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Exhibit 10.19
FINANCING AGREEMENT
DATE: November 27, 1996
REPUBLIC ACCEPTANCE CORPORATION 0000
Xxxxxxx Xxxxxx XX, Xxxxx 000
Xxxxxxxxxxx, Xxxxxxxxx 00000
We, THE DELICIOUS FROOKIE COMPANY, INC., propose the following arrangement
with you, REPUBLIC ACCEPTANCE CORPORATION, for borrowing from you based upon the
loan value of our "accounts", "inventory" (as those terms are defined in the
Uniform Commercial Code as adopted and in effect in the State of Illinois) and a
certain right to payment, secured by a first priority security interest in
accounts, inventory, equipment and other collateral, as granted to you by the
Security Agreement between us of even date herewith (the "Security Agreement").
SECTION 1. (LOAN AGREEMENT).
A. The Loans. At our request, you in your sole discretion may lend to us,
from time to time, amounts up to a maximum amount of Three Million Five Hundred
Thousand and No/100 Dollars ($3,500,000.00) in the aggregate consisting of
separate loans comprised of advances from time to time of amounts equal to:
(i) seventy-five percent (75%) of the net amount of accounts (other
than accounts owing by WB Distributing Company) which are listed in
current schedules provided by us and which are deemed eligible for
advances by you in your sole judgment, or any greater or lesser percentage
at your absolute discretion, provided that the percentage may be increased
to up to eighty percent (80%) at your absolute discretion if subsequent
audits and analysis by you confirm that the dilution rate of accounts has
been reduced to five percent (5%) or less (collectively, the "Accounts
Loan"), and further provided that eligible accounts shall not include (a)
accounts which are over ninety (90) days past due, (b) all accounts if
twenty-five percent (25%) or more of all accounts are ninety (90) days
past due, (c) any and all accounts owing to employees or affiliates of us,
(d) billed finance charges, (e) foreign accounts with prepaid inventory or
other prepaid or deposit arrangements and (f) any other accounts deemed
ineligible by you in your sole discretion;
(ii) a one time advance equal to the lesser of (a) $375,000 and (b)
fifty percent (50%) of the settled accounts receivable balance owing to us
by WB Distributing Company as evidenced by that certain letter agreement
dated August 27, 1996 (the "WB Letter Agreement") among us, WB
Distributing Company and Jersey Snacks, a copy of which is attached hereto
as Exhibit A, or any greater or lesser percentage at your absolute
discretion (the "WB Settlement Advance"); and
(iii) fifty percent (50%) of the net amount of accounts owing to us
by WB Distributing Company invoiced after September 1, 1996 (the "WB
Accounts") which are listed in current schedules provided by us and which
are deemed eligible for advances by you in your sole judgment, or any
greater or lesser percentage at your absolute discretion (collectively,
the "WB Accounts Loans" and, together with the WB Settlement Advance, the
"WB Loans"), provided that:
(a) any WB Account deemed eligible by you in your sole
discretion shall be deemed eligible only for a period of forty-five
(45) days after the date of the invoice relating to such WB Account,
provided, however, that no more than three (3) times during the term
of the Loans, such forty-five (45) day period shall be extended for
an additional five (5) days (each such period hereinafter referred
to as an "Eligibility Period") to allow WB Distributing Company to
remit payment to us on such WB Account;
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(b) if any WB Account remains unpaid after the expiration of
the applicable Eligibility Period, then at your sole discretion all
WB Accounts shall be deemed ineligible and the WB Loans immediately
shall be due and payable and, at your sole discretion, Individual
Guarantor (as defined herein) shall remedy, and we shall cause
Individual Guarantor to remedy, any overadvance which may result as
a consequence thereof on or before the fifth (5th) day after receipt
by Individual Guarantor of notice of such overadvance; and
(c) the outstanding aggregate amount of the WB Loans at any
one time shall not exceed Six Hundred Fifty Thousand and No/100
Dollars ($650,000). Notwithstanding anything contained in this
paragraph (iii) to the contrary,
(iv) fifty percent (50%) of the net amount of inventory (determined
on lower of cost or market basis) which constitutes raw materials or
finished goods and is listed in current schedules provided by us and
deemed eligible for advances by you (provided that we understand that no
inventory which may constitute "perishable agricultural commodities". as
defined at U.S.C. ss. 499a(b)(4) and the regulations promulgated
thereunder, and all inventory, receivables and proceeds of such
commodities shall be so eligible), or any greater or lesser percentage at
your absolute discretion, but not in excess of Five Hundred Thousand and
No/100 Dollars ($500,000.00) (collectively, the "Inventory Loan" and,
together with the Accounts Loan and the WB Loans, the "Loans"), provided
that until such time we shall have implemented a perpetual accounting
system acceptable to you in your absolute discretion, you shall determine
the eligibility of inventory for advances in your absolute discretion
based on monthly physical inventory counts performed by us and acceptable
to you, the cost of which shall be borne by us;
provided that amounts advanced under these Loans may be repaid and reborrowed
within the above limits or other limits you may set in your sole discretion so
long as you have not demanded payment of outstanding amounts. For purposes of
the Inventory Loan, advances shall be determined only on inventory (i) located
at public warehouses and other similar locations for which we have supporting
documentation necessary to insure lien rights in favor of you and (ii) which
does not constitute shipping supplies or obsolete items of inventory in your
absolute discretion. Notwithstanding the foregoing, at no time shall all
advances outstanding in the aggregate be less than One Million and No/100
Dollars ($1,000,000) on the average outstanding principal balance of the Loans
during the trailing thirty (30) day period ending on the date of determination.
B. Repayment. All borrowings pursuant hereto shall be due and payable on
demand. With respect to the WB Settlement Advance, which shall be due and
payable on demand, we shall make regularly scheduled monthly principal payments
in amounts not less than (i) $6,500 during the months of September through and
including February of each year the Loans are outstanding and (ii) $8,000 during
the months of March through and including August of each year the Loans are
outstanding (until the WB Settlement Advance has been repaid in full), or such
greater amounts as received by us from WB Distributing Company and/or Jersey
Snacks during any such months as payment or prepayment by WB Distributing
Company or Jersey Snacks of their obligations under the WB Letter Agreement.
Notwithstanding the foregoing, in the event any of the WB Accounts become
ineligible in your sole discretion, the WB Settlement Advance shall be
immediately due and payable.
C. Reserves. You may establish reserves on each February 1 and August 1
after the date hereof in an amount equal to $18,000, increasing every subsequent
month by an incremental amount equal to $18,000 until such reserves equal
$90,000 (the "Interest Reserve"), or such greater or lesser amount in your sole
discretion, to provide a fund for payment of semi-annual interest (the
"Subordinated Interest Payments") due on each January 31 and July 31 after the
date hereof to our subordinated noteholders listed on Schedule I attached hereto
(the "Subordinated Note Holders"), and each such Interest Reserve either shall
be (i) released upon our payment of the Subordinated Interest Payments to which
such Interest Reserve relates or (ii) upon our failure to pay such Subordinated
Interest Payments, at your option, used to make such Subordinated Interest
Payments, in which case such amount shall be added to the
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outstanding principal balance of the Loans made pursuant hereto and the
execution and delivery by us of this Agreement shall constitute a continuing
authorization to make such Subordinated Interest Payments.
D. Discretionary Nature. Nothing set forth in this Agreement, the Security
Agreement or any other agreement between you and us shall in any way limit your
discretion to make or not to make loans to us hereunder or your right to demand
payment of our obligations to you under any of the Loans. Any and all terms and
conditions you set must be fully met before you will advance any funds to us
under any of the Loans and an advance of funds under one of the Loans will not
obligate you to advance funds under any other of the Loans.
E. Statement of Account. You may from time to time furnish to us a
statement of our account. Any such statement shall be conclusive on us except in
the case of manifest error, and then only if written objections thereto calling
your attention to such errors are received by you within 30 days after the
statement is mailed or delivered to us.
SECTION I. (CHARGES).
A. Interest on Loans. We agree to pay interest on the net balance owed to
you at the close of each day on all amounts outstanding under the Accounts Loan
and the Inventory Loan at a rate per annum (computed on the basis of actual
number of days elapsed and a year of 360 days) which is equal to the reference
rate of interest publicly announced from time to time by First Bank National
Association in Minneapolis, Minnesota (the "Reference Rate"), plus three and
twenty-five one hundredths of one percent (3.25%); provided that in the event
our net income for the year ended December 31, 1996 is equal to or greater than
$1,000,000 based on our audited financial statements for such year delivered to
you pursuant to Section VI hereof, said interest rate for year two and
thereafter shall be equal to the Reference Rate plus two and seventy-five one
hundredths of one percent (2.75%). All such interest on amounts outstanding
under the Accounts Loan and the Inventory Loan shall be due and payable to you
on the first business day of each month.
B. Loan Fees. We agree to pay to you upon the closing of the Loans a fee
in the amount of Thirty-Five Thousand and No/100 Dollars ($35,000.00 (the "Loan
Fee.). You are authorized to withhold such fees from the amount of the initial
advances we request from you.
C. Termination Fees. We agree that if we give notice to you of the
termination of this Agreement under Section X hereof on or before May 27, 1997,
we will pay to you at the time of such termination a prepayment charge, as
additional compensation for your costs of entering into this Agreement, in the
amount of One Hundred Seventy Five Thousand and No/100 Dollars ($175,000,00);
and if we give notice to you of the termination of this Agreement under Section
X hereof at any time after May 27,1997 but prior to the second anniversary of
the date of this Agreement, we will pay to you at the time of such termination a
prepayment charge, as additional compensation for your costs of entering into
this Agreement, in the amount of Fifty Two Thousand Five Hundred and No/100
Dollars ($52,500.00).
Notwithstanding the foregoing, if the portion of the Loans so prepaid is
refinanced by an affiliate of First Bank System following the first anniversary
of the date of this Agreement no prepayment charge shall be due and payable as a
result of such prepayment.
D. Examination Fee. We further agree to pay you fees for examinations of
our assets in an amount equal to $600.00 per day per examiner plus all of the
out-of-pocket costs and reasonable expenses incurred by you or any other entity
conducting any such examination at your direction. Such fees, costs and
reasonable expenses will be due and payable to you upon our receipt of your
invoice therefor.
E. Minimum Charge. We further agree to pay you a minimum charge ("Minimum
Charge") for the availability of the Loans. You will determine whether you have
received interest in an amount at least equal to the Minimum Charge on a monthly
basis and we will pay you within ten days of your notice to us of amounts due
under
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this provision. The Minimum Charge shall be equal to the product of (i)
$1,000,000 multiplied by (ii) the product of the interest rate applicable to
amounts outstanding under the Loans multiplied by 1/12.
F. Wire Transfer Charge. We further agree to pay you a wire transfer
charge of $15.00 per wire transfer of loan advances to our account.
SECTION II. (SECURITY)
A. Security Interests. We agree to secure repayment of the Loans by
granting to you (i) first priority perfected security interests in all of our
accounts and other rights to payment (including, without limitation, the WB
Letter Agreement, the WB Security Agreement defined below and the Xxxxx Guaranty
defined below), inventory, equipment, fixtures and general intangibles (each as
defined under the Illinois Uniform Commercial Code) and our other assets under
one or more security agreements acceptable to you and (ii) an assignment of (A)
our first priority perfected security interests in the assets of WB Distributing
Company and Jersey Snacks granted to us pursuant to that certain Security
Agreement dated as of May 17, 1996 among WB Distributing Company, Jersey Snacks
and us (the "WB Security Agreement"), (A) our interests under the WB Letter
Agreement and (C) our interests under the personal guaranty of Mr. Xxxxxx Xxxxx,
the President, Chief Executive Officer, Chairman of the Board of Directors and
principal stockholder of WB Distributing Company and Jersey Snacks, which
guarantees WB Distributing Company's obligations under the WB Letter Agreement
(the "Xxxxx Guaranty"). We agree to deliver to you the originally executed WB
Letter Agreement, the WB Security Agreement and the Xxxxx Guaranty to perfect
your security interest therein. We agree to execute any and all documents and
instruments, including without limitation UCC financing statements, to grant,
perfect or continue all such security interests and liens. We agree to obtain
the personal guaranty of the Loans in your favor by Xxxxxxx X. Worth, the Chief
Executive Officer of Borrower (the "Individual Guarantor"), which guaranty shall
be limited to $1,000,000 plus all costs and expenses paid or incurred by you in
collecting on or enforcing such guaranty. Mr. Xxxxxxx Xxxxx further shall agree
to execute an agreement, in form and substance satisfactory to you, pursuant to
which Mr. Worth shall agree to repay any overadvance under the WB Accounts Loans
due to any WB Accounts becoming ineligible, in whole or in part, in your sole
discretion, which repayment shall be made within five (5) business days after
receipt by Mr. Worth of notice of any such overadvance. Further, we agree that
all Subordinated Note Holders, or such lesser amount as acceptable to you in
your sole discretion, which constitute all shareholders and investors holding
promissory notes or convertible notes, must agree to subordinate their rights to
payment under indebtedness from us to your rights to payments under the Loans
and that this agreement to subordinate must be evidenced by a document
acceptable to you. We further agree to deliver to you a bailee waiver in form
and substance satisfactory to you covering each public warehouse location at
which we maintain inventory.
B. Confirmation of Interests; Discretionary Nature. We understand that you
must be able to confirm all security interests, liens, guaranties and further
assurances described in the paragraph above before making any advance to us
under any of the Loans, but that in addition to these requirements, each of the
Loans is fully discretionary in any event and you may at any time and in your
sole discretion refuse to advance any funds under any of the Loans and/or demand
repayment of all outstanding amounts.
SECTION III. (LISTING ACCOUNTS AND INVENTORY)
A. Accounts Listing. Prior to or concurrently with our initial borrowing
hereunder, and monthly thereafter within ten (10) days after the end of each
month, we shall furnish to you a list of all accounts owned by us, in form
satisfactory to you, including a list of all accounts created or acquired by us
since our last previous list.
B. Inventory Listing. Prior to or concurrently with our initial borrowing
hereunder, and monthly thereafter within twenty (20) days or, upon the earlier
of (i) our implementation of a perpetual accounting system acceptable to you in
your absolute discretion and (ii) the ninetieth day after the date hereof,
within ten (10) days after the end of each month, we will furnish you with a
list of our inventory, in form satisfactory to you, setting forth the value of
such inventory at the lower of cost or market, together with written reports,
certified as correct
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by one of our officers, showing all sales of merchandise, returns and
allowances, collections, and all miscellaneous charges and credits affecting the
collateral.
C. Aging Reports. Prior to or concurrently with our initial borrowing
hereunder, and monthly thereafter within ten (10) days after the end of each
month thereafter, we shall furnish you with (i) an aging of all accounts owned
by us and (ii) an aging of all of our accounts payable, all in form satisfactory
to you.
D. Accounts Representation. We warrant that, except as may be disclosed in
the lists of accounts furnished to you: (i) each billing correctly states the
subject matter and terms of sale; (ii) the merchandise conforms thereto and is
in all respects acceptable to the customer; (iii) the date of billing is not
prior to shipment; (iv) the account is not subject to any known dispute,
defense, offset or counterclaim; (v) the account debtor is not a subsidiary or
affiliated company; and (vi) that we have no known reason to believe the account
will not be paid in the regular course of business. We will notify you promptly
of any event, circumstance or communication with respect to any account that is
inconsistent with the foregoing representations.
SECTION IV. (CUSTODY AND INSPECTION OF RECORDS; HANDLING OF COLLECTIONS)
A. Custody of Records. All ledger sheets or cards, invoices, shipping
records, correspondence and other writings relating to accounts shall be
maintained in safe keeping on our premises without cost to you.
B. Collection by You. We shall enter into a lockbox agreement with you, in
form and substance acceptable to you in your sole discretion (the "Lockbox
Agreement"). We shall direct our account debtors to make all payments on the
company's accounts receivable to the lockbox (the "Lockbox") set up pursuant to
the Lockbox Agreement, and shall fulfill all other requirements set forth in the
Lockbox Agreement and any related documents or agreements. All payments or other
amounts sent to the Lockbox shall each day be placed into an account with you in
our name for such purposes (the "Collateral Account"). We shall notify you by
8:00 a.m. each business day of the amount of funds deposited into the Collateral
Account and collected since the previous day's report, and shall transfer, or
authorize you to transfer, at such time on each such day all such collected
funds to be applied against amounts outstanding under this Financing Agreement
(provided that for purposes of calculating interest all such amounts received by
you will be credited to our account two (2) business days after receipt by you).
In the event we fail to comply with this provision, you are hereby authorized
and directed to determine the amount of collected funds so deposited in the
Collateral Account and to apply, on a daily basis, all such funds against the
amounts outstanding under this Financing Agreement. Further, if we receive any
payments on accounts receivable or chattel paper directly, we immediately shall
deliver all such payments to Bank in the form received (except for the our
endorsement where necessary) to be applied against amounts outstanding under
this Financing Agreement. Until so delivered to you, we shall hold all such
payments in trust for you and as your property, and shall not commingle the same
with any of our funds or property. You may remove from our premises copies of
all books and records, correspondence, documents and files relating to accounts;
and you may without cost or expense to you use such of our personnel, supplies,
space and equipment at our place of business as you may desire for the handling
of collections. We will pay any and all internal, office and out-of-pocket
expenses and costs of collection (including reasonable attorney fees) incurred
by you in your handling of or effort to enforce collections.
C. Inspection. We will permit you or your representatives, at all
reasonable times, to examine or inspect our assets, wherever located, and to
examine, inspect and copy our books and records pertaining to our assets and our
business and financial condition.
SECTION V. (REPORTS)
In addition to the reports we have promised to provide under Section III
of this Agreement, we will furnish you from time to time such information
concerning our business, assets, liabilities and financial condition as you may
reasonably request, including, without limitation the following:
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1. As soon as available, but in any event within ninety (90) days of
our fiscal year end, our audited financial statements including, without
limitation, a balance sheet, income statement and sources of income
certified by certified public accountants satisfactory to you to have been
prepared in accordance with GAAP consistently applied;
2. As soon as available, but in any event within twenty-five (25)
days of the end of each month, financial statements (including at a
minimum a balance sheet and profit and loss statement) dated as of the
last business day of such month, certified by our Chief Financial Officer
to have been prepared from our records on the basis of accounting
principles consistently applied by us;
3. As soon as available after December 31 of each year, but in any
event not later than ninety (90) days thereafter, the personal financial
statements of the Individual Guarantor in form and substance satisfactory
to you and certified by such person as to accuracy;
4. Within thirty (30) days of the filing thereof, a copy of the
individual tax returns (federal and state) filed by the Individual
Guarantor for the preceding year;
5. Within five (5) business days after the due date, proof of
payment or deposit, when due, of all withholding and F.I.C.A. taxes owing
by us from time to time, by a payroll service satisfactory to you and
whose services we shall at all times retain while we are indebted to you;
6. Upon issuance, a copy of all public accountants' reports rendered
to us while we are indebted to you;
7. Within two (2) days after the last day of each week, a report of
our accounts which we collected during such week; and
8. Within three (3) days after the last day of each week and on any
day we request an advance, a borrowing base certificate in form
satisfactory to you.
SECTION VI. (WARRANTIES, REPRESENTATIONS AND COVENANTS)
A. Representation and Warranties Regarding Us. We represent and warrant to
you that:
(i) We are validly organized and existing and in good standing as a
corporation under the laws of the State of Delaware and have full power
and authority to own our property and conduct our business as presently
conducted and we are qualified to do business and are in good standing as
a foreign corporation in each other jurisdiction where the nature of our
business makes such qualification necessary. We have full power and
authority to enter into and perform our obligations under this Agreement
and all related documents and to obtain the loans and advances hereunder.
(ii) Our execution, delivery and performance of this Agreement and
all related documents (collectively, the "Loan Documents") have been duly
authorized by all necessary corporate action, do not require any approval
or consent of, or any registration, qualification or filing with, any
governmental agency or authority or any approval or consent of any other
person or other entity (including, without limitation, any stockholder),
do not and will not conflict with, result in any violation of or
constitute any default under, any provision of our Articles of
Incorporation or Bylaws, any agreement binding on or applicable to us or
any of our property, or any law or governmental regulation or court decree
or order, binding upon or applicable to us or of any of our property and
will not result in the creation or imposition of any lien or other
encumbrance on any of our property pursuant to the provisions of any
agreement binding on or applicable to us or any of our property except
pursuant to the Loan Documents.
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(iii) The Loan Documents to which we are a party are our legal,
valid and binding obligations and are enforceable in accordance with their
terms.
(iv) The financial statements we have furnished to you have been and
will be prepared in accordance with generally accepted accounting
principles ("GAAP") consistently applied and those statements present
fairly our financial condition as of the dates thereof and for the periods
covered by such statements. We are not aware of any contingent liabilities
or obligations which would, upon becoming noncontingent liabilities or
obligations, have a material adverse effect on our financial condition.
Since the date of the most recent such statements, neither our condition
(financial or otherwise), business nor properties have been materially,
adversely affected in any way.
(v) There is no action, suit or proceeding at law or equity, or
before or by any governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, pending or, to our
knowledge, threatened, against us or any of our property, which, if
determined adversely could have a material adverse effect on our financial
condition or business; and we are not in default with respect to any final
judgment, writ, injunction, decree, rule or regulation of any court or
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign.
(vi) We have good and marketable title to all of our assets, real
and personal.
(vii) The security interests created by the Security Agreement are
attached and perfected first priority security interests in the property
covered by the Security Agreement.
(viii) Except as disclosed on our financial statements furnished to
you, we are not a party to any contract of guaranty or suretyship and none
of our assets is subject to any contract of that nature and we are not
indebted to any other party, except you.
(ix) We will not use any part of any loan or advance hereunder at
any time to purchase or carry margin stock (within the meaning of
Regulation U promulgated by the Board of Governors of the Federal Reserve
System) or to extend credit to others for the purpose of purchasing or
carrying any margin stock. We are not engaged principally, or as one of
our important activities, in the business of extending credit for the
purposes of purchasing or carrying any such margin stock. We will not use
any part of the proceeds of any loan or advance hereunder for any purpose
which violates, or which is inconsistent with, any regulations promulgated
by the Board of Governors of the Federal Reserve System.
(x) We have filed all federal, state and other income tax returns
which are required to be filed through the date of this Agreement and have
paid all taxes as shown on said returns, and all taxes due or payable
without returns and all assessments received to the extent such taxes and
assessments have become due. All our tax liabilities are adequately
provided for on our books, including interest and penalties. No income tax
liability of a material nature has been asserted by taxing authorities for
taxes in excess of those already paid. We have made all required
withholding deposits.
(xi) All factual information furnished by or on our behalf to you
for purposes of or in connection with this Agreement or any transaction
contemplated by this Agreement is, and all other such factual information
furnished by or on our behalf to you in the future will be, true and
accurate in every material respect on the date as of which such
information is dated or certified. No such information contains any
material misstatement of fact or omits any material fact or any fact
necessary to prevent such information from being misleading.
(xii) We are not a party to any agreement or instrument or subject
to any restriction that materially, adversely affects our business,
property or assets, operations or condition (financial or otherwise).
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(xiii) We are not in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained
in any: (1) agreement to which we arc a party, which default might have a
material adverse effect on our business, properties or assets, operations,
or condition (financial or otherwise); or (2) instrument evidencing any
indebtedness or under any agreement relating to such indebtedness.
(xiv) (1) No Reportable Event has occurred and is continuing with
respect to any Plan; (2) the Pension Benefit Guaranty Corporation or any
successor entity has not instituted proceedings to terminate any Plan; and
(3) each of our Plans has been maintained and funded in all material
respects in accordance with its terms and with the Employee Retirement
Income Security Act of 1974, as amended and as may be further amended from
time to time, and the rules and regulations promulgated thereunder by any
governmental agency or authority, as from time to time in effect
("ERISA"). All undefined capitalized terms used in this Section shall have
the meanings ascribed to them in ERISA.
(xv) We arc not insolvent (as such term defined in Section 101(29)
of the United States Bankruptcy Code of 1978, as amended or Minnesota
Statutes Section 513.42, as amended) and will not be rendered insolvent
(as such term is defined in Section 101(29) of the United States
Bankruptcy Code of 1978, as amended or Minnesota Statutes Section 513.42
as amended) by the execution of this Agreement or any other Loan Document,
or-the consummation of the transactions contemplated thereby.
(xvi) Listed on Schedule II attached hereto are all public
warehouses and other locations at which any of our inventory is located.
(xvii) We do not lease any parcels of real property at which
inventory is maintained or stored.
B. Additional Warranties. Representations and Covenants. We warrant and
represent to, and covenant with, you that we shall not:
(i) permit any levy, attachment or restraint to be made affecting
any of our assets;
(ii) permit any receiver, trustee or assignee for the benefit of
creditors to be appointed to take possession of any or all of our assets;
(iii) without your prior written consent:
(1) sell, lease or otherwise dispose of or transfer any of our
assets other than (i) sales of inventory in the ordinary course of
our business and (ii) sales of assets (whether individually or in
the aggregate) having a gross book value not exceeding $40,000;
(2) merge or consolidate with any other corporation;
(3) acquire any other corporation;
(4) enter into any transaction not in the usual course of our
business;
(5) make any investment in the securities of any person,
association, firm, entity or corporation other than securities of
the United States of America;
(6) guarantee or otherwise become liable in any way with
respect to the obligations of any person, association, firm, entity
or corporation except by endorsement of instruments or items of
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payment for deposit to our general account or which are transmitted
or turned over to you on account of our obligations;
(7) other than dividends necessary to permit our shareholders
to pay their income taxes which are directly attributable to our
profits, pay or declare any dividends upon our capital stock;
(8) redeem, retire, purchase or otherwise acquire directly or
indirectly any of our capital stock;
(9) make any change in our capital structure or in any of our
business objectives, purposes and operations which might in any way
materially adversely affect our ability to repay our obligation;
(10) make any distribution of our property or assets except as
provided in subparagraph (1) above;
(11) incur any debts outside of the ordinary course of our
business except renewals or extensions of existing debts and
interest thereon;
(12) make any loan, advance, contribution or payment of money
or goods to any subsidiary, affiliate or parent corporation or to
any officer, director or stockholder (except compensation for
services rendered), except that we may make loans to Individual
Guarantor from time to time which shall not exceed $60,000
outstanding at any one time in the aggregate; or
(13) encumber, pledge, assign or permit to be created a lien
or security interest in any property owned by us.
C. Subordinated Indebtedness.
(i) We hereby represent and warrant that set forth on Schedule I is
a list of all Subordinated Note Holders and a description of all
indebtedness owing by us to each Subordinated Note Holder, containing the
outstanding principal amount due as of the date hereof under the
subordinated promissory notes (the "Subordinated Promissory Notes") made
by us to Subordinated Note Holders and all other material terms.
(ii) We hereby acknowledge and agree that all payments due under the
Subordinated Promissory Notes expressly is subordinated to the prior
payment in full in cash of the Loans.
(iii) Notwithstanding any provision of the Subordinated Promissory
Notes, we agree that no payment of principal, interest, fees or any other
amount due with respect to the Subordinated Promissory Notes shall be made
until all of the Loans are paid in full in cash and your commitment to
extend credit to us shall have expired; provided that as long as no event
of default has occurred or will be created as result thereof (in each case
determined in your sole discretion), we may make regularly scheduled
semiannual interest payments to the Subordinated Note Holders pursuant to
the terms of the Subordinated Promissory Notes.
(iv) We agree that we shall not agree to any amendment, extension,
renewal, supplement or other modification of any of the terms of the
Subordinated Promissory Notes, including, without limitation, any
amendment, extension, renewal, supplement or other modification the effect
of which is to increase the principal amount of any Subordinated
Promissory Note or rate of interest thereunder, to change the maturity
date of any Subordinated Promissory Note or otherwise alter the payment
terms of same, without your prior written consent, which consent may be
given or withheld in your sole discretion.
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(v) We represent and warrant that no event of default has occurred
or is continuing under any of the Subordinated Promissory Notes.
D.Continuing Nature. All covenants, representations and warranties set
forth in this Agreement and in any other Loan Document executed by us in
connection herewith and all terms, conditions, provisions and agreements to be
performed by us pursuant to this Agreement and such other agreements shall
survive the execution and delivery of such agreements and the making or payment
of any loans hereunder.
SECTION VII. (MISCELLANEOUS)
A. Segregation of Collateral. We agree that you, from time to time, for
your convenience, may segregate or apportion the property securing repayment of
the Loans ("Collateral") for purposes of determining the amounts and maximum
amounts of loans and advances which may be made hereunder. Nevertheless, your
security interest in all such Collateral, and any other collateral rights,
interests and properties which may now or hereafter be available to you, shall
secure and may be applied to the payment of any and all loans, advances and
other indebtedness secured by your security interest, in any order or manner of
application and without regard to the method by which you determine to make
loans hereunder.
B. Power of Attorney. We hereby irrevocably make, constitute and appoint
you, or any person whom you may designate, our proxy and true and lawful
attorney with power to receive, open and dispose of all mail addressed to us, to
endorse our name on any notes, acceptance, checks, drafts, money orders or other
means of payment that may come into your possession as payment of or upon
accounts or other collateral, to endorse our name on any invoice, freight or
express xxxx or xxxx of lading relating to any collateral, to sign our name to
drafts against account debtors, to assignments and verification of accounts and
notices thereof to account debtors, and to documents of title covering any
Collateral and to do all other things necessary or proper to carry out the
intent of this Agreement. You shall provide us with notice within a reasonable
time period of your exercising any power granted to you in this Paragraph B. We
acknowledge that the constitution and appointment of such proxy and
attorney-in-fact are coupled with an interest and are irrevocable until all of
our obligations under this Agreement and the other Loan Documents are paid and
performed in full.
C. Confirmation of Accounts. At your request, we will deliver customers'
monthly statements to you for examination and for mailing in our stamped
addressed envelope. From time to time, you may verify directly with customers
the amounts owing through the use of standard audit confirmation procedures, or
at your request, we or our independent accountants will do so and deliver the
results to you in any manner satisfactory to you.
D. Participants' Rights. We agree that any bank participating with you in
loans to us hereunder may exercise any and all rights of banker's lien or
set-off with respect to such participation as fully as if such participant had
lent directly to us the amount of such participation.
E. Costs and Expenses. We agree to reimburse you for all reasonable
attorney fees, filing fees and other out-of-pocket expenses (including, but not
limited to, travel expenses) you may incur in connection with the negotiation
and administration of this Agreement or any related agreements, preparation of
documents relating thereto, perfecting any security interest or lien granted
thereby, inspecting our books, records, premises, business and operations, or
enforcing any of our obligations to you arising under and any of your rights and
remedies under or in connection with this or any other agreement between us. If
you elect, you may treat the amount of any such expense as a Loan to us and add
the amount to the net balance owed to you hereunder.
F. Binding Agreement. This Agreement shall bind and inure to the benefit
of you and us and your and our respective successors and assigns. This
Agreement, and all assignments of collateral, shall be construed pursuant to the
laws of the State of Minnesota.
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SECTION VIII. (DEMAND FEATURE AND REMEDIES)
A. Loans Due on Demand; Additional Circumstances. The Loans are due and
payable upon your demand whether or not we have complied with terms and
conditions of this Agreement or the other Loan Documents. In addition, the Loans
shall become immediately due and payable without demand, declaration, notice,
presentment or protest of any kind (all of which we hereby waive) if, in
addition to the occurrence of certain events described herein: (i) we or the
Individual Guarantor become insolvent or generally fail to pay or admit in
writing its inability to pay its debts as they become due; (ii) we or the
Individual Guarantor shall apply for, consent to or acquiesce in the appointment
of a trustee, receiver or other custodian for itself or any of its property, or
make a general assignment for the benefit of its creditors; (iii) a trustee,
receiver or other custodian shall otherwise be appointed for us or the
Individual Guarantor; (iv) any bankruptcy, reorganization, debt arrangement or
other case or proceeding under any bankruptcy or insolvency law, or any
dissolution or liquidation proceeding shall be commenced by or against us or the
Individual Guarantor; (v) we or the Individual Guarantor takes any action to
authorize, or in furtherance of, any of the foregoing, (vi) this Agreement is
terminated in accordance with Section X, (vii) we breach any representation,
warranty or covenant contained in paragraph C of Section VII or (viii) any
default, either payment or otherwise, occurs under the WB Letter Agreement, the
WB Security Agreement or the Xxxxx Guaranty.
B. Remedies. If all or any portion of any of the Loans is not paid when
due, whether upon demand or otherwise, you may declare all of the Loans and all
other of our obligations to you immediately due and payable without further
notice and exercise any or all rights and remedies available to you at law or in
equity for collection of the Loans and all such other obligations, and to
realize upon all property serving as collateral for the repayment thereof.
SECTION IX. (TERMINATION)
This Agreement shall continue in effect until terminated upon at least 30
days' prior written notice delivered by certified mail by either party to the
other. Termination shall not impair or affect your rights and your obligations
existing as of the time of termination.
SECTION X. (WAIVER OF JURY TRIAL; JURISDICTION)
A. JURY WAIVER. BY OUR EXECUTION AND DELIVERY HEREOF, AND BY YOUR
ACCEPTANCE HEREOF, EACH PARTY HEREBY EXPRESSLY WAIVES ANY RIGHT OF A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS
AGREEMENT, OR ARISING FROM ANY CREDIT RELATIONSHIP EXISTING IN CONNECTION WITH
THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY.
B. JURISDICTION. WE HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY
MINNESOTA STATE OR FEDERAL COURT SITTING IN HENNEPIN OR XXXXXX COUNTY,
MINNESOTA, OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT. WE HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT WE MAY EFFECTIVELY
DO SO, THE DEFENSE OF ANY INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION
OR PROCEEDING. WE AGREE THAT A JUDGMENT, FINAL BY APPEAL OR EXPIRATION OF TIME
TO APPEAL WITHOUT BEING TAKEN, IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR
IN ANY OTHER MANNER PROVIDED BY LAW.
C. Interest Limitation. All agreements between us are hereby limited so
that in no contingency or event whatsoever, whether by reason of acceleration of
maturity of the indebtedness evidenced or secured thereby or
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otherwise, shall the rate of interest charged or agreed to be charged to you for
the use, forbearance, loaning or detention of such indebtedness (the "Stated
Rate") exceed the maximum permissible interest rate under applicable law
("Maximum Rate"). If for any reason or in any circumstance whatsoever
fulfillment of any provision of this Agreement and/or any document securing or
executed in connection with this Agreement, or any other agreement between us,
at any time shall require or permit the interest rate applied thereunder to
exceed the Maximum Rate, then the interest rate shall automatically be reduced
to the Maximum Rate, and if you should ever receive interest at a rate that
would exceed the Maximum Rate, the amount of interest received which would be in
excess of the amount receivable after applying the Maximum Rate to the balance
of the outstanding obligation shall be applied to the reduction of the principal
balance of the outstanding obligation for which the amount was paid and not to
the payment of interest thereunder; provided, however, that if at any time
thereafter the Stated Rate is less than the Maximum Rate, we shall, to the
extent permitted by law, continue to pay interest at the Maximum Rate until such
time as the total interest received by you is equal to the total interest which
you would have received had the Stated Rate been (but for the operation of this
provision) the interest rate payable. Thereafter, the interest rate payable
shall be the Stated Rate unless and until the Stated Rate again exceeds the
Maximum Rate, in which event the provisions contained in this provision against
shall apply. This provision shall control every other provision of any and all
agreements between us.
[remainder of page intentionally left blank]
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THE DELICIOUS FROOKIE COMPANY, INC., a
Delaware corporation
By: /s/ Xxxxxxx Xxxxx
--------------------------------
Name: Xxxxxxx Xxxxx
--------------------------------
Its: Chief Financial Officer
--------------------------------
ACCEPTED AND ACKNOWLEDGED THIS 27TH
DAY OF NOVEMBER, 1996 BY:
REPUBLIC ACCEPTANCE CORPORATION, a
Minnesota corporation
By: /s/ Xxxxxxx X. Xxxxxxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
--------------------------------
Its: Regional Manager
--------------------------------
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EXHIBIT A
WB Letter Agreement
-------------------
Please see attached.
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[DELICIOUS/FROOKIE LETTERHEAD]
Aug. 27, 1996
Mr. Xxxxxx Xxxxx
W & B Distributors
000 Xxxxxxxxx Xxxxx
Xxxxxxx, X.X. 00000
Dear Xxxxxx,
This will summarize the agreement between W & B Distributors and Delicious
Frookie Co. regarding repayment of W & B's settled accounts receivable balance
of $739,180.43 during the period September 1996 through August 1997. During this
period W & B Distributors agree to the following payment schedule:
A. An immediate payment of $39,533.78.
B. Individual monthly payments of $6,500 for the period September - February
due on the last Thursday of each month.
C. Individual monthly payments of $8,000.00 for the period March - August due
on the last Thursday of each month.
In addition, W & B agrees to make the best faith effort to obtain additional
financing from either banks, finance companies or other outside sources to
accelerate the payment of all past accounts receivables.
W & B also agrees that if they miss a monthly payment or allow current
receivables to become past due, they will lose their thirty day terms and revert
to COD.
Both parties agree to review this arrangement in May 1997 with the intention of
negotiating a new payment arrangement for the future.
W & B Distributors agrees to add the Xxxxx Group to all UCC Filings currently
held by Delicious Frookie Co.
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The aforementioned items summarize all the conditions agreed to by all parties.
Xxxxxx, we appreciate your cooperation in getting to this stage and hope that we
have a profitable future relationship.
/s/ Xxxxxxx Xxxxx Sept. 21, 1996
------------------------------ ------------------------
Xxxxxxx Xxxxx Dated
/s/ Xxxxxx Xxxxx Sept. 17, 1996
------------------------------ ------------------------
Xxxxxx Xxxxx Dated
cc: Xxxxxx Xxxxxx
Xxx Xxxxxxx
jmb:BW
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SCHEDULE I
Loans: Advances to Officers, Directors and Affiliates
Advance to Xxxxxxx Xxxxx - $54,510.00
Description of Subordinated Indebtedness, including Names of Subordinated
Note Holders, Amounts Due and Other Material Terms
Five year 9% Subordinated Convertible Promissory Notes totaling
$2,110,000.00 paying interest semi-annually on January 20 and July 20 due on
April 27, 1999
Subscriber Amount Invested
---------- ---------------
A-1 International Foods $100,000.00
The Beanstalk Group 50,000.00
Xxxxxx X. Xxxxx 100,000.00
The C G Biscuit Company Inc. 50,000.00
Xxxxxx X. Xxxxx 16,666.66
Xxxxxxx X. Xxxxx 10,000.00
Xxxxxxx and Xxxxx Xxxxx 10,000.00
Xxxxxxx and Xxxxx Xxxx 100,000.00
Xxxxxxx and Xxxxxxx Xxxx 100,000.00
Irving and Xxxx Xxxx 100,000.00
Xxxxxx Xxxxxxxx 16,666.67
Xxxxx and Xxxx Xxxx 50,000.00
Alison Greenhouse 50,000.00
Xxxxx Greenhouse 50,000.00
Xxxxxxx Greenhouse 50,000.00
Xxxxx Greenhouse 50,000.00
Xxxxxx X. Xxxxxx 25,000.00
Xxxxx and Xxxxxxxxx Xxxx 17,000.00
Xxxxxx and Xxxxx Xxxx 17,000.00
Xxxxxx and Xxxxxxx Xxxxxxxxxx 10,000.00
Xxxx Xxxxxxxx 5,000.00
Xxxxxx X. Xxxxxx 50,000.00
Xxxx X. X'Xxxxx 10,000.00
Xxxxx X. X'Xxxxx 10,000.00
Xxxxxx and Xxxxxxx X'Xxxxx 270,000.00
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Provident Bank FBO 40,000.00
Xxxxxx X. Xxxxxxx, XXX
Provident Bank FBO 40,000.00
Xxxx X. Xxxxxxx, XXX
Xxxxxxxx A. Xxxxx, XXX 30,000.00
Xxxx X. Xxxxx, XXX 20,000.00
Xxxxxxx Xxxxxxxxx 100,000.00
I. Xxxx Xxxxxxxxx 100,000.00
Xxxxxx and Xxxx Xxxxxxx 50,000.00
Xxxxx and Xxxxx Xxxxxxx 22,000.00
Xxxxxxx X. Xxxxxxx 17,000.00
Xxxxxxx X. Xxxxxxx, 20,000.00
Guardian for Xxxx Xxxxxxx Xxxxxxx
Xxxxxx and Xxxx Xxxxxxx 77,000.00
Xxxx X. Xxxxxxx 60,000.00
Xxxxxxx and Xxxxx Xxxxxxx 50,000.00
Xxxxxx X. Xxxxxxxx, President 50,000.00
Xxxxxxxx Biscuit Company, Inc.
Xxxxxxx and Xxxxxx Worth 100,000.00
Xxxxxx Xxxxxxxxx 16,666.67
---------
$2,110,000.00
=============
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SCHEDULE II
Inventory Locations
-------------------
Mrs. Alison's Bakery
c/o Xxxx Xxxxxxx
0000 Xxxxx Xxxxxx
Xx. Xxxxx, XX 00000
Mrs. Alison's
Leased Facility
00000 Xxxx Xxxxx Xxxxxxxxxx Xxxx.
Xxxxxxxx Xxxxxxx, XX 00000
GATX, Inc.
c/o Xxxxxx Xxxxx
0000 Xxxxx Xxxxxx
Xx. Xxxxx, XX 00000
Homebaked
0000 X. Xxxxxx Xxxxxx
Xxxx Xxxxx, XX 00000
Hall Street Cold Storage Warehouses Inc.
c/o Xxxxx Xxxxxxxx
00-00 Xxxx Xxxxxx
Xxxxxxxx, XX 00000
Taurus Packaging & Display Corp.
c/o Xxx Xxxxxxx
0000 Xxxxx Xxxxxx
Xxxxxx Xxxx, XX 00000
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