EXHIBIT 10.33
GUARANTY AND SECURITY AGREEMENT
GUARANTY AND SECURITY AGREEMENT (this "Agreement") made this 28th day of
February, 2002, by and between PAT FRANCHISE SYSTEMS, INC., a Delaware
corporation, having an office at 5 Dakota Drive, Suite 303, Lake Success, New
York 11042 (the "Guarantor"), and DIGITAL CREATIVE DEVELOPMENT CORPORATION, a
Delaware corporation having an office at 101 Larkspur Circle, Larkspur
California 94939 (the "Secured Party");
W I T N E S S E T H:
WHEREAS, PAT Services, Inc., a Delaware corporation ("PAT Services"), MIE
Hospitality Inc. ("MIE") and Arthur Treacher's, Inc. ("ATI", PAT Services, MIE
and ATI are sometimes collectively referred to herein as the "Debtors") have
executed and delivered an Amended and Restated Senior Secured Promissory Note of
even date herewith (the "Note") in favor of the Secured Party; and
WHEREAS, the Guarantor has entered into a Purchase Agreement with ATI of
even date herewith (the "Purchase Agreement") pursuant to which, among other
things, the Guarantor has agreed to enter execute and deliver this Guaranty and
Security Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the Secured Party and the Guarantor agree as follows:
1.Guaranty.
The Guarantor irrevocably and unconditionally guarantees to the Secured
Party, payment when due, whether by acceleration or otherwise, of the Note,
together with all interest thereon. This is an absolute, unconditional, present
and continuing guaranty of payment, regardless of the validity, regularity or
enforceability of the Note. The Guarantor agrees that the Secured Party may
proceed directly against the Guarantor under this Guaranty when first
instituting legal or other proceedings against Debtors.
The obligations of Guarantor with respect to the guarantee of the principal
amount of the Note and all accrued interest thereon shall not be reduced until
the Debtors have fully satisfied their obligations under the Note owed by
Debtors to the Secured Party and its assigns. Any payment to Secured Party on
account of the Note shall be deemed to be made on behalf of Guarantor and the
amount of this Guaranty shall be reduced by the amount of such payment.
Guarantor consents that the Note or the liability of any other guarantor,
surety, indemnitor, indorser, or any other party for or upon the Note may, from
time to time, in whole or in part, be renewed, extended, modified, accelerated,
compromised, settled or released by the Secured Party, all without any notice
to, or further assent by, or any reservation of rights against, Guarantor and
without in any way effecting or releasing the liability of Guarantor hereunder.
The Secured Party shall not be liable for failure to collect or realize upon the
Note, or any part thereof, for any delay in so doing, nor shall Secured Party be
under any obligation to take any action whatsoever with regard thereto.
No executory agreement and no course of dealing between any Debtor and
Secured Party or Guarantor shall be effective to terminate, change or modify
this Guaranty in whole or in part; nor shall any waiver of any rights or powers
of the Secured Party, or consent by the Secured Party, be valid or effective
unless in writing and signed by Secured Party.
2.Security Interest.
To secure the due payment and performance of all indebtedness and other
liabilities and obligations of PAT Services, ATI and MIE to the Secured Party
under the Note, arising out of or in any way connected with the Note, including,
without limitation, any future advances, and the obligations of the Guarantor
under this Agreement (all hereinafter referred to collectively as the "Secured
Obligations"), the Guarantor hereby assigns, pledges, hypothecates, transfers
and sets over to the Secured Party and grants to the Secured Party, a first lien
upon and security interest in the assets of the Guarantor listed on Schedule I
annexed hereto and made a part hereof (all hereinafter referred to as the
"Collateral"), subject to the liens identified on Schedule II annexed hereto and
made a part hereof (the "Liens"). The Guarantor represents and warrants that the
Collateral represents all of the assets of the Guarantor, Pudgies Franchise
Corp. and Arthur Treacher's Franchise Systems, Inc. as of the date hereof
(except for the capital stock of Pudgies Franchise Corp. and Arthur Treacher's
Franchise Systems, Inc. owned by Guarantor).
3.Guarantor's Title; Liens and Encumbrances.
The Guarantor represents and warrants that the Guarantor is, or to the
extent that this Agreement states that the Collateral is to be acquired after
the date hereof, will be, the owner of the Collateral, having good title
thereto, free from any and all liens, security interests, encumbrances and
claims except for liens granted pursuant hereto and the Liens. The Guarantor
will not create or assume or permit to exist any such lien, security interest,
encumbrance or claim on or against the Collateral except as created by this
Agreement or the Liens, and the Guarantor will promptly notify the Secured Party
of any such other claim, lien, security interest or other encumbrance made or
asserted against the Collateral and will defend against any such claim, lien,
security interest or other encumbrance.
4.Perfection of Security Interest.
The Guarantor hereby authorizes the Secured Party to take all action
(including, without limitation, the filing of any Uniform Commercial Code
Financing Statements or amendments thereto without the signature of the
Guarantor) which the Secured Party may reasonably deem necessary or desirable to
perfect or otherwise protect the liens and security interests created hereunder
and to obtain the benefits of this Agreement.
5.General Covenants.
The Guarantor shall:
a) furnish the Secured Party from time to time at the Secured Party's
request written statements and schedules further identifying and describing the
Collateral in such detail as the Secured Party may reasonably require;
b) advise the Secured Party promptly, in sufficient detail, of any
substantial change in the Collateral, and of the occurrence of any event which
would have a material adverse effect on the value of the Collateral or on the
Secured Party's security interest therein;
c) comply with all acts, rules, regulations and orders of any legislative,
administrative or judicial body or official applicable to the Collateral or any
part thereof or to the operation of the Guarantor's business, provided that the
Guarantor may contest any acts, rules, regulations, orders and directions of
such bodies or officials in any reasonable manner which will not, in the
Guarantor's reasonable judgment, adversely affect its rights or the priority of
the Secured Party's security interest in the Collateral; and
d) promptly execute and deliver to the Secured Party such further
assignments, security agreements or other instruments, documents, certificates
and assurances and take such further action as the Secured Party may from time
to time in its sole discretion deem necessary to perfect, protect or enforce its
security interest in the Collateral or otherwise to effectuate the intent of
this Agreement and the Note.
6.Collections.
In the event of the occurrence of any Default, the Guarantor will
immediately upon receipt of all checks, drafts, cash or other remittances in
payment of any of its accounts, accounts receivable, contract rights or general
intangibles constituting part of the Collateral, or in payment for any
Collateral sold, transferred, leased or otherwise disposed of, or in payment or
on account of its accounts, accounts receivable, contracts, contract rights,
notes, drafts, acceptances, general intangibles, choses in action and all other
forms of obligations relating to any of the Collateral so sold, transferred or
otherwise disposed of, deliver any such items to the Secured Party accompanied
by a remittance report in form supplied or approved by the Secured Party, such
items to be delivered to the Secured Party in the same form received, endorsed
or otherwise assigned by the Guarantor where necessary to permit collection of
such items and, regardless of the form of such endorsement, the Guarantor hereby
waives presentment, demand, notice of dishonor, protest, notice of protest and
all other notices with respect thereto. All such remittances shall be applied
and credited by the Secured Party first to satisfaction of the Secured
Obligations or as otherwise required by applicable law, and to the extent not so
credited or applied, shall be paid over to the Guarantor.
7.Rights and Remedies on Default.
For purposes of this Agreement, the term "Default" shall mean the
occurrence of an Event of Default under the Note. Upon a Default, the Secured
Party shall give written notice to the Guarantor, and if such Event of Default
is capable of being cured, allow the Guarantor 10 days to cure such Event of
Default. In the event of the occurrence of any Default, the Secured Party shall,
after giving written notice to the Guarantor and the Guarantor has failed to
cure such Event of Default, as to any or all of the Collateral, by any available
judicial procedure, or without judicial process, to take possession of the
Collateral and without liability for trespass to enter any premises where the
Collateral may be located for the purpose of taking possession of or removing
the Collateral, and, generally, to exercise any and all rights afforded to a
secured party under the applicable Uniform Commercial Code or other applicable
law. Without limiting the generality of the foregoing, the Guarantor agrees that
in the event of any occurrence of a Default, the Secured Party shall have the
right to sell, lease, or otherwise dispose of all or any part of the Collateral,
whether in its then condition or after further preparation or processing, either
at public or private sale or at any broker's board, in lots or in bulk, for cash
or for credit, with or without warranties or representations, and upon such
terms and conditions, all as the Secured Party in its sole discretion may deem
advisable, and it shall have the right to purchase at any such sale; and, if any
Collateral shall require rebuilding, repairing, maintenance, preparation, or is
in process or other unfinished state, the Secured Party shall have the right, at
its option, to do such rebuilding, repairing, preparation, processing or
completion of manufacturing, for the purpose of putting the Collateral in such
saleable or disposable form as it shall deem appropriate. At the Secured Party's
request, the Guarantor shall assemble the Collateral and make it available to
the Secured Party at places which the Secured Party shall reasonably select,
whether at the Guarantor's premises or elsewhere, and make available to the
Secured Party, without rent, all of the Guarantor's premises and facilities for
the purpose of the Secured Party's taking possession of, removing or putting the
Collateral in saleable or disposable form. The proceeds of any such sale, lease
or other disposition of the Collateral shall be applied first, to the expenses
of retaking, holding, storing, processing and preparing for sale, selling, and
the like, and to the reasonable attorneys' fees and legal expenses incurred by
the Secured Party, and then to satisfaction of the Secured Obligations, and to
the payment of any other amounts required by applicable law, after which the
Secured Party shall account to the Guarantor for any surplus proceeds. If, upon
the sale, lease or other disposition of the Collateral, the proceeds thereof are
insufficient to pay all amounts to which the Secured Party is legally entitled,
the Guarantor will be liable for the deficiency, together with interest thereon,
to the extent permitted by applicable law, at the rate, if any, prescribed in
the Note, and the reasonable fees of any attorneys employed by the Secured Party
to collect such deficiency. To the extent permitted by applicable law, the
Guarantor waives all claims, damages and demands against the Secured Party
arising out of the repossession, removal, retention or sale of the Collateral,
except for such claims, damages and demands premised on the gross negligence or
willful malfeasance of the Secured Party.
8.Notification to Account Debtors and Other Obligors.
In the event of the occurrence of any Default, the Guarantor shall, at the
request of the Secured Party, notify account debtors on accounts, accounts
receivable, chattel papers and general intangibles of the Guarantor and obligors
on instruments for which the Guarantor is an obligee, of the security interest
of the Secured Party in any account, account receivable, chattel paper, general
intangible or instrument and that payment thereof is to be made directly to the
Secured Party or to any financial institution designated by the Secured Party as
the Secured Party's agent therefor, and the Secured Party may itself, if a
Default shall have occurred, without notice to or demand upon the Guarantor, so
notify account debtors and obligors. After the making of such a request or the
giving of any such notification, the Guarantor shall hold any proceeds of
collection of accounts, accounts receivable, chattel paper, general intangibles
and instruments received by the Guarantor as trustee for the Secured Party
without commingling the same with other funds of the Guarantor and shall
promptly turn the same over to the Secured Party in the identical form received,
together with any necessary endorsements or assignments. The Secured Party shall
apply the proceeds of collection of accounts, accounts receivable, chattel
paper, general intangibles and instruments received by the Secured Party to the
Secured Obligations, such proceeds to be immediately entered after final payment
in cash or solvent credits of the items giving rise to them.
9.Costs and Expenses.
Any and all fees, costs and expenses, of whatever kind or nature, including
the reasonable attorneys' fees and legal expenses incurred by the Secured Party,
in connection with the enforcing, foreclosing, retaking, holding, storing,
processing, selling or otherwise realizing upon the Collateral and the Secured
Party's security interest therein, whether through judicial proceedings or
otherwise, or in defending or prosecuting any actions or proceedings arising out
of or related to the transaction to which this Agreement relates, shall be borne
and paid by the Guarantor on demand by the Secured Party and until so paid shall
be added to the principal amount of the Secured Obligations and shall bear
interest at the rate prescribed in the Notes and shall be secured by the
Collateral.
10.Power of Attorney.
Upon the occurrence of a Default, the Guarantor authorizes the Secured
Party and does hereby make, constitute and appoint the Secured Party, and any
officer or agent of the Secured Party, with full power of substitution, as the
Guarantor's true and lawful attorney-in-fact coupled with an interest, with
power, in its own name or in the name of Debtor, upon the occurrence of a
Default to endorse any notes, checks, drafts, money orders, or other instruments
of payment (including payments payable under or in respect of any policy of
insurance) in respect of the Collateral that may come into possession of the
Secured Party; to sign and endorse any invoice, drafts against debtors,
assignments, verifications and notices in connection with accounts, and other
documents relating to Collateral; to pay or discharge taxes, liens, security
interests or other encumbrances at any time levied or placed on or threatened
against the Collateral; to demand, collect, receipt for, compromise, settle and
sue for monies due in respect of the Collateral; and, generally, to do, at the
Secured Party's option and at the Guarantor's expense, at any time, or from time
to time, all acts and things which the Secured Party deems reasonably necessary
to protect, preserve and realize upon the Collateral and the Secured Party's
security interest therein in order to effect the intent of this Agreement and of
the Notes all as fully and effectually as the Guarantor might or could do; and
the Guarantor hereby ratifies all that said attorney shall lawfully do or cause
to be done by virtue hereof. This power of attorney shall be irrevocable for the
term of this Agreement and thereafter as long as any of the Secured Obligations
shall be outstanding.
11.Notices.
Any notice required hereunder shall be deemed duly given on the day
delivered by hand or by recognized overnight courier, or on the earlier of
actual receipt by the recipient or four (4) days after deposited in mail, if
deposited in the mails, postage prepaid and sent by certified or registered
mail, return receipt requested, addressed as follows:
a)If to the Guarantor:
PAT Franchise Systems, Inc.
5 Dakota Drive
Suite 303
Lake Success, New York 11042
Attn: President
With a copy to:
Steven Wolosky, Esq.
Olshan, Grundmen, Frome, Rosenweig & Wolosky, LLP
505 Park Avenue
New York, New York 10022
b)If to the Secured Party:
Digital Creative Development Corporation
101 Larkspur Circle
Larkspur California 94939
With a copy to:
Steven Schuster, Esq.
McLaughlin & Stern, LLP
260 Madison Avenue
New York, New York 10016
or at such other address as shall have been specified by such party by
notice given in the same manner.
12. Other Security.
To the extent that the Secured Obligations are now or hereafter secured by
property other than the Collateral or by the guarantee, endorsement or pledge of
any other property of any other person, firm, corporation or other entity, then
the Secured Party shall have the right in its sole discretion to pursue,
relinquish, subordinate, modify or take any other action with respect thereto,
without in any way modifying or affecting any of the Secured Party's rights and
remedies hereunder.
13.Miscellaneous.
a)Beyond the safe custody thereof, the Secured Party shall have no duty as
to the collection of any Collateral in its possession or control or in the
possession or control of any agent or nominee of the Secured Party, or any
income thereon or as to the preservation of rights against prior parties or any
other rights pertaining thereto.
b)No course of dealing between the Guarantor and the Secured Party, nor any
failure to exercise, nor any delay in exercising, on the part of the Secured
Party, any right, power or privilege hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise or any other right, power or privilege.
c)All of the Secured Party's rights and remedies with respect to the
Collateral, whether established hereby or by any other agreements, instruments
or documents or by law shall be cumulative and may be exercised singly or
concurrently.
d)The provisions of this Agreement are severable, and if any clause or
provision shall be held invalid or unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall affect only such
clause or provision, or part thereof, in such jurisdiction and shall not in any
manner affect such clause or provision of this Agreement in any other
jurisdiction.
e)This Agreement is subject to modification only by a writing signed by
both parties. This Agreement may be signed in any number of counterparts each of
which shall be deemed to constitute an original and shall become effective when
each party has delivered manually executed counterparts to the other party
hereto.
f)The benefits and burdens of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties;
provided, however, that the rights and obligations of the Guarantor under this
Agreement shall not be assigned or delegated without the prior written consent
of the Secured Party, and any purported assignment or delegation without such
consent shall be void.
g)Governing Law; Jurisdiction. (i) THIS AGREEMENT WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW OR CONFLICT PROVISION OR RULE (WHETHER OF THE STATE
OF NEW YORK, OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK TO BE APPLIED. IN FURTHERANCE OF
THE FOREGOING, THE INTERNAL LAW OF THE STATE OF NEW YORK WILL CONTROL THE
INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT, EVEN IF UNDER SUCH
JURISDICTION'S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF
SOME OTHER JURISDICTION WOULD ORDINARILY APPLY. (ii) EACH PARTY CONSENTS THAT
ANY LEGAL ACTION OR PROCEEDING AGAINST IT UNDER, ARISING OUT OF OR IN ANY MANNER
RELATING TO THIS AGREEMENT, OR ANY OTHER INSTRUMENT OR DOCUMENT EXECUTED AND
DELIVERED IN CONNECTION HEREWITH, SHALL BE BROUGHT EXCLUSIVELY IN THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR IF SUCH COURT
LACKS SUBJECT MATTER JURISDICTION THEN IN ANY COURT OF THE STATE OF NEW YORK.
EACH PARTY, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, EXPRESSLY AND
IRREVOCABLY CONSENTS AND SUBMITS TO THE PERSONAL JURISDICTION OF ANY OF SUCH
COURTS IN ANY SUCH ACTION OR PROCEEDINGS. EACH PARTY AGREES THAT TO THE EXTENT
PERMITTED BY APPLICABLE LAW PERSONAL JURISDICTION OVER IT MAY BE OBTAINED BY THE
DELIVERY OF A SUMMONS (POSTAGE PREPAID) IN ACCORDANCE WITH THE PROVISIONS OF
SECTION 11 OF THIS AGREEMENT. ASSUMING DELIVERY OF THE SUMMONS IN ACCORDANCE
WITH THE PROVISIONS OF SECTION 11 OF THIS AGREEMENT, EACH PARTY HEREBY EXPRESSLY
AND IRREVOCABLY WAIVES ANY ALLEGED LACK OF PERSONAL JURISDICTION, IMPROPER VENUE
OF FORUM NON CONVENIENS OR ANY SIMILAR BASIS.
14.Term of Agreement.
The term of this Agreement shall commence on the date hereof and this
Agreement shall continue in full force and effect, and be binding upon the
Guarantor, until all of the Secured Obligations have been fully paid and
performed and such payment, whereupon this Agreement shall terminate.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
PAT FRANCHISE SYSTEMS, INC.
By:_______________________________
Name:
Title:
DIGITAL CREATIVE DEVELOPMENT
CORPORATION, a Delaware corporation
By:_______________________________
Name:
Title: