SECURITY AGREEMENT

Exhibit 4.2

 

 

SECURITY AGREEMENT

 

among

 

QUALITY DISTRIBUTION, LLC,

 

VARIOUS SUBSIDIARIES OF

QUALITY DISTRIBUTION, INC.

 

and

 

CREDIT SUISSE FIRST BOSTON,

acting through its Cayman Islands Branch,

as Collateral Agent

 

 

Dated as of November 13, 2003

 

 

TABLE OF CONTENTS

 

 

(i)

Table of Contents

(continued)

 

 

(ii)

Table of Contents

(continued)

 

 

 

(iii)

Table of Contents

(continued)

 

 

(iv)

SECURITY AGREEMENT

 

SECURITY AGREEMENT, dated as of November 13, 2003 (as the same may be further amended, amended and restated, modified and/or supplemented from time to time, this “ Agreement ”), among each of the undersigned (each, an “ Assignor ” and, together with each other entity which becomes a party hereto pursuant to Section 11.12, collectively, the “ Assignors ”) and CREDIT SUISSE FIRST BOSTON, acting through its Cayman Islands Branch, as Collateral Agent (in such capacity, together with any successor collateral agent, the “ Collateral Agent ”), for the benefit of the Secured Creditors (as defined below). Certain capitalized terms as used herein are defined in Article X hereof. Except as otherwise defined herein, all capitalized terms used herein and defined in the Credit Agreement (as defined below) shall be used herein as therein defined.

 

W I T N E S S E T H :

 

WHEREAS, Quality Distribution, Inc. (“ Holdings ”), Quality Distribution, LLC (the “ Borrower ”), various financial institutions from time to time party thereto (such financial institutions, together with their successors and assigns, and any lenders pursuant to any Credit Agreement referred to below, being herein collectively called the “ Lenders ”), JPMorgan Chase Bank, as Documentation Agent, (in such capacity, together with any successor documentation agent, the “ Documentation Agent ”), Deutsche Bank Securities Inc. and Bear Stearns Corporate Lending Inc., as Co-Syndication Agents (in such capacity, together with any successor syndication agents, collectively, the “ Co-Syndication Agents ”), and Credit Suisse First Boston, acting through its Cayman Islands Branch, as Administrative Agent (in such capacity, together with any successor administrative agent, the “ Administrative Agent ”), have entered into a Credit Agreement, dated as of November 13, 2003 (as amended, amended and restated, modified and/or supplemented from time to time, the “ Credit Agreement ”), providing for the making of Loans to, and the issuance of, and participation in, Letters of Credit for the account of the Borrower, all as contemplated therein (the Lenders, each Letter of Credit Issuer, the Documentation Agent, the Co-Syndication Agents, the Administrative Agent and the Collateral Agent are herein called the “ Lender Creditors ”);

 

WHEREAS, the Borrower may at any time and from time to time enter into one or more Interest Rate Protection Agreements or Other Hedging Agreements with one or more Lenders or any affiliate thereof (each such Lender or affiliate, even if the respective Lender subsequently ceases to be a Lender under the Credit Agreement for any reason, together with such Lender’s or affiliate’s successors and assigns, if any, collectively, the “ Other Creditors ”);

 

WHEREAS, the Borrower, as issuer, and the other Assignors (other than Holdings), as guarantors, have heretofore entered into the Existing Senior Subordinated Secured Notes Indenture (as defined below) with the trustee thereunder (in such capacity, together with any successor trustee, the “ Existing Senior Subordinated Secured Notes Indenture Trustee ”), providing for the issuance of the Existing Senior Subordinated Secured Notes by the Borrower (with the holders from time to time of such Existing Senior Subordinated Secured Notes being herein called the “ Existing Senior Subordinated Secured Noteholders ”);

WHEREAS, pursuant to the Holdings Guaranty, Holdings has guaranteed to the Lender Creditors and the Other Creditors the payment when due of the Guaranteed Obligations as described therein;

 

WHEREAS, pursuant to a Subsidiaries Guaranty, dated as of November 13, 2003 (as amended, restated, modified and/or supplemented from time to time, the “ Subsidiaries Guaranty ”), each Subsidiary Guarantor has jointly and severally guaranteed to the Lender Creditors and the Other Creditors the payment when due of the Guaranteed Obligations as described therein;

 

WHEREAS, pursuant to certain of the Existing Senior Subordinated Secured Notes Documents, the Assignors (other than Holdings) have jointly and severally guaranteed the payment when due of all obligations and liabilities of the Borrower under or with respect to the Existing Senior Subordinated Secured Notes Documents;

 

WHEREAS, it is a condition under the Existing Senior Subordinated Secured Notes Indenture that each Assignor shall have executed and delivered to the Collateral Agent this Agreement, providing for, inter alia , the grant of a security interest to secure the Existing Senior Subordinated Secured Notes Obligations on the terms set forth therein;

 

WHEREAS, it is a condition precedent to the making of Loans to the Borrower and the issuance of, and participation in, Letters of Credit for the account of the Borrower under the Credit Agreement and to the Other Creditors entering into Interest Rate Protection Agreements and Other Hedging Agreements that each Assignor shall have executed and delivered to the Collateral Agent this Agreement; and

 

WHEREAS, each Assignor will obtain benefits from the incurrence of Loans by the Borrower and the issuance of, and participation in, Letters of Credit for the account of the Borrower under the Credit Agreement and the entering into by the Borrower of Interest Rate Protection Agreements or Other Hedging Agreements and, accordingly, desires to execute this Agreement in order to satisfy the condition described in the preceding paragraph and to induce the Lenders to make Loans to the Borrower and issue, and/or participate in, Letters of Credit for the account of the Borrower and the Other Creditors to enter into Interest Rate Protection Agreements or Other Hedging Agreements with the Borrower;

 

NOW, THEREFORE, in consideration of the benefits accruing to each Assignor, the receipt and sufficiency of which are hereby acknowledged, each Assignor hereby makes the following representations and warranties to the Collateral Agent for the benefit of the Secured Creditors (as defined below) and hereby covenants and agrees with the Collateral Agent for the benefit of the Secured Creditors as follows:

 

ARTICLE I

 

SECURITY INTERESTS

 

1.1 Grant of Security Interests . (a) As security for the prompt and complete payment and performance when due of all of the Obligations (excluding the Existing Senior Subordinated Secured Notes Obligations in the case of an assignment, transfer, grant or pledge of

 

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Excluded Existing Senior Subordinated Secured Notes Collateral by any Assignor), each Assignor does hereby assign and transfer unto the Collateral Agent for the benefit of the Secured Creditors (excluding the Existing Senior Subordinated Secured Notes Creditor in the case of any assignment, transfer, pledge or grant of Excluded Existing Senior Subordinated Secured Notes Collateral by any Assignor), and does hereby pledge and grant to the Collateral Agent for the benefit of the Secured Creditors (excluding the Existing Senior Subordinated Secured Notes Creditor in the case of any assignment, transfer, pledge or grant of Excluded Existing Senior Subordinated Secured Notes Collateral by any Assignor), a continuing security interest in all of the right, title and interest of such Assignor in, to and under all of the following personal property and fixtures (and all rights therein) of such Assignor, or in which or to which such Assignor has any rights, in each case, whether now existing or hereafter from time to time acquired:

 

(i) each and every Account;

 

(ii) all cash;

 

(iii) the Cash Collateral Account and all monies, securities, Instruments and other investments deposited or required to be deposited in the Cash Collateral Account;

 

(iv) all Chattel Paper (including, without limitation, all Tangible Chattel Paper and all Electronic Chattel Paper);

 

(v) all Commercial Tort Claims, including, without limitation, those set forth on Annex F hereto;

 

(vi) all computer programs of such Assignor and all intellectual property rights therein and all other proprietary information of such Assignor, including but not limited to Domain Names and Trade Secret Rights;

 

(vii) Contracts, together with all Contract Rights arising thereunder;

 

(viii) all Copyrights;

 

(ix) all Equipment;

 

(x) all Deposit Accounts and all other demand, deposit, time, savings, cash management, passbook and similar accounts maintained by such Assignor with any Person and all monies, securities, Instruments and other investments deposited or required to be deposited in any of the foregoing;

 

(xi) all Documents;

 

(xii) all General Intangibles;

 

(xiii) all Goods;

 

(xiv) all Instruments;

 

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(xv) all Inventory;

 

(xvi) all Investment Property;

 

(xvii) all Letter-of-Credit Rights (whether or not the respective letter of credit is evidenced by a writing);

 

(xviii) all Marks, together with the registrations and right to all renewals thereof, and the goodwill of the business of such Assignor symbolized by the Marks;

 

(xix) all Patents;

 

(xx) all Permits;

 

(xxi) all Software and all Software licensing rights, all writings, plans, specifications and schematics, all engineering drawings, customer lists, goodwill and licenses, and all recorded data of any kind or nature, regardless of the medium of recording;

 

(xxii) all Supporting Obligations;

 

(xxiii) all Tractor Trailers; and

 

(xxiv) all Proceeds and products of any and all of the foregoing (all of the above, the “ Collateral ”).

 

(b) Notwithstanding anything to the contrary contained above in this Section 1 or elsewhere in this Agreement, no Excluded Existing Senior Subordinated Secured Notes Collateral hereunder shall secure any of the Existing Senior Subordinated Secured Notes Obligations (although the Excluded Existing Senior Subordinated Secured Notes Collateral shall secure all other Obligations hereunder).

 

(c) The security interest of the Collateral Agent under this Agreement extends to all Collateral which any Assignor may acquire, or with respect to which any Assignor may obtain rights, at any time during the term of this Agreement.

 

(d) Notwithstanding anything to the contrary contained in Section 1.1(a) above, in no event shall the Collateral include, and no Assignor shall be deemed to have granted a security interest in any of such Assignor’s rights or interests in any license, contract or agreement to which such Assignor is a party or any of its rights or interests thereunder to the extent, but only to the extent, that such a grant would, under the terms of such license, contract or agreement or otherwise, result in a breach of the terms of, or constitute a default under any license, contract or agreement to which such Assignor is a party (other than to the extent that any such term would be rendered ineffective pursuant to the UCC or any other applicable law (including the Bankruptcy Code) or principles of equity); provided , however , that (x) immediately upon the ineffectiveness, lapse or termination of any such provision (as a result of a change in law, receipt of an appropriate consent or otherwise), the Collateral shall include, and such Assignor shall be deemed to have granted a security interest in, all such rights and interests

 

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without any further action on the part of such Assignor or any Secured Creditor as if such provision had never been in effect and (y) the right to receive payments of money or other consideration in respect of such license, contract or agreement shall not be excluded from the security interest created hereunder. In the event that any asset of the Assignor is excluded from the Collateral by virtue of this paragraph, such Assignor, upon the request of the Collateral Agent, shall use all reasonable efforts to enable such Assignor to provide a security interest in such asset pursuant hereto as promptly as practicable.

 

1.2 Power of Attorney . Each Assignor hereby constitutes and appoints the Collateral Agent its true and lawful attorney, irrevocably, with full power after the occurrence of and during the continuance of an Event of Default (in the name of such Assignor or otherwise) to act, require, demand, receive, compound and give acquittance for any and all monies and claims for monies due or to become due to such Assignor under or arising out of the Collateral, to endorse any checks or other instruments or orders in connection therewith and to file any claims or take any action or institute any proceedings which the Collateral Agent may deem to be necessary or advisable to protect the interests of the Secured Creditors, which appointment as attorney is coupled with an interest.

 

ARTICLE II

 

GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS

 

Each Assignor represents, warrants and covenants, which representations, warranties and covenants shall survive execution and delivery of this Agreement, as follows:

 

2.1 Necessary Filings . (i) Subject to Section 13.19 of the Credit Agreement, all filings, registrations, recordings and other actions necessary or appropriate to create, preserve, protect and perfect the security interest granted by such Assignor to the Collateral Agent for the benefit of the Secured Creditors (excluding the Existing Senior Subordinated Secured Notes Creditor in the case of any assignment, transfer, pledge or grant of Excluded Existing Senior Subordinated Secured Notes Collateral by any Assignor) hereby in respect of the Collateral (other than Excluded Unperfected Tractor Trailer Collateral) have been accomplished or (x) in the case of Collateral for which it is necessary to file a UCC-1 financing statement (or appropriate local equivalent) in order to perfect a security interest in such Collateral, such filings will be accomplished within the time limits set forth in Section 13.19 of the Credit Agreement (or to the extent such Collateral is acquired after the Initial Borrowing Date, within 10 days following the date of the acquisition of such Collateral), (y) in the case of Collateral (other than Excluded Unperfected Tractor Trailer Collateral) for which a certificate of title has been issued and for which it is necessary to record a security interest upon such certificate of title in order to perfect a security interest in such Collateral, such recordings will be accomplished within the time limits set forth in Section 13.19 of the Credit Agreement (or to the extent such Collateral is acquired after the Initial Borrowing Date, within 45 days following the date of the acquisition of such Collateral) or such later date as the Collateral Agent shall determine in its sole discretion, and (ii) the security interest granted to the Collateral Agent pursuant to this Agreement in and to the Collateral (other than Excluded Unperfected Tractor Trailer Collateral) constitutes (or, in the case of Collateral subject to clauses (x) and (y) above, upon compliance with such clauses, will constitute) a perfected security interest therein prior to the rights of all other Persons therein

 

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(other than other Persons holding Permitted Liens set forth on Schedule IX to the Credit Agreement) and subject to no other Liens (other than Permitted Liens) and is entitled to all the rights, priorities and benefits afforded by the UCC or other relevant law as enacted in any relevant jurisdiction to perfected security interests.

 

2.2 No Liens . Such Assignor is, and as to all Collateral acquired by it from time to time after the date hereof such Assignor will be, the owner of all Collateral free from any Lien, security interest, encumbrance or other right, title or interest of any Person (other than Permitted Liens and Liens created under this Agreement), and such Assignor shall defend the Collateral against all claims and demands of all Persons at any time claiming the same or any interest therein adverse to the Collateral Agent.

 

2.3 Other Financing Statements . Except as may be permitted under Section 13.19 of the Credit Agreement, as of the date hereof, there is no financing statement evidencing a valid security interest against Holdings or any of its Subsidiaries (or similar statement or instrument of registration under the law of any jurisdiction) covering or purporting to cover any interest of any kind in the Collateral (other than (x) those created under this Agreement, (y) financing statements filed in respect of Permitted Liens and (z) those with respect to which appropriate termination statements executed by the secured lender thereunder have been delivered or shall be delivered to the Collateral Agent pursuant to the terms of the Secured Debt Agreements), and so long as the Termination Date has not occurred, such Assignor will not execute or authorize to be filed in any public office any financing statement (or similar statement or instrument of registration under the law of any jurisdiction) or statements relating to the Collateral, except financing statements filed or to be filed in respect of and covering the security interests granted hereby by such Assignor or as permitted by the Secured Debt Agreements.

 

2.4 Chief Executive Office; Record Locations . The chief executive office of such Assignor is, on the date of this Agreement, located at the address indicated on Annex A hereto for such Assignor. During the period of the four calendar months preceding the date of this Agreement, the chief executive office of such Assignor has not been located at any address other than that indicated on Annex A in accordance with the immediately preceding sentence, in each case unless each such other address is also indicated on Annex A hereto for such Assignor.

 

2.5 Location of Inventory and Equipment . All Inventory and Equipment (other than vehicles, trailers, chassis, containers and other Goods covered by a certificate of title statute) held on the date hereof, or held at any time during the four calendar months prior to the date hereof, by each Assignor is located at one of the locations shown on Annex B hereto or is in transit between such locations for such Assignor.

 

2.6 Legal Names; Type of Organization (and Whether a Registered Organization and/or a Transmitting Utility); Jurisdiction of Organization; Location; Organizational Identification Numbers; Changes Thereto; etc. The exact legal name of each Assignor, the type of organization of such Assignor, whether or not such Assignor is a Registered Organization, the jurisdiction of organization of such Assignor, such Assignor’s Location, the organizational identification number (if any) of such Assignor, and whether or not such Assignor is a Transmitting Utility, is listed on Annex C hereto for such Assignor. Such Assignor shall not change its legal name, its type of organization, its status as a Registered Organization (in the case

 

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of a Registered Organization), its status as a Transmitting Utility or as a Person which is not a Transmitting Utility, as the case may be, its jurisdiction of organization, its Location, or its organizational identification number (if any) from that used on Annex C hereto, except that any such changes shall be permitted (so long as not in violation of the applicable requirements of the Secured Debt Agreements and so long as same do not involve (x) a Registered Organization ceasing to constitute same or (y) such Assignor changing its jurisdiction of organization or Location from the United States or a State thereof to a jurisdiction of organization or Location, as the case may be, outside the United States or a State thereof) if (i) it shall have given to the Collateral Agent not less than 15 days’ prior written notice of each change to the information listed on Annex C (as adjusted for any subsequent changes thereto previously made in accordance with this sentence), together with a supplement to Annex C which shall correct all information contained therein for such Assignor, and (ii) in connection with the respective such change or changes, it shall have taken all action reasonably requested by the Collateral Agent to maintain the security interests of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect. In addition, to the extent that such Assignor does not have an organizational identification number on the date hereof and later obtains one, such Assignor shall promptly thereafter notify the Collateral Agent of such organizational identification number and shall take all actions reasonably satisfactory to the Collateral Agent to the extent necessary to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby fully perfected and in full force and effect.

 

2.7 Trade Names; etc. As of the date hereof, such Assignor has or operates in any jurisdiction under, or within the five year period preceding the date of this Agreement (or, if shorter, the period of time such entity has been a Subsidiary of Holdings) has had or has operated in any jurisdiction under, no trade names, fictitious names or other names except its legal name as specified in Annex C and such other trade or fictitious names as are listed on Annex D hereto for such Assignor. Such Assignor shall not assume or operate in any jurisdiction under any new trade, fictitious or other name until (i) it shall have given to the Collateral Agent not less than 15 days’ prior written notice of its intention so to do, clearly describing such new name and the jurisdictions in which such new name will be used and providing such other information in connection therewith as the Collateral Agent may reasonably request and (ii) with respect to such new name, it shall have taken all action reasonably requested by the Collateral Agent to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect.

 

2.8 Certain Significant Transactions . During the one year period preceding the date of this Agreement, no Person shall have merged or consolidated with or into any Assignor, and no Person shall have liquidated into, or transferred all or substantially all of its assets to, any Assignor, in each case except as described in Annex E hereto. With respect to any transactions so described in Annex E hereto, the respective Assignor shall have furnished such information with respect to the Person (and the assets of the Person and locations thereof) which merged with or into or consolidated with such Assignor, or was liquidated into or transferred all or substantially all of its assets to such Assignor, and shall have furnished to the Collateral Agent such UCC lien searches as may have been requested with respect to such Person and its assets, to establish that no security interest (excluding Permitted Liens) continues perfected on the date hereof with respect to any Person described above (or the assets transferred to the respective Assignor by such Person), including without limitation pursuant to Section 9-316(a)(3) of the UCC.

 

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2.9 As-Extracted Collateral; Timber-to-be-Cut . On the date hereof, such Assignor does not own, or expect to acquire, any property which constitutes, or would constitute, As-Extracted Collateral or Timber-to-be-Cut. If at any time after the date of this Agreement such Assignor owns, acquires or obtains rights to any As-Extracted Collateral or Timber-to-be-Cut, such Assignor shall furnish the Collateral Agent with prompt written notice thereof (which notice shall describe in reasonable detail the As-Extracted Collateral and/or Timber-to-be-Cut and the locations thereof) and shall take all actions as may be deemed reasonably necessary or desirable by the Collateral Agent to perfect the security interest of the Collateral Agent therein.

 

2.10 Collateral in the Possession of a Bailee . If any Inventory or other Goods (other than vehicles, trailers, chassis or containers) are at any time in the possession of a bailee, such Assignor shall promptly notify the Collateral Agent thereof and, if requested by the Collateral Agent, shall use its reasonable best efforts to promptly obtain an acknowledgment from such bailee, in form and substance reasonably satisfactory to the Collateral Agent, that the bailee holds such Collateral for the benefit of the Collateral Agent and shall act upon the instructions of the Collateral Agent, without the further consent of such Assignor. The Collateral Agent agrees with such Assignor that the Collateral Agent shall not give any such instructions unless an Event of Default has occurred and is continuing or would occur after taking into account any action by the respective Assignor with respect to any such bailee.

 

2.11 Recourse . This Agreement is made with full recourse to each Assignor and pursuant to and upon all the warranties, representations, covenants and agreements on the part of such Assignor contained herein, in the other Secured Debt Agreements and otherwise in writing in connection herewith or therewith.

 

ARTICLE III

 

SPECIAL PROVISIONS CONCERNING

ACCOUNTS; CONTRACT RIGHTS; INSTRUMENTS

 

3.1 Additional Representations and Warranties . As of the time when each of its Accounts arises, each Assignor shall be deemed to have represented and warranted that each such Account, and all records, papers and documents relating thereto (if any) are genuine and in all material respects what they purport to be, and that all papers and documents (if any) relating thereto (i) will, to the knowledge of such Assignor, represent the genuine legal, valid and binding (except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws generally affecting creditors’ rights and by equitable principles (regardless of whether enforcement is sought in equity or law) obligation of the account debtor evidencing indebtedness unpaid and owed by the respective account debtor arising out of the performance of labor or services or the sale or lease and delivery of the merchandise listed therein, or both, (ii) will be the only original writings evidencing and embodying such obligation of the account debtor named therein (other than copies created for general accounting purposes), (iii) will, to the knowledge of such Assignor, evidence true and valid obligations, enforceable in accordance with their respective terms (except to the extent that

 

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the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws generally affecting creditors’ rights and by equitable principles (regardless of whether enforcement is sought in equity or law)) and (iv) will be in compliance and will conform in all material respects with all applicable federal, state and local laws and applicable laws of any relevant foreign jurisdiction.

 

3.2 Maintenance of Records . Each Assignor will keep and maintain at its own cost and expense reasonably satisfactory and complete records of its Accounts and Contracts, including, but not limited to, originals or copies of all documentation (including each Contract) with respect thereto, records of all payments received, all credits granted thereon, all merchandise returned and all other dealings therewith, and such Assignor will make the same available on such Assignor’s premises to the Collateral Agent for inspection, at such Assignor’s own cost and expense, at any and all reasonable times upon prior notice to such Assignor and otherwise in accordance with the Credit Agreement. Upon the occurrence and during the continuance of an Event of Default and at the request of the Collateral Agent, such Assignor shall, at its own cost and expense, deliver all tangible evidence of its Accounts and Contract Rights (including, without limitation, all documents evidencing the Accounts and all Contracts) and such books and records to the Collateral Agent or to its representatives (copies of which evidence and books and records may be retained by such Assignor). Upon the occurrence and continuation of an Event of Default, each Assignor shall legend, in form and manner satisfactory to the Collateral Agent, all leases of Tractor Trailers to Program Affiliates, as well as all documents of such Assignor evidencing or pertaining to such leases, with an appropriate reference to the fact that such lease has been assigned to the Collateral Agent and that the Collateral Agent has a security interest therein. In addition, upon the occurrence and during the continuance of an Event of Default and if the Collateral Agent so directs, such Assignor shall legend, in form and manner satisfactory to the Collateral Agent, the Accounts and all other Contracts, as well as books, records and documents (if any) of such Assignor evidencing or pertaining to such Accounts and Contracts with an appropriate reference to the fact that such Accounts and Contracts have been assigned to the Collateral Agent and that the Collateral Agent has a security interest therein.

 

3.3 Direction to Account Debtors; Contracting Parties; etc. . Upon the occurrence and during the continuance of an Event of Default, if the Collateral Agent so directs any Assignor, such Assignor agrees (x) to cause all payments on account of the Accounts and Contracts to be made directly to the Cash Collateral Account, (y) that the Collateral Agent may, at its option, directly notify the obligors with respect to any Accounts and/or under any Contracts to make payments with respect thereto as provided in the preceding clause (x), and (z) that the Collateral Agent may enforce collection of any such Accounts and Contracts and may adjust, settle or compromise the amount of payment thereof, in the same manner and to the same extent as such Assignor. Without notice to or assent by any Assignor, the Collateral Agent may, upon the occurrence and during the continuance of an Event of Default, apply any or all amounts then in, or thereafter deposited in, the Cash Collateral Account toward the payment of the Obligations in the manner provided in Section 8.4 of this Agreement. The reasonable costs and expenses of collection (including reasonable attorneys’ fees), whether incurred by an Assignor or the Collateral Agent, shall be borne by the relevant Assignor. The Collateral Agent shall deliver a copy of each notice referred to in the preceding clause (y) to the relevant Assignor prior to, or simultaneous with, delivery to the relevant obligor, provided that (x) the failure by the Collateral

 

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Agent to so notify such Assignor shall not affect the effectiveness of such notice or the other rights of the Collateral Agent created by this Section 3.3 and (y) no such notice shall be required if an Event of Default of the type described in Section 10.05 of the Credit Agreement has occurred and is continuing.

 

3.4 Modification of Terms; etc. Except in accordance with such Assignor’s ordinary course of business and consistent with reasonable business judgment or as permitted by Section 3.5, no Assignor shall rescind or cancel any indebtedness evidenced by any Account or under any Contract, or modify any material term thereof or make any material adjustment with respect thereto, or extend or renew the same, or compromise or settle any material dispute, claim, suit or legal proceeding relating thereto, or sell any Account or Contract, or interest therein, without the prior written consent of the Collateral Agent, except (i) as permitted by Section 3.5 and (ii) to the extent that the aggregate cost to Holdings and its Subsidiaries of any such rescission, cancellation, modification, adjustment, extension, compromise, settlement or sale is not reasonably likely to have a Material Adverse Effect. No Assignor will do anything to impair in any material respect the rights of the Collateral Agent in the Accounts or Contracts.

 

3.5 Collection . Each Assignor shall endeavor in accordance with reasonable business practices to cause to be collected from the account debtor named in each of its Accounts or obligor under any Contract, as and when due (including, without limitation, amounts which are delinquent, such amounts to be collected in accordance with generally accepted lawful collection procedures) any and all amounts owing under or on account of such Account or Contract, and apply forthwith upon receipt thereof all such amounts as are so collected to the outstanding balance of such Account or under such Contract. Except as otherwise directed by the Collateral Agent after the occurrence and during the continuation of an Event of Default, any Assignor may allow in the ordinary course of business as adjustments to amounts owing under its Accounts and Contracts (i) an extension or renewal of the time or times of payment, or settlement for less than the total unpaid balance or unperformed service, which such Assignor finds appropriate in accordance with reasonable business judgment and (ii) a refund or credit due as a result of returned or damaged merchandise or improperly performed services or for other reasons which such Assignor finds appropriate in accordance with reasonable business judgment. The reasonable costs and expenses (including, without limitation, reasonable attorneys’ fees) of collection, whether incurred by an Assignor or the Collateral Agent, shall be borne by the relevant Assignor.

 

3.6 Instruments . If any Assignor owns or acquires any Instrument (other than (x) checks and other payment instruments received and collected in the ordinary course of business and (y) Instruments which qualify as Non-Deliverable Notes (as defined in the U.S. Pledge Agreement), such Assignor will within 10 Business Days notify the Collateral Agent thereof, and upon request by the Collateral Agent will promptly deliver such Instrument to the Collateral Agent appropriately endorsed to the order of the Collateral Agent as further security hereunder.

 

3.7 Assignors Remain Liable Under Accounts . Anything herein to the contrary notwithstanding, the Assignors shall remain liable under each of the Accounts to observe and perform all of the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any agreement giving rise to such Accounts. Neither the Collateral Agent nor any other Secured Creditor shall have any obligation or liability under any

 

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Account (or any agreement giving rise thereto) by reason of or arising out of this Agreement or the receipt by the Collateral Agent or any other Secured Creditor of any payment relating to such Account pursuant hereto, nor shall the Collateral Agent or any other Secured Creditor be obligated in any manner to perform any of the obligations of any Assignor under or pursuant to any Account (or any agreement giving rise thereto), to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by them or as to the sufficiency of any performance by any party under any Account (or any agreement giving rise thereto), to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to them or to which they may be entitled at any time or times.

 

3.8 Assignors Remain Liable Under Contracts . Anything herein to the contrary notwithstanding, the Assignors shall remain liable under each of the Contracts to observe and perform all of the conditions and obligations to be observed and performed by them thereunder, all in accordance with and pursuant to the terms and provisions of each Contract. Neither the Collateral Agent nor any other Secured Creditor shall have any obligation or liability under any Contract by reason of or arising out of this Agreement or the receipt by the Collateral Agent or any other Secured Creditor of any payment relating to such Contract pursuant hereto, nor shall the Collateral Agent or any other Secured Creditor be obligated in any manner to perform any of the obligations of any Assignor under or pursuant to any Contract, to make any payment, to make any inquiry as to the nature or the sufficiency of any performance by any party under any Contract, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to them or to which they may be entitled at any time or times.

 

3.9 Deposit Accounts; etc. (a) No Assignor maintains, or at any time after the date of this Agreement shall establish or maintain, any demand, time, savings, passbook or similar account, except for such accounts maintained with a bank (as defined in Section 9-102 of the UCC) whose jurisdiction (determined in accordance with Section 9-304 of the UCC) is (x) within a State of the United States or (y) within Canada, so long as the aggregate amount of cash or Cash Equivalents maintained in accounts within Canada does not exceed $500,000 for any consecutive three-day period (in the case of cash and Cash Equivalents denominated in a currency other than U.S. Dollars, taking the U.S. Dollar Equivalent thereof at such time). Annex L hereto accurately sets forth, as of the date of this Agreement, for each Assignor, each Deposit Account maintained by such Assignor (including a description thereof and the respective account number), the name of the respective bank with which such Deposit Account is maintained, and the jurisdiction of the respective bank with respect to such Deposit Account. For each Deposit Account (other than (i) the Cash Collateral Account or any other Deposit Account maintained with the Collateral Agent, (ii) Deposit Accounts with an aggregate monthly balance of less than $10,000, provided that, with respect to this clause (ii) only, the aggregate amount in all such Deposit Accounts excluded pursuant to this clause (ii) does not exceed $200,000 at any time, (iii) payroll accounts and (iv) such other accounts used solely for disbursement purposes), the respective Assignor shall cause the bank with which the Deposit Account is maintained to execute and deliver to the Collateral Agent, within 60 days after the date of this Agreement (or such later date as the Collateral Agent may determine in its sole discretion) or, if later, at the time of the establishment of the respective Deposit Account, a “control agreement” in the form of Annex M hereto (appropriately completed), with such changes thereto as may be acceptable to

 

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the Collateral Agent. If any bank with which a Deposit Account is maintained refuses to, or does not, enter into such a “control agreement”, then the respective Assignor shall promptly (and in any event within 60 days after the date of this Agreement (or such later date as the Collateral Agent may determine in its sole discretion) or, if later, 30 days after the establishment of such account) close the respective Deposit Account and transfer all balances therein to the Cash Collateral Account or another Deposit Account meeting the requirements of this Section 3.9. If any bank with which a Deposit Account is maintained refuses to subordinate all its claims with respect to such Deposit Account to the Collateral Agent’s security interest therein on terms satisfactory to the Collateral Agent, then the Collateral Agent, at its option, may (x) require that such Deposit Account be terminated in accordance with the immediately preceding sentence or (y) agree to a “control agreement” without such subordination, provided that in such event the Collateral Agent may at any time, at its option, subsequently require that such Deposit Account be terminated (within 30 days after notice from the Collateral Agent) in accordance with the requirements of the immediately preceding sentence.

 

(b) After the date of this Agreement, no Assignor shall establish any new demand, time, savings, passbook or similar account, except for Deposit Accounts established and maintained with banks and meeting the requirements of preceding clause (a). At the time any such Deposit Account is established, the appropriate “control agreement” shall be entered into in accordance with the requirements of preceding clause (a) and the respective Assignor shall furnish to the Collateral Agent a supplement to Annex L hereto containing the relevant information with respect to the respective Deposit Account and the bank with which same is established.

 

3.10 Letter-of-Credit Rights . If any Assignor is at any time a beneficiary under a letter of credit with a stated amount of $1,000,000 or more, such Assignor shall promptly notify the Collateral Agent thereof and, at the request of the Collateral Agent, such Assignor shall, pursuant to an agreement in form and substance reasonably satisfactory to the Collateral Agent, use its reasonable best efforts to (i) arrange for the issuer and any confirmer of such letter of credit to consent to an assignment to the Collateral Agent of the proceeds of any drawing under such letter of credit or (ii) arrange for the Collateral Agent to become the transferee beneficiary of such letter of credit, with the Collateral Agent agreeing, in each case, that the proceeds of any drawing under the letter of credit are to be applied as provided in this Agreement after the occurrence and during the continuance of an Event of Default.

 

3.11 Commercial Tort Claims . Each Commercial Tort Claim of any Assignor in an amount (taking the greater of the aggregate claimed damages thereunder or the reasonably estimated value thereof, in each case less the amount of any claim against such Assignor arising from the same facts and circumstances as such Commercial Tort Claim) of $1,000,000 or more in existence on the date of this Agreement is described in Annex F hereto. If any Assignor shall at any time after the date of this Agreement acquire a Commercial Tort Claim in an amount (taking the greater of the aggregate claimed damages thereunder or the reasonably estimated value thereof, in each case less the amount of any claim against such Assignor arising from the same facts and circumstances as such Commercial Tort Claim) of $1,000,000 or more, such Assignor shall promptly notify the Collateral Agent thereof in a writing signed by such Assignor and describing the details thereof and shall grant to the Collateral Agent in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to the Collateral Agent.

 

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3.12 Chattel Paper . Upon the request of the Collateral Agent made at any time or from time to time, each Assignor shall promptly furnish to the Collateral Agent a list of all Electronic Chattel Paper held or owned by such Assignor. Furthermore, if requested by the Collateral Agent, each Assignor shall promptly take all actions which are reasonably practicable so that the Collateral Agent has “control” of all Electronic Chattel Paper in accordance with the requirements of Section 9-105 of the UCC. Each Assignor will promptly (and in any event within 10 days) following any request by the Collateral Agent, deliver all of its Tangible Chattel Paper to the Collateral Agent.

 

3.13 Further Actions . Each Assignor will, at its own expense, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, certificates, reports and other assurances or instruments and take such further steps, including any and all actions as may be necessary or required under the Federal Assignment of Claims Act, relating to its Accounts, Contracts, Instruments and other property or rights covered by the security interest hereby granted, as the Collateral Agent may reasonably require.

 

ARTICLE IV

 

SPECIAL PROVISIONS CONCERNING

TRADEMARKS AND DOMAIN NAMES

 

4.1 Additional Representations and Warranties . Each Assignor represents and warrants that it is the true and lawful owner of or otherwise has the right to use the registered Marks and Domain Names listed in Annex G hereto for such Assignor and that said listed Marks and Domain Names include all United States marks and applications for United States marks registered in the United States Patent and Trademark Office and all Domain Names that such Assignor owns or uses in connection with its business as of the date hereof. Each Assignor represents and warrants that it owns, is licensed to use or otherwise has the right to use, all Marks and Domain Names that it uses. Each Assignor further warrants that it has no knowledge of any third party claim received by it that any aspect of such Assignor’s present or contemplated business operations infringes or will infringe any trademark, service mark or trade name of any other Person other than as could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each Assignor represents and warrants that, except as set forth on Annex G, it is the true and lawful owner of or otherwise has the right to use all U.S. trademark registrations and applications and Domain Name registrations listed in Annex G hereto and that said registrations are valid, subsisting, have not been canceled and that such Assignor is not aware of any material third-party claim that any of said registrations is invalid or unenforceable, and is not aware that there is any reason that any of said registrations is invalid or unenforceable, and is not aware that there is any reason that any of said applications will not mature into registrations. Each Assignor hereby grants to the Collateral Agent an absolute power of attorney to sign, upon the occurrence and during the continuance of an Event of Default, any document which may be required by the United States Patent and Trademark Office or similar registrar in order to effect an absolute assignment of all right, title and interest in each Mark and/or Domain Name, and record the same.

 

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4.2 Licenses and Assignments . Except as otherwise permitted by the Secured Debt Agreements, each Assignor hereby agrees not to divest itself of any right under any Mark or Domain Name that is material to the business of such Assignor absent prior written approval of the Collateral Agent.

 

4.3 Infringements . Each Assignor agrees, promptly upon learning thereof, to notify the Collateral Agent in writing of the name and address of, and to furnish such pertinent information that may be available with respect to, any party who such Assignor believes is, or may be, infringing or diluting or otherwise violating any of such Assignor’s rights in and to any Mark or Domain Name in any manner that could reasonably be expected to have a Material Adverse Effect, or with respect to any party claiming that such Assignor’s use of any Mark or Domain Name material to such Assignor’s business violates in any material respect any property right of that party. Each Assignor further agrees to prosecute in accordance with reasonable business practices any Person infringing any Mark or Domain Name in any manner that could reasonably be expected to have a Material Adverse Effect.

 

4.4 Preservation of Marks and Domain Names . Each Assignor agrees to use its Marks and Domain Names which are material to such Assignor’s business in interstate commerce during the time in which this Agreement is in effect and to take all such other actions as are reasonably necessary to preserve such Marks as trademarks or service marks under the laws of the United States; provided that no Assignor shall be obligated to preserve any Mark or Domain Name to the extent the Assignor determines, in its reasonable business judgment, that the preservation of such Mark or Domain Name is no longer useful in the conduct of its business.

 

4.5 Maintenance of Registration . Each Assignor shall, at its own expense, diligently process all documents reasonably required to maintain all Mark and/or Domain Name registrations, including but not limited to affidavits of use and applications for renewals of registration in the United States Patent and Trademark Office for all of its material registered Marks, and shall pay all fees and disbursements in connection therewith and shall not abandon any such filing of affidavit of use or any such application of renewal prior to the exhaustion of all administrative and judicial remedies without prior written consent of the Collateral Agent (other than with respect to registrations and applications deemed by such Assignor in its reasonable business judgment to be no longer prudent to pursue or maintain).

 

4.6 Future Registered Marks and Domain Names . If any Mark registration is issued hereafter to any Assignor as a result of any application now or hereafter pending before the United States Patent and Trademark Office or any Domain Name is registered by Assignor, within 30 days of receipt of such certificate or similar indicia of ownership, such Assignor shall deliver to the Collateral Agent a copy of such registration certificate or similar indicia of ownership, and a grant of a security interest in such Mark and/or Domain Name, to the Collateral Agent and at the expense of such Assignor, confirming the grant of a security interest in such Mark and/or Domain Name to the Collateral Agent hereunder, the form of such security to be substantially in the form of Annex N hereto or in such other form as may be reasonably satisfactory to the Collateral Agent.

 

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4.7 Remedies . If an Event of Default shall occur and be continuing, the Collateral Agent may, by written notice to the relevant Assignor, take any or all of the following actions: (i) declare the entire right, title and interest of such Assignor in and to each of the Marks and Domain Names, together with all trademark rights and rights of protection to the same, vested in the Collateral Agent for the benefit of the Secured Creditors (excluding the Existing Senior Subordinated Secured Notes Creditor, in the case of Marks and Domain Names and rights therein owned or held by any Assignor which constitute Excluded Existing Senior Subordinated Secured Notes Collateral), in which event such rights, title and interest shall immediately vest, in the Collateral Agent for the benefit of the relevant Secured Creditors, and the Collateral Agent shall be entitled to exercise the power of attorney referred to in Section 4.1 hereof to execute, cause to be acknowledged and notarized and record said absolute assignment with the applicable agency or registrar; (ii) take and use or sell the Marks or Domain Names and the goodwill of such Assignor’s business symbolized by the Marks or Domain Names and the right to carry on the business and use the assets of such Assignor in connection with which the Marks or Domain Names have been used; and (iii) direct such Assignor to refrain, in which event such Assignor shall refrain, from using the Marks or Domain Names in any manner whatsoever, directly or indirectly, and such Assignor shall execute such further documents that the Collateral Agent may reasonably request to further confirm this and to transfer ownership of the Marks or Domain Names and registrations and any pending trademark applications in the United States Patent and Trademark Office or applicable Domain Name registrar to the Collateral Agent.

 

ARTICLE V

 

SPECIAL PROVISIONS CONCERNING

PATENTS, COPYRIGHTS AND TRADE SECRETS

 

5.1 Additional Representations and Warranties . Each Assignor represents and warrants that it is the true and lawful owner of all rights in (i) all Trade Secret Rights, (ii) the Patents listed in Annex H hereto for such Assignor and that said Patents include all the United States patents and applications for United States patents that such Assignor owns as of the date hereof and (iii) the Copyrights listed in Annex I hereto for such Assignor and that said Copyrights include all the United States copyrights registered with the United States Copyright Office and applications to United States copyrights that such Assignor owns as of the date hereof. Each Assignor further warrants that it has no knowledge of any material third party claim that any aspect of such Assignor’s present or contemplated business operations infringes or will infringe any patent of any other Person or such Assignor has misappropriated any trade secret or proprietary information which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. Each Assignor hereby grants to the Collateral Agent an absolute power of attorney to sign, upon the occurrence and during the continuance of any Event of Default, any document which may be required by the United States Patent and Trademark Office or the United States Copyright Office in order to effect an absolute assignment of all right, title and interest in each Patent or Copyright, and to record the same.

 

5.2 Licenses and Assignments . Except as otherwise permitted by the Secured Debt Agreements, each Assignor hereby agrees not to divest itself of any right under any Patent or Copyright that is material to the business of such Assignor absent prior written approval of the Collateral Agent (such written approval not to be unreasonably withheld).

 

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5.3 Infringements . Each Assignor agrees, promptly upon learning thereof, to furnish the Collateral Agent in writing with all pertinent information available to such Assignor with respect to any infringement, contributing infringement or active inducement to infringe or other violation of such Assignor’s rights in any Patent or Copyright or to any claim that the practice of any Patent or use of any Copyright violates any property right of a third party, or with respect to any misappropriation of any Trade Secret Right or any claim that practice of any Trade Secret Right violates any property right of a third party, in each case, in any manner which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. Each Assignor further agrees, absent direction of the Collateral Agent to the contrary, to diligently prosecute, in accordance with its reasonable business judgment, any Person infringing any Patent or Copyright or any Person misappropriating any Trade Secret Right, in each case to the extent that such infringement or misappropriation, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

 

5.4 Maintenance of Patents or Copyrights . At its own expense, each Assignor shall make timely payment of all post-issuance fees required to maintain in force its rights under each Patent or Copyright, absent prior written consent of the Collateral Agent (other than any such Patents or Copyrights which are no longer used or are deemed by such Assignor in its reasonable business judgment to no longer be useful in its business or operations).

 

5.5 Prosecution of Patent or Copyright Applications . At its own expense, each Assignor shall prosecute, in accordance with reasonable business practices, all material applications for (i) United States Patents listed in Annex H hereto and (ii) Copyrights listed on Annex I hereto, in each case for such Assignor and shall not abandon any such application prior to exhaustion of all administrative and judicial remedies (other than applications that are deemed by such Assignor in its reasonable business judgment to no longer be necessary in the conduct of the Assignor’s business), absent written consent of the Collateral Agent.

 

5.6 Other Patents and Copyrights . Within 30 days of the acquisition or issuance of a United States Patent, registration of a Copyright, or acquisition of a registered Copyright, or of filing of an application for a United States Patent or Copyright, the relevant Assignor shall deliver to the Collateral Agent a copy of said Copyright or Patent, or certificate or registration of, or application therefor, as the case may be, with a grant of a security interest as to such Patent or Copyright, as the case may be, to the Collateral Agent and at the expense of such Assignor, confirming the grant of a security interest, the form of such grant of a security interest to be substantially in the form of Annex O or P hereto, as appropriate, or in such other form as may be reasonably satisfactory to the Collateral Agent.

 

5.7 Remedies . If an Event of Default shall occur and be continuing, the Collateral Agent may, by written notice to the relevant Assignor, take any or all of the following actions: (i) declare the entire right, title, and interest of such Assignor in each of the Patents and Copyrights vested in the Collateral Agent for the benefit of the Secured Creditors (excluding the Existing Senior Subordinated Secured Notes Creditor, in the case of Patents and Copyrights and rights therein owned or held by any Assignor which constitute Excluded Existing Senior Subordinated Secured Notes Collateral), in which event such right, title, and interest shall immediately vest in the Collateral Agent for the benefit of the relevant Secured Creditors, in which case the Collateral Agent shall be entitled to exercise the power of attorney referred to in

 

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Section 5.1 hereof to execute, cause to be acknowledged and notarized and to record said absolute assignment with the applicable agency; (ii) take and practice or sell the Patents and Copyrights; and (iii) direct such Assignor to refrain, in which event such Assignor shall refrain, from practicing the Patents and using the Copyrights directly or indirectly, and such Assignor shall execute such further documents as the Collateral Agent may reasonably request further to confirm this and to transfer ownership of the Patents and Copyrights to the Collateral Agent for the benefit of the Secured Creditors (excluding the Existing Senior Subordinated Secured Notes Creditor, in the case of Patents and Copyrights and rights therein owned or held by any Assignor which constitute Excluded Existing Senior Subordinated Secured Notes Collateral).

 

ARTICLE VI

 

SPECIAL PROVISIONS CONCERNING TRACTOR TRAILERS

 

6.1 Additional Representations and Warranties . Each Assignor represents and warrants that, as of the Initial Borrowing Date, it is the true, lawful, sole and exclusive owner of or otherwise has the right to use the Tractor Trailers of such Assignor listed in Annex J hereto and that said listed Tractor Trailers constitute all the Tractor Trailers that such Assignor presently owns or uses in connection with its business. Each Assignor represents and warrants that upon the recordation of a security interest in favor of the Collateral Agent on the certificate of title for each Tractor Trailer listed on Annex J (other than Excluded Unperfected Tractor Trailer Collateral) and the filing of such certificates of title in the state or province specified for such Tractor Trailer on Annex J (which recordations have been made if this representation and warranty is being made no later than the 90th day following the Initial Borrowing Date or such later date as the Collateral Agent may decide in its sole discretion), all filings, registrations and recordings necessary or appropriate to perfect the security interest granted to the Collateral Agent for the benefit of the Secured Creditors (excluding the Existing Senior Subordinated Secured Notes Creditor, in the case of Tractor Trailers and rights therein owned or held by any Assignor which constitute Excluded Existing Senior Subordinated Secured Notes Collateral) in the Tractor Trailers listed on Annex J and covered by this Agreement (other than the Excluded Unperfected Tractor Trailer Collateral) will have been accomplished, and such security interests shall be perfected under applicable law. Each Assignor agrees to execute all documentation reasonably required to effect such recordations and to cause the filing of the relevant certificates of title with the appropriate state or provincial governmental agency. Each Assignor hereby grants to the Collateral Agent an absolute power of attorney to sign, upon the occurrence and during the continuance of an Event of Default, any document which may be required by the relevant governmental agency of any state or province in order to effect an absolute assignment of all right, title and interest in each Tractor Trailer, and register the same.

 

6.2 Maintenance of Registration . Each Assignor shall, at its own expense and in accordance with reasonable business practices, process all documents required by the relevant state and provincial governmental agencies to maintain vehicle registrations, for all of its owned Tractor Trailers.

 

6.3 Subsequently Acquired Tractor Trailers . Within 90 days following the acquisition of any Tractor Trailer (or such later date as the Collateral Agent shall determine in its sole discretion), the relevant Assignor shall, at its own expense, cause a security interest in favor of

 

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the Collateral Agent to be recorded on the certificate of title for such Tractor Trailer and cause each such certificate of title to be filed in the relevant state or province in which such Tractor Trailer is registered (in each case, except to the extent such Tractor Trailer constitutes Excluded Unperfected Tractor Trailer Collateral). Each Assignor agrees to execute all documentation reasonably required to effect such recordations and to cause the filing of relevant certificates of title with the appropriate state or provincial governmental agency.

 

6.4 Remedies . If an Event of Default shall occur and be continuing, the Collateral Agent may, by written notice to the relevant Assignor, take any or all of the following actions: (i) declare the entire right, title and interest of such Assignor in and to each of the Tractor Trailers, vested in the Collateral Agent for the benefit of the Secured Creditors (excluding the Existing Senior Subordinated Secured Notes Creditor, in the case of Tractor Trailers and rights therein owned or held by any Assignor which constitute Excluded Existing Senior Subordinated Secured Notes Collateral), in which event such rights, title and interest shall immediately vest, in the Collateral Agent for the benefit of the Secured Creditors (excluding the Existing Senior Subordinated Secured Notes Creditor, in the case of Tractor Trailers and rights therein owned or held by any Assignor which constitute Excluded Existing Senior Subordinated Secured Notes Collateral), and the Collateral Agent shall be entitled to exercise the power of attorney referred to in Section 6.1 to execute, cause to be acknowledged and notarized and to record said absolute assignment with the applicable agency; (ii) subject to Section 8.2, take and use or sell the Tractor Trailers; and (iii) request such Assignor to (whereupon such Assignor shall) deliver all of the certificates of title for each Tractor Trailer owned by such Assignor to the Collateral Agent.

 

6.5 Further Assurances . Each Assignor will, at its own expense, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such lists, descriptions and designations of its owned Tractor Trailers, documents of title, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments and, other than in respect of any Tractor Trailer which constitutes Excluded Unperfected Collateral, take such further steps relating to the Tractor Trailers constituting Collateral and other property or rights covered by the security interest hereby granted, which the Collateral Agent deems reasonably appropriate or advisable to perfect, preserve or protect its security interest in such Tractor Trailers constituting Collateral.

 

ARTICLE VII

 

PROVISIONS CONCERNING ALL COLLATERAL

 

7.1 Protection of Collateral Agent’s Security . Each Assignor will do nothing to impair the rights of the Collateral Agent in the Collateral. Each Assignor will at all times keep its Inventory and Equipment insured in favor of the Collateral Agent, at such Assignor’s own expense to the extent and in the manner provided in the Credit Agreement; all policies or certificates with respect to such insurance (and any other insurance maintained by such Assignor) (i) shall be endorsed to the Collateral Agent’s reasonable satisfaction for the benefit of the Collateral Agent (including, without limitation, by naming the Collateral Agent as loss payee and naming each of the the Collateral Agent and the other Secured Creditors as additional

 

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insureds), (ii) shall state that such insurance policies shall not be cancelled or revised without 30 days’ prior written notice thereof by the insurer to the Collateral Agent, and (iii) certified copies of such policies or certificates shall be deposited with the Collateral Agent to the extent, at the times and in the manner specified in the Credit Agreement. If any Assignor shall fail to insure its Inventory and Equipment in accordance with the preceding sentence, or if any Assignor shall fail to so endorse and deposit all policies or certificates with respect thereto, the Collateral Agent shall have the right (but shall be under no obligation) to procure such insurance and such Assignor agrees to promptly reimburse the Collateral Agent for all costs and expenses of procuring such insurance. Except as otherwise permitted to be retained or expended by the relevant Assignor pursuant to the Credit Agreement (or, after the Credit Document Obligations Termination Date, any other Secured Debt Agreement), the Collateral Agent shall, upon receipt of any proceeds from insurance maintained by any Assignor, apply such proceeds in accordance with the Credit Agreement (or, after the Credit Document Obligations Termination Date, in accordance with the instructions of the Required Secured Creditors), or after the Obligations have been accelerated or otherwise become due and payable, with Section 8.4. Each Assignor assumes all liability and responsibility in connection with the Collateral acquired by it and the liability of such Assignor to pay the Obligations shall in no way be affected or diminished by reason of the fact that such Collateral may be lost, destroyed, stolen, damaged or for any reason whatsoever unavailable to such Assignor.

 

7.2 Warehouse Receipts Non-Negotiable . To the extent practicable, each Assignor agrees that if any warehouse receipt or receipt in the nature of a warehouse receipt is issued with respect to any of its Inventory, such Assignor shall request that such warehouse receipt or receipt in the nature thereof shall not be “negotiable” (as such term is used in Section 7-104 of the UCC as in effect in any relevant jurisdiction or under other relevant law).

 

7.3 Additional Information . Each Assignor will, at its own expense, from time to time upon the reasonable request of the Collateral Agent, promptly (and in any event within 15 days (or, if a Default or an Event of Default has occurred and is continuing, within 10 days) after its receipt of the respective request) furnish to the Collateral Agent such information with respect to the Collateral (including the identity of the Collateral or such components thereof as may have been requested by the Collateral Agent, the value and location of such Collateral, etc.) as may be requested by the Collateral Agent. Without limiting the forgoing, each Assignor agrees that it shall promptly (and in any event within 15 days (or, if a Default or an Event of Default has occurred and is continuing, within 10 days) after its receipt of the respective request) furnish to the Collateral Agent such updated Annexes hereto as may from time to time be reasonably requested by the Collateral Agent.

 

7.4 Further Actions . Each Assignor will, at its own expense and upon the reasonable request of the Collateral Agent, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such lists, descriptions and designations of its Collateral, warehouse receipts, receipts in the nature of warehouse receipts, bills of lading, documents of title, vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, certificates, reports and other assurances or instruments and take such further steps relating to the Collateral and other property or rights covered by the security interest hereby granted, which the Collateral Agent deems reasonably appropriate or advisable to perfect, preserve or protect its security interest in the Collateral.

 

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7.5 Financing Statements . Each Assignor agrees to execute and deliver to the Collateral Agent such financing statements, in form reasonably acceptable to the Collateral Agent, as the Collateral Agent may from time to time reasonably request or as are reasonably necessary or desirable in the opinion of the Collateral Agent to establish and maintain a valid, enforceable, and except in respect of Collateral subject to Permitted Liens set forth on Schedule IX to the Credit Agreement, first priority perfected security interest in the Collateral as provided herein and the other rights and security contemplated hereby (subject only to Permitted Liens). Each Assignor will pay any applicable filing fees, recordation taxes and related expenses relating to its Collateral. Each Assignor hereby authorizes the Collateral Agent to file any such financing statements without the signature of such Assignor where permitted by law (and such authorization includes describing the Collateral as “all assets” of such Assignor).

 

ARTICLE VIII

 

REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT

 

8.1 Remedies; Obtaining the Collateral Upon Default . Each Assignor agrees that, if any Event of Default shall have occurred and be continuing, then and in every such case, the Collateral Agent, in addition to any rights now or hereafter existing under applicable law and under the other provisions of this Agreement, shall have all rights as a secured creditor under any UCC, and such additional rights and remedies to which a secured creditor is entitled under the laws in effect in all relevant jurisdictions and may:

 

(i) personally, or by agents or attorneys, immediately take possession of the Collateral or any part thereof, from such Assignor or any other Person who then has possession of any part thereof with or without notice or process of law, and for that purpose may enter upon such Assignor’s premises where any of the Collateral is located and remove the same and use in connection with such removal any and all services, supplies, aids and other facilities of such Assignor;

 

(ii) instruct the obligor or obligors on any agreement, instrument or other obligation (including, without limitation, the Accounts and the Contracts) constituting the Collateral to make any payment required by the terms of such agreement, instrument or other obligation directly to the Collateral Agent and may exercise any and all remedies of such Assignor in respect of such Collateral;

 

(iii) instruct all banks which have entered into a control agreement with the Collateral Agent to transfer all monies, securities and instruments held by such depository bank to the Cash Collateral Account and withdraw all monies, securities and instruments in the Cash Collateral Account for application to the Obligations in accordance with Section 8.4;

 

(iv) sell, assign or otherwise liquidate any or all of the Collateral or any part thereof in accordance with Section 8.2 hereof, or direct such Assignor to sell, assign or otherwise liquidate any or all of the Collateral or any part thereof, and, in each case, take possession of the proceeds of any such sale or liquidation;

 

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(v) take possession of the Collateral or any part thereof, by directing such Assignor in writing to deliver the same to the Collateral Agent at any reasonable place or places designated by the Collateral Agent, in which event such Assignor shall at its own expense:

 

(x) forthwith cause the same to be moved to the place or places so designated by the Collateral Agent and there delivered to the Collateral Agent;

 

(y) store and keep any Collateral so delivered to the Collateral Agent at such place or places pending further action by the Collateral Agent as provided in Section 8.2 hereof; and

 

(z) while the Collateral shall be so stored and kept, provide such guards, other security and maintenance services as shall be reasonably necessary to protect the same and to preserve and maintain it in good condition;

 

(vi) license or sublicense, whether on an exclusive or nonexclusive basis, any Marks, Domain Names, Patents or Copyrights included in the Collateral for such term and on such conditions and in such manner as the Collateral Agent shall in its sole judgment determine;

 

(vii) apply any monies constituting Collateral or proceeds thereof in accordance with the provisions of Section 8.4; and

 

(viii) take any other action as specified in clauses (1) through (5), inclusive, of Section 9-607 of the UCC;

 

it being understood that each Assignor’s obligation so to deliver the Collateral is of the essence of this Agreement and that, accordingly, upon application to a court of equity having jurisdiction, the Collateral Agent shall be entitled to a decree requiring specific performance by such Assignor of said obligation. By accepting the benefits of this Agreement and each other Security Document, the Secured Creditors expressly acknowledge and agree that this Agreement and each other Security Document may be enforced only by the action of the Collateral Agent acting upon the instructions of the Required Secured Creditors and that no other Secured Creditor shall have any right individually to seek to enforce or to enforce this Agreement or any other Security Document or to realize upon the security to be granted hereby or thereby, it being understood and agreed that such rights and remedies shall be exercised exclusively by the Collateral Agent for the benefit of the Secured Creditors upon the terms of this Agreement and the other Security Documents.

 

8.2 Remedies; Disposition of the Collateral . If any Event of Default shall have occurred and be continuing, then any Collateral repossessed by the Collateral Agent under or pursuant to Section 8.1 hereof and any other Collateral whether or not so repossessed by the Collateral Agent, may be sold, assigned, leased or otherwise disposed of under one or more contracts or as an entirety, and without the necessity of gathering at the place of sale the property to be sold, and in general in such manner, at such time or times, at such place or places and on

 

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such terms as the Collateral Agent may, in compliance with any mandatory requirements of applicable law, determine to be commercially reasonable. Any of the Collateral may be sold, leased or otherwise disposed of, in the condition in which the same existed when taken by the Collateral Agent or after any overhaul or repair at the expense of the relevant Assignor which the Collateral Agent shall determine to be commercially reasonable. Any such sale, lease or other disposition which shall be a private sale or other private proceedings permitted by such requirements shall be made upon not less than 10 days’ written notice to the relevant Assignor specifying the time at which such disposition is to be made and the intended sale price or other consideration therefor, and shall be subject, for the 10 days after the giving of such notice, to the right of the relevant Assignor or any nominee of such Assignor to acquire the Collateral involved at a price or for such other consideration at least equal to the intended sale price or other consideration so specified. Any such disposition which shall be a public sale permitted by such requirements shall be made upon not less than 10 days’ written notice to the relevant Assignor specifying the time and place of such sale and, in the absence of applicable requirements of law, shall be by public auction (which may, at the Collateral Agent’s option, be subject to reserve), after publication of notice of such auction not less than 10 days prior thereto in two newspapers in general circulation to be selected by the Collateral Agent. To the extent permitted by any such requirement of law, the Collateral Agent may bid for and become the purchaser (and may pay all or any portion of the purchase price by crediting Obligations against the purchase price) of the Collateral or any item thereof, offered for disposition in accordance with this Section without accountability to the relevant Assignor. If, under applicable law, the Collateral Agent shall be permitted to make disposition of the Collateral within a period of time which does not permit the giving of notice to the relevant Assignor as hereinabove specified, the Collateral Agent need give such Assignor only such notice of disposition as shall be required by such applicable law. Each Assignor agrees to do or cause to be done all such other acts and things as may be reasonably necessary to make such disposition or dispositions of all or any portion of the Collateral valid and binding and in compliance with any and all applicable laws, regulations, orders, writs, injunctions, decrees or awards of any and all courts, arbitrators or governmental instrumentalities, domestic or foreign, having jurisdiction over any such sale or sales, all at such Assignor’s expense.

 

8.3 Waiver of Claims . Except as otherwise provided in this Agreement, EACH ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT’S TAKING POSSESSION OR THE COLLATERAL AGENT’S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES, and each Assignor hereby further waives, to the extent permitted by law:

 

(i) all damages occasioned by such taking of possession or any such disposition except any damages which are the direct result of the Collateral Agent’s gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final and non-appealable decision);

 

(ii) all other requirements as to the time, place and terms of sale or other requirements with respect to the enforcement of the Collateral Agent’s rights hereunder; and

 

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(iii) all rights of redemption, appraisement, valuation, stay, extension or moratorium now or hereafter in force under any applicable law in order to prevent or delay the enforcement of this Agreement or the absolute sale of the Collateral or any portion thereof, and each Assignor, for itself and all who may claim under it, insofar as it or they now or hereafter lawfully may, hereby waives the benefit of all such laws.

 

Upon the occurrence and during the continuation of an Event of Default, any sale of, or the grant of options to purchase, or any other realization upon, any Collateral shall operate to divest all right, title, interest, claim and demand, either at law or in equity, of the relevant Assignor therein and thereto, and shall be a perpetual bar both at law and in equity against such Assignor and against any and all Persons claiming or attempting to claim the Collateral so sold, optioned or realized upon, or any part thereof, from, through and under such Assignor.

 

8.4 Application of Proceeds . (a) All moneys collected by the Collateral Agent upon any sale or other disposition of any Collateral (other than Excluded Existing Senior Subordinated Secured Notes Collateral) pursuant to the enforcement of this Agreement or the exercise of any of the remedial provisions hereof (or, if any other Security Document requires proceeds of “collateral” thereunder (other than Excluded Collateral) to be applied in accordance with the terms of this Agreement, by such other “collateral agent” thereunder pursuant to the enforcement of such Security Document or the exercise of the remedial provisions thereof), together with all other moneys received by the Collateral Agent hereunder (or such other “collateral agent” under such other Security Documents) as a result of any such enforcement or the exercise of any such remedial provisions (other than with respect to Excluded Collateral) or as a result of any distribution of any Collateral (or “collateral” under any other Security Document, as the case may be) (in each case, other than Excluded Collateral) upon the bankruptcy, arrangement, receivership, assignment for the benefit of creditors or any other action or proceeding involving the readjustment of the obligations and indebtedness of any Credit Party, or the application of any Collateral (or “collateral” under any other Security Document, as the case may be) (in each case, other than Excluded Collateral) to the payment thereof or any distribution of Collateral (or “collateral” under any other Security Document, as the case may be) (in each case, other than Excluded Collateral) upon the liquidation or dissolution of any Credit Party, or the winding up of the assets or business of any Credit Party or under any Mortgage Policies (to the extent same does not constitute Excluded Collateral), shall be applied as follows:

 

(i) first , to the payment of all Obligations owing the Collateral Agent of the type described in clauses (iv), (v) and (vi) of the definition of “Obligations”;

 

(ii) second , to the extent proceeds remain after the application pursuant to the preceding clause (i), to the payment of all amounts owing to any Agent of the type described in clause (vi) and (vii) of the definition of “Obligations”;

 

(iii) third , to the extent proceeds remain after the application pursuant to the preceding clauses (i) and (ii), an amount equal to the outstanding Primary Obligations shall be paid to the Secured Creditors as provided in Section 8.4(f), with each Secured Creditor receiving an amount equal to its outstanding Primary Obligations or, if the proceeds are insufficient to pay in full all such Primary Obligations, its Pro Rata Share of the amount remaining to be distributed;

 

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(iv) fourth , to the extent proceeds remain after the application pursuant to the preceding clauses (i) through (iii), an amount equal to the outstanding Secondary Obligations shall be paid to the Secured Creditors as provided in Section 8.4(f), with each Secured Creditor receiving an amount equal to its outstanding Secondary Obligations or, if the proceeds are insufficient to pay in full all such Secondary Obligations, its Pro Rata Share of the amount remaining to be distributed;

 

(v) fifth , to the extent proceeds remain after the applications pursuant to preceding clauses (i) through (iv), an amount equal to the outstanding Tertiary Obligations (as hereinafter defined) shall be paid to the Existing Senior Subordinated Secured Notes Creditor as provided in Section 8.4(f), with the Existing Senior Subordinated Secured Notes Creditor to receive an amount equal to the outstanding Tertiary Obligations or, if the proceeds are insufficient to pay in full all such Tertiary Obligations, the amount remaining to be distributed; and

 

(vi) sixth , to the extent proceeds remain after the applications pursuant to preceding clauses (i) through (v), inclusive, and following the termination of this Agreement pursuant to Section 11.8(a) hereof, to the relevant Assignor or to whomever may be lawfully entitled to receive such surplus.

 

(b) All moneys collected by the Collateral Agent upon any sale or other disposition of any Excluded Existing Senior Subordinated Secured Notes Collateral pursuant to the enforcement of this Agreement or the exercise of any of the remedial provisions hereof (or, if any other Security Document requires proceeds of Excluded Collateral thereunder to be applied in accordance with the terms of this Agreement, by such other “collateral agent” thereunder pursuant to the enforcement of such Security Document or the exercise of the remedial provisions thereof), together with all other moneys received by the Collateral Agent hereunder (or such other “collateral agent” under such other Security Documents) with respect to Excluded Existing Senior Subordinated Secured Notes Collateral (or Excluded Collateral, as applicable) as a result of any such enforcement or the exercise of any such remedial provisions or as a result of any distribution of any Excluded Existing Senior Subordinated Secured Notes Collateral (or Excluded Collateral, as applicable) upon the bankruptcy, arrangement, receivership, assignment for the benefit of creditors or any other action or proceeding involving the readjustment of the obligations and indebtedness of any Credit Party, or the application of any Excluded Existing Senior Subordinated Secured Notes Collateral (or Excluded Collateral, as applicable) to the payment thereof or any distribution of the Excluded Existing Senior Subordinated Secured Notes Collateral (or Excluded Collateral, as applicable) upon the liquidation or dissolution of any Credit Party, or the winding up of the assets or business of any Credit Party or under any Mortgage Policy covering Excluded Existing Senior Subordinated Secured Notes Collateral (or Excluded Collateral, as applicable), shall be applied as follows:

 

(i) first , to the payment of all Obligations owing the Collateral Agent of the type described in clauses (iv), (v) and (vi) of the definition of “Obligations”;

 

(ii) second , to the extent proceeds remain after the application pursuant to the preceding clause (i), to the payment of all amounts owing to any Agent of the type described in clause (vi) and (vii) of the definition of “Obligations”;

 

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(iii) third , to the extent proceeds remain after the application pursuant to the preceding clauses (i) and (ii), an amount equal to the outstanding Primary Obligations shall be paid to the Secured Creditors as provided in Section 8.4(f), with each Secured Creditor receiving an amount equal to its outstanding Primary Obligations or, if the proceeds are insufficient to pay in full all such Primary Obligations, its Pro Rata Share of the amount remaining to be distributed;

 

(iv) fourth , to the extent proceeds remain after the application pursuant to the preceding clauses (i) through (iii), an amount equal to the outstanding Secondary Obligations shall be paid to the Secured Creditors as provided in Section 8.4(f), with each Secured Creditor receiving an amount equal to its outstanding Secondary Obligations or, if the proceeds are insufficient to pay in full all such Secondary Obligations, its Pro Rata Share of the amount remaining to be distributed; and

 

(v) fifth , to the extent proceeds remain after the applications pursuant to preceding clauses (i) through (iv), inclusive, and following the termination of this Agreement pursuant to Section 11.8(a) hereof, to the relevant Assignor or to whomever may be lawfully entitled to receive such surplus.

 

(c) For purposes of this Agreement (i) “Pro Rata Share” shall mean, when calculating a Secured Creditor’s portion of any distribution or amount, that amount (expressed as a percentage) equal to a fraction the numerator of which is the then unpaid amount of such Secured Creditor’s Primary Obligations, Secondary Obligations or Tertiary Obligations, as the case may be, and the denominator of which is the then outstanding amount of all Primary Obligations, Secondary Obligations or Tertiary Obligations, as the case may be, (ii) “Primary Obligations” shall mean (x) all principal of, and interest on, all Loans, all Unpaid Drawings theretofore made (together with all interest accrued thereon), the aggregate Stated Amounts of all Letters of Credit issued under the Credit Agreement, and all Fees and (y) in the case of the Other Obligations, all amounts due under any Interest Rate Protection Agreement or Other Hedging Agreement (other than indemnities, fees (including, without limitation, attorneys’ fees) and similar obligations and liabilities), (iii) “Secondary Obligations” shall mean all Obligations other than Primary Obligations and Tertiary Obligations and (iv) “Tertiary Obligations” shall mean all Existing Senior Subordinated Secured Notes Obligations. Furthermore, and notwithstanding anything to the contrary contained elsewhere in this Agreement, to the extent that the relevant Secured Creditors amend or modify the Credit Documents, the Existing Senior Subordinated Secured Notes Documents or the other Secured Debt Agreements in a manner which has the effect of increasing the outstanding amount of the Primary Obligations,