SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement"), is entered into and made
effective as of December 28, 2005, by and CARGO CONNECTION LOGISTICS CORP., a
Delaware corporation with its principal place of business at 600 Bayview Avenue,
Inwood, NY 11096 and MID-COAST MANAGEMENT, INC. an Illinois Corporation with its
principal place of business at 600 Bayview Avenue, Inwood, NY 11096 (Cargo
Connection Logistics Corp. and Mid-Coast Management, Inc. shall be referred to
collectively as the "Companies"), and Montgomery Equity Partners, Ltd. (the
"Secured Party").
WHEREAS, the Companies are each a wholly owned subsidiary of Cargo
Connection Logistics Holding, Inc. (the "Parent");
WHEREAS, on the date hereof, the Parent shall issue and sell to the
Secured Party, as provided in the Securities Purchase Agreement dated the date
hereof, and the Secured Party shall purchase up to Two Million Three Hundred
Fifty Thousand Dollars ($2,350,000) of secured convertible debentures (the
"Convertible Debentures"), which shall be convertible into shares of common
stock of the Parent, par value $0.001 (the "Common Stock") (as converted, the
"Conversion Shares"), in the respective amounts set forth opposite each Buyer(s)
name on Schedule I attached to the Securities Purchase Agreement;
WHEREAS, the Companies shall benefit from the sale of the Convertible
Debentures by the Parent to the Secured Party;
WHEREAS, to induce the Secured Party to enter into the transaction
contemplated by the Securities Purchase Agreement, the Secured Convertible
Debenture, the Investor Registration Rights Agreement, the Irrevocable Transfer
Agent Instructions, and the Escrow Agreement (collectively referred to as the
"Transaction Documents"), the Companies each hereby grant to the Secured Party a
security interest in and to the Pledged Property (as defined below) of each of
the Companies until the satisfaction of the Obligations, as defined herein
below.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and for other good and valuable consideration, the adequacy
and receipt of which are hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE 1.
DEFINITIONS AND INTERPRETATIONS
Section 1.1. Recitals.
The above recitals are true and correct and are incorporated herein, in
their entirety, by this reference.
Section 1.2. Interpretations.
Nothing herein expressed or implied is intended or shall be construed to
confer upon any person other than the Secured Party any right, remedy or claim
under or by reason hereof.
Section 1.3. Obligations Secured.
The obligations secured hereby are any and all obligations of the
Companies or the Parent now existing or hereinafter incurred to the Secured
Party, whether oral or written and whether arising before, on or after the date
hereof including, without limitation, those obligations of the Parent to the
Secured Party under the Transaction Documents, and any other amounts now or
hereafter owed to the Secured Party by the Parent thereunder or hereunder
(collectively, the "Obligations").
ARTICLE 2.
PLEDGED PROPERTY, ADMINISTRATION OF COLLATERAL AND
TERMINATION OF SECURITY INTEREST
Section 2.1. Pledged Property.
(a) The Companies each hereby pledge to the Secured Party, and
creates in the Secured Party for its benefit, a security interest for such time
until the Obligations are paid in full, in and to all of the property of the
each of the Companies as set forth in Exhibit "A" attached hereto and the
products thereof and the proceeds of all such items (collectively, the "Pledged
Property"):
(b) Simultaneously with the execution and delivery of this
Agreement, the Companies shall make, execute, acknowledge, file, record and
deliver to the Secured Party any documents reasonably requested by the Secured
Party to perfect its security interest in the Pledged Property. Simultaneously
with the execution and delivery of this Agreement, the Companies shall make,
execute, acknowledge and deliver to the Secured Party such documents and
instruments, including, without limitation, financing statements, certificates,
affidavits and forms as may, in the Secured Party's reasonable judgment, be
necessary to effectuate, complete or perfect, or to continue and preserve, the
security interest of the Secured Party in the Pledged Property, and the Secured
Party shall hold such documents and instruments as secured party, subject to the
terms and conditions contained herein.
Section 2.2. Rights; Interests; Etc.
(a) So long as no Event of Default (as hereinafter defined) shall
have occurred and be continuing:
(i) the Companies shall be entitled to exercise any and all
rights pertaining to the Pledged Property or any part thereof for any purpose
not inconsistent with the terms hereof; and
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(ii) the Companies shall be entitled to receive and retain any
and all payments paid or made in respect of the Pledged Property.
(b) Upon the occurrence and during the continuance of an Event of
Default:
(i) All rights of the Companies to exercise the rights which
it would otherwise be entitled to exercise pursuant to Section 2.2(a)(i) hereof
and to receive payments which it would otherwise be authorized to receive and
retain pursuant to Section 2.2(a)(ii) hereof shall be suspended, and all such
rights shall thereupon become vested in the Secured Party who shall thereupon
have the sole right to exercise such rights and to receive and hold as Pledged
Property such payments; provided, however, that if the Secured Party shall
become entitled and shall elect to exercise its right to realize on the Pledged
Property pursuant to Article 5 hereof, then all cash sums received by the
Secured Party, or held by Companies for the benefit of the Secured Party and
paid over pursuant to Section 2.2(b)(ii) hereof, shall be applied against any
outstanding Obligations; and
(ii) All interest, dividends, income and other payments and
distributions which are received by the Companies contrary to the provisions of
Section 2.2(b)(i) hereof shall be received in trust for the benefit of the
Secured Party, shall be segregated from other property of the Companies and
shall be forthwith paid over to the Secured Party; or
(iii) The Secured Party in its sole discretion shall be
authorized to sell any or all of the Pledged Property at public or private sale
in order to recoup all of the outstanding principal plus accrued interest owed
pursuant to the Convertible Debenture as described herein
(c) An "Event of Default" shall be deemed to have occurred under
this Agreement upon an Event of Default under the Convertible Debentures.
ARTICLE 3.
ATTORNEY-IN-FACT; PERFORMANCE
Section 3.1. Secured Party Appointed Attorney-In-Fact.
Upon the occurrence of an Event of Default, the Companies hereby appoints
the Secured Party as its attorney-in-fact, with full authority in the place and
stead of the Companies and in the name of the Companies or otherwise, from time
to time in the Secured Party's discretion to take any action and to execute any
instrument which the Secured Party may reasonably deem necessary to accomplish
the purposes of this Agreement, including, without limitation, to receive and
collect all instruments made payable to the Companies representing any payments
in respect of the Pledged Property or any part thereof and to give full
discharge for the same. The Secured Party may demand, collect, receipt for,
settle, compromise, adjust, sue for, foreclose, or realize on the Pledged
Property as and when the Secured Party may determine. To facilitate collection,
the Secured Party may notify account debtors and obligors on any Pledged
Property to make payments directly to the Secured Party.
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Section 3.2. Secured Party May Perform.
If the Companies fail to perform any agreement contained herein, the
Secured Party, at its option, may itself perform, or cause performance of, such
agreement, and the expenses of the Secured Party incurred in connection
therewith shall be included in the Obligations secured hereby and payable by the
Companies under Section 8.3.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
Section 4.1. Authorization; Enforceability.
Each of the parties hereto represents and warrants that it has taken all
action necessary to authorize the execution, delivery and performance of this
Agreement and the transactions contemplated hereby; and upon execution and
delivery, this Agreement shall constitute a valid and binding obligation of the
respective party, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights or by the principles
governing the availability of equitable remedies.
Section 4.2. Ownership of Pledged Property.
The Companies warrant and represent that they are the legal and beneficial
owner of the Pledged Property free and clear of any lien, security interest,
option or other charge or encumbrance except for the security interest created
by this Agreement except for Pledged Property which already has a lien, in which
case, the Secured Party will take a second position.
ARTICLE 5.
DEFAULT; REMEDIES; SUBSTITUTE COLLATERAL
Section 5.1. Default and Remedies.
(a) If an Event of Default occurs, then in each such case the
Secured Party may declare the Obligations to be due and payable immediately, by
a notice in writing to the Companies, and upon any such declaration, the
Obligations shall become immediately due and payable.
(b) Upon the occurrence of an Event of Default, the Secured Party
shall: (i) be entitled to receive all distributions with respect to the Pledged
Property, (ii) to cause the Pledged Property to be transferred into the name of
the Secured Party or its nominee, (iii) to dispose of the Pledged Property, and
(iv) to realize upon any and all rights in the Pledged Property then held by the
Secured Party.
Section 5.2. Method of Realizing Upon the Pledged Property; Other
Remedies.
Upon the occurrence of an Event of Default, in addition to any rights and
remedies available at law or in equity, the following provisions shall govern
the Secured Party's right to realize upon the Pledged Property:
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(a) Any item of the Pledged Property may be sold for cash or other value
in any number of lots at brokers board, public auction or private sale and may
be sold without demand, advertisement or notice (except that the Secured Party
shall give the Companies ten (10) days' prior written notice of the time and
place or of the time after which a private sale may be made (the "Sale
Notice")), which notice period shall in any event is hereby agreed to be
commercially reasonable. At any sale or sales of the Pledged Property, the
Companies may bid for and purchase the whole or any part of the Pledged Property
and, upon compliance with the terms of such sale, may hold, exploit and dispose
of the same without further accountability to the Secured Party. The Companies
will execute and deliver, or cause to be executed and delivered, such
instruments, documents, assignments, waivers, certificates, and affidavits and
supply or cause to be supplied such further information and take such further
action as the Secured Party reasonably shall require in connection with any such
sale.
(b) Any cash being held by the Secured Party as Pledged Property and all
cash proceeds received by the Secured Party in respect of, sale of, collection
from, or other realization upon all or any part of the Pledged Property shall be
applied as follows:
(i) to the payment of all amounts due the Secured Party for the
expenses reimbursable to it hereunder or owed to it pursuant to Section 8.3
hereof;
(ii) to the payment of the Obligations then due and unpaid.
(iii) the balance, if any, to the person or persons entitled
thereto, including, without limitation, the Companies.
(c) In addition to all of the rights and remedies which the Secured Party
may have pursuant to this Agreement, the Secured Party shall have all of the
rights and remedies provided by law, including, without limitation, those under
the Uniform Commercial Code.
(i) If the Companies fails to pay such amounts due upon the
occurrence of an Event of Default which is continuing, then the Secured Party
may institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Companies and collect the monies adjudged or
decreed to be payable in the manner provided by law out of the property of
Companies, wherever situated. The Secured Party may proceed against the
Companies without proceeding first against any other party, including, without
limitation, the Parent.
(ii) The Companies agrees that it shall be liable for any reasonable
fees, expenses and costs incurred by the Secured Party in connection with
enforcement, collection and preservation of the Transaction Documents,
including, without limitation, reasonable legal fees and expenses, and such
amounts shall be deemed included as Obligations secured hereby and payable as
set forth in Section 8.3 hereof.
Section 5.3. Proofs of Claim.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relating to the Companies or the property of the
Companies or of such other obligor or its creditors, the Secured Party
(irrespective of whether the Obligations shall then be due and payable as
therein expressed or by declaration or otherwise and irrespective of whether the
Secured Party shall have made any demand on the Companies for the payment of the
Obligations), subject to the rights of Previous Security Holders, shall be
entitled and empowered, by intervention in such proceeding or otherwise:
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(i) to file and prove a claim for the whole amount of the
Obligations and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Secured Party (including any claim
for the reasonable legal fees and expenses and other expenses paid or incurred
by the Secured Party permitted hereunder and of the Secured Party allowed in
such judicial proceeding), and
(ii) to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same; and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by the
Secured Party to make such payments to the Secured Party and, in the event that
the Secured Party shall consent to the making of such payments directed to the
Secured Party, to pay to the Secured Party any amounts for expenses due it
hereunder.
Section 5.4. Duties Regarding Pledged Property.
The Secured Party shall have no duty as to the collection or protection of
the Pledged Property or any income thereon or as to the preservation of any
rights pertaining thereto, beyond the safe custody and reasonable care of any of
the Pledged Property actually in the Secured Party's possession.
ARTICLE 6.
AFFIRMATIVE COVENANTS
The Companies covenant and agree that, from the date hereof and until the
Obligations have been fully paid and satisfied, unless the Secured Party shall
consent otherwise in writing (as provided in Section 8.4 hereof):
Section 6.1. Existence, Properties, Etc.
(a) The Companies shall do, or cause to be done, all things, or
proceed with due diligence with any actions or courses of action, that may be
reasonably necessary (i) to maintain Companies' due organization, valid
existence and good standing under the laws of its state of incorporation, and
(ii) to preserve and keep in full force and effect all qualifications, licenses
and registrations in those jurisdictions in which the failure to do so could
have a Material Adverse Effect (as defined below); and (b) the Companies shall
not do, or cause to be done, any act impairing the Companies' corporate power or
authority (i) to carry on the Companies' business as now conducted, and (ii) to
execute or deliver this Agreement or any other document delivered in connection
herewith, including, without limitation, any UCC-1 Financing Statements required
by the Secured Party (which other loan instruments collectively shall be
referred to as the "Loan Instruments") to which it is or will be a party, or
perform any of its obligations hereunder or thereunder. For purpose of this
Agreement, the term "Material Adverse Effect" shall mean any effect on the
business, operations, properties or financial condition of the Companies and its
consolidated subsidiaries that is material and adverse to the Companies, whether
individually or in the aggregate, or any condition, circumstance, or situation
that would prohibit or otherwise interfere with the ability of the Companies to
perform any of its obligations under this Agreement or to make payment as and
when due of all or any part of the Obligations.
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Section 6.2. Financial Statements and Reports.
The Companies shall provide the Security Party with such financial data as
the Secured Party may reasonably request, within a reasonable time after any
such request, including, without limitation the following financial data:
(a) The balance sheet of the Companies as of the close of each
fiscal year, the statement of earnings and retained earnings of the Companies as
of the close of such fiscal year, and statement of cash flows for the Companies
for such fiscal year, all in reasonable detail, prepared in accordance with
generally accepted accounting principles consistently applied, certified by the
chief executive and chief financial officers of the Companies as being true and
correct and accompanied by a certificate of the chief executive and chief
financial officers of the Companies, stating that the Companies has kept,
observed, performed and fulfilled each covenant, term and condition of this
Agreement and the other Loan Instruments during such fiscal year and that no
Event of Default hereunder has occurred and is continuing, or if an Event of
Default has occurred and is continuing, specifying the nature of same, the
period of existence of same and the action the Companies proposes to take in
connection therewith;
(b) A balance sheet of the Companies as of the close of each month,
and statement of earnings and retained earnings of the Companies as of the close
of such month, all in reasonable detail, and prepared substantially in
accordance with generally accepted accounting principles consistently applied,
certified by the chief executive and chief financial officers of the Companies
as being true and correct; and
(c) Copies of all accountants' reports and Companies financial
reports submitted to the Companies by independent accountants in connection with
each annual examination of the Companies.
Section 6.3. Accounts and Reports.
The Companies shall maintain a standard system of accounting in accordance
with generally accepted accounting principles consistently applied and provide,
at its sole expense, to the Secured Party the following:
(a) as soon as available, a copy of any notice or other
communication alleging any nonpayment or other material breach or default, or
any foreclosure or other action respecting any material portion of its assets
and properties, received respecting any of the indebtedness of the Companies in
excess of $50,000 (other than the Obligations), or any demand or other request
for payment under any guaranty, assumption, purchase agreement or similar
agreement or arrangement respecting the indebtedness or obligations of others in
excess of $50,000, including any received from any person acting on behalf of
the Secured Party or beneficiary thereof; and
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(b) within fifteen (15) days after the making of each submission or
filing, a copy of any report, financial statement, notice or other document,
whether periodic or otherwise, submitted to the shareholders of the Companies,
or submitted to or filed by the Companies with any governmental authority
involving or affecting (i) the Companies that could have a Material Adverse
Effect; (ii) the Obligations; (iii) any part of the Pledged Property; or (iv)
any of the transactions contemplated in this Agreement or the Loan Instruments.
Section 6.4. Maintenance of Books and Records; Inspection.
The Companies shall maintain its books, accounts and records in accordance
with generally accepted accounting principles consistently applied, and permit
the Secured Party, its officers and employees and any professionals designated
by the Secured Party in writing, at any time to visit and inspect any of its
properties (including but not limited to the collateral security described in
the Transaction Documents and/or the Loan Instruments), corporate books and
financial records, and to discuss its accounts, affairs and finances with any
employee, officer or director thereof.
Section 6.5. Maintenance and Insurance.
(a) The Companies shall maintain or cause to be maintained, at its
own expense, all of its assets and properties in good working order and
condition, subject to ordinary wear and tear, making all necessary repairs
thereto and renewals and replacements thereof.
(b) The Companies shall maintain or cause to be maintained, at its
own expense, insurance in form, substance and amounts (including deductibles),
which the Companies deems reasonably necessary to the Companies' business, (i)
adequate to insure all assets and properties of the Companies, which assets and
properties are of a character usually insured by persons engaged in the same or
similar business against loss or damage resulting from fire or other risks
included in an extended coverage policy; (ii) against public liability and other
tort claims that may be incurred by the Companies; (iii) as may be required by
the Transaction Documents and/or the Loan Instruments or applicable law and (iv)
as may be reasonably requested by Secured Party, all with adequate, financially
sound and reputable insurers.
Section 6.6. Contracts and Other Collateral.
The Companies shall perform all of its obligations under or with respect
to each instrument, receivable, contract and other intangible included in the
Pledged Property to which the Companies are now or hereafter will be party on a
timely basis and in the manner therein required, including, without limitation,
this Agreement.
Section 6.7. Defense of Collateral, Etc.
The Companies shall defend and enforce its right, title and interest in
and to any part of: (a) the Pledged Property; and (b) if not included within the
Pledged Property, those assets and properties whose loss could have a Material
Adverse Effect, the Companies shall defend the Secured Party's right, title and
interest in and to each and every part of the Pledged Property, each against all
manner of claims and demands on a timely basis to the full extent permitted by
applicable law.
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Section 6.8. Payment of Debts, Taxes, Etc.
The Companies shall pay, or cause to be paid, all of its indebtedness and
other liabilities and perform, or cause to be performed, all of its obligations
in accordance with the respective terms thereof, and pay and discharge, or cause
to be paid or discharged, all taxes, assessments and other governmental charges
and levies imposed upon it, upon any of its assets and properties on or before
the last day on which the same may be paid without penalty, as well as pay all
other lawful claims (whether for services, labor, materials, supplies or
otherwise) as and when due.
Section 6.9. Taxes and Assessments; Tax Indemnity.
The Companies shall (a) file all tax returns and appropriate schedules
thereto that are required to be filed under applicable law, prior to the date of
delinquency, (b) pay and discharge all taxes, assessments and governmental
charges or levies imposed upon the Companies, upon its income and profits or
upon any properties belonging to it, prior to the date on which penalties attach
thereto, and (c) pay all taxes, assessments and governmental charges or levies
that, if unpaid, might become a lien or charge upon any of its properties;
provided, however, that the Companies in good faith may contest any such tax,
assessment, governmental charge or levy described in the foregoing clauses (b)
and (c) so long as appropriate reserves are maintained with respect thereto.
Section 6.10. Compliance with Law and Other Agreements.
The Companies shall maintain its business operations and property owned or
used in connection therewith in compliance with (a) all applicable federal,
state and local laws, regulations and ordinances governing such business
operations and the use and ownership of such property, and (b) all agreements,
licenses, franchises, indentures and mortgages to which the Companies is a party
or by which the Companies or any of its properties is bound. Without limiting
the foregoing, the Companies shall pay all of its indebtedness promptly in
accordance with the terms thereof.
Section 6.11. Notice of Default.
The Companies shall give written notice to the Secured Party of the
occurrence of any default or Event of Default under this Agreement, the
Transaction Documents or any other Loan Instrument or any other agreement of
Companies for the payment of money, promptly upon the occurrence thereof.
Section 6.12. Notice of Litigation.
The Companies shall give notice, in writing, to the Secured Party of (a)
any actions, suits or proceedings wherein the amount at issue is in excess of
$50,000, instituted by any persons against the Companies, or affecting any of
the assets of the Companies, and (b) any dispute, not resolved within fifteen
(15) days of the commencement thereof, between the Companies on the one hand and
any governmental or regulatory body on the other hand, which might reasonably be
expected to have a Material Adverse Effect on the business operations or
financial condition of the Companies.
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ARTICLE 7.
NEGATIVE COVENANTS
The Companies covenants and agrees that, from the date hereof until the
Obligations have been fully paid and satisfied, the Companies shall not, unless
the Secured Party shall consent otherwise in writing:
Section 7.1. Liens and Encumbrances.
Except as already in place, the Companies shall not directly or indirectly
make, create, incur, assume or permit to exist any assignment, transfer, pledge,
mortgage, security interest or other lien or encumbrance of any nature in, to or
against any part of the Pledged Property or of the Companies' capital stock, or
offer or agree to do so, or own or acquire or agree to acquire any asset or
property of any character subject to any of the foregoing encumbrances
(including any conditional sale contract or other title retention agreement), or
assign, pledge or in any way transfer or encumber its right to receive any
income or other distribution or proceeds from any part of the Pledged Property
or the Companies' capital stock; or enter into any sale-leaseback financing
respecting any part of the Pledged Property as lessee, or cause or assist the
inception or continuation of any of the foregoing.
Section 7.2. Articles, By-Laws, Mergers, Consolidations, Acquisitions and
Sales.
Without the prior express written consent of the Secured Party, which
consent shall not be unreasonably withheld, the Companies shall not: (a) Amend
its Articles of Incorporation or By-Laws; (b) be a party to any merger,
consolidation or corporate reorganization, (c) purchase or otherwise acquire all
or substantially all of the assets or stock of, or any partnership or joint
venture interest in, any other person, firm or entity, (d) sell, transfer,
convey, grant a security interest in or lease all or any substantial part of its
assets, nor (e) create any subsidiaries nor convey any of its assets to any
subsidiary in excess of $200,000 in the aggregate.
Section 7.3. Management, Ownership.
The Companies shall not materially change its ownership, executive staff
or management without the prior written consent of the Secured Party. The
ownership, executive staff and management of the Companies are material factors
in the Secured Party's willingness to institute and maintain a lending
relationship with the Companies.
Section 7.4. Dividends, Etc.
Except for dividends payable to the Parent, the Companies shall not
declare or pay any dividend of any kind, in cash or in property, on any class of
its capital stock, nor purchase, redeem, retire or otherwise acquire for value
any shares of such stock, nor make any distribution of any kind in respect
thereof, nor make any return of capital to shareholders, nor make any payments
in respect of any pension, profit sharing, retirement, stock option, stock
bonus, incentive compensation or similar plan (except as required or permitted
hereunder), without the prior written consent of the Secured Party, which
consent shall not be unreasonably withheld.
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Section 7.5. Conduct of Business.
The Companies will continue to engage, in an efficient and economical
manner, in a business of the same general type as conducted by it on the date of
this Agreement.
Section 7.6. Places of Business.
The location of the Companies' chief place of business is 600 Bayview
Avenue, Inwood, NY 11096. The Companies shall not change the location of its
chief place of business, chief executive office or any place of business
disclosed to the Secured Party or move any of the Pledged Property from its
current location without thirty (30) days prior written notice to the Secured
Party in each instance.
ARTICLE 8.
MISCELLANEOUS
Section 8.1. Notices.
All notices or other communications required or permitted to be given
pursuant to this Agreement shall be in writing and shall be considered as duly
given on: (a) the date of delivery, if delivered in person, by nationally
recognized overnight delivery service or (b) five (5) days after mailing if
mailed from within the continental United States by certified mail, return
receipt requested to the party entitled to receive the same:
If to the Secured Party: Montgomery Equity Partners, Ltd.
101 Hudson Street, Suite 3700
Jersey City, New Jersey 07302
Attention: Mark Angelo
Portfolio Manager
Telephone: (201) 986-8300
Facsimile: (201) 985-8266
With copy to: David Gonzalez, Esq.
101 Hudson Street, Suite 3700
Jersey City, NJ 07302
Telephone: (201) 985-8300
Facsimile: (201) 985-8266
And if to the Companies: Cargo Connection Logistics Holding, Inc. and Mid-Coast
Management, Inc.
600 Bayview Avenue
Inwood, NY 11096
Attention: Jesse Dobrinsky
Telephone: (516) 239-7000
Facsimile: (516) 239-2508
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With a copy to: Gregg E. Jaclin, Esq.
Anslow & Jaclin, LLP
195 Route 9 South, Suite 204
Manalapan, NJ 07725
Telephone: (732) 409-1212
Facsimile: (732) 577-1188
Any party may change its address by giving notice to the other party
stating its new address. Commencing on the tenth (10th) day after the giving of
such notice, such newly designated address shall be such party's address for the
purpose of all notices or other communications required or permitted to be given
pursuant to this Agreement.
Section 8.2. Severability.
If any provision of this Agreement shall be held invalid or unenforceable,
such invalidity or unenforceability shall attach only to such provision and
shall not in any manner affect or render invalid or unenforceable any other
severable provision of this Agreement, and this Agreement shall be carried out
as if any such invalid or unenforceable provision were not contained herein.
Section 8.3. Expenses.
In the event of an Event of Default, the Companies will pay to the Secured
Party the amount of any and all reasonable expenses, including the reasonable
fees and expenses of its counsel, which the Secured Party may incur in
connection with: (i) the custody or preservation of, or the sale, collection
from, or other realization upon, any of the Pledged Property; (ii) the exercise
or enforcement of any of the rights of the Secured Party hereunder or (iii) the
failure by the Companies to perform or observe any of the provisions hereof.
Section 8.4. Waivers, Amendments, Etc.
The Secured Party's delay or failure at any time or times hereafter to
require strict performance by Companies of any undertakings, agreements or
covenants shall not waiver, affect, or diminish any right of the Secured Party
under this Agreement to demand strict compliance and performance herewith. Any
waiver by the Secured Party of any Event of Default shall not waive or affect
any other Event of Default, whether such Event of Default is prior or subsequent
thereto and whether of the same or a different type. None of the undertakings,
agreements and covenants of the Companies contained in this Agreement, and no
Event of Default, shall be deemed to have been waived by the Secured Party, nor
may this Agreement be amended, changed or modified, unless such waiver,
amendment, change or modification is evidenced by an instrument in writing
specifying such waiver, amendment, change or modification and signed by the
Secured Party.
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Section 8.5. Continuing Security Interest.
This Agreement shall create a continuing security interest in the Pledged
Property and shall: (i) remain in full force and effect until payment in full of
the Obligations; and (ii) be binding upon the Companies and its successors and
heirs and (iii) inure to the benefit of the Secured Party and its successors and
assigns. Upon the payment or satisfaction in full of the Obligations, the
Companies shall be entitled to the return, at its expense, of such of the
Pledged Property as shall not have been sold in accordance with Section 5.2
hereof or otherwise applied pursuant to the terms hereof.
Section 8.6. Independent Representation.
Each party hereto acknowledges and agrees that it has received or has had
the opportunity to receive independent legal counsel of its own choice and that
it has been sufficiently apprised of its rights and responsibilities with regard
to the substance of this Agreement.
Section 8.7. Applicable Law: Jurisdiction.
This Agreement shall be governed by and interpreted in accordance with the
laws of the State of New Jersey without regard to the principles of conflict of
laws. The parties further agree that any action between them shall be heard in
Hudson County, New Jersey, and expressly consent to the jurisdiction and venue
of the Superior Court of New Jersey, sitting in Hudson County and the United
States District Court for the District of New Jersey sitting in Newark, New
Jersey for the adjudication of any civil action asserted pursuant to this
Paragraph.
Section 8.8. Waiver of Jury Trial.
AS A FURTHER INDUCEMENT FOR THE SECURED PARTY TO ENTER INTO THIS AGREEMENT
AND TO MAKE THE FINANCIAL ACCOMMODATIONS TO THE COMPANIES, THE COMPANIES HEREBY
WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO
THIS AGREEMENT AND/OR ANY AND ALL OTHER DOCUMENTS RELATED TO THIS TRANSACTION.
Section 8.9. Entire Agreement.
This Agreement constitutes the entire agreement among the parties and
supersedes any prior agreement or understanding among them with respect to the
subject matter hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
CARGO CONNECTION LOGISTICS CORP.
By: ______________________________________
Name:
Title:
MID-COAST MANAGEMENT, INC.
By: ______________________________________
Name:
Title:
SECURED PARTY:
MONTGOMERY EQUITY PARTNERS, LTD.
By: Yorkville Advisors, LLC
Its: General Partner
By: ______________________________________
Name: Mark Angelo
Title: Portfolio Manager
14
EXHIBIT A
DEFINITION OF PLEDGED PROPERTY
For the purpose of securing prompt and complete payment and performance by
the Company of all of the Obligations, the Company unconditionally and
irrevocably hereby grants to the Secured Party a continuing security interest in
and to, and lien upon, the following Pledged Property of the Company:
(a) all goods of the Company, including, without limitation,
machinery, equipment, furniture, furnishings, fixtures, signs, lights, tools,
parts, supplies and motor vehicles of every kind and description, now or
hereafter owned by the Company or in which the Company may have or may hereafter
acquire any interest, and all replacements, additions, accessions, substitutions
and proceeds thereof, arising from the sale or disposition thereof, and where
applicable, the proceeds of insurance and of any tort claims involving any of
the foregoing;
(b) all inventory of the Company, including, but not limited to, all
goods, wares, merchandise, parts, supplies, finished products, other tangible
personal property, including such inventory as is temporarily out of Company's
custody or possession and including any returns upon any accounts or other
proceeds, including insurance proceeds, resulting from the sale or disposition
of any of the foregoing;
(c) all contract rights and general intangibles of the Company,
including, without limitation, goodwill, trademarks, trade styles, trade names,
leasehold interests, partnership or joint venture interests, patents and patent
applications, copyrights, deposit accounts whether now owned or hereafter
created;
(d) all documents, warehouse receipts, instruments and chattel paper
of the Company whether now owned or hereafter created;
(e) all accounts and other receivables, instruments or other forms
of obligations and rights to payment of the Company (herein collectively
referred to as "Accounts"), together with the proceeds thereof, all goods
represented by such Accounts and all such goods that may be returned by the
Company's customers, and all proceeds of any insurance thereon, and all
guarantees, securities and liens which the Company may hold for the payment of
any such Accounts including, without limitation, all rights of stoppage in
transit, replevin and reclamation and as an unpaid vendor and/or lienor, all of
which the Company represents and warrants will be bona fide and existing
obligations of its respective customers, arising out of the sale of goods by the
Company in the ordinary course of business;
(f) to the extent assignable, all of the Company's rights under all
present and future authorizations, permits, licenses and franchises issued or
granted in connection with the operations of any of its facilities;
(g) all products and proceeds (including, without limitation,
insurance proceeds) from the above-described Pledged Property.
A-1