Exhibit 10.1
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement") is entered into as of the 28th
day of November, 2006 by and between Girls' Life Acquisition Corp, a Delaware
corporation ("Debtor") and TNK, Inc., f/k/a Girls' Life, Inc., a Maryland
corporation ("Secured Party").
RECITALS
WHEREAS, Monarch Services, Inc., ("Monarch"), Xxxxx Xxxxxx ("Bokram"),
Debtor and Secured Party entered into an Asset Purchase Agreement dated August
18, 2006 (the "Purchase Agreement"), pursuant to which Debtor purchased the
assets of Secured Party in connection with the business of operating a girls'
magazine (the "Business"). The purchase price was paid by the assumption of
the Assumed Liabilities (as defined in the Purchase Agreement) and the delivery
of a Promissory Note dated August 18, 2006, made by Debtor, payable to the
order of Secured Party (the "Note").
WHEREAS, Debtor is currently negotiating a senior debt facility (the
"Senior Debt") with Manufacturers and Traders Trust Company (the "Bank");
WHEREAS Monarch, Bokram, Debtor and Secured Party have agreed to extend
the maturity date for payment of half of the outstanding principal amount of
the Note and all unpaid interest accrued to date, until August 16, 2007,
contingent upon, inter alia, Debtor's execution of this Agreement in favor
of Secured Party;
WHEREAS, Debtor has agreed to pledge personal property of the business
as collateral for all amounts outstanding from time to time under the Note
and Debtor's performance required under the Agreement;
WHEREAS, Debtor hereby enters into this Agreement to pledge to Secured
Party as collateral, items of personal property of the business and revenues
from said property as the terms and conditions of such pledge, subject at all
times to the rights and interests of the Bank pursuant to a Subordination
Agreement of even date herewith (the "Subordination Agreement").
NOW, THEREFORE, the parties hereto agree as follows:
1. Security Interest.
(a) Debtor hereby grants to and creates in favor of the Secured Party,
a security interest in, and hereby assigns and pledges to the Secured Party, all
of Debtor's right, title and interest in and to the following:
(i) all personal property of the business acquired from Secured
Party pursuant to the Purchase Agreement (the "Business Assets");
(ii) any and all revenues relating to or arising from the use of
the Business Assets, including but not limited to any and all payments from
Secured Party to Debtor; and
(iii) all additions, substitutions, attachments, replacements, and
accessions thereof, plus the proceeds of all the foregoing including amounts
payable under any insurance policy.
(b) The items identified in Section 1(a) above, and all their
fixtures, features, and/or accessories whether now present or hereafter
acquired are hereby pledged and collectively referred to hereafter as the
"Collateral."
2. Security for Obligations. The security interest granted to the Secured
Party in the Collateral and the assignment of the Collateral to the Secured
Party have been made herein for purposes of securing the performance of all
obligations of the Debtor under the Note and this Agreement, hereinafter
referred to as the "Obligations".
3. Representations and Warranties. Debtor hereby represents and warrants
as follows:
(a) Debtor has the requisite authority to grant the security interest
in, and assign, the Collateral to the Secured Party in the manner provided
herein; Debtor has taken all necessary action to authorize the execution,
delivery and performance of this Agreement, and this Agreement constitutes the
legal, valid and binding obligation of Debtor, enforceable in accordance with
its terms;
(b) Upon due filing or recording of financing statements in the
appropriate jurisdiction and filing records or taking possession of such
portions of the Collateral as shall be required to perfect security interest
therein according to applicable law, this Agreement creates a valid and
perfected first priority security interest in all of the Collateral and secures
the performance of the Obligations, subject at all times to the rights and
interests of the Bank pursuant to the Subordination Agreement; all filings,
notices and other actions necessary or desirable to perfect and protect such
security interests have been duly taken. Secured Party shall retain a first
position lien against all of the Collateral, but Secured Party agrees to
reasonably subordinate its lien to the Bank, which will require first position
against the Collateral in order to secure Debtor's obligations associated with
acquisition financing that shall be used by Debtor, in part, to satisfy the
Obligations. For purposes of this Section 3(b), Secured Party agrees to
execute the Subordination Agreement and any and all documents necessary to
subordinate its lien to that of the Bank;
(c) No financing statement or other security instrument is on file in
any jurisdiction covering any of the Collateral, other than such instruments
filed in favor of the Secured Party relating to this Agreement;
(d) Debtor's grant of a security interest in, and assignment of, the
Collateral to the Secured Party herein will not violate any other material
agreement to which Debtor is a party or result in the creation or imposition
of any lien, encumbrance, or claim upon any Collateral;
(e) No authorization, approval or another action by, and no notice to
or filing with, any governmental authority or regulatory body is required,
except (i) such authorization or approval as has already been obtained and (ii)
filing or recording of financing statements or other filings as required by
applicable law, either (A) for the grant by Debtor of the security interest
granted hereby or for the execution, delivery or performance of this Agreement
by Debtor or (B) for the perfection of or the exercise by the Secured Party of
its rights and remedies hereunder.
(f) Debtor agrees (i) to maintain all risk property damage insurance,
including but not limited to general liability insurance covering the
Collateral; and (ii) to maintain all general business insurance currently in
effect, including public liability insurance and workers compensation
insurance.
4. [INTENTIONALLY DELETED]
5. Further Assurances.
(a) Debtor agrees that from time to time, at its expense, Debtor will
promptly execute and deliver all further instruments and documents, and take
all further action, that may be required, necessary or desirable, or that
Secured Party may reasonably request, in order to perfect, continue, renew and
protect the security interest granted or purported to be granted herein in the
Collateral or to enable the Secured Party to exercise and enforce its rights
and remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, Debtor shall execute and deliver or file or
record, as the case may be, and obtain the execution and delivery by third
parties, of such financing or continuation statements, affidavits, instruments
or notices, as may be required, necessary or desirable, or as the Secured Party
may reasonably request, to perfect and preserve the security interest granted
or purported to be granted hereby.
(b) Debtor hereby authorizes Secured Party to file one or more
financing or continuation statements, and amendments thereto, relating to all
or any part of the Collateral, without the signature of Debtor where permitted
by law.
(c) Debtor will furnish to the Secured Party from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with its Collateral as the Secured Party may
reasonably request, all in reasonable detail satisfactory to the Secured Party.
6. Records. Debtor will keep and preserve all records evidencing or
relating to the Collateral at its chief place of business and will permit
representatives of the Secured Party at any time during normal business hours
to inspect and make abstracts from such records.
7. Actions Affecting the Collateral.
(a) Debtor shall, at its expense:
(i) Keep all Collateral at 0000 Xxxxxxx Xxxx, Xxxxxxxxx, XX 00000
and shall not change the location of any such Collateral, the location of its
principal place of business or chief executive office, or Debtor's name, unless
it has given thirty (30) days prior written notice to the Secured Party and all
action required by or requested pursuant to Section 4 in connection with such
change shall have been taken;
(ii) Promptly give notice to the Secured Party of any material
loss or damage to any of its Collateral;
(iii) Defend title to the Collateral against all Persons and
against all claims whatsoever;
(iv) Pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon, and all claims
(including claims for labor, material and supplies) against the Collateral,
except to the extent the validity thereof is being contested in good faith
and appropriate reserves therefor;
(v) Keep accurate records of the Collateral, including the
location thereof, and permit the Secured Party to inspect and have access to
any of the Collateral and any Collateral and to furnish to the Secured Party
at its request any and all information which Debtor may have with respect to
the Collateral.
(b) Debtor shall not without the prior written consent of the Secured
Party (which consent will not be unreasonably withheld), (i) sell, assign (by
operation of law or otherwise) or otherwise dispose of any of the Collateral,
or (ii) create or suffer to exist any lien upon or with respect to any of the
Collateral, except in the ordinary course of the Business, and for the
assignment and security interest created by this Agreement or contemplated
herein.
(c) Debtor agrees that the Collateral consists of tangible property
and is now and shall remain personal property, notwithstanding the manner in
which such Collateral or any part thereof shall now or hereafter be affixed
or annexed to real estate.
8. Secured Party May Perform. If Debtor fails to perform any provision
contained herein, the Secured Party may itself perform, or cause performance
of such provision, and the expense of the Secured Party incurred in connection
therewith shall be payable by Debtor under Section 12.
9. The Secured Party's Duties. The powers conferred on the Secured Party
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 Secured Party shall not have any duty
as to the Collateral or as to the taking of any necessary steps to preserve
its rights against other parties or any other rights pertaining to the
Collateral.
10. Events of Default. Debtor shall be in default under this Agreement
upon the happening of any of the following:
(a) An Event of Default occurs under the Note or the Debtor fails to
perform any obligation of the Debtor under the Note or this Agreement;
(b) Any of the Collateral deteriorates, is impaired or declines in
character or value such that the Secured Party in its reasonable judgment
determines that the Collateral does not adequately secure the Obligations;
(c) There shall be any execution or levy on, or any seizure or
attachment of, or the institution of any proceeding for foreclosure of any
lien against or for any forced sale or forfeiture of, all or any part of the
Collateral and shall not be vacated, discharged, satisfied or stayed or bonded
pending appeal within sixty (60) days after such issuance;
(d) Subject to the terms and conditions set forth in Section 3(b)
herein, Secured Party shall fail to have a first priority perfected security
interest in any of the Collateral.
11. Consequences of Default. Whenever Debtor is in default under this
Agreement pursuant to Section 10 hereof, the Secured Party shall have the
right to exercise any or all of the following rights and shall be the Debtor's
attorney-in-fact when necessary to enforce those rights:
(a) The Secured Party shall have the right to declare the entire
unpaid amount of any indebtedness owed by Debtor to the Secured Party to be
immediately due and payable without notice or demand on Debtor, which notice
or demand are hereby expressly waived by Debtor, and upon the making of any
such declaration, the entire unpaid amount shall become immediately due and
payable.
(b) Upon the Secured Party's request, Debtor shall immediately assign
and transfer to the Secured Party any portion or all of the Collateral that has
not already been assigned to it. Such assignment shall be in writing and in
such form as the Secured Party may prescribe.
(c) Upon the Secured Party's request, Debtor shall immediately cause
all future revenues generated from the Business to be placed in an escrow
account, approved by Secured Party. Such revenues shall be released from the
escrow account, pursuant to Secured Party's instructions, in the following
order: (i) to payment of the Note; (ii) to the operating expenses of the
Business; and (iii) to Debtor.
(d) Upon receipt of notice from the Secured Party, Debtor shall hold
all payments received by it in respect to any proceeds from the Collateral in
trust for the benefit of the Secured Party, shall segregate such payments from
other funds of Debtor and shall forthwith pay over such payments to the Secured
Party in the same form as received (with any necessary endorsement). Should
Debtor refuse, Secured Party shall have the right as attorney-in-fact to
undertake these responsibilities for Debtor, including but not limited to
endorsement in Debtor's name(s).
(e) The Secured Party shall have the right to enter into or upon any
premises where the Collateral is located and take possession of the Collateral,
or render it unusable, without demand or notice and without prior judicial
hearing or legal proceedings, which Debtor hereby expressly waives. Secured
Party may take such measures as the Secured Party may deem necessary or
advisable to preserve, process, develop, maintain, protect and care for the
Collateral or any portion thereof. If Secured Party shall so require, Debtor
shall assemble any and all Collateral to the extent possible (and books,
documents and other records evidencing or relating to any of the Collateral) as
directed by the Secured Party and make them available to the Secured Party at a
place or places to be designated by the Secured Party that is reasonably
convenient to Secured Party and Debtor.
(f) The Secured Party shall have the right, and is hereby expressly
authorized by Debtor, to sell or make any other reasonable disposition of all
or any part of the Collateral without the use of any judicial process or
proceeding. Collateral may be sold by the Secured Party at any public or
private sale, without prior notice to Debtor except as specified below, in any
commercially reasonable manner at any time. The Secured Party and Debtor hereby
agree that, to the extent notice of sale shall be required by law, notice to
the Debtor of the time and place of any public sale or the time after which any
private sale is to be made, is mailed postage prepaid to the address of Debtors
set forth in Section 16 not later than five (5) calendar days before the time
of sale or disposition, such notice shall constitute reasonable notification.
The Secured Party shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Secured Party 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.
(g) The Secured Party may exercise, in addition to any rights and
remedies provided for herein or otherwise available to it as a secured party
under applicable statutes and laws, all of the rights and remedies of a secured
party upon default under the Maryland Uniform Commercial Code or, to the extent
required by applicable law, the Uniform Commercial Code as in effect in the
jurisdiction where the Secured Party enforces such rights and remedies.
(h) All cash proceeds received by the Secured Party in respect of any
sale of, collection from, or other realization upon all or any part of the
Collateral, and all payments made in respect of the Collateral and received by
the Secured Party may, in the discretion of the Secured Party, be held by the
Secured Party as collateral for the Obligations or may be applied (after
pay ment to the Secured Party of the reasonable expenses, including attorneys'
fees and expenses and expert witnesses' fees and expenses, incurred by the
Secured Party in retaking, collection, selling or disposing the Collateral and
other amounts payable under Section 12) at any time in whole or in part by the
Secured Party against all or any part of the Obligations in such order as the
Secured Party shall elect. Debtors shall remain liable for any Obligations
remaining unpaid.
(i) Secured Party shall have the right to become the purchaser at any
public sale made pursuant to the provision of this Section 11 and shall have
the right to credit against the amount of the bid made therefor the amount
payable to Secured Party out of the net proceeds of such sale. Debtors shall
remain liable for any Obligations remaining unpaid.
(j) Any sale of the Collateral or any part thereof pursuant to the
provisions of this Section 11 shall operate to divest all right, title,
interest, claim, and demand of Debtor in and to the Collateral sold and shall
be a perpetual bar against Debtor. Nevertheless, if requested by the Secured
Party so to do, Debtor shall join in the execution, acknowledgment, and
delivery of all proper conveyances, assignments, and transfers of the
Collateral so sold.
12. Expenses.
(a) Debtor agrees to indemnify, protect and defend the Secured Party
from and against any and all claims, losses and liabilities growing out of or
resulting from this Agreement (including, without limitation, enforcement of
this Agreement), except claims, losses or liabilities resulting solely from the
Secured Party's negligence, gross negligence or willful misconduct.
(b) Upon the occurrence of any Event of Default, Secured Party shall
be entitled to recover all reasonable costs, expenses, and attorneys' fees
(including any allocated costs of in-house counsel) in connection with the
administering or enforcing of this Agreement, whether or not an action is filed;
provided, that costs and expenses incurred in any judicial action shall be paid
to the prevailing party by the other party.
13. Amendment, Waiver. No amendment or waiver of any provision of this
Agreement, nor consent to any departure by Debtor here from, shall in any event
be effective unless the same shall be in writing and signed by the parties
hereto, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose of which given. No change in the
performance of the Obligations including but not limited to the payment terms
under the note shall change this Agreement, except as permitted above.
14. Notices. All notices, demands and requests to either party must be in
writing and may be delivered by any reasonable commercial means unless delivery
method is otherwise specified in this Agreement. Notices shall be addressed as
follows:
Secured Party: TNK, Inc. (f/k/a Girls' Life, Inc.)
Attn: A. Xxxx Xxxx, President
0000 Xxxxxxx Xxxx
Xxxxxxxxx, XX 00000
With a copy to: Xxxxxx, Feinblatt, Rothman, Hoffberger & Xxxxxxxxx, LLC
Attn: Abba Xxxxx Xxxxxxxxx
The Xxxxxxx Building
000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000-0000
Debtor: Girls' Life Acquisition Corp.
Attn: Xxxxx Xxxxxx, Chief Executive Officer
0000 Xxxxxxx Xxxx
Xxxxxxxxx, XX 00000
With a copy to: Holland & Knight, LLP
Attn: Xxxx Xxxxxxxxxxxx
0000 Xxxxxx Xxxxxxxxx
Xxxxx 000
XxXxxx, XX 00000
15. Liability to Third Parties. The Secured Party shall not, in any event,
be liable to any third party for damages of any kind, including but not limited
to, direct, indirect, special, or consequential damages, resulting from the
existence, use, operation of the Collateral hereunder, except as may result
from the willful misconduct or gross negligence of the Secured Party. Debtor
hereby indemnifies Secured Party against any such third party claims.
16. Assignment. The Secured Party shall have the right to assign from time
to time all or any part of its rights under this Agreement. No rights or
obligations of Debtor may be assigned or delegated without the prior written
consent of Secured Party. All provision of this Agreement shall inure to the
benefit of and bind the successors and assigns of the Secured Party and
Debtor's successors and assigns.
17. Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Maryland. Unless otherwise defined
herein, terms used in the Maryland Uniform Commercial Code are used herein as
therein defined.
18. Severability. If any one or more of the provisions contained in this
Agreement shall be invalid, illegal or unenforceable in any respect under any
applicable law, such provision shall be adjusted rather than voided, if
possible, in order to achieve the intent of the parties to the extent possible.
In any event, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired.
19. Term. The term of this Agreement shall be from the date hereof until
performance and payment in full of all of the Obligations.
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed and delivered this agreement as of the day and year
first written above.
GIRLS LIFE ACQUISITION CORPORATION TNK, INC. (f/k/a GIRLS' LIFE, INC.)
By: /s/ Xxxxx Xxxxxx By: /s/ A. Xxxx Xxxx
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Xxxxx Xxxxxx, President A. Xxxx Xxxx, President
