1
EXHIBIT 10.25
----------------------------------------------------------
CREDIT AGREEMENT
among
BANKBOSTON, N.A.,
XXXXXXXX COFFEE, INC.
AND
ITS DIRECT AND INDIRECT SUBSIDIARIES WHO ARE PARTIES HERETO
Dated as of July 7, 1999
----------------------------------------------------------
2
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINITIONS............................................................1
SECTION 2. THE CREDIT FACILITIES.................................................15
2.1 THE LOANS AND NOTES...........................................................15
2.2 SCHEDULED PRINCIPAL REPAYMENTS ON THE LOANS...................................16
2.3 CLOSING FEE; COMMITMENT FEES; INTEREST; DEFAULT RATE..........................16
2.4 REQUESTS FOR LOANS............................................................17
2.5 CONVERSION AND CONTINUANCE OF LOANS...........................................18
2.6 REDUCTION OR TERMINATION OF THE REVOLVER COMMITMENT...........................18
2.7 MANDATORY PAYMENTS AND PREPAYMENTS............................................19
2.8 LETTERS OF CREDIT.............................................................20
2.9 CHANGED CIRCUMSTANCES.........................................................22
2.10 CAPITAL ADEQUACY.............................................................25
2.11 PAYMENTS BEFORE END OF EURODOLLAR PERIOD.....................................26
2.12 SECURITY.....................................................................27
2.13 USE OF PROCEEDS..............................................................27
2.14 TIME AND METHOD OF PAYMENTS..................................................27
SECTION 3. CONDITIONS OF CREDIT EXTENSIONS.......................................27
3.1 CONDITIONS TO INITIAL CREDIT EXTENSION........................................29
3.2 CONDITIONS TO ALL CREDIT EXTENSIONS...........................................29
SECTION 4. REPRESENTATIONS AND WARRANTIES........................................30
4.1 ORGANIZATION AND QUALIFICATION................................................30
4.2 CORPORATE OR PARTNERSHIP AUTHORITY............................................30
4.3 VALID OBLIGATIONS.............................................................30
4.4 APPROVALS.....................................................................30
4.5 TITLE TO PROPERTIES; ABSENCE OF LIENS.........................................30
4.6 LICENSES, PATENTS, TRADEMARKS AND INTELLECTUAL PROPERTY.......................31
4.7 COMPLIANCE WITH LAWS AND AGREEMENTS...........................................31
4.8 MATERIAL AGREEMENTS...........................................................31
4.9 ENVIRONMENTAL MATTERS.........................................................31
4.10 COMPLIANCE WITH ERISA........................................................33
4.11 FINANCIAL STATEMENTS.........................................................33
4.12 SOLVENCY.....................................................................33
4.13 TAXES........................................................................34
4.14 LITIGATION...................................................................34
4.15 MARGIN RULES.................................................................34
4.16 RESTRICTIONS ON THE BORROWERS................................................34
4.17 CAPITALIZATION...............................................................34
4.18 FULL DISCLOSURE..............................................................34
4.19 INVESTMENT COMPANY ACT.......................................................35
4.20 LABOR DISPUTES; COLLECTIVE BARGAINING AGREEMENTS; EMPLOYEE GRIEVANCES........35
4.21 YEAR 2000 COMPLIANCE.........................................................35
SECTION 5. FINANCIAL COVENANTS...................................................35
5.1 MAXIMUM LEVERAGE RATIO........................................................35
5.2 MINIMUM FIXED CHARGES COVERAGE RATIO..........................................36
5.3 MINIMUM INTEREST COVERAGE RATIO...............................................36
5.4 MAXIMUM CAPITAL EXPENDITURES..................................................37
-i-
3
Page
----
SECTION 6. AFFIRMATIVE COVENANTS..................................................37
6.1 FINANCIAL REPORTING............................................................37
6.2 CONDUCT OF BUSINESS............................................................39
6.3 MAINTENANCE AND INSURANCE......................................................39
6.4 TAXES..........................................................................40
6.5 INSPECTION BY THE LENDER.......................................................40
6.6 ACCOUNTING SYSTEM..............................................................40
6.7 FURTHER ASSURANCES.............................................................40
6.8 ENVIRONMENTAL LAWS.............................................................40
6.9 DEPOSITORY.....................................................................40
SECTION 7. NEGATIVE COVENANTS.....................................................41
7.1 INDEBTEDNESS; CONTINGENT LIABILITIES...........................................41
7.2 SALE AND LEASEBACK.............................................................41
7.3 ENCUMBRANCES...................................................................42
7.4 DISPOSITION OF ASSETS, ETC.....................................................42
7.5 AMENDMENT TO CHARTER OR PARTNERSHIP DOCUMENTS..................................43
7.6 MERGERS; CONSOLIDATIONS; ISSUANCE OF SECURITIES; ETC...........................43
7.7 RESTRICTED PAYMENTS............................................................44
7.8 INVESTMENTS, LOANS AND ACQUISITIONS............................................44
7.9 ERISA..........................................................................44
7.10 TRANSACTIONS WITH AFFILIATES..................................................45
7.11 AMENDMENT OF CERTAIN AGREEMENTS...............................................45
7.12 NEGATIVE PLEDGES, ETC.........................................................45
SECTION 8. DEFAULTS................................................................45
8.1 EVENTS OF DEFAULT..............................................................45
8.2 REMEDIES.......................................................................47
8.3 LETTERS OF CREDIT..............................................................48
SECTION 9. MISCELLANEOUS...........................................................48
9.1 NOTICES........................................................................48
9.2 EXPENSES.......................................................................49
9.3 INDEMNIFICATION................................................................49
9.4 TERM OF AGREEMENT..............................................................49
9.5 NO WAIVERS.....................................................................50
9.6 GOVERNING LAW..................................................................50
9.7 ENTIRE AGREEMENT; AMENDMENTS...................................................50
9.8 ASSIGNMENTS; PARTICIPATIONS...................................................50
9.9 COUNTERPARTS; PARTIAL INVALIDITY...............................................51
9.10 WAIVER OF JURY TRIAL..........................................................51
9.11 CONSENT TO JURISDICTION.......................................................51
9.12 JOINT AND SEVERAL LIABILITY...................................................51
-ii-
4
EXHIBITS
Exhibit 2.1(a) Form of Revolving Note
Exhibit 2.1(b) Form of Term Note
Exhibit 2.4 Form of Loan Request
Exhibit 2.5 Form of Interest Rate Option Notice
Exhibit 2.9 Exemption Certificate
Exhibit 6.1 Form of Covenant Compliance Report
SCHEDULES
Schedule 1(a) Coffee People Sale Stores
Schedule 1(b) Quarterly Dates
Schedule 4.1 Qualifications
Schedule 4.4 Approvals
Schedule 4.5 Title to Properties; Absence of Liens
Schedule 4.6 Intellectual Property; Trademarks, Etc.
Schedule 4.8 Material Agreements
Schedule 4.9 Environmental Matters
Schedule 4.14 Litigation
Schedule 4.17 Capitalization
Schedule 7.1 Indebtedness
Schedule 7.3 Encumbrances
Schedule 7.8 Investments
-iii-
5
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made as of July 7, 1999, among XXXXXXXX
COFFEE, INC., a Delaware corporation (the "Parent"), and its Subsidiaries,
COFFEE PEOPLE WORLDWIDE, INC., a Delaware corporation, COFFEE PEOPLE, INC., an
Oregon corporation ("Coffee People"), XXXXXX XXXX'X, INC., a Delaware
corporation, EDGLO ENTERPRISES, INC., a Illinois corporation, XXXXXX XXXX'X
GOURMET COFFEES CORP., an Illinois corporation, and XXXXXX XXXX'X GOURMET
COFFEES FRANCHISING CORP., an Illinois corporation (the Parent and such
Subsidiaries and such other Subsidiaries who hereafter become parties hereto
being collectively referred to herein as the "Borrowers" and individually as a
"Borrower") and BANKBOSTON, N.A., a national banking association, or any
successor thereto (the "Lender").
RECITALS
A. The Borrowers are in the business of owning and operating retail
coffee Stores and manufacturing and selling wholesale and retail specialty
coffees.
B. The Parent has entered into a Merger Agreement dated as of March 16,
1999 (the "CP Acquisition Agreement") to acquire all of the Capital Stock (the
"CP Acquisition") of Coffee People.
C. The Borrowers have requested that the Lender provide a term loan of
$12,000,000 to be used for repayment of indebtedness and closing costs in
connection with the CP Acquisition and a revolving line of credit to the
Borrowers of up to $3,000,000 to be used for working capital, standby letters of
credit for remodeling Stores and to develop or fund new coffee retail Stores via
development and acquisition.
D. The Lender is willing, subject to the terms and conditions set forth
herein, to provide such credit facilities to the Borrowers.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS. As used herein, the terms shall have the
following meanings:
Accountants: KPMG LLP or other independent certified public accountants
acceptable to the Lender.
Acquisition: See definition of Permitted Acquisition.
Adjusted Eurodollar Rate: As applied to any Interest Period, the rate
per annum determined pursuant to the following formula:
AER = [ IOR ]*
---------------
[1.00 - RP]
6
AER = Adjusted Eurodollar Rate
IOR = Interbank Offered Rate
RP = Reserve Percentage
----------------
* The amount in brackets shall be rounded upwards, if necessary, to the
next higher 1/100th of 1%.
Where:
The "Interbank Offered Rate" applicable to any Eurodollar Loan
for any Interest Period means the rate of interest determined by the
Lender to be the prevailing rate per annum at which deposits in U.S.
dollars are offered to the Lender by first-class banks in the interbank
Eurodollar market in which it regularly participates on or about 10:00
a.m. (Boston time) two Business Days before the first day of such
Interest Period in an amount approximately equal to the principal
amount of the Eurodollar Loan to which such Interest Period is to apply
for a period of time approximately equal to such Interest Period; and
The "Reserve Percentage" applicable to any Interest Period
means the rate (expressed as a decimal) applicable to the Lender during
such Interest Period under regulations issued from time to time by the
Board of Governors of the Federal Reserve System for determining the
maximum reserve requirement (including, without limitation, any basic,
supplemental, emergency or marginal reserve requirement) of the Lender
with respect to "Eurocurrency liabilities" as that term is defined
under such regulations.
The Adjusted Eurodollar Rate shall be adjusted automatically as of the
effective date of any change in the Reserve Percentage.
Affiliates: As applied to any Person, (a) if an individual, a spouse or
relative of such person; (b) if a business entity, any partner, shareholder,
member, director, officer or manager of such Person (except an equityholder of
not more than 5% of the outstanding stock of any company listed on a national
securities exchange or actively traded in the over-the-counter securities
market); (c) any corporation, association, partnership, joint venture, firm or
other entity of which such Person is a partner, stockholder (except an
equityholder of not more than 5% of the outstanding stock of any company listed
on a national securities exchange or actively traded in the over-the-counter
securities market), venturer, member, director, officer or manager; and (d) any
other Person directly or indirectly controlling, controlled by, or under common
control with, such Person.
Asset Sale: Any sale, lease, sale and leaseback, assignment,
conveyance, transfer or other disposition ("Disposition") of property or a
series of any such related Dispositions of property (excluding any such
Disposition permitted by clause (a) of Section 7.4) for which any Company
receives (valued at the initial principal amount thereof in the case of non-cash
proceeds consisting of notes or other debt, securities and valued at fair market
value in the case of other non-cash proceeds) $25,000 or more.
Available Amount: See Section 2.1(a).
-2-
7
Available Revolver Commitment: At any time, the aggregate Revolver
Commitment, minus the Revolving Credit Outstandings.
Base Rate: The higher of (i) the annual rate of interest announced from
time to time by the Lender at its head office as its Base Rate, and (ii) the
Federal Funds Effective Rate plus .50% per annum (rounded upwards, if necessary,
to the next .125%). The Base Rate is not necessarily intended to be the lowest
rate of interest determined by the Agent in connection with extensions of
credit.
Base Rate Loan: Any Loan bearing interest calculated by reference to
the Base Rate.
Borrower: See the Preamble.
Business Day: (i) For all purposes other than as covered by clause (ii)
below, any day other than a Saturday, Sunday or legal holiday on which banks in
Boston, Massachusetts are open for the transaction of a substantial part of
their commercial banking business; and (ii) with respect to all notices and
determinations in connection with, and payments of principal and interest on,
Eurodollar Loans, any day that is a Business Day described in clause (i) and
that is also a day for trading by and between banks in the U.S. Dollar deposits
in the interbank Eurodollar market.
Capital Expenditures: As to any Person for any period, the sum of all
amounts which would, in accordance with GAAP consistently applied, be included
as additions to property, plant and equipment and other capital expenditures for
such Person for such period, including without limitation amounts with respect
to Capitalized Leases, but excluding (i) expenditures constituting the purchase
price for Permitted Acquisitions and (ii) so long as no Event of Default exists
at the time of such Asset Sale or casualty, amounts constituting Net Sale
Proceeds of Asset Sales of the Coffee People Sale Stores and proceeds of
casualty insurance policies to the extent permitted to be reinvested in the
business of the Borrowers within 180 days after such Asset Sale or casualty to
upgrade or remodel Stores or to make other improvements in the assets and
operations of the Borrowers.
.
Capital Stock: Any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all
similar ownership interests in any Person which is not a corporation, and any
and all warrants, options or other rights to acquire any of the foregoing.
Capitalized Leases: Leases under which any Company is the lessee or
obligor, the discounted future rental payment obligations under which are
required to be capitalized on the balance sheet of the lessee or obligor in
accordance with GAAP.
Change in Control: for any reason (a) any "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes
the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a Person shall be deemed to have "beneficial ownership" of all
securities that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than
-3-
8
35% of the total outstanding Capital Stock (on a fully-diluted basis) of the
Parent entitled to vote in the election of directors; (b) any Borrower shall
cease to own of record and beneficially 100% of the issued and outstanding
Capital Stock in each of its Subsidiaries (unless otherwise permitted
hereunder); or (c) during any period of up to 24 consecutive months, commencing
after the date of this Agreement, individuals who at the beginning of such 24
month period were directors of the Parent (together with any new director whose
election by its Board of Directors or whose nomination for election by its
shareholders was approved by a vote of at least two-thirds of the directors then
still in office who either were directors at the beginning of such period or
whose election or nomination for election was previously so approved) cease for
any reason to constitute a majority of the directors of the Parent then in
office.
Code: The Internal Revenue Code of 1986 and the rules and regulations
promulgated thereunder, collectively, as the same may from time to time be
supplemented or amended and remain in effect.
Coffee People: See the Recitals.
Coffee People Sales Stores: Those certain existing Coffee People
company-owned Stores listed on Schedule 1(a) and located in Texas, Colorado,
Oregon and Arizona which are intended to be sold by the Borrowers.
Collateral: Any and all real and personal property of any of the
Companies, whether tangible or intangible, in each case in which the Lender now
has, is granted by this Agreement or otherwise, or hereafter acquires a security
interest or any other lien, to secure any of the Obligations.
Commitment Fee: See Section 2.3.
Commitments: The Revolver Commitment and the Term Loan Commitment.
Companies: The Borrowers and each of their Subsidiaries from time to
time.
Consolidated Cash Flow: For any period, without duplication, the sum of
(a) the Consolidated EBITDA of the Companies for such period, minus (b) cash
taxes in respect of income and profits for such period, minus (c) the aggregate
amount of Maintenance Capital Expenditures during such period; in each case
determined on a consolidated basis in accordance with GAAP.
Consolidated EBITDA: For any period determined on a consolidated basis
in accordance with GAAP, without duplication, the sum of (a) the Consolidated
Net Income of the Companies for such period, plus (b) taxes in respect of income
and profits, if any, paid or accrued by the Companies for such period, plus (c)
Consolidated Interest Expense of the Companies for such period, plus (d)
consolidated depreciation and amortization expenses of the Companies for such
period (including amortization of goodwill and other intangibles and
organizational costs), plus (e) other consolidated non-cash charges of the
Companies for such period, plus (f) consolidated nonrecurring charges of the
Companies for such period related to mergers and acquisitions, minus (g) other
consolidated non-cash credits of the Companies for such period; provided that
(i) if at any time during such Reference Period any Asset Sale shall have
occurred, the Consolidated EBITDA for such Reference Period
-4-
9
shall be reduced by an amount equal to the Consolidated EBITDA (if positive)
attributable to the property that is the subject of such Asset Sale for such
Reference Period or increased by an amount equal to the Consolidated EBITDA (if
negative) attributable thereto for such Reference Period and (ii) if during such
Reference Period an Acquisition shall have occurred, Consolidated EBITDA for
such Reference Period shall be calculated after giving pro forma effect thereto
as if such Acquisition occurred on the first day of such Reference Period.
Consolidated EBITDAR: For any period, without duplication, the sum of
(a) Consolidated EBITDA, plus (b) rental expense under Operating Leases; in each
case determined on a consolidated basis in accordance with GAAP.
Consolidated Financial Obligations: For any period, without
duplication, the sum of all scheduled payments (including without limitation,
principal and Consolidated Interest Expense) on Consolidated Funded Indebtedness
of the Companies (including without limitation with respect to Capitalized
Leases) which came due during such period, in each case determined on a
consolidated basis in accordance with GAAP.
Consolidated Funded Indebtedness: At any time, without duplication, as
to any Person, the sum of (a) all indebtedness of such Person for borrowed
money, (b) all obligations of such Person for the deferred purchase price of
property or services (other than trade payables incurred in the ordinary course
of such Person's business), (c) all obligations of such Person evidenced by
notes, bonds, debentures or other similar instruments, (d) indebtedness created
or arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default are limited
to repossession or sale of such property), (e) the principal portion of
Capitalized Leases of such Person, (f) all obligations of such Person,
contingent or otherwise, as an account party under acceptance, letter of credit
(as to the face amount thereof plus, without duplication, LC Draw Obligations)
or similar facilities, (g) all Guarantees of such Person in respect of
Indebtedness of another Person, (h) all Indebtedness of another Person secured
by (or for which the holder of such obligation has an existing right, contingent
or otherwise, to be secured by) any Lien on property owned by such Person,
whether or not such Person has assumed or become liable for the payment of such
obligation, (i) all obligations of such Person in respect of Interest Rate
Protection Agreements, (j) all obligations of such Person under take-or-pay or
similar arrangements or under commodities agreements, (k) all preferred Capital
Stock issued by such Person and which by the terms thereof could be (at the
request of the holders thereof or otherwise) subject to mandatory sinking fund
payments, redemption or other acceleration (other than as a result of a Change
of Control or an Asset Sale that does not in fact result in a redemption of such
preferred Capital Stock) at any time during the term of this Agreement, (l) the
principal portion of all obligations of such Person under synthetic leases, (m)
the Indebtedness of any partnership or unincorporated joint venture in which
such Person is a general partner or a joint venturer, and (n) the outstanding
attributed principal amount under any securitization transaction.
Consolidated Interest Expense: For any period, without duplication, the
sum of (a) interest expense (including amortization or write-off of debt
discount and debt issuance costs) of the Companies for such period, (b) the
interest component of all Capitalized Leases of the Companies for such period,
and (c) all commitment fees, Letter of Credit Fees, fees relating to Interest
Rate
-5-
10
Protection Agreements and other fees, discounts, commissions and other charges
incurred or payable by the Companies during such period relating to
Indebtedness; in each case determined on a consolidated basis in accordance with
GAAP.
Consolidated Net Assets: As of any date on which the amount thereof is
to be determined, the net book value of all assets of the Companies as
determined on a consolidated basis in accordance with GAAP.
Consolidated Net Income: For any period, the net income (or loss) of
the Companies, excluding any extraordinary income (or loss) for such period
(taken as a cumulative whole), after deducting all operating expenses,
provisions for all taxes and reserves (including reserves for deferred income
taxes) and all other proper deductions; all determined on a consolidated basis
in accordance with GAAP.
Controlled Group: All trades or businesses (whether or not
incorporated) under common control that, together with the Companies, are
treated as a single employer under Section 414(b) or 414(c) of that Code or
Section 4001 of ERISA.
CP Acquisition: See the Recitals.
CP Acquisition Agreement: See the Recitals.
Credit Extensions: The Loans and the Letters of Credit.
Debt/Equity Proceeds Payments: See Section 2.7.
Debt Issuance: The issuance of Consolidated Funded Indebtedness
subordinated to the obligations of the Borrowers to pay principal of and
interest on and other amounts due with respect to the Loans, the Notes and other
Obligations on terms of subordination satisfactory to the Lender, and pursuant
to documentation containing other terms and including, without limitation,
interest, amortization, mandatory prepayments, covenants and events of default
in form and substance satisfactory to the Lender.
Default: An Event of Default or event or condition that, but for the
requirement that time elapse or notice be given, or both, would constitute an
Event of Default.
Distribution: As to any Person, any direct or indirect: (i) declaration
or payment of any dividend on or in respect of any Capital Stock of such Person
(except, in the case of the Parent, a dividend payable solely in shares of
Permitted Capital Stock); (ii) redemption, purchase or other retirement or
acquisition of any Capital Stock of such Person, through a Subsidiary of such
Person or otherwise; or (iii) return of capital by such Person to its
shareholders or other equityholders as such; or (iv) other distribution on or in
respect of any Capital Stock of such Person (except, in the case of the Parent,
any distribution made by the Parent solely in shares of Permitted Capital Stock
in connection with any stock split or reverse stock split).
Encumbrances: See Section 7.3.
-6-
11
Environmental Laws: Any and all applicable foreign, federal, state and
local environmental, health or safety statutes, laws, regulations, rules,
ordinances, policies and rules or common law (whether now existing or hereafter
enacted or promulgated), of all governmental agencies, bureaus or departments
which may now or hereafter have jurisdiction over any Borrower and all
applicable judicial and administrative and regulatory decrees, judgments and
orders, including common law rulings and determinations, relating to injury to,
or the protection of, real or personal property or human health or the
environment, including, without limitation, all requirements pertaining to
reporting, licensing, permitting, investigation, remediation and removal of
emissions, discharges, releases or threatened releases of Hazardous Materials,
chemical substances, pollutants or contaminants whether solid, liquid or gaseous
in nature, into the environment or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of such
Hazardous Materials, chemical substances, pollutants or contaminants. Without
limiting the generality of the foregoing, the term shall encompass each of the
following statutes and regulations promulgated thereunder, and amendments and
successors to such statutes and regulations, as enacted and promulgated from
time to time: (a) the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (codified in scattered sections of 26 U.S.C.; 33 U.S.C.;
42 U.S.C. and 42 U.S.C. Section 9601 et seq.); (b) the Resource Conservation and
Recovery Act of 1976 (42 U.S.C. Section 6901 et seq. ); (c) the Hazardous
Materials Transportation Act (49 U.S.C. Section 1801 et seq.); (d) the Toxic
Substances Control Act (15 U.S.C. Section 2601 et seq.); (e) the Clean Water Act
(33 U.S.C. Section 1251 et seq.); (f) the Clean Air Act (42 U.S.C. Section 7401
et seq.); (g) the Safe Drinking Water Act (21 U.S.C. Section 349; 42 U.S.C.
Section 201 and Section 300 et seq.); (h) the National Environmental Policy Act
of 1969 (42 U.S.C. Section 4321); (i) the Superfund Amendment and
Reauthorization Act of 1986 (codified in scattered sections of 10 U.S.C.; 29
U.S.C.; 33 U.S.C. and 42 U.S.C.); and (j) Title III of the Superfund Amendment
and Reauthorization Act (40 U.S.C. Section 1101 et seq.).
Equity Issuance: any issuance or sale by any Company of (i) any of its
Capital Stock, (ii) any warrants or options exercisable in respect of Capital
Stock, or (iii) any other security or instrument if representing any Capital
Stock (or the right to obtain any Capital Stock) in any Company.
ERISA: The Employee Retirement Income Security Act of 1974 and the
rules and regulations thereunder, collectively, as the same may from time to
time be supplemented or amended and remain in effect.
Eurodollar Loan: Any Revolving Loan bearing interest at a rate
calculated by reference to the Adjusted Eurodollar Rate.
Event of Default: See Section 8.1.
Expiration Date: The fifth anniversary of the date hereof, or such
earlier date on which the Revolver Commitment of the Lender shall terminate in
accordance with the terms hereof.
Federal Funds Effective Rate: For any day, a fluctuating interest rate
per annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is not a
-7-
12
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day that is a Business
Day, the average of the quotations for such day on such transactions received by
the Lender from three Federal funds brokers of recognized standing selected by
the Lender.
Fee Letter: The Fee Letter among the Lender and the Borrowers dated as
of June 30, 1999.
Franchise Agreements: The franchise agreements between the Borrowers
and their franchisees in effect from time to time.
Franchisees: Each of the franchisees which is a party to a Franchise
Agreement with any Borrower pursuant to a Franchise Agreement from time to time.
FTC: The Federal Trade Commission, and any successor agency thereof.
GAAP: For all purposes other than the financial statements contemplated
by Sections 6.1(a), (b) and (c) of this agreement, GAAP shall mean generally
accepted accounting principles in effect as of January 27, 1999, applied on a
consistent basis. With respect to the financial statements contemplated by
Sections 6.1(a) and (b) of this Agreement, GAAP shall mean generally accepted
accounting principles in effect at the time of the effective dates thereof,
applied on a consistent basis with past financial statements (unless otherwise
mutually agreed to in writing by the parties hereto).
Guaranty or Guarantees: All guarantee(s), endorsement(s) or other
contingent or surety obligation(s) of any Company with respect to obligations of
others, whether or not reflected on its balance sheet, including any obligation
to furnish funds, directly or indirectly (whether by virtue of partnership
arrangements, by agreement to keep-well or otherwise), through the purchase of
goods, supplies or services, or by way of stock purchase, capital contribution,
advance or loan, or to enter into a contract for any of the foregoing, for the
purpose of payment of obligations of any other Person.
Hazardous Material: Any substance (a) the presence of which requires or
may hereafter require notification, investigation or remediation under any
Environmental Law; (b) which is or becomes defined as a "hazardous waste",
"hazardous material", "hazardous material or oil" or "hazardous substance" or
"controlled industrial waste" or "pollutant" or "contaminant" or "chemical
substance or mixture" under any present or future Environmental Law or
amendments thereto including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (43 U.S.C. Section 9601
et seq.) and any applicable local statutes and the regulations promulgated
thereunder; (c) which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is or becomes
regulated by any governmental authority, agency, department, commission, board,
agency or instrumentality of any foreign country, and the United States, any
state of the United States, or any political subdivision thereof to the extent
any of the foregoing has or had jurisdiction over the Companies; or (d) without
limitation, which contains gasoline, diesel fuel or other petroleum products,
asbestos or polychlorinated biphenyls.
Hedging Agreement: Any commodity swap or other agreement designed to
protect against fluctuations in the price of coffee or coffee-related products.
-8-
13
Indebtedness: As to any Person, all obligations, contingent or
otherwise, that in accordance with GAAP should be classified on a Person's
balance sheet as liabilities or to which reference should be made by footnotes.
Initial Financial Statements: See Section 4.11.
Insolvent or Insolvency: As applied to any Person, a Person as to which
there has occurred one or more of the following events, as applicable: (a)
dissolution (except for dissolution of Subsidiaries to the extent permitted
hereunder); (b) termination of existence (except for mergers, consolidations or
dissolutions to the extent permitted hereunder); (c) insolvency within the
meaning of the United States Bankruptcy Code or other applicable statute; (d)
such Person's inability to pay his or its debts as they come due; or (e)
appointment of a receiver of any part of the property of, execution of a trust
mortgage or an assignment for the benefit of creditors by, of the filing of a
petition in bankruptcy or the commencement of any proceedings under any
bankruptcy or insolvency laws, or any laws relating to the relief of debtors,
readjustment or indebtedness or reorganization of debtors, or the offering of a
plan to creditors for composition or extension, except for an involuntary
proceeding commenced against such Person which is dismissed within 60 days after
the commencement thereof without the entry of an order for relief or the
appointment of a trustee.
Intercompany Notes: See Section 7.1.
Interest Period: (a) With respect to each Eurodollar Loan, the period
commencing on the date of the making or continuation of or conversion to such
Eurodollar Loan and ending one, two, three or six months thereafter, as the
Borrowers may elect in the applicable Loan Request or Interest Rate Option
Notice; and (b) with respect to each Base Rate Loan, the period commencing on
the date of the making or continuation of or conversion to such Base Rate Loan
and ending on the next Quarterly Date thereafter provided that, in each case:
(i) any Interest Period (other than an Interest Period
determined pursuant to clause (iv) below) that would otherwise end on a
day that is not a Business Day shall be extended to the next succeeding
Business Day unless, in the case of Eurodollar Loans, such Business Day
falls in the next calendar month, in which case such Interest Period
shall end on the immediately preceding Business Day;
(ii) if the Borrowers shall fail to give notice as provided in
Section 2.5, the Borrowers shall be deemed to have requested a
conversion of the affected Eurodollar Loan to a Base Rate Loan on the
last day of the then current Interest Period with respect thereto;
(iii) any Interest Period relating to a Eurodollar Loan that
begins on the last Business Day of a calendar month (or on a day for
which there is not numerically corresponding day in the calendar month
at the end of such Interest Period) shall, subject to clause (iv)
below, end on the last Business Day of a calendar month;
(iv) any Interest Period that would otherwise end after the
Expiration Date shall end on the Expiration Date; and
-9-
14
(v) notwithstanding clause (iv) above, no Interest Period
relating to a Eurodollar Loan shall have a duration of less than one
month.
Interest Rate Option Notice: See Section 2.5.
Interest Rate Protection Agreement: Any interest rate swap agreement or
other financial agreement or arrangement designed to protect any Company against
fluctuations in interest rate.
June, 1999 Offering: The 4,600,000 shares of common Capital Stock of
the Parent being offered pursuant to the Prospectus in connection with the CP
Acquisition.
LC Draw Obligation: The Borrowers' obligation to reimburse the Lender
on account of any drawing under any Letter of Credit as provided in Section
2.8(c).
LC Exposure Amount: At any time, the sum of (i) the aggregate undrawn
face amount of all Letters of Credit outstanding at such time, and (ii) the
aggregate amount of all drawings under Letters of Credit for which the Lender
shall not have been reimbursed by the Borrowers as provided in Section 2.8(c).
Lease: Any Operating Lease or Capitalized Lease.
Lender: See the Preamble.
Letter of Credit: See Section 2.8(a).
Letter of Credit Documents: See Section 2.8(a).
Letter of Credit Fee: See Section 2.8(g).
Loan Documents: Collectively, this Agreement, the Fee Letter, the
Notes, the Letters of Credit, the Letter of Credit Documents, the Security
Documents and any and all other agreements, instruments, certificates, Loan
Requests, Interest Rate Option Notices or reports executed or delivered from
time to time in connection with this Agreement, in each case as may be amended
or restated from time to time.
Loan Request: See Section 2.4.
Loans: The Term Loan and the Revolving Loans.
Maintenance Capital Expenditures: Capital Expenditures relating solely
to expenditures with respect to fixed assets existing as of the date hereof,
including without limitation coffee retail Stores, production facilities and
corporate offices.
Margin Stock: See Section 4.5.
-10-
15
Material Adverse Effect: A material adverse effect on (a) the business,
assets, property, operations, condition (financial or otherwise), liabilities or
prospects of the Parent or of the Borrowers taken as a whole, (b) the ability of
any Borrower to perform any material obligation under any of the Loan Documents
to which it is bound, or (c) the validity or enforceability of (i) this
Agreement, (ii) any of the other Transaction Documents, or (iii) any of the
rights or remedies of the Lender hereunder or thereunder.
Net Debt/Equity Proceeds: In the case of any Debt Issuance or Equity
Issuance (other than an Equity Issuance constituting an Asset Sale), the
aggregate amount of all cash received by any Company in respect thereof, net of
reasonable, customary fees, discounts, commissions and expenses incurred by the
Companies for such Debt Issuance or Equity Issuance.
Net Sale Proceeds: With respect to any Asset Sale, the aggregate amount
of all cash received by any Company in respect thereof, net of reasonable,
customary fees, commissions and expenses incurred by the Companies for such
Asset Sale net of taxes paid or reasonably estimated to be payable and for which
reserves have been provided as a result thereof.
Obligations: Any and all obligations (whether payment or performance
related or otherwise) of any Company to the Lender or any of its affiliates of
every kind and description, direct or indirect, absolute or contingent, primary
or secondary, due or to become due, now existing or hereafter arising, which may
arise under, out of, or in connection with, this Agreement (as may be amended or
restated from time to time), any other Loan Document (as may be amended or
restated from time to time), any Interest Rate Protection Agreement entered into
with the Lender or any affiliate of the Lender or any other document made,
delivered or given in connection herewith or therewith, whether on account of
principal (including any increases thereto), interest, reimbursement
obligations, fees, indemnities, costs, expenses (including all fees, charges and
disbursements of counsel to the Lender that are required to be paid by the
Borrowers pursuant to any Loan Document) or otherwise (including interest
accruing after the maturity of the Credit Extensions and interest accruing after
the filing of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to any Company, whether or not a
claim for post-filing or post-petition interest is allowed in such proceeding).
Operating Leases: Leases or other periodic payment arrangements for the
use of real or personal property, other than Capitalized Leases.
Organizational Documents: See Section 4.2.
PBGC: The Pension Benefit Guaranty Corporation or any entity succeeding
to any or all of its functions under ERISA
Permitted Acquisitions: The acquisition by any Borrower, whether by way
of the purchase of assets or equity interests, by merger or consolidation or
otherwise, of substantially all of the assets of or equity interests in a
specialty coffee retail Store or Stores (each, an "Acquisition"), subject to the
fulfillment of the following conditions:
-11-
16
(a) At least 90% of all Stores owned and operated by each of
the Borrowers as of the date of such Acquisition must each have a
positive Store Cash Flow for the four fiscal quarters immediately
preceding such Acquisition (excluding from such computation Stores not
owned and operated by the Borrowers throughout such four quarter period
and the existing 26 Xxxxxx Xxxx'x Stores owned and operated by Xxxxxx
Xxxx'x Gourmet Coffees Corp. and Xxxxxx Xxxx'x Stores bought by
Borrowers in the future from franchisees of Xxxxxx Xxxx'x Gourmet
Coffees Franchising Corp.);
(b) If such Acquisition involves the purchase of equity
interests, the same shall be effected in such a manner as to assure
that the acquired entity becomes a direct or indirect wholly-owned
Subsidiary of the Parent;
(c) No later than: (i) 15 days prior to the consummation of
any such Acquisition or, if earlier, 10 business days after the
execution and delivery of the related acquisition agreement, the
Borrowers shall have delivered to the Lender a copy of executed
counterparts of such acquisition agreement, together with all schedules
thereto, and all applicable financial information, including new
Projections (if such Acquisition involves more than five stores),
updated to reflect such Acquisition and any related transactions, (ii)
promptly following a request therefor, copies of such other information
or documents relating to such Acquisition as the Lender shall have
reasonably requested, and (iii) promptly following the consummation of
such Acquisition, copies of the material agreements, instruments and
documents executed and delivered at the closing under such acquisition
agreement;
(d) No Borrower nor any Subsidiary shall, in connection with
any such Acquisition, assume or remain liable with respect to any
Indebtedness (including any material tax or ERISA liability) of the
related seller, except (i) Indebtedness to the extent permitted under
Section 7.1 of this Agreement, (ii) trade obligations of such seller
incurred in the ordinary course of business and necessary or desirable
to the continued operation of the underlying Store business (but which
do not constitute Consolidated Financial Obligations) and (iii)
existing Operating Leases of Stores acquired in the Permitted
Acquisition;
(e) All assets and properties acquired in connection with such
Acquisition shall be free and clear of any Encumbrances, other than
Permitted Encumbrances;
(f) Immediately prior to any such Acquisition and after giving
effect thereto, no Default shall have occurred or be continuing;
(g) Without limiting the generality of the foregoing, after
giving effect to such Acquisition (including any Loan therefor) the
Borrowers shall be in compliance with the provisions of Section 5, (i)
calculated on a pro forma basis as of the end of and for the Reference
Period most recently ended prior to the effective date of such
Acquisition, and (ii) under the updated Projections referred to above
(if applicable). The Borrowers shall provide to the Lender a
certificate signed on behalf of the Borrowers by their treasurer
demonstrating such compliance in reasonable detail;
-12-
17
(h) On or before the consummation of each such Acquisition
involving the purchase or formation of a Subsidiary, such Subsidiary
shall be wholly-owned by a Borrower and the Loan Documents shall be
revised pursuant to amendments satisfactory in form and substance to
the Lender providing for such Subsidiary to become another "Borrower"
hereunder and for compliance with all requirements of Section 2.13; and
(i) On or before the consummation of each such Acquisition,
the Borrowers and their Subsidiaries shall have complied with all of
the requirements of Section 2.13 hereto, including the execution and
delivery of any required Security Documents, and the Lender shall have
received on behalf of the Lenders a first priority security interest in
all of the assets so acquired, whether by way of an asset or equity
interest acquisition, and the Lender shall have also received a first
priority perfected security interest in and pledge of the equity
interests of any such acquired Subsidiary.
Permitted Capital Stock: Capital Stock of the Parent with respect to
which the Parent has no obligation to make any Distributions prior to the
indefeasible payment in full in cash of all Obligations.
Permitted Encumbrances: See Section 7.3.
Permitted Sale: See Section 7.4.
Person: Any individual, corporation, partnership, joint venture, trust
or unincorporated organization or any government or any agency or political
subdivision thereof.
Plan: At any time, an employee pension or other benefit plan that is
subject to Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is either (a) maintained by any Company or any
member of the Controlled Group for employees of any Company or any member of the
Controlled Group or (b) if such Plan is established maintained pursuant to a
collective bargaining agreement or any other arrangement under which more than
one employer makes contributions and to which any Company or any member of the
Controlled Group is then making or accruing an obligation to make contributions
or has within the preceding five Plan years made contributions.
Prospectus: The Prospectus dated June 30, 1999 of the Parent, filed
with the SEC.
Qualified Investments: As applied to any Company, investments in (a)
notes, bonds or other obligations of the United States of America or any agency
thereof that as to principal and interest constitute direct obligations or are
guaranteed by the United States of America, (b) certificates of deposit or other
deposit instruments or accounts of banks or trust companies organized under the
laws of the United States or any state thereof that have capital and surplus of
at least $500,000,000 and are members of the Federal Deposit Insurance
Corporation, (c) commercial paper of the Lender or commercial paper of other
issuers that is rated not less than prime-one or A-1 or their equivalents by
Xxxxx'x Investors Service, Inc. or Standard & Poor's Corporation, respectively,
or their successors or municipal bonds with at least the equivalent rating, (d)
any repurchase agreement secured by any one or more of the foregoing, (e)
securities with maturities of one year or less from
-13-
18
the date of acquisition issued or fully guaranteed by any state, commonwealth or
territory of the United States, by any political subdivision or taxing authority
of any such state, commonwealth or territory or by any foreign government, the
securities of which state, commonwealth, territory, political subdivision,
taxing authority or foreign government (as the case may be) are rated at least A
by S&P or A by Moody's; (f) securities with maturities of six months or less
from the date of acquisition backed by standard letters of credit issued by the
Lender or any commercial bank satisfying the requirements of clause (b) of this
definition; or (g) shares of money market mutual or similar funds which invest
exclusively in assets satisfying the requirements of clauses (a) through (f) of
this definition; and (h) with the Lender's prior written consent, any Subsidiary
provided such Subsidiary complies with the provisions of the Loan Documents
applicable to it (including without limitation Section 2.12 hereof).
Quarterly Dates: The last day of each fiscal quarter of the Borrowers,
using their fiscal year accounting as in effect with respect to the Initial
Financial Statements of the Parent. The Quarterly Dates for the period from the
date hereof through fiscal year end 2004 are listed on Schedule 1 hereto.
Reference Period: Each period of four consecutive fiscal quarters of
the Borrowers ending on or after the Quarterly Date for the second fiscal
quarter of fiscal year 1999.
Remedial Work: All activities, including, without limitation, cleanup
design and implementation, removal activities, investigation, field and
laboratory testing and analysis, monitoring and other remedial and response
actions, taken or to be taken, arising out of or in connection with Hazardous
Materials, including without limitation (a) all activities included within the
meaning of the terms "removal," "remedial action" or "response," as defined in
42 U.S.C. Section 9601(23), (24) and (25), and (b) all activities included
within the meaning of the terms "remedial response actions" and "Remedial
Response Implementation Plan (RRIP)," as defined in 310 CMR 40.
Rental Expense: For any period, all rental expense under Operating
Leases.
Restricted Payment: With reference to any Company any (i) Distribution
or (ii) any retirement, repurchase, defeasance or redemption of, any acquisition
for value of, or any repayment of, any Debt Issuance other than as expressly
permitted in writing by the Lender.
Revolver Commitment: See Section 2.1.
Revolving Credit Outstandings: At any time, the sum of (i) the
aggregate principal amount of Revolving Loans outstanding at such time, plus
(ii) the LC Exposure Amount at such time.
Revolving Loans: See Section 2.1.
Revolving Note: See Section 2.1.
Sale Leaseback: See Section 7.2.
-14-
19
Sale Proceeds Payments: See Section 2.7.
SEC: The Securities and Exchange Commission, or any successor agency
thereto.
SEC Acquisition Filings: The Prospectus, Form S-1 and Form S-4 filed
with the SEC relating to the June, 1999 Offering or the CP Acquisition.
Security Documents: Collectively, the agreements and instruments
referred to in Section 3.1 and any and all other agreements, documents and
instruments executed by any Company or other Affiliates, to secure, or otherwise
in connection with, the Obligations, all as amended from time to time.
Store: Any store owned or controlled or franchised as franchisor
directly or indirectly by any Company.
Store Cash Flow: For any period as to any Store, determined in
accordance with generally accepted accounting principles consistently applied,
without duplication, the sum of the income (or loss) of such Store, excluding
any extraordinary income (or loss) for such Store for such period, after
deducting all operating expenses for such Store.
Subsidiary: (a) Any corporation, association, joint stock company,
business trust or other similar organization of which 50% or more of the
ordinary voting power for the election of a majority of the members of the board
of directors or other governing body of such entity is held or controlled by any
Borrower or a Subsidiary of any Borrower; (b) any other such organization the
management of which is directly or indirectly controlled by any Borrower or a
Subsidiary of any Borrower through the exercise of voting power or otherwise; or
(c) any joint venture, association, partnership or other entity in which any
Borrower or any Subsidiary thereof has a 50% or greater equity interest.
Term Loan: See Section 2.1.
Term Loan Commitment: See Section 2.1.
Term Loan Maturity Date: The fifth anniversary of the date hereof, or
such earlier date on which all the Commitments of the Lender shall terminate in
accordance with the terms hereof.
Term Note: See Section 2.1.
Transaction Documents: See Section 4.2.
SECTION 2. THE CREDIT FACILITY.
2.1 The Loans and Notes.
(a) Revolving Loans. The Lender agrees, subject to the terms of this
Agreement, to make revolving credit loans (the "Revolving Loans") to the
Borrower from time to time from and
-15-
20
after the date hereof until the Expiration Date in an aggregate principal amount
at any time outstanding up to, but not exceeding, $3,000,000 (the "Revolver
Commitment"), minus the LC Exposure Amount at such time. Subject to the terms
and conditions of this Agreement, from time to time from and after the date
hereof until the Expiration Date, the Borrowers may borrow, repay and reborrow
Revolving Loans. The Revolving Loans shall be evidenced by a promissory note in
the form of Exhibit 2.1(a) hereto delivered to the Lender on the date hereof (as
may be amended, renewed, substituted or replaced from time to time, the
"Revolving Note").
(b) Term Loan. The Lender agrees, subject to the terms of this
Agreement, to make a term loan (the "Term Loan") to the Borrowers on or about
the date hereof in the principal amount of $12,000,000 to pay closing costs and
to repay outstanding indebtedness in connection with the CP Acquisition. The
Borrowers shall not be entitled to reborrow all or any part of the principal of
the Term Loan which shall be paid or prepaid at any time. The Term Loan shall be
evidenced by a promissory note in the form of Exhibit 2.1(b) hereto delivered to
the Lender on the date hereof (as may be amended, renewed, substituted or
replaced from time to time, the "Term Note").
(c) Notations on Notes. The Borrowers irrevocably authorize the Lender
to make an appropriate notation on the applicable Note reflecting the making of
each Loan and each payment on the Loans. The outstanding amount of the Loans
entered in the computer records of the Lender shall be prima facie evidence of
the principal amount thereof owing and unpaid to the Lender, but the failure to
enter, or any error in so entering, any such amount shall not limit or otherwise
affect the obligations of the Borrowers hereunder or under the Notes to make
payments of principal, interest and other amounts due thereunder.
2.2 Scheduled Principal Repayments on the Loans.
(a) Revolving Loans. The Borrowers shall pay to the Lender on the
Expiration Date all then outstanding principal on the Revolving Loans.
(b) Term Loan. The Borrower shall pay to the Lender principal of the
Term Loan in 18 consecutive quarterly installments, payable on each March 31,
June 30, September 30 and December 31, commencing on December 31, 1999. Each of
the first 17 installments shall be in the amount of $666,666, with the final
18th installment being in the amount of all remaining outstanding principal due
and payable in full on the Term Loan Maturity Date.
2.3 Closing Fee; Commitment Fees; Interest; Default Rate.
(a) Closing Fee. The Borrowers shall pay jointly and severally pay to
the Lender a fully-earned nonrefundable closing fee on the date hereof as set
forth in the Fee Letter.
(b) Commitment Fees. The Borrowers shall pay jointly to the Lender a
commitment fee (the "Commitment Fee") on the daily unused portion of the
Revolver Commitment (taking into account the LC Exposure Amount as usage) at a
per annum rate equal to .50%.
(c) Interest Rate. The Borrowers may elect an interest rate for each
Loan (or one or more portions thereof) based on either the Base Rate or the
applicable Adjusted Eurodollar Rate and
-16-
21
determined as follows: (i) the rate for any Base Rate Loan shall be the Base
Rate plus 1.25%; and (ii) the rate for any Eurodollar Loan shall be the
applicable Adjusted Eurodollar Rate plus 3.00%.
(e) Interest and Commitment Fees Payment Dates. Interest on Base Rate
Loans shall be due and payable, without setoff, deduction or counterclaim,
quarterly in arrears on each March 31, June 30, September 30 and December 31,
commencing on September 30, 1999, and when such Base Rate Loan is due (whether
at maturity, by reason of acceleration or otherwise). The rate of interest on
Base Rate Loans shall change on the date of any change in the applicable Base
Rate. Interest on each Eurodollar Loan shall be payable, without setoff,
deduction or counterclaim, for the related Interest Period on the last day
thereof and when such Eurodollar Loan is due (whether at maturity, by reason of
acceleration or otherwise) and, if such Interest Period is longer than three
months, at intervals of three months after the first day of such Interest
Period. Commitment Fees shall be due and payable in arrears on each Quarterly
Date and on the Expiration Date.
(f) Default Rate; Late Fee. During the existence of any Event of
Default, the outstanding principal under the Notes and, to the extent permitted
by applicable law, any interest (under this Section 2.3) and fees or any other
amounts due and payable hereunder (including without limitation overadvances)
shall bear interest, from and including the date such Event of Default occurred
at a rate per annum equal to the Base Rate plus 3.00%, which interest shall be
compounded daily and payable on demand. If any payment of principal, interest or
other amount due hereunder is not paid in full within 10 days after the same is
due, the Borrowers shall also jointly and severally pay to the Lender a late fee
in the amount of 5.0% of the amount not paid when due. Nothing in this Section
2.3(f) shall affect the Lender's right to exercise any of its rights or
remedies, including those provided in Section 8.2 and in the Security Documents,
arising upon the occurrence of an Event of Default.
(g) Computations. Interest on the Loans and on fees and expenses shall
be computed on the basis of the actual number of days elapsed over a 360-day
year. Except as otherwise provided in the definition of the term "Interest
Period" with respect to the Eurodollar Loans, if any payment hereunder or under
the Notes shall be due and payable on a day which is not a Business Day, such
payment shall be deemed due on the next following Business Day and interest
shall be payable at the applicable rate specified herein through such extension
period.
2.4 Requests for Loans. The Parent shall give the Lender telephonic
notice confirmed in writing in the form of Exhibit 2.4 of each Loan requested
hereunder (a "Loan Request") no later than (a) 1:00 PM (Boston time) on the same
Business Day as the proposed date of any Base Rate Loan and (b) 1:00 PM (Boston
time) on the third Business Day prior to the proposed date of any Eurodollar
Loan. Each such notice shall specify (i) the principal amount thereof requested
and the use or uses thereof, (ii) the proposed date of such Loan, (iii) the
Interest Period for such Loan, if a Eurodollar Loan, and (iv) whether such Loan
shall be a Base Rate Loan or a Eurodollar Loan. Notwithstanding anything herein
to the contrary, any Revolving Loan that is to be used by any Borrower for the
purpose of new unit growth or Permitted Acquisitions may only be used for such
so long as 90% of the company-owned Stores as of the date of such Loan each have
a positive Store Cash Flow for the four fiscal quarters immediately preceding
the proposed date of such Revolving Loan (excluding from such computation Stores
not owned and operated by the Borrowers throughout such four quarter period and
the existing 26 Xxxxxx Xxxx'x Stores owned and operated by Xxxxxx
-17-
22
Jean's Gourmet Coffees Corp. and Xxxxxx Xxxx'x Stores purchased by Borrowers in
the future from their franchisees of Xxxxxx Xxxx'x Gourmet Coffees Franchising
Corp.). Each Loan Request shall be irrevocable and binding on the Borrowers and
shall obligate the Borrowers to accept the Loan requested on the proposed date.
Each Loan Request for a Base Rate Loan shall be in a minimum amount of $50,000
(and integrals thereof) and each Loan Request for a Eurodollar Loan shall be in
a minimum amount of $100,000 (and integrals thereof); provided, that at no time
shall there be more than five Eurodollar Loans outstanding. The Lender shall
disburse Revolving Loans to the Borrowers by depositing them in a joint account
of the Borrowers with the Lender.
2.5 Conversion and Continuance of Loans.
(a) Conversion to a Different Type of Loan. The Borrowers may elect
from time to time to convert any outstanding Loan to a Base Rate Loan or
Eurodollar Loan, as the case may, be provided that (i) with respect to any such
conversion of a Eurodollar Loan to a Base Rate Loan, the Borrowers shall provide
the appropriate Interest Rate Option Notice in the form of Exhibit 2.5 hereto
(an "Interest Rate Option Notice") to the Lender by 1:00 PM (Boston time) on the
date of such proposed conversion; (ii) with respect to any such conversion of a
Base Rate Loan to a Eurodollar Rate Loan, the Borrowers shall provide the
appropriate Interest Rate Option Notice to the Lender by 1:00 PM (Boston time)
at least three Business Days' prior to the date of such proposed conversion;
(iii) with respect to any such conversion of a Eurodollar Loan into a Base Rate
Loan, such conversion shall only be made on the last day of the related Interest
Period; (iv) no Loans may be converted into a Eurodollar Loan when any Default
has occurred and is continuing; (v) at no time shall there be more than five
Eurodollar Loans outstanding; and (vi) any conversion of less than all of the
outstanding Loans of either type into Loans of the other type shall be in a
minimum principal amount of $100,000, provided that a conversion of a Eurodollar
Loan to a Base Rate Loan shall be in a minimum principal amount of $100,000.
(b) Continuance of an Interest Rate Option. The Borrowers may continue
any Loan of either type as a Loan of the same type upon the expiration of the
related Interest Period by providing an Interest Rate Option Notice to the
Lender in compliance with the notice provisions set forth in Section 2.5(a);
provided that no Eurodollar Loan may be continued as such when any Default has
occurred and is continuing, but shall be automatically converted to a Base Rate
Loan on the last day of the first applicable Interest Period which ends during
the continuance of such Default; provided further that if the Borrowers fail to
give a timely Interest Rate Option Notice, the affected Loan shall be
automatically converted to a Base Rate Loan on the last day of the applicable
Interest Period.
2.6 Reduction or Termination of the Revolver Commitment.
(a) At any time prior to the Expiration Date, upon at least 10 days
prior written notice, the Borrowers may permanently terminate or permanently
reduce the Revolver Commitment. Any such reduction shall be in an amount of not
less than $500,000 (or multiples thereof) or such lesser amount as equals the
Available Revolver Commitment. Simultaneously with any such termination or
reduction of the Revolver Commitment, the Borrowers shall (i) make any payments
required under Section 2.11 and (ii) pay to the Lender any then accrued unpaid
commitment fees and interest on the terminated Revolver Commitment or on the
portion of the Revolver Commitment terminated pursuant to any reduction thereof;
-18-
23
(b) The Revolver Commitment shall be automatically and permanently
reduced to -0- on the Expiration Date, when all outstanding principal, accrued
interest and other amounts due on the Revolving Note shall be due and payable in
full.
2.7 Mandatory Payments and Prepayments.
(a) Overdraws. If at any time the Revolving Credit Outstandings exceed
the sum of the Revolver Commitment, the Borrowers shall immediately pay to the
Lender the amount of such excess, which excess shall be first applied to any
unpaid LC Draw Obligations or, if a Default then exists and is continuing,
applied at the Lender's sole and absolute discretion.
(b) Mandatory Payments in Connection with Prepayment Events. If at any
time any portion of the Term Loan is outstanding, the Borrowers shall, not later
than 30 days following each day any Net Sale Proceeds are received by any
Borrower or any of its Subsidiaries in excess of $250,000 in the aggregate as to
all Asset Sales in any fiscal year, pay to the Lender the amount of such Net
Sale Proceeds (each such payment to the Lender being referred to herein as a
"Sale Proceeds Payment"), provided, however, Net Sale Proceeds of any Asset Sale
of the Coffee People Sale Stores need not be paid to the Lender until 180 days
after such Asset Sale and then only to the extent not reinvested pursuant to the
definition of "Capital Expenditures".
(c) Mandatory Payments in Connection with Debt or Equity Issuances. If
at any time any portion of the Term Loan is outstanding, the Borrowers shall,
not later than 30 days following each day any Net Debt/Equity Proceeds are
received by any Borrower or any of its Subsidiaries in excess of $250,000 in the
aggregate as to all Debt Issuances and Equity Issuances of all Companies in any
fiscal year, pay to the Lender the amount of such Net Debt/Equity Proceeds (each
such payment to the Lender being referred to herein as a "Debt/Equity Proceeds
Payment"); provided, however, no Debt/Equity Proceeds Payment shall be required
with respect to the June, 1999 Offering.
(d) Voluntary Prepayments. Subject to the provisions hereof, including
without limitation the provisions of Section 2.11, the Borrowers may at any time
voluntarily prepay the Loans in whole or in part (in multiples of $100,000 as to
Eurodollar Loans and $50,000 as to Base Rate Loans) from time to time upon not
less than the one Business Day's prior notice by 1:00 PM to the Lender with
respect to Base Rate Loans and three Business Days' prior notice by 1:00 PM to
the Lender with respect to Eurodollar Loans; provided, however, that (i)
Eurodollar Loans may be repaid only on the last day of an Interest Period
therefor, and (ii) all repayments of Eurodollar Loans or any portion thereof
shall be made together with payment of all interest accrued on the amount repaid
and other amounts due with respect thereto through the date of such repayment.
(e) Application of Payments.
(i) If no Default then exists hereunder, all Sale Proceeds
Payments and all Debt/Equity Proceeds Payments shall be applied to
principal of the Term Loan in inverse order of maturity.
-19-
24
(ii) Except as set forth in subparagraph (i) above (or if a
Default exists in which case all payments and prepayments may be
applied as the Lender elects), all payments and repayments made
pursuant to the terms hereof shall be applied (A) first to all (if any)
amounts (except principal, interest and fees) due and payable under
this Agreement at such time, (B) then to payment of all fees due and
payable at such time, (C) then to interest due and payable at such
time, (D) then to accrued interest, (E) then to principal of Base Rate
Loans, (F) then to principal of Eurodollar Loans, and (G) finally, to
all other Obligations.
2.8 Letters of Credit.
(a) Letter of Credit Commitment. Subject to the execution and delivery
by the Borrowers of a letter of credit application and any other related
documents on the Lender's customary forms in effect from time to time
(collectively, the "Letter of Credit Documents") and in reliance upon the
representations and warranties of the Borrowers contained herein, the Lender
agrees from time to time until the Expiration Date to issue, extend and renew
for the account of any Borrower one or more standby letters of credit (each
individually, a "Letter of Credit"), in such form as may be requested from time
to time by the Borrowers and agreed to by the Lender. In the event and to the
extent that any provision of any Letter of Credit Document shall be inconsistent
with any provision of this Agreement, then the provisions of this Agreement
shall govern.
(b) Conditions to Issuance of Letters of Credit; Etc.
(i) The obligation of the Lender to issue, extend or renew any
Letter of Credit hereunder shall be subject to the conditions for Loans
set forth in Section 3 and to the following conditions:
(A) Such Letter of Credit shall provide for payment
in U.S. Dollars and shall expire by its terms no later than
the earlier to occur of (A) 30 days prior to the Expiration
Date and (b) one year from the date of its issuance;
(B) After giving effect to such issuance, extension
or renewal, (1) the aggregate outstanding principal amount of
the Revolving Loans shall not exceed the Available Revolver
Commitment and (2) the sums of the aggregate LC Exposure
Amount shall not exceed $1,000,000;
(C) The form and terms of each Letter of Credit and
the related Letter of Credit Documents shall be acceptable to
the Lender; and
(D) Each Letter of Credit shall be issued to support
obligations of one or more of the Borrowers incurred in the
ordinary course of its or their business.
(ii) Whenever the Borrowers desire to have a Letter of Credit
issued, extended or renewed, the Borrowers will furnish to the Lender a
written application therefor which shall (A) be received by the Lender
not less than three Business Days prior to the proposed date of
issuance, extension or renewal and (B) specify (1) such proposed date
(which must be a Business Day), (2) the expiration date of such Letter
of Credit, (3) the name and address of
-20-
25
the beneficiary of the Letter of Credit, (4) the amount of such Letter
of Credit, and (5) the purpose and proposed form of such Letter of
Credit. Each Letter of Credit shall be subject to the International
Standby Practices (1998) and, to the extent not inconsistent therewith,
the laws of the Commonwealth of Massachusetts.
(c) LC Draw Obligations of the Borrowers. In order to induce the Lender
to issue, extend and renew each Letter of Credit, the Borrowers hereby jointly
and severally agree to reimburse or pay to the Lender:
(i) except as otherwise expressly provided in paragraph (ii)
below, on the Business Day immediately following each date that any
draft presented under such Letter of Credit is honored by the Lender or
the Lender otherwise makes a payment with respect thereto, as indicated
in the notice thereof from the Lender to the Borrowers (A) the amount
paid by the Lender under or with respect to such Letter of Credit, and
(B) the amount of any taxes, fees, charges or other reasonable costs
and expenses whatsoever incurred by the Lender in connection with any
payment made by the Lender under or with respect to such Letter of
Credit; and
(ii) upon the termination or reduction of the Revolver
Commitment, or the acceleration of the LC Draw Obligations in
accordance with Section 8.1, an amount equal to the LC Exposure Amount
(or with respect to a reduction, the excess thereof over the reduced
aggregate Revolver Commitment), which amount shall be held by the
Lender as cash collateral for all LC Draw Obligations.
Interest shall accrue on any and all amounts remaining unpaid by the Borrowers
under this Section 2.8 at any time from the date of any draw under a Letter of
Credit until payment in full (whether before or after judgment) at the rate
specified in Section 2.3 for principal on the Revolving Loans until the Business
Day immediately following such draw and, thereafter, at the default rate set
forth in Section 2.3, and shall be payable to the Lender on demand.
(d) Revolving Loans to Satisfy LC Draw Obligations. The Borrowers may
elect to satisfy any LC Draw Obligation arising under paragraph (c)(i) of this
Section by borrowing a Base Rate Loan in the amount thereof and applying the
proceeds thereto, provided that (i) all conditions to such Revolving Loan set
forth in Section 3 shall have been satisfied in full and (ii) after giving
effect to such Revolving Loan and the application of proceeds thereof, the
Revolving Credit Outstandings will not exceed the Revolver Commitment.
(e) Borrowers' Obligations Absolute. The Borrowers assume all risks in
connection with the Letters of Credit. The Borrowers' obligations under this
Section 2.8 shall be absolute and unconditional under any and all circumstances
and irrespective of the occurrence of any Default or any condition precedent
whatsoever or any setoff, counterclaim or defense to payment which any Borrower
may have or have had against the Lender or any beneficiary of a Letter of
Credit. The Borrowers also agree that the Lender shall not be responsible for,
and the Borrowers' LC Draw Obligations shall not be affected by, among other
things, (i) the validity, genuineness or enforceability of documents or of any
endorsements thereon, even if such documents should in fact prove to be in any
or all respects invalid, insufficient (provided all such documents conform on
their
-21-
26
face), fraudulent or forged, or (ii) any dispute between or among any Borrower,
any of its Subsidiaries, the beneficiary of any Letter of Credit or any
financing institution or other party to which any Letter of Credit may be
transferred or any claims or defenses whatsoever of any Borrower or any of its
Subsidiaries against the beneficiary of any Letter of Credit or any such
transferee. The Lender shall not be liable for any error, omission, interruption
or delay in transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit. The Borrowers agree that
any action taken or omitted to be taken by the Lender under or in connection
with each Letter of Credit and the related drafts and documents, if done in good
faith without gross negligence, shall be binding upon the Borrowers and shall
not subject the Lender to any liability.
(f) Reliance by Lender. The Lender shall be entitled to rely, and shall
be fully protected in relying upon, any Letter of Credit, draft, writing,
resolution, notice, consent, certificate, affidavit, letter, telegram, telecopy,
telex or teletype message, statement, order or other document believed by it to
be genuine and correct and to have been signed, sent or made by the proper
Person and upon advice and statements of legal counsel, independent accountants
and other experts selected by the Lender.
(g) Letter of Credit Fee. In order to induce the Lender to issue,
extend and renew each Letter of Credit, the Borrowers hereby agree jointly and
severally to pay to the Lender quarterly in arrears on the Quarterly Dates with
respect to each such issuance, extension and renewal a fee (in each case, a
"Letter of Credit Fee") on the stated amount of such Letter of Credit at a rate
per annum equal to 3.00%. In addition, the Borrowers shall pay to the Lender any
and all standard charges customarily made by the Lender in connection with such
issuance, extension or renewal.
2.9 Changed Circumstances.
(a) Eurodollar Loans. In the event that:
(i) on any date on which the Adjusted Eurodollar Rate would
otherwise be set, the Lender shall have determined in good faith (which
determination shall be final and conclusive) that adequate and fair
means do not exist for ascertaining the Interbank Offered Rate, or
(ii) at any time the Lender shall have determined in good
faith (which determination shall be final and conclusive) that:
(A) the making or continuation of, or conversion of
any Base Rate Loan to, a Eurodollar Loan has been made
impracticable or unlawful by (1) the occurrence of a
contingency that materially and adversely affects the
interbank eurodollar market or (2) compliance by the Lender in
good faith with any applicable law or governmental regulation,
guideline or order or interpretation or change thereof by any
governmental authority charged with the interpretation or
administration thereof or with any request or directive of any
such governmental authority (whether or not having the force
of law); or
-22-
27
(B) the Adjusted Eurodollar Rate shall no longer
represent the effective cost to the Lender for U.S. dollar
deposits in the interbank market for deposits in which they
regularly participate;
then, and in any such event, the Lender shall notify the Borrowers. Until the
Lender notifies the Borrowers that the circumstances giving rise to such notice
no longer apply, the obligation of the Lender to allow selection by the
Borrowers of Eurodollar Loans shall be suspended. If at the time the Lender so
notifies the Borrowers, the Borrowers have previously given the Lender a Loan
Request or Interest Rate Option Notice with respect to one or more Eurodollar
Loans but such Loan or Loans have not yet gone into effect, such notification by
the Borrowers shall be deemed to be void and the Loan or Loans shall bear
interest at the rate then applicable to Base Rate Loans. Upon such date as the
Lender shall specify in such notice (which shall be the last day of applicable
Interest Period, if an earlier date is not required), the Borrowers shall prepay
all outstanding Eurodollar Loans, together with interest thereon, and may borrow
Base Rate Loans in accordance with this Agreement by delivering an Interest Rate
Option Notice pursuant to Section 2.5. In the event that the Lender determines
at any time following the giving of notice pursuant to this clause that it may
lawfully make Eurodollar Loans, the Lender shall give notice thereof to the
Borrowers of such determination, whereupon the Borrowers' right to request, and
the Lender's obligation to make, Eurodollar Loans shall be restored.
(b) All Credit Extensions. After the date hereof, in case any change in
any existing or any new law, regulation, treaty or official directive or the
interpretation or application thereof by any court or by any governmental
authority charged with the administration thereof or the compliance with any
guideline or request of any central bank or other governmental authority
(whether or not having the force of law):
(i) subject to (c) below, subjects the Lender to any tax with
respect to payments of principal or interest or any other amounts
payable hereunder by any Borrower or otherwise with respect to the
transactions contemplated hereby (except for taxes on the overall net
income of such Persons imposed by the United States of America or any
political subdivision thereof), or
(ii) imposes, modifies or deems applicable any deposit
insurance, reserve, special deposit or similar requirement against
assets held by, or deposits in or for the account of, or Loans or
Letters of Credit issued by the Lender (other than such requirements as
are already included in the determination of the Adjusted Eurodollar
Rate), or
(iii) imposes upon the Lender any other condition with respect
to the Loans or the Letters of Credit or otherwise with respect to its
performance under this Agreement,
and the result of any of the foregoing is to increase the cost to the Lender,
reduce the income receivable by the Lender or impose any expense with respect to
any Loan or Letter of Credit (in each case without duplication of amounts
described in Section 2.10), the Lender shall so notify the Borrowers. The
Borrowers agree to pay to the Lender the amount of such increase in cost,
reduction in income or additional expense as and when such cost, reduction or
expense is incurred or determined, upon demand after presentation by the Lender
of a statement in the amount and setting
-23-
28
forth the Lender's calculation thereof, which statement shall be deemed true and
correct absent manifest error.
(c) All payments made by the Borrowers under the Loan Documents shall
be made free and clear of, and without deduction or withholding for or on
account of, any present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or hereafter imposed,
levied, collected, withheld or assessed by any governmental authority, excluding
net income taxes and franchise taxes (imposed in lieu of net income taxes)
imposed on the Lender as a result of a present or former connection between the
Lender and the jurisdiction of the governmental authority imposing such tax or
any political subdivision or taxing authority thereof or therein (other than any
such connection arising solely from the Lender having executed, delivered or
performed its obligations or received a payment under, or enforced, any Loan
Document). If any such non-excluded taxes, levies, imposts, duties, charges,
fees, deductions or withholdings ("Non-Excluded Taxes") or other stamp or
documentary taxes or excise or property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement or any other Loan Document
("Other Amounts") are required to be withheld from any amounts payable to the
Lender hereunder, the amounts so payable to the Lender shall be increased to the
extent necessary to yield to the Lender (after payment of all Non-Excluded Taxes
and Other Amounts) interest or any such other amounts payable hereunder at the
rates or in the amounts specified in this Agreement or such other Loan Document,
provided, however, that the Borrowers shall not be required to increase any such
amounts payable to the Lender with respect to any Non-Excluded Taxes (i) that
are attributable to the Lender's failure to comply with the requirements of
paragraph (e) or (f) of this Section or (ii) that are United States withholding
taxes imposed on amounts payable to the Lender at the time the Lender becomes a
party to this Agreement, except to the extent that the Lender's assignor (if
any) was entitled, at the time of assignment, to receive additional amounts from
the Borrowers with respect to such Non-Excluded Taxes pursuant to this Section.
In addition, the Borrowers shall pay any Other Amounts to the relevant
governmental authority in accordance with applicable law.
(d) Whenever any Non-Excluded Taxes or Other Amounts are payable by the
Borrowers, as promptly as possible thereafter the Borrowers shall send to the
Lender a certified copy of an original official receipt received by the
Borrowers showing payment thereof. If the Borrowers fail to pay any Non-Excluded
Taxes or Other Amounts when due to the appropriate taxing authority or fails to
remit to the Lender the required receipts or other required documentary
evidence, the Borrowers hereby indemnify the Lender for any incremental taxes,
interest or penalties that may become payable by the Lender as a result of any
such failure.
(e) The Lender or any participant or successor or assignee of the
Lender that is not a citizen or resident of the United States of America, a
corporation, partnership or other entity created or organized in or under the
laws of the United States of America (or any jurisdiction thereof), or any
estate or trust that is subject to federal income taxation regardless of the
source of its income (a "Non-U.S. Lender") shall deliver to the Borrowers (or,
in the case of a participant, to the Lender) two copies of either U.S. Internal
Revenue Service Form 1001 or Form 4224, or, in the case of a Non-U.S. Lender
claiming exemption from U.S. federal withholding tax under Section 871(h) or 88
1 (c) of the Code with respect to payments of "portfolio interest", a statement
substantially in the form of Exhibit 2.9 (an "Exemption Certificate") and a Form
W-8, or any subsequent versions
-24-
29
thereof or successors thereto, properly completed and duly executed by such
Non-U.S. Lender claiming complete exemption from, or a reduced rate of, U.S.
federal withholding tax on all payments by the Borrowers under this Agreement
and the other Loan Documents. Such forms shall be delivered by each Non-U.S.
Lender on or before the date it becomes a party to this Agreement (or, in the
case of any participant, on or before the date such participant purchases the
related participation). In addition, each Non-U.S. Lender shall deliver such
forms promptly upon the obsolescence or invalidity of any form previously
delivered by such Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify
the Borrowers at any time it determines that it is no longer in a position to
provide any previously delivered certificate to the Borrowers (or any other form
of certification adopted by the U.S. taxing authorities for such purpose).
Notwithstanding any other provision of this Section, a Non-U.S. Lender shall not
be required to deliver any form pursuant to this Section that such Non-U.S.
Lender is not legally able to deliver.
(f) The Lender or any participant or successor or assignee of the
Lender that is entitled to an exemption from or reduction of non-U.S.
withholding tax under the law of the jurisdiction in which any Borrower is
located, or any treaty to which such jurisdiction is a party, with respect to
payments under this Agreement shall deliver to the Borrowers (with a copy to the
Lender), at the time or times prescribed by applicable law or reasonably
requested by the Borrowers, such properly completed and executed documentation
prescribed by applicable law as will permit such payments to be made without
withholding or at a reduced rate, provided that such Person is legally entitled
to complete, execute and deliver such documentation and in such Person's
judgment such completion, execution or submission would not materially prejudice
its legal position.
(g) If the Lender determines that it has recovered or used as a credit
any amount withheld on its account pursuant to this section, it shall reimburse
the Borrowers to the extent of such amount so determined to have been recovered
or used as a credit, provided that nothing contained in this paragraph (g) shall
require the Lender to make available its tax returns (or any other information
relating to its taxes which it deems to be confidential).
(h) The agreements in this Section shall survive the termination of
this Agreement and the payment of the Obligations.
2.10 Capital Adequacy. The Lender shall notify the Borrowers if, after
the date hereof, the Lender determines that (a) the adoption of or change in any
law, rule, regulation or guideline regarding capital requirements for banks or
bank holding companies , or any change in the interpretation or application
thereof by any governmental authority charged with the administration thereof,
or (b) compliance by any such Person or its parent bank holding company with any
guideline, request or directive of any such entity regarding capital adequacy
(whether or not having the force of law), has the effect of reducing the return
on such Person's or such holding company's capital as a consequence of such
Person's commitment to make Loans or issue Letters of Credit hereunder to a
level below that which such Person or such holding company could have achieved
but for such adoption, change or compliance (taking into consideration such
Person's or such holding company's then existing policies with respect to
capital adequacy and assuming the full utilization of such entity's capital and
excluding any such reduction resulting from a decline in such Person's capital
or capital ratios) by any amount reasonably deemed by such Person to be
material. The Borrowers agree to pay to the Lender the amount of such reduction
of return of capital within 30
-25-
30
days after presentation by the Lender of a statement in the amount and setting
forth the Agent's or such Lender's calculation thereof, which statement shall be
deemed true and correct absent manifest error. In determining such amount, the
Lender may use any reasonable averaging and attribution methods used in similar
circumstances.
2.11 Payments Before End of Eurodollar Period. If any Borrower for any
reason makes any payment or prepayment (whether voluntary or mandatory) of
principal with respect to any Eurodollar Loan on any day other than the last day
of the applicable Interest Period, or fails to borrow, continue or convert to a
Eurodollar Loan after giving a Loan Request or Interest Rate Option Notice
pursuant to Section 2.4 or 2.5, or if any Eurodollar Loan is accelerated
pursuant to Section 8.1, the Borrowers shall pay to the Lender a makewhole
payment pursuant to the following formula:
L = (R - T) x P x D
---------------
360
L = amount payable to the Lender
R = interest rate on such Loan
T = effective interest rate per annum at which any
readily marketable bond or other obligation of the United States,
selected at the Lender's sole discretion, maturing on or near the
last day of the then applicable Interest Period and in
approximately the same amount as such Loan can be purchased by
the Lender on the day of such payment of principal or failure to
borrow, continue or convert
P = the amount of principal prepaid or the amount of
the requested Loan
D = the number of days remaining in the Interest
Period as of the date of such payment or the number of days of
the requested Interest Period
The Borrowers shall pay such amount upon demand upon presentation by the Lender
of a statement setting forth the amount and the Lender's calculation thereof
pursuant hereto, which statement shall be deemed true and correct absent
manifest error.
2.12 Security. The Obligations, whether under this Agreement, the
Notes, the Letter of Credit Documents, the other Loan Documents or otherwise,
shall be secured at all times by:
(a) a first priority perfected security interest in all presently owned
and hereafter acquired tangible and intangible personal property and fixtures of
the Borrowers and their Subsidiaries (including without limitation all
Intercompany Notes and trademarks and service marks and licenses), subject only
to Permitted Encumbrances, together with any landlord waivers with respect to
the locations of such personal property and fixtures (provided that landlord
waivers will not be required for individual Stores other than the Companies'
so-called coffee houses) and, after an Event of Default has been declared by the
Lender, lock box or agency account agreements with respect to cash receipts; and
(b) a first priority perfected pledge of all of the issued and
outstanding shares of Capital Stock of all of the Borrowers other than the
Parent.
-26-
31
The Borrowers agree to take such actions (and to cause their Subsidiaries, if
any, to take such actions) as the Lender may reasonably request from time to
time in order to cause the Lender to be secured at all times as described in
this Section.
2.13 Use of Proceeds. Each of the Borrowers hereby covenants, warrants
and represents that proceeds of the Term Loan shall be used for closing costs
and repayment of outstanding indebtedness in connection with the CP Acquisition
and all Revolving Loans shall be used for the Borrowers' working capital and
general corporate purposes, for remodeling of Stores and, so long as 90% of the
Stores owned and operated by the Borrowers as of the date of such Loan each have
a positive Store Cash Flow for the four fiscal quarters immediately preceding
such Revolving Loan (excluding from such computation Stores not owned and
operated by the Borrowers throughout such four quarter period and the existing
26 Xxxxxx Xxxx'x Stores owned and operated by Xxxxxx Xxxx'x Gourmet Coffees
Corp. and Xxxxxx Xxxx'x Stores bought by Borrowers in the future from
franchisees of Xxxxxx Xxxx'x Gourmet Coffees Corp.) to fund new unit growth and
for Permitted Acquisitions.
2.14 Time and Method of Payments. All payments of principal, interest,
fees and other amounts (including indemnities) payable by the Borrowers
hereunder shall be made in U.S. Dollars, in immediately available funds, without
deduction, setoff or counterclaim, to the Lender at its principal office on the
date on which such payment shall become due; provided, however, that any payment
not received by the Lender by 3:00 PM, (Boston time) on the date made shall be
deemed received on the next Business Day (but no Default shall be deemed to have
occurred as a result thereof under Section 8.1 if payment is received after 3:00
PM (Boston time) but prior to 5:00 PM (Boston time) on the date on which such
payment shall become due). The Lender may, but shall not be obligated to, debit
the amount of any such payment which is not made by such time to any deposit
account of any of the Borrowers with the Lender. Except as otherwise provided in
the definition of the term "Interest Period" with respect to the Eurodollar
Loans, if any payment of principal or interest becomes due on a day other than a
Business Day, such payment may be made on the next succeeding Business Day, and
such extension shall be included in computing interest in connection with such
payment. All payments hereunder and under the Notes shall be made without setoff
or counterclaim.
SECTION 3. CONDITIONS OF CREDIT EXTENSIONS.
3.1 Conditions to Initial Credit Extension. The obligations of the
Lender to make the initial Credit Extensions hereunder are subject to the
fulfillment of the following conditions precedent:
(a) Receipt by the Lender of the following documents, certificates and
opinions in form and substance satisfactory to the Lender, duly executed and
delivered as follows:
(i) This Agreement, executed and delivered by all Borrowers;
(ii) The Notes executed and delivered by all Borrowers;
-27-
32
(iii) The Security Documents executed and delivered by all
Borrowers and such stock certificates, stock powers, assignments,
consents, landlord waivers, UCC financing statements and other
instruments and documents as the Lender shall deem necessary to satisfy
the requirements of Section 2.12, provided the Borrowers need use only
best efforts in obtaining such landlord waivers;
(v) An officer's certificate executed by the chief financial
officer of each of the Borrowers in the form provided by the Lender,
including all attachments thereto;
(vi) Certificates of insurance or insurance binders evidencing
compliance with Section 6.3 (including the required lender's loss
payable endorsements); and
(vii) A favorable legal opinion satisfactory to the Lender,
addressed to the Lender and its counsel, from Xxxxxx Xxxx & Xxxxxxxx
LLP, general counsel to the Borrowers and their Subsidiaries, if any;
provided, however, an authority opinion from Illinois counsel to the
Borrowers who are Illinois corporations need not be delivered to Lender
until July 31, 1999; and
(viii) A favorable legal opinion satisfactory to the Lender,
addressed to the Lender and its counsel, from Knobbe Martins Xxxxx &
Bear, trademark counsel to the Borrowers and their Subsidiaries, if
any.
(b) The Borrowers shall have paid the fee required by the Fee Letter
and the other fees required to be paid as of the date of such Credit Extension
and all reasonable fees and expenses of the Lender's counsel through the date of
such Credit Extension.
(c) The Borrowers shall have provided the Lender with such payoff
letters, payment instructions and other additional instruments, certificates,
opinions and other documents as the Lender or its counsel shall reasonably
request.
(d) The Parent shall have received no less than $18,000,000 in Net
Debt/Equity Proceeds from the June, 1999 Offering and shall have provided Lender
with satisfactory evidence thereof.
(e) The closing of the CP Acquisition (including all conditions
precedent thereto) shall have been consummated in accordance with the terms of
the CP Acquisition Agreement and the SEC Acquisition Filings (except for that
portion of the Indebtedness being repaid with proceeds of the Term Loan) and the
Borrowers shall constitute the Parent and all of its direct and indirect
Subsidiaries.
(f) All governmental or other third party approvals necessary or
advisable for this Agreement, the CP Acquisition, the June, 1999 Offering or any
transactions contemplated thereby or by the SEC Acquisition Filings shall have
been obtained and be in full force and effect (including without limitation any
consent of the shareholders of the Parent and Coffee People, the SEC, the FTC
and the U.S. Department of Justice).
-28-
33
(g) The Lender shall be satisfied that no litigation or other legal
proceeding exists which could reasonably be expected to result in a Material
Adverse Effect or which restrains or attempts to restrain or undo the
consummation of the CP Acquisition or any portion thereof.
(h) All corporate, partnership and other proceedings, and all
documents, instruments and other legal, diligence and financial matters in
connection with the transactions contemplated by the Loan Documents shall be
reasonably satisfactory in form and substance to the Lender and its counsel.
3.2 Conditions to All Credit Extensions. The obligation of the Lender
to make any Credit Extension (including the initial Credit Extension) is subject
to the following additional conditions:
(a) All representations and warranties contained in this Agreement or
otherwise made in writing by or on behalf of any of the Borrowers or any of
their Subsidiaries in connection with the transactions contemplated hereby shall
be true and correct in all material respects at the time of each such Credit
Extension (except to the extent such representations and warranties were
expressly made only as of a specific date and except to the extent affected by
transactions occurring after the date hereof and permitted hereunder), with and
without giving effect to the Credit Extension at such time and the application
of the proceeds thereof.
(b) At the time of each such Credit Extension (i) the Borrowers and
their Subsidiaries shall have performed and complied with all covenants required
in this Agreement to be performed or complied with by it prior to the making of
such Credit Extension, (ii) no Default shall have occurred and be continuing or
would result from such Credit Extension, and (iii) no event or condition shall
have occurred which could reasonably be likely to have a Material Adverse
Effect.
(c) As to any such Credit Extension, the Lender shall have received a
properly completed Loan Request or Letter of Credit Documents, as appropriate.
(d) The Lender shall have received such other supporting documents and
certificates as it may reasonably request.
Each request for a Credit Extension shall be deemed to constitute the Borrowers'
representations and warranty that all of the foregoing conditions in Sections
3.1 and 3.2 have been satisfied in full.
SECTION 4. REPRESENTATIONS AND WARRANTIES. In order to induce the
Lender to enter into this Agreement and make the Credit Extensions hereunder,
each of the Borrowers hereby confirms the representations and warranties set
forth in the Security Documents (which are incorporated by reference herein)
and, further, represents and warrants (all of which representations and
warranties assume the making of the initial Credit Extensions hereunder) as
follows:
4.1 Organization and Qualification. Each of the Companies (a) is a
corporation duly organized, validly existing and in good standing under the laws
of its state of formation (as designated on Schedule 4.1); (b) has all requisite
corporate power and authority to own its property and conduct its business as
now conducted and as presently contemplated; and (c) is duly qualified
-29-
34
and in good standing in each jurisdiction where the nature of its properties or
its business requires such qualification, as specified in Schedule 4.1, except
to the extent that the failure to be so qualified could not reasonably be
expected to have a Material Adverse Effect. Schedule 4.1 also sets forth each of
the Organizational Documents to which any Company is a party.
4.2 Corporate Authority. The execution, delivery and performance of
each of the Loan Documents and the CP Acquisition Agreement and each of the
documents contemplated thereby (together with the Loan Documents, the
"Transaction Documents") and the transactions contemplated thereby (including
without limitation the granting of security interests thereunder in favor of the
Lender) are within the corporate authority of each of the Companies, have been
authorized by all necessary corporate proceedings on the part of each of the
Companies, and do not and will not contravene any provision of law (including
without limitation the rules and provision of law or the charter documents or
by-laws (collectively, "Organizational Documents")) of any of the Companies, or
contravene any provisions of, or constitute a Default hereunder or a default
under any other material agreement (including any Lease, any shareholder
agreement, any license agreement or any supplier contracts), instrument,
judgment, order, decree, permit, license or undertaking binding upon or
applicable to any of the Companies or any of its properties, or result in the
creation, other than in favor of the Lender, of any Encumbrance upon any of the
properties of any of the Companies.
4.3 Valid Obligations. Each of the Transaction Documents and all of its
terms and provisions (including the security interests granted thereunder to the
Lender) are legal, valid and binding obligations of each of the Companies who
are named as parties thereto, enforceable in accordance with its respective
terms.
4.4 Approvals. The execution, delivery and performance of the
Transaction Documents and the transactions contemplated thereby do not require
any approval or consent of, or filing or registration with, any governmental or
other agency or authority or any other Person, except as disclosed on Schedule
4.4 and all of such approvals or consents and filings or registrations have been
obtained or completed, as applicable, as of the date hereof to the extent
material to the business of any of the Companies.
4.5 Title to Properties; Absence of Liens. Schedule 4.5 (as updated
from time to time as required hereunder) lists all of the Stores of each of the
Companies, including the owner thereof, the address thereof, and whether such
Store is company-owned or franchised to a Franchisee pursuant to a Franchise
Agreement. As of the date hereof or as of the date of the latest required
quarterly financials, as applicable, the Companies own the number of
company-owned Stores listed on Schedule 4.5 (as updated from time to time as
required hereunder) and the number of franchised Stores franchised to
Franchisees pursuant to Franchise Agreements listed on Schedule 4.5. Except as
set forth in Schedule 4.5 (as updated from time to time as required hereunder),
as of the date of this Agreement and after giving effect to the application of
the proceeds of the Loans as provided in Section 2.13, or as of the date of the
latest required quarterly financials, as applicable, each of the Companies has
good and marketable title to all of its material properties of every name and
nature now purported to be owned by it, including without limitation all assets
of the Stores listed on Schedule 4.5 which are designated thereon as
company-owned (as updated from time to time as required hereunder), all rights
under each of the Franchise Agreements to which any Company is a
-30-
35
party (including without limitation all rights to development and royalty
payments thereunder), the Collateral and the properties reflected in the Initial
Financial Statements, in each case free from all Encumbrances whatsoever except
for Permitted Encumbrances.
4.6 Licenses, Patents, Trademarks and Intellectual Property. Except as
otherwise described in Schedule 4.6, each of the Companies has all necessary
permits, approvals, authorizations, consents, license (including liquor
licenses), franchises, registrations, patents, trademarks, trade names and
copyrights, recipes and other rights and privileges to allow it to own and
operate its respective business and to operate or franchise, as applicable, the
Stores listed on Schedule 4.5 (as updated from time to time as required
hereunder) without any violation of law or the rights of others. All trademarks,
service marks (including without limitation Xxxxxxxx Coffee(R), Weiner
Melange(R), Harvest Peak(R), SCOOP-A-CCINO(R), Xxxx xx Xxxxxx(R), Coffee
People(R), Xxxxxx Xxxx'x(R), Coffee Plantation(R), Motor Moka(R) and Aero
Moka(R)), trade names, patents and patent applications in which any Company has
an ownership or licensee interest, and all United States, state and foreign
registrations thereof and applications therefor in the name of any Company, are
listed on Schedule 4.6 (as updated from time to time as required hereunder), and
the Parent or Coffee People is and will at all times hereafter be the owner
thereof, free of all Encumbrances except in favor of the Lender. No interest in
any of such intellectual property has been licensed or sublicensed to any other
Person except to Franchisees pursuant to the Franchise Agreements.
4.7 Compliance with Laws and Agreements. No Company is in violation of
any provision of its Organizational Documents and no Company is in violation of
any provision of any material indenture, agreement or instrument to which it is
a party or by which it is bound (including without limitation any material
lease) or of any provision of law (including without limitation, ERISA,
Environmental Laws, SEC and FTC Laws, and franchising laws), the violation of
which could reasonably be expected to have a Material Adverse Effect or any
order, judgment or decree of any court or other agency of government. Without
limiting the scope of the foregoing, each Company is in compliance in all
material respects with all federal and state laws and regulations, the violation
of which could reasonably be expected to have a Material Adverse Effect. To
Borrowers' knowledge, third parties to any material agreements are not in
material violation thereof to the extent that such violations in the aggregate
could reasonably be expected to result in a Material Adverse Effect.
4.8 Material Agreements. As of the date hereof, each of the material
agreements to which any Company is a party is in full force and effect and
constitutes the legally valid and binding obligation of the Company identified
with it thereon and, to Borrowers' knowledge, the other parties thereto,
enforceable against each of them in accordance with its respective terms. None
of the Franchise Agreements under which any Company is a franchisor prohibit the
granting of a security interest by such Company therein to the Lender, including
without limitation a security interest in all development fees, royalties and
other amounts payable thereunder. Each Company agrees that each Franchise
Agreement entered into by it after the date hereof shall not prohibit the
granting of any such security interest or the collateral assignment to the
Lender of any rights or remedies of such Company thereunder, including without
limitation the right to collect development fees, royalties and other payments
thereunder.
-31-
36
4.9 Environmental Matters. Except as specified in Schedule 4.9:
(a) Each Company has obtained all permits, licenses and other
authorizations which are required under all Environmental Laws, except to the
extent failure to have any such permit, license or authorization could not
reasonably be likely to have a Material Adverse Effect. Each Company is in
compliance with the terms and conditions of all such permits, licenses and
authorizations, and is also in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in any applicable Environmental Law or in any
regulation, code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder, except to the extent
failure to comply would not have a Material Adverse Effect.
(b) No notice, notification, demand, request for information, citation,
summons or order has been issued, no complaint has been filed, no penalty has
been assessed and no investigation or review is pending or threatened by any
governmental or other entity with respect to any alleged failure by any Company
to have any permit, license or authorization required in connection with the
conduct of its business or with respect to any Environmental Laws, including,
without limitation, Environmental Laws relating to the generation, treatment,
storage, recycling, transportation, disposal or release of any Hazardous
Materials, except to the extent that such notice, complaint, penalty or
investigation did not or could not result in the remediation of any property
costing in excess of $250,000 in the aggregate in each fiscal year prior to the
date of this Agreement and, for any periods after such date, except for matters
that individually and in the aggregate could not reasonably be expected to have
a Material Adverse Effect.
(c) No material oral or written notification of a release of a
Hazardous Material has been filed by or on behalf of any Company and no property
now or previously owned, leased or used by any Company is listed or proposed for
listing on the National Priorities List under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, or on any similar
state list of sites requiring investigation or clean-up.
(d) There are no Encumbrances arising under or pursuant to any
Environmental Laws on any of the material real properties owned, leased or used
by any Company, and no governmental actions have been taken or are in process
which could subject any of such properties to any Encumbrances or, as a result
of which any Company would be required to place any notice or restriction
relating to the presence of Hazardous Materials at any property owned by it or
in any deed to such property.
(e) No Company has (i) engaged in or permitted any operations or
activities upon or any use or occupancy of any property owned, leased or used by
it, or any portion thereof, for the purpose of or in any way involving the
handling, manufacture, treatment, storage, use generation, release, discharge,
refining, dumping or disposal (whether legal or illegal, accidental or
intentional) of any Hazardous Materials on, under, in or about such property,
except to the extent commonly used in day-to-day operations of such property and
in such case only in compliance with all Environmental Laws, or (ii) transported
any Hazardous Materials to, from or across such property except to the extent
commonly used in day-to-day operations of such property and, in such case, in
compliance with, all Environmental Laws; nor to the knowledge of any of the
Borrowers have any Hazardous Materials migrated from other properties upon,
about or beneath such property, nor are any
-32-
37
Hazardous Materials presently constructed, deposited, stored or otherwise
located on, under, in or about such property except to the extent commonly used
in day-to-day operations, and, in such case, in compliance with, all
Environmental Laws.
4.10 Compliance with ERISA. Each of the Companies and each member of
the Controlled Group have fulfilled their obligations under the minimum funding
standards of ERISA and the Code with respect to each Plan and are in compliance
in all material respects with the applicable provisions of ERISA and the Code,
and have not incurred any material liability to the PBGC or a Plan under Title
IV of ERISA; and no "prohibited transaction" or "reportable event" (as such
terms are defined in ERISA and other than reportable events as to which the 30
day notice period is waived) has occurred with respect to any Plan.
4.11 Financial Statements. The Parent has furnished to the Lender (a)
its consolidated audited balance sheet as at January 27, 1999 audited by the
Accountants and its related consolidated audited statements of operations and
cash flow for the fiscal year then ended, and related consolidating financial
statements, and (b) the consolidated audited balance sheet as at June 27, 1998
of Coffee People by PricewaterhouseCoopers LLP and the related consolidated
audited statements of operations and cash flow for the fiscal year then ended
(collectively, the "Initial Financial Statements"). Such Initial Financial
Statements were prepared in accordance with GAAP and as to such fiscal year
statements audited by the Accountants. Such Initial Financial Statements fairly
present the financial position of the respective Companies as at such dates and
the results of operations for such periods covered thereby. No Debt Issuance is
outstanding as of the date hereof. The Borrowers have reviewed the projections
for the future results of operations of the Companies dated June 3, 1999 for the
period commencing June, 1999 and ending June, 2004 (the "Projections"), after
given effect to the CP Acquisition, and the Borrowers hereby certify to the
Lender that the Projections are based upon good faith estimates and assumptions
believed by management of the Parent to be reasonable at the time made, it being
recognized by the Lender that such financial information as it relates to future
events is not to be viewed as fact and that actual results during the periods
covered thereby may differ from the projected results set forth therein by a
material amount. Except as reflected in the Initial Financial Statements, as of
the date hereof none of the Companies has any material contingent obligations,
liabilities for taxes or unusual forward or long-term commitments. Since the
effective date of the latest audited Initial Financial Statements, there have
been no changes in the assets, liabilities, financial condition, business or
prospects of any Company, the effect of which has, individually or in the
aggregate, could reasonably be likely to have a Material Adverse Effect.
4.12 Solvency. Each of the Companies has assets (both tangible and
intangible) having a fair salable value in excess of the amount required to pay
the probable liability on its respective existing debts (whether matured or
unmatured, liquidated or unliquidated, fixed or contingent); each of the
Companies has access to adequate capital for the conduct of its respective
business for the foreseeable future and the discharge of its debts incurred in
connection therewith as such debts mature; each of the Companies is not
Insolvent and, immediately prior to the consummation of the Term Loan hereunder,
each of the Companies was not Insolvent; and each of the Companies does not
intend to or believe that it will incur debts beyond its ability to pay them at
their maturity.
-33-
38
4.13 Taxes. Each of the Companies has filed all federal, state and
other material tax returns required to be filed and has paid or made adequate
provision for the payment of all taxes, assessments and other such governmental
charges due have been fully paid (other than any taxes the amount or validity of
which are currently being contested in good faith by appropriate proceedings and
with respect to which reserves in conformity with GAAP have been provided for on
the books of the Companies). No Company has executed any waiver that would have
the effect of extending the applicable statute of limitations in respect of tax
liabilities (other than any taxes the amount or validity of which are currently
being contested in good faith by appropriate proceedings and with respect to
which reserves in conformity with GAAP have been provided for on the books of
the Companies).
4.14 Litigation. Except as otherwise described in Schedule 4.14, there
is no litigation, proceeding or governmental investigation, administrative or
judicial, pending or, to any of the Borrowers' knowledge, threatened against or
affecting any Company or its properties which could reasonably be expected to
result in a Material Adverse Effect.
4.15 Margin Rules. None of the Borrowers or any of their Subsidiaries
is engaged principally, or as one of its important activities, in the business
of extending credit for the purposes of purchasing or carrying any "margin
security" or "margin stock" ("Margin Stock") as such terms are used in
Regulations U or X (the "Margin Regulations") of the Board of Governors of the
Federal Reserve System. The value of all Margin Stock held by the Borrowers and
their Subsidiaries constitutes less than 25% of the value, as determined in
accordance with the Margin Regulations, of all assets of the Borrowers and their
Subsidiaries.
4.16 Restrictions on the Borrowers. No Company is a party to or bound
by any contract, agreement or instrument, nor subject to any charter or other
corporate restriction, that has or could reasonably be expected to have a
Material Adverse Effect.
4.17 Capitalization. All of the Subsidiaries of each of the Companies
are listed on Schedule 4.1 and a Borrower owns all of the issued and outstanding
Capital Stock thereof as noted thereon and all of such Subsidiaries are
Borrowers hereunder. The Borrowers have supplied the Lender with true and
complete copies of their Organizational Documents. Except as otherwise set forth
in Schedule 4.1: (a) no Capital Stock of any Company carries preemptive rights;
(b) there are no outstanding subscriptions, warrants or options to purchase any
Capital Stock of the Parent as of the date hereof or of any other Company; (c)
no Company is obligated to redeem or repurchase any of its Capital Stock; and
(d) there is no other agreement, arrangement or plan which could directly or
indirectly affect the equity structure of any Company. All Capital Stock of each
Subsidiary is validly issued and fully paid and non-assessable, free of any
Encumbrance, except for liens on the Capital Stock granted to the Lender and
restrictions on transfer indicated on the certificates evidencing such Capital
Stock pursuant to applicable Federal or state securities regulations. No Company
owns any minority interest in any Person, except as set forth in Schedule 4.1.
4.18 Full Disclosure. No statement of fact made by or on behalf of any
Company or any Principal in this Agreement or any of the other Loan Documents or
in any certificate or schedule furnished to the Lender pursuant hereto or
thereto in light of all information provided to the Lender, as of the date such
statement, certificate or schedule was so furnished contains any untrue
statement
-34-
39
of a material fact or omits, when considered as a whole, to state any material
fact necessary to make statements continued therein or herein not misleading as
of the date such statement, certificate or schedule was so furnished. As of the
date hereof, there is no fact known to any Borrower which has not been disclosed
to the Lender in writing which could reasonably be likely to have a Material
Adverse Effect.
4.19 Investment Company Act. No Company is an "investment company"
within the meaning of the Investment Company Act of 1940, as amended, or a
"holding company," or a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company," or of a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
4.20 Labor Disputes; Collective Bargaining Agreements; Employee
Grievances. Except for matters that individually and in the aggregate could not
reasonably be expected to have a Material Adverse Effect (a) there are no
collective bargaining agreements or other organized labor contracts covering any
Company or any Store; (b) no union or other labor organization is seeking to
organize, or to be recognized as bargaining representative for, a bargaining
unit of employees of any Company or any Store; (c) there is no material labor
dispute pending or threatened against or affecting any Company or any Store; (d)
there has not been, during the five year period prior to the date hereof, any
material labor dispute against or affecting any Company or any Store, other than
employee grievances arising in the ordinary course of business which are not, in
the aggregate, material; and (e) each of the Companies and each Store has
complied with (or corrected in full any prior noncompliance) and is in
compliance with the provisions of the Fair Labor Standards Act and regulations
thereunder.
4.21 Year 2000 Compliance. The Borrowers have (a) reviewed the areas
within their business and operations which could be adversely affected by
failure to become "Year 2000 Compliant" (that is that computer application,
imbedded microchips and other systems used by the Borrowers will be able
properly to recognize and perform date sensitive functions involving certain
dates prior to and any date after December 31, 1999); (b) developed a detailed
plan and timetable to become Year 2000 Compliant in a timely manner; and (c)
committed adequate resources to support its Year 2000 plan. Based on such review
and plan, the Borrowers reasonably believe that they will become Year 2000
Compliant on a timely basis except to the extent that a failure to do so will
not have a Material Adverse Effect.
SECTION 5. FINANCIAL COVENANTS. Each of the Borrowers covenants and
agrees that, until all Commitments have been terminated, all Letters of Credit
have terminated or expired, and all Obligations have been indefeasibly paid in
full in cash, the Borrowers will not cause or permit:
5.1 Maximum Leverage Ratio. The ratio of Consolidated Funded
Indebtedness at any date to Consolidated EBITDA for the most recently ended
Reference Period ending on the Quarterly Date falling nearest to the dates
identified in the table below to be greater than the ratio specified below
opposite such date.
-35-
40
Date Maximum Leverage Ratio
---- ----------------------
9/30/99 3.25:1.00
12/31/99 3.00:1.00
3/31/00 2.75:1.00
6/30/00 2.25:1.00
9/30/00 and all Reference 2.00:1.00
Periods thereafter
5.2 Minimum Fixed Charges Coverage Ratio. The ratio of Consolidated
Cash Flow for any Reference Period ending on any Quarterly Date falling nearest
to the dates identified in the table below to Consolidated Financial Obligations
for such Reference Period to be less than the ratio specified below opposite
such date.
Minimum Fixed
Date Charges Coverage Ratio
---- ----------------------
9/30/99 through 3/31/00 1.25:1.00
6/30/00 1.10:1.00
9/30/00 1.25:1.00
12/31/00 1.40:1.00
3/31/01 1.50:1.00
6/30/01 through 9/30/01 2.00:1.00
12/31/01 through 6/30/02 2.50:1.00
9/30/02 and each Reference 2.75:1.00
Period thereafter
5.3 Minimum Interest Coverage Ratio. The ratio of Consolidated EBITDAR
for any Reference Period ending on any Quarterly Date falling nearest to the
dates identified in the table below to Consolidated Interest Expense for such
Reference Period to be less than the ratio specified below opposite such date.
Minimum Interest
Date Coverage Ratio
---- ----------------
9/30/99 through 6/30/00 1.25:1.00
9/30/00 through 12/31/00 1.50:1.00
3/31/01 1.75:1.00
6/30/01 2.00:1.00
9/30/01 2.50:1.00
12/31/01 2.75:1.00
3/31/02 3.00:1.00
6/30/02 3.25:1.00
9/30/02 through 3/31/03 3.50:1.00
6/30/03 and each Reference 4.00:1.00
Period thereafter
-36-
41
5.4 Maximum Capital Expenditures. Make or agree to make, or incur any
obligations with respect to, any Capital Expenditures in excess of the maximum
amounts set forth below for the fiscal years listed, plus the lesser of the
unused portion, if any, or 35% of the maximum Capital Expenditures amount for
the immediately preceding fiscal year (in either case, the "Carryforward
Amount"); provided, however, there shall be excluded from Capital Expenditures
for purposes of the calculation hereof expenditures constituting the purchase
price for Permitted Acquisitions. For purposes of determining the Carryforward
Amount in any fiscal year, Capital Expenditures shall first be applied to reduce
any Carryforward Amount from the immediately preceding fiscal year and then to
reduce the maximum amount specified herein.
Fiscal Year Maximum Capital Expenditures
----------- ----------------------------
(ending in June each year)
2000 $ 6,500,000
2001 9,000,000
2002 14,500,000
2003 16,500,000
2004 21,000,000
SECTION 6. AFFIRMATIVE COVENANTS. Each of the Borrowers covenants and
agrees that, until all Commitments have been terminated, all Letters of Credit
have terminated or expired, and all Obligations have been indefeasibly paid in
full in cash:
6.1 Financial Reporting. The Borrowers will furnish to the Lender:
(a) as soon as available, but in any event within 90 days after each
fiscal year-end, the Parent's consolidated balance sheet as at the end of, and
related consolidated statements of operations and cash flow for, such year,
prepared in accordance with GAAP consistently applied and audited by the
Accountants; and concurrently with such financial statements, consolidating
financial statements and a written statement by the Accountants that, in
conducting such audit, they have obtained no knowledge of any Default or Event
of Default (or, if such an event exists, a statement as to its nature and
status), provided that the Accountants shall not be liable to the Lender for
failure to obtain knowledge of any Default or Event of Default;
(b) as soon as available, but in any event within 45 days after the end
of each fiscal quarter, the Parent's consolidated balance sheet as at, the end
of, and related consolidated statements of operations and cash flow for, the
portion of the year then ended and the fiscal quarter then ended, prepared in
accordance with GAAP, together with a comparison of such results to budgeted
results and to the results for the comparable period in the prior fiscal year,
prepared on a consolidated basis and, in the case of Store Cash Flow only, a per
Store basis, in each case certified by the Parent's chief financial officer or
controller; together with updated Schedules 4.1, 4.5 and 4.6 hereto, if any
changes thereto;
-37-
42
(c) as soon as available, but in any event within 45 days after the end
of each fiscal quarter, a covenant compliance report in substantially the form
of Exhibit 6.1, signed by the Parent's chief financial officer or controller,
and updated Schedules 4.1, 4.5 and 4.6 if any changes thereto;
(d) as soon as available, but in any event within 30 days after the end
of each month, the Parent's consolidated income statement and the coffee house
"controllables ranking" report of the Companies;
(e) promptly as they become available, a copy of each report (including
any so-called management letters) submitted to any Company by the Accountants in
connection with each annual, interim or special audit of its books;
(f) promptly as they become available, copies of all such financial
statements, proxy material and reports as any Company shall send or make
available to its stockholders and copies of all material reports filed with the
FTC or state or local franchising authorities and all 10K, 10Q and other reports
filed by any Company with the SEC;
(g) within 30 days after the beginning of each fiscal year, pro forma
projections for the Companies for such fiscal year, prepared on a quarterly
basis, consisting of a projected balance sheet, projected statements of income,
cash flow and projections of Capital Expenditures, all prepared on a basis
consistent with the financial statements required by Section 6.1(a);
(h) no more than five Business Days after any Company gives or is
required to give notice to the PBGC of any "Reportable Event" (as defined in
Section 4043 of ERISA) with respect to any Plan that might constitute grounds
for a termination of such Plan under Title IV of ERISA, or knows that any member
of the Controlled Group or the plan administrator of any Plan has given or is
required to give notice of any such Reportable Event, a copy of the notice of
such Reportable Event given or required to be given to the PBGC;
(i) promptly upon becoming aware of the existence of any condition or
event that constitutes an Event of Default or would reasonably be likely to
result in a Material Adverse Effect, written notice thereof specifying the
nature and duration thereof and the action being or proposed to be taken with
respect thereto;
(j) no more than five Business Days after becoming aware of any
litigation or of any investigative proceedings by a governmental agency or
authority commenced or threatened against any Company, the outcome of which
could reasonably be likely to have a Material Adverse Effect, written notice
thereof and of the action being or proposed to be taken with respect thereto;
(k) no more than five Business Days after becoming aware of any
investigative proceedings by a governmental agency or authority commenced or
threatened against any Company regarding any potential violation of
Environmental Laws, any spill, release, discharge or disposal of any Hazardous
Material or any other material event required to be reported to any such
governmental agency or authority in respect of Environmental Laws or Hazardous
Material, written notice thereof and of the action being proposed to be taken
with respect thereto;
-38-
43
(l) Prior to the consummation of any Asset Sale, if the Net Sale
Proceeds of all Asset Sales received by the Companies in the fiscal year in
which such Asset Sale occurs are equal to or in excess of $250,000, written
notice thereof, specifying the purchase price, payment terms and closing date
thereof;
(m) At the same time as written notice, if any, is required to be given
to the Lender concerning an Asset Sale or concerning a Permitted Acquisition,
updated Schedules 4.1, 4.5 and 4.6 to this Agreement, giving effect to such
Permitted Sale or Permitted Acquisition, as the case may be; and
(n) as soon as reasonably possible and in any event within 10 days
after request therefor, such other information regarding the operations, assets,
business, affairs and financial condition of any Company or any Store as the
Lender may reasonably request.
6.2 Conduct of Business. Each of the Companies will (a) duly observe
and comply in all material respects with all applicable laws and all
requirements of any governmental authorities relative to its corporate
existence, rights and franchises, to the conduct of its business and to its
property and assets (including without limitation all applicable health laws,
restaurant licensing laws, FTC laws, SEC laws, Environmental Laws and ERISA);
(b) maintain and keep in full force and effect all licenses and permits
necessary to the proper conduct of its business; (c) comply in all material
respects with all material agreements (including without limitation material
leases and supplier contracts) to which it is a party; (d) maintain its
corporate existence except for mergers and consolidations to the extent
permitted hereunder; and (e) remain or engage in the business of owning and
operating coffee retail Stores and manufacturing and selling specialty coffees
wholesale, and in no other business. Each of Coffee People Worldwide, Inc. and
Xxxxxx Xxxx'x, Inc. will be qualified as a foreign corporation in good standing
in the State of California on or before August 15, 1999 and shall supply the
Lender and its counsel with evidence thereof on or before such date. No Company
will engage in any business unless it is a Borrower hereunder.
6.3 Maintenance and Insurance. Each of the Companies will maintain and
keep its properties in good repair, working order and condition, and from time
to time make all needful and proper repairs, renewals, replacements, additions
and improvements thereto so that its business may be properly and advantageously
conducted at all times. Each of the Companies and each Store at all times will
maintain, or cause to be maintained, insurance covering it and its tangible
property in such amounts (including, without limitation, so-called "all perils"
coverage at replacement value, "broad form" liability coverage, and fidelity and
business interruption insurance), against such hazards and liabilities and for
such purposes as is customary in the industry for companies of established
reputation engaged in the same or similar businesses and owning or operating
similar properties. The Lender shall be named as loss payee (pursuant to a
standard "lender's loss payable" endorsement) on property insurance policies and
additional insured on liability insurance policies and shall be given at least
10 days' advance notice of any cancellation, change in form or renewal of
insurance. Such insurance shall insure the Lender's interest regardless of any
breach or violation of the underlying policies by any Company or any other
Person. Each of the Companies shall insure, or cause to be insured, its assets
in amounts sufficient to prevent the application of any co-insurance provisions.
The Borrowers shall evidence their compliance with this Section by delivering a
certificate with respect to each policy concurrently with the execution hereof,
annually thereafter and
-39-
44
at any time upon the Lender's request. If any Company fails to provide or cause
to be provided such insurance, the Lender, in its sole discretion, may provide
such insurance and charge the cost to any of the Borrowers' deposit accounts
with the Lender.
6.4 Taxes. Each of the Companies will pay or cause to be paid all
taxes, assessments or governmental charges on or against it or its properties
prior to such taxes becoming delinquent; except for any tax, assessment or
charge (other than any charge for required environmental cleanup costs) which is
being contested in good faith by appropriate legal or other proceedings or
actions and with respect to which adequate reserves have been established and
are being maintained in accordance with GAAP, if no Encumbrance shall have been
filed to secure such tax, assessment or charge.
6.5 Inspection by the Lender. Each of the Companies will at all
reasonable times (and upon reasonable notice if no Event of Default exists),
during normal business hours permit the Lender or its designees, to (a) visit
and inspect the Stores and other properties of the Companies and (b) examine and
make copies of and take abstracts from the Companies' and the Stores' books and
records. Without limiting the foregoing, the Lender may conduct as many
commercial credit examinations of the Companies and the Stores as it reasonably
deems necessary (but not more than one such examination per calendar year if no
Event of Default exists), whether or not an Event of Default exists, and the
Borrowers will reimburse the Lender the reasonable costs of all such credit
examinations.
6.6 Accounting System. The Companies will maintain an accurate system
of accounting in accordance with GAAP, will at all times be part of a
consolidated group for accounting purposes, and, without the Lender's prior
written consent, will not change their fiscal year from the June 30 fiscal year
end used in the preparation of the Initial Financial Statements for Coffee
People.
6.7 Further Assurances. From time to time hereafter, the Companies will
execute and deliver, or cause to be executed and delivered, such additional
instruments, certificates and documents, and take all such actions, as the
Lender shall reasonably request for the purpose of implementing or effectuating
the provisions of this Agreement, the Notes, the Letter of Credit Documents or
the other Loan Documents, and upon the exercise by the Lender of any power,
right, privilege or remedy pursuant to this Agreement, the Notes, the Letter of
Credit Documents or the other Loan Documents which requires any consent,
approval, registration, qualification or authorization of any governmental
authority or instrumentality, exercise and deliver all applications,
certifications, instruments and other documents and papers that the Lender may
be so required to obtain.
6.8 Environmental Laws. Each of the Companies will comply in all
material respects with, and perform or cause to be performed any and all
Remedial Work necessary under, all Environmental Laws applicable (now or in the
future) to it or to its business.
6.9 Depository. The Borrowers shall maintain a depository account or
accounts with the Lender to facilitate borrowings and payments hereunder. Each
of the Companies hereby irrevocably authorizes the Lender to debit such
depository account or accounts in order to effect the making of any such
payments not paid when due.
-40-
45
SECTION 7. NEGATIVE COVENANTS. Each of the Borrowers covenants and
agrees that, until all Commitments have been terminated, all Letters of Credit
have terminated or expired, and all Obligations have been indefeasibly paid in
full in cash:
7.1 Indebtedness; Contingent Liabilities. No Company will create,
incur, assume, guarantee or be or remain liable with respect to any Consolidated
Funded Indebtedness except:
(a) Indebtedness of the Companies to the Lender;
(b) Indebtedness not constituting Capitalized Leases or purchase money
Indebtedness in the amounts existing on the date hereof and described in
Schedule 7.1 (but no refinancings, renewals or extensions thereof without the
Lender's prior written consent);
(c) Guarantees in respect of endorsements of negotiable instruments for
collections in the ordinary course of business (and refinancings, renewals or
extensions thereof);
(d) Capitalized Leases and purchase money Indebtedness which relate to
outstanding Indebtedness in the aggregate not exceeding $2,000,000 at any time
secured by Permitted Encumbrances under Section 7.3(f);
(e) unsecured Indebtedness of any Borrower to any other Borrower
hereunder, evidenced by promissory notes pledged and delivered to the Lender
pursuant to the Security Documents (the "Intercompany Notes");
(f) Guarantees incurred by the Parent (1) of Indebtedness otherwise
permitted hereunder of any other Borrower and (2) of real estate Leases of
franchisees of the Borrowers in the ordinary course of business;
(g) Indebtedness in respect of Hedging Arrangements not exceeding
$5,000,000 in aggregate net exposure at any one time outstanding, provided that
such Hedging Arrangements are entered into for legitimate purposes related to
the business of the Companies and not for speculative purposes;
(h) unsecured Indebtedness in respect of contractual commitments
related to future purchases of inventory;
(i) provided no Default then exists or could reasonably be expected to
result therefrom, Debt Issuance, provided the Net Debt/Equity Proceeds therefrom
are paid to the Lender to the extent required hereunder; and
(j) additional Indebtedness of the Borrowers in an aggregate principal
amount (for all Borrowers) not to exceed $1,000,000 at any one time outstanding.
7.2 Sale and Leaseback. No Company will enter into any arrangement (a
"Sale Leaseback"), directly or indirectly whereby any of them shall sell or
transfer any of its property
-41-
46
acquired prior to the date of this Agreement in order to lease such property or
lease other property that any Company intends to use for substantially the same
purpose as such property being sold or transferred.
7.3 Encumbrances. No Company will create, incur, assume or suffer to
exist any mortgage, pledge, security interest, lien or other charge or
encumbrance, including the lien or retained security title of a conditional
vendor upon or with respect to any of its property or assets ("Encumbrances"),
or assign or otherwise convey any right to receive income, including the sale or
discount of accounts receivable with or without recourse, except the following
("Permitted Encumbrances"):
(a) Encumbrances in favor of the Lender under the Loan Documents;
(b) Encumbrances existing as of the date of this Agreement and
disclosed in Schedule 7.3;
(c) liens for taxes, fees, assessments and other governmental charges
to the extent that payment of the same may be postponed or is not required in
accordance with the provisions of Section 6.4;
(d) landlord's and lessors' liens in respect of rent not in default or
liens in respect of pledges or deposits under worker's compensation,
unemployment insurance, social security laws, or similar legislation (other than
ERISA) or in connection with appeal and similar bonds incidental to litigation;
mechanics', laborers' and materialmen's and similar liens, if the obligations
secured by such liens are not then delinquent or are released by appropriate
statutory release bonds; liens securing the performance of bids, tenders,
contracts (other than for the payment of money); and statutory obligations
incidental to the conduct of its business and that do not in the aggregate
materially detract from the value of its property or materially impair the use
thereof in the operation of its business;
(e) judgment liens that shall not have been in existence for a period
of longer than 30 days after the creation thereof or, if a stay of execution
shall have been obtained, for a period longer than 30 days after the expiration
of such stay;
(f) Encumbrances in respect of Capital Leases and purchase money
obligations incurred within 120 days of purchase which in the aggregate do not
secure Indebtedness in excess of $1,000,000 for tangible personal property other
than inventory used in its business, provided that any such Encumbrances shall
not extend to property and assets not financed by such Capitalized Lease or
purchase money obligation and shall not secure Indebtedness greater than the
lesser of the cost or fair market value of such tangible personal property so
acquired; and
(g) easements, rights of way, restrictions and other similar
Encumbrances relating to real property and not interfering in a material way
with the ordinary conduct of its business.
7.4 Disposition of Assets, Etc. No Company will sell, lease, transfer
or otherwise dispose of any of its properties, assets, rights, licenses or
franchises to any Person, except for (a)
-42-
47
dispositions of inventory in the ordinary course of business (which dispositions
may be made free from the Encumbrances of the Loan Documents), the disposition
in the ordinary course of business, without replacement, of equipment which is
obsolete or no longer needed in the conduct of its business and the disposition
and replacement in the ordinary course of business of equipment or other
tangible personal property with other equipment of at least equal utility and
value (provided that, except for purchase money security interests and rights of
lessors of equipment if permitted hereunder, the Lender's lien upon such newly
acquired equipment shall have the same priority as the Lender's lien upon the
replaced equipment); and (b) so long as no Default exists or could reasonably be
expected to result therefrom, (i) the sale of the Coffee People Sale Stores for
not less than the fair market value thereof and (ii) any other sale of tangible
assets (other than the sale of all or substantially all of the assets of any
Company and other than, in any four-quarter period, the sale of greater than 5%
of the value of Consolidated Net Assets as of any date therein) for not less
than the fair market value thereof (each such permitted sale being referred to
as a "Permitted Sale"), provided that prior notice thereof is given to the
Lender, if required, pursuant to Section 6.1(l) and the Sale Proceeds Payment
with respect thereto is made, if and to the extent required, pursuant to Section
2.7 of this Agreement.
7.5 Amendment to Charter or Partnership Documents. Except for mergers
or consolidations to the extent permitted hereunder, each of the Companies will
not permit or suffer any amendment of its Organizational Documents without the
Lender's prior written consent, which consent shall not be unreasonably
withheld. Without limiting the foregoing, no Company will amend any
Organizational Document in any manner which could materially adversely affect
its financial condition or adversely affect (in light of the entire transaction
in which it is a part) the rights of the Lender hereunder or under the Loan
Documents (it being expressly agreed that the inclusion in any such charter
documents of any provision similar to those set forth in Section 102(b)(2) of
Title 8 of the Delaware General Corporation Law is prohibited under this
Section).
7.6 Mergers; Consolidations; Issuance of Securities; Etc. No Company
will dissolve, liquidate, merge or consolidate into or with any other Person;
provided that any Borrower may merge with any other Borrower (so long as the
Parent is the surviving entity of any merger to which it is a party). No Company
other than the Parent will issue any additional shares of Capital Stock or any
securities convertible thereto.
7.7 Restricted Payments. No Company will make any Restricted Payment;
provided, that (a) so long as no Default or Event of Default exists or could
reasonably be likely to result therefrom, the Parent may make Distributions to
the extent required for any repurchase, redemption or other acquisition for
value of any Capital Stock of the Parent held by any member of the Parent's
management pursuant to any management equity subscription agreement or stock
option agreement or similar agreement upon their death, disability, retirement
or termination of employment or departure from the Board of Directors of the
Parent (provided that the aggregate price paid for all such repurchased,
redeemed, acquired or retired Capital Stock shall not exceed $500,000 in any
twelve-month period), (b) the Subsidiaries of the Borrowers may make
Distributions to the Borrowers, and the Subsidiaries of the Borrowers shall
declare and pay cash distributions to the Borrowers, if the same comply with
applicable law, to the extent required to ensure that the Borrowers at all times
pay and perform when due their Obligations under the Loan Documents, and (c) the
Borrowers may make regularly scheduled payments on Debt Issuance to the extent
expressly
-43-
48
permitted by the applicable terms of subordination of such Debt Issuance agreed
to in writing by Lender.
7.8 Investments, Loans and Acquisitions. No Company will (a) purchase
or acquire any share of capital stock, partnership interest, evidence of
Indebtedness or other equity security of any other Person, (b) acquire all or
substantially all of the assets of any Person or any division of any Person, (c)
make any loan, advance or extension of credit to, or contribution to the capital
of, any other Person other than loans to employees not to exceed $500,000 and to
Franchisees not to exceed $500,000, in each case in the aggregate at any time
outstanding, advances pursuant to customary indemnification provisions in favor
of officers and directors of the Borrowers, extensions of trade credit in the
ordinary course of business consistent with past practices, Interest Rate
Protection Agreements permitted under Section 7.1 and notes received as part of
the settlement of litigation or satisfaction of debts owed by any other Person
in the ordinary course of business, (d) purchase any real estate for sale or
investment, (e) purchase any commodities futures contracts other than in
connection with bona fide hedging transactions in the ordinary course of
business, (f) make any other investment in any Person, (g) form any Subsidiary
(except to the extent the Parent determines that the formation of a Subsidiary
is necessary or appropriate in connection with a Permitted Acquisition), or (h)
make any commitment or acquisition of any option or enter into any other
arrangement for the purpose of making any of the foregoing investments, loans or
acquisitions, except the following:
(i) Qualified Investments;
(ii) Permitted Acquisitions;
(iii) Loans and capital contributions from the Parent to
Subsidiaries who are Borrowers hereunder pursuant to Section 7.1(e);
(iv) the existing investments referred to in Schedule 7.8
hereto; and
(v) other investments in an aggregate amount at any one time
outstanding not to exceed $250,000.
7.9 ERISA. No Company nor any member of the Controlled Group shall
permit any Plan maintained by it to (a) engage in any "prohibited transaction"
(as defined in Section 4975 of the Code), (b) incur any "accumulated funding
deficiency" (as defined in Section 302 of ERISA) whether or not waived, or (c)
terminate any Plan in a manner that could result in the imposition of a lien or
encumbrance on the assets of any Company pursuant to Section 4068 of ERISA.
7.10 Transactions with Affiliates. Except as otherwise expressly
permitted by this Agreement, no Company will directly or indirectly (i) make any
Investment in any Affiliate, (ii) sell, lease or otherwise dispose of any assets
or services to, or purchase, lease or otherwise acquire any Assets or services
from, any Affiliate, or (iii) directly or indirectly engage in any other
transaction with or for the benefit of, or make any payment or distribution to,
any Affiliate; provided, that: (i) any employee (or former employee) of any
Company owning any Capital Stock of the Parent may serve as an employee or
director of the Parent and receive reasonable compensation (including stock
-44-
49
options and other customary incentive compensation) and customary indemnities,
(ii) the Companies may make loans and advances to employees for moving,
entertainment, travel and other similar expenses in the ordinary course of
business not to exceed $500,000 in the aggregate at any time outstanding, (iii)
any Borrower may enter into any transaction with another Borrower provided such
transaction is not disadvantageous to the Borrowers taken as a whole, and (iv)
any Borrower may enter into any transaction with any Affiliate providing for the
rendering or receipt of services or the purchase, sale or lease of assets in the
ordinary course of business if the monetary or business consideration arising
therefrom would be as advantageous to the Borrowers taken as a whole as the
monetary or business consideration which it would obtain in a comparable arm's
length transaction with a Person not an Affiliate, and such transaction is
accurately reflected on the books of the Borrowers.
7.11 Amendment of Certain Agreements. No Company will amend or modify
any of its material agreements if the same would be likely to have a material
adverse effect upon its business, its ability to fulfill any of its obligations
under the Loan Documents, or any of the Lender's rights under any of the Loan
Documents.
7.12 Negative Pledges, Etc. No Company will enter into any agreement,
amendment or arrangement (excluding this Agreement or any other Loan Document)
prohibiting or restricting (a) it from amending or otherwise modifying this
Agreement or any other Loan Document, (b) the creation or assumption of any
Encumbrances upon its properties, revenues or assets, whether now owned or
hereafter acquired, or (c) the ability of any Subsidiary to make any payment or
distribution, directly or indirectly, to the Parent; provided that this Section
7.13 shall not apply to (i) purchase money obligations or Capitalized Leases (or
refinancings thereof that impose no more restrictive restrictions than those
applicable to the obligation being refinanced) for property acquired in
accordance with Section 7.1 that impose restrictions solely on the property so
acquired which are in effect at the time of acquisition of such property and
(ii) restrictions arising by reason of customary non-assignment or no-subletting
clauses in leases or other contracts entered into in the ordinary course of
business.
SECTION 8. DEFAULTS.
8.1 Events of Default. There shall be an Event of Default hereunder if
any of the following events occurs:
(a) any Borrower shall fail to pay when due (whether on the date fixed
for such payment, mandatory prepayment, by acceleration or otherwise) any amount
of principal of any Loan, any LC Draw Obligation or any principal on any other
Obligation or to pay within three Business Days of when due (whether on the date
fixed for such payment, mandatory prepayment, by acceleration or otherwise) any
interest thereon, or fees or expenses constituting any Obligation; or
(b) any Company shall fail to perform any term, covenant or agreement
contained in Section 5, Section 6.1 (other than Section 6.1(m)), or Section 7
hereof;
(c) any Company shall fail to perform any term, covenant or agreement
contained in this Agreement or any default shall occur on the part of any
Company under any other Loan Document,
-45-
50
other than those referred to in Sections 8.1(a) and (b) above, and such default
shall continue for 30 days after the earlier of (i) written notice thereof from
the Lender to the Borrowers, or (ii) actual knowledge thereof by any executive
officer of any Company; or
(d) any representation or warranty by or on behalf of any Company made
in this Agreement or any other Loan Document or in any report, certificate or
financial statement delivered hereunder shall prove to have been false in any
material respect upon the date when made or deemed to have been made; or
(e) any Company shall fail to pay at maturity, or within any applicable
period of grace, any obligations which, together with all other such obligations
of the Companies, exceed $500,000 in the aggregate, or any Company shall fail to
observe or perform any term, covenant or agreement evidencing or securing such
obligations, the result of which failure is to permit the holder or holders of
such obligations to cause the indebtedness relating thereto to become due prior
to its stated maturity upon delivery of required notice, if any; or
(f) any Company shall (i) apply for or consent to the appointment of,
or the taking of possession by, a receiver, custodian, trustee, liquidator or
similar official of itself or of all or a substantial part of its property, (ii)
be generally not paying its debts as such debts become due, (iii) make a general
assignment for the benefit of its creditors, (iv) commence a voluntary case
under the Federal Bankruptcy Code (as now or hereafter in effect), (v) take any
action or commence any case or proceeding under any law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of debts, or
any other law providing for the relief of debtors, (vi) fail to contest in a
timely or appropriate manner, or acquiesce in writing to, any petition filed
against it in an involuntary case under the Federal Bankruptcy Code or other
law, (vii) take any action under the laws of its jurisdiction of incorporation
or organization similar to any of the foregoing, or (viii) take any action for
the purpose of effecting any of the foregoing; or
(g) a proceeding or case shall be commenced with respect to any
Company, without the application or consent of such in any court of competent
jurisdiction, seeking (i) the liquidation, reorganization, dissolution, winding
up, or composition or readjustment of its debts, (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of it or of all or any
substantial part of its assets, or (iii) similar relief in respect of it, under
any law relating to bankruptcy, insolvency, reorganization, winding-up or
composition or adjustment of debts or any other law providing for the relief of
debtors, and such proceeding or case shall continue undismissed, or unstayed and
in effect, for a period of 60 days; or an order for relief shall be entered in
an involuntary case under the Federal Bankruptcy Code, against any Company; or
action under the laws of the jurisdiction of incorporation or organization of
any Company similar to any of the foregoing shall be taken with respect to any
Company and shall continue unstayed and in effect for any period of 60 days; or
(h) a judgment or order for the payment of money shall be entered
against any Company by any court, or a warrant of attachment or execution or
similar process shall be issued or levied against property of any Company, that,
together with all other such judgments and attachments against the Companies
exceeds $250,000 in the aggregate in value and such judgment, order, warrant or
process shall continue undischarged, unstayed or not bonded over in full for 30
days, any
-46-
51
action shall be legally taken by a judgment creditor to levy upon assets or
properties of any Company to enforce any such judgment; or
(i) any Company or any member of the Controlled Group shall fail to pay
when due an amount or amount that it shall have become liable to pay to the PBGC
or to a Plan under Title IV of ERISA and which, together with all such amounts,
exceeds $500,000 in the aggregate; or notice of intent to terminate a Plan or
Plans shall be filed under Title IV of ERISA by any Company, any member of the
Controlled Group, any plan administrator or any combination of the foregoing and
such action could reasonably be expected to have a Material Adverse Effect; or
the PBGC shall institute proceedings under Title IV of ERISA to terminate or to
cause a trustee to be appointed to administer any such Plan or Plans or a
proceeding shall be instituted by a fiduciary of any such Plan or Plans against
any Company and such proceedings shall not have been dismissed within 30 days
thereafter; or a condition shall exist by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any such Plan or Plans must be
terminated and such action could reasonably be expected to have a Material
Adverse Effect; or
(j) for any reason, there shall have occurred a Change in Control; or
(k) for any reason, any Security Documents shall not be in full force
or effect in all material respects, or any party thereto shall contest the
validity thereof or disaffirm its obligations thereunder or default with respect
to any of its material obligations thereunder.
8.2 Remedies. Upon the occurrence of an Event of Default described in
Section 8.1(f) or (g), immediately and automatically, and upon the occurrence
and continuance of any other Event of Default, or if on any date that a draft is
presented under a Letter of Credit or any date that a Letter of Credit is sought
to be issued, extended or renewed, the conditions precedent to the issuance,
extension or renewal of Letters of Credit are not satisfied, at the Lender's
option and upon the Lender's declaration: (a) the Commitments and any obligation
to issue, extend or renew Letters of Credit shall terminate; and (b) the unpaid
principal amount of the Loans, together with accrued interest, all LC Draw
Obligations and all other Obligations shall become immediately due and payable
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived. Upon termination of the Commitments and
acceleration of the Loans and the LC Draw Obligations, the Lender may exercise
any and all rights it has under this Agreement, the Security Documents or any
other Loan Documents, or at law or in equity, and proceed to protect and enforce
the Lender's rights by any action at law, in equity or other appropriate
proceeding. In the event that the Lender shall apply for the appointment of, or
the taking of possession by, a trustee, receiver or liquidator of any Company or
of any other similar official to hold or liquidate all or any substantial part
of the properties or assets of any Company following the occurrence of a default
in payment of any amount owed hereunder and following any applicable notice or
cure period, each of the Companies hereby consents to such appointment and
taking of possession and agrees to execute and deliver any and all documents
requested by the Lender relating thereto (whether by joining in a petition for
the voluntary appointment of, or entering no contest to a petition for the
appointment of, such an official or otherwise, as appropriate under applicable
law).
-47-
52
8.3 Letters of Credit. If any one or more Events of Default shall at
any time occur, the Lender may also, by written notice to the Borrowers, take
any or all of the following actions, at the same or different times:
(a) The Lender may send notices to all or any of the beneficiaries of
the Letters of Credit advising such beneficiaries of the intention and desire of
the Lender to effect the termination, cancellation and surrender of such Letters
of Credit in 30 days; provided, however, that the Lender shall not send any such
notice to any beneficiary unless the Lender has requested that the Borrowers
deliver cash collateral to the Lender pursuant to paragraph (b) below and the
Borrowers have failed to deliver such cash collateral to the Lender within 10
days after such request; and
(b) The Lender may require that the Borrowers deliver to the Lender
first priority perfected cash collateral in an amount equal to the face amount
of all Letters of Credit which remain outstanding.
SECTION 9. MISCELLANEOUS.
9.1 Notices. Unless otherwise specified herein, all notices hereunder
to any party hereto shall be in writing and shall be deemed to have been given
(a) when delivered by hand, (b) three days after mailing by certified mail,
return receipt requested, or (c) one day after delivery or electronic facsimile
transmission, or to the overnight courier; in each case addressed to such party
at its address indicated below:
(a) If to the Borrowers:
Xxxxxxxx Coffee, Inc.
0000 Xxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xx. Xxx Xxxxx
Telecopier No.: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxx X. Xxxxxxxx III, Esq.
Xxxxxx, Xxxx & Xxxxxxxx, LLP
0 Xxxx Xxxxx
Xxxxxx, XX 00000
Telecopier No.: (000) 000-0000
-48-
53
(c) If to the Lender:
BankBoston, N.A.
000 Xxxxxxx Xxxxxx
Mail Stop: 01-09-05
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxx, Director
Telecopier No.: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxx X. Xxxxxxx, Esq.
Xxxxxxx & Xxxxxx, LLP
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Telecopier No.: (000) 000-0000
or to any other address specified by such party in writing.
9.2 Expenses. The Borrowers will pay jointly and severally on demand
all reasonable expenses of the Lender in connection with the preparation, waiver
or amendment of this Agreement or any other Loan Documents or the default or
collection of the Loans, the LC Draw Obligations or any other Obligation or in
connection with the Lender's exercise, preservation or enforcement of any of its
rights, remedies or options thereunder, including without limitation the
reasonable fees and expenses of outside legal counsel or the allocated costs of
in-house legal counsel, accounting, consulting, brokerage or other similar
professionals and any reasonable fees or expense associated with any travel or
other costs relating to any appraisals or credit or other examinations conducted
in connection with the Obligations or any Collateral therefor, and the amount of
all such expenses shall, unless paid within 30 days after submission of
statements therefor to the Borrowers, thereafter bear interest until paid in
full at the highest rate applicable to principal hereunder (including any
default rate). All such expenses may be charged against any deposit account
maintained by any Borrower with the Lender.
9.3 Indemnification. Each of the Borrowers shall absolutely and
unconditionally indemnify and hold the Lender harmless against any and all
claims, demands, suits, actions, causes of action, expenses and all other
liabilities whatsoever which shall at any time or times be incurred or sustained
by it or by any of its shareholders, directors, officers, employees,
subsidiaries, affiliates or agents (except any of the foregoing incurred or
sustained as a result of the gross negligence or willful misconduct of such
Person) on account of, or in relation to, or in any way in connection with, any
of the arrangements or transactions contemplated by, associated with or
ancillary to any of the Loan Documents, whether or not all or any of the
transactions contemplated by, associated with or ancillary to this Agreement or
any of such documents are ultimately consummated.
9.4 Term of Agreement. This Agreement shall continue in force and
effect until all Commitments have been terminated, all Letters of Credit have
been terminated or expired, and all Obligations have been indefeasibly paid in
full in cash.
-49-
54
9.5 No Waivers. No failure or delay by the Lender in exercising any
right, power or privilege hereunder or under any other documents or agreements
executed in connection herewith shall operate as a waiver thereof; nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein, in the Notes and in the other Loan Documents are cumulative and
not exclusive of any rights or remedies otherwise provided by agreement or law.
9.6 Governing Law. This Agreement shall be deemed to be a contract made
under seal and shall be construed in accordance with and governed by the laws of
Massachusetts (without giving effect to any conflicts of laws provisions
contained therein).
9.7 Entire Agreement; Amendments. This Agreement, the Notes and the
other Loan Documents constitute the final agreement of the parties hereto and
supersede any prior agreement or understanding, written or oral, with respect to
the matters contained herein and therein. No modification or waiver of any
provision hereof or of the Notes or any other Loan Document, nor consent to the
departure by any Borrower or any of its Subsidiaries therefrom, shall be
effective unless the same is in writing, and then such waiver or consent shall
be effective only in the specific instance, and for the purpose, for which
given. The Lender's failure to insist upon the strict performance of any term,
condition or other provision of this Agreement, the Notes, or any of the other
Loan Documents, or to exercise any right or remedy hereunder or thereunder,
shall not constitute a waiver by the Lender of any such term, condition or other
provision or Default or Event of Default in connection therewith, nor shall a
single or partial exercise of any such right or remedy preclude any other or
future exercise, or the exercise of any other right or remedy; and any waiver of
any such term condition or other provision or of any such Default or Event of
Default shall not affect or alter this Agreement, the Notes or any of the other
Loan Documents, and each and every term, condition and other provision of this
Agreement, the Notes and the other Loan Documents shall, in such event, continue
in full force and effect and shall be operative with respect to any other then
existing or subsequent Default or Event of Default in connection therewith. An
Event of Default hereunder and a Default under the Notes or under any of the
other Loan Documents shall be deemed to be continuing unless and until cured to
the Lender's reasonable satisfaction or waived in writing by the Lenders.
9.8 Assignments; Participations. This Agreement shall be binding upon
and inure to the benefit of the Borrowers and their successors and to the
benefit of the Lender and their respective successors and assigns. Except
pursuant to mergers in which a Borrower is the surviving entity to the extent
permitted hereunder, the rights and obligations of the Borrowers under this
Agreement shall not be assigned or delegated without the prior written consent
of the Lender, and any purported assignment or delegation without such consent
shall be void. Each of the Borrowers authorizes the Lender to disclose to any
participant or assignee any prospective participant or assignee of any and all
information in the Lender's possession concerning the Companies which has been
delivered to the Lender by or on behalf of the Companies pursuant to this
Agreement or which has been delivered to such Lender by or on behalf of the
Companies in connection with the Lender's credit evaluation prior to becoming a
party to this Agreement. The Lender may at any time pledge or assign all or any
portion of such Lender's rights under this Agreement and the other Loan
Documents to a Federal
-50-
55
Reserve bank; provided, however, that no such pledge or assignment shall release
such Lender from its obligations hereunder or any other Loan Document.
9.9 Counterparts; Partial Invalidity. This Agreement may be signed in
any number of counterparts with the same effect as if the signatures hereto and
thereto were upon the same instrument. The invalidity or unenforceability of any
one or more phrases, clauses or sections of this Agreement shall not affect the
validity or enforceability of the remaining portions of it.
9.10 WAIVER OF JURY TRIAL. EACH OF BORROWERS AND THE LENDER AGREES THAT
NEITHER IT NOR ANY ASSIGNEE OR SUCCESSOR SHALL (A) SEEK A JURY TRIAL IN ANY
LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED UPON, OR ARISING OUT
OF, THIS AGREEMENT, EITHER NOTE, ANY SECURITY DOCUMENT OR ANY OTHER LOAN
DOCUMENT, ANY COLLATERAL OR THE DEALINGS OR THE RELATIONSHIP BETWEEN ANY
BORROWER OR THE LENDER, OR (B) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY
OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE
PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY THE PARTIES HERETO,
AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER THE LENDER NOR
ANY BORROWER HAS AGREED WITH OR REPRESENTED TO ANY OTHER THAT THE PROVISIONS OF
THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
9.11 CONSENT TO JURISDICTION. EACH OF THE BORROWERS HEREBY SUBMITS TO
THE JURISDICTION OF THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS AND THE
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS, AS WELL AS TO
THE JURISDICTION OF ALL COURTS FROM WHICH AN APPEAL MAY BE TAKEN OR OTHER REVIEW
SOUGHT FROM THE AFORESAID COURTS, FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER
PROCEEDING ARISING OUT OF ANY BORROWERS' OBLIGATIONS UNDER OR WITH RESPECT TO
THE NOTES, ANY SECURITY DOCUMENT OR ANY OTHER LOAN DOCUMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREBY, AND EXPRESSLY WAIVES ANY AND ALL OBJECTIONS
IT MAY HAVE AS TO VENUE IN ANY OF SUCH COURTS.
9.12 Joint and Several Liability. Each of the Borrowers acknowledges
and agrees that it is jointly and severally liable for all Obligations under the
Loan Documents.
-51-
56
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed under seal by their duly authorized officers as of the day and year
first above written.
LENDER:
BANKBOSTON, N.A.
By: /s/
--------------------------------------
BORROWERS:
XXXXXXXX COFFEE, INC.
By: /s/ Xxx Xxxxx
--------------------------------------
COFFEE PEOPLE, INC.
By: /s/ Xxx Xxxxx
--------------------------------------
COFFEE PEOPLE WORLDWIDE, INC.
By: /s/ Xxx Xxxxx
--------------------------------------
XXXXXX XXXX'X, INC.
By: /s/ Xxx Xxxxx
--------------------------------------
(SIGNATURES CONTINUED)
57
EDGLO ENTERPRISES, INC.
By: /s/ Xxx Xxxxx
--------------------------------------
XXXXXX XXXX'X GOURMET COFFEES CORP.
By: /s/ Xxx Xxxxx
--------------------------------------
XXXXXX XXXX'X GOURMET COFFEES
FRANCHISING CORP.
By: /s/ Xxx Xxxxx
--------------------------------------
