Exhibit 10.5
SECURITY AGREEMENT
DATE: October 12, 1999
DEBTOR: SECURED PARTY:
Sparta Foods, Inc. Norwest Bank Minnesota,
0000 Xxxxx Xxxxxx XX National Association
Xxx Xxxxxxxx, Xxxxxxxxx 00000 00 Xxxx Xxxxx Xxxxxx
Xx. Xxxx, Xxxxxxxxx 00000
1. Security Interest and Collateral. To secure the payment and performance of
each and every debt, liability and obligation of every type and description
which Debtor may now or at any time hereafter owe to Secured Party (whether such
debt, liability or obligation now exists or is hereafter created or incurred,
whether it is currently contemplated by the Debtor and Secured Party, whether
any documents evidencing it refer to this Security Agreement, whether it arises
with or without any documents (e.g. obligations to Secured Party created by
checking overdrafts), and whether it is or may be direct or indirect, due or to
become due, absolute or contingent, primary or secondary, liquidated or
unliquidated, or joint, several or joint and several; all such debts,
liabilities and obligations being herein collectively referred to as the
"Obligations"), Debtor hereby grants Secured Party a security interest (herein
called the "Security Interest") in the following property (herein called the
"Collateral") (check applicable boxes and complete information):
(a) INVENTORY:
|X| All inventory of Debtor, whether now owned or
hereafter acquired and wherever located;
(b) EQUIPMENT, FARM PRODUCTS AND CONSUMER GOODS:
|X| All Equipment of Debtor, whether now owned or
hereafter acquired, including but not limited to all
present and future machinery, vehicles, furniture,
appliances, fixtures, manufacturing and processing
equipment, farm machinery and equipment, shop
equipment, office and recordkeeping equipment,
computer hardware and software, parts and tools,
goods, and types of goods of every kind and
description.
[ ] All farm products of Debtor, whether now owned or
hereafter acquired, including but not limited to (i)
all poultry and livestock and their young, products
thereof and produce thereof, all holding marks and
brands and branding irons of Debtor that at any time
cover any such livestock, and, if the livestock
includes sheep, all wool pulled, clipped or shorn
therefrom, (ii) all crops, whether annual or
perennial, and the products thereof, (iii) all feed,
seed, fertilizer, medicines and other supplies used
or produced by Debtor in farming operations, and (iv)
all crop insurance payments and storage payments and
all rights to payment and payments under any
government agricultural diversion, assistance or
support program, Farm Services Agency program and any
other such government agricultural program including,
without limitation, any diversion or deficiency
payments. The real estate concerned with the above
described crops growing or to be grown is: and the
name of the record owner is:
| | The following goods or types of goods:
(c) ACCOUNTS AND OTHER RIGHTS TO PAYMENT:
|X| Accounts and each and every right of Debtor to the
payment of money, whether such right to payment now
exists or hereafter arises, whether such right to
payment arises out of a sale, lease or other
disposition of goods or other property by Debtor, out
of a rendering of services by Debtor, out of a loan
by Debtor, out of the overpayment of taxes or other
liabilities of Debtor, or otherwise arises under any
contract or agreement, whether such right to payment
is or is not already earned by performance, and
howsoever such right to payment may be evidenced,
together with all other rights and interests
(including all liens and security interests) which
Debtor may at any time have by law or agreement
against any account debtor or other obligor obligated
to make any such payment or against any of the
property of such account debtor or other obligor; all
including but not limited to all present and future
debt instruments, chattel papers, accounts, contract
rights, loans and obligations receivable, tax
refunds, unearned insurance premiums, rebates, and
negotiable documents.
| | __________________________________________________
__________________________________________________
__________________________________________________
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(d) GENERAL INTANGIBLES:
|X| All general intangibles of Debtor, whether now owned
or hereafter acquired, including, but not limited to,
certificates of deposit, applications for patents,
patents, copyrights, trademarks, trade secrets, good
will, tradenames, customers' lists, permits and
franchises, and the right to use Debtor's name,
together with all other intangible property rights
such as the right to redeem or accept payment under
an annuity contract or a non-negotiable certificate
of deposit issued by a bank.
together with all substitutions and replacements for and products of any of the
foregoing property not constituting consumer goods and together with proceeds of
any and all of the foregoing property including without limitation insurance
proceeds and any rights of subrogation resulting from the damage or destruction
thereof, and, in the case of all tangible Collateral, together with all
accessions and, except in the case of consumer goods, together with (i) all
accessories, attachments, parts, equipment and repairs now or hereafter attached
or affixed to or used in connection with any such goods, and (ii) all warehouse
receipts, bills of lading and other documents of title now or hereafter covering
such goods.
2. Representations, Warranties and Agreements. Debtor represents, warrants and
agrees that:
(a) Debtor is | | an individual, | | a partnership,
|X| a corporation | |___________________________.
(b) The Collateral will be used primarily for | | personal, family
or household purposes; | | agricultural purposes; |X| business
purposes.
(c) | | If any part or all of the tangible Collateral will become
so related to particular real estate as to become a fixture,
the real estate concerned is: _____________________________
___________________________________________________________
___________________________________________________________
________________________and the name of the record owner is:
___________________________________________________________
___________________________________________________________
(d) Debtor's chief executive office is located at:_____________
__________________________________________________or, if left
blank, at the address of Debtor shown at the beginning of
this Agreement. If Debtor is an individual, the Debtor's
residence is at the address of Debtor shown at the beginning
of this Agreement.
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3. Additional Representations, Warranties and Agreements. Debtor represents,
warrants and agrees that:
(a) Debtor has (or will have at the time Debtor acquires rights in
Collateral hereafter arising) absolute title to each item of Collateral free and
clear of all security interests, liens and encumbrances, except the Security
Interest and any other security interest permitted under the terms of the Term
Loan and Credit Agreement dated the date hereof, and will defend the Collateral
against all claims or demands of all persons other than Secured Party. Debtor
will not sell or otherwise dispose of the Collateral or any interest therein
without the prior written consent of Secured Party, except that, until the
occurrence of an Event of Default and the revocation by Secured Party of
Debtor's right to do so, Debtor may sell any inventory constituting Collateral
to buyers in the ordinary course of business and use and consume any farm
products constituting Collateral in Debtor's farming operation. If Debtor is not
an individual, this Agreement has been duly and validly authorized by all
necessary action of the Debtor's governing body.
(b) Debtor will not permit any tangible Collateral to be located in any
state (and, if county filing is required, in any county) in which a financing
statement covering such Collateral is required to be, but has not in fact been,
filed in order to perfect the Security Interest.
(c) Each account and right to payment and each instrument, document,
chattel paper and other agreement constituting or evidencing Collateral is (or
will be when arising or issued) the valid, genuine and legally enforceable
obligation, subject to no defense, set-off or counterclaim (other than those
arising in the ordinary course of business) of the account debtor or other
obligor named therein or in Debtor's records pertaining thereto as being
obligated to pay such obligation. Debtor will neither agree to any material
modification or amendment nor agree to any cancellation of any such obligation
without Secured Party's prior written consent, and will not subordinate any such
right to payment to claims of other creditors of such account debtor or other
obligor.
(d) Debtor will (i) keep all tangible Collateral in good repair,
working order and condition, normal depreciation excepted, and will, from time
to time, replace any worn, broken or defective parts thereof; (ii) promptly pay
all taxes and other governmental charges levied or assessed upon or against any
Collateral or upon or against the creation, perfection or continuance of the
Security Interest; (iii) keep all Collateral free and clear of all security
interests, liens and encumbrances except the Security Interest and any other
security interest permitted under the terms of the Term Loan and Credit
Agreement dated the date hereof; (iv) at all reasonable times, permit Secured
Party or its representatives to examine or inspect any Collateral, wherever
located, and to examine, inspect and copy Debtor's books and records pertaining
to the Collateral and its business and financial condition and to discuss with
account debtors and other obligors requests for verifications of amounts owed to
Debtor; (v) keep accurate and complete records pertaining to the Collateral and
pertaining to Debtor's business and financial condition and submit to Secured
Party such periodic reports concerning the Collateral and Debtor's business and
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financial condition as Secured Party may from time to time reasonably request;
(vi) promptly notify Secured Party of any loss of or material damage to any
Collateral or of any adverse change, known to Debtor, in the prospect of payment
of any sums due on or under any instrument, chattel paper, or account
constituting Collateral; (vii) if Secured Party at any time so requests (whether
the request is made before or after the occurrence of an Event of Default),
promptly deliver to Secured Party any instrument, document or chattel paper
constituting Collateral, duly endorsed or assigned by Debtor; (viii) at all
times keep all tangible Collateral insured against risks of fire (including
so-called extended coverage), theft, collision (in case of Collateral consisting
of motor vehicles) and such other risks and in such amounts as Secured Party may
reasonably request, with any loss payable to Secured Party to the extent of its
interest and with the commitment of the issuer to notify Secured Party before
cancellation; (ix) from time to time execute such financing statements and
effective financing statements, and furnish lists of potential buyers of farm
products as Secured Party may reasonably require in order to perfect the
Security Interest and, if any Collateral consists of a motor vehicle, execute
such documents as may be required to have the Security Interest properly noted
on a certificate of title; (x) pay when due or reimburse Secured Party on demand
for all costs of collection of any of the Obligations and all other
out-of-pocket expenses (including in each case all reasonable attorney's fees)
incurred by Secured Party in connection with the creation, perfection,
satisfaction, protection, defense or enforcement of the Security Interest or the
creation, continuance, protection, defense or enforcement of this Agreement or
any or all of the Obligations, including expenses incurred in any litigation or
bankruptcy, receivership or insolvency proceedings; (xi) execute, deliver or
endorse any and all instruments, documents, assignments, security agreements and
other agreements and writings which Secured Party may at any time reasonably
request in order to secure, protect, perfect or enforce the Security Interest
and Secured Party's rights under this Agreement; (xii) not use the Collateral
for hire, use or keep any Collateral, or permit it to be used or kept, for any
unlawful purpose or in violation of any federal, state or local law, statute,
ordinance, or insurance policy; (xiii) permit Secured Party at any time and from
time to time to send request (both before and after the occurrence of an Event
of Default) to account debtors or other obligors for verification of amounts
owed to Debtor; (xiv) not permit any tangible Collateral to become part of or to
be affixed to any real property without first assuring to the reasonable
satisfaction of Secured Party that the Security Interest will be prior and
senior to any interest or lien then held or thereafter acquired by any mortgagee
of such real property or the owner or purchaser of any interest therein; (xv)
upon Secured Party's request, obtain a waiver or consent from the owner and any
mortgagee of any real property where the Collateral may be located that provides
that the Security Interest will at all times be senior to any such interest or
lien; and (xvi) if any Collateral consists of farm products, if applicable,
sell, cosign or transfer the Collateral only to those persons whose names and
addresses have been furnished to Secured Party as potential buyers of farm
products. If Debtor at any time fails to perform or observe any agreement
contained in this Section 3(d), and if such failure shall continue for a period
of ten calendar days after Secured Party gives Debtor written notice thereof
(or, in the case of the agreements contained in clauses (viii) and (ix) of this
Section 3(d), immediately upon the occurrence of such failure, without notice or
lapse of time), Secured Party may (but need not) perform or observe such
agreement on behalf and in the name, place and stead of Debtor (or, at Secured
Party's option, in Secured Party's own name) and may (but need not) take any and
all other actions which Secured Party may reasonably deem necessary to cure or
correct such failure (including, without limitation, the payment of taxes, the
satisfaction of security interests, liens, or encumbrances, the performance of
obligations under contracts or agreements with account debtors or other
obligors, the procurement and maintenance of insurance, the execution of
financing statements, the endorsement of instruments, and the procurement of
repairs, transportation or insurance); and, except to the extent that the effect
of such payment would be to render any loan or forbearance of money usurious or
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otherwise illegal under any applicable law. Debtor shall thereupon pay Secured
Party on demand the amount of all moneys expended and all costs and expenses
(including reasonable attorneys' fees) incurred by Secured Party in connection
with or as a result of Secured Party's performing or observing such agreements
or taking such actions, together with interest thereon from the date expended or
incurred by Secured Party at the highest rate then applicable to any of the
Obligations. To facilitate the performance or observance by Secured Party of
such agreements of Debtor, Debtor hereby irrevocably appoints (which appointment
is coupled with an interest) Secured Party, or its delegate, as the
attorney-in-fact of Debtor with the right (but not the duty) from time to time
to create, prepare, complete, execute, deliver, endorse or file, in the name and
on behalf of Debtor, any and all instruments, documents, financing statements,
applications for insurance and other agreements and writings required to be
obtained, executed, delivered or endorsed by Debtor under this Section 3 and
Section 4. Unless not permitted by applicable law, Debtor hereby irrevocably
authorizes Secured Party to create, prepare, complete, execute and file, in the
name and on behalf of Debtor, such financing statements as may be required to
perfect the Security Interest.
4. Lock Box, Collateral Account. If Secured Party so requests at any time
(whether before or after the occurrence of an Event of Default), Debtor will
direct each of its account debtors to make payments due under the relevant
account or chattel paper directly to a special lock box to be under the control
of Secured Party. Debtor hereby authorizes and directs Secured Party to deposit
into a special collateral account to be established and maintained with Secured
Party all checks, drafts and cash payments, received in said lock box. All
deposits in said collateral account shall constitute proceeds of Collateral and
shall not constitute payment of any Obligation. At its option, Secured Party
may, at any time, apply finally collected funds on deposit in said collateral
account to the payment of the Obligations in such order of application as
Secured Party may determine, or permit Debtor to withdraw all or any part of the
balance on deposit in said collateral account. If a collateral account is so
established, Debtor agrees that it will promptly deliver to Secured Party, for
deposit into said collateral account, all payments on accounts and chattel paper
received by it. All such payments shall be delivered to Secured Party in the
form received (except for Debtor's endorsement where necessary). Until so
deposited, all payments on accounts and chattel paper received by Debtor shall
be held in trust by Debtor for and as the property of Secured Party and shall
not be commingled with any funds or property of Debtor.
5. Collection Rights of Secured Party. Notwithstanding Secured Party's rights
under Section 4 with respect to any and all debt instruments, chattel papers,
accounts, and other rights to payment constituting Collateral (including
proceeds), Secured Party may, after the occurrence of an Event of Default notify
any account debtor, or any other person obligated to pay any amount due, that
such chattel paper, account, or other right to payment has been assigned or
transferred to Secured Party for security and shall be paid directly to Secured
Party. If Secured Party so requests at any time, Debtor will so notify such
account debtors and other obligors in writing and will indicate on all invoices
to such account debtors or other obligors that the amount due is payable
directly to Secured Party. At any time after Secured Party or Debtor gives such
notice to an account debtor or other obligor, Secured Party may (but need not),
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in its own name or in Debtor's name, demand, xxx for, collect or receive any
money or property at any time payable or receivable on account of, or securing,
any such chattel paper, account, or other right to payment, or grant any
extension to, make any compromise or settlement with or otherwise agree to
waive, modify, amend or change the obligations (including collateral
obligations) of any such account debtor or other obligor.
6. Assignment of Insurance. Debtor hereby assigns to Secured Party, as
additional security for the payment of the Obligations, any and all moneys
(including but not limited to proceeds of insurance and refunds of unearned
premiums) due or to become due under, and all other rights of Debtor under or
with respect to, any and all policies of insurance covering the Collateral, and
Debtor hereby directs the issuer of any such policy to pay any such moneys
directly to Secured Party. Both before and after the occurrence of an Event of
Default, Secured Party may (but need not), in its own name or in Debtor's name,
execute and deliver proofs of claim, receive all such moneys, endorse checks and
other instruments representing payment of such moneys, and adjust, litigate,
compromise or release any claim against the issuer of any such policy.
7. Events of Default. Each of the following occurrences shall constitute an
event of default under this Agreement (herein called "Event of Default"): (i)
Debtor shall fail to pay any or all of the Obligations when due or (if payable
on demand) on demand, or shall fail to observe or perform any covenant or
agreement binding on it; (ii) any representation or warranty by Debtor set forth
in this Agreement or otherwise made to Secured Party, including without
limitation in any financial statements or reports submitted to Secured Party, by
or on behalf of Debtor, shall prove materially false or misleading; (iii) a
garnishment, summons or a writ of attachment shall be issued against or served
upon the Secured Party for the attachment of any property of the Debtor or any
indebtedness owing to Debtor; or (iv) the occurrence of an event of default
under the Term Loan and Credit Agreement dated on or about October 12, 1999 (as
may be amended or replaced from time to time) made by and between the Debtor and
the Secured Party.
8. Remedies upon Event of Default. Upon the occurrence of an Event of Default
under Section 7 and at any time thereafter, Secured Party may exercise any one
or more of the following rights and remedies: (i) declare all unmatured
Obligations to be immediately due and payable, and the same shall thereupon be
immediately due and payable, without presentment or other notice or demand; (ii)
exercise and enforce any or all rights and remedies available upon default to a
secured party under the Uniform Commercial Code, including but not limited to
the right to take possession of any Collateral, proceeding without judicial
process or by judicial process (without a prior hearing or notice thereof, which
Debtor hereby expressly waives), and the right to sell, lease or otherwise
dispose of any or all of the Collateral, and in connection therewith, Secured
Party may require Debtor to make the Collateral available to Secured Party at a
place to be designated by Secured Party which is reasonably convenient to both
parties, and if notice to Debtor of any intended disposition of Collateral or
any other intended action is required by law in a particular instance, such
notice shall be deemed commercially reasonable if given (in the manner specified
in Section 10) at least 10 calendar days prior to the date of intended
disposition or other action; (iii) exercise or enforce any or all other rights
or remedies available to Secured Party by law or agreement against the
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Collateral, against Debtor or against any other person or property. Secured
Party is hereby granted a nonexclusive, worldwide and royalty-free license to
use or otherwise exploit all trademarks, trade secrets, franchises, copyrights
and patents of Debtor that Secured Party deems necessary or appropriate to the
disposition of any Collateral.
9. Other Personal Property. Unless at the time Secured Party takes possession of
any tangible Collateral, or within seven days thereafter, Debtor gives written
notice to Secured Party of the existence of any goods, papers or other property
of Debtor, not affixed to or constituting a part of such Collateral, but which
are located or found upon or within such Collateral, describing such property.
Secured Party shall not be responsible or liable to Debtor for any action taken
or omitted by or on behalf of Secured Party with respect to such property
without actual knowledge of the existence of any such property or without actual
knowledge that it was located or to be found upon or within such Collateral.
10. Miscellaneous. This Agreement does not contemplate a sale of accounts, or
chattel paper. Debtor agrees that each provision whose box is checked is part of
this Agreement. This Agreement can be waived, modified, amended, terminated or
discharged, and the Security Interest can be released, only explicitly in a
writing signed by Secured Party. A waiver signed by Secured Party shall be
effective only in the specific instance and for the specific purpose given. Mere
delay or failure to act shall not preclude the exercise or enforcement of any of
Secured Party's rights or remedies. All rights and remedies of Secured Party
shall be cumulative and may be exercised singularly or concurrently, at Secured
Party's option, and the exercise or enforcement of any one such right or remedy
shall neither be a condition to nor bar the exercise or enforcement of any
other. All notices to be given to Debtor shall be deemed sufficiently given if
delivered or mailed by registered or certified mail, postage prepaid, to Debtor
at its address set forth above or at the most recent address shown on Secured
Party's records. Secured Party's duty of care with respect to Collateral in its
possession (as imposed by law) shall be deemed fulfilled if Secured Party
exercises reasonable care in physically safekeeping such Collateral or, in the
case of Collateral in the custody or possession of a bailee or other third
person, exercises reasonable care in the selection of the bailee or other third
person, and Secured Party need not otherwise preserve, protect, insure or care
for any Collateral. Secured Party shall not be obligated to preserve any rights
Debtor may have against prior parties, to realize on the Collateral at all or in
any particular manner or order, or to apply any cash proceeds of Collateral in
any particular order of application. This Agreement shall be binding upon and
inure to the benefit of Debtor and Secured Party and their respective heirs,
representatives, successors and assigns and shall take effect when signed by
Debtor and delivered to Secured Party, and Debtor waives notice of Secured
Party's acceptance hereof. Secured Party may execute this Agreement if
appropriate for the purpose of filing, but the failure of Secured Party to
execute this Agreement shall not affect or impair the validity or effectiveness
of this Agreement. A carbon, photographic or other reproduction of this
Agreement or of any financing statement signed by the Debtor shall have the same
force and effects as the original for all purposes of a financing statement.
Except to the extent otherwise required by law, this Agreement shall be governed
by the internal laws of the state named as part of Secured Party's address
above. If any provision or application of this Agreement is held unlawful or
unenforceable in any respect, such illegality or unenforceability shall not
affect other provisions or applications which can be given effect, and this
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Agreement shall be construed as if the unlawful or unenforceable provision or
application had never been contained herein or prescribed hereby. All
representations and warranties contained in this Agreement shall survive the
execution, delivery and performance of this Agreement and the creation and
payment of the Obligations. If this Agreement is signed by more than one person
as Debtor, the term "Debtor" shall refer to each of them separately and to both
or all of them jointly; all such persons shall be bound both severally and
jointly with the other(s); and the Obligations shall include all debts,
liabilities and obligations owed to Secured Party by any Debtor solely or by
both or several or all Debtors jointly or jointly and severally, and all
property described in Section 1 shall be included as part of the Collateral,
whether it is owned jointly or by both or all Debtors or is owned in whole or in
part by one (or more) of them.
NORWEST BANK MINNESOTA, SPARTA FOODS, INC.
NATIONAL ASSOCIATION
By:____________________________ By:________________________________
Xxxx Xxxxxxx,
Vice President Title:_____________________________
By:________________________________
Title:_____________________________
