Document:

Exhibit
10.3

 

 

THE WORNICK
COMPANY,

THE WORNICK COMPANY RIGHT AWAY DIVISION,

RIGHT AWAY MANAGEMENT CORPORATION, and

THE WORNICK COMPANY RIGHT AWAY DIVISION, L.P.

(as Grantors)

 

 

SECURITY AGREEMENT

 

Dated as of
June 30, 2004

 

 

 

U.S. BANK NATIONAL
ASSOCIATION

(as Collateral Agent)

 

 

 

TABLE OF CONTENTS

 

	
  SECTION 1

  	
  DEFINITIONS AND INTERPRETATION

  	
   

  
	
  1.1

  	
  Definitions

  	
  1

  
	
  1.2

  	
  Interpretation

  	
  1

  
	
   

  	
   

  	
  4

  
	
  SECTION 2

  	
  GRANT OF SECURITY, SECURED OBLIGATIONS,
  AND RELATED PROVISIONS

  	
  4

  
	
  2.1

  	
  Grant of
  Security

  	
  4

  
	
  2.2

  	
  Secured
  Obligations

  	
  5

  
	
  2.3

  	
  Continuing
  Liability Under Collateral

  	
  5

  
	
  2.4

  	
  Continuing
  Security Interest

  	
  5

  
	
   

  	
   

  	
   

  
	
  SECTION 3

  	
  REPRESENTATIONS AND WARRANTIES

  	
  5

  
	
  3.1

  	
  Title; Accurate Information

  	
  5

  
	
  3.2

  	
  Organizational
  Matters

  	
  5

  
	
  3.3

  	
  Authority and Enforceability

  	
  6

  
	
  3.4

  	
  Third-Party Authorizations and Approvals

  	
  6

  
	
  3.5

  	
  Attachment and Perfection

  	
  6

  
	
  3.6

  	
  No Encumbrances

  	
  6

  
	
  3.7

  	
  Accounts

  	
  6

  
	
  3.8

  	
  Deposit Accounts

  	
  7

  
	
  3.9

  	
  Investment Property.

  	
  7

  
	
  3.10

  	
  Intellectual Property

  	
  7

  
	
  3.11

  	
  Commercial Tort
  Claims

  	
  8

  
	
   

  	
   

  	
   

  
	
  SECTION 4

  	
  COVENANTS AND AGREEMENTS

  	
  8

  
	
  4.1

  	
  Encumbrances

  	
  8

  
	
  4.2

  	
  Use of Collateral

  	
  8

  
	
  4.3

  	
  Taxes and
  Claims

  	
  8

  
	
  4.4

  	
  Materially Adverse Changes

  	
  8

  
	
  4.5

  	
  Inventory

  	
  8

  
	
  4.6

  	
  Bailees; Landlords

  	
  8

  
	
  4.7

  	
  Accounts

  	
  9

  
	
  4.8

  	
  Limitations
  on Issuers of Pledged Capital Stock

  	
  9

  
	
  4.9

  	
  Deposit
  Accounts and Securities Accounts.

  	
  9

  
	
  4.10

  	
  After-Acquired Collateral

  	
  9

  
	
  4.11

  	
  Certain
  Proceeds

  	
  10

  
	
  4.12

  	
  Certain
  Non-U.S. Collateral

  	
  10

  
	
  4.13

  	
  Certificated
  Collateral

  	
  10

  
	
  4.14

  	
  Voting
  and Distributions

  	
  10

  
	
  4.15

  	
  Intellectual
  Property

  	
  11

  
	
  4.16

  	
  Commercial
  Tort Claims

  	
  11

  
	
  4.17

  	
  Insurance

  	
  11

  
	
  4.18

  	
  Additional
  Grantors

  	
  11

  
	
  4.19

  	
  Further
  Assurances

  	
  12

  
	
   

  	
   

  	
   

  
	
  SECTION 5

  	
  REMEDIES

  	
  12

  
	
  5.1

  	
  Generally

  	
  12

  
	
  5.2

  	
  Sale of
  Collateral

  	
  13

  

 

i

 

	
  5.3

  	
  Marshalling; Payments Set Aside

  	
  14

  
	
  5.4

  	
  Application
  of Proceeds

  	
  14

  
	
  5.5

  	
  Accounts

  	
  14

  
	
  5.6

  	
  Investment
  Property.

  	
  14

  
	
  5.7

  	
  Deposit
  Accounts

  	
  15

  
	
  5.8

  	
  Intellectual
  Property.

  	
  15

  
	
  5.9

  	
  Cash Proceeds

  	
  16

  
	
  5.10

  	
  Certain Rights Respecting Contracts

  	
  17

  
	
   

  	
   

  	
   

  
	
  SECTION 6

  	
  RIGHTS AND OBLIGATIONS OF COLLATERAL
  AGENT

  	
  17

  
	
  6.1

  	
  Appointment, Resignation and Removal

  	
  17

  
	
  6.2

  	
  Standard of
  Care; Collateral Agent May Perform

  	
  17

  
	
  6.3

  	
  Attorney-In-Fact

  	
  18

  
	
  6.4

  	
  Access; Right of Inspection

  	
  19

  
	
  6.5

  	
  Authorizations

  	
  19

  
	
  6.6

  	
  Expenses

  	
  19

  
	
  6.7

  	
  Indemnity

  	
  20

  
	
  6.8

  	
  Release
  of Collateral

  	
  20

  
	
   

  	
   

  	
   

  
	
  SECTION 7

  	
  MISCELLANEOUS

  	
  20

  
	
  7.1

  	
  Notices

  	
  20

  
	
  7.2

  	
  Amendment and Waivers

  	
  20

  
	
  7.3

  	
  No Waiver; Remedies Cumulative

  	
  20

  
	
  7.4

  	
  Successors and Assigns

  	
  21

  
	
  7.5

  	
  Independence of Covenants

  	
  21

  
	
  7.6

  	
  Survival of
  Representations, Warranties and Agreements

  	
  21

  
	
  7.7

  	
  Severability

  	
  21

  
	
  7.8

  	
  Governing Law

  	
  21

  
	
  7.9

  	
  Counterparts

  	
  21

  
	
  7.10

  	
  Effectiveness

  	
  21

  
	
  7.11

  	
  Entire
  Agreement

  	
  21

  
	
  7.12

  	
  Limitation
  on Collateral Agent’s Liability

  	
  21

  
	
  7.13

  	
  Rights
  and Obligations Subject to Intercreditor

  	
  22

  
	
   

  	
   

  	
   

  
	
  SCHEDULES

  	
   

  	
   

  
	
  3.2

  	
  Organizational Matters

  	
   

  
	
  3.5

  	
  UCC Filing Offices

  	
   

  
	
  3.8

  	
  Deposit Accounts

  	
   

  
	
  3.9

  	
  Investment Property

  	
   

  
	
  3.10

  	
  Intellectual Property

  	
   

  
	
  3.11

  	
  Commercial Tort Claims

  	
   

  
	
  7.1

  	
  Addresses for Notices;
  Contact Information

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  	
   

  
	
  A

  	
  Security Agreement Supplement

  	
   

  

 

ii

 

This SECURITY AGREEMENT,
dated as of June 30, 2004 (this “Agreement”),
is between The Wornick Company, a Delaware corporation (“TWC”), and the Subsidiaries of TWC listed
on the signature pages hereto (the “Subsidiary
Grantors”), and each Additional Grantor that from time to time
becomes a party by executing a Security Agreement Supplement (together with TWC
and the Subsidiary Grantors, the “Grantors”),
and U.S. Bank National Association, as collateral agent for the Secured Parties
(in such capacity, the “Collateral Agent”).

 

RECITALS

 

WHEREAS, reference is
made to that certain Indenture, dated as of the date hereof (as amended,
restated, supplemented or otherwise modified from time to time, the “Indenture”), by and among the Grantors and
U.S. Bank National Association, as trustee (in such capacity, the “Trustee”) and Collateral Agent; and

 

WHEREAS, in consideration
of the extension of credit set forth in the Indenture, each Grantor has agreed
to secure all obligations under the Indenture and the Notes issued in
connection therewith.

 

NOW, THEREFORE, in
consideration of the premises and the agreements, provisions and covenants
herein contained, each Grantor and the Collateral Agent agree as follows,
intending to be legally bound:

 

SECTION 1                                                      
DEFINITIONS AND INTERPRETATION

 

1.1                              
Definitions.  Undefined capitalized terms used herein have the meanings
assigned to them in the Indenture, or, if not defined therein, in the
UCC.  The following terms have the meanings assigned to them in
Article 9 of the UCC:  “Account,”
“Account Debtor,” “Authenticate,” “Cash Proceeds,” “Chattel
Paper,” “Commercial Tort Claim,”
“Deposit Account,” “Document,” “Equipment,” “Fixtures,”
“General Intangible,” “Goods,” “Instruments,”
“Inventory,” “Letter-of-Credit Right,” “Proceeds,” “Record,” and “Supporting
Obligation.”

 

In addition to the
foregoing terms and the terms defined in the preamble and recitals hereto, in
this Agreement:

 

“Additional Grantors” has the meaning set
forth in Section 4.18.

 

“Collateral” has the meaning set forth in Section 2.1.

 

“Collateral Documents” means this Agreement
and all other instruments, documents and agreements delivered by any of the
parties to the Indenture Documents pursuant to this Agreement or any other
Indenture Document to grant or perfect a Lien in favor of the Collateral Agent
on any real, personal or mixed property of such party as security for the
Secured Obligations.

 

“Collateral Records” means books, records,
ledger cards, files, correspondence, customer lists, blueprints, technical
specifications, manuals, computer software, computer printouts, tapes, disks
and other electronic storage media and related data processing software and
similar items that at any time evidence or contain information relating to any
of the Collateral or are otherwise necessary or helpful in the collection
thereof or realization thereon.

 

 

“Collateral Support” means all property
(real or personal) assigned, hypothecated or otherwise securing any Collateral
and includes any security agreement or other agreement granting a lien or
security interest in such real or personal property.

 

“Copyrights” means all United States, state
and foreign copyrights, including copyrights in software and databases, and all
Mask Works (as defined under 17 U.S.C. 901 of the U.S. Copyright Act), whether
registered or unregistered, and, with respect to the foregoing, (i) all
registrations and applications therefor, (ii) all extensions and renewals thereof,
(iii) all rights corresponding thereto throughout the world, (iv) all rights to
sue for past, present and future infringements thereof, (v) all licenses,
claims, damages and proceeds of suit arising therefrom, and (vi) all payments
and rights to payments arising out of the sale, lease, license, assignment, or
other disposition thereof.

 

“Credit Agreement” means the Loan Agreement,
dated as of the date hereof, among the Grantors and Texas State Bank, as
amended, restated, refinanced, supplemented or otherwise modified from time to
time.

 

“Indemnitee” means any of the Collateral
Agent and its Affiliates’ officers, partners, directors, trustees, employees
and agents.

 

“Indenture Document” means any of the
Indenture, the Notes, the Collateral Agreements, and any other agreement,
document or instrument entered into or issued in connection with any of the
foregoing.

 

“Insurance” means (i) all insurance policies
covering any portion of the Collateral (regardless of whether the Collateral
Agent is the loss payee thereof) and (ii) any key man life insurance policies.

 

“Intellectual Property” means, collectively,
any Grantor’s Copyrights, Patents, Trademarks, and Trade Secrets, and any
agreement granting any right in, to or under Copyrights, Patents, Trademarks or
Trade Secrets, where such Grantor is licensee or licensor under such agreement.

 

“Intercreditor” means that certain
Intercreditor Agreement, dated as of the date hereof, among the Collateral
Agent and Texas State Bank (and acknowledged by the Grantors), as amended,
restated, supplemented or otherwise modified from time to time.

 

“Investment Property” has the meaning
assigned to the term “investment property” in Article 9 of the UCC, and
also means Instruments, Pledged Debt, and Pledged Capital Stock.

 

“IP Security Agreement” means an IP Security
Agreement, in form and substance reasonably satisfactory to the Collateral
Agent.

 

“Patents” means all United States and
foreign patents and certificates of invention, or similar industrial property
rights, (i) all applications therefore, (ii) all reissues, divisions,
continuations, continuations-in-part, extensions, renewals, and reexaminations
thereof, (ii) all rights corresponding thereto throughout the world, (ii) all
inventions and improvements described therein, (iv) all rights to sue for past,
present and future infringements thereof, (v) all licenses, claims, damages,
and proceeds of suit arising therefrom, and (v) all payments and rights to
payments arising out of the sale, lease, license, assignment, or other disposition
thereof.

 

2

 

“Pledged Debt” means, with respect to any
Grantor, Indebtedness for borrowed money owed to such Grantor, whether or not
evidenced by any instrument or promissory note, all monetary obligations owing
to such Grantor from any other Person, the Instruments evidencing any of the
foregoing, and all interest, cash, Instruments and other property or proceeds
from time to time received, receivable or otherwise distributed in respect of
or in exchange for any of the foregoing.

 

“Pledged Capital Stock” means, with respect
to any Grantor, the Capital Stock of any other Person owned by such Grantor,
and the certificates, if any, representing such Capital Stock and any interest
of such Grantor in the entries on the books of the Person issuing such Capital
Stock or on the books of any securities intermediary pertaining to such Capital
Stock, and all dividends, distributions, cash, warrants, rights, options,
instruments, securities and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any such Capital Stock, and any other warrant, right or option to acquire any
of the foregoing.

 

“Secured Obligations” has the meaning
assigned to the term “Obligations” in the Indenture, and also means all
interest that, but for the filing of a petition in bankruptcy with respect to
any Grantor, would have accrued on any Obligation, whether or not a claim is
allowed against such Grantor for such interest in the related bankruptcy
proceeding).

 

“Secured Parties” means the Trustee, the
Collateral Agent, the Holders, and any future party to which Secured
Obligations are owed under the Indenture Documents.

 

“Security Agreement Supplement” means a
supplement to this agreement substantially in the form of Exhibit A,
whereby an Additional Grantor becomes a party hereto.

 

“Trade Secrets” means all trade secrets and
all other confidential or proprietary information and know-how, whether or not
reduced to a writing or other tangible form, including with respect to the
foregoing, (i) all documents and things embodying or incorporating the
foregoing, (ii) all rights to sue for past, present and future infringement
thereof, and (iii) all licenses, claims, damages, and proceeds of suit arising
therefrom, and (iv) all payments and rights to payments arising out of the
sale, lease, license, assignment, or other dispositions thereof.

 

“Trademarks” means all United States, state
and foreign trademarks, service marks, certification marks, collective marks,
trade names, corporate names, d/b/as, business names, fictitious business
names, Internet domain names, trade styles, logos, other source or business
identifiers, designs and General Intangibles of a like nature, rights of
publicity and privacy pertaining to the names, likeness, signature and
biographical data of natural persons, and, with respect to the foregoing, (i)
all registrations and applications therefor, (ii) the goodwill of the business
symbolized thereby, (iii) all rights corresponding thereto throughout the
world, (iv) all rights to sue for past, present and future infringement or
dilution thereof or for any injury to goodwill, (v) all licenses, claims,
damages, and proceeds of suit arising therefrom, and (vi) all payments and
rights to payments arising out of the sale, lease, license assignment or other
disposition thereof.

 

“UCC” means the Uniform Commercial Code as
in effect from time to time in the State of New York; provided that, if by reason of mandatory provisions of law,
the perfection or the effect of perfection or nonperfection of the security
interest in any Collateral is governed by the Uniform Commercial Code as in
effect in a jurisdiction other than the State of New York, “UCC”

 

3

 

also means the Uniform Commercial Code as in effect in
such other jurisdiction for purposes of the provisions hereof relating to such
perfection or effect of perfection or nonperfection.

 

1.2                              
Interpretation.  Unless otherwise specifically provided, references to
“Sections,” “Exhibits” and “Schedules” are to sections, exhibits and schedules,
as the case may be, of this Agreement.  Section headings in this
Agreement are included for convenience only and do not constitute a part of
this Agreement for any other purpose or be given any substantive effect. 
Unless the context otherwise requires, defined terms may be used in the
singular or the plural.  The use of the word “include” or any derivative
thereof is not limiting or restrictive.  If any conflict or inconsistency
exists between this Agreement and the Indenture, the Indenture governs. 
All references to provisions of the UCC include all successor provisions under
any subsequent version or amendment to any Article of the UCC.

 

SECTION 2                                                      
GRANT OF SECURITY, SECURED OBLIGATIONS, AND RELATED PROVISIONS

 

2.1                              
Grant of Security.  Each Grantor hereby grants to the Collateral
Agent for the benefit of the Secured Parties a security interest in and
continuing lien on all of such Grantor’s right, title and interest in, to and
under all personal property of such Grantor (except for the Excluded Assets),
including the following, in each case whether now owned or existing or
hereafter acquired or arising and wherever located (collectively, the “Collateral”):

 

(i)                      
all Accounts,

 

(ii)                   
all Chattel Paper,

 

(iii)                
all Commercial Tort
Claims,

 

(iv)               
all Deposit Accounts
(and any money, cash or cash equivalents, checks or other property credited
thereto),

 

(v)                  
all Documents,

 

(vi)               
all General
Intangibles,

 

(vii)            
all Goods (including
all Equipment, Fixtures, and Inventory),

 

(viii)          all Insurance,

 

(ix)                 
all Investment
Property (including the Investment Property listed on Schedule 3.9),

 

(x)                    
all Intellectual
Property (including the Intellectual Property listed on Schedule 3.10),

 

(xi)                 
all Letter-of-Credit
Rights, and

 

(xii)              
to the extent not
otherwise included above, all tangible and intangible personal property, and
all Collateral Records, Collateral

 

4

 

Support, Records, Supporting Obligations, Proceeds,
products, accessions, rents and profits of or relating to any of the foregoing.

 

2.2                              
Secured Obligations.  This Agreement secures, and the Collateral is
collateral security for, the prompt and complete payment or performance in full
when due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise including the payment of amounts that would
become due but for the operation of the automatic stay under the Bankruptcy
Code, 11 U.S.C. §362(a) (and any successor provision thereof), of all the
Secured Obligations.

 

2.3                              
Continuing Liability Under Collateral.  Notwithstanding anything herein
to the contrary, (a) each Grantor remains liable for its obligations under the
Collateral and nothing contained herein is intended to or constitutes a
delegation of duties to the Collateral Agent or any Secured Party, (b) each
Grantor remains liable under each of the agreements to which it is a party
included in the Collateral, including any agreements relating to any Investment
Property, to perform all of the obligations undertaken by it thereunder in
accordance with and pursuant to the terms and provisions thereof, and neither
the Collateral Agent nor any Secured Party has any obligation or liability
under any of such agreements by reason of or arising out of this Agreement or
any other document related hereto, and neither the Collateral Agent nor any
Secured Party has any obligation to make any inquiry as to the nature or
sufficiency of any payment received by it or have any obligation to take any
action to collect or enforce any rights under any agreement included in the
Collateral, including any agreements relating to any Investment Property, and
(c) the exercise by the Collateral Agent of any of its rights hereunder will
not release any Grantor from any of its duties or obligations under the
contracts and agreements included in the Collateral.

 

2.4                              
Continuing Security Interest.  This Agreement creates a
continuing security interest in the Collateral and will remain in full force
and effect until the payment in full of all of the Secured Obligations, be
binding on each Grantor, its successors and assigns, and inure, together with
the rights and remedies of the Collateral Agent hereunder, to the benefit of
the Collateral Agent and its successors, transferees and assigns.  Upon
the payment in full of all of the Secured Obligations, the security interest
granted hereby will terminate and all rights to the Collateral will revert and
be deemed reassigned to the Grantors.  Upon any such termination, the
Collateral Agent will, at the Grantors’ request and expense, execute and
deliver to Grantors such documents as the Grantors will reasonably request to
evidence such termination reversions or reassignment, without recourse,
representation, or warranty of any kind.

 

SECTION 3                                                      
REPRESENTATIONS AND WARRANTIES

 

Each Grantor hereby
represents and warrants as follows:

 

3.1                              
Title; Accurate Information.  Each Grantor owns the Collateral
purported to be owned by it or otherwise has the rights it purports to have in
each item of Collateral and, as to all Collateral whether now existing or
hereafter acquired, will continue to own or have such rights in each item of
Collateral, in each case free and clear of all Liens, rights or claims of any
Person, other than Permitted Liens.  All information supplied by or on
behalf of any of the Grantors with respect to any of the Collateral (in each
case taken as a whole with respect to any particular Collateral) is accurate
and complete in all material respects.

 

3.2                              
Organizational Matters.  Each Grantor is duly organized
and validly existing under the laws of the jurisdiction of its organization and
has not filed any certificates of

 

5

 

domestication, transfer or continuance in any other
jurisdiction.  The full legal name of each Grantor is set forth on Schedule 3.2,
and such Grantor has not done in the last five years, and does not do, business
under any other name (including any trade-name or fictitious business name)
except for those names set forth on such schedule.  Each Grantor has
further indicated on Schedule 3.2 the type of organization of such
Grantor, its mailing address, its jurisdiction of organization, and its
organizational identification number.  Except as provided on Schedule 3.2,
it has not changed its name or jurisdiction of organization, or its corporate
structure in any way (e.g., by
merger, consolidation, change in corporate form or otherwise) within the past
five years.

 

3.3                              
Authority and Enforceability.  Each Grantor has all requisite
power and authority to enter into this Agreement and to carry out its obligations
hereunder, and has duly executed and delivered this Agreement.  This
Agreement and each other document, statement, or instrument relating hereto,
when executed and delivered by the Grantors, will constitute legal, valid and
binding obligations of each Grantor, enforceable in accordance with their
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting creditors’ rights generally and general principles of
equity.

 

3.4                              
Third-Party Authorizations and Approvals.  No authorization, approval or
other action by, and no notice to or filing, registration or recording with,
any governmental authority or regulatory body (in each case that has not been
obtained as of the date hereof) is required for either (i) the grant by each
Grantor of the Liens purported to be created in favor of the Collateral Agent
hereunder, or (ii) the exercise by the Collateral Agent of any rights or
remedies in respect of any Collateral (whether specifically granted or created
hereunder or created or provided for by applicable law), except for the filings
contemplated hereunder, as may be required in connection with the disposition
of any Investment Property, and as may be required under federal laws
pertaining to Intellectual Property.

 

3.5                              
Attachment and Perfection.  This Agreement is effective to
create a valid and continuing security interest in all of the Collateral in
favor of the Collateral Agent for the benefit of the Secured Parties. 
With respect to each Grantor, upon the filing of all UCC financing statements
describing the Collateral and naming such Grantor as debtor and the Collateral
Agent as secured party in the filing offices set forth opposite such Grantor’s
name on Schedule 3.5, the security interests granted to the
Collateral Agent hereunder will constitute perfected Liens with respect to that
portion of the Collateral on which a Lien can be perfected by such methods,
subject in the case of priority only to Permitted Liens.

 

3.6                              
No Encumbrances.  No effective UCC financing statement, fixture filing or other
instrument similar in effect under any applicable law covering all or any part
of the Collateral is on file in any filing or recording office except for (x)
financing statements for which proper termination statements have been
delivered to the Collateral Agent and (y) financing statements, fixture filings
and other instruments similar in effect filed in connection with Permitted
Liens.

 

3.7                              
Accounts.  Each Account is the legal, valid
and binding obligation of the Account Debtor in respect thereof, representing
an unsatisfied obligation of such Account Debtor, is enforceable in accordance
with its terms, to the knowledge of the applicable Grantor, is not subject to
any set-offs, defenses, taxes, or counterclaims (except with respect to
refunds, returns and allowances in the ordinary course of business with respect
to damaged merchandise), and is in compliance in all material respects with all
applicable laws, whether federal, state, local or foreign.

 

6

 

3.8                              
Deposit Accounts.  Schedule 3.8 sets
forth under the heading “Deposit Accounts” all of the Deposit Accounts in which
the Grantors have an interest and each Grantor listed thereunder is the sole
account holder of the Deposit Accounts listed next to its name.  No such
Grantor has consented to or is otherwise aware of, any Person (other than the
Collateral Agent or Texas State Bank (or its successor or assign)) having
either sole dominion and control (within the meaning of common law) or
“control” (within the meaning of Section 9-104 of the UCC) over, or any
other interest in, any such Deposit Account or any money or other property
deposited therein.

 

3.9                              
Investment Property.

 

(a)                     
Pledged Capital
Stock.  Schedule 3.9
sets forth under the heading “Pledged Capital Stock” all of the Pledged Capital
Stock owned by the Grantors and such Pledged Capital Stock constitutes the
percentage of issued and outstanding Capital Stock of the respective issuers
thereof indicated on such schedule.  Each Grantor listed thereunder is the
record and beneficial owner of such Pledged Capital Stock listed next to its
name on such schedule, free and clear of all Liens, rights or claims of any
Person, other than Permitted Liens, and there are no outstanding warrants,
options or other rights to purchase, or shareholder, voting trust or similar
agreements outstanding with respect to, or property that is convertible into,
or that requires the issuance or sale of, such Pledged Capital Stock.

 

(b)                    
Pledged Debt.  Schedule 3.9 sets
forth under the heading “Pledged Debt” all of the Pledged Debt owned by the
Grantors and all of such Pledged Debt has been duly authorized, Authenticated
or issued, and delivered, is the legal, valid and binding obligation of the
issuers thereof, and is not in default, and Schedule 3.9 includes
all of the issued and outstanding intercompany Indebtedness evidenced by an
Instrument or certificated security of the respective issuers thereof owing to
the Grantors.

 

(c)                     
Securities
Accounts.  Schedule 3.9
sets forth under the heading “Securities Accounts,” all of the Securities
Accounts in which any Grantor has an interest.  Such Grantor is the sole
entitlement holder of each such Securities Account, and such Grantor has not
consented to, and is not otherwise aware of, any Person (other than the Collateral
Agent or Texas State Bank (or its successor or assign)) having “control”
(within the meanings of Sections 8-106 and 9-106 of the UCC) over, or any other
interest in, any such Securities Account or any securities or other property
credited thereto.

 

3.10                       
Intellectual Property.  Schedule 3.10 sets
forth a true and complete list of all United States, state and foreign
registrations of and applications for Patents, Trademarks, and Copyrights owned
by each Grantor.  With respect to each Grantor listed on Schedule 3.10,
such Grantor (i) is the sole and exclusive owner of the entire right, title,
and interest in and to all Intellectual Property on Schedule 3.10,
and (ii) owns or has the right to use all other Intellectual Property used in
the conduct of its business free and clear of all Liens, claims, encumbrances,
and material licenses granted by such Grantor, in each case except for
Permitted Liens and such licenses set forth on Schedule 3.10. 
To each Grantor’s knowledge, the conduct of such Grantor’s business does not
infringe on any Trademark, Patent, Copyright, Trade Secret or other
intellectual property right of any third party; no claim is pending, or to such
Grantor’s knowledge, threatened or has been made that the conduct of such Grantor’s
business or the use of any Intellectual Property owned or used by such Grantor
violates the intellectual property rights of any third party.  There is no
effective financing statement or other document or instrument now executed, or
on file or recorded in any public office, granting a security interest in or
otherwise encumbering any

 

7

 

part of the Intellectual Property owned by any
Grantor, other than in favor of the Collateral Agent or Texas State Bank (or
its successor or assign).

 

3.11                       
Commercial Tort Claims.  Schedule 3.11 sets
forth all Commercial Tort Claims of the Grantors.

 

SECTION 4                                                      
COVENANTS AND AGREEMENTS

 

Each Grantor hereby
covenants and agrees as follows:

 

4.1                              
Encumbrances.  Except for the security interest created by this Agreement, no
Grantor will create or suffer to exist any Lien on or with respect to any of
the Collateral, except Permitted Liens, and such Grantor will defend the
Collateral against all Persons at any time claiming any such interest therein.

 

4.2                              
Use of Collateral.  Except where any such actions, individually or
in the aggregate, would not have a material adverse effect on the Collateral as
a whole, no Grantor will produce, use or permit any Collateral to be used in
violation of any provision of this Agreement, or to be knowingly used
unlawfully or in violation of any applicable statute, regulation or ordinance
or any policy of insurance covering the Collateral.

 

4.3                              
Taxes and Claims.  Each Grantor will promptly pay when due all property and other
taxes, assessments and governmental charges or levies imposed on, and all
claims (including claims for labor, materials and supplies) against, the
Collateral, except to the extent the validity thereof is being contested in
good faith; provided that, such
Grantor will in any event pay such taxes, assessments, charges, levies or
claims not later than five days prior to the date of any proposed sale under
any judgment, writ or warrant of attachment entered or filed against such
Grantor or any of the Collateral as a result of the failure to make such
payment.

 

4.4                              
Materially Adverse Changes.  Upon any Grantor or any officer
of any Grantor obtaining knowledge thereof, such Grantor will promptly notify
the Collateral Agent in writing of any event that may materially adversely
affect the value of the Collateral, the ability of any Grantor or the
Collateral Agent to dispose of the Collateral or any portion thereof, or the
rights and remedies of the Collateral Agent in relation thereto, including the
levy of any legal process against the Collateral or any portion thereof. 
Subject to the Intercreditor, no Grantor will take or permit any action that
could impair the Collateral Agent’s rights in the Collateral.  No Grantor
will sell, transfer or assign (by operation of law or otherwise) any Collateral
except as permitted under the Indenture and the Intercreditor.

 

4.5                              
Inventory.  Each
applicable Grantor will keep correct and accurate records of its Inventory as
are customarily maintained under similar circumstances by Persons of
established reputation engaged in similar business, and in any event in
conformity with GAAP.

 

4.6                              
Bailees; Landlords.  If material Equipment or
Inventory is in possession or control of any third party, including any
warehouseman, bailee or agent, the applicable Grantor will notify the third
party of the Collateral Agent’s security interest and will use commercially
reasonable efforts to obtain an Authenticated acknowledgment from such third
party that it is holding the Equipment and Inventory for the benefit of the
Collateral Agent.  With respect to any material Collateral located on real
property that is not owned by any Grantor, the applicable Grantor will use
commercially reasonable efforts to obtain and deliver to the Collateral Agent a
landlord waiver in form and substance reasonably satisfactory to the Collateral
Agent.

 

8

 

4.7                              
Accounts.  Except
as otherwise provided in this Section 4.7, each Grantor will
continue to collect all amounts due or to become due to such Grantor under the
Accounts and any Supporting Obligation and, in the exercise of its reasonable
business judgment, diligently exercise each material right it may have under
any Account, Supporting Obligation or Collateral Support.  Upon the
occurrence and during the continuance of an Event of Default, at such Grantor’s
expense and in connection with the foregoing collections and exercises, such
Grantor will take such action as the Collateral Agent may deem necessary or
advisable.  Notwithstanding the foregoing, the Collateral Agent will have
the right at any time, subject to the Intercreditor, to notify or require any
Grantor to notify any Account Debtor of the Collateral Agent’s security
interest in the Accounts and any Supporting Obligation.

 

4.8                              
Limitations on Issuers of Pledged Capital
Stock. 
Without the prior written consent of the Collateral Agent, no Grantor will
permit any issuer of any Pledged Capital Stock to merge or consolidate, unless (i) such merger or consolidation is
permitted under the Indenture, (ii) such issuer creates a security interest
that is perfected by a filed financing statement (that is not effective solely
under Section 9-508 of the UCC) in collateral in which such new debtor has
or acquires rights, and (iii) all the outstanding Capital Stock of the
surviving or resulting Person that is owned by such Grantor (except any such
Capital Stock constituting Excluded Assets) is, upon such merger or
consolidation, pledged hereunder and no cash, securities or other property is
distributed in respect of the outstanding equity interests of any other
constituent Grantors.

 

4.9                              
Deposit Accounts and Securities Accounts.

 

(a)                     
With respect to any
Investment Property consisting of Securities Accounts or Securities
Entitlements having a value (with respect to each such account) in excess of
$100,000, each Grantor will, subject to the Intercreditor, cause the securities
intermediary maintaining such Securities Account or Securities Entitlement to
enter into an agreement reasonably acceptable to the Collateral Agent pursuant
to which, upon the occurrence and during the continuance of an Event of
Default, it will agree to comply with the Collateral Agent’s “entitlement
orders” without further consent by such Grantor or any other Person.  With
respect to each Deposit Account (subject to Section 4.9(b)), such
Grantor will, subject to the Intercreditor, cause the depositary institution
maintaining such account to enter into an agreement reasonably acceptable to
the Collateral Agent, pursuant to which, upon the occurrence and during the
continuance of an Event of Default, the Collateral Agent will have “control”
(within the meaning of Section 9-104 of the UCC) over such Deposit
Account.

 

(b)                    
Deposit Accounts may
be maintained at any bank without having to obtain a control agreement as
provided in the foregoing Section 4.9(a) so long as the balances of
such Deposit Accounts are used exclusively for (i) petty cash needs, or (ii)
employee payroll, employee benefits, or taxes.  All control agreements
required pursuant to this Section 4.9 shall be effective with
respect to the applicable Deposit Accounts within 30 days after the date hereof
or after the date established, if later.

 

4.10                    
After-Acquired Collateral.  Subject to the Intercreditor, if
any Grantor acquires rights in any Investment Property, Letter-of-Credit Rights
or Deposit Accounts after the date hereof, such Grantor will deliver to the
Collateral Agent a completed Security Agreement Supplement, together with all
supplements to schedules thereto, reflecting such newly acquired rights. 
Notwithstanding the foregoing, it is understood and agreed that the security
interest of the Collateral Agent will attach to all after-acquired property
immediately upon any Grantor’s

 

9

 

acquisition of rights therein and will not be affected
by the failure of any Grantor to deliver a Security Agreement Supplement as
required hereby.

 

4.11                       
Certain Proceeds.  Except as provided in the next sentence, in
the event any Grantor receives any dividends, interest or distributions on any
Investment Property, or any securities or other property upon the merger,
consolidation, liquidation or dissolution of any issuer of any such Proceeds,
then (a) such dividends, interest or distributions and securities or other
property will be included in the definition of Collateral without further
action, and (b) subject to the Intercreditor, such Grantor will immediately
take all steps, if any, reasonably necessary or advisable to ensure the
validity, perfection, priority and, if applicable, control of the Collateral
Agent over such Proceeds (including delivery thereof to the Collateral Agent)
and pending any such action such Grantor will be deemed to hold such dividends,
interest, distributions, securities or other property in trust for the benefit
of the Collateral Agent and will be segregated from all other property of such
Grantor.  Notwithstanding the foregoing, so long as no Event of Default
will have occurred and be continuing, the Collateral Agent authorizes each
Grantor to retain all ordinary cash dividends and distributions paid in the
normal course of the business of the issuer and consistent with the past practice
of the issuer and all scheduled payments of principal and interest.

 

4.12                       
Certain Non-U.S. Collateral.  If any issuer of any Investment
Property is located in a jurisdiction outside of the United States, the
applicable Grantor will, to the extent commercially reasonable as determined by
the Collateral Agent in consultation with such Grantor, take such additional
actions, including causing the issuer to register the grant of security
hereunder on its books and records or making such filings or recordings, in
each case as may be necessary or advisable, under the laws of such issuer’s
jurisdiction to insure the validity, perfection and priority of the security
interest of the Collateral Agent, subject to the Intercreditor.  Upon the
occurrence and continuation of an Event of Default, the Collateral Agent will
have the right, subject to the Intercreditor and without notice to any Grantor,
to transfer all or any portion of such Collateral to its name or the name of
its nominee or agent.  In addition, the Collateral Agent will have the
right at any time, without notice to any Grantor, to exchange any certificates
or instruments representing any of such Collateral for certificates or
instruments of smaller or larger denominations.

 

4.13                       
Certificated Collateral.  With respect to any Collateral that is
represented by a certificate or that is an Instrument (other than any such
Collateral credited to a Securities Account) and subject to the Intercreditor,
the applicable Grantor will cause such certificate or instrument to be
delivered to the Collateral Agent, indorsed in blank by an “effective
indorsement” (as defined in Section 8-107 of the UCC), regardless of
whether such certificate constitutes a “certificated security” for purposes of
the UCC.  With respect to any such Collateral that is an “uncertificated
security” for purposes of the UCC (other than any “uncertificated securities”
credited to a Securities Account) and subject to the Intercreditor, the
applicable Grantor will cause the issuer of such uncertificated security to
either (i) register the Collateral Agent as the registered owner thereof on the
books and records of the issuer or (ii) execute an agreement reasonably
acceptable to the Collateral Agent, pursuant to which, upon the occurrence and
continuation of an Event of Default, such issuer agrees to comply with the
Collateral Agent’s instructions with respect to such uncertificated security
without further consent by such Grantor or any other Person.

 

4.14                       
Voting and Distributions.  So long as no Event of Default has occurred
and is continuing, (a) except as otherwise provided under the covenants and
agreements relating to Investment Property in this Agreement or elsewhere
herein or in the Indenture, each Grantor

 

10

 

will be entitled to exercise or refrain from
exercising its voting and other consensual rights pertaining to such Collateral
or any part thereof for any purpose not inconsistent with the terms of this
Agreement, the Indenture and the Intercreditor; provided that, no Grantor will exercise or refrain from
exercising any such right if such action would have a material adverse effect
on the value of such Collateral; and (b) the Collateral Agent will promptly
execute and deliver (or cause to be executed and delivered) to each Grantor all
proxies and other instruments as such Grantor may from time to time reasonably
request for the purpose of enabling such Grantor to exercise the voting and
other consensual rights when and to the extent that it is entitled to exercise
pursuant to clause (a) above.

 

4.15                       
Intellectual Property.  Each Grantor will promptly report to the
Collateral Agent all of the following:  (i) the filing by such Grantor or
on its behalf of any application to register any Intellectual Property owned by
such Grantor in whole or in part with the United States Patent and Trademark
Office, the United States Copyright Office, or any foreign counterpart of the
foregoing, (ii) the registration of any Intellectual Property owned by such
Grantor in whole or in part by any such office, and (iii) the acquisition by
such Grantor of any issued Patent, or application or registration of any other
Patent, Copyright, Trademark, or Trade Secret.  In each event, such
Grantor will execute and deliver to the Collateral Agent a completed Security
Agreement Supplement, together with all supplements to schedules thereto, and,
if requested, signed counterparts of an IP Security Agreement, as applicable,
or any other agreement reasonably acceptable to the Collateral Agent having the
same operative effect, together with all supplements to the schedules thereto.

 

4.16                       
Commercial Tort Claims.  With respect to all Commercial
Tort Claims hereafter arising, each Grantor will deliver to the Collateral
Agent a completed Security Agreement Supplement, together with all supplements
to schedules thereto, identifying such new Commercial Tort Claims.

 

4.17                       
Insurance.  Each
Grantor will maintain, with financially sound and reputable companies,
insurance policies (i) insuring the Inventory and Equipment against loss by
fire, explosion, theft and such other casualties as may be reasonably
satisfactory to the Collateral Agent, and (ii) insuring such Grantor and the
Collateral Agent against liability for personal injury and property damage
relating to such Inventory and Equipment, such policies to be in such amounts
and covering such risks as is commercially reasonable and prudent with respect
to the business and properties of the Grantors and that are usually carried by
companies engaged in similar businesses and owning similar properties in the
same general areas in which the Grantors operate.  All such insurance
shall (i) provide that no cancellation, material reduction in amount or
material change in coverage thereof will be effective until at least 30 days
after notice to the Collateral Agent thereof, (ii) name the Collateral Agent as
an additional insured party or loss payee, as its interests may appear, and,
(iii) if reasonably requested by the Collateral Agent, include a breach of
warranty clause.

 

4.18                       
Additional Grantors.  From time to time subsequent to the date
hereof, additional Persons may become parties hereto as additional grantors
(each, an “Additional Grantor”) by
executing a Security Agreement Supplement, together with all supplements to
schedules thereto.  Upon delivery of any such Security Agreement
Supplement to the Collateral Agent, notice of which is hereby waived by each of
the Grantors, each Additional Grantor will be a grantor and will be as fully a
party hereto as if such Additional Grantor were an original signatory
hereto.  Each Grantor expressly agrees that its obligations arising
hereunder will not be affected or diminished by the addition or release of any
other Grantor, nor by any election of the Collateral Agent not to cause any
subsidiary of any Grantor to become an Additional Grantor.

 

11

 

This Agreement will be fully effective as to any Grantor
that is or becomes a party hereto regardless of whether any other Person
becomes or fails to become or ceases to be a Grantor.

 

4.19                       
Further Assurances.  Each Grantor agrees that from time to time, at
the expense of such Grantor, it will promptly Authenticate, execute and deliver
all further agreements, instruments, certificates and documents, and take all
further action, that may be necessary or desirable, or that the Collateral
Agent may reasonably request, to create or maintain the validity, perfection or
priority of and protect any security interest granted or purported to be
granted hereby or to enable the Collateral Agent to exercise and enforce its
rights and remedies hereunder with respect to any Collateral.  Without
limiting the generality of the foregoing, each Grantor shall:

 

(a)                     
file such financing
or continuation statements, or amendments thereto, and execute and deliver such
other agreements, instruments, endorsements, powers of attorney or notices, as
may be necessary or desirable, or as the Collateral Agent may reasonably
request, to perfect and preserve the security interests granted or purported to
be granted hereby;

 

(b)                    
take all actions
necessary to ensure the recordation of appropriate evidence of the Liens and
security interest granted hereunder in Intellectual Property with any
intellectual property registry in which such Intellectual Property is
registered or in which an application for registration of such Intellectual Property
is pending;

 

(c)                     
at any reasonable
time, upon request by the Collateral Agent, allow inspection of the Collateral
by the Collateral Agent, or Persons designated by the Collateral Agent; and

 

(d)                    
at the Collateral
Agent’s reasonable request, appear in and defend any action or proceeding that
may affect such Grantor’s title to or the Collateral Agent’s security interest
in all or any part of the Collateral.

 

SECTION 5                                                      
REMEDIES

 

5.1                              
Generally.  If any
Event of Default will have occurred and be continuing, the Collateral Agent may
exercise in respect of the Collateral, subject to the Intercreditor and in
addition to all other rights and remedies provided for herein or otherwise
available to it at law or in equity, all the rights and remedies of the
Collateral Agent on default under the UCC (whether or not the UCC applies to
the affected Collateral) to collect, enforce or satisfy any Secured Obligations
then owing, whether by acceleration or otherwise, and also may pursue any of
the following separately, successively or simultaneously:

 

(a)                     
require any Grantor
to, and each Grantor hereby agrees that it will at its expense and promptly
upon request of the Collateral Agent, forthwith assemble all or part of the
Collateral as directed by the Collateral Agent and make it available to the
Collateral Agent at a place to be designated by the Collateral Agent that is reasonably
convenient to both parties;

 

(b)                    
enter onto the
property where any Collateral is located and take possession thereof with or
without judicial process;

 

(c)                     
prior to the
disposition of the Collateral, store, process, repair or recondition the
Collateral or otherwise prepare the Collateral for disposition in any manner to
the extent the Collateral Agent deems appropriate; and

 

12

 

(d)                    
without notice,
except as specified below or under the UCC, sell, assign, lease, license (on an
exclusive or nonexclusive basis, to the extent the Grantor has the lawful right
to do so), or otherwise dispose of the Collateral or any part thereof in one or
more parcels at public or private sale, at any of the Collateral Agent’s
offices or elsewhere, for cash, on credit or for future delivery, at such time
or times and at such price or prices and on such other terms as the Collateral
Agent may deem commercially reasonable.

 

5.2                              
Sale of Collateral.  The Collateral Agent or any Secured Party may
be the purchaser of any portion of the Collateral at any public or private (to
the extent that the portion of the Collateral being privately sold is of a kind
that is customarily sold on a recognized market or the subject of widely
distributed standard price quotations) sale in accordance with the UCC, and the
Collateral Agent, as collateral agent for and representative of the Secured
Parties, will be entitled, for the purpose of bidding and making settlement or
payment of the purchase price for all or any portion of the Collateral sold at
any such sale, to use and apply any of the Secured Obligations as a credit on
account of the purchase price for any Collateral payable by the Collateral
Agent at such sale.  Each purchaser at any such sale will hold the
property sold absolutely free from any claim or right on the part of any
Grantor, and each Grantor hereby waives (to the extent permitted by applicable
law) all rights of redemption, stay or appraisal that it now has or may at any
time in the future have under any rule of law or statute now existing or
hereafter enacted.  Each Grantor agrees that, to the extent notice of sale
will be required by law, at least ten days notice to such Grantor of the time
and place of any public sale or the time after which any private sale is to be
made will constitute reasonable notification.  The Collateral Agent will
not be obligated to make any sale of Collateral regardless of notice of sale
having been given.  The Collateral Agent may adjourn any public or private
sale from time to time by announcement at the time and place fixed therefor,
and such sale may, without further notice, be made at the time and place to
which it was so adjourned.  Each Grantor agrees that it would not be
commercially unreasonable for the Collateral Agent to dispose of the Collateral
or any portion thereof by using Internet sites that provide for the auction of
assets of the types included in the Collateral or that have the reasonable capability
of doing so, or that match buyers and sellers of assets.  The Collateral
Agent may sell the Collateral without giving any warranties as to the
Collateral, and may specifically disclaim or modify any warranties of title or
the like, which procedure will not be considered to adversely effect the
commercial reasonableness of any sale of the Collateral.  Each Grantor
hereby waives any claims against the Collateral Agent arising by reason of the
fact that the price at which any Collateral may have been sold at such a
private sale was less than the price that might have been obtained at a public
sale, even if the Collateral Agent accepts the first offer received and does
not offer such Collateral to more than one offeree.  If the proceeds of
any sale or other disposition of the Collateral are insufficient to pay all the
Secured Obligations, each Grantor will be liable for the deficiency and the
fees of any attorneys employed by the Collateral Agent to collect such
deficiency.  Each Grantor further agrees that a breach of any of the
covenants contained in this Section 5.2 will cause irreparable
injury to the Collateral Agent, that the Collateral Agent has no adequate
remedy at law in respect of such breach and, as a consequence, that each and
every covenant contained in this Section will be specifically enforceable
against such Grantor, and such Grantor hereby waives and agrees not to assert
any defenses against an action for specific performance of such covenants
except for a defense that no default has occurred giving rise to the Secured
Obligations becoming due and payable prior to their stated maturities.  If
the Collateral Agent sells any of the Collateral on credit, the applicable
Grantors will be credited only with payments actually made by purchaser and
received by the Collateral Agent and applied to indebtedness of the
purchaser.  In the event the purchaser fails to pay for the Collateral,
the Collateral Agent may resell the Collateral and the applicable Grantors will
be credited with proceeds of the sale.  Nothing in this Section 5.2
will in any way alter the rights of the Collateral Agent hereunder.

 

13

 

5.3                              
Marshalling; Payments Set Aside.  Subject to the Intercreditor, the
Collateral Agent will have no obligation to marshall any assets in favor of any
Grantor or any other Person or against or in payment of any of the Secured
Obligations.

 

5.4                              
Application of Proceeds.  Except as expressly provided elsewhere in this
Agreement or in the Intercreditor, all proceeds received by the Collateral
Agent in respect of any sale, collection from, or other realization on all or
any part of the Collateral shall be applied in full or in part by the
Collateral Agent against the Secured Obligations in the following order of
priority:  first, to the
payment of all costs and expenses of such sale, collection or other
realization, including reasonable compensation to the Collateral Agent and its
agents and counsel, and all other expenses, liabilities and advances made or
incurred by the Collateral Agent in connection therewith, and all amounts for
which the Collateral Agent is entitled to indemnification hereunder and all
advances made by the Collateral Agent hereunder for the account of the
applicable Grantor, and to the payment of all costs and expenses paid or
incurred by the Collateral Agent in connection with the exercise of any right
or remedy hereunder or under any Indenture Document, all in accordance with the
terms hereof or thereof; second,
to the extent of any excess of such proceeds, to the payment of all other
Secured Obligations for the ratable benefit of each Secured Party; and third, to the extent of any excess of such
proceeds, to the payment to or upon the order of such Grantor or to whosoever
may be lawfully entitled to receive the same or as a court of competent
jurisdiction may direct.

 

5.5                              
Accounts.  Subject
to the Intercreditor, at any time following the occurrence and during the
continuation of an Event of Default, the Collateral Agent may:  (a) direct
the Account Debtors under any Accounts to make payment of all amounts due or to
become due to such Grantor thereunder directly to the Collateral Agent, (b)
notify, or require any Grantor to notify, each Person maintaining a lockbox or
similar arrangement to which Account Debtors under any Accounts have been
directed to make payment to remit all amounts representing collections on
checks and other payment items from time to time sent to or deposited in such
lockbox or other arrangement directly to the Collateral Agent, or (c) enforce
collection, at the Grantors’ expense, of any such Accounts and to adjust,
settle or compromise the amount or payment thereof, in the same manner and to
the same extent as any applicable Grantor might have done.  If the
Collateral Agent notifies any Grantor that it has elected to collect the
Accounts in accordance with the preceding sentence, any payments of Accounts
received by such Grantor will be forthwith (and in any event within two Business
Days) deposited by such Grantor in the exact form received, duly indorsed by
such Grantor to the Collateral Agent if required, in a collateral account
maintained under the sole dominion and control of the Collateral Agent, and
until so turned over, all amounts and proceeds (including checks and other
instruments) received by such Grantor in respect of the Accounts, any
Supporting Obligation or Collateral Support will be received in trust for the
benefit of the Collateral Agent hereunder and will be segregated from other
funds of such Grantor and such Grantor will not adjust, settle or compromise
the amount or payment of any Account, or release wholly or partly any Account
Debtor or obligor thereof, or allow any credit or discount thereon.

 

5.6                              
Investment Property.

 

(a)                     
Each Grantor
recognizes that, by reason of certain prohibitions contained in the Securities
Act and applicable state securities laws, the Collateral Agent may be
compelled, with respect to any sale of all or any part of the Investment
Property conducted without prior registration or qualification of such
Investment Property under the Securities Act or such state securities laws, to
limit purchasers to those who will agree, among other things, to acquire the
Investment Related Property for their own account, for investment and not with
a

 

14

 

view to the distribution or resale thereof.  Each
Grantor acknowledges that any such private sale may be at prices and on terms
less favorable than those obtainable through a public sale without such
restrictions (including a public offering made pursuant to a registration
statement under the Securities Act) and, notwithstanding such circumstances,
each Grantor agrees that any such private sale will be deemed to have been made
in a commercially reasonable manner and that the Collateral Agent will have no
obligation to engage in public sales and no obligation to delay the sale of any
Investment Property for the period of time necessary to permit the issuer
thereof to register it for a form of public sale requiring registration under
the Securities Act or under applicable state securities laws, even if such
issuer would, or should, agree to so register it.  If the Collateral Agent
determines to exercise its right to sell any of the Investment Property, upon
written request, each Grantor will and will use commercially reasonable efforts
to cause each issuer of any Pledged Capital Stock or Pledged Debt to be sold
hereunder from time to time to furnish to the Collateral Agent all such
information as the Collateral Agent may request to determine the number and
nature of interest, shares or other instruments included in the Investment
Property that may be sold by the Collateral Agent in exempt transactions under
the Securities Act and the rules and regulations of the SEC thereunder, as the
same are from time to time in effect.

 

(b)                
Upon the occurrence
and during the continuation of an Event of Default and subject to the
Intercreditor, (i) all rights of each Grantor to exercise or refrain from
exercising the voting and other consensual rights that it would otherwise be
entitled to exercise pursuant hereto will cease and all such rights will
thereupon become vested in the Collateral Agent, who will thereupon have the
sole right to exercise such voting and other consensual rights; (ii) all rights
of each Grantor to receive dividends and other distributions that it would
otherwise be entitled to receive pursuant hereto will cease and all such rights
will thereupon become vested in the Collateral Agent, who will thereupon have
the sole right to receive such dividends and other distributions; and (iii) to
permit the Collateral Agent to exercise the voting and other consensual rights
that the Grantors would otherwise be entitled to exercise pursuant hereto and
to receive all dividends and other distributions that the Grantors would
otherwise be entitled to receive, each Grantor will promptly execute and
deliver (or cause to be executed and delivered) to the Collateral Agent all
proxies, dividend payment orders and other instruments as the Collateral Agent
may from time to time reasonably request, and each Grantor acknowledges that
the Collateral Agent may utilize the power of attorney set forth in Section 6.3.

 

5.7                              
Deposit Accounts.  Upon the occurrence and during the
continuation of an Event of Default and subject to the Intercreditor, the
Collateral Agent will have the right to apply the balance from any Deposit
Account or instruct the bank at which any Deposit Account is maintained to pay
the balance of any Deposit Account to or for the benefit of the Collateral
Agent.

 

5.8                              
Intellectual Property.

 

(a)                     
Upon the occurrence
and during the continuation of an Event of Default and subject to the
Intercreditor:

 

(i)                      
the Collateral Agent
will have the right (but not the obligation) to bring suit or otherwise
commence any action or proceeding in the name of any Grantor, the Collateral
Agent or otherwise, in the Collateral Agent’s sole discretion, to enforce any
Intellectual Property included in the Collateral, in which event, such Grantor
will, at the request of the Collateral Agent, do all lawful acts and execute all
documents reasonably required by the Collateral Agent in aid of such
enforcement, and such Grantor will promptly,

 

15

 

upon demand, reimburse and indemnify the Collateral
Agent as provided in Sections 6.6 and 6.7 in connection
therewith;

 

(ii)                   
upon written demand
from the Collateral Agent, each Grantor will assign, convey or otherwise
transfer to the Collateral Agent or its designee all of such Grantor’s right,
title and interest in and to the Intellectual Property included in the Collateral,
and will execute and deliver to the Collateral Agent such documents as are
necessary to effectuate and record such assignment, conveyance, or transfer of,
or other evidence of foreclosure on, such Intellectual Property;

 

(iii)                
in the event of any
assignment, conveyance or other transfer of any of the Trademarks included in
the Collateral, the goodwill symbolized by any such Trademarks will be included
in such sale or transfer, and the applicable Grantor will supply to the
Collateral Agent or its designee such Grantor’s manufacturing, advertising, and
distribution know-how, and copies of records embodying such know-how, relating
to products and services theretofore sold under such Trademarks;

 

(iv)               
each Grantor agrees that
an assignment, conveyance, or transfer of any Intellectual Property included in
the Collateral will be applied to reduce the Secured Obligations outstanding
only to the extent that the Collateral Agent receives cash proceeds in respect
of such assignment, conveyance, or other transfer of the Intellectual Property;
and

 

(v)                  
the Collateral Agent
will have the right to notify, or require each Grantor to notify, any obligors
with respect to payments due or to become due to such Grantor in respect of the
Intellectual Property, of the existence of the security interest created
herein, to direct such obligors to make payment of all such amounts directly to
the Collateral Agent, and, upon such notification and at the expense of such
Grantor, to enforce collection of any such amounts and to adjust, settle or
compromise the amount of such payment, to the same extent as such Grantor could
have done.

 

(b)                    
Solely for the
purpose of enabling the Collateral Agent to exercise rights and remedies under
this Section 5.8, at such time as the Collateral Agent will be
lawfully entitled to exercise such rights and remedies, each Grantor hereby
grants to the Collateral Agent, to the extent it has the lawful right to do so,
an irrevocable, nonexclusive worldwide license (exercisable without payment of
royalty or other compensation to such Grantor), to use, operate under, or
sublicense any Intellectual Property now or hereafter owned by such Grantor,
subject, in the case of Trademarks, to the maintenance by or on behalf of the
Collateral Agent of quality standards with respect to the products and services
sold under such Trademarks at a level at least substantially comparable to that
prevailing at the time of Event of Default.  The foregoing license grant
to the Collateral Agent is in addition to, and not in limitation of, the
Collateral Agent’s rights under Section 6.

 

5.9                              
Cash Proceeds.  In addition to the rights of the Collateral Agent specified in Section 5.5,
upon the occurrence and during the continuation of an Event of Default and
subject to the Intercreditor, Cash Proceeds will be held by such Grantor in
trust for the Collateral Agent, segregated from other funds of such Grantor,
and will, forthwith upon receipt by such Grantor, unless otherwise provided in Section 5.5
or in the Intercreditor, be turned over

 

16

 

to the Collateral Agent in the exact form received by
such Grantor (duly indorsed by such Grantor to the Collateral Agent, if
required) and held by the Collateral Agent in a designated collateral
account.  Any Cash Proceeds received by the Collateral Agent (whether from
a Grantor or otherwise), if an Event of Default has occurred and is continuing,
may, in the sole discretion of the Collateral Agent, (A) be held by the
Collateral Agent for the ratable benefit of the Secured Parties, as collateral
security for the Secured Obligations (whether matured or unmatured), or (B)
then or at any time thereafter may be applied by the Collateral Agent against the
Secured Obligations then due and owing.

 

5.10                       
Certain Rights Respecting Contracts.  Upon the occurrence and during
the continuation of an Event of Default and subject to the Intercreditor, the
Collateral Agent may assume any Grantor’s rights under any or all contracts of
such Grantor, it being in the Collateral Agent’s sole discretion whether to do
so and which Contracts are to be assumed.  Without limiting the generality
of the foregoing, in such event the Collateral Agent may notify (or require the
applicable Grantor to notify) other parties to any such contract that it has
assumed the applicable Grantor’s rights thereunder, may perform and discharge
any or all such Grantor’s obligations thereunder, and, in the exercise of such
rights, may pay any costs and expenses and employ agents and legal counsel, all
at the sole cost and expense of the Grantors.  The Collateral Agent will
not be obligated to perform or discharge any obligation or duty to be performed
or discharged by any Grantor under any contract, and each Grantor hereby agrees
to indemnify the Collateral Agent, its nominee and each other principal for,
and hold each such Person harmless from, any and all liability arising from
such contracts, except to the extent that such liability results from such
Person’s gross negligence or willful misconduct.  Nothing herein shall be
construed to place responsibility for the control, care, management, or repair
of any property to which any Grantor has rights under the contracts on the Collateral
Agent or make it liable for any negligence in the management, operation,
upkeep, repair or control of such property.

 

SECTION 6                                                      
RIGHTS AND OBLIGATIONS OF COLLATERAL AGENT

 

6.1                              
Appointment, Resignation and Removal.  The Collateral Agent has been
appointed to act as Collateral Agent hereunder by each Secured Party pursuant
to the Indenture.  The Collateral Agent will be obligated, and will have
the right hereunder, to make demands, to give notices, to exercise or refrain
from exercising any rights, and to take or refrain from taking any action
(including the release or substitution of Collateral), solely in accordance
with this Agreement, the Indenture and the Intercreditor.  The Collateral
Agent may resign and a successor Collateral Agent may be appointed in the
manner provided in the Indenture.  Upon the acceptance of any appointment
as Collateral Agent under the terms of the Indenture by a successor Collateral
Agent, that successor Collateral Agent will thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring or
removed Collateral Agent under this Agreement, and the retiring or removed
Collateral Agent under this Agreement will be discharged from its duties and
obligations hereunder.  After any retiring or removed Collateral Agent’s
resignation or removal, the provisions of this Agreement will inure to its
benefit as to any actions taken or omitted to be taken by it under this
Agreement while it was the Collateral Agent hereunder.

 

6.2                              
Standard of Care; Collateral Agent May
Perform. 
The powers conferred on the Collateral Agent hereunder are solely to protect
the Secured Parties’ interest and does not impose any duty on it to exercise
any such powers.  Except for the exercise of reasonable care in the
custody of any Collateral in its possession and the accounting for moneys
actually received by it hereunder, the Collateral Agent will have no duty as to
any Collateral or as to the taking of any necessary steps to preserve rights
against prior parties, subject to the

 

17

 

Intercreditor, or any other rights pertaining to any
Collateral.  The Collateral Agent will be deemed to have exercised reasonable
care in the custody and preservation of Collateral in its possession if such
Collateral is accorded treatment substantially equal to that which the
Collateral Agent accords its own property.  Neither the Collateral Agent
nor any of its directors, officers, employees or agents will be liable for
failure to demand, collect or realize on all or any part of the Collateral or
for any delay in doing so or will be under any obligation to sell or otherwise
dispose of any Collateral upon the request of any Grantor or otherwise. 
If any Grantor fails to perform any agreement contained herein, the Collateral
Agent may itself perform, or cause performance of, such agreement, and the
expenses of the Collateral Agent incurred in connection therewith will be payable
by each Grantor pursuant to Section 6.6.

 

6.3                              
Attorney-In-Fact.  Each Grantor hereby irrevocably appoints the Collateral Agent
(such appointment being coupled with an interest), subject to the
Intercreditor, as such Grantor’s attorney-in-fact, with full authority in the
place and stead of such Grantor and in the name of such Grantor, the Collateral
Agent or otherwise, from time to time to take any action and to execute any
instrument reasonably necessary or advisable or that the Collateral Agent may
deem reasonably necessary or advisable to accomplish the purposes of this
Agreement, including the following:

 

(a)                     
to prepare, sign, and
file for recordation in any Intellectual Property registry, appropriate evidence
of the lien and security interest granted herein in the Intellectual Property
in the name of such Grantor as assignor or pledgor;

 

(b)                    
to take or cause to
be taken all actions necessary to perform or comply or cause performance or
compliance with the terms of this Agreement, including access to pay or
discharge taxes or Liens (other than Permitted Liens) levied or placed on or
threatened against the Collateral, any such payments made by the Collateral
Agent to become part of the Secured Obligations of such Grantor (Collateral
Agent agrees to give reasonable notice to such Grantor of such payments) to the
Collateral Agent, due and payable immediately without demand; and

 

(c)                     
Upon the occurrence
and during the continuance of any Event of Default and subject to the
Intercreditor:

 

(i)                      
to obtain and adjust
insurance required to be maintained by such Grantor or paid to the Collateral
Agent pursuant to the Indenture Documents;

 

(ii)                   
to ask for, demand,
collect, sue for, recover, compound, receive and give acquittance and receipts
for moneys due and to become due under or in respect of any of the Collateral;

 

(iii)                
to receive, endorse
and collect any drafts or other Instruments, Documents and Chattel Paper in
connection with Section 6.3(b);

 

(iv)               
to file any claims or
take any action or institute any proceedings that the Collateral Agent may deem
necessary or desirable for the collection of any of the Collateral or otherwise
to enforce the rights of the Collateral Agent with respect to any of the
Collateral;

 

18

 

(v)                  
to sell, transfer,
assign, lease, license, pledge, make any agreement with respect to or otherwise
deal with any of the Collateral as fully and completely as though the
Collateral Agent were the absolute owner thereof for all purposes, and to do,
at the Collateral Agent’s option and such Grantor’s expense, at any time or
from time-to-time, all acts and things reasonably necessary or advisable or
that the Collateral Agent reasonably deems necessary to protect, preserve, or
realize on the Collateral and the Collateral Agent’s security interest therein
as fully and effectively as such Grantor might do.

 

6.4                              
Access; Right of Inspection.  The Collateral Agent will at all
times upon reasonable prior notice have full and free access during normal
business hours to all the books, correspondence and records of each Grantor,
and the Collateral Agent and its representatives may examine the same, take
extracts therefrom and make photocopies thereof, and each Grantor agrees to
render to the Collateral Agent, at such Grantor’s cost and expense, such
clerical and other assistance as may be reasonably requested with regard
thereto.  The Collateral Agent and its representatives will during normal
business hours upon reasonable prior notice also have the right to enter any
premises of each Grantor and inspect any property of each Grantor where any of
such Grantor’s Collateral is located for the purpose of inspecting the same,
observing its use or otherwise protecting its interests therein.

 

6.5                              
Authorizations.  Each Grantor hereby authorizes the Collateral Agent to take all
steps reasonably necessary or that it deems reasonably necessary to maintain
and preserve the Collateral, consistent with the Grantor’s obligations to do so
hereunder and under the Intercreditor, all at the Grantor’s expense. 
Without limiting the foregoing, each Grantor hereby authorizes the filing of
any financing statements or continuation statements, and amendments to
financing statements, or any similar document in any jurisdictions and with any
filing offices as are necessary or advisable to perfect the security interest
granted to the Collateral Agent hereunder.  Such financing statements may
describe the Collateral in the same manner as described herein or may contain
an indication or description of collateral that describes such property in any
other manner as is necessary, advisable or prudent to ensure the perfection of
the security interest in the Collateral granted to the Collateral Agent
hereunder, including describing such property as “all assets” or “all personal
property, whether now owned or hereafter acquired.”  Each Grantor will
from time to time furnish to the Collateral Agent statements and schedules
further identifying and describing the Collateral and such other reports in
connection with the Collateral as the Collateral Agent may reasonably request,
all in reasonable detail.

 

6.6                              
Expenses.  Each Grantor will promptly pay to
the Collateral Agent the amount of any and all costs and expenses, including
the reasonable fees and expenses of its counsel and the fees and expenses of
any experts and agents, that the Collateral Agent may incur in connection with
this Agreement, including all costs and expenses relating to (a) any and all
filings and other actions taken to ensure the attachment, perfection and
priority of, and the ability of the Collateral Agent to enforce, the Collateral
Agent’s security interest in the Collateral; (b) any action, suit or other
proceeding affecting the Collateral or any part thereof commenced, in which
action, suit or proceeding the Collateral Agent is made a party or participates
or in which the right to use the Collateral or any part thereof is threatened,
or in which it becomes necessary or in the reasonable judgment of the
Collateral Agent becomes reasonably necessary to defend or uphold the Lien
hereof (including any action, suit or proceeding to establish or uphold the
compliance of the Collateral with any requirements of any governmental
authority or law); (c) the collection of the Secured Obligations; (d) the
enforcement and administration hereof; (e) the custody or preservation of, or
the sale of, collection from, or other realization on, any of the Collateral;
(f) the exercise or enforcement of any of the rights of the Collateral Agent or
any

 

19

 

Secured Party hereunder; or (g) the failure by any
Grantor to perform or observe any of the provisions hereof.  All amounts
expended by the Collateral Agent and payable by any Grantor under this Section 6.6
will be due upon demand (together with interest thereon accruing at the
applicable default rate during the period from and including the date on which
such funds were so expended to the date of repayment) and will be part of the
Secured Obligations.  Each Grantor’s obligations under this Section 6.6
will survive the termination hereof and the discharge of such Grantor’s other
obligations under this Agreement, the Indenture and the Notes.

 

6.7                              
Indemnity.  Each
Grantor jointly and severally agrees to (a) defend (subject to Indemnitees’
selection of counsel), indemnify, pay and hold harmless each Indemnitee, from
and against all claims, losses and liabilities in any way relating to, growing
out of or resulting from this Agreement and the transactions contemplated
hereby (including enforcement of this Agreement), except to the extent such
claims, losses or liabilities result from such Indemnitee’s gross negligence or
willful misconduct; and (b) to pay to the Collateral Agent promptly following
written demand the amount of all reasonable costs and reasonable expenses,
including the reasonable fees and expenses of its counsel and of any experts
and agents in accordance with the terms and conditions of the Indenture. 
The obligations of each Grantor under this Section 6.7 will survive
the termination of this Agreement and the discharge of such Grantor’s other
obligations under this Agreement, the Indenture and Notes.

 

6.8                              
Release of Collateral.  Upon the payment in full of all Secured
Obligations (other than contingent indemnification obligations to the extent
any unsatisfied claims giving rise thereto have not been asserted), and in
connection with any sale or other disposition of any portion of the Collateral
permitted by the Indenture, the security interests granted hereunder in such
Collateral will terminate and all rights to such Collateral will revert to the
applicable Grantor (or other Person entitled thereto) in accordance with
Section 10.4 of the Indenture.  Upon such termination, the Collateral
Agent will, at the Grantors’ expense, execute and deliver to the applicable
Grantor such documents as such Grantor may reasonably request to evidence such
termination and release of such security interest.

 

SECTION 7                                                      
MISCELLANEOUS

 

7.1                              
Notices.  Unless otherwise specifically
provided herein, any notice or other communication herein required or permitted
to any Grantor shall be sent to such Grantor’s address as set forth on Schedule 7.1. 
Any notice or other communication herein required or permitted to the
Collateral Agent shall be sent to the Collateral Agent’s address set forth in
Section 12.2 of the Indenture.  Each notice hereunder shall be in
writing and may be personally served or sent by facsimile, United States mail
or courier service and will be deemed to have been given when delivered in
person or by courier service and signed for against receipt thereof, upon
receipt of facsimile, or three Business Days after depositing it in the United
States mail with postage prepaid and properly addressed; provided that, no notice to the Collateral
Agent will be effective until received by the Collateral Agent.

 

7.2                              
Amendment and Waivers.  No amendment, modification,
termination or waiver of any provision of this Agreement, or consent to any
departure by any Grantor therefrom, will in any event be effective without the
written concurrence of the Collateral Agent.

 

7.3                              
No Waiver; Remedies Cumulative.  No failure or delay on the part
of the Collateral Agent in the exercise of any power, right or privilege
hereunder or under any other Indenture Document will impair such power, right
or privilege or be construed to be a waiver of any default or acquiescence
therein, nor will any single or partial exercise of any such power,

 

20

 

right or privilege preclude other or further exercise
thereof or of any other power, right or privilege.  All rights, powers and
remedies existing under this Agreement and the other Indenture Documents are
cumulative, and not exclusive of, any rights or remedies otherwise
available.  Any forbearance or failure to exercise, and any delay in
exercising, any right, power or remedy hereunder will not impair any such
right, power or remedy or be construed to be a waiver thereof, nor will it
preclude the further exercise of any such right, power or remedy.

 

7.4                              
Successors and Assigns.  This Agreement will be binding on
the parties hereto and their respective successors and assigns including all
persons who become bound as debtor to this Agreement.  No Grantor may,
without the prior written consent of the Collateral Agent, assign any right,
duty or obligation hereunder.

 

7.5                              
Independence of Covenants.  All covenants hereunder shall be
given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or would otherwise be within the limitations of, another covenant
will not avoid the occurrence of a Default or an Event of Default if such
action is taken or condition exists.

 

7.6                              
Survival of Representations, Warranties and
Agreements. 
All representations, warranties and agreements made herein will survive the
execution and delivery hereof.  Notwithstanding anything herein or implied
by law to the contrary, the agreements of each Grantor set forth in Sections
6.6 and 6.7 will survive the payment of the Secured Obligations and
the termination hereof.

 

7.7                              
Severability.  If any provision in or obligation hereunder will be invalid,
illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of such provision
or obligation in any other jurisdiction, will not in any way be affected or
impaired thereby.

 

7.8                              
Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

7.9                              
Counterparts.  This Agreement may be executed in any number of counterparts,
each of which when so executed and delivered will be deemed an original, but
all such counterparts together will constitute but one and the same instrument.

 

7.10                       
Effectiveness.  This Agreement will become effective upon the execution of a
counterpart hereof by each of the parties and receipt by the Grantors and the
Collateral Agent of written or telephonic notification of such execution and
authorization of delivery thereof.

 

7.11                       
Entire Agreement.  This Agreement and the other Indenture
Documents embody the entire agreement and understanding between the Grantors and
the Collateral Agent, and supersede all prior agreements and understandings
between such parties relating to the subject matter hereof and thereof. 
Accordingly, the Indenture Documents may not be contradicted by evidence of
prior, contemporaneous or subsequent oral agreements of the parties. 
There are no unwritten oral agreements between the parties.

 

7.12                       
Limitation on Collateral Agent’s Liability.  Notwithstanding anything to the
contrary contained herein, the Collateral Agent shall not be responsible for
filing any

 

21

 

financing or continuation statements or recording any
documents or instruments in any public office at any time or times or otherwise
perfecting or maintaining the perfection of any security interest in the Collateral,
nor shall the Collateral Agent be liable or responsible for any loss or
diminution in the value of any of the Collateral, by reason of the act or
omission of any carrier, forwarding agency or other agent or bailee selected by
the Collateral Agent in good faith.  The Collateral Agent shall not be
responsible for the existence, genuineness or value of any of the Collateral or
for the validity, perfection, priority or enforceability of the Liens in any of
the Collateral, whether impaired by operation of law or by reason of any action
or omission to act on its part hereunder, except to the extent such action or
omission constitutes gross negligence, bad faith or willful misconduct on the
part of the Collateral Agent.  Nor shall the Collateral Agent be responsible
for the validity or sufficiency of the Collateral or any agreement or
assignment contained therein, for the validity of the title of any Grantor to
the Collateral, for insuring the Collateral or for the payment of taxes,
charges, assessments or Liens on the Collateral or otherwise as to the
maintenance of the Collateral.

 

7.13                       
Rights and Obligations Subject to
Intercreditor. 
All rights and remedies provided herein to the Collateral Agent, and all
obligations of the Grantors hereunder, are subject to the applicable terms and
provisions of the Intercreditor.  So long as the Intercreditor is
effective, if any inconsistency exists or arises between the terms hereof and
the Intercreditor, the Intercreditor controls.

 

[signature pages follow]

 

22

 

IN WITNESS WHEREOF, each
Grantor and the Collateral Agent have caused this Agreement to be duly executed
and delivered by their respective officers thereunto duly authorized as of the
date first written above.

 

 

	
   

  	
  GRANTORS:

  
	
   

  	
   

  	
   

  
	
   

  	
  THE WORNICK COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert B. McKeon

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Robert B. McKeon

  
	
   

  	
   

  	
  Title:

  	
  Robert B. McKeon

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  RIGHT AWAY MANAGEMENT

  CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert B. McKeon

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Robert B. McKeon

  
	
   

  	
   

  	
  Title:

  	
  Robert B. McKeon

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  THE WORNICK COMPANY
  RIGHT AWAY

  DIVISION

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert B. McKeon

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Robert B. McKeon

  
	
   

  	
   

  	
  Title:

  	
  Robert B. McKeon

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  THE WORNICK COMPANY
  RIGHT AWAY

  DIVISION, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Right Away Management Corporation,

  its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/

  	
   Robert B. McKeon

  	
   

  
	
   

  	
   

  	
   

  	
  Name:  
  Robert B. McKeon

  
	
   

  	
   

  	
   

  	
  Title:    
  Robert B. McKeon

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

	
   

  	
  THE COLLATERAL AGENT:

  
	
   

  	
   

  
	
   

  	
  U.S. BANK NATIONAL
  ASSOCIATION

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard H. Prokosch

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Richard H. Prokosch

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

EXHIBIT A

 

[Form of]

SECURITY
AGREEMENT SUPPLEMENT

 

This SECURITY AGREEMENT
SUPPLEMENT, dated as of
[           ],
200[   ] (this “Supplement”),
is made by the Persons listed on the signature pages hereof (collectively, the
“[Additional] Grantors”) in favor
of U.S. Bank National Association, as collateral agent for the Secured Parties
(in such capacity, the “Collateral Agent”). 
Undefined capitalized terms used in this Agreement have the meanings assigned
to them in that certain Security Agreement, dated as of
June [    ], 2004 (as amended, restated, supplemented
or otherwise modified from time to time, the “Security
Agreement”), between The Wornick Company, the other Grantors party thereto
and the Collateral Agent.

 

Section 1.  Affirmation and Grant of Security.  Each [Additional]
Grantor hereby [For existing Grantors add: 
affirms its grant to the Collateral Agent for the benefit of the Secured
Parties set forth in the Security Agreement of, and] grants to the Collateral
Agent for the benefit of the Secured Parties, a security interest in and
continuing lien on all of such [Additional] Grantor’s right, title and interest
in, to and under the Collateral to secure the Secured Oligations.

 

Section 2. 
Representation and Warranties.  Each [Additional] Grantor represents and
warrants that the attached schedules supplement the schedules to the Security
Agreement, and that each such supplemental schedule accurately and
completely sets forth all additional information required pursuant to the
Security Agreement, and such Grantor hereby agrees that such supplemental
schedules constitutes part of the schedules to the Security Agreement.

 

[The following
bracketed section is for Additional Grantors only:]

 

[Section 3.  Additional Grantor Provisions. 
Pursuant to Section 4.18 of the Security Agreement, each Additional
Grantor hereby:

 

(a)                                 
agrees that by the
execution and delivery hereof, such Additional Grantor becomes a Grantor under
the Security Agreement and agrees to be bound by all of the terms thereof as if
it were an original signatory thereto, and all of the property pledged hereby
shall be deemed to be part of the Collateral and hereafter subject to each of the
terms and conditions of the Security Agreement;

 

(b)                                
represents and
warrants that, except as set forth on the schedules hereto, each of the
representations and warranties set forth in the Security Agreement and
applicable to such Additional Grantor is true and correct both before and after
giving effect to this Supplement, except to the extent that any such
representation and warranty relates solely to any earlier date, in which case
such representation and warranty is true and correct as of such earlier date;

 

(c)                                 
agrees that from time
to time, at such Additional Grantor’s expense, it will promptly Authenticate,
execute and deliver all further agreements, instruments, certificates and documents,
and take all further action, that may be necessary or desireable, or that the
Collateral Agent may reasonably request, to create or maintain the validity,
perfection or priority of and protect any security interest granted or
purported to be granted hereby or to enable the Collateral Agent to exercise
and enforce its rights and remedies hereunder with respect to any Collateral;
and

 

A-1

 

(d)                                
agrees that any
notice or other communication herein required or permitted to be given shall be
given in accordance with Section 7.1 of the Security Agreement, and all
for purposes thereof, the notice address of the undersigned shall be the
address as set forth on the applicable schedule hereto.]

 

Section [3][4]. 
Miscellaneous. 
Each [Additional] Grantor agrees that neither this Supplement nor any term
hereof may be changed, waived, discharged or terminated, except by an
instrument in writing signed by the party (including, if applicable, any party
required to evidence its consent to or acceptance of this Supplement) against
whom enforcement of such change, waiver, discharge or termination is
sought.  If any provision in or obligation hereunder will be invalid,
illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of such provision
or obligation in any other jurisdiction, will not in any way be affected or
impaired thereby.  This Supplement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.

 

Section [4][5]. 
Governing Law. 
THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.

 

IN WITNESS WHEREOF, each
[Additional] Grantor has caused this Supplement to be duly executed and
delivered by its officer thereunto duly authorized as of the date first above
written.

 

	
   

  	
  [Name of Subsidiary],

  as a[n Additional] Grantor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Acknowledged and
  Accepted:

  
	
   

  	
   

  
	
   

  	
  U.S. BANK NATIONAL
  ASSOCIATION,

  as Collateral Agent

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

A-2Exhibit
10.4

 

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

  	
   

  

 

40

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00084-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00084-of-00352.parquet"}]]