Document:

exv10w2

 

Exhibit 10.2

PROMISSORY NOTE

	 	 	 
	$1,350,000.00

	 	August 18, 2004
	

	 	Dallas, Texas

     FOR VALUE RECEIVED, CAPITAL SENIOR MANAGEMENT 1, INC., a Texas corporation
(collectively with its successors and assigns, “Maker”), hereby promises to pay
to the order of COVENANT GROUP OF TEXAS, INC., a Delaware corporation
(“Payee”), at 5601 Bridge Street, Suite 504, Fort Worth, Texas 76112 or such
other place designated by Payee by notice to Maker in lawful money of the
United States of America, the principal sum of One Million Three Hundred Fifty
Thousand and No/100 Dollars ($1,350,000.00), or so much thereof as from time to
time may be owed and remain unpaid and outstanding pursuant to that certain
Stock Purchase Agreement by and between Maker and Payee dated as of July 30,
2004, as amended (the “Purchase Agreement”). This Note shall bear no interest
prior to the Maturity Date. All past due principal of this Note shall bear
interest at the lesser of ten percent (10%) per annum or the maximum
non-usurious rate of interest from time to time allowed by applicable federal
or state law, whichever shall permit the higher lawful rate.

     Maker shall, subject to the limitations and reductions provided in the
Purchase Agreement, pay to the holder hereof three (3) installments of
principal, as follows: (i) Three Hundred Thousand Dollars ($300,000.00) due and
payable on the first anniversary of the date hereof, (ii) Four Hundred Thousand
Dollars ($400,000.00) due and payable on the third anniversary of the date
hereof, and (iii) Six Hundred Fifty Thousand Dollars ($650,000.00) due and
payable on the fifth anniversary of the date hereof (the “Maturity Date”), at
which time this Note shall mature and all unpaid principal hereunder shall be
due and payable in full.

     At such time as the unpaid principal of this Note is reduced to zero by
payment or reduction pursuant to the Purchase Agreement, this Note shall be
deemed paid in full and be of no further force or effect. Maker shall be
entitled to prepay this Note in whole or in part from time to time, without
penalty.

     If default is made in the payment of this Note and the same is placed in
the hands of an attorney for collection, or suit is filed hereon, or proceeds
are held in bankruptcy, probate, receivership, reorganization, arrangement or
other judicial proceeding for the establishment or collection of an amount
called for hereunder, or if any amount payable or to be payable hereunder is
collected through any such proceeding, Maker agrees to pay to the owner or
holder of this Note all costs of collection, including, but not limited to,
court costs and reasonable attorneys’ fees.

     No failure to exercise and no delay on the part of the Payee or other
holder hereof in exercising any power or right under this Note shall operate as
a waiver thereof, nor shall any single or partial exercise of any right or
power under this Note preclude any other or further exercise thereof or the
exercise of any other right or power. No modification or waiver of any
provision of this Note shall be effective unless the same shall be in writing
and signed by the

PROMISSORY NOTE (Capital Senior Management 1, Inc., Maker) — Page 1

 

Payee and Maker, and then such waiver or consent shall be effective only
in the specific instance to which it relates and for the purpose for which it
is given. The rights and remedies provided for in this Note are cumulative and
not intended to be exclusive of any other right or remedy given hereunder or
now or hereafter existing at law or in equity or by statute or otherwise.

     Maker and each co-maker, surety, endorser, guarantor and other party ever
liable for payment for any sums of money payable on this Note, jointly and
severally, waive presentment and demand for payment, protest, notice of protest
and nonpayment, notice of dishonor, notice of acceleration or notice of
intention to accelerate, bringing of suit and diligence in taking any action to
collect any amount called for hereunder, and agree that the liability under
this Note shall not be affected by any renewal or extension in the time of
payment hereof, or in any indulgences, and hereby consent to any and all
renewals, extensions or indulgences, regardless of the number of such renewals,
extensions or indulgences.

     Maker and Payee intend to conform strictly to applicable usury laws.
Therefore, the total amount of interest (as defined under applicable law)
contracted for, charged, or collected under this Note shall never exceed the
highest lawful rate. If Payee contracts for, charges, or receives any excess
interest,(i) it shall be deemed a mistake, (ii) the contract or charge shall,
without the necessity of any further action, be automatically and irrevocably
deemed reformed to conform to applicable law, and (iii) if excess interest has
been received, Payee shall either refund the excess to Maker or credit the
excess on the unpaid principal amount of this Note. All amounts constituting
interest shall be spread throughout the full term of this Note in determining
whether interest exceeds lawful amounts.

     THIS NOTE SHALL BE DEEMED TO HAVE BEEN ENTERED INTO AND IS PERFORMABLE IN
DALLAS, DALLAS COUNTY, TEXAS AND SHALL BE GOVERNED AND INTERPRETED UNDER THE
LAWS OF THE STATE OF TEXAS. MAKER AGREES THAT EXCLUSIVE VENUE AND PERSONAL AND
SUBJECT MATTER JURISDICTION OF ANY SUIT ARISING HEREUNDER SHALL LIE WITHIN THE
COURTS OF THE STATE OF TEXAS LOCATED IN THE COUNTY OF DALLAS OR WITHIN THE
COURTS OF THE UNITED STATES OF AMERICA LOCATED WITHIN THE NORTHERN DISTRICT OF
TEXAS.

     NO COURSE OF DEALING BETWEEN MAKER AND PAYEE, NO COURSE OF PERFORMANCE, NO
TRADE PRACTICES, AND NO EXTRINSIC EVIDENCE OF ANY NATURE MAY BE USED TO
CONTRADICT OR MODIFY ANY TERM OF THIS NOTE,. THE PURCHASE AGREEMENT, OR THE
SECURITY AGREEMENT (COLLECTIVELY, THE “LOAN DOCUMENTS”). THIS NOTE AND THE
OTHER LOAN DOCUMENTS COLLECTIVELY REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE
CONTRADICTED BY ANY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS BETWEEN THEM. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES.

PROMISSORY NOTE (Capital Senior Management 1, Inc., Maker) — Page 2

 

	 	 	 	 	 
	 	MAKER:

CAPITAL SENIOR MANAGEMENT 1, INC.,

a Texas corporation

 	 
	 	By:  	/s/ David R. Brickman
 	 
	 	 	David R. Brickman, Vice President 	 
	 	 	 	 
	 

PROMISSORY NOTE (Capital Senior Management 1, Inc., Maker) — Page 3exv10w3

 

Exhibit 10.3

SECURITY AGREEMENT

     THIS SECURITY AGREEMENT (“Agreement”) is executed and entered into by and
between Covenant Group of Texas, Inc., a Delaware corporation (“Secured
Party”), and Capital Senior Management 1, Inc., a Texas corporation (“Debtor”),
as of August 18, 2004.

W I T N E S S E T H:

     WHEREAS, Debtor and Secured Party have executed and entered into that
certain Stock Purchase Agreement dated effective as of July 30, 2004 (“Purchase
Agreement”), pursuant to the closing under which Debtor has acquired from
Secured Party all of issued and outstanding capital stock of CGI Management,
Inc., a Delaware corporation (the “Company”); and

     WHEREAS, pursuant to the closing under the Purchase Agreement, Debtor has
executed and delivered to Secured Party that certain Promissory Note dated
August 18, 2004, in the original principal amount of One Million Three Hundred
Fifty Thousand and No/100 Dollars ($1,350,000.00) made payable by the Debtor to
the order of Secured Party (the “Note”); and

     WHEREAS, as an inducement to Secured Party, the parties hereto wish to
more fully secure payment and performance of the obligations of the Debtor
under the Note pursuant to the terms and provisions set forth hereinbelow;

     NOW, THEREFORE, in consideration of the foregoing, the parties hereby
agree as follows:

     1. The term “Collateral” shall mean all of the shares of the capital stock
of the Company, together with all certificates, options, rights or other
distributions issued as an addition to, in substitution or in exchange for, or
on account of, any such capital stock, and all proceeds of the foregoing, as
further described in Paragraph 4 below, now or hereafter owned or acquired by
Debtor, or by any Affiliate of Debtor. For the purposes of this Agreement, an
“Affiliate” of a person or entity means any other person or entity that
controls, is controlled by, or is under common control with such person or
entity.

     2. As security for the full and timely payment, performance and
satisfaction of the Obligations (as defined below), Debtor, for value received,
hereby grants to Secured Party a first priority security interest in the
Collateral.

     3. As used herein, (a) the term “Obligations” shall mean (i) all of the
Debtor’s obligations, covenants and agreements under the Note, together with
any and all renewals, extensions, or modifications thereof, and (ii) all of
Debtor’s obligations, covenants and agreements under this Agreement, and (b)
the term “Loan Documents” shall mean collectively the Note and this Agreement.

SECURITY AGREEMENT — Page 1

 

 

     4. In the event Debtor shall become entitled to receive or shall receive,
in connection with any of the Collateral (i) any stock certificate, including
any certificate representing a stock dividend or any certificate in connection
with any increase or reduction of capital, reclassification, merger,
consolidation, sale of assets, combination of shares, stock split or spin-off
or (ii) any option, warrant or right, whether as an addition to or in
substitution of any of the Collateral, or otherwise, Debtor shall accept same
as encumbered by the security interest created hereby, and shall deliver same
forthwith to Secured Party in the exact form received, including as
appropriate, Debtor’s endorsement or appropriate stock powers duly executed in
blank, to be held by Secured Party as a part of the Collateral, subject to the
terms hereof; provided, however, that for so long as no event of default (as
defined in Paragraph 10 below) is in existence, Debtor shall have the right to
receive cash dividends declared and paid on account of the Collateral.

     5. Debtor warrants and represents to Secured Party that (a) Debtor has the
power and authority to enter into this Agreement, and to pledge the Collateral
for the purposes described herein, (b) Debtor is the sole legal and beneficial
owner of all the Collateral, (c) the Collateral constitutes all of the issued
and outstanding shares of capital stock of the Company, (d) all of the
Collateral has been duly and validly issued and the stock certificate
representing the same has been duly executed by the President and Secretary of
the Company, (e) to the best of its knowledge the Collateral is fully paid and
nonassessable, and is owned by Debtor free of any pledge, mortgage, lien or
security interest of any kind, (f) to the best of its knowledge execution and
delivery by Debtor of this Agreement, and the performance of its terms, has
been duly authorized by all corporate action necessary on Debtor’s part and
will not result in any violation or default under Debtor’s corporate charter or
bylaws, or under any agreement, instrument, law, governmental rule or
regulation, order or judgment applicable to Debtor or the Collateral, (g) to
the best of its knowledge upon execution and deliver by Debtor of this
Agreement and upon delivery of the Collateral to Secured Party, this Agreement
shall create a valid perfected first priority security interest in the
Collateral, (h) this Agreement and the Note constitute legal, valid, and
binding obligations of Debtor, enforceable against Debtor in accordance with
their respective terms, and (i) no consent, approval, authorization or order
of, and no notice to or filing with, any court, governmental authority or third
party is required in connection with the grant by Debtor of the security
interest herein or with the exercise by Secured Party of its rights and
remedies hereunder.

     6. Until such time as the Obligations have been fully paid, performed and
satisfied, Debtor shall not without the prior written consent of Secured Party:
(a) sell, convey or otherwise dispose of any of the Collateral or any interest
therein, or create, incur or permit to exist any pledge, mortgage, lien,
charge, encumbrance or any security interest whatsoever in or with respect to
any of the Collateral, other than the security interest created hereby, (b)
consent to, approve, or allow the issuance of any additional equity securities
of the Company, or of any instrument convertible voluntarily by the holder
thereof or automatically upon the occurrence or non-occurrence of any event or
condition into, or exchangeable for, any such equity securities, or of any
warrants, options, contracts, rights or other commitments entitling any third
party to purchase or otherwise to acquire any such equity securities, (c) take
any action that could impair in any manner the enforceability of Secured
Party’s security interest in the Collateral, (d) fail to take any action
necessary to prevent, in any manner, the impairment of enforceability of
Secured Party’s security interest in the Collateral, or (e) enter into any
agreement creating, or otherwise permit to exist, any restriction or condition
upon the transfer, voting, or control of any Collateral.

SECURITY AGREEMENT — Page 2

 

 

     7. Until such time as the Obligations have been fully paid, performed and
satisfied, Debtor shall (a) maintain good and marketable title to the
Collateral free and clear of all liens, security interests, encumbrances or
adverse claims, except for the security interest created by this Agreement,
(b)“not permit or suffer to exist any dispute, right of setoff, counterclaim or
defense to exist with respect to all or any part of the Collateral, (c) cause
any financing statement or other security instrument covering the Collateral to
be terminated, except as may exist or as may have been filed in favor of
Secured Party, (d) keep adequate records concerning the Collateral and permit
Secured Party and its representatives to inspect Debtor’s books and records of
or relating to the Collateral at any time during normal business hours, to make
and take away, without charge, photocopies, photographs and printouts thereof
and to write down and record any such information, (e) promptly notify Secured
Party of any claim, action or proceeding affecting title to the Collateral, or
any part thereof, or the security interest created hereunder, and (f)
contemporaneously with the execution hereof and from time to time thereafter at
Secured Party’s expense promptly execute and deliver all further instruments
and documents and take all further action necessary or appropriate or that
Secured Party may reasonably request in order (i) to perfect and protect the
security interest created or purported to be created hereby and the perfection
and first priority of such security interest, (ii) to enable Secured Party to
exercise and enforce its rights and remedies hereunder in respect of the
Collateral, and (iii) otherwise to effect the purposes of this Agreement.

     8. Until such time as the Obligations have been fully paid, performed and
satisfied, Secured Party shall have the rights contained in this Paragraph.

     (a) If Debtor fails to perform any agreement or obligation provided
herein, Secured Party may itself perform, or cause performance of, such
agreement or obligation, and the reasonable expenses of Secured Party incurred
in connection therewith shall be a part of the Obligations, secured by the
Collateral and payable by Debtor on demand.

     (b) Notwithstanding any other provision herein to the contrary, Secured
Party does not have any duty to exercise or continue to exercise any of the
foregoing rights and shall not be responsible for any failure to do so or for
any delay in doing so.

     9. Debtor shall defend, at Debtor’s sole cost and expense, Secured Party’s
right, title and security interest in and to the Collateral against the claims
of any person or entity.

     10. The occurrence of any one or more of the following events shall
constitute a default by Debtor hereunder:

     (a) The failure of timely payment or performance of any of the Obligation
and the failure to cure such default within ten (10) days after written notice
from Secured Party;

     (b) Default by Debtor in the punctual performance of any of the
obligations, covenants, terms or provisions contained or referred to in this
Agreement and the failure to cure such default within thirty (30) days after
written notice from Secured Party;

     (c) Any warranty, representation or statement contained in this Agreement
or made or furnished to Secured Party by or on behalf of Debtor in connection
with this Agreement proves to have been false in any material respect when made
or furnished;

SECURITY AGREEMENT — Page 3

 

 

     (d) The making of any levy on or seizure or attachment of any of the
Collateral;

     (e) If Debtor (i) becomes insolvent, or makes a transfer in fraud of
creditors, or makes an assignment for the benefit of creditors, or admits in
writing its inability to pay its debts as they become due; (ii) has a receiver,
trustee or custodian appointed for, or take possession of, all or substantially
all of the assets of such party or any of the Collateral, either in a
proceeding brought by such party or in a proceeding brought against such party
and such appointment is not discharged or such possession is not terminated
within one hundred twenty (120) days after the effective date thereof or such
party consents to or acquiesces in such appointment or possession; (iii) files
a petition for relief under the United States Secured Bankruptcy Code or any
other present or future federal or state insolvency, bankruptcy or similar laws
(all of the foregoing hereinafter collectively called “Applicable Secured
Bankruptcy Law”) or an involuntary petition for relief is filed against such
party under any Applicable Secured Bankruptcy Law and such involuntary petition
is not dismissed within one hundred twenty (120) days after the filing thereof,
or an order for relief naming such party is entered under any Applicable
Secured Bankruptcy Law, or any composition, rearrangement, extension,
reorganization or other relief of debtors now or hereafter existing is
requested or consented to by such party; or (iv) fails to have discharged
within a period of one hundred twenty (120) days any attachment, sequestration
or similar writ levied upon any property of such party;

     (f) The liquidation or dissolution of Debtor; or

     (g) The Company hereafter issues any shares of any class of equity
security (unless immediately upon issuance, additional securities are pledged
and delivered to Secured Party pursuant to the terms hereof to the extent
necessary to give Secured Party a security interest after such issuance in at
least the same percentage of the Company’s outstanding securities as Secured
Party had before such issuance) or any warrants, options, contracts, rights or
other commitments entitling any third party to purchase or otherwise to acquire
any such equity securities.

     11. Upon the occurrence of any of the events of default set forth in
Paragraph 10 above, Secured Party may, at Secured Party’s option, (a) proceed
immediately to have any or all of the Collateral registered in Secured Party’s
name or the name of Secured Party’s nominee, and Debtor hereby covenants that,
in such event and upon Secured Party’s request, Debtor will cause the issuer of
the Collateral to effect such registration, (b) exercise all voting rights with
respect to the Collateral and all other corporate rights and rights of
conversion, exchange, subscription or other rights, privileges or options
pertaining thereto as if Secured Party were the absolute owner thereof,
including without limitation, the right to exchange any or all of the
Collateral upon the merger, consolidation, reorganization, recapitalization or
other readjustment of the Company, or upon the exercise by the Company of any
right, privilege or option pertaining to any of the Collateral and, in
connection therewith, to deliver any of the Collateral to any committee,
depository, transfer agent, registrar or other designated agency upon such
terms and conditions as it may determine, without liability except to account
for property actually received by Secured Party (provided, however, that
Secured Party shall have no duty to exercise any of the foregoing rights,
privileges or options and shall not be responsible for any delay or failure to
do so), (c) proceed immediately to dispose of the Collateral, or any part
thereof, and in connection therewith, sell or otherwise dispose of and deliver
the 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

SECURITY AGREEMENT — Page 4

 

 

Secured Party’s offices or elsewhere, at such prices and on such terms
(including, but without limitation, a requirement that any purchaser of all or
any part of the Collateral purchase the Collateral for investment and without
any intention to make a distribution thereof), as it may deem best, for cash or
on credit, or for future delivery without assumption of any credit risk, with
the right of Secured Party or any purchaser to purchase at any such sale either
the whole or any part of the Collateral (in connection with any such sale or
disposition, Secured Party need not give more than five (5) calendar days’
notice by certified mail, return receipt requested, of the time and place of
any public sale or of the time after which a private sale may take place, which
notice Debtor hereby acknowledges to be reasonable.)

     12. The proceeds of any disposition of all or any part of the Collateral,
as provided in Paragraph 11 above, shall be applied as follows: (a) first, to
the reasonable costs and expenses incurred in connection therewith or
incidental thereto, including reasonable attorneys’ fees and legal expenses;
(b) second, to the satisfaction of all security interests and liens on the
Collateral other than the security interest granted hereby; (c) second, to the
satisfaction of the Obligations; (d) third, to the payment of any other amounts
required by applicable law; and (e) fourth, to Debtor to the extent of any
surplus remaining.

     13. Debtor recognizes and acknowledges that Secured Party may be unable to
effect a public sale of all or a part of the Collateral and may elect to resort
to one or more private sales to purchasers who will be obligated to agree,
among other things, to acquire the Collateral for their own account, for
investment, and not with a view to the distribution or resale thereof. Debtor
acknowledges that any such private sales may be at prices and on terms less
favorable to Secured Party than those of public sales, and agree that such
private sales may be deemed to have been made in a commercially reasonable
manner and that Secured Party has no obligation to delay sale of any Collateral
or to permit the issuer thereof to register it for public sale under the
Securities Act of 1933, as amended.

     14. (i) In the event of any dispute, controversy, or claim arising out of
or in connection with this Agreement or with the transactions contemplated
hereby, or with the breach or alleged breach hereof, in each case whether
sounding in contract, tort, or otherwise (each a “Dispute”), the parties shall
settle such Dispute in accordance with the provisions of this Section 14.

           (ii) Upon the occurrence and during the continuation of a Dispute, the
parties agree first to attempt to settle such Dispute amicably through
consultation and negotiation between their respective executive officers.

           (iii) Upon the occurrence and during the continuation of any Dispute that
remains unresolved notwithstanding compliance with Section 14(ii) above, the
parties agree to attempt to settle such Dispute through non-binding mediation
conducted by a mediator with at least five (5) years of mediation experience
who has been qualified under the Texas Alternative Dispute Resolution Act (a
“Mediator”). In the event that the parties cannot agree on a single Mediator,
then each of the parties shall select a Mediator, and the two (2) Mediators
thus selected shall select a single Mediator to hear the Dispute. Each of the
parties shall pay one-half (1/2) of the aggregate fees and expenses of the
mediation.

SECURITY AGREEMENT — Page 5

 

 

           (iv) Any Dispute that remains unresolved notwithstanding compliance with
Sections 14(ii) and (iii) above, or any Dispute with respect to which one or
more parties shall fail to comply in all material respects with the
requirements of such Section 14(ii) and/or (iii) promptly following the written
request of the other party, shall be settled by arbitration administered by the
American Arbitration Association (“AAA”) under its “R-Series” Commercial
Arbitration Rules, as supplemented and modified by its “E-Series” Commercial
Arbitration Rules (or under such other AAA rules as may then apply with respect
to expedited arbitration), and judgment on the award (the “Award”) rendered by
the arbitrator(s) (the “Arbitrator”) may be entered in any court having
jurisdiction thereof. The parties agree to and mutually request an oral hearing
of the Dispute. The Arbitrator must have at least five (5) years of arbitration
experience.

           (v) The parties expressly agree that, prior to the appointment of the
Arbitrator, nothing in this Agreement shall prevent a party from applying to a
court that otherwise would be of competent jurisdiction solely to obtain a
preliminary injunction or other similar provisional or interim relief to
maintain the status quo. Upon appointment of the Arbitrator, the Arbitrator
shall have sole jurisdiction to hear any such applications, except that any
such provisional or interim measures that the Arbitrator may order may be
immediately and specifically enforced by a court that otherwise would be of
competent jurisdiction.

           (vi) Each of the parties shall pay one-half (1/2) of the aggregate fees
and expenses of the arbitration, and all other fees and expenses (such as, for
example, attorney and accounting fees, actuarial and other experts) shall be
paid by the party incurring them; provided, however, that a party prevailing on
substantially all of its claims shall be entitled to reasonable attorneys’
fees, costs, and other disbursements in addition to any other relief to which
such party may be entitled.

           (vii) The place of any arbitration instituted under this Section 14 shall
be Dallas, Texas. Each party consents to jurisdiction in such forum.

     15. Upon the execution hereof, Debtor shall deliver to Secured Party the
stock certificate or certificates representing the Collateral, including
Debtor’s endorsements thereon as appropriate or appropriate stock powers, duly
executed in blank, to be held by Secured Party in accordance with the terms of
this Agreement.

     16. Upon full payment and performance of all of the Obligations and upon
payment of all additional costs and expenses provided herein, this Agreement
shall terminate and Secured Party shall deliver to Debtor, at Debtor’s expense,
such of the Collateral as shall not have been sold or otherwise disposed of
pursuant to this Agreement.

     17. Secured Party shall exercise reasonable care to assure the safe
custody of the Collateral while held pursuant hereto, but shall have no other
obligations with respect to the Collateral.

     18. The rights and remedies provided herein are cumulative and are in
addition to, and not exclusive of, any rights or remedies provided in other
instruments and agreements

SECURITY AGREEMENT — Page 6

 

 

between Debtor and Secured Party, or as provided by law, including without
limitation, the rights and remedies of a secured party under the Code.

     19. This Agreement shall be governed as to its validity, interpretation
and effect in accordance with the laws of the State of Texas, except as
required by mandatory provisions of law and except if the validity or
perfection of the security interest hereunder, or remedies hereunder, are
governed by the laws of a jurisdiction other than the State of Texas.

     20. This Agreement and the security interest created hereby shall be
transferable and assignable by the Secured Party in whole or in part, at such
times and upon such terms as it deems advisable and, upon any such transfer or
assignment, the transferee or assignee shall succeed to all rights and powers
of the Secured Party hereunder to the extent of any such transfer or
assignment. The Agreement shall not be transferable or assignable by Debtor
without the prior written consent of Secured Party. This Agreement is binding
upon and shall inure to the benefit of the parties hereto, their successors,
permitted assigns, heirs and legal representatives.

     21. All notices, requests, demands, claims, and other communications
hereunder will be in writing. Any notice, request, demand, claim, or other
communication hereunder shall be deemed (i) duly given if (A) it is faxed to
the intended recipient as set forth below, and (B) thereafter it is sent by
registered or certified mail, return receipt requested, postage prepaid, and
addressed to the intended recipient as set forth below, and (ii) duly received
upon actual receipt:

	 	 	 	 	 
	If to the Secured Party:	 	Copy to:
	Covenant Group of Texas, Inc.	 	Brian D. Bowden, Esq.
	5601 Bridge Street, Suite 504	 	Brian D. Bowden, P.C.
	Fort Worth, Texas 76112	 	2900 Westridge Avenue
	Attn: Mr. Gary Staats	 	Fort Worth, Texas 76116
	Facsimile: 817/446-0923	 	Facsimile: 817/732-7722
	 
	 	 	 	 
	If to the Debtor:	 	Copy to:
	Capital Senior Management 1, Inc.	 	Jeffrey L. Fisher, Esq.
	14160 Dallas Parkway, Suite 300	 	Geary, Porter & Donovan, P.C.
	Dallas, Texas 75254	 	16475 Dallas Parkway, Suite 500
	Attn:

	 	James A. Stroud and
	 	Addison, Texas 75001
	

	 	David R. Brickman
	 	Facsimile: 972/931-9208
	Facsimile: 972/770-5666	 	 

Either party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth
above using any other means (including personal delivery, expedited courier,
messenger service, telecopy, ordinary mail or electronic mail), but no such
notice, request demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Either party may change the address to which notices, requests,
demands, claims, and other communications hereunder are to be delivered by
giving the other party notice in the manner herein set forth.

     22. This Agreement and all documents and instruments executed in
connection therewith or herewith, supersede any and all other agreements,
either oral or in writing, between

SECURITY AGREEMENT — Page 7

 

 

the parties hereto with respect to the subject matter hereof and contain
all of the covenants and agreements between the parties with respect to the
subject matter hereof.

     23. No term or condition of this Agreement shall be deemed to have been
waived nor shall there be any estoppel to enforce any provision of this
Agreement except by written instrument of the party charged with such waiver or
estoppel. No amendment or modification of this Agreement shall be deemed
effective unless and until executed in writing by all of the parties hereto.
Secured Party may waive any default without waiving any other prior or
subsequent default. Secured Party may remedy any default without waiving the
default remedied. Neither the failure by Secured Party to exercise, nor the
delay by Secured Party in exercising, any right or remedy upon any default
shall be construed as a waiver of such default or as a waiver of the right to
exercise any such right or remedy at a later date. No single or partial
exercise by Secured Party of any right or remedy hereunder shall exhaust the
same or shall preclude any other or further exercise thereof, and every such
right or remedy hereunder may be exercised at any time. No waiver of any
provision hereof or consent to any departure by Debtor therefrom shall be
effective unless the same shall be in writing and signed by Secured Party and
then such waiver or consent shall be effective only in the specific instances,
for the purpose for which given and to the extent therein specified.

     24. This Agreement (i) creates a continuing security interest in the
Collateral, (ii) shall be binding on Debtor and the heirs, executors,
administrators, personal representatives, successors and assigns of Debtor, and
(iii) shall inure to the benefit of Secured Party and its successors and
assigns. Secured Party may not pledge, assign or otherwise transfer the
Obligations and its rights under this Agreement and any of the other Loan
Documents to any other party. Debtor’s rights and obligations hereunder may not
be assigned or otherwise transferred without the prior written consent of
Secured Party.

     25. In the event any one or more of the provisions contained in this
Agreement shall for any reason be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not
affect any other provision hereof and this Agreement shall be construed as if
such invalid, illegal or unenforceable provision had never been contained
herein.

     26. No delay, failure to enforce or single or partial exercise on the part
of Secured Party in connection with any of its rights hereunder shall
constitute an estoppel or waiver thereof, or preclude other or further exercise
or enforcement thereof and no waiver of any default hereunder shall be a waiver
of any subsequent default.

     27. Notwithstanding any other provision contained in this Agreement or the
Note, in the event that the proceeds of any sale of, collection from, or other
realization upon, all or any part of the Collateral by Secured Party are
insufficient to pay all amounts to which Secured Party is legally entitled,
Debtor shall be liable for the deficiency, together with interest thereon as
provided in the Loan Documents and Purchase Agreement, to the full extent
permitted by the Code.

[Signature page follows]

SECURITY AGREEMENT — Page 8

 

 

     IN WITNESS WHEREOF, Debtor and Secured Party have entered into this
Security Agreement as of the date first above written.

	 	 	 	 	 
	 	DEBTOR:

CAPITAL SENIOR MANAGEMENT 1, INC.,

a Texas corporation

 	 
	 	By:  	/s/ David R. Brickman
 	 
	 	 	David R. Brickman, Vice President 	 
	 	 	 	 
	 
	 	SECURED PARTY:

COVENANT GROUP OF TEXAS, INC.,

a Delaware corporation

 	 
	 	By:  	/s/ Robert Bullock
 	 
	 	 	Robert Bullock, Executive Vice President 	 
	 	 	 	 
	 

SECURITY AGREEMENT — Page 9

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00071-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00071-of-00352.parquet"}]]