SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "AGREEMENT") is made by and between XXXX
X. XXXXXXX ASSOCIATES, INC., a Maryland corporation ("SECURED PARTY"), and
XXXXXX X. XXXXXXX ("DEBTOR"), effective as of May 26, 1998.
RECITALS:
I. Debtor has purchased, using financing provided by Secured Party, a
membership interest in CMF RQI Holdings L.L.C., a Delaware limited liability
company ("CMF RQI").
II. In connection with such financing for the purchase of Debtor's
membership interest in CMF RQI, Debtor has executed that certain Promissory Note
of even date herewith payable to the order of Secured Party (the "CMF RQI
NOTE").
III. In further consideration of the agreement by Secured Party to
provide purchase money financing in connection with Debtor's purchase of a
membership interest in CMF RQI, Debtor has agreed that the CMF RQI Note shall be
secured by a security interest in all of Debtor's interest in CMF RQI.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
A. As security for the Obligations (as hereinafter defined), Debtor
does hereby assign, grant, and set over to Secured Party, and agrees that
Secured Party shall have a security interest in (i) all of Debtor's right, title
and interest in and to CMF RQI and (ii) all of Debtor's rights and interests in
and under the operating agreement or other governing documents of CMF RQI, such
security interest to include, without limitation, any dividends or distributions
payable thereunder, and proceeds of any of the above (collectively, the
"COLLATERAL"). For purposes hereof, the "OBLIGATIONS" shall be deemed to consist
of all debts, liabilities and obligations evidenced or arising under (i) the CMF
RQI Note, including any extensions, renewals, refinancings or changes in form
thereof, and (ii) this Agreement, as may now or hereafter be amended.
Accordingly, Debtor acknowledges and agrees that all of the Collateral shall
remain subject to the lien and other terms hereof until all of the Obligations
shall have been paid in full.
B. Debtor and Secured Party agree that any and all dividends or
distributions from CMF RQI to which Debtor is entitled shall be paid directly to
the Secured Party and, to the extent any such dividends or distributions consist
of cash, applied by the Secured Party to the Obligations, in such order as may
be provided in the CMF RQI Note.
C. At any time and from time to time, upon request of Secured Party,
Debtor will give, execute, file and/or record any notice, financing statement,
continuation statement, instrument, document or agreement that Secured Party may
consider necessary or desirable to create, preserve, continue, perfect or
validate any security interest granted hereunder or which Secured Party may
consider necessary or desirable to exercise or enforce its rights hereunder with
respect to such security interest. Without limiting the generality of the
foregoing, Secured Party is authorized to (i) file with respect to the
Collateral one or more financing statements, continuation statements or other
documents without the signature of Debtor and to name therein Debtor as debtor
and Secured Party as secured party, and (ii) correct or complete, or cause to be
corrected or completed, any financing statements, continuation statements or
other such documents as have been filed naming Debtor as debtor and Secured
Party as secured party.
D. Debtor represents that it owns all of the Collateral free and clear
of all liens and encumbrances. Debtor agrees that he will not encumber or grant
a security interest in or file a financing statement covering the Collateral, or
permit any of the foregoing, without the prior written consent of Secured Party,
and Debtor hereby represents that he has not heretofore done so.
E. Each of the following shall constitute an event of default ("EVENT
OF DEFAULT") hereunder: (a) if Debtor shall fail to make any payment of any of
the Obligations as and when due, (b) if Debtor has made any representation,
warranty or statement to Secured Party that is false or misleading in any
material respect at the time made, or becomes false or misleading at any time
thereafter in or with respect to, or has breached any provision of, this
Agreement , (c) if Debtor shall become insolvent, (d) if a receiver or a trustee
for all or any part of Debtor's property shall be appointed, (e) if any
assignment for the benefit of Debtor's creditors shall be made, (f) if a
petition in bankruptcy shall be filed by or against Debtor, (g) if any
proceeding under any bankruptcy or insolvency law or any law relating to the
relief of debtors or readjustments of indebtedness shall be commenced by or
against Debtor, or (h) if this Agreement ceases to be in full force and effect
(including the failure of this Agreement to create and maintain a valid and
perfected first priority security interest in the Collateral) at any time and
for any reason or if any of the Collateral shall be attached or distrained at
any time pursuant to any court order or other legal process.
If an Event of Default shall occur, then all Obligations shall become
immediately due and payable and Secured Party may avail itself of all rights and
remedies granted a secured party under the Uniform Commercial Code in force in
the State of Maryland or Delaware or the Commonwealth of Virginia, including,
without limiting the generality of the foregoing, the right to sell, assign and
deliver the Collateral, or any part thereof, at public or private sale in the
State of Maryland or elsewhere as Secured Party may determine in good faith and
at such prices as Secured Party may deem best. At any such sale Secured Party
shall have the right to purchase the Collateral, or any part thereof, to the
full extent permitted by law. At any such sale Secured Party may, in its
discretion, restrict the prospective bidders or purchasers to persons who will
represent and
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warrant that they are acquiring the Collateral for their own account, for
investment only and not with a view toward the resale or distribution thereof
and who will make such further representations and warranties as Secured Party
may, in its discretion, deem necessary or desirable to assure Secured Party that
such prospective bidders or purchasers are, with respect to the applicable
federal and state securities laws and rules, suitable bidders or purchasers of
such Collateral, which restrictions as to prospective bidders or purchasers the
parties agree are commercially reasonable. The parties agree that written notice
mailed to Debtor ten (10) business days prior to the date of public sale of the
Collateral or ten (10) business days prior to the date after which private sale
or any other disposition of the Collateral will be made shall constitute
reasonable notice (all other notices, demands, or advertisements of any kind
being hereby expressly waived), but notice given in any other reasonable manner
or at any other reasonable time shall be sufficient. Debtor shall be liable for
reasonable attorneys' fees and legal expenses incurred by Secured Party in
enforcing any of its rights or remedies under this Agreement , and, without
limiting the rights of Secured Party, the proceeds of disposition may be
applied, in Secured Party's discretion, to payment of such reasonable attorneys'
fees and legal expenses. EACH OF SECURED PARTY AND DEBTOR WAIVES THE RIGHT TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING INSTITUTED AGAINST DEBTOR IN RESPECT
OF THE CMF RQI NOTE, ANY OTHER OBLIGATIONS OR THE ENFORCEMENT OF ANY RIGHTS
GRANTED TO SECURED PARTY UNDER THIS SECURITY AGREEMENT.
Notwithstanding the foregoing, if an Event of Default, other than an
Event of Default relating to any failure to make timely and full payment of any
of the Obligations, is curable, and if Debtor has not been given a notice of a
similar default within the preceding twelve (12) months, such default may be
cured (and no Event of Default will have occurred) if Debtor after receiving
written notice from Secured Party demanding cure of such default: (a) cures the
default within ten (10) days; or (b) if the cure reasonably requires more than
ten (10) days, immediately initiates steps which Secured Party deems in Secured
Party's sole discretion to be sufficient to cure the default and thereafter
diligently and continuously pursues and completes all reasonable and necessary
steps sufficient to produce compliance as soon as reasonably practical, but in
no event later than sixty (60) days after the end of such ten (10) day period.
F. Failure of Secured Party to exercise any right or remedy under this
Agreement , or delay by Secured Party in exercising same, will not operate as a
waiver thereof. No waiver by Secured Party will be effective unless and until it
is in written form and signed by Secured Party. Secured Party shall have no
obligation to resort to the Collateral or any other security which is or may
become available to it.
G. This Agreement, the CMF RQI Note, any amendments or replacements
hereof and thereof, and the legality, validity and performance of the terms
hereof and thereof, shall be governed by, enforced, determined and construed in
all respects in accordance with the internal laws of the State of Maryland
(i.e., the laws other than those relating to conflict of laws rules) applicable
to contracts, transactions and obligations entered into and to be performed in
the State of Maryland.
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Debtor hereby agrees that any suit, action or proceeding with respect
to this Agreement, the CMF RQI Note, any amendments or any replacement hereof
and thereof, and any transactions relating hereto or thereto may be brought in
the state courts of the State of Maryland, and Debtor hereby irrevocably
consents and submits to the jurisdiction of such courts for the purpose of any
such suit, action or proceeding. Debtor agrees that service of process on Debtor
in any such suit, action or proceeding may be made by certified United States
mail, postage prepaid, return receipt requested, to Debtor c/o Xxxx X. Xxxxxxx
Associates, Inc., 00000 Xxxxx Xxxxx Xxxx, Xxxxxxx, Xxxxxxxx 00000, or to such
other address furnished by notice given in accordance with Paragraph H of this
Agreement. Debtor hereby waives, and agrees not to assert against the Secured
Party (or any assignee thereof), by way of motion, as a defense, or otherwise,
in any such suit, action or proceeding, (a) any claim that he is not personally
subject to the jurisdiction of the above-named courts or that his property is
exempt or immune from setoff, execution or attachment, either prior to judgment
or in aid of execution and (b) to the extent permitted by applicable law, any
claim that such suit, action or proceeding is brought in an inconvenient forum
or that the venue of such suit, action or proceeding is improper or that this
Agreement, the CMF RQI Note or any amendments or any replacements thereof may
not be enforced in or by such courts.
This Agreement and the rights, powers and duties set forth herein shall
be binding upon Debtor, his estate, successors, personal representatives, heirs
and assigns and shall inure to the benefit of Secured Party, its successors and
assigns (including, without limitation, any assignee of the CMF RQI Note or any
part thereof). In the event that any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any
provision hereof which may prove invalid or unenforceable under any applicable
law shall not affect the validity or enforceability of any other provision
hereof.
H. Notices required or permitted to be given under this Agreement shall
be in writing and shall be deemed to be sufficiently given when personally
delivered or three business days after being sent by certified United States
mail, postage prepaid, return receipt requested, addressed to the applicable
party at the address of such party set forth below or to such other address
furnished by notice given in accordance with this Paragraph H.
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the day and year first above written.
DEBTOR:
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/s/ Xxxxxx X. Xxxxxxx
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Xxxxxx X. Xxxxxxx
Address: c/o Xxxx X. Xxxxxxx Associates, Inc.
00000 Xxxxx Xxxxx Xxxx
Xxxxxxx, Xxxxxxxx 00000
SECURED PARTY:
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XXXX X. XXXXXXX ASSOCIATES, INC.,
a Maryland corporation
By: /s/ T. Xxxxxxx Xxxxx
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T. Xxxxxxx Xxxxx
Vice President
Address: Cabin Xxxx Center
00000 Xxxxx Xxxxx Xxxx
Xxxxxxx, Xxxxxxxx 00000