Exhibit 10.2
INTERCREDITOR
AGREEMENT
This INTERCREDITOR
AGREEMENT, dated as of June 30, 2004 (this “ Agreement ”), is made by and
between U.S. BANK NATIONAL ASSOCIATION, in its capacity as trustee
under the Indenture (as defined below) and as secured party under
the Security Agreement (as defined in the Indenture) (together with
its successors in such capacities, the “ Trustee ”), and TEXAS STATE
BANK, as the lender (the “ Bank ”) under the Credit
Agreement (as defined below).
RECITALS
WHEREAS, The
Wornick Company, a Delaware corporation (the “
Issuer ”), the
Guarantors (as defined in the Indenture referred to below) and the
Trustee entered into that certain Indenture, dated as of the date
hereof (as amended, restated, supplemented, or otherwise modified
from time to time, the “ Indenture ”), whereby
indebtedness was incurred by the Issuer, the repayment of which is
guaranteed by the Guarantors and secured by a continuing security
interest in and lien on substantially all of the assets of the
Issuer and the Guarantors (other than the Excluded Assets (defined
therein)) (the “ Collateral ”);
WHEREAS, the
Issuer, the Guarantors and the Bank entered into that certain Loan
Agreement, dated as of the date hereof (as amended, restated,
supplemented or otherwise modified from time to time, the “
Credit Agreement
”), whereby the Bank agreed, upon the terms and conditions
stated therein, to make loans and advances to, or to issue letters
of credit (or guaranties in respect thereof) for the account of the
Issuer, the repayment of which is secured by a continuing security
interest in and lien on the Collateral in accordance with the
Credit Agreement and all other Loan Documents (as defined in the
Credit Agreement) (collectively, the “ Credit Documents
”);
WHEREAS, one of
the conditions of the Credit Agreement is that the security
interest in the Collateral under the Credit Documents be senior in
priority to the security interest in the Collateral under the
Indenture Documents (defined below) in the manner and to the extent
provided for in this Agreement;
WHEREAS, the
Trustee and the Bank desire to enter into this Agreement concerning
their respective rights with respect to the priority of their
respective security interests in the Collateral; and
WHEREAS, the terms
of the Indenture permit the Issuer and the Guarantors to enter into
the Credit Agreement, and in connection therewith, authorize and
direct the Trustee to enter into an intercreditor agreement in the
form of this Agreement.
NOW, THEREFORE,
the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1
Definitions
. In addition to the
capitalized terms defined above, as used in this Agreement, the
following capitalized terms are used:
“
Credit Facility
Indebtedness ” means all present and future
Obligations (as defined in the Credit Agreement), contingent or
otherwise, of the Issuer and the Guarantors to the Senior Creditor
arising under or pursuant to the Credit Documents, including, in
each case, interest, fees, and expenses accruing after the
initiation of any Insolvency Proceeding (irrespective of whether
allowed as a claim in such proceeding), and also including the
secured claims of the Senior Creditor in respect of the Collateral
in any Insolvency Proceeding.
“
Enforcement Action
” means, with respect to the Trustee or the Senior Creditor,
(a) the commencement of any action, whether judicial or otherwise,
for the enforcement of such Party’s rights and remedies as a
secured creditor with respect to the Collateral, including the
commencement of any receivership or foreclosure proceedings
against, or any other sale of, collection on, or disposition of,
any Collateral, or any exercise of remedies with respect to the
Collateral under the Indenture Documents or the Credit Documents;
(b) notifying any third-party account debtors of the Issuer, any
Guarantor or any of their respective subsidiaries to make payment
directly to such Party or to any of its agents or other Persons
acting on its behalf; or (c) following the commencement of an
Insolvency Proceeding against the Issuer or any Guarantor,
exercising any rights afforded to secured creditors in a case under
the Bankruptcy Code that directly relates to or directly affects
any of the Collateral.
“
Enforcement Event
” means the occurrence and continuance of an Event of
Default.
“
Enforcement Event
Notice ” has the meaning set forth in Section
3.2(a) .
“
Entitled Party
” has the meaning set forth in Section 4.1(a)
.
“
Event of Default
” has the meaning set forth in the Financing
Documents.
“
Expiry Date ”
has the meaning set forth in Section 3.2(b)(i) .
“
Financing Documents
” means the Indenture Documents and the Credit
Documents.
“
Fully Paid ”
means the payment in cash or cash equivalents in full of all
obligations (other than inchoate indemnity obligations that survive
payment in full) under the Credit Documents or the Indenture
Documents, as the case may be, and in the case of the Credit
Documents, at such time when there shall no longer be any
obligation to make loans or advances or issue letters of credit (or
guaranties in respect thereof) thereunder and there shall no longer
be any letter of credit (or guaranty in respect thereof)
outstanding thereunder or such letter of credit (or guaranty in
respect thereof) shall have been fully cash collateralized (in
accordance with the provisions of the Credit Documents).
“
Indenture Documents
” means the Indenture, the Notes, the Security Documents and
the Registration Rights Agreement, and such other agreements,
instruments and certificates executed and delivered (or issued) by
the Issuer or the Guarantors pursuant to the Indenture, as any or
all of the same may be amended, restated, supplemented or otherwise
modified from time to time.
“
Insolvency Proceeding
” means any proceeding for the purposes of dissolution,
winding up, liquidation, arrangement or reorganization of the
Issuer, any Guarantor, or any other subsidiary of the Issuer, or
its successors or assigns, whether in bankruptcy, insolvency,
arrangement, reorganization or receivership proceedings, or upon an
assignment for the benefit of
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creditors or any other
marshaling of the assets and liabilities of the Issuer, any
Guarantor, or any other subsidiary of the Issuer, or its successors
or assigns.
“
Lien Priority ”
means, with respect to any Lien in and to the Collateral, the order
of priority of such Lien as specified in Sections 2.1 and
2.2 .
“
Maximum Amount
” means an aggregate amount of Credit Facility Indebtedness
incurred and outstanding at any time ( plus any Refinancing Indebtedness
incurred to retire, defease, refinance, replace or refund such
Indebtedness) of up to the greater of (a) $15.0 million,
plus any
Indebtedness owing to the Senior Creditor certified by the Issuer
to the Senior Creditor at the time of incurrence to be permitted
under the Indenture pursuant to clause (ii) of paragraph (g) or
paragraph (h) of the definition of “Permitted
Indebtedness,” minus the amount of any such
Indebtedness certified by the Issuer to the Senior Creditor to be
(1) retired with the Net Cash Proceeds from any Asset Sale or Event
of Loss applied to permanently reduce the outstanding amounts or
the commitments with respect to such Indebtedness pursuant to
Section 4.13 of the Indenture, or (2) assumed by a transferee in an
Asset Sale, and (b) the sum of (i) 85% of the net book value of
accounts receivable of the Issuer and the Subsidiaries, and (ii)
65% of the net book value of inventory of the Issuer and the
Subsidiaries, in the case of each of clauses (b)(i) and (ii), as
determined by the Issuer in accordance with GAAP as of the date or
dates of incurrence of such Indebtedness under the Credit
Agreement, and which Indebtedness is certified by the Issuer to the
Senior Creditor at the time of incurrence as permitted under the
Indenture, and including accounts receivable and inventory acquired
with the proceeds of the substantially concurrent incurrence of
Indebtedness under the Credit Agreement, plus in the instance of either
clause (a) or (b), all related interest, fees, indemnities, costs
and expenses.
“
Notes ” means
the senior secured notes issued under the Indenture.
“
Party ” means
any signatory to this Agreement.
“
Secured Liability
” means the Subordinated Lien Indebtedness and the Credit
Facility Indebtedness.
“
Senior Creditor
” means the Bank or, if applicable, the administrative agent
(or similar designation, if the Credit Facility Indebtedness is
syndicated among a group of lenders) under the Credit
Agreement.
“
Subordinated Lien
Indebtedness ” means all present and future
obligations, contingent or otherwise, of the Issuer and the
Guarantors to the Trustee or the Holders arising under or pursuant
to the Indenture Documents, including, in each case, interest, fees
and expenses accruing after the initiation of any Insolvency
Proceeding (irrespective of whether allowed as a claim in such
proceeding), and including the secured claims of the Trustee or the
Holders in respect of the Collateral in any Insolvency
Proceeding.
“
Trigger Date ”
means the earlier of (i) the date on which an event contemplated by
clause (b) or (c) of the definition of Trigger Event occurs, (ii)
the date on which an Enforcement Event Notice is delivered, and
(iii) the final maturity date of the Credit Facility Indebtedness
(after giving effect to any extensions granted
thereunder).
“
Trigger Event ”
means:
(a)
the occurrence of an Event
of Default,
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(b)
the acceleration of the
maturity of the Credit Facility Indebtedness by the Senior Creditor
pursuant to the Credit Agreement, or
(c)
the commencement of any
action or proceeding by the Senior Creditor, whether judicial or
otherwise (but excluding demands for payment or notices of
default), for the enforcement of the Senior Creditor’s rights
and remedies under any of the Credit Documents, including (i)
commencement of any Enforcement Action against or any other sale
of, collection on or disposition of any Collateral, including any
notification to third parties to make payment directly to the
Senior Creditor; (ii) exercise of any right of set-off; (iii)
commencement of any Insolvency Proceeding; and (iv) commencement of
any judicial action or proceeding against the Issuer or any
Guarantor to recover all or any part of the Credit Facility
Indebtedness.
Section 1.2
Indenture
Definitions . Undefined capitalized terms have the
meanings assigned to them in the Indenture.
Section 1.3
Miscellaneous . All definitions herein (whether set
forth herein directly or by reference to definitions in other
documents) shall be equally applicable to both the singular and the
plural forms of the terms defined. The words
“hereof,” “herein” or
“hereunder” and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement. The term
“including” (and similar terms) means “including
without limitation.”
ARTICLE II
LIEN PRIORITY
Section 2.1
Agreement to
Subordinate Liens . The Trustee hereby agrees that the
Liens of the Trustee for the benefit of itself and the Holders in
and to the Collateral are and shall be subordinate in priority to
the Liens of the Senior Creditor in and to the Collateral securing
the Credit Facility Indebtedness up to, but not in excess of, the
Maximum Amount; provided that, the rights of the
Senior Creditor under this Agreement shall be void and of no
further force and effect if, and only to the extent that, the Liens
of the Senior Creditor in and to the Collateral are avoided,
disallowed, set aside or otherwise invalidated in any action or
proceeding by a court, tribunal or administrative agency of
competent jurisdiction. The subordination of the Liens of the
Trustee for the benefit of itself and the Holders in and to the
Collateral in favor of the Senior Creditor provided for herein
shall not be deemed to (a) subordinate the Liens of the Trustee to
the Liens of any other Person, or (b) subordinate the Subordinated
Lien Indebtedness to any Indebtedness of the Issuer or any of the
Guarantors, including the Credit Facility Indebtedness.
Section 2.2
No Contest; Excluded
Assets .
Each Party agrees that it will not attack or contest the validity,
perfection, priority or enforceability of the Liens of the other
Party (and the Trustee agrees that it will not contest the Senior
Creditor’s good faith reliance on any certification
referenced in the definition of “Maximum Amount” made
by the Issuer to the Senior Creditor), or finance or urge any other
Person to do so; provided that, either Party may
enforce its rights and privileges hereunder without being deemed to
have violated this provision. Any provision contained in this
Agreement to the contrary notwithstanding, the terms and conditions
of this Agreement shall not apply to any property or assets
(including property or assets that do not constitute Collateral)
that one Party has a Lien on and the other Party does
not.
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Section 2.3
Exercise of
Rights .
(a)
The Trustee may exercise,
and nothing herein shall constitute a waiver of, any right it may
have at law or in equity to receive notice of, or to commence or
join with any creditor in commencing any Insolvency Proceeding;
provided that, the
exercise of any such right by the Trustee shall be (i) subject to
the Lien Priority and the application of proceeds of Collateral
under Section 3.4 , and (ii) subject to the provisions of
Sections 3.1 and 3.2 .
(b)
Notwithstanding any other
provision hereof, the Trustee may make such demands or file such
claims as may be necessary to prevent the waiver or bar of such
claims under applicable statutes of limitations or other statutes,
court orders or rules of procedure.
Section 2.4
Priority of
Liens .
Irrespective of the order of recording of mortgages, financing
statements, security agreements or other instruments, and
irrespective of the descriptions of Collateral contained in the
Financing Documents, including any financing statements, the
Parties agree among themselves that their respective Liens in the
Collateral shall be governed by the Lien Priority, which shall be
controlling in the event of any conflict between this Agreement and
any of the Financing Documents.
ARTICLE III
ACTIONS OF THE PARTIES
Section 3.1
Limitation on Certain
Actions .
Subject to Section 3.2 , until the earlier of (a) the date
on which all Credit Facility Indebtedness is Fully Paid, and (b)
the first date following the date on which the Maximum Amount of
Credit Facility Indebtedness is Fully Paid, the Trustee will not,
without the prior written consent of the Senior Creditor, take any
Enforcement Action.
Section 3.2
Standstill
Period .
(a)
If an Enforcement Event
with respect to the Indenture Documents has occurred and is
continuing, the Trustee, on behalf of the Holders, will give the
Senior Creditor written notice thereof (an “ Enforcement Event Notice
”).
(b)
The Trustee may, subject
to the Lien Priority and the application of all proceeds of the
Collateral in accordance with Section 3.4 , take one or more
Enforcement Actions so long as:
(i)
(A) an Enforcement Event
is continuing for more than 45 consecutive days after the delivery
of an Enforcement Event Notice (the “ Expiry
