Exhibit 10.1
SECURITY, PLEDGE AND GUARANTY AGREEMENT
SECURITY, PLEDGE AND
GUARANTY AGREEMENT
(this "Agreement"),
dated as of
January 19, 2007 by and among PHS Group Inc., a Pennsylvania corporation (the
"Borrower"), and Synergy Brands Inc., (the "Parent Company"), and
SYBR.Com Inc.,
a New Jersey
corporation, Gran
Reserve Corporation, a Florida corporation,
Dealbynet.com Inc., a New York corporation, Quality Food Brands, Inc., a
Nevada
corporation, NYCE
North America Inc., a New Jersey corporation, Net Cigar.Com
Inc., a Florida corporation, (each of the foregoing a "Subsidiary" and
collectively referred
to herein as the "Subsidiaries") and Lloyd I. Miller, III
and Milfam
I L.P. (collectively referred to herein as the "Purchasers").
Together the Borrower,
the Parent Company and the Subsidiaries are referred to
herein as the
"Debtors". Certain
defined terms are set forth in
Article 10
hereof.
Recitals
WHEREAS, the Borrower, the Parent Company and the Purchasers are
parties to
a Securities Purchase
Agreement dated as of the date hereof (the
"Securities
Purchase Agreement"); and
WHEREAS, as a
condition to the
Purchasers' obligation
to enter into the
Securities Purchase
Agreement and to
extend credit to the Borrower thereunder
that the Debtors
execute and deliver this Security, Pledge and Guaranty
Agreement as security for the payment and performance of all obligations of
the
Borrower and
Parent Company to the Purchasers and to guarantee all of the
obligations of the
Borrower and Parent
Company under the
Securities
Purchase
Agreement:
NOW,
THEREFORE,
in consideration of
the premises contained herein and for
other good and valuable consideration, the receipt and sufficiency of
which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1.
GRANT OF SECURITY
Section 1.1 Grant of Security. The Debtors hereby grant to the
Purchasers a
lien and continuing
security interest
("Security
Interest") in and to,
and a
right of set-off against, all of the following personal property
and fixtures of
the Debtors,
whether now owned by or owing to, or
hereafter acquired by or
arising in favor of, such Debtor (including under any trade names, styles or
derivations thereof), and whether owned or consigned by or to, or
leased from or
to, such Debtor, and regardless of where located (all of which
being hereinafter
collectively referred to as the "Collateral"):
(a)
all Accounts;
(b)
all Chattel Paper;
(c)
all documents;
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(d)
all General Intangibles (including Marks, Copyrights, Patents, payment
intangibles, Proprietary Information and Trade Secrets);
(e)
all Goods (including Inventory, Equipment and Fixtures);
(f)
all Instruments;
(g)
all Investment Property, including (i) all shares of the
capital stock
or membership interests of each subsidiary owned or held by each
Debtor, whether
now owned or hereafter formed or acquired (those shares and
membership interests
being listed and described on Schedule A attached hereto), and all
substitutions
and additions
to such shares
(herein, the "Pledged Securities"), (ii) all
dividends,
distributions, and
sums distributable
or payable from, upon
or in
respect of the Pledged
Securities, and (iii)
all other rights and
privileges
incident to the
Pledged Securities
(all of the
foregoing being hereinafter
referred to collectively as the "Stock Collateral");
(h)
all Deposit Accounts
of such Debtor,
including all blocked
accounts,
concentration
accounts, disbursement
accounts, and all other bank accounts and
all deposits therein;
(i)
all money, cash or cash equivalents of such Debtor;
(j)
all Supporting Obligations and Letter-of-Credit Rights of such
Debtor;
(k)
the commercial tort claims identified on Schedule B hereto; and
(l)
to the extent not
otherwise included, all Proceeds, tort claims,
insurance claims and
other rights to
payments not
otherwise included in the
foregoing and products of the foregoing and all accessions to,
substitutions and
replacements for, and
rents and profits of, each of the foregoing and all other
tangible and intangible personal property whatsoever of any Debtor
including all
cash, products,
offspring, rents, revenues, issues, profits, royalties, income,
benefits, accessions,
additions,
substitutions and
replacements of and to any
and all of the
foregoing, including
all Proceeds of and to any of the property
of any of the Debtors described in the preceding paragraphs of this Section 1.1
(including, without limitation, any loss proceeds or other Proceeds
of insurance
thereon (whether or not any Purchaser is loss payee thereof), and
any indemnity,
warranty or guarantee,
payable by any reason
of loss or damage to or otherwise
with respect to any of
the foregoing,
and all causes of action, claims and
warranties now or
hereafter held by any Debtor in respect of
any of the items
listed above).
Notwithstanding the
foregoing,
a security
interest in the assets
of the
Borrower is not granted under this Agreement if and to the extent that such
a
grant of a security interest is prohibited by the terms of that
certain Loan and
Security Agreement,
entered into as of November 11, 2002 (as amended, the "IIG
Loan and Security
Agreement") by and
between the Borrower and IIG Capital LLC;
provided, however,
that from and after the date upon which all obligations owed
by the Borrower to IIG Capital LLC under the IIG Loan and Security
Agreement are
paid in full the
exclusion of a grant under this Agreement of a security
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interest in the
assets of the Borrower, that is called for above, shall
immediately cease to
have any force and effect and the assets of Borrower shall
immediately be subject to the grant of a security interest under
this Agreement,
without any action being required on the part of any party
to this Agreement or
any other person or entity. Additionally, a security interest
in 288,000 shares
(the "Interline
Shares") of common
stock of Interline
Travel & Tour,
Inc., a
Texas corporation, owned by SYBR.com Inc. is not granted under this
Agreement if
and to the extent that such a grant of a security interest is prohibited by the
terms of certain outstanding promissory notes (the "Interline
Notes") issued by
the Borrower to Lawrence K. Fleischman, Edmond O'Donnell, and DBMK Partners,
Ltd. (collectively,
the "Interline Holders"); provided, however, that from
and
after the date upon which all obligations owed by the Borrower to the
Interline
Holders under the
Interline Notes are paid in full the
exclusion of a grant
under this Agreement
of a security interest
in the Interline
Shares, that is
called for above,
shall immediately
cease to have any force and effect and the
Interline Shares
shall immediately be subject to the grant of a security
interest under this Agreement, without any action being required
on the part of
any party to this Agreement or any other person or entity.
Section 1.2 Security
for Obligations. This Agreement and the Security
Interest shall secure the payment and performance of the
Obligations.
ARTICLE 2.
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Each
Debtor represents,
warrants and
covenants,
which representations,
warranties and covenants shall survive execution and delivery of
this Agreement,
as follows:
Section 2.1 Necessary
Filings. All financing statements necessary or
appropriate to perfect
the security interest granted by each Debtor to the
Purchasers hereby in
respect of the
Collateral, which can
be perfected by the
filing of a financing
statement,
have been filed and the Security Interest
granted to the Purchasers pursuant to this Agreement in and
to such Collateral
constitutes a perfected Security Interest therein (to the extent
that the same
can be perfected by filing) prior to the rights of all other
persons or entities
therein (other than any such rights pursuant to the Permitted
Liens) and subject
to no other Liens
(other than Permitted Liens) and is entitled to all the
rights, priorities and
benefits afforded by the Uniform Commercial Code of the
State of New York to perfected security interests.
Section 2.2 No Liens.
Each Debtor is, and as to Collateral acquired by it
from time to time after the date hereof such Debtor will be, the owner of
all
Collateral pledged
by it hereunder free from any Lien, security interest,
encumbrance or other
right, title or interest of any person or
entity (other
than Permitted Liens),
and each Debtor shall defend the Collateral against all
claims and demands of all persons or entities at any time
claiming the same or
any interest therein
(other than in connection with Permitted Liens) adverse to
the Purchasers.
Section 2.3 Other
Financing Statements. To the best knowledge of each
Debtor, as of the date
hereof, there is no financing statement covering or
purporting to cover any interest of any kind in the Collateral (other than (i)
the financing
statements
filed in respect of Permitted Liens and (ii) the
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financing statements
identified
in Schedule C hereof for which termination
statements will be
filed prior to the date hereof or on the date of this
Agreement), and so
long as any
Obligations are
outstanding,
no Debtor will
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 Debtor or in connection with
Permitted Liens.
Section 2.4 Chief Executive Office; Records.
(a)
As of the date hereof,
the chief executive office of each Debtor is
located at the address indicated on Schedule D hereto for such
Debtor. No Debtor
will move its chief executive office except to such new location
as such Debtor
may establish
in accordance with the last sentence of this Section 2.4. A
complete set of books
of account and
records of each
Debtor relating to the
Accounts, Chattel Paper and Documents are, and will continue to be,
kept at such
chief executive
office, at one or more
of the other record locations set forth
on Schedule D hereto for such Debtor or at such new locations as
such Debtor may
establish in accordance with the last sentence of this Section
2.4.
(b)
All Accounts, Chattel
Paper and Documents of each Debtor are, and will
continue to be, maintained at, and controlled and directed
(including,
without
limitation, for
general accounting purposes) from, the office locations
described above or
such new location
established in
accordance with the
last
sentence of this Section 2.4. No Debtor shall establish new locations for such
offices until (a) it shall have given to the Purchasers not less than 30 days'
prior written notice
of its intention to do
so, clearly
describing
such new
location and providing
such other information
in connection
therewith as the
Purchasers may reasonably request and (b) with respect to such new
location, it
shall have taken all
action reasonably satisfactory to the Purchasers, to
maintain the security
interest of the Purchasers in the Collateral intended to
be granted hereby at all times fully perfected and in full force
and effect.
Section 2.5 Location of Inventory and Equipment. As of the date
hereof, all
Inventory and
Equipment held by each
Debtor is located at one of the locations
shown on Schedule E hereto. Each Debtor agrees that all
Inventory and Equipment
now held or
subsequently
acquired by it shall be kept at (or shall be in
transport to) any one of the locations shown on Schedule E hereto,
or such new
location as such Debtor may establish in accordance with the last sentence of
this Section 2.5. Each
Debtor may establish a
new location for
Inventory and
Equipment in a
jurisdiction in which
such Debtor currently
does business and
with respect to which the Purchasers have a first perfected
security interest in
such Inventory
and Equipment (subject to Permitted Liens). Each Debtor may
establish a new location outside of a jurisdiction in which it currently does
business and
with respect to which the Purchasers have a first perfected
security interest in
such Inventory
and Equipment only if (a) it shall have
given to the
Purchasers not less
than 30 days'
prior written notice of its
intention so to do,
clearly describing
such new location and
providing such
other information
in connection
therewith as the
Purchasers
may reasonably
request and (b) with
respect to such new location, it shall have taken all
action reasonably
satisfactory
to the Purchasers to maintain the security
interest of the
Purchasers in the
Collateral intended to
be granted hereby at
all times fully perfected and in full force and effect.
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Section 2.6 Recourse.
This Agreement is made with full
recourse to each
Debtor and pursuant to and upon all the warranties, representations, covenants
and agreements on the part of each Debtor contained herein, in the Securities
Purchase Agreement and otherwise in writing in connection herewith
or therewith.
Section 2.7
Trade Names; Change of Name. Each Debtor's legal name,
jurisdiction of organization and organizational number (if any) are correctly
set forth on Schedule F of this Agreement. No Debtor has transacted business
at
any time during the immediately preceding five-year period, and does not
currently transact
business, under any other legal names or
trade names other
than the prior legal
names and trade
names (if any) set
forth on Schedule
F
attached hereto. No Debtor shall change its jurisdiction of
organization without
the Purchasers' prior written consent. No Debtor shall change its legal
name or
transact business under any other trade name without first giving
30 days' prior
written notice of its
intent to do so to the
Purchasers. With
respect to such
new name or
jurisdiction of
organization,
such Debtor shall have taken all
action reasonably requested by the Purchasers, to maintain the
Security Interest
at all times fully perfected and in full force and effect.
ARTICLE 3.
SPECIAL PROVISIONS CONCERNING
ACCOUNTS; INSTRUMENTS
Section 3.1 Additional
Representations and Warranties. As of the time when
each of its Accounts arises, each Debtor shall be deemed to have
represented and
warranted that such
Account, and all
records, papers and
documents relating
thereto are what they
purport to be in all
material respects, and that such
Account will,
to the best
knowledge of each
Debtor, evidence
true and valid
obligations of the account debtor named therein.
Section 3.2
Maintenance of Records. Each Debtor will keep and maintain
at
its own cost and expense, records of its Accounts and each
Debtor will make the
same available on such Debtor's premises to the Purchasers for
inspection,
at
such Debtor's own cost and expense, at any and all commercially
reasonable times
upon commercially
reasonable prior
notice to such Debtor.
Upon the occurrence
and during
the continuance of an Event of Default and at the commercially
reasonable request of
the Purchasers,
each Debtor shall,
at its own cost
and
expense, deliver all
tangible evidence of its Accounts, including, without
limitation, all
documents evidencing the Accounts and such books and records to
the Purchasers or to its representatives (copies of which evidence
and books and
records may be retained by each Debtor). If the Purchasers so direct,
upon the
occurrence and during the continuance of an Event of Default,
each Debtor shall
legend, in form and manner satisfactory to the Purchasers, the
Accounts, as well
as books, records and
documents of such Debtor evidencing or pertaining to such
Receivables and
Contracts with an
appropriate reference
to the fact that such
Receivables and
Contracts have been assigned to the
Purchasers
and that the
Purchasers have a security interest therein.
Section 3.3 Direction to Account Debtors; Contracting Parties; Etc. Upon
the occurrence and
during the continuance
of an Event of
Default, and if
the
Purchasers so direct
each Debtor, each
Debtor agrees (a) to cause all payments
on account of the Accounts, Deposit Accounts or General
Intangibles to be
made
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directly to the Cash Collateral Account, (b) that the Purchasers may, at
their
option, directly
notify the
obligors with respect to any Accounts, Deposit
Accounts or
General Intangibles to make payments with respect thereto as
provided in
preceding clause (a) and (c) that the Purchasers may enforce
collection of any such Accounts, Deposit Accounts or General
Intangibles and may
adjust, settle or
compromise the amount of payment thereof, in the same manner
and to the same extent
as such Debtor. Without notice to or assent by each
Debtor, the
Purchasers
may apply any or all
amounts then in, or thereafter
deposited in, the Cash Collateral Account which application shall
be effected in
the manner
provided in this Agreement. The reasonable costs and expenses
(including reasonable
attorneys' fees) of collection, whether incurred by such
Debtor or the Purchasers, shall be borne by such Debtor.
The Purchasers
shall
deliver a copy of each notice referred to in the preceding clause (b) to such
Debtor; provided,
however, that the failure by the Purchasers to so notify such
Debtor shall not affect the effectiveness of such notice or
the other rights of
the Purchasers created by this Section 3.3.
Section 3.4
Modification of Terms;
etc. No Debtor shall rescind or cancel
any indebtedness
evidenced by any
Account, or modify any
term thereof or make
any 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 interest
therein, without the prior written
consent of the Purchasers, except in accordance with such
Debtor's commercially
reasonable business practices.
Section 3.5
Collection. Each
Debtor shall
endeavor in
accordance
with
commercially
reasonable business
practices to cause to
be collected from
the
account debtor
named in each of its
Accounts, 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
Accounts and apply
forthwith upon
receipt thereof all such amounts as are so collected to the
outstanding
balance
of such Account. The reasonable costs and expenses (including, without
limitation, attorneys'
fees) of collection,
if incurred by each
Debtor or the
Purchasers, shall be borne by such Debtor.
Section 3.6
Instruments.
If a Debtor
owns or acquires any Instrument
constituting
Collateral, at
Purchasers' request upon the occurrence and during
the continuation of an Event of Default, such Debtor will promptly deliver
such
Instrument to
the Purchasers appropriately endorsed to the order of the
Purchasers as further
security hereunder.
At the Purchasers' request, such
Debtor that owns or acquires any other Instrument constituting Collateral will,
within five
(5) business days, promptly deliver such Instrument to the
Purchasers
appropriately endorsed
to the order of the
Purchasers
as further
security hereunder.
ARTICLE 4.
SPECIAL PROVISIONS CONCERNING MARKS
Section 4.1
Additional
Representations
and Warranties. Each Debtor
represents and warrants that, as of the date hereof,
it is the true and
lawful
owner of all right,
title and interest to or otherwise has the right to use the
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registered Marks
listed in Schedule G hereto and that,
as of the date
hereof
said listed Marks constitute all the marks and applications for
marks registered
in the United States Patent and Trademark Office that such Debtor
presently owns
or uses in connection
with its business.
Each Debtor represents
and warrants
that it owns, is
licensed to use or otherwise has the right to use all material
Marks that it uses. Each Debtor further warrants that it has no
knowledge of any
third party
claim that any
aspect of such
Debtor's present or contemplated
business operations
infringes or will
infringe any trademark, service mark or
trade name in any respect which could reasonably be expected to have a
material
adverse effect on the business, operations, property, assets, liabilities or
condition (financial
or otherwise) of such Debtor. Each Debtor represents and
warrants that
except as listed on
Schedule G, as of the
date hereof it is the
beneficial and record
owner of all trademark
registrations
and applications
listed in Schedule G hereto and that said registrations are valid and
subsisting, and that
no Debtor is aware of any third-party claim that any of
said registrations in
respect of any material Mark is invalid or unenforceable.
Each Debtor hereby
grants to the
Purchasers 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
in order to effect an absolute assignment of all right, title and interest in
each Mark, and record the same.
Section 4.2
Infringements. Each
Debtor agrees,
promptly upon learning
thereof, to notify the
Purchasers 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 Debtor believes is infringing or diluting or
otherwise
violating
in any material respect any of such Debtor's rights in and to any
material Mark,
or with respect to any
party claiming
that such Debtor's use of any material
Mark violates in any
material respect any
property right of that
party. Each
Debtor further
agrees to prosecute
any Person infringing
any material Mark in
accordance with commercially reasonable business practices.
Section 4.3
Preservation of Marks.
Each Debtor agrees to use its Marks as
required in each of the applicable jurisdictions during the time in which this
Agreement is
in effect, sufficiently to preserve such Marks (and any
registrations thereto)
as trademarks or service marks under the laws of the
United States
and any other applicable law; provided, that, prior to any
Default, no Debtor
shall be obligated to preserve any Mark in the event
such
Debtor determines, in
its commercially
reasonable business judgment, that the
preservation of such Mark is no longer desirable in the conduct of
its business.
Section 4.4
Maintenance of
Registration.
Each Debtor shall,
at its own
expense, diligently process all documents required by the Trademark
Act of 1946,
15 U.S.C. Section 1051
et seq. to maintain trademark 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
registered Marks pursuant to 15 U.S.C. Section 1058(a), 1059 and
1065, 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 Purchasers; provided, that, prior to any Default, no
Debtor shall
be obligated to maintain any Mark in the event that such Debtor
determines,
in
its commercially reasonable business judgment, that the maintenance
of such Mark
is no longer necessary or desirable in the conduct of its
business.
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Section 4.5 Future Registered Marks. If any Mark registration issues
hereafter to a Debtor as a result of any application now or hereafter pending
before the United States Patent and Trademark Office, within 60 days of receipt
of such certificate,
such Debtor shall deliver to the Purchasers a copy of such
certificate, and an
assignment for security in such Mark, to the Purchasers and
at the expense of such Debtor, confirming the assignment for security in
such
Mark to the Purchasers hereunder, in such form as may be reasonably
satisfactory
to the Purchasers.
Section 4.6 Remedies. If an Event of Default shall occur and be
continuing,
the Purchasers
may take any or all of
the following actions:
(a) declare the
entire right,
title and interest of such Debtor in and to each of
the Marks,
together with all trademark rights and rights of protection to the
same, vested
in the Purchasers for the benefit of the Purchasers, in which event the rights,
title and interest shall immediately vest, in the
Purchasers for the benefit of
the Purchasers,
and the Purchasers
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;
(b) take and use or sell the Marks and the goodwill of such Debtor's business
symbolized by the
Marks and the right to carry on the business and use the
assets of such Debtor in connection with which the Marks have been
used; and (c)
direct such Debtor to refrain, in which event such Debtor shall
refrain, from
using the Marks in any
manner whatsoever,
directly or indirectly, and, if
requested by the
Purchasers, change
such Debtor's
corporate name to eliminate
therefrom any use of any Mark and execute such other and further
documents that
the Purchasers may request to further confirm this and to transfer
ownership of
the Marks and registrations and any pending trademark application in the United
States Patent and Trademark Office to the Purchasers.
Section 4.7 Collateral
Assignment.
This Agreement is made
for collateral
security purposes only. This Agreement and Purchasers' Security Interest in the
Marks shall continue in full force and effect as long as any
Obligations
shall
be owed to the Purchasers (or any of said Purchasers). Upon payment in full of
the Obligations
and termination of the Securities
Purchase Agreement, this
Agreement shall terminate and Purchasers shall promptly execute and deliver to
each Debtor, at such
Debtor's expense,
all termination statements and other
instruments as may be
necessary or proper to
terminate Purchasers' security
interest in the Marks,
subject to any
disposition thereof
which may have been
made by Purchasers pursuant to this Agreement or the Securities Purchase
Agreement.
ARTICLE 5.
SPECIAL PROVISIONS CONCERNING
PATENTS, COPYRIGHTS AND TRADE SECRETS
Section 5.1
Additional
Representations
and Warranties. Each Debtor
represents and warrants that, as of the date hereof,
it is the true and
lawful
owner of all rights in (a) all material Trade Secrets and Proprietary
Information necessary
to operate the
business of such Debtor, (b) the Patents
listed in Schedule H hereto for the Debtor and that said Patents
constitute all
the patents and applications for patents that the Debtor owns on
the date hereof
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and (c) the Copyrights
listed in Schedule I hereto and that said Copyrights
constitute all
registrations
of copyrights and applications for copyright
registrations that
such Debtor owns on
the date hereof.
Each Debtor
further
warrants that it has
no knowledge
of any third party
claim that any aspect of
such Debtor's present
or contemplated
business operations infringes or will
infringe any patent or
any copyright
or such Debtor has
misappropriated
any
Trade Secret or Proprietary Information, in each case in any
respect which could
reasonably be
expected to have a material adverse effect on the business,
operations, property,
assets, liabilities or condition (financial or otherwise)
of such Debtor. Each Debtor hereby grants to the Purchasers 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
the United States
Copyright Office in order to effect an
absolute assignment
of all right, title and interest in each Patent and
Copyright, and to record the same.
Section 5.2
Infringements. Each
Debtor agrees,
promptly upon learning
thereof, to furnish
the Purchasers in
writing with all
pertinent
information
available to
such Debtor with respect to any infringement, contributing
infringement or active
inducement
to infringe in any material respect any
material Patent or
Copyright or to any
claim that the practice of any material
Patent or the use of any material Copyright violates in any
material respect any
property right of a third party, or with respect to any
misappropriation of
any
material Trade
Secret Right or any
claim that practice of
any material Trade
Secret Right
violates in any
material respect any
property right of a third
party. Each Debtor
further agrees, to the
extent consistent with
commercially
reasonable business practices, to prosecute any Person infringing
any Patent or
Copyright or any Person misappropriating any Trade Secret
Right.
Section 5.3 Maintenance of Patents. At its own expense, each Debtor
