Exhibit 10.32
LOAN AND SECURITY AGREEMENT
LOAN AND SECURITY AGREEMENT (the "Agreement"), dated to be effective as of
December 1, 2004, (the "Effective Date") by BROOKLYN CHEESECAKE & DESSERTS
COMPANY, INC., formerly known as CREATIVE BAKERIES, INC., a New York corporation
("Brooklyn Cheesecake") and X.X. SPECIALTIES, INC., A NEW JERSEY CORPORATION
("JMS") (Brooklyn Cheesecake and JMS are collectively referred to as the
"Borrowers"), and XXXXXX X. XXXXXXX ("Lender")
W I T N E S S E T H:
WHEREAS, pursuant to this Agreement, the Lender has agreed to make a
loan to the Borrowers upon the terms and subject to the conditions set forth
herein;
WHEREAS, Borrowers executed certain Secured Promissory Note in favor
of Lender, dated to be effective as of September 1, 2004 (the "Note"), in the
principal amount of $317,000; and
WHEREAS, it is a condition to the obligation of the Lender to make
the loan to the Borrowers under the Note, that the Borrowers shall have executed
and delivered this Agreement to the Lender.
NOW THEREFORE, in consideration of the premises and to induce the
Lender to accept the Note, and to make the loan to the Borrowers, the Borrowers
hereby agree with the Lender as follows:
ARTICLE I
THE LOAN
1.1. The Loan. Subject to the terms and conditions hereinafter provided,
Lender shall lend to Borrowers Three Hundred Seventeen Thousand ($317,000)
Dollars (the "Loan"), for the purposes indicated below:
The Loan shall be used only for Borrowers operating requirements
including but not limited to payment of debt not incurred in ordinary course of
Borrowers' business and for no other purpose.
1.2. The Note. The Loan shall be evidenced by the Note substantially in
the form attached hereto as Exhibit 1.2, which Note shall be executed by the
Borrowers as of the Effective Date. Every term contained in the Note shall be
deemed incorporated into this Agreement. To the extent any provision of the Note
shall be deemed to be inconsistent with the provisions of this Agreement,
however, the provisions of this Agreement shall control.
1.3. Interest
1.3.1. The outstanding principal balance of the Loan and any other
obligations arising under this Agreement shall bear interest at the rate of
Thirteen percent (13%) per annum computed on the actual number of days elapsed
in a 360-day year. Any unpaid interest shall be added to the outstanding
principal balance of the Loan and shall bear interest as well.
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1.3.2. Interest Payment on the Loan shall be due and payable on the
last day of each month up to and including the Due Date of the Loan provided
such day is a Business Day ("Business Day"). Business Day shall mean any day
other than Saturday, Sunday, or any other day on which commercial banks located
in the State of New York are required or authorized by law to be closed for
business. In the event that the date upon which payment is due is not a Business
Day, then payment shall be made on the earliest preceding Business Day, and any
such earlier payment shall not change the manner in which interest is calculated
pursuant to this Agreement.
1.3.3. The "Interest Rate Factor" shall be calculated by dividing
the annual interest rate of 13% by 360 days and then multiplying the resulting
quotient by the Number of Elapsed Days. The "Number of Elapsed Days" shall be
determined respectively for each month an Interest Payment is due by the number
of days from the last day of the previous month (excluding such last day of the
month), up until and including the last day of the month in which the Interest
Payment is due. The "Number of Elapsed Days" shall be determined in such a
manner up until the Due Date of the Loan.
1.3.4. The "Interest" shall be calculated by multiplying the
applicable Interest Rate Factor by the outstanding principal balance of the Loan
as of the date each Interest payment is due, unless there has been a
modification of the principal balance during such period (such as prepayment),
in which event interest will be calculated based on outstanding balances from
time to time.
1.3.3. Borrowers shall pay interest on any overdue installment of
principal and/or interest for the period for which such payment is overdue at
the rate of eighteen percent (18%) per annum. Nothing contained herein shall be
deemed to require the payment of interest at a rate in excess of the maximum
rate permitted by applicable law. In the event that the amount required to be
paid hereunder for any period exceeds the maximum rate permitted by law, such
amounts shall be automatically reduced for such period to the maximum rate
permitted by applicable law.
1.3.4. The Borrowers shall compensate the Lender, upon the Lender's
delivery of a written demand therefor to the Borrowers (which demand shall,
absent manifest error, be final and conclusive and binding upon all of the
parties hereto) for all reasonable losses, expenses and liabilities that the
Lender sustains as a consequence of any default by the Borrowers in repaying the
Loan or any other amounts owing hereunder when required by the terms of this
Agreement.
1.3.5. Intentionally left blank.
1.4. Repayment of Principal. Except as otherwise provided in this
Agreement, repayment of principal shall be due and payable in one lump sum on
April 30,2005 (the "Due Date").
1.5. Prepayment. The Borrowers may prepay up to Sixty Two Thousand Five
Hundred ($62,500) Dollars in principal on each date that interest is due
pursuant to this Agreement, without penalty or premium in which case any such
prepayments shall be deducted from the outstanding principal balance of the Loan
for any Interest payments due thereafter. Borrowers may also prepay all of the
principal of the Loan at any time provided such prepayment shall include
interest calculated to the date of prepayment plus fifty (50%) percent of the
interest that would have been earned had the Loan not been prepaid from the date
of such prepayment to the Due Date (the "Yield Maintenance Payment"). It is
acknowledged that the Yield Maintenance Payment is intended to compensate Lender
for utilizing its credit in order to make the Loan to Borrowers and is not to be
deemed additional interest for any purpose. The Yield Maintenance Payment shall
also be due in the event of a prepayment as a result of acceleration of the Loan
as a result of an Event of Default (See Section 1.6).
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1.6. Acceleration. Notwithstanding the other provisions of this Agreement,
immediately upon the occurrence of any Event of Default (as defined in Section
5.1) and during any continuance thereof, the Lender may declare the Loan, all
interest thereon and all other amounts and obligations payable to be forthwith
due and payable to the Lender or may take any other action as provided in
Section 5.2 and 5.3 of this Agreement.
1.7. Payment Procedures. All payments made by Borrowers under this
Agreement shall be made to the Lender at its office at the address indicated in
Section 7.3 and shall be made in U.S. dollars. All payments received by the
Lender shall be applied first to fees and expenses (if any), then to accrued
interest, then to the Yield Maintenance Payment and lastly, to unpaid principal
in accordance with the terms of this Agreement. To the extent not previously
repaid, all principal and interest outstanding with respect to the Loan, plus
any accrued but unpaid expenses and fees or other obligations arising under this
Agreement, shall be due and payable in full on the "Due Date."
ARTICLE II
COLLATERAL
2.1. Collateral. Borrowers hereby pledge, assign and grant to Lender, as
security for the performance of this Agreement, the Note and any other documents
executed in connection herewith (the "Loan Documents"), and the repayment of the
Loan and for all other indebtedness, liabilities and obligations of Borrowers
(primary, secondary, direct, contingent, related, unrelated, sole, joint or
several) due or to become due to Lender or which may be contracted for or
acquired hereafter (collectively, the "Obligations"), a security interest under
the Uniform Commercial Code in effect in the States of New Jersey and New York
in all Accounts, Inventory, General Intangibles, (including but not limited to
trade names, brand names (such as Brooklyn Cheesecake), recipes and customer
lists), Chattel Paper, Instruments, Documents and Equipment (whether or not
constituting fixtures) and any other asset now owned or hereafter acquired by
Borrowers, together with all cash and non-cash proceeds, products,
distributions, additions, accessions, substitutions, exchanges and replacements
thereof, (collectively, the "Collateral").
2.2. Further Assurances. Borrowers shall from time to time promptly take
all actions (and execute, deliver and record all instruments and documents)
necessary or reasonably appropriate or requested by Lender, to perfect and
protect any security interest granted or purported to be granted hereby or to
enable Lender to exercise and enforce its rights and remedies hereunder with
respect to any of the Collateral.
2.3. Attorney-In-Fact. Borrowers hereby irrevocably appoint Lender as its
attorney-in-fact, in the name of Borrowers or otherwise, from time to time in
Lender's discretion and at Borrowers' expense, to take any action and to
execute, deliver and record any instruments or documents which Lender may deem
necessary or advisable in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable Lender to exercise and
enforce its rights and remedies hereunder with respect to any of the Collateral
including, without limitation, financing or continuation statements under the
Uniform Commercial Code, and amendments thereto. Lender shall not, in its
capacity as such attorney-in-fact, be liable for any acts or omissions, nor for
any error of judgment or mistake of fact or law, but only for gross negligence
or willful misconduct. All authorizations and agencies herein contained with
respect to the collateral are irrevocable powers coupled with an interest.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
Borrowers hereby make the following representations and warranties, which
shall be continuing in nature and remain in full force and effect until the
Obligations are satisfied in full:
3.1. Existence and Power. Brooklyn Cheesecake and JMS are corporations
duly organized, validly existing and in good standing in all material respects
under the laws of the jurisdiction of their respective incorporation or
organization and have all requisite power and authority to own and operate their
assets and to conduct their business as now or proposed to be carried on, and
are duly qualified, licensed and in good standing to do business in all
jurisdictions where their ownership of property or the nature of their business
requires such qualification or licensing. Borrowers have the full power and
authority to execute, deliver and perform this Agreement, the Note, financing
statements, and all other agreements, instruments, and documents evidencing or
securing the Loan (collectively as "Loan Documents").
3.2. Authorization and Enforceability. Borrowers have been duly authorized
to execute, deliver and perform the Loan Documents by all appropriate action of
their respective Boards of Directors or otherwise as may be required by law,
charter or other organizational documents or agreements. Each of the Loan
Documents, when executed and delivered by Borrowers, will constitute the legal,
valid and binding obligation of Borrowers, enforceable in accordance with their
respective terms.
3.3. No Defaults or Violations. There does not exist any Event of Default
(as that term is defined in Section 5.1) under this Agreement or any material
default or violation by Borrowers of or under any of the terms, conditions or
obligations of: (a) Brooklyn Cheesecake and JMS articles or certificate of
incorporation, regulations or bylaws or other organizational documents as
applicable; (b) any indenture, mortgage, deed of trust, franchise, permit,
contract, agreement, or other instrument to which Brooklyn Cheesecake and JMS
are a party or by which they or any of their properties may be bound; or (c) any
law, regulation, ruling, order, injunction, decree, condition or other
requirement applicable to or imposed upon Borrowers by any law, or by the action
of any court or other governmental authority or agency; and the execution,
delivery and performance of the Loan Documents will not result in any such
default or violation, nor are any approvals, authorizations, licenses, waivers
or consents, governmental (foreign, federal, state or local) or
non-governmental, under the terms of contracts or otherwise, required to be
obtained by Borrowers by reason of or in connection with their execution,
delivery and performance of any of the Loan Documents. Notwithstanding anything
else to the contrary contained in this Agreement or any Loan Document, Lender
acknowledges that Borrowers have informed Lender that Borrowers may pay their
creditors on a 90-day or more basis, and that such event shall not constitute a
breach or an Event of Default with respect to this Agreement or any of the Loan
Documents.
3.4. Financial Statements. Borrowers have delivered or caused to be
delivered to Lender their most recent balance sheet, income statement and
statement of cash flows as of December 31, 2004 (the "Financial Statements").
The Financial Statements are true, accurate and complete in all material
respects and fairly present the financial condition, cash flow and the results
of Borrowers' operations as of the respective dates thereof and for the periods
therein referred to, all in accordance with generally accepted accounting
principles in effect from time to time ("GAAP"), consistently applied from
period to period subject in the case of interim statements to normal year-end
adjustments and excluding disclosures normally required by XXXX. Borrowers do
not have any liabilities or obligations of any nature (whether or not of the
nature required to be reflected in a balance sheet prepared in accordance with
GAAP) that are not reflected on the Financial Statements (including, without
limitation, any liabilities relating to environmental, occupational and health
matters or ERISA) except for current liabilities (within the meaning of GAAP)
which have been incurred since the date thereof in the ordinary course of
business and consistent in nature and amount with Borrowers' operating history.
Notwithstanding anything else to the contrary contained in this Agreement or any
Loan Document, Lender acknowledges that Borrower has informed Lender that
Borrower has incurred liabilities as set forth on Schedule 4.2.1, and the
existence of such debt shall not constitute a breach or an Event of Default of
this Agreement or any of the Loan Documents.
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3.5. No Material Adverse Change. Since the date of their most recent
Financial Statements, Borrowers have not suffered any damage, destruction or
loss, and no event or condition has occurred or exists, which has resulted or
could result in a material adverse change in its business, assets, operations,
financial condition or results of operation.
3.6. Title to Assets; Existing Liens. Borrowers have good and marketable
title to their assets, free and clear of all liens and encumbrances, except for
(a) current taxes and assessments not yet due and payable, (b) liens and
encumbrances, if any, reflected or noted in their most recent Financial
Statements, (c) assets disposed of by Borrowers since the date of their most
recent Financial Statements in the ordinary course of business, consistent with
past practice, and (d) the liens and encumbrances described on Schedule 3.6.
3.7. Litigation. Except as set forth in Schedule 3.7, there are no
actions, suits, proceedings or governmental investigations pending or, to the
knowledge of Borrowers, threatened, against Borrowers or any of their properties
which could result in a material adverse change in Borrowers' business, assets,
operations, financial condition or results of operations and there is no basis
known to Borrowers for any action, suit, proceeding or investigation which could
result in such a material adverse change.
3.8. Tax Returns. Borrowers have filed all returns and reports that are
required to be filed by them in connection with any federal, state or local tax,
duty or charge levied, assessed or imposed upon them or any of their properties
or that they are required to withhold and pay over including, without
limitation, unemployment, social security and similar taxes, and all of such
taxes have been paid or adequate reserves therefor have been set aside or other
provisions therefor have been made.
3.9. Intellectual Property. Borrowers own or are licensed to use all
patents, patent rights, trademarks, trade names, service marks, copyrights,
intellectual property, technology, know-how and processes necessary for the
conduct of their business as currently conducted that are material to Borrowers'
condition (financial or otherwise), business or operations. Lender acknowledges
that the names "Brooklyn Cheesecake Company, Inc." and "Brooklyn Cheesecake and
Desserts Company" are not registered or protected under state or federal laws,
but Borrowers represent that they have instituted the process of registering and
trade marking said names, and Borrowers covenant that they will pursue said
process with diligence.
3.10. Intentionally left blank.
3.11. Disclosure. None of the Loan Documents contain any untrue statement
of material fact or omit to state a material fact necessary in order to make the
statements contained in the Loan Documents not misleading. There is no fact
known to Borrowers which materially and adversely affects or, so far as
Borrowers can now foresee, might materially and adversely affect Borrowers'
business, assets, operations, financial condition or results of operation and
which have not otherwise been fully set forth in this Agreement or otherwise
disclosed in writing to Lender.
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3.12. Places of Business. The locations of Borrowers' chief executive
office and other places of business are shown on Schedule 3.12. Borrowers
covenant not to establish any new, or discontinue any existing, place of
business without giving Lender at least 30 days' prior notice.
3.13. Intentionally left blank.
3.14. Subsidiaries, Affiliates, and Other Investments. Except as shown on
Schedule 3.14, Borrowers have no subsidiaries or affiliates (other than its own
shareholders); nor do Borrowers have any investment in any other person or
entity.
ARTICLE IV
COVENANTS
4.1. Affirmative Covenants. Borrowers agree that from the date of
execution of this Agreement until the Obligations are satisfied in full,
Borrowers shall (and shall cause each of its majority-owned subsidiaries, if
any, to):
4.1.1. Payments of Taxes and Other Charges. Pay and discharge when
due all taxes, assessments, charges, levies and other liabilities imposed upon
Borrowers, their income, profits, properties or business, except those which
currently are being contested in good faith by appropriate proceedings and for
which Borrowers shall have set aside adequate reserves or made other adequate
provisions acceptable to Lender in its sole discretion.
4.1.2. Maintenance of Existence, Operation and Assets; Inspection.
Do all things necessary to maintain, renew and keep in full force and effect
their respective organizational existence and all rights, permits and franchises
necessary to enable them to continue their business; continue in operation in
substantially the same manner as at present; conduct business and enter into
transactions only in the ordinary course, consistent with past practice; keep
their properties in good operating condition and repair; make all necessary and
proper repairs, renewals, replacements, additions and improvements thereto; and
permit representatives of Lender to inspect Borrowers' properties and its books
and records and to make extracts therefrom at all reasonable times during normal
business hours.
4.1.3. Insurance. Keep their assets insured with responsible
insurance companies against those risks and in such amounts as are commonly
insured against by companies in similar businesses and owning similar assets. At
Lender's request, Borrowers shall have Lender named as loss payee on all hazard
insurance policies covering the Collateral and shall have Lender named as an
additional insured on liability policies. Borrowers shall deliver to Lender such
certificates, endorsements, and other evidence of such insurance as Lender may
reasonably request.
4.1.4. Compliance with Laws. Comply materially with all laws
applicable to Borrowers and to the operation of their respective business
(including, without limitation, any statute, rule or regulation relating to
employment practices and employee benefits and to environmental, occupational
and health standards and controls).
4.1.5. Financial Reports. Deliver promptly such financial statements
and reports as Lender may reasonably request including, without limitation,
annual financial statements audited or reviewed by independent certified public
accountants, quarterly interim financial statements prepared by Borrowers'
management and within ten (10) days after the end of each calendar month, a
monthly statement of cash flow and accounts receivable certified as accurate by
the CEO of Borrowers. All such financial data shall be true, accurate and
complete in all material respects and shall be prepared in accordance with GAAP
consistently applied, subject, in the case of interim statements, to normal
year-end adjustments and excluding disclosures normally required by GAAP.
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4.1.6. Additional Reports. Provide prompt notice to Lender of the
occurrence of any of the following (together with a description of the action
which Borrowers propose to take with respect thereto): (a) any Event of Default
or potential Event of Default hereunder or under any of the Loan Documents, (b)
any litigation filed by or against Borrowers, (c) any event which might result
in a material adverse change in Borrowers' business, assets, operations,
financial condition or results of operation; and provide to Lender any other
reports reasonably requested thereby.
4.1.7. Use of Proceeds. Use of the proceeds of the Loan only for the purposes
specified in Section 1.1 above.
4.1.8. Indemnification. Borrowers agree to pay, and to hold Lender harmless
from, any and all liabilities, costs and expenses (including, without
limitation, reasonable legal fees and expenses) (i) with respect to, or
resulting from, any delay in paying any and all excise, sales or other taxes
which may be payable or determined to be payable with respect to any of the
Collateral, (ii) with respect to, or resulting from, any delay in complying with
any requirement of law applicable to any of the Collateral or (iii) in
connection with any of the transactions contemplated by this Agreement or the
Loan Documents. In any suit, proceeding or action brought by Lender to enforce
the provisions of this Agreement, Borrowers will save, indemnify and keep Lender
harmless from and against all expense, loss or damage suffered by reason of any
defense, set off, counterclaim, recoupment or reduction or liability whatsoever
of the account of Borrowers or obligor thereunder, arising out of a breach by
Borrowers of any obligation thereunder or arising out of any other agreement,
indebtedness or liability at any time owing to or in favor of such account of
Borrowers or obligor or its successors.
4.1.9. Further Identification of Collateral. Borrowers will furnish
to Lender from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as Lender may reasonably request, all in reasonable detail.
4.1.10 Notices. Borrowers will advise Lender, in reasonable detail,
at its address set forth below, (i) of any encumbrance on, or claim asserted
against, any of the Collateral and (ii) of the occurrence of any other event
which could reasonably be expected to have a material adverse effect on the
aggregate value of the Collateral or on the encumbrances created hereunder.
4.2. Negative Covenants. Borrowers covenant and agree that from the date
of execution of this Agreement until the Obligations are satisfied in full,
Borrowers shall not (and shall cause each of its majority-owned subsidiaries, if
any, not to), without Lender's prior written consent:
4.2.1. Indebtedness. Except as provided in Schedule 4.2.1 of this
Agreement, maintain, create or incur any indebtedness for borrowed money other
than the Loan and any subsequent indebtedness to Lender,
4.2.2. Liens and Encumbrances. Except for liens in favor of Lender
create, assume or permit to exist any mortgage, pledge, encumbrance or other
security interest or lien upon any assets now owned or hereafter acquired by
Borrower. Notwithstanding anything else to the contrary contained in this
Agreement or any of the Loan Documents, (i) Borrowers may lease equipment under
which the lessor of such equipment may maintain a security interest in the
equipment leased, and (ii) Borrowers may purchase equipment under which the
seller of such equipment may maintain a security interest in the equipment
purchased by the Borrowers.
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4.2.3. Guarantees. Guarantee, endorse or become contingently liable
for the obligations of any person or entity, except in connection with the
endorsement and deposit of checks in the ordinary course of business for
collection.
4.2.4. Merger; Disposition of Assets. Merge or consolidate with or
into any person or entity or lease, sell, transfer or otherwise dispose of any
material assets, whether now owned or hereafter acquired, other than in the
normal course of business and consistent with past practices.
4.2.5. Change in Business, Management or Ownership. Make or permit
any material change in the nature of Borrower's business as carried on as of the
date hereof or make any other major decisions which effect the business of
Borrower other than day to day operation decisions.
4.2.6. Intentionally left blank.
4.2.7. Investments. Purchase or hold beneficially any stock, other
securities or evidence of indebtedness or make any loans or advances to, or make
any investment or acquire any interests in, any other person or entity
4.2.8. Related Party Loans. Repay any loans payable to officers,
shareholders or directors of Borrowers.
For so long as no Event of Default has occurred, notwithstanding anything else
to the contrary contained in this Agreement or any of the Loan Documents, the
Borrower may pay to (i) Xxxxxx X. Xxxxxxx the "Minimum Amount Due," or past due
amounts thereof, as required under the American Express Business Capital Line
and in connection with the Revolving Credit Note to Xxxxxx X. Xxxxxxx listed in
Schedule 4.2.1 and (ii) Xxxxxxx Xxxxxxx the "Minimum Payment Due," or past due
amounts thereof, as required under the Fleet Business Credit Express and in
connection with the Revolving Credit Note to Xxxxxxx Xxxxxxx listed in Schedule
4.2.1.
ARTICLE V
DEFAULT
5.1. Events of Default. Events of default (an "Event of Default") are as
follows:
5.1.1. Any material default in the Note or any of the other Loan
Documents.
5.1.2 (a) Borrowers fail to make any payment of principal or
interest payable under this Agreement or Loan Documents when due; or
(b) Borrowers fail to fully perform any material term,
condition or obligation as provided in this Agreement or
Loan Documents that remains uncured for five (5)
business days after notice from Lender of such default;
or
(c) Brooklyn Cheesecake or JMS file for bankruptcy or
reorganization, are generally not paying their debts in
accordance with past business practice, make an
assignment for the benefit of creditors, a trustee or
receiver is appointed over Brooklyn Cheesecake or JMS or
any of their property, bankruptcy, liquidation or other
similar proceedings is commenced against Brooklyn
Cheesecake or JMS, or a writ or warrant or similar
process is issued against Brooklyn Cheesecake or JMS or
their property; or
(d) Brooklyn Cheesecake or JMS no longer remain a
corporation in good standing in the State of its
organization, or
(e) The death, disability, resignation or removal of Xxxxxx
X. Xxxxxxx ("Xxxxxxx"), as CEO of Borrowers, unless in
the case of death or disability there exists "Key Man"
or disability insurance policies with proceeds utilized
to pay all amounts due the Lender within a reasonable
period of time. In addition, the Lender must be named as
an additional insured and/or beneficiary on such
policies, or
(f) The inability of Borrowers to pay any of their debts (in
accordance with past business practice) or taxes as they
become due, or
(g) The filing of a summary proceeding by Borrowers'
landlord or of any lawsuit in excess of $20,000 against
Brooklyn Cheesecake and/or JMS that is not removed or
bonded within 15 days of institution of such lawsuit.
5.2. Remedies on Default: .
5.2.1. Proceeds. If an Event of Default under this Agreement shall
occur and be continuing or if any portion of the Obligations has become
due and remain unpaid and if so requested by Lender (a) all proceeds
received by Borrowers consisting of cash, checks and other near-cash items
shall be held by Borrowers in trust for Lender, and shall, forthwith upon
receipt by Borrowers, be turned over to Lender in the exact form received
by Borrowers (duly endorsed by Borrowers to Lender, if required), and (b)
any and all such proceeds received by Lender (whether from Borrowers or
otherwise) may, in the sole discretion of Lender, be held by Lender for
its own benefit as collateral security for, and/or then or at any time
thereafter may be applied by Lender against the Obligations (whether
matured or unmatured), such application to be in such manner as set forth
in the Note and Borrowers waive any right of offset they may otherwise
have. Any balance of such proceeds remaining after the Obligations shall
have been paid in full and Lender shall have no further obligations or
commitments under the Note shall be paid over to Borrowers or to
whomsoever may be lawfully entitled to receive the same.
5.2.2. Remedies. If any Event of Default under this Agreement shall
have occurred and be continuing or from and after the date that any
portion of the Obligations has become due and remains unpaid, Lender may
exercise in addition to all other rights and remedies granted to them in
this Agreement and in any Loan Documents, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the UCC.
Without limiting the generality of the foregoing, in the event of such an
Event of Default as described in the preceding sentence, Lender, without
demand of performance or other demand, presentment, protest, advertisement
or notice of any kind (except any notice required by law referred to
below) to or upon Borrowers or any other person (all and each of which
demands, defenses, advertisements and notices are hereby waived) may in
such circumstances forthwith collect, receive, appropriate and realize
upon the Collateral, or any part thereof, and/or may forthwith sell,
lease, assign, give option or options to purchase, or otherwise dispose of
and deliver the Collateral or any part thereof (or contract to do any of
the foregoing) in one or more parcels at public or private sale or sales,
at any exchange, broker's board or office of Lender or elsewhere upon such
terms and conditions as it may deem advisable and at such prices as it may
deem best, for cash or on credit or for future delivery without assumption
of any credit risk. Lender shall have the right upon any such public sale
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or sales, and, to the extent permitted by law, upon any such private sale
or sales, to purchase the whole or any part of the Collateral so sold,
free of any right or equity of redemption which right or equity is hereby
waived or released. Borrowers further agree, at Lender's request, and to
the extent that Borrowers are able to do so, to assemble the Collateral
and make it available to Lender at places, which Lender shall reasonably
select, whether at Borrowers' premises or elsewhere. Lender shall apply
the net proceeds of any such collection, recovery, receipt, appropriation,
realization or sale, after deducting all reasonable costs and expenses of
every kind incurred therein or incidental to the care or safekeeping of
any of the Collateral or in any way relating to the Collateral or the
rights of Lender hereunder, including, without limitation, reasonable
attorneys' fees and disbursements, to the payment in whole or in part of
the obligations, in such manner as is set forth in the Note and only after
such application and after the payment by Lender of any other amount
required by any provision of law, including, without limitation, Section
9-504(1)(c) of the UCC, need Lender account for surplus, if any, to
Borrowers. To the extent permitted by applicable law, Borrowers waive all
claims, damages and demands it may acquire against Lender arising out of
the exercise by them of any rights hereunder. If any notice of a proposed
sale or other disposition of Collateral shall be required by law, such
notice shall be deemed reasonable and proper if given at least ten (10)
days before such sale or other disposition. Borrowers shall remain liable
for any deficiency if the proceeds of any sale or other disposition of the
Collateral are insufficient to pay the obligations and the fees and
disbursements of any attorneys employed by Lender to collect such
deficiency.
5.2.3. No Subrogation. Notwithstanding any payment or payments made
by Borrowers hereunder, or any set off or application of funds of
Borrowers by Lender, or the receipt of any amounts by Lender with respect
to any of the Collateral, Borrowers shall not be entitled to be subrogated
to any of the rights of Lender against any other collateral security held
by Lender for the payment of the Obligations until all amounts owing to
Lender on account of the Obligations or commitments under the Note have
been paid in full. If any amount shall be paid to Lender on account of
such subrogation rights at any time when all of the Obligations shall not
have been paid in full, such amount shall be held by Borrowers in trust
for Lender, and shall, forthwith upon receipt by Borrowers, be turned over
to Lender in the exact form received by Borrowers (duly endorsed by
Borrowers to Lender, if required) to be applied against the Obligations,
whether matured or unmatured, in such manner as set forth in the Note,
this Agreement and the Loan Documents.
5.2.4. Appointment to Borrowers Board of Directors. Within 10 days
after a default under the Loan Documents, Brooklyn Cheesecake and JMS
shall take actions to cause the removal and/or resignation of a sufficient
number of directors and to replace such directors with directors nominated
by the Lender in order that there shall be a majority of directors on
their respective Boards of Directors that are nominated by the Lender,
provided that nominees of the Lender are qualified to serve as directors
and there remains on the Boards of Directors a sufficient number of
independent directors in order to be in compliance with law. It is
acknowledged that this provision is intended to facilitate Lender's
execution on the Collateral if an Event of Default occurs.
ARTICLE VI
DISPUTE RESOLUTION
6.1. Resolution of Disputes.
10
6.1.1. Jurisdiction; Process. The parties hereto irrevocably submit
to the non-exclusive jurisdiction of any New York state or United States Federal
Court sitting in New York, New York over any suit, action or proceeding arising
out of or relating to this Agreement.
The parties hereto further consent to process being served in any
such suit, action or proceeding by mailing a certified copy thereof, return
receipt requested, to said party at its respective address referred to in
Section 7.3. Each party agrees that such service shall be deemed in every
respect effective service of process upon it in any such suit, action or
proceeding and shall, to the full extent permitted by law, be taken and held to
be valid personal service upon and personal delivery to it. Nothing in this
paragraph shall affect or limit any right to serve process in any manner
permitted by law, to bring proceedings in the courts of any jurisdiction or to
enforce in any lawful manner a judgment obtained in any other jurisdiction.
Borrowers irrevocably waive, to the full extent permitted by law,
any objection which it may have to the laying of venue of any such suit, action
or proceeding brought in any such court any claim that any such suit, action or
proceeding has been brought in an inconvenient forum. So long as this Agreement
remains in effect, Borrowers will at all times have an authorized agent in New
Jersey upon whom process may be served in any action or proceeding arising out
of or relating to this Agreement.
6.1.2. Performance Pending Resolution. Each party shall be required
to continue to perform its respective obligations under the Loan Documents
pending final resolution of any Dispute, unless to do so would be impossible or
impracticable under the circumstances.
ARTICLE VII
MISCELLANEOUS
7.1. Expenses. Borrowers shall pay to Lender or at Lender's direction,
upon execution of this Agreement, and otherwise on demand, all costs and
expenses incurred by Lender in connection with (a) the preparation, negotiation
and closing of this Agreement, Loan Documents and any related documents, and any
modifications hereto or thereto, it being agreed that reimbursement for said
legal fees incurred by Lender exclusive of disbursements shall not exceed
$5,000, and (b) instituting, maintaining, preserving, enforcing and foreclosing
the security interest in any of the Collateral, whether through judicial
proceedings, arbitration or otherwise, or in defending or prosecuting any
actions, arbitrations or proceedings arising out of or relating to this
Agreement or the Loan Documents including, without limitation, reasonable fees
and expenses of counsel, expenses for auditors, appraisers and environmental
consultants, lien searches, recording and filing fees and taxes.
7.2. Amendments, Indulgences, Etc. No amendment or waiver of any provision
of this Agreement nor consent to any departure by Borrower herefrom shall in any
event be effective unless the same shall be in writing and signed by Lender, and
then such amendment, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. No failure or delay on
the part of Lender in the exercise of any right, power, or remedy under this
Agreement or any of the other Loan Documents shall under any circumstances
constitute or be deemed to be a waiver thereof, or prevent the exercise thereof
in that or any other instance.
7.3. Notices. All notices given hereunder shall be in writing and deemed
validly given (a) three (3) business days after sent, postage prepaid, by
certified mail, return receipt requested, (b) one (1) business day after sent,
charges paid by the sender, by Federal Express Next Day Delivery or other
guaranteed delivery service, (c) when confirmation of transmission by facsimile
during normal business hours is received, or (d) when delivered by hand, upon
delivery, in each case to the intended recipient at its address shown below or
to such other address, or in care of such other person, as either party shall
hereafter specify to the other from time to time by due notice:
11
If to Borrowers:
Brooklyn Cheesecake & Desserts Company, Inc.
00 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxx Xxxxxxx
Fax No.: (000) 000-0000
X.X. Specialties, Inc.
Creative Bakeries, Inc.
00 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx Fax
No.: (000) 000-0000
If to Lender:
Xxxxxx X. Xxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxx Xxxx 00000
Fax No.: (000) 000-0000
7.4. Interpretation. Except as otherwise indicated, all agreements defined
herein refer to the same as from time to time amended or supplemented or the
terms thereof waived or modified in accordance herewith and therewith. Any
provision hereof found to be illegal, invalid or unenforceable for any reason
whatsoever shall not affect the legality, validity or enforceability of the
remainder hereof. Except as otherwise provided for in this Agreement, in the
computation of a period of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding." Unless otherwise expressly provided, the word
"including" does not limit the preceding words or terms.
7.5. Entire Agreement. This Agreement, and all agreements and instruments
to be delivered by the parties pursuant hereto or in connection herewith,
represent the entire understanding of the parties with respect to the subject
matter hereof, and supersede all other prior and contemporaneous agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof.
7.6. Governing Law. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors and
assigns, and construed and interpreted according to the laws of the State of New
York.
7.7. Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one and the same
instrument.
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7.8. Continuing Security Interest. This Agreement shall create a
continuing security interest in the Collateral and shall remain in full force
and effect until the payment in full of the obligations and all other amounts
payable under this Agreement and the Loan Documents. Upon any assignment or
transfer by Lender, the transferee shall thereupon become vested with all the
benefits in respect thereof granted to Lender herein or otherwise. Upon the
payment in full of the Obligations and all other amounts payable under this
Agreement, the security interest granted hereby shall terminate and all rights
to the Collateral shall revert to Borrowers. Upon any such termination, Lender
will, at Borrowers' expense, execute and delivery to Borrowers such documents as
Borrowers shall reasonably request to evidence such termination.
7.9 Limitation on Duties Regarding Preservation of Collateral. Lender's
sole duty with respect to the custody, safekeeping and physical preservation of
the Collateral in its possession, under Section 9-207 of the UCC or otherwise,
shall be to deal with it in the same manner as Lender deals with similar
property for its own account. Neither Lender, nor any of their respective
directors, officers, employees or agents shall be liable for failure to demand,
collect or realize upon all or any part of the collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of Borrowers or otherwise.
7.10. Paragraph Headings. The paragraph headings used in this Agreement
are for convenience of reference only and are not to affect the construction
hereof or be taken into consideration in the interpretation hereof.
NO FURTHER TEXT ON THIS PAGE
SIGNATURE PAGE FOLLOWS
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IN WITNESS WHEREOF, the parties have executed or caused to be executed this
Agreement as of the day and year first above written.
Borrowers:
Brooklyn Cheesecake & Desserts Company, Inc., formerly known as
Creative Bakeries, Inc.
By:
------------------------------
Xxxxxx X. Xxxxxxx
Title: Chief Executive Officer
X.X. Specialties, Inc., A New Jersey Corporation
By:
------------------------------
Xxxxxx X. Xxxxxxx
Title: Chief Executive Officer & President
Lender:
------------------------------
Xxxxxx X. Xxxxxxx
CONFIRMATION
IN WITNESS WHEREOF, on behalf of and upon due authorization from the Board of
Directors of Brooklyn Cheesecake & Desserts Company, Inc., formerly known as
Creative Bakeries, Inc. ("Corporation"), the director below has read and
understands, and hereby approves, confirms, and ratifies this Agreement on
behalf of the Board of Directors as of the date first written above; and the
director below further approves, confirms, and ratifies on behalf of the Board
of Directors the execution and delivery of this Agreement and all the acts by
Xxxxxxx performed on behalf of the Corporation in connection with this
Agreement.
By:
-------------------------------
Name: Xxxxxxx X. Xxxx
Title: Director
State of New Jersey, County of s s : On the day of in the year before me, the
undersigned, personally appeared Xxxxxx X. Xxxxxxx personally known to me or
proved to me on the basis of satisfactory evidence to be the individual(s) whose
name(s) is (are) subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their capacity(ies), and that by
his/her/their signature(s) on the instrument, the individual(s), or the person
upon behalf of which the individual(s) acted, executed the instrument.
----------------------------------------------------------
(signature and office of individual taking acknowledgment)
14
SCHEDULES AND EXHIBITS
-----------------------------------------
Exhibit 1.2 Note
Schedule 3.6 Liens and Encumbrances
Schedule 3.7 Litigation
Schedule 3.12 Places of Business
Schedule 3.14 Subsidiaries and Affiliates; Other Investments
Schedule 4.2.1 Indebtedness for Borrowed Money
15
Exhibit 1.2 Secured Promissory Note
16
Schedule 3.6 Liens and Encumbrances
Voicemail System
17
Schedule 3.7 Litigation
None
18
Schedule 3.12 Places of Business
00 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
19
Schedule 3.14 Subsidiaries and Affiliates; Other Investments
X.X. Specialties, Inc. A New Jersey Corporation is a wholly owned subsidiary of
Brooklyn Cheesecake & Desserts Company, Inc., formerly known as Creative
Bakeries, Inc.
20
Schedule 4.2.1 Indebtedness for Borrowed Money
1. Promissory Note payable to Xxxxxx X. Xxxxxxx in the amount of $88,000.00.
2. Promissory Note payable to Xxxxxx X. Xxxxxxx in the amount of $54,000.00.
3. Promissory Note payable to Xxxxxxx X. Xxxxxxx in the amount of $28,000.00.
4. Revolving Credit Note payable to Xxxxxx X. Xxxxxxx in the amount of
$50,000.00, representing funds loaned to Borrower from Xxxxxx X. Xxxxxxx'x
and Creative Bakers's Inc.'s American Express Business Capital Line.
5. Revolving Credit Note payable to Xxxxxxx Xxxxxxx and Xxxxxxx X. Xxxxxxx
CPA in the amount of $50,000.00 loaned to Borrower from Xxxxxxx Xxxxxxx'x
and Xxxxxxx X. Xxxxxxx CPA's Fleet Business Capital Express line of
credit.
6. Promissory Note payable to Xxxxxxx X. Xxxxxxx in the amount of $8,910.74.
21
