EXHIBIT 10.2
SECURED LOAN AGREEMENT
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This secured loan agreement (the "Agreement") is made and entered into as
of the 31st day of January, 1997 between HFMI ACQUISITION CORPORATION, a
Delaware corporation ("Newco"), and HARRY'S FARMERS MARKET, INC., a Georgia
corporation (the "Company").
RECITALS
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Newco and Company have entered into a transaction agreement pursuant to
which Newco has agreed to enter into a secured loan agreement providing for
certain secured loans to the Company. This Agreement is being entered into to
provide two separate credit facilities to Company: (i) a refinancing credit
facility and (ii) a development credit facility.
COVENANTS
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In consideration of the mutual representations, warranties, and covenants
set forth herein, and in consideration of any advances made hereunder to or for
the benefit of Company by Newco, the parties hereto agree as follows:
ARTICLE I
THE REFINANCING LOAN
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1.1 The Refinancing Loan. Newco agrees, on the terms and subject to the
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conditions hereinafter set forth, including, but not limited to, the conditions
to loan advances set forth in Article V hereof and the limitation on the amount
available from time to time to be borrowed set forth in Section 3.2 hereof, to
advance on the Closing (as defined in Section 3.7 hereof) the principal amount
of $12,000,000 (the "Refinancing Loan"). The Refinancing Loan shall be advanced
by wire transfer of Newco to the account of Company.
1.2 Purposes of the Refinancing Loan. Proceeds of the Refinancing Loan
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shall be used by Company to repay $12,000,000 in principal amount of
indebtedness owed to NationsBank, N.A. (South).
ARTICLE II
THE DEVELOPMENT LOAN
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2.1 The Development Loan. Newco agrees, on the terms and subject to the
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conditions hereinafter set forth, including, but not limited to, the conditions
to loan advances set forth in Article V hereof and the limitation on the amount
available from time to time to be borrowed set forth in Section 3.2 hereof, to
advance at any time and from time to time during the period commencing on the
date hereof and ending on the fifth anniversary of the date hereof (the "Draw
Loan Termination Date"), amounts requested by Company in an aggregate principal
amount not to exceed an $8,000,000 (the "Development Loan"). Each advance of
the Development Loan shall be in a minimum amount of $100,000 and shall be made
by wire transfer of Newco to the account of Company.
2.2 Purposes of the Development Loan. Proceeds of the Development Loan
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shall be used by Company solely (i) to fund expenditures of the Company provided
for in Section 3 of the Consulting Services Agreement of even date herewith
among Newco, the Company and Xxxxx X. Blazer and (ii) for general corporate
purposes in accordance with the last sentence of Section 3.2 hereof.
ARTICLE III
GENERAL PROVISIONS
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3.1 Promissory Notes. The Refinancing Loan and the Development Loan
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(together, the "Loans") shall be evidenced by promissory notes (the "Notes") of
even date herewith in the form attached hereto as Exhibit A-1 (the "Refinancing
Note") and Exhibit A-2 (the "Development Note").
3.2 Maximum Principal Balance. The aggregate outstanding principal
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balance of the Loans shall at no time exceed $20,000,000, less the principal
amount of debt contributed in respect of option exercises under Section 3.9 (the
"Maximum Principal Balance"); provided, however, that Newco shall have no
obligation to fund, nor shall Company have any right to borrow hereunder, during
any fiscal year, any portion of the Development Loan unless Newco and the
Company have approved a budget setting forth the use of the proceeds of such
funding. Notwithstanding the foregoing, the Company may use proceeds of, and
Newco shall be obligated to fund without regard to any budget and/or approval
thereof by Newco, the Development Loan for general corporate purposes in an
amount not to exceed $500,000 from the Closing through the first anniversary of
the Closing, $1,000,000 from the Closing through the second anniversary of the
Closing, $1,500,000
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from the Closing through the third anniversary of the Closing and $2,000,000
from the Closing through the fourth anniversary of the Closing ("Committed
Loans").
3.3 The Loan Account. Newco shall maintain a loan account on its books in
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which shall be recorded all advances under the Loans (collectively, "Advances")
made by Newco to Company pursuant to this Agreement, and all payments made by
Company with respect to the Loans; provided, however, that failure to maintain
such account or record any advances therein shall not relieve Company of its
obligations to repay the outstanding principal amount of the Loans, all accrued
interest thereon, and any amount payable with respect thereto in accordance with
the terms of this Agreement and the Notes.
3.4 Interest Rate.
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(a) Interest shall accrue daily on the aggregate outstanding principal
balance of the Loans, for the period commencing on the date the Loans are made
until the Loans are paid in full, (i) during the period commencing on the date
the Loans are made until the Draw Loan Termination Date, at a per annum rate of
5%, and (ii) thereafter at a per annum rate equal to the rate designated and
announced by Bank of America Illinois or its successor in interest ("B of A")
from time to time as its "reference rate" in effect at its principal office in
Chicago, Illinois, plus 1%. The interest rate shall be adjusted, from time to
time, on the same day on which B of A adjusts its "reference rate." Interest on
the outstanding principal amount of the Loans shall be payable in arrears on the
dates set forth herein and at maturity (whether at stated maturity, by
acceleration or otherwise).
(b) Interest shall be computed on the basis of a 360-day year and the
actual number of days elapsed.
(c) Any principal payment due under a Note not paid when due, whether
at stated maturity, by notice of repayment, by acceleration or otherwise, shall,
to the extent permitted by applicable law, thereafter bear interest (compounded
monthly and payable upon demand) at a rate which is 2% per annum in excess of
the rate of interest otherwise payable under this Agreement in respect of such
principal amount until such unpaid amount has been paid in full (whether before
or after judgment).
3.5 Payment of Interest. During the Interest Payment Period (as defined
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below) Company shall pay to Newco interest only on the outstanding principal
balance of the Loans on the first day of each fiscal quarter of the Company.
The "Interest Payment Period" shall mean the period commencing on the first day
of the fiscal quarter immediately following the date on which the Company
initially draws on the Loans under this Agreement and continuing through and
including
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the Draw Loan Termination Date. Thereafter Company shall pay principal and
interest as provided in Section 3.6 hereof.
3.6 Repayment of the Loans. If not earlier paid, exchanged in accordance
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with Section 3.9, or if not accelerated for payment, the outstanding principal
amount of the Loans shall, at the close of business on the Draw Loan Termination
Date, thereafter become an amortized term loan payable as follows: the
principal balance of the Loans shall be payable to Newco in 20 substantially
equal quarterly installments of principal (the amount of which periodic
installments of principal shall be determined at the close of business on the
Draw Loan Termination Date based on a schedule amortizing such outstanding
principal balance of the Loans as of such date in 40 substantially equal
quarterly installments of principal), plus accrued but unpaid interest, on the
first day of each of Newco's 20 consecutive fiscal quarters, commencing on the
first day of the first quarter commencing after the Draw Loan Termination Date
and continuing until the first day of the first quarter commencing after the
fifth anniversary of the Draw Loan Termination Date, when the entire remaining
principal balance of the Loans and all interest accrued thereon shall be due and
payable.
3.7 Term of this Agreement. This Agreement and all covenants and
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agreements of Newco hereunder shall be effective as of January 31, 1997 and
shall continue in effect until the last to occur of (i) the exercise,
expiration, or other termination of all remaining option rights granted in
Section 3.9 hereof, (ii) the date on which there is no amount (principal or
interest) remaining outstanding under the Notes and (iii) the date on which
Newco no longer has an obligation to make any Advances hereunder if Company were
to make a valid request for an Advance pursuant to and in accordance with
Article V hereof. Notwithstanding the effective date of this Agreement, the
closing of the loan transaction contemplated hereby (the "Closing") shall take
place at the offices of Xxxxxxxxxx, Xxxxxx & Xxxxxxx, L.L.P., 000 Xxxxxxxxx
Xxxxxx, X.X., Xxxxxxx, Xxxxxxx, at 8:00 a.m., local time, on January 31, 1997
(the "Closing Date").
3.8 Subordination of the Loans. The Loans and other obligations of the
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Company under the Notes and this Agreement have been subordinated in right of
payment, and the liens and security interest granted by the Company or its
Subsidiaries to secure the Loans have been subordinated in right of priority, to
certain indebtedness and any refinancing of such indebtedness, in each case
pursuant to a certain Intercreditor Agreement, dated as of the date hereof (the
"Intercreditor Agreement"), between Newco and Creditanstalt-Bankverein, as the
agent (in such capacity and together with any successor Agents, the "Agent") for
the lenders party to the Amended and Restated Credit Agreement, dated as of
December 30, 1994, or any agreement governing such refinancing indebtedness
(such agreement as amended, supplemented or refinanced, the "Bank Credit
Agreement"), among the Company, such lenders and the Agent. Any instrument,
document or agreement evidencing or securing the Loans, including, but not
limited to, the Notes, will on the date hereof or on the date of execution
thereof, whichever is later, shall either provide by its terms, or
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shall be inscribed with a legend indicating, that such instrument, document or
agreement has been subordinated pursuant to the Intercreditor Agreement and is
subject to the terms and conditions thereof.
3.9 Option and Mandatory Share Purchase.
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(a) Subject to the provisions of Section 3.9(b), Newco shall have the
option, at any time and from time to time after the earlier of (i) the
acceleration of either of the Loans or (ii) July 30, 1998 and up to the later of
the first day of the first fiscal quarter of the Company commencing after the
Draw Loan Termination Date, to purchase (the "Option") at a purchase price of
$40 per share (the "Option Price") up to that number of shares of Series B
Preferred Stock of the Company equal to (A) the Maximum Principal Balance,
divided by (B) the Option Price, provided, however, that Newco shall be
permitted to exercise the Option to purchase the shares of Series B Preferred
Stock in excess of 3,000,0000 shares (adjusted in the same manner as provided in
Section 3.9(e)) only to the extent it has initially funded the Development Loan
(at a rate of one share becoming exercisable for each $40 of funding) unless
such Development Loan was not funded due to a material breach of any of the
Company's obligations to Newco under the agreements entered into between the
Company and Newco on January 31, 1997 (which breach was not cured pursuant to
any applicable right to notice and cure).
(b) Newco shall be required to exercise the Option and thereby
purchase from the Company, and the Company shall be required to sell to Newco,
that number of shares of Series B Preferred Stock equal to (A) $12,000,000,
divided by (B) the Option Price, not later than the fifth anniversary of the
date hereof, provided that Newco shall not be required to consummate such
purchase if on such date there exists any Refinancing Default unless such
Refinancing Default is cured in accordance with the provisions of Section 10.2
hereof, in which event Newco shall be required to consummate such purchase upon
such cure.
(c) Newco shall pay the purchase price upon any exercise of the Option
by the contribution to the Company of a principal amount of the Loans equal to
the purchase price, and, to the extent the principal amount of outstanding Loans
is insufficient for this purpose, by delivery of cash.
(d) Upon exercise of any portion of the Option under this Section 3.9,
Newco's obligations to make additional Advances to Company under this Agreement
shall be reduced by an aggregate amount equal to the amount paid upon such
Option exercise.
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(e) In case of any reclassification or change of outstanding shares of
Series B Preferred Stock of the Company or in case of any consolidation or
merger of Company with or into any partnership, corporation, or other entity
(other than a merger in which Company is the surviving entity and which does not
result in any reclassification or change of outstanding shares of Series B
Preferred Stock of the Company, other than a change in number of shares of
Series B Preferred Stock of the Company issuable upon exercise of the Option) or
in case of any sale or conveyance to any partnership, corporation, or other
entity of the property of Company as an entirety or substantially as an
entirety, then the holder of the Notes shall have the right thereafter to
exercise the Option for the kind and amount of units and other securities and
property receivable upon such reclassification, change, consolidation, merger,
sale, or conveyance by a holder of the number of shares of Series B Preferred
Stock of Company issuable upon exercise of the Option immediately prior to such
reclassification, change, consolidation, merger, sale, or conveyance, subject to
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for herein.
3.10 Obligations. Subject to Section 10.2 hereof, all Advances made
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hereunder, and all interest accrued thereon, shall constitute one obligation of
Company with regard to enforcing the security interests granted by this
Agreement and by all other security interests, liens, claims, and encumbrances
from time to time hereafter granted to Newco by Company. For all other
purposes, the Development Loan and the Refinancing Loan shall be separate
obligations. In the event Newco makes one or more payments to a senior lender
to the Company to cure any payment default by the Company, such amounts shall be
considered Advances hereunder, shall bear interest (compounded monthly) at a
rate which is 2% per annum in excess of the rate referred to in Section
3.4(a)(ii), shall be payable on demand and shall be subordinated in accordance
with the terms of the Intercreditor Agreement.
3.11 Credit Resources. Company acknowledges that Newco has informed it
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that Newco may not from time to time in the future have cash, cash equivalents,
and credit resources sufficient to permit Newco to necessarily make all
requested Advances under this Agreement while maintaining sufficient working
capital for Newco's operating needs. Company agrees that in the event Newco
shall fail to fund the Loans as and to the extent required hereby solely as a
result of the unavailability to Newco of cash and/or credit resources to fund
the Loans and not as a result of any failure of Company to satisfy the
conditions precedent to Advances or of the occurrence of a Development Default
or Event of Default hereunder (a "Funding Default"), such Funding Default shall
not (a) constitute fraud (by any person or entity, including Newco and its
successors and assignees) or (b) give rise to any liability of any person or
entity (other than Newco and its successors and assignees) in any other tort,
and Company further agrees that it shall be limited to its remedies in contract
and in a non-fraud tort action against Newco. Newco and Company agree that this
Section 3.11 shall not diminish or otherwise affect in any way the amount of
damages for which Newco may be liable to Company in a contract or non-fraud tort
action for a Funding Default.
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3.12 Payment Method. All payments to be made by Company hereunder shall be
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made in lawful money of the United States, in immediately available funds,
without set off, counterclaims, deduction or withholding of any type.
3.13 Tax Treatment. Company and Newco both covenant and agree that they
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will each treat aggregate outstanding principal balances of the Refinancing Loan
and the Development Loan created hereunder as debt for income, state and local
tax purposes, unless the parties expressly otherwise agree.
ARTICLE IV
SECURITY AND COLLATERAL
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4.1 Security Interest. To secure payment and performance of Company's
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obligations hereunder and under the Notes, and any and all other indebtedness,
obligations or liabilities of any kind of Company to Newco arising under this
Agreement, whether now existing or hereafter arising, direct or indirect,
absolute or contingent, joint and/or several, Company hereby grants to Newco a
continuing security interest in and to the following property and interests in
property, whether now owned or hereafter acquired by Company and wheresoever
located:
(a) all of Company's property and rights and interest therein (except
in connection with the Nationwide Debt Agreement (as defined in Section 4.2),
accounts, equipment (including, but not limited to machinery, furniture,
fixtures, tools, and other tangible property), inventory, lease hold
improvements, contract rights (including its rights as lessee under all leases
of real property), general intangibles (other than intellectual property that is
required to be contributed to the HFMI Trust but including the Company's
interest in the HFMI Trust evidenced by HFMI Trust Certificate and the license
granted thereby), deposit accounts, tax refunds, chattel paper, instruments,
notes, letters of credit, documents, and documents of title, capital stock or
other ownership interests of all Subsidiaries (as defined in Section 8.10
hereof) and all shares of common stock of Newco owned by Company;
(b) all insurance proceeds of or relating to any of the foregoing;
(c) all of Company's books, records, and computer programs and data
relating to any of the foregoing; and
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(d) all accessories and additions to, substitutions for, and
replacements, products, and proceeds of, any of the foregoing (all of the
foregoing, and all of the security described in Sections 4.2 and 4.3, being
referred to collectively as the "Collateral").
4.2 Subsidiary Security Documents. Company shall cause each person or
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entity becoming a Subsidiary of Company from time to time to execute and deliver
to Newco, within thirty (30) days after such person or entity becomes a
Subsidiary, a guarantee substantially in the form attached hereto as Exhibit B-1
and a security agreement substantially in the form attached hereto as Exhibit B-
2, together with all financing statements and other related documents (including
real estate deeds to secure debt) as Newco may reasonably request and such
closing documents with respect to such Subsidiary of the type described in
Article IX as Newco may reasonably request, sufficient to grant to Newco a
second-priority lien and security interest in all assets of each Subsidiary of
the type described in Section 4.1, except to the extent prohibited by the Bank
Credit Agreement or the Company's and/or any Subsidiary's agreements with
Nationwide Life Insurance Company, or any refinancing of such indebtedness (such
agreements, together with any refinancing thereof, the "Nationwide Debt
Agreement").
4.3 Preservation of Collateral and Perfection of Security Interests
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Therein.
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(a) Company shall execute and deliver to Newco, and shall, except to
the extent prohibited by the Nationwide Debt Agreement, execute and deliver or
cause any Subsidiary of Company to execute and deliver to Newco at any time or
times hereafter at the request of Newco or the Agent (as defined in Section 4.4
below), all financing statements or other documents, including real estate deeds
to secure on debt on real estate owned by Company or its Subsidiaries and
Subsidiary security agreements (the "Security Instruments") (and pay the cost of
filing or recording the same in all public offices deemed reasonably necessary
by Newco), as Newco or the Agent may reasonably request, in forms satisfactory
to Newco, and take all further action that Newco or the Agent may request, or
which may be reasonably necessary or desirable, to perfect and keep perfected a
second-priority security interest in the Collateral granted by Company to Newco,
to create and perfect a second-priority security interest in the assets of any
Subsidiaries of Company provided in Section 4.2 hereof, or otherwise to protect
and preserve the Collateral and Newco's security interest therein. Should
Company fail to do so after receipt of five (5) business days' notice in
writing, Newco is authorized to sign any such Security Instruments as Company 's
agent.
(b) Company will furnish to Newco from time to time statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Newco may reasonably request, all
in reasonable detail.
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(c) Company shall notify Newco, within thirty (30) days after the
occurrence thereof, of the acquisition of any property by Company that is not
subject to the existing liens and security interests, in favor of Newco, of any
person or entity's becoming a Subsidiary, and of any other event or condition
that may require additional action of any nature in order to create, preserve,
or perfect the liens and security interests of Newco.
(d) Company shall, except to the extent prohibited by the Nationwide
Debt Agreement, cause each Subsidiary to cause all tangible Collateral to be
maintained and preserved in the same condition, repair and working order as when
new, ordinary wear and tear excepted, and in accordance with any manufacturer's
manual.
4.4 Alternate Security Agreements. If requested by Newco in order for the
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transactions contemplated by this Agreement to comply with the limitations and
restrictions of any applicable agreement between Newco and its lender or between
its lender and its lender's banks and any bank designated as agent for its
lender's banks ("Newco Bank Agent"), as amended from time to time, or to obtain
a waiver therefrom, Company hereby agrees that a security interest as referred
to in Section 4.1 hereof, and the additional security interests described in
Sections 4.2 and 4.3 hereof may be assigned by Newco to Newco's lender or to the
Newco Bank Agent.
ARTICLE V
CONDITIONS TO ADVANCES
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Notwithstanding any other provisions contained in this Agreement, Newco's
obligations to make any Advance (including an initial Advance) provided for in
Section 1.1 and Section 2.1 shall be conditioned upon the following:
5.1 No Material Adverse Change. No material adverse change, in the
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financial condition, results of operations, assets, or business of Company,
shall have occurred at any time or times subsequent to the date thereof, or, in
the event such a material adverse change shall have occurred, such change shall
have been fully remedied without any material adverse effect on the financial
condition, results of operations, assets or other business of Company and its
Subsidiaries taken as a whole, provided, however, that changes resulting from
the activities of Newco and the Company under the consulting agreement of even
date herewith between Newco and the Company shall not be taken into account for
this purpose ("Material Adverse Effect").
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5.2 No Default. Neither a Development Default (as that term is defined in
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Article X hereof) nor any event which, through the passage of time or the
service of notice or both, would mature into a Development Default (an "Event of
Default") shall have occurred and be continuing. The condition set forth in this
Section 5.2 shall be a condition only to Advances under the Development Loan.
5.3 Representations and Warranties. The representations and warranties
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contained in Article VI hereof and in the other Security Instruments shall be
true and correct on and as of the date such Advance is made.
5.4 Other Requirements. Newco shall have received, in form and substance
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satisfactory to it, all certificates, consents, affidavits, schedules,
instruments, and other documents which Company is obligated to provide to Newco
hereunder or which Newco may at any time reasonably request.
5.5 Advance Request. Other than the initial Advance, Newco shall have
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received, at least five business days prior to the day an Advance is to be made
hereunder, (i) a certificate of Company in the form attached hereto as Exhibit
C, which shall be signed by the chief operating officer, chief financial officer
or other officer of the Company that Newco deems appropriate, and (ii) copies of
all other documents required to be delivered to Newco under Section 7.1 below or
otherwise reasonably requested.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
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Company represents and warrants that:
6.1 Financial Statements. The financial statements to be furnished to
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Newco or the Agent in accordance with Section 7.1 below will be prepared in
conformity with generally accepted accounting principles consistently applied
throughout the periods involved, and will fairly present in all material
respects the financial condition of Company and its Subsidiaries at the dates
thereof and its results of operations for the periods indicated (subject, in the
case of financial statements covering less than one full fiscal year, to normal
recurring year-end adjustments).
6.2 [Intentionally Omitted.]
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6.3 [Intentionally Omitted.]
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6.4 No Pending Material Litigation or Proceedings. There are no actions,
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suits, investigations or proceedings pending or, to the knowledge of Company or
its Subsidiaries, threatened against or affecting Company or its Subsidiaries or
the business or properties of Company or its Subsidiaries, in any court or
before or by any governmental department, commission, board, agency or
instrumentality, or any arbitrator which could reasonably be expected to have a
Material Adverse Effect. Neither Company nor any of its Subsidiaries is in
default with respect to any order, writ, injunction, or decree of any court or
arbitrator or governmental agency.
6.5 Valid Organization; Due Authorization; Valid and Binding Agreement.
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(a) Company is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Georgia, with power and authority
to enter into and perform this Agreement and to issue the Notes and incur the
indebtedness to be evidenced thereby. The Company is qualified to do business in
each additional jurisdiction in which failure to so qualify could have a
material adverse affect on its property, business, operations, or prospects.
(b) This Agreement and the Notes have each been duly authorized by
all required action on the part of Company, and each of this Agreement and the
Notes has been duly executed and delivered by Company and constitutes the legal,
valid, and binding obligation of Company enforceable in accordance with its
terms.
(c) The execution and delivery of this Agreement and the Note and the
performance by Company of its obligations hereunder and thereunder are not in
contravention of any law, rule or regulation, including without limitation
Regulation G, T, U, or X of the Board of Governors of the Federal Reserve
System, and will not conflict with or result in any breach of any of the
provisions, or constitute a default under or result in the creation or
imposition of any lien or encumbrance (except as expressly provided herein) upon
any of the property of Company pursuant to any of the provisions of the articles
of incorporation or bylaws of the Company, as amended to date, or any agreement
or instrument to which Company is a party or by which it or its assets is bound.
(d) No consent, authorization, approval, or other action by, and no
notice to or filing with, any governmental authority or regulatory body or any
other person, which has not been
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obtained or taken, is required for the execution and delivery of, or the
performance by Company of its obligations under, this Agreement or the Note.
6.6 Conduct of Business. Since their inception, Company and each
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Subsidiary has conducted its business and operations in a manner consistent with
that of an owner and operator of retail food stores, food processing facilities,
baking and food distribution facilities and other activities incidental thereto
(the "Company Business").
6.7 Absence of Material Liabilities. Neither Company nor any Subsidiary
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has any material liabilities or obligations, either accrued, absolute,
contingent, or otherwise, except (a) as set forth in its most recent unaudited
balance sheet, (b) normal liabilities and obligations incurred in the ordinary
course of business since the date of its most recent unaudited balance sheet,
and (c) obligations under contracts and agreements entered into in the ordinary
course of business.
6.8 Tax Matters. Company and its Subsidiaries have filed all federal,
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state, and local tax returns which are required to be filed, except for
extensions duly obtained, and has paid, or made provisions for the payment of,
all taxes which have become due pursuant to such returns or pursuant to any
assessment received by Company or any Subsidiary, except such taxes, if any, as
are being contested in good faith and as to which adequate reserves have been
provided.
6.9 Ownership of Collateral; Security Interest Priority. At the time any
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Collateral becomes subject to a security interest of Newco hereunder, unless
Newco shall otherwise consent, (a) Company or a Subsidiary shall be the lawful
owner of such Collateral and have the right and authority to subject the same to
the security interest of Newco, (b) none of the Collateral or collateral granted
by any Subsidiary under a Subsidiary Security Agreement shall be subject to any
lien or encumbrance other than (i) those in favor of Newco and that in favor of
the Agent, (ii) those set forth in the Company Disclosure Schedule (as defined
in the Transaction Agreement of even date herewith between Newco and the
Company) and refinancings or renewals thereof, (iii) those permitted by the Bank
Credit Agreement, and (iv) those liens that secure indebtedness permitted by
Section 8.5 hereof (collectively, the "Permitted Liens"), nor shall there be an
effective financing statement covering any such Collateral on file in any public
office, other than those which evidence Permitted Liens. This Agreement creates
in favor of Newco a valid and perfected second-priority security interest in the
Collateral enforceable against Company or its Subsidiary, as the case may be,
and all third parties (other than the Agent) and secures the payment of
Company's obligations hereunder and under the Note, and all other obligations of
Company to Newco, whether now existing or hereafter arising, and all filings and
other actions necessary or desirable to create, preserve, or perfect such
security interest have been duly taken. Notwithstanding the foregoing
provisions of this Section 6.9, clause (b) and (c) and the immediately preceding
sentence of this Section 6.9 shall not be inaccurate by reason of
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any purchase money security interest (including pursuant to a financing lease)
in any equipment for Company's stores.
6.10 Location of Offices, Records, and Facilities. Company's chief
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executive office and chief place of business and the office where Company keeps
its records concerning its accounts, contract rights, chattel papers,
instruments, general intangibles, and other obligations arising out of or in
connection with the operation of its business or otherwise ("Receivables"), and
all originals of all leases and other chattel paper which evidence Receivables,
are located in the State of Georgia, at the address of Company set forth in
Section 11.4 hereof (as such address may be changed from time to time in
accordance therewith). The federal tax identification number of Company is 58-
2037452. The name of Company is "Harry's Farmers Market, Inc." and Company
operates under no other names other than the names "Harry's Farmers Market(R) "
and "Harry's In A Hurry(R)" on its stores.
6.11 Location of Inventory, Fixtures, Machinery, and Equipment.
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(a) All Collateral consisting of inventory, fixtures, machinery, or
equipment is located in the following locations: 0000 Xxxxx Xxxxxxx Xxxx,
Xxxxxxx, Xxxxxxx; 0000 Xxxxxxxxxx Xxx, Xxxxxxx, Xxxxxxx; 0000 Xxxxxxxxx Xxxxxx,
Xxxxxx, Xxxxxxx; 0000 Xxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx; 0000 Xxxxxxx Xxxx,
X.X., Xxxxxxx, Xxxxxxx; 00 Xxxxxx Xxxxx Xxxx, Xxxxxxxx, Xxxxxxx and 0000 Xxxxx
Xxxxx, Xxxxxx, Xxxxxxx (the "Xxxxxxx Property"), and at no other locations
without at least 30 days prior notice.
(b) If the Collateral described in clause (a) is kept at leased
locations, Company will, at the request of Newco, use reasonable best efforts to
obtain appropriate landlord lien waivers or subordination satisfactory to Newco,
unless such has been waived in writing by Newco for the particular instance.
(c) If the Collateral described in clause (a) is warehoused, Company
will, at the request of Newco, use reasonable best efforts to appropriate
warehousemen's notices, each reasonably satisfactory to Newco, unless such has
been waived by Newco for the particular instance.
6.12 Investment Company Act. Company is not an "investment company", or a
----------------------
company "controlled" by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.
13
6.13 Public Utility Holding Company Act. Company is not a "holding
----------------------------------
company", or an "affiliate" of a "holding company" or a "subsidiary company" of
a "holding company", within the meaning of the Public Utility Holding Newco Act
of 1935, as amended.
6.14 Subsidiaries. Company has no Subsidiaries as of the date of this
------------
Agreement, other than Roman Properties, Inc., Karelea, Inc., and Marthasville
Trading Company.
ARTICLE VII
AFFIRMATIVE COVENANTS
---------------------
Company covenants and agrees that so long as this Agreement remains in
effect:
7.1 Financial Statements.
--------------------
(a) Company shall cause to be furnished to Newco and, at Newco's
request, to Newco's lender or to the Agent: (i) as soon as practicable and in
any event within 45 days after the end of each interim fiscal quarter,
statements of income and cash flows of Company and its Subsidiaries for such
period and for the period from the beginning of the then current fiscal year to
the end of such quarter and a balance sheet of Company and its Subsidiaries as
of the end of such quarter, setting forth in each case, in comparative form,
figures for the corresponding periods in the preceding fiscal year, certified as
accurate by the chief financial officer or treasurer of the of Company, subject
to changes resulting from normal, recurring year-end adjustments; (ii) as soon
as practicable and in any event within 90 days after the end of each fiscal
year, statements of income and cash flows of Company and its Subsidiaries for
such year, and a balance sheet of Company and its Subsidiaries as of the end of
such year, setting forth in each case, in comparative form, corre sponding
figures for the preceding fiscal year and as of the end of the preceding fiscal
year, audited by independent certified public accountants selected by Company
and reasonably satisfactory to Newco; and (iii) as soon as practicable (but in
any event not more than five business days after the president or chief
financial officer of the Company obtains knowledge of the occurrence of an event
or the existence of a circumstance giving rise to an Event of Default or a
Development Default), notice of any and all Events of Default or Development
Defaults hereunder. All financial statements delivered to Newco, and if
applicable, Newco's lender or the Agent pursuant to the requirements of Section
7.1(a) shall be prepared in accordance with generally accepted accounting
principles consistently applied. Company authorizes Newco to discuss the
financial condition of Company with Company's independent public accountants and
agrees that such discussion or communication shall be without liability to
either Newco or Company's independent public accountants.
14
7.2 Inspection. Newco, or any person designated from time to time by
----------
Newco, shall have the right, from time to time hereafter, to call at Company's
or its Subsidiaries' place or places of business on reasonable notice during
ordinary business hours, and, without hindrance or delay, (a) to inspect, audit,
check, and make copies of and extracts from Company's and its Subsidiaries'
books, records, journals, orders, receipts, and any correspondence and other
data relating to the business of Company or its Subsidiaries or to any
transactions between the parties hereto, and (b) to discuss the affairs,
finances, and business of Company and its Subsidiaries with the executive
officers of Company and its Subsidiaries.
7.3 Conduct of Business.
-------------------
(a) Company shall, and shall cause each Subsidiary to (i) maintain its
existence (other than in connection with a liquidation of a Subsidiary permitted
under Section 8.6(d) hereof) and qualification to do business in good standing
in each jurisdiction where the failure to be so qualified would have a material
adverse effect on the financial condition of Company or its Subsidiaries, (ii)
maintain in full force and effect all material licenses, bonds, franchises,
leases, patents, contracts, and other rights necessary to the conduct of its
business, and (iii) comply with all applicable laws and regulations of any
federal, state, or local governmental authority, including those relating to
environmental matters, labor and employment laws and employee benefit matters.
(b) Company shall, and shall cause its Subsidiaries to, duly pay and
discharge (i) all lawful claims, whether for labor, materials, supplies,
services, or anything else, which might or could, if unpaid, become a lien or
charge upon its property or assets, unless and to the extent only that the
validity thereof is being contested in good faith and by such appropriate
proceedings, (ii) all of its trade bills when due in accordance with customary
practice, and (iii) all taxes, unless and to the extent that the validity
thereof is being contested by Company in good faith and by appropriate
proceedings.
(c) Company shall, and shall cause each Subsidiary to, conduct its
business and operations in a manner consistent with that of the Company
Business.
7.4 Insurance.
---------
(a) Company shall keep and maintain, and shall cause its Subsidiaries
to keep and maintain, at their sole cost and expense, (i) insurance on their
assets for at least 80% of the full replacement value (or the full insurable
value) thereof against loss or damage by fire, theft, explosion, and all other
hazards and risks ordinarily insured against by other owners or users of such
15
properties in similar businesses similarly situated; and (ii) public liability
insurance relating to Company's and its Subsidiaries' ownership and use of their
assets.
(b) All such policies of insurance shall be in such form and in such
amounts as is customary in the case of other owners or users of like properties
in similar businesses, with insurers as shall be reasonably satisfactory to
Newco, provided that Newco agrees that the current insurance maintained by the
Company on the date hereof is satisfactory. Upon demand, Company shall deliver
to Newco the original (or certified) copy of each policy of insurance, and
evidence of payment of all premiums for each such policy. Such policies of
insurance (except those of public liability) shall contain an endorsement in
form and substance acceptable to Newco, showing Newco as an additional insured.
Such endorsement, or an independent instrument furnished to Newco, shall provide
that all insurance companies will give Newco at least 30 days prior written
notice before any such policy or policies of insurance shall be altered or
canceled. In the event Company or any Subsidiary at any time or times hereafter
shall fail to obtain or maintain any of the policies of insurance required above
or to pay any premium in whole or in part relating thereto, then Newco, without
waiving or releasing any Development Default or Event of Default hereunder, may
at any time or times thereafter (but shall be under no obligation to do so)
obtain and maintain such policies of insurance and pay such premium and take any
other action with respect thereto which Newco deems advisable. All sums so
disbursed by Newco, including reasonable attorneys' fees, court costs, expenses,
and other charges relating thereto, shall be part of Company's obligations
hereunder, payable by Company to Newco on demand.
7.5 Notice of Suit or Adverse Change in Business. Company shall give
--------------------------------------------
written notice to Newco (a) as soon as possible, and in any event within five
business days after Company receives actual notice (written or oral) of any
material proceeding(s) being instituted or threatened to be instituted by or
against Company or any Subsidiary in any federal, state, or local court or
before any commission or other regulatory body (federal, state, or local), and
(b) as soon as possible, and in any event within five business days after
Company learns of any Material Adverse Effect.
7.6 Use of Proceeds. Except as otherwise authorized in writing by Newco,
---------------
Company shall use the proceeds of the Loans solely for the purposes set forth in
Article I and Article II hereof. Company will not, directly or indirectly, use
any part of such proceeds for the purpose of purchasing or carrying any margin
stock within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System or to extend credit to any person for the purpose of
purchasing or carrying any such margin stock.
7.7 [Intentionally Omitted.].
---------------------
7.8 [Intentionally Omitted.]
---------------------
16
7.9 Company Subsidiaries. Each corporation or other entity becoming a
--------------------
Subsidiary of Company after the date hereof will be duly organized, validly
existing, and in good standing under the laws of its jurisdiction of
organization and will be duly qualified to do business in each additional
jurisdiction where the failure to be so qualified would have a material adverse
effect on such Subsidiary. Each Subsidiary of Company will have all requisite
power to own or lease the properties used in its business and to carry on its
business as now being conducted and as proposed to be conducted. All
outstanding shares of capital stock or other units of ownership interest of each
class of each Subsidiary of Company will be validly issued and will be fully
paid and nonassessable and will be owned, beneficially and of record, by Company
or another Subsidiary of Company free and clear of any liens, except for the
pledge of such shares to the Agent.
7.10 Place of Business. Company will provide Newco with 60 days' prior
-----------------
written notice of any proposed change in the location of its chief executive
office. Company shall not change its name without 30 days prior written notice
to Newco.
7.11 Location of Inventory, Fixtures, Machinery, and Equipment.
---------------------------------------------------------
(a) All Collateral consisting of inventory, fixtures, machinery, and
equipment, shall at all times be located at the following locations: 0000 Xxxxx
Xxxxxxx Xxxx, Xxxxxxx, Xxxxxxx; 0000 Xxxxxxxxxx Xxx, Xxxxxxx, Xxxxxxx; 0000
Xxxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxx; 0000 Xxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx; 0000
Xxxxxxx Xxxx, X.X., Xxxxxxx, Xxxxxxx; 00 Xxxxxx Xxxxx Xxxx, Xxxxxxxx, Xxxxxxx
and 0000 Xxxxx Xxxxx, Xxxxxx, Xxxxxxx, and at no other locations without at
least thirty 30 days notice.
(b) If the Collateral described in clause (a) is at any time kept at
leased locations, at Newco's request, Company shall use its best reasonable
efforts to obtain appropriate landlord lien waivers or subordination
satisfactory to Newco, unless such has been waived in writing by Newco for a
particular instance.
(c) If the Collateral described in clause (a) is at any time
warehoused, Company shall, at Newco's request, send appropriate warehousemen's
notices, each satisfactory to Newco, unless such has been waived by Newco for
the particular instance.
7.12 HSR Act Compliance. In the event Newco determines that any filing is
------------------
required under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR Act") in connection with any exercise of the Option pursuant
to Section 3.9 hereof, Company agrees to
17
prepare and file with the Federal Trade Commission and the United States
Department of Justice within 15 business days from the date of notice from Newco
any notification required to be filed under the HSR Act or any rules or
regulations promulgated thereunder. Newco shall pay any filing fees required
under the HSR Act in connection with such filing. Any information about Company
or its Subsidiaries contained in such filing shall be true and accurate in all
material respects and responsive to the requirements of the HSR Act and any such
rules and regulations. Each of Company and Newco shall make available to the
other party such information as may be required for the preparation of any such
notification or related reports.
7.13 Newco Board Observer. (a) During the period commencing on the date
--------------------
hereof and ending on the fifth anniversary of the Draw Loan Termination Date,
Newco shall have the right to have a representative (the "Newco Observer")
attend meetings of the Company's Board of Directors, or any committee thereof,
and the Company shall permit the Newco Observer to attend all such meetings as
an observer, subject to reasonable limitations on such Observer to permit
maintenance of attorney-client privilege. The Newco Observer shall not have the
right to vote on any matter presented to the Board or any committee thereof.
The Company shall give the Newco Observer such notice of each meeting of the
Board of Directors or any committee thereof and all written materials and other
information given to the Company's directors and committee members in the same
manner and at the same time such notices, materials and other information are
given to the directors and committee members. If the Board of Directors or any
committee thereof proposes to take any action by written consent in lieu of a
meeting, the Company shall give written notice thereof to the Newco Observer
prior to the effective date of such consent describing the nature and substance
of such action.
(b) Newco shall cause the Newco Observer to keep confidential all
confidential information provided to it in its capacity as an observer pursuant
to this Section 7.13; provided, however, that the Newco Observer may disclose
such confidential information to Newco. Newco shall also be bound by this
Section 7.13 confidentiality obligation, except that Newco may disclose such
confidential information to its directors, officers, employees, consultants,
advisors and professional representatives who need to know such information so
long as prior to disclosing such confidential information to any such person,
Newco shall inform such person of the confidential nature of such information
and of Newco's obligations under this Section 7.13 and direct such person to
treat such information confidentially, provided that in the case of advisors or
consultants, such persons shall execute a confidentiality agreement reasonably
acceptable to the Company. The confidentiality obligations contained in this
Section 7.13 shall not apply to any information which (i) is or becomes
generally available to and known by the public (other than as a result of a
disclosure by Newco or the Newco Observer) or (ii) is or becomes available to
Newco or the Newco Observer on a non-confidential basis from a source other than
the Company.
18
ARTICLE VIII
NEGATIVE COVENANTS
------------------
Company covenants and agrees that, subject to the provision of Section
8.12, so long as this Agreement remains in effect (unless Newco shall give its
prior written consent thereto):
8.1 Guarantees; etc. Company shall not, and shall not permit any
----------------
Subsidiary to, guarantee, endorse or otherwise in any way become or be
responsible for obligations of any other person, whether by agreement to
purchase the indebtedness of any other person or through the purchase of goods,
supplies, or services, or by agreement to maintain net worth, working capital,
or other balance sheet covenants or conditions, or by way of stock purchase,
capital contribution, advance, or loan for the purpose of paying or discharging
any indebtedness or obligation of such other person or otherwise, except
endorsements of negotiable instruments for collection in the ordinary course of
business and except for guarantees of indebtedness permitted by Section 8.5 and
of non-material loans made by third parties to any employee.
8.2 Disposal of Property. Company shall not, and shall not permit any
--------------------
Subsidiary to, sell, lease, transfer, or otherwise dispose of any of its
properties, assets, and rights (or agree to sell, lease, transfer, or otherwise
dispose of any of its properties, assets, and rights) (including the Collateral)
to any party except in the ordinary course of business (including the
disposition of obsolete equipment), except for sales of equipment stored at the
Xxxxxxx Property and sales not in excess of $100,000, and provided, further,
that Newco shall not be entitled unreasonably to withhold consent hereunder.
8.3 Compensation to Shareholders and Others. Other than reasonable
---------------------------------------
salaries and other normal benefits (including options pursuant to Company's
stock option plans, relocation loans and other loans to employees), Company
shall not make any loans to, or pay any compensation, bonuses, fees, options, or
other amounts to any shareholder or to any of the affiliates or immediate family
members of any shareholder except to Company's Board of Directors (other than
Xxxxx Xxxxxx). Company shall not, without the prior written consent of Newco,
amend or modify any employment arrangement or agreement with any equity holder
or any affiliate or immediate family member of any equity holder previously
approved by Newco.
8.4 Distributions and Stock Redemptions. Company shall not, directly or
-----------------------------------
indirectly, (i) redeem, purchase, or otherwise retire any of its shares of
capital stock, or (ii) pay any dividends or make any distributions (in cash or
securities) with respect to shares of its capital stock in any fiscal year,
other than pro rata stock dividends.
19
8.5 Additional Indebtedness; Financial Covenants. (a) Except for trade
--------------------------------------------
payables and real estate and equipment leases that are classified as operating
leases for financial reporting purposes, in each case entered into in the
ordinary course of business, Company shall not, and shall not permit any
Subsidiary to, incur after the date hereof indebtedness other than (i)
indebtedness (which may be increased to $13,500,000) under the Bank Credit
Agreement, (ii) indebtedness under the Nationwide Debt Agreement, and (iii)
refinancings and renewals of indebtedness existing on the date hereof.
(b) The Company shall not agree to modify the financial covenants
under the Bank Credit Agreement, or governing indebtedness refinancing the Bank
Credit Agreement in any manner that would make such covenants more restrictive
from the Company's point of view than such covenants as in effect on the date
hereof, after giving effect to the ninth amendment thereto, provided, however
that in the event the Company is unable to consummate a refinancing of the Bank
Credit Agreement on such terms, Newco will not unreasonably withhold its consent
hereunder. For purposes of the foregoing sentence, Newco agrees that in
connection with any such refinancing on or after the third anniversary hereof,
(i) such consent will be provided upon the Company demonstrating that it has
used its reasonable best efforts to refinance such indebtedness so as to comply
with requirement under this Section 8.5(b) but was unable to do so, and (ii) any
subsequent intercreditor agreement entered into between Newco and the new senior
lender of the Company resulting from such refinancing as contemplated by Section
20 of that certain Intercreditor Agreement dated as of the date hereof between
Newco and the Agent (the "Intercreditor Agreement") will include a modified
version of clauses (ii), (iii) and (iv) of Section 13(b) of the Intercreditor
Agreement to take into account the changes in such financial covenants required
by the senior lender in such refinancing.
8.6 Mergers, Consolidations, Acquisitions, etc. Company shall not, and
------------------------------------------
shall not permit any Subsidiary to (a) be a party to any consolidation,
reorganization, or merger; (b) effect any change in its capital structure or in
any of its business objectives, purposes, and operation in a manner that would
materially adversely affect Newco; (c) acquire any material amount of capital in
or equity ownership of another corporation, partnership, limited liability
company or other business organization; (d) liquidate or dissolve or take any
action with a view toward liquidation or dissolution other than a liquidation of
a Subsidiary into the Company or another Subsidiary.
8.7 Articles of Incorporation and Bylaws. Company shall not make any
------------------------------------
changes in or amendments to its articles of incorporation and bylaws as they are
in effect as of the date hereof if such changes would materially adversely
affect Newco or its rights hereunder.
20
8.8 Liens. Company shall not, and shall not permit any Subsidiary to,
-----
create, incur, or suffer to exist any lien on any of the assets, rights,
revenues or property, real, personal, or mixed, tangible or intangible, whether
now owned or hereafter acquired, of Company or any Subsidiary, other than
Permitted Liens.
8.9 Transactions with Affiliates. Company shall not, and shall not permit
----------------------------
any Subsidiary to, become a party to, or become liable in respect of, any
material contract or undertaking with any Affiliate (as defined in Section 11.2
hereof) except in the ordinary course of business and on terms not less
favorable to Company or such Subsidiary than those which could be obtained if
such contract or undertaking was an arms length transaction with a person other
than an affiliate.
8.10 Subsidiaries. Company shall not, and shall not permit any Subsidiary
------------
to, create or otherwise make any material investment in any corporation,
partnership, or other entity outside of the ordinary course of business, unless
Company or such Subsidiary owns directly 100% of the issued and outstanding
equity interests therein (such 100% owned entity to be referred to herein as a
"Subsidiary").
8.11 Issuance of Senior Securities. Company shall not issue any preferred
-----------------------------
stock senior or pari passu to its Series B Preferred Stock.
8.12 Limitation on Negative Covenants. To the extent any of the covenants
--------------------------------
in Sections 8.1 through 8.6, 8.8, 8.9 and 8.10 above are more restrictive than
corresponding covenants in the Bank Credit Agreement, then the Company shall not
be deemed to be in breach of the foregoing covenants if it is not in breach of
such corresponding covenants in the Bank Credit Agreement.
ARTICLE IX
CONDITIONS OF CLOSING
---------------------
Newco's obligations hereunder shall be subject to (a) the performance by
Company prior to or on the Closing Date of all of its covenants theretofore to
be performed under this Agreement, (b) the accuracy of Company's representations
and warranties contained in this Agreement on the Closing Date, and (c) the
satisfaction (unless expressly waived by Newco), prior to or on the Closing
Date, of the following further conditions:
21
9.1 Opinion of Counsel. Newco shall have received on the Closing Date
------------------
from Xxxxxx & Bird an opinion, dated the Closing Date, in the form attached
hereto as Exhibit D with all blanks appropriately completed.
9.2 Proceedings and Documents. All proceedings to be taken in connection
-------------------------
with the transaction contemplated by this Agreement and all documents incident
to such transaction shall be satisfactory in form and substance to Newco and its
counsel, and Newco shall have received all documents or other evidence which it
and its counsel may reasonably have requested in connection with such
transaction, including copies of records of all proceedings in connection with
such transaction and compliance with the conditions set forth in this Article
IX, in form and substance satisfactory to Newco and its counsel.
9.3 Executed Documents. Company and its Subsidiaries shall have each duly
------------------
executed the following documents to which they are parties, and shall have
delivered to Newco the following:
(a) this Agreement;
(b) the Notes;
(c) the Subsidiary Security Agreement and Subsidiary Guaranty, where
applicable;
(d) Collateral Assignments of Tenant's Interest in Lease for each
lease of real property to which Company is a party; and
(e) such financing statements or other documents for filing with
public officials with respect to the Security Instruments as Newco may
reasonably request.
9.4 No Defaults. There shall exist no Event of Default or Default.
-----------
9.5 Additional Deliveries. Newco shall have received, in form and
---------------------
substance satisfactory to it, copies of the following documents:
22
(a) Company's articles of incorporation, certified as true and correct
by the Secretary of State of Georgia, dated within ten days prior to the Closing
Date, and certified as true and correct as of the Closing Date by a duly
authorized officer of the Company;
(b) the Company's bylaws, as amended, certified as true and correct as
of the Closing Date by the Secretary or Assistant Secretary of the manager of
the Company;
(c) certificate of good standing of the Company from the Secretary of
State of Georgia dated within ten days prior to the Closing Date; and
(d) evidence satisfactory in form and substance to Newco of all
required action taken by Company to authorize, among other things, the
execution, delivery, and performance by Company of this Agreement, the Notes,
and the Security Instruments and the consummation of the transactions
contemplated hereby, certified as true and correct as of the Closing Date by a
duly authorized officer of the manager of Company.
9.6 Opinion of Auditors. Newco shall have received on the Closing Date
-------------------
from Newco's independent public accountants an opinion, dated the Closing Date,
in form and substance satisfactory to Newco, to the effect that the Notes and
the obligations incurred hereunder are deemed to be debt, and not equity, in
accordance with generally accepted accounting principles.
9.7 Compliance with Newco Credit Agreements. Newco shall (a) determine in
---------------------------------------
good faith that this Agreement complies with applicable restrictions or
limitations under any lending arrangements or credit agreements to which Newco
is a party, (b) obtain a written waiver of noncompliance of the transactions
contemplated hereby with such agreements, or (c) deliver to its lender or the
Agent from Company such pledges, collateral, and other documentation as may be
required to evidence compliance with such lending arrangements or credit
agreements of the transactions contemplated hereby.
ARTICLE X
DEFAULT, RIGHTS AND REMEDIES OF NEWCO
-------------------------------------
10.1 Default. The occurrence of any of the following events or acts
-------
shall constitute a default under the Development Loan ("Development Default"):
23
(a) default in the payment when due of any portion of the principal on
the Development Note and the continuance of such default for a period of five
days;
(b) default in the payment when due of any portion of the interest on
the outstanding principal of the Development Note and the continuance of such
default for a period of 10 days;
(c) any representation or warranty now or hereafter made in this
Agreement, the Subsidiary Security Agreement, any other Security Instrument, or
any certificate hereunder or thereunder shall not be true, or any certificate,
statement, report, financial data, or notice furnished at any time by Company to
Newco shall be materially inaccurate;
(d) any breach of, or failure to perform or observe, any covenant,
condition, or agreement contained in the Subsidiary Security Agreement or in any
other Security Instrument, which in each case shall continue unremedied for a
period of 10 calendar days following written notice thereof from Newco;
(e) the breach of, or failure to perform or observe, any covenant,
condition, or agreement contained in Sections 7.6, 8.1, 8.2, 8.4, 8.5, 8.6, 8.7,
8.8, 8.10 or 8.11 of this Agreement that is not cured within thirty (30) days
after written notice of such breach is given by Newco to the Company.
(f) any breach of, or failure to perform or observe, any other
covenant, condition, or agreement contained in this Agreement or the Development
Note which shall continue unremedied for a period of 30 calendar days following
written notice thereof from Newco;
(g) Company or any Subsidiary shall (i) generally not, or shall be
unable to, or shall admit in writing its inability to pay its debts as such
debts become due, (ii) make an assignment for the benefit of creditors, petition
or apply to any tribunal for the appointment of a custodian, receiver, or
trustee for it or a substantial part of its assets, (iii) commence any
proceeding under any bankruptcy, reorganization, arrangements, readjustment of
debt, dissolution, or liquidation law or statute of any jurisdiction, whether
now or hereafter in effect, (iv) have any such petition or application filed or
any such proceeding commenced against it in which an order for relief is entered
or adjudication or appointment is made and which remains undismissed for a
period of 60 days or more, (v) by any act or omission, indicate its consent to,
approval of, or knowing acquiescence in any such petition, application, or
proceeding, or order for relief, or the appointment of a custodian, receiver, or
trustee for all or any substantial part of its properties, or (vi) suffer any
such custodianship, receivership, or trusteeship to continue undischarged for a
period of 60 days or more;
24
(h) any material breach of, or failure to perform or observe, any
material covenant, condition or agreement contained in the license agreement
between HFMI Trust and the Company of even date herewith, the administration and
servicing agreement among HFMI Trust, Newco and the Company of even date
herewith, the transfer agreement among HFMI Trust, Newco and the Company of even
date herewith or the consulting services agreement of even date herewith between
the Company and Newco, which in each case shall continue unremedied for a period
of 30 calendar days following written notice thereof from Newco;
(i) dissolution or liquidation of the Company;
(j) there occurs an event which results in a Material Adverse Effect
and such Material Adverse Effect shall not have been eliminated within sixty
(60) days of such event, provided, however, that changes resulting from the
activities of Newco and the Company under the consulting agreement of even date
herewith between Newco and the Company shall not be taken into account for this
purpose.
(k) Company or any Subsidiary shall (a) fail to pay any indebtedness
for borrowed money in excess of $100,000 (other than the Notes) of Company or
such Subsidiary, or any interest or premium thereon, when due (whether by
scheduled maturity, required prepayment, acceleration, demand, or otherwise) and
the effect of such failure is to accelerate, after the giving of notice, the
maturity of such indebtedness, or (b) fail to perform or observe any term,
covenant, or condition on its part to be performed or observed under any
agreement or instrument relating to any such indebtedness, when required to be
performed or observed, if the effect of such failure to perform or observe is to
accelerate, after the giving of notice, the maturity of such indebtedness, or
(c) default in the performance or observance of any obligations under leases of
real property if the effect of such default is to cause the termination of such
lease and any applicable cure period therein has expired;
(l) one or more final judgments, decrees or orders for the payment of
money in excess of $100,000 in the aggregate and not otherwise fully covered by
insurance shall be rendered against Company or any of its Subsidiaries;
(m) the Subsidiary Security Agreement, any other Security Instrument,
or the security interests created under this Agreement shall be terminated,
invalidated, or set aside or be declared ineffective or inoperative or in any
way cease to give or provide to Newco the benefits purported to be created
thereby; or
25
(n) there occurs a Change in Control of the Company. For this purpose
a Change in Control of the Company shall occur, except in each case for any such
occurrence resulting from the death or disability of Xxxxx X. Blazer, if: (i)
any individual, corporation, partnership, joint venture, association, trust,
unincorporated organization or other entity (each a "Person") or "group" (within
the meaning of Section 13(a)(3) of the Securities Exchange Act of 1934, as
amended), other than Xxxxx X. Blazer and Affiliates of Xxxxx X. Blazer, at any
time (a) acquires or becomes entitled to acquire or has or becomes entitled to
have beneficial ownership of securities (including options, warrants, rights and
convertible and exchangeable securities) having a majority of the voting power
of the capital stock of the Company (assuming exercise or conversion solely of
securities held by such Persons or group), or (b) is or becomes entitled to
appoint a majority of the directors of the Company, or (c) enters into any
binding arrangement, agreement or proposal to do any of the foregoing; or (ii)
Xxxxx X. Blazer or affiliates of Xxxxx X. Blazer, at any time, cease to be
entitled (a) to beneficial ownership of securities having a majority of the
voting power of the capital stock of the Company, or (b) to appoint a majority
of the directors of the Company; or (iii) a majority of the directors of the
Company at the date hereof are removed or replaced without the approval of a
majority of the directors of the Company.
Notwithstanding anything contained in this Agreement to the contrary,
to the extent any of the Non Monetary Development Defaults or Events of Default
herein are more restrictive than corresponding events of default in the
Company's Bank Credit Agreement, then the Company shall not be deemed to be in
default hereunder if it is not in default of such corresponding defaults under
the Bank Credit Agreement. As used herein, the term "Non Monetary Development
Defaults or Events of Default" means any of the Development Defaults or Events
of Default hereunder other than the defaults described in Section 10.1(a) and
(b).
10.2 Default; Remedies.
-----------------
(a) In the event a Development Default shall exist or occur Newco may:
(i) terminate its obligations under this Agreement in
respect of the Development Loan and cease to make any further advances under
Section 1.1 and Section 2.1, and shall have the right to declare the Development
Note due and payable in full, without demand, presentment, or notice of any
kind;
(ii) in its sole and absolute discretion, exercise any one
or more of the rights and remedies accruing to a secured party under the Uniform
Commercial Code in respect of the Development Note with respect to the
Collateral and any other applicable law upon default by a debtor;
26
(iii) exercise its rights under the other Security
Instruments in respect of the Development Loan;
(iv) exercise all or a portion of the Option;
provided, however, that in the case of any event or condition described in
Section 10.1(g) with respect to Company or any Subsidiary, Newco's obligations
under this Agreement shall automatically terminate forthwith and all amounts
owed by Company hereunder and under the Development Note shall automatically
become immediately due and payable without notice, demand, presentment, protest,
diligence, notice of dishonor, or other formality, all of which are hereby
expressly waived.
(b) In connection with the exercise of Newco's rights and remedies
provided in Section 10.2(a)(ii), Company hereby agrees to assemble the
Collateral and make it available to Newco at a place to be designated by Newco
which is reasonably convenient to both parties, authorizes Newco to take
possession of the Collateral with or without demand and with or without process
of law and to sell and dispose of the same at public or private sale and to
apply the proceeds of such sale to the costs and expenses thereof (including
reasonable attorneys' fees and disbursements actually incurred by Newco) and
then to the payment and satisfaction of the Development Loans. Any requirement
of reasonable notice shall be met if Newco sends such notice to Company, by
registered or certified mail, at least ten days prior to the date of sale,
disposition, or other event giving rise to a required notice. Newco may be the
purchaser at any such sale. Company expressly authorizes such sale or sales of
the Collateral in advance of and to the exclusion of any sale or sales of or
other realization upon any other collateral securing the Development Loans.
Newco shall have no obligation to preserve rights against prior parties. Company
hereby waives as to Newco any right of subrogation or marshaling of such
Collateral and any other collateral for the Development Loans. To this end,
Company hereby expressly agrees that any such collateral or other security of
Company or any other party which Newco may hold, or which may come to any of
them or any of their possession, may be dealt with in all respects and
particulars as though this Agreement were not in existence. The parties hereto
further agree that public sale of the Collateral by auction conducted in any
county in which any Collateral is located or in which Newco or Company does
business after advertisement of the time and place thereof shall, among other
manners of public and private sale, be deemed to be a commercially reasonable
disposition of the Collateral. Company shall be liable for any deficiency
remaining after disposition of the Collateral. Newco agrees and acknowledges
that there are different defaults for the Refinancing Loan and the Development
Loan and that it is possible for one of the loans to be in default while the
other is not. Consequently, the rights and remedies of Newco hereunder with
respect to the Collateral are limited to the amount of the obligations that are
the subject of the default.
27
(c) In the event of a Refinancing Default (as hereinafter defined),
and only in such event, Newco may declare the Refinancing Loan due and payable
or exercise rights equivalent to those in Section 10.2(a)(i), (ii) or (iii). For
purposes of this Agreement, a "Refinancing Default" shall mean:
(i) default in the payment when due of any portion of the
principal or interest due under the Refinancing Note and the continuance of such
default for a period of 30 days after written notice of such nonpayment is given
by Newco to the Company;
(ii) the breach of, or failure to perform or observe, any
covenant, condition or agreement contained in Sections 8.4, 8.6(a), 8.7, 8.9 or
8.11 that is not cured within 30 days after written notice of such breach is
given by Newco to the Company;
(iii) the breach of, or failure to perform or observe, any
covenant, condition or agreement contained in Section 8.5(a) that is not cured
within 60 days after written notice of such breach is given by Newco to the
Company;
(iv) the occurrence of a Change in Control of the Company,
as defined in 10.1(n), that is not cured within 90 days after written notice
thereof is given by Newco to the Company; or
(v) Company or any Subsidiary shall (i) generally not, or
shall be unable to, or shall admit in writing its inability to pay its debts as
such debts become due, (ii) make an assignment for the benefit of creditors,
petition or apply to any tribunal for the appointment of a custodian, receiver,
or trustee for it or a substantial part of its assets, (iii) commence any
proceeding under any bankruptcy, reorganization, arrangements, readjustment of
debt, dissolution, or liquidation law or statute of any jurisdiction, whether
now or hereafter in effect, (iv) have any petition or application filed or any
such proceeding commenced against it in which an order for relief is entered or
adjudication or appointment is made and which remains undismissed for a period
of 60 days or more, (v) by any act or omission, indicate its consent to,
approval of, or knowing acquiescence in any such petition, application, or
proceeding, or order for relief, or the appointment of a custodian, receiver, or
trustee for all or any substantial part of its properties, or (vi) suffer any
such custodianship, receivership, or trusteeship to continue undischarged for a
period of 60 days or more.
For purposes of the foregoing, the Company shall be deemed to have
cured the Refinancing Default referred to in clause (iii) above if the
prohibited indebtedness is repaid or
28
otherwise satisfied within the 60-day period and the Company shall be deemed to
have cured the Refinancing Default referred to in clause (iv) above if Xxxxx X.
Blazer or any Affiliate of Xxxxx X. Blazer acquires, within the 90-day period
referred to therein, a sufficient number of shares of capital stock of the
Company such that Xxxxx X. Blazer and his Affiliates have beneficial ownership
of securities having a majority of the voting power of the capital stock of the
Company.
(d) All of Newco's rights and remedies under this Agreement are
cumulative and nonexclusive. Any conversion of, or exercise of the Option with
respect to, less than all of the principal balance outstanding under the Notes
shall not affect Newco's rights and remedies with respect to any portion of a
Note not so converted or exercised. In addition, the parties hereto acknowledge
that irreparable damage would result if this Agreement were not specifically
enforced, and they therefore consent that the rights and obligations of the
parties under this Agreement may be enforced by a decree of specific performance
issued by a court of competent jurisdiction. Such remedy shall, however, not be
exclusive and shall be in addition to any other remedies which any party may
have under this Agreement or otherwise.
10.3 No Waiver. Newco's failure, at any time or times hereafter, to
---------
require Company's strict compliance with or performance of any provision of this
Agreement shall not waive, affect, or diminish any right of Newco thereafter to
demand such strict compliance or performance therewith. Any suspension or
waiver by Newco of a Default or an Event of Default by Newco under this
Agreement or the Note shall not suspend, waive, or affect any other Default or
Event of Default by Company under this Agreement or the Notes, whether the same
is prior or subsequent thereto and whether of the same or of a different kind or
character. None of the undertakings, agreements, warranties, covenants, and
representations of Company contained in this Agreement or the Notes and no
Default or Event of Default by Company under this Agreement or the Notes shall
be deemed to have been suspended or waived by Newco unless such suspension or
waiver is in writing signed by an officer of Newco.
ARTICLE XI
MISCELLANEOUS
-------------
11.1 No Oral Change. This Agreement may not be changed orally, but only
--------------
by an agreement in writing and signed by the party against whom enforcement of
any waiver, change, modification, or discharge is sought.
11.2 Assignment. Company may not assign any of its rights or delegate any
----------
of its obligations under this Agreement without Newco's written consent, which
consent may be withheld
29
in Newco's sole discretion. Newco may assign any of its rights or delegate any
of its obligations under this Agreement (including assignment of this Agreement,
the Notes and the Security Instruments), (a) without notice to Company, (i) to
any Affiliate of Newco (except Company) or (ii) in connection with any pledge of
its assets under Newco's credit agreements and (b) with notice, but without any
requirement of consent or approval, to any other person entity (except Company),
provided, however, that in no event shall Newco assign its rights to the Loans
unless (A) such assignee is (i) a company whose securities are publicly traded,
or (ii) a person or private entity, if such person or the controlling holders of
such entity are of good character in Newco's reasonable judgment, and (B) such
transferee has the financial resources to discharge Newco's obligations under
the Agreement. Any such assignment shall vest in the assignee all of the
benefits under the documents so assigned. For purposes of this Agreement, the
term "Affiliate" of a specified person shall mean any person or entity which
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the person specified.
11.3 Costs and Attorneys' Fees.
-------------------------
(a) Except as provided in Section 4.3 hereof and subsection (b) of
this Section 11.3, each of the parties hereto shall pay its own expenses
(including accounting and attorney's fees) incident to the negotiation and
execution of this Agreement and to the consummation of the transactions
contemplated hereby.
(b) The party to any action hereunder who does not prevail shall pay
to the prevailing party the court costs and reasonable attorneys' fees and other
expenses (including, but not limited to, fees and expenses of expert witnesses
or consulting experts) incurred directly or indirectly by the prevailing party
in connection with its prosecution or defense of the action, as the case may be.
11.4 Communications and Notices. All communications and notices provided
--------------------------
for in this Agreement or under the Note shall be in writing and shall be deemed
to have been duly given if delivered personally to the party to whose attention
the notice is directed or sent by overnight express, facsimile transmission,
express mail delivery service, or registered or certified mail, return receipt
requested, postage prepaid, and properly addressed as follows:
If to Company:
0000 Xxxxx Xxxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Blazer
Facsimile: (000) 000-0000
30
with a copy to:
Xxxxxx & Bird
One Atlantic Center
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxx X. Xxxxxx
Facsimile: (000) 000-0000
If to Newco:
00000 Xxxxxx Xxxx Xxxxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxx
Facsimile: (000) 000-0000
Any party may change the address to which notices hereunder are to be sent to it
by giving written notice of such change of address in the manner herein provided
for giving notice. Any notice delivered personally shall be deemed to have been
given when so delivered. Any notice delivered by facsimile transmission shall
be deemed to have been given on the earlier of the date it is actually received
or one day after such transmission. Any notice delivered by overnight express
courier will be deemed to have been given on the next succeeding business day
after the day it is sent to the intended recipient at the address set forth
above, and any notice delivered by registered or certified mail or express mail
delivery service shall be deemed to have been duly given on the earlier of the
date it is actually received or three business days after it is sent to the
intended recipient at the address set forth above.
11.5 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
-------------
AND GOVERNED BY THE LAWS OF THE STATE OF GEORGIA APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS
THEREOF.
11.6 Headings. The headings of the sections of this Agreement are inserted
--------
for convenience only and shall not be deemed to constitute a part of this
Agreement.
11.7 Severability. If any provision of this Agreement or the application
------------
thereof to any person or circumstance is held invalid or unenforceable, the
remainder of this Agreement and the application of such provision to other
persons or circumstances shall not be affected thereby, and the provisions of
this Agreement shall be severable in any such instance.
31
11.8 Avoidance. To the extent that Newco receives any payment on account
---------
of Company's obligations hereunder, and any such payment(s) and/or proceeds or
any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside, subordinated, and/or required to be repaid to a
trustee, receiver, or any other party under any bankruptcy law, state or federal
law, common law, or equitable cause, then, to the extent of such payment(s) or
proceeds received, Company's obligations hereunder, or part thereof intended to
be satisfied, shall be revived and continue in full force and effect, as if such
payment(s) and/or proceeds had not been received by Newco.
11.9 Counterparts. This Agreement may be executed in counterparts, each
------------
of which shall be deemed an original, but all of which together shall constitute
but one and the same instrument.
11.10 Entire Agreement. This Agreement, the Notes, the Security
----------------
Instruments and the exhibits to each of the foregoing contain the entire
agreement of the parties hereto with respect to the transactions contemplated
herein, and collectively supersede all prior understandings and agreements of
the parties with respect to the subject matter hereof.
11.11 General Indemnity. In addition to the payments pursuant to Section
-----------------
11.3, Company agrees to indemnify, pay, and hold Newco and any holder of the
Notes, and the officers, directors, employees, agents, and Affiliates of Newco
and any such holder (collectively, the "Indemnitees"), harmless from and against
any and all other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses, and disbursements of any kind or
nature whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel for any of such Indemnitees in connection with any
investigative, administrative, or judicial proceeding commenced or threatened,
whether or not any of such Indemnitees shall be designated a party thereto) that
may be imposed on, incurred by, or asserted against any Indemnitee, in any
manner relating to or arising out of the indebtedness created by this Agreement,
the Notes, the Subsidiary Security Agreement, the Security Instruments and the
exhibits or any other agreements or documents executed and delivered by Company
in connection therewith, including without limitation any damage to public or
worker health and safety or the environment, Newco's agreement to make the Loans
hereunder, or the use or intended use of the proceeds of the Loans (the
"indemnified liabilities"); provided that Company shall have no obligation to an
Indemnitee hereunder with respect to indemnified liabilities arising from the
gross negligence or willful misconduct of such Indemnitee. To the extent that
the undertaking to indemnify, pay, and hold harmless set forth in the preceding
sentence may be unenforceable because it violates any law or public policy,
Company shall contribute the maximum portion that it is permitted to pay under
applicable law to the payment and satisfaction of all indemnified liabilities
incurred by the Indemnitees or any of them. The provisions of the undertakings
and indemnification set out in this Section 11.11 shall survive satisfaction and
payment of Company's obligations hereunder and termination of this Agreement.
32
11.12 Limitation on Damages. Notwithstanding anything to the contrary
---------------------
herein no party hereto shall be liable for consequential, indirect, incidental,
special, speculative, or punitive damages (including, but not limited to, loss
of revenue or profit) whether such claim alleges breach of contract, tortious
conduct including, but not limited to, negligence, or any other theory.
11.13 Submission to Jurisdiction. Company agrees that any legal action or
--------------------------
proceeding with respect to this Agreement, the Notes, the Subsidiary Security
Agreement or any Security Instrument or the transactions contemplated hereby may
be brought in any court of the State of Georgia, or in any court of the United
States of America sitting in Georgia, and Company hereby submits to and accepts
generally and unconditionally the jurisdiction of those courts with respect to
their respective person and property, and irrevocably consents to the service of
process in connection with any such action or proceeding by personal delivery to
Company or by the mailing thereof by registered or certified mail, postage
prepaid to Company at the address for Company set forth in Section 11.4. Nothing
in this paragraph shall affect the right of Newco to serve process in any other
manner permitted by law or limit the rights of Newco to bring any such action or
proceeding against Company or property in the courts of any other jurisdiction.
Company hereby irrevocably waives any objection to the laying of venue of any
such suit or proceeding in the above described courts.
11.14 Waiver of Jury Trial. No party to this instrument, which includes
--------------------
any assignee, successor, heir or personal representative of a party, shall seek
a jury trial in any lawsuit, proceeding, counterclaim, or any other litigation
procedure based upon, or arising out of this Agreement, the Notes, the
Subsidiary Security Agreement, any Security Instrument, any related instrument,
or the dealings or the relationship between the parties. No party will seek to
consolidate any such action, in which a jury has been waived, with any other
action in which a jury trial cannot or has not been waived.
THE PROVISIONS OF THIS SECTION 11.14 HAVE BEEN FULLY DISCUSSED BY THE
PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO
PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE
PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR NEWCO IN ENTERING INTO THIS AGREEMENT.
IN WITNESS WHEREOF, each of the parties has caused this Secured Loan
Agreement to be duly executed in its behalf as of the day and year first written
above.
HFMI ACQUISITION CORPORATION
By: /s/ Xxxx X. Xxxxxx
---------------------------------
Name: Xxxx X. Xxxxxx
Title: Chief Executive Officer
HARRY'S FARMERS MARKET, INC.
By: /s/ Xxxxx X. Blazer
---------------------------------
Name: Xxxxx X. Blazer
Title: President
33
REFINANCING NOTE
----------------
$12,000,000 Atlanta, Georgia
As of January 31, 1997
FOR VALUE RECEIVED, Harry's Farmers Market, Inc., a Georgia
corporation (the "Company"), promises to pay to the order of HFMI Acquisition
Corporation, a Delaware corporation ( "Newco"), pursuant to the Loan Agreement
(as hereinafter defined) at such place as Newco may from time to time designate
in writing, in lawful money of the United States of America and in immediately
available funds, the principal sum of twelve million dollars ($12,000,000) and
any interest thereon, or, if less, the aggregate unpaid amount of the Loans made
pursuant to Section 1.1 of the Loan Agreement and any interest thereon.
This Note evidences the Refinancing Loan made under, and is referred
to in and is executed and delivered pursuant to, a Secured Loan Agreement dated
of even date herewith between the Company and Newco (the "Loan Agreement"), to
which reference is hereby made for a statement of the terms and conditions under
which this Note may be repaid and accelerated and for a description of the
collateral and security securing this Note. Capitalized terms not otherwise
defined herein shall have the meanings ascribed to them in the Loan Agreement.
Interest shall accrue daily on the aggregate outstanding principal
balance of the Refinancing Loan, for the period commencing on the date the
Refinancing Loan is made until the Refinancing Loan is paid in full, (i) during
the period commencing on the date the Refinancing Loan is made until the Draw
Loan Termination Date, at a per annum rate of 5%, and (ii) thereafter at a per
annum rate equal to the rate designated and announced by B of A or its
successors in interest from time to time as its "reference rate" in effect at
its principal office in Chicago, Illinois, plus 1%. The interest rate shall be
adjusted, from time to time, on the same day on which B of A adjusts its
"reference rate." Interest on the outstanding principal amount of the
Refinancing Loan shall be payable in arrears on the dates set forth herein and
at maturity (whether at stated maturity, by acceleration or otherwise).
Interest shall be computed on the basis of a 360-day year and the
actual number of days elapsed.
1
Any principal payment due under this Note not paid when due, whether
at stated maturity, by notice of repayment, by acceleration or otherwise, shall,
to the extent permitted by applicable law, thereafter bear interest (compounded
monthly and payable upon demand) at a rate which is 2% per annum in excess of
the rate of interest otherwise payable under this Note in respect of such
principal amount until such unpaid amount has been paid in full (whether before
or after judgment).
Except as otherwise provided in the Loan Agreement, if not earlier
paid, or if not accelerated for payment, the outstanding principal amount of the
Refinancing Loan shall, at the close of business on the Draw Loan Termination
Date, thereafter become an amortized term loan payable as follows: the principal
balance of the Refinancing Loan shall be payable to Newco in 20 substantially
equal quarterly installments of principal (the amount of which periodic
installments of principal shall be determined at the close of business on the
Draw Loan Termination Date based on a schedule amortizing such outstanding
principal balance of the Refinancing Loan as of such date in 40 substantially
equal quarterly installments of principal), plus accrued but unpaid interest, on
the first day of each of Newco's 20 consecutive fiscal quarters, commencing on
the first day of the first quarter commencing after the Draw Loan Termination
Date and continuing until the first day of the first quarter commencing after
the fifth anniversary of the Draw Loan Termination Date, when the entire
remaining principal balance of the Refinancing Loan and all interest accrued
thereon shall be due and payable.
This Note may be prepaid at any time without payment of penalty or
premium. All payments made hereunder shall be applied first to interest and then
to outstanding principal.
If payment hereunder becomes due and payable on a Saturday, Sunday, or
legal holiday, under the laws of the State of Georgia, the due date thereof
shall be extended to the next succeeding business day.
Demand, presentment, protest, diligence, notice of dishonor, and any
other formality are hereby expressly waived by the Company and any endorser or
guarantor.
THE INDEBTEDNESS EVIDENCED BY THIS NOTE IS SUBORDINATED TO CERTAIN
INDEBTEDNESS OF THE COMPANY PURSUANT TO AN INTERCREDITOR AGREEMENT DATED JANUARY
31, 1997, BETWEEN CREDITANSTALT-BANKVEREIN, AS AGENT, AND NEWCO, AS SUCH
2
AGREEMENT IS AMENDED FROM TIME TO TIME WITH THE APPROVAL OF NEWCO.
ARTICLE I
Refinancing Default, Rights and Remedies of Holder
--------------------------------------------------
1.1 The occurrence of a Refinancing Default shall be a default under
this Note. Upon any default under this Note, the holder of this Note may
declare this Note due and payable in full and exercise such other rights and
remedies as are available to the holder under the Loan Agreement or applicable
law.
1.2 If there is any default under this Note, and this Note is placed
in the hands of an attorney for collection, or is collected through any court,
including any bankruptcy court, the Company promises to pay to the order of the
holder hereof such holder's reasonable attorneys' fees and court costs actually
incurred in collecting or attempting to collect or securing or attempting to
secure this Note or enforcing the holder's rights with respect to the
Collateral, to the extent allowed by the laws of the State of Georgia or any
state in which any Collateral is situated.
ARTICLE II
Miscellaneous
-------------
2.1 THIS NOTE HAS BEEN DELIVERED IN, AND SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF, THE STATE OF GEORGIA APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICTS OF
LAW PROVISIONS THEREOF.
2.2 The holder of this Note may, with or without notice to any party,
and without affecting the obligations of any maker, surety, guarantor, endorser,
accommodation party, or any other party to this Note (i) extend the time for
payment of either principal or interest from time to time, (ii) release or
discharge any one or more parties liable on this Note, (iii) suspend the right
to enforce this Note with respect to any persons, (iv) change, exchange, or
release any property in which the holder has any interest securing this Note,
(v) justifiably or otherwise, impair any of the Collateral or suspend the right
to enforce against any such Collateral, and (vi) at any time it deems
3
it necessary or proper, call for and, should it be made available, accept, as
additional security, the signature or signatures of additional parties or a
security interest in property of any kind or description or both.
2.3 Any provision herein, or in the Loan Agreement, or any other
document executed or delivered in connection herewith or therewith, or in any
other agreement or commitment, whether written or oral, expressed or implied, to
the contrary notwithstanding, neither Newco nor any holder hereof shall in any
event be entitled to receive or collect, nor shall any amounts received
hereunder be credited, so that Newco or any holder hereof shall be paid, as
interest, a sum greater than the maximum amount permitted by applicable law to
be charged to the person primarily obligated to pay this Note at the time in
question. If any construction of this Note or the Loan Agreement, or any and all
other papers, agreements or commitments, indicate a different right given to
Newco or any holder hereof to ask for, demand, or receive any larger sum as
interest, such is a mistake in calculation or wording which this clause shall
override and control, it being the intention of the parties that this Note, the
Loan Agreement, and all other documents executed or delivered in connection
herewith shall in all ways comply with applicable law and proper adjustments
shall automatically be made accordingly. In the event that Newco or any holder
hereof ever receives, collects, or applies as interest, any sum in excess of
the maximum amount permitted by applicable law, if any, such excess amount shall
be applied to the reduction of the unpaid principal balance of this Note, and if
this Note is paid in full, any remaining excess shall be paid to the Company. In
determining whether or not the interest paid or payable, under any specific
contingency, exceeds the maximum amount permitted by applicable law, if any, the
Company and any holder hereof shall, to the maximum extent permitted under
applicable law: (a) characterize any non-principal payment as an expense or fee
rather than as interest, and (b) "spread" the total amount of interest
throughout the entire term of this Note.
IN WITNESS WHEREOF, the Company has caused this Refinancing Note to be
executed in its corporate name by the undersigned officer, thereunto duly
authorized.
HARRY'S FARMERS MARKET, INC.
By:/s/ Xxxxx X. Blazer
-------------------------------
Title: President
---------------------------
4
DEVELOPMENT NOTE
----------------
$8,000,000 Atlanta, Georgia
As of January 31, 1997
FOR VALUE RECEIVED, Harry's Farmers Market, Inc., a Georgia
corporation (the "Company"), promises to pay to the order of HFMI Acqusition
Corporation, a Delaware corporation ("Newco"), pursuant to the Loan Agreement
(as hereinafter defined) at such place as Newco may from time to time designate
in writing, in lawful money of the United States of America and in immediately
available funds, the principal sum of eight million dollars ($8,000,000) and any
interest thereon, or, if less, the aggregate unpaid amount of the Development
Loan made pursuant to Section 2.1 of the Loan Agreement and any interest
thereon.
This Note evidences the Development Loan made under, and is referred
to in and is executed and delivered pursuant to, a Secured Loan Agreement dated
of even date herewith between the Company and Newco (the "Loan Agreement"), to
which reference is hereby made for a statement of the terms and conditions under
which this Note may be repaid and accelerated and for a description of the
collateral and security securing this Note. Capitalized terms not otherwise
defined herein shall have the meanings ascribed to them in the Loan Agreement.
Interest shall accrue daily on the aggregate outstanding principal
balance of the Development Loan, for the period commencing on the date the
Development Loan is made until the Development Loan is paid in full, (i) during
the period commencing on the date the Development Loan is made until the Draw
Loan Termination Date, at a per annum rate of 5%, and (ii) thereafter at a per
annum rate equal to the rate designated and announced by B of A or its
successors in interest from time to time as its "reference rate" in effect at
its principal office in Chicago, Illinois, plus 1%. The interest rate shall be
adjusted, from time to time, on the same day on which B of A adjusts its
"reference rate." Interest on the outstanding principal amount of the
Development Loan shall be payable in arrears on the dates set forth herein and
at maturity (whether at stated maturity, by acceleration or otherwise).
Interest shall be computed on the basis of a 360-day year and the
actual number of days elapsed.
1
Any principal payment due under this Note not paid when due, whether
at stated maturity, by notice of repayment, by acceleration or otherwise, shall,
to the extent permitted by applicable law, thereafter bear interest (compounded
monthly and payable upon demand) at a rate which is 2% per annum in excess of
the rate of interest otherwise payable under this Note in respect of such
principal amount until such unpaid amount has been paid in full (whether before
or after judgment).
Except as otherwise provided in the Loan Agreement, if not earlier
paid, or if not accelerated for payment, the outstanding principal amount of the
Refinancing Loan shall, at the close of business on the Draw Loan Termination
Date, thereafter become an amortized term loan payable as follows: the principal
balance of the Refinancing Loan shall be payable to Newco in 20 substantially
equal quarterly installments of principal (the amount of which periodic
installments of principal shall be determined at the close of business on the
Draw Loan Termination Date based on a schedule amortizing such outstanding
principal balance of the Refinancing Loan as of such date in 40 substantially
equal quarterly installments of principal), plus accrued but unpaid interest, on
the first day of each of Newco's 20 consecutive fiscal quarters, commencing on
the first day of the first quarter commencing after the Draw Loan Termination
Date and continuing until the first day of the first quarter commencing after
the fifth anniversary of the Draw Loan Termination Date, when the entire
remaining principal balance of the Refinancing Loan and all interest accrued
thereon shall be due and payable.
This Note may be prepaid at any time without payment of penalty or
premium. All payments made hereunder shall be applied first to interest and
then to outstanding principal.
If payment hereunder becomes due and payable on a Saturday, Sunday, or
legal holiday, under the laws of the State of Georgia, the due date thereof
shall be extended to the next succeeding business day.
Demand, presentment, protest, diligence, notice of dishonor, and any
other formality are hereby expressly waived by the Company and any endorser or
guarantor.
THE INDEBTEDNESS EVIDENCED BY THIS NOTE IS SUBORDINATED TO CERTAIN
INDEBTEDNESS OF THE COMPANY PURSUANT TO AN INTERCREDITOR AGREEMENT DATED JANUARY
31, 1997, BETWEEN CREDITANSTALT-BANKVEREIN, AS AGENT, AND NEWCO, AS SUCH
2
AGREEMENT IS AMENDED FROM TIME TO TIME WITH THE APPROVAL OF NEWCO.
ARTICLE I
Advances
--------
1.1 Development Loan advances may be made from time to time by Newco
to the Company in the manner and on the terms and subject to the conditions set
forth in the Loan Agreement. Upon granting each loan advance (an "Advance"),
Newco shall record the making and amount of such advance on its books in a
separate loan account, and shall also record in the loan account all payments
made by the Company with respect to the Development Loan. The aggregate amount
of all Advances, less the amounts of payment of principal made by the Company,
shall be the principal amount outstanding under this Note. The loan account
shall be prima facie evidence of the unpaid amount of principal outstanding
under this Note; provided, however, that failure to maintain such account or
record any Advances therein shall not relieve the Company of its obligations to
repay the outstanding principal amount of the Development Loan, all accrued
interest thereon, and any amount payable with respect thereto in accordance with
the terms of this Note.
ARTICLE II
Development Default, Rights and Remedies of Holder
--------------------------------------------------
2.1 The occurrence of a Development Default shall be a default under
this Note. Upon any such default under this Note, the holder of this Note may
declare this Note due and payable in full and exercise such other rights and
remedies as are available to the holder under the Loan Agreement or applicable
law.
2.2 If there is any default under this Note, and this Note is placed
in the hands of an attorney for collection, or is collected through any court,
including any bankruptcy court, the Company promises to pay to the order of the
holder hereof such holder's reasonable attorneys' fees and court costs actually
incurred in collecting or attempting to collect or securing or attempting to
secure this Note or enforcing the holder's rights with respect to the
Collateral, to the extent allowed by the laws of the State of Georgia or any
state in which any Collateral is situated.
3
ARTICLE III
Miscellaneous
-------------
3.1 THIS NOTE HAS BEEN DELIVERED IN, AND SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF, THE STATE OF GEORGIA APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICTS OF
LAW PROVISIONS THEREOF.
3.2 The holder of this Note may, with or without notice to any party,
and without affecting the obligations of any maker, surety, guarantor, endorser,
accommodation party, or any other party to this Note (i) extend the time for
payment of either principal or interest from time to time, (ii) release or
discharge any one or more parties liable on this Note, (iii) suspend the right
to enforce this Note with respect to any persons, (iv) change, exchange, or
release any property in which the holder has any interest securing this Note,
(v) justifiably or otherwise, impair any of the Collateral or suspend the right
to enforce against any such Collateral, and (vi) at any time it deems it
necessary or proper, call for and, should it be made available, accept, as
additional security, the signature or signatures of additional parties or a
security interest in property of any kind or description or both.
3.3 Any provision herein, or in the Loan Agreement, or any other
document executed or delivered in connection herewith or therewith, or in any
other agreement or commitment, whether written or oral, expressed or implied, to
the contrary notwithstanding, neither the Newco nor any holder hereof shall in
any event be entitled to receive or collect, nor shall any amounts received
hereunder be credited, so that Newco or any holder hereof shall be paid, as
interest, a sum greater than the maximum amount permitted by applicable law to
be charged to the person primarily obligated to pay this Note at the time in
question. If any construction of this Note or the Loan Agreement, or any and all
other papers, agreements or commitments, indicate a different right given to
Newco or any holder hereof to ask for, demand, or receive any larger sum as
interest, such is a mistake in calculation or wording which this clause shall
override and control, it being the intention of the parties that this Note, the
Loan Agreement, and all other documents executed or delivered in connection
herewith shall in all ways comply with applicable law and proper adjustments
shall automatically be made accordingly. In the event that Newco or any holder
hereof ever receives, collects, or applies as interest, any sum in excess of the
maximum amount permitted by applicable law, if any, such excess amount shall be
applied to the reduction of the unpaid principal balance of this Note, and if
this Note is paid in full, any remaining excess shall be paid to the Company. In
4
determining whether or not the interest paid or payable, under any specific
contingency, exceeds the maximum amount permitted by applicable law, if any, the
Company and any holder hereof shall, to the maximum extent permitted under
applicable law: (a) characterize any non-principal payment as an expense or fee
rather than as interest, and (b) "spread" the total amount of interest
throughout the entire term of this Note.
IN WITNESS WHEREOF, the Company has caused this Development Note to be
executed in its corporate name by the undersigned officer, thereunto duly
authorized.
HARRY'S FARMERS MARKET, INC.
By: /s/ Xxxxx X. Blazer
---------------------------
President
5
EXHIBIT B-1
FORM OF SUBSIDIARY GUARANTY
GUARANTY
--------
THIS GUARANTY is made and entered into this ____ day of ______________,
1997 by ___________________________, a ___________________ corporation (the
"Guarantor"), in favor of HFMI Acquisition Corporation, a Delaware corporation
(hereinafter referred to as the "Lender"), as follows:
Section 1. Background Statement. Reference is made to the Secured Loan
Agreement, dated on or about the date hereof (the same as it may be amended,
modified or supplemented from time to time being referred to as the "Loan
Agreement"), between Harry's Farmers Market, Inc., a Georgia corporation (the
"Borrower"), and the Lender. Unless otherwise defined in this Guaranty, terms
used herein which are defined in the Loan Agreement shall have the same meaning
herein as therein ascribed to them. Pursuant to and subject to the terms and
conditions of the Loan Agreement, the Lender has agreed to loan certain funds to
the Borrower. The Guarantor is a wholly-owned subsidiary of the Borrower and
some of the proceeds of the Loans may be made available to the Guarantor from
time to time. The Guarantor will benefit from the making of the Loans under the
Loan Agreement as the continued success of the business operations of the
Guarantor are directly dependent upon the ability of the Borrower to obtain
adequate financing for its business operations and the expansion of such
operations and is therefore willing to execute this Guaranty.
Section 2. Guaranty.
(a) Guaranty. In consideration of the execution and delivery by the Lender
of the Loan Agreement and the making of Loans to the Borrower by the Lender
thereunder, the Guarantor, as primary obligor and not as surety merely, hereby
guarantees absolutely and unconditionally to the Lender the due and punctual
payment, when and as due (whether upon demand, at maturity, by reason of
acceleration or otherwise), and performance of all obligations of the Borrower
now or hereafter existing under the Loan Agreement and the Note, whether for
principal, interest, fees, expenses or otherwise and any and all other
indebtedness, obligations or liabilities of any kind of the Borrower to the
Lender, whether now existing or hereafter arising, direct or indirect, absolute
or contingent, joint or several, arising by operation of law or otherwise
(hereinafter referred to as the "Guaranteed Obligations"), and agrees to pay any
and all expenses (including, but not limited to, reasonable legal fees and
disbursements) which may be incurred by the Lender in enforcing its rights under
this Guaranty. The liability of the Guarantor under this Guaranty is primary,
unlimited and unconditional, and shall be enforceable before, concurrently or
after any claim or demand is made or suit is filed against the Borrower or any
other Obligor and before, concurrently or after any proceeding by the Lender
against any Collateral or other security for the Guaranteed Obligations and
shall be effective regardless of the solvency or insolvency of the Borrower or
any other Obligor at any time, the extension or modification of any of the
Guaranteed Obligations by operation of law or the subsequent reorganization,
merger or
-1-
consolidation of the Borrower or any change in its composition, nature,
ownership, personnel or location, and this Guaranty shall be a continuing
guaranty of any and all notes given in extension or renewal of the Guaranteed
Obligations. The Guarantor acknowledges, agrees and confirms that this is a
guaranty of payment and not of collection only and that demand for payment may
be made hereunder on any number of occasions in the amount of all or any portion
of the Guaranteed Obligations then due and no single demand shall exhaust the
rights of the Lender hereunder.
(b) Payment by Guarantor. If the Borrower shall fail to pay, when due and
payable, any Guaranteed Obligation, the Guarantor will, without demand or
notice, immediately pay the same to the Lender. If any Guaranteed Obligation
would be subject to acceleration, but such acceleration is enjoined or stayed,
the Guarantor will to the extent permitted by applicable law, purchase such
Guaranteed Obligation for a price equal to the outstanding principal amount
thereof, plus such accrued interest and other amounts as would have been payable
had such Guaranteed Obligation been paid or prepaid at the time of such
purchase. All payments by the Guarantor under this Guaranty shall be made
without any setoff, counterclaim or deduction whatsoever, and in the same
currency and funds as are required to be paid by the Borrower.
(c) Waiver. The Guarantor waives without any requirement of any notice to
or further assent by the Guarantor, to the fullest extent permitted by
applicable law, (i) diligence, presentment, demand, protest and notice of any
kind whatsoever, (ii) any requirement that the Lender exhaust any right or take
any action against any obligor or other person or any of the collateral or other
security for the Guaranteed Obligations, (iii) the benefit of all principles or
provisions of applicable law which are or might be in conflict with the terms of
this Guaranty, including, without limitation, Section 10-7-24 of the Official
Code of Georgia Annotated, (iv) notice of acceptance hereof, (v) notice of
Default or Event of Default, (vi) notice of any and all favorable and
unfavorable information, financial or other, about the Borrower, any Obligor or
other Person, heretofore, now or hereafter learned or acquired by the Lender,
(vii) all other notice to which the Guarantor or any other obligor might
otherwise be entitled, (viii) all defenses, set-offs and counterclaims of any
kind whatsoever (but not the right to bring an independent action), (ix) notice
of the existence or creation of any Guaranteed Obligations, (x) notice of any
alteration, amendment, increase, extension or exchange of any of the Guaranteed
Obligations, (xi) notice of any amendments, modifications or supplements to the
Loan Agreement or any instrument, document or agreement issued or delivered
pursuant thereto, (xii) notice of any release of collateral or other security
for the Guaranteed Obligations or any compromise or settlement with respect
thereto, (xiii) all diligence in collection or protection of or realization upon
the Collateral or any of the Guaranteed Obligations, and (xiv) the right to
require the Lender to proceed against any obligor with respect to the Guaranteed
Obligations.
(d) Consents. The Guarantor consents without the requirement of any notice
to or further assent by the Guarantor, to the fullest extent permitted by
applicable law, that (i) the time of payment of any Guaranteed Obligation may be
extended, (ii) any provision of the Loan
-2-
Agreement or any instrument, document or agreement issued or delivered pursuant
thereto may be amended, waived or modified, (iii) any obligor with respect to
the Guaranteed Obligations may be released from its obligations or other
obligors or guarantors substituted therefor or added, (iv) any collateral or
other property now or hereafter securing the Guaranteed Obligations may be
released, exchanged, substituted, compromised or subordinated in whole or in
part or any security may be added, and (v) the Lender may proceed against the
Guarantor or any other obligor without proceeding against any other obligor with
respect to the Guaranteed Obligations.
(e) Guarantor Bound. The Guarantor will remain bound under this Guaranty
notwithstanding any changes, extensions, exchanges, substitutions, releases,
compromises, subordinations, amendments, waivers or modifications or any other
circumstances, whether or not referred to in clauses (c) or (d) above, which
might otherwise constitute a legal or equitable discharge of a guaranty.
(f) Absolute Obligation. The obligations of the Guarantor hereunder are
irrespective of and shall not be dependent upon or affected by (i) the validity,
legality or enforceability of the Loan Agreement, the Note(s) or any instrument,
document or agreement issued or delivered pursuant thereto, (ii) the existence,
value or condition of any of the collateral or other security for the Guaranteed
Obligations, (iii) the validity, perfection or priority of the security interest
or lien in any of the collateral or other security, (iv) any action or failure
to take action by the Lender under, or with respect to, the Loan Agreement, the
Note(s), any instrument, document or agreement issued or delivered pursuant
thereto, any Guaranteed Obligation, any obligor or any of the collateral or
other security, (v) any other dealings among the Lender, the Borrower or any
other obligor, or (vi) any present or future law or order of any government
agency thereof purporting to reduce, amend or otherwise affect any obligations
of the Borrower or the Guarantor.
(g) Recovery of Payments. In the event that any or all of the amounts
guaranteed by the Guarantor are or were paid by the Borrower or any other
Obligor or are or were paid or reduced by application of the proceeds of any
Collateral, and all or any part of such payment is recovered from the Lender
under any applicable bankruptcy or insolvency law or otherwise, the liability of
the Guarantor under this Guaranty shall continue and remain in full force and
effect to the extent permitted by applicable law.
(h) Waiver of Reimbursement, Subrogation. The Guarantor hereby waives,
irrevocably and to the fullest extent permitted by applicable law, any and all
rights of subrogation, indemnification, reimbursement, contribution or similar
rights which the Guarantor may have against the Borrower or any other obligor or
any collateral for the Guaranteed Obligations, other security or otherwise. The
provisions of this subsection (h) shall survive the termination of this
Guaranty.
-3-
(i) Binding Nature of Certain Adjudications. Upon written notice of the
institution by the Lender of any action or proceedings, legal or otherwise, for
the adjudication of any controversy with the Borrower, the Guarantor will be
conclusively bound by the adjudication in any such action or proceedings and by
a judgment, award or decree entered therein. The Guarantor waives the right to
assert in any action or proceeding brought by the Lender, upon the Loan
Agreement, the Note(s) or any instrument, document or agreement issued or
delivered pursuant thereto, any offsets or counterclaims which the Guarantor may
have with respect there to.
(j) Validity and Enforceability of Guaranty. The Guarantor will take all
action required so that the guaranty contained herein will at all times be a
binding obligation of the Guarantor enforceable in accordance with its terms.
Section 3. Representations and Warranties. The Guarantor represents and
warrants to the Lender as follows:
a. Organization; Power; Qualification. The Guarantor is a corporation, duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, has the power and authority to own its properties
and to carry on its business as now being and hereafter proposed to be conducted
and is duly qualified and authorized to do business in each jurisdiction in
which the character of its properties or the nature of its business requires
such qualification or authorization.
b. Authorization of Guaranty. The Guarantor has the right and power and has
taken all necessary action to authorize it to guarantee the Guaranteed
Obligations hereunder and to execute, deliver and perform this Guaranty in
accordance with its terms. This Guaranty has been duly executed and delivered by
the duly authorized officers of the Guarantor and is a legal, valid and binding
obligation of the Guarantor enforceable in accordance with its terms.
c. Compliance of Guaranty With Laws, Etc. The execution, delivery and
performance of this Guaranty in accordance with its terms and the guaranty of
the Guaranteed Obligations hereunder do not and will not, by the passage of
time, the giving of notice or otherwise, (i) require any government approval or
violate any applicable law relating to the Guarantor or (ii) conflict with,
result in a breach of or constitute a default under the certificate of
incorporation or by-laws of the Guarantor.
d. Financial Interest. The Guarantor is a subsidiary of the Borrower and is
engaged in a related and mutually interdependent business with the Borrower and
will derive indirect financial and business advantages and benefits from the
Loans and other financial accommodations that the Lender may make to the
Borrower.
-4-
Section 4. Litigation. THE GUARANTOR, AND THE LENDER BY ITS ACCEPTANCE
HEREOF, EACH HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDINGS OF ANY
KIND OR NATURE IN ANY COURT IN WHICH AN ACTION MAY BE COMMENCED BY OR AGAINST
THE GUARANTOR ARISING OUT OF THIS GUARANTY, OR BY REASON OF ANY OTHER CAUSE OR
DISPUTE WHATSOEVER BETWEEN THE GUARANTOR AND LENDER OF ANY KIND OR NATURE. THE
GUARANTOR, AND THE LENDER BY ITS ACCEPTANCE HEREOF, EACH HEREBY AGREES THAT THE
FEDERAL COURT OF THE NORTHERN DISTRICT OF GEORGIA OR, AT THE OPTION OF THE
LENDER, ANY COURT IN WHICH LENDER SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS
AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY, SHALL
HAVE NONEXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES
BETWEEN THE GUARANTOR AND LENDER, PERTAINING DIRECTLY OR INDIRECTLY TO THIS
GUARANTY, OR TO ANY MATTER ARISING THEREFROM. THE GUARANTOR EXPRESSLY SUBMITS
AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING
COMMENCED IN SUCH COURTS, HEREBY WAIVING PERSONAL SERVICE OF THE SUMMONS AND
COMPLAINT, OR OTHER PROCESS OR PAPERS ISSUED THEREIN, AND AGREEING THAT SERVICE
OF SUCH SUMMONS AND COMPLAINT, OR OTHER PROCESS OR PAPERS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE GUARANTOR AT THE ADDRESS OF THE
GUARANTOR SET FORTH HEREIN. SHOULD THE GUARANTOR FAIL TO APPEAR OR ANSWER ANY
SUMMONS, COMPLAINT, PROCESS OR PAPERS SO SERVED WITHIN THIRTY (30) DAYS AFTER
THE MAILING THEREOF, IT SHALL BE DEEMED IN DEFAULT AND AN ORDER AND OR JUDGMENT
MAY BE ENTERED AGAINST HIM AS DEMANDED OR PRAYED FOR IN SUCH SUMMONS, COMPLAINT,
PROCESS OR PAPERS. THE NONEXCLUSIVE CHOICE OF FORUM SET FORTH IN THIS SECTION
SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT OBTAINED IN SUCH
FORUM OR THE TAKING OF ANY ACTION UNDER THE GUARANTY TO ENFORCE SAME IN ANY
APPRO PRIATE JURISDICTION.
Section 5. Titles and Captions. Titles and captions of Sections and
subsections in this Guaranty are for convenience only, and neither limit nor
amplify the provisions of this Guaranty.
Section 6. Severability of Provisions. Any provision of this Guaranty
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective only to the extent of such prohibition or
unenforceability without invalidating the remainder of such provision or the
remaining provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction.
-5-
Section 7. Governing Law. This Guaranty shall be construed in accordance
with and governed by the laws of the State of Georgia.
Section 8. Counterparts. This Guaranty may be executed in any number of
counterparts, each of which shall be deemed to be an original and shall be
binding upon all parties, their successors and assigns.
Section 9. Miscellaneous. This Guaranty and the other agreements
contemplated by this Guaranty supersede all prior negotiations, agreements and
understandings, and constitute the entire agreement between the parties with
respect to the subject matter thereof. All the provisions of this Guaranty shall
be binding upon the Guarantor and its successors and assigns, and Lender may
assign or transfer any of its rights under this Guaranty. Any term, covenant,
agreement or condition of this Guaranty may be amended or waived, and any
departure therefrom may be consented to, if, but only if, such amendment, waiver
or consent is in writing and is signed by an authorized officer of the Lender
and, in the case of any amendment, also by the Guarantor. Unless otherwise
specified in such waiver or consent, a waiver or consent given hereunder shall
be effective only in the instance and for the specific purpose for which given
and no waiver of any condition, or of the breach of any term, provision,
warranty, representation, agreement or covenant contained in this Guaranty,
whether by conduct or otherwise, in any one or more instances shall be deemed or
construed as a further or continuing waiver of any such condition or breach or a
waiver of any other condition or of the breach of any other term, provision,
warranty, representation, agreement or covenant contained in this Guaranty. The
failure of the Lender at any time or times to require performance of any
provisions of this Guaranty shall in no manner affect the right to enforce the
same. Whenever the context so requires, the singular number shall include the
plural and the plural shall include the singular, and the gender of any pronoun
shall include the other genders.
Section 10. Assignment by Lender. The Lender may, with five (5) days prior
written notice to the Guarantor, sell, assign or transfer any or all of the
Guaranteed Obligations and in such event each and every immediate and successive
assignee, transferee or holder of any of the Guaranteed Obligations shall have
the right to enforce this Guaranty, by suit or otherwise for the benefit of such
assignee, transferee or holder, as fully as if such assignee, transferee or
holder were herein by name specifically given such rights, power and benefits.
The Lender shall have unimpaired right prior and superior to that of any such
assignee, transferee or holder to enforce this Guaranty for the benefit of the
Lender as to such of the Guaranteed Obligations as are not sold, assigned or
transferred.
Section 11. Notices. All notices and other communications provided for
hereunder shall be in writing and given in accordance with the notice provisions
of the Loan Agreement and such provisions are hereby incorporated herein by this
reference as if fully set forth herein. The address of the Guarantor for such
purposes shall be as set forth on the signature page hereof, or such other
address notice of which is given in accordance with the provisions
-6-
hereof and the address of the Lender shall be as provided from time to time
pursuant to the Loan Agreement. The Guarantor agrees that if any notification of
intended disposition of Collateral or other security for the Guaranteed
Obligations or of any other act by the Lender is required by law and a specific
time period is not stated therein, such notification given in accordance with
the provisions of this Section 11, at least seven (7) days prior to such
disposition or act shall be deemed reasonable and properly given.
Section 12. Limitation on Guarantor's Liability. Notwithstanding Section 2
hereof, the liability of the Guarantor hereunder with respect to the Guaranteed
Obligations, and the aggregate liability of the Guarantor hereunder with respect
to the Guaranteed Obligations, shall not in each case exceed at any time the
Maximum Amount (as hereinafter defined) less the sum of the amounts, if any,
collected by or on behalf of the Lender from the Guarantor pursuant to any other
agreement or instrument executed by the Guarantor pursuant to the or as
contemplated by the Loan Agreement. The "Maximum Amount" means the greater of:
(a) the proceeds of any Loan that are used to purchase assets for the Guarantor
or are otherwise made directly or indirectly available to the Guarantor through
intercompany loans, advances, capital contributions or otherwise or (b) the
lesser of (i) $20,000,000 or (ii) 95% of (A) the fair salable value of the
property of the Guarantor as of the date hereof minus (B) the total liabilities
of the Guarantor (including contingent liabilities, but excluding liabilities of
the Guarantor owing to shareholders, directors, officers and other direct or
indirect affiliates of the Guarantor or the Borrower and excluding liabilities
of the Guarantor to the Lender) as of the date hereof.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed
by its duly authorized officer(s) as of the day and year first written above.
________________________________________, a
_________________ corporation
By:
----------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Attest:
------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
[CORPORATE SEAL]
-7-
Address:
-----------------------------------
-----------------------------------
-8-
EXHIBIT B-2
FORM OF SUBSIDIARY SECURITY AGREEMENT
SUBSIDIARY SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of __________, 1997 (this "Security
Agreement"), is made by __________________________, a _______________
corporation (the "Subsidiary"), in favor of HFMI ACQUISITION CORPORATION, a
Delaware corporation ("Newco").
WITNESSETH:
WHEREAS, Harry's Farmers Market, Inc., a Georgia corporation company (the
"Company") has entered into a Secured Loan Agreement dated as of January 31,
1997 (the "Loan Agreement"; all capitalized terms not otherwise defined herein
shall have the meanings set forth in the Loan Agreement), with Newco pursuant to
which Newco has agreed on the terms and conditions therein, to make the Loans
(as defined in the Loan Agreement) to the Company; and
WHEREAS, the Subsidiary is a wholly-owned subsidiary of the Company;
WHEREAS, as a condition to Newco entering into the Loan Agreement, Newco
has required that the Subsidiary unconditionally guarantee all of the Company's
obligations under the Loan Agreement pursuant to that certain Subsidiary
Guaranty dated as of the date hereof made by the Subsidiary in favor of Newco
(the "Guaranty");
WHEREAS, the Subsidiary, the Company and the other Subsidiaries of the
Company, though separate legal entities, are mutually dependent on each other in
the conduct of their respective businesses as an integrated operation and have
determined it to be in their mutual best interests to obtain financing from
Newco through their collective efforts;
WHEREAS, the Subsidiary acknowledges that it will receive direct and
indirect benefits from Newco making such financial accommodations available to
the Company under the Loan Agreement;
WHEREAS, as a further condition to the effectiveness of Newco's obligations
under the Loan Agreement, the Subsidiary has agreed, among other things, to
grant to Newco a security interest in and to the Collateral hereinafter
described;
NOW, THEREFORE, to secure all of the Subsidiary's obligations under the
Guaranty , including without limitation, all payment obligations thereunder (all
of the aforesaid indebtedness, obligations and liabilities of the Subsidiary
being herein called the "Secured Obligations", and all of the documents,
agreements and instruments between the Subsidiary and Newco evidencing or
securing the repayment of, or otherwise pertaining to the Secured Obligations
being herein collectively called the "Operative Documents"), for value received
and pursuant to the Loan Agreement, the Subsidiary hereby grants, assigns and
transfers to Newco a security interest in and to the following described
property whether now owned or existing or hereafter acquired or arising and
wherever located (all of which is herein collectively called the "Collateral"):
(a) all of the Subsidiary's real estate, accounts, equipment
(including, but not limited to machinery, furniture, fixtures, tools, and other
tangible property), inventory, leasehold improvements, contract rights
(including its rights as lessee under all leases of real property), general
intangibles, deposit accounts, tax refunds, chattel paper, instruments, notes,
letters of credit, documents, and documents of title;
(b) all insurance proceeds of or relating to any of the foregoing;
(c) all of the Subsidiary's books, records, and computer programs and
data relating to any of the foregoing; and
(d) all accessories and additions to, and substitutions for, and
replacements, products and proceeds of, any of the foregoing.
1. Representations, Warranties, Covenants and Agreements. The Subsidiary
further represents, warrants, covenants, and agrees with Newco as follows:
(a) Ownership of Collateral; Security Interest Priority At the time
any Collateral becomes subject to a security interest of Newco hereunder, unless
Newco shall otherwise consent, the Subsidiary shall be deemed to have
represented and warranted that (i) the Subsidiary is the lawful owner of such
Collateral and has the right and authority to subject the same to the security
interest of Newco; (ii) none of the Collateral is subject to any lien other than
Permitted Liens and there is
no effective financing statement covering any of the Collateral on file in any
public office, other than those evidencing Permitted Liens. This Security
Agreement creates in favor of Newco a valid and perfected security interest in
the Collateral enforceable against the Subsidiary and all third parties and
securing the payment of the Secured Obligations and all filings and other
actions necessary or desirable to create, preserve or perfect such security
interests have been duly taken.
(b) Location of Offices, Records and Facilities. The Subsidiary's
chief executive office and chief place of business and the office where the
Subsidiary keeps its records concerning its accounts, contract rights, chattel
papers, instruments, general intangibles and other obligations arising out of or
in connection with the sale or lease of goods or the rendering of services or
otherwise ("Receivables"), and all originals of all leases and other chattel
paper which evidence Receivables, are located in the State of Georgia, County of
Xxxxxx, at ____________________________. The Subsidiary will provide Newco with
prior written notice of any proposed change in the location of its chief
executive office and will not change the location of its chief executive office
without thirty (30) days' prior written notice to Newco. The federal tax
identification number of the Subsidiary is ___________. The name of the
Subsidiary is _____________________, and the Subsidiary operates under no other
names [except for "________________________"]. The Subsidiary shall not change
its name without thirty (30) days' prior written notice to Newco.
(c) Location of Inventory, Fixtures, Machinery and Equipment. All
Collateral consisting of inventory, fixtures, machinery or equipment is, and
will be, located in the locations set forth in Section 1(b). If the Collateral
described in this paragraph 1(c) is kept at leased locations or warehoused, the
Subsidiary will use its best efforts to obtain appropriate landlord's lien
waivers or appropriate warehousemen's notices have been sent, each satisfactory
to Newco, unless waived by Newco.
(d) Liens, Etc. The Subsidiary will keep the Collateral free at all
times from any and all liens, security interests or encumbrances other than
those described in paragraph 1(a)(ii) hereof and those consented to in writing
by Newco. Upon reasonable notice, Newco or its attorneys may at any and all
reasonable times inspect the Collateral and for such purpose may enter upon any
and all premises where the Collateral is or might be kept or located.
(e) Insurance. The Subsidiary shall keep the tangible Collateral
insured at all times against loss by theft, fire and other casualties and shall
otherwise comply with the insurance provisions set forth in Section 7.4 of the
Loan Agreement.
(f) Taxes, Etc. The Subsidiary will pay promptly, and within the time
that they can be paid without interest or penalty, any taxes, assessments and
similar imposts and charges, not being contested in good faith, which are now or
hereafter may become a lien, charge or encumbrance upon any of the Collateral.
If the Subsidiary fails to pay any such taxes, assessments or other imposts or
charges in accordance with this Section, Newco shall have the option to do so
and the Subsidiary agrees to repay forthwith all amounts so expended by Newco
with interest at the default rate set forth in the Loan Agreement.
(g) Further Assurances. The Subsidiary will do all acts and things and
will execute all financing statements and writings requested by Newco to
establish, maintain and continue a perfected and valid security interest of
Newco in the Collateral, and will promptly on demand pay all reasonable costs
and expenses of filing and recording all instruments, including the costs of any
searches reasonably deemed necessary by Newco to establish and determine the
validity and the priority of Newco's security interests. A carbon, photographic
or other reproduction of this Security Agreement or any financing statement
covering the Collateral shall be sufficient as a financing statement.
(h) Maintenance of Tangible Collateral. The Subsidiary will cause the
tangible Collateral to be maintained and preserved in the same condition, repair
and working order as when new, ordinary wear and tear excepted, and in
accordance with any manufacturer's manual, and shall forthwith, or, in the case
of any loss or damage to any of the tangible Collateral as quickly as
practicable after the occurrence thereof, make or cause to be made all repairs,
replacements, and other improvements made in connection therewith which are
necessary or desirable to such end. The Subsidiary shall promptly furnish to
Newco a statement respecting any loss or damage to any of the tangible
Collateral.
(i) Maintenance of Intangible Collateral. The Subsidiary shall
preserve and maintain all rights of the Subsidiary and Newco in the intangible
Collateral, including without limitation the payment of all maintenance fees and
the taking of appropriate action at the Subsidiary's expense to halt the
infringement of any of the intangible Collateral (except where its failure to
maintain such Collateral could not reasonably be expected to result in a
material adverse change).
(j) Special Rights Regarding Accounts Receivable. Newco or any of its
agents may, at any time and from time to time during the continuation of a
Default in its sole discretion, verify directly with the Subsidiary's account
debtors the accounts pledged hereunder in any manner. During the continuation of
a Default, Newco or any of its agents may, at any time from time to time in its
sole discretion, notify the Subsidiary's account debtors of the security
interest of Newco in the Collateral and/or direct such account debtors that all
payments in connection with such obligations
and the Collateral be made directly to Newco in Newco's name. During the
continuation of a Default, if Newco or any of its agents shall collect such
obligations directly from the Subsidiary's account debtors, Newco or any of its
agents shall have the right to resolve any disputes relating to returned goods
directly with the Subsidiary's account debtors in such manner and on such terms
as Newco or any of its agents shall deem appropriate. During the continuation
of a Default, the Subsidiary directs and authorizes any and all of its present
and future account debtors to comply with requests for information from Newco,
Newco's designees and agents and/or auditors, relating to any and all business
transactions between the Subsidiary and the Subsidiary's account debtors.
During the continuation of a Default, the Subsidiary further directs and
authorizes all of its account debtors upon receiving a notice or request sent by
Newco or Newco's agents or designees to pay directly to Newco any and all sums
of money or proceeds now or hereafter owing by the Subsidiary's account debtors
to the Subsidiary, and any such payment shall act as a discharge of any debt of
such account debtor to the Subsidiary in the same manner as if such payment had
been made directly to the Subsidiary. The Subsidiary agrees to take any and all
action as Newco may request to assist Newco in exercising the rights described
in this Section.
2. Events of Default. The occurrence of any Event of Default specified
in the Loan Agreement shall be deemed an event of default under this Security
Agreement.
3. Remedies. (a) Subject to subsection (b) below, upon the occurrence
of any such Event of Default, Newco shall have and may exercise any one or more
of the rights and remedies provided to it under this Security Agreement or any
of the other Operative Documents or provided by law, including but not limited
to all of the rights and remedies of a secured party under the Uniform
Commercial Code, and the Subsidiary hereby agrees to assemble the Collateral and
make it available to Newco at a place to be designated by Newco which is
reasonably convenient to both parties, authorizes Newco to take possession of
the Collateral with or without demand and with or without process of law and to
sell and dispose of the same at public or private sale and to apply the proceeds
of such sale to the costs and expenses thereof (including reasonable attorneys'
fees and disbursements, incurred by Newco) and then to the payment of the
indebtedness and satisfaction of other Secured Obligations. Any requirement of
reasonable notice shall be met if Newco sends such notice to the Subsidiary, by
registered or certified mail, at least ten (10) days prior to the date of sale,
disposition or other event giving rise to a required notice. Newco may be the
purchaser at any such sale. The Subsidiary expressly authorizes such sale or
sales of the Collateral in advance of and to the exclusion of any sale or sales
of or other realization upon any other collateral securing the Secured
Obligations. Newco shall have no obligation to preserve rights against prior
parties. The Subsidiary hereby waives as to Newco any right of subrogation or
marshaling of such Collateral and any other collateral for the Secured
Obligations. To this end, the Subsidiary hereby expressly agrees that any such
collateral or other security of the Subsidiary or any other party which Newco
may hold,
or which may come to any of them or any of their possession, may be dealt with
in all respects and particulars as though this Security Agreement were not in
existence. The parties hereto further agree that public sale of the Collateral
by auction conducted in any county in which any Collateral is located or in
which Newco or the Subsidiary does business after advertisement of the time and
place thereof shall, among other manners of public and private sale, be deemed
to be a commercially reasonable disposition of the Collateral. The Subsidiary
shall be liable for any deficiency remaining after disposition of the
Collateral.
(b) By its acceptance hereof, Newco agrees and acknowledges that there
are different defaults for the Refinancing Loan and the Development Loans and
that it is possible for one of the loans to be in default while the other is
not. Consequently, the rights and remedies of Newco hereunder with respect to
the Collateral are limited to the amount of the obligations that are the subject
of the default.
4. Remedies Cumulative. No right or remedy conferred upon or reserved to
Newco under any Operative Document is intended to be exclusive of any other
right or remedy, and every right and remedy shall be cumulative in addition to
every other right or remedy given hereunder or now or hereafter existing under
any applicable law. Every right and remedy of Newco under any Operative
Document or under applicable law may be exercised from time to time and as is
often as may be deemed expedient by Newco. To the extent that it lawfully may,
the Subsidiary agrees that it will not at any time insist upon, plead, or in any
manner whatever claim or take any benefit or advantage of any applicable present
or future stay, extension or moratorium law, which may effect observance or
performance of any provisions of any Operative Document; nor will it claim, take
or insist upon any benefit or advantage of any present or future law providing
for the valuation or appraisal of any security for its obligations under any
Operative Document prior to any sale or sales thereof which may be made under or
by virtue of any instrument governing the same; nor will it, after any such sale
or sales, claim or exercise any right, under any applicable law to redeem any
portion of such security so sold.
5. Conduct No Waiver. No waiver of default shall be effective unless in
writing executed by Newco and waiver of any default or forbearance on the part
of Newco in enforcing any of its rights under this Security Agreement shall not
operate as a waiver of any other default or of the same default on a future
occasion or of such right.
6. Governing Law; Definitions. This Security Agreement is a contract
made under, and the rights and obligations of the parties hereunder shall be
governed by and construed in accordance with, the laws of the State of Georgia
applicable to contracts made and to be performed entirely within such State.
Terms used but not defined herein shall have the respective meaning ascribed
thereto in the Loan Agreement. Unless otherwise defined herein or in the Loan
Agreement, terms used in Article 9 of the Uniform Commercial Code in the State
of Georgia are used herein as therein
defined on the date hereof. The headings of the various subdivisions hereof are
for convenience of reference only and shall in no way modify any of the terms or
provisions hereof.
7. Notices. All notices, demands, requests, consents and other
communications hereunder shall be delivered and shall be effective in the manner
specified in Section 9.4 of the Loan Agreement.
8. Rights Not Construed as Duties. Newco neither assumes nor shall it
have any duty of performance or other responsibility under any contracts in
which Newco has or obtains a security interest hereunder. If the Subsidiary
fails to perform any agreement contained herein, Newco may but is in no way
obligated to itself perform, or cause performance of, such agreement, and the
expenses of Newco incurred in connection therewith shall be payable by the
Subsidiary under paragraph 11.
9. Amendments. None of the terms and provisions of this Security
Agreement may be modified or amended in any way except by an instrument in
writing executed by each of the parties hereto.
10. Severability. If any one or more provisions of this Security
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected, impaired or prejudiced thereby.
11. Expenses. The Subsidiary agrees to indemnify Newco from and against
any and all claims, losses and liabilities growing out of or resulting from this
Security Agreement (including, without limitation, enforcement of this Security
Agreement), except claims, losses or liabilities resulting from Newco's gross
negligence or willful misconduct.
12. Successors and Assigns; Termination. This Security Agreement shall
create a continuing security interest in the Collateral and shall (a) remain in
full force and effect until full payment and performance of the Secured
Obligations (b) be binding upon the Subsidiary, its successors and assigns and
(c) inure, together with the rights and remedies of Newco hereunder, to the
benefit of Newco and its successors, transferees and assigns as permitted under
Section 11.2 of the Loan Agreement. Upon the full payment and performance of
the Secured Obligations the
security interests granted hereby shall terminate and all rights to the
Collateral shall revert to the Subsidiary. Upon any such termination, Newco
will, at the Subsidiary's expense, execute and deliver to the Subsidiary such
documents as the Subsidiary shall reasonably request to evidence such
termination.
13. Subordination. THIS AGREEMENT, THE LIENS AND SECURITY INTERESTS
GRANTED HEREBY AND THE RIGHTS AND REMEDIES OF NEWCO HEREUNDER HAVE BEEN
SUBORDINATED PURSUANT TO, AND ARE SUBJECT TO THE TERMS AND CONDITIONS OF, THAT
CERTAIN INTERCREDITOR AGREEMENT DATED AS OF THE DATE HEREOF BETWEEN NEWCO AND
THE AGENT, AS SUCH AGREEMENT IS AMENDED FROM TIME TO TIME WITH THE APPROVAL OF
NEWCO.
14. Submission to Jurisdiction. The Subsidiary agrees that any legal
action or proceeding with respect to this Security Agreement or the transactions
contemplated hereby may be brought in any court of the State of Georgia, or in
any court of the United States of America sitting in Georgia, and the Subsidiary
hereby submits to and accepts generally and unconditionally the jurisdiction of
those courts with respect to their respective person and property, and
irrevocably consents to the service of process in connection with any such
action or proceeding by personal delivery to the Subsidiary or by the mailing
thereof by registered or certified mail, postage prepaid addressed to the
Subsidiary at the address for notices as provided in Section 7 hereof. Nothing
in this paragraph shall affect the right of Newco to serve process in any other
manner permitted by law or limit the right of Newco to bring any such action or
proceeding against the Subsidiary or property in the courts of any other
jurisdiction. The Subsidiary hereby irrevocably waives any objection to the
laying of venue of any such suit or proceeding in the above described courts.
15. Waiver of Jury Trial. No party to this instrument, which includes any
assignee, successor, heir or personal representative of a party, shall seek a
jury trial in any lawsuit, proceeding, counterclaim, or any other litigation
procedure based upon, or arising out of this Agreement, any related instrument,
or the dealings or the relationship between the parties. If the subject matter
of any such litigation is one in which the waiver of a jury trial is prohibited,
if at all, under the controlling law of the applicable jurisdiction, by
constitutional or statutory provision, no party hereto will present as a defense
or counterclaim in such litigation any claim which would reduce or offset any
amount or right claimed under the provisions of this Agreement. No party will
seek to consolidate any such action, in which a jury has been waived, with any
other action in which a jury trial cannot or has not been waived.
THE PROVISIONS OF THIS SECTION 15 HAVE BEEN FULLY DISCUSSED BY THE PARTIES
HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY HAS IN
ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER
PARTY THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL
INSTANCES. THIS PROVISION IS A MATERIAL INDUCEMENT FOR NEWCO IN ENTERING INTO
THIS AGREEMENT.
IN WITNESS WHEREOF, the Subsidiary has caused this Security Agreement to be
duly executed as of the day and year first set forth above.
[NAME OF SUBSIDIARY]
By:
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Its:
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