Document:

Exhibit

4.0

 

Loan No. 06717

Lawrenceville, GA

 

PROMISSORY

NOTE

 

	

  $1,500,000.00

  	

   

  	

  Date: March 23, 1998

  

 

PROMISE

TO PAY.  For value received, THE WESTERN SIZZLIN STORES, INC., a

Virginia corporation, (“Borrower”) promises to pay to CAPTEC FINANCIAL GROUP FUNDING

CORPORATION, a Michigan corporation (together with its successors,

assigns and transferees, “Lender”), or order, One Million Five Hundred Thousand

Dollars and 00/100 Dollars ($1,500,000.00), or so much of such sum as has been

advanced under this Note, as follows:

 

Interest only from and after the date on which funds are disbursed by

Lender hereunder (“Effective Date”) through the last day of the month in which

the Effective Date occurs shall be due and payable on the first day of the next

month following the Effective Date; provided that if the Effective Date occurs

after the fifteenth (15th) day of a month, the interest which would accrue,

based on the actual number of days, through the end of such month shall be due

and payable in advance on the Effective Date. Installments of principal and

interest in the amount of Sixteen Thousand One Hundred Eighty Four and 00/100

Dollars ($16,184.00) are due and payable on the first day of each month (each a

“Payment Date”), commencing May 1, 1998; until April 1, 2013 (“Due Date”), when

the outstanding principal balance, plus accrued interest, is due and payable

(unless the indebtedness evidenced by this Note is accelerated, in which case,

the Due Date is the date of acceleration). The amortization period for this Note,

for purposes of calculating the monthly installments of principal and interest,

is fifteen (15) years.

 

All payments under this Note shall be made at Lender’s principal office

at 24 Frank Lloyd Wright Drive, Lobby L, 4th Floor, P.O. Box 544, Ann Arbor, Michigan

48106-0544, or at such other address as Lender may designate in writing, or by

electronic funds withdrawal made by Lender upon written authorization therefor

from Borrower, which authorization shall not be revocable by Borrower without

the consent of Lender. Payments due and payable on a day on which Lender is not

open for business are due on the next succeeding business day. Payments will be

applied first to accrued interest and then to principal.

 

INTEREST

RATE.  The outstanding principal balance of this Note will

bear interest at a fixed rate equal to ten and seven hundredths percent

(10.07%) per annum (the “Stated Rate”), until the Due Date (whether by

acceleration or otherwise), and thereafter at a rate which is three percent

(3%) above the Stated Rate (“Default Rate”).

 

Interest will be computed on the basis of a year consisting of twelve

(12) months of thirty (30) days each. In no event, however, shall the interest

rate exceed the maximum rate allowed by law. Notwithstanding anything to the

contrary contained herein, at no time shall the interest payable under this

Note be greater than the maximum rate permitted by applicable law (“Legal

Rate”). If any obligation under this Note shall result in Lender receiving an

amount deemed to be interest under applicable law in excess of the Legal Rate,

then the amount which would be excessive interest shall be applied to the

reduction of the principal balance of this Note and not to payment of interest.

If such excessive interest exceeds the unpaid principal balance of this Note,

the excess shall be refunded to Borrower.

 

 

PREPAYMENT.

Borrower shall not have any right, except as otherwise specifically provided,

to prepay the principal balance of this Note until two (2) loan years have

elapsed. The first “loan year” shall commence on the date of the closing of the

loan evidenced by this Note, and subsequent loan years shall commence on the

anniversaries of such date. Commencing with the third (3rd) loan year and if no

Event of Default (as hereinafter defined) then exists, Borrower shall have the

right to prepay all, but not merely a portion of, the principal balance of this

Note together with accrued interest thereon on any Payment Date; provided,

however, that Borrower shall provide no less than thirty (30) days prior

written notice to Lender of Borrower’s intention to prepay (the “Prepayment

Notice”). Once given, the Prepayment Notice may not be withdrawn, and the

failure to prepay in accordance with the Prepayment Notice shall constitute an

Event of Default.

 

Borrower acknowledges and agrees that Lender is making

the loan evidenced by this Note in consideration of the receipt by Lender of

all interest and other benefits intended to be conferred by this Note, and if

payments of principal are made to Lender prior to the regularly scheduled due

date of such payments, for whatever reason (whether voluntarily or

involuntarily), Lender will not receive all such interest and other benefits

and may incur additional costs. For these reasons, and to induce Lender to make

the loan, Borrower expressly waives any right to prepay this Note except as

specifically provided herein.

 

Lender shall not be required to accept any tender of prepayment of the

principal balance of this Note at any time when the “Reinvestment Rate” (as

hereinafter defined) is lower than the Stated Rate, less eighty-five basis

points, unless such tender also includes a sum of money (the “Prepayment

Premium”) equal to the present value (computed at the Reinvestment Rate) of the

difference between a stream of monthly payments necessary to amortize the

outstanding principal balance of this Note at the Stated Rate and a stream of

monthly payments necessary to amortize the outstanding principal balance of

this Note at the Reinvestment Rate (the “Differential”). In the event the

Differential is less than zero, no Prepayment Premium will be required. For

purposes of this Note, the “Reinvestment Rate” is the yield on a United States

Treasury obligation of a constant maturity rate maturing closest in time but prior

to the maturity date of this Note, as reported in Federal Reserve Statistical

Release H. 15 (519) (or any comparable successor publication) on the fifth

(5th) business day preceding the prepayment date.

 

In addition to the Prepayment Premium, if any, every tender of

prepayment of the principal balance of this Note shall be accompanied by a

payment equal to (x) all accrued but unpaid interest and other charges to the

date of prepayment and (y) an administrative fee equal to one half of one

percent (0.5%) of the outstanding principal balance of this Note; provided,

however, that the administrative fee shall not be less than One Thousand and

00/100 Dollars ($1,000.00) (collectively, the “Other Charges”).

 

If the outstanding principal balance of this Note is accelerated by

reason of an Event of Default, such acceleration shall be deemed to be a

prepayment and Borrower shall pay to Lender, in addition to all sums due as a

result of the acceleration, any applicable Prepayment Premium and Other

Charges. In the event of an acceleration of this Note in the first or second

loan year, Borrower shall be required to pay a Prepayment Premium equal to five

percent (5%) of the outstanding principal balance of this Note together with

any Other Charges. In the event that this Note is partially prepaid from

casualty insurance proceeds or condemnation awards (as provided in the Security

Deed, defined below), no Prepayment Premium or Other Charges shall be due and

payable with respect to such prepayment, and each monthly installment

thereafter shall be reduced to an amount which will amortize the then unpaid

principal balance of this Note at the Stated Rate over the then remaining term

of this Note.

 

LATE PAYMENT CHARGE.

In the event that any payment under this Note is not received by Lender within

fifteen (15) days of the date when due, a late charge of five percent (5%) of

the amount of such payment will be due. Borrower agrees that the late charge is

a reasonable estimate of the administrative costs which Lender will incur in processing

the delinquency. Lender’s acceptance of a late payment and/or of the late

payment charge will not waive any default under this Note or affect the

acceleration of this Note (if this Note has been accelerated).

 

2

 

COLLATERAL.

This Note and the other obligations of Borrower to Lender contained in the

documents securing this Note are secured by and in accordance with the terms of

that certain Security Deed, effective March 31, 1998, executed by Borrower for

the benefit of Lender (the “Security Deed”; together with any other documents

securing payment under this Note, the "Loan ”). All property securing the

Indebtedness (as defined in the

Security Deed) is referred to as the “Collateral”.

 

DEFAULT.  Any of

the following events shall, for purposes of this Note, constitute an “Event of

Default”:

 

(a)            Failure

by Borrower to pay any amount owing on or with respect to the Indebtedness when

due, whether by maturity, acceleration or otherwise, which failure continues

for five (5) business days.

 

(b)            Any

failure by Borrower (or any guarantor of all or any part of the Indebtedness)

to comply with any of the non-monetary terms, provisions, warranties or

covenants of this Note, the Security Deed or the other Loan Documents, which

failure continues for fifteen (15) days after the date of written notice to

Borrower (or any guarantor) from Lender of such default; provided, however,

that if: (i) the nature of Borrower’s (or any guarantor’s) noncompliance is

such that more than fifteen (15) days are reasonably required for its cure,

(ii) Borrower (or any guarantor) has commenced such cure within said fifteen

(15) day period, (iii) Borrower (or any guarantor) diligently prosecutes such

cure to completion, (iv) Borrower (or any guarantor) provides Lender with

written notice of the noncompliance, AND (v) Borrower (or any guarantor)

furnishes reserves or a security bond, in an amount satisfactory to Lender in

its sole discretion, then Borrower (or any guarantor) shall not be in default.

 

(c)             Institution of

foreclosure proceedings or other exercise of rights and remedies by the holder

of any mortgage, deed of trust, security interest or other lien against the

Collateral (or any portion thereof); provided, however, if there is a good

faith dispute by Borrower or Guarantor as to the validity or reasonableness of

the claim which is the basis for such proceedings, then no Event of Default

shall have occurred under this clause (c) if Borrower or Guarantor provides

Lender with written notice of the proceedings and furnishes reserves or a

security bond for the proceedings satisfactory to Lender.

 

(d)            Insolvency of

Borrower (or any guarantor) or the admission in writing of Borrower’s (or any

guarantor’s) inability to pay debts as they mature.

 

(e)             Any statement,

representation or information made or furnished by or on behalf of Borrower (or

any guarantor) to Lender in connection with or to induce Lender to provide or

advance any of the Indebtedness shall prove to be false or materially misleading

when made or furnished.

 

(f)             Institution of

bankruptcy, reorganization, insolvency or other similar proceedings by or

against Borrower (or any guarantor), unless, in the case of a petition filed

against Borrower (or any guarantor), the same is dismissed within sixty (60)

days of the date of filing.

 

(g)            The issuance or

filing of any judgment, attachment, levy, garnishment or the commencement of

any related proceedings or the commencement of any other judicial process upon

or in respect to Borrower (or any guarantor) or the Collateral in which the

amount in controversy exceeds One Hundred Thousand Dollars ($100,000) and is

not covered by the insurance of Borrower (or any guarantor), unless satisfied,

or Borrower (or any guarantor) furnishes reserves or a security bond in an

amount satisfactory to Lender in its sole discretion, released or discharged

within sixty (60) days after the date of such issuance, filing or commencement.

 

(h)            Sale or other

disposition by Borrower (or any guarantor) of any substantial portion of its

assets or property.

 

3

 

(i)              Death,

dissolution, merger, consolidation, termination of existence, insolvency,

business failure or assignment for the benefit of creditors of or by Borrower (or

any guarantor); without the prior written consent of Lender, which consent

shall not be unreasonably withheld.

 

(j)              Any failure by

Borrower (or any guarantor) to pay any indebtedness (other than to Lender) in

excess of One Hundred Thousand Dollars ($100,000) (and exclusive of trade debt

incurred in the ordinary course of business) when due, or any failure in the

observance or performance of any term, covenant or condition in any document

evidencing, securing or relating to such indebtedness, which failure continues

beyond any applicable cure period.

 

(k)             Receipt by

Borrower of a notice of termination of the Management and Licensing Agreement

from The WesterN SizzliN Corporation, a Tennessee corporation, for the Great

American Steak & Buffet Company Restaurant franchised restaurant operation

located at 655 Hwy. 20 North, Lawrenceville, Georgia (“Franchised Operation”).

 

(l)              If this Note, the

Security Deed and the other Loan Documents have not been assigned to the Trust

(as defined in the Security Deed), the default by Borrower which continues

beyond any applicable grace or cure period under the Retained Obligations (as

defined in the Security Deed); provided, however, if this Note, the Security

Deed and the other Loan Documents are assigned to the Trust, this Clause (l)

shall be of no force and effect during the term of such assignment.

 

(m)            In the event that

this Note, the Security Deed and the other Loan Documents are assigned to the

Trust, the default by Borrower which continues beyond any applicable grace or

cure period under the Trust Obligations (as defined in the Security Deed).

 

Upon an occurrence of an Event of Default, Lender shall have the option

to declare all or part of the Indebtedness (including this Note) immediately

due and payable. If this Note is not paid at maturity (whether by acceleration

or otherwise), Lender shall have all of the rights and remedies provided at law

or equity or by agreement, including, without limit, the right to sell or

liquidate all or any part of the Collateral. The remedies of Lender are

cumulative and not exclusive.

 

EXAMINATION OF RECORDS.

Borrower shall at all times keep full and accurate records of its business

and of the Collateral, which records shall be open to inspection and copying by

Lender at all reasonable times.

 

LIABILITY OF SIGNATORIES.

Borrower, and all guarantors and endorsers, and any other party liable for the

Indebtedness evidenced by this Note: (i) severally waive presentment, demand,

protest, notice of dishonor, notice of non-payment and notice of acceleration

of this Note; and (ii) agree that no extension or postponement of the time for

payment, or waiver, or indulgence or forbearance granted to Borrower (without

limit as to number or period) or any modification of this Note, or any

substitution, or exchange or release of all or part of the Collateral, or

addition of any party to this Note, or release or discharge of, or suspension

of any rights and remedies against any party liable on this Note, shall reduce

or affect the obligation of any other party liable for the payment of this

Note.

 

NON-WAIVER.  No

delay by Lender in the exercise of any right or remedy shall operate as a

waiver. No single or partial exercise by Lender of any right or remedy shall

preclude any future exercise of such right or remedy or the exercise of any

other right or remedy. No waiver or indulgence by Lender of any default or

Event of Default shall be effective unless in writing and signed by Lender, nor

shall a waiver on one occasion be construed as a bar to any right or remedy, or

waiver of any default or Event of Default on any future occasion.

 

4

 

REIMBURSEMENT OF EXPENSES.

Borrower shall reimburse Lender for all costs and expenses, including

reasonable attorneys’ fees, incurred by Lender in enforcing the rights of

Lender under this Note. Such costs and expenses shall include, without

limitation, costs or expenses incurred by Lender in any bankruptcy,

reorganization, insolvency or other similar proceeding. Any reference in this

Note to attorneys’ fees shall mean fees, charges, costs and expenses of

in-house and/or outside counsel and paralegals, whether or not a suit or

proceeding is instituted, and whether incurred at the trial court level, on

appeal, in a bankruptcy, administrative or probate proceeding, in consultation

with counsel, or otherwise.

 

WAIVER

OF JURY TRIAL. BORROWER AND LENDER ACKNOWLEDGE THAT THE RIGHT

TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH

PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL

OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT,

WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE

PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS NOTE OR THE

INDEBTEDNESS.

 

ASSIGNMENT.

This Note is freely assignable, in whole or in part, by Lender without

prior notice to or consent of Borrower; provided, however, that Lender (or its

assignee) shall provide written notice of such assignment to Borrower in the

event that Lender (or such assignee) desires to designate a new person or

entity as payee and/or a new place of payment for the obligations under this

Note. Borrower may not, in whole or in part, directly or indirectly, assign

this Note or its rights hereunder or delegate its duties hereunder without, in

each instance, the specific prior written consent of Lender, which consent may

be withheld or delayed in Lender’s sole discretion. Lender shall be fully

discharged from all responsibility accruing hereunder from and after the

effective date of any such assignment. Lender’s assignee shall, to the extent

of the assignment, be vested with all the powers and rights of Lender

hereunder, and to the extent of such assignment the assignee may fully enforce such

rights and powers, and all references to Lender shall mean and refer to such

assignee. Lender shall retain all rights and powers hereby given not so

assigned, transferred and/or delivered. Borrower hereby waives all defenses

which Borrower may be entitled to assert against Lender’s assignee with respect

to liability accruing hereunder prior to the effective date of any assignment

of Lender’s interest herein.

 

SECURITIZATION.

Borrower understands and agrees that Lender may, from time to time, assign

its rights and powers under this Note, the Security Deed and any other Loan

Documents, in whole or in part, in connection with a securitization program.

Borrower agrees to enter into an amendment to this Note, the Security Deed and

any other Loan Documents if such amendments are required by a nationally

recognized rating agency in connection with a securitization program sponsored

by Lender and in which this Note, the Security Deed and any other Loan

Documents are to be included; provided that Borrower shall not be obligated to

enter into any amendment which adversely affects Borrower or otherwise

adversely alters any of the financial terms of this Note, the Security Deed and

any other Loan Documents.

 

MISCELLANEOUS.

The terms and provisions of this Note shall be governed by and construed in

accordance with the laws of the State of Georgia. Lender and Borrower agree

that any dispute which may arise between them with regard to this Note shall be

resolved by litigation in state or federal court. Litigation may be initiated

by Lender or its assignee, at its discretion, in the State of the principal

place of business of Lender or its assignee, the State of the principal place

of business of Borrower, or the State where the Collateral is located. BORROWER

HEREBY KNOWINGLY AND IRREVOCABLY WAIVES ANY OBJECTIONS ON THE GROUNDS OF

IMPROPER JURISDICTION OR VENUE TO AN ACTION INITIATED AS SET FORTH ABOVE AND

AGREES THAT EFFECTIVE SERVICE OF PROCESS MAY BE MADE UPON BORROWER BY

REGISTERED MAIL RETURN RECEIPT REQUESTED. The terms and provisions

of this Note may only be changed in writing, executed by Borrower and Lender.

 

THE WESTERN SIZZLIN STORES, INC.

 

	

  By:

  	

  Victor F. Foti

  	

   

  
	

   

  	

   

  	

  Its: 

  	

  President

  	

   

  
						

Address: P.O. Box 12167

Roanoke, Virginia 24023-2167 

Tax I.D. No. 54-1787907

 

5

 

Pay to the order of

without warranty or

recourse.

Captec Financial Group Funding Corporation

	

  By :

  	

  [ILLEGIBLE]

  	

   

  
	

  Its:

  	

   

  	

   

  

 

6

 

When Recorded Return To:

 

Liggie V. Perkins

Captec Financial Group Funding Corporation

24 Frank Lloyd Wright Drive

Lobby L, Fourth Floor

P.O. Box 544

Ann Arbor, Michigan 48106-0544

 

Loan Number: 06717

Lawrenceville,

Gwinnett County, Georgia

 

 

DEED TO SECURE

DEBT, SECURITY AGREEMENT AND

ASSIGNMENT OF

LEASES AND RENTS

 

THIS DEED TO SECURE DEBT, SECURITY AGREEMENT AND ASSIGNMENT OF LEASES

AND RENTS (“Security Deed”) is made this 23 day of March 1998, by THE WESTERN

SIZZLIN STORES, INC., a Virginia corporation, whose address is P. O.

Box 12167, Roanoke, Virginia 24023-2167 (“Borrower”), for the benefit of CAPTEC

FINANCIAL GROUP FUNDING CORPORATION, a Michigan corporation, whose

address is 24 Frank Lloyd Wright Drive, Lobby L, 4th Floor, P.O. Box 544, Ann

Arbor, Michigan 48106-0544 (together with its successors, assigns and

transferees, “Lender”). This instrument shall become effective on March 31,

1998.

 

PRELIMINARY

STATEMENT

 

This Security Deed is made to secure payment in the sum of One Million

Five Hundred Thousand and 00/100 Dollars ($1,500,000.00), together with

interest, costs and all other sums due under that certain promissory note made

as of the date hereof in favor of Lender (the “Note”), to be paid by Borrower

to Lender (the “Indebtedness”). This Security Deed is given to secure an obligation

incurred by Borrower for the purpose of financing certain improvements on the

Real Estate, which obligation may include the acquisition cost of the Real

Estate.

 

GRANTING CLAUSE

 

To secure the Indebtedness and as security for the purposes stated elsewhere

in this Security Deed, Borrower does hereby grant, bargain, sell, convey,

assign, transfer and set over unto Lender, its successors and assigns, all of

the following described land and interests in land, estates, easements, rights,

improvements, personal property, fixtures, equipment, furniture, furnishings,

appliances and appurtenances (collectively, “Deeded Property”):

 

1.             The parcel(s) of

real estate commonly known as 655 Hwy. 20 North located in the City of

Lawrenceville, Gwinnett County, Georgia and particularly described on Schedule

A attached to this Security Deed (“Real Estate”).

 

1

 

2.             All buildings,

structures and improvements now located, or subsequently constructed or placed

upon the Real Estate, including, without limit, all building materials and

building equipment located on the Real Estate;

 

3.             All machinery,

apparatus, equipment, goods, fittings, fixtures and articles of personal

property of every kind and nature located or subsequently located on the Real

Estate (individually and collectively, “Equipment”), and all of the right,

title and interest of Borrower in and to any Equipment which may be subjected

to any title retention or security agreement superior in lien to the lien of this

Security Deed.  It is agreed that all

Equipment is part and parcel of the Deeded Property and appropriated to the use

of the Real Estate and, whether affixed or not, unless Lender shall otherwise

elect, be deemed to be real estate and granted under this Security Deed;

 

4.             All easements,

rights-of-way, licenses, privileges and appurtenances relating to the Real

Estate;

 

5.             All rents, issues,

profits, revenues, proceeds, accounts and general intangibles arising from the

Real Estate or relating to any business conducted by Borrower on the Real

Estate, under present or future leases, usufructs, reservation and/or purchase

agreements, licenses or otherwise, which are specifically assigned and

transferred to Lender;

 

6.             All right, title

and interest of Borrower in and to the land lying in the bed of any street,

road, avenue, alley or walkway, opened or proposed or vacated, adjoining the

Real Estate;

 

7.             Any and all awards

or payments, including, without limit, interest on any awards or payments, and

the right to receive them, which may be made with respect to the Deeded

Property as a result of: (a) the exercise of the right of eminent domain, (b)

the alteration of the grade of any street, (c) any loss of or damage to any

building or other improvement on the Real Estate, (d) any other injury to or

decrease in the value of the Deeded Property, (e) any refund due on account of

the payment of real estate taxes, assessments or other charges levied against

or imposed upon the Deeded Property, or (f) any refund of utility deposits or

right to any tenant deposit;

 

8.             All substitutions,

replacements, extensions, renewals, additions and accessories for or to any of

the foregoing.

 

TO HAVE AND TO HOLD the Deeded Property and all parts, rights, members

and appurtenances thereof, to the use and benefit of Lender, its successors and

assigns, IN FEE SIMPLE forever; and Borrower covenants that Borrower is

lawfully seized and possessed of the Deeded Property and has good right to

convey the same, that the same are unencumbered except for the Permitted Liens

(as that term is defined in subsection l(b) hereinbelow), and that Borrower

does warrant and will forever defend the title thereto against the claims of

all persons whomsoever, except as to the Permitted Liens.

 

This Security Deed is intended (i) to constitute a security agreement

as required under the Uniform Commercial Code of Georgia, and (ii) to operate

and is to be construed as a deed passing the title to the Deeded Property to

Lender and is made under those provisions of the existing laws of the State of

Georgia relating to deeds to secure debt, and not as a mortgage, and is given

to secure the payment of the Indebtedness.

 

1.             COVENANTS AND WARRANTIES.  Borrower covenants and

warrants to Lender as follows:

 

(a)           Authority; No Conflict.

Borrower has the power and authority to execute, deliver and perform its

obligations under this Security Deed. The execution, delivery and performance

of this Security Deed by Borrower does not, and will not violate or conflict

with any provision of its organizational or charter documents or any agreement,

court order or consent decree to which Borrower is a party or by which Borrower

may be bound.

 

2

 

(b)           Title to Deeded Property.  Borrower is

the owner and is lawfully seized and possessed of the Deeded Property.  Borrower has good right, full power and

authority to grant the Deeded Property to the Lender in accordance with the

terms of this Security Deed. The Deeded Property is and shall remain free and

clear of any liens and encumbrances excepting only Permitted Liens.  For purposes of this Security Deed,

“Permitted Liens” shall mean the current zoning requirements for the Deeded

Property and those liens or encumbrances shown on a loan policy of title insurance

accepted in writing by Lender.

 

(c)           Payment of Indebtedness.  Borrower will

pay and perform the Indebtedness when due, whether by maturity, acceleration or

otherwise.

 

(d)           Maintenance of Deeded Property; Waste.  Borrower

shall preserve and maintain the Deeded Property in good repair, working order

and condition, excepting ordinary wear and tear, and shall not commit or permit

the commission of waste against the Deeded Property.  Failure, refusal or neglect of Borrower to pay any taxes or

assessment or any utility rates levied, assessed or imposed upon the Deeded

Property, and/or nonpayment of any premiums for insurance, shall constitute

waste, and shall entitle Lender to exercise the remedies provided in  this Security Deed, as well as those

afforded by law.

 

(e)           Payment of Taxes; Discharge of Liens.

 

(i)               Borrower shall pay when due, and

before any interest, collection fees or penalties accrue, all taxes,

assessments, encumbrances, liens, mortgages, water or sewer charges and other

charges and impositions (individually and collectively, “Imposition(s)”)

levied, assessed or existing with respect to the Deeded Property, or any part

of it, and Borrower will deliver to Lender receipts showing payment of the

Imposition(s). Borrower shall have the right, at its sole cost and expense, to

contest the amount or validity, in whole or in part, of Impositions by

appropriate proceedings diligently conducted in good faith, but no such contest

shall be carried on or maintained by Borrower after the time limit for payment

of any Impositions unless Borrower, at its option, shall either pay the amount

involved under protest, or shall deposit with Lender one hundred twenty-five

percent (125%) of the contested amount or such other reasonable security as may

be demanded by Lender to insure payment of the contested Impositions and all

penalties, interest, costs and expenses which may accrue during the period of

the contest. Upon the termination of any such proceedings, Borrower shall pay

the Impositions or part thereof as finally determined together with any

penalties or other liabilities in connection therewith; provided, however, that

if Borrower has deposited cash or its equivalent with Lender as security,

Lender shall arrange to pay such Impositions in the manner set forth in Section

l(e)(ii) below and any funds remaining after payment of the Impositions by

Lender shall be refunded to Borrower. If Borrower fails to pay any of the

Imposition(s), Lender may, at its option, pay such Imposition(s) and the monies

paid shall be a lien upon the Deeded Property, added to the amount secured by

this Security Deed, and payable immediately by Borrower to Lender, with

interest at the higher of (i) the interest rate, if any, charged by the

particular entity levying or assessing the Imposition(s), or (ii) the highest

rate charged by Lender on any of the Indebtedness (but in either case not to

exceed the maximum interest rate permitted by law).

 

(ii)              Upon the occurrence of an Event of

Default (as hereinafter defined), at the option of Lender, Borrower shall pay

to Lender, in advance on the first day of each month, a pro rata portion (as

determined by Lender) of all Imposition(s) levied, assessed or existing on the

Deeded Property. In the event that sufficient funds have been deposited with Lender

to cover the amount of these Imposition(s) when they become due and payable,

Lender shall pay them. In the event that sufficient funds have not been

deposited to cover the amount of these Imposition(s) at least thirty (30) days

prior to the time when they become due and payable, Borrower shall immediately

pay the amount of the deficiency to Lender. Lender shall not be required to

keep a separate account or to pay Borrower any interest on the funds held by

Lender for the payment of the Imposition(s) pursuant to this Section l(e) or

for the payment of insurance premiums under Section l(g) below, or on any other

funds deposited with Lender in connection with this Security Deed, unless the

aggregate amount of such funds is in excess of Fifty Thousand Dollars ($50,000),

at which time Lender will place such funds in an interest bearing account.

 

3

 

The funds on deposit with

Lender are further security for the Indebtedness and if an Event of Default

occurs under this Security Deed, any funds remaining on deposit with Lender may

be applied against the Indebtedness at any time after the Event of Default

occurs, and without notice to Borrower.

 

(f)            Sale

or Transfer.  Borrower

will not sell or transfer all or any interest in the Deeded Property or in

Borrower without the prior written consent of Lender. For purposes of this

Section l(f), a “transfer” of Borrower shall include, without limitation, any

sale (involving either all or any portion of the equity interest in Borrower or

all or substantially all of Borrower’s assets), merger, consolidation, change

in control or termination of existence of Borrower.  Notwithstanding the foregoing, Lender’s consent shall not be

required for transfers of shares of stock of Borrower for estate planning

purposes, provided that such transfers, in the aggregate, shall not result in a

change in control of Borrower.  In the

event ownership of the Deeded Property, or any part, becomes vested in any person(s)

other than Borrower, Lender may deal with and may enter into any contract or

agreement with the successor(s) in interest with reference to this Security

Deed in the same manner as with Borrower, without discharging or otherwise

affecting the lien of this Security Deed or Borrower’s obligations under this

Security Deed.

 

(g)           Insurance.

 

(i)               Borrower shall keep the buildings

and all other improvements on the Deeded Property insured for the benefit of

Lender against fire and other hazards and risks. Borrower covenants and agrees

that Borrower will carry and maintain, at its sole cost and expense, the

following types of insurance, in the amounts specified: (A) comprehensive

general liability insurance with initial limits of not less than Two Million

Dollars ($2,000,000) for death or injuries to one person and not less than Two

Million Dollars ($2,000,000) for death or injuries to two or more persons in

one occurrence, and not less than One Million Dollars ($1,000,000) for damage

to property; (B) fire and extended coverage insurance on a replacement form

with inflation-guard, vandalism and malicious mischief endorsements; (C) rent

loss or business interruption insurance covering a period of not less than

twelve (12) months; (D) flood insurance (if the Deeded Property is situated in

an area which is considered a flood risk area by the United States Department

of Housing and Urban Development, and for which flood insurance is available

under the National Flood Insurance Act of 1968, as amended); (E) builder’s risk

insurance (if Borrower is constructing buildings or improvements on the Deeded

Property) in an amount not less than 100% of their full insurable replacement

cost; and (F) such other insurance and in such amounts as may be reasonably

required from time to time by Lender. All insurance shall be in forms and with

companies satisfactory to Lender. Borrower shall deliver to Lender the policies

(or, alternatively, originally executed certificates of insurance therefor)

evidencing the required insurance with premiums fully paid for one year in advance,

and with standard mortgagee clauses (making all losses payable to Lender).

Renewals of the required insurance (together with evidence of premium

prepayment for one (1) year in advance) shall be delivered to Lender at least

thirty (30) days before the expiration of any existing policies.  All policies and renewals shall provide that

they may not be canceled or amended without giving Lender thirty (30) days

prior written notice of cancellation or amendment.

 

(ii)              Should Borrower fail to insure or

fail to pay the premiums on any required insurance or fail to deliver the

policies or renewals as provided above, Lender may have the insurance issued or

renewed (and pay the premiums on it for the account of Borrower) in amounts and

with companies and at premiums as Lender deems appropriate. If Lender elects to

have insurance issued or renewed to insure Lender’s interest, Lender shall have

no duty or obligation of any kind to also insure Borrower’s interest or to

notify Borrower of Lender’s actions. Any sums paid by Lender for insurance, as

provided above, shall be a lien upon the Deeded Property, added to the amount

secured by this Security Deed, and payable immediately by Borrower to Lender,

as the case may be, with interest on those sums at the highest rate charged by

Lender on any of the Indebtedness (but not to exceed the maximum interest rate

permitted by law).

 

(iii)             In the event of loss or damage to

the Deeded Property, the proceeds of all required insurance shall be paid to

Lender.   No loss or damage shall itself

reduce the Indebtedness.

 

4

 

Lender or any of its

employees is each irrevocably appointed attorney-in-fact for Borrower and is

authorized to adjust and compromise each loss without the consent of Borrower,

to collect, receive and receipt for the insurance proceeds in the name of

Lender and Borrower and to endorse Borrower’s name upon any check in payment of

the loss.

 

(iv)             Lender shall apply such proceeds to

the repair and restoration of the Deeded Property subject to the following

conditions:

 

(1)                                  there

shall be no Event of Default existing hereunder;

 

(2)                                  plans

for repair and restoration shall be reviewed and approved by Lender, which

approval shall not be unreasonably withheld or delayed;

 

(3)                                  repair

and restoration of the Deeded Property to a viable, economic unit (as

determined by Lender) can practicably be completed prior to the Due Date set

forth in the Note;

 

(4)                                  Borrower

shall have deposited with Lender funds equal to the positive difference, if

any, between the cost of repair, 

restoration and completion, and the amount of the insurance proceeds;

and

 

(5)                                  disbursements

will be made by Lender or, at Lender’s option, a title insurance company

acceptable to Lender, pursuant to procedures necessary  or appropriate to keep the  Deeded Property  free of mechanics’ liens and to ensure that funds are properly

applied.

 

Provided that no

Event of Default exists, if there are insurance proceeds in the amount of

Twenty-Five Thousand Dollars ($25,000) or less remaining after the repair and

restoration of the Deeded Property as required hereunder, such proceeds shall

be paid to Borrower. Provided that no Event of Default exists, if there are

insurance proceeds in excess of Twenty-Five Thousand Dollars ($25,000)

remaining after the repair and restoration of the Deeded Property as required

hereunder, such proceeds shall be applied toward payment of the Indebtedness

(or any portion thereof) without premium or other applicable charges, whether

or not then due or payable, in whatever order of maturity as Lender may elect.

Application of proceeds by Lender toward later maturing installments of the

Indebtedness shall not excuse Borrower from making the regularly scheduled

installment payments nor shall such application extend or reduce the amount of

any of these payments.

 

(v)              Notwithstanding Section l(g)(iv)

above, if a substantial portion (fifty percent [50%] or more) of the Deeded

Property is damaged or destroyed during the last twenty-four (24) months of the

term of the Note, and provided that no Event of Default then exists hereunder,

either Borrower or Lender may elect not to rebuild and to apply the insurance

proceeds toward payment of the Indebtedness (or any portion thereof) without

premium or other applicable charges, whether or not then due or payable, in

whatever order of maturity as Lender may elect. Application of proceeds by

Lender toward later maturing installments of the Indebtedness shall not excuse

Borrower from making the regularly scheduled installment payments nor shall

such application extend or reduce the amount of any of these payments.

 

(vi)             In the event of a foreclosure of

this Security Deed, or the giving of a deed in lieu of foreclosure, or the

exercise of the power of sale or other proceeding relating to the Deeded

Property, the purchaser or grantee of the Deeded Property shall succeed to all

of the rights of Borrower under the insurance policies including, without

limit, any right to unearned premiums and to receive the proceeds.

 

5

 

(vii)            Upon the occurrence of an Event of

Default hereunder, at the option of Lender, Borrower shall pay to Lender, in

advance on the first day of each month, a pro rata portion of the annual

premiums due (as estimated by Lender) on the required insurance. In the event

that sufficient funds have been deposited with Lender to cover the amount of

the insurance premiums when the premiums become due and payable, Lender shall

pay the premiums. In the event that sufficient funds have not been deposited

with Lender to pay the insurance premiums at least thirty (30) days prior to

the time when they become due and payable, Borrower shall immediately pay the

amount of the deficiency to Lender.

 

(h)           Compliance With Law and Other Matters.

Borrower will comply with all federal, state and local laws, ordinances,

rules, regulations and restrictions relating to the ownership, use, occupancy

and operation of the Deeded Property. Borrower shall be solely responsible to

apply for and secure any building permit or permission of any duly constituted

authority for the purpose of doing any of the things which Borrower is required

or permitted to do under the provisions of this Security Deed. Further,

Borrower will comply with, perform Borrower’s obligations under, and enforce

the obligations of all other parties to all building and use restrictions,

ground leases, leases, reservation and/or purchase agreements, condominium

documents and/or other instruments affecting or relating to the use and/or

occupancy of the Deeded Property.

 

(i)            Alteration of Improvements.

 

(i)       Without the prior

written consent of Lender, Borrower will not remove any building, structure or

other improvement forming part of the Deeded Property.

 

(ii)      Borrower may from time to

time make alterations, replacements, additions, changes, and improvements

(collectively, “Alterations”) in and to the Deeded Property as Borrower may

find necessary or convenient for its purposes; provided, however, that no such

Alterations shall decrease the value of the Deeded Property. All work with

respect to any Alteration shall be done in a good and workmanlike manner by

properly qualified and licensed personnel, and such work shall be diligently

prosecuted to completion.

 

(iii)     Borrower shall pay the

costs of any Alterations done on the Deeded Property, and shall keep the Deeded

Property free and clear of liens of any kind. Borrower shall indemnify and

defend Lender from and against any liability, loss, damage, costs, attorneys’

fees, and any other expense incurred as a result of claims of lien by any

person performing work or furnishing materials or supplies for Borrower or any

person claiming under Borrower.

 

(iv)     No Alteration shall be

undertaken until Borrower shall have procured and paid for all required permits

and authorizations of all municipal departments and governmental subdivisions

having jurisdiction. Any Alteration involving an estimated cost of more than

Twenty-Five Thousand and 00/100 Dollars ($25,000.00) shall be conducted under

the supervision of a licensed architect or engineer selected by Borrower and

satisfactory to Lender and shall be made in accordance with detailed plans and

specifications (“Plans and Specifications”) and cost estimates prepared by such

architect or engineer and approved in writing in advance by Lender. Any

Alteration shall be made promptly and in a good workmanlike manner and in

compliance with all applicable permits and authorizations and building and

zoning laws and all laws and in accordance with the orders, rules and

regulations of the Board of Fire Insurance Underwriters and any other body

hereafter exercising similar functions having or asserting jurisdiction over

the Deeded Property.

 

(v)      In connection with any

Alteration involving an estimated cost in excess of Twenty-Five Thousand and

00/100 Dollars ($25,000.00), Lender shall have the right to require Borrower to

post a bond or other security reasonably satisfactory to Lender to insure the

completion of such Alteration.

 

6

 

(j)            Obligation to Rebuild.

 

(i)           If any portion of

the Deeded Property is damaged or destroyed by fire or other casualty, subject

to Section l(g)(iv) above, Borrower shall, at its sole cost and expense,

forthwith repair, restore, rebuild or replace the damaged or destroyed

improvements, fixtures or equipment, and complete the same as soon as

reasonably possible, to the condition they were in prior to such damage or

destruction, except for such changes in design or materials as may then be required

by law or are approved by Lender in Lender’s reasonable discretion. Lender, in

such event, shall, to the extent the proceeds of the insurance are made

available to Lender and within a reasonable amount of time after receipt of

such proceeds by Lender, reimburse Borrower for the costs of making such

repairs, restoration, rebuilding and replacements on such terms as Lender may

reasonably require. To the extent, if any, that the proceeds of insurance made

available as aforesaid are insufficient to pay the entire cost of making such

repairs, restoration, rebuilding and replacements, Borrower shall pay the

amount by which such costs exceed the insurance proceeds made available as

aforesaid.

 

(ii)          Notwithstanding the

foregoing, in the event that Borrower fails to commence the repair or

restoration of the Deeded Property pursuant to this Section l(j) within sixty

(60) days after the casualty, or if Borrower abandons or fails to diligently

pursue completion of such repair or restoration (as determined in Lender’s

reasonable judgment), then Lender shall be entitled to apply the insurance

proceeds first towards reimbursement of all costs and expenses of Lender in

collecting the proceeds (including, without limit, court costs and reasonable

attorneys’ fees), and then toward any payment of the Indebtedness or any

portion of it, whether or not then due or payable and in whatever order of

maturity as Lender may elect. Application of proceeds by Lender toward later

maturing installments of the Indebtedness shall not excuse Borrower from making

the regularly scheduled installment payments nor shall such application extend

or reduce the amount of any of these payments.

 

(k)           Recording.

Borrower will cause this Security Deed, any supplemental security deed and any

financing and continuation statements required by the applicable Uniform

Commercial Code to be recorded and filed at Borrower’s expense in such manner

and in such place as may, in Lender’s opinion, be necessary or proper.

 

(1)           Additional

Assurances. Borrower will execute and deliver additional

instruments and take additional actions as Lender may reasonably request to

carry out the terms and conditions of this Security Deed.

 

(m)          Books

and Records; Inspection Rights. Borrower will at all times

maintain accurate and complete books and records and copies of all building and

use restrictions, ground leases, leases, reservation and/or purchase

agreements, condominium documents, contracts and/or other instruments with

respect to the Deeded Property. Lender may inspect and make copies of those

books and records and any other data relating to the Deeded Property. Lender

may inspect the Deeded Property at such reasonable times as Lender shall

determine. Borrower will promptly provide to Lender reports concerning the

income, expenses and financial and other conditions of the Deeded Property as

may be required from tune to time by Lender.

 

(n)           Environmental

Representation. Warranty and Indemnification. Notwithstanding

anything in this Security Deed to the contrary, Borrower represents, covenants

and warrants to Lender as follows:

 

(i)           At all times since

Borrower has acquired any interest or rights in the Deeded Property, whether

through lease, land contract, deed or otherwise and, to Borrower’s knowledge,

after due inquiry (including, without limitation, the Phase I Environmental

Assessment dated February 18, 1998, prepared by Secor International

Incorporated and identified as Job No. QO345-003-01 [“Assessment”]), at all

times prior to Borrower’s acquisition of such interest or rights in the Deeded

Property: there are no and have been no violations of the Relevant

Environmental Laws (as hereinafter defined) at the Deeded Property and no

consent orders have been entered with respect the Deeded Property; there are no

and have been no Hazardous Materials (as hereinafter defined) or Asbestos (as

hereinafter defined) either at, upon, under or within, or discharged or emitted

at or from, the Deeded Property; no Hazardous Materials or Asbestos have flown,

blown or otherwise become present at the Deeded Property

 

7

 

from neighboring land; and no Hazardous Materials or Asbestos have been

removed from the Deeded Property.

 

(ii)          Borrower, after  due inquiry (including,  without limitation, the Assessment), is not

aware of any claims of litigation, and has not received any communication,

concerning the presence or possible presence of Hazardous Materials or Asbestos

at the Deeded Property or concerning any violation or alleged violation of the Relevant

Environmental Laws respecting the Deeded Property. Borrower shall promptly

notify Lender of any such claims and shall furnish Lender with a copy of any

such communications received after the date of this Security Deed.

 

(iii)         Borrower shall

ensure that the Deeded Property complies in all respects with the Relevant

Environmental Laws and shall notify Lender promptly and in reasonable detail in

the event that Borrower becomes aware of the presence of Hazardous Materials or

Asbestos or a violation of the Relevant Environmental Laws at the Deeded

Property.

 

(iv)         Should Borrower use

or permit the Deeded Property to be used or maintained so as to subject

Borrower, Lender or the use of the Deeded Property to a claim of violation of

the Relevant Environmental Laws (unless contested in good faith by appropriate

proceedings satisfactory to Lender), Borrower shall immediately remedy and

fully cure, at its own cost and expense, any conditions arising therefrom.

 

(v)          Borrower shall pay

immediately when due the cost of compliance with the Relevant Environmental

Laws. Further, Borrower shall keep the Deeded Property free of any lien imposed

pursuant to the Relevant Environmental Laws.

 

(vi)         In the event that

Borrower fails to comply with the requirements of clauses (i) through (v) in

this Section l(n), after notice to Borrower and the earlier of the expiration

of any applicable cure period under this Security Deed or the expiration of the

cure period permitted under the Relevant Environmental Laws, if any, Lender may,

but in no event shall be obligated to, exercise its right to do one or more of

the following: (A) elect that such failure constitutes an Event of Default

under this Security Deed; and/or (B) take any and all actions, at Borrower’s

expense, that Lender deems necessary or desirable to cure such failure of

compliance. Any costs incurred pursuant to this clause (vi) or clause (vii) in

this Section l(n), shall become immediately due and payable without notice and

with interest thereon at a rate equal to the highest interest rate charged on

the Indebtedness (but not to exceed the maximum interest rate permitted by

law), and such amount, including interest, shall, if incurred prior to the

foreclosure of this Security Deed or the delivery of a deed in lieu of foreclosure,

or the exercise of the power of sale or other proceeding relating to the Deeded

Property, be added to amounts owing under the Indebtedness and shall be secured

by this Security Deed.

 

(vii)        Lender shall not be

liable for and Borrower shall immediately pay to and indemnify, defend and hold

Lender harmless from and against, all loss, cost, liability, damage and expense

(including, without limit, attorneys’ fees and costs incurred in the

investigation, defense and settlement of claims) that Lender may suffer or

incur (as holder of this Security Deed, as mortgagee in possession or as

successor in interest to Borrower as owner of the Deeded Property by virtue of

foreclosure or acceptance of a deed in lieu of foreclosure or the exercise of

the power of sale or other proceeding relating to the Deeded Property) as a

result of or in connection in any way with Borrower’s failure to comply with

the terms and provisions of this Section l(n).

 

(viii)       The provisions of

clauses (i) through (vii) of this Section l(n) shall survive the repayment of

the Indebtedness and the performance of all duties and obligations related

thereto, the foreclosure of this Security Deed, the delivery of a deed in lieu

of foreclosure, or the exercise of the power of sale or other proceeding

relating to the Deeded Property and/or the discharge of this Security Deed.

 

8

 

“Relevant

Environmental Laws” shall mean all applicable federal, state and local laws,

rules, regulations, orders, judicial determinations and decisions or

determinations by any judicial, legislative or executive body of any

governmental or quasi-governmental entity, whether in the past, the present or

the future, with respect to: (i) the installation, existence or removal of, or

exposure to, Asbestos on the Deeded Property; (ii) the existence on, discharge

from, or removal from the Deeded Property of Hazardous Materials; and/or (iii)

the effects on the environment of the Deeded Property or of any activity now,

previously, or hereafter conducted on the Deeded Property.

 

“Asbestos” shall

have the meanings provided under the Relevant Environmental Laws, and shall

include, without limitation, asbestos fibers and friable asbestos, as such

terms are defined under the Relevant Environmental Laws.

 

“Hazardous

Materials” shall mean any of the following (as defined by the Relevant

Environmental Laws): solid wastes; toxic or hazardous substances, wastes, or

contaminants (including, without limit, polychlorinated biphenyls, paint

containing lead, and/or urea formaldehyde foam insulation; and discharges of

sewage or effluent.

 

(o)           Reporting

Requirements.  Borrower hereby covenants and agrees to deliver to

Lender, or to cause The WesterN SizzliN Corporation, a Tennessee corporation

(“Guarantor”) to deliver to Lender, the following:

 

(i)            Management prepared and certified

consolidated quarterly financial statements for Guarantor within forty-five

(45) days after the end of the first three (3) quarters of each fiscal year of

Guarantor;

 

(ii)           Annual consolidated financial

statements for Guarantor audited by an independent certified public accountant

within one hundred twenty (120) days after the end of each fiscal year of

Guarantor;

 

(iii)          Management prepared and certified unit

level profit and loss statements relating to the operation of the Great

American Steak & Buffet Company franchised restaurant operation located on

the Deeded Property (“Franchised Operation”) within forty-five (45) days after

the end of each fiscal year of Borrower;

 

Such financial statements shall be true and correct in all respects,

shall be prepared in accordance with generally accepted accounting principles,

and shall fairly represent the respective financial conditions of the subjects

thereof as of the respective dates thereof. If Borrower’s financial statements

are prepared on a consolidated basis, Borrower hereby covenants and agrees to

prepare financial statements specifically relating to the operation of the

Franchised Operation. At the request of Lender, Borrower shall obtain the

consent of Borrower’s accountant(s) to the inclusion of Borrower’s most recent

financial statement in any regulatory filing or report to be filed by Lender.

 

(p)           Indemnification.  Borrower

shall appear in and defend any suit, action or proceeding that might in any way

and in the sole judgment of Lender affect the value of the Deeded Property, the

validity, enforceability and priority of this Security Deed or the rights and

powers of Lender. Borrower shall, at all times, indemnify, defend, hold harmless

and on demand, reimburse Lender for any and all loss, damage, expense or cost,

including cost of evidence of title and attorneys’ fees, arising out of or

incurred in connection with any such suit, action or proceeding, and the sum of

such expenditures shall be secured by this Security Deed and shall bear

interest at the highest rate accruing on the Indebtedness, not to exceed the

maximum rate permitted by law, and shall be due and payable on demand. Borrower

shall pay cost of suit, cost of evidence of title and reasonable attorneys’

fees in any proceeding or suit, including appellate proceedings, brought by

Lender to foreclose or otherwise enforce this Security Deed.

 

(q)           Estoppel Certificates.  Borrower

shall, within ten (10) days after written request therefor

 

9

 

from Lender, furnish to Lender, or such other persons

or entities as Lender shall designate, a duly acknowledged written statement

setting forth the amount of the debt secured by this Security Deed, and stating

either that no setoffs or defenses exist against such debt, or, if such setoffs

or defenses are alleged to exist, the nature thereof, that no Event of Default

then exists, and no event has occurred, which with notice or the passage of time,

or both, would constitute and Event of Default.

 

(r)            Management Agreement.  Borrower is a

franchisee in good standing with The WesterN SizzliN Corporation, a Tennessee

corporation (“Franchisor”), and is not in default under its Management and

Licensing Agreement with Franchisor relating to the Franchised Operation

(“Management Agreement”). Borrower agrees to comply with the terms of the

Management Agreement and to take all actions necessary or required to keep the

Management Agreement in full force and effect. Borrower will not encumber its

rights under the Management Agreement except to Lender. Borrower agrees to

promptly provide Lender with a copy of any notice to Borrower of a default

under the Management Agreement. Further, Borrower agrees to promptly provide

Lender with a copy of any notice to Borrower of the existence of any breach

which, with notice or passage of time, or both, would entitle Franchisor to

terminate the Management Agreement.

 

(s)           Fixed Charge Coverage Ratio. Borrower

shall maintain a Fixed Charge Coverage Ratio (as hereinafter defined) of not

less than 1.2 to 1.0 for Borrower’s business operations generally and not less

than 1.2 to 1.0 for the Franchised Operation. “Fixed Charge Coverage Ratio”

shall mean Borrower’s Operating Cash Flow divided by its Fixed Charges (each as

defined below). The Fixed Charge Coverage Ratios shall be calculated by

Borrower from time to time and dates as determined by Lender, and Borrower

shall submit such information as Lender may require to confirm and approve

Borrower’s calculation of the Fixed Charge Coverage Ratios.

 

(i)            “Fixed Charges” shall mean the sum

of the following items set forth on a pro forma basis separately stated for

both Borrower’s business operations generally and for the Franchised Operation,

in each case, for the applicable twelve (12) month operating period:

 

(A)          current portion of long-term debt

(defined as the current portion of long-term debt due to mature during the next

twelve (12) month operating period, as stated in Borrower’s applicable

financial statement, plus, if not already included therein, the current portion

of principal payments imputed on all capital leases), plus

 

(B)           interest expense (defined as the

interest expense as stated on Borrower’s applicable financial statement, plus,

if not already included therein, the interest expense imputed on all capital

leases), plus

 

(C)           the current portion of operating

leases (defined as the amount of rent due under operating leases for the next

twelve (12) month operating period).

 

(ii)           “Operating Cash Flow” shall mean the

sum or subtraction of the following items separately stated for both Borrower’s

business operations generally and for the Franchised Operation, in each case,

for the applicable prior twelve (12) month operating period:

 

(A)          net income (defined as the net income

stated on Borrower’s applicable financial statement), plus

 

(B)           depreciation and amortization

(defined as the depreciation and amortization expense as stated on Borrower’s

applicable financial statement), plus

 

(C)           interest expense (as defined above), plus

 

(D)          operating lease expense (defined as

the amount of rental expense paid under operating leases, as stated on

Borrower’s applicable financial statements), plus or minus

 

10

 

(E)           non-recurring items (defined as items

which, when computing cash flow, should in Lender’s reasonable business

judgment, be added back to or subtracted from net income to normalize results).

 

2.             APPLICATION OF CONDEMNATION

AWARDS.

 

(a)           Condemnation Award.  Any eminent domain or condemnation proceeds

shall be paid directly to Lender and applied toward reimbursement of all

Lender’s costs and expenses incurred in connection with collecting the award

(including, without limit, court costs and reasonable attorneys’ fees), and the

balance applied upon the Indebtedness whether or not then due or payable in

whatever manner Lender deems advisable. Application by Lender of any

condemnation award or portion of it toward the last maturing installments of

the Indebtedness shall not excuse Borrower from making the regularly scheduled

payments nor extend or reduce the amount of these payments.

 

(b)           Appointment of Lender. Lender or any of

its employees is each irrevocably appointed attorney-in-fact for Borrower and

is authorized to receive, receipt for, discharge and satisfy any condemnation

award or judgment, whether joint or several, on behalf of Borrower, Borrower’s

legal representatives, successors and assigns; provided, however, that Lender

shall not be liable for failure to collect any condemnation award.

 

3.             ADDITIONAL SECURITY.

 

(a)           Security Interest.

 

(i)            This Security Deed,

as to any Equipment, fixtures, accounts, general intangibles and other personal

property included within the definition of Deeded Property (collectively,

“Personal Property”), shall constitute a security agreement within the meaning

of the Uniform Commercial Code and Borrower grants to Lender a security

interest in the Personal Property. Borrower agrees, upon request of Lender, to

promptly furnish a list of Personal Property owned by Borrower and subject to

this Security Deed and, upon request by Lender, to immediately execute, deliver

and/or file any amendments to this Security Deed, any separate security

agreement and any financing statements to evidence and perfect the security

interest in such Personal Property contemplated by this Section. Lender or any

of its employees are each irrevocably appointed artomey-in-fact and are

authorized to execute, deliver and/or file any of such amendments to this

Security Deed, any separate security agreement and any financing statements.

 

(ii)           Upon the occurrence

of any Event of Default under this Security Deed, Lender shall have all of the

rights and remedies of a secured party under the Uniform Commercial Code or

otherwise provided by law or by this Security Deed including, without limit,

the right to require Borrower to assemble the Personal Property and make it

available to Lender at a place to be designated by Lender which is reasonably convenient

to such parties, the right to collect all accounts receivable, the right to

take possession of the Personal Property with or without demand and with or

without process of law and the right to sell and dispose of it and distribute

the proceeds according to law. Borrower agrees that any requirement of

reasonable notice, if any, shall be met if Lender sends notice to Borrower at

least five (5) days prior to the date of sale, disposition or other event

giving rise to the required notice. Borrower agrees that the proceeds of any

disposition of the Personal Property may be applied by Lender first to Lender’s

reasonable expenses in connection with the disposition including, without

limit, reasonable attorneys’ fees and legal expenses, and then to payment of

the Indebtedness.

 

(b)           Licenses and Permits.   As additional security for the Indebtedness

and to the extent permitted by their terms, Borrower assigns to Lender all of

Borrower’s rights and interest in all licenses or permits affecting the Deeded

Property. This assignment shall not impose upon Lender any obligations with

respect to any license or permit. Borrower shall not cancel or amend any of the

licenses or permits assigned (nor permit any of

 

11

 

them to terminate if they are necessary or desirable for the operation

of the Deeded Property) without first obtaining the written approval of Lender.

 

(c)           Assignment of Rents and Leases.

 

(i)            As additional

security for the payment of the Indebtedness and performance of this Security

Deed, Borrower assigns to Lender all of Borrower’s right, title and interest in

and to all written and oral leases, usufructs and occupancy agreements (the

“Leases”), now or later existing, covering the Deeded Property or any part of

it (but without an assumption by Lender of liabilities of Borrower under any of

these leases, usufructs or occupancy agreements by virtue of this assignment),

and Borrower assigns to Lender the leases, rents, issues and profits

(collectively, the “Rents”) of the Deeded Property. Borrower acknowledges and

confirms that Lender has a present absolute assignment of Leases and Rents.

Notwithstanding the foregoing, Lender grants to Borrower a revocable license to

collect the Rents. At any time upon or after an Event of Default the license

granted to Borrower herein may be revoked by Lender.

 

(ii)           At least annually,

and more frequently if requested by Lender, Borrower shall provide Lender with

a certified rent roll and such other information regarding the leases and/or

occupancy agreements as Lender may reasonably require.

 

(iii)          If an Event of

Default occurs under this Security Deed, Lender may receive and collect the

rents, issues and profits personally, or through a receiver, so long as the

Event of Default exists and during the pendency of any foreclosure proceedings

or the exercise of the power of sale or other proceeding and during any

redemption period. Borrower consents to the appointment of a receiver.

 

(iv)          Lender shall at no

time have any obligation whatever to attempt to collect rent or other amounts

from any tenant of the Deeded Property. Further, Lender shall have no

obligation to enforce any other obligations owed by tenants of the Deeded

Property. No action taken by Lender under this Security Deed shall make Lender

a “party or mortgagee in possession.”

 

(v)           Borrower shall not

collect advance rent under any lease or occupancy agreement pertaining to the

Deeded Property in excess of one month (other than as a security deposit) and

Lender shall not be bound by any rent prepayment made or received in violation

of this prohibition.

 

(vi)          At the option of

Lender, this Security Deed shall become subordinate, in whole or in part (but

not with respect to priority as to insurance proceeds or any condemnation award)

to any or all leases and/or occupancy agreements of all or part of the Deeded

Property upon the execution and recording by Lender of an affidavit to that

effect.

 

4.            EVENTS

OF DEFAULT AND REMEDIES.

 

(a)           Events of Default.  Any of the following

events shall, for purposes of this Security Deed, constitute an “Event of

Default”:

 

(i)            Failure by Borrower

to pay any amount owing on or with respect to the Indebtedness when due,

whether by maturity, acceleration or otherwise, which failure continues for

five (5) business days.

 

(ii)           Any failure by

Borrower (or any Guarantor) to comply with any of the non-monetary terms,

provisions, warranties or covenants of the Note, this Security Deed or the

other Loan Documents, which failure continues for fifteen (15) days after the

date of written notice to Borrower (or any Guarantor) from Lender of such

default; provided, however, that if: (i) the nature of Borrower’s (or

 

12

 

any Guarantor’s)

noncompliance is such that more than fifteen (15) days are reasonably required

for its cure, (ii) Borrower (or any Guarantor) has commenced such cure within

said fifteen (15) day period, (iii) Borrower (or any Guarantor) diligently

prosecutes such cure to completion, (iv) Borrower (or any Guarantor) provides

Lender with written notice of the noncompliance, AND (v) Borrower (or any

Guarantor) furnishes reserves or a security bond, in an amount satisfactory to

Lender in its sole discretion, then Borrower (or any Guarantor) shall not be in

default.

 

(iii)          Institution of

foreclosure proceedings or other exercise of rights and remedies under any

mortgage, security deed or other lien against the Deeded Property (or any

portion thereof); provided, however, if there is a good faith dispute by Borrower

or Guarantor as to the validity or reasonableness of the claim which is the

basis for such proceedings, then no Event of Default shall have occurred under

this clause (iii) if Borrower or Guarantor provides Lender with written notice

of the proceedings and furnishes reserves or a security bond for the

proceedings satisfactory to Lender.

 

(iv)          Insolvency of

Borrower (or any Guarantor) or the admission in writing of Borrower’s (or any

Guarantor’s) inability to pay debts as they mature.

 

(v)           Any statement,

representation or information made or furnished by or on behalf of Borrower (or

any Guarantor) to Lender in connection with or to induce Lender to provide or

advance any of the Indebtedness shall prove to be false or materially

misleading when made or furnished.

 

(vi)          Institution of

bankruptcy, reorganization, insolvency or other similar proceedings by or

against Borrower (or any Guarantor), unless, in the case of a petition filed

against Borrower (or any Guarantor) the same is dismissed within sixty (60)

days) of the date of filing.

 

(vii)         The issuance or

filing of any attachment, levy, garnishment or the commencement of any related

proceedings or the commencement of any other judicial process upon or in

respect to Borrower (or any Guarantor) or the Deeded Property in which the

amount in controversy exceeds One Hundred Thousand Dollars ($100,000) and is

not covered by the insurance of Borrower (or any Guarantor), unless satisfied,

or Borrower (or any Guarantor) furnishes reserves or a security bond in an

amount satisfactory to Lender in its sole discretionreleased or discharged

within sixty (60) days after the date of such issuance, filing or commencement.

 

(viii)        Sale or other

disposition by Borrower (or any Guarantor) of any substantial portion of its assets

or property.

 

(ix)           Death, dissolution,

merger, consolidation, termination of existence, insolvency, business failure

or assignment for the benefit of creditors of or by Borrower (or any

Guarantor); without the prior written consent of Lender, which consent shall

not be unreasonably withheld.

 

(x)            Any failure by

Borrower (or any Guarantor) to pay any indebtedness (other than to Lender) in

excess of One Hundred Thousand Dollars ($100,000) (and exclusive of trade debt

incurred in the ordinary course of business) when due, or any failure in the

observance or performance of any term, covenant or condition contained in any

document evidencing, securing or relating to such indebtedness, which failure

continues beyond any applicable cure period.

 

(xi)           Receipt by Borrower

of a notice of termination of the Management Agreement.

 

(xii)          The default by

Borrower under the terms and conditions of any other loans to Borrower from

Lender, Captec Financial Group, Inc., a Michigan corporation, or Captec Leasing

Company, a California corporation, now or hereafter existing (collectively, the

“Other Loans”) as such

 

13

 

Other Loans may be

assigned from time to time, to Captec Loan Receivables Trust-1996A or any other

affiliate of Lender.

 

(b)           Remedies Upon Event of Default.  Upon

the occurrence of any Event of Default, Lender shall have the following rights:

 

(i)            Declare all or part

of the Indebtedness immediately due and payable, time being of the essence of

this Security Deed.

 

(ii)           Demand that

Borrower immediately surrender the possession of the Deeded Property to Lender,

and Borrower consents to Lender taking possession of the Deeded Property and

the books and records relating to the Deeded Property.

 

(iii)          Lease the Deeded Property

and may collect rents for the account of Borrower.

 

(iv)          When the

Indebtedness secured hereby shall become due, whether by acceleration or

otherwise, Lender, at its option, may sell the Deeded Property or any part of

the Deeded Property at one or more public sale or sales before the door of the

courthouse of the county in which the Deeded Property or any part of the Deeded

Property is situated, to the highest bidder for cash. The time, place and terms

of such sale shall be advertised once a week for four (4) consecutive weeks,

immediately prior to the sale (but without regard to the number of days elapsed

intervening between the date of publication of the first advertisement and the

date of sale) in the newspaper in which Sheriffs sales are advertised in said

county. From the proceeds of the sale, Lender shall pay the Indebtedness

secured hereby and accrued interest thereon and insurance premiums, liens,

assessments, taxes and charges, including utility charges, if any, with accrued

interest thereon, and all expenses of the sale and all proceedings in

connection therewith, including reasonable attorneys’ fees and any and all

transfer taxes and recording costs incident to the execution and delivery of

the conveyance pursuant to such sale. Lender may bid and purchase at such sale

or sales. In case of a sale as provided herein, Borrower or any person in

possession of the Deeded Property under Borrower shall be deemed a tenant

holding over and shall forthwith deliver possession to the purchaser at any such

sale, or be summarily dispossessed in accordance with the provisions of law

applicable to tenants holding over.

 

(v)           At any such public

sale, Lender may execute and deliver to the purchaser a conveyance of the

Deeded Property or any part of the Deeded Property in fee simple, with or

without warranties of title and to this end, Borrower hereby constitutes and

appoints Lender the agent and attorney-in-fact of Borrower to make such sale

and conveyance, and thereby divest Borrower of all right, title or equity that

Borrower may have in and to the Deeded Property and to vest the same in the

purchaser or purchasers at such sale or sales, and all the acts and doings of

said agent and attomey-in-fact are hereby ratified and confirmed and any

recitals in said conveyance or conveyances as to facts essential to a valid

sale shall be binding upon Borrower. In case of any sale under this Security

Deed by virtue of the exercise of the powers herein granted, pursuant to any

order in any judicial proceeding or otherwise, the Deeded Property may be sold

at one or more successive sales in the

manner provided by the Uniform Commercial Code of Georgia. The aforesaid power

of sale and agency hereby granted are coupled with an interest and are

irrevocable by death or otherwise, and are granted as cumulative of the other

remedies provided by law for collection of the Indebtedness and shall not be

exhausted by one exercise thereof but may be exercised until full payment of

all sums secured hereby.

 

(vi)          Collect and receive

all rents, profits and other amounts that are due or shall subsequently become

due under the terms of any leases, land contract, or other agreements by which

Borrower is leasing or selling the Deeded Property or any interest in the

Deeded Property. Lender may also exercise any other rights or remedy of

Borrower under any such lease, land contract or other agreement. However,

Lender shall have no obligation to make any demand or inquiry as to the nature

or

 

14

 

sufficiency of any

payment received or to present or file any claim or take any other action to

collect or enforce the payment of any amounts to which Lender may become

entitled under this Security Deed. Similarly, Lender shall not be liable for

any of Borrower’s obligations under any such lease, land contract or other

agreement.

 

(vii)         Exercise all rights,

remedies and privileges afforded a “secured party” under Article 9 of the

Uniform Commercial Code.

 

(viii)        Enter upon the

Deeded Property and take other actions as Lender deems appropriate to perform

Borrower’s obligations under this Security Deed to inspect, repair, protect or

preserve the Deeded Property, to investigate or test for the presence of any

Hazardous Materials and/or to appraise the Deeded Property.

 

(ix)           Pursue any other

available remedy at law or equity to enforce the payment of the Indebtedness.

 

(c)           Remedies

Generally.

 

(i)            All remedies

provided for in Section 4(b) shall be available to the extent not prohibited by

law. Each remedy shall be cumulative and additional to any other remedy of

Lender at law, in equity or by statute. No delay or omission to exercise any

right or power accruing upon any default or Event of Default shall impair any

such right or power or shall be construed to be a waiver of, or acquiescence

in, any such default or Event of Default.

 

(ii)           Lender may waive

any Event of Default and may rescind any declaration of maturity of payments on

the Indebtedness. In case of such waiver or recision Borrower and Lender shall

be restored to their former positions and rights under this Security Deed. Any

waiver by Lender of any default or Event of Default shall be in writing and

shall be limited to the particular default waived and shall not be deemed to

waive any other default.

 

(d)           Receivers.

Upon an Event of Default and the exercise of the rights of Lender under this

Security Deed, or upon the commission of waste against the Deeded Property,

Lender shall be entitled to the appointment of a receiver or receivers of the

Deeded Property and of the rents, issues and profits of the Deeded Property,

without notice to Borrower.

 

(e)           Application of Proceeds.    Any

proceeds received by Lender from the exercise of remedies pursuant to Section

4(b) of this Security Deed shall be applied as follows:

 

(i)            First, to pay all

costs and expenses incidental to the leasing, foreclosure, exercise of the

power of sale granted hereunder or other disposition of the Deeded Property.

These costs and expenses shall include, without limit, any costs and expenses

incurred by Lender (including, without limit, attorneys’ fees and

disbursements), and any taxes and assessments or other liens and encumbrances

prior to the lien of this Security Deed.

 

(ii)           Second, to all sums

expended or incurred by Lender directly or indirectly in carrying out any term,

covenant or agreement under this Security Deed or any related document,

together with interest as provided in this Security Deed.

 

(iii)          Third, to the

payment of the Indebtedness.  If the

proceeds are insufficient to fully pay the Indebtedness, then application shall

be made first to late charges and interest accrued and unpaid, then to any

applicable prepayment premiums, then to unpaid fees and other charges and then

to the outstanding principal balance.

 

15

 

(iv)          Fourth, any  surplus remaining shall be paid to Borrower

or to whomsoever may be lawfully entitled.

 

(f)            Marshalling.  In the event of foreclosure of this Security Deed or the

enforcement by Lender of any other rights and remedies under this Security

Deed, Borrower waives any right in respect to marshalling of assets which

secure the Indebtedness or to require Lender to pursue its remedies against any

other assets or any other party which may be liable for any of the Indebtedness.

 

(g)           Further Actions.  Promptly upon the request of Lender, Borrower shall execute,

acknowledge and deliver any and all further conveyances, documents, mortgages,

deeds of trust, security deeds and assurances, and do or cause to be done all

further acts as Lender may require to confirm and protect the lien of this

Security Deed or otherwise to accomplish the purposes of this Security Deed.

 

(h)           Attorneys Fees.  Any reference in this

Security Deed to attorneys’ fees shall refer to fees, charges, costs and

expenses of in-house and outside attorneys and paralegals, whether or not a

suit or proceeding is instituted, and whether incurred at the trial court

level, on appeal, in a bankruptcy, administrative or probate proceeding, in

consultation with counsel, or otherwise. All costs, expenses and fees of any

nature for which Borrower is obligated to reimburse or indemnify Lender are

part of the Indebtedness secured by this Security Deed and are payable upon

demand, unless expressly provided otherwise, with interest until repaid at the

highest rate charged on any of the Indebtedness (but not to exceed the maximum

rate permitted by law).

 

5.                             MISCELLANEOUS.

 

(a)            Governing Law.  This Security Deed shall

be construed in accordance with the laws of the State of Georgia.

 

(b)           Successors and Assigns.  This Security

Deed shall be binding upon the successors and assigns of Borrower including,

without limit, any debtor in possession or trustee in bankruptcy for Borrower,

and the rights and privileges of Lender under this Security Deed shall inure to

the benefit of their respective successors and assigns. This shall not be

deemed a consent by Lender to a conveyance by Borrower of all or any part of

the Deeded Property or of any ownership interest in Borrower.

 

(c)            Notices.  Notice

from one party to another relating to this Security Deed shall be deemed

effective if made in writing (including telecommunications) and delivered to

the recipient’s address, telex number or telecopier number set forth in this

Security Deed by any of the following means: (i) hand delivery, (ii) registered

or certified mail, postage prepaid, (iii) express mail or other overnight

courier service, or (iv) telecopy, telex or other wire transmission with

request for assurance of receipt in a manner typical with respect to

communications of that type. Notice made in accordance with these provisions

shall be deemed delivered on receipt if delivered by hand or wire transmission,

on the third business day after mailing if mailed by registered or certified mail,

or on the next business day after mailing or deposit with the postal service or

an overnight courier service if delivered by express mail or overnight

courier.   Borrower’s telecopier number

is (540) 345-0831 and Lender’s telecopier number is (734) 994-1376.

 

(d)           Entire Agreement: Amendments.   This Security Deed and any agreement to

which it refers state all rights and obligations of the parties and supersede

all other agreements (oral or written) with respect to the lien granted by this

Security Deed.   Any amendment of this

Security Deed shall be in writing and shall require the signature of Borrower

and Lender.

 

(e)            Partial Invalidity.  The invalidity or

unenforceability of any provision of this Security Deed shall not affect the

validity or enforceability of the remaining provisions of this Security Deed.

 

(f)            Inspections.  Any inspection, audit,

appraisal or examination by Lender or its agents of the Deeded Property or of

information or documents pertaining to the Deeded Property is for the sole

purpose of

 

16

 

protecting

Lender’s interests under this Security Deed and is not for the benefit or

protection of Borrower or any third party.

 

(g)           Joint and Several Liability.  In the

event that more than one person or entity executes this Security Deed, the

obligations of each person or entity shall be joint and several.

 

(h)           Automatic Reinstatement.  Notwithstanding

any prior revocation, termination, surrender or discharge of this Security

Deed, the effectiveness of this Security Deed shall automatically continue or

be reinstated, as the case may be, in the event that:

 

(i)            Any payment

received or credit given by Lender in respect of the Indebtedness is determined

to be a preference, impermissible setoff, fraudulent conveyance, diversion of

trust funds, or otherwise required to be returned to Borrower for the benefit

of Borrower or any third party under any applicable state or federal law,

including, without limit, laws pertaining to bankruptcy or insolvency, in which

case this Security Deed shall be enforceable as if any such payment or credit

had not been received or given, whether or not Lender relied upon this payment

or credit or changed its position as a consequence of it.

 

(ii)           Any liability is

imposed, or sought to be imposed, against Lender relating to the environmental

condition of, or the presence of Hazardous Materials on, in or about the Real

Estate, whether this condition is known or unknown, now exists or subsequently

arises (excluding only conditions which arise after any acquisition by Lender

of any such property, by foreclosure, in lieu of foreclosure, by exercise of

the power of sale granted herein or otherwise, to the extent due to the

wrongful acts or omissions of Lender), in which case this Security Deed shall

be enforceable to the extent of all liability, costs and expenses (including

without limit reasonable attorneys fees) incurred by Lender as the direct or

indirect result of any environmental condition or Hazardous Materials.

 

(iii)          In the event of

continuation or reinstatement of this Security Deed, Borrower agrees upon

demand by Lender to execute and deliver to Lender those documents which Lender

determines are appropriate to further evidence (in the public records or

otherwise) this continuation or reinstatement, although the failure of Borrower

to do so shall not affect in any way the reinstatement or continuation. If

Borrower does not execute and deliver to Lender upon demand such documents,

Lender and each officer of such Lender is irrevocably appointed (which

appointment is coupled with an interest) the true and lawful attorney of

Borrower (with full power of substitution) to execute and deliver such

documents in the name and on behalf of Borrower.

 

(i)            WAIVER OF JURY TRIAL.   BORROWER AND LENDER ACKNOWLEDGE THAT THE

RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH

PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL

OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT,

WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE

PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS SECURITY DEED OR

THE INDEBTEDNESS.

 

(j)            Consumer Credit.  Notwithstanding

anything in this Security Deed to the contrary, this Security Deed shall not

secure any portion of the Indebtedness which is deemed to be consumer credit

under the Truth in Lending Act.

 

(k)           Assignment.  This

Security Deed is freely assignable, in whole or in part, by Lender without

notice to or consent of Borrower. Lender shall be fully discharged from all

responsibility accruing hereunder from and after the effective date of any such

assignment; provided, however, that Lender (or its assignee) shall provide

written notice of such assignment to Borrower in the event that Lender (or such

assignee) desires to designate a new person or entity as payee and/or a new

place of payment for the obligations under the Note.

 

17

 

Lender’s assignee

shall, to the extent of the assignment, be vested with all the powers and

rights of Lender hereunder (including those granted under Section 4 hereof or

otherwise with respect to the Deeded Property), and to the extent of such

assignment the assignee may fully enforce such rights and powers, and all

references to Lender shall mean and refer to such assignee. Lender shall retain

all rights and powers hereby given not so assigned, transferred and/or

delivered. Borrower hereby waives all defenses which Borrower may be entitled

to assert against Lender’s assignee with respect to liability accruing

hereunder prior to the effective date of any assignment of Lender’s interest

herein. Borrower may not, in whole or in part, directly or indirectly, assign

this Security Deed or its rights hereunder or delegate its duties hereunder

without, in each instance, the specific prior written consent of Lender, which

consent may be withheld or delayed in Lender’s sole discretion.

 

(1)           Securitization.

Borrower understands and agrees that Lender may, from time to time, assign its

rights and powers under the Note, this Security Deed and any other Loan

Documents, in whole or in part, in connection with a securitization program.

Borrower agrees to enter into an amendment to the Note, this Security Deed and

any other Loan Documents if such amendments are required by a nationally

recognized rating agency in connection with a securitization program sponsored

by Lender and in which the Note, this Security Deed and any other Loan

Documents are to be included; provided that Borrower shall not be obligated to

enter into any amendment which adversely affects Borrower or otherwise

adversely alters any of the financial terms of the Note, this Security Deed and

any other Loan Documents.

 

(m)          Subrogation.

To the full extent of the Indebtedness, Lender is hereby subrogated to the

liens, claims and demands, and to the rights of the owners and holders of each

and every claim, demand and other encumbrance on the Deeded Property which is

paid or satisfied, in whole or in part, out of the proceeds of the

Indebtedness, and the respective liens, claims, demands and other encumbrances

shall be, and each of them is hereby, preserved and shall pass to and be held

by Lender as additional collateral and further security for the Indebtedness,

to the same extent they would have been preserved and would have been passed to

and held by Lender, had they been duly and legally assigned, transferred, set

over and delivered unto Lender by assignment, notwithstanding the fact that any

instrument providing public notice of the same may be satisfied and canceled of

record.

 

(n)           Cancellation of Deed.

If all of the obligations are paid as they become due and payable and all of

the covenants, warranties, undertakings and agreements made in this Security

Deed are kept and performed, and all obligations, if any, of Lender for further

advances have been terminated, then, and in that event only, this Security Deed

shall be canceled and surrendered by Lender in due form at Borrower’s cost.

 

(o)           WAIVER

OF NOTICE AND HEARING. BORROWER HEREBY WAIVES ANY RIGHT

IT MAY HAVE UNDER THE CONSTITUTION OF THE STATE OF GEORGIA OR THE CONSTITUTION

OF THE UNITED STATES OF AMERICA TO NOTICE OR TO A JUDICIAL HEARING PRIOR TO THE

EXERCISE OF ANY RIGHT OR REMEDY PROVIDED BY THIS SECURITY DEED AND BORROWER

WAIVES ANY RIGHTS, IF ANY, TO SET ASIDE OR INVALIDATE ANY SALE DULY CONSUMMATED

IN ACCORDANCE WITH THE PROVISIONS OF THIS SECURITY DEED ON THE GROUND (IF SUCH

BE THE CASE) THAT THE SALE WAS CONSUMMATED WITHOUT A PRIOR JUDICIAL HEARING.

ALL WAIVERS BY BORROWER IN THIS PARAGRAPH HAVE BEEN MADE VOLUNTARILY,

INTELLIGENTLY AND KNOWINGLY, AFTER BORROWER HAS BEEN FIRST INFORMED BY COUNSEL

OF ITS OWN CHOOSING AS TO POSSIBLE ALTERNATIVE RIGHTS, AND HAVE BEEN MADE AS AN

INTENTIONAL RELINQUISHMENT AND ABANDONMENT OF A KNOWN RIGHT AND PRIVILEGE.

 

 

[SIGNATURE PAGE FOLLOWS]

 

18

 

SCHEDULE A

 

THIS SCHEDULE

ATTACHED TO AND MADE A PART OF THAT CERTAIN DEED TO SECURE DEBT, SECURITY

AGREEMENT AND ASSIGNMENT OF LEASES AND RENTS, EXECUTED BY THE WESTERN SIZZLIN

STORES, INC. FOR THE BENEFIT OF CAPTEC FINANCIAL GROUP FUNDING CORPORATION.

 

Land in the City of Lawrenceville, Gwinnett County, Georgia, described

as:

 

ALL THAT TRACT or parcel

of land lying and being in Land Lot 11 of the 7th District, Gwinnett County,

Georgia, in the City of Lawrenceville, and being more particularly described as

follows:

 

TO FIND THE POINT OF

BEGINNING, commence at the intersection of the northwest right of way of Ga.

Hwy. #316 and the southeast right of way of Reynolds Road; thence South 18

degrees 23 minutes 58 seconds West a distance of 421.11 feet to a point on the

southeast right of way of Ga. Hwy. #316; thence South 38 degrees 45 minutes 18

seconds West a distance of 201.38 feet to a point; thence south 04 degrees 46

minutes 56 seconds West a distance of 193.63 feet to an iron pin found on the

easterly right of way of State Route 20, WHICH IS THE PLACE OR POINT OF

BEGINNING; from said beginning point as thus established, run North 75 degrees

04 minutes 24 seconds East a distance of 50.59 feet to an iron pin found;

thence South 85 degrees 13 minutes 04 seconds East a distance of 32.80 feet to

a nail set; thence North 75 degrees 51 minutes 32 seconds East a distance of

101.84 feet to an iron pin found; thence South 04 degrees 46 minutes 56 seconds

West a distance of 48.52 feet to an iron pin found; thence South 05 degrees 36

minutes 14 seconds West a distance of 263.89 feet to an iron pin found; thence

South 79 degrees 37 minutes 55 seconds West a distance of 198.56 feet to an

iron pin found on the easterly right of way of State route #20; thence along

said easterly right of way along a curve to the left, a distance of 285.57

feet, having a radius of 2153.48 feet, and a chord of North 08 degrees 32

minutes 12 seconds East a distance of 285.36 feet to an iron pin found; thence

continuing along said easterly right of way of State Route #20, North 04

degrees 46 minutes 56 seconds East a distance of 29.44 feet to an iron pin

found, WHICH IS THE PLACE OR POINT OF BEGINNING.

 

The above described

property contains 1.282 acres as shown on an As Built Survey for The Western

Sizzlin Corp. and Captec Financial Group Funding Corp. by Cofer Technical

Services, Inc., certified by William D. Shaw, Georgia Registered Land Surveyor

No. 2162, dated February 14, 1998.

 

A-1

 

IN WITNESS

WHEREOF, Borrower has executed this Security Deed under seal as of the day and

year first noted above.

 

 

Signed , sealed and

delivered in the presence of:

 

	

  [ILLEGIBLE]

  	

   

  	

  THE

  WESTERN SIZZLIN STORES, INC.

  
	

  Witness:

  	

   

  	

   

  
	

   

  	

   

  	

  By: 

  	

  /s/ Victor F. Foti,

  President

  
	

  /s/ Richard R. Sayers

  	

   

  	

   

  
	

  Notary Public: Richard

  R Sayers

  	

   

  	

  Attest: 

  	

  /s/ Robyn B. Mabe

  
	

   

  	

   

  	

   

  	

  Name:

  	

  Robyn B. Mabe

  
	

  (Notarial Seal)

  	

   

  	

   

  	

  Its:

  	

  Corporate Secretary

  
	

   

  	

   

  	

   

  
	

  My Commission Expires: 

  	

   

  	

  (Corporate Seal)

  
	

  February 28, 1999

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
						

 

19

 

Loan No. 06717

Lawrenceville, GA

 

GUARANTY

 

THE WESTERN SIZZLIN CORPORATION, a Tennessee corporation and THE

WESTERN SIZZLIN STORES OF LITTLE ROCK, INC., an Arkansas corporation (each a

“Guarantor”), as a material inducement to and in consideration of CAPTEC

FINANCIAL GROUP FUNDING CORPORATION, a Michigan corporation, whose address is

24 Frank Lloyd Wright Drive, Lobby L, Ann Arbor, Michigan 48106 (together with

its successors, assigns and transferees, “Lender”), making a loan in the

original principal amount of One Million Five Hundred Thousand and 00/100

Dollars ($1,500,000.00) as evidenced by a Promissory Note, dated March  23, 1998 (“Note”), made by

THE WESTERN SIZZLIN STORES, INC., a Virginia corporation (“Borrower”), which

Note is secured by the instruments referenced therein (together with the Note,

“Loan Documents”), hereby jointly and severally, unconditionally and

irrevocably, personally guarantees to and for the benefit of Lender, and

Lender’s successors and assigns, the full and timely payment and performance of

all of the Borrower’s duties, obligations and covenants under the Loan

Documents. This is a guaranty of payment and performance and not of collection.

 

This Guaranty shall not be affected by Lender’s failure or delay to

enforce any of its rights.

 

Guarantor’s obligations are independent of Borrower’s obligations. If

Borrower defaults under the Loan Documents, Lender can proceed immediately

against Guarantor or Borrower, or both, or Lender can enforce against Guarantor

or Borrower, or both, any rights that it has under the Loan Documents or

pursuant to applicable laws. If any lien created by the Loan Documents

terminates and Lender has any rights it can enforce against Borrower after

termination, Lender can enforce those rights against Guarantor without giving

previous notice to Borrower or Guarantor or without making any demand on either

of them.

 

To the extent permitted by law, Guarantor waives the benefit of any

statute of limitations affecting Guarantor’s liability under this Guaranty.

Guarantor waives the right to require Lender to first or concurrently: (1)

proceed against Borrower; (2) proceed against or exhaust any security that

Lender holds from Borrower; or (3) pursue any other remedy in Lender’s power.

The liability of Guarantor shall not be affected or exonerated by any

indulgence, compromise, settlement or variation of terms which may be extended

by Lender to Borrower, or agreed upon by Lender or Borrower, and, unless agreed

to in writing by Lender, shall not be affected or exonerated by any assignment

by Borrower of its interest in any one or more of the Loan Documents, nor shall

the liability of the Guarantor be affected or exonerated by the insolvency,

bankruptcy (voluntary or involuntary), or reorganization of Borrower, nor by

the voluntary or involuntary liquidation, sale or other disposition of all or

substantially all of the assets of Borrower, or by the release of any other

Guarantor. Lender and Borrower, without notice to or consent by Guarantor, may

at any time or times enter into such modifications, extensions, amendments or

other covenants of the Loan Documents as they may deem appropriate, and

Guarantor shall not be released nor its liability exonerated thereby but shall

continue to be fully liable for the payment and performance of all obligations

and duties of Borrower under the Loan Documents as so modified, extended or

amended.

 

Guarantor further agrees (1) to indemnify and hold harmless Lender from

and against any claims, damages, expenses or losses, including to the extent

permitted by law, all reasonable attorneys’ fees incurred by counsel of

Lender’s choice (whether or not litigation is commenced), resulting from or

arising out of any breach of any provision of the Loan Documents by Borrower or

by reason of Borrower’s failure to perform any of its obligations thereunder,

and (2) to the extent permitted by law, to pay all costs and expenses,

including reasonable attorneys’ fees (whether or not litigation is commenced),

incurred by Lender in enforcing this Guaranty.

 

Until all of Borrower’s obligations to Lender have been discharged in

full, Guarantor has no right of subrogation against Borrower. Guarantor assumes

the responsibility to remain informed of the financial condition of Borrower

and of all other circumstances bearing upon the risk of Borrower’s default,

which reasonable inquiry

 

 

would reveal, and

agrees that Lender shall have no duty to advise Guarantor of information known

to it regarding such condition or any such circumstances. Lender shall not be

required to inquire into the powers of Borrower or the officers, employees,

partners or agents acting or purporting to act on its behalf, and any

indebtedness made or created in reliance upon the professed exercise of such

powers shall be guaranteed under this Guaranty. Each Guarantor hereby

represents and warrants to Lender that such Guarantor has received a copy of

each of the Loan Documents, has read or had the opportunity to read each of the

Loan Documents, and understands the terms of the Loan Documents. The provisions

in the Loan Documents relating to the execution of additional documents, legal

proceedings by Lender against Borrower, severability of the provisions of the

Loan Documents, interpretation of the Loan Documents, notices, waivers

(including waiver of a jury trial), limitation on right of recovery against Lender,

disclaimer of individual liability, and the applicable laws which govern the

interpretation of the Loan Documents are incorporated herein in their entirety

by this reference and made a part hereof as though set forth in full herein;

any reference in those provisions to “Borrower” shall mean each Guarantor and

any reference in those provisions to the “Loan Documents” shall mean this

Guaranty.

 

To the extent permitted by law, Guarantor waives its right to enforce

any remedies that Borrower now has, or later may have, against Lender.

Guarantor waives any right to participate in any security now or later held by

Lender. Guarantor waives notice of acceptance of this Guaranty, and all other

notices in connection with this Guaranty or in connection with the liabilities,

obligations and duties guaranteed hereby, including notices to Guarantor of

default by the Borrower under the Loan Documents. Guarantor hereby waives

diligence, presentment, demand for performance, notice of nonperformance,

protest, notice of protest, notice of dishonor, and notice of acceptance of

this Guaranty, and waives all notices of toe existence, creation, or incurring

of new or additional obligations.

 

If there is more than one Guarantor, the liability of each Guarantor

shall be joint and several. Guarantor’s obligations under this Guaranty shall

be binding on Guarantor’s legal representatives, heirs, successors and assigns.

 

If Borrower disposes of its interest in the property secured by the

Loan Documents, “Borrower”, as used in this Guaranty, shall mean Borrower’s

successors or assigns. Assignment of the Loan Documents by Lender (as permitted

by the Loan Documents) shall not affect this Guaranty. In the event of an

assignment of the Loan Documents by Lender, the term “Lender” as used in this

Guaranty shall mean Lender’s successors or assigns.

 

Guarantor hereby covenants and agrees to deliver to Lender the

following: (a) management prepared and certified consolidated quarterly

financial statements for Guarantor within forty-five (45) days after the end of

the first three (3) quarters of each fiscal year of Guarantor, and (b) annual

consolidated financial statements for Guarantor audited by an independent

certified public accountant within one hundred twenty (120) days after the end

of each fiscal year of Guarantor. Such financial statements shall be true and

correct in all respects, shall be prepared in accordance with generally

accepted accounting principles, and shall fairly represent the respective

financial conditions of the subjects thereof as of the respective dates

thereof. At the request of Lender, Guarantor shall obtain the consent of

Guarantor’s accountant(s) to the inclusion of Guarantor’s most recent financial

statement in any regulatory filing or report to be filed by Lender.

 

If any one or more of the provisions of this Guaranty shall be held to

be invalid, illegal or unenforceable in any respect, such invalidity,

illegality or unenforceability shall not affect any other provision of this

Guaranty, and this Guaranty shall be construed as if such invalid, illegal or

unenforceable provision had never been contained herein.

 

This Guaranty shall be construed according to the laws of the State of

Georgia. Guarantor agrees that any dispute which may arise between Lender and

Guarantor with regard to this Guaranty shall be resolved by litigation in state

or federal court. Litigation may be initiated by Lender or its assignee, at its

discretion, in the State of the principal place of business of Lender or its

assignee, the State of the principal place of business of Guarantor, or the

State where the Collateral (as defined in the Loan Documents) is located.

 

2

 

GUARANTOR

HEREBY KNOWINGLY AND IRREVOCABLY WAIVES ANY OBJECTIONS ON THE GROUNDS OF

IMPROPER JURISDICTION OR VENUE TO AN ACTION INITIATED AS SET FORTH ABOVE AND

AGREES THAT EFFECTIVE SERVICE OF PROCESS MAY BE MADE UPON GUARANTOR BY

REGISTERED MAIL RETURN RECEIPT

REQUESTED. GUARANTOR WAIVES, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY IN

ANY ACTION BETWEEN THE PARTIES.

 

This Guaranty shall become effective on March 31, 1998.

 

THE WESTERN SIZZLIN CORPORATION

 

	

  By:

  	

  Victor F. Foti

  	

   

  
	

   

  	

   

  	

   

  
	

  Its: 

  	

  President

  	

   

  

 

 

THE WESTERN SIZZLIN STORES OF LITTLE

ROCK, INC.

 

	

  By: 

  	

  Victor F. Foti

  	

   

  
	

   

  	

   

  	

   

  
	

  Its: 

  	

  President

  	

   

  

 

3

 

Loan No. 06717

Lawrenceville, GA

 

CERTIFICATE OF BORROWER

 

THE WESTERN SIZZLIN STORES, INC., a Virginia corporation (“Borrower”),

for the benefit of CAPTEC FINANCIAL GROUP FUNDING CORPORATION, a Michigan

corporation (together with its successors, assigns and transferees, “Lender”),

warrants, represents, covenants and agrees that the following are true and

correct as of the date hereof:

 

1.             All

warranties and representations of Borrower contained in this Certificate shall

survive the execution of this Certificate and any advances made in accordance

with the Promissory Note executed by Borrower, in favor of Lender, dated

March   23, 1998, in the original principal

amount of One Million Five Hundred Thousand and 00/100 Dollars ($1,500,000.00)

(“Note”).

 

2.             Borrower

has good, indefeasible and marketable title to the property (“Premises”)

described on Schedule A attached to that certain Security Deed, Security

Agreement and Assignment of Leases and Rents (“Security Deed”) executed by

Borrower in favor of Lender, dated March 31, 1998, free and clear of all liens,

matters, agreements and encumbrances other than the Permitted Liens (as defined

in the Security Deed). Except for the Security Deed and Permitted Liens, there

are no instruments, matters or agreements, and Borrower is not a party to any

instrument, matter or agreement, which will in any way encumber, bind or

otherwise affect the Premises or Lender. Borrower has neither done nor failed

to do anything, nor has suffered anything to be done, as a result of which the

Premises or any part thereof has been or will be encumbered or title thereto

has been or will be affected in any way and no person, firm or entity has any

present, conditional or contingent rights to acquire all or any portion of the

Premises.

 

3.             The survey prepared by

Cofer Technical Services, Inc. and identified as Job No. MISC-616 satisfies the

requirements set forth in Lender’s commitment letter dated November 7, 1997.

 

4.             Borrower

is a corporation duly organized and validly existing in good standing under the

laws of the Commonwealth of Virginia and is qualified to do business in the

State of Georgia.   The person or

persons executing the Note, the Security Deed and the other Loan Documents (as

defined in the Security Deed) and all related documents have full power and

complete authority to execute the Note, the Security Deed and the other Loan

Documents and, when executed, the Note, the Security Deed and the other Loan

Documents will be legal, valid and binding obligations of Borrower, enforceable

in accordance with their terms.

 

5.             As

of the date hereof, Borrower is not “insolvent” within the meaning of Section

548(a)(2)(B) of the United States Bankruptcy Code.

 

6.             Borrower

is in the business of owning and operating Great American Steak & Buffet

Company Restaurants. Borrower’s chief executive office is 416 South Jefferson

Street, Roanoke, Virginia, and the Premises are located at 655 Hwy. 20 North,

Lawrenceville, Georgia.

 

7.             Borrower

has furnished to Lender its most recent annual audited financial statements and

most recent management prepared and certified quarterly financial statements,

which statements were prepared in accordance with generally accepted accounting

principles and are correct and complete and accurately present the financial

condition of Borrower on the dates thereof. 

Further, there has been no material adverse change in the business,

property or condition of Borrower since the date of the most recent financial

statements.

 

8.             The

Premises is free of any liens, except as set forth on the Title Commitment and

approved by Lender and there are no outstanding amounts due any third party

that could give rise to a lien on the Premises if not fully paid when due; to

the best of Borrower’s knowledge, the Premises have been constructed in

accordance

 

 

with any

applicable restrictive covenants; there are no structural defects in the

Project; and the anticipated use complies with applicable zoning ordinances,

regulations and restrictive covenants affecting the Premises.

 

9.             Borrower

has complied and will continue to comply with all applicable laws, rules,

regulations and orders relating to Borrower or any aspect of Borrower’s

business or assets, including, without limit, all environmental laws, rules,

regulations and orders. Borrower agrees to indemnify and hold Lender harmless

against and from all claims, losses and costs resulting from any and all

violations by Borrower of any laws, rules, regulations and/or orders.

 

10.           Borrower

has not received any written notice of, and, to the best knowledge of Borrower,

neither Borrower nor the Premises are in violation of any law, municipal

ordinance or other governmental requirement of any governmental authority.

 

11.           There

do not exist:   (a) any pending or, to

the best knowledge of Borrower, any contemplated annexation or condemnation

proceedings, or private purchase hi lieu thereof, affecting or which may affect

the Premises, or any part thereof, (b) any pending, or, to the best knowledge

of Borrower, any proposed proceeding to change or redefine the zoning

classification of all or any part of the Premises, (c) any pending or, to the

best knowledge of Borrower, any proposed special assessments affecting the

Premises or any portion thereof, (d) any penalties or interest due with respect

to real estate taxes assessed against the Premises and (e) to the best

knowledge of Borrower, any proposed change(s) in any road patterns or grades

with respect to the roads providing ingress and egress to the Premises.

 

12.           There

are no circumstances, state of facts or other matters which, with the passage

of time or the giving of notice, or both, would constitute an Event of Default

under the terms of the Note, the Security Deed or the other Loan Documents.

 

13.           Borrower

has filed all federal, state and local income and other tax returns and other

reports required to be filed prior to the date of this Certificate and Borrower

has paid all taxes, assessments, withholdings and other governmental charges

that are due and payable prior to the date of this Certificate.

 

14.           All

taxes and all installments of assessments and all other charges of any kind

imposed or levied by any governmental authority against either Borrower or the

Premises which are due and payable or constitute a lien at or prior to the date

of this Certificate, together with all interest and penalties due thereon, have

been paid in full.

 

15.           The

Premises are legally occupied by Borrower, and all required certificates of

occupancy, building permits, certificates of environmental impact approval, all

zoning, building, housing, safety, fire and health approvals and all permits

and licenses required by any governmental authority and necessary or advisable

to operate, occupy or use the Premises for the purposes permitted under the

Security Deed have been issued, are unexpired, permanent and unconditional,

and, without cost or risk to Lender, are hereby assigned, to the extent

assignable, to Lender.

 

16.           There

is now fully paid and enforceable fire, liability and other forms of insurance

in such amounts and covering such risks as are required under the Security

Deed.

 

17.            There

are no disputes, litigation or other such proceedings pending or, to the best

of Borrower’s knowledge, threatened against or related to Borrower, the

Premises, the operation or the zoning thereof, nor does Borrower know of any

basis for any such action.

 

18.            All

construction on or at the Premises has been (or will be) performed in a good

and workmanlike manner and has been (or will be) completed and paid for in all

respects and in accordance with the requirements of all governmental

authorities and all applicable governmental and insurance rating board rules,

requirements and regulations.

 

2

 

19.           All public utilities

including, but not limited to, electric, gas, sewer, water, telephone and other

utilities required for the operation of the Premises either enter the Premises

through adjoining public streets, or, if they pass through adjoining private

land, do so in accordance with valid public easements or private easements. All

such public utilities are installed and operating, and all installation and

connection charges have been fully paid. Access to the Premises is over

publicly dedicated streets or through valid, indefeasible easements of record.

 

20.           In

consideration of the loan evidenced by the Note and secured by the Security

Deed and the other Loan Documents, Borrower agrees to indemnify and hold Lender

harmless against all claims, liabilities, losses, deficiencies and damages as

well as reasonable expenses (including attorney’s fees), interest and penalties

related thereto, asserted by any third party against, or incurred by Lender, by

reason of or resulting from any breach, inaccuracy, incompleteness or

nonfulfillment of the covenants, representations and/or warranties of Borrower

contained in this Certificate.

 

21.           Commencing

May 1, 1998 and on the first day of each following month, Lender is authorized

to initiate an electronic funds transfer to pay the monthly installment payment

owing under the Loan from the account designated below, and to receive payments

from such account. This authorization will remain in effect unless the

undersigned requests a modification that is agreed to by the Financial

Institution and Lender; provided, however, that Lender and its successors,

assigns and transferees may modify the place of payment to be made by Borrower

without the consent of the Financial Institution.

 

Financial Institution:

Financial

Institution 

  Address: 

Routing/Transit #: 

Account #:

 

This Certificate shall

become effective on                          

, 1998.

 

	

   

  	

  THE

  WESTERN SIZZLIN STORES, INC.

  
	

   

  	

   

  
	

   

  	

  By

  	

  /s/Victor F. Foti

  	

   

  
	

   

  	

   

  	

  Its

  	

  President

  	

   

  
						

 

3

 

Loan No. 06717

Lawrenceville, GA

 

CERTIFICATE OF GUARANTOR

 

THE WESTERN SIZZLIN CORPORATION, a Tennessee corporation (“Guarantor”),

for the benefit of CAPTEC FINANCIAL GROUP FUNDING CORPORATION, a Michigan

corporation (together with its successors, assigns and transferees, “Lender”),

warrants, represents, covenants and agrees that the following are true and

correct as of the date hereof:

 

1.             Guarantor

has received a copy of that certain Promissory Note, dated March 23 1998 in the

original principal amount of One Million Five Hundred Thousand and 00/100

Dollars ($1,500,000.00) (“Note”) made by THE WESTERN SIZZLIN STORES, INC., a

Virginia corporation (“Borrower”). Guarantor has also received a copy of the

instruments securing the Note, as referenced therein (together with the Note,

the “Loan Documents”). The Loan Documents create a lien with respect to certain

real and personal property located at 655 Hwy. 20 North, Lawrenceville, Georgia

(“Premises”).

 

2.             Guarantor

has had the opportunity to review the Certificate of Borrower, dated even

herewith, made by Borrower for the benefit of Lender, and confirms that the

warranties and representations set forth therein are true and correct as of the

date hereof.

 

3.             Guarantor

has full power and authority to enter into that certain Guaranty executed by

Guarantor in favor of Lender, dated as of the date of this Certificate

(“Guaranty”) and to assume and perform all of Guarantor’s obligations under the

Guaranty in accordance with all of the terms and conditions of the Guaranty.

The execution and delivery of the Guaranty and the performance by Guarantor of

Guarantor’s obligations under the Guaranty and under all documents contemplated

by the Guaranty require no further action or approval.   The Guaranty and all other documents

contemplated by the Guaranty are fully binding and enforceable obligations of

Guarantor.

 

4.             There

are no circumstances, state of facts or other matters which, with the passage

of time or the giving of notice, or both, would constitute an event of default

under the terms of the Guaranty, or to the best of the Guarantor’s knowledge,

under the Loan Documents.

 

5.             There

are no disputes, litigation or other such proceedings pending or, to the best

of the Guarantor’s knowledge, threatened against or related to the Guarantor or

the Premises, nor does Guarantor know of any basis for any such action, except

as disclosed to Lender on Exhibit A hereto.

 

6.             Guarantor

has furnished to Lender its most recent annual audited consolidated financial

statements and most recent management prepared and certified quarterly

consolidated financial statements, which statements were prepared in accordance

with generally accepted accounting principles and are correct and complete and

accurately present the financial condition of Guarantor on the dates

thereof.  Further, there has been no

material adverse change in the business, property or condition of Guarantor

since the date of the most recent financial statements.

 

7.             In

consideration of the loan evidenced by the Note and secured, in part, by the

Loan Documents, the receipt and sufficiency of which Guarantor acknowledges,

and in order to induce Lender to make such loan, Guarantor agrees to indemnify

and hold Lender harmless against all claims, liabilities, losses, deficiencies

and damages as well as reasonable expenses (including attorney’s fees),

interest and penalties related thereto, asserted by any third party against, or

incurred by Lender, by reason of or resulting from any breach, inaccuracy,

incompleteness or nonfulfillment of the covenants, representations and/or

warranties of Guarantor contained in this Certificate.

 

 

This Certificate

shall become effective on March 31,1998.

 

	

   

  	

  THE

  WESTERN SIZZLIN CORPORATION

  
	

   

  	

   

  
	

   

  	

  By

  	

  /s/ Victor F. Foti

  	

   

  
	

   

  	

   

  	

  Its 

  	

  President

  	

   

  
						

 

2

 

Loan No. 06717

Lawrenceville, GA

 

CERTIFICATE OF GUARANTOR

 

THE WESTERN SIZZLIN STORES OF LITTLE ROCK, INC., an Arkansas

corporation (“Guarantor”), for the benefit of CAPTEC FINANCIAL GROUP FUNDING CORPORATION,

a Michigan corporation (together with its successors, assigns and transferees,

“Lender”), warrants, represents, covenants and agrees that the following are

true and correct as of the date hereof:

 

1.             Guarantor

has received a copy of that certain Promissory Note, dated March 23, 1998 in the original

principal amount of One Million Five Hundred Thousand and 00/100 Dollars

($1,500,000.00) (“Note”) made by THE WESTERN SIZZLING STORES, INC., a Virginia

corporation (“Borrower”). Guarantor has also received a copy of the instruments

securing the Note, as referenced therein (together with the Note, the “Loan

Documents”). The Loan Documents create a lien with respect to certain real and

personal property located at 655 Hwy. 20 North, Lawrenceville, Georgia

(“Premises”).

 

2.             Guarantor

has had the opportunity to review the Certificate of Borrower, dated even

herewith, made by Borrower for the benefit of Lender, and confirms that the

warranties and representations set forth therein are true and correct as of the

date hereof.

 

3.             Guarantor

has full power and authority to enter into that certain Guaranty executed by

Guarantor in favor of Lender, dated as of the date of this Certificate

(“Guaranty”) and to assume and perform all of Guarantor’s obligations under the

Guaranty in accordance with all of the terms and conditions of the Guaranty.

The execution and delivery of the Guaranty and the performance by Guarantor of

Guarantor’s obligations under the Guaranty and under all documents contemplated

by the Guaranty require no further action or approval.   The Guaranty and all other documents

contemplated by the Guaranty are fully binding and enforceable obligations of

Guarantor.

 

4.             There

are no circumstances, state of facts or other matters which, with the passage

of time or the giving of notice, or both, would constitute an event of default

under the terms of the Guaranty, or to the best of the Guarantor’s knowledge,

under the Loan Documents.

 

5.             There are no

disputes, litigation or other such proceedings pending or, to the best of the

Guarantor’s knowledge, threatened against or related to the Guarantor, nor does

Guarantor know of any basis for any such action.

 

6.             Guarantor

has furnished to Lender its most recent annual audited consolidated financial

statements and most recent management prepared and certified quarterly

consolidated financial statements, which statements were prepared in accordance

with generally accepted accounting principles and are correct and complete and

accurately present the financial condition of Guarantor on the dates

thereof.  Further, there has been no

material adverse change in the business, property or condition of Guarantor

since the date of the most recent financial statements.

 

7.             In

consideration of the loan evidenced by the Note and secured, in part, by the

Loan Documents, the receipt and sufficiency of which Guarantor acknowledges,

and in order to induce Lender to make such loan, Guarantor agrees to indemnify

and hold Lender harmless against all claims, liabilities, losses, deficiencies

and damages as well as reasonable expenses (including attorney’s fees),

interest and penalties related thereto, asserted by any third party against, or

incurred by Lender, by reason of or resulting from any breach, inaccuracy,

incompleteness or nonfulfillment of the covenants, representations and/or

warranties of Guarantor contained in this Certificate.

 

 

This Certificate shall become effective on March 31, 1998.

 

	

   

  	

  THE

  WESTERN SIZZLIN STORES OF LITTLE ROCK, INC.

  
	

   

  	

   

  
	

   

  	

  By

  	

  /s/ Victor F. Foti

  	

   

  
	

   

  	

   

  	

  Its 

  	

  President

  	

   

  
						

 

2

 

Loan No. 06717

655 Hwy. 20 North,

Lawrenceville, Georgia

 

CONSENT AND SUBORDINATION AGREEMENT

 

THIS CONSENT AND SUBORDINATION AGREEMENT (“Agreement”) is made and

entered into as of the 9 day of May 2002, by and among Linda M, Low and Steve

Yu Lam (collectively, the “tenant” ); Western Sizzlin Stores, Inc., a Virginia

corporation (“Borrower); and WELLS FARGO BANK MINNESOTA NATIONAL ASSOCIATION,

national banking association, as the Indenture Trustee on behalf of the holders

of FRANCHISE LOAN TRUST 1998-1, a Delaware business trust and issuer of the

FRANCHISE LOAN NOTES SERIES 1998-1 (“Lender”) whose address is c/o Captec

Financial Group, Inc., 24 Frank Lloyd Wright Drive, Lobby L, 4th Floor, P.O.

Box 544, Ann Arbor, Michigan 48106-0544. This instrument shall become effective

upon execution.

 

PRELIMINARY STATEMENT

 

In order to secure a loan of $1,500,000 from a predecessor-in-interest

to Lender, Borrower has executed a Deed to Secure Debt, Security Agreement and

Assignment of Leases (the “Mortgage/Trust Deed”), dated March 23, 1998 and

recorded at Book 15762, page 215 in the office of the Clerk of the Superior

Court in Gwinnett County in the State of Georgia, granting that certain parcel

of real property and the improvements thereon owned by it located at 655 Hwy.

20 North, Lawrenceville, Georgia as more

particularly described in Exhibit A attached hereto, the “Property”) to Captec

Financial Funding Corporation.

 

Lender has succeeded to the interest of Captec Financial Funding

Corporation under the Mortgage/Trust Deed.

 

The Mortgage/Trust Deed requires Borrower to obtain the consent of

Lender to that certain lease, dated October 1, 2000, pursuant to which Tenant

leases the property from Borrower (as attached hereto as Exhibit B, the

“Lease”)

 

Lender has agreed to consent to the Lease, provided that Tenant confirm

that the Lease is subordinate to the lien of the Mortgage/Trust Deed, consent

to the collateral assignment of the Lease by Borrower in favor of Lender, and

agree to certain additional notice and rental payment requirements.

 

FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which is

acknowledged, the parties agree as follows:

 

1.               CONSENTS.

Lender hereby consents to the Lease from Borrower to Tenant in the form

attached hereto as Exhibit B. Tenant hereby consents to the collateral

assignment of the Lease to Lender by Borrower.

 

2.               SUBORDINATION.  The Lease, and the rights of Tenant in, to

and under the Lease and the Property, are hereby made subject, junior and

subordinate in all respects to the Mortgage/Trust Deed and to all renewals,

modifications, consolidations, replacements and extensions of me Mortgage/Trust

Deed and to the rights of Lender, its successors and assigns under the Mortgage/Trust

Deed, as if all such instruments had been executed, delivered and recorded

prior to the execution of the Lease. This clause shall be self-operative, and

no further instrument shall be required. However, Tenant covenants and agrees

that if requested by Lender, Tenant will promptly execute, acknowledge and

deliver any instrument or document reasonably requested by Lender to confirm

the foregoing subordination of the Lease.

 

3.               ADVANCE

RENTAL PAYMENT. 

Notwithstanding any provision, term or condition of the Lease, Tenant

hereby agrees that it shall not pay any rental amounts due under the Lease more

than thirty (30) days in advance of the due date for such payment under the

Lease.

 

4.               PRESERVATION

OF LEASE COLLATERAL. Notwithstanding any provision, term

or condition of the Lease, Tenant hereby agrees that it will not assign,

mortgage, pledge, hypothecate or use the Lease

 

A-1

 

as collateral

without the express written consent of Lender, In addition, Tenant acknowledges

and agrees that it shall in no event permit any contractor or subcontractors

engaged on its behalf to place or attain mechanics liens on the leasehold or

fee interest in the Property and Tenant hereby indemnifies and holds harmless

Borrower and Leader from (i) any and all claims made by any contractor or

subcontractor in connection with such liens against either of them (ii) all

costs or expenses (including reasonable attorneys’ fees) actually incurred by

either or both of them to remove or pay off such liens. Finally, Tenant agrees

to provide Lender with copies of all notice sent by Tenant to Borrower under

the Lease (including without limitation any notices of default or termination).

 

4                TERMINATION

OF LEASE. In the event that Lender forecloses upon the Property

or takes a deed in lieu of foreclosure, the Lease shall terminate concurrently.

Notwithstanding the foregoing, Lender may, at its option, elect to enter into a

new lease agreement with Tenant for the Property for a term equal to the term

of the Lease before giving effect to the termination, and on such other terms

as Lender may require in its sole and absolute discretion.

 

5.               CONFLICT.

The terms of this Agreement shall control in the event of any conflict between

the terms of this Agreement and the terms of the Lease.

 

6.             Miscellaneous.

Borrower and Lender further agree as follows:

 

(a)                                                                               Governing

Law.  This Agreement shall be construed according to the laws of

the State of Georgia

 

(b)                                                                              Successors

and Assigns. Except as otherwise provided herein, this

Agreement shall be binding upon and shall inure to the benefit of the permitted

successors and assigns of each party to this Agreement.

 

(c)         Notices. Notice

from one party to another relating to this Agreement shall be deemed effective

if made in writing (including telecommunications) and delivered to the

recipient’s address, telex number or telecopier number set forth in this

Agreement by any of the following means: (i)hand delivery, (ii) registered or

certified mail, postage prepaid, (iii) express mail or other overnight courier

service, or (iv) telecopy, telex or other wire transmission with request for

assurance of receipt in a manner typical with respect to communications of that

type. Notice made in accordance with these provisions shall be deemed delivered

on receipt if delivered by hand or wire transmission, on the third business day

after mailing if mailed by registered or certified mail, or on the next

business day after mailing or deposit with the postal service or an overnight courier

service if delivered by express mail or overnight courier.   Tenant’s telecopier number is (   ) 995-7969 Borrower’s telecopier number is

(540) 345-0831 and Lender’s telecopier number is (734) 994-1376.

 

(d)           Amendments. Any

amendment of this Agreement shall be in writing and shall require the signature

of Tenant, Borrower and Lender,

 

(e)           Partial Invalidity.

The invalidity or unenforceability of any provision of this Agreement shall not

affect the validity or enforceabiljty of the remaining provisions of this

Agreement.

 

(f)            Fees and

Expenses. Borrower or Tenant, as the case may be, shall

pay to Lender all of Lender’s expenses, including reasonable attorneys’ fees

and expenses, and disbursements for title searches, appraisals, credit reports

and other expenses, related to the preparation and/or enforcement of this

Agreement and any otber document evidencing and/or securing the Loan.

 

(g)           WAIVER OF JURY TRIAL.  TENANT, 

BORROWER  AND LENDER ACKNOWLEDGE

THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE

WAIVED.  EACH PARTY, AFTER CONSULTING

(OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE,

KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY RIGHT TO TRIAL

BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF,

OR IN ANY WAY RELATED TO, THIS AGREEMENT.

 

A-2

 

(g)           Assignment.

This Agreement is freely assignable, in whole or in part, by Lender without

notice to or consent of Borrower or Tenant. Lender shall be fully discharged

from all responsibility accruing hereunder from and after the effective date of

any such assignment. Lender’s assignee shall, to the extent of the assignment,

be vested with all the powers and rights of Lender hereunder, and to the extent

of such assignment the assignee may fully enforce such rights and powers, and

all references to Lender shall mean and refer to such assignee. Lender shall

retain all rights and powers hereby given not so assigned, transferred and/or

delivered. Borrower and Tenant hereby waive all defenses which Borrower or

Tenant may be entitled to assert against Lender’s assignee with respect to

liability accruing hereunder prior to the effective date of any assignment of

Lender’s interest herein.  Neither

Borrower nor Tenant may, in whole or in part, directly or indirectly, assign

this Agreement or their respective rights hereunder or delegate their

respective duties hereunder without, in each instance, the specific prior

written consent of Lender, which consent may be withheld or delayed in Lender’s

sole discretion.

 

(h)           Securitization.

Borrower and Tenant understand and agree that Lender may, from time to time,

assign its rights and powers under this Agreement, in whole or in part, in connection

with a securitization program.  Borrower

and Tenant agree to enter into an amendment to the Agreement if such amendments

are required by a nationally recognized rating agency in connection with a

securitization program sponsored by Lender and in which this Agreement is to be

included.

 

A-3

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the

day and year noted above.

 

	

  WITNESSES:

  	

   

  	

  TENANT

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  /s/  [ILLEGIBLE]

  	

   

  	

  /s/ Linda M. Low

  	

   

  
	

   

  	

   

  	

  Linda M. Low

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  /s/ [ILLEGIBLE]

  	

   

  	

  /s/ Steve Yu Lam

  	

   

  
	

   

  	

  Steve Yu Lam

  	

   

  

 

 

	

   

  	

   

  	

  BORROWER:

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

  WESTERN S1ZZLIN STORES,

  INC.

  
	

   

  	

   

  	

   

  	

   

  
	

  /s/ [ILLEGIBLE]

  	

   

  	

   

  	

  /s/ Victor Foti

  	

   

  
	

   

  	

   

  	

  Its:

  	

  Pres. & CEO

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  /s/ Renee L. Luckhardt

  	

   

  	

   

  	

   

  	

   

  
	

  Renee L. Luckhardt

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  /s/ Siobhan Lyle

  	

   

  	

   

  	

   

  	

   

  
	

  Siobhan Lyle

  	

   

  	

   

  	

   

  	

   

  
								

 

 

 

	

   

  	

  LENDER:

  
	

   

  	

   

  
	

   

  	

  WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, a

  National banking association, as the Indenture Trustee on behalf of the

  holders of FRANCHISE LOAN TRUST 1998-1, a Delaware business trust and issuer

  of the FRNACHISE LOAN NOTES SERIES I998-1, by BNY ASSET SOLUTIONS LLC, a

  Delaware limited liability company, Its Servicer

  
	

   

  	

   

  
	

   

  	

  By: Captec Financial

  Group, Inc., a Michigan Corporation 

  its Attorney-in-Fact

  
	

   

  	

   

  
	

   

  	

  By

  	

  /s/ Gary A Bruder

  
	

   

  	

   

  	

  Gary A Bruder

  
	

   

  	

   

  	

   

  
	

   

  	

  Its:

  	

  Vice President

  

 

A-4

 

	

  COMMONWEALTH OF VIRGINIA

  	

  )

  	

   

  
	

   

  	

  )

  	

   

  
	

  COUNTY OF

  	

   

  	

  )

  	

   

  
				

 

I,                           ,  a

notary public in and for the State and County aforesaid, do certify that Steve

Yu Lam and Linda M. Low, whose names are signed to the writing above, bearing

date on the         day of            ,2002 have acknowledged the same

before me in my county aforesaid.

 

Given under my hand and

official seal this        day of                       , 2002.

 

My term of office expires on the          day of                   

 

Notary Public 

[Notary Public’s Seal] 

Notary Public 

[Notary Public’s Seal]

 

	

  COMMONWEALTH OF

  VIRGINIA

  	

  )

  	

   

  
	

   

  	

  )

  	

   

  
	

  CITY OF ROANOKE

  	

  )

  	

   

  
	

   

  	

   

  	

   

  

 

I, Melody J.

Shockley, a notary public in and for the State and County aforesaid, do certify

that Victor F. Foti, whose name, as Pres & CEO of The Western Sizzlin

Stores, Inc., is signed to the writing above, bearing date on the 9th day of

January, 2002 has acknowledged the same before me in my county aforesaid.

 

Given under my

hand and official seal this 9th day of January 2002.

 

My term of office

expires February 29,2004

 

                                                                                                                                                

	

  Notary Public

  	

  /s/ Melody J. Schockley

  
	

  [Notary Public’s Seal]

  
	

   

  

 

	

  STATE OF MICHIGAN

  	

  )

  
	

   

  	

  ) ss.

  
	

  COUNTY OF WASHTENAW

  	

  )

  
	

   

  	

   

  

 

                The

foregoing instrument was acknowledged before me this 9 day of May 2002, by Gary

A. Bruder, the Vice President of Captec Financial Group, Inc., a Michigan

corporation, as the attorney-in-fact for BNY Asset Solutions LLC, a Delaware

limited liability company as Servicer for Wells Fargo Bank Minnesota, N.A., a

national banking association, as Indenture Trustee on behalf of the holders of

Franchise Loan Trust 1998-1, a Delaware business trust and issuer of the

Franchise Loan Notes Series 1998-1 .

 

	

   

  	

  /s/ Jennifer L. Tingley

  	

   

  
	

   

  	

  Jennifer L. Tingley Notary Public

  
	

   

  	

  Washtenaw County, Michigan

  
	

   

  	

  My Commission Expires:

  

 

A-5

 

Loan No. 06717

655 Hwy. 20 North

Lawrenceville,

Georgia

 

COLLATERAL ASSIGNMENT OF LEASE

 

THIS COLLATERAL ASSIGNMENT OF LEASE AND OPTION RIGHTS

(“Assignment”) is made as of the 9

day of May 2002, by THE WESTERN SIZZLIN STORES, INC., a Virginia corporation,

whose address is P. O. Box 12167, Roanoke, VA 24023-2167 (“Assignor”), in favor

of NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION (N.K.A. WELLS FARGO BANK

MINNESOTA, NATIONAL ASSOCIATION) as the Indenture Trustee on behalf of the

holders of Franchise Loan Trust 1998-1, a Delaware business trust and issuer of

the Franchise Loan Notes Series 1998-1, (“Assignee”) whose address is c/o

Captec Financial Group Funding Corporation, 24 Frank Lloyd Wright Drive, Lobby

L, 4th Floor, P.O. Box 544, Ann Arbor, Michigan 48106-0544. This instrument

shall become effective on May 9, 2002.

 

WHEREAS, Assignor, as lessor, and Steve Yu Lam and Linda M. Low, as

lessees (together, the “Lessee”) entered in that certain leases (the “Lease”)

dated as of October 1, 2001, respecting the premises commonly known as 655 Hwy.

20 North, Lawrenceville, Georgia (the “Premises”).

 

WHEREAS, Assignor executed that certain Promissory Note (the “Note”),

dated March 23, 1998, in favor of the Assignee in the original principal amount

of One Million Five Hundred Thousand and 00/100 Dollars ($1,500,000.00).

 

WHEREAS, in order to secure the consent of the Assignee to the Lease,

Assignor has agreed, among other things, to collaterally assign its interest in

the Lease as security for its indebtedness under the Note.

 

NOW THEREFORE, the Assignor and Assignee agree as follows:

 

For good and valuable consideration, the receipt and sufficiency of

which is hereby acknowledged, Assignor presently assigns to Assignee all of

Assignor’s right, title and interest in and to the Lease. This Assignment is

for collateral purposes only, and except as specified herein, Assignee shall

have no liability or obligation of any kind whatsoever arising from or in

connection with this Assignment or the Lease unless Assignee shall take

possession of the Premises and assume the obligations of Assignor thereunder.

 

Assignor represents and warrants to Assignee that (i) a true, correct

and complete copy of the Lease is attached to this Assignment as Exhibit A and

made a part hereof and (ii) it has full power and authority to so assign the

Lease and its interest therein and that Assignor has not previously, and is not

obligated to, assign or transfer any of its interest in the Lease or the

Premises.

 

Assignor shall send Assignee a copy of any and all notices sent by

Assignor as lessor under the Lease.

 

If an “Event of Default” occurs under the Note or under any documents

or instruments securing the Note, Assignee shall have the right and is hereby

empowered to take possession of the Premises and expel Assignor therefrom. In

such event, Assignor shall have no further right, title or interest in the

Lease, but shall remain liable to Assignee for all past due amounts under the

Lease.

 

Assignor agrees that it will not suffer or permit any surrender,

termination, amendment or modification of the Lease without the prior written

consent of Assignee, which consent shall not be unreasonably withheld. At the

request of Assignee, Assignor shall provide Assignee with rent payment or such

other information regarding the Lease as Assignee shall reasonably require.

 

This Assignment shall be governed by the laws of the Commonwealth of

Virginia.

 

This Assignment may be executed in one or more counterparts, each of

which shall constitute an original and all of which together shall constitute

one and the same instrument.

 

[SIGNATURE PAGE FOLLOWS]

 

 

IN WITNESS

WHEREOF, Assignor has executed this Assignment as of the day and year noted

above.

 

 

 

	

  Witnesses:

  	

  ASSIGNOR:

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  THE

  WESTERN SIZZLIN STORES, INC.

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

  By: 

  	

  /s/ Victor F. Foti

  	

   

  
	

   

  	

   

  
	

   

  	

  Its: 

  	

  Pres. & CEO

  	 

							

 

	

  COMMONWEALTH OF VIRGINIA

  	

  )

  
	

   

  	

  )

  
	

  City of Roanoke

  	

  )

  

 

I, Melody

Shockley, a notary public in and for the State and County aforesaid, do certify

that Victor F. Foti, whose name. as Pres. & CEO  of The Western Sizzlin Stores, Inc., is signed to the writing

above, bearing date on the 9th day of January has acknowledged the same before

me in my county aforesaid.

 

Given under my hand and official seal this 9th day of January, 2002.

 

My Commission Expires February 29, 2004

 

My term of office expires on the        day of

 

	

   

  	

  Notary Public

  	

  /s/ Melody Shockley

  	

   

  
	

   

  	

  [Notary Public's Seal]

  

 

 

2

 

EXHIBIT A

 

Land situated in

Lawrenceville, Georgia, described as follows:

 

[LEGAL

DESCRIPTION]

 

 

EXHIBIT B

 

LEASE

 

 

Loan No. 06717

 

AFFIRMATION OF GUARANTY

 

May 9  ,2002

 

The undersigned guarantor (“Guarantor”) hereby acknowledges and agrees

that it executed a guaranty, dated March 23, 1998 (the “Guaranty”) in favor of

Captec Financial Group Funding Corporation (“Original Lender”), its successors

and assigns of the loan obligations of The Western Sizzlin Stores, Inc.

(“Borrower”) in connection with certain loan from Original Lender to Borrower

in the original amount of $1,500,000 made pursuant to a Promissory Note dated

March 23, 1998. The Guarantor certifies to Original Lender, its successors and

assigns, that (i) a true, correct and complete copy of the Guaranty is attached

hereto as Exhibit A, (ii) the undersigned Guarantor has notice of, and consents

to, the terms and conditions of the Letter of Credit, dated as of November 20,

2001 issued by Branch Banking and Trust Company of Virginia in favor of Wells

Fargo Bank Minnesota, National Association, a national banking association, as

the Indenture Trustee on behalf of the holders of Franchise Loan Trust 1998-1,

a Delaware business trust and issuer of the Franchise Loan Notes Series 1998-1

and Captec Fmancial Group, Inc., (collectively, “Lender”), and (iii) the

Guarantor hereby irrevocably ratifies, confirms and acknowledges its continuing

obligations to Lender under the Guaranty.

 

	

   

  	

  GUARANTOR:

  
	

   

  	

   

  
	

   

  	

  The Western Sizzlin Stores of Little Rock, Inc.

  
	

   

  	

  By:

  	

  /s/ Victor F. Foti

  
	

   

  	

   

  	

  Name:

  	

  Victor F. Foti

  
	

   

  	

   

  	

  Title:

  	

  Pres. & C. E. O.

  
					

 

 

 

Exhibit A

Guaranty

 

 

C-1

 

Loan No. 06717

Lawrenceville, GA

 

GUARANTY

 

THE WESTERN SIZZLIN CORPORATION, a Tennessee corporation and THE

WESTERN SIZZLIN STORES OF LITTLE ROCK, INC., an Arkansas corporation (each a

“Guarantor”), as a material inducement to and in consideration of CAPTEC

FINANCIAL GROUP FUNDING CORPORATION, a Michigan corporation, whose address is

24 Frank Lloyd Wright Drive, Lobby L, Ann Arbor, Michigan 48106 (together with

its successors, assigns and transferees, “Lender”), making a loan in the

original principal amount of One Million Five Hundred Thousand and 00/100

Dollars ($1,500,000.00) as evidenced by a Promissory Note, dated March 23 1998

(“Note”), made by THE WESTERN SIZZLIN STORES, INC., a Virginia corporation

(“Borrower”), which Note is secured by the instruments referenced therein

(together with the Note, “Loan Documents”), hereby jointly and severally,

unconditionally and irrevocably, personally guarantees to and for the benefit

of Lender, and Lender’s successors and assigns, the full and timely payment and

performance of all of the Borrower’s duties, obligations and covenants under

the Loan Documents. This is a guaranty of payment and performance and not of

collection.

 

This Guaranty shall not be affected by Lender’s failure or delay to

enforce any of its rights.

 

Guarantor’s obligations are independent of Borrower’s obligations. If

Borrower defaults under the Loan Documents, Lender can proceed immediately

against Guarantor or Borrower, or both, or Lender can enforce against Guarantor

or Borrower, or both, any rights that it has under the Loan Documents or

pursuant to applicable laws. If any lien created by the Loan Documents

terminates and Lender has any rights it can enforce against Borrower after

termination, Lender can enforce those rights against Guarantor without giving

previous notice to Borrower or Guarantor or without making any demand on either

of them.

 

To the extent permitted by law, Guarantor waives the benefit of any

statute of limitations affecting Guarantor’s liability under this Guaranty.

Guarantor waives the right to require Lender to first or concurrently: (1)

proceed against Borrower; (2) proceed against or exhaust any security that

Lender holds from Borrower; or (3) pursue any other remedy in Lender’s power.

The liability of Guarantor shall not be affected or exonerated by any

indulgence, compromise, settlement or variation of terms which may be extended

by Lender to Borrower, or agreed upon by Lender or Borrower, and, unless agreed

to in writing by Lender, shall not be affected or exonerated by any assignment

by Borrower of its interest in any one or more of the Loan Documents, nor shall

the liability of the Guarantor be affected or exonerated by the insolvency,

bankruptcy (voluntary or involuntary), or reorganization of Borrower, nor by

the voluntary or involuntary liquidation, sale or other disposition of all or

substantially all of the assets of Borrower, or by the release of any other

Guarantor. Lender and Borrower, without notice to or consent by Guarantor, may

at any time or times enter into such modifications, extensions, amendments or

other covenants of the Loan Documents as they may deem appropriate, and

Guarantor shall not be released nor its liability exonerated thereby but shall

continue to be fully liable for the payment and performance of all obligations

and duties of Borrower under the Loan Documents as so modified, extended or

amended.

 

Guarantor further agrees (1) to indemnify and hold harmless Lender from

and against any claims, damages, expenses or losses, including to the extent

permitted by law, all reasonable attorneys’ fees incurred by counsel of

Lender’s choice (whether or not litigation is commenced), resulting from or

arising out of any breach of any provision of the Loan Documents by Borrower or

by reason of Borrower’s failure to perform any of its obligations thereunder,

and (2) to the extent permitted by law, to pay all costs and expenses,

including reasonable attorneys’ fees (whether or not litigation is commenced),

incurred by Lender in enforcing this Guaranty.

 

Until all of Borrower’s obligations to Lender have been discharged hi

full, Guarantor has no right of subrogation against Borrower. Guarantor assumes

the responsibility to remain informed of the financial condition of Borrower

and of all other circumstances bearing upon the risk of Borrower’s default,

which reasonable inquiry

 

 

would reveal, and

agrees that Lender shall have no duty to advise Guarantor of information known

to it regarding such condition or any such circumstances. Lender shall not be

required to inquire into the powers of Borrower or the officers, employees,

partners or agents acting or purporting to act on its behalf, and any

indebtedness made or created in reliance upon the professed exercise of such

powers shall be guaranteed under this Guaranty. Each Guarantor hereby

represents and warrants to Lender that such Guarantor has received a copy of

each of the Loan Documents, has read or had the opportunity to read each of the

Loan Documents, and understands the terms of the Loan Documents. The provisions

in the Loan Documents relating to the execution of additional documents, legal

proceedings by Lender against Borrower, severability of the provisions of the

Loan Documents, interpretation of the Loan Documents, notices, waivers

(including waiver of a jury trial), limitation on right of recovery against

Lender, disclaimer of individual liability, and the applicable laws which

govern the interpretation of the Loan Documents are incorporated herein in

their entirety by this reference and made a part hereof as though set forth in

full herein; any reference in those provisions to “Borrower” shall mean each

Guarantor and any reference in those provisions to the “Loan Documents” shall

mean this Guaranty.

 

To the extent permitted by law, Guarantor waives its right to enforce

any remedies that Borrower now has, or later may have, against Lender.

Guarantor waives any right to participate in any security now or later held by

Lender. Guarantor waives notice of acceptance of this Guaranty, and all other

notices in connection with this Guaranty or in connection with the liabilities,

obligations and duties guaranteed hereby, including notices to Guarantor of

default by the Borrower under the Loan Documents. Guarantor hereby waives

diligence, presentment, demand for performance, notice of nonperformance,

protest, notice of protest, notice of dishonor, and notice of acceptance of

this Guaranty, and waives all notices of the existence, creation, or incurring

of new or additional obligations.

 

If there is more than one Guarantor, the liability of each Guarantor

shall be joint and several. Guarantor’s obligations under this Guaranty shall

be binding on Guarantor’s legal representatives, heirs, successors and assigns.

 

If Borrower disposes of its interest in the property secured by the

Loan Documents, “Borrower”, as used in this Guaranty, shall mean Borrower’s

successors or assigns. Assignment of the Loan Documents by Lender (as permitted

by the Loan Documents) shall not affect this Guaranty. In the event of an

assignment of the Loan Documents by Lender, the term “Lender” as used in this

Guaranty shall mean Lender’s successors or assigns.

 

Guarantor hereby covenants and agrees to deliver to Lender the

following: (a) management prepared and certified consolidated quarterly

financial statements for Guarantor within forty-five (45) days after the end of

the first three (3) quarters of each fiscal year of Guarantor, and (b) annual

consolidated financial statements for Guarantor audited by an independent

certified public accountant within one hundred twenty (120) days after the end

of each fiscal year of Guarantor. Such financial statements shall be true and

correct in all respects, shall be prepared in accordance with generally

accepted accounting principles, and shall fairly represent the respective financial

conditions of the subjects thereof as of the respective dates thereof. At the

request of Lender, Guarantor shall obtain the consent of Guarantor’s

accountant(s) to the inclusion of Guarantor’s most recent financial statement

in any regulatory filing or report to be filed by Lender.

 

If any one or more of the provisions of this Guaranty shall be held to

be invalid, illegal or unenforceable in any respect, such invalidity,

illegality or unenforceability shall not affect any other provision of this Guaranty,

and this Guaranty shall be construed as if such invalid, illegal or

unenforceable provision had never been contained herein.

 

This Guaranty shall be construed according to the laws of the State of

Georgia. Guarantor agrees that any dispute which may arise between Lender and

Guarantor with regard to this Guaranty shall be resolved by litigation in state

or federal court. Litigation may be initiated by Lender or its assignee, at its

discretion, in the State of the principal place of business of Lender or its

assignee, the State of the principal place of business of Guarantor, or the

State where the Collateral (as defined hi the Loan Documents) is located.

 

2

 

GUARANTOR

HEREBY KNOWINGLY AND IRREVOCABLY WAIVES ANY OBJECTIONS ON THE GROUNDS OF

IMPROPER JURISDICTION OR VENUE TO AN ACTION INITIATED AS SET FORTH ABOVE AND

AGREES THAT EFFECTIVE SERVICE OF PROCESS MAY BE MADE UPON GUARANTOR BY

REGISTERED MAIL RETURN RECEIPT REQUESTED. GUARANTOR WAIVES, TO THE EXTENT

PERMITTED BY LAW, TRIAL BY JURY IN ANY ACTION BETWEEN THE PARTIES.

 

This Guaranty shall become effective on  March 31, 1998.

 

	

  THE WESTERN SIZZLIN CORPORATION

  	

   

  	 

	

   

  	

   

  	 

	

   

  	

  By: Victor F. Foti

  	

   

  	

   

  	 

	

   

  	

  Its: President

  	

   

  	

   

  	 

	

   

  	

   

  	 

	

  THE

  WESTERN SIZZLIN STORES OF LITTLE ROCK, INC.

  	

   

  	 

	

   

  	

   

  	 

	

   

  	

  /s/ Victor F. Foti

  	

   

  	

   

  	 

	

   

  	

   

  	

   

  	 

	

   

  	

  Its: 

  	

  President

  	

   

  	

   

  
										

 

3

 

Loan No. 06717

 

AFFIRMATION OF GUARANTY

 

May 9,    2002

 

The undersigned guarantor (“Guarantor”) hereby acknowledges and agrees

that it executed a guaranty, dated March 23, 1998 (the “Guaranty”) in favor of

Captec Financial Group Funding Corporation (“Original Lender”), its successors

and assigns of the loan obligations of The Western Sizzlin Stores, Inc.

(“Borrower”) in connection with certain loan from Original Lender to Borrower

in the original amount of $1,500,000 made pursuant to a Promissory Note dated

March 23, 1998. The Guarantor certifies to Original Lender, its successors and

assigns, that (i) a true, correct and complete copy of the Guaranty is attached

hereto as Exhibit A, (ii) the undersigned Guarantor has notice of, and consents

to, the terms and conditions of the Letter of Credit, dated as of November 20,

2001 issued by Branch Banking and Trust Company of Virginia in favor of Wells Fargo

Bank Minnesota, National Association, a national banking association, as the

Indenture Trustee on behalf of the holders of Franchise Loan Trust 1998-1, a

Delaware business trust and issuer of the Franchise Loan Notes Series 1998-1

and Captec Financial Group, Inc. (collectively, “Lender”), and (iii) the

Guarantor hereby irrevocably ratifies, confirms and acknowledges its continuing

obligations to Lender under the Guaranty.

 

	

   

  	

  GUARANTOR:

  	 

	

   

  	

   

  	 

	

   

  	

  The Western Sizzlin

  Corporation

  	 

	

   

  	

  By:

  	

   /s/ Victor F. Foti

  	

   

  
	

   

  	

   

  	

  Name:

  	

  Victor F. Foti

  	

   

  	 

	

   

  	

   

  	

  Title : 

  	

  PRES. & C.E.O.

  	

   

  	 

								

 

 

Exhibit A

 

Guaranty

 

 

 

C-1

 

Loan No. 06717

Lawrenceville, GA

 

GUARANTY

 

THE WESTERN SIZZLIN

CORPORATION, a Tennessee corporation and THE WESTERN SIZZLIN STORES OF LITTLE

ROCK, INC., an Arkansas corporation (each a “Guarantor”), as a material

inducement to and in consideration of CAPTEC FINANCIAL GROUP FUNDING

CORPORATION, a Michigan corporation, whose address is 24 Frank Lloyd Wright

Drive, Lobby L, Ann Arbor, Michigan 48106 (together with its successors,

assigns and transferees, “Lender”), making a loan in the original principal

amount of One Million Five Hundred Thousand and 00/100 Dollars ($1,500,000.00)

as evidenced by a Promissory Note, dated March 23 1998 (“Note”), made by THE

WESTERN SIZZLIN STORES, INC., a Virginia corporation (“Borrower”), which Note

is secured by the instruments referenced therein (together with the Note, “Loan

Documents”), hereby jointly and severally, unconditionally and irrevocably,

personally guarantees to and for the benefit of Lender, and Lender’s successors

and assigns, the full and timely payment and performance of all of the

Borrower’s duties, obligations and covenants under the Loan Documents. This is

a guaranty of payment and performance and not of collection.

 

This Guaranty shall not be affected by Lender’s failure or delay to

enforce any of its rights.

 

Guarantor’s obligations are independent of Borrower’s obligations. If

Borrower defaults under the Loan Documents, Lender can proceed immediately

against Guarantor or Borrower, or both, or Lender can enforce against Guarantor

or Borrower, or both, any rights that it has under the Loan Documents or

pursuant to applicable laws. If any lien created by the Loan Documents terminates

and Lender has any rights it can enforce against Borrower after termination,

Lender can enforce those rights against Guarantor without giving previous

notice to Borrower or Guarantor or without making any demand on either of them.

 

To the extent permitted by law, Guarantor waives the benefit of any

statute of limitations affecting Guarantor’s liability under this Guaranty.

Guarantor waives the right to require Lender to first or concurrently: (1)

proceed against Borrower; (2) proceed against or exhaust any security that

Lender holds from Borrower; or (3) pursue any other remedy in Lender’s power.

The liability of Guarantor shall not be affected or exonerated by any

indulgence, compromise, settlement or variation of terms which may be extended

by Lender to Borrower, or agreed upon by Lender or Borrower, and, unless agreed

to in writing by Lender, shall not be affected or exonerated by any assignment

by Borrower of its interest in any one or more of the Loan Documents, nor shall

the liability of the Guarantor be affected or exonerated by the insolvency,

bankruptcy (voluntary or involuntary), or reorganization of Borrower, nor by

the voluntary or involuntary liquidation, sale or other disposition of all or

substantially all of the assets of Borrower, or by the release of any other

Guarantor. Lender and Borrower, without notice to or consent by Guarantor, may

at any time or times enter into such modifications, extensions, amendments or

other covenants of the Loan Documents as they may deem appropriate, and

Guarantor shall not be released nor its liability exonerated thereby but shall

continue to be fully liable for the payment and performance of all obligations

and duties of Borrower under the Loan Documents as so modified, extended or

amended.

 

Guarantor further agrees (1) to indemnify and hold harmless Lender from

and against any claims, damages, expenses or losses, including to the extent

permitted by law, all reasonable attorneys’ fees incurred by counsel of

Lender’s choice (whether or not litigation is commenced), resulting from or

arising out of any breach of any provision of the Loan Documents by Borrower or

by reason of Borrower’s failure to perform any of its obligations thereunder,

and (2) to the extent permitted by law, to pay all costs and expenses,

including reasonable attorneys’ fees (whether or not litigation is commenced),

incurred by Lender in enforcing this Guaranty.

 

Until all of Borrower’s obligations to Lender have been discharged in

full, Guarantor has no right of subrogation against Borrower. Guarantor assumes

the responsibility to remain informed of the financial condition of Borrower

and of all other circumstances bearing upon the risk of Borrower’s default,

which reasonable inquiry

 

 

would reveal, and

agrees that Lender shall have no duty to advise Guarantor of information known

to it regarding such condition or any such circumstances. Lender shall not be

required to inquire into the powers of Borrower or the officers, employees,

partners or agents acting or purporting to act on its behalf, and any

indebtedness made or created in reliance upon the professed exercise of such

powers shall be guaranteed under this Guaranty. Each Guarantor hereby

represents and warrants to Lender that such Guarantor has received a copy of

each of the Loan Documents, has read or had the opportunity to read each of the

Loan Documents, and understands the terms of the Loan Documents. The provisions

in the Loan Documents relating to the execution of additional documents, legal

proceedings by Lender against Borrower, severability of the provisions of the

Loan Documents, interpretation of the Loan Documents, notices, waivers

(including waiver of a jury trial), limitation on right of recovery against

Lender, disclaimer of individual liability, and the applicable laws which

govern the interpretation of the Loan Documents are incorporated herein in

their entirety by this reference and made a part hereof as though set forth in

full herein; any reference in those provisions to “Borrower” shall mean each

Guarantor and any reference in those provisions to the “Loan Documents” shall

mean this Guaranty.

 

To the extent permitted by law, Guarantor waives its right to enforce

any remedies that Borrower now has, or later may have, against Lender.

Guarantor waives any right to participate in any security now or later held by

Lender. Guarantor waives notice of acceptance of this Guaranty, and all other

notices in connection with this Guaranty or in connection with the liabilities,

obligations and duties guaranteed hereby, including notices to Guarantor of

default by the Borrower under the Loan Documents. Guarantor hereby waives

diligence, presentment, demand for performance, notice of nonperformance,

protest, notice of protest, notice of dishonor, and notice of acceptance of

this-Guaranty, and waives all notices of the existence, creation, or incurring

of new or additional obligations.

 

If there is more than one Guarantor, the liability of each Guarantor

shall be joint and several. Guarantor’s obligations under this Guaranty shall be

binding on Guarantor’s legal representatives, heirs, successors and assigns.

 

If Borrower disposes of its interest in the property secured by the

Loan Documents, “Borrower”, as used in this Guaranty, shall mean Borrower’s

successors or assigns. Assignment of the Loan Documents by Lender (as permitted

by the Loan Documents) shall not affect this Guaranty. In the event of an

assignment of the Loan Documents by Lender, the term “Lender” as used in this

Guaranty shall mean Lender’s successors or assigns.

 

Guarantor hereby covenants and agrees to deliver to Lender the

following: (a) management prepared and certified consolidated quarterly

financial statements for Guarantor within forty-five (45) days after the end of

the first three (3) quarters of each fiscal year of Guarantor, and (b) annual

consolidated financial statements for Guarantor audited by an independent

certified public accountant within one hundred twenty (120) days after the end

of each fiscal year of Guarantor. Such financial statements shall be true and

correct in all respects, shall be prepared in accordance with generally

accepted accounting principles, and shall fairly represent the respective

financial conditions of the subjects thereof as of the respective dates

thereof. At the request of Lender, Guarantor shall obtain the consent of

Guarantor’s accountant(s) to the inclusion of Guarantor’s most recent financial

statement in any regulatory filing or report to be filed by Lender.

 

If any one or more of the provisions of this Guaranty shall be held to

be invalid, illegal or unenforceable in any respect, such invalidity,

illegality or unenforceability shall not affect any other provision of this

Guaranty, and this Guaranty shall be construed as if such invalid, illegal or

unenforceable provision had never been contained herein.

 

This Guaranty shall be construed according to the laws of the State of

Georgia. Guarantor agrees that any dispute which may arise between Lender and

Guarantor with regard to this Guaranty shall be resolved by litigation in state

or federal court. Litigation may be initiated by Lender or its assignee, at its

discretion, in the State of the principal place of business of Lender or its

assignee, the State of the principal place of business of Guarantor, or the

State where the Collateral (as defined in the Loan Documents) is located.

 

2

 

GUARANTOR

HEREBY KNOWINGLY AND IRREVOCABLY WAIVES ANY OBJECTIONS ON THE GROUNDS OF

IMPROPER JURISDICTION OR VENUE TO AN ACTION INITIATED AS SET FORTH ABOVE AND

AGREES THAT EFFECTIVE SERVICE OF PROCESS MAY BE MADE UPON GUARANTOR BY

REGISTERED MAIL RETURN RECEIPT REQUESTED. GUARANTOR WAIVES, TO THE EXTENT

PERMITTED BY LAW, TRIAL BY JURY IN ANY ACTION BETWEEN THE PARTIES.

 

This Guaranty shall become

effective on March 31, 1998.

 

 

	

  THE WESTERN SIZZLIN CORPORATION

  	

   

  	 

	

   

  	

   

  	 

	

  By: 

  	

  /s/ Victor F. Foti

  	

   

  	 

	

   

  	

  Its:  

  	

  President

  	

   

  	 

	

   

  	

   

  	

   

  	 

	

   

  	

   

  	 

	

   

  	

   

  	 

	

  THE WESTERN SIZZLIN STORES OF

  LITTLE ROCK, INC.

  	

   

  	 

	

   

  	

   

  	 

	

  By: 

  	

  /s/ Victor F. Foti

  	

   

  	 

	

   

  	

  Its:  

  	

  President

  	

   

  
								

 

Loan No. 06718

8365 Sudley Rd.

Manassas, Virginia

 

PROMISSORY

NOTE

 

	

  $500,000.00

  	

   

  	

  Date: March 23, 1998

  

 

PROMISE TO PAY. For value received,

THE WESTERN SIZZLIN STORES, INC., a Virginia corporation, (“Borrower”) promises

to pay to CAPTEC FINANCIAL GROUP FUNDING CORPORATION, a Michigan corporation

(together with its successors, assigns and transferees, “Lender”), or order,

Five Hundred Thousand and 00/100 Dollars ($500,000.00), or so much of such sum

as has been advanced under this Note, as follows:

 

Interest only from and after the date on which funds are disbursed by

Lender hereunder (“Effective Date”) through the last day of the month in which

the Effective Date occurs shall be due and payable on the first day of the next

month following the Effective Date; provided that if the Effective Date occurs

after the fifteenth (15th) day of a month, the interest which would accrue,

based on the actual number of days, through the end of such month shall be due

and payable in advance on the Effective Date. Installments of principal and

interest in the amount of Eight Thousand Two Hundred Sixty-Two and 00/100

Dollars ($8,262.00) are due and payable on the first day of each month (each a

“Payment Date”), commencing May 1, 1998; until April 1, 2005 (“Due Date”), when

the outstanding principal balance, plus accrued interest, is due and payable

(unless the indebtedness evidenced by this Note is accelerated, in which case,

the Due Date is the date of acceleration). The amortization period for this

Note, for purposes of calculating the monthly installments of principal and

interest, is eighty-four (84) months.

 

All payments under this Note shall be made at Lender’s principal office

at 24 Frank Lloyd Wright Drive, Lobby L, 4th Floor, P.O. Box 544, Ann Arbor,

Michigan 48106-0544, or at such other address as Lender may designate in

writing, or by electronic funds withdrawal made by Lender upon written

authorization therefor from Borrower, which authorization shall not be

revocable by Borrower without the consent of Lender. Payments due and payable

on a day on which Lender is not open for business are due on the next

succeeding business day. Payments will be applied first to accrued interest and

then to principal.

 

INTEREST RATE. The outstanding

principal balance of this Note will bear interest at a fixed rate equal to nine

and eighty-five hundredths percent (9.85%) per annum (the “Stated Rate”), until

the Due Date (whether by acceleration or otherwise), and thereafter at a rate

which is three percent (3%) above the Stated Rate (“Default Rate”).

 

Interest will be computed on the basis of a year consisting of twelve

(12) months of thirty (30) days each. In no event, however, shall the interest

rate exceed the maximum rate allowed by law. Notwithstanding anything to the

contrary contained herein, at no time shall the interest payable under this

Note be greater than the maximum rate permitted by applicable law (“Legal

Rate”). If any obligation under this Note shall result in Lender receiving an

amount deemed to be interest under applicable law in excess of the Legal Rate,

then the amount which would be excessive interest shall be applied to the

reduction of the principal balance of this Note and not to payment of interest.

If such excessive interest exceeds the unpaid principal balance of this Note,

the excess shall be refunded to Borrower.

 

 

PREPAYMENT. Borrower shall not have

any right, except as otherwise specifically provided, to prepay the principal

balance of this Note until two (2) loan years have elapsed. The first “loan

year” shall commence on the date of the closing of the loan evidenced by this

Note, and subsequent loan years shall commence on the anniversaries of such

date. Commencing with the third (3rd) loan year and if no Event of Default (as

hereinafter defined) then exists, Borrower shall have the right to prepay all,

but not merely a portion of, the principal balance of this Note together with

accrued interest thereon on any Payment Date; provided, however, that Borrower

shall provide no less than thirty (30) days prior written notice to Lender of Borrower’s

intention to prepay (the “Prepayment Notice”). Once given, the Prepayment

Notice may not be withdrawn, and the failure to prepay in accordance with the

Prepayment Notice shall constitute an Event of Default.

 

Borrower acknowledges and agrees that Lender is making the loan

evidenced by this Note in consideration of the receipt by Lender of all

interest and other benefits intended to be conferred by this Note, and if

payments of principal are made to Lender prior to the regularly scheduled due

date of such payments, for whatever reason (whether voluntarily or

involuntarily), Lender will not receive all such interest and other benefits

and may incur additional costs. For these reasons, and to induce Lender to make

the loan, Borrower expressly waives any right to prepay this Note except as

specifically provided herein.

 

Lender shall not be required to accept any tender of prepayment of the

principal balance of this Note at any time when the “Reinvestment Rate” (as

hereinafter defined) is lower than the Stated Rate, less eighty-five basis

points, unless such tender also includes a sum of money (the “Prepayment

Premium”) equal to the present value (computed at the Reinvestment Rate) of the

difference between a stream of monthly payments necessary to amortize the

outstanding principal balance of this Note at the Stated Rate and a stream of

monthly payments necessary to amortize the outstanding principal balance of

this Note at the Reinvestment Rate (the “Differential”). In the event the

Differential is less than zero, no Prepayment Premium will be required. For

purposes of this Note, the “Reinvestment Rate” is the yield on a United States

Treasury obligation of a constant maturity rate maturing closest in time but

prior to the maturity date of this Note, as reported in Federal Reserve

Statistical Release H.15 (519) (or any comparable successor publication) on the

fifth (5th) business day preceding the prepayment date.

 

In addition to the Prepayment Premium, if any, every tender of

prepayment of the principal balance of this Note shall be accompanied by a

payment equal to (x) all accrued but unpaid interest and other charges to the

date of prepayment and (y) an administrative fee equal to one half of one

percent (0.5%) of the outstanding principal balance of this Note; provided,

however, that the administrative fee shall not be less than One Thousand and

00/100 Dollars ($1,000.00) (collectively, the “Other Charges”).

 

If the outstanding principal balance of this Note is accelerated by

reason of an Event of Default, such acceleration shall be deemed to be a

prepayment and Borrower shall pay to Lender, in addition to all sums due as a

result of the acceleration, any applicable Prepayment Premium and Other

Charges. In the event of an acceleration of this Note in the first or second

loan year, Borrower shall be required to pay a Prepayment Premium equal to five

percent (5%) of the outstanding principal balance of this Note together with

any Other Charges. In the event that this Note is partially prepaid from

casualty insurance proceeds (as provided in the Security Agreement, defined

below), no Prepayment Premium or Other Charges shall be due and payable with

respect to such prepayment, and each monthly installment thereafter shall be

reduced to an amount which will amortize the then unpaid principal balance of

this Note at the Stated Rate over the then remaining term of this Note.

 

LATE PAYMENT CHARGE. In the event

that any payment under this Note is not received by Lender within fifteen (15)

days of the date when due, a late charge of five percent (5%) of the amount of

such payment will be due. Borrower agrees that the late charge is a reasonable

estimate of the administrative costs which Lender will incur in processing the

delinquency. Lender’s acceptance of a late payment and/or of the late payment

charge will not waive any default under this Note or affect the acceleration of

this Note (if this Note has been accelerated).

 

2

 

COLLATERAL.

This Note and the other obligations of Borrower to Lender contained in the

documents securing this Note are secured by and in accordance with the terms of

that certain Security Agreement, effective March 31, 1998, executed by Borrower for the benefit of Lender

(the “Security Agreement”; together with any other documents securing payment

under this Note, the “Loan Documents”). All property securing the Indebtedness

(as defined in the Security Agreement) is referred to as the “Collateral”.

 

DEFAULT. Any of

the following events shall, for purposes of this Note, constitute an “Event of

Default”:

 

(a)             Failure by

Borrower to pay any amount owing on or with respect to the Indebtedness when

due, whether by maturity, acceleration or otherwise, which failure continues

for five (5) business days.

 

(b)             Any failure by

Borrower (or any guarantor of all or any part of the Indebtedness) to comply

with any of the non-monetary terms, provisions, warranties or covenants of this

Note, the Security Agreement or the other Loan Documents, which failure

continues for fifteen (15) days after the date of written notice to Borrower

(or any guarantor) from Lender of such default; provided, however, that if: (i)

the nature of Borrower’s (or any guarantor’s) noncompliance is such that more

than fifteen (15) days are reasonably required for its cure, (ii) Borrower (or

any guarantor) has commenced such cure within said fifteen (15) day period,

(iii) Borrower (or any guarantor) diligently prosecutes such cure to

completion, (iv) Borrower (or any guarantor) provides Lender with written

notice of the noncompliance, AND (v) Borrower (or any guarantor) furnishes

reserves or a security bond, in an amount satisfactory to Leader in its sole

discretion, then Borrower (or any guarantor) shall not be in default.

 

(c)             Institution of foreclosure

proceedings or other exercise of rights and remedies by the holder of any

mortgage, deed of trust, security interest or other lien against the Collateral

(or any portion thereof); provided, however, if there is a good faith dispute

by Borrower (or any guarantor) as to the validity or reasonableness of the

claim which is the basis for such proceedings, then no Event of Default shall

have occurred under this clause (c) if Borrower (or any guarantor) provides

Lender with written notice of the proceedings and furnishes reserves or a

security bond for the proceedings satisfactory to Lender.

 

(d)             Insolvency of

Borrower (or any guarantor) or the admission in writing of Borrower’s (or any

guarantor’s) inability to pay debts as they mature.

 

(e)             Any statement,

representation or information made or furnished by or on behalf of Borrower (or

any guarantor) to Lender in connection with or to induce Lender to provide or

advance any of the Indebtedness shall prove to be false or materially

misleading when made or furnished.

 

(f)              Institution of

bankruptcy, reorganization, insolvency or other similar proceedings by or

against Borrower (or any guarantor), unless, in the case of a petition filed

against Borrower (or any guarantor), the same is dismissed within sixty (60)

days of the date of filing.

 

(g)             The issuance or

filing of any judgment, attachment, levy, garnishment or the commencement of

any related proceedings or the commencement of any other judicial process upon

or in respect to Borrower (or any guarantor) or the Collateral in which the

amount in controversy exceeds One Hundred Thousand Dollars ($100,000) and is

not covered by the insurance of Borrower (or any guarantor), unless satisfied,

or Borrower (or any guarantor) furnishes reserves or a security bond in an

amount satisfactory to Lender in its sole discretion, released or discharged

within sixty (60) days after the date of such issuance, filing or commencement.

 

3

 

(h)             Sale or other

disposition by Borrower (or any guarantor) of any substantial portion of its

assets or property.

 

(i)              Death,

dissolution, merger, consolidation, termination of existence, insolvency,

business failure or assignment for the benefit of creditors of or by Borrower

(or any guarantor); without the prior written consent of Lender, which consent

shall not be unreasonably withheld.

 

(j)              Any failure by

Borrower (or any guarantor) to pay any indebtedness (other than to Lender) in

excess of One Hundred Thousand Dollars ($100,000) (and exclusive of trade debt

incurred in the ordinary course of business) when due, or any failure in the

observance or performance of any term, covenant or condition in any document

evidencing, securing or relating to such indebtedness, which failure continues

beyond any applicable cure period.

 

(k) Receipt by Borrower of a notice of termination of the Management

and Licensing Agreement from The WesterN SizzliN Corporation, a Tennessee

corporation (“Franchisor”), for the Great American Steak & Buffet Company

Restaurant located at 8365 Sudley Rd., Manassas, Virginia 22110 (“Franchised

Operation”).

 

(1)             If this Note, the

Security Agreement and the other Loan Documents have not been assigned to the

Trust (as defined in the Security Agreement), the default by Borrower which

continues beyond any applicable grace or cure period under the Retained

Obligations (as defined in the Security Agreement); provided, however, if this

Note, the Security Agreement and the other Loan Documents are assigned to the

Trust, this Clause (1) shall be of no force and effect during the term of such

assignment.

 

(m) In the event that this Note, the Security Agreement and the other

Loan Documents are assigned to the Trust, the default by Borrower which

continues beyond any applicable grace or cure period under the Trust

Obligations (as defined in the Security Agreement).

 

(n)             Any default by

Borrower under the Lease between Combined Properties Limited Partnership, a

Maryland limited partnership, as landlord, and Borrower, as tenant, dated April

20, 1990 (“Lease”), which default is not cured within any applicable cure

period set forth in such Lease.

 

Upon an occurrence of an Event of Default, Lender shall have the option

to declare all or part of the Indebtedness (including this Note) immediately

due and payable. If this Note is not paid at maturity (whether by acceleration

or otherwise), Lender shall have all of the rights and remedies provided at law

or equity or by agreement, including, without limit, the right to sell or

liquidate all or any part of the Collateral. The remedies of Lender are

cumulative and not exclusive.

 

EXAMINATION OF RECORDS.

Borrower shall at all times keep full and accurate records of its business and

of the Collateral, which records shall be open to inspection and copying by Lender

at all reasonable times.

 

LIABILITY OF SIGNATORIES.

Borrower, and all guarantors and endorsers, and any other party liable for the

Indebtedness evidenced by this Note: (i) severally waive presentment, demand,

protest, notice of dishonor, notice of non-payment and notice of acceleration

of this Note; and (ii) agree that no extension or postponement of the time for

payment, or waiver, or indulgence or forbearance granted to Borrower (without

limit as to number or period) or any modification of this Note, or any

substitution, or exchange or release of all or part of the Collateral, or

addition of any party to this Note, or release or discharge of, or suspension

of any rights and remedies against any party liable on this Note, shall reduce

or affect the obligation of any other party liable for the payment of this

Note.

 

4

 

NON-WAIVER.  No

delay by Lender in the exercise of any right or remedy shall operate as a

waiver. No single or partial exercise by Lender of any right or remedy shall

preclude any future exercise of such right or remedy or the exercise of any

other right or remedy. No waiver or indulgence by Lender of any default or

Event of Default shall be effective unless in writing and signed by Lender, nor

shall a waiver on one occasion be construed as a bar to any right or remedy, or

waiver of any default or Event of Default on any future occasion.

 

REIMBURSEMENT

OF EXPENSES.  Borrower shall reimburse Lender for all

costs and expenses, including reasonable attorneys’ fees, incurred by Lender in

enforcing the rights of Lender under this Note. Such costs and expenses shall

include, without limitation, costs or expenses incurred by Lender in any

bankruptcy, reorganization, insolvency or other similar proceeding. Any

reference in this Note to attorneys’ fees shall mean fees, charges, costs and

expenses of in-house and/or outside counsel and paralegals, whether or not a

suit or proceeding is instituted, and whether incurred at the trial court

level, on appeal, in a bankruptcy, administrative or probate proceeding, in

consultation with counsel, or otherwise.

 

WAIVER

OF JURY TRIAL. BORROWER AND LENDER ACKNOWLEDGE THAT THE RIGHT

TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH

PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL

OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT,

WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE

PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS NOTE OR THE

INDEBTEDNESS.

 

ASSIGNMENT.  This

Note is freely assignable, in whole or in part, by Lender without prior notice

to or consent of Borrower; provided, however, that Lender (or its assignee)

shall provide written notice of such assignment to Borrower in the event that

Lender (or such assignee) desires to designate a new person or entity as payee

and/or a new place of payment for the obligations under this Note. Borrower may

not, in whole or in part, directly or indirectly, assign this Note or its

rights hereunder or delegate its duties hereunder without, in each instance,

the specific prior written consent of Lender, which consent may be withheld or

delayed in Lender’s sole discretion. Lender shall be fully discharged from all

responsibility accruing hereunder from and after the effective date of any such

assignment. Lender’s assignee shall, to the extent of the assignment, be vested

with all the powers and rights of Lender hereunder, and to the extent of such

assignment the assignee may fully enforce such rights and powers, and all

references to Lender shall mean and refer to such assignee. Lender shall retain

all rights and powers hereby given not so assigned, transferred and/or

delivered. Borrower hereby waives all defenses which Borrower may be entitled

to assert against Lender’s assignee with respect to liability accruing

hereunder prior to the effective date of any assignment of Lender’s interest

herein.

 

SECURITIZATION.  Borrower

understands and agrees that Lender may, from time to time, assign its rights

and powers under this Note, the Security Agreement and any other Loan

Documents, in whole or in part, in connection with a securitization program.

Borrower agrees to enter into an amendment to this Note, the Security Agreement

and any other Loan Documents if such amendments are required by a nationally

recognized rating agency in connection with a securitization program sponsored

by Lender and in which this Note, the Security Agreement any other Loan

Documents are to be included; provided that Borrower shall not be obligated to

enter into any amendment which adversely affects Borrower or otherwise

adversely alters any of the financial terms of this Note, the Security

Agreement and any other Loan Documents.

 

MISCELLANEOUS.  The

terms and provisions of this Note shall be governed by and construed in

accordance with the laws of the State of Virginia. Lender and Borrower agree

that any dispute which may arise between them with regard to this Note shall be

resolved by litigation in state or federal court. Litigation may be initiated

by Lender or its assignee, at its discretion, in the State of the principal

place of business of Lender or its assignee, the State of the principal place

of business of Borrower, or the State where the Collateral is located. BORROWER HEREBY KNOWINGLY AND IRREVOCABLY WAIVES ANY

OBJECTIONS ON THE

 

5

 

GROUNDS OF IMPROPER JURISDICTION OR VENUE TO AN ACTION INITIATED AS SET FORTH ABOVE AND AGREES THAT EFFECTIVE

SERVICE OF PROCESS MAY BE MADE UPON BORROWER BY REGISTERED MAIL RETURN RECEIPT

REQUESTED. The terms and provisions of this Note may only be

changed in writing, executed by Borrower and Lender.

 

	

  THE

  WESTERN SIZZLIN STORES, INC.

  	

   

  
	

   

  	

   

  
	

  By:

  	

  /s/ Victor  F. Foti

  	

   

  	 

	

   

  	

   

  	

   

  	 

	

   

  	

  Its 

  	

  President

  	

   

  
							

 

Address:

 

P.O. Box 12167

Roanoke, VA 24023-2167

 

Tax I.D. No. 54-1787907

 

6

 

Pay to the order of                             

without warranty or recourse.

Captec Financial

Group Funding Corporate

 

	

  BY:

  	

  /s/ [ILLEGIBLE]

  	

   

  
	

   

  
	

  Its:

  	

   

  	

   

  
				

 

7

 

Loan No. 06718

8365 Sudley Rd.

Manassas, Virginia

 

COLLATERAL ASSIGNMENT OF LEASE AND

OPTION RIGHTS

 

THIS COLLATERAL ASSIGNMENT OF LEASE AND OPTION RIGHTS (“Assignment”) is

made as of the 23 day of March, 1998, by THE WESTERN SIZZLIN STORES, INC., a

Virginia corporation, whose address is P. O. Box 12167, Roanoke, VA 24023-2167

(“Assignor”), in favor of CAPTEC FINANCIAL GROUP FUNDING CORPORATION, a

Michigan corporation, whose address is 24 Frank Lloyd Wright Drive, Lobby L,

4th Floor, P.O. Box 544, Ann Arbor, Michigan 48106-0544 (“Assignee”). This

instrument shall become effective on

March 31,  1998.

 

For good and valuable consideration, the receipt and sufficiency of

which is hereby acknowledged, Assignor presently assigns to Assignee all of

Assignor’s right, title and interest in and to its lessee’s interest in that

certain lease with Combined Properties Limited Partnership, a Maryland

limited partnership, (“Lessor”) dated as of April 20, 1990, a copy

of which is attached hereto as Exhibit A (the “Lease”) respecting the premises

commonly known as the Great American Steak & Buffet Company Restaurant

located at 8365 Sudley Rd., Manassas, Virginia (“Premises”). This Assignment is

for collateral purposes only, and except as specified herein, Assignee shall

have no liability or obligation of any kind whatsoever arising from or in

connection with this Assignment or the Lease unless Assignee shall take

possession of the Premises and assume the obligations of Assignor thereunder.

 

Assignor represents and warrants to Assignee that it has full power and

authority to so assign the Lease and its interest therein and that Assignor has

not previously, and is not obligated to, assign or transfer any of its interest

in the Lease or the Premises.

 

Throughout the term of the Lease, Assignor covenants and agrees to

exercise all options to extend or renew the term of the Lease not less than

ninety (90) days prior to the last day upon which any such option may be

exercised, but in no event less than six (6) months prior to of the term of the

Lease, unless Assignee otherwise agrees in writing. Assignor shall send

Assignee a copy of the notice of exercise concurrently with Assignor’s exercise

of the option. Upon the failure of Assignor to so elect or renew the Lease as

aforesaid (and the failure of Assignee to otherwise agree in writing), Assignee

shall have the right, but not the obligation, to exercise such extension or

renewal option on behalf of Assignor, and Assignor hereby appoints Assignee (or

any of its employees) as its attorney-in-fact for the purpose of exercising

such extension or renewal option.

 

If an “Event of Default” occurs under the Promissory Note, dated March

23, 1998, in the  original principal

amount of Five Hundred Thousand and 00/100 Dollars ($500,000.00), by Assignor

in favor of Assignee (the “Note”) or under any documents or instruments

securing the Note, Assignee shall have the right and is hereby empowered to

take possession of the Premises, expel Assignor therefrom, and, in such event,

Assignor shall have no further right, title or interest in the Lease and shall

remain liable to Assignee for all past due rents Assignee shall be required to

pay to the Lessor under the Lease to effectuate this Assignment.

 

Assignor agrees that it will not suffer or permit any surrender,

termination, amendment or modification of the Lease without the prior written

consent of Assignee, which consent shall not be unreasonably withheld. At the

request of Assignee, Assignor shall provide Assignee with rent payment or such

other information regarding the Lease as Assignee shall reasonably require.

 

This Assignment shall be governed by the laws of the Commonwealth of

Virginia.

 

This Assignment may be executed in one or more counterparts, each of

which shall constitute an original and all of which together shall constitute

one and the same instrument.

 

[SIGNATURE PAGE FOLLOWS]

 

 

IN WITNESS WHEREOF, Assignor has executed

this Assignment as of the day and year noted above.

 

	

   

  	

  assignor:

  	 

	

  Witnesses:

  	

   

  	 

	

   

  	

   

  	 

	

   

  	

  the western sizzlin stores, inc.

  	 

	

   

  	

   

  	 

	

  /s/ [ILLEGIBLE]

  	

   

  	

  By: 

  	

  /s/ Victor F. Foti

  	

   

  	 

	

   

  	

   

  	

   

  	

   

  	 

	

  /s/ [ILLEGIBLE]

  	

   

  	

  Its:

  	

  President

  	

   

  
									

 

 

	

  COMMONWEALTH OF

  VIRGINIA

  	

  )

  
	

   

  	

  )

  
	

  COUNTY OF ROANOKE

  	

  )

  

 

 

I, Richard R. Sayers, a notary public in and for the

State and County aforesaid, do certify that Victor F. Foti, whose name, as

President of The WesterN SizzliN Stores, Inc., is signed to the writing above,

bearing date on the 23rd day of March 1998 has acknowledged the same

before me in my county aforesaid.

 

Given under my hand and official seal this 23rd

day of March 1998.

My term of office expires on the 28th day of February

1999.

 

	

   

  	

  /s/ Richard L. Sayers

  	

   

  
	

   

  	

  Notary Public 

  
	

   

  	

  [Notary Public’s Seal]

  

 

 

2

 

Loan No. 06718

8365 Sudley Rd.

Manassas, Virginia

 

GUARANTY

 

THE WESTERN SIZZLIN

CORPORATION, a Tennessee corporation and THE WESTERN SIZZLIN STORES OF LITTLE

ROCK, INC., an Arkansas corporation (each a “Guarantor”), as a material

inducement to and in consideration of CAPTEC FINANCIAL GROUP FUNDING

CORPORATION, a Michigan corporation, whose address is 24 Frank Lloyd Wright

Drive, Lobby L, Ann Arbor, Michigan 48106 (together with its successors,

assigns and transferees, “Lender”), making a loan in the original principal

amount of Five Hundred Thousand and 00/100 Dollars ($500,000.00) as evidenced

by a Promissory Note, dated March 23, 1998 (“Note”), made by THE WESTERN

SIZZLIN STORES, INC., a Virginia corporation (“Borrower”), which Note is

secured by the instruments referenced therein (together with the Note, “Loan

Documents”), hereby jointly and severally, unconditionally and irrevocably,

personally guarantees to and for the benefit of Lender, and Lender’s successors

and assigns, the full and timely payment and performance of all of the

Borrower’s duties, obligations and covenants under the Loan Documents. This is

a guaranty of payment and performance and not of collection.

 

This Guaranty shall not

be affected by Lender’s failure or delay to enforce any of its rights.

 

Guarantor’s obligations

are independent of Borrower’s obligations. If Borrower defaults under the Loan

Documents, Lender can proceed immediately against Guarantor or Borrower, or

both, or Lender can enforce against Guarantor or Borrower, or both, any rights

that it has under the Loan Documents or pursuant to applicable laws. If any

lien created by the Loan Documents terminates and Lender has any rights it can

enforce against Borrower after termination, Lender can enforce those rights

against Guarantor without giving previous notice to Borrower or Guarantor or

without making any demand on either of them.

 

To the extent permitted

by law, Guarantor waives the benefit of any statute of limitations affecting

Guarantor’s liability under this Guaranty. Guarantor waives the right to

require Lender to first or concurrently: (1) proceed against Borrower; (2)

proceed against or exhaust any security that Lender holds from Borrower; or (3)

pursue any other remedy in Lender’s power. The liability of Guarantor shall not

be affected or exonerated by any indulgence, compromise, settlement or

variation of terms which may be extended by Lender to Borrower, or agreed upon

by Lender or Borrower, and, unless agreed to in writing by Lender, shall not be

affected or exonerated by any assignment by Borrower of its interest in any one

or more of the Loan Documents, nor shall the liability of the Guarantor be

affected or exonerated by the insolvency, bankruptcy (voluntary or

involuntary), or reorganization of Borrower, nor by the voluntary or

involuntary liquidation, sale or other disposition of all or substantially all

of the assets of Borrower, or by the release of any other Guarantor. Lender and

Borrower, without notice to or consent by Guarantor, may at any time or times

enter into such modifications, extensions, amendments or other covenants of the

Loan Documents as they may deem appropriate, and Guarantor shall not be

released nor its liability exonerated thereby but shall continue to be fully

liable for the payment and performance of all obligations and duties of

Borrower under the Loan Documents as so modified, extended or amended.

 

Guarantor further agrees

(1) to indemnify and hold harmless Lender from and against any claims, damages,

expenses or losses, including to the extent permitted by law, all reasonable

attorneys’ fees incurred by counsel of Lender’s choice (whether or not

litigation is commenced), resulting from or arising out of any breach of any

provision of the Loan Documents by Borrower or by reason of Borrower’s failure

to perform any of its obligations thereunder, and (2) to the extent permitted

by law, to pay all costs and expenses, including reasonable attorneys’ fees

(whether or not litigation is commenced), incurred by Lender in enforcing this

Guaranty.

 

Until all of Borrower’s

obligations to Lender have been discharged in full, Guarantor has no right of

subrogation against Borrower. Guarantor assumes the responsibility to remain

informed of the financial condition of Borrower and of all other circumstances

bearing upon the risk of Borrower’s default, which reasonable inquiry

 

 

would reveal, and agrees that Lender shall have no

duty to advise Guarantor of information known to it regarding such condition or

any such circumstances. Lender shall not be required to inquire into the powers

of Borrower or the officers, employees, partners or agents acting or purporting

to act on its behalf, and any indebtedness made or created in reliance upon the

professed exercise of such powers shall be guaranteed under this Guaranty. Each

Guarantor hereby represents and warrants to Lender that such Guarantor has

received a copy of each of the Loan Documents, has read or had the opportunity

to read each of the Loan Documents, and understands the terms of the Loan

Documents. The provisions in the Loan Documents relating to the execution of

additional documents, legal proceedings by Lender against Borrower,

severability of the provisions of the Loan Documents, interpretation of the

Loan Documents, notices, waivers (including waiver of a jury trial), limitation

on right of recovery against Lender, disclaimer of individual liability, and

the applicable laws which govern the interpretation of the Loan Documents are

incorporated herein in their entirety by this reference and made a part hereof

as though set forth in full herein; any reference in those provisions to

“Borrower” shall mean each Guarantor and any reference in those provisions to

the “Loan Documents” shall mean this Guaranty.

 

To the extent permitted

by law, Guarantor waives its right to enforce any remedies that Borrower now

has, or later may have, against Lender. Guarantor waives any right to

participate in any security now or later held by Lender. Guarantor waives

notice of acceptance of this Guaranty, and all other notices in connection with

this Guaranty or in connection with the liabilities, obligations and duties

guaranteed hereby, including notices to Guarantor of default by the Borrower

under the Loan Documents. Guarantor hereby waives diligence, presentment,

demand for performance, notice of nonperformance, protest, notice of protest,

notice of dishonor, and notice of acceptance of this Guaranty, and waives all

notices of the existence, creation, or incurring of new or additional obligations.

 

If there is more than one

Guarantor, the liability of each Guarantor shall be joint and several.

Guarantor’s obligations under this Guaranty shall be binding on Guarantor’s

legal representatives, heirs, successors and assigns.

 

If Borrower disposes of

its interest in the property secured by the Loan Documents, “Borrower”, as used

in this Guaranty, shall mean Borrower’s successors or assigns. Assignment of

the Loan Documents by Lender (as permitted by the Loan Documents) shall not

affect this Guaranty. In the event of an assignment of the Loan Documents by

Lender, the term “Lender” as used in this Guaranty shall mean Lender’s

successors or assigns.

 

Guarantor hereby

covenants and agrees to deliver to Lender the following: (a) management

prepared and certified consolidated quarterly financial statements for

Guarantor within forty-five (45) days after the end of the first three (3)

quarters of each fiscal year of Guarantor, and (b) annual consolidated

financial statements for Guarantor audited by an independent certified public

accountant within one hundred twenty (120) days after the end of each fiscal

year of Guarantor. Such financial statements shall be true and correct in all

respects, shall be prepared in accordance with generally accepted accounting

principles, and shall fairly represent the respective financial conditions of

the subjects thereof as of the respective dates thereof. At the request of

Lender, Guarantor shall obtain the consent of Guarantor’s accountant(s) to the

inclusion of Guarantor’s most recent financial statement in any regulatory

filing or report to be filed by Lender.

 

If any one or more of the

provisions of this Guaranty shall be held to be invalid, illegal or

unenforceable in any respect, such invalidity, illegality or unenforceability

shall not affect any other provision of this Guaranty, and this Guaranty shall

be construed as if such invalid, illegal or unenforceable provision had never

been contained herein.

 

This Guaranty shall be

construed according to the laws of the State of Virginia. Guarantor agrees that

any dispute which may arise between Lender and Guarantor with regard to this

Guaranty shall be resolved by litigation hi state or federal court. Litigation

may be initiated by Lender or its assignee, at its discretion, in the State of

the principal place of business of Lender or its assignee, the State of the

principal place of business of Guarantor, or the State where the Collateral (as

defined in the Loan Documents) is located.

 

2

 

GUARANTOR HEREBY KNOWINGLY AND

IRREVOCABLY WAIVES ANY OBJECTIONS ON THE GROUNDS OF IMPROPER JURISDICTION OR

VENUE TO AN ACTION INITIATED AS SET FORTH ABOVE AND AGREES THAT EFFECTIVE

SERVICE OF PROCESS MAY BE MADE UPON GUARANTOR BY REGISTERED MAIL RETURN RECEIPT

REQUESTED. GUARANTOR WAIVES, TO

THE EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY ACTION BETWEEN THE PARTIES.

 

This Guaranty shall

become effective on March 31, 1998.

 

	

  THE WESTERN SIZZLIN CORPORATION

  
	

   

  
	

  By:

  	

  /s/ Victor F. Foti

  	

   

  

 

	

  Its:

  	

  President

  	

   

  

 

THE WESTERN SIZZLIN STORES OF LITTLE ROCK, INC.

 

	

  By:

  	

  /s/ Victor F. Foti

  	

   

  

 

	

  Its:

  	

  President

  	

   

  

 

3

Loan No. 06718

8365 Sudley Rd.

Manassas, Virginia

 

CERTIFICATE OF BORROWER

 

THE WESTERN SIZZLIN STORES,

INC., a Virginia corporation (“Borrower”), for the benefit of CAPTEC FINANCIAL

GROUP FUNDING CORPORATION, a Michigan corporation (together with its

successors, assigns and transferees, “Lender”), warrants, represents, covenants

and agrees that the following are true and correct as of the date hereof:

 

1.             All warranties and representations of Borrower contained

in this Certificate shall survive the execution of this Certificate and any

advances made in accordance with the Promissory Note executed by Borrower, in

favor of Lender, dated even herewith, in the original principal amount of Five

Hundred Thousand and 00/100 Dollars ($500,000.00) (the “Note”).

 

2.             Borrower has good, indefeasible and marketable title to

the Collateral (as defined in that certain Security Agreement, dated even

herewith, between Borrower and Lender (the “Security Agreement”)). Except for

the Security Agreement, there are no instruments, matters or agreements, and

Borrower is not a party to any instrument, matter or agreement, which will in

any way encumber, bind or otherwise affect the Collateral or Lender.  Borrower has neither done nor failed to do

anything, nor has suffered anything to be done, as a result of which the

Collateral or any part thereof has been or will be encumbered or title thereto

has been or will be affected in any way and no person, firm or entity has any

present, conditional or contingent rights to acquire all or any portion of the

Collateral.

 

3.             Borrower is a corporation duly organized and validly

existing in good standing under the laws of the Commonwealth of Virginia. The

person or persons executing the Note, the Security Agreement and the other Loan

Documents (as defined in the Security Agreement) have full power and complete

authority to execute the Note, the Security Agreement and the other Loan

Documents, and, when executed, the Note, the Security Agreement and the other

Loan Documents will be legal, valid and binding obligations of Borrower,

enforceable in accordance with their terms.

 

4.             As of the date hereof, Borrower is not “insolvent”

within the meaning of Section 548(a)(2)(B) of the United States Bankruptcy

Code.

 

5.             Borrower is in the business of owning and operating

Great American Steak & Buffet Company restaurants, including the restaurant

operation located at 8365 Sudley Rd., Manassas, Virginia (the “Franchised

Operation”). Borrower’s chief executive office is located at 416 South

Jefferson Street, Roanoke, Virginia 24012, and the Collateral is located at

Borrower’s Chief Executive Office and the Franchised Operation.

 

6.             Borrower has furnished to Lender its most recent annual

audited financial statements and most recent management prepared and certified

quarterly financial statements, which statements were prepared in accordance

with generally accepted accounting principles and are correct and complete and

accurately present the financial condition of Borrower on the dates

thereof.  Further, there has been no

material adverse change in the business, property or condition of Borrower

since the date of the most recent financial statements.

 

7.             Borrower has complied and will continue to comply with

all applicable laws, rules, regulations and orders relating to Borrower or any

aspect of Borrower’s business or assets, including, without limit, all environmental

laws, rules, regulations and orders. Borrower agrees to indemnify and hold

Lender harmless against and from all claims, losses and costs resulting from

any and all violations by Borrower of any laws, rules, regulations and/or

orders.

 

 

8.             Borrower has not received any written notice of, and, to

the best knowledge of Borrower, none of Borrower, the Franchised Operation or

the premises where the Franchised Operation is located are in violation of any

law, municipal ordinance or other governmental requirement of any governmental

authority.

 

9.             There are no circumstances, state of facts or other

matters which, with the passage of time or the giving of notice, or both, would

constitute an Event of Default under the terms of the Note, the Security Agreement

or the other Loan Documents.

 

10.           Borrower has filed all federal, state

and local income and other tax returns and other reports required to be filed

prior to the date of this Certificate and Borrower has paid all taxes,

assessments, withholdings and other governmental charges that are due and

payable prior to the date of this Certificate.

 

11.           All taxes and all installments of

assessments and all other charges of any kind imposed or levied by any

governmental authority against either Borrower or the Collateral which are due

and payable or constitute a lien at or prior to the date of this Certificate,

together with all interest and penalties due thereon, have been paid in full.

 

12.           There is now fully paid and

enforceable fire, liability and other forms of insurance in such amounts and

covering such risks as are required under the Security Agreement.

 

13.           There are no disputes, litigation or

other such proceedings pending or, to the best of Borrower’s knowledge,

threatened against or related to Borrower, the Collateral or the Franchised

Operation, nor does Borrower know of any basis for any such action.

 

14.          In consideration of the loan evidenced

by the Note and secured, by the Security Agreement and the other Loan

Documents, Borrower agrees to indemnify and hold Lender harmless against all

claims, liabilities, losses, deficiencies and damages as well as reasonable

expenses (including attorney’s fees), interest and penalties related thereto,

asserted by any third party against, or incurred by Lender, by reason of or

resulting from any breach, inaccuracy, incompleteness or nonfulfillment of the

covenants, representations and/or warranties of Borrower contained in this

Certificate.

 

15.          Commencing May 1, 1998 and on the

first day of each following month, Lender is authorized to initiate an

electronic funds transfer to pay the monthly installment payment owing under

the loan evidenced by the Note from the account designated below, and to

receive payments from such account.  

This authorization will remain in effect unless the undersigned requests

a modification that is agreed to by the Financial Institution and Lender;

provided, however, that Lender and its successors, assigns and transferees may

modify the place of payment to be made by Borrower without the consent of the

Financial Institution.

 

Financial Institution:

Financial Institution

Address:

Routing/Transit #:

Account #:

 

[SIGNATURE PAGE

FOLLOWS]

 

2

 

This Certificate shall become effective on March 31,

1998.

 

 

	

   

  	

  THE

  WESTERN SIZZLIN STORES, INC.

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

  By

  	

  /s/ Victor F. Foti

  	

   

  
	

   

  	

   

  	

  Its

  	

  President

  	

   

  
								

 

3

 

Loan No. 06719

3135 Crain Hwy.

Waldorf, Maryland

PROMISSORY NOTE

 

	

  $750,000.00

  	

   

  	

  Date: March 23. 1998

  

 

PROMISE TO PAY.  For

value received, THE WESTERN SIZZLIN STORES, INC.,  a Virginia corporation,

(“Borrower”) promises to pay to CAPTEC FINANCIAL GROUP FUNDING CORPORATION, a

Michigan corporation (together with its successors, assigns and transferees,

“Lender”), or order, Seven Hundred Fifty Thousand and 00/100 Dollars

($750,000.00), or so much of such sum as has been advanced under this Note, as

follows:

 

Interest only from and

after the date on which funds are disbursed by Lender hereunder (“Effective

Date”) through the last day of the month in which the Effective Date occurs

shall be due and payable on the first day of the next month following the

Effective Date; provided that if the Effective Date occurs after the fifteenth

(15th) day of a month, the interest which would accrue, based on the actual

number of days, through the end of such month shall be due and payable in

advance on the Effective Date. Installments of principal and interest in the

amount of Eight Thousand Ninety-Two and 00/100 Dollars ($8,092.00) are due and

payable on the first day of each month (each a “Payment Date”), commencing May

1, 1998; until April 1, 2013 (“Due Date”), when the outstanding principal

balance, plus accrued interest, is due and payable (unless the indebtedness

evidenced by this Note is accelerated, in which case, the Due Date is the date

of acceleration). The amortization period for this Note, for purposes of

calculating the monthly installments of principal and interest, is fifteen (15)

years.

 

All payments under this

Note shall be made at Lender’s principal office at 24 Frank Lloyd Wright Drive,

Lobby L, 4th Floor, P.O. Box 544, Ann Arbor, Michigan 48106-0544, or at such

other address as Lender may designate in writing, or by electronic funds

withdrawal made by Lender upon written authorization therefor from Borrower,

which authorization shall not be revocable by Borrower without the consent of

Lender. Payments due and payable on a day on which Lender is not open for

business are due on the next succeeding business day. Payments will be applied

first to accrued interest and then to principal.

 

INTEREST RATE.  The

outstanding principal balance of this Note will bear interest at a fixed rate

equal to ten and seven hundredths percent (10.07%) per annum (the “Stated

Rate”), until the Due Date (whether by acceleration or otherwise), and

thereafter at a rate which is three percent (3%) above the Stated Rate

(“Default Rate”).

 

Interest will be computed

on the basis of a year consisting of twelve (12) months of thirty (30) days

each. In no event, however, shall the interest rate exceed the maximum rate

allowed by law. Notwithstanding anything to the contrary contained herein, at

no time shall the interest payable under this Note be greater than the maximum

rate permitted by applicable law (“Legal Rate”). If any obligation under this

Note shall result in Lender receiving an amount deemed to be interest under

applicable law in excess of the Legal Rate, then the amount which would be

excessive interest shall be applied to the reduction of the principal balance

of this Note and not to payment of interest. If such excessive interest exceeds

the unpaid principal balance of this Note, the excess shall be refunded to

Borrower.

 

 

PREPAYMENT.

Borrower shall not have any right, except as otherwise specifically provided,

to prepay the principal balance of this Note until two (2) loan years have

elapsed. The first “loan year” shall commence on the date of the closing of the

loan evidenced by this Note, and subsequent loan years shall commence on the

anniversaries of such date. Commencing with the third (3rd) loan year and if no

Event of Default (as hereinafter defined) then exists, Borrower shall have the

right to prepay all, but not merely a portion of, the principal balance of this

Note together with accrued interest thereon on any Payment Date; provided,

however, that Borrower shall provide no less than thirty (30) days prior

written notice to Lender of Borrower’s intention to prepay (the “Prepayment

Notice”). Once given, the Prepayment Notice may not be withdrawn, and the

failure to prepay in accordance with the Prepayment Notice shall constitute an

Event of Default.

 

Borrower acknowledges and

agrees that Lender is making the loan evidenced by this Note in consideration

of the receipt by Lender of all interest and other benefits intended to be

conferred by this Note, and if payments of principal are made to Lender prior

to the regularly scheduled due date of such payments, for whatever reason

(whether voluntarily or involuntarily), Lender will not receive all such

interest and other benefits and may incur additional costs. For these reasons,

and to induce Lender to make the loan, Borrower expressly waives any right to

prepay this Note except as specifically provided herein.

 

Lender shall not be

required to accept any tender of prepayment of the principal balance of this

Note at any time when the “Reinvestment Rate” (as hereinafter defined) is lower

than the Stated Rate, less eighty-five basis points, unless such tender also

includes a sum of money (the “Prepayment Premium”) equal to the present value

(computed at the Reinvestment Rate) of the difference between a stream of

monthly payments necessary to amortize the outstanding principal balance of

this Note at the Stated Rate and a stream of monthly payments necessary to

amortize the outstanding principal balance of this Note at the Reinvestment

Rate (the “Differential”). In the event the Differential is less than zero, no

Prepayment Premium will be required. For purposes of this Note, the

“Reinvestment Rate” is the yield on a United States Treasury obligation of a

constant maturity rate maturing closest in time but prior to the maturity date

of this Note, as reported in Federal Reserve Statistical Release H.15 (519) (or

any comparable successor publication) on the fifth (5th) business day preceding

the prepayment date.

 

In addition to the

Prepayment Premium, if any, every tender of prepayment of the principal balance

of this Note shall be accompanied by a payment equal to (x) all accrued but

unpaid interest and other charges to the date of prepayment and (y) an

administrative fee equal to one half of one percent (0.5%) of the outstanding

principal balance of this Note; provided, however, that the administrative fee

shall not be less than One Thousand and 00/100 Dollars ($1,000.00)

(collectively, the “Other Charges”).

 

If the outstanding

principal balance of this Note is accelerated by reason of an Event of Default,

such acceleration shall be deemed to be a prepayment and Borrower shall pay to

Lender, in addition to all sums due as a result of the acceleration, any

applicable Prepayment Premium and Other Charges. In the event of an

acceleration of this Note in the first or second loan year, Borrower shall be

required to pay a Prepayment Premium equal to five percent (5%) of the

outstanding principal balance of this Note together with any Other Charges. In

the event that this Note is partially prepaid from casualty insurance proceeds

(as provided in the Security Agreement, defined below), no Prepayment Premium

or Other Charges shall be due and payable with respect to such prepayment, and

each monthly installment thereafter shall be reduced to an amount which will

amortize the then unpaid principal balance of this Note at the Stated Rate over

the then remaining term of this Note.

 

LATE

PAYMENT CHARGE.  In the event that any payment under this

Note is not received by Lender within fifteen (15) days of the date when due, a

late charge of five percent (5%) of the amount of such payment will be due.

Borrower agrees that the late charge is a reasonable estimate of the

administrative costs which Lender will incur in processing the delinquency.

Lender’s acceptance of a late payment and/or of the late payment charge will

not waive any default under this Note or affect the acceleration of this Note

(if this Note has been accelerated).

 

2

 

COLLATERAL.

This Note and the other obligations of Borrower to Lender contained in the

documents securing this Note are secured by and in accordance with the terms of

that certain Security Agreement, effective March 31, 1998, executed by Borrower

for the benefit of Lender (the “Security Agreement”; together with any other

documents securing payment under this Note, the “Loan Documents”). All property

securing the Indebtedness (as defined in the Security Agreement) is referred to

as the “Collateral”.

 

DEFAULT.  Any of

the following events shall, for purposes of this Note, constitute an “Event of

Default”:

 

(a)           Failure by Borrower to pay any amount

owing on or with respect to the Indebtedness when due, whether by maturity,

acceleration or otherwise, which failure continues for five (5) business days.

 

(b)          Any failure by Borrower (or any

guarantor of all or any part of the Indebtedness) to comply with any of the

non-monetary terms, provisions, warranties or covenants of this Note, the

Security Agreement or the other Loan Documents, which failure continues for

fifteen (15) days after the date of written notice to Borrower (or any

guarantor) from Lender of such default; provided, however, that if: (i) the

nature of Borrower’s (or any guarantor’s) noncompliance is such that more than

fifteen (15) days are reasonably required for its cure, (ii) Borrower (or any

guarantor) has commenced such cure within said fifteen (15) day period, (iii)

Borrower (or any guarantor) diligently prosecutes such cure to completion, (iv)

Borrower (or any guarantor) provides Lender with written notice of the

noncompliance, AND (v) Borrower (or any guarantor) furnishes reserves or a security

bond, in an amount satisfactory to Lender in its sole discretion, then Borrower

(or any guarantor) shall not be in default.

 

(c)           Institution of foreclosure

proceedings or other exercise of rights and remedies by the holder of any

mortgage, deed of trust, security interest or other lien against the Collateral

(or any portion thereof); provided, however, if there is a good faith dispute

by Borrower (or any guarantor) as to the validity or reasonableness of the

claim which is the basis for such proceedings, then no Event of Default shall

have occurred under this clause (c) if Borrower (or any guarantor) provides

Lender with written notice of the proceedings and furnishes reserves or a

security bond for the proceedings satisfactory to Lender.

 

(d)          Insolvency of Borrower (or any

guarantor) or the admission in writing of Borrower’s (or any guarantor’s)

inability to pay debts as they mature.

 

(e)           Any statement, representation or

information made or furnished by or on behalf of Borrower (or any guarantor) to

Lender in connection with or to induce Lender to provide or advance any of the

Indebtedness shall prove to be false or materially misleading when made or

furnished.

 

(f)           Institution of bankruptcy,

reorganization, insolvency or other similar proceedings by or against Borrower

(or any guarantor), unless, in the case of a petition filed against Borrower

(or any guarantor), the same is dismissed within sixty (60) days of the date of

filing.

 

(g)          The 

issuance or filing of any judgment, attachment, levy, garnishment or the

commencement of any related proceedings or the commencement of any other

judicial process upon or in respect to Borrower (or any guarantor) or the

Collateral in which the amount in controversy exceeds One Hundred Thousand

Dollars ($100,000) and is not covered by the insurance of Borrower (or any

guarantor), unless satisfied, or Borrower (or any guarantor) furnishes reserves

or a security bond in an amount satisfactory to Lender in its sole discretion,

released or discharged within sixty (60) days after the date of such issuance,

filing or commencement.

 

3

 

(h)          Sale or other disposition by Borrower

(or any guarantor) of any substantial portion of its assets or property.

 

(i)            Death, dissolution, merger,

consolidation, termination of existence, insolvency, business failure or

assignment for the benefit of creditors of or by Borrower (or any guarantor);

without the prior written consent of Lender, which consent shall not be

unreasonably withheld.

 

(j)            Any failure by Borrower (or any

guarantor) to pay any indebtedness (other than to Lender) in excess of One

Hundred Thousand Dollars ($100,000) (and exclusive of trade debt incurred in

the ordinary course of business) when due, or any failure in the observance or

performance of any term, covenant or condition in any document evidencing,

securing or relating to such indebtedness, which failure continues beyond any

applicable cure period,

 

(k)           Receipt by Borrower of a notice of

termination of the Management and Licensing Agreement from The Western Sizzlin

Corporation, a Tennessee corporation (“Franchisor”), for the Great American

Steak & Buffet Company Restaurant located at 3135 Crain Hwy., Waldorf,

Maryland 20603 (“Franchised Operation”).

 

(l)            If this Note, the Security Agreement

and the other Loan Documents have not been assigned to the Trust (as defined in

the Security Agreement), the default by Borrower which continues beyond any

applicable grace or cure period under the Retained Obligations (as defined in the

Security Agreement); provided, however, if this Note, the Security Agreement

and the other Loan Documents are assigned to the Trust, this Clause (1) shall

be of no force and effect during the term of such assignment.

 

(m)          In the event that this Note, the Security

Agreement and the other Loan Documents are assigned to the Trust, the default

by Borrower which continues beyond any applicable grace or cure period under

the Trust Obligations (as defined in the Security Agreement).

 

(n)          Any default by Borrower under the

Lease between Guy E. Clark and Steven R, Ellis, both individuals, as landlord,

and Borrower, as tenant, dated March 1, 1996 (“Lease”), which default is not

cured within any applicable cure period set forth in such Lease.

 

Upon an occurrence of an Event

of Default, Lender shall have the option to declare all or part of the

Indebtedness (including this Note) immediately due and payable. If this Note is

not paid at maturity (whether by acceleration or otherwise), Lender shall have

all of the rights and remedies provided at law or equity or by agreement,

including, without limit, the right to sell or liquidate all or any part of the

Collateral. The remedies of Lender are cumulative and not exclusive.

 

EXAMINATION

OF RECORDS. Borrower shall at all times keep full and

accurate records of its business and of the Collateral, which records shall be

open to inspection and copying by Lender at all reasonable times.

 

LIABILITY

OF SIGNATORIES. Borrower, and all guarantors and

endorsers, and any other party liable for the Indebtedness evidenced by this

Note: (i) severally waive presentment, demand, protest, notice of dishonor,

notice of non-payment and notice of acceleration of this Note; and (ii) agree

that no extension or postponement of the time for payment, or waiver, or

indulgence or forbearance granted to Borrower (without limit as to number or

period) or any modification of this Note, or any substitution, or exchange or

release of all or part of the Collateral, or addition of any party to this

Note, or release or discharge of, or suspension of any rights and remedies

against any party liable on this Note, shall reduce or affect the obligation of

any other party liable for the payment of this Note.

 

4

 

NON-WAIVER.  No

delay by Lender in the exercise of any right or remedy shall operate as a

waiver. No single or partial exercise by Lender of any right or remedy shall

preclude any future exercise of such right or remedy or the exercise of any

other right or remedy. No waiver or indulgence by Lender of any default or

Event of Default shall be effective unless in writing and signed by Lender, nor

shall a waiver on one occasion be construed as a bar to any right or remedy, or

waiver of any default or Event of Default on any future occasion.

 

REIMBURSEMENT OF EXPENSES.

Borrower shall reimburse Lender for all costs and expenses, including

reasonable attorneys’ fees, incurred by Lender in enforcing the rights of

Lender under this Note. Such costs and expenses shall include, without

limitation, costs or expenses incurred by Lender in any bankruptcy,

reorganization, insolvency or other similar proceeding. Any reference in this

Note to attorneys’ fees shall mean fees, charges, costs and expenses of

in-house and/or outside counsel and paralegals, whether or not a suit or

proceeding is instituted, and whether incurred at the trial court level, on

appeal, in a bankruptcy, administrative or probate proceeding, in consultation

with counsel, or otherwise.

 

WAIVER OF JURY TRIAL.

BORROWER AND LENDER ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A

CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY AFTER CONSULTING (OR

HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY

AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY RIGHT TO TRIAL BY

JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR

IN ANY WAY RELATED TO, THIS NOTE OR THE INDEBTEDNESS.

 

ASSIGNMENT.  This

Note is freely assignable, in whole or in part, by Lender without prior notice

to or consent of Borrower; provided, however, that Lender (or its assignee)

shall provide written notice of such assignment to Borrower in the event that

Lender (or such assignee) desires to designate a new person or entity as payee

and/or a new place of payment for the obligations under this Note. Borrower may

not, in whole or in part, directly or indirectly, assign this Note or its

rights hereunder or delegate its duties hereunder without, in each instance,

the specific prior written consent of Lender, which consent may be withheld or

delayed in Lender’s sole discretion. Lender shall be fully discharged from all

responsibility accruing hereunder from and after the effective date of any such

assignment. Lender’s assignee shall, to the extent of the assignment, be vested

with all the powers and rights of Lender hereunder, and to the extent of such

assignment the assignee may fully enforce such rights and powers, and all

references to Lender shall mean and refer to such assignee. Lender shall retain

all rights and powers hereby given not so assigned, transferred and/or

delivered. Borrower hereby waives all defenses which Borrower may be entitled

to assert against Lender’s assignee with respect to liability accruing

hereunder prior to the effective date of any assignment of Lender’s interest

herein.

 

SECURITIZATION.  Borrower

understands and agrees that Lender may, from time to time, assign its rights

and powers under this Note, the Security Agreement and any other Loan

Documents, in whole or in part, in connection with a securitization program.

Borrower agrees to enter into an amendment to this Note, the Security Agreement

and any other Loan Documents if such amendments are required by a nationally

recognized rating agency in connection with a securitization program sponsored

by Lender and in which this Note, the Security Agreement any other Loan

Documents are to be included; provided that Borrower shall not be obligated to

enter into any amendment which adversely affects Borrower or otherwise adversely

alters any of the financial terms of this Note, the Security Agreement and any

other Loan Documents.

 

MISCELLANEOUS.  The

terms and provisions of this Note shall be governed by and construed in

accordance with the laws of the State of Maryland. Lender and Borrower agree

that any dispute which may arise between them with regard to this Note shall be

resolved by litigation in state or federal court. Litigation may be initiated

by Lender or its assignee, at its discretion, in the State of the principal place

of business of Lender or its assignee, the State of the principal place of

business of Borrower, or the State where the Collateral is located BORROWER

HEREBY KNOWINGLY AND IRREVOCABLY WAIVES ANY OBJECTIONS ON THE

 

5

 

GROUNDS OF IMPROPER JURISDICTION OR VENUE TO AN ACTION

INITIATED AS SET FORTH ABOVE AND AGREES THAT EFFECTIVE SERVICE OR PROCESS MAY

BE MADE UPON BORROWER BY REGISTERED MAIL RETURN RECEIPT REQUESTED.  The terms and provisions

of this Note may only be changed in writing, executed by Borrower and Lender.

 

THE WESTERN SIZZLIN STORES, INC.

 

	

  By:

  	

  /s/ Victor F. Foti

  	

   

  

 

	

   

  	

  Its: President

  

 

Address:

 

P.O. Box 12167

Roanoke, VA 24023-2167

 

Tax I.D. No. 54-1787907

 

6

 

Pay to the order of

without warranty or recourse.

Captec Financial Group Funding Corporation

 

	

  By:

  	

  /s/ [ILLEGIBLE]

  	

   

  
	

   

  	

   

  
	

  Its:

  	

   

  	

   

  
				

 

7

 

Loan No. 06719

3135 Crain Hwy.

Waldorf, Maryland

 

COLLATERAL ASSIGNMENT OF LEASE AND

OPTION RIGHTS

 

THIS COLLATERAL

ASSIGNMENT OF LEASE AND OPTION RIGHTS (“Assignment”) is made as of the 23 day

of March, 1998, by THE WESTERN SIZZLIN STORES, INC.,  a Virginia corporation, whose address is

P. O. Box 12167, Roanoke, VA 24023-2167 (“Assignor”), in favor of CAPTEC

FINANCIAL GROUP FUNDING CORPORATION, a Michigan corporation, whose

address is 24 Frank Lloyd Wright Drive, Lobby L, 4th Floor, P.O. Box 544, Ann

Arbor, Michigan 48106-0544 (“Assignee”). This instrument shall become effective

on March 31, 1998.

 

For good and valuable

consideration, the receipt and sufficiency of which is hereby acknowledged,

Assignor presently assigns to Assignee all of Assignor’s right, title and

interest in and to its lessee’s interest in that certain lease with Guy E. Clark

and Steven R. Ellis, both individuals, (“Lessor”) dated as of March

1, 1996, a copy of which is attached hereto as Exhibit A (the “Lease”)

respecting the premises commonly known as the Great American Steak & Buffet

Company Restaurant located at 3135 Crain Hwy., Waldorf, Maryland (“Premises”).

This Assignment is for collateral purposes only, and except as specified

herein, Assignee shall have no liability or obligation of any kind whatsoever

arising from or in connection with this Assignment or the Lease unless Assignee

shall take possession of the Premises and assume the obligations of Assignor

thereunder.

 

Assignor represents and

warrants to Assignee that it has full power and authority to so assign the

Lease and its interest therein and that Assignor has not previously, and is not

obligated to, assign or transfer any of its interest in the Lease or the

Premises.

 

Throughout the term of

the Lease, Assignor covenants and agrees to exercise all options to extend or

renew the term of the Lease not less than ninety (90) days prior to the last

day upon which any such option may be exercised, but in no event less than six

(6) months prior to of the term of the Lease, unless Assignee otherwise agrees

in writing. Assignor shall send Assignee a copy of the notice of exercise

concurrently with Assignor’s exercise of the option. Upon the failure of

Assignor to so elect or renew the Lease as aforesaid (and the failure of

Assignee to otherwise agree in writing), Assignee shall have the right, but not

the obligation, to exercise such extension or renewal option on behalf of

Assignor, and Assignor hereby appoints Assignee (or any of its employees) as

its attorney-in-fact for the purpose of exercising such extension or renewal

option.

 

If an “Event of Default”

occurs under the Promissory Note, dated

              ,

1998, in the original principal amount of Seven Hundred Fifty Thousandand

00/100 Dollars ($750,000.00), by Assignor in favor of Assignee (the “Note”) or

under any documents or instruments securing the Note, Assignee shall have the

right and is hereby empowered to take possession of the Premises, expel

Assignor therefrom, and, in such event, Assignor shall have no further right,

title or interest in the Lease and shall remain liable to Assignee for all past

due rents Assignee shall be required to pay to the Lessor under the Lease to

effectuate this Assignment.

 

Assignor agrees that it

will not suffer or permit any surrender, termination, amendment or modification

of the Lease without the prior written consent of Assignee, which consent shall

not be unreasonably withheld. At the request of Assignee, Assignor shall

provide Assignee with rent payment or such other information regarding the

Lease as Assignee shall reasonably require.

 

This Assignment shall be governed by the laws of the State of Maryland.

 

This Assignment may be

executed in one or more counterparts, each of which shall constitute an

original and all of which together shall constitute one and the same

instrument.

 

[SIGNATURE PAGE

FOLLOWS]

 

 

IN WITNESS WHEREOF, Assignor has executed this Assignment as of the day

and year noted above.

 

	

   

  	

  ASSIGNOR:

  	 

	

   

  	

   

  	 

	

  Witnesses:

  	

  THE

  WESTERN SIZZLIN STORES, INC.

  	 

	

   

  	 

	

  /s/ [ILLEGIBLE]

  	

   

  	

  By:

  	

  /s/ Victor F. Foti

  	 

	

   

  	 

	

   

  	

  Its:

  	

  President

  
	

  /s/ [ILLEGIBLE]

  	

   

  	 

								

 

	

  STATE OF Virginia

  	

  )

  
	

   

  	

  )

  
	

  COUNTY OF Roanoke

  	

  )

  

 

I, Richard R. Sayers, a

notary public in and for the State and County aforesaid, do certify that Victor

F. Foti, whose name, as President of The Western Sizzlin Stores, Inc., is

signed to the writing above, bearing date on the 23rd day of March

has acknowledged the same before me in my county aforesaid.

 

Given

under my hand and official seal this 23rd day of March.

 

My term of office expires on the 28th day of February 1999.

 

	

   

  	

  /s/ Richard R. Sayers

  
	

   

  	

  Notary Public

  
	

   

  	

  [Notary Public’s Seal]

  

 

2

 

Loan Nos. 06719

3135 Crain Hwy.

Waldorf, Maryland

 

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT (“Agreement”) is  made as of the 23 day of of March, 1998, by THE WESTERN SIZZLIN STORES, INC., a

Virginia corporation, of P.O. Box 12167, Roanoke, Virginia 24023-2167

(“Borrower”) in favor of CAPTEC FINANCIAL GROUP FUNDING CORPORATION, a

Michigan corporation, of 24 Frank Lloyd Wright Drive, Lobby L, 4th Floor, P.O.

Box 544, Ann Arbor, Michigan, 48106 (together with its successors, assigns and

transferees, “Lender”). This instrument shall become effective on March 31,

1998.

 

PRELIMINARY

STATEMENT

 

This Agreement is made to secure all of the following (individually and

collectively the “Indebtedness”):

 

1.             Payment in the sum

of Seven Hundred Fifty Thousand and 00/100 Dollars ($750,000.00), together with

interest, costs and all other sums, to be paid according to that certain

Promissory Note (the “Note”), by Borrower to Lender, made as of the date of

this Agreement by Borrower, together with any and all extensions, renewals,

modifications, substitutions or replacements thereof; and the performance of

the covenants and obligations of Borrower due or to become due to Lender under

this Agreement or under any other documents securing payment of all amounts due

under the Note (collectively, the “Loan Documents”), and the repayment of all

sums expended by Lender in connection with performance of those covenants and

obligations.

 

2.             If the Note, this

Agreement and the Loan Documents are assigned to Captec Loan Receivables Trust

- 1996A (the “Trust”), “Indebtedness” shall also include the payment of all

other sums (together with interest and costs thereon) concurrently or

subsequently loaned to Borrower by Captec Financial Group, Inc., a Michigan

corporation, Captec Financial Group Funding Corporation, a Michigan

corporation, or Captec Leasing Company, a California corporation (each an

“Originator”), as evidenced and/or secured by certain notes and other documents

of Borrower with respect to such amounts and which notes and other documents

are assigned to the Trust, together with any and all extensions, renewals,

modifications, substitutions or replacements thereof; and the performance of

the covenants and obligations of Borrower due or to become due under such notes

and other documents assigned to the Trust, and the repayment of all sums

expended in connection with performance of those covenants and obligations

(collectively, the “Trust Obligations”).

 

3 .            If the Note, this

Agreement and the Loan Documents are not assigned to the Trust, “Indebtedness”

shall also include the payment of all other sums (together with interest

thereon) concurrently or subsequently loaned to Borrower by an Originator, as

evidenced and/or secured by certain notes and other documents of Borrower which

are not assigned to the Trust, together with any and all extensions, renewals,

modifications, substitutions or replacements thereof; and the performance of

the covenants and obligations of Borrower due or to become due under such notes

and other documents, and the repayment of all sums expended in connection with

performance of those covenants and obligations (collectively, the “Retained

Obligations”).

 

In consideration of the

above facts and the mutual promises of the parties, and as security for the

purposes stated above and elsewhere in this Agreement, the parties agree as

follows:

 

1.             COLLATERAL.

 

(a)           Grant of Security Interest.  Borrower

grants Lender a security interest in all of Borrower’s Inventory, Equipment,

Instruments, Accounts and General Intangibles, each as defined in Section l(b)

below, whether now owned or hereafter acquired, together with all replacements,

substitutions, and additions thereto

 

 

(the “Collateral”) which are (i) located on the

premises of, or are related to the operation of, the Great American Steak &

Buffet Company Restaurants or WesterN SizzliN Restaurant operated by Borrower

and located at the address set forth in Exhibit A attached hereto (“Franchised Operation”

y the “Franchised Operations”), or (ii) related to the Franchised Operation and

located at the principal business office of Borrower located at 416 South

Jefferson Street, 4th Floor, Roanoke, Virginia 24012. Also included as part of

the Collateral are all proceeds and products thereof, including, without limit,

insurance proceeds, stock rights, subscription rights, dividends, stock

dividends, stock splits or liquidating dividends, and all cash, accounts,

chattel paper and general intangibles arising from the sale, rent, lease,

casualty loss or other disposition of the Collateral, and including any records

or documents of title relating to the Collateral.

 

(b)           Definitions.   For purposes of this Agreement, the following terms shall be

defined as follows:

 

(i)             “Inventory” shall consist of all

property held at any location by or for Borrower for sale, rent, or lease, or

furnished or to be furnished by Borrower under any contract of service, or raw

materials or work in process and their products, or materials used or consumed

in Borrower’s business.

 

(ii)            “Equipment” shall consist of any

goods at any time acquired, owned or held by Borrower at any location primarily

for use in Borrower’s business, including, without limit, machinery, fixtures,

furniture, furnishings and vehicles, and any accessions, parts, attachments,

accessories, tools, dies, additions, substitutions, replacements and

appurtenances and their related rights.

 

(iii)           “Instruments” shall consist of

Borrower’s interest of any kind in any negotiable instrument or security as

those terms are defined in the Maryland Uniform Commercial Code (“UCC”), or any

other writing which evidences a right to payment of money and is of a type

which is, in the ordinary course of business, transferred by delivery alone or

by delivery with any necessary endorsement or assignment.

 

(iv)           “General Intangibles” shall consist

of any personal property (including things in action) other than goods,

accounts, chattel paper, documents, instruments and money.

 

(v)            “Accounts” shall consist of any

right to payment for goods sold or leased or for services rendered which is not

evidenced by an instrument or chattel paper whether or not it has been earned

by performance.

 

2.             WARRANTIES AND REPRESENTATIONS. Borrower

warrants and covenants to Lender as follows:

 

(a)           Payment of Indebtedness.  Borrower will

pay the Indebtedness and perform all obligations related to the Indebtedness

when due, whether by maturity, acceleration or otherwise.

 

(b)           Authority.  This Agreement is the valid and

binding obligation of Borrower, enforceable in accordance with its terms.    If Borrower is a corporation, partnership,

limited liability company or other organization, Borrower is organized and

validly existing and in good standing under the laws of its state of

establishment, and the execution, delivery and performance of this Agreement

has been duly authorized by all necessary action of Borrower’s board of

directors, partners, members or governing body, and will not violate Borrower’s

governing instruments or other agreements.

 

2

 

(c)           Name; Address; Location of Collateral.  Borrower’s

name and address and the location of the Collateral are accurately set forth on

the signature page and Exhibit A of this Agreement.

 

(d)           Title to Collateral.  Borrower has good and marketable title

to the Collateral, free and clear of any liens, encumbrances or security

interests whatsoever, other than the security interest granted by this

Agreement and existing liens, encumbrances or security interests disclosed to

and accepted by Lender in writing. Borrower will keep the Collateral free of

all other liens, encumbrances and security interests. Borrower will defend the

Collateral against all claims and demands of all persons at any time claiming

any interest in the Collateral.

 

(e)           Priority of Security Interest.   The execution and delivery of

this Agreement creates a valid security interest in the Collateral, and upon

the filing of a UCC-1 financing statement with the Maryland Department of

Assessments and Taxation, Lender will have a first priority perfected security

interest in the Collateral, subject to no other security interest, except as

otherwise approved by Lender in writing.

 

(f)            Financing Statements.   Except as disclosed to and accepted by

Lender in writing, no financing statement covering all or any part of the

Collateral is on file in any public office. Borrower will execute financing

statement(s) in form acceptable to Lender and will pay the cost of filing financing

statement(s) in all public offices wherever filing is deemed desirable by

Lender.   A carbon, photographic or

other reproduction of this Agreement shall be sufficient as a financing

statement under the UCC and may be filed by Lender in any filing office.  This Agreement shall be terminated only by

the filing of a termination statement in accordance with the applicable

provisions of the UCC.

 

(g)           Payment of Taxes.  Borrower shall pay

when due and before any interest, collection fees or penalties accrue, all

taxes, expenses, assessments, liens or other charges which may now or hereafter

be levied or assessed against the Collateral.  

Borrower shall furnish proof of payment upon request of Lender.

 

(h)           Insurance.

 

(i)            Borrower shall keep the tangible

Collateral (including, without limit, the Equipment and Inventory) insured for

the benefit of Lender. Borrower covenants and agrees that Borrower will carry

and maintain, at its sole cost and expense, the following types of insurance,

in the amounts specified: (A) comprehensive general liability insurance with

initial limits of not less than Two Million Dollars ($2,000,000) for death or

injuries to one person and not less than Two Million Dollars ($2,000,000) for

death or injuries to two or more persons in one occurrence, and not less than

One Million Dollars ($1,000,000) for damage to property; (B) fire and extended

coverage insurance on a replacement form with inflation-guard, vandalism and

malicious mischief endorsements; (C) rent loss or business interruption

insurance covering a period of not less than twelve (12) months; and (D) such

other insurance and in such amounts as may be reasonably required from time to

time by Lender. All insurance shall be in forms and with companies satisfactory

to Lender. Borrower shall deliver to Lender the policies evidencing the

required insurance with premiums fully paid, and with loss payee clauses

(making all losses payable to Lender). Renewals of the required insurance

(together with evidence of premium prepayment for one (1) year in advance)

shall be delivered to Lender at least thirty (30) days before the expiration of

any existing policies. All policies and renewals shall provide that they may

not be canceled or amended without giving Lender thirty (30) days prior written

notice of cancellation or amendment.

 

(ii)           Should Borrower fail to insure or

fail to pay the premiums on any required insurance or fail to deliver the

policies or renewals as provided above, Lender may have the insurance issued or

renewed (and pay the premiums on it for the account of Borrower) in amounts and

with companies and at premiums as Lender deems appropriate. If Lender elects to

have insurance issued or renewed to insure Lender’s interest, Lender shall have

no duty or obligation of any kind to also insure Borrower’s interest or to

notify Borrower of Lender’s actions. Any sums paid by Lender for insurance, as

provided above, shall be a lien upon the Collateral, added to the amount

secured by this Agreement, and payable immediately by Borrower to Lender, with

interest on

 

3

 

those sums at the highest rate charged by Lender on

any of the Indebtedness (but not to exceed the maximum interest rate permitted

by law).

 

(iii)          In the event of loss or damage, the

proceeds of all required insurance shall be paid to Lender. No loss or damage

shall itself reduce the Indebtedness. Lender or any of its employees is each

irrevocably appointed attorney-in-fact for Borrower and is authorized to adjust

and compromise each loss without the consent of Borrower, to collect, receive

and receipt for the insurance proceeds in the name of Lender and Borrower and

to endorse Borrower’s name upon any check in payment of the loss.

 

(iv)          Lender shall apply such proceeds to

the repair and replacement of the Collateral subject to the following

conditions:

 

(1)                                   there

shall be no Event of Default existing hereunder;

 

(2)                                   plans

for repair and replacement shall be reviewed and approved by Lender, which

approval shall not be unreasonably withheld or delayed;

 

(3)                                   repair

and replacement of the Collateral to a saleable commodity (as determined by

Lender) can practicably be completed prior to the Due Date set forth in the

Note;

 

(4)                                   Borrower

shall have deposited with Lender funds equal to the positive difference,  if any, between the cost of repair,

replacement and completion, and the amount of the insurance proceeds; and

 

(5)                                   disbursements

will be made by Lender,  pursuant to

procedures necessary or appropriate to ensure that funds are properly applied.

 

Provided that no Event of Default exists, if there are insurance

proceeds in the amount of Twenty-Five Thousand Dollars ($25,000) or less

remaining after the repair and replacement of the Collateral as required

hereunder, such proceeds shall be paid to Borrower. Provided that no Event of

Default exists, if there are insurance proceeds in excess of Twenty-Five

Thousand Dollars ($25,000) remaining after the repair and replacement of the

Collateral as required hereunder, such proceeds shall be applied toward payment

of the Indebtedness (or any portion thereof) without premium, whether or not

then due or payable, in whatever order of maturity as Lender may elect.

Application of proceeds by Lender toward later maturing installments of the

Indebtedness shall not excuse Borrower from making the regularly scheduled

installment payments nor shall such application extend or reduce the amount of

any of these payments.

 

(v)           Notwithstanding Section 2(h)(iv)

above, if a substantial portion (fifty percent [50%] or more) of the Collateral

is damaged or destroyed during the last twenty-four (24) months of the term of

the Note, and an Event of Default then exists hereunder, then either Borrower

or Lender may elect not to repair/restore and to apply the insurance proceeds

toward payment of the Indebtedness (or any portion thereof) without premium,

whether or not then due or payable, in whatever order of maturity as Lender may

elect. Application of proceeds by Lender toward later maturing installments of

the Indebtedness shall not excuse Borrower from making the regularly scheduled

installment payments nor shall such application extend or reduce the amount of

any of these payments.

 

(vi)          In the event of a sale of the

Collateral, the purchaser of the Collateral shall succeed to all of the rights

of Borrower under the insurance policies including, without limit, any right to

unearned premiums and to receive the proceeds.

 

4

 

(vii)         Upon the occurrence of an Event of

Default hereunder, at the option of Lender, Borrower shall pay to Lender, in

advance on the first day of each month, a pro rata portion of die annual

premiums due (as estimated by Lender) on the required insurance. In the event

that sufficient funds have been deposited with Lender to cover the amount of

the insurance premiums when the premiums become due and payable, Lender shall

pay the premiums. In the event that sufficient funds have not been deposited

with Lender to pay the insurance premiums at least thirty (30) days prior to

the time when they become due and payable, Borrower shall immediately pay the

amount of the deficiency to Lender.

 

(i)            Maintenance of Collateral. Borrower will maintain the

Collateral in good condition and repair. Borrower will promptly inform Lender

of any loss or diminution in value of the Collateral. Borrower may modify,

compromise or substitute for the Collateral without the prior written consent

of Lender provided that any modifications, compromises or substitutions have

the same or greater value as the original items and that any such

modifications, compromises or substitutions remain at all times subject to this

Agreement.

 

(j)            Leased Facilities.  If the Collateral is

located at a facility leased by Borrower, Borrower will obtain from the lessor

a consent to the granting of a security interest in the Collateral and a

subordination of the lessor’s interest hi the Collateral. The consent and

subordination shall be in form acceptable to Lender.

 

(k)           Reporting Obligations.  Borrower hereby

covenants and agrees to deliver to Lender, or to cause The WesterN SizzliN

Corporation (“Guarantor”) to deliver to Lender, the following:

 

(A)           Management prepared

and certified consolidated quarterly financial statements for Guarantor within

forty-five (45) days after the end of the first three (3) quarters of each

fiscal year of Guarantor.

 

(B)            Annual consolidated

financial statements for Guarantor audited by an independent certified public

accountant within one hundred twenty (120) days after the end of each fiscal

year of Guarantor.

 

(C)            Management prepared

and certified unit level profit and loss statements relating to the operation

of the Franchised Operation within forty-five (45) days after the end of each

fiscal year of Borrower.

 

Such financial statements shall be true and correct in

all respects, shall be prepared in accordance with generally accepted

accounting principles, and shall fairly represent the respective financial

conditions of the subjects thereof as of the respective dates thereof. If Borrower’s

financial statements are prepared on a consolidated basis, Borrower hereby

covenants and agrees to prepare financial statements specifically relating to

the operation of the Franchised Operation. At the request of Lender, Borrower

shall obtain the consent of Borrower’s accountant(s) to the inclusion of

Borrower’s most recent financial statement in any regulatory filing or report

to be filed by Lender.

 

(l)            Management and Licensing Agreement.  Borrower

is a franchisee in good standing with The Western Sizzlin Corporation

(“Franchisor”), and is not in default under its Management and Licensing

agreement with Franchisor relating to the Franchised Operation (“Management

Agreement”). Borrower agrees to comply with the terms of the Management

Agreement and to take all actions necessary or required to keep the Management

Agreement in full force and effect. Borrower will not encumber its rights under

the Management Agreement, except to Lender. Borrower agrees to promptly provide

Lender with a copy of any notice of default under the Management Agreement.

Further, Borrower agrees to promptly provide Lender with a copy of any notice

to Borrower of the existence of any breach which, with notice or the passage of

time, or both, would entitle Franchisor to terminate the Management Agreement.

 

5

 

(m)          Fixed Charge Coverage Ratio.  Borrower

shall maintain a Fixed Charge Coverage Ratio (as hereinafter defined) of not

less than 1.2 to 1.0 for Borrower’s business operations generally and not less

than 1.4 to 1.0 for the Franchised Operation. “Fixed Charge Coverage Ratio”

shall mean Borrower’s Operating Cash Flow divided by its Fixed Charges (each as

defined below). The Fixed Charge Coverage Ratios shall be calculated by

Borrower from time to time and dates as determined by Lender, and Borrower

shall submit such information as Lender may require to confirm and approve

Borrower’s calculation of the Fixed Charge Coverage Ratios.

 

(i)            “Fixed Charges” shall mean the sum of

the following items set forth on a pro forma basis separately stated for both

Borrower’s business operations generally and for the Franchised Operation, in

each case, for the applicable twelve (12) month operating period:

 

(A)          current portion of long-term debt

(defined as the current portion of long-term debt due to mature during the next

twelve (12) month operating period, as stated in Borrower’s applicable

financial statement, plus, if not already included therein, the current of

portion of principal payments imputed on all capital leases), plus

 

(B)           interest expense (defined as the

interest expense as stated on Borrower’s applicable financial statement, plus,

if not already included therein, the interest expense imputed on all capital

leases), plus

 

(C)           the current portion of operating

leases (defined as the amount of rent due under operating leases for the next

twelve (12) month operating period).

 

(ii)           “Operating Cash Flow” shall mean the

sum or subtraction of the following items separately stated for both Borrower’s

business operations generally and for the Franchised Operation, in each case,

for the applicable prior twelve (12) month operating period:

 

(A)          net income (defined as the net income

stated on Borrower’s applicable financial statement), plus

 

(B)           depreciation and amortization

(defined as the depreciation and amortization expense as stated on Borrower’s

applicable financial statement), plus

 

(C)           interest expense (as defined above), plus

 

(D)          operating lease expense (defined as

die amount of rental expense paid under operating leases, as stated on

Borrower’s applicable financial statements), plus or minus

 

(E)           non-recurring items (defined as items

which, when computing cash flow, should in Lender’s reasonable business

judgment, be added back to or subtracted from net income to normalize results).

 

3.             PROHIBITION

ON TRANSFER OR MODIFICATION.   Borrower

shall not transfer, sell, assign, lease or modify the Collateral or any

interest therein, any pan thereof, or any substantial portion of Borrower’s

other assets or property without the prior written consent of Lender.   Notwithstanding the foregoing, Borrower may

use Collateral if the same is in the ordinary course of Borrower’s business and

on customary terms and at usual prices.

 

4.             PROHIBITION

ON CHANGE OF NAME,

ORGANIZATION

OR LOCATION.  Borrower  shall not assume a different name, change

the location of its principal place of business, cease conducting business

 

6

 

at any location that appears in this Agreement, merge,

consolidate, change or reorganize its organizational structure nor change the

location of any of the Collateral without, in each instance, obtaining the

prior written consent of Lender thirty (30) days prior to any such event.

 

5.             RIGHT

OF SETOFF.  Borrower

hereby grants Lender the right, exercisable if Borrower is in default, to set

off or apply against the Indebtedness any account or deposit with Lender in

which Borrower has an interest or against any other amounts which may be in the

possession of Lender and to the credit of Borrower.

 

6.             EXAMINATION

OF RECORDS AND COLLATERAL.  Borrower

shall keep full and accurate records of Borrower’s business, including, without

limit, records related to the Collateral, and such records shall be open to

inspection and duplication by Lender at all reasonable times.   Lender may enter upon any property owned by

or in the possession of Borrower to examine and inspect the Collateral during

regular business hours. Borrower shall promptly provide Lender with any information

concerning the Collateral as Lender may request at any time.

 

7.             REIMBURSEMENT

OF EXPENSES. Borrower shall reimburse Lender for all

reasonable costs and expenses, including reasonable attorneys’ fees, incurred

by Lender in enforcing the rights of Lender under this Agreement. All costs and

expenses shall be included in the Indebtedness and shall be immediately due and

payable together with interest at the maximum legal rate.  Such costs and expenses shall include,

without limitation, costs or expenses incurred by Lender in any bankruptcy,

reorganization, insolvency or other similar proceeding.

 

8.             RIGHTS

AND OBLIGATIONS OF LENDER. In the event that Borrower fails

to pay taxes, maintain insurance or perform any other obligation arising under

this Agreement, Lender may pay or perform such obligation(s) for the account of

Borrower and the same shall be added to the Indebtedness and shall be

immediately due and payable together with interest at the highest rate charged

by Lender on any of the Indebtedness (but not to exceed the maximum rate

permitted by law). Lender shall not be liable for any loss to the Collateral

nor shall such loss reduce the balance due.

 

9.             INDEMNIFICATION.   Borrower shall indemnify

and save Lender harmless from all claims, obligations, costs, expenses,

including attorneys’ fees, and causes of action or other rights asserted

against Lender and relating to this Agreement and/or the Collateral, except

those arising from the gross negligence or wilful misconduct of Lender.

 

10.          EVENTS OF DEFAULT

AND REMEDIES.

 

(a)           Events of Default.  Any of the following

events shall, for purposes of this Agreement, constitute an “Event of Default”:

 

(i)       Failure by Borrower to pay any amount

owing on or with respect to die Indebtedness when due, whether by maturity,

acceleration or otherwise, which failure continues for five (5) business days.

 

(ii)      Any failure by Borrower or any guarantor

to comply with, or breach by Borrower or any guarantor of, any of the

non-monetary terms, provisions, warranties or covenants of the Note, this

Agreement or the other Loan Documents, which failure continues for fifteen (15)

days after the date of written notice to Borrower (or any guarantor) from

Lender of such default; provided, however, that if: (i) the nature of Borrower’s

(or any guarantor’s) noncompliance is such that more than fifteen (15) days are

reasonably required for its cure, (ii) Borrower (or any guarantor) has

commenced such cure within said fifteen (15) day period, (iii) Borrower (or any

guarantor) diligently prosecutes such cure to completion, (iv) Borrower (or any

guarantor) provides Lender with written notice of the noncompliance, AND (v)

Borrower (or any guarantor) furnishes reserves

 

7

 

or a security bond, in an amount satisfactory to

Lender in its sole discretion, then Borrower (or any guarantor) shall not be in

default.

 

(iii)     Institution of remedial proceedings or

other exercise of rights and remedies by the holder of any security interest or

other lien against the Collateral or any portion thereof; provided, however, if

there is a good faith dispute by Borrower (or any guarantor) as to the validity

or reasonableness of the claim which is the basis for such proceedings, then no

Event of Default shall have occurred under this clause (iii) if Borrower (or

any guarantor) provides Lender with written notice of the proceedings and

furnishes reserves or a security bond for the proceedings satisfactory to

Lender.

 

(iv)     The insolvency of Borrower or any guarantor

or the admission in writing of Borrower’s or any guarantor’s inability to pay

debts as they mature.

 

(v)      Any statement, representation or

information made or furnished by or on behalf of Borrower or any guarantor to

Lender in connection with or to induce Lender to provide any of the

Indebtedness shall prove to be false or materially misleading when made or

furnished.

 

(vi)     Institution of bankruptcy, reorganization,

insolvency or other similar proceedings by or against Borrower or any

guarantor, unless, in the case of a petition filed against Borrower, the same

is dismissed within sixty (60) days of filing.

 

(vii)    The issuance or filing of any judgment,

attachment, levy, garnishment or the commencement of any related proceeding or

the commencement of any other judicial process upon or in respect to Borrower

or any guarantor or the Collateral in which the amount in controversy exceeds

One Hundred Thousand Dollars ($100,000) and is not covered by the insurance of

Borrower (or any guarantor), unless satisfied, or Borrower (or any guarantor)

furnishes reserves or a security bond in an amount satisfactory to Lender in

its sole discretion, released or discharged within sixty (60) days after the

date of such issuance, filing or communication.

 

(viii)   Sale or other disposition by Borrower or any

guarantor of any substantial portion of assets or property.

 

(ix)     Death, dissolution, merger, consolidation,

termination of existence, insolvency, business failure or assignment for the

benefit of creditors of or by Borrower or any guarantor; without the prior

written consent of Lender, which consent shall not be unreasonably withheld.

 

(x)      If there is any failure by Borrower or any

guarantor to pay any indebtedness (other than to Lender) in excess of One

Hundred Thousand Dollars ($100,000) (and exclusive of trade debt incurred in

the ordinary course of business) when do or in the observance or performance of

any term, covenant or condition in any document evidencing, securing or

relating to such indebtedness, which failure continues beyond any applicable

cure period.

 

(xi)     Receipt by Borrower of a notice of

termination of the Management Agreement.

 

(xii)    If the Note, this Agreement and the other

Loan Documents have not been assigned to the Trust, the default by Borrower

which continues beyond any applicable grace or cure period under the Retained

Obligations; provided, however, if the Note, this Agreement and the other Loan

Documents are assigned to the Trust, this clause (xii) shall be of no force or

effect during the term of such assignment.

 

(xiii)   In the event that the Note, this Agreement

and the other Loan Documents are assigned to the Trust, the default by Borrower

which continues beyond any applicable grace or cure period under the Trust

Obligations.

 

8

 

(b)           Remedies Upon Event of Default.  Upon

the occurrence of any Event of Default, Lender shall have the following rights:

 

(i)       Declare all or part of the Indebtedness

immediately due and payable.

 

(ii)      Borrower agrees, upon request of Lender,

to assemble the Collateral and make it available to Lender at any place which

is reasonably convenient for Borrower and Lender. Borrower grants Lender

permission to enter upon any premises owned or occupied by Borrower for the

purpose of taking possession of the Collateral.

 

(iii)     Lender shall have the right to take

possession of the Collateral, with or without demand, and with or without

process of law. Lender shall have the right to sell and dispose of the

Collateral and to distribute the proceeds according to law. In connection with

the right of Lender to take possession of the Collateral, Lender may take

possession of any other items of property in or on the Collateral at the time

of taking possession, and hold them for Borrower without liability on the part

of Lender. If there is any statutory requirement for notice, that requirement

shall be met if Lender shall send notice to Borrower at least five (5) days

prior to the date of sale, disposition or other event giving rise to the

required notice. Borrower shall be liable for any deficiency remaining after

disposition of the Collateral.

 

(iv)     Lender shall also have any one or more of

the rights and remedies under the UCC or at law or equity to enforce the

payment of the Indebtedness.

 

(c)           Remedies Generally.

 

(i)       All remedies provided for in Section

10(b) shall be available to the extent not prohibited by law. Each remedy shall

be cumulative and additional to any other remedy of Lender at law, in equity or

by statute. No delay or omission to exercise any right or power accruing upon

any default or Event of Default shall impair any such right or power or shall

be construed to be a waiver of, or acquiescence in, any such default or Event

of Default.

 

(ii)      Lender may waive any Event of Default and

may rescind any declaration of maturity of payments on the Indebtedness. In

case of such waiver or recision Borrower and Lender shall be restored to their

respective former positions and rights under this Agreement. Any waiver by

Lender of any default or Event of Default shall be in writing and shall be

limited to the particular default waived and shall not be deemed to waive any

other default.

 

(d)           Application of Proceeds.  Any proceeds received by Lender from the

exercise of remedies pursuant to Section 10(b) of this Agreement shall be

applied as follows:

 

(i)       First, to pay all costs and expenses

incidental to the leasing, foreclosure, sale or other disposition of the

Collateral. These costs and expenses shall include, without limit, any costs

and expenses incurred by Lender (including, without limit, reasonable

attorneys’ fees and disbursements), and any taxes and assessments or other

liens and encumbrances prior to the lien of this Agreement.

(ii)      Second, to all sums expended or incurred

by Lender, directly or indirectly in carrying out any term, covenant or

agreement under this Agreement or any related document, together with interest

as provided in this Agreement.

 

(iii)     Third, to the payment of the Indebtedness.

If the proceeds are insufficient to fully pay the Indebtedness, then

application shall be made first to late charges and interest accrued and

unpaid, then

 

9

 

to any applicable prepayment premiums, and then to

unpaid fees and other charges, then to the outstanding principal balance.

 

(iv)     Fourth, any surplus remaining shall be paid

to Borrower or to whomsoever may be lawfully entitled.

 

(e)           Further

Actions.    Promptly upon

the request of Lender, Borrower shall execute, acknowledge and deliver any and

all further documents, security agreements, financing statements and

assurances, and do or cause to be done all further acts as Lender may require

to confirm and protect the lien of this Agreement or otherwise to accomplish

the purposes of this Agreement.

 

(f)            Attorneys

Fees.  Any reference in

this Agreement to attorneys’ fees shall refer to fees, charges, costs and

expenses of in-house and outside attorneys and paralegals, whether or not a

suit or proceeding is instituted, and whether incurred at the trial court

level, on appeal, in a bankruptcy, administrative or probate proceeding, in

consultation with counsel, or otherwise. All costs, expenses and fees of any

nature for which Borrower is obligated to reimburse or indemnify Lender are

part of the Indebtedness secured by this Agreement and are payable upon demand,

unless expressly provided otherwise, with interest until repaid at the highest

rate charged on any of the Indebtedness (but not to exceed the maximum rate

permitted by law).

 

11.          PARTIAL

RELEASES. Lender shall from time to time execute and deliver to

Borrower, within ten (10) business days after the written request of Borrower,

UCC termination statements with respect to a portion of the Collateral secured

hereunder, provided that (a) Borrower shall not be in default under any of the

terms, covenants or conditions of any document or instrument evidencing or

securing the Indebtedness; (b) the outstanding principal balance of the

applicable promissory note, together with interest, premiums, costs and all

other sums on that amount, shall be paid in full; and (c) all termination

statements shall be prepared by Lender at Borrower’s expense. The portion of

the Collateral released under this Section 11 shall be determined by matching

the Collateral located at or related to a specified Franchised Operation with

the promissory note referencing that Franchised Operation on its face.

 

12.          MISCELLANEOUS.

 

(a)           Governing

Law. This Agreement shall be construed according to the laws of

the State of Maryland.

 

(b)           Successors

and Assigns.   This

Agreement shall be binding upon the successors and assigns of Borrower

including, without limit, any debtor in possession or trustee in bankruptcy for

Borrower, and the rights and privileges of Lender under this Agreement shall

inure to the benefit of its successors and assigns. This shall not be deemed a

consent by Lender to a conveyance by Borrower of all or any pan of the

Collateral or of any ownership interest in Borrower.

 

(c)           Notices.  Notice from one party to another relating to

this Agreement, if required, shall be deemed effective if made in writing

(including telecommunications) and delivered to the recipient’s address, telex

number or telecopier number set forth by any of the following means: (i) hand

delivery, (ii) registered or certified mail, postage prepaid, (iii) express

mail or other overnight courier service or (iv) telecopy, telex or other wire

transmission with request for assurance of receipt in a manner typical with

respect to communications of that type. 

Notice made in accordance with these provisions shall be deemed

delivered on receipt if delivered by hand or wire transmission, on the third

business day after mailing if mailed by registered or certified mail, or on the

next business day after mailing or deposit with the postal service or an

overnight courier service if delivered by express mail or overnight courier.

Borrower’s telecopier number is (540) 345-0831, and Lender’s telecopier number

is (743) 994-1376.

 

10

 

(d)           Entire Agreement; Amendments.  This

Agreement and any agreement to which it refers state all rights and obligations

of the parties and supersede all other agreements (oral or written) with

respect to the security interests granted by this Agreement.   Any amendment of this Agreement shall be in

writing and shall require the signature of Borrower and Lender.

 

(e)           Partial Invalidity.  The invalidity or

unenforceability of any provision of this Agreement shall not affect the

validity or enforceability of the remaining provisions of this Agreement.

 

(f)            Inspections.  Any inspection, audit,

appraisal or examination by Lender or its agents of the Collateral or of

information or documents pertaining to the Collateral is for the sole purpose

of protecting Lender’s interests under this Agreement and is not for the

benefit or protection of Borrower or any third party.

 

(g)           Joint and Several Liability.  In the

event that more than one person or entity executes this Agreement, the

obligations of each person or entity shall be joint and several,

 

(h)           Automatic Reinstatement.  Notwithstanding

any prior revocation, termination, surrender or discharge of this Agreement,

the effectiveness of this Agreement shall automatically continue or be

reinstated, as the case may be, in the event that:

 

(i)                Any payment received or credit

given by Lender in respect of the Indebtedness is determined to be a

preference, impermissible setoff, fraudulent conveyance, diversion of trust

funds, or otherwise required to be returned to Borrower or any third party

under any applicable state or federal law, including, without limit, laws

pertaining to bankruptcy or insolvency, in which case this Agreement shall be

enforceable as if any such payment or credit had not been received or given, whether

or not Lender relied upon this payment or credit or changed its position as a

consequence of it.

 

(ii)               In the event of continuation or

reinstatement of this Agreement, Borrower agrees upon demand by Lender to

execute and deliver to Lender those documents which Lender determines are

appropriate to further evidence (in the public records or otherwise) this

continuation or reinstatement, although the failure of Borrower to do so shall

not affect in any way the reinstatement or continuation. If Borrower does not

execute and deliver to Lender such documents upon demand, Lender and each

officer of Lender is irrevocably appointed (which appointment is coupled with

an interest) the true and lawful attorney of Borrower (with full power of

substitution) to execute and deliver such documents in the name and on behalf

of Borrower.

 

(i)            WAIVER

OF JURY TRIAL.   BORROWER AND LENDER

ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT

IT MAY BE WAIVED. EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY

TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR

THEIR MUTUAL BENEFIT, WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF

LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED

TO, THIS AGREEMENT OR THE INDEBTEDNESS.

 

(j)            Assignment. This Agreement is

freely assignable, in whole or in part, by Lender without notice to or consent

of Borrower; provided, however, that Lender (or its assignee) shall provide

written notice of such assignment to Borrower in the event that Lender (or such

assignee) desires to designate a new person or entity as payee and/or a new

place of payment for the obligations under the Note. Lender shall be fully

discharged from all responsibility accruing hereunder from and after the

effective date of any such assignment. Lender’s assignee shall, to the extent

of the assignment, be vested with all the powers and rights of Lender hereunder

(including those granted under Section 10 hereof or otherwise with respect to

the Collateral), and to the extent of such assignment the assignee may fully

enforce such rights and powers, and all references to Lender shall mean and

refer to such assignee. Lender shall retain all rights and powers hereby given

not so assigned, transferred and/or delivered.

 

11

 

Borrower hereby waives all defenses which Borrower may

be entitled to assert against Lender’s assignee with respect to liability

accruing hereunder prior to the effective date of any assignment of Lender’s

interest herein. Borrower may not, in whole or in part, directly or indirectly,

assign this Agreement or its rights hereunder or delegate its duties hereunder

without, in each instance, the specific prior written consent of Lender, which consent

may be withheld or delayed in Lender’s sole discretion.

 

(k)           Securitization. Borrower

understands and agrees that Lender may, from time to time, assign its rights

and powers under the Note, this Agreement and any other Loan Documents, in

whole or in part, in connection with a securitization program. Borrower agrees

to enter into an amendment to the Note, this Agreement and any other Loan

Documents if such amendments are required by a nationally recognized rating

agency in connection with a securitization program sponsored by Lender and in

which the Note, this Agreement and any older Loan Documents are to be included;

provided that Borrower shall not be obligated to enter into any amendment which

adversely affects Borrower or otherwise adversely alters any of the financial

terms of the Note, this Agreement and any other Loan Documents.

 

[SIGNATURE PAGE

FOLLOWS]

 

12

 

Borrower has executed this Agreement on the day and

year first above written.

Borrower’s principal place of business is located in

the City of Roanoke, Commonwealth of Virginia.

 

Locations of the Collateral:

416 South Jefferson Street, 4th Floor

Roanoke, Virginia 24012 and

each of the sites listed on Exhibit A attached hereto.

 

BORROWER:

 

THE WESTERN SIZZLIN STORES, INC.

 

	

  By

  	

  /s/ Victor F. Foti

  	

   

  	 

	

   

  	

   

  	

   

  	 

	

   

  	

   

  	

   

  	 

	 
	

  Its:

  	

  President

  	

   

  
							

 

 

Address:

 

P.O. Box 12167

Roanoke, VA 24023-2167

 

Tax I.D. No. 54-1787907

 

13

 

EXHIBIT A

 

TO

 

SECURITY AGREEMENT

 

 

3135 Crain Hwy.,

Waldorf, MD

 

A-1

 

Loan No. 06719

3135 Crain Hwy.

Waldorf, Maryland

 

GUARANTY

 

THE WESTERN SIZZLIN CORPORATION, a Tennessee corporation and THE

WESTERN SIZZLIN STORES OF LITTLE ROCK, INC., an Arkansas corporation (each a

“Guarantor”), as a material inducement to and in consideration of CAPTEC

FINANCIAL GROUP FUNDING CORPORATION, a Michigan corporation, whose address is

24 Frank Lloyd Wright Drive, Lobby L, Ann Arbor, Michigan 48106 (together with

its successors, assigns and transferees, “Lender”), making a loan in the

original principal amount of Seven Hundred Fifty Thousand and 00/100 Dollars

($750,000.00) as evidenced by a Promissory Note, dated March 23,

1998 (“Note”), made by THE WESTERN SIZZLIN STORES, INC., a Virginia corporation

(“Borrower”), which Note is secured by the instruments referenced therein

(together with the Note, “Loan Documents”), hereby jointly and severally,

unconditionally and irrevocably, personally guarantees to and for the benefit

of Lender, and Lender’s successors and assigns, the full and timely payment and

performance of all of the Borrower’s duties, obligations and covenants under

the Loan Documents. This is a guaranty of payment and performance and not of

collection.

 

This Guaranty shall not be affected by Lender’s failure or delay to

enforce any of its rights.

 

Guarantor’s obligations

are independent of Borrower’s obligations. If Borrower defaults under the Loan

Documents, Lender can proceed immediately against Guarantor or Borrower, or

both, or Lender can enforce against Guarantor or Borrower, or both, any rights

that it has under the Loan Documents or pursuant to applicable laws. If any

lien created by the Loan Documents terminates and Lender has any rights it can

enforce against Borrower after termination, Lender can enforce those rights

against Guarantor without giving previous notice to Borrower or Guarantor or

without making any demand on either of them.

 

To the extent permitted

by law, Guarantor waives the benefit of any statute of limitations affecting

Guarantor’s liability under this Guaranty. Guarantor waives the right to

require Lender to first or concurrently: (1) proceed against Borrower; (2)

proceed against or exhaust any security that Lender holds from Borrower; or (3)

pursue any other remedy in Lender’s power. The liability of Guarantor shall not

be affected or exonerated by any indulgence, compromise, settlement or

variation of terms which may be extended by Lender to Borrower, or agreed upon

by Lender or Borrower, and, unless agreed to in writing by Lender, shall not be

affected or exonerated by any assignment by Borrower of its interest in any one

or more of the Loan Documents, nor shall the liability of the Guarantor be

affected or exonerated by the insolvency, bankruptcy (voluntary or

involuntary), or reorganization of Borrower, nor by the voluntary or

involuntary liquidation, sale or other disposition of all or substantially all

of the assets of Borrower, or by the release of any other Guarantor. Lender and

Borrower, without notice to or consent by Guarantor, may at any time or times

enter into such modifications, extensions, amendments or other covenants of the

Loan Documents as they may deem appropriate, and Guarantor shall not be

released nor its liability exonerated thereby but shall continue to be fully

liable for the payment and performance of all obligations and duties of

Borrower under the Loan Documents as so modified, extended or amended.

 

Guarantor further agrees

(1) to indemnify and hold harmless Lender from and against any claims, damages,

expenses or losses, including to the extent permitted by law, all reasonable

attorneys’ fees incurred by counsel of Lender’s choice (whether or not

litigation is commenced), resulting from or arising out of any breach of any

provision of the Loan Documents by Borrower or by reason of Borrower’s failure

to perform any of its obligations thereunder, and (2) to the extent permitted

by law, to pay all costs and expenses, including reasonable attorneys’ fees

(whether or not litigation is commenced), incurred by Lender in enforcing this

Guaranty.

 

Until all of Borrower’s

obligations to Lender have been discharged in full, Guarantor has no right of

subrogation against Borrower. Guarantor assumes the responsibility to remain

informed of the financial condition

 

 

of Borrower and of all other circumstances bearing

upon the risk of Borrower’s default, which reasonable inquiry would reveal, and

agrees that Lender shall have no duty to advise Guarantor of information known

to it regarding such condition or any such circumstances. Lender shall not be

required to inquire into the powers of Borrower or the officers, employees,

partners or agents acting or purporting to act on its behalf, and any

indebtedness made or created in reliance upon the professed exercise of such

powers shall be guaranteed under this Guaranty. Each Guarantor hereby

represents and warrants to Lender that such Guarantor has received a copy of

each of the Loan Documents, has read or had the opportunity to read each of the

Loan Documents, and understands the terms of the Loan Documents. The provisions

in the Loan Documents relating to the execution of additional documents, legal

proceedings by Lender against Borrower, severability of the provisions of the

Loan Documents, interpretation of the Loan Documents, notices, waivers

(including waiver of a jury trial), limitation on right of recovery against

Lender, disclaimer of individual liability, and the applicable laws which

govern the interpretation of the Loan Documents are incorporated herein in

their entirety by this reference and made a part hereof as though set forth in

full herein; any reference in those provisions to “Borrower” shall mean each

Guarantor and any reference in those provisions to the “Loan Documents” shall

mean this Guaranty.

 

To the extent permitted

by law, Guarantor waives its right to enforce any remedies that Borrower now

has, or later may have, against Lender. Guarantor waives any right to

participate in any security now or later held by Lender. Guarantor waives

notice of acceptance of this Guaranty, and all other notices in connection with

this Guaranty or in connection with the liabilities, obligations and duties

guaranteed hereby, including notices to Guarantor of default by the Borrower under

the Loan Documents. Guarantor hereby waives diligence, presentment, demand for

performance, notice of nonperformance, protest, notice of protest, notice of

dishonor, and notice of acceptance of this Guaranty, and waives all notices of

the existence, creation, or incurring of new or additional obligations.

 

If there is more than one

Guarantor, the liability of each Guarantor shall be joint and several.

Guarantor’s obligations under this Guaranty shall be binding on Guarantor’s

legal representatives, heirs, successors and assigns.

 

If Borrower disposes of

its interest in the property secured by the Loan Documents, “Borrower”, as used

in this Guaranty, shall mean Borrower’s successors or assigns. Assignment of

the Loan Documents by Lender (as permitted by the Loan Documents) shall not

affect this Guaranty. In the event of an assignment of the Loan Documents by

Lender, the term “Lender” as used in this Guaranty shall mean Lender’s

successors or assigns.

 

Guarantor hereby

covenants and agrees to deliver to Lender the following: (a) management

prepared and certified consolidated quarterly financial statements for

Guarantor within forty-five (45) days after the end of the first three (3)

quarters of each fiscal year of Guarantor, and (b) annual consolidated financial

statements for Guarantor audited by an independent certified public accountant

within one hundred twenty (120) days after the end of each fiscal year of

Guarantor. Such financial statements shall be true and correct in all respects,

shall be prepared in accordance with generally accepted accounting principles,

and shall fairly represent the respective financial conditions of the subjects

thereof as of the respective dates thereof. At the request of Lender, Guarantor

shall obtain the consent of Guarantor’s accountant(s) to the inclusion of

Guarantor’s most recent financial statement in any regulatory filing or report

to be filed by Lender.

 

If any one or more of the

provisions of this Guaranty shall be held to be invalid, illegal or

unenforceable in any respect, such invalidity, illegality or unenforceability

shall not affect any other provision of this Guaranty, and this Guaranty shall

be construed as if such invalid, illegal or unenforceable provision had never

been contained herein.

 

This Guaranty shall be

construed according to the laws of the State of Maryland. Guarantor agrees that

any dispute which may arise between Lender and Guarantor with regard to this

Guaranty shall be resolved by litigation in state or federal court. Litigation

may be initiated by Lender or its assignee, at its discretion, in the State of

the principal place of business of Lender or its assignee, the State of the

principal place of business of Guarantor, or the State where the Collateral (as

defined in the Loan Documents) is located.

 

2

 

GUARANTOR HEREBY KNOWINGLY AND

IRREVOCABLY WAIVES ANY OBJECTIONS ON THE GROUNDS OF IMPROPER JURISDICTION OR

VENUE TO AN ACTION INITIATED AS SET FORTH ABOVE AND AGREES THAT EFFECTIVE

SERVICE OF PROCESS MAY BE MADE UPON GUARANTOR BY REGISTERED MAIL RETURN RECEIPT

REQUESTED. GUARANTOR WAIVES, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY IN

ANY ACTION BETWEEN THE PARTIES.

 

This Guaranty shall

become effective on March 31, 1998.

 

THE

WESTERN SIZZLIN CORPORATION

 

	

  By:

  	

  /s/ Victor F. Foti

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  Its: President

  	

   

  
				

 

THE WESTERN SIZZLIN STORES OF LITTLE ROCK, INC.

 

	

  By:

  	

  /s/ Victor F. Foti

  	

   

  
	

   

  
	

   

  	

  Its: President

  	

   

  
				

 

3

 

Loan No. 06719

3135 Grain Hwy.

Waldorf, Maryland

 

CERTIFICATE OF BORROWER

 

THE WESTERN SIZZLIN

STORES, INC., a Virginia corporation ("Borrower"), for the benefit of

CAPTEC FINANCIAL GROUP FUNDING CORPORATION, a Michigan corporation (together

with its successors, assigns and transferees, “Lender”), warrants, represents,

covenants and agrees that the following are true and correct as of the date

hereof:

 

1.             All warranties and representations of Borrower contained

in this Certificate shall survive the execution of this Certificate and any

advances made in accordance with the Promissory Note executed by Borrower, in

favor of Lender, dated even herewith, in the original principal amount of Seven

Hundred Fifty Thousand and 00/100 Dollars ($750,000.00) (the “Note”).

 

2.             Borrower has good, indefeasible and marketable title to

the Collateral (as defined in that certain Security Agreement, dated even

herewith, between Borrower and Lender (the “Security Agreement”)). Except for

the Security Agreement, there are no instruments, matters or agreements, and

Borrower is not a party to any instrument, matter or agreement, which will in

any way encumber, bind or otherwise affect the Collateral or Lender.  Borrower has neither done nor failed to do

anything, nor has suffered anything to be done, as a result of which the Collateral

or any part thereof has been or will be encumbered or title thereto has been or

will be affected in any way and no person, firm or entity has any present,

conditional or contingent rights to acquire all or any portion of the

Collateral.

 

3.             Borrower is a corporation duly organized and validly

existing in good standing under the laws of the Commonwealth of Virginia and is

qualified to do business in the State of Maryland.   The person or persons executing the Note, the Security Agreement

and the other Loan Documents (as defined in the Security Agreement) have full

power and complete authority to execute the Note, the Security Agreement and

the other Loan Documents, and, when executed, the Note, the Security Agreement

and the other Loan Documents will be legal, valid and binding obligations of

Borrower, enforceable in accordance with their terms.

 

4.             As of the date hereof, Borrower is not “insolvent”

within the meaning of Section 548(a)(2)(B) of the United States Bankruptcy

Code.

 

5.             Borrower is in the business of owning and operating

Great American Steak & Buffet Company restaurants, including the restaurant

operation located at 3135 Crain Hwy., Waldorf, Maryland (the “Franchised

Operation”). Borrower’s chief executive office is located at 416 South Jefferson

Street, Roanoke, Virginia 24012, and the Collateral is located at Borrower’s

Chief Executive Office and the Franchised Operation.

 

6.             Borrower has furnished to Lender its most recent annual

audited financial statements and most recent management prepared and certified

quarterly financial statements, which statements were prepared in accordance

with generally accepted accounting principles and are correct and complete and

accurately present the financial condition of Borrower on the dates thereof.  Further, there has been no material adverse

change in the business, property or condition of Borrower since the date of the

most recent financial statements.

 

7.             Borrower has complied and will continue to comply with

all applicable laws, rules, regulations and orders relating to Borrower or any

aspect of Borrower’s business or assets, including, without limit, all

environmental laws, rules, regulations and orders. Borrower agrees to indemnify

and hold Lender harmless against and from all claims, losses and costs

resulting from any and all violations by Borrower of any laws, rules,

regulations and/or orders.

 

 

8.             Borrower has not received any

written notice of, and, to the best knowledge of Borrower, none of Borrower,

the Franchised Operation or the premises where the Franchised Operation is

located are in violation of any law, municipal ordinance or other governmental

requirement of any governmental authority.

 

9.             There are no circumstances, state

of facts or other matters which, with the passage of time or the giving of

notice, or both, would constitute an Event of Default under the terms of the

Note, the Security Agreement or the other Loan Documents.

 

10.           Borrower has filed all federal, state

and local income and other tax returns and other reports required to be filed

prior to the date of this Certificate and Borrower has paid all taxes,

assessments, withholdings and other governmental charges that are due and

payable prior to the date of this Certificate.

 

11.           All taxes and all installments of

assessments and all other charges of any kind imposed or levied by any

governmental authority against either Borrower or the Collateral which are due

and payable or constitute a lien at or prior to the date of this Certificate,

together with all interest and penalties due thereon, have been paid in full.

 

12.           There is now fully paid and

enforceable fire, liability and other forms of insurance in such amounts and

covering such risks as are required under the Security Agreement.

 

13.           There are no disputes, litigation or

other such proceedings pending or, to the best of Borrower’s knowledge,

threatened against or related to Borrower, the Collateral or the Franchised

Operation, nor does Borrower know of any basis for any such action.

 

14.           In consideration of the loan evidenced

by the Note and secured, by the Security Agreement and the other Loan

Documents, Borrower agrees to indemnify and hold Lender harmless against all

claims, liabilities, losses, deficiencies and damages as well as reasonable

expenses (including attorney’s fees), interest and penalties related thereto,

asserted by any third party against, or incurred by Lender, by reason of or

resulting from any breach, inaccuracy, incompleteness or nonfulfillment of the

covenants, representations and/or warranties of Borrower contained in this

Certificate.

 

15.           Commencing May 1, 1998 and on the

first day of each following month, Lender is authorized to initiate an

electronic funds transfer to pay the monthly installment payment owing under

the loan evidenced by the Note from the account designated below, and to

receive payments from such account.  

This authorization will remain in effect unless the undersigned requests

a modification that is agreed to by the Financial Institution and Lender;

provided, however, that Lender and its successors, assigns and transferees may

modify the place of payment to be made by Borrower without the consent of the

Financial Institution.

 

	

  Financial

  Institution:

  	

   

  
	

  Financial

  Institution

  	

   

  
	

  Address:

  	

   

  
	

  Routing/Transit

  #:

  	

   

  
	

  Account #:

  	

   

  
					

 

 

[SIGNATURE PAGE

FOLLOWS]

 

2

 

This Certificate shall

become effective on March 31, 1998.

 

	

   

  	

  THE WESTERN SIZZLIN STORES, INC.

  	 

	

   

  	

   

  	

   

  	 

	

   

  	

  By:

  	

  /s/ Victor F. Foti

  	 

	

   

  	 

	

   

  	

  Its:

  	

  President

  
						

 

3

 

[LETTERHEAD OF WESTERN

SIZZLIN STORES, INC.]

 

 

	

  TO;

  	

   

  	

  Martha R. Young, (313) 668-7612

  	

   

  	 

	

   

  	

   

  	

  Fax:   747-7147

  	

   

  	 

	

   

  	

   

  	

   

  	

   

  	 

	

  FROM:

  	

   

  	

  Calvin Lilly, (540) 345-3195

  	

   

  
	

   

  	

   

  	

  Fax:   345-0831

  	

   

  	 

	

   

  	

   

  	

   

  	

   

  	 

	

  DATE:

  	

   

  	

  March 24, 1998

  	

   

  	 

	

   

  	

   

  	

   

  	

   

  	 

	

  RE:

  	

   

  	

  Closing Items — Follow-up

  	

   

  	 

								

 

 

	

  Information for account drafting:

  	

   

  	

   

  	

   

  

 

 

	

   

  	

   

  	

   

  
	

  Financial Institution:

  	

   

  	

  Wachovia Bank, N. A.

  
	

   

  	

   

  	

   

  
	

  Financial Institution Address:

  	

   

  	

  111 Franklin Road

  
	

   

  	

   

  	

  Roanoke, Virginia 24001

  
	

   

  	

   

  	

  Attn:  Kelly

  Kiser

  
	

   

  	

   

  	

   

  
	

  Routing #:

  	

   

  	

  051000253

  
	

   

  	

   

  	

   

  
	

  Account #:

  	

   

  	

  7911787711

  
	

   

  	

   

  	

  The WesterN SizzliN Stores, Inc.

  

 

 

[ILLEGIBLE]

 

Loan No. 06719

3135 Crain Hwy.

Waldorf, Maryland

 

CERTIFICATE OF GUARANTOR

 

THE WESTERN SIZZLIN

CORPORATION, a Tennessee corporation (“Guarantor”), for the benefit of CAPTEC

FINANCIAL GROUP FUNDING CORPORATION, a Michigan corporation (together with its

successors, assigns and transferees, “Lender”), warrants, represents, covenants

and agrees that the following are true and correct as of the date hereof:

 

1.             Guarantor has received a copy of that certain Promissory

Note, dated March 23, 1998 in the original principal amount of Seven Hundred

Fifty Thousand and 00/100 Dollars ($750,000.00) (“Note”) made by THE WESTERN

SIZZLIN STORES, INC., a Virginia corporation (“Borrower”).   Guarantor has also received a copy of the instruments

securing the Note, as referenced therein (together with the Note, the “Loan

Documents”). The Loan Documents create a lien with respect to certain real and

personal property located at 3135 Crain Hwy., Waldorf, Maryland (“Premises”).

 

2.             Guarantor has had the opportunity to review the

Certificate of Borrower, dated even herewith, made by Borrower for the benefit

of Lender, and confirms that the warranties and representations set forth

therein are true and correct as of the date hereof.

 

3.             Guarantor has full power and authority to enter into

that certain Guaranty executed by Guarantor in favor of Lender, dated as of the

date of this Certificate (“Guaranty”) and to assume and perform all of

Guarantor’s obligations under the Guaranty in accordance with all of the terms

and conditions of the Guaranty. The execution and delivery of the Guaranty and

the performance by Guarantor of Guarantor’s obligations under the Guaranty and

under all documents contemplated by the Guaranty require no further action or approval.   The Guaranty and all other documents

contemplated by the Guaranty are fully binding and enforceable obligations of

Guarantor.

 

4.             There are no circumstances, state of facts or other

matters which, with the passage of time or the giving of notice, or both, would

constitute an event of default under the terms of the Guaranty, or to the best

of the Guarantor’s knowledge, under the Loan Documents.

 

5.             There are no disputes, litigation or other such

proceedings pending or, to the best of the Guarantor’s knowledge, threatened

against or related to the Guarantor or the Premises, nor does Guarantor know of

any basis for any such action, except as

disclosed to Lender on Exhibit A hereto.

 

6.             Guarantor has furnished to Lender its most recent annual

audited consolidated financial statements and most recent management prepared

and certified quarterly consolidated financial statements, which statements

were prepared in accordance with generally accepted accounting principles and

are correct and complete and accurately present the financial condition of

Guarantor on the dates thereof.  

Further, there has been no material adverse change in the business,

property or condition of Guarantor since the date of the most recent financial

statements.

 

7.             In consideration of the loan evidenced by the Note and

secured, in part, by the Loan Documents, the receipt and sufficiency of which

Guarantor acknowledges, and in order to induce Lender to make such loan,

Guarantor agrees to indemnify and hold Lender harmless against all claims,

liabilities, losses, deficiencies and damages as well as reasonable expenses

(including attorney’s fees), interest and penalties related thereto, asserted

by any third party against, or incurred by Lender, by reason of or resulting

from any breach, inaccuracy, incompleteness or nonfulfillment of the covenants,

representations and/or warranties of Guarantor contained in this Certificate.

 

 

This Certificate shall

become effective on March 31,1998.

 

 

	

   

  	

  THE

  WESTERN SIZZLIN CORPORATION

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

  By

  	

  /s/ Victor F. Foti

  	

   

  
	

   

  
	

   

  	

  Its:

  	

  President

  
						

 

2

 

The WesterN SizzliN Corporation

Litigation Proceedings against The WesterN SizzliN

Corporation

Exhibit A, to Certificate of Guarantor

 

	

  Name /

  Caption

  	

   

  	

  Amount in Controversy

  	

   

  	

  Status

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  David K Wachtel, Jr. v. WSC, et al

  First Complaint -

  breach of employment contract;

  wrongful termination

  	

   

  	

  $1,319,000

  	

   

  	

  Wachtel, president until

  2/95 claims wrongful termination; which, under his contract would mean two

  years’ of compensation, approx. $400,000. 

  	

   

  
	

  Second Complaint -

  includes officers and directors in the suit

  	

   

  	

   

  	

   

  	

  The termination was well

  justified. The suit had included certain officers and directors, whose cases

  have been dismissed through award of summary judgment.

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Third Complaint - loss

  of value of stock 

  Indemnification for

  expenses

  	

   

  	

  $

  	

  8,500,000

  	

   

  	

  Summary judgment granted to defendant, case

  dismissed; plaintiff has appealed.

  Discovery not complete.

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Mann v. WSC

  Breach of employment

  	

   

  	

  $

  	

  50,000

  	

   

  	

  Mann is now deceased, with very little discovery. We

  expect that the suit will be dismissed.

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Durham Enterprises v. WSC

  Denial of awarding a

  franchise

  	

   

  	

  $

  	

  1,000,000

  	

   

  	

  Summary judgment granted to defendant, case

  dismissed; plaintiff not appealed.

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Cruthis v. Elgin Hamner and WSC

  Contaminated tea

  	

   

  	

  $

  	

  4,000

  	

   

  	

  Suit primarily against franchise; WSC named as

  codefendant; discovery beginning.

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Perry v. WSC and David Wachtel, Jr.

  Business interference

  between franchisee/seller and potential buyer — would not allow franchise

  assumption

  	

   

  	

  $

  	

  2,500,000

  	

   

  	

  Discovery is beginning; D & O insurance.

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  WSC v. Moody / Fowler

  Counter claim, in

  response to WSC’s collection suit for underpaid royalties

  	

   

  	

  $

  	

  500,000

  	

   

  	

  Discovery Beginning.

  	

   

  

 

3

 

Loan No. 06719

3135 Crain Hwy.

Waldorf, Maryland

 

CERTIFICATE OF GUARANTOR

 

THE WESTERN SIZZLIN

STORES OF LITTLE ROCK, INC., an Arkansas corporation (“Guarantor”), for the

benefit of CAPTEC FINANCIAL GROUP FUNDING CORPORATION, a Michigan corporation

(together with its successors, assigns and transferees, “Lender”), warrants,

represents, covenants and agrees that the following are true and correct as of

the date hereof:

 

1.             Guarantor has received a copy of that certain Promissory

Note, dated March 23, 1998 in the original principal amount of Seven Hundred

Fifty Thousand and 00/100 Dollars ($750,000.00) (“Note”) made by THE WESTERN

SIZZLIN STORES, INC., a Virginia corporation (“Borrower”). Guarantor has also

received a copy of the instruments securing the Note, as referenced therein

(together with the Note, the “Loan Documents”). The Loan Documents create a

lien with respect to certain real and personal property located at 3135 Crain

Hwy., Waldorf, Maryland (“Premises”).

 

2.             Guarantor has had the opportunity to review the

Certificate of Borrower, dated even herewith, made by Borrower for the benefit

of Lender, and confirms that the warranties and representations set forth

therein are true and correct as of the date hereof.

 

3.             Guarantor has full power and authority to enter into

that certain Guaranty executed by Guarantor in favor of Lender, dated as of the

date of this Certificate (“Guaranty”) and to assume and perform all of

Guarantor’s obligations under the Guaranty in accordance with all of the terms

and conditions of the Guaranty. The execution and delivery of the Guaranty and

the performance by Guarantor of Guarantor’s obligations under the Guaranty and

under all documents contemplated by the Guaranty require no further action or

approval.    The Guaranty and all other

documents contemplated by the Guaranty are fully binding and enforceable

obligations of Guarantor.

 

4.             There are no circumstances, state of facts or other

matters which, with the passage of time or the giving of notice, or both, would

constitute an event of default under the terms of the Guaranty, or to the best

of the Guarantor’s knowledge, under the Loan Documents.

 

5.             There are no disputes, litigation or other such

proceedings pending or, to the best of the Guarantor’s knowledge, threatened

against or related to the Guarantor, nor does Guarantor know of any basis for

any such action.

 

6.             Guarantor has furnished to Lender its most recent annual

audited consolidated financial statements and most recent management prepared

and certified quarterly consolidated financial statements, which statements

were prepared in accordance with generally accepted accounting principles and

are correct and complete and accurately present the financial condition of Guarantor

on the dates thereof.   Further, there

has been no material adverse change in the business, property or condition of

Guarantor since the date of the most recent financial statements.

 

7.             In consideration of the loan evidenced by the Note and

secured, in part, by the Loan Documents, the receipt and sufficiency of which

Guarantor acknowledges, and in order to induce Lender to make such loan,

Guarantor agrees to indemnify and hold Lender harmless against all claims,

liabilities, losses, deficiencies and damages as well as reasonable expenses

(including attorney’s fees), interest and penalties related thereto, asserted

 

 

by any third party against, or incurred by Lender, by

reason of or resulting from any breach, inaccuracy, incompleteness or nonfulfillment

of the covenants, representations and/or warranties of Guarantor contained in

this Certificate.

 

This Certificate shall

become effective on March 31, 1998.

 

 

 

	

   

  	

  THE

  WESTERN SIZZLIN STORES OF LITTLE ROCK, INC.

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

  /s/ Victor F. Foti

  	

   

  
	

   

  	

  Its 

  	

  President

  
						

 

2

 

Loan No. 06720

4310 Chapman Hwy.

Knoxville, Tennessee

 

PROMISSORY NOTE

 

	

  $500,000.00

  	

  Date:

  	

   

  	

  March 23, 1998

  

 

PROMISE TO PAY.

For value received, THE WESTERN SIZZLIN

STORES, INC., a Virginia corporation, (“Borrower”) promises to pay

to CAPTEC FINANCIAL GROUP FUNDING CORPORATION,

a Michigan corporation (together with its successors, assigns and transferees,

“Lender”), or order, Five Hundred Thousand and 00/100 Dollars ($500,000.00), or

so much of such sum as has been advanced under this Note, as follows:

 

Interest only from and

after the date on which funds are disbursed by Lender hereunder (“Effective

Date”) through the last day of the month in which the Effective Date occurs

shall be due and payable on the first day of the next month following the

Effective Date; provided that if the Effective Date occurs after the fifteenth

(15th) day of a month, the interest which would accrue, based on the actual

number of days, through the end of such month shall be due and payable in

advance on the Effective Date. Installments of principal and interest in the

amount of Five Thousand Three Hundred Ninety-Five and 00/100 Dollars

($5,395.00) are due and payable on the first day of each month (each a “Payment

Date”), commencing May 1, 1998; until April 1, 2013 (“Due Date”), when the

outstanding principal balance, plus accrued interest, is due and payable

(unless the indebtedness evidenced by this Note is accelerated, in which case,

the Due Date is the date of acceleration). The amortization period for this

Note, for purposes of calculating the monthly installments of principal and

interest, is fifteen (15) years.

 

All payments under this

Note shall be made at Lender’s principal office at 24 Frank Lloyd Wright Drive,

Lobby L, 4th Floor, P.O. Box 544, Ann Arbor, Michigan 48106-0544, or at such

other address as Lender may designate in writing, or by electronic funds

withdrawal made by Lender upon written authorization therefor from Borrower,

which authorization shall not be revocable by Borrower without the consent of

Lender. Payments due and payable on a day on which Lender is not open for

business are due on the next succeeding business day. Payments will be applied

first to accrued interest and then to principal.

 

INTEREST RATE.

The outstanding principal balance of this Note will bear interest at a fixed

rate equal to ten and seven hundredths percent (10.07%) per annum (the “Stated

Rate”), until the Due Date (whether by acceleration or otherwise), and

thereafter at a rate which is three percent (3%) above the Stated Rate

(“Default Rate”).

 

Interest will be computed

on the basis of a year consisting of twelve (12) months of thirty (30) days

each. In no event, however, shall the interest rate exceed the maximum rate

allowed by law. Notwithstanding anything to the contrary contained herein, at

no time shall the interest payable under this Note be greater than the maximum

rate permitted by applicable law (“Legal Rate”). If any obligation under this

Note shall result in Lender receiving an amount deemed to be interest under

applicable law in excess of the Legal Rate, then the amount which would be

excessive interest shall be applied to the reduction of the principal balance

of this Note and not to payment of interest. If such excessive interest exceeds

the unpaid principal balance of this Note, the excess shall be refunded to

Borrower.

 

 

PREPAYMENT. Borrower

shall not have any right, except as otherwise specifically provided, to prepay

the principal balance of this Note until two (2) loan years have elapsed. The

first “loan year” shall commence on the date of the closing of the loan

evidenced by this Note, and subsequent loan years shall commence on the

anniversaries of such date. Commencing with the third (3rd) loan year and if no

Event of Default (as hereinafter defined) then exists, Borrower shall have the

right to prepay all, but not merely a portion of, the principal balance of this

Note together with accrued interest thereon on any Payment Date; provided,

however, that Borrower shall provide no less than thirty (30) days prior

written notice to Lender of Borrower’s intention to prepay (the “Prepayment

Notice”). Once given, the Prepayment Notice may not be withdrawn, and the

failure to prepay in accordance with the Prepayment Notice shall constitute an

Event of Default.

 

Borrower acknowledges and

agrees that Lender is making the loan evidenced by this Note in consideration

of the receipt by Lender of all interest and other benefits intended to be

conferred by this Note, and if payments of principal are made to Lender prior

to the regularly scheduled due date of such payments, for whatever reason

(whether voluntarily or involuntarily), Lender will not receive all such

interest and other benefits and may incur additional costs. For these reasons,

and to induce Lender to make the loan, Borrower expressly waives any right to

prepay this Note except as specifically provided herein.

 

Lender shall not be

required to accept any tender of prepayment of the principal balance of this

Note at any time when the “Reinvestment Rate” (as hereinafter defined) is lower

than the Stated Rate, less eighty-five basis points, unless such tender also

includes a sum of money (the “Prepayment Premium”) equal to the present value

(computed at the Reinvestment Rate) of the difference between a stream of

monthly payments necessary to amortize the outstanding principal balance of

this Note at the Stated Rate and a stream of monthly payments necessary to

amortize the outstanding principal balance of this Note at the Reinvestment

Rate (the “Differential”). In the event the Differential is less than zero, no

Prepayment Premium will be required. For purposes of this Note, the

“Reinvestment Rate” is the yield on a United States Treasury obligation of a

constant maturity rate maturing closest in time but prior to the maturity date

of this Note, as reported in Federal Reserve Statistical Release H. 15 (519)

(or any comparable successor publication) on the fifth (5th) business day

preceding the prepayment date.

 

In addition to the

Prepayment Premium, if any, every tender of prepayment of the principal balance

of this Note shall be accompanied by a payment equal to (x) all accrued but

unpaid interest and other charges to the date of prepayment and (y) an

administrative fee equal to one half of one percent (0.5%) of the outstanding

principal balance of this Note; provided, however, that the administrative fee

shall not be less than One Thousand and 00/100 Dollars ($1,000.00)

(collectively, the “Other Charges”).

 

If the outstanding

principal balance of this Note is accelerated by reason of an Event of Default,

such acceleration shall be deemed to be a prepayment and Borrower shall pay to

Lender, in addition to all sums due as a result of the acceleration, any

applicable Prepayment Premium and Other Charges. In the event of an

acceleration of this Note in the first or second loan year, Borrower shall be

required to pay a Prepayment Premium equal to five percent (5%) of the

outstanding principal balance of this Note together with any Other Charges. In

the event that this Note is partially prepaid from casualty insurance proceeds

(as provided in the Security Agreement, defined below), no Prepayment Premium

or Other Charges shall be due and payable with respect to such prepayment, and

each monthly installment thereafter shall be reduced to an amount which will

amortize the then unpaid principal balance of this Note at the Stated Rate over

the then remaining term of this Note.

 

LATE PAYMENT CHARGE. In the event that any payment under

this Note is not received by Lender within fifteen (15) days of the date when

due, a late charge of five percent (5%) of the amount of such payment will be

due. Borrower agrees that the late charge is a reasonable estimate of the

administrative costs which Lender will incur in processing the delinquency.

Lender’s acceptance of a late payment and/or of the late payment charge will

not waive any default under this Note or affect the acceleration of this Note

(if this Note has been accelerated).

 

2

 

COLLATERAL. This

Note and the other obligations of Borrower to Lender contained in the documents

securing this Note are secured by and in accordance with the terms of that

certain Security Agreement, effective March 31, 1998, executed by Borrower for

the benefit of Lender (the “Security Agreement”; together with any other

documents securing payment under this Note, the “Loan Documents”). All property

securing the Indebtedness (as defined in the Security Agreement) is referred to

as the “Collateral”.

 

DEFAULT. Any of

the following events shall, for purposes of this Note, constitute an “Event of

Default”:

 

(a)           Failure by Borrower to pay any amount

owing on or with respect to the Indebtedness when due, whether by maturity,

acceleration or otherwise, which failure continues for five (5) business days.

 

(b)          Any failure by Borrower (or any

guarantor of all or any part of the Indebtedness) to comply with any of the

non-monetary terms, provisions, warranties or covenants of this Note, the

Security Agreement or the other Loan Documents, which failure continues for

fifteen (15) days after the date of written notice to Borrower (or any

guarantor) from Lender of such default; provided, however, that if: (i) the

nature of Borrower’s (or any guarantor’s) noncompliance is such that more than

fifteen (15) days are reasonably required for its cure, (ii) Borrower (or any

guarantor) has commenced such cure within said fifteen (15) day period, (iii)

Borrower (or any guarantor) diligently prosecutes such cure to completion, (iv)

Borrower (or any guarantor) provides Lender with written notice of the

noncompliance, AND (v) Borrower (or any guarantor) furnishes reserves or a

security bond, in an amount satisfactory to Lender in its sole discretion, then

Borrower (or any guarantor) shall not be in default.

 

(c)           Institution of foreclosure

proceedings or other exercise of rights and remedies by the holder of any

mortgage, deed of trust, security interest or other lien against the Collateral

(or any portion thereof); provided, however, if there is a good faith dispute

by Borrower (or any guarantor) as to the validity or reasonableness of the

claim which is the basis for such proceedings, then no Event of Default shall

have occurred under this clause (c) if Borrower (or any guarantor) provides

Lender with written notice of the proceedings and furnishes reserves or a

security bond for the proceedings satisfactory to Lender.

 

(d)          Insolvency of Borrower (or any

guarantor) or the admission in writing of Borrower’s (or any guarantor’s)

inability to pay debts as they mature.

 

(e)           Any statement, representation or

information made or furnished by or on behalf of Borrower (or any guarantor) to

Lender in connection with or to induce Lender to provide or advance any of the

Indebtedness shall prove to be false or materially misleading when made or

furnished.

 

(f)           Institution of bankruptcy,

reorganization, insolvency or other similar proceedings by or against Borrower

(or any guarantor), unless, in the case of a petition filed against Borrower

(or any guarantor), the same is dismissed within sixty (60) days of the date of

filing.

 

(g)          The issuance or filing of any

judgment, attachment, levy, garnishment or the commencement of any related

proceedings or the commencement of any other judicial process upon or in

respect to Borrower (or any guarantor) or the Collateral in which the amount in

controversy exceeds One Hundred Thousand Dollars ($100,000) and is not covered

by the insurance of Borrower (or any guarantor), unless satisfied, or Borrower

(or any guarantor) furnishes reserves or a security bond in an amount

satisfactory to Lender in its sole discretion, released or discharged within

sixty (60) days after the date of

such issuance, filing or commencement.

 

3

 

(h)          Sale or other disposition by Borrower

(or any guarantor) of any substantial portion of its assets or property.

 

(i)            Death, dissolution, merger,

consolidation, termination of existence, insolvency, business failure or

assignment for the benefit of creditors of or by Borrower (or any guarantor);

without the prior written consent of Lender, which consent shall not be

unreasonably withheld.

 

(j)            Any failure by Borrower (or any

guarantor) to pay any indebtedness (other than to Lender) in excess of One

Hundred Thousand Dollars ($100,000) (and exclusive of trade debt incurred in

the ordinary course of business) when due, or any failure in the observance or

performance of any term, covenant or condition in any document evidencing,

securing or relating to such indebtedness, which failure continues beyond any

applicable cure period.

 

(k)           Receipt by Borrower of a notice of

termination of the Management and Licensing Agreement from The WesterN SizzliN

Corporation, a Tennessee corporation (“Franchisor”), for the Great American

Steak & Buffet Company Restaurant located at 4310 Chapman Hwy., Knoxville,

Tennessee 37920 (“Franchised Operation”).

 

(1)           If this Note, the Security Agreement

and the other Loan Documents have not been assigned to the Trust (as defined in

the Security Agreement), the default by Borrower which continues beyond any

applicable grace or cure period under the Retained Obligations (as defined in

the Security Agreement); provided, however, if this Note, the Security

Agreement and the other Loan Documents are assigned to the Trust, this Clause

(1) shall be of no force and effect during the term of such assignment.

 

(m)          In the event that this Note, the

Security Agreement and the other Loan Documents are assigned to the Trust, the

default by Borrower which continues beyond any applicable grace or cure period

under the Trust Obligations (as defined in the Security Agreement).

 

(n)          Any default by Borrower under the

Lease between Lovell Center, Inc., a Tennessee corporation, as landlord, and

Borrower, as tenant, dated January 5, 1995 (“Lease”), which default is not

cured within any applicable cure period set forth in such Lease.

 

Upon an occurrence of an

Event of Default, Lender shall have the option to declare all or part of the

Indebtedness (including this Note) immediately due and payable. If this Note is

not paid at maturity (whether by acceleration or otherwise), Lender shall have

all of the rights and remedies provided at law or equity or by agreement,

including, without limit, the right to sell or liquidate all or any part of the

Collateral. The remedies of Lender are cumulative and not exclusive.

 

EXAMINATION OF RECORDS. Borrower shall at all times keep

full and accurate records of its business and of the Collateral, which records

shall be open to inspection and copying by Lender at all reasonable times.

 

LIABILITY OF SIGNATORIES. Borrower, and

all guarantors and endorsers, and any other party liable for the Indebtedness

evidenced by this Note: (i) severally waive presentment, demand, protest,

notice of dishonor, notice of non-payment and notice of acceleration of this

Note; and (ii) agree that no extension or postponement of the time for payment,

or waiver, or indulgence or forbearance granted to Borrower (without limit as

to number or period) or any modification of this Note, or any substitution, or

exchange or release of all or part of the Collateral, or addition of any party

to this Note, or release or discharge of, or suspension of any rights and

remedies against any party liable on this Note, shall reduce or affect the

obligation of any other party liable for the payment of this Note.

 

4

 

NON-WAIVER.  No

delay by Lender in the exercise of any right or remedy shall operate as a

waiver. No single or partial exercise by Lender of any right or remedy shall

preclude any future exercise of such right or remedy or the exercise of any

other right or remedy. No waiver or indulgence by Lender of any default or

Event of Default shall be effective unless in writing and signed by Lender, nor

shall a waiver on one occasion be construed as a bar to any right or remedy, or

waiver of any default or Event of Default on any future occasion.

 

REIMBURSEMENT OF EXPENSES.

Borrower shall reimburse Lender for all costs and expenses, including

reasonable attorneys’ fees, incurred by Lender in enforcing the rights of

Lender under this Note. Such costs and expenses shall include, without

limitation, costs or expenses incurred by Lender in any bankruptcy,

reorganization, insolvency or other similar proceeding. Any reference in this

Note to attorneys’ fees shall mean fees, charges, costs and expenses of

in-house and/or outside counsel and paralegals, whether or not a suit or

proceeding is instituted, and whether incurred at the trial court level, on

appeal, in a bankruptcy, administrative or probate proceeding, in consultation

with counsel, or otherwise.

 

WAIVER OF JURY TRIAL.

BORROWER AND LENDER ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL

ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE

OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND

VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY RIGHT TO TRIAL BY JURY IN

THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY

WAY RELATED TO, THIS NOTE OR THE INDEBTEDNESS.

 

ASSIGNMENT.  This

Note is freely assignable, in whole or in part, by Lender without prior notice

to or consent of Borrower; provided, however, that Lender (or its assignee)

shall provide written notice of such assignment to Borrower in the event that

Lender (or such assignee) desires to designate a new person or entity as payee

and/or a new place of payment for the obligations under this Note. Borrower may

not, in whole or in part, directly or indirectly, assign this Note or its

rights hereunder or delegate its duties hereunder without, in each instance,

the specific prior written consent of Lender, which consent may be withheld or

delayed in Lender’s sole discretion. Lender shall be fully discharged from all

responsibility accruing hereunder from and after the effective date of any such

assignment. Lender’s assignee shall, to the extent of the assignment, be vested

with all the powers and rights of Lender hereunder, and to the extent of such

assignment the assignee may fully enforce such rights and powers, and all

references to Lender shall mean and refer to such assignee. Lender shall retain

all rights and powers hereby given not so assigned, transferred and/or

delivered. Borrower hereby waives all defenses which Borrower may be entitled

to assert against Lender’s assignee with respect to liability accruing

hereunder prior to the effective date of any assignment of Lender’s interest

herein.

 

SECURITIZATION.  Borrower

understands and agrees that Lender may, from time to time, assign its rights

and powers under this Note, the Security Agreement and any other Loan

Documents, in whole or in part, in connection with a securitization program.

Borrower agrees to enter into an amendment to this Note, the Security Agreement

and any other Loan Documents if such amendments are required by a nationally

recognized rating agency in connection with a securitization program sponsored

by Lender and in which this Note, the Security Agreement any other Loan

Documents are to be included; provided that Borrower shall not be obligated to

enter into any amendment which adversely affects Borrower or otherwise

adversely alters any of the financial terms of this Note, the Security

Agreement and any other Loan Documents.

 

MISCELLANEOUS.  The

terms and provisions of this Note shall be governed by and construed in

accordance with the laws of the State of Tennessee. Lender and Borrower agree

that any dispute which may arise between them with regard to this Note shall be

resolved by litigation in state or federal court. Litigation may be initiated

by Lender or its assignee, at its discretion, in the State of the principal

place of business of Lender or its assignee, the State of the principal place

of business of Borrower, or the State where the Collateral is located. BORROWER

HEREBY KNOWINGLY AND IRREVOCABLY WAIVES ANY OBJECTIONS ON THE

 

5

 

GROUNDS OF IMPROPER JURISDICTION OR VENUE  TO AN

ACTION

INITIATED AS SET FORTH ABOVE AND AGREES THAT EFFECTIVE SERVICE OF PROCESS MAY

BE MADE UPON BORROWER BY REGISTERED MAIL RETURN RECEIPT REQUESTED. The

terms and provisions of this Note may only be changed in writing, executed by

Borrower and Lender.

 

THE WESTERN SIZZLIN STORES, INC.

 

	

  By:

  	

   /s/ Victor

  F. Foti

  	

   

  
	

  Its

  	

  President

  
				

 

Address:

 

P.O. Box 12167

Roanoke, VA 24023-2167

 

Tax I.D. No. 54-1787907

 

6

 

	

  Pay to the order

  of

  	

   

  
	

  without warranty

  or recourse.

  	

   

  

 

 

	

  Captec Financial Group Funding Corporation

  
	

   

  	

   

  	

   

  
	

  By:

  	

  /s/ [ILLEGIBLE]

  	

   

  
	

   

  
	

  Its:

  	

   

  	

   

  
					

 

7

 

Loan No. 06720

4310 Chapman Hwy

Knoxville, Tennessee

 

COLLATERAL ASSIGNMENT OF LEASE AND

OPTION RIGHTS

 

THIS COLLATERAL ASSIGNMENT OF LEASE AND OPTION RIGHTS (“Assignment”) is

made as of the 23 day of March, 1998, by THE WESTERN SIZZLIN STORES, INC.,  a Virginia corporation, whose address is

P. O. Box 12167, Roanoke, VA 24023-2167 (“Assignor”), in favor of CAPTEC

FINANCIAL GROUP FUNDING CORPORATION, a Michigan corporation, whose

address is 24 Frank Lloyd Wright Drive, Lobby L, 4th Floor, P.O. Box 544, Ann

Arbor, Michigan 48106-0544 (“Assignee”). This instrument shall become effective

on March 31, 1998.

 

For good and valuable consideration,

the receipt and sufficiency of which is hereby acknowledged, Assignor presently

assigns to Assignee all of Assignor’s right, title and interest in and to its

lessee’s interest in that certain lease with Lovell Center, Inc., (“Lessor”)

dated as of January 5, 1995, a copy of which is attached hereto as Exhibit A

(the “Lease”) respecting the premises commonly known as the Great American

Steak & Buffet Company Restaurant located at 4310 Chapman Hwy.,Knoxville,

Tennessee (“Premises”). This Assignment is for collateral purposes only, and

except as specified herein, Assignee shall have no liability or obligation of

any kind whatsoever arising from or in connection with this Assignment or the

Lease unless Assignee shall take possession of the Premises and assume the

obligations of Assignor thereunder.

 

Assignor represents and

warrants to Assignee that it has full power and authority to so assign the

Lease and its interest therein and that Assignor has not previously, and is not

obligated to, assign or transfer any of its interest in the Lease or the

Premises.

 

Throughout the term of

the Lease, Assignor covenants and agrees to exercise all options to extend or

renew the term of the Lease not less than ninety (90) days prior to the last

day upon which any such option may be exercised, but in no event less than six

(6) months prior to of the term of the Lease, unless Assignee otherwise agrees

in writing. Assignor shall send Assignee a copy of the notice of exercise

concurrently with Assignor’s exercise of the option. Upon the failure of

Assignor to so elect or renew the Lease as aforesaid (and the failure of

Assignee to otherwise agree in writing), Assignee shall have the right, but not

the obligation, to exercise such extension or renewal option on behalf of Assignor,

and Assignor hereby appoints Assignee (or any of its employees) as its

attorney-in-fact for the purpose of exercising such extension or renewal

option.

 

If an “Event of Default” occurs under the Promissory Note, dated March

23, 1998, in the original principal amount of Five Hundred Thousand and 00/100

Dollars ($500,000.00), by Assignor in favor of Assignee (the “Note”) or under

any documents or instruments securing the Note, Assignee shall have the right

and is hereby empowered to take possession of the Premises, expel Assignor

therefrom, and, in such event, Assignor shall have no further right, title or

interest in the Lease and shall remain liable to Assignee for all past due

rents Assignee shall be required to pay to the Lessor under the Lease to

effectuate this Assignment.

 

Assignor agrees that it

will not suffer or permit any surrender, termination, amendment or modification

of the Lease without the prior written consent of Assignee, which consent shall

not be unreasonably withheld. At

8

 

the request of Assignee, Assignor shall provide

Assignee with rent payment or such other information regarding the Lease as

Assignee shall reasonably require.

 

This Assignment shall be governed by the laws of the State of

Tennessee.

 

This Assignment may be executed

in one or more counterparts, each of which shall constitute an original and all

of which together shall constitute one and the same instrument.

 

IN WITNESS WHEREOF,

Assignor has executed this Assignment as of the day and year noted above.

 

	

   

  	

  ASSIGNOR:

  	

   

  
	

  Witnesses:

  	

   

  	

   

  
	

   

  	

  THE WESTERN SIZZLIN STORES, INC.

  	

   

  
	

   

  
	

  /s/ [ILLEGIBLE]

  	

   

  	

  By:

  	

  /s/ Victor F. Foti

  	

   

  
	

   

  
	

   

  	

  Its:

  	

  President

  	

   

  	 

	

  [ILLEGIBLE]

  	

   

  	

   

  	

   

  
											

 

STATE OF Virginia

 

COUNTY OF Roanoke

 

I, Richard R Sayers, A

notary public in and for the State and County aforesaid, do certify that Victor

F. Foti, whose name, as President  of The WesterN SizzliN Stores, Inc., is

signed to the writing above, bearing date on the 23rd day of March has

acknowledged the same before me in my county aforesaid.

 

Given under my hand and

official seal this 23rd day of March.

 

My term of office expires on the 28th day of February

1999.

 

	

   

  	

  /s/ Richard R Sayers

  
	

   

  	

  Notary Public

  	

   

  
	

   

  	

  [Notary Public’s Seal]

  	

   

  

 

2

 

Loan No. 06720

4310 Chapman Hwy.

Knoxville, Tennessee

 

COLLATERAL ASSIGNMENT OF LEASE AND

OPTION RIGHTS

 

THIS COLLATERAL

ASSIGNMENT OF LEASE AND OPTION RIGHTS (“Assignment”) is made as of the 23  day

of March, 1998, by THE WESTERN SIZZLIN STORES, INC., a

Virginia corporation, whose address is P. O. Box 12167, Roanoke, VA 24023-2167

(“Assignor”), in favor of CAPTEC FINANCIAL GROUP FUNDING CORPORATION, a

Michigan corporation, whose address is 24 Frank Lloyd Wright Drive, Lobby L,

4th Floor, P.O. Box 544, Ann Arbor, Michigan 48106-0544 (“Assignee”). This

instrument shall become effective on March 31, 1998.

 

For good and valuable

consideration, the receipt and sufficiency of which is hereby acknowledged,

Assignor presently assigns to Assignee all of Assignor’s right, title and

interest in and to its lessee’s interest in that certain lease with Lovell

Center, Inc., (“Lessor”) dated as of January 5, 1995, a copy of

which is attached hereto as Exhibit A (the “Lease”) respecting the premises

commonly known as the Great American Steak & Buffet Company Restaurant

located at 4310 Chapman Hwy., Knoxville, Tennessee (“Premises”). This

Assignment is for collateral purposes only, and except as specified herein,

Assignee shall have no liability or obligation of any kind whatsoever arising

from or in connection with this Assignment or the Lease unless Assignee shall

take possession of the Premises and assume the obligations of Assignor

thereunder.

 

Assignor represents and

warrants to Assignee mat it has full power and authority to so assign the Lease

and its interest therein and that Assignor has not previously, and is not

obligated to, assign or transfer any of its interest hi the Lease or the

Premises.

 

Throughout the term of

the Lease, Assignor covenants and agrees to exercise all options to extend or

renew the term of the Lease not less than ninety (90) days prior to the last

day upon which any such option may be exercised, but in no event less than six

(6) months prior to of the term of the Lease, unless Assignee otherwise agrees

in writing. Assignor shall send Assignee a copy of the notice of exercise

concurrently with Assignor’s exercise of the option. Upon the failure of

Assignor to so elect or renew the Lease as aforesaid (and the failure of

Assignee to otherwise agree in writing), Assignee shall have the right, but not

the obligation, to exercise such extension or renewal option on behalf of

Assignor, and Assignor hereby appoints Assignee (or any of its employees) as

its attorney-in-fact for the purpose of exercising such extension or renewal

option.

 

If an “Event of Default”

occurs under the Promissory Note, dated March 23, 1998, in the original

principal amount of Five Hundred Thousand and 00/100 Dollars ($500,000.00), by

Assignor in favor of Assignee (the “Note”) or under any documents or

instruments securing the Note, Assignee shall have the right and is hereby

empowered to take possession of the Premises, expel Assignor therefrom, and, in

such event, Assignor shall have no further right, title or interest in the

Lease and shall remain liable to Assignee for all past due rents Assignee shall

be required to pay to the Lessor under the Lease to effectuate this Assignment.

 

Assignor agrees that it

will not suffer or permit any surrender, termination, amendment or modification

of the Lease without the prior written consent of Assignee, which consent shall

not be unreasonably withheld. At

 

 

the request of Assignee, Assignor shall

provide Assignee with rent payment or such other information regarding the

Lease as Assignee shall reasonably require.

 

This Assignment shall be governed by the laws of the State of

Tennessee.

 

This Assignment may be

executed in one or more counterparts, each of which shall constitute an

original and all of which together shall constitute one and the same

instrument.

 

IN WITNESS WHEREOF, Assignor

has executed this Assignment as of the day and year noted above.

 

 

	

   

  	

  ASSIGNOR:

  	

   

  
	

  Witnesses:

  	

  The WESTERN SIZZLIN STORES, INC.

  
	

   

  
	

  /s/ [ILLEGIBLE]

  	

  By:

  	

   /s/ Victor

  F. Foti

  	

   

  
	

   

  
	

   

  	

  Its:

  	

  President

  	

   

  
	

  /s/[ILLEGIBLE]

  	

   

  	

   

  
										

 

STATE OF Virginia

 

COUNTY OF Roanoke.

 

I, Richard R Sayers, a

notary public in and for the State and County aforesaid, do certify that Victor

F. Foti, whose name, as President  of The WesterN SizzliN Stores, Inc., is

signed to the writing above, bearing date on the 23rd day of March has

acknowledged the same before me in my county aforesaid.

 

Given under my hand and

official seal this 23rd day of March.

 

My term of office

expires on the 28th day of February 1999.

 

	

   

  	

  /s/ Richard R Sayers

  
	

   

  	

  Notary Public

  	

   

  
	

   

  	

  [Notary Public’s Seal]

  	

   

  

 

2

 

Loan Nos. 06720

& 06721

Knoxville,

Tennessee

 

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT

(“Agreement”) is made as of the 23rd  day of March, 1998, by THE WESTERN

SIZZLES STORES, INC., a Virginia corporation, of P.O. Box 12167,

Roanoke, Virginia 24023-2167 (“Borrower”) in favor of CAPTEC FINANCIAL GROUP FUNDING

CORPORATION, a Michigan corporation, of 24 Frank Lloyd Wright Drive,

Lobby L, 4th Floor, P.O. Box 544, Ann Arbor, Michigan, 48106 (together with its

successors, assigns and transferees, “Lender”). This instrument shall become

effective on March 31, 1998.

 

PRELIMINARY

STATEMENT

 

This Agreement is made to secure all of the following (individually and

collectively the “Indebtedness”):

 

1.             Payment in the sum of One Million Seven Hundred Thousand

and 00/100 Dollars ($1,700,000.00), together with interest, costs and all other

sums, to be paid according to those certain Promissory Notes (the “Notes”), by

Borrower to Lender, made as of the date of this Agreement by Borrower, together

with any and all extensions, renewals, modifications, substitutions or

replacements thereof; and the performance of the covenants and obligations of

Borrower due or to become due to Lender under this Agreement or under any other

documents securing payment of all amounts due under the Notes (collectively,

the “Loan Documents”), and the repayment of all sums expended by Lender in

connection with performance of those covenants and obligations.

 

2.             If the Notes, this Agreement and the Loan Documents are assigned

to Captec Loan Receivables Trust - 1996A (the “Trust”), “Indebtedness” shall

also include the payment of all other sums (together with interest and costs

thereon) concurrently or subsequently loaned to Borrower by Captec Financial

Group, Inc., a Michigan corporation, Captec Financial Group Funding

Corporation, a Michigan corporation, or Captec Leasing Company, a California

corporation (each an "Originator"), as evidenced and/or secured by

certain notes and other documents of Borrower with respect to such amounts and

which notes and other documents are assigned to the Trust, together with any

and all extensions, renewals, modifications, substitutions or replacements

thereof; and the performance of the covenants and obligations of Borrower due

or to become due under such notes and other documents assigned to the Trust,

and the repayment of all sums expended in connection with performance of those

covenants and obligations (collectively, the “Trust Obligations”).

 

3.             If the Notes, this Agreement and the Loan Documents are

not assigned to the Trust, “Indebtedness” shall also include the payment of all

other sums (together with interest thereon) concurrently or subsequently loaned

to Borrower by an Originator, as evidenced and/or secured by certain notes and

other documents of Borrower which are not assigned to the Trust, together with

any and all extensions, renewals, modifications, substitutions or replacements

thereof; and the performance of the covenants and obligations of Borrower due

or to become due under such notes and other documents, and the repayment of all

sums expended in connection with performance of those covenants and obligations

(collectively, the “Retained Obligations”).

 

In consideration of the

above facts and the mutual promises of the parties, and as security for the

purposes stated above and elsewhere in this Agreement, the parties agree as

follows:

 

1.             COLLATERAL.

 

(a)     Grant of Security Interest.  Borrower grants Lender a security

interest in all of Borrower’s Inventory, Equipment, Instruments, Accounts and

General Intangibles, each as defined in Section l(b) below, whether now owned

or hereafter acquired, together with all replacements, substitutions, and

additions thereto (the “Collateral”) which are (i) located on the premises of, or

are related to the operation of, the Great American

 

 

Steak & Buffet Company Restaurants or WesterN

SizzliN Restaurant operated by Borrower and located at the addresses set forth

in Exhibit A attached hereto (each a “Franchised Operation” and collectively

the “Franchised Operations”), or (ii) related to the Franchised Operations and

located at the principal business office of Borrower located at 416 South

Jefferson Street, 4th Floor, Roanoke, Virginia 24012. Also included as part of

the Collateral are all proceeds and products thereof, including, without limit,

insurance proceeds, stock rights, subscription rights, dividends, stock

dividends, stock splits or liquidating dividends, and all cash, accounts,

chattel paper and general intangibles arising from the sale, rent, lease,

casualty loss or other disposition of the Collateral, and including any records

or documents of title relating to the Collateral.

 

(b)     Definitions.  For purposes of this Agreement, the following terms shall be

defined as follows:

 

(i)            “Inventory” shall consist of all

property held at any location by or for Borrower for sale, rent, or lease, or

furnished or to be furnished by Borrower under any contract of service, or raw

materials or work in process and their products, or materials used or consumed

in Borrower’s business.

 

(ii)           “Equipment” shall consist of any

goods at any time acquired, owned or held by Borrower at any location primarily

for use in Borrower’s business, including, without limit, machinery, fixtures,

furniture, furnishings and vehicles, and any accessions, parts, attachments,

accessories, tools, dies, additions, substitutions, replacements and

appurtenances and their related rights.

 

(Hi)         “Instruments” shall consist of

Borrower’s interest of any kind in any negotiable instrument or security as

those terms are defined in the Tennessee Uniform Commercial Code (“UCC”), or

any other writing which evidences a right to payment of money and is of a type

which is, in the ordinary course of business, transferred by delivery alone or

by delivery with any necessary endorsement or assignment.

 

(iv)         “General Intangibles” shall consist of

any personal property (including things in action) other than goods, accounts,

chattel paper, documents, instruments and money.

 

(v)          “Accounts” shall consist of any right

to payment for goods sold or leased or for services rendered which is not

evidenced by an instrument or chattel paper whether or not it has been earned

by performance.

 

2.             WARRANTIES

AND REPRESENTATIONS.  Borrower

warrants and covenants to Lender as follows:

 

(a)           Payment of Indebtedness.    Borrower will pay the Indebtedness and

perform all obligations related to the Indebtedness when due, whether by

maturity, acceleration or otherwise.

 

(b)           Authority. 

This Agreement is the valid and binding obligation of Borrower,

enforceable in accordance with its terms.   

If Borrower is a corporation, partnership, limited liability company or

other organization, Borrower is organized and validly existing and in good

standing under the laws of its state of establishment, and the execution,

delivery and performance of this Agreement has been duly authorized by all

necessary action of Borrower’s board of directors, partners, members or

governing body, and will not violate Borrower’s governing instruments or other

agreements.

 

(c)           Name; Address; Location of Collateral.  Borrower’s name and address and the

location of the Collateral are accurately set forth on the signature page and

Exhibit A of this Agreement.

 

2

 

(d)           Title to Collateral.  Borrower has good

and marketable title to the Collateral, free and clear of any liens,

encumbrances or security interests whatsoever, other than the security interest

granted by this Agreement and existing liens, encumbrances or security

interests disclosed to and accepted by Lender in writing. Borrower will keep

the Collateral free of all other liens, encumbrances and security interests.

Borrower will defend the Collateral against all claims and demands of all

persons at any time claiming any interest in the Collateral.

 

(e)           Priority of Security Interest.  The execution and delivery of

this Agreement creates a valid security interest in the Collateral, and upon

the filing of a UCC-1 financing statement with the Tennessee Secretary of

State, will have a first priority perfected security interest in the

Collateral, subject to no other security interest, except as otherwise approved

by Lender in writing.

 

(f)            Financing Statements.   Except as disclosed to and accepted by

Lender in writing, no financing statement covering all or any part of the

Collateral is on file in any public office. Borrower will execute financing

statement(s) in form acceptable to Lender and will pay the cost of filing

financing statement(s) in all public offices wherever filing is deemed

desirable by Lender.   A carbon,

photographic or other reproduction of this Agreement shall be sufficient as a

financing statement under the UCC and may be filed by Lender in any filing

office.  This Agreement shall be terminated

only by the filing of a termination statement in accordance with the applicable

provisions of the UCC.

 

(g)           Payment of Taxes.  Borrower shall pay

when due and before any interest, collection fees or penalties accrue, all

taxes, expenses, assessments, liens or other charges which may now or hereafter

be levied or assessed against the Collateral. Borrower shall furnish proof of

payment upon request of Lender.

 

(h)           Insurance.

 

(i)            Borrower shall keep the tangible

Collateral (including, without limit, the Equipment and Inventory) insured for

the benefit of Lender. Borrower covenants and agrees that Borrower will carry

and maintain, at its sole cost and expense, the following types of insurance,

in the amounts specified: (A) comprehensive general liability insurance with

initial limits of not less than Two Million Dollars ($2,000,000) for death or

injuries to one person and not less than Two Million Dollars ($2,000,000) for

death or injuries to two or more persons in one occurrence, and not less than

One Million Dollars ($1,000,000) for damage to property; (B) fire and extended

coverage insurance on a replacement form with inflation-guard, vandalism and

malicious mischief endorsements; (C) rent loss or business interruption

insurance covering a period of not less than twelve (12) months; and (D) such

other insurance and in such amounts as may be reasonably required from time to

tune by Lender. All insurance shall be in forms and with companies satisfactory

to Lender. Borrower shall deliver to Lender the policies evidencing the

required insurance with premiums fully paid, and with loss payee clauses

(making all losses payable to Lender). Renewals of the required insurance

(together with evidence of premium prepayment for one (1) year in advance)

shall be delivered to Lender at least thirty (30) days before the expiration of

any existing policies. All policies and renewals shall provide that they may

not be canceled or amended without giving Lender thirty (30) days prior written

notice of cancellation or amendment.

 

(ii)           Should Borrower fail to insure or

fail to pay the premiums on any required insurance or fail to deliver the

policies or renewals as provided above, Lender may have the insurance issued or

renewed (and pay the premiums on it for the account of Borrower) in amounts and

with companies and at premiums as Lender deems appropriate. If Lender elects to

have insurance issued or renewed to insure Lender’s interest, Lender shall have

no duty or obligation of any kind to also insure Borrower’s interest or to

notify Borrower of Lender’s actions. Any sums paid by Lender for insurance, as

provided above, shall be a lien upon the Collateral, added to the amount

secured by this Agreement, and payable immediately by Borrower to Lender, with

interest on those sums at the highest rate charged by Lender on any of the

Indebtedness (but not to exceed the maximum interest rate permitted by law).

 

3

 

(iii)          In the event of loss or damage, the

proceeds of all required insurance shall be paid to Lender. No loss or damage

shall itself reduce the Indebtedness. Lender or any of its employees is each

irrevocably appointed attorney-in-fact for Borrower and is authorized to adjust

and compromise each loss without the consent of Borrower, to collect, receive

and receipt for the insurance proceeds in the name of Lender and Borrower and

to endorse Borrower’s name upon any check in payment of the loss.

 

(iv)         Lender shall apply such proceeds to the

repair and replacement of the Collateral subject to the following conditions:

 

(1)                                   there

shall be no Event of Default existing hereunder;

 

(2)                                   plans

for repair and replacement shall be reviewed and approved by Lender, which

approval shall not be unreasonably withheld or delayed; 

 

(3)                                   repair

and replacement of the Collateral to a saleable commodity (as determined by

Lender) can practicably be completed prior to the Due Date set forth in the

Note;

 

(4)                                   Borrower

shall have deposited with Lender funds equal to the positive difference, if

any, between the cost of repair, replacement and completion, and the amount of

the insurance proceeds; and

 

(5)                                   disbursements

will be made by Lender, pursuant to procedures necessary or appropriate to

ensure that funds are properly applied.

 

Provided that no Event of

Default exists, if there are insurance proceeds in the amount of Twenty-Five

Thousand Dollars ($25,000) or less remaining after the repair and replacement

of the Collateral as required hereunder, such proceeds shall be paid to

Borrower. Provided that no Event of Default exists, if there are insurance

proceeds in excess of Twenty-Five Thousand Dollars ($25,000) remaining after

the repair and replacement of the Collateral as required hereunder, such

proceeds shall be applied toward payment of the Indebtedness (or any portion

thereof) without premium, whether or not then due or payable, in whatever order

of maturity as Lender may elect. Application of proceeds by Lender toward later

maturing installments of the Indebtedness shall not excuse Borrower from making

the regularly scheduled installment payments nor shall such application extend

or reduce the amount of any of these payments.

 

(v)          Notwithstanding Section 2(h)(iv)

above, if a substantial portion (fifty percent [50%] or more) of the Collateral

is damaged or destroyed during the last twenty-four (24) months of the term of

the Note, and an Event of Default then exists hereunder, then either Borrower

or Lender may elect not to repair/restore and to apply the insurance proceeds

toward payment of the Indebtedness (or any portion thereof) without premium,

whether or not then due or payable, in whatever order of maturity as Lender may

elect. Application of proceeds by Lender toward later maturing installments of

the Indebtedness shall not excuse Borrower from making the regularly scheduled

installment payments nor shall such application extend or reduce the amount of

any of these payments.

 

(vi)         In the event of a sale of the

Collateral, the purchaser of the Collateral shall succeed to all of the rights

of Borrower under the insurance policies including, without limit, any right to

unearned premiums and to receive the proceeds.

 

(vii)        Upon the occurrence of an Event of

Default hereunder, at the option of Lender, Borrower shall pay to Lender, in

advance on the first day of each month, a pro rata portion of the annual

premiums due (as estimated by Lender) on the required insurance. In the event

that sufficient funds

 

4

 

have been deposited with

Lender to cover the amount of the insurance premiums when the premiums become

due and payable, Lender shall pay the premiums. In the event that sufficient

funds have not been deposited with Lender to pay the insurance premiums at

least thirty (30) days prior to the time when they become due and payable,

Borrower shall immediately pay the amount of the deficiency to Lender.

 

(i)            Maintenance of Collateral.  Borrower

will maintain the Collateral in good condition and repair. Borrower will

promptly inform Lender of any loss or diminution in value of the Collateral.

Borrower may modify, compromise or substitute for the Collateral without the

prior written consent of Lender provided that any modifications, compromises or

substitutions have the same or greater value as the original items and that any

such modifications, compromises or substitutions remain at all times subject to

this Agreement.

 

(j)            Leased Facilities.  If  the Collateral is located at a facility

leased by Borrower, Borrower will obtain from the lessor a consent to the

granting of a security interest in the Collateral and a subordination of the

lessor’s interest in the Collateral. The consent and subordination shall be in

form acceptable to Lender.

 

(k)           Reporting Obligations.  Borrower hereby

covenants and agrees to deliver to Lender, or to cause The WesterN SizzliN

Corporation (“Guarantor”) to deliver to Lender, the following:

 

(A)  Management prepared and certified consolidated

quarterly financial statements for Guarantor within forty-five (45) days after

the end of the first three (3) quarters of each fiscal year of Guarantor.

 

(B)   Annual consolidated financial statements for

Guarantor audited by an independent certified public accountant within one

hundred twenty (120) days after the end of each fiscal year of Guarantor.

 

(C)   Management prepared and certified unit level

profit and loss statements relating to the operation of the Franchised

Operations within forty-five (45) days after the end of each fiscal year of

Borrower.

 

Such financial statements shall be true and correct in

all respects, shall be prepared in accordance with generally accepted

accounting principles, and shall fairly represent the respective financial

conditions of the subjects thereof as of the respective dates thereof. If

Borrower’s financial statements are prepared on a consolidated basis, Borrower

hereby covenants and agrees to prepare financial statements specifically

relating to the operation of the Franchised Operations. At the request of

Lender, Borrower shall obtain the consent of Borrower’s accountant(s) to the

inclusion of Borrower’s most recent financial statement in any regulatory

filing or report to be filed by Lender.

 

(l)            Management and Licensing Agreement.  Borrower

is a franchisee in good standing with The WesterN SizzliN Corporation

(“Franchisor”), and is not in default under its Management and Licensing

agreement with Franchisor relating to the Franchised Operations (“Management

Agreement”). Borrower agrees to comply with the terms of the Management

Agreement and to take all actions necessary or required to keep the Management

Agreement in full force and effect. Borrower will not encumber its rights under

the Management Agreement, except to Lender. Borrower agrees to promptly provide

Lender with a copy of any notice of default under the Management Agreement.

Further, Borrower agrees to promptly provide Lender with a copy of any notice

to Borrower of the existence of any breach which, with notice or the passage of

time, or both, would entitle Franchisor to terminate the Management Agreement.

 

(m)          Fixed Charge Coverage Ratio.  Borrower

shall maintain a Fixed Charge Coverage Ratio (as hereinafter defined) of not

less than 1.2 to 1.0 for Borrower’s business operations generally and not less

than 1.4 to 1.0 for the Franchised Operations. “Fixed Charge Coverage Ratio”

shall mean Borrower’s Operating Cash Flow divided by its Fixed Charges (each as

defined below). The Fixed Charge Coverage Ratios shall be calculated

 

5

 

by Borrower from time to time and dates as determined

by Lender, and Borrower shall submit such information as Lender may require to

confirm and approve Borrower’s calculation of the Fixed Charge Coverage Ratios.

 

(i) “Fixed

Charges” shall mean the sum of the following items set forth on a pro forma

basis separately stated for both Borrower’s business operations generally and

for the Franchised Operations, in each case, for the applicable twelve (12)

month operating period:

 

(A)          current portion of long-term debt

(defined as the current portion of long-term debt due to mature during the next

twelve (12) month operating period, as stated in Borrower’s applicable

financial statement, plus, if not already included therein, the current of

portion of principal payments imputed on all capital leases), plus

 

(B)           interest expense (defined as the

interest expense as stated on Borrower’s applicable financial statement, plus,

if not already included therein, the interest expense imputed on all capital

leases), plus

 

(C)           the current portion of operating

leases (defined as the amount of rent due under operating leases for the next

twelve (12) month operating period).

 

(ii) “Operating

Cash Flow” shall mean the sum or subtraction of the following items separately

stated for both Borrower’s business operations generally and for the Franchised

Operations, in each case, for the applicable prior twelve (12) month operating

period:

 

(A)          net income (defined as the net income

stated on Borrower’s applicable financial statement), plus

 

(B)           depreciation and amortization (defined

as the depreciation and amortization expense as stated on Borrower’s applicable

financial statement), plus

 

(C)           interest expense (as defined above), plus

 

(D)          operating lease expense (defined as

the amount of rental expense paid under operating leases, as stated on

Borrower’s applicable financial statements), plus or minus

 

(E)           non-recurring items (defined as items

which, when computing cash flow, should in Lender’s reasonable business

judgment, be added back to or subtracted from net income to normalize results).

 

3.             PROHIBITION

ON TRANSFER OR MODIFICATION.   Borrower

shall not transfer, sell, assign, lease or modify the Collateral or any

interest therein, any part thereof, or any substantial portion of Borrower’s

other assets or property without the prior written consent of Lender.  Notwithstanding the foregoing, Borrower may

use Collateral if the same is in the ordinary course of Borrower’s business and

on customary terms and at usual prices.

 

4.             PROHIBITION

ON CHANGE OF NAME,

ORGANIZATION

OR LOCATION.  Borrower shall

not assume a different name, change the location of its principal place of

business, cease conducting business at any location that appears in this

Agreement, merge, consolidate, change or reorganize its organizational

structure nor change the location of any of the Collateral without, in each

instance, obtaining the prior written consent of Lender thirty (30) days prior

to any such event.

 

6

 

5.             RIGHT

OF SETOFF.  Borrower

hereby grants Lender the right, exercisable if Borrower is in default, to set

off or apply against the Indebtedness any account or deposit with Lender in

which Borrower has an interest or against any other amounts which may be in the

possession of Lender and to the credit of Borrower.

 

6.             EXAMINATION

OF RECORDS AND COLLATERAL. Borrower shall keep full and

accurate records of Borrower’s business, including, without limit, records

related to the Collateral, and such records shall be open to inspection and

duplication by Lender at all reasonable times.   Lender may enter upon any property owned by or in the possession

of Borrower to examine and inspect the Collateral during regular business

hours. Borrower shall promptly provide Lender with any information concerning

the Collateral as Lender may request at any time.

 

7.             REIMBURSEMENT

OF EXPENSES. Borrower shall reimburse Lender for all

reasonable costs and expenses, including reasonable attorneys’ fees, incurred

by Lender in enforcing the rights of Lender under this Agreement. All costs and

expenses shall be included in the Indebtedness and shall be immediately due and

payable together with interest at the maximum legal rate.  Such costs and expenses shall include,

without limitation, costs or expenses incurred by Lender in any bankruptcy,

reorganization, insolvency or other similar proceeding.

 

8.             RIGHTS

AND OBLIGATIONS OF LENDER.  In

the event that Borrower fails to pay taxes, maintain insurance or perform any

other obligation arising under this Agreement, Lender may pay or perform such

obligation(s) for the account of Borrower and the same shall be added to the

Indebtedness and shall be immediately due and payable together with interest at

the highest rate charged by Lender on any of the Indebtedness (but not to

exceed the maximum rate permitted by law). Lender shall not be liable for any

loss to the Collateral nor shall such loss reduce the balance due.

 

9.             INDEMNIFICATION.   Borrower shall indemnify

and save Lender harmless from all claims, obligations, costs, expenses, including

attorneys’ fees, and causes of action or other rights asserted against Lender

and relating to this Agreement and/or the Collateral, except those arising from

the gross negligence or wilful misconduct of Lender.

 

10.          EVENTS OF DEFAULT AND REMEDIES.

 

(a)           Events of Default.  Any of the following events shall, for

purposes of this Agreement, constitute an “Event of Default”:

 

(i)            Failure by Borrower to pay any

amount owing on or with respect to the Indebtedness when due, whether by

maturity, acceleration or otherwise, which failure continues for five (5)

business days.

 

(ii)           Any failure by Borrower or any

guarantor to comply with, or breach by Borrower or any guarantor of, any of the

non-monetary terms, provisions, warranties or covenants of the Notes, this Agreement

or the other Loan Documents, which failure continues for fifteen (15) days

after the date of written notice to Borrower (or any guarantor) from Lender of

such default; provided, however, that if: (i) the nature of Borrower’s (or any

guarantor’s) noncompliance is such that more than fifteen (15) days are

reasonably required for its cure, (ii) Borrower (or any guarantor) has

commenced such cure within said fifteen (15) day period, (iii) Borrower (or any

guarantor) diligently prosecutes such cure to completion, (iv) Borrower (or any

guarantor) provides Lender with written notice of the noncompliance, AND (v)

Borrower (or any guarantor) furnishes reserves or a security bond, in an amount

satisfactory to Lender in its sole discretion, then Borrower (or any guarantor)

shall not be in default.

 

(iii)          Institution of remedial proceedings or

other exercise of rights and remedies by the holder of any security interest or

other lien against the Collateral or any portion thereof; provided, however,

 

7

 

if there is a good faith dispute by Borrower (or any

guarantor) as to the validity or reasonableness of the claim which is the basis

for such proceedings, then no Event of Default shall have occurred under this

clause (iii) if Borrower (or any guarantor) provides Lender with written notice

of the proceedings and furnishes reserves or a security bond for the

proceedings satisfactory to Lender,

 

(iv)          The insolvency of Borrower or any

guarantor or the admission in writing of Borrower’s or any guarantor’s

inability to pay debts as they mature.

 

(v)           Any statement, representation or

information made or furnished by or on behalf of Borrower or any guarantor to

Lender in connection with or to induce Lender to provide any of the

Indebtedness shall prove to be false or materially misleading when made or

furnished.

 

(vi)          Institution of bankruptcy,

reorganization, insolvency or other similar proceedings by or against Borrower

or any guarantor, unless, in the case of a petition filed against Borrower, the

same is dismissed within sixty (60) days of filing.

 

(vii)         The issuance or filing of any judgment,

attachment, levy, garnishment or the commencement of any related proceeding or

the commencement of any other judicial process upon or in respect to Borrower

or any guarantor or the Collateral in which the amount in controversy exceeds

One Hundred Thousand Dollars ($100,000) and is not covered by the insurance of

Borrower (or any guarantor), unless satisfied, or Borrower (or any guarantor)

furnishes reserves or a security bond in  an

amount satisfactory to Lender in its sole discretion, released or discharged

within sixty (60) days after the date of such issuance, filing or

communication.

 

(viii)        Sale or other disposition by Borrower or

any guarantor of any substantial portion of assets or property.

 

(ix)           Death, dissolution, merger,

consolidation, termination of existence, insolvency, business failure or

assignment for the benefit of creditors of or by Borrower or any guarantor;

without the prior written consent of Lender, which consent shall not be

unreasonably withheld.

 

(x)            If there is any failure by Borrower

or any guarantor to pay any indebtedness (other than to Lender) in excess of

One Hundred Thousand Dollars ($100,000) (and exclusive of trade debt incurred

in the ordinary course of business) when do or in the observance or performance

of any term, covenant or condition in any document evidencing, securing or

relating to such indebtedness, which failure continues beyond any applicable cure

period.

 

(xi)           Receipt by Borrower of a notice of

termination of the Management Agreement.

 

(xii)          If the Notes, this Agreement and the

other Loan Documents have not been assigned to the Trust, the default by

Borrower which continues beyond any applicable grace or cure period under the

Retained Obligations; provided, however, if the Notes, this Agreement and the

other Loan Documents are assigned to the Trust, this clause (xii) shall be of

no force or effect during the term of such assignment.

 

(xiii)         In the event that the Notes, this

Agreement and the other Loan Documents are assigned to the Trust, the default

by Borrower which continues beyond any applicable grace or cure period under

the Trust Obligations.

 

(b)            Remedies

Upon Event of Default. Upon the occurrence of any Event of

Default, Lender shall have the following rights:

 

(i)            Declare all or part of the

Indebtedness immediately due and payable.

 

8

 

(ii)          Borrower agrees, upon request of

Lender, to assemble the Collateral and make it available to Lender at any place

which is reasonably convenient for Borrower and Lender. Borrower grants Lender

permission to enter upon any premises owned or occupied by Borrower for the

purpose of taking possession of the Collateral.

 

(iii)         Lender shall have the right to take

possession of the Collateral, with or without demand, and with or without

process of law. Lender shall have the right to sell and dispose of the

Collateral and to distribute the proceeds according to law. In connection with

the right of Lender to take possession of the Collateral, Lender may take

possession of any other items of property in or on the Collateral at the time

of taking possession, and hold them for Borrower without liability on the part

of Lender. If there is any statutory requirement for notice, that requirement

shall be met if Lender shall send notice to Borrower at least five (5) days

prior to the date of sale, disposition or other event giving rise to the

required notice. Borrower shall be liable for any deficiency remaining after

disposition of the Collateral.

 

(iv)         Lender shall also have any one or more

of the rights and remedies under the UCC or at law or equity to enforce the

payment of the Indebtedness.

 

(c)            Remedies Generally.

 

(i)           All remedies provided for in Section

10(b) shall be available to the extent not prohibited by law. Each remedy shall

be cumulative and additional to any other remedy of Lender at law, in equity or

by statute. No delay or omission to exercise any right or power accruing upon

any default or Event of Default shall impair any such right or power or shall

be construed to be a waiver of, or acquiescence in, any such default or Event

of Default.

 

(ii)          Lender may waive any Event of Default

and may rescind any declaration of maturity of payments on the Indebtedness. In

case of such waiver or recision Borrower and Lender shall be restored to their

respective former positions and rights under this Agreement. Any waiver by

Lender of any default or Event of Default shall be in writing and shall be

limited to the particular default waived and shall not be deemed to waive any

other default.

 

(d)            Application of Proceeds.   Any proceeds received by Lender from

the exercise of remedies pursuant to Section 10(b) of this Agreement shall be

applied as follows:

 

(i)           First, to pay all costs and expenses

incidental to the leasing, foreclosure, sale or other disposition of the

Collateral. These costs and expenses shall include, without limit, any costs

and expenses incurred by Lender (including, without limit, reasonable

attorneys’ fees and disbursements), and any taxes and assessments or other

liens and encumbrances prior to the lien of this Agreement.

 

(ii)          Second, to all sums expended or

incurred by Lender, directly or indirectly in carrying out any term, covenant

or agreement under this Agreement or any related document, together with

interest as provided in this Agreement.

 

(iii)         Third, to the payment of the

Indebtedness.  If the proceeds are

insufficient to fully pay the Indebtedness, then application shall be made

first to late charges and interest accrued and unpaid, then to any applicable

prepayment premiums, and then to unpaid fees and other charges, then to the

outstanding principal balance.

 

(iv)         Fourth, any surplus remaining shall be

paid to Borrower or to whomsoever may be lawfully entitled.

 

9

 

(e)            Further Actions.    Promptly upon the request of Lender, Borrower shall

execute, acknowledge and deliver any and all further documents, security

agreements, financing statements and assurances, and do or cause to be done all

further acts as Lender may require to confirm and protect the lien of this

Agreement or otherwise to accomplish the purposes of this Agreement.

 

(f)             Attorneys Fees.   Any reference in this Agreement to

attorneys’ fees shall refer to fees, charges, costs and expenses of in-house

and outside attorneys and paralegals, whether or not a suit or proceeding is

instituted, and whether incurred at the trial court level, on appeal, in a

bankruptcy, administrative or probate proceeding, in consultation with counsel,

or otherwise. All costs, expenses and fees of any nature for which Borrower is

obligated to reimburse or indemnify Lender are part of the Indebtedness secured

by this Agreement and are payable upon demand, unless expressly provided

otherwise, with interest until repaid at the highest rate charged on any of the

Indebtedness (but not to exceed the maximum rate permitted by law).

 

11.          PARTIAL

RELEASES. Lender shall from time to time execute and deliver

to Borrower, within ten (10) business days after the written request of

Borrower, UCC termination statements with respect to a portion of the

Collateral secured hereunder, provided that (a) Borrower shall not be in default

under any of the terms, covenants or conditions of any document or instrument

evidencing or securing the Indebtedness; (b) the outstanding principal balance

of the applicable promissory note, together with interest, premiums, costs and

all other sums on that amount, shall be paid in full; and (c) all termination

statements shall be prepared by Lender at Borrower’s expense. The portion of

the Collateral released under this Section 11 shall be determined by matching

the Collateral located at or related to a specified Franchised Operation with

the promissory note referencing that Franchised Operation on its face.

 

12.          MISCELLANEOUS.

 

(a)           Governing Law.  This Agreement shall be

construed according to the laws of the State of Tennessee.

 

(b)           Successors and Assigns.   This Agreement shall be binding upon

the successors and assigns of Borrower including, without limit, any debtor in

possession or trustee in bankruptcy for Borrower, and the rights and privileges

of Lender under this Agreement shall inure to the benefit of its successors and

assigns. This shall not be deemed a consent by Lender to a conveyance by

Borrower of all or any part of the Collateral or of any ownership interest in

Borrower.

 

(c)           Notices.  Notice from one party to

another relating to this Agreement, if required, shall be deemed effective if

made in writing (including telecommunications) and delivered to the recipient’s

address, telex number or telecopier number set forth by any of the following

means: (i) hand delivery, (ii) registered or certified mail, postage prepaid,

(iii) express mail or other overnight courier service or (iv) telecopy, telex

or other wire transmission with request for assurance of receipt in a manner

typical with respect to communications of that type. Notice made in accordance

with these provisions shall be deemed delivered on receipt if delivered by hand

or wire transmission, on the third business day after mailing if mailed by

registered or certified mail, or on the next business day after mailing or

deposit with the postal service or an overnight courier service if delivered by

express mail or overnight courier. Borrower’s telecopier number is (540)

345-0831, and Lender’s telecopier number is (743) 994-1376.

 

(d)           Entire Agreement; Amendments.  This

Agreement and any agreement to which it refers state all rights and obligations

of the parties and supersede all other agreements (oral or written) with

respect to the security interests granted by this Agreement.   Any amendment of this Agreement shall be in

writing and shall require the signature of Borrower and Lender.

 

10

 

(e)           Partial Invalidity.  The invalidity or unenforceability of any

provision of this Agreement shall not affect the validity or enforceability of

the remaining provisions of this Agreement.

 

(f)            Inspections.  Any inspection, audit, appraisal or

examination by Lender or its agents of the Collateral or of information or

documents pertaining to the Collateral is for the sole purpose of protecting

Lender’s interests under this Agreement and is not for the benefit or

protection of Borrower or any third party.

 

(g)           Joint and Several Liability.  In the event that more than one person

or entity executes this Agreement, the obligations of each person or entity

shall be joint and several.

 

(h)           Automatic Reinstatement.  Notwithstanding any prior revocation,

termination, surrender or discharge of this Agreement, the effectiveness of

this Agreement shall automatically continue or be reinstated, as the case may

be, in the event that:

 

(i)            Any payment received or credit given

by Lender in respect of the Indebtedness is determined to be a preference,

impermissible setoff, fraudulent conveyance, diversion of trust funds, or

otherwise required to be returned to Borrower or any third party under any

applicable state or federal law, including, without limit, laws pertaining to

bankruptcy or insolvency, in which case this Agreement shall be enforceable as

if any such payment or credit had not been received or given, whether or not

Lender relied upon this payment or credit or changed its position as a

consequence of it.

 

(ii)           In the event of continuation or

reinstatement of this Agreement, Borrower agrees upon demand by Lender to

execute and deliver to Lender those documents which Lender determines are

appropriate to further evidence (in the public records or otherwise) this

continuation or reinstatement, although the failure of Borrower to do so shall

not affect in any way the reinstatement or continuation. If Borrower does not

execute and deliver to Lender such documents upon demand, Lender and each

officer of Lender is irrevocably appointed (which appointment is coupled with

an interest) the true and lawful attorney of Borrower (with full power of

substitution) to execute and deliver such documents in the name and on behalf

of Borrower.

 

(i)            WAIVER

OF JURY TRIAL.  BORROWER AND LENDER

ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT

IT MAY BE WAIVED. EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY

TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR

THEIR MUTUAL BENEFIT, WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF

LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED

TO, THIS AGREEMENT OR THE INDEBTEDNESS.

 

(j)            Assignment.  This Agreement is freely assignable, in whole or in part, by

Lender without notice to or consent of Borrower; provided, however, that Lender

(or its assignee) shall provide written notice of such assignment to Borrower

in the event that Lender (or such assignee) desires to designate a new person

or entity as payee and/or a new place of payment for the obligations under the

Notes.  Lender shall be fully discharged

from all responsibility accruing hereunder from and after the effective date of

any such assignment.  Lender’s assignee

shall, to the extent of the assignment, be vested with all the powers and

rights of Lender hereunder (including those granted under Section 10 hereof or

otherwise with respect to the Collateral), and to the extent of such assignment

the assignee may fully enforce such rights and powers, and all references to

Lender shall mean and refer to such assignee. 

Lender shall retain all rights and powers hereby given not so assigned,

transferred and/or delivered.  Borrower

hereby waives all defenses which Borrower may be entitled to assert against

Lender’s assignee with respect to liability accruing hereunder prior to the

effective date of any assignment of Lender’s interest herein.  Borrower may not, in whole or in part,

directly or indirectly, assign this Agreement or its rights hereunder or

delegate its duties hereunder without, in each instance, the specific prior

written consent of Lender, which consent may be withheld or delayed in Lender’s

sole discretion.

 

11

 

(k)           Securitization.  Borrower understands and agrees that Lender

may, from time to time, assign its rights and powers under the Notes, this

Agreement and any other Loan Documents, in whole or in part, in connection with

a securitization program.  Borrower

agrees to enter into an amendment to the Notes, this Agreement and any other

Loan Documents if such amendments are required by a nationally recognized rating

agency in connection with a securitization program sponsored by Lender and in

which the Notes, this Agreement and any other Loan Documents are to be

included; provided that Borrower shall not be obligated to enter into any

amendment which adversely affects Borrower or otherwise adversely alters any of

the financial terms of the Notes, this Agreement and any other Loan Documents.

[SIGNATURE PAGE

FOLLOWS]

 

12

 

EXHIBIT A

 

TO

 

SECURITY AGREEMENT

 

4310 Chapman Hwy.,

Knoxville, TN

 

900 Merchants Rd, Knoxville,

TN

 

A-1

 

Borrower has executed

this Agreement on the day and year first above written.

 

Borrower’s principal

place of business is located in the City of Roanoke, Commonwealth of Virginia.

 

Locations of the Collateral:

 

416 South Jefferson Street, 4th Floor

Roanoke, Virginia 24011 and

each of the sites listed

on Exhibit A attached hereto.

 

 

 

BORROWER:

 

	

  THE

  WESTERN SIZZLIN STORES, INC.

  
	

   

  	 

	

   

  	 

	

  By:

  	

  /s/ Victor F. Foti

  	

   

  	 

	

   

  	 

	

  Its:

  	

  President

  	 

						

 

 

Address:

 

P.O. Box 12167

Roanoke, VA 24023-2167

 

Tax I.D. No.

54-1787907

13

 

Loan No. 06720

4310 Chapman Hwy.

Knoxville, Tennessee

 

GUARANTY

 

THE WESTERN SIZZLIN

CORPORATION, a Tennessee corporation and THE WESTERN SIZZLIN STORES OF LITTLE

ROCK, INC., an Arkansas corporation (each a “Guarantor”), as a material

inducement to and in consideration of CAPTEC FINANCIAL GROUP FUNDING

CORPORATION, a Michigan corporation, whose address is 24 Frank Lloyd Wright

Drive, Lobby L, Ann Arbor, Michigan 48106 (together with its successors,

assigns and transferees, “Lender”), making a loan in the original principal

amount of Five Hundred Thousand and 00/100 Dollars ($500,000.00) as evidenced

by a Promissory Note, dated March 23, 1998 (“Note”), made by THE WESTERN

SIZZLIN STORES, INC., a Virginia corporation (“Borrower”), which Note is

secured by the instruments referenced therein (together with the Note, “Loan

Documents”), hereby jointly and severally, unconditionally and irrevocably,

personally guarantees to and for the benefit of Lender, and Lender’s successors

and assigns, the full and timely payment and performance of all of the

Borrower’s duties, obligations and covenants under the Loan Documents.  This is a guaranty of payment and performance

and not of collection.

 

This Guaranty shall not

be affected by Lender’s failure or delay to enforce any of its rights.

 

Guarantor’s obligations

are independent of Borrower’s obligations. 

If Borrower defaults under the Loan Documents, Lender can proceed

immediately against Guarantor or Borrower, or both, or Lender can enforce

against Guarantor or Borrower, or both, any rights that it has under the Loan

Documents or pursuant to applicable laws. 

If any lien created by the Loan Documents terminates and Lender has any

rights it can enforce against Borrower after termination, Lender can enforce

those rights against Guarantor without giving previous notice to Borrower or

Guarantor or without making any demand on either of them.

 

To the extent permitted

by law, Guarantor waives the benefit of any statute of limitations affecting

Guarantor’s liability under this Guaranty. 

Guarantor waives the right to require Lender to first or concurrently:

(1) proceed against Borrower; (2) proceed against or exhaust any security that

Lender holds from Borrower; or (3) pursue any other remedy in Lender’s

power.  The liability of Guarantor shall

not be affected or exonerated by any indulgence, compromise, settlement or

variation of terms which may be extended by Lender to Borrower, or agreed upon

by Lender or Borrower, and, unless agreed to in writing by Lender, shall not be

affected or exonerated by any assignment by Borrower of its interest in any one

or more of the Loan Documents, nor shall the liability of the Guarantor be

affected or exonerated by the insolvency, bankruptcy (voluntary or

involuntary), or reorganization of Borrower, nor by the voluntary or

involuntary liquidation, sale or other disposition of all or substantially all

of the assets of Borrower, or by the release of any other Guarantor.  Lender and Borrower, without notice to or

consent by Guarantor, may at any time or times enter into such modifications,

extensions, amendments or other covenants of the Loan Documents as they may

deem appropriate, and Guarantor shall not be released nor its liability exonerated

thereby but shall continue to be fully liable for the payment and performance

of all obligations and duties of Borrower under the Loan Documents as so

modified, extended or amended.

 

Guarantor further agrees

(1) to indemnify and hold harmless Lender from and against any claims, damages,

expenses or losses, including to the extent permitted by law, all reasonable

attorneys’ fees incurred by counsel of Lender’s choice (whether or not

litigation is commenced), resulting from or arising out of any breach of any

provision of the Loan Documents by Borrower or by reason of Borrower’s failure

to perform any of its obligations thereunder, and (2) to the extent permitted

by law, to pay all costs and expenses, including reasonable attorneys’ fees

(whether or not litigation is commenced), incurred by Lender in enforcing this

Guaranty.

 

Until all of Borrower’s

obligations to Lender have been discharged in full, Guarantor has no right of

subrogation against Borrower.  Guarantor

assumes the responsibility to remain informed of the financial condition of

Borrower and of all other circumstances bearing upon the risk of Borrower’s

default, which reasonable inquiry

 

 

would reveal, and agrees that Lender shall have no

duty to advise Guarantor of information known to it regarding such condition or

any such circumstances.  Lender shall

not be required to inquire into the powers of Borrower or the officers,

employees, partners or agents acting or purporting to act on its behalf, and

any indebtedness made or created in reliance upon the professed exercise of

such powers shall be guaranteed under this Guaranty.  Each Guarantor hereby represents and warrants to Lender that such

Guarantor has received a copy of each of the Loan Documents, has read or had

the opportunity to read each of the Loan Documents, and understands the terms

of the Loan Documents.  The provisions

in the Loan Documents relating to the execution of additional documents, legal

proceedings by Lender against Borrower, severability of the provisions of the

Loan Documents, interpretation of the Loan Documents, notices, waivers

(including waiver of a jury trial), limitation on right of recovery against

Lender, disclaimer of individual liability, and the applicable laws which

govern the interpretation of the Loan Documents are incorporated herein in

their entirety by this reference and made a part hereof as though set forth in

full herein; any reference in those provisions to “Borrower” shall mean each

Guarantor and any reference in those provisions to the “Loan Documents” shall

mean this Guaranty.

 

To the extent permitted

by law, Guarantor waives its right to enforce any remedies that Borrower now

has, or later may have, against Lender. Guarantor waives any right to

participate in any security now or later held by Lender.  Guarantor waives notice of acceptance of

this Guaranty, and all other notices in connection with this Guaranty or in

connection with the liabilities, obligations and duties guaranteed hereby,

including notices to Guarantor of default by the Borrower under the Loan

Documents.  Guarantor hereby waives

diligence, presentment, demand for performance, notice of nonperformance,

protest, notice of protest, notice of dishonor, and notice of acceptance of

this Guaranty, and waives all notices of the existence, creation, or incurring

of new or additional obligations.

 

If there is more than one

Guarantor, the liability of each Guarantor shall be joint and several.  Guarantor’s obligations under this Guaranty

shall be binding on Guarantor’s legal representatives, heirs, successors and

assigns.

 

If Borrower disposes of

its interest in the property secured by the Loan Documents, “Borrower”, as used

in this Guaranty, shall mean Borrower’s successors or assigns.  Assignment of the Loan Documents by Lender

(as permitted by the Loan Documents) shall not affect this Guaranty.  In the event of an assignment of the Loan

Documents by Lender, the term “Lender” as used in this Guaranty shall mean

Lender’s successors or assigns.

 

Guarantor hereby

covenants and agrees to deliver to Lender the following: (a) management

prepared and certified consolidated quarterly financial statements for

Guarantor within forty-five (45) days after the end of the first three (3)

quarters of each fiscal year of Guarantor, and (b) annual consolidated

financial statements for Guarantor audited by an independent certified public

accountant within one hundred twenty (120) days after the end of each fiscal

year of Guarantor.  Such financial

statements shall be true and correct in all respects, shall be prepared in

accordance with generally accepted accounting principles, and shall fairly

represent the respective financial conditions of the subjects thereof as of the

respective dates thereof.  At the

request of Lender, Guarantor shall obtain the consent of Guarantor’s

accountant(s) to the inclusion of Guarantor’s most recent financial statement

in any regulatory filing or report to be filed by Lender.

 

If any one or more of the

provisions of this Guaranty shall be held to be invalid, illegal or unenforceable

in any respect, such invalidity, illegality or unenforceability shall not

affect any other provision of this Guaranty, and this Guaranty shall be

construed as if such invalid, illegal or unenforceable provision had never been

contained herein.

 

This Guaranty shall be

construed according to the laws of the State of Tennessee.  Guarantor agrees that any dispute which may

arise between Lender and Guarantor with regard to this Guaranty shall be

resolved by litigation in state or federal court.  Litigation may be initiated by Lender or its assignee, at its

discretion, in the State of the principal place of business of Lender or its

assignee, the State of the principal place of business of Guarantor, or the

State where the Collateral (as defined in the Loan Documents) is located.

14

 

GUARANTOR HEREBY KNOWINGLY AND

IRREVOCABLY WAIVES ANY OBJECTIONS ON THE GROUNDS OF IMPROPER JURISDICTION OR

VENUE TO AN ACTION INITIATED AS SET FORTH ABOVE AND AGREES THAT EFFECTIVE

SERVICE OF PROCESS MAY BE MADE UPON GUARANTOR BY REGISTERED MAIL RETURN RECEIPT

REQUESTED.  GUARANTOR WAIVES, TO THE

EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY ACTION BETWEEN THE PARTIES.

 

This Guaranty shall

become effective on March 31, 1998.

 

	

  THE

  WESTERN SIZZLIN CORPORATION

  
	

   

  	

   

  
	

  By:.

  	

  /s/ Victor F. Foti

  	

   

  
	

   

  	

   

  
	

   

  	

  Its: President

  
	

   

  	

   

  
	

  THE

  WESTERN SIZZLIN STORES OF LITTLE ROCK, INC .

  
	

   

  	

   

  
	

  By:

  	

  /s/ Victor F. Foti

  	

   

  
	

   

  	

   

  
	

  Its:  

  	

  President

  	

   

  
						

 

3

 

Loan No. 06720

4310 Chapman Hwy.

Knoxville, Tennessee

 

CERTIFICATE OF BORROWER

 

THE WESTERN SIZZLIN

STORES, INC., a Virginia corporation ("Borrower"), for the benefit of

CAPTEC FINANCIAL GROUP FUNDING CORPORATION, a Michigan corporation (together

with its successors, assigns and transferees, “Lender”), warrants, represents,

covenants and agrees that the following are true and correct as of the date

hereof:

 

1.             All warranties and representations of Borrower contained

in this Certificate shall survive the execution of this Certificate and any

advances made in accordance with the Promissory Note executed by Borrower, in

favor of Lender, dated even herewith, in the original principal amount of Five

Hundred Thousand and 00/100 Dollars ($500,000.00) (the “Note”).

 

2.             Borrower has good, indefeasible and marketable title to

the Collateral (as defined in that certain Security Agreement, dated even

herewith, between Borrower and Lender (the “Security Agreement”)).  Except for the Security Agreement, there are

no instruments, matters or agreements, and Borrower is not a party to any instrument,

matter or agreement, which will in any way encumber, bind or otherwise affect

the Collateral or Lender.  Borrower has

neither done nor failed to do anything, nor has suffered anything to be done,

as a result of which the Collateral or any part thereof has been or will be

encumbered or title thereto has been or will be affected in any way and no

person, firm or entity has any present, conditional or contingent rights to

acquire all or any portion of the Collateral.

 

3.             Borrower is a corporation duly organized and validly

existing in good standing under the laws of the Commonwealth of Virginia and is

qualified to do business in the State of Tennessee.  The person or persons executing the Note, the Security Agreement

and the other Loan Documents (as defined in the Security Agreement) have full

power and complete authority to execute the Note, the Security Agreement and

the other Loan Documents, and, when executed, the Note, the Security Agreement

and the other Loan Documents will be legal, valid and binding obligations of

Borrower, enforceable in accordance with their terms.

 

4.             As of the date hereof, Borrower is not “insolvent”

within the meaning of Section 548(a)(2)(B) of the United States Bankruptcy

Code.

 

5.             Borrower is in the business of owning and operating

Great American Steak & Buffet Company restaurants,

including the restaurant operation located at 4310 Chapman Hwy., Knoxville,

Tennessee (the “Franchised Operation”). 

Borrower’s chief executive office is located at 416 South Jefferson Street,

Roanoke, Virginia 24012, and the Collateral is located at Borrower’s Chief

Executive Office and the Franchised Operation.

 

6.             Borrower has furnished to Lender its most recent annual

audited financial statements and most recent management prepared and certified

quarterly financial statements, which statements were prepared in accordance

with generally accepted accounting principles and are correct and complete and

accurately present the financial condition of Borrower on the dates thereof.  Further, there has been no material adverse

change in the business, property or condition of Borrower since the date of the

most recent financial statements.

 

7.             Borrower has complied and will continue to comply with

all applicable laws, rules, regulations and orders relating to Borrower or any

aspect of Borrower’s business or assets, including, without limit, all

environmental laws, rules, regulations and orders.  Borrower agrees to indemnify and hold Lender harmless against and

from all claims, losses and costs resulting from any and all violations by

Borrower of any laws, rules, regulations and/or orders.

 

 

8.             Borrower has not received any written notice of, and, to

the best knowledge of Borrower, none of Borrower, the Franchised Operation or

the premises where the Franchised Operation is located are in violation of any

law, municipal ordinance or other governmental requirement of any governmental

authority.

 

9.             There are no circumstances, state of facts or other

matters which, with the passage of time or the giving of notice, or both, would

constitute an Event of Default under the terms of the Note, the Security

Agreement or the other Loan Documents.

 

10.           Borrower has filed all federal, state

and local income and other tax returns and other reports required to be filed

prior to the date of this Certificate and Borrower has paid all taxes,

assessments, withholdings and other governmental charges that are due and

payable prior to the date of this Certificate.

 

11.           All taxes and all installments of

assessments and all other charges of any kind imposed or levied by any

governmental authority against either Borrower or the Collateral which are due

and payable or constitute a lien at or prior to the date of this Certificate,

together with all interest and penalties due thereon, have been paid in full.

 

12.           There is now fully paid and

enforceable fire, liability and other forms of insurance in such amounts and

covering such risks as are required under the Security Agreement.

 

13.           There are no disputes, litigation or

other such proceedings pending or, to the best of Borrower’s knowledge,

threatened against or related to Borrower, the Collateral or the Franchised

Operation, nor does Borrower know of any basis for any such action.

 

14.           In consideration of the loan

evidenced by the Note and secured, by the Security Agreement and the other Loan

Documents, Borrower agrees to indemnify and hold Lender harmless against all

claims, liabilities, losses, deficiencies and damages as well as reasonable

expenses (including attorney’s fees), interest and penalties related thereto,

asserted by any third party against, or incurred by Lender, by reason of or

resulting from any breach, inaccuracy, incompleteness or nonfulfillment of the

covenants, representations and/or warranties of Borrower contained in this

Certificate.

 

15.           Commencing May 1, 1998 and on the

first day of each following month, Lender is authorized to initiate an

electronic funds transfer to pay the monthly installment payment owing under

the loan evidenced by the Note from the account designated below, and to

receive payments from such account. 

This authorization will remain in effect unless the undersigned requests

a modification that is agreed to by the Financial Institution and Lender;

provided, however, that Lender and its successors, assigns and transferees may

modify the place of payment to be made by Borrower without the consent of the

Financial Institution.

 

	

  Financial

  Institution:

  	

   

  
	

  Financial

  Institution

  	

   

  
	

  Address:

  	

   

  
	

  Routing/Transit

  #:

  	

   

  
	

  Account #:

  	

   

  

 

 

[SIGNATURE PAGE FOLLOWS]

 

 

This Certificate shall

become effective on March 31, 1998.

 

	

   

  	

  THE

  WESTERN SIZZLIN STORES, INC.

  	 

	

   

  	

   

  	 

	

   

  	

  By 

  	

  /s/ Victor

  F. Foti

  	

   

  
	

   

  	

   

  	 

	

   

  	

  Its  

  	

  President

  	 

							

 

3

 

[LETTERHEAD OF

WESTERN SIZZLIN STORES, INC.]

 

	

  TO:

  	

  Martha R. Young, (313) 668-7612

  
	

   

  	

  Fax: 

  747-7147

  
	

   

  	

   

  	

   

  
	

  FROM:

  	

  Calvin Lilly, (540) 345-3195

  
	

   

  	

  Fax: 

  345-0831

  
	

   

  	

   

  	

   

  
	

  DATE:

  	

  Match 24, 1998

  
	

   

  	

   

  	

   

  
	

  RE:

  	

  Closing Items- Follow-up

  
	

   

  	

   

  	

   

  
	

  Information for account drafting:

  
	

   

  
	

  Financial Institution:

  	

  Wachovia Bank, N. A.

  
	

   

  	

   

  	

   

  
	

  Financial Institution Address:

  	

  111 Franklin Road

  Roanoke, Virginia 24001

  Attn:  Kelly Kiser

  
	

   

  	

   

  
	

  Routing #:

  	

  051000253

  
	

   

  	

   

  
	

  Account #:

  	

  7911787711

  The WesterN SizzliN Stores, Inc.

  

 

 

[ILLEGIBLE]

 

Loan No. 06720

4310 Chapman Hwy.

Knoxville, Tennessee

 

CERTIFICATE OF GUARANTOR

 

THE WESTERN SIZZLIN

STORES OF LITTLE ROCK, INC., an Arkansas corporation (“Guarantor”), for the

benefit of CAPTEC FINANCIAL GROUP FUNDING CORPORATION, a Michigan corporation

(together with its successors, assigns and transferees, “Lender”), warrants,

represents, covenants and agrees that the following are true and correct as of

the date hereof:

 

1.             Guarantor has received a copy of that certain Promissory

Note, dated March 23, 1998 in

the original principal amount of Five Hundred Thousand and 00/100 Dollars

($500,000.00) (“Note”) made by THE WESTERN SIZZLIN STORES, INC., a Virginia

corporation (“Borrower”).  Guarantor has

also received a copy of the instruments securing the Note, as referenced therein

(together with the Note, the “Loan Documents”).  The Loan Documents create a lien with respect to certain real and

personal property located at 4310 Chapman Hwy., Knoxville, Tennessee

(“Premises”).

 

2.             Guarantor has had the opportunity to review the

Certificate of Borrower, dated even herewith, made by Borrower for the benefit

of Lender, and confirms that the warranties and representations set forth

therein are true and correct as of the date hereof.

 

3.             Guarantor has full power and authority to enter into

that certain Guaranty executed by Guarantor in favor of Lender, dated as of the

date of this Certificate (“Guaranty”) and to assume and perform all of

Guarantor’s obligations under the Guaranty in accordance with all of the terms

and conditions of the Guaranty.  The

execution and delivery of the Guaranty and the performance by Guarantor of

Guarantor’s obligations under the Guaranty and under all documents contemplated

by the Guaranty require no further action or approval.  The Guaranty and all other documents

contemplated by the Guaranty are fully binding and enforceable obligations of

Guarantor.

 

4.             There are no circumstances, state of facts or other

matters which, with the passage of time or the giving of notice, or both, would

constitute an event of default under the terms of the Guaranty, or to the best

of the Guarantor’s knowledge, under the Loan Documents.

 

5.             There are no disputes, litigation or other such

proceedings pending or, to the best of the Guarantor’s knowledge, threatened

against or related to the Guarantor, nor does Guarantor know of any basis for

any such action.

 

6.             Guarantor has furnished to Lender its most recent annual

audited consolidated financial statements and most recent management prepared

and certified quarterly consolidated financial statements, which statements

were prepared in accordance with generally accepted accounting principles and

are correct and complete and accurately present the financial condition of

Guarantor on the dates thereof. 

Further, there has been no material adverse change in the business,

property or condition of Guarantor since the date of the most recent financial

statements.

 

7.             In consideration of the loan evidenced by the Note and

secured, in part, by the Loan Documents, the receipt and sufficiency of which

Guarantor acknowledges, and in order to induce Lender to make such loan,

Guarantor agrees to indemnify and hold Lender harmless against all claims,

liabilities, losses, deficiencies and damages as well as reasonable expenses

(including attorney’s fees), interest and penalties related thereto, asserted

by any third party against, or incurred by Lender, by reason of or resulting

from any breach, inaccuracy, incompleteness or nonfulfillment of the covenants,

representations and/or warranties of Guarantor contained in this Certificate.

 

 

 

 

This Certificate shall

become effective on March 31, 1998.

 

	

   

  	

  THE

  WESTERN SIZZLIN STORES OF LITTLE ROCK, INC.

  
	

   

  	

   

  
	

   

  	

  By

  	

  /s/ Victor F. Foti

  	

   

  
	

   

  	

   

  
	

   

  	

  Its

  	

  President

  	

   

  	 

								

 

2

 

Loan No. 06720

4310 Chapman Hwy.

Knoxville, Tennessee

 

CERTIFICATE OF GUARANTOR

 

THE WESTERN SIZZLIN

CORPORATION, a Tennessee corporation (“Guarantor”), for the benefit of CAPTEC

FINANCIAL GROUP FUNDING CORPORATION, a Michigan corporation (together with its

successors, assigns and transferees, “Lender”), warrants, represents, covenants

and agrees that the following are true and correct as of the date hereof:

 

1.             Guarantor has received a copy of that certain Promissory

Note, dated March 23, 1998 in the original principal amount of Five Hundred

Thousand and 00/100 Dollars ($500,000.00) (“Note”) made by THE WESTERN SIZZLIN

STORES, INC., a Virginia corporation (“Borrower”).  Guarantor has also received a copy of the instruments securing

the Note, as referenced therein (together with the Note, the “Loan Documents”).  The Loan Documents create a lien with

respect to certain real and personal property located at 4310 Chapman Hwy.,

Knoxville, Tennessee (“Premises”).

 

2.             Guarantor has had the opportunity to review the

Certificate of Borrower, dated even herewith, made by Borrower for the benefit

of Lender, and confirms that the warranties and representations set forth

therein are true and correct as of the date hereof.

 

3.             Guarantor has full power and authority to enter into

that certain Guaranty executed by Guarantor in favor of Lender, dated as of the

date of this Certificate (“Guaranty”) and to assume and perform all of

Guarantor’s obligations under the Guaranty in accordance with all of the terms

and conditions of the Guaranty.  The

execution and delivery of the Guaranty and the performance by Guarantor of

Guarantor’s obligations under the Guaranty and under all documents contemplated

by the Guaranty require no further action or approval.  The Guaranty and all other documents

contemplated by the Guaranty are fully binding and enforceable obligations of

Guarantor.

 

4.             There are no circumstances, state of facts or other

matters which, with the passage of time or the giving of notice, or both, would

constitute an event of default under the terms of the Guaranty, or to the best

of the Guarantor’s knowledge, under the Loan Documents.

 

5.             There are no disputes, litigation or other such

proceedings pending or, to the best of the Guarantor’s knowledge, threatened

against or related to the Guarantor or the Premises, nor does Guarantor know of

any basis for any such action, except as disclosed to Lender on Exhibit A

hereto.

 

6.             Guarantor has furnished to Lender its most recent annual

audited consolidated financial statements and most recent management prepared

and certified quarterly consolidated financial statements, which statements

were prepared in accordance with generally accepted accounting principles and

are correct and complete and accurately present the financial condition of

Guarantor on the dates thereof.  Further,

there has been no material adverse change in the business, property or

condition of Guarantor since the date of the most recent financial statements.

 

7.            In consideration of the loan

evidenced by the Note and secured, in part, by the Loan Documents, the receipt

and sufficiency of which Guarantor acknowledges, and in order to induce Lender

to make such loan, Guarantor agrees to indemnify and hold Lender harmless

against all claims, liabilities, losses, deficiencies and damages as well as

reasonable expenses (including attorney’s fees), interest and penalties related

thereto, asserted by any third party against, or incurred by Lender, by reason

of or resulting from any breach, inaccuracy, incompleteness or nonfulfillment

of the covenants, representations and/or warranties of Guarantor contained in

this Certificate.

 

 

This Certificate shall

become effective on March 31, 1998.

 

	

   

  	

   

  	

  THE WESTERN SIZZLIN CORPORATION

  
	

   

  	

   

  
	

   

  	

  By

  	

  /s/ Victor F. Foti

  	

   

  
	

   

  	

   

  
	

   

  	

   

  	

  Its

  	

  President

  	

   

  	 

									

 

2

 

The WesterN SizzliN

Corporation

Litagation Proceedings against The WesterN SzzliN Corporation

Exhibit A, to Certificate of Guarantor

 

	

  Name/Caption

  	

   

  	

   

  	

   

  	

  Status

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  David K.

  Wachtal, Jr. v. WSC. et al

  First Complaint –

  Breach of

  employment contract;

  wrongful termination 

  Second Complaint -

  Includes officers and directors in the suit

  	

   

  	

  $

  	

  1,319,000

  	

   

  	

  Wachtal president until 2/95 claims wrongful

  termination: which under his contract would mean two years’ of compensation,

  approx. $400,000. The termination was well justified. The suit had included

  certain officers and directors whose cases have been dismissed through award

  of summary judgement.

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Third Complaint - loss

  of value of stock

  Idemnification for expenses

  	

   

  	

  $

  	

  8,500,000

  	

   

  	

  Summary judgement granted to defendant, case

  dismissed; plaintiff has appealed. Discovery not complete. 

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Mann v. WSC

  Breach of employment

  	

   

  	

  $

  	

  50,000 

  	

   

  	

  Mann is now deceased, with very little discovery. We

  expect that the suit will be dismissed.

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Durham Enterprises

  v. WSC Denial of

  awarding a franchise

  	

   

  	

  $

  	

  1,000,000 

  	

   

  	

  Summary judgment granted to defendant, case

  dismissed; plantiff has not appealed.

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Cruthis v. Elgin

  Hamner and WSC

  Contaminated tea

  	

   

  	

  $

  	

  4,000

  	

   

  	

  Suit primarily against franchise; WSC named as

  codefendant; discovery beginning.

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Perry v. WSC and

  David Wachtal, Jr,

  	

   

  	

   

  	

   

  	

  Discovery is beginning: D & O Insurance.

  	

   

  
	

  Business Interference

  between franchisee/seller

  and potential buyer - would not allow franchise assumption

  	

   

  	

  $

  	

  2,500,000

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  WSC v. Moody /

  Fowler

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Counter

  claim, In response to WSCs collection suit

  for unpaid royalties

  	

   

  	

  $

  	

  500,000

  	

   

  	

  Discovery beginning

  	

   

  

 

 

Loan No. 06721

900 Merchants Rd.

Knoxville,

Tennessee

 

PROMISSORY

NOTE

 

	

  $1,200,000.00

  	

  Date: March 23, 1998

  

 

PROMISE TO PAY.  For

value received, THE WESTERN SIZZLIN STORES, INC., a Virginia corporation, (“Borrower”) promises to pay to CAPTEC

FINANCIAL GROUP FUNDING CORPORATION, a Michigan corporation (together with its successors, assigns

and transferees, “Lender”), or order, One Million Two Hundred Thousand and

00/100 Dollars ($1,200,000.00), or so much of such sum as has been advanced

under this Note, as follows:

 

Interest only from and

after the date on which funds are disbursed by Lender hereunder (“Effective

Date”) through the last day of the month in which the Effective Date occurs

shall be due and payable on the first day of the next month following the

Effective Date; provided that if the Effective Date occurs after the fifteenth

(15th) day of a month, the interest which would accrue, based on the actual

number of days, through the end of such month shall be due and payable in

advance on the Effective Date. 

Installments of principal and interest in the amount of Seventeen

Thousand One Hundred Eighty-Two and 00/100 Dollars ($17,182.00) are due and

payable on the first day of each month (each a “Payment Date”), commencing May

1, 1998; until December 1, 2006 (“Due Date”), when the outstanding principal

balance, plus accrued interest, is due and payable (unless the indebtedness

evidenced by this Note is accelerated, in which case, the Due Date is the date

of acceleration).  The amortization

period for this Note, for purposes of calculating the monthly installments of

principal and interest, is one hundred four (104) months.

 

All payments under this

Note shall be made at Lender’s principal office at 24 Frank Lloyd Wright Drive,

Lobby L, 4th Floor, P.O. Box 544, Ann Arbor, Michigan 48106-0544, or at such

other address as Lender may designate in writing, or by electronic funds

withdrawal made by Lender upon written authorization therefor from Borrower,

which authorization shall not be revocable by Borrower without the consent of

Lender.  Payments due and payable on a

day on which Lender is not open for business are due on the next succeeding

business day.  Payments will be applied

first to accrued interest and then to principal.

 

INTEREST RATE.  The

outstanding principal balance of this Note will bear interest at a fixed rate

equal to nine and eighty-two hundredths percent (9.82%) per annum (the “Stated

Rate”), until the Due Date (whether by acceleration or otherwise), and

thereafter at a rate which is three percent (3%) above the Stated Rate

(“Default Rate”).

 

Interest will be computed

on the basis of a year consisting of twelve (12) months of thirty (30) days

each.  In no event, however, shall the

interest rate exceed the maximum rate allowed by law.  Notwithstanding anything to the contrary contained herein, at no

time shall the interest payable under this Note be greater than the maximum

rate permitted by applicable law (“Legal Rate”).  If any obligation under this Note shall result in Lender

receiving an amount deemed to be interest under applicable law in excess of the

Legal Rate, then the amount which would be excessive interest shall be applied

to the reduction of the principal balance of this Note and not to payment of

interest.  If such excessive interest

exceeds the unpaid principal balance of this Note, the excess shall be refunded

to Borrower.

 

 

PREPAYMENT.

Borrower shall not have any right, except as otherwise specifically provided,

to prepay the principal balance of this Note until two (2) loan years have

elapsed.  The first “loan year” shall

commence on the date of the closing of the loan evidenced by this Note, and

subsequent loan years shall commence on the anniversaries of such date.  Commencing with the third (3rd) loan year

and if no Event of Default (as hereinafter defined) then exists, Borrower shall

have the right to prepay all, but not merely a portion of, the principal

balance of this Note together with accrued interest thereon on any Payment

Date; provided, however, that Borrower shall provide no less than thirty (30)

days prior written notice to Lender of Borrower’s intention to prepay (the “Prepayment

Notice”).  Once given, the Prepayment

Notice may not be withdrawn, and the failure to prepay in accordance with the

Prepayment Notice shall constitute an Event of Default.

 

Borrower acknowledges and

agrees that Lender is making the loan evidenced by this Note in consideration

of the receipt by Lender of all interest and other benefits intended to be

conferred by this Note, and if payments of principal are made to Lender prior

to the regularly scheduled due date of such payments, for whatever reason

(whether voluntarily or involuntarily), Lender will not receive all such

interest and other benefits and may incur additional costs.  For these reasons, and to induce Lender to

make the loan, Borrower expressly waives any right to prepay this Note except as

specifically provided herein.

 

Lender shall not be

required to accept any tender of prepayment of the principal balance of this

Note at any time when the “Reinvestment Rate” (as hereinafter defined) is lower

than the Stated Rate, less eighty-five basis points, unless such tender also

includes a sum of money (the “Prepayment Premium”) equal to the present value

(computed at the Reinvestment Rate) of the difference between a stream of

monthly payments necessary to amortize the outstanding principal balance of

this Note at the Stated Rate and a stream of monthly payments necessary to

amortize the outstanding principal balance of this Note at the Reinvestment

Rate (the “Differential”).  In the event

the Differential is less than zero, no Prepayment Premium will be

required.  For purposes of this Note,

the “Reinvestment Rate” is the yield on a United States Treasury obligation of

a constant maturity rate maturing closest in time but prior to the maturity

date of this Note, as reported in Federal Reserve Statistical Release H.15

(519) (or any comparable successor publication) on the fifth (5th) business day

preceding the prepayment date.

 

In addition to the

Prepayment Premium, if any, every tender of prepayment of the principal balance

of this Note shall be accompanied by a payment equal to (x) all accrued but

unpaid interest and other charges to the date of prepayment and (y) an

administrative fee equal to one half of one percent (0.5%) of the outstanding

principal balance of this Note; provided, however, that the administrative fee

shall not be less than One Thousand and 00/100 Dollars ($1,000.00)

(collectively, the “Other Charges”).

 

If the outstanding

principal balance of this Note is accelerated by reason of an Event of Default,

such acceleration shall be deemed to be a prepayment and Borrower shall pay to

Lender, in addition to all sums due as a result of the acceleration, any

applicable Prepayment Premium and Other Charges.  In the event of an acceleration of this Note in the first or

second loan year, Borrower shall be required to pay a Prepayment Premium equal

to five percent (5%)  of

the outstanding principal balance of this Note together with any Other

Charges.  In the event that this Note is

partially prepaid from casualty insurance proceeds (as provided in the Security

Agreement, defined below), no Prepayment Premium or Other Charges shall be due

and payable with respect to such prepayment, and each monthly installment

thereafter shall be reduced to an amount which will amortize the then unpaid

principal balance of this Note at the Stated Rate over the then remaining term

of this Note.

 

LATE PAYMENT CHARGE.

In the event that any payment under this Note is not received by Lender within

fifteen (15) days of the date when due, a late charge of five percent (5%) of

the amount of such payment will be due. 

Borrower agrees that the late charge is a reasonable estimate of the

administrative costs which Lender will incur in processing the delinquency.  Lender’s acceptance of a late payment and/or

of the late payment charge will not waive any default under this Note or affect

the acceleration of this Note (if this Note has been accelerated).

 

2

 

COLLATERAL.  This

Note and the other obligations of Borrower to Lender contained in the documents

securing this Note are secured by and in accordance with the terms of that

certain Security Agreement, effective March 31,1998, executed by Borrower for

the benefit of Lender (the “Security Agreement”; together with any other documents

securing payment under this Note, the “Loan Documents”).  All property securing the Indebtedness (as

defined in the Security Agreement) is referred to as the “Collateral”.

 

DEFAULT.  Any of the following events shall, for

purposes of this Note, constitute an “Event of Default”:

 

(a)           Failure by Borrower to pay any amount

owing on or with respect to the Indebtedness when due, whether by maturity,

acceleration or otherwise, which failure continues for five (5) business days.

 

(b)           Any failure by Borrower (or any

guarantor of all or any part of the Indebtedness) to comply with any of the

non-monetary terms, provisions, warranties or covenants of this Note, the

Security Agreement or the other Loan Documents, which failure continues for

fifteen (15) days after the date of written notice to Borrower (or any

guarantor) from Lender of such default; provided, however, that if: (i) the

nature of Borrower’s (or any guarantor’s) noncompliance is such that more than

fifteen (15) days are reasonably required for its cure, (ii) Borrower (or any

guarantor) has commenced such cure within said fifteen (15) day period, (iii)

Borrower (or any guarantor) diligently prosecutes such cure to completion, (iv)

Borrower (or any guarantor) provides Lender with written notice of the noncompliance,

AND (v) Borrower (or any guarantor) furnishes reserves or a security bond, in

an amount satisfactory to Lender in its sole discretion, then Borrower (or any

guarantor) shall not be in default.

 

(c)           Institution of foreclosure

proceedings or other exercise of rights and remedies by the holder of any

mortgage, deed of trust, security interest or other lien against the Collateral

(or any portion thereof); provided, however, if there is a good faith dispute

by Borrower (or any guarantor) as to the validity or reasonableness of the

claim which is the basis for such proceedings, then no Event of Default shall

have occurred under this clause (c) if Borrower (or any guarantor) provides

Lender with written notice of the proceedings and furnishes reserves or a

security bond for the proceedings satisfactory to Lender.

 

(d)           Insolvency of Borrower (or any

guarantor) or the admission in writing of Borrower’s (or any guarantor’s)

inability to pay debts as they mature.

 

(e)           Any statement, representation or

information made or furnished by or on behalf of Borrower (or any guarantor) to

Lender in connection with or to induce Lender to provide or advance any of the

Indebtedness shall prove to be false or materially misleading when made or

furnished,

 

(f)            Institution of bankruptcy,

reorganization, insolvency or other similar proceedings by or against Borrower

(or any guarantor), unless, in the case of a petition filed against Borrower

(or any guarantor), the same is dismissed within sixty (60) days of the date of

filing.

 

(g)           The issuance or filing of any

judgment, attachment, levy, garnishment or the commencement of any related

proceedings or the commencement of any other judicial process upon or in

respect to Borrower (or any guarantor) or the Collateral in which the amount in

controversy exceeds One Hundred Thousand Dollars ($100,000) and is not covered

by the insurance of Borrower (or any guarantor), unless satisfied, or Borrower

(or any guarantor) furnishes reserves or a security bond in an amount

satisfactory to Lender in its sole discretion, released or discharged within

sixty (60) days after the date of such issuance, filing or commencement.

 

3

 

(h)           Sale or other disposition by Borrower

(or any guarantor) of any substantial portion of its assets or property.

 

(i)            Death, dissolution, merger,

consolidation, termination of existence, insolvency, business failure or

assignment for the benefit of creditors of or by Borrower (or any guarantor);

without the prior written consent of Lender, which consent shall not be

unreasonably withheld.

 

(j)            Any failure by Borrower (or any

guarantor) to pay any indebtedness (other than to Lender) in excess of One

Hundred Thousand Dollars ($100,000) (and exclusive of trade debt incurred in

the ordinary course of business) when due, or any failure in the observance or

performance of any term, covenant or condition in any document evidencing,

securing or relating to such indebtedness, which failure continues beyond any

applicable cure period.

 

(k)           Receipt by Borrower of a notice of

termination of the Management and Licensing Agreement from The WesterN SizzliN

Corporation, a Tennessee corporation (“Franchisor”), for the Great American

Steak & Buffet Company Restaurant located at 900 Merchants Rd., Knoxville,

Tennessee 37912 (“Franchised Operation”).

 

(1)           If this Note, the Security Agreement

and the other Loan Documents have not been assigned to the Trust (as defined in

the Security Agreement), the default by Borrower which continues beyond any

applicable grace or cure period under the Retained Obligations (as defined in

the Security Agreement); provided, however, if this Note, the Security

Agreement and the other Loan Documents are assigned to the Trust, this Clause

(1) shall be of no force and effect during the term of such assignment.

 

(m)          In the event that this Note, the

Security Agreement and the other Loan Documents are assigned to the Trust, the

default by Borrower which continues beyond any applicable grace or cure period

under the Trust Obligations (as defined in the Security Agreement).

 

(n)           Any default by Borrower under the

Lease between Ray Ward, an individual, as landlord, and Borrower, as tenant,

dated March 1, 1994 (“Lease”), which default is not cured within any applicable

cure period set forth in such Lease.

 

Upon an occurrence of an

Event of Default, Lender shall have the option to declare all or part of the

Indebtedness (including this Note) immediately due and payable.  If this Note is not paid at maturity

(whether by acceleration or otherwise), Lender shall have all of the rights and

remedies provided at law or equity or by agreement, including, without limit,

the right to sell or liquidate all or any part of the Collateral.  The remedies of Lender are cumulative and

not exclusive.

 

EXAMINATION

OF RECORDS. Borrower shall at all times keep full and

accurate records of its business and of the Collateral, which records shall be

open to inspection and copying by Lender at all reasonable times.

 

LIABILITY

OF SIGNATORIES. Borrower, and all guarantors and

endorsers, and any other party liable for the Indebtedness evidenced by this

Note: (i) severally waive presentment, demand, protest, notice of dishonor,

notice of non-payment and notice of acceleration of this Note; and (ii) agree

that no extension or postponement of the time for payment, or waiver, or

indulgence or forbearance granted to Borrower (without limit as to number or

period) or any modification of this Note, or any substitution, or exchange or

release of all or part of the Collateral, or addition of any party to this

Note, or release or discharge of, or suspension of any rights and remedies

against any party liable on this Note, shall reduce or affect the obligation of

any other party liable for the payment of this Note.

 

4

 

NON-WAIVER.  No delay by Lender in the exercise of any

right or remedy shall operate as a waiver. 

No single or partial exercise by Lender of any right or remedy shall

preclude any future exercise of such right or remedy or the exercise of any

other right or remedy.  No waiver or

indulgence by Lender of any default or Event of Default shall be effective

unless in writing and signed by Lender, nor shall a waiver on one occasion be

construed as a bar to any right or remedy, or waiver of any default or Event of

Default on any future occasion.

 

REIMBURSEMENT OF EXPENSES:  Borrower shall reimburse Lender for all

costs and expenses, including reasonable attorneys’ fees, incurred by Lender in

enforcing the rights of Lender under this Note.  Such costs and expenses shall include, without limitation, costs

or expenses incurred by Lender in any bankruptcy, reorganization, insolvency or

other similar proceeding.  Any reference

in this Note to attorneys’ fees shall mean fees, charges, costs and expenses of

in-house and/or outside counsel and paralegals, whether or not a suit or

proceeding is instituted, and whether incurred at the trial court level, on

appeal, in a bankruptcy, administrative or probate proceeding, in consultation

with counsel, or otherwise.

 

WAIVER OF JURY TRIAL.  BORROWER AND

LENDER ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT

THAT IT MAY BE WAIVED.  EACH PARTY,

AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF

THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES

ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE

OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS NOTE OR THE INDEBTEDNESS.

 

ASSIGNMENT.  This Note is freely assignable, in whole or

in part, by Lender without prior notice to or consent of Borrower; provided,

however, that Lender (or its assignee) shall provide written notice of such

assignment to Borrower in the event that Lender (or such assignee) desires to

designate a new person or entity as payee and/or a new place of payment for the

obligations under this Note.  Borrower

may not, in whole or in part, directly or indirectly, assign this Note or its

rights hereunder or delegate its duties hereunder without, in each instance,

the specific prior written consent of Lender, which consent may be withheld or

delayed in Lender’s sole discretion. 

Lender shall be fully discharged from all responsibility accruing

hereunder from and after the effective date of any such assignment.  Lender’s assignee shall, to the extent of

the assignment, be vested with all the powers and rights of Lender hereunder,

and to the extent of such assignment the assignee may fully enforce such rights

and powers, and all references to Lender shall mean and refer to such

assignee.  Lender shall retain all

rights and powers hereby given not so assigned, transferred and/or

delivered.  Borrower hereby waives all

defenses which Borrower may be entitled to assert against Lender’s assignee

with respect to liability accruing hereunder prior to the effective date of any

assignment of Lender’s interest herein.

 

SECURITIZATION.  Borrower understands and agrees that Lender

may, from time to time, assign its rights and powers under this Note, the

Security Agreement and any other Loan Documents, in whole or in part, in

connection with a securitization program. 

Borrower agrees to enter into an amendment to this Note, the Security

Agreement and any other Loan Documents if such amendments are required by a

nationally recognized rating agency in connection with a securitization program

sponsored by Lender and in which this Note, the Security Agreement any other

Loan Documents are to be included; provided that Borrower shall not be

obligated to enter into any amendment which adversely affects Borrower or

otherwise adversely alters any of the financial terms of this Note, the

Security Agreement and any other Loan Documents.

 

MISCELLANEOUS.  The terms and provisions of this Note shall

be governed by and construed in accordance with the laws of the State of

Tennessee.  Lender and Borrower agree

that any dispute which may arise between them with regard to this Note shall be

resolved by litigation in state or federal court. Litigation may be initiated

by Lender or its assignee, at its discretion, in the State of the principal

place of business of Lender or its assignee, the State of the principal place

of business of Borrower, or the State where the Collateral is located.  BORROWER HEREBY KNOWINGLY AND IRREVOCABLY

WAIVES ANY OBJECTIONS ON THE

 

5

 

GROUNDS OF IMPROPER JURISDICTION OR

VENUE TO AN ACTION INITIATED AS SET

FORTH

ABOVE AND AGREES THAT EFFECTIVE SERVICE OF PROCESS MAY BE MADE UPON BORROWER BY

REGISTERED MAIL RETURN RECEIPT REQUESTED. 

The terms and provisions of this Note may only be changed in

writing, executed by Borrower and Lender.

 

	

  THE WESTERN SIZZLIN STORES, INC.

  
	

   

  
	

  By:

  	

  /s/ Victor F. Foti

  	

   

  
	

   

  	

   

  
	

   

  	

  Its: 

  	

   President

  
					

 

Address:

 

P.O. Box 12167

Roanoke, VA 24023-2167

 

Tax I.D. No. 54-1787907

 

6

 

 

without warranty or recourse.

	

  Pay to the order of

  	

   

  	

   

  
	

   

  
	

  Captec Financial Group Funding Corporation

  
	

  By:

  	

  /s/ [ILLEGIBLE]

  	

   

  
	

   

  
	

  Its:

  	

   

  	

   

  
					

 

 

Loan No. 06721

900 Merchants Rd.

Knoxville, Tennessee

 

COLLATERAL ASSIGNMENT OF LEASE AND

OPTION RIGHTS

 

THIS COLLATERAL

ASSIGNMENT OF LEASE AND OPTION RIGHTS (“Assignment”) is made as of the 23  day of March, 1998,

by THE

WESTERN SIZZLIN STORES, INC., a Virginia corporation, whose address

is P. O. Box 12167, Roanoke, VA 24023-2167 (“Assignor”), in favor of CAPTEC

FINANCIAL GROUP FUNDING CORPORATION, a Michigan corporation, whose

address is 24 Frank Lloyd Wright Drive, Lobby L, 4th Floor, P.O. Box 544, Ann

Arbor, Michigan 48106-0544 (“Assignee”). 

This instrument shall become effective on March 31, 1998.

 

For good and valuable

consideration, the receipt and sufficiency of which is hereby acknowledged,

Assignor presently assigns to Assignee all of Assignor’s right, title and

interest in and to its lessee’s interest in that certain lease with Ray Ward, an

individual, (“Lessor”) dated as of March 1, 1994, a copy of which is

attached hereto as Exhibit A (the “Lease”) respecting the premises commonly

known as the Great American Steak & Buffet Company Restaurant located at

900 Merchants Rd., Knoxville, Tennessee (“Premises”).  This Assignment is for collateral purposes only, and except as

specified herein, Assignee shall have no liability or obligation of any kind

whatsoever arising from or in connection with this Assignment or the Lease

unless Assignee shall take possession of the Premises and assume the

obligations of Assignor thereunder.

 

Assignor represents and

warrants to Assignee that it has full power and authority to so assign the

Lease and its interest therein and that Assignor has not previously, and is not

obligated to, assign or transfer any of its interest in the Lease or the

Premises.

 

Throughout the term of

the Lease, Assignor covenants and agrees to exercise all options to extend or

renew the term of the Lease not less than ninety (90) days prior to the last

day upon which any such option may be exercised, but in no event less than six

(6) months prior to of the term of the Lease, unless Assignee otherwise agrees

in writing.  Assignor shall send

Assignee a copy of the notice of exercise concurrently with Assignor’s exercise

of the option.  Upon the failure of

Assignor to so elect or renew the Lease as aforesaid (and the failure of

Assignee to otherwise agree in writing), Assignee shall have the right, but not

the obligation, to exercise such extension or renewal option on behalf of

Assignor, and Assignor hereby appoints Assignee (or any of its employees) as

its attorney-in-fact for the purpose of exercising such extension or renewal

option.

 

If an “Event of Default”

occurs under the Promissory Note, dated March 23, 1998, in the original

principal amount of One Million Two Hundred Thousand and 00/100 Dollars

($1,200,000.00), by Assignor in favor of Assignee (the “Note”) or under any

documents or instruments securing the Note, Assignee shall have the right and

is hereby empowered to take possession of the Premises, expel Assignor

therefrom, and, in such event, Assignor shall have no further right, title or

interest in the Lease and shall remain liable to Assignee for all past due

rents Assignee shall be required to pay to the Lessor under the Lease to

effectuate this Assignment.

 

Assignor agrees that it

will not suffer or permit any surrender, termination, amendment or modification

of the Lease without the prior written consent of Assignee, which consent shall

not be unreasonably withheld.  At

 

 

the request of Assignee,

Assignor shall provide Assignee with rent payment or such other information

regarding the Lease as Assignee shall reasonably require.

 

This Assignment shall be

governed by the laws of the State of Tennessee.

 

This Assignment may be

executed in one or more counterparts, each of which shall constitute an

original and all of which together shall constitute one and the same

instrument.

 

IN WITNESS WHEREOF,

Assignor has executed this Assignment as of the day and year noted above.

 

	

   

  	

   

  	

   

  	

  ASSIGNOR:

  	 

	

  Witnesses:

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  /s/ [ILLEGIBLE]

  	

   

  	

  WESTERN

  SIZZLIN STORES, INC.

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  By:

  	

  /s/ Victor F. Foti

  
	

  /s/ [ILLEGIBLE]

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  Its:  

  	

  President

  	 

	

   

  	

   

  	

   

  	

   

  
	

  STATE OF Virginia

  	

  )

  	

   

  	

   

  
	

   

  	

  )

  	

   

  	

   

  
	

  COUNTY OF Roanoke

  	

  )

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
										

 

 

I, [ILLEGIBLE], a notary public in and for the State

and County aforesaid, do certify that Victor F. Foti, whose name, as President

of The WesterN SizzliN Stores, Inc., is signed to the writing above, bearing

date on the 23rd day of March has acknowledged the same before me in my county

aforesaid.

 

Given under my hand and

official seal this 23rd day of March.

 

My term of office expires

on the 28th day of February 1999.

 

	

   

  	

  /s/ [ILLEGIBLE]

  
	

   

  	

  Notary Public 

  [Notary Public’s Seal]

  

 

2

 

Loan Nos.

06717-06723

 

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT

(“Agreement”) is made as of the 23 day of March, 1998, by THE WESTERN SIZZLIN CORPORATION, a

Tennessee corporation, of P.O. Box 12167, Roanoke, Virginia 24023-2167

(“Guarantor”) in favor of CAPTEC FINANCIAL

GROUP FUNDING CORPORATION, a

Michigan corporation, of 24 Frank Lloyd Wright Drive, Lobby L, 4th Floor, P.O.

Box 544, Ann Arbor, Michigan, 48106 (together with its successors, assigns and

transferees, “Lender”).  This instrument

shall become effective on March 31, 1998.

 

WITNESSETH:

 

This Agreement is made to

secure the payment and performance obligations of Guarantor under those certain

Guaranties, effective of even date herewith, made by Guarantor in favor of

Lender (“Guaranties”).  The Guaranties

secure the payment and performance obligations of THE WESTERN SIZZLIN STORES,

INC., a Virginia corporation and a wholly owned subsidiary of Guarantor

(“Borrower”), under those certain loans in the original aggregate principal

amount of Six Million Two Hundred Thousand and 00/100 Dollars ($6,200,000.00)

evidenced by those certain Promissory Notes, each of even dated herewith

(“Notes”), made by Borrower in favor of Lender, which Notes are secured by the

instruments referenced therein (together with the Notes, “Loan Documents”).

 

1.                                      DEFINITIONS

For purposes of this Agreement, the following terms shall be defined as

follows:

 

(a)           Franchise Agreement(s) - shall mean those

agreement(s) by which Guarantor grants an entity(ies) or individual(s), other

than a Subsidiary, the right to operate a WesterN SizzliN Steak House or

WesterN SizzliN Wood Grill Buffet restaurant or to use the WesterN SizzliN or

WesterN SizzliN Wood Grill trademarks, trade names or service marks, which

agreements are specified on Schedule 1 attached hereto, as updated and amended

from time to time.

 

(b)           Subsidiary - with respect to Guarantor

shall mean any corporation or other entity in which Guarantor or one of its

Subsidiaries, holds securities or other interests having the power to election

a majority of that corporation’s or entity’s board of directors or similar

governing body, or otherwise having the power to direct the business and

policies of that corporation or entity.

 

2.             COLLATERAL.

 

Grant of Security Interest.  Guarantor grants Lender a security interest

in all of Guarantor’s franchise fee and franchise royalty fee accounts

receivable now outstanding or hereafter arising owing to Guarantor and to be

paid to Guarantor pursuant to the Franchise Agreement(s) including without

limitation, franchise fees, management fees or any other similar fees for the

use of trademarks, trade names, service marks, advertising services, know-how, management

services, materials, equipment and/or labor (collectively, “Franchise Accounts

Receivable”), all general intangibles (as defined in the Uniform Commercial

Code relating to the documents or instruments evidencing the obligations to

Guarantor for payment of the Franchise Accounts Receivable, and all other

instruments and documents evidencing the Franchise Agreements now owned or

hereafter acquired (collectively, the “Collateral”).  The Collateral shall also include any documents of title

evidencing the aforementioned Collateral. 

PROVIDED, HOWEVER, that Lender assumes no responsibility of performance

of any of Guarantor’s obligations with reference to any of said Collateral.

 

 

3.             WARRANTIES

AND REPRESENTATIONS.  Guarantor warrants and covenants to Lender as

follows:

 

(a)           Authority. This Agreement is the

valid and binding obligation of Guarantor, enforceable in accordance with its

terms.  If Guarantor is a corporation,

partnership, limited liability company or other organization, Guarantor is organized

and validly existing in good standing under the laws of its state of

establishment, and the execution, delivery and performance of this Agreement

have been duly authorized by all necessary action of Guarantor’s Board of

Directors, partners, or governing body and will not violate Guarantor’s

governing instruments or other agreements.

 

(b)           Name; Address; Location of Collateral.

Guarantor’s name and principal place of business and the location(s) of the

Collateral are accurately set forth on the signature page and on Schedule 1 of

this Agreement.

 

(c)           Nature of Collateral. All of the

Collateral is held by Guarantor solely for business purposes, and none of the

Collateral constitutes consumer goods. 

No part of the Collateral consists of equipment used in farming

operations or farm products or accounts or general intangibles arising from or

relating to the sale of farm products by a farmer.  The Collateral was acquired in the ordinary course of business of

Guarantor.  There are no setoffs,

counterclaims, or defenses against the Collateral, except as provided under the

terms of the Franchise Agreements.

 

(d)           Title to Collateral. Guarantor

has good and marketable title to the Collateral, free and clear of any liens or

encumbrances whatsoever, other than Permitted Liens, as hereinafter

defined.  Guarantor will keep the

Collateral free of all other liens, encumbrances and security interests.  Guarantor will defend the Collateral against

all claims and demands of all persons at any time claiming any interest in the

Collateral.  Guarantor warrants that the

Franchise Accounts Receivable are due and owing under the related Franchise

Agreements.

 

(e)           Perfection and Priority of Security Interest.

The execution and delivery of this Agreement creates a valid security interest

in the Collateral, and upon the filing of a UCC-1 financing statement with the

Secretary of State of Tennessee and the Virginia State Corporation Commission,

Lender will have a second priority perfected security interest in the

Collateral, subject only to the security interest of the Permitted Liens.

 

“Permitted Liens” shall

mean any mortgage, security interest or other lien or encumbrance that Central

Fidelity National Bank (“CFNB”) may now have or subsequently obtain as security

for the payment of that certain $500,000.00 Revolving Line of Credit granted to

Guarantor by CFNB (the “Revolving Line of Credit”) and as evidenced by that

certain Commercial Note and that certain Security Agreement, both dated May 26,

1995, between Guarantor and CFNB. 

Lender agrees that this Agreement and any mortgage, security interest or

other lien (including possessory liens) or encumbrance that it may presently

have or subsequently create or acquire as security for the Guaranties is and

shall remain subject and subordinate in right of priority to any mortgage,

security interest or other lien or encumbrance that CFNB may now have or

subsequently obtain as security for the payment of the Revolving Line of

Credit.  Guarantor agrees to execute any

instrument or financing statements necessary to evidence the subordination

herein set forth.

 

(f)            Financing Statements. Except as

disclosed to and accepted by Lender in writing and subject to any Permitted

Liens, no financing statement covering any part of the Collateral is on file in

any public office.  Borrower will

execute financing statement(s) in form acceptable to Lender and will pay the

cost of filing financing statement(s) in all public offices wherever filing is

deemed desirable by Lender.  A carbon,

photographic or other reproduction of this Agreement shall be sufficient as a

financing statement under the UCC and may be filed by Lender in any filing

office.  This Agreement shall be

terminated only by the filing of a termination statement(s) in accordance with

the applicable provisions of the UCC.

 

(g)           Payment of Taxes. Guarantor

shall pay when due and before any interest, collection fees or penalties

accrue, all taxes, expenses, assessments, liens or other charges which may now

or hereafter be levied or assessed against the Collateral, and shall furnish

proof of payment of the same upon request by Lender or, in the

 

2

 

alternative, post a bond

satisfactory to Lender under the provisions of the applicable law with respect

to any lien or claim of lien filed for record within ten (10) days of the date

of filing of said lien or claim.

 

4.             PROHIBITION ON TRANSFER OR

MODIFICATION.  Guarantor

shall not transfer, sell, assign or lease or modify the Collateral or any

interest therein, any part thereof, nor permit any other security interest to

be created therein without the prior written consent of Lender.

 

5.             PROHIBITION ON CHANGE OF NAME,

ORGANIZATION

OR LOCATION.  Guarantor shall

not conduct Guarantor’s business under any name other than as appears in this

Agreement nor change or reorganize the type of Guarantor’s business entity, nor

change the location of any of the Collateral without the prior written consent

of Lender, which consent shall not be unreasonably withheld.  Guarantor shall maintain its present

business form and right to do business.

 

6.             RIGHT OF SETOFF.  Guarantor hereby grants to Lender

the right, exercisable at any time and from time to time, if Guarantor is then

in default, to set off or apply against the Guaranties any account or deposit

with Lender of which Guarantor is the or one of the owners or against any other

amounts which may be in the possession of Lender and to the credit of

Guarantor.

 

7.             EXAMINATION OF RECORDS AND

COLLATERAL.  Guarantor shall

at all times keep full and accurate records of its business, including

Franchise Accounts Receivable at Guarantor’s place of business, which records

shall be open to inspection by Lender during Guarantor’s regular business hours

(whether the records are printed or in magnetic, electronic, or machine

readable or other form).  Lender is

hereby granted the full right to enter upon any property owned by or in the

possession of Guarantor to examine and inspect the Collateral during Guarantor’s

regular business hours.  Guarantor

shall, upon reasonable request by Lender, deliver any or all records to a place

of Lender’s choosing.

 

8.             REIMBURSEMENT OF EXPENSES.  Guarantor shall reimburse Lender

for all expenses, including reasonable attorneys’ fees, incurred by Lender in

enforcing the rights of Lender hereunder, including the storage and liquidation

of Collateral, and any such expenses shall be included in the amount covered by

the Guaranties and shall be immediately due and payable.  Such expenses shall include, without

limitation, any costs or expenses incurred by Lender in any bankruptcy,

reorganization, insolvency or other similar proceeding.

 

9.             RIGHTS AND OBLIGATIONS OF LENDER.  In the event Guarantor fails to

pay taxes or other assessments (and does not post a bond, supply additional

reserves or provide additional security satisfactory to Lender) or fails to

perform any other of its obligations hereunder, Lender may (but shall not be

required to) without notice to or consent from Guarantor, pay or perform such

obligations for the account of Guarantor and the same shall be added to the

amount of the indebtedness covered by the Guaranties and secured by this

Agreement and shall be immediately due and payable.  Lender shall not be liable for any loss to the Collateral nor

shall such loss reduce the balance due. 

Guarantor hereby expressly waives any and all claims or right to partial

or complete discharge resulting from Lender’s release of or failure to seek

payment from any other party or failure to realize on any instrument or collateral

or to setoff any moneys, or to perfect its lien or realize on any collateral

security, notwithstanding Section 3605 of the Uniform Commercial Code.  This shall include, without limitation,

extension of time or forbearance of payment or performance, bankruptcy, change

in terms of notes, guaranties or other loan document, or waiver by Lender of

any required performance of any condition, or the surrender, release, exchange,

dissipation, loss or alteration of any collateral, in whole or in part.

 

10.          INDEMNIFICATION. 

Guarantor shall indemnify and save Lender harmless from all

claims, obligations, costs, expenses, including attorneys’ fees, and causes of

action or other rights asserted against Lender relating to the Collateral.  Any such claim, obligation, cost or expense

shall be an indebtedness of Guarantor covered by the Guaranties, secured by

this Agreement and payable upon demand.

 

3

 

11.          DEFAULT AND REMEDIES.

 

(a)           Events of Default. Any of the

following events shall, for purposes of this Agreement, constitute an “Event of

Default”:

 

(i) Failure by Guarantor

to pay any amount owing on or with respect to the indebtedness secured by the

Guaranties when due, whether by maturity, acceleration or otherwise, which

failure continues for five (5) business days.

 

(ii) Any failure

by Borrower or Guarantor to comply with, or breach by Borrower or Guarantor of,

any of the non-monetary terms, provisions, warranties or covenants of the

Note(s), this Agreement or the other Loan Documents, which failure continues

for fifteen (15) days after the date of written notice to Borrower or Guarantor

from Lender of such default; provided, however, that if: (i) the nature of

Borrower’s (or Guarantor’s) noncompliance is such that more than fifteen (15)

days are reasonably required for its cure, (ii) Borrower (or Guarantor) has

commenced such cure within said fifteen (15) day period, (iii) Borrower (or

Guarantor) diligently prosecutes such cure to completion, (iv) Borrower (or Guarantor)

provides Lender with written notice of the noncompliance, AND (v) Borrower (or

Guarantor) furnishes reserves or a security bond, in an amount satisfactory to

Lender in its sole discretion, then Borrower (or Guarantor) shall not be in

default.

 

(iii) Institution of

remedial proceedings or other exercise of rights and remedies by the holder of

any security interest or other lien against the Collateral or any portion

thereof, except for proceedings with respect to the Permitted Liens; provided,

however, if there is a good faith dispute by Borrower or Guarantor as to the

validity or reasonableness of the claim which is the basis for such

proceedings, then no Event of Default shall have occurred under this Section if

Borrower or Guarantor provides Lender with written notice of the proceedings

and furnishes reserves or a security bond for the proceedings satisfactory to

Lender.

 

(iv) The insolvency of

Borrower or Guarantor or the admission in writing of Borrower’s or Guarantor’s

inability to pay debts as they mature.

 

(v) Any statement,

representation or information made or furnished by or on behalf of Borrower or

Guarantor to Lender in connection with or to induce Lender to provide any of

the indebtedness secured by the Guaranties shall prove to be false or materially

misleading when made or furnished.

 

(vi) Institution of

bankruptcy, reorganization, insolvency or other similar proceedings by or

against Borrower or Guarantor, unless, in the case of a petition filed against

Borrower or Guarantor, the same is dismissed within sixty (60) days of the date

of filing.

 

(vii) The issuance or

filing of any judgment, attachment, levy, garnishment or the commencement of

any related proceedings or the commencement of any other judicial process upon

or in respect to Borrower or Guarantor or the Collateral, except with respect

to the Permitted Liens, in which the amount in controversy exceeds One Hundred

Thousand Dollars ($100,000) and is not covered by the insurance of Borrower or

Guarantor, unless satisfied, or Borrower (or any guarantor) furnishes reserves

or a security bond in an amount satisfactory to Lender in its sole discretion,

released or discharged within sixty (60) days after the date of such issuance,

filing or commencement.

 

(viii) Sale or other

disposition by Borrower or Guarantor of any substantial portion of assets or

property.

 

(ix) Dissolution, merger,

consolidation, termination of existence, insolvency, business failure or

assignment for the benefit of creditors of or by Borrower or Guarantor; without

the prior written consent of Lender, which consent shall not be unreasonably

withheld.

 

(x) Any failure by

Borrower or Guarantor to pay any indebtedness (other than to Lender) in excess

of One Hundred Thousand Dollars ($100,000) (and exclusive of trade debt incurred

in the ordinary course of business) when due, or any failure in the observance

or performance of any term, covenant or condition in any

 

4

 

document evidencing, securing or relating to such

indebtedness, which failure continues beyond any applicable cure period.

 

(b)           Remedies. Upon the occurrence of

an Event of Default as defined above, unless the same is waived by Lender in

writing, Lender shall be entitled to the following remedies, all of which shall

be cumulative and not alternative:

 

(i)            Collection

of Franchise Accounts Receivable. 

Guarantor shall continue to collect the Franchise Accounts Receivable

until Lender notifies Guarantor and the obligors on such Franchise Accounts

Receivable, after which time Guarantor shall hold any proceeds collected in

trust for Lender and shall not commingle the same and shall turn such proceeds

over to the Lender immediately upon receipt thereof.

 

(ii)           Guarantor shall, upon request from

time to time and at any time by Lender, provide Lender with an updated list of

Guarantor’s Franchise Accounts Receivable, stating the current name and address

of the obligor, the balance due, and any comments pertaining to the status of

the collection and defenses or counterclaims by such obligors to the extent

that such information is not reflected in the financial statements of Guarantor

to be delivered to Lender pursuant to the terms of the Guaranties.

 

(iii)          Lender may, or upon Lender’s request,

Guarantor shall notify obligors under such accounts of the existence of this

Agreement and instruct such obligors to make future payments directly to Lender

at any time it chooses to do so only after default by Guarantor.

 

(iv)          Guarantor hereby irrevocably

authorizes Lender in Guarantor’s name: (a) To demand, receive, sue for and give

receipts as acquittances for any moneys due or to become due on any Franchise

Accounts Receivable (a) with respect to any Collateral, to assent to any or all

extensions or postponements of the time of payment thereof or any other

indulgence in connection therewith, to the substitution, exchange or release of

Collateral, to the addition or release of any party primarily or secondarily

liable, to the acceptance of partial payments thereon and the settlement, compromise

or adjustment thereof, all in such manner and at such time or times as Lender

shall deem advisable; (b) to make all necessary transfers of all or any part of

the Collateral in connection with any sale, lease, or other disposition made

pursuant hereto: to execute and deliver for value all necessary or appropriate

bills of sale, assignment and other instruments in connection with any such

sale, lease, or other disposition, Guarantor hereby ratifies and confirms all

that its said attorney (or any substitute) shall lawfully do hereunder and

pursuant hereto; nevertheless, if so requested by Lender or a purchaser or

lessee, Guarantor shall ratify and confirm any sale, lease or other disposition

by executing and delivering to Lender or such purchaser or lessee, all proper

bills of sale, assignments, releases, leases, and other instruments as may be

designated in any such request. Guarantor understands that Lender has no duty

for collection or preservation, beyond reasonable care of Guarantor’s Franchise

Accounts Receivable.

 

(v)           Obtain Possession of Collateral.  Guarantor agrees, upon request of Lender, to

assemble the Collateral and make it available to the Lender at any place

reasonably convenient for Guarantor and Lender.  Guarantor grants Lender permission to enter upon any premises

owned or occupied by Guarantor for the purpose of taking possession of the

Collateral or any part of it, including any paper covering such Collateral or

such part thereof as remains in Guarantor’s possession, and any and all proceeds

of such Collateral as has been sold, wherever and in whatever form.

 

(vi)          Lender shall have the right to take

possession of the Collateral, with or without demand, and with or without

process of law.  Lender shall have the

right to sell and dispose of the Collateral and to distribute the proceeds

according to law.  If there is any

statutory requirement for notice, that requirement shall be met if Lender shall

send notice to Borrower at least five (5) days prior to the date of sale,

disposition or other event giving rise to the required notice.  Borrower shall be liable for any deficiency

remaining after disposition of the Collateral.

 

5

 

(vii)         Additional Rights and Remedies.  Lender shall also have, and may exercise in

addition to the above any one or more of the rights and remedies under the

Uniform Commercial Code or any other law.

 

(c)           Remedies Generally.

 

(i)            All remedies provided for in Section

10(b) shall be available to the extent not prohibited by law.  Each remedy shall be cumulative and

additional to any other remedy of Lender at law, in equity or by statute.  No delay or omission to exercise any right

or power accruing upon any default or Event of Default shall impair any such

right or power or shall be construed to be a waiver of, or acquiescence in, any

such default or Event of Default.

 

(ii)           Lender may waive any Event of Default

and may rescind any declaration of maturity of payments on the Indebtedness. In

case of such waiver or recision Guarantor and Lender shall be restored to their

respective former positions and rights under this Agreement.  Any waiver by Lender of any default or Event

of Default shall be in writing and shall be limited to the particular default

waived and shall not be deemed to waive any other default.

 

(d)           Application of Proceeds.  Any proceeds received by Lender from the

exercise of remedies pursuant to Section 10(b) of this Agreement shall be

applied as follows:

 

(i)            First, to pay all costs and expenses

incidental to the leasing, foreclosure, sale or other disposition of the

Collateral.  These costs and expenses

shall include, without limit, any costs and expenses incurred by Lender

(including, without limit, attorneys’ fees and disbursements), and any taxes

and assessments or other liens and encumbrances prior to the lien of this

Agreement.

 

(ii)           Second, to all sums expended or

incurred by Lender, directly or indirectly in carrying out any term, covenant

or agreement under this Agreement or any related document, together with

interest as provided in this Agreement.

 

(iii)          Third, to the payment of the

Indebtedness.  If the proceeds are

insufficient to fully pay the Indebtedness, then application shall be made

first to late charges and interest accrued and unpaid, then to any applicable

prepayment premiums, and then to unpaid fees and other charges, then to the

outstanding principal balance.

 

(iv)          Fourth, any surplus remaining shall be

paid to Guarantor or to whomsoever may be lawfully entitled.

 

(e)           Further Actions.  Promptly upon the request of Lender,

Guarantor shall execute, acknowledge and deliver any and all further documents,

security agreements, financing statements and assurances, and do or cause to be

done all further acts as Lender may require to confirm and protect the lien of

this Agreement or otherwise to accomplish the purposes of this Agreement.

 

(f)            Attorneys Fees.  Any reference in this Agreement to attorneys’

fees shall refer to reasonable fees, charges, costs and expenses of in-house

and outside attorneys and paralegals, whether or not a suit or proceeding is

instituted, and whether incurred at the trial court level, on appeal, in a

bankruptcy, administrative or probate proceeding, in consultation with counsel,

or otherwise.  All costs, expenses and

fees of any nature for which Guarantor is obligated to reimburse or indemnify

Lender are part of the indebtedness covered by the Guaranties and secured by

this Agreement and are payable upon demand, unless expressly provided

otherwise, with interest until repaid at the highest rate charged on any of the

Indebtedness (but not to exceed the maximum rate permitted by law).

 

6

 

12.                                 MISCELLANEOUS.

 

(a)           Notices. Any notices, demands or

other communications required or contemplated by this Agreement shall be deemed

duly given if delivered or mailed, registered mail, return receipt requested,

postage fully prepaid, to the addresses of the parties as stated in this

Agreement, or as subsequently directed by the appropriate party in writing, and

shall be deemed effective when mailed.

 

(b)           Non-Waiver. Failure of Lender to

exercise any right hereunder, including the right to declare the balance of the

Indebtedness immediately due, shall not constitute a waiver nor preclude the

Lender from exercising such right at any time. 

Neither extension of time for payment or any other modification of the

terms of the Indebtedness or of this Agreement shall operate to release the

liability of Guarantor or permit any delay as to future payments.  Acceptance by Lender of a partial payment

shall not alter the obligation of Guarantor to make the full payment, nor shall

acceptance of a late payment constitute Lender’s waiver of prompt payment of

such payment or any subsequent payment. 

No waiver shall be valid unless in writing and signed by an officer of

Lender.

 

(c)           Joint and Several Obligations.

In the event that more than one person or entity executes this Agreement, the

obligations of each shall be joint and several.

 

(d)           Governing Law.  This Agreement shall be construed according

to the laws of the State of Tennessee.

 

(e)           Successors and Assigns.  This Agreement shall be binding upon the

successors and assigns of Guarantor including, without limit, any debtor in

possession or trustee in bankruptcy for Guarantor, and the rights and

privileges of Lender under this Agreement shall inure to the benefit of its

successors and assigns.  This shall not

be deemed a consent by Lender to a conveyance by Guarantor of all or any part

of the Collateral or of any ownership interest in Guarantor.

 

(f)            Notices. Notice from one party

to another relating to this Agreement, if required, shall be deemed effective

if made in writing (including telecommunications) and delivered to the

recipient’s address, telex number or telecopier number set forth by any of the

following means:  (1) hand delivery, (2)

registered or certified mail, postage prepaid, (3) express mail or other

overnight courier service or (4) telecopy, telex or other wire transmission

with request for assurance of receipt in a manner typical with respect to

communications of that type.  Notice

made in accordance with these provisions shall be deemed delivered on receipt

if delivered by hand or wire transmission, on the third business day after

mailing if mailed by registered or certified mail, or on the next business day

after mailing or deposit with the postal service or an overnight courier

service if delivered by express mail or overnight courier.  Guarantor’s telecopier number is (540)

345-0831, and Lender’s telecopier number is (313) 994-1376.

 

(g)           Entire Agreement; Amendments.  This Agreement and any agreement to which it

refers state all rights and obligations of the parties and supersede all other

agreements (oral or written) with respect to the security interests granted by

this Agreement.  Any amendment of this

Agreement shall be in writing and shall require the signature of Guarantor and

Lender.

 

(h)           Partial Invalidity. The

invalidity or unenforceability of any provision of this Agreement shall not

affect the validity or enforceability of the remaining provisions of this

Agreement.

 

(i)            Inspections. Any inspection,

audit, appraisal or examination by Lender or its agents of the Collateral or of

information or documents pertaining to the Collateral is for the sole purpose

of protecting Lender’s interests under this Agreement and is not for the

benefit or protection of Guarantor or any third party.

 

(j)            Joint and Several Liability. In

the event that more than one person or entity executes this Agreement, the obligations

of each person or entity shall be joint and several.

 

7

 

(k)           Automatic Reinstatement.  Notwithstanding any prior revocation,

termination, surrender or discharge of this Agreement, the effectiveness of

this Agreement shall automatically continue or be reinstated, as the case may

be, in the event that:

 

(i)            Any payment received or credit given

by Lender in respect of the Indebtedness is determined to be a preference,

impermissible setoff, fraudulent conveyance, diversion of trust funds, or

otherwise required to be returned to Guarantor or any third party under any

applicable state or federal law, including, without limit, laws pertaining to

bankruptcy or insolvency, in which case this Agreement shall be enforceable as

if any such payment or credit had not been received or given, whether or not

Lender relied upon this payment or credit or changed its position as a

consequence of it.

 

(ii)           In the event of continuation or

reinstatement of this Agreement, Guarantor agrees upon demand by Lender to

execute and deliver to Lender those documents which Lender determines are

appropriate to further evidence (in the public records or otherwise) this

continuation or reinstatement, although the failure of Guarantor to do so shall

not affect in any way the reinstatement or continuation.  If Guarantor does not execute and deliver to

Lender such documents upon demand, Lender and each officer of Lender is

irrevocably appointed (which appointment is coupled with an interest) the true

and lawful attorney of Guarantor (with full power of substitution) to execute

and deliver such documents in the name and on behalf of Guarantor.

 

(1)           WAIVER

OF JURY TRIAL.  GUARANTOR AND LENDER

ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT

IT MAY BE WAIVED.  EACH PARTY, AFTER

CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR

CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY

RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR

ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT OR THE INDEBTEDNESS.

 

(m)          Assignment.  This Agreement is freely assignable, in whole or in part, by

Lender without prior notice to or consent of Guarantor; provided, however, that

Lender (or its assignee) shall provide written notice of such assignment to

Guarantor in the event that Lender (or such assignee) desires to designate a

new person or entity as payee and/or a new place of payment for the obligations

under the Notes.  Guarantor may not, in

whole or in part, directly or indirectly, assign this Agreement or its rights

hereunder or delegate its duties hereunder without, in each instance, the

specific prior written consent of Lender, which consent may be withheld or

delayed in Lender’s sole discretion. 

Lender shall be fully discharged from all responsibility accruing

hereunder from and after the effective date of any such assignment.  Lender’s assignee shall, to the extent of

the assignment, be vested with all the powers and rights of Lender hereunder

(including those granted under Section 10 hereof or otherwise with respect to

the Collateral), and to the extent of such assignment the assignee may fully

enforce such rights and powers, and all references to Lender shall mean and

refer to such assignee.  Lender shall

retain all rights and powers hereby given not so assigned, transferred and/or

delivered.  Guarantor hereby waives all

defenses which Guarantor may be entitled to assert against Lender’s assignee with

respect to liability accruing hereunder prior to the effective date of any

assignment of Lender’s interest herein.

 

(n)           Securitization.  Guarantor understands and agrees that Lender

may, from time to time, assign its rights and power under the Note(s), this

Agreement and any other Loan Documents, in whole or in part, in connection with

a securitization program.  Guarantor

agrees to enter into an amendment to the Note(s), this Agreement and any other

Loan Documents if such amendments are required by a nationally recognized

rating agency in connection with a securitization program sponsored by Lender

and in which the Note(s), this Agreement and any other Loan Documents are to be

included; provided that Guarantor shall not be obligated to enter into any amendment

which adversely affects Guarantor or otherwise adversely alters any of the

financial terms of the Notes, this Agreement and any other Loan Documents.

 

13.           ENTIRE

AGREEMENT.  This Agreement

contains all of the understandings, promises and undertakings of the parties

hereto. All prior understandings and agreements or statements, oral or written,

are rescinded except as stated herein.

 

8

 

Schedule 1

To

Security Agreement

between The WesterN SizzliN Corporation

and Captec Financial Group Funding Corporation

 

	

  Title of

  Agreement

  	

   

  	

  Date

  	

   

  	

  Name of

  Franchisee

  	

   

  	

  Location

  of Franchise

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  

 

9

 

The WesterN SizzliN Corporation

Schedule 1, To Security Agreement between The Western

SizzliN Corporation and

Captec Financial Group Funding Corporation

 

 

	

  Type of Agreement

  	

   

  	

  Date

  	

   

  	

  Name of

  Franchisee

  	

   

  	

  Store

  Number

  	

   

  	

  City

  	

   

  	

  State

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  1/30/78

  	

   

  	

  Vezertzis, Pat; Hamilton, Paul

  	

   

  	

  613

  	

   

  	

  Ft. Payne

  	

   

  	

  Alabama

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  2/9/79

  	

   

  	

  Hill, Jimmy & Harvey

  	

   

  	

  709

  	

   

  	

  Opelika

  	

   

  	

  Alabama

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  12/1/83

  	

   

  	

  Stanoll, Ron

  	

   

  	

  1060

  	

   

  	

  Anniston

  	

   

  	

  Alabama

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  10/9/89

  	

   

  	

  Vezertzis, Pat

  	

   

  	

  1323

  	

   

  	

  Rainbow City

  	

   

  	

  Alabama

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  1/12/98

  	

   

  	

  Shockley, Leonard & Martha; Penton

  	

   

  	

  1325

  	

   

  	

  Alexander City

  	

   

  	

  Alabama

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  5/15/88

  	

   

  	

  Stanoll, Ron

  	

   

  	

  1392

  	

   

  	

  Oxford

  	

   

  	

  Alabama

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  5/8/89

  	

   

  	

  Schwichtenberg, Richard; Vezertzis, I

  	

   

  	

  2007

  	

   

  	

  Scottsboro

  	

   

  	

  Alabama

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  9/11/95

  	

   

  	

  Vezertzis, Pat; Schwichtenberg, Rich

  	

   

  	

  5021

  	

   

  	

  Arab

  	

   

  	

  Alabama

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/23/97

  	

   

  	

  Patty, Blyde & Margaret

  	

   

  	

  8002

  	

   

  	

  Prescott

  	

   

  	

  Arizona

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  4/22/78

  	

   

  	

  Barzda, Mary

  	

   

  	

  330

  	

   

  	

  Pine Bluff

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  9/18/75

  	

   

  	

  Gardner, Jerry & Vonda

  	

   

  	

  449

  	

   

  	

  Fort Smith

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/28/77

  	

   

  	

  Christison, W; Hamilton, Dwayne

  	

   

  	

  600

  	

   

  	

  Hot Springs

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  10/26/77

  	

   

  	

  Brashear, John

  	

   

  	

  568

  	

   

  	

  Conway

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/21/90

  	

   

  	

  Dudley, Gerald

  	

   

  	

  754

  	

   

  	

  Jonesboro

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  11/24/79

  	

   

  	

  Gardner, Jerry & Vonda

  	

   

  	

  782

  	

   

  	

  Fort Smith

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  7/10/80

  	

   

  	

  Barzda, Mary

  	

   

  	

  819

  	

   

  	

  Pine Bluff

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  5/18/83

  	

   

  	

  Gardner, Jerry & Vonda

  	

   

  	

  1000

  	

   

  	

  Van Buren

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise Agreemt

  	

   

  	

  5/9/84

  	

   

  	

  Chambless, Gary; Campbell, P; Vess

  	

   

  	

  1066

  	

   

  	

  Hope

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/20/84

  	

   

  	

  Walker, Barbara

  	

   

  	

  1114

  	

   

  	

  Brinkley

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  1/28/85

  	

   

  	

  Bailey, Michael; Howard, Eddie 

  	

   

  	

  1167

  	

   

  	

  Malvern

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  11/5/85

  	

   

  	

  Edwards, Benny

  	

   

  	

  1231

  	

   

  	

  Clinton

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  1/21/80

  	

   

  	

  Sexton, Jack

  	

   

  	

  1240

  	

   

  	

  Clarksville

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  9/1/89

  	

   

  	

  Bailey, Michael; Howard, Eddie

  	

   

  	

  1260

  	

   

  	

  Stuttgart

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/23/86

  	

   

  	

  Hamner, III, Elgin

  	

   

  	

  1281

  	

   

  	

  Benton

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  1/23/87

  	

   

  	

  Daugherty, Jack

  	

   

  	

  1317

  	

   

  	

  Magnolia

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  8/25/87

  	

   

  	

  Grissom, Jimmy

  	

   

  	

  1354

  	

   

  	

  Crossett

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  3/1/88

  	

   

  	

  Hamner, III, Elgin

  	

   

  	

  1379

  	

   

  	

  Searcy

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/22/87

  	

   

  	

  Bazyk, Mark & Laura

  	

   

  	

  1418

  	

   

  	

  Russellville

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  5/14/89

  	

   

  	

  Hamner, III, Elgin

  	

   

  	

  2000

  	

   

  	

  Arkadelphia

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  12/27/89

  	

   

  	

  Wallace, M A & Vaudine

  	

   

  	

  2010

  	

   

  	

  Wynne

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  3/21/94

  	

   

  	

  Clayton, Jack; Sisler, Allan

  	

   

  	

  5004

  	

   

  	

  Batesville

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/15/94

  	

   

  	

  Bazyk, Mark & Laura

  	

   

  	

  5005

  	

   

  	

  Springdale

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  10/1/94

  	

   

  	

  Hicks, Don & Rick

  	

   

  	

  5006

  	

   

  	

  Nashville

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  1/1/92

  	

   

  	

  Scott, Frank

  	

   

  	

  816

  	

   

  	

  Pueblo

  	

   

  	

  Colorado

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  3/3/86

  	

   

  	

  Cash, Robert; Boswell, Bob; Henley,

  	

   

  	

  1256

  	

   

  	

  Evans

  	

   

  	

  Colorado

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  3/5/87

  	

   

  	

  Welch, William

  	

   

  	

  1326

  	

   

  	

  Colorado Springs

  	

   

  	

  Colorado

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  1/16/87

  	

   

  	

  Welch, William; Sims, Loyd

  	

   

  	

  1329

  	

   

  	

  Grand Junction

  	

   

  	

  Colorado

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  8/15/94

  	

   

  	

  Lu, Thomas & Alice

  	

   

  	

  5001

  	

   

  	

  Durango

  	

   

  	

  Colorado

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/21/77

  	

   

  	

  Williams, Rick; Colborn, Ron

  	

   

  	

  493

  	

   

  	

  Mt. Vernon

  	

   

  	

  Illinois

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  5/24/79

  	

   

  	

  Colborn, Ron; James, Rick

  	

   

  	

  744

  	

   

  	

  Marion

  	

   

  	

  Illinois

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  9/21/93

  	

   

  	

  McMillin, Bradley

  	

   

  	

  1131

  	

   

  	

  O'Fallon

  	

   

  	

  Illinois

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/25/87

  	

   

  	

  Jones, Larry; Pamela; Welch William

  	

   

  	

  1339

  	

   

  	

  Bloomington

  	

   

  	

  Indiana

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  8/23/97

  	

   

  	

  Khoury, George

  	

   

  	

  778

  	

   

  	

  Wichita

  	

   

  	

  Kansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  4/28/82

  	

   

  	

  Cash, Robert; Reaves, Jimmy

  	

   

  	

  901

  	

   

  	

  Harrison

  	

   

  	

  Kansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  8/29/83

  	

   

  	

  Cash, Robert; McElroy, Lenord

  	

   

  	

  1023

  	

   

  	

  Salina

  	

   

  	

  Kansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  10/15/97

  	

   

  	

  Davis, Steven; Debbie Jo

  	

   

  	

  1087

  	

   

  	

  Emporia

  	

   

  	

  Kansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/8/84

  	

   

  	

  Albritton, Dale

  	

   

  	

  1102

  	

   

  	

  Pittsburg

  	

   

  	

  Kansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  7/23/84

  	

   

  	

  Cirks, Todd; Dick, Curtis

  	

   

  	

  1110

  	

   

  	

  Winfield

  	

   

  	

  Kansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  4/18/96

  	

   

  	

  Khoury, George & Therese

  	

   

  	

  1274

  	

   

  	

  Augusta

  	

   

  	

  Kansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  4/4/91

  	

   

  	

  Cash, Robert; McElroy, Leonard

  	

   

  	

  5000

  	

   

  	

  Leavenworth

  	

   

  	

  Kansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  8/17/77

  	

   

  	

  Mills, H; Hain, J.; Harris, H A

  	

   

  	

  523

  	

   

  	

  Somerset

  	

   

  	

  Kentucky

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  11/23/77

  	

   

  	

  Green, Jerry; Mills, H; Carter, Joe

  	

   

  	

  682

  	

   

  	

  Danville

  	

   

  	

  Kentucky

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  12/13/77

  	

   

  	

  Moody, Kenneth

  	

   

  	

  590

  	

   

  	

  Harlan

  	

   

  	

  Kentucky

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  4/17/78

  	

   

  	

  Elkins, Johnny & Patricia

  	

   

  	

  635

  	

   

  	

  Goody (Forest Hills)

  	

   

  	

  Kentucky

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  7/11/83

  	

   

  	

  Barker, Andrew, [ILLEGIBLE]; Hodges, Ed

  	

   

  	

  1010

  	

   

  	

  Richmond

  	

   

  	

  Kentucky

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  8/15/95

  	

   

  	

  Kelly, Ted & Sharon

  	

   

  	

  1263

  	

   

  	

  Jamestown

  	

   

  	

  Kentucky

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/22/88

  	

   

  	

  Hurst, Larry

  	

   

  	

  1401

  	

   

  	

  Corbin

  	

   

  	

  Kentucky

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  10/3/89

  	

   

  	

  Diez, Doug

  	

   

  	

  46

  	

   

  	

  Baton Rouge

  	

   

  	

  Louisiana

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  12/28/81

  	

   

  	

  Case, George & Georgia

  	

   

  	

  888

  	

   

  	

  Bogalusa

  	

   

  	

  Louisiana

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  1/4/90

  	

   

  	

  Vauleman, Norman & Marcia

  	

   

  	

  944

  	

   

  	

  Alexandria

  	

   

  	

  Louisiana

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  11/21/84

  	

   

  	

  Albritton, Keith; W L

  	

   

  	

  1168

  	

   

  	

  Monroe

  	

   

  	

  Louisiana

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/18/85

  	

   

  	

  Parker, Bob

  	

   

  	

  1197

  	

   

  	

  Lake Charles

  	

   

  	

  Louisiana

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  3/18/88

  	

   

  	

  Diez, Doug

  	

   

  	

  1383

  	

   

  	

  Thibodeaux

  	

   

  	

  Louisiana

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  3/18/88

  	

   

  	

  Diez, Doug

  	

   

  	

  1384

  	

   

  	

  Gonzales

  	

   

  	

  Louisiana

  	

   

  

 

 

10

 

 

	

  Type of Agreement

  	

   

  	

  Date

  	

   

  	

  Name of

  Franchisee

  	

   

  	

  Store

  Number

  	

   

  	

  City

  	

   

  	

  State

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  7/1/92

  	

   

  	

  Albritton, Keith; W L

  	

   

  	

  2032

  	

   

  	

  W. Monroe

  	

   

  	

  Louisiana

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  9/18/78

  	

   

  	

  Snyder, Bruce & Larry

  	

   

  	

  678

  	

   

  	

  LaVale

  	

   

  	

  Maryland

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  9/1/81

  	

   

  	

  Romsburg, Betty; Pual; Kim

  	

   

  	

  873

  	

   

  	

  Hagerstown

  	

   

  	

  Maryland

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/10/71

  	

   

  	

  Jackson, Kenneth

  	

   

  	

  35

  	

   

  	

  Jackson

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  8/24/89

  	

   

  	

  Sethi, Dr. S L

  	

   

  	

  93

  	

   

  	

  Jackson

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  12/9/75

  	

   

  	

  Sethi, Dr. S L 

  	

   

  	

  270

  	

   

  	

  Greenwood

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  8/24/89

  	

   

  	

  Sethi, Dr. S L

  	

   

  	

  463

  	

   

  	

  Pearl (Flowood)

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  11/7/77

  	

   

  	

  Sethi, Dr. S L, Monica, Rascksha

  	

   

  	

  588

  	

   

  	

  Cleveland

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  12/20/79

  	

   

  	

  Hontzas, Thomas; Tattle, A. A.

  	

   

  	

  792

  	

   

  	

  Meridian

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  2/22/80

  	

   

  	

  Sethi, Dr. S L; Monica; Jackie's Int'l;

  	

   

  	

  804

  	

   

  	

  Waynesboro

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/3/82

  	

   

  	

  Sethi, Dr. S L

  	

   

  	

  913

  	

   

  	

  Grenada

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  8/17/82

  	

   

  	

  Albritton, Keith; 

  W L

  	

   

  	

  921

  	

   

  	

  Natchez

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  7/8/96

  	

   

  	

  Hughes, Robert C.

  	

   

  	

  969

  	

   

  	

  Tupelo

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  3/7/83

  	

   

  	

  Sethi, Dr. S L

  	

   

  	

  985

  	

   

  	

  Brookhaven

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  3/20/84

  	

   

  	

  Hontzas, Thomas; Tattis, A A

  	

   

  	

  1046

  	

   

  	

  Mages

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  7/8/84

  	

   

  	

  Sethi, Dr. S L

  	

   

  	

  1108

  	

   

  	

  Senatobia

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  12/6/85

  	

   

  	

  Sethi, Dr. S L

  	

   

  	

  1238

  	

   

  	

  Philadelphia

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  5/1/92

  	

   

  	

  Liberto, Vincent; Mauldin, Joe; King,

  	

   

  	

  1276

  	

   

  	

  Laurel

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  11/14/86

  	

   

  	

  Sethi, Dr. S L

  	

   

  	

  1306

  	

   

  	

  Batesville

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  3/26/87

  	

   

  	

  Sethi, Dr. S L

  	

   

  	

  1332

  	

   

  	

  New Albany

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  3/29/88

  	

   

  	

  Evans, Alfred; Worbington, Alfred

  	

   

  	

  1385

  	

   

  	

  Clarksdale

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  8/5/88

  	

   

  	

  Sethi, Dr. S L

  	

   

  	

  1416

  	

   

  	

  Booneville

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  11/10/89

  	

   

  	

  Sethi, Dr. S L; Monica; Raksha

  	

   

  	

  2021

  	

   

  	

  Amory

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/13/79

  	

   

  	

  Albritton, Larry & Dale

  	

   

  	

  749

  	

   

  	

  Joplin

  	

   

  	

  Missouri

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  3/10/96

  	

   

  	

  Siraj, Saleem; Mohamed

  	

   

  	

  899

  	

   

  	

  Branson

  	

   

  	

  Missouri

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  4/10/96

  	

   

  	

  Siraj, Saleem; Mohamed

  	

   

  	

  1078

  	

   

  	

  Branson

  	

   

  	

  Missouri

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/15/84

  	

   

  	

  Cobb, Doug; Scholfield, Robert; Don

  	

   

  	

  1124

  	

   

  	

  Springfield

  	

   

  	

  Missouri

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  7/1/96

  	

   

  	

  Lai, Wu Shih; Lee Y

  	

   

  	

  1128

  	

   

  	

  Lebanon

  	

   

  	

  Missouri

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  3/8/87

  	

   

  	

  Johnson, Kimmie & Ray

  	

   

  	

  1327

  	

   

  	

  Monett

  	

   

  	

  Missouri

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/24/87

  	

   

  	

  Ackman, David; Sakarelos, Nick

  	

   

  	

  1338

  	

   

  	

  Jackson (Cape Girard)

  	

   

  	

  Missouri

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/25/84

  	

   

  	

  Siraj, Saleem

  	

   

  	

  5008

  	

   

  	

  Grandview

  	

   

  	

  Missouri

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  2/12/96

  	

   

  	

  Dudley, Gerald; Dudley, Beauton

  	

   

  	

  5022

  	

   

  	

  Popular Bluff

  	

   

  	

  Missouri

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  5/1/94

  	

   

  	

  O'Sullivan, Tom & Mary

  	

   

  	

  472

  	

   

  	

  Alamorgordo

  	

   

  	

  New Mexico

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  7/23/87

  	

   

  	

  Dobry, Mary

  	

   

  	

  1345

  	

   

  	

  Hobbs

  	

   

  	

  New Mexico

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  3/3/95

  	

   

  	

  Zvonar, David; Velasquez, Doris

  	

   

  	

  2030

  	

   

  	

  Tucumcari

  	

   

  	

  New Mexico

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  1/12/98

  	

   

  	

  Lu, Thomas & Alice

  	

   

  	

  5033

  	

   

  	

  Farmington

  	

   

  	

  New Mexico

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  3/13/78

  	

   

  	

  Albrittain D; Hill W; Collins B, L; Loga

  	

   

  	

  618

  	

   

  	

  Lima

  	

   

  	

  Ohio

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  7/14/73

  	

   

  	

  Mott, Dennis B., Jr., & Hazel

  	

   

  	

  113

  	

   

  	

  Tulsa

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  9/12/74

  	

   

  	

  McNear, Mack

  	

   

  	

  163

  	

   

  	

  Oklahoma City

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  10/19/76

  	

   

  	

  McNear, Mack

  	

   

  	

  397

  	

   

  	

  Oklahoma City

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  12/10/76

  	

   

  	

  McNear, Mack

  	

   

  	

  417

  	

   

  	

  Edmond

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/17/77

  	

   

  	

  McNear, Mack

  	

   

  	

  494

  	

   

  	

  Oklahoma City

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/28/77

  	

   

  	

  Harris, S; Albritton; Hamilton; Harden

  	

   

  	

  499

  	

   

  	

  Enid

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  4/18/96

  	

   

  	

  Shaw, II, Sidney

  	

   

  	

  517

  	

   

  	

  Stillwater

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  8/29/77

  	

   

  	

  Albritton, Dale; Morrow, Jeff, David

  	

   

  	

  522

  	

   

  	

  Muskogee

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/17/77

  	

   

  	

  McNear, Mack

  	

   

  	

  526

  	

   

  	

  Midwest City

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  9/3/77

  	

   

  	

  McNear, Mack

  	

   

  	

  527

  	

   

  	

  Oklahoma City

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  2/6/78

  	

   

  	

  Mott, Jr, Dennis & Hazel

  	

   

  	

  606

  	

   

  	

  Sand Springs

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  8/16/78

  	

   

  	

  McNear, Mack

  	

   

  	

  664

  	

   

  	

  Moore

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  12/21/81

  	

   

  	

  Gardner, Jim

  	

   

  	

  886

  	

   

  	

  McAlester

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  7/12/82

  	

   

  	

  Sudderth, Sam & Randy Dale

  	

   

  	

  917

  	

   

  	

  Shawnee

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  9/13/82

  	

   

  	

  McNear, Mack; Coursey, Bill

  	

   

  	

  932

  	

   

  	

  Chickasha

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  9/27/82

  	

   

  	

  Jobes, Rick; Morrow, David & Jeff

  	

   

  	

  937

  	

   

  	

  Sallisaw

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  1/26/96

  	

   

  	

  Rifal, Mike; Alishammat, M A

  	

   

  	

  940

  	

   

  	

  Broken Arrow

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  4/18/96

  	

   

  	

  Shaw, II, Sidney

  	

   

  	

  995

  	

   

  	

  Ponoa City

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  8/15/94

  	

   

  	

  Ray, Forrest

  	

   

  	

  1030

  	

   

  	

  Elk City

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/19/85

  	

   

  	

  McNear, Mack

  	

   

  	

  1200

  	

   

  	

  Del City

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  4/29/83

  	

   

  	

  Caufield, Dennis & Karen

  	

   

  	

  1397

  	

   

  	

  Bartlesville

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  11/1/92

  	

   

  	

  Wiss, Connie & Don

  	

   

  	

  2034

  	

   

  	

  Poteau

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  10/1/94

  	

   

  	

  Ray, Forrest

  	

   

  	

  5013

  	

   

  	

  Altus

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  9/22/97

  	

   

  	

  Sudderth, Randy & Sam

  	

   

  	

  5036

  	

   

  	

  Seminole

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/2/77

  	

   

  	

  Bratio, Dusan; Wolf, Jan; Thakrar, A.

  	

   

  	

  486

  	

   

  	

  Carlisle

  	

   

  	

  Pennsylvania

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  7/31/84

  	

   

  	

  Sickle, David; Yodock, Lee Jr.

  	

   

  	

  1116

  	

   

  	

  Bloomsburg

  	

   

  	

  Pennsylvania

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  8/18/87

  	

   

  	

  Bratio, Dusan

  	

   

  	

  1352

  	

   

  	

  Harrisburg

  	

   

  	

  Pennsylvania

  	

   

  

 

 

11

 

 

	

  Type of Agreement

  	

   

  	

  Date

  	

   

  	

  Name of

  Franchisee

  	

   

  	

  Store

  Number

  	

   

  	

  City

  	

   

  	

  State

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/5/74

  	

   

  	

  Miller, Aline; Hugh, Ellis, Sharon M.

  	

   

  	

  157

  	

   

  	

  Memphis

  	

   

  	

  Tennessee

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  9/20/75

  	

   

  	

  Scudder, A; Quinton, W.; Winget, R.

  	

   

  	

  235

  	

   

  	

  Columbia

  	

   

  	

  Tennessee

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  1/31/77

  	

   

  	

  Milhorne, D.; Wells J & MT; Jones, Cl

  	

   

  	

  431

  	

   

  	

  Jackson

  	

   

  	

  Tennessee

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  12/20/77

  	

   

  	

  Burris, Sr., David, Michelle; Pirkle, J.

  	

   

  	

  589

  	

   

  	

  Athens

  	

   

  	

  Tennessee

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  12/28/78

  	

   

  	

  Bible, John; Harris HA; Macon W; Git

  	

   

  	

  697

  	

   

  	

  East Morristown

  	

   

  	

  Tennessee

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  7/1/93

  	

   

  	

  Stanfill, Jerry; Carter, J. P; Grics M.

  	

   

  	

  1268

  	

   

  	

  Lexington

  	

   

  	

  Tennessee

  	

   

  
	

  Franchise Agreemt

  	

   

  	

  8/1/96

  	

   

  	

  Vezertzis, Pat

  	

   

  	

  1319

  	

   

  	

  Tullahoma

  	

   

  	

  Tennessee

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  9/1/90

  	

   

  	

  Burris, Jr. & Sr., David; Vezertzis Pat

  	

   

  	

  1409

  	

   

  	

  Jasper

  	

   

  	

  Tennessee

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  4/26/93

  	

   

  	

  Burris, Sr., David & Michelle

  	

   

  	

  2035

  	

   

  	

  Dayton

  	

   

  	

  Tennessee

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  10/1/93

  	

   

  	

  Hurst, Larry; Lois

  	

   

  	

  2037

  	

   

  	

  Knoxville

  	

   

  	

  Tennessee

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  7/10/97

  	

   

  	

  Vezertzis, Pat

  	

   

  	

  5035

  	

   

  	

  Dickson

  	

   

  	

  Tennessee

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  4/12/76

  	

   

  	

  Brown, Floyd

  	

   

  	

  322

  	

   

  	

  Midland

  	

   

  	

  Texas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  4/12/76

  	

   

  	

  Brown, Floyd

  	

   

  	

  323

  	

   

  	

  Odessa

  	

   

  	

  Texas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  5/1/96

  	

   

  	

  Mills, Joe, Catherine; Robertson, B.

  	

   

  	

  324

  	

   

  	

  Abilene

  	

   

  	

  Texas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/13/81

  	

   

  	

  Branstetter, Neal; Morrow, David

  	

   

  	

  569

  	

   

  	

  Amarillo

  	

   

  	

  Texas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  10/14/85

  	

   

  	

  Dale, Timothy; Sorrells, W L; D S; J I

  	

   

  	

  1170

  	

   

  	

  Mt. Pleasant

  	

   

  	

  Texas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  4/1/85

  	

   

  	

  Hicks, Don

  	

   

  	

  1194

  	

   

  	

  Texarkana

  	

   

  	

  Texas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  7/18/86

  	

   

  	

  Mc Gee, Robert

  	

   

  	

  1258

  	

   

  	

  Denton

  	

   

  	

  Texas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  1/1/92

  	

   

  	

  Corse, Earl & Carolyn

  	

   

  	

  2031

  	

   

  	

  Dumas

  	

   

  	

  Texas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/12/95

  	

   

  	

  Ray, Forrest

  	

   

  	

  5019

  	

   

  	

  Lubbock

  	

   

  	

  Texas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  12/15/96

  	

   

  	

  Broyles, Kelly

  	

   

  	

  5028

  	

   

  	

  Sulphur Springs

  	

   

  	

  Texas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  12/23/96

  	

   

  	

  Dodd, Jerry

  	

   

  	

  5031

  	

   

  	

  Decatur

  	

   

  	

  Texas

  	

   

  
	

  Franchise Agreemt

  	

   

  	

  9/27/94

  	

   

  	

  Christy, Frank

  	

   

  	

  167

  	

   

  	

  Parkersburg

  	

   

  	

  West Virginia

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  3/1/91

  	

   

  	

  Wilson, Janet & Ronald

  	

   

  	

  991

  	

   

  	

  Weston

  	

   

  	

  West Virginia

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/7/83

  	

   

  	

  Malcolm, Richard; Robinson, Patricia

  	

   

  	

  1001

  	

   

  	

  Westover

  	

   

  	

  West Virginia

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  1/24/95

  	

   

  	

  Wingo, John; Mariane; Willie III

  	

   

  	

  1270

  	

   

  	

  Lewisburg

  	

   

  	

  West Virginia

  	

   

  

 

 

12

 

14.           GOVERNING

LAW. This Agreement shall be construed according to the laws of the

State of Tennessee.

 

(a)           Except as otherwise provided, all

other terms used herein shall have the meanings assigned to them in Article 9

(or, absent definition in Article 9, in any other Article) of the Uniform

Commercial Code.

 

IN WITNESS WHEREOF the

Guarantor has executed this Agreement on the day and year first above written.

 

Guarantor’s principal

place of business is located in the City of Roanoke, Commonwealth of Virginia.

 

 

	

  Location(s) of the Collateral

  	

  GUARANTOR:

  
	

   

  	

   

  
	

  416 South Jefferson Street, 4th Floor

  Roanoke, Virginia 24012 and

  each of the sites listed on 

  Schedule 1 hereto.

  	

  THE WESTERN SIZZLEN CORPORATION

  
	

  By:

  	

  /s/ Victor F. Foti

  
	

   

  	

   

  
	

   

  	

  Its:  

  	

  President

  	 

						

 

Guarantor’s Address:

 

P.O. Box 12167

Roanoke, Virginia 24023-2167

 

Guarantor’s

Tax Identification Number: 54-1684114

 

13

 

Loan No. 06721

900 Merchants Rd.

Knoxville, Tennessee

 

GUARANTY

 

THE WESTERN SIZZLIN

CORPORATION, a Tennessee corporation and THE WESTERN SIZZLIN STORES OF LITTLE

ROCK, INC., an Arkansas corporation (each a “Guarantor”), as a material

inducement to and in consideration of CAPTEC FINANCIAL GROUP FUNDING

CORPORATION, a Michigan corporation, whose address is 24 Frank Lloyd Wright

Drive, Lobby L, Ann Arbor, Michigan 48106 (together with its successors,

assigns and transferees, “Lender”), making a loan in the original principal

amount of One Million Two Hundred Thousand and 00/100 Dollars ($1,200,000.00)

as evidenced by a Promissory Note, dated March 23, 1998 (“Note”), made by THE

WESTERN SIZZLIN STORES, INC., a Virginia corporation (“Borrower”), which Note

is secured by the instruments referenced therein (together with the Note, “Loan

Documents”), hereby jointly and severally, unconditionally and irrevocably,

personally guarantees to and for the benefit of Lender, and Lender’s successors

and assigns, the full and timely payment and performance of all of the

Borrower’s duties, obligations and covenants under the Loan Documents. This is

a guaranty of payment and performance and not of collection.

 

This Guaranty shall not

be affected by Lender’s failure or delay to enforce any of its rights.

 

Guarantor’s obligations

are independent of Borrower’s obligations. 

If Borrower defaults under the Loan Documents, Lender can proceed

immediately against Guarantor or Borrower, or both, or Lender can enforce

against Guarantor or Borrower, or both, any rights that it has under the Loan

Documents or pursuant to applicable laws. 

If any lien created by the Loan Documents terminates and Lender has any

rights it can enforce against Borrower after termination, Lender can enforce

those rights against Guarantor without giving previous notice to Borrower or

Guarantor or without making any demand on either of them.

 

To the extent permitted

by law, Guarantor waives the benefit of any statute of limitations affecting

Guarantor’s liability under this Guaranty. 

Guarantor waives the right to require Lender to first or concurrently:

(1) proceed against Borrower; (2) proceed against or exhaust any security that

Lender holds from Borrower; or (3) pursue any other remedy in Lender’s

power.  The liability of Guarantor shall

not be affected or exonerated by any indulgence, compromise, settlement or

variation of terms which may be extended by Lender to Borrower, or agreed upon

by Lender or Borrower, and, unless agreed to in writing by Lender, shall not be

affected or exonerated by any assignment by Borrower of its interest in any one

or more of the Loan Documents, nor shall the liability of the Guarantor be

affected or exonerated by the insolvency, bankruptcy (voluntary or

involuntary), or reorganization of Borrower, nor by the voluntary or

involuntary liquidation, sale or other disposition of all or substantially all

of the assets of Borrower, or by the release of any other Guarantor.  Lender and Borrower, without notice to or

consent by Guarantor, may at any time or times enter into such modifications,

extensions, amendments or other covenants of the Loan Documents as they may

deem appropriate, and Guarantor shall not be released nor its liability

exonerated thereby but shall continue to be fully liable for the payment and

performance of all obligations and duties of Borrower under the Loan Documents

as so modified, extended or amended.

 

Guarantor further agrees

(1) to indemnify and hold harmless Lender from and against any claims, damages,

expenses or losses, including to the extent permitted by law, all reasonable

attorneys’ fees incurred by counsel of Lender’s choice (whether or not

litigation is commenced), resulting from or arising out of any breach of any

provision of the Loan Documents by Borrower or by reason of Borrower’s failure

to perform any of its obligations thereunder, and (2) to the extent permitted

by law, to pay all costs and expenses, including reasonable attorneys’ fees

(whether or not litigation is commenced), incurred by Lender in enforcing this

Guaranty.

 

Until all of Borrower’s

obligations to Lender have been discharged in full, Guarantor has no right of

subrogation against Borrower.  Guarantor

assumes the responsibility to remain informed of the financial condition

 

 

of Borrower and of all other circumstances bearing

upon the risk of Borrower’s default, which reasonable inquiry would reveal, and

agrees that Lender shall have no duty to advise Guarantor of information known to

it regarding such condition or any such circumstances.  Lender shall not be required to inquire into

the powers of Borrower or the officers, employees, partners or agents acting or

purporting to act on its behalf, and any indebtedness made or created in

reliance upon the professed exercise of such powers shall be guaranteed under

this Guaranty.  Each Guarantor hereby

represents and warrants to Lender that such Guarantor has received a copy of

each of the Loan Documents, has read or had the opportunity to read each of the

Loan Documents, and understands the terms of the Loan Documents.  The provisions in the Loan Documents

relating to the execution of additional documents, legal proceedings by Lender

against Borrower, severability of the provisions of the Loan Documents,

interpretation of the Loan Documents, notices, waivers (including waiver of a

jury trial), limitation on right of recovery against Lender, disclaimer of

individual liability, and the applicable laws which govern the interpretation

of the Loan Documents are incorporated herein in their entirety by this

reference and made a part hereof as though set forth in full herein; any

reference in those provisions to “Borrower” shall mean each Guarantor and any

reference in those provisions to the “Loan Documents” shall mean this Guaranty.

 

To the extent permitted

by law, Guarantor waives its right to enforce any remedies that Borrower now

has, or later may have, against Lender. 

Guarantor waives any right to participate in any security now or later

held by Lender.  Guarantor waives notice

of acceptance of this Guaranty, and all other notices in connection with this

Guaranty or in connection with the liabilities, obligations and duties

guaranteed hereby, including notices to Guarantor of default by the Borrower

under the Loan Documents.  Guarantor

hereby waives diligence, presentment, demand for performance, notice of

nonperformance, protest, notice of protest, notice of dishonor, and notice of

acceptance of this Guaranty, and waives all notices of the existence, creation,

or incurring of new or additional obligations.

 

If there is more than one

Guarantor, the liability of each Guarantor shall be joint and several.  Guarantor’s obligations under this Guaranty

shall be binding on Guarantor’s legal representatives, heirs, successors and

assigns.

 

If Borrower disposes of

its interest in the property secured by the Loan Documents, “Borrower”, as used

in this Guaranty, shall mean Borrower’s successors or assigns.  Assignment of the Loan Documents by Lender

(as permitted by the Loan Documents) shall not affect this Guaranty.  In the event of an assignment of the Loan

Documents by Lender, the term “Lender” as used in this Guaranty shall mean

Lender’s successors or assigns.

 

Guarantor hereby

covenants and agrees to deliver to Lender the following: (a) management

prepared and certified consolidated quarterly financial statements for

Guarantor within forty-five (45) days after the end of the first three (3)

quarters of each fiscal year of Guarantor, and (b) annual consolidated

financial statements for Guarantor audited by an independent certified public

accountant within one hundred twenty (120) days after the end of each fiscal

year of Guarantor.  Such financial

statements shall be true and correct in all respects, shall be prepared in

accordance with generally accepted accounting principles, and shall fairly

represent the respective financial conditions of the subjects thereof as of the

respective dates thereof.  At the

request of Lender, Guarantor shall obtain the consent of Guarantor’s

accountant(s) to the inclusion of Guarantor’s most recent financial statement

in any regulatory filing or report to be filed by Lender.

 

If any one or more of the

provisions of this Guaranty shall be held to be invalid, illegal or unenforceable

in any respect, such invalidity, illegality or unenforceability shall not

affect any other provision of this Guaranty, and this Guaranty shall be

construed as if such invalid, illegal or unenforceable provision had never been

contained herein.

 

This Guaranty shall be

construed according to the laws of the State of Tennessee.  Guarantor agrees that any dispute which may

arise between Lender and Guarantor with regard to this Guaranty shall be

resolved by litigation in state or federal court.  Litigation may be initiated by Lender or its assignee, at its

discretion, in the State of the principal place of business of Lender or its

assignee, the State of the principal place of business of Guarantor, or the

State where the Collateral (as defined in the Loan Documents) is located.

 

2

 

GUARANTOR HEREBY KNOWINGLY AND

IRREVOCABLY WAIVES ANY OBJECTIONS ON THE GROUNDS OF IMPROPER JURISDICTION OR

VENUE TO AN ACTION INITIATED AS SET FORTH ABOVE AND AGREES THAT EFFECTIVE

SERVICE OF PROCESS MAY BE MADE UPON GUARANTOR BY REGISTERED MAIL, RETURN

RECEIPT REQUESTED.  GUARANTOR WAIVES, TO

THE EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY ACTION BETWEEN THE PARTIES.

 

This Guaranty shall

become effective on March 31, 1998.

 

	

  THE WESTERN SIZZLIN CORPORATION

  
	

   

  
	

  By:

  	

  /s/ Victor F. Foti

  	

   

  
	

   

  
	

   

  	

  Its:

  	

  President

  	

   

  	 

	

   

  
	

  THE

  WESTERN SIZZLIN STORES OF LITTLE ROCK, INC.

  
	

   

  
	

  By:.

  	

  /s/ Victor F. Foti

  	

   

  
	

   

  
	

   

  	

  Its:

  	

  President

  	

   

  
	

   

  	

   

  
									

 

 

Loan No. 06721

900 Merchants Rd.

Knoxville, Tennessee

 

CERTIFICATE

OF BORROWER

 

THE WESTERN SIZZLIN

STORES, INC., a Virginia corporation (“Borrower”), for the benefit of CAPTEC

FINANCIAL GROUP FUNDING CORPORATION, a Michigan corporation (together with its

successors, assigns and transferees, “Lender”), warrants, represents, covenants

and agrees that the following are true and correct as of the date hereof:

 

1.             All warranties and representations of Borrower contained

in this Certificate shall survive the execution of this Certificate and any

advances made in accordance with the Promissory Note executed by Borrower, in

favor of Lender, dated even herewith, in the original principal amount of One

Million Two Hundred Thousand and 00/100 Dollars ($1,200,000.00) (the “Note”).

 

2.             Borrower has good, indefeasible and marketable title to

the Collateral (as defined in that certain Security Agreement, dated even

herewith, between Borrower and Lender (the “Security Agreement”)).  Except for the Security Agreement, there are

no instruments, matters or agreements, and Borrower is not a party to any

instrument, matter or agreement, which will in any way encumber, bind or

otherwise affect the Collateral or Lender. 

Borrower has neither done nor failed to do anything, nor has suffered

anything to be done, as a result of which the Collateral or any part thereof

has been or will be encumbered or title thereto has been or will be affected in

any way and no person, firm or entity has any present, conditional or

contingent rights to acquire all or any portion of the Collateral.

 

3.             Borrower is a corporation duly organized and validly

existing in good standing under the laws of the Commonwealth of Virginia and is

qualified to do business in the State of Tennessee.  The person or persons executing the Note, the Security Agreement

and the other Loan Documents (as defined in the Security Agreement) have full

power and complete authority to execute the Note, the Security Agreement and

the other Loan Documents, and, when executed, the Note, the Security Agreement

and the other Loan Documents will be legal, valid and binding obligations of

Borrower, enforceable in accordance with their terms.

 

4.             As of the date hereof, Borrower is not “insolvent”

within the meaning of Section 548(a)(2)(B) of the United States Bankruptcy

Code.

 

5.             Borrower is in the business of owning and operating

Great American Steak & Buffet Company restaurants, including the restaurant

operation located at 900 Merchants Rd., Knoxville, Tennessee (the “Franchised

Operation”).  Borrower’s chief executive

office is located at 416 South Jefferson Street, Roanoke, Virginia 24012, and

the Collateral is located at Borrower’s Chief Executive Office and the

Franchised Operation.

 

6.             Borrower has furnished to Lender its most recent annual

audited financial statements and most recent management prepared and certified

quarterly financial statements, which statements were prepared in accordance

with generally accepted accounting principles and are correct and complete and

accurately present the financial condition of Borrower on the dates thereof.  Further, there has been no material adverse

change in the business, property or condition of Borrower since the date of the

most recent financial statements.

 

7.             Borrower has complied and will continue to comply with

all applicable laws, rules, regulations and orders relating to Borrower or any

aspect of Borrower’s business or assets, including, without limit, all

environmental laws, rules, regulations and orders.  Borrower agrees to indemnify and hold Lender harmless against and

from all claims, losses and costs resulting from any and all violations by

Borrower of any laws, rules, regulations and/or orders.

 

 

8.             Borrower has not received any written notice of, and, to

the best knowledge of Borrower, none of Borrower, the Franchised Operation or

the premises where the Franchised Operation is located are in violation of any

law, municipal ordinance or other governmental requirement of any governmental

authority.

 

9.             There are no circumstances, state of facts or other

matters which, with the passage of time or the giving of notice, or both, would

constitute an Event of Default under the terms of the Note, the Security

Agreemt or the other Loan Documents.

 

10.           Borrower has filed all federal, state

and local income and other tax returns and other reports required to be filed

prior to the date of this Certificate and Borrower has paid all taxes,

assessments, withholdings and other governmental charges that are due and

payable prior to the date of this Certificate.

 

11.           All taxes and all installments of

assessments and all other charges of any kind imposed or levied by any

governmental authority against either Borrower or the Collateral which are due

and payable or constitute a lien at or prior to the date of this Certificate,

together with all interest and penalties due thereon, have been paid in full.

 

12.           There is now fully paid and

enforceable fire, liability and other forms of insurance in such amounts and

covering such risks as are required under the Security Agreement.

 

13.           There are no disputes, litigation or

other such proceedings pending or, to the best of Borrower’s knowledge,

threatened against or related to Borrower, the Collateral or the Franchised

Operation, nor does Borrower know of any basis for any such action.

 

14.           In consideration of the loan

evidenced by the Note and secured, by the Security Agreement and the other Loan

Documents, Borrower agrees to indemnify and hold Lender harmless against all

claims, liabilities, losses, deficiencies and damages as well as reasonable

expenses (including attorney’s fees), interest and penalties related thereto,

asserted by any third party against, or incurred by Lender, by reason of or

resulting from any breach, inaccuracy, incompleteness or nonfulfillment of the

covenants, representations and/or warranties of Borrower contained in this

Certificate.

 

15.           Commencing May 1, 1998 and on the

first day of each following month, Lender is authorized to initiate an

electronic funds transfer to pay the monthly installment payment owing under

the loan evidenced by the Note from the account designated below, and to

receive payments from such account. 

This authorization will remain in effect unless the undersigned requests

a modification that is agreed to by the Financial Institution and Lender;

provided, however, that Lender and its successors, assigns and transferees may

modify the place of payment to be made by Borrower without the consent of the

Financial Institution.

 

	

  Financial

  Institution:

  	

   

  
	

  Financial

  Institution

  	

   

  
	

  Address:

  	

   

  
	

  Routing/Transit

  #:

  	

   

  
	

  Account #:

  	

   

  
					

 

[SIGNATURE PAGE FOLLOWS]

 

2

 

This

Certificate shall become effective on March 31, 1998.

 

	

   

  	

  THE

  WESTERN SIZZLIN STORES, INC.

  	 

	

   

  	

   

  	 

	

   

  	

  By:

  	

  /s/ Victor F. Foti

  	 

	

   

  	

   

  	 

	

   

  	

  Its:  

  	

  President

  
						

 

3

 

[LETTERHEAD OF

WESTERN SIZZLIN STORES, INC.]

 

	

  TO:

  	

  Martha R. Young, (313) 668-7612

  
	

   

  	

  Fax: 

  747-7147

  
	

   

  	

   

  	

   

  
	

  FROM:

  	

  Calvin Lilly, (540) 345-3195

  
	

   

  	

  Fax: 

  345-0831

  
	

   

  	

   

  	

   

  
	

  DATE:

  	

  March 24, 1998

  
	

   

  	

   

  	

   

  
	

  RE:

  	

  Closing Items — Follow-up

  
	

   

  	

   

  	

   

  
	

  Information for account drafting:

  
	

   

  	

   

  	

   

  
	

  Financial Institution:

  	

  Wachovia Bank, N. A.

  
	

   

  	

   

  	

   

  
	

  Financial Institution Address:

  	

  111 Franklin Road

  Roanoke, Virginia 24001

  Attn:  Kelly Kiser

  
	

   

  	

   

  	

   

  
	

  Routing

  #:

  	

  051000253

  
	

   

  	

   

  	

   

  
	

  Account

  #:

  	

  7911787711

  
	

   

  	

   

  	

  The WesterN SizzliN Stores, Inc.

  

 

 

Loan No. 06721 

900 Merchants Rd.

Knoxville, Tennessee

 

CERTIFICATE OF GUARANTOR

 

THE WESTERN SIZZLIN

CORPORATION, a Tennessee corporation (“Guarantor”), for the benefit of CAPTEC

FINANCIAL GROUP FUNDING CORPORATION, a Michigan corporation (together with its

successors, assigns and transferees, “Lender”), warrants, represents, covenants

and agrees that the following are true and correct as of the date hereof:

 

1.             Guarantor has received a copy of that certain Promissory

Note, dated March 23, 1998 in the original principal amount of One Million Two

Hundred Thousand and 00/100 Dollars ($1,200,000.00) (“Note”) made by THE

WESTERN SIZZLIN STORES, INC., a Virginia corporation (“Borrower”).  Guarantor has also received a copy of the

instruments securing the Note, as referenced therein (together with the Note,

the “Loan Documents”).  The Loan

Documents create a lien with respect to certain real and personal property

located at 900 Merchants Rd., Knoxville, Tennessee (“Premises”).

 

2.             Guarantor has had the opportunity to review the

Certificate of Borrower, dated even herewith, made by Borrower for the benefit

of Lender, and confirms that the warranties and representations set forth

therein are true and correct as of the date hereof.

 

3.             Guarantor has full power and authority to enter into

that certain Guaranty executed by Guarantor in favor of Lender, dated as of the

date of this Certificate (“Guaranty”) and to assume and perform all of

Guarantor’s obligations under the Guaranty in accordance with all of the terms

and conditions of the Guaranty.  The

execution and delivery of the Guaranty and the performance by Guarantor of

Guarantor’s obligations under the Guaranty and under all documents contemplated

by the Guaranty require no further action or approval.  The Guaranty and all other documents

contemplated by the Guaranty are fully binding and enforceable obligations of

Guarantor.

 

4.             There are no circumstances, state of facts or other

matters which, with the passage of time or the giving of notice, or both, would

constitute an event of default under the terms of the Guaranty, or to the best

of the Guarantor’s knowledge, under the Loan Documents.

 

5.             There are no disputes, litigation or other such

proceedings pending or, to the best of the Guarantor’s knowledge, threatened

against or related to the Guarantor or the Premises, nor does Guarantor know of

any basis for any such action, except as disclosed to Lender on Exhibit A

hereto.

 

6.             Guarantor has furnished to Lender its most recent annual

audited consolidated financial statements and most recent management prepared

and certified quarterly consolidated financial statements, which statements

were prepared in accordance with generally accepted accounting principles and

are correct and complete and accurately present the financial condition of

Guarantor on the dates thereof. 

Further, there has been no material adverse change in the business,

property or condition of Guarantor since the date of the most recent financial

statements.

 

7.             In consideration of the loan evidenced by the Note and

secured, in part, by the Loan Documents, the receipt and sufficiency of which

Guarantor acknowledges, and in order to induce Lender to make such loan,

Guarantor agrees to indemnify and hold Lender harmless against all claims,

liabilities, losses, deficiencies and damages as well as reasonable expenses

(including attorney’s fees), interest and penalties related thereto, asserted

by any third party against, or incurred by Lender, by reason of or resulting

from any breach, inaccuracy, incompleteness or nonfulfillment of the covenants,

representations and/or warranties of Guarantor contained in this Certificate.

 

 

This Certificate shall

become effective on March 31, 1998.

 

	

   

  	

  THE

  WESTERN SIZZLIN CORPORATION

  
	

   

  	

   

  
	

   

  	

  By

  	

  /s/ Victor F. Foti

  
	

   

  	

   

  
	

   

  	

   

  	

  Its:  

  	

  President

  
					

 

2

 

	

  Name/Caption

  	

   

  	

  Amount in

  Controversy

  	

   

  	

  Status

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  David K Wachtal, Jr. v. WSC. et al

  First Complaint – breach of employment contract;

  wrongful termination

  Second Complaint - includes officers and directors in the suit

  	

   

  	

  $

  	

  1,319,000

  	

   

  	

  Wachtel, president until

  2/95 claims wrongful termination; which, under his contract would mean two

  years’ of compensation, approx. $400,000. The termination was well justified.

  The suit had included certain officers and directors, whose cases have been

  dismissed through award of summary judgment.

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Third Complaint - loss of value of stock Idemnification for expenses

  	

   

  	

  $

  	

  8,500,000

  —

  	

   

  	

  Summary judgment granted

  to defendant, case dismissed; plaintiff has appealed. 

  Discovery not complete.

  	

   

  
	

  Mann v. WSC

  Breach of employment

  	

   

  	

  $

  	

  50,000 

  	

   

  	

  Mann is now deceased, with

  very little discovery.  We expect that

  the suit will be dismissed

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Durham Enterprises v. WSC

  Denial of awarding a franchise

  	

   

  	

  $

  	

  1,000,000 

  	

   

  	

  Summary judgment granted

  to defendant, case dismissed; plantiff has not appealed.

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Cruthis v. Elgin Hamner and WSC 

  Contaminated tea

  	

   

  	

  $

  	

  4,000

  	

   

  	

  Suit primarily against

  franchise; WSC named as codefendant; discovery beginning.

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Perry v. WSC and David Wachtel, Jr.

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Business interference between franchisee/seller and potential buyer -

  would not allow franchise assumption

   

  	

   

  	

  $

  	

  2,500,000

  	

   

  	

  Discovery is beginning; D

  & O insurance.

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  WSC v. Moody / Fowler

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Counter claim, in response to WSC’s collection suit for unpaid

  royalties

  	

   

  	

  $

  	

  500,000

  	

   

  	

  Discovery Beginning.

  	

   

  

 

 

Loan No. 06721

900 Merchants Rd.

Knoxville, Tennessee

 

CERTIFICATE OF GUARANTOR

 

THE WESTERN SIZZLIN

STORES OF LITTLE ROCK, INC., an Arkansas corporation (“Guarantor”), for the

benefit of CAPTEC FINANCIAL GROUP FUNDING CORPORATION, a Michigan corporation

(together with its successors, assigns and transferees, “Lender”), warrants,

represents, covenants and agrees that the following are true and correct as of

the date hereof:

 

1.             Guarantor has received a copy of that certain Promissory

Note, dated March 23, 1998 in the original principal amount of One Million Two

Hundred Thousand and 00/100 Dollars ($1,200,000.00) (“Note”) made by THE

WESTERN SIZZLIN STORES, INC., a Virginia corporation (“Borrower”). Guarantor

has also received a copy of the instruments securing the Note, as referenced

therein (together with the Note, the “Loan Documents”).  The Loan Documents create a lien with

respect to certain real and personal property located at 900 Merchants Rd.,

Knoxville, Tennessee (“Premises”).

 

2.             Guarantor has had the opportunity to review the

Certificate of Borrower, dated even herewith, made by Borrower for the benefit

of Lender, and confirms that the warranties and representations set forth

therein are true and correct as of the date hereof.

 

3.             Guarantor has full power and authority to enter into

that certain Guaranty executed by Guarantor in favor of Lender, dated as of the

date of this Certificate (“Guaranty”) and to assume and perform all of

Guarantor’s obligations under the Guaranty in accordance with all of the terms

and conditions of the Guaranty.  The

execution and delivery of the Guaranty and the performance by Guarantor of

Guarantor’s obligations under the Guaranty and under all documents contemplated

by the Guaranty require no further action or approval.  The Guaranty and all other documents

contemplated by the Guaranty are fully binding and enforceable obligations of

Guarantor.

 

4.             There are no circumstances, state of facts or other

matters which, with the passage of time or the giving of notice, or both, would

constitute an event of default under the terms of the Guaranty, or to the best

of the Guarantor’s knowledge, under the Loan Documents.

 

5.             There are no disputes, litigation or other such

proceedings pending or, to the best of the Guarantor’s knowledge, threatened

against or related to the Guarantor, nor does Guarantor know of any basis for

any such action.

 

6.             Guarantor has furnished to Lender its most recent annual

audited consolidated financial statements and most recent management prepared

and certified quarterly consolidated financial statements, which statements

were prepared in accordance with generally accepted accounting principles and

are correct and complete and accurately present the financial condition of

Guarantor on the dates thereof. 

Further, there has been no material adverse change in the business,

property or condition of Guarantor since the date of the most recent financial

statements.

 

7.             In consideration of the loan evidenced by the Note and

secured, in part, by the Loan Documents, the receipt and sufficiency of which

Guarantor acknowledges, and in order to induce Lender to make such loan,

Guarantor agrees to indemnify and hold Lender harmless against all claims,

liabilities, losses, deficiencies and damages as well as reasonable expenses

(including attorney’s fees), interest and penalties related thereto, asserted

 

 

by any third party against, or incurred by Lender, by

reason of or resulting from any breach, inaccuracy, incompleteness or

nonfulfillment of the covenants, representations and/or warranties of Guarantor

contained in this Certificate.

 

This Certificate shall

become effective on March 31, 1998.

 

	

   

  	

  THE

  WESTERN SIZZLIN STORES OF LITTLE ROCK, INC.

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By

  	

  /s/ Victor F. Foti

  
	

   

  	

   

  	

  Its

  	

  President

  
					

 

2

 

Loan No. 06722

5902 Richmond Hwy.

Alexandria, Virginia

 

PROMISSORY

NOTE

 

	

  $l,250,000.00

  	

   

  	

  Date:  3/23, 1998

  

 

PROMISE TO PAY.  For

value received, THE WESTERN SIZZLIN STORES,

INC., a Virginia

corporation, (“Borrower”) promises to pay to CAPTEC

FINANCIAL GROUP FUNDING CORPORATION,  a

Michigan corporation (together with its successors, assigns and transferees,

“Lender”), or order, One Million Two Hundred Fifty Thousand and 00/100 Dollars

($1,250,000.00), or so much of such sum as has been advanced under this Note,

as follows:

 

Interest

only from and after the date on which funds are disbursed by Lender hereunder

(“Effective Date”) through the last day of the month in which the Effective

Date occurs shall be due and payable on the first day of the next month

following the Effective Date; provided that if the Effective Date occurs after

the fifteenth (15th) day of a month, the interest which would accrue, based on

the actual number of days, through the end of such month shall be due and

payable in advance on the Effective Date. 

Installments of principal and interest in the amount of Thirteen

Thousand Four Hundred Eighty-Seven and 00/100 Dollars ($13,487.00) are due and

payable on the first day of each month (each a “Payment Date”), commencing May

1, 1998; until April 1, 2013 (“Due Date”), when the outstanding principal

balance, plus accrued interest, is due and payable (unless the indebtedness

evidenced by this Note is accelerated, in which case, the Due Date is the date

of acceleration).  The amortization

period for this Note, for purposes of calculating the monthly installments of

principal and interest, is fifteen (15) years.

 

All

payments under this Note shall be made at Lender’s principal office at 24 Frank

Lloyd Wright Drive, Lobby L, 4th Floor, P.O. Box 544, Ann Arbor, Michigan

48106-0544, or at such other address as Lender may designate in writing, or by

electronic funds withdrawal made by Lender upon written authorization therefor

from Borrower, which authorization shall not be revocable by Borrower without

the consent of Lender.  Payments due and

payable on a day on which Lender is not open for business are due on the next

succeeding business day.  Payments will

be applied first to accrued interest and then to principal.

 

INTEREST RATE.  The

outstanding principal balance of this Note will bear interest at a fixed rate

equal to ten and seven hundredths percent (10.07%) per annum (the “Stated

Rate”), until the Due Date (whether by acceleration or otherwise), and

thereafter at a rate which is three percent (3%) above the Stated Rate

(“Default Rate”).

 

Interest

will be computed on the basis of a year consisting of twelve (12) months of

thirty (30) days each.  In no event,

however, shall the interest rate exceed the maximum rate allowed by law.  Notwithstanding anything to the contrary

contained herein, at no time shall the interest payable under this Note be

greater than the maximum rate permitted by applicable law (“Legal Rate”).  If any obligation under this Note shall

result in Lender receiving an amount deemed to be interest under applicable law

in excess of the Legal Rate, then the amount which would be excessive interest

shall be applied to the reduction of the principal balance of this Note and not

to payment of interest.  If such

excessive interest exceeds the unpaid principal balance of this Note, the

excess shall be refunded to Borrower.

 

 

PREPAYMENT. 

Borrower shall not have any right, except as otherwise specifically

provided, to prepay the principal balance of this Note until two (2) loan years

have elapsed.  The first “loan year”

shall commence on the date of the closing of the loan evidenced by this Note,

and subsequent loan years shall commence on the anniversaries of such

date.  Commencing with the third (3rd)

loan year and if no Event of Default (as hereinafter defined) then exists,

Borrower shall have the right to prepay all, but not merely a portion of, the

principal balance of this Note together with accrued interest thereon on any

Payment Date; provided, however, that Borrower shall provide no less than

thirty (30) days prior written notice to Lender of Borrower’s intention to

prepay (the “Prepayment Notice”).  Once

given, the Prepayment Notice may not be withdrawn, and the failure to prepay in

accordance with the Prepayment Notice shall constitute an Event of Default.

 

Borrower

acknowledges and agrees that Lender is making the loan evidenced by this Note

in consideration of the receipt by Lender of all interest and other benefits

intended to be conferred by this Note, and if payments of principal are made to

Lender prior to the regularly scheduled due date of such payments, for whatever

reason (whether voluntarily or involuntarily), Lender will not receive all such

interest and other benefits and may incur additional costs.  For these reasons, and to induce Lender to

make the loan, Borrower expressly waives any right to prepay this Note except

as specifically provided herein.

 

Lender

shall not be required to accept any tender of prepayment of the principal

balance of this Note at any time when the “Reinvestment Rate” (as hereinafter

defined) is lower than the Stated Rate, less eighty-five basis points, unless

such tender also includes a sum of money (the “Prepayment Premium”) equal to

the present value (computed at the Reinvestment Rate) of the difference between

a stream of monthly payments necessary to amortize the outstanding principal

balance of this Note at the Stated Rate and a stream of monthly payments

necessary to amortize the outstanding principal balance of this Note at the

Reinvestment Rate (the “Differential”). 

In the event the Differential is less than zero, no Prepayment Premium

will be required.  For purposes of this

Note, the “Reinvestment Rate” is the yield on a United States Treasury

obligation of a constant maturity rate maturing closest in time but prior to

the maturity date of this Note, as reported in Federal Reserve Statistical

Release H. 15 (519) (or any comparable successor publication) on the fifth

(5th) business day preceding the prepayment date.

 

In

addition to the Prepayment Premium, if any, every tender of prepayment of the

principal balance of this Note shall be accompanied by a payment equal to (x)

all accrued but unpaid interest and other charges to the date of prepayment and

(y) an administrative fee equal to one half of one percent (0.5%) of the

outstanding principal balance of this Note; provided, however, that the

administrative fee shall not be less than One Thousand and 00/100 Dollars

($1,000.00) (collectively, the “Other Charges”).

 

If

the outstanding principal balance of this Note is accelerated by reason of an

Event of Default, such acceleration shall be deemed to be a prepayment and

Borrower shall pay to Lender, in addition to all sums due as a result of the

acceleration, any applicable Prepayment Premium and Other Charges.  In the event of an acceleration of this Note

in the first or second loan year, Borrower shall be required to pay a

Prepayment Premium equal to five percent (5%) of the outstanding principal

balance of this Note together with any Other Charges.  In the event that this Note is partially prepaid from casualty

insurance proceeds (as provided in the Security Agreement, defined below), no

Prepayment Premium or Other Charges shall be due and payable with respect to

such prepayment, and each monthly installment thereafter shall be reduced to an

amount which will amortize the then unpaid principal balance of this Note at

the Stated Rate over the then remaining term of this Note.

 

LATE PAYMENT CHARGE.  In

the event that any payment under this Note is not received by Lender within

fifteen (15) days of the date when due, a late charge of five percent (5%) of

the amount of such payment will be due. 

Borrower agrees that the late charge is a reasonable estimate of the

administrative costs which Lender will incur in processing the

delinquency.  Lender’s acceptance of a late

payment and/or of the late payment charge will not waive any default under this

Note or affect the acceleration of this Note (if this Note has been

accelerated).

 

2

 

COLLATERAL.  This

Note and the other obligations of Borrower to Lender contained in the documents

securing this Note are secured by and in accordance with the terms of that

certain Security Agreement, effective March 31, 1998, executed by Borrower for

the benefit of Lender (the “Security Agreement”; together with any other

documents securing payment under this Note, the “Loan Documents”).  All property securing the Indebtedness (as

defined in the Security Agreement) is referred to as the “Collateral”.

 

DEFAULT.  Any

of the following events shall, for purposes of this Note, constitute an “Event

of Default” :

 

(a)           Failure by Borrower to

pay any amount owing on or with respect to the Indebtedness when due, whether

by maturity, acceleration or otherwise, which failure continues for five (5)

business days.

 

(b)           Any failure by

Borrower (or any guarantor of all or any part of the Indebtedness) to comply

with any of the non-monetary terms, provisions, warranties or covenants of this

Note, the Security Agreement or the other Loan Documents, which failure

continues for fifteen (15) days after the date of written notice to Borrower

(or any guarantor) from Lender of such default; provided, however, that if: (i)

the nature of Borrower’s (or any guarantor’s) noncompliance is such that more

than fifteen (15) days are reasonably required for its cure, (ii) Borrower (or

any guarantor) has commenced such cure within said fifteen (15) day period,

(iii) Borrower (or any guarantor) diligently prosecutes such cure to

completion, (iv) Borrower (or any guarantor) provides Lender with written

notice of the noncompliance, AND (v) Borrower (or any guarantor) furnishes

reserves or a security bond, in an amount satisfactory to Lender in its sole

discretion, then Borrower (or any guarantor) shall not be in default.

 

(c)           Institution of

foreclosure proceedings or other exercise of rights and remedies by the holder

of any mortgage, deed of trust, security interest or other lien against the

Collateral (or any portion thereof); provided, however, if there is a good

faith dispute by Borrower (or any guarantor) as to the validity or

reasonableness of the claim which is the basis for such proceedings, then no

Event of Default shall have occurred under this clause (c) if Borrower (or any

guarantor) provides Lender with written notice of the proceedings and furnishes

reserves or a security bond for the proceedings satisfactory to Lender.

 

(d)           Insolvency of Borrower

(or any guarantor) or the admission in writing of Borrower’s (or any

guarantor’s) inability to pay debts as they mature.

 

(e)           Any statement,

representation or information made or furnished by or on behalf of Borrower (or

any guarantor) to Lender in connection with or to induce Lender to provide or

advance any of the Indebtedness shall prove to be false or materially

misleading when made or furnished.

 

(f)            Institution of

bankruptcy, reorganization, insolvency or other similar proceedings by or

against Borrower (or any guarantor), unless, in the case of a petition filed

against Borrower (or any guarantor), the same is dismissed within sixty (60)

days of the date of filing.

 

(g)           The issuance or filing

of any judgment, attachment, levy, garnishment or the commencement of any

related proceedings or the commencement of any other judicial process upon or

in respect to Borrower (or any guarantor) or the Collateral in which the amount

in controversy exceeds One Hundred Thousand Dollars ($100,000) and is not

covered by the insurance of Borrower (or any guarantor), unless satisfied, or

Borrower (or any guarantor) furnishes reserves or a security bond in an amount

satisfactory to Lender in its sole discretion, released or discharged within

sixty (60) days after the date of such issuance, filing or commencement.

 

3

 

(h)           Sale or other

disposition by Borrower (or any guarantor) of any substantial portion of its

assets or property.

 

(i)            Death, dissolution,

merger, consolidation, termination of existence, insolvency, business failure

or assignment for the benefit of creditors of or by Borrower (or any

guarantor); without the prior written consent of Lender, which consent shall not

be unreasonably withheld.

 

(j)            Any failure by

Borrower (or any guarantor) to pay any indebtedness (other than to Lender) in

excess of One Hundred Thousand Dollars ($100,000) (and exclusive of trade debt

incurred in the ordinary course of business) when due, or any failure in the

observance or performance of any term, covenant or condition in any document

evidencing, securing or relating to such indebtedness, which failure continues

beyond any applicable cure period.

 

(k)           Receipt by Borrower of

a notice of termination of the Management and Licensing Agreement from The

WesterN SizzliN Corporation, a Tennessee corporation (“Franchisor”), for the

Great American Steak & Buffet Company Restaurant located at 5902 Richmond

Hwy., Alexandria, Virginia 22303 (“Franchised Operation”).

 

(1)           If this Note, the

Security Agreement and the other Loan Documents have not been assigned to the

Trust (as defined in the Security Agreement), the default by Borrower which

continues beyond any applicable grace or cure period under the Retained

Obligations (as defined in the Security Agreement); provided, however, if this

Note, the Security Agreement and the other Loan Documents are assigned to the

Trust, this Clause (1) shall be of no force and effect during the term of such

assignment.

 

(m)          In the event that this

Note, the Security Agreement and the other Loan Documents are assigned to the

Trust, the default by Borrower which continues beyond any applicable grace or

cure period under the Trust Obligations (as defined in the Security Agreement).

 

(n)           Any default by

Borrower under the Lease between Guy E. Clark and Betty S. Clark, both

individuals, as landlord, and Borrower, as tenant, dated January 1, 1996

(“Lease”), which default is not cured within any applicable cure period set

forth in such Lease.

 

Upon

an occurrence of an Event of Default, Lender shall have the option to declare

all or part of the Indebtedness (including this Note) immediately due and

payable.  If this Note is not paid at

maturity (whether by acceleration or otherwise), Lender shall have all of the

rights and remedies provided at law or equity or by Agreement, including,

without limit, the right to sell or liquidate all or any part of the

Collateral.  The remedies of Lender are

cumulative and not exclusive.

 

EXAMINATION OF RECORDS. 

Borrower shall at all times keep full and accurate records of its

business and of the Collateral, which records shall be open to inspection and

copying by Lender at all reasonable times.

 

LIABILITY OF SIGNATORIES. 

Borrower, and all guarantors and endorsers, and any other party liable

for the Indebtedness evidenced by this Note: (i) severally waive presentment,

demand, protest, notice of dishonor, notice of non-payment and notice of

acceleration of this Note; and (ii) agree that no extension or postponement of

the time for payment, or waiver, or indulgence or forbearance granted to

Borrower (without limit as to number or period) or any modification of this

Note, or any substitution, or exchange or release of all or part of the

Collateral, or addition of any party to this Note, or release or discharge of,

or suspension of any rights and remedies against any party liable on this Note,

shall reduce or affect the obligation of any other party liable for the payment

of this Note.

 

4

 

NON-WAIVER.  No

delay by Lender in the exercise of any right or remedy shall operate as a

waiver.  No single or partial exercise

by Lender of any right or remedy shall preclude any future exercise of such

right or remedy or the exercise of any other right or remedy.  No waiver or indulgence by Lender of any

default or Event of Default shall be effective unless in writing and signed by

Lender, nor shall a waiver on one occasion be construed as a bar to any right

or remedy, or waiver of any default or Event of Default on any future occasion.

 

REIMBURSEMENT OF EXPENSES. 

Borrower shall reimburse Lender for all costs and expenses, including

reasonable attorneys’ fees, incurred by Lender in enforcing the rights of

Lender under this Note.  Such costs and

expenses shall include, without limitation, costs or expenses incurred by

Lender in any bankruptcy, reorganization, insolvency or other similar

proceeding.  Any reference in this Note

to attorneys’ fees shall mean fees, charges, costs and expenses of in-house

and/or outside counsel and paralegals, whether or not a suit or proceeding is

instituted, and whether incurred at the trial court level, on appeal, in a

bankruptcy, administrative or probate proceeding, in consultation with counsel,

or otherwise.

 

WAIVER OF JURY TRIAL.  BORROWER AND

LENDER ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT

THAT IT MAY BE WAIVED.  EACH PARTY,

AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF

THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES

ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE

OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS NOTE OR THE INDEBTEDNESS.

 

ASSIGNMENT.  This

Note is freely assignable, in whole or in part, by Lender without prior notice

to or consent of Borrower; provided, however, that Lender (or its assignee)

shall provide written notice of such assignment to Borrower in the event that

Lender (or such assignee) desires to designate a new person or entity as payee

and/or a new place of payment for the obligations under this Note.  Borrower may not, in whole or in part,

directly or indirectly, assign this Note or its rights hereunder or delegate

its duties hereunder without, in each instance, the specific prior written

consent of Lender, which consent may be withheld or delayed in Lender’s sole

discretion. Lender shall be fully discharged from all responsibility accruing

hereunder from and after the effective date of any such assignment.  Lender’s assignee shall, to the extent of

the assignment, be vested with all the powers and rights of Lender hereunder,

and to the extent of such assignment the assignee may fully enforce such rights

and powers, and all references to Lender shall mean and refer to such

assignee.  Lender shall retain all

rights and powers hereby given not so assigned, transferred and/or

delivered.  Borrower hereby waives all

defenses which Borrower may be entitled to assert against Lender’s assignee

with respect to liability accruing hereunder prior to the effective date of any

assignment of Lender’s interest herein.

 

SECURITIZATION. 

Borrower understands and agrees that Lender may, from time to time,

assign its rights and powers under this Note, the Security Agreement and any

other Loan Documents, in whole or in part, in connection with a securitization

program.  Borrower agrees to enter into

an amendment to this Note, the Security Agreement and any other Loan Documents

if such amendments are required by a nationally recognized rating agency in

connection with a securitization program sponsored by Lender and in which this

Note, the Security Agreement any other Loan Documents are to be included;

provided that Borrower shall not be obligated to enter into any amendment which

adversely affects Borrower or otherwise adversely alters any of the financial

terms of this Note, die Security Agreement and any other Loan Documents.

 

MISCELLANEOUS.  The

terms and provisions of this Note shall be governed by and construed in

accordance with the laws of the Commonwealth of Virginia.  Lender and Borrower agree that any dispute

which may arise between them with regard to this Note shall be resolved by

litigation in state or federal court. 

Litigation may be initiated by Lender or its assignee, at its

discretion, in the State of the principal place of business of Lender or its

assignee, the State of the principal place of business of Borrower, or the

State where the Collateral is located.  BORROWER HEREBY KNOWINGLY AND IRREVOCABLY WAIVES ANY

OBJECTIONS ON THE

 

5

 

GROUNDS

OF IMPROPER JURISDICTION OR VENUE  TO  AN ACTION INITIATED AS SET FORTH ABOVE AND

AGREES THAT EFFECTIVE SERVICE OF PROCESS MAY BE MADE UPON BORROWER BY

REGISTERED MAIL RETURN RECECIPT REQUESTED. 

The terms and

provisions of this Note may only be changed in writing, executed by Borrower

and Lender.

 

	

  THE WESTERN SIZZLIN STORES, INC.

  
	

   

  
	

  By:

  	

  /s/ Victor F. Foti

  	

   

  
	

   

  
	

   

  	

  Its:  President

  
				

 

Address:

 

P.O.

Box 12167 

Roanoke,

VA 24023-2167

 

Tax

I.D. No. 54-1787907

 

6

 

Pay to the order of

without warranty or

recourse.

	

  Captec Financial Group Funding Corporation

  
	

  By:

  
	

   

  	

  /s/ [ILLEGIBLE]

  	

   

  
	

   

  	

   

  	

   

  
	

  Its:

  	

   

  	

   

  
					

 

 

Loan No. 06722

5902 Richmond Hwy.

Alexandria, Virginia

 

COLLATERAL

ASSIGNMENT OF LEASE AND OPTION RIGHTS

 

THIS

COLLATERAL ASSIGNMENT OF LEASE AND OPTION RIGHTS (“Assignment”) is made as of

the 23 day of March, 1998, by THE WESTERN SIZZLIN STORES, INC., a Virginia corporation, whose address is P.

O. Box 12167, Roanoke, VA 24023-2167 (“Assignor”), in favor of CAPTEC

FINANCIAL GROUP FUNDING CORPORATION, a Michigan corporation, whose address is 24 Frank Lloyd Wright Drive,

Lobby L, 4th Floor, P.O. Box 544, Ann Arbor, Michigan 48106-0544 (“Assignee”).  This instrument shall become effective on

March 31, 1998.

 

For

good and valuable consideration, the receipt and sufficiency of which is hereby

acknowledged, Assignor presently assigns to Assignee all of Assignor’s right,

title and interest in and to its lessee’s interest in that certain lease with Guy E. Clark and Betty S. Clark, both individuals,(“Lessor”) dated as of January 1, 1996,

a copy of which is attached hereto as Exhibit A (the “Lease”) respecting die

premises commonly known as the Great American Steak & Buffet Company

Restaurant located at 5902 Richmond Hwy., Alexandria, Virginia

(“Premises”).  This Assignment is for

collateral purposes only, and except as specified herein, Assignee shall have

no liability or obligation of any kind whatsoever arising from or in connection

with this Assignment or the Lease unless Assignee shall take possession of the

Premises and assume the obligations of Assignor thereunder.

 

Assignor

represents and warrants to Assignee that it has full power and authority to so

assign the Lease and its interest therein and that Assignor has not previously,

and is not obligated to, assign or transfer any of its interest in the Lease or

the Premises.

 

Throughout

the term of the Lease, Assignor covenants and agrees to exercise all options to

extend or renew the term of the Lease not less than ninety (90) days prior to

the last day upon which any such option may be exercised, but in no event less

than six (6) months prior to of the term of the Lease, unless Assignee otherwise

agrees in writing.  Assignor shall send

Assignee a copy of the notice of exercise concurrently with Assignor’s exercise

of the option.  Upon the failure of

Assignor to so elect or renew the Lease as aforesaid (and the failure of

Assignee to otherwise agree in writing), Assignee shall have the right, but not

the obligation, to exercise such extension or renewal option on behalf of

Assignor, and Assignor hereby appoints Assignee (or any of its employees) as

its attorney-in-fact for die purpose of exercising such extension or renewal

option.

 

If

an “Event of Default” occurs under the Promissory Note, dated March 23, 1998,

in the original principal amount of One Million Two Hundred Fifty Thousand and

00/100 Dollars ($1,250,000.00), by Assignor in favor of Assignee (the “Note”)

or under any documents or instruments securing the Note, Assignee shall have

the right and is hereby empowered to take possession of the Premises, expel

Assignor therefrom, and, in such event, Assignor shall have no further right,

title or interest in the Lease and shall remain liable to Assignee for all past

due rents Assignee shall be required to pay to the Lessor under the Lease to

effectuate this Assignment.

 

Assignor

agrees that it will not suffer or permit any surrender, termination, amendment

or modification of the Lease without the prior written consent of Assignee,

which consent shall not be unreasonably wthheld.  At the request of

Assignee, Assignor shall provide Assignee with rent payment or such other

information regarding the Lease as Assignee shall reasonably require.

 

This

Assignment shall be governed by the laws of the Commonwealth of Virginia.

 

This

Assignment may be executed in one or more counterparts, each of which shall

constitute an original and all of which together shall constitute one and the

same instrument.

 

[SIGNATURE PAGE FOLLOWS]

 

 

IN

WITNESS WHEREOF, Assignor has executed this Assignment as of the day and year

noted above.

 

	

  Witnesses:

  	

   

  	

  ASSIGNOR:

  	 

	

   

  	

   

  	

   

  	 

	

   

  	

   

  	

  THE WESTERN SIZZLIN STORES, INC.

  	 

	

   

  	

   

  	

   

  	 

	

  /s/ [ILLEGIBLE]

  	

   

  	

  By:

  	

  /s/ Victor F. Foti

  	 

	

   

  	

   

  	

   

  	 

	

  /s/ [ILLEGIBLE]

  	

   

  	

   

  	

  Its:  

  	

  President

  
								

 

COMMONWEALTH

OF VIRGINIA          )

 

COUNTY

OF ROANOKE                             )

 

I,

Richard R. Sayers, a notary public in and for the State and County aforesaid,

do certify that Victor F. Foti, whose name, as President of The WesterN SizzliN Stores, Inc.,

is signed to the writing above, bearing date on the 23rd day of March has

acknowledged the same before me in my county aforesaid.

 

Given

under my hand and official seal this 23rd day of March.

 

My

term of office expires on the 28th day of Februrary 28, 1999.

 

	

   

  	

  /s/ Richard R. Sayers

  
	

   

  	

   

  
	

   

  	

  Notary Public

  [Notary Public’s Seal]

  

 

2

 

Loan Nos. 06717-06723

 

SECURITY AGREEMENT

 

THIS

SECURITY AGREEMENT (“Agreement”) is made as of the 23rd day of March, 1998, by THE WESTERN  SIZZLIN  CORPORATION, a Tennessee corporation, of P.O. Box 12167,

Roanoke, Virginia 24023-2167 (“Guarantor”) in favor of CAPTEC

FINANCIAL GROUP FUNDING CORPORATION, a Michigan corporation, of 24 Frank Lloyd Wright Drive, Lobby L, 4th

Floor, P.O. Box 544, Ann Arbor, Michigan, 48106 (together with its successors,

assigns and transferees, “Lender”). 

This instrument shall become effective on March 31, 1998.

 

WITNESSETH:

 

This

Agreement is made to secure the payment and performance obligations of

Guarantor under those certain Guaranties, effective of even date herewith, made

by Guarantor in favor of Lender (“Guaranties”).  The Guaranties secure the payment and performance obligations of

THE WESTERN SIZZLIN STORES, INC., a Virginia corporation and a wholly owned

subsidiary of Guarantor (“Borrower”), under those certain loans in the original

aggregate principal amount of Six Million Two Hundred Thousand and 00/100

Dollars ($6,200,000.00) evidenced by those certain Promissory Notes, each of

even dated herewith (“Notes”), made by Borrower in favor of Lender, which Notes

are secured by the instruments referenced therein (together with the Notes,

“Loan Documents”).

 

1.             DEFINITIONS  For purposes of this Agreement,

the following terms shall be defined as follows:

 

(a)           Franchise Agreement(s) - shall mean those Agreement(s) by which

Guarantor grants an entity(ies) or individual(s), other than a Subsidiary, the

right to operate a WesterN SizzliN Steak House or WesterN SizzliN Wood Grill Buffet

restaurant or to use the WesterN SizzliN or WesterN SizzliN Wood Grill

trademarks, trade names or service marks, which Agreements are specified on

Schedule 1 attached hereto, as updated and amended from time to time.

 

(b)           Subsidiary - with respect to Guarantor shall mean any

corporation or other entity in which Guarantor or one of its Subsidiaries,

holds securities or other interests having the power to election a majority of

that corporation’s or entity’s board of directors or similar governing body, or

otherwise having the power to direct the business and policies of that

corporation or entity.

 

2.            COLLATERAL.

 

Grant of Security Interest. 

Guarantor grants Lender a security interest in all of Guarantor’s

franchise fee and franchise royalty fee accounts receivable now outstanding or

hereafter arising owing to Guarantor and to be paid to Guarantor pursuant to

the Franchise Agreemt(s) including without limitation, franchise fees,

management fees or any other similar fees for the use of trademarks, trade

names, service marks, advertising services, know-how, management services,

materials, equipment and/or labor (collectively, “Franchise Accounts

Receivable”), all general intangibles (as defined in the Uniform Commercial

Code relating to the documents or instruments evidencing the obligations to

Guarantor for payment of the Franchise Accounts Receivable, and all other

instruments and documents evidencing the Franchise Agreemts now owned or

hereafter acquired (collectively, the “Collateral”).  The Collateral shall also include any documents of title

evidencing the aforementioned Collateral. 

PROVIDED, HOWEVER, that Lender assumes no responsibility of performance

of any of Guarantor’s obligations with reference to any of said Collateral.

 

 

3.                                       WARRANTIES

AND REPRESENTATIONS.  Guarantor warrants and covenants to Lender

as follows:

 

(a)           Authority. This Agreement is the valid and binding obligation of Guarantor,

enforceable in accordance with its terms. 

If Guarantor is a corporation, partnership, limited liability company or

other organization, Guarantor is organized and validly existing in good

standing under the laws of its state of establishment, and the execution,

delivery and performance of this Agreement have been duly authorized by all

necessary action of Guarantor’s Board of Directors, partners, or governing body

and will not violate Guarantor’s governing instruments or other Agreements.

 

(b)           Name; Address; Location of

Collateral. Guarantor’s

name and principal place of business and the location(s) of the Collateral are

accurately set forth on the signature page and on Schedule 1 of this Agreement.

 

(c)           Nature of Collateral. All of the Collateral is held by Guarantor

solely for business purposes, and none of the Collateral constitutes consumer

goods.  No part of the Collateral

consists of equipment used in farming operations or farm products or accounts

or general intangibles arising from or relating to the sale of farm products by

a farmer.  The Collateral was acquired

in the ordinary course of business of Guarantor.  There are no setoffs, counterclaims, or defenses against the

Collateral, except as provided under the terms of the Franchise Agreements.

 

(d)           Title to Collateral. Guarantor has good and marketable title to

the Collateral, free and clear of any liens or encumbrances whatsoever, other

than Permitted Liens, as hereinafter defined. 

Guarantor will keep the Collateral free of all other liens, encumbrances

and security interests.  Guarantor will

defend the Collateral against all claims and demands of all persons at any time

claiming any interest in the Collateral. 

Guarantor warrants that the Franchise Accounts Receivable are due and

owing under the related Franchise Agreements.

 

(e)           Perfection and Priority of Security

Interest. The execution

and delivery of this Agreement creates a valid security interest in the

Collateral, and upon the filing of a UCC-1 financing statement with the

Secretary of State of Tennessee and the Virginia State Corporation Commission,

Lender will have a second priority perfected security Interest in the

Collateral, subject only to the security interest of the Permitted Liens.

 

“Permitted

Liens”  shall mean any mortgage,

security interest or other lien or encumbrance that Central Fidelity National

Bank (“CFNB”) may now have or subsequently obtain as security for the payment

of that certain $500,000.00 Revolving Line of Credit granted to Guarantor by

CFNB (the “Revolving Line of Credit”) and as evidenced by that certain

Commercial Note and that certain Security Agreement, both dated May 26, 1995,

between Guarantor and CFNB.  Lender

agrees that this Agreement and any mortgage, security interest or other lien

(including possessory liens) or encumbrance that it may presently have or

subsequently create or acquire as security for the Guaranties is and shall

remain subject and subordinate in right of priority to any mortgage, security

interest or other lien or encumbrance that CFNB may now have or subsequently

obtain as security for the payment of the Revolving Line of Credit.  Guarantor agrees to execute any instrument

or financing statements necessary to evidence the subordination herein set

forth.

 

(f)            Financing Statements. Except as disclosed to and accepted by

Lender in writing and subject to any Permitted Liens, no financing statement

covering any part of the Collateral is on file in any public office.  Borrower will execute financing statement(s)

in form acceptable to Lender and will pay the cost of filing financing

statement(s) in all public offices wherever filing is deemed desirable by

Lender.  A carbon, photographic or other

reproduction of this Agreement shall be sufficient as a financing statement

under the UCC and may be filed by Lender in any filing office.  This Agreement shall be terminated only by

the filing of a termination statement(s) in accordance with the applicable

provisions of the UCC.

 

(g)           Payment of Taxes. Guarantor shall pay when due and before any

interest, collection fees or penalties accrue, all taxes, expenses,

assessments, liens or other charges which may now or hereafter be levied or

assessed against the Collateral, and shall furnish proof of payment of the same

upon request by Lender or, in the

 

2

 

alternative, post a bond

satisfactory to Lender under the provisions of the applicable law with respect

to any lien or claim of lien filed for record within ten (10) days of the date

of filing of said lien or claim.

 

4.             PROHIBITION

ON TRANSFER OR MODIFICATION.  Guarantor shall not transfer, sell, assign or

lease or modify the Collateral or any interest therein, any part thereof, nor

permit any other security interest to be created therein without the prior

written consent of Lender.

 

5.             PROHIBITION

ON CHANGE OF NAME, ORGANIZATION OR LOCATION. 

Guarantor

shall not conduct Guarantor’s business under any name other than as appears in

this Agreement nor change or reorganize the type of Guarantor’s business

entity, nor change the location of any of the Collateral without the prior

written consent of Lender, which consent shall not be unreasonably

withheld.  Guarantor shall maintain its

present business form and right to do business.

 

6.             RIGHT OF

SETOFF.  Guarantor hereby grants to Lender the right,

exercisable at any time and from tune to time, if Guarantor is then in default,

to set off or apply against the Guaranties any account or deposit with Lender

of which Guarantor is the or one of the owners or against any other amounts

which may be in the possession of Lender and to the credit of Guarantor.

 

7.             EXAMINATION

OF RECORDS AND COLLATERAL.  Guarantor shall at all times keep full and

accurate records of its business, including Franchise Accounts Receivable at

Guarantor’s place of business, which records shall be open to inspection by

Lender during Guarantor’s regular business hours (whether the records are

printed or in magnetic, electronic, or machine readable or other form).  Lender is hereby granted the full right to

enter upon any property owned by or in the possession of Guarantor to examine

and inspect the Collateral during Guarantor’s regular business hours.  Guarantor shall, upon reasonable request by

Lender, deliver any or all records to a place of Lender’s choosing,

 

8.             REIMBURSEMENT

OF EXPENSES.  Guarantor shall reimburse Lender for all

expenses, including reasonable attorneys’ fees, incurred by Lender in enforcing

the rights of Lender hereunder, including the storage and liquidation of

Collateral, and any such expenses shall be included in the amount covered by

the Guaranties and shall be immediately due and payable.  Such expenses shall include, without

limitation, any costs or expenses incurred by Lender in any bankruptcy,

reorganization, insolvency or other similar proceeding.

 

9.             RIGHTS

AND OBLIGATIONS OF LENDER.  In the event Guarantor fails to pay taxes or other

assessments (and does not post a bond, supply additional reserves or provide

additional security satisfactory to Lender) or fails to perform any other of

its obligations hereunder, Lender may (but shall not be required to) without

notice to or consent from Guarantor, pay or perform such obligations for the

account of Guarantor and the same shall be added to the amount of the

indebtedness covered by the Guaranties and secured by this Agreement and shall

be immediately due and payable.  Lender

shall not be liable for any loss to the Collateral nor shall such loss reduce

the balance due.  Guarantor hereby

expressly waives any and all claims or right to partial or complete discharge

resulting from Lender’s release of or failure to seek payment from any other

party or failure to realize on any instrument or collateral or to setoff any

moneys, or to perfect its lien or realize on any collateral security,

notwithstanding Section 3605 of the Uniform Commercial Code.  This shall include, without limitation, extension

of time or forbearance of payment or performance, bankruptcy, change in terms

of notes, guaranties or other loan document, or waiver by Lender of any

required performance of any condition, or the surrender, release, exchange,

dissipation, loss or alteration of any collateral, in whole or in part.

 

10.          INDEMNIFICATION.  Guarantor shall indemnify and save Lender harmless from all claims,

obligations, costs, expenses, including attorneys’ fees, and causes of action

or other rights asserted against Lender relating to the Collateral.  Any such claim, obligation, cost or expense

shall be an indebtedness of Guarantor covered by the Guaranties, secured by

this Agreement and payable upon demand.

 

3

 

11.          DEFAULT AND

REMEDIES.

 

(a)           Events of

Default. Any of the

following events shall, for purposes of this Agreement, constitute an “Event of

Default”:

 

(i)

Failure by Guarantor to pay any amount owing on or with respect to the

indebtedness secured by the Guaranties when due, whether by maturity,

acceleration or otherwise, which failure continues for five (5) business days.

 

(ii)

Any failure by Borrower or Guarantor to comply with, or breach by Borrower or

Guarantor of, any of the non-monetary terms, provisions, warranties or

covenants of the Note(s), this Agreement or the other Loan Documents, which

failure continues for fifteen (15) days after the date of written notice to

Borrower or Guarantor from Lender of such default; provided, however, that if:

(i) the nature of Borrower’s (or Guarantor’s) noncompliance is such that more

than fifteen (15) days are reasonably required for its cure, (ii) Borrower (or

Guarantor) has commenced such cure within said fifteen (15) day period, (iii)

Borrower (or Guarantor) diligently prosecutes such cure to completion, (iv)

Borrower (or Guarantor) provides Lender with written notice of the

noncompliance, AND (v) Borrower (or Guarantor) furnishes reserves or a security

bond, in an amount satisfactory to Lender in its sole discretion, then Borrower

(or Guarantor) shall not be in default.

 

(iii)

Institution of remedial proceedings or other exercise of rights and remedies by

the holder of any security interest or other lien against the Collateral or any

portion thereof, except for proceedings with respect to the Permitted Liens;

provided, however, if there is a good faith dispute by Borrower or Guarantor as

to the validity or reasonableness of the claim which is the basis for such

proceedings, then no Event of Default shall have occurred under this Section if

Borrower or Guarantor provides Lender with written notice of the proceedings

and furnishes reserves or a security bond for the proceedings satisfactory to

Lender.

 

(iv)

The insolvency of Borrower or Guarantor or the admission in writing of Borrower’s

or Guarantor’s inability to pay debts as they mature.

 

(v)

Any statement, representation or information made or furnished by or on behalf

of Borrower or Guarantor to Lender in connection with or to induce Lender to

provide any of the indebtedness secured by the Guaranties shall prove to be

false or materially misleading when made or furnished.

 

(vi)

Institution of bankruptcy, reorganization, insolvency or other similar

proceedings by or against Borrower or Guarantor, unless, in the case of a

petition filed against Borrower or Guarantor, the same is dismissed within

sixty (60) days of the date of filing.

 

(vii)

The issuance or filing of any judgment, attachment, levy, garnishment or the

commencement of any related proceedings or the commencement of any other

judicial process upon or in respect to Borrower or Guarantor or the Collateral,

except with respect to the Permitted Liens, in which the amount in controversy

exceeds One Hundred Thousand Dollars ($100,000) and is not covered by the

insurance of Borrower or Guarantor, unless satisfied, or Borrower (or any

guarantor) furnishes reserves or a security bond in an amount satisfactory to

Lender in its sole discretion,released or discharged within sixty (60) days

after the date of such issuance, filing or commencement.

 

(viii)

Sale or other disposition by Borrower or Guarantor of any substantial portion

of assets or property.

 

(ix)

Dissolution, merger, consolidation, termination of existence, insolvency,

business failure or assignment for the benefit of creditors of or by Borrower

or Guarantor; without the prior written consent of Lender, which consent shall

not be unreasonably withheld.

 

(x)

Any failure by Borrower or Guarantor to pay any indebtedness (other than to

Lender) in excess of One Hundred Thousand Dollars ($100,000) (and exclusive of

trade debt incurred in the ordinary course of business) when due, or any

failure in the observance or performance of any term, covenant or condition in

any

 

4

 

document evidencing,

securing or relating to such indebtedness, which failure continues beyond any

applicable cure period.

 

(b)

Remedies. Upon the occurrence of an Event of Default

as defined above, unless the same is waived by Lender in writing, Lender shall

be entitled to the following remedies, all of which shall be cumulative and not

alternative:

 

(i) Collection of Franchise Accounts Receivable.  Guarantor shall continue to collect the Franchise Accounts

Receivable until Lender notifies Guarantor and the obligors on such Franchise

Accounts Receivable, after which time Guarantor shall hold any proceeds

collected in trust for Lender and shall not commingle the same and shall rum

such proceeds over to the Lender immediately upon receipt thereof.

 

(ii) Guarantor shall, upon request from time to time and at any time by

Lender, provide Lender with an updated list of Guarantor’s Franchise Accounts

Receivable, stating the current name and address of the obligor, the balance

due, and any comments pertaining to the status of the collection and defenses

or counterclaims by such obligors to the extent that such information is not

reflected in the financial statements of Guarantor to be delivered to Lender

pursuant to the terms of the Guaranties.

 

(iii) Lender may, or upon Lender’s request, Guarantor shall notify

obligors under such accounts of the existence of this Agreement and instruct

such obligors to make future payments directly to Lender at any time it chooses

to do so only after default by Guarantor.

 

(iv) Guarantor hereby irrevocably authorizes Lender in Guarantor’s name:

(a) To demand, receive, sue for and give receipts as acquittances for any

moneys due or to become due on any Franchise Accounts Receivable (a) with

respect to any Collateral, to assent to any or all extensions or postponements

of the time of payment thereof or any other indulgence in connection therewith,

to the substitution, exchange or release of Collateral, to the addition or

release of any party primarily or secondarily liable, to the acceptance of partial

payments thereon and the settlement, compromise or adjustment thereof, all in

such manner and at such time or times as Lender shall deem advisable; (b) to

make all necessary transfers of all or any part of the Collateral in connection

with any sale, lease, or other disposition made pursuant hereto: to execute and

deliver for value all necessary or appropriate bills of sale, assignment and

other instruments in connection with any such sale, lease, or other

disposition, Guarantor hereby ratifies and confirms all that its said attorney

(or any substitute) shall lawfully do hereunder and pursuant hereto;

nevertheless, if so requested by Lender or a purchaser or lessee, Guarantor

shall ratify and confirm any sale, lease or other disposition by executing and

delivering to Lender or such purchaser or lessee, all proper bills of sale,

assignments, releases, leases, and other instruments as may be designated in

any such request.  Guarantor understands

that Lender has no duty for collection or preservation, beyond reasonable care

of Guarantor’s Franchise Accounts Receivable.

 

(v) Obtain Possession of Collateral.  Guarantor agrees, upon request

of Lender, to assemble the Collateral and make it available to the Lender at

any place reasonably convenient for Guarantor and Lender.  Guarantor grants Lender permission to enter

upon any premises owned or occupied by Guarantor for the purpose of taking

possession of the Collateral or any part of it, including any paper covering

such Collateral or such part thereof as remains in Guarantor’s possession, and

any and all proceeds of such Collateral as has been sold, wherever and in

whatever form.

 

(vi) Lender shall have the right to take possession of the Collateral,

with or without demand, and with or without process of law.  Lender shall have the right to sell and

dispose of the Collateral and to distribute the proceeds according to law.  If there is any statutory requirement for

notice, that requirement shall be met if Lender shall send notice to Borrower

at least five (5) days prior to the date of sale, disposition or other event

giving rise to the required notice. 

Borrower shall be liable for any deficiency remaining after disposition

of the Collateral.

 

5

 

(vii) Additional Rights

and Remedies. Lender shall also have, and may exercise in addition

to the above any one or more of the rights and remedies under the Uniform

Commercial Code or any other law.

 

(c)           Remedies Generally.

 

(i) All remedies

provided for in Section 10(b) shall be available to the extent not prohibited

by law. Each remedy shall be cumulative and additional to any other remedy of

Lender at law, in equity or by statute. No delay or omission to exercise any

right or power accruing upon any default or Event of Default shall impair any

such right or power or shall be construed to be a waiver of, or acquiescence

in, any such default or Event of Default.

 

(ii) Lender may

waive any Event of Default and may rescind any declaration of maturity of

payments on the Indebtedness. In case of such waiver or recision Guarantor and

Lender shall be restored to their respective former positions and rights under

this Agreement. Any waiver by

Lender of any default or Event of Default shall be in writing and shall be

limited to the particular default waived and shall not be deemed to waive any

other default.

 

(d)           Application of Proceeds.   Any proceeds received by Lender from the

exercise of remedies pursuant to Section 10(b) of this Agreement shall be applied as follows:

 

(i) First, to pay

all costs and expenses incidental to the leasing, foreclosure, sale or other

disposition of the Collateral. These costs and expenses shall include, without

limit, any costs and expenses incurred by Lender (including, without limit,

attorneys' fees and disbursements), and any taxes and assessments or other

liens and encumbrances prior to the lien of this Agreement.

 

(ii) Second, to

all sums expended or incurred by Lender, directly or indirectly in carrying out

any term, covenant or agreement

under this Agreement or any

related document, together with interest as provided this Agreement.

 

(iii) Third, to

the payment of the Indebtedness. If the proceeds are insufficient to fully pay

the Indebtedness, then application shall be made first to late charges and

interest accrued and unpaid, then to any applicable prepayment premiums, and

then to unpaid fees and other charges, then to the outstanding principal

balance.

 

(iv) Fourth, any

surplus remaining shall be paid to Guarantor or to whomsoever may be lawfully

entitled.

 

(e)           Further Actions.  Promptly upon the request of Lender,

Guarantor shall execute, acknowledge and deliver any and all further documents,

security agreements, financing

statements and assurances, and do or cause to be done all further acts as

Lender may require to confirm and protect the lien of this Agreement or otherwise to accomplish the

purposes of this Agreement.

 

(f)            Attorneys Fees.

Any reference in this Agreement

to attorneys’ fees shall refer to reasonable fees, charges, costs and expenses

of in-house and outside attorneys and paralegals, whether or not a suit or

proceeding is instituted, and whether incurred at the trial court level, on

appeal, in a bankruptcy, administrative or probate proceeding, in consultation

with counsel, or otherwise. All costs, expenses and fees of any nature for

which Guarantor is obligated to reimburse or indemnify Lender are part of the

indebtedness covered by the Guaranties and secured by this Agreement and are payable upon demand,

unless expressly provided otherwise, with interest until repaid at the highest

rate charged on any of the Indebtedness (but not to exceed the maximum rate

permitted by law).

 

6

 

12.           MISCELLANEOUS.

 

(a)           Notices. Any notices, demands or

other communications required or contemplated by this Agreement shall be deemed duly given if

delivered or mailed, registered mail, return receipt requested, postage fully

prepaid, to the addresses of the parties as stated in this Agreement, or as subsequently directed by

the appropriate party in writing, and shall be deemed effective when mailed.

 

(b)           Non-Waiver.

Failure of Lender to exercise any right hereunder, including the right to

declare the balance of the Indebtedness immediately due, shall not constitute a

waiver nor preclude the Lender from exercising such right at any time. Neither

extension of time for payment or any other modification of the terms of the

Indebtedness or of this Agreement

shall operate to release the liability of Guarantor or permit any delay as to

future payments. Acceptance by Lender of a partial payment shall not alter the

obligation of Guarantor to make the full payment, nor shall acceptance of a

late payment constitute Lender’s waiver of prompt payment of such payment or

any subsequent payment. No waiver shall be valid unless in writing and signed

by an officer of Lender.

 

(c)           Joint and Several Obligations. In the event that more than one person or entity

executes this Agreemt, the obligations of each shall be joint and several.

 

(d)           Governing Law.    This Agreement shall be construed according to the laws of the State of

Tennessee.

 

(e)           Successors and Assigns.   This Agreement shall be binding upon the successors and assigns of Guarantor

including, without limit, any debtor in possession or trustee in bankruptcy for

Guarantor, and the rights and privileges of Lender under this Agreement shall inure to the benefit of its

successors and assigns. This shall not be deemed a consent by Lender to a

conveyance by Guarantor of all or any part of the Collateral or of any

ownership interest in Guarantor.

 

(f)            Notices.

Notice from one party to another relating to this Agreement, if required, shall be deemed effective if made in writing

(including telecommunications) and delivered to the recipient’s address, telex

number or telecopier number set forth by any of the following means:  (1) hand delivery, (2) registered or

certified mail, postage prepaid, (3) express mail or other overnight courier

service or (4) telecopy, telex or other wire transmission with request for

assurance of receipt in a manner typical with respect to communications of that

type. Notice made in accordance with these provisions shall be deemed delivered

on receipt if delivered by hand or wire transmission, on the third business day

after mailing if mailed by registered or certified mail, or on the next

business day after mailing or deposit with the postal service or an overnight

courier service if delivered by express mail or overnight courier. Guarantor’s

telecopier number is (540) 345-0831, and Lender’s telecopier number is (313)

994-1376.

 

(g)           Entire Agreement; Amendments.  This Agreement and any Agreement

to which it refers state all rights and obligations of the parties and

supersede all other Agreements

(oral or written) with respect to the security interests granted by this Agreement. 

Any amendment of this Agreement

shall be in writing and shall require the signature of Guarantor and Lender.

 

(h)           Partial Invalidity.  The invalidity or

unenforceability of any provision of this Agreement shall not affect the validity or enforceability of the

remaining provisions of this Agreement.

 

(i)            Inspections.

Any inspection, audit, appraisal or examination by Lender or its agents of the

Collateral or of information or documents pertaining to the Collateral is for

the sole purpose of protecting Lender’s interests under this Agreement and is not for the benefit or

protection of Guarantor or any third party.

 

(j)            Joint and Several Liability. In the

event that more than one person or entity executes this Agreement, the obligations of each person or

entity shall be joint and several.

 

7

 

(k)           Automatic Reinstatement.

Notwithstanding any prior revocation, termination, surrender or discharge of

this Agreement, the

effectiveness of this Agreement

shall automatically continue or be reinstated, as the case may be, in the event

that:

 

(i)            Any payment received or credit given

by Lender in respect of the Indebtedness is determined to be a preference,

impermissible setoff, fraudulent conveyance, diversion of trust funds, or

otherwise required to be returned to Guarantor or any third party under any

applicable state or federal law, including, without limit, laws pertaining to

bankruptcy or insolvency, in which case this Agreement shall be enforceable as if any such payment or credit had not

been received or given, whether or not Lender relied upon this payment or

credit or changed its position as a consequence of it.

 

(ii)           In the event of continuation or

reinstatement of this Agreement,

Guarantor agrees upon demand by Lender to execute and deliver to Lender those

documents which Lender determines are appropriate to further evidence (in the

public records or otherwise) this continuation or reinstatement, although the

failure of Guarantor to do so shall not affect in any way the reinstatement or

continuation. If Guarantor does not execute and deliver to Lender such

documents upon demand, Lender and each officer of Lender is irrevocably

appointed (which appointment is coupled with an interest) the true and lawful

attorney of Guarantor (with full power of substitution) to execute and deliver

such documents in the name and on behalf of Guarantor.

 

(1)           WAIVER

OF JURY TRIAL. GUARANTOR AND LENDER ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY

JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER

CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR

CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY RIGHT

TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR

ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT OR THE INDEBTEDNESS.

 

(m)          Assignment. This Agreement is freely assignable, in whole or

in part, by Lender without prior notice to or consent of Guarantor; provided,

however, that Lender (or its assignee) shall provide written notice of such

assignment to Guarantor in the event that Lender (or such assignee) desires to

designate a new person or entity as payee and/or a new place of payment for the

obligations under the Notes. Guarantor may not, in whole or in part, directly

or indirectly, assign this Agreement

or its rights hereunder or delegate its duties hereunder without, in each

instance, the specific prior written consent of Lender, which consent may be

withheld or delayed in Lender’s sole discretion. Lender shall be fully

discharged from all responsibility accruing hereunder from and after the

effective date of any such assignment. Lender’s assignee shall, to the extent

of the assignment, be vested with all the powers and rights of Lender hereunder

(including those granted under Section 10 hereof or otherwise with respect to

the Collateral), and to the extent of such assignment the assignee may fully

enforce such rights and powers, and all references to Lender shall mean and

refer to such assignee. Lender shall retain all rights and powers hereby given

not so assigned, transferred and/or delivered. Guarantor hereby waives all

defenses which Guarantor may be entitled to assert against Lender’s assignee

with respect to liability accruing hereunder prior to the effective date of any

assignment of Lender’s interest herein.

 

(n)           Securitization. Guarantor understands

and agrees that Lender may, from time to time, assign its rights and power

under the Note(s), this Agreement

and any other Loan Documents, in whole or in part, hi connection with a

securitization program. Guarantor agrees to enter into an amendment to the

Note(s), this Agreement and any

other Loan Documents if such amendments are required by a nationally recognized

rating agency in connection with a securitization program sponsored by Lender

and in which the Note(s), this Agreement

and any other Loan Documents are to be included; provided that Guarantor shall

not be obligated to enter into any amendment which adversely affects Guarantor

or otherwise adversely alters any of the financial terms of the Notes, this

Agreement and any other Loan

Documents.

 

13.           ENTIRE

AGREEMENT. This

Agreement contains all of the

understandings, promises and undertakings of the parties hereto. All prior

understandings and agreements or

statements, oral or written, are rescinded except as stated herein.

 

8

 

Schedule 1

To

Security Agreement between The WesterN SizzliN

Corporation 

and Captec Financial Group Funding Corporation

 

	

  Title of

  Agreement

  	

   

  	

  Date

  	

   

  	

  Name of Franchisee

  	

   

  	

  Location of Franchise

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  

 

 

9

 

The WestorN SizzliN Corporation

Schedule 1, To Security Agreemt between The WesterN

SizzliN Corporation and

Captec Financial Group Funding Corporation

 

	

  Type of Agreement

  	

   

  	

  Date

  	

   

  	

  Name of

  Franchisee

  	

   

  	

  Store

  Number

  	

   

  	

  City

  	

   

  	

  State

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  1/30/78

  	

   

  	

  Vezertzis, Pat; Hamilton, Paul

  	

   

  	

  613

  	

   

  	

  Ft. Payne

  	

   

  	

  Alabama

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  2/9/79

  	

   

  	

  Hill, Jimmy & Harvey

  	

   

  	

  709

  	

   

  	

  Opelika

  	

   

  	

  Alabama

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  12/1/83

  	

   

  	

  Stanoll, Ron

  	

   

  	

  1050

  	

   

  	

  Anniston

  	

   

  	

  Alabama

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  10/9/89

  	

   

  	

  Vezertzis, Pat

  	

   

  	

  1323

  	

   

  	

  Rainbow City

  	

   

  	

  Alabama

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  1/12/98

  	

   

  	

  Shockley, Leonard & Martha; Penton

  	

   

  	

  1325

  	

   

  	

  Alexander City

  	

   

  	

  Alabama

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  5/15/88

  	

   

  	

  Stanoll, Ron

  	

   

  	

  1392

  	

   

  	

  Oxford

  	

   

  	

  Alabama

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  5/8/89

  	

   

  	

  Schwichtenberg, Richard; Vezertzis, I

  	

   

  	

  2007

  	

   

  	

  Scottsboro

  	

   

  	

  Alabama

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  9/11/95

  	

   

  	

  Vezertzis, Pat; Schwichtenberg, Rich

  	

   

  	

  5021

  	

   

  	

  Arab

  	

   

  	

  Alabama

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/23/97

  	

   

  	

  Patty, Blyde & Margaret

  	

   

  	

  8002

  	

   

  	

  Prescott

  	

   

  	

  Arizona

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  4/22/78

  	

   

  	

  Barzda, Mary

  	

   

  	

  330

  	

   

  	

  Pine Bluff

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  9/18/75

  	

   

  	

  Gardner, Jerry & Vonda

  	

   

  	

  449

  	

   

  	

  Fort Smith

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/28/77

  	

   

  	

  Christison, W; Hamilton, Dwayne

  	

   

  	

  500

  	

   

  	

  Hot Springs

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  10/26/77

  	

   

  	

  Brashear, John

  	

   

  	

  568

  	

   

  	

  Conway

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/21/90

  	

   

  	

  Dudley, Gerald

  	

   

  	

  754

  	

   

  	

  Jonesboro

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  11/24/79

  	

   

  	

  Gardner, Jerry & Vonda

  	

   

  	

  782

  	

   

  	

  Fort Smith

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  7/10/80

  	

   

  	

  Barzda, Mary

  	

   

  	

  819

  	

   

  	

  Pine Bluff

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  5/19/83

  	

   

  	

  Gardner, Jerry & Vonda

  	

   

  	

  1000

  	

   

  	

  Van Buren

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  5/9/84

  	

   

  	

  Chambless, Gary; Campbell, P; Vess

  	

   

  	

  1066

  	

   

  	

  Hope

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  5/20/84

  	

   

  	

  Walker, Barbara

  	

   

  	

  1114

  	

   

  	

  Brinkley

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  1/28/85

  	

   

  	

  Bailey, Michael; Howard, Eddie 

  	

   

  	

  1167

  	

   

  	

  Malvern

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  11/5/85

  	

   

  	

  Edwards, Benny

  	

   

  	

  1231

  	

   

  	

  Clinton

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  1/21/86

  	

   

  	

  Sexton, Jack

  	

   

  	

  1240

  	

   

  	

  Clarksville

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  9/1/89

  	

   

  	

  Bailey, Michael; Howard, Eddie

  	

   

  	

  1260

  	

   

  	

  Stuttgart

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/23/86

  	

   

  	

  Hamner, III, Elgin

  	

   

  	

  1281

  	

   

  	

  Benton

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  1/23/87

  	

   

  	

  Daugherty, Jack

  	

   

  	

  1317

  	

   

  	

  Magnolia

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  8/25/87

  	

   

  	

  Grissom, Jimmy

  	

   

  	

  1354

  	

   

  	

  Crossett

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  3/1/88

  	

   

  	

  Hamner, III, Elgin

  	

   

  	

  1379

  	

   

  	

  Searcy

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/22/87

  	

   

  	

  Bazyk, Mark & Laura

  	

   

  	

  1418

  	

   

  	

  Russellville

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  5/14/89

  	

   

  	

  Hamner, III, Elgin

  	

   

  	

  2000

  	

   

  	

  Arkadelphia

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  12/27/89

  	

   

  	

  Wallace, M A & Vaudine

  	

   

  	

  2010

  	

   

  	

  Wynne

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  3/21/94

  	

   

  	

  Clayton, Jack; Sisler, Allan

  	

   

  	

  5004

  	

   

  	

  Batesville

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/15/94

  	

   

  	

  Bazyk, Mark & Laura

  	

   

  	

  5005

  	

   

  	

  Springdale

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  10/1/94

  	

   

  	

  Hicks, Don & Rick

  	

   

  	

  5006

  	

   

  	

  Nashville

  	

   

  	

  Arkansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  1/1/92

  	

   

  	

  Scott, Frank

  	

   

  	

  816

  	

   

  	

  Pueblo

  	

   

  	

  Colorado

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  3/3/86

  	

   

  	

  Cash, Robert; Boswell, Bob; Henley,

  	

   

  	

  1256

  	

   

  	

  Evans

  	

   

  	

  Colorado

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  3/5/87

  	

   

  	

  Welch, William

  	

   

  	

  1326

  	

   

  	

  Colorado Springs

  	

   

  	

  Colorado

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  1/16/87

  	

   

  	

  Welch, William; Sims, Loyd

  	

   

  	

  1329

  	

   

  	

  Grand Junction

  	

   

  	

  Colorado

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  8/15/94

  	

   

  	

  Lu, Thomas & Alice

  	

   

  	

  5001

  	

   

  	

  Durango

  	

   

  	

  Colorado

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/21/77

  	

   

  	

  Williams, Rick; Colborn, Ron

  	

   

  	

  493

  	

   

  	

  Mt. Vernon

  	

   

  	

  Illinois

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  5/24/79

  	

   

  	

  Colborn, Ron; James, Rick

  	

   

  	

  744

  	

   

  	

  Marion

  	

   

  	

  Illinois

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  9/21/93

  	

   

  	

  McMillin, Bradley

  	

   

  	

  1131

  	

   

  	

  O'Fallon

  	

   

  	

  Illinois

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/25/87

  	

   

  	

  Jones, Larry; Pamela; Welch William

  	

   

  	

  1339

  	

   

  	

  Bloomington

  	

   

  	

  Indiana

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  8/23/97

  	

   

  	

  Khoury, George

  	

   

  	

  778

  	

   

  	

  Wichita

  	

   

  	

  Kansas

  	

   

  
	

  Franchise Agreemt

  	

   

  	

  4/28/82

  	

   

  	

  Cash, Robert; Reaves, Jimmy

  	

   

  	

  901

  	

   

  	

  Harrison

  	

   

  	

  Kansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  8/29/83

  	

   

  	

  Cash, Robert; McElroy, Lenord

  	

   

  	

  1023

  	

   

  	

  Salina

  	

   

  	

  Kansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  10/15/97

  	

   

  	

  Davis, Steven; Debbie Jo

  	

   

  	

  1087

  	

   

  	

  Emporia

  	

   

  	

  Kansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/8/84

  	

   

  	

  Albritton, Dale

  	

   

  	

  1102

  	

   

  	

  Pittsburg

  	

   

  	

  Kansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  7/23/84

  	

   

  	

  Cirks, Todd; Dick, Curtis

  	

   

  	

  1110

  	

   

  	

  Winfield

  	

   

  	

  Kansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  4/19/96

  	

   

  	

  Khoury, George & Theresa

  	

   

  	

  1274

  	

   

  	

  Augusta

  	

   

  	

  Kansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  4/4/91

  	

   

  	

  Cash, Robert; McElroy, Leonard

  	

   

  	

  5000

  	

   

  	

  Leavenworth

  	

   

  	

  Kansas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  8/17/77

  	

   

  	

  Mills, H; Hain, J.; Harris, H A

  	

   

  	

  523

  	

   

  	

  Somerset

  	

   

  	

  Kentucky

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  11/23/77

  	

   

  	

  Green, Jerry; Mills, H; Carter, Joe

  	

   

  	

  682

  	

   

  	

  Danville

  	

   

  	

  Kentucky

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  12/13/77

  	

   

  	

  Moody, Kenneth

  	

   

  	

  590

  	

   

  	

  Harlan

  	

   

  	

  Kentucky

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  4/17/78

  	

   

  	

  Elkins, Johnny & Patricia

  	

   

  	

  635

  	

   

  	

  Goody (Forest Hills)

  	

   

  	

  Kentucky

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  7/11/83

  	

   

  	

  Barker, Andrew, [ILLEGIBLE]; Hodges, Ed

  	

   

  	

  1010

  	

   

  	

  Richmond

  	

   

  	

  Kentucky

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  8/15/95

  	

   

  	

  Kelly, Ted & Sharon

  	

   

  	

  1263

  	

   

  	

  Jamestown

  	

   

  	

  Kentucky

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/22/88

  	

   

  	

  Hurst, Larry

  	

   

  	

  1401

  	

   

  	

  Corbin

  	

   

  	

  Kentucky

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  10/3/89

  	

   

  	

  Diez, Doug

  	

   

  	

  46

  	

   

  	

  Baton Rouge

  	

   

  	

  Louisiana

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  12/28/81

  	

   

  	

  Case, George & Georgia

  	

   

  	

  888

  	

   

  	

  Bogalusa

  	

   

  	

  Louisiana

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  1/4/90

  	

   

  	

  Vauleman, Norman & Marcia

  	

   

  	

  944

  	

   

  	

  Alexandria

  	

   

  	

  Louisiana

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  11/21/84

  	

   

  	

  Albritton, Keith; W L

  	

   

  	

  1168

  	

   

  	

  Monroe

  	

   

  	

  Louisiana

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/18/85

  	

   

  	

  Parker, Bob

  	

   

  	

  1197

  	

   

  	

  Lake Charles

  	

   

  	

  Louisiana

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  3/18/88

  	

   

  	

  Diez, Doug

  	

   

  	

  1383

  	

   

  	

  Thibodeaux

  	

   

  	

  Louisiana

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  3/18/88

  	

   

  	

  Diez, Doug

  	

   

  	

  1384

  	

   

  	

  Gonzales

  	

   

  	

  Louisiana

  	

   

  

 

1

 

	

  Type of Agreement

  	

   

  	

  Date

  	

   

  	

  Name of

  Franchisee

  	

   

  	

  Store

  Number

  	

   

  	

  City

  	

   

  	

  State

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  7/1/92

  	

   

  	

  Albritton, Keith; W L

  	

   

  	

  2032

  	

   

  	

  W. Monroe

  	

   

  	

  Louisiana

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  9/16/76

  	

   

  	

  Snyder, Bruce & Larry

  	

   

  	

  678

  	

   

  	

  LaVale

  	

   

  	

  Maryland

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  9/1/81

  	

   

  	

  Romsburg, Betty; Pual; Kim

  	

   

  	

  873

  	

   

  	

  Hagerstown

  	

   

  	

  Maryland

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/10/71

  	

   

  	

  Jackson, Kenneth

  	

   

  	

  35

  	

   

  	

  Jackson

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  8/24/89

  	

   

  	

  Sethi, Dr. S L

  	

   

  	

  93

  	

   

  	

  Jackson

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  12/9/75

  	

   

  	

  Sethi, Dr. S L 

  	

   

  	

  270

  	

   

  	

  Greenwood

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  8/24/89

  	

   

  	

  Sethi, Dr. S L

  	

   

  	

  463

  	

   

  	

  Pearl (Flowood)

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  11/7/77

  	

   

  	

  Sethi, Dr. S L, Monica, Rasksha

  	

   

  	

  588

  	

   

  	

  Cleveland

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  12/20/79

  	

   

  	

  Hontzas, Thomas; Tattle, A. A.

  	

   

  	

  792

  	

   

  	

  Meridian

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  2/22/80

  	

   

  	

  Sethi, Dr. S L; Monica; Jackie's Int'l;

  	

   

  	

  804

  	

   

  	

  Waynesboro

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/3/82

  	

   

  	

  Sethi, Dr. S L

  	

   

  	

  913

  	

   

  	

  Grenada

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  8/17/82

  	

   

  	

  Albritton, Keith; 

  W L

  	

   

  	

  921

  	

   

  	

  Natchez

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise Agreemt

  	

   

  	

  7/8/96

  	

   

  	

  Hughes, Robert C.

  	

   

  	

  969

  	

   

  	

  Tupelo

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  3/7/83

  	

   

  	

  Sethi, Dr. S L

  	

   

  	

  985

  	

   

  	

  Brookhaven

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  3/20/84

  	

   

  	

  Hontzas, Thomas; Tattle, A. A.

  	

   

  	

  1046

  	

   

  	

  Mages

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  7/6/84

  	

   

  	

  Sethi, Dr. S L

  	

   

  	

  1108

  	

   

  	

  Senatobia

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  12/6/85

  	

   

  	

  Sethi, Dr. S L

  	

   

  	

  1238

  	

   

  	

  Philadelphia

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  5/1/92

  	

   

  	

  Liberto, Vincent; Mauldin, Joe; King,

  	

   

  	

  1276

  	

   

  	

  Laurel

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  11/14/86

  	

   

  	

  Sethi, Dr. S L

  	

   

  	

  1308

  	

   

  	

  Batesville

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  3/26/87

  	

   

  	

  Sethi, Dr. S L

  	

   

  	

  1332

  	

   

  	

  New Albany

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  3/29/88

  	

   

  	

  Evans, Alfred; Worbington, Alfred

  	

   

  	

  1385

  	

   

  	

  Clarksdale

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise Agreemt

  	

   

  	

  6/5/88

  	

   

  	

  Sethi, Dr. S L

  	

   

  	

  1416

  	

   

  	

  Boonesville

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  11/10/89

  	

   

  	

  Sethi, Dr. S L; Monica; Raksha

  	

   

  	

  2021

  	

   

  	

  Amory

  	

   

  	

  Mississippi

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/13/79

  	

   

  	

  Albritton, Larry & Dale

  	

   

  	

  749

  	

   

  	

  Joplin

  	

   

  	

  Missouri

  	

   

  
	

  Franchise Agreemt

  	

   

  	

  3/10/96

  	

   

  	

  Siraj, Saleem; Mohamed

  	

   

  	

  899

  	

   

  	

  Branson

  	

   

  	

  Missouri

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  4/10/95

  	

   

  	

  Siraj, Saleem; Mohamed

  	

   

  	

  1079

  	

   

  	

  Branson

  	

   

  	

  Missouri

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/15/84

  	

   

  	

  Cobb, Doug; Scholfield, Robert; Don

  	

   

  	

  1124

  	

   

  	

  Springfield

  	

   

  	

  Missouri

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  7/1/95

  	

   

  	

  Lai, Wu Shih; Lee Y

  	

   

  	

  1128

  	

   

  	

  Lebanon

  	

   

  	

  Missouri

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  3/6/87

  	

   

  	

  Johnson, Kimmie & Ray

  	

   

  	

  1327

  	

   

  	

  Monett

  	

   

  	

  Missouri

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/24/87

  	

   

  	

  Ackman, David; Sakarelos, Nick

  	

   

  	

  1338

  	

   

  	

  Jackson (Cape Girard)

  	

   

  	

  Missouri

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/25/94

  	

   

  	

  Siraj, Saleem

  	

   

  	

  5006

  	

   

  	

  Grandview

  	

   

  	

  Missouri

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  2/12/96

  	

   

  	

  Dudley, Gerald; Dudley, Beauton

  	

   

  	

  5022

  	

   

  	

  Popular Bluff

  	

   

  	

  Missouri

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  5/1/94

  	

   

  	

  O'Sullivan, Tom & Mary

  	

   

  	

  472

  	

   

  	

  Alamorgordo

  	

   

  	

  New Mexico

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  7/23/87

  	

   

  	

  Dobry, Mary

  	

   

  	

  1345

  	

   

  	

  Hobbs

  	

   

  	

  New Mexico

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  3/3/95

  	

   

  	

  Zvonar, David; Velasquez, Doris

  	

   

  	

  2030

  	

   

  	

  Tucumcari

  	

   

  	

  New Mexico

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  1/12/98

  	

   

  	

  Lu, Thomas & Alice

  	

   

  	

  5033

  	

   

  	

  Farmington

  	

   

  	

  New Mexico

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  3/13/78

  	

   

  	

  Albrittain D; Hill W; Collins B, L; Loga

  	

   

  	

  618

  	

   

  	

  Lima

  	

   

  	

  Ohio

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  7/14/73

  	

   

  	

  Mott, Dennis B., Jr., & Hazel

  	

   

  	

  113

  	

   

  	

  Tulsa

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  9/12/74

  	

   

  	

  McNear, Mack

  	

   

  	

  163

  	

   

  	

  Oklahoma City

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  10/19/75

  	

   

  	

  McNear, Mack

  	

   

  	

  397

  	

   

  	

  Oklahoma City

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  12/10/76

  	

   

  	

  McNear, Mack

  	

   

  	

  417

  	

   

  	

  Edmond

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/17/77

  	

   

  	

  McNear, Mack

  	

   

  	

  494

  	

   

  	

  Oklahoma City

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/26/77

  	

   

  	

  Harris, S; Albritton; Hamilton; Harden

  	

   

  	

  499

  	

   

  	

  Enid

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  4/16/96

  	

   

  	

  Shaw, II, Sidney

  	

   

  	

  517

  	

   

  	

  Stillwater

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  8/29/77

  	

   

  	

  Albritton, Dale; Morrow, Jeff, David

  	

   

  	

  522

  	

   

  	

  Muskogee

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/17/77

  	

   

  	

  McNear, Mack

  	

   

  	

  526

  	

   

  	

  Midwest City

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  9/3/77

  	

   

  	

  McNear, Mack

  	

   

  	

  527

  	

   

  	

  Oklahoma City

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  2/6/78

  	

   

  	

  Mott, Jr, Dennis & Hazel

  	

   

  	

  606

  	

   

  	

  Sand Springs

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  8/16/76

  	

   

  	

  McNear, Mack

  	

   

  	

  664

  	

   

  	

  Moore

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  12/21/81

  	

   

  	

  Gardner, Jim

  	

   

  	

  866

  	

   

  	

  McAlester

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  7/12/82

  	

   

  	

  Suddearth, Sam & Randy Dale

  	

   

  	

  917

  	

   

  	

  Shawnee

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  9/13/82

  	

   

  	

  McNear, Mack; Coursey, Bill

  	

   

  	

  932

  	

   

  	

  Chickasha

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  9/27/82

  	

   

  	

  Jobes, Rick; Morrow, David & Jeff

  	

   

  	

  937

  	

   

  	

  Sallisaw

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  1/26/96

  	

   

  	

  Rifal, Mike; Alishammat, M A

  	

   

  	

  940

  	

   

  	

  Broken Arrow

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  4/18/96

  	

   

  	

  Shaw, II, Sidney

  	

   

  	

  995

  	

   

  	

  Ponca City

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  8/15/94

  	

   

  	

  Ray, Forrest

  	

   

  	

  1030

  	

   

  	

  Elk City

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/19/85

  	

   

  	

  McNear, Mack

  	

   

  	

  1200

  	

   

  	

  Del City

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  4/29/88

  	

   

  	

  Caufield, Dennis & Karen

  	

   

  	

  1397

  	

   

  	

  Bartlesville

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  11/1/92

  	

   

  	

  Wise, Connie & Don

  	

   

  	

  2034

  	

   

  	

  Poteau

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  10/1/94

  	

   

  	

  Ray, Forrest

  	

   

  	

  5013

  	

   

  	

  Altus

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  9/22/97

  	

   

  	

  Suddearth, Randy & Sam

  	

   

  	

  5036

  	

   

  	

  Seminole

  	

   

  	

  Oklahoma

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/2/77

  	

   

  	

  Bratio, Dusan; Wolf, Jan; Thakrar, A.

  	

   

  	

  488

  	

   

  	

  Carlisle

  	

   

  	

  Pennsylvania

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  7/31/84

  	

   

  	

  Sickle, David; Yodock, Lee Jr.

  	

   

  	

  1118

  	

   

  	

  Bloomsburg

  	

   

  	

  Pennsylvania

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  8/18/87

  	

   

  	

  Bratio, Dusan

  	

   

  	

  1352

  	

   

  	

  Harrisburg

  	

   

  	

  Pennsylvania

  	

   

  

 

2

 

	

  Type of Agreement

  	

   

  	

  Date

  	

   

  	

  Name of

  Franchisee

  	

   

  	

  Store

  Number

  	

   

  	

  City

  	

   

  	

  State

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/5/74

  	

   

  	

  Miller, Aline; Hugh, Ellis, Sharon M.

  	

   

  	

  157

  	

   

  	

  Memphis

  	

   

  	

  Tennessee

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  9/20/75

  	

   

  	

  Scudder, A; Quinton, W.; Winget, R.

  	

   

  	

  235

  	

   

  	

  Columbia

  	

   

  	

  Tennessee

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  1/31/77

  	

   

  	

  Milhorne, D.; Wells J & MT; Jones, Cl

  	

   

  	

  431

  	

   

  	

  Jackson

  	

   

  	

  Tennessee

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  12/20/77

  	

   

  	

  Burris, Sr., David, Michelle; Pirkle, J.

  	

   

  	

  589

  	

   

  	

  Athens

  	

   

  	

  Tennessee

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  12/28/78

  	

   

  	

  Bible, John; Harris HA; Mason W; Gib

  	

   

  	

  697

  	

   

  	

  East Morristown

  	

   

  	

  Tennessee

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  7/1/93

  	

   

  	

  Stanfill, Jerry; Carter, J. P; Grics Ma.

  	

   

  	

  1268

  	

   

  	

  Lexington

  	

   

  	

  Tennessee

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  8/1/96

  	

   

  	

  Vezertzis, Pat

  	

   

  	

  1319

  	

   

  	

  Tullahoma

  	

   

  	

  Tennessee

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  9/1/90

  	

   

  	

  Burris, Jr. & Sr., David; Vezertzis Pat

  	

   

  	

  1409

  	

   

  	

  Jasper

  	

   

  	

  Tennessee

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  4/26/93

  	

   

  	

  Burris, Sr., David & Michelle

  	

   

  	

  2035

  	

   

  	

  Dayton

  	

   

  	

  Tennessee

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  10/1/93

  	

   

  	

  Hurst, Larry; Lois

  	

   

  	

  2037

  	

   

  	

  Knoxville

  	

   

  	

  Tennessee

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  7/10/97

  	

   

  	

  Vezertzis, Pat

  	

   

  	

  5035

  	

   

  	

  Dickson

  	

   

  	

  Tennessee

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  4/12/76

  	

   

  	

  Brown, Floyd

  	

   

  	

  322

  	

   

  	

  Midland

  	

   

  	

  Texas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  4/12/76

  	

   

  	

  Brown, Floyd

  	

   

  	

  323

  	

   

  	

  Odessa

  	

   

  	

  Texas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  5/1/96

  	

   

  	

  Mills, Joe, Catherine; Robertson, B.

  	

   

  	

  324

  	

   

  	

  Abilene

  	

   

  	

  Texas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/13/81

  	

   

  	

  Branstetter, Neal; Morrow, David

  	

   

  	

  569

  	

   

  	

  Amarillo

  	

   

  	

  Texas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  10/14/85

  	

   

  	

  Dale, Timothy; Borralls, W L; D S; J I

  	

   

  	

  1170

  	

   

  	

  Mt. Pleasant

  	

   

  	

  Texas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  4/1/85

  	

   

  	

  Hicks, Don

  	

   

  	

  1194

  	

   

  	

  Texarkana

  	

   

  	

  Texas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  7/18/86

  	

   

  	

  Mc Gee, Robert

  	

   

  	

  1258

  	

   

  	

  Denton

  	

   

  	

  Texas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  1/1/92

  	

   

  	

  Corse, Earl & Carolyn

  	

   

  	

  2031

  	

   

  	

  Dumas

  	

   

  	

  Texas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/12/95

  	

   

  	

  Ray, Forrest

  	

   

  	

  5019

  	

   

  	

  Lubbock

  	

   

  	

  Texas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  12/15/96

  	

   

  	

  Broyles, Kelly

  	

   

  	

  5028

  	

   

  	

  Sulphur Springs

  	

   

  	

  Texas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  12/23/96

  	

   

  	

  Dodd, Jerry

  	

   

  	

  5031

  	

   

  	

  Decatur

  	

   

  	

  Texas

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  9/27/94

  	

   

  	

  Christy, Frank

  	

   

  	

  167

  	

   

  	

  Parkersburg

  	

   

  	

  West Virginia

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  3/1/91

  	

   

  	

  Wilson, Janet & Ronald

  	

   

  	

  991

  	

   

  	

  Weston

  	

   

  	

  West Virginia

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  6/7/83

  	

   

  	

  Malcolm, Richard; Robinson, Patricia

  	

   

  	

  1001

  	

   

  	

  Westover

  	

   

  	

  West Virginia

  	

   

  
	

  Franchise

  Agreemt

  	

   

  	

  1/24/95

  	

   

  	

  Wingo, John; Mariane; Willie III

  	

   

  	

  1270

  	

   

  	

  Lewisburg

  	

   

  	

  West Virginia

  	

   

  

 

3

 

14.          GOVERNING LAW.

This Agreement shall be

construed according to the laws of the State of Tennessee.

 

(a)           Except as otherwise provided, all

other terms used herein shall have the meanings assigned to them in Article 9

(or, absent definition in Article 9, in any other Article) of the Uniform

Commercial Code.

 

IN WITNESS WHEREOF

the Guarantor has executed this Agreemt on the day and year first above

written.

 

Guarantor’s principal

place of business is located in the City of Roanoke, Commonwealth of Virginia.

 

 

	

  Location(s) of the Collateral

  	

  GUARANTOR:

  	 

	

   

  	

   

  	 

	

  416 South Jefferson Street, 4th Floor

  	

  THE

  WESTERN SIZZLIN CORPORATION

  	 

	

  Roanoke, Virginia 24012 and each

  	

   

  	 

	

  of the sites listed on Schedule 1 hereto.

  	

   

  	 

	

   

  	

  By:

  	

  /s/ Victor F. Foti

  	 

	

   

  	

   

  	

   

  	 

	

   

  	

  Its:

  	

  President

  	 

	

   

  	

   

  
	

   

  	

   

  	 

	

   

  	

   

  	 

	

  Guarantor’s

  Address:

  	

   

  	 

	

   

  	

   

  	 

	

  P.O. Box 12167

  	

   

  	 

	

  Roanoke, Virginia

  24023-2167

  	

   

  	 

	

   

  	

   

  	 

	

  Guarantor’s Tax Identification

  Number: 54-1684114

  	

   

  	 

							

 

 

9

 

Loan Nos. 06718, 06722

& 06723

Manassas, Alexandria, and

Falls Church, Virginia

 

SECURITY

AGREEMENT

 

THIS SECURITY AGREEMENT

(“Agreement”) is made as of the

23 day of March, 1998, by THE WESTERN SIZZLIN

STORES, INC., a Virginia corporation, of P.O. Box 12167, Roanoke,

Virginia 24023-2167 (“Borrower”) in favor of

CAPTEC FINANCIAL GROUP FUNDING CORPORATION, a Michigan corporation,

of 24 Frank Lloyd Wright Drive, Lobby L, 4th Floor, P.O. Box 544, Ann Arbor,

Michigan, 48106 (together with its successors, assigns and transferees,

“Lender”). This instrument shall become effective on March 31, 1998.

 

PRELIMINARY

STATEMENT

 

This Agreement is made to secure all of the following

(individually and collectively the “Indebtedness”):

 

1.             Payment in the sum of Two Million Two Hundred Fifty

Thousand and 00/100 Dollars ($2,250,000.00), together with interest, costs and

all other sums, to be paid according to those certain Promissory Notes (the

“Notes”), by Borrower to Lender, made as of the date of this Agreement by Borrower, together with any and

all extensions, renewals, modifications, substitutions or replacements thereof;

and the performance of the covenants and obligations of Borrower due or to

become due to Lender under this Agreement

or under any other documents securing payment of all amounts due under the

Notes (collectively, the “Loan Documents”), and the repayment of all sums

expended by Lender in connection with performance of those covenants and

obligations.

 

2.            If the Notes, this Agreement and the Loan Documents are

assigned to Captec Loan Receivables Trust - 1996A (the “Trust”), “Indebtedness”

shall also include the payment of all other sums (together with interest and

costs thereon) concurrently or subsequently loaned to Borrower by Captec

Financial Group, Inc., a Michigan corporation, Captec Financial Group Funding

Corporation, a Michigan corporation, or Captec Leasing Company, a California

corporation (each an “Originator”), as evidenced and/or secured by certain

notes and other documents of Borrower with respect to such amounts and which

notes and other documents are assigned to the Trust, together with any and all

extensions, renewals, modifications, substitutions or replacements thereof; and

the performance of the covenants and obligations of Borrower due or to become

due under such notes and other documents assigned to the Trust, and the

repayment of all sums expended in connection with performance of those covenants

and obligations (collectively, the “Trust Obligations”).

 

3.             If the Notes, this Agreement and the Loan Documents are not assigned to the Trust,

“Indebtedness” shall also include the payment of all other sums (together with

interest thereon) concurrently or subsequently loaned to Borrower by an

Originator, as evidenced and/or secured by certain notes and other documents of

Borrower which are not assigned to the Trust, together with any and all

extensions, renewals, modifications, substitutions or replacements thereof; and

the performance of the covenants and obligations of Borrower due or to become

due under such notes and other documents, and the repayment of all sums

expended in connection with performance of those covenants and obligations

(collectively, the “Retained Obligations”).

 

In consideration of the

above facts and the mutual promises of the parties, and as security for the

purposes stated above and elsewhere in this Agreement, the parties agree as follows:

 

1.             COLLATERAL.

 

(a)           Grant

of Security Interest. Borrower grants Lender a security interest

in all of Borrower’s Inventory, Equipment, Instruments, Accounts and General

Intangibles, each as defined in Section l(b) below, whether now owned or

hereafter acquired, together with all replacements, substitutions, and

additions thereto (the “Collateral”) which are (i) located on the premises of,

or are related to the operation of, the Great American

 

 

Steak & Buffet Company Restaurants or WesterN

SizzliN Restaurant operated by Borrower and located at the addresses set forth

in Exhibit A attached hereto (each a “Franchised Operation” and collectively

the “Franchised Operations”), or (ii) related to the Franchised Operations and

located at the principal business office of Borrower located at 416 South Jefferson

Street, 4th Floor, Roanoke, Virginia 24012. Also included as part of the

Collateral are all proceeds and products thereof, including, without limit,

insurance proceeds, stock rights, subscription rights, dividends, stock

dividends, stock splits or liquidating dividends, and all cash, accounts,

chattel paper and general intangibles arising from the sale, rent, lease,

casualty loss or other disposition of the Collateral, and including any records

or documents of title relating to the Collateral.

 

(b)           Definitions.  For purposes of this Agreemt, the following

terms shall be defined as follows:

 

(i)            “Inventory” shall consist of all

property held at any location by or for Borrower for sale, rent, or lease, or

furnished or to be furnished by Borrower under any contract of service, or raw

materials or work in process and their products, or materials used or consumed

in Borrower’s business.

 

(ii)           “Equipment” shall consist of any

goods at any time acquired, owned or held by Borrower at any location primarily

for use in Borrower’s business, including, without limit, machinery, fixtures,

furniture, furnishings and vehicles, and any accessions, parts, attachments,

accessories, tools, dies, additions, substitutions, replacements and

appurtenances and their related rights.

 

(iii)          “Instruments” shall consist of

Borrower’s interest of any kind in any negotiable instrument or security as

those terms are defined in the Virginia Uniform Commercial Code (“UCC”), or any

other writing which evidences a right to payment of money and is of a type

which is, in the ordinary course of business, transferred by delivery alone or

by delivery with any necessary endorsement or assignment.

 

(iv)          “General Intangibles” shall consist of

any personal property (including things in action) other than goods, accounts,

chattel paper, documents, instruments and money.

 

(v)           “Accounts” shall consist of any right

to payment for goods sold or leased or for services rendered which is not

evidenced by an instrument or chattel paper whether or not it has been earned

by performance.

 

2.             WARRANTIES AND REPRESENTATIONS.  Borrower warrants and covenants to Lender as

follows:

 

(a)           Payment

of Indebtedness. 

Borrower will pay the Indebtedness and perform all obligations related

to the Indebtedness when due, whether by maturity, acceleration or otherwise.

 

(b)           Authority.

This Agreement is the valid and

binding obligation of Borrower, enforceable in accordance with its terms.  If Borrower is a corporation, partnership,

limited liability company or other organization, Borrower is organized and

validly existing and in good standing under the laws of its state of

establishment, and the execution, delivery and performance of this Agreemt has

been duly authorized by all necessary action of Borrower’s board of directors,

partners, members or governing body, and will not violate Borrower’s governing

instruments or other agreements.

 

(c)          Name;

Address; Location of Collateral. Borrower’s name and address and

the location of the Collateral are accurately set forth on the signature page

and Exhibit A of this Agreement.

 

2

 

(d)           Title

to Collateral. Borrower has good and marketable title to the

Collateral, free and clear of any liens, encumbrances or security interests

whatsoever, other than the security interest granted by this Agreemt and

existing liens, encumbrances or security interests disclosed to and accepted by

Lender in writing. Borrower will keep the Collateral free of all other liens,

encumbrances and security interests. Borrower will defend the Collateral

against all claims and demands of all persons at any time claiming any interest

in the Collateral.

 

(e)           Priority

of Security Interest. 

The execution and delivery of this Agreemt creates a valid security

interest in the Collateral, and upon the filing of a UCC-1 financing statement

with the Virginia State Corporation Commission, Lender will have a first

priority perfected security interest in the Collateral, subject to no other

security interest, except as otherwise approved by Lender in writing.

 

(f)            Financing

Statements.  Except as

disclosed to and accepted by Lender in writing, no financing statement covering

all or any part of the Collateral is on file in any public office. Borrower

will execute financing statement(s) in form acceptable to Lender and will pay

the cost of filing financing statement(s) in all public offices wherever filing

is deemed desirable by Lender.   A

carbon, photographic or other reproduction of this Agreemt shall be sufficient

as a financing statement under the UCC and may be filed by Lender in any filing

office.  This Agreemt shall be

terminated only by the filing of a termination statement in accordance with the

applicable provisions of the UCC.

 

(g)           Payment

of Taxes. Borrower shall pay when due and before any interest,

collection fees or penalties accrue, all taxes, expenses, assessments, liens or

other charges which may now or hereafter be levied or assessed against the

Collateral.  Borrower shall furnish

proof of payment upon request of Lender.

 

(h)          Insurance.

 

(i)            Borrower shall keep the tangible

Collateral (including, without limit, the Equipment and Inventory) insured for

the benefit of Lender. Borrower covenants and agrees that Borrower will carry

and maintain, at its sole cost and expense, the following types of insurance,

in the amounts specified: (A) comprehensive general liability insurance with

initial limits of not less than Two Million Dollars ($2,000,000) for death or

injuries to one person and not less than Two Million Dollars ($2,000,000) for

death or injuries to two or more persons in one occurrence, and not less than

One Million Dollars ($1,000,000) for damage to property; (B) fire and extended

coverage insurance on a replacement form with inflation-guard, vandalism and

malicious mischief endorsements; (C) rent loss or business interruption

insurance covering a period of not less than twelve (12) months; and (D) such

other insurance and in such amounts as may be reasonably required from time to

time by Lender. All insurance shall be in forms and with companies satisfactory

to Lender. Borrower shall deliver to Lender the policies evidencing the

required insurance with premiums fully paid, and with loss payee clauses

(making all losses payable to Lender). Renewals of the required insurance

(together with evidence of premium prepayment for one (1) year in advance)

shall be delivered to Lender at least thirty (30) days before the expiration of

any existing policies. All policies and renewals shall provide that they may

not be canceled or amended without giving Lender thirty (30) days prior written

notice of cancellation or amendment.

 

(ii)           Should Borrower fail to insure or

fail to pay the premiums on any required insurance or fail to deliver the

policies or renewals as provided above, Lender may have the insurance issued or

renewed (and pay the premiums on it for the account of Borrower) in amounts and

with companies and at premiums as Lender deems appropriate. If Lender elects to

have insurance issued or renewed to insure Lender’s interest, Lender shall have

no duty or obligation of any kind to also insure Borrower’s interest or to

notify Borrower of Lender’s actions. Any sums paid by Lender for insurance, as

provided above, shall be a lien upon the Collateral, added to the amount secured

by this Agreement, and payable

immediately by Borrower to Lender, with interest on those sums at the highest

rate charged by Lender on any of the Indebtedness (but not to exceed the

maximum interest rate permitted by law).

 

3

 

(iii)          In the event of loss or damage, the

proceeds of all required insurance shall be paid to Lender. No loss or damage

shall itself reduce the Indebtedness. Lender or any of its employees is each

irrevocably appointed attorney-in-fact for Borrower and is authorized to adjust

and compromise each loss without the consent of Borrower, to collect, receive

and receipt for the insurance proceeds in the name of Lender and Borrower and

to endorse Borrower’s name upon any check in payment of the loss.

 

(iv)          Lender shall apply such proceeds to

the repair and replacement of the Collateral subject to the following

conditions:

 

(1)               there shall be no

Event of Default existing hereunder;

 

(2)               plans for repair

and replacement shall be reviewed and approved by Lender, which approval shall

not be unreasonably withheld or delayed;

 

(3)               repair and

replacement of the Collateral to a saleable commodity (as determined by Lender)

can practicably be completed prior to the Due Date set forth in the Note;

 

(4)               Borrower shall have

deposited with Lender funds equal to the positive difference,  if any, between the cost of repair,

replacement and completion, and the amount of the insurance proceeds; and

 

(5)               disbursements will

be made by Lender, pursuant to procedures necessary or appropriate to ensure

that funds are properly applied.

 

Provided that no Event of

Default exists, if there are insurance proceeds in the amount of Twenty-Five

Thousand Dollars ($25,000) or less remaining after the repair and replacement

of the Collateral as required hereunder, such proceeds shall be paid to

Borrower. Provided that no Event of Default exists, if there are insurance

proceeds in excess of Twenty-Five Thousand Dollars ($25,000) remaining after

the repair and replacement of the Collateral as required hereunder, such

proceeds shall be applied toward payment of the Indebtedness (or any portion

thereof) without premium, whether or not then due or payable, in whatever order

of maturity as Lender may elect. Application of proceeds by Lender toward later

maturing installments of the Indebtedness shall not excuse Borrower from making

the regularly scheduled installment payments nor shall such application extend

or reduce the amount of any of these payments.

 

(v)           Notwithstanding Section 2(h)(iv)

above, if a substantial portion (fifty percent [50%] or more) of the Collateral

is damaged or destroyed during the last twenty-four (24) months of the term of

the Note, and an Event of Default then exists hereunder, then either Borrower

or Lender may elect not to repair/restore and to apply the insurance proceeds

toward payment of the Indebtedness (or any portion thereof) without premium,

whether or not then due or payable, in whatever order of maturity as Lender may

elect. Application of proceeds by Lender toward later maturing installments of

the Indebtedness shall not excuse Borrower from making the regularly scheduled

installment payments nor shall such application extend or reduce the amount of

any of these payments.

 

(vi)          In the event of a sale of the

Collateral, the purchaser of the Collateral shall succeed to all of the rights

of Borrower under the insurance policies including, without limit, any right to

unearned premiums and to receive the proceeds.

 

(vii)         Upon the occurrence of an Event of Default

hereunder, at the option of Lender, Borrower shall pay to Lender, in advance on

the first day of each month, a pro rata portion of the annual premiums due (as

estimated by Lender) on the required insurance. In the event that sufficient

funds

 

4

 

have been deposited with

Lender to cover the amount of the insurance premiums when the premiums become

due and payable, Lender shall pay the premiums. In the event that sufficient

funds have not been deposited with Lender to pay the insurance premiums at

least thirty (30) days prior to the time when they become due and payable,

Borrower shall immediately pay the amount of the deficiency to Lender.

 

(i)            Maintenance

of Collateral. Borrower will maintain the Collateral in good

condition and repair. Borrower will promptly inform Lender of any loss or

diminution in value of the Collateral. Borrower may modify, compromise or

substitute for the Collateral without the prior written consent of Lender

provided that any modifications, compromises or substitutions have the same or

greater value as the original items and that any such modifications,

compromises or substitutions remain at all times subject to this Agreement.

 

(j)            Leased

Facilities. If the Collateral is located at a facility leased by

Borrower, Borrower will obtain from the lessor a consent to the granting of a

security interest in the Collateral and a subordination of the lessor’s

interest in the Collateral. The consent and subordination shall be in form

acceptable to Lender.

 

(k)          Reporting

Obligations. Borrower hereby covenants and agrees to deliver to

Lender, or to cause The WesterN SizzliN Corporation (“Guarantor”) to deliver to

Lender, the following:

 

(A)                                Management

prepared and certified consolidated quarterly financial statements for

Guarantor within forty-five (45) days after the end of the first three (3)

quarters of each fiscal year of Guarantor.

 

(B)                 Annual consolidated financial

statements for Guarantor audited by an independent certified public accountant

within one hundred twenty (120) days after the end of each fiscal year of

Guarantor.

 

(C)                 Management

prepared and certified unit level profit and loss statements relating to the

operation of the Franchised Operations within forty-five (45) days after the

end of each fiscal year of Borrower.

 

Such financial statements

shall be true and correct in all respects, shall be prepared in accordance with

generally accepted accounting principles, and shall fairly represent the

respective financial conditions of the subjects thereof as of the respective

dates thereof. If Borrower’s financial statements are prepared on a

consolidated basis, Borrower hereby covenants and agrees to prepare financial

statements specifically relating to the operation of the Franchised Operations.

At the request of Lender, Borrower shall obtain the consent of Borrower’s

accountant(s) to the inclusion of Borrower’s most recent financial statement in

any regulatory filing or report to be filed by Lender.

 

(1)           Management

and Licensing Agreement.

Borrower is a franchisee in good standing with The WesterN SizzliN Corporation

(“Franchisor”), and is not in default under its Management and Licensing Agreement with Franchisor relating to the

Franchised Operations (“Management Agreement”). Borrower agrees to comply with the terms of the Management

Agreement and to take all

actions necessary or required to keep the Management Agreemt in full force and

effect. Borrower will not encumber its rights under the Management Agreement, except to Lender. Borrower agrees

to promptly provide Lender with a copy of any notice of default under the

Management Agreement. Further,

Borrower agrees to promptly provide Lender with a copy of any notice to

Borrower of the existence of any breach which, with notice or the passage of

time, or both, would entitle Franchisor to terminate the Management Agreement.

 

(m)          Fixed

Charge Coverage Ratio. Borrower shall maintain a Fixed Charge

Coverage Ratio (as hereinafter defined) of not less than 1.2 to 1.0 for

Borrower’s business operations generally and not less than 1.4 to 1.0 for the

Franchised Operations. “Fixed Charge Coverage Ratio” shall mean Borrower’s

Operating Cash Flow divided by its Fixed Charges (each as defined below). The

Fixed Charge Coverage Ratios shall be calculated

 

5

 

by Borrower from time to time and dates as determined

by Lender, and Borrower shall submit such information as Lender may require to

confirm and approve Borrower’s calculation of the Fixed Charge Coverage Ratios.

 

(i) “Fixed

Charges” shall mean the sum of the following items set forth on a pro forma

basis separately stated for both Borrower’s business operations generally and

for the Franchised Operations, in each case, for the applicable twelve (12) month

operating period:

 

(A)          current portion of long-term debt

(defined as the current portion of long-term debt due to mature during the next

twelve (12) month operating period, as stated in Borrower’s applicable

financial statement, plus, if not already included therein, the current of

portion of principal payments imputed on all capital leases), plus

 

(B)           interest expense (defined as the

interest expense as stated on Borrower’s applicable financial statement, plus,

if not already included therein, the interest expense imputed on all capital

leases), plus

 

(C)           the current portion of operating

leases (defined as the amount of rent due under operating leases for the next

twelve (12) month operating period).

 

(ii) “Operating

Cash Flow” shall mean the sum or subtraction of the following items separately

stated for both Borrower’s business operations generally and for the Franchised

Operations, in each case, for the applicable prior twelve (12) month operating

period:

 

(A)          net income (defined as the net income

stated on Borrower’s applicable financial statement), plus

 

(B)           depreciation and amortization

(defined as the depreciation and amortization expense as stated on Borrower’s

applicable financial statement), plus

 

(C)           interest expense (as defined above), plus

 

(D)          operating lease expense (defined as

the amount of rental expense paid under operating leases, as stated on

Borrower’s applicable financial statements), plus or minus

 

(E)           non-recurring items (defined as items

which, when computing cash flow, should in Lender’s reasonable business

judgment, be added back to or subtracted from net income to normalize results).

 

3.             PROHIBITION

ON TRANSFER OR MODIFICATION.  

Borrower shall not transfer, sell, assign, lease or modify the

Collateral or any interest therein, any part thereof, or any substantial

portion of Borrower’s other assets or property without the prior written

consent of Lender.  Notwithstanding the

foregoing, Borrower may use Collateral if the same is in the ordinary course of

Borrower’s business and on customary terms and at usual prices.

 

4.             PROHIBITION ON CHANGE OF NAME,

ORGANIZATION OR LOCATION. 

Borrower shall not assume a different name, change the location of its

principal place of business, cease conducting business at any location that

appears in this Agreemt, merge, consolidate, change or reorganize its

organizational structure nor change the location of any of the Collateral

without, in each instance, obtaining the prior written consent of Lender thirty

(30) days prior to any such event.

 

6

 

5.             RIGHT OF SETOFF.  Borrower hereby grants Lender the right,

exercisable if Borrower is in default, to set off or apply against the

Indebtedness any account or deposit with Lender in which Borrower has an interest

or against any other amounts which may be in the possession of Lender and to

the credit of Borrower.

 

6.             EXAMINATION OF RECORDS AND

COLLATERAL. Borrower shall keep full and accurate records of

Borrower’s business, including, without limit, records related to the

Collateral, and such records shall be open to inspection and duplication by

Lender at all reasonable times.  Lender

may enter upon any property owned by or in the possession of Borrower to

examine and inspect the Collateral during regular business hours. Borrower

shall promptly provide Lender with any information concerning the Collateral as

Lender may request at any time.

 

7.             REIMBURSEMENT OF EXPENSES.

Borrower shall reimburse Lender for all reasonable costs and expenses,

including reasonable attorneys’ fees, incurred by Lender in enforcing the

rights of Lender under this Agreement.

All costs and expenses shall be included in the Indebtedness and shall be

immediately due and payable together with interest at the maximum legal

rate.  Such costs and expenses shall

include, without limitation, costs or expenses incurred by Lender hi any

bankruptcy, reorganization, insolvency or other similar proceeding.

 

8.             RIGHTS AND OBLIGATIONS OF LENDER.  In the event that Borrower fails to pay

taxes, maintain insurance or perform any other obligation arising under this

Agreement, Lender may pay or

perform such obligation(s) for the account of Borrower and the same shall be

added to the Indebtedness and shall be immediately due and payable together

with interest at the highest rate charged by Lender on any of the Indebtedness

(but not to exceed the maximum rate permitted by law). Lender shall not be

liable for any loss to the Collateral nor shall such loss reduce the balance

due.

 

9.             INDEMNIFICATION.  Borrower shall indemnify and save Lender

harmless from all claims, obligations, costs, expenses, including attorneys’

fees, and causes of action or other rights asserted against Lender and relating

to this Agreement and/or the

Collateral, except those arising from the gross negligence or wilful misconduct

of Lender.

 

10.         EVENTS OF DEFAULT AND REMEDIES.

 

(a)        Events

of Default.  Any of the

following events shall, for purposes of this Agreement, constitute an “Event of Default”:

 

(i)            Failure by Borrower to pay any

amount owing on or with respect to the Indebtedness when due, whether by

maturity, acceleration or otherwise, which failure continues for five (5)

business days.

 

(ii)           Any failure by Borrower or any

guarantor to comply with, or breach by Borrower or any guarantor of, any of the

non-monetary terms, provisions, warranties or covenants of the Notes, this

Agreement or the other Loan

Documents, which failure continues for fifteen (15) days after the date of

written notice to Borrower (or any guarantor) from Lender of such default;

provided, however, that if: (i) the nature of Borrower’s (or any guarantor’s)

noncompliance is such that more than fifteen (15) days are reasonably required

for its cure, (ii) Borrower (or any guarantor) has commenced such cure within

said fifteen (15) day period, (iii) Borrower (or any guarantor) diligently

prosecutes such cure to completion, (iv) Borrower (or any guarantor) provides

Lender with written notice of the noncompliance, AND (v) Borrower (or any

guarantor) furnishes reserves or a security bond, in an amount satisfactory to

Lender in its sole discretion, then Borrower (or any guarantor) shall not be in

default.

 

(iii)          Institution of remedial proceedings or

other exercise of rights and remedies by the holder of any security interest or

other lien against the Collateral or any portion thereof; provided, however,

 

7

 

if there is a good faith dispute by Borrower (or any

guarantor) as to the validity or reasonableness of the claim which is the basis

for such proceedings, then no Event of Default shall have occurred under this

clause (iii) if Borrower (or any guarantor) provides Lender with written notice

of the proceedings and furnishes reserves or a security bond for the

proceedings satisfactory to Lender.

 

(iv)          The insolvency of Borrower or any

guarantor or the admission in writing of Borrower’s or any guarantor’s

inability to pay debts as they mature.

 

(v)           Any statement, representation or

information made or furnished by or on behalf of Borrower or any guarantor to

Lender in connection with or to induce Lender to provide any of the

Indebtedness shall prove to be false or materially misleading when made or

furnished.

 

(vi)          Institution of bankruptcy,

reorganization, insolvency or other similar proceedings by or against Borrower

or any guarantor, unless, in the case of a petition filed against Borrower, the

same is dismissed within sixty (60) days of filing.

 

(vii)         The issuance or filing of any judgment,

attachment, levy, garnishment or the commencement of any related proceeding or

the commencement of any other judicial process upon or in respect to Borrower

or any guarantor or the Collateral in which the amount in controversy exceeds

One Hundred Thousand Dollars ($100,000) and is not covered by the insurance of

Borrower (or any guarantor), unless satisfied, or Borrower (or any guarantor)

furnishes reserves or a security bond in an amount satisfactory to Lender in

its sole discretion, released or discharged within sixty (60) days after the

date of such issuance, filing or communication.

 

(viii)        Sale or other disposition by Borrower or

any guarantor of any substantial portion of assets or property.

(ix)           Death, dissolution, merger,

consolidation, termination of existence, insolvency, business failure or

assignment for the benefit of creditors of or by Borrower or any guarantor;

without the prior written consent of Lender, which consent shall not be

unreasonably withheld.

 

(x)            If there is any failure by Borrower

or any guarantor to pay any indebtedness (other than to Lender) in excess of

One Hundred Thousand Dollars ($100,000) (and exclusive of trade debt incurred

in the ordinary course of business) when do or in the observance or performance

of any term, covenant or condition in any document evidencing, securing or

relating to such indebtedness, which failure continues beyond any applicable

cure period.

 

(xi)           Receipt by Borrower of a notice of

termination of the Management Agreement.

 

(xii)          If the Notes, this Agreement and the other Loan Documents have

not been assigned to the Trust, the default by Borrower which continues beyond

any applicable grace or cure period under the Retained Obligations; provided,

however, if the Notes, this Agreement

and the other Loan Documents are assigned to the Trust, this clause (xii) shall

be of no force or effect during the term of such assignment.

 

(xiii)         In the event that the Notes, this

Agreement and the other Loan

Documents are assigned to the Trust, the default by Borrower which continues

beyond any applicable grace or cure period under the Trust Obligations.

 

(b)           Remedies

Upon Event of Default. Upon the occurrence of any Event of

Default, Lender shall have the following rights:

(i)            Declare all or part of the

Indebtedness immediately due and payable.

 

8

 

(ii)           Borrower agrees, upon request of

Lender, to assemble the Collateral and make it available to Lender at any place

which is reasonably convenient for Borrower and Lender.  Borrower grants Lender permission to enter

upon any premises owned or occupied by Borrower for the purpose of taking

possession of the Collateral.

 

(iii)          Lender shall have the right to take

possession of the Collateral, with or without demand, and with or without

process of law.  Lender shall have the right

to sell and dispose of the Collateral and to distribute the proceeds according

to law. In connection with the right of Lender to take possession of the

Collateral, Lender may take possession of any other items of property in or on

the Collateral at the time of taking possession, and hold them for Borrower

without liability on the part of Lender. 

If there is any statutory requirement for notice, that requirement shall

be met if Lender shall send notice to Borrower at least five (5) days prior to

the date of sale, disposition or other event giving rise to the required

notice.  Borrower shall be liable for

any deficiency remaining after disposition of the Collateral.

 

(iv)         Lender shall also have any one or more

of the rights and remedies under the UCC or at law or equity to enforce the

payment of the Indebtedness.

 

(c)           Remedies

Generally.

 

(i)            All remedies provided for in Section

10(b) shall be available to the extent not prohibited by law. Each remedy shall

be cumulative and additional to any other remedy of Lender at law, in equity or

by statute. No delay or omission to exercise any right or power accruing upon

any default or Event of Default shall impair any such right or power or shall

be construed to be a waiver of, or acquiescence in, any such default or Event

of Default.

 

(ii)           Lender may waive any Event of Default

and may rescind any declaration of maturity of payments on the Indebtedness. In

case of such waiver or recision Borrower and Lender shall be restored to their

respective former positions and rights under this Agreement. Any waiver by Lender of any default or Event of Default shall

be in writing and shall be limited to the particular default waived and shall

not be deemed to waive any other default.

 

(d)           Application

of Proceeds.  Any

proceeds received by Lender from the exercise of remedies pursuant to Section

10(b) of this Agreement shall be

applied as follows:

 

(i)            First, to pay all costs and expenses

incidental to the leasing, foreclosure, sale or other disposition of the

Collateral. These costs and expenses shall include, without limit, any costs

and expenses incurred by Lender (including, without limit, reasonable

attorneys’ fees and disbursements), and any taxes and assessments or other

liens and encumbrances prior to the lien of this Agreement.

 

(ii)           Second, to all sums expended or

incurred by Lender, directly or indirectly in carrying out any term, covenant

or Agreement under this Agreement or any related document, together

with interest as provided in this Agreement.

 

(iii)          Third, to the payment of the

Indebtedness.  If the proceeds are

insufficient to fully pay the Indebtedness, then application shall be made

first to late charges and interest accrued and unpaid, then to any applicable

prepayment premiums, and then to unpaid fees and other charges, then to the

outstanding principal balance.

 

(iv)          Fourth, any surplus remaining shall be

paid to Borrower or to whomsoever may be lawfully entitled.

 

9

 

(e)           Further

Actions.    Promptly upon

the request of Lender, Borrower shall execute, acknowledge and deliver any and

all further documents, security Agreements,

financing statements and assurances, and do or cause to be done all further

acts as Lender may require to confirm and protect the lien of this Agreement or otherwise to accomplish the

purposes of this Agreement.

 

(f)            Attorneys

Fees.  Any reference in

this Agreement to attorneys’

fees shall refer to fees, charges, costs and expenses of in-house and outside

attorneys and paralegals, whether or not a suit or proceeding is instituted,

and whether incurred at the trial court level, on appeal, in a bankruptcy,

administrative or probate proceeding, in consultation with counsel, or

otherwise. All costs, expenses and fees of any nature for which Borrower is

obligated to reimburse or indemnify Lender are part of the Indebtedness secured

by this Agreement and are

payable upon demand, unless expressly provided otherwise, with interest until

repaid at the highest rate charged on any of the Indebtedness (but not to

exceed the maximum rate permitted by law).

 

11.           PARTIAL

RELEASES. Lender shall from time to time execute and deliver to

Borrower, within ten (10) business days after the written request of Borrower,

UCC termination statements with respect to a portion of the Collateral secured

hereunder, provided that (a) Borrower shall not be in default under any of the

terms, covenants or conditions of any document or instrument evidencing or

securing the Indebtedness; (b) the outstanding principal balance of the

applicable promissory note, together with interest, premiums, costs and all

other sums on that amount, shall be paid in full; and (c) all termination

statements shall be prepared by Lender at Borrower’s expense. The portion of

the Collateral released under this Section 11 shall be determined by matching

the Collateral located at or related to a specified Franchised Operation with

the promissory note referencing that Franchised Operation on its face.

 

12.          MISCELLANEOUS.

 

(a)           Governing

Law.  This Agreement shall be construed according to

the laws of the Commonwealth of Virginia.

 

(b)           Successors

and Assigns.    This

Agreement shall be binding upon

the successors and assigns of Borrower including, without limit, any debtor in

possession or trustee in bankruptcy for Borrower, and the rights and privileges

of Lender under this Agreement shall inure to the benefit of its successors and

assigns. This shall not be deemed a consent by Lender to a conveyance by

Borrower of all or any part of the Collateral or of any ownership interest in

Borrower.

 

(c)           Notices.

Notice from one party to another relating to this Agreement, if required, shall be deemed effective if made in writing

(including telecommunications) and delivered to the recipient’s address, telex

number or telecopier number set forth by any of the following means: (i) hand

delivery, (ii) registered or certified mail, postage prepaid, (iii) express

mail or other overnight courier service or (iv) telecopy, telex or other wire

transmission with request for assurance of receipt in a manner typical with

respect to communications of that type. Notice made in accordance with these

provisions shall be deemed delivered on receipt if delivered by hand or wire

transmission, on the third business day after mailing if mailed by registered

or certified mail, or on the next business day after mailing or deposit with

the postal service or an overnight courier service if delivered by express mail

or overnight courier. Borrower’s telecopier number is (540) 345-0831, and

Lender’s telecopier number is (743) 994-1376.

 

(d)           Entire

Agreement; Amendments.  This Agreement and any Agreement

to which it refers state all rights and obligations of the parties and

supersede all other Agreements (oral or written) with respect to the security

interests granted by this Agreement.   Any amendment of this Agreement shall be in writing and shall

require the signature of Borrower and Lender.

 

10

 

(e)           Partial

Invalidity.  The

invalidity or unenforceability of any provision of this Agreement shall not affect the validity or

enforceability of the remaining provisions of this Agreement.

 

(f)            Inspections.  Any inspection, audit, appraisal or

examination by Lender or its agents of the Collateral or of information or

documents pertaining to the Collateral is for the sole purpose of protecting

Lender’s interests under this Agreement

and is not for the benefit or protection of Borrower or any third party.

 

(g)           Joint

and Several Liability. 

In the event that more than one person or entity executes this Agreement, the obligations of each person or

entity shall be joint and several.

 

(h)          Automatic

Reinstatement. 

Notwithstanding any prior revocation, termination, surrender or

discharge of this Agreement, the

effectiveness of this Agreement

shall automatically continue or be reinstated, as the case may be, in the event

that:

 

(i)            Any payment received or credit given

by Lender in respect of the Indebtedness is determined to be a preference,

impermissible setoff, fraudulent conveyance, diversion of trust funds, or

otherwise required to be returned to Borrower or any third party under any

applicable state or federal law, including, without limit, laws pertaining to

bankruptcy or insolvency, in which case this Agreement shall be enforceable as if any such payment or credit had not

been received or given, whether or not Lender relied upon this payment or

credit or changed its position as a consequence of it.

 

(ii)           In the event of continuation or

reinstatement of this Agreement,

Borrower agrees upon demand by Lender to execute and deliver to Lender those

documents which Lender determines are appropriate to further evidence (in the

public records or otherwise) this continuation or reinstatement, although the

failure of Borrower to do so shall not affect in any way the reinstatement or

continuation. If Borrower does not execute and deliver to Lender such documents

upon demand, Lender and each officer of Lender is irrevocably appointed (which

appointment is coupled with an interest) the true and lawful attorney of

Borrower (with full power of substitution) to execute and deliver such

documents in the name and on behalf of Borrower.

 

(i)           WAIVER

OF JURY TRIAL.  BORROWER AND

LENDER ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT

THAT IT MAY BE WAIVED.  EACH PARTY,

AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF

THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES

ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE

OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT OR THE

INDEBTEDNESS.

 

(j)           Assignment.  This Agreement is freely assignable, in whole or in part, by Lender without

notice to or consent of Borrower; provided, however, that Lender (or its

assignee) shall provide written notice of such assignment to Borrower in the

event that Lender (or such assignee) desires to designate a new person or

entity as payee and/or a new place of payment for the obligations under the

Notes. Lender shall be fully discharged from all responsibility accruing

hereunder from and after the effective date of any such assignment. Lender’s

assignee shall, to the extent of the assignment, be vested with all the powers

and rights of Lender hereunder (including those granted under Section 10 hereof

or otherwise with respect to the Collateral), and to the extent of such

assignment the assignee may fully enforce such rights and powers, and all

references to Lender shall mean and refer to such assignee. Lender shall retain

all rights and powers hereby given not so assigned, transferred and/or

delivered. Borrower hereby waives all defenses which Borrower may be entitled

to assert against Lender’s assignee with respect to liability accruing

hereunder prior to the effective date of any assignment of Lender’s interest

herein. Borrower may not, in whole or in part, directly or indirectly, assign

this Agreement or its rights

hereunder or delegate its duties hereunder without, in each instance, the

specific prior written consent of Lender, which consent may be withheld or

delayed in Lender’s sole discretion.

 

11

 

(k)           Securitization.  Borrower understands and agrees that Lender

may, from time to time, assign its rights and powers under the Notes, this

Agreement and any other Loan

Documents, in whole or in part, in connection with a securitization program.

Borrower agrees to enter into an amendment to the Notes, this Agreement and any other Loan Documents if

such amendments are required by a nationally recognized rating agency in

connection with a securitization program sponsored by Lender and in which the

Notes, this Agreement and any

other Loan Documents are to be included; provided that Borrower shall not be

obligated to enter into any amendment which adversely affects Borrower or

otherwise adversely alters any of the financial terms of the Notes, this Agreement and any other Loan Documents.

[SIGNATURE

PAGE FOLLOWS]

 

12

 

EXHIBIT A

 

TO

 

SECURITY AGREEMENT

 

 

8365 Sudley Rd.,

Manassas, VA

 

5902 Richmond

Hwy., Alexandria, VA

 

3500 S. Jefferson,

Falls Church, VA

 

A-1

 

Borrower

has executed this Agreement on the day and year first above written. 

Borrower’s

principal place of business is located in the City of Roanoke, Commonwealth of

Virginia. 

Locations

of the Collateral:

 

416 South Jefferson Street,

4th Floor

Roanoke,

Virginia 24012 and

each

of the sites listed on Exhibit A attached hereto.

 

	

  BORROWER:

  	

   

  
	

   

  	

   

  
	

  THE

  WESTERN SIZZLIN STORES, INC.

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

  By:

  	

  /s/ Victor F. Foti

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

  Its 

  	

  President

  	

   

  
	

   

  	

   

  
	

  Address:

  	

   

  
	

   

  	

   

  
	

  P.O. Box 12167 

  Roanoke, VA 24023-2167

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

  Tax I.D. No. 54-1787907

  	

   

  
					

 

13

 

Loan No. 06722

5902 Richmond Hwy.

Alexandria, Virginia

 

GUARANTY

 

THE

WESTERN SIZZLIN CORPORATION, a Tennessee corporation and THE WESTERN SIZZLIN

STORES OF LITTLE ROCK, INC., an Arkansas corporation (each a “Guarantor”), as a

material inducement to and in consideration of CAPTEC FINANCIAL GROUP FUNDING

CORPORATION, a Michigan corporation, whose address is 24 Frank Lloyd Wright

Drive, Lobby L, Ann Arbor, Michigan 48106 (together with its successors,

assigns and transferees, “Lender”), making a loan in the original principal

amount of One Million Two Hundred Fifty Thousand and 00/100 Dollars

($1,250,000.00) as evidenced by a Promissory Note, dated March 23,  1998

(“Note”), made by THE WESTERN SIZZLIN STORES, INC., a Virginia corporation

(“Borrower”), which Note is secured by the instruments referenced therein

(together with the Note, “Loan Documents”), hereby jointly and severally,

unconditionally and irrevocably, personally guarantees to and for the benefit

of Lender, and Lender’s successors and assigns, the full and timely payment and

performance of all of the Borrower’s duties, obligations and covenants under

the Loan Documents. This is a guaranty of payment and performance and not of

collection.

 

This

Guaranty shall not be affected by Lender’s failure or delay to enforce any of

its rights.

 

Guarantor’s

obligations are independent of Borrower’s obligations. If Borrower defaults

under the Loan Documents, Lender can proceed immediately against Guarantor or

Borrower, or both, or Lender can enforce against Guarantor or Borrower, or

both, any rights that it has under the Loan Documents or pursuant to applicable

laws. If any lien created by the Loan Documents terminates and Lender has any

rights it can enforce against Borrower after termination, Lender can enforce

those rights against Guarantor without giving previous notice to Borrower or

Guarantor or without making any demand on either of them.

 

To

the extent permitted by law, Guarantor waives the benefit of any statute of

limitations affecting Guarantor’s liability under this Guaranty. Guarantor

waives the right to require Lender to first or concurrently: (1) proceed

against Borrower; (2) proceed against or exhaust any security that Lender holds

from Borrower; or (3) pursue any other remedy in Lender’s power. The liability

of Guarantor shall not be affected or exonerated by any indulgence, compromise,

settlement or variation of terms which may be extended by Lender to Borrower,

or agreed upon by Lender or Borrower, and, unless agreed to in writing by Lender,

shall not be affected or exonerated by any assignment by Borrower of its

interest in any one or more of the Loan Documents, nor shall the liability of

the Guarantor be affected or exonerated by the insolvency, bankruptcy

(voluntary or involuntary), or reorganization of Borrower, nor by the voluntary

or involuntary liquidation, sale or other disposition of all or substantially

all of the assets of Borrower, or by the release of any other Guarantor. Lender

and Borrower, without notice to or consent by Guarantor, may at any time or

times enter into such modifications, extensions, amendments or other covenants

of the Loan Documents as they may deem appropriate, and Guarantor shall not be

released nor its liability exonerated thereby but shall continue to be fully

liable for the payment and performance of all obligations and duties of

Borrower under the Loan Documents as so modified, extended or amended.

 

Guarantor

further agrees (1) to indemnify and hold harmless Lender from and against any

claims, damages, expenses or losses, including to the extent permitted by law,

all reasonable attorneys’ fees incurred by counsel of Lender’s choice (whether

or not litigation is commenced), resulting from or arising out of any breach of

any provision of the Loan Documents by Borrower or by reason of Borrower’s

failure to perform any of its obligations thereunder, and (2) to me extent

permitted by law, to pay all costs and expenses, including reasonable

attorneys’ fees (whether or not litigation is commenced), incurred by Lender in

enforcing this Guaranty.

 

Until

all of Borrower’s obligations to Lender have been discharged in full, Guarantor

has no right of subrogation against Borrower. Guarantor assumes the

responsibility to remain informed of the financial condition

 

 

of Borrower and of all other

circumstances bearing upon the risk of Borrower’s default, which reasonable

inquiry would reveal, and agrees that Lender shall have no duty to advise

Guarantor of information known to it regarding such condition or any such circumstances.

Lender shall not be required to inquire into the powers of Borrower or the

officers, employees, partners or agents acting or purporting to act on its

behalf, and any indebtedness made or created in reliance upon the professed

exercise of such powers shall be guaranteed under this Guaranty. Each Guarantor

hereby represents and warrants to Lender that such Guarantor has received a

copy of each of the Loan Documents, has read or had the opportunity to read

each of the Loan Documents, and understands the terms of the Loan Documents.

The provisions in the Loan Documents relating to the execution of additional

documents, legal proceedings by Lender against Borrower, severability of the

provisions of the Loan Documents, interpretation of the Loan Documents,

notices, waivers (including waiver of a jury trial), limitation on right of

recovery against Lender, disclaimer of individual liability, and the applicable

laws which govern the interpretation of the Loan Documents are incorporated

herein in their entirety by this reference and made a part hereof as though set

forth in full herein; any reference in those provisions to “Borrower” shall

mean each Guarantor and any reference in those provisions to the “Loan

Documents” shall mean this Guaranty.

 

To

the extent permitted by law, Guarantor waives its right to enforce any remedies

that Borrower now has, or later may have, against Lender. Guarantor waives any

right to participate m any security now or later held by Lender. Guarantor

waives notice of acceptance of this Guaranty, and all other notices in

connection with this Guaranty or in connection with the liabilities,

obligations and duties guaranteed hereby, including notices to Guarantor of

default by the Borrower under the Loan Documents. Guarantor hereby waives

diligence, presentment, demand for performance, notice of nonperformance,

protest, notice of protest, notice of dishonor, and notice of acceptance of

this Guaranty, and waives all notices of the existence, creation, or incurring

of new or additional obligations.

 

If

there is more than one Guarantor, the liability of each Guarantor shall be

joint and several. Guarantor’s obligations under this Guaranty shall be binding

on Guarantor’s legal representatives, heirs, successors and assigns.

 

If

Borrower disposes of its interest in the property secured by the Loan

Documents, “Borrower”, as used in this Guaranty, shall mean Borrower’s

successors or assigns. Assignment of the Loan Documents by Lender (as permitted

by the Loan Documents) shall not affect this Guaranty.   In the event of an assignment of the Loan

Documents by Lender, the term “Lender” as used in this Guaranty shall mean

Lender’s successors or assigns.

 

Guarantor

hereby covenants and agrees to deliver to Lender the following: (a) management

prepared and certified consolidated quarterly financial statements for

Guarantor within forty-five (45) days after the end of the first three (3)

quarters of each fiscal year of Guarantor, and (b) annual consolidated

financial statements for Guarantor audited by an independent certified public

accountant within one hundred twenty (120) days after the end of each fiscal

year of Guarantor. Such financial statements shall be true and correct in all

respects, shall be prepared in accordance with generally accepted accounting

principles, and shall fairly represent the respective financial conditions of

the subjects thereof as of the respective dates thereof. At the request of

Lender, Guarantor shall obtain the consent of Guarantor’s accountant(s) to the

inclusion of Guarantor’s most recent financial statement in any regulatory

filing or report to be filed by Lender.

 

If

any one or more of the provisions of this Guaranty shall be held to be invalid,

illegal or unenforceable in any respect, such invalidity, illegality or unenforceability

shall not affect any other provision of this Guaranty, and this Guaranty shall

be construed as if such invalid, illegal or unenforceable provision had never

been contained herein.

 

This

Guaranty shall be construed according to the laws of the State of Virginia.

Guarantor agrees that any dispute which may arise between Lender and Guarantor

with regard to this Guaranty shall be resolved by litigation in state or

federal court. Litigation may be initiated by Lender or its assignee, at its

discretion, in the State of the principal place of business of Lender or its

assignee, the State of the principal place of business of Guarantor, or the

State where the Collateral (as defined in the Loan Documents) is located.

 

2

 

GUARANTOR HEREBY KNOWINGLY AND

IRREVOCABLY WAIVES ANY OBJECTIONS ON THE GROUNDS OF IMPROPER JURISDICTION OR

VENUE TO AN ACTION INITIATED AS SET FORTH ABOVE AND AGREES THAT EFFECTIVE

SERVICE OF PROCESS MAY BE MADE UPON GUARANTOR BY REGISTERED MAIL RETURN RECEIPT

REQUESTED. GUARANTOR WAIVES, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY IN

ANY ACTION BETWEEN THE PARTIES.

 

This

Guaranty shall become effective on March 31, 1998. 

 

	

   

  	

   

  	 

	

  THE WESTERN SIZZLIN

  CORPORATION

  	

   

  	 

	

   

  	

   

  	 

	

   

  	

   

  	 

	

  By:

  	

  /s/ Victor F. Foti

  	

   

  	 

	

   

  	

   

  	 

	 
	

  Its: 

  	

  President

  	

   

  
	

   

  	

   

  	 

	

  THE

  WESTERN SIZZLIN STORES OF LITTLE ROCK, INC.

  	 

	

   

  	 

	

   

  	 

	

  By:

  	

  /s/ Victor F. Foti

  	

   

  	 

	

   

  	

   

  	 

	 
	

  Its: 

  	

  President

  	

   

  	 

													

 

3

 

 

This

Certificate shall become effective on March 31, 1998.

 

	

   

  	

  THE

  WESTERN SIZZLIN STORES, INC.

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By

  	

  /s/ Victor F. Foti

  
	

   

  	

   

  
	

   

  	

  Its:     President

  
					

 

4

 

Loan

No. 06722

5902 Richmond Hwy.

Alexandria, Virginia

CERTIFICATE OF BORROWER

 

THE WESTERN SIZZLIN STORES, INC., a Virginia corporation

("Borrower”), for the benefit of CAPTEC FINANCIAL GROUP FUNDING

CORPORATION, a Michigan corporation (together with its successors, assigns and

transferees, “Lender"), warrants, represents, covenants and agrees that

the following are true and correct as of the date hereof:

 

1.             All warranties and

representations of Borrower contained in this Certificate shall survive the

execution of this Certificate and any advances made in accordance with the

Promissory Note executed by Borrower, in favor of Lender, dated even herewith,

in the original principal amount of One Million Two Hundred Fifty Thousand and

00/100 Dollars ($1,250,000.00) (the “Note”).

 

2.             Borrower has good,

indefeasible and marketable title to the Collateral (as defined in that certain

Security Agreement, dated even herewith, between Borrower and Lender (the

“Security Agreement”)). Except for the Security Agreement, there are no

instruments, matters or agreements, and Borrower is not a party to any

instrument, matter or agreement, which will in any way encumber, bind or

otherwise affect the Collateral or Lender. 

Borrower has neither done nor failed to do anything, nor has suffered

anything to be done, as a result of which the Collateral or any part thereof

has been or will be encumbered or title thereto has been or will be affected in

any way and no person, firm or entity has any present, conditional or

contingent rights to acquire all or any portion of the Collateral.

 

3.             Borrower is a corporation duly

organized and validly existing in good standing under the laws of the

Commonwealth of Virginia. The person or persons executing the Note, the

Security Agreement and the other Loan Documents (as defined in the Security

Agreement) have full power and complete authority to execute the Note, the Security

Agreement and the other Loan Documents, and, when executed, the Note, the

Security Agreement and the other Loan Documents will be legal, valid and

binding obligations of Borrower, enforceable in accordance with their terms.

 

4.             As of the date

hereof, Borrower is not “insolvent” within the meaning of Section 548(a)(2)(B)

of the United States Bankruptcy Code.

 

5.             Borrower

is in the business of owning and operating Great American Steak & Buffet

Company restaurants, including the restaurant operation located at 5902

Richmond Hwy., Alexandria, Virginia (the “Franchised Operation”).   Borrower’s chief executive office is

located at 416 South Jefferson Street, Roanoke, Virginia 24012, and the

Collateral is  located

at Borrower’s Chief Executive Office and the Franchised Operation.

 

6.             Borrower has furnished to Lender

its most recent annual audited financial statements and most recent management

prepared and certified quarterly financial statements, which statements were

prepared in accordance with generally accepted accounting principles and are

correct and complete and accurately present the financial condition of Borrower

on the dates thereof.   Further, there

has been no material adverse change in the business, property or condition of

Borrower since the date of the most recent financial statements.

 

7.             Borrower has complied

and will continue to comply with all applicable laws, rules, regulations and

orders relating to Borrower or any aspect of Borrower’s business or assets,

including, without limit, all environmental laws, rules, regulations and

orders. Borrower agrees to indemnify and hold Lender harmless against and from

all claims, losses and costs resulting from any and all violations by Borrower

of any laws, rules, regulations and/or orders.

 

 

8.             Borrower has not

received any written notice of, and, to the best knowledge of Borrower, none of

Borrower, the Franchised Operation or the premises where the Franchised

Operation is located are in violation of any law, municipal ordinance or other

governmental requirement of any governmental authority.

 

9.             There are no

circumstances, state of facts or other matters which, with the passage of time

or the giving of notice, or both, would constitute an Event of Default under

the terms of the Note, the Security Agreement or the other Loan Documents.

 

10.           Borrower has filed all

federal, state and local income and other tax returns and other reports

required to be filed prior to the date of this Certificate and Borrower has

paid all taxes, assessments, withholdings and other governmental charges that

are due and payable prior to the date of this Certificate.

 

11.           All taxes and all

installments of assessments and all other charges of any kind imposed or levied

by any governmental authority against either Borrower or the Collateral which

are due and payable or constitute a lien at or prior to the date of this

Certificate, together with all interest and penalties due thereon, have been

paid in full.

 

12.           There is now fully

paid and enforceable fire, liability and other forms of insurance in such

amounts and covering such risks as are required under the Security Agreement.

 

13.           There are no disputes,

litigation or other such proceedings pending or, to the best of Borrower’s

knowledge, threatened against or related to Borrower, the Collateral or the

Franchised Operation, nor does Borrower know of any basis for any such action.

 

14.           In consideration of the loan

evidenced by the Note and secured, by the Security Agreement and the other Loan

Documents, Borrower agrees to indemnify and hold Lender harmless against all

claims, liabilities, losses, deficiencies and damages as well as reasonable

expenses (including attorney’s fees), interest and penalties related thereto,

asserted by any third party against, or incurred by Lender, by reason of or

resulting from any breach, inaccuracy, incompleteness or nonfulfillment of the

covenants, representations and/or warranties of Borrower contained in this

Certificate.

 

15.           Commencing May 1, 1998

and on the first day of each following month, Lender is authorized to initiate

an electronic funds transfer to pay the monthly installment payment owing under

the loan evidenced by the Note from the account designated below, and to

receive payments from such account.  

This authorization will remain in effect unless the undersigned requests

a modification that is agreed to by the Financial Institution and Lender;

provided, however, that Lender and its successors, assigns and transferees may

modify the place of payment to be made by Borrower without the consent of the

Financial Institution.

 

 

	

  Financial Institution:

  	

   

  
	

  Financial Institution

  	

   

  
	

  Address:

  	

   

  
	

  Routing/Transit #:

  	

   

  
	

  Account #:

  	

   

  
					

 

 

[SIGNATURE PAGE FOLLOWS]

 

2

 

Loan No. 06722

5902 Richmond Hwy.

Alexandria, Virginia

 

CERTIFICATE OF GUARANTOR

 

THE

WESTERN SIZZLIN STORES OF LITTLE ROCK, INC., an Arkansas corporation

(“Guarantor”), for the benefit of CAPTEC FINANCIAL GROUP FUNDING CORPORATION, a

Michigan corporation (together with its successors, assigns and transferees,

“Lender”), warrants, represents, covenants and agrees that the following are

true and correct as of the date hereof:

 

1.             Guarantor has received a copy of

that certain Promissory Note, dated March 23, 1998 in the original principal

amount of One Million Two Hundred Fifty Thousand and 00/100 Dollars

($1,250,000.00) (“Note”) made by THE WESTERN SIZZLIN STORES, INC., a Virginia

corporation (“Borrower”). Guarantor has also received a copy of the instruments

securing the Note, as referenced therein (together with the Note, the “Loan

Documents”). The Loan Documents create a lien with respect to certain real and

personal property located at 5902 Richmond Hwy., Alexandria, Virginia

(“Premises”).

 

2.             Guarantor has had the

opportunity to review the Certificate of Borrower, dated even herewith, made by

Borrower for the benefit of Lender, and confirms that the warranties and

representations set forth therein are true and correct as of the date hereof.

 

3.             Guarantor has full

power and authority to enter into that certain Guaranty executed by Guarantor

in favor of Lender, dated as of the date of this Certificate (“Guaranty”) and

to assume and perform all of Guarantor’s obligations under the Guaranty in

accordance with all of the terms and conditions of the Guaranty. The execution

and delivery of the Guaranty and the performance by Guarantor of Guarantor’s

obligations under the Guaranty and under all documents contemplated by the

Guaranty require no further action or approval.  The Guaranty and all other documents contemplated by the Guaranty

are fully binding and enforceable obligations of Guarantor.

 

4.             There are no

circumstances, state of facts or other matters which, with the passage of time

or the giving of notice, or both, would constitute an event of default under

the terms of the Guaranty, or to the best of the Guarantor’s knowledge, under

the Loan Documents.

 

5.             There are no

disputes, litigation or other such proceedings pending or, to the best of the

Guarantor’s knowledge, threatened against or related to the Guarantor, nor does

Guarantor know of any basis for any such action.

 

6.             Guarantor has

furnished to Lender its most recent annual audited consolidated financial

statements and most recent management prepared and certified quarterly

consolidated financial statements, which statements were prepared in accordance

with generally accepted accounting principles and are correct and complete and

accurately present the financial condition of Guarantor on the dates

thereof.   Further, there has been no

material adverse change in the business, property or condition of Guarantor

since the date of the most recent financial statements.

 

7.             In consideration of

the loan evidenced by the Note and secured, in part, by the Loan Documents, the

receipt and sufficiency of which Guarantor acknowledges, and in order to induce

Lender to make such loan, Guarantor agrees to indemnify and hold Lender

harmless against all claims, liabilities, losses, deficiencies and damages as

well as reasonable expenses (including attorney’s fees), interest and penalties

related thereto, asserted

 

 

by

any third party against, or incurred by Lender, by reason of or resulting from

any breach, inaccuracy, incompleteness or nonfulfillment of the covenants,

representations and/or warranties of Guarantor contained in this Certificate.

 

This

Certificate shall become effective on March 31, 1998.

 

	

   

  	

  THE WESTERN SIZZLIN STORES OF LITTLE ROCK, INC.

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By

  	

  /s/ Victor F. Foti

  
	

   

  	

   

  	

   

  
	

   

  	

  Its

  	

  President

  	 

						

 

2

 

Loan No. 06722

5902 Richmond Hwy

Alexandria, Virginia

 

CERTIFICATE OF GUARANTOR

 

THE

WESTERN SIZZLIN CORPORATION, a Tennessee corporation (“Guarantor”), for the

benefit of CAPTEC FINANCIAL GROUP FUNDING CORPORATION, a Michigan corporation

(together with its successors, assigns and transferees, “Lender”), warrants,

represents, covenants and agrees that the following are true and correct as of

the date hereof:

 

1.             Guarantor has

received a copy of that certain Promissory Note, dated March 23,  1998 in the original principal amount of One

Million Two Hundred Fifty Thousand and 00/100 Dollars ($1,250,000.00) (“Note”)

made by THE WESTERN SIZZLIN STORES, INC., a Virginia corporation (“Borrower”).

Guarantor has also received a copy of the instruments securing the Note, as

referenced therein (together with the Note, the “Loan Documents”). The Loan

Documents create a lien with respect to certain real and personal property

located at 5902 Richmond Hwy., Alexandria, Virginia (“Premises”).

 

2.             Guarantor has had the opportunity

to review the Certificate of Borrower, dated even herewith, made by Borrower

for the benefit of Lender, and confirms that the warranties and representations

set forth therein are true and correct as of the date hereof.

 

3.             Guarantor has full power and authority

to enter into that certain Guaranty executed by Guarantor in favor of Lender,

dated as of the date of this Certificate (“Guaranty”) and to assume and perform

all of Guarantor’s obligations under the Guaranty in accordance with all of the

terms and conditions of the Guaranty. The execution and delivery of the

Guaranty and the performance by Guarantor of Guarantor’s obligations under the

Guaranty and under all documents contemplated by the Guaranty require no

further action or approval.  The

Guaranty and all other documents contemplated by the Guaranty are fully binding

and enforceable obligations of Guarantor.

 

4.             There are no circumstances, state

of facts or other matters which, with the passage of time or the giving of

notice, or both, would constitute an event of default under the terms of the

Guaranty, or to the best of the Guarantor’s knowledge, under the Loan

Documents.

 

5.             There are no disputes, litigation

or other such proceedings pending or, to the best of the Guarantor’s knowledge,

threatened against or related to the Guarantor or the Premises, nor does

Guarantor know of any basis for any such action, except as disclosed to Lender

on Exhibit A hereto.

 

6.             Guarantor has furnished to Lender

its most recent annual audited consolidated financial statements and most

recent management prepared and certified quarterly consolidated financial

statements, which statements were prepared in accordance with generally

accepted accounting principles and are correct and complete and accurately

present the financial condition of Guarantor on the dates thereof.  Further, there has been no material adverse

change in the business, property or condition of Guarantor since the date of

the most recent financial statements.

 

7.             In consideration of the loan

evidenced by the Note and secured, in part, by the Loan Documents, the receipt

and sufficiency of which Guarantor acknowledges, and in order to induce Lender

to make such loan, Guarantor agrees to indemnify and hold Lender harmless

against all claims, liabilities, losses, deficiencies and damages as well as

reasonable expenses (including attorney’s fees), interest and penalties related

thereto, asserted by any third party against, or incurred by Lender, by reason

of or resulting from any breach, inaccuracy, incompleteness or nonfulfillment

of the covenants, representations and/or warranties of Guarantor contained in

this Certificate.

 

 

This

Certificate shall become effective on 

March  31, 1998.

 

	

   

  	

  THE WESTERN SIZZLIN CORPORATION

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By

  	

  /s/ Victor F. Foti

  
	

   

  	

   

  	

   

  
	

   

  	

  Its 

  	

  President

  
					

 

2

 

The WesterN SizzliN Corporation

Litigation Proceedings against The WesterN SizzliN Corporation

Exhibit A, to Certificate of Guarantor

 

	

  Name/Caption

  	

   

  	

  Amount in

  Controversy

  	

   

  	

  Status

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  David K Wachtal,

  Jr. v. WSC. et al

  First Complaint - breach of employment contract;

  wrongful termination

  Second Complaint -

  Includes officers and directors in the suit

  	

   

  	

  $

  	

  1,319,000

  	

   

  	

  Wachtal president until 2/95 claims wrongful

  termination; which under his contract would mean two years’ of compensation,

  approx. $400,000. The termination was well justified. The suit had included

  certain officers and directors, whose cases have been dismissed through award

  of summary judgement.

  	

   

  
	

   

  
	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Third Complaint

  - loss of value of stock 

  Indemnification for

  expenses

  	

   

  	

  $

  	

  8,500,000

  	

   

  	

  Summary judgement granted to defendant, case

  dismissed; plaintiff has appealed. Discovery not complete.

  	

   

  
	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Mann v. WSC 

  Breach of employment

  	

   

  	

  $

  	

  50,000 

  	

   

  	

  Mann is now deceased, with very little

  discovery.  We expect that the suit

  will be dismissed.

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Durham

  Enterprises v. WSC 

  Denial of awarding a

  franchise

  	

   

  	

  $

  	

  1,000,000 

  	

   

  	

  Summary judgment granted to defendant, case

  dismissed; plantiff has not appealed.

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Cruthis v Elgin

  Hamner and WSC 

  Contaminated tea

  	

   

  	

  $

  	

  4,000

  	

   

  	

  Suit primarily against franchise; WSC named as

  codefendant; discovery beginning

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Pony  v. WSC

  and David Wachtel, Jr.

  Business Interference

  between franchisee/seller 

  and potential buyer - would not allow franchise assumption

  	

   

  	

  $

  	

  2,500,000

  	

   

  	

  Discovery is beginning: D & O insurance.

  	

   

  
	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  WSC v. Moody /

  Fowler

  Counter claim, in response to WSC's collection suit for unpaid

  royalties

  	

   

  	

  $

  	

  500,000

  	

   

  	

  Discovery Beginning.

  	

   

  

 

 

Loan No. 06723

3500 S. Jefferson

Falls Church, Virginia

 

PROMISSORY NOTE

 

	

  $500,000.00

  	

  Date: March 23, 1998

  

 

 

PROMISE TO PAY. For value received, THE WESTERN

SIZZLIN STORES, INC., a

Virginia corporation, (“Borrower”) promises to pay to CAPTEC

FINANCIAL GROUP FUNDING CORPORATION, a Michigan corporation (together with its successors, assigns and

transferees, “Lender”), or order, Five Hundred Thousand and 00/100 Dollars

($500,000.00), or so much of such sum as has been advanced under this Note, as

follows:

 

Interest

only from and after the date on which funds are disbursed by Lender hereunder

(“Effective Date”) through the last day of the month in which the Effective

Date occurs shall be due and payable on the first day of the next month

following the Effective Date; provided that if the Effective Date occurs after

the fifteenth (15th) day of a month, the interest which would accrue, based on

the actual number of days, through the end of such month shall be due and

payable in advance on the Effective Date. Installments of principal and

interest in the amount of Six Thousand Five Hundred Ninety-One and 00/100

Dollars ($6,591.00) are due and payable on the first day of each month (each a

“Payment Date”), commencing May 1, 1998; until March 1, 2008 (“Due Date”), when

the outstanding principal balance, plus accrued interest, is due and payable

(unless the indebtedness evidenced by this Note is accelerated, in which case,

the Due Date is the date of acceleration). The amortization period for this

Note, for purposes of calculating the monthly installments of principal and

interest, is one hundred nineteen (119) months.

 

All

payments under this Note shall be made at Lender’s principal office at 24 Frank

Lloyd Wright Drive, Lobby L, 4th Floor, P.O. Box 544, Ann Arbor, Michigan

48106-0544, or at such other address as Lender may designate in writing, or by

electronic funds withdrawal made by Lender upon written authorization therefor

from Borrower, which authorization shall not be revocable by Borrower without

the consent of Lender. Payments due and payable on a day on which Lender is not

open for business are due on the next succeeding business day. Payments will be

applied first to accrued interest and then to principal.

 

INTEREST RATE. The outstanding principal balance of this

Note will bear interest at a fixed rate equal to nine and eighty-two hundredths

percent (9.82%) per annum (the “Stated Rate”), until the Due Date (whether by

acceleration or otherwise), and thereafter at a rate which is three percent

(3%) above the Stated Rate (“Default Rate”).

 

Interest

will be computed on the basis of a year consisting of twelve (12) months of

thirty (30) days each. In no event, however, shall the interest rate exceed the

maximum rate allowed by law. Notwithstanding anything to the contrary contained

herein, at no time shall the interest payable under this Note be greater than

the maximum rate permitted by applicable law (“Legal Rate”). If any obligation

under this Note shall result in Lender receiving an amount deemed to be

interest under applicable law in excess of the Legal Rate, then the amount

which would be excessive interest shall be applied to the reduction of the

principal balance of this Note and not to payment of interest. If such

excessive interest exceeds the unpaid principal balance of this Note, the

excess shall be refunded to Borrower.

 

 

PREPAYMENT. Borrower shall not have any right, except as otherwise specifically

provided, to prepay the principal balance of this Note until two (2) loan years

have elapsed. The first “loan year” shall commence on the date of the closing

of the loan evidenced by this Note, and subsequent loan years shall commence on

the anniversaries of such date. Commencing with the third (3rd) loan year and

if no Event of Default (as hereinafter defined) then exists, Borrower shall

have the right to prepay all, but not merely a portion of, the principal

balance of this Note together with accrued interest thereon on any Payment

Date; provided, however, that Borrower shall provide no less than thirty (30)

days prior written notice to Lender of Borrower’s intention to prepay (the

“Prepayment Notice”). Once given, the Prepayment Notice may not be withdrawn,

and the failure to prepay in accordance with the Prepayment Notice shall

constitute an Event of Default.

 

Borrower

acknowledges and agrees that Lender is making the loan evidenced by this Note

in consideration of the receipt by Lender of all interest and other benefits

intended to be conferred by this Note, and if payments of principal are made to

Lender prior to the regularly scheduled due date of such payments, for whatever

reason (whether voluntarily or involuntarily), Lender will not receive all such

interest and other benefits and may incur additional costs. For these reasons,

and to induce Lender to make the loan, Borrower expressly waives any right to

prepay this Note except as specifically provided herein.

 

Lender

shall not be required to accept any tender of prepayment of the principal

balance of this Note at any time when the “Reinvestment Rate” (as hereinafter

defined) is lower than the Stated Rate, less eighty-five basis points, unless

such tender also includes a sum of money (the “Prepayment Premium”) equal to

the present value (computed at the Reinvestment Rate) of the difference between

a stream of monthly payments necessary to amortize the outstanding principal

balance of this Note at the Stated Rate and a stream of monthly payments

necessary to amortize the outstanding principal balance of this Note at the

Reinvestment Rate (the “Differential”). In the event the Differential is less

than zero, no Prepayment Premium will be required. For purposes of this Note,

the “Reinvestment Rate” is the yield on a United States Treasury obligation of

a constant maturity rate maturing closest in time but prior to the maturity

date of this Note, as reported in Federal Reserve Statistical Release H. 15

(519) (or any comparable successor publication) on the fifth (5th) business day

preceding the prepayment date.

 

In

addition to the Prepayment Premium, if any, every tender of prepayment of the

principal balance of this Note shall be accompanied by a payment equal to (x)

all accrued but unpaid interest and other charges to the date of prepayment and

(y) an administrative fee equal to one half of one percent (0.5%) of the

outstanding principal balance of this Note; provided, however, that the

administrative fee shall not be less than One Thousand and 00/100 Dollars

($1,000.00) (collectively, the “Other Charges”).

 

If

the outstanding principal balance of this Note is accelerated by reason of an

Event of Default, such acceleration shall be deemed to be a prepayment and

Borrower shall pay to Lender, in addition to all sums due as a result of the

acceleration, any applicable Prepayment Premium and Other Charges. In the event

of an acceleration of this Note in the first or second loan year, Borrower

shall be required to pay a Prepayment Premium equal to five percent (5%) of the

outstanding principal balance of this Note together with any Other Charges. In

the event that this Note is partially prepaid from casualty insurance proceeds

(as provided in the Security Agreement, defined below), no Prepayment Premium

or Other Charges shall be due and payable with respect to such prepayment, and

each monthly installment thereafter shall be reduced to an amount which will

amortize the then unpaid principal balance of this Note at the Stated Rate over

the then remaining term of this Note.

 

LATE PAYMENT CHARGE. In the event that any payment under this

Note is not received by Lender within fifteen (15) days of the date when due, a

late charge of five percent (5%) of the amount of such payment will be due.

Borrower agrees that the late charge is a reasonable estimate of the

administrative costs which Lender will incur in processing the delinquency.

Lender’s acceptance of a late payment and/or of the late payment charge will

not waive any default under this Note or affect the acceleration of this Note

(if this Note has been accelerated).

 

2

 

COLLATERAL. This Note and the other obligations of

Borrower to Lender contained in the documents securing this Note are secured by

and in accordance with the terms of that certain Security Agreement, effective

March 31, 1998, executed by Borrower for the benefit of Lender (the “Security

Agreement”; together with any other documents securing payment under this Note,

the “Loan Documents”). All property securing the Indebtedness (as defined in

the Security Agreement) is referred to as the “Collateral”,

 

DEFAULT. Any of the following events shall, for

purposes of this Note, constitute an “Event of Default” :

 

(a)           Failure by Borrower to

pay any amount owing on or with respect to the Indebtedness when due, whether

by maturity, acceleration or otherwise, which failure continues for five (5)

business days.

 

(b)             Any

failure by Borrower (or any guarantor of all or any part of the Indebtedness)

to comply with any of the non-monetary terms, provisions, warranties or

covenants of this Note, the Security Agreemt or the other Loan Documents, which

failure continues for fifteen (15) days after the date of written notice to

Borrower (or any guarantor) from Lender of such default; provided, however,

that if: (i) the nature of Borrower’s (or any guarantor’s) noncompliance is such

that more than fifteen (15) days are reasonably required for its cure, (ii)

Borrower (or any guarantor) has commenced such cure within said fifteen (15)

day period, (iii) Borrower (or any guarantor) diligently prosecutes such cure

to completion, (iv) Borrower (or any guarantor) provides Lender with written

notice of the noncompliance, AND (v) Borrower (or any guarantor) furnishes

reserves or a security bond, in an amount satisfactory to Lender in its sole

discretion, then Borrower (or any guarantor) shall not be in default.

 

(c)             Institution

of foreclosure proceedings or other exercise of rights and remedies by the

holder of any mortgage, deed of trust, security interest or other lien against

the Collateral (or any portion thereof); provided, however, if there is a good

faith dispute by Borrower (or any guarantor) as to the validity or

reasonableness of the claim which is the basis for such proceedings, then no

Event of Default shall have occurred under this clause (c) if Borrower (or any

guarantor) provides Lender with written notice of the proceedings and furnishes

reserves or a security bond for the proceedings satisfactory to Lender.

 

(d)             Insolvency

of Borrower (or any guarantor) or the admission in writing of Borrower’s (or

any guarantor’s) inability to pay debts as they mature.

 

(e)             Any

statement, representation or information made or furnished by or on behalf of

Borrower (or any guarantor) to Lender in connection with or to induce Lender to

provide or advance any of the Indebtedness shall prove to be false or

materially misleading when made or furnished.

 

(f)              Institution

of bankruptcy, reorganization, insolvency or other similar proceedings by or

against Borrower (or any guarantor), unless, in the case of a petition filed

against Borrower (or any guarantor), the same is dismissed within sixty (60)

days of the date of filing.

 

(g)             The

issuance or filing of any judgment, attachment, levy,  garnishment or the commencement of any related proceedings or the

commencement of any other judicial process upon or in respect to Borrower (or

any guarantor) or the Collateral in which the amount in controversy exceeds One

Hundred Thousand Dollars ($100,000) and is not covered by the insurance of

Borrower (or any guarantor), unless satisfied, or Borrower (or any guarantor)

furnishes reserves or a security bond in an amount satisfactory to Lender in

its sole discretion, released or discharged within sixty (60) days after the

date of such issuance, filing or commencement.

 

3

 

(h)             Sale

or other disposition by Borrower (or any guarantor) of any substantial portion

of its assets or property.

 

(i)            Death, dissolution,

merger, consolidation, termination of existence, insolvency, business failure

or assignment for the benefit of creditors of or by Borrower (or any

guarantor); without the prior written consent of Lender, which consent shall

not be unreasonably withheld.

 

(j)              Any

failure by Borrower (or any guarantor) to pay any indebtedness (other than to

Lender) in excess of One Hundred Thousand Dollars ($100,000) (and exclusive of

trade debt incurred in the ordinary course of business) when due, or any

failure in the observance or performance of any term, covenant or condition in

any document evidencing, securing or relating to such indebtedness, which

failure continues beyond any applicable cure period.

 

(k)           Receipt by Borrower of

a notice of termination of the Management and Licensing Agreemt from The

WesterN SizzliN Corporation, a Tennessee corporation (“Franchisor”), for the

WesterN SizzliN Restaurant located at 3500 S. Jefferson, Falls Church, Virginia

22041 (“Franchised Operation”).

 

(1)           If this Note, the

Security Agreement and the other Loan Documents have not been assigned to the

Trust (as defined in the Security Agreemt), the default by Borrower which

continues beyond any applicable grace or cure period under the Retained

Obligations (as defined in the Security Agreement); provided, however, if this

Note, the Security Agreement and the other Loan Documents are assigned to the

Trust, this Clause (1) shall be of no force and effect during the term of such

assignment.

 

(m)          In

the event that this Note, the Security Agreement and the other Loan Documents

are assigned to the Trust, the default by Borrower which continues beyond any applicable

grace or cure period under the Trust Obligations (as defined in the Security

Agreement).

 

(n)           Any default by

Borrower under the Lease between Janice H. Levin, as landlord, and Borrower, as

tenant, dated March 23, 1988 (“Lease”), which default is not cured within any

applicable cure period set forth in such Lease.

 

Upon

an occurrence of an Event of Default, Lender shall have the option to declare

all or part of the Indebtedness (including this Note) immediately due and

payable. If this Note is not paid at maturity (whether by acceleration or

otherwise), Lender shall have all of the rights and remedies provided at law or

equity or by Agreement, including, without limit, the right to sell or

liquidate all or any part of the Collateral. The remedies of Lender are

cumulative and not exclusive.

 

EXAMINATION OF RECORDS. Borrower shall at all times keep full and

accurate records of its business and of the Collateral, which records shall be

open to inspection and copying by Lender at all reasonable times.

 

LIABILITY OF SIGNATORIES. Borrower, and all guarantors and endorsers,

and any other party liable for the Indebtedness evidenced by this Note: (i)

severally waive presentment, demand, protest, notice of dishonor, notice of

non-payment and notice of acceleration of this Note; and (ii) agree that no

extension or postponement of the time for payment, or waiver, or indulgence or

forbearance granted to Borrower (without limit as to number or period) or any

modification of this Note, or any substitution, or exchange or release of all

or part of the Collateral, or addition of any party to this Note, or release or

discharge of, or suspension of any rights and remedies against any party liable

on this Note, shall reduce or affect the obligation of any other party liable

for the payment of this Note.

 

4

 

NON-WAIVER. No delay by Lender in the exercise of any

right or remedy shall operate as a waiver. No single or partial exercise by

Lender of any right or remedy shall preclude any future exercise of such right

or remedy or the exercise of any other right or remedy. No waiver or indulgence

by Lender of any default or Event of Default shall be effective unless in

writing and signed by Lender, nor shall a waiver on one occasion be construed

as a bar to any right or remedy, or waiver of any default or Event of Default

on any future occasion.

 

REIMBURSEMENT OF EXPENSES. Borrower shall reimburse Lender for all costs and expenses, including

reasonable attorneys’ fees, incurred by Lender in enforcing the rights of

Lender under this Note. Such costs and expenses shall include, without

limitation, costs or expenses incurred by Lender in any bankruptcy,

reorganization, insolvency or other similar proceeding. Any reference in this Note

to attorneys’ fees shall mean fees, charges, costs and expenses of in-house

and/or outside counsel and paralegals, whether or not a suit or proceeding is

instituted, and whether incurred at the trial court level, on appeal, in a

bankruptcy, administrative or probate proceeding, in consultation with counsel,

or otherwise.

 

WAIVER OF JURY TRIAL. BORROWER AND LENDER ACKNOWLEDGE THAT THE RIGHT TO

TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY,

AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF

THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES

ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE

OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS NOTE OR THE INDEBTEDNESS.

 

ASSIGNMENT. This Note is freely assignable, in whole or

in part, by Lender without prior notice to or consent of Borrower; provided,

however, that Lender (or its assignee) shall provide written notice of such

assignment to Borrower in the event that Lender (or such assignee) desires to

designate a new person or entity as payee and/or a new place of payment for the

obligations under this Note. Borrower may not, in whole or in part, directly or

indirectly, assign this Note or its rights hereunder or delegate its duties

hereunder without, in each instance, the specific prior written consent of

Lender, which consent may be withheld or delayed in Lender’s sole discretion.

Lender shall be fully discharged from all responsibility accruing hereunder

from and after the effective date of any such assignment. Lender’s assignee

shall, to the extent of the assignment, be vested with all the powers and

rights of Lender hereunder, and to the extent of such assignment the assignee

may fully enforce such rights and powers, and all references to Lender shall

mean and refer to such assignee. Lender shall retain all rights and powers

hereby given not so assigned, transferred and/or delivered. Borrower hereby

waives all defenses which Borrower may be entitled to assert against Lender’s

assignee with respect to liability accruing hereunder prior to the effective

date of any assignment of Lender’s interest herein.

 

SECURITIZATION. Borrower understands and agrees that Lender

may, from time to time, assign its rights and powers under this Note, the

Security Agreement and any other Loan Documents, in whole or in part, in

connection with a securitization program. Borrower agrees to enter into an

amendment to this Note, the Security Agreement and any other Loan Documents if

such amendments are required by a nationally recognized rating agency in

connection with a securitization program sponsored by Lender and in which this

Note, the Security Agreement any other Loan Documents are to be included;

provided that Borrower shall not be obligated to enter into any amendment which

adversely affects Borrower or otherwise adversely alters any of the financial

terms of this Note, the Security Agreement and any other Loan Documents.

 

MISCELLANEOUS. The terms and provisions of this Note shall

be governed by and construed in accordance with the laws of the Commonwealth of

Virginia. Lender and Borrower agree that any dispute which may arise between

them with regard to this Note shall be resolved by litigation in state or

federal court. Litigation may be initiated by Lender or its assignee, at its

discretion, in the State of the principal place of business of Lender or its

assignee, the State of the principal place of business of Borrower, or the

State where the Collateral is located. BORROWER HEREBY KNOWINGLY AND

IRREVOCABLY WAIVES ANY OBJECTIONS ON THE

 

5

 

GROUNDS OF IMPROPER JURISDICTION OR

VENUE TO AN ACTION INITIATED AS SET FORTH ABOVE AND AGREES THAT EFFECTIVE

SERVICE OF PROCESS MAY BE MADE UPON BORROWER BY REGISTERED MAIL RETURN RECEIPT

REQUESTED. The terms

and provisions of this Note may only be changed in writing, executed by

Borrower and Lender.

 

	

   

  	

   

  
	

  THE

  WESTERN SIZZLIN STORES, INC.

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  By:

  	

  /s/ Victor F. Foti

  	

   

  
	

   

  	

   

  
	 
	

  Its

  	

  President

  	

   

  	 

	

   

  	

   

  
	

  Address:

  
	

   

  
	

  P.O. Box 12167

  
	

  Roanoke, VA 24023-2167

  
	

   

  
	

  Tax I.D. No. 54-1787907

  
								

 

6

 

Pay

to the order of

without warranty or recourse.

Captec Rinlancial Group

Funding Corporation

 

	

  By:

  	

  /s/ [ILLEGIBLE]

  	

   

  
	

  Its:

  	

   

  	

   

  

 

7

 

 

SECURITY AGREEMENT

 

THIS

SECURITY AGREEMENT (“Agreement”) is made as of the 23rd  day of March, 1998, by THE WESTERN

SIZZLIN CORPORATION, a

Tennessee corporation, of P.O. Box 12167, Roanoke, Virginia 24023-2167

(“Guarantor”) in favor of CAPTEC FINANCIAL GROUP FUNDING CORPORATION, a Michigan corporation, of 24 Frank Lloyd

Wright Drive, Lobby L, 4th Floor, P.O. Box 544, Ann Arbor, Michigan, 48106

(together with its successors, assigns and transferees, “Lender”). This

instrument shall become effective on March 31, 1998.

 

WITNESSETH:

 

This

Agreement is made to secure the payment and performance obligations of

Guarantor under those certain Guaranties, effective of even date herewith, made

by Guarantor in favor of Lender (“Guaranties”). The Guaranties secure the

payment and performance obligations of THE WESTERN SIZZLIN STORES, INC., a

Virginia corporation and a wholly owned subsidiary of Guarantor (“Borrower”),

under those certain loans in the original aggregate principal amount of Six

Million Two Hundred Thousand and 00/100 Dollars ($6,200,000.00) evidenced by

those certain Promissory Notes, each of even dated herewith (“Notes”), made by

Borrower in favor of Lender, which Notes are secured by the instruments

referenced therein (together with the Notes, “Loan Documents”).

 

1.             DEFINITIONS  For purposes

of this Agreement, the following terms shall be defined as follows:

 

(a)           Franchise Agreement(s) - shall mean those Agreement(s) by which

Guarantor grants an entity(ies) or individual(s), other than a Subsidiary, the

right to operate a WesterN SizzliN Steak House or WesterN SizzliN Wood Grill

Buffet restaurant or to use the WesterN SizzliN or WesterN SizzliN Wood Grill

trademarks, trade names or service marks, which Agreements are specified on

Schedule 1 attached hereto, as updated and amended from time to time.

 

(b)           Subsidiary - with respect to Guarantor shall mean any

corporation or other entity in which Guarantor or one of its Subsidiaries,

holds securities or other interests having the power to election a majority of

that corporation’s or entity’s board of directors or similar governing body, or

otherwise having the power to direct the business and policies of that

corporation or entity.

 

2.             COLLATERAL.

 

Grant of Security Interest. 

Guarantor grants Lender a security interest in all of Guarantor’s

franchise fee and franchise royalty fee accounts receivable now outstanding or

hereafter arising owing to Guarantor and to be paid to Guarantor pursuant to the

Franchise Agreement(s) including without limitation, franchise fees, management

fees or any other similar fees for the use of trademarks, trade names, service

marks, advertising services, know-how, management services, materials,

equipment and/or labor (collectively, “Franchise Accounts Receivable”), all

general intangibles (as defined in the Uniform Commercial Code relating to the

documents or instruments evidencing the obligations to Guarantor for payment of

the Franchise Accounts Receivable, and all other instruments and documents

evidencing the Franchise Agreements now owned or hereafter acquired

(collectively, the “Collateral”). The Collateral shall also include any

documents of title evidencing the aforementioned Collateral. PROVIDED, HOWEVER,

that Lender assumes no responsibility of performance of any of Guarantor’s

obligations with reference to any of said Collateral.

 

 

3.             WARRANTIES AND REPRESENTATIONS. Guarantor warrants and covenants to Lender

as follows:

 

(a)           Authority.  This

Agreement is the valid and binding obligation of Guarantor, enforceable in

accordance with its terms. If Guarantor is a corporation, partnership, limited

liability company or other organization, Guarantor is organized and validly

existing in good standing under the laws of its state of establishment, and the

execution, delivery and performance of this Agreement have been duly authorized

by all necessary action of Guarantor’s Board of Directors, partners, or

governing body and will not violate Guarantor’s governing instruments or other

Agreements.

 

(b)           Name; Address; Location of

Collateral.  Guarantor’s name and principal place of

business and the location(s) of the Collateral are accurately set forth on the

signature page and on Schedule 1 of this Agreement.

 

(c)           Nature of Collateral. All of the Collateral is held by Guarantor

solely for business purposes, and none of the Collateral constitutes consumer

goods. No part of the Collateral consists of equipment used in farming

operations or farm products or accounts or general intangibles arising from or

relating to the sale of farm products by a farmer. The Collateral was acquired

in the ordinary course of business of Guarantor. There are no setoffs,

counterclaims, or defenses against the Collateral, except as provided under the

terms of the Franchise Agreements.

 

(d)           Title to Collateral. Guarantor has good and marketable title to

the Collateral, free and clear of any liens or encumbrances whatsoever, other

than Permitted Liens, as hereinafter defined. Guarantor will keep the Collateral

free of all other liens, encumbrances and security interests. Guarantor will

defend the Collateral against all claims and demands of all persons at any time

claiming any interest in the Collateral. Guarantor warrants that the Franchise

Accounts Receivable are due and owing under the related Franchise Agreements.

 

(e)           Perfection and Priority of Security

Interest.  The execution and delivery of this Agreement

creates a valid security interest in the Collateral, and upon the filing of a

UCC-1 financing statement with the Secretary of State of Tennessee and the

Virginia State Corporation Commission, Lender will have a second priority

perfected security interest in the Collateral, subject only to the security

interest of the Permitted Liens.

 

“Permitted

Liens” shall mean any mortgage, security interest or other lien or encumbrance

that Central Fidelity National Bank (“CFNB”) may now have or subsequently

obtain as security for the payment of that certain $500,000.00 Revolving Line

of Credit granted to Guarantor by CFNB (the “Revolving Line of Credit”) and as

evidenced by that certain Commercial Note and that certain Security Agreement,

both dated May 26, 1995, between Guarantor and CFNB. Lender agrees that this

Agreement and any mortgage, security interest or other lien (including

possessory liens) or encumbrance that it may presently have or subsequently

create or acquire as security for the Guaranties is and shall remain subject

and subordinate in right of priority to any mortgage, security interest or other

lien or encumbrance that CFNB may now have or subsequently obtain as security

for the payment of the Revolving Line of Credit. Guarantor agrees to execute

any instrument or financing statements necessary to evidence the subordination

herein set forth.

 

(f)            Financing Statements. 

Except as disclosed to and accepted by Lender in writing and subject to

any Permitted Liens, no financing statement covering any part of the Collateral

is on file in any public office. Borrower will execute financing statement(s)

in form acceptable to Lender and will pay the cost of filing financing

statement(s) in all public offices wherever filing is deemed desirable by

Lender. A carbon, photographic or other reproduction of this Agreement shall be

sufficient as a financing statement under the UCC and may be filed by Lender in

any filing office. This Agreement shall be terminated only by the filing of a

termination statement(s) in accordance with the applicable provisions of the

UCC.

 

(g)           Payment

of Taxes.  Guarantor shall pay when due and before any

interest, collection fees or penalties accrue, all taxes, expenses,

assessments, liens or other charges which may now or hereafter be levied or

assessed against the Collateral, and shall furnish proof of payment of the same

upon request by Lender or, in the

 

2

 

alternative, post a bond

satisfactory to Lender under the provisions of the applicable law with respect

to any lien or claim of lien filed for record within ten (10) days of the date

of filing of said lien or claim.

 

4.             PROHIBITION ON TRANSFER OR

MODIFICATION. Guarantor

shall not transfer, sell, assign or lease or modify the Collateral or any

interest therein, any part thereof, nor permit any other security interest to

be created therein without the prior written consent of Lender.

 

5.             PROHIBITION ON CHANGE OF NAME,

ORGANIZATION OR LOCATION.

Guarantor shall not conduct Guarantor’s business under any name other than as

appears in this Agreement nor change or reorganize the type of Guarantor’s

business entity, nor change the location of any of the Collateral without the

prior written consent of Lender, which consent shall not be unreasonably

withheld. Guarantor shall maintain its present business form and right to do

business.

 

6.             RIGHT OF SETOFF. Guarantor hereby grants to Lender the right,

exercisable at any time and from time to time, if Guarantor is then in default,

to set off or apply against the Guaranties any account or deposit with Lender

of which Guarantor is the or one of the owners or against any other amounts

which may be in the possession of Lender and to the credit of Guarantor.

 

7.             EXAMINATION OF RECORDS AND

COLLATERAL. Guarantor shall

at all times keep full and accurate records of its business, including

Franchise Accounts Receivable at Guarantor’s place of business, which records

shall be open to inspection by Lender during Guarantor’s regular business hours

(whether the records are printed or in magnetic, electronic, or machine

readable or other form). Lender is hereby granted the full right to enter upon

any property owned by or in the possession of Guarantor to examine and inspect

the Collateral during Guarantor’s regular business hours. Guarantor shall, upon

reasonable request by Lender, deliver any or all records to a place of Lender’s

choosing.

 

8.             REIMBURSEMENT OF EXPENSES. Guarantor shall reimburse Lender for all

expenses, including reasonable attorneys’ fees, incurred by Lender in enforcing

the rights of Lender hereunder, including the storage and liquidation of

Collateral, and any such expenses shall be included in the amount covered by

the Guaranties and shall be immediately due and payable. Such expenses shall

include, without limitation, any costs or expenses incurred by Lender in any

bankruptcy, reorganization, insolvency or other similar proceeding.

 

9.             RIGHTS AND

OBLIGATIONS OF LENDER. In

the event Guarantor fails to pay taxes or other assessments (and does not post

a bond, supply additional reserves or provide additional security satisfactory

to Lender) or fails to perform any other of its obligations hereunder, Lender

may (but shall not be required to) without notice to or consent from Guarantor,

pay or perform such obligations for the account of Guarantor and the same shall

be added to the amount of the indebtedness covered by the Guaranties and

secured by this Agreement and shall be immediately due and payable. Lender

shall not be liable for any loss to the Collateral nor shall such loss reduce

the balance due. Guarantor hereby expressly waives any and all claims or right

to partial or complete discharge resulting from Lender’s release of or failure

to seek payment from any other party or failure to realize on any instrument or

collateral or to setoff any moneys, or to perfect its lien or realize on any collateral

security, notwithstanding Section 3605 of the Uniform Commercial Code. This

shall include, without limitation, extension of time or forbearance of payment

or performance, bankruptcy, change in terms of notes, guaranties or other loan

document, or waiver by Lender of any required performance of any condition, or

the surrender, release, exchange, dissipation, loss or alteration of any

collateral, in whole or in part.

 

10.           INDEMNIFICATION. Guarantor shall indemnify and save Lender

harmless from all claims, obligations, costs, expenses, including attorneys’

fees, and causes of action or other rights asserted against Lender relating to

the Collateral. Any such claim, obligation, cost or expense shall be an

indebtedness of Guarantor covered by the Guaranties, secured by this Agreement

and payable upon demand.

 

3

 

11.          DEFAULT AND

REMEDIES.

 

(a)           Events of Default. Any of the following events shall, for

purposes of this Agreement, constitute an “Event of Default”:

(i)

Failure by Guarantor to pay any amount owing on or with respect to the

indebtedness secured by the Guaranties when due, whether by maturity,

acceleration or otherwise, which failure continues for five (5) business days.

 

(ii)

Any failure by Borrower or Guarantor to comply with, or breach by Borrower or

Guarantor of, any of the non-monetary terms, provisions, warranties or

covenants of the Note(s), this Agreement or the other Loan Documents, which

failure continues for fifteen (15) days after the date of written notice to

Borrower or Guarantor from Lender of such default; provided, however, that if:

(i) the nature of Borrower’s (or Guarantor’s) noncompliance is such that more

than fifteen (15) days are reasonably required for its cure, (ii) Borrower (or

Guarantor) has commenced such cure within said fifteen (15) day period, (iii)

Borrower (or Guarantor) diligently prosecutes such cure to completion, (iv)

Borrower (or Guarantor) provides Lender with written notice of the

noncompliance, AND (v) Borrower (or Guarantor) furnishes reserves or a security

bond, in an amount satisfactory to Lender in its sole discretion, then Borrower

(or Guarantor) shall not be in default.

 

(iii)

Institution of remedial proceedings or other exercise of rights and remedies by

the holder of any security interest or other lien against the Collateral or any

portion thereof, except for proceedings with respect to the Permitted Liens;

provided, however, if there is a good faith dispute by Borrower or Guarantor as

to the validity or reasonableness of the claim which is the basis for such

proceedings, then no Event of Default shall have occurred under this Section if

Borrower or Guarantor provides Lender with written notice of the proceedings

and furnishes reserves or a security bond for the proceedings satisfactory to

Lender.

 

(iv)

The insolvency of Borrower or Guarantor or the admission in writing of

Borrower’s or Guarantor’s inability to pay debts as they mature.

 

(v)

Any statement, representation or information made or furnished by or on behalf

of Borrower or Guarantor to Lender in connection with or to induce Lender to

provide any of the indebtedness secured by the Guaranties shall prove to be

false or materially misleading when made or furnished.

 

(vi)

Institution of bankruptcy, reorganization, insolvency or other similar

proceedings by or against Borrower or Guarantor, unless, in the case of a

petition filed against Borrower or Guarantor, the same is dismissed within

sixty (60) days of the date of filing.

 

(vii)

The issuance or filing of any judgment, attachment, levy, garnishment or the

commencement of any related proceedings or the commencement of any other

judicial process upon or in respect to Borrower or Guarantor or the Collateral,

except with respect to the Permitted Liens, in which the amount in controversy

exceeds One Hundred Thousand Dollars ($100,000) and is not covered by the

insurance of Borrower or Guarantor, unless satisfied, or Borrower (or any

guarantor) furnishes reserves or a security bond in an amount satisfactory to

Lender in its sole discretion. released or discharged within sixty (60) days

after the date of such issuance, filing or commencement.

 

(viii)

Sale or other disposition by Borrower or Guarantor of any substantial portion

of assets or property.

 

(ix)

Dissolution, merger, consolidation, termination of existence, insolvency,

business failure or assignment for the benefit of creditors of or by Borrower

or Guarantor; without the prior written consent of Lender, which consent shall

not be unreasonably withheld.

 

(x)

Any failure by Borrower or Guarantor to pay any indebtedness (other than to

Lender) in excess of One Hundred Thousand Dollars ($100,000) (and exclusive of

trade debt incurred in the ordinary course of business) when due, or any

failure in the observance or performance of any term, covenant or condition in

any

 

4

 

document evidencing,

securing or relating to such indebtedness, which failure continues beyond any

applicable cure period.

 

(b)

Remedies. Upon the occurrence of an Event of Default

as defined above, unless the same is waived by Lender in writing, Lender shall

be entitled to the following remedies, all of which shall be cumulative and not

alternative:

 

(i) Collection of Franchise Accounts Receivable. Guarantor shall continue to collect the

Franchise Accounts Receivable until Lender notifies Guarantor and the obligors

on such Franchise Accounts Receivable, after which time Guarantor shall hold

any proceeds collected in trust for Lender and shall not commingle the same and

shall turn such proceeds over to the Lender immediately upon receipt thereof.

 

(ii) Guarantor shall, upon request from time to time and at any time by

Lender, provide Lender with an updated list of Guarantor’s Franchise Accounts

Receivable, stating the current name and address of the obligor, the balance

due, and any comments pertaining to the status of the collection and defenses

or counterclaims by such obligors to the extent that such information is not

reflected in the financial statements of Guarantor to be delivered to Lender

pursuant to the terms of the Guaranties.

 

(iii) Lender may, or upon Lender’s request, Guarantor shall notify

obligors under such accounts of the existence of this Agreement and instruct

such obligors to make future payments directly to Lender at any time it chooses

to do so only after default by Guarantor.

 

(iv) Guarantor hereby irrevocably authorizes Lender in Guarantor’s name:

(a) To demand, receive, sue for and give receipts as acquittances for any

moneys due or to become due on any Franchise Accounts Receivable (a) with

respect to any Collateral, to assent to any or all extensions or postponements

of the time of payment thereof or any other indulgence in connection therewith,

to the substitution, exchange or release of Collateral, to the addition or

release of any party primarily or secondarily liable, to the acceptance of

partial payments thereon and the settlement, compromise or adjustment thereof,

all in such manner and at such time or times as Lender shall deem advisable;

(b) to make all necessary transfers of all or any part of the Collateral in

connection with any sale, lease, or other disposition made pursuant hereto: to

execute and deliver for value all necessary or appropriate bills of sale,

assignment and other instruments in connection with any such sale, lease, or

other disposition, Guarantor hereby ratifies and confirms all that its said

attorney (or any substitute) shall lawfully do hereunder and pursuant hereto;

nevertheless, if so requested by Lender or a purchaser or lessee, Guarantor

shall ratify and confirm any sale, lease or other disposition by executing and

delivering to Lender or such purchaser or lessee, all proper bills of sale,

assignments, releases, leases, and other instruments as may be designated in

any such request. Guarantor understands that Lender has no duty for collection

or preservation, beyond reasonable care of Guarantor’s Franchise Accounts

Receivable.

 

(v) Obtain Possession of Collateral. Guarantor agrees, upon request of Lender, to assemble the Collateral and

make it available to the Lender at any place reasonably convenient for

Guarantor and Lender. Guarantor grants Lender permission to enter upon any

premises owned or occupied by Guarantor for the purpose of taking possession of

the Collateral or any part of it, including any paper covering such Collateral

or such part thereof as remains in Guarantor’s possession, and any and all

proceeds of such Collateral as has been sold, wherever and in whatever form.

 

(vi) Lender shall have the right to take possession of the Collateral,

with or without demand, and with or without process of law. Lender shall have

the right to sell and dispose of the Collateral and to distribute the proceeds

according to law. If there is any statutory requirement for notice, that

requirement shall be met if Lender shall send notice to Borrower at least five

(5) days prior to the date of sale, disposition or other event giving rise to

the required notice. Borrower shall be liable for any deficiency remaining

after disposition of the Collateral.

 

5

 

(vii) Additional Rights and Remedies. Lender shall also have, and may exercise in

addition to the above any one or more of the rights and remedies under the

Uniform Commercial Code or any other law.

 

(c)           Remedies Generally.

 

(i) All remedies provided for in Section 10(b) shall be available to the

extent not prohibited by law. Each remedy shall be cumulative and additional to

any other remedy of Lender at law, in equity or by statute. No delay or

omission to exercise any right or power accruing upon any default or Event of

Default shall impair any such right or power or shall be construed to be a

waiver of, or acquiescence in, any such default or Event of Default.

 

(ii) Lender may waive any Event of Default and may rescind any

declaration of maturity of payments on the Indebtedness. In case of such waiver

or recision Guarantor and Lender shall be restored to their respective former

positions and rights under this Agreement. Any waiver by Lender of any default

or Event of Default shall be in writing and shall be limited to the particular

default waived and shall not be deemed to waive any other default.

 

(d)           Application of Proceeds.   Any

proceeds received by Lender from the exercise of remedies pursuant to Section

10(b) of this Agreement shall be applied as follows:

 

(i) First, to pay all costs and expenses incidental to the leasing,

foreclosure, sale or other disposition of the Collateral. These costs and

expenses shall include, without limit, any costs and expenses incurred by

Lender (including, without limit, attorneys’ fees and disbursements), and any

taxes and assessments or other liens and encumbrances prior to the lien of this

Agreement.

 

(ii) Second, to all sums expended or incurred by Lender, directly or

indirectly in carrying out any term, covenant or agreement under this Agreement

or any related document, together with interest as provided in this Agreement.

 

(iii) Third, to the payment of the Indebtedness. If the proceeds are

insufficient to fully pay the Indebtedness, then application shall be made

first to late charges and interest accrued and unpaid, then to any applicable

prepayment premiums, and then to unpaid fees and other charges, then to the

outstanding principal balance.

 

(iv) Fourth, any surplus remaining shall be paid to Guarantor or to

whomsoever may be lawfully entitled.

 

(e)           Further Actions. Promptly upon the request of Lender,

Guarantor shall execute, acknowledge and deliver any and all further documents,

security agreements, financing statements and assurances, and do or cause to be

done all further acts as Lender may require to confirm and protect the lien of

this Agreement or otherwise to accomplish the purposes of this Agreement.

 

(f)            Attorneys Fees. Any reference in this Agreement to

attorneys’ fees shall refer to reasonable fees, charges, costs and expenses of

in-house and outside attorneys and paralegals, whether or not a suit or

proceeding is instituted, and whether incurred at the trial court level, on

appeal, in a bankruptcy, administrative or probate proceeding, in consultation

with counsel, or otherwise. All costs, expenses and fees of any nature for

which Guarantor is obligated to reimburse or indemnify Lender are part of the

indebtedness covered by the Guaranties and secured by this Agreement and are

payable upon demand, unless expressly provided otherwise, with interest until

repaid at the highest rate charged on any of the Indebtedness (but not to

exceed the maximum rate permitted by law).

 

6

 

12.          MISCELLANEOUS.

 

(a)           Notices.  Any notices, demands or other

communications required or contemplated by this Agreement shall be deemed duly

given if delivered or mailed, registered mail, return receipt requested,

postage fully prepaid, to the addresses of the parties as stated in this

Agreement, or as subsequently directed by the appropriate party in writing, and

shall be deemed effective when mailed.

 

(b)           Non-Waiver.  Failure of Lender to exercise any right hereunder, including the

right to declare the balance of the Indebtedness immediately due, shall not

constitute a waiver nor preclude the Lender from exercising such right at any

time. Neither extension of time for payment or any other modification of the

terms of the Indebtedness or of this Agreement shall operate to release the

liability of Guarantor or permit any delay as to future payments. Acceptance by

Lender of a partial payment shall not alter the obligation of Guarantor to make

the full payment, nor shall acceptance of a late payment constitute Lender’s

waiver of prompt payment of such payment or any subsequent payment. No waiver

shall be valid unless in writing and signed by an officer of Lender.

 

(c)           Joint and Several Obligations.  In

the event that more than one person or entity executes this Agreement, the

obligations of each shall be joint and several.

 

(d)           Governing Law.  This

Agreement shall be construed according to the laws of the State of Tennessee.

 

(e)           Successors and Assigns.  This

Agreement shall be binding upon the successors and assigns of Guarantor

including, without limit, any debtor in possession or trustee in bankruptcy for

Guarantor, and the rights and privileges of Lender under this Agreement shall inure

to the benefit of its successors and assigns. This shall not be deemed a

consent by Lender to a conveyance by Guarantor of all or any part of the

Collateral or of any ownership interest in Guarantor.

 

(f)            Notices. 

Notice from one party to another relating to this Agreement, if

required, shall be deemed effective if made in writing (including

telecommunications) and delivered to the recipient’s address, telex number or

telecopier number set forth by any of the following means:  (1) hand delivery, (2) registered or

certified mail, postage prepaid, (3) express mail or other overnight courier

service or (4) telecopy, telex or other wire transmission with request for

assurance of receipt in a manner typical with respect to communications of that

type. Notice made in accordance with these provisions shall be deemed delivered

on receipt if delivered by hand or wire transmission, on the third business day

after mailing if mailed by registered or certified mail, or on the next

business day after mailing or deposit with the postal service or an overnight

courier service if delivered by express mail or overnight courier. Guarantor’s

telecopier number is (540) 345-0831, and Lender’s telecopier number is (313)

994-1376.

 

(g)           Entire Agreemt; Amendments.  

This Agreement and any Agreement to which it refers state all rights and

obligations of the parties and supersede all other Agreements (oral or written)

with respect to the security interests granted by this Agreement.   Any amendment of this Agreement shall be in

writing and shall require the signature of Guarantor and Lender.

 

(h)          Partial

Invalidity. The

invalidity or unenforceability of any provision of this Agreement shall not

affect the validity or enforceability of the remaining provisions of this

Agreement.

 

(i)            Inspections. Any inspection, audit, appraisal or

examination by Lender or its agents of the Collateral or of information or

documents pertaining to the Collateral is for the sole purpose of protecting

Lender’s interests under this Agreement and is not for the benefit or

protection of Guarantor or any third party.

 

(j)            Joint and

Several Liability. In

the event that more than one person or entity executes this Agreement, the

obligations of each person or entity shall be joint and several.

 

7

 

(k)           Automatic

Reinstatement.  Notwithstanding any prior revocation,

termination, surrender or discharge of this Agreement, the effectiveness of

this Agreement shall automatically continue or be reinstated, as the case may

be, in the event that:

 

(i)            Any payment received

or credit given by Lender in respect of the Indebtedness is determined to be a

preference, impermissible setoff, fraudulent conveyance, diversion of trust

funds, or otherwise required to be returned to Guarantor or any third party

under any applicable state or federal law, including, without limit, laws

pertaining to bankruptcy or insolvency, in which case this Agreement shall be

enforceable as if any such payment or credit had not been received or given, whether

or not Lender relied upon this payment or credit or changed its position as a

consequence of it.

 

(ii)           In the event of

continuation or reinstatement of this Agreement, Guarantor agrees upon demand

by Lender to execute and deliver to Lender those documents which Lender

determines are appropriate to further evidence (in the public records or

otherwise) this continuation or reinstatement, although the failure of

Guarantor to do so shall not affect in any way the reinstatement or

continuation. If Guarantor does not execute and deliver to Lender such

documents upon demand, Lender and each officer of Lender is irrevocably

appointed (which appointment is coupled with an interest) the true and lawful

attorney of Guarantor (with full power of substitution) to execute and deliver

such documents in the name and on behalf of Guarantor.

 

(1)          WAIVER OF

JURY TRIAL. GUARANTOR AND LENDER ACKNOWLEDGE THAT THE RIGHT TO TRIAL

BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED.  EACH PARTY, AFTER CONSULTING (OR HAVING HAD

THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND

VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY RIGHT TO TRIAL BY JURY IN

THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY

WAY RELATED TO, THIS AGREEMENT OR THE INDEBTEDNESS.

 

(m)          Assignment.  This

Agreement is freely assignable, in whole or in part, by Lender without prior

notice to or consent of Guarantor; provided, however, that Lender (or its

assignee) shall provide written notice of such assignment to Guarantor in the

event that Lender (or such assignee) desires to designate a new person or

entity as payee and/or a new place of payment for the obligations under the

Notes. Guarantor may not, in whole or in part, directly or indirectly, assign

this Agreement or its rights hereunder or delegate its duties hereunder

without, in each instance, the specific prior written consent of Lender, which

consent may be withheld or delayed in Lender’s sole discretion. Lender shall be

fully discharged from all responsibility accruing hereunder from and after the

effective date of any such assignment. Lender’s assignee shall, to the extent

of the assignment, be vested with all the powers and rights of Lender hereunder

(including those granted under Section 10 hereof or otherwise with respect to

the Collateral), and to the extent of such assignment the assignee may fully

enforce such rights and powers, and all references to Lender shall mean and

refer to such assignee. Lender shall retain all rights and powers hereby given

not so assigned, transferred and/or delivered. Guarantor hereby waives all

defenses which Guarantor may be entitled to assert against Lender’s assignee

with respect to liability accruing hereunder prior to the effective date of any

assignment of Lender’s interest herein.

 

(n)           Securitization. 

Guarantor understands and agrees that Lender may, from tune to time,

assign its rights and power under the Note(s), this Agreement and any other

Loan Documents, in whole or in part, in connection with a securitization

program. Guarantor agrees to enter into an amendment to the Note(s), this

Agreement and any other Loan Documents if such amendments are required by a

nationally recognized rating agency in connection with a securitization program

sponsored by Lender and in which the Note(s), this Agreement and any other Loan

Documents are to be included; provided that Guarantor shall not be obligated to

enter into any amendment which adversely affects Guarantor or otherwise

adversely alters any of the financial terms of the Notes, this Agreement and

any other Loan Documents.

 

13. ENTIRE

AGREEMENT. This Agreement

contains all of the understandings, promises and undertakings of the parties

hereto. All prior understandings and Agreements or statements, oral or written,

are rescinded except as stated herein.

 

8

 

Schedule 1

To

Security Agreement between The WesterN SizzliN

Corporation

and Captec Financial Group Funding Corporation

 

	

  Title of

  Agreement

  	

   

  	

  Date

  	

   

  	

  Name of Franchisee

  	

   

  	

  Location of Franchise

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  

 

9

 

14.           GOVERNING LAW. This Agreement shall be construed according to the laws of the State of

Tennessee.

 

(a)           Except as otherwise provided, all other

terms used herein shall have the meanings assigned to them in Article 9 (or,

absent definition in Article 9, in any other Article) of the Uniform Commercial

Code.

 

IN WITNESS WHEREOF the Guarantor has executed this Agreement on

the day and year first above written.

 

Guarantor’s

principal place of business is located in the City of Roanoke, Commonwealth of

Virginia.

 

	

  Location(s) of the Collateral

  	

  GUARANTOR:

  
	

   

  	

   

  
	

  416 South Jefferson Street, 4th Floor

  	

  THE

  WESTERN SIZZLIN CORPORATION

  
	

  Roanoke, Virginia 24012 and each

  	

   

  
	

  of the sites listed on Schedule 1 hereto.

  	

   

  
	

   

  	

   

  
	

   

  	

  By:

  	

  /s/ Victor F. Foti

  
	

   

  	

   

  	

   

  
	

   

  	

  Its:

  	

  President

  	 

	

   

  	

   

  
	

  Guarantor’s

  Address:

  	

   

  
	

   

  	

   

  
	

  P.O. Box 12167

  	

   

  
	

  Roanoke, Virginia

  24023-2167

  	

   

  
	

   

  	

   

  
	

  Guarantor’s Tax Identification

  Number: 54-1684114

  	

   

  
						

 

10

 

Loan No. 06723 

3500 S. Jefferson 

Falls Church, Virginia

 

GUARANTY

 

THE

WESTERN SIZZLIN CORPORATION, a Tennessee corporation and THE WESTERN S1ZZLIN

STORES OF LITTLE ROCK, INC., an Arkansas corporation (each a “Guarantor”), as a

material inducement to and in consideration of CAPTEC FINANCIAL GROUP FUNDING

CORPORATION, a Michigan corporation, whose address is 24 Frank Lloyd Wright

Drive, Lobby L, Ann Arbor, Michigan 48106 (together with its successors,

assigns and transferees, “Lender”), making a loan in the original principal

amount of Five Hundred Thousand and 00/100 Dollars ($500,000.00) as evidenced

by a Promissory Note, dated March  23,

1998 (“Note”), made by THE WESTERN SIZZLIN STORES, INC., a Virginia corporation

(“Borrower”), which Note is secured by the instruments referenced therein

(together with the Note, “Loan Documents”), hereby jointly and severally,

unconditionally and irrevocably, personally guarantees to and for the benefit

of Lender, and Lender’s successors and assigns, the full and timely payment and

performance of all of the Borrower’s duties, obligations and covenants under

the Loan Documents. This is a guaranty of payment and performance and not of

collection.

 

This

Guaranty shall not be affected by Lender’s failure or delay to enforce any of

its rights.

 

Guarantor’s

obligations are independent of Borrower’s obligations. If Borrower defaults

under the Loan Documents, Lender can proceed immediately against Guarantor or

Borrower, or both, or Lender can enforce against Guarantor or Borrower, or

both, any rights that it has under the Loan Documents or pursuant to applicable

laws. If any lien created by the Loan Documents terminates and Lender has any

rights it can enforce against Borrower after termination, Lender can enforce

those rights against Guarantor without giving previous notice to Borrower or

Guarantor or without making any demand on either of them.

 

To

the extent permitted by law, Guarantor waives the benefit of any statute of

limitations affecting Guarantor’s liability under this Guaranty. Guarantor

waives the right to require Lender to first or concurrently: (1) proceed

against Borrower; (2) proceed against or exhaust any security that Lender holds

from Borrower; or (3) pursue any other remedy in Lender’s power. The liability

of Guarantor shall not be affected or exonerated by any indulgence, compromise,

settlement or variation of terms which may be extended by Lender to Borrower,

or agreed upon by Lender or Borrower, and, unless agreed to in writing by

Lender, shall not be affected or exonerated by any assignment by Borrower of

its interest in any one or more of the Loan Documents, nor shall the liability

of the Guarantor be affected or exonerated by the insolvency, bankruptcy

(voluntary or involuntary), or reorganization of Borrower, nor by the voluntary

or involuntary liquidation, sale or other disposition of all or substantially

all of the assets of Borrower, or by the release of any other Guarantor. Lender

and Borrower, without notice to or consent by Guarantor, may at any time or

times enter into such modifications, extensions, amendments or other covenants

of the Loan Documents as they may deem appropriate, and Guarantor shall not be

released nor its liability exonerated thereby but shall continue to be fully

liable for the payment and performance of all obligations and duties of

Borrower under the Loan Documents as so modified, extended or amended.

 

Guarantor

further agrees (1) to indemnify and hold harmless Lender from and against any

claims, damages, expenses or losses, including to the extent permitted by law,

all reasonable attorneys’ fees incurred by counsel of Lender’s choice (whether

or not litigation is commenced), resulting from or arising out of any breach of

any provision of the Loan Documents by Borrower or by reason of Borrower’s

failure to perform any of its obligations thereunder, and (2) to the extent

permitted by law, to pay all costs and expenses, including reasonable

attorneys’ fees (whether or not litigation is commenced), incurred by Lender in

enforcing this Guaranty.

 

Until

all of Borrower’s obligations to Lender have been discharged in full, Guarantor

has no right of subrogation against Borrower. Guarantor assumes the

responsibility to remain informed of the financial condition of Borrower and of

all other circumstances bearing upon the risk of Borrower’s default, which

reasonable inquiry

 

 

would reveal, and agrees

that Lender shall have no duty to advise Guarantor of information known to it

regarding such condition or any such circumstances. Lender shall not be

required to inquire into the powers of Borrower or the officers, employees,

partners or agents acting or purporting to act on its behalf, and any

indebtedness made or created in reliance upon the professed exercise of such

powers shall be guaranteed under this Guaranty. Each Guarantor hereby

represents and warrants to Lender that such Guarantor has received a copy of

each of the Loan Documents, has read or had the opportunity to read each of the

Loan Documents, and understands the terms of the Loan Documents. The provisions

in the Loan Documents relating to the execution of additional documents, legal

proceedings by Lender against Borrower, severability of the provisions of the

Loan Documents, interpretation of the Loan Documents, notices, waivers

(including waiver of a jury trial), limitation on right of recovery against

Lender, disclaimer of individual liability, and the applicable laws which

govern the interpretation of the Loan Documents are incorporated herein in

their entirety by this reference and made a part hereof as though set forth in

full herein; any reference in those provisions to “Borrower” shall mean each

Guarantor and any reference in those provisions to the “Loan Documents” shall

mean this Guaranty.

 

To

the extent permitted by law, Guarantor waives its right to enforce any remedies

that Borrower now has, or later may have, against Lender. Guarantor waives any

right to participate in any security now or later held by Lender. Guarantor

waives notice of acceptance of this Guaranty, and all other notices in

connection with this Guaranty or in connection with the liabilities,

obligations and duties guaranteed hereby, including notices to Guarantor of

default by the Borrower under the Loan Documents. Guarantor hereby waives

diligence, presentment, demand for performance, notice of nonperformance,

protest, notice of protest, notice of dishonor, and notice of acceptance of

this Guaranty, and waives all notices of the existence, creation, or incurring

of new or additional obligations.

 

If

there is more than one Guarantor, the liability of each Guarantor shall be

joint and several. Guarantor’s obligations under this Guaranty shall be binding

on Guarantor’s legal representatives, heirs, successors and assigns.

 

If

Borrower disposes of its interest in the property secured by the Loan

Documents, “Borrower”, as used in this Guaranty, shall mean Borrower’s

successors or assigns. Assignment of the Loan Documents by Lender (as permitted

by the Loan Documents) shall not affect this Guaranty. In the event of an

assignment of the Loan Documents by Lender, the term “Lender” as used in this

Guaranty shall mean Lender’s successors or assigns.

 

Guarantor

hereby covenants and agrees to deliver to Lender the following: (a) management

prepared and certified consolidated quarterly financial statements for

Guarantor within forty-five (45) days after the end of the first three (3)

quarters of each fiscal year of Guarantor, and (b) annual consolidated

financial statements for Guarantor audited by an independent certified public

accountant within one hundred twenty (120) days after the end of each fiscal

year of Guarantor. Such financial statements shall be true and correct in all

respects, shall be prepared in accordance with generally accepted accounting

principles, and shall fairly represent the respective financial conditions of

the subjects thereof as of the respective dates thereof. At the request of

Lender, Guarantor shall obtain the consent of Guarantor’s accountant(s) to the

inclusion of Guarantor’s most recent financial statement in any regulatory

filing or report to be filed by Lender.

 

If

any one or more of the provisions of this Guaranty shall be held to be invalid,

illegal or unenforceable in any respect, such invalidity, illegality or

unenforceability shall not affect any other provision of this Guaranty, and

this Guaranty shall be construed as if such invalid, illegal or unenforceable

provision had never been contained herein.

 

This

Guaranty shall be construed according to the laws of the State of Virginia.

Guarantor agrees that any dispute which may arise between Lender and Guarantor

with regard to this Guaranty shall be resolved by litigation in state or

federal court. Litigation may be initiated by Lender or its assignee, at its

discretion, in the State of the principal place of business of Lender or its

assignee, the State of the principal place of business of Guarantor, or the

State where the Collateral (as defined in the Loan Documents) is located.

 

2

 

GUARANTOR HEREBY KNOWINGLY AND

IRREVOCABLY WAIVES ANY OBJECTIONS ON THE GROUNDS OF IMPROPER JURISDICTION OR

VENUE TO AN ACTION INITIATED AS SET FORTH ABOVE AND AGREES THAT EFFECTIVE

SERVICE OF PROCESS MAY BE MADE UPON GUARANTOR BY REGISTERED MAIL RETURN RECEIPT

REQUESTED. GUARANTOR WAIVES, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY IN

ANY ACTION BETWEEN THE PARTIES.

 

This Guaranty shall become effective on  March 31, 1998. 

 

	

  THE

  WESTERN SIZZLIN CORPORATION

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

  By:

  	

  /s/ Victor F. Foti

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  Its : President

  	

   

  
				

 

	

  THE

  WESTERN SIZZLIN STORES OF LITTLE ROCK, INC.

  
	

   

  	

   

  
	

   

  	

   

  
	

  By:

  	

  /s/ Victor F. Foti

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  Its : President

  	

   

  
				

 

3

 

Loan No. 06723

3500 S. Jefferson

Falls Church, Virginia

 

COLLATERAL ASSIGNMENT OF LEASE AND

OPTION RIGHTS

 

THIS

COLLATERAL ASSIGNMENT OF LEASE AND OPTION RIGHTS (“Assignment”) is made as of

the 23 day of March, 1998, by THE WESTERN SIZZLIN STORES, INC., a Virginia corporation, whose address is P.

O. Box 12167, Roanoke, VA 24023-2167 (“Assignor”), in favor of CAPTEC

FINANCIAL GROUP FUNDING CORPORATION, a Michigan corporation, whose address is 24 Frank Lloyd Wright Drive,

Lobby L, 4th Floor, P.O. Box 544, Ann Arbor, Michigan 48106-0544 (“Assignee”).

This instrument shall become effective on March 31, 1998.

 

For

good and valuable consideration, the receipt and sufficiency of which is hereby

acknowledged, Assignor presently assigns to Assignee all of Assignor’s right,

title and interest in and to its lessee’s interest in that certain lease with Janice H.

Levin, (“Lessor”) dated as

of March 23, 1988, a copy of which is attached hereto as Exhibit A (the

“Lease”) respecting the premises commonly known as the Great American Steak

& Buffet Company Restaurant located at 3500 S. Jefferson, Falls Church,

Virginia (“Premises”). This Assignment is for collateral purposes only, and

except as specified herein, Assignee shall have no liability or obligation of

any kind whatsoever arising from or in connection with this Assignment or the

Lease unless Assignee shall take possession of the Premises and assume the

obligations of Assignor thereunder.

 

Assignor

represents and warrants to Assignee that it has full power and authority to so

assign the Lease and its interest therein and that Assignor has not previously,

and is not obligated to, assign or transfer any of its interest in the Lease or

the Premises.

 

Throughout

the term of the Lease, Assignor covenants and agrees to exercise all options to

extend or renew the term of the Lease not less than ninety (90) days prior to

the last day upon which any such option may be exercised, but in no event less

than six (6) months prior to of the term of the Lease, unless Assignee

otherwise agrees in writing. Assignor shall send Assignee a copy of the notice

of exercise concurrently with Assignor’s exercise of the option. Upon the

failure of Assignor to so elect or renew the Lease as aforesaid (and the

failure of Assignee to otherwise agree in writing), Assignee shall have the

right, but not the obligation, to exercise such extension or renewal option on

behalf of Assignor, and Assignor hereby appoints Assignee (or any of its

employees) as its attorney-in-fact for the purpose of exercising such extension

or renewal option.

 

If

an “Event of Default” occurs under the Promissory Note, dated March 23, 1998,

in the original principal amount of Five Hundred Thousand and 00/100 Dollars

($500,000.00), by Assignor in favor of Assignee (the “Note”) or under any

documents or instruments securing the Note, Assignee shall have the right and

is hereby empowered to take possession of the Premises, expel Assignor

therefrom, and, in such event, Assignor shall have no further right, title or

interest in the Lease and shall remain liable to Assignee for all past due rents

Assignee shall be required to pay to the Lessor under the Lease to effectuate

this Assignment.

 

Assignor

agrees that it will not suffer or permit any surrender, termination, amendment

or modification of the Lease without the prior written consent of Assignee,

which consent shall not be unreasonably withheld. At the request of Assignee,

Assignor shall provide Assignee with rent payment or such other information

regarding the Lease as Assignee shall reasonably require.

 

This

Assignment shall be governed by the laws of the Commonwealth of Virginia.

 

This

Assignment may be executed in one or more counterparts, each of which shall

constitute an original and all of which together shall constitute one and the

same instrument.

[SIGNATURE PAGE FOLLOWS]

 

 

IN

WITNESS WHEREOF, Assignor has executed this Assignment as of the day and year

noted above.

 

	

   

  	

  ASSIGNOR:

  	 

	

  Witnesses:

  	

   

  	 

	

   

  	

  THE

  WESTERN SIZZLBV STORES, INC.

  	 

	

   

  	

   

  	 

	

   

  	

  /s/ C.L. Lilly

  	

   

  	

   

  	

  By:

  	

  /s/ Victor F. Foti

  	

   

  	 

	

   

  	

   

  	

   

  	

   

  	

  Its:

  	

  President

  	

   

  	 

	

   

  	

   

  	

   

  	

   

  	 

	

   

  	

   

  	

   

  	

   

  	 

	

   

  	

  /s/ Robyn B. Mabe

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

  COMMONWEALTH OF VIRGINIA

  	

  )

  	

   

  
	

   

  	

   

  	

  )

  	

   

  
	

   

  	

  COUNTY OF ROANOKE

  	

  )

  	

   

  
															

 

 

 

 

I,  Richard R Sayers, a notary

public in and for the State and County aforesaid, do certify that Victor F.

Foti , whose

name, as President  of The WesterN

SizzliN Stores, Inc., is signed to the writing above, bearing date on the 23

rdday of  March 1999,  has acknowledged the same before me in my

county aforesaid.                                                         

 

Given

under my hand and official seal this 23rd  day of March 1998.

 

My

term of office expires on the 28th  day Februry 1999

	

   

  	

  /s/ Richard R Sayers

  
	

   

  	

  Notary Public

  
	

   

  	

  [Notary Public’s Seal]

  

 

 

 

2

 

Loan No. 6723

3500 S. Jefferson

Falls Church, Virginia

 

CERTIFICATE OF GUARANTOR

 

THE

WESTERN SIZZLIN STORES OF LITTLE ROCK, INC., an Arkansas corporation

(“Guarantor”), for the benefit of CAPTEC FINANCIAL GROUP FUNDING CORPORATION, a

Michigan corporation (together with its successors, assigns and transferees,

“Lender”), warrants, represents, covenants and agrees that the following are

true and correct as of the date hereof:

 

1.             Guarantor has received a copy of that certain Promissory

Note, dated March 23, 1998 in

the original principal amount of Five Hundred Thousand and 00/100 Dollars

($500,000.00) (“Note”) made by THE WESTERN SIZZLIN STORES, INC., a Virginia

corporation (“Borrower”). Guarantor has also received a copy of the instruments

securing the Note, as referenced therein (together with the Note, the “Loan

Documents”). The Loan Documents create a lien with respect to certain real and

personal property located at 3500 S. Jefferson, Falls Church, Virginia

(“Premises”).

 

2.             Guarantor has had the opportunity

to review the Certificate of Borrower, dated even herewith, made by Borrower

for the benefit of Lender, and confirms that the warranties and representations

set forth therein are true and correct as of the date hereof.

 

3.             Guarantor has full power and

authority to enter into that certain Guaranty executed by Guarantor in favor of

Lender, dated as of the date of this Certificate (“Guaranty”) and to assume and

perform all of Guarantor’s obligations under the Guaranty in accordance with

all of the terms and conditions of the Guaranty. The execution and delivery of

the Guaranty and the performance by Guarantor of Guarantor’s obligations under

the Guaranty and under all documents contemplated by the Guaranty require no

further action or approval.   The

Guaranty and all other documents contemplated by the Guaranty are fully binding

and enforceable obligations of Guarantor.

 

4.             There are no circumstances, state

of facts or other matters which, with the passage of time or the giving of

notice, or both, would constitute an event of default under the terms of the

Guaranty, or to the best of the Guarantor’s knowledge, under the Loan

Documents.

 

5.             There are no disputes, litigation

or other such proceedings pending or, to the best of the Guarantor’s knowledge,

threatened against or related to the Guarantor, nor does Guarantor know of any

basis for any such action.

 

6.             Guarantor has furnished to Lender

its most recent annual audited consolidated financial statements and most

recent management prepared and certified quarterly consolidated financial

statements, which statements were prepared in accordance with generally

accepted accounting principles and are correct and complete and accurately

present the financial condition of Guarantor on the dates thereof.   Further, there has been no material adverse

change in the business, property or condition of Guarantor since the date of

the most recent financial statements.

 

7.             In consideration of the loan

evidenced by the Note and secured, in part, by the Loan Documents, the receipt

and sufficiency of which Guarantor acknowledges, and in order to induce Lender

to make such loan, Guarantor agrees to indemnify and hold Lender harmless

against all claims, liabilities, losses, deficiencies and damages as well as

reasonable expenses (including attorney’s fees), interest and penalties related

thereto, asserted 

 

 

by any third party against,

or incurred by Lender, by reason of or resulting from any breach, inaccuracy,

incompleteness or nonfulfillment of the covenants, representations and/or

warranties of Guarantor contained in this Certificate.

 

This

Certificate shall become effective on March 31, 1998.

 

	

   

  	

  THE

  WESTERN SIZZLIN STORES OF LITTLE ROCK, INC.

  	 

	

   

  	

   

  	 

	

   

  	

  By.

  	

  /s/ Victor F. Foti

  	 

	

   

  	

   

  	 

	

   

  	

  Its:  

  	

  President

  
						

 

2

 

Loan No. 06723

3500 S. Jefferson

Falls Church, Virginia

 

CERTIFICATE OF BORROWER

 

THE

WESTERN SIZZLIN STORES, INC., a Virginia corporation (‘Borrower”), for the

benefit of CAPTEC FINANCIAL GROUP FUNDING CORPORATION, a Michigan corporation

(together with its successors, assigns and transferees, “Lender”), warrants,

represents, covenants and agrees that the following are true and correct as of

the date hereof:

 

1.             All warranties and representations

of Borrower contained in this Certificate shall survive the execution of this

Certificate and any advances made in accordance with the Promissory Note

executed by Borrower, in favor of Lender, dated even herewith, in the original

principal amount of Five Hundred Thousand and 00/100 Dollars ($500,000.00) (the

“Note”).

 

2.             Borrower has good, indefeasible and

marketable title to the Collateral (as defined in that certain Security Agreement,

dated even herewith, between Borrower and Lender (the “Security Agreement”)).

Except for the Security Agreement, there are no instruments, matters or

agreements, and Borrower is not a party to any instrument, matter or Agreement,

which will in any way encumber, bind or otherwise affect the Collateral or

Lender.  Borrower has neither done nor

flailed to do anything, nor has suffered anything to be done, as a result of

which the Collateral or any part thereof has been or will be encumbered or

title thereto has been or will be affected in any way and no person, firm or

entity has any present, conditional or contingent rights to acquire all or any

portion of the Collateral.

 

3.             Borrower is a corporation duly

organized and validly existing in good standing under the laws of the

Commonwealth of Virginia. The person or persons executing the Note, the

Security Agreement and the other Loan Documents (as defined in the Security

Agreement) have full power and complete authority to execute the Note, the

Security Agreement and the other Loan Documents, and, when executed, the Note,

the Security Agreement and the other Loan Documents will be legal, valid and

binding obligations of Borrower, enforceable in accordance with their terms.

 

4.             As of the date hereof, Borrower is

not “insolvent” within the meaning of Section 548(a)(2)(B) of the United States

Bankruptcy Code.

 

5.             Borrower is in the business of

owning and operating WesterN SizzliN Restaurants, including the restaurant

operation located at 3500 S. Jefferson, Falls Church, Virginia (the “Franchised

Operation”). Borrower’s chief executive office is located at 416 South

Jefferson Street, Roanoke, Virginia 24012, and the Collateral is located at

Borrower’s Chief Executive Office and the Franchised Operation.

 

6.             Borrower has furnished to Lender

its most recent annual audited financial statements and most recent management

prepared and certified quarterly financial statements, which statements were

prepared in accordance with generally accepted accounting principles and are

correct and complete and accurately present the financial condition of Borrower

on the dates thereof. Further, there has been no material adverse change in the

business, property or condition of Borrower since the date of the most recent

financial statements.

 

7.             Borrower has complied and will

continue to comply with all applicable laws, rules, regulations and orders

relating to Borrower or any aspect of Borrower’s business or assets, including,

without limit, all environmental laws, rules, regulations and orders. Borrower

agrees to indemnify and hold Lender harmless against and from all claims,

losses and costs resulting from any and all violations by Borrower of any laws,

rules, regulations and/or orders.

 

 

8.             Borrower has not received any

written notice of, and, to the best knowledge of Borrower, none of Borrower,

the Franchised Operation or the premises where the Franchised Operation is

located are in violation of any law, municipal ordinance or other governmental

requirement of any governmental authority.

 

9.             There are no circumstances, state

of facts or other matters which, with the passage of time or the giving of

notice, or both, would constitute an Event of Default under the terms of the

Note, the Security Agreement or the other Loan Documents.

 

10.           Borrower has filed all federal, state

and local income and other tax returns and other reports required to be filed

prior to the date of this Certificate and Borrower has paid all taxes,

assessments, withholdings and other governmental charges that are due and

payable prior to the date of this Certificate.

 

11.           All taxes and all installments of

assessments and all other charges of any kind imposed or levied by any

governmental authority against either Borrower or the Collateral which are due

and payable or constitute a lien at or prior to the date of this Certificate,

together with all interest and penalties due thereon, have been paid in full.

 

12.           There is now fully paid and

enforceable fire, liability and other forms of insurance in such amounts and

covering such risks as are required under the Security Agreement.

 

13.           There are no disputes, litigation or

other such proceedings pending or, to the best of Borrower’s knowledge,

threatened against or related to Borrower, the Collateral or the Franchised

Operation, nor does Borrower know of any basis for any such action.

 

14.           In consideration of the loan

evidenced by the Note and secured, by the Security Agreemt and the other Loan

Documents, Borrower agrees to indemnify and hold Lender harmless against all

claims, liabilities, losses, deficiencies and damages as well as reasonable

expenses (including attorney’s fees), interest and penalties related thereto,

asserted by any third party against, or incurred by Lender, by reason of or

resulting from any breach, inaccuracy, incompleteness or nonfulfillment of the

covenants, representations and/or warranties of Borrower contained in this

Certificate.

 

15.           Commencing May 1, 1998 and on the

first day of each following month, Lender is authorized to initiate an electronic

funds transfer to pay the monthly installment payment owing under the loan

evidenced by the Note from the account designated below, and to receive

payments from such account.   This

authorization will remain in effect unless the undersigned requests a

modification that is agreed to by the Financial Institution and Lender;

provided, however, that Lender and its successors, assigns and transferees may

modify the place of payment to be made by Borrower without the consent of the

Financial Institution.

 

Financial Institution:

Financial Institution

Address:

Routing/Transit #:

Account #:

 

[SIGNATURE PAGE FOLLOWS]

 

2

 

This

Certificate shall become effective on 

March 31, 1998.

 

	

   

  	

  THE

  WESTERN SIZZLIN STORES, INC.

  
	

   

  	

   

  
	

   

  	

  By.

  	

  /s/ Victor F. Foti

  
	

   

  	

   

  
	

   

  	

  Its:  

  	

  President

  
				

 

3

 

[LETTERHEAD OF WESTERN SIZZLIN STORES, INC.]

 

	

  TO:

  	

   

  	

  Martha R. Young, (313) 668-7612

  
	

   

  	

   

  	

  Fax: 747-7147

  
	

   

  	

   

  	

   

  
	

  FROM:

  	

   

  	

  Calvin Lilly, (540) 345-3195

  
	

   

  	

   

  	

  Fax: 345-0831

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  DATE:

  	

   

  	

  March 24, 1998

  
	

   

  	

   

  	

   

  
	

  RE:

  	

   

  	

  Closing Items - Follow-up

  

 

Information for account drafting:

 

	

  Financial Institution:

  	

  Wachovia Bank, N. A.

  
	

   

  	

   

  
	

  Financial Institution

  Address:

  	

  111 Franklin Road 

  
	

   

  	

  Roanoke, Virginia 24001 

  
	

   

  	

  Attn:  Kelly Kiser

  
	

   

  	

   

  
	

  Routing #: 

  	

  051000253

  
	

   

  	

   

  
	

  Account #:

  	

  7911787711

  
	

   

  	

  The WesterN SizzliN

  Stores, Inc.

  

 

	

  /s/ Calvin Lilly

  	

   

  

 

 

Loan No. 06723

3500 S. Jefferson

Falls Church, Virginia

 

CERTIFICATE OF GUARANTOR

 

THE WESTERN SIZZLIN CORPORATION, a Tennessee corporation

(“Guarantor”), for the benefit of CAPTEC FINANCIAL GROUP FUNDING CORPORATION, a

Michigan corporation (together with its successors, assigns and transferees,

“Lender”), warrants, represents, covenants and agrees that the following are

true and correct as of the date hereof:

 

1.             Guarantor

has received a  copy

of that certain Promissory Note, dated March 23, 1998 in the original principal

amount of Five Hundred Thousand and 00/100 Dollars ($500,000.00) (“Note”) made

by THE WESTERN SIZZLIN STORES, INC., a Virginia corporation (“Borrower”).

Guarantor has also received a copy of the instruments securing the Note, as  referenced therein (together with the

Note, the “Loan Documents”). The Loan Documents create a lien with respect to

certain real and personal property located at 3500 S. Jefferson, Falls Church,

Virginia (“Premises”).

 

2.             Guarantor

has had the opportunity to review the Certificate of Borrower, dated even

herewith, made by Borrower for the benefit of Lender, and confirms that the

warranties and representations set forth therein are true and correct as of the

date hereof.

 

3.             Guarantor has full

power and authority to enter into that certain Guaranty executed by Guarantor

in favor of Lender, dated as of the date of this Certificate (“Guaranty”) and

to assume and perform all of Guarantor’s obligations under the Guaranty in

accordance with all of the terms and conditions of the Guaranty. The execution

and delivery of the Guaranty and the performance by Guarantor of Guarantor’s

obligations under the Guaranty and under all documents contemplated by the

Guaranty require no further action or approval.  The Guaranty and all other documents contemplated by the Guaranty

are fully binding and enforceable obligations of Guarantor.

 

4.             There

are no circumstances, state of facts or other matters which, with the passage

of time or the giving of notice, or both, would constitute an event of default

under the terms of the Guaranty, or to the best of the Guarantor’s knowledge,

under the Loan Documents.

 

5.             There

are no disputes, litigation or other such proceedings pending or, to the best

of the Guarantor’s knowledge, threatened against or related to the Guarantor or

the Premises, nor does Guarantor know of any basis for any such action, except

as disclosed to Lender on Exhibit A hereto.

 

6.             Guarantor has furnished to Lender

its most recent annual audited consolidated financial statements and most

recent management prepared and certified quarterly consolidated financial

statements, which statements were prepared in accordance with generally

accepted accounting principles and are correct and complete and accurately

present the financial condition of Guarantor on the dates thereof.   Further, there has been no material adverse

change in the business, property or condition of Guarantor since the date of

the most recent financial statements.

 

7.             In

consideration of the loan evidenced by the Note and secured, in part, by the

Loan Documents, the receipt and sufficiency of which Guarantor acknowledges,

and in order to induce Lender to make such loan, Guarantor agrees to indemnify

and hold Lender harmless against all claims, liabilities, losses, deficiencies

and damages as well as reasonable expenses (including attorney’s fees),

interest and penalties related thereto, asserted by any third party against, or

incurred by Lender, by reason of or resulting from any breach, inaccuracy,

incompleteness or nonfulfillment of the covenants, representations and/or

warranties of Guarantor contained in this Certificate.

 

 

This

Certificate shall become effective on March 31, 1998.

 

	

   

  	

  THE

  WESTERN SIZZLIN CORPORATION

  
	

   

  	

   

  
	

   

  	

  By

  	

  /s/ Victor F. Foti

  
	

   

  	

   

  
	

   

  	

  Its

  	

  President

  	 

						

 

2

 

The WesterN SizzliN Corporation

Litigation Proceedings against The WesterN SizzliN Corporation

Exhibit A, to Certificate of Guarantor

 

	

  Name/Qanfforj

  	

   

  	

  Ammrt

  InCanfrovasv

  	

   

  	

  Status

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Devid K.

  Wachtel, Jr. v. WSC. et al First

  Complaint - breach of employment contract; wrongful termination

  Second Complaint - Includes officers and directors

  in the suit

  	

   

  	

  $

  	

  1,319,000

  	

   

  	

  Wachtel, president until 2/95 claims wrongful

  termination; which, under his contract would mean two years’ of compensation,

  approx. $400,000. The termination was well justified. This suit had included

  certain directors, whose cases have been dismissed through award of summary

  judgment.

  	

   

  
	

   

  
	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Third Complaint - loss

  of value of stock 

  Indemnification for expenses

  	

   

  	

  $

  	

  8,500,000

  	

   

  	

  Summary Judgment granted to defendant, case

  dismissed; plaintiff has appealed Discovery not complete.

  	

   

  
	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Mann v. WSC 

  Breach of employment

  	

   

  	

  $

  	

  50,000 

  	

   

  	

  Mann is now deceased with very little

  discovery.  We expect that the suit

  will be dismissed

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Durham

  Enterprises V. WSC 

  Denial of awarding a franchise

  	

   

  	

  $

  	

  1,000,000 

  	

   

  	

  Summary Judgment granted to defendant, case

  dismissed; plaintiff has not appealed.

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Cruthis v. Elgin

  Hamner and WSC 

  Contaminated tea

  	

   

  	

  $

  	

  4,000

  	

   

  	

  Suit primarily against franchise; WSC named as

  codefendant; discovery beginning.

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Perry v. WSC and

  David Wachtel, Jr.

  Business Interference between t between 

  Franchisee/seller and

  potential buyer - would not allow franchise assumption

  	

   

  	

  $

  	

  2,500,000

  	

   

  	

  Discovery is beginning: D & O insurance.

  	

   

  
	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  WSC v. Moody /

  Fowler

  Counter claim, In response to WSC’s collection suit for unpaid

  royalties

  	

   

  	

  $

  	

  500,000

  	

   

  	

  Discovery Beginning.Loan No

 

EXHIBIT 10.1

SEVERANCE MATTERS

 

At the November 14, 2001 board of directors meeting, a resolution was

adopted providing for severance payments equal to the current annual salaries

for Victor F. Foti and Robyn B. Mabe in the event they are terminated following

a merger or sale of the Company.

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