EXHIBIT 10.3
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is made and entered into as of
March 6, 2002, between AVADO BRANDS, INC., a Georgia corporation having offices
at ▇▇▇▇▇▇▇ at Washington, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ or its assignee ("Secured
Party"), and ▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. a Georgia resident having a mailing address at
▇▇▇▇▇▇▇ at Washington, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Debtor").
In consideration of any and all extensions of credit or other financial
accommodations which may be now or hereafter made from time to time by Secured
Party to Debtor, as well as for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, Debtor hereby agrees in
favor of Secured Party as follows:
1. Security Interest. (a) Debtor hereby grants to Secured Party a present
and continuing security interest in and lien on all rights, titles and interests
of Debtor in, to or under any or all of the following property (collectively,
the "Collateral"): (i) investment or securities account established with ▇▇▇▇▇▇
▇▇▇▇▇▇ & Company, Inc. ("▇▇▇▇▇▇ ▇▇▇▇▇▇") or any replacement for such account
(the "Account"), (ii) any and all cash, cash equivalents or other securities,
investments, financial assets or other property that may be now or hereafter
held or carried in the Account (collectively, the "Investments"), (iii) any and
all interest, dividends, or other distributions or income that may be now or
hereafter earned on or paid or payable with respect to any of the Investments
(collectively, the "Distributions"), and (iv) any and all direct or indirect
proceeds (whether cash or non-cash) of any of the foregoing property.
(b) Unless otherwise defined herein, all terms contained in this Agreement
shall have the meanings provided for by the Uniform Commercial Code as in effect
in the State of Georgia to the extent the same are used or defined therein.
2. Obligations Secured.
This Agreement and the security interest and lien granted hereunder to
Secured Party secure any and all indebtedness, obligations or other liabilities
which may be now or hereafter owing by Debtor to Secured Party, whether for
principal, interest, or other amounts, under (i) the Promissory Note, dated as
of the date hereof, executed by Debtor in favor of Secured Party in the original
stated principal amount of $14,130,472.99 or any extension, renewal, amendment,
restatement, replacement or refinancing thereof (the "Note") or (ii) this
Agreement, and including further without limitation any interest which, but for
the filing by or against Debtor of a petition in bankruptcy, would accrue on any
of the foregoing indebtedness, obligations or other liabilities. All of the
foregoing indebtedness, obligations and other liabilities are herein
collectively called the "Obligations".
3. Representations and Warranties. Debtor hereby represents and warrants to
Secured Party that:
(a) Debtor has full power and authority, and has completed all proceedings
and obtained all approvals and consents necessary, to execute, deliver and
perform this Agreement, the Note and the transactions contemplated hereby.
(b) Such execution, delivery, and performance will not violate, or cause a
default under or result in a lien (other than Secured Party's security interest
and lien hereunder) upon any property of Debtor pursuant to, any applicable law,
rule or regulation or any agreement, indenture, judgment, order, decree, or
instrument binding upon or affecting Debtor or any of the Collateral.
(c) Each of this Agreement and the Note constitutes the legal, valid, and
binding obligation of Debtor, enforceable against Debtor in accordance with its
terms (except as such enforceability may be limited by bankruptcy, insolvency,
or other similar laws affecting the enforcement of creditor's rights or by
general equitable principles), and this Agreement grants to Secured Party a
valid and enforceable security interest in or other lien on the Collateral.
(d) Debtor's primary residence is located at Debtor's address shown above
and Debtor's social security number is set forth beneath his signature below.
(e) Debtor has good and marketable title to the Collateral (or, in the case
of any after-acquired Collateral, Debtor will have good and marketable title to
the Collateral at the time Debtor acquires rights in such Collateral).
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(f) Except for the security interest and lien granted hereunder in favor of
Secured Party, no person has (or, in the case of any after-acquired Collateral,
at the time Debtor acquires rights therein, will have) any right, title, claim,
or other interest (whether in the nature of a security interest, other lien or
charge, or otherwise) in, against or to any Collateral or any interest therein.
All of the foregoing representations and warranties shall survive the
execution, delivery and acceptance of this Agreement and the Note by Secured
Party and Debtor and the closing of the transactions contemplated hereby and
thereby.
4. Covenants and Agreements of Debtor. Debtor hereby covenants and agrees
with Lender as follows:
(a) Debtor shall pay promptly when due all taxes, assessments, charges,
encumbrances and liens now or hereafter imposed upon or affecting any
Collateral, this Agreement or the Note or Secured Party's security interest or
other lien hereunder (including all property, excise, intangible, use, sales,
stamp and other such taxes).
(b) Debtor shall not sell, encumber, lease, rent or otherwise dispose of or
transfer any Collateral or any right or interest therein except as hereinafter
provided, and Debtor shall keep the Collateral free of all levies, security
interests or other liens, charges or encumbrances except those granted hereunder
to Secured Party or those approved in writing by Secured Party.
(c) Debtor shall comply in all material respects with all laws, rules and
regulations (including those governing environmental matters) relating to the
possession, disposal, and control of the Collateral.
(d) If and to the extent requested by Secured Party, Debtor shall account
fully for and promptly deliver to Secured Party, in the form received, all
documents, chattel paper, instruments, and agreements constituting Collateral
hereunder and all proceeds of the Collateral received, all endorsed to Secured
Party or in blank.
(e) Debtor shall keep accurate, and complete records of the Collateral and
shall provide Secured Party with such records and such other reports and
information relating to the Collateral as Secured Party may request from time to
time.
(f) Debtor shall keep, procure, execute, and deliver from time to time any
and all, indorsements, notifications, registrations, assignments, financing
statements, blank transfer powers, and other writings deemed necessary or
appropriate by Secured Party to perfect, maintain, and protect its security
interest in or other lien on the Collateral hereunder and the priority thereof,
and Debtor shall take such other actions as Secured Party may request to protect
the value of the Collateral and of Secured Party's security interest in the
Collateral. Without limiting the generality of the immediately preceding
sentence, Debtor shall enter into a control agreement in form and substance
satisfactory to Secured Party with respect to the Account with Secured Party and
▇▇▇▇▇▇ ▇▇▇▇▇▇ (the "Control Agreement"). Debtor authorizes Secured Party to give
entitlement orders to ▇▇▇▇▇▇ ▇▇▇▇▇▇ with respect to the Collateral without
further consent of Debtor at any time that an Event of Default (as defined in
this Agreement) has occurred and is continuing. Unless prohibited by applicable
law, Debtor hereby authorizes Secured Party to execute and file any financing
statement on Debtor's behalf and without Debtor's signature, and the parties
further agree that any carbon, photographic, or other reproduction of this
Agreement shall be sufficient as a financing statement and may be filed in any
appropriate office in lieu thereof.
(g) Debtor shall reimburse Secured Party upon demand for all costs and
expenses, including, without limitation, actual and reasonable attorney's fees
and disbursements, Secured Party may now or hereafter incur while exercising or
enforcing any right, power, or remedy provided to Secured Party by this Security
Agreement or by law, all of which costs and expenses shall constitute part of
the Obligations secured hereunder.
(h) Debtor shall give Secured Party not less than thirty (30) days prior
written notice of any change in Debtor's primary residence or Debtor's legal
name from that set forth in this Agreement.
(i) Debtor shall furnish Secured Party with such information regarding the
Collateral as Secured Party from time to time may request.
(j) Debtor shall not allow any of the Collateral to be subject to any lien
or security interest other than Secured Party's security interest hereunder.
(k) Debtor shall invest any and all cash now or hereafter on deposit in or
credited to the Account in the 11-3/4% Senior Subordinated Notes due 2009 issued
by Secured Party or in such other Investments as may be expressly approved in
writing by Secured Party. Any and all Distributions on any of the Investments
shall be paid to Secured Party and applied to the Obligations. Debtor hereby
authorizes Secured Party to offset against any of the Obligations any payments
now or hereafter due to Debtor with respect to any of the Collateral consisting
of Secured Party's 11-3/4% Senior Subordinated Notes due 2009 or any extension,
renewal, amendment, replacement or refinancing of such notes.
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(l) Debtor agrees that all risk of loss of the Collateral shall at all
times be and remain upon Debtor irrespective of whether such Collateral is then
in Debtor's or Secured Party's possession.
(m) Debtor shall permit Secured Party (or any person designated by Secured
Party) from time to time to inspect the Collateral and to inspect, audit and
make copies of or extracts from all books and records maintained by or on behalf
of Debtor or ▇▇▇▇▇▇ ▇▇▇▇▇▇ pertaining to the Collateral (including computer
records), all at such times and places as Secured Party may request from time to
time.
5. Power of Attorney. Debtor hereby agrees that from time to time, without
presentment, notice or demand, and without affecting or impairing in any way the
rights of Secured Party with respect to the Collateral, the obligations of
Debtor hereunder or the other Obligations, Secured Party may, but shall not be
obligated to and shall incur no liability to Debtor or any third party for
failing to, take any action which Debtor is obligated by this Agreement to take,
and Debtor also hereby appoints (which appointment is coupled with an interest
and shall be irrevocable so long as this Agreement is in effect) Secured Party
as its attorney-in-fact with full power and authority at any time to take any of
the following actions during the existence of any Event of Default hereunder in
either Debtor's or Secured Party's name (but Secured Party shall have no
obligation to and shall incur no liability to Debtor or any third party for
failing to exercise any such power or authority): (a) to collect by legal
proceedings or otherwise and indorse, receive and receipt for all dividends,
interest, payments, proceeds, and other sums and property now or hereafter
payable on or on account of any of the Collateral; (b) to enter into any
extension, reorganization, deposit, merger, consolidation, or other agreement
pertaining to, or deposit, surrender, accept, hold or apply other property in
exchange for, any of the Collateral; (c) to protect and preserve any of the
Collateral or to take any other action which Debtor is obligated by this
Agreement to take; (d) to transfer any of the Collateral to its own or its
nominee's name; (e) to make any compromise or settlement, and take any action it
deems advisable, with respect to any of the Collateral; (f) to prepare, file and
sign Debtor's name to any proof of claim in bankruptcy (or any similar document)
against any account debtor on any of the Collateral; (g) to indorse Debtor's
name upon any checks or other proceeds of any Collateral and deposit same to any
account of Secured Party; (h) to indorse Debtor's name on any other document,
instrument or other agreement relating to any of the Collateral; (i) to use the
information recorded on or contained in any data processing equipment, other
computer hardware or any software relating to any Collateral; (j) to do all
other acts and things necessary, in Secured Party's judgment, to fulfill
Debtor's obligations under this Agreement; and (k) to pay any and all taxes,
assessments, charges, encumbrances or liens now or hereafter imposed upon or
affecting any of the Collateral. The foregoing power of attorney may be
exercised by Secured Party in its discretion, in its name or Debtor's name, and
without prior notice to or demand upon Debtor. Debtor agrees to reimburse
Secured Party on demand for any sums advanced or expenses incurred by Secured
Party in exercising any of the foregoing rights and powers together with
interest accruing thereon daily at the highest rate Debtor has contracted to pay
on any of the Obligations. Debtor's reimbursement obligations under this Section
shall constitute part of the Obligations secured hereunder.
6. Events of Default. An event of default under this Agreement shall be
deemed to exist upon the occurrence of any of the following event (each such
event being herein called an "Event of Default"):
(a) Failure of Debtor punctually to make payment of any amount payable,
whether principal, interest or otherwise, on the Note or any of the other
Obligations when and as the same becomes due and payable, whether at maturity,
or at a date fixed for any prepayment or partial prepayment, or by acceleration,
on demand or otherwise;
(b) If any statement, representation, or warranty of Debtor made in this
Agreement, the Note, the Control Agreement or in any other document furnished in
connection herewith or therewith to Secured Party proves to have been untrue,
incorrect, misleading or incomplete in any material respect as of the date made
or deemed made;
(c) Failure of Debtor punctually and fully to perform, observe, discharge
or comply with any of the covenants set forth in this Agreement, the Note or the
Control Agreement;
(d) The occurrence of any Event of Default under (and as such term is
defined in) the Note; or
(e) ▇▇▇▇▇▇ ▇▇▇▇▇▇ gives written notice to Secured Party of its intention to
terminate the Control Agreement and within 20 days thereafter the Investments
are not transferred to a replacement securities or investment account at another
financial institution acceptable to Secured Party or the Control Agreement is
not replaced by another control agreement satisfactory to Secured Party
7. Secured Party's Remedies. Upon the occurrence and during the
continuation of any one or more of the foregoing Events of Default, Secured
Party may, at its option, and without notice to or demand on Debtor and in
addition to all rights and remedies available to Secured Party under any other
agreement, at law, in equity, or otherwise, do any one or more of the following:
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(a) Secured Party may declare any or all of the Obligations to be
immediately due and payable and foreclose or otherwise enforce Secured Party's
security interest in or other lien hereunder on any or all of the Collateral in
any manner permitted by law or provided for in this Agreement.
(b) Secured Party may recover from Debtor all costs and expenses,
including, without limitation, actual and reasonable attorney's fees, incurred
or paid by Secured Party in exercising or enforcing any right, power, or remedy
with respect to any or all of the Collateral provided to it by this Agreement or
by applicable law.
(c) Secured Party may require that any and all of the Account and the
Investments be transferred into Secured Party's name or the name of its nominee;
(d) Secured Party may vote all or any of the Collateral (and in connection
therewith Debtor hereby grants to Secured Party a proxy to vote the Collateral
which proxy shall be irrevocable so long as this Agreement is in effect);
provided, however, that unless and until an Event of Default has occurred
hereunder and Secured Party has elected as a result thereof to exercise its
voting right and proxy under this subsection, Debtor shall be entitled to vote
the Collateral but no vote may be cast by Debtor which would violate or be
inconsistent with any of the terms of this Agreement.
(e) Secured Party may transfer any of the Collateral into its name, notify
any account debtor under or other person obligated on any Collateral to make
payments thereunder directly to Secured Party, and otherwise collect or enforce
payment of any of the Collateral (but Secured Party shall have no obligation to
do any of the foregoing).
(f) Secured Party may sell or otherwise dispose of any of the Collateral at
one or more public or private sales at Debtor's or Secured Party's place of
business or any other place or places, including without limitation at any
brokers board or security exchange, in lots or in bulk, for cash or on credit,
all as Secured Party, in its discretion, may deem advisable. Debtor agrees that
five (5) days' prior written notice from Secured Party to Debtor of any public
sale of any Collateral or the date after which any private sale of any
Collateral will be held shall constitute reasonable notice thereof and such sale
may be held at such locations as Secured Party may designate in each said
notice. Secured Party shall have the right to conduct any such sale on Debtor's
premises, without any charge therefor, and any such sales may be adjourned from
time to time in accordance with applicable law. Secured Party may purchase all
or any part of the Collateral at any public sale or, if permitted by law, any
private sale and, in lieu of actual payment of such purchase price, Secured
Party may setoff the amount of such price against the Obligations.
(g) Upon any sale or other disposition of any of the Collateral pursuant to
this Security Agreement, Secured Party shall have the right to deliver, assign,
and transfer to the purchaser thereof the Collateral or the portion thereof so
sold or disposed of and each purchaser at any such sale or other disposition
(including Secured Party) shall acquire such Collateral free from any claim or
right of whatever kind, including any equity or right of redemption of Debtor
and Debtor specifically waives (to the maximum extent permitted by law) all
rights of redemption, stay or appraisal with respect to the Collateral which
Debtor has or may have under any applicable law, statute, or constitution now
existing or hereafter in effect.
8. Application of Proceeds. (a) All monies and other proceeds received by
Secured Party upon any collection, sale or other disposition of any Collateral,
together with all other monies and other proceeds received by Secured Party
hereunder, shall be applied as follows:
First , to the payment of the reasonable costs and expenses of such sale,
collection or other disposition which may have been incurred by Secured Party,
including without limitation attorney's fees as provided in Section 7(b) above
and all other reasonable expenses, liabilities and advances made or incurred by
Secured Party in connection therewith;
Second , to the payment of all other Obligations then due in such order as
Secured Party may elect;
Third , to be held by the Secured Party in escrow until the Obligations
have been paid in full; and
Fourth , after payment in full of all Obligations, any surplus then
remaining from such proceeds shall be paid to Debtor.
(b) Debtor shall remain liable to Secured Party for any deficiency owing on
the Obligations after the application of the proceeds of the Collateral as
provided above.
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9. Indemnity. Debtor hereby agrees to indemnify Secured Party and hold
Secured Party harmless from and against any claim, liability, loss, damage,
expense, suit, action or proceeding which may now or hereafter be suffered or
incurred by Secured Party as a result of Debtor's failure to observe, perform or
discharge Debtor's duties or obligations hereunder or Secured Party's holding or
administering this Agreement or any Collateral unless with respect to any of the
above Secured Party is finally determined to have acted with gross negligence or
to have engaged in willful misconduct. Without limiting the generality of the
foregoing, this indemnity shall extend to any claims asserted against Secured
Party by any person under any environmental, occupational safety and hazard, or
other similar laws, rules or regulations by reason of Debtor's or any other
person's failure to comply with any such laws, rules or regulations. The
indemnity obligations of Debtor under this Section shall constitute a part of
the Obligations secured hereunder and shall survive the termination of this
Agreement.
10. Miscellaneous. (a) Any waiver, forbearance or failure or delay by
Secured Party in exercising any of its rights, powers, or remedies hereunder
shall not preclude the further exercise thereof, and every right, power, or
remedy of Secured Party hereunder shall continue in full force and effect until
such right, power or remedy is specifically waived in a writing executed by
Secured Party. Debtor waives any right to require Secured Party to proceed
against any person or to exhaust any Collateral or to pursue any remedy in
Secured Party's power.
(b) This Agreement may be executed in any number of several counterparts,
each of which when so executed shall be deemed to be an original and all of
which counterparts taken together shall constitute one and the same instrument.
(c) This Agreement contains the entire agreement between Secured Party and
Debtor with respect to the Collateral and supersedes all prior agreements,
commitments, understandings, negotiations or correspondence between them with
respect thereto. If any provision of this Agreement shall be held invalid or
prohibited under applicable law, this Agreement shall be invalid or ineffective
only to the extent of such invalidity or prohibition, without invalidating the
remainder of this Agreement.
(d) The rights, powers, and remedies of Secured Party under this Agreement
shall be in addition to all other rights, powers, or remedies given to Secured
Party by applicable law or by any other agreement, all of which rights, powers
and remedies shall be cumulative and may be exercise successively or
concurrently without impairing Secured Party's security interest in or other
lien on any of the Collateral.
(e) All singular terms used herein shall include the plural and vice versa.
All pronouns used herein shall be deemed to cover all genders. All headings used
herein are for convenience of reference only and shall not constitute a
substantive part of this Agreement.
(f) This Agreement may not be amended or modified except by a writing
signed by each of the parties hereto.
(g) Except as may be otherwise expressly provided herein, all notices,
requests and demands to or upon any party hereto shall be in writing (and, if
sent by mail, shall be sent by certified or registered mail, return receipt
requested) and, unless otherwise expressly provided herein, shall be deemed to
have been validly given and delivered when delivered against receipt or three
(3) business days after deposit in the United States mail, postage prepaid, and
addressed in each case to the address of such party as shown above (or to such
other address as any such party may designate for itself by like notice given to
the other party hereafter).
(h) All rights of Secured Party under this Agreement shall inure to the
benefit of its successors and assigns, and all obligations of Debtor hereunder
shall bind its heirs, legal representatives, successors, and assigns.
(i) This Agreement and all security interests and other liens granted or
conveyed hereunder shall remain in full force and effect and shall be
irrevocable until such time as (x) no Obligations are outstanding, (y) Secured
Party is under no obligation to make any further loans or other extensions of
credit to Debtor, and (z) Debtor notifies Secured Party in writing that it is
thereby terminating this Agreement. Debtor hereby waives any right Debtor may
have upon payment in full of the Obligations to require Secured Party to
terminate its security interest in the Collateral or any financing statement
relating thereto until this Agreement is terminated in accordance with the
foregoing terms.
(j) This Agreement shall be construed in accordance with and governed by
the laws of the State of Georgia.
(k) Time is of the essence of this Agreement.
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11. WAIVERS AND CONSENTS. (a) DEBTOR HEREBY WAIVES ANY AND ALL RIGHTS IT
MAY HAVE TO NOTICE OR HEARING PRIOR TO SEIZURE BY SECURED PARTY OF ANY OF THE
COLLATERAL, WHETHER BY WRIT OF POSSESSION OR OTHERWISE.
(b) EACH OF DEBTOR AND SECURED PARTY HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PERSON MAY HAVE UNDER ANY APPLICABLE
LAW TO A TRIAL BY JURY WITH RESPECT TO ANY SUIT OR LEGAL ACTION WHICH MAY BE
COMMENCED BY OR AGAINST SUCH PARTY CONCERNING THE INTERPRETATION, CONSTRUCTION,
VALIDITY, ENFORCEMENT OR PERFORMANCE OF THIS AGREEMENT OR THE NOTE.
(c) EACH OF DEBTOR AND SECURED PARTY HEREBY EXPRESSLY AGREES, CONSENTS AND
SUBMITS TO THE PERSONAL JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN
THE COUNTY IN WHICH SECURED PARTY'S ADDRESS SHOWN ABOVE IS LOCATED WITH RESPECT
TO ANY SUIT OR LEGAL ACTION WHICH MAY BE COMMENCED BY OR AGAINST SUCH PARTY
CONCERNING THE INTERPRETATION, CONSTRUCTION, VALIDITY OR ENFORCEMENT OR
PERFORMANCE OF THIS AGREEMENT OR THE NOTE AND EACH OF DEBTOR AND SECURED PARTY
ALSO EXPRESSLY CONSENTS AND SUBMITS TO AND AGREES THAT VENUE IN ANY SUCH SUIT OR
LEGAL ACTION IS PROPER IN SAID COURTS AND COUNTY AND HEREBY EXPRESSLY WAIVES ANY
AND ALL PERSONAL RIGHTS UNDER APPLICABLE LAW OR IN EQUITY TO OBJECT TO THE
JURISDICTION AND VENUE IN SAID COURTS AND COUNTY. THE JURISDICTION AND VENUE OF
THE COURTS CONSENTED AND SUBMITTED TO AND AGREED TO IN THIS PARAGRAPH ARE NOT
EXCLUSIVE BUT ARE CUMULATIVE AND IN ADDITION TO THE JURISDICTION AND VENUE OF
ANY OTHER COURT UNDER ANY APPLICABLE LAWS OR IN EQUITY.
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IN WITNESS WHEREOF, Debtor and Secured Party have executed and delivered
this Agreement and Debtor has affixed its seal hereto, all as of the day and
year first above set forth.
SECURED PARTY:
AVADO BRANDS, INC.
By:
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Name:
--------------------------------------
Title:
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DEBTOR:
▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Debtor's Social Security
Number:
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S-1