SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB/A-1
(Mark One)
[x] Quarterly Report under Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the quarterly period ended October 19, 1997
OR
[ ] Transition Report Pursuant to Section 13 Or 15 (D) of the
Securities Exchange Act Of 1934
Commission file number 0-12701
For the transition period from _______________ to _____________
-----------------------------
CUCOS INC.
(Exact name of small business issuer as specified in its charter)
LOUISIANA 72-0915435
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
110 Veterans Blvd., Suite 222, Metairie, Louisiana 70005
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code--504-835-0306
Check whether the issuer: (1) has filed all reports required to
be filed by Section 13 or 15 (d) of the Exchange Act during the
post 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [ X ] No [ ]
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
2,113,747 shares of common stock, no par value, as of December 1,
1997.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ X ]
Item 6.a.
This Amendment to the Form 10QSB filed on December 3, 1997,
is being done to add the Exhibit 4-K - Pledge and Security
Agreement dated October 7, 1997, between Cucos Inc. and AMRESCO
Commercial Lending Corporation (with Subordination Agreement and
Affiliant Guaranty) as follows:
PLEDGE AND SECURITY AGREEMENT
ACLC 1997-SBL PROGRAM
made by
Cucos Inc.,
as Borrower
in favor of
AMRESCO COMMERCIAL LENDING CORPORATION,
as Secured Party
PLEDGE AND SECURITY AGREEMENT (this "Security
Agreement"), dated as of the date set forth on the signature page
hereof, by Cucos Inc., (the "Borrower"), in favor of AMRESCO
COMMERCIAL LENDING CORPORATION, a Nevada corporation (together
with its successors and assigns, the "Secured Party").
Preliminary Statements
1. On the date hereof, the Secured Party will make
certain loans (each a "Loan" and, collectively, the "Loans") to
the Borrower. The Borrower will execute and deliver four
Promissory Notes to the Secured Party, one Promissory Note in the
amount of $3,327,777.79, a second Promissory Note in the amount
of $222,222.23 a third Promissory Note in the amount of
$305,555.55 and a fourth Promissory Note in the amount of
$133,333.33, dated the date hereof individually and collectively
(the "Promissory Note"), in a form prepared by and acceptable to
Secured Party, which Promissory Note will evidence the Borrower's
obligation, inter, alia, (i) to repay the Loans, (ii) to
guarantee the payment of delinquencies or defaults in respect of
Program Loans (as defined therein) in an amount up to the
Aggregate Credit Enhancement Amount (as defined therein), (iii)
to pay rebatable Scheduled Monthly Credit Enhancement Obligation
Payments (as defined therein) on each Loan and (iv) to pay
interest and other amounts as set forth therein.
2. It is a condition to the making of the Loans, that
the Borrower shall have executed and delivered this Security
Agreement whereby the Borrower, in order to provide security for
the full payment when due of all amounts payable under the
Promissory Note, shall pledge and grant to the Secured Party a
security interest in the collateral described herein.
NOW THEREFORE, in consideration of the foregoing and in
order to induce the Secured Party to make the Loans available to
the Borrower and for other good and valuable consideration, the
receipt and sufficiency of which the Borrower hereby
acknowledges, the Borrower and the Secured Party agree as
follows:
ARTICLE I
DEFINITIONS AND OTHER TERMS
1. Definitions and Other Terms
1.1 Defined Terms. The following terms shall have
the meanings herein specified unless the context otherwise
requires. All terms defined in the singular will have the same
meaning when used in the plural and vice versa.
"Affiliate" means, with respect to any designated
Person, any Person that, directly or indirectly, controls or is
controlled by or is under common control with such designated
Person and, without limiting the generality of the foregoing,
shall include, (i) any Person who is a director or officer of,
partner in, trustee of, or blood or legal relative, guardian or
representative of the designated Person, or any Person who acts
or serves in a similar capacity with respect to the designated
Person, (ii) any Person of which or whom the designated Person is
a director or officer, partner, trustee, or blood or legal
relative, guardian or representative, or with respect to which or
whom, the designated Person acts or serves in a similar capacity;
and (iii) any Person, who, directly or indirectly, is the legal
or beneficial owner of or controls 10% or more of any class of
equity securities of the designated Person. For the purposes of
this definition, "control" (including, with correlative meanings,
the terms "controlled by" and "under common control with"), as
used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or
otherwise.
"Affiliate Guarantor" has the meaning ascribed to such
term in Section 1.2.
"Aggregate Credit Enhancement Amount" has the meaning
ascribed to such term in the Promissory Note.
"Applicable Collateral" means, for each Loan, the
portion of the Collateral specifically relating to the Store
which corresponds to such Loan (as set forth on Schedule 4
attached hereto).
"Business" means all Stores operated by the Borrower.
"Business Day" means any day other than a Saturday,
Sunday or a day on which banking institutions in New York City
are authorized or obligated by law or executive order to be
closed.
"Cash Flow" means, for any period, with respect to any
Person, an amount equal to (a) the sum of (i) pre-tax income,
(ii) interest expense, (iii) depreciation and amortization, (iv)
Discretionary Expenses, (v) Rental Expense and (vi) Non-Recurring
Expenses less (b) Non-Recurring Income, all as reflected on such
Person's financial statement for such period.
"Chattel Paper" has the meaning ascribed to such term
under the UCC.
"Code" means the Internal Revenue Code of 1986 as
amended.
"Collateral" has the meaning ascribed to such term in
Section 2.
"Consolidated FCCR" means, for any period, the ratio of
(a) the Borrower's Cash Flow for such period to (b) the sum of
Fixed Charges and Rental Expense of the Borrower for such period.
"Contracts" shall mean all contracts and agreements to
which the Borrower now is, or hereafter will be, bound, or a
party, beneficiary or assignee (other than rights evidenced by
Chattel Paper, Documents or Instruments), including, without
limitation, any franchise agreements or license agreements and
all other agreements and documents executed and delivered with
respect to such contracts, and all revenues, rentals and other
sums of money due and to become due thereunder from any of the
foregoing.
"Copyrights" shall mean all United States or other
registered and unregistered copyrights, all licenses thereto, and
all applications therefor, and all reissues, divisions,
continuations, renewals, extensions, modifications, supplements
thereto or to any part thereof, and the right to sue for past,
present and future infringements of the foregoing, and all rights
corresponding to the foregoing throughout the world.
"Credit Enhancement Amount" has the meaning ascribed to
such term in the Promissory Note.
"Default Rate" has the meaning ascribed to such term in
the Promissory Note.
"Discretionary Expenses" means, with respect to any
Person, the difference between (a) operating expenses for
salaries, wages, benefits, and reimbursements and the like
incurred by such Person and (b) the reasonable and customary
expenses for salaries, wages, benefits, and reimbursements
incurred by such Person, as determined by the Secured Party or
any appointed servicer. Discretionary Expenses shall in no event
be less than zero.
"Distributions" means distributions, all salaries, fees
and other compensation, and all reimbursement or indemnification,
directly or indirectly, paid or payable to (or for the benefit
of) any Affiliate of the Borrower, other than a Person who is an
officer of the Borrower and is not otherwise an Affiliate of the
Borrower. "Distributions" shall include, but not be limited to,
any payment or reimbursement of travel and entertainment
expenses, automobile expenses, and premiums or expenses
associated with any insurance policy other than those expressly
required to be maintained pursuant to Section 3.18 hereof.
"Document" has the meaning ascribed to such term under
the UCC.
"ERISA" means the Employee Retirement Income Security
Act of 1974 as amended.
"Equipment" means any "equipment", as such term is
defined in the UCC, used or bought for use primarily in the
Pledged Stores and not included within Inventory, now or
hereafter owned or leased by the Borrower and, in any event,
shall include, but shall not be limited to, all machinery, tools,
computer software, office equipment, furniture, appliances,
furnishings, fixtures, vehicles, motor vehicles, petroleum
storage tanks and pumps, and any manuals, instructions and
similar items which relate to the foregoing, and any and all
additions, substitutions and replacements of any of the
foregoing, wherever located, together with all improvements
thereon and all attachments, components, parts, equipment and
accessories installed thereon or affixed thereto.
"Event of Default" has the meaning ascribed to such
term in Section 7.
"Financing Statements" means the UCC financing
statements, prepared by Secured Party, and delivered to Borrower
and which Borrower must execute and deliver to Secured Party as a
condition under the Loan Documents.
"Fixed Charges" means, with respect to any Person, for
any period, without duplication, the aggregate of all amounts
paid or accrued by such Person during such period with respect to
Indebtedness, as determined in accordance with generally accepted
accounting principles.
"Franchise Agreement" means the franchise or license
agreement between the Franchisor, as franchisor or licensor, and
the Borrower, as franchisee or licensee, including a franchise
under a Franchise Agreement where the Borrower is also the
franchisor or licensor.
"General Intangibles" shall mean "general intangibles"
as such item is defined in the UCC and shall include, but not be
limited to, writings, memoranda, confirmations, passbooks,
signature cards, acknowledgments, understandings, contract
rights, licenses, leases, permits, filings, consents, and
approvals, and all puts, calls, options, warrants, and
securities, and all security interests, Patents, inventions,
processes, lists (including customer and suppliers lists),
methods, and information (including proprietary information,
director and shareholder, sales, business, financial, accounting,
forecasts, projections, media, and other information), knowhow,
software, programs, plans, data, blueprints, designs, drawings,
surveys, notices, Copyrights, Trademarks, tradenames, trade
secrets, service marks, service names, logos and goodwill, and
all recordings and registrations thereof, applications for
recording or registration, renewals, modifications, supplements,
reissues, continuations, extensions, divisions thereof and rights
corresponding thereto, and all manuals, standards, practices,
mail, advertisements, files, reports, books, catalogs, records,
journals, invoices, and bills, and all rights (including voting
rights, rights to receive notice or to consent, rights to
payment, interest, dividends, distributions or earnings, rights
to sue and enforce), powers (including powers of attorney),
privileges, benefits, and remedies relating thereto or arising in
connection therewith.
"Goods" has the meaning ascribed to such term in the
UCC.
"Indebtedness" means, with respect to any Person, (i)
all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes
or other similar instruments, (iii) all obligations of such
Person to pay the deferred purchase price of property or
services, (iv) all capitalized lease obligations of such Person,
(v) all Indebtedness of others secured by a Lien on any asset of
such Person, whether or not such Debt has been assumed by such
Person and (vi) all Indebtedness of others to the extent
guaranteed by such Person.
"Instrument" has the meaning ascribed to such term in
the UCC (other than Instruments constituting Chattel Paper).
"Inventory" means all inventory of the Borrower of
every type or description, including all "inventory" as such term
is defined in the UCC, now owned or hereafter acquired and
wherever located, whether raw, in process or finished, and all
materials usable in processing the same and all documents of
title covering any inventory, including, without limitation, work
in process, materials used or consumed in the Pledged Stores, now
owned or hereafter acquired or manufactured by the Borrower and
held for sale in the ordinary course of its business; all present
and future substitutions thereof, parts and accessories thereof
an all additions thereto; and all Proceeds thereof and products
of such inventory in any form whatsoever.
"Lease Obligations" means with respect to any Person,
any obligations of such Person in connection with any leases for
personal property (including Equipment) or real property, to the
extent such obligations are not included in Indebtedness.
"License" means the license to use the Trademarks of
the franchisor under the Franchise Agreement.
"Lien" means any deed, mortgage, pledge, security
interest, hypothecation, collateral assignment, encumbrance, lien
(statutory or other), or preference, priority or other security
agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any conditional sale
or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing,
and the filing of any financing statement under the UCC).
"Loan" and "Loans" have the meanings ascribed to such
terms in the preliminary statements of this Security Agreement.
"Loan Documents" means the Promissory Note, this
Security Agreement and any guarantee, mortgage, deed of trust or
other instrument, agreement, certificate or other writing, now or
hereafter executed and delivered in connection with the
Obligations.
"Make Whole Premium" means:
(i) for a Fixed Rate loan has the meaning ascribed to
such term in the Fixed Rate Promissory Note,
(ii) for an Adjustable rate loan means the same as
"Prepayment Premium" as such term is defined in the Adjustable
Promissory Note.
"Non-Recurring Expenses" and "Non-Recurring Income"
mean expenses or income, as the case may be, that is
extraordinary and generally not reflected in any prior period or
reasonably anticipated to be incurred in any subsequent period
received.
"Note Amount" has the meaning ascribed to such term in
the Promissory Note.
"Obligations" means each and every obligation,
covenant, agreement, Indebtedness and liability of the Borrower
to the Secured Party evidenced by, arising under or in connection
with the Promissory Note (including, without limitation,
indebtedness, obligations and liabilities in respect of
principal, interest, the Make Whole Premium, the Credit
Enhancement Amount and the Scheduled Monthly Credit Enhancement
Obligation Payments for each of the Loans), this Security
Agreement, or any other Loan Document, and any future advances
thereon, renewals, extensions, modifications, amendments,
substitutions and consolidations thereof, including the
Borrower's obligations to pay (or reimburse the Secured Party
for) all costs and expenses (including attorneys fees and
disbursements) incurred by the Secured Party in obtaining,
maintaining, protecting and preserving its interest in the
Collateral or its security interest therein, foreclosing,
retaking, holding, preparing for sale or lease, selling or
otherwise disposing or realizing on the Collateral or in
exercising its rights hereunder or as a secured party under the
UCC, any other applicable law, regulation or rule or this
Security Agreement and all other indebtedness, obligations and
liabilities of any kind of the Borrower to the Secured Party, now
or hereafter existing (including future advances whether or not
pursuant to commitment), arising directly between the Borrower
and the Secured Party or acquired outright, conditionally or as
collateral security from another, absolute or contingent, joint
and/or several, secured or unsecured, due or not due, contractual
or tortious, liquidated or unliquidated, arising by operation of
law or otherwise, or direct or indirect, including the Borrower's
liabilities to the Secured Party as a member of any partnership,
syndicate, association or other group, and whether incurred by
the Borrower as principal, surety, indorser, guarantor,
accommodation party or otherwise.
"Patents" means all United States or other registered
and unregistered patents, all licenses thereto, and all
applications therefor, and all reissues, divisions,
continuations, renewals, extensions, modifications, supplements
thereto or to any part thereof, and the right to sue for past,
present and future infringements of the foregoing, and all rights
corresponding to the foregoing throughout the world.
"Permitted Liens" means any and all of the Liens set
forth on Exhibit B attached hereto.
"Person" means any individual, corporation,
partnership, unincorporated association, firm, trust, joint stock
company, joint venture or other entity of whatever nature.
"Pledged Stores" means those Stores listed on Schedule
1 attached hereto.
"Principal Party" shall have the meaning ascribed to
such term in Section 7(e).
"Proceeds" shall mean "proceeds" as such term is
defined in the UCC or under other relevant law and shall include,
but shall not be limited to, (a) any and all proceeds of any
insurance (insuring the Collateral or otherwise required to be
maintained hereunder, including return of unearned premium),
indemnity, warranty or guaranty payable to the Secured Party or
Borrower from time to time, and claims for insurance, indemnity,
warranty or guaranty effected or held for the benefit of the
Borrower, with respect to any of the Collateral, (b) any and all
payments (in any form whatsoever) made or due and payable to the
Borrower from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any governmental authority (or any
person acting under color of governmental authority) and (c) any
and all interest, income, dividends, distributions and earnings
on the Collateral or other monies, revenues or other amounts
derived from the Collateral, including any such property received
in connection with any disposition of the Franchise Agreement.
"Program" means the ACLC 1997-SBL program of loans to
Program Borrowers.
"Program Borrower" has the meaning ascribed to such
term in the Promissory Note. In addition, in the Secured Party's
opinion, all Program Borrowers substantially comply with the
Secured Party's current underwriting guidelines for loans to
small business owners, and in no event will loans be made to
Program Borrowers where (i) the Pledged Store has less than one
year of seasoning, and (ii) (a) the most recent annual revenue of
the Borrower is less than $500,000 or (b) the most recent annual
Borrower Cash Flow is less than $100,000.
"Program Loan Deficiencies" has the meaning ascribed to
such term in the Promissory Note.
"Promissory Note" has the meaning ascribed to such term
in the preliminary statements to this Security Agreement.
"Property" means the real property or properties on
which the Pledged Stores are located, as more specifically
described on Schedule 1 attached hereto.
"Rental Expense" means, with respect to any Person, for
any period, the aggregate of all amounts paid or accrued with
respect to Lease Obligations during such period, as determined in
accordance with generally accepted accounting principles.
"Required Consolidated FCCR" has the meaning ascribed
to such term in Section 3.15.
"Required Unit FCCR" has the meaning ascribed to such
term in Section 3.15.
"Scheduled Monthly Credit Enhancement Obligation
Payment" shall have the meaning ascribed to such term in the
Promissory Note.
"Scheduled Monthly Loan Payment" shall have the meaning
ascribed to such term in the Promissory Note.
"Securitization" means the sale, pledge, grant of a
security interest, collateral assignment, transfer and delivery
or other encumbrance or disposition of all or any portion of the
Program Loans (or the Secured Party's rights and powers therein)
by the Secured Party, from time to time, to one or more of its
Affiliates or to other Persons, including the sale of the Program
Loans by the Secured Party to one or more Persons who will issue
debt instruments or equity certificates backed by such Program
Loans and the servicing of such Program Loans by Person appointed
as servicer in connection therewith.
"State" shall have the meaning ascribed to such term in
the Promissory Note.
"Store" means a business/commercial property owned
and/or operated by the Borrower and includes all aspects of the
operating unit.
"Trademarks" shall mean all United States or other
registered or unregistered trademarks together with the goodwill
of the business connected with the use thereof, and symbolized
thereby, all licenses thereto (including the License, if
applicable) and all applications therefor, and all reissues,
divisions, continuations, renewals, extensions, modifications,
supplements thereto or to any part thereof, and the right to sue
for past, present and future infringements of the foregoing, and
all rights corresponding to the foregoing throughout the world.
"UCC" means the Uniform Commercial Code (or any
comparable law) in effect in any relevant jurisdiction the laws
of which govern the perfection of security interests hereunder.
"UCC Search" means the security interest, tax lien,
suit and judgment search of the Borrower conducted in the
locations set forth on Schedule 2 hereto.
"Unit FCCR" means, with respect to any Pledged Store,
for any period, the ratio of (x) such Pledged Store's Cash Flow
for such period to (y) the sum of Fixed Charges and Rental
Expense of the Borrower for such Pledged Store of such period.
1.2 Certain. For the purposes of calculating the
Borrower's Cash Flow, Discretionary Expenses, Non-Recurring
Expenses, Non-Recurring Income, Indebtedness and Lease
Obligations, the term "Borrower" shall mean the Borrower and any
corporate Affiliate of the Borrower (an "Affiliate Guarantor")
that is providing the Secured Party with a guarantee of any of
the Borrower's Obligations and the term "financial statement"
shall mean a consolidated financial statement of the Borrower and
such corporate Affiliate.
1.3. Rules of Construction. When used in this
Security Agreement: (a) "or" is not exclusive; (b) a reference to
a law includes any amendment or modification of such law; (c) a
reference to a Person includes its permitted successors and
permitted assigns; and (d) a reference to an agreement,
instrument or document shall include such agreement, instrument
or document as the same may be amended, modified or supplemented
from time to time in accordance with its terms.
ARTICLE II
SECURITY INTERESTS
2. Security Interests
2.1 Pledge and Grant of Security Interest. As
collateral security for the prompt and complete payment and
performance when due of all of the Obligations, the Borrower
hereby pledges and grants to the Secured Party, a continuing
security interest in, and Lien on, all of the Borrower's right,
title and interest in and to the following (collectively, the
"Collateral"): all Goods, Documents, Chattel Paper, Inventory,
Equipment, General Intangibles, Contracts (including the
Franchise Agreement and License, if applicable), certificates of
title, fixtures, credits, claims, demands, assets and other
personal property, now owned, existing hereafter acquired, held,
used, sold or consumed in connection with the Pledged Stores and
any other property, rights and interests of the Borrower which at
any time relate to, arise out of or in connection with the
foregoing or which shall come into the possession or custody or
under the control of the Secured Party or any of its agents,
representatives, associates or correspondents, in connection with
the foregoing; any and all additions and accessions,
replacements, substitutions, and improvements, of or to all the
foregoing; and all products, rents, profits, offspring, and
Proceeds thereof. Without limiting the generality of the
foregoing, this Agreement also secures the payment of all amounts
which constitute part of the Obligations and would be owed by the
Borrower to the Secured Party but for the fact they are
unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving the
Borrower.
2.2 Security Interest. All rights of the Secured
Party and the security interests hereunder shall be absolute and
unconditional irrespective of:
(a) any change in the time, manner, amount or place of
payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent
to any departure from the Promissory Note or any other Loan
Document;
(b) any exchange, release or nonperfection of all or
any part of the Collateral or any other collateral, or any
release from, amendment to, waiver of or consent to departure
from any guaranty, for all or any of the Obligations; or
(c) to the fullest extent permitted by law, any other
circumstances which might otherwise constitute a defense
available to, or a discharge of, the Borrower or a third party
pledgor.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
3. Representations, Warranties and Covenants.
Representations, Warranties and Covenants. The Borrower hereby
represents, warrants and covenants that:
3.1. Organization. The Borrower (unless the Borrower
is an individual) is and will continue to be duly formed, validly
existing and in good standing under the laws of the state of its
organization set forth on Schedule 1 and is duly authorized to do
business in, and is in good standing in each jurisdiction where
the Business or the Property is located and where such
organization, qualification or standing is necessary, required or
proper in connection with the Borrower's ownership or use of the
Collateral or the Property or the conduct of the Business.
3.2. Power and Authority. The Borrower (and, with
respect to clause (c), below, in the case of Loan Documents
executed by an Affiliate Guarantor, each such Affiliate
Guarantor) has all requisite power, authority and the legal right
and all necessary permits, consents, licenses and authorizations
(a) to own the Collateral, (b) to conduct the Business and (c) to
execute, deliver and perform its obligations under this Security
Agreement, the Promissory Note and the other Loan Documents.
3.3 Execution and Delivery; Enforceability. Upon
execution, this Security Agreement, the Promissory Note and the
other Loan Documents will be duly executed and delivered by the
Borrower (and in the case of Loan Documents executed by an
Affiliate Guarantor, by each such Affiliate Guarantor). Upon
execution, each of this Security Agreement, the Promissory Note
and the other Loan Documents will constitute a legal, valid and
binding obligation of the Borrower, enforceable against the
Borrower, in accordance with its terms.
3.4 Name; Chief Executive Office; Location.
(a) The Borrower's legal name, federal tax payor
identification number, and mailing address are accurately set
forth on Schedule 1. The Borrower has not merged, consolidated,
acquired all or substantially all of the assets of any other
Person, or except as disclosed on Schedule 1, used any other name
(whether in connection with the Business or the Collateral or
for business, obtaining credit or financing or otherwise) in the
last five years.
(b) The Borrower's principal place of business, chief
executive office (and, if the Borrower is an individual,
residence) is accurately set forth on Schedule 1.
(c) The Borrower operates and shall continue to
operate the Pledged Stores from the Property at the address(es)
and in the county(ies) and state(s) set forth in Schedule 1.
Schedule 1 correctly discloses that the Borrower either (i) is
sole record owner of the Property or (ii) leases (or subleases)
the Property and the record owner of each Property is the person
or entity disclosed on Schedule 1. All personal property of the
Borrower owned, acquired, held, used, sold or consumed in the
Pledged Stores including Goods, Inventory, Equipment, General
Intangibles, Contracts, Chattel Paper, Instruments, Documents,
certificates of title, fixtures, securities and money, and all
writings relating thereto and records thereof, books of record or
account, employees, business, offices and operations are located
at and conducted out of such Property or at its chief executive
office.
(d) The Borrower will neither change its name, federal
tax payor identification number, or its chief executive office
(or, if an individual, residence), nor the location of its
business, property or assets (including the Pledged Stores and
the Collateral), nor assume a different name, nor conduct its
business or affairs under any other name or in any other
location, nor merge, consolidate, or change its corporate
structure (whether by stock sale, issuance, purchase or
otherwise), nor change its use of any item of Collateral, without
in each instance providing the Secured Party with not less than
60-days prior written notice of the proposed action and
specifying within such notice and with reasonable clarity and
particularity the timing and nature of such proposed action.
Additionally, the Borrower shall provide such other information
in connection with the proposed action as the Secured Party may
reasonably request and shall have taken all action, reasonably
satisfactory to the Secured Party, to maintain the security
interest of the Secured Party in the Collateral intended to be
granted hereby at all times fully perfected and in full force and
effect.
3.5. No Conflict. The Borrower's (and in the case of
Loan Documents executed by an Affiliate Guarantor, such Affiliate
Guarantor's) execution, delivery and consummation of the
transactions contemplated by this Security Agreement, the
Promissory Note and other Loan Documents do not and will not
(with the passage of time or otherwise) (i) conflict with,
violate or constitute a default under any law, rule, regulation,
order, decree, contract, agreement (including the Franchise
Agreement, if applicable), note, mortgage, bond, indenture,
lease, license, or obligation of or applicable to the Borrower
(or such Affiliate Guarantor) or the Collateral or (ii) grant,
create or result in any Lien in favor of any person (other than
the Secured Party) on or to the Business or any other property or
assets of the Borrower (including the Collateral and the
Franchise Agreement, if applicable).
3.6 No Consent Required. Except for the filing of the
Financing Statements in the locations set forth on Schedule 2
hereto (and, if applicable, the recording of the mortgage or deed
of trust included in the Loan Documents), no consent of any other
Person and no authorization, approval or other action by and no
notice to or filing with, any court, government, agency or
regulatory authority is required (i) for the grant by the
Borrower of the pledge and security interest granted hereby or
for the execution, delivery or performance of this Security
Agreement, the Promissory Note and other Loan Documents or (ii)
for validity, perfection or maintenance of the pledge, lien and
security interest created hereby.
3.7 Affiliates. Schedule 3 contains a complete and
accurate list of all Affiliates of the Borrower (including
Affiliate Guarantors) who have executed and delivered any note,
security agreement, guarantee or other loan document to the
Secured Party.
3.8. Title to the Collateral. The Borrower has and,
subject to Section 4, will maintain good and marketable title to
the Collateral and the Franchise Agreement (if applicable), free
of all Liens (other than Permitted Liens and the security
interest granted to the Secured Party hereunder) and such
Collateral and Franchise Agreements are sufficient to enable a
franchise of the Franchisor to operate the Pledged Stores at the
Property in accordance with the Franchise Agreement.
3.9. No Liens. Except as shown on the UCC List
attached hereto as Exhibit A, there is no Lien other than
Permitted Liens identified on Exhibit B,(including any federal or
state tax lien), suit (including any action, proceeding, or other
litigation pending, or to the Borrower's knowledge, threatened)
or judgment (including any award, injunction, order) filed with,
registered, indexed or recorded in any public office, court,
arbitration panel, administrative agency or regulatory authority
(or intended so to be), directly or indirectly, identifying or
encumbering or covering or involving the Collateral or the
Franchise Agreement (if applicable) or which could have a
material adverse effect on the Borrower, any Pledged Store or the
Borrower's ability to perform its Obligations. All Liens listed
on Exhibit A shall be removed upon funding of the Loan unless
such lien is specifically identified as a Permitted Lien. Other
than the security interest granted to the Secured Party hereunder
and the Permitted Liens, and except as provided in Section 4
hereof, the Borrower has not and, without the prior written
consent of the Secured Party, will not enter into any agreement
or understanding or take, permit or suffer to exist any action
(including the filing of a financing statement, agreement,
pledge, mortgage, notice or registration) or event (whether by
operation of law or otherwise) for the purpose of, or that may
have the effect of, directly or indirectly, (i) granting a Lien
on (including any state of federal tax lien), pledging,
transferring, assigning, selling, disposing of, or encumbering
any Collateral or the Franchise Agreement (if applicable), any
interest therein or rights pertaining thereto or involving the
Borrower or the Pledged Stores, or (ii) changing, modifying,
supplementing, or increasing the amount of credit, loans,
indebtedness or value secured by the Permitted Liens, if any, or
the amount, property or assets encumbered thereby.
3.10. Maintenance of Collateral and Business. At the
Borrower's sole cost and expense, the Borrower shall (i) keep,
use, operate and maintain the Collateral, the Pledged Stores, the
Business and the Property in accordance with applicable laws,
rules, and regulations, (ii) operate the Pledged Stores at the
Property and in accordance with the Franchise Agreement (if
applicable) and customary, prudent business practices, and at all
times fully comply with terms and provisions of the Franchise
Agreement (if applicable), (iii) fully comply with all current
and future laws and regulations concerning the storage and sale
of petroleum products, if applicable, and (iv) not do or suffer
to be done any act whereby the value of the Collateral, the
Property or any Pledged Store or any part or interest therein may
be lessened in any material respect. The Borrower shall notify
the Secured Party promptly of any actual or threatened
destruction or material damage or impairment of any Pledged
Store, the Collateral or the Property or if Borrower receives a
notice of violation from any governmental entity or agency.
3.11. Perfected Security Interest. This Security
Agreement and the grant and transfer of the Collateral hereunder
creates a valid and enforceable security interest in the
Collateral. Upon filing of the Financing Statements in the
locations set forth on Schedule 2 hereto, such security interest
will be perfected and subject to no prior or equal security
interest other than and only to the extent of the Permitted
Liens. The execution and filing of the Financing Statements has
been duly authorized by all appropriate action on the part of the
Borrower (and any other Person named as debtor therein) and the
Borrower (and any other Person named as debtor therein) has duly
executed the Financing Statements.
3.12. No Violation; Indemnity. The Borrower has not
and shall not acquire, obtain, make, manufacture, produce,
operate, hold, possess, maintain, use, sell, transfer, grant,
pledge, or dispose of (for purposes of this Section 3.12,
collectively "the Borrower's use") any of its Business,
securities, property or assets (including any proceeds of the
Loans, the Collateral and the Property) in violation of any
statute, law, rule, ordinance, regulation, policy, procedure,
injunction, award, decree, judgment, contract, agreement
(including the Franchise Agreement, if applicable),
understanding, or right or interest of any other Person (for
purposes of this Section 3.12, each such event a "violation"),
and to the Borrower's knowledge no such violation has been made
by any other Person and no basis for a claim of any such
violation exists. The Borrower shall indemnify and hold the
Secured Party harmless from and against any such violation, and
any other loss, liability, damage, cost or expense whatsoever
(including attorneys' fees and disbursements) arising out of or
in connection with the Borrower's use of any of its Business (if
applicable), securities, property or assets (including any
proceeds of the Loans, the Collateral and the Property).
3.13. Franchise Agreement. The Borrower, if a
franchisee under a Franchise Agreement, is and will continue to
be in good standing with the franchisor of such Franchise
Agreement. The Borrower, if a franchisee under a Franchise
Agreement, has not breached and is not in default under the
Franchise Agreement; the Borrower shall not terminate, fail to
renew, breach or be in default under the Franchise Agreement; and
the Borrower has no knowledge of any claim of (or basis for any
claim of) any such termination, nonrenewal, breach or default.
The Borrower agrees to fully comply, at the Borrower's own cost
and expense, with the terms of the License and the Franchise
Agreement (including any renewal option) and to promptly notify
the Secured Party of any adverse development with regard to the
Franchise Agreement or the License, including any claim of breach
of or default under, or threat of nonrenewal or termination of,
or litigation involving the Franchise Agreement or the License.
3.14. Operating Experience. The Borrower has had at
least two years experience operating a business or businesses
similar to the Business of the Pledged Store. In addition, each
Pledged Store has been operating for at least eighteen months.
3.15. FCCR. During the term of this Security
Agreement, the Borrower shall maintain (i) a Unit FCCR for each
Pledged Store of not less than 1.20:1 (the "Required Unit FCCR")
and (ii) a Consolidated FCCR of not less than 1.25:1 (the
"Required Consolidated FCCR"). All calculations of each Unit
FCCR and the Consolidated FCCR shall be based upon the financial
information furnished by the Borrower hereunder (see Sections
3.21 and 3.22) for the twelve-month period ending December 31 of
each year or more frequently as the Secured Party may from time
to time reasonably request.
3.16 Limitation on Indebtedness, Lease Obligations and
Distributions. The Borrower shall not, directly or indirectly,
incur any Indebtedness, Lease Obligations or make or become
obligated to make any Distributions if after giving effect to
such incurrence or payments, any Unit FCCR would be less than the
Required Unit FCCR or the Consolidated FCCR would be less than
the Required Consolidated FCCR.
3.17. Inspection. The Borrower shall allow the
Secured Party, its agents and representatives, from time to time,
to inspect the Collateral, the Property and the Borrower's books
and records pertaining thereto or otherwise to the Business, and
the Borrower will assist (and permit abstracts and photocopies of
the Borrower's books and records to be taken and retained by) the
Secured Party, its agents and representatives in making any such
inspection.
3.18. Insurance. At the Borrower's sole cost and
expense, the Borrower shall
(i) keep the Collateral (which for purposes of
this Section 3.18 includes the Property) insured against loss or
damage by fire, theft, collision and other hazards (including
flood, if no certification or other evidence satisfactory to the
Secured Party is delivered to the Secured Party to the effect
that the Property is not located within a federally designated
special flood hazard area) as may be required by the franchisor
of the Franchise Agreement, if applicable, or the Secured Party
and by policies of fire, extended coverage and other insurance
with such company or companies, in such amounts (and, with
respect to policies required for property, fire and flood
insurance in an amount not less than the lesser of (A) the
replacement value thereof and (B) the Loan Amount payable under
the Promissory Note), as may be required by or acceptable to the
franchisor of the Franchise Agreement (if applicable) and the
Secured Party, but in no event less than the minimum amount
required to prevent the imposition of any coinsurance requirement
on the insured, (b) maintain liability insurance of not less than
$1 million, (c) maintain business interruption insurance with
scope and coverage reasonably satisfactory to the Secured Party,
and (d) maintain such other insurance (including certain minimum
levels of acceptable workers' compensation, property damage,
general public liability insurance) as may be required by law or
by the franchisor of the Franchise Agreement (if applicable);
(ii) cause all insurance policies required
hereunder (a) to be maintained by providers either (A) having
ratings of not less than B++ from A.M. Best Company Inc. (or
comparable ratings from a comparable rating agency) or (B) who,
if not so rated, have been approved by the Secured Party and (b)
to contain a standard lender's loss payable endorsement or
mortgagee's endorsement providing for payment directly to the
Secured Party and/or its designees and to provide for a minimum
of 30-days notice to the Secured Party prior to cancellation or
modification or nonrenewal;
(iii) timely pay all premiums, fees and charges
required in connection with all of its insurance policies and
otherwise continue to maintain such policies in full force and
effect;
(iv) promptly deliver the insurance policies,
certificates (and renewals) thereof or other evidence of
compliance herewith to the Secured Party; and
(v) promptly notify the Secured Party of any loss
covered by such insurance policies and allow the Secured Party to
join the Borrower in adjusting any loss in excess of $50,000.
3.19. Loan Proceeds. No part of the proceeds of the
Loans will be used, directly or indirectly, for the purpose of
buying or carrying any "margin stock" within the meaning of
Regulation G or U of the Board of Governors of the Federal
Reserve System. The Borrower intends to and agrees to use the
proceeds of the Loans solely for the lawful, proper business or
commercial purpose(s) set forth in its application for the Loans
and Secured Parties commitment letter.
3.20. Solvency. The Borrower (and each Affiliate
Guarantor) is solvent and, after giving effect to the
Obligations, will continue to be solvent.
3.21. Reporting Requirements. The Borrower agrees to
provide to the Secured Party within 20 days after June 30 and
December 31 of each calendar year during the term of this
Security Agreement, a compliance certificate (in the form
attached hereto as Exhibit C). The Borrower further agrees to
provide to the Secured Party within 5 days after each month end
during the term of this Security Agreement, a monthly compliance
certificate (in the form attached hereto as Exhibit D). The
Borrower further agrees to provide to the Secured Party: (i)
within 75 days after December 31st of each calendar year and as
the Secured Party may reasonably request from time to time,
consolidated Borrower and individual Pledged Store internally
generated financial statements covering the twelve (12) month
period then-ended; and (ii) copies of such other reports and
information as the Secured Party may from time to time request.
The financial statements furnished to the Secured Party in
connection with the Borrower's application for the Loans and
hereunder shall reflect all Indebtedness and Lease Obligations of
the Person covered thereby and shall be sufficiently detailed to
allow the Secured Party to calculate the Unit FCCR of each
Pledged Store and the Consolidated FCCR.
3.22. Accuracy of Information. All information,
reports, statements and financial and other data furnished (or
hereafter furnished) by the Borrower to the Secured Party, its
agents or representatives hereunder or in connection with the
Borrower's application for the Loans and the Obligations, are
(and shall be on the date so furnished) true, complete and
correct. Borrower hereby authorizes Secured Party to request
credit bureau reports while any of the Obligations are
outstanding.
3.23. Employee Benefit Plans. (a) Neither the
Borrower nor any ERISA Affiliate (as hereinafter defined) is
currently obligated to contribute to an employee benefit plan
subject to ERISA (an "ERISA Plan"). Within the five-year period
ending on the date hereof, no ERISA Affiliate has incurred any
material liability to the U.S. Pension Benefit Guaranty
Corporation (the "PBGC"), the U.S. Internal Revenue Service (the
"IRS") or an ERISA Plan on account of any failure to meet the
contribution requirements or minimum funding standards of, or
prohibited transactions with respect to, any ERISA Plan, the
administration or termination of any single employer pension plan
which is an ERISA Plan, or any partial or complete withdrawal
from, or the insolvency, reorganization or termination of, a
multiemployer plan which is an ERISA Plan, and no event has
occurred and no condition exists which presents a material risk
that the Borrower or any of its Affiliates or Affiliate
Guarantors will incur liabilities on account of the foregoing
circumstances which are material in aggregate. As used in this
Agreement, the term "ERISA Affiliate" means the Borrower and
every Affiliate and Affiliate Guarantor and any other trade or
business, whether or not incorporated, which is subject to ERISA
and which is from time to time a member of a controlled group or
a group under common control with the Borrower (within the
meaning of Section 414(b) or Section 414(c) of the Code or
Section 4001(b) (1) of ERISA); and other terms used in this
Section 3.23 shall have the meanings assigned thereto in the
applicable provisions of ERISA and the Code.
(b) Solely for the purposes of making the
representation in the next sentence and only to the extent that
the accuracy of the representation made by this sentence affects
the accuracy of the representation in the next sentence, neither
the Borrower nor any of its Affiliates or Affiliate Guarantors is
a "party in interest" (within the meaning of Section 3(14) of
ERISA) with respect to any ERISA Plan, and none of their
securities are "employer securities" (within the meaning of
Section 407(d) or ERISA) with respect to any ERISA Plan. The
acquisition of the Promissory Note by Secured Party or its
Assigns does not and will not constitute a "prohibited
transaction" (within the meaning of Section 4975 of the Code or
Section 406 of ERISA).
3.24. Taxes. The Borrower and each of its Affiliates
and each entity which might have tax liabilities for which the
Borrower or any of its Affiliates is or may be liable, has filed
all tax returns and paid all taxes required by law to be filed or
paid, which have become due pursuant to said returns (or which to
the knowledge of the Borrower are due and payable) and on all
assessments received by the Borrower, such Affiliate or such
entity, as the case may be. No extensions of the time for the
assessment of deficiencies have been granted by the Borrower or
any of its Affiliates. There are no material Liens on any
properties or assets of the Borrower or any of its Affiliates
imposed or arising as a result of the delinquent payment or the
nonpayment of any tax, assessment, fee or other governmental
charge. The income tax returns of the Borrower and its
Affiliates have been examined and reported upon by the relevant
tax authorities, or closed by applicable statutes of limitations,
for all fiscal years through the fiscal year ended June 30, 1996,
and neither the Borrower nor any of its Affiliates nor any such
entity has given or consented to any waiver of the statute of
limitations with respect to its tax liabilities for any such
year. Adequate provision has also been made for all other taxes
(whether past, current or deferred, federal, provincial, local or
foreign, due or to come due) on such balance sheet, and the
Borrower knows of no transaction or matter which might or could
result in additional tax assessments to the Borrower or any of
its Affiliates in the ordinary course since the date of such
balance sheet. There are no applicable taxes, fees or other
governmental charges payable by the Borrower or any of its
Affiliates in connection with the execution and delivery of this
Agreement, and the other Loan Documents by the Borrower or any of
its Affiliates or the offer, issuance, sale and delivery of the
Promissory Note by the Borrower.
3.25. Life Insurance. Borrower shall maintain life
insurance policies on the life of the Guarantor (as defined in
the Affiliate Guaranty) in an amount equal to one-half of the
outstanding balance of the Note. Said life insurance shall be
assigned to the Secured Party, and upon the death of the
Guarantor, at the option of the Secured Party, the Secured Party
shall be paid the life insurance benefits in the amount of one
half of the outstanding balance of the Note at the time of the
Affiliate Guarantor's death.
ARTICLE IV
SPECIAL PROVISIONS CONCERNING INVENTORY, EQUIPMENT AND REAL
PROPERTY
4. Special Provisions Concerning Inventory, Equipment
and Real Property. The Borrower shall do nothing to impair the
rights of the Secured Party in the Inventory and the Equipment
and shall cause the Inventory and the Equipment to at all times
be, constitute and remain personal property subject to the
security interest granted to the Secured Party. Notwithstanding
the preceding sentence, provided the Borrower is not in default
under any of its Obligations (and no event which with the passage
of time would be an Event of Default has occurred and is
continuing), in the ordinary course of the Borrower's Business,
(i) the Borrower may sell its Inventory, and (ii) subject to
sections 3.14, 3.15 and 3.16 hereto, with the prior consent of
the Secured Party, which will not be unreasonably withheld, the
Borrower may, from time to time, refinance existing Permitted
Liens in accordance with the terms thereof, replace its
Equipment, acquire new Equipment and accessions to its Equipment,
or fee interest in (or ground lease of) any Property, subject to
purchase money security interests; provided that, if the Secured
Party has a leasehold mortgage or deed of trust on any lease of
such Property, such lease remains in full force and effect,
subject to the Secured Party's security interest and any Person
with a lien on the acquire fee interest in (or ground lease of)
such Property provides the Secured Party with a nondisturbance
agreement and such other assurances as the Secured Party shall
reasonably request. The Borrower does not need the prior written
consent of the Secured Party for purchases of Equipment or
accessions which are less that $5,000.
ARTICLE V
SPECIAL PROVISIONS CONCERNING PROCEEDS
5. Special Provisions Concerning Proceeds. Unless
prohibited under the terms of the Property lease, if (i) the
Borrower is late or delinquent in the payment of any monetary
obligations under the Loan Documents, or (ii) it is not
commercially reasonable to restore the Collateral, the Borrower
hereby directs any and all transferors, distributors or payors
(including insurance companies with whom the Borrower maintains
insurance) to make payment of all Proceeds directly to the
Secured Party and authorizes the Secured Party, in its sole
discretion, to apply the same toward repayment of the Loans,
whether or not due, or, toward replacement of the Collateral.
Notwithstanding the terms of the Property lease, if applicable,
the Borrower will use its best efforts and hereby assigns the
Proceeds toward repayment of the Loans if (1) the Borrower is
late or delinquent in the payment of any monetary obligations
under the Loan Documents, or (2) it is not commercially
reasonable to restore the Collateral, or if the Loans are not
paid off, borrower shall apply the Proceeds toward replacement of
the Collateral and will keep any lease or options to extend the
lease in effect until the Loans are paid. All Proceeds, whether
received by the Secured Party or by the Borrower, or by any other
Person will be included in the Collateral subject to the security
interest granted to the Secured Party hereunder. Upon and during
the continuation of an Event of Default, the Borrower shall (i)
identify, earmark, segregate and keep separate all Proceeds
received by it, (ii) upon the Secured Party's request, promptly
account to the Secured Party for all Proceeds, and (iii) hold all
Proceeds received by the Borrower in trust for the benefit of the
Secured Party and shall promptly (and in any event not later than
the fifth day after receipt) deliver (or cause to be delivered)
the same to the Secured Party and into its possession in the form
received by the Borrower and at a time and in a manner
satisfactory to the Secured Party.
ARTICLE VI
SPECIAL PROVISION CONCERNING RIGHTS AND
DUTIES WHILE IN POSSESSION OF COLLATERAL
6. Special Provision Concerning Rights and Duties
While in Possession of Collateral.
6.1. Borrower's Possession. Upon and during the
continuance of an Event of Default, to the extent the same shall,
from time to time, be in the Borrower's possession, the Borrower
will hold all securities, Instruments, Chattel Paper, Documents,
certificates and money and other writings evidencing or relating
to the Collateral in trust for the Secured Party and, upon
request or as otherwise provided herein, promptly deliver the
same to the Secured Party in a form received and at a time and in
a manner satisfactory to the Secured Party. With respect to the
Collateral in the Borrower's possession the Borrower shall at the
Secured Party's request take such action as the Secured Party in
its discretion deems necessary or desirable to create, perfect
and protect the Secured Party's security interest in any of the
Collateral.
6.2. Secured Party's Possession. With respect to all
of the Collateral delivered or transferred to, or otherwise in
the custody or control of (including any items in transit to or
set apart for) the Secured Party or any of its agents, associates
or correspondence in accordance with this Security Agreement, the
Borrower agrees that (i) such Collateral will be and be deemed to
be in the sole possession of the Secured Party; (ii) subject to
Section 4, the Borrower has no right to withdraw or substitute
any such Collateral without the consent of the Secured Party,
which consent may be withheld or delayed in the Secured Party's
sole discretion; (iii) the Borrower shall not take or permit any
action, or exercise any voting and other rights, powers and
privileges in respect of the Collateral inconsistent with the
Secured Party's sole possession thereof and (iv) the Secured
Party may in its sole discretion and without notice, without
obligation or liability except to account for property actually
received by it, and without affecting or discharging the
Obligations, (x) further transfer and segregate the Collateral in
its possession; (y) receive Proceeds and hold the same as part of
the Collateral and/or apply the same as hereinafter provided; and
(z) exchange any of the Collateral for other property upon
reorganization, recapitalization or other readjustment.
Following the occurrence of an Event of Default, the Secured
Party is authorized (i) to exercise or cause its nominee to
exercise all or any rights, powers and privileges (including to
vote) on or with respect to the Collateral with the same force
and effect as an absolute owner thereof; (ii) whether any of the
Obligations be due, in its name or in the Borrower's name or
otherwise, to demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in
exchange for, or make any compromise or settlement the Secured
Party deems desirable with respect to, any of the Collateral; and
(iii) to extend the time of payment, arrange for payment in
installments, or otherwise modify the terms of, or release, any
of the Collateral. Notwithstanding the rights accorded the
Secured Party with respect to the Collateral and except to the
extent provided below or required by the UCC or other applicable
law (which requirement cannot be modified, waived or excused),
the Secured Party's sole duty with respect to the Collateral in
its possession (with respect to custody, preservation,
safekeeping or otherwise) will be to deal with it in the same
manner that the Secured Party deals with similar property owned
and possessed by it. Without limiting the foregoing, the Secured
Party, and any of its officers, directors, partners, trustees,
owners, employees and agents, to the extent permitted by law (i)
will have no duty with respect to the Collateral or the rights
granted hereunder; (ii) will not be required to sell, invest,
substitute, replace or otherwise dispose of the Collateral; (iii)
will not be required to take any steps necessary to preserve any
rights against prior parties to any of the Collateral; (iv) will
not be liable for (or deemed to have made an election of or
exercised any right or remedy on account of) any delay or failure
to demand, collect or realize upon any of the Collateral; and (v)
will have no obligation or liability in connection with the
Collateral or arising under this Security Agreement. The
Borrower agrees that such standard of care is reasonable and
appropriate under the circumstances.
ARTICLE VII
EVENTS OF DEFAULT
7. Events of Default. The happening of any one or
more of the following events shall constitute an "Event of
Default" hereunder:
(a) the Borrower shall fail to make any payment under
this Security Agreement, the Promissory Note or any Loan Document
when the same becomes due and payable and such failure shall
continue for five Business Days after the Secured Party provides
notice to the Borrower of such failure; or
(b) the Borrower shall default under, fail to perform
or observe any covenant or condition of or agreement in, or
breach, or make a material inaccuracy in or omission from, any
representation or warranty under or in, this Security Agreement,
the Promissory Note, any other Loan Document, the Franchise
Agreement or the License (if applicable), any financial or other
statement delivered to the Secured Party or any agreement,
instrument or obligation in connection with any Permitted Lien,
and such default, failure, breach, inaccuracy or omission shall
continue unremedied for the earliest of (i) fifteen days
following the date that notice of such default, failure, breach,
inaccuracy or omission is given to the Borrower by the Secured
Party, or (ii) in the case of any Permitted Lien, the occurrence
of such event (or, if there exists an applicable cure period, the
expiration of such cure period); or
(c) if the Borrower is a franchisee under a Franchise
Agreement as of the execution of this Security Agreement and the
Borrower or the franchisor of the Franchise Agreement shall
terminate or not renew such Franchise Agreement; or
(d) any of the Borrower's Affiliates listed on
Schedule 3 shall fail to make any payment when due under, or
default under, fail to perform or observe any covenant of or
condition or agreement in breach of, or make any material
inaccuracy in or omission from any representation and warranty
under, any security agreement with the Secured Party or note held
by the Secured Party or any other loan document with the Secured
Party or in any other agreement, instrument, document or
certificate, or financial or other statement delivered to the
Secured Party, and such failure, default or breach continues
beyond any applicable grace period provided therein; or
(e) the Borrower or any partnership in which the
Borrower is a partner (each hereinafter called a "Principal
Party") shall die, dissolve, merge or consolidate (without
written consent of Secured Party, which consent will not be
unreasonably withheld), suspend the transaction of business or
incur any material adverse change in its financial condition or
prospects; or
(f) the Borrower or any other Principal Party shall be
expelled from or suspended by any stock or securities exchange or
other exchange, or any proceeding, procedure or remedy
supplementary to or in enforcement of judgment (involving an
amount in excess of $50,000 in the aggregate) shall be resorted
to or commenced against, or with respect to any property of, the
Borrower or any other Principal Party; or
(g) the Borrower or any other Principal Party shall
make an assignment for the benefit of, or composition with,
creditors, or shall be or become insolvent or unable, or
generally fail, to pay its debts when due, or shall be or become
a party or subject to any bankruptcy, reorganization, insolvency
or other similar proceeding, or a receiver or liquidator,
custodian or trustee shall be appointed for the Borrower or any
other liable party, or a substantial portion of any of the
Borrower's or their respective assets and, if any of the
foregoing shall occur involuntarily as to the Borrower and any
other Principal Party, it shall not be dismissed with prejudice,
stayed or discharged within 45 days; or
(h) the Borrower or any other Principal Party shall
take any action to effect, or which indicates its acquiescence
in, any of (e), (f) or (g), above; or
(i) the Borrower defaults under any other loan or note
to any other lender.
(j) notwithstanding the foregoing, if a notice of
default is given to Borrower under any lease or ground lease with
respect to a Property and such default is not cured within five
days before the expiration of any applicable grace or curative
period.
(k) the Borrower will be in default if: (i) on the
first anniversary of the funding of loan, its Trade Accounts
Payable Balance is greater than $800,000.00, and (ii) from the
first anniversary forward, Borrower does not remain in
satisfactory standing with its' trade creditors; and
(l) the Borrower will be in default after the second
anniversary of the loan closing if it has not provided evidence
that the Pensacola restaurant has been remodeled so long as there
is a balance due under the Loan on said unit.
7.1. Limited Cure Period. Notwithstanding anything to
the contrary in Section 7 above, If a Unit FCCR for a Pledged
Store is out of compliance with Section 3.15(i) above, Borrower
shall have 90 days from the date that a notice of such Default is
given to Borrower by the Secured Party to bring the unit back
into compliance or pay the entire amount of the Loan attributable
to that unit in full or such failure to do either shall be an
Event of Default.
ARTICLE VIII
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
8. Remedies Upon Occurrence of Event of Default.
8.1. Cumulative Rights and Remedies. Upon the
occurrence of an Event of Default, the Secured Party shall have
the rights, powers and remedies (i) granted to secured parties
under the UCC; (ii) granted to the Secured Party under any other
applicable statute, law, rule or regulation; and (iii) granted to
the Secured Party under this Security Agreement, the Promissory
Note or any other Loan Document or any other agreement between
the Borrower and the Secured Party. In addition, all such
rights, powers and remedies shall be cumulative and not
alternative. Any single or partial exercise of, or forbearance,
failure or delay in exercising any right, power or remedy shall
not be, nor shall any such single or partial exercise of, or
forbearance, failure or delay be deemed to be a limitation,
modification or waiver or any right, power or remedy and shall
not preclude the further exercise thereof; and every right power
and remedy of the Secured Party shall continue in full force and
effect until such right, power and remedy is specifically waived
by an instrument in writing executed and delivered with respect
to each such waiver by the Secured Party.
8.2. Acceleration of Obligations. Upon the occurrence
of an Event of Default, and at any time thereafter if any Event
of Default shall then be continuing, the Secured Party may, from
time to time in its discretion, by written notice to the Borrower
declare the Promissory Note (including any Make Whole Premium
required to be paid upon prepayment of any Loan) and any other
Obligations to be immediately due and payable whereupon (and,
automatically without any notice, demand or other action by the
Secured Party, upon the occurrence of any Event of Default set
forth in subsections (e) through (h) of Section 7) such
principal, interest and other Obligations shall be immediately
due and payable, without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the
Borrower to the maximum extent permitted by law.
8.3. Additional Rights of the Secured Party. Upon the
occurrence of an Event of Default, the Secured Party may, from
time to time, in its discretion, and without the Borrower's
assent, without advertisements or notices of any kind (except for
the notice specified in Section 8.5 below regarding notice
required in connection with a public or private sale), or demand
of performance or other demand, or obligation or liability
(except to account for amounts actually received) to or upon the
Borrower or any other person (all such advertisements, notices
and demands, obligations and liabilities, if any, hereby being
expressly waived and discharged to the extent permitted by law),
forthwith, directly or through its agents or representatives, (i)
disclose such default and other matters (including the name,
address and telephone number of the Borrower) in connection
therewith in the Secured Party's reasonable discretion to any
other Program Borrower, the Borrower's franchisor (if applicable)
and other creditors or obligors of the Borrower (and the Borrower
understands that the Secured Party intends to make such
disclosure, from time to time); (ii) to the extent permitted by
applicable law enter any premises, with or without the assistance
of other persons or legal process; (iii) require the Borrower to
account for (including accounting for any products and proceeds
of any Collateral), segregate, assemble, make available and
deliver to the Secured Party, its agents or representatives, the
Collateral; (iv) take possession of, operate, render unusable,
collect, transfer and receive, recover, appropriate, foreclose,
extend payment of, adjust, compromise, settle, release any claims
included in, and do all other acts or things necessary or, in the
Secured Party's sole discretion appropriate, to protect,
maintain, preserve and realize upon, the Collateral and any
products and proceeds thereof, in whole or in part; and (v)
exercise all rights, powers and interests with respect to any and
all Collateral, and sell, assign, lease, license, pledge,
transfer, negotiate (including endorse checks, drafts, orders, or
instruments), deliver or otherwise dispose (by contract,
option(s) or otherwise) of the Collateral or any part thereof.
Any such disposition may be in one or more public or private
sales, at or upon an exchange, board or system or in the
county(ies), in the state(s) set forth on Schedule 1 or
elsewhere, at such price, for cash or credit (or for future
delivery without credit risk) and upon such other terms and
conditions as it deems appropriate, with the right of the Secured
Party to the extent permitted by law upon any cash sale or sales,
public or private, to purchase the whole or any part of said
Collateral, free of any right, claim or equity of redemption of
or in the Borrower (such rights, claims and equity or redemption,
if any, hereby being expressly waived). Notwithstanding that the
Secured Party, whether in its own behalf and/or on behalf of
another or others, may continue to hold the Collateral and
regardless of the value thereof, or any delay or failure to
dispose thereof, unless and then only to the extent that the
Secured Party proposes to retain the Collateral in satisfaction
of the Obligations by written notice in accordance with the UCC,
the Borrower shall be and remain liable for the payment in full
of any balance of the Obligations and expenses at any time
unpaid. Without limiting the foregoing, upon the Borrower's
failure to abide by and comply with its obligations under Section
3 (including Sections 3.9, 3.10 or 3.18) or Section 13 hereof, in
addition to its other rights and remedies, the Secured Party may
(but is not required to), in its sole discretion and to the
extent it deems necessary, advisable or appropriate, take or
cause to be taken such actions or things to be done (including
the payment or advancement of funds, or requiring advancement of
funds to be held by the Secured Party to fund such obligations,
including taxes or insurance) as may be required hereby (or
necessary or desirable in connection herewith) to correct such
failure (including causing the Collateral to be maintained or
insurance protection required hereby to be procured and
maintained) and any and all costs and expenses incurred
(including attorney's fees and disbursements) in connection
therewith shall be included in the Borrower's Obligations and
shall be immediately due and payable and bear interest at the
Default Rate.
8.4. Application of Proceeds. The Secured Party may
apply the net proceeds, if any, of any collection, receipt,
recovery, appropriation, foreclosure or realization, or from any
use, operation, sale, assignment, lease, pledge, transfer,
delivery or disposition of all or any of the Collateral, after
deducting all reasonable costs and expenses (including attorneys
fees, court costs and legal expenses) incurred in connection
therewith or with respect to the care, safekeeping, custody,
maintenance, protection, administration or otherwise of any and
all of said Collateral or in any way relating to the rights of
the Secured Party under this Security Agreement, (i) first, to
the satisfaction of the Obligations, in whole or in part, in such
order as the Secured Party may, in its discretion, elect; (ii)
second, to the payment, satisfaction or discharge of any of other
Indebtedness or obligation as required by any law, rule or
regulation; and (iii) lastly, the surplus, if any, to the
Borrower.
8.5. Required Notice of Sale. In exercising its
rights, powers and remedies as secured party, the Secured Party
agrees to give the Borrower five days notice of the time and
place of any public sale of Collateral or of the time after which
any private sale of Collateral may take place, unless the
Collateral is perishable or threatens to decline speedily in
value or is of a type customarily sold on a recognized market.
The Borrower agrees that such period and notice is commercially
reasonable under the circumstances.
8.6. Applicable Collateral. In furtherance and not in
limitation of the foregoing, in no event shall the designation of
all or any portion of the Collateral as "Applicable Collateral"
restrict or limit the Secured Party in the exercise of its
remedies under this Section 8. Such designation is intended
solely for the purposes set forth in Section 14.2. All of the
Collateral shall secure all of the Obligations. The Borrower
expressly waives any right (a) to limit the Secured Party solely
to the Applicable Collateral with respect to any Loan or (b) to
require the Secured Party to proceed against the Applicable
Collateral with respect to any Loan before proceeding against any
other Collateral with respect to such Loan. The Borrower agrees
that, upon the occurrence of an Event of Default, the Secured
Party may proceed against the Collateral in satisfaction of any
Obligation, in such manner and in such order as the Secured Party
may determine in its sole and absolute discretion.
8.7. Louisiana Confession of Judgment. In the event
that Secured Party is domiciled in, or any of the Collateral is
located in Louisiana and to the extent of such domicile or
location where Louisiana law is applicable to this Mortgage.
(a) Borrower hereby confesses judgment in favor of
Secured Party for the full amount of the Promissory Note in
principal and interest, together with all attorney's fees as
specified herein, and any and all sums that Secured Party may
advance during the life of this Mortgage for the payment of
premiums of insurance, municipal charges, taxes, costs, and
expenses, or for the protection and preservation of this Mortgage
as authorized herein, and does, by these presents, consent, agree
and stipulate that in the event of any payment of principal and
interest due hereunder not being properly and fully paid when the
same becomes due and payable, or in the event of failure to
comply with any of the obligations set forth herein, the
Indebtedness shall, at the option of the Secured Party, become
due and payable, and it shall be lawful for Secured Party,
without making a demand and without notice or putting in default,
the same being hereby expressly waived, to cause all and singular
the Collateral herein secured to be seized and sold by executory
process issued by any competent court or to proceed with
enforcement of its rights under this Mortgage in any other manner
provided by law; and
(b) Borrower hereby expressly waives allotment,
citation, and all legal notices, including the three and five day
notices of demand and delays provided for by the Code of Civil
Procedure of the State of Louisiana, and consents that said
judgment or order for executory process may be rendered, signed
and executed immediately, either in vacation or in term time, and
also waives the benefit of any and all laws or parts of laws
relative to the appraisement of the property seized and sold
under executory or other legal process, and consents that said
property be sold with or without appraisement, at Secured Party's
option, to the highest bidder for cash, or on such terms as
Secured Party may direct, and that in the event of any such sale
the property may be sold at the option of Secured Party either as
a whole or in such lots and parcels as Secured Party may elect.
(c) In the event the Collateral, or any part thereof,
is seized as an incident to an action for the recognition or the
enforcement of this Mortgage, whether by executory process, writ
of fieri facias, sequestration or otherwise, Borrower and Secured
Party do hereby designate Secured Party or its agent as the
keeper of the property, all in accordance with the provisions of
Louisiana Revised Statutes, Title 9, Section 5136, et seq.
ARTICLE IX
POST-DEFAULT POWER OF ATTORNEY
9. Post-Default Power of Attorney. The Borrower
hereby irrevocably constitutes and appoints, effective on and
after the occurrence of an Event of Default, the Secured Party
acting through any officer or agent thereof, with full power of
substitution, as the Borrower's true and lawful attorney-in-fact
with full irrevocable power and authority in the Borrower's place
and stead and in the Borrower's name or in its own name, from
time to time in the Secured Party's discretion, to receive, open
and dispose of mail addressed to the Borrower, to take any and
all action, to do all things, to execute, endorse, deliver and
file any and all writings, documents, instruments, notices,
statements (including financing statements, and writings to
correct any error or ambiguity in any Loan Document),
applications and registrations (including registrations and
licenses for securities, Copyrights, Patents and Trademarks),
checks, drafts, acceptances, money orders, or other evidence of
payment or proceeds, which may be or become necessary or
desirable in the sole discretion of the Secured Party to
accomplish the terms, purposes and intent of this Security
Agreement and the other Loan Documents, including the right to
appear in and defend any action or proceeding brought with
respect to the Collateral or Property, and to bring any action or
proceeding, in the name and on behalf of the Borrower, which the
Secured Party, in its discretion, deems necessary or desirable to
protect its interest in the Collateral or Property. Said
attorney or designee shall not be liable for any acts of
commission or omission, nor for any error of judgment or mistake
of fact or law, unless and then only to the extent that the same
constitutes its gross negligence or willful misconduct. This
power is coupled with an interest and is irrevocable. THIS POWER
DOES NOT AND SHALL NOT BE CONSTRUED TO AUTHORIZE ANY CONFESSION
OF JUDGMENT.
ARTICLE X
INDEMNIFICATION
10. Indemnification. The Borrower agrees to indemnify
the Secured Party and hold the Secured Party harmless from and
against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be
imposed on, incurred by, or asserted against the Secured Party in
any way relating, in any way arising out of or in connection with
this Security Agreement, the Loan Documents or the transactions
contemplated hereby or thereby. Without limitation of the
foregoing, the Borrower will reimburse the Secured Party for all
expenses (including expenses for legal services of every kind)
of, or incidental to, the negotiation of, entering into and
enforcement of any of the provisions hereof and of any of the
Obligations, and any actual or attempted sale, lease or other
disposition of, and any exchange, enforcement, collection,
compromise or settlement of any of the Collateral and receipt of
the Proceeds thereof, and for the care of the Collateral and
defending or asserting the rights and claims of the Secured Party
in respect thereof, and for the care of the Collateral and
defending or asserting the rights and claims of the Secured Party
in respect thereof, by litigation or otherwise, including expense
of insurance, and all such expenses shall be the Borrower's
Obligations.
ARTICLE XI
OBLIGATIONS ABSOLUTE
11. Obligations Absolute. The Borrower's Obligations
will be absolute, unconditional and irrevocable and will be paid
or satisfied strictly in accordance with their respective terms
under all circumstances whatsoever, including: (i) the invalidity
or unenforceability of all or any of, or any part of, this
Security Agreement, the Promissory Note or any other Loan
Document, or any consent, waiver, amendment or modification
thereof; (ii) the existence of any claim, setoff, defense or
other right which the Borrower may have at any time against the
Secured Party, or any other Person, whether in connection with
this Security Agreement, any other Loan Documents, the
transactions contemplated hereby, thereby or otherwise all of
which the Borrower hereby waives to the maximum extent permitted
by law; or (iii) the loss, theft, damage, destruction or
unavailability of the Collateral to the Borrower for any reason
whatsoever, it being understood and agreed that the Borrower
retains all liability and responsibility with respect to the
Collateral.
ARTICLE XII
ASSIGNMENT
12. Assignment. This Security Agreement is freely
assignable, in whole or in part, by the Secured Party and, to the
extent of any such assignment, the Secured Party shall be fully
discharged from all responsibility. The Borrower understands and
agrees that the Secured Party intends to and may, from time to
time, sell, pledge, grant a security interest in and collaterally
assign, transfer and deliver or otherwise encumber or dispose of
the Promissory Note, this Security Agreement and the other Loan
Documents and its rights and powers hereunder and thereunder, in
whole or in part, in connection with the Securitization or any
other assignment or other disposition of the Promissory Note. The
Borrower may not, in whole or in part, directly or indirectly,
assign this Security Agreement or any Loan Document or its rights
hereunder or thereunder or delegate its duties hereunder without,
in each instance, the specific prior written consent of the
Secured Party, which consent may be withheld or delayed in the
Secured Party's sole discretion, and payment of the amounts
required under and compliance with Section 13(b) of the
Promissory Note. For purposes of this Security Agreement, a
change in control of the Borrower (whether by stock sale,
issuance or otherwise) shall constitute an assignment hereof.
ARTICLE XIII
FURTHER ASSURANCE
13. Further Assurance. The Borrower agrees at any
time and from time to time, at the Borrower's sole cost and
expense, to obtain, procure, execute and deliver, file and affix
such further agreements, bills of sale and assignments,
instruments, documents, warehouse receipts, bills of lading,
vouchers, invoices, notices, statements, writings, (including
financing statements, and writings to correct any error or
ambiguity in any Loan Document), powers (including stock and bond
powers, and powers of attorney), tax stamps and information, and
to do or cause to be done all such further acts and things
(including the execution, delivery and filing of financing
statements on Form UCC-1, payment of filing fees and transfer,
gains and recording taxes) as the Secured Party may reasonably
request, from time to time, in its discretion. Without limiting
the foregoing, the Borrower authorizes the Secured Party to the
extent permitted under the UCC to execute and file, or file
without the Borrower's signature, any and all financing
statements, amendments thereto and continuations thereof as the
Secured Party deems necessary or appropriate and the Borrower
shall pay and indemnify the Secured Party for and hold the
Secured Party harmless from any and all costs and expenses in
connection therewith. The Borrower agrees that it will promptly
notify the Secured Party of and agree to correct any defect,
error or omission in the contents of any of the Loan Documents or
in the execution, delivery or acknowledgment thereof. The
Borrower further agrees to execute, prior to or within three
months following closing, a Form 4506 Request for Copy or
Transcript of Tax Form, which form will be provided by Secured
Party.
ARTICLE XIV
TERM, PARTIAL RELEASE AND REINSTATEMENT
14. Term, Partial Release and Reinstatement.
14.1. Term. This Security Agreement shall be
immediately in full force and effect upon the Borrower's
execution below, whether or not it is signed by the Secured
Party. Upon indefeasible payment in full of the Obligations in
accordance with the terms thereof, this Security Agreement and
the security interest granted hereunder shall terminate and the
Secured Party, at the Borrower's expense, will execute and
deliver to the Borrower the proper instruments (including UCC
termination statements) acknowledging the termination of such
security interest, and will duly assign, transfer and deliver
(without recourse, representation or warranty) such Collateral as
may be in the Secured Party's possession, and not to be retained,
sold, or otherwise applied or released pursuant to this Security
Agreement, to the Borrower, except that the Borrower's
obligations under Sections 10, 11, 13 and 15 shall survive
indefinitely.
14.2. Partial Release. Upon the indefeasible payment
in full of any Loan (including, without limitation, any Make
Whole Premium or other amounts payable by the Borrower with
respect to such Loan) in accordance with the provisions of the
Promissory Note, the security interest hereunder with respect to
the Applicable Collateral shall terminate, and the Secured Party,
at the expense of the Borrower, will execute and deliver to the
Borrower the proper instruments (including UCC partial release
statements) acknowledging the termination of such security
interest, and will duly assign, transfer and deliver (without
recourse, representation or warranty) such of the Applicable
Collateral as may be in the possession of the Secured Party and
has not theretofore been sold or otherwise applied or released
pursuant to this Security Agreement, to the Borrower, and shall
take such other action as the Borrower may reasonably request to
effectuate the foregoing.
14.3. Reinstatement. This Security Agreement shall
continue to be effective or be reinstated, as the case may be, if
at any time any amount received by the Secured Party in respect
of the Obligations is rescinded or must otherwise be restored or
returned by the Secured Party upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Borrower or any
Principal Party or upon the appointment of any intervenor or
conservator of, or trustee or similar official for, the Borrower,
any Principal Party or any substantial part of the Borrower's or
any Principal Party's assets, or otherwise, all as though such
payments had not been made.
ARTICLE XV
MISCELLANEOUS
15. Miscellaneous.
15.1. FINAL AGREEMENT; AMENDMENTS, CONSENTS,
AUTHORIZATIONS. THIS SECURITY AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE BORROWER AND THE SECURED PARTY AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE BORROWER AND THE SECURED PARTY.
THE BORROWER UNDERSTANDS AND AGREES THAT ORAL AGREEMENTS AND ORAL
COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM
ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE. THE BORROWER
ACKNOWLEDGES AND AGREES THERE ARE NO ORAL AGREEMENTS BETWEEN THE
BORROWER AND THE SECURED PARTY. This Security Agreement and the
Loan Documents represent the entire understanding of the Secured
Party and the Borrower with respect to the transactions
contemplated hereby and thereby. None of the terms or provisions
of this Security Agreement or any other Loan Document may be
waived, altered, modified, or amended except in each instance by
a specific written instrument duly executed by the Secured Party.
Without limiting the foregoing, no action or omission to act
shall be deemed to be a consent, authorization, representation or
agreement of the Secured Party, under the UCC or otherwise,
unless, in each instance, the same is in a specific writing
signed by the Secured Party. The inclusion of Proceeds in the
Collateral does not and shall not be deemed to authorize the
Borrower to sell, exchange or dispose the Collateral or the
Franchise Agreement or otherwise use the Collateral in any manner
not otherwise specifically authorized herein.
15.2. Notices. All notices and other communications
given pursuant to or in connection with this Security Agreement
shall be in duly executed writing delivered to the parties at the
addresses set forth below (or such other address as may be
provided by one party in a notice to the other party):
If to the Secured Party: AMRESCO COMMERCIAL LENDING
CORPORATION, 565 West Myrtle, Suite 410, Boise, Idaho 83702,
Facsimile Number (208) 333-2000.
If to the Assignee of Secured Party: NORWEST BANK
MINNESOTA, N.A., Sixth & Marquette, Minneapolis, MN 55479-0069,
Facsimile Number (612) 667-9825.
If to the Borrower, to the Borrower's chief executive
office (or residence), as represented by the Borrower herein and
to the general counsel of the Borrower.
Notice delivered in accordance with the foregoing shall be
effective (i) when delivered, if delivered personally or by
receipted-for telex, telecopier, or facsimile transmission, (ii)
two days after being delivered in the United States (properly
addressed and all fees paid) for overnight delivery service to a
courier (such as Federal Express) which regularly provides such
service and regularly obtains executed receipts evidencing
delivery or (iii) five days after being deposited (properly
addressed and stamped for first-class delivery) in a daily
serviced United States mail box.
15.3. Reasonableness. If at any time the Borrower
believes that the Secured Party has not acted reasonably in
granting or withholding any approval or consent under the
Promissory Note, this Security Agreement, or any other Loan
Document or otherwise with respect to the Obligations, as to
which approval or consent either the Secured Party has expressly
agreed to act reasonably, or absent such agreement, a court of
law having jurisdiction over the subject matter would require the
Secured Party to act reasonably, then the Borrower's sole remedy
shall be to seek injunctive relief or specific performance and no
action for monetary damages or punitive damages shall in any
event or under any circumstance be maintained by the Borrower
against the Secured Party.
15.4. Recovery of Sums Required To Be Paid. The
Secured Party shall have the right from time to time to take
action to recover any sum or sums which constitute a part of the
Obligations as the same become due, without regard to whether or
not the balance of the Obligations shall be due, and without
prejudice to the right of the Secured Party thereafter to bring
an action of foreclosure, or any other action, for a default or
defaults by the Borrower existing at the time such earlier action
was commenced.
15.5. WAIVERS. THE BORROWER HEREBY MAKES AND
ACKNOWLEDGES THAT IT MAKES ALL OF THE WAIVERS SET FORTH IN THIS
SECURITY AGREEMENT, THE PROMISSORY NOTE AND THE OTHER LOAN
DOCUMENTS KNOWINGLY, INTENTIONALLY, VOLUNTARILY, WITHOUT DURESS,
AND ONLY AFTER EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS OF
SUCH WAIVERS WITH ITS ATTORNEY; THE BORROWER FURTHER ACKNOWLEDGES
THAT SUCH WAIVERS ARE A MATERIAL INDUCEMENT TO THE SECURED PARTY
TO MAKE THE LOANS TO THE BORROWER AND THAT THE SECURED PARTY
WOULD NOT HAVE MADE THE LOANS WITHOUT SUCH WAIVERS; AND THE
BORROWER HEREBY MAKES AND ACKNOWLEDGES THAT IT MAKES SUCH WAIVERS
WITH RESPECT TO EACH OTHER LOAN IN THE PROGRAM.
15.6. WAIVER OF TRIAL BY JURY. THE BORROWER HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES, AND THE SECURED PARTY BY
ITS ACCEPTANCE OF THE PROMISSORY NOTE AND THIS SECURITY AGREEMENT
AND OTHER LOAN DOCUMENTS IRREVOCABLY AND UNCONDITIONALLY WAIVES,
ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT OR
COUNTERCLAIM ARISING IN CONNECTION WITH, OUT OF OR OTHERWISE
RELATING TO THE PROMISSORY NOTE, THIS SECURITY AGREEMENT, OR ANY
OTHER LOAN DOCUMENT OR THE OBLIGATIONS.
15.7. Relationship. The relationship of the Secured
Party to the Borrower hereunder is strictly and solely that of
secured lender on the one hand and borrower and guarantor on the
other and nothing contained in the Promissory Note, this Security
Agreement or any other Loan Document or otherwise in connection
with the Obligations is intended to create, or shall in any event
or under any circumstance be construed as creating, a
partnership, joint venture, tenancy-in-common, joint tenancy or
other relationship of any nature whatsoever between the Secured
Party and the Borrower other than as secured lender on the one
hand and borrower and guarantor on the other.
15.8. Time is of the Essence. For all payments to be
made and all obligations to be performed under the Loan
Documents, time is of the essence.
15.9. Governing Law; Binding Effect. THIS SECURITY
AGREEMENT AND ALL LOAN DOCUMENTS ARE ENTERED INTO IN THE STATE OF
IDAHO, AND BORROWER AND SECURED PARTY AGREE THAT THE VALIDITY,
ENFORCEABILITY, CONSTRUCTION AND INTERPRETATION OF THIS SECURITY
AGREEMENT, AND OF ALL TRANSACTIONS AND DOCUMENTS UNDER OR
RELATING TO IT, WILL BE CONSTRUED, APPLIED, ENFORCED AND GOVERNED
UNDER THE LAWS OF THE STATE OF IDAHO (WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW), PROVIDED HOWEVER, THAT WITH
RESPECT TO THE CREATION, ATTACHMENT, PERFECTION, PRIORITY AND
ENFORCEMENT OF ANY LIENS CREATED BY THIS SECURITY AGREEMENT, THE
LAWS OF THE STATE WHERE THE APPLICABLE PROPERTY IS LOCATED SHALL
APPLY. This Security Agreement shall be binding upon the
Borrower, and the heirs, devises, administrators, executives,
personal representatives, successors, receivers, trustees, and
(without limiting Section 12 hereof) assignees, including all
successors in interest of the Borrower in and to all or any part
of the Collateral, and shall inure to the benefit of the Secured
Party, and the successors and assignees of the Secured Party.
15.10. Severability. Whenever possible this Security
Agreement, the Promissory Note and each Loan Document and each
provision hereof and thereof shall be interpreted in such manner
as to be effective, valid and enforceable under applicable law.
If and to the extent that any such provision shall be held
invalid and unenforceable by any court of competent jurisdiction,
such holding shall not invalidate or render unenforceable any
other provisions hereof or thereof, and any determination that
the application of any provision hereof or thereof to any person
or under any circumstance is illegal and unenforceable shall not
affect the legality, validity and enforceability of such
provision as it may be applied to any other person or in any
other circumstance.
15.11. Headings Descriptive. The headings, titles and
captions used herein are for convenience only and shall not
affect the construction of this Security Agreement or any term or
provision hereof.
15.12. Counterparts. This Security Agreement may be
executed in a number of counterparts and each of such
counterparts shall for all purposes be deemed to be an original;
and all such counterparts shall together constitute but one and
the same agreement.
15.13. Acknowledgment. Borrower acknowledges that
Secured Party's underwriting guidelines and standards are applied
on a case basis and that waivers may be granted in any particular
case (including in the case of a borrower to be included in a
pool with Borrower). Borrower further acknowledges that Secured
Party's underwriting guidelines or standards may be modified at
any time by Secured Party without notice to Borrower.
15.14. Attorneys Fees and Costs. Borrower agrees that
upon the occurrence of an Event of Default, the Borrower shall
pay all costs and expenses actually incurred by Secured Party
(including without limitation attorney's fees and disbursements)
incident to the enforcement, collection, protection or
preservation of any right or claim of Secured Party under the
Loan Documents, including any such fees or costs incurred in
connection with any bankruptcy or insolvency proceeding of
Borrower.
15.15. Loan Pool Flexibility. Secured Party shall have
the right, at its sole and absolute discretion upon written
notice to Borrower, to transfer (a "Transfer"), within 18 months
from the effective date of this Security Agreement, all or any of
the Loans and all Liens related to such Loans, from the CLC 19971
Program to any other loan program to a Franchise Group formed by
Secured Party. Upon the occurrence of a Transfer, the Loan
Documents shall be automatically amended and reclassified to
reflect the Transfer. Borrower shall execute all amendments or
other documents Secured party deems necessary to effectuate a
Transfer.
IN WITNESS WHEREOF, the Borrower has executed and
entered into this Security Agreement and delivered it to the
Secured Party on and as of the date set forth below. This
document is executed under seal and intended to take effect as a
sealed instrument.
Date: October 7, 1997 Cucos Inc.
Attest:/s/ Thomas J. Grace By: /s/ Vincent J. Liuzza, Jr.
Name: Thomas J. Grace Vincent J. Liuzza, Jr.
Title: Secretary Chairman and Chief Executive
Officer
(SEAL)
Signed, sealed and delivered in the presence of:
Martha C. Scott
Unofficial Witness
Mary Ann Brockhaus
Notary Public
My commission expires:
at death
SEAL
SECURED PARTY:
AMRESCO COMMERCIAL LENDING CORPORATION
By: /s/ Lex A. Lane
Lex A. Lane
Authorized Representative
SUBORDINATION AGREEMENT
In consideration of the loan or loans which AMRESCO
Commercial Lending Corporation (referred to herein with its
successors and assigns as the "Secured Party") may have made or
may in the future make to or for the account of Cucos Inc., (with
their successors and assigns as the "Borrower"),which is or will
be reflected in a promissory note or notes by Borrower in favor
of Secured Party in the aggregate amount of $3,988,888.90, plus
interest and all other costs referenced in the loan documents
related to such promissory note or notes (the "Principal
Indebtedness"), Elie Khoury, Jolie Khoury, Frank J. Ferrara and
Sadie Ferrara, (collectively "Creditors") covenant and agree with
Secured Party that any and all indebtedness, now or hereafter
owing pursuant to the following described notes and the note
purchase agreement of Borrower to Creditors ("Subordinated
Indebtedness"), shall be and hereby is subordinated to the
Principal Indebtedness. The term Subordinated Indebtedness shall
include all amounts owing pursuant to the note purchase agreement
dated July 28, 1995, but is not limited to the Promissory Note of
Borrower in favor of Elie Khoury dated July 28, 1995 in the
amount of $87,500.00, the Promissory Note of Borrower in favor of
Frank J. Ferrara dated July 28, 1995 in the amount of
$206,250.00, the Promissory Note of Borrower in favor of Elie
Khoury and Jolie Khoury dated February 24, 1997 in the amount of
$56,250.00 and the Promissory Note of Borrower in favor of Frank
J. Ferrara and Sadie Ferrara dated February 24, 1997 in the
amount of $150,000.00 (each such promissory note is referred to
as the "Note" and all such promissory notes are referred to
collectively as the "Notes").
Creditors acknowledge that no payments are due under the
Notes until June 30, 2015. Further, Creditors covenant and agree
that they shall not take any action against Borrower to recover
any Subordinated Indebtedness ("Prohibited Action"), including
but not limited to demanding, accepting, or receiving any payment
or security related to the Notes or filing suit for any amount
owed under the Notes, unless the Borrower has paid the Principal
Indebtedness in full to the Secured Party or until Creditors
obtain specific written consent of Secured Party to take such
action. The Creditors further agree that it shall not take a
Prohibited Action unless Creditors shall have informed the
Secured Party in writing by certified mail addressed to AMRESCO
Commercial Lending Corporation in care of the Servicing
Department Manager at least 14 days prior to taking such
Prohibited Action that Creditors intend to take such Prohibited
Action.
In the event that any Creditor receives payment or security
from Borrower for or on account of the Subordinated Indebtedness
in violation of this agreement, each Creditor covenants and
agrees to hold the same in constructive trust for the Secured
Party and to deliver the same immediately to Secured Party in the
form received, duly endorsed, if applicable, and the Secured
Party agrees that the same shall either be applied to, or held as
security for the Principal Indebtedness.
Each Creditor warrants that the amount owed under the Note
for such Creditor, constitutes the entire Subordinated
Indebtedness as of the date of this agreement. Creditors further
warrant and covenant that all Subordinated Indebtedness incurred
after the date of this agreement, shall be evidenced only by
promissory notes or other instruments in writing capable of
delivery to Secured Party and which shall be promptly delivered
after execution by each Creditor to Secured Party to be held by
Secured Party during the entire period of time that any part of
the Principal Indebtedness is outstanding.
Creditors and Borrower covenant and agree that the Notes and
any promissory notes or instruments related to future
Subordinated Indebtedness shall include the following language:
All rights of any payee under this note have been
subordinated to AMRESCO Commercial Lending Corporation
pursuant to a subordination agreement dated November 25,
1997, entered into between Elie Khoury, Jolie Khoury, Frank
J. Ferrara, Sadie Ferrara, Cucos Inc., and AMRESCO
Commercial Lending Corporation (the "Subordination
Agreement"), and such payee shall not be entitled to enforce
any rights under this note or take any action in conflict
with or derogation of the Subordination Agreement.
Creditors and Borrower further covenant and agree that the
Notes and any promissory notes or instruments related to future
Subordinated Indebtedness shall not be accelerated unless all
obligations owed to Secured Party related to the Principal
Indebtedness have been paid in full.
This agreement and the Subordinated Indebtedness hereunder
shall not be in any way affected by the extension of time or
renewal of the Principal Indebtedness, the modification in any
manner or the taking or release in whole or in part of any
security therefore, or the obligations of any endorsers,
sureties, guarantors or other parties, or the granting of any
other indulgences to Borrower.
This shall be a continuing agreement, shall apply to all
Principal Indebtedness incurred, and shall be in effect until the
Principal Indebtedness is paid in full. This agreement shall be
binding upon and inure to the benefit of this successors and
assigns or Creditors and Secured Party.
In consideration of the above stated agreements by Creditors
and of loans made or to be made to Borrower by Secured Party,
Borrower hereby covenants and agrees to make no payment and to
give no security to any Creditor for or on account of the
Subordinated Indebtedness so long as any obligations relating to
the Principal Indebtedness shall be or remain delinquent (past
due) unless Secured Party specifically consents in writing. Any
such payment or security made or given to any Creditor contrary
to the foregoing shall be deemed to have been made or given for
or on account of the Principal Indebtedness and shall be
immediately delivered or endorsed to the Secured Party as
provided above, and may be held or applied by Secured Party as
security for the Principal Indebtedness or in payment of the
Principal Indebtedness. Borrower further covenants and agrees
that all Subordinated Indebtedness incurred after the date of
this agreement shall be evidenced only by a promissory note or other
instrument in writing capable of transfer and delivery to Secured
Party and which as provided above, will be promptly delivered by
Any Creditor to Secured Party to be held by Secured Party during
the entire period of time that any part of the Principal
Indebtedness is outstanding.
Creditors understand and acknowledge that Secured Party
would not make the loan to Borrower without this agreement.
IN WITNESS WHEREOF, the parties have executed this
Subordination Agreement as of the 25th day of November, 1997.
CREDITOR:
Witness: /s/ Elie Khoury, Individual
Witness: /s/ Jolie Khoury, Individual
Witness: /s/ Frank J. Ferrara, Individual
Witness: /s/ Sadie Ferrara, Individual
Attest: BORROWER:
Cucos, Inc.
/s/Thomas J. Grace /s/ Vincent J. Liuzza, Jr.,
Chairman and Chief Executive Officer
SECURED PARTY: AMRESCO Commercial
Lending Corporation
Witness: By: /s/ William C. Cole
William C. Cole
Vice President
AFFILIATE GUARANTY
(Personal)
THIS AFFILIATE GUARANTY ("Guaranty") dated as of the
date set forth at the foot hereof is made between the undersigned
Vincent J. Liuzza, Jr. (the "Guarantor") and AMRESCO COMMERCIAL
LENDING CORPORATION, a Nevada corporation, its successors and
assigns (the "Secured Party").
RECITALS
A. Pursuant to that certain Pledge and Security
Agreement (as such agreement shall be modified, amended or
supplemented from time to time, the "Security Agreement") dated
as of the date hereof, among the Secured Party and the person or
entity listed on Schedule A hereto, which has executed and
delivered a Promissory Note, a Security Agreement and other Loan
Documents to the Secured Party on the date hereof (the
"Borrower"), the Secured Party has agreed to make certain loans
to the Borrower for the commercial or business purposes set forth
in such Borrower's application.
B. The Guarantor (i) is an affiliate of the Borrower,
(ii) owns, directly or indirectly, a significant amount of the
issued and outstanding capital stock of the Borrower and (iii)
will benefit from the Secured Party's making such loans to the
Borrower.
C. As an express condition to the making of the Loans
by the Secured Party to the Borrower, Guarantor is required to
enter into this Guaranty and to guaranty the Obligations as
hereinafter provided.
1. Definitions. Terms defined in the Security
Agreement and not otherwise defined in this Guaranty shall have
the meanings given those terms in the Security Agreement when
used herein and such definitions are incorporated herein as
though set forth in full.
2. Guaranty of Borrower's Obligations. In order to
induce the Secured Party to make the Loans to the Borrower, the
Guarantor jointly and severally if more than one, irrevocably,
absolutely and unconditionally guaranties to the Secured Party
the payment when due of all Obligations of the Borrower,
including, without limitation, all amendments, modifications,
supplements, renewals or extensions of any of the Loan Documents
or Obligations, whether such amendments, modifications,
supplements, renewals or extensions are evidenced by new or
additional instruments, documents or agreements or change the
rate of interest on any Obligation or the security therefor, or
otherwise.
3. Nature of Guaranty. This Guaranty is irrevocable
and continuing in nature and relates to any of the Obligations
now existing or hereafter arising of the Borrower. This Guaranty
is a guaranty of prompt and punctual payment and performance and
is not merely a guaranty of collection. This Guaranty is in full
force and effect on the date hereof and shall continue until all
such Obligations have been indefeasibly paid or satisfied in full
at which time the Secured Party shall terminate this Guaranty by
marking it cancelled and returning it to the Guarantor.
4. Relationship to Other Agreements. Nothing herein
shall in any way modify or limit the effect of terms or
conditions set forth in any other document, instrument or
agreement executed by the Guarantor, the Borrower or in
connection with the Obligations, but each and every term and
condition hereof shall be in addition thereto.
5. When the Obligations are Deemed Due. For purposes
of this Guaranty, the Obligations of the Borrower are deemed due
within thirty (30) days after (a) receipt by the Guarantor from
the Secured Party of written notice (a "Notice of Default")
stating that an Event of Default under Section 7(a), (b), (c) or
(d) of the Security Agreement of such Borrower has occurred, or
(b) an Event of Default under Section 7(e), (f), (g) or (h) of
the Security Agreement of such Borrower. The Guarantor agrees
that the giving of a Notice of Default by the Secured Party will
be final, conclusive and binding upon the Guarantor and that the
Secured Party's delay or failure to give such Notice of Default
shall not discharge, release, modify, reduce or impair
Guarantor's obligations under this Guaranty or the rights of and
remedies available to the Secured Party. The Guarantor agrees
that any delay or default by the Guarantor in making any payment
required in a Notice of Default for any reason whatsoever is a
default by the Guarantor of its obligations under this Guaranty.
6. Nature of Obligations. This Guaranty is a guaranty
of prompt and punctual payment and performance. The obligations
of the Guarantor to make payments to the Secured Party under this
Guaranty are direct and primary obligations. Upon the occurrence
and during the continuance of any Event of Default, the Guarantor
understands and agrees that the Secured Party may, but is not
required to enforce this Guaranty independently of any other
remedy or security the Secured Party may have or hold in
connection with this Guaranty or the Obligations guarantied
hereunder without first or ever proceeding against and/or
exhausting any security or remedy against any other Person or
party or any Collateral. Without limiting the generality of the
foregoing, the liability of the Guarantor under this Guaranty
shall be absolute and unconditional notwithstanding any event or
occurrence, including without limitation:
(a) any defect in, or invalidity, illegality or
unenforceability of any of the Loan Documents;
(b) the existence of any claim, defense or set-off
which the Borrower or the Guarantor may have at any time
against the Secured Party whether in connection with the
transactions contemplated by this Guaranty or otherwise;
(c) the existence or absence of any legal action to
enforce the Loan Documents or any security therefor, the
issuance of any judgment therefor or the execution of any
such judgment;
(d) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Obligations
under any Loan Document or any other agreement or instrument
relating thereto or any other amendment or waiver of any
consent to departure therefrom including, without
limitation, any increase in the Obligations resulting from
the extension of additional credit to the Borrower or
otherwise;
(e) any taking, exchange, release or non-perfection of
any Collateral, or any taking, release or amendment or
waiver of or consent to departure from any other guaranty,
for all or any of the Obligations;
(f) any manner of application of any Collateral, or
proceeds thereof, to all or any of the Obligations, or any
manner of sale or other disposition of any Collateral or any
other assets of the Borrower;
(g) any change, restructuring, merger, buy out, sale,
or termination of the structure or existence of the
Borrower; or
(h) any possibility or impracticality of performance,
illegality, force majeure, any act of government, or any
other circumstance which might otherwise constitute a
defense available to, or a discharge of the Borrower or the
Guarantor, or any other circumstance or event or happening
whatsoever, whether foreseen or unforeseen and whether
similar or dissimilar to anything referred to above in this
Section.
(i) To the extent that Guarantor makes payments to the
Secured Party under this Guaranty, Guarantor shall be
entitled to whatever Security Interests and remedies which
the Secured Party may have under the Loan Documents, and by
these presents the Secured Party does hereby agree to assign
to Guarantor said Security Interests, including the Pledge,
Leasehold Mortgage and Assignment of Leases which it,
Secured Party, possesses, but only to the extent that
Guarantor makes actual payments to the Secured Party under
the Guaranty.
(j) This Guaranty shall terminate upon the death of
Guarantor if Borrower is in full compliance with Section
3.25 of the Pledge and Security Agreement.
7. Statute of Limitations and Other Laws. Until the
Obligations shall have been paid and performed in full, all of
the rights, privileges, powers and remedies granted to the
Secured Party hereunder shall continue to exist and may be
exercised by the Secured Party at any time and from time to time
irrespective of the fact that any of the Obligations may have
become barred by any statute of limitations. Guarantor expressly
waives the benefit of any and all statutes of limitation, and any
and all laws providing for exemption of property from execution
or for valuation and appraisal upon foreclosure, to the maximum
extent permitted by applicable law.
8. Waivers. Except to the extent required by law and
to the extent such requirement cannot be waived, the Guarantor
(a) waives notice of acceptance of this Guaranty and notice of
any liability to which it may apply, (b) waives promptness,
diligence, notice of acceptance and any other notice with respect
to any of the Obligations and any requirement that the Secured
Party or the Borrower protect, secure, perfect or insure any lien
or any property subject thereto or exhaust any right or take any
action against the Borrower or any other Person or any
collateral, and (c) waives any rights it, the Borrower, any other
guarantor or any other person may now or hereafter have to an
appraisal of any security or collateral for the Borrower's
Obligations, including, without limitation, any such rights
provided by statute. BORROWER ALSO WAIVES ALL DEFENSES THAT IT
MAY BE ENTITLED TO UNDER SURETYSHIP LAW.
9. Consents. The Guarantor consents and agrees that
the Secured Party, at any time and from time to time, without
notice or demand, without incurring any responsibility to the
Guarantor, and without impairing, reducing, modifying, amending,
releasing or discharging the obligations of the Guarantor, may
take any of the following actions or take no action in connection
with the Borrower or the Loan Documents, including without
limitation:
(a) supplement, modify, amend, extend, renew,
accelerate or otherwise change the time for payment or the
terms of the Obligations or any part thereof;
(b) supplement, modify, amend or waive, or enter into
or give any agreement, approval or consent with respect to,
the Obligations or any part thereof, or any of the Loan
Documents or any additional security or guaranties, or any
condition, covenant, default, remedy, right, representation
or term thereof or thereunder;
(c) accept new or additional instruments, documents or
agreements in exchange for or relative to any of the Loan
Documents or the Obligations or any part thereof;
(d) accept partial payments on the Obligations;
(e) receive and hold additional security or guaranties
for the Obligations or any part thereof;
(f) release, reconvey, terminate, waive, abandon, fail
to perfect, subordinate, exchange, substitute, transfer
and/or enforce any security or guaranties, and apply any
security and direct the order or manner of sale thereof as
the Secured Party in its sole and absolute discretion may
determine;
(g) release any Person from any personal liability
with respect to the Obligations or any part thereof;
(h) settle, release on terms satisfactory to the
Secured Party or by operation of applicable laws or
otherwise liquidate or enforce any Obligation and any
security or guarantee therefor in any manner, consent to the
transfer of any security and bid and purchase at any sale;
and/or
(i) consent to the merger, change or any other
restructuring or termination of the partnership or corporate
existence, as the case may be, of the Borrower or any other
Person, and correspondingly restructure the Obligations, and
any such merger, change, restructuring or termination shall
not affect the liability of the Borrower or the continuing
effectiveness hereof, or the enforceability hereof with
respect to all or any part of the Obligations.
10. Amounts Reclaimed. Guarantor understands that one
or more claims may be made upon the Secured Party for repayment
or recovery of any amount received on account of any of the
Obligations and that the Secured Party may be required to repay
(or otherwise satisfy the recovery of) all or part of said amount
by reason of (a) any judgment, decree or order of any court,
administrative body or trustee in bankruptcy (or other person
acting on behalf of any person or its estate), or (b) any
settlement or compromise of any such claim effected by the
Secured Party with any such claimant (including the Borrower).
Guarantor agrees that in such event any such judgment, decree,
order, settlement or compromise will be binding upon the
Guarantor, notwithstanding any cancellation of the Loan Documents
or this Guaranty and that Guarantor will be and remain liable to
the Secured Party under this Guaranty for the amount so repaid or
recovered to the same extent as if such amount had never been
received by the Secured Party.
11. Interest. If the Guarantor fails to make any
payment due and required to be made by it under this Guaranty (a
"Payment"), then, to the extent permitted by law, such Payment
shall bear interest from the due date thereof until paid at the
Default Rate. Guarantor agrees to pay interest accrued hereunder
in respect of any Payment on demand. All computations of
interest hereunder will be made by the Secured Party on the basis
of a year of 360 days and based upon the actual number of days
elapsed (including the first day but excluding the last day).
12. Representations, Warranties and Covenants. The
Guarantor hereby makes the following representations, warranties
and covenants which survive the execution and delivery of this
Guaranty:
(a) The Guarantor, if it is a corporation, is and will
continue to be, duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization
and qualified as a foreign corporation and in good standing in
each jurisdiction where such qualification is required or
necessary in connection with the conduct of the Guarantor's
business or the performance of its obligations under this
Guaranty.
(b) The Guarantor has the power and/or legal right to own
its assets, to conduct its business as now conducted, and to
enter into and perform the provisions of this Guaranty.
(c) The execution, delivery and performance of this
Guaranty by the Guarantor, if it is a corporation, has been duly
authorized by all necessary corporate, stockholder and other
action.
(d) The execution, delivery and performance of this
Guaranty by the Guarantor does not contravene (i) any existing
law or any legal order applicable to, or license or permit
granted to the Guarantor, (ii) any agreement or instrument to
which the Guarantor is a party or to which it or any of its
assets is subject, or (iii) if it is an entity, any provisions of
the Guarantor's certificate of incorporation, by-laws or
organizational papers.
(e) The Guarantor is not, and will not as a result of the
execution and delivery of this Guaranty, be rendered insolvent.
(f) This Guaranty is a legal, valid and binding
obligation of the Guarantor, enforceable against the Guarantor in
accordance with its terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency or other similar laws of
general application affecting the enforcement of creditors'
rights or by general principles of equity limiting the
availability of equitable remedies.
(g) No governmental approval is required for the due
execution, delivery and performance by the Guarantor of this
Guaranty.
(h) There are no conditions precedent to the effectiveness
of this Guaranty that have not been satisfied or waived.
(i) The Guarantor shall provide the Secured Party within 75
days after December 31st of each calendar year and as the Secured
Party may reasonably request, from time to time, financial
statements covering the twelve (12) month period then ended.
(j) The Guarantor shall provide the Secured Party with
copies of all tax returns filed by the Guarantor as soon as such
tax returns are available or, in any event, within ten (10) days
of the filing thereof.
(k) Guarantor is either financially interest in Borrower or
will receive other material economic benefits as a result of the
Loans provided by Secured Party. Guarantor is entering into this
Guaranty as a material inducement to Secured Party to make the
Loans and acknowledges that Secured Party would not make such
Loans absent of this Guaranty.
13. WAIVER OF TRIAL BY JURY. THE GUARANTOR HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES, AND THE SECURED PARTY BY
ITS ACCEPTANCE OF THIS GUARANTY IRREVOCABLY AND UNCONDITIONALLY
WAIVES, ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT
OR COUNTERCLAIM ARISING IN CONNECTION WITH, OUT OF OR OTHERWISE
RELATING TO THIS GUARANTY OR THE OBLIGATIONS GUARANTEED
HEREUNDER.
14. LIMITATION ON INTEREST. NOTWITHSTANDING ANY OTHER
PROVISION HEREOF, IN NO EVENT SHALL THE AMOUNT OR RATE OF
INTEREST PAYABLE, CONTRACTED FOR, CHARGED OR RECEIVED UNDER OR IN
CONNECTION WITH THIS GUARANTY OR THE OBLIGATIONS GUARANTEED
HEREUNDER, FROM TIME TO TIME OR FOR WHATEVER REASON, EXCEED THE
MAXIMUM RATE OR AMOUNT, IF ANY, SPECIFIED BY APPLICABLE LAW.
15. Miscellaneous.
(a) Costs and Expenses. Guarantor agrees to pay to
the Secured Party all costs and expenses (including, without
limitation, reasonable attorneys' fees and disbursements)
incurred by the Secured Party in the enforcement of this
Guaranty, whether or not an action is filed in connection
therewith, and in connection with any waiver or amendment of
any term or provision hereof. All advances, charges, costs
and expenses, including reasonable attorneys' fees and
disbursements, incurred or paid by the Secured Party in
exercising any right, privilege, power or remedy conferred
by this Guaranty, or in the enforcement or attempted
enforcement thereof, shall be subject hereto and shall
become a part of the Obligations and shall be paid to the
Secured Party by Guarantor, immediately upon demand,
together with interest thereon at the Default Rate.
(b) Information. The Guarantor will promptly furnish
to the Secured Party such information regarding its business
affairs and financial condition as the Secured Party may
from time to time reasonably request.
(c) Amendment. Neither this Guaranty nor any
provision hereof may be amended, altered, modified, changed,
waived, discharged or terminated, except by an instrument in
writing signed by the Secured Party.
(d) Governing Law. This Guaranty and the rights and
obligations of the parties hereunder shall be construed in
accordance with and governed by the laws of the State.
(e) Notices. All notices and other communications
hereunder shall be given in the manner set forth in the
Security Agreement to the parties at their respective
addresses set forth below, as the same may be changed by
written notice to the other party.
(f) Remedies Cumulative; No Waiver. The Guarantor
hereby agrees that the enumeration of the Secured Party's
rights and remedies set forth in this Guaranty is not
intended to be exhaustive and the exercise by the Secured
Party of any right or remedy shall not preclude the exercise
of any other rights or remedies, all of which shall be
cumulative and shall be in addition to any other right or
remedy given hereunder or under any other agreement between
the parties or which may now or hereafter exist at law or in
equity or by suit or otherwise, including but not limited to
the Secured Party's rights and remedies under the Security
Agreement or any Loan Document. No delay on the part of the
Secured Party in exercising any right, power or privilege
shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or privilege preclude
other or further exercise thereof or the exercise of any other
right, power or privilege shall be construed to be a waiver of
any default. No course of dealing between the Guarantor and the
Secured Party, or any of the Secured Party's agents or employees
shall be effective to change, modify or discharge any provision
of this Guaranty or to constitute a waiver of any default.
(g) Guarantor's Waiver of Claims. The Guarantor hereby
expressly and irrevocably waives any and all rights which
Guarantor may have at any time (whether arising directly or
indirectly, by operation of law, under any Loan Document or
otherwise) to assert any "claim" (as defined in 11 U.S.C. Section
101), including, without limitation, any right or claim of
subrogation, reimbursement, exoneration, contribution or
indemnity, whether any such right or claim is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, secured or unsecured.
(f) Time is of the Essence. For all payments to be
made and obligations to be performed under this Guaranty, time is
of the essence.
(i) Assignment, Binding Effect, Benefit of Agreement. This
Guaranty and the duties and obligations of the Guarantor
hereunder, together with the Secured Party's rights and
privileges under the Security Agreement and the other Loan
Documents, (1) shall be fully assignable, in whole or in part,
and transferable by the Secured Party; (2) may not be delegated
or transferred by the Guarantor without the prior written consent
of the Secured Party, which consent may be withheld or delayed by
the Secured Party in its sole discretion; (3) shall inure to the
benefit of, and be enforceable by, the Secured Party and its
successors and assigns and the duties and obligations of the
Guarantor shall bind the Guarantor and the Guarantor's successors
and permitted assigns; and (4) the provisions of Section 15(g)
also shall be for the benefit of and may be enforced by the
Borrower.
(j) Severability. Whenever possible this Guaranty and each
provision hereof shall be interpreted in such manner as to be
effective, valid and enforceable under applicable law. Any
provisions of this Guaranty which are prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any
other jurisdiction. In addition, any determination that the
application of any provision hereof to any person or under any
circumstance is illegal and unenforceable shall not affect the
legality, validity and enforceability of such provision as it may
be applied to any other person or in any other circumstance.
(k) Survival. The provisions of Sections 10 and 13
shall survive the termination and cancellation of this Guaranty
and, after cancellation and return to the Guarantor, a photocopy
hereof may be submitted as evidence of such surviving
obligations. Nothing herein shall preclude the Secured Party
from establishing such obligations by other means.
(l) Receipt of Loan Documents. The Guarantor
acknowledges receipt of a copy, as executed, of the Loan
Documents of the Borrower.
(m) Headings. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or
interpretation of any provision hereof.
16. ACKNOWLEDGEMENT. GUARANTOR HEREBY ACKNOWLEDGES
AND AGREES THAT IT MAKES ALL OF THE WAIVERS, AGREEMENTS AND
CONSENTS ("WAIVERS") SET FORTH IN THIS GUARANTY KNOWINGLY,
INTENTIONALLY, VOLUNTARILY, WITHOUT DURESS, AND ONLY AFTER
EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS OF SUCH WAIVERS WITH
ITS COUNSEL; GUARANTOR FURTHER ACKNOWLEDGES THAT SUCH WAIVERS ARE
A MATERIAL INDUCEMENT TO THE SECURED PARTY TO MAKE THE LOANS TO
BORROWER AND THAT THE SECURED PARTY WOULD NOT HAVE MADE THE LOANS
WITHOUT SUCH WAIVERS. THE GUARANTOR ACKNOWLEDGES THAT IT HAS
SUFFICIENT KNOWLEDGE AND EXPERIENCE TO BE CAPABLE OF EVALUATING
THE RISKS OF ITS GUARANTY. IF ANY OF THE WAIVERS HEREIN ARE
DETERMINED TO BE UNENFORCEABLE UNDER APPLICABLE LAW, SUCH WAIVERS
SHALL BE EFFECTIVE TO THE MAXIMUM EXTENT PERMITTED BY SUCH LAW.
17. THIS GUARANTY SHALL TERMINATE AFTER THE THIRD YEAR
FROM THE CLOSING DATE IF THE BORROWER HAS A CONSOLIDATED FCCR OF
1.50:1 OR GREATER FOR TWO CONSECUTIVE YEARS.
IN WITNESS WHEREOF, the parties hereto executed this
Agreement or have caused this Agreement to be executed and
delivered by their duly authorized officer(s) as of October 7,
1997. THIS DOCUMENT IS EXECUTED UNDER SEAL AND INTENDED TO TAKE
EFFECT AS A SEALED INSTRUMENT.
GUARANTOR:
Witness:
Vincent J. Liuzza, Jr.
/s/ Martha C. Scott
Name: Martha C. Scott /s/Vincent J. Liuzza, Jr.
GUARANTOR'S ADDRESS: 110 Veterans Blvd., Suite 222
Metairie, LA 70005
Receipt of this Guaranty is hereby acknowledged and accepted:
AMRESCO COMMERCIAL LENDING CORPORATION,
as Secured Party
By:____________________________
Lex A. Lane
Authorized Representative
ADDRESS OF SECURED PARTY:
AMRESCO Commercial Lending Corporation
565 West Myrtle
Suite 410
Boise, Idaho 83702
