SECURITY AGREEMENT
April 30, 1999
XXXXX Corporation
c/o Xxxx X. Xxxxxx
000 Xxxx Xxxxx Xxxxxx
Xxxxx X
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
(Individually and collectively "Debtor")
First Union National Bank
00 Xxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
(Hereinafter referred to as "Bank")
For value received and to secure payment and performance of the Promissory Note
executed by RS1 Holdings, Inc. ("Borrower") dated of even date herewith, in the
original principal amount of $500,000.00, payable to Bank, and any extensions,
renewals, modifications or novations thereof (the "Note"), this Security
Agreement and the other Loan Documents, and any other obligations of Borrower to
Bank however created, arising or evidenced, whether direct or indirect, absolute
or contingent, now existing or hereafter arising or acquired, and whether or not
evidenced by a Loan Document, including swap agreements (as defined in 11 U.S.C.
Section 101), future advances, and all costs and expenses incurred by Bank to
obtain, preserve, perfect and enforce the security interest granted herein and
to maintain, preserve and collect the property subject to the security interest
(collectively, "Obligations"), Debtor hereby grants to Bank a continuing
security interest in and lien upon the following described property, whether now
owned or hereafter acquired, and any additions, replacements, accessions, or
substitutions thereof and all cash and non-cash proceeds and products thereof
(collectively, "Collateral"):
All securities that are certificated and held in vault at Bank, described as
follows: 170,000 shares of common stock, issued by Delta Woodside Industries,
Inc., cusip number 247909 10 4. Shares are represented in certificate nos.: AC
2640 (20,000 shares); AC 2641 (20,000 shares); AC 2642 (20,000 shares); AC 2643
(20,000 shares): AC 2644 (20,000 shares); AC 2645 (20,000 shares); AC 2646
(20,000 shares); AC 2669 (10,000 shares); AC 2670 (10,000 shares); and AC
2671(10,000 shares).
Debtor hereby represents and agrees that:
OWNERSHIP. Debtor owns the Collateral. The Collateral is free and clear of all
liens, security interests, and claims except those previously reported in
writing to Bank, and Debtor will keep the Collateral free and clear from all
liens, security interests and claims, other than those granted to Bank. All
securities and security entitlements pledged as Collateral are fully paid and
non-assessable and if certificated, have been delivered to Bank with
unrestricted endorsements. All income, dividends, earnings and profits with
respect to the Collateral shall be reported for state and federal income tax
purposes as attributable to the Debtor and not Bank, and Third Party (as defined
herein), Bank or any other person authorized to report income distributions, are
authorized to issue IRS Forms 1099 indicating Debtor as the recipient of such
income, earnings.and profits.
NAME AND OFFICES. There has been no change in the name of Debtor, or the name
under which Debtor conducts business, within the five years preceding the date
hereof and Debtor has not moved its executive offices or residence within the
five years preceding the date hereof except as previously reported in writing to
Bank.
TITLE/TAXES. Debtor has good and marketable title to Collateral and will warrant
and defend same against all claims, Debtor will not transfer, sell, or lease
Collateral (except as permitted herein). Debtor agrees to pay promptly all taxes
and assessments upon or for the use of Collateral and on this Security
Agreement. At its option, Bank may discharge taxes, liens, security interests or
other encumbrances at any time levied or placed on Collateral. Debtor agrees to
reimburse Bank, on demand, for any such payment made by Bank. Any amounts so
paid shall be added to the Obligations.
WAIVERS. Debtor waives presentment, demand, protest, notice of dishonor, notice
of default, demand for payment, notice of intention to accelerate, and notice of
acceleration of maturity. Debtor further agrees not to assert against Bank as a
defense (legal or equitable), as a set-off, as a counterclaim, or otherwise, any
claims Debtor may have against any seller or lessor that provided personal
property or services relating to any part of the Collateral. Debtor waives all
exemptions and homestead rights with regard to the Collateral. Debtor waives any
and all rights to notice or to hearing prior to Bank's taking immediate
possession or control of any Collateral, and to any bond or security which might
be required by applicable law prior to the exercise of any of Bank's remedies
against any Collateral. All rights of Bank and security interests hereunder, and
all obligations of Debtor hereunder, shall be absolute and unconditional, not
discharged or impaired irrespective of (and regardless of whether Debtor
receives any notice of): (i) any lack of validity or enforceability of any Loan
Document; (ii) any change in the time, manner or place of payment or
performance, or in any term, of all or any of the Obligations or the Loan
Documents or any other amendment or waiver of or any consent to any departure
from any Loan Document; (iii) any exchange, release or non-perfection of any
collateral, or any release of or modifications of the obligations of any
guarantor or other obligor; (iv) any amendment or waiver of or consent to
departure from any Loan Document or other agreement. To the extent permitted by
law, Debtor hereby waives any rights under any valuation, stay, appraisement,
extension or redemption laws now existing or which may hereafter exist and
which, but for this provision, might be applicable to any sale or disposition of
the Collateral by Bank; and any other circumstance which might otherwise
constitute a defense available to, or a discharge of any party with respect to
the Obligations.
NOTIFICATIONS. Debtor will notify Bank in writing at least 30 days prior to any
change in: (i) Debtors chief place of business and/or residence; (ii) Debtor's
name or identity; or (iii) Debtor's corporate/organizational structure. In
addition, Debtor shall promptly notify Bank of any claims or alleged claims of
any other person or entity to the Collateral or the institution of any
litigation, arbitration, governmental investigation or administrative
proceedings against or affecting the Collateral. Debtor will keep Collateral at
the location(s) previously provided to Bank until such time as Bank provides
written advance consent to a change of location. Debtor will bear the cost of
preparing and filing any documents necessary to protect Bank's liens.
FINANCING STATEMENTS, POWER OF ATTORNEY. No financing statement (other than any
filed by Bank or disclosed above) covering any Collateral is on file in any
public filing office. On request of Bank, Debtor will execute one or more
financing statements in form satisfactory to Bank and will pay all costs and
expenses of filing the same or of filing this Security Agreement in all public
filing offices, where filing is deemed by Bank to be desirable. Bank is
authorized to file financing statements relating to Collateral without Debtor's
signature where authorized by law. Debtor hereby constitutes and appoints Bank
the true and lawful attorney of Debtor with full power of substitution to take
any and all appropriate action and to execute any and all documents or
instruments that may be necessary or desirable to accomplish the purpose and
carry out the terms of this Security Agreement, including, without limitation;
to complete, execute, and deliver Account Control Agreement(s) by Bank, Debtor
and Third Party(s) required in connection herewith (individually and
collectively the "Control Agreement"), instructions to Third Party(s) regarding,
among other things, control and disposition of any Collateral, and endorsements
desirable for transfer or delivery of any Collateral, registration of any
Collateral under applicable laws, retitling any Collateral, receipt, endorsement
and/or collection of all checks and other orders for payment of money payable to
Debtor with respect to Collateral. The foregoing power of attorney is coupled
with an interest and shall be irrevocable until all of the Obligations have been
paid in full. Neither Bank nor anyone acting on its behalf shall be liable for
acts, omissions, errors in judgment, or mistakes in fact in such capacity as
attorney-in-fact. Debtor ratifies all acts of Bank as attorney-in-fact. Debtor
agrees to take such other actions as might be requested for the perfection,
continuation and assignment, in whole or in part, of the security interests
granted herein. If certificates, passbooks, or other documentation or evidence
is/are issued or outstanding as to any of the Collateral, Debtor will cause the
security interests of Bank to be properly protected, including perfection by
notation thereon or delivery thereof to Bank. Upon Bank's request, Debtor will,
at its own expense: (i) do all things determined by Bank to be desirable to
register such Collateral or qualify for an exemption from registration, under
the provisions of all applicable securities laws, and (ii) otherwise do or cause
to be done all other acts and things as may be necessary to make the sale of the
Collateral valid, binding and in compliance with applicable law.
STOCK, DIVIDENDS. If, with respect to any securities pledged hereunder, a stock
dividend is declared, any stock split made or right to subscribe is issued, all
the certificates for the shares representing such stock dividend, stock split or
right to subscribe will be immediately delivered, duly endorsed, to the Bank as
additional Collateral, and any cash or non-cash proceeds and products thereof,
including investment property and security entitlements will be immediately
delivered to Bank. Debtor acknowledges that such grant includes all investment
property and security entitlements, now existing or hereafter arising, relating
to such securities. In addition, Debtor agrees to execute such notices and
instructions to securities intermediaries as Bank may reasonably request.
VALUE REQUIREMENT. The outstanding balance of the Obligations shall not exceed
at any time 50.00% of the Fair Market Value of the securities pledged to Bank
hereunder. If at any time the outstanding balance of the Obligations exceeds
this percentage, Debtor shall, within 3 business days, either pledge and deliver
additional securities or reduce the outstanding balance of the Obligations so
that the outstanding balance of the Obligations does not exceed the stated
percentage as of the close of business on the day immediately preceding such
delivery or reduction. "Fair Market Value" means the value of the securities
pledged hereunder based on the closing price per unit of any of the investment
property which is a part of the Collateral as quoted or reported in The Wall
Street Journal or, if not available, other customary publication of such
information, plus the amount of any cash or other financial assets comprising
the Collateral. If the Fair Market Value of any securities pledged hereunder
cannot be determined by the foregoing procedure, the Fair Market Value of such
Collateral shall be determined by the Bank by reference to such public
information as may be available.
NO TRADING OF COLLATERAL. Until a Default occurs, Debtor shall have the right to
vote the securities pledged hereunder; provided, however, Debtor may not sell,
transfer, exchange for other property or cash ("Trade") or otherwise exercise
rights with respect to such Collateral without the prior written consent of the
Bank. Any consent pursuant to this paragraph shall be in Bank's sole discretion.
COLLATERAL DUTIES. Bank shall have no custodial or ministerial duties to perform
with respect to Collateral pledged except as set forth herein; and by way of
explanation and not by way of limitation, Bank shall incur no liability for any
of the following: (i) loss or depreciation of Collateral (unless caused by its
willful misconduct or gross negligence), (ii) failure to present any paper for
payment or protest, to protest or give notice of nonpayment, or any other notice
with respect to any paper or Collateral, (iii) failure to ascertain, notify
Debtor of, or take any action in connection with any conversion, call,
redemption, retirement or any other event relating to any of the Collateral, or
failure to notify any party hereto that Collateral should be presented or
surrendered for any such reason. Debtor acknowledges that Bank is not an
investment advisor or insurer with respect to the Collateral; and Bank has no
duty to advise Debtor of any actual or anticipated changes in the value of the
Collateral.
TRANSFER OF COLLATERAL. Bank may assign its rights in Collateral or any part
thereof to any assignee who shall thereupon become vested with all the powers
and rights herein given to Bank with respect to the property so transferred and
delivered, and Bank shall thereafter be forever relieved and fully discharged
from any liability with respect to such property so transferred, but with
respect to any property not so transferred, Bank shall retain all rights and
powers hereby given.
INSPECTION, BOOKS AND RECORDS. Debtor will at all times keep accurate and
complete records covering each item of Collateral, including the proceeds
therefrom. Bank, or any of its agents, shall have the right, at intervals to be
determined by Bank and without hindrance or delay, to inspect, audit, and
examine the Collateral and to make extracts' from the books, records, journals,
orders, receipts, correspondence and other data relating to Collateral, Debtor's
business or any other transaction between the parties hereto. Debtor will at its
expense furnish Bank copies thereof upon request.
CROSS COLLATERALIZATION LIMITATION. As to any other existing or future consumer
purpose loan made by Bank to Debtor, within the meaning of the Federal Consumer
Credit Protection Act, Bank expressly waives any security interest granted
herein in Collateral that Debtor uses as a principal dwelling and household
goods.
ATTORNEYS' FEES AND OTHER COSTS OF COLLECTION. Debtor shall pay all of Bank's
reasonable expenses incurred in enforcing this Security Agreement and in
preserving and liquidating Collateral, including but not limited to, reasonable
arbitration, paralegals', attorneys'and experts'fees and expenses, whether
incurred with or without the commencement of a suit, trial, arbitration, or
administrative proceeding, or in any appellate or bankruptcy proceeding.
DEFAULT. If any of the following occurs, a default ("Default") under this
Security Agreement shall exist: (i) the failure of timely payment or performance
of any of Obligations or a default under any Loan Document; (ii) any breach of
any representation or agreement contained or referred to in this Security
Agreement or other Loan Document; (iii) any loss, theft, substantial damage, or
destruction of Collateral not fully covered by insurance, or as to which
insurance proceeds are not remitted to Bank within 30 days of the loss; (iv) any
sale, lease, or encumbrance of any Collateral not specifically permitted herein
without prior written consent of Bank; (v) the making of any levy, seizure, or
attachment on or of Collateral which is not removed within 10 days; (vi) the
death of, appointment of guardian for, dissolution of, termination of existence
of, loss of good standing status by, appointment of a receiver for, assignment
for the benefit of creditors of, or commencement of any bankruptcy or insolvency
proceeding by or against Debtor, its Subsidiaries or Affiliates ("Affiliate"
shall have the meaning as defined in 11 U.S.C. Section 101; and "Subsidiary"
shall mean any corporation of which more than 50% of the issued and outstanding
voting stock is owned directly or indirectly by Debtor), if any, or any general
partner of or the holder(s) of the majority ownership interests in Debtor or any
party to the Loan Documents; (vii) any default or breach by a Third Party of any
provision contained in any Control Agreement executed in connection with any of
the Collateral; or (viii) any attempt to terminate, revoke, rescind, modify, or
violate the terms of this Security Agreement or any Control Agreement without
the prior written consent of Bank.
REMEDIES ON DEFAULT (INCLUDING POWER OF SALE). If a Default occurs, all of the
Obligations shall be immediately due and payable, without notice and Bank shall
have all the rights and remedies of a secured party under the Uniform Commercial
Code. Without limitation thereto, Bank shall have the following rights and
remedies: (i) to take immediate possession of Collateral, without notice or
resort to legal process, and for such purpose, to enter upon any premises on
which Collateral or any part thereof may, be situated and to remove the same
therefrom, or, at its option, to render Collateral unusable or dispose of said
Collateral on Debtor's premises; (ii) to require Debtor to assemble the
Collateral and make it available to Bank at a place to be designated by Bank;
(iii) to exercise its right of set-off or bank lien as to any monies of Debtor
deposited in accounts of any nature maintained by Debtor with Bank or affiliates
of Bank, without advance notice, regardless of whether such accounts are general
or special; (iv) to dispose of Collateral, as a unit or in parcels, separately
or with any real property interests also securing the Obligations, in any county
or place to be selected by Bank, at either private or public sale (at which
public sale Bank may be the purchaser) with or without having the Collateral
physically present at said sale. In addition to the foregoing, Bank shall be
authorized to: notify Third Party to terminate immediately any trading, other
rights or entitlements with respect to the Collateral and any distributions from
the Collateral; transfer into Bank's name or the name of its nominee, all or any
part of the Collateral; receive all interest, dividends, and other proceeds of
the Collateral; notify any person obligated on any Collateral of the security
interest of Bank therein and require such person to make payment directly to
Bank; demand, xxx for, collect or receive the Collateral and any proceeds
thereof, and/or make any settlement or compromise as Bank deems desirable with
respect to any Collateral; and exercise any voting, conversion, registration,
purchase or other rights of an owner, holder or entitlement holder of the
Collateral. Debtor agrees that Bank may exercise its rights under this Security
Agreement without regard for the actual or potential tax consequences to Debtor
under federal or state law and without regard to any instructions or directives
given Bank by Debtor.
Any notice of sale, disposition or other action by Bank required by law and sent
to Debtor at Debtor's address shown above, or at such other address of Debtor as
may from time to time be shown on the records of Bank, at least 5 days prior to
such action, shall constitute reasonable notice to Debtor. Notice shall be
deemed given or sent when mailed postage prepaid to Debtor's address as provided
herein. Bank shall be entitled to apply the proceeds of any sale or other
disposition of the Collateral, and the payments received by Bank with respect to
any of the Collateral, to Obligations in such order and manner as Bank may
determine. Collateral that is subject to rapid declines in value and is
customarily sold in recognized markets may be disposed of by Bank in a
recognized market for such collateral without providing notice of sale. Debtor
waives any and all requirements that the Bank sell or dispose of all or any part
of the Collateral at any particular time, regardless of whether Debtor has
requested such sale or disposition.
REMEDIES ARE CUMULATIVE. No failure on the part of Bank to exercise, and no
delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by Bank or any right,
power or remedy hereunder preclude any other or further exercise thereof or the
exercise of any right, power or remedy. The remedies herein provided are
cumulative and are not exclusive of any remedies provided by law, in equity, or
in other Loan Documents.
MISCELLANEOUS. (i) Amendments and Waivers. No waiver, amendment or modification
of any provision of this Security Agreement shall be valid unless in writing and
signed by Debtor and an officer of Bank. No waiver by Bank of any Default shall
operate as a waiver of any other Default or of the same Default on a future
occasion. (ii) Assignment. All rights of Bank hereunder are freely assignable,
in whole or in part, and shall inure to the benefit of and be enforceable by
Bank, its successors, assigns and affiliates. Debtor shall not assign its rights
and interest hereunder without the prior written consent of Bank, and any
attempt by Debtor to assign
without Bank's prior written consent is null and void. Any assignment shall not
release Debtor from the Obligations. This Security Agreement shall be binding
upon Debtor, and the heirs, personal representatives, successors, and assigns of
Debtor. (iii) Applicable Law; Conflict Between Documents. This Security
Agreement shall be governed by and construed under the law of the state named in
the address of the Bank first shown above without regard to that state's
conflict of laws principles. If any terms of this Security Agreement conflict
with the terms of any commitment letter or loan proposal, the terms of this
Security Agreement shall control. (iv) Jurisdiction. Debtor irrevocably agrees
to non-exclusive personal jurisdiction in the state in which the office of Bank
as stated above is located. (v) Severability. If any provision of this Security
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective but only to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of this Security Agreement, (vi) Notices. Any notices to Debtor shall be
sufficiently given, if in writing and mailed or delivered to the address of
Debtor shown above or such other address as provided hereunder; and to Bank, if
in writing and mailed or delivered to Bank's office address shown above or such
other address as Bank may specify in writing from time to time. In the event
that Debtor changes Debtor's mailing address at any time prior to the date the
Obligations are paid in full, Debtor agrees to promptly give written notice of
said change of address by registered or certified mail, return receipt
requested, all charges prepaid. (vii) Captions. The captions contained herein
are inserted for convenience only and shall not affect the meaning or
interpretation of this Security Agreement or any provision hereof. The use of
the plural shall also mean the singular, and vice versa. (viii) Joint and
Several Liability. If more than one party has signed this Security Agreement,
such parties are jointly and severally obligated hereunder. (ix) Binding
Contract. Debtor by execution and Bank by acceptance of this Security Agreement,
agree that each party is bound by all terms and provisions of this Security
Agreement. (x) Loan Documents. The term "Loan Documents" refers to all
documents, whether now or hereafter existing, executed in connection with the
Obligations and may include, without limitation and whether executed by Debtor
or others, commitment letters, loan agreements, guaranty agreements,
confirmations, deposit or other similar agreements, other security agreements,
letters of credit, instruments, financing statements, mortgages, deeds of trust,
deeds to secure debt, and any amendments or supplements (excluding swap
agreements as defined in 11 U.S.C. Section 101). (xi) Issuer. The term "Issuer"
means a person who creates a share, participation or other interest in its
property or in an enterprise, or undertakes an obligation that is an
uncertificated security, including a mutual fund, or who directly or indirectly
creates a fractional interest in its rights or property which is represented by
a security certificate. (xii) Securities Intermediary. The term "Securities
Intermediary" means any bank, custodian, broker or other person that in the
ordinary course of its business maintains accounts similar to the Account
described herein or securities accounts for others and is acting in that
capacity. (xiii) Third Party. The term "Third Party" means each and every issuer
or Securities Intermediary having, holding, issuing, or otherwise owing some or
all of the Collateral to the Debtor. Certain terms used herein, including,
"financial asset," "investment property," and 11securities entitlements," shall
have the meanings ascribed thereto in the 1994 revisions to Article 8 and
Article 9 of the Uniform Commercial Code proposed by the American Law Institute
and the National Conference of Commissioners on Uniform State Laws.
ARBITRATION. Upon demand of any party hereto, whether made before or after
institution of any judicial proceeding, any claim or controversy arising out of
or relating to the Loan Documents between parties hereto (a "Dispute") shall be
resolved by binding arbitration conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association (the "AAN') and the Federal Arbitration Act. Disputes
may include, without limitation, tort claims, counterclaims, a dispute as to
whether a matter is subject to arbitration, claims brought as class actions, or
claims arising from documents executed in the future. A judgment upon the award
may be entered in any court having jurisdiction. Notwithstanding the foregoing,
this arbitration provision does not apply to disputes under or related to swap
agreements. Special Rules. All arbitration hearings shall be conducted in the
city named in the address of Bank
first stated above. A hearing shall begin within 90 days of demand for
arbitration and all hearings shall conclude within 120 days of demand for
arbitration. These time limitations may not be extended unless a party shows
cause for extension and then for no more than a total of 60 days. The expedited
procedures set forth in Rule 51 et seq. of the Arbitration Rules shall be
applicable to claims of less than $1,000,000.00. Arbitrators shall be licensed
attorneys selected from the Commercial Financial Dispute Arbitration Panel of
the AAA. The parties do not Waive applicable Federal or state substantive law
except as provided herein. Preservation and Limitation of Remedies.
Notwithstanding the preceding binding arbitration provisions, the parties agree
to preserve, without diminution, certain remedies that any party may exercise
before or after an arbitration proceeding is brought. The parties shall have the
right to proceed in any court of proper jurisdiction or by self-help to exercise
or prosecute the following remedies, as applicable: (i) all rights to foreclose
against any real or personal property or other security by exercising a power of
sale or under applicable law by judicial foreclosure including a proceeding to
confirm the sale; (ii) all rights of self-help including peaceful occupation of
real property and collection of rents, set-off, and peaceful possession of
personal property; (iii) obtaining provisional or ancillary remedies including
injunctive relief, sequestration, garnishment, attachment, appointment of
receiver and filing an involuntary bankruptcy proceeding; and (iv) when
applicable, a judgment by confession of judgment. Any claim or controversy with
regard to any party's entitlement to such remedies is a Dispute. Waiver of
Exemplary Damages. The parties agree that they shall not have a remedy of
punitive or exemplary damages against other parties in any 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. Waiver of Jury Trial. THE PARTIES
ACKNOWLEDGE THAT BY AGREEING TO BINDING ARBITRATION THEY HAVE IRREVOCABLY WAIVED
ANY RIGHT THEY MAY HAVE TO JURY TRIAL WITH REGARD TO A DISPUTE.
IN WITNESS WHEREOF, Debtor, on the day and year first written above, has caused
this Security Agreement to be executed under seal.
XXXXX Corporation
Taxpayer Identification Number: 00-0000000
CORPORATE
SEAL By: /s/ Xxxx X. Xxxxxx 4/30/99
-------------------------------------------
Xxxx X. Xxxxxx, Vice President
