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EXHIBIT 10(z)
SECURITY AGREEMENT
FAMILY RESTAURANTS, INC.
This SECURITY AGREEMENT (this "Agreement"), is entered into as
of January 10, 1997 between FOOTHILL CAPITAL CORPORATION, a California
corporation ("Foothill"), with a place of business located at 00000 Xxxxx
Xxxxxx Xxxxxxxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000, and FAMILY
RESTAURANTS, INC., a Delaware corporation ("Guarantor"), with its chief
executive office located at 00000 Xxx Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxx 00000.
WHEREAS, Borrower, Foothill, and the other parties thereto
are, contemporaneously herewith, entering into the Loan Agreement;
WHEREAS, Guarantor owns 100% of the issued and outstanding
stock of FRI-MRD Corporation, a Delaware corporation, which in turn owns 100%
of the issued and outstanding stock of Borrower, such that the entities
Borrower comprises are indirect subsidiaries of Guarantor;
WHEREAS, Guarantor has executed that certain General
Continuing Guaranty, of even date herewith, in favor of Foothill (the
"Guaranty"), respecting certain obligations of Borrower owing to Foothill under
the Loan Agreement;
WHEREAS, Guarantor desires to collateralize its obligations
under the Guaranty by granting to Foothill a security interest in certain of
its assets; and
WHEREAS, Guarantor will benefit by virtue of the loan from
Foothill to Borrower.
NOW THEREFORE, in consideration of the premises set forth
above, the terms and conditions contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
and each intending to be bound hereby, Foothill and Guarantor agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. All capitalized terms used
herein and not otherwise defined herein shall have the meanings ascribed to
them in the Loan Agreement. As used in this Agreement, the following terms
shall have the following definitions:
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"Accounts" means all currently existing and
hereafter arising accounts, contract rights, and all other forms of obligations
owing to Guarantor arising out of the sale, license, or lease of goods or the
rendition of services by Guarantor, irrespective of whether earned by
performance, and any and all credit insurance, guaranties, or security
therefor.
"Acquired Indebtedness" means Indebtedness of
a Person that exists at the time such Person becomes a Restricted Subsidiary of
Guarantor or that is assumed by Guarantor or any Restricted Subsidiary in
connection with the acquisition of assets from such Person, and, in any such
case, is not incurred by such Person in connection with, or in anticipation of,
such Person becoming a Restricted Subsidiary of Guarantor or in connection
with, or in anticipation of, the acquisition of assets from such Person.
"Agreement" means this Security Agreement and
any extensions, riders, supplements, notes, amendments, or modifications to or
in connection with this Security Agreement.
"Borrower" means any one or more of
Chi-Chi's, Inc., a Delaware corporation and El Torito Restaurants, Inc., a
Delaware corporation, individually and collectively, jointly and severally.
"Collateral" means each of the following: the
Accounts; Guarantor's Books; the Equipment; the General Intangibles; the
Inventory; the Negotiable Collateral; any money, or other assets of Guarantor
which now or hereafter come into the possession, custody, or control of
Foothill; and the proceeds and products, whether tangible or intangible, of any
of the foregoing, including proceeds of insurance covering any or all of the
Collateral, and any and all Accounts, Guarantor's Books, Equipment, General
Intangibles, Inventory, Negotiable Collateral, money, deposit accounts, or
other tangible or intangible property resulting from the sale, exchange,
collection, or other disposition of any of the foregoing, or any portion
thereof or interest therein, and the proceeds thereof.
"Equipment" means all of Guarantor's present
and hereafter acquired machinery, machine tools, motors, equipment, furniture,
furnishings, fixtures, vehicles (including motor vehicles and trailers), tools,
parts, goods (other than consumer goods, farm products, or Inventory), wherever
located, and any interest of Guarantor in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing, wherever located.
"Event of Default" has the meaning ascribed
to it in Section 6.
"Excluded Contract Right" means, with respect
to Guarantor, and with respect to any contract to which Guarantor is a party, a
right or privilege of Guarantor under
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such contract, or an obligation due to Guarantor under such contract, that: (a)
In the case of a More Important Contract, arises under a contract described on
Schedule E-1 to the Loan Agreement; or (b) In the case of a Less Important
Contract, (i) does not consist of the right of Guarantor to receive a payment,
or an obligation due to Guarantor with respect to a payment, and (ii) is, by
the express terms of such contract, subject to a restriction on assignability
that prohibits the pledge, hypothecation, mortgage, encumbrance, or grant of a
Lien on same, if such restriction is enforceable, and if the breach of such
restriction by Guarantor would constitute a material breach of such contract
sufficient to give rise to a right on the part of another party to such
contract to terminate such contract or to impose liability for not
insignificant damages upon Guarantor for breach of such contract; provided that
the proceeds of any disposition of any Excluded Contract Right shall not
constitute an Excluded Contract Right, and any such proceeds shall be subject
to Foothill's security interest.
"General Corporate Purposes" means, with
respect to any transfer or disposition of Collateral by Guarantor or any
Restricted Subsidiary, a transfer or disposition made for general corporate
purposes of such Person reasonably related to (a) its ownership, operation,
management, or conduct of restaurant businesses and other businesses reasonably
related or incidental thereto, (b) ownership of its Subsidiaries to the extent
that such Subsidiaries are engaged in the ownership, operation, management, or
conduct of restaurant businesses and other businesses reasonably related or
incidental thereto, (c) the recapitalization of Guarantor or the restructuring
of the Indebtedness of Guarantor, (d) the payment of principal or interest owed
by Guarantor with respect to Senior Notes or Subordinated Notes, or (e) the
purchase, redemption, or retirement by Guarantor of Senior Notes or
Subordinated Notes.
"General Intangibles" means all of
Guarantor's present and future general intangibles and other personal property
(including contract rights, rights arising under common law, statutes, or
regulations, choses or things in action, goodwill, patents, trade names,
trademarks, servicemarks, copyrights, blueprints, drawings, purchase orders,
customer lists, monies due or recoverable from pension funds, route lists,
rights to payment and other rights under any royalty or licensing agreements,
infringement claims, computer programs, information contained on computer discs
or tapes, literature, reports, catalogs, deposit accounts, insurance premium
rebates, tax refunds, and tax refund claims), other than goods, Accounts, and
Negotiable Collateral; provided that General Intangibles shall not include any
Excluded Contract Right.
"Guarantied Obligations" shall have the
meaning ascribed to it in the Guaranty.
"Guarantor's Books" means all of Guarantor's
books and records, including: ledgers; records indicating, summarizing, or
evidencing Guarantor's properties or assets (including the Collateral) or
liabilities; all information relating to Guarantor's business
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operations or financial condition; and all computer programs, disc or tape
files, printouts, runs, or other computer prepared information in respect of
such books and records.
"Guarantor" has the meaning ascribed thereto
in the preamble to this Agreement.
"Guaranty" means the General Continuing
Guaranty of Guarantor to Foothill of even date herewith.
"Inventory" means all present and future
inventory in which Guarantor has any interest, including goods held for sale,
license, or lease or to be furnished under a contract of service and all of
Guarantor's present and future raw materials, work in process, finished goods,
and packing and shipping materials, wherever located, and any documents of
title representing any of the above.
"Investment Property" means "investment
property" as that term is defined in Section 9-115 of the Official Text of the
Uniform Commercial Code and as defined in California Senate Xxxx 1591 which was
approved by the Governor of the State of California on September 14, 1996 and
will be effective as of January 1, 1997 as part of the Code.
"Less Important Contract" means, with respect
to Guarantor, a contract to which Guarantor is a party that is not a More
Important Contract.
"Loan Agreement" means that certain Loan and
Security Agreement, dated as of even date herewith, between Borrower, Foothill,
and the other parties thereto.
"Material Adverse Collateral Change" means
(a) a material and adverse decline in the value of the Collateral (exclusive of
the Stock of Subsidiaries of Guarantor and exclusive of dispositions of the
Collateral (including, the Flagstar Bonds) that are not prohibited by the Loan
Documents) or the amount that Foothill would be likely to receive (after giving
consideration to delays in payment and costs of enforcement) in the liquidation
of such Collateral, or (b) a material impairment of the priority of Foothill's
Liens with respect to such Collateral, in each case, other than as the
proximate result of the action or inaction of Foothill.
"More Important Contract" means, with respect
to Guarantor, a contract to which Guarantor is a party: (a) Described on
Schedule E-1 to the Loan Agreement; (b) the material breach of which by
Guarantor could give rise to a claim against Guarantor that is material in
relation to Guarantor's financial condition; or (c) the termination of which
could interfere substantially with the ongoing operations, businesses, or
prospects of Guarantor.
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"Negotiable Collateral" means all of
Guarantor's present and future letters of credit, notes, drafts, instruments,
Investment Property (including the shares of stock of Subsidiaries of
Guarantor), documents, personal property leases (wherein Guarantor is the
lessor), chattel paper, and Guarantor's Books relating to any of the foregoing.
"Permitted Liens" means, with respect to
assets of Guarantor or any Restricted Subsidiary: (a) Liens granted to
Foothill or any assignee under the Loan Documents; (b) Liens for unpaid taxes,
assessments, and government charges that either (i) are not yet due and payable
or (ii) are the subject of Permitted Protests; (c) Liens set forth on Schedule
P-1 of the Loan Agreement, (d) the interests of lessors or lessees under
operating leases and subleases; (e) Liens securing purchase money Indebtedness
or capital leases granted or entered into by Guarantor or any Restricted
Subsidiary, other than in connection with the acquisition of a Person or the
acquisition of assets not in the ordinary course of an existing business of
Guarantor or a Restricted Subsidiary, provided, however, that such Lien only
attaches to the asset purchased or acquired; (f) Liens arising by operation of
law, incurred in the ordinary course of business of Guarantor and Garauntor's
Restricted Subsidiaries and not in connection with the borrowing of money, and
which Liens either (i) are for sums not yet due and payable, (ii) are the
subject of Permitted Protests, or (iii) in the aggregate are de minimis in
amount; (g) Liens arising from deposits made in connection with obtaining
worker's compensation or other unemployment insurance; (h) Liens or deposits to
secure performance of bids, tenders, contracts or leases (to the extent
permitted under this Agreement), incurred in the ordinary course of business of
Guarantor or any Restricted Subsidiary and not in connection with the borrowing
of money; (i) Liens arising by reason of security for surety or appeal bonds;
(j) Liens of or resulting from any judgment or award that does not constitute
an Event of Default hereunder; (k) Liens with respect to the Headquarters
Property, that are exceptions to the commitments for title insurance issued in
connection with the Headquarters Mortgage, as accepted by Foothill at the time
of such issuance, (l) with respect to any Real Property, easements, rights of
way, zoning and similar covenants and restrictions, and similar encumbrances
that do not materially interfere with or impair the use or operation thereof by
Guarantor or any Restricted Subsidiary; (m) other Liens imposed by operation of
law that do not materially affect Guarantor's or any Restricted Subsidiary's
ability to perform their respective obligations under the Loan Documents; (n)
replacement or continued Liens granted to a Person who provides refinancing or
continuation of Indebtedness under any Permitted Lien; provided, that the
replacement or continued Lien is limited to all or part of the properties or
assets that secured the refinanced or continued Indebtedness; (o) existing
mortgages or Liens disclosed in the most recent financial statements (or the
notes thereto) of Guarantor delivered to Foothill prior to the Closing Date;
and (p) with respect to any acquisition after the Closing Date by Guarantor or
any Restricted Subsidiary of any assets, or of any Person, any pre-existing
Liens on such acquired assets or on the assets of such acquired Person to the
extent and only to the extent that they secure Acquired Indebtedness.
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"Permitted Protest" means the right of
Guarantor or any Restricted Subsidiary to protest any Lien (other than any such
Lien that secures the Guarantied Obligations), tax (other than taxes that are
the subject of a United States federal tax lien), or rental payment, provided
that (a) if required in accordance with GAAP, a reserve with respect to such
obligation is established on the books of Guarantor or any Restricted
Subsidiary, as applicable under the circumstances, in accordance with GAAP, and
(b) any such protest is instituted and diligently prosecuted by Guarantor or
any Restricted Subsidiary, as applicable under the circumstances, in good
faith.
"Restricted Subsidiary" means any Subsidiary
of Guarantor (other than FRI-MRD and its Subsidiaries) that has not been
designated by Guarantor as an Unrestricted Subsidiary.
"Secured Obligations" shall mean all
liabilities, obligations, or undertakings owing by Guarantor to Foothill of any
kind or description arising out of or outstanding under, advanced or issued
pursuant to, or evidenced by the Guaranty, any other Loan Document heretofore,
herewith, or hereafter executed by Guarantor, or this Agreement, irrespective
of whether for the payment of money, whether direct or indirect, absolute or
contingent, due or to become due, voluntary or involuntary, whether now
existing or hereafter arising, and including all interest (including interest
that accrues after the filing of a case under the Bankruptcy Code) and any and
all reasonable out- of-pocket costs, fees (including reasonable attorneys
fees), and expenses which Guarantor is required to pay pursuant to any of the
foregoing, by law, or otherwise.
"Unrestricted Subsidiary" means any
Subsidiary of Guarantor (other than FRI-MRD and its Subsidiaries) that is (a)
now existing or hereafter created or acquired, and (b) designated in writing by
Guarantor to Foothill as an Unrestricted Subsidiary.
1.2 CODE. Any terms used in this Agreement which
are defined in the Code shall be construed and defined as set forth in the Code
unless otherwise defined herein.
1.3 CONSTRUCTION. Unless the context of this
Agreement clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the term "including"
is not limiting, and the term "or" has, except where otherwise indicated, the
inclusive meaning represented by the phrase "and/or." The words "hereof,"
"herein," "hereby," "hereunder," and similar terms in this Agreement refer to
this Agreement as a whole and not to any particular provision of this
Agreement. Section, subsection, clause, schedule, and exhibit references are
to this Agreement unless otherwise specified. Any reference in this Agreement
or in any of the other Loan Documents to this Agreement or any of the other
Loan Documents shall include all alterations, amendments, restatements,
changes, extensions, modifications, renewals, replacements, substitutions, and
supplements, thereto and thereof, as
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applicable. In the event of a direct conflict between the terms and provisions
of this Agreement and the Loan Agreement, it is the intention of the parties
hereto that both such documents shall be read together and construed, to the
fullest extent possible, to be in concert with each other. In the event of any
actual, irreconcilable conflict that cannot be resolved as aforesaid, the terms
and provisions of the Loan Agreement shall control and govern; provided,
however, that the inclusion herein of additional obligations on the part of
Guarantor and supplemental rights and remedies in favor of Foothill, in each
case in respect of the Collateral, shall not be deemed a conflict with the Loan
Agreement.
1.4 SCHEDULES AND EXHIBITS. All of the schedules
and exhibits attached to this Agreement shall be deemed incorporated herein by
reference.
2. CREATION OF SECURITY INTEREST.
2.1 GRANT OF SECURITY INTEREST. Guarantor hereby
grants to Foothill a continuing security interest in all of its currently
existing and hereafter acquired or arising Collateral in order to secure
payment and performance of the Secured Obligations. Foothill's security
interests in the Collateral shall attach to all Collateral without further act
on the part of Foothill or Guarantor. Anything contained in this Agreement or
any other Loan Document to the contrary notwithstanding, Guarantor has no
authority, express or implied, to dispose of any item or portion of the
Collateral except as set forth in Section 2.7 hereof. Concurrent with the
consummation of any Permitted Disposition, Foothill agrees to release its Liens
on the subject property or asset (but not the proceeds from the Asset
Disposition).
2.2 NEGOTIABLE COLLATERAL. In the event that any
Collateral, including proceeds, is evidenced by or consists of Negotiable
Collateral (other than Collection items received by Guarantor in the ordinary
course of Guarantor's business and deposited), Guarantor shall, promptly upon
the request of Foothill, deliver physical possession of such Negotiable
Collateral to Foothill or its bailee to the extent required for Foothill to
have a first priority perfected Lien thereon.
2.3 [Intentionally omitted.]
2.4 DELIVERY OF ADDITIONAL DOCUMENTATION
REQUIRED. Guarantor shall execute, and deliver to Foothill, prior to or
concurrently with Guarantor's execution and delivery of this Agreement and at
any time thereafter at the request of Foothill, all financing statements,
continuation financing statements, fixture filings, security agreements,
chattel mortgages, pledges, mortgages, deeds of trust, assignments,
endorsements of certificates of title, applications for title, affidavits,
reports, notices, schedules of accounts, letters of authority, and all other
documents that Foothill may reasonably request, in form satisfactory to
Foothill, to perfect and continue perfected
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Foothill's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
2.5 POWER OF ATTORNEY. Guarantor hereby
irrevocably makes, constitutes, and appoints Foothill (and any of Foothill's
officers, employees, or agents designated by Foothill) as Guarantor's true and
lawful attorney, with power to: (a) if Guarantor refuses to, or fails timely
to execute and deliver any of the documents described in Section 2.4, sign the
name of Guarantor on any of the documents described in Section 2.4; (b) endorse
Guarantor's name on any Collection item that may come into Foothill's
possession; (c) at any time that an Event of Default has occurred and is
continuing, make, settle, and adjust all claims under Guarantor's policies of
insurance and make all determinations and decisions with respect to such
policies of insurance. The appointment of Foothill as Guarantor's attorney,
and each and every one of Foothill's rights and powers, being coupled with an
interest, is irrevocable until all of the Secured Obligations have been fully
and finally repaid and performed and Foothill's obligation to extend credit
under the Loan Agreement is terminated.
2.6 RIGHT TO INSPECT. Prior to the time that an
Event of Default has occurred and is continuing or Foothill deems itself
insecure, Foothill (through any of its officers, employees, or agents) shall
have the right, from time to time hereafter upon reasonable prior notification
to Guarantor and during normal business hours, to inspect Guarantor's and each
Restricted Subsidiary's Books and to check, test, and, subject to Section
2.11(d) of the Loan Agreement, appraise the Collateral in order to verify
Guarantor's financial condition or the amount, quality, value, condition of, or
any other matter relating to, the Collateral. After the time that an Event of
Default has occurred and is continuing or Foothill deems itself insecure,
Foothill (through any of its officers, employees, or agents) shall have the
right, from time to time thereafter, to inspect Guarantor's and each Restricted
Subsidiaries' Books and to check, test, and, subject to Section 2.11(d) of the
Loan Agreement, appraise the Collateral in order to verify Guarantor's
financial condition or the amount, quality, value, condition of, or any other
matter relating to, the Collateral.
2.7 DISPOSITION OF COLLATERAL. So long as (a) no
Triggering Event exists, (b) such transfer or disposition would not result in
the breach of any covenant contained in any Loan Document to which Guarantor or
any Restricted Subsidiary is a party or by which Guarantor or any Restricted
Subsidiary has agreed to be bound (including, Section 21(d) of the Guaranty),
and (c) the transfer or disposition is for General Corporate Purposes of
Guarantor or any of Guarantor's Restricted Subsidiaries, Guarantor or any
Restricted Subsidiary may transfer or dispose of Collateral, such transfer or
disposition to be free and clear of the security interest of Foothill, provided
that Foothill's security interest shall attach to all proceeds of any transfer
or disposition and Guarantor or such Restricted Subsidiary promptly shall take
or cause to be taken all steps reasonably requested by Foothill to perfect such
security interest in proceeds. Anything in the foregoing to the contrary
notwithstanding, nothing in this Agreement shall be construed
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to authorize Guarantor to transfer or dispose of any real property or interest
in real property which is subject to any mortgage or deed of trust in favor of
Foothill without the prior written consent of Foothill to any such transfer or
disposition.
3. REPRESENTATIONS AND WARRANTIES.
Guarantor represents and warrants on its own behalf
and on behalf of its Restricted Subsidiaries as follows:
3.1 NO PRIOR ENCUMBRANCES. Guarantor and its
Restricted Subsidiaries own the Collateral, free and clear of Liens, except for
Permitted Liens.
3.2 PLACE OF BUSINESS/CHIEF EXECUTIVE OFFICE;
FEIN. On the Closing Date, the chief executive office of Guarantor is at the
address indicated in the first paragraph of this Agreement. Guarantor's FEIN
is 00-0000000.
3.3 [Intentionally Omitted.]
3.4 [Intentionally Omitted.]
3.5 [Intentionally Omitted.]
3.6 DUE ORGANIZATION AND QUALIFICATION.
Guarantor is a Delaware corporation, and it is and shall at all times hereafter
be duly organized and existing and in good standing under the laws of Delaware
and qualified and licensed to do business in, and in good standing in, any
state where the failure to be so licensed or qualified could reasonably be
expected to have a material adverse effect on the business, operations,
condition (financial or otherwise), or prospects of Guarantor or on the value
of the Collateral.
3.7 DUE AUTHORIZATION; NO CONFLICT. The
execution, delivery, and performance of this Agreement, the Guaranty, and any
other Loan Document to which Guarantor is a party are within Guarantor's
corporate powers, have been duly authorized, and are not in conflict with nor,
constitute a breach of any provision contained in Guarantor's Articles or
Certificate of Incorporation or By-laws, nor will they constitute an event of
default under any material agreement to which Guarantor is now or may hereafter
become a party.
3.8 LITIGATION. There are no actions or
proceedings pending against Guarantor or any Restricted Subsidiary before any
court or administrative agency and neither Guarantor or any Restricted
Subsidiary has knowledge or belief of any pending, threatened, or imminent
litigation, governmental investigations, or claims, complaints, actions, or
prosecutions involving Guarantor or any Restricted Subsidiary, except for: (a)
matters disclosed on Schedule
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5.9 of the Loan Agreement; and (b) matters arising after the date hereof that,
if decided adversely to Guarantor or any Restricted Subsidiary, would not
materially impair the prospect of repayment of the Secured Obligations or
materially impair the value or priority of Foothill's security interests in the
Collateral.
3.9 NO INTENT TO HINDER CREDITORS. No transfer
of property is being made by Guarantor and no obligation is being incurred by
Guarantor or any Restricted Subsidiary in connection with the transactions
contemplated by this Agreement or the other Loan Documents with the intent to
hinder, delay, or defraud either present or future creditors of Guarantor or
any Restricted Subsidiary.
3.10 RELIANCE BY FOOTHILL; CUMULATIVE. The
warranties, representations, and agreements set forth herein shall be
conclusively presumed to have been relied upon by Foothill and shall be
cumulative and in addition to any and all other warranties, representations,
and agreements which Guarantor and its Restricted Subsidiaries shall now or
hereinafter give, or cause to be given, to Foothill.
4. AFFIRMATIVE COVENANTS.
Guarantor covenants and agrees that, until payment in
full of the Secured Obligations, and unless Foothill shall otherwise consent in
writing, Guarantor shall do all of the following:
4.1 [Intentionally Omitted.]
4.2 [Intentionally Omitted.]
4.3 [Intentionally Omitted.]
4.4 [Intentionally Omitted.]
4.5 TAXES. Other than taxes of which Guarantor
is unaware or that in the aggregate are de minimis, all assessments and taxes
(including withholding taxes), whether real, personal, or otherwise, due or
payable by, or imposed, levied, or assessed against Guarantor or any of its
Restricted Subsidiaries, or any of their properties, have been paid, and shall
be paid in full, before delinquency or before the expiration of any extension
period, except to the extent that the validity of such assessment or tax (other
than taxes that are the subject of a United States federal tax lien) is the
subject of a Permitted Protest. Guarantor and its Restricted Subsidiaries, upon
request, shall furnish Foothill with proof reasonably satisfactory to Foothill
indicating that Guarantor and its Restricted Subsidiaries have made all due and
timely payments or deposits of all such federal, state, and local taxes,
assessments, or contributions required of them by law.
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4.6 INSURANCE.
(a) At its expense, keep the Collateral
insured against loss or damage by fire, theft, explosion, sprinklers, and other
hazards and risks, and in such amounts, as are ordinarily insured against by
other owners in similar businesses. Guarantor also shall maintain business
interruption, public liability, product liability, and property damage
insurance relating to their ownership and use of the Collateral, as well as
insurance against larceny, embezzlement, and criminal misappropriation, in each
case consistent with past practice; provided, however, that FRI-MRD and its
Subsidiaries only shall be required to use their reasonable best efforts to
maintain earthquake insurance, in amounts and subject to deductibles consistent
with those ordinarily insured against by other similar companies in the same
industry, so long as it is available at reasonable commercial rates. Foothill
agrees that Guarantor and its Subsidiaries may self-insure for workers
compensation insurance, generally liability insurance, auto liability
insurance, and health insurance, in each case, consistent with past practice
and with a limit of up to $500,000 per occurrence.
(b) All such policies of insurance shall
be in such form, with such companies, and in such amounts as may be reasonably
satisfactory to Foothill. Insurance policies covering property and assets
against loss by fire, lightening, windstorm, hail, explosion, aircraft, smoke
damage, earthquake, elevator collisions and other risks included under an
"extended coverage" endorsement shall, with respect to hazard insurance and
such other insurance as Foothill shall specify, contain a California Form
438BFU (NS) mortgagee endorsement, or an equivalent endorsement satisfactory to
Foothill, showing Foothill as a loss payee thereof as its interests may appear,
and shall contain a waiver of warranties. All such insurance (with the
exception of workers' compensation and health insurance policies) shall name
Foothill as an additional insured as its interest may appear. Every policy of
insurance referred to in this Section 4.6 (with the exception of workers'
compensation and health insurance policies) shall contain an agreement by the
insurer that it will not cancel such policy except after 10 days prior written
notice to Foothill. Certified copies or originals of such policies or
certificates thereof satisfactory to Foothill evidencing such insurance shall
be delivered to Foothill prior to the expiration or the cancellation of the
existing or preceding policies. Guarantor shall deliver to Foothill, upon the
request of Foothill, evidence of the payment of all premiums for such policies
of insurance.
4.7 FOOTHILL EXPENSES. Guarantor shall
immediately and without demand reimburse Foothill for all sums expended by
Foothill which constitute Foothill Expenses and Guarantor hereby authorizes and
approves all advances and payments by Foothill for items constituting Foothill
Expenses.
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4.8 CONTROL AGREEMENT. Each of Guarantor,
Foothill, and each applicable financial intermediary shall enter into a control
agreement that, among other things, provides that, from and after the giving of
notice by Foothill to such financial intermediary, it shall take instructions
solely from Foothill with respect to the applicable Securities Account and
related securities entitlements. Foothill agrees that it will not give such
notice unless a Triggering Event has occurred. Guarantor agrees that it will
not transfer assets out of such Securities Accounts other than in the ordinary
course of business or as otherwise permitted under the Loan Documents and, if
to another financial intermediary, unless each of Guarantor, Foothill, and the
substitute financial intermediary have entered into a control agreement of the
type described above. No arrangement contemplated hereby shall be modified by
Guarantor without the prior written consent of Foothill. Upon the occurrence
and during the continuance of a Triggering Event, Foothill may elect to notify
the financial intermediary to liquidate or transfer the securities entitlements
in such Securities Account and remit the proceeds thereof to the Foothill
Account.
5. NEGATIVE COVENANTS.
Guarantor covenants and agrees that until payment in
full of the Secured Obligations, it will not, nor will it permit any Restricted
Subsidiary to, do any of the following without Foothill's prior written
consent:
5.1 LIENS. Create, incur, assume, or permit to
exist, directly or indirectly, any lien on or with respect to any of its
property or assets, of any kind, whether now owned or hereafter acquired, or
any income or profits therefrom, except Permitted Liens.
5.2 [Intentionally omitted.]
5.3 [Intentionally omitted.]
5.4 CHANGE NAME. Except on 30 days prior written
notice to Foothill, change its name or FEIN.
5.5 [Intentionally omitted.]
5.6 [Intentionally omitted.]
5.7 [Intentionally omitted.]
5.8 [Intentionally omitted.]
5.9 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE;
INVENTORY AND EQUIPMENT WITH BAILEES. Without thirty (30) days prior written
notification to Foothill, relocate
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its chief executive office to a new location, unless, at the time of such
written notification, it provides any financing statements or fixture filings
necessary to perfect and continue perfected Foothill's security interests and
also provides to Foothill a landlord's waiver in form and substance
satisfactory to Foothill. The Inventory and Equipment shall not at any time
now or hereafter be stored with a bailee, warehouseman, or similar party
without Foothill's prior written consent.
6. EVENTS OF DEFAULT.
Any one or more of the following events shall
constitute an event of default (each, an "Event of Default") under this
Agreement:
6.1 The occurrence of an Event of Default (as defined in
the Loan Agreement);
6.2 If (a) Guarantor fails or neglects to perform, keep,
or observe, in any material respect, any term, provision, condition, covenant,
or agreement contained in this Agreement or in the Guaranty, or in any other
present or future Loan Document between Guarantor and Foothill, and such
failure continues for a period of 15 days from the date on which Guarantor
first had knowledge or reasonably should have had knowledge of such failure or
neglect, or (b) Guarantor fails or neglects to perform, keep, or observe, in
any material respect, any other term, provision, condition, covenant, or
agreement contained in this Agreement or in the Guaranty, or in any other
present or future Loan Document between Guarantor and Foothill, and Foothill,
in its reasonable discretion, determines such failure or neglect is not capable
of cure by Guarantor within 15 days from the date on which Guarantor first had
knowledge or reasonably should have had knowledge of such failure or neglect.
6.3 If there is a Material Adverse Collateral Change;
6.4 (a) If a notice of lien, levy, or assessment is filed
of record with respect to any of Guarantor's properties or assets by the United
States Government, or any department, agency, or instrumentality thereof, or if
any taxes or debts owing at any time hereafter to the United States becomes a
lien, whether xxxxxx or otherwise, upon any of Guarantor's properties or
assets; or (b) if a notice of lien, levy, or assessment is filed of record for
an amount in excess of $250,000 with respect to any of Guarantor's properties
or assets by any state, county, municipal, or governmental agency, or if any
taxes or debts owing at any time hereafter to any one or more of such entities
becomes a lien for an amount in excess of $250,000, whether xxxxxx or
otherwise, upon any of Guarantor's properties or assets and, in any such case,
such taxes or debts are not the subject of a Permitted Protest, and the lien,
levy, or assessment is not released, discharged, or bonded against before the
earlier of 30 days of the date it first arises or 5 days of the date when such
property or asset is subject to being forfeited;
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6.5 If a judgment or other claim becomes a Lien upon any
material portion of Guarantor's properties or assets and the same is not
released, discharged, bonded against, or stayed pending appeal before the
earlier of 30 days of the date it first arises or 5 days of the date when such
property or asset is subject to being forfeited;
6.6 If there is a material default in any material
agreement relating to Indebtedness to which Guarantor is a party with one or
more third Persons resulting in a right by such third Persons, irrespective of
whether exercised, to accelerate the maturity of Guarantor's obligations
thereunder;
6.7 [Intentionally omitted;]
6.8 If any misstatement or misrepresentation exists now
or hereafter in any written warranty, representation, statement, or report made
pursuant to any of the Loan Documents to Foothill by Guarantor or any officer,
director, employee, or agent of Guarantor (in the case of employees or agents
who are not officers or directors, to the extent authorized by an officer or
director to communicate or transact business with Foothill or who regularly
communicate or transact business with Foothill), or if any such warranty or
representation is withdrawn.
7. FOOTHILL'S RIGHTS AND REMEDIES.
7.1 RIGHTS AND REMEDIES. Upon the occurrence and
during the continuation of an Event of Default, the security hereby constituted
shall become enforceable and, in addition to all other rights and remedies
available to Foothill as provided hereafter, Foothill may, at its election,
without notice of its election and without demand, do any one or more of the
following, all of which are authorized by Guarantor:
(a) Proceed directly and at once,
without notice, against the Guarantor to collect and recover the full amount or
any portion of the Guarantied Obligations, without first proceeding against
Borrower, or against any security or collateral for the Guarantied Obligations.
(b) Without notice to the Guarantor and
regardless of the acceptance of any security or collateral for the payment
hereof, appropriate and apply toward the payment of the Guarantied Obligations
(i) any indebtedness due or to become due from Foothill to the Guarantor and
(ii) any moneys, credits or other property belonging to the Guarantor at any
time held by or coming into the possession of Foothill.
(c) May exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein and
the Guaranty or otherwise available to it, all the
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rights and remedies available to it at law (including those of a secured party
under the Code) or in equity.
(d) [Intentionally Omitted;]
(e) [Intentionally Omitted;]
(f) Without notice or demand, make such
payments and do such acts as Foothill considers reasonably necessary to protect
its security interest in the Collateral. Guarantor agrees to assemble the
Collateral if Foothill so requires, and to make the Collateral available to
Foothill as Foothill may designate. Guarantor authorizes Foothill to enter the
premises where the Collateral is located, to take and maintain possession of
the Collateral, or any part of it, and to pay, purchase, contest, or compromise
any encumbrance, charge, or lien which in Foothill's reasonable determination
appears to be prior or superior to its security interest and to pay all
reasonable expenses incurred in connection therewith. With respect to any of
Guarantor's owned premises, Guarantor hereby grants Foothill a license to enter
into possession of such premises and to occupy the same, without charge, for up
to one hundred twenty (120) days in order to exercise any of Foothill's rights
or remedies provided herein, at law, in equity, or otherwise;
(g) Ship, reclaim, recover, store,
finish, maintain, repair, prepare for sale, advertise for sale, and sell (in
the manner provided for herein) the Collateral. Foothill is hereby granted a
license or other right to use, without charge, Guarantor's labels, patents,
copyrights, rights of use of any name, trade secrets, trade names, trademarks,
service marks, and advertising matter, or any property of a similar nature, as
it pertains to the Collateral, in completing production of advertising for sale
and selling any Collateral, and Guarantor's rights under all licenses and all
franchise agreements shall inure to Foothill's benefit;
(h) Sell all or any part of the
Collateral at either a public or private sale, or both, by way of one or more
contracts or transactions, for cash or on terms, in such manner and at such
places (including Guarantor's premises) as Foothill determines is commercially
reasonable. It is not necessary that the Collateral be present at any such
sale. Foothill shall have the right upon any such public sale or sales, and,
to the extent permitted by law, upon any such private sale or sales, to
purchase the whole or any part of the Collateral so sold, free of any right or
equity of redemption in Guarantor, which right or equity is hereby waived or
released to the extent permitted by law. Anything in the foregoing to the
contrary notwithstanding, Foothill acknowledges and agrees that (i) the
Flagstar Bonds contain certain legends, contain certain restrictions on
transfer, and are subject to certain claims of Flagstar and potential
reductions of the principal amount thereof, (ii) any transfer of the Flagstar
Bonds (including, without limitation, upon foreclosure) shall be subject to any
enforceable restrictions contained in the Flagstar Bonds, and (iii) so long as
no Triggering Event has occurred and is
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continuing and so long as the proposed sale would not violate any covenant
contained in any Loan Document to which Guarantor is a party or by which
Guarantor is bound, in the event of a proposed sale by Guarantor of any
Flagstar Bonds in the possession of a bailee under a bailee agreement with
Foothill, promptly after Guarantor notifies Foothill of such sale, Foothill
shall instruct the bailee to deliver such Flagstar Bonds to Guarantor (or
otherwise in accordance with Guarantor's written instructions) within 5
Business Days of Guarantor's notice to Foothill, and within 5 Business Days of
Guarantor's notice to Foothill, it shall deliver duly executed non-recourse
endorsements or assignments (if necessary), provided that Guarantor shall
immediately return such Flagstar Bonds to the bailee, and any such endorsements
or assignments to Foothill, in the event that such sale is not consummated
within 5 Business Days of the delivery of such Flagstar Bonds to Guarantor.
(i) Foothill shall give notice of the
disposition of the Personal Property Collateral as follows:
(1) Foothill shall give Guarantor and each
holder of a security interest in the Personal Property Collateral who has filed
with Foothill a written request for notice, a notice in writing of the time and
place of public sale, or, if the sale is a private sale or some other
disposition other than a public sale is to be made of the Personal Property
Collateral, then the time on or after which the private sale or other
disposition is to be made;
(2) The notice shall be personally delivered
or mailed, postage prepaid, to Guarantor as provided in Section 10, at least 10
days before the date fixed for the sale, or at least 10 days before the date on
or after which the private sale or other disposition is to be made; no notice
needs to be given prior to the disposition of any portion of the Personal
Property Collateral that is perishable or threatens to decline speedily in
value or that is of a type customarily sold on a recognized market. Notice to
Persons other than Guarantor claiming an interest in the Personal Property
Collateral shall be sent to such addresses as they have furnished to Foothill;
(3) If the sale is to be a public sale,
Foothill also shall give notice of the time and place by publishing a notice
one time at least 10 days before the date of the sale in a newspaper of general
circulation in the county in which the sale is to be held;
(j) [Intentionally omitted;]
(k) [Intentionally omitted;]
(l) [Intentionally omitted;]
(m) [Intentionally omitted;]
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(n) Any deficiency which exists after
disposition of the Collateral as provided above will be paid immediately by
Guarantor up to the maximum amount, if any, of Guarantor's liability under the
Guaranty. Any excess will be promptly returned to Guarantor, without interest
and subject to the rights of third parties, by Foothill.
Except as required by law, Foothill may take any or all of the foregoing action
without demand, presentment, protest, advertisement or notice of any kind to or
upon Guarantor or any other person. Anything in this Agreement to the contrary
notwithstanding, unless a Triggering Event has occurred and is continuing,
Foothill (a) shall not exercise any of its default remedies with respect to the
Flagstar Bonds, and (b) shall not exercise any of its default remedies with
respect to the Investment Property.
7.2 REMEDIES CUMULATIVE. Foothill's rights and
remedies under this Agreement and the other Loan Documents shall be cumulative.
Foothill shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Foothill of one
right or remedy shall be deemed an election,and no waiver by Foothill of any
Event of Default on Borrower's part shall be deemed a continuing waiver. No
delay by Foothill shall constitute a waiver, election, or acquiescence by it.
8. TAXES AND EXPENSES REGARDING THE COLLATERAL.
If Guarantor fails to pay any monies (whether taxes,
rents, assessments, insurance premiums, or otherwise) due to third persons or
entities, or fails to make any deposits or furnish any required proof of
payment or deposit, all as required under the terms of this Agreement, then, to
the extent that Foothill determines that such failure, by Guarantor reasonably
could be expected to have a material adverse effect on Foothill's interests in
the Collateral, in its discretion and without prior notice to Guarantor,
Foothill may do any or all of the following: (a) make payment of the same or
any part thereof; (b) set up such reserves in Borrower's loan account as
Foothill reasonably deems necessary to protect Foothill from the exposure
created by such failure; or (c) obtain and maintain insurance policies of the
type described in Sections 4.6 hereof insuring Guarantor's ownership and use of
the Collateral, and take any action with respect to such policies as Foothill
reasonably deems prudent. Any amounts paid or deposited by Foothill shall
constitute Foothill Expenses, shall immediately become additional Secured
Obligations, shall bear interest at the applicable rate described in the Loan
Document, and shall be secured by the Collateral. Any payments made by
Foothill shall not constitute an agreement by Foothill to make similar payments
in the future or a waiver by Foothill of any Event of Default under this
Agreement. Foothill need not inquire as to, or contest the validity of, any
such expense, tax, security interest, encumbrance, or lien and the receipt of
the usual official notice for the payment thereof shall for the purposes of
this Agreement be conclusive evidence that the same was validly due and owing.
Foothill shall use its best efforts to provide notice to Guarantor of any
action taken by it under this Section 8.
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9. WAIVERS; INDEMNIFICATION.
9.1 DEMAND; PROTEST; ETC. To the fullest extent
permitted by applicable law, Guarantor waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment,
notice of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Foothill on which Guarantor may in any way be
liable.
9.2 FOOTHILL'S LIABILITY FOR COLLATERAL. So long
as Foothill complies with its obligations, if any, under Section 9207 of the
Code, Foothill shall not in any way or manner be liable or responsible for:
(a) the safekeeping of the Collateral; (b) any loss or damage thereto occurring
or arising in any manner or fashion from any cause; (c) any diminution in the
value thereof; or (d) any act or default of any carrier, warehouseman, bailee,
forwarding agency, or other Person; and (e) risk of loss, damage, or
destruction of the Collateral.
9.3 INDEMNIFICATION. Guarantor agrees to defend,
indemnify, save, and hold Foothill and its officers, employees, and agents
harmless against: (a) all demands, claims, and liabilities claimed or asserted
by any other Person, and (b) all losses (including reasonable attorneys fees
and disbursements) in any way suffered, incurred, or paid by Foothill as a
result of or in any way arising out of, or related to transactions with
Borrower or Guarantor, under this Agreement and any other Loan Documents.
Guarantor shall have no obligation under this Section 9.3: (a) with respect to
indemnification of any liability that a court of competent jurisdiction finally
determines to have resulted from the gross negligence or willful misconduct of
the indemnified person; (b) with respect to any settlement in excess of
$250,000 made without Guarantor's consent (which shall not be unreasonably
withheld, conditioned, or delayed and which consent need not be obtained if
FRI-MRD or Borrower is in default of its obligations under this Section 9.3);
or (c) without Guarantor's consent (which shall not be reasonably withheld,
conditioned, or delayed), for the fees and disbursements of more than one
separate firm of attorneys for all indemnified persons relative to a
indemnification of any particular liability. This provision shall survive
full and final payment in cash of the Secured Obligations and the termination
of all commitments of Foothill to extend credit to Borrower or Guarantor for a
period of 2 years.
9.4 WAIVERS. (a) To the fullest extent permitted
by applicable law, Guarantor hereby waives: (i) notice of acceptance hereof;
(ii) notice of any loans or other financial accommodations made or extended
under the Loan Agreement, or the creation or existence of any Obligations;
(iii) notice of the amount of the Obligations, subject, however, to Guarantor's
right to make inquiry of Foothill to ascertain the amount of the Obligations at
any reasonable time; (iv) notice of any adverse change in the financial
condition of Borrower or of any other fact that might increase Guarantor's risk
hereunder; (v) notice of presentment for payment, demand, protest, and notice
thereof as to any instrument among the Loan Documents;
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(vi) notice of any unmatured Event of Default or Event of Default under the
Loan Agreement; and (vii) all other notices (except if such notice is
specifically required to be given to Guarantor under this Agreement) and
demands to which Guarantor might otherwise be entitled.
(b) To the fullest extent permitted by applicable law,
Guarantor waives the right by statute or otherwise to require Foothill to
institute suit against Borrower or to exhaust any rights and remedies which
Foothill has or may have against Borrower. Guarantor further waives any
defense arising by reason of any disability or other defense (other than the
defense that the Obligations shall have been fully and finally indefeasibly
paid) of Borrower or by reason of the cessation from any cause (other than that
the Obligations shall have been fully and finally indefeasibly paid) whatsoever
of the liability of Borrower in respect thereof.
(c) To the fullest extent permitted by applicable law,
Guarantor hereby waives: (i) any rights to assert against Foothill any defense
(legal or equitable), set-off, counterclaim, or claim which Guarantor may now
or at any time hereafter have against Borrower or any other party liable to
Foothill on account of or with respect to the Obligations; (ii) any defense,
set-off, counterclaim, or claim, of any kind or nature, arising directly or
indirectly from the present or future sufficiency, validity, or enforceability
of the Obligations; (iii) any defense arising by reason of any claim or defense
based upon an election of remedies by Foothill including, to the extent
applicable, the provisions of Section Section 580d and 726 of the California
Code of Civil Procedure, or any similar law of California or any other
jurisdiction; (iv) the benefit of any statute of limitations affecting
Guarantor's liability hereunder or the enforcement thereof.
(d) To the fullest extent permitted by applicable law,
Guarantor hereby waives any right of subrogation Guarantor has or may have as
against Borrower with respect to the Obligations. In addition, Guarantor
hereby waives any right to proceed against Borrower, now or hereafter, for
contribution, indemnity, reimbursement, or any other suretyship rights and
claims (irrespective of whether direct or indirect, liquidated or contingent),
with respect to the Obligations. Guarantor also hereby waives any right to
proceed or to seek recourse against or with respect to any property or asset of
Borrower. Guarantor hereby agrees that, in light of the waivers contained in
this Section, Guarantor shall not be deemed to be a "creditor" (as that term is
defined in the Bankruptcy Code or otherwise) of Borrower, whether for purposes
of the application of Sections 547 or 550 of the United States Bankruptcy Code
or otherwise.
(e) If any of the Secured Obligations at any time are
secured by a mortgage or deed of trust upon real property, Foothill may elect,
in its sole discretion, upon a default with respect to the Secured Obligations,
to foreclose such mortgage or deed of trust judicially or nonjudicially in any
manner permitted by law, before or after enforcing this Agreement, without
diminishing or affecting the liability of Guarantor hereunder. Guarantor
understands that (a) by virtue of the operation of California's antideficiency
law applicable to nonjudicial foreclosures, an election by Foothill
nonjudicially to foreclose such a mortgage or deed of trust probably would
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have the effect of impairing or destroying rights of subrogation,
reimbursement, contribution, or indemnity of Guarantor against Borrower or
guarantors or sureties, and (b) absent the waiver given by Guarantor herein,
such an election might estop Foothill from enforcing this Agreement against
Guarantor. Understanding the foregoing, and understanding that Guarantor is
hereby relinquishing a defense to the enforceability of this Agreement,
Guarantor hereby waives any right to assert against Foothill any defense to the
enforcement of this Agreement, whether denominated "estoppel" or otherwise,
based on or arising from an election by Foothill nonjudicially to foreclose any
such mortgage or deed of trust. Guarantor understands that the effect of the
foregoing waiver may be that Guarantor may have liability hereunder for amounts
with respect to which Guarantor may be left without rights of subrogation,
reimbursement, contribution, or indemnity against Borrower or guarantors or
sureties. Guarantor also agrees that the "fair market value" provisions of
Section 580a of the California Code of Civil Procedure shall have no
applicability with respect to the determination of Guarantor's liability under
this Agreement.
(f) WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER
OR OTHER PROVISION SET FORTH IN THIS AGREEMENT, GUARANTOR HEREBY WAIVES, TO THE
MAXIMUM EXTENT SUCH WAIVER IS PERMITTED BY LAW, ANY AND ALL DEFENSES ARISING
DIRECTLY OR INDIRECTLY UNDER ANY ONE OR MORE OF CALIFORNIA CIVIL CODE Section
Section 2808, 2809, 2810, 2815, 2819, 2820, 2821, 2838, 2839, 2845, 2848,
2849, AND 2850, TO THE EXTENT APPLICABLE, CALIFORNIA CODE OF CIVIL PROCEDURE
Section Section 580A, 580B, 580C, 580D, AND 726, AND, TO THE EXTENT
APPLICABLE, CHAPTER 2 OF TITLE 14 OF THE CALIFORNIA CIVIL CODE.
(g) WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR
OTHER PROVISION SET FORTH IN THIS AGREEMENT, GUARANTOR HEREBY WAIVES ALL RIGHTS
AND DEFENSES ARISING OUT OF AN ELECTION OF REMEDIES BY FOOTHILL, EVEN THOUGH
THAT ELECTION OF REMEDIES, SUCH AS A NONJUDICIAL FORECLOSURE WITH RESPECT TO
SECURITY FOR A SECURED OBLIGATION, HAS DESTROYED GUARANTOR'S RIGHTS OF
SUBROGATION AND REIMBURSEMENT AGAINST THE BORROWER BY THE OPERATION OF SECTION
580D OF THE CODE OF CIVIL PROCEDURE OR OTHERWISE.
10. NOTICES.
All notices and other communications hereunder to
Foothill shall be in writing and shall be mailed, sent or delivered in
accordance with the Loan Agreement and all notices and other communications
hereunder to Guarantor shall be in writing and shall be mailed, sent or
delivered in care of Borrower in accordance with the Loan Agreement.
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11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE
DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF CALIFORNIA. THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING
IN CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE
STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY
COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT FOOTHILL'S OPTION, IN THE
COURTS OF ANY JURISDICTION WHERE FOOTHILL ELECTS TO BRING SUCH ACTION OR WHERE
SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH OF GUARANTOR AND FOOTHILL
WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE
TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE
EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 11.
GUARANTOR AND FOOTHILL HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW
OR STATUTORY CLAIMS. GUARANTOR AND FOOTHILL REPRESENT THAT EACH HAS REVIEWED
THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY
OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
12. DESTRUCTION OF GUARANTOR'S DOCUMENTS.
All documents, schedules, agings, or other papers
delivered to Foothill may be destroyed or otherwise disposed of by Foothill
four (4) months after they are delivered to or received by Foothill, unless
Guarantor requests, in writing, the return of said documents, schedules or
other papers and makes arrangements, at Guarantor's expense, for their return.
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13. GENERAL PROVISIONS.
13.1 EFFECTIVENESS. This Agreement shall be
binding and deemed effective upon the later of (a) the execution of this
Agreement by Guarantor and Foothill and (b) the Closing Date.
13.2 SUCCESSORS AND ASSIGNS. This Agreement shall
bind and inure to the benefit of the respective successors and assigns of each
of the parties; provided, however, that Guarantor may not assign this Agreement
or any rights or duties hereunder without Foothill's prior written consent and
any prohibited assignment shall be absolutely void. No consent to an
assignment by Foothill shall release Guarantor from its Secured Obligations.
Foothill may assign this Agreement and its rights and duties hereunder in
accordance with the Loan Agreement, and no consent or approval by Guarantor is
required in connection with any such assignment. In accordance with the Loan
Agreement, Foothill reserves the right to sell, assign, transfer, negotiate, or
grant participations in all or any part of, or any interest in Foothill's
rights and benefits hereunder. In accordance with the Loan Agreement, Foothill
may disclose all documents and information which Foothill now or hereafter may
have relating to Guarantor or Guarantor's business. To the extent that
Foothill assigns its rights and obligations to a third Person in accordance
with the Loan Agreement, Foothill thereafter shall be released from such
assigned obligations to Guarantor and such assignment shall effect a novation
between Guarantor and such third Person.
13.3 SECTION HEADINGS. Headings and numbers have
been set forth herein for convenience only. Unless the contrary is compelled
by the context, everything contained in each section applies equally to this
entire Agreement.
13.4 INTERPRETATION. Neither this Agreement nor
any uncertainty or ambiguity herein shall be construed or resolved against
Foothill or Guarantor, whether under any rule of construction or otherwise. On
the contrary, this Agreement has been reviewed by all parties and shall be
construed and interpreted according to the ordinary meaning of the words used
so as to fairly accomplish the purposes and intentions of all parties hereto.
13.5 SEVERABILITY OF PROVISIONS. Each provision
of this Agreement shall be severable from every other provision of this
Agreement for the purpose of determining the legal enforceability of any
specific provision.
13.6 AMENDMENTS IN WRITING. This Agreement can
only be amended by a writing signed by both Foothill and Guarantor.
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13.7 COUNTERPARTS. This Agreement may be executed
in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one
and the same Agreement. Delivery of an executed counterpart of this Agreement
by telefacsimile shall be equally as effective as delivery of an original
executed counterpart of this Agreement. Any party delivering an executed
counterpart of this Agreement by telefacsimile also shall deliver an original
executed counterpart of this Agreement but the failure to deliver an original
executed counterpart shall not affect the validity, enforceability, and binding
effect of this Agreement.
13.8 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If
the incurrence or payment of the Secured Obligations by Guarantor or the
transfer by Guarantor to Foothill of any property of Guarantor should for any
reason subsequently be declared to be void or voidable under any state or
federal law relating to creditors' rights, including provisions of the
Bankruptcy Code relating to fraudulent conveyances, preferences, and other
voidable or recoverable payments of money or transfers of property
(collectively, a "Voidable Transfer"), and if Foothill is required to repay or
restore, in whole or in part, any such Voidable Transfer, or elects to do so
upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that Foothill is required or elects to repay or
restore, and as to all reasonable costs, expenses, and attorneys fees of
Foothill related thereto, the liability of Guarantor automatically shall be
revived, reinstated, and restored and shall exist as though such Voidable
Transfer had never been made.
13.9 TERMINATION. Upon the full and final payment
in cash of the Secured Obligations and the termination of all commitments of
Foothill to extend credit to Borrower or Guarantor, Foothill shall promptly
terminate and release its security interests in the Collateral, execute and
deliver any necessary financing statement terminations or releases, and return
to Guarantor any Collateral that was in the possession of Foothill, provided
that, with respect to any loss or damage Foothill may incur as a result of
dishonored checks or other items of payment received by Foothill and applied to
the Secured Obligations, Foothill shall, at its option, (i) have received a
written agreement, executed by Borrower or Guarantor (as required by Foothill
in its sole discretion) and by any Person whose loans or other advances to
Borrower or Guarantor are used in whole or in part to satisfy the Secured
Obligations, indemnifying Foothill from any such loss or damage; or (ii) have
retained such monetary reserves or Liens on the Collateral for such period of
time as Foothill, in its reasonable discretion, may deem necessary to protect
Foothill from any such loss or damage. All reasonable expenses incurred by
Foothill in connection with the termination of the security interests granted
to Foothill in connection with this agreement shall be the sole expense of
Guarantor.
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IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed at Los Angeles, California.
FAMILY RESTAURANTS, INC.,
a Delaware corporation
By_____________________________________
Its____________________________________
FOOTHILL CAPITAL CORPORATION,
a California corporation
By_____________________________________
Its____________________________________
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