Document:

Exhibit
10.3

 

LOAN AGREEMENT

 

THIS LOAN AGREEMENT
(“Agreement”) is made and entered into as of June 30, 2004, by and among
TEXAS STATE BANK (“Lender”), THE WORNICK COMPANY, a Delaware corporation
(“Borrower”), RIGHT AWAY MANAGEMENT CORPORATION, a Delaware corporation, THE
WORNICK COMPANY RIGHT AWAY DIVISION, a Delaware corporation, and THE WORNICK
COMPANY RIGHT AWAY DIVISION, L.P., a Delaware limited partnership.

 

RECITALS

 

WHEREAS, Borrower has
requested Lender to make the Revolving Loan (hereinafter defined) and the other
loans to Borrower as described below, the proceeds of which shall be applied by
Borrower for working capital and other general corporate purposes; and

 

WHEREAS, Lender is
willing to make the Revolving Loan and the other loans to Borrower on the
condition that (i) Lender will  have
valid and enforceable first, superior and senior liens and security interests
in the Collateral (hereinafter defined) securing the Obligations (hereinafter
defined) until the Obligations have been fully satisfied and (ii) Borrower
complies strictly with the terms and conditions of this Agreement.

 

NOW, THEREFORE, in
consideration of the mutual covenants and agreements contained herein,
Lender,  Borrower and the Subsidiaries
(hereinafter defined) do hereby agree as follows:

 

ARTICLE 1.

 

Definition of
Terms

 

Section 1.01                                Definitions.
As used in this Agreement, and unless the context otherwise requires, the
following terms shall have the respective meanings indicated below:

 

(a)                                  “Accounts
Receivable” shall mean all accounts and accounts receivable now and hereafter
owned or acquired by Borrower and the Subsidiaries, all of which shall be
pledged to Lender as Collateral for the Obligations.

 

(b)                                 “Advance”
or “Advances” shall mean the disbursement or disbursements of a sum or sums
loaned or to be loaned by Lender to Borrower pursuant to the Obligations.

 

(c)                                  “Annual
Commitment Fee” shall mean $37,500.

 

(d)                                 “Asset
Transaction” shall mean the transactions contemplated by the December 3,
2003, Assets Purchase and Sale Contract between The Wornick Company, a Nevada
corporation, and its subsidiaries, The Wornick Company Right Away Division, a
Nevada corporation, The Wornick Company Right Away Division, L.P., a Texas
limited partnership,  and Right Away
Management Corporation, a Texas corporation, as sellers, and Borrower, as
amended.

 

 

(e)                                  “Borrower”
shall mean The Wornick Company, a Delaware corporation.

 

(f)                                    “Borrowing
Base” shall mean the sum of: (i) ninety percent (90%) of Eligible Accounts
Receivable that arise from Government Contracts; and (ii) eighty percent (80%)
of Eligible Accounts Receivable that arise from sources other than Government
Contracts; and (iii) eighty percent (80%) of Eligible Inventory that are
attributable to Government Contracts; and (iv) sixty percent (60%) of Eligible
Inventory that are attributable to sources other than Government Contracts; and
(v) fifty percent (50%) of the value of all Parts Inventory; and (vi)
twenty-five percent (25%) of the agreed value of all Fixed Assets (subject to
the limitations in Section 2.08 of this Agreement).

 

(g)                                 “Borrowing
Date” shall mean a date upon which an Advance is to be made pursuant to an
Obligation.

 

(h)                                 “Business
Day” shall mean a day when Lender is open for business, excluding Saturdays.

 

(i)                                     “Cash”
shall mean any and all cash balances of Borrower and the Subsidiaries, all of
which shall be pledged by Borrower and the Subsidiaries to secure the
Obligations.

 

(j)                                     “Collateral”
shall mean all collateral now or hereafter securing the Obligations including,
without limitation, all of Borrower’s and the Subsidiaries’ assets, including
Cash, Deposit Accounts, Accounts Receivable, Contracts, Inventory, Equipment,
Fixed Assets, Parts Inventory, instruments, documents, chattel paper (whether
tangible or electronic), letter-of-credit
rights (whether or not the letter of credit is evidenced by a writing),
commercial tort claims, securities and all other investment property,
supporting obligations, Fixtures, Intangibles, leasehold interest in the
Property, and insurance claims and proceeds, 
and  the Ownership Interests held
by Borrower, its Subsidiaries and TWC.

 

(k)                                  “Computation
Date” shall mean : (i) the date reflected in any
Draw Request, or (ii) any other date on which Lender elects to value those
components of the Collateral included in the calculation of the Borrowing Base
or the Maximum Amount.

 

(l)                                     “Contracts”
shall mean any and all contracts of the Borrower and the Subsidiaries with
third parties for the sale of goods or services, and shall include specifically
but without limitation any and all Government Contracts, all of which shall be
pledged by Borrower and the Subsidiaries to secure the Obligations.

 

(m)                               “Daily
Administrative Fee” shall mean a daily administrative fee payable by Borrower
to Lender associated with the unfunded portion (“Unfunded Portion”) of the
$10,000,000 loan commitment granted by Lender to Borrower under the terms of
this Loan Agreement which is unrelated to any unfunded portion of the Revolving
Loan.  The daily administrative fee shall
be computed by multiplying the Unfunded Amount by .00125 and dividing the
result by 360.

 

(n)                                 “Debtor
Relief Laws” shall mean any applicable liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, insolvency, reorganization, or similar
laws affecting the rights or remedies of creditors generally, as in effect from
time to time.

 

2

 

(o)                                 “Default” or “Event of Default” shall mean
the occurrence of any such event set forth in Article 10 hereof.

 

(p)                                 “Deposit Accounts” shall mean any and all
deposit accounts of Borrower and the Subsidiaries, all of which shall be pledged to secure the Obligations.

 

(q)                                 “Eligible Accounts Receivable” shall mean all
Accounts Receivable evidenced by invoices issued by Borrower and the
Subsidiaries for performance of
services or delivery of products fully and satisfactorily performed to account
debtor’s acceptance, less: (i) any account outstanding more than ninety (90)
days from the invoice date; (ii) any account in dispute, including accounts in
dispute due to the United States Government’s suspension or denial of payment
based on the pending novations of the Government Contracts required of the
Prior Wornick Parties (hereinafter defined) under the Asset Transaction; and
(iii) any related, intercompany or affiliate accounts, unless the account is
otherwise acceptable to Lender (in writing and at Lender’s sole discretion) for
inclusion as an Eligible Account Receivable. Eligible Accounts Receivable shall
specifically exclude any amounts contractually owing to Borrower and the
Subsidiaries but which have not been invoiced.

 

(r)                                    “Eligible
Inventory” shall mean all raw materials, work-in-progress and finished goods or
packaging materials of Borrower and the Subsidiaries valued at the lower of
cost or market value, which are subject, in Lender’s sole judgment, to a valid,
existing prior lien in favor of Lender.

 

(s)                                  “Equipment”
shall mean, collectively, all trucks, tractors, trailers, buses, automobiles,
replacement parts, related equipment and accessories, fork lifts, tools,
furniture, advertising equipment (including signs, racks and shelves in the
trade), assembly line and manufacturing equipment and machinery, sales training
equipment, office equipment, computer hardware and software, office supplies,
sales of literature and other promotional goods and materials, and, other
tangible personal property located on the Property or used in Borrower’s and
the Subsidiaries’ business in which Borrower or the Subsidiaries hereafter own
an interest, but shall not include any such aforementioned items leased to
Borrower by any person or entity, all of which shall be pledged to secure the
Obligations.

 

(t)                                    “Financing
Statements” shall mean the Form UCC-1 financing statements securing the
Obligations, to be filed with the appropriate offices for the perfection of a
security interest in the Collateral.

 

(u)                                 “Fixed
Assets” shall mean all tangible
personal property of Borrower and the Subsidiaries, such as Equipment
and Fixtures, all of which shall be pledged to secure the Obligations.  Initially,
the agreed value of Fixed Assets will be based on the information prepared by
Standard and Poor’s Corporate Value Consulting, dated as of May 1, 2004, and
delivered to Lender on or prior to the Closing Date.    At least once each year,  on the anniversary date of this Agreement,
the Fixed Assets portion of the Borrowing Base will be adjusted to reflect the
value, as mutually agreed by Lender and Borrower; however,

 

3

 

nothing herein shall prohibit the adjustment of the Fixed Assets value
as mutually agreed to by Lender and Borrower at any other time during the term
of this Agreement.

 

(v)                                 “Fixtures”
shall mean any and all fixtures now or hereafter owned by Borrower and the
Subsidiaries, all of which shall be pledged to secure the Obligations.

 

(w)                               “GAAP”
shall mean generally accepted accounting principles and practices consistently
applied.

 

(x)                                   “Government
Contracts” shall have the definition assigned to it in Section 6.08 below.

 

(y)                                 “Guaranty”
shall mean the guaranty agreements of even date herewith executed by the
Subsidiaries for the benefit of Lender.

 

(z)                                   “Indenture”
shall mean an indenture among  Borrower,
the Guarantors named therein and U. S. Bank National Association, as trustee,
providing for the issuance of notes by Borrower in the maximum aggregate
principal amount of $125,000,000, which 
notes shall be secured by subordinate liens and security interests in
the Collateral, subject to certain exceptions.

 

(aa)                            “Intangibles”
shall mean all intangible and intellectual property rights of Borrower and the
Subsidiaries, including the rights in and to the names and any and all other
intangibles now or hereafter used by Borrower and the Subsidiaries in
connection with their respective businesses, all of which shall be pledged to
Lender to secure the Obligations.

 

(bb)                          “Inventory”
shall mean all raw materials, work in process and finished goods inventory now
or hereafter owned or acquired by Borrower and the Subsidiaries, all of which
shall be pledged to Lender as Collateral for the Obligations.

 

(cc)                            “Intercreditor
Agreement” shall mean that certain agreement of even date herewith between
Lender and U.S. Bank National Association, as the trustee under the Indenture.

 

(dd)                          “Leasehold
Deed of Trust” shall collectively refer to the Leasehold Deed of Trust (With
Security Agreement - Financing Statement and Assignment of Rents and Leases) of
even date herewith executed by The Wornick Company Right Away Division,
L.P.  to Paul S. Moxley, Trustee,
describing certain liens and security interests against certain property in
Hidalgo County, Texas, and the Open-Ended Leasehold Mortgage and Security
Agreement executed by Borrower of even date herewith describing liens and
security interests against certain property in Hamilton County, Ohio, in each
case given to secure the payment of the Obligations.

 

(ee)                            “Leases”
shall collectively refer to those leases on the Property now or hereafter
entered into, or assigned to, Borrower and any Subsidiary, and any other real
property leases hereafter entered into by Borrower or any Subsidiary.

 

4

 

(ff)                                “Lender”
shall mean the party named as Lender in the first paragraph of this Agreement,
or any successor or assign of said Lender, it being acknowledged and agreed by
Borrower that Lender shall have the right to assign all or any part of the
Obligations and the Collateral, including participation interests therein.

 

(gg)                          “Loan
Documents” shall mean this Agreement, the Revolving Note, the Leasehold Deed of
Trust, the Security Agreement, the Pledge Agreement, the Financing Statements,
the Guaranty, and such other and all instruments (whether executed prior to,
contemporaneously with or subsequent to the date hereof) evidencing, securing
or pertaining to the Revolving Loan, and any other  Obligations and extensions of credit by
Lender to Borrower pursuant to this Agreement, as the same shall from time to
time be executed and delivered by Borrower, the Subsidiaries, TWC (hereinafter
defined) or any other party to Lender pursuant to such extension of credit, and
all amendments, modifications, renewals, extensions, increases and
rearrangements of, and substitutions for, any of the foregoing.

 

(hh)                          “Maximum
Amount” shall have the meaning assigned to such term in the Intercreditor
Agreement.

 

(ii)                                  “Obligations”
shall mean all present and future extensions of credit, obligations and
indebtedness, and all renewals and extensions thereof or any part thereof, of
Borrower and the Subsidiaries to Lender arising pursuant to this Agreement or
any other Loan Documents, including extensions of credit, obligations and
indebtedness incurred pursuant to the Revolving Note, the Guaranty, and any
documents evidencing additional credit facilities permitted under
Section 2.01 hereof, all interest accruing thereon, all attorneys’ fees
and costs incurred in the enforcement or collection thereof, and all amounts
advanced by Lender for the protection of the Collateral (including taxes,
insurance and repairs), regardless of whether such obligations and indebtedness
are direct, indirect, fixed, contingent, liquidated, unliquidated, joint,
several, or joint and several.

 

(jj)                                  “Ownership
Interests” shall mean: all issued and outstanding shares of the common capital
stock of Borrower; all issued and outstanding shares of the common capital
stock of Right Away Management Corporation; all issued and outstanding shares
of the common capital stock of The Wornick Company Right Away Division; and all
general and limited partnership interests of The Wornick Company Right Away
Division, L.P.

 

(kk)                            “Parts
Inventory” shall mean all Equipment consisting of replacement parts only, now
or hereafter owned or acquired by Borrower and the Subsidiaries, all of which
shall be pledged to Lender as Collateral for the Obligations.

 

(ll)                                  “Pledge
Agreement” shall mean one or more agreements between TWC,  Borrower, Right Away Management Corporation
and The Wornick Company Right Away Division as the “pledgors” and Lender
wherein the pledgors have pledged all Ownership Interests  to secure the Obligations.

 

5

 

(mm)                      “Prior
Wornick Parties” shall have the meaning assigned to such term in
Section 4.01(g) hereof.

 

(nn)                          “Property”
shall mean the real property described in Schedule 1(nn) attached hereto
and incorporated herein by reference, together with all improvements located
thereon and all rights and appurtenances pertaining thereto, which real
property is leased by Borrower and certain of the Subsidiaries for use in their
respective businesses and which real property leases have been pledged as
Collateral to secure the Obligations pursuant to the Leasehold Deed of Trust.

 

(oo)                          “Revolving  Loan” shall mean a $15,000,000 revolving line
of credit Obligation approved by Lender for Borrower under the terms of this
Agreement.

 

(pp)                          “Revolving
Note” shall mean that certain five year adjustable interest rate revolving line
of credit promissory note of even date herewith in the original principal
amount of $15,000,000, executed by Borrower and payable to the order of Lender,
maturing on June 30, 2009, and all renewals, extensions, modifications and
increases, if any, thereof.

 

(qq)                          “Security
Agreement” shall mean any security agreement executed by Borrower and the
Subsidiaries granting a security interest in any of the Collateral.

 

(rr)                                Intentionally
Omitted.

 

(ss)                            “Subsidiaries”
shall mean The Wornick Company Right Away Division, L.P., a Delaware limited
partnership, Right Away Management Corporation, a Delaware corporation, and The
Wornick Company Right Away Division, a Delaware corporation.

 

(tt)                                “Tribunal”
shall mean any state, commonwealth, federal, foreign, territorial, or other
court or governmental department, commission, board, bureau, agency, or
instrumentality.

 

(uu)                          “TWC”
shall mean TWC Holding LLC, a Delaware limited liability company, the owner of
all the issued and outstanding shares of common stock of Borrower.

 

ARTICLE 2.

 

Loans

 

Section 2.01                                Loans.
Subject to the terms and conditions of this Agreement, Lender agrees to make
the Revolving Loan, and for a period of five (5) years from the date
hereof,  to enter into other revolving
loan credit facilities with Borrower and Advance funds to Borrower pursuant to
such additional credit facilities so long as such additional revolving loan
credit facilities: (i) do not violate the terms of the Indenture; (ii) conform
to the terms of this Agreement;  (iii)
are secured by the Collateral; (iv) are secured by a first lien priority on the
Collateral pursuant to the terms of the Intercreditor Agreement; and (v) do not
exceed

 

6

 

$10,000,000 in the
aggregate.   The outstanding principal
balance of all Obligations from time to time may not exceed the lesser of (i)
$25,000,000 or the (ii) lesser of (x) the amount of the Borrowing Base
available as of a Computation Date,  or
(y) the Maximum Amount available as of a Computation Date.  Each Advance associated with an Obligation will
be accompanied by a Draw Request (hereinafter defined), duly tendered as
required by Section 2.03 hereof, and accompanied by such documentation as
Lender may require.     At the
time of each Advance made under or pursuant to this Agreement, Borrower shall
immediately become indebted to Lender for the amount of such Advance and
interest shall accrue on such Advance from the date of the Advance.  The form of the promissory note executed to
evidence an Advance with regard to any additional Obligation not represented by
the Revolving Note shall be conformed to the form of the Revolving Note.

 

Section 2.02                                Loan
Account. A Loan Account (herein so called) will be established by Lender
for each loan Obligation, in which will be recorded (i) as a debit, the amount
of all Advances under such loan Obligation, plus all accrued interest under
such loan Obligation, and all other amounts owing in connection with such loan
Obligation, and (ii) as a credit, the amount of all payments on such loan
Obligation.

 

Section 2.03                                Draw
Request. As a condition to making an Advance, Borrower shall submit a draw
request (“Draw Request”) in substantially the form of Schedule 2.03
attached hereto or another form acceptable to Lender, identifying the
Obligation to be funded by the Advance, and delivered at least one (1) Business
Day  prior to the date the requested
Advance is to be funded, with the blanks completed so as to accurately reflect
the facts as of the date thereof, signed by an officer of Borrower who shall
certify to Lender the accuracy of the information in, and any documentation
submitted with, the Draw Request. Lender shall lend to Borrower the amount of
the requested Advance shown on the Draw Request associated with an unfunded
Obligation, but only if, with respect to all Advances, at the time of  such Advance:

 

(a)                                  The
outstanding principal balance of all Obligations, plus the amount of the
requested Advance, does not exceed the lesser of:  (i) $25,000,000; or (ii) the  lesser of (x) the amount of the Borrowing
Base available as of a Computation Date, 
or (y) the Maximum Amount available as of a Computation Date; as
permitted under Section 2.01 above;

 

(b)                                 Lender’s
obligation to lend hereunder has not been terminated pursuant to any provision
hereof;

 

(c)                                  No
Event of Default exists, and no event has occurred and no condition exists
which, with the lapse of time or notice or both, could become an Event of
Default;

 

(d)                                 No
legal proceeding is pending or threatened against Borrower  or any Subsidiary by or before any Tribunal
which might, in the reasonable opinion of Lender, have a material adverse
effect upon the business, operations, or financial condition of Borrower  or any Subsidiary;

 

(e)                                  All
conditions precedent to the obligations of Lender to make the Advance have been
complied with; and

 

7

 

(f)                                    The
consummation of such Advance shall not violate any applicable provision of any
law, the Intercreditor Agreement or the Indenture.

 

Lender, at its option,
may waive any condition precedent to an Advance.

 

Section 2.04                                Optional
Prepayments. Borrower may at any time pay or prepay without premium or
penalty all or a part of any Obligation. Partial prepayments shall be applied
first to accrued unpaid interest and then to the principal balance outstanding
on the Obligation for which the voluntary prepayment is tendered.  Principal amounts prepaid on any revolving
line of credit Obligation, including the Revolving Loan, can be re-borrowed by
Borrower, subject to Section 2.03 hereof.

 

Section 2.05                                Use
of Proceeds. The proceeds of the Advances shall be used for working capital
and other general corporate purposes of Borrower and its Subsidiaries,
including without limitation, the purchase of Equipment, Inventory and other
assets necessary to Borrower’s and its Subsidiaries’  businesses, as well as for the payment of
wages to salaried and hourly employees.

 

Section 2.06                                Interest
Rate on the Obligations.  The
principal amount of all Obligations, including the Revolving Note, advanced
from time to time remaining unpaid prior to maturity shall bear interest at a
varying or fluctuating rate per annum (computed on the actual number of days
elapsed over a 360 day year) that is equal to the “Prime Rate” as published
each day by the Wall Street Journal in its “Money Rates” section, and if
more than one such rate is published, then the highest such rate.  On any day when the Wall Street Journal
is not published or a Prime Rate is not published under the Money Rates
section thereof, then the Prime Rate published for the preceding
publication date of the Wall Street Journal shall apply.  Should the method of establishing the Prime
Rate or the publication of such Prime Rate cease or be abolished, then the
Prime Rate used for the balance of the term of 
an Obligation will be the interest rate established, adopted or used by
Lender as its prime or base interest rate. 
The principal  amount of all
Obligations advanced from time to time remaining unpaid after maturity or after
default will bear interest at the Prime Rate plus  two percent (2%) per annum (computed on the
actual number of days elapsed over a 360 day year).  In no event shall interest on the Revolving
Note or any other Obligation ever exceed the maximum lawful contractual amount
of interest that is permissible and nonusurious under applicable state or
federal law for the type of loan evidenced by such Obligation.

 

Section 2.07    Payment Terms – Obligations.  Subject to all terms of this
Agreement and the other Loan Documents, including the mandatory prepayment
provisions,  unless Lender and Borrower
agree otherwise at the time an instrument evidencing an Obligation is executed,
each Obligation (including the Revolving Note Obligation) shall be payable as
follows: (i)  All unpaid principal shall
be due and payable on June 30, 2009; and (ii) Interest, computed on the
unpaid principal outstanding from time to time, shall be due and payable
monthly as it accrues, on the  last day
of each calendar month, beginning on the last calendar day of the month in which
the instrument evidencing an Obligation is executed by Borrower,  and monthly thereafter until June 30,
2009, when all remaining accrued, but unpaid, interest shall be due and
payable.

 

Section 2.08.  Limitations on Fixed Assets Component of
the Borrowing Base.  As of the date
of this Agreement, the agreed value of all Fixed Assets Collateral is
$28,500,000, so that

 

8

 

under
the Borrowing Base, up to $7,125,000 in Advances could be requested and funded
by Borrower based on the Fixed Assets component of the Borrowing Base.  Notwithstanding the foregoing, except during
the period July 1, 2004, through September 30, 2004, the value of the
Fixed Assets and Parts Inventory components of the Borrowing Base may not
exceed 25% of the total combined value of all components of the Borrowing
Base.  For example, on and after
October 1, 2004, if the outstanding Obligations are $1,000,000, then the
actual make-up of the Borrowing Base must, at a minimum, consist of other
assets (Eligible Accounts Receviable and Eligible Inventory) with a Borrowing
Base value not less than $750,000, and the Fixed Assets and Parts Inventory
components of the Borrowing Base may not exceed $250,000 of the actual make-up
of  such Borrowing Base associated with
the outstanding $1,000,000 Obligation. 
In addition, until the Leasehold Deed of Trust is executed, delivered
and recorded: in Hidalgo County, Texas, the Fixed Assets component of the
Borrowing Base shall exclude leasehold improvements valued, as of the date of
this Agreement, at $1,440,770; and in Hamilton County, Ohio,  the Fixed 
Assets component of the Borrowing Base shall exclude leasehold
improvements valued, as of the date of this Agreement, at $542,050.

 

ARTICLE 3.

 

Obligation to Pay
Obligations

 

Section 3.01                                Exclusivity
of Agreement. The duties of Borrower to pay and perform the Obligations
shall be governed exclusively by the terms of this Agreement and the other Loan
Documents evidencing any Obligation.

 

Section 3.02                                Obligation
to Repay Excess. If at any time the outstanding principal balance of all
Obligations shall exceed the least  of
(i) the Borrowing Base or (ii) the Maximum Amount or (iii) $25,000,000,
Borrower shall notify Lender, in writing, of such fact within one (1) Business
Day of acquiring such knowledge, accompanied by a tender of the amount
necessary to pay the entire amount of such excess, to be credited to the
Obligations in such order as Lender may elect.

 

Section 3.03                                Obligation
to Repay Upon Default. Except for those circumstances set forth in any Loan
Document where notice and opportunity to remedy default is applicable, upon the
occurrence of an Event of Default, Borrower shall, immediately upon demand, pay
to Lender all amounts represented by the Obligations.

 

Section 3.04                                Payment
of Interest and Principal on Obligations. Borrower shall pay to Lender
interest on the aggregate unpaid principal balance of all Obligations from time
to time outstanding, for the actual period funds represented by the Obligations
are outstanding, at the  annual interest
rate (computed based on the actual number of days elapsed over a 360 day year)
provided for in Section 2.06 above, and calculated in accordance with the
terms of Section 2.06, unless otherwise provided for in the instrument
governing such Obligation, provided that (notwithstanding anything therein to
the contrary) the rate from time to time in effect shall not exceed the Weekly
Ceiling rate from time to time in effect under the Texas Finance Code, as
amended. All payments of interest and principal associated with an Obligation
shall be made at the time or times provided for in Section 2.07 above,
unless otherwise provided for in the instrument governing each Obligation.

 

9

 

Section 3.05  Payment of Annual Commitment Fee and Daily
Administrative Fee.  Borrower shall
pay Lender an Annual Commitment Fee on June 30 of each calendar year,
beginning June 30, 2004, and annually thereafter through and including
June 30, 2008.  Borrower shall also
pay Lender a Daily Administrative Fee, on a quarterly basis, due and payable as
follows:  For the period  January 1 through March 31 in each
calendar year, on the following April 15; For the period April 1
through June 30 in each calendar year, on the following July 15; For
the period July 1 through September 30 in each calendar year, on the
following October 15; and for the period October 1 through
December 31, on the following January 15.

 

Section 3.06                                Manner
and Place of Payments. All payments and prepayments of principal and/or
interest on the Obligations and all payments of fees and other obligations
hereunder shall be made in immediately available funds, and shall be made to
Lender at its office at 3900 North Tenth Street, McAllen, Texas, or at such
other addresses as Lender may notify Borrower in writing.  Borrower
and  the Subsidiaries hereby authorize
Lender to debit from time to time against all Deposit Accounts of Borrower and
the Subsidiaries with Lender the amount (in the aggregate) necessary  to fund any amount due from Borrower on any
of the Obligations.  Whenever payment is
to be made on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest.

 

ARTICLE 4.

 

Conditions to
Advances

 

Section 4.01 Conditions
to Initial Advance under Revolving Note. The obligation of Lender to make
the initial Advance pursuant to this Agreement under the Revolving Note is
subject to the accuracy of all covenants, representations, warranties, terms
and conditions herein contained or otherwise made by Borrower and each
Subsidiary in connection with this Agreement and the other Loan Documents; to
the performance by Borrower and each Subsidiary of all of its agreements to be
performed hereunder and thereunder; and to the fulfillment to the satisfaction
of Lender of the following further conditions on or before the Closing:

 

(a)                                  Borrower
shall have delivered to Lender in form and substance acceptable to Lender (i)
resolutions of the Board of Directors or other governing authority of Borrower,
its Subsidiaries and TWC certified by their respective  secretary, assistant secretary or other
authorized signatory, which resolutions shall authorize the execution, delivery
and performance by Borrower, its Subsidiaries and TWC, as contemplated hereby,
of this Agreement and the other Loan Documents and which shall authorize the
transactions contemplated hereby by Borrower, its Subsidiaries and TWC; (ii)
certificates of incumbency certified by the president and secretary or
assistant secretary of Borrower and each Subsidiary with specimen signatures of
the president or vice president and secretary or other officers of Borrower and  each Subsidiary who will sign this Agreement
or the other Loan Documents signed and delivered pursuant hereto on behalf of
Borrower and  its Subsidiaries; (iii)
certificate of incorporation, 
organization or formation of Borrower and  its Subsidiaries certified as of a recent
date by the Secretary of State of its state of incorporation or formation; (iv)
bylaws, regulations or limited

 

10

 

partnership
agreement of Borrower and its Subsidiaries, as applicable, certified by its
secretary, assistant secretary or other authorized signatory;  and (v) 
certificates  of the  appropriate 
governmental  officials  of such jurisdictions as Lender may request,
each bearing a recent date, to the effect that Borrower, its Subsidiaries and
TWC is a corporation, limited liability company or limited partnership, as
applicable, duly incorporated,  organized
or formed, validly existing, and in good standing under the laws of its
incorporation or organization, and is duly qualified to transact business and
is in good standing in each other jurisdiction where the nature and extent of
its business and property require it to be so qualified, accompanied by the
certificate of the secretary,  assistant
secretary or authorized signatory of Borrower, its Subsidiaries and TWC, as
applicable, dated the date hereof, that such certificates are true and correct.

 

(b)                                 Borrower
shall have delivered to Lender a Draw Request for an Advance signed by a duly
authorized officer of Borrower in accordance with Section 2.03 hereof, and
Lender shall be satisfied as to the accuracy of Borrower’s computation of the
Borrowing Base and the Maximum Amount.

 

(c)                                  Borrower
shall have delivered, or cause to be delivered, to Lender the fully executed
Loan Documents, including without limitation, this Agreement, the Revolving
Note,  the Security Agreement,  the Leasehold Deed of Trust, the  Pledge Agreement, the Financing
Statements,  and the Guaranty.

 

(d)                                 Borrower
shall have delivered, or cause to be delivered, to Lender copies of the Leases.

 

(e)                                  Borrower shall have delivered, or cause to be
delivered, to Lender a listing of the Fixed Assets of Borrower and its
Subsidiaries, certified by an officer of Borrower, and an appraisal on the
Fixed Assets of Borrower and its Subsidiaries, in a form reasonably acceptable
to Lender.

 

(f)                                    Borrower, TWC and the Subsidiaries shall have
delivered, or cause to be delivered to Lender, evidence of insurance on the
tangible Collateral with Lender named additional insured, mortgagee and loss
payee.

 

(g)                                 Borrower and the Subsidiaries shall have
delivered, or cause to be delivered to Lender: 
(i)  an agreement between the
sellers under the Asset Transaction (collectively, the “Prior Wornick Parties”)
and Borrower and the Subsidiaries: (x) acknowledging that Borrower and the
Subsidiaries, on and after July 1, 2004, will perform all further
obligations of the Prior Wornick Parties under the Government Contracts; (y)
obligating the Prior Wornick Parties to continue their assistance to Borrower
and the Subsidiaries in their obtaining the United States Government novations
required under the Asset Transaction and will not act in any manner that will
interfere with the continuation and satisfaction of the Government Contracts;
and (z) providing that the Prior Wornick Parties, on and after July 1,
2004, will immediately deliver to Lender, for deposit into Borrower’s Deposit
Accounts maintained with Lender, any payments actually received by any Prior
Wornick Party on Accounts Receivable on Government Contracts invoiced by
Borrower or its Subsidiaries to the United States Government on or after
July 1, 2004;

 

11

 

(ii) a grant by the Prior Wornick Parties of a security interest in
favor of Lender, to further secure Lender in the payment of the Obligations, in
all of the Prior Wornick Parties’ right, title and interest in and to all
Government Contracts assigned, assignable or to be assigned, to  Borrower and the Subsidiaries pursuant to the
Asset Transaction, all Inventory associated with Government Contracts
transferred to Borrower and the Subsidiaries pursuant to the Asset Transaction,
and all Government Contracts Accounts Receivable invoiced by  Borrower and the Subsidiaries, on and after
July 1, 2004, to the United States Government prior to the United States
Government’s approval of the novations required of the Prior Wornick Parties
under the Asset Transaction; and (iii) a written confirmation from the
administrative contracting officer responsible for Borrower confirming that the
novation process contemplated by the Asset Transaction and associated with the
assignment of the Government Contracts from the Prior Wornick Parties to
Borrower and its Subsidiaries will not result in an interruption in payment by
the United States Government, subject to compliance with all other applicable
terms of the Government Contracts.

 

(h)                                 Borrower and the Subsidiaries shall have
executed an assignment of rights in Government Contracts on each Government
Contract listed on Schedule 7. 18A in form and substance satisfactory to
Lender.

 

(i)                                     Borrower and the Subsidiaries shall have
delivered to Lender such documentation as is required by the United States
Government for submission with the notifications to the United States Government
of the assignment of rights in each Government Contract listed on
Schedule 7. 18A in form and substance satisfactory to Lender.

 

(j)                                     Borrower
shall have delivered, or cause to be delivered to Lender, a fully executed copy
of the Intercreditor Agreement, the Indenture and all other documents granting
a lien or security interest in any of the Collateral executed by Borrower, TWC
and any Subsidiary in conjunction with the execution of the Indenture.

 

(k)                                  Lender
shall have received the original
certificates evidencing the Ownership Interests of Borrower, Right Away
Management Corporation, and The Wornick Company Right Away Division, with
transfer powers, endorsed in blank.

 

(l)                                     Intentionally
Omitted.

 

(m)                               Lender shall have received written evidence,
in a form reasonably satisfactory to Lender, that Lender’s liens and security
interests on the Collateral, represent a first lien and security interest in
the Collateral.

 

(n)                                 The transactions contemplated by the Asset
Transaction shall have been consummated.

 

(o)                                 Borrower
shall have paid Lender the Annual Commitment Fee due on June 30, 2004.

 

(p)                                 Borrower shall
have paid all expenses of the type described in Section 7.15 hereof;

 

12

 

(q)                                 Borrower
shall have delivered, or cause to be delivered to Lender, budgets of Borrower
and its Subsidiaries for the period from July 1 through December 31,
2004.

 

(r)                                    Borrower,
TWC and the Subsidiaries shall have delivered to Lender such other documents,
instruments and certificates as Lender may reasonably require.

 

(s)                                  All
indebtedness of the Prior Wornick Parties to Lender secured by a lien or
security interest in any Collateral shall have been paid by the Prior Wornick
Parties at Closing from the proceeds of sale received by them under the terms
of the Asset Transaction.

 

(t)                                    All
proceedings to be taken in connection with the transactions contemplated by
this Agreement, and all documents incident thereto, except where otherwise
provided, shall be satisfactory in form and substance to Lender and its legal
counsel, and Lender shall have received copies of all documents which it may
reasonably request in connection with such transactions and all corporate
proceedings with respect thereto, in form and substance satisfactory to Lender
and its legal counsel.

 

Section 4.02                                Conditions
to Subsequent Advances. The obligations of Lender to make each Advance
under any unfunded loan Obligation on any Borrowing Date subsequent to the
initial Advance hereunder shall be subject to the fulfillment of the following
conditions precedent:

 

(a)                                  Borrower,
its Subsidiaries and TWC shall have executed and delivered to Lender
appropriate Loan Documents with respect to any new loan Obligations, and with
respect to all Obligations, Borrower shall have executed and delivered to
Lender an appropriate Draw Request signed by a duly authorized officer of
Borrower in accordance with Section 2.03 hereof, and Lender shall be
satisfied as to the accuracy of Borrower’s computation of the Borrowing Base
and the Maximum Amount.

 

(b)                                 If
requested by Lender, Borrower and  its
Subsidiaries shall have delivered to Lender a Certificate of No Default, an
Insurance Report and a Government Contracts Status Report and Certification,
each executed by a duly authorized officer of Borrower and its Subsidiaries, to
the extent applicable,  in the form
required by Lender.

 

(c)                                  The
representations and warranties contained in Article 6 hereof and any other
document executed and delivered in connection herewith are and shall be true
and correct in all material respects as though made on and as of such Borrowing
Date (except as not materially affected by transactions hereafter occurring in
the ordinary course of business, and except as may be waived by or cured to the
satisfaction of Lender), and no event has or will have occurred, and is or will
be continuing, or would result from such Advance, which constitutes or would
constitute an Event of Default (as defined in Article 10 hereof), or which
with notice or lapse of time or both will or would constitute an Event of
Default (unless waived by or cured to the satisfaction of Lender).

 

(d)                                 The
making of the proposed Advance will not violate or contravene any applicable
provision of any law or any regulation, demand, decree, order, writ, or injunction
of any Tribunal.

 

13

 

(e)                                  Borrower,
TWC and the Subsidiaries shall have delivered to Lender such other documents,
instruments and certificates as Lender may reasonably require.

 

ARTICLE 5.

 

The Closing

 

Section 5.01 Closing.
The closing (the “Closing”) of the transaction contemplated by this Agreement
and Asset Transaction, and the delivery of all documents and instruments
required hereunder to be delivered at the Closing in connection with this Agreement,
including the delivery of the Intercreditor Agreement and all Loan Documents,
shall occur on or before June 30, 2004 (the “Closing Date”), at the
offices of Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New York
10022. All Advances shall be made at the banking offices of Lender at 3900
North Tenth Street, McAllen, Texas (or at such other address as Lender may
notify Borrower in writing) upon such Borrowing Dates as Borrower may request
in accordance with Section 2.03 hereof.

 

Section 5.02  Lender’s Delivery of Releases of Lien and
Termination Statements on Certain Collateral Transferred by the Prior Wornick
Parties.  Borrower and the
Subsidiaries, in consideration of Lender’s agreement to include the value of
Inventory and Accounts Receivable on Government Contracts in the Borrowing Base
prior to the time that the United States Government actually approves the
requested novations on the Government Contracts as required under the Asset
Transaction,  agree that Lender is not
required to release its liens and security interests held by Lender in the name
of the Prior Wornick Parties in any Collateral described in Section 4.01
(g) (ii) hereof until Lender receives written evidence, in a form reasonably
acceptable to Lender, that the novations required of the Prior Wornick Parties
under the Asset Transaction on the Government Contracts have been approved by
the United States Government. 

 

ARTICLE 6.

 

Representations,
Warranties and Covenants

 

Representations.
Warranties and Covenants. Borrower and  its Subsidiaries represent and warrant to
Lender, and covenant with Lender, as follows:

 

Section 6.01    Organization. Authority and
Qualifications.

 

(a)                                  Borrower
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and is duly qualified to do business as a
foreign corporation under the laws of the State of Ohio and any other state in
which the Borrower is required to be qualified as a result of the business
activity undertaken by Borrower in such state; 
The Wornick Company Right Away Division, L.P. is a limited partnership
duly organized, validly existing and in good standing under the laws of the
State of Delaware and is duly qualified to do business as a foreign limited
partnership under the laws of the State of Texas, and any other state in which
The Wornick Company Right Away Division, L.P. is required to be qualified as a
result of the business activity undertaken by The Wornick Company Right Away
Division, L.P. in such state; Right

 

14

 

Away Management
Corporation is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and is duly qualified to do
business as a foreign corporation  in any
state in which Right Away Management Corporation is required to be qualified as
a result of the business activity undertaken by Right Away Management
Corporation in such state; The Wornick Company Right Away Division is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and is duly qualified to do business as a foreign
corporation  in any other state in which
The Wornick Company Right Away Division is required to be qualified as a result
of the business activity undertaken by The Wornick Company Right Away Division
in such state; and TWC is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware and is
duly qualified to do business as a foreign limited liability company in any
state in which TWC is required to be qualified as a result of the business
activity undertaken by TWC in such state.

 

(b)                                 Borrower
has the corporate power and authority to execute, deliver and perform this
Agreement and the other Loan Documents it is a party to,  to borrow hereunder, and to pledge its
Collateral to secure the Obligations hereunder; each Subsidiary  has the requisite power and authority to
execute, deliver and perform this Agreement and the other Loan Documents to
which it is a party and to pledge its 
Collateral to secure the Obligations hereunder; and TWC has the
requisite power and authority to execute, deliver and perform the Pledge
Agreement to which it is a party and to pledge its Collateral to secure the
Obligations hereunder.

 

(c)                                  The
person signing this Agreement and the other Loan Documents on behalf of
Borrower has full authority to execute the same on behalf of Borrower and to
bind it to the terms thereof; the person signing this Agreement and the other
Loan Documents on behalf of the Subsidiaries has full authority to execute the
same on behalf of the Subsidiaries and to bind it to the terms thereof; and the
person signing the Pledge Agreement on behalf of TWC has full authority to
execute the same on behalf of TWC and to bind it to the terms thereof.

 

Section 6.02                                Authorization
and Compliance with Laws and Material Agreements. The execution, delivery
and performance of this Agreement and the other Loan Documents to which it is a
party,  the borrowing hereunder and the
pledge of its Collateral for the Obligations, by Borrower has been duly
authorized by all requisite corporate action on the part of Borrower and will
not violate the Certificate of Incorporation or Bylaws of Borrower and will not
violate any provision of law, or order of any court or governmental agency
affecting it in any respect, and will not conflict with, result in a breach of
the provisions of, constitute a default under, or result in the imposition of
any lien, charge, or encumbrance upon any assets of Borrower pursuant to the
provisions of any indenture, mortgage, deed of trust, franchise, permit,
license, note or other agreement or instrument to which Borrower may be bound.
No approval or consent from any Tribunal or other third party is required in
connection with the execution of or performance by Borrower under this
Agreement and the other Loan Documents to which Borrower is a party other than
the Leasehold Deed of Trust other than the Leasehold Deed of Trust.  The execution, delivery and performance of
this Agreement and the other Loan Documents to which The Wornick Company Right
Away Division, L.P. is a party, and the providing of Collateral

 

15

 

thereunder for the
borrowing hereunder, by such Subsidiary has been duly authorized by all
requisite action on the part of such Subsidiary and will not violate the
Certificate of Limited Partnership or the Limited Partnership Agreement of The
Wornick Company Right Away Division, L.P. and will not violate any provision of
law, or order of any court or governmental agency affecting it in any respect,
and will not conflict with, result in a breach of the provisions of, constitute
a default under, or result in the imposition of any lien, charge or encumbrance
of any assets of such  Subsidiary
pursuant to the provisions of any indenture, mortgage, deed of trust,
franchise, permit, license, note or other agreement or instrument to which such
Subsidiary may be bound.  No approval or
consent from any Tribunal or other third party is required in connection with
the execution of or performance by The Wornick Company Right Away Division,
L.P.  under this Agreement and the other
Loan Documents to which such Subsidiary is a party.  The execution, delivery and performance of
this Agreement and the other Loan Documents to which TWC, Right Away Management
Corporation and The Wornick Company Right Away Division is a party, and the
providing of Collateral thereunder for the borrowing hereunder, including without
limitation the assignment of monies due under the Government Contracts, by TWC
and such Subsidiaries has been duly authorized by all requisite action on the
part of TWC and such Subsidiaries and will not violate the Certificate of
Formation or operating agreement of TWC and the Certificate of Incorporation or
Bylaws of such Subsidiaries and will not violate any provision of law, or order
of any court or governmental agency affecting them in any respect, and will not
conflict with, result in a breach of the provisions of, constitute a default
under, terminate, or result in the imposition of any lien, charge, or
encumbrance upon any assets of TWC, Right Away Management Corporation and The
Wornick Company Right Away Division pursuant to the provisions of any
indenture, mortgage, deed of trust, franchise, permit, license, note or other
agreement or instrument to which TWC or such Subsidiaries may be bound. No
approval or consent from any Tribunal or other third party is required in
connection with the execution of or performance by TWC, Right Away Management
Corporation and The Wornick Company Right Away Division under this Agreement
and the other Loan Documents to which they are a party.

 

Section 6.03                                Financial
Statements. Any financial statements of Borrower furnished to Lender shall
be true and correct and will be prepared on a consolidated basis with all
Subsidiaries in accordance with GAAP, and will fairly and accurately reflect
the financial condition of Borrower and its Subsidiaries, and the results of their  operations as of the period then ended,
subject, in the case of unaudited financial statements, to changes resulting
from audit and normal year-end adjustments.

 

Section 6.04                                Litigation
and Judgments. Except as set forth in Schedule 6.04, neither Borrower
nor any Subsidiary, nor TWC is involved in, nor is either the Subsidiaries, TWC
or Borrower aware of, any action, suit, or proceeding, at law or in equity, or
by or before any Tribunal or other governmental authority (collectively,
“Litigation”), pending, or to the knowledge of Borrower, TWC or the
Subsidiaries, threatened, against or affecting Borrower, TWC or the
Subsidiaries or involving the validity or enforceability of the Loan Documents,
which in the reasonable opinion of Borrower, TWC or the Subsidiaries,
respectively, if adversely determined, would materially adversely affect the
financial condition of Borrower, TWC or the Subsidiaries, or the ability of
Borrower, TWC or the Subsidiaries to perform its obligations as contemplated by
this Agreement or the other Loan Documents to which they are parties. There are
no outstanding judgments (final or otherwise) against Borrower, TWC or the
Subsidiaries.

 

16

 

Section 6.05                                No
Materially Adverse Agreements. Except as may be provided in the
Intercreditor Agreement or the Indenture, neither Borrower, TWC nor the
Subsidiaries is a party to any agreement which in the opinion of Borrower, TWC
or the Subsidiaries, respectively, does or will materially and adversely affect
the business, operations or condition, financial or otherwise, of Borrower, TWC
or the Subsidiaries.

 

Section 6.06                                Ownership
of Properties; Liens. Each of Borrower and the Subsidiaries  has good and marketable title to or valid
leasehold interests in all the Collateral, and in all of its other significant
or material properties and assets, real and personal, which are owned or used
in connection with the production and distribution of its products or services,
and, except as may be provided in this Agreement, the other Loan Documents, the
Intercreditor Agreement and the Indenture, none of such properties or assets or
leasehold interests of Borrower or the Subsidiaries is subject to any mortgage,
pledge, security interest, encumbrance, lien or charge of any kind which would
materially restrict the manner in which Borrower or the Subsidiaries uses or
intends to use such property.

 

Section 6.07                                Taxes.
Each of Borrower, TWC and the Subsidiaries has filed all federal and state tax
returns or reports required of it, including but not limited to income,
franchise, employment and sales taxes, and has paid or made adequate provision
for the payment of all taxes which have become due pursuant to such returns or
reports or pursuant to any assessment which has been received, none of such
being outstanding and unpaid, and neither Borrower, TWC nor the Subsidiaries
knows of pending investigations of Borrower, TWC or the Subsidiaries by any
taxing authority, nor of any material pending but unassessed tax liability.

 

Section 6.08                                Default
and Pending Actions. Neither Borrower, TWC nor any Subsidiary is in default
in any material respect under the provisions of any instrument evidencing any
material obligation, indebtedness or liability of Borrower, TWC or the Subsidiaries
or of any agreement relating thereto, or under any order, writ, injunction, or
decree of any court, or in default under or in violation of any order,
regulation, or demand of any governmental instrumentality which default or
violation might have consequences which would materially and adversely affect
the business, financial condition, or properties of Borrower, TWC or the
Subsidiaries.  Without limiting the
generality of the foregoing, neither Borrower, TWC nor  any Subsidiary is in default in any material
respect under the provisions of any contracts with the United States Government
or any agency or instrumentality thereof (“Government Contracts”), and there is
no proceeding pending or threatened for the renegotiation of price, terms or
performance of any such Government Contracts, and no audit or investigation not
in the regular course of Borrower’s, TWC’s or the Subsidiaries’ business is in
process, pending or scheduled.

 

Section 6.09                                Guarantees.
Except as may be provided in the Intercreditor Agreement and the
Indenture,  neither Borrower, TWC
nor  any Subsidiary has guaranteed any
dividend or any obligation of any other person, corporation or entity,
including any unconsolidated subsidiary, and neither TWC nor any Subsidiary has
guaranteed any dividend, obligation or indebtedness of Borrower other than to
Lender and pursuant to the Indenture.

 

Section 6.10                                Title
to and Perfection of Security Interest in Certain Collateral. Each of
Borrower and each Subsidiary is and will be the owner of all of its Accounts
Receivable, Contracts (subject to Section 6.11 hereof), Deposit Accounts,
Equipment, Fixed Assets, Fixtures,

 

17

 

Intangibles, Ownership
Interests, and Parts Inventory, and TWC is and will be the owner of its
Ownership Interests, in each case, free and clear of all liens, security
interests, and encumbrances other than those in favor of Lender hereunder and
except as provided in the Intercreditor Agreement and the security documents
under the Indenture, and Lender will have a valid and perfected first lien
security interest therein and in the products or proceeds thereof, and
Borrower, TWC and  each Subsidiary will
each execute all such financing statements or other documents and take such
actions as Lender may deem necessary or desirable to evidence or perfect its
first and prior security interest and lien in its respective Collateral
described in this Section.

 

Section 6.11                                Title
to and Perfection of Security Interest in Government Contracts. Subject to
the rights of the United States Government under Government Contracts, upon
novation of the Government Contracts to Borrower and the Subsidiaries,
respectively, each of Borrower and each Subsidiary is and will be the owner of
all right, title and interest in and to all of its respective Government
Contracts, free and clear of all liens, security interests, and encumbrances
other than those in favor of Lender and except as provided in the Intercreditor
Agreement and the security documents under the Indenture, and Lender will have
a valid and perfected first lien security interest therein and in the products
or proceeds thereof, and Borrower and 
each Subsidiary will each execute all consents, assignments, pledges, financing
statements or other documents and take such actions as Lender may deem
necessary or desirable to evidence or perfect its first and prior security
interest and lien in any Government Contracts now held or hereafter acquired
and entered into.

 

Section 6.12                                Title
to and Perfection of Security Interest in Inventory. Subject to the rights
of the United States Government in components owned by the United States
Government and included within Inventory, ownership of which is not claimed by
either Borrower or the Subsidiaries, each of the Subsidiaries and Borrower is
and will be the owner of all of its Inventory, free and clear of all liens,
security interests, and encumbrances other than those in favor of Lender and
except as provided in the Intercreditor Agreement and the security documents under
the Indenture, and Lender will have a valid and perfected first lien security
interest therein and in the products or proceeds thereof, and Borrower and  each Subsidiary will each execute all such
financing statements or other documents and take such actions as Lender may
deem necessary or desirable to evidence or perfect its first and prior security
interest and lien in Inventory under the Loan Documents.

 

Section 6.13                                Title
to and Perfection of Security Interest in Leasehold Estates. Each of
Borrower and  each Subsidiary is and will
be the lessee of all of its real properties used in the conduct of its
business, and such leasehold interests will be held by them free and clear of
all liens, security interests, and encumbrances other than those in favor of
Lender and except as provided in the Intercreditor Agreement and the security
documents under the Indenture, and Lender will have a valid and perfected first
lien security interest therein, and Borrower and  each Subsidiary will each execute all such
deeds of trust or other documents and take such actions as Lender may deem
necessary or desirable to evidence or perfect its first and prior security
interest and lien in such leasehold estates, including leasehold interests in
the Property.

 

18

 

Section 6.14                                Purpose
of Borrower; Use of Proceeds. Borrower and its Subsidiaries have entered
into this Agreement for legitimate purposes, and Borrower will use the proceeds
of the loans exclusively as required hereby.

 

Section 6.15                                Environmental Matters. 
Except as disclosed in the Phase I environmental site assessment reports
heretofore made available to Lender, neither Borrower nor any Subsidiary has
received notice of, nor know of, nor suspect facts which might constitute any
violations of any federal, state, or local environmental, health, or safety
laws, codes or ordinances, and any rules or regulations promulgated thereunder
with respect to the Property.  Except in
accordance with a valid governmental permit, license, certificate, or approval,
there has been no emission, spill, release, or discharge of any toxic or
hazardous substances or wastes, in amounts requiring investigation or cleanup
under applicable environmental laws,  at
or from the Property into or upon:

 

(a)                                  the air;

 

(b)                                 soils, or any improvements located thereon;

 

(c)                                  surface water or groundwater; or

 

(d)                                 the sewer, septic system or waste treatment,
storage or disposal system servicing the Property;

 

and
accordingly the Property is free of all such toxic or hazardous substances or
wastes.  Except as disclosed in the Phase
I environmental site assessment reports heretofore made available to Lender,
there has been no complaint, order, directive, claim, citation, or notice by
any Tribunal or otherwise with respect to:

 

(a)                                  air emissions;

 

(b)                                 spills, releases, or discharges to soils or
improvements located thereon, surface water, groundwater or the sewer, septic
system or waste treatment, storage or disposal systems servicing the Property;

 

(c)                                  noise emissions;

 

(d)                                 solid or liquid waste disposal;

 

(e)                                  the use, generation, storage, transportation,
or disposal of toxic or hazardous substances or waste; or

 

(f)                                    other environmental, health, or safety
matters affecting Borrower, its Subsidiaries, 
or their businesses, operations, assets, equipment, property,
leaseholds, or other facilities.

 

Except
as disclosed in the Phase I environmental site assessment reports previously
made available to Lender, neither Borrower nor any Subsidiary  has any indebtedness, obligations, or

 

19

 

liability,
absolute or contingent, matured or not matured, with respect to the storage,
treatment, cleanup, or disposal of any solid wastes, hazardous wastes, or other
toxic or hazardous substances affecting the Property (including without
limitation any such indebtedness, obligation, or liability with respect to any
current regulations, law, or statute regarding such storage, treatment, cleanup
or disposal).  Borrower and the Subsidiaries hereby agree to defend, indemnify and hold
the Lender harmless from and against any and all claims, damages, judgments,
penalties, cost, and expenses (including attorneys’ fees and court costs now or
hereafter arising from the aforesaid enforcement of this Section) arising
directly or indirectly from the activities of any party on the Property, or
arising directly or indirectly from the violation of any environmental
protection, health, or safety law, whether such claims are asserted by any
Tribunal or any other party. 
This indemnity shall survive the termination of this Agreement.  The Leasehold Deed of Trust will also contain
Lender’s standard form of environmental warranties, representations and
indemnities.

 

ARTICLE 7.

 

Positive Covenants

 

Positive Covenants.                                     Borrower
and  each Subsidiary covenant and agree
that, as long as the Obligations or any part thereof is outstanding, unless
otherwise allowed by written instrument of Lender:

 

Section 7.01                                Performance
of Obligations. Borrower will duly and punctually pay and perform or cause
the payment or performance of each of the Obligations, including without
limitation its obligations under this Agreement and each of the Loan Documents,
as the same may at any time be amended or modified, and each Subsidiary will, and
Borrower will cause each of TWC and the Prior Wornick Parties to, duly and
punctually perform its obligations under this Agreement and each of the other
Loan Documents to which it is a party.

 

Section 7.02                                Preservation
of Existence and Franchises and Conduct of Business. Borrower will do or
cause to be done, and will cause  each
Subsidiary and TWC to do or cause to be done, 
all things necessary to preserve and keep in full force and effect the
organizational existence, rights, leases, patents, franchise agreements, and
all other licenses or rights necessary to comply with all laws, regulations,
rules, statutes, or other provisions applicable to Borrower, TWC and each
Subsidiary, the loss of which would have a material adverse effect in the
operation of its business, in a prudent and businesslike manner.

 

Section 7.03                                Maintenance
of Properties. Borrower will cause, and will cause the Subsidiaries and TWC
to cause,  each of Borrower’s, TWC’s and
the Subsidiaries’ properties used or useful in the conduct of its business to
be maintained and kept in good condition, repair, and working order, and
supplied with all necessary equipment, and cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as
in the prudent judgment of Borrower, each Subsidiary and TWC, as applicable,
may be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times.

 

20

 

Section 7.04                                Payment
of Taxes and Other Charges. Borrower and each Subsidiary will promptly pay
and discharge, or cause to be paid and discharged, all lawful taxes,
assessments, and other governmental charges imposed upon Borrower and each  Subsidiary or upon the property, real,
personal or mixed, belonging to Borrower 
and  each Subsidiary, or upon any
part thereof, before the payment thereof shall become in default, as well as
all lawful claims for labor, materials and supplies, which, if unpaid, might
become a lien or charge upon such property, or upon any part thereof, provided,
however, that Borrower and the Subsidiaries shall not be required to pay and
discharge, or cause to be paid and discharged, any such tax, assessment,
charge, levy or claim, so long as the validity or amount thereof shall be
contested in good faith by appropriate proceedings diligently pursued, if
appropriate reserves have been provided therefor by Borrower  or the Subsidiaries.

 

Section 7.05                                Insurance.
Borrower will maintain, and will cause each Subsidiary to maintain, insurance
with such insurance companies, in such amounts, and covering such risks
(including products liability and business interruption insurance) as shall be
satisfactory to Lender with respect to the Collateral, deliver to Lender
certificates evidencing such insurance and, at Closing and within 60 days after
the close of each fiscal year of Borrower, a report (“Insurance Report”)
certified by the chief financial officer of Borrower describing all insurance
policies on Equipment, Fixed Assets, Fixtures, Inventory, Parts Inventory and
leasehold improvements on the Property to which liens or security interests in
favor of Lender have attached, showing Lender as additional insured, mortgagee
and loss payee, as its interest may appear, and in such event deliver
certificates evidencing such insurance to Lender. All such certificates shall
provide that the coverage so evidenced may not be terminated, canceled or
reduced except upon 30 days written notice to Lender by the insurer.

 

Section 7.06                                Maintenance
of Books and Records. Borrower will, and will cause each Subsidiary to,
maintain proper books of record and account in which full, true and correct
entries will be made of all dealings and transactions in relation to its
business and activities.

 

Section 7.07                                Inspection
of Properties. Books and Records. Borrower will, and will cause each
Subsidiary to, permit Lender and its representatives to visit and inspect any
of the properties of Borrower and each 
Subsidiary, to examine and make copies of the books and accounts of
Borrower and each  Subsidiary, and to
discuss the affairs, finances and accounts of Borrower and each  Subsidiary with the officers of Borrower
and  each Subsidiary, all at such
reasonable times as Lender may request upon reasonable notice. Lender may, at
its option, perform or arrange for periodic audits of Borrower’s and the
Subsidiaries’ assets, books and records, the results of which must be
acceptable to Lender in its reasonable discretion.

 

Section 7.08                                Audited
Annual Financial Statements. As soon as available, and in any event within
120 days after the end of each fiscal year, beginning with its fiscal year
ending December 31, 2004, Borrower will furnish to Lender a copy of the
annual audited financial statements of Borrower and the Subsidiaries for such
fiscal year containing, on a consolidated 
basis, balance sheets, statements of income, statements of stockholders’
equity, and statements of changes in financial position, accompanied by the
report of one of the six largest national firms of independent certified public
accountants, accompanied by (i) a copy of the management letter prepared by the
accounting firm auditing and reporting upon such financial statements, and (ii)
a compliance certificate certified by the President or the Chief Financial
Officer of Borrower.

 

21

 

Section 7.09                                Unaudited
Quarterly Financial Statements and Compliance Certification. As soon as
available, and in any event within 45 days after the end of each calendar
quarter, Borrower will furnish to Lender a copy of the unaudited financial
statements of Borrower and its Subsidiaries as of the end of such quarter and
for the period then ended, on a consolidated basis, containing balance sheets
and statements of income, all in reasonable detail and prepared in accordance
with GAAP, compiled by a certified public accountant reasonably acceptable to
Lender, and certified by the President or the Chief Financial Officer of
Borrower to fairly present the financial condition and results of the
operations of Borrower and its Subsidiaries at the date and for the period
indicated therein, subject to changes resulting from audit and normal year-end
adjustments. The quarterly financial statements shall be accompanied by (i)
comparison to current year projections and comparison to prior year comparable
period; and (ii) a Certificate of No Default executed by the President or the
Chief Financial Officer of Borrower, in form and content satisfactory to the Lender
in its sole discretion.

 

Section 7.10                                Monthly
Aging of Accounts Receivable and Report of Equipment, etc. As soon as
available, and in any event within 15 days after the end of each month,
Borrower will, and will cause each 
Subsidiary to, furnish to Lender (or will cause to be furnished to
Lender) a monthly report of (i) an aging of all its Accounts Receivable
identifying such Accounts Receivable upon the basis of a 30 day, 60 day, 90 day
and beyond 90 day schedule; and (ii) a report of the status of the Borrowing
Base (consolidated with the Subsidiaries) and the Maximum Amount as of the
month end next preceding the date of the report.  A list of all Equipment owned by Borrower and
the Subsidiaries will be furnished to Lender on Lender’s request, and annually
at the time  the audited financial
statements provided for in Section 7.08 are furnished to Lender.

 

Section 7.11                                Projections;
Other Reports and Information. Within 30 days following each fiscal year
end, Borrower will provide to Lender updated financial projections of financial
status and performance for the Borrower and its Subsidiaries (accompanied by a
statement of the assumptions underlying such projections) covering the
following fiscal year.  The financial
projections shall be in such format, and shall contain such level of detail and
supporting documentation as Lender may reasonably request.  Borrower shall also furnish to Lender from
time to time such further information regarding the business, affairs, and
financial condition of Borrower and its Subsidiaries as Lender may reasonably
request.

 

Section 7.12                                Performance
of Contracts and the Indenture. Borrower will, and Borrower will cause its
Subsidiaries to,  punctually pay all
amounts due, and observe and perform or cause to be observed and performed all
covenants and agreements in the Indenture and in each material Contract,
agreement, order, lease or other commitment to which Borrower or any  Subsidiary is a party, including specifically
but without limitation any Government Contracts, so as not to give rise to any
event of default or defense to payment or performance on the part of any other
party thereto or to any right on the part of any other party thereto of setoff,
counterclaim, recoupment, rescission, 
termination, or enforcement of rights against Borrower,  any Subsidiary or the Collateral.

 

Section 7.13   Performance of Leases on the Property.  Borrower and each tenant Subsidiary will
punctually pay all amounts due, and observe and perform, or cause to be
observed and performed, all agreements, obligations and covenants in the Leases
so as not to

 

22

 

give rise to any tenant
event of default or defense to landlord’s performance under the Leases, or
permit landlord take any enforcement action against the tenant under the
Leases.

 

Section 7.14                                Compliance
with Laws. Borrower will, and Borrower will cause its Subsidiaries to,
comply or cause compliance with the requirements of all applicable laws, rules,
regulations and orders of any Tribunal materially affecting the operation of
Borrower’s  and the Subsidiaries’
business.

 

Section 7.15                                Expenses
and Legal Fees. Borrower and the Subsidiaires will pay all reasonable
out-of-pocket expenses arising in connection with this Agreement and the other
Loan Documents, the enforcement hereof and thereof, any amendment of this
Agreement or any Loan Documents, and the Closing of the transactions
contemplated hereby including, but not limited to, all legal fees and expenses
incurred by Lender in connection with the Revolving Loan and any Advances on
any Borrowing Date hereunder with respect to any Obligation. All such expenses
shall be paid by Borrower and its Subsidiaries within 30 days after written
demand by Lender. Any and all payments made hereunder, or under any instruments
evidencing the Obligations,  shall be
made free and clear of any present or future taxes, withholdings, or other
deductions whatsoever.

 

Section 7.16                                Notice
of Litigation, Material Adverse Changes, and Events of Default. Borrower
and the Subsidiaries will promptly give to Lender a notice in writing of (i)
any litigation or any proceeding before any Tribunal which involves an amount
in controversy in excess of $500,000.00, or which, if adversely determined,
would in the reasonable opinion of Borrower or any Subsidiary, materially
adversely affect Borrower’s or such Subsidiaries’ financial condition, affairs
or operations, (ii) any other matter which in the reasonable opinion of
Borrower or any Subsidiary might materially adversely affect Borrower’s or such
Subsidiaries’ financial condition, affairs, or operations, (iii) any notice of
landlord or tenant default under the Leases, and (iv) the occurrence of any
Event of Default.

 

Section 7.17    Ratios.

 

(a)                                  Current
Ratio:   During the term of this
Agreement, Borrower shall not allow its ratio of Current Assets to Current
Liabilities to be less than 1.5 to 1 on an aggregate and consolidated basis.
For purposes hereof, “Current Assets” shall mean at any date the aggregate
amount of the current assets of Borrower (excluding the cash collateral pledged
to the  Lender other than the  operating account of Borrower) determined on
a consolidated basis in accordance with GAAP after deducting adequate reserves
in each case where a reserve is proper in accordance with GAAP; and “Current
Liabilities” shall mean (i) all indebtedness of Borrower which by its terms is
payable on demand or matures not more than one year from such date and (ii) all
other items which in accordance with GAAP on a consolidated basis would be
included as current liabilities of Borrower, except for trade payables.

 

(b)                                 Quick
Ratio: During the term of this Agreement, Borrower shall not allow its ratio of
Quick Assets to Current Liabilities, on an aggregate and consolidated basis, to
be less than 0.65 to 1. For purposes hereof, “Quick Assets” shall mean Current
Assets (as defined in Section 7. 17(a) above) less inventory (other than
80% of Eligible Inventory

 

23

 

attributable to
Government Contracts); and “Current Liabilities” shall have the same meaning as
in Section 7. 17(a) above.

 

(c)                                  Minimum
Profitability:  As of the end of each
fiscal year during the term of this Agreement, Borrower shall have operating
profits, computed on a consolidated basis in accordance with GAAP, consistently
applied, of not less than zero, thereby resulting in positive cash flow for
Borrower and its Subsidiaries as of the end of such fiscal year.   “Operating profits” for purposes of this
Agreement shall mean gross profits less operating expenses.  For purposes of this Agreement, “positive
cash flow” shall mean an amount greater than zero, which amount is the sum of
net income (loss) for Borrower and its Subsidiaries  as of the end of the applicable fiscal year and
all non-cash expenses of Borrower and its Subsidiaries for such fiscal year.

 

(d)                                 Minimum
Net Worth: At all times during the term of this Agreement, Borrower shall
maintain a minimum net worth, on a consolidated basis, equal to not less than
$10,000,000.

 

Section 7.18                                Government
Contracts. Borrower will provide Lender 
notice of any  awards related to
Government Contracts or notices related to Government Contracts now or
hereafter entered into between Borrower or any 
Subsidiary and the United States, or between Borrower or any  Subsidiary and any other person as a
subcontract involving ultimate sale of product to the United States, or
assigned, assignable or to be assigned to Borrower or any Subsidiary pursuant
to the Asset Transaction, regarding any contract awards, contract revocations,
or any material changes in contracted volume, pricing or delivery schedules, or
any material changes in cost components of products sold or any other material
change in contract terms for any prime contract or subcontract with the
Borrower, in each case within seven days of receipt of such notice. Attached as
Schedule 7.18A  is a list of all Government Contracts in effect as
of the date hereof. As often as requested by Lender, Borrower shall provide to
Lender a report as to the status of the novations on Government Contracts
required of the Prior Wornick Parties under the Asset Transaction, Government
Contracts entered into between Borrower or any Subsidiary and the United
States, or between Borrower or any Subsidiary and any other person as a
subcontract involving ultimate sale of product to the United States, and if
requested,  a copy of  such Government Contracts. Immediately upon
execution of any Government Contracts entered into between the Borrower or any
Subsidiary and the United States, or between Borrower or any Subsidiary and any
other person as a subcontract involving ultimate sale of product to the United
States, Borrower and any Subsidiary as applicable shall execute and deliver to
Lender its rights under such contracts pursuant to an assignment in the form of
Schedule 7. 18B attached hereto and incorporated herein by reference for
all relevant purposes and shall give Lender such documentation as is required
by the United States Government for submission to the United States Government
with the notification of such assignment and obtain confirmation of such
assignment in the forms also attached as Schedule 7. 18C or in such other
form as may be approved by Lender.

 

Section 7.19                                Minimum
Working Capital. Borrower shall at all times maintain a minimum of
$2,000,000.00 in current working capital on an aggregate and consolidated
basis. Current working capital shall be defined as all Current Assets,  less all Current Liabilities.

 

24

 

Section 7.20   Depository.  Borrower and each Subsidiary will maintain
all their Deposit Accounts and Cash with Lender.

 

Section 7.21  Report on Indenture Payments.  At least 45 days prior to the date:  an interest payment is due under the Indenture;
or a permitted or mandatory redemption of principal on the notes associated
with the Indenture is due; Borrower shall provide Lender a written report
detailing the source of funds Borrower will use to make such payment, evidence
that such payment will not result in an Event of Default under this Agreement
or the other Loan Documents, and such other information and documentation as
Lender may reasonably request.

 

Section 7.22  Title Equipment.  Within forty-five (45) days after the Closing
Date, Lender shall have received the original certificates of title on all
titled Equipment owned by Borrower and the Subsidiaries, and during the term of
this Agreement, Borrower and its Subsidiaries shall deliver to Lender the
original certificates of title on all subsequently acquired titled Equipment
within thirty (30) days of acquiring possession of such titled Equipment.  Borrower and its Subsidiaries shall cooperate
with Lender in having new certificates of title issued on all titled Equipment
reflecting Lender’s first lien and security interest in such Collateral.

 

ARTICLE 8.

 

Negative Covenants

 

Negative Covenants.
Each of Borrower and the Subsidiaries covenants and agrees that, as long as the
Obligations or any part thereof are outstanding, without the prior written
consent of Lender:

 

Section 8.01                                Liens.
Neither Borrower nor any Subsidiary will directly or indirectly create, incur,
assume, or permit to exist any mortgage, lien, charge or encumbrance on, or
security interest in, any property or asset now or hereafter acquired by
Borrower  or any Subsidiary; provided,
however, that the restrictions in this Section 8.01 shall not prohibit the
following (“Permitted Liens”):

 

(a)                                  Purchase
money secured indebtedness incurred in connection with the acquisition by Borrower
or any Subsidiary, respectively, in the ordinary course of business of any
property or asset, whether real, personal or mixed (but not acquired in
replacement of equipment included in the Collateral), up to a maximum aggregate
of $2,000,000.00 so long as such acquisition does not result in an Event of
Default under the Indenture;

 

(b)                                 Liens,
security interests, charges or other encumbrances in favor of Lender or
otherwise contemplated by this Agreement;

 

(c)                                  Liens
for taxes, assessments, or other governmental charges or claims of any nature,
the payment of which is not at the time required or which are being contested
in good faith by appropriate proceedings diligently prosecuted;

 

25

 

(d)                                 Liens
of carriers, warehousemen, mechanics and materialmen incurred in the ordinary
course of business for sums not yet due or being contested in good faith by
appropriate proceedings diligently prosecuted;

 

(e)                                  Liens
incurred or deposits made in the ordinary course of business in connection with
Workers’ Compensation, unemployment insurance and other types of social
security, or to secure the performance of surety and appeal bonds, bids,
leases, performance bonds and other similar obligations; or

 

(f)                                    Liens
provided for in the Intercreditor Agreement and the security documents under
the Indenture so long as such liens do not result in an Event of Default under
the Indenture.

 

Section 8.02                                Limitation
on Leases. Borrower will not permit the aggregate rentals payable under all
non-cancelable operating leases entered into after Closing to which Borrower or
a Subsidiary is a party to exceed $500,000 during any fiscal year. Lender
acknowledges and consents to the Leases pledged to Lender by Leasehold Deed of
Trust to secure the Obligations and the other existing leases on other real
property disclosed to Lender. Borrower agrees not to amend the Leases in any
material respect without the prior written consent of the Lender.  At Lender’s request, Borrower and its
Subsidiaries will grant Lender first liens on the leasehold interest in all
real property leases to the extent Borrower and its Subsidiaries are permitted
to grant liens on their leasehold interest under such leases.

 

 Section 8.03                             Limitations on
Dividends and Similar Payments. Except as allowed under the terms of the
Indenture, Borrower will not declare or pay any dividends on any class of
stock, or directly or indirectly make any payment on account of the purchase,
redemption or other retirement of any shares of such stock, or any warrants,
rights, or options to purchase, or otherwise acquire any shares of its stock of
any class or make any distribution in respect to its stock, either directly or
indirectly, whether in cash or property or in obligations of Borrower.

 

Section 8.04                                Mergers,
Etc. Except as allowed under the terms of the Indenture, Borrower and its
Subsidiaries will not (i) consolidate with or merge into any other corporation,
(ii) permit any other corporation to merge into Borrower and its Subsidiaries,
(iii) acquire all or any substantial part of the capital stock, property or
assets of any other corporation, partnership, or other entity, or (iv) sell or
otherwise dispose of any investment (including any ownership of common stock,
partnership interest, or other securities, interest, or other evidence of
indebtedness or any ownership interest of any kind) in any other business or
company.

 

Section 8.05                                Acquisition
of Equipment. Borrower and its Subsidiaries will not purchase or otherwise
acquire any additional Equipment (including any substitutions for Equipment
owned on the Closing Date) or make any other capital expenditures in violation
of the Indenture, or which would cause Borrower and its Subsidiaries to be in
default under the terms of this Agreement or any other Loan Document.

 

Section 8.06                                No Materially Adverse Management Changes. 
Except in the case of death, disability, resignation,  or retirement in the normal course of
business, and except as otherwise determined by the board of directors of
Borrower or any Subsidiary in the exercise of

 

26

 

its
fiduciary obligations, there shall not be any change in the office of  president of Borrower or any  Subsidiary which would materially adversely
affect Borrower’s or a Subsidiary’s financial condition, affairs or operations.

 

Section 8.07
Changes in Certain Management. 
Borrower will provide Lender written notice of any change in the office
of president, chief financial officer or vice president of operations or manufacturing
of Borrower or any Subsidiary as soon as practical under the circumstances, and
whenever possible, at least ten days prior to the effective date of any change
in the office of president, chief financial officer or vice president of
operations or manufacturing of Borrower or any Subsidiary.

 

Section 8.08  Obligations under Indenture. Neither
Borrower nor any Subsidiary shall take any action, or refrain from taking any
action, under the terms of the Indenture, which would cause Borrower or any Subsidiary to default
on their obligations to Lender under this Agreement or under any other Loan
Document, or which would result in any change in priority or reduction in
Lender’s liens and security interests on any of the Collateral.

 

Section 8.09 Issuance of Additional
Interests.  Neither Borrower nor any
Subsidiary will issue any
additional stock, membership interest, and/or partnership interest of any class
without informing Lender of the issuance of such interests, and the party
acquiring such stock, membership interest and/or partnership interest pledges
such interests to Lender as security for the Obligations.

 

27

 

ARTICLE 9.

 

Collateral for Obligations

 

Section 9.01                                Security
Interest in Property. In order to increase the Borrowing Base through
inclusion of leasehold improvements, Borrower and The Wornick Company Right
Away Division, L.P. shall have granted to Lender a first and superior lien
upon, and a first and superior security interest in, the interest of Borrower
and The Wornick Company Right Away Division, L.P., respectively, under the
Leases,  for the Property, the granting
of such liens to be subject to consent by the landlord, and a first and
superior lien against or a first and superior security interest in any other
real property now leased, or hereafter leased or acquired, by Borrower or any
Subsidiary to the extent permitted under the applicable lease. On each
anniversary date of this Agreement, Borrower and the Subsidiaries will provide
Lender a listing of all real property leases in existence as of  the date of the report, and if requested by
Lender, copies of such leases.  Each of
Borrower and, to the extent applicable, each Subsidiary agrees to notify Lender
of Borrower’s and each Subsidiary’s entry into leases on real property
simultaneously with the entry of such leases by Borrower or its Subsidiaries,
and to execute and deliver to Lender, upon request by Lender, , a Leasehold
Deed of Trust on such other real property. 
Unless otherwise agreed, the form of the instrument granting such lien
or mortgage shall be in substantially the same form as the Leasehold Deed of
Trust on the Property conformed to the applicable jurisidiction if the other
real property is located in a state other than the State of Texas or the State
of Ohio.

 

Section 9.02                                Security
Interest in Equipment. In order to secure payment and performance of the
Obligations, each of Borrower and each Subsidiary hereby grants to Lender a
first and superior lien upon, and a first and superior security interest in,
all Equipment now owned and hereafter acquired by Borrower and each Subsidiary.
Each of Borrower and each  Subsidiary
agrees to execute and deliver to Lender, as a condition to the obligations of
Lender hereunder, a duly and validly executed security agreement creating a
first and superior security interest in its Equipment.

 

Section 9.03                                Security
Interest in Ownership Interests. In order to secure payment and performance
of the Obligations, each of Borrower, Right Away Management Corporation and The
Wornick Company Right Away Division hereby grants to Lender a first and
superior lien upon, and a first and superior security interest in, all
Ownership Interests now owned and hereafter acquired by each of them. Each of
Borrower, Right Away Management Corporation and The Wornick Company Right Away
Division agrees to execute and deliver to Lender, as a condition to the
obligations of Lender hereunder, a duly and validly executed security agreement
creating a first and superior security interest in the Ownership
Interests.  Borrower shall cause TWC, in
order to secure the payment and performance of the Obligations, to grant Lender
a first and superior lien upon, and a first and superior security interest in,
all Ownership Interests of The Wornick Company, a Delaware corporation, and to
execute a pledge agreement creating a first and superior security interest in
such Ownership Interests.

 

Section 9.04                                Security
Interest in Other Assets. In order to secure payment and performance of the
Obligations, each of Borrower and each 
Subsidiary hereby grants to Lender a first and superior lien upon, and a
first and superior security interest in, all other personal

 

28

 

property, including
Accounts Receivable, Contract rights (to the extent assignable, or to the
extent which interests therein or in the proceeds thereof are assignable to
Lender), Deposit Accounts, chattel paper, Intangibles, Inventory, Parts
Inventory, Fixed Assets, Fixtures, and such other assets now owned or hereafter
acquired by Borrower and each 
Subsidiary, and agrees to execute and deliver to Lender, as a condition
to the obligations of Lender hereunder, a duly and validly executed security
agreement which further sets forth the first and superior lien granted herein.

 

Section 9.05                                Execution
of Further Documentation. Promptly after acquisition by Borrower or the
Subsidiaries of any Inventory, Parts Inventory, Equipment or other Collateral
subsequent to Closing, Borrower will, if requested by Lender, confirm to Lender
that Lender has a first and superior security interest therein, shall deliver
such Collateral for which perfection is accomplished by possession and, for
Collateral for which perfection is accomplished by notation on a certificate of
title or similar documentation, shall cause the security interest to be noted,
where applicable, upon the certificate of title or other documentation related
thereto. Each of Borrower and each Subsidiary shall, upon request by Lender,
execute, acknowledge and deliver such further chattel mortgages, assignments,
financing statements, title certificates, security agreements and other
documents as may be requested by Lender to more fully evidence and perfect the
first and superior security interest in the Collateral. In addition, each of
Borrower, TWC and each Subsidiary agrees to execute, acknowledge, and deliver
any and all instruments, mortgages, agreements, certificates, applications,
transfers, assignments, financing statements, and other documents of every
nature, with such covenants, warranties, indemnities and other provisions, and
to do all other acts and things to be done by Borrower, TWC and each Subsidiary
as may from time to time, in the opinion of Lender, be necessary or proper to fully
effectuate the purposes of this Article 9 and the intentions of the
parties hereto.

 

ARTICLE 10.

 

Default

 

Section 10.01 Events
of Default. As used herein, the term “Event of Default” means any one or
more of the following events:

 

(a)                                  The
failure of any portion of the Obligations, including interest thereon, or any
part thereof, to be paid when due.

 

(b)                                 The
breach or other failure of Borrower, TWC and each Subsidiary to punctually and
properly observe, keep and perform each of its covenants and agreements
contained in this Agreement, or the failure by Borrower, TWC and each
Subsidiary to comply with any of the other terms or conditions specified herein
or in any of the other Loan Documents.

 

(c)                                  Any
representation or warranty made by Borrower, TWC and each Subsidiary in this
Agreement, any instrument evidencing an Obligation,  any of other Loan Documents, or the Indenture
is untrue in any material respect, or any schedule, statement, report, notice
or writing furnished by Borrower, TWC and each Subsidiary to Lender is untrue
in any material respect on the date as of which the facts set forth therein are
stated or

 

29

 

certified, or
information is omitted from such schedules, statements, reports, notices, or
writings and the omission of such information would cause the representations
and warranties contained therein to be misleading in any material respect.

 

(d)                                 An
inability of Borrower and each Subsidiary to satisfy any condition specified
herein as precedent to the obligation of Lender to make an Advance after a Draw
Request for an Advance has been submitted by Borrower to Lender, provided that
a Draw Request for an Advance by Borrower in an amount in excess of the amounts
that may be advanced pursuant to this Agreement shall not be an Event of
Default, but Lender shall have no obligation to make such Advance.

 

(e)                                  The   appointment of a receiver, trustee,
custodian, conservator, or liquidator, or other similar official for Borrower
or any Subsidiary, any of the Collateral, or any other property of Borrower or
any Subsidiary.

 

(f)                                    Borrower
or any Subsidiary shall generally not pay its debts as they become due or shall
admit in writing its inability to pay its debts, or Borrower or any Subsidiary
shall make a general assignment for the benefit of creditors.

 

(g)                                 Borrower
or any Subsidiary shall commence any case, proceeding or other action seeking
reorganization, arrangement, adjustment, liquidation, dissolution or
composition of Borrower or any Subsidiary or its debts under any Debtor Relief
Laws.

 

(h)                                 Any
case, proceeding or other action commenced against Borrower or any Subsidiary
seeking to have an order for relief entered against Borrower or any Subsidiary
as debtor, or seeking a reorganization, arrangement, adjustment, liquidation,
dissolution or composition of Borrower or any Subsidiary or its debts under
Debtor Relief Laws, or seeking an appointment of a receiver, trustee, custodian
or other similar official for Borrower or any Subsidiary or for all or any of
the Collateral, or any other property of Borrower or any Subsidiary and such
case, proceeding or other action (i) results in the entry of an order for
relief against Borrower or any Subsidiary or (ii) remains undismissed for a
period of 60 days.

 

(i)                                     Borrower
or any Subsidiary shall have concealed, removed, or permitted to be concealed
or removed, any part of its property, with intent to hinder, delay or defraud
its creditors or any of them, or made or suffered a transfer of any of its
property which may be fraudulent under any bankruptcy, fraudulent conveyance or
similar law; or shall have made any transfer of its property to or for the
benefit of a creditor at a time when other creditors similarly situated have
not been paid; or shall have suffered or permitted, while insolvent, any
creditor to obtain a lien upon any of its property through legal proceedings or
distraint which is not vacated within 60 days from the date thereof.

 

(j)                                     An
occurrence of any event or condition which results in, or with notice or lapse
of time could result in, a default in the payment of any indebtedness or
performance of any obligation of Borrower or any Subsidiary to Lender or any
other party, including any obligation of Borrower  or any Subsidiary under the Indenture.

 

(k)                                  The
liquidation, termination or dissolution of Borrower or any Subsidiary.

 

30

 

(l)                                     Borrower
or any Subsidiary fails to be awarded (including failure to obtain novation of
any Government Contracts to be assigned or assignable under the Asset
Transaction), or following an award, fails to maintain in effect, Government
Contracts on MREs (meals ready to eat) representing at least 20% of the total
case volume of all outstanding MREs (meals ready to eat) Government Contracts.

 

(m)                               A final judgment or judgments where the
amount not paid by insurance is material, if collected, against Borrower or any
Subsidiary, and the same shall remain undischarged for a period of thirty (30)
days during which execution shall not be effectively stayed.

 

(n)                                 Any claim is asserted, or any court shall find
or rule, or Lender shall determine, that Lender does not have a valid first
lien on the Collateral.

 

(o)                                 The sale, encumbrance or abandonment (except
as otherwise expressly permitted by this Agreement, any other Loan Documents or
the Indenture) of the Collateral and/or any other property now or hereafter
subject to any of the Loan Documents; or the making of any levy, seizure or
attachment thereof or thereon; or the loss, theft, substantial damage, or
destruction of any material portion of the Collateral and such loss, theft,
substantial damage or destruction is not covered by casualty and hazard
insurance in accordance with the terms of this Agreement, the other Loan
Documents or the Indenture, or, if so insured, the issuer of such insurance
does not promptly compensate the Borrower or the Subsidiaries for such loss,
theft, substantial damage or destruction.

 

(p)                                 Any default by the Prior Wornick Parties
under the security agreement evidencing the security interest referenced in
Section 4.01(g)(ii) above, provided, that Lender has provided Borrower
written notice of such default and Borrower has failed to diligently prosecute
against the Prior Wornick Parties any rights relating to such default that
Borrower may have under the Asset Transaction.

 

ARTICLE 11.

 

Rights and
Remedies of Lender

 

Section 11.01                          Remedies
Upon Default. Subject to compliance by Lender with any requirement of
notice and opportunity to cure as may be contained in this Agreement or any
instrument evidencing an Obligation (which notices and cure provisions are
incorporated by reference into this Agreement, with the qualification that in
no event or circumstance shall more than one notice and opportunity for cure be
required for the same default), upon the occurrence of an Event of Default,
Lender shall have, in addition to any and all other rights, remedies and
recourses available to it under any of the Loan Documents or otherwise
available at law or in equity, including specifically, but without limitation,
the right to declare immediately due and payable all or any part of the
outstanding Obligations and accrued but unpaid interest thereon and to
foreclose any and all liens and security interests in all Collateral securing
the repayment of same, the right (a) to take exclusive possession of the
Collateral, (b) to prosecute and defend all actions or proceedings relating to
the Collateral, (c) to pay, settle or compromise all existing bills and claims
which are or may be liens against the Collateral, (d) to execute in Borrower’s
and

 

31

 

each Subsidiary’s name
all applications, certificates and other instruments which may be required to
preserve and protect the Collateral, and (e) to employ such contractors,
subcontractors, agents, attorneys, accountants and inspectors as Lender may
deem desirable to accomplish any of the above purposes. For these purposes,
Borrower and each Subsidiary hereby constitutes and appoints Lender its true
and lawful attorney-in-fact with full power of substitution to take any and all
of the above described actions, which power of attorney shall be deemed to be
coupled with an interest and shall be irrevocable. All sums expended by Lender
for any of the above purposes shall be deemed to be Advances hereunder and
shall be secured by the Loan Documents. With respect to each and every right of
Lender enumerated in this Section 11.01, Borrower and each Subsidiary
hereby expressly waives demand, presentment, notice of dishonor, notice of
intent to demand or accelerate payment, notice of acceleration, diligence in
collecting, grace, notice and protest, except as set forth in this Agreement or
any instrument evidencing an Obligation.

 

Section 11.02                          Cessation
of Lender’s Obligations. Upon the occurrence of any Event of Default
hereunder or under any other Loan Document, all obligations (if any) of Lender
hereunder, including specifically any obligation to make Advances hereunder,
shall immediately cease and terminate.

 

Section 11.03                          Acceleration.
Subject to Section 11.01, upon the occurrence of an Event of Default,
Lender may, at its option, declare the Obligations, together with accrued but
unpaid interest, immediately due and payable without notice of any kind.

 

Section 11.04                          Additional
Remedies. Right of Set-Off. In addition to any other security required or
permitted hereunder, Lender is hereby given a lien, security interest, mortgage
and/or pledge for the payment of all debts and liabilities of Borrower or any
Subsidiary to Lender upon all monies, securities, or other property of Borrower
and each Subsidiary, now or hereafter held by Lender (including Cash and
property held in Deposit Accounts or for safekeeping, in custodial accounts or
by pledge, or any items received for collection or transmission and the
proceeds thereof). Lender shall have (to the extent not prohibited or limited
by statutory or common law), upon the occurrence of an Event of Default, and
provided that such Event of Default is continuing and is not waived by or
remedied to the satisfaction of Lender, (i) the right to withhold payment of
the balance of any Deposit Account (whether general or special, time or demand,
provisional or final) of Borrower and each Subsidiary with Lender or pledged by
any other party as Collateral for the Obligations; (ii) the right to
appropriate and apply to the payment of any liabilities of the Borrower and
each Subsidiary to Lender, whether or not then due, any security therefor and
any monies, Deposit Accounts, claims, securities, or other property or proceeds
thereof, (iii) the right to sell, assign, give options to purchase, and deliver
the whole or any part thereof in one or more parcels, at public or private
sale, at Lender’s offices, or at any exchange or brokers’ board, or elsewhere,
for cash, upon credit, or for future delivery, without demand, advertisement,
or notice, which are hereby expressly waived by Borrower and each Subsidiary;
and upon any such sale Lender may become the purchaser of any such property
free from any right of redemption, which is hereby waived and released by
Borrower and each Subsidiary.

 

Section 11.05                          Funds
of Lender. Any funds of Lender used for any purpose referred to in
Section 11.01 shall constitute Advances secured by the Loan Documents and,
subject to Section

 

32

 

12.05, shall bear
interest at the greater of the rate specified in this Agreement or the
instrument evidencing the Obligation to be applicable after default thereunder.

 

Section 11.06                          No
Waiver or Exhaustion. No waiver by Lender of any of its rights or remedies
hereunder, in the other Loan Documents, or otherwise, shall be considered a
waiver of any other or subsequent right or remedy of Lender; no delay or
omission in the exercise or enforcement by Lender of any rights or remedies
shall ever be construed as a waiver of any right or remedy of Lender; and no
exercise or enforcement of any such rights or remedies shall ever be held to
exhaust any right or remedy of Lender.

 

ARTICLE 12.

 

Miscellaneous

 

Section 12.01                          Notices.
All notices or other communications required or permitted to be given pursuant
to the provisions of this Agreement shall be in writing and shall be considered
properly given upon deposit into the care and custody of the United States
Postal Service, if mailed by first class United States mail, postage prepaid,
by registered or certified with return receipt requested. Notice given in any
other manner shall be effective only if and when received by the addressee. For
purposes of notice, the addresses of the parties shall be as set forth below
the signature lines at the end of this Agreement; provided, however, that any
party to this Agreement shall have the right to change its address for notice
hereunder to any other location within the continental United States by the
giving of 30 days’ written notice to the other party in the manner set forth
hereinabove.

 

Section 12.02                          Waiver.
Any failure by Lender to insist, or any election by Lender not to insist, upon
Borrower’s,  and each Subsidiary’s strict
performance of any of the terms, provisions or conditions of the Loan Documents
shall not be deemed to be a waiver of same or of any other term, provision or
condition thereof; and Lender shall have the right at any time thereafter to
insist upon strict performance by Borrower and each Subsidiary of any and all
of same. Specifically, no Advance by Lender when there exists an Event of
Default under Article 10 hereinabove shall in any way preclude Lender from
thereafter declaring such failure to comply to be an Event of Default
hereunder.

 

Section 12.03                          Survival.
The representations, warranties and covenants of Borrower, TWC and each
Subsidiary contained in this Agreement shall survive the Closing.

 

Section 12.04                          Participations.
Lender may, at any time, sell, transfer, assign or grant participations in the
Obligations described in or evidenced by this Agreement; and Lender may forward
to each participant and prospective participant all documents and information
relating to such loan, whether furnished by Borrower, any Subsidiary or
otherwise, as Lender determines necessary or desirable.

 

Section 12.05                          Limitations
on Interest. All agreements between Lender and Borrower and Lender and each
Subsidiary, whether now existing or hereafter arising and whether written or
oral, are hereby limited so that in no contingency, whether by reason of demand
for payment or acceleration of the maturity hereof or otherwise, shall the
interest contracted for, charged or received by Lender exceed the maximum
amount permissible under applicable law. If, from any

 

33

 

circumstance whatsoever,
interest would otherwise be payable to Lender in excess of the maximum lawful
amount, the interest payable to Lender shall be reduced to the maximum amount
permitted under applicable law; and if from any circumstance Lender shall ever
receive anything of value deemed interest by applicable law in excess of the
maximum lawful amount, an amount equal to any excessive interest shall be
applied to the reduction of the principal obligation and not to the payment of
interest, or if such excessive interest exceeds the principal obligation such
excess shall be refunded. All interest paid or agreed to be paid to Lender
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated, and spread throughout the full period until payment in full of the
principal so that the interest hereon for such full period shall not exceed the
maximum amount permitted by applicable law. This paragraph shall control all
agreements between Lender and Borrower and between Lender and each Subsidiary.

 

Section 12.06                          Applicable
Law. This Agreement and the Loan Documents shall be governed by and
construed in accordance with the laws of the State of Texas and the laws of the
United States applicable to transactions within the State of Texas. Subject to
Article 13, the parties hereto stipulate and agree that any action, suit
or proceeding brought to enforce any obligation or covenant under this
Agreement or the Loan Documents shall be brought exclusively in Hidalgo County,
Texas, it being stipulated and agreed that such county is the exclusive county
for venue for any such suit or proceeding.

 

Section 12.07                          Rights.
Remedies and Recourses Cumulative. All rights, remedies and recourses
afforded Lender in the Loan Documents or otherwise available at law or in
equity, including specifically, but without limitation, those granted by the
Uniform Commercial Code in effect in the State of Texas (a) shall be deemed
cumulative and concurrent, (b) may be pursued separately, successively or
concurrently against Borrower and the Subsidiaries or anyone else obligated
under any or all of the Loan Documents, or against any Collateral secured by
the Loan Documents, or against any one or more of them, at the sole discretion
of Lender, (c) may be exercised as often as the occasion therefor shall arise,
it being understood by Borrower and each Subsidiary that the exercise, failure
to exercise or election not to exercise any of the same shall in no event be
construed as a waiver of same or of any other right, remedy or recourse
available to Lender and (d) are intended to be, and shall be, nonexclusive.

 

Section 12.08                          Severability.
If any provision hereof or of any of the other Loan Documents or the
application thereof to any person or circumstance shall, for any reason and to
any extent, be invalid or unenforceable, neither the application of such
provision to any other person or circumstance nor the remainder of the
instrument in which such provision is contained shall be affected thereby, but
rather shall be enforced to the greatest extent permitted by law.

 

Section 12.09                          Construction.
The parties acknowledge that each party and its counsel have reviewed this
Agreement and the Loan Documents and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement, the Loan
Documents or any amendments or exhibits hereto.

 

Section 12.10                          Modification.
This Agreement and any obligation undertaken herein shall not be amended,
waived, discharged or terminated orally but only by an instrument executed by

 

34

 

the party against which
enforcement of the amendment, waiver, discharge or termination is sought, which
instrument may be in the form of a letter agreement.

 

Section 12.11                          Lender’s
Discretion. In any instance under this Agreement or any other of the Loan
Documents (including any Exhibits, Schedules, Annexes or Addenda hereto or
thereto) where Lender’s approval or consent is required, the granting or denial
of such approval or consent shall be within the reasonable discretion of
Lender.

 

Section 12.12                          No
Third Party Beneficiary. This Agreement is for the sole benefit of Lender,
Borrower and the Subsidiaries, and is not for the benefit of any third party.

 

Section 12.13                          Borrower
and Subsidiaries In Control; No Partnership. In no event shall Lender’s rights
and interests under the Loan Documents be construed to give Lender the right
to, or be deemed to indicate that Lender is in control of, the business,
management or properties of Borrower, or the Subsidiaries or to indicate that
Lender has power over the daily management functions and operating decisions
made by Borrower and the  Subsidiaries.
Nothing contained herein or in any of the other Loan Documents shall be
construed as creating a joint venture, partnership, tenancy-in-common or joint
tenancy arrangement between Lender and Borrower,  or between Lender and the Subsidiaries. The
relationship of Lender, Borrower and the Subsidiaries is and at all times shall
be solely that of debtor and creditor. However, if Lender becomes the owner of
any stock of Borrower or any Subsidiary, whether through foreclosure or
otherwise, Lender shall be entitled to exercise such legal rights as it may
have by virtue of being a shareholder of Borrower or a Subsidiary.

 

Section 12.14                          Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their heirs, successors, legal representatives and
assigns. However, neither Borrower, nor any Subsidiary shall not assign or
encumber this Agreement or any rights herein, it being expressly understood and
agreed that Borrower’s’s and the Subsidiaries’ rights hereunder are not
assignable.

 

Section 12.15                          Number
and Gender. Whenever used herein, the singular number shall include the
plural and the plural the singular, and the use of any gender shall be
applicable to all genders. The duties, covenants, obligations, and warranties
of Borrower and the Subsidiaries in this Agreement shall be joint and several
obligations of Borrower and the Subsidiaries and of each Borrower and each
Subsidiary if more than one.

 

Section 12.16                          Captions.
The captions, headings, and arrangements used in this Agreement are for
convenience only and do not in any way affect, limit, amplify, or modify the
terms and provisions hereof.

 

Section 12.17                          Time
of the Essence. Time is of the essence with respect to each and every
matter pertaining to performance under this Agreement and of each provision
hereof.

 

Section 12.18                          Executed
Copies. This Agreement may be executed in any number of counterpart copies,
each of which counterparts shall be deemed an original for all purposes.

 

Section 12.19   List of Schedules.  The following schedules are attached to this
Agreement:

 

35

 

Schedule 1(nn) –
Legal Description of Property

 

Schedule 2.03 – Draw
Request

 

Schedule 6.04 –
Listing of Litigation and Administrative Proceedings

 

Schedule 7.18A –
Listing of Government Contracts

 

Schedule 7.18B –
Form of Assignment of Rights in Government Contracts

 

Schedule 7.18C –
Notice of Assignment of Rights in Government Contracts

 

ARTICLE 13

 

ARTICLE 13  ARBITRATION

 

Section 13.01                     Binding
Arbitration.  Except to the extent
prohibited by law, upon the request of any party to this Agreement, whether
made before or after the institution of any legal proceeding, any action,
dispute, claim or controversy of any kind (e.g., whether in contract or in
tort, statutory or common law, legal or equitable, or otherwise), now existing
or hereafter arising between the parties, 
shall be resolved by binding arbitration in accordance with the terms of
this Article.  The foregoing matters
shall be collectively referred to as “Disputes.”  Any party hereto may, by summary proceedings,
bring an action in court to compel arbitration of any Disputes.

 

Section 13.02   Governing Rules.  Except to the extent the parties involved in
a Dispute may otherwise agree, Disputes shall be resolved by binding
arbitration administered by the American Arbitration Association (the “AAA”) in
accordance with the terms of this Article, the Commercial Arbitration Rules of
the AAA, and, to the maximum extent applicable, the Federal Arbitration Act
(Title 9 of the United States Code).  The
parties hereto acknowledge and agree that the relationship between the parties,
including the transaction contemplated herein, involves interstate
commerce.  If it is determined that the
Federal Arbitration Act is inapplicable, Disputes shall be resolved in
accordance with the provisions of the Texas General Arbitration Act, Texas
Civil Practices and Remedies Code, Section 171.001, et seq.  In the event of any inconsistency between
this Article and such statutes and rules, this Article shall
control.  Judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction;
provided, however, that nothing contained herein shall be deemed to be a waiver
by Lender of the protections afforded to it under 12 U.S.C. §91 or Texas
Finance Code, Section 31.008.

 

Section 13.03   Preservation of Remedies; No Waiver.

 

(a)                                  No
provision of, nor the exercise of any rights under, this Article shall
limit the right of any party, and the parties shall have the right during any
Dispute, to seek, use and employ ancillary or preliminary remedies, judicial or
otherwise, for the purposes of realizing upon, preserving, protecting, or
foreclosing upon any

 

36

 

Collateral
which is involved in a Dispute or which is subject to, or described in, the
Loan Documents, including, without limitation, rights and remedies relating
to:  (i) foreclosing against any real or
personal property Collateral or other security by the exercise of a power of
sale under a deed of trust, mortgage or other security agreement or instrument,
or applicable law; (ii) exercising self-help remedies (including setoff
rights); or (iii) obtaining provisional or ancillary remedies such as
injunctive relief, sequestration, attachment, garnishment or the appointment of
a receiver by a court having jurisdiction, before, during or after the pendency
of any arbitration.  The institution and
maintenance of an action for judicial relief or pursuit of provisional or
ancillary remedies or exercise of self-help remedies shall not constitute a
waiver of the right of any party to submit the Dispute to arbitration nor
render inapplicable the compulsory arbitration provisions hereof.  Without limitation of the foregoing, the
parties shall be entitled to the benefits of each and all of the remedies and
assistance provided for by applicable law.

 

(b)                                  In
Disputes involving indebtedness or other monetary obligations, each party
agrees that the other parties may proceed against all liable Persons, jointly
and severally, or against one or more of them, without impairing rights against
other liable Persons.  Nor shall a party be
required to join the principal obligor or any other liable Persons (including,
without limitation, sureties and guarantors) in any proceeding against a
particular Person.  A party may release
or settle with one or more liable Persons as the party deems appropriate
without releasing or impairing rights to proceed against any Persons not so
released.

 

Section 13.04   Statute of Limitations.  All statutes of limitation that would
otherwise be applicable shall apply to any arbitration proceeding.

 

Section 13.05   Scope of Award; Modification or Vacation
of Award; Qualifications.  The
arbitrators shall resolve all Disputes in accordance with applicable
substantive law.  Any arbitrator shall be
knowledgeable in the subject matter of the Dispute.  With respect to a Dispute in which the claim
or amount in controversy does not exceed $1,000,000.00, a single arbitrator
(who shall have authority to render a maximum award of $1, 000,000.00,
including all damages of any kind, costs and fees) shall be chosen and shall decide
the Dispute.  With respect to a Dispute
in which the claim or amount in controversy exceeds $1,000,000.00, the Dispute
shall be decided by a majority vote of three (3) arbitrators.  The arbitrators may grant any remedy or
relief that the arbitrators deem just and equitable and within the scope of
this Article.  The arbitrators may also
grant such ancillary relief as is necessary to make effective the award.  In all arbitration proceedings in which the
amount in controversy exceeds $1, 000,000.00 in the aggregate, the arbitrators
shall make specific, written findings of fact and conclusions of law.  In all arbitration proceedings in which the
amount in controversy exceeds $1, 000,000.00 in the aggregate, the parties
shall have, in addition to the limited statutory right to seek vacation or
modification of an award pursuant to applicable law, the right to seek vacation
or modification of any award that is based, in whole or in part, on an
incorrect ruling of law; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must
be filed in a court having jurisdiction over the Dispute within fifteen (15)
days from

 

37

 

the date
the award is rendered.  The arbitrators’
findings of fact shall be binding on all parties and shall not be subject to
further review except as otherwise allowed by applicable law.

 

Section 13.06    Discovery.  Arbitrators shall have the discretion to
order a pre-hearing exchange of information by the parties, including, without
limitation, production of requested documents, exchange of summaries of
testimony of proposed witnesses, and examination by deposition of parties.  All time limitations and all issues regarding
conformation with discovery requests shall be decided by the arbitrator(s).

 

Section 13.07   Confidentiality.  Each party agrees to keep all Disputes and
arbitration proceedings strictly confidential, except for disclosures of
information required in the ordinary course of business of the parties or by
applicable law or regulation.  No party
nor any arbitrator may disclose the existence, content or results of any
arbitration hereunder without the prior written consent of all parties.

 

Section 13.08   Other Matters.  To the maximum extent practicable, an
arbitration proceeding brought hereunder shall be concluded within one hundred
eighty (180) days of the filing of the Dispute with the AAA.  Arbitration proceedings hereunder shall be
conducted at a location in Hidalgo County, Texas, agreed to in writing by the
parties, or, in the absence of such an agreement, selected by the AAA.  Arbitrators shall be empowered to impose
sanctions and to take such other actions as the arbitrators deem necessary to
the same extent as a judge would be allowed pursuant to the Federal Rules of
Civil Procedure, the Texas Rules of Civil Procedure and applicable law.  To the extent permitted by applicable law,
the arbitrator(s) shall have the power to award and allocate recovery of all
costs and fees (including attorneys’ fees, administrative fees and arbitrators’
fees) between the parties.  The
provisions of this Article shall survive any termination, amendment or
expiration of the Loan Documents, unless the parties otherwise expressly agree in
writing.  This Article may be
amended, changed or modified only by the express provisions of a writing which
specifically refers to this Article and which is signed by all of the
parties hereto.

 

THIS AGREEMENT PROVIDES
FOR INDEMNITIES IN SECTION 6.15 AND FOR ARBITRATION OF DISPUTES IN
ARTICLE 13.

 

 

THIS WRITTEN LOAN
AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES HERETO.  THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES HERETO.

 

 

EXECUTED and DELIVERED as
of the date first recited above.

 

[Signature Pages
Follow]

 

38

 

	
   

  	
  Lender:

  
	
   

  	
   

  
	
   

  	
  TEXAS STATE BANK

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Douglas G. Bready

  	
   

  
	
   

  	
   

  	
  Name: Douglas G. Bready

  	
   

  
	
   

  	
   

  	
  Title:   President

  	
   

  
	
   

  	
   

  	
  Address:   3900
  North 10th Street

  McAllen, Texas 78501

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Borrower:

  
	
   

  	
   

  
	
   

  	
  THE WORNICK COMPANY, a
  Delaware

  corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Robert B. McKeon

  	
   

  
	
   

  	
   

  	
  Robert
  B. McKeon,

  
	
   

  	
   

  	
  Chariman
  of the Board

  
	
   

  	
   

  	
  Address:  c/o Veritas Capital

  Management II, L.L.C.

  660 Madison Avenue

  New York, New York 10021

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Subsidiary/Guarantor:

  
	
   

  	
   

  
	
   

  	
  THE WORNICK COMPANY
  RIGHT

  AWAY DIVISION, L.P., a Delaware

  limited partnership

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Right Away Management
  Corporation,

  	
   

  
	
   

  	
   

  	
  its general partner

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Robert B. McKeon

  	
   

  
	
   

  	
   

  	
   

  	
  Name: Robert B. McKeon

  	
   

  
	
   

  	
   

  	
   

  	
  Title:   Chairman of the Board

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  	
  c/o
  Veritas Capital Management II,

  L.L.C.

  
	
   

  	
   

  	
  660
  Madison Avenue

  
	
   

  	
   

  	
  New
  York, New York 10021

  

 

39

 

	
   

  	
  RIGHT AWAY MANAGEMENT

  CORPORATION

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Robert B. McKeon

  	
   

  
	
   

  	
   

  	
  Name: Robert B. McKeon

  	
   

  
	
   

  	
   

  	
  Title:   Chairman of the Board

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
  Address:  c/o Veritas Capital

  Management II, L.L.C.

  	
   

  
	
   

  	
   

  	
  660
  Madison Avenue

  	
   

  
	
   

  	
   

  	
  New
  York, New York 10021

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  THE WORNICK COMPANY
  RIGHT

  AWAY DIVISION

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Robert B. McKeon

  	
   

  
	
   

  	
   

  	
  Name: Robert B. McKeon

  	
   

  
	
   

  	
   

  	
  Title:   Chairman of the Board

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
  Address:  c/o Veritas Capital

  Management II, L.L.C.

  	
   

  
	
   

  	
   

  	
  660
  Madison Avenue

  	
   

  
	
   

  	
   

  	
  New
  York, New York 10021

  	
   

  

 

40Exhibit
10.4

 

REVOLVING LINE OF CREDIT

PROMISSORY NOTE

 

June 30, 2004

 

Promise to Pay:                   For value received, The Wornick Company, a
Delaware corporation, promises to pay to the order of Lender the Principal
Amount, to the extent the same is advanced by Lender and remains unpaid,
together with interest on the unpaid balance of such amount, in lawful money of
the United States of America, in accordance with all the terms, conditions and
covenants set forth below.  Capitalized
terms in this Promissory Note not otherwise defined herein shall have the
meaning assigned such terms in a Loan Agreement of even date herewith by and
among Lender, Borrower, Right Away Management Corporation, a Delaware
corporation, The Wornick Company Right Away Division, a Delaware corporation,
The Wornick Company Right Away Division, L.P., a Delaware limited partnership,
and TWC Holding LLC, a Delaware limited liability company

 

Borrower:             The Wornick Company, a Delaware corporation

 

Borrower’s
Address for Notice:

 

The
Wornick Company

Attention:
Larry L. Rose

President
and CEO

10825
Kenwood Road

Cincinnati,
OH 45242

Fax:
(513) 791-4148

With
copy to: Robert B. McKeon

Veritas
Capital Management II, L.L.C.

660
Madison Avenue

New
York, New York 10021

Fax:
(212) 688-9411

 

Lender:                  Texas State Bank, a Texas banking corporation

 

Lender’s
Address for Payment:

 

3900
N. 10th Street

McAllen,
Texas 78501

 

Principal Amount:              Fifteen Million and 00/100 Dollars
($15,000,000.00)

 

Permitted Borrowings:              The least of the: (i) Principal Amount; or
(ii) Borrowing Base; or (iii) Maximum Amount

 

 

Interest Rate:                      Applicable Rate (hereinafter defined)

 

Default Interest Rate:                 Applicable Rate plus two percent (2%) per
annum based on the actual number of days elapsed over a 360 day year

 

Payment Terms:

 

(a)           Interest, computed at the Interest Rate on the unpaid balance of the
Principal Amount from time to time outstanding, is due and payable monthly as
it accrues on the last day of each calendar month, beginning July 31,
2004, and continuing regularly on the last day of each calendar month
thereafter until June 30, 2009, when all accrued, but unpaid, interest
shall be due and payable.

 

(b)           If at any time the outstanding principal balance of all Obligations
shall exceed the lesser of (i) the Borrowing Base or (ii) the Maximum Amount,
Borrower shall immediately upon receipt of written notice from Lender pay to
Lender the entire amount of such excess, which amount will be credited by
Lender to the unpaid Principal Amount or to unpaid principal on such other
outstanding Obligations as Lender may elect.

 

(c)           The entire unpaid Principal Amount owing on this Promissory Note shall
be due and payable on June 30, 2009.

 

Interest
Provisions:

 

(a)           Rate: The Principal Amount of this Promissory Note advanced from time to
time and remaining unpaid prior to maturity shall bear interest at a varying or
fluctuating rate per annum based on the actual number of days elapsed over a
360 day year (the “Applicable Rate”) that is equal to the “Prime Rate” as that
term is defined and stated in this Promissory Note, but never greater than the
“Maximum Lawful Rate”, as defined below. The term “Prime Rate” as used in this
Promissory Note means a per annum interest rate equal to the “Prime Rate” as
published each day by The Wall Street Journal in its “Money Rates”
section, and if more than one such rate is published, then the highest such
rate. On any day when The Wall Street Journal is not published or a
Prime Rate is not published under the Money Rates section thereof, then
the Prime Rate published for the preceding publication date of The Wall
Street Journal shall apply. Should the method of establishing the Prime
Rate, or the publication of such Prime Rate, cease or be abolished, then the
Prime Rate used for the balance of the term of this Promissory Note shall be
that interest rate, established, adopted or used by holder as its prime or base
interest rate. The Applicable Rate will automatically fluctuate upward or
downward with changes to the Prime Rate, without notice to Borrower or any
other person. Interest shall be calculated on the amount of each Advance of the
Principal Amount of this Promissory Note from the date of each Advance.

 

(b)           Maximum Lawful Rate: The term “Maximum Lawful Rate” means the
maximum lawful contractual rate of interest, and the term “Maximum Lawful
Amount” means the maximum lawful contractual amount of interest, that are
permissible and nonusurious under

 

2

 

applicable
state or federal law for the type of loan evidenced by this Promissory Note and
the other Loan Documents. To the extent that the Texas Finance Code, as
amended, is applicable to this Promissory Note, the “Weekly Ceiling” defined in
Chapter 303, Texas Finance Code, shall be the basis for determining the Maximum
Lawful Rate in effect from time to time.

 

(c)           Usury Disclaimer:  All
agreements between Lender and Borrower, whether now existing or hereafter
arising and whether written or oral, are hereby limited so that in no
contingency, whether by reason of demand for payment or acceleration of the
maturity hereof or any other circumstance whatsoever, shall the interest
contracted for, charged or received by Lender exceed the Maximum Lawful Amount.
If, from any circumstance whatsoever, interest would otherwise be payable to
Lender in excess of the Maximum Lawful Amount, the interest payable to Lender
shall be reduced to the Maximum Lawful Amount; and if from any circumstance
Lender shall ever receive any interest in excess of the Maximum Lawful Amount,
an amount equal to any excessive interest shall be applied to the reduction of
the Principal Amount and not to the payment of interest, or if such excessive
interest exceeds the unpaid Principal Amount such excess shall be refunded to
Borrower. All interest paid or agreed to be paid to Lender shall, to the extent
permitted by applicable law, be amortized, prorated, allocated, and spread
throughout the full period until payment in full of the Principal Amount
(including the period of any renewal or extension hereof) so that the interest
hereon for such full period shall not exceed the Maximum Lawful Amount. For
purposes of this paragraph, the term interest shall include all considerations
and amounts that constitute interest under applicable usury law. This paragraph
shall control all agreements between Borrower and Lender.

 

(d)           Interest After Default:  All
past due installments of principal and interest on this Promissory Note, and
the unpaid principal balance during the existence of any default and after
maturity, shall bear interest at a per annum rate equal to the lesser of (i)
the Default Interest Rate stated above or (ii) the Maximum Lawful Rate. Where
no Maximum Lawful Rate is applicable and a Default Interest Rate is not
specified, the interest rate on such amounts shall be the Applicable Rate
stated above.

 

Revolving
Line of Credit:

 

(a)           Indebtedness and Liens: This Promissory Note shall evidence
principal indebtedness of Borrower to Lender up to the Principal Amount based
on Advances requested and funded from time to time under a $25,000,000.00
revolving credit line established under the Loan Agreement.  Subject to the Permitted Borrowings
limitations, the indebtedness outstanding from time to time pursuant to this
Promissory Note may be decreased, increased, paid in full and then
renewed.  This Promissory Note and all
Loan Documents securing it and the liens and security interests thereunder with
respect to the Collateral shall remain in effect until this Promissory Note is
formally terminated in writing, and this Promissory Note and such other Loan
Documents, and liens and security interests shall not otherwise be terminated
by payment of all or any part of the indebtedness hereby represented.  All Advances requested under this Promissory
Note are subject to, and shall be made pursuant to the terms of this Promissory
Note, the Loan Agreement and the other Loan Documents.

 

3

 

(b)           Evidence of Amount Outstanding: The books and records of Lender relating to
this Promissory Note will be evidence of the amounts advanced, paid and owing
hereunder. Without limiting the foregoing, all advances and all payments made
on account of the principal hereof may be endorsed by Lender on the back of or
on an attachment to this Promissory Note, and when endorsed thereon shall
become a part hereof and evidence of the amounts due hereunder.

 

Default
Provisions:

 

(a)           Definitions: The term “Monetary Default” shall mean a party’s failure, in whole or
in part, to pay any amounts due on any Obligation, including Obligations
pursuant to this Promissory Note, or to pay any amount necessary to repair,
maintain, replace or insure the Collateral, or to pay taxes on the
Collateral.  The term “Non-Monetary
Default” shall mean any Event of Default other than a Monetary Default.  The term “Selected Enforcement Activities”
shall mean: (i) acceleration of maturity of the indebtedness evidenced by the
Promissory Note; (ii) advancing funds to repair, maintain, replace or insure the
Collateral, or to pay taxes on the Collateral; or (iii) exercising collection
rights or foreclosure rights with respect to any Collateral.

 

(b)           Event of Default:  The
occurrence of any:

 

(i)  Non-Monetary Default listed in
Section 10.01 (d), (e), (f), (g), (h), (i), (k), (m), (n), (o) or (p) of
the Loan Agreement; or Borrower’s failure to make any interest or principal
payment on the $125,000,000 aggregate principal amount, 10 7/8% Senior Secured
Notes due 2011, owed by Borrower to the holders of such notes on the due date
(“Notes Debt”); or if there is not sufficient availability under the Borrowing
Base from which to fund an Advance pursuant to the terms of the Loan
Agreement,  Borrower’s failure to have
sufficient cash on hand at least five (5) calendar days prior to a required
Notes Debt payment date in order to make the required Notes Debt payment; or to
pay amounts required of tenants under the Leases; shall constitute an Event of
Default immediately upon the occurrence of the event constituting such default;

 

(ii)  Monetary Default, and/or the occurrence of
any Non-Monetary Default listed in Section 10.01 (j) or (l) of the Loan
Agreement shall constitute an Event of Default hereunder if Lender shall
declare such occurrence as a default, and Lender notifies the parties in
default in writing of same, and the parties in default fail to remedy such
default within eight (8) calendar days following notice from Lender; and

 

(iii)
Non-Monetary Defaults listed in Section 10.01 of the Loan Agreement which
are not otherwise included in sub-items (i) or (ii) of this
sub-section (b) shall constitute an Event of Default hereunder if Lender
shall declare such occurrence as a default and notifies the parties in default
in writing of same, and such parties in default fail to remedy such default
within fifteen (15) calendar days following notice from Lender, provided,
within five (5) days after the delivery or mailing of the notice of default,
the parties in default commence to remedy such default and

 

4

 

at
the time such parties commence the remedy of such default they submit to Lender
in writing their plan to remedy the default, and said cure is thereafter
continuously pursued by the defaulting parties with due diligence and is
remedied within such fifteen (15) calendar day period. If such Non-Monetary
Default is not reasonably capable of being remedied within fifteen (15)
calendar days, the defaulting parties, on written request to Lender, shall have
such additional time as is reasonable under the circumstances to complete the
cure of such default, but in no event more than thirty (30) calendar days after
the delivery or mailing of the original notice of default;

 

however,
if in Lender’s reasonable judgment: (x) the Monetary Default or Non-Monetary
Default otherwise subject to notice and an opportunity to remedy default listed
in sub-items (ii) and (iii) of this sub-section are not capable of being
remedied by the defaulting parties during the period otherwise permitted herein
for the cure of such default; or (y) allowing the parties in default an
opportunity to remedy the default will likely result in the Collateral being
damaged or destroyed, uninsured or rendered unavailable to Lender; or (z)
allowing the parties in default an opportunity to remedy the default will
likely result in the Collateral being materially and adversely affected; then
Lender will notify the parties in default of such determination (“Lender
Determination”), and if such determination is made, no notice and opportunity
to remedy default is available for such Monetary Default or Non-Monetary
Default.  In addition, in no event is
Lender obligated to provide the parties in default notice and opportunity to
cure any default of the same type or nature which is repeated more than twice
in any one (1) calendar year.  The
provisions of sub-section (b) shall apply to Events of Default under all
Loan Documents applicable to this Promissory Note, and unless expressly stated
to the contrary in such documents, any notice and opportunity to remedy default
period referred to therein shall be deemed to incorporate said provisions. If
any of the Loan Documents applicable to this Promissory Note are inconsistent
with this paragraph,  the terms of this
Promissory Note shall be controlling, unless the other Loan Document expressly
provides otherwise.  Nothing in this
sub-section (b) shall be construed as extending the term of this
Promissory Note or the date upon which a default occurs, and no decision to
forego any remedy for any given Event of Default shall be deemed a waiver on
the part of the holder hereof of any right relating to any other Event of
Default.

 

(c)           Remedies for an Event of Default: Provided a Lender Determination has not been
made with respect to an Event of Default, Lender will not initiate a Selected
Enforcement Activity with respect to an Event of Default during any applicable
notice and cure period described in sub-section (b) hereof.  Except as provided in the preceding sentence,
if an Event of Default exists and is continuing, Lender may, without notice or
demand, declare the entire unpaid Principal Amount and all accrued and earned
but unpaid interest at once due and payable, and exercise all rights and
remedies available to Lender under the Loan Documents.  The limitation on Lender’s rights with
respect to initiating a Selected Enforcement Activity following certain Events
of Default shall be strictly construed, and such limitation shall not impair
the exercise of any remedy not referred to in such definition, including,
without limitation, the seeking of any mandatory or prohibitive injunction or
restraining order.

 

5

 

(d)           Waiver by Borrower: Except as provided in this Promissory Note,
Borrower and all other parties liable for this Promissory Note waive demand,
presentment for payment, notice of nonpayment, protest, notice of protest,
grace, notice of dishonor, notice of intent to accelerate, notice of
acceleration, and diligence in collection.

 

(e)           Non-Waiver by Lender: Any previous extension of time,
forbearance, failure to pursue some remedy, or acceptance of partial payment by
Lender, before or after maturity, does not constitute a waiver by Lender of the
existence of any Event of Default nor of its right to strictly enforce the
collection of this Promissory Note according to its terms.

 

(f)            Other Remedies Not Required: Lender shall not be required to first file
suit, exhaust all remedies, or enforce its rights against any security in order
to enforce payment of this Promissory Note.

 

(g)           Joint and Several Liability: Each Borrower who signs this Promissory
Note, and all of the other parties liable for the payment of this Promissory
Note, such as guarantors, endorsers, and sureties, are jointly and severally
liable for the payment of this Promissory Note.

 

(h)           Attorney’s Fees: If Lender requires the services of an
attorney to enforce the payment of this Promissory Note or the performance of
the other Loan Documents, or if this Promissory Note is collected through any
lawsuit, probate, bankruptcy, or other judicial proceeding, Borrower agrees to
pay Lender an amount equal to its reasonable attorney’s fees and other
collection costs. This provision shall be limited by any applicable statutory
restrictions relating to the collection of attorney’s fees.

 

Miscellaneous
Provisions:

 

(a)           Collateral: This Promissory Note is secured by a lien and security interest in
all the Collateral.

 

(b)           Application of Payments: All payments on the indebtedness evidenced
by this Promissory Note and by any documents securing or governing this
Promissory Note, other than regularly scheduled payments, shall be applied to
such indebtedness in such order and manner as Lender may from time to time
determine in its absolute discretion.

 

(c)           Prepayment: Borrower may prepay this Promissory Note in whole or in part at any
time, without penalty. Any prepayment shall be applied to the last maturing
installments of principal due on this Promissory Note, that is in the inverse
order of maturity and without reducing the amount or time of payment of the
remaining obligatory installments until the indebtedness evidenced by this
Promissory Note is fully paid.

 

(d)           Subsequent Holder: All references to Lender in this Promissory
Note shall also refer to any subsequent owner or holder of this Promissory Note
by transfer, assignment, endorsement or otherwise.

 

6

 

(e)           Transfer or Participation: 
Borrower acknowledges and agrees that Lender may, from time to time,
transfer or sell this Promissory Note to one or more transferees or
participants. Borrower authorizes Lender to disseminate any information it has
pertaining to the loan evidenced by this Promissory Note, including, without
limitation, credit information on Borrower, any of its principals and any
guarantor of this Promissory Note, to any such transferee or participant or
prospective transferee or participant.

 

(f)            Set-Off: Borrower agrees that Lender may exercise Lender’s right of set-off to
pay all or any part of the outstanding Principal Amount and accrued interest,
costs, attorney’s fees, and advances owed on this Promissory Note against any
obligation Lender may have, now or hereafter, to pay money, securities or other
property to Borrower. This includes, without limitation:

 

(i)            any deposit account balance, securities
account balance or certificate of deposit balance (whether matured or
unmatured) Borrower has with Lender, whether general, special, time, savings,
checking or NOW account;

 

(ii)           any money owing to Borrower on an item presented to Lender or in
Lender’s possession for collection or exchange; and

 

(iii)          any repurchase agreement or any other non-deposit obligation or credit
in Borrower’s favor.

 

Lender’s
right of set-off may be exercised upon Borrower’s default:

 

(i)            without prior demand or notice;

 

(ii)           without regard to the existence or value of any Collateral securing
this Promissory Note; and

 

(iii)          without regard to the number or creditworthiness of any other persons
who have agreed to pay this Promissory Note.

 

Lender
will not be liable for dishonor of a check or other request for payment where
there are insufficient funds in the account (or other obligation) to pay such
request because of Lender’s exercise of Lender’s right of set-off. Borrower
agrees to indemnify and hold Lender harmless from any person’s claims and the
costs and expenses, including without limitation, attorneys’ fees, incurred as
a result of such claims or arising as the result of Lender’s exercise of
Lender’s right of set-off.

 

If
any such money, securities or other property is also owned by some other person
who has not agreed to pay this Promissory Note (such as another depositor on a
joint account) Lender’s right of set-off will extend to the amount which could
be withdrawn or paid directly to Borrower on Borrower’s request, endorsement or
instruction alone. In addition, where Borrower may obtain payment from Lender
only with the endorsement or consent of someone who has not agreed to pay this
Promissory Note, Lender’s right of set-off will extend to Borrower’s interest
in

 

7

 

the
obligation. Lender’s right of set-off will not apply to an account or other
obligation if it clearly appears that Borrower’s rights in the obligation are
solely as a fiduciary for another or to an account, which by its nature and
applicable law (for example an IRA or other tax deferred retirement account),
must be exempt from the claims of creditors. Borrower hereby appoints Lender as
Borrower’s attorney-in-fact and authorizes Lender to redeem or obtain payment
of any certificate of deposit in which Borrower has an interest in order to
exercise Lender’s right of set-off. Such authorization applies to any
certificate of deposit even if not matured. Borrower further authorizes Lender to
withhold any early withdrawal penalty without liability against Lender in the
event such penalty is applicable as a result of Lender’s set-off against a
certificate of deposit prior to its maturity.

 

(g)           Successors and Assigns: The provisions of this Promissory Note
shall be binding upon and for the benefit of the successors, assigns, heirs,
executors and administrators of Lender and Borrower.

 

(h)           Other Parties Liable:  All
promises, waivers, agreements and conditions applicable to Borrower shall
likewise be applicable to and binding upon any other parties primarily or
secondarily liable for the payment of this Promissory Note, including all
guarantors, endorsers and sureties.

 

(i)            Modifications: Any modifications agreed to by Lender
relating to the release of liability of any of the parties primarily or
secondarily liable for the payment of this Promissory Note, or relating to the
release, substitution, or subordination of all or part of the security for this
Promissory Note, shall in no way constitute a release of liability with respect
to the other parties or security not covered by such modification.

 

(j)            Borrower’s Address for Notice:  All
notices required to be sent by Lender to Borrower shall be sent by United
States Mail, postage prepaid, to Borrower’s Address for Notice stated on the
first page of this Promissory Note, until Lender shall receive written
notification from Borrower of a new address for notice.

 

(k)           Lender’s Address for Payment: All sums payable by Borrower to Lender
shall be paid at Lender’s Address for Payment stated on the first page of this
Promissory Note, until Lender shall notify Borrower of a new address for
payment.

 

(1)           Applicable Law: This Promissory Note has been executed and
delivered, and shall be construed, in accordance with the applicable laws of
the State of Texas and the United States of America. This Promissory Note is
payable in Hidalgo County, Texas, and venue shall lie in Hidalgo County, Texas,
with respect to any action brought with respect to this Promissory Note.  All disputes associated with this Promissory
Note shall be resolved by binding arbitration in accordance with the procedures
set forth in the Loan Agreement.

 

(m)          Time of Essence: Time is of the essence in Borrower’s
performance of all duties and obligations imposed by this Promissory Note.

 

8

 

(n)           Business Use: Borrower represents and warrants to Lender
that the proceeds of this Promissory Note will be used solely for the purposes
permitted in the Loan Agreement.

 

(o)           Chapter 346 Not Applicable: It is understood that Chapter 346, Texas
Finance Code,  relating to certain
revolving credit loan accounts and tri-party accounts is not applicable to this
Promissory Note, and any applicability thereof is hereby expressly waived.

 

	
   

  	
  THE
  WORNICK COMPANY, a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert B. McKeon

  	
   

  
	
   

  	
   

  	
  Robert
  B. McKeon

  
	
   

  	
   

  	
  Chairman
  of the Board

  
	
   

  	
   

  	
  Address:  c/o Veritas Capital Management II, L.L.C.

  
	
   

  	
   

  	
  660
  Madison Avenue

  
	
   

  	
   

  	
  New
  York, New York 10021

  

 

9

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