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EXHIBIT 4.3
SECOND AMENDMENT
TO
PURCHASE AGREEMENT
Second Amendment to Purchase Agreement dated effective as of July 31,
1997 (the "Amendment"), among WATERMARC FOOD MANAGEMENT CO., a Texas
corporation formerly known as Billy Blues Food Corporation (the "Company"), and
the persons listed in Schedule 1 hereto (the "Purchasers");
WITNESSETH:
Whereas, the Company and the Purchasers are parties to a Purchase
Agreement dated as of December 19, 1994, as amended by the First Amendment to
Purchase Agreement dated as of March 31, 1996, (such Purchase Agreement, as
amended, being referred to herein as the "Purchase Agreement"), pursuant to
which the Company issued and the Purchasers purchased (a) the Company's 12%
Subordinated Notes due March 31, 1996, in the aggregate principal amount of
$3,000,000 (the "Notes") and (b) warrants (the "Warrants") evidencing the right
to purchase an aggregate of 1,333,320 shares of Common Stock, $.05 par value
(the "Company Common Stock"), of the Company, at $2.25 per share; and
Whereas, the Company has paid $1,250,000 in principal amount on the
Notes and has paid accrued interest on the Notes through August 31, 1997, and
$500,000 in aggregate principal amount of the Notes has been converted to other
debt; and
Whereas, the Company has requested that the Purchasers agree to extend
the maturity date of the remaining Notes until July 10, 1998; and
Whereas, the Purchasers are willing to extend the maturity date of the
Notes upon the terms and subject to the conditions set forth herein;
Now, therefore, in consideration of the foregoing premises, the
following mutual agreement, and other good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, the Company and the
Purchasers agree to amend the Purchase Agreement as follows:
1. Definitions. Capitalized terms used herein shall have the
meaning assigned to them in the Purchase Agreement unless otherwise defined
herein or the context otherwise requires.
2. Amendments to the Purchase Agreement. The Purchase Agreement
is hereby amended as follows:
(a) Section 1 of the Purchase Agreement is hereby amended by:
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(i) deleting the words "July 31, 1997" and substituting
in place thereof the words "July 10, 1998,"
(ii) deleting reference to "$1.00" and substituting in
place thereof "$0.25," and
(iii) deleting the third sentence in its entirety and
substituting in place there of the following sentence:
Each Note issued hereunder will be dated the date purchased by
you hereunder, will mature on July 10, 1998, and will bear
interest on its unpaid balance at the rate of 12% per annum,
payable monthly on the last day of each month, commencing on
September 30, 1997, and will have the other terms and
provisions provided herein and in the form of Note attached
hereto as Exhibit A.
(b) Section 7 of the Purchase Agreement is hereby amended by
inserting the following new Sections 7.15 and 7.16 immediately after Section
7.14:
7.15 ADDITIONAL SECURITY AGREEMENT. Ghulam M. Bombaywala
shall execute and deliver to the Purchasers a Security Agreement
substantially in the form attached hereto as Exhibit E pursuant to
which he will grant the Purchasers a security interest in 100% of the
outstanding securities of Michelangelo's, Inc., a Texas corporation.
7.16 GUARANTY OF GHULAM M. BOMBAYWALA. Ghulam M.
Bombaywala shall unconditionally and irrevocably guarantee the full
punctual payment when due, whether at stated maturity, by
acceleration, or otherwise, of all obligations of the Company to the
Purchasers under this Purchase Agreement and the Notes now or
hereafter existing whether for principal, interest, fees, expenses or
otherwise.
3. Amendments to the Notes. Each of the Notes is hereby amended
by deleting the words "July 31, 1997" wherever they may appear and substituting
in place thereof the words "July 10,1998."
4. Amendments to the Warrants. Each of the Warrants is hereby
amended by deleting the number "$1.00" in the first paragraph and substituting
in place thereof the number "$0.25" and by deleting the words "December 31,
1999" in the introduction and first paragraph and substituting in place thereof
the words "August 31, 2002."
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5. Representations and Warranties. The Company represents and
warrants as follows:
(a) The execution, delivery and performance of this
Amendment and the Purchase Agreement, as modified by this Amendment,
and the transactions contemplated hereby and thereby (i) are within
the corporate authority of the Company, (ii) have been authorized by
all necessary corporate proceedings on the part of the Company, (iii)
do not conflict with or result in any material breach or contravention
of any provision of law, statute, rule, or regulation to which the
Company is subject or any judgment, order, writ, injunction, license,
or permit applicable to the Company, and (iv) do not conflict with any
provision of the corporate charter or bylaws of the Company or any
agreement or other instrument binding upon the Company.
(b) The execution, delivery, and performance of this
Amendment and the Purchase Agreement, as modified by this Amendment,
will result in valid and legally binding obligations of the Company
enforceable against it in accordance with the respective terms and
provisions hereof and thereof,
(c) The execution, delivery, and performance of this
Amendment and the Purchase Agreement, as modified by this Amendment,
and the consummation by the Company of the transactions contemplated
hereby and thereby do not require any approval or consent of, or
filing with, any governmental agency or authority.
6. Ratification. Except as expressly amended hereby, the Purchase
Agreement, the Notes, and the Warrants are hereby ratified and confirmed in all
respects and shall continue in full force and effect. This Amendment and the
Purchase Agreement shall hereafter be read and construed together as a single
document, and all references to the Purchase Agreement or any agreement or
instrument related to the Purchase Agreement shall hereafter refer to the
Purchase Agreement as amended by this Amendment. This ratification and
amendment is made effective as of July 31, 1997, and the Purchasers agree that,
as amended, the Notes are not in default and, if due to timing factors a
default in the Notes existed for a temporary period, such default is waived
and/or cured by this Amendment.
7. Notation on Notes and Warrants. Promptly following execution
of this Amendment and in any event within 30 days thereof, each holder of a
Note and/or a Warrant agrees to deliver such Note and/or Warrant to the Company
so that the amendments effected by this Amendment may be noted thereon.
8. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
counterparts taken together shall be deemed to constitute one and the same
instrument.
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9. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of Texas (without reference
to conflict of laws).
10. Execution by Marco's. Marco's has executed this Amendment to
evidence its agreement to comply with the covenant's contained in Sections 7.13
and 7.14 of the Purchase Agreement.
11. Execution by Ghulam M. Bombaywala. Mr. Bombaywala has executed
this Amendment to evidence his agreement to comply with the covenants contained
in Section 7.15 of the Purchase Agreement and his agreement that the Put Option
Agreement dated as of December 19, 1994, between Mr. Bombaywala and the
Purchasers is hereby ratified and confirmed in all respects and shall continue
in full force and effect.
In witness whereof, the Company and the Purchasers have executed this
Amendment effective as of the date first above written.
WATERMARC FOOD MANAGEMENT CO.
By:
-----------------------------------
Name:
Title:
MARCO'S MEXICAN RESTAURANTS, INC.
By:
-----------------------------------
Name:
Title:
---------------------------------------
GHULAM M. BOMBAYWALA
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Don A. Sanders
Atlantis Software Company Employee
Profit Sharing Plan
By:
-----------------------------------
Name:
-----------------------------
Title:
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Philip M. Mount
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John I. Mundy
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Katherine U. Sanders
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Ben T. Morris
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Neil Lande, Custodian for Lynne Lande,
Stephen Lande, Sara Lande, and
Caroline Lande
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John E. Drury
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George L. Ball
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John M. O'Quinn
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Nolan Ryan
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Roger P. Lindstedt
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Ray C. Childress
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Kara S. Childress
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Morton A. Cohn
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Michael S. Chadwick
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EXHIBIT A
Secured Parties
Don A. Sanders
Atlantis Software Company Employee Profit Sharing Plan
Philip M. Mount
John I. Mundy
Katherine U. Sanders
Ben T. Morris
Neil Lande, Custodian for Lynne Lande,
Stephen Lande, Sara Lande, and
Caroline Lande
John E. Drury
George L. Ball
John M. O'Quinn
Nolan Ryan
Roger P. Lindstedt
Ray C. Childress
Kara S. Childress
Morton A. Cohn
Michael S. Chadwick
c/o Sanders Morris Mundy Inc.
3100 Texas Commerce Tower
600 Travis
Houston, Texas 77002
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EXHIBIT E
SECURITY AGREEMENT
SECURITY AGREEMENT dated as of July 31, 1997, among GHULAM M.
BOMBAYWALA, a resident of the State of Texas ("Debtor"), and the persons
identified on Exhibit A hereto (collectively, "Secured Party").
RECITALS
A. Secured Party has loaned $1,250,000 to Watermarc Food
Management Co., a Texas corporation (the "Company") pursuant to the Purchase
Agreement dated as of December 19, 1994, by and between the Company and Secured
Party (such Purchase Agreement, as amended by the First Amendment to Purchase
Agreement, being referred to herein as the "Original Purchase Agreement") and
the Company's 12% Subordinated Notes due July 31, 1997 (the "Notes").
B. Debtor and Secured Party are parties to a Put Option Agreement
dated as of December 19, 1994, pursuant to which Debtor agreed to purchase the
Notes under certain conditions.
C. Secured Party and Debtor have this date entered into a Second
Amendment to Purchase Agreement (the "Second Amendment"), under which, among
other things, Secured Party has agreed to waive all defaults, if any, occurring
on or before the date of the Second Amendment and to extend the maturity date
of the Notes (as defined in the Original Purchase Agreement), in consideration
for which DEBTOR has agreed to pledge the capital stock of Michelangelo's,
Inc., a Texas corporation ("Michelangelo's") as security therefor (the Original
Purchase Agreement, as amended by the First Amendment, is hereafter referred to
as the "Purchase Agreement").
A. Debtor is the record and beneficial owner of the issued and
outstanding shares of Capital stock issued by Michelangelo's described in
Schedule I (being hereinafter referred to as the "Pledged Shares").
AGREEMENT
In consideration of the premises and the covenants hereinafter
contained and for other good and valuable consideration, receipt of which is
hereby acknowledged, it is agreed as follows:
1. Definitions. The following terms shall have (unless otherwise
provided elsewhere in this Security Agreement) the following respective
meanings (such meanings being equally applicable to both the singular and
plural form of the terms defined):
"Agreement" shall mean this Security Agreement, including all
amendments, modifications and supplements and any exhibits or schedules to any
of the foregoing, and shall refer to the Agreement as the same may be in effect
at the time such reference becomes operative.
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"Business Day" shall mean any day that is not a Saturday, a Sunday or
a day on which banks are required or permitted to be closed in the State of
Texas.
"Code" shall mean the Texas Uniform Commercial Code as in effect from
time to time.
"Collateral" shall mean the Pledged Collateral.
"Default" shall mean any event which, with the passage of time or
notice or both, would, unless cured or waived, become an Event of Default.
"Event of Default" shall have the meaning assigned to it in the
Purchase Agreement.
"Lien" shall mean any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, easement or encumbrance, or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any lease or title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any financing statement
perfecting a security interest under the Code or comparable law of any
jurisdiction).
"Loan Documents" shall mean this Agreement, the Purchase Agreement,
those other ancillary agreements as to which Secured Party, the Company or the
Debtor is a party or a beneficiary, and all other agreements, instruments,
documents and certificates, including, without limitation, pledges, powers of
attorney, consents, assignments, contracts, notices, and all other written
matter whether heretofore, now or hereafter executed by or on behalf of Debtor
and delivered to Secured Party, in connection with this Agreement or the
transactions contemplated hereby.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether Federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Pledged Collateral" shall have the meaning assigned to such term in
Section 2 hereof.
"Purchase Agreement" shall have the meaning set forth in the recitals.
"Secured Obligations" shall have the meaning assigned to such term in
Section 3 hereof.
2. Pledge. Debtor hereby pledges, assigns, hypothecates,
transfers and delivers all the Pledged Shares owned by it and hereby grants to
Secured Party a lien on, and security interest in, and agrees to accept any
interest in the Pledged Shares that is received by it as Secured Party's agent
and to hold the same in trust on behalf of and for the ratable benefit of
Secured Party and
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to deliver the same forthwith to Secured Party in the exact form received, with
the endorsement of Debtor when necessary and/or appropriate undated stock
powers duly executed in blank, to be held by Secured Party, subject to the
terms hereof, all of the following (herein, the "Pledged Collateral"):
(a) The Pledged Shares and the certificates representing
the Pledged Shares (including, without limitation, any certificate
representing a stock dividend or a distribution in connection with any
reclassification, increase or reduction of capital, or issued in
connection with any reorganization), options or rights, and all
dividends, cash, 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 the Pledged Shares.
(b) All additional shares of stock (including, without
limitation, any certificate representing a stock dividend or a
distribution in connection with any reclassification, increase or
reduction of capital, or issued in connection with any
reorganization), options or rights of the issuer of the Pledged Shares
from time to time acquired by Debtor in any manner (which shares shall
be deemed to be part of the Pledged Shares), and the certificates
representing such additional shares, and all dividends, cash,
instruments and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of, in exchange for, as
an addition to, or in substitution of any or all of such shares.
3. Security for Obligations. This Agreement secures, and the
Collateral is security for, the prompt payment in full when due, whether at
stated maturity, by acceleration or otherwise, of the unpaid principal of and
interest on any promissory notes issued to evidence loans made and to be made
by Secured Party to Debtor pursuant to the Purchase Agreement; and performance
of the obligations, whether for principal, premium, interest, fees, costs and
expenses, and all obligations of Debtor now or hereafter existing under the
Purchase Agreement or of Debtor now existing or hereafter arising under this
Agreement (collectively, the "Secured Obligations").
4. Delivery of Pledged Collateral. All certificates representing
or evidencing the Pledged Shares shall be delivered to and held by or on behalf
of Secured Party pursuant hereto and shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to Secured Party. Secured Party shall have the right, at any time
in its discretion and without notice to Debtor, to transfer to or to register
in the name of Secured Party or any of its nominees any or all of the Pledged
Shares. In addition, Secured Party shall have the right at any time to exchange
certificates or instruments representing or evidencing Pledged Shares for
certificates or instruments of smaller or larger denominations.
5. Representations and Warranties. Debtor represents and warrants
to Secured Party that:
(a) Debtor is, and at the time of delivery of the Pledged
Shares to Secured Party pursuant to Section 4 hereof, the legal holder
of record and the sole beneficial owner of the Pledged Shares and has
good and marketable title to the Pledged Shares free and clear
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of any Lien, mortgage, hypothecation, security interest, charge,
option or other encumbrance whatsoever, except for the Lien created by
this Agreement.
(b) All of the Pledged Shares have been duly authorized,
validly issued and are fully paid and non-assessable.
(c) Debtor has the full power, authority and legal right
to pledge, assign, transfer, deliver, deposit and set over the Pledged
Collateral pledged by Debtor to Secured Party as provided herein.
(d) None of the Pledged Shares has been issued or
transferred in violation of the securities registration, securities
disclosure or similar laws of any jurisdiction to which such issuance
or transfer may be subject.
(e) The Michelangelo's Pledged Shares constitute one
hundred percent (100%) of the issued and outstanding shares of stock
of Michelangelo's.
(f) No consent, approval, authorization or other order of
any Person and no consent, authorization, approval, or other action
by, and no notice to or filing with any governmental authority or
regulatory body is required either (i) for the pledge by Debtor of the
Pledged Collateral pursuant to this Agreement or for the execution,
delivery or performance of this Agreement by Debtor or (ii) for the
exercise by the Secured Party of the voting or other rights provided
for in this Agreement or the remedies in respect of the Pledged
Collateral pursuant to this Agreement, except as may be required in
connection with such disposition by laws affecting the offering and
sale of securities generally.
(g) Except for the security interest (and pledges and
assignments as applicable) granted hereby and as disclosed in
paragraph (a) above, Debtor is, and as to any property acquired after
the date hereof which is included within the Collateral, Debtor will
be, the owner of all such Collateral free and clear from all charges,
Liens, security interests, adverse claims and encumbrances of any and
every nature whatsoever.
(h) There is no financing statement or similar filing now
on file in any public office covering any part of the Collateral, and
Debtor will not execute and there will not be on file in any public
office any financing statement or similar filing except the financing
statements filed or to be filed in favor of Secured Party.
(i) All information furnished to Secured Party concerning
Debtor, the Collateral and the Secured Obligations, or otherwise for
the purpose of obtaining or maintaining credit, is or will be at the
time the same is furnished, accurate and complete in all material
respects.
(j) The pledge, assignment and delivery of the Collateral
pursuant to this Agreement will create a valid first priority lien on
and a first priority perfected security
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interest in the Michelangelo's Pledged Shares pledged by Debtor, and
the proceeds thereof, subject to no prior pledge, lien, mortgage,
hypothecation, security interest, charge, option or encumbrance or to
any agreement purporting to grant to any third party a security
interest in the property or assets of Debtor which would include the
Collateral, securing the payment of the Secured Obligations.
(k) This Agreement has been duly authorized, executed and
delivered by Debtor and constitutes a legal, valid and binding
obligation of Debtor enforceable in accordance with its terms, except
as enforceability may be limited by bankruptcy, insolvency, or other
similar laws affecting the rights of creditors generally or by the
application of general equity principles.
The representations and warranties set forth in this Section 5 shall
survive the execution and delivery of this Agreement.
6. Covenants. Debtor, with respect to the Pledged Collateral held
in his or its name, covenants and agrees that until the Notes are paid in full
and the Secured Obligations are satisfied:
(a) Without the prior written consent of Secured Party,
Debtor agrees that it will not sell, assign, transfer, exchange or
otherwise dispose of, or grant any option with respect to, the
Collateral, nor will it create, incur or permit to exist any pledge,
lien, mortgage, hypothecation, security interest, charge, option or
any other encumbrance with respect to any of the Collateral or any
interest therein except for the Lien provided by this Agreement.
Without the prior written consent of Secured Party, Debtor agrees that
it will not vote to enable and will not otherwise permit the Company
to, issue any stock or other securities of any nature in addition to
or in exchange or substitution for such Pledged Shares.
(b) Debtor will, at its expense, promptly execute,
acknowledge and deliver all such instruments and take all such action
as Secured Party from time to time may request in order to ensure to
Secured Party the benefits of the Lien in and to the Collateral
intended to be created by this Agreement.
(c) Debtor has and will defend the title to the
Collateral and the Liens of Secured Party thereon against the claim of
any Person and will maintain and preserve such Liens. Debtor covenants
and agrees that it will have like title to and right to pledge any
other property which at any time hereafter may be pledged to Secured
Party as Pledged Collateral hereunder and will likewise defend Secured
Party's right thereto and security interest therein.
(d) Debtor shall promptly pay when due all taxes,
assessments, license fees, registration fees, and governmental charges
levied or assessed against Debtor or with respect to the Collateral or
any part thereof.
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(e) Debtor agrees not to suffer or permit any charge,
lien, security interest, adverse claim or encumbrance of any and every
nature whatsoever against the Collateral or any part thereof, except
for the Liens.
(f) Except as otherwise provided in this Agreement with
respect to inventory, and except in the ordinary course of business
with respect to other Collateral, Debtor shall not, without the prior
written consent of Secured Party, sell, assign, transfer, lease,
charter, encumber, hypothecate or dispose of the Collateral, or any
part thereof, or interest therein, or offer to do any of the
foregoing.
(g) Debtor shall promptly notify Secured Party in writing
of any change in the name, identity or structure of Debtor, any
charge, lien, security interest, claim or encumbrance asserted against
the Collateral, any theft, loss, injury or similar incident involving
the Collateral, and any other material matter or litigation adversely
affecting Debtor or the Collateral. Debtor shall furnish such other
reports, information and data regarding Debtor's financial condition
and operations, the Collateral and such other matters as Secured Party
may reasonably request from time to time.
(h) Debtor agrees to execute and deliver such financing
statement or statements, or amendments thereof or supplements thereto,
or other documents as Secured Party may from time to time require in
order to comply with the Code (or other applicable state law of the
jurisdiction where any of the Collateral is located) and to preserve
and protect the Secured Party's rights to the Collateral.
(i) Secured Party, at its option, whether before or after
default, but without any obligation whatsoever to do so, may (a)
discharge taxes, claims, charges, liens, security interests,
assessments or other encumbrances of any and every nature whatsoever
at any time levied, placed upon or asserted against the Collateral,
(b) place and pay for insurance on the Collateral, including insurance
that only protects Secured Party's interest, (c) pay for the repair,
improvement, testing, maintenance and preservation of the Collateral,
(d) pay any filing, recording, registration, licensing or
certification fees or other fees and charges related to the
Collateral, or (e) take any other action to preserve and protect the
Collateral and Secured Party's rights and remedies under this
Agreement as Secured Party may deem necessary or appropriate. Debtor
agrees that Secured Party shall have no duty or obligation whatsoever
to take any of the foregoing action. Debtor agrees to promptly
reimburse Secured Party upon demand for any payment made or any
expense incurred by the Secured Party pursuant to this authorization.
These payments and expenditures, together with interest thereon from
date incurred until paid by Debtor at the maximum contract rate
allowed under applicable laws, which Debtor agrees to pay, shall
constitute additional Obligations and shall be secured by and entitled
to the benefits of this Agreement.
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(j) Debtor shall do, make, procure, execute and deliver
all such additional and further acts, things, deeds, interests and
assurances as Secured Party may require from time to time to protect,
assure and enforce Secured Party's rights and remedies.
7. Debtor's Right. As long as no Default or Event of Default
under this Agreement, the Notes, the Purchase Agreement or any other agreement
executed to evidence and/or secure the Secured Obligations (the "Other
Agreements"), shall have occurred and be continuing and until written notice
shall be given to Debtor in accordance with Section 8(a) hereof:
(a) Debtor shall have the right, from time to time, to
vote and give consents, ratifications and waivers with respect to the
Pledged Collateral or any part thereof for all purposes not
inconsistent with the provisions of this Agreement, the Purchase
Agreement, and any Other Agreement; provided, however, that no vote
shall be cast, and no consent, ratification, or waiver shall be given
or action taken, which would have the effect of materially impairing
the position or interest of Secured Party in respect of the Pledged
Collateral, be inconsistent with or violate any provision of this
Agreement, the Purchase Agreement, or the Other Agreements;
(b) (i) Debtor shall be entitled, from time to time,
to collect and receive for its own use all cash dividends paid in
respect of the Pledged Shares to the extent not in violation of this
Agreement, the Purchase Agreement, or the Other Agreements, other than
any and all (A) dividends paid or payable other than in cash in
respect of, and instruments and other property received, receivable or
otherwise distributed in respect of, or in redemption of or exchange
for, any Pledged Collateral, (B) distributions paid or payable in cash
in respect of any Pledged Collateral in connection with a partial or
total liquidation or dissolution or reorganization of the Company, (C)
cash paid, or payable or otherwise distributed in redemption of, or in
exchange for, any Pledged Collateral, in addition, until actually paid
all rights to such dividends shall remain subject to the Lien created
by this Agreement; and
(ii) all dividends (other than such cash dividends
as are permitted to be paid to Debtor in accordance with clause (i)
above) and all other distributions in respect of the Pledged
Collateral, whenever paid or made, shall be delivered to Secured Party
to hold as Pledged Collateral and shall, if received by Debtor, be
received in trust for the benefit of Secured Party, be segregated from
the other property or funds of Debtor, and be forthwith delivered to
Secured Party as Pledged Collateral as additional Collateral for the
Secured Obligations in the form so received (with any necessary
endorsement).
8. Defaults and Remedies. Upon the occurrence of an Event of
Default and during the continuation of such Event of Default, then or at any
time after such declaration (provided that such declaration is not rescinded by
the Secured Party), without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified below of time
and place of public or private sale) to or upon Debtor or any other person (all
and each of which demands, advertisements and/or notices are hereby expressly
waived), Secured Party (personally or through
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an agent) is hereby authorized and empowered subject to the approval of any
governmental authority (to the extent such consent or approval of any
governmental authority is required), to
(a) Transfer and register in its name or in the name of
its nominee the whole or any part of the Pledged Collateral, to
exercise the voting rights with respect thereto, to collect and
receive all cash dividends and other distributions made thereon, and
to exercise any and all rights of conversion, exchange, subscription
or any other rights, privileges or options pertaining to any shares of
the Pledged Shares as if it were the absolute owner thereof, including
without limitation, the right to exchange at its discretion, any and
all of the Pledged Shares upon the merger, consolidation,
reorganization, recapitalization or other readjustment of any
corporation issuing any of such shares or upon the exercise by any
such issuer or Secured Party of any right, privilege or option
pertaining to any shares of the Pledged Shares, and in connection
therewith, to deposit and deliver any and all of the Pledged Shares
with any committee, depositary, transfer agent, registrar other
designated agency upon such terms and conditions as it may determine,
all without liability except to account for property actually received
by it, but Secured Party shall have no duty to exercise any of the
aforesaid rights, privileges or options and shall not be responsible
for any failure to do so or delay in so doing.
(b) Collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or sell, assign, give option or
options to purchase, contract to sell or otherwise dispose of and
deliver said Collateral, or any part thereof, in one or more parcels
at public or private sale or sales, at any exchange, broker's board or
at any of Secured Party's offices or elsewhere in one or more sales
after ten (10) days' notice of the time and place of any public sale
or of the time after which a private sale is to take place (which
notice Debtor agrees is commercially reasonable), but without any
previous notice or advertisement, the whole or any part of the
Collateral and to otherwise act with respect to the Collateral as
though Secured Party was the outright owner thereof, Debtor hereby
irrevocably constituting and appointing Secured Party as the proxy and
attorney-in-fact of Debtor, with full power of substitution to do so;
provided, however, Secured Party shall not have any duty to exercise
any such right or to preserve the same and shall not be liable for any
failure to do so or for any delay in doing so. Any sale shall be made
either for cash or upon credit or for future delivery without
assumption of any credit risk at such price as Secured Party may deem
fair, and such terms and conditions as Secured Party may deem
advisable and Secured Party may be the purchaser of the whole or any
part of the Collateral so sold and hold the same thereafter in its own
right free from any claim of Debtor or any right or equity of
redemption in Debtor, which right or equity is hereby expressly waived
and released. Each sale shall be made to the highest bidder, but
Secured Party reserves the right to reject any and all bids at such
sale which, in its discretion, it shall deem inadequate. Demands of
performance, except as otherwise herein specifically provided for,
notices of sale, advertisements and the presence of property at sale
are hereby waived and any sale hereunder may be conducted by an
auctioneer or any officer or agent of Secured Party.
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(c) If, at the original time or times appointed for the
sale of the whole or any part of the Collateral, the highest bid, if
there be but one sale, shall be inadequate to discharge in full all
the Secured Obligations, or if the Collateral be offered for sale in
lots, if at any of such sales, the highest bid for the lot offered for
sale would indicate to Secured Party, in its discretion, the
unlikelihood of the proceeds of the sales of the whole of the
Collateral being sufficient to discharge all the Secured Obligations,
Secured Party may, on one or more occasions and in its discretion,
postpone any of said sales by public announcement at the time of sale
or the time of previous postponement of sale, and no other notice of
such postponement or postponements of sale need be given, any other
notice being hereby waived; provided, however, that any sale or sales
made after such postponement shall be after ten (10) days' notice to
Debtor.
(d) In the event of any sales hereunder, Secured Party
shall pay over the proceeds of any such collection, recovery, receipt,
appropriation, realization or sale in accordance with Section 9 of
this Agreement.
(e) In addition to the rights and remedies granted to it
in this Agreement and in any other instrument or agreement securing,
evidencing or relating to any of the Secured Obligations, Secured
Party shall have all the rights and remedies of a secured party under
the Code.
(f) Debtor agrees that following the occurrence and
during the continuance of an Event of Default it will not at any time
plead, claim or take the benefit of any appraisal, valuation, stay,
extension, moratorium or redemption law now or hereafter in force in
order to prevent or delay the enforcement of this Agreement, or the
absolute sale of the whole or any part of the Collateral or the
possession thereof by any purchaser at any sale hereunder, and Debtor
waives the benefit of all such laws to the extent it lawfully may do
so. Debtor agrees that it will not interfere with any right, power and
remedy of Secured Party provided for in this Agreement or now or
hereafter existing at law or in equity or by statute or otherwise, or
the exercise or beginning of the exercise by Secured Party of any one
or more of such rights, powers or remedies. No failure or delay on the
part of Secured Party to exercise any such right, power or remedy and
no notice or demand which may be given to or made upon Debtor by
Secured Party with respect to any such remedies shall operate as a
waiver thereof, or limit or impair Secured Party's right to take any
action or to exercise any power or remedy hereunder, without notice or
demand, or prejudice its rights as against Debtor in any respect.
(g) Debtor further agrees that a breach of any of the
covenants contained in this Section 8 will cause irreparable injury to
Secured Party, that Secured Party has no adequate remedy at law in
respect of such breach and, as a consequence, agrees that each and
every covenant contained in this Section 8 shall be specifically
enforceable against Debtor, and Debtor hereby waives and agrees not to
assert any defenses against an action for specific performance of such
covenants except for a defense that the Secured Obligations are not
then due and payable in accordance with the agreements and instruments
governing and
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evidencing such obligations. Debtor further acknowledges the
impossibility of ascertaining the amount of damages which would be
suffered by Secured Party by reason of a breach of any of such
covenants and, consequently, agrees that, if Secured Party shall sue
for damages for breach, it shall pay, as liquidated damages and not as
a penalty, an amount equal to the value of the Collateral pledged by
Debtor on the date Secured Party shall demand compliance with this
Section 8.
(h) Debtor recognizes that Secured Party may be unable to
effect a public sale of any or all the Pledged Shares by reason of
certain prohibitions contained in the Act and applicable state
securities laws, but may be compelled to resort to one or more private
sales thereof to a restricted group or purchasers who will be obliged
to agree, among other things to acquire such securities for their own
account for investment and not with a view to the distribution or
resale thereof. Debtor acknowledges and agrees that any such private
sale may result in prices and other terms less favorable to the
Secured Party than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner.
Secured Party shall be under no obligation to delay a sale of any of
the Pledged Shares for the period of time necessary to permit the
issuer of such securities to register such securities for public sale
under the Act, or under applicable state securities laws, even if the
issuer would agree to do so.
(i) Debtor further agrees to do or cause to be done all
such other acts and things as may be reasonably necessary to make such
sale or sales of any portion or all of the Pledged Shares owned by it
valid and binding and in compliance with any and all applicable laws,
regulations, orders, writs, injunctions, decrees or awards of any and
all courts, arbitrators or governmental instrumentalities, domestic or
foreign, having jurisdiction over any such sale or sales, all at
Debtor's expense.
(j) Debtor shall be liable for and agrees to pay the
reasonable expenses incurred by Secured Party in enforcing its rights
and remedies, in retaking, holding, testing, repairing, improving,
selling, leasing or disposing of the Collateral, or like expenses,
including, without limitation, attorneys' fees and legal expenses
incurred by Secured Party. These expenses, together with interest
thereon from the date incurred until paid by Debtor at the maximum
contract rate allowed under applicable laws, which Debtor agrees to
pay, shall constitute additional Secured Obligations and shall be
secured by and entitled to the benefits of this Agreement.
(k) The rights and remedies of Secured Party are
cumulative and the exercise of any one or more of the rights or
remedies shall not be deemed an election of rights or remedies or a
waiver of any other right or remedy. Secured Party may remedy any
default and may waive any default without waiving,the default remedied
or without waiving any other prior or subsequent default.
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9. Application of Proceeds. Any cash held by Secured Party as
Collateral and all cash proceeds received by Secured Party in respect of any
sale of, liquidation of, or other realization upon all or any part of the
Collateral shall be applied by Secured Party as follows:
(a) First, to the payment of the costs and expenses of
such sale, including (i) reasonable compensation to the Secured Party
and its agents and counsel, and (ii) all expenses, liabilities and
advances made or incurred by Secured Party in connection therewith
including those incurred for care, safekeeping, collection, sale,
delivery or otherwise of the Collateral.
(b) Next, to the payment of the Secured Obligations in
such order as Secured Party may elect.
(c) Finally, after payment in full of all Secured
Obligations, payment to the Debtor, or its successors or assigns, or
to whomsoever may be lawfully entitled to receive the same or as a
court of competent jurisdiction may direct, of any surplus then
remaining from such proceeds.
10. Waiver. No delay on Secured Party's part in exercising any
power of sale, Lien, option or other right hereunder, and no notice or demand
which may be given to or made upon Debtor by Secured Party with respect to any
power of sale, Lien, option or other right hereunder shall constitute a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege constitute a waiver thereof; or
limit or impair Secured Party's right to take any action or to exercise any
power of sale, Lien, option, or any other right hereunder, without notice or
demand, or prejudice Secured Party's rights as against Debtor in any respect.
The rights and remedies herein provided are cumulative and may be exercised
singly or concurrently, and are not exclusive of any rights or remedies
provided by law.
11. Assignment and Amendment. Secured Party may assign, endorse or
transfer any instrument evidencing all or any part of the Secured Obligations
as provided in, and in accordance with, the Purchase Agreement, and the holder
of such instrument shall be entitled to the benefits of this Agreement. None of
the terms or provisions of this Agreement may be waived, altered, modified or
amended except by an instrument in writing, duly executed by Secured Party and
Debtor.
12. Termination. Immediately following the payment of all Secured
Obligations, Secured Party shall deliver to Debtor the Pledged Collateral
pledged by Debtor at the time subject to this Agreement and all instruments of
assignment executed in connection therewith, free and clear of the Lien hereof
and, except as otherwise provided herein, all of Debtor's obligations hereunder
shall at such time terminate.
13. Lien Absolute. All rights of Secured Party hereunder, and all
obligations of the Debtor hereunder, shall be absolute and unconditional
irrespective of:
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(a) Any lack of validity or enforceability of the
Purchase Agreement, any other Loan Document or any other agreement or
instrument governing or evidencing any Secured Obligations.
(b) Any change in the time, manner or place of payment
of, or in any other term of, all or any part of the Secured
Obligations, or any other amendment or waiver of or any consent to any
departure from the Purchase Agreement, any other Loan Document or any
other agreement or instrument governing or evidencing any Secured
Obligations.
(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.
(d) Any other circumstance which might otherwise
constitute a defense available to, or a discharge of, Debtor.
14. Indemnification. Debtor severally agrees to indemnify and hold
Secured Party harmless from and against any taxes, liabilities, claims and
damages, including reasonable attorney's fees and disbursements, and other
expenses incurred or arising by reason of the taking or the failure to take
action by Secured Party, in good faith, in respect of any transaction effected
under this Agreement or in connection with the Lien provided for herein,
including, without limitation, any taxes payable in connection with the
delivery or registration of any of the Pledged Collateral as provided herein.
Debtor severally agrees to be liable for payment to Secured Party of all
Secured Party's out-of-pocket costs and expenses incurred in connection with
this Agreement after the date hereof and all reasonable fees, expenses and
disbursements, including registration costs under the Act (or similar statute)
and the reasonable fees of Secured Party's agents or representatives, incurred
in connection with this Agreement and the performance by Secured Party of the
provisions of this Agreement and of any transactions effected in connection
with this Agreement. The obligations of the Debtor under this Section 14 shall
survive the termination of this Agreement. Notwithstanding any other provision
of this paragraph, or any other paragraph of this Agreement, if Debtor tenders
his Pledged Collateral to Secured Party pursuant to the terms of this
Agreement, but is prevented from tendering the Pledged Collateral to Secured
Party by virtue of the actions of any Person other than Debtor, or any Person
controlled or in common control with Debtor, then Debtor shall only be liable
for delivery of good, valid and marketable title to all of the Pledged
Collateral immediately upon legally being permitted to do so, and in such case
shall not be liable for any costs, arising from Debtor's obligation to
indemnify Secured Party as discussed in this Section 14.
15. Reinstatement. This Agreement shall remain in full force and
effect and continue to be effective should any petition be filed by or against
Debtor for liquidation or reorganization, should Debtor become insolvent or
make an assignment for the benefit of creditors or should a receiver or trustee
be appointed for all or any significant part of Debtor's assets, and shall
continue to be effective or be reinstated, as the case may be, if at any time
payment and performance of the Secured Obligations, or any part thereof, is,
pursuant to applicable law, rescinded or reduced in
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amount, or must otherwise be restored or returned by any obligee of the Secured
Obligations, whether as a "voidable preference", "fraudulent conveyance", or
otherwise, all as though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Secured Obligations shall be reinstated and deemed reduced only
by such amount paid and not so rescinded, reduced, restored or returned.
16. Miscellaneous.
(a) Secured Party may execute any of its duties hereunder
by or through agents or employees and shall be entitled to advice of
counsel concerning all matters pertaining to its duties hereunder.
(b) Neither Secured Party nor any of its officers,
directors, employees, agents or counsel shall be liable for any action
lawfully taken or omitted to be taken by it or them hereunder or in
connection herewith, except for its or their own gross negligence or
willful misconduct.
(c) This Agreement shall be binding upon Debtor and its
successors and assigns, and shall inure to the benefit of, and be
enforceable by, Secured Party and its successors and assigns, and
shall be governed by, and construed and enforced in accordance with,
the internal laws in effect in the State of Texas without giving
effect to principles of choice of law, and none of the terms or
provisions of this Agreement may be waived, altered, modified or
amended except in writing, signed by Secured Party, duly signed for
and on behalf of Secured Party and the Debtors and then only to the
extent therein set forth.
(d) Notwithstanding any provision to the contrary herein,
or in any of the documents evidencing the Secured Obligations or
otherwise relating thereto, no such provision shall require the
payment or permit the collection of interest in excess of the maximum
permitted by applicable usury laws. If any such excessive interest is
so provided for, then in such event (i) the provisions of this
paragraph shall govern and control, (ii) neither Debtor nor its
successors or assigns or any other party liable for the payment
thereof, shall be obligated to pay the amount of such interest to the
extent that is in excess of the maximum amount permitted by law, (iii)
any such excess interest that may have been collected shall be, at the
option of the holder of the instrument evidencing the Secured
Obligations, either applied as a credit against the then unpaid
principal amount thereof or refunded to the maker thereof, and (iv)
the effective rate of interest shall be automatically reduced to the
maximum lawful rate under applicable usury laws as now or hereafter
construed by the courts having jurisdiction.
(e) Any carbon, photographic or,other reproduction of any
financing statement signed by Debtor is sufficient as a financing
statement for all purposes, including without limitation, filing in
any state as may be permitted by the provisions of the Uniform
Commercial Code of such state.
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17. Severability. If for any reason any provision or provisions
hereof are determined to be invalid and contrary to any existing or future law
in any jurisdiction, such invalidity in any jurisdiction shall not impair the
operation of or effect those portions of this Agreement which are valid in any
other jurisdiction.
18. Notices. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon any
of the parties by any other party, or whenever any of the parties desires to
give or serve upon any other a communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and either shall be delivered in person with
receipt acknowledged or sent by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
(a) If to Secured Party, at
Sanders Morris Mundy
3100 Texas Commerce Tower
Houston, Texas 77002
Attn: Michael S. Chadwick
(b) If to Debtor, at
Ghulam M. Bombaywala
Watermarc Food Management Co.
11111 Wilcrest Green, Suite 350
Houston, Texas 77042
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, or three (3) Business Days after the same shall have
been deposited in the United States mail. Failure or delay in delivering copies
of any notice, demand, request, consent, approval, declaration or other
communication to the persons designated above to receive copies shall in no way
adversely affect the effectiveness of such notice, demand, request, consent,
approval, declaration or other communication.
19. Section Titles. The Section titles contained in this Agreement
are and shall be without substantive meaning or content of any kind whatsoever
and are not a part of the agreement between the parties hereto.
20. Counterparts. This Agreement may be executed in any number of
counterparts, which shall, collectively and separately, constitute one
agreement.
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21. Further Assurances. Debtor agrees that at any time and from
time to time, upon the written request of Secured Party, Debtor will execute
and deliver such further documents and do such further acts and things as
Secured Party may reasonably request in order to effect the purposes of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed as of the date first written above.
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Ghulam M. Bombaywala
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SCHEDULE I
DEBTOR PLEDGED SHARES
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Ghulam M. Bombaywala 750 shares of Common Stock, $1,00
par value, of Michelangelo's, Inc.,
Texas corporation, evidenced by the
certificate heretofore delivered to
Secured Party.
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