EXHIBIT (c)(2)
Security Agreement
This Security Agreement is made by DUTTERER'S OF MANCHESTER CORPORATION, a
Maryland corporation (the Owner) for the use and benefit of Crestar Bank (the
Bank).
1. Security Agreement. In order to induce the Bank from time to time to extend
or continue to extend credit to XXXXXXXX'X FOODS, INC. (the Borrower), the Owner
(which may include the Borrower) hereby grants the Bank, its successors and
assigns, a security interest in the collateral and all proceeds, products, rents
and profits thereof and all revenues from the right to use the collateral as
described below (the Collateral) to secure the payment of all present and future
indebtedness of every kind and description, however evidenced, of the Borrower
to the Bank, whether such indebtedness is direct or indirect, fixed or
contingent, liquidated or unliquidated, including any extensions, modifications
or renewals thereof (the Indebtedness) and to secure the performance by the
Owner of the agreements and warranties contained in this Security Agreement.
2. Collateral. As used in this Security Agreement, the term "Collateral,"
whether now existing or hereafter acquired, shall mean the following securities,
instruments, including unsecured notes and notes secured by deeds of trust or
otherwise, certificates of deposit, documents, including documents of title,
documentary drafts, accounts, letters of credit, chattel paper, general
intangibles, including interest in estates and trusts, and other property
described as: Promissory note dated September 3, 1995, made by Value Added Food
Services, Inc., and payable to the Owner in the original principal amount of
$1,038,756, together with any and all documents which evidence and/or secure
such note.
The Owner also grants the Bank a security interest in all rights to which an
owner of the Collateral is now or may become entitled by virtue of owning such
Collateral including, without limitation, interest, cash dividends, stock
dividends and stock rights, all of which shall, when received, and upon request
by the Bank, be delivered to the Bank with written authority to sell, transfer
or rehypothecate the same.
If the Collateral includes all rights, title and interest in an Estate or Trust,
the security interest shall not apply to any shares of capital stock of Crestar
Financial Corporation or any of its affiliates, or to any units of participation
in the Bank's Common Trust Fund held by the Estate or Trust, but shall apply to
any proceeds from the sale of such stocks and units or cash dividends thereof.
3. Accounts. If the Collateral includes Accounts: a) The Owner warrants that
each and every Account, now owned or hereafter acquired, is a bona fide existing
obligation, valid and enforceable against the account debtor, for goods sold or
leased and delivered or services rendered in the ordinary course of business; it
is subject to no dispute, defense or offset; the Owner has good title to the
Account and has full right and power to grant the Bank a security interest in
the Collateral; b) The Owner will immediately notify the Bank of any Account to
which the above warranties are or become untrue; c) The Owner will prepare and
deliver to the Bank, at the Bank's request, a listing and aging of all Accounts
and any further schedules or information that the Bank may require. d) The Bank
shall have the right at any time to notify account debtors of its security
interest in the Accounts and require payments to be made directly to the Bank.
The Owner hereby appoints the Bank and any officer or employee of the Bank, as
the Bank may from time to time designate, as its attorneys-in-fact for the
Owner, to sign and endorse in the name of the Owner, to give notice in the name
of the Owner, and to perform all other actions necessary or desirable at the
reasonable discretion of the Bank to effect these provisions and carry out the
intent hereof, all at the cost and expense of the Owner. The Owner hereby
ratifies and approves all acts of such attorneys-in-fact and neither the Bank
nor any other such attorneys-in-fact will be liable for any acts of commission
or omission nor for any error of judgment or mistake of fact or law. This power
being coupled with an interest is irrevocable so long as any Account or General
Intangible assigned to the Bank remains unpaid and the Borrower has any
Indebtedness to the Bank. The costs of such collection and enforcement,
including attorneys' fees and out-of-pocket expenses, shall be borne solely by
the Owner whether the same are incurred by the Bank or the Owner; e) At the
option of the Bank, all payments on the Accounts received by the Owner shall be
remitted to the Bank in their original form on the day of receipt; all notes,
checks, drafts and other instruments so received shall be duly endorsed to the
order of the Bank. At the Bank's election, the payments shall be deposited into
a special deposit account ("Special Account") maintained with the Bank. The Bank
may designate with each such deposit the particular Account upon which payment
was made. The Special Account shall be held by the Bank as security for the
Indebtedness. Prior to depositing payments on the Accounts into the Special
Account, the Owner agrees that it will not commingle such payments with any of
the Owner's funds or property, but will hold them separate and apart and in
trust for the Bank. The Bank will have the power to withdraw from the Special
Account. The Bank may at any time and from time to time, in its sole discretion,
apply any part of the funds in the Special Account to the Indebtedness whether
or not the same is due. Upon full and final satisfaction of the Indebtedness
plus termination of any commitment to extend additional funds, the Bank will pay
to the Owner any excess funds, whether received by the Bank as a deposit
in the Special Account or as a direct payment on any of the Indebtedness; f) If
any of the Owner's Accounts arise out of contracts with the United States or any
department, agency, or instrumentality thereof, the Owner will immediately
notify the Bank in writing and execute any instruments and take any steps
required by the Bank in order that all monies due and to become due under such
contracts shall be assigned to the Bank and in order that proper notice be given
under the Federal Assignment of Claims Act; g) The Bank shall not be liable and
shall suffer no loss on account of loss or deprivation of any account due to
acts or omissions of the Bank unless the Bank's conduct is willful and
malicious, and the Bank shall have no duty to take any action to preserve the
Collateral or collect Accounts.
4. Inventory. If the Collateral includes Inventory: a) The Owner agrees to
maintain books and records pertaining to the Inventory in such detail, form and
scope as the Bank shall require. The Owner shall promptly advise the Bank of any
substantial changes relating to the type, quality or quantity of the Inventory
or any event which would have a material effect on the value of the Inventory or
on the security interest granted to the Bank. Upon reasonable notice by the
Bank, the Owner shall assemble and make readily available for inspection and
examination all of the Inventory and all books and records pertaining to the
Inventory at any time; b) If the Inventory remains in the possession or control
of any of the Owner's agents or processors, the Owner shall notify such agents
or processors of the Bank's security interest, and upon request, instruct them
to hold such Inventory for the Bank's account and subject to the Bank's
instructions; c) The Owner will prepare and deliver to the Bank, at the Bank's
request, listing of all Inventory and such information regarding the Inventory
as the Bank may require.
5. Securities, Instruments, Certificates of Deposit, Documents, Chattel Paper
and General Intangibles. If the Collateral includes securities, instruments,
certificates of deposit, documents, chattel paper or general intangibles: a) The
Owner represents and warrants, as may be applicable, that (i) The Owner has good
and marketable title to the Collateral. The Collateral is valid and genuine and
represents a bona fide, binding, legal obligation of the maker, issuer, or
grantor, and all signatures are genuine; (ii) The Collateral is in full force
and effect and is not in default and no prepayments have been made; (iii) The
Collateral is not represented by a judgment or any other document not provided
to the Bank; (iv) The Collateral is not subject to any assignment, claim, lien,
right of setoff or security interest of any other party; (v) Unless otherwise
stated, the face amount on the Collateral is the correct amount actually and
unconditionally due or to become due according to the terms of the Collateral,
and such amount is not disputed or subject to any setoff, credit, deduction, or
counterclaim; (vi) With respect to the security on the Collateral, the lien or
security interest represented thereby is not subject to prior
claim, lien, or security interest of any other party, unless otherwise stated
herein, or in the document evidencing such security; (vii) With respect to the
security on the Collateral, it has been properly perfected by the filing or
recording of all necessary financing statements, deeds of trust or other
documents and the payment of all recording, transfer and other taxes and fees
made in the appropriate public offices. b) At any time, and from time to time,
whether before or after default, without notice, and at the expense of the
Owner, the Bank in its name or in the name of its nominee or of the Owner, may,
but shall not be obligated to: (i) Notify the obligors on any Collateral to make
payment to the Bank of any or all dividends, interest, principal payments and
other sums now or hereafter payable upon or on account of the Collateral, may
collect the same by legal proceedings or otherwise, and may perform any contract
or endorse in the name of the Owner any checks, drafts, notes, instruments or
other documents which constitute the collateral; (ii) Enter into any extension,
reorganization, deposit, merger or consolidation agreement or any agreement in
any way relating to or affecting the Collateral and in connection therewith may
deposit or surrender control of the Collateral, accept other property in
exchange for the Collateral and do and perform such acts and things as it may
deem proper, and any money or property received in exchange for the Collateral
may be either applied to any Indebtedness or may be held by the Bank pursuant to
the provisions of this Security Agreement; (iii) Make any compromise or
settlement it deems desirable or proper with reference to the Collateral; (iv)
Insure, process and preserve the Collateral; (v) Cause the Collateral to be
transferred to its name or the name of its nominee; (vi) Exercise as to the
Collateral all the rights, powers and remedies of an owner.
6. Representations and Warranties. The Owner represents and warrants to the Bank
as follows: a) The Owner is and will continue to be the absolute owner of the
Collateral and that there are no other liens or security interests affecting the
Collateral other than the security interest granted in this Security Agreement
except those previously disclosed to the Bank in writing by the Owner; if the
Owner is acting in the capacity of trustee, administrator or executor of an
estate, such fact shall be disclosed and evidence of capacity shall be provided
to the Bank; b) The Owner will defend the Collateral against the claims and
demands of all parties. The Owner will not, without prior written consent of the
Bank, grant any security interest in the Collateral and will keep it free from
any lien, encumbrance or security interest; c) The Owner represents and warrants
that the Collateral never has been, and never will be so long as this Agreement
remains a lien on the Collateral, used for the generation, collection,,
manufacture, storage, treatment, disposal, release or threatened release of any
hazardous substance, as those terms are defined in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Section 9601, et
seq. ("CERCLA"), Superfund Amendments and Reauthorization Act ("XXXX"),
applicable state laws, or regulations adopted pursuant to either of the
foregoing. The Owner agrees to comply with any federal, state or local law,
statute, ordinance or regulation, court or administrative order or decree or
private agreement regarding materials which require special handling in
collection, storage, treatment or disposal because of their impact on the
environment ("Environmental Requirements"). The Owner agrees to indemnify and
hold the Bank harmless against any and all claims, losses and expenses resulting
from a breach of this provision of this Agreement and the Owner will pay or
reimburse the Bank for all costs and expenses for expert opinions or
investigations required or requested by the Bank which, in the Bank's sole
discretion, are necessary to ensure compliance with this provision of this
Agreement. This obligation to indemnify shall survive the payment of the
indebtedness and the satisfaction of the Agreement; d) The Collateral is and
will be used or bought for use primarily for the following purpose: business; e)
The Owner warrants and represents that all Collateral has been produced in
compliance with the Fair Labor Standards Act or other applicable wage and
employee law, rule, regulation or order, and that no existing or future
liability shall occur as a result thereof. The Owner may contest, in good faith,
the applicability of any such law, rule, regulation or order, including
prosecuting any appeals, so long as the Bank's interest in the Collateral, in
the opinion of the Bank, is not jeopardized thereby; f) The Owner, if an
individual, is above the age of majority and has the legal capacity to enter
into this Security Agreement; g) If an individual, the Owner's home address is
____________________________; h) The Owner, if a corporation, is duly organized
and existing under the laws of Maryland; is duly qualified and in good standing
as a foreign corporation in every jurisdiction where such qualification is
necessary; the execution and performance of this Security Agreement have been
duly authorized by action of its Board of Directors, no action of its
shareholders being necessary; the execution and performance of this Security
Agreement will not violate or contravene any provisions of law or regulation or
its Articles of Incorporation, Shareholder Agreement, By-Laws or other
agreements to which it is a party or by which it is bound; and that no consent
or approval of any governmental agency or authority is required in making or
performing the obligations under this Security Agreement; i) The Owner, if a
partnership, is duly qualified and in good standing to do business in every
jurisdiction where such qualification is necessary; the execution and
performance of this Security Agreement have been duly authorized by its
partners, no further actions of its partners is necessary; the execution and
performance of this Security Agreement will not violate or contravene any
provisions of law or regulation or its Partnership Agreement or other agreements
to which it is a party or by which it is bound; and that no consent or approval
of any governmental agency or authority is required in making or performing the
obligations under this Security Agreement; j) If a corporation, partnership or
proprietorship, the location of the Owner's principal place of business in
_________(jurisdiction) is
___________(city) and it does __ does not __ have a place of
business in another city or county in that jurisdiction (list
other jurisdiction if applicable):____________________; k) The
Collateral will be located at the Bank; l) The Owner will maintain the
Collateral in the above locations. The Collateral shall not be moved from the
above locations without the prior written consent of the Bank. The Owner must
notify the Bank in writing at least 30 days prior to any change of its name,
corporate structure or identity; m) The Owner maintains its books of account and
records only at ____________; n) All information supplied and statements made to
the Bank in any financial or credit statement or application are true, correct,
complete, valid and genuine in all material respects.
7. Covenants.
a) The Owner shall maintain complete and accurate books of account and records,
and its principal books of account and records, including all records concerning
Accounts and contract rights, shall be kept and maintained at the place (s)
specified above. The Owner shall not move such books of account and records
without giving the Bank at least 30 days prior written notice and executing and
delivering to the Bank financing statements satisfactory to the Bank prior to
any such move. All accounting records and financial reports furnished to the
Bank shall be maintained and prepared in accordance with generally accepted
accounting principles consistently applied. It is specifically agreed that the
bank shall have and the Owner hereby grants to the Bank a security interest in
all books of account and records of the Owner and shall have access to them at
any time for inspection, verification, examination and audit; b) The Owner shall
furnish to the Bank such financial and business information and reports in form
and content satisfactory to the Bank as and when the Bank may from time to time
require; c) The Owner, if a corporation, shall maintain its corporate existence
in good standing and shall not consolidate or merge with or acquire the stock of
any other corporation without the prior written consent of the Bank. If the
Owner is a corporation, the Owner shall, at the request of the Bank, qualify as
a foreign corporation and obtain all requisite licenses and permits in each
jurisdiction where the Owner does business. The Owner shall not discontinue
business, liquidate, sell, transfer, assign or otherwise dispose of any of its
assets, except with the prior written permission of the Bank, provided, however,
that it may sell in the ordinary course of business and for a full consideration
in money or money's worth, any product, merchandise or service produced or
marketed by it. The Bank's security interest shall attach to all proceeds of all
sales or dispositions of the Collateral; d) The Owner shall maintain all of the
Collateral in good condition and repair. The Bank shall have the right to
inspect the Collateral at any reasonable time and shall have the right to obtain
such appraisals, reappraisals, appraisal updates or environmental inspections as
the Bank, in its sole discretion, may deem necessary from time to time. e) The
Owner shall at all times keep insurable Collateral
insured against any and all risks, including, without limitation, fire, and such
other insurance as may be required by the Bank from time to time; and in such
amounts as may be satisfactory to the Bank. The Bank shall be named as Loss
Payee on any such insurance policies. Insurance may be purchased from an insurer
of the Owner's choice, except as otherwise required by law. The Owner shall pay
and discharge all taxes, assessments and charges of every kind prior to the date
when such taxes, assessments or charges shall become delinquent and provide
proof of such payments to the Bank, upon request. However, nothing contained in
this Security Agreement shall require the Owner to pay any such taxes,
assessments and charges so long as it shall contest its validity in good faith
and shall post any bond or security required by the Bank against the payment.
Upon the failure of the Owner to pay such required amounts, the Bank, at its
option, and at the Owner's expense, may obtain such insurance or pay such taxes,
assessments or charges with the costs or premiums becoming part of the
Indebtedness at the option of the Bank, such amounts may be payable on demand.
Any insurance obtained by the Bank, at its option, may be single or dual
interest, protecting its rights, rights of the Owner or joint rights. Any
insurance obtained by the Bank, at its option, may be single or dual interest,
protecting its rights, rights of the Owner or joint rights. Any insurance
obtained by the Bank may provide, at its option, that such insurance will pay
the lesser of the unpaid balance of the indebtedness or the repair or
replacement value of the Collateral. The Owner authorizes the Bank to give
effect to any of these options without prior notice to Owner or further consent
from owner. No matter which insurance coverage or repayment options the Bank
chooses, the collateral will secure payment of these amounts. The Bank may use
the proceeds of any insurance obtained by Owner or by the Bank to repair or
replace the collateral or, if the Bank elects to do so, to repay part of all of
the indebtedness, and the Borrowers will still be responsible to repay any
remaining unpaid balance of the indebtedness. Owner assigns to the Bank all
amounts payable under the insurance, including unearned premiums, directing the
insurer to make payment to the Bank, and Owner appoints us attorney-in=fact to
endorse any draft. f) The Owner will not pledge or grant any security interest
in any of the Collateral to anyone except the Bank, or permit any lien or
encumbrance to attach to any of the Collateral, or any levy to be made on the
Collateral, or any financing statement (except financing statements in favor of
the Bank) to be on file against the collateral; g)The Owner agrees that it will
not permit any return of merchandise, the sale of which gave rise to any of the
Accounts, except in the usual and regular course of business.
8. Default. In addition to any right which the Bank may have to demand payment
of the Indebtedness under any other agreement, upon the occurrence of any of the
following events of default, the Bank, at its option, may declare any or all of
the Indebtedness immediately due and payable and may exercise any and all of the
rights and remedies of default of a secured party under the Uniform Commercial
Code and other applicable law and
all rights provided herein, all of which rights and remedies shall, to the full
extent permitted by law, be cumulative. The occurrence of an Event of Default as
defined in the Amended and Restated Credit Agreement of even date herewith
between the Borrower and the Bank. The Bank may require the Owner to assemble
the Collateral and make it available to the Bank at a place to be designated by
the Bank which is reasonably convenient to the Bank and the Owner. The Bank may
take possession of the Collateral without a court order. The Owner shall pay to
the Bank on demand all legal expenses and reasonable attorneys' fees if the Bank
refers this Security Agreement to an attorney who is not a salaried employee of
the Bank, appraisal fees and all expenses incurred or paid by the Bank, in
protecting and enforcing the rights of the Bank under this Security Agreement,
including the Bank's right to take possession of the Collateral and its
proceeds, and to hold, prepare for sale, sell and dispose of the Collateral. Any
required notice by the Bank of sale or other disposition on default, when placed
in the mail and addressed to or left upon the premises of the Owner, at the
address specified next to the Owner's signature below or such other address of
the Owner as may from time to time be shown on the Bank's records, at least ten
days prior to such action shall constitute reasonable notice to the Owner.
9. Term. This security Agreement shall be a continuing agreement and shall
remain in full force and effect irrespective of any interruptions in the
business relations of the Borrower with the Bank and shall apply to any ultimate
balance which shall remain due by the Borrower to the Bank; provided, however,
that the Owner may be written notice terminate this Security Agreement with
respect to all Indebtedness of the Borrower incurred or contracted by the
Borrower or acquired by the Bank after the date on which such notice is
personally delivered to or mailed via registered mail and accepted by the
Borrower's lending officer.
10. Execution by More than One Party. The term "Owner" as used in this Security
Agreement shall, if this instrument is signed by more than one Party, mean the
"Owner and each of them" and each shall be jointly and severally obligated and
liable. If any Party shall be a partnership, the agreements and obligations on
the part of the Owner shall remain in force and applicable regardless of any
changes in the individuals composing the partnership and the term "Owner" shall
include any altered or successive partnerships and the predecessor partnerships
and their partners shall not be released from any obligation or liability.
11. Waivers by the Owner. The Owner hereby waives (1) notice of acceptance of
this Security Agreement and of any extensions or renewals of credit by the Bank
to the Borrower; (2) presentment and demand for payment of the Indebtedness; (3)
protest and notice of dishonor or default to the Owner or to any other party
with respect to the Indebtedness; (4) all other notices to which the Owner might
otherwise be entitled; and (5) if for business purposes, the benefit of the
Homestead Exemption. The Owner
further waives any right to require that any action be brought against the
Borrower or any other party, to require that resort be had to any security or to
any balance of any deposit account or credit on the books of the Bank in favor
of the Borrower or any other party. The Owner further agrees that it shall not
be subrogated and will not enforce on its part or behalf any right of action
which the Bank may have against the borrower until every Indebtedness secured
under this Security Agreement is paid in full.
12. No Obligations to Extend Credit. This contract shall not be construed to
impose any obligation on the Bank to extend or continue to extend any credit at
any time.
13. Indemnity. The Owner agrees to indemnify and hold harmless the Bank and its
subsidiaries, affiliates, successors, parents, and assigns and their respective
agents, directors, employees, and officers from and against any and all
complaints, claims, defenses, demands, actions, bills, causes of action
(including, without limitation, costs and attorneys' fees), and losses of every
nature and kind whatsoever, which may be raised or sustained by any directors,
officers, employees, shareholders, creditors, regulators, successors in
interest, or receivers of the Borrower or any third party as a result of or
arising out of, directly or indirectly, the Bank extending credit as evidenced
by the Indebtedness to the Borrower, and taking the Collateral as security for
the Indebtedness, and the Owner further agrees to be liable for any and all
judgments which may be recovered in any such action, claim, proceeding, suit, or
xxxx, including any compromise or settlement thereof, and defray any and all
expenses, including, without limitation, costs and attorneys' fees, that may be
incurred in or by reason of such actions, claims, proceedings, suits, or bills.
14. Financing Statements. The Owner will deliver such instruments of further
assignment or assurance as the Bank may from time to time request to carry out
the intent of this Security Agreement, and will join with the Bank in executing
financing statements and other documents in form satisfactory to the Bank and
pay the cost of filing the same, including all recordation, transfer and other
taxes and fees, continuation statements and any other documents in any public
office deemed advisable by the Bank. The Owner agrees that a carbon,
photographic or other reproduction of a financing statement or this Security
Agreement shall be sufficient as a financing statement.
15. Successor In Interest. This Security Agreement shall be binding upon the
Owner, its successors and assigns, and the benefits hereof shall inure to the
Bank, its successors and assigns.
16. Waiver by the Bank. The Bank may waive any default or remedy any default
without waiving the default remedied or any other prior or subsequent default.
The Bank's failure to
exercise any right or take any action under this Security Agreement shall not
constitute a waiver of that or any other right or action.
17. Waiver of Jury Trial. To the extent legally permissible, the Owner waives
all right to trial by jury in any litigation relating to transactions under this
Security Agreement, whether sounding in contract, tort or otherwise.
18. Governing Law. The laws of the jurisdiction in which the Bank is located
shall govern the construction of this Security Agreement and the rights and
duties of the Owner and Parties.
The undersigned have executed or caused this Security Agreement to be executed,
under seal, as of this 14th day of June, 1996.
DUTTERER'S OF MANCHESTER CORPORATION
a Maryland corporation
By: Xxxx Xxxx Bulog
------------------------
(Signature)
Secretary/Treasurer
