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EXHIBIT 10.6
SUBSIDIARY SECURITY AGREEMENT
This SECURITY AGREEMENT (this "Security Agreement"), dated as
of January 28, 1999, is made by each Subsidiary (as defined in the Credit
Agreement referred to below) a signatory hereto on the date hereof and each
other Subsidiary that may, from time to time hereto (individually, a "Grantor"
and collectively, the "Grantors"), in favor of THE BANK OF NOVA SCOTIA, as lead
arranger and administrative agent (together with any successor(s) thereto in
such capacity, the "Administrative Agent") for each of the Lender Parties (as
defined below).
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of January
28, 1999 (as amended, supplemented, amended and restated or otherwise modified
from time to time, the "Credit Agreement"), among New World Pasta Company, the
various financial institutions as are, or may from time to time become, parties
thereto (the "Lenders"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Senior Funding, Inc., as Syndication
Agent, the Co-Agents named therein and the Administrative Agent, the Lenders and
the Issuer have extended Commitments to make Credit Extensions to the Borrower;
and
WHEREAS, as a condition precedent to the making of each Credit
Extension (including the initial Credit Extension) under the Credit Agreement,
each Grantor is required to execute and deliver this Security Agreement;
WHEREAS, each Grantor has duly authorized the execution,
delivery and performance of this Security Agreement; and
WHEREAS, it is in the best interests of each Grantor to
execute this Security Agreement inasmuch as each Grantor will derive substantial
direct and indirect benefits from the Credit Extensions made from time to time
to the Borrower by the Lenders and the Issuer pursuant to the Credit Agreement;
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and in order to induce
the Lenders and the Issuer to make each Credit Extension (including the initial
Credit Extension) to each Grantor pursuant to the Credit Agreement, each Grantor
jointly
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and severally, agrees with the Administrative Agent, for the benefit of each
Lender Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or
not underscored) when used in this Security Agreement, including its preamble
and recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Administrative Agent" is defined in the preamble.
"Collateral" is defined in Section 2.1.
"Collateral Account" is defined in Section 4.1.2(c).
"Copyright Collateral" means:
(a) all United States copyrights (including without limitation
copyrights for mask works) owned by each Grantor in each Grantor's name as such
may be changed from time to time, whether statutory or common law, registered or
unregistered, including without limitation, all of each Grantor's right, title
and interest in and to all common law copyrights and copyrights registered in
the United States Copyright Office and also including, without limitation, the
copyrights referred to in Item A of Schedule IV attached hereto, and all
applications for registration and renewals thereof (all of the foregoing items
in this clause (a) being collectively called a "Copyright");
(b) all United States written Copyright licenses and other
agreements providing each Grantor with the right to use any of the items of the
type referred to in clause (a) (other than software licenses from third
parties), including each Copyright license referred to in Item B of Schedule IV
attached hereto, if any, subject, in each case, to the terms of such license
agreements; and
(c) all proceeds of, and rights of each Grantor associated
with the foregoing (including license royalties and proceeds of infringement
suits), the right to ▇▇▇ third parties for past, present or future infringements
of any registered Copyright described in clause (a), including any registered
Copyright application referred to in Item A of Schedule IV attached hereto, and
for breach or enforcement of any
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Copyright license, including any Copyright license referred to in Item B of
Schedule IV attached hereto, subject, in each case, to the terms of such license
agreements.
"Credit Agreement" is defined in the first recital.
"Deposit Accounts" means any and all demand, time, savings,
passbook or other accounts with a bank or other financial institution, including
general deposit and cash concentration accounts, in which any cash, payments or
receipts of or for the benefit of each Grantor are or are to be deposited, and
all deposits therein and investments thereof, whether now or at any time
hereafter existing.
"Equipment" is defined in clause (a) of Section 2.1.
"Grantor" is defined in the preamble.
"Intellectual Property Collateral" means, collectively, the
Copyright Collateral, the Patent Collateral, the Trademark Collateral and the
Trade Secrets Collateral.
"Inventory" is defined in clause (b) of Section 2.1.
"Lender Party" means, as the context may require, each Lender,
the Issuer, each Co-Agent and the Administrative Agent and each of its
respective successors, permitted transferees and assigns.
"Lenders" is defined in the first recital.
"Patent Collateral" means:
(a) all United States letters patent and applications for
letters patent owned by each Grantor in each Grantor's name as such may be
changed from time to time, including each patent and patent application referred
to in Item A of Schedule II attached hereto (all of the foregoing items in this
clause (a) being collectively called a "Patent");
(b) all reissues, divisions, continuations,
continuations-in-part, extensions, renewals and reexaminations of any of the
items described in clause (a);
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(c) all United States written Patent licenses and other
agreements of each Grantor providing each Grantor with the right to use any of
the items of the type referred to in clauses (a) and (b), including each Patent
license referred to in Item B of Schedule II attached hereto subject, in each
case, to the terms of such license agreements; and
(d) all proceeds of, and rights of each Grantor associated
with the foregoing (including license royalties and proceeds of infringement
suits), the right to ▇▇▇ third parties for past, present or future infringements
of any registered Patent described in clause (a), including any registered
Patent referred to in Item A of Schedule II attached hereto, and for breach or
enforcement of any Patent license, including any Patent license referred to in
Item B of Schedule II attached hereto, subject, in each case, to the terms of
such license agreements.
"Rate Protection Agreement" means a Hedging Obligation entered
into between the Borrower or any of its Subsidiaries and a Lender or an
Affiliate of a Lender.
"Receivables" is defined in clause (c) of Section 2.1.
"Related Contracts" is defined in clause (c) of Section 2.1.
"Security Agreement" is defined in the preamble.
"Trademark Collateral" means:
(a) all United States trademarks, trade names, trade dress,
service marks, logos, other source of business identifiers, and designs owned by
each Grantor in each Grantor's name as such may be changed from time to time
(all of the foregoing items in this clause (a) being collectively called a
"Trademark"), now existing in the United States or hereafter adopted or acquired
in the United States, and all registrations and renewals thereof and all
applications in connection there with, including registrations, renewals and
applications in the United States Patent and Trademark Office, including those
referred to in Item A of Schedule III attached hereto, provided, however, that
Trademark Collateral shall not include "intent to use" applications for
trademark or service ▇▇▇▇ registrations filed in the United States Patent and
Trademark Office pursuant to Section 1(b) of the ▇▇▇▇▇▇ Act, 15 U.S.C. Section
1051, unless and until an Amendment to Allege Use or a Statement of Use under
Section 1(c) or 1(d) of said Act has been filed;
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(b) all United States written Trademark licenses and other
agreements of each Grantor providing each Grantor with the right to use any
items of the type described in clause (a), including each Trademark license
referred to in Item B of Schedule III attached hereto, subject, in each case, to
the terms of such license agreements;
(c) all of the goodwill of the business connected with the use
of, and symbolized by, the items described in clause (a); and
(d) all proceeds of, and rights of each Grantor associated
with the foregoing (including license royalties and proceeds of infringement
suits), the right to ▇▇▇ third parties for past, present or future infringement
or dilution of any Trade ▇▇▇▇ or Trademark registration referred to in Item A of
Schedule III attached hereto, or for any injury to the goodwill associated with
the use of any such Trademark and for breach or enforcement of any Trademark
license, including any Trademark license referred to in Item B of Schedule III
attached hereto, subject, in each case, to the terms of such license agreements.
"Trade Secrets Collateral" means all United States common law
and statutory trade secrets and all other confidential or proprietary
information and know-how owned by each Grantor in each Grantor's name as such
may be changed from time to time (to the extent such confidential, proprietary
or useful information or know-how is protected by each Grantor against
disclosure and is not readily ascertainable) (all of the foregoing being
collectively called a "Trade Secret"), whether or not such Trade Secret has been
reduced to a writing or other tangible form, including all documents and things
embodying, incorporating or referring in any way to such Trade Secret, all
United States written Trade Secret licenses or other agreements of each Grantor,
including each Trade Secret license referred to in Schedule V attached hereto,
subject, in each case, to the terms of such license agreements; and including
the right to ▇▇▇ and to enjoin and to collect damages for the actual
misappropriation of any Trade Secret and for the breach or enforcement of any
such Trade Secret license, subject, in each case, to the terms of such license
agreements.
"U.C.C." means the Uniform Commercial Code, as in effect in
the State of New York.
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SECTION 1.2. Credit Agreement Definitions. Unless otherwise
defined herein or the context otherwise requires, terms used in this Security
Agreement, including its preamble and recitals, have the meanings provided in
the Credit Agreement.
SECTION 1.3. U.C.C. Definitions. Unless otherwise defined
herein or the context otherwise requires, terms for which meanings are provided
in the U.C.C. are used in this Security Agreement, including its preamble and
recitals, with such meanings.
ARTICLE II
SECURITY INTEREST
SECTION 2.1. Grant of Security. Each Grantor to the extent it
has any interest whatsoever, hereby assigns and pledges to the Administrative
Agent for its benefit and the ratable benefit of each of the Lender Parties, and
hereby grants to the Administrative Agent for its benefit and the ratable
benefit of each of the Lender Parties a security interest in, all of each
Grantor's right, title and interest in and to all of the following, whether now
or hereafter existing or acquired by each Grantor (the "Collateral"):
(a) all equipment in all of its forms of such Grantor,
wherever located, including all parts thereof and all accessions, additions,
attachments, improvements, substitutions and replacements thereto and therefor
(any and all of the foregoing being the "Equipment");
(b) all inventory in all of its forms of such Grantor,
wherever located, including
(i) all raw materials and work in process therefor, finished
goods thereof, and materials used or consumed in the manufacture or production
thereof,
(ii) all goods in which such Grantor has an interest in mass
or a joint or other interest or right of any kind (including goods in which each
Grantor has an interest or right as consignee), and
(iii) all goods which are returned to or repossessed by such
Grantor,
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and all accessions thereto, products thereof and documents
therefor (any and all such inventory, materials, goods, accessions, products and
documents being the "Inventory");
(c) all accounts, contracts, contract rights, chattel paper,
documents, and general intangibles, rental agreement, or any part thereof
including, but not limited to such Grantor's right to receive, either directly
or indirectly, from any person, any rents or other payments due and payable
under such agreements) of such Grantor, whether or not arising out of or in
connection with the sale or lease of goods or the rendering of services, and all
rights of such Grantor now or hereafter existing in and to all security
agreements, guaranties, leases and other contracts securing or otherwise
relating to any such accounts, contracts, contract rights, chattel paper,
documents, instruments, and general intangibles (any and all such accounts,
contracts, contract rights, chattel paper, documents, instruments, and general
intangibles being the "Receivables", and any and all such security agreements,
guaranties, leases and other contracts being the "Related Contracts");
(d) all Intellectual Property Collateral of such Grantor and
all Investment Property;
(e) all books and records relating to, used or useful in
connection with, evidencing, embodying, incorporating or referring to, any of
the foregoing in this Section 2.1;
(f) all of such Grantor's other personal property and rights
of every kind and description and interests therein (including all Deposit
Accounts); and
(g) all products, rents, issues, profits, returns, income and
proceeds of and from any and all of the foregoing Collateral (including proceeds
which constitute property of the types described in clauses (a), (b), (c), (d),
(e) and (f)), proceeds deposited from time to time in the Collateral Account and
in any lock boxes of such Grantor, and, to the extent not otherwise included,
all payments under insurance (whether or not the Administrative Agent is the
loss payee thereof), or any indemnity, warranty or guaranty, payable by reason
of loss or damage to or other wise with respect to any of the foregoing
Collateral).
Notwithstanding anything herein to the contrary, the
Collateral shall exclude (i) each Grantor's rights under contracts and
agreements which by their terms
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prohibit the granting of a security interest therein or assignment thereof
(except for accounts and general intangibles for money due or to become due
thereunder), and (ii) Equipment which is the subject of a capitalized lease or
purchase money financing permitted under the Credit Agreement under which a Lien
has been granted in accordance with Section 7.2.3., but only so long as such
Lien remains in effect.
SECTION 2.2. Security for Obligations. This Security Agreement
secures the payment of all Obligations now or hereafter existing under the
Credit Agreement, the Notes and each other Loan Document to which each Grantor
is or may become a party, whether for principal, interest, costs, fees, expenses
or other wise.
SECTION 2.3. Continuing Security Interest; Transfer of Notes.
This Security Agreement shall create a security interest in the Collateral and
shall in accordance with applicable law
(a) remain in full force and effect until the payment in full
of all Obligations and the termination of all Commitments,
(b) be binding upon each Grantor, its successors, transferees
and assigns, and
(c) inure, together with the rights and remedies of the
Administrative Agent hereunder, to the benefit of the Administrative Agent and
each other Lender Party.
Without limiting the generality of the foregoing clause (c),
any Lender may assign or otherwise transfer (in whole or in part) any Note or
Loan held by it to any other Person or entity in accordance with the Credit
Agreement, and such other Person or entity shall thereupon become vested with
all the rights and benefits in respect thereof granted to such Lender under any
Loan Document (including this Security Agreement) or otherwise, subject,
however, to any contrary provisions in such assignment or transfer, and to the
provisions of Section 10.11 of the Credit Agreement. Upon (i) the sale, transfer
or other disposition of Collateral in accordance with the Credit Agreement or
(ii) the payment in full of all Obligations, the termination or expiration of
all Letters of Credit and the termination of all Commitments, the security
interest granted herein shall automatically terminate with respect to (x) such
Collateral (in the case of clause (i)) or (y) all Collateral (in the case of
clause (ii)). Upon any such termination, the Administrative Agent will, at such
Grantor's sole expense, deliver any Collateral (or portion thereof) to the
extent held by the Administrative Agent hereunder and to the extent the
termination relates to
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such Collateral, and at such Grantor's sole expense execute and deliver to each
Grantor such documents and instruments and take such other action as such
Grantor shall reasonably request to evidence or more fully effect termination of
the security interest hereunder relating to such portion or all of the
Collateral, as the case may be.
SECTION 2.4. Grantor Remains Liable. Anything herein to the
contrary notwithstanding
(a) each Grantor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein, as if
this Security Agreement had not been executed,
(b) the exercise by the Administrative Agent of any of its
rights hereunder shall not release any Grantor from any of its duties or
obligations under any such contracts or agreements included in the Collateral,
and
(c) neither the Administrative Agent nor any other Lender
Party shall have any obligation or liability under any such contracts or
agreements included in the Collateral by reason of this Security Agreement, nor
shall the Administrative Agent or any other Lender Party be obligated to perform
any of the obligations or duties of any Grantor thereunder or to take any action
to collect or enforce any claim for payment assigned hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties. Each Grantor
represents and warrants unto each Lender Party as set forth in this Article.
SECTION 3.1.1. Location of Collateral, etc. All of the
Equipment and Inventory (other than Inventory in transit) of such Grantor are
located at the places specified in Item A of Schedule I hereto, and at such
other locations as are notified to the Administrative Agent pursuant to clause
(a) of Section 4.1.2. The place(s) of business and chief executive office of
such Grantor and the office(s) where such Grantor keeps its records concerning
the Receivables, and all originals of all chattel paper which evidence
Receivables, are located at the addresses as set forth in Item C of Schedule I
hereto, and at such other locations as are notified to the Administrative Agent
pursuant to clause (a) of Section 4.1.2. As of the date hereof, such Grantor has
no trade name, except as set forth in Item D of Schedule I hereto.
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During the four months preceding the date hereof, such Grantor has not been
known by any legal name different from the one set forth on the signature page
hereto, nor has such Grantor been the subject of any merger or other corporate
reorganization, in each case, except as contemplated by the Transactions and as
set forth in Item E of Schedule I.
SECTION 3.1.2. Intentionally Omitted.
SECTION 3.1.3. Negotiable Documents, Instruments and Chattel
Paper. Such Grantor has delivered to the Administrative Agent possession of all
originals of all negotiable documents, instruments and chattel paper (other than
those payable within 30 days of the date of issuance) currently owned or held by
such Grantor (duly endorsed in blank, if requested by the Administrative Agent)
having a face amount in excess of $500,000 individually or to the extent such
securities have a face amount exceeding $750,000 in the aggregate (including all
other negotiable documents, instruments and chattel paper then held or owned by
other Obligors).
SECTION 3.1.4. Intellectual Property Collateral. With respect
to any material Intellectual Property Collateral the loss, impairment or
infringement of which could reasonably be expected to have a Material Adverse
Effect:
(a) each Patent, Trademark or Copyright is subsisting and has
not been adjudged invalid or unenforceable, in whole or in part;
(b) such Grantor has made such filings and recordations to
protect its interest in such Intellectual Property Collateral, as are
commercially reasonable and will, if requested by the Administrative Agent to
the extent practicable, effect recordations of its interest in such Patent
Collateral and Trademark Collateral in the United States Patent and Trademark
Office and its claims to the such Copyright Collateral in the United States
Copyright Office;
(c) such Grantor is the exclusive owner of the entire and
unencumbered right, title and interest in and to or has the legal right to use
such Patents, Trademarks and Copyrights, and no claim has been made that the use
of such Patents, Trademarks and Copyrights does or may violate the asserted
rights of any third party; and
(d) except as permitted by Section 4.1.4 hereof and the Loan
Documents, such Grantor has performed and will continue to perform all acts and
has paid and will continue to pay all required fees and taxes to maintain all
registered
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Patents, Trademarks and Copyrights in full force and effect in the United
States, as applicable.
SECTION 3.1.5. Validity, etc. (a) This Security Agreement is
effective to create, as collateral security for the Obligations of each Grantor,
valid and enforceable Liens on the Collateral in favor of the Administrative
Agent, for the benefit of the Lender Parties, except as enforceability may be
affected by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditor's rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
(b) Upon the completion of the Filings (with respect to
Collateral existing on the Effective Date) and Subsequent Filings (to the extent
necessary with respect to Collateral acquired following the Effective Date for
which the Filings are not effective to perfect the Lien on such after-acquired
Collateral), and the delivery to and continuing possession by the Administrative
Agent of all instruments, investment property, chattel paper and documents a
security interest in which is (or, in the case of investment property, may be)
perfected by possession (which, in the case of such Subsequent Filings and (to
the extent required under Section 3.1.3) such instruments, chattel paper and
negotiable documents, subject to Section 3.1.1 and Section 3.1.3, shall have
occurred prior to any Credit Extensions after the initial Credit Extensions),
the Liens created pursuant to this Security Agreement will constitute valid
Liens on and (to the extent provided herein) perfected security interests in the
Collateral in favor of the Administrative Agent for the benefit of the Lender
Parties, and will be prior to all other Liens of all other Persons other than
Permitted Liens permitted pursuant to Section 7.2.3. of the Credit Agreement,
and enforceable as such as against all other Persons, except (i) to the extent
that the recording of an assignment or other transfer of title to the
Administrative Agent, or the recording of other applicable documents in the
United States Patent and Trademark Office or United States Copyright Office may
be necessary for perfection or enforceability, and (ii) as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law) or by an implied covenant of good faith and fair dealing.
Notwithstanding the foregoing, the representation set forth above shall be
deemed true and correct for all purposes so long as each Grantor has complied
with its covenants set forth under Section 4.1.1, clause(a) of Section 4.1.2
clause(e) of Section 4.1.4, and Section 4.1.7 of this Security Agreement in all
material respects, including the delivery to the Administrative Agent of
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executed financing statements for Subsequent Filings, whether or not the
Administrative Agent has caused such financing statements to be filed in the
applicable filing offices. As used in this Section, the following terms shall
have the following meanings:
"Filings": the filing or recording of the Financing Statements
relating to the Collateral existing on the Effective Date, in the places
specified in Item A.1 of Schedule I hereto.
"Financing Statements": the financing statements delivered to
the Administrative Agent by each Grantor on the date hereof for filing in the
jurisdictions listed in Item A.1 of Schedule I hereto.
"Permitted Liens": Liens permitted pursuant to the Loan
Documents, including those permitted to exist pursuant to Section 7.2.3 of the
Credit Agreement.
"Subsequent Filings": any filings after the date hereof in any
jurisdiction as may be necessary under any requirement of law to perfect a Lien
on the Collateral in favor of the Administrative Agent.
ARTICLE IV
COVENANTS
SECTION 4.1. Certain Covenants. Each Grantor covenants and
agrees insofar as the covenants contained herein are applicable to such Grantor
and its properties, that, so long as any Credit Extensions shall remain unpaid
or any Lender shall have any outstanding Commitment, each Grantor will, unless
the Required Lenders shall otherwise consent in writing, perform the obligations
set forth in this Section.
SECTION 4.1.1. As to Equipment and Inventory. Such Grantor
hereby agrees that it shall keep all the Equipment and Inventory (other than
Equipment and Inventory sold or otherwise disposed of in accordance with the
Credit Agreement and Inventory in transit) at the places therefor specified in
Section 3.1.1 or at such other places in a jurisdiction where all
representations and warranties set forth in Article III shall be true and
correct, and all action required pursuant to the first sentence of Section 4.1.7
shall have been taken with respect to the Equipment and Inventory.
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SECTION 4.1.2. As to Receivables, Etc..
(a) Such Grantor shall give the Administrative Agent a
supplement to Schedule I and Schedule VI hereto on each date a Compliance
Certificate is required to be delivered to the Administrative Agent under the
Credit Agreement, which shall set forth any changes as of such date to the
information set forth in Section 3.1.1, Section 4.1.2(b), Schedule I or Schedule
VI, as applicable. Such Grantor shall be entitled to deliver such a supplement
at other times in addition to the times set forth in the preceding sentence.
Such Grantor shall keep its place(s) of business and chief executive office and
the office(s) where it keeps its records concerning the Receivables located at
the addresses set forth in Item C of Schedule I hereto, or at such other
locations in a jurisdiction where all actions required by the first sentence of
Section 4.1.7 shall have been taken with respect to the Receivables, and shall
not change its name after the Effective Date except upon 30 days' prior written
notice to the Administrative Agent.
(b) Such Grantor shall list each of its Deposit Accounts in
Schedule VI hereto, as such Schedule is supplemented by notice to the
Administrative Agent pursuant to clause (a) of Section 4.1.2. Subject to, and
without limiting the effect of, clause (c) of this Section 4.1.2 each Grantor
shall, following and at the direction of the Administrative Agent, after an
Event of Default has occurred and only so long as an Event of Default shall be
continuing, maintain each of its Deposit Accounts pursuant to a deposit account
agreement which is in all respects satisfactory to the Administrative Agent and
which provides, among other things, that (i) until the deposit account bank
shall have received written notice from the Administrative Agent pursuant to
this clause, the deposit account bank will make all payments from the Deposit
Account as specified by such Grantor, and, after any such notice, the deposit
account bank will make all payments from the Deposit Account to the
Administrative Agent for credit to the Collateral Account, (ii) the deposit
account bank (if other than the Administrative Agent or a Lender) waives all set
off rights (other than setoff rights for reasonable and customary account
service charges and fees and amounts based on items that are dishonored by the
payor thereof and returned to the deposit account bank), and (iii) such deposit
account agreement may not be amended without the written consent of the
Administrative Agent. The Administrative Agent will not give the notice referred
to in the preceding clause (b)(i) unless it has given, or is contemporaneously
giving, notice pursuant to clause (c) of this Section. In the event that a
deposit account bank refuses to enter into a deposit account agreement in
accordance with the above listed terms within 30 days of the requesting
Grantor's request, the Administrative Agent shall have the right to
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direct such Grantor to transfer the assets in that deposit account to a bank
which will enter into a deposit account agreement in accordance with the above
listed terms.
(c) Following the occurrence and during the continuance of a
Default described Section 8.1.9 of the Credit Agreement or an Event of Default,
the Administrative Agent may give written notice to such Grantor that all
proceeds of Collateral received by such Grantor shall thereafter be delivered in
kind to the Administrative Agent for deposit to a deposit account (the
"Collateral Account") of such Grantor maintained with the Administrative Agent,
and after receipt of such notice and until such delivery such Grantor shall not
commingle any such proceeds, and shall hold separate and apart from all other
property, all such proceeds in express trust for the benefit of the
Administrative Agent until delivery thereof is made to the Administrative Agent
or until such Default or Event of Default has been cured or waived. No funds,
other than proceeds of Collateral, will be deposited in the Collateral Account.
(d) Until the Default or the Event of Default referred to in
Section 4.1.2(c) has been cured or waived, the Administrative Agent shall have
the right to apply any amount in the Collateral Account to the payment of any
Obligations which are due and payable or payable upon demand. The Administrative
Agent may at any time transfer to such Grantor's general demand deposit account
at the Administrative Agent any or all of the collected funds after an Event of
Default has occurred and so long as an Event of Default shall be continuing, in
the Collateral Account; provided, however, that any such transfer shall not be
deemed to be a waiver or modification of any of the Administrative Agent's
rights under this clause.
SECTION 4.1.3. As to Collateral.
(a) If there shall have occurred and be continuing a Default
of the nature set forth in Section 8.1.9 of the Credit Agreement or any other
Event of Default, the Administrative Agent may notify any parties obligated on
any of the Collateral to make payment to the Administrative Agent of any amounts
due or to become due thereunder and enforce collection of any of the Collateral
by suit or otherwise and surrender, release, or exchange all or any part
thereof, or compromise or extend or renew for any period (whether or not longer
than the original period) any indebtedness thereunder or evidenced thereby. Upon
request of the Administrative Agent (which request may not be made unless there
shall have occurred and be continuing a Default of the nature set forth in
Section 8.1.9 of the Credit Agreement or any other Event of Default), such
Grantor will, at its own expense, notify any
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parties obligated on any of the Collateral to make payment to the Administrative
Agent of any amounts due or to become due thereunder.
(b) The Administrative Agent is authorized to endorse, in the
name of such Grantor, any item, howsoever received by the Administrative Agent,
representing any payment on or other proceeds of any of the Collateral for
application pursuant to Section 6.1.
SECTION 4.1.4. As to Intellectual Property Collateral. Each
Grantor covenants and agrees to comply with the following provisions as such
provisions relate to any Intellectual Property Collateral to the extent material
to the operations or business of each Grantor:
(a) As to any Patent Collateral that such Grantor may acquire
following the Effective Date, such Grantor shall not, unless such Grantor shall
reasonably and in good faith determine (in which case, Grantor will, in
conjunction with the notices provided under Section 4.1.4(e), give notice of
such determination to the Administrative Agent) that any of the Patent
Collateral is of negligible economic value to such Grantor, do any act, or omit
to do any act, whereby any of the Patent Collateral may lapse or become
abandoned or dedicated to the public or unenforceable.
(b) Such Grantor shall not, and such Grantor shall not permit
any of its licensees to, unless such Grantor shall reasonably and in good faith
determine it could not reasonably be expected to have a Material Adverse Effect,
(i) fail to continue to use any of the Trademarks in order to
maintain all of the Trademarks in full force free from any claim of abandonment
for non-use,
(ii) fail to maintain substantially as in the past the quality
of products and services offered under all of the Trademark Collateral,
(iii) fail to employ all of the Trademarks registered with the
United States Patent and Trademark Office with an appropriate notice of such
registration; and
(iv) do or permit any act or knowingly omit to do any act
whereby any of the Trademark Collateral may lapse or become invalid or
unenforceable.
(c) Such Grantor shall not, unless such Grantor shall either
reasonably and in good faith determine that any of the Copyright Collateral or
Trade
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Secret Collateral, respectively, do or permit any act or knowingly omit to do
any act whereby any of the Copyright Collateral or any of the Trade Secrets
Collateral may lapse or become invalid or unenforceable or placed in the public
domain except upon expiration of the end of an unrenewable term of a
registration thereof.
(d) Such Grantor shall notify the Administrative Agent
promptly if it knows, or has reason to know, that any application or
registration relating to any material Patent, Trademark or Copyright may become
abandoned or dedicated to the public or placed in the public domain or invalid
or unenforceable, or of any adverse determination or development (including the
institution of, or any such determination or development in, any proceeding in
the United States Patent and Trademark Office, the United States Copyright
Office or any court) regarding such Grantor's ownership of any of such material
Patent, Trademark or Copyright, its right to register the same or to keep and
maintain and enforce the same, in each case, which could reasonably be expected
to have a Material Adverse Effect.
(e) Such Grantor shall notify the Administrative Agent with
each delivery of a Compliance Certificate, of the prior filing by such Grantor
of any application for the registration of any Patent, Trademark or Copyright
with the United States Patent and Trademark Office or the United States
Copyright Office, and upon request of the Administrative Agent, execute and
deliver any and all agreements, instruments, documents and papers as the
Administrative Agent may reasonably request (including a Patent Security
Agreement, a Trademark Security Agreement and a Copyright Security Agreement in
the forms of Exhibit A, Exhibit B and Exhibit C hereto, as applicable) to
evidence the Administrative Agent's security interest in such Patent, Trademark
or Copyright and the goodwill and general intangibles of each Grantor relating
thereto or represented thereby.
(f) Such Grantor shall take all commercially reasonable steps,
including in any proceeding before the United States Patent and Trademark Office
or the United States Copyright Office to maintain and pursue any application
(and to obtain the relevant registration) filed with respect to, and to maintain
any registration of, any material Patent, Trademark or Copyright, including the
filing of applications for renewal, affidavits of use, affidavits of
incontestability and opposition, interference and cancellation proceedings and
the payment of fees and taxes (except to the extent that dedication, abandonment
or invalidation is permitted under the foregoing clauses (a), (b) and (c)).
SECTION 4.1.5. Intentionally Omitted.
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SECTION 4.1.6. Intentionally Omitted.
SECTION 4.1.7. Further Assurances, etc. Such Grantor agrees
that, from time to time at its own expense, such Grantor will promptly execute
and deliver all further instruments and documents, and take all further action,
that may be necessary or that the Administrative Agent may reasonably request,
in order to perfect, preserve and protect any security interest granted or
purported to be granted hereby in Collateral located in the United States or to
enable the Administrative Agent to exercise and enforce its rights and remedies
hereunder with respect to any Collateral. Without limiting the generality of the
foregoing, such Grantor will
(a) execute and file such financing or continuation
statements, or amendments thereto, and such other instruments or notices
(including, without limitation, any assignment of claim form under or pursuant
to the federal assignment of claims statute, 31 U.S.C. Section 3726, any
successor or amended version thereof or any regulation promulgated under or
pursuant to any version thereof with respect to any Collateral the value of
which exceeds $500,000, as the Administrative Agent may reasonably request, in
order to perfect and preserve the security interests and other rights granted or
purported to be granted to the Administrative Agent hereby; and
(b) furnish to the Administrative Agent, from time to time at
the Administrative Agent's reasonable request, statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as the Administrative Agent may reasonably request, all in
reasonable detail.
With respect to the foregoing and the grant of the security
interest hereunder, such Grantor hereby authorizes the Administrative Agent 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 such
Grantor where permitted by law. A carbon, photographic or other reproduction of
this Security Agreement or any financing statement covering the Collateral or
any part thereof shall be sufficient as a financing statement where permitted by
law.
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ARTICLE V
THE ADMINISTRATIVE AGENT
SECTION 5.1. Administrative Agent Appointed Attorney-in-Fact.
Each Grantor hereby irrevocably appoints the Administrative Agent such Grantor's
attorney-in-fact, with full authority in the place and stead of such Grantor and
in the name of such Grantor or otherwise, from time to time in the
Administrative Agent's discretion following the occurrence and during the
continuance of an Event of Default and notice to such Grantor, to take any
action and to execute any instrument which the Administrative Agent may deem
necessary or advisable to accomplish the purposes of this Security Agreement,
including, without limitation:
(a) to ask, demand, collect, ▇▇▇ for, recover, compromise,
receive and give acquaintance and receipts for moneys due and to become due
under or in respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause (a) above;
(c) to file any claims or take any action or institute any
proceedings which the Administrative Agent may deem necessary or desirable for
the collection of any of the Collateral or otherwise to enforce the rights of
the Administrative Agent with respect to any of the Collateral; and
(d) to perform the affirmative obligations of such Grantor
hereunder (including all obligations of such Grantor pursuant to Section 4.1.7).
Such Grantor hereby acknowledges, consents and agrees that the
power of attorney granted pursuant to this Section is irrevocable and coupled
with an interest; provided, that the foregoing power of attorney shall terminate
upon the release of the Administrative Agent's Liens on all Collateral pursuant
to Section 2.3.
SECTION 5.2. Administrative Agent May Perform. If any Grantor
fails to perform any agreement contained herein within 30 days after written
notice from the Administrative Agent, the Administrative Agent may itself
perform, or cause performance of, such agreement, and the expenses of the
Administrative Agent incurred in connection therewith shall be payable by such
Grantor pursuant to Section 6.2.
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SECTION 5.3. Administrative Agent Has No Duty. In addition to,
and not in limitation of, Section 2.4, the powers conferred on the
Administrative Agent hereunder are solely to protect its interest (on behalf of
the Lender Parties) in the Collateral and shall not impose any duty on it to
exercise any such powers. Except for reasonable care of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Administrative Agent 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.
SECTION 5.4. Reasonable Care. The Administrative Agent is
required to exercise reasonable care in the custody and preservation of any of
the Collateral in its possession; provided, however, the Administrative Agent
shall be deemed to have exercised reasonable care in the custody and
preservation of any of the Collateral, if it takes such action for that purpose
as each Grantor reasonably requests in writing at times other than upon the
occurrence and during the continuance of any Event of Default, but failure of
the Administrative Agent to comply with any such request at any time shall not
in itself be deemed a failure to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. Certain Remedies. If any Event of Default shall
have occurred and be continuing:
(a) The Administrative Agent may exercise in respect of the
Collateral, in addition to 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 U.C.C. (whether or not the U.C.C. applies to the affected
Collateral) and also may
(i) require each Grantor to, and each Grantor hereby agrees
that it will, at its expense and upon request of the Administrative Agent
forthwith, assemble all or part of the Collateral as directed by the
Administrative Agent and make it available to the Administrative Agent at a
place to be designated by the Administrative Agent which is reasonably
convenient to both parties; and
(ii) 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 the Administrative Agent's offices or elsewhere, for cash, on credit
or for future delivery, and upon such other terms as the Administrative Agent
may deem commercially reason-
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able. Each Grantor agrees that, to the extent notice of sale shall be required
by law, at least ten days' prior notice to each 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. The Administrative Agent shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given. The Administrative Agent 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.
(b) All cash proceeds received by the Administrative Agent in
respect of any sale of, collection from or other realization upon all or any
part of the Collateral may, in the discretion of the Administrative Agent, be
held by the Administrative Agent as collateral for, and/or then or at any time
thereafter applied (after payment of any amounts payable to the Administrative
Agent pursuant to Section 6.2) in whole or in part by the Administrative Agent
for the benefit of the Lender Parties against, all or any part of the
Obligations as follows: (i) first, to the reason able out-of-pocket costs and
expenses of the Administrative Agent in connection with the retaking, holding,
preparing for sale, selling or other disposition of the Collateral, including,
without limitation, all court costs and the reasonable fees and expenses of its
agents and legal counsel; (ii) second, to the payment in full of the Obligations
or in the event that such proceeds are insufficient to pay in full the
Obligations, equally and ratably in accordance with each Lender's respective
amounts owing to it under or pursuant to the Credit Agreement or any other Loan
Document, or under or pursuant to any Rate Protection Agreement (as to each
Lender, applied first to fees and expense reimbursements then due to such
Lender, then to interest due to such Lender, then to pay or prepay principal of
the Loans or owing to, or to reduce the "credit exposure" of, such Lender under
such Rate Protection Agreement, as the case may be, then to pay (or cash
collateralize) the remaining obligations); (iii) third, without duplication of
any amounts paid pursuant to clause (ii) above, to the Indemnified Parties to
the extent of any amounts owing pursuant to Section 10.4 of the Credit
Agreement; and (iv) fourth, to each Grantor, or its successors and assigns, or
whomever may be lawfully entitled to receive the same, of any surplus then
remaining. For purposes of this Agreement, the "credit exposure" at any time of
any Lender under a Rate Protection Agreement to which such Lender is a party
shall be determined at such time in accordance with the customary methods of
calculating credit exposure under similar arrangements by the counterparty to
such arrangements, taking into account potential interest rate movements,
mitigating factors such as other interest rate swaps, caps, collars and ▇▇▇▇▇▇,
and the respective termination provisions and notional principal amount and term
of such Rate Protection Agreement. The Grantor shall remain liable to the
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Lenders for any deficiency. If the Administrative Agent has funds available to
apply to a portion of, but not all of, one of the amounts described in clauses
(i) through (iv) above, then the Administrative Agent shall apply such funds to
the applicable parties in proportion to the amounts to which such parties would
have been entitled if the entire amount described in any such clause had been
available.
SECTION 6.2. Indemnity and Expenses.
(a) Each Grantor jointly and severally agrees to indemnify the
Administrative Agent from and against any and all claims, losses and liabilities
arising out of or resulting from this Security Agreement (including, without
limitation, enforcement of this Security Agreement), except claims, losses or
liabilities resulting from the Administrative Agent's gross negligence or
willful misconduct.
(b) Each Grantor will upon demand pay to the Administrative
Agent the amount of any and all reasonable expenses, including the reasonable
fees and disbursements of its counsel (but not more than one firm and all local
or special expert counsel, if any, who may be retained by counsel to the
Administrative Agent) and of any experts and agents, which the Administrative
Agent may incur in connection with
(i) the administration of this Security 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 the
Administrative Agent or the Lender Parties hereunder, or
(iv) the failure by such Grantor to perform or observe any of
the provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Loan Document. This Security Agreement is a Loan
Document executed pursuant to the Credit Agreement and shall (unless otherwise
expressly indicated herein) be construed, administered and applied in accordance
with the terms and provisions thereof.
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SECTION 7.2. Amendments; etc. No amendment to or waiver of any
provision of this Security Agreement nor consent to any departure by any Grantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Administrative Agent (on behalf of the Lenders or the Required
Lenders, as the case may be) and each Grantor (other than with respect to
consent or waiver), and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
SECTION 7.3. Addresses for Notices. All notices and other
communications provided to each Grantor under this Security Agreement shall be
in writing or by facsimile and addressed, delivered or transmitted to each
Grantor at its address or facsimile number as set forth in the Subsidiary
Guaranty, or at such other address or facsimile number as may be designated by
such Grantor in a notice to the other parties. Any notice, if mailed and
properly addressed with postage prepaid or if properly addressed and sent by
pre-paid courier service, shall be deemed given when received; any notice, if
transmitted by facsimile, shall be deemed given when transmitted.
SECTION 7.4. Section Captions. Section captions used in this
Security Agreement are for convenience of reference only, and shall not affect
the construction of this Security Agreement.
SECTION 7.5. Severability. Wherever possible each provision of
this Security Agreement shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Security Agreement
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Security Agreement.
SECTION 7.6. Governing Law, Entire Agreement, etc. THIS
SECURITY AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY
OR 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. THIS SECURITY AGREEMENT AND THE OTHER LOAN
DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND SU-
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PERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 7.7 Counterparts. This Security Agreement may be
executed by the parties hereto in any number of counterparts, each of which
shall be deemed an original and all of which shall constitute together but one
and the same agreement.
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IN WITNESS WHEREOF, each Grantor has caused this Security
Agreement to be duly executed and delivered by its officer thereunto duly
authorized as of the date first above written.
WINCHESTER PASTA, LLC
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President, Finance
and Chief Financial Officer
PASTA GROUP, LLC
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President, Finance
and Chief Financial Officer
THE BANK OF NOVA SCOTIA,
as Administrative Agent
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Senior Relationship Manager
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