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EXHIBIT G
SECURITY AGREEMENT
(Pledge)
by
WATERMARC FOOD MANAGEMENT CO.
to
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
as Payee under the
Notes dated September 14, 1995
and as Secured Party
hereunder
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Security Agreement - Pledge
THIS Security Agreement-Pledge (this "Security Agreement") is entered
into as of September 14, 1995 by and between WATERMARC FOOD MANAGEMENT CO., a
Texas corporation, whose business address is ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ("Guarantor") and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, an individual
residing in Fort Bend County, Texas with a business address of ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ("Secured Party").
WITNESSETH:
WHEREAS, the Guarantor is the owner of all of the issued and outstanding
equity securities of Pasta Acquisition Co. ("PAC"), a Texas corporation (the
"Securities");
WHEREAS, of even date herewith, Guarantor and Secured Party have
executed an Agreement and Plan of Merger (the "Merger Agreement") whereby The
Original Pasta Co., a Texas corporation ("TOPC") will be merged with and into
PAC (the "Merger") and Secured Party, as the sole shareholder of TOPC will
receive common stock of Guarantor and two promissory notes 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 a "Restaurant Assets
Security Agreement" dated as of the date hereof by and between TOPC, PAC and
Secured Party, (ii) the unconditional, irrevocable and absolute guarantee of
the Guarantor (the "Guarantee") pursuant to the Guaranty Agreement as of the
date hereof between Guarantor and Secured Party, and (iii) this Security
Agreement; and
WHEREAS, the parties to the Merger Agreement agreed to execute and
deliver the Merger Agreement, the Notes, the Security Documents and the
consideration to be delivered by each of the parties thereto into escrow, with
such consideration to be released on the "Effective Date" of the Merger as
defined in the Merger Agreement.
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, Guarantor hereby agrees with the
Secured Party as follows:
ARTICLE I
DEFINITIONS
1.01 Terms Defined Above. As used in this Security Agreement, the terms
"Guarantor", "Secured Party", "Securities", and "Security Agreement" will have
the meanings indicated above.
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1.02 Security Documents. As used in this Security Agreement, the term
"Security Documents" will mean the Merger Agreement, the Notes, the Security
Agreement, the Restaurant Assets Security Agreement, the Guaranty Agreement and
any other documents, instruments or agreements representing obligations of PAC
and/or Guarantor to Secured Party or intended to provide security to Secured
Party in connection with the Merger and the transactions contemplated by the
Merger Agreement and the foregoing agreements.
1.03 Terms Defined in Security Agreement. As used in this Security
Agreement, terms defined in the Security Documents will have the meanings
assigned to such terms in the Security Documents, unless herein expressly
provided to the contrary.
1.04 Additional Defined Terms.
(a) "Collateral" will mean
(i) the Securities and the certificates representing
the Securities, and all dividends, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the
Securities; and
(ii) all additional shares of stock or securities,
including debt obligations, preferred stock or any other equity
or debt securities of PAC from time to time acquired by Guarantor
in any manner while this Security Agreement remains in effect,
whether by way of stock dividend, additional capital contribution
or in any other manner and the certificates representing such
additional shares or securities, and all dividends, cash,
instruments or other property from time to time received,
receivable or otherwise distributed in respect of or in exchange
for any or all of such shares or securities (the term
"Securities" as used herein shall also include the additional
debt and equity securities described in this Section
1.04(a)(ii)).
(b) "Obligations" will mean all present and future loans, advances,
liabilities, obligations, covenants, duties, and indebtedness of Guarantor or
PAC to the Secured Party under the Security Documents; and any and all
renewals, extensions for any period, rearrangements or enlargements of any of
the foregoing, whether evidenced by any note or other instrument or agreement,
whether arising by an extension of credit, letter of credit, overdraft,
endorsement, loan, guaranty, indemnification or otherwise, whether direct or
indirect, including without limitation any of the foregoing acquired by
assignment or participation, absolute or contingent, due or to become due. The
Obligations shall also include all interest, charges, customary out-of-pocket
expenses, reasonable attorneys' or other fees and any other sums incurred by
the Secured Party in connection with the execution, administration or
enforcement of the Secured Party's rights and remedies under the Security
Documents or under any other agreement with Guarantor
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ARTICLE 2
SECURITY INTEREST
2.01 Grant of Security Interest in Collateral. Guarantor, for value
received, the receipt and sufficiency of which are hereby acknowledged, and to
induce the Secured Party to enter into the Security Documents and to accept
debt obligations of PAC, hereby pledges to the Secured Party and hereby grants
to the Secured Party a first lien on and security interest in the Collateral.
2.02 Indebtedness Secured. The security interest created in Section 2.01
is granted to the Secured Party to secure the Obligations.
2.03 Delivery of Securities. All certificates or instruments representing
or evidencing the Securities shall be delivered to and held by and shall be in
suitable form for transfer by delivery, or shall be accompanied by duly
executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Secured Party and Secured Party shall at all
times have actual possession of the Securities and shall be deemed to have
possession of any of the Collateral in transit to Secured Party.
2.04 Power of Attorney. The Guarantor hereby irrevocably constitutes and
appoints the Secured Party and any authorized officer or agent thereof, 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 Guarantor and in the
name of Guarantor or in its own name, from time to time in the Secured Party's
discretion, for the purpose of carrying out the terms of this Security
Agreement, and without notice to Guarantor, to take any and all appropriate
action and to execute any and all documents and instruments which may be
necessary or desirable to accomplish the purposes of this Security Agreement,
including, without limitation, as necessary to do the following:
(a) upon the occurrence and continuance of any Event of
Default, to transfer to or register in the name of the Secured Party, or
any of its nominees, any or all of the Collateral;
(b) to exchange the certificates or instruments representing
or evidencing the Collateral for certificates or instruments of smaller
or larger denominations;
(c) (i) to receive payment of any and all moneys, claims and
other amounts due and to become due at any time in respect of or arising
out of any Collateral, (ii) to commence and prosecute any suits, actions
or proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any part thereof and to
enforce any other right in respect of any Collateral, (iii) to defend
any suit, action or proceeding brought against Guarantor with respect to
any Collateral, (iv) to settle, compromise or adjust any suit, action or
proceeding described above and, in connection therewith, to give such
discharges or releases as the Secured Party may deem appropriate, and
(v) to
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complete any blanks contained in any instruments of transfer or
assignment appended to or delivered with the certificates representing
the Securities; and
(d) to exchange any of the Collateral for other property upon
reorganization, recapitalization or other readjustment, and in
connection therewith to deposit any of the Collateral with any committee
or depository upon such terms as the Secured Party may determine, and,
subsequent to any Event of Default, to exercise voting rights as to any
of the Collateral, all without notice and without liability except to
account for property actually received by the Secured Party.
The Guarantor hereby ratifies all that said attorney shall lawfully do or cause
to be done within the scope of the power of attorney granted hereunder. This
power of attorney is a power coupled with an interest and shall be irrevocable.
The powers conferred on the Secured Party hereunder are solely to protect its
interests in the Collateral and shall not impose any duty upon him to exercise
any such powers. The Secured Party shall be accountable only for amounts that
he actually receives as a result of the exercise of such powers, and neither he
nor any of his employees or agents shall be responsible to Guarantor for any
act or failure to act, except for gross negligence or willful misconduct.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.01 Valid Issuance. The Guarantor represents, warrants and agrees that
the Securities have been duly authorized, validly issued and are validly
outstanding, fully paid and nonassessable, and were not issues in violation of
the preemptive rights of any person or of any agreement by which Guarantor or
any issuer of such Collateral is bound.
3.02 No Material Misstatements. No information, exhibit or report
furnished by Guarantor or any subsidiary to the Secured Party in connection
with the negotiation of the Security Documents contained or contains any
material misstatement of fact or omitted to state a material fact or any fact
necessary to make the statements obtained herein or therein not misleading.
3.03 Ownership and Liens. The Guarantor represents, warrants and agrees
that Guarantor owns (and at the time of transfer or delivery of the Collateral
to Secured Party, owned or will own) good and indefeasible title to the
Collateral free and clear of any other security interests, liens, adverse
claims or options (other than, with respect to encumbrances permitted by the
Security Documents).
3.04 Status of Securities Generally. The Guarantor represents, warrants
and agrees that the Securities were properly issued, drawn, made and/or
accepted and are genuine; the Securities have not been materially altered; all
signatures on the Securities are genuine or authorized; the
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Guarantor's transfer of the Securities to Secured Party for the purposes herein
stated, is effective; and Guarantor knows of no fact that might impair the
validity of the Securities.
ARTICLE 4
COVENANTS AND AGREEMENTS
4.01 Taxes. The Guarantor covenants and agrees that Guarantor will pay,
prior to delinquency, all taxes, charges, liens and assessments against the
Collateral and, upon the failure of Guarantor to do so, the Secured Party at
its option may, but will not be obligated to, pay any of them and shall be the
sole judge of the legality or validity thereof and of the amount necessary to
discharge the same.
4.02 Delivery of Collateral. The Guarantor covenants and agrees that if
Guarantor receives any dividend or distribution, whether in cash, Securities or
other property, declared and paid with respect to the Securities, Guarantor
will immediately deliver the same to the Secured Party to be held as additional
Collateral and/or apply them to the Obligations at the election of the Secured
Party. So long as the Obligations are outstanding, Guarantor shall not vote
for, approve or acquiesce in the issuance of additional Securities of PAC to
any person or party other than Guarantor, except for commercial bank loans,
which are not owned or held by Guarantor and delivered to Secured Party
hereunder.
4.03 Further Assurances. The Guarantor covenants and agrees that
Guarantor will sign, execute, deliver and file, alone or with the Secured
Party, any financing statement, security agreements or other documents or
procure any document as may be requested by the Secured Party from time to time
to confirm, perfect and preserve the security interest created hereby, and in
addition, the Guarantor hereby authorizes the Secured Party to execute and
deliver on behalf of Guarantor and to file such financing statements without
the signature of Guarantor. The Guarantor will do all such additional and
further acts, things, deeds, give such assurances and execute such instruments
as the Secured Party reasonably requires to vest more completely in and assure
to the Secured Party his rights under this Security Agreement.
4.04 Filing Reproductions. The Guarantor covenants and agrees that, at
the option of the Secured Party, a carbon, photographic or other reproduction
of this Security Agreement or of a financial statement covering the Collateral
shall be sufficient as a financing statement and may be filed as a financing
statement.
4.05 Prohibited Liens and Filings. The Guarantor covenants and agrees
that Guarantor will not pledge, mortgage, or otherwise encumber, create or
suffer a security interest to exist in any of the Collateral (other than in
favor of the Secured Party and liens and other encumbrances permitted by the
Security Documents) or sell, assign or otherwise transfer any of the
Collateral, to or in favor of anyone other than the Secured Party, for the
benefit of the Secured Party, and Guarantor will not file or permit to be filed
any financing statement or other
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security instrument with respect to the Collateral other than in favor of the
Secured Party or other than liens or other encumbrances permitted by the
Security Documents.
ARTICLE 5
RIGHTS AND REMEDIES
5.01 Voting Rights and Dividends.
(a) So long as no Event of Default shall have occurred and be
continuing:
(i) The Guarantor will be entitled to exercise any and all
voting and other consensual rights pertaining to the Collateral or any
part thereof for any purpose not inconsistent with the terms of this
Security Agreement.
(ii) The Secured Party shall execute and deliver (or cause to
be executed and delivered) to Guarantor all such proxies and other
instruments as Guarantor may reasonably request for the purposes of
enabling Guarantor to exercise the voting and other rights which it is
entitled to exercise pursuant to subsection (i).
(b) Upon the occurrence and during the continuance of an Event of
Default all rights of Guarantor to exercise the voting and other consensual
rights which it would otherwise be entitled to exercise pursuant to Subsection
5.01(a)(i) shall cease and Secured Party shall be entitled to vote the
Securities.
5.02 Default Events. "Event of Default" shall have the meaning ascribed
to such term in the Notes or other Security Documents. Upon the occurrence of
an Event of Default, all of the Obligations shall immediately become due and
payable irrespective of any agreed maturity or period of grace and/or any
obligation of the Secured Party for further financial accommodation shall
terminate.
5.03 Default Remedies. If all or any part of the Obligation shall become
due and payable as specified in Section 5.02, the Secured Party may then, or at
any time thereafter, apply, set-off, collect, sell in one or more sales, or
otherwise dispose of, any or all of the Collateral, in its then condition or
following any commercial reasonable preparation or processing, in such order as
the Secured Party may elect, and any such sale may be made either at public or
private sale at its place of business or elsewhere, or at any brokers' board or
securities exchange, either for cash or upon credit or for future delivery, at
such price as the Secured Party may deem fair, and the Secured Party may be the
purchaser of any or all Collateral so sold and may hold the same thereafter in
its own right free from any claim of Guarantor or right of redemption. No such
purchase or holding by the Secured Party shall be deemed a retention by the
Secured Party in satisfaction of the Obligations. All demands, notices and
advertisements, and the presentment of property at sale are hereby waived. If,
notwithstanding the foregoing provisions, any applicable provision of the
Uniform Commercial Code or other law requires the Secured Party
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to give reasonable notice of any such sale or disposition or other action, five
days' prior written notice shall constitute reasonable notice. The Secured
Party may require Guarantor to assemble the Collateral, to the extent not in
the possession of the Secured Party, and make it available to the Secured Party
at a place designated by the Secured Party that is reasonably convenient to the
Secured Party. Any sale hereunder may be conducted by an auctioneer or any
officer or agent of the Secured Party. In connection with the sale of
Collateral which is stock or other investment securities, in the absence of
registration of the Securities under the Securities act of 1933, as amended
(the "Act"), and any applicable state securities laws, by Guarantor or, at the
election of the Secured Party, the Secured Party must limit prospective
purchasers to the extent deemed necessary or advisable by the Secured Party to
render such sale exempt from the registration requirements of the Act, and any
applicable state securities laws, and no sale so made in good faith by the
Secured Party shall be deemed not to be "commercially reasonable" because so
made.
5.04 Proceeds. Prior to all or any part of the Obligations becoming due
and payable as specified in Section 5.02, all cash sums paid to and received by
the Secured Party on account of the Collateral shall be promptly applied by the
Secured Party on the Obligations, whether or not such Obligations shall have by
their terms matured, such application to be made to principal or interest as
the Secured Party may determine; provided, however, the Secured Party need not
apply or give credit for any item included in such sums until the Secured Party
has received final payment thereof. After all or any part of the Obligations
becomes due and payable as specified in Section 5.02, the proceeds of any sale
or other disposition of the Collateral and all sums received or collected by
the Secured Party for or on account of the Collateral shall be applied by the
Secured Party in the manner set forth in Section 9.504 of the Texas Uniform
Commercial Code - Secured Transactions.
5.05 Secured Party's Duties. The Secured Party shall be under no duty
whatsoever to make or give any presentment, demand for performance, notice of
nonperformance, protest, notice of protest, notice of dishonor, or other notice
or demand in connection with any Collateral or the Obligations, or to take any
steps necessary to preserve any rights against prior parties. The Secured Party
shall not be liable for failure to collect or realize upon any or all of the
Obligations or Collateral, or for any delay in so doing, nor shall the Secured
Party be under any duty to take any action whatsoever with regard thereto. The
Secured Party shall use reasonable care in the custody and preservation of any
Collateral in its possession. The Secured Party shall have no duty to comply
with any recording, filing, or other legal requirements necessary to establish
or maintain the validity, priority or enforceability of, or the Secured Party's
rights in or to, any of the Collateral.
5.06 Secured Party's Actions. The Guarantor waives any right to require
the Secured Party to proceed against any Person, exhaust any collateral or
pursue any other remedy in the Secured Party's power; waives any and all notice
of acceptance of this Security Agreement or of creation, modification renewal
or extension for any period of any of the Obligations from time to time; and
waives any defense arising by reason of any disability or other defense of
Guarantor or any other party liable on the Obligations, or by reason of the
cessation from any
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cause whatsoever of the liability of Guarantor, or any other party liable on
the Obligations. All dealings between Guarantor and the Secured Party shall
conclusively be presumed to have been had or consummated in reliance upon this
Security Agreement. Until all Obligations shall have been paid in full,
Guarantor shall have no right to subrogation, and Guarantor waives any right to
enforce any remedy that the Secured Party now has or may hereafter have against
Guarantor, or any other party liable on the Obligations and, except as
otherwise expressly provided in this Security Agreement, waives any benefit of
and right to participate in any Collateral or security whatsoever now or
hereafter held by the Secured Party.
ARTICLE 6
MISCELLANEOUS
6.01 Transfer of Indebtedness and Collateral. Subject to the limitations
of the Security Documents, the Secured Party may transfer any or all of the
Obligations, and upon any such transfer such Secured Party may transfer any and
all of the Collateral and shall be fully discharged thereafter form all
liability, if any, with respect to the Collateral so transferred, and the
transferee shall be vested with all rights, powers and remedies of such Secured
Party hereunder with respect to the Collateral so transferred; but with respect
to any Collateral not so transferred, the Secured Party shall retain all
rights, powers and remedies hereby given. The Secured Party may at any time
deliver any or all of the Collateral to Guarantor, whose receipt shall be a
complete and full acquittance for the Collateral so delivered, and the Secured
Party shall thereafter be discharged from any liability therefor.
6.02 Cumulative Security. The execution and delivery of this Security
Agreement in no manner shall impair or affect any other security by
(endorsement or otherwise) for the payment of the Obligations. No security
taken hereafter as security for payment of the Obligations shall impair in any
manner or affect this Security Agreement. All such present and future
additional security is to be considered as cumulative security.
6.03 Continuing Agreement. This is a continuing agreement and the
conveyance hereunder shall remain in full force and effect, and all the rights,
powers and remedies of the Secured Party hereunder shall continue to exist
until the Obligations shall be paid in full as the same become due and payable,
and until the Secured Party, upon request of Guarantor, has executed a written
termination statement, and reassigned to Guarantor, without recourse,
representation or warranty of any kind, the Collateral and all rights and Liens
conveyed hereby and returned possession of the Collateral to Guarantor. This
Security Agreement shall continue irrespective of the fact that the liability
of any other party liable for the Obligations may have ceased, and
notwithstanding the death or incapacity of Guarantor or any other person liable
for the Obligations, or any other event or proceeding affecting Guarantor
and/or any other person liable for the Obligations.
6.04 Cumulative Rights. The rights, powers and remedies of the Secured
Party hereunder shall be in addition to all rights, powers and remedies given
by statute or rule of law
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and are cumulative. The exercise of any one or more of the rights, powers and
remedies provided herein shall not be construed as a waiver of any other
rights, powers and remedies of the Secured Party. Furthermore, regardless of
whether or not the Uniform Commercial Code is in effect in the jurisdiction
where such rights, powers and remedies are asserted, the Secured Party shall
have the rights, powers and remedies of a secured party under the Texas Uniform
Commercial Code, as amended.
6.05 Exercise of Rights. Time shall be of the essence for the
performance of any act under this Security Agreement by Guarantor or any other
party liable for the Obligations, but neither the Secured Party's acceptance of
partial or delinquent payments nor any forbearance, failure or delay by the
Secured Party in exercising any right, power or remedy shall be deemed a waiver
of any obligation of Guarantor or any other party liable for the Obligations or
of any right, power or remedy of the Secured Party or preclude any other or
further exercise thereof; and no single or partial exercise of any right, power
or remedy shall preclude any other or further exercise thereof, or the exercise
of any other right, power or remedy.
6.06 Remedy and Waiver. The Secured Party may remedy any default and may
waive any default without waiving the default remedied or waiving any prior or
subsequent default, subject only to the requirements of the Security Documents
in this regard.
6.07 Non-Judicial Remedies. The Secured Party may enforce his rights
hereunder without prior judicial process or judicial hearing, and Guarantor
expressly waives, renounces and knowingly relinquishes any and all legal rights
which might otherwise require the Secured Party to enforce his rights by
judicial process. In so providing for non-judicial remedies, Guarantor
recognizes and concedes that such remedies are consistent with the usage of the
trade, are responsive to commercial necessity, and are the result of bargain at
arm's length. Nothing herein is intended to prevent the Secured Party or
Guarantor from resorting to judicial process at such party's option.
6.08 Guarantor. The term "the Guarantor", as used throughout this
Security Agreement, shall (regardless of use of the singular form) mean
Guarantor individually and/or collectively and shall, subject to the
limitations of the Security Documents, include the respective successors, legal
representatives, heirs and assigns of Guarantor.
6.09 Preservation of Liability. Neither this Security Agreement nor the
exercise by the Secured Party of (or the failure to so exercise) any right,
power or remedy conferred herein or by law shall be construed as relieving any
person liable on the Obligations from full liability on the Obligations and for
any deficiency thereon.
6.10 Notices. Any notice or demand to Guarantor under this Security
Agreement or in connection with this Security Agreement may be driven and shall
conclusively be deemed and considered to have been given and received if in
compliance with the applicable provisions of the Security Documents.
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6.11 Construction. This Security Agreement shall be governed by the laws
of the State of Texas in all respects, including matters of construction,
validity, enforcement and performance.
6.12 Amendment and Waiver. This Security Agreement may not be amended
(or may any of its terms be waived) except in writing duly signed by an
authorized officer of the Secured Party and by Guarantor.
6.13 Terms Defined in Uniform Commercial Code. Except as the context may
otherwise require, any term used herein that is defined in the Texas Uniform
Commercial Code shall have the meaning given therein.
6.14 Invalidity. In the event that any one or more of the provisions
contained in this Security Agreement shall, for any reason, be held invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability will not affect any other provision of this Security
Agreement, or any other instrument executed in connection herewith.
6.15 Successors and Assigns. The covenants, representations, warranties
and agreements herein set forth shall be binding upon Guarantor and its
successors and assigns as permitted pursuant to the Security Documents and
shall inure to the benefit of the Secured Party and his successors and assigns.
6.16 Counterparts. This Security Agreement may be executed in two or
more counterparts, and it will not be necessary that the signatures of all
parties hereto be contained on any one counterpart hereof; each counterpart
will be deemed an original, but all of which together will constitute one and
the said instrument.
IN WITNESS WHEREOF, this Security Agreement is executed as of the date
first hereinabove written.
Guarantor:
WATERMARC FOOD MANAGEMENT CO.
------------------------------
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Its: President
Secured Party:
------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
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SCHEDULE I
Attached to and forming a part of that certain Security Agreement (Pledge)
dated to be effective as of September 14, 1995 by WATERMARC FOOD MANAGEMENT
CO., as the Guarantor to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ as Secured Party.
Stock Number
Stock Class of Certificate Par of
Issuer Stock No(s). Value Shares
----- ----- ------ ----- ------
Pasta Common 1 $.01 100
Acquisition
Co.