SECURITY AGREEMENT
Accounts, Inventory, Equipment,
Chattel Paper, Documents, Instruments and General Intangibles
THIS SECURITY AGREEMENT (this "Agreement") is made as of February 14, 1997
between XXXXXX XXXXXX OPERATING L.P. "B" (formerly known as Enron Transportation
Services L.P.), a Delaware limited partnership with an address for notices at
0000 XxXxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000 ("Debtor"), and FIRST
UNION NATIONAL BANK OF NORTH CAROLINA, a national banking association with
offices at 000 Xxxxx Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxx Xxxxxxxx 00000, as Agent
("Secured Party") for itself and the Lenders which are from time to time parties
to the Credit Agreement referred to below ("Lenders").
RECITALS
A. On even date herewith, Debtor, the Lenders and Secured Party are
executing a Credit Agreement (such agreement, as may from time to time be
amended or supplemented, being hereinafter called the "Credit Agreement")
pursuant to which, upon the terms and conditions stated therein, the Lenders
agree to make loans and extend other credit to Debtor.
B. The Lenders have conditioned their respective obligations under the
Credit Agreement upon the execution and delivery by Debtor of this Agreement,
and Debtor has agreed to enter into this Agreement.
C. Therefore, in order to comply with the terms and conditions of the
Credit Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Debtor hereby agrees with Secured
Party as follows:
ARTICLE 1
SECURITY INTEREST
Section 1.01 Grant of Security Interest. Debtor hereby assigns and grants
to Secured Party a security interest in and right of set-off against the assets
referred to in Section 1.02 (the "Collateral") to secure the prompt payment and
performance of the "Obligations" (as defined in Section 2.02) and the
performance by Debtor of this Agreement.
Section 1.02 Collateral. The Collateral consists of the following types or
items of property (including property hereafter acquired by Debtor as well as
property which Debtor now owns or in which Debtor has rights):
(a) All of Debtor's accounts, inventory, equipment, chattel paper,
documents, instruments and general intangibles, including, without
limitation, any
of the foregoing which may be more specifically
indicated in the remainder of this Section.
(b) (i) Any related or additional property from time to time delivered
to or deposited with Secured Party by or for the account of Debtor; (ii)
all certificates of title or other documents evidencing ownership or
possession of or otherwise relating to any property referred to in this
Section; (iii) all property used or usable in connection with any property
referred to in this Section; (iv) all policies of insurance (whether or
not required by Secured Party) covering any property referred to in this
Section; (v) all goods which were at any time included in the Collateral
and which are returned to or for the account of Debtor following their
sale, lease or other disposition; (vi) all proceeds, products,
replacements, additions to, substitutions for, accessions of, and property
necessary for the operation of any of the property referred to in this
Section, including, without limitation, insurance payable as a result of
loss or damage to any of the property referred to in this Section, refunds
of unearned premiums of any such insurance policy and claims against third
parties; and (vii) all books and records related to any of the property
referred to in this Section, including, without limitation, any and all
books of account, customer lists and other records relating in any way to
the accounts, chattel paper, instruments or inventory referred to in this
Section.
(d) All general intangibles related to any property referred to in
this Section, including, without limitation, all (i) letters of credit,
bonds, guaranties, purchase or sales agreements and other contractual
rights, rights to performance, and claims for damages, refunds (including
tax refunds) or other monies due or to become due; (ii) orders,
franchises, permits, certificates, licenses, consents, exemptions,
variances, authorizations or other approvals by any governmental agency or
court, to the extent assignable; (iii) consulting, engineering and
technological information and specifications, design data, patent rights,
trade secrets, literary rights, copyrights, trademarks, labels, trade
names and other intellectual property; (iv) business records, computer
tapes and computer software; (v) goodwill; and (vi) other intangible
personal property, whether similar or dissimilar to the property referred
to in this Section.
It is expressly contemplated that additional property may from time to time be
pledged, assigned or granted to Secured Party as additional security for the
Obligations, and the term "Collateral" as used herein shall be deemed for all
purposes hereof to include all such additional property, together with all other
property of the types described above related thereto.
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ARTICLE 2
DEFINITIONS
Section 2.01 Terms Defined Above or in the Credit Agreement. As used in
this Agreement, the terms defined above shall have the meanings respectively
assigned to them. Other capitalized terms which are defined in the Credit
Agreement but which are not defined herein shall have the same meanings as
defined in the Credit Agreement.
Section 2.02 Certain Definitions. As used in this Agreement, the following
terms shall have the following meanings, unless the context otherwise requires:
"Accounts" means all accounts, chattel paper and instruments (as such
terms are defined in the Code) at any time included in the Collateral.
"Account Debtor" means any Person liable (whether directly or
indirectly, primarily or secondarily) for the payment or performance of
any obligations included in the Collateral, whether as an account debtor
(as defined in the Code), obligor on an instrument, issuer of documents or
securities, guarantor or otherwise.
"Agreement" means this Security Agreement, as the same may from time
to time be amended or supplemented.
"Code" means the Uniform Commercial Code as presently in effect in the
State of Texas, Business and Commerce Code, Chapters 1 through 9. Unless
otherwise indicated by the context herein, all uncapitalized terms which
are defined in the Code shall have their respective meanings as used in
Chapter 9 of the Code.
"Event of Default" means any event specified in
Section 6.01.
"Inventory" means all inventory (as defined in
the Code) at any time included in the Collateral.
"Obligations" means the following indebtedness,
obligations and liabilities:
(a) payment of and performance of any and all indebtedness,
obligations and liabilities of Debtor pursuant to the Credit Agreement
dated as of February 14, 1997 among Debtor, Secured Party and the
Lenders") (as amended, restated or supplemented from time to time the
"Governing Agreement"), including without limitation, those certain
promissory notes which are or may be executed by Debtor in the aggregate
principal amount of $15,875,000 with final maturity on or before February
14, 1999 and all other notes given in substitution therefor or in
modification, renewal or extension thereof, in whole or in part (such
notes, as from time to time supplemented, amended or modified and all
other notes given in substitution therefor or in modification, renewal or
extension thereof, in whole or in part, being hereafter called the
"Revolving Credit Notes");
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(b) Replacement Term Note dated of even date herewith executed by
Debtor payable to the order of First Union National Bank of North Carolina
in the face amount of ____________________ ($___________________), bearing
interest and payable as therein provided with a final maturity of all
principal and interest of February 14, 1999 and all other notes given in
substitution therefor or in modification, renewal or extension thereof, in
whole or in part (such notes, as from time to time supplemented, amended
or modified and all other notes given in substitution therefor or in
modification, renewal or extension thereof, in whole or in part, being
hereafter the "Replacement Term Note"; the Revolving Credit Notes and the
Term Note being herein collectively referred to as the "Notes");
(c) Payment of any sums which may be advanced or paid by Secured Party
under the terms hereof on account of the failure of Debtor to comply with
the covenants of Debtor contained herein; and all other indebtedness of
Debtor arising pursuant to the provisions of this Agreement;
(d) Payment of any additional loans made by the Lenders to Debtor. It
is contemplated that the Lenders may lend additional sums to Debtor from
time to time, but shall not be obligated to do so, and Debtor agrees that
any such additional loans shall be secured by this Agreement;
(e) Payment of and performance of any and all present or future
obligations of Debtor according to the terms of any present or future
interest or currency rate swap, rate cap, rate floor, rate collar,
exchange transaction, forward rate agreement or other exchange or rate
protection agreements or any option with respect to any such transaction
now existing or hereafter entered into between Debtor and Secured Party or
any of the Lenders;
(f) Payment of and performance of any and all present or future
obligations of Debtor according to the terms of any present or future swap
agreements, cap, floor, collar, exchange transaction, forward agreement or
other exchange or protection agreements relating to crude oil, natural gas
or other hydrocarbons or any option with respect to any such transaction
now existing or hereafter entered into between Debtor and Secured Party or
any of the Lenders;
(g) All reimbursement obligations for drawn or undrawn portions under
that certain irrevocable letter of credit No. ________ in the amount of
$24,128,548.00 issued by First Union National Bank of North Carolina (the
"Replacement Letter of Credit") and any letter of credit now outstanding
or hereafter issued under or pursuant to the Governing Agreement in
replacement of the Replacement Letter of Credit; and
(h) Payment of and performance of any and all other indebtedness,
obligations and liabilities of any kind of Debtor to the Secured Party or
any Lender, now or hereafter existing, arising directly between Debtor and
the Secured Party or any Lender or acquired outright, as a participation,
conditionally or as collateral security from another by the Secured Party
or any Lender, absolute or contingent,
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joint and/or several, secured or unsecured, due or not due, arising by
operation of law or otherwise, or direct or indirect, including
indebtedness, obligations and liabilities to the Secured Party or any
Lender of Debtor as a member of any partnership, syndicate, association or
other group, and whether incurred by Debtor as principal, surety,
endorser, guarantor, accommodation party or otherwise.
The Obligations shall also include all interest, charges, expenses,
attorneys' or other fees and any other sums payable to or incurred by
Secured Party and the Lenders in connection with the execution,
administration or enforcement of Secured Party's or any of the Lenders'
rights and remedies hereunder or any other agreement with Debtor.
Notwithstanding any other provision of this Agreement, the Obligations
shall not include any reimbursement obligation under the Support Letter of
Credit (as defined in the Governing Agreement) that may be issued under
the Governing Agreement and any principal or interest outstanding on the
Support Term Note (as defined in the Governing Agreement).
"Obligor" means any Person, other than Debtor, liable (whether
directly or indirectly, primarily or secondarily) for the payment or
performance of any of the Obligations whether as maker, co-maker,
endorser, guarantor, accommodation party, general partner or otherwise.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
In order to induce Secured Party to accept this Agreement, Debtor
represents and warrants to Secured Party (which representations and warranties
will survive the creation and payment of the Obligations) that:
Section 3.01 Ownership of Collateral; Encumbrances. Debtor is the legal
and beneficial owner of the Collateral free and clear of any adverse claim,
lien, security interest, option or other charge or encumbrance except for the
security interest created by this Agreement, and Debtor has full right, power
and authority to assign and grant a security interest in the Collateral to
Secured Party.
Section 3.02 No Required Consent. No authorization, consent, approval or
other action by, and no notice to or filing with, any governmental authority or
regulatory body (other than the filing of financing statements and other
Security Instruments) is required for (i) the due execution, delivery and
performance by Debtor of this Agreement, (ii) the grant by Debtor of the
security interest granted by this Agreement, (iii) the perfection of such
security interest or (iv) the exercise by Secured Party of its rights and
remedies under this Agreement.
Section 3.03 First Priority Security Interest. The grant of the security
interest in the Collateral pursuant to this Agreement creates a valid and
perfected first priority security interest in the Collateral, enforceable
against Debtor and all third parties and securing payment of the Obligations.
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Section 3.04 No Filings By Third Parties. No financing statement or other
public notice or recording covering the Collateral is on file in any public
office (other than any financing statement or other public notice or recording
naming Secured Party as the secured party therein), and Debtor will not execute
any such financing statement or other public notice or recording so long as any
of the Obligations are outstanding.
Section 3.05 No Name Changes. Debtor has not, during the preceding five
years, entered into any contract, agreement, security instrument or other
document using a name other than, or been known by or otherwise used any name
other than, the name used by Debtor herein, except that Debtor has used the name
"Enron Transportation Services L.P."
Section 3.06 Location of Debtor. Debtor's chief executive office or
residence (as applicable) and Debtor's records concerning the Collateral are
located at the address or location set forth in the opening paragraph hereof and
the other addresses and locations specified in Schedule 3.06.
Section 3.07 Collateral. All statements or other information provided by
Debtor to Secured Party or any Lender describing or with respect to the
Collateral is or (in the case of subsequently furnished information) will be
when provided correct and complete in all material respects. The delivery at any
time by Debtor to Secured Party of additional Collateral or of additional
descriptions of Collateral shall constitute a representation and warranty by
Debtor to Secured Party hereunder that the representations and warranties of
this Article 3 are correct insofar as they would pertain to such Collateral or
the descriptions thereof.
Section 3.08 Accounts.
(a) To the best of Debtor's knowledge, each Account represents in all
material respects a genuine, valid and legally enforceable indebtedness of an
Account Debtor arising from the sale, lease or rendition by Debtor of goods or
services and is not and will not be subject to contra accounts, set-offs,
defenses, counterclaims, allowances or adjustments (other than discounts for
prompt payment shown on the invoice), or objections or complaints by the Account
Debtor concerning its liability on the Account; and any goods, the sale of which
gave rise to an Account, have not been, to the best of Debtor's knowledge,
returned or rejected by the Account Debtor or lost or damaged prior to receipt
by the Account Debtor.
(b) The amount shown as to each Account on Debtor's books is or will be in
all material respects the true and undisputed amount owing and unpaid thereon.
Each Account arose or shall have arisen in the ordinary course of Debtor's
business; provided, however, that any Accounts which arose or hereafter arise
outside the ordinary course of Debtor's business shall nevertheless be included
as part of the Collateral. Debtor has no knowledge of any bankruptcy, insolvency
or other action affecting creditors' rights with respect to any Account Debtor.
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Section 3.09 Delivery of Documents or Letters of Credit. With respect to
any Inventory or other Collateral covered by one or more certificates of title
or other documents evidencing ownership or possession thereof, and with respect
to any Accounts or other Collateral supported by letters of credit, each of such
certificates, documents or letters of credit will be delivered to Secured Party
upon Secured Party's request (provided that all certificates, documents and
letters of credit referred to in Section 1.02 shall be subject to the security
interest created by this Agreement irrespective of whether or not such delivery
shall have been made).
ARTICLE 4
COVENANTS AND AGREEMENTS
Debtor will at all times comply with the covenants and agreements
contained in this Article 4, from the date hereof and for so long as any part of
the Obligations are outstanding.
Section 4.01 Change in Location of Collateral or Debtor. Debtor will
notify Secured Party on or before the date of any change in location of the
Collateral. Debtor will not, without Secured Party's prior written consent,
change the location of the Collateral to any state, county or other jurisdiction
in which Secured Party has not already filed a financing statement or taken
other necessary steps to perfect its security interests in the Collateral or to
maintain such perfection. Debtor will give Secured Party 30 days' prior written
notice of (i) the opening or closing of any place of Debtor's business or (ii)
any change in the location of Debtor's residence, chief executive office or
address.
Section 4.02 Change in Debtor's Name or Corporate Structure. Debtor will
not change its name, identity or corporate structure (including, without
limitation, any merger, consolidation or sale of substantially all of its
assets) without notifying Secured Party of such change in writing at least 30
days prior to the effective date of such change. Without the express written
consent of Secured Party, however, Debtor will not engage in any other business
or transaction under any name other than Debtor's name hereunder.
Section 4.03 Documents; Collateral in Possession of Third Parties. If
certificates of title or other documents evidencing ownership or possession of
the Collateral are issued or outstanding, Debtor will, at Secured Party's
request, cause the interest of Secured Party to be properly noted thereon and
will, forthwith upon receipt, deliver same to Secured Party. If any Collateral
is at any time in the possession or control of any warehouseman, bailee, agent
or independent contractor, Debtor shall notify such Person of Secured Party's
security interest in such Collateral. Upon Secured Party's request, Debtor shall
instruct any such Person to hold all such Collateral for Secured Party's account
subject to Debtor's instructions, or, if an Event of Default shall have
occurred, subject to Secured Party's instructions.
Section 4.04 Delivery of Letters of Credit and Instruments. Upon Secured
Party's request, Debtor will deliver each letter of credit, if any, included in
the Collateral to Secured Party, in each case forthwith upon receipt by or for
the account of Debtor. If any
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Account having a value in excess of $__________ becomes evidenced by a
promissory note, trade acceptance or any other instrument for the payment of
money (other than checks or drafts in payment of Accounts collected by Debtor in
the ordinary course of business prior to notification by Secured Party under
Section 6.02(h)), Debtor will immediately deliver such instrument to Secured
Party appropriately endorsed and, regardless of the form of presentment, demand,
notice of dishonor, protest and notice of protest with respect thereto, Debtor
will remain liable thereon until such instrument is paid in full.
Section 4.05 Sale, Disposition or Encumbrance of Collateral. Except as
permitted by Section 4.10 or with Secured Party's prior written consent, Debtor
will not in any way encumber any of the Collateral (or permit or suffer any of
the Collateral to be encumbered) or sell, assign, lend, rent, lease or otherwise
dispose of or transfer any of the Collateral to or in favor of any Person other
than Secured Party.
Section 4.06 Proceeds of Collateral. Except as permitted by Sections 4.04,
4.10 and 4.11, Debtor will deliver to Secured Party promptly upon receipt all
proceeds delivered to Debtor from the sale or disposition of any Collateral. If
chattel paper, documents or instruments are received as proceeds, which are
required to be delivered to Secured Party, they will be, immediately upon
receipt, properly endorsed or assigned and delivered to Secured Party as
Collateral. This Section 4.06 shall not be construed to permit sales or
dispositions of Collateral except as may be elsewhere expressly permitted by
this Agreement.
Section 4.07 Records and Information. Debtor shall keep accurate and
complete records of the Collateral (including proceeds). Secured Party may at
any time have access to, examine, audit, make extracts from and inspect without
hindrance or delay Debtor's records, files and the Collateral. Debtor will
promptly provide written notice to Secured Party of all information which in any
way relates to or affects the filing of any financing statement or other public
notices or recordings, or the delivery and possession of items of Collateral for
the purpose of perfecting a security interest in the Collateral. Debtor will
also promptly furnish such information as Secured Party may from time to time
reasonably request regarding (i) the business, affairs or financial condition of
Debtor or (ii) the Collateral or Secured Party's rights or remedies with respect
thereto.
Section 4.08 Reimbursement of Expenses. Debtor hereby assumes all
liability for the Collateral, the security interests created hereunder and any
use, possession, maintenance, management, enforcement or collection of any or
all of the Collateral. Debtor agrees to indemnify and hold Secured Party and the
Lenders harmless from and against and covenants to defend Secured Party and the
Lenders against any and all losses, damages, claims, costs, penalties,
liabilities and expenses, including, without limitation, court costs and
attorneys' fees, incurred because of, incident to, or with respect to the
Collateral (including, without limitation, any use, possession, maintenance or
management thereof, or any injuries to or deaths of persons or damage to
property), except those arising from Debtor's gross negligence or willful
misconduct. All amounts for which Debtor is liable pursuant to this Section 4.08
shall be due and payable by Debtor to Secured Party upon demand. If Debtor fails
to make such payment upon demand (or if demand is not made due to an injunction
or stay arising from bankruptcy or other proceedings) and Secured Party or any
Lender pays such amount, the same shall be due and payable by Debtor to Secured
Party, plus interest
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thereon from the date of Secured Party's demand (or from the date of Secured
Party's payment if demand is not made due to such proceedings) at the Highest
Lawful Rate.
Section 4.09 Further Assurances. Upon the request of Secured Party, Debtor
shall (at Debtor's expense) execute and deliver all such assignments,
certificates, financing statements or other documents and give further
assurances and do all other acts and things as Secured Party may reasonably
request to perfect Secured Party's interest in the Collateral or to protect,
enforce or otherwise effect Secured Party's rights and remedies hereunder.
Section 4.10 Inventory. Until an Event of Default occurs hereunder, Debtor
may use the Inventory in any lawful manner not inconsistent with this Agreement
and with the terms of insurance thereon and may sell, lease or otherwise dispose
of its Inventory for cash or terms in the ordinary course of business, and
Debtor may retain the proceeds of such sales, leases or other dispositions
(subject to Section 4.04 and subsection 4.11(a)); provided, however, the
Inventory shall remain in Debtor's possession and control at all times prior to
sale, lease or other disposition at Debtor's address set forth in the opening
paragraph hereof or at such other location(s) as may be specified in Section
1.02. Debtor shall bear any risk of loss of the Inventory. Debtor shall not use
any item of Inventory in a manner inconsistent with the holding thereof for
sale, lease or other disposition in the ordinary course of business or in
contravention of the terms of any agreement. A sale, lease or disposition in the
ordinary course of business does not include the exchange of Inventory for
services or goods in kind or transfers of Inventory for the satisfaction of
obligations to suppliers or other indebtedness.
Section 4.11 Accounts.
(a) Prior to notification by Secured Party under Section 6.02(h), Debtor
will collect the Accounts in the ordinary course of its business and may retain
the proceeds of such collections (subject to Section 4.04).
(b) Debtor will duly perform or cause to be performed all of Debtor's
obligations with respect to the Accounts and the underlying sales of goods or
other transactions giving rise to the Accounts.
Section 4.12 Condition of Collateral. Except with respect to the
Collateral described in Schedule 4.12 hereto, Debtor will maintain all the
Collateral in good condition, repair and working order (ordinary wear and tear
excepted), and in accordance with any manufacturer's manual. Debtor will not
misuse, abuse, waste, destroy or endanger the Collateral or allow it to
deteriorate, except for ordinary wear and tear from its intended use. Debtor
will not use any Collateral in violation of any law, statute, ordinance,
regulation or administrative order, or suffer it to be so used.
Section 4.13 Collateral Attached to Other Property. In the event that the
Collateral is to be attached or affixed to any real property, Debtor hereby
agrees that this Agreement may be filed for record in any appropriate real
estate records as a financing statement which is a fixture filing. In connection
therewith, Debtor will take whatever action is required by Section 4.09. If
Debtor is not the record owner of such real property,
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Debtor will provide Secured Party with any additional security agreements or
financing statements necessary for the perfection of Secured Party's security
interest in the Collateral. If the Collateral is wholly or partly affixed to
real estate or installed in or affixed to other goods, Debtor will, on demand of
Secured Party, furnish Secured Party with a disclaimer (including landlord's or
other lien waivers or releases, if applicable), signed by all Persons or
entities having an interest in the real estate or other goods to which the
Collateral may have become affixed, of any prior interest to Secured Party's
interest in the Collateral.
Section 4.14 Collateral Separate and Distinct. Debtor shall at all times
keep the Collateral, including proceeds, or cause it to be kept (when in the
possession of warehousemen, bailees, agents, independent contractors or other
third parties), separate and distinct from other property.
ARTICLE 5
RIGHTS, DUTIES AND POWERS OF SECURED PARTY
The following rights, duties and powers of Secured Party are applicable
irrespective of whether an Event of Default occurs and is continuing:
Section 5.01 Discharge Encumbrances. Secured Party may, at its option,
discharge any taxes, liens, security interests or other encumbrances at any time
levied or placed on the Collateral, may pay for insurance on the Collateral and
may pay for the maintenance and preservation of the Collateral. Debtor agrees to
reimburse Secured Party upon demand for any payment so made, plus interest
thereon from the date of Secured Party's demand at the Highest Lawful Rate.
Section 5.02 Transfer of Collateral. Upon reasonable notice to Debtor,
Secured Party may transfer any or all of the Obligations, and upon any such
transfer Secured Party may transfer its interest in any or all of the Collateral
and shall be fully discharged thereafter from all liability therefor, other than
liabilities arising prior to the date of such transfer. Any transferee of the
Collateral shall be vested with all rights, powers and remedies of Secured Party
hereunder.
Section 5.03 Licenses and Rights to Use Collateral. In connection with any
transfer or sale (to Secured Party or any other Person) of the Collateral,
Secured Party is hereby granted a non-exclusive transferable license or other
right to use, without any charge, any of Debtor's labels, patents, copyrights,
trade names, trade secrets, trademarks or other similar property in completing
production, advertising or selling such Collateral. Debtor's rights under all
licenses and franchise agreements shall inure to the benefit of Secured Party
and any transferee of all or any part of the Collateral.
Section 5.04 Cumulative and Other Rights. The rights, powers and remedies
of Secured Party hereunder are in addition to all rights, powers and remedies
given by law or in equity. The exercise by Secured Party of any one or more of
the rights, powers and remedies herein shall not be construed as a waiver of any
other rights, powers and remedies, including, without limitation, any other
rights of set-off. If any of the Obligations are given
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in renewal, extension for any period or rearrangement, or applied toward the
payment of debt secured by any lien, Secured Party shall be, and is hereby,
subrogated to all the rights, titles, interests and liens securing the debt so
renewed, extended, rearranged or paid.
Section 5.05 Disclaimer of Certain Duties. The powers conferred upon
Secured Party by this Agreement are to protect its interest in the Collateral
and shall not impose any duty upon Secured Party or any Lender to exercise any
such powers. To the fullest extent permitted by applicable law, Debtor hereby
agrees that Secured Party shall not be liable for, nor shall the indebtedness
evidenced by the Obligations be diminished by, Secured Party's delay or failure
to collect upon, foreclose, sell, take possession of or otherwise obtain value
for the Collateral.
ARTICLE 6
EVENTS OF DEFAULT
Section 6.01 Events. It shall constitute an Event of Default under this
Agreement if an Event of Default occurs and is continuing under the Credit
Agreement.
Section 6.02 Remedies. Upon the occurrence and during the continuance of
any Event of Default, Secured Party may take any or all of the following actions
without notice (except where expressly required below or in the Credit
Agreement) or demand to Debtor:
(a) Declare all or part of the Obligations immediately due and payable
and enforce payment of the same by Debtor or any Obligor.
(b) Take possession of the Collateral, or at Secured Party's request
Debtor shall, at Debtor's cost, assemble the Collateral and make it
available at a location to be specified by Secured Party which is
reasonably convenient to Debtor and Secured Party. Secured Party may, at
its option, render any equipment unusable that may be included in the
Collateral, or, at Secured Party's request, Debtor will render it
unusable. In any event, Debtor shall bear the risk of accidental loss or
damage to or diminution in value of the Collateral, and neither Secured
Party nor any Lender will have any liability whatsoever for failure to
obtain or maintain insurance, nor to determine whether any insurance ever
in force is adequate as to amount or as to risk insured.
(c) Sell or lease, in one or more sales or leases and in one or more
parcels, or otherwise dispose of any or all of the Collateral in its then
condition or in any other commercially reasonable manner as Secured Party
may elect, in a public or private transaction, at any location as deemed
reasonable by Secured Party (including, without limitation, Debtor's
premises), either for cash or credit or for future delivery at such price
as Secured Party may deem fair, and (unless prohibited by the Code, as
adopted in any applicable jurisdiction) Secured Party or any Lender may be
the purchaser of any or all Collateral so sold and may apply upon the
purchase price therefor any Obligations secured hereby. Any such sale or
transfer by Secured Party either to itself or to any other Person shall be
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absolutely free from any claim of right by Debtor, including any equity or
right of redemption, stay or appraisal which Debtor has or may have under
any rule of law, regulation or statute now existing or hereafter adopted.
Upon any such sale or transfer, Secured Party shall have the right to
deliver, assign and transfer to the purchaser or transferee thereof the
Collateral so sold or transferred. It shall not be necessary that the
Collateral or any part thereof be present at the location of any such sale
or transfer. Secured Party may, at its discretion, provide for a public
sale, and any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as Secured Party may
fix in the notice of such sale. Secured Party shall not be obligated to
make any sale pursuant to any such notice. Secured Party may, without
notice or publication, adjourn any public or private sale by announcement
at any time and place fixed for such sale, and such sale may be made at
any time or place to which the same may be so adjourned. In the event any
sale or transfer hereunder is not completed or is defective in the opinion
of Secured Party, such sale or transfer shall not exhaust the rights of
Secured Party hereunder, and Secured Party shall have the right to cause
one or more subsequent sales or transfers to be made hereunder. In the
event that any of the Collateral is sold or transferred on credit, or to
be held by Secured Party for future delivery to a purchaser or transferee,
the Collateral so sold or transferred may be retained by Secured Party
until the purchase price or other consideration is paid by the purchaser
or transferee thereof, but in the event that such purchaser or transferee
fails to pay for the Collateral so sold or transferred or to take delivery
thereof, neither Secured Party nor any Lender shall incur any liability in
connection therewith. If only part of the Collateral is sold or
transferred such that the Obligations remain outstanding (in whole or in
part), Secured Party's rights and remedies hereunder shall not be
exhausted, waived or modified, and Secured Party is specifically empowered
to make one or more successive sales or transfers until all the Collateral
shall be sold or transferred and all the Obligations are paid. In the
event that Secured Party elects not to sell the Collateral, Secured Party
retains its rights to lease or otherwise dispose of or utilize the
Collateral or any part or parts thereof in any manner authorized or
permitted by law or in equity, and to apply the proceeds of the same
towards payment of the Obligations. To the fullest extent permitted by
applicable law, each and every method of disposition of the Collateral
described in this subsection or in subsection (f) shall constitute
disposition in a commercially reasonable manner.
(d) Take possession of all books and records of Debtor pertaining to
the Collateral. Secured Party shall have the authority to enter upon any
real property or improvements thereon in order to obtain any such books or
records, or any Collateral located thereon owned by Debtor, and remove the
same therefrom without liability.
(e) Apply proceeds of the disposition of the Collateral to the
Obligations in any manner elected by Secured Party and permitted by the
Code or otherwise permitted by law or in equity. Such application may
include, without limitation, the reasonable expenses of retaking, holding,
preparing for sale or other disposition, and the reasonable attorneys'
fees and legal expenses incurred by Secured Party and the Lenders.
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(f) Appoint any Person as agent to perform any act or acts necessary
or incident to any sale or transfer by Secured Party of the Collateral.
Additionally, any sale or transfer hereunder may be conducted by an
auctioneer or any officer or agent of Secured Party.
(g) Receive, change the address for delivery, open and dispose of mail
addressed to Debtor, and to execute, assign and endorse negotiable and
other instruments for the payment of money, documents of title or other
evidences of payment, shipment or storage for any form of Collateral on
behalf of and in the name of Debtor.
(h) Notify or require Debtor to notify Account Debtors that the
Accounts have been assigned to Secured Party and direct such Account
Debtors to make payments on the Accounts directly to Secured Party. To the
extent Secured Party does not so elect, Debtor shall continue to collect
the Accounts. Secured Party or its designee shall also have the right, in
its own name or in the name of Debtor, to do any of the following: (i) to
demand, collect, receipt for, settle, compromise any amounts due, give
acquittances for, prosecute or defend any action which may be in relation
to any monies due or to become due by virtue of, the Accounts; (ii) to
sell, transfer or assign or otherwise deal in the Accounts or the proceeds
thereof or the related goods, as fully and effectively as if Secured Party
were the absolute owner thereof; (iii) to extend the time of payment of
any of the Accounts, to grant waivers and make any allowance or other
adjustment with reference thereto; (iv) to endorse the name of Debtor on
notes, checks or other evidences of payments on Collateral that may come
into possession of Secured Party; (v) to take control of cash and other
proceeds of any Collateral; (vi) to sign the name of Debtor on any invoice
or xxxx of lading relating to any Collateral, or any drafts against
Account Debtors or other persons making payment with respect to
Collateral; (vii) to send a request for verification of Accounts to any
Account Debtor; and (viii) to do all other acts and things necessary to
carry out the intent of this Agreement.
Section 6.03 Attorney-in-Fact. Debtor hereby irrevocably appoints Secured
Party as Debtor's attorney-in-fact, with full authority in the place and stead
of Debtor and in the name of Debtor or otherwise, from time to time in Secured
Party's discretion upon the occurrence and during the continuance of an Event of
Default, but at Debtor's cost and expense and without notice to Debtor:
(a) To obtain, adjust, sell and cancel any insurance with respect to
the Collateral, and endorse any draft drawn by insurers of the Collateral.
Secured Party may apply any proceeds or unearned premiums of such
insurance to the Obligations (whether or not due).
(b) To take any action and to execute any assignment, certificate,
financing statement, notification, document or instrument which Secured
Party may deem necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation, to receive, endorse and collect
all instruments made
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payable to Debtor representing any payment or other distribution in
respect of the Collateral or any part thereof and to give full discharge
for the same.
Section 6.04 Account Debtors. Any payment or settlement of an Account made
by an Account Debtor will be, to the extent of such payment or to the extent
provided under such settlement, a release, discharge and acquittance of the
Account Debtor with respect to such Account, and Debtor shall take any action as
may be required by Secured Party in connection therewith. No Account Debtor on
any Account will ever be bound to make inquiry as to the termination of this
Agreement or the rights of Secured Party to act hereunder, but shall be fully
protected by Debtor in making payment directly to Secured Party.
Section 6.05 Liability for Deficiency. If any sale or other disposition of
Collateral by Secured Party or any other action of Secured Party or any Lender
hereunder results in reduction of the Obligations, such action will not release
Debtor from its liability to Secured Party and the Lenders for any unpaid
Obligations, including costs, charges and expenses incurred in the liquidation
of Collateral, together with interest thereon, and the same shall be immediately
due and payable to Secured Party at Secured Party's address set forth in the
opening paragraph hereof.
Section 6.06 Reasonable Notice. If any applicable provision of any law
requires Secured Party or any Lender to give reasonable notice of any sale or
disposition or other action, Debtor hereby agrees that ten days' prior written
notice shall constitute reasonable notice thereof. Such notice, in the case of
public sale, shall state the time and place fixed for such sale and, in the case
of private sale, the time after which such sale is to be made.
Section 6.07 Non-judicial Enforcement. Secured Party may enforce its
rights hereunder without prior judicial process or judicial hearing, and to the
extent permitted by law Debtor expressly waives any and all legal rights which
might otherwise require Secured Party to enforce its rights by judicial process.
ARTICLE 7
MISCELLANEOUS PROVISIONS
Section 7.01 Notices. Any notice required or permitted to be given under
or in connection with this Agreement shall be given in accordance with the
notice provisions of the Credit Agreement.
Section 7.02 Amendments and Waivers. Secured Party's acceptance of partial
or delinquent payments or any forbearance, failure or delay by Secured Party in
exercising any right, power or remedy hereunder shall not be deemed a waiver of
any obligation of Debtor or any Obligor, or of any right, power or remedy of
Secured Party; and no partial exercise of any right, power or remedy shall
preclude any other or further exercise thereof. Secured Party may remedy any
Event of Default hereunder or in connection with the Obligations without waiving
the Event of Default so remedied. Debtor hereby agrees that if Secured Party
agrees to a waiver of any provision hereunder, or an exchange of or release of
the
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Collateral, or the addition or release of any Obligor or other Person, any such
action shall not constitute a waiver of any of Secured Party's other rights or
of Debtor's obligations hereunder. This Agreement may be amended only by an
instrument in writing executed jointly by Debtor and Secured Party and may be
supplemented only by documents delivered or to be delivered in accordance with
the express terms hereof.
Section 7.03 Copy as Financing Statement. A photocopy or other
reproduction of this Agreement or any financing statement covering the
Collateral is sufficient as a financing statement, and the same may be filed
with any appropriate filing authority for the purpose of perfecting Secured
Party's security interest in the Collateral.
Section 7.04 Possession of Collateral. Secured Party shall be deemed to
have possession of any Collateral in transit to it or set apart for it (or, in
either case, any of its agents, affiliates or correspondents).
Section 7.05 Redelivery of Collateral. If any sale or transfer of
Collateral by Secured Party results in full satisfaction of the Obligations, and
after such sale or transfer and discharge there remains a surplus of proceeds,
Secured Party will deliver to Debtor such excess proceeds in a commercially
reasonable time; provided, however, that neither Secured Party nor any Lender
shall have any liability for any interest, cost or expense in connection with
any reasonable delay in delivering such proceeds to Debtor.
Section 7.06 Governing Law; Jurisdiction. This Agreement and the security
interest granted hereby shall be construed in accordance with and governed by
the laws of the State of Texas (except to the extent that the laws of any other
jurisdiction govern the perfection and priority of the security interests
granted hereby).
Section 7.07 Continuing Security Agreement.
(a) Except as may be expressly applicable pursuant to Section 9.505 of the
Code, no action taken or omission to act by Secured Party or the Lenders
hereunder, including, without limitation, any action taken or inaction pursuant
to Section 6.02, shall be deemed to constitute a retention of the Collateral in
satisfaction of the Obligations or otherwise to be in full satisfaction of the
Obligations, and the Obligations shall remain in full force and effect, until
Secured Party and the Lenders shall have applied payments (including, without
limitation, collections from Collateral) towards the Obligations in the full
amount then outstanding or until such subsequent time as is hereinafter provided
in subsection (b) below.
(b) To the extent that any payments on the Obligations or proceeds of the
Collateral are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver or other Person under any bankruptcy law, common law or
equitable cause, then to such extent the Obligations so satisfied shall be
revived and continue as if such payment or proceeds had not been received by
Secured Party or the Lenders, and Secured Party's and the Lenders' security
interests, rights, powers and remedies hereunder shall continue in full force
and effect. In such event, this Agreement shall be automatically reinstated if
it shall theretofore have been terminated pursuant to Section 7.08.
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Section 7.08 Termination. The grant of a security interest hereunder and
all of Secured Party's and the Lenders' rights, powers and remedies in
connection therewith shall remain in full force and effect until Secured Party
has retransferred and delivered all Collateral in its possession to Debtor, and
executed a written release or termination statement and reassigned to Debtor
without recourse or warranty any remaining Collateral and all rights conveyed
hereby. Upon the complete payment of the Obligations and the compliance by
Debtor with all covenants and agreements hereof, Secured Party, at the written
request and expense of Debtor, will release, reassign and transfer the
Collateral to Debtor and declare this Agreement to be of no further force or
effect. Notwithstanding the foregoing, the reimbursement and indemnification
provisions of Section 4.08 and the provisions of subsection 7.07(b) shall
survive the termination of this Agreement.
Section 7.09 Counterparts, Effectiveness. This Agreement may be executed
in two or more counterparts. Each counterpart is deemed an original, but all
such counterparts taken together constitute one and the same instrument. This
Agreement becomes effective upon the execution hereof by Debtor and delivery of
the same to Secured Party or the Lenders, and it is not necessary for Secured
Party or any Lender to execute any acceptance hereof or otherwise signify or
express its acceptance hereof.
DEBTOR: XXXXXX XXXXXX OPERATING L.P. "B"
By: Kinder Xxxxxx X.X., Inc.,
its General Partner
By:____________________________
Name: Xxxxxx X. Xxxx
Title: President
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FINANCING STATEMENT
This Financing Statement is presented to a filing officer for filing
pursuant to the Uniform Commercial Code.
1. The name and address of the Debtor is:
XXXXXX XXXXXX OPERATING L.P. "B"
0000 XxXxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
2. The name and address of the Secured Party is:
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, AS AGENT 000 Xxxxx Xxxxxxx Xxxxxx Xxxxxxxxx, Xxxxx
Xxxxxxxx 00000
3. This Financing Statement covers the following
Collateral:
(a) All of Debtor's accounts, inventory, equipment, chattel paper,
documents, instruments and general intangibles, including, without
limitation, any of the foregoing which may be more specifically indicated
in the remainder of this paragraph 3.
(b) (i) Any related or additional property from time to time delivered
to or deposited with Secured Party by or for the account of Debtor; (ii)
all certificates of title or other documents evidencing ownership or
possession of or otherwise relating to any property referred to in this
paragraph 3; (iii) all property used or usable in connection with any
property referred to in this paragraph 3; (iv) all policies of insurance
(whether or not required by Secured Party) covering any property referred
to in this paragraph 3; (v) all goods which were at any time included in
the Collateral and which are returned to or for the account of Debtor
following their sale, lease or other disposition; (vi) all proceeds,
products, replacements, additions to, substitutions for, accessions of,
and property necessary for the operation of any of the property referred
to in this paragraph 3, including, without limitation, insurance payable
as a result of loss or damage to any of the property referred to in this
paragraph 3, refunds of unearned premiums of any such insurance policy and
claims against third parties; and (vii) all books and records related to
any of the property referred to in this paragraph 3, including, without
limitation, any and all books of account, customer lists and other records
relating in any way to the accounts, chattel paper, instruments or
inventory referred to in this paragraph 3.
(c) All general intangibles related to any property referred to in
this paragraph 3, including, without limitation, all (i) letters of
credit, bonds, guaranties, purchase or sales agreements and other
contractual rights, rights to performance, and claims for damages, refunds
(including tax refunds) or other monies due or to become due; (ii) orders,
franchises, permits, certificates, licenses, consents, exemptions,
variances, authorizations or other approvals by any governmental agency or
court; (iii) consulting, engineering and technological information and
specifications, design data, patent rights, trade secrets, literary
rights, copyrights, trademarks, labels, trade names and other intellectual
property; (iv) business records, computer tapes and computer software; (v)
goodwill; and (vi) other intangible personal property, whether similar or
dissimilar to the property referred to in this paragraph 3.
DEBTOR: XXXXXX XXXXXX OPERATING L.P. "B"
By: Kinder Xxxxxx X.X., Inc.
its General Partner
By:_______________________________
Name: Xxxxxx X. Xxxx
Title: President
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