Exhibit 10.1
EXECUTION COPY
SECURITY AGREEMENT
(SECOND LIEN)
SECURITY AGREEMENT, dated November 8, 2006, made by Aerobic
Creations, Inc., a Delaware corporation, to be known as Summit Global Logistics,
Inc. ("Parent"), Maritime Logistics US Holdings Inc., a Delaware corporation
("MLI"), Summit Logistics International Inc, a New Jersey corporation
("Summit"), SeaMaster Logistics Inc., a Delaware corporation ("SeaMaster"),
AmeRussia Shipping Company Inc., a Delaware corporation ("AmeRussia Shipping"),
FMI International LLC, a Delaware limited liability company ("FMI
International"), Fashion Marketing, Inc., a New Jersey corporation ("FM"), FMI
International Corp. (West), a New Jersey corporation ("FMIW"), FMI International
Corp., a New Jersey corporation ("FMII"), Freight Management LLC, a Delaware
limited liability company ("FMLLC"), FMI Trucking, Inc., a New Jersey
corporation ("Trucking"), FMI Express Corp., a New Jersey corporation
("Express"), Clare Freight, Los Angeles, Inc., a California corporation
("Clare"), TUG New York, Inc., a New York corporation ("TUG NY"), TUG USA, Inc.,
a New Jersey corporation, formerly known as Dolphin US Logistics Inc ("TUG
USA"), AMR Investments Inc, a New Jersey corporation ("AMRI") and FMI Holdco I,
LLC, a Delaware limited liability company ("FMI Holdco", and together with MLI,
Summit, SeaMaster, AmeRussia Shipping, FM, FMI International, FMIW, FMII, FMLLC,
Trucking, Express, Clare, TUG NY, TUG USA, AMRI and FMI Holdco, each
individually, a "Guarantor" and collectively, "Guarantors" and, together with
Parent, each a "Grantor" and collectively, the "Grantors"), in favor of LAW
DEBENTURE TRUST COMPANY OF NEW YORK, a limited purpose trust company chartered
by the New York State Banking Department, in its capacity as collateral agent
for and on behalf of the Noteholders (as defined below) (in such capacity, the
"Agent").
W I T N E S S E T H:
WHEREAS, MLI and each party listed as a "Buyer" on the Schedule of
Buyers attached thereto (collectively, the "Buyers") are parties to the
Securities Purchase Agreement (Notes and Warrants), dated as of the date hereof
(as amended, restated, supplemented or otherwise modified from time to time in
accordance with the terms thereof, the "Securities Purchase Agreement"),
pursuant to which MLI will cause Parent to authorize a new series of its senior
secured convertible notes (as such Notes may be amended, restated, replaced or
otherwise modified from time to time in accordance with the terms thereof,
collectively, the "Notes"), which Notes shall be convertible into Parent's
common stock in accordance with the terms thereof;
WHEREAS, pursuant to a joinder agreement dated the date hereof,
Parent shall become a party to the Securities Purchase Agreement;
WHEREAS, each of the Guarantors has executed and delivered a
Guaranty dated the date hereof (as amended, restated, supplemented or otherwise
modified from time to time in accordance with the terms thereof the "Guaranty")
in favor of the Agent for the benefit of itself and the Noteholders, with
respect to Parent's obligations under the Securities Purchase Agreement, the
Notes and the Transaction Documents (as defined below); and
WHEREAS, it is a condition precedent to the Buyers purchasing the
Notes pursuant to the Securities Purchase Agreement that the Grantors shall have
executed and delivered to the Agent this Agreement providing for the grant to
the Agent for the benefit of the Noteholders of a perfected security interest in
substantially all personal property of each Grantor to secure all of Parent's
obligations under the Securities Purchase Agreement, the Notes and the
"Transaction Documents" (as defined in the Securities Purchase Agreement) and
the Guarantors' obligations under the Guaranty;
WHEREAS, the Grantors are mutually dependent on each other in the
conduct of their respective businesses as an integrated operation, with the
credit needed from time to time by each Grantor often being provided through
financing obtained by the other Grantors and the ability to obtain such
financing being dependent on the successful operations of all of the Grantors as
a whole; and
WHEREAS, each Grantor has determined that the execution, delivery
and performance of this Agreement directly benefits, and is in the best interest
of, such Grantor;
NOW, THEREFORE, in consideration of the premises and the agreements
herein and in order to induce the Buyers to purchase the Notes pursuant to the
Securities Purchase Agreement, the Grantors hereby jointly and severally agree
with the Agent, for itself and the benefit of the Noteholders, as follows:
SECTION 1. DEFINITIONS.
(a) Reference is hereby made to the Notes and the Securities
Purchase Agreement for a statement of the terms thereof. All terms used in this
Agreement and the recitals hereto which are defined in the Note or the
Securities Purchase Agreement or in Article 9 of the Uniform Commercial Code
(the "CODE") as in effect from time to time in the State of New York and which
are not otherwise defined herein shall have the same meanings herein as set
forth therein (subject to Section 1(b) below).
(b) The following terms shall have the respective meanings provided
for in the Code (as in effect on the date hereof): "Accounts", "Cash Proceeds",
"Chattel Paper", "Commercial Tort Claim", "Commodity Account", "Commodity
Contracts", "Deposit Account", "Documents", "Equipment", "Fixtures", "General
Intangibles", "Goods", "Instruments", "Inventory", "Investment Property",
"Letter-of-Credit Rights", "Noncash Proceeds", "Payment Intangibles",
"Proceeds", "Promissory Notes", "Record", "Securities Account", "Software", and
"Supporting Obligations".
(c) As used in this Agreement, the following terms shall have the
respective meanings indicated below, such meanings to be applicable equally to
both the singular and plural forms of such terms:
"COPYRIGHT LICENSES" means all licenses, contracts or other
agreements, whether written or oral, naming any Grantor as licensee or licensor
and providing for the grant of any right to use or sell any works covered by any
copyright (including, without limitation, all Copyright Licenses set forth in
Schedule II hereto).
2
"COPYRIGHTS" means all domestic and foreign copyrights,
whether registered or unregistered, including, without limitation, all copyright
rights throughout the universe (whether now or hereafter arising) in any and all
media (whether now or hereafter developed), in and to all original works of
authorship fixed in any tangible medium of expression, acquired or used by any
Grantor (including, without limitation, all copyrights described in Schedule II
hereto), all applications, registrations and recordings thereof (including,
without limitation, applications, registrations and recordings in the United
States Copyright Office or in any similar office or agency of the United States
of America or any other country or any political subdivision thereof), and all
reissues, divisions, continuations, continuations in part and extensions or
renewals thereof.
"INTELLECTUAL PROPERTY" means the Copyrights, Trademarks and
Patents.
"LICENSES" means the Copyright Licenses, the Trademark
Licenses and the Patent Licenses.
"NOTEHOLDERS" means, collectively, the Buyers and/or their
permitted assigns of the Notes.
"PATENT LICENSES" means all licenses, contracts or other
agreements, whether written or oral, naming any Grantor as licensee or licensor
and providing for the grant of any right to manufacture, use or sell any
invention covered by any Patent (including, without limitation, all Patent
Licenses set forth in Schedule II hereto).
"PATENTS" means all domestic and foreign letters patent,
design patents, utility patents, industrial designs, inventions, trade secrets,
ideas, concepts, methods, techniques, processes, proprietary information,
technology, know-how, formulae, rights of publicity and other general
intangibles of like nature, now existing or hereafter acquired (including,
without limitation, all domestic and foreign letters patent, design patents,
utility patents, industrial designs, inventions, trade secrets, ideas, concepts,
methods, techniques, processes, proprietary information, technology, know-how
and formulae described in Schedule II hereto), all applications, registrations
and recordings thereof (including, without limitation, applications,
registrations and recordings in the United States Patent and Trademark Office,
or in any similar office or agency of the United States of America or any other
country or any political subdivision thereof), and all reissues, divisions,
continuations, continuations in part and extensions or renewals thereof.
"REQUIRED NOTEHOLDERS" means holders holding more than fifty
percent (50%) of the aggregate outstanding principal amount of the Notes.
"TRADEMARK LICENSES" means all licenses, contracts or other
agreements, whether written or oral, naming any Grantor as licensor or licensee
and providing for the grant of any right concerning any Trademark, together with
any goodwill connected with and symbolized by any such trademark licenses,
contracts or agreements and the right to prepare for sale or lease and sell or
lease any and all Inventory now or hereafter owned by any Grantor and now or
hereafter covered by such licenses (including, without limitation, all Trademark
Licenses described in Schedule II hereto).
3
"TRADEMARKS" means all domestic and foreign trademarks,
service marks, collective marks, certification marks, trade names, business
names, d/b/a's, Internet domain names, trade styles, designs, logos and other
source or business identifiers and all general intangibles of like nature, now
or hereafter owned, adopted, acquired or used by any Grantor (including, without
limitation, all domestic and foreign trademarks, service marks, collective
marks, certification marks, trade names, business names, d/b/a's, Internet
domain names, trade styles, designs, logos and other source or business
identifiers described in Schedule II hereto), all applications, registrations
and recordings thereof (including, without limitation, applications,
registrations and recordings in the United States Patent and Trademark Office or
in any similar office or agency of the United States of America, any state
thereof or any other country or any political subdivision thereof), and all
reissues, extensions or renewals thereof, together with all goodwill of the
business symbolized by such marks and all customer lists, formulae and other
Records of any Grantor relating to the distribution of products and services in
connection with which any of such marks are used.
SECTION 2. GRANT OF SECURITY INTEREST.
(a) As collateral security for all of the Obligations (as defined in
Section 3 hereof), each Grantor (other than Parent) hereby pledges and
collaterally assigns to the Agent for the benefit of itself and the Noteholders,
and grants to the Agent for the benefit of itself and the Noteholders, a
continuing security interest in all personal property of such Grantor, wherever
located and whether now or hereafter existing and whether now owned or hereafter
acquired, of every kind and description, tangible or intangible (the
"COLLATERAL"), including, without limitation, the following:
(i) all Accounts;
(ii) all Chattel Paper (whether tangible or electronic);
(iii) the Commercial Tort Claims specified on Schedule VI
hereto;
(iv) all Deposit Accounts, all cash, and all other property
from time to time deposited therein and the monies and property in the
possession or under the control of the Agent or any Noteholder or any affiliate,
representative, agent or correspondent of the Agent or such Noteholder;
(v) all Documents;
(vi) all Equipment;
(vii) all Fixtures;
(viii) all General Intangibles (including, without limitation,
all Payment Intangibles);
(ix) all Goods;
(x) all Instruments (including, without limitation, Promissory
Notes);
4
(xi) all Inventory;
(xii) all Investment Property;
(xiii) all Copyrights, Patents and Trademarks, and all
Licenses;
(xiv) all Letter-of-Credit Rights;
(xv) all Supporting Obligations;
(xvi) all other tangible and intangible personal property of
such Grantor (whether or not subject to the Code), including, without
limitation, all bank and other accounts and all cash and all investments
therein, all proceeds, products, offspring, accessions, rents, profits, income,
benefits, substitutions and replacements of and to any of the property of such
Grantor described in the preceding clauses of this Section 2 (including, without
limitation, any proceeds of insurance thereon and all causes of action, claims
and warranties now or hereafter held by such Grantor in respect of any of the
items listed above), and all books, correspondence, files and other Records,
including, without limitation, all tapes, desks, cards, Software, data and
computer programs in the possession or under the control of such Grantor or any
other Person from time to time acting for such Grantor that at any time evidence
or contain information relating to any of the property described in the
preceding clauses of this Section 2 or are otherwise necessary or helpful in the
collection or realization thereof; and
(xvii) all Proceeds, including all Cash Proceeds and Noncash
Proceeds, and products of any and all of the foregoing Collateral;
in each case howsoever such Grantor's interest therein may arise or appear
(whether by ownership, security interest, claim or otherwise).
(b) Notwithstanding anything to the contrary set forth in Section
2(a) above, the types or items of Collateral described in such Section shall not
include (i) any rights or interests in any contract, lease, permit, license,
charter or license agreement covering real or personal property, as such, if
under the terms of such contract, lease, permit, license, charter or license
agreement, or applicable law with respect thereto, the valid grant of a security
interest or lien therein to the Agent is prohibited and such prohibition has not
been or is not waived or the consent of the other party to such contract, lease,
permit, license, charter or license agreement has not been or is not otherwise
obtained or under applicable law such prohibition cannot be waived; PROVIDED,
that, the foregoing exclusion shall in no way be construed (A) to apply if any
such prohibition is unenforceable under Sections 9-406, 9-407 or 9-408 of the
Code or other applicable law or (B) so as to limit, impair or otherwise affect
the Agent's unconditional continuing security interests in and liens upon any
rights or interests of a Grantor in or to monies due or to become due under any
such contract, lease, permit, license, charter or license agreement (including
any Receivables) or (ii) the funds held in escrow by Law Debenture Trust Company
of New York, a , a limited purpose trust company, chartered by the New York
State Banking Department ("Law Debenture Trust"), as escrow agent pursuant to
the escrow agreement, dated as of May 4, 2006, among AMRI, ▇▇▇▇ ▇▇▇▇▇▇▇, an
individual and Law Debenture Trust Company.
5
(c) Notwithstanding anything to the contrary set forth in this
Agreement, the Collateral for the Obligations of any Borrower shall not include
the Capital Stock of any Subsidiary that is organized under the laws of a
jurisdiction outside of the United States of America that is a "controlled
foreign corporation" (as such term is defined in Section 957(a) of the Internal
Revenue Code or a successor provision thereof) in excess of sixty-five (65%)
percent of all of the issued and outstanding shares of Capital Stock of such
foreign Subsidiary entitled to vote (within the meaning of Treasury Regulation
Section 1.956-2) to the extent that the grant of a security interest in the
Capital Stock of such foreign Subsidiary in excess of sixty-six and two thirds
(66 2/3%) percent of all of the issued and outstanding shares of Capital Stock
of such foreign Subsidiary entitled to vote (within the meaning of Treasury
Regulation Section 1.956-2) to secure the Obligations may result in any adverse
tax consequence to any Grantor.
SECTION 3. SECURITY FOR OBLIGATIONS. The security interest created hereby
in the Collateral constitutes continuing collateral security for all of the
following obligations, whether now existing or hereafter incurred (the
"OBLIGATIONS"):
(a) all present and future indebtedness, obligations, and
liabilities of each Grantor to Agent and the Noteholders under the Notes, the
Securities Purchase Agreement and any other Transaction Document, whether or not
the right of payment in respect of such claim is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed,
legal, equitable, secured, unsecured, and whether or not such claim is
discharged, stayed or otherwise affected by any proceeding referred to in
Section 4(vii) or 4(viii) of the Notes. Without limiting the generality of the
foregoing, the Obligations include the obligation of each Grantor to pay
principal, interest, charges, expenses, fees, attorneys' fees and disbursements,
indemnities and other amounts payable by such Grantor under the Transaction
Documents, whether now existing or hereafter arising, whether arising before,
during or after the initial or any renewal term of the Notes or after the
commencement of any case with respect to such Grantor under the United States
Bankruptcy Code or any similar statute (including the payment of interest and
other amounts which would accrue and become due but for the commencement of such
case, whether or not such amounts are allowed or allowable in whole or in part
in such case); and
(b) the due performance and observance by each Grantor of all of its
other obligations from time to time existing in respect of any of the
Transaction Documents, including without limitation, with respect to any
conversion or redemption rights of the Buyers under the Notes; and
(c) the obligation of each Grantor to reimburse any amount in
respect of any of the foregoing that Agent or any Noteholder (in its sole
discretion) may elect to pay or advance on behalf of such Grantor. Each Grantor
waives any rights it may have under the Code to demand the filing of termination
statements by Agent with respect to the Collateral, and Agent shall not be
required to deliver such termination statements to such Grantor, or to file them
with any filing office, in each case, unless and until all of the Obligations
are paid in full and the Transaction Documents are terminated.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Each Grantor jointly and
severally represents and warrants as follows:
6
(a) Schedule I hereto sets forth (i) the exact legal name of each
Grantor and (ii) the organizational identification number of each Grantor or
states that no such organizational identification number exists.
(b) Each Grantor (i) is a corporation, limited liability company,
trust or limited partnership duly organized, validly existing and in good
standing under the laws of the state or jurisdiction of its organization as set
forth on Schedule I hereto, (ii) has all requisite power and authority to
execute, deliver and perform this Agreement and each other Transaction Document
to be executed and delivered by it pursuant hereto and to consummate the
transactions contemplated hereby and thereby, and (iii) is duly qualified to do
business and is in good standing in each jurisdiction in which the character of
the properties owned or leased by it or in which the transaction of its business
makes such qualification necessary where the failure to be so qualified and in
good standing has or could reasonably be expected to have a Material Adverse
Effect.
(c) The execution, delivery and performance by each Grantor of this
Agreement (i) have been duly authorized by all necessary action, (ii) do not and
will not contravene its charter or by-laws, its limited liability company or
operating agreement, its trust agreement or its certificate of partnership or
partnership agreement, as applicable, or any applicable law compliance with
which is material to the business of any Grantor or any Material Contract or any
other contractual restriction binding on or otherwise affecting it or any of its
properties where the contravention of such other contractual restriction has or
could reasonably be expected to have a Material Adverse Effect, (iii) do not and
will not result in or require the creation of any Lien upon or with respect to
any of its properties other than pursuant to any Transaction Document and (iv)
do not and will not result in any default, noncompliance, suspension,
revocation, impairment, forfeiture or nonrenewal of any permit, license,
authorization or approval applicable to it or its operations or any of its
properties where such default, noncompliance, suspension, revocation,
impairment, forfeiture or nonrenewal has or could reasonably be expected to have
a Material Adverse Effect.
(d) This Agreement is a legal, valid and binding obligation of such
Grantor, enforceable against such Grantor in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally.
(e) There is no pending or, to the best of the knowledge of any
Grantor, threatened action, suit, proceeding or claim affecting any Grantor or
to which any of the properties of any Grantor is subject, before any
Governmental Authority or any arbitrator, or any order, judgment or award by any
Governmental Authority or arbitrator, that may adversely affect the grant by any
Grantor, or the perfection, of the Lien purported to be created hereby in the
Collateral, or the exercise by the Agent of any of its rights or remedies
hereunder.
(f) All taxes, assessments and other governmental charges imposed
upon any Grantor or any property of such Grantor (including, without limitation,
all federal income and social security taxes on employees' wages) and which have
become due and payable on or prior to the date hereof have been paid, except to
the extent contested in good faith by proper proceedings which stay the
imposition of any penalty, fine or Lien resulting from the non-
7
payment thereof and with respect to which adequate reserves have been set aside
for the payment thereof in accordance with GAAP.
(g) All Equipment, Fixtures, Goods and Inventory now existing are,
and all Equipment, Fixtures, Goods and Inventory hereafter existing will be,
located at the addresses specified therefor in Schedule III hereto, as such
Schedule may be modified from time to time in accordance with Section 5(b)
hereof except for, (i) Inventory in transit which is shipped from the
manufacturer or vendor thereof to the location set forth or permitted in this
clause (g), (ii) Equipment, to the extent necessary for any repair or
maintenance thereof in the ordinary course of any Grantor's business, (iii)
Equipment in transit from one location set forth or permitted in this clause (g)
to another such location to the extent necessary to move such Equipment in the
ordinary course of any Grantor's business, and (iv) motor vehicles used by or
for the benefit of any Grantor in the ordinary course of business. Each
Grantor's chief place of business and chief executive office, the place where
such Grantor keeps its Records concerning Accounts and all originals of all
Chattel Paper are located at the addresses specified therefor in Schedule III
hereto as such Schedule may be modified from time to time in accordance with
Section 5(b) hereof. None of the Accounts is evidenced by Promissory Notes or
other Instruments except for (A) Promissory Notes or other Instruments that have
been delivered to Agent to hold as part of the Collateral and (B) Promissory
Notes and other Instruments, each with an outstanding principal amount of less
than $25,000, provided, that, (1) the aggregate outstanding principal amount of
all such Promissory Notes and other Instruments which shall are not delivered to
Agent shall not at any time exceed $250,000 and (2) at any time a Default or
Event of Default shall exist or have occurred, all of such Promissory Notes and
other Instruments shall be promptly delivered to Agent upon its request. Set
forth in Schedule IV hereto is a complete and accurate list, as of the date of
this Agreement, of each Deposit Account, Securities Account and Commodities
Account of each Grantor, together with the name and address of each institution
at which each such Account is maintained, the account number for each such
Account and a description of the purpose of each such Account. Set forth in
Schedule II hereto is (C) a complete and correct list of each trade name used by
each Grantor as of the date hereof and (D) the name of, and each trade name used
by, each person from which such Grantor has acquired any substantial part of the
Collateral.
(h) As of the date hereof, each Grantor has not granted to any other
Person, and has not been granted by any other Person, any material License with
respect to any Intellectual Property other than as set forth in Schedule II. The
Licenses set forth on Schedule II constitute all of the Licenses material to the
business of Parent and each of its Subsidiaries existing on the date hereof.
(i) Each Grantor has delivered to the Agent complete and correct
copies of each License described in Schedule II hereto, including all schedules
and exhibits thereto, which includes all of the Licenses material to such
Grantor's business and existing on the date of this Agreement (other than such
Licenses which under the terms thereof or applicable law with respect thereto,
the valid grant of a security interest or lien therein to Agent is prohibited
and such prohibition has not been or is not waived or the consent of the other
party to such License has not been or is not otherwise obtained or under
applicable law such prohibition cannot be waived). Each such License sets forth
the entire agreement and understanding of the parties thereto relating to the
subject matter thereof, and there are no other agreements, arrangements or
8
understandings, written or oral, relating to the matters covered thereby or the
rights of any Grantor or any of its affiliates in respect thereof. Each such
License now existing which is material to any Grantor's business is the legal,
valid and binding obligation of the parties thereto, enforceable against such
parties in accordance with its terms. To Grantors' knowledge, no default by any
Grantor or any other party has occurred under any License nor does any defense,
offset, deduction or counterclaim exist thereunder in favor of any such party.
Each Grantor is current in its payments under such Licenses, and no Grantor has
failed to meet any minimum sales volumes, minimum royalty payments or other
similar requirements necessary to maintain such Grantor's rights, or the
exclusivity thereof, under any such License.
(j) Each Grantor owns, or otherwise possesses adequate rights to
use, all Intellectual Property, which includes the Trademarks, Patents and
Copyrights necessary to conduct its business as conducted as of the date hereof
or projected to be conducted from time to time. Schedule II hereto sets forth a
true and complete list of all registered and applied-for Intellectual Property
and Licenses owned or used by each Grantor as of the date hereof which is
necessary to conduct such Grantor's business in substantially the same manner as
conducted as of the date hereof or projected to be conducted from time to time.
All such Intellectual Property is subsisting and in full force and effect, has
not been adjudged invalid or unenforceable, is valid and enforceable and has not
been abandoned in whole or in part. Except as set forth in Schedule II, no
Grantor has any knowledge of any conflict with the rights of others to any
Intellectual Property and, to the knowledge of each Grantor, no Grantor is now
infringing or in conflict with any such rights of others, and to the knowledge
of each Grantor, no other Person is now infringing or in conflict with any such
properties, assets and rights owned or used by any Grantor. No Grantor has
received any notice that it is violating or has violated the trademarks,
patents, copyrights, inventions, trade secrets, proprietary information and
technology, know-how, formulae, rights of publicity or other intellectual
property rights of any third party. The Grantors have timely made all filings
and payments with the appropriate foreign and domestic Governmental Authorities
required to maintain in subsistence all Intellectual Property that is issued,
registered or applied-for in any jurisdiction, including without limitation
office action responses, affidavits of use, affidavits of continuing use,
renewals, requests for extension of time, maintenance fees, application fees and
foreign convention priority filings, other than where the failure to make such
filings or payments could not reasonably be expected to have an adverse effect
on the rights of any Grantor as to any Intellectual Property being used in the
business or that has a value of more than $250,000. The Licenses set forth in
Schedule II constitute all of the Licenses material to the business of Parent
and each of its Subsidiaries existing on the date hereof (other than such
Licenses which under the terms thereof or applicable law with respect thereto,
the valid grant of a security interest or lien therein to the Agent is
prohibited and such prohibition has not been or is not waived or the consent of
the other party to such License has not been or is not otherwise obtained or
under applicable law such prohibition cannot be waived) and complete and correct
copies of each License described on Schedule II have been delivered to the
Agent. Each such License sets forth the entire agreement and understanding of
the parties thereto relating to the subject matter thereof, and there are no
other agreements, arrangements or understandings, written or oral, relating to
the matters covered thereby or the rights of Parent or any of its Subsidiaries
or any of their affiliates in respect thereof. Each such License now existing,
which is material to any Grantor's business, is the legal, valid and binding
obligation of the parties thereto, enforceable against such parties in
accordance with its terms. To the knowledge of the Grantors, no default by
Parent or any of its Subsidiaries or any other party has
9
occurred under any License, nor does any defense, offset, deduction or
counterclaim exist thereunder in favor of any such party. As to each License of
Intellectual Property where Parent or any of its Subsidiaries is the licensee,
Parent or such Subsidiary, as the case may be, is current in its payments under
such Licenses, and has not failed to meet any minimum sales volumes, minimum
royalty payments or other similar requirements necessary to maintain such
party's rights, or the exclusivity thereof, under any such License.
(k) The Grantors are and will be at all times the sole and exclusive
owners of, or otherwise have and will have adequate rights in, the Collateral
free and clear of any Lien except for (i) the Liens created by this Agreement
and (ii) the Permitted Liens. No effective financing statement or other
instrument similar in effect covering all or any part of the Collateral is on
file in any recording or filing office except (A) such as may have been filed in
favor of the Agent relating to this Agreement and (B) such as may have been
filed to perfect or protect any Permitted Liens.
(l) The exercise by the Agent of any of its rights and remedies
hereunder in accordance with the terms of this Agreement will not contravene any
applicable law compliance with which is material to the business of any Grantor
or any contractual restriction binding on or otherwise affecting any Grantor or
any of its properties where the contravention of such contractual restriction
has or could reasonably be expected to have a Material Adverse Effect and will
not result in or require the creation of any Lien (other than pursuant to this
Agreement or the other Transaction Documents) upon or with respect to any of its
properties.
(m) No authorization or approval or other action by, and no notice
to or filing with, any Governmental Authority or other regulatory body, or any
other Person, is required for (i) the grant by any Grantor, or the perfection,
of the security interest purported to be created hereby in the Collateral or
(ii) the exercise by the Agent of any of its rights and remedies hereunder,
except (A) for the filing under the Code as in effect in the applicable
jurisdiction of the financing statements described in Schedule V hereto, all of
which financing statements when duly filed will be in full force and effect, or
such other filings as may be provided for under the laws of a jurisdiction
outside of the United States of America as to those Grantors organized under the
laws of such jurisdictions, (B) with respect to the perfection of the security
interest created hereby in the United States Intellectual Property, for the
filing under the Code as in effect in the applicable jurisdiction of the
financing statements described in Schedule V hereto and for the recording of the
appropriate Assignment for Security, substantially in the form of Exhibit A
hereto in the United States Patent and Trademark Office or the United States
Copyright Office, as applicable, (C) with respect to the perfection of the
security interest created hereby in foreign Intellectual Property and Licenses,
for registrations, filings and notifications in jurisdictions located outside of
the United States of America and covering rights in such jurisdictions relating
to the Intellectual Property and Licenses in accordance with the laws of the
applicable jurisdiction, (D) with respect to the perfection of the security
interest created hereby in motor vehicles for which the title to such motor
vehicles (including, without limitation, all trucks, trailers, tractors, service
vehicles, automobiles and other mobile equipment) is governed by a certificate
of title or ownership (collectively, the "MOTOR VEHICLES"), for the submission
of an appropriate application requesting that the Lien of the Agent be noted on
the certificate of title or ownership, completed and authenticated by the
applicable Grantor, together with the certificate of title, with respect to each
Motor Vehicle, to the appropriate state agency, (E) with respect to
10
the perfection of the security interest created by any Pledge Agreement over
Capital Stock, for the registrations, filings and notifications of the relevant
Pledge Agreement in accordance with the laws of the applicable jurisdiction, (F)
with respect to any action that may be necessary to obtain control in Collateral
described in Sections 5(i) and 5(k) hereof and item (E) of the present
paragraph, the taking of such actions, (G) the taking possession of all
Documents, Chattel Paper, Instruments and cash constituting Collateral or such
assets being taken into possession by an agent or bailee for the benefit of
Agent, and (H) generally, with respect to the perfection and enforcement of the
security interest created herein, any actions and formalities as described in
the other Transaction Documents.
(n) This Agreement creates in favor of the Agent for the benefit of
itself and the Noteholders a legal, valid and enforceable security interest in
the Collateral, as security for the Obligations. The Agent's having possession
of all Instruments, Documents and Chattel Paper and cash constituting Collateral
and obtaining control of all Collateral described in Sections 5(i) and 5(k)
hereof from time to time, the recording of the appropriate Assignment for
Security executed pursuant hereto in the United States Patent and Trademark
Office and the United States Copyright Office, as applicable, the submission of
an appropriate application requesting that the Lien of the Agent be noted on the
certificate of title or ownership, completed and authenticated by the applicable
Grantor, together with the certificate of title or ownership, with respect to
such Motor Vehicles, to the applicable state agency, and the filing of the
financing statements described in Schedule V hereto and, with respect to the
Intellectual Property hereafter existing and not covered by an appropriate
Assignment for Security, the recording in the United States Patent and Trademark
Office or the United States Copyright Office, as applicable, of appropriate
instruments of assignment, result in the perfection of such security interests.
Such security interests are, or in the case of Collateral in which any Grantor
obtains rights after the date hereof, will be, perfected, first priority
security interests, subject only to the Permitted Liens and the taking of
actions described in this Section 4(n). No Grantor holds any Commercial Tort
Claims in respect of which a claim has been filed in a court of law or a written
notice by an attorney has been given to a potential defendant or is aware of any
such pending claims, except for such claims described in Schedule VI. Such
recordings and filings and all other action necessary or desirable to perfect
and protect such security interest have been duly taken, except for (i) the
Agent's having possession of Instruments, Documents and Chattel Paper and cash
constituting Collateral that may come into existence after the date hereof, (ii)
the Agent obtaining control of any Collateral described in Sections 5(i) and
5(k) of this Agreement coming into existence after the date hereof and (iii) the
other filings, recordations and actions described in Section 4(m) hereof.
SECTION 5. COVENANTS AS TO THE COLLATERAL. Unless and until the
Obligations have been paid in full and subject to the terms of the Intercreditor
Agreement (as defined in Section 11(n) of this Agreement), each Grantor will,
unless Agent or Required Noteholders shall otherwise consent in writing:
(a) FURTHER ASSURANCES. Each Grantor will at its expense, at any
time and from time to time, promptly execute and deliver all further instruments
and documents and take all further action that may be necessary or appropriate
or that the Agent may request in order to (i) perfect and protect the security
interest purported to be created hereby subject to the terms hereof; (ii) enable
the Agent to exercise and enforce its rights and remedies hereunder in respect
of the
11
Collateral; or (iii) otherwise effect the purposes of this Agreement, including,
without limitation: (A) marking conspicuously all Chattel Paper and each License
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 Chattel Paper, License or Collateral is subject to the
security interest created hereby, (B) if any Account shall be evidenced by
Promissory Notes or other Instruments or Chattel Paper, delivering and pledging
to the Agent hereunder such Promissory Notes, Instruments or Chattel Paper, duly
endorsed and accompanied by executed instruments of transfer or collateral
assignment, all in form and substance satisfactory to the Agent, except for any
Promissory Note, Instrument or Chattel Paper which is for a principal amount of
less than $25,000, provided, that, (1) the aggregate outstanding principal
amount of all such Promissory Notes, Instruments and Chattel Paper which are not
delivered to Agent shall not at any time exceed $250,000 and (2) at any time a
Default or Event of Default shall exist or have occurred, all of such Promissory
Notes, Instruments and Chattel Paper shall be promptly delivered to Agent upon
its request. (C) executing and filing (to the extent, if any, that such
Grantor's signature is required thereon) or authenticating the filing of, such
financing or continuation statements, or amendments thereto, as may be necessary
or desirable or that the Agent may request in order to perfect and preserve the
security interest purported to be created hereby, (D) furnishing 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, (E) if any Collateral in
excess of $25,000 shall be in the possession of a third party, notifying such
Person of the Agent's security interest created hereby and obtaining a written
acknowledgment from such Person that such Person holds possession of the
Collateral for the benefit of the Agent, which such written acknowledgement
shall be in form and substance satisfactory to the Agent, (F) if at any time
after the date hereof any Grantor acquires or holds any Commercial Tort Claim,
upon the commencement of an action, suit or proceeding with respect to such
Commercial Tort Claim, immediately notifying the Agent in a writing signed by
such Grantor setting forth a brief description of such Commercial Tort Claim and
granting to the Agent a security interest therein and in the proceeds thereof,
which writing shall incorporate the provisions hereof and shall be in form and
substance satisfactory to the Agent, (G) if requested by the Agent, causing the
Agent to be listed as the lien holder, for the benefit of itself and the
Noteholders, on each certificate of title or ownership with respect to each
Motor Vehicle or other item of Equipment subject to a certificate of title or
ownership (other than a Motor Vehicle or item of Equipment that is subject to a
purchase money security interest permitted by Section 6.02(a) of the Loan
Agreement and a Motor Vehicle having a fair market value of not more than
$50,000) and within 15 days of such request deliver evidence of the same to the
Agent, and (H) taking all actions required by any relevant version of the Code
or by other law, as applicable, or by other law as applicable in any foreign
jurisdiction.
(b) LOCATION OF EQUIPMENT AND INVENTORY.
(i) Each Grantor will keep the Equipment and Inventory (other
than used Equipment and Inventory sold in the ordinary course of business in
accordance with Section 5(g) hereof and Equipment and Inventory sold as part of
a Permitted Disposition subject to the conditions specified in Section 6.02(c)
of the Loan Agreement) at the locations specified therefor in Section 4(g)
hereof or any of the locations of Equipment and Inventory otherwise permitted
under Section 4(g) hereof or, upon not less than thirty (30) days' prior written
notice to the Agent accompanied by a new Schedule III hereto indicating each new
location of the Equipment and
12
Inventory, at such other locations in the continental United States of America
or, in connection with the business and operations of any Grantor organized
under the laws of a jurisdiction outside of the United States of America,
outside the continental United States of America as the Grantors may elect (but
within the jurisdiction in which such Grantor is organized), PROVIDED THAT,
subject to the terms hereof with respect to Motor Vehicles, other than with
respect to Equipment and Inventory described in Section 4(g), (A) all action has
been taken to grant to the Agent a perfected, first priority security interest
in such Equipment and Inventory (subject only to Permitted Liens), and (B) the
Agent's rights in such Equipment and Inventory, including, without limitation,
the existence, perfection and priority of the security interest created hereby
in such Equipment and Inventory, are not adversely affected thereby.
(ii) No Grantor shall remove any Equipment or Inventory from
the locations set forth or permitted herein, except (A) to move Inventory or
Equipment directly from one location set forth or permitted herein to another
such location, (B) Inventory shipped from the manufacturer thereof or the
applicable vendor selling such Inventory to such Grantor which is in transit to
the locations set forth or permitted herein, (C) to the extent necessary to have
any Equipment repaired or maintained in the ordinary course of its business or
(D) the movement of motor vehicles or other titled Equipment used by or for the
benefit of any Grantor in the ordinary course of business.
(c) CONDITION OF EQUIPMENT. Each Grantor will maintain or cause the
Equipment necessary to the conduct of its business, as conducted as of the date
hereof or projected to be conducted from time to time, to be maintained and
preserved in good condition, repair and working order, ordinary wear and tear
excepted, and will forthwith, or in the case of any loss or damage to any
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, consistent with past practice, or
which the Agent may reasonably request for such purpose unless (i) Grantor
decides in its reasonable business judgment that such Equipment is obsolete or
that such repairs, replacements or other improvements are not feasible or
desirable given the value of such Equipment such Grantor's business plan or
strategy or the current operations of such Grantor or (ii) the failure to so
repair, replace or improve upon such Equipment would not have a Material Adverse
Effect. Each Grantor will promptly furnish to the Agent a statement describing
in reasonable detail any such loss or damage in excess of $250,000 per
occurrence to any Equipment.
(d) TAXES, ETC. Each Grantor jointly and severally agrees to pay
promptly when due, after giving effect to all applicable extensions, 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 and Inventory, except to the extent the validity thereof
is being contested in good faith by proper proceedings which stay the imposition
of any penalty, fine or Lien resulting from the non-payment thereof and with
respect to which adequate reserves in accordance with GAAP have been set aside
for the payment thereof.
(e) INSURANCE.
(i) Each Grantor will, at its own expense, maintain insurance
(including, without limitation, comprehensive general liability and property
insurance) with respect to the
13
Equipment and Inventory in such amounts, against such risks, in such form and
with responsible and reputable insurance companies or associations as is
required by any Governmental Authority having jurisdiction with respect thereto
or as is carried generally in accordance with sound business practice by
companies in similar businesses similarly situated and in any event, in amount,
adequacy and scope reasonably satisfactory to the Agent. Each policy for
liability insurance shall provide for all losses to be paid on behalf of the
Agent and the Grantors as their respective interests may appear, and each policy
for property damage insurance shall provide for all losses to be adjusted with,
and paid directly to, the Agent for the benefit of itself and the Noteholders.
Each such policy shall in addition (A) name the Agent as an additional insured
party thereunder (without any representation or warranty by or obligation upon
the Agent) as its interests may appear, (B) contain an agreement by the insurer
that any loss thereunder shall be payable to the Agent notwithstanding any
action, inaction or breach of representation or warranty by any Grantor, (C)
provide that there shall be no recourse against the Agent for payment of
premiums or other amounts with respect thereto and (D) provide that at least ten
(10) days' prior written notice of the exercise of any right of cancellation as
a result of the failure to pay premiums shall be given to the Agent by the
insurer and otherwise at least thirty (30) days' prior written notice of
cancellation, lapse, expiration or other adverse change shall be given to the
Agent by the insurer. Upon the request of the Agent, each Grantor will deliver
to the Agent original or duplicate policies of such insurance, with the loss
payable and additional insured endorsement in favor of the Agent and such other
Persons as the Agent may designate from time to time. A report of a reputable
insurance broker with respect to such insurance shall be delivered as often as
the Agent may reasonably request. Each Grantor will also, at the request of the
Agent, execute and deliver instruments of assignment of such insurance policies
assigning such policies to the Agent as security for the Obligations and cause
the respective insurers to acknowledge notice of such assignment.
(ii) Reimbursement under any liability insurance maintained by
any Grantor pursuant to this Section 5(e) shall be paid in the manner set forth
in Section 3.03 of the Senior Loan Agreement. In the case of any loss involving
damage to Equipment, Inventory or other Collateral, any proceeds of insurance
maintained by a Grantor pursuant to this Section 5(e) shall be paid in the
manner set forth in Section 3.03 of the Senior Loan Agreement. Such Grantor will
make or cause to be made the necessary repairs to or replacements of such
Equipment, Inventory or other Collateral.
(iii) All insurance payments in respect of any Collateral
shall be paid in the manner set forth in the Notes.
(f) PROVISIONS CONCERNING THE ACCOUNTS AND THE LICENSES.
(i) No Grantor shall change (A) its name, identity or
organizational structure; PROVIDED, THAT, Parent may change its name to "Summit
Global Logistics Inc." within forty five (45) days after the date hereof or (B)
its jurisdiction of incorporation as set forth in Section 4(b) hereto. Each
Grantor shall (1) immediately notify the Agent upon obtaining an organizational
identification number, if on the date hereof such Grantor did not have such
identification number, and (2) keep adequate records concerning the Accounts and
Chattel Paper and permit representatives of the Agent pursuant to the terms of
the Notes to inspect and make abstracts from such Records and Chattel Paper.
14
(ii) Each Grantor will, except as otherwise provided in this
subsection (f), continue to collect, at its own expense, all amounts due or to
become due under the Accounts in accordance with its customary business
practices and subject to the terms of the Transaction Documents. In connection
with such collections, each Grantor may (and, after the occurrence and during
the continuance of an Event of Default, at the Agent's direction, will) take
such action as such Grantor or the Agent, as the case may be, may deem necessary
or advisable to enforce collection or performance of the Accounts ; PROVIDED,
HOWEVER, that the Agent shall have the right at any time, upon the occurrence
and during the continuance of an Event of Default, to notify the Account Debtors
or obligors under any Accounts of the assignment of such Accounts to the Agent
and to direct such Account Debtors or obligors to make payment of all amounts
due or to become due to such Grantor thereunder directly to the Agent or its
designated agent and, upon such notification and at the expense of such Grantor
and to the extent permitted by law, to enforce collection of any such Accounts
and to adjust, settle or compromise the amount or payment thereof. After receipt
by any Grantor of a notice from the Agent that the Agent has notified, intends
to notify, or has enforced or intends to enforce a Grantor's rights against the
Account Debtors or obligors under any Accounts as referred to in the proviso to
the immediately preceding sentence, (A) all amounts and proceeds (including
Instruments) received by such Grantor in respect of the Accounts shall be
received in trust for the benefit of the Agent hereunder, shall be segregated
from other funds of such Grantor and shall be forthwith paid over to the Agent,
in the same form as so received (with any necessary endorsement) to be held as
cash collateral and either (1) held in a Deposit Account or Securities Account
over which the Agent has control in accordance with Section 5(i) so long as no
Event of Default shall have occurred and be continuing or (2) if an Event of
Default shall have occurred and be continuing, applied as specified in Section
7(b) hereof, and (B) such Grantor will not adjust, settle or compromise the
amount or payment of any Account or release wholly or partly any Account Debtor
or obligor thereof or allow any credit or discount thereon. In addition, upon
the occurrence and during the continuance of an Event of Default, the Agent may
in its sole and absolute discretion direct any or all of the banks and financial
institutions with which any Grantor either maintains a Deposit Account or a
lockbox or deposits the proceeds of any Accounts to send immediately to the
Agent by wire transfer (to such account as the Agent shall specify, or in such
other manner as the Agent shall direct) all or a portion of such securities,
cash, investments and other items held by such institution. Any such securities,
cash, investments and other items so received by the Agent shall (in the sole
and absolute discretion of the Agent) be held as additional Collateral for the
Obligations or distributed in accordance with Section 7 hereof.
(iii) Upon the occurrence and during the continuance of any
breach or default under any License referred to in Schedule II hereto by any
party thereto other than a Grantor, which has or could reasonably be expected to
have a Material Adverse Effect, (A) the Grantors will, promptly after obtaining
knowledge thereof, give the Agent written notice of the nature and duration
thereof, specifying what action, if any, it has taken and proposes to take with
respect thereto, (B) no Grantor will, without the prior written consent of the
Agent, declare or waive any such breach or default or affirmatively consent to
the cure thereof or exercise any of its remedies in respect thereof, and (C)
each Grantor will, upon written instructions from the Agent and at such
Grantor's expense, take such action as the Agent may deem necessary or advisable
in respect thereof.
15
(iv) Each Grantor will, at its expense, promptly, and in any
event within five (5) days after receipt, deliver to the Agent a copy of each
material notice or other material communication received by it by which any
other party to any License referred to in Schedule II hereto purports to
exercise any of its rights or affect any of its obligations thereunder, together
with a copy of any reply by such Grantor thereto.
(v) Each Grantor will exercise promptly and diligently each
and every material right which it may have under each License referred to in
Schedule II in accordance with reasonable and sound business practice (other
than any right of termination) and will duly perform and observe in all respects
all of its obligations under each License and will take all action necessary to
maintain such Licenses in full force and effect, the exercise, performance,
observance or taking of which is material to the business of any Grantor. No
Grantor will, without the prior written consent of the Agent, cancel, terminate,
amend or otherwise modify in any material respect, or waive any provision of,
any License referred to in Schedule II hereto which is material to the business
of any Grantor.
(g) TRANSFERS AND OTHER LIENS.
(i) Except to the extent expressly permitted by the Notes or
approved by the Senior Agent (as defined in the Intercreditor Agreement (as
defined in Section 11(n) hereof)) in accordance with Section 2.5 of the
Intercreditor Agreement, no Grantor will sell, assign (by operation of law or
otherwise), lease, license, exchange or otherwise transfer or dispose of any of
the Collateral.
(ii) Except to the extent expressly permitted by the Notes, no
Grantor will create, suffer to exist or grant any Lien upon or with respect to
any Collateral.
(h) INTELLECTUAL PROPERTY.
(i) If applicable, each Grantor has duly executed and
delivered the applicable Assignment for Security in the form attached hereto as
Exhibit A. Each Grantor (either itself or through licensees) will, and will
cause each licensee thereof to, take all action necessary to maintain all of the
Intellectual Property necessary for the conduct of its business, as currently
conducted as of the date hereof or projected to be conducted from time to time,
in full force and effect, including, without limitation, using the proper
statutory notices and markings and using the Trademarks on each applicable
trademark class of goods in order to so maintain the Trademarks in full force,
free from any claim of abandonment for non-use, and no Grantor will (nor permit
any licensee thereof to) do any act or knowingly omit to do any act whereby any
such Intellectual Property may become invalidated; PROVIDED, THAT, no Grantor
shall have an obligation to use or to maintain any such Intellectual Property
(A) that relates solely to any product or work, that has been, or is in the
process of being, discontinued, abandoned or terminated, (B) whose full term has
expired without possibility of renewal or (C) that is substantially the same as
another Intellectual Property that is in full force and effect, so long as the
failure to use or maintain such Intellectual Property does not materially
adversely affect the validity of such replacement Intellectual Property and so
long as such other Intellectual Property is subject to the Lien and security
interest created by this Agreement. Each Grantor will cause to be taken all
necessary steps in any proceeding before the United States Patent and Trademark
Office and the United States Copyright Office or any
16
similar office or agency in any other country or political subdivision thereof
to maintain each registration of the Intellectual Property necessary for the
conduct of its business, as currently conducted as of the date hereof or
projected to be conducted from time to time (other than the Intellectual
Property described in the proviso to the immediately preceding sentence),
including, without limitation, filing of renewals, affidavits of use, affidavits
of incontestability and opposition, interference and cancellation proceedings
and payment of maintenance fees, filing fees, taxes or other governmental fees.
(ii) If any Intellectual Property necessary for the conduct of
its business, as currently conducted as of the date hereof or projected to be
conducted from time to time, is infringed, misappropriated, diluted or otherwise
violated in any material respect by a third party, the Grantors shall (A) upon
learning of such infringement, misappropriation, dilution or other violation,
promptly notify the Agent and (B) promptly attempt to cause such infringement to
cease including, where reasonably necessary, ▇▇▇ for infringement,
misappropriation, dilution or other violation, seek injunctive relief where
appropriate and recover any and all damages for such infringement,
misappropriation, dilution or other violation, or take such other actions as the
Grantors shall deem appropriate under the circumstances to protect such
Intellectual Property.
(iii) As Agent may reasonably request, each Grantor shall
furnish to the Agent from time to time (but, unless an Event of Default has
occurred and is continuing, no more frequently than quarterly) statements and
schedules further identifying and describing the Intellectual Property and
Licenses necessary for the conduct of its business, as currently conducted as of
the date hereof or projected to be conducted from time to time, and such other
reports in connection with such Intellectual Property and Licenses, all in
reasonable detail, and following receipt by the Agent of any such statements,
schedules or reports, promptly upon request of Agent, the Grantors shall modify
this Agreement by amending Schedule II hereto to include any Intellectual
Property and License necessary for the conduct of its business, as currently
conducted as of the date hereof or projected to be conducted from time to time,
as the case may be, which becomes part of the Collateral under this Agreement.
Each Grantor shall execute and authenticate such documents and do such acts as
shall be necessary or, in the judgment of the Agent, desirable to subject such
Intellectual Property and Licenses to the Lien and security interest created by
this Agreement. Notwithstanding anything herein to the contrary, upon the
occurrence and during the continuance of an Event of Default, no Grantor may
abandon or otherwise permit any such Intellectual Property to become invalid
without the prior written consent of the Agent, and if any such Intellectual
Property is infringed, misappropriated, diluted or otherwise violated in any
material respect by a third party, the Grantors will take such action as the
Agent shall deem appropriate under the circumstances to protect such
Intellectual Property.
(iv) In no event shall any Grantor, either itself or through
any agent, employee, licensee or designee, file an application for the
registration of any Trademark or Copyright or the issuance of any Patent with
the United States Patent and Trademark Office or the United States Copyright
Office, as applicable, or in any similar office or agency of the United States
of America or any country or any political subdivision thereof unless it gives
the Agent prior written notice thereof. Upon request of the Agent, each Grantor
shall execute, authenticate and deliver any and all collateral assignments,
agreements, instruments, documents and papers as the Agent may reasonably
request to evidence the Agent's security interest hereunder in such Intellectual
Property and the General Intangibles of such Grantor relating thereto or
represented thereby, and each
17
Grantor hereby appoints the Agent its attorney-in-fact to execute and/or
authenticate and file all such writings for the foregoing purposes, all acts of
such attorney being hereby ratified and confirmed, and such power (being coupled
with an interest) shall be irrevocable until the Obligations are paid in full
and the Transaction Documents are terminated.
(v) Each applicable Grantor shall, concurrently with the
execution and delivery of this Agreement, execute and deliver to Agent five (5)
originals of a Special Power of Attorney in the form of Exhibit B hereto for the
implementation of the assignment, sale or other disposition of the Intellectual
Property pursuant to Agent's exercise of the rights and remedies granted to
Agent hereunder.
(i) DEPOSIT, COMMODITIES AND SECURITIES ACCOUNTS.
(i) As promptly as practicable, but in no event later than 45 days
after the date hereof, except as otherwise provided in the last sentence of this
Section 5(i), each Grantor shall cause each of its Deposit Accounts at Bank of
America, N.A. to be subject to a control agreement in favor of the Agent in form
and substance reasonably satisfactory to the Agent that enables the Agent to
obtain control thereof within the meaning of Section 9-104 of the UCC (subject
to the security interest under the Senior Loan Documents) and (ii) if funds are
transferred to the Senior Agent to hold as cash collateral pursuant to Section
6.01(t)(ix) of the Senior Loan Agreement, Parent shall cause the Agent to have a
perfected security interest in such cash collateral (subject only to the
security interest of the Senior Agent). Except as otherwise provided in the last
sentence of this Section 5(i), Grantor shall use commercially reasonable efforts
to cause each Commodity Account or Securities Account of such Grantor to be
subject to an agreement in form and substance reasonably satisfactory to the
Agent that provides Agent with control within the meaning of Section 9-106 of
the UCC of such Commodity Account or Securities Account (subject to the security
interest under the Senior Loan Documents). No Grantor shall open or maintain any
Deposit Account, Commodity Account or Securities Account that is not in
compliance with the Transaction Documents. Grantors shall obtain a control
agreement in favor of the Agent in form and substance reasonably satisfactory to
Agent for each Deposit Account; except that Grantors shall not be required to
obtain control agreements for (aa) Deposit Accounts for which the Agent is the
customer, (bb) Deposit Accounts specifically and exclusively used for ▇▇▇▇▇ cash
so long as the aggregate balance of the funds on deposit in all of such ▇▇▇▇▇
cash Deposit Accounts shall not exceed $250,000 at any time and no Default or
Event of Default shall exist or have occurred and be continuing, (cc) Deposit
Accounts specifically and exclusively used for payroll, payroll taxes and other
employee wage and benefit payments to or for the benefit of any Grantor's
employees, or (dd) the other Deposit Accounts listed on Schedule IV hereto that
are not at Bank of America; PROVIDED, THAT, as to any such Deposit Accounts not
at Bank of America, (x) the applicable Grantor shall, prior to November 30,
2006, cause to be manually transferred on a weekly basis, and thereafter, such
manual transfers shall occur every other business day, all funds deposited in or
credited to such Deposit Accounts to the Concentration Account (as defined in
the Senior Loan Agreement) (or, after the Senior Debt has been Paid in Full (as
each such term is defined in the Intercreditor Agreement), as the Agent may
direct) and (y) such Deposit Accounts shall be closed on or before December 31,
2006 and (ee) any other Deposit Accounts excluded from the requirements of this
paragraph 5(i) in the sole discretion of the Agent.
18
(j) MOTOR VEHICLES.
(i) If requested by the Agent, each Grantor shall deliver to
the Agent originals of the certificates of title or ownership for all Motor
Vehicles owned by it with the Agent listed as lienholder, for the benefit of the
Noteholders; PROVIDED that the Agent shall not be required to be listed as the
lienholder if (A) a Motor Vehicle is subject to a purchase money security
interest permitted by the Note or (B) a Motor Vehicle has a fair market value of
not more than $50,000.
(ii) Each Grantor hereby appoints the Agent as its
attorney-in-fact, effective the date hereof and terminating upon the termination
of the Transaction Documents and the Obligations being paid in full, for the
purpose of (A) executing on behalf of such Grantor title or ownership
applications for filing with appropriate state agencies to enable Motor Vehicles
now owned or hereafter acquired by such Grantor to be retitled and the Agent
listed as lienholder thereof in accordance with Section 5(j)(i) hereof, (B)
filing such applications with such state agencies, and (C) executing such other
documents and instruments on behalf of, and taking such other action in the name
of, such Grantor as the Agent may deem necessary or advisable to accomplish the
purposes hereof (including, without limitation, for the purpose of creating in
favor of the Agent a perfected Lien on the Motor Vehicles and exercising the
rights and remedies of the Agent hereunder). This appointment as
attorney-in-fact is coupled with an interest and is irrevocable until all of the
Obligations are paid in full and the Transaction Documents are terminated.
(iii) Any certificates of title or ownership delivered
pursuant to the terms hereof shall be accompanied by odometer statements for
each Motor Vehicle covered thereby.
(iv) So long as no Event of Default shall have occurred and be
continuing, upon the request of any Grantor, the Agent shall execute and deliver
to such Grantor such instruments as such Grantor shall reasonably request to
remove the notation of the Agent as lienholder on any certificate of title for
any Motor Vehicle; PROVIDED THAT any such instruments shall be delivered, and
the release effective, only upon receipt by the Agent of a certificate from such
Grantor, stating that the Motor Vehicle, the Lien on which is to be released, is
to be sold or has suffered a casualty loss (with title thereto passing to the
casualty insurance company therefor in settlement of the claim for such loss),
the amount that such Grantor will receive as sale proceeds or insurance proceeds
and whether or not such sale proceeds or insurance proceeds are required by the
Senior Loan Documents to be paid to the Senior Agent to be applied to the
obligations under the Senior Loan Agreement and, to the extent required by the
Senior Loan Documents, any proceeds of such sale or casualty loss shall be paid
to the Senior Agent hereunder to be applied to the obligations under the Senior
Loan Agreement then outstanding.
(k) CONTROL. Each Grantor hereby agrees to take any or all action
that may be necessary or desirable promptly upon request of the Agent and
subject to the Loan Agreement in order for the Agent to obtain control in
accordance with Sections 9-105 through and including 9-107 of the Code with
respect to the following Collateral: (i) Electronic Chattel Paper with a value
in excess of $25,000, (ii) Investment Property with a value in excess of $25,000
and (iii) Letter-of-Credit Rights with a value in excess of $25,000.
19
(l) INSPECTION AND REPORTING. Each Grantor shall permit the Agent
and representative of Agent and any Noteholder at any time and from time to time
during normal business hours upon prior notice to such Grantor so long as no
Default or Event of Default shall exist or have occurred and be continuing and
at any time without notice at any time a Default or an Event of Default shall
exist or have occurred and be continuing, no more than two (2) times in any
twelve (12) month period so long as no Default or Event of Default shall exist
or have occurred and be continuing, but otherwise as the Agent may request, at
the reasonable expense of such Grantor, (i) to examine and make copies of and
abstracts from such Grantor's records and books of account, (ii) to visit and
inspect its properties, (iii) to verify materials, leases, notes, accounts
receivable, deposit accounts and its other assets, (iv) to conduct audits,
physical counts, valuations, appraisals, Phase I and Phase II Environmental Site
Assessments or examinations at the locations of such Grantor and (v) to discuss
such Grantor's affairs, finances and accounts with any of its directors,
officers, managerial employees, independent accountants or any of its other
representatives. In furtherance of the foregoing, each Grantor hereby authorizes
its independent accountants to discuss the affairs, finances and accounts of
such Grantor (independently or together with representatives of Grantor) with
Agent and representative of any Noteholder in accordance with this Section 5(l).
SECTION 6. ADDITIONAL PROVISIONS CONCERNING THE COLLATERAL.
(a) Each Grantor hereby (i) authorizes the Agent to file, one or
more financing or continuation statements, and amendments thereto, relating to
the Collateral and (ii) ratifies such authorization to the extent that the Agent
has filed any such financing or continuation statements, or amendments thereto,
prior to the date hereof. 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.
(b) Each Grantor hereby irrevocably appoints the Agent as its
attorney-in-fact and proxy, with full authority in the place and stead of such
Grantor and in the name of such Grantor or otherwise, from time to time in the
Agent's discretion, to take any action and to execute any instrument which the
Agent may deem necessary or advisable to accomplish the purposes of this
Agreement (subject to the rights of a Grantor under Section 5 hereof),
including, without limitation, (i) to obtain and adjust insurance required to be
paid to the Agent for the benefit of itself and Noteholders pursuant to Section
5(e) hereof, (ii) upon the occurrence and during the continuation of any Event
of Default, to ask, demand, collect, ▇▇▇ for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any Collateral, (iii) to receive, endorse, and collect any drafts or
other instruments, documents and chattel paper in connection with clause (i) or
(ii) above, (iv) upon the occurrence and during the continuation of any Event of
Default, 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
Collateral or otherwise to enforce the rights of the Agent and the Noteholders
with respect to any Collateral, and (v) upon the occurrence and during the
continuation of any Event of Default, to execute assignments, licenses and other
documents to enforce the rights of the Agent and the Noteholders with respect to
any Collateral. This power is coupled with an interest and is irrevocable until
all of the Obligations are paid in full and the Transaction Documents are
terminated.
20
(c) For the purpose of enabling the Agent to exercise rights and
remedies hereunder, at such time as the Agent shall be lawfully entitled to
exercise such rights and remedies, and for no other purpose, each Grantor hereby
grants to the Agent, to the extent assignable, an irrevocable, non-exclusive
license (exercisable without payment of royalty or other compensation to any
Grantor) to use, assign, license or sublicense any Intellectual Property now
owned or hereafter acquired by any Grantor, wherever the same may be located,
including in such license reasonable access to all media in which any of the
licensed items may be recorded or stored and to all computer programs used for
the compilation or printout thereof. Notwithstanding anything contained herein
to the contrary, but subject to the provisions of the Securities Purchase
Agreement and the Notes that limit the right of any Grantor to dispose of its
property, and Section 5(g) and Section 5(h) hereof, so long as no Event of
Default shall have occurred and be continuing, any Grantor may exploit, use,
enjoy, protect, license, sublicense, assign, sell, dispose of or take other
actions with respect to the Intellectual Property in the ordinary course of its
business or as the Senior Agent (as defined in the Intercreditor Agreement (as
defined in Section 11(n) hereof)) may approve in accordance with Section 2.05 of
the Intercreditor Agreement. In furtherance of the foregoing, unless an Event of
Default shall have occurred and be continuing, the Agent shall from time to
time, upon the request of a Grantor, execute and deliver any instruments,
certificates or other documents, in the form so requested, which such Grantor
shall have certified are appropriate (in such Grantor's judgment) to allow it to
take any action permitted above (including relinquishment of the license
provided pursuant to this clause (c) as to any Intellectual Property). Further,
on the date the Obligations have been paid in full and the Transaction Documents
have been terminated, the Agent (subject to Section 10(e) hereof) shall release
and reassign to the Grantors all of the Agent's right, title and interest in and
to the Intellectual Property, and the Licenses, all without recourse,
representation or warranty whatsoever. The exercise of rights and remedies
hereunder by the Agent shall not terminate the rights of the holders of any
licenses or sublicenses theretofore granted by any Grantor in accordance with
the terms of the Transaction Documents. Each Grantor hereby releases the Agent
from any claims, causes of action and demands at any time arising out of or with
respect to any actions taken or omitted to be taken by the Agent under the
powers of attorney granted herein other than actions taken or omitted to be
taken through the Agent's gross negligence or willful misconduct, as determined
by a final determination of a court of competent jurisdiction.
(d) If any Grantor fails to perform any agreement contained herein,
upon five (5) days written notice to such Grantor so long as no Default or Event
of Default shall exist or have occurred and be continuing, but otherwise without
any notice to any Grantor, the Agent may itself perform, or cause performance
of, such agreement or obligation, in the name of such Grantor or the Agent, and
the expenses of the Agent incurred in connection therewith shall be jointly and
severally payable by the Grantors pursuant to Section 8 hereof and shall be
secured by the Collateral.
(e) The powers conferred on the Agent hereunder are solely to
protect its interest 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, the
Agent shall have no duty as to any Collateral or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral.
21
(f) Anything herein to the contrary notwithstanding (i) each Grantor
shall remain liable under the Licenses and otherwise with respect to any of the
Collateral to the extent set forth therein to perform all of its obligations
thereunder to the same extent as if this Agreement had not been executed, (ii)
the exercise by the Agent of any of its rights hereunder shall not release any
Grantor from any of its obligations under the Licenses or otherwise in respect
of the Collateral, and (iii) the Agent shall not have any obligation or
liability by reason of this Agreement under the Licenses or with respect to any
of the other Collateral (except as expressly set forth in Section 6(e) hereof),
nor shall the Agent be obligated to perform any of the obligations or duties of
any Grantor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.
SECTION 7. REMEDIES UPON DEFAULT. If any Event of Default shall have
occurred and be continuing and subject to the terms of the Intercreditor
Agreement:
(a) The Agent may exercise in respect of the Collateral, in addition
to any other rights and remedies provided for herein or otherwise available to
it, all of the rights and remedies of a secured party upon default under the
Code (whether or not the Code applies to the affected Collateral), and also may
(i) take absolute control of the Collateral for the benefit of itself and the
Noteholders, including, without limitation, transfer into the Agent's name or
into the name of its nominee or nominees (to the extent the Agent has not
theretofore done so) and thereafter receive, for the benefit of itself and the
Noteholders all payments made thereon, give all consents, waivers and
ratifications in respect thereof and otherwise act with respect thereto as
though it were the outright owner thereof, (ii) require each Grantor to, and
each 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 the Agent at a place or places to be designated by the
Agent that is reasonably convenient to both parties, and the Agent may enter
into and occupy any premises owned or leased by any Grantor where the Collateral
or any part thereof is located or assembled for a reasonable period in order to
effectuate the Agent's rights and remedies hereunder or under law, without
obligation to any Grantor in respect of such occupation, and (iii) without
notice except as specified below and without any obligation to prepare or
process the Collateral for sale, (A) 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 at such price or
prices and upon such other terms as the Agent may deem commercially reasonable
and/or (B) lease, license or dispose of the Collateral or any part thereof upon
such terms as the Agent may deem commercially reasonable. Each Grantor agrees
that, to the extent notice of sale or any other disposition of the Collateral
shall be required by law, at least ten (10) days' notice to a Grantor of the
time and place of any public sale or the time after which any private sale or
other disposition of the Collateral is to be made shall constitute reasonable
notification. The Agent shall not be obligated to make any sale or other
disposition 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. Each Grantor hereby
waives any claims against the Agent and the Noteholders arising by reason of the
fact that the price at which the Collateral may have been sold at a private sale
was less than the price which might have been obtained at a public sale or was
less than the aggregate amount of the Obligations, even if the Agent accepts the
first offer received and does not offer the Collateral to more than one offeree,
and waives all rights that such Grantor may
22
have to require that all or any part of the Collateral be marshalled upon any
sale (public or private) thereof. Each Grantor hereby acknowledges that (i) any
such sale of the Collateral by the Agent shall be made without warranty, (ii)
the Agent may specifically disclaim any warranties of title, possession, quiet
enjoyment or the like (but will provide a copy of this Agreement to any
prospective purchaser who requests such information), and (iii) such actions set
forth in clauses (i) and (ii) above shall not adversely effect the commercial
reasonableness of any such sale of the Collateral. In addition to the foregoing,
(i) upon written notice to any Grantor from the Agent, each Grantor shall cease
any use of the Intellectual Property or any trademark, patent or copyright
similar thereto for any purpose described in such notice; (ii) the Agent may, at
any time and from time to time, upon ten (10) days' prior notice to any Grantor,
license, whether general, special or otherwise, and whether on an exclusive or
non-exclusive basis, any of the Intellectual Property, throughout the universe
for such term or terms, on such conditions, and in such manner, as the Agent
shall in its sole discretion determine; and (iii) the Agent may, at any time,
pursuant to the authority granted in Section 6 hereof (such authority being
effective upon the occurrence and during the continuance of an Event of
Default), execute and deliver on behalf of a Grantor, one or more instruments of
assignment of the Intellectual Property (or any application or registration
thereof), in form suitable for filing, recording or registration in any country.
(b) Any cash held by the Agent as Collateral and all Cash Proceeds
received by the Agent in respect of any sale of or 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 applied (after payment of any amounts payable to the Agent pursuant
to Section 8 hereof) in whole or in part by the Agent against, all or any part
of the Obligations in such order as the Agent shall elect, consistent with the
provisions of the Transaction Documents. Any surplus of such cash or Cash
Proceeds held by the Agent and remaining after the Obligations have been paid in
full and the Transaction Documents are terminated shall be paid over to
whomsoever shall be lawfully entitled to receive the same or as a court of
competent jurisdiction shall direct.
(c) In the event that the proceeds of any such sale, collection or
realization are insufficient to pay all amounts to which the Agent and the
Noteholders are legally entitled, the Grantors shall be jointly and severally
liable for the deficiency, together with interest thereon at the highest rate
specified in any applicable Transaction Document for interest on overdue
principal thereof or such other rate as shall be fixed by applicable law,
together with the costs of collection and the reasonable fees, costs, expenses
and other client charges of any attorneys employed by the Agent to collect such
deficiency.
(d) Each Grantor hereby acknowledges that if the Agent complies with
any applicable state or federal law requirements in connection with a
disposition of the Collateral, such compliance will not adversely effect the
commercial reasonableness of any sale or other disposition of the Collateral.
(e) The Agent shall not be required to marshal any present or future
collateral security (including, but not limited to, this Agreement and the
Collateral) for, or other assurances of payment of, the Obligations or any of
them or to resort to such collateral security or other assurances of payment in
any particular order, and all of the Agent's rights hereunder and in
23
respect of such collateral security and other assurances of payment shall be
cumulative and in addition to all other rights, however existing or arising. To
the extent that any Grantor lawfully may, such Grantor hereby agrees that it
will not invoke any law relating to the marshalling of collateral which might
cause delay in or impede the enforcement of the Agent's rights under this
Agreement or under any other instrument creating or evidencing any of the
Obligations or under which any of the Obligations is outstanding or by which any
of the Obligations is secured or payment thereof is otherwise assured, and, to
the extent that it lawfully may, each Grantor hereby irrevocably waives the
benefits of all such laws.
SECTION 8. INDEMNITY AND EXPENSES.
(a) Each Grantor jointly and severally agrees to defend, protect,
indemnify and hold the Agent harmless from and against any and all claims,
damages, losses, liabilities, obligations, penalties, fees, costs and expenses
(including, without limitation, reasonable legal fees, costs, expenses, and
disbursements of Agent's counsel) to the extent that they arise out of or
otherwise result from this Agreement (including, without limitation, enforcement
of this Agreement), except claims, damages, losses, liabilities, obligations,
penalties, fees, costs or expenses resulting solely and directly from the
Agent's gross negligence or willful misconduct, as determined by a final
judgment of a court of competent jurisdiction.
(b) The Grantors will upon demand pay to the Agent the amount of any
and all costs and expenses, including the reasonable fees, costs, expenses and
disbursements of counsel for the Agent and of any experts and agents (including,
without limitation, the Administrative Agent and any collateral trustee which
may act as agent of the Agent), which the Agent may incur in connection with (i)
the preparation, negotiation, execution, delivery, recordation, administration,
amendment, waiver or other modification or termination of this Agreement, (ii)
the custody, preservation, use or operation of, or the sale of, collection from,
or other realization upon, any Collateral, (iii) the exercise or enforcement of
any of the rights of the Agent hereunder, or (iv) the failure by any Grantor to
perform or observe any of the provisions hereof.
SECTION 9. NOTICES, ETC. All notices and other communications provided for
hereunder shall be in writing and shall be mailed (by certified mail, postage
prepaid and return receipt requested), telecopied or delivered, if to a Grantor,
to its address specified in Section 9(f) of the Securities Purchase Agreement or
as otherwise specified next to such Grantor's signature below and if to the
Agent, to it at its address specified in Section 9(f) of the Securities Purchase
Agreement; or as to any such Person, at such other address as shall be
designated by such Person in a written notice to such other Person complying as
to delivery with the terms of this Section 9. All such notices and other
communications shall be effective as set forth in the Loan Agreement.
SECTION 10. SECURITY INTEREST ABSOLUTE. All rights of the Agent and the
Noteholders, all Liens and all obligations of each of the Grantors hereunder
shall be absolute and unconditional irrespective of (a) any lack of validity or
enforceability of the Loan Agreement, any other Transaction Document or any
other agreement or instrument relating thereto, (b) any change in the time,
manner or place of payment of, or in any other term in respect of, all or any of
the Obligations, or any other amendment or waiver of or consent to any departure
from the Notes or any other Transaction Document, (c) any exchange or release
of, or non-perfection of any Lien on any Collateral except to the extent of any
such release, or any release or amendment
24
or waiver of or consent to departure from any guaranty, for all or any of the
Obligations, or (d) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, any of the Grantors in respect of the
Obligations other than payment in full of all such Obligations. All
authorizations and agencies contained herein with respect to any of the
Collateral are irrevocable and powers coupled with an interest.
SECTION 11. MISCELLANEOUS.
(a) AMENDMENTS, ETC. No amendment or waiver of any provision of this
Agreement shall be effective unless it is in writing and signed by each Grantor
and the Agent, and no consent to any departure by any Grantor from any provision
of this Agreement, shall be effective unless it is 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.
(b) NO WAIVERS; REMEDIES, ETC. No failure on the part of the Agent
to exercise, and no delay in exercising, any right hereunder or under any other
Transaction Document shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. The rights and remedies of the Agent
or any Noteholder provided herein and in the other Transaction Documents are
cumulative and are in addition to, and not exclusive of, any rights or remedies
provided by law. The rights of the Agent or any Noteholder under any Transaction
Document against any party thereto are not conditional or contingent on any
attempt by Agent and the Noteholders to exercise any of their respective rights
under any other Transaction Document against such party or against any other
Person, including but not limited to, any Grantor.
(c) SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or thereof or affecting the validity
or enforceability of such provision in any other jurisdiction.
(d) BINDING EFFECT OF THIS AGREEMENT; ASSIGNMENTS. This Agreement
shall create a continuing security interest in the Collateral and shall (i)
remain in full force and effect until the date the Obligations shall have been
paid in full and the Transaction Documents have been terminated and (ii) be
binding on each Grantor and all other Persons who become bound as debtor to this
Agreement in accordance with Section 9-203(d) of the Code and shall inure,
together with all rights and remedies of the Agent and the Noteholders
hereunder, to the benefit of the Agent and the Noteholders and their respective
permitted successors, transferees and assigns. Without limiting the generality
of clause (ii) of the immediately preceding sentence, without notice to the
Grantors, the Agent and the Noteholders may assign or otherwise transfer their
rights and obligations under this Agreement and any other Transaction Document,
to any other Person (to the extent permitted by the Notes) and such other Person
shall thereupon become vested with all of the benefits in respect thereof
granted to the Agent and the Noteholders herein or otherwise. Upon any such
assignment or transfer, all references in this Agreement to the Agent or any
such Noteholder shall mean the assignee of the Agent or such Noteholder. None of
the rights or obligations of any Grantor hereunder may be assigned or otherwise
transferred without the prior written consent of the Agent, and any such
assignment or transfer without Agent's consent shall be null and void.
25
(e) Upon the earlier to occur of the date the Obligations have been
paid in full and the Transaction Documents have been terminated and the
conversion of all of the then outstanding obligations under the Notes into the
common stock of Parent in accordance with the Notes, (i) this Agreement and the
security interests created hereby shall terminate and all rights to the
Collateral shall revert to the Grantors and (ii) the Agent will, at the
Grantors' expense, except as otherwise required by applicable law, (A) return to
any of the Grantors such of the Collateral as shall not have been sold or
otherwise disposed of or applied pursuant to the terms hereof and (B) execute
and deliver to the Grantors such documents as the Grantors shall reasonably
request to evidence such termination, all without any representation, warranty
or recourse whatsoever.
(f) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY
MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY AND
PERFECTION OR THE PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION OF
THE SECURITY INTEREST CREATED HEREBY, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK.
(g) PROCESS AGENTS. Each Grantor (collectively, the "Process Agent
Entities") hereby irrevocably and unconditionally appoints Corporation Service
Company, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ (the "Process Agent") as its
agent to receive on behalf of such Process Agent Entity and its property service
of copies of the summons and complaint and any other process which may be served
in any such action, suit or proceeding, agrees that such service may be made by
mailing (by certified or registered mail, postage prepaid and return receipt
requested) or delivering a copy of such process to such Process Agent Entity in
care of the Process Agent at the Process Agent's above address, irrevocably
authorizes and directs the Process Agent to accept such service on its behalf
and as an alternative method of service, irrevocably consents to the service of
any and all process in any such action, suit or proceeding by the mailing of
copies of such process to such Process Agent Entity at its address specified
above such service to become effective ten (10) days after such mailing. The
Agent hereby irrevocably appoints the Secretary of State of the State of New
York as its agent for service of process in respect of any such action or
proceeding and further irrevocably consents to the service of process out of any
of the aforementioned courts and in any such action or proceeding by the mailing
of copies thereof by registered or certified mail, postage prepaid, to the
Secretary of State of the State of New York, such service to become effective
ten (10) days after such mailing. Nothing herein shall affect the right of the
Agent to service of process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against any Grantor in any other
jurisdiction.
(h) VENUE; CONSENT TO JURISDICTION. ANY LEGAL ACTION OR PROCEEDING
WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN ▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇
▇▇▇▇ IN THE COUNTY OF NEW YORK OR OF THE UNITED STATES OF AMERICA DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH OF THE GRANTORS HEREBY IRREVOCABLY ACCEPTS IN RESPECT OF ITS
PROPERTY,
26
GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH
GRANTOR HEREBY IRREVOCABLY APPOINTS PROCESS AGENT AS ITS AGENT FOR SERVICE OF
PROCESS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING AND FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS AND
IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED
OR CERTIFIED MAIL, POSTAGE PREPAID, TO ADMINISTRATIVE BORROWER AT ITS ADDRESS
FOR NOTICES AS SET FORTH IN SECTION 9(f) OF THE SECURITIES PURCHASE AGREEMENT
AND TO THE PROCESS AGENT, SUCH SERVICE TO BECOME EFFECTIVE TEN (10) DAYS AFTER
SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT AND THE
NOTEHOLDERS TO SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY GRANTOR IN ANY OTHER
JURISDICTION. EACH GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE JURISDICTION OR LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN
ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION BROUGHT
IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT ANY GRANTOR HAS OR
HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS
PROPERTY, EACH GRANTOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS.
(i) WAIVER OF JURY TRIAL, ETC. EACH GRANTOR (AND BY ITS ACCEPTANCE
OF THIS AGREEMENT, THE AGENT) HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS AGREEMENT OR
THE OTHER TRANSACTION DOCUMENTS, OR UNDER ANY AMENDMENT, WAIVER, CONSENT,
INSTRUMENT, DOCUMENT OR OTHER AGREEMENT DELIVERED OR WHICH IN THE FUTURE MAY BE
DELIVERED IN CONNECTION THEREWITH, OR ARISING FROM ANY FINANCING RELATIONSHIP
EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION,
PROCEEDINGS OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
EACH GRANTOR CERTIFIES THAT NO OFFICER, REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
AGENT OR ANY NOTEHOLDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT ANY AGENT
OR ANY NOTEHOLDER WOULD NOT, IN THE EVENT OF ANY ACTION, PROCEEDING OR
COUNTERCLAIM, SEEK TO ENFORCE THE FOREGOING WAIVERS. EACH GRANTOR HEREBY
ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE
NOTEHOLDERS ENTERING INTO THIS AGREEMENT.
27
(j) LIMITATION OF REMEDIES OF GRANTOR. EACH GRANTOR IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL
ACTION, SUIT OR PROCEEDING REFERRED TO IN THIS SECTION ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES.
(k) SECTION HEADINGS. Section headings herein are included for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.
(l) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which shall be deemed to be an original, but all of which taken together
constitute one in the same Agreement.
(m) JOINT AND SEVERAL. All of the obligations of the Grantors
hereunder are joint and several. The Agent may, in its sole and absolute
discretion, enforce the provisions hereof against any of the Grantors and shall
not be required to proceed against all Grantors jointly or seek payment from the
Grantors ratably. In addition, the Agent may, in its sole and absolute
discretion, select the Collateral of any one or more of the Grantors for sale or
application to the Obligations, without regard to the ownership of such
Collateral, and shall not be required to make such selection ratably from the
Collateral owned by all of the Grantors. The release or discharge of any Grantor
by the Agent shall not release or discharge any other Grantor from the
obligations of such Person hereunder.
(n) INTERCREDITOR AGREEMENT. Reference is made to the Intercreditor
and Subordination Agreement dated as of the date hereof (as amended, restated,
supplemented or otherwise modified from time to time, the "Intercreditor
Agreement"), among Fortress Credit corp., as agent (the "Senior Agent") pursuant
to the Senior Credit Agreement (as defined in the Intercreditor Agreement), the
parties to the Senior Credit Agreements as lenders (the "Senior Lenders"), the
Agent and the Buyers. Notwithstanding anything to the contrary herein, the Lien
and security interest granted to the Agent, for the benefit of the Noteholders,
pursuant to this Agreement and the exercise of any right or remedy by the Agent
and the Noteholders hereunder are subject to the provisions of the Intercreditor
Agreement. In the event of any inconsistency or conflict between the provisions
of the Intercreditor Agreement and this Agreement, the provisions of the
Intercreditor Agreement shall control. Until the Senior Debt is Paid in Full (as
each such term is defined in the Intercreditor Agreement), with respect to any
Collateral or proceeds of insurance or other assets that are required to be
delivered to, or (with respect with electronic chattel paper, letter-of credit
rights, commodity contracts and commodity accounts) subject to the control of,
the Agent hereunder, a Grantor's obligation to deliver such Collateral, proceeds
of insurance or other assets to the Agent, or to cause the Agent to have such
control thereof, shall be satisfied if it is instead delivered to the possession
of the Senior Agent, or subject to the control of the Senior Agent, subject to
the terms of the Intercreditor Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
28
IN WITNESS WHEREOF, each Grantor has caused this Agreement to be
executed and delivered by its officer thereunto duly authorized, as of the date
first above written.
GRANTORS:
MARITIME LOGISTICS US HOLDINGS INC.
By:_____________________________________
Name: _______________________________
Title: ______________________________
SUMMIT LOGISTICS INTERNATIONAL INC
By:_____________________________________
Name: _______________________________
Title: ______________________________
SEAMASTER LOGISTICS INC.
By:_____________________________________
Name: _______________________________
Title: ______________________________
AMERUSSIA SHIPPING COMPANY INC.
By:_____________________________________
Name: _______________________________
Title: ______________________________
FMI INTERNATIONAL LLC
By:_____________________________________
Name: _______________________________
Title: ______________________________
[Signature Page to Security Agreement]
FASHION MARKETING, INC.
By:_____________________________________
Name: _______________________________
Title: ______________________________
FMI INTERNATIONAL CORP. (WEST)
By:_____________________________________
Name: _______________________________
Title: ______________________________
FMI INTERNATIONAL CORP.
By:_____________________________________
Name: _______________________________
Title: ______________________________
FREIGHT MANAGEMENT LLC
By:_____________________________________
Name: _______________________________
Title: ______________________________
FMI TRUCKING, INC.
By:_____________________________________
Name: _______________________________
Title: ______________________________
FMI EXPRESS CORP.
By:_____________________________________
Name: _______________________________
Title: ______________________________
[Signature Page to Security Agreement]
CLARE FREIGHT, LOS ANGELES, INC.
By:_____________________________________
Name: _______________________________
Title: ______________________________
TUG NEW YORK, INC.
By:_____________________________________
Name: _______________________________
Title: ______________________________
TUG USA, INC. (formerly known as Dolphin
US Logistics Inc)
By:_____________________________________
Name: _______________________________
Title: ______________________________
AMR INVESTMENTS INC
By:_____________________________________
Name: _______________________________
Title: ______________________________
FMI HOLDCO I, LLC
By:_____________________________________
Name: _______________________________
Title: ______________________________
AEROBIC CREATIONS, INC.
By:_____________________________________
Name: _______________________________
Title: ______________________________
[Signature Page to Security Agreement]
AGENT:
LAW DEBENTURE TRUST COMPANY OF NEW YORK,
as Agent for the Noteholders.
By:_____________________________________
Name: _______________________________
Title: ______________________________
[Signature Page to Security Agreement]
SCHEDULE I
LEGAL NAMES; ORGANIZATIONAL IDENTIFICATION NUMBERS; STATES OR
JURISDICTION OF ORGANIZATION
LEGAL NAME ORGANIZATIONAL ID JURISDICTION
---------- ----------------- ------------
SCHEDULE II
INTELLECTUAL PROPERTY AND LICENSES; TRADENAMES
I. Trademarks
----------------------------------------------------------------------------------------------------------------------
County of Registration
Trademark Registration Number Registration Date Expiration Date
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
II. Licenses
----------------------------------------------------------------------------------------------------------------------
Store Number Address Buyer Term Description
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
III. Tradenames
IV. Domain Names
Sched. II-1
SCHEDULE III
LOCATIONS OF GRANTORS
I. Owned Locations
Description of Location (State if Location
(i) contains Equipment, Fixtures, Goods or
Inventory,
(ii) is chief place of business and chief
executive office, or
(iii) contains Records concerning Accounts
LOCATION and originals of Chattel Paper)
II. Leased Locations
Description of Location (State if Location
(i) contains Equipment, Fixtures, Goods or
Inventory,
(ii) is chief place of business and chief
executive office, or
(iii) contains Records concerning Accounts
LOCATION and originals of Chattel Paper)
Sched. III-1
SCHEDULE IV
DEPOSIT ACCOUNTS, SECURITIES ACCOUNTS AND COMMODITIES ACCOUNTS
Name and Address
of Institution
Maintaining Account Account Number Type of Account
------------------- -------------- ---------------
Sched. IV-1
SCHEDULE V
UCC-1 FINANCING STATEMENTS
UCC-1 Financing Statements have been filed in the jurisdictions
below against the Loan Parties:
--------------------------------------------------------------------------------
Debtor Secured Party Jurisdiction
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SCHEDULE VI
COMMERCIAL TORT CLAIMS
Sched. VI-1
EXHIBIT A
COLLATERAL ASSIGNMENT FOR SECURITY
[TRADEMARKS] [PATENTS] [COPYRIGHTS]
WHEREAS, ____________________ (the "ASSIGNOR") [has adopted, used and is
using, and holds all right, title and interest in and to, the trademarks and
service marks listed on the annexed Schedule A, which trademarks and service
marks are registered or applied for in the United States Patent and Trademark
Office (the "TRADEMARKS")] [holds all right, title and interest in the letter
patents, design patents and utility patents listed on the annexed Schedule A,
which patents are issued or applied for in the United States Patent and
Trademark Office (the "PATENTS")] [holds all right, title and interest in the
copyrights listed on the annexed Schedule A, which copyrights are registered in
the United States Copyright Office (the "COPYRIGHTS")];
WHEREAS, the Assignor has collaterally assigned to [_______], in its
capacity as agent (in such capacity, "ASSIGNEE") pursuant to the Securities
Purchase Agreement (as hereinafter defined) acting for and on behalf of the
Noteholders (as defined in the Security Agreement referred to below) and granted
to the Assignee for the benefit of itself and the Noteholders a continuing
security interest in all right, title and interest of the Assignor in, to and
under the [Trademarks, together with, among other things, the good-will of the
business symbolized by the Trademarks] [Patents] [Copyrights] and the
applications and registrations thereof, and all proceeds thereof, including,
without limitation, any and all causes of action which may exist by reason of
infringement thereof and any and all damages arising from past, present and
future violations thereof (the "COLLATERAL"), as set forth in the Security
Agreement, dated as of November 8, 2006, by and among Assignee, Assignor and
certain of its affiliates (as the same may be amended, supplemented, restated or
replaced, the "SECURITY AGREEMENT") to secure the payment, performance and
observance of the Obligations (as defined in the Security Agreement);
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Assignor does hereby pledge
and collaterally assign unto the Assignee and grants to the Assignee for the
benefit of itself and the Lenders a continuing security interest in the
Collateral to secure the prompt payment, performance and observance of the
Obligations.
The Assignor does hereby further acknowledge and affirm that the rights
and remedies of the Assignee with respect to the Collateral are more fully set
forth in the Security Agreement, the terms and provisions of which are hereby
incorporated herein by reference as if fully set forth herein.
The term "Securities Purchase Agreement" as used herein means the
Securities Purchase Agreement, dated of even date herewith, by and among
Maritime Logistics US Holdings Inc., Assignee, and each party listed as a
"Buyer" on the Schedule of Buyers attached thereto (the "BUYERS"), as the same
may be amended, supplemented, restated or replaced.
Reference is made to the Intercreditor and Subordination Agreement dated
as of the date hereof (as amended, restated, supplemented or otherwise modified
from time to time, the "INTERCREDITOR AGREEMENT"), among Fortress Credit Corp.,
as agent (the "SENIOR AGENT") pursuant
Exh. A-1
to the Senior Credit Agreement (as defined in the Intercreditor Agreement), the
parties to the Senior Credit Agreement as lenders (the "SENIOR LENDERS"), the
Agent and the Buyers. Notwithstanding anything to the contrary herein, the Lien
and security interest granted to the Agent, for the benefit of the Noteholders,
pursuant to this Agreement and the exercise of any right or remedy by the Agent
and the Noteholders hereunder are subject to the provisions of the Intercreditor
Agreement. In the event of any inconsistency or conflict between the provisions
of the Intercreditor Agreement and this Agreement, the provisions of the
Intercreditor Agreement shall control.
IN WITNESS WHEREOF, the Assignor has caused this Assignment to be duly
executed by its officer thereunto duly authorized as of _____________ __, 20__.
[GRANTOR]
By:________________________________
Name:___________________________
Title:__________________________
STATE OF ______________
ss.:
COUNTY OF _____________
On this ____ day of _______________, 20__, before me personally came
________________, to me known to be the person who executed the foregoing
instrument, and who, being duly sworn by me, did depose and say that s/he is the
________________ of _______________________________________, a
____________________, and that s/he executed the foregoing instrument in the
firm name of _______________________________________, and that s/he had
authority to sign the same, and s/he acknowledged to me that he executed the
same as the act and deed of said firm for the uses and purposes therein
mentioned.
___________________________
Exh. A-2
SCHEDULE A TO ASSIGNMENT FOR SECURITY
[Trademarks and Trademark Applications]
[Patent and Patent Applications]
[Copyright and Copyright Applications]
Owned by ______________________________
EXHIBIT B
TO
SECURITY AGREEMENT
SPECIAL POWER OF ATTORNEY
STATE OF __________________ )
) ss.:
COUNTY OF _________________ )
KNOW ALL MEN BY THESE PRESENTS, that ("Debtor"), having an office at
_______________________________________ hereby appoints and constitutes,
severally, [_____________], as Agent ("Secured Party"), and each of its
officers, its true and lawful attorney, with full power of substitution and with
full power and authority to perform the following acts on behalf of Debtor in
each case in accordance with the Security Agreement (as hereafter defined):
1. Execution and delivery of any and all agreements, documents, instrument
of assignment, or other papers which Secured Party, in its discretion, deems
necessary or advisable for the purpose of assigning, selling, or otherwise
disposing of all right, title, and interest of Debtor in and to any [trademarks
and all registrations, recordings, reissues, extensions, and renewals thereof,]
[patents and all applications, registrations and recordings related to the
foregoing and all reissues, divisions continuations, extensions, and renewals
thereof,] or for the purpose of recording, registering and filing of, or
accomplishing any other formality with respect to the foregoing.
2. Execution and delivery of any and all documents, statements,
certificates or other papers which Secured Party, in its discretion, deems
necessary or advisable to further the purposes described in Subparagraph 1
hereof.
This Power of Attorney is made pursuant to a Security Agreement, dated of
even date herewith, between Debtor and Secured Party (the "Security Agreement")
and is subject to the terms and provisions thereof. This Power of Attorney,
being coupled with an interest, is irrevocable until all "Obligations", as such
term is defined in the Security Agreement, are paid in full and the Security
Agreement is terminated in writing by Secured Party.
Dated: ___________, ____
___________________________
By:________________________
Name:______________________
Title:_____________________
STATE OF __________________ )
) ss.:
COUNTY OF _________________ )
On this ____ day of ____________, ____, before me personally came
___________________, to me known, who being duly sworn, did depose and say, that
he is the _________ of , the corporation described in and which executed the
foregoing instrument; and that he signed his name thereto by order of the Board
of Directors of said corporation.
_____________________________________
Notary Public