Exhibit 10.2
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of September 30, 2001, by and between
TREX COMPANY, LLC, a Delaware limited liability company, TREX COMPANY, INC., a
Delaware corporation (collectively, the "Borrower") and FIRST UNION NATIONAL
BANK, a national banking association (the "Bank"), recites and provides as
follows:
The Borrower and the Bank are parties to a Second Amended and Restated
Credit Agreement of even date herewith (as the same may be amended, supplemented
or modified from time to time and including any agreement extending the maturity
of, refinancing or otherwise restructuring all or any portion of the obligations
of the Borrower under such agreement or any successor agreement, the "Credit
Agreement"). To induce the Bank to enter into the Credit Agreement, and as a
condition precedent to the Bank's obligations thereunder, the Borrower has
agreed to grant a continuing security interest in and to the Collateral (as
hereinafter defined) to secure the obligations of the Borrower as set forth in
the Credit Agreement (the "Obligations"). Accordingly, the parties hereto agree
as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings provided
for in the Credit Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
Section 2.01. Title to Collateral. The Borrower has good and marketable
title to all the Collateral, free and clear of any Liens other than Permitted
Liens. The Borrower has not performed any acts which might prevent the Bank from
enforcing any of the terms of this Agreement or which would limit the Bank in
any such enforcement. Other than financing statements or other similar or
equivalent documents or instruments with respect to the Security Interests and
Permitted Liens, no financing statement, mortgage, security agreement or similar
or equivalent document or instrument covering all or any part of the Collateral
is on file or on record in any jurisdiction in which such filing or recording
would be effective to create a Lien on such Collateral. No Collateral is in the
possession of any Person (other than Borrower) asserting any claim thereto or
security interest therein, except that the Bank or its designee may have
possession of the Collateral as contemplated hereby and by the Credit Agreement.
Section 2.02. Condition of Collateral. Borrower represents that the
Collateral is in good repair and condition and that Borrower shall use
reasonable care to prevent Collateral from being damaged or depreciating,
ordinary wear and tear excepted. Borrower shall immediately notify Bank of any
material loss or damage to Collateral. Borrower shall not permit any item of
Collateral to become a fixture to real estate or an accession to other personal
property. Borrower represents it is in compliance in all respects with all laws,
rules and regulations applicable to the Collateral and its properties,
operations, business, and finances except when noncompliance could not
reasonably be expected to have a Material Adverse Affect. In addition, Borrower
shall promptly notify Bank of any claims or alleged claims of any other person
or entity to the Collateral or the institution of any litigation, arbitration,
governmental investigation or administrative proceedings against or affecting
the Collateral.
Section 2.03. Validity, Perfection and Priority of Security Interests. The
Security Interests constitute valid security interests under the UCC securing
the Obligations. When UCC financing statements containing a description of the
Collateral in the form specified in Exhibit B hereto shall have been filed in
the offices specified in Schedule 4.01 hereto, the Security Interests shall
constitute perfected security interests in all right, title and interest of
Borrower in the Collateral to the extent that a security interest therein may be
perfected by filing pursuant to the UCC, prior to all other Liens and rights of
others therein except for the Permitted Liens.
Section 2.04. Insurance. The Collateral is insured in accordance with the
requirements of the Credit Agreement.
Section 2.05. Fair Labor Standards Act. All Inventory has or will have
been produced in compliance with the applicable requirements of the Fair Labor
Standards Act, as amended from time to time, or any successor statute and
regulations promulgated thereunder.
ARTICLE III
SECURITY INTEREST
Section 3.01. Grant of Security Interest. In order to secure the full and
punctual payment of the Obligations in accordance with the terms thereof, the
Borrower hereby grants to the Bank a continuing security interest in and to all
of the Collateral, whether now owned or existing or hereafter acquired, created
or arising, whether tangible or intangible, and regardless of where located (the
"Security Interests").
As used in this Agreement, "Collateral" means all right, title and
interest of the Borrower in the following, whether now owned or existing or
hereafter acquired, created or arising, whether tangible or intangible, and
regardless of where located:
(a) the Cash Proceeds Account and the Insurance Account;
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(b) all business assets of every type and description of Borrower
and its Subsidiaries, including any property and acquisitions, whether now
owned or hereafter acquired and wherever located, including, but not
limited to the following:
(i) all accounts, contract rights, leases, and any other
rights of Borrower to payment for goods sold or leased or for
services rendered; furniture; furnishings; fixtures; equipment;
machinery; accessories; moveable trade fixtures; goods held for sale
or being processed for sale in Borrower's business, including all
raw materials, supplies, and other materials used or consumed in
Borrower's business, goods in process, finished goods, and all other
items customarily classified as inventory; building improvement and
construction materials, supplies and equipment; chattel paper;
instruments; documents; letters of credit (including, but not
limited to, any written undertaking to pay money conditioned upon
the presentation of specified documents, and advices of letters of
credits); all funds on deposit with Bank and its affiliates; as well
as all parts, replacements, substitutions, profits, products and
cash and non-cash proceeds of the foregoing (including insurance and
condemnation proceeds payable by reason of condemnation of or loss
or damage thereto) in any form and wherever located.
(ii) all general intangibles (including, without limitation,
all contract rights, tax refunds and tax refund claims, choses in
action, causes of action, corporate or other business records,
inventions, designs, patents, patent applications, trademarks, trade
names, trade secrets, goodwill, copyrights, registrations, licenses,
franchises, claims under guaranties, security interests or other
security held or granted to secure payment of contracts by account
debtors, all rights to indemnification and all other intangible
property of every kind and nature);
(iii) all instruments, documents, chattel paper, goods,
moneys, securities, drafts, and other property of Borrower now in
possession of and at any time and from time to time hereafter
delivered to Bank, its agents or affiliates, whether for
safekeeping, pledge, custody, transmission, collection, or
otherwise, and all of Borrower's deposits, balances, sums, proceeds,
and credits with, and any of its claims against Bank and affiliates
of Bank, at any time existing, together with the increases and
profits received therefrom and the proceeds thereof, including
insurance payable because of loss or damage thereto;
(iv) all of the Borrower's capital stock in its Subsidiaries,
excluding Borrower's capital stock in Trex Wood Polymer Espana,
S.L., its Spanish Subsidiary;
(c) all products and proceeds (including investment property and
security entitlements) of any of the property described above in any form,
and all proceeds of such products.
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Notwithstanding the foregoing, until the occurrence of an Event of Default
and the election of the Bank to terminate the rights of the Borrower with
respect thereto, Borrower shall retain all right incidental to the ownership of
the capital stock of its Subsidiaries including without limitation, voting
rights with respect thereto and all rights to dividends issued thereon.
Section 3.02. Continuing Liability of the Borrower. The Security Interests
are granted as security only and shall not subject the Bank to, or transfer or
in any way affect or modify, any obligations or liability of the Borrower with
respect to any of the Collateral or any transaction in connection therewith.
Section 3.03. Insurance Account.
(a) Creation of and Deposits to Insurance Account. Promptly upon and
at all times after the receipt of any cash proceeds of insurance policies,
awards of condemnation or other compensation required to be paid to the
Bank pursuant to Section 4.07 of this Agreement (the "Insurance
Proceeds"), the Borrower shall establish and shall thereafter maintain a
cash collateral account the ("Insurance Account") at the offices of the
Bank in the name and under the exclusive control of the Bank. Forthwith
upon such establishment, the Borrower shall notify the Bank of the
location, account name and account number of such account. The Borrower
hereby agrees to cause any Insurance Proceeds received from time to time
after the establishment of the Insurance Account to be deposited therein
as set forth in this paragraph. Any Insurance Proceeds received from time
to time by the Bank in respect of which the Bank is an insured party and
loss payee shall be promptly deposited to the Insurance Account as set
forth in this paragraph. Any income received with respect to the balance
from time to time to the credit of the Insurance Account, including any
interest or capital gains on Liquid Investments, shall remain, or be
deposited in the Insurance Account. All right, title and interest in and
to the cash amounts on deposit from time to time in the Insurance Account
together with any Liquid Investments from time to time made pursuant to
Section 3.03(c) shall vest in the Bank, shall constitute part of the
Collateral and shall not constitute payment of the Obligations until
applied thereto as hereinafter provided. The Bank may in its sole and
absolute discretion, (i) apply Insurance Proceeds, or any portion thereof,
to the payment of the Obligations, or (ii) allow Insurance Proceeds to be
withdrawn in accordance with Section 3.03(b).
(b) Withdrawals from Insurance Account. The balance from time to
time standing to the credit of the Insurance Account shall be subject to
withdrawal only upon the instructions of the Bank, which instructions
shall not be unreasonably or untimely withheld or delayed. Except upon the
occurrence and continuation of an Event of Default, the Bank agrees to
give instructions to distribute such amounts to the Borrower at such times
an in such amounts as the Borrower shall request for the purpose of
repairing, reconstructing or replacing the property in respect of which
such Insurance Proceeds were received. Any such request shall be
accompanied by a certificate of the chief executive officer or treasurer
of the Borrower setting forth in detail reasonably
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satisfactory to the Bank the repair, reconstruction or replacement for
which such funds will be expended. If immediately available cash on
deposit in the Insurance Account is not sufficient to make such
distribution to the Borrower, the Bank shall cause to be liquidated as
promptly as possible the Liquid Investments in the Insurance Account
designated by the Borrower as are required to obtain sufficient cash to
make such distribution and, notwithstanding, any other provision of this
Article III, such distribution shall not be made until such liquidation
has occurred. Upon the occurrence and continuation of an Event of Default,
the Bank (in its sole discretion) may apply or cause to be applied
(subject to collection) any or all of the balance from time to time
standing to the credit of the Insurance Account in the manner specified in
Section 5.04.
(c) Investment of Funds in Insurance Account. Amounts on deposit in
the Insurance Account shall be invested and re-invested from time to time
in such Liquid Investments as the Borrower shall determine, which Liquid
Investments shall be held in the name of and be under the control of the
Bank, provided that, if an Event of Default has occurred and is
continuing, the Bank may liquidate any such Liquid Investments and apply
or cause to be applied the proceeds thereof in the manner specified in
Section 5.04. For this purpose, "Liquid Investments" means Cash
Equivalents; provided that (i) each Liquid Investment shall mature within
30 days after it is acquired by the Bank and (ii) in order to provide the
Bank with a perfected security interest therein each Liquid Investment
shall be either:
(i) Evidenced by negotiable certificates or instruments, which
(together with any appropriate instruments of transfer) are
delivered to, and held by, Bank or an agent thereof (which shall not
be the Borrower or any of its Affiliates); or
(ii) In book entry form and issued by the United States and
subject to pledge under applicable state law and Treasury
regulations and as to which (in the opinion of counsel to the Bank)
appropriate measures have been taken for perfection of the Security
Interests.
Section 3.04. Cash Proceeds Account.
(a) Creation of Cash Proceeds. Upon the later of (i) occurrence and
continuation of an Event of Default, and (ii) notification of Borrower by
the Bank, Trex Company, LLC's ZBA Master Account Number 2050000189063, or
such other equivalent account as shall then exist (the "Master Account"),
shall become a cash collateral account (the "Cash Proceeds Account") under
the exclusive control of the Bank into which there shall be deposited from
time to time the cash proceeds of the Collateral required to be delivered
to the Bank pursuant to this Section or any other provision of the Loan
Documents. Any income received with respect to the balance from time to
time to the credit of the Cash Proceeds Account, including any interest,
shall remain, or be deposited in the Cash Proceeds Account. All right,
title and interest in and to the cash amounts on deposit from time to time
in the Cash Proceeds Account shall vest in the
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Bank, shall constitute part of the Collateral and shall not constitute
payment of the Obligations until applied thereto as hereinafter provided.
(b) Deposits to Cash Proceeds Accounts. Upon the later of (i)
notification by the Bank and (ii) the occurrence and continuation of an
Event of Default, all cash proceeds of the Collateral shall be delivered
to the bank and deposited in the Cash Proceeds Account. In addition to the
foregoing, the Borrower agrees that if the proceeds of any Collateral
shall be received by it, the Borrower shall as promptly as possible
deposit such proceeds in the Cash Proceeds Account. Until so deposited,
all such proceeds shall be held in trust by the Borrower for and as the
property of the Bank and shall not be commingled with any other funds or
property of the Borrower. The Borrower hereby irrevocably authorizes and
empowers the Bank, its officers, employees, and authorized agents to
endorse and sign its name on all checks, drafts, money orders or other
media of payment so delivered and such endorsements or assignments shall,
for all purposes, be deemed to have been made by the Borrower prior to any
endorsement or assignment thereof by the Bank. The Bank may use any
convenient or customary means for the purpose of collecting such checks,
drafts, money orders or other media of payment.
(c) Withdrawals from Cash Proceeds Account Collected funds on
deposit in the Cash Proceeds Account shall be withdrawn by the Bank on the
Business Day following the day on which the Bank considers the funds
deposited therein to be collected funds and applied to repay the
Obligations which are then due and payable. Upon the conversion of the
Master Account to the Cash Proceeds Account, the Borrower will not have
the right to make withdrawals from the Cash Proceeds Account and all
automatic withdrawals from such account will terminate.
Section 3.05. Stock Dividends. If, with respect to any securities pledged
hereunder, a stock dividend is declared, any stock split made or right to
subscribe is issued, all the certificates for the shares representing such stock
dividend, stock split or right to subscribe will be immediately delivered, duly
endorsed, to the Bank as additional Collateral, and any cash or non-cash
proceeds and products thereof, including investment property and security
entitlements will be immediately delivered to Bank. Borrower acknowledges that
such grant includes all investment property and security entitlements, now
existing or hereafter arising, relating to such securities. In addition,
Borrower agrees to execute such notices and instructions to securities
intermediaries as Bank may reasonably request.
Section 3.06. Contracts, Chattel Paper, Accounts, General Intangibles.
Borrower warrants that Collateral consisting of contract rights, chattel paper,
accounts, or general intangibles is (i) genuine and enforceable in accordance
with its terms except as limited by law; (ii) not subject to any defense,
set-off, claim or counterclaim of a material nature against Borrower except as
to which Borrower has notified Bank in writing; and (iii) not subject to any
other circumstances that would impair the validity, enforceability, value, or
amount of such Collateral except as to which Borrower has notified Bank in
writing. Borrower shall not amend,
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modify or supplement any lease, contract or agreement contained in Collateral or
waive any provision therein, without prior written consent of Bank.
Section 3.07. Account Information. From time to time, at Bank's request,
Borrower shall provide Bank with schedules describing all accounts and
contracts, including customers' addresses, credited or acquired by Borrower and
at Bank's request shall execute and deliver written assignments of contracts and
other documents evidencing such accounts and contracts to Bank. Together with
each schedule, Borrower shall, if requested by Bank, furnish Bank with copies of
Borrower's sales journals, invoices, customer purchase orders or the equivalent,
and original shipping or delivery receipts for all goods sold, and Borrower
warrants the genuineness thereof.
Section 3.08. Account and Contract Borrowers. If an Event of Default
should occur and be continuing, Bank shall have the right to notify the account
and contract debtors obligated on any or all of the Collateral to make payment
thereof directly to Bank and Bank may take control of all proceeds of any such
Collateral, which rights Bank may exercise at any time. The cost of such
collection and enforcement, including attorneys' fees and expenses, shall be
borne solely by Borrower whether the same is incurred by Bank or Borrower. If an
Event of Default should occur and is continuing or upon demand of Bank, Borrower
will, upon receipt of all checks, drafts, cash and other remittances in payment
on Collateral, deposit the same in a special bank account maintained with Bank,
over which Bank also has the power of withdrawal.
If an Event of Default should occur and is continuing, no discount,
credit, or allowance shall be granted by Borrower to any account or contract
debtor and no return of merchandise shall be accepted by Borrower without Bank's
consent. Bank may, after the occurrence and continuation of an Event of Default,
settle or adjust disputes and claims directly with account contract debtors for
amounts and upon terms that Bank considers advisable, and in such cases Bank
will credit the Obligations with the net amounts received by Bank, after
deducting all of the expenses incurred by Bank. Borrower agrees to indemnify and
defend Bank and hold it harmless with respect to any claim or proceeding arising
out of any matter related to collection of Collateral unless arising out of
Bank's gross negligence or wilfull misconduct.
Section 3.09. Government Contracts. If any Collateral covered hereby
arises from obligations due to Borrower from any governmental unit or
organization, Borrower shall immediately notify Bank in writing and execute all
documents and take all actions demanded by Bank to ensure recognition by such
governmental unit or organization of the rights of Bank in the Collateral.
Section 3.10. Inventory. So long as no Event of Default has occurred and
is continuing, Borrower shall have the right in the regular course of business,
to process and sell Borrower's inventory. If an Event of Default should occur
and be continuing or upon demand of Bank, Borrower will, upon receipt of all
checks, drafts, cash and other remittances, in payment of Collateral sold,
deposit the same in a special bank account maintained with Bank, over which Bank
also has the power of withdrawal. Borrower shall comply in all respects with all
laws, regulations, rulings, and orders applicable to Borrower or its assets or
business including, without
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limitation, the Federal Fair Labor Standards Act in the conduct of its business
and the production of inventory. Borrower shall notify Bank immediately of any
violation by Borrower of the Fair Labor Standards Act, and a failure of Borrower
to so notify Bank shall constitute a continuing representation that all
inventory then existing has been produced in compliance with the Fair Labor
Standards Act.
Section 3.11. Instruments, Chattel Paper. Any Collateral that is
instruments, chattel paper and negotiable documents will be properly assigned
to, the originals deposited with and held by Bank, unless Bank shall hereafter
otherwise direct or consent in writing. Bank may, without notice, upon the
occurrence and continuation of an Event of Default, exercise any or all rights
of collection, conversion, or exchange and other similar rights, privileges and
options pertaining to such Collateral, but shall have no duty to do so.
Section 3.12. Collateral Duties. Bank shall have no custodial or
ministerial duties to perform with respect to Collateral pledged except as set
forth herein; and by way of explanation and not by way of limitation, Bank shall
incur no liability for any of the following: (i) loss or depreciation of
Collateral (unless caused by its willful misconduct or gross negligence), or
(ii) failure to present any paper for payment or protest, to protest or give
notice of nonpayment, or any other notice with respect to any paper or
Collateral.
Section 3.13. Transfer of Collateral. Bank may assign its rights in
Collateral or any part thereof to any assignee selected by Bank in good faith
who shall thereupon become vested with all the powers and rights herein given to
Bank with respect to the property so transferred and delivered, and Bank shall
thereafter be forever relieved and fully discharged from any liability with
respect to such property so transferred, but with respect to any property not so
transferred, Bank shall retain all rights and powers hereby given.
Section 3.14. [Intentionally Deleted]
Section 3.15. Landlord Waivers. Borrower shall cause each landlord of real
property leased by Borrower on which Borrower has stored any finished goods
inventory, to execute and deliver instruments satisfactory in form and substance
to Bank by which such landlord waives its rights, if any, in the Collateral.
ARTICLE IV
COVENANTS
The Borrower covenants and agrees with the Bank that until the payment in
full of all Obligations and until there is no Commitment by the Bank to make any
further Revolving Loans, incur obligations or otherwise give value, the Borrower
will comply with the following:
Section 4.01. Delivery of Perfection Certificate; Filing of Financing
Statements and Delivery of Search Reports. On or prior to the Closing Date, the
Borrower shall deliver the Perfection Certificates and all filings other actions
specified in Section 4.01 hereto to have been
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delivered to the Bank for recordation. The information set forth in the
Perfection Certificates shall be correct and complete. Not later than 60 days
after the Closing Date, the Borrower shall furnish to the Bank file search
reports from each UCC filing office set forth in Schedule 4.01 confirming the
filing information set forth in such Schedule and confirming that the Bank has a
first priority security interest in the Collateral, except for the Permitted
Liens.
Section 4.02. Change of Name, Identity or Structure; Locations of State of
Organization. The Borrower will not change its name, identity or structure
(corporate or limited liability company, as applicable) in any manner unless it
shall have given the Bank not less than 30 days prior written notice thereof.
The Borrower will not reorganize in such a way that its state of organization
shall change which change would cause the Security Interests in the Collateral
to lapse or case to be perfected unless it shall have given Bank not less than
30 days prior written notice and taken such steps as are necessary to maintain
Bank's Security Interests.
Section 4.03. Further Assurances. The Borrower will, from time to time, at
its expense, execute, deliver, file and record any statement, assignment,
instrument, document, agreement or other paper and take any action (including,
without limitation, any filings of financing or continuation statements under
the UCC) that from time to time may be necessary or reasonably desirable, or
that the Bank may reasonably request, in order to create, preserve, perfect,
confirm or validate the Security Interests or to enable the Bank to obtain the
full benefit of this Agreement, or to enable the Bank to exercise and enforce
any of its rights, powers and remedies created hereunder or under applicable law
with respect to any of the Collateral. The Borrower agrees that a carbon,
photographic or photostatic or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement. The Borrower shall
pay the costs of, or incidental to, any recording or filing of any financing or
continuation statements concerning the Collateral. Bank is authorized to file
financing statements relating to Collateral without Borrower's signature where
authorized by law. Borrower hereby constitutes and appoints Bank the true and
lawful attorney of Borrower with full power of substitution to take any and all
appropriate action and to execute any and all documents or instruments that may
be necessary or desirable to accomplish the purpose and carry out the terms of
this Security Agreement. The foregoing power of attorney is coupled with an
interest and shall be irrevocable until all of the Obligations have been paid in
full. Neither Bank nor anyone acting on its behalf shall be liable for acts,
omissions, errors in judgment, or mistakes in fact in such capacity as
attorney-in-fact. Borrower ratifies all acts of Bank as attorney-in-fact.
Borrower agrees to take such other actions as might be requested for the
perfection, continuation and assignment, in whole or in part, of the security
interests granted herein. If certificates, passbooks, or other documentation or
evidence is/are issued or outstanding as to any of the Collateral, Borrower will
cause the security interests of Bank to be properly protected, including
perfection by notation thereon or delivery thereof to Bank.
Section 4.04. Collateral in Possession of Other Persons. If any Collateral
is at any time in the possession or control of any warehouseman, bailee, or any
of the Borrower's agents or processors, the Borrower shall notify such
warehouseman, bailee, agent or processor of the
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Security Interests created hereby and to hold all such Collateral for the Bank's
account subject to the Bank's instructions.
Section 4.05. Books and Records. The Borrower shall keep full and accurate
books and records relating to the Collateral, including without limitation the
originals of all documentation with respect thereto, records of all payments
received, all credits granted thereon, all merchandise returned and all other
dealings therewith, and the Borrower will make the same available for the Bank's
inspection, at the Borrower's own cost and expense, at any and all reasonable
times upon demand. Upon direction by the Bank, the Borrower shall stamp or
otherwise xxxx such books and records in such manner as the Bank may reasonably
require to reflect the Security Interests.
Section 4.06. Disposition of Collateral. Without the prior written
permission of the Bank (which consent shall not be unreasonably withheld or
untimely withheld, conditioned or delayed), the Borrower will not sell, lease,
exchange, assign or otherwise dispose of, or grant any option or security
interest with respect to the Collateral, except that, subject to the rights of
the Bank hereunder if an Event of Default shall have occurred and be continuing,
the Borrower may sell, lease or exchange Inventory in the ordinary course of
business and may sell or dispose of equipment no longer used or useful in the
conduct of the Borrower's business, whereupon, in the case of such a sale or
exchange, the Security Interests created hereby in such item (but not in any
Proceeds arising from such sale or exchange) shall cease immediately without any
further action on the part of the Bank.
Section 4.07. Insurance. Borrower shall bear all risk of loss with respect
to the Collateral. The injury to or loss of Collateral, either partial or total,
shall not release Borrower from payment or other performance hereof. Borrower
agrees to obtain and keep in force casualty and hazard insurance on Collateral
naming Bank as loss payee. Such insurance is to be in form and amounts and
issued by such companies as are satisfactory to Bank. Borrower shall furnish to
Bank such policies, or other evidence of such policies satisfactory to Bank.
Each such insurance policy shall include effective waivers by the insurer of all
claims for insurance premiums against the Bank unless Bank elects to continue
coverage, provide for coverage to the Bank regardless of the breach by the
Borrower of any warranty or representation made therein, not be subject to
co-insurance, provide that all insurance proceeds in excess of $50,000 per claim
shall be adjusted with and payable to the Bank and provide that no cancellation,
termination or material modifications (i.e. reductions in coverage limits)
thereof shall be effective until at least 10 days after receipt by the Bank of
notice thereof. Bank is authorized, but not obligated, from and after (and
during the continuation of) any Event of Default, to purchase any or all
insurance or "Single Interest Insurance" protecting such interest as Bank deems
appropriate against such risks and for such coverage and for such amounts,
including either the loan amount or value of the Collateral, all at its
discretion, and at Borrower's expense. In such event, Borrower agrees to
reimburse Bank for the cost of such insurance and Bank may add such cost to the
Obligations. Borrower shall bear the risk of loss to the extent of any
deficiency in the effective insurance coverage with respect to loss or damage to
any of the Collateral. Borrower hereby assigns to Bank the proceeds of all such
insurance and directs any insurer to make payments directly to Bank. Borrower
hereby appoints Bank its attorney-in-fact, which appointment shall be
irrevocable and coupled
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with an interest for so long as Obligations are unpaid, to file proof of loss
and/or any other forms required to collect from any insurer any amount due from
any damage or destruction of Collateral, to agree to and bind Borrower as to the
amount of said recovery, to designate payee(s) of such recovery, to grant
releases to insurer, to grant subrogation rights to any insurer, and to endorse
any settlement check or draft. Borrower agrees not to exercise any of the
foregoing powers granted to Bank without Bank's prior written consent.
Section 4.08. Information Regarding Collateral. The Borrower will,
promptly upon request, provide to the Bank all information and evidence which it
may reasonably request concerning the Collateral to enable the Bank to enforce
the provisions of this Agreement.
ARTICLE V
REMEDIES, RIGHTS UPON DEFAULT
Section 5.01. General Authority. The Borrower hereby irrevocably appoints
the Bank its true and lawful attorney, with full power of substitution, in the
name of the Borrower, the Bank or otherwise, for the sole use and benefit of the
Bank, but at the Borrower's expense to the extent permitted by law to exercise
at any time and from time to time while an Event of Default has occurred and is
continuing, all or any of the following powers with respect to all or any of the
Collateral, all acts of such attorney being hereby ratified and confirmed; such
power, being coupled with an interest, irrevocable until the Obligations are
paid in full and until there is no commitment by the Bank to make any further
Revolving Loans, incur obligations or otherwise give value:
(a) To demand, xxx for, collect, receive and give acquittance for
any and all monies due or to become due thereon or by virtue thereof;
(b) To settle, compromise, compound, prosecute or defend any action
or proceeding with respect thereto;
(c) To sell transfer, assign or otherwise deal in or with the same
or the proceeds or avails thereof, as fully and effectually asif the Bank
were the absolute owner thereof; and
(d) To extend the time of payment of any or all thereof and to make
any allowance and other adjustments with reference thereto;
Provided, that the Bank shall give the Borrower not less than ten days
prior notice of the time and place of any sale or other intended disposition of
any of the Collateral, except any Collateral which is perishable or threatens to
decline speedily in value or is of the type customarily sold on a recognized
market. The Bank and Borrower agree that such notice constitutes "reasonable
notification" within the meaning of Section 9-504(3) of the UCC.
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Section 5.02. Remedies upon Event of Default.
(a) If any Event of Default has occurred and is continuing, the Bank
may exercise all rights of a secured party under the UCC, and in addition,
the Bank may, without being required to give any notice, except as herein
provided or as may be required by mandatory provisions of law; (i)
withdraw all cash and Liquid Investments in the Insurance Account and Cash
Proceedings Account (collectively the "Collateral Accounts") and apply
such cash and Liquid Investments and other cash, if any, then held by it
as Collateral as specified in Section 5.04 and (ii) if there shall be no
such cash or Liquid Investments or if such cash and Liquid Investments
shall be insufficient to pay all of the Obligations in full or cannot be
so applied for any reason, sell the Collateral or any part thereof at a
public or private sale, for cash, upon credit or for future delivery, and
at such price or prices as the Bank may deem satisfactory. The Bank may be
the purchaser of any or all of the Collateral so sold at any public sale
(or, if the Collateral is of a type that customarily sold in a recognized
market or is of a type which is the subject of widely distributed standard
price quotations, at any private sale). The Borrower will execute and
deliver such documents and take such other action as the Bank deems
necessary or advisable in order that any such sale may be made in
compliance with law. Upon any such sale, the bank shall have the right to
deliver, assign and transfer to the purchaser thereof the Collateral so
sold. Each purchaser at any such sale shall hold the Collateral so sold to
it absolutely and free from any claim or right of whatsoever kind,
including any equity or right of redemption of the Borrower which may be
waived, and the Borrower, to the extent permitted by law, hereby
specifically waives all rights of redemption, stay or appraisal which it
has or may have under any law now existing or hereafter adopted. The
notice (if any) of such sale required by Section 5.01 shall (i) in the
case of a public sale, state the time and place for such sale, and (ii) in
the case of a private sale, state the day after which the sale may be
consummated. Any such public sale shall be held at such time or times
within ordinary business hours and at such place or places as the Bank may
fix in the notice of such sale. At any such sale the Collateral may be
sold in one lot as an entirety or in separate parcels, as the Bank may
determine. The Bank shall not be obligated to make any such sale pursuant
to any such notice. The Bank may, without notice or publication, adjourn
any public or private sale or cause the same to be adjourned from time to
time by announcement at the time and place fixed for the sale, and such
sale may be made at any time or place to which the same may be so
adjourned without further notice. In the case of any sale of all or any
part of the Collateral on credit or for future delivery, the Collateral so
sold may be retained by the Bank until the selling price is paid by the
purchaser thereof, but the Bank shall not incur any liability in the case
of the failure of such purchaser to take up and pay for the collateral so
sold and in, the case of any such failure, such Collateral may again be
sold upon like notice. The Bank, instead of exercising the power of sale
herein conferred upon it, may proceed by a suit or suits at law or in
equity to foreclose the Security Interests and sell the Collateral, or any
portion thereof, under a judgment or decree of a court or courts of
competent jurisdiction.
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(b) For the purpose of enforcing any and all rights and remedies
under this Agreement the Bank may (i) require the Borrower to, and the
Borrower agrees that it will, at its expense and upon request of the Bank,
forthwith assemble all or any part of the Collateral as directed by the
Bank and make it available at a reasonable place designated by the Bank
which is, in the Bank's opinion, reasonably convenient to the Bank and the
Borrower, whether at the premises of the Borrower or otherwise, it being
understood that the Borrower's obligation so to deliver the Collateral is
of the essence of this Agreement and that, accordingly, upon application
to a court of equity having jurisdiction, the Bank shall be entitled to a
decree requiring specific performance by the Borrower of such obligations;
(ii) to the extent permitted by applicable law, enter, with or without
process of law and without breach of the peace, any premise where any of
the Collateral is or may be located, and without charge or liability to
the Bank seize and remove such Collateral from such premises; (iii) have
access to and use the Borrower's books and records relating to the
Collateral; and (iv) prior to the disposition of the Collateral, store or
transfer it without charge in or by means of any storage or transportation
facility owned or leased by the Borrower, process, repair or recondition
it or otherwise prepare it for disposition in any manner and to the extent
the Bank reasonably deems appropriate. The Bank may also dispose of such
Collateral on such premises without liability for rent or costs.
Section 5.03. Limitation on Duty of the Bank in Respect of Collateral.
Beyond the exercise of reasonable care in the custody thereof, the Bank shall
have no duty to exercise any rights or take any steps to preserve the rights of
the Borrower in the Collateral in its or the Borrower's possession or control or
in the possession or control of any agent or bailee or any income thereon or as
to the preservation of rights against prior parties or any other rights
pertaining thereto, nor shall the Bank be liable to the Borrower or any other
Person for failure to meet any obligation imposed by Section 9-207 of the UCC or
any successor provision. The Bank 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 existing at the
time in the Borrower's industry, and shall not be liable or responsible for any
loss or damage to any of the Collateral, or for any diminution in the value
thereof, by reason of the act or omission of any warehouseman, carrier,
forwarding agency, consignee or other agent or bailee selected by the Bank in
good faith.
Section 5.04. Application of Proceeds. The proceeds of any sale of, or
other realization upon, all or any part of the Collateral and any cash held in
the Collateral Accounts shall be applied by the Bank in the following order of
priorities:
(a) to payment of the reasonable expenses of such sale or other
realization, including reasonable compensation to agents and counsel for
the Bank, and all expenses, liabilities and advances incurred or made by
the Bank in connection therewith, and any other Obligations owing to the
Bank in respect of sums advanced by the Bank to preserve the Collateral or
to preserve its security interest in the Collateral;
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(b) an amount equal to (A) the unpaid principal of and accrued but
unpaid interest on all Revolving Loans and all other Obligations which
arise or are incurred in connection with the Loan Documents; plus (B) all
unpaid fees owing to the Bank under the Credit Agreement relating to the
Obligations; plus (C) to the extent not covered by paragraph (i) above,
all unreimbursed expenses for which the Bank is to be reimbursed pursuant
to Section 9.03 of the Credit Agreement or Section 6.03 hereof shall be
applied to payment of the Obligations;
(c) to the payment of all other Obligations, until all Obligations
shall have been paid in full; and
(d) to payment to the Borrower or its successors or assigns, or as a
court of competent jurisdiction may direct, of any surplus then remaining
from such proceeds.
Section 5.05. [Intentionally Deleted]
ARTICLE VI
MISCELLANEOUS
Section 6.01. Notices. Unless otherwise specified herein, all notices,
requests or other communications to any party hereunder shall be in writing
(including bank wire, facsimile transmission or similar writing) and shall be
given to such party (i) at its address set forth on the signature pages hereto
or (ii) other address or facsimile number as such party shall hereafter specify
for the purpose of communications hereunder by notice to the other parties
hereto. Each such notice, request or other communication shall be effective (i)
if given by facsimile transmission, when transmitted to the facsimile number
specified in this Section and confirmation of receipt is received, (ii) if given
by mail, 72 hours after such communication is deposited, certified mail, return
receipt requested, in the mails with appropriate first class postage prepaid,
addressed as aforesaid or (iii) if given by other means, when delivered at the
address specified in this Section 6.01. Rejection or refusal to accept, or the
inability to deliver because of a changed address of which no notice was given
shall not affect the validity of notice given in accordance with this Section.
Section 6.02. No Waivers: Non-Exclusive Remedies. No failure or delay on
the part of either party to exercise, no course of dealing with respect to, and
no delay in exercising any right, power or privilege under this Agreement or any
other Loan Document or any other document or agreement contemplated hereby or
thereby shall operate as a waiver thereof nor shall any single or partial
exercise of any such right, power or privilege preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies provided herein and in the other Loan Documents are
cumulative and are not exclusive of any other remedies provided by law. Without
limiting the foregoing, nothing in this Agreement shall impair the right of the
Bank to exercise any right of set-off or counterclaim it may have and to apply
the amount subject to such exercise to the payment of indebtedness of the
Borrower other
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than its indebtedness under the Credit Agreement and the other Loan Documents
only relating to the Term Note and Term Loan.
Section 6.03. Compensation and Expenses of the Bank; Indemnification.
(a) Expenses. The Borrower shall pay (i) all reasonable
out-of-pocket expenses of the Bank, including fees and disbursements of
special and local counsel for the Bank, in connection with the preparation
and administration of this Agreement or any document or agreement
contemplated hereby, any consent or waiver hereunder or any amendment
hereof or any Default or alleged Default and (ii) if an Event of Default
occurs, all reasonable out-of-pocket expenses incurred by the Bank,
including (without duplication) the fees and disbursements of outside
counsel in connection with such Event of Default and collection,
bankruptcy, insolvency and other enforcement proceedings resulting
therefrom.
(b) Protection of Collateral. If the Borrower fails to comply with
the provisions of the Credit Agreement, this Agreement or any other Loan
Document, such that the material value of any Collateral or the validity,
perfection, rank or material value of any Security Interest is thereby
diminished or potentially diminished or put at risk, the Bank may, but
shall not be required to, effect such compliance on behalf of the
Borrower, and the Borrower shall reimburse the Bank for the costs hereof
on demand. All commercially customary insurance expenses and all
commercially customary expenses of protecting, storing, warehousing,
appraising, insuring, handling, maintaining and shipping the Collateral,
any and all excise, property, sales and use taxes imposed by any state,
federal or local authority on any of the Collateral, or in respect of
periodic appraisals and inspections of the Collateral to the extent the
same may be reasonably requested by the Bank from time to time, or in
respect of the sale or other disposition thereof shall be borne and paid
by the Borrower. If the Borrower fails to promptly pay any portion thereof
when due, the Bank may, at its option, but shall not be required to, pay
the same and charge the Borrower's account therefor, and the Borrower
agrees to reimburse the Bank therefor on demand. All sums so paid or
incurred by the Bank for any of the foregoing and any and all other sums
for which the Borrower may become liable hereunder and all costs and
expenses (including reasonable attorneys' fees, legal expenses and court
costs) reasonably incurred by the Bank in enforcing or protecting the
Security Interests or any of its rights or remedies under this Agreement,
shall, together with interest thereon until paid at the rate applicable to
the Loans plus 2%, be additional Obligations hereunder.
(c) [Intentionally Deleted]
(d) [Intentionally Deleted]
15
Section 6.04. Amendments and Waivers. Any provision of this Agreement may
be amended, changed, discharged, terminated or waived if, but only if, such
amendment or waiver is in writing and is signed by the Borrower and the Bank.
Section 6.05. Successors and Assigns. This Agreement shall be binding upon
each of the parties hereto and inure to the benefit of the Borrower and of the
Bank and its successors and assigns. The Borrower shall not assign or delegate
any of its rights and duties hereunder without the prior written consent of the
Bank, which consent shall not be unreasonably withheld.
Section 6.06. Limitation of Law; Severability.
(a) All rights, remedies and powers provided in this Agreement may
be exercised only to the extent that the exercise thereof does not violate
any applicable provision of law, and all the provisions of this Agreement
are intended to be subject to all applicable mandatory provisions of law
which may be controlling and be limited to the extent necessary so that
they will not render this Agreement invalid, unenforceable in whole or in
part, or not entitled to be recorded, registered or filed under the
provisions of any applicable law.
(b) If any provision hereof is invalid or unenforceable in any
jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such
jurisdiction; and (ii) the invalidity or unenforceability of any provision
hereof in any jurisdiction shall not affect the validity or enforceability
of such provisions in any other jurisdiction.
Section 6.07. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Virginia except as
otherwise required by mandatory provisions of law and except to the extent that
remedies provided by the laws of any jurisdiction other than the Commonwealth of
Virginia are governed by the laws of such jurisdictions.
Section 6.08. Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when the Bank shall receive counterparts
hereof executed by itself and the Borrower.
Section 6.09. Termination. Upon full, final and irrevocable payment and
performance of all Obligations and the termination of the commitment under the
Credit Agreement to make Revolving Loans, the Security Interests shall terminate
and all rights to the Collateral shall revert to the Borrower. In addition, at
any time and from time to time prior to such termination of the Security
Interests, the Bank may release any of the Collateral. Upon any such termination
of the Security Interests or release of Collateral, the Bank will, upon request
by and at the expense of the Borrower, execute and deliver to the Borrower such
documents as the Borrower shall reasonably request to evidence the termination
of the Security Interests or the release of such
16
Collateral, as the case may be. Any such documents shall be without recourse to
or warranty by the Bank.
Section 6.10. Entire Agreement. This Agreement and the other Loan
Documents constitute the entire agreement and understanding among the parties
hereto and supersedes any and all prior agreements and understandings, oral or
written, and any contemporaneous oral agreements and understandings relating to
the subject matter hereof and thereof.
Section 6.11. Waivers. Borrower waives presentment, demand, protest,
notice of dishonor, notice of default, demand for payment, notice of intention
to accelerate, and notice of acceleration of maturity. Borrower further agrees
not to assert against Bank as a defense (legal or equitable), as a set-off, as a
counterclaim, or otherwise, any claims Borrower may have against any seller or
lessor that provided personal property or services relating to any part of the
Collateral. Borrower waives all exemptions and homestead rights with regard to
the Collateral. Borrower waives any and all rights to notice or to hearing prior
to Bank's taking immediate possession or control of any Collateral, and to any
bond or security which might be required by applicable law prior to the exercise
of any of Bank's remedies against any Collateral. All rights of Bank and
security interests hereunder, and all obligations of Borrower hereunder, shall
be absolute and unconditional, not discharged or impaired irrespective of (and
regardless of whether Borrower receives any notice of): (i) any lack of validity
or enforceability of any Loan Document; (ii) any change in the time, manner or
place of payment or performance, or in any term, of all or any of the
Obligations or the Loan Documents or any other amendment or waiver of or any
consent to any departure from any Loan Document; (iii) any exchange, release or
non-perfection of any collateral, or any release of or modifications of the
obligations of any guarantor or other obligor; (iv) any amendment or waiver of
or consent to departure from any Loan Document or other agreement. To the extent
permitted by law, Borrower hereby waives any rights under any valuation, stay,
appraisement, extension or redemption laws now existing or which may hereafter
exist and which, but for this provision, might be applicable to any sale or
disposition of the Collateral by Bank; and any other circumstance which might
otherwise constitute a defense available to, or a discharge of any party with
respect to the Obligations.
Section 6.12. Jurisdiction. Borrower irrevocably agrees to non-exclusive
personal jurisdiction in the Commonwealth of Virginia.
Section 6.13. Captions. The captions contained herein are inserted for
convenience only and shall not affect the meaning or interpretation of this
Security Agreement or any provision hereof. The use of the plural shall also
mean the singular, and vice versa.
Section 6.14. Joint and Several Liability. If more than one party has
signed this Security Agreement, such parties are jointly and severally obligated
hereunder.
Section 6.15. Binding Contract. Borrower by execution and Bank by
acceptance of this Security Agreement, agree that each party is bound by all
terms and provisions of this Security Agreement.
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[SIGNATURES BEGIN ON NEXT PAGE]
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WITNESS the following signatures and seals:
TREX COMPANY, LLC
000 Xxxxxx Xxxxx
Xxxxxxxxxx, XX 00000-0000
Facsimile: (000) 000-0000
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------------------
Xxxxxxx X. Xxxxxxx, Executive Vice
President; Chief Financial Officer;
Treasurer
TREX COMPANY, INC.
000 Xxxxxx Xxxxx
Xxxxxxxxxx, XX 00000-0000
Facsimile: (000) 000-0000
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------
Xxxxxx X. Xxxxxxx, President
FIRST UNION NATIONAL BANK
000 Xxxxx Xxxxxxx Xxxxxx, XX-0
Xxx Xxxxx Xxxxx -- 0xx Xxxxx
Xxxxxxxxx, XX 00000-0000
Facsimile: (000) 000-0000
By: /s/ Xxxxxxx Xxxx Xxxxxxx
--------------------------------------
Name/Title Xxxxxxx Xxxx Xxxxxxx,
------------------------------
Senior Vice President/Director
------------------------------------------
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