SECURITY AGREEMENT
Exhibit 10.2
EXECUTION COPY
This SECURITY AGREEMENT (together with all amendments, supplements and modifications, if any,
from time to time hereto, this “Agreement”), dated as of July 7, 2009, is by the
undersigned (each, a “Grantor” and, collectively, the “Grantors”) in favor of Xxxxx
Fargo Bank, National Association, in its capacity as the collateral agent (in such capacity,
together with its successors and assignees, the “Collateral Agent”) for the Secured Parties
(as defined below).
WHEREAS, Real Mex Restaurants, Inc., a Delaware corporation (the “Issuer”), the
guarantors party to the Indenture (as defined below) and Xxxxx Fargo Bank, National Association, as
trustee (in such capacity, the “Trustee” ) thereunder, are parties to that certain
indenture, dated as of even date herewith (as amended, restated, modified, supplemented, renewed,
refunded, replaced or refinanced from time to time, the “Indenture”);
WHEREAS, the Collateral Agent, the Trustee and General Electric Capital Corporation, as Agent,
have entered into the Intercreditor Agreement, dated as of even date herewith (as amended,
supplemented or otherwise modified from time to time, the “Intercreditor Agreement”);
WHEREAS, each Grantor is either the Issuer, the parent of the Issuer, or a direct or indirect
subsidiary of the Issuer and as such will derive direct and indirect economic benefits from the
issuance of the Notes under the Indenture; and
WHEREAS, the holders of the Note Obligations (the “Holders”) have required, as a
condition to the purchase of the Notes under the Indenture, that each Grantor grant to the
Collateral Agent for the ratable benefit of the Collateral Agent, the Trustee and the Holders
(collectively, the “Secured Parties”) a security interest in and to the Collateral (as
defined herein).
NOW, THEREFORE, in consideration of the promises contained herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
1. DEFINITIONS.
Except as otherwise defined in this Agreement, all capitalized terms used herein without
definitions shall have the respective meanings provided therefor in the Indenture. All terms
defined in the Uniform Commercial Code of the State of New York and used herein shall have the same
definitions herein as specified therein. However, if a term is defined in Article 9 of the New
York Uniform Commercial Code differently than in another Article of the New York Uniform Commercial
Code, the term has the meaning specified in Article 9. The term “electronic document” applies in
the event that the 2003 revisions to Article 7, with amendments to Article 9, of the Uniform
Commercial Code, in substantially the form approved by the American Law Institute and the National
Conference of Commissioners on Uniform State Laws, are now or hereafter adopted and become
effective in the State of New York or in any other relevant jurisdiction. For purposes of this
Agreement, “Obligations” means all of the Note Obligations (including, without limitation,
the Issuer’s Obligations under or in respect of the Notes (including any exchange notes issued from time to time pursuant to any agreement to
provide registration rights in respect of the Notes)) and, in addition, with respect to any Grantor
that is a Guarantor of the Note Obligations, all obligations and liabilities of such Grantor which
may arise under or in connection with such Guarantee or any other Note Document to which such
Grantor is a party, in each case whether on account of guarantee obligations, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all
fees and disbursements of counsel to any Secured
Party that are required to be paid by such Grantor
pursuant to the terms of this Agreement or any other Note Document). For purposes of this
Agreement, (i) “Stock Pledge Agreement” means the Stock Pledge Agreement, dated as of even
date herewith, by the Grantors party thereto in favor of the Collateral Agent, (ii) “Membership
Interest Pledge Agreement” means the Membership Interest Pledge Agreement, dated as of even
date herewith, by CKR Acquisition Corp., a Delaware corporation, in favor of the Collateral Agent,
and (iii) “Trademark Security Agreement” means the Trademark Collateral Security and Pledge
Agreement, dated as of even date herewith, by the Grantors party thereto in favor of the Collateral
Agent, in each case as amended, modified, supplemented or waived in accordance with the provisions
of the Indenture.
Unless otherwise provided herein, the rules of construction set forth in Section 1.04 of the
Indenture shall be applicable to this Agreement.
2. GRANT OF SECURITY INTEREST.
2.1. Collateral Granted. Each Grantor hereby unconditionally grants to the Collateral
Agent, for the benefit of the Secured Parties, to secure the payment and performance in full of all
of the Obligations, a security interest in and so pledges and assigns to the Collateral Agent, for
the benefit of the Secured Parties, the following properties, assets and rights of such Grantor,
wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products
thereof (all of the same being hereinafter called the “Collateral”): all personal and
fixture property of every kind and nature including all goods (including inventory, equipment and
any accessions thereto), instruments (including promissory notes), documents (including, if
applicable, electronic documents), accounts (including health-care-insurance receivables), chattel
paper (whether tangible or electronic), deposit accounts, letter-of-credit rights (whether or not
the letter of credit is evidenced by a writing), commercial tort claims, securities and all other
investment property, supporting obligations, any other contract rights or rights to the payment of
money, insurance claims and proceeds, all general intangibles (including all payment intangibles)
and all proceeds and products of any or all of the foregoing.
2.2. Commercial Tort Claims. The Collateral Agent acknowledges that the attachment of
its security interest in any commercial tort claim as original collateral is subject to the
Grantor’s compliance with §2.5.
2.3. Delivery of Instruments, etc.
(a) Pursuant to the terms hereof, each Grantor has endorsed, assigned and delivered to the
Priority Lien Collateral Agent as bailee for the Collateral Agent pursuant to the Intercreditor
Agreement all negotiable or non-negotiable instruments, certificated securities and chattel paper
pledged by it hereunder, together with instruments of transfer or assignment duly executed in blank
as the Priority Lien Collateral Agent as bailee for the Collateral Agent or the Collateral Agent
may have specified. In the event that any Grantor shall, after the date of this Agreement, acquire
any other negotiable or non-negotiable instruments, certificated securities or chattel paper to be
pledged by it hereunder, such Grantor shall forthwith endorse, assign and deliver the same to the
Priority Lien Collateral Agent as bailee for the Collateral Agent pursuant to the Intercreditor
Agreement, accompanied by such instruments of transfer or assignment duly executed in blank as the
Priority Lien Collateral Agent as bailee for the Collateral Agent pursuant to the Intercreditor Agreement, or the Collateral
Agent may from time to time specify.
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(b) To the extent that any securities now or hereafter acquired by any Grantor are
uncertificated and are issued to such Grantor or its nominee directly by the issuer thereof, such
Grantor shall cause the issuer to note on its books the security interest of the Collateral Agent
in
such securities and, subject to the Intercreditor Agreement, shall cause the issuer, pursuant to
an agreement in form and substance reasonably satisfactory to the Collateral Agent, to agree to
comply with instructions from the Collateral Agent as to such securities at any time after the
Collateral Agent’s receipt of a Priority Lien Obligations Discharge Notice (as defined in the
Intercreditor Agreement), without further consent of such Grantor or such nominee. To the extent
that any securities, whether certificated or uncertificated, or other investment property now or
hereafter acquired by any Grantor are held by such Grantor or its nominee through a securities
intermediary, subject to the Intercreditor Agreement, such Grantor shall at the request of the
Collateral Agent cause such securities intermediary, pursuant to an agreement in form and substance
satisfactory to the Collateral Agent, to agree to comply at any time after the Collateral Agent’s
receipt of a Priority Lien Obligations Discharge Notice (as defined in the Intercreditor Agreement)
with entitlement orders or other instructions from the Collateral Agent to such securities
intermediary as to such securities, or other investment property, or (as the case may be) at any
time after the Collateral Agent’s receipt of a Priority Lien Obligations Discharge Notice (as
defined in the Intercreditor Agreement) to apply any value distributed on account of any commodity
contract as directed by the Collateral Agent to such commodity intermediary without further consent
of such Grantor or such nominee.
(c) To the extent that any Grantor is a beneficiary under any written letter of credit now or
hereafter issued in favor of such Grantor, such Grantor shall deliver such letter of credit to the
Priority Lien Collateral Agent as bailee for the Collateral Agent pursuant to the Intercreditor
Agreement. The Collateral Agent shall from time to time, at the request and expense of such
Grantor, use its commercially reasonable efforts to make such arrangements with such Grantor as are
in the Collateral Agent’s reasonable judgment necessary and appropriate so that such Grantor may
make any drawing to which such Grantor is entitled under such letter of credit, without impairment
of the Collateral Agent’s perfected security interest in such Grantor’s rights to proceeds of such
letter of credit or in the actual proceeds of such drawing. At the Collateral Agent’s request,
subject to the Intercreditor Agreement, each Grantor shall, for any letter of credit, whether or
not written, now or hereafter issued in favor of such Grantor as beneficiary, (i) execute and
deliver to the issuer and any confirmer of such letter of credit an assignment of proceeds form, in
favor of the Collateral Agent and satisfactory to the Collateral Agent and such issuer or (as the
case may be) such confirmer, requiring the proceeds of any drawing under such letter of credit to
be paid directly to the Collateral Agent for delivery to the Trustee for application as provided in
the Indenture, and (ii) use its commercially reasonable efforts to cause the issuer and any such
confirmer to execute and deliver such assignment of proceeds form to the Collateral Agent.
2.4. Excluded Assets. Notwithstanding the foregoing provisions of this §2, (a) such
grant of security interest shall not extend to, and the term “Collateral” shall not include, any
Excluded Assets, and (b) the obligations of the Grantors under §2.3 shall apply only with respect
to Collateral and shall not apply to any Excluded Assets.
2.5. Commercial Tort Claims. If any Grantor shall, now or at any time hereafter, hold
or acquire a commercial tort claim that is not an Excluded Asset, such Grantor shall immediately
notify the Collateral Agent in a writing signed by such Grantor of the particulars thereof and
grant to the Collateral Agent, for the benefit of the Secured Parties, in such writing a security
interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such
writing to be in form and substance reasonably satisfactory to the Collateral Agent.
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3. AUTHORIZATION TO FILE FINANCING STATEMENTS.
Each Grantor hereby irrevocably authorizes the Collateral Agent at any time and from time to
time to file in any filing office in any Uniform Commercial Code jurisdiction any initial financing
statements and amendments thereto that (a) indicate the collateral (i) as all assets of such
Grantor or
words of similar effect (including, without limitation, “all assets of the Debtor
whether now owned or hereafter acquired”), regardless of whether any particular asset comprised in
the Collateral falls within the scope of Article 9 of the Uniform Commercial Code of the State of
New York or such other jurisdiction, or (ii) as being of an equal or lesser scope or with greater
detail, and (b) provide any other information required by part 5 of Article 9 of the Uniform
Commercial Code of the State of New York or such other jurisdiction for the sufficiency or filing
office acceptance of any financing statement or amendment, including (i) whether such Grantor is an
organization, the type of organization and any organizational identification number issued to such
Grantor and, (ii) in the case of a financing statement filed as a fixture filing or indicating
Collateral as as-extracted collateral or timber to be cut, a sufficient description of real
property to which the Collateral relates. The filing of any financing statement as an “all assets”
filing shall in no way mean that any Excluded Asset is deemed Collateral. Each Grantor agrees to
furnish any such information to the Collateral Agent promptly upon request. Each Grantor also
ratifies its authorization for the Collateral Agent to have filed in any Uniform Commercial Code
jurisdiction any like initial financing statements or amendments thereto if filed prior to the date
hereof.
4. RELATION TO OTHER SECURITY DOCUMENTS.
The provisions of this Agreement supplement the provisions of any real estate mortgage or deed
of trust granted by the Grantors to the Collateral Agent, for the benefit of the Secured Parties,
as security for the payment or performance of any of the Obligations. Nothing contained in any
such real estate mortgage or deed of trust shall derogate from any of the rights or remedies of the
Collateral Agent or any of the other Secured Parties hereunder. In addition to the provisions of
this Agreement being so read and construed with any such mortgage or deed of trust, the provisions
of this Agreement shall be read and construed with the other Security Documents referred to below
in the manner so indicated.
4.1. Stock Pledge Agreement and Membership Interest Pledge Agreement. Concurrently
herewith all or certain of the Grantors are executing and delivering to the Collateral Agent, for
the benefit of the Secured Parties, the Stock Pledge Agreement and the Membership Interest Pledge
Agreement, pursuant to which the applicable Grantors are pledging to the Collateral Agent, for the
benefit of the Secured Parties, the equity interests subject thereto. Such pledges shall be
governed by the terms of the Stock Pledge Agreement and the Membership Pledge Agreement,
respectively, and not by the terms of this Agreement, and shall be subject to the terms of the
Intercreditor Agreement.
4.2. Trademark Security Agreement. Concurrently herewith the Grantors are executing
and delivering to the Collateral Agent, for the benefit of the Secured Parties, the Trademark
Security Agreement pursuant to which the Grantors are assigning to the Collateral Agent, for the
benefit of the Secured Parties, certain Collateral consisting of trademarks, service marks and
trademark and service xxxx rights, together with the goodwill appurtenant thereto. The provisions
of the Trademark Security Agreement are supplemental to the provisions of this Agreement, and
nothing contained in the Trademark Security Agreement shall derogate from any of the rights or
remedies of the Collateral Agent or any of the other Secured Parties hereunder. Nor shall anything
contained in the Trademark Security Agreement be deemed to prevent or extend the time of attachment
or perfection of any security interest in such Collateral created hereby. The Trademark Security
Agreement shall be subject to the terms of the Intercreditor Agreement.
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5. REPRESENTATIONS AND WARRANTIES CONCERNING COLLATERAL, ETC.
Each Grantor represents and warrants to the Secured Parties as follows: (a) the Grantors are
the owners of the Collateral free from any right or claim of any person or any Lien, except for the
security interest created by this Agreement and other Permitted Liens, (b) none of the Collateral
constitutes, or is
the proceeds of, “farm products” as defined in §9-102(a)(34) of the New York
Uniform Commercial Code, (c) none of the account debtors or other Persons obligated on any of the
Collateral is a governmental authority subject to the Federal Assignment of Claims Act or like
federal, state or local statute or rule in respect of such Collateral, (d) the Grantors hold no
commercial tort claim except as indicated on Schedule A hereto, and (e) the Grantors have
at all times operated their businesses in compliance in all material respects with all applicable
provisions of the Federal Fair Labor Standards Act, as amended and with all applicable provisions
of federal, state and local statutes and ordinances dealing with the control shipment, storage or
disposal of hazardous materials or substances.
6. CONTINUOUS PERFECTION.
Each Grantor’s place of business or, if more than one, chief executive office is indicated on
Schedule B hereto. No Grantor will change the same, or the name, identity, jurisdiction of
organization or organizational structure of such Grantor in any manner, without providing at least
30 days prior written notice to the Collateral Agent. The tangible Collateral, to the extent not
delivered pursuant to §2.3 to the Priority Lien Collateral Agent as bailee for the Collateral Agent
pursuant to the Intercreditor Agreement, will be kept at those locations listed on Schedule
B hereto and at additional locations from time to time established by the Grantors which shall
give at least 60 days prior written notice thereof to the Collateral Agent and no Grantor will
remove the tangible Collateral from such locations, without providing at least 30 days prior
written notice to the Collateral Agent.
7. NO LIENS.
Except for the security interest herein granted and other Permitted Liens, the Grantors shall
be the owners of the Collateral free from any Lien, and each Grantor shall defend the same against
all claims and demands of all persons at any time claiming the same or any interests therein
adverse to the Collateral Agent or any of the other Secured Parties; provided that, as to
priority, the security interests granted herein shall be subject only to Permitted Prior Liens. No
Grantor shall pledge, mortgage or create, or suffer to exist any right of any Person in or claim by
any Person to the Collateral or any Lien in the Collateral, in favor of any Person, or become bound
(as provided in Section 9-203(d) of the New York Uniform Commercial Code or any other relevant
jurisdiction or otherwise) by a security agreement in favor of any Person, as secured party, other
than the Collateral Agent, for the benefit of the Secured Parties, except for Permitted Liens;
provided that, as to priority, the security interests granted herein shall be subject only
to Permitted Prior Liens.
8. NO TRANSFERS.
No Grantor will sell or offer to sell or otherwise transfer or dispose of the Collateral or
any interest therein, except as provided in the Indenture.
9. INSURANCE.
9.1. Maintenance of Insurance. Each Grantor will maintain such insurance as shall be
required to be maintained under the Indenture and the other Note Documents. Such insurance shall
be in such minimum amounts that each Grantor will not be deemed a co-insurer under applicable
insurance
laws, regulations and policies and otherwise shall be in such amounts, contain such terms, be
in such forms and be for such periods as are customary with companies in the same or similar
business operating in the same or similar locations. In addition, subject to the Intercreditor
Agreement, all such insurance proceeds shall be payable to the Collateral Agent as loss payee under
a “standard” loss payee clause for the benefit of the Secured Parties. Without limiting the
foregoing, each Grantor will keep all of its physical property insured with casualty or physical
hazard insurance on an “all risks” basis, with broad
form flood and earthquake coverages and
electronic data processing coverage, with a full replacement cost endorsement and an “agreed
amount” clause in an amount equal to 100% of the full replacement cost of such property.
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9.2. Insurance Proceeds. [Intentionally omitted]
9.3. Notice of Cancellation, etc. All policies of insurance shall provide for at
least 30 days prior written cancellation notice to the Collateral Agent. In the event of failure
by any Grantor to provide and maintain insurance as herein provided, the Collateral Agent may, at
its option, provide such insurance and charge the amount thereof to the appropriate Grantor. Upon
request by the Collateral Agent, each Grantor shall furnish the Collateral Agent with certificates
of insurance and policies evidencing compliance with the foregoing insurance provision.
10. MAINTENANCE OF COLLATERAL; COMPLIANCE WITH LAW.
Each Grantor will keep the Collateral in good order and repair and will not use the same in
violation of material law or any policy of insurance thereon. The Collateral Agent, or its
designee, may inspect the Collateral at any reasonable time, wherever located. Each Grantor will
pay promptly when due all taxes, assessments, governmental charges, levies and claims upon the
Collateral or incurred in connection with the use or operation of such Collateral or incurred in
connection with this Agreement; provided that any such tax, assessment, charge, levy or
claim need not be paid if the validity or amount thereof shall currently be contested in good faith
by appropriate proceedings and if such Grantor shall have set aside on its books adequate reserves
with respect thereto; and provided further that each of the Grantors will pay all
such taxes, assessments, charges, levies or claims forthwith upon the commencement of proceedings
to foreclose any Lien that may have attached as security therefor. Each Grantor has at all times
operated, and each Grantor will continue to operate, its business in compliance in all material
respects with all applicable provisions of the federal Fair Labor Standards Act, as amended, and
with all applicable provisions of federal, state and local statutes and ordinances dealing with the
control, shipment, storage or disposal of hazardous materials or substances.
11. COLLATERAL PROTECTION EXPENSES; PRESERVATION OF COLLATERAL.
11.1. Expenses Incurred by the Collateral Agent. In its reasonable discretion after
an Event of Default has occurred and is continuing, the Collateral Agent may discharge taxes and
other encumbrances at any time levied or placed on any of the Collateral, make repairs thereto and
pay any necessary filing fees. The Grantors jointly and severally agree to reimburse the
Collateral Agent on demand for any and all expenditures so made. The Collateral Agent shall have
no obligation to any Grantor to make any such expenditures, nor shall the making thereof relieve
any Grantor of any Default or Event of Default.
11.2. Collateral Agent’s Obligations and Duties. Anything herein to the contrary
notwithstanding, each Grantor shall remain liable under each contract or agreement comprised in the
Collateral to be observed or performed by such Grantor thereunder. Neither the Collateral Agent
nor any other Secured Party shall have any obligation or liability under any such contract or
agreement by reason
of or arising out of this Agreement or the receipt by the Collateral Agent or any other
Secured Party of any payment relating to any of the Collateral, nor shall the Collateral Agent or
any other Secured Party be obligated in any manner to perform any of the obligations of any Grantor
under or pursuant to any such contract or agreement, to make inquiry as to the nature or
sufficiency of any payment received by the Collateral Agent or any other Secured Party in respect
of the Collateral or as to the sufficiency of any performance by any party under any such contract
or agreement, to present or file any claim, to take any
action to enforce any performance or to
collect the payment of any amounts which may have been assigned to the Collateral Agent or to which
the Collateral Agent or any other Secured Party may be entitled at any time or times. The
Collateral Agent’s sole duty with respect to the custody, safekeeping and physical preservation of
the Collateral in its possession, under §9-207 of the New York Uniform Commercial Code or
otherwise, shall be to deal with such Collateral in the same manner as the Collateral Agent deals
with similar property for its own account.
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12. SECURITIES AND DEPOSITS.
At any time during the continuance of an Event of Default, subject to the Intercreditor
Agreement, at its option, (a) the Collateral Agent may transfer to itself or any nominee any
securities constituting Collateral, receive any income thereon and hold such income as additional
Collateral or apply it to the Obligations, (b) whether or not any Obligations are due, the
Collateral Agent may demand, xxx for, collect, or make any settlement or compromise which it deems
desirable with respect to the Collateral and (c) regardless of the adequacy of the Collateral or
any other security for the Obligations, any deposits or other sums at any time credited by or due
from the Collateral Agent or any other Secured Party to any Grantor may at any time be applied to
or set off against any of the Obligations.
13. NOTIFICATION TO ACCOUNT DEBTORS AND OTHER OBLIGORS.
If an Event of Default shall have occurred and be continuing, subject to the Intercreditor
Agreement, any one or all of the Grantors shall, at the request of the Collateral Agent, notify
account debtors and other Persons obligated on any of the Collateral of the security interest of
the Collateral Agent in any account, chattel paper, general intangible or instrument or other
Collateral and that payment thereof is to be made directly to the Collateral Agent or to any
financial institution designated by the Collateral Agent as the Collateral Agent’s agent therefor,
and, subject to the Intercreditor Agreement, the Collateral Agent may itself, if a Default or an
Event of Default shall have occurred and be continuing, without notice to or demand upon any
Grantor, so notify account debtors and other Persons obligated on Collateral. After the making of
such a request or the giving of any such notification, such Grantors shall hold any proceeds of
collection of accounts, chattel paper, general intangibles, instruments and other Collateral
received by such Grantors as trustee for the Collateral Agent, for the benefit of the Secured
Parties, without commingling the same with other funds of such Grantors and, subject to the
Intercreditor Agreement, shall turn the same over to the Collateral Agent in the identical form
received, together with any necessary endorsements or assignments. Subject to the Intercreditor
Agreement, the Collateral Agent shall transfer the proceeds of collection of accounts, chattel
paper, general intangibles, instruments and other Collateral received by the Collateral Agent to
the Trustee, which shall apply such proceeds to the Obligations.
14. FURTHER ASSURANCES.
14.1. General. Each Grantor, at its own expense, shall do, make, execute and deliver
all such additional and further acts, things, deeds, assurances and instruments as the Collateral
Agent may reasonably require more completely to vest in and assure to the Collateral Agent and the
other Secured Parties their respective rights hereunder or in any of the Collateral, including,
without limitation, (i) executing, delivering and, where appropriate, filing financing statements
and continuation statements
under the Uniform Commercial Code, and (ii) except to the extent expressly not required under
the definition of Excluded Assets, obtaining (or, so long as an Event of Default shall not have
occurred and be continuing, using its commercially reasonable efforts to obtain) governmental and
other third party consents and approvals, including without limitation any consent of any licensor,
lessor or other applicable party referred to in the definition of Excluded Assets as it is used in
§2.4.
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14.2. Duties of the Grantors. Without limiting the provisions of §14.1 above, each
Grantor hereby covenants and agrees that such Grantor shall maintain the security interest created
by this Agreement as a perfected security interest having priority over all other Liens other than
Permitted Prior Liens and, in furtherance of, but without limiting, the foregoing, except as
otherwise expressly permitted by this Agreement, shall (i) no later than the later of the date
hereof and within one (1) Business Day of the date on which any Collateral that would not be
covered by previously filed Uniform Commercial Code financing statements is acquired, file, or
cause to be filed, Uniform Commercial Code financing statements (or amendments to existing Uniform
Commercial Code financing statements) (or such other statements as may be required under applicable
law) in such manner and in such places as may be required under applicable law to fully preserve,
maintain, and protect the security interest of the Collateral Agent and the priority thereof in the
Collateral granted hereunder, including the filing of Uniform Commercial Code financing statements
in the jurisdiction of organization of such Grantor, naming such Grantor as the debtor, naming the
Collateral Agent as the secured party and describing the collateral as the Collateral or as may
otherwise be permitted to be described under §3 and (ii) to the extent that the security interest
granted hereunder with respect to the applicable assets remains in effect at such time, file
Uniform Commercial Code continuation statements (or such other statements as may be required under
applicable law to continue the priority of the security interests described in clause (i)) in the
jurisdiction of organization of such Grantor and in any other location as necessary or appropriate
under applicable law to continue such security interest and the priority thereof, no earlier than
six (6) months and no later than thirty (30) days prior to the date on which the financing
statements described in clause (i) would otherwise lapse or become ineffective under applicable
law. Each Grantor agrees to deliver to each of the Trustee and the Collateral Agent copies of all
Uniform Commercial Code financing statements (including continuation statements) and other
statements filed pursuant to this §14.2 within ten (10) days after the filing thereof.
15. POWER OF ATTORNEY.
15.1. Appointment and Powers of the Collateral Agent. Each Grantor hereby irrevocably
constitutes and appoints the Collateral Agent and any officer or agent thereof, with full power of
substitution, as its true and lawful attorneys-in-fact with full irrevocable power and authority in
the place and stead of such Grantor or in the Collateral Agent’s own name, for the purpose of
carrying out the terms of this Agreement, to take any and all appropriate action and to execute any
and all documents and instruments that may be necessary or desirable to accomplish the purposes of
this Agreement and, without limiting the generality of the foregoing, hereby gives said attorneys
the power and right, on behalf of such Grantor, without notice to or assent by such Grantor, to do
the following, in each case, subject to the Intercreditor Agreement:
(a) upon the occurrence and during the continuance of an Event of Default, generally to sell,
transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral
in such manner as is consistent with the Uniform Commercial Code of the State of New York or any
other relevant jurisdiction and as fully and completely as though the Collateral Agent were the
absolute owner thereof for all purposes, and to do at such Grantor’s expense, at any time, or from
time to time, all acts and things which the Collateral Agent deems necessary to protect, preserve
or realize upon the Collateral and the Collateral Agent’s security interest therein, in order to
effect the intent of this Agreement, all as fully and effectively as such Grantor might do,
including, without limitation, (i) the
filing and prosecuting of registration and transfer applications with the appropriate federal
or local agencies or authorities with respect to trademarks, copyrights and patentable inventions
and processes, (ii) upon written notice to such Grantor, the exercise of voting rights with respect
to voting securities, which rights may be exercised, if the Collateral Agent so elects, with a view
to causing the liquidation in a commercially reasonable manner of assets of the issuer of any such
securities and (iii) the execution, delivery and recording, in connection with any sale or other
disposition of any Collateral, of the
endorsements, assignments or other instruments of conveyance
or transfer with respect to such Collateral; and
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(b) to the extent that the Grantors’ authorization in §3 is not sufficient, to file such
financing statements with respect hereto, as the Collateral Agent may deem appropriate.
15.2. Ratification by Grantors. To the extent permitted by law, each Grantor hereby
ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. This
power of attorney is a power coupled with an interest and shall be irrevocable.
15.3. No Duty on the Collateral Agent. The powers conferred on the Collateral Agent
hereunder are solely to protect the interests of the Secured Parties in the Collateral and shall
not impose any duty upon the Collateral Agent to exercise any such powers. The Collateral Agent
shall be accountable only for the amounts that it actually receives as a result of the exercise of
such powers and neither it nor any of its officers, directors, employees or agents shall be
responsible to any Grantor for any act or failure to act, except for the Collateral Agent’s own
gross negligence or willful misconduct.
15.4. Benefit of Indenture Provisions. In acting as Collateral Agent, the Collateral
Agent may rely upon and enforce each and all of the rights powers, protections, immunities,
indemnities and benefits of the Trustee under Article 7 of the Indenture, mutatis mutandis, as if
the Collateral Agent was the “Trustee,” each reference therein to the Indenture was a reference to
this Agreement and the other Security Documents and each reference therein to the “Company” or any
“Guarantor” was a reference to the Grantors. Each Grantor hereby acknowledges and affirms that the
rights and remedies of the Collateral Agent with respect to the security interest in the Collateral
made and granted hereby, including with respect to limitation of liability and indemnification, are
more fully set forth in Article 10 of the Indenture, the terms and provisions of which are
incorporated by reference herein.
16. REMEDIES.
If an Event of Default shall have occurred and be continuing, subject to the Intercreditor
Agreement, the Collateral Agent may, without notice to or demand upon any Grantor, declare this
Agreement to be in default, and the Collateral Agent shall thereafter have in any jurisdiction in
which enforcement hereof is sought, in addition to all other rights and remedies, the rights and
remedies of a secured party under the Uniform Commercial Code of the State of New York or any other
relevant jurisdiction, including, without limitation, the right to take possession of the
Collateral, and for that purpose the Collateral Agent may, so far as the Grantors can give
authority therefor, enter upon any premises on which the Collateral may be situated and remove the
same therefrom. Subject to the Intercreditor Agreement, the Collateral Agent may in its discretion
require any Grantor to assemble all or any part of the Collateral at such location or locations
within the state(s) of such Grantor’s principal office(s) or at such other locations as the
Collateral Agent may designate. Unless the Collateral is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized market, the Collateral Agent
shall give to the Grantors at least six Business Days prior written notice of the time and place of
any public sale of Collateral or of the time after which any private sale or any other intended
disposition is to be made. Each Grantor hereby acknowledges that six Business Days prior written
notice of such sale or sales shall be reasonable notice. In addition, each Grantor waives any and
all rights that it may have to a judicial hearing in advance of the enforcement of any of the
Collateral Agent’s rights hereunder, including, without limitation, its right following an Event of
Default to take immediate possession of the Collateral and to exercise its rights with respect
thereto.
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17. NO WAIVERS, ETC.
Each Grantor waives demand, notice, protest, notice of acceptance of this Agreement, notice of
loans made, credit extended, Collateral received or delivered or other action taken in reliance
hereon and all other demands and notices of any description. With respect to both the Obligations
and the Collateral, each Grantor assents to any extension or postponement of the time of payment or
any other indulgence, to any substitution, exchange or release of or failure to perfect any
security interest in any Collateral, to the addition or release of any party or person primarily or
secondarily liable, to the acceptance of partial payment thereon and the settlement, compromising
or adjusting of any thereof, all in such manner and at such time or times as the Collateral Agent
may deem advisable. The Collateral Agent shall have no duty as to the collection or protection of
the Collateral or any income thereon, nor as to the preservation of rights against prior parties,
nor as to the preservation of any rights pertaining thereto beyond the safe custody thereof as set
forth in §11.2. No delay or omission on the part of the Collateral Agent in exercising any right
shall operate as a waiver of such right or any other right. A waiver on any one occasion shall not
be construed as a bar to or waiver of any right on any future occasion. All rights and remedies of
the Collateral Agent with respect to the Obligations or the Collateral, whether evidenced hereby or
by any other instrument or papers, shall be cumulative and may be exercised singularly,
alternatively, successively or concurrently at such time or at such times as the Collateral Agent
deems expedient. No amendment or modification to, or any waiver of, any provision of this
Agreement shall be effective unless such amendment, modification or waiver is permitted under and
effected in accordance with Article 9 of the Indenture.
18. NOTICES.
All notices, requests and demands hereunder shall be in writing and (a) made to (i) the
Collateral Agent at Xxxxx Fargo Bank, National Association, Corporate Trust Services, 000 Xxxxxxxx
Xxxxxxxxx, 00xx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000, Attn: Xxxxx Xxxx, and (ii) each
Grantor care of the address for notices for the Issuer under the Indenture or to such other address
as any party may designate by written notice to the other in accordance with this provision, and
(b) deemed to have been given or made: if delivered in person, immediately upon delivery; if by
telex, telegram or facsimile transmission, immediately upon sending and upon confirmation of
receipt; if by nationally recognized overnight courier service with instructions to deliver the
next business day, one (1) business day after sending; and if by certified mail, return receipt
requested, five (5) days after mailing.
19. MARSHALLING.
Neither the Collateral Agent nor any other Secured Party shall be required to marshal any
present or future collateral security (including but not limited to this Agreement and the
Collateral) for, or other assurances of payment of, the Obligations or any of them or to resort to
such collateral security or other assurances of payment in any particular order, and all of the
rights of the Collateral Agent hereunder and of the Collateral Agent or any other Secured Party in
respect of such collateral security and other assurances of payment shall be cumulative and in
addition to all other rights, however existing or arising. To the extent that it lawfully may,
each Grantor hereby agrees that it will not invoke any law relating to the marshalling of
collateral which might cause delay in or impede the enforcement of the Collateral Agent’s rights
under this Agreement or under any other instrument creating or evidencing any of the Obligations or
under which any of the Obligations is outstanding or by which any of the Obligations is
secured or payment thereof is otherwise assured, and, to the extent that it lawfully may, each
Grantor hereby irrevocably waives the benefits of all such laws.
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20. PROCEEDS OF DISPOSITIONS; EXPENSES.
The Grantors jointly and severally agree to pay to the Collateral Agent on demand any and all
expenses, including reasonable attorneys’ fees and disbursements, incurred or paid by the
Collateral Agent in connection with the administration of the Collateral Agent’s duties under this
Agreement or any other Note Document to which the Collateral Agent is a party (including, without
limitation, the Intercreditor Agreement) and/or in connection with protecting, preserving or
enforcing the Collateral Agent’s rights under or in respect of any of the Obligations or any of the
Collateral. After deducting all of said expenses, the residue of any proceeds of collection or
sale of the Obligations or Collateral shall, to the extent actually received in cash, be
transferred to the Trustee, who shall apply the residue to the payment of the Obligations in such
order or preference as is provided in the Indenture, proper allowance and provision being made for
any Obligations not then due. Upon the final payment and satisfaction in full of all of the
Obligations and after making any payments required by Sections 9-608(a)(1)(C) or 9-615(a)(3) of the
New York Uniform Commercial Code, any excess shall be returned to the Grantors, and each Grantor
shall remain liable for any deficiency in the payment of the Obligations.
21. OVERDUE AMOUNTS.
Until paid, all amounts due and payable by any Grantor hereunder shall be a debt secured by
the Collateral and shall bear, whether before or after judgment, interest at the rate of interest
set forth in the Indenture for payment on the Notes during the continuation of an Event of Default.
22. GOVERNING LAW; CONSENT TO JURISDICTION.
THIS AGREEMENT IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL AND SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. Each Grantor
agrees that any suit for the enforcement of this Agreement may be brought in the courts of the
State of New York sitting in New York County or in the United States District Court of the Southern
District of New York, or any appellate court from any thereof, and consents to the non-exclusive
jurisdiction of such courts and to service of process in any such suit being made upon the Grantors
by mail at the address specified in §18 of this Agreement. Each Grantor hereby waives any
objection that it may now or hereafter have to the venue of any such suit or any such court or that
such suit is brought in an inconvenient court.
23. WAIVER OF JURY TRIAL.
EACH GRANTOR WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT
OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE
PERFORMANCE OF ANY SUCH RIGHTS OR OBLIGATIONS. Except as prohibited by law, each Grantor waives
any right which it may have to claim or recover in any litigation referred to in the preceding
sentence any special, exemplary, punitive or consequential damages or any damages other than, or in
addition to, actual damages. Each Grantor (i) certifies that neither the Collateral Agent nor any
other Secured Party nor any representative, agent or attorney of the Collateral Agent or any other
Secured Party has represented, expressly or otherwise, that the Collateral Agent or any other
Secured Party would not, in the event of litigation, seek to enforce the foregoing waivers and (ii)
acknowledges that, in entering into the Indenture and the other Note Documents to which the
Collateral Agent or any other Secured Party is a party, the
Collateral Agent and the other Secured Parties are relying upon, among other things, the
waivers and certifications contained in this §23.
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24. INTERCREDITOR AGREEMENT.
The provisions of this Agreement are subject in all respects to the provisions of the
Intercreditor Agreement and, in the event of any discrepancy or inconsistency between this
Agreement and the Intercreditor Agreement, the terms of the Intercreditor Agreement shall control.
25. DELIVERY.
Notwithstanding the foregoing, subject to the terms of the Intercreditor Agreement, at such
time as there are no Priority Lien Obligations existing that have not been Discharged (as defined
in the Intercreditor Agreement), any and all items (including instruments of transfer or
assignments in blank) that are required to be delivered, assigned, and/or endorsed to the Priority
Lien Collateral Agent under this Agreement shall be delivered, assigned and/or endorsed to the
Collateral Agent.
26. NOTICE OF REAL ESTATE.
Each of the Grantors will, and will cause each of its Subsidiaries to, give notice to the
Collateral Agent in writing of any such Person acquiring any additional real property owned or
leased (as lessee or sublessee) by any Grantor or any of its Subsidiaries not later than one month
following the last day of each fiscal quarter of the Issuer.
27. INSPECTION OF PROPERTIES AND BOOKS, ETC.
Each of the Grantors shall permit the Collateral Agent and its agents to visit and inspect any
of the properties of any of the Grantors or their Subsidiaries, to examine the books of account of
the Grantors and their Subsidiaries (and to make copies thereof and extracts therefrom), and shall
permit the Collateral Agent and the other Secured Parties to discuss the affairs, finances and
accounts of the Grantors and their Subsidiaries with, and to be advised as to the same by, its and
their officers, all at such reasonable times and intervals as the Collateral Agent may reasonably
request, provided that any such visits shall occur no more frequently than twice per year
if no Event of Default has occurred and is continuing.
28. FRANCHISES.
Each Grantor will not, and will not permit any of its Restricted Subsidiaries to, enter into
any franchise agreement pursuant to which any such Grantor or such Restricted Subsidiary is
prohibited from pledging or otherwise assigning its rights under such franchise agreement including
its right to receive any franchise fees or other fees or amounts paid to such Grantor or such
Restricted Subsidiary thereunder.
12
29. RELEASE OF SECURITY INTEREST; TERMINATION.
At such time as all of the Obligations have been finally paid and satisfied in full, this
Agreement shall terminate and, subject to Article 10 of the Indenture (including Section 10.06
thereof) and the Intercreditor Agreement, the Liens granted hereunder shall be released and the
Collateral Agent shall, subject to the satisfaction of the conditions described in Article 10 of
the Indenture (including Section 10.06 thereof), following the written request and at the expense
of the Grantors (the Grantors being jointly and severally liable for such expense), without any
recourse or representation, warranty or liability of any kind, execute and deliver to the Grantors
such deeds, assignments and other instruments, prepared by the
applicable Grantors and delivered to the Collateral Agent for its execution, as may be
necessary or proper to release the Liens granted hereunder and to reassign and reconvey to and
re-vest in the Grantors the entire right, title and interest to the Collateral previously granted,
assigned, transferred and conveyed to
the Collateral Agent by the Grantors pursuant to this
Agreement, as fully as if this Agreement had not been made, subject to any disposition of all or
any part thereof that may have been made pursuant to or in accordance with any Note Document or the
Intercreditor Agreement.
30. MISCELLANEOUS.
The headings of each section of this Agreement are for convenience only and shall not define
or limit the provisions thereof. This Agreement and all rights and obligations hereunder shall be
binding upon each Grantor and its respective successors and assigns, and shall inure to the benefit
of the Secured Parties and their respective successors and assigns; provided that neither
this Agreement nor any rights or obligations hereunder may be assigned by any Grantor, without the
prior written consent of the Collateral Agent acting at the direction of the Holders of at least a
majority in aggregate principal amount of the Notes then outstanding, and any purported assignment
in breach of this proviso shall be of no force and effect. This Agreement may be executed in one
or more duplicate counterparts and when signed by all of the parties listed below shall constitute
a single binding agreement. Delivery of an executed counterpart of a signature page of this
Agreement by telecopy or other electronic transmission shall be effective as delivery of a manually
executed counterpart of this Agreement. If any term of this Agreement shall be held to be invalid,
illegal or unenforceable, the validity of all other terms hereof shall in no way be affected
thereby, and this Agreement shall be construed and be enforceable as if such invalid, illegal or
unenforceable term had not been included herein. Each Grantor acknowledges receipt of a copy of
this Agreement.
[Signature Pages to Follow]
13
IN WITNESS WHEREOF, intending to be legally bound, the Grantors have caused this Security
Agreement to be duly executed as of the date first above written.
| GRANTORS: | ||||||
| REAL MEX RESTAURANTS, INC. | ||||||
| ACAPULCO RESTAURANTS, INC. | ||||||
| EL TORITO FRANCHISING COMPANY | ||||||
| EL TORITO RESTAURANTS, INC. | ||||||
| TARV, INC. | ||||||
| ACAPULCO RESTAURANT OF VENTURA, INC. | ||||||
| ACAPULCO RESTAURANT OF WESTWOOD, INC. | ||||||
| ACAPULCO XXXX CORP. | ||||||
| XXXXXX PACIFIC | ||||||
| REAL MEX FOODS, INC. | ||||||
| ALA DESIGN, INC. | ||||||
| ACAPULCO RESTAURANT OF XXXXXX, INC. | ||||||
| ACAPULCO RESTAURANT OF XXXXXX VALLEY, INC. | ||||||
| EL PASO CANTINA, INC. | ||||||
| CKR ACQUISITION CORP. | ||||||
| CHEVYS RESTAURANTS, LLC | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
| RESTAURANT HOLDING CORP. | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
Security
Agreement
Accepted:
XXXXX FARGO BANK, NATIONAL ASSOCIATION,
as Collateral Agent
as Collateral Agent
By: |
||||
| Name: | ||||
| Title: | ||||
Security
Agreement
SCHEDULE A TO SECURITY AGREEMENT
Commercial Tort Claims
None.
Security
Agreement
Schedule A-1
SCHEDULE B TO SECURITY AGREEMENT
Location of Chief Executive Offices/Records/Places of Business
0000 Xxxxxxx Xxx., Xxxxx 000
Xxxxxxx, XX 00000
Xxxxxxx, XX 00000
Security
Agreement
Schedule B-1
