EXHIBIT 10.5
AMENDED, RESTATED, AND CONSOLIDATED
STOCK PLEDGE AGREEMENT
----------------------
THIS AMENDED, RESTATED, AND CONSOLIDATED STOCK PLEDGE AGREEMENT (this
"Agreement"), dated as of July 19, 2000, is entered into among PRANDIUM, INC., a
Delaware corporation formerly known as Family Restaurants, Inc. ("Prandium"),
FRI-MRD CORPORATION, a Delaware corporation ("FRI-MRD"), CHI-CHI'S, INC., a
Delaware corporation ("Borrower"; together with Prandium and FRI-MRD, each a
"Pledgor," and collectively, "Pledgors"), and FOOTHILL CAPITAL CORPORATION, a
California corporation ("Secured Party"), with reference to the following:
WHEREAS, Borrower, Prandium, the Subsidiaries of Prandium identified
therein, and Secured party are parties to that certain Loan and Security
Agreement, dated as of January 10, 1997 (as amended, modified, and otherwise
supplemented through the date hereof, the "Existing Loan Agreement");
WHEREAS, pursuant to the terms and conditions of the Existing Loan
Agreement, Prandium and Secured Party entered into that certain Stock Pledge
Agreement, dated as of January 10, 1997 (the "Prandium Pledge Agreement"), FRI-
MRD and Secured Party entered into that certain Stock Pledge Agreement, dated as
of January 10, 1997 (the "FRI-MRD Pledge Agreement"), and Borrower and Secured
Party entered into that certain Stock Pledge Agreement, dated as of January 10,
1997 (the "Borrower Pledge Agreement"; together with the Prandium Pledge
Agreement and the FRI-MRD Pledge Agreement, the "Existing Pledge Agreements");
and
WHEREAS, Borrower, Prandium, the Subsidiaries of Prandium identified
therein, and Secured Party desire to amend and restate the Existing Loan
Agreement in its entirety as provided in that certain Amended and Restated Loan
and Security Agreement, dated as of the date hereof (the "Loan Agreement"), it
being understood that no repayment of the obligations under the Existing Loan
Agreement is being effected thereby, but merely an amendment and restatement in
accordance with the terms thereof; and
WHEREAS, pursuant to the Loan Agreement and as one of the conditions
thereof, Pledgors and Secured Party have agreed to amend, restate, and
consolidate the Existing Pledge Agreements in their entirety as provided in this
Agreement, it being understood that no satisfaction of the obligations under the
Existing Pledge Agreements is being effected hereby, but merely an amendment,
restatement, and consolidation in accordance with the terms hereof.
NOW, THEREFORE, in consideration of the mutual promises, covenants,
representations, and warranties set forth herein and for other good and valuable
consideration, the parties hereto agree as follows:
1. Definitions and Construction.
(a) Definitions. All initially capitalized terms used herein and not
otherwise defined herein shall have the meaning ascribed thereto in the Loan
Agreement. As used in this Agreement:
"Agreement" shall mean this Amended and Restated Stock Pledge
---------
Agreement.
"Chief Executive Office" shall mean, with respect to any Pledgor,
----------------------
where such Pledgor is deemed located pursuant to section 9103(3)(d) of the Code.
"Collateral" shall mean the Pledged Shares, the Future Rights, and the
----------
Proceeds, collectively.
"Future Rights" shall mean: (a) to the extent of any Pledgor's
-------------
interest therein, all shares of stock (other than Pledged Shares) of the
Issuers, and all securities convertible or exchangeable into, and all warrants,
options, or other rights to purchase, shares of stock of the Issuers; (b) to the
extent of any Pledgor's interest therein, all shares of, all securities
convertible or exchangeable into, and all warrants, options, or other rights to
purchase shares of stock of any Person in which any Pledgor, after the date of
this Agreement, acquires a direct equity interest, irrespective of whether such
Person is or becomes a Subsidiary of such Pledgor; and (c) the certificates or
instruments representing such additional shares, convertible or exchangeable
securities, warrants, and other rights and all dividends, cash, options,
warrants, rights, instruments, and other property or proceeds from time to time
received, receivable, or otherwise distributed in respect of or in exchange for
any or all of such shares.
"Guaranty" means that certain Amended, Restated, and Consolidated
--------
General Continuing Guaranty dated of even date herewith made by Prandium, FRI-
MRD, and the Subsidiaries of Prandium identified therein for the benefit of
Secured Party, as the same may from time to time be amended, modified,
supplemented, renewed, or reinstated.
"Holder" and "Holders" shall have the meanings ascribed thereto in
------ -------
Section 3 of this Agreement.
---------
"Issuers" shall mean each of the Persons identified as an Issuer on
-------
Schedule A attached hereto (or any addendum thereto), and any successors
----------
thereto, whether by merger or otherwise.
"Lien" shall mean any lien, mortgage, pledge, assignment (including
----
any assignment of rights to receive payments of money), security interest,
charge, or encumbrance of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof, or any agreement to
give any security interest).
"Loan Agreement" shall have the meaning ascribed thereto in the
--------------
recitals to this Agreement.
-2-
"Permitted Liens" shall have the meaning ascribed thereto in the Loan
---------------
Agreement.
"Permitted Protest" means the right of any Pledgor to protest any Lien
-----------------
(other than any such Lien that secures the 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 Pledgor, as applicable under the
circumstances, in accordance with GAAP, and (b) any such protest is instituted
and diligently prosecuted by such Pledgor, as applicable under the
circumstances, in good faith.
"Pledged Shares" shall mean all of the shares identified as Pledged
--------------
Shares on Schedule A attached hereto (or any addendum thereto).
----------
"Pledgor" shall have the meaning ascribed thereto in the preamble to
-------
this Agreement.
"Proceeds" shall mean all proceeds (including proceeds of proceeds) of
--------
the Pledged Shares and Future Rights including all: (a) rights, benefits,
distributions, premiums, profits, dividends, interest, cash, instruments,
documents of title, accounts, contract rights, inventory, equipment, general
intangibles, investment property, deposit accounts, chattel paper, and other
property from time to time received, receivable, or otherwise distributed in
respect of or in exchange for, or as a replacement of or a substitution for, any
of the Pledged Shares, Future Rights, or proceeds thereof (including any cash,
stock, or other securities or instruments issued after any recapitalization,
readjustment, reclassification, merger or consolidation with respect to the
Issuers and any claims against financial intermediaries under (S) 8313(2) of the
Code or otherwise); (b) "proceeds," as such term is used in (S) 9306 of the
Code; (c) proceeds of any insurance, indemnity, warranty, or guaranty (including
guaranties of delivery) payable from time to time with respect to any of the
Pledged Shares, Future Rights, or proceeds thereof; (d) payments (in any form
whatsoever) made or due and payable to any Pledgor from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Pledged Shares, Future Rights, or proceeds
thereof; and (e) other amounts from time to time paid or payable under or in
connection with any of the Pledged Shares, Future Rights, or proceeds thereof.
"Secured Obligations" shall mean, with respect to any Pledgor, all
-------------------
liabilities, obligations, or undertakings owing by such Pledgor to Secured Party
of any kind or description arising out of or outstanding under, advanced or
issued pursuant to, or evidenced by the Loan Agreement, the Guaranty, this
Agreement, or any other Loan Document heretofore, herewith, or hereafter
executed by such Pledgor, 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
-3-
expenses which such Pledgor is required to pay pursuant to any of the foregoing,
by law, or otherwise.
"Secured Party" shall have the meaning ascribed thereto in the
-------------
preamble to this Agreement, together with its successors or assigns.
"Securities Act" shall have the meaning ascribed thereto in Section
-------------- -------
9(c) of this Agreement.
----
(b) Construction.
(i) Unless the context of this Agreement clearly requires
otherwise, references to the plural include the singular and to the singular
include the plural, the part includes the whole, 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 other similar terms in this Agreement refer to this
Agreement as a whole and not exclusively to any particular provision of this
Agreement. Article, section, subsection, exhibit, and schedule references are to
this Agreement unless otherwise specified. All of the exhibits or schedules
attached to this Agreement shall be deemed incorporated herein by reference. Any
reference to any of the following documents includes any and all alterations,
amendments, restatements, extensions, modifications, renewals, or supplements
thereto or thereof, as applicable: this Agreement, the Loan Agreement, or any of
the other Loan Documents.
(ii) This Agreement has been reviewed by all of the parties
and their respective counsel 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 the parties hereto.
(iii) In the event of any direct conflict between the
express terms and provisions of this Agreement and of the Loan Agreement, the
terms and provisions of the Loan Agreement shall control.
2. Pledge. Each Pledgor, as security for the prompt payment and performance of
the Secured Obligations in full by such Pledgor when due, whether at stated
maturity, by acceleration or otherwise (including amounts that would become due
but for the operation of the provisions of the Bankruptcy Code), hereby pledges,
grants, transfers, and assigns to Secured Party a security interest in all of
such Pledgor's right, title, and interest in and to the Collateral.
3. Delivery and Registration of Collateral.
(a) All certificates or instruments representing or evidencing the
Collateral shall be promptly delivered by the applicable Pledgor to Secured
Party or Secured Party's designee pursuant hereto at a location designated by
Secured Party and shall be held by or on behalf of Secured Party pursuant
hereto, and shall be in suitable form for transfer by
-4-
delivery, or shall be accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance reasonably satisfactory to
Secured Party.
(b) After the occurrence and during the continuance of an Event of
Default, Secured Party shall have the right, at any time in its discretion and
without notice to any Pledgor, to transfer to or to register on the books of the
Issuers (or of any other Person maintaining records with respect to the
Collateral) in the name of Secured Party or any of its nominees any or all of
the Collateral. In addition, Secured Party shall have the right, at any time
after the occurrence and during the continuation of an Event of Default, to
exchange certificates or instruments representing or evidencing Collateral for
certificates or instruments of smaller or larger denominations.
(c) If, at any time and from time to time, any Collateral (including any
certificate or instrument representing or evidencing any Collateral) is in the
possession of a Person other than Secured Party or the applicable Pledgor (a
"Holder"), then such Pledgor shall promptly, at Secured Party's option, either
cause such Collateral to be delivered into Secured Party's possession, or
execute and deliver to such Holder a written notification/instruction, and take
all other reasonable steps necessary to perfect the security interest of Secured
Party in such Collateral, including obtaining from such Holder a written
acknowledgement that such Holder holds such Collateral for Secured Party, all
pursuant to (S)(S) 8313 and 8321 of the Code or other applicable law governing
the perfection of Secured Party's security interest in the Collateral in the
possession of such Holder. Each such notification/instruction and
acknowledgement shall be in form and substance reasonably satisfactory to
Secured Party.
(d) Any and all Collateral (including dividends, interest, and other cash
distributions) at any time received or held by any Pledgor shall be so received
or held in trust for Secured Party, shall be segregated from other funds and
property of such Pledgor and shall be forthwith delivered to Secured Party in
the same form as so received or held, with any necessary endorsements; provided
that dividends or distributions received by such Pledgor, if and to the extent
they are not prohibited by the Loan Agreement, may be retained by such Pledgor
in accordance with Section 4.
---------
(e) If at any time and from time to time any Collateral consists of an
uncertificated security or a security in book entry form, then the applicable
Pledgor shall promptly cause such Collateral to be registered or entered, as the
case may be, in the name of Secured Party, or otherwise cause Secured Party's
security interest thereon to be perfected in accordance with applicable law.
4. Voting Rights and Dividends.
(a) So long as no Triggering Event exists and is continuing or would
result therefrom, and except to the extent that the Collateral, or any portion
thereof, shall have been disposed of by Secured Party following the occurrence
and during the continuance of an Event of Default in connection with the
exercise by Secured Party of its remedies as the holder of a security interest
therein, each Pledgor shall be entitled to exercise any and all
-5-
voting and other consensual rights pertaining to its Collateral or any part
thereof for any purpose not inconsistent with the express terms of the Loan
Documents and shall be entitled to receive and retain any dividends, interest,
or distributions paid in respect of the Collateral in accordance with the terms
of the Loan Agreement and the Loan Documents.
(b) Upon the occurrence and during the continuance of any Triggering
Event, all rights of each Pledgor to exercise the voting and other consensual
rights or receive and retain cash dividends or distributions that it would
otherwise be entitled to exercise or receive and retain, as applicable pursuant
to Section 4(a), shall cease, and all such rights shall thereupon become vested
------------
in Secured Party, who shall thereupon have the sole right to exercise such
voting or other consensual rights and to receive and retain such cash dividends
and distributions. Each Pledgor shall execute and deliver (or cause to be
executed and delivered) to Secured Party all such proxies and other instruments
as Secured Party may reasonably request for the purpose of enabling Secured
Party to exercise the voting and other rights which it is entitled to exercise
and to receive the dividends and distributions that it is entitled to receive
and retain pursuant to the preceding sentence.
5. Representations and Warranties. Each Pledgor represents, warrants, and
covenants as follows:
(a) such Pledgor has taken all steps it deems necessary or appropriate to
be informed on a continuing basis of changes or potential changes affecting the
Collateral (including rights of conversion and exchange, rights to subscribe,
payment of dividends, reorganizations or recapitalization, tender offers and
voting rights), and such Pledgor agrees that Secured Party shall have no
responsibility or liability for informing such Pledgor of any such changes or
potential changes or for taking any action or omitting to take any action with
respect thereto;
(b) All information herein or hereafter supplied to Secured Party by or on
behalf of such Pledgor in writing with respect to the Collateral is, or in the
case of information hereafter supplied will be, accurate and complete in all
material respects;
(c) such Pledgor is and will be the sole record holder and beneficial
owner (provided that, for purposes of determining beneficial ownership of a
Person, indirect ownership through ownership of interests in one or more
intermediate Persons, that in turn own direct interests in such Person first
referred to, shall not be deemed beneficial ownership) of its Collateral
(including the Pledged Shares and all other Collateral acquired by such Pledgor
after the date hereof) free and clear of any adverse claim, Lien, or other
right, title, or interest of any party other than Permitted Liens;
(d) This Agreement, and the delivery to Secured Party of the Pledged
Shares representing Collateral (or the delivery to all Holders of the Pledged
Shares representing Collateral of the notification/instruction referred to in
Section 3 of this Agreement), creates a valid, perfected, and first priority
---------
security interest in one hundred percent (100%) of the Pledged Shares in favor
of Secured Party securing payment of the
-6-
Secured Obligations, and all actions necessary to achieve such perfection have
been duly taken;
(e) Schedule A to this Agreement is true and correct and complete in all
----------
material respects; without limiting the generality of the foregoing: (i) all the
Pledged Shares are in certificated form, and, except to the extent registered in
the name of Secured Party or its nominee pursuant to the provisions of this
Agreement, are registered in the name of the applicable Pledgor; and (ii) the
Pledged Shares as to each of the Issuers constitute at least the percentage of
all the fully diluted issued and outstanding shares of stock of such Issuer as
set forth in Schedule A to this Agreement;
----------
(f) There are no presently existing Future Rights or Proceeds owned by any
Pledgor, except as set forth in Schedule C hereto;
----------
(g) The Pledged Shares have been duly authorized and validly issued and
are fully paid and nonassessable; and
(h) Neither the pledge of the Collateral pursuant to this Agreement nor
the extensions of credit related to the Secured Obligations violates Regulation
T, U or X of the Board of Governors of the Federal Reserve System.
6. Further Assurances.
(a) Each Pledgor agrees that from time to time, at the expense of such
Pledgor, such Pledgor will promptly execute and deliver all further instruments
and documents, and take all further action that may be necessary or reasonably
desirable, as Secured Party may request, in order to perfect and protect any
security interest granted or purported to be granted hereby or to enable Secured
Party to exercise and enforce its rights and remedies hereunder with respect to
any Collateral. Without limiting the generality of the foregoing, each Pledgor
will: (i) at the request of Secured Party, xxxx conspicuously each of its
records pertaining to the Collateral with a legend, in form and substance
reasonably satisfactory to Secured Party, indicating that such Collateral is
subject to the security interest granted hereby; (ii) execute and file such
financing or continuation statements, or amendments thereto, and such other
instruments or notices, as may be necessary or reasonably desirable, as Secured
Party may request, in order to perfect and preserve the security interests
granted or purported to be granted hereby; (iii) allow inspection of the
Collateral by Secured Party or Persons designated by Secured Party (subject to
any applicable restrictions or limitations on inspection rights set forth in any
of the Loan Documents); and (iv) appear in and defend any action or proceeding
that may affect such Pledgor's title to or Secured Party's security interest in
the Collateral.
(b) Each Pledgor hereby authorizes Secured Party to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of such Pledgor where permitted
by law. A carbon, photographic, or other reproduction of this Agreement or any
financing statement covering
-7-
the Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law.
(c) Each Pledgor will furnish to Secured Party, upon the reasonable
request of Secured Party: (i) a certificate executed by an authorized officer of
such Pledgor, and dated as of the date of delivery to Secured Party, itemizing
in such detail as Secured Party reasonably may request, the Collateral which, as
of the date of such certificate, has been delivered to Secured Party by such
Pledgor pursuant to the provisions of this Agreement; and (ii) such statements
and schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Secured Party reasonably may
request.
7. Covenants of Pledgors. Each Pledgor shall:
(a) At all times keep at least one complete set of its records concerning
substantially all of the Collateral at its Chief Executive Office as set forth
in Schedule B hereto, and not change the location of its Chief Executive Office
----------
or such records without giving Secured Party at least thirty (30) days prior
written notice thereof;
(b) Upon receipt by such Pledgor of any material written notice, report,
or other written communication from any of the Issuers or any Holder relating to
all or any part of the Collateral, deliver such notice, report or other
communication to Secured Party as soon as possible, but in no event later than
five (5) days following the receipt thereof by such Pledgor.
8. Secured Party as Pledgors' Attorney-in-Fact.
(a) Each Pledgor hereby irrevocably appoints Secured Party as such
Pledgor's attorney-in-fact, with full authority in the place and stead of such
Pledgor and in the name of such Pledgor, Secured Party or otherwise, from time
to time at Secured Party's reasonable discretion, to take any action and to
execute any instrument that Secured Party may reasonably deem necessary or
advisable to accomplish the purposes of this Agreement, including: (i) after the
occurrence and during the continuance of a Triggering Event, to receive,
endorse, and collect all instruments made payable to such Pledgor representing
any dividend, payment, or other distribution in respect of the Collateral or any
part thereof to the extent permitted hereunder and to give full discharge for
the same and to execute and file governmental notifications and reporting forms;
(ii) to issue any notifications/instructions Secured Party reasonably deems
necessary pursuant to Section 3 of this Agreement; or (iii) after the occurrence
---------
and during the continuance of an Event of Default, to arrange for the transfer
of the Collateral on the books of any of the Issuers or any other Person to the
name of Secured Party or to the name of Secured Party's nominee.
(b) In addition to the designation of Secured Party as such Pledgor's
attorney-in-fact in subsection (a), each Pledgor hereby irrevocably appoints
Secured Party as such Pledgor's agent and attorney-in-fact, upon the occurrence
and during the continuance of an Event of Default, to make, execute and deliver
any and all documents and writings which may be necessary or appropriate for
approval of, or be required by, any regulatory authority
-8-
located in any city, county, state or country where such Pledgor or any of the
Issuers engage in business, in order to transfer or to effectively transfer any
of the Pledged Shares or otherwise enforce Secured Party's rights hereunder.
9. Remedies upon Default. Upon the occurrence and during the continuance of an
Event of Default:
(a) Secured Party may exercise in respect of the Collateral, in addition
to other rights and remedies provided for herein or otherwise available to it,
all the rights and remedies of a secured party on default under the Code
(irrespective of whether the Code applies to the affected items of Collateral),
and Secured Party may also without notice (except as specified below) sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any exchange, broker's board or at any of Secured Party's offices or
elsewhere, for cash, on credit or for future delivery, at such time or times and
at such price or prices and upon such other terms as Secured Party in good faith
believes to be commercially reasonable, irrespective of the impact of any such
sales on the market price of the Collateral. To the maximum extent permitted by
applicable law, Secured Party may be the purchaser of any or all of the
Collateral at any such sale and shall be entitled, for the purpose of bidding
and making settlement or payment of the purchase price for all or any portion of
the Collateral sold at any such public sale, to use and apply all or any part of
the Secured Obligations as a credit on account of the purchase price of any
Collateral payable at such sale. Each purchaser at any such sale shall hold the
property sold absolutely free from any claim or right on the part of any
Pledgor, and each Pledgor hereby waives (to the extent permitted by law) all
rights of redemption, stay, or appraisal that it now has or may at any time in
the future have under any rule of law or statute now existing or hereafter
enacted. Each Pledgor agrees that, to the extent notice of sale shall be
required by law, at least ten (10) calendar days notice to such Pledgor of the
time and place of any public sale or the time after which a private sale is to
be made shall constitute reasonable notification. Secured Party shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given. Secured Party may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. To the maximum extent permitted by law, each Pledgor hereby waives
any claims against Secured Party arising because the price at which any
Collateral may have been sold at such a private sale was less than the price
that might have been obtained at a public sale, even if Secured Party accepts
the first offer received and does not offer such Collateral to more than one
offeree.
(b) Each Pledgor hereby agrees that any sale or other disposition of the
Collateral conducted in conformity with reasonable commercial practices of
banks, insurance companies, or other reputable financial institutions in the
City of Los Angeles, California in disposing of property similar to the
Collateral shall be deemed to be commercially reasonable.
(c) Each Pledgor hereby acknowledges that the sale by Secured Party of any
Collateral pursuant to the terms hereof in compliance with the Securities Act of
1933 as
-9-
now in effect or as hereafter amended, or any similar statute hereafter adopted
with similar purpose or effect (the "Securities Act"), as well as applicable
"Blue Sky" or other state securities laws may require strict limitations as to
the manner in which Secured Party or any subsequent transferee of the Collateral
may dispose thereof. Each Pledgor acknowledges and agrees that in order to
protect Secured Party's interest it may be necessary to sell the Collateral at a
price less than the maximum price attainable if a sale were delayed or were made
in another manner, such as a public offering under the Securities Act. No
Pledgor has any objection to sale in such a manner and agrees that Secured Party
shall have no obligation to obtain the maximum possible price for the
Collateral. Without limiting the generality of the foregoing, each Pledgor
agrees that, upon the occurrence and during the continuation of an Event of
Default, Secured Party may, subject to applicable law, from time to time attempt
to sell all or any part of the Collateral by a private placement, restricting
the bidders and prospective purchasers to those who will represent and agree
that they are purchasing for investment only and not for distribution. In so
doing, Secured Party may solicit offers to buy the Collateral or any part
thereof for cash, from a limited number of investors deemed by Secured Party, in
its reasonable judgment, to be institutional investors or other responsible
parties who might be interested in purchasing the Collateral. If Secured Party
shall solicit such offers in such fashion, then the good faith acceptance by
Secured Party of an offer received in response to such solicitation shall be
deemed to be a commercially reasonable method of disposition of the Collateral.
(d) If Secured Party shall determine to exercise its right to sell all or
any portion of the Collateral pursuant to this Section, each Pledgor agrees
that, upon request of Secured Party, such Pledgor will, at its own expense:
(i) use its reasonable best efforts to execute and deliver, and cause
the Issuers and the directors and officers thereof to execute and deliver, all
such instruments and documents, and to do or cause to be done all such other
acts and things, as may be necessary or advisable, in the opinion of experienced
securities counsel for Secured Party, to register such Collateral under the
provisions of the Securities Act, and to cause the registration statement
relating thereto to become effective and to remain effective for such period as
prospectuses are required by law to be furnished, and to make all amendments and
supplements thereto and to the related prospectuses which, in the opinion of
experienced securities counsel for Secured Party, are necessary or advisable,
all in conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto;
(ii) use its reasonable best efforts to qualify the Collateral under
the state securities laws or "Blue Sky" laws of each state reasonably requested
in writing by Secured Party and to obtain all necessary governmental approvals
for the sale of the Collateral, as reasonably requested by Secured Party;
provided, that no Issuer shall be required to qualify generally to do business
in any state where it is not so qualified, or to take any action that would
subject it to taxation or general service of process in any such state where it
is not then so subject;
-10-
(iii) if such Pledgor is in control (within the meaning of
the Securities Act) of an Issuer, use its reasonable best efforts to cause such
Issuer to make available to its security holders, as soon as practicable, an
earnings statement which will satisfy the provisions of Section 11(a) of the
Securities Act;
(iv) use its reasonable best efforts to execute and deliver, or cause
the officers and directors of the Issuers to execute and deliver, to any person,
entity or governmental authority as Secured Party may choose, any and all
documents and writings which, in Secured Party's reasonable judgment, may be
necessary or appropriate for approval, or be required by, any regulatory
authority located in any city, county, state or country where Pledgor or the
Issuers engage in business, in order to transfer or to more effectively transfer
the Pledged Shares or otherwise enforce Secured Party's rights hereunder, or in
conjunction with such transfer of the Pledged Shares, in order to facilitate the
transfer of any license, permit, or leasehold estate or interest of any Issuer,
or compliance with any "change of control" or like restriction with respect
thereto; and
(v) use its reasonable best efforts to do or cause to be done all
such other acts and things as may be necessary to make such sale of the
Collateral or any part thereof valid, binding, and in compliance with applicable
law.
Each Pledgor acknowledges that there is no adequate remedy at law for failure by
it to comply with the provisions of this Section and that such failure would not
be adequately compensable in damages, and therefore agrees that its agreements
contained in this Section may be specifically enforced. Anything in this
Section 9(d) to the contrary notwithstanding, Secured Party shall not, in
------------
connection with any specific proposed disposition of Collateral, require
registration of the Collateral under the Securities Act unless, in the opinion
of experienced securities counsel for Secured Party, such registration is
reasonably necessary to ensure that such specific proposed distribution does not
violate the Securities Act.
(e) EACH PLEDGOR EXPRESSLY WAIVES TO THE MAXIMUM EXTENT PERMITTED BY LAW:
(i) ANY CONSTITUTIONAL OR OTHER RIGHT TO A JUDICIAL HEARING PRIOR TO THE TIME
SECURED PARTY DISPOSES OF ALL OR ANY PART OF THE COLLATERAL AS PROVIDED IN THIS
SECTION; (ii) ALL RIGHTS OF REDEMPTION, STAY, OR APPRAISAL THAT IT NOW HAS OR
MAY AT ANY TIME IN THE FUTURE HAVE UNDER ANY RULE OF LAW OR STATUTE NOW EXISTING
OR HEREAFTER ENACTED; AND (iii) EXCEPT AS SET FORTH IN SUBSECTION (a) OF THIS
--------------
SECTION, ANY REQUIREMENT OF NOTICE, DEMAND, OR ADVERTISEMENT FOR SALE.
-11-
10. Application of Proceeds. After the occurrence and during the continuance of
an Event of Default, any cash held by Secured Party as Collateral and all cash
proceeds received by Secured Party in respect of any sale of, collection from,
or other realization upon all or any part of the Collateral pursuant to the
exercise by Secured Party of its remedies as a secured creditor as provided in
Section 9 shall be applied from time to time by Secured Party as provided in
---------
the Loan Agreement.
11. Duties of Secured Party. The powers conferred on Secured Party hereunder
are solely to protect its interests in the Collateral and shall not impose on it
any duty to exercise such powers. Except as provided in Section 9207 of the
Code, Secured Party shall have no duty with respect to the Collateral or any
responsibility for taking any necessary steps to preserve rights against any
Persons with respect to any Collateral.
12. Choice of Law and Venue. 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 SECURED PARTY'S OPTION, IN THE COURTS OF ANY
JURISDICTION WHERE SECURED PARTY ELECTS TO BRING SUCH ACTION OR WHERE SUCH
COLLATERAL OR PROPERTY MAY BE FOUND. EACH PLEDGOR AND SECURED PARTY 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 12.
----------
13. Amendments; Etc. No amendment or waiver of any provision of this Agreement
nor consent to any departure by Pledgors herefrom shall in any event be
effective unless the same shall be in writing and signed by Secured Party and
each Pledgor, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. No failure on
the part of Secured Party to exercise, and no delay in exercising any right
under this Agreement, any other Loan Document, or otherwise with respect to any
of the Secured Obligations, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right under this Agreement, any other Loan
Document, or otherwise with respect to any of the Secured Obligations preclude
any other or further exercise thereof or the exercise of any other right. The
remedies provided for in this Agreement or otherwise with respect to any of the
Secured Obligations are cumulative and not exclusive of any remedies provided by
law.
-12-
14. Notices. Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
shall be delivered in the manner set forth in the Loan Agreement.
15. Continuing Security Interest. This Agreement shall create a continuing
security interest in the Collateral and shall: (i) remain in full force and
effect until the indefeasible payment in full of the Secured Obligations,
including the cash collateralization, expiration, or cancellation of all Secured
Obligations, if any, consisting of letters of credit, and the full and final
termination of any commitment to extend any financial accommodations under the
Loan Agreement; (ii) be binding upon Pledgors and their respective successors
and permitted assigns; and (iii) inure to the benefit of Secured Party and its
successors, transferees, and assigns. Upon the indefeasible payment in full of
the Secured Obligations, including the cash collateralization, expiration, or
cancellation of all Secured Obligations, if any, consisting of letters of
credit, and the full and final termination of any commitment to extend any
financial accommodations under the Loan Agreement, the security interests
granted herein shall automatically terminate and all rights to the Collateral
shall revert to the applicable Pledgor. Upon any such termination, Secured Party
will, at Pledgors' expense, execute and deliver to any Pledgor such documents as
such Pledgor shall reasonably request to evidence such termination. Such
documents shall be prepared by such Pledgor and shall be in form and substance
reasonably satisfactory to Secured Party.
16. Security Interest Absolute. To the maximum extent permitted by law, all
rights of Secured Party, all security interests hereunder, and all obligations
of Pledgors hereunder, shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of any of the Secured
Obligations or any other agreement or instrument relating thereto, including any
of the Loan Documents;
(b) any change in the time, manner, or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other amendment or
waiver of or any consent to any departure from any of the Loan Documents, or any
other agreement or instrument relating thereto;
(c) any exchange, release, or non-perfection of any other collateral, or
any release or amendment or waiver of or consent to departure from any guaranty
for all or any of the Secured Obligations; or
(d) any other circumstances that might otherwise constitute a defense
available to, or a discharge of, any Pledgor.
To the maximum extent permitted by law, each Pledgor hereby waives any right to
require Secured Party to: (A) proceed against or exhaust any security held from
any Pledgor; or (B) pursue any other remedy in Secured Party's power whatsoever.
-13-
17. Headings. Section and subsection headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement or be given any substantive effect.
18. Severability. In case any provision in or obligation under this Agreement
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
19. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same Agreement.
20. Waiver of Marshaling. Pledgors and Secured Party each acknowledges and
agrees that in exercising any rights under or with respect to the Collateral:
(i) Secured Party is under no obligation to marshal any Collateral; and (ii)
may, in its absolute discretion, realize upon the Collateral in any order and in
any manner it so elects. Pledgors and Secured Party waive any right to require
the marshaling of any of the Collateral.
21. Waiver of Jury Trial. PLEDGORS AND SECURED PARTY 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. PLEDGOR AND SECURED PARTY 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.
22. Waivers.
(a) To the maximum extent permitted by law, each Pledgor 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 Secured Obligations; (iii) notice of the amount of the Secured
Obligations, subject, however, to each Pledgor's right to make inquiry of
Secured Party to ascertain the amount of the Secured 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 such Pledgor's risk hereunder;
(v) notice of presentment for payment, demand, protest, and notice thereof as to
any instrument among the Loan Documents; (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 such
Pledgor under this Agreement or any other Loan Document) and demands to which
such Pledgor might otherwise be entitled.
-14-
(b) To the fullest extent permitted by applicable law, each Pledgor waives
the right by statute or otherwise to require Secured Party to institute suit
against Borrower or to exhaust any rights and remedies which Secured Party has
or may have against Borrower. Each Pledgor further waives any defense arising by
reason of any disability or other defense (other than the defense that the
Secured Obligations shall have been fully and finally indefeasibly paid) of
Borrower or by reason of the cessation from any cause (other than that the
Secured Obligations shall have been fully and finally indefeasibly paid)
whatsoever of the liability of Borrower in respect thereof.
(c) To the maximum extent permitted by law, each Pledgor hereby waives:
(i) any rights to assert against Secured Party any defense (legal or equitable),
set-off, counterclaim, or claim which Pledgor may now or at any time hereafter
have against Borrower or any other party liable to Secured Party on account of
or with respect to the Secured 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
Secured Obligations; (iii) any defense arising by reason of any claim or defense
based upon an election of remedies by Secured Party including, to the extent
applicable, the provisions of (S)(S) 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 such Pledgor's
liability hereunder or the enforcement thereof.
(d) To the maximum extent permitted by law, each Pledgor hereby waives any
right of subrogation such Pledgor has or may have as against Borrower with
respect to the Secured Obligations. In addition, each Pledgor 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 Secured Obligations. Each Pledgor also hereby waives any right
to proceed or to seek recourse against or with respect to any property or asset
of Borrower. Each Pledgor hereby agrees that, in light of the waivers contained
in this Section, such Pledgor 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, Secured Party 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 Pledgors hereunder. Each Pledgor
understands that (a) by virtue of the operation of California's antideficiency
law applicable to nonjudicial foreclosures, an election by Secured Party
nonjudicially to foreclose such a mortgage or deed of trust probably would have
the effect of impairing or destroying rights of subrogation, reimbursement,
contribution, or indemnity of such Pledgor against Borrower or guarantors or
sureties, and (b) absent the waiver given by such Pledgor herein, such an
election might estop Secured Party from enforcing this Agreement against such
Pledgor. Understanding the foregoing, and understanding that such Pledgor is
hereby
-15-
relinquishing a defense to the enforceability of this Agreement, each Pledgor
hereby waives any right to assert against Secured Party any defense to the
enforcement of this Agreement, whether denominated "estoppel" or otherwise,
based on or arising from an election by Secured Party nonjudicially to foreclose
any such mortgage or deed of trust. Each Pledgor understands that the effect of
the foregoing waiver may be that such Pledgor may have liability hereunder for
amounts with respect to which such Pledgor may be left without rights of
subrogation, reimbursement, contribution, or indemnity against Borrower or
guarantors or sureties. Each Pledgor 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 such Pledgor's liability
under this Agreement.
(f) WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER PROVISION
SET FORTH IN THIS AGREEMENT, EACH PLEDGOR 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 (S)(S) 2808, 2809,
2810, 2815, 2819, 2820, 2821, 2838, 2839, 2845, 2848, 2849, AND 2850, TO THE
EXTENT APPLICABLE, CALIFORNIA CODE OF CIVIL PROCEDURE (S)(S) 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, EACH PLEDGOR HEREBY WAIVES ALL RIGHTS AND DEFENSES
ARISING OUT OF AN ELECTION OF REMEDIES BY SECURED PARTY, EVEN THOUGH THAT
ELECTION OF REMEDIES, SUCH AS A NONJUDICIAL FORECLOSURE WITH RESPECT TO SECURITY
FOR A SECURED OBLIGATION, HAS DESTROYED SUCH PLEDGOR'S RIGHTS OF SUBROGATION AND
REIMBURSEMENT AGAINST THE BORROWER BY THE OPERATION OF SECTION 580d OF THE CODE
OF CIVIL PROCEDURE OR OTHERWISE.
- Remainder of page intentionally left blank. -
-16-
IN WITNESS WHEREOF, Pledgors and Secured Party have caused this
Agreement to be duly executed and delivered by their officers thereunto duly
authorized as of the date first written above.
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /s/ Xxxxxx Xxxxxx
Title: Vice President
PRANDIUM, INC.,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxx, Xx.
Title: Executive Vice President and CFO
FRI-MRD CORPORATION,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxx, Xx.
Title: President
CHI-CHI'S, INC.,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxx, Xx.
Title: Vice President
C-1
