EXHIBIT 10.3
PROMISSORY NOTE
$15,000,000.00 November 18, 1996
FOR VALUE RECEIVED, the undersigned, 50-OFF STORES, INC., a Delaware
corporation, 50-OFF TEXAS STORES, L.P., a Texas limited partnership, 50-OFF
MULTISTATE OPERATIONS, INC., a Nevada corporation and 50-OFF OPERATING COMPANY,
a Nevada corporation (collectively, "Borrowers"), hereby jointly and severally
promise to pay to the order of GENERAL ELECTRIC CAPITAL CORPORATION ("Lender"),
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at the office of Lender located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, in lawful money of the United States of America and in
immediately available funds, the principal amount of the lesser of (a) FIFTEEN
MILLION DOLLARS ($15,000,000) and (b) the aggregate unpaid principal amount of
all Advances made by Lender to Borrowers pursuant to the Credit Agreement
referred to below. All capitalized terms, unless otherwise defined herein,
shall have the respective meanings assigned to such terms in the Credit
Agreement referred to below.
Borrowers further agree to pay interest on the unpaid principal amount
outstanding hereunder from time to time from the date hereof in like money and
funds at such office at the rates per annum and on the dates provided in the
Credit Agreement referred to below. The date and amount of each Advance made by
Lender to Borrowers, the rate of interest applicable thereto and each payment
made on account of the principal thereof shall be recorded by Lender on its
books, provided that the failure of Lender to make any such recordation or
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endorsement shall not affect the obligations of Borrowers to make payments when
due of any amount owing under the Credit Agreement referred to below or this
Promissory Note in respect of the Advances made by ▇▇▇▇▇▇.
This Promissory Note is the Note referred to in that certain $15,000,000
Senior Secured Super Priority Debtor-In-Possession Revolving Credit Agreement,
dated as of November 18, 1996, by and among Borrowers and Lender (as amended,
supplemented or otherwise modified from time to time, the "Credit
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Promissory Note -- Page 1 of 4 pages Initial Makers:
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Agreement"), is entitled to the benefits thereof, and is secured as provided
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therein. Reference is made to the Credit Agreement for all purposes, including,
without limitation, for provisions for the prepayment and repayment hereof.
If any payment of this Promissory Note becomes due and payable on a day
other than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension.
Upon the occurrence of any one or more of the Events of Default
specified in the Credit Agreement, all amounts then remaining unpaid on this
Promissory Note shall become, or may be declared to be, immediately due and
payable, all as provided therein.
All parties now or hereafter liable with respect to this Promissory
Note, whether any Borrower, guarantor, endorser or other Person, hereby waive
diligence, presentment, protest, demand, notice of non-payment or dishonor and
other notices of any kind.
Borrowers promise to pay all reasonable out-of-pocket costs of
collection, including reasonable attorneys' fees as provided in the Credit
Agreement, should this Promissory Note be collected by or through an attorney-
at-law or under advice therefrom.
THIS PROMISSORY NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF GEORGIA, WITHOUT GIVING
EFFECT TO CONFLICTS OF LAW PRINCIPLES.
[Remainder of page intentionally left blank.]
Promissory Note -- Page 2 of 4 pages Initial Makers:
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IN WITNESS WHEREOF, ▇▇▇▇▇▇▇▇▇ have caused this Promissory Note dated November
18, 1996 in the original principal amount of $15,000,000 (subect to the terms
hereof) in favor of General Electric Capital Corporation to be duly executed and
delivered under seal by their respective officers thereunto duly authorized as
of the date hereof.
50-OFF STORES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇
President
Attest: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Assistant Secretary
50-OFF TEXAS STORES, L.P.
By: 50-OFF Texas Management, Inc.,
Managing General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇
Its President
Attest: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Assistant Secretary
Promissory Note -- Page 3 of 4 pages Initial Makers:
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50-OFF MULTISTATE OPERATIONS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇
President
Attest: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Assistant Secretary
50-OFF OPERATING COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇
President
Attest: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Assistant Secretary
Promissory Note -- Page 4 of 4 pages Initial Makers:
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SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of November 18, 1996, made by 50-OFF STORES,
INC., a Delaware corporation, 50-OFF TEXAS STORES, L.P., a Texas limited
partnership, 50-OFF MULTISTATE OPERATIONS, INC., a Nevada corporation and 50-OFF
OPERATING COMPANY, a Nevada corporation, (collectively, "Grantors," and each
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individually a "Grantor"), in favor of GENERAL ELECTRIC CAPITAL CORPORATION, a
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New York corporation having an office at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Lender").
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W I T N E S S E T H:
WHEREAS, pursuant to and subject to the terms and conditions of that
certain $15,000,000 Senior Secured Super Priority Debtor-In-Possession Revolving
Credit Agreement dated as of November 18, 1996, by and among Grantors and
▇▇▇▇▇▇ (as the same from time to time may be amended, restated, supplemented or
otherwise modified, the "Credit Agreement"), Lender has agreed, among other
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things, to make Advances to Grantors (except as otherwise defined herein, all
capitalized terms used in these recitals having the respective meanings referred
to in Section 1 hereof);
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WHEREAS, ▇▇▇▇▇▇ is willing to make Advances as and to the extent provided
for in the Credit Agreement, but only upon the condition, among others, that
Grantors shall have executed and delivered this Security Agreement in favor of
Lender for its benefit;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and for other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. DEFINED TERMS. (a) The following capitalized terms used herein have
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the respective meanings set forth or referred to below:
"Accounts" shall mean all "accounts," as such term is defined in the Code
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and, in any event, shall include, without limitation, all accounts, accounts
receivable, credit card receivables, notes, drafts, acceptances, and other forms
of obligations and receivables and rights to payment for credit extended and for
goods sold or leased, or services rendered, whether or not yet earned by
performance, and all rights under any Contract, and all "contract rights" as
formerly defined in the Code, and all Inventory which gave rise thereto, and all
rights associated with such Inventory, including the right of stoppage in
transit, and all reclaimed, returned, rejected or repossessed Inventory (if any)
the sale of which gave rise to any Account.
"Account Debtor" shall mean any Person who is or who may become obligated
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to any Borrower under, with respect to, or on account of, an Account.
"Chattel Paper" shall mean all "chattel paper," as such term is defined in
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the Code, now owned or hereafter acquired and wherever located.
"Code" shall mean the Uniform Commercial Code as the same may, from time to
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time, be in effect in the State of Georgia; provided, that in the event that by
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reason of mandatory provisions of law, any or all of the attachment, perfection
or priority of, or the remedies with respect to, ▇▇▇▇▇▇'s security interest in
any Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of Georgia, the term "Code" shall mean the
Uniform Commercial Code as in effect in such other jurisdiction for purposes of
the provisions hereof relating to such attachment, perfection, priority or
remedies and for purposes of definitions related to such provisions.
"Collateral" shall have the meaning ascribed thereto in Section 2 of this
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Agreement.
"Contracts" shall mean, with respect to any Person, all the contracts,
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undertakings, or agreements (other than rights evidenced by Chattel Paper,
Documents or Instruments) in or under which such Person may now or hereafter
have any right, title or interest, including any agreement relating to the terms
of payment or the terms of performance of any Account.
"Documents" shall mean, with respect to any Person, all "documents," as
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such term is defined in the Code, now owned or hereafter acquired by such
Person, wherever located, and in any event any bills of lading, dock warrants,
dock receipts, warehouse receipts or other documents of title.
"Equipment" shall mean all "equipment" as such term is defined in the Code,
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and, in any event, shall include all motor vehicles, rolling stock, machinery,
office equipment, plant equipment, tools, dies, molds, store fixtures,
furnishings, and other goods, property and assets which are used, or were
purchased for use, in the operation or furtherance of any Grantor's business,
and any and all additions, accessions, substitutions and replacements of any of
the foregoing, wherever located, together with all attachments, components,
parts, equipment and accessories installed thereon or affixed thereto.
"Fixtures" shall, with respect to any Person, mean all "fixtures," as such
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term is defined in the Code, now or hereafter owned or acquired by such Person,
wherever located, and, in any event, including all of the fixtures, systems,
machinery,
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apparatus, equipment and fittings of every kind and nature whatsoever and all
appurtenances and additions thereto and substitutions therefor or replacements
thereof, now or hereafter attached or affixed to or constituting a part of, or
located in or upon, real property wherever located (including all heating,
electrical, mechanical, lighting, lifting, plumbing, ventilating, air-
conditioning and air cooling, refrigerating, incinerating and power, loading and
unloading, signs, escalators, elevators, boilers, communication, switchboards,
sprinkler and other fire prevention and extinguishing fixtures, systems,
machinery, apparatus and equipment, and all engines, motors, dynamos, machinery,
pipes, pumps, tanks, conduits and ducts constituting a part of any of the
foregoing, together with all extensions, improvements, betterments, renewals,
substitutes and replacements of, and all additions and appurtenances to, any of
the foregoing property).
"General Intangibles" shall mean, with respect to any Person, all "general
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intangibles," as such term is defined in the Code, now owned or hereafter
acquired by such Person and, in any event, including without limitation all
right, title and interest which such Person may now or hereafter have in or
under any or all of the following: right to payment for credit extended;
deposits; amounts due to any Grantor; credit memoranda in favor of any Grantor;
warranty claims; tax refunds and abatements; insurance refunds and premium
rebates; all means and vehicles of investment or hedging, including, without
limitation, options, warrants and futures contracts; records; customer lists;
telephone numbers; goodwill; causes of action (including, without limitation,
the proceeds of (a) that action initiated in the United States District Court
for the Western District of Texas, San Antonio Division and styled "50-Off
Stores, Inc. v. Banque Paribas (Suisse) S.A., et al" (Docket No. SA-95-CA-0159),
and (b) that action initiated in the District Court for the 224th Judicial
District, Bexar County, Texas, and styled as "50-OFF Stores, Inc. ▇. ▇▇▇▇▇▇▇▇▇ &
Company, Inc., et al" (Docket No. 96CI-00349) which is currently pending in Adv.
No. 96-05198 in the Chapter 11 Case, and (c) any action, cause of action or
right to payment which arises out of, or is in respect to, the set of facts
which forms the basis for each aforementioned action); judgments; payments under
any settlement or other agreement; royalties; license and/or franchise fees;
rights of admission; licenses; franchises; and permits; certificates of
convenience and necessity, and similar rights granted by any governmental
authority; proprietary processes; blueprints, drawings, designs, diagrams,
plans, reports and charts; catalogs; manuals; technical data; computer records,
computer software, rights of access to computer record service bureaus, service
bureau computer contracts and computer data; trade names, trademarks, service
marks and all goodwill relating thereto; proposals; cost estimates and
reproductions on paper, or otherwise, of any and all concepts or ideas; and any
matter related to, or connected with, the design, development, manufacture,
sale, marketing, leasing or
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use of any or all property produced, sold or leased by any Grantor, or credit
extended or services performed by any Grantor, whether intended for an
individual customer or the general business of any Grantor, or used or useful in
connection with research by any Grantor.
"Goods" has the meaning assigned to it in the Code.
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"Headquarters Building" shall have the meaning ascribed thereto in Section
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1(a) of this Agreement.
"Instruments" shall mean, for any Person, all "instruments," as such term
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is defined in the Code, now owned or hereafter acquired by such Person, wherever
located and in any event all certificated securities, certificates of deposit
and all notes and other evidences of indebtedness, other than instruments that
constitute, or are a part of a group of writings that constitute, Chattel Paper.
"Proceeds" shall mean all "proceeds," as such term is defined in the Code
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and, in any event, shall include, with respect to any Person: (a) any and all
proceeds of any insurance, indemnity, warranty or guarantee payable to such
Person from time to time with respect to any of its property or assets; (b) any
and all payments (in any form whatsoever) made or due and payable to such Person
from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of such Person's property
or assets by any governmental body, authority, bureau or agency (or any person
acting under color of governmental authority), (c) any recoveries by such Person
against third parties with respect to any litigation or dispute concerning any
of such Person's property or assets (including, without limitation, any recovery
with respect to that litigation specifically identified in the definition of
General Intangibles); and (d) any and all other amounts from time to time paid
or payable under or in connection with any of such Person's property or assets,
upon disposition or otherwise.
"Real Property" shall mean all present and future right, title and interest
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(including, without limitation, any leasehold estate) in (i) any plots, pieces
or parcels of land, (ii) any improvements, buildings, structures and fixtures
now or hereafter located or erected thereon or attached thereto of every nature
whatsoever (the rights and interests described in clauses (i) and (ii) above
being the "Premises"), (iii) all easements, rights of way, gores of land or any
lands occupied by streets, ways, alleys, passages, sewer rights, water courses,
water rights and powers, and public places adjoining such land, and any other
interests in property constituting appurtenances to the Premises, or which
hereafter shall in any way belong, relate or be appurtenant thereto, (iv) all
hereditaments, gas, oil, minerals (with the right to extract, sever and remove
such gas, oil and
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minerals), and easements, of every nature whatsoever, located in or on the
Premises and (v) all other rights and privileges thereunto belonging or
appertaining and all extensions, additions, improvements, betterments, renewals,
substitutions and replacements to or of an of the rights and interests described
in clauses (iii) and (iv) above, and shall specifically include, but not be
limited to, that real property generally known as the 50-OFF Building and the
land on which it is located together with an adjacent parcel of land, all of
which is the Grantors' corporate headquarters located at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (the "Headquarters Building").
(b) Except as expressly defined above or elsewhere herein, all other
capitalized terms used herein shall have the respective meanings set forth in
the Credit Agreement.
2. GRANT OF SECURITY INTEREST. (a) To secure the prompt and complete
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payment, performance and observance of all of the Obligations, and to induce
Lender to enter into the Credit Agreement and to make extensions of credit
provided for therein in accordance with the terms thereof, each Grantor hereby
grants to Lender a security interest in all property of such Grantor, including,
without limitation, all of such Grantor's right, title and interest in, to and
under the following, whether now owned by or owing to, or hereafter acquired by
or arising in favor of such Grantor (including, but not limited to, under any
trade names or divisions thereof), and whether owned, leased or consigned by or
to such Grantor, and regardless of where located (all of which being hereinafter
collectively referred to as the "Collateral"):
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(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Contracts;
(iv) all General Intangibles;
(v) all Inventory;
(vi) all Equipment;
(vii) all Instruments, Documents, policies and certificates of
insurance, securities, deposits, deposit accounts, impressed accounts,
compensating balances, money, cash, cash equivalents or other property;
(viii) all lockbox, deposit and other bank accounts of each
Grantor and all deposits therein and investments made with the funds
therein, including, but not limited to, all accounts of any Grantor
maintained at NationsBank or Bank One;
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(ix) all Real Property;
(x) all Fixtures;
(xi) all other Goods and interests in property of any kind,
nature or description whatsoever, whether tangible or intangible,
whether real or personal, and whether now or hereafter owned or
existing, leased, consigned by or to, or acquired by, any Grantor and
wherever located;
(xii) all books, records and information relating to the
Collateral and/or to the operation of any Borrower's business, and all
rights of access to such books, records and information, and all
property in which such books, records and information are stored,
recorded and maintained;
(xiii) all insurance proceeds, refunds and premium rebates,
including, without limitation, proceeds of fire and credit insurance,
whether any of such proceeds, refunds and premium rebates arise out of
any of the foregoing ((i) through (xii)) or otherwise;
(xiv) all liens, guaranties, rights, remedies and privileges
pertaining to any of the foregoing ((i) through (xii)) including the
right of stoppage in transit; and
(xv) all proceeds of any and all of the foregoing Collateral,
including, but not limited to, that litigation specifically identified
in the definition of General Intangibles and the Headquarters Building
specifically identified in the definition of Real Property, (including,
without limitation, cash proceeds and other proceeds which constitute
property of the types described subsections (i) through (xi) of this
Section 2(a)), and to the extent not otherwise included, all payments
under insurance (whether or not the Lender is the loss payee thereof),
or any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing Collateral.
(b) In addition, to secure the prompt and complete payment,
performance and observance of the Obligations and in order to induce Lender as
aforesaid, each Grantor hereby grants to Lender a security interest in all
property of such Grantor held by ▇▇▇▇▇▇ including, without limitation, all
property of every description now or hereafter in the possession or custody of,
or in transit to Lender for any purpose, including safekeeping, collection or
pledge, for the account of such Grantor, or as to which such Grantor may have
any right or power.
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3. RIGHTS OF LENDER; LIMITATIONS ON OBLIGATIONS OF LENDER. (a) It
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is expressly agreed by each Grantor that, anything herein to the contrary
notwithstanding, such Grantor shall remain liable under each of its Contracts
and each of its Licenses to observe and perform all the conditions and
obligations to be observed and performed by it thereunder and Lender shall have
no obligation or liability under any Contract or License by reason of or arising
out of this Security Agreement or the granting herein of a security interest
therein or the receipt by Lender of any payment relating to any Contract or
License pursuant hereto, nor shall Lender be required or obligated in any manner
to perform or fulfill any of the obligations of any Grantor under or pursuant to
any Contract or License, or to make any payment, or to make any inquiry as to
the nature or the sufficiency of any payment received by it or the sufficiency
of any performance by any party under any Contract or License, or to present or
file any claim, or to take any action to collect or enforce any performance or
the payment of any amounts which may have been assigned to it or to which it may
be entitled at any time or times.
(b) Lender may at any time after the occurrence of an Event of Default
and without prior notice to any Grantor, notify Account Debtors, parties to the
Contracts, and obligors in respect of Instruments and Chattel Paper that the
Accounts and the right, title and interest of each Grantor in and under such
Contracts, Instruments and Chattel Paper have been assigned to Lender and that
payments shall be made directly to Lender. Upon the request of ▇▇▇▇▇▇, each
Grantor shall so notify such Account Debtors, parties to Contracts and obligors
in respect of Instruments and Chattel Paper.
(c) Lender shall have the right from time to time upon prior notice to
any Grantor to make test verifications of the Accounts and physical
verifications and appraisals of the Inventory and other Collateral in any manner
and through any medium that it considers reasonably advisable, and each Grantor
agrees to furnish all such assistance and information as Lender may require in
connection therewith. Lender may at any time in ▇▇▇▇▇▇'s own name or in the
name of any Grantor communicate with Account Debtors, parties to Contracts and
obligors in respect of Instruments to verify with such Persons, to Lender's
satisfaction, the existence, amount and terms of any Accounts, Contracts,
Instruments or Chattel Paper.
4. REPRESENTATIONS AND WARRANTIES. Each Grantor hereby represents
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and warrants that:
(a) Each Grantor is the sole owner of each item of the Collateral in
which it purports to grant a security interest hereunder, having good and
marketable title thereto free and clear of any and all Liens except (i) the
security interest granted to Lender under this Security Agreement, (ii)
Permitted Encumbrances,
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and (iii) as otherwise expressly permitted by the Credit Agreement. Each Grantor
will warrant and defend such Collateral against all claims and demands of all
persons at any time claiming the same or any interest thereon.
(b) No effective security agreement, financing statement, equivalent
security or Lien instrument or continuation statement covering all or any part
of the Collateral is on file or of record in any public office, except (i) such
as have been or will be filed in favor of Lender pursuant to this Security
Agreement, (ii) such as relate to Permitted Encumbrances or (iii) such as have
been filed by GBFC, Inc. prior to the Relief Date and for which appropriate
termination statements and releases have been delivered to Lender or will be
filed prior to the Funding Date.
(c) Immediately upon the filing of appropriate financing statements in
the jurisdictions listed on Schedule 1 hereto or as may be otherwise provided in
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the Orders, this Security Agreement is and will be effective to create a valid
and continuing Lien on and perfected security interest in favor of Lender in the
Collateral with respect to which a security interest may be perfected by filing
pursuant to the Code, which Lien and security interest is prior to all other
Liens except Senior Liens and those Liens specifically disclosed in the Credit
Agreement as being prior to the Lien of this Security Agreement, and is
enforceable as such as against creditors of and purchasers from any Grantor
(other than purchasers of Inventory in the ordinary course of business). All
action (including, without limitation, all filings, registrations and
recordings) necessary or desirable to create, protect and perfect the security
interest granted to Lender hereby in respect of each item of the Collateral has
been duly accomplished.
(d) Each Grantor's chief executive office, principal place of
business, corporate offices, all warehouses and premises within which Collateral
is stored or located and the locations of all of its records concerning the
Collateral are set forth on Schedule 1. Such Schedule 1 correctly identifies
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any of such facilities or locations that are not owned by any Grantor and sets
forth the names of the owners and lessors or collateral of, and the holders of
any mortgages on, such facilities and locations. Each Grantor agrees that it
shall not change its chief executive office, principal place of business,
corporate offices, or warehouses or Collateral premises or the location of its
records concerning the Collateral without giving thirty (30) days prior written
notice thereof to Lender and taking all actions deemed by Lender to be
reasonably necessary or appropriate to protect and perfect ▇▇▇▇▇▇'s interest in
the Collateral.
5. COVENANTS. Each Grantor covenants and agrees with Lender that
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from and after the date of this Security Agreement and until the Termination
Date:
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(a) Further Assurances; Pledge of Instruments. At any time and from
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time to time, upon the written request of ▇▇▇▇▇▇ and at the sole expense of such
Grantor, each Grantor shall promptly and duly execute and deliver any and all
such further instruments and documents and take such further action as Lender
may reasonably deem desirable to obtain the full benefits of this Security
Agreement and of the rights and powers herein granted, including (i) securing
all consents and approvals necessary or appropriate for the assignment to or for
the benefit of Lender of any License or Contract held by any Grantor or in which
any Grantor has any rights not heretofore assigned, (ii) filing any financing or
continuation statements under the Code with respect to the liens and security
interests granted hereunder or under any other Loan Document, (iii) transferring
Collateral to Lender's possession (if such Collateral consists of Documents, or
Chattel Paper or if a security interest in such Collateral can be perfected by
possession, or if requested by ▇▇▇▇▇▇) and (iv) obtaining waivers of liens from
landlords and mortgagees or the subordination of such liens in the Emergency
Interim Order and the Final Order in accordance with Section 6.18 of the Credit
Agreement (it being understood that Lender in its discretion may establish a
reserve against availability under the Credit Agreement until the same have been
obtained). Each Grantor also hereby authorizes Lender to file any such
financing or continuation statement without the signature of such Grantor to the
extent permitted by applicable law. Each Grantor will warrant and defend the
Collateral against all claims and demands of all Persons at any time claiming
the same or any interest thereon. Each Grantor shall give Lender not less than
thirty (30) days prior written notice before moving any Collateral to a location
not set forth in Schedule 1 hereto, and shall in no event move any Collateral
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outside the United States of America.
(b) Maintenance of Records. Each Grantor shall keep and maintain, at
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its own cost and expense, satisfactory and complete records of the Collateral,
including a record of any and all payments received and any and all credits
granted with respect to the Collateral and all other dealings with the
Collateral. Each Grantor shall mark its books and records pertaining to the
Collateral to evidence this Security Agreement and the security interests
granted hereby. Upon the occurrence of any Event of Default, each Grantor shall
deliver and turn over all of its books and records pertaining to the Collateral
to Lender or to Lender's representatives at any time on demand of Lender.
(c) Continuous Perfection. Each Grantor agrees that it shall not
---------------------
change its name, identity or corporate structure in any manner which might make
any financing or continuation statement filed in connection herewith seriously
misleading within the meaning of any applicable provision of the Code unless
such Grantor shall have given Lender at least thirty (30) days' prior written
notice thereof and shall have taken all action necessary or
-9-
requested by ▇▇▇▇▇▇ to amend such financing statement or continuation statement
so that it is not seriously misleading.
(d) Provisions Regarding Accounts.
-----------------------------
(i) Each Grantor agrees that it shall not re-date any invoice or
sale or make sales on extended dating beyond that customary in such Grantor's
business, or extend or modify any Account (other than correction of errors in
the ordinary course). If any Grantor becomes aware of any matter materially
affecting any Account, including information regarding such Account Debtor's
creditworthiness, such Grantor will promptly so advise Lender; and
(ii) Except as provided in the Credit Agreement, each Grantor
agrees that it shall not grant any discount, credit or allowance to any Account
Debtor without ▇▇▇▇▇▇'s consent, except for discounts, credits and allowances
for returns, rejections and damaged goods made or given in the ordinary course
of such Grantor's business consistent with past practices.
(e) Provisions Regarding Inventory.
------------------------------
(i) Each Grantor agrees that it will engage in the sale of the
Inventory for fair consideration in the conduct of each Grantor's business in
the ordinary course and that each of the Grantors will not engage in sales or
other dispositions to creditors, sales or other dispositions in bulk, or in any
way use any of the Inventory in breach of any provision of this Agreement;
(ii) Each Grantor agrees that there shall be no sale of
Inventory on consignment, approval, or under any other circumstances such that,
with the exception of the subject Grantor's customary return policy applicable
to the return of Inventory purchased by that Grantor's retail customers in the
ordinary course, such Inventory may be returned to such Grantor without the
consent of the Lender; and
(iii) Each Grantor agrees that all Inventory now owned or
hereafter acquired is and will be of good and merchantable quality free from
defects (other than defects within customary trade tolerances). No tangible
personal property of any Grantor is or will be stored or entrusted with a bailee
or other third party without the Lender's prior written consent and approval.
6. ▇▇▇▇▇▇'S APPOINTMENT AS ATTORNEY-IN-FACT.
----------------------------------------
(a) Each Grantor hereby irrevocably constitutes and appoints ▇▇▇▇▇▇, and any
designee of Lender, with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of such Grantor and in the name of such Grantor or in its own name, from
time to time in ▇▇▇▇▇▇'s reasonable discretion, for the purpose of carrying out
the terms of this Security Agreement, to take any and
-10-
all appropriate action and to execute and deliver any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of
this Security Agreement and, without limiting the generality of the foregoing,
hereby grants to Lender the power and right, on behalf of such Grantor, without
notice to or assent by any Grantor, and at any time, to do the following:
(i) in the name of such Grantor, in its own name or otherwise,
take possession of, endorse and receive payment of any checks, drafts,
notes, acceptances or other Instruments for the payment of monies due
under any Collateral;
(ii) if such Grantor fails or refuses to do so, continue any
insurance existing pursuant to the terms of the Loan Documents, and pay
all or any part of the premiums therefor and the costs thereof;
(iii) receive payment of any and all monies, claims and other
amounts due or to become due at any time arising out of or in respect of
any Collateral;
(iv) ask, demand, collect, receive and give acquittances and
receipts for any and all money due or to become due under any
Collateral; and
(v) pay or discharge any taxes, Liens, security interests or
other encumbrances levied or placed on or threatened against the
Collateral;
(b) Each Grantor hereby irrevocably constitutes and appoints Lender
and any designee of Lender, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of such Grantor and in the name of such Grantor or in its own name,
from time to time in Lender's discretion, for the purpose of carrying out the
terms of this Security Agreement, to take any and all appropriate action and to
execute and deliver any and all documents and instruments which may be necessary
or desirable to accomplish the purposes of this Security Agreement and, without
limiting the generality of the foregoing, hereby grants to Lender the power and
right, on behalf of such Grantor, without notice to or assent by any Grantor,
upon the occurrence of an Event of Default and until such Event of Default is
waived in writing by the Lender, to do the following:
(i) sign and endorse any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against Account Debtors,
assignments, verifications and notices in connection with accounts and other
documents constituting or related to the Collateral;
-11-
(ii) settle, compromise or adjust any suit, action or proceeding
described above and, in connection therewith, give such discharges or releases
as Lender may deem reasonably appropriate;
(iii) file any claim or take or commence any other action or
proceeding in any court of law or equity or otherwise deemed reasonably
appropriate by Lender for the purpose of collecting any and all such monies due
under any Collateral whenever payable;
(iv) commence and prosecute any suits, actions or proceedings at law
or in equity in any court to collect the Collateral or any part thereof and to
enforce any other right in respect of any Collateral;
(v) defend any suit, action or proceeding brought against such
Grantor with respect to any Collateral if such Grantor does not defend such
suit, action or proceeding or if ▇▇▇▇▇▇ believes that such Grantor is not
pursuing its defense in a manner that will maximize the recovery with respect to
such Collateral;
(vi) license or, to the extent permitted by an applicable License,
sublicense whether general, specific or otherwise, and whether on an exclusive
or non-exclusive basis, any Trademark throughout the world on such terms and
conditions and in such manner as Lender shall, in its sole discretion,
determine; and
(vii) sell, transfer, pledge, make any agreement with respect to or
otherwise deal with any of the Collateral as fully and completely as though
Lender were the absolute owner thereof for all purposes, and to do, at ▇▇▇▇▇▇'s
option and such Grantor's expense, at any time, or from time to time, all acts
and other things which Lender reasonably deems necessary to perfect, preserve or
realize upon the Collateral and ▇▇▇▇▇▇'s Lien therein in order to effect the
intent of this Security Agreement, all as fully and effectively as such Grantor
might do and execute, in connection with the sale provided for in Section 8
hereof, any endorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral.
(c) Each Grantor hereby ratifies, to the extent permitted by law, all
that said attorneys shall lawfully do or cause to be done by virtue hereof. The
power of attorney granted pursuant to this Section 6 is a power coupled with an
interest and shall be irrevocable until the Termination Date.
(d) The powers conferred on Lender hereunder are solely to protect
▇▇▇▇▇▇'s security interests in the Collateral and shall not impose any duty upon
it to exercise any such powers. Lender shall be accountable only for amounts
that it actually receives as a result of the exercise of such powers and none of
its officers, directors, employees, agents or representatives shall be
-12-
responsible to any Grantor for any act or failure to act, except for their own
gross negligence or willful misconduct as determined by a final judgment of a
court of competent jurisdiction.
7. PERFORMANCE BY ▇▇▇▇▇▇ OF ANY GRANTOR'S OBLIGATIONS. If any Grantor
--------------------------------------------------
fails to perform or comply with any of its agreements contained herein or in any
of the other Loan Documents, and Lender, as provided for by the terms of this
Security Agreement or any other Loan Documents, shall itself perform or comply,
or otherwise cause performance of or compliance with such agreement, the
expenses, including reasonable attorneys' fees, of Lender incurred in connection
with such performance or compliance, together with interest thereon at the
default rate provided in the Credit Agreement shall be payable by each Grantor
to Lender on demand and shall constitute part of the Obligations secured hereby.
8. REMEDIES; RIGHTS UPON AN EVENT OF DEFAULT. (a) If any Event of
-----------------------------------------
Default shall occur and until such Event of Default is waived in writing by
Lender, Lender may exercise in addition to all other rights and remedies granted
to it under this Security Agreement, the Credit Agreement, the other Loan
Documents and under any other instrument or agreement securing, evidencing or
relating to the Obligations, all rights and remedies of a secured party under
the Code. Without limiting the generality of the foregoing, each Grantor
expressly agrees that in any such event Lender, without demand of performance or
other demand, advertisement or notice of any kind (except the notice specified
below of time and place of public or private sale or as expressly required by
the Credit Agreement) to or upon any Grantor or any other Person and without any
further order of the Court other than the Final Order (all and each of which
demands, advertisements and notices are hereby expressly waived to the maximum
extent permitted by the Code and other applicable law), may forthwith enter upon
the premises of any Grantor where any Collateral is located through self-help,
without judicial process, without first obtaining a final judgment or giving any
Grantor notice and opportunity for a hearing on Lender's claim or action, and
without paying rent to any Grantor, and collect, receive, assemble, process,
appropriate and realize upon the Collateral, or any part thereof, and may
forthwith sell, lease, assign, give an option or options to purchase, or sell or
otherwise dispose of and deliver said Collateral (or contract to do so), or any
part thereof, in one or more parcels at public or private sale or sales, at any
exchange at such prices as it may deem best, for cash or on credit or for future
delivery without assumption of any credit risk. Lender shall have the right
upon any such public sale or sales and, to the extent permitted by law, upon any
such private sale or sales, to purchase for its benefit the whole or any part of
said Collateral so sold, free of any right or equity of redemption, which equity
of redemption each Grantor hereby releases. Such sales may be adjourned or
continued from time to time with or without notice. Lender shall have the right
to conduct such sales on any Grantor's premises or elsewhere and
-13-
shall have the right to use any Grantor's premises without charge for such sales
for such time or times as Lender deems necessary or advisable except as
otherwise provided in the applicable landlord's waiver. For the purpose of
enabling Lender to exercise rights and remedies under this Section 8, each
Grantor hereby grants to Lender an irrevocable, non-exclusive license to use,
transfer, license or sublicense any trademark or trade name now owned or
hereafter acquired by such Grantor.
Each Grantor further agrees, at ▇▇▇▇▇▇'s request, to assemble the
Collateral and make it available to Lender at places which Lender shall
reasonably select, whether at any Grantor's premises or elsewhere. Until Lender
is able to effect a sale, lease or other disposition of the Collateral, Lender
shall have the right to hold or use the Collateral on behalf of Lender, or any
part thereof, to the extent that it deems appropriate for the purpose of
preserving the Collateral or its value or for any other purpose deemed
appropriate by Lender. Lender shall have no obligation to any Grantor to
maintain or preserve the rights of such Grantor as against third parties with
respect to the Collateral while the Collateral is in the possession of Lender.
Lender may, if it so elects, seek the appointment of a receiver or keeper to
take possession of the Collateral and to enforce any of ▇▇▇▇▇▇'s remedies with
respect to such appointment without prior notice or hearing. Lender shall apply
the net proceeds of any such collection, recovery, receipt, appropriation,
realization or sale, as provided in Section 8(d) hereof, each Grantor remaining
liable for any deficiency remaining unpaid after such application, and after so
paying over such net proceeds and after the payment in full of the Obligations,
the surplus, if any, will be delivered to the Court. To the maximum extent
permitted by applicable law, each Grantor waives all claims, damages and demands
against Lender arising out of the repossession, retention or sale of the
Collateral except such as arise out of the gross negligence or willful
misconduct of such party. Each Grantor agrees that ten (10) days' prior notice
by ▇▇▇▇▇▇ of the time and place of any public sale or of the time after which a
private sale may take place is reasonable notification of such matters. Each
Grantor shall remain liable for any deficiency if the proceeds of any sale or
disposition of the Collateral are insufficient to pay all amounts to which
Lender is entitled, each Grantor also being liable for any and all costs and
expenses incurred by ▇▇▇▇▇▇, including reasonable attorneys' fees, to collect
such deficiency.
(b) Each Grantor agrees to pay any and all costs of ▇▇▇▇▇▇, including,
without limitation, reasonable attorneys' fees, incurred in connection with the
enforcement of any of its rights and remedies hereunder.
(c) Except as otherwise specifically provided herein or in the Credit
Agreement, to the maximum extent permitted by applicable law, each Grantor
hereby waives presentment, demand,
-14-
protest or any notice (to the maximum extent permitted by applicable law) of any
kind in connection with this Security Agreement or any Collateral.
(d) The Proceeds of any sale, disposition or other realization upon all
or any part of the Collateral shall be distributed by Lender upon receipt, in
the following order of priorities:
First, the payment in full of all fees and expenses of Lender then
-----
due and payable to Lender, including all expenses of Lender in connection
with such sale, disposition or other realization and all expenses,
liabilities and advances incurred or made by Lender in connection
therewith, including reasonable attorney's fees and any other Obligations
owed to Lender (other than principal, interest or Letter of Credit
Obligations);
Second, to the payment of accrued but unpaid interest on the
------
Obligations;
Third, to cash collaterize Letter of Credit Obligations as provided
-----
for in the Credit Agreement;
Fourth, to the payment of unpaid principal of the Obligations;
------
Fifth, to the payment of all other Obligations until all other
-----
Obligations shall have been paid in full; and
Finally, any surplus then remaining from such proceeds shall be
-------
delivered to the Court or to payment to any Person as the Court may
otherwise direct.
9. LIMITATION ON LENDER'S DUTY IN RESPECT OF COLLATERAL. Lender shall
----------------------------------------------------
use reasonable care with respect to the Collateral in its possession or under
its control. Lender shall not have any other duty as to any Collateral in its
possession or control or in the possession or control of any agent or nominee of
Lender, or any income thereon or as to the preservation of rights against prior
parties or any other rights pertaining thereto. Upon request of any Grantor,
Lender shall account for any monies received by Lender in respect of any
foreclosure on or disposition of the Collateral.
10. NOTICES. Except as otherwise provided herein, whenever it is
-------
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by any other party, or whenever either of the parties desires to give or
serve upon any communication with respect to this Security Agreement, each such
notice, demand, request, consent, approval, declaration or other
-15-
communication shall be in writing and shall be given in the manner as provided
for in the Credit Agreement.
11. SEVERABILITY. Any provision of this Security Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. This Security Agreement
is to be read, construed and applied together with the Credit Agreement and the
other Loan Documents, which, taken together, set forth the complete
understanding and agreement of the Lender and each Grantor with respect to the
matters referred to herein and therein.
12. NO WAIVER; CUMULATIVE REMEDIES. Lender shall not by any act, delay,
------------------------------
omission or otherwise be deemed to have waived any of its rights or remedies
hereunder, and no waiver shall be valid unless in writing, signed by ▇▇▇▇▇▇ and
then only to the extent therein set forth. A waiver by ▇▇▇▇▇▇ of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which Lender would otherwise have had on any future occasion.
No failure to exercise nor any delay in exercising on the part of Lender, any
right, power or privilege hereunder, shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude any other or future exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies hereunder provided are
cumulative and may be exercised singly or concurrently, and are not exclusive of
any rights and remedies provided by law. None of the terms or provisions of
this Security Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by ▇▇▇▇▇▇ and each Grantor.
13. LIMITATION BY LAW. All rights, remedies and powers provided in this
-----------------
Security Agreement may be exercised only to the extent that the exercise thereof
does not violate any applicable provision of law, and all the provisions of this
Security Agreement are intended to be subject to all applicable mandatory
provisions of law that may be controlling and to be limited to the extent
necessary so that they do not render this Security Agreement invalid,
unenforceable, in whole or in part, or not entitled to be recorded, registered
or filed under the provisions of any applicable law.
14. TERMINATION OF THIS SECURITY AGREEMENT. This Security Agreement
--------------------------------------
shall terminate upon the Termination Date.
15. SUCCESSOR AND ASSIGNS. This Security Agreement and all obligations
---------------------
of each Grantor hereunder shall be binding upon the successors and assigns of
such Grantor, and shall, together with
-16-
the rights and remedies of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, inure to the benefit of ▇▇▇▇▇▇, all
future holders of any instrument evidencing any of the Obligations, any other
Person that becomes a 'Lender' under the Credit Agreement, and their respective
successors and assigns. No sales of participations, other sales, assignments,
transfers or other dispositions of any agreement governing or instrument
evidencing the Obligations or any portion thereof or interest therein shall in
any manner affect the security interest granted to Lender hereunder. Each
Grantor acknowledges that it may not assign, sell or otherwise transfer an
interest in this Security Agreement.
16. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE. EXCEPT AS
------------------------------------------------
OTHERWISE EXPRESSLY PROVIDED HEREIN OR IN ANY OF THE LOAN DOCUMENTS, IN ALL
RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS
SECURITY AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, AND ANY APPLICABLE
LAWS OF THE UNITED STATES OF AMERICA. NOTHING IN THIS SECURITY AGREEMENT SHALL
BE DEEMED OR OPERATE TO PRECLUDE LENDER FROM BRINGING SUIT OR TAKING OTHER LEGAL
ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER
SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGEMENT OR OTHER COURT ORDER IN
FAVOR OF LENDER. EACH GRANTOR EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY FEDERAL COURT SITTING IN THE
STATE OF TEXAS, AND EACH GRANTOR HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE
BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS
--------------------
AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS
DEEMED APPROPRIATE BY SUCH COURT. EACH GRANTOR HEREBY WAIVES PERSONAL SERVICE
OF THE SUMMONS, COMPLAINTS AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT
AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE
MADE BY REGISTERED OR CERTIFIED MAIL OR BY FEDERAL EXPRESS OR OTHER COURIER
SERVICE ADDRESSED TO EACH GRANTOR AT THE ADDRESSES SET FORTH IN THE CREDIT
AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON EACH GRANTOR'S
ACTUAL RECEIPT THEREOF.
[Remainder of page intentionally left blank.]
-17-
IN WITNESS WHEREOF, the parties have caused this Security Agreement to be
executed and delivered by its duly authorized officer on the date first set
forth above.
GRANTORS: 50-OFF STORES, INC.,
-------- a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇
President
50-OFF MULTISTATE OPERATIONS, INC.,
a Nevada corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇
President
50-OFF OPERATING COMPANY
a Nevada corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇
President
50-OFF TEXAS STORES, L.P.,
a Texas limited partnership
By: 50-OFF Texas Management, Inc.,
a Nevada corporation,
its managing general partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇
-----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇
President
-18-
LENDER: GENERAL ELECTRIC CAPITAL CORPORATION
------
By: /s/ General Electric Capital Corporation
-----------------------------------------
Name:
---------------------------------------
Its:
----------------------------------------
-19-
SCHEDULE 1
----------
Location of Collateral
----------------------
1. Collateral is located at each of the non-rejected store locations
identified in the attached exhibit of store leases.
2. Further collateral is located at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
3. Further collateral is located at the warehouse of DFW Logistics
located at ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
TRADEMARK AND LICENSE SECURITY AGREEMENT
----------------------------------------
THIS TRADEMARK AND LICENSE SECURITY AGREEMENT (this "Agreement") is
made as of November 18, 1996, by and among 50-OFF Stores, Inc., a Delaware
corporation, 50-OFF Texas Stores, L.P., a Texas limited partnership, 50-OFF
Operating Company, a Nevada corporation, and 50-OFF Multistate Operations, Inc.,
a Nevada corporation (collectively, the "Borrowers"), and General Electric
Capital Corporation, a New York corporation (the "Lender") (as such terms are
defined in the Credit Agreement defined below).
W I T N E S S E T H:
-------------------
WHEREAS, the Borrowers and the Lender are parties to that certain
$15,000,000 Senior Secured Super Priority Debtor-in-Possession Revolving Credit
Agreement of even date herewith (as the same may hereafter be modified, amended,
restated or supplemented from time to time, the "Credit Agreement"), pursuant to
----------------
which the Lender may, from time to time, extend credit to the Borrowers; and
WHEREAS, the Borrowers and the Lender are parties to that certain
Security Agreement of even date herewith (as the same may hereafter be modified,
amended, restated or supplemented from time to time, the "Security Agreement"),
------------------
pursuant to which each of the Borrowers has granted a security interest in
certain of its assets to the Lender; and
WHEREAS, the Lender has required each of the Borrowers to execute and
deliver this Agreement (i) in order to secure the prompt and complete payment,
observance and performance of all of the Obligations (as defined in the Credit
Agreement) and (ii) as a condition precedent to any extension of credit under
the Credit Agreement;
NOW, THEREFORE, in consideration of the premises set forth herein and
for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, each Borrower agrees as follows:
1. Defined Terms.
-------------
(a) Unless otherwise defined herein, each capitalized term used
herein that is defined in the Credit Agreement shall have the meaning specified
for such term in the Credit Agreement. Unless otherwise defined herein or in
the
Credit Agreement, each capitalized term used herein that is defined in the
Security Agreement shall have the meaning specified for such term in the
Security Agreement.
(b) The words "hereof," "herein" and "hereunder" and words of like
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and paragraph references are
to this Agreement unless otherwise specified.
(c) All terms defined in this Agreement in the singular shall have
comparable meanings when used in the plural, and vice versa, unless otherwise
----------
specified.
2. Incorporation of Premises. The premises set forth above are
-------------------------
incorporated into this Agreement by this reference thereto and are made a part
hereof.
3. Incorporation of the Credit Agreement. The Credit Agreement
-------------------------------------
and the terms and provisions thereof are hereby incorporated herein in their
entirety by this reference thereto.
4. Security Interest in Trademarks. To secure the complete and
-------------------------------
timely payment, performance and satisfaction of all of the Obligations, each
Borrower hereby grants to the Lender, a security interest in, as and by way of a
first mortgage and security interest having priority over all other security
interests, with power of sale to the extent permitted by applicable law, all of
each Borrower's now owned or existing and hereafter acquired or arising: (i)
trademarks, trade names, registered trademarks, trademark applications, service
marks, registered service marks and service mark applications, including,
without limitation, the trademarks, trade names, registered trademarks,
trademark applications, service marks, registered service marks and service mark
applications listed on Schedule 1 attached hereto and made a part hereof, and
----------
(a) all renewals thereof, (b) all income, royalties, damages and payments now
and hereafter due and/or payable under and with respect thereto, including,
without limitation, payments under all licenses entered into in connection
therewith and damages and payments for past or future infringements or dilutions
thereof, (c) the right to sue for past, present and future infringements and
dilutions thereof, (d) the goodwill of each Borrower's business symbolized by
the foregoing and connected therewith, and
2
(e) all of each Borrower's rights corresponding thereto throughout the world
(all of the foregoing trademarks, trade names, registered trademarks and
trademark applications, service marks, registered service marks and service mark
applications, together with the items described in clauses (a)-(e) in this
---------------
paragraph 4(i), are sometimes hereinafter individually and/or collectively
--------------
referred to as the "Trademarks"); and (ii) the goodwill of each Borrower's
----------
business connected with and symbolized by the Trademarks.
5. Security Interest in Licenses. To secure the complete and
-----------------------------
timely payment, performance and satisfaction of all of the Obligations, each
Borrower hereby grants to the Lender, a security interest in, as and by way of a
first mortgage and security interest having priority over all other security
interests, with power of sale to the extent permitted by applicable law, all of
each Borrower's now owned or existing and hereafter acquired or arising rights
under or interest in any license agreements with any other party, whether such
Borrower is a licensee or licensor under any such license agreement, including,
without limitation, license agreements listed on Schedule 2 attached hereto and
----------
made a part hereof, together with any goodwill connected with and symbolized by
any such license agreements, and the right to use the foregoing in connection
with the enforcement of the Lender's rights under the Credit Agreement,
including without limitation, the right to prepare for sale and sell any and all
Inventory now or hereafter owned by any Borrower and now or hereafter covered by
such licenses (all of the foregoing are hereinafter referred to collectively as
the "Licenses"). Notwithstanding the foregoing provisions of this paragraph 5,
-------- -----------
the Licenses shall not include any license agreement in effect as of the date
hereof which by its terms prohibits the grant of the security contemplated by
this Agreement; provided, however, that upon the termination of such
-------- -------
prohibitions for any reason whatsoever, the provisions of this paragraph 5 shall
-----------
be deemed to apply thereto automatically.
6. Restrictions on Future Agreements. None of the Borrowers
---------------------------------
will, without the Lender's prior written consent, enter into any agreement,
including, without limitation, any license agreement, which is inconsistent with
this Agreement, and each Borrower further agrees that it will not take any
action, and will use its best efforts not to permit any action to be taken by
others subject to its control, including, without limitation, licensees, or fail
to take any action, which would in any
3
material respect affect the validity or enforcement of the rights transferred to
the Agent under this Agreement or the rights associated with the Trademarks or
the Licenses.
7. New Trademarks and Licenses. Each Borrower represents and
---------------------------
warrants that, from and after the Closing Date, (a) the Trademarks listed on
Schedule 1 include all of the trademarks, trade names, registered trademarks,
----------
trademark applications, service marks, registered service marks and service mark
applications now owned or held by any Borrower, (b) the Licenses listed on
Schedule 2 include all of the license agreements under which any Borrower is the
----------
license or licensor, and (c) no liens, claims or security interests in such
Trademarks or Licenses have been granted by any Borrower to any Person other
than the Lender and except as disclosed in the Credit Agreement. If, prior to
the termination of this Agreement, any Borrower shall (i) obtain rights to any
new trademarks, trade names, registered trademarks, trademark applications,
service marks, registered service marks or service mark applications, (ii)
obtain rights to any new license agreements, (iii) become entitled to the
benefit of any trademarks, trade names, registered trademarks, trademark
applications, trademark licenses, trademark license renewals, service marks,
registered service marks, service mark applications, service mark licenses or
service mark license renewals or license agreements whether as licensee or
licensor, or (iv) enter into any new license agreement, the provisions of
paragraphs 4 & 5, as applicable, above shall automatically apply thereto (to the
----------------
extent permitted by licensors under agreements in connection with the granting
of such licenses). Each Borrower shall give to the Agent written notice of
events described in clauses (i), (ii), (iii), and (iv) of the preceding sentence
------------------------- ----
promptly after the occurrence thereof. Each Borrower hereby authorizes the
Lender to modify this Agreement unilaterally (i) by amending Schedule 1 to
----------
include any future trademarks, trade names, registered trademarks, trademark
applications, service marks, registered service marks and service mark
applications, which are Trademarks under paragraph 4 above or under this
-----------
paragraph 7, (ii) by amending Schedule 2 to include any future license
----------- ----------
agreements which are licenses under paragraph 5 above or under this paragraph 7,
----------- -----------
and (iii) by filing, in addition to and not in substitution for this Agreement,
a duplicate original of this Agreement containing on Schedule 1 thereto, as the
----------
case may be, such future trademarks, trade names, registered trademarks,
trademark applications, service marks, registered service marks and service mark
applications and
4
containing on Schedule 2 thereto, as the case may be, such future license
----------
agreements.
8. Royalties. Each Borrower hereby agrees that the use by the
---------
Lender of the Trademarks and the Licenses as authorized hereunder in connection
with the Lender's exercise of its rights and remedies under paragraph 16 or
------------
pursuant to any Loan Document shall be coextensive with each Borrower's rights
thereunder and with respect thereto and without any liability for royalties or
other related charges from the Lender to the Borrowers.
9. Right to Inspect; Further Assignments and Security Interest.
-----------------------------------------------------------
The Lender may at all times, in accordance with the Credit Agreement, have
access to, examine, audit, make copies (at such Borrower's expense) and extracts
from and inspect each Borrower's premises and examine each Borrower's books,
records and operations relating to the Trademarks or the Licenses. Each
Borrower agrees (i) not to sell or assign its respective interests in, or grant
any license under, the Trademarks without the prior and express written consent
of the Lender, and (ii) not to sell or assign its respective interests in the
Licenses without the prior and express written consent of the Lender.
10. Nature and Continuation of the Lender's Security Interest;
----------------------------------------------------------
Termination of the Lender's Security Interest. This Agreement is made for
---------------------------------------------
collateral security purposes only. This Agreement shall create a continuing
security interest in the Trademarks and the Licenses and shall terminate only
when the Obligations have been paid in full and the Commitment, the Credit
Agreement and the Security Agreement have been terminated. When this Agreement
has terminated, the Lender shall promptly execute and deliver to the Borrower
Representative, at the Borrowers' expense, all termination statements and other
instruments as may be necessary or proper to terminate the Lender's security
interest in the Trademarks and in the Licenses, subject to any disposition
thereof which may have been made by the Lender pursuant to this Agreement or the
Security Agreement.
11. Duties of the Borrowers. Each Borrower shall have the duty:
-----------------------
(i) to the extent desirable in the normal conduct of each Borrower's business,
(x) to prosecute diligently any trademark application or service mark
application that is part of the Trademarks pending as of the date hereof or
hereafter until
5
the termination of this Agreement and (y) to take all reasonable and necessary
action to preserve and maintain all of each Borrower's rights in the Licenses,
and (ii) to make application for trademarks or service marks. Each Borrower
further agrees (i) not to abandon any Trademark or any License without the prior
written consent of the Lender, and (ii) to use its best efforts to maintain in
full force and effect the Trademarks and the Licenses that are or shall be
necessary or economically desirable in the operation of any Borrower's business.
Any expenses incurred in connection with the foregoing shall be borne by the
Borrowers. The Lender shall not have any duty with respect to the Trademarks or
the Licenses. Without limiting the generality of the foregoing, the Lender
shall not be under any obligation to take any steps necessary to preserve rights
in the Trademarks or the Licenses against any other parties, but the Lender may
do so at its option from and after the occurrence of an Event of Default, and
all expenses incurred in connection therewith shall be for the sole account of
the Borrowers and shall be added to the Obligations secured hereby.
12. The Lender's Right to ▇▇▇. From and after the occurrence of
-------------------------
an Event of Default, the Lender shall have the right, but shall not be
obligated, to bring suit in its own name to enforce the Trademarks and Licenses
and, if the Lender shall commence any such suit, each Borrower shall, at the
request of the Lender, do any and all lawful acts and execute any and all proper
documents reasonably required by the Lender in aid of such enforcement. Each
Borrower shall, upon demand, promptly reimburse the Lender for all costs and
expenses incurred by the Lender in the exercise of its rights under this
paragraph 12 (including, without limitation, reasonable fees and expenses of
------------
attorneys and paralegals for the Lender).
13. Waivers. The Lender's failure, at any time or times hereafter, to
-------
require strict performance by each Borrower of any provision of this Agreement
shall not waive, affect or diminish any right of the Lender thereafter to demand
strict compliance and performance therewith nor shall any course of dealing
between any Borrower and the Lender have such effect. No single or partial
exercise of any right hereunder shall preclude any other or further exercise
thereof or the exercise of any other right. None of the undertakings,
agreements, warranties, covenants and representations of any Borrower contained
in this Agreement shall be deemed to have been suspended or waived by the Lender
unless such suspension or waiver is in writing signed by
6
an officer of the Lender and directed to such Borrower specifying such
suspension or waiver.
14. Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but the provisions of this Agreement are severable, and if any
clause or provision shall be held invalid and unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part hereof, in such jurisdiction, and shall not in
any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Agreement in any jurisdiction.
15. Modification. This Agreement cannot be altered, amended or
------------
modified in any way, except as specifically provided in paragraph 7 hereof or by
-----------
a writing signed by the parties hereto.
16. Power of Attorney; Cumulative Remedies. (a) Each Borrower
--------------------------------------
hereby irrevocably designates, constitutes and appoints the Lender (and all
officers and agents of the Lender designated by the Lender in its sole and
absolute discretion) as each Borrower's true and lawful attorney-in-fact, and
authorizes the Lender and any of the Lender's designees, in any Borrower's or
the Lender's name, from and after the occurrence of an Event of Default, and
upon the giving by the Lender of notice to any Borrower of the Lender's
intention to enforce its rights and claims against such Borrower, to take any
action and execute any instrument necessary or reasonably advisable to
accomplish the purposes of this Agreement, including, without limitation, to (i)
endorse the Borrower's name on all applications, documents, papers and
instruments necessary or reasonably desirable for the Lender in the use of the
Trademarks or the Licenses, (ii) assign, pledge, convey or otherwise transfer
title in or dispose of the Trademarks or the Licenses to anyone, if permitted by
their terms or by the Court, (iii) grant or issue any exclusive or nonexclusive
license under the Trademarks or the Licenses, if permitted by their terms or by
the Court, to anyone, and (iv) take any other actions with respect to the
Trademarks or the Licenses as the Lender deems in its best interest. Each
Borrower hereby ratifies all that such attorney shall lawfully do or cause to be
done by virtue hereof. This power of attorney is coupled with an interest and
shall be irrevocable. Each Borrower acknowledges and agrees that this Agreement
is not intended to
7
limit or restrict in any way the rights and remedies of the Lender under the
Security Agreement, any other Loan Document or the Final Order, but rather is
intended to facilitate the exercise of such rights and remedies.
(b) The Lender shall have, in addition to all other rights and
remedies given it by the terms of this Agreement, all rights and remedies
allowed by law and the rights and remedies of a secured party under the Uniform
Commercial Code as enacted in any jurisdiction in which the Trademarks or the
Licenses may be located or deemed located. Upon the occurrence of an Event of
Default and the election by the Lender to exercise any of its remedies under
Section 9-504 or Section 9-505 of the Uniform Commercial Code with respect to
the Trademarks or the Licenses, each Borrower agrees to assign, convey and
otherwise transfer title in and to the Trademarks and the Licenses to the Lender
or any transferee of the Lender and to execute and deliver to the Lender or any
such transferee all such agreements, documents and instruments as may be
necessary, in the Lender's sole discretion, to effect such assignment,
conveyance and transfer. All of the Lender's rights and remedies with respect to
the Trademarks and the Licenses, whether established hereby, by the Security
Agreement or by any other agreements or by law, shall be cumulative and may be
exercised separately or concurrently. Notwithstanding anything set forth herein
to the contrary, it is hereby expressly agreed that upon the occurrence of an
Event of Default, the Lender may exercise any of the rights and remedies
provided in this Agreement, the Security Agreement, any of the other Loan
Documents and the Final Order. Each Borrower agrees that any notification of
intended disposition of any of the Trademarks or Licenses required by law shall
be deemed reasonably and properly given if given at least ten (10) days before
such disposition; provided, however, that the Lender may give any shorter notice
-------- -------
that is commercially reasonable under the circumstances or approved by the
Court.
17. Successors and Assigns. This Agreement shall be binding upon
----------------------
each Borrower and its successors and assigns, and shall inure to the benefit of
each of the Lender and its nominees, successors and assigns. Each Borrower's
successors and assigns shall include, without limitation, a receiver, or a
trustee of or such Borrower; provided, however, that none of the Borrowers shall
-------- -------
voluntarily assign or transfer its rights or obligations hereunder without the
Lender's prior written consent.
8
18. Governing Law. This Agreement shall be construed and enforced
-------------
and the rights and duties of the parties shall be governed by in all respects in
accordance with the laws and decisions of the State of Georgia without reference
to the conflicts of law principles thereof.
19. Notices. All notices or other communications hereunder shall
-------
be given in the manner and to the addresses set forth in the Credit Agreement.
20. Paragraph Titles. The paragraph titles herein are for
----------------
convenience of reference only, and shall not affect in any way the
interpretation of any of the provisions hereof.
21. Execution in Counterparts. This Agreement may be executed in
-------------------------
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
22. Merger. This Agreement represents the final agreement of the
------
Borrowers and the Lender with respect to the matters contained herein and may
not be contradicted by evidence of prior or contemporaneous agreements, or
subsequent oral agreements, between any Borrower.
23. This Agreement shall become effective on the Closing Date.
[Remainder of this page intentionally left blank]
9
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.
Sworn to and subscribed 50-OFF STORES, INC.
before me this ___ day of
November, 1996.
By: /s/ 50-OFF Stores, Inc.
-----------------------------------
-------------------------------------- Its:
NOTARY PUBLIC ----------------------------------
--------------------------------------
My Commission Expires
Accepted and agreed to as
of the day and year first
above written.
Sworn to and subscribed 50-OFF TEXAS STORES, L.P.
before me this ___ day of
November, 1996.
By: /s/ 50-OFF Texas Management, Inc.
-----------------------------------
-------------------------------------- Its:
NOTARY PUBLIC ----------------------------------
--------------------------------------
My Commission Expires
Accepted and agreed to as
of the day and year first
above written.
Sworn to and subscribed 50-OFF OPERATING COMPANY
before me this ___ day of
November, 1996.
By: /s/ 50-OFF Operating Company
-------------------------------------- -----------------------------------
NOTARY PUBLIC Its:
----------------------------------
--------------------------------------
My Commission Expires
10
Sworn to and subscribed 50-OFF MULTISTATE OPERATIONS, INC.
before me this ___ day of
November, 1996.
By: /s/ 50-OFF Multistate Operations, Inc.
------------------------------- ------------------------------------------
NOTARY PUBLIC Its:
------------------------------------------
-------------------------------
My Commission Expires
Accepted and agreed to as
of the day and year first
above written.
Sworn to and subscribed GENERAL ELECTRIC CAPITAL
before me this ___ day of CORPORATION
November, 1996.
------------------------------- By: /s/ General Electric Capital Corporation
NOTARY PUBLIC ------------------------------------------
Its:
------------------------------- -----------------------------------------
My Commission Expires
11
Schedule 1
to
Trademark and License Security Agreement
Dated as of November 18, 1996
Current Trademarks
------------------
SECTION
8
& 15 DUE RENEWAL
COUNTRY REG. NO. REG. DATE MARK BY DATE
--------- --------- --------- --------------------- -------- -------
Mexico 482,205 12/22/92 The 50-Off (Plus n/a 4/23/02
Design)
U.S. 1,710,636 8/25/92 The 50-Off (Plus 8/25/98 8/25/02
Design)
U.S. 1,710,637 8/25/92 50 Off (Plus Design) 8/25/98 8/25/02
U.S. 1,716,901 9/16/92 50-Off Why Pay More 9/15/98 9/15/02
(Plus Design)
U.S. 1,818,263 1/25/94 50-Off Stores Where 1/25/00 1/25/04
You Save as Much as
you Spend
U.S. 1,494,671 6/28/88 The 50-Off (Plus n/a 6/28/08
Design)
Tradenames
----------
Trademarks Not Currently In Use
-------------------------------
Name Registration No.
---- ----------------
A-1
Trademarks and Service Mark Applications
----------------------------------------
Section 8
& Renewal
Country Docket No. Reg. Date Mark 15 Due By Date
--------- ---------- --------- -------- --------- -------
U.S. 060615.120 n/a Lots Off n/a n/a
A-2
SCHEDULE 2
----------
License Agreements
------------------
The sole licenses, permits and approvals of Borrowers consist of sales tax
permits, certificates of occupancy, and food and non-alcoholic beverage licenses
which will be provided to Lender within ten (10) business days of written
request therefor from Lender to Borrowers.
STOCK PLEDGE AGREEMENT
----------------------
This Stock Pledge Agreement (this "Agreement"), entered into as of this
18 day of November, 1996, by and between 50-OFF Stores, Inc., a Delaware
corporation (the "Pledgor") and General Electric Capital Corporation, a New York
corporation (the "Lender"),
W I T N E S S E T H :
---------------------
WHEREAS, the Pledgor is the owner of the issued and outstanding stock of
each of the Subsidiaries listed on Schedule 1 attached hereto in the percentage
----------
amounts set forth on Schedule 1 attached hereto (the "Subsidiaries"); and
----------
WHEREAS, the Pledgor, 50-OFF Texas Stores, L.P., a Texas limited
partnership, 50-OFF Operating Company, a Nevada corporation, and 50-OFF
Multistate Operations, Inc., a Nevada corporation (together with Pledgor,
referred to collectively as the "Borrowers") and the Lender are parties to that
certain $15,000,000 Senior Secured Super Priority Debtor-In-Possession Revolving
Credit Agreement of even date herewith among Pledgor (as amended, modified or
supplemented from time to time, the "Credit Agreement"), pursuant to which the
Lender has agreed to extend credit to the Borrowers in an aggregate amount not
to exceed $15,000,000; and
WHEREAS, in consideration for, among other things, the Lender's execution
of the Credit Agreement, and to secure the payment and performance of the
Obligations of the Borrowers under the Credit Agreement, the Pledgor has agreed
to pledge to the Lender all of the shares of stock of Subsidiaries owned by the
Pledgor (the "Stock");
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree that capitalized terms used herein shall
have the meanings ascribed to them in the Credit Agreement to the extent not
otherwise defined or limited herein, and further agree as follows:
1. Security Interest. The Pledgor hereby unconditionally pledges,
-----------------
transfers, conveys, grants and assigns to the Lender and its successors and
assigns a continuing security interest in and security title to the Stock owned
by it and all substitutions therefor and replacements thereof, all proceeds and
products thereof and all rights relating thereto, including, without limitation,
the certificates representing the Stock, all warrants, options, share
appreciation rights and other rights, contractual or otherwise, in respect
thereof and of all dividends, cash, instruments and other property from time to
time received, receivable or otherwise distributed in respect of or in addition
to, in substitution of, on account of or in exchange for any or all of the
Stock, whether now owned or hereafter acquired by the Pledgor. The Pledgor has
delivered to the Lender certificates representing the Stock owned by it, and an
undated stock power endorsed in blank, as security for the Obligations; it being
the intention of the parties hereto that record and beneficial ownership of the
Stock including, without limitation, all voting and consensual rights shall
remain in the Pledgor until the occurrence of an Event of Default and until the
Lender shall notify the Pledgor of the Lender's exercise of voting and dividend
rights to the Stock pursuant to Section 9 of this Agreement.
---------
2. Additional Shares. In the event that, during the term of this
-----------------
Agreement:
(a) any stock dividend, stock split, reclassification, readjustment
or other change is declared or made in the capital structure of any of
the Subsidiaries, or any new stock is issued by any of the Subsidiaries,
all new, substituted, and additional shares, or other securities, shall
be issued to the Pledgor, and shall be promptly delivered to the Lender,
together with undated stock powers endorsed in blank by the Pledgor and
shall thereupon constitute additional Stock, to be held by the Lender
under the terms of this Agreement; and
(b) any subscriptions, warrants or any other rights or options
issued in connection with the Stock, all new stock or other securities
acquired through such subscriptions, warrants, rights or options by the
2
Pledgor, together with appropriate powers, shall be promptly delivered to
the Lender and shall thereupon constitute additional Stock, to be held by
the Lender under the terms of this Agreement.
3. Representations and Warranties. The Pledgor hereby represents and
------------------------------
warrants to the Lender that: (a) except for the security interest created
hereby, the Pledgor is and will at all times be the legal and beneficial owner
of the Stock free and clear of all Liens; (b) all shares of capital stock from
time to time constituting the Stock, either have been or will be duly
authorized, validly issued, fully paid and non-assessable, with no personal
liability attaching to the ownership thereof, and the Stock constitutes such
percentage of the issued and outstanding shares of capital stock of each of the
Subsidiaries as set forth on Schedule 1 attached hereto; (c) the Pledgor has the
----------
unencumbered right and power to pledge the Stock, as provided herein; and (d)
all actions necessary or desirable to perfect, establish the first priority of,
or otherwise protect, the security interest of the Lender in the Stock, have
been duly taken, upon the taking possession by the Lender of certificates
constituting Stock on the date hereof.
4. Default. Upon the occurrence of an Event of Default and until such
-------
Event of Default is waived in writing by the Lender, the Lender may, in
accordance with Section 9.2 of the Credit Agreement, sell or otherwise dispose
-----------
of the Stock, at a public or private sale or make other disposition of the
Stock, or any portion thereof, and the Lender may purchase the Stock, or any
portion thereof at any public sale. The proceeds of the public or private sale
or other disposition shall be first applied to the reasonable costs of the
Lender incurred in connection with the sale, expressly including, but not
limited to, any costs under Section 7 hereof, and then applied as set forth in
---------
the Credit Agreement, and the Borrowers shall remain liable for any deficiency.
5. Additional Rights of Secured Party. In addition to its rights and
----------------------------------
privileges under this Agreement, the Lender, shall have all the rights, powers
and privileges of a secured party under the Uniform Commercial Code as in effect
in any applicable jurisdiction.
3
6. Return of Stock to the Pledgor. On the Termination Date, the Lender
------------------------------
shall return the remaining Stock and all rights received by the Lender as a
result of its possessory interest in the Stock to the Pledgor (except to the
extent the Stock is subject to remedies then being exercised by the Lender
hereunder), and this Agreement shall terminate.
7. Disposition of Stock by ▇▇▇▇▇▇. The Stock is not registered or
------------------------------
qualified under the various Federal or state securities laws of the United
States and disposition thereof after an Event of Default, in accordance with
Section 4 above, may be restricted to one or more private (instead of public)
---------
sales in view of the lack of such registration. The Pledgor understands that
upon such disposition, the Lender may approach only a restricted number of
potential purchasers and further understands that a sale under such
circumstances may yield a lower price for the Stock than if the Stock was
registered and qualified pursuant to Federal and state securities laws and sold
on the open market. The Pledgor, therefore, agrees that:
(a) if the Lender shall, pursuant to the terms of this Agreement,
sell or cause the Stock or any portion thereof to be sold at a private
sale, the Lender shall have the right to rely upon the advice and opinion
of any national investment firm (but shall not be obligated to seek such
advice and the failure to do so shall not be considered in determining
the commercial reasonableness of such action) as to the best manner in
which to expose the Stock for sale and as to the best price reasonably
obtainable at the private sale thereof; and
(b) that such reliance shall be conclusive evidence that the Lender
has handled such disposition in a commercially reasonable manner.
8. ▇▇▇▇▇▇▇'s Obligations Absolute. The obligations of the Pledgor
------------------------------
under this Agreement shall be direct and immediate and not conditional or
contingent upon the pursuit of any remedies against other security or liens
available to the Lender. The Pledgor waives any right to require that resort be
had to any security or to any balance of any deposit account or credit on the
books of the Lender prior to the exercise of remedies hereunder, or to require
action hereunder prior to resort by the Lender to any other security or
collateral for the Obligations.
4
9. Voting Rights.
-------------
(a) After the occurrence of an Event of Default, motion for
authorization filed with the Court and entry of an order of the Court
pursuant to Section 9.2 of the Credit Agreeent, (i) the Lender may, upon
ten (10) calendar days' prior notice to the Pledgor of its intention to
do so, exercise all voting rights, and all other ownership or consensual
rights of the Stock but under no circumstances is the Lender obligated by
the terms of this Agreement to exercise such rights (and if the Lender
fails to exercise such rights, the Pledgor may continue to exercise such
rights), and (ii) the Pledgor hereby appoints the Lender, which
appointment shall be effective on the 10th day following the giving of
notice by the Lender as provided in the foregoing Section 9(a)(i), the
---------------
Pledgor's true and lawful attorney-in-fact and IRREVOCABLE PROXY to vote
the Stock in any manner the Lender deems advisable for or against all
matters submitted or which may be submitted to a vote of shareholders.
The power-of-attorney granted hereby is coupled with an interest and
shall be irrevocable until this Agreement is terminated pursuant to
Section 6 hereof.
---------
(b) For so long as the Pledgor shall have the right to vote the
Stock, the Pledgor covenants and agrees that it will not, without the
prior written consent of the Lender, vote or take any consensual action
with respect to the Stock which would constitute a breach of any covenant
or condition under the Credit Agreement or any other Loan Document.
10. Notices. All notices and other communications required or permitted
-------
hereunder shall be in writing and shall be given in the manner and at the
addresses as set forth in the Credit Agreement.
11. Governing Law; Entire Agreement. This Agreement shall be construed
-------------------------------
and interpreted in accordance with the internal laws of the State of Georgia
applicable to agreements made and to be performed wholly within the State of
Georgia. This Agreement, together with all documents referred to herein,
5
constitutes the entire agreement between the parties with respect to the matters
addressed herein and may not be modified except by a writing executed by the
Lender and the Pledgor and delivered by the Lender to the Pledgor.
12. Severability. If any paragraph of this Agreement, or part thereof,
------------
shall for any reason be held or adjudged to be invalid, illegal or unenforceable
by any court of competent jurisdiction, such paragraph or part thereof so
adjudicated invalid, illegal or unenforceable shall be deemed separate, distinct
and independent, and the remainder of this Agreement shall remain in full force
and effect and shall not be affected by such holding or adjudication.
13. Successors and Assigns. This Agreement shall be binding upon the
----------------------
Pledgor and its successors and assigns, and shall inure to the benefit of the
Lender, any other Person which subsequently becomes a 'Lender' under the Credit
Agreement, and their respective successors and assigns.
14. Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed to be an original, but all such
separate counterparts shall together constitute but one and the same instrument.
[Remainder of this page intentionally left blank.]
6
IN WITNESS WHEREOF, the undersigned parties hereto have executed this
Agreement by and through their duly authorized officers, as of the day and year
first above written.
PLEDGOR: 50-OFF STORES, INC.
By: /s/ 50-OFF Stores, Inc.
--------------------------------------------
Its:
-------------------------------------------
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ General Electric Capital Corporation
--------------------------------------------
Its:
---------------------------------
7
SCHEDULE 1
----------
Outstanding Stock of Subsidiaries
ENTITY SHARES OWNED BY PERCENTAGE
OUTSTANDING OWNERSHIP
-----------------------------------------------------------------------------------
50-OFF Multistate Operations, Inc. 25,000 50-OFF Stores, Inc. 100%
-----------------------------------------------------------------------------------
50-OFF Operating Company 25,000 50-OFF Stores, Inc. 100%
-----------------------------------------------------------------------------------
50-OFF Texas Management, Inc. 25,000 50-OFF Stores, Inc. 100%
-----------------------------------------------------------------------------------
You Pay Half Investments, Inc. 25,000 50-OFF Stores, Inc. 100%
-----------------------------------------------------------------------------------
GUARANTY
--------
THIS GUARANTY (this "Guaranty") is made and entered into as of November
18, 1996 by 50-OFF TEXAS MANAGEMENT, INC., a Nevada corporation (the
"Guarantor"), in favor of GENERAL ELECTRIC CAPITAL CORPORATION, a New York
corporation having an office at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Lender").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to and subject to the terms and conditions of that
certain $15,000,000 Senior Secured Super Priority Debtor-In-Possession Revolving
Credit Agreement dated as of November 18, 1996, by and among 50-Off Stores,
Inc. a Delaware corporation ("Parent"), 50-Off Texas Stores, L.P., a Texas
limited partnership, 50-Off Multistate Operations, Inc., a Nevada corporation,
and 50-Off Operating Company, a Nevada corporation, (together with Parent,
collectively referred to as "Borrowers" and individually as a "Borrower") and
Lender (as the same from time to time may be amended, restated, supplemented or
otherwise modified, the "Credit Agreement"), Lender has agreed, among other
things, to make Advances to Borrowers pursuant to the Credit Agreement (except
as otherwise defined herein, all other capitalized terms used herein shall have
the respective meanings given to such terms in the Credit Agreement); and
WHEREAS, Parent owns 100% of the issued and outstanding capital
stock of the Guarantor; and
WHEREAS, the transactions contemplated by the Credit Agreement will
confer, directly or indirectly, a benefit on the Guarantor; and
WHEREAS, ▇▇▇▇▇▇ is willing to make Advances as and to the extent
provided for in the Credit Agreement, but only upon the condition, among others,
that the Guarantor shall have executed and delivered this Guaranty in favor of
Lender for the benefit of securing the Obligations under the Loan Documents;
NOW, THEREFORE, in consideration of the premises and in order to
induce Lender to extend credit under the Credit Agreement, the Guarantor hereby
agrees with ▇▇▇▇▇▇, for the benefit of ▇▇▇▇▇▇, as follows:
SECTION 1. THE GUARANTY. The guaranty of the Guarantor hereunder
------------
is as follows:
SECTION 1.1 Guaranty of Extensions of Credit to Borrowers. The
---------------------------------------------
Guarantor hereby unconditionally and irrevocably guarantees to Lender and its
successors, endorsees, transferees and assigns, the prompt and complete payment
when due (whether at stated maturity, by acceleration or otherwise) and
performance of all of the Obligations. The Guarantor agrees that this Guaranty
is a guaranty of payment and performance and not of collection, and that its
obligations under this Guaranty shall be joint and several with every other
guarantor and any other Persons which may at any time or from time to time be or
become directly or indirectly financially responsible to Lender with respect to
the Obligations and shall be under all circumstances primary, absolute and
unconditional, irrespective of, and unaffected by:
(a) the genuineness, validity, regularity, enforceability or any
future amendment of, or change in this Guaranty, the Credit Agreement, any Loan
Document or other agreement, document or instrument to which any Borrower or the
Guarantor (collectively, a "Loan Party") is or may become a party;
(b) the absence of any action to enforce this Guaranty, the
Credit Agreement, any Loan Document or the waiver or consent by Lender with
respect to any of the provisions thereof;
(c) the existence, value or condition of, or failure of Lender to
perfect its Lien against, any security for the Obligations or any action, or the
absence of any action, by Lender in respect thereof (including, without
limitation, the release of any such security);
(d) any bankruptcy, insolvency, reorganization, arrangement,
adjustment, composition, liquidation or the like of the Guarantor;
(e) any merger or consolidation of any Loan Party into or with
any other Person, or any sale, lease or transfer of any or all of the assets of
any Loan Party to any other Person;
(f) any circumstance other than full and final payment which
might constitute a defense available to, or a discharge of, any Loan Party;
2
(g) absence of any notice to, or knowledge by, the Guarantor of the
existence or occurrence of any of the matters or events set forth in the
foregoing subdivisions (a) through (f); or
(h) any sale, transfer or other disposition by Parent of any stock of
the Guarantor;
it being agreed by the Guarantor that its obligations under this Guaranty shall
not be discharged until the Termination Date or the release in writing of the
Guarantor by Lender of the Guarantor's obligations hereunder, whichever shall
occur first. The Guarantor shall be regarded, and shall be in the same
position, as principal debtor with respect to the Obligations and specifically
agrees that, notwithstanding any discharge of any Borrower or any other Person
or the operation of any provision of the Bankruptcy Code with respect to the
Obligations or any such Persons, the Guarantor shall be fully responsible for
paying all interest and costs of enforcement or preservation and protection of
Collateral which may at any time accrue with respect to the Obligations. The
Guarantor expressly waives all rights it may have now or in the future under any
statute, or at common law, or at law or in equity, or otherwise, to compel
Lender to proceed in respect of the Obligations against any Borrower or any
other Person or against any security for the payment and performance of the
Obligations before proceeding against, or as a condition to proceeding against,
the Guarantor. The Guarantor agrees that any notice or directive given at any
time to Lender which is inconsistent with the waiver in the immediately
preceding sentence shall be null and void and may be ignored by , and, in
addition, may not be pleaded or introduced as evidence in any litigation
relating to this Guaranty for the reason that such pleading or introduction
would be at variance with the written terms of this Guaranty unless ▇▇▇▇▇▇ has
specifically agreed otherwise in writing. It is agreed between the Guarantor
and ▇▇▇▇▇▇ that the foregoing waivers are of the essence of the transaction
contemplated by the Loan Documents and that, but for this Guaranty and such
waivers, Lender will decline to extend credit under the Credit Agreement.
SECTION 1.2 Maximum Guaranteed Amount. Notwithstanding any other
-------------------------
provision of this Guaranty to the contrary, if the obligations of the Guarantor
hereunder would otherwise be held or determined by a court of competent
jurisdiction in any action or proceeding involving any state corporate law or
any state or Federal bankruptcy, insolvency, reorganization, moratorium,
3
fraudulent conveyance or other law affecting the rights of creditors generally,
to be void, invalid or unenforceable to any extent on account of the amount of
the Guarantor's liability under this Guaranty, then notwithstanding any other
provision of this Guaranty to the contrary, the amount of such liability shall,
without any further action by the Guarantor or any other Person, be
automatically limited and reduced to the highest amount which is valid and
enforceable as determined in such action or proceeding.
SECTION 1.3 Enforcement of Guaranty. In no event shall Lender have
-----------------------
any obligation (although it is entitled, at its option) to proceed against any
Borrower or any other Person or any real or personal property pledged to secure
the Obligations before seeking satisfaction from the Guarantor, and Lender may
proceed, prior or subsequent to, or simultaneously with, the enforcement of
Lender's rights hereunder, to exercise any right or remedy which it may have
against any property, real or personal, as a result of any Lien it or they may
have as security for all or any portion of the Obligations.
SECTION 1.4 Waiver. The Guarantor hereby waives diligence,
------
presentment and demand (whether for nonpayment or protest or of acceptance,
maturity, extension of time, change in nature or form of the Obligations,
acceptance of further security, release of further security, composition or
agreement arrived at as to the amount of, or the terms of, the Obligations,
notice of adverse change in any Borrower's financial condition or any other fact
which might materially increase the risk to the Guarantor) with respect to any
of the Obligations or all other demands whatsoever and waives the benefit of all
provisions of law which are or might be in conflict with the terms of this
Guaranty. Lender will use reasonable efforts to mitigate the damages resulting
from any default under the Obligations. Notwithstanding the foregoing, however,
the Guarantor hereby waives any defense based on the failure of Lender or any
holder of any Obligation to mitigate the damages resulting from any default with
respect to such Obligations. The Guarantor represents, warrants and agrees
that, as of the date of this Guaranty, its obligations under this Guaranty are
not subject to any offsets or defenses of any kind against Lender, any Borrower
or any other Person that executes a Loan Document. The Guarantor hereby waives,
to the extent permitted by applicable law: (a) defenses and offsets of any kind
which may arise in the future against Lender, any Borrower or any other Person
that executes a Loan Document, and (b) the right to interpose any counterclaim
or cross-claim, except to the extent
4
that the failure to assert any such counterclaim or cross-claim would
permanently preclude the prosecution of or recovery upon same; provided that the
--------
Guarantor agrees that any such counterclaim will not be used as an offset
against any recovery by ▇▇▇▇▇▇ hereunder.
SECTION 1.5 Benefit of Guaranty. The provisions of this Guaranty are
-------------------
for the benefit of Lender and its respective successors, transferees, endorsees
and assigns. In the event all or any part of the Obligations are transferred,
endorsed or assigned by Lender to any Person or Persons in accordance with the
terms of the Credit Agreement, any reference to "Lender" herein shall be deemed
to refer equally to such Person or Persons.
SECTION 1.6 Modification of Obligations. If Lender shall at any time
---------------------------
or from time to time, with or without the consent of, or notice to, the
Guarantor:
(a) change or extend the manner, place or terms of payment of, or
renew or alter all or any portion of, the Obligations;
(b) take any action under or in respect of the Loan Documents in
the exercise of any remedy, power or privilege contained therein or available to
it at law, equity or otherwise, or waive or refrain from exercising any such
remedies, powers or privileges;
(c) amend or modify, in any manner whatsoever, any Loan Document;
(d) extend or waive the time for the Guarantor's or any other
Person's performance of, or compliance with, any term, covenant or agreement on
the Guarantor's or any other Person's part to be performed or observed under the
Loan Documents, or waive such performance or compliance or consent to a failure
of, or departure from, such performance or compliance;
(e) take and hold security or collateral for the payment of the
Obligations, or sell, exchange, release, dispose of, or otherwise deal with, any
property pledged, mortgaged or conveyed, or in which ▇▇▇▇▇▇ has been granted a
Lien, to secure any indebtedness of the Guarantor or any Borrower to Lender;
5
(f) release or limit the liability of anyone who may be liable in
any manner for the payment of any amounts owed by the Guarantor or any Borrower
to Lender;
(g) modify or terminate the terms of any intercreditor or
subordination agreement pursuant to which claims of other creditors of the
Guarantor or any Borrower are subordinated to the claims of Lender; and/or
(h) apply any sums by whomever paid or however realized to any
amounts owing by the Guarantor or any Borrower to Lender in such manner as
Lender shall determine in its discretion;
then Lender shall not incur any liability to the Guarantor pursuant hereto as a
result thereof and no such action shall impair or otherwise affect or release
the obligations of the Guarantor under this Guaranty.
SECTION 1.7 Reinstatement. This Guaranty shall remain in full force
-------------
and effect and continue to be effective in the event any petition is filed by or
against the Guarantor for liquidation or reorganization, in the event the
Guarantor becomes insolvent or makes an assignment for the benefit of creditors
or in the event a receiver or trustee is appointed for all or any significant
part of the Guarantor's assets, and shall continue to be effective or be
reinstated, as the case may be, if at any time payment and performance of the
Obligations, or any part thereof, is, pursuant to applicable law, rescinded or
reduced in amount, or must otherwise be restored or returned by Lender, whether
as a "voidable preference," "fraudulent conveyance," or otherwise, all as though
such payment or performance had not been made. In the event that any payment,
or any part thereof, is rescinded, reduced, restored or returned, the
Obligations shall be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.
SECTION 1.8 No Subrogation. Notwithstanding any payment or payments
--------------
made by the Guarantor hereunder, or any set-off or application of funds of the
Guarantor by ▇▇▇▇▇▇, the Guarantor shall not be entitled to be subrogated to any
of the rights of Lender against any Borrower or against any collateral security
or guaranty or right of offset held by Lender for the payment of the
Obligations, nor shall the Guarantor seek any reimbursement from any Borrower in
respect of payments made by the Guarantor hereunder, until the Termination Date.
If any amount shall be paid
6
to the Guarantor on account of such subrogation rights at any time prior to the
Termination Date, such amount shall be held by the Guarantor in trust for
Lender, segregated from other funds of the Guarantor, and shall, forthwith upon
receipt by the Guarantor, be turned over to Lender in the exact form received by
the Guarantor (duly indorsed by the Guarantor to Lender, if required), to be
applied against the Obligations, whether matured or unmatured, in the manner
provided in the Credit Agreement.
SECTION 1.9 Continuing Guaranty. This Guaranty is a continuing
-------------------
guaranty and shall (i) remain in full force and effect until the Termination
Date, (ii) be binding upon the Guarantor and its respective successors and
permitted assigns, and (iii) inure, together with the rights and remedies of the
Lender hereunder, to the benefit of Lender and its respective successors,
transferees and assigns.
SECTION 2. DELIVERIES. In a form satisfactory to Lender, the
----------
Guarantor shall deliver to Lender, concurrently with the execution of this
Guaranty, such Loan Documents and other instruments, certificates and documents
as are required to be delivered by the Guarantor to Lender under the Credit
Agreement.
SECTION 3. REPRESENTATIONS, WARRANTIES AND COVENANTS. (a) The
-----------------------------------------
Guarantor hereby makes all representations and warranties, and agrees to comply
with all of the obligations, requirements and restrictions in the
representations, warranties and covenants contained in the Credit Agreement, to
the extent such obligations, requirements and restrictions are expressly
applicable to the Guarantor.
(b) The Guarantor further represents and warrants to Lender that:
(i) the execution, delivery and performance by the Guarantor of this Guaranty
are within the Guarantor's corporate powers, have been duly authorized by all
necessary corporate action, require no action by or in respect of, or filing
with, any governmental authority, do not contravene, or constitute a default
under, any provision of applicable law or regulation or of the certificate of
incorporation or bylaws of the Guarantor, or of any agreement, judgment,
injunction, order, decree or other instrument binding upon the Guarantor and
will not result in the creation or imposition of any Lien on any asset of the
Guarantor (other than pursuant to the Loan Documents); and (ii) this such
Guaranty has been duly authorized, executed and delivered by the Guarantor and
constitutes a legal, valid and binding obligation of the Guarantor,
7
enforceable against the Guarantor in accordance with its terms, except as such
enforceability may be limited by the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and general principles of equity.
SECTION 4. FURTHER ASSURANCES. The Guarantor agrees, upon the
------------------
written request of ▇▇▇▇▇▇, and at the Guarantor's expense, to execute and
deliver to Lender, from time to time, any additional instruments or documents
considered reasonably necessary by Lender to cause this Guaranty to be, become
or remain valid and effective in accordance with its terms.
SECTION 5. RIGHT OF SET-OFF. In addition to and not in limitation of
----------------
all rights of offset that Lender or any other holder of any Obligation may have
under applicable law or under the Credit Agreement, Lender or any other holder
of any Obligation shall, upon the occurrence of any Event of Default and whether
or not Lender or such holder has made any demand or whether the Guarantor's
obligations are matured, have the right to appropriate and apply to the payment
of the Guarantor's obligations hereunder, all deposits (general or special, time
or demand, provisional or final) then or thereafter held by, and other
indebtedness or property then or thereafter owing, Lender whether or not related
to this Guaranty or any transaction hereunder.
SECTION 6. MISCELLANEOUS PROVISIONS.
------------------------
SECTION 6.1 Amendments. Any amendment or waiver of any provision of
----------
this Guaranty and any consent to any departure by the Guarantor from any
provision of this Guaranty, shall be effective only if made pursuant to a
written instrument executed by the Guarantor and Lender (or, if a waiver or a
consent, a written letter or agreement executed by ▇▇▇▇▇▇).
SECTION 6.2 Headings. The headings in this Guaranty are for purposes
--------
of reference only and shall not otherwise affect the meaning or construction or
any provision of this Guaranty.
SECTION 6.3 Severability. The provisions of this Guaranty are
------------
severable, and if any clause or provision shall be held invalid or unenforceable
in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
8
provision in any other jurisdiction, or any other clause or provision of this
Guaranty in any jurisdiction.
SECTION 6.4 NOTICES. Except as otherwise provided herein, whenever
-------
it is provided herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon any
of the parties by any other party, or whenever either of the parties desires to
give or serve upon any communication with respect to this Guaranty, each such
notice, demand, request, consent, approval, declaration or other communication
shall be in writing and shall be given in the manner provided for in Section
10.9 of the Credit Agreement and, in the case of the Guarantor, delivered to the
Guarantor at its respective address listed on Schedule 1 to this Guaranty.
----------
SECTION 6.5 Remedies Cumulative. Each right, power and remedy of
-------------------
Lender provided in this Guaranty or now or hereafter existing at law or in
equity or by statute or otherwise shall be cumulative and concurrent and shall
be in addition to every other right, power or remedy provided for in this
Guaranty or now or hereafter existing at law or in equity or by statute or
otherwise. The exercise or partial exercise by Lender of any one or more of such
rights, powers or remedies shall not preclude the simultaneous or later exercise
by Lender of all such other rights, powers or remedies, and no failure or delay
on the part of Lender to exercise any such right, power or remedy shall operate
as a waiver thereof.
SECTION 6.6 Statute of Limitations. To the full extent permitted by
----------------------
applicable law, the Guarantor hereby waives the right to plead any statute of
limitations as a defense to performance of its obligations under, or enforcement
of, this Guaranty.
SECTION 6.7 Final Expression. This Guaranty, together with any other
----------------
agreement executed in connection herewith, is intended by the parties as a final
expression of this Guaranty and is intended as a complete and exclusive
statement of the terms and conditions thereof. Acceptance of or acquiescence in
a course of performance rendered under this Guaranty shall not be relevant to
determine the meaning of this Guaranty even though the accepting or acquiescing
party had knowledge of the nature of the performance and opportunity for
objection.
SECTION 6.8 Financial Status. The Guarantor hereby assumes
----------------
responsibility for keeping itself informed of the financial
9
condition of each Borrower and any and all endorsers and/or other guarantors of
any instrument or document evidencing all or any part of the Obligations and of
all other circumstances bearing upon the risk of nonpayment of the Obligations
or any part thereof that diligent inquiry would reveal, and the Guarantor hereby
agrees that Lender shall have no duty to advise the Guarantor of information
known to Lender regarding such condition or any such circumstances.
SECTION 6.9 Assignability. This Guaranty shall be binding on the
-------------
Guarantor and its respective successors and shall inure to the benefit of Lender
and its respective successors and assignees. This Guaranty may not be assigned
by the Guarantor without the prior written consent of ▇▇▇▇▇▇.
SECTION 6.10 Non-Waiver. The failure of Lender to enforce any right
----------
or remedy hereunder, or promptly to enforce any such right or remedy, shall not
constitute a waiver thereof, nor give rise to any estoppel against ▇▇▇▇▇▇, nor
excuse the Guarantor from its obligations hereunder.
SECTION 6.11 GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE.
------------------------------------------------
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE LOAN DOCUMENTS, IN ALL
RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS
GUARANTY AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, AND ANY APPLICABLE
LAWS OF THE UNITED STATES OF AMERICA. THE GUARANTOR HEREBY CONSENTS AND AGREES
THAT THE STATE OR FEDERAL COURTS LOCATED IN THE STATE OF TEXAS, SHALL HAVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE GUARANTOR
AND LENDER PERTAINING TO THIS GUARANTY OR TO ANY MATTER ARISING OUT OF OR
RELATING TO THIS GUARANTY, THE CREDIT AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS, PROVIDED, THAT NOTHING IN THIS GUARANTY SHALL BE DEEMED OR OPERATE TO
--------
PRECLUDE LENDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER
JURISDICTION TO ENFORCE A JUDGEMENT OR OTHER COURT ORDER IN FAVOR OF ▇▇▇▇▇▇.
THE GUARANTOR EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN
ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND THE GUARANTOR HEREBY WAIVES
ANY OBJECTION WHICH THE GUARANTOR MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE
--------------------
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH
COURT. THE GUARANTOR HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINTS
AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE
10
OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED OR
CERTIFIED MAIL OR BY FEDERAL EXPRESS OR OTHER COURIER SERVICE ADDRESSED TO THE
GUARANTOR AT ITS RESPECTIVE ADDRESS SET FORTH ON SCHEDULE 1 HERETO AND THAT
----------
SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE GUARANTOR'S ACTUAL RECEIPT
THEREOF.
SECTION 6.12 MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN
---------------------------
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY
RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE
STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES
DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.
THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL
SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN THE PARTIES ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN THEM IN CONNECTION WITH, THIS GUARANTY, THE CREDIT AGREEMENT OR ANY OF
THE OTHER LOAN DOCUMENTS OR THE TRANSACTION THERETO.
SECTION 6.13 Acknowledgements. The Guarantor hereby acknowledges
----------------
that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Guaranty;
(b) ▇▇▇▇▇▇ has no fiduciary relationship to the Guarantor, and
the relationship between ▇▇▇▇▇▇, on the one hand, and the Guarantor, on the
other hand, is solely that of creditor and debtor, respectively; and
(c) no joint venture exists among Lender or among the Guarantor
and Lender.
[Remainder of this page intentionally left blank.]
11
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered as of the date first above written.
GUARANTOR: 50-OFF TEXAS MANAGEMENT, INC.,
---------
A NEVADA CORPORATION
By: /s/ 50-OFF Texas Management, Inc.
-------------------------------------------------
Name:
Title:
12
SCHEDULE 1
----------
Notice Addresses
50-OFF Texas Management, Inc.
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇, P.C.
Attn: ▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
ASSIGNMENT OF PARTNERSHIP INTEREST
THIS ASSIGNMENT OF PARTNERSHIP INTEREST (the "Assignment"), made as of
the 18 day of November, 1996 by the undersigned entity (the "Partner") in
favor of General Electric Capital Corporation (the "Lender"),
W I T N E S S E T H
-------------------
IN CONSIDERATION of the execution and delivery of a certain $15,000,000
Senior Secured Super Priority Debtor-in-Possession Revolving Credit Agreement of
even date (as amended, modified or supplemented from time to time, the "Credit
Agreement") among 50-Off Stores, Inc., a Delaware corporation, 50-Off Texas
Stores, L.P., a Texas limited partnership, 50-Off Operating Company, a Nevada
corporation, and 50-Off Multistate Operations, Inc., a Nevada corporation
(collectively, the "Borrowers") and the Lender pursuant to which the Lender has
agreed to lend up to U.S. $15,000,000 to the Borrowers, and the sum of Ten and
No/100 Dollars ($10.00) in hand paid, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged:
The Partner, as the sole general partner of 50-Off Texas Stores, L.P., a
Texas limited partnership (the "Partnership"), hereby sells, assigns, transfers,
conveys and grants unto the Lender, and its respective successors and assigns,
all of its right, title and interest in and to, and a continuing security
interest in and security title to, all of its economic general partner interest
in the Partnership, as more fully set forth on Schedule 1 hereto, including,
----------
without limitation, right to receive all proceeds, distributions of income,
profits, surplus or other compensation by way of income or liquidating
distributions, in cash or in kind, from the Partnership, including such right,
title and interest now owned by the Partner or which is hereafter acquired by
it, whether a general or limited partnership interest, (the "Assigned Rights"),
as security for payment and performance of the Obligations.
TO HAVE AND TO HOLD UNTO the Lender and it successors and assigns
forever, upon and subject to the following terms and conditions:
1. For purposes of this Assignment, capitalized terms used herein shall
have the meanings ascribed thereto in the Credit Agreement unless otherwise
defined herein.
2. The Partner hereby constitutes and appoints the Lender as its true
and lawful attorney, in its name and stead upon the occurrence of an Event of
Default: (a) to collect any and all distributions of cash and other assets due
the Partner from the Partnership or otherwise in respect of the Assigned Rights,
and (b) to use such measures, legal or equitable, as in its discretion may be
deemed necessary or appropriate to enforce the payment thereof to the Lender.
The power of attorney hereby created is coupled with an interest and is
irrevocable.
3. The Lender is hereby granted full irrevocable power and authority to
hold, use and apply all cash and non-cash distributions received by it upon the
occurrence of an Event of Default (together with all interest earned thereon) in
full or partial payment of the Obligations and may convert any such non-cash
distributions to cash and may apply the proceeds thereof in payment of charges
or expenses incurred by the Lender in connection with any and all things which
the Lender may do or cause to be done hereunder, and thereafter in the order of
application set forth in the Credit Agreement.
4. The Lender shall not in any way be responsible for any failure to do
any or all of the things for which rights, interests, power and authority are
herein granted. The Lender shall be responsible only for the application of
such cash or other property as it actually receives under the terms hereof;
provided, however, that the failure of the Lender to do any of the things or
exercise any of the rights, interests, powers and authorities hereunder shall
not be construed to be a waiver of any such rights, interests, powers and
authorities.
5. This Assignment shall not operate to place any responsibility or
obligation whatsoever upon the Lender. The Lender shall not have assumed any
liability of the Partner or of the Partnership as a result of this Assignment.
The Partner agrees to protect, indemnify and save harmless the Lender from and
against all liabilities, obligations, claims, damages, penalties, causes of
action, costs and expenses including, without limitation, attorneys' fees and
expenses (except as may arise from the gross negligence or wilful misconduct of
the Lender) imposed upon or incurred by the Lender by reason of this
2
Assignment and any claim and demand whatsoever which may be asserted against the
Lender by reason of any alleged obligation or undertaking to be performed or
discharged by the Lender under this Assignment. In the event the Lender incurs
any liability, loss or damage by reason of this Assignment, or in curing any
default or breach by the Partner of its obligations under the partnership
agreement of the Partnership (the "Partnership Agreement"), or in the defense of
any claims or demands arising out of or in connection with this Assignment, the
amount of such liability, loss or damage shall be added to the Obligations.
6. The Partner agrees to execute, deliver and record, upon the request
of the Lender, any and all instruments requested by the Lender to carry these
presents into effect or to accomplish any other purpose deemed by the Lender to
be necessary or appropriate in connection with these presents, expressly
including UCC-l financing statements.
7. The Partner hereby warrants and represents that copies of the
Partnership Agreement to which it is a party furnished to the Lender are true,
complete and correct copies of the Partnership Agreement, as amended through the
date hereof; that the Partnership Agreement is unmodified and in full force and
effect; that the Assigned Rights have not been heretofore sold, assigned,
transferred, set over or encumbered by any instrument now in force, and will not
at any time during the term of this Assignment be sold, assigned, transferred,
set over or encumbered by it or by any Person or Persons whomsoever, without the
prior written consent of the Lender; that the Assigned Rights are all of such
rights the Partner has arising from its partnership interests in the Partnership
and that the interests of the Partner in the Partnership represent the
percentage shown on Schedule 1 attached hereto of the general partner ownership
----------
interest in the Partnership; that the Partner has the right to sell, assign,
transfer, set over and encumber the Assigned Rights to the Lender and to grant
to and confer upon the Lender the Assigned Rights; that the Partner is not at
present in default in any material respect under the Partnership Agreement; and
that all actions, approvals and consents required by applicable law or by the
Partnership Agreement have been obtained.
8. The Partner ▇▇▇▇▇▇ agrees that it will not, at any time during the
term of this Assignment, convey or encumber any of its interests, including,
without limitation, the Assigned Rights, in the Partnership in any manner
whatsoever or consent to
3
any departure from or any modification or amendment to the Partnership
Agreement, or consent to the admission of any new general or limited partner or
consent to any change in the business of the Partnership, without the prior
written consent of the Lender. The Partner agrees that it will perform all its
obligations as a general or a limited partner, as applicable, under the
Partnership Agreement, and that it will do all things necessary to maintain its
interests in the Partnership in full force and effect.
9. In the event the Partner receives any payment or other distribution
of any kind or character from the Partnership or from any other source
whatsoever in respect of the Partner's interest in the Partnership hereby
assigned, such payments or other distributions shall be received in trust for
the Lender and shall be promptly turned over by the Partner to the Lender. The
Partner will mark its books and records, so as to clearly indicate that the
Partner's rights as a general partner, or a limited partner as applicable, of
the Partnership are subject to the terms of this Assignment.
10. This Assignment and the rights hereunder shall inure to the benefit
of the Lender and may be assigned in whole or in part by the Lender in
connection with any assignment of the Credit Agreement or the Indebtedness
evidenced thereby, as is permitted thereunder, and shall be binding upon the
Partner and its respective successors and assigns.
11. Notwithstanding anything herein to the contrary, it is understood
and agreed that although this Assignment is and shall be effective as of the
date hereof, no right or power granted hereunder or obligation under Section 9
---------
hereof shall be exercised or enforced by the Lender unless and until an Event of
Default shall have occurred. It is the intention of the parties hereto that
beneficial ownership of the Assigned Rights, including, without limitation, all
voting, consensual and distribution rights, shall remain in the Partner until an
Event of Default shall have occurred. Upon the occurrence of any Event of
Default, the Lender may exercise such rights and remedies as are provided in the
Credit Agreement, the other Loan Documents, the Final Order, and in this
Assignment and under applicable law. The rights and remedies granted hereunder
shall be cumulative, and not exclusive. The Partner expressly agrees that the
Lender shall not in any event be under any obligation to resort to any right or
remedy hereunder prior to exercising any
4
other rights the Lender may have against the Partner or any Borrower or any
other Person to secure repayment of the Obligations, nor shall the Lender be
required to resort to any such other rights prior to the exercise of rights and
remedies hereunder.
12. After the occurrence of an Event of Default, the Lender may exercise
all ownership or consensual rights pertaining to the Assigned Rights of the
Partner and may notify and instruct the Partnership to thereafter make all
payments otherwise due the Partner in respect of the Assigned Rights payable
directly to the Lender, and the Lender shall have the right to apply such
payments in reduction of the Obligations in accordance with the Credit
Agreement. The Partner hereby appoints the Lender as the Partner's true and
lawful attorney-in-fact at such times to exercise such ownership or consensual
rights pertaining to the Assigned Rights in any manner the Lender deems
advisable for or against all matters with respect to the Partnership. The power
of attorney granted hereby is coupled with an interest and shall be irrevocable.
13. The Partner undertakes and agrees, in connection herewith, to
deliver to the Lender a copy of any notice or mailing received by the Partner
from the Partnership, at the address of the Lender given for notices in the
Credit Agreement.
14. In addition to its rights and privileges under this Assignment, the
Lender shall have all of the rights, powers and privileges of a secured party
under the Uniform Commercial Code as in effect in any applicable jurisdiction.
15. This Assignment shall be deemed to be made pursuant to the internal
laws of the State of Georgia with respect to agreements made and to be performed
wholly within the State of Georgia and shall be construed, interpreted,
performed and enforced in accordance therewith.
16. This Assignment may be executed in multiple counterparts, each of
which shall be deemed to be an original, but all such separate counterparts
shall together constitute but one and the same instrument.
17. On the Termination Date, the Lender shall return its remaining
interest in the Assigned Rights to the Partner.
5
IN WITNESS WHEREOF, the undersigned Partner and the Lender have caused
this instrument to be executed by their duly authorized representatives as of
the day and year first above written.
PARTNER: 50-OFF TEXAS MANAGEMENT, INC.
By: /s/ 50-OFF Texas Management, Inc.
------------------------------------------
Its:
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LENDER: GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ General Electric Capital Corporation
------------------------------------------
Its:
-----------------------------------------
5
SCHEDULE 1
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Description of Partnership Interests
50-OFF Texas Management, Inc., Nevada corporation, is the Managing Genral
Partner of 50-OFF Texas Stores, L.P., a Texas limited partnership. A copy of
the Limited Partnership Agreement is attached hereto as Schedule 1(a).
Schedule 1(a) intentionally omitted