of the securities or “Blue Sky” laws of any jurisdiction which
Lender shall reasonably designate.
8. Obligations Not Affected by Acts of Lender. Pledgor’s obligations hereunder
shall not be affected or impaired by any of the following acts or things which
Lender is expressly authorized to do, omit or suffer from time to time, without
notice or approval by Lender: (a) any extension, renewal, modification or
amendment of the Credit Agreement or any of the documents, instruments or
agreements creating, evidencing or securing the Secured Obligations or delivered
therewith; (b) any delay or lack of diligence in the enforcement of any of the
Secured Obligations; (c) any failure to institute proceedings, file a claim or
give any required notices; (d) any full or partial release of, settlement with
or agreement not to sue any guarantor, indemnitor or any other person or entity
obligated under the Secured Obligations; (e) any waiver or indulgence granted to
any guarantor or any person or entity obligated under the Secured Obligations;
(f) any failure to obtain or realize upon any other Collateral obtained from any
other party or to see to the proper perfection thereof or to establish the
priority of the lien thereon or (g) acquire a security interest in any property
in addition to the Collateral or release any such interests so acquired or
permit any substitution or exchange for such property or any portion thereof.
9. Continuing Security Interest. The security interest granted hereby is a
continuing security interest and no notice of the creation or existence of any
Secured Obligation or of any renewal, extension or modification thereof need be
given by Lender. The security interest shall continue in effect notwithstanding
that from time to time no Secured Obligations may exist. Pledgor hereby
expressly waives demand, presentment, protest and notice of a dishonor on any
and all of the Secured Obligations.

 

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10. Additional Rights of Lender. Upon an Event of Default, Lender, in the name
of Pledgor or otherwise, shall have the authority but shall not be obligated to
demand, collect, receive and receipt for, compromise, compound, settle and give
acquittance for and prosecute and discontinue any suits and proceedings in
respect of any or all of the Collateral and to take any action which Lender may
deem necessary or desirable in order to realize on the Collateral, including,
without limitation, the power (a) to perform any contract, to endorse in the
name of Pledgor any checks, drafts, notes or other documents which are
Collateral or are received in payment or on account of the Collateral, (b) to
transfer any of the Collateral into his name or that of its nominee and to
notify the obligor on or issuer of any Collateral, to remit to Lender any
amounts due or distributable thereon, and (c) to apply any proceeds of any
Collateral against the Secured Obligations as Lender, in its sole discretion,
may determine whether the same shall then be due or not due. Pledgor, and not
Lender, shall have full responsibility for complying with all call dates,
conversion dates or other deadlines for action by the owner of any securities
pledged hereby.
11. Attorneys’ Fees. Pledgor agrees, upon the occurrence of an Event of Default,
to pay all costs of Lender including attorneys’ fees in the collection of the
Collateral and the enforcement of any of Lender’s rights against Pledgor
hereunder.
12. Waiver or Amendment. No delay or failure by Lender in the exercise of any
right or remedy shall constitute a waiver thereof, and no single or partial
exercise by Lender of any right or remedy shall preclude other or further
exercise thereof or the exercise of any other right or remedy. This Agreement
shall be binding upon and inure to the benefit of Lender and its replacements,
successors and assigns and shall take effect when signed by Pledgor and
delivered to Lender, and Pledgor waives notice of Lender’s acceptance thereof.
This Agreement shall not be amended except in writing signed by Pledgor and
Lender.
13. GOVERNING LAW/JURISDICTION. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF
THE STATE OF MINNESOTA. PLEDGOR HEREBY CONSENTS TO THE PERSONAL JURISDICTION OF
THE STATE AND FEDERAL COURTS LOCATED IN THE STATE OF MINNESOTA IN CONNECTION
WITH ANY CONTROVERSY RELATED TO THIS AGREEMENT, WAIVES ANY ARGUMENT THAT VENUE
IN SUCH FORMS IS NOT CONVENIENT AND AGREES THAT ANY LITIGATION INSTIGATED BY
PLEDGOR AGAINST LENDER IN CONNECTION WITH THIS AGREEMENT SHALL BE VENUED IN
EITHER THE DISTRICT COURTS OF HENNEPIN COUNTY, MINNESOTA OR THE UNITED STATES
DISTRICT COURT FOR THE DISTRICT OF MINNESOTA, FOURTH DIVISION.
14. Severability. If any provision or application of this Agreement is held
unlawful or unenforceable in any respect, such illegality or unenforceability
shall not affect other provisions or applications which can be given effect, and
this Agreement shall be construed as if the unlawful or unenforceable provision
or application had never been contained or prescribed hereby.
15. Admissibility of Pledge Agreement. Pledgor agrees that a copy of this
Agreement signed by Pledgor and transmitted by telecopier or other electronic
means for delivery to Lender shall be admissible in evidence as the original
itself in any judicial or administrative proceeding, whether or not the original
is in existence.
16. Construction. The headings of the various sections of this Agreement have
been inserted for reference only and should not be construed as defining or
limiting in any way the scope or intent of the provisions hereof. Whenever the
context requires or permits, the singular shall include the plural, the plural
shall include the singular and the masculine, feminine and neuter shall be
freely interchangeable.
[Remainder of page intentionally left blank;
signature page follows]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first above.

                 
PLEDGOR:
               
 
                    GT ACQUISITION SUB, INC.,         a Minnesota corporation  
 
 
               
 
  By:                          
 
      Name:        
 
         
 
   
 
      Title:        
 
         
 
   
 
                        Address for notices:    
 
                        490 Villaume Avenue             South St. Paul, MN 55075
   
 
               
LENDER:
               
 
                    TCI BUSINESS CAPITAL, INC.,         a Minnesota corporation
   
 
               
 
  By:                          
 
      Name:   Catherine Sedacca    
 
      Title:   Chief Risk Officer    

 

 

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EXHIBIT A
Members of C-SCAN, LLC

          Name   Percentage Interest  
 
       
GT ACQUISITION SUB, INC., a Minnesota corporation
    100 %

 

 

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EXHIBIT B
IRREVOCABLE ASSIGNMENT IN BLANK
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers to
                                         the following membership units of
C-SCAN, LLC, a Minnesota limited liability company:

          No. of Membership Units     Certificate No.  

and irrevocably appoints                                          its agent and
attorney-in-fact to transfer all or any part of such membership units and to
take all necessary and appropriate action to effect any such transfer. The agent
and attorney-in-fact may substitute and appoint one or more persons to act for
him. The effectiveness of a transfer pursuant to this assignment shall be
subject to any and all transfer restrictions referenced on the face of the
certificates evidencing such interest or in the articles of organization or
limited liability company of the subject company, to the extent they may from
time to time exist.

            GT ACQUISITION SUB, INC.,
a Minnesota corporation
      By:           Name:           Title:        

 

 

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ISSUER ACKNOWLEDGEMENT
The undersigned hereby (a) acknowledges receipt of a copy of that certain
Membership Interest Pledge Agreement (the “Pledge Agreement”) executed by GT
ACQUISITION SUB, INC., a Minnesota corporation (“Pledgor”) in favor of TCI
BUSINESS CAPITAL, INC., a Minnesota corporation (“Lender”), (b) agrees promptly
to note on its books the security interests granted to Lender, (c) agrees that
it will comply with the instructions of Lender with respect to the Pledged
Membership Interest (as defined in the Pledge Agreement) without further consent
by Pledgor, (d) agrees to notify Lender upon obtaining knowledge of any interest
in favor of any Person in the Pledged Membership Interest that is adverse to the
interest of Lender therein and (e) waives any right or requirement at any time
hereafter to receive a copy of the Pledge Agreement in connection with the
registration of any Pledged Membership Interest thereunder in the name of Lender
or its nominee or the exercise of voting rights by Lender or its nominee.

            GT ACQUISITION SUB, INC.,
a Minnesota corporation
      By:           Name:           Title: