Exhibit 2.7
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (as amended, restated, modified or
otherwise supplemented, the "Agreement"), dated as of February 25,
1998, is made and entered into by and among WLR FOODS, INC., CASSCO
ICE & COLD STORAGE, INC., XXXXXXX FOODS, INC., XXXXXXX SUPPLY COMPANY,
INC. AND VALLEY RAIL SERVICE, INC. (collectively, the "Grantors;"
individually, a "Grantor"), and FIRST UNION NATIONAL BANK, successor
to First Union National Bank of Virginia, a national banking
association, as Collateral Agent (the "Collateral Agent"), for the
ratable benefit of itself and the financial institutions
(collectively, the "Secured Parties") as are, or may from time to time
become, parties to one or more of the Credit Agreements and the
Intercreditor Agreement (as defined below).
BACKGROUND STATEMENT
A. Pursuant to the terms of the Revolving Credit Agreement and
the Term Loan Agreement each dated as of February 25, 1998 (as
amended, restated, modified or otherwise supplemented, the "Bank
Credit Agreements"), by and among the Grantors, the Bank Lenders, and
and the Collateral Agent, the Bank Lenders have agreed to extend
and/or restructure certain loans to the Grantors as more particularly
described therein.
B. Pursuant to the terms of a Note Purchase Agreement dated as
of February 25, 1998 (as amended, restated, modified or otherwise
supplemented, the "Note Agreement," and, together with the Bank Credit
Agreements, the "Credit Agreements") by and among WLR, as borrower,
and the remaining Grantors, as guarantors, the Note Lenders (as
defined in the Intercreditor Agreement) have agreed to extend and/or
restructure certain credit accommodations to the Grantors as more
particularly described therein.
C. As of the date hereof, the Secured Parties and the Grantors
have entered into that certain Collateral Agency and Intercreditor
Agreement (the "Intercreditor Agreement") to, among other things, set
forth the relative rights of the Secured Parties with respect to the
Collateral.
D. The Grantors comprise one integrated financial enterprise,
and any loans made to any of them individually will inure, directly or
indirectly, to the benefit of all of them.
E. To induce the Secured Parties and the Collateral Agent to
provide and to continue to provide financial accommodations under the
Credit Agreements, and as a condition to the making of future loans
thereunder, the Secured Parties require that the Grantors each grant a
continuing security interest in and to the "Collateral" (as
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hereinafter defined) to secure the "Secured Obligations" (as
hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing Background
Statement, and other good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. Definitions. Terms defined in the Intercreditor
Agreement or the Credit Agreements and not otherwise defined herein,
when used in this Agreement including its preamble and recitals, shall
have the respective meanings provided for in the Intercreditor
Agreement or if not defined in the Intercreditor Agreement, the Credit
Agreements. The following additional terms, when used in this
Agreement, shall have the following meanings:
"Account Debtor" means any Person who is or may become obligated
to any Grantor under, with respect to, or on account of, an Account.
"Accounts" means all "accounts" (as defined in the UCC) now or
hereafter owned or acquired by any Grantor or in which any Grantor now
or hereafter has or acquires any right or interest, and, in any event,
shall also include, without limitation, all accounts receivable,
contract rights, notes, drafts and other obligations or indebtedness
owing to any Grantor arising from the sale or lease of goods or other
property by it or the performance of services by it, or to be
performed, and all of any Grantor's rights to any goods, services or
other property represented by any of the foregoing and all monies due
to or to become due to any Grantor under all contracts for the sale,
lease, consignment or exchange of goods or other property or the
performance of services by it (whether or not yet earned by
performance on the part of such Grantor), in each case whether now in
existence or hereafter arising or acquired, including, without
limitation, the right to receive the proceeds of such contracts and
all collateral security and guarantees of any kind given by any Person
with respect to any of the foregoing.
"Affiliate" means any direct and indirect affiliates and
subsidiaries of the Collateral Agent or any of the Secured Parties.
"Approved Contract Growers" shall have the meaning ascribed in
the Credit Agreements.
"Collateral" means the collective reference to:
(a) Accounts;
(b) Inventory;
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(c) Documents;
(d) Equipment;
(e) Farm Products;
(f) Fixtures;
(g) Instruments;
(h) Intellectual Property;
(i) General Intangibles;
(j) Vehicles;
(k) Rights Against Growers;
(l) Monies and property of any kind of any Grantor in the
possession or under the control of the Collateral Agent or any Secured
Party;
(m) All books and records (including, without limitation,
customer lists, credit files, computer programs, printouts and other
computer materials and records) of any Grantor pertaining to any of
the Collateral;
(n) Investment Property;
(o) All other goods and personal property of any Grantor,
whether tangible or intangible; and
(p) All products and Proceeds of all or any of the
Collateral described in clauses (a) through (o) hereof.
"Documents" means all "documents" (as defined in the UCC) or
other receipts covering, evidencing or representing goods or services,
now or hereafter owned or acquired by any Grantor or in which any
Grantor now or hereafter has or acquires any right or interest.
"Equipment" means all "equipment" (as defined in the UCC) of any
Grantor, wherever located, and all other machinery, equipment and
goods (other than Inventory) of any Grantor used or bought for use
primarily in the business of such Grantor, including all accessions,
additions, attachments, improvements, substitutions and replacements
thereto and therefor, in all such cases whether now owned or hereafter
acquired by any Grantor or in which any Grantor now has or hereafter
acquires any right or interest.
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"Event of Default" shall have the meaning set forth in the
Intercreditor Agreement.
"Farm Products" shall mean all crops or seed of any Grantor now
or hereafter growing or grown and all other personal property of any
Grantor used or for use in farming or related business operations
including, without limitation, native grass, grain, fertilizer, hay,
silage, livestock (including, without limitation, any and all turkeys,
chickens, and other poultry or farm animals as well as the offspring
of the same), and supplies now or hereafter owned by any Grantor or
now or hereafter purchased by or for the benefit of any Grantor. Farm
Products shall also include, but shall not be limited to, all now
owned or hereafter acquired feed additives, feed supplements,
veterinary supplies, and related products of any Grantor whether
purchased by or for the benefit of such Grantor, and any other "farm
products" as defined in the UCC.
"Financing Statements" means the Uniform Commercial Code Form
UCC-1 Financing Statements executed by each Grantor with respect to
the Collateral and to be filed in the jurisdictions set forth in the
Perfection Certificate or otherwise in the discretion of the
Collateral Agent.
"Fixtures" means all "fixtures" (as defined in the UCC) of any
Grantor, whether now owned or hereafter acquired, or in which any
Grantor now has or hereafter acquires any right or interest.
"General Intangibles" means all "general intangibles" (as defined
in the UCC) now or hereafter owned or acquired by any Grantor or in
which any Grantor now or hereafter has or acquires any right or
interest, and, in any event, shall mean and include, without
limitation, all rights to indemnification, and all rights, title and
interest which any Grantor may now or hereafter have in or under all
contracts (excluding contracts described in the definition of
Accounts), agreements, permits, licenses (which contracts, agreements,
permits and licenses may be pledged pursuant to the terms thereof and
Applicable Law), causes of action, franchises, tax refund claims,
insurance policies, customer lists, Intellectual Property, license
royalties, goodwill trade secrets, data bases, business records and
all other intangible property of every kind and nature.
"Instruments" means all "instruments," "chattel paper," or
"letters of credit" (each as defined in the UCC), including, without
limitation, instruments, chattel paper and letters of credit
evidencing, representing, arising from or existing in respect of,
relating to, securing or otherwise supporting the payment of, any of
the Accounts, including (but not limited to) promissory notes, drafts,
bills of exchange and trade acceptances, now or hereafter owned or
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acquired by any Grantor or in which any Grantor now or hereafter has
or acquires any right or interest.
"Intellectual Property" means, collectively, (a) all systems
software and applications software, including, but not limited to,
screen displays and formats, program structures, sequence and
organization, all documentation for such software, including, but not
limited to, user manuals, flowcharts, programmer's notes, functional
specifications, and operations manuals, all formulas, processes, ideas
and know-how embodied in any of the foregoing, and all program
materials, flowcharts, notes and outlines created in connection with
any of the foregoing, whether or not patentable or copyrightable, (b)
concepts, discoveries, improvements and ideas, (c) any useful
information relating to the items described in clause (a) or (b),
including know-how, technology, engineering drawings, reports, design
information, trade secrets, practices, laboratory notebooks,
specifications, test procedures, maintenance manuals, research,
development, manufacturing, marketing, merchandising, selling,
purchasing and accounting, (d) trademark applications, trademarks
(whether registered, unregistered or for which any application to
register has been filed), service xxxx applications, service marks
(whether registered, unregistered or for which any application to
register has been filed) and trade names, including, without
limitation, all renewals thereof and all proceeds thereof (such as, by
way of example, license royalties and proceeds of infringement suits),
the right to xxx for past, present and future infringements, all
rights owned by any Grantor corresponding thereto throughout the world
(all of the foregoing are collectively called the "Marks"), together
with the goodwill of the business symbolized by each of the Marks and
the registrations (if any) thereof and (e) all licenses to use any of
the items described in the foregoing clauses (a), (b), (c) and (d) or
any other similar items of any Grantor necessary for the conduct of
its business.
"Inventory" means all "inventory" (as defined in the UCC) now or
hereafter owned or acquired by any Grantor or in which any Grantor now
or hereafter has or acquires any right or interest, wherever located
and, in any event, shall mean and include, without limitation, all raw
materials, inventory and other materials and supplies, work-in-
process, finished goods, all accessions thereto, documents therefor
and any products made or processed therefrom, all substances, if any,
commingled therewith or added thereto (including, without limitation,
any of the foregoing in which the Grantor has an interest as a
consignor).
"Investment Property" means all "Investment Property" (as defined
in the UCC) now or hereafter owned or acquired by any Grantor or in
which any Grantor now or hereafter has or acquires any right or
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interest, wherever located and, in any event, shall mean and include,
any and all of the following:
(a) securities, whether certificated or uncertificated;
(b) security entitlements;
(c) securities accounts;
(d) commodity contracts; and
(e) commodity accounts.
"Perfection Certificate" means a certificate dated as of even
date herewith and attached hereto as Exhibit "A", setting forth the
corporate names, chief executive office or principal place of business
in each state and other current locations of Collateral of each
Grantor and such other information as the Collateral Agent deems
pertinent to the perfection of security interests, completed and
supplemented with the schedules and attachments contemplated thereby
to the satisfaction of the Collateral Agent, and duly certified by the
chief executive or chief financial officer of each Grantor so
authorized to act.
"Permitted Liens" shall have the meaning ascribed in the Credit
Agreements.
"Proceeds" means all proceeds of, and all other profits, rentals
or receipts, in whatever form, arising from the collection, sale,
lease, exchange, assignment, licensing or other disposition of, or
realization upon, the Collateral, including, without limitation, all
claims of any Grantor against third parties for loss of, damage to or
destruction of, or for proceeds payable under, or unearned premiums
with respect to, policies of insurance in respect of, any Collateral,
and any condemnation or requisition payments with respect to any
Collateral and all Collateral acquired with the cash proceeds of any
other Collateral.
"Rights Against Growers" means all claims and rights of the
Grantor, whether now existing or hereafter arising, under any contract
or agreement with any other person, firm, corporation or other entity
providing for the care and maintenance of any live poultry (including
chickens and/or turkeys), other livestock and eggs now or at any time
hereafter owned by the Grantor, and all claims or rights now existing
or hereafter arising, against other persons, firms, corporations or
other entities in connection with the care, custody and maintenance of
any live poultry (including chickens and/or turkeys), other livestock
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and eggs now owned or hereafter acquired by the Grantor, whether such
rights and claims are based upon contract, tort or otherwise.
"Schedule of Inventory" means a schedule of Inventory based upon
each Grantor's most recent physical inventory and its perpetual
inventory records, showing each Grantor's cost of all such Inventory
with a monthly reconciliation to the general ledger inventory account
of each Grantor, as may be requested by the Collateral Agent pursuant
to Section 4(c)(i) hereof.
"Schedule of Vehicles" means a schedule of Vehicles as may be
requested by the Collateral Agent pursuant to Section 4(e) hereof.
"Secured Obligations" means the "Secured Obligations" as defined
under the Intercreditor Agreement and any renewals or extensions of
any of the Secured Obligations.
"Security Interests" means the security interests granted
pursuant to Section 2, as well as all other security interests created
or assigned as additional security for the Secured Obligations
pursuant to the provisions of this Agreement.
"Transaction Documents" shall have the meaning set forth in the
Intercreditor Agreement.
"UCC" means the Uniform Commercial Code as in effect in the State
of New York; provided, that if by reason of mandatory provisions of
law, the perfection or the effect of perfection or non-perfection of
the Security Interests in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than New York.
"UCC" means the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating to such
perfection or effect of perfection or non-perfection.
"Vehicles" means all cars, trucks, trailers, construction and
earth moving equipment of any Grantor and other vehicles covered by a
certificate of title law of any state, and all tires, accessions,
additions, attachments, substitutions, replacements and other
appurtenances to any of the foregoing.
SECTION 2. The Security Interests.
(a) To secure the payment and performance of all of the Secured
Obligations, each Grantor hereby grants to the Collateral Agent, for
the ratable benefit of the Collateral Agent and the Secured Parties, a
continuing security interest in and to all of such Grantor's estate,
right, title and interest in and to all Collateral whether now or
hereafter owned or acquired by such Grantor or in which such Grantor
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now has or hereafter has or acquires any rights, and wherever located,
and in all cases, to the extent that the grant of a security interest
therein is permitted pursuant to Applicable Law.
(b) The Security Interests are granted as security only and
shall not subject the Collateral Agent or any Secured Party to, or
transfer to the Collateral Agent or any Secured Party, or in any way
affect or modify, any obligation or liability of any Grantor with
respect to any of the Collateral or any transaction in connection
therewith.
SECTION 3. Representations and Warranties. Each Grantor
represents and warrants as follows:
(a) Such Grantor has the corporate power and authority and the
legal right to execute and deliver, to perform its obligations under,
and to grant the Security Interests in the Collateral pursuant to,
this Agreement and has taken all necessary corporate action to
authorize its execution, delivery and performance of, and grant of the
Security Interests in the Collateral pursuant to, this Agreement.
(b) This Agreement constitutes a legal, valid and binding
obligation of such Grantor enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally.
(c) The execution, delivery and performance of this Agreement
will not violate any provision of any Applicable Law or Material
Contract of such Grantor and will not result in the creation or
imposition of any Lien on any of the properties or revenues of such
Grantor pursuant to any Applicable Law or Material Contract of such
Grantor, except as contemplated hereby.
(d) No consent or authorization of, filing with, or other act by
or in respect of, any arbitrator or Governmental Authority and no
consent of any other Person (including, without limitation, any
stockholder or creditor of such Grantor), is required in connection
with the execution, delivery, performance, validity or enforceability
of this Agreement, except for the filing of Financing Statements and,
except to the extent applicable to any Collateral, filings with the
United States Copyright Office or the United States Patent and
Trademark Office, filings with state transportation authorities with
respect to liens on Vehicles, and any filing or action in compliance
with the Federal Assignment of Claims Act.
(e) Except as otherwise disclosed in or permitted under the
Credit Agreements, no litigation, investigation or proceeding of or
before any arbitrator or Governmental Authority is pending or, to the
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knowledge of such Grantor after due inquiry, threatened by or against
such Grantor or against any of its properties or revenues with respect
to this Agreement or any of the transactions contemplated hereby.
(f) Except for Permitted Liens, such Grantor has good and
marketable title to all of its respective Collateral, free and clear
of any Liens other than in favor of the Collateral Agent and the
Secured Parties as conveyed herein.
(g) Such Grantor has not performed or failed to perform any acts
that would prevent or hinder the Collateral Agent from enforcing any
of the terms of this Agreement. Other than financing statements or
other similar or equivalent documents or instruments with respect to
Liens in favor of the Collateral Agent or the Secured Parties as
provided herein, no financing statement, mortgage, security agreement
or similar or equivalent document or instrument covering all or any
part of the Collateral of such Grantor is on file or of record in any
jurisdiction except as disclosed on the schedule of liens attached
hereto as Schedule 3(g). No Collateral of such Grantor is in the
possession of any Person (other than such Grantor) asserting any claim
thereto or security interest therein, except that the Collateral Agent
or its designee may have possession of the Collateral as contemplated
hereby and a bailee may have possession of the Collateral as
contemplated by, and so long as, the Grantor has complied with Section
4(a)(iv) and 4(a)(v) hereof.
(h) All of the information set forth in the Perfection
Certificate with respect to such Grantor is true and correct as of the
date hereof.
(i) Such Grantor has, contemporaneously herewith, delivered to
the Collateral Agent possession of all originals of all negotiable
instruments, documents and chattel paper constituting Collateral with
an aggregate face amount in excess of $2,000,000, on an individual
basis currently owned or held by such Grantor, if any (duly endorsed
in blank, if requested by the Collateral Agent).
(j) With respect to any Inventory of such Grantor: (i) except
for ice merchandisers owned by Cassco located in the states listed on
schedule 3(j) attached hereto, all Inventory is, and shall be at all
times, located at places of business listed in the Perfection
Certificate or as to which such Grantor has complied with the
provisions of Section 4(a)(i) hereof, except Inventory in transit from
one such location to another such location; (ii) except for Permitted
Liens, no Inventory is, nor shall at any time or times be, subject to
any Lien whatsoever other than in favor of the Collateral Agent and
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the Secured Parties as conveyed herein; (iii) except to the extent
live inventory may be held with one or more Approved Contract Growers,
no Inventory in aggregate value exceeding $100,000 at any time is, nor
shall at any time or times be, kept, stored or maintained with a
bailee, warehouseman, carrier or similar party (other than a carrier
delivering Inventory to a purchaser in the ordinary course of such
Grantor's business) unless the Collateral Agent shall have received
prior written notice of such storage and such Grantor has complied
with the provisions of Section 4(a)(iv) hereof; (iv) no Inventory is,
nor shall at any time or times be, in transit for more than 90 days;
(v) all Inventory (except for Inventory otherwise described in
subsection (iii) above) shall at any time or times be delivered to a
location owned or leased by any Grantors as set forth in the
Perfection Certificate where the Collateral Agent has previously filed
Financing Statements against such Grantor; and (vi) no Inventory in
aggregate value exceeding $100,000 at any time is, nor shall at any
time or times be, kept, stored or maintained with a consignee unless
the Collateral Agent shall have received prior written notice of such
consignment and such Grantor has complied with the provisions of
Section 4(a)(v) hereof.
(k) The Financing Statements executed by such Grantor are in
appropriate form and when filed in the appropriate filing offices, the
Security Interests will constitute valid and perfected security
interests in the Collateral of such Grantor, prior to all other Liens
(except for Permitted Liens) and rights of others therein (to the
extent that a security interest therein may be perfected by filing
pursuant to the UCC) and all filings and other actions necessary or
desirable to perfect and protect such Security Interests have been
duly taken.
(l) The Inventory, Fixtures, Equipment and Vehicles of such
Grantor are insured in accordance with the requirements of Section
4(a)(vi) hereof and of the Bank Credit Agreements.
(m) Xxxxxxx Foods, Inc. is the only Grantor which owns Farm
Products.
SECTION 4. Further Assurances; Covenants.
(a) General.
(i) Each Grantor agrees not to change the location of its
chief executive office or principal place of business in any state
unless it shall have given the Collateral Agent thirty (30) days prior
written notice thereof, executed and delivered to the Collateral Agent
all financing statements and financing statement amendments which the
Collateral Agent may request in connection therewith and, if requested
by the Collateral Agent, delivered an opinion of counsel with respect
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thereto in accordance with Section 4(a)(viii) hereof. Each Grantor
agrees not to change the locations where it keeps or holds any
Collateral or any records relating thereto from the applicable
location described in the Perfection Certificate unless such Grantor
shall have given the Collateral Agent thirty (30) days prior written
notice of such change of location, executed and delivered to the
Collateral Agent all financing statements and financing statement
amendments which the Collateral Agent may request in connection
therewith and, if requested by the Collateral Agent, delivered an
opinion of counsel with respect thereto in accordance with Section
4(a)(viii) hereof; provided, however, that such Grantor may keep
Inventory at, or in transit to, any location described in the
Perfection Certificate. Each Grantor agrees not to, in any event,
change the location of any Collateral if such change would cause the
Security Interests in such Collateral to lapse or cease to be
perfected.
(ii) Each Grantor agrees not to change its name, identity or
corporate or partnership structure in any manner unless it shall have
given the Collateral Agent thirty (30) days prior written notice
thereof, executed and delivered to the Collateral Agent all financing
statements and financing statement amendments which the Collateral
Agent may request in connection therewith and, if requested by the
Collateral Agent, delivered an opinion of counsel with respect thereto
in accordance with Section 4(a)(viii) hereof.
(iii) Each Grantor 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 other
action that from time to time may be necessary, or that the Collateral
Agent may reasonably request, in order to create, preserve, upgrade in
rank (to the extent required hereby), perfect, confirm or validate the
Security Interests or to enable the Collateral Agent and the Secured
Parties to obtain the full benefits of this Agreement, or to enable
the Collateral Agent to exercise and enforce any of its rights, powers
and remedies hereunder with respect to any of the Collateral. Prior
to the irrevocable payment in full of the Secured Obligations, each
Grantor hereby authorizes the Collateral Agent to execute and file
financing statements, financing statement amendments or continuation
statements without such Grantor's signature appearing thereon. Each
Grantor agrees that a photographic, photostatic or other reproduction
of this Agreement or of a financing statement is sufficient as a
financing statement. Each Grantor shall pay the costs of, or
incidental to, any recording or filing of the Financing Statements and
any other financing statements, financing statement amendments or
continuation statements concerning the Collateral.
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(iv) If any Collateral exceeding in value $100,000 in the
aggregate is at any time in the possession or control of any
warehouseman, bailee, or any Grantor's agents or processors, such
Grantor shall notify in writing such warehouseman, bailee, agent or
processor of the Security Interests created hereby, shall use its best
efforts to obtain such warehouseman's, bailee's, agent's or
processor's agreement in writing to hold all such Collateral for the
Collateral Agent's account subject to the Collateral Agent's
instructions, and shall use its best efforts to cause such
warehouseman, bailee, agent or processor to issue and deliver to the
Collateral Agent warehouse receipts, bills of lading or any similar
documents relating to such Collateral in the Collateral Agent's name
and in form and substance reasonably acceptable to the Collateral
Agent; provided that this subparagraph shall not apply to live chicken
or live turkey Inventory located with Approved Contract Growers.
(v) If any Collateral exceeding in value $50,000 in the
aggregate is at any time in the possession or control of any consignee
(other than another Grantor), such Grantor shall notify in writing
such consignee of the Security Interests created hereby, shall use its
best efforts to obtain such consignee's agreement in writing to hold
all such Collateral for the Collateral Agent's account subject to the
Collateral Agent's instructions, and shall use its best efforts to
cause such consignee to issue and deliver to the Collateral Agent
warehouse receipts, bills of lading or any similar documents relating
to such Collateral in the Collateral Agent's name and in form and
substance reasonably acceptable to the Collateral Agent. Further,
such Grantor shall perfect and protect such Grantor's ownership
interests in all Inventory stored with a consignee (other than another
Grantor) against creditors of the consignee by filing and maintaining
financing statements against the consignee reflecting the consignment
arrangement filed in all appropriate filing offices, providing any
written notices required to notify any prior creditors of the
consignee of the consignment arrangement, and taking such other
actions as may be appropriate to perfect and protect the Grantor's
interests in such inventory under Section 2-326, Section 9-114 and
Section 9-408 of the UCC or otherwise. All such financing statements
filed pursuant to this Section 4(a)(v) shall be assigned, on the face
thereof, to the Collateral Agent, for the ratable benefit of itself
and the Secured Parties.
(vi) Each Grantor shall bear the full risk of any loss of
any nature whatsoever with respect to its respective Collateral. At
such Grantor's own cost and expense in amounts and with carriers
reasonably acceptable to the Collateral Agent, each Grantor shall (a)
keep all its insurable properties and properties in which such Grantor
has an interest insured against the hazards of fire, flood, those
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hazards covered by extended coverage insurance and such other hazards,
and for such amounts, as is customary in the case of companies engaged
in businesses similar to such Grantor including, without limitation,
business interruption insurance; (b) maintain a bond in such amounts
as is customary in the case of companies engaged in businesses similar
to such Grantor insuring against larceny, embezzlement or other
criminal misappropriation of insured's officers and employees who may
either singly or jointly with others at any time have access to the
assets or funds of such Grantor either directly or through authority
to draw upon such funds or to direct generally the disposition of such
assets; (c) maintain public and product liability insurance against
claims for personal injury, death or property damage suffered by
others; (d) maintain all such worker's compensation or similar
insurance as may be required under the laws of any state or
jurisdiction in which such Grantor is engaged in business; (e) furnish
the Collateral Agent with (i) copies of all policies (or binders) and
evidence of the maintenance of such policies by the renewal thereof at
least thirty (30) days before any expiration date, and (ii)
appropriate loss payable endorsements in form and substance
satisfactory to the Collateral Agent, naming the Collateral Agent as a
co-insured and loss payee, as applicable, on behalf of itself and the
Secured Parties with respect to all insurance coverage referred to in
clauses (a) and (b) above, and providing (A) that all proceeds
thereunder shall be payable to the Collateral Agent, on behalf of
itself and the Secured Parties, (B) no such insurance shall be
affected by any act or neglect of the insured or owner of the property
described in such policy absent the Collateral Agent receiving sixty
(60) days prior written notice of such act or neglect from such
Grantor's insurance company, and (C) that such policy and loss payable
clauses may not be canceled, amended or terminated unless at least
thirty (30) days' prior written notice is sent to the Collateral
Agent. In the event of any loss thereunder, the carriers named
therein hereby are directed by the Collateral Agent and such Grantor
to make payment for such loss under clauses (a) and (b) above to the
Collateral Agent, on behalf of itself and the Secured Parties, and not
to such Grantor and the Collateral Agent jointly. If any insurance
losses are paid by check, draft or other instrument payable to such
Grantor and the Collateral Agent jointly, the Collateral Agent may
endorse such Grantor's name thereon and do such other things as the
Collateral Agent may deem advisable to reduce the same to cash. At
any time following the occurrence of an Event of Default, the
Collateral Agent is hereby authorized in its good faith discretion to
adjust and compromise claims under insurance coverage referred to in
clauses (a) and (b). Any insurance proceeds shall be applied first to
the payment of all costs and expenses incurred by the Collateral
Agent, if any, in obtaining such proceeds. The balance of the
proceeds, if any, shall be applied (1) if the Collateral Agent
determines in its reasonable judgment that (A) the proceeds together
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with such other sums as the applicable Grantor shall deposit with the
Collateral Agent to pay the costs of restoration, repair or
replacement of the applicable Collateral or such portion thereof which
may have been altered, damaged or destroyed, are sufficient to pay
such costs in full, (B) no Event of Default shall have occurred and be
continuing under the Credit Agreements or any of them, (C) following
completion of such restoration, repair or replacement, the applicable
Collateral will be equal in value and economic viability to its status
prior to such casualty, (D) such restoration, repair or replacement
can be completed on or prior to the maturity of the Secured
Obligations or any portion thereof, and (E) the applicable Grantor
will have sufficient income pending the completion of such
restoration, repair or replacement to pay all debt service due the
Collateral Agent and the Secured Parties with respect to the Secured
Obligations, toward restoring, repairing or replacing the applicable
Collateral or such portion thereof which may have been altered,
damaged or destroyed, on the same or similar conditions and
requirements as are customarily required for construction loans made
by the Collateral Agent, or (2) otherwise, to the repayment of the
Secured Obligations to be applied in the order and manner set forth in
section 7 of the Intercreditor Agreement. Notwithstanding anything to
the contrary contained in this subparagraph (vi), provided that no
Event of Default shall have occurred, the Collateral Agent shall not
restrict the Borrower's use of insurance proceeds related to any
single loss which, in any individual instance does not exceed $250,000
(the "De Minimis Proceeds"), and such De Minimis Proceeds shall be
made available to the Borrower in the same way as other cash
collections upon receipt thereof by the Collateral Agent.
(vii) Each Grantor will, promptly upon request, provide to
the Collateral Agent all information and evidence the Collateral Agent
may reasonably request concerning the Collateral, and in particular
the Accounts, to enable the Collateral Agent to enforce the provisions
of this Agreement.
(viii) If requested by the Collateral Agent or the Required
Secured Parties, prior to each date on which any Grantor proposes to
take any action contemplated by Section 4(a)(i) or Section 4(a)(ii)
hereof, such Grantor shall, at its cost and expense, cause to be
delivered to the Collateral Agent and the Secured Parties an opinion
of counsel, in form and content reasonably satisfactory to the
Collateral Agent.
(ix) Each Grantor will comply with all Applicable Laws
applicable to the Collateral or any part thereof or to the operation
of such Grantor's business, except where such non-compliance could not
reasonably be expected to have a Material Adverse Effect.
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(x) Each Grantor will pay promptly when due all taxes,
assessments and governmental charges or levies imposed upon the
Collateral or in respect of its income or profits therefrom, as well
as all claims of any kind (including, without limitation, claims for
labor, materials and supplies) against or with respect to the
Collateral, except that no such charge need be paid if (A) the
validity thereof is being contested in good faith by appropriate
proceedings, (B) such proceedings have resulted in the stay or
prohibition of the enforcement of any sale, forfeiture or Lien on any
of the Collateral or any interest therein and such stay or prohibition
is currently in effect and such charge is adequately reserved against
on such Grantor's books in accordance with GAAP.
(xi) Except as authorized in the Credit Agreements, no
Grantor shall:
(A) sell, assign (by operation of law or otherwise) or
otherwise dispose of any of the Collateral, except in the ordinary
course of its business; or
(B) create or suffer to exist any Lien or other charge
or encumbrance upon or with respect to any of the Collateral to secure
indebtedness of any Person or entity.
(b) Accounts, Etc.
(i) Each Grantor shall use all reasonable efforts to cause
to be collected from its Account Debtors, as and when due, any and all
amounts owing under or on account of each Account (including, without
limitation, Accounts which are delinquent, such Accounts to be
collected in accordance with lawful collection procedures) and to
apply forthwith upon receipt thereof all such amounts as are so
collected to the outstanding balance of such Account. The costs and
expenses (including, without limitation, attorney's fees), of
collection of Accounts incurred by such Grantor or, if applicable, the
Collateral Agent shall be borne by such Grantor.
(ii) Upon the occurrence and during the continuance of any
Event of Default, the Collateral Agent may notify (and each Grantor
hereby authorizes the Collateral Agent so to notify) each Account
Debtor in respect of any Account that such Account has been assigned
to the Collateral Agent hereunder and that any payments due or to
become due in respect of such Account are to be made directly to the
Collateral Agent or its designee. Each Grantor hereby appoints the
Collateral Agent as its lawful attorney-in-fact to do, at the
Collateral Agent's option and at the Grantor's expense and liability,
all acts and things which the Collateral Agent may deem necessary or
desirable to effectuate its rights under this Security Agreement,
15
including without limitation, upon the occurrence of an Event of
Default, to communicate with Account Debtors and other third parties
for the purpose of collecting, protecting, or preserving any Account
or any other Collateral and, in the Grantor's or the Collateral
Agent's name, to receive and endorse any checks or other items to be
presented for payment with respect to any Account.
(iii) Each Grantor will perform and comply in all
material respects with all of its obligations in respect of Accounts
and General Intangibles and the exercise by the Collateral Agent of
any of its rights hereunder shall not release any Grantor from any of
its duties or obligations.
(iv) No Grantor will (A) amend, modify, terminate or waive
any material provision of any agreement giving rise to an Account in
any manner which could reasonably be expected to materially adversely
affect the value of such Account as Collateral, except with respect to
such Accounts with any single Account debtor which, in the aggregate,
do not exceed $25,000 in any Fiscal Year, (B) fail to exercise
promptly and diligently each and every material right which it may
have under each agreement giving rise to an Account (other than any
right of termination), except with respect to such Accounts with any
single Account debtor which, in the aggregate, do not exceed $15,000
in any Fiscal Year, (the Aggregate Amount of the Accounts excepted
from Section 4(b)(iv)(A) and (B) shall not exceed $100,000 in any
Fiscal Year), or (C) fail to deliver to the Collateral Agent a copy of
each material demand, notice or document received by it relating in
any way to any agreement giving rise to an Account with a face amount
in excess of $100,000.
(v) Each Grantor agrees that the Collateral Agent, at any
time and from time to time, may confirm orders or verify any and all
of such Grantor's Accounts in the Collateral Agent's name, or in any
fictitious name used by the Collateral Agent for verifications, or
through any public accountants.
(vi) At such intervals as the Collateral Agent shall
require, the Grantor shall deliver to the Secured Party copies of
purchase orders, invoices, contracts, shipping and delivery receipts
and any other documents or instrument which evidence or give rise to
an Account.
(c) Inventory, Etc.
(i) At the request of the Collateral Agent, each Grantor
shall deliver to the Collateral Agent a Schedule of Inventory. Unless
otherwise indicated in writing by such Grantor or as otherwise
disclosed in the Credit Agreements, each Schedule of Inventory
delivered by any Grantor to the Collateral Agent shall constitute a
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representation with respect to the Inventory listed thereon or
referred to therein that: (A) all such Inventory is located at places
of business listed in the Perfection Certificate or as to which the
applicable Grantor has complied with the provisions of Section 4(a)(i)
hereof or on the premises identified on the then current Schedule of
Inventory or is Inventory in transit from one such location to another
such location and the period of transit is less than 10 days; (B) no
such Inventory is subject to any Lien whatsoever other than in favor
of the Collateral Agent and the Secured Parties as conveyed herein;
(C) except for Inventory located with Approved Contract Growers, no
such Inventory in aggregate value exceeding $50,000 at any time is,
nor shall at any time or times be, kept, stored or maintained with a
bailee, warehouseman, carrier or similar party (other than a carrier
delivering Inventory to a purchaser in the ordinary course of such
Grantor's business) unless the Required Secured Parties have given
their prior written consent and such Grantor has complied with the
provisions of Section 4(a)(iv) hereof.
(ii) If at any time during the term of this Agreement, any
Inventory is placed by any Grantor on consignment with any consignee,
such Grantor shall, prior to the delivery of any such consigned
Inventory: (A) provide the Collateral Agent with all consignment
agreements and other instruments and documentation to be used in
connection with such consignment, all of which agreements, instruments
and documentation shall be reasonably acceptable in form and substance
to the Collateral Agent; (B) prepare, execute and file appropriate
financing statements with respect to any consigned Inventory showing
the consignee as debtor, the Grantor as secured party and the
Collateral Agent as assignee of secured party; (C) prepare, execute
and file appropriate financing statements with respect to any
consigned Inventory showing the Grantor as debtor and the Collateral
Agent as secured party; (D) after all financing statements referred to
in clauses (B) and (C) above shall have been filed, conduct a search
of all filings made against the consignee in all jurisdictions in
which the Inventory to be consigned is to be located while on
consignment, and deliver to the Collateral Agent copies of the results
of all such searches; (E) notify, in writing, all creditors of the
consignee which would be holders of security interests in the
Inventory to be consigned that the Grantor expects to deliver certain
Inventory to the consignee, all of which Inventory shall be described
in such notice by item or type, and (F) if requested by the Collateral
Agent, deliver an opinion of counsel to the effect that all financing
statements and amendments or supplements thereto, continuation
statements and other documents required to be recorded or filed in
order to perfect and protect the Security Interests and priority
thereof against all creditors of and purchasers of the Grantor and
such consignee have been filed in each filing office necessary or
17
desirable for such purposes and that all filing fees and taxes, if
any, payable in connection with such filings have been paid in full.
(d) Equipment, Etc. Except as otherwise provided in the Credit
Agreements, each Grantor will maintain each item of Equipment in the
same condition, repair and working order as when acquired, ordinary
wear and tear and immaterial impairments of value and damage by the
elements excepted, and will as quickly as practicable provide all
maintenance, service and repairs necessary for such purpose and will
promptly furnish to the Collateral Agent a statement respecting any
material loss or damage to any of the Equipment, to the extent such
loss or damage constitutes a Material Adverse Change (as defined in
the Credit Agreements) in the Borrower, taken as a whole.
(e) Vehicles. As of the Closing Date, each Grantor shall deliver to
the Collateral Agent with a copy for each Secured Party a Schedule of
Vehicles together with the original certificate of title for each
Vehicle. Each Grantor will maintain each Vehicle in good operating
condition ordinary wear and tear excepted, and will provide all
maintenance, service and repairs necessary for such purpose. As of
the Closing Date, all applications for certificates of title or
ownership indicating the Collateral Agent's first priority Lien on the
Vehicle covered by such certificate, and any other necessary
documentation, shall be filed in each office in each jurisdiction
where necessary to perfect the Collateral Agent's Liens on the
Vehicles. Each certificate of title or ownership relating to each
Vehicle shall be maintained by the applicable Grantor in accordance
with Applicable Law to reflect the ownership interest of such Grantor.
(f) Farm Products. Except as promptly disclosed to the
Collateral Agent from time to time in writing, the Grantors shall
maintain all Farm Products in good and merchantable quality, free from
any diseases and other defects which would render such Farm Products
unmerchantable. The Grantors will keep correct and accurate records
itemizing and describing the kind, type, quality, quantity, and
location of Farm Products, the Grantor's cost therefor, the selling
price thereof, daily withdrawals therefrom, and additions thereto.
(g) Indemnification. Each Grantor agrees to pay, and to save
the Collateral Agent and the Secured Parties, harmless from, any and
all liabilities, costs and expenses (including, without limitation,
legal fees and expenses) (i) with respect to, or resulting from any
and all excise, sales or other taxes which may be payable or
determined to be payable with respect to any of the Collateral, (ii)
with respect to, or resulting from, complying with any Applicable Law
applicable to any of the Collateral or (iii) in connection with any of
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the transactions contemplated by this Agreement (except to the extent
any such liabilities, costs and expenses result from the gross
negligence or willful misconduct of the Collateral Agent or Secured
Parties). In any suit, proceeding or action brought by the Collateral
Agent under any Account for any sum owing thereunder, or to enforce
any provisions of any Account, each Grantor will save, indemnify and
keep the Collateral Agent and the Secured Parties harmless from and
against all expense, loss or damage suffered by reason of any defense,
setoff, counterclaim, recoupment or reduction or liability whatsoever
of the Account Debtor or any other obligor thereunder, arising out of
a breach by such Grantor of any obligation thereunder or arising out
of any other agreement, indebtedness or liability at any time owing to
or in favor of such Account Debtor or obligor or its successors from
such Grantor (except to the extent any such expense, loss or damage
results from the gross negligence or willful misconduct of the
Collateral Agent or Secured Parties). The obligations of each Grantor
under this Section 4(g) shall survive the termination of the other
provisions of this Agreement.
(h) Grower Inventory. To the extent that the Grantor maintains
Inventory with any Approved Contract Grower, grower, or any other
Person pursuant to a grower contract or otherwise, the Grantor will
take all steps necessary to preserve and maintain the security
interests of the Secured Parties in such Inventory, and to preserve
and maintain the ownership interest of the Grantor in such Inventory.
SECTION 5. Reporting and Record Keeping. Each Grantor
respectively covenants and agrees with the Collateral Agent and the
Secured Parties that from and after the date of this Agreement and
until all Secured Obligations have been fully satisfied:
(a) Maintenance of Records Generally. Such Grantor will keep
and maintain at its own cost and expense complete and accurate records
of the Collateral, including, without limitation, record of all
payments received and all credits granted with respect to the
Collateral and all other dealings with the Collateral. All chattel
paper given to such Grantor with respect to any Accounts will be
marked with the following legend: "This writing and the obligations
evidenced or secured hereby are subject to the security interest of
First Union National Bank, as Collateral Agent."
(b) Further Identification of Collateral. Such Grantor will, if
so requested by the Collateral Agent, furnish to the Collateral Agent
statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as
the Collateral Agent may reasonably request, all in reasonable detail.
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(c) Notices. Such Grantor will advise the Collateral Agent
promptly, in reasonable detail, (i) of any Lien or claim made or
asserted against any material portion of the Collateral, (ii) of any
material adverse change in the composition of the Collateral, and
(iii) of the occurrence of any other event which could reasonably be
expected to have a material adverse effect on the Collateral or on the
validity, perfection or priority of the Security Interests.
SECTION 6. General Authority.
(a) Each Grantor hereby irrevocably appoints the Collateral
Agent its true and lawful attorney, with full power of substitution,
in the name of such Grantor, the Collateral Agent, the Secured Parties
or otherwise, for the sole use and benefit of the Collateral Agent and
the Secured Parties, but at such Grantor's expense, to exercise, at
any time from time to time all or any of the following powers:
(i) to file the Financing Statements and any financing
statements, financing statement amendments and continuation statements
necessary, appropriate or convenient to maintain the rights and
benefits of the Collateral Agent and/or the Secured Parties under this
Agreement and/or the Credit Agreements including, without limitation,
the benefits of Sections 4(a)(i), 4(a)(ii) and 4(a)(iii) of this
Agreement,
(ii) at any time following the occurrence of an Event of
Default, to demand, xxx for, collect, receive and give acquittance for
any and all monies due or to become due with respect to any Collateral
or by virtue thereof,
(iii) at any time following the occurrence of an Event of
Default, to settle, compromise, compound, prosecute or defend any
action or proceeding with respect to any Collateral,
(iv) at any time following the occurrence of an Event of
Default, to sell, transfer, assign or otherwise deal in or with the
Collateral and the Proceeds thereof, as fully and effectually as if
the Collateral Agent were the absolute owner thereof, and
(v) at any time following the occurrence of an Event of
Default, to extend the time of payment and to make any allowance and
other adjustments with reference to the Collateral.
(b) Each Grantor hereby ratifies all that said attorney shall
lawfully do or cause to be done by virtue hereof. This power of
attorney is a power coupled with an interest and shall be irrevocable.
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(c) Each Grantor also authorizes the Collateral Agent at any
time and from time to time, to execute, in connection with the sale
provided for in Section 7 hereof, any endorsements, assignments or
other instruments of conveyance or transfer with respect to the
Collateral.
SECTION 7. Remedies Upon Event of Default. If any Event of
Default has occurred and is continuing, the Collateral Agent may
exercise on behalf of itself and the Secured Parties all rights of a
secured party under the UCC (whether or not in effect in the
jurisdiction where such rights are exercised) and, in addition,
without limitation, the Collateral Agent may exercise the following
rights and remedies, which rights and remedies are cumulative and are
in addition to any rights and remedies available to the Collateral
Agent under the Credit Agreements or any other Transaction Document.
(a) The Collateral Agent may sell the Collateral or any part
thereof at public or private sale, for cash, upon credit or for future
delivery, and at such price or prices as the Collateral Agent may deem
satisfactory. The Collateral Agent or any Secured Party 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 customarily sold in a recognized
market or is of a type which is the subject of widely distributed
standard price quotations or if otherwise permitted under applicable
law, at any private sale) and thereafter hold the same, absolutely,
free from any right or claim of whatsoever kind. Each Grantor will
execute and deliver such documents and take such other action as the
Collateral Agent deems reasonably necessary or advisable in order that
any such sale may be made in compliance with law. Upon any such sale
the Collateral Agent shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral so sold (without
warranty). Each purchaser at any such sale shall hold the Collateral
so sold to it absolutely, free from any claim or right of whatsoever
kind, including any equity or right of redemption of any Grantor. To
the extent permitted by law, each Grantor 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 of such
sale shall be given to the applicable Grantor ten (10) Business Days
prior to such sale (or one (1) day notice by telephone with respect to
Collateral that is perishable or threatens to decline rapidly in value
and for Collateral which is marketable securities) and (A) in case of
a public sale, state the time and place fixed for such sale, and (B)
in the case of a private sale, state the day after which 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
21
Collateral Agent 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 Collateral Agent may determine. The Collateral Agent
shall not be obligated to make any such sale pursuant to any such
notice. The Collateral Agent may, without notice or publication,
adjourn any public or private sale or cause the sale 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. In 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 Collateral Agent until the selling price is
paid by the purchaser thereof, but the Collateral Agent shall not
incur any liability in case of the failure of such purchaser to take
up and pay for the Collateral so sold and, in case of any such
failure, such Collateral may again be sold upon like notice. The
Collateral Agent, 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. The Grantors shall, under all circumstances,
remain liable for any deficiency.
(b) The Collateral Agent may, without notice to any of the
Grantors, and is specifically authorized hereby to set off against and
apply to the then unpaid balance of the Secured Obligations any items
or funds of any of the Grantors held by the Collateral Agent, any of
the Secured Parties or any Affiliate, any and all deposits (whether
general or special, time or demand, matured or unmatured) or any other
property of any Grantor, including, without limitation, securities
and/or certificates of deposit, now or hereafter maintained by any
Grantor for its or their own account with the Collateral Agent, any of
the Secured Parties or any Affiliate, and any other indebtedness at
any time held or owing by the Collateral Agent, any of the Secured
Parties or any Affiliate to or for the credit or the account of any
Grantor, even if effecting such setoff results in a loss or reduction
of interest or the imposition of a penalty applicable to the early
withdrawal of time deposits. For such purpose, the Collateral Agent
shall have, and each of the Grantors hereby grants to the Collateral
Agent, for the ratable benefit of itself and the Secured Parties, a
first lien on and continuing security interest in such deposits,
property, funds, and accounts, and the proceeds thereof. Each of the
Grantors further authorizes any Affiliate, upon and following the
occurrence of an Event of Default, at the request of the Collateral
Agent, and without notice to the Grantors, to turn over to the
Collateral Agent any property of any of the Grantors, including,
without limitation, funds and securities held by the Affiliate for the
account of any of the Grantors, and to debit any deposit account
maintained by any of the Grantors with such Affiliate (even if such
22
deposit account is not then due or there results a loss or reduction
of interest or the imposition of a penalty in accordance with law
applicable to the early withdrawal of time deposits), in the amount
requested by the Collateral Agent up to the amount of the Secured
Obligations, and to pay or transfer such amount or property to the
Collateral Agent for application to the Secured Obligations.
(c) The Collateral Agent may retain the Collateral in full or
partial satisfaction of the Secured Obligations, as permitted by
applicable law.
(d) For the purpose of enforcing any and all rights and remedies
under this Agreement, the Collateral Agent may (i) require each
Grantor to, and each Grantor agrees that it will, at its expense and
upon the request of the Collateral Agent, forthwith assemble all or
any part of the Collateral as directed by the Collateral Agent and
make it available at a place designated by the Collateral Agent which
is, in the Collateral Agent's opinion, reasonably convenient to the
Collateral Agent and such Grantor, whether at the premises of such
Grantor or otherwise, (ii) to the extent permitted by applicable law,
enter, with or without process of law and without breach of the peace,
any premises where any of the Collateral is or may be located and,
without charge or liability to the Collateral Agent, seize and remove
such Collateral from such premises, (iii) have access to and use such
Grantor's books and records relating to the Collateral and (iv) prior
to the disposition of the Collateral, store or transfer such
Collateral without charge in or by means of any storage or
transportation facility owned or leased by such Grantor, process,
repair or recondition such Collateral or otherwise prepare it for
disposition in any manner and to the extent the Collateral Agent deems
appropriate and, in connection with such preparation and disposition,
use without charge any trade name or technical process used by such
Grantor.
SECTION 8. Limitation on Duty of Collateral Agent in Respect of
Collateral. Beyond reasonable care in the custody thereof, the
Collateral Agent shall have no duty as to any Collateral in its
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. The
Collateral Agent shall be deemed to have exercised reasonable care in
the custody of the Collateral in its possession if the Collateral is
accorded treatment substantially equal to that which the Collateral
Agent accords its own property, and the Collateral Agent 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 Collateral Agent in good faith.
23
SECTION 9. Application of Proceeds. Upon the occurrence and
during the continuance of an Event of Default, the proceeds of any
sale of, or other realization upon, all or any part of the Collateral
shall be applied by the Collateral Agent in accordance with the
Intercreditor Agreement.
SECTION 10. Expenses. In the event that any Grantor fails to
comply with the provisions of the this Agreement or any other
Transaction Document, such that the value of any Collateral or the
validity, perfection, rank or value of the Security Interests are
thereby diminished or potentially diminished or put at risk, the
Collateral Agent may, but shall not be required to, upon reasonable
prior notice to such Grantor, effect such compliance on behalf of such
Grantor, and such Grantor shall reimburse the Collateral Agent for the
costs thereof on demand. All insurance expenses and all reasonable
expenses of protecting, storing, warehousing, insuring, handling,
maintaining and shipping the Collateral, any and all excise, stamp,
intangibles, transfer, property, sales, and use taxes imposed by any
state, federal, or local authority or any other Governmental Authority
on any of the Collateral, or in respect of the sale or other
disposition thereof, shall be borne and paid by the Grantors; and if
any Grantor fails promptly to pay any portion thereof when due, the
Collateral Agent or any Secured Party may, at its option, but shall
not be required to, pay the same and charge such Grantor's account
therefor, and such Grantor agrees to reimburse, the Collateral Agent
or such Secured Party therefor on demand. All sums so paid or
incurred by the Collateral Agent or any Secured Party for any of the
foregoing and any and all other sums for which any Grantor may become
liable hereunder and all costs and expenses (including reasonable
attorneys' fees, legal expenses and court costs) incurred by the
Collateral Agent or any Secured Party in enforcing or protecting the
Security Interests or any of their rights or remedies thereon shall be
payable by the Grantors on demand and shall bear interest (after as
well as before judgment) until paid at the rate then applicable to
Base Rate Loans under the Bank Credit Agreements or the applicable
interest rate under the Note Agreement, as the case may be, and shall
be additional Secured Obligations hereunder.
SECTION 11. Concerning the Collateral Agent. The provisions of
Article XII of each of the Bank Credit Agreements shall inure to the
benefit of the Collateral Agent in respect of this Agreement and shall
be binding upon the parties to the Bank Credit Agreements in such
respect. In furtherance and not in derogation of the rights,
privileges and immunities of the Collateral Agent therein set forth:
(a) The Collateral Agent is authorized to take all such action
as is provided to be taken by it as Collateral Agent hereunder and all
other action incidental thereto. As to any matters not expressly
24
provided for herein, the Collateral Agent may request instructions
from the Secured Parties and shall act or refrain from acting in
accordance with written instructions from the Required Secured Parties
(or, when expressly required by this Agreement or the Intercreditor
Agreement, all the Secured Parties) or, in the absence of such
instructions, in accordance with its discretion.
(b) The Collateral Agent shall not be responsible for the
existence, genuineness or value of any of the Collateral or for the
validity, perfection, priority or enforceability of the Security
Interests, whether impaired by operation of law or by reason of any
action or omission to act on its part (other than any such action or
inaction constituting gross negligence or willful misconduct). The
Collateral Agent shall have no duty to ascertain or inquire as to the
performance or observance of any of the terms of this Agreement by any
Grantor.
SECTION 12. Appointment of Collateral Agents. At any time or
times, in order to comply with any legal requirement in any
jurisdiction or in order to effectuate any provision of the
Transaction Documents, the Collateral Agent may appoint another bank
or trust company or one or more other Persons, either to act as
collateral agent or agents, jointly with the Collateral Agent or
separately, on behalf of the Collateral Agent and the Secured Parties
with such power and authority as may be necessary for the effectual
operation of the provisions hereof and specified in the instrument of
appointment (which may, in the discretion of the Collateral Agent,
include provisions for the protection of such collateral agent similar
to the provisions of Section 11 hereof).
SECTION 13. Notices. All notices, communications and
distributions hereunder shall be given or made in accordance with the
Intercreditor Agreement.
SECTION 14. Waivers, Non-Exclusive Remedies. No failure on the
part of the Collateral Agent or any Secured Party to exercise, and no
delay in exercising and no course of dealing with respect to any right
under the Credit Agreements, this Agreement or any other Transaction
Document shall operate as a waiver thereof or hereof; nor shall any
single or partial exercise by the Collateral Agent or any Secured
Party of any right under the Credit Agreement, this Agreement or any
other Transaction Document preclude any other or further exercise
thereof, and the exercise of any rights in this Agreement, the Credit
Agreements and the other Transaction Documents are cumulative and are
not exclusive of any other remedies provided by law. This Agreement
is both a Loan Document executed pursuant to the Bank Credit
Agreements and a Transaction Document under the Intercreditor
Agreement.
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SECTION 15. Successors and Assigns. This Agreement is for the
benefit of the Collateral Agent and the Secured Parties and their
successors and assigns, and in the event of an assignment of all or
any of the Secured Obligations, the rights hereunder, to the extent
applicable to the indebtedness so assigned, may be transferred with
such indebtedness. This Agreement shall be binding on each Grantor
and its successor and assigns; provided, however, that such Grantor
may not assign any of its rights or obligations hereunder without the
prior written consent of the Collateral Agent.
SECTION 16. Changes in Writing. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated
orally, but only in writing signed by each Grantor and the Collateral
Agent with the consent of the Required Secured Parties (or, when
expressly required by this Agreement, the Intercreditor Agreement, or
the Credit Agreements, all of the Secured Parties).
SECTION 17. Powers Coupled with an Interest. All authorizations
and agencies herein contained with respect to the Collateral are
irrevocable and powers coupled with an interest.
SECTION 18. Governing Law. This Agreement shall be governed by,
construed and enforced in accordance with the internal laws of the
State of New York, without reference to the conflicts or choice of law
principles thereof, except that matters involving perfection of
security interests in the Collateral shall be governed by the
applicable provisions of the UCC depending upon the location of the
Collateral.
SECTION 19. Consent to Jurisdiction. Each Grantor hereby
irrevocably consents to the personal jurisdiction of the United States
District Court for the Southern District of New York and the Supreme
Court of the State of New York - County of New York, in any action,
claim or other proceeding arising out of or any dispute in connection
with this Agreement, any rights or obligations hereunder, or the
performance of such rights and obligations. Each Grantor hereby
irrevocably consents to the service of a summons and complaint and
other process in any action, claim or proceeding brought by the
Collateral Agent or any Secured Party in connection with this
Agreement, any rights or obligations hereunder, or the performance of
such rights and obligations, on behalf of itself or its property, with
respect to the Bank Lenders, in the manner provided in Sections 13.1
of the Bank Credit Agreements, and with respect to the Note Lenders,
in the manner provided in the Note Agreement, as applicable. Nothing
in this Section 19 shall affect the right of the Collateral Agent or
any Secured Party to serve legal process in any other manner permitted
by Applicable Law or affect the right of the Collateral Agent or any
26
Secured Party to bring any action or proceeding against any Grantor or
its properties in the courts of any other jurisdictions.
SECTION 20. Waiver of Jury Trial; Waiver of Certain Damages.
(a) WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE
LAW, THE COLLATERAL AGENT, EACH SECURED PARTY AND EACH GRANTOR HEREBY
IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT
TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING, OUT OF OR ANY
DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS
HEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.
(b) Waiver of Certain Damages. The Grantors and the Collateral
Agent on behalf of itself and the Secured Parties agree that they
shall not have a remedy of punitive or exemplary damages against the
other in any judicial proceeding, any dispute, claim or controversy
arising out of, connected with or relating to this Agreement
("Dispute") and hereby waive any right or claim to punitive or
exemplary damages they have now or which may arise in the future in
connection with any Dispute whether the Dispute is resolved by
arbitration or judicially.
SECTION 21. Severability. If any provision hereof is invalid
and unenforceable in any jurisdiction, then, to the fullest extent
permitted by law, (a) the other provisions hereof shall remain in full
force and effect in such jurisdiction and shall be liberally construed
in favor of he Collateral Agent and the Secured Parties in order to
carry out the intentions of the parties hereto as nearly as may be
possible; and (b) the invalidity or unenforceability of any provisions
hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
SECTION 22. Headings. The various headings of this Agreement
are inserted for convenience only and shall not affect the meaning or
interpretation of this Agreement or any provisions hereof.
SECTION 23. Counterparts. This Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed
to be an original and all of which shall constitute together one and
the same agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
27
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed under seal by their duly authorized officers, all as of
the day and year first written above.
WLR FOODS, INC.
By:__/S/ Xxxxxx X. Ritter__
Xxxxxx X. Xxxxxx
Vice President
CASSCO ICE & COLD STORAGE, INC.
By:__/S/ Xxxxxx X. Ritter__
Xxxxxx X. Xxxxxx
Vice President
XXXXXXX FOODS, INC.
By:__/S/ Xxxxxx X. Ritter__
Xxxxxx X. Xxxxxx
Treasurer
XXXXXXX SUPPLY COMPANY, INC.
By:__/S/ Xxxxxx X. Ritter__
Xxxxxx X. Xxxxxx
Vice President
28
VALLEY RAIL SERVICE, INC.
By:__/S/ Xxxxxx X. Ritter__
Xxxxxx X. Xxxxxx
Vice President
FIRST UNION NATIONAL BANK,
as Collateral Agent for itself and
the Secured Parties
By:__/S/ Xxxxx Bouhuys__
Xxxxx Xxxxxxx
Senior Vice President
29
EXHIBIT "A"
Perfection Certificate
The undersigned, WLR Roods, Inc., a Virginia corporation (the
"Company"), hereby represents and warrants to First Union National
Bank, successor to First Union National Bank of Virginia, a national
banking association, as Collateral Agent (the "Collateral Agent"), for
the ratable benefit of itself and the financial institutions
(collectively, the "Secured Parties") as are, or may from time to time
become, parties to the Credit Agreements (as defined in the attached
Security Agreement), and its successors and assigns that the following
information is true, accurate and complete:
(i) Names.
a) The exact corporate name of the Company as it appears
in its Certificate or Articles of Incorporation is as follows:
WLR Foods, Inc.
b) The following is a list of all other names (including
trade names or similar appellations) used by the Company or any of its
divisions or other unincorporated business unites during the past five
(5) years:__None________________________________________________
________________________________________________________________.
(c) The following are the names of all corporations which
have been merged into the Company during the past five (5)
years:__None___________________________________________________
_______________________________________________________________.
(d) The following are the names and addresses of all
entities from whom the Company has acquired any personal property
during the past five (5) years, other than entities that in the
ordinary course of business sell the type of personal property
acquired from such entity, together with the date of such acquisition
and the type of personal property acquired (e.g., equipment,
inventory, etc.)
Date of Type of
Name Address Acquisition Property
None
(ii) Current Locations.
30
(a) The chief executive office of the Company is located at
the following address:
Name of
City or Mailing
Location Address County State
Timberville XX Xxx 0000 Xxxxxxxxxx Xxxxxxxx
Xxxxxxxx, XX
00000-0000
(b) The following are the locations in the United States of
America where the Company maintains any books or records relating to
any of its accounts receivable:
Name of
City or Mailing
Location Address County State
None
(c) The following are all of the locations in the United
States of America where the Company maintains any equipment, fixtures
or inventory:
Name of
City or Mailing Record Owner
Xxxxxxxx Xxxxxxx Xxxxxx Xxxxx xx Xxxx Xxxxxx
None
(d) The following are all the locations in the United
States of American where the Company owns, leases, or occupies any
realty:
Name of
City or Mailing Record Owner
Xxxxxxxx Xxxxxxx Xxxxxx Xxxxx xx Xxxx Xxxxxx
None
(e) The following are the names and address of all
consignees of the Company:
Name Xxxxxx Xxxxxxx Xxxxxx Xxxxx
Xxxx
00
(x) The following are the names and addresses of all
warehouseman or bailees who have possession of any of the Company's
inventory:
Are
Documents If So,
Street of Title Are They
Name Address County State Issued? Negotiable?
None
(iii) Special Types of Collateral.
(a) The following are all of the trademarks or trademark
applications of the Company, together with the trademark numbers and
dates of registration with the U.S. Patent and Trademark Office, if
applicable:
If Foreign
Trademark -
Trademark Number Date What Country?
None
(b) The following are all of the patents or patent
applications of the Company, together with the patent numbers, names
of inventors and dates of registration with the U.S. Patent and
Trademark Office, if applicable:
If Foreign
Patent -
Patents Number Date What Country?
None
(c) The following are all of the copyrights or copyright
applications of the Company, together with the patent numbers, names
of inventors and dates of registration with the U.S. Copyright Office,
if applicable:
If Foreign
Copyright -
Copyright Number Date What Country?
None
32
(d) The Company owns the following kinds of assets:
Motor Vehicles - Yes __X__ No _____
Aircraft - Yes _____ No __X__
Vessels, Boats or Ships - Yes _____ No __X__
Railroad Rolling Stock - Yes _____ No __X__
WLR Foods, Inc.
Dated as of: February 25, 1998 By:__/S/ Xxxxxx X. Ritter__
Name: Xxxxxx X. Xxxxxx
Title: Vice President
33
SCHEDULE 3(g)-Disclosure of Liens
Original Current
Company Debt Amount Maturity Balance1 Security
X. Xxxxxxx Foods, Inc.
Pennsylvania Industrial Real
Development Authority 995,000 2005 574,917 Estate and
Equipment
at New
Oxford, Pa
Farmers Bank and Trust
Co. of Hanover 1,300,000 2004 900,678 Real
Estate and
Equipment
at New
Oxford, Pa
Bank of Hanover &
Trust Company (2 notes)
$1.5M + $0.3M 1,800,000 2002 441,667 Real
Estate at
New
Oxford, Pa
Xxxxxxx'x Old Car Farm 200,000 2000 77,510 Real
Estate at
Rockingham
County, Va
B. Cassco Ice & Cold Storage, Inc.
Crestar Mortgage
Harrisonburg Revenue
Bond 1,200,000 2001 451,777 Real
Estate and
Equipment at
Harrisonburg,
Inc.
Receivables
NationsBank of
South Carolina, N.A. 3,400,000 2003 2,202,920 Real Estate and
Equipment at
Marshville, NC
34
Xxxxx Xxxxxxxx 255,000 2004 104,000 Real
Estate at
City of
Radford, Va
X. Xxxxxxx Supply Company, Inc.
None
D. WLR Foods, Inc.
None
E. Valley Rail Service, Inc.
None
F. All those liens evidenced by UCC-1 financing statements, as the
same may be amended from time to time, filed at such times and in such
jurisdictions as fully set forth in Exhibit "A" to Schedules 10.3(f)
of the Credit Agreements, which is attached thereto and incorporated
therein by reference, which is to be attached post-closing.
G. All those liens evidenced by those certain Title Commitments as set
forth in Exhibit "B" to Schedules 10.3(f) of the Credit Agreements,
which is attached thereto and incorporated therein by reference, which
is to be attached post-closing.
1 As of December 27, 1997.
35
SCHEDULE 4(c)(i)-Schedule of Inventory
To be delivered by the Borrower post-closing.
36
SCHEDULE 4(e) - Schedule of Vehicles
Schedule 4(e) begins on the following page.
37
