GENERAL SECURITY AGREEMENT
AGREEMENT made this 17th day of October, 1996 by Technology Flavors &
Fragrances, Inc., a Delaware corporation (the "Debtor") to The High View Fund,
L.P., a Delaware limited partnership ("High View"), as collateral agent (in such
capacity, the "Collateral Agent") for the ratable benefit of the purchasers (the
"Purchasers") party to the Purchase Agreement dated as of the date hereof (as
the same may be amended or modified from time to time, the "Purchase Agreement")
by and between the Debtor and the Purchasers. Capitalized terms used herein
without definition shall have the meanings given to such terms in the Purchase
Agreement.
1. Definitions.
The term "Obligations" shall include all indebtedness, obligations,
liabilities, and guarantees of any kind of the Debtor to the Purchasers (and
also to others to the extent of participations or interests therein of the
Purchasers), now existing or hereafter arising, and whether direct or indirect,
acquired outright, conditionally or as collateral security from another,
absolute or contingent, joint or several, secured or unsecured, due or not due,
contractual or tortious, liquidated or unliquidated, arising by operation of law
or otherwise, whether or not of a nature presently contemplated by the parties
or subsequently agreed to by them, including, without limitation, all
indebtedness, obligations and liabilities of the Debtor arising out of the
Purchase Agreement or any of the other Purchase Documents.
The term "Collateral" shall include all assets of the Debtor including, but
not limited to the following: accounts receivable, inventory and fixed assets,
customer lists, product formulas, all personal property and fixtures in which
the Debtor has or shall have an interest, now or hereafter existing or acquired,
and wherever located, tangible or intangible, including not limited to all
machinery and equipment of the Debtor, all present and hereafter existing or
acquired contract rights, general intangibles, equipment, goods, raw materials,
components, work-in process, finished merchandise and packing and shipping
materials), personal property made available to Debtor by the Collateral Agent
(or its agent or bailee) pursuant to a trust receipt or other security agreement
the effect of which is to continue the Collateral Agent's security interest
therein, money, instruments, documents, chattel paper, securities, deposits,
credits, claims and demands against the Collateral Agent, and all proceeds,
products, returns, additions, accessions and substitutions of and to any of the
foregoing.
All terms used in this Agreement which are defined in the Uniform
Commercial Code as in effect from time to time in the State of New York (the
"UCC"), and not otherwise defined herein, shall have the meanings given to such
terms in the UCC.
2. Grant of Security Interest.
In consideration of the purchase of Convertible Notes and Warrants, the
Debtor hereby grants to the Collateral Agent, for the ratable benefit of the
Purchasers, a valid and binding security interest in the Collateral as security
for the payment, performance, and observance by the Debtor of the Obligations,
subject and subordinate only to the security interests described on Schedule A
annexed hereto (the "Senior Security Interests"). Notwithstanding anything in
this Agreement to the contrary, all obligations of the Debtor and rights of the
Collateral Agent hereunder shall be subject to the rights and priorities of the
Senior Security Interests and shall not be performed or enforceable if then in
conflict therewith. Subject to the priority of the Senior Security Interests,
the Debtor will transfer and deliver to the Collateral Agent all Collateral
which the Collateral Agent is required to take possession of in order to perfect
its security interest, and agrees to transfer and deliver to the Collateral
Agent all Collateral subsequently acquired by the Collateral Agent which the
Collateral Agent are required to take possession of in order to perfect its
security interest therein promptly upon such acquisition.
3. Warranties and Agreements. The Debtor warrants and agrees that:
(a) Collateral location and use. The Debtor's chief executive office
and principal place of business, its financial books and records relating
to the Collateral, and the Collateral, are located and/or based at the
address set forth at the foot of this Agreement. The Debtor will not change
its chief executive office, the location of its books and records or the
location of the Collateral (except to customers in the ordinary course of
business or to other jurisdictions in which the Collateral Agent has a
perfected security interest), or change its name, identity or structure in
any manner which might make any financing statement filed in favor of the
Collateral Agent misleading or otherwise ineffective, unless in each case
the Debtor shall have given the Collateral Agent at least sixty (60) days'
prior written notice thereof and shall have taken such action, at the
Debtor's expense, reasonably satisfactory to the Collateral Agent, as may
be necessary to maintain the security interest of the Collateral Agent in
the Collateral at all times fully perfected and in full force and effect.
The Collateral was and/or will be acquired by the Debtor solely for use in
its business at said locations, and the Collateral is not and shall not be
used for any other use. The Debtor will furnish information to the
Collateral Agent regarding the location of Collateral not held at the
Debtor's chief place of business.
(b) Existing liens, security interests, and encumbrances. Except for
the Senior Security Interests, the Debtor is, or on the effective date
hereof shall be, the legal owner of all interests in the Collateral and
shall keep the Collateral free and clear of liens, security interests, or
encumbrances ("Liens"), and will not assign, sell, mortgage, lease,
transfer, pledge, grant a security interest in, encumber or otherwise
dispose of or abandon any part or all of the Collateral without the prior
written consent of the Collateral Agent, except for:
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(i) Liens for taxes not yet due or which are being contested in
good faith by appropriate proceedings and with respect to which
adequate reserves in accordance with generally accepted accounting
principles are being maintained;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other Liens imposed by law
created in the ordinary course of business for amounts not yet due or
which are being contested in good faith by appropriate proceedings and
with respect to which adequate reserves are being maintained;
(iii) Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of
social security, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed
money);
(iv) easements, rights-of-way, restrictions and other similar
charges or encumbrances not interfering with the ordinary conduct of
the business of the Debtor or any of its Subsidiaries; and
(v) Liens in favor of the Collateral Agent.
The Debtor will make due and timely payment of all obligations and
indebtedness secured by each and every security interest set forth on Schedule
A, and the Debtor shall fully comply with all terms and provisions of all
security instruments representing such security interests.
(c) Taxes, compliance with laws. The Debtor will make due and timely
payment or deposit of all taxes, assessments, or contributions required by
law which may be lawfully levied or assessed with respect to any of the
Collateral (except as the Debtor may in good faith contest such taxes,
assessments or contributions) and will execute and deliver to the
Collateral Agent, on demand, appropriate certificates attesting to the
timely payment or deposit of all such taxes, assessments or contributions.
The Debtor will use the Collateral for lawful purposes only, and with all
reasonable care and caution, and in conformity with all applicable laws,
ordinances and regulations. At its own cost and expense, the Debtor will
keep the Collateral in proper order, repair, and condition.
(d) Inspection. The Collateral Agent shall, at reasonable times, have
free access to and the right of inspection of any part or all of the
Collateral and any records of the Debtor (and the right to make extracts
from such records), and the Debtor shall deliver to the Collateral Agent
the originals or true copies of such papers and instruments relating to any
or all of the Collateral as the Collateral Agent may reasonably request
from time to time.
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(e) Collateral to remain personal property. The Collateral is now and
shall be and remain personal property, notwithstanding the manner in which
the Collateral or any part thereof shall be now or hereafter affixed,
attached or annexed to real property. The Debtor will use its best efforts
to obtain and deliver to the Collateral Agent such instruments as may be
reasonably requested by the Collateral Agent pursuant to which any person
with an interest in any real estate upon which any part or all of the
tangible Collateral is now or may hereafter be located consents to the
security interest granted herein, disclaims any interest in the tangible
Collateral as fixtures, waives in favor of the Collateral Agent all right
to distrain or levy upon the Collateral for rent due or to become due from
the Debtor, and authorizes the Collateral Agent to enter upon any premises
of the Debtor at reasonable times and to remove the Collateral.
(f) Insurance. The Debtor, at its own cost and expense, will insure
the Collateral against loss or damage by fire and extended coverage, theft,
burglary, pilferage, bodily injury and such other risks as the Collateral
Agent may reasonably require, with such companies and in such amounts as
may be required by the Collateral Agent in its reasonable discretion and
add the Collateral Agent as loss payee and additional insured under each
policy. All such policies shall provide for thirty (30) days' minimum
written notice of cancellation to the Collateral Agent, and the Debtor
shall deliver to the Collateral Agent the original or duplicate policies,
or certificates or other evidence satisfactory to the Collateral Agent, of
compliance with the foregoing insurance provisions within five business
days of such request. All premiums will be paid by Debtor when due and if
Debtor fails to do so the Collateral Agent shall have the right (but not
the obligation) to procure such insurance at Debtor's expense. The Debtor
assumes all responsibility and liability arising from the use of the
Collateral, either for negligence or otherwise, by whomsoever used,
employed or operated, and will defend, indemnify and save the Collateral
Agent harmless from any and all claims, loss or damage to persons or
property caused by the Collateral or by its use and operation.
(g) Maintain security interests, reports. In addition to all other
provisions hereof, the Debtor will, from time to time, at the sole expense
of the Debtor, perform any and all steps and/or procedures reasonably
requested by the Collateral Agent to perfect and maintain the Collateral
Agent's security interest in the Collateral, including but not limited to
transferring any part or all of the Collateral to the Collateral Agent or
any nominee of the Collateral Agent (including warehouses), placing and
maintaining signs, appointing custodians, executing and filing financing
statements and notices of lien, delivering to the Collateral Agent
documents of title representing the Collateral or evidencing the Collateral
Agent's security interest in any other manner acceptable to and reasonably
requested by the Collateral Agent. If requested by the Collateral Agent,
the Debtor will, from time to time, execute and deliver to the Collateral
Agent assignments of accounts in form satisfactory to the Collateral Agent,
in its reasonable discretion, but should the Debtor fail in any one or more
instances to execute and deliver any such assignments of accounts, such
failure shall not constitute a waiver or limitation of the within security
interest in all of the Collateral (including said accounts) which shall
remain in full force and effect.
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At the request of the Collateral Agent, the Debtor shall use its best
efforts to deliver to the Collateral Agent all original documents evidencing the
sale and delivery of merchandise or the performance of labor or services which
created any account, including but not limited to all original contracts,
orders, invoices, bills of lading, warehouse receipts and shipping receipts,
together with all collateral security and/or guarantees or other contracts of
suretyship held by the Debtor in respect of the accounts, together with
assignments of any of the foregoing where reasonably requested by the Collateral
Agent.
If at any time any part or all of the Collateral shall be in the possession
or control of any of the Debtor's bailees or agents, the Debtor will notify such
persons of the Collateral Agent's security interest therein and upon the
Collateral Agent's request, the Debtor will instruct such persons to hold all
such Collateral for the Collateral Agent's account and subject to the Collateral
Agent's reasonable instructions and the Debtor will obtain and deliver to the
Collateral Agent such instruments reasonably requested by the Collateral Agent
pursuant to which such persons consent to the security interest granted herein,
disclaim any interest in the Collateral, waive in favor of the Collateral Agent
all liens upon and claims to the Collateral or any part thereof, and authorize
the Collateral Agent at reasonable times to enter upon and remove the Collateral
from any premises upon which the same may be located.
(h) Further documentation. The Debtor shall, at its sole cost and
expense, simultaneously herewith and upon the reasonable request of the
Collateral Agent, from time to time, execute and deliver to the Collateral
Agent one or more financing statements pursuant to the Uniform Commercial
Code, and any other papers, documents or instruments reasonably required by
the Collateral Agent in connection herewith. The Debtor hereby authorizes
the Collateral Agent to execute and file, at any time and from time to
time, on behalf of the Debtor, one or more financing statements with
respect to all or any part of the Collateral, the filing of which is
advisable, in the sole judgment of the Collateral Agent, although the same
may have been executed only by the Collateral Agent as secured party. The
Debtor also irrevocably appoints the Collateral Agent, its agents,
representatives and designees, as the Debtor's agent and attorney-in-fact,
to execute and file, from time to time, on behalf of the Debtor, one or
more financing statements with respect to all or any part of the
Collateral.
(i) Bona fide accounts. The Debtor warrants to the Collateral Agent
that each of the debtors named in any account is indebted to the Debtor in
the amount indicated in the books and records of the Debtor and in any
assignments executed and delivered to the Collateral Agent; that each
account is bona fide and arises out of the sale and delivery of merchandise
and/or the performance of labor or services.
(j) Settlement of accounts. The Collateral Agent is authorized and
empowered to compromise or extend the time for payment of any of the
Collateral, for such amounts and upon such terms as the Collateral Agent
and the Debtor may determine, and to accept the return of goods represented
by any of the Collateral without discharging or affecting the obligations
of the Debtor hereunder.
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(k) Payment of debtor's obligations, reimbursement. The Collateral
Agent may in its discretion, for the account and expense of the Debtor (i)
pay any amount or do any act which is required to be paid or done by the
Debtor under this Agreement (including but not limited to, the repair and
insuring of Collateral and payment of taxes) and which the Debtor fails to
do or pay as herein required, (ii) pay any sums due and owing by the Debtor
to the landlord(s) of any premises where any Collateral is located, and
(iii) pay or discharge any lien, security interest or encumbrance in favor
of anyone other than the Collateral Agent which covers or affects the
Collateral or any part thereof. The Debtor will promptly reimburse and pay
the Collateral Agent for any and all sums, costs, fees and expenses which
the Collateral Agent may reasonably pay or incur by reason of defending,
protecting or enforcing the security interest herein granted or the
priority thereof or in enforcing payment of the Obligations or in
discharging any lien or claim against the Collateral or any part thereof or
in the exchange, collection, compromise or settlement of any of the
Collateral or receipt of the proceeds thereof or for the care of the
Collateral, by litigation or otherwise, and with respect to either the
Debtor, account debtors, guarantors of the Debtor and other persons,
including but not limited to all court costs, collection charges, travel,
and reasonable attorneys' fees and all reasonable expenses (including
reasonable counsel fees) incident to the enforcement of payment of any
obligations of the Debtor by any action or participation in, or in
connection with, a case or proceeding under chapters 7, 11 or 13 of
Bankruptcy Code, or any successor statute thereto. All sums paid and all
costs, expenses and liabilities incurred by the Collateral Agent pursuant
to the foregoing provisions, together with interest thereon at the rate of
twelve percent (12%) per annum, shall be added to and become part of the
Obligations secured hereby.
4. Transfer of Collateral.
Upon an Event of Default, as hereinafter defined, at its discretion the
Collateral Agent may, whether or not any of the Obligations are due, in its name
or in the name of the Debtor or otherwise, notify any account debtor or the
obligor on any instrument to make payment to the Collateral Agent, demand, xxx
for, collect or receive any money or property at any time payable or receivable
on account of or in exchange for, or make any compromise or settlement deemed
desirable by the Collateral Agent with respect to, any of the Collateral, but
shall be under no obligation to do so, and/or the Collateral Agent may extend
the time of payment, arrange for payment in installments, or otherwise modify
the terms of, or release any of the Collateral, without thereby incurring
responsibility to, or discharging or otherwise affecting any liability of, the
Debtor. At any time the Collateral Agent may assign, transfer and/or deliver to
any transferee of any of the Obligations, any or all of the Collateral, and
thereafter the Collateral Agent shall be fully discharged from all
responsibility with respect to the Collateral so assigned, transferred and/or
delivered. Such transferee shall be vested with all the powers and rights of the
Collateral Agent hereunder, with respect to such Collateral, but the Collateral
Agent shall retain all rights and powers hereby given with respect to any of the
Collateral not so assigned, transferred or delivered.
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5. Remedies on Default. If an Event of Default shall have occurred and be
continuing, then in addition to any rights now or hereafter existing under
applicable law, the Collateral Agent shall have the following rights and
remedies in addition to all rights and remedies of a secured party under the
Uniform Commercial Code of the State of New York or other applicable statute or
rule, all such rights and remedies being cumulative and not exclusive:
(a) Collateral. The Collateral Agent may, at any time and from time to
time, with or without process of law and with or without the aid and
assistance of others, enter upon any premises in which the Collateral or
any part thereof may be located and, without resistance or interference by
the Debtor, take possession of the Collateral; and/or dispose of all or any
part of the Collateral on any premises of the Debtor; and/or require the
Debtor to assemble and make available to the Collateral Agent all or any
part of the Collateral at any place and time designated by the Collateral
Agent which is reasonably convenient to the Collateral Agent and the
Debtor; and/or remove all or any part of the Collateral from any premises
on which any part thereof may be located for the purpose of effecting
preservation or sale or other disposition thereof; and/or sell, resell,
lease, assign and deliver, or otherwise dispose of, the Collateral or any
part thereof in its existing condition or following any commercially
reasonable preparation or processing, at public or private proceedings, in
one or more places at the same or different times with or without having
the Collateral at the place of sale or other disposition for cash, upon
credit or for future delivery, and in connection therewith the Collateral
Agent may grant options, at such place or places and time or times and to
such persons, firms or corporations as the Collateral Agent deems best, and
without demand for performance or any notice or advertisement to the Debtor
of the place and time of any public sale or of the place and time after
which any private sale or other disposition may be made, and/or liquidate
or dispose of the Collateral or any part thereof in any other commercially
reasonable manner.
If any of the Collateral is sold by the Collateral Agent upon credit or for
future delivery, the Collateral Agent shall not be liable for the failure of the
purchaser to purchase or pay for the same and, in the event of any such failure,
the Collateral Agent may resell such Collateral. The Collateral Agent may buy
any part or all of the Collateral at any public sale and if any part of all of
the Collateral is of a type which is the subject of widely distributed standard
price quotations the Collateral Agent may buy at private sale.
The Collateral Agent may apply the cash proceeds actually received from any
sale or other disposition to the reasonable expenses of retaking, holding,
preparing for sale, selling, leasing and the like, to reasonable attorney's fees
if this Agreement or any of the Obligations is referred to an attorney for
enforcement, to all reasonable legal expenses, court costs, collection charges,
travel and other related expenses which may be incurred by the Collateral Agent
in attempting to collect the Obligations or to enforce this Agreement and
realize upon the Collateral, or in the prosecution or defense of any action or
proceeding related to the subject matter of this Agreement; and then to the
Obligations in such order and as to principal or interest as the Collateral
Agent may in its reasonable discretion determine; and the Debtor shall at all
times be and remain liable and, after crediting the net proceeds of sale or
other disposition as aforesaid,
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will pay the Collateral Agent on demand any deficiency remaining, including
interest thereon and the balance of any reasonable expenses at any time unpaid,
with any surplus to be paid to the Debtor, subject to any duty of the Collateral
Agent imposed by law to the holder of any subordinate security interest in the
Collateral known to the Collateral Agent.
(b) Proceeds. Any of the proceeds of the Collateral received by the
Debtor shall not be commingled with other property of the Debtor, but shall
be segregated, held by the Debtor in trust for the Collateral Agent as the
exclusive property of the Collateral Agent, and the Debtor will immediately
deliver to the Collateral Agent the identical checks, moneys or other
proceeds of Collateral received, and the Collateral Agent shall have the
right to endorse the name of the Debtor on any and all checks, or other
forms of remittance received, where such endorsement is required to effect
collection. The Debtor hereby designates, constitutes and appoints the
Collateral Agent and any designee or agent of the Collateral Agent as
attorney-in-fact of the Debtor, irrevocably and with power of substitution,
with authority to receive, open and dispose of all mail addressed to the
Debtor, to notify the Post Office authorities to change the address for
delivery of mail addressed to the Debtor, to such address as the Collateral
Agent may designate; to endorse the name of the Debtor on any notes,
acceptances, checks, drafts, money orders or other evidences of payment or
proceeds of the Collateral that may come into the Collateral Agent's
possession; to sign the name of the Debtor on any invoices, documents,
drafts against account debtors of the Debtor, assignments, requests for
verification of accounts and notices to debtors of the Debtor; to execute
any endorsements, assignments, or other instruments of conveyance or
transfer; and to do all other acts and things necessary and advisable in
the sole discretion of the Collateral Agent to carry out and enforce this
Agreement. Said attorney or designee shall not be liable for any error of
judgment or mistake of fact or law. This power of attorney being coupled
with an interest is irrevocable while any of the Obligations shall remain
unpaid.
6. Liability Disclaimer.
Under no circumstances whatsoever shall the Collateral Agent be deemed to
assume any responsibility for or obligation or duty with respect to any part or
all of the Collateral, of any nature or kind whatsoever, or any matter or
proceedings arising out of or relating thereto. The Collateral Agent shall not
be required to take any action of any kind to collect or protect any interest in
the Collateral, including but not limited to any action necessary to preserve
its or the Debtor's rights against prior parties to any of the Collateral. The
Collateral Agent shall not be liable or responsible in any way for the
safekeeping, care or custody of any of the Collateral, or for any loss or damage
thereto, or for any diminution in the value thereof, or for any act or default
of any agent or bailee of the Collateral Agent or the Debtor, or of any carrier,
forwarding agency or other person whomsoever, or for the collection of any
proceeds, but the same shall be at the Debtor's sole risk at all times. The
Debtor hereby releases the Collateral Agent from any claims, causes of action
and demands at any time arising out of or with respect to this Agreement or the
Obligations, and any actions taken or omitted to be taken by the Collateral
Agent with respect thereto, and the Debtor agrees to defend and hold the
Collateral Agent harmless from and
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with respect to any and all such claims, causes of action and demands, except
for such claims, causes of action, and demands arising out of and in connection
with the gross negligence or willful misconduct of the Collateral Agent. The
Collateral Agent's prior recourse to any part or all of the Collateral shall not
constitute a condition of any demand for payment of the Obligations or of any
suit or other proceeding for the collection of the Obligations.
7. Termination.
The security interests granted hereunder shall terminate upon final and
indefeasible payment in full of the Obligations. Upon such termination, the
Collateral Agent shall, at the expense of the Debtor, promptly file or cause to
be filed fully-executed UCC-3 termination statements in each jurisdiction where
a financing statement with respect to such interests has been filed.
8. Nonwaiver.
No failure or delay on the part of the Collateral Agent in exercising any
of its rights and remedies hereunder or otherwise shall constitute a waiver
thereof, and no single or partial waiver by the Collateral Agent of any default
or other right or remedy which it may have shall operate as a waiver of any
other default, right or remedy or of the same default, right or remedy on a
future occasion.
9. Modification.
No provision hereof shall be modified, altered or limited except by a
written instrument expressly referring to this Agreement and to the provision so
modified or limited, and executed by the party to be charged.
10. Authorization.
The execution and delivery of this Agreement has been authorized by the
Board of Directors of the Debtor.
11. Binding Effect.
This Agreement and all Obligations of the Debtor hereunder shall be binding
upon the successors or assigns of the Debtor, and shall, together with the
rights and remedies of the Collateral Agent hereunder, inure to the benefit of
the Collateral Agent and its successors, endorsees and assigns.
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12. Severability.
If any term of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity of all other terms hereof shall in no way be
affected thereby.
IN WITNESS WHEREOF, the Debtor has executed or caused this Agreement to be
executed in the State of New York on the date first above written.
TECHNOLOGY FLAVORS &
FRAGRANCES, INC.
By: /s/ Xxxxxx Xxxxxx
--------------------------------
Xxxxxx Xxxxxx, President
The chief place of business of Technology Flavors Fragrances, Inc. and the
location of the books and records pertaining to the Collateral is 00 Xxxxxx
Xxxxxx, Xxxx, Xxxxxxxxxx, Xxx Xxxx. The location of the Collateral is 00 Xxxxxx
Xxxxxx Xxxx, Xxxxxxxxxx, Xxx Xxxx, 000 Xxxxxx Xxxxxx, Xxxxxxxxx, XX, and 000
Xxxx Xxxxx, Xxxxxxx, Xxxx.
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SCHEDULE A
First security interest in all of the assets of the Debtor granted by the
Debtor to North Fork Bank, pursuant to the Amended and Restated General Security
Agreement dated December 4, 1995, as reaffirmed on the date hereof (see attached
copies of UCC-1s).
Second security interest in certain assets of the Debtor located at 000
Xxxx Xxxxx, Xxxxxxx, XX 00000 acquired from Seafla, Inc. and after-acquired
assets of the Seafla Division of the Debtor granted by the Debtor to RRHDH,
Inc., successor in interest to Seafla, Inc. in connection with the acquisition
of those assets of Seafla, Inc., pursuant to the Security Agreement dated
December 6, 1995 (see attached copies of UCC-1s).
Lien of Hyster Credit Company on Used Hyster Fork Lift (9/91).
Lien of Canamerica Corp. on IBM 320H Computer (5/92).
A-1
