EXHIBIT 10.3
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Security Agreement") is entered into as
of December __, 2001 among XXXX FOODS COMPANY (formerly known as Suiza Foods
Corporation, by change of name only), a Delaware corporation (the "Borrower"),
the Subsidiaries of the Borrower from time to time party hereto (individually a
"Guarantor" and collectively the "Guarantors"; together with the Borrower,
individually an "Obligor", and collectively the "Obligors") and FIRST UNION
NATIONAL BANK, in its capacity as administrative agent (in such capacity, the
"Administrative Agent") for the lenders from time to time party to the Credit
Agreement described below (the "Lenders").
RECITALS
WHEREAS, pursuant to that certain Credit Agreement, dated as of July
31, 2001 (as amended, modified, extended, renewed or replaced from time to time,
the "Credit Agreement"), among the Borrower, the Guarantors, the Lenders, the
Administrative Agent, Bank One, NA, as syndication agent, and Fleet National
Bank, Xxxxxx Trust and Savings Bank and Suntrust Bank, as co-documentation
agents, the Lenders have agreed to make Loans and issue Letters of Credit upon
the terms and subject to the conditions set forth therein; and
WHEREAS, it is a condition precedent to the obligations of the Lenders
to make their respective Loans and to issue Letters of Credit under the Credit
Agreement that the Obligors shall have executed and delivered this Security
Agreement to the Administrative Agent for the ratable benefit of the Lenders.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Definitions.
(a) Unless otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to such terms in the Credit
Agreement, and the following terms which are defined in the Uniform
Commercial Code (the "UCC") in effect in the State of North Carolina on
the date hereof are used herein as so defined: Accessions, Accounts,
As-Extracted Collateral, Chattel Paper, Commercial Tort Claim,
Commingled Goods, Consumer Goods, Deposit Account, Documents,
Electronic Chattel Paper, Equipment, Farm Products, Fixtures, General
Intangibles, Goods, Instruments, Inventory, Investment Property,
Letter-of-Credit Rights, Manufactured Home, Proceeds, Software,
Standing Timber, Supporting Obligation and Tangible Chattel Paper. For
purposes of this Security Agreement, the term "Lender" shall include
any Affiliate of any Lender which has entered into a Hedging Agreement
with any Credit Party.
(b) In addition, the following terms shall have the following
meanings:
"Bank One Purchase Agreement" means that certain Amended and
Restated Receivables Purchase Agreement, dated as of December __, 2001,
among Suiza Receivables, L.P., and the Servicers, the Permitted
Receivables Financing Obligors and other Originators party thereto and
the Financial Institutions party thereto, and Bank One, NA (Main Office
Chicago), as Agent, as the same may be amended, supplemented, amended
and restated, or otherwise modified from time to time.
"Bank One Sale Agreement" means that certain Receivables Sale
Agreement dated as of June 30, 2000, among Suiza Receivables, L.P.,
Morningstar Receivables Corp., Permitted Receivables Financing Obligors
and the other Originators party thereto, as the same may be amended,
supplemented, amended and restated, or otherwise modified from time to
time.
"Collection Account" means each concentration account,
depositary account, lock-box account or similar account in which any
Collections are collected or deposited.
"Collections" means, with respect to any Receivable, all cash
collections and other cash proceeds in respect of such Receivable,
including, without limitation, all yield, finance charges or other
related amounts accruing in respect thereof and all cash proceeds of
Related Security with respect to such Receivable.
"Copyright Licenses" means any written agreement, naming any
Obligor as licensor, granting any right under any Copyright including,
without limitation, any thereof referred to in Schedule 3.16 to the
Credit Agreement.
"Copyrights" means (a) all registered United States copyrights
in all Works, now existing or hereafter created or acquired, all
registrations and recordings thereof, and all applications in
connection therewith, including, without limitation, registrations,
recordings and applications in the United States Copyright office
including, without limitation, any thereof referred to in Schedule 3.16
to the Credit Agreement, and (b) all renewals thereof including,
without limitation, any thereof referred to in Schedule 3.16 to the
Credit Agreement.
"Excluded Ownership Interests" means (i) all Capital Stock,
partnership interests, membership interests and other ownership
interests now owned or hereafter acquired, from time to time, by Xxxx
Holding Company [new name of entity into which Xxxx Foods Company is
merging] or any of its Subsidiaries, and issued by a Subsidiary of Xxxx
Holding Company that owns any real property, and (ii) thirty-four
percent (34%) of the issued and outstanding Capital Stock, partnership
interests, membership interests and other ownership interests issued by
any Foreign Subsidiary of Borrower.
"Excluded Receivables" means the following property:
(a) all Receivables (other than Receivables of a Permitted
Receivables Financing Obligor arising after the Termination Date for
such Permitted Receivables Financing Obligor) and inventory but only to
the extent the financing or lease of which
2
gives rise to any Receivable (other than Receivables of a Permitted
Receivables Financing Obligor arising after the Termination Date for
such Permitted Receivables Financing Obligor);
(b) all Related Security;
(c) all Collections;
(d) all books and records of each Permitted Receivables
Financing Obligor related to any of the foregoing;
(e) all other rights and payments relating to any Receivable;
(f) all general partnership interests (but not a limited
partnership interests) of Suiza Receivables, L.P.; and
(g) all proceeds and products of any of the foregoing.
For the avoidance of doubt, "Excluded Receivables" shall
include all Receivables, all Collections, Related Security, each
Lock-Box and Collection Account, the Transfer Agreement, all other
rights and payments relating to the Receivables and all proceeds of the
foregoing (for purposes of this sentence each capitalized term used in
this sentence shall have the meaning set forth in, or incorporated by
reference into, the Bank One Sale Agreement).
"Lock-Box" means each locked postal box to which Collections
are sent.
"Patent License" means all agreements, whether written or
oral, providing for the grant by or to an Obligor of any right to
manufacture, use or sell any invention covered by a Patent, including,
without limitation, any thereof referred to in Schedule 3.16 to the
Credit Agreement.
"Patents" means (a) all letters patent of the United States or
any other country and all reissues and extensions thereof, including,
without limitation, any thereof referred to in Schedule 3.16 to the
Credit Agreement, and (b) all applications for letters patent of the
United States or any other country and all divisions, continuations and
continuations-in-part thereof, including, without limitation, any
thereof referred to in Schedule 3.16 to the Credit Agreement.
"Performance Undertaking" has the meaning set forth in the
Receivables Purchase Agreement and shall mean the guaranty or support
obligations undertaken by Borrower or one or more of its Subsidiaries
in respect of the obligations of a Permitted Receivables Financing
Obligor pursuant to an agreement entered into in connection with a
Permitted Receivables Financing.
"Permitted Receivables Financing Obligor" means any Obligor
that is now or hereafter a party to a Permitted Receivables Financing.
3
"Receivable" means all indebtedness and other obligations owed
to a Permitted Receivables Financing Obligor (at the time it arises,
and before giving effect to any transfer or conveyance under any
Permitted Receivables Financing) or in which such Permitted Receivables
Financing Obligor has a security interest or other interest, including,
without limitation, any indebtedness, obligation or interest
constituting an account, chattel paper, instrument or general
intangible, arising in connection with the sale of goods or the
rendering of services by such Permitted Receivables Financing Obligor,
and further includes, without limitation, the obligation to pay any
finance charges with respect thereto. Indebtedness and other rights and
obligations arising from any one transaction, including, without
limitation, indebtedness and other rights and obligations represented
by an individual invoice, shall constitute a Receivable separate from a
Receivable consisting of the indebtedness and other rights and
obligations arising from any other transaction; provided, that any
indebtedness, rights or obligations referred to in the immediately
preceding sentence shall be a Receivable regardless of whether the
Receivables Obligor or Permitted Receivables Financing Obligor treats
such indebtedness, rights or obligations as a separate payment
obligation.
"Receivables Contract" means with respect to any Receivable,
any and all written agreements pursuant to which such Receivable arises
or that evidences such Receivable.
"Receivables Obligor" means a Person obligated to make
payments pursuant to a Receivables Writing or Receivables Contract.
"Receivables Purchase Agreement" means the Bank One Purchase
Agreement or any comparable agreement entered into in connection with
any other Permitted Receivables Financing, or both, as the same may be
amended, supplemented, amended and restated, or otherwise modified from
time to time.
"Receivables Records" means, with respect to any Receivable,
all Receivables Writings or Receivables Contracts and other documents,
books, records and other information (including, without limitation,
computer programs, tapes, disks, punch cards, data processing software
and related property and rights) relating to such Receivable, any
Related Security therefore and the related Receivables Obligor.
"Receivables Sale Agreement" means the Bank One Sale Agreement
or any comparable agreement entered into in connection with any other
Permitted Receivables Financing, or both, as the same may be amended,
supplemented, amended and restated, or otherwise modified from time to
time.
"Receivables Transfer Agreement" means that certain
Receivables Transfer Agreement dated as of June 30, 2000, between
Morningstar Foods Inc. and Morningstar Receivables Corp., or any
comparable agreement entered into in connection with any other
Permitted Receivables Financing, or both, as the same may be amended,
supplemented, amended and restated, or otherwise modified from time to
time.
4
"Receivables Writing" means, with respect to any Receivable,
any and all instruments, invoices, purchase orders or other writings
(which may be electronic) (other than Receivables Contracts) pursuant
to which such Receivable arises or that evidences such Receivable.
"Related Security" means, with respect to any Receivable: (a)
all security interests or liens and property subject thereto from time
to time, if any, purporting to secure payment of such Receivable,
whether pursuant to the Receivables Writing or Receivables Contract
related to such Receivable or otherwise, together with all financing
statements and security agreements describing any collateral securing
such Receivable; (b) all guaranties, letters of credit, insurance,
"supporting obligations" (within the meaning of Section 9-102(a) of the
Uniform Commercial Code as in effect from time to time in all
applicable jurisdictions) and other agreements or arrangements of
whatever character from time to time supporting or securing payment of
such Receivable whether pursuant to the Receivables Writing or
Receivables Contract related to such Receivable or otherwise; (c) all
service contracts and other contracts and agreements associated with
such Receivable; (d) all Receivables Records related to such
Receivable; (e) all of the Permitted Receivables Financing Obligor's
right, title and interest in, to and under the Receivables Sale
Agreement and the Receivables Transfer Agreement in respect of such
Receivable and all of Suiza Receivables, L.P.'s right, title and
interest in, to and under the Performance Undertaking; (f) all of each
Permitted Receivables Financing Obligor's interest in the inventory and
goods (constituting returned or repossessed inventory or goods with
respect to which a Receivable has previously been generated) but only
to the extent the sale, financing or lease of which by such Permitted
Receivables Financing Obligor gave rise to such Receivable, and all
insurance contracts with respect thereto; (g) all of each Permitted
Receivables Financing Obligor's right, title and interest in each
Lock-Box and each Collection Account; and (h) all proceeds of any of
the foregoing.
"Secured Obligations" means the collective reference to all of
the Credit Party Obligations, now existing or hereafter arising
pursuant to the Credit Documents or any Hedging Agreement between a
Credit Party and any Lender, owing from the Borrower or any other
Credit Party to any Lender or the Administrative Agent, howsoever
evidenced, created, incurred or acquired, whether primary, secondary,
direct, contingent, or joint and several, including, without
limitation, all obligations and liabilities incurred in connection with
collecting and enforcing the foregoing.
"Termination Date" means (a) with respect to any Excluded
Receivable related to the Bank One Purchase Agreement or the Bank One
Sale Agreement or the transactions contemplated by such agreements, the
date on which the Aggregate Unpaids (as defined in the Bank One
Purchase Agreement) have been indefeasibly paid in full and the Bank
One Purchase Agreement terminates in accordance with its terms and (b)
with respect to any other Excluded Receivable, the date the Permitted
Receivables Financing Obligor that originated the Receivable related to
such Excluded Receivable ceases to transfer Receivables pursuant to the
Permitted Receivables Financing to which it is a party upon the
termination of such Permitted Receivables Financing.
5
"Trademark License" means any agreement, written or oral,
providing for the grant by or to an Obligor of any right to use any
Trademark, including, without limitation, any thereof referred to in
Schedule 3.16 to the Credit Agreement.
"Trademarks" means (a) all trademarks, trade names, corporate
names, fictitious business names, trade dress and service marks, and
the goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all
applications in connection therewith, whether in the United States
Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or any other country or any political
subdivision thereof, or otherwise, including, without limitation, any
thereof referred to in Schedule 3.16 to the Credit Agreement, and (b)
all renewals thereof.
"Work" means any work which is subject to copyright protection
pursuant to Title 17 of the United States Code.
2. Grant of Security Interest in the Collateral. To secure the prompt
payment and performance in full when due, whether by lapse of time,
acceleration, mandatory prepayment or otherwise, of the Secured Obligations,
each Obligor hereby grants to the Administrative Agent, for the benefit of the
Lenders, a continuing security interest in, and a right to set off against, any
and all right, title and interest of such Obligor in and to the personal
property of the Obligors, whether now owned or existing or owned, acquired, or
arising hereafter (collectively, the "Collateral") including, without
limitation, the following:
(a) all Accounts;
(b) all cash and currency;
(c) all Chattel Paper;
(d) those certain Commercial Tort Claims set
forth on Schedule 2(d) attached hereto;
(e) all Copyrights;
(f) all Copyright Licenses;
(g) all Deposit Accounts;
(h) all Documents;
(i) all Equipment;
(j) all Fixtures;
6
(k) all General Intangibles;
(l) all Instruments;
(m) all Inventory;
(n) all Investment Property;
(o) all Letter-of-Credit Rights;
(p) all Patents;
(q) all Patent Licenses;
(r) all Software;
(s) all Supporting Obligations;
(t) all Trademarks;
(u) all Trademark Licenses; and
(v) all Accessions to and Proceeds of any
and all of the foregoing.
provided, that, notwithstanding the foregoing, Collateral shall expressly
exclude and no security interest shall attach to the Excluded Receivables and
the Excluded Ownership Interests.
The Obligors and the Administrative Agent, on behalf of the Lenders,
hereby acknowledge and agree that the security interest created hereby in the
Collateral (i) constitutes continuing collateral security for all of the Secured
Obligations, whether now existing or hereafter arising and (ii) is not to be
construed as an assignment of any Copyright, Copyright License, Patent, Patent
License, Trademark or Trademark License, or any other license or lease, to the
extent and only for so long as such item of intellectual property, license or
lease contains a legally enforceable restriction on the granting of a security
interest therein.
3. Provisions Relating to Accounts.
(a) Anything herein to the contrary notwithstanding, each of
the Obligors shall remain liable under each of the Accounts to observe
and perform all the conditions and obligations to be observed and
performed by it thereunder, all in accordance with the terms of any
agreement giving rise to each such Account. Neither the Administrative
Agent nor any Lender shall have any obligation or liability under any
Account (or any agreement giving rise thereto) by reason of or arising
out of this Security Agreement or the receipt by the Administrative
Agent or any Lender of any payment relating to such Account pursuant
hereto, nor shall the Administrative Agent or any Lender be obligated
in any manner to perform any of
7
the obligations of an Obligor 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
it 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 it or to which
it may be entitled at any time or times.
(b) At any time after the occurrence and during the
continuation of an Event of Default, the Administrative Agent shall
have the right, but not the obligation, to make test verifications of
the Accounts in any manner and through any medium that it reasonably
considers advisable, and the Obligors shall furnish all such assistance
and information as the Administrative Agent may require in connection
with such test verifications. At any time and from time to time, upon
the Administrative Agent's request and at the expense of the Obligors,
the Obligors shall cause independent public accountants or others
satisfactory to the Administrative Agent to furnish to the
Administrative Agent reports showing reconciliations, aging and test
verifications of, and trial balances for, the Accounts. At any time
after the occurrence and during the continuation of an Event of
Default, the Administrative Agent in its own name or in the name of
others may communicate with account debtors on the Accounts to verify
with them to the Administrative Agent's satisfaction the existence,
amount and terms of any Accounts.
4. Representations and Warranties. Each Obligor hereby represents and
warrants to the Administrative Agent, for the benefit of the Lenders, that so
long as any of the Secured Obligations remain outstanding (other than any such
obligations which by the terms thereof are stated to survive termination of the
Credit Documents) or any Credit Document or Hedging Agreement between a Credit
Party and any Lender is in effect or any Letter of Credit shall remain
outstanding, and until all of the Commitments shall have been terminated:
(a) Legal Name and Location of Obligor; Location of
Collateral. Such Obligor's exact legal name is as shown in this
Security Agreement and its state of formation is (and for the prior
four months has been) as set forth on the signature pages hereto. The
principal place of business and chief executive office of such Obligor
is as set forth on Schedule 4(a) attached hereto. Such Obligor has not
in the past four months changed its name, been party to a merger,
consolidation or other change in structure or used any tradename except
as set forth on Schedule 4(a) attached hereto. All Collateral
consisting of Goods is located solely in the states identified on
Schedule 4(a) attached hereto.
(b) Ownership. Such Obligor is the legal and beneficial owner
of the Collateral which it purports to own, and such Obligor has the
right to pledge, sell, assign or transfer the Collateral.
(c) Security Interest/Priority. This Security Agreement
creates a valid security interest in favor of the Administrative Agent,
for the benefit of the Lenders, in the Collateral of such Obligor and,
when properly perfected by filing or otherwise, shall constitute a
valid first priority, perfected security interest in such Collateral,
to the extent such security interest can be
8
perfected by filing or otherwise under the UCC, free and clear of all
Liens except for Permitted Liens.
(d) Types of Collateral. None of the Collateral consists of,
or is the Proceeds of, (i) As-Extracted Collateral, (ii) Consumer
Goods, (iii) Manufactured Homes, or (iv) Standing Timber.
(e) Accounts. With respect to the Accounts of the Obligors:
(i) each Account and the papers and documents of the applicable Obligor
relating thereto are genuine and in all material respects what they
purport to be; (ii) each Account arises out of a bona fide transaction
for goods sold and delivered (or in the process of being delivered) by
an Obligor or for services actually rendered by an Obligor, which
transaction was conducted in the ordinary course of the Obligor's
business and was completed in accordance with the terms of any
documents pertaining thereto; (iii) the goods sold and/or services
furnished giving rise to each Account are not subject to any security
interest or Lien except the first priority, perfected security interest
granted to the Administrative Agent herein and except for Permitted
Liens; (iv) no Account of an Obligor in excess of $1,000,000 pursuant
to the original invoice related thereto is evidenced by any Instrument
or Chattel Paper unless such Instrument or Chattel Paper has been
theretofore endorsed over and delivered to, or submitted to the control
of, the Administrative Agent; (v) the amount of each Account as shown
on the applicable Obligor's books and records, and on all invoices and
statements which may be delivered to the Administrative Agent with
respect thereto, is due and payable to the applicable Obligor and is
not in any way contingent; (vi) no Account is evidenced by a judgment,
there are no set-offs, counterclaims or disputes existing or asserted
with respect to any Account in excess of $1,000,000 pursuant to the
original invoice related thereto, and no Obligor has made any agreement
with any account debtor for any deduction from any Account except a
discount or allowance for prompt payment allowed by the applicable
Obligor in the ordinary course of its business; (vii) there are no
facts, events or occurrences which in any material respect impair the
validity or enforcement of any Account or tend to reduce the amount
payable thereunder as shown on the applicable Obligor's books and
records and all invoices and statements delivered to the Administrative
Agent with respect thereto; (viii) each Account is assignable; (ix) the
account debtor with respect to each Account has the capacity to
contract; (x) there are no proceedings or actions which are threatened
or pending against any account debtor with respect to any Account; and
(xi) no surety bond was required or given in connection with any
Account of an Obligor or the contracts or purchase orders out of which
they arose except in the ordinary course of business.
(f) Inventory. No Inventory is held by an Obligor pursuant to
consignment, sale or return, sale on approval or similar arrangement.
(g) Equipment. With respect to each Obligor's Equipment: (i)
all such Equipment is in normal operating condition and repair,
ordinary wear and tear alone excepted (subject to casualty events), and
is suitable for the uses to which it is customarily put in the conduct
of such Obligor's business; and (ii) no Equipment used in the conduct
of such Obligor's business
9
is leased, except for non-material items and to the extent permitted
under the Credit Agreement.
(h) Documents, Instruments and Chattel Paper. All Documents,
Instruments and Chattel Paper describing, evidencing or constituting
Collateral are, to the Obligors' knowledge, complete, valid, and
genuine.
(i) Copyrights, Patents and Trademarks.
(i) Schedule 3.16 to the Credit Agreement
includes all Copyrights, Copyright Licenses, Patents, Patent
Licenses, Trademarks (except for non-material unregistered
trademarks and service marks) and Trademark Licenses owned by
the Obligors in their own names as of the date hereof.
(ii) Each Copyright, Patent and Trademark of
such Obligor is valid, subsisting, unexpired and enforceable.
(iii) Except as set forth in Schedule 3.16
to the Credit Agreement, none of such Copyrights, Patents and
Trademarks is the subject of any licensing or franchise
agreement.
(iv) No holding, decision or judgment has
been rendered by any Governmental Authority which would limit,
cancel or question the validity of any Copyright, Patent or
Trademark.
(v) No action or proceeding is pending
seeking to limit, cancel or question the validity of any
Copyright, Patent or Trademark, or which, if adversely
determined, would have a material adverse effect on the value
of any Copyright, Patent or Trademark, except as disclosed in
writing to the Lenders.
(vi) All applications pertaining to the
Copyrights, Patents and Trademarks of each Obligor have been
duly and properly filed, all registrations or letters
pertaining to such Copyrights, Patents and Trademarks have
been duly and properly filed and issued, and all of such
Copyrights, Patents and Trademarks are valid and enforceable,
except as could not have or reasonably be expected to have a
Material Adverse Effect.
(vii) Except for licenses to third parties
in the ordinary course of business, no Obligor has made any
assignment or agreement in conflict with the security interest
in the Copyrights, Patents or Trademarks of such Obligor
hereunder.
(j) Restrictions on Security Interest. None of the Obligors is
party to any material license or any material lease that contains
legally enforceable restrictions on the granting of a security interest
therein.
10
(k) Binding Agreement. This Security Agreement has been duly
authorized, executed and delivered by the Obligors and constitutes a
legal, valid and binding obligation of the Obligors enforceable in
accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy or insolvency laws or by general principles of
equity.
5. Covenants. Each Obligor covenants that, so long as any of the
Secured Obligations remain outstanding (other than any such obligations which by
the terms thereof are stated to survive termination of the Credit Documents) or
any Credit Document or Hedging Agreement between a Credit Party and any Lender
is in effect or any Letter of Credit shall remain outstanding, and until all of
the Commitments shall have been terminated, such Obligor shall:
(a) Other Liens. Defend the Collateral against the claims and
demands of all other parties claiming an interest therein and keep the
Collateral free from all Liens, except for Permitted Liens. Neither the
Administrative Agent, nor any Lender authorizes any Obligor to, and no
Obligor shall, sell, exchange, transfer, assign, lease or otherwise
dispose of the Collateral or any interest therein, except as permitted
under the Credit Agreement.
(b) Preservation of Collateral. Keep the Collateral in good
order, condition and repair and not use the Collateral in violation of
the provisions of this Security Agreement or any other agreement
relating to the Collateral or any policy insuring the Collateral or any
applicable statute, law, bylaw, rule, regulation or ordinance.
(c) Instruments/Tangible Chattel Paper/Documents. If any
amount payable under or in connection with any of the Collateral shall
be or become evidenced by any Instrument or Tangible Chattel Paper, or
if any property constituting Collateral shall be stored or shipped
subject to a Document, such Obligor shall ensure that such Instrument,
Tangible Chattel Paper or Document is either in the possession of such
Obligor at all times or, if requested by the Administrative Agent to
perfect its security interest in such Collateral, is delivered to the
Administrative Agent duly indorsed in a manner satisfactory to the
Administrative Agent. Such Obligor shall ensure that any Collateral
consisting of Tangible Chattel Paper is marked with a legend acceptable
to the Administrative Agent indicating the Administrative Agent's
security interest in such Tangible Chattel Paper.
(d) Changes in Corporate Structure or Location. Not, without
providing written notice to the Administrative Agent and without filing
such amendments to any previously filed financing statements as the
Administrative Agent may require within thirty (30) days thereafter,
(a) alter its corporate existence or, in one transaction or a series of
transactions, merge into or consolidate with any other entity, or sell
all or substantially all of its assets, (b) change its state of
incorporation or formation or (c) change its registered corporate name.
(e) Inspection. Upon reasonable notice, and during reasonable
hours, at all times allow the Administrative Agent or its
representatives to visit and inspect the Collateral as set forth in
Section 3.19(b) of the Credit Agreement.
11
(f) Filing of Financing Statements, Notices, etc. Each Obligor
hereby authorizes the Administrative Agent to prepare and file such
financing statements (including renewal statements) or amendments
thereof or supplements thereto or other instruments as the
Administrative Agent may from time to time deem necessary or
appropriate in order to perfect and maintain the security interests
granted hereunder in accordance with the UCC. Each Obligor shall also
execute and deliver to the Administrative Agent such agreements,
assignments or instruments (including affidavits, notices,
reaffirmations and amendments and restatements of existing documents)
as the Administrative Agent may reasonably request and do all such
other things as the Administrative Agent may reasonably deem necessary
or appropriate (i) to assure to the Administrative Agent its security
interests hereunder, including (A) with regard to Copyrights, a Notice
of Grant of Security Interest in Copyrights in the form of Schedule
5(f)(i) attached hereto, (B) with regard to Patents, a Notice of Grant
of Security Interest in Patents for filing with the United States
Patent and Trademark Office in the form of Schedule 5(f)(ii) attached
hereto and (C) with regard to Trademarks, a Notice of Grant of Security
Interest in Trademarks for filing with the United States Patent and
Trademark Office in the form of Schedule 5(f)(iii) attached hereto,
(ii) to consummate the transactions contemplated hereby and (iii) to
otherwise protect and assure the Administrative Agent of its rights and
interests hereunder. To that end, each Obligor hereby irrevocably
makes, constitutes and appoints the Administrative Agent, its nominee
or any other person whom the Administrative Agent may designate, as
such Obligor's attorney-in-fact with full power and for the limited
purpose to sign in the name of such Obligor any such notices or similar
documents which in the Administrative Agent's reasonable discretion
would be necessary, appropriate or convenient in order to perfect and
maintain perfection of the security interests granted hereunder, such
power, being coupled with an interest, being and remaining irrevocable
so long as the Credit Agreement is in effect or any amounts payable
thereunder or under any other Credit Document, any Letter of Credit or
any Hedging Agreement between a Credit Party and any Lender shall
remain outstanding, and until all of the Commitments thereunder shall
have terminated. Each Obligor hereby agrees that a carbon, photographic
or other reproduction of this Security Agreement or any such financing
statement is sufficient for filing as a financing statement by the
Administrative Agent without notice thereof to such Obligor wherever
the Administrative Agent may in its sole discretion desire to file the
same. In the event for any reason the law of any jurisdiction other
than North Carolina becomes or is applicable to the Collateral of any
Obligor or any part thereof, or to any of the Secured Obligations, such
Obligor agrees to execute and deliver all such instruments and to do
all such other things as the Administrative Agent in its sole
discretion reasonably deems necessary or appropriate to preserve,
protect and enforce the security interests of the Administrative Agent
under the law of such other jurisdiction (and, if an Obligor shall fail
to do so promptly upon the request of the Administrative Agent, then
the Administrative Agent may execute any and all such requested
documents on behalf of such Obligor pursuant to the power of attorney
granted hereinabove). Each Obligor agrees to xxxx its books and records
to reflect the security interest of the Administrative Agent in the
Collateral.
(g) Control. Each Obligor shall execute and deliver all
agreements, assignments, instruments or other documents as reasonably
requested by the Administrative Agent for the
12
purpose of obtaining and maintaining control within the meaning of the
UCC with respect to any Collateral consisting of:
(i) Deposit Accounts;
(ii) Investment Property;
(iii) Letter-of-Credit Rights; and
(iv) Electronic Chattel Paper.
(h) Collateral Held by Warehouseman, Bailee, etc. If any
Collateral is at any time in the possession or control of a
warehouseman, bailee or any agent or processor of such Obligor, (i)
notify the Administrative Agent of such possession, (ii) upon the
request of the Administrative Agent, notify such Person of the
Administrative Agent's security interest for the benefit of the Lenders
in such Collateral, (iii) upon the request of the Administrative Agent,
instruct such Person to hold all such Collateral for the Administrative
Agent's account and subject to the Administrative Agent's instructions
and (iv) upon the request of the Administrative Agent, obtain an
acknowledgment from such Person that it is holding such Collateral for
the benefit of the Administrative Agent.
(i) Treatment of Accounts.
(i) Not grant or extend the time for payment of any
Account, or compromise or settle any Account for less than the
full amount thereof, or release any person or property, in
whole or in part, from payment thereof, or allow any credit or
discount thereon, other than as normal and customary in the
ordinary course of an Obligor's business, and (ii) maintain at
its principal place of business a record of Accounts
consistent with customary business practices.
(j) Covenants Relating to Copyrights.
(i) Employ the Copyright for each Work with
such notice of copyright as may be required by law to secure
copyright protection.
(ii) Not do any act or knowingly omit to do
any act whereby any material Copyright may become invalidated
and (A) not do any act, or knowingly omit to do any act,
whereby any material Copyright may become injected into the
public domain; (B) notify the Administrative Agent immediately
if it knows, or has reason to know, that any material
Copyright may become injected into the public domain or of any
adverse determination or development (including, without
limitation, the institution of, or any such determination or
development in, any proceeding in any court or tribunal in the
United States or any other country) regarding an Obligor's
ownership of any such Copyright or its validity; (C) take all
necessary steps as it shall deem appropriate under the
circumstances, to maintain and pursue each application, to
obtain
13
the relevant registration and to maintain each registration of
each material Copyright owned by an Obligor including, without
limitation, filing of applications for renewal where
necessary; and (D) promptly notify the Administrative Agent of
any material infringement of any material Copyright of an
Obligor of which it becomes aware and take such actions as it
shall reasonably deem appropriate under the circumstances to
protect such Copyright, including, where appropriate, the
bringing of suit for infringement, seeking injunctive relief
and seeking to recover any and all damages for such
infringement.
(iii) Not make any assignment or agreement
in conflict with the security interest in the Copyrights of
each Obligor hereunder other than in the ordinary course of
business.
(k) Covenants Relating to Patents and Trademarks.
(i) Subject to each Obligor's reasonable
business judgment, (A) continue to use each material Trademark
on each and every trademark class of goods applicable to its
current line as reflected in its current catalogs, brochures
and price lists in order to maintain such Trademark in full
force free from any claim of abandonment for non-use, (B)
maintain as in the past the quality of products and services
offered under such Trademark, (C) employ such Trademark with
the appropriate notice of registration, (D) not adopt or use
any xxxx which is confusingly similar or a colorable imitation
of such Trademark unless the Administrative Agent, for the
ratable benefit of the Lenders, shall obtain a perfected
security interest in such xxxx pursuant to this Security
Agreement, and (E) not (and not permit any licensee or
sublicensee thereof to) do any act or knowingly omit to do any
act whereby any material Trademark may become invalidated.
(ii) Not do any act, or omit to do any act,
whereby any material Patent may become abandoned or dedicated.
(iii) Promptly notify the Administrative
Agent if it knows, or has reason to know, that any application
or registration relating to any material Patent or material
Trademark may become abandoned or dedicated, or of any adverse
determination or development (including, without limitation,
the institution of, or any such determination or development
in, any proceeding in the United States Patent and Trademark
Office or any court or tribunal in any country) regarding an
Obligor's ownership of any such Patent or Trademark or its
right to register the same or to keep, maintain and use the
same.
(iv) Whenever an Obligor, either by itself
or through an agent, employee, licensee or designee, shall
file an application for the registration of any Patent or
Trademark with the United States Patent and Trademark Office
or any similar office or agency in any other country or any
political subdivision thereof, such Obligor shall report such
filing to the Administrative Agent in accordance with the
14
terms of the Credit Agreement. Upon request of the
Administrative Agent, an Obligor shall execute and deliver any
and all agreements, instruments, documents and papers as the
Administrative Agent may reasonably request to evidence the
Administrative Agent's and the Lenders' security interest in
any Patent or Trademark and the goodwill and General
Intangibles of such Obligor relating thereto or represented
thereby.
(v) Take all reasonable and necessary steps,
including, without limitation, in any proceeding before the
United States Patent and Trademark Office, or any similar
office or agency in any other country or any political
subdivision thereof, to maintain and pursue each application,
to obtain the relevant registration and to maintain each
registration of all material Patents and material Trademarks,
including, without limitation, filing of applications for
renewal, affidavits of use and affidavits of incontestability.
(vi) Promptly notify the Administrative
Agent and the Lenders after it learns that any material Patent
or material Trademark included in the Collateral is infringed,
misappropriated or diluted by a third party and promptly xxx
for infringement, misappropriation or dilution, to seek
injunctive relief where appropriate and to recover any and all
damages for such infringement, misappropriation or dilution,
or take such other actions as it shall reasonably deem
appropriate under the circumstances to protect such Patent or
Trademark.
(vii) Except for licenses to third parties
in the ordinary course of business, not make any assignment or
agreement in conflict with the security interest in the
Patents or Trademarks of any Obligor hereunder.
(l) New Patents, Copyrights and Trademarks. In accordance with
the terms of the Credit Agreement, provide the Administrative Agent
with (i) a listing of all applications, if any, for new Copyrights,
Patents or Trademarks (together with a listing of the issuance of
registrations or letters on present applications), which new
applications and issued registrations or letters shall be subject to
the terms and conditions hereunder, and (ii) (A) with respect to
Copyrights, a duly executed Notice of Grant of Security Interest in
Copyrights, (B) with respect to Patents, a duly executed Notice of
Grant of Security Interest in Patents, (C) with respect to Trademarks,
a duly executed Notice of Grant of Security Interest in Trademarks or
(D) such other duly executed documents as the Administrative Agent may
request in a form acceptable to counsel for the Administrative Agent
and suitable for recording to evidence the security interest of the
Administrative Agent for the benefit of the Lenders in the Copyright,
Patent or Trademark which is the subject of such new application.
(m) Insurance. Insure, repair and replace the Collateral of
such Obligor as set forth in the Credit Agreement. All insurance
proceeds shall be subject to the security interest of the
Administrative Agent hereunder.
(n) Commercial Tort Claims; Notice of Litigation. (i) Promptly
forward to the Administrative Agent written notification of any and all
Commercial Tort Claims,
15
including, but not limited to, any and all actions, suits, and
proceedings before any court or Governmental Authority by or affecting
such Obligor or any of its Subsidiaries and (ii) execute and deliver
such statements, documents and notices and do and cause to be done all
such things as may be required by the Administrative Agent, or required
by law, including all things which may from time to time be necessary
under the UCC to fully create, preserve, perfect and protect the
priority of the Administrative Agent's security interest in any
Commercial Tort Claims.
(o) Maintain Collateral as Personal Property. At all times
maintain the Collateral as personal property and not affix any of the
Collateral to any real property in a manner which would change its
nature from personal property to real property or a Fixture to real
property.
6. Advances by Lenders. On failure of any Obligor to perform any of the
covenants or agreements contained herein, upon ten days' prior written notice to
such Obligor (unless such delay would be adverse to the interests of the Lenders
and, in such event, as the Administrative Agent deems necessary) the
Administrative Agent may, at its sole option and in its reasonable discretion,
perform the same and in so doing may expend such sums as the Administrative
Agent may reasonably deem advisable in the performance thereof, including,
without limitation, the payment of any insurance premiums, the payment of any
taxes, a payment to obtain a release of a Lien or potential Lien, expenditures
made in defending against any adverse claim and all other expenditures which the
Administrative Agent or the Lenders may make for the protection of the security
interest hereof or may be compelled to make by operation of law. All such sums
and amounts so expended shall be repayable by the Obligors on a joint and
several basis promptly upon timely notice thereof and demand therefor, shall
constitute additional Secured Obligations and shall bear interest from the date
said amounts are expended at the default rate specified in Section 2.10(b) of
the Credit Agreement. No such performance of any covenant or agreement by the
Administrative Agent or the Lenders on behalf of any Obligor, and no such
advance or expenditure therefor, shall relieve the Obligors of any default under
the terms of this Security Agreement, the other Credit Documents or any Hedging
Agreement. The Administrative Agent or the Lenders may make any payment hereby
authorized in accordance with any xxxx, statement or estimate procured from the
appropriate public office or holder of the claim to be discharged without
inquiry into the accuracy of such xxxx, statement or estimate or into the
validity of any tax assessment, sale, forfeiture, tax lien, title or claim
except to the extent such payment is being contested in good faith by an Obligor
in appropriate proceedings and against which adequate reserves are being
maintained in accordance with GAAP.
7. Events of Default.
The occurrence of an event which under the Credit Agreement would
constitute an Event of Default shall be an event of default hereunder (an "Event
of Default").
8. Remedies.
(a) General Remedies. Upon the occurrence of an Event of
Default and during the continuation thereof, the Lenders shall have, in
addition to the rights and remedies provided
16
herein, in the Credit Documents, in the Hedging Agreements or by law
(including, but not limited to, levy of attachment, garnishment and the
rights and remedies set forth in the UCC of the jurisdiction applicable
to the affected Collateral), the rights and remedies of a secured party
under the UCC (regardless of whether the UCC is the law of the
jurisdiction where the rights and remedies are asserted and regardless
of whether the UCC applies to the affected Collateral), and further,
the Administrative Agent may, with or without judicial process or the
aid and assistance of others, (i) enter on any premises on which any of
the Collateral may be located and, without resistance or interference
by the Obligors, take possession of the Collateral, (ii) dispose of any
Collateral on any such premises, (iii) require the Obligors to assemble
and make available to the Administrative Agent at the expense of the
Obligors any Collateral at any place and time designated by the
Administrative Agent which is reasonably convenient to both parties,
(iv) remove any Collateral from any such premises for the purpose of
effecting the sale or other disposition thereof, and/or (v) at any
place and time or times, sell and deliver any or all Collateral held by
or for it at public or private sale, by one or more contracts, in one
or more parcels, for cash, upon credit or otherwise, at such prices and
upon such terms as the Administrative Agent deems advisable, in its
sole discretion (subject to any and all mandatory legal requirements).
Neither the Administrative Agent's compliance with any applicable state
or federal law in the conduct of such sale, nor its disclaimer of any
warranties relating to the Collateral, shall be considered to adversely
affect the commercial reasonableness of such sale. In addition to all
other sums due the Administrative Agent and the Lenders with respect to
the Secured Obligations, the Obligors shall pay the Administrative
Agent and each of the Lenders all reasonable documented costs and
expenses incurred by the Administrative Agent or any such Lender,
including, but not limited to, reasonable attorneys' fees and court
costs, in obtaining or liquidating the Collateral, in enforcing payment
of the Secured Obligations, or in the prosecution or defense of any
action or proceeding by or against the Administrative Agent or the
Lenders or the Obligors concerning any matter arising out of or
connected with this Security Agreement, any Collateral or the Secured
Obligations, including, without limitation, any of the foregoing
arising in or under or related to a case under the Bankruptcy Code.
Each Obligor agrees that any requirement of reasonable notice shall be
met if such notice is personally served on or mailed postage prepaid to
the Borrower in accordance with the notice provisions of Section 9.2 of
the Credit Agreement at least 10 days before the time of sale or other
event giving rise to the requirement of such notice. The Administrative
Agent and the Lenders shall not be obligated to make any sale or other
disposition of the Collateral regardless of notice having been given.
To the extent permitted by applicable law, any Lender may be a
purchaser at any such sale. To the extent permitted by applicable law,
each of the Obligors hereby waives all of its rights of redemption with
respect to any such sale. Subject to the provisions of applicable law,
the Administrative Agent and the Lenders may postpone or cause the
postponement of the sale of all or any portion of the Collateral by
announcement at the time and place of such sale, and such sale may,
without further notice, to the extent permitted by law, be made at the
time and place to which such sale was postponed, or the Administrative
Agent and the Lenders may further postpone such sale by announcement
made at such time and place.
(b) Remedies relating to Accounts. Upon the occurrence of an
Event of Default and during the continuation thereof, whether or not
the Administrative Agent has exercised any
17
or all of its rights and remedies hereunder, each Obligor will promptly
upon request of the Administrative Agent instruct all account debtors
to remit all payments in respect of Accounts to a mailing location
selected by the Administrative Agent. In addition, the Administrative
Agent or its designee may notify any Obligor's customers and account
debtors that the Accounts of such Obligor have been assigned to the
Administrative Agent or of the Administrative Agent's security interest
therein, and may (either in its own name or in the name of an Obligor
or both) demand, collect (including without limitation by way of a
lockbox arrangement), receive, take receipt for, sell, xxx for,
compound, settle, compromise and give acquittance for any and all
amounts due or to become due on any Account, and, in the Administrative
Agent's discretion, file any claim or take any other action or
proceeding to protect and realize upon the security interest of the
Lenders in the Accounts. Each Obligor acknowledges and agrees that the
Proceeds of its Accounts remitted to or on behalf of the Administrative
Agent in accordance with the provisions hereof shall be applied to the
Secured Obligations. The Administrative Agent and the Lenders shall
have no liability or responsibility to any Obligor for acceptance of a
check, draft or other order for payment of money bearing the legend
"payment in full" or words of similar import or any other restrictive
legend or endorsement or be responsible for determining the correctness
of any remittance. Each Obligor hereby agrees to indemnify the
Administrative Agent and the Lenders from and against all liabilities,
damages, losses, actions, claims, judgments, costs, expenses, charges
and reasonable attorneys' fees suffered or incurred by the
Administrative Agent or the Lenders (each, an "Indemnified Party")
because of the maintenance of the foregoing arrangements except as
relating to or arising out of the gross negligence or willful
misconduct of an Indemnified Party or its officers, directors,
employees, counsel or agents. In the case of any investigation,
litigation or other proceeding, the foregoing indemnity shall be
effective whether or not such investigation, litigation or proceeding
is brought by an Obligor, its directors, shareholders or creditors or
an Indemnified Party or any other Person or any other Indemnified Party
is otherwise a party thereto.
(c) Access. In addition to the rights and remedies hereunder,
upon the occurrence of an Event of Default and during the continuation
thereof, the Administrative Agent shall have the right to enter and
remain upon the various premises of the Obligors without cost or charge
to the Administrative Agent, and use the same, together with materials,
supplies, books and records of the Obligors, for the purpose of
collecting and liquidating the Collateral, or for preparing for sale
and conducting the sale of the Collateral, whether by foreclosure,
auction or otherwise, and the Administrative Agent may remove
Collateral, or any part thereof, from such premises and/or any records
with respect thereto in order to effectively collect or liquidate such
Collateral.
(d) Nonexclusive Nature of Remedies. Failure by the
Administrative Agent or the Lenders to exercise any right, remedy or
option under this Security Agreement, any other Credit Document, any
Hedging Agreement or as provided by law, or any delay by the
Administrative Agent or the Lenders in exercising the same, shall not
operate as a waiver of any such right, remedy or option. No waiver
hereunder shall be effective unless it is in writing, signed by the
party against whom such waiver is sought to be enforced and then only
to the extent specifically stated therein, which in the case of the
Administrative Agent or the Lenders
18
shall only be granted as provided herein. To the extent permitted by
law, neither the Administrative Agent, the Lenders, nor any party
acting as attorney for the Administrative Agent or the Lenders, shall
be liable hereunder for any acts or omissions or for any error of
judgment or mistake of fact or law other than their gross negligence or
willful misconduct hereunder. The rights and remedies of the
Administrative Agents and the Lenders under this Security Agreement
shall be cumulative and not exclusive of any other right or remedy
which the Administrative Agent or the Lenders may have.
(e) Retention of Collateral. The Administrative Agent may,
after providing the notices required by Sections 9-620 and 9-621 of the
UCC or otherwise complying with the requirements of the applicable law
of the relevant jurisdiction, accept or retain the Collateral in
satisfaction of the Secured Obligations. Unless and until the
Administrative Agent shall have provided such notices, however, the
Administrative Agent shall not be deemed to have retained any
Collateral in satisfaction of any Secured Obligations for any reason.
(f) Deficiency. In the event that the proceeds of any sale,
collection or realization are insufficient to pay all amounts to which
the Administrative Agent or the Lenders are legally entitled, the
Obligors shall be jointly and severally liable for the deficiency,
together with interest thereon at the default rate specified in Section
2.10(b) of the Credit Agreement, together with the costs of collection
and the reasonable fees of any attorneys employed by the Administrative
Agent to collect such deficiency. Any surplus remaining after the full
payment and satisfaction of the Secured Obligations shall be returned
to the Obligors or to whomsoever a court of competent jurisdiction
shall determine to be entitled thereto.
9. Rights of the Administrative Agent.
(a) Power of Attorney. In addition to other powers of attorney
contained herein, each Obligor hereby designates and appoints the
Administrative Agent, on behalf of the Lenders, and each of its
designees or agents, as attorney-in-fact of such Obligor, irrevocably
and with power of substitution, with authority to take any or all of
the following actions upon the occurrence and during the continuation
of an Event of Default:
(i) to demand, collect, settle, compromise, adjust,
and give discharges and releases concerning the Collateral of
such Obligor, all as the Administrative Agent may reasonably
determine;
(ii) to commence and prosecute any actions at any
court for the purposes of collecting any Collateral and
enforcing any other right in respect thereof;
(iii) to defend, settle or compromise any action
brought and, in connection therewith, give such discharge or
release as the Administrative Agent may deem reasonably
appropriate;
19
(iv) to receive, open and dispose of mail addressed
to an Obligor and endorse checks, notes, drafts, acceptances,
money orders, bills of lading, warehouse receipts or other
instruments or documents evidencing payment, shipment or
storage of the goods giving rise to the Collateral of such
Obligor, or securing or relating to such Collateral, on behalf
of and in the name of such Obligor;
(v) to sell, assign, transfer, make any agreement in
respect of, or otherwise deal with or exercise rights in
respect of, any Collateral or the goods or services which have
given rise thereto, as fully and completely as though the
Administrative Agent were the absolute owner thereof for all
purposes;
(vi) to adjust and settle claims under any insurance
policy relating thereto;
(vii) to execute and deliver all assignments,
conveyances, statements, financing statements, renewal
financing statements, security agreements, affidavits, notices
and other agreements, instruments and documents that the
Administrative Agent may determine necessary in order to
perfect and maintain the security interests and liens granted
in this Security Agreement and in order to fully consummate
all of the transactions contemplated herein;
(viii) to institute any foreclosure proceedings that
the Administrative Agent may deem appropriate; and
(ix) to do and perform all such other acts and things
as the Administrative Agent may reasonably deem to be
necessary, proper or convenient in connection with the
Collateral.
This power of attorney is a power coupled with an interest and shall be
irrevocable (i) for so long as any of the Secured Obligations remain
outstanding, any Credit Document or any Hedging Agreement between a
Credit Party and any Lender is in effect or any Letter of Credit shall
remain outstanding and (ii) until all of the Commitments shall have
been terminated. The Administrative Agent shall be under no duty to
exercise or withhold the exercise of any of the rights, powers,
privileges and options expressly or implicitly granted to the
Administrative Agent in this Security Agreement, and shall not be
liable for any failure to do so or any delay in doing so. The
Administrative Agent shall not be liable for any act or omission or for
any error of judgment or any mistake of fact or law in its individual
capacity or its capacity as attorney-in-fact except acts or omissions
resulting from its gross negligence or willful misconduct. This power
of attorney is conferred on the Administrative Agent solely to protect,
preserve and realize upon its security interest in the Collateral.
(b) Assignment by the Administrative Agent. The Administrative
Agent may from time to time, subject to the provisions of the Credit
Agreement, assign the Secured Obligations
20
or any portion thereof and/or the Collateral or any portion thereof,
and the assignee shall be entitled to all of the rights and remedies of
the Administrative Agent under this Security Agreement in relation
thereto.
(c) The Administrative Agent's Duty of Care. Other than the
exercise of reasonable care to ensure the safe custody of the
Collateral while being held by the Administrative Agent hereunder, the
Administrative Agent shall have no duty or liability to preserve rights
pertaining thereto, it being understood and agreed that the Obligors
shall be responsible for preservation of all rights in the Collateral,
and the Administrative Agent shall be relieved of all responsibility
for the Collateral upon surrendering it or tendering the surrender of
it to the Obligors. The Administrative Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the
Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which the Administrative Agent accords its
own property, which shall be no less than the treatment employed by a
reasonable and prudent agent in the industry, it being understood that
the Administrative Agent shall not have responsibility for taking any
necessary steps to preserve rights against any parties with respect to
any of the Collateral. In the event of a public or private sale of
Collateral pursuant to Section 8 hereof, the Administrative Agent shall
have no obligation to clean-up, repair or otherwise prepare the
Collateral for sale.
10. Application of Proceeds. Upon the occurrence and during the
continuation of an Event of Default, any payments in respect of the Secured
Obligations and any proceeds of the Collateral, when received by the
Administrative Agent or any of the Lenders in cash or its equivalent, will be
applied in reduction of the Secured Obligations in the order set forth in
Section 2.13(b) of the Credit Agreement, and each Obligor irrevocably waives the
right to direct the application of such payments and proceeds and acknowledges
and agrees that the Administrative Agent shall have the continuing and exclusive
right to apply and reapply any and all such payments and proceeds in the
Administrative Agent's sole discretion, notwithstanding any entry to the
contrary upon any of its books and records.
11. Costs of Counsel. If at any time hereafter, whether upon the
occurrence of an Event of Default or not, the Administrative Agent employs
counsel to prepare or consider amendments, waivers or consents with respect to
this Security Agreement, or to take action or make a response in or with respect
to any legal or arbitral proceeding relating to this Security Agreement or
relating to the Collateral, or to protect the Collateral or exercise any rights
or remedies under this Security Agreement or with respect to the Collateral,
then the Obligors agree to promptly pay upon demand any and all such reasonable
documented costs and expenses of the Administrative Agent or the Lenders, all of
which costs and expenses shall constitute Secured Obligations hereunder.
12. Continuing Agreement.
(a) This Security Agreement shall be a continuing agreement in
every respect and shall remain in full force and effect so long as any
of the Secured Obligations (other than inchoate indemnity obligations)
remain outstanding or any Credit Document or Hedging Agreement between
a Credit Party and any Lender is in effect or any Letter of Credit
shall remain outstanding (other than any such obligations which by the
terms thereof are stated to
21
survive termination of the Credit Documents), and until all of the
Commitments thereunder shall have terminated. Upon such payment and
termination, this Security Agreement shall be automatically terminated
and the Administrative Agent and the Lenders shall, upon the request
and at the expense of the Obligors, forthwith release all of their
liens and security interests hereunder and shall execute and deliver
all UCC termination statements and/or other documents reasonably
requested by the Obligors evidencing such termination. Notwithstanding
the foregoing all releases and indemnities provided hereunder shall
survive termination of this Security Agreement.
(b) This Security Agreement shall continue to be effective or
be automatically reinstated, as the case may be, if at any time
payment, in whole or in part, of any of the Secured Obligations is
rescinded or must otherwise be restored or returned by the
Administrative Agent or any Lender as a preference, fraudulent
conveyance or otherwise under any bankruptcy, insolvency or similar
law, all as though such payment had not been made; provided that in the
event payment of all or any part of the Secured Obligations is
rescinded or must be restored or returned, all reasonable costs and
expenses (including, without limitation, any reasonable legal fees and
disbursements) incurred by the Administrative Agent or any Lender in
defending and enforcing such reinstatement shall be deemed to be
included as a part of the Secured Obligations.
13. Amendments; Waivers; Modifications. This Security Agreement and the
provisions hereof may not be amended, waived, modified, changed, discharged or
terminated except as set forth in Section 9.1 of the Credit Agreement.
14. Successors in Interest. This Security Agreement shall create a
continuing security interest in the Collateral and shall be binding upon each
Obligor, its successors and assigns and shall inure, together with the rights
and remedies of the Administrative Agent and the Lenders hereunder, to the
benefit of the Administrative Agent and the Lenders and their successors and
permitted assigns; provided, however, that none of the Obligors may assign its
rights or delegate its duties hereunder without the prior written consent of
each Lender or the Required Lenders, as required by the Credit Agreement. To the
fullest extent permitted by law, each Obligor hereby releases the Administrative
Agent and each Lender, and its successors and assigns, from any liability for
any act or omission relating to this Security Agreement or the Collateral,
except for any liability arising from the gross negligence or willful misconduct
of, or intentional breach of applicable law by, the Administrative Agent, or
such Lender, or its officers, employees or agents.
15. Notices. All notices required or permitted to be given under this
Security Agreement shall be in conformity with Section 9.2 of the Credit
Agreement.
16. Counterparts. This Security Agreement may be executed in any number
of counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Security Agreement to produce or
account for more than one such counterpart.
22
17. Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Security Agreement.
18. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial;
Venue. This Security Agreement and the rights and obligations of the parties
hereunder shall be governed by and construed and interpreted in accordance with
the laws of the State of North Carolina. The provisions of the Credit Agreement
relating to submission to jurisdiction, waiver of jury trial and venue are
hereby incorporated by reference herein, mutatis mutandis.
19. Severability. If any provision of this Security Agreement is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.
20. Entirety. This Security Agreement, the other Credit Documents and
all Hedging Agreements between the Credit Parties and the Lenders represent the
entire agreement of the parties hereto and thereto, and supersede all prior
agreements and understandings, oral or written, if any, including any commitment
letters or correspondence relating to the Credit Documents, such Hedging
Agreements or the transactions contemplated herein and therein.
21. Survival. All indemnification obligations and representations and
warranties of the Obligors hereunder shall survive the execution and delivery of
this Security Agreement, the other Credit Documents and the Hedging Agreements
between the Credit Parties and the Lenders, the delivery of the Notes, the
making of the Loans and the issuance of the Letters of Credit under the Credit
Agreement.
22. Other Security. To the extent that any of the Secured Obligations
are now or hereafter secured by property other than the Collateral (including,
without limitation, real property and securities owned by an Obligor), or by a
guarantee, endorsement or property of any other Person, then the Administrative
Agent and the Lenders shall have the right to proceed against such other
property, guarantee or endorsement upon the occurrence of any Event of Default,
and the Administrative Agent and the Lenders have the right, in their sole
discretion, to determine which rights, security, liens, security interests or
remedies the Administrative Agent and the Lenders shall at any time pursue,
relinquish, subordinate, modify or take with respect thereto, without in any way
modifying or affecting any of them or any of the Administrative Agent's and the
Lenders' rights or the Secured Obligations under this Security Agreement, under
any other of the Credit Documents or under any Hedging Agreement between a
Credit Party and any Lender.
23
23. Joint and Several Obligations of Obligors.
(a) Each of the Obligors is accepting joint and several
liability hereunder in consideration of the financial accommodation to
be provided by the Lenders under the Credit Agreement, for the mutual
benefit, directly and indirectly, of each of the Obligors and in
consideration of the undertakings of each of the Obligors to accept
joint and several liability for the obligations of each of them.
(b) Each of the Obligors jointly and severally hereby
irrevocably and unconditionally accepts, not merely as a surety but
also as a co-debtor, joint and several liability with the other
Obligors with respect to the payment and performance of all of the
Secured Obligations arising under this Security Agreement, the other
Credit Documents and the Hedging Agreements between the Credit Parties
and the Lenders, it being the intention of the parties hereto that all
the Obligations shall be the joint and several obligations of each of
the Obligors without preferences or distinction among them.
(c) Notwithstanding any provision to the contrary contained
herein or in any other of the Credit Documents, to the extent the
obligations of an Obligor shall be adjudicated to be invalid or
unenforceable for any reason (including, without limitation, because of
any applicable state or federal law relating to fraudulent conveyances
or transfers) then the obligations of each Obligor hereunder shall be
limited to the maximum amount that is permissible under applicable law
(whether federal or state and including, without limitation, the
Bankruptcy Code).
24. Partial Releases. Upon the written request of any of the Obligors,
the Administrative Agent agrees to provide, execute and file any and
all financing statement amendments, releases, terminations or other
documents or instruments that may be necessary to evidence the release
of the security interests of the Lenders in the portion of the
Collateral designated by such Obligor to be transferred, sold, or
otherwise disposed of, by such Obligor in accordance with the terms of
the Credit Agreement.
25. Excluded Receivables Definition. Notwithstanding any other
provision of this Agreement, until the date on which the Aggregate
Unpaids (as defined in the Bank One Purchase Agreement) have been
indefeasibly paid in full and the Bank One Purchase Agreement
terminates in accordance with its terms, the definition of Excluded
Receivables in this Agreement shall not be amended, restated or
otherwise modified without the prior written consent of the Agent
under, and as defined, in the Bank One Purchase Agreement.
24
Each of the parties hereto has caused a counterpart of this Security
Agreement to be duly executed and delivered as of the date first above written.
BORROWER: SUIZA FOODS CORPORATION,
a Delaware corporation
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
GUARANTORS: MORNINGSTAR FOODS INC.,
a [__________] corporation
MORNINGSTAR SERVICES INC.,
a [__________] corporation
NEPTUNE DELAWARE CORPORATION,
a [__________] corporation
XXXX PLASTICS MANUFACTURING CORP.,
a [__________] corporation
SUIZA DAIRY CORPORATION,
a [__________] corporation
SUIZA FRUIT CORPORATION,
a [__________] corporation
SUIZA MANAGEMENT CORPORATION,
a [__________] corporation
THE MORNINGSTAR GROUP INC.,
a [__________] corporation
[ADD XXXX ENTITIES AND ADDITIONAL SUIZA
SUBSIDIARIES]
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Accepted and agreed to as of the date first above written.
FIRST UNION NATIONAL BANK,
as Administrative Agent
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
SCHEDULE 2(d)
COMMERCIAL TORT CLAIMS
SCHEDULE 4(a)
A. PRINCIPAL PLACE OF BUSINESS/CHIEF EXECUTIVE OFFICES
B. MERGERS, CONSOLIDATIONS, CHANGE IN STRUCTURE OR USE OF TRADENAMES
C. LOCATION(S) OF COLLATERAL
SCHEDULE 5(f)(i)
NOTICE
OF
GRANT OF SECURITY INTEREST
IN
COPYRIGHTS
United States Copyright Office
Please be advised that pursuant to the Security Agreement dated as of
_______, 2001 (as the same may be amended, modified, extended or restated from
time to time, the "Security Agreement") by and among the Obligors party thereto
(each an "Obligor" and collectively, the "Obligors") and First Union National
Bank, as Administrative Agent (the "Administrative Agent") for the Lenders
referenced therein (the "Lenders"), the undersigned Obligor has granted a
continuing security interest in and continuing lien upon, the copyrights and
copyright applications shown below to the Administrative Agent for the ratable
benefit of the Lenders:
COPYRIGHTS
Date of
Copyright No. Description of Copyright Copyright
------------- ------------------------ ---------
COPYRIGHT APPLICATIONS
Copyright Description of Copyright Date of Copyright
Applications No. Applied For Applications
---------------- ------------------------ -----------------
The Obligor and the Administrative Agent, on behalf of the Lenders,
hereby acknowledge and agree that the security interest in the foregoing
copyrights and copyright applications (i) may only be terminated in accordance
with the terms of the Security Agreement and (ii) is not to be construed as an
assignment of any copyright or copyright application.
Very truly yours,
-------------------------------------------
[Obligor]
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Acknowledged and Accepted:
FIRST UNION NATIONAL BANK,
as Administrative Agent
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
SCHEDULE 5(f)(ii)
NOTICE
OF
GRANT OF SECURITY INTEREST
IN
PATENTS
United States Patent and Trademark Office
Please be advised that pursuant to the Security Agreement dated as of
______, 2001 (as the same may be amended, modified, extended or restated from
time to time, the "Security Agreement") by and among the Obligors party thereto
(each an "Obligor" and collectively, the "Obligors") and First Union National
Bank, as Administrative Agent (the "Administrative Agent") for the Lenders
referenced therein (the "Lenders"), the undersigned Obligor has granted a
continuing security interest in and continuing lien upon, the patents and patent
applications shown below to the Administrative Agent for the ratable benefit of
the Lenders:
PATENTS
Description of Patent Date of
Patent No. Item Patent
---------- --------------------- -------
PATENT APPLICATIONS
Patent Date of Patent
Applications No. Applications
---------------- --------------
The Obligor and the Administrative Agent, on behalf of the Lenders,
hereby acknowledge and agree that the security interest in the foregoing patents
and patent applications (i) may only be terminated in accordance with the terms
of the Security Agreement and (ii) is not to be construed as an assignment of
any patent or patent application.
Very truly yours,
-------------------------------------------
[Obligor]
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Acknowledged and Accepted:
FIRST UNION NATIONAL BANK,
as Administrative Agent
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
SCHEDULE 5(f)(iii)
NOTICE
OF
GRANT OF SECURITY INTEREST
IN
TRADEMARKS
United States Patent and Trademark Office
Please be advised that pursuant to the Security Agreement dated as of
______, 2001 (as the same may be amended, modified, extended or restated from
time to time, the "Security Agreement") by and among the Obligors party thereto
(each an "Obligor" and collectively, the "Obligors") and First Union National
Bank, as Administrative Agent (the "Administrative Agent") for the Lenders
referenced therein (the "Lenders"), the undersigned Obligor has granted a
continuing security interest in and continuing lien upon, the trademarks and
trademark applications shown below to the Administrative Agent for the ratable
benefit of the Lenders:
TRADEMARKS
Description of Trademark Date of
Trademark Registration No. Item Trademark
-------------------------- ------------------------ ---------
TRADEMARK APPLICATIONS
Trademark Description of Trademark Date of Trademark
Applications No. Applied For Applications
---------------- ------------------------ -----------------
The Obligor and the Administrative Agent, on behalf of the Lenders,
hereby acknowledge and agree that the security interest in the foregoing
trademarks and trademark applications (i) may only be terminated in accordance
with the terms of the Security Agreement and (ii) is not to be construed as an
assignment of any trademark or trademark application.
Very truly yours,
-------------------------------------------
[Obligor]
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Acknowledged and Accepted:
FIRST UNION NATIONAL BANK,
as Administrative Agent
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
