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Exhibit 10.5
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement") is made this 26th day of
July, 1996 by RIVER OAKS FURNITURE, INC., a Mississippi corporation (the
"Parent"), R.O. WEST, INC., a Mississippi corporation ("R.O.West"), R.O. EAST,
INC., a Mississippi corporation ("R.O. East"), and XXXXXX MANUFACTURING
COMPANY, a Tennessee corporation ("Xxxxxx") (each a "Grantor" and collectively
the "Grantors") in favor of BNY FINANCIAL CORPORATION, a corporation organized
under the laws of the State of New York ("BNY"), as Agent (the "Agent") for
BNY, as factor under the Factoring Agreement (as defined below), and each of
the lenders now or hereafter party to the Credit Agreement (as defined below)
(the "Lenders" and collectively with BNY, the "Secured Parties"). All
capitalized terms used and not otherwise defined herein shall have the
respective meanings assigned thereto in the Credit Agreement.
W I T N E S S E T H:
WHEREAS, the Agent and the Lenders have agreed to provide the Grantors
certain term loan and revolving credit facilities pursuant to the terms of that
certain Credit Agreement among the Grantors, the Agent and the Lenders dated as
of July 26, 1996 (as from time to time amended, supplemented or replaced, the
"Credit Agreement");
WHEREAS, the Grantors will directly and materially benefit from the
credit facilities provided under the Credit Agreement and the making of loans
and advances thereunder as contemplated thereby; and
WHEREAS, the Grantors and BNY individually have entered into that
certain Factoring Agreement dated as of the date hereof (the "Factoring
Agreement") pursuant to which BNY has agreed to purchase certain accounts
receivable of the Grantors;
WHEREAS, as collateral security for payment and performance of its
Obligations under the Credit Agreement, and all indebtedness and obligations
under the Factoring Documents, each Grantor is willing to grant to the Agent
for the benefit of the Secured Parties a security interest in the assets
described herein; and
WHEREAS, the Secured Parties are unwilling to enter into the Loan
Documents and the Factoring Documents unless the Grantors enter into this
Agreement;
NOW, THEREFORE, in order to induce the Secured Parties to enter into
the Loan Documents and the Factoring Documents and in consideration of the
premises and the mutual covenants contained herein, the parties hereto agree as
follows:
1. GRANT OF SECURITY INTEREST. As collateral security for the
payment and satisfaction of all obligations and liabilities of each Grantor
under the Loan Documents and the Factoring
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Documents (collectively, the "Secured Obligations"), each Grantor hereby
pledges and collaterally assigns to the Agent for the benefit of the Secured
Parties and grants to the Agent for the benefit of the Secured Parties a
continuing first priority security interest in and to all of the following
property of such Grantor, whether now owned or existing or hereafter acquired
or arising and wheresoever located:
(a) All accounts, accounts receivable, contracts, notes,
bills, acceptances, choses in action, chattel paper, instruments,
documents and other forms of obligations at any time owing to each
Grantor arising out of goods sold or leased or for services rendered
by such Grantor, the proceeds thereof and all of such Grantor's rights
with respect to any goods represented thereby, whether or not
delivered, goods returned by customers and all rights as an unpaid
vendor or lienor, including rights of stoppage in transit and of
recovering possession by proceedings including replevin and
reclamation, together with all customer lists, books and records,
ledger and account cards, computer tapes, software, disks, printouts
and records, whether now in existence or hereafter created, relating
thereto (collectively referred to hereinafter as "Accounts");
(b) All inventory of each Grantor, including without
limitation, all goods manufactured or acquired for sale or lease, and
any piece goods, raw materials, work in process and finished
merchandise, findings or component materials, and all supplies, goods,
incidentals, office supplies, packaging materials and any and all
items used or consumed in the operation of the business of such
Grantor or which may contribute to the finished product or to the
sale, promotion and shipment thereof, in which such Grantor now or at
any time hereafter may have an interest, whether or not the same is in
transit or in the constructive, actual or exclusive occupancy or
possession of such Grantor or is held by such Grantor or by others for
such Grantor's account (collectively referred to hereinafter as
"Inventory");
(c) All goods of each Grantor, including without
limitation, all machinery, equipment, motor vehicles, parts, supplies,
apparatus, appliances, tools, patterns, molds, dies, blueprints,
fittings, furniture, furnishings, fixtures and articles of tangible
personal property of every description now or hereafter owned by a
Grantor or in which such Grantor may have or may hereafter acquire any
interest, at any location (collectively referred to hereinafter as
"Equipment");
(d) All general intangibles of each Grantor in which a
Grantor now has or hereafter acquires any rights, including but not
limited to, causes of action, corporate or business records,
inventions, designs, patents, patent applications, trademarks,
trademark registrations and applications therefor, goodwill, trade
names, trade secrets, trade processes, copyrights, copyright
registrations and applications therefor, licenses, permits,
franchises, customer lists, computer programs, all claims under
guaranties, tax refund claims, rights and claims against carriers and
shippers, leases, claims under insurance policies, all rights to
indemnification and all other intangible personal property and
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intellectual property of every kind and nature (collectively referred
to hereinafter as "General Intangibles");
(e) All rights now or hereafter accruing to each Grantor
under contracts, leases, agreements or other instruments to perform
services, to hold and use land and facilities, and to enforce all
rights thereunder (collectively referred to hereinafter as "Contract
Rights");
(f) all partnership interests, membership interests and
all other equity interests now or hereafter owned, of record or
beneficially, by the Grantor in any partnership, limited liability
partnership, limited liability company or other entity, other than a
corporation, in which an ownership interest can be created (the
"Equity Interests");
(g) all cash, securities, rights (including without
limitation any and all options, warrants or other rights to subscribe
to or acquire additional Equity Interests), and other property at any
time and from time to time declared or distributed in respect of or in
exchange for any or all of the Equity Interests; and
(h) all other property hereafter delivered to the Grantor
in substitution for or in addition to any of the foregoing and all
certificates and instruments representing or evidencing any Equity
Interests or such other property.
(i) All books and records relating to any of the
Collateral (as hereinafter defined) (including without limitation,
customer data, credit files, computer programs, printouts, and other
computer materials and records of each Grantor pertaining to any of
the foregoing); and
(j) All accessions to, substitutions for and all
replacements, products and proceeds of the foregoing, including
without limitation proceeds of insurance policies insuring the
Collateral (as hereinafter defined).
All of the property and interests in property described in subsections
(a) through (g) and all other property and interests in personal property which
shall, from time to time, secure the Secured Obligations are herein
collectively referred to as the "Collateral."
2. FINANCING STATEMENTS. At the time of execution of this
Agreement, each Grantor shall have furnished the Agent with properly executed
financing statements and assignments as prescribed by the Uniform Commercial
Code as presently in effect in the states where the Collateral is located,
prepared and approved by the Agent in form and number sufficient for filing
wherever required with respect to the Collateral, in order that the Agent for
the benefit of the Secured Parties shall have a duly perfected security
interest of record in the Collateral, to the extent a security interest in such
Collateral can be perfected by filing a financing statement, following the
filing of such financing statements with the appropriate local and state
governmental authorities, subject only to Permitted Liens. Each Grantor shall
execute as reasonably required
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by the Agent any additional financing statements or other documents to effect
the same, together with any necessary continuation statements so long as this
Agreement remains in effect.
3. MAINTENANCE OF SECURITY INTEREST. Each Grantor will, from
time to time, upon the request of the Agent, deliver specific assignments of
Collateral, together with such other instruments and documents, financing
statements, amendments thereto, assignments or other writings as the Agent may
reasonably request to carry out the terms of this Agreement or to protect or
enforce the Agent's security interest on behalf of the Secured Parties in the
Collateral.
With respect to any and all Collateral to be secured and conveyed
under this Agreement, each Grantor agrees to do and cause to be done all things
necessary to perfect and keep in full force the security interest granted in
favor of the Secured Parties, including, but not limited to, the prompt payment
of all fees and expenses incurred in connection with any filings made to
perfect or continue a security interest in the Collateral in favor of the
Secured Parties.
Each Grantor agrees to make appropriate entries upon its financial
statements and books and records disclosing the Secured Parties' security
interest granted hereunder.
4. RECEIPT OF PAYMENT. In the event an Event of Default shall
occur and be continuing and a Grantor (or any of its affiliates, subsidiaries,
stockholders, directors, officers, employees or agents) shall receive any
proceeds of Collateral consisting of monies, checks, notes, drafts or any other
items of payment, each Grantor shall hold all such items of payment in trust
for the Agent on behalf of the Secured Parties, and as the property of the
Agent on behalf of the Secured Parties, separate from the funds of such
Grantor, and no later than the first Business Day following the receipt
thereof, such Grantor shall cause the same to be forwarded to the Agent for its
custody and possession on behalf of the Agent on behalf of the Secured Parties
as additional Collateral.
5. COLLECTIONS; AGENT'S RIGHT TO NOTIFY ACCOUNT DEBTORS AND TO
ENDORSE A GRANTOR'S NAME. Each Grantor hereby authorizes the Agent, on behalf
of the Secured Parties, at all times after the occurrence and during the
continuation of an Event of Default (a) to open such Grantor's mail and collect
any and all amounts due to such Grantor from Persons obligated on any Accounts
("Account Debtors"); (b) to take over such Grantor's post office boxes or make
other arrangements as the Agent deems necessary to receive such Grantor's mail,
including notifying the post office authorities to change the address for
delivery of such Grantor's mail to such address as the Agent may designate; and
(c) to notify any or all Account Debtors that the Accounts have been assigned
to the Secured Parties and that Agent has a security interest therein for the
benefit of the Secured Parties (provided that the Agent may at any time give
such notice to an Account Debtor that is a department, agency or authority of
the United States government). Each Grantor at all times after the occurrence
and during the continuation of an Acceleration Event (as hereinafter defined)
irrevocably makes, constitutes and appoints the Agent (and all Persons
designated by the Agent for that purpose) as such Grantor's true and lawful
attorney (and agent-in-fact) to endorse such Grantor's name on any checks,
notes, drafts or any other payment
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relating to and/or proceeds of the Collateral which comes into the Agent's
possession or Agent's control, and deposit the same to the account of the Agent
on account of the Secured Obligations. The Agent shall promptly furnish each
Grantor with a copy of any such notice sent with respect to Accounts of such
Grantor pursuant to clause (c) of this Section 5 and each Grantor hereby agrees
that any such notice, in the Agent's sole discretion, may be sent on such
Grantor's stationery, in which event such Grantor shall co-sign such notice
with the Agent. For purposes of this Agreement, "Acceleration Event" means
that (a) an Event of Default has occurred and is continuing and (b) the Secured
Obligations have become due and payable (whether by acceleration, at final
maturity or otherwise).
6. COVENANTS. Each Grantor covenants with the Agent that from
and after the date of this Agreement until termination hereof in accordance
with Section 24 hereof:
(a) ASSIGNMENTS, RECORDS AND SCHEDULES OF ACCOUNTS. If
requested by the Agent, each Grantor shall furnish the Agent with
copies of proof of delivery and other documents relating to the
Accounts so scheduled, including without limitation repayment
histories and present status reports (collectively, "Account
Documents") and such other matter and information relating to the
status of then existing Accounts as the Agent shall request. No
Grantor shall remove any Account Records or Account Documents or
change its chief executive offices from the locations set forth in
Exhibit A hereto without 30 days prior written notice to the Agent as
provided in Section 18 hereof and delivery to the Agent of duly
executed financing statements sufficient to perfect the security
interest of the Agent for the benefit of the Secured Parties.
(b) SAFEKEEPING OF INVENTORY. Each Grantor shall be
responsible for the safekeeping of its Inventory, and, subject to
Section 14 hereof, in no event shall the Agent have any responsibility
for:
(i) Any loss or damage to Inventory or
destruction thereof occurring or arising in any manner or
fashion from any cause;
(ii) Any diminution in the value of Inventory; or
(iii) Any act or default of any carrier,
warehouseman, bailee or forwarding agency thereof or other
Person in any way dealing with or handling Inventory.
(c) RECORDS AND SCHEDULES OF INVENTORY. Each Grantor
shall keep correct and accurate records itemizing and describing the
kind, type, location and quantity of Inventory, its cost therefor and
the selling price of Inventory held for sale, and the weekly
withdrawals therefrom and additions thereto, and shall furnish to the
Agent from time to time at reasonable intervals designated by the
Agent, a current schedule of Inventory ("Schedule of Inventory") based
upon its most recent physical inventory and its weekly
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inventory records. Each Grantor shall conduct a physical inventory,
no less than annually, and shall furnish to the Agent such other
documents and reports as the Agent shall reasonably request with
respect to the Inventory. Except as permitted under Section 9 hereof,
no Grantor shall, other than in the ordinary course of business in
connection with its sale, remove any material amount of Inventory from
the locations set forth on Exhibit B hereto to a location not also set
forth on Exhibit B hereto, each of such locations being owned by a
Grantor unless otherwise indicated, without 30 days prior written
notice to the Agent as provided in Section 18 hereof and delivery to
the Agent of duly executed financing statements sufficient to perfect
the security interest of the Agent for the benefit of the Secured
Parties.
(d) RETURNS OF INVENTORY. If any individual Account
Debtor returns any Inventory to a Grantor after shipment thereof, and
such return generates a credit in excess of $10,000 in the aggregate
on any Account or Accounts of such Account Debtor, such Grantor shall
notify the Agent of the same as soon as practicable.
(e) EVIDENCE OF OWNERSHIP OF EQUIPMENT. The Grantors, as
soon as practicable following a request therefor by the Agent, shall
deliver to the Agent any and all evidence of ownership of any of the
Equipment (including without limitation certificates of title and
applications for title).
(f) RECORDS AND SCHEDULES OF EQUIPMENT. The Grantors
shall maintain accurate, itemized records itemizing and describing the
kind, type, quality, quantity and value of its Equipment and shall
furnish the Agent upon request with a current schedule containing the
foregoing information, but, other than during the continuance of an
Event of Default, not more often than once per fiscal quarter. Except
as permitted by subsection (g) below and except for temporary removals
to effect maintenance or repair, no Grantor shall remove any material
portion of the Equipment from the locations set forth in Exhibit C
hereto to a location not also set forth on Exhibit C hereto without at
least 30 days' prior written notice to the Agent as provided in
Section 18 hereof and delivery to the Agent of duly executed financing
statements sufficient to perfect the security interest of the Agent
for the benefit of the Secured Parties.
(g) SALE OR MORTGAGE OF EQUIPMENT. Except as permitted by
the Credit Agreement prior to the occurrence and continuance of an
Event of Default, no Grantor shall sell, exchange, lease, mortgage,
encumber, pledge or otherwise dispose of or transfer any of the
Equipment or any part thereof without the prior written consent of the
Agent.
(h) MAINTENANCE OF EQUIPMENT. Each Grantor shall keep and
maintain its Equipment in good operating condition and repair,
ordinary wear and tear excepted. Except with respect to Equipment
located at the manufacturing facilities of River Oaks in New Albany
and Xxxxxx, Mississippi, no Grantor shall permit any Equipment to
become
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a fixture to real property (unless such Grantor has granted the Agent
for the benefit of the Secured Parties a lien on such real property)
or accessions to other personal property.
(i) EVIDENCE OF EQUITY INTERESTS. Each Pledgor covenants with
the Lenders that it shall at all times cause all partnership interests
owned by it to be and remain uncertificated, and in the event,
notwithstanding the foregoing, that such partnership interests or any
other Equity Interests are certificated, to deliver such certificates
promptly to the Agent together with such instruments of assignment and
transfer duly executed in blank by such Grantor as the Agent shall
request.
(j) REGISTRATION OF SECURITY INTEREST IN EQUITY
INTERESTS. Upon the creation or acquisition of any Equity Interest,
each Grantor shall take all actions and deliver all documents
requested by the Agent to register the interests of the Agent for the
benefit of the Lenders and BNY in such Equity Interest and shall take
whatever other actions and deliver such documents as the Agent shall
deem necessary to perfect its security interest therein.
7. WARRANTIES AND REPRESENTATIONS REGARDING COLLATERAL GENERALLY.
Each Grantor warrants and represents that it is and, except as permitted by the
Credit Agreement, will continue to be the owner of the Collateral hereunder,
now owned and upon the acquisition of the same, free and clear of all Liens,
claims, encumbrances and security interests other than the security interest in
favor of the Secured Parties hereunder and Permitted Liens, and that it will
defend such Collateral and any products and proceeds thereof against all claims
and demands of all Persons (other than holders of Permitted Liens) at any time
claiming the same or any interest therein adverse to the Agent or the Secured
Parties.
8. ACCOUNT WARRANTIES AND REPRESENTATIONS. With respect to its
Accounts, each Grantor warrants and represents to the Agent and the Secured
Parties that they may rely on all statements or representations made by such
Grantor on or with respect to any Schedule of Accounts prepared and delivered
by it and that all Account Records and Account Documents are located and shall
be kept only at such Grantor's locations as set forth on Exhibit A attached
hereto and incorporated herein by reference, provided that any Account
Documents and Account Records may be relocated to any other location set forth
on such Exhibit A, or at such other locations as to which such Grantor has
notified the Agent in writing not less than 30 days prior to such relocation as
provided in Section 18 hereof and delivery to the Agent of duly executed
financing statements sufficient to perfect the security interest of the Agent
for the benefit of the Secured Parties, and, unless otherwise indicated in
writing by such Grantor, that:
(a) They are genuine, are in all respects what they
purport to be, are not evidenced by an instrument or document or, if
evidenced by an instrument or document, are only evidenced by one
original instrument or document;
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(b) They cover bona fide sales and deliveries of
Inventory usually dealt in by such Grantor, or the rendition by such
Grantor of services, to an Account Debtor in the ordinary course of
business or as permitted by the Credit Agreement;
(c) The amounts of the face value shown on any Schedule
of Accounts provided to the Agent and/or all invoices and statements
delivered to the Agent, with respect to any Account, are actually
owing to such Grantor and are not contingent for any reason; and there
are no setoffs, discounts, allowances, claims, counterclaims or
disputes of any kind or description in an amount greater than $10,000
in the aggregate, or greater than $10,000 individually, existing or
asserted with respect thereto and such Grantor has not made any
agreement with any Account Debtor thereunder for any deduction
therefrom, except as may be stated in the Schedule of Accounts and
reflected in the calculation of the face value of each respective
invoice related thereto; provided that the Accounts of Xxxxxx, Inc.
may be billed at 105% of the actual cost to Xxxxxx, it being
understood that this billing practice shall not be subject to the
restrictions set forth in this subsection (c);
(d) Except for conditions generally applicable to such
Grantor's industry and markets, there are no facts, events, or
occurrences known to such Grantor pertaining particularly to any
Accounts which are reasonably expected to materially impair in any way
the validity, collectibility or enforcement of Accounts that would
reasonably be likely, in the aggregate, to be of material economic
value, or in the aggregate materially reduce the amount payable
thereunder from the amount of the invoice face value shown on any
Schedule of Accounts, and on all contracts, invoices and statements
delivered to the Agent, with respect thereto;
(e) The goods or services giving rise thereto are not,
and were not at the time of the sale or performance thereof, subject
to any Lien, claim, encumbrance or security interest, except those of
the Agent for the benefit of the Secured Parties and those removed or
terminated prior to the date hereof and Permitted Liens;
(f) Its Accounts have not been pledged to any Person
other than to the Secured Parties under this Agreement and will be
owned by such Grantor free and clear of any Liens, claims,
encumbrances or security interests except Permitted Liens;
(g) The Secured Parties' security interest therein will
not be subject to any offset, deduction, counterclaim, Lien or other
adverse condition, other than Permitted Liens; and
(h) The location of its chief executive office and any
state in which it (i) has a place of business in only one county of
such state or (ii) resides in such state (within the meaning of the
applicable Uniform Commercial Code) but does not have any place of
business in such state, is set forth on Exhibit A attached hereto and
incorporated herein
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by reference and each Grantor shall deliver to the Agent not less than
30 days written notice prior to any change of such location or status
of places of business or residency.
9. INVENTORY WARRANTIES AND REPRESENTATIONS. With respect to its
Inventory, each Grantor warrants and represents to the Secured Parties that (a)
they may rely on all statements or representations made by such Grantor on or
with respect to any Inventory, (b) all Inventory, other than Inventory
consisting of samples utilized by salespeople or showrooms or otherwise having
a reasonable value of less than $250,000 in the aggregate for all location, is
located and shall be kept only at such Grantor's locations as set forth on
Exhibit B attached hereto and incorporated herein by reference, provided that
any Inventory may be relocated to any other location set forth on such Exhibit
B, or is Inventory in transit or at such other locations as to which such
Grantor has notified the Agent in writing not less than 30 days prior to such
relocation and has provided to the Agent executed financing statements for such
location sufficient to perfect the security interest of the Agent for the
benefit of the Secured Parties, and (c) unless otherwise indicated in writing
by such Grantor, that:
(i) None of its Inventory is or will be subject to any
Lien, claim, encumbrance or security interest whatsoever, except for
the security interest of the Agent for the benefit of the Secured
Parties hereunder and Permitted Liens;
(ii) No Inventory of such Grantor that would reasonably
be likely, in the aggregate, to be of material economic value is now,
and shall not at any time or times hereafter be, stored with a bailee,
warehouseman, or similar party without the Agent's prior written
consent and, if the Agent gives such consent, such Grantor will
concurrently therewith cause any such bailee, warehouseman, or similar
party to issue and deliver to the Agent, in form and substance
reasonably acceptable to the Agent, warehouse receipts therefor in the
Agent's name and take such other action and be party to such document
as deemed necessary or prudent by the Agent to maintain the security
interest of the Agent for the benefit of the Secured Parties in such
Inventory;
(iii) No Inventory is under consignment to any Person;
and
(iv) No Inventory of such Grantor is at or shall be
kept at any location that is leased by such Grantor from any other
Person unless such location and lessor is set forth on Exhibit B
hereto and such lessor waives its rights with respect to such
Inventory in form and substance acceptable to the Agent.
10. EQUIPMENT REPRESENTATIONS AND WARRANTIES. With respect to its
Equipment, each Grantor warrants and represents to the Agent and the Secured
Parties that they may rely on all statements or representations made by such
Grantor on or with respect to any Equipment and that, except as permitted under
Section 6(j) hereof, all Equipment is located and shall be kept only at such
Grantor's locations set forth in Exhibit C hereto or at such other locations as
to which such Grantor has notified the Agent in writing not less than 30 days
prior to such relocation and has
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provided to the Agent executed financing statements for such location
sufficient to perfect the security interest of the Secured Parties and, unless
otherwise indicated in writing by such Grantor, that:
(a) None of its Equipment is or will be subject to any
Lien, claim, encumbrance or security interest whatsoever, except for
the security interest of the Agent for the benefit of the Secured
Parties hereunder and Permitted Liens;
(b) No Equipment of such Grantor is at or shall be
kept at any location that is leased by such Grantor from any other
Person unless such location and lessor is set forth on Exhibit C
hereto and such lessor waives its rights with respect to such
Equipment in form and substance acceptable to the Agent.
11. EVENTS OF DEFAULT. It is understood and agreed that the
occurrence of any one or more of the following shall constitute an "Event of
Default" hereunder and shall entitle the Agent, for the benefit of the Lenders,
to take such actions as are elsewhere provided in this Agreement in respect of
Events of Default: (a) an "Event of Default" as defined in the Credit Agreement
shall have occurred and be continuing; or (b) any covenant made by a Grantor
herein is breached, violated, or not complied with and not cured within 30 days
after notice thereof from any of the Agent or the Secured Parties.
12. RIGHTS AND REMEDIES UPON ACCELERATION EVENT. Upon and after
an Acceleration Event, the Agent shall have the following rights and remedies
on behalf of the Secured Parties in addition to any rights and remedies set
forth elsewhere in this Agreement, all of which may be exercised with or
without notice to a Grantor:
(a) All of the rights and remedies of a secured party
under the Uniform Commercial Code of the state where such rights and
remedies are asserted, or under other applicable law, all of which
rights and remedies shall be cumulative, and none of which shall be
exclusive, to the extent permitted by law, in addition to any other
rights and remedies contained in this Agreement, the Factoring
Documents or any other Loan Document;
(b) The right to foreclose the Liens and security
instruments created under this Agreement by any available judicial
procedure or without judicial process;
(c) The right to (i) enter upon the premises of a
Grantor through self-help and without judicial process, without first
obtaining a final judgment or giving such Grantor notice and
opportunity for a hearing on the validity of the Agent's claim and
without any obligation to pay rent to such Grantor, or any other place
or places where any Collateral is located and kept, and remove the
Collateral therefrom to the premises of the Agent or any agent of the
Agent, for such time as the Agent may desire, in order effectively to
collect or liquidate the Collateral, and/or (ii) require such Grantor
to assemble the
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Collateral and make it available to the Agent at a place to be
designated by the Agent that is reasonably convenient to both parties;
(d) The right to (i) demand payment of the Accounts;
(ii) enforce payment of the Accounts, by legal proceedings or
otherwise; (iii) exercise all of a Grantor's rights and remedies with
respect to the collection of the Accounts; (iv) settle, adjust,
compromise, extend or renew the Accounts; (v) settle, adjust or
compromise any legal proceedings brought to collect the Accounts; (vi)
if permitted by applicable law, sell or assign the Accounts upon such
terms, for such amounts and at such time or times as the Agent deems
advisable; (vii) discharge and release the Accounts; (viii) take
control, in any manner, of any item of payment or proceeds referred to
in Section 4 above; (ix) prepare, file and sign a Grantor's name on a
Proof of Claim in bankruptcy or similar document against any Account
Debtor; (x) prepare, file and sign a Grantor's name on any notice of
Lien, assignment or satisfaction of Lien or similar document in
connection with the Accounts; (xi) endorse the name of a Grantor upon
any chattel paper, document, instrument, invoice, freight xxxx, xxxx
of lading or similar document or agreement relating to the Accounts or
Inventory; (xii) use a Grantor's stationery for verifications of the
Accounts and notices thereof to Account Debtors; (xiii) use the
information recorded on or contained in any data processing equipment
and computer hardware and software relating to any Collateral to which
a Grantor has access; and (xiv) do all acts and things and execute all
documents necessary, in Agent's sole discretion, to collect the
Accounts; and
(e) The right to sell, assign, lease or to otherwise
dispose of all or any Collateral in its then existing condition, or
after any further manufacturing or processing thereof, at public or
private sale or sales, with such notice as may be required by law, in
lots or in bulk, for cash or on credit, with or without
representations and warranties, all as the Agent, in its sole
discretion, may deem advisable. The Agent shall have the right to
conduct such sales on a Grantor's premises or elsewhere and shall have
the right to use a Grantor's premises without charge for such sales
for such time or times as the Agent may see fit. The Agent may, if it
deems it reasonable, postpone or adjourn any sale of the Collateral
from time to time by an announcement at the time and place of such
postponed or adjourned sale, and such sale may, without further
notice, be made at the time and place to which it was so adjourned.
Each Grantor agrees that the Agent has no obligation to preserve
rights to the Collateral against prior parties or to xxxxxxxx any
Collateral for the benefit of any Person. The Agent is hereby granted
a license or other right to use, without charge, each Grantor's
labels, patents, copyrights, rights of use of any name, trade secrets,
trade names, trademarks and advertising matter, or any property of a
similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale and selling any Collateral and a
Grantor's rights under any license and any franchise agreement shall
inure to the Agent's benefit. If any of the Collateral shall require
repairs, maintenance, preparation or the like, or is in process or
other unfinished state, the Agent shall have the right, but shall not
be obligated to perform such repairs, maintenance, preparation,
processing or completion of manufacturing for the purpose of putting
the same in such
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saleable form as the Agent shall deem appropriate, but the Agent shall
have the right to sell or dispose of the Collateral without such
processing. In addition, each Grantor agrees that in the event notice
is necessary under applicable law, written notice mailed to such
Grantor in the manner specified herein seven (7) days prior to the
date of public sale of any of the Collateral or prior to the date
after which any private sale or other disposition of the Collateral
will be made shall constitute commercially reasonable notice to such
Grantor. All notice is hereby waived with respect to any of the
Collateral which threatens to decline speedily in value or is of a
type customarily sold on a recognized market. The Agent may purchase
all or any part of the Collateral at public or, if permitted by law,
private sale, free from any right of redemption which is hereby
expressly waived by such Grantor and, in lieu of actual payment of
such purchase price, may set off the amount of such price against the
Secured Obligations. The net cash proceeds resulting from the
collection, liquidation, sale, lease or other disposition of the
Collateral shall be applied first to the expenses (including all
attorneys' fees) of retaking, holding, storing, processing and
preparing for sale, selling, collecting, liquidating and the like, and
then to the satisfaction of all Secured Obligations. Any sale or
other disposition of the Collateral and the possession thereof by the
Agent shall be in compliance with all provisions of applicable law
(including applicable provisions of the Uniform Commercial Code).
Each Grantor shall be liable to the Agent and shall pay to the Agent
on demand any deficiency which may remain after such sale,
disposition, collection or liquidation of the Collateral. The Agent
shall remit to such Grantor or other Person entitled thereto any
surplus remaining after this Agreement has been terminated in
accordance with Section 24 hereof.
13. ANTI-MARSHALLING PROVISIONS. The right is hereby given by
each Grantor to the Agent on behalf of the Secured Parties to make releases
(whether in whole or in part) of all or any part of the Collateral agreeable to
the Agent without notice to, or the consent, approval or agreement of other
parties and interests, including junior lienors, which releases shall not
impair in any manner the validity of or priority of the Liens and security
interests in the remaining Collateral conferred under such documents, nor
release such Grantor from personal liability for the Secured Obligations hereby
secured. Notwithstanding the existence of any other security interest in the
Collateral held by the Agent, the Agent shall have the right to determine the
order in which any or all of the Collateral shall be subjected to the remedies
provided in this Agreement. The proceeds realized upon the exercise of the
remedies provided herein shall be applied by the Agent, for the account of the
Secured Parties, in the manner herein provided. Each Grantor hereby waives any
and all right to require the marshalling of assets in connection with the
exercise of any of the remedies permitted by applicable law or provided herein.
14. APPOINTMENT OF AGENT AS A GRANTOR'S LAWFUL ATTORNEY. Without
limitation of any other provision of this Agreement, upon and after an
Acceleration Event, each Grantor irrevocably designates, makes, constitutes and
appoints the Agent (and all Persons designated by the Agent) as such Grantor's
true and lawful attorney (and agent-in-fact) to take all actions and to do all
things required to be taken or done by such Grantor under this Agreement. All
acts of the Agent or its designee taken pursuant to this Section 14 are hereby
ratified and confirmed and
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the Agent or its designee shall not be liable for any acts of omission or
commission nor for any error of judgment or mistake of fact or law, other than
as a result of its gross negligence or willful misconduct. This power, being
coupled with an interest, is irrevocable by such Grantor until this Agreement
has been terminated in accordance with Section 24 hereof.
15. RIGHTS AND REMEDIES CUMULATIVE; NON-WAIVER; ETC. The
enumeration of the rights and remedies of the Agent set forth in this Agreement
is not intended to be exhaustive and the exercise by the Agent or any Secured
Party of any right or remedy shall not preclude the exercise of any other
rights or remedies, all of which shall be cumulative, and shall be in addition
to any other right or remedy given hereunder, or under any other agreement
between a Grantor and the Agent or any Secured Party or which may now or
hereafter exist in law or in equity or by suit or otherwise. No delay or
failure to take action on the part of the Agent or any Secured Party in
exercising any right, power or privilege shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right, power or privilege
preclude other or further exercise thereof or the exercise of any other right,
power or privilege or shall be construed to be a waiver of any Event of
Default. No waiver by a party hereunder shall be effective unless it is in
writing and signed by the party making such waiver, and then only to the extent
specifically stated in such writing. No course of dealing between a Grantor
and the Agent or the Agent's agents or employees shall be effective to change,
modify or discharge any provision of this Agreement or to constitute a waiver
of any Event of Default. The Agent shall not have any liability for any error,
omission or delay of any kind occurring in the handling or liquidation of the
Collateral or for any damages resulting therefrom, other than as a result of
its gross negligence or willful misconduct.
16. SUPPLEMENTAL DOCUMENTATION. At the Agent's request, each
Grantor shall execute and deliver to the Agent, at any time or times hereafter,
all documents, instruments and other written matter that the Agent may
reasonably request to perfect and maintain perfected the Agent's security
interest for the benefit of the Secured Parties in the Collateral, in form and
substance acceptable to the Agent, and pay all charges, expenses and fees the
Agent may reasonably incur in filing any of such documents, and all taxes
relating thereto. Each Grantor agrees that a carbon, photographic,
photostatic, or other reproduction of this Agreement or a financing statement
is sufficient as a financing statement and may be filed by the Agent in any
filing office.
17. WAIVERS. In addition to the other waivers contained herein,
each Grantor hereby expressly waives, to the extent permitted by law:
presentment for payment, demand, protest, notice of demand, notice of protest,
notice of default or dishonor, notice of payments and nonpayments and all other
notices and consents to any action taken by the Agent unless expressly required
by this Agreement.
18. NOTICE. Any notice shall be conclusively deemed to have been
received by any party hereto and be effective on the day on which delivered to
such party (against receipt therefor) at the address set forth below or such
other address as such party shall specify to the other parties in writing (or,
in the case of telephonic notice or notice by telecopy (where the receipt of
such
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message is verified by return) expressly provided for hereunder, when received
at such telephone or telecopy number as may from time to time be specified in
written notice to the other parties hereto or otherwise received), or if sent
prepaid by certified or registered mail return receipt requested on the third
Business Day after the day on which mailed, or if sent prepaid by a national
overnight courier service, on the first Business Day after the day on which
delivered to such service against receipt therefor, addressed to such party at
said address:
(a) if to any Grantor:
c/o River Oaks Furniture, Inc.
0000 XxXxxxxxx Xxxxxxxxx
Xxxxxx, Xxxxxxxxxxx 00000
Attn: Mr. Xxxxxx Xxxxxx
Telephone: (000) 000-0000
Telefacsimile: (000) 000-0000
with a copy to:
Waller, Lansden, Xxxxxx & Xxxxx, PLLC
Nashville City Center
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000-0000
Attn: Xxxxx X. Xxxxx
Telephone: (000) 000-0000
Telefacsimile: (000) 000-0000
(b) if to the Agent or any Secured Party:
BNY Financial Corporation
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxxx
Telephone: (000) 000-0000
Telefacsimile: (000) 000-0000
with a copy to:
BNY Financial Corporation
2810 Interstate Tower
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000
Attention: Xx. Xxxxxxx X. Xxxxxxxx
Telephone: (000) 000-0000
Telefacsimile: (000) 000-0000
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or to such other address as each party may designate for itself by like notice
given in accordance with this Section 18.
19. DEFINITIONS. All terms used herein shall be defined in
accordance with the appropriate definitions appearing in the Uniform Commercial
Code as in effect in New York, and such definitions are hereby incorporated
herein by reference and made a part hereof.
20. ENTIRE AGREEMENT. This Agreement, together with the Credit
Agreement, the Factoring Documents and other Loan Documents, constitutes and
expresses the entire understanding between the parties hereto with respect to
the subject matter hereof, and supersedes all prior agreements and
understandings, inducements, commitments or conditions, express or implied,
oral or written, except as herein contained. The express terms hereof control
and supersede any course of performance or usage of the trade inconsistent with
any of the terms hereof. Neither this Agreement nor any portion or provision
hereof may be changed, altered, modified, supplemented, discharged, canceled,
terminated, or amended orally or in any manner other than by an agreement, in
writing signed by the parties hereto.
21. SEVERABILITY. The provisions of this Agreement are
independent of and separable from each other. If any provision hereof shall
for any reason be held invalid or unenforceable, such invalidity or
unenforceability shall not affect the validity or enforceability of any other
provision hereof, but this Agreement shall be construed as if such invalid or
unenforceable provision had never been contained herein.
22. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
the successors and assigns of each Grantor, and the right, remedies, powers,
and privileges of the Agent hereunder shall inure to the benefit of the
successors and assigns of the Agent; provided, however, that no Grantor shall
make any assignment hereof without the prior written consent of the Agent.
23. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and all the counterparts taken together shall be deemed to
constitute one and the same instrument.
24. TERMINATION; RELEASE. On the date when all of the Secured
Obligations have been paid in full and the Credit Agreement has been
terminated, this Agreement and all obligations of each Grantor hereunder shall
terminate without delivery of any instrument or performance of any act by any
party, and the Collateral shall automatically be released from the Liens
created by this Agreement and all rights to such Collateral shall automatically
revert to such Grantor. Notwithstanding the immediately preceding sentence,
upon such termination of this Agreement, the Agent shall reassign and redeliver
such Collateral then held by or for the Agent and execute and deliver to such
Grantor such documents as such Grantor shall reasonably request to evidence
such termination.
25. APPOINTMENT OF AGENT. BNY, as factor under the Factoring
Agreement, hereby irrevocably designates and appoints BNY Financial
Corporation, in its capacity as agent under the Credit Agreement, as its agent
under this Agreement, and hereby irrevocably authorizes BNY Financial
Corporation, as its agent, to take any action on its behalf under this
Agreement and to
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exercise such powers as are expressly delegated to the Agent by the terms of
this Agreement as are reasonably incidental thereto.
26. GOVERNING LAW.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.
(b) EACH PARTY HEREBY EXPRESSLY AND IRREVOCABLY AGREES
AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN
MAY BE INSTITUTED IN ANY STATE OR FEDERAL COURT SITTING IN THE XXXXXX
XX XXX XXXX, XXXXX XX XXX XXXX, XXXXXX XXXXXX OF AMERICA AND, BY THE
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY EXPRESSLY WAIVES
ANY OBJECTION THAT IT MAY HAVE NOW OR HEREAFTER TO THE LAYING OF THE
VENUE OR TO THE JURISDICTION OF ANY SUCH SUIT, ACTION OR PROCEEDING,
AND IRREVOCABLY SUBMITS GENERALLY AND UNCONDITIONALLY TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING.
(c) EACH PARTY AGREES THAT SERVICE OF PROCESS MAY BE
MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR
OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY
REGISTERED OR CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF SUCH
PARTY PROVIDED BY SECTION 18 HEREOF, OR BY ANY OTHER METHOD OF
SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE
OF NEW YORK.
(d) NOTHING CONTAINED IN SUBSECTIONS (B) OR (C) HEREOF
SHALL PRECLUDE ANY PARTY FROM BRINGING ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS IN THE COURTS OF ANY PLACE WHERE ANY PARTY OR ANY OF SUCH
PARTY'S PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT
PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH JURISDICTION, EACH PARTY
HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND
EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING,
THE JURISDICTION OF ANY OTHER COURT OR COURTS WHICH NOW OR HEREAFTER,
BY REASON OF ITS PRESENT OR FUTURE DOMICILE, OR OTHERWISE, MAY BE
AVAILABLE TO IT.
(e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS OR REMEDIES UNDER OR RELATED TO THIS AGREEMENT
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OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT
MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH THE FOREGOING, EACH
PARTY HEREBY AGREES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT
ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY AND EACH PARTY HEREBY WAIVES, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, ANY OBJECTION THAT IT MAY HAVE THAT EACH ACTION OR
PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
[SIGNATURES ON FOLLOWING PAGES]
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IN WITNESS WHEREOF, the parties have duly executed this Security
Agreement on the day and year first written above.
GRANTORS:
RIVER OAKS FURNITURE, INC.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
R.O. WEST, INC.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
R.O. EAST, INC.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
XXXXXX MANUFACTURING COMPANY
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
SECURITY AGREEMENT
Signature Page 1 of 2
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AGENT:
BNY FINANCIAL CORPORATION, as Agent for the
Lenders
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
SECURITY AGREEMENT
Signature Page 2 of 2
