Exhibit 10.7






Exhibit 10.7




	 	 	 
	DEBTOR NAME AND ADDRESS

	 	SECURED PARTY NAME AND ADDRESS
	 
	 	 
	ANN ARBOR BURGER, INC.

	 	HOME CITY FEDERAL SAVINGS BANK OF SPRINGFIELD
	857 WEST EISENHOWER PARKWAY

	 	2454 N. LIMESTONE STREET
	ANN ARBOR, MI 48103

	 	P.O. BOX 1288

SPRINGFIELD, OH 45501











Type: o Individual

o partnership

þ corporation

o                                         

State of organization/registration (if applicable MI

o If checked, refer to addendum for additional Debtors and signatures.




COMMERCIAL SECURITY AGREEMENT




The date of this Commercial Security Agreement (Agreement) is 06-30-2008.



SECURED DEBTS. This Agreement will secure all sums advanced by Secured Party under the terms of
this Agreement and the payment and performance of the following described Secured Debts that
(check one) þ Debtor
o                                         
 (Borrower) owes to Secured Party:




þ Specific Debts. The following debts and all extensions, renewals, refinancings, modifications, and replacements (describe):
PROMISSORY NOTE FOR $500,000.00 DATED 06/30/2008.




o All debts. All present and future debts, even if this Agreement is not referenced, the debts
are also secured by other collateral, or the future debt is unrelated to or of a different type
than the current debt. Nothing in this Agreement is a commitment to make future loans or
advances.



SECURITY INTEREST. To secure the payment and performance of the Secured Debt, Debtor gives Secured
Party a security interest in all of the Property described in this Agreement that Debtor owns
or has sufficient rights in which to transfer an interest, now or in the future, wherever the
Property is or will be located, and all proceeds and products of the Property. “Property”
includes all parts, accessories, repairs, replacements, improvements, and accessions to the
Property; any original evidence of title or ownership and all obligations that support the
payment or performance of the Property. “Proceeds” includes anything acquired upon the sale,
lease, license, exchange, or other disposition of the Property; any rights and claims arising
from the Property; and any collections and distributions on account of the Property. This
Agreement remains in effect until terminated in writing, even if the Secured Debts are paid
and Secured Party is no longer obligated to advance funds to Debtor or Borrower.



PROPERTY DESCRIPTION. The Property is described as follows:




þ Accounts and Other Rights to Payment: All rights to payment, whether or not earned by
performance, including but not limited to, payment for property or services sold, leased, rented,
licensed, or assigned. This includes any rights and interests (including all liens) which Debtor
may have by law or agreement against debtor or obligor of Debtor.




þ Inventory: All inventory held for ultimate sale or leas, or which has been or will be
supplied under contract5 of service, or which are raw materials, work in process, or materials
used or consumed in Debtor’s business. Excluding liquor inventory.




þ Equipment: All equipment including, but not limited to, machinery, vehicles, furniture,
fixtures, manufacturing equipment, farm machinery and equipment, shop equipment, office and record
keeping equipment, parts and tools. The Property includes any equipment described in a list or
schedule Debtor gives to Secured Party, but such a list is not necessary to create a valid
security interest in all Debtor’s equipment.




o Instruments and Chattel Paper: All Instruments, including negotiable instruments and promissory
notes and any other writings or records that evidence the right to payment of a monetary
obligation, and tangible and electronic chattel paper.




þ General Intangibles: All general intangibles including, but not limited to, tax refunds,
patents and applications for patents, copyrights, trademarks, trade secrets, goodwill, trade
names, consumer lists, permits and franchises, payment intangibles, computer programs and all
supporting information provided in connection with a transaction relating to computer programs,
and the right to use Debtor’s name.




o Documents: All documents of title including, but not limited to, bills of lading, dock warrants
and receipts, and warehouse receipts.




o Farm Products and Supplies: All farm products including, but not limited to, all poultry and
livestock and their young, along with their produce, products, and replacements, all crops, annual
or perennial, and all products of the crops; and all feed, seed, fertilizer, medicines, and other
supplies used or produced in Debtor’s farming operations.




o Government Payments and Programs: All payment, accounts, general intangibles, and benefits
including, but not limited to, payments in kind, deficiency payments, letters of entitlement,
warehouse receipts, storage payments, emergency assistance and diversion payments, production
flexibility contracts, and conservation reserve payments under any preexisting, current, or future
federal or state government program.




o Investment Property: All investment property including, but not limited to, certificated
securities, uncertificated securities, securities entitlements, securities accounts, commodity
contracts, commodity accounts, and financial assets.




o Deposit Accounts: All deposit accounts including, but not limited to, demand, time, savings,
passbook, and similar accounts.




o Specific Property Description: The Property includes, but is not limited by, the following (if
required, provide real estate description):



USE OF PROPERTY. The Property will be sued for o personal þ business o agricultural
o
                                         purposes.




SIGNATURES. Debtor agrees to the terms on pages 1 and 2 of this Agreement and acknowledges receipt of a copy of this Agreement.



	 	 	 	 	 	 	 
	DEBTOR

	 	 	 	SECURED PARTY	 	 
	 
	 	 	 	 	 	 
	ANN ARBOR BURGER, INC.

	 	 	 	HOME CITY FEDERAL SAVINGS BANK OF SPRINGFIELD	 	 
	 
	 	 	 	 	 	 
	/s/ T. Michael Ansley

	 	 	 	/s/ Don E. Lynam	 	 
	 

THOMAS MICHAEL ANSLEY

	 	 	 	 

DON E. LYNAM
	 	 
	PRESIDENT

	 	 	 	EXECUTIVE VICE PRESIDENT	 	 






 












 







GENERAL PROVISIONS. Each Debtor’s obligations under this Agreement are independent of the
obligations of any other Debtor. Secured Party may sue each Debtor individually or together with
any other Debtor. Secured Party may release any part of the Property and Debtor will remain
obligated under this Agreement. The duties and benefits of this Agreement will bind the successors
and assigns of Debtor and Secured Party. No modification of this Agreement is effective unless
made in writing and signed by Debtor and Secured Party. Whenever used, the plural includes the
singular and the singular includes the plural. Time is of the essence.



APPLICABLE LAW. This Agreement is governed by the laws of the state in which Secured Party is
located. In the event of a dispute, the exclusive forum, venue and place of jurisdiction will be
the state in which Secured Party is located, unless otherwise required by law. If any provision of
this Agreement is unenforceable by law, the unenforceable provision will be severed and the
remaining provisions will still be enforceable.



NAME AND LOCATION. Debtor’s name indicated on Page 1 is Debtor’s exact legal name. If Debtor is
an individual, Debtor’s address is Debtor’s principal residence. If Debtor is not an individual,
Debtor’s address is the location of Debtor’s chief executive offices of sole place of business. If
Debtor is an entity organized and registered under state law, Debtor has provided Debtor’s state of
registration on Page 1. Debtor will provide verification of registration and location upon Secured
Party’s request. Debtor will provide Secured Party with at least 30 days notice prior to any
change in Debtor’s name, address, or state of organization or registration.



WARRANTIES AND REPRESENTATIONS. Debtor has the right, authority, and power to enter into this
Agreement. The execution and delivery of this Agreement will not violate any agreement governing
Debtor or Debtor’s property, or to which Debtor is a party. Debtor makes the following warranties
and representations which continue as long as the Agreement is in effect:



(1) Debtor is duly organized and validly existing in all jurisdictions in with Debtor does
business;



(2) the execution and performance of the terms of this Agreement have been duly authorized, have
received all necessary governmental approval, and will not violate any provision of law or order;



(3) other than previously disclosed to Secured Party, Debtor has not changed Debtor’s name or
principal place of business within the last 10 years and has not used any other trade or fictitious
name; and



(4) Debtor does not and will not use any other name without Secured Party’s prior written consent.
Debtor owns all of the Property, and Secured Party’s claim to the Property is ahead of the claims
of any other creditor, except as otherwise agreed and disclosed to Secured Party prior to any
advance on the Secured Debts. The Property has not been used for any purpose that would violate
any laws or subject the Property to forfeiture.



DUTIES TOWARD PROPERTY. Debtor will protect the Property and Secured Party’s interest against any
competing claim. Except as otherwise agreed, Debtor will keep the Property in Debtor’s possession
at the address indicated on Page 1 of this Agreement. Debtor will keep the Property in good repair
and use the Property only for purposes specified on Page 1. Debtor will not use the Property in
violation of any law and will pay all taxes and assessments levied or assessed against the
Property. Secured Party has the right of reasonable access to inspect the Property, including the
right to require Debtor to assemble and make the Property available to Secured Party. Debtor will
immediately notify Secured Party of any loss or damage to the Property. Debtor will prepare and
keep books, records, and accounts about the Property and Debtor’s Business, to which Debtor will
allow Secured Party reasonable access.



Debtor will not sell, offer to sell, license, lease, or otherwise transfer or encumber the Property
without Secured Party’s prior written consent. Any disposition of the Property will violate
Secured Party’s rights, unless the Property is inventory sold in the ordinary course of business at
fair market value. If the Property includes chattel paper or instruments, either as original
collateral or as proceeds of the Property, Debtor will record Secured Party’s interest on the face
of the chattel paper or instruments. If the Property includes accounts, Debtor will not settle any
account for less than the full value, dispose of the accounts by assignment, or make any material
change in the terms of any account without secured Party’s prior written consent. Debtor will
collect all accounts in the ordinary course of business, unless otherwise required by Secured
Party. Debtor will keep the proceeds of the accounts, and any good returned to Debtor, in trust
for Secured Party and will not commingle the proceeds or returned goods with any of Debtor’s other
property. Secured Party has the right to require Debtor to pay Secured Party the full price on any
returned items. Secured Party may require account debtors to make payments under the accounts
directly to Secured Party. Debtor will deliver the accounts to Secured Party at Secured Party’s
request. Debtor will give Secured Party all statements, reports, certificates, lists of account
debtors (showing names, addresses, and amounts owing), invoices applicable to each account, and any
other data pertaining to the accounts as Secured Party requests.



If the Property includes farm products, Debtor will provide Secured Party with a list of the
buyers, commission merchants, and selling agents to or through whom Debtor may sell the farm
products. Debtor authorizes Secured Party to notify any additional parties regarding Secured
Party’s interest in Debtor’s farm products, unless prohibited by law. Debtor agrees to plant,
cultivate, and harvest crops in due season. Debtor will be in default if any loan proceeds are
used for a purpose that will contribute to excessive erosion of highly erodible land or to the
conversion of wetland to produce of to make possible the production of an agricultural commodity,
further explained in 7 CFR Part 1940, Subpart G, Exhibit M. If Debtor pledges the Property to
Secured Party (delivers the Property into the possession or control of Secured Party or a
designated third party), Debtor will, upon receipt, deliver any proceeds and products of the
Property to Secured Party. Debtor will provide Secured Party with any notices, documents,
financial statements, reports, and other information relating to the Property Debtor receives as
the owner of the Property.



PERFECTION OF SECURITY INTEREST. Debtor authorized Secured Party to file a financing statement
covering the Property. Debtor will comply with, facilitate, and otherwise assist Secured Party in
connection with obtaining possession or control over the property for purposes of perfecting
Secured Party’s interest under the Uniform Commercial Code.



INSURANCE. Each Debtor agrees to keep the Property insured against the risks reasonably associated
with the Property until the Property is released from this Agreement. Debtor will maintain this
insurance in the amounts Secured Party requires. Debtor may choose the insurance company, subject
to Secured Party’s approval, which will not be unreasonably withheld. Debtor will have the
insurance provider name Secured Party as loss payee on the insurance policy. Debtor will give
Secured Party and the insurance provider immediate notice of any loss. Secured Party may apply the
insurance proceed toward the Secured Debts. Secured Party may require additional security as a
condition of permitting any insurance proceeds to be used to repair or replace the Property. If
Secured Party acquires the Property in damaged conditions, Debtor’ rights to any insurance policies
and proceeds will pass to Secured Party to the extent of the Secured Debts. Debtor will
immediately notify Secured Party of the cancellation or termination of insurance. If Debtor fails
to keep the Property insured, or fails to provide Secured Party will proof of insurance, Secured
Party may obtain insurance to protect Secured Party’s Interest in the Property. The insurance may
include coverages not originally required of Debtor, may be written by a company other than one
Debtor would choose, and may be written at a higher rate than Debtor could obtain if Debtor
purchased the insurance.



AUTHORITY TO PERFORM. Debtor authorizes Secured Party to do anything Secured Party deems
reasonably necessary to protect the Property and Secured Party’s Interest in the Property. If
Debtor fails to perform any of Debtor’s duties under this Agreement, Secured Party is authorized,
without notice to Debtor, to perform the duties or cause them to be performed. These
authorizations include, but are not limited to, permission to pay for the repair, maintenance, and
preservation of the Property and take any action to realize the value of the Property. Secured
Party’s authority to perform for Debtor does not create an obligation to perform, and Secured
Party’s failure to perform will not preclude Secured Party from exercising any other rights under
the law or this Agreement.



If Secured Party performs for Debtor, Secured Party will use reasonable care. Reasonable care will
not include any steps necessary to preserve rights against prior parties or any duty to take action
in connection with the management of the Property.



If Secured Party performs for Debtor, Secured Party will use reasonable care. Reasonable care will
not include any steps necessary to preserve rights against prior parties or any duty to take action
in connection with the managements of the Property.



If Secured Party comes into possession of the Property, Secured Party will preserve and protect the
Property to the extent required by law. Secured Party’s duty of care with respect to the Property
will be satisfied if Secured Party exercises reasonable care in the safekeeping of the Property or
in the selection of a third party in possession of the Property.



Secured Party may enforce the obligations of an account debtor or other persona obligated on the
Property. Secured Party may exercise Debtor’s rights with respect to the account debtor’s or other
person’ obligations to make payment or otherwise render performance to Debtor, and enforce any
security interest that secures such obligations.



PURCHASE MONEY SECURITY INTEREST. If the Property includes items purchases with the Secured Debts,
the Property purchased with Secured Debts will remain subject to Secured Party’s security interest
until the Secured Debts are paid in full. Payments on any non-purchase money loan also secured by
this Agreement will not be applied to the purchase money loan. Payments on the purchase money loan
will be applied first to the non-purchase money portion of the loan, if any, and then to the
purchase money portion in the order in which the purchase money Property was acquired. If the
purchase money Property was acquired at the same time, payments will be applied in the order
secured Party selects. No security Interest will be terminated by application of this formula.



DEFAULT. Debtor will be in default if:



(1) Debtor (or Borrower, if not the same) fails to make a payment in full when due;



(2) Debtor fails to perform any condition or keep any covenant on this or any debt or agreement
Debtor has with Secured Party;



(3) a default occurs under the terms of any instrument or agreement evidencing or pertaining to
the Secured Debts;



(4) anything else happens that either causes secured Party to reasonably believe that Secured
Party will have difficulty in collecting the Secured Debts or significantly impairs the value of
the Property.



REMEDIES. After Debtor defaults, and after Secured Party gives any legally required notice and
opportunity to cure the default, Secured Party may at Secured Party’s option to any one or more of
the following:



(1) make all or any part of the Secured Debts immediately due and accrue interest at the highest
post-maturity interest rate;



(2) require Debtor to gather the Property and make it available to Secured Party in a reasonable
fashion;



(3) enter upon Debtor’s premises and take possession of all or any part of Debtor’s property for
purposes of preserving the Property or its value and use and operate Debtor’s property to protect
Secured Party’s interest, all without payment or compensation to Debtor;



(4) use any remedy allowed by state of federal law, or provided in any agreement evidencing or
pertaining to the Secured Debts.



If Secured Party repossesses the Property or enforces the obligations of an account debtor, Secured
Party may keep or dispose of the Property as provided by law. Secured Party will apply the
proceeds of any collection or disposition first to Secured Party’s expenses of enforcement, which
includes reasonable attorneys’ fees and legal expenses to the extent not prohibited by law, and
then to the Secured Debts. Debtor (or Borrower, if not the same) will be liable for the
deficiency, if any.



By choosing any one or more of these remedies, Secured Party does not give up the right to use any
other remedy. Secured Party does not waive a default by not using a remedy.



WAIVER. Debtor waives all claims for damages caused by Secured Party’s acts or omissions where
Secured Party acts in good faith.



NOTICE AND ADDITINOAL DOCUMENTS. Where notice is required, Debtor agrees that 10 days prior
written notice will be reasonable notice to all parties. Debtor agrees to sign, deliver, and file
any additional documents and certifications Secured Party considers necessary to perfect, continue,
or preserve Debtor’s obligations under this Agreement and to confirm Secured Party’s lien status on
the Property.




 


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