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EXHIBIT F
Security Agreement
THIS Security Agreement (the "Security Agreement" or "Agreement") is
entered into as of September 14, 1995 by and among THE ORIGINAL PASTA CO., a
Texas corporation ("TOPC") and PASTA ACQUISITION CO., a Texas corporation
("PAC"), whose business addresses are ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇. (collectively PAC and TOPC are hereinafter referred to as the
"Obligor" or the "Obligors") and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, an individual residing
in Fort Bend County, Texas with a business address of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ("Secured Party"),
WITNESSETH:
WHEREAS, WATERMARC FOOD MANAGEMENT CO., a Texas corporation ("WAMA") is
the owner of all of the issued and outstanding equity securities of PAC (the
"Securities");
WHEREAS, of even date herewith, WAMA, the Obligors and Secured Party
have executed an Agreement and Plan of Merger (the "Merger Agreement") whereby
TOPC Will be merged with and into PAC (the "Merger") and Secured Party, as the
sole shareholder of TOPC, will receive (i) common stock of WAMA, and (ii) two
promissory notes of PAC referred to in Section 2.02 of the Merger Agreement in
the aggregate principal amount of $3,750,000.00 (the "Notes");
WHEREAS, the Notes are to be secured by (i) certain restaurant assets of
TOPC to be acquired by PAC in the Merger pursuant to this Security Agreement,
(ii) the unconditional, irrevocable and absolute guarantee of WAMA of the Notes
pursuant to the Guaranty Agreement as of the date hereof between WAMA and
Secured Party and (iii) the Security Agreement-Pledge between WAMA and Secured
Party whereby WAMA is pledging the Securities as collateral for its Guaranty
Agreement;
WHEREAS, the parties to the Merger Agreement agreed to execute and
deliver the Merger Agreement, the Notes, the Security Documents (as defined in
Section 2.02 of the Merger Agreement) and certain other consideration to be
delivered by each of the parties thereto into escrow, with such consideration
and documents to be released on and as of the "Effective Date" as defined in
the Merger Agreement; and
WHEREAS, since the restaurant assets will be transferred by operation of
law on the Effective Date of the Merger from TOPC to PAC, both TOPC and PAC are
executing this Security Agreement in favor of Secured Party.,
NOW, THEREFORE, in order to comply with the terms and conditions of the
Merger Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Obligors hereby agree with
the Secured Party as follows:
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SECTION 1.
SECTION 1.01 TERMS DEFINED ABOVE. As used in this Security Agreement,
the terms "Effective Date", "Merger", "Merger Agreement", "PAC", "Obligors",
"Secured Party", "Securities", "Security Agreement", and "TOPC" will have the
meanings indicated above.
SECTION 1.02 SECURITY DOCUMENTS. As used in this Security Agreement, the
term "Security Documents" will mean the Merger Agreement, the Notes, the
Security Agreement-Pledge, this Security Agreement, the Guaranty Agreement and
any other documents, instruments or agreements representing obligations of PAC
and/or WAMA to Secured Party or intended to provide security to Secured Party
in connection with the Merger and the Merger Agreement.
SECTION 1.03 ASSIGNMENT AND GRANT OF SECURITY. The Obligors hereby
assign and grant to the Secured Party a security interest in all of its right,
title and interest in and to the following, whether now owned or hereafter
acquired (the "Collateral"):
(1) All assets of TOPC constituting equipment located at or used in
connection with the operation of the ten (10) existing restaurants of TOPC at
the first 10 locations listed in Schedule 4.13 to the Merger Agreement
(collectively referred as "TOPC Restaurants") and all fixtures constituting a
part of the TOPC Restaurants and all parts thereof and all accessions thereto
(any and all such equipment, fixtures, parts, and accessions being the
"Equipment");
(2) All assets of TOPC constituting inventory or supplies of the TOPC
Restaurants now owned or hereafter acquired by Obligor and used in connection
with the TOPC Restaurants (any and all such inventory and supplies being the
"Inventory");
(3) All other assets, rights or interests of TOPC relating to,
located on or used in connection with the operation of the TOPC Restaurants,
whether tangible or intangible, now owned or hereinafter acquired, real or
personal, including, but not limited to accounts, receivables, contract rights,
chattel paper, licenses, cash, bank accounts, instruments, permits, deposits,
conditional sales contracts and interests or rights under any real property or
personal property leases; and
(4) All proceeds of any and all of the foregoing Collateral
(including, without limitation, proceeds which constitute property of the types
described in clauses (1)-(3) of this Section 1.03), and, to the extent not
otherwise included, all payments under insurance (whether or not the Secured
Party 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.
Notwithstanding anything in this Section 1.03 to the contrary, the
Obligor is not granting Secured Party a security interest in the name, concept,
trademark, service ▇▇▇▇, logo, tradedress, design or proprietary recipes or
products relating to the operation of the TOPC Restaurants under the name and
concept "The Original Pasta Company" as it currently
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conducted or as it later develops which assets (the "Excluded Assets") are
subject to a Service ▇▇▇▇ License Agreement of even date herewith between
Secured Party and PAC.
SECTION 2.
SECURITY FOR OBLIGATIONS.
This Agreement secures the payment of all obligations of Obligor under
the Notes and the Security Documents (collectively the "Obligations").
SECTION 3.
PERFORMANCE OF AGREEMENTS.
Anything herein to the contrary notwithstanding, (1) Obligor shall
remain liable under the contracts and agreements included in the Collateral to
the extent set forth therein to perform all of its duties and obligations
thereunder to the same extent as if this Agreement had not been executed; (2)
the exercise by Secured Party of any rights hereunder shall not release Obligor
from any of its duties or obligations under the contracts and agreements
included in the Collateral; and (3) the Secured Party shall not have any
obligation or liability under the contracts and agreements included in the
Collateral by reason of this Agreement, nor shall the Secured Party be
obligated to perform any of the obligations or duties of Obligor thereunder or
to take any action to collect or enforce any claim for payment or performance.
SECTION 4.
REPRESENTATIONS AND WARRANTIES.
To the extent the representations and warranties below address facts
(pertaining to any of the Collateral or TOPC) existing prior to the Effective
Date, such representations and warranties are made in reliance on the
representations and warranties of the Secured Party in the Merger Agreement.
Subject to the foregoing, Obligor represents and warrants as follows:
(1) All of the Equipment and Inventory are located at the locations
of the TOPC Restaurants listed in Schedule 4.13 to the Merger Agreement.
(2) Obligor is the legal and beneficial owner of the Collateral.
(3) Obligor has exclusive possession and control of the Equipment and
Inventory.
(4) Subject to the consents described in Section 3.03 of the Merger
Agreement, this Agreement creates a valid security interest in the Collateral,
securing the payment of the Obligations, and all filings and other actions
necessary or desirable to perfect and protect such security interest shall have
been duly taken by the Effective Date.
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(5) Obligors are corporations duly incorporated, validly existing, and
in good standing under the laws of the jurisdiction of Texas, and have the
corporate power and authority to own their assets and to transact their business
as currently conducted.
(6) The execution and performance by Obligors of this Agreement has
been duly authorized by all necessary corporate action and does not and will
not (a) subject to obtaining the consents referred to in Section 3.03 of the
Merger Agreement, require any consent or approval of any third party; (b)
contravene such corporation's charter or bylaws; (c) violate any provision of
any law, rule, or regulation; or (d) subject to obtaining the consents referred
to in Section 3.03 of the Merger Agreement, result in a breach of or constitute
a default under any indenture or loan or credit agreement or any other material
agreement, lease, or instrument to which such corporation is a party or by
which it or its properties may be bound or affected.
(7) This Agreement is the legal, valid, and binding obligation of
Obligors enforceable in accordance with its respective terms, except to the
extent that such enforcement may be limited by applicable bankruptcy,
insolvency, and other similar laws affecting creditors' rights generally or
equitable principles.
(8) Except for the consents set forth in Section 3.03 of the Merger
Agreement and those contemplated by this Agreement, no consent of any other
person or entity and no authorization, approval, or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required (a) for the grant by Obligors of the security interest granted hereby
or for the execution, delivery, or performance of this Agreement by Obligors;
(b) for the perfection or maintenance of the security interest created hereby;
or (c) for the exercise by the Secured Party of the rights provided for in this
Agreement or the remedies in respect of the Collateral pursuant to this
Agreement.
(9) As of the Effective Date, there shall be no conditions precedent
to the effectiveness of this Agreement that have not been satisfied or waived.
SECTION 5.
FURTHER ASSURANCES.
(1) Obligors agrees that from time to time, at its expense, Obligors
will promptly execute and deliver all further instruments and documents, and
take all further action, that may be necessary or desirable, or that the
Secured Party may reasonably request, in order to perfect and protect any
assignment or security interest granted or purported to be granted hereby or to
enable the Secured Party to exercise and enforce its rights and remedies
hereunder with respect to any Collateral. Without limiting the generality of
the foregoing, Obligors will execute and file such financing or continuation
statements, or amendments thereto, and such other instruments or notices, as
may be necessary or desirable, or as the Secured Party may request, in order to
perfect and preserve the assignment and security interest granted or purported
to be granted hereby.
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(2) Obligors hereby authorize the Secured Party to file one or more
financing or continuation statements, and amendments thereto, relating to all
or any part of the Collateral without the signature of Obligors where permitted
by law, including the real property record filings referred in subparagraph (4)
below. A photocopy or other reproduction of this Agreement or any financing
statement covering the Collateral or any part thereof shall be sufficient as a
financing statement where permitted by law.
(3) Obligors will furnish to the Secured Party from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the Secured Party may
reasonably request, all in reasonable detail.
(4) With respect to the interests of Obligor as lessee under the real
estate leases (the "Leases") for the TOPC Restaurants and the security interest
therein granted to Secured Party hereby, upon any Event of Default with respect
to the Obligations (as "Event of Default" is defined in the Notes) all of
Obligor's interest in such Leases shall without further action be assigned to
Secured Party and Obligor's interests are assigned hereby. As Secured Party may
reasonably request to perfect its security interest in and to receive an
effective and valid assignment of the Leases or to perfect its security
interest in and to the other Collateral, Obligor shall assist Secured Party in
obtaining from the Lessors of the Leases such consents, waivers and assignments
as are necessary to perfect and obtain the security interests and assignments
granted hereunder. Obligors authorize Secured Party to file this Agreement in
such form as is required by law on its behalf and on behalf of Obligor in the
real property records where the property subject to the Leases is located.
SECTION 6.
AS TO EQUIPMENT AND INVENTORY.
(1) Obligors shall keep the Equipment and Inventory (other than
Inventory sold in the ordinary course of business) at the existing locations
for the TOPC Restaurants.
(2) Obligors shall cause the Equipment to be maintained and preserved
in the same condition, repair, and working order as when new, ordinary wear and
tear excepted, and in accordance with any manufacturer's manual, and shall
forthwith, or in the case of any loss or damage to any of the Equipment as
quickly as practicable after the occurrence thereof, make or cause to be made
all repairs, replacements, and other improvements in connection therewith which
are necessary or desirable to such end. Obligors shall promptly furnish to the
Secured Party a statement respecting any loss or damage to any of the
Equipment.
(3) Obligors shall pay promptly when due all property and other
taxes, assessments, and governmental charges or levies imposed upon, and all
claims (including claims for labor, materials, and supplies) against, the
Equipment and Inventory.
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SECTION 7.
INSURANCE.
Obligor shall, at its own expense, maintain insurance with respect to
the Collateral in such amounts, against such risks, in such form and with such
insurers, as shall be satisfactory to the Secured Party from time to time.
SECTION 8.
TRANSFERS AND OTHER LIENS.
Obligors shall not without Secured Party's consent which may be withheld
in his sole discretion, (a) sell, assign (by operation of law or otherwise), or
otherwise dispose of, any of the Collateral, except Inventory and Equipment in
the ordinary course of business, or (b) create or permit to exist any lien upon
or with respect to any of the Collateral, except for the security interests
under this Agreement and the security interests disclosed in the Merger
Agreement or permitted thereby. Notwithstanding the foregoing, Obligors shall
have the right, without the prior written consent of the Secured Party, to
grant a junior security interest and lien in and to the Collateral to any
person or entity in connection with financing which is directly related to the
Additional Restaurants as disclosed in Section 3.02 of the Merger Agreement.
Secured Party shall also subordinate his lien and security interest hereunder
in favor of any bank or institution providing financing for the Additional
Restaurants as provided in Section 3.02 of the Merger Agreement.
SECTION 9.
PERFORMANCE BY SECURED PARTY.
If Obligor fails to perform any agreement contained herein, the Secured
Party may himself perform, or cause performance of, such agreement, and the
expenses of the Secured Party incurred in connection therewith shall be payable
by Obligors hereunder.
Obligors hereby irrevocably appoint Secured Party as its
attorney-in-fact, with full authority in the place and stead of Obligors and in
the name of Obligors or otherwise, from time to time in Secured Party's
discretion, to take any action and to execute any instrument which the Secured
Party may deem necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation:
(1) To obtain and adjust insurance required to protect the
Collateral;
(2) To ask, demand, collect, ▇▇▇ for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due under or in
connection with the Collateral;
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(3) To receive, endorse, and collect any draft or other instruments,
documents and chattel paper, in connection therewith;
(4) To file any claims or take any action or institute any
proceedings which the Secured Party may deem reasonably necessary for the
collection of any of the Collateral or otherwise to enforce compliance with the
terms and conditions of any agreement constituting part of the Collateral; and
(5) To file any additional filings relating to the security interest
and assignments granted hereby including those referred to in Section 5 hereof
and to enter into any agreements, consents and waivers as required with the
owners of the real property represented by the Leases on behalf of Obligor.
The powers conferred on the Secured Party hereunder are solely to
protect his interests in the Collateral and shall not impose any duty upon him
to exercise any such powers. Except for the safe custody of any Collateral in
its possession and the accounting for moneys actually received by him
hereunder, the Secured Party shall have no duty as to any Collateral.
SECTION 10.
REMEDIES.
If any Event of Default (as defined in the Notes) shall have occurred
and shall not be cured as provided for in such Notes:
(1) The Secured Party may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the Uniform Commercial Code in effect in the State of Texas at that time
(the "Code") (whether or not the code applies to the affected Collateral).
Notice of sale shall be at least thirty (30) days notice to Obligors of the
time and place of any public sale or the time after which any private sale is
to be made. The parties agree that thirty (30) days' notice shall constitute
reasonable notification. The Secured Party shall not be obligated to make any
sale of Collateral regardless of notice of sale having been given. The Secured
Party may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so adjourned.
(2) All cash proceeds received by the Secured Party in respect of any
sale of, collection from, or other realization upon all or any part of the
Collateral may, in the discretion of the Secured Party, be held by the Secured
Party as Collateral, and/or then or any time thereafter be applied in whole or
in part by the Secured Party against, all or any part of the Obligations in
such order as the Secured Party shall elect. Any surplus of such cash proceeds
held by the Secured Party and remaining after payment in full of all the
Obligations shall be paid over to Obligors or to whomsoever may be lawfully
entitled to received such surplus.
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(3) The Secured Party may exercise any and all rights and remedies of
Obligors under or in connection with the any agreements constituting a part of
or otherwise in respect of the Collateral, including, without limitation, any
and all rights of Obligors to demand or otherwise require payment of any amount
under, or performance of any provision of, any agreement constituting part of
the Collateral. Secured Party or his agents shall have the right to take
possession of and operate the TOPC Restaurants and to collect and receive the
proceeds from such operations.
(4) All payments received by Obligors under or in connection with any
agreement or otherwise in respect of the Collateral shall be received in trust
for the benefit of the Secured Party, shall be segregated from other funds of
Obligors and shall be forthwith paid over to the Secured Party in the same form
as so received (with any necessary endorsement).
SECTION 11.
MISCELLANEOUS.
(1) Indemnity. Obligors agree to indemnify the Secured Party from and
against any and all claims, losses, and liabilities (including reasonable
attorneys' fees) growing out of or resulting from this Agreement (including,
without limitation, enforcement of this Agreement), except claims, losses, or
liabilities resulting from the Secured Party's gross negligence or willful
misconduct.
(2) Expenses. Obligor will upon demand pay to the Secured Party the
amount of any and all reasonable expenses, including the reasonable fees and
expenses of their counsel and of any experts and agents, which the Secured
Party may incur in connection with (a) the administration of this Agreement;
(b) the custody, preservation, use or operation of, or the sale of, collection
from, or other realization upon, any of the Collateral; (c) the exercise or
enforcement of any of the rights of the Secured Party hereunder; or (d) the
failure by Obligors to perform or observe any of the provisions hereof.
(3) Modification of Obligations. As of the Effective Date and
thereafter, all rights of the Secured Party and the assignment, and security
interest hereunder, and all obligations of Obligors hereunder, shall be
absolute and unconditional, irrespective of (i) any change in the time, manner,
or place of payment of, or in any other term of, all or any of the Obligations,
or any other amendment or waiver of or any consent to any departure from the
Merger Agreement, or the Security Documents or any other agreement relating
thereto, (ii) any taking, exchange, release, or nonperfection of any other
collateral, or any taking, release, or amendment or waiver of or consent to
departure from any guaranty; for all or any of the Obligations, or (iii) any
change, restructuring, or termination of the corporation structure or existence
of Obligors or any of its subsidiaries.
(4) Amendments; Etc. No amendment, modification, termination, or
waiver of any provision of this Agreement, and no consent to any departure by
Obligors herefrom, shall in
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any event be effective unless the same shall be in writing and signed by the
Secured Party, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
(5) Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing (including telegraphic, telex, and
facsimile transmissions) and mailed or transmitted or delivered, if to
Obligors, at its address, at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, Attention: President, and if to the Secured Party, at his address or, as
to either party, at such other address as shall be designated by such party in
a written notice to the other party. All such notices and other communications
shall be effective when received.
(6) Continuing Security Interest; Assignments. This Agreement shall
create a continuing security interest in the Collateral and shall (1) remain in
full force and effect until the payment in full of the Obligations and all
other amounts payable under this Agreement, (2) be binding upon Obligor, its
successors and assigns; and (3) inure to the benefit of, and be enforceable by,
the Secured Party and his personal representatives, successors, transferees,
and assigns. Without limiting the generality of the foregoing clause (3), the
Secured Party may assign or otherwise transfer all or any portion of his rights
and obligations under the Notes to any other person or entity, and such other
person or entity shall thereupon become vested with all the benefits in respect
thereof granted to the assigning party herein or otherwise.
(7) Governing Law; Terms. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, except to the
extent that the validity or perfection of the security interest hereunder, or
remedies hereunder, in respect of any particular Collateral are governed by the
laws of a jurisdiction other than the State of Texas.
IN WITNESS WHEREOF, Obligors and Secured Party have executed this
Agreement as of the date first above written.
PASTA ACQUISITION CO.
By:
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President
THE ORIGINAL PASTA CO.
By:
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, President ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇,
Individually and as Secured Party