EXHIBIT 10.(a)(a)
SECURITY AGREEMENT
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This SECURITY AGREEMENT, dated as of April 21, 1999, is made by Guest
Supply, Inc., a New Jersey corporation (the "Pledgor"), in favor of PNC Bank,
National Association, as Collateral Agent (the "Collateral Agent") for the
benefit of the Secured Parties, as such term is defined in the Collateral Agency
and Intercreditor Agreement dated as of April 21, 1999 (as the same may be
amended, modified or supplemented from time to time, the "Collateral Agency and
Intercreditor Agreement") by and among Pledgor, Guest Packaging, Inc., Guest
Distribution Services, Inc., ▇▇▇▇▇▇▇▇▇▇▇▇-▇▇▇▇ Co. and ▇▇▇▇▇▇▇ Enterprises,
Inc., PNC Bank, National Association in its capacity as Agent for the Lenders
party to the Revolving Credit Agreement, the Lenders, and J. ROMEO & CO., as
nominee for MONY Life Insurance Company (formerly The Mutual Life Insurance
Company of New York), ▇▇▇▇ & Co., as nominee for AUSA Life Insurance Company,
Inc., Great-West Life & Annuity Insurance Company and Nationwide Life and
Annuity Insurance Company, each in its capacity as a Senior Noteholder under the
Senior Note Purchase Agreements.
W I T N E S S E T H :
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WHEREAS, all financial accommodations outstanding as of the date
hereof and to be made in the future to the Borrower Group by the Secured Parties
pursuant to the terms and conditions of the Secured Party Agreements are to be
secured by, among other collateral, the assignment, grant and pledge by the
Pledgor to the Collateral Agent for the benefit of the Secured Parties of a
continuing security interest in all of the (i) Accounts, (ii) Contracts and
contract rights, (iii) Chattel Paper, (iv) Documents, (v) Equipment, (vi)
General Intangibles, (vii) Instruments, (viii) Inventory and (ix) Fixtures of
the Pledgor, whether now owned or hereafter acquired; and
WHEREAS, one of the conditions precedent to the obligation of the
Secured Parties to maintain the credit facilities described in the Secured Party
Agreements is that the Pledgor execute and deliver this Security Agreement to
the Collateral Agent for the benefit of the Secured Parties.
NOW, THEREFORE, in consideration of the premises, to induce the
Secured Parties to maintain the credit facilities described in the Secured Party
Agreements and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Pledgor hereby agrees with the
Collateral Agent and the Secured Parties, as follows:
1. Defined Terms. (a) Unless otherwise defined herein, terms which
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are defined in the Collateral Agency and Intercreditor Agreement and used
herein are used herein as defined in the Collateral Agency and Intercreditor
Agreement.
(b) The following terms which are defined in the UCC (as such
term is defined below) on the date hereof are used herein as so defined:
Accounts, Account debtor, Chattel Paper, Documents, Equipment, Fixtures, General
Intangibles, Goods, Instruments, Inventory, Proceeds and Products.
(c) The following terms shall have the following meanings:
"Borrower Group" means, collectively, Guest Supply,
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Inc., Guest Packaging, Inc., Guest Distribution Services, Inc., ▇▇▇▇▇▇▇▇▇▇▇▇-
▇▇▇▇ Co., ▇▇▇▇▇▇▇ Enterprises, Inc. and any other Person which may become a
Borrower under the Revolving Credit Agreement or an obligor under the Senior
Notes.
"Collateral" shall have the meaning assigned to it in
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Section 2 of this Security Agreement;
"Contracts" means all contracts to which the Pledgor
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is now or hereafter becomes a party, including, in each case, without
limitation, (a) all rights of the Pledgor to receive moneys due and to become
due to it thereunder or in connection therewith, (b) all rights of the Pledgor
to damages arising out of, or for, breach or default in respect thereof, (c) all
rights of the Pledgor to terminate the contracts, to perform thereunder and to
compel performance and to otherwise exercise all remedies thereunder, and (d)
any other rights or benefits arising under any other contract entered into by
the Pledgor;
"Lenders" means, collectively, PNC Bank, National
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Association, First Union National Bank and Fleet Bank, N.A.
"Obligations" means all indebtedness, liabilities and
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obligations (whether denominated as principal, fees, interest or otherwise
including amounts that, but for the initiation of any proceeding under any
insolvency or bankruptcy law, would become due) of (i) any Person constituting
the Borrower Group to the Collateral Agent and/or any of the Secured Parties,
whether direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of, or in connection
with the Secured Party Agreements, and (ii) the Pledgor to the Collateral Agent
and or any of the Secured Parties whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred, which
may arise under, out of, or in connection with this Security Agreement or the
Collateral Agency and Intercreditor Agreements;
"Revolving Credit Agreement" means the Amended and
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Restated Revolving Credit Agreement dated as of April 21, 1999 among Guest
Supply, Inc., Guest Packaging, Inc., Guest Distribution Services, Inc.,
▇▇▇▇▇▇▇▇▇▇▇▇-▇▇▇▇ Co. and ▇▇▇▇▇▇▇ Enterprises, Inc. and PNC Bank, National
Association, as Agent, and the Lenders.
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"Security Agreement" means this Security Agreement, as
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amended, supplemented or otherwise modified from time to time; and
"Secured Parties" means, collectively, the Agent under
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the Revolving Credit Agreement, the Lenders and the Senior Noteholders.
"Senior Note Purchase Agreements" means, collectively
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(i) the Note Purchase Agreements dated as of December 3, 1997 by and among the
Borrower Group and the Senior Noteholders as amended by Amendment No. 1 to
Senior Note Purchase Agreements, and (ii) the Senior Notes and all other
documents, instruments, and agreements executed and delivered in connection
therewith.
"UCC" means the Uniform Commercial Code as from time
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to time in effect in the State of New Jersey; provided, that if by reason of
mandatory provisions of law, the perfection or the effect of perfection or non-
perfection of any Lien on any Collateral is governed by the Uniform Commercial
Code as in effect in a jurisdiction other than New Jersey, "UCC" means the
Uniform Commercial Code as in effect in such other jurisdiction for purposes of
the provisions hereof relating to such perfection or the effect of perfection or
non-perfection. References to sections of the UCC shall be construed as
necessary to refer to any successor sections of the UCC.
2. Grant of Security Interest. As collateral security for the prompt
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and complete payment and performance when due (whether at stated maturity, by
acceleration or otherwise) of the Obligations, and subject in all respects to
the Collateral Agency and Intercreditor Agreement, the Pledgor hereby mortgages,
pledges, assigns, hypothecates and grants to the Collateral Agent, for the
benefit of the Collateral Agent and the Secured Parties, a continuing security
interest in all of the following property now owned or at any time hereafter
acquired by the Pledgor or in which the Pledgor now has or at any time in the
future may acquire any right, title or interest (collectively, the
"Collateral"):
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(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Contracts and contract rights, including without
limitation all of Pledgors rights and remedies under, and all monies and claims
for monies due or to become due under the Stock Purchase Agreement (as defined
in the Revolving Credit Agreement) and Escrow Agreement dated as of April 23,
1999 by and among ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, as Trustees of The ▇▇▇▇▇▇▇
Family Trust, ▇▇▇▇▇▇▇▇▇▇▇▇-▇▇▇▇ Co., Guest Supply Inc. and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇▇, as Escrow Agent;
(iv) all Documents;
(v) all General Intangibles, including, without limitation,
all trade secrets, tradenames, copyrights, copyright applications, patent
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applications, patents, trademarks, trademark registrations and applications
therefor;
(vi) all Instruments;
(vii) all Equipment
(viii) all Inventory;
(ix) any and all deposits (general or special, including,
but not limited to, Indebtedness evidenced by certificates of deposit,
whether matured or unmatured but not including trust accounts) and any
other Indebtedness at any time held or owing by the Collateral Agent or any
Lender to or for the credit or the account of the Pledgor;
(x) any and all claims or payments made under any
insurance policy;
(xi) all interest of the Pledgor in any goods the sale or lease of
which shall have given or shall give rise to, and in all guaranties and
other property securing the payment of or performance under, any Accounts,
Contracts, General Intangibles or any Chattel Paper or Instruments referred
to above;
(xii) any and all personal property of any Person of any kind or
description subject to a separate mortgage, pledge or security interest in
favor of the Pledgor or in which the Pledgor now or hereafter has or
acquires a security interest securing any indebtedness, pursuant to any
written agreement or instrument other than this Security Agreement;
(xiii) all replacements, substitutions, additions or accessions to
or for any of the foregoing;
(xiv) to the extent related to the property described above, all
books, correspondence, credit files, records, invoices and other papers and
documents, including, without limitation, to the extent so related, all
tapes, cards, computer runs, computer programs and electronic, magnetic or
other archival systems or papers and documents in the possession or control
of the Pledgor or any computer or service bureau from time to time acting
for the Pledgor;
(xv) all property or interests in property of the Pledgor which
now may be owned or hereafter may come into the possession, custody or
control of the Collateral Agent or any Secured Party, or any agent or
affiliate of the Collateral Agent or any Secured Party (whether for
safekeeping, deposit, custody, pledge, transmission, collection or
otherwise), including, without limitation, all rights and interests of the
Pledgor in respect of any and all
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(a) notes, drafts, letters of credit, stocks, bonds, and debt
and equity securities, whether or not certificated, and warrants, options,
puts, calls and other rights to acquire or otherwise relating to the same,
(b) cash, and
(c) proceeds of loans, advances and other financial
accommodations; and
(xvi) to the extent not otherwise included, all Proceeds and
products of any and all of the foregoing.
The Liens and security interests granted to the Collateral Agent pursuant to
this Section 2 shall be subject in all respects to the Collateral Agency and
Intercreditor Agreement.
3. Rights of Collateral Agent; Limitations on Collateral Agent's
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Obligations.
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(a) Pledgor Remains Liable under Accounts and Contracts. Anything
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herein to the contrary notwithstanding, the Pledgor shall remain liable under
each of the Accounts and Contracts to observe and perform all the conditions and
obligations to be observed and performed by it thereunder, all in accordance
with the terms of any agreement giving rise to each such Account and in
accordance with and pursuant to the terms and provisions of each such Contract.
Neither the Collateral Agent nor any Secured Party shall have any obligation or
liability under any Account (or any agreement giving rise thereto) or Contract
by reason of or arising out of this Security Agreement or the receipt by the
Collateral Agent or any Secured Party of any payment relating to such Account or
Contract pursuant hereto, nor shall the Collateral Agent or any Secured Party be
obligated in any manner to perform any of the obligations of the Pledgor under
or pursuant to any Account (or any agreement giving rise thereto) or under or
pursuant to any Contract, to make any payment, to make any inquiry as to the
nature or the sufficiency of any payment received by any of them or as to the
sufficiency of any performance by any party under any Account (or any agreement
giving rise thereto) or under any Contract, to present or file any claim, to
take any action to enforce any performance or to collect the payment of any
amounts which may have been assigned to them or to which they may be entitled at
any time or times.
(b) Notice to Account Debtors and Contracting Parties. After the
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occurrence and during the continuance of an Event of Default, upon the request
of the Collateral Agent at any time, the Pledgor shall notify Account debtors on
the Accounts and the parties to the Contracts that the Accounts and the
Contracts have been assigned to the Collateral Agent and the Secured Parties and
that payments in respect thereof shall be made directly to the Collateral Agent
for the benefit of the Secured Parties. Prior to the occurrence of an Event of
Default, the Collateral Agent may, with the consent of Pledgor (which consent
shall not be unreasonably withheld or delayed) and, after the occurrence and
during the continuance of an Event of Default, the Collateral Agent may, at any
time, in its own name or in the names of others communicate with Account debtors
on the Accounts and the parties to the Contracts to verify with them to its
satisfaction the existence, amount and terms of any Accounts or Contracts. The
costs relating to the foregoing matters, including reasonable attorneys' fees
and out of pocket expenses shall be borne solely by the Pledgor whether incurred
by the Collateral Agent, the Secured Parties or the Pledgor.
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(c) Analysis of Accounts. Upon reasonable notice to the Pledgor, the
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Collateral Agent, on behalf of the Secured Parties shall have the right to make
test verifications of the Accounts in any manner and through any medium that it
reasonably considers advisable, and the Pledgor shall furnish all such
assistance and information as the Collateral Agent may require in connection
therewith. At any time and from time to time, upon the Collateral Agent's
request and at the expense of the Pledgor, the Pledgor shall furnish to the
Collateral Agent reports showing reconciliations, aging and test verifications
of, and trial balances for, the Accounts.
4. Representations and Warranties. The Pledgor hereby represents and
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warrants that:
(a) Title; No Other Liens. The Pledgor has good and marketable title
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to the Collateral, subject to no Liens except the Lien granted hereby. No
security agreement, financing statement or other public notice with respect to
all or any part of the Collateral is on file or of record in any public office
except such as may have been filed pursuant hereto or pursuant to the Collateral
Agency and Intercreditor Agreement or as to which UCC-3 termination statements
have been received and filed or which have expired and not been renewed.
Informational filings with respect to leased equipment and certain unexpired
filings of Chemical Bank New Jersey, N.A. filed in 1994 (Pledgor representing
that it owes no monies to, and has no commitment to lend from, Chemical Bank New
Jersey, N.A.) shall not constitute a breach of this representation.
(b) Perfected First Priority Liens. When appropriate financing
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statements have been filed by the Collateral Agent in the jurisdictions listed
on Schedule A hereto against the Pledgor, the Liens granted pursuant to this
Security Agreement will constitute perfected Liens (to the extent such Liens can
be perfected by filing) on the Collateral in favor of the Collateral Agent and
the Secured Parties, which are prior to all other Liens on the Collateral, and
which are enforceable as such against all creditors of the Pledgor.
(c) Accounts. The amount represented by the Pledgor to the
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Collateral Agent from time to time as owing by each Account Debtor or by all
Account Debtors in respect of the Accounts will at such time be the correct
amount actually owing by such Account Debtor or Debtors thereunder. The
place(s) where the Pledgor keeps its books and records concerning the Accounts
is as set forth on Schedule B hereto.
(d) Contracts. No consent of any Person (other than the Pledgor),
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including, without limitation, any Governmental Authority, to any Contract is
required, or purports to be required, in connection with the execution, delivery
and performance of this Security Agreement in respect of rights described in
clause (a) of the definition of "Contracts" and, to Pledgor's actual knowledge,
no such consent with respect to any other rights described in the definition of
Contracts (other than Contracts to which Pledgor is a party, as lessee) is
required or purports to be required, in connection with the execution, delivery
and performance of this Security Agreement. To the best knowledge of the
Pledgor each Contract is in full force and effect and constitutes a valid and
legally enforceable obligation of the parties thereto, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or similar
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laws affecting that enforcement of creditor's rights generally. No consent or
authorization of, filing with or other act by or in respect of any Governmental
Authority is required in connection with the execution, delivery, performance,
validity or enforceability of any of the Contracts by any party thereto other
than those which have been duly obtained, made or performed, are in full force
and effect and do not subject the scope of any such Contract to any adverse
limitation, either specific or general in nature. Neither the Pledgor nor (to
the best of the Pledgor's knowledge) any other party to any Contract is in
default in the performance or observance of any of the terms thereof. The
Pledgor has fully performed all its material obligations under each Contract
required to be performed as of the date hereof. To the best knowledge of the
Pledgor the right, title and interest of the Pledgor in, to and under each
Contract are not subject to any defense, offset, counterclaim or claim which
would materially adversely affect the value of such Contract as Collateral, nor
have any of the foregoing been asserted or alleged against the Pledgor as to any
Contract. The Pledgor has made available to the Collateral Agent and Secured
Parties a complete and correct copy of each Contract, including all amendments,
supplements and other modifications thereto.
(e) Inventory and Equipment. The Inventory and Equipment is kept,
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from time to time, at the locations listed on Schedule C hereto.
(f) Chief Executive Office. The Pledgor's chief executive
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office is as set forth on Schedule B annexed hereto.
(g) Other Places of Business. The Pledgor's other places of business
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are as set forth on Schedule B annexed hereto, and if no other places of
business are set forth on Schedule B then Pledgor has no other place of business
other than its chief executive office as set forth in Section 4(f) above.
(h) Trade Names. Certain Accounts may be and/or certain of the
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Pledgor's invoices may be, from time to time, rendered to customers under the
trade names listed on Schedule B (which together with any new trade names used
after the date hereof are referred to collectively, as the "Trade Names" and
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each individually, as a "Trade Name"). As to such Trade Names and the related
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Accounts, the Pledgor hereby warrants and agrees that:
(i) each Trade Name is a trade name and style (and not the name of an
independent corporation or other legal entity) by which the Pledgor may identify
and sell certain of its goods or services and conduct a portion of its business
and Pledgor has filed or made all public or other notices in any jurisdiction
required to lawfully operate under such Trade Names.
(ii) all Accounts, Chattel Paper, Instruments and Proceeds thereof and
returned merchandise which arise from the sale of goods invoiced under the Trade
Names are and shall be (x) owned solely by the Pledgor and (y) subject to the
security interest and other terms of this Security Agreement;
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(iii) new Trade Names may only be used by the Pledgor after the
Collateral Agent is given thirty (30) days prior written notice of the use of
any such new Trade Name, which notice shall set forth the name of such new Trade
Name; and
(iv) the Pledgor does not use any Trade Name other than the
Trade Names listed on Schedule B hereto.
(i) Rolling Stock. The Pledgor does not own any railroad cars,
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locomotives or other rolling stock used or intended for use in interstate
commerce.
(j) Patents, Trademarks, Copyrights. Except as set forth on Schedule
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D, the Pledgor does not own, license or have rights in or to any trademark,
patent or copyright and has not filed and is not in the process of filing any
application with any Governmental Authority to obtain any of the foregoing.
Except as set forth on Schedule D, the Pledgor does not need or require a
license or right to use any patent, copyright, trademark or service ▇▇▇▇ to
conduct its business.
5. Covenants. The Pledgor covenants and agrees that, from and after
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the date of this Security Agreement until the Obligations are paid in full:
(a) Further Documentation; Pledge of Instruments and Chattel Paper.
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At any time and from time to time, upon the written request of the Collateral
Agent and at the sole expense of the Pledgor, the Pledgor will promptly and duly
execute and deliver such further instruments and documents and take such further
action as the Collateral Agent may reasonably request for the purpose of
obtaining or preserving the full benefits of this Security Agreement and the
rights and powers herein granted, including, without limitation, the filing of
documents with the Office of Patents and Trademarks and the filing of any
financing or continuation statements under the UCC in effect in any jurisdiction
with respect to the Liens created hereby. The Pledgor also hereby authorizes the
Collateral Agent, or any agent acting for the benefit and on behalf of the
Collateral Agent and the Secured Parties to file any such financing or
continuation statement without the signature of the Pledgor to the extent
permitted by applicable law. A carbon, photographic or other reproduction of
this Security Agreement shall be sufficient as a financing statement for filing
in any jurisdiction. If any amount payable under or in connection with any of
the Collateral shall be or become evidenced by any Instrument or Chattel Paper,
such Instrument or Chattel Paper shall, after the occurrence and during the
continuance of an Event of Default, be immediately delivered to the Collateral
Agent, duly endorsed in a manner satisfactory to the Collateral Agent to be held
as Collateral pursuant to this Security Agreement.
(b) Indemnification. The Pledgor agrees to pay, and to save the
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Collateral Agent and the Secured Parties harmless from, any and all
liabilities, costs and expenses (including without limitation, reasonable legal
fees and expenses) (i) with respect to, or resulting from, any delay in paying,
any and all excise, sales or other taxes which may be payable or determined to
be payable with respect to any of the Collateral, (ii) with respect to, or
resulting from, any delay in complying with any Requirement of Law applicable to
any of the Collateral, (iii) with respect to fees, taxes or other costs incurred
with respect to recording UCC financing
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statements or other public recordings or notices of security interests, or (iv)
in connection with any of the transactions contemplated by this Security
Agreement or the enforcement of the Collateral Agent's and the Secured Parties'
rights hereunder, except those liabilities, costs and expenses arising out of
the Collateral Agent's or the Secured Parties' gross negligence or willful
misconduct. In any suit, proceeding or action brought by the Collateral Agent
and the Secured Parties' under any Account for any sum owing thereunder or to
enforce any provisions of any Account or Contract the Pledgor will save,
indemnify and keep the Collateral Agent and the Secured Parties' harmless from
and against all expense, loss or damage suffered by the Collateral Agent and the
Secured Parties' in such action commenced in connection with the enforcement of
any provision of any Account or Contract except for expenses, loss or damage
arising out of the gross negligence or willful misconduct of the Collateral
Agent (in the case of indemnified amounts which would otherwise be owing to the
Collateral Agent) or the applicable Secured Party seeking indemnification.
(c) Maintenance of Records. The Pledgor will keep and maintain at
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its own cost and expense, complete records of the Collateral, including, without
limitation, a record of all payments received and all credits granted with
respect to the Collateral. The Pledgor will ▇▇▇▇ its books and records
pertaining to the Collateral to evidence this Security Agreement and the
security interests granted hereby. For the Collateral Agent's and the Secured
Parties' further security, the Collateral Agent and the Secured Parties shall
have a security interest in all of the Pledgor's books and records pertaining to
the Collateral. Upon reasonable notice from Collateral Agent to Pledgor prior
to an Event of Default and upon demand after the occurrence and during the
continuance of an Event of Default, the Pledgor shall make available all such
books and records to the Collateral Agent or the Secured Parties or to their
respective representatives during normal business hours at the request of the
Collateral Agent.
(d) Right of Inspection. The Collateral Agent and the Secured
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Parties shall at all times have full and free access during normal business
hours, upon reasonable prior notice, to all the books, correspondence and
records of the Pledgor and the Collateral Agent and the Secured Parties or their
respective representatives may examine the same and make photocopies thereof,
and the Pledgor agrees to render to the Collateral Agent and the Secured Parties
such clerical and other assistance as may be reasonably requested with regard
thereto. The Collateral Agent and the Secured Parties shall also have the
right, during normal business hours and subject to any landlord's rights, to
enter into and upon any premises where any of the Inventory is located for the
purpose of inspecting the same, observing its use or otherwise protecting its
interests therein.
(e) Compliance with Laws, etc. The Pledgor will comply with all
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Requirements of Law applicable to the Collateral or any part thereof except
where the failure so to comply would not have a Material Adverse Effect (as
defined in the Revolving Credit Agreement).
(f) Compliance with Terms of Contracts, etc. The Pledgor will
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perform and comply in all material respects with all its obligations under any
agreements, documents and other instruments relating to the Collateral except
where the failure to so perform will not have a Material Adverse Effect.
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(g) Payment of Obligations. The Pledgor will pay, as the same become
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due, all obligations (including without limitation, any and all lease
obligations and warehouse charges), taxes and governmental fees, charges or
levies imposed upon the Collateral or in respect of its income or profits
therefrom, as well as all claims of any kind (including, without limitation,
claims for labor, materials and supplies) against or with respect to the
Collateral; provided, that it may protest the payment of, and withhold payment
during such protest of, any such obligations, taxes, fees, charges or levies or
claims if it is acting in good faith and reserves in conformity with GAAP with
respect thereto have been provided on its books unless such protest violates
Section 5(h) below.
(h) Limitation on Liens on Collateral. The Pledgor will not create,
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incur or permit to exist, will defend the Collateral against, and will take such
other action as is necessary to remove, any Lien or claim on or to the
Collateral, other than the Liens created hereby and Liens for taxes not yet due
and payable and will defend the right, title and interest of the Collateral
Agent and the Secured Parties in and to any of the Collateral against the claims
and demands of all Persons whomsoever except Persons claiming under this
Security Agreement.
(i) Limitations on Dispositions of Collateral. Except for disposal
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of obsolete items, the Pledgor will not sell, transfer, lease or otherwise
dispose of any Collateral, except as permitted by the Revolving Credit Agreement
and Senior Note Purchase Agreements.
(j) Limitations on Modifications, Waivers and Extensions of Contracts
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and Agreements Giving Rise to Accounts. The Pledgor will not (i) amend, modify,
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terminate or waive any provision of any Contract or any agreement giving rise to
any Account with a value equal to or in excess of $________ in any manner which
could reasonably be expected to materially adversely affect the value of such
Contract or Account as Collateral, or, in the case of any Contract or agreement
giving rise to any Account with a value of less than $_____ in any manner which
could reasonably be expected to materially adversely affect the value of
Pledgor's Contracts or Accounts as Collateral taken as a whole, (ii) except in
the exercise of prudent business judgment, fail to exercise promptly and
diligently each and every right which it may have under each Contract, or
agreement giving rise to an Account or (iii) fail to deliver to the Collateral
Agent (after request by it) a copy of each material demand, notice or document
received by it relating in any way to any Contract.
(k) Limitations on Discounts, Compromises and Extensions of Accounts
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and Contracts. Other than in the ordinary course of business as generally
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conducted by the Pledgor over a period of time, and in any event, after the
occurrence and during the continuance of an Event of Default, the Pledgor will
not grant any extension of the time of payment of any of the Accounts or
payments of any amounts due under any of the Accounts or payments of any amounts
due under any Contract, compromise, compound or settle the same for less than
the full amount thereof, release, wholly or partially, any Person liable for the
payment thereof, or allow any credit or discount whatsoever thereon.
(l) Maintenance of Equipment. The Pledgor will maintain each item
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of Equipment in good operating condition, ordinary wear and tear and immaterial
impairments of
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value and damage by the elements excepted, and will provide all
maintenance, service and repairs reasonably necessary for such purpose.
(m) Maintenance of Insurance. The Pledgor will maintain, with
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financially sound and reputable companies, insurance policies (i) insuring the
Inventory and Equipment against loss by fire, explosion, theft, such other
casualties as may be reasonably satisfactory to the Collateral Agent and (ii)
insuring the Pledgor and the Collateral Agent against liability for personal
injury and property damage relating to such Inventory and Equipment, such
policies to be in such form and amounts and having such coverage as may be
reasonably satisfactory to the Collateral Agent, with losses payable to the
Pledgor and the Collateral Agent, provided, that all payments to be made to the
Collateral Agent under such policies in an aggregate amount not exceeding
$1,000,000 in any calendar quarter may be used by Pledgor to repair or replace
damaged or destroyed Inventory or Equipment. The Collateral Agent shall be
provided all evidence and documents necessary to demonstrate the use of such
insurance proceeds. All such insurance shall (i) provide that no cancellation,
material reduction in amount or material change in coverage thereof shall be
effective until at least 30 days after receipt by the Collateral Agent of
written notice thereof, (ii) name the Collateral Agent as loss payee, (iii)
provide that the Collateral Agent shall have the right, but not the obligation,
to pay premiums thereon, and (iv) be reasonably satisfactory in all other
respects to the Collateral Agent. Upon the request of the Collateral Agent, the
Pledgor shall deliver to the Collateral Agent a report of a reputable insurance
broker with respect to such insurance during each calendar year and such
supplemental reports with respect thereto as the Collateral Agent may from time
to time reasonably request.
(n) Further Identification of Collateral. The Pledgor will furnish
------------------------------------
to the Collateral Agent from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as the Collateral Agent may reasonably request, all in
reasonable detail.
(o) Notices. The Pledgor will advise the Collateral Agent promptly,
-------
in reasonable detail, by written notice (i) of any Lien (other than Liens
created or permitted hereby) on, or material claim asserted against, any of the
Collateral and (ii) of the occurrence of any other event which could reasonably
be expected to have any material adverse effect on the aggregate value of the
Collateral or on the Liens created hereunder.
(p) Changes in Locations, Name, etc. The Pledgor will not (i) change
-------------------------------
the location of its chief executive office or other places of business from that
specified in Sections 4(f) and 4(g), respectively, or remove its books and
records from the location specified in Section 4(c), (ii) permit any of the
Inventory to be kept at a location other than that listed in Schedule C hereto,
or (iii) change its name, taxpayer identification number, identity or corporate
structure to such an extent that any financing statement filed by the Collateral
Agent, or any agent acting for the benefit and on behalf of the Collateral
Agent, in connection with this Security Agreement would become misleading,
unless it shall have given the Collateral Agent at least 30 days prior written
notice thereof.
11
(q) Limitation on Assignments. Pledgor will not, without the consent
-------------------------
of Collateral Agent, agree to any provision in any Contract or other agreement
constituting Collateral, which purports to limit Pledgor's rights to pledge or
assign the right to payment of monies due or to become due thereunder.
6. Appointment as Attorney-in-Fact.
-------------------------------
(a) Powers. The Pledgor hereby irrevocably constitutes and appoints
------
the Collateral Agent for the benefit of the Collateral Agent and the Secured
Parties, with full power of substitution, as its true and lawful attorney-in-
fact with full irrevocable power and authority in the place and stead of the
Pledgor and in the name of the Pledgor or in its own name, from time to time in
the Collateral Agent's discretion, for the purpose of carrying out the terms of
this Security Agreement, to execute UCC-1 Financing Statements in the Pledgor's
name as debtor and, upon the occurrence and during the continuance of any Event
of Default, to take any and all appropriate action and to execute any and all
documents and instruments which may be necessary or desirable to accomplish the
purposes of this Security Agreement, and without limiting the generality of the
foregoing, the Pledgor hereby gives the Collateral Agent for the benefit for the
Collateral Agent and the Secured Parties, the power and right (but not the
obligation), on behalf of the Pledgor, without notice to or assent by the
Pledgor, to do the following:
(i) in the case of any Collateral, at any time when any Event of
Default shall have occurred and be continuing, in the name of the Pledgor or its
own name, or otherwise, to open mail addressed to the Pledgor, to take
possession of and endorse and collect any checks, drafts, notes, acceptances or
other instruments for the payment of moneys due under any Account, Instrument,
General Intangible or Contract or contract right or with respect to any other
Collateral and to file any claim or to take any other action or proceeding in
any court of law or equity or otherwise deemed appropriate by the Collateral
Agent for the purpose of collecting any and all such moneys due under any such
Account, Instrument, General Intangible or contract right or with respect to any
other Collateral whenever payable;
(ii) to pay or discharge taxes and Liens levied or placed on the
Collateral, to effect any repairs or any insurance called for by the terms of
this Security Agreement and to pay all or any part of the premiums therefor and
the costs thereof; and
(iii) upon the occurrence and during the continuance of any Event of
Default, (A) to direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due thereunder
directly to the Collateral Agent or the Collateral Agent and the Secured
Parties; (B) to ask or demand for, collect, receive payment of and receipt for,
any and all moneys, claims and other amounts due or to become due at any time in
respect of or arising out of any Collateral; (C) to sign and endorse any
invoices, freight or express bills, bills of lading, storage or warehouse
receipts, drafts against debtors, assignments, verifications, notices and other
documents in connection with any of the Collateral; (D) to commence and
prosecute any suits, actions or proceedings at law or in equity in any court of
competent jurisdiction to collect the Collateral or any thereof and to enforce
any other right in respect of any Collateral; (E) to defend any suit, action or
proceeding brought against the Pledgor with respect to any Collateral; (F) to
settle, compromise or adjust any suit, action or proceeding
12
described in clause (E) above and in connection therewith, to give such
discharges or releases as the Collateral Agent may deem appropriate; and (G)
generally, to sell, transfer, pledge and make any agreement with respect to or
otherwise deal with any of the Collateral as fully and completely as though the
Collateral Agent was the absolute owner thereof for all purposes, and to do at
the Collateral Agent's option and the Pledgor's expense, at any time, or from
time to time, all acts and things which the Collateral Agent deems necessary to
protect, preserve or realize upon the Collateral and the Liens granted hereunder
and to effect the intent of this Security Agreement, all as fully and
effectively as the Pledgor might do.
The Pledgor hereby ratifies all that said attorney shall lawfully do or cause to
be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
(b) Other Powers. The Pledgor also authorizes the Collateral Agent,
------------
for the benefit of the Collateral Agent and the Secured Parties, at any time and
from time to time, to execute, in connection with the sale provided for in
Section 9 hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
(c) No Duty on Collateral Agent's Part. The powers conferred on the
----------------------------------
Collateral Agent and the Secured Parties hereunder are solely to protect their
interests in the Collateral and shall not impose any duty upon the Collateral
Agent and the Secured Parties to exercise any such powers. Each Secured Party
shall be accountable only for amounts that it actually receives as a result of
the exercise of such powers. None of the Collateral Agent or the Secured
Parties or any of their respective officers, directors, employees or agents
shall be responsible to the Pledgor for any act or failure to act hereunder,
except for their own gross negligence or willful misconduct.
(d) Trademarks and Licences. The Pledgor further grants to the
-----------------------
Collateral Agent for the benefit of the Collateral Agent and the Secured Parties
an irrevocable, non-exclusive license at no charge to use the trademarks,
patents, copyrights and licenses used by Pledgor in connection with the sale of
goods including, without limitation, those listed on Schedule D annexed hereto
associated with the Collateral in connection with any foreclosure or liquidation
together with the right to grant a nonexclusive sublicense without charge to any
buyer of such Collateral for the purpose of resale. All such licenses and
rights to sublicense include all computer programs and other Collateral used in
connection with such trademarks.
7. Performance by Collateral Agent of Pledgor's Obligations. If the
--------------------------------------------------------
Pledgor fails to perform or comply with any of its agreements contained herein
and the Collateral Agent shall perform or comply, or otherwise cause performance
or compliance, with such agreement, the expenses of the Collateral Agent
incurred in connection with such performance or compliance, together with
interest thereon at a rate per annum equal to the highest interest rate
prescribed in the Credit Agreement, shall be payable by the Pledgor to the
Collateral Agent on demand and shall constitute Obligations secured hereby.
8. Proceeds. If an Event of Default shall occur and be continuing,
--------
all proceeds of Collateral received by the Pledgor consisting of cash, checks
and cash equivalents (other than the payment prior to the occurrence of an Event
of Default of interest accrued on Accounts or
13
Instruments) shall be held by the Pledgor in trust for the Collateral Agent, for
the benefit of the Collateral Agent and the Secured Parties, segregated from
other funds of the Pledgor, and shall, forthwith upon receipt by the Pledgor, be
turned over to the Collateral Agent in the exact form received by the Pledgor
(duly endorsed by the Pledgor to the Collateral Agent, if required). Any and all
such proceeds of Collateral received by the Collateral Agent (whether from the
Pledgor or otherwise) may, in the sole discretion of the Collateral Agent, be
held by the Collateral Agent as collateral security for, and/or then or at any
time thereafter may be applied by the Collateral Agent against, the Obligations
then due and payable, such application to be in such order as is required by the
Collateral Agency and Intercreditor Agreement.. Any balance of such proceeds
remaining after the Obligations shall have been paid in full shall be paid over
to the Pledgor or to whomsoever may be lawfully entitled to receive the same.
9. Remedies. If an Event of Default shall occur and be continuing,
--------
the Collateral Agent and the Secured Parties may exercise, in addition to all
other rights and remedies granted to the them in this Security Agreement and in
any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the UCC or any
other applicable laws. Without limiting the generality of the foregoing, the
Collateral Agent and the Secured Parties, without demand of performance or other
demand, presentment, protest, advertisement or notice of any kind (except any
notice required by law) to or upon the Pledgor or any other Person (all and each
of which demands, presentments, protests, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
lease, assign, give option or options to purchase, or otherwise dispose of and
deliver the Collateral or any part thereof (or contract to do any of the
foregoing) in one or more parcels at public or private sale or sales, at any
exchange, broker's board or office of the Collateral Agent or any of the Secured
Parties or elsewhere upon such terms and conditions as they may deem advisable
and at such prices as they may deem best, for cash or on credit or for future
delivery without assumption of any credit risk. The Secured Parties shall have
the right upon any such public sale or sales, and, to the extent permitted by
law, upon any such private sale or sales, to purchase the whole or any part of
the Collateral so sold. The Pledgor further agrees, at the Collateral Agent's
request, to assemble the Collateral and make it available to the Collateral
Agent at places which the Collateral Agent shall reasonably select, whether at
the Pledgor's premises or elsewhere. Subject to the terms of the Collateral
Agency and Intercreditor Agreement, the Collateral Agent shall apply the net
proceeds of any such collection, recovery, receipt, appropriation, realization
or sale, after deducting all reasonable costs and expenses of every kind
incurred therein or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of the
Collateral Agent and the Secured Parties hereunder, including, without
limitation, reasonable attorneys' fees and disbursements, to the payment in
whole or in part of the Obligations, in such order as is required by the
Collateral Agency and Intercreditor Agreement, and only after such application
and after the payment to the Collateral Agent of any other amount required by
any provision of law, including, without limitation, any provision of the UCC,
need the Collateral Agent account for the surplus, if any, to the Pledgor. To
the extent permitted by applicable law, the Pledgor waives all claims, damages
and demands it may acquire against the Collateral Agent or the Secured Parties
arising out of the exercise by the Collateral Agent and the Secured Parties of
any of their respective rights hereunder except any arising out of their gross
negligence or willful misconduct. If any notice of
14
a proposed sale or other disposition of Collateral shall be required by law,
such notice shall be deemed reasonable and proper if given at least 10 days
before such sale or other disposition.
10. Limitation on Duties Regarding Preservation of Collateral. The
---------------------------------------------------------
Collateral Agent's sole duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession, under the UCC or
otherwise, shall be to deal with it in the same manner as the Collateral Agent
deals with similar property for its own account. Neither the Collateral Agent,
any of the Secured Parties or any of their respective directors, officers,
employees or agents shall be liable for failure to demand, collect or realize
upon all or any part of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of the Pledgor or otherwise.
11. Powers Coupled with an Interest. All authorizations and agencies
-------------------------------
herein contained with respect to the Collateral are coupled with an interest and
are irrevocable.
12. Severability. Any provision of this Security Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
13. Section Headings. The section headings used in this Security
----------------
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
14. No Waiver; Cumulative Remedies. None of the Collateral Agent or
------------------------------
the Secured Parties shall by any act (except by a written instrument pursuant to
Section 15 hereof), delay, indulgence, omission or otherwise be deemed to have
waived any right or remedy hereunder or to have acquiesced in any Event of
Default or in any breach of any of the terms and conditions hereof. No failure
to exercise, nor any delay in exercising, on the part of the Collateral Agent or
the Secured Parties, of any right, power or privilege hereunder shall operate as
a waiver thereof. No single or partial exercise of any right, power or
privilege hereunder shall preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. A waiver by the Collateral
Agent or the Secured Parties of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which the
Collateral Agent and the Secured Parties would otherwise have on any future
occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any rights or remedies
provided by law.
15. Waivers and Amendments; Successors and Assigns; Governing Law.
-------------------------------------------------------------
(a) None of the terms or provisions of this Security Agreement may be waived,
amended, supplemented or otherwise modified except by a written instrument
executed by the Pledgor and the Collateral Agent. It is understood that the
Collateral Agent's ability to grant waivers other accommodation hereunder is
governed by the Collateral Agency and Intercreditor Agreement.
15
(b) This Security Agreement shall be binding upon the successors and
assigns of the Pledgor and shall inure to the benefit of the Collateral Agent
and the Secured Parties and their respective successors and assigns. This
Security Agreement shall be governed by, and be construed and interpreted in
accordance with, the laws of the State of New Jersey (without regard to
conflicts of law principles thereof), except to the extent that the validity,
perfection or enforcement of the security interests hereunder, or remedies
hereunder, in respect of any particular Collateral located outside the
boundaries of the State of New Jersey are governed by the laws of a jurisdiction
other than the State of New Jersey.
16. Notices. Unless otherwise specified herein, all notices,
-------
requests, consents, approvals, demands or other communications to or from the
parties hereto shall be in writing and shall be deemed to have been duly given
and made, when personally delivered by courier or, if mailed, three Business
Days after the date when sent by registered or certified mail, postage prepaid,
or if telecopied, when sent to the telecopier number set forth herein. Any such
notice, request, demand or other communication shall be delivered or addressed
as follows: (i) if to the Pledgor to it at c/o Guest Supply, Inc., ▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇ One, Box 902, Monmouth Junction, New Jersey 08852-0902, Attention: ▇▇▇▇
▇▇▇▇▇, Phone: ▇▇▇-▇▇▇-▇▇▇▇, Fax: ▇▇▇-▇▇▇-▇▇▇▇ with a copy to: ▇▇▇▇▇▇ & ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. Cost, Esq.,
Phone: ▇▇▇-▇▇▇-▇▇▇▇, Fax: ▇▇▇-▇▇▇-▇▇▇▇ and (ii) if to the Collateral Agent to
its office located at ▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇/▇▇/ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, telephone: ▇▇▇-▇▇▇-▇▇▇▇,
telecopier: ▇▇▇-▇▇▇-▇▇▇▇, or at such other address as either party hereto may
designate by written notice to the other party hereto.
17. Jurisdiction. The Pledgor hereby irrevocably submits to the
------------
jurisdiction of any court of the State of New Jersey or Federal court sitting in
the State of New Jersey in any action or proceeding arising out of or relating
to this Agreement and the Pledgor hereby irrevocably agrees that all claims in
respect of such action or proceeding may be heard and determined in such court
of the State of New Jersey, or to the extent permitted by law, in such Federal
court. The Pledgor hereby irrevocably waives, to the fullest extent it may
effectively do so, the defense of an inconvenient forum to the maintenance of
such action or proceeding. The Pledgor also irrevocably consents to the service
of any and all process in any such action or proceeding arising out of or in
connection with this Agreement by the mailing of copies of such process to the
Pledgor at the address and in the manner specified in Section 16 hereof. The
Pledgor agrees that a final and non-appealable judgment (or a judgment whose
time to appeal has expired) in any such action or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on the judgment or in any
other manner provided by law. THE PLEDGOR AND THE COLLATERAL AGENT HEREBY WAIVE
TRIAL BY JURY IN ANY ACTION OR PROCEEDING (INCLUDING ANY COUNTERCLAIM) IN ANY
COURT ARISING ON, OUT OF, OR IN ANY WAY RELATING TO THIS AGREEMENT OR ANY
AMENDMENT OR SUPPLEMENT HERETO OR THERETO OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.
18. Pledge and Assignment Absolute. All rights of the Collateral
------------------------------
Agent and the Secured Parties, the pledge and assignment hereunder and all
obligations of the Pledgor hereunder, shall be absolute and unconditional,
irrespective of:
16
(i) any lack of validity or enforceability of the Credit Agreement or
any of the Senior Note Purchase Agreements, any other document or any other
agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations or any other amendment or waiver
of or any consent to any departure from the Credit Agreement or any of the
Senior Note Purchase Agreements;
(iii) any exchange, release or non-perfection of any other Collateral,
or any release or amendment or waiver of or consent to departure from this
Agreement or any other Collateral Document; or
(iv) any other circumstance that might otherwise constitute a defense
available to, or a discharge of, the Pledgor.
19. Indemnity and Expenses. (a) The Pledgor agrees to indemnify the
----------------------
Collateral Agent from and against any and all claims, losses and liabilities
growing out of or resulting from this Agreement (including, without limitation,
enforcement of this Agreement), except claims, losses or liabilities resulting
from the Collateral Agent's gross negligence or willful misconduct.
(b) The Pledgor will upon demand pay to the Collateral Agent the
amount of any and all reasonable expenses, including, without limitation, the
reasonable fees and disbursements of its counsel and of any experts and agents,
which the Collateral Agent may incur in connection with (i) the administration
of this Agreement, (ii) the custody, preservation, or use 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 Collateral Agent hereunder,
or (iv) the failure by the Pledgor to perform or observe any of the provisions
hereof.
IN WITNESS WHEREOF, the Pledgor has caused this Security Agreement to
be duly executed and delivered as of the date first above written.
GUEST SUPPLY, INC.
By:___________________________
Name:
Title:
17
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF __________ )
: ss.:
COUNTY OF _________ )
Before me, the undersigned, a Notary Public in and for the county
aforesaid, on this _____ day of ___________ 1999, personally appeared
____________________, to me known personally, and who, being by me duly sworn,
deposes and says that he is the ________________________ of Guest Supply, Inc.
and that the seal affixed to the foregoing instrument is the corporate seal of
said corporation, and that said instrument was signed and sealed on behalf of
said corporation by authority of its Board of Directors, and said
____________________ acknowledged said instrument to be the free act and deed of
said corporation.
_________________
Notary Public
18
Schedule A
----------
Jurisdictions for filing UCC-1's (Section 4(b))
-----------------------------------------------
19
Schedule B
----------
a)65535 Location of Pledgor's books and records concerning Accounts:
b)65535 Location of Pledgor's chief executive office:
c)65535 Location of Pledgor's other places of business:
d)65535 Trade Names:
20
Schedule C
----------
Location(s) of the Pledgor's Inventory:
Locations of Equipment:
21
Schedule D
----------
Patents, Trademarks, Copyrights
22