EXHIBIT 10.26
SUBSIDIARY SECURITY AGREEMENT
This SUBSIDIARY SECURITY AGREEMENT (this "AGREEMENT") is dated as of
October 23, 1997 and entered into by and between [INSERT NAME OF GRANTOR IN
CAPS], a _____________________ corporation ("GRANTOR"), and FIRST UNION NATIONAL
BANK, as administrative agent for and representative of (in such capacity herein
called "SECURED PARTY") the financial institutions ("LENDERS") party to the
Credit Agreement referred to below and any Interest Rate Exchangers (as
hereinafter defined).
PRELIMINARY STATEMENTS
A. Secured Party, Syndication Agent and Lenders have entered into a
Credit Agreement dated as of October 23, 1997 (said Credit Agreement, as it may
hereafter be amended, supplemented or otherwise modified from time to time,
being the "CREDIT AGREEMENT", the terms defined therein and not otherwise
defined herein being used herein as therein defined) with The Pantry, Inc.,
Delaware corporation ("COMPANY"), pursuant to which Lenders have made certain
commitments, subject to the terms and conditions set forth in the Credit
Agreement, to extend certain credit facilities to Company.
B. Company may from time to time enter, or may from time to time have
entered, into one or more Interest Rate Agreements (collectively, the "LENDER
INTEREST RATE AGREEMENTS") with one or more Lenders (in such capacity,
collectively, "INTEREST RATE EXCHANGERS").
C. Grantor has executed and delivered that certain Subsidiary
Guaranty dated as of October 23, 1997 (said Subsidiary Guaranty, as it may
hereafter be amended, supplemented or otherwise modified from time to time,
being the "GUARANTY") in favor of Secured Party for the benefit of Lenders and
any Interest Rate Exchangers, pursuant to which Grantor has guarantied the
prompt payment and performance when due of all obligations of Company under the
Credit Agreement and the other Loan Documents and all obligations of Company
under the Lender Interest Rate Agreements, including the obligation of Company
to make payments thereunder in the event of early termination thereof.
D. It is a condition precedent to the initial extensions of credit by
Lenders under the Credit Agreement that Grantor shall have granted the security
interests and undertaken the obligations contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
Lenders to make Loans and other extensions of credit under the Credit Agreement
and to induce Interest Rate
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Exchangers to enter into the Lender Interest Rate Agreements, and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Grantor hereby agrees with Secured Party as follows:
SECTION 1. GRANT OF SECURITY. Grantor hereby grants to Secured Party
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a security interest in, all of Grantor's right, title and interest in and to the
following, in each case whether now or hereafter existing or in which Grantor
now has or hereafter acquires an interest and wherever the same may be located
(the "COLLATERAL"):
(a) all equipment in all of its forms, all parts thereof and all
accessions thereto (any and all such equipment, parts and accessions being the
"EQUIPMENT");
(b) all inventory in all of its forms (including (i) all goods held by
Grantor for sale or lease or to be furnished under contracts of service or so
leased or furnished, (ii) all raw materials, work in process, finished goods,
and materials used or consumed in the manufacture, packing, shipping,
advertising, selling, leasing, furnishing or production of such inventory or
otherwise used or consumed in Grantor's business, (iii) all goods in which
Grantor has an interest in mass or a joint or other interest or right of any
kind, (iv) all goods which are returned to or repossessed by Grantor, and (v)
all accessions thereto and products thereof (all such inventory, accessions and
products being the "INVENTORY") and all negotiable documents of title (including
warehouse receipts, dock receipts and bills of lading) issued by any Person
covering any Inventory (any such negotiable document of title being a
"NEGOTIABLE DOCUMENT OF TITLE");
(c) all accounts, contract rights, chattel paper, documents,
instruments, general intangibles and other rights and obligations of any kind
and all rights in, to and under all security agreements, leases and other
contracts securing or otherwise relating to any such accounts, contract rights,
chattel paper, documents, instruments, general intangibles or other obligations
(any and all such accounts, contract rights, chattel paper, documents,
instruments, general intangibles and other obligations being the "ACCOUNTS", and
any and all such security agreements, leases and other contracts being the
"RELATED CONTRACTS");
(d) the agreements listed in Part A of Schedule II annexed hereto, as
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each such agreement may be amended, supplemented or otherwise modified from time
to time (said agreements, as so amended, supplemented or otherwise modified,
being referred to herein individually as an "ASSIGNED AGREEMENT" and
collectively as the "ASSIGNED AGREEMENTS"), including (i) all rights of Grantor
to receive moneys due or to become due under or pursuant to the Assigned
Agreements, (ii) all rights of Grantor to receive proceeds of any insurance,
indemnity, warranty or guaranty with respect to the Assigned Agreements, (iii)
all
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claims of Grantor for damages arising out of any breach of or default under the
Assigned Agreements, and (iv) all rights of Grantor to terminate, amend,
supplement, modify or exercise rights or options under the Assigned Agreements,
to perform thereunder and to compel performance and otherwise exercise all
remedies thereunder;
(e) all deposit accounts, including the deposit accounts listed in Part
B of Schedule II annexed hereto and all other deposit accounts maintained with
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Secured Party;
(f) all trademarks, tradenames, tradesecrets, business names, patents,
patent applications, licenses, copyrights, registrations and franchise rights,
and all goodwill associated with any of the foregoing;
(g) to the extent not included in any other paragraph of this Section
1, all other general intangibles (including tax refunds, rights to payment or
performance, choses in action and judgments taken on any rights or claims
included in the Collateral);
(h) all plant fixtures, business fixtures and other fixtures and
storage and office facilities, and all accessions thereto and products thereof;
(i) all books, records, ledger cards, files, correspondence, computer
programs, tapes, disks and related data processing software that at any time
evidence or contain information relating to any of the Collateral or are
otherwise necessary or helpful in the collection thereof or realization
thereupon; and
(j) all proceeds, products, rents and profits of or from any and all of
the foregoing Collateral and, to the extent not otherwise included, all payments
under insurance (whether or not Secured Party is the loss payee thereof), or any
indemnity, warranty or guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing Collateral. For purposes of this
Agreement, the term "PROCEEDS" includes whatever is receivable or received when
Collateral or proceeds are sold, exchanged, collected or otherwise disposed of,
whether such disposition is voluntary or involuntary.
Notwithstanding the foregoing, nothing in this Section 1 or otherwise
in this Agreement shall constitute a grant by Grantor of a security interest in
any contract, document, instrument, general intangible, lease, license or other
right of any kind to the extent such a grant of a security interest would, after
giving effect to the provisions of subsection 9-318 of the Uniform Commercial
Code for the relevant jurisdiction, constitute a breach or violation of any term
thereof.
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures, and the
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Collateral is collateral security for, the
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prompt payment or performance in full when due, whether at stated maturity, by
required prepayment, declaration, acceleration, demand or otherwise (including
the payment of amounts that would become due but for the operation of the
automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C.
(S)362(a)), of all obligations and liabilities of every nature of Grantor now or
hereafter existing under or arising out of or in connection with the Guaranty
and all extensions or renewals thereof, whether for principal, interest
(including interest that, but for the filing of a petition in bankruptcy with
respect to Company, would accrue on such obligations, whether or not a claim is
allowed against Company for such interest in the related bankruptcy proceeding),
reimbursement of amounts drawn under Letters of Credit, payments for early
termination of Lender Interest Rate Agreements, fees, expenses, indemnities or
otherwise, whether voluntary or involuntary, direct or indirect, absolute or
contingent, liquidated or unliquidated, whether or not jointly owed with others,
and whether or not from time to time decreased or extinguished and later
increased, created or incurred, and all or any portion of such obligations or
liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Secured Party, Syndication
Agent or any Lender or Interest Rate Exchanger as a preference, fraudulent
transfer or otherwise and all obligations of every nature of Grantor now or
hereafter existing under this Agreement (all such obligations of Grantor being
the "SECURED OBLIGATIONS").
SECTION 3. GRANTOR REMAINS LIABLE. Anything contained herein to the
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contrary notwithstanding, (a) Grantor shall remain liable under any contracts
and agreements included in the Collateral, to the extent set forth therein, to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by Secured Party of any
of its rights hereunder shall not release Grantor from any of its duties or
obligations under the contracts and agreements included in the Collateral, and
(c) Secured Party shall not have any obligation or liability under any contracts
and agreements included in the Collateral by reason of this Agreement, nor shall
Secured Party be obligated to perform any of the obligations or duties of
Grantor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Grantor represents and
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warrants as follows:
(a) Ownership of Collateral. Except for the security interest created
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by this Agreement or any other Collateral Documents, Grantor owns the Collateral
free and clear of any Lien except for Permitted Encumbrances and Liens permitted
under subsection 7.2A(iv) and (v) of the Credit Agreement (with regard to the
Liens permitted under sections 7.2A(iv) and (v) of the Credit Agreement, only to
the extent such Liens relate to the specific property subject to such Liens).
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(b) Location of Equipment and Inventory. All of the Equipment and
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Inventory is, as of the date hereof, located in one of the states (and counties
thereof) specified in Schedule I annexed hereto.
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(c) Negotiable Documents of Title. No Negotiable Documents of Title
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are outstanding with respect to any of the Inventory (other than in respect of
(i) Inventory with an aggregate value not in excess of $500,000 or (ii)
Inventory which, in the ordinary course of business, is in transit either (A)
from a supplier to Grantor, (B) between Grantor's retail locations, or (C) to
customers of Grantor).
(d) Office Locations; Other Names. The chief place of business, the
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chief executive office and the office where Grantor keeps its records regarding
the Accounts and all originals of all chattel paper that evidence Accounts is,
and has been for the four month period preceding the date hereof, located at the
location(s) specified in Schedule I. Grantor has not in the past five years
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done, and does not now do, business under any other name (including any trade-
name or fictitious business name), except as described in Schedule I.
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(e) Delivery of Certain Collateral. All notes and other instruments
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(excluding checks) comprising any and all items of Collateral have been
delivered to Secured Party duly endorsed and accompanied by duly executed
instruments of transfer or assignment in blank.
SECTION 5. FURTHER ASSURANCES.
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(a) Grantor agrees that from time to time, at the expense of Grantor,
Grantor will promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary or desirable, or that Secured
Party may request, in order to perfect and protect any security interest granted
or purported to be granted hereby or to enable Secured Party to exercise and
enforce its rights and remedies hereunder with respect to any Collateral.
Without limiting the generality of the foregoing, Grantor will: (i) xxxx
conspicuously each item of chattel paper included in the Accounts, each Related
Contract and, at the request of Secured Party, each of its records pertaining to
the Collateral, with a legend, in form and substance satisfactory to Secured
Party, indicating that such Collateral is subject to the security interest
granted hereby, (ii) at the request of Secured Party, deliver and pledge to
Secured Party hereunder all promissory notes and other instruments (including
checks) and all original counterparts of chattel paper constituting Collateral,
duly endorsed and accompanied by duly executed instruments of transfer or
assignment, all in form and substance satisfactory to Secured Party, (iii)
execute and file such financing or continuation statements, or amendments
thereto, and such other instruments or notices, as may be necessary or
desirable, or as Secured Party may request, in order to perfect and preserve the
security
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interests granted or purported to be granted hereby, (iv) upon the request of
Secured Party, promptly after the acquisition by Grantor of any item of
Equipment which is covered by a certificate of title under a statute of any
jurisdiction under the law of which indication of a security interest on such
certificate is required as a condition of perfection thereof, execute and file
with the registrar of motor vehicles or other appropriate authority in such
jurisdiction an application or other document requesting the notation or other
indication of the security interest created hereunder on such certificate of
title, (v) upon the request of Secured Party within 30 days after the end of
each calendar quarter, deliver to Administrative Agent copies of all such
applications or other documents filed during such calendar quarter and copies of
all such certificates of title issued during such calendar quarter indicating
the security interest created hereunder in the items of Equipment covered
thereby, (vi) at any reasonable time, upon request by Secured Party, exhibit the
Collateral to and allow inspection of the Collateral by Secured Party, or
persons designated by Secured Party, and (vii) at Secured Party's request,
appear in and defend any action or proceeding that may affect Grantor's title to
or Secured Party's security interest in all or any part of the Collateral.
(b) Grantor hereby authorizes Secured Party to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of Grantor. Grantor agrees
that a carbon, photographic or other reproduction of this Agreement or of a
financing statement signed by Grantor shall be sufficient as a financing
statement and may be filed as a financing statement in any and all
jurisdictions.
(c) Grantor will furnish to Secured Party from time to time statements
and schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Secured Party may reasonably
request, all in reasonable detail.
SECTION 6. CERTAIN COVENANTS OF GRANTOR. Grantor shall:
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(a) not use or permit any Collateral to be used unlawfully or in
violation of any provision of this Agreement or any applicable statute,
regulation or ordinance or any policy of insurance covering the Collateral;
(b) notify Secured Party of any change in Grantor's name, identity or
corporate structure within 15 days of such change;
(c) give Secured Party 30 days' prior written notice of any change in
Grantor's chief place of business, chief executive office or residence or the
office where Grantor keeps
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its records regarding the Accounts and all originals of all chattel paper that
evidence Accounts;
(d) if Secured Party gives value to enable Grantor to acquire rights in
or the use of any Collateral, use such value for such purposes; and
(e) pay promptly when due all property and other taxes, assessments and
governmental charges or levies imposed upon, and all claims (including claims
for labor, materials and supplies) against, the Collateral, except to the extent
the validity thereof is being contested in good faith; provided that Grantor
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shall in any event pay such taxes, assessments, charges, levies or claims not
later than five days prior to the date of any proposed sale under any judgement,
writ or warrant of attachment entered or filed against Grantor or any of the
Collateral as a result of the failure to make such payment.
SECTION 7. SPECIAL COVENANTS WITH RESPECT TO EQUIPMENT AND INVENTORY.
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Grantor shall:
(a) keep the Equipment and Inventory in the jurisdictions specified on
Schedule I annexed hereto or, upon 30 days' prior written notice to Secured
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Party, at such other places in jurisdictions where all action that may be
necessary in order to perfect and protect any security interest granted or
purported to be granted hereby, or to enable Secured Party to exercise and
enforce its rights and remedies hereunder, with respect to such Equipment and
Inventory shall have been taken;
(b) cause the Equipment to be maintained and preserved in the same
condition, repair and working order as when new, ordinary wear and tear
excepted, and in accordance with Grantor's past practices. Grantor shall
promptly furnish to Secured Party a statement respecting any material loss or
damage to any of the Equipment;
(c) keep correct and accurate records of the Inventory, itemizing and
describing the kind, type and quantity of Inventory, Grantor's cost therefor and
(where applicable) the current list prices for the Inventory;
(d) if any Inventory is in possession or control of any of Grantor's
agents or processors, if the aggregate book value of all such Inventory exceeds
$500,000, and in any event upon the occurrence of an Event of Default (as
defined in the Credit Agreement), instruct such agent or processor to hold all
such Inventory for the account of Secured Party and subject to the instructions
of Secured Party; and
(e) promptly upon the issuance and delivery to Grantor of any
Negotiable Document of Title (other than any one or more Negotiable Documents of
Title covering (i) Inventory with an aggregate value not in excess of $500,000
or (ii) Inventory which, in the ordinary course of business, is in transit
either
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(A) from a supplier to Grantor, (B) between Grantor's retail locations, or (C)
to customers of Grantor), deliver such Negotiable Document of Title to Secured
Party.
SECTION 8. INSURANCE. Grantor shall, at its own expense, maintain
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insurance with respect to the Equipment and Inventory in accordance with the
terms of the Credit Agreement.
SECTION 9. SPECIAL COVENANTS WITH RESPECT TO ACCOUNTS AND RELATED
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CONTRACTS.
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(a) Grantor shall keep its chief place of business and chief executive
office and the office where it keeps its records concerning the Accounts and
Related Contracts, and all originals of all chattel paper that evidence
Accounts, at the location therefor specified in Section 4 or, upon 30 days'
prior written notice to Secured Party, at such other location in a jurisdiction
where all action that may be necessary or desirable, or that Secured Party may
request, in order to perfect and protect any security interest granted or
purported to be granted hereby, or to enable Secured Party to exercise and
enforce its rights and remedies hereunder, with respect to such Accounts and
Related Contracts shall have been taken. Grantor will hold and preserve such
records and chattel paper and will permit representatives of Secured Party at
any time during normal business hours to inspect and make abstracts from such
records and chattel paper, and Grantor agrees to render to Secured Party, at
Grantor's cost and expense, such clerical and other assistance as may be
reasonably requested with regard thereto. Promptly upon the request of Secured
Party, Grantor shall deliver to Secured Party complete and correct copies of
each Related Contract.
(b) Grantor shall, for not less than 5 years from the date on which
such Account arose, maintain (i) complete records of each Account, including
records of all payments received, credits granted and merchandise returned, and
(ii) all documentation relating thereto.
(c) Except as otherwise provided in this subsection (c), Grantor shall
continue to collect, at its own expense, all amounts due or to become due to
Grantor under the Accounts and Related Contracts. In connection with such
collections, Grantor may take (and, at Secured Party's direction, shall take)
such action as Grantor or Secured Party may deem necessary or advisable to
enforce collection of amounts due or to become due under the Accounts; provided,
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however, that Secured Party shall have the right at any time, upon the
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occurrence and during the continuation of an Event of Default and upon written
notice to Grantor of its intention to do so, to notify the account debtors or
obligors under any Accounts of the assignment of such Accounts to Secured Party
and to direct such account debtors or obligors to make payment of all amounts
due or to become due to Grantor thereunder directly to Secured Party, to notify
each Person maintaining a lockbox or similar arrangement to which account
debtors or obligors under any Accounts have been
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directed to make payment to remit all amounts representing collections on checks
and other payment items from time to time sent to or deposited in such lockbox
or other arrangement directly to Secured Party and, upon such notification and
at the expense of Grantor, to enforce collection of any such Accounts and to
adjust, settle or compromise the amount or payment thereof, in the same manner
and to the same extent as Grantor might have done. After receipt by Grantor of
the notice from Secured Party referred to in the proviso to the preceding
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sentence, (i) all amounts and proceeds (including checks and other instruments)
received by Grantor in respect of the Accounts and the Related Contracts shall
be received in trust for the benefit of Secured Party hereunder, shall be
segregated from other funds of Grantor and shall be forthwith paid over or
delivered to Secured Party in the same form as so received (with any necessary
endorsement) to be held as cash Collateral and applied as provided by Section
18, and (ii) Grantor shall not adjust, settle or compromise the amount or
payment of any Account, or release wholly or partly any account debtor or
obligor thereof, or allow any credit or discount thereon.
SECTION 10. SPECIAL PROVISIONS WITH RESPECT TO THE ASSIGNED
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AGREEMENTS.
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(a) Grantor shall at its expense:
(i) perform and observe all terms and provisions of the Assigned
Agreements to be performed or observed by it, maintain the Assigned
Agreements in full force and effect, enforce the Assigned Agreements in
accordance with their terms, and take all such action to such end as may be
from time to time requested by Secured Party; and
(ii) furnish to Secured Party, promptly upon receipt thereof,
copies of all notices, requests and other documents received by Grantor
under or pursuant to the Assigned Agreements, and from time to time (A)
furnish to Secured Party such information and reports regarding the Assigned
Agreements as Secured Party may reasonably request and (B) upon request of
Secured Party make such demands and requests for information and reports or
for action as Grantor is entitled to make under the Assigned Agreements.
(b) Grantor shall not:
(i) cancel or terminate any of the Assigned Agreements or consent
to or accept any cancellation or termination thereof;
(ii) amend or otherwise modify the Assigned Agreements or give any
consent, waiver or approval thereunder;
(iii) waive any default under or breach of the Assigned
Agreements;
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(iv) consent to or permit or accept any prepayment of amounts to become
due under or in connection with the Assigned Agreements, except as expressly
provided therein; or
(v) take any other action in connection with the Assigned Agreements
that would impair the value of the interest or rights of Grantor thereunder
or that would impair the interest or rights of Secured Party.
SECTION 11. DEPOSIT ACCOUNTS. Upon the occurrence and during the
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continuation of an Event of Default, Secured Party may exercise dominion and
control over, and refuse to permit further withdrawals (whether of money,
securities, instruments or other property) from any deposit accounts maintained
with Secured Party constituting part of the Collateral.
SECTION 12. LICENSE OF PATENTS, TRADEMARKS, COPYRIGHTS, ETC. Grantor
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hereby assigns, transfers and conveys to Secured Party, effective upon the
occurrence of any Event of Default, the nonexclusive right and license to use
all trademarks, tradenames, copyrights, patents or technical processes owned or
used by Grantor that relate to the Collateral and any other collateral granted
by Grantor as security for the Secured Obligations, together with any goodwill
associated therewith, all to the extent necessary to enable Secured Party to
use, possess and realize on the Collateral and to enable any successor or assign
to enjoy the benefits of the Collateral. This right and license shall inure to
the benefit of all successors, assigns and transferees of Secured Party and its
successors, assigns and transferees, whether by voluntary conveyance, operation
of law, assignment, transfer, foreclosure, deed in lieu of foreclosure or
otherwise. Such right and license is granted free of charge, without
requirement that any monetary payment whatsoever be made to Grantor.
SECTION 13. TRANSFERS AND OTHER LIENS. Grantor shall not:
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(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except as permitted by the Credit Agreement;
provided that in the event Grantor makes an Asset Sale or sale and lease-back
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transaction permitted by the Credit Agreement and the assets subject to such
Asset Sale or sale and lease-back transaction constitute Collateral, Secured
Party shall release the Collateral that is the subject of such Asset Sale to
Grantor free and clear of any Lien and security interest under this Agreement or
any other Collateral Document concurrently with the consummation of such Asset
Sale or sale and lease-back transaction; provided, further that, as a condition
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precedent to such release, Secured Party shall have received evidence
satisfactory to it that arrangements satisfactory to it have been made for
delivery to Secured Party of that amount of Net Asset Sale Proceeds required to
be delivered to Secured Party under the Credit Agreement; or
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(b) except for the security interest created by this Agreement, create
or suffer to exist any Lien upon or with respect to any of the Collateral to
secure the indebtedness or other obligations of any Person, except as otherwise
permitted under subsections 7.2A(iv) and (v) of the Credit Agreement (with
regard to the Liens permitted under subsections 7.2A(iv) and (v) of the Credit
Agreement, only to the extent such Liens relate to the specific property subject
to such Liens). If Grantor proposes to obtain financing permitted under Section
7.1(iii) of the Credit Agreement with respect to any asset acquired after the
Closing Date ("PERMITTED CAPEX FINANCING"), Secured Party will either (a) with
respect to such asset, subordinate the Lien and security interest created
hereunder to the Lien securing such Permitted CapEx Financing by a subordination
agreement reasonably acceptable to Secured Party and the provider thereof or (b)
if Grantor has not been able, after reasonable effort, to get the provider of
such Permitted CapEx Financing to agree to subordination, Secured Party will
release the Lien and security interest granted hereunder in such asset.
SECTION 14. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Grantor hereby
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irrevocably appoints Secured Party as Grantor's attorney-in-fact, with full
authority in the place and stead of Grantor and in the name of Grantor, Secured
Party or otherwise, from time to time in Secured Party's discretion, upon the
occurrence and during the continuation of an Event of Default or Potential Event
of Default, to take any action and to execute any instrument that Secured Party
may deem necessary or advisable to accomplish the purposes of this Agreement,
including:
(a) to obtain and adjust insurance required to be maintained by Grantor
or paid to Secured Party pursuant to Section 8;
(b) to ask for, demand, collect, xxx for, recover, compound, receive
and give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(c) to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection with clauses (a) and (b) above;
(d) to file any claims or take any action or institute any proceedings
that Secured Party may deem necessary or desirable for the collection of any of
the Collateral or otherwise to enforce the rights of Secured Party with respect
to any of the Collateral;
(e) to pay or discharge taxes or Liens (other than Liens permitted
under this Agreement or the Credit Agreement) levied or placed upon or
threatened against the Collateral, the legality or validity thereof and the
amounts necessary to discharge the same to be determined by Secured Party in its
sole discretion, any such payments made by Secured Party to become
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obligations of Grantor to Secured Party, due and payable immediately without
demand;
(f) to sign and endorse any invoices, freight or express bills, bills
of lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with Accounts and other documents
relating to the Collateral; and
(g) upon the occurrence and during the continuation of an Event of
Default, generally to sell, transfer, pledge, make any agreement with respect to
or otherwise deal with any of the Collateral as fully and completely as though
Secured Party were the absolute owner thereof for all purposes, and to do, at
Secured Party's option and Grantor's expense, at any time or from time to time,
all acts and things that Secured Party deems necessary to protect, preserve or
realize upon the Collateral and Secured Party's security interest therein in
order to effect the intent of this Agreement, all as fully and effectively as
Grantor might do.
SECTION 15. SECURED PARTY MAY PERFORM. If Grantor fails to perform
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any agreement contained herein within the period provided herein, upon
reasonable notice, Secured Party may itself perform, or cause performance of,
such agreement, and the expenses of Secured Party incurred in connection
therewith shall be payable by Grantor under Section 19.
SECTION 16. STANDARD OF CARE. The powers conferred on Secured Party
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hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the exercise of
reasonable care in the custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, Secured Party shall
have no duty as to any Collateral or as to the taking of any necessary steps to
preserve rights against prior parties or any other rights pertaining to any
Collateral. Secured Party shall be deemed to have exercised reasonable care in
the custody and preservation of Collateral in its possession if such Collateral
is accorded treatment substantially equal to that which Secured Party accords
its own property.
SECTION 17. REMEDIES. If any Event of Default shall have occurred and
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be continuing, Secured Party may exercise in respect of the Collateral, in
addition to all other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default under
the Uniform Commercial Code as in effect in any relevant jurisdiction (the
"CODE") (whether or not the Code applies to the affected Collateral), and also
may (a) require Grantor to, and Grantor hereby agrees that it will at its
expense and upon request of Secured Party forthwith, assemble all or part of the
Collateral as directed by Secured Party and make it available to Secured Party
at a place to be designated by Secured Party that is reasonably convenient to
both parties, (b) enter onto the
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property where any Collateral is located and take possession thereof with or
without judicial process, (c) prior to the disposition of the Collateral, store,
process, repair or recondition the Collateral or otherwise prepare the
Collateral for disposition in any manner to the extent Secured Party deems
appropriate, (d) take possession of Grantor's premises or place custodians in
exclusive control thereof, remain on such premises and use the same and any of
Grantor's equipment for the purpose of completing any work in process, taking
any actions described in the preceding clause (c) and collecting any Secured
Obligation, and (e) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any of Secured Party's offices or elsewhere, for cash, on credit or for
future delivery, at such time or times and at such price or prices and upon such
other terms as Secured Party may deem commercially reasonable. Secured Party or
any Lender or Interest Rate Exchanger may be the purchaser of any or all of the
Collateral at any such public sale and, to the extent permitted by law, private
sale, and Secured Party, as agent for and representative of Lenders and Interest
Rate Exchangers (but not any Lender or Lenders or Interest Rate Exchanger or
Interest Rate Exchangers in its or their respective individual capacities unless
Requisite Obligees (as defined in Section 21(a)) shall otherwise agree in
writing), shall be entitled, for the purpose of bidding and making settlement or
payment of the purchase price for all or any portion of the Collateral sold at
any such public sale, to use and apply any of the Secured Obligations as a
credit on account of the purchase price for any Collateral payable by Secured
Party at such sale. Each purchaser at any such sale shall hold the property
sold absolutely free from any claim or right on the part of Grantor, and Grantor
hereby waives (to the extent permitted by applicable law) all rights of
redemption, stay and/or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
Grantor agrees that, to the extent notice of sale shall be required by law, at
least ten days' notice to Grantor of the time and place of any public sale or
the time after which any private sale is to be made shall constitute reasonable
notification. Secured Party shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. Secured Party may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned. Grantor hereby waives any
claims against Secured Party arising by reason of the fact that the price at
which any Collateral may have been sold at such a private sale was less than the
price which might have been obtained at a public sale, even if Secured Party
accepts the first offer received and does not offer such Collateral to more than
one offeree. If the proceeds of any sale or other disposition of the Collateral
are insufficient to pay all the Secured Obligations, Grantor shall be liable for
the deficiency and the fees of any attorneys employed by Secured Party to
collect such deficiency.
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SECTION 18. APPLICATION OF PROCEEDS. Except as expressly provided
-----------------------
elsewhere in this Agreement, all proceeds received by Secured Party in respect
of any sale of, collection from, or other realization upon all or any part of
the Collateral shall be applied as provided in subsection 2.4D of the Credit
Agreement.
SECTION 19. INDEMNITY AND EXPENSES.
----------------------
(a) Grantor agrees to indemnify Secured Party, Syndication Agent, each
Lender and each Interest Rate Exchanger from and against any and all claims,
losses and liabilities in any way relating to, growing out of or resulting from
this Agreement and the transactions contemplated hereby (including enforcement
of this Agreement), except to the extent such claims, losses or liabilities
result solely from Secured Party's, Syndication Agent's or such Lender's or
Interest Rate Exchanger's gross negligence or willful misconduct as finally
determined by a court of competent jurisdiction.
(b) Grantor shall pay to Secured Party upon demand the amount of any
and all costs and expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, that Secured Party may incur in
connection with (i) the administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of Secured Party hereunder, or (iv) the failure by Grantor to
perform or observe any of the provisions hereof.
SECTION 20. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS. This
-----------------------------------------------
Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until the payment in full of the
Secured Obligations, the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, (b) be binding
upon Grantor, its successors and assigns, and (c) inure, together with the
rights and remedies of Secured Party hereunder, to the benefit of Secured Party
and its successors, transferees and assigns. Without limiting the generality of
the foregoing clause (c), but subject to the provisions of subsection 10.1 of
the Credit Agreement, any Lender may assign or otherwise transfer any Loans held
by it to any other Person, and such other Person shall thereupon become vested
with all the benefits in respect thereof granted to Lenders herein or otherwise.
Upon the payment in full of all Secured Obligations, the cancellation or
termination of the Commitments and the cancellation or expiration of all
outstanding Letters of Credit, the security interest granted hereby shall
terminate and all rights to the Collateral shall revert to Grantor. Upon any
such termination Secured Party will, at Grantor's expense, execute and deliver
to Grantor such documents as Grantor shall reasonably request to evidence such
termination.
14
SECTION 21. SECURED PARTY AS ADMINISTRATIVE AGENT.
-------------------------------------
(a) Secured Party has been appointed to act as Secured Party hereunder
by Lenders and, by their acceptance of the benefits hereof, Interest Rate
Exchangers. Secured Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including
the release or substitution of Collateral), solely in accordance with this
Agreement and the Credit Agreement; provided that Secured Party shall exercise,
--------
or refrain from exercising, any remedies provided for in Section 17 in
accordance with the instructions of (i) Requisite Lenders or (ii) after payment
in full of all Obligations under the Credit Agreement and the other Loan
Documents, the holders of a majority of the aggregate notional amount (or, with
respect to any Lender Interest Rate Agreement that has been terminated in
accordance with its terms, the amount then due and payable (exclusive of
expenses and similar payments but including any early termination payments then
due) under such Lender Interest Rate Agreement) under all Lender Interest Rate
Agreements (Requisite Lenders or, if applicable, such holders being referred to
herein as "REQUISITE OBLIGEES"). In furtherance of the foregoing provisions of
this Section 21(a), each Interest Rate Exchanger, by its acceptance of the
benefits hereof, agrees that it shall have no right individually to realize upon
any of the Collateral hereunder, it being understood and agreed by such Interest
Rate Exchanger that all rights and remedies hereunder may be exercised solely by
Secured Party for the benefit of Lenders and Interest Rate Exchangers in
accordance with the terms of this Section 21(a).
(b) Secured Party shall at all times be the same Person that is
Administrative Agent under the Credit Agreement. Written notice of resignation
by Administrative Agent pursuant to subsection 9.5 of the Credit Agreement shall
also constitute notice of resignation as Secured Party under this Agreement;
removal of Administrative Agent pursuant to subsection 9.5 of the Credit
Agreement shall also constitute removal as Secured Party under this Agreement;
and appointment of a successor Administrative Agent pursuant to subsection 9.5
of the Credit Agreement shall also constitute appointment of a successor Secured
Party under this Agreement. Upon the acceptance of any appointment as
Administrative Agent under subsection 9.5 of the Credit Agreement by a successor
Administrative Agent, that successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring or removed Secured Party under this Agreement, and the retiring
or removed Secured Party under this Agreement shall promptly (i) transfer to
such successor Secured Party all sums, securities and other items of Collateral
held hereunder, together with all records and other documents necessary or
appropriate in connection with the performance of the duties of the successor
Secured Party under this Agreement, and (ii) execute and deliver to such
successor Secured Party such amendments to financing statements, and take such
other actions,
15
as may be necessary or appropriate in connection with the assignment to such
successor Secured Party of the security interests created hereunder, whereupon
such retiring or removed Secured Party shall be discharged from its duties and
obligations under this Agreement. After any retiring or removed Administrative
Agent's resignation or removal hereunder as Secured Party, the provisions of
this Agreement shall inure to its benefit as to any actions taken or omitted to
be taken by it under this Agreement while it was Secured Party hereunder.
SECTION 22. AMENDMENTS; ETC. No amendment, modification, termination
---------------
or waiver of any provision of this Agreement, and no consent to any departure by
Grantor therefrom, shall in any event be effective unless the same shall be in
writing and signed by Secured Party and, in the case of any such amendment or
modification, by Grantor. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
SECTION 23. NOTICES. Any notice or other communication herein
-------
required or permitted to be given shall be in writing and may be personally
served, telexed or sent by telefacsimile or United States mail or courier
service and shall be deemed to have been given when delivered in person or by
courier service, upon receipt of telefacsimile or telex, or three Business Days
after depositing it in the United States mail with postage prepaid and properly
addressed. For the purposes hereof, the address of each party hereto shall be
as set forth under such party's name on the signature pages hereof or, as to
either party, such other address as shall be designated by such party in a
written notice delivered to the other party hereto.
SECTION 24. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
-----------------------------------------------------
failure or delay on the part of Secured Party in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude any
other or further exercise thereof or of any other power, right or privilege.
All rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 25. SEVERABILITY. In case any provision in or obligation
------------
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 26. HEADINGS. Section and subsection headings in this
--------
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
16
SECTION 27. GOVERNING LAW; TERMS; RULES OF CONSTRUCTION. THIS
-------------------------------------------
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES, EXCEPT TO THE EXTENT THAT THE CODE PROVIDES THAT THE PERFECTION OF
THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK. Unless otherwise defined herein or in the Credit Agreement,
terms used in Articles 8 and 9 of the Uniform Commercial Code in the State of
New York are used herein as therein defined. The rules of construction set
forth in subsection 1.3 of the Credit Agreement shall be applicable to this
Agreement mutatis mutandis.
SECTION 28. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL
----------------------------------------------
JUDICIAL PROCEEDINGS BROUGHT AGAINST GRANTOR ARISING OUT OF OR RELATING TO THIS
AGREEMENT, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL
COURT OF COMPETENT JURISDICTION IN XXX XXXXX, XXXXXX XXX XXXX XX XXX XXXX. BY
EXECUTING AND DELIVERING THIS AGREEMENT, GRANTOR, FOR ITSELF AND IN CONNECTION
WITH ITS PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION
AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY
SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO GRANTOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 23;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER GRANTOR IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT SECURED PARTY RETAINS THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST GRANTOR IN THE
COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SECTION 28 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST
EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR
OTHERWISE.
SECTION 29. WAIVER OF JURY TRIAL. GRANTOR AND SECURED PARTY HEREBY
--------------------
AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is
intended to be
17
all-encompassing of any and all disputes that may be filed in any court and that
relate to the subject matter of this transaction, including contract claims,
tort claims, breach of duty claims, and all other common law and statutory
claims. Grantor and Secured Party each acknowledge that this waiver is a
material inducement for Grantor and Secured Party to enter into a business
relationship, that Grantor and Secured Party have already relied on this waiver
in entering into this Agreement and that each will continue to rely on this
waiver in their related future dealings. Grantor and Secured Party further
warrant and represent that each has reviewed this waiver with its legal counsel,
and that each knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT
MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN
WAIVER SPECIFICALLY REFERRING TO THIS SECTION 29 AND EXECUTED BY EACH OF THE
PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.
SECTION 30. COUNTERPARTS. This Agreement may be executed in one or
------------
more counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[Remainder of page intentionally left blank]
18
IN WITNESS WHEREOF, Grantor and Secured Party have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
[NAME OF GRANTOR], as Grantor
By: ____________________
Title:
Notice Address:
_____________________
_____________________
_____________________
FIRST UNION NATIONAL BANK,
as Secured Party
By: ____________________
Title:
Notice Address:
_____________________
_____________________
_____________________
S-1
SCHEDULE I
TO SECURITY AGREEMENT
Chief Place of Business, Chief Executive
Office and Location of Records:
Locations of Equipment:
Locations of Inventory:
Trade Names:
SCHEDULE II
TO SECURITY AGREEMENT
A. Assigned Agreements
B. Deposit Accounts
