EXHIBIT 10.3
SECURITY AGREEMENT
This Security Agreement is made and entered into this 30 day of July,
1996, by and between The Italian Oven, Inc., a Pennsylvania corporation
("Italian Oven"), and Mid-Central Sysco Food Services, Inc., a Missouri
corporation ("Mid-Central"), and Deaktor/Sysco Food Services Company, a
Pennsylvania corporation ("Deaktor")[Deaktor and Mid-Central are collectively
"Sysco"].
1. BACKGROUND.
A. Prior hereto, Sysco has provided certain extensions of credit, sales
on account and other financial accommodations to Italian Oven (collectively the
"Financial Accommodations"). The Financial Accommodations are past due and owing
and Italian Oven desires Sysco to presently forbear from immediately collecting
the past due Financial Accommodations and to continue selling to Italian Oven.
B. Sysco is willing to presently forbear from immediately collecting
the past due Financial Accommodations and sell to Italian Oven, but solely on
the terms and subject to the terms and conditions contained in this Security
Agreement, that certain Demand Note of even date herewith executed and delivered
by Italian Oven to Sysco in a maximum aggregate principal amount not to exceed
One Million Eighty-Eight Thousand and no/100 Dollars ($1,088,000.00)[the
"Note"], and the other agreements, documents and instruments executed and
delivered in connection with or pursuant to any of the foregoing (the "Other
Agreements"), including, but not limited to, all Leasehold Mortgages now or
hereafter executed and delivered by Sysco to Italian Oven.
C. In consideration of the foregoing, the mutual promises and
understandings of the parties hereto set forth herein, and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as set forth in this Security
Agreement.
II. DEFINITIONS.
A. When used herein. the following terms shall have the following
meanings:
1. "Assets" means all of Italian Oven's now existing or owned and
hereafter arising or acquired: (a) accounts, accounts receivable, any royalty
receivables and the "Franchise Income" (hereinafter defined); (b) contract
rights, documents, instruments. contracts, royalty agreements or other writings
executed in connection therewith, including, but not limited to, all real and
personal property lease rights, and all sums now due or which may become due
from Sysco to Italian Oven; (c) chattel paper, documents of title, instruments,
documents and general intangibles; (d) patents, trademarks, tradenames,
trademark registrations and copyrights, all applications therefor, service
marks, trade secrets, goodwill, processes, and other intellectual or proprietary
rights or interests of any kind, nature or description, and registrations,
licenses, customer lists, tax refund claims, liquor licenses, claims against
carriers and shippers, insurance claims, guarantied claims, all other claims,
proof of claims filed in any bankruptcy, insolvency or other proceeding,
contract rights, chooses in action, security interests, security deposits and
rights to indemnification; (e) inventory; (f) equipment and fixtures; (g) cash
and cash equivalents, bank accounts and deposit accounts; (h) franchise
agreements, royalty agreements and development agreements (collectively the
"Franchise Agreements"), including, but not limited to, the Franchise Agreements
listed on Exhibit "A" attached hereto; and (i) Italian Oven's books and records
relating to any of the foregoing and to Italian Oven's business.
2. "Event of Default" means the occurrence of any one of the following
events: (a) Italian Oven fails to fully and timely perform any term, covenant,
provision, warranty or condition contained in this Security Agreement or in any
other agreement, instrument or document heretofore, now or at any time hereafter
executed by Italian Oven and delivered to Sysco, including, but not limited to,
the Note and the Other Agreements; (b) Italian Oven fails to fully and timely
pay all or any portion of the "Liabilities" (hereinafter defined); (c) any of
Italian Oven's assets are attached, seized. subjected to a writ or distress
warrant, or are levied upon, or come within the possession of any receiver,
trustee. custodian or assignee for the benefit of creditors; (d) a petition
under the United States Bankruptcy Code or any similar federal, state or local
law, statute or regulation shall be filed by Italian Oven; (e) a petition under
the United States Bankruptcy Code or any similar federal, state or local law,
statute or regulation shall be filed against Italian Oven and is not dismissed
within thirty (30) days thereof, (f) Italian Oven makes an assignment for the
benefit of creditors or an application is made by or against Italian Oven for
the appointment of a receiver, trustee, custodian or conservator for Italian
Oven or any of Italian Oven's assets; (g) Italian Oven is enjoined, restrained
or in any way prevented by court order from conducting any part of its business
affairs; (h) a lawsuit or other proceeding isfiled by Italian Oven to liquidate
any of Italian Oven's assets; (i) a lawsuit or other proceeding is filed against
Italian Oven to liquidate any of Italian Oven's assets and such lawsuit or other
proceeding is not dismissed within thirty (30) days of the filing thereof, (j) a
notice of lien, levy or assessment is filed of record with respect to any of
Italian Oven's assets by the United States of America, or any department, agency
or instrumentality thereof, or by arty state, county, municipal or other
governmental department, agency or instrumentality, and such notice is not
released within (30) days of the filing thereof; (k) Italian Oven defaults in
the payment of its other obligations or liabilities, and such default is not
cured within the time, if any, specified therefor; (1) Sysco, in good faith,
believes its prospect of payment of performance of the Liabilities is impaired
or it deems itself insecure for whatever reason; or (m) any (i) person or entity
or group of persons or entities acting in concert shall become the beneficial
owner of thirty percent (30%) or more of the voting shares of any class of
capital stock of Italian Oven, (ii) person or entity (other than a majority of
the Board of Directors of Italian Oven) shall solicit proxies with respect to
voting shares of any class of capital stock of Italian Oven for any "Election
Contest" (hereinafter defined) relating to the election of directors of Italian
Oven and as a result of such solicitation, at least thirty percent (30%) of the
composition of the Board of Directors is changed, or (iii) other event shall
occur which constitutes a "Change in Control" of Italian Oven. For purposes of
this subsection, beneficial ownership shall be determined in accordance with
Section 13 of the Securities Exchange Act, the term "Election Contest" shall
have the meaning ascribed to it in Rule 14a-11 of the Securities Exchange Act
and a "Change in Control" shall be deemed to have occurred if Italian Oven, in
any filing under the Securities Act or the Securities Exchange Act, discloses
that such a Change in Control has occurred.
3. "Hazardous Material" shall mean any hazardous, toxic or dangerous
waste, chemical, pollutant, substance or material described, defined or covered
by the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, 42 U.S.C. 9601, et seq., The Hazardous Materials
Transportation Act, as amended, 49 U.S.C. ss.1802, et seq., The Resource
Conservation and Recovery Act, as amended, 49 U.S.C. 6901, et seq. The Toxic
Substance Control Act of 1976, as amended, 15 U. S.C. ss. 2601, et seq., The
Clean Water Act, as amended, 33 U.S.C. ss. 1251, et seq., The Clean Air Act, as
amended, 42 U.S.C. ss. 7401, et seq., or other applicable federal, state or
local environmental, health or safety statutes, laws or regulations now or
hereafter enacted (collectively the "Hazardous Material Laws").
4. "Liabilities" means all indebtedness, obligations or liabilities of
Italian Oven to Sysco, whether primary, secondary, direct, indirect, fixed or
otherwise, heretofore, now or from time to time hereafter owing, due or payable,
howsoever arising, including, but not limited to, the indebtedness evidenced by
the Note, sales on account, any amounts advanced by Sysco to protect or preserve
the Collateral or to, or for the benefit of, Italian Oven pursuant to the terms
of this Security Agreement or any other agreement by and between Italian Oven
and Sysco, and all expenses of Sysco in administering, enforcing or exercising
its rights or privileges under this Security Agreement, including, but not
limited to, all attorneys' and paralegals' fees.
5. "Securities Act" shall mean the Securities Act of 1933, as amended
from time to time, and any successor statute of similar import, together with
the regulations thereunder as in effect from time to time.
6. "Securities Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time, and any successor statute of similar import,
together with the regulations thereunder, as in effect from time to time.
B. All other terms contained in this Security Agreement shall have the
meanings specifically set forth herein or as provided by the Uniform Commercial
Code as adopted by the State of Illinois to the extent the same are used or
defined therein.
111. COLLATERAL.
A. To secure the full and timely payment to Sysco of the Liabilities
and the full and timely performance of all covenants, duties, obligations and
agreements of Italian Oven to and with Sysco, whether pursuant to this Security
Agreement, the Note or otherwise, Italian Oven hereby grants to Sysco a first
position, priority, security interest and lien in and to: (1) the Assets; and
(2) all additions and accessions to, parts, substitutions for and replacements,
products and-cash and non-cash proceeds of all of the Assets, including, but not
limited to, all accounts and all proceeds of all insurance policies insuring the
Assets (collectively the "Proceeds") [the Assets, together with the Proceeds are
collectively the "Collateral"]. Italian Oven shall make appropriate entries upon
its financial statements and books and records disclosing Sysco's perfected
first position, priority, security interest and lien in and to the Collateral.
B. Italian Oven shall execute and deliver to Sysco all financing
statements, instruments, documents and other agreements as Sysco may request to
fully consummate all of the transactions contemplated hereunder. Italian Oven
hereby appoints Sysco as Italian Oven's attomey-in-fact to execute and file
financing andcontinuation statements on Italian Oven's behalf. Italian Oven
shall, at its sole expense and at all times during the term of this Security
Agreement, maintain the Collateral in good and safe operating order and
condition, reasonable wear and tear excepted, and in accordance with the
requirements of any federal, state, county, municipal or other authority.
Italian Oven shall immediately notify Sysco in writing of any seizure of, levy
upon, loss of, possession of, destruction of or damage to the Collateral. If
Italian Oven fails to maintain the Collateral as required, then Sysco, without
waiving any Event of Default hereunder, may, but shall not be obligated to,
perform such maintenance with respect thereto. All sums paid by Sysco on account
of Italian Oven's failure to properly maintain the Collateral shall be
additional Liabilities of Italian Oven owing to Sysco, payable on demand, and
secured by the Collateral.
IV. FRANCHISE AGREEMENTS.
A. Italian Oven represents, warrants and covenants unto Sysco as
follows:
1. the Franchise Agreements and the Franchise Income are freely
assignable by Italian Oven to Sysco, and Italian Oven has full power and
authority to make the assignment described herein and such assignment is not in
violation of the terms of any agreements, documents or instruments, including
the Franchise Agreements, to which Italian Oven is a party;
2. all Franchise Income as of the date hereof has been fully and timely
paid. except as set forth on Exhibit "B", and Italian Oven is currently not in
possession of any pre-paid Franchise Income in connection therewith;
3. no Franchise Income arising or accruing after the date hereof will
be waived, released, reduced, discounted or otherwise discharged or compromised
by Italian Oven;
4. Italian Oven is and will continue to be the owner of the entire
interest as franchiser in any currently existing Franchise Agreements and in any
Franchise Agreements entered into after the date hereof, and the Franchise
Agreements are valid and enforceable in accordance with their terms and have not
been altered, modified or amended in any manner whatsoever;
5. there are no claims or causes of action in connection with the
Franchise Agreements, whether by Italian Oven or any "Franchisee" (hereinafter
defined);
6. Italian Oven has not, and will not at any time hereafter, assign or
pledge to any person or entity, other than Sysco, any or all of the Franchise
Agreements or Franchise Income;
7. the only Franchise Agreements currently in effect are described on
Exhibit "A" attached hereto;
8. no defaults exist on the part of either Italian Oven or any
Franchisee, and there exists no fact which, with the giving of notice, lapse of
time or both, would constitute a default under the Franchise Agreements. Italian
Oven will promptly provide Sysco with copies of any notices of default sent or
received by Italian Oven in connection with any Franchise Agreement; and
9. Italian Oven hereby covenants unto Sysco that it shall:
a. observe and perform all the obligations imposed upon Italian Oven
under the Franchise Agreements and not do or permit to be done anything to
impair the Franchise Agreements;
b. not materially alter, modify or change the terms of the Franchise
Agreements or any guaranties thereof, cancel or terminate the Franchise
Agreements or any guaranties thereof or accept a surrender thereof without the
prior written consent of Sysco;
c. deliver to Sysco, within ten (10) days of the execution thereof,
copies of all Franchise Agreements executed after the date hereof;
d. promptly pay to any Franchisee any amounts owed by Italian Oven, and
not allow or permit any Franchisee to set-off any amounts owed by Italian Oven
to such Franchisee, whether such set-off is against the Franchise Income or
otherwise; and
10. All hereafter executed Franchise Agreements are and shall remain
part of the Collateral.
B. Italian Oven hereby irrevocably appoints Sysco as its true and
lawful attomey-in-fact to (a) after the occurrence of an Event of Default,
collect, sue for, settle and compromise all of the Franchise Agreements and all
royalty or other payments now due or which may at any time hereafter become due
from any franchisee (a "Franchisee") in connection with the Franchise Agreements
(collectively the "Franchise Income"), and (b) amend Exhibit "A" attached hereto
and to execute on behalf of Italian Oven UCC financing statement amendments to
include any and all Franchise Agreements entered into by Italian Oven after the
date hereof.
C. Italian Oven agrees that Sysco shall have full power to use such
measures, legal or equitable, in its sole discretion or in the discretion of its
successors, divisions, parents, subsidiaries, affiliates or assigns, as may be
deemed proper or necessary to collect and enforce the payment of the Franchise
Income, including, but not limited to, actions for the recovery of royalty
payments. Italian Oven hereby grants to Sysco full power and authority to
exercise each and every of the rights, privileges and powers granted herein at
any and all times hereafter, without notice to Italian Oven, including, but not
limited to, the right to receive all Franchise Income.
D. Upon the occurrence of an Event of Default, Italian Oven hereby
authorizes and directs Sysco to notify any and all Franchisees under the
Franchise Agreements to pay Sysco directly all Franchise Income.
E. The relationship between Italian Oven and Sysco is solely that of
supplier/secured creditor and purchaser/debtor, and nothing contained herein
shall in any manner be construed as making the parties hereto partners, joint
venturers or any other relationship other than supplier/secured creditor and
purchaser/debtor.
V. ITALIAN OVEN'S PLACE OF BUSINESS. Italian Oven keeps and will
continue to keep the Collateral, all records relating to the Collateral and its
principal place of business at the locations listed on Exhibit "C" attached
hereto (collectively the "Collateral Locations"). Italian Oven will provide
Sysco with written notice prior to the opening or closing of any place of
business, office or other location, or prior to changing Italian Oven's name.
VI. PRIORITY OF SECURITY INTERESTS. Italian Oven represents, warrants
and covenants unto Sysco that the security interest and lien in and to the
Collateral which is granted to Sysco hereunder and by virtue of any other
agreements heretofore, now or at any time or times hereafter executed by Italian
Oven and delivered to Sysco shall constitute at all times a valid perfected,
first position, priority, security interest and lien in and to all of the
Collateral. All costs and expenses incurred by Sysco with respect to the
administration, enforcement, collection or protection of its security interest
and lien in and to the Collateral, the enforcement of any claims against Italian
Oven or the exercise of any of Sysco's rights, remedies or privileges granted in
this Security Agreement, at law, in equity or otherwise, including, but not
limited to, attorneys' and paralegals' fees, shall be additional Liabilities of
Italian Oven owing to Sysco, payable on demand and secured by the Collateral.
VII. TAXES. Italian Oven shall pay promptly when due all sales, use,
excise, personal property, income, withholding and other taxes, assessments and
governmental charges upon and relating to the ownership or use of the
Collateral, or its income, gross receipts or otherwise, for which Italian Oven
is or may be liable. Italian Ovenshall not permit or suffer to remain, and will
promptly discharge, any lien on any of the Collateral arising from any unpaid
tax, assessment, levy or governmental charge. If Italian Oven fails to pay any
such tax, assessment, levy or charge, or to discharge any such lien, then Sysco,
without waiving any Event of Default arising therefrom, may, but shall not be
obligated to, make such payment, settlement or compromise, or release or cause
to be released any such lien. All sums paid by Sysco in satisfaction of, or on
account of any such taxes, levies, assessments or governmental charges, or to
discharge or release any such liens or expenses, including, but not limited to,
attorneys' fees, court costs and other charges relating thereto, shall be
additional Liabilities of Italian Oven owing to Sysco, payable on demand and
secured by the Collateral.
VIII. INSURANCE.
A. Italian Oven shall keep all of the Collateral insured, at its
expense, against loss or damage by fire, theft, explosion and such other risks
ordinarily insured against by other owners or users of property in similar
businesses for the full insurable value thereof, by policies of insurance in
such form, with such companies and in such amounts as may be satisfactory to
Sysco. All such insurance policies shall contain standard Lender's Loss Payable
clauses naming Sysco as sole loss payee and additional insured, and copies of
insurance certificates in compliance with the terms hereof shall be delivered to
Sysco contemporaneously herewith. All proceeds payable under any of said
policies shall be payable to Sysco and applied by Sysco to the Liabilities. Each
insurer shall agree by endorsement upon the policy or policies issued by it to
Italian Oven required above, or by independent instruments furnished to Sysco,
that it will give Sysco thirty (30) days notice before any policy or policies
shall be altered, modified or canceled.
B. If Italian Oven fails to obtain or maintain any of the policies of
insurance required above, or fails to pay any premiums in whole or in part
relating to any such policies, then Sysco, without waiving any Event of Default,
may, but shall not be obligated to, obtain and cause to be maintained any or all
of such policies and pay any part or all of the premiums due thereunder, and any
funds so disbursed by Sysco shall be additional Liabilities owing from Italian
Oven to Sysco, payable on demand and secured by the Collateral.
C. Italian Oven hereby irrevocably appoints Sysco, and all agents,
officers or employees designated by Sysco, as Italian Oven's attomey-in-fact to
make adjustments of all insurance losses, to sign all applications, receipts,
releases and other papers necessary for the collection of any such loss and any
unearned premium, to execute proofs of loss, to make settlements, to endorse and
collect any check or other item payable to Italian Oven issued in connection
therewith and to apply the same to any of the Liabilities.
IX. REPRESENTATIONS, WARRANTIES AND COVENANTS. Italian Oven represents warrants
and covenants as follows:
A. Italian Oven is a corporation, duly incorporated and organized,
validly existing, and in good standing under the laws of the state of
Pennsylvania.
B. This Security Agreement is duly authorized, executed and delivered
by Italian Oven, and constitutes a legal, valid and binding obligation of
Italian Oven enforceable in accordance with its terms.
C. The execution, delivery and performance by Italian Oven of this
Security Agreement shall not constitute a breach of any provision of applicable
law or any provision contained in any agreement to which Italian Oven is a
party.
D. Italian Oven shall promptly supply Sysco with such other information
as Sysco may reasonably request, and shall promptly notify Sysco of any default
in any agreement executed by Italian Oven and delivered to Sysco.
E. The Collateral will be used solely for commercial or business use.
F. Italian Oven shall not, without the prior written consent of Sysco,
(1) grant a security interest in, pledge, assign, mortgage, create, or permit a
lien or encumbrance upon any of the Collateral to anyone, except Sysco; (2)
permit any levy, attachment or restraint to be made affecting any of the
Collateral; (3) merge or consolidate with any other firm, dissolve, liquidate or
sell, transfer or otherwise dispose of all or any portion of the Collateral, or
enter into any transaction not in the ordinary course of its business: or (4)
change its name, form of ownership or location. or the location of the
Collateral.
G. Italian Oven will deliver to Sysco the following financial
information, all of which shall be prepared in accordance with generally
accepted accounting principles consistently applied from period to period: (i)
no later than thirty (30) days after each calendar month, copies of internally
prepared financial statements, including, without limitation, balance sheets and
statements of income, retained earnings and cash flow of Italian Oven, certified
by the Chief Financial Officer of Italian Oven as to accuracy and completeness
and otherwise in form and substance acceptable to Sysco; (ii) no later than
thirty (30) days after the end of each of the first three quarters of Italian
Oven's fiscal year, a balance sheet and statement of income and retained
earnings and cash flow of Italian Oven, which quarterly financial statements
shall be audited; (iii) no later than ninety (90) days after the end of each of
Italian Oven's fiscal years, audited annual financial statements with an
unqualified certification and opinion by independent certified public
accountants selected by Italian Oven and reasonably satisfactory to Sysco; and
(iv) together with the financial statements furnished above, a certificate from
Italian Oven's Chief Financial Officer, dated the date of such financial and
other statements, as the case may be, certifying that no Event of Default has
occurred and no event has occurred which with notice, lapse of time or both
would result in an Event of Default.
H. Immediately upon receipt, Italian Oven will deliver to Sysco copies
of any management letters sent to Italian Oven by their independent certified
public accountants.
I. Promptly upon the filing or making thereof, Italian Oven agrees to
deliver to Sysco copies of each filing or report made by Italian Oven with or to
the Securities and Exchange Commission or any similar commission or
organization.
J. Italian Oven possesses, and shall continue to possess, adequate
licenses, patents. patent applications, copyrights, service marks, trademarks,
trademark applications, tradestyles and tradenames to continue to conduct its
business as heretofore conducted by it.
K. Italian Oven has filed and will continue to file with the Securities
and Exchange Commission in accordance with applicable law, all forms, reports,
documents, proxy statements and registration statements required to filed by
Italian Oven under the Securities Act or Securities Exchange Act, and none of
such forms, reports, documents, proxy statements or registration statements
contained or will contain any untrue statement of a material fact or omitted or
will omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances under
which such statements were made.
L. Italian Oven will not use, generate, manufacture, store, dispose or
transport Hazardous Material in violation of applicable law. Italian Oven have
and at all times hereafter will keep and maintain all Property in compliance
with. and will not cause or permit such Property, or any portion thereof, to be
in violation of any Hazardous Material Laws. Italian Oven has obtained all
environmental, health and safety permits necessary for its operations, all such
permits are in good standing and Italian Oven is in material compliance with all
terms and conditions of such permits.
M. Neither Italian Oven nor its past or present operations or real
property heretofore, now or hereafter leased or owned by Italian Oven
(collectively "Property") are subject to any order from or agreement with any
person or entity or any judicial or administrative proceeding or investigation
in connection with any Hazardous Material Laws, any remedial action or any
release or threatened release of any Hazardous Material. Italian Oven has not
filed a notice under any Hazardous Material Laws indicating past or present
"'treatment", "storage" or "disposal" of a "hazardous waste" as defined under
the Hazardous Material Laws, or any notice reporting a release of any
contaminant into the environment.
N. Except for certain janitorial supplies, which are stored and used in
accordance with Hazardous Material Laws, there is not presently on or in the
Property (i) any "treatment", "storage" or "disposal" of any Hazardous
Materials, (ii) more than one (1) underground storage tank, (iii) any surface
impoundments, or (iv) any polychlorinated biphenyls (PCB's) , whether used in
hydraulic oils, electrical transformers, other equipment or otherwise. Italian
Oven has not received any notice or claim indicating that it may be liable to
any other Person as a result of or in connection with any release or threatened
release into the environment. No lien has attached or has been recorded against
any of Italian Oven's property or assets in connection with (v) any liability
under any Hazardous Material Laws, or (vi) any damages arising from, or any
costs incurred by any Person in connection with, a release or threatened release
of a contaminant.
0. Italian Oven shall not declare or pay any dividend or other
distributor (whether in cash or in kind) on any class of its stock, or purchase
or redeem any partnership, equity, profit or other ownership interests held by
any Person in Italian Oven.
P. Italian Oven agrees to defend, protect, indemnify and hold harmless
Sysco, each parent, affiliate or subsidiary of Sysco (with counsel satisfactory
to Sysco), and each of their respective officers, directors, employees,
attorneys and agents (each an "Indemnified Party") from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature (including,
without limitation, the disbursements and the reasonable fees of counsel for
each Indemnified Party in connection with any investigative, administrative or
judicial proceeding, whether or not the Indemnified Party shall be designated a
party thereto), which may be imposed on, incurred by, or asserted against, any
Indemnified Party (whether direct, indirect or consequential and whether based
on any federal, state or local laws or regulations, including, without
limitation, securities, environmental and commercial laws and regulations, under
common law or in equity, or based on contract or otherwise) in any manner
relating to or arising out of this Security Agreement, the Note or the Other
Agreements, or any act, event or transaction related or attendant thereto. Any
liability, obligation, loss, damage, penalty, cost or expense covered by this
indemnity shall be paid to each Indemnified Party on demand, and, failing prompt
payment, shall, together with interest thereon at the "Default Rate" (as defined
in the Note) from the date incurred by each Indemnified Party until paid by
Italian Oven, be added to the Liabilities of Italian Oven and be secured by the
Collateral. The provisions of this Paragraph shall survive the satisfaction and
payment of the Liabilities and the termination of this Agreement.
Q. Italian Oven shall cause to be executed and delivered to Sysco
within thirty (30) days hereof a fully executed original of the Landiord's
Agreement for each Collateral Location in form and substance acceptable to Sysco
in its sole discretion; and
R. Contemporaneously herewith, Italian Oven shall execute and deliver
to Sysco a fully executed Leasehold Mortgage for each Collateral Location in
form and substance acceptable to Sysco in its sole discretion, together with a
list of the leases that require the landlord's consent prior to the execution of
the Leasehold Mortgages. Within thirty (30) days hereof, Italian Oven shall
cause to be executed and delivered to Sysco the necessary consent for each of
the Leasehold Mortgages requiring such consent. Sysco shall not record any
Leasehold Mortgage until the required landlord's consent is delivered to Sysco.
Sysco acknowledges and agrees that all Leasehold Mortgages requiring the consent
of the landlord shall not be effective until the required consent is obtained.
S. Italian Oven does not own any patents or patent applications.
Italian Oven agrees to give Sysco written notice prior to the development or
acquisition of any patents or patent applications and Italian Oven shall execute
and deliver to Sysco such documents and agreements, in form and substance
satisfactory to Sysco, as Sysco shall require in its sole discretion to grant
Sysco a first position priority security interest and lien in and to such
patents or patent applications as additional security for the Liabilities.
T. Contemporaneously herewith, Italian Oven shall pay to Sysco
Twenty-Five Thousand and no/100 Dollars ($25.000.00), which shall be applied to
reduce the principal balance of the Note. Within two (2) business days of the
closing of the sale of the Erie, Pennsylvania and Cranberry, Pennsylvania
Collateral Locations, Italian Oven shall pay to Sysco an additional Twenty-Five
Thousand and no/ I 00 Dollars ($25,000.00), which shall be applied to reduce the
principal balance of the Note. Both payments required under this Paragraph IX.T
are in addition to the daily payments required pursuant to the terms of the Note
and under no circumstances shall the payments required pursuant to this
Paragraph IX.T modify or reduce such required daily payments.
U. Italian Oven shall cause Marine Bank to execute and delivered to
Sysco that certain letter agreement in the form attached hereto as Exhibit "D".
V. Italian Oven does not and shall not own any investment brokerage or
securities accounts.
X. REMEDIES.
A. Upon an Event of Default by Italian Oven, two (2) days after written
notice by Sysco to and demand upon Italian Oven, the Liabilities shall be
immediately due and payable at the sole discretion and option of Sysco, and
Sysco, as a "secured party" (as that term is defined in the Uniform Commercial
Code), may proceed to enforce the payment of same and to exercise any and all
rights afforded to a "secured party" under the Uniform Commercial Code,
including, without limitation, the right to sell, transfer, lease or otherwise
dispose of any or all of the Collateral or any part thereof at public auction or
private sale, for cash or on credit, as Sysco may elect at its option. Italian
Oven acknowledges and agrees that ten (10) days notice of such sale sent by
Sysco to Italian Oven is reasonable notice. Furthermore, Sysco shall have the
right to take immediate and exclusive possession of the Collateral, or any part
thereof, and for that purpose. Italian Oven hereby grants to Sysco the
unqualified right and license to enter upon any premises on which the Collateral
or any part thereof may be situated, and to take possession and remove the
Collateral therefrom. Italian Oven irrevocably waives any bonds, surety or other
security relating thereto required by any statute, court rules or otherwise as
an incident to taking such possession, and Italian Oven waives any demand for
possession prior to the commencement of any suit or action with respect thereto
and in any other action in which Sysco is a party.
B. After the occurrence of an Event of Default and Sysco giving notice
as required in Paragraph X.A, upon request by Sysco. Italian Oven shall assemble
the Collateral and make it available to Sysco, at a place to be designated by
Sysco. Sysco may apply the proceeds of any sale or other disposition of the
Collateral to the Liabilities in any order of priority. Italian Oven shall pay
to Sysco all fees, costs and expenses, including attorneys' fees, of or
incidental to retaking, holding, preparing for sale, selling and the like, and
in otherwise enforcing any term or provision of this Security Agreement.
C. During the time that Sysco is in the possession of the Collateral,
and to the extent permitted by law, Sysco shall have the right to (1) hold. use,
operate, manage and control all or any portion of the Collateral; (2) make any
repairs, replacements, alterations, additions, and improvements to the
Collateral as it may deem proper; (3) demand, collect, and retain all earnings,
proceeds and other sums due or to become due with respect to the Collateral,
accounting only for the net earnings arising from such use and charging against
all other costs, expenses, charges, damage or loss by reason of such use; and
(4) exercise or continue to exercise all of the rights granted to Sysco.
Notwithstanding the foregoing, Sysco shall also be entitled to have a receiver
appointed to take charge of all or any portion of the Collateral and to exercise
all of the rights specified in this Paragraph X.C.
D. Italian Oven hereby waives presentment, protest, and notice of
presentment, demand, protest, non-payment, maturity, release. compromise,
settlement, extension or renewal of this Security Agreement, or any of the
Collateral or any other collateral or security for the Liabilities or the
covenants. Italian Oven also waives the benefit of all valuation, appraisement
and exemption laws and further waives all rights to notice and hearing of any
kind prior to the exercise by Sysco of its rights to repossess the Collateral
without judicial process or to replevy, attach or levy upon the Collateral
without prior notice or hearing.
XI. TERM. The term of this Security Agreement will commence as of the
date hereof and will continue in full force and effect until the indefeasible
payment and satisfaction in full of the Liabilities. The term of this Security
Agreement and the rights and privileges of Sysco set forth herein shall be
reinstated upon any requirement that Sysco return or reimburse Italian Oven, or
any trustee or a receiver, any of the Liabilities paid to Sysco. No termination
of the term of this Security Agreement shall in any way affect or impair the
rights and liabilities of the parties hereto relating to any transactions or
events prior to such termination or to any Collateral in which Sysco has a
security interest or lien.
XII. GENERAL.
A. Italian Oven will at all times keep accurate and complete records of
the Collateral, and Sysco, or any of their agents, shall have the right at all
reasonable times to examine and inspect the Collateral, all related records and
the premises upon which the Collateral is located; provided, however, prior to
the occurrence of an Event of Default, Sysco shall give Italian Oven two (2)
days notice prior to such examination and inspection.
B. Any and all notices, services of process, demands, requests,
consents, designations, waivers and other communications required or desired
hereunder shall be in writing and shall be deemed effective upon personal
delivery, upon receipted delivery by overnight carrier. or three (3) days after
mailing if mailed by registered or certified mail, return receipt requested,
postage prepaid, to Sysco or Italian Oven at the following addresses or such
other address as Sysco or Italian Oven specify in like manner; provided,
however, that notices of a change of address shall be effective only upon
receipt thereof:
If to Sysco, then to:
Deaktor/Sysco Food and Mid-Central Sysco Food
Services Company Services, Inc.
One Whytney Drive 1915 Kansas City Road
Harmony, Pennsylvania 16037 Olathe, Kansas 66061
Attention: President Attention: President
with a copy to: Fagel & Haber
140 South Dearborn Street
Suite 1400
Chicago, Illinois 60603
Attention: Gina M. Gentili, Esq.
If to Italian Oven. then to: The Italian Oven. Inc.
Eleven Lloyd Avenue
Latrobe. Pennsylvania 15650
Attention: President
With a copy to: Doepken Keevican & Weiss
600 Grant Street, 37th Floor
USX Tower
Pittsburgh, Pennsylvania 15219
Attention: Jeffrey W. Letwin, Esq.
C. Wherever possible, each provision of this Security Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Security Agreement shall beprohibited by or invalid
under applicable law, such provision shall be severed herefrom and such
invalidity or unenforceability shall not affect any other provision of this
Security Agreement, the balance of which shall remain in and have its intended
full force and effect; provided, however, if such provision may be modified so
as to be valid and enforceable as a matter of law, such provision shall be
deemed to be modified so as to be valid and enforceable to the maximum extent
permitted by law.
D. All of the rights of Sysco under this Security Agreement shall be
cumulative and shall inure to the benefit of their successors and assigns. This
Security Agreement may be assigned or transferred by either Sysco at any time
and shall not be assigned in whole or in part by Italian Oven. All obligations
of Italian Oven hereunder shall be binding upon Italian Oven and its successors,
divisions, parents and affiliates.
E. All representations and warranties of Italian Oven contained herein,
and in any other agreement executed and delivered to Sysco by Italian Oven shall
be true and correct when delivered, and shall survive the consummation of the
transactions described herein. No delay on the part of Sysco in the exercise of
any right or remedy shall operate as a waiver thereof, and no single or partial
exercise by Sysco of any right or remedy shall preclude any other or future
exercise thereof or the exercise of any other right or remedy.
F. This Security Agreement shall be interpreted, construed and governed
by and under the laws of the State of Pennsylvania without regard to choice of
law principles which would require the application of the law of a different
state or jurisdiction.
G. Notwithstanding any provision in this Security Agreement, the Note
or the Other Agreements to the contrary, Italian Oven acknowledges and agrees
that under no circumstances is Sysco obligated to sell merchandise to Italian
Oven, whether on account or otherwise, and any such sales are at the sole,
exclusive and absolute discretion of Sysco.
H. This Security Agreement contains the entire agreement between Sysco
and Italian Oven with regard to the subject matter hereof, and supersedes all
prior and contemporaneous communications, agreements and assurances, whether
verbal or written, and may not be modified, altered or amended except by an
agreement in writing signed by Italian Oven and Sysco.
I. If at any time or times before or after, an Event of Default, Sysco:
1. employs an accountant, consultant, legal counsel or any other
representative or advisor:
a. with respect to the Liabilities, this Security Agreement, the Note,
the Other Agreements, the Collateral or otherwise,
b. to represent or consult with Sysco in connection with any
litigation, contest, dispute, suit or proceeding, or to commence, defend,
intervene or take any other action in or with respect to any litigation,
contest, dispute, suit or proceeding, whether initiated by Sysco, Italian Oven,
a guarantor or any other person or entity, in any way or respect arising from,
relating to or in connection with the Liabilities, this Security Agreement, the
Note, the Other Agreements, or the Collateral, or
c. to enforce any of Sysco's rights or remedies;
2. takes any action or initiates any proceeding to protect, collect,
sell, liquidate or otherwise dispose of any of the Collateral or other security
for the Liabilities;
3. attempts to or enforces any of Sysco's rights or remedies against
Italian Oven or any guarantor of the Liabilities, then the costs and expenses so
incurred by Sysco shall be part of the Liabilities payable by Italian Oven to
Sysco upon demand with interest at the Default Rate until actually paid. Without
limiting the generality of the foregoing, such costs and expenses shall include
the fees, expenses and charges of attorneys, paralegals, accountants, investment
bankers, appraisers, valuation and other specialists, experts, expert witnesses,
auctioneers, court reporters, telegram, telex and telefax charges, overnight
delivery services, messenger services and expenses for travel, lodging and
meals. Contemporaneously with the execution hereof, Italian Oven shall pay to
Sysco all costs, fees and expenses incurred by Sysco in connection herewith,
including, but not limited to, costs, fees and expenses incurred by Sysco for
the preparation and negotiation of this Security Agreement, the Note and the
Other Agreements, and for uniform commercial code search charges.
J. All references to Sysco shall mean Mid-Central and Deaktor, both
individually and collectively, and all representations, warranties, duties,
covenants, agreements and obligations of Italian Oven to Sysco shall inure to
the benefit of Mid-Central and Deaktor, both individually and collectively.
K. Italian Oven hereby irrevocably appoints and designates Jeffrey W.
Letwin. Esq., of Doepken, Keevican & Weiss, 600 Grant Street. 37th Floor USX
Tower, Pittsburgh, PA 15219 Pennsylvania, as Italian Oven's true and lawful
attomey-in-fact and duly authorized agent to accept any notice which,
notwithstanding Italian Oven's waiver of notice contained in this Security
Agreement, Sysco desires or elects to provide to Italian Oven and for service of
legal process, and agrees that service of process upon such attomey-in-fact
shall constitute personal service of process upon Italian Oven, and waives any
objection to service of process upon such attomey-in-fact in accordance with
this Security Agreement. Italian Oven and Sysco hereby irrevocably agree,
consent and submit to the non-exclusive jurisdiction of the Court of Common
Pleas of Allegheny County, Pennsylvania, and the United States District Court
for the Western District of Pennsylvania, Civil Division, with regard to any
actions or proceedings arising from, relating to or in connection with the
Liabilities, this Security Agreement or the Collateral. Italian Oven hereby
waives any right Italian Oven may have to transfer or change the venue of any
litigation filed in the Court of Common Pleas of Allegheny County, Pennsylvania,
or the United States District Court for the Western District of Pennsylvania,
Civil Division, and further waives any objection to service of process upon such
attorney-in-fact in accordance with this Security Agreement. SYSCO AND ITALIAN
OVEN HEREBY WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY.
IN WITNESS WHEREOF, this Security Agreement has been duly executed as
of the date first set forth above.
MID-CENTRAL SYSCO THE ITALIAN OVEN, INC., a
FOODS SERVICES, INC., a Pennsylvania corporation
Missouri corporation
By: ________________________ By: ________________________
Its: ________________________ Its: ________________________
DEAKTOR/SYSCO FOOD SERVICES
COMPANY, a Pennsylvania corporation ATTEST:
By: ________________________ By: ________________________
Its: ________________________ Its: ________________________