EXHIBIT 10.31
INVESTMENT AND LOAN AGREEMENT
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THIS INVESTMENT AND LOAN AGREEMENT (this "Agreement") is made and entered
into as of the 12th day of December, 1996 by and among La-Xxx Xxxxxxx
UrbanCityFoods, LLC (the "Company") and BET Holdings, INC. (BET").
WHEREAS, BET desires to make a $5,000,000 investment in the Company in
exchange for a 15% membership interest and is also willing to make a loan to the
Company in the maximum principal amount of $10,000,000; and
WHEREAS, the Company desires to sell BET a 15% membership interest and to
borrow up to $10,000,000 from BET.
NOW THEREFORE, in consideration of the foregoing, the mutual promises
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and BET hereby agree
as follows:
ARTICLE 1
DEFINITIONS
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For the purposes of this Agreement, the following terms shall have the
following meanings:
"Advance" shall mean any of the First Advance or the Second Advance.
"Affiliate" shall have the meaning given thereto in Section 6.2(p).
"BET" shall have the meaning given thereto in the first paragraph hereof
and shall include any successor or assigns of its rights hereunder.
"Burger King Documents" shall mean any and all agreements by and between
the Company and Burger King Corporation, including any and all Franchise
Agreements and Burger King Restaurant Number Assignments.
"Business Plan" shall have the meaning given thereto in Section
4.1(h)(iii).
"Closing Date" shall have the meaning given thereto in Section 2.7.
"Company" shall have the meaning given thereto in the first paragraph
hereof.
"Financing Statements" shall have the meaning given thereto in Section
3.1(b).
"First Advance" shall have the meaning given thereto in Section 2.3(b).
"FMAC" shall mean Franchise Mortgage Acceptance Company, LLC.
"FMAC Documents" shall mean the documents pursuant to which the Company
borrowed Seven Million Eighty Eight Dollars ($7,000,088.00) from FMAC.
"Investor Rights Agreements" shall mean that certain Investor Rights
Agreement by and between the Company, Management, UrbanCityFoods Holding, Inc.,
and BET in substantially the form attached hereto as Exhibit A.
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"Loan" shall have the meaning given thereto in Section 2.2(a).
"Loan Advance Criteria" shall have the meaning given thereto on Schedule
4.2(c).
"Loan Documents" shall mean this Investment and Loan Agreement, the Notes,
the Investor Rights Agreement, the Mortgages, the Assignments of Leases, the
Security Agreement, the Financing Statements, and all other documents, exhibits,
and schedules executed and delivered in connection herewith or therewith,
including all amendments, modifications and supplements of or to all such
documents.
"Management" shall have the meaning given thereto in Section 2.6.
"Note" and "Notes" shall have the meaning given thereto in Section 2.4(a).
"Operation Agreement" shall mean the Amended and Restated Operating
Agreement of the Company, dated as of September 13, 1996, between Management and
UrbanCityFoods Holdings, Inc.
"Person" shall have the meaning given thereto in Section 6.2(p)(i).
INVESTMENT AND LOAN AGREEMENT PAGE 2
"Projections" shall have the meaning given thereto in Section 4.1(h) (ii).
"Second Advance" shall have the meaning given thereto in Section 2.3(c).
"Security Agreement" shall mean a security agreement substantially in the
form attached hereto as Exhibit B executed by the Company in favor of BET.
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"Senior Indebtedness" shall have the meaning given thereto in Section 2.5.
ARTICLE 2
AMOUNTS AND TERMS OF THE INVESTMENT AND LOAN
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2.1 THE INVESTMENT.
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Simultaneously herewith BET will contribute $5,000,000 to the Company
(the "Equity Investment") in exchange for a 15% membership interest in the
Company (the "Membership Interest"). The Membership Interest shall be issued to
BET free and clear of all liens and encumbrances and any other third party
claims whatsoever. Simultaneously, with the execution of this Agreement,
the parties hereto will enter into a certain amended and restated operating
agreement for the Company in the form of Exhibit J attached hereto.
2.2 THE LOAN.
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(a) BET agrees, subject to the terms and conditions hereinafter set
forth, to provide financing to the Company in the maximum principal amount of
Ten Million Dollars ($10,000,000) (the "Loan").
(b) The Loan shall be convertible, at any time until paid in full,
in accordance with the terms of those certain Notes, which Notes shall provide
that the First Advance shall be convertible into a membership interest
sufficient to increase BET's equity stake in the Company to thirty percent
(30%), and the Second Advance shall be convertible into an additional membership
interest sufficient to increase BET's equity stake in the Company to forty-five
percent (45%). Any accured and unpaid interest at the time of conversion of any
Advance shall continue to accrue interest and shall be payable on the maturity
date of the Note under which it accrued.
INVESTMENT AND LOAN AGREEMENT PAGE 3
2.3 ADVANCES.
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(a) BET will fund the Equity Investment on the Closing Date.
(b) BET may fund an advance of up to Five Million Dollars
($5,000,000) (the "First Advance") either (i) upon the written request of the
Company if the conditions set forth in Section 4.2 have been met, or (ii) upon
the decision of BET to make the advance in its sole discretion.
(c) BET may fund an additional advance of up to Five Million Dollars
($5,000,000) (the "Second Advance") either (i) upon the written request of the
Company if the conditions set forth in Section 4.2 have been met, or (ii) upon
the decision of BET to make the advance in its sole discretion.
(d) BET shall be under no obligation whatsoever to make the First
Advance or the Second Advance regardless of whether the conditions set forth in
Section 4.2 have been met. Such advances shall be made in the sole discretion
of BET and may be withheld for any reason whatsoever. The Company agrees,
however, prior to seeking any additional "equity" or subordinated financing of
the type contemplated under this Loan Agreement that it shall provide BET thirty
(30) days advance written notice of its desire to seek such alternative
financing. Within such period, BET shall have the right to make the First
Advance or the Second Advance, as the case may be, on the terms and conditions
set forth in this Loan Agreement. If BET fails to make the First Advance or the
Second Advance when so requested and provided that conditions to such Advance
have been satisfied, notwithstanding the restrictions set forth in Section
6.2(e) the Company shall be free to seek and obtain alternative equity or
subordinated financing, provided, however, that the Company shall not be
otherwise relieved of its obligations under this Agreement or the Investor
Rights Agreement and that any such additional equity or subordinated financing
shall dilute Management's interest solely and shall not in any way dilute or
reduce BET's interest in or rights with respect to the Company. Additionally, at
any time, all dates inclusive, commencing on the date hereof and continuing to
the day which is sixty (60) months from the date hereof, BET in its sole
discretion may make the First Advance and/or the Second Advance and the Company
shall be required to accept such Advances and issue the Notes as contemplated
hereunder.
INVESTMENT AND LOAN AGREEMENT PAGE 4
2.4 THE NOTES.
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(a) Each Advance shall be evidenced by and subject to the terms of a
convertible subordinated promissory note substantially in the form attached
hereto as Exhibit C and by this reference incorporated herein (each a "Note",
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collectively, the "Notes"), to be duly executed and delivered by the Company to
BET. Each Note shall bear interest at a floating rate equal to the Bank of New
York Prime Rate plus 200 basis points utilizing a 360-day year and shall be
payable in a single payment of principal and accrued interest five years from
the date of the advance which that Note evidences.
(b) The Notes shall be secured in accordance with Article 3 hereof,
shall be subject to the Investor Rights Agreement, and the Notes shall contain
such additional terms and conditions which are customary in transactions of this
kind including, without limitation, provisions for default interest,
acceleration of payment upon default, customary waivers (including the rights to
notices, demands, presentments, and a jury in resolving disputes), and an
agreement to jurisdiction.
2.5 SUBORDINATION.
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BET is aware that in order to carry out the Business Plan which
contemplates acquiring and/or developing 225 Burger King Restaurants over the
next five (5) years, the Company will require significant additional financing.
BET also recognizes that in order for the Company to obtain such financing, BET
will be required to subordinate the repayment of the Loan and its interest in
the collateral securing the Loan to certain Senior Indebtedness incurred by the
Company. BET agrees to cooperate with the Company and the Company's senior
lenders and to execute such subordination agreements or other similar agreements
as may be reasonably required in order to facilitate the financing required by
the Company to accomplish its Business Plan. For the purposes of this Agreement,
"Senior Indebtedness" shall mean all indebtedness, not to exceed One Hundred
Fifty Million Dollars ($150,000,000.00), incurred by the Company to banks or
other similar financial institutions or commercial lenders to finance the
acquisition, construction, development and operation of the Company's Burger
King Restaurants in accordance with the Business Plan. Senior Indebtedness
shall not include any indebtedness of the Company to an Affiliate. BET agrees
that in the event the Company is unable, after reasonable efforts, to obtain the
Senior Indebtedness required to implement and accomplish the Business Plan,
solely as a result of the capital structure resulting from the Loan, BET will
reasonably consider a request by the Company to convert its Loan to a preferred
membership interest in the
INVESTMENT AND LOAN AGREEMENT PAGE 5
Company, which membership interest will have characteristics substantially
identical to the Loan. BET, however, shall be under no obligation whatsoever to
restructure the Loan in the manner described in this Section 2.5.
2.6. BOARD OF DIRECTORS.
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(a) So long as BET owns at least 15% of the membership interests of
the Company, or holds convertible debt instruments convertible into at least 15%
of the membership interests of the Company, each Member of the Company shall,
pursuant to the Investor Rights Agreement, vote all of its interests to elect as
directors of the Company, two individuals designated by BET, two individuals
designated by UrbanCityFoods Management, LLC ("Management") and one person
mutually agreeable to both BET and Management.
(b) In the event that (i) there occurs an Event of Default under any
of the Loan Documents, (ii) the Company becomes in default under any material
provision of any Senior Indebtedness, or (iii) the Company fails to meet EBITDA
set forth in the Projections for any fiscal year by more than fifty percent
(50%), the board member selected by agreement of BET and the Company shall be
removed and a new member selected by BET shall be appointed. BET's right to
appoint the fifth director shall continue until the foregoing defaults are
cured. For the purposes of this Section the first determination of whether the
Company failed to meet the EBITDA requirements of (iii) above, shall be made
for the twelve months ending November 30, 1997 and thereafter each determination
shall be made on a calendar year basis, with the first calendar year
determination being made for calendar year 1997. The EBITDA threshold for the
period ending November 30, 1997 shall be $2.35 million (50% of $4.7 million).
2.7 THE CLOSING.
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(a) BET shall disburse the Equity Investment on the date on which the
Agreement is executed by all parties (the "Closing Date"), via wire transfer or
certified funds, if all of the conditions precedent contained in Article 4
hereof have been fully satisfied, as determined by BET in its sole discretion.
ARTICLE 3
SECURITY/ADDITIONAL CONSIDERATION FOR LOAN
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INVESTMENT AND LOAN AGREEMENT PAGE 6
3.1 SECURITY INTEREST. As security for the Loan, the Company shall deliver
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to BET, on or before an Advance:
(a) The Security Agreement granting to BET (i) a second lien priority
security interest (until such time as BET executes a subordination agreement in
accordance with Section 2.5), subordinate only to the existing lien and security
interest of Franchise Mortgage Acceptance Company, LLC, in all tangible and
intangible assets of the Company now or hereafter acquired and all proceeds and
products therefrom, including but not limited to those assets specified in
Section 2 of the Security Agreement; and
(b) duly executed UCC-1 financing statements (the "Financing
Statements") for filing as shall be required by BET.
3.2 MORTGAGE. As further security for the Loan, the Company shall deliver
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to BET from time to time, at the request of BET, (i) mortgages or deeds of
trust, as applicable (the "Mortgages") in favor of BET securing any or all real
property now owned or hereafter acquired by the Company in substantially the
form of Exhibit D, and (ii) assignments of lease (the "Assignments of Lease")
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in favor of BET relating to any or all leases entered into by the Company prior
to or subsequent to the date of this Agreement in substantially the form of
Exhibit E; in each case subordinate only to the existing lien and security
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interest of FMAC and purchase money financing with respect to assets acquired by
the Company subsequent to the date hereof. In connection with the execution of
the Assignments of Lease, the Company agrees to use its best efforts to obtain
consent of the landlord under each lease to the assignment of such lease.
ARTICLE 4
CONDITIONS TO LENDING
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4.1 CONDITIONS TO THE EQUITY INVESTMENT. The obligation of BET to make the
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Equity Investment is subject to the conditions that BET shall have received
(unless expressly modified or waived in writing by BET) prior to or on the
Closing Date, all of the following in form and substance satisfactory to BET:
(a) The Loan Documents, duly executed and delivered by the Company
thereto;
INVESTMENT AND LOAN AGREEMENT PAGE 7
(b) The favorable written opinion of Xxxxx & Associates substantially
in the form attached hereto as Exhibit F and by this reference incorporated
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herein;
(c) Certification by counsel to the Company that the Company retains
legal title to all its real and personal property free and clear of any liens or
encumbrances;
(d) Incumbency certificates with respect to the officers of the
Company;
(e) A certificate of the President of the Company that all of the
representations and warranties contained in this Agreement shall be true and
correct on the Closing Date;
(f) A copy of the Articles of Organization of the Company and all
amendments thereto, certified by the Maryland State Department of Assessments
and Taxation; a certificate of good standing from the Maryland State Department
of Assessments and Taxation and in each other state in which the Company is
required to be qualified to do business; and a copy of the Company's Operating
Agreement, certified by the Company's Secretary as true and correct;
(g) A copy of the resolutions of the Members and of the Board of
Directors of the Company evidencing approval of the execution, delivery and
performance of the Loan Documents, and all other instruments to be executed,
delivered and performed pursuant thereto, and all other matters contemplated
thereby, and a copy of all documents evidencing other necessary Company action,
if any, with respect thereto; and a list of the Members, directors and officers
of the Company, all of which documents shall be certified by each of the
Company's Secretary as true and correct;
(h) The following statements, schedules and projections of the
Company certified as true and correct by appropriate officers of the Company:
(i) Schedule of all indebtedness or liabilities of the Company
in excess of $50,000 dated as of the Closing Date; which shall be attached
hereto as schedule 4.1(h) (i).
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(ii) Projections of balance sheets, statements of income and
retained earnings, and cash flow for the Company the next five (5) years
following the Closing (the "Projections") which shall be attached hereto as
Exhibit G; and
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INVESTMENT AND LOAN AGREEMENT PAGE 8
(iii) The Company's business plan for the development,
acquisition, and operation of 225 Burger King restaurants during the next
five years (the "Business Plan") a copy of which is attached hereto as
Exhibit H.
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(i) Copies of the Company's federal and state (if required) tax
filings;
(j) Copies of all insurance policies pertaining to the Company and
the operation of its business operations required to be maintained pursuant to
Section 6.1(c) below;
(k) Any required written consents to the Loans, the grant of the
security interests, and the other matters contemplated by the Loan Documents by
each third party whose consent is required under other agreements executed by
the Company;
(l) Copies of such searches for lawsuits, liens, encumbrances, UUC
filings, federal and state tax liens, and judgment filings relating to the
Company as BET may require;
(m) Copies of all leases, including ground leases, and contracts or
agreements where the contract or agreement price exceeds $50,000 to which the
company is a party;
(n) Evidence of the current premium payments for a "key-man" life
insurance policy in the amount of Five Million Dollars ($5,000,000) insuring
La-Xxx Xxxxxxx and naming BET as the sole beneficiary;
(o) Copies of the Burger King franchise agreement and all other
agreements entered into between the Company and Burger King;
(p) Copies of all management or other agreements between Management
and the Company (the "Management Agreement");
(q) All legal matters incident to the Loan that shall be satisfactory
to counsel to BET.
4.2 CONDITIONS PRECEDENT TO THE FIRST AND SECOND ADVANCES.
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The Company may request that BET make the First Advance or the Second Advance at
any time provided that the following conditions are met:
(a) The Company shall submit, with the request a certificate of the
President that all of the representations and
INVESTMENT AND LOAN AGREEMENT PAGE 9
warranties contained in this Agreement are true and correct as of the date of
the request;
(b) There exists no Event of Default under this Agreement;and
(c) The Company has satisfied the Loan Advance Criteria set forth on
Schedule 4.2(c).
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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The Company and La-Xxx Xxxxxxx jointly and severally represent and warrant
to BET, and shall be deemed to represent and warrant as of the Closing Date, as
follows:
5.1 DUE ORGANIZATION, GOOD STANDING, POWER AND AUTHORITY. The Company is
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a limited liability company duly organized, validly existing in good standing
under the laws of the State of Maryland, is duly qualified to do business under
the laws of all jurisdictions in which the character of the properties owned or
proposed to be owned by the Company or in which the transaction of the business
of the Company is now conducted or is proposed to be conducted requires or will
require it to qualify to do business and is in good standing in such
jurisdictions. The Company has all requisite power and authority, corporate or
otherwise, to conduct its business, to own its properties, to borrow hereunder,
and to execute, deliver and perform all of its respective obligations under the
Loan Documents.
5.2 CAPITALIZATION. The capitalization of the Company as of the closing
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date is as set forth on Schedule 5.2. There are no membership interests held by
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any person other than as set forth in the Operating Agreement of the Company;
the designations, powers, preferences, rights, qualifications, limitations and
restrictions in respect of each class of authorized membership interests are as
set forth in the Articles of Organization and all such designations, powers,
preferences, rights, qualifications, limitations and restrictions are valid,
binding and enforceable and in accordance with all applicable laws; all
outstanding membership interests have been duly authorized and validly issued
and are fully paid and nonassessable; all of the outstanding securities were
issued in compliance with all applicable Federal and state securities laws; none
of the outstanding securities has been issued in violation of any preemptive
rights, rights of first refusal or similar rights; there are no outstanding
options, warrants, convertible
INVESTMENT AND LOAN AGREEMENT PAGE 10
securities, calls, rights, commitments, preemptive rights or agreements or
instruments or understandings of any character, to which the Company is a party
or by which it is bound, obligating it to issue, deliver or sell, or cause to be
issued, delivered or sold, contingently or otherwise, additional membership
interests or any securities or obligations convertible into or exchangeable for
such shares or to grant, extend or enter into any such option, warrant,
convertible security, call, right, commitment, preemptive right or agreement;
there are no outstanding obligations, contingent or otherwise, to purchase,
redeem or otherwise acquire any membership interests of the Company; there are
no voting trust agreements or other contracts, agreements, arrangements,
commitments, plans or understandings restricting or otherwise relating to
voting, dividend or other rights with respect to the Company's membership
interests.
5.3 AUTHORIZATIONS, NO DEFAULTS, COMPLIANCE WITH LAWS. The execution,
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delivery and performance of the Loan Documents by the Company has been duly
authorized by all necessary action, corporate or otherwise, and do not and will
not (a) violate, conflict with, or result in a breach of any provision of any
law, rule, regulation, order, writ, judgment, injunction, decree, determination
or award presently in effect and applicable to the Company, or of the Articles
of Organization or the Operating Agreement of the Company; or (b) create (with
or without the giving of notice or lapse of time, or both) a breach of or a
default under any indenture, loan, credit or borrowing agreement, or any other
agreement, lease or instrument to which the Company is a party or by which its
properties or assets may be bound or affected or result in the imposition of a
lien or encumbrances of any nature whatsoever upon any of the properties or
assets of the Company and the Company is not in default under any such law,
rule, regulation, order, writ, judgment, injunction, decree, determination or
award or any indenture, loan, creditor borrowing agreement, or any other
agreement, lease or instrument to which it is a party or by which it is bound,
or by which its properties or assets may be bound or affected; and the Company
has complied and is in compliance in all respects with all applicable laws,
ordinances and regulations thereof. Notwithstanding the foregoing, the Company
has disclosed to BET that execution of the Loan Documents requires the consent
of FMAC under the terms of the FMAC Documents and the consent of Burger King
Corporation under the terms of the Burger King Documents, which consents have
been obtained pursuant to Section 5.4 below.
5.4 NO CONSENT. No consent or approval of any other party and no
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authorization, consent, approval, declaration, license or exemption of, or
filing or registration with, any court or other governmental department,
commission, board, bureau, agency or
INVESTMENT AND LOAN AGREEMENT PAGE 11
instrumentality, domestic or foreign, is or will be necessary in connection
with the valid execution, delivery, performance validity, enforcement or
priority of the Loan Documents or any lien, security interest, or encumbrance
created and granted thereunder; except that the consent of FMAC is required
under the FMAC Documents, which consent has been received by the Company; and
the consent of Burger King Corporation is required under the Burger King
Documents, which consent has been received by the Company.
5.5 BINDING OBLIGATION. The Loan Documents constitute, and any other
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agreements or instruments when delivered by the Company will constitute, legal,
valid and binding obligations of the Company, enforceable against the Company in
accordance with its terms.
5.6 FINANCIAL INFORMATION. All financial statements, balance sheets and
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operating statements of the Company provided to BET fairly present the financial
condition of the Company as of the date of said statements and are true,
accurate and correct in all material respects. The Company has no material
obligations, liabilities or commitments, direct or contingent, which are not
reflected in the aforementioned financial statements, balance sheets and
operating statements. The monthly financial statements provided to BET are true,
correct and accurate and have been prepared in accordance with generally
accepted accounting practices. Set forth as Exhibit I is the Company's balance
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sheet as of September 15, 1996.
5.7 ACTIONS, JUDGMENTS, PROCEEDINGS. There are no outstanding judgments,
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actions, or proceedings pending before any court or governmental authority,
bureau or agency, or against or affecting the Company, or the properties of any
of them, nor are there any such actions or proceedings in which the Company is a
plaintiff or complainant.
5.8 USE OF PROCEEDS, REGULATION G. No part of the proceeds received by the
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Company from the Equity Investment or the Loan will be used directly or
indirectly for purposes other than those contemplated by the Business Plan. No
part of the proceeds will be used to make any distributions, loan repayments or
other payments to any Member of the Company or any employee of the Company other
than compensation paid in the ordinary course of business. Additionally, no part
of the proceeds received by the Company from the Loan will be used directly or
indirectly for the purpose of purchasing or carrying, or for payment in full or
in part of any indebtedness which was incurred for the purposes of purchasing or
carrying any margin stock as such term is defined
INVESTMENT AND LOAN AGREEMENT PAGE 12
in Regulation G of the Board of Governors of the Federal Reserve System, 12
C.F.R., Chapter II.
5.9 TITLE TO PROPERTIES.
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(a) Personal Property. The Company has good and marketable title to
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all of its personal property, free and clear of any and all liens, security
interests and encumbrances of any nature whatsoever, except for the lien
created pursuant to the Security Agreement and those liens, security interests
and encumbrances listed on Schedule 5.9(a) (1) attached hereto and made a part
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hereof. Except for those filed or to be filed pursuant to the Security
Agreement, no financing statements, mortgages or other evidences of security
interests, liens, or encumbrances covering all or any of the Company's personal
property are on file among the records of any public office, except for those
financing statements, mortgages or security interests listed in Schedule 5.9(a)
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(2) attached hereto and made a part hereof.
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(b) Real Property. The Company has good and marketable title to all
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of its respective real property free and clear of any and all liens, security
interests, and encumbrances of any nature whatsoever, except for the
encumbrances created by the Mortgages and the Assignments of Lease, if any.
Except for those filed pursuant to the Security Agreement, the Mortgages or the
Assignments of Lease, and except for those matters listed on Schedule 5.9(b), no
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financing statements, mortgages, deed of trust or other evidences of security
interests, liens, or encumbrances covering or pertaining to all or any of the
Company's real property are on file among the records of any public office.
5.10 ZONING. All necessary occupancy and other certificates and permits for
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the lawful use and occupancy of all of the Company's properties have been
procured.
5.11 LEGAL BAR; BURDENSOME DOCUMENTS. The Company is not a party to or
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bound by, nor are any of the properties or assets owned by the Company affected
by, any indenture, resolution, decree, loan or credit agreement, lease, bond,
note, order, judgment, or other agreement or instrument, or subject to any
charter or corporate restriction which would have an adverse effect on the
business, properties, assets, operations or condition, financial or otherwise,
of the Company or on the ability of the Company to carry out its obligations
under the Loan Documents
INVESTMENT AND LOAN AGREEMENT PAGE 13
5.12 GUARANTIES. The Company is not a party to any agreement by which it
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assumes, guarantees, endorses, contingently agrees to purchase or provide funds
for the payment of or otherwise becomes liable upon any obligation of any other
person or entity or any agreement by which it agrees to maintain the net worth
or financial condition of any other person or entity.
5.13 TAX RETURNS. The Company has filed all tax returns or extensions
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(federal, state and local) required to be filed and has paid all taxes,
including interest and penalties, on or before the due dates thereof, and has
and will timely file federal tax returns, as necessary. There are no federal,
state or local tax liabilities of the Company due or to become due for any tax
year ended on or prior to the date of the financial statements provided to BET,
whether incurred in respect of or measured by the income of the Company, and
there are no claims pending or, to the best knowledge of the Company proposed or
threatened, against the Company for past federal, state or local taxes, except
for those tax liabilities reserved against and reflected on the financial
statements provided to BET.
5.14 ENVIRONMENTAL COMPLIANCE. The Company is in compliance with all
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applicable federal, state or local environmental laws and regulations,
including, without limitation, all environmental laws and regulations in all
jurisdictions in which the Company owns or operates or has owned or operated, a
facility or site; arranges or has arranged for disposal or treatment of
hazardous substances, hazardous waste, solid waste or other wastes; accepts or
has accepted for transport any hazardous substances, hazardous waste, solid
waste or other wastes; or holds or has held any interest in real property or
otherwise. No litigation or proceeding arising under, relating to or in
connection with any applicable federal, state or local environmental law or
regulation is pending or, to the best knowledge of the Company proposed or
threatened against the Company, with respect to any real property related,
directly or indirectly, to any past or present operation of the Company or any
real property in which the Company holds or has held an interest. No release,
threatened release, storage, treatment, or disposal of any hazardous substance,
hazardous waste, solid waste or other waste is occurring or has occurred, on,
under or to any real property in which the Company holds any interest or
performs any of its operations in violation of any applicable federal, state or
local environmental law, regulation, complaint, order or citation. As used in
this Section 5.14, "litigation or proceeding" means any demand, claim, notice,
suit, suit in equity, action, administrative action, investigation or inquiry
whether brought by any governmental authority, private person or entity or
otherwise.
INVESTMENT AND LOAN AGREEMENT PAGE 14
5.15 MATERIAL MISSTATEMENT. No document, statement, exhibit, financial
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statement, or report furnished by or on behalf of the Company in connection with
the negotiation, execution and delivery of the Loan Documents contains any
untrue statement of a material fact, or omits to state a material fact necessary
in order to make the statements contained therein or herein not misleading, as
of the date such statement was made. There is no fact known to the Company which
has, or would in the foreseeable future have, a material adverse affect on the
business, prospects or condition, financial or otherwise, of the Company or any
of its properties or assets, which fact has not been set forth herein, in any
document, statement, exhibit, financial statement, or report, or other written
statements so made or furnished to BET by or on behalf of the Company.
5.16 INTANGIBLE ASSETS. The Company possesses or is licensed to use all
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necessary patents, trademarks, trademark rights, trade names, trade name rights
and copyrights to conduct its businesses as now conducted and as currently
proposed to be conducted, without any conflict with the patents, trademark
rights, trade names, trade name rights and copyrights of others.
5.17 LICENSES AND APPROVALS. The Company has all requisite power and
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authority and necessary licenses and permits, which are necessary to own and
operate its properties and/or to carry on its businesses as now conducted and as
currently proposed to be conducted. No event has occurred which (a) results in,
or after notice or lapse of time or both would result in, revocation or
termination of any such licenses or permits or (b) materially or adversely
affect or in the future would materially or adversely affect any of the rights
of the Company thereunder. To the best of the Company's knowledge, no other
license or franchise is necessary for the operation of the business of the
Company as now conducted or as proposed to be conducted.
5.18 EMPLOYEE GRIEVANCES. There are no actions or proceedings pending or,
-------------------
to the best knowledge of the Company threatened against any of them by or on
behalf of, or with, its employees.
5.19 CONDITION OF ASSETS. All of the assets and properties of the Company
-------------------
now owned, and acquired in the future when owned, are in good working condition,
except for normal wear and tear.
5.20 ERISA.
-----
(a) The Company does not have and has never had any plan in
connection with which there could arise a direct or contingent liability of the
Company to the Pension Benefit
INVESTMENT AND LOAN AGREEMENT PAGE 15
Guaranty Corporation (the "PBGC"), the Department of Labor, or the Internal
Revenue Service (the "IRS"). The Company is not a participating employer (i) in
any Plan under which more than one employer makes contributions as described in
Sections 4063 and 4064 of the Employment Retirement Income Security Act of 1974,
as amended from time to time ("ERISA"), or (ii) in a multi-employer plan as
defined in Section 4001(a) (3) of ERISA. For purposes of this Agreement, "Plan"
shall mean an employee welfare benefit plan as defined in Section 3(1) of ERISA,
or an employee pension benefit plan as defined in Section 3(2) of ERISA or a
plan which is both an employee welfare benefit plan and an employee pension
benefit plan.
(b) All references to the Company in this Section 5.20 or in any
other section of this Agreement relating to ERISA, shall be deemed to refer to
the Company and all other entities which are, together with the Company, part of
a controlled group.
5.21 SUBSIDIARIES. The Company (i) has no subsidiaries, (ii) does not own
------------
of record or beneficially, directly or indirectly, (A) any shares or stock or
securities convertible into stock or any other corporation or (B) any
participating interest in any partnership, joint venture, limited liability
company or other non-corporate business enterprise and (iii) does not control,
directly or indirectly, any other entity.
5.22 MEMBERSHIP INTEREST. The Membership Interest to be issued to BET as
-------------------
contemplated under Section 2.1 shall be issued free and clear of all liens and
encumbrances of any nature whatsoever and BET will obtain good title to the
Membership Interest subject to no liability, mortgage, pledge, lien,
encumbrance, debt, obligation or charge of any nature whatsoever.
5.23 LOANS FROM AFFILIATES. Except as set forth on Schedule 5.23 attached
-------------------- -------------
hereto, the Company is not indebted to La-Xxx Xxxxxxx or any Affiliate of La-Xxx
Xxxxxxx.
ARTICLE 6
COVENANTS OF THE COMPANY
-------------------------
6.1 AFFIRMATIVE COVENANTS. So long as BET owns at least 15% of the
---------------------
membership interests of the Company or so long as the Notes remain outstanding
and until payment in full of the Notes and full and complete performance of all
of the Company's obligations arising under any of the Loan Documents, the
Company shall:
INVESTMENT AND LOAN AGREEMENT PAGE 16
(a) Preservation of Corporate Existence, Etc. Preserve and maintain
-----------------------------------------
the Company's limited liability company existence, rights, franchises and
privileges in the jurisdiction of its formation, and qualify and remain
qualified as a foreign limited liability company in each jurisdiction in which
qualification is necessary or desirable in view of its business and operations
or the ownership of its properties; shall not seek to amend the Company's
articles of organization or operating agreement without permission of BET, which
permission must be received in writing before any change or amendment is made.
(b) Payment of Taxes, Etc. Pay and discharge (i) all taxes,
---------------------
assessments and governmental charges or levies imposed upon the Company or its
income or profits, or upon any properties belonging to the Company, prior to
the due date of such taxes, assessments and governmental charges or levies,
and (ii) all lawful claims which, if unpaid, might become a lien or charge
upon any properties of the Company.
(c) Maintenance of Insurance. Maintain policies of insurance covering
------------------------
all of the Company's property, real and personal, and all of the Company's
operations with responsible and reputable insurance companies or associations
and covering such risks and insured amounts as may be reasonably requested by
BET.
(d) Maintenance of Properties. Maintain and preserve all of the
-------------------------
Company's properties, whether real or personal, in good working order and
condition, ordinary wear and tear excepted.
(e) Board of Directors and Directors and Shareholders Meetings.
----------------------------------------------------------
Maintain a five (5) member Board of Directors elected in accordance with Section
2.6 and hold Board of Directors' meetings at least once quarterly and Members'
meetings at least once annually. A representative of BET may attend all Members'
meetings as an observer and shall receive at the same time as the Members all
information regarding actions to be taken or matters to be discussed at Members'
meetings.
(f) Compliance with Laws. Comply with the requirements of all
--------------------
applicable laws, rules, regulations and orders of any governmental authority.
(g) Keeping of Records and Books of Account. Keep adequate records
---------------------------------------
and books of account, in which complete entries will be made in accordance with
then generally-accepted accounting principles consistently applied, reflecting
all dealings or transactions of the Company.
INVESTMENT AND LOANS AGREEMENT PAGE 17
(h) Examination of Records. Upon reasonable notice and at reasonable
----------------------
times during normal business hours, as often as BET may require, permit BET or
its agents or representatives, to examine and make copies and abstracts of
information pertinent to the Loans, from the records and books of account of the
Company, to visit the properties of the Company, and to discuss the affairs,
finances and accounts of the Company with any of its specifically designated
officers and directors.
(i) Additional Documents. Deliver to BET, upon BET's request, such
--------------------
documents as BET, in its sole discretion, shall deem necessary to perfect BET's
rights with respect to the Mortgages, the Assignments of Lease, and the
Security Agreement, including without limitation, any documents required by the
uniform commercial code of any applicable state or other jurisdiction;
(j) Minimum EBITDA. For each fiscal year of the Company, maintain a
--------------
minimum EBITDA equal to fifty percent (50%) of the EBITDA set forth in the
Projections, determined by the Company's regular accounting firm in accordance
with generally accepted accounting principals. For the purposes of this Section,
the first determination of whether the company failed to meet the EBITDA
requirements set forth herein shall be made for the twelve months ending
November 30, 1997 and thereafter shall be made on a calendar year basis, with
the first calendar year determination being made for calendar year 1997.
(k) Life Insurance. Maintain a "key-man" life insurance policy in the
--------------
amount of $5,000,000 (or such greater amount as BET shall reasonably require) in
full force and effect insuring La-Xxx Xxxxxxx and naming BET as the sole
beneficiary.
(l) Notice of Litigation. Promptly notify BET in writing of any
--------------------
litigation or other legal or administrative proceeding instituted against or
involving the Company, or any threatened litigation or other legal or
administrative proceeding involving the Company:
(i) With respect to the compliance by the Company with any law,
ordinance, regulation or order, or its operations; or
(ii) Involving amounts in excess of $10,000, whether or not
fully covered by insurance, and regardless of the subject matter thereof.
(m) Compliance with ERISA, Reportable Events. Comply with all
----------------------------------------
applicable provisions of ERISA now or hereafter in
INVESTMENT AND LOAN AGREEMENT PAGE 18
effect, and promptly notify BET in writing of the occurrence of any reportable
event, as defined in Section 4043 of ERISA, if a notice of such reportable event
is required under ERISA to be delivered to the PBGC, together with a description
of such reportable event and a statement of the action the Company intends to
take with respect thereto, together with a copy of the notice thereof given to
the PBGC.
(n) Accounts Receivable. Maintain an average accounts receivable
-------------------
aging of no more than ninety (90) days.
6.2 NEGATIVE COVENANTS. So long as BET owns at least 15% of the membership
------------------
interests of the Company, or so long as the Notes remain outstanding and until
payment in full of the Notes and full and complete performance of all of the
Company's obligations arising under any of the Loan Documents, the Company shall
not do, agree to do, or permit to be done, without the prior written consent of
BET, any of the following:
(a) Indebtedness. Incur, create, assume or suffer to exist any
------------
indebtedness including any indebtedness evidenced by notes, bonds, debentures,
conditional sale or other title retention agreements, or accept any deposits,
advances, or progress payments of any kind except: (i) the Senior Indebtedness;
(ii) trade debt to vendors, suppliers, landlords and the like incurred in the
ordinary course of business; (iii) unsecured short term indebtedness which shall
not exceed, in the aggregate, twenty five percent (25%) more than the amounts
reflected in the Projections.
(b) Liens. Except for purchase money financing with respect to assets
-----
being acquired by the Company, create, assume or suffer to exist, directly or
indirectly, any security interest, mortgage, pledge, lien, charge or other
encumbrance, of any nature whatsoever upon the Company's properties, real or
personal, now owned or hereafter acquired, excluding, however, from the
operation of this covenant:
(i) any security interests or liens created pursuant to this
Agreement or to secure the Senior Indebtedness as contemplated under the
Business Plan;
(ii) liens for taxes or assessments either not delinquent or the
validity of which are being contested in good faith by appropriate legal or
administrative proceedings and as to which adequate reserves shall have
been set aside on the books of the Company, in conformity with generally
accepted accounting principles, or deposited in a restricted account for
the benefit of the Company;
INVESTMENT AND LOAN AGREEMENT PAGE 19
(iii) materialmen's mechanics', carriers', workmen's,
repairmen's, warehousemen's or other like liens arising in the ordinary
course of the Company's business or being contested in good faith by
appropriate legal proceedings and as to which adequate reserves shall have
been set aside on the books of the Company, in conformity with generally
accepted accounting principles, but not to exceed, in the aggregate, at any
one time, $25,000;
(iv) deposits or pledges to secure payment of worker's
compensation, employment insurance or other social security benefits or
obligations, incurred in the ordinary course of business;
(v) any judgment lien securing a judgment which shall, within
thirty (30) days after the entry thereof, have been discharged, vacated,
reversed, or execution thereof stayed pending appeal, and, if stayed, shall
have been discharged, vacated or reversed within sixty (60) days after the
expiration of any such stay.
(c) Distributions. Declare or make any distribution, or make payment
-------------
or distribution on account of the Company's membership or equity interests or
set aside any sum for any such purpose.
(d) Loans and Advances. Make any loan or advance to any officer,
------------------
member, director or employee of the Company or any Affiliate of such person
except for advances to its officers and employees to cover travel and other
similar expenses to be incurred in the ordinary course of business or repay any
loan or advance from any Member, director, or employee of the Company or any
Affiliate of such Person, or repay any loan to an Affiliate other than in
accordance with terms approved by the Board of Directors of the Company, except
for the repayment of those loans or advances reflected in the financial
statements provided to BET and upon the repayment schedule set forth in the
Projections.
(e) Capital Interests. Except pursuant to the conversion of the Loan
-----------------
and as contemplated hereunder or pursuant to the Investor Rights Agreement,
issue or authorize the issuance of additional membership interests or any right
or option to acquire any membership or equity interest in the Company, or
authorize any sale or assignment of any capital interest, or purchase, or
redeem, retire or otherwise acquire, directly or indirectly, or make any sinking
fund payments with respect to any membership interest.
INVESTMENT AND LOAN AGREEMENT PAGE 20
(f) Disposition of Assets. Without the consent of BET, which consent
---------------------
shall not be unreasonably withheld if the Company's performance is consistent
with the Projections, sell, transfer, assign, convey, lease or otherwise dispose
of any portion of the Company's business or discount, sell, pledge, hypothecate,
or otherwise dispose of the accounts receivable of the Company. Notwithstanding
the foregoing, the Company may dispose of unprofitable locations from time to
time, without BET's consent, consistent with the Business Plan, provided that
any single disposition does not involve assets valued at more then $1,000,000
and all dispositions in any one calendar year do not involve assets valued in
excess of $4,000,000.
(g) Merger. Enter into any consolidation or merger with, or into any
------
acquisition of all or substantially all the properties or assets or any of the
capital stock of, any person or entity, except with respect to the acquisition
of restaurants or restaurant sites in a manner consistent with the Business
Plan.
(h) Capital Expenditures. Expend more than $1,500,000 in any fiscal
--------------------
year for capital improvements for the Company, including without limitation any
equipment leases which, under generally accepted accounting principals, may be
deemed capitalized leases, except as may be incurred directly in connection with
the acquisition or operation of restaurants consistent with the Business Plan.
(i) La-Xxx Xxxxxxx Compensation. Pay to La-Xxx Xxxxxxx, annually, as
---------------------------
an officer, director or employee of the Company compensation, in the aggregate,
an amount that shall exceed $500,000 unless and until the Board of Directors of
the Company unanimously adopts an incentive-based compensation plan. Said plan
shall contain, among other things, a compensation package based upon meeting
certain cash flow projections for the operations of the Company. The term
"compensation" shall include all payments for services rendered whether such
payments be denominated salary, bonus or otherwise (including benefits such as
insurance, car, allowances, deferred compensation and retirement benefits).
Notwithstanding the foregoing, La-Xxx Xxxxxxx compensation shall not exceed
$250,000 on an annualized basis for any period in which the targets set forth on
Schedule 6.2(i) are not met. Any adjustments to La-Xxx Xxxxxxx' compensation
---------------
shall be effective for the entire period following any period in which the
targets have not been met. If, after having failed to meet the target for a
particular quarter, the target for the next quarter is met, La-Xxx Xxxxxx'x
compensation shall be increased to $500,000 per year for the quarter following
the quarter in which the targets were met. Additionally, in any
INVESTMENT AND LOAN AGREEMENT PAGE 21
calendar year in which, on a cumulative basis, the targets have been satisfied,
even though in one or more periods for that calendar year the targets were not
satisfied, La-Xxx Xxxxxxx shall be entitled to a bonus such that the total
compensation for such calendar year equals $500,000.
(j) Change of Business or Name. Engage in any business activities
--------------------------
not contemplated in the Business Plan, change the nature or character of the
Company's businesses or purchase, engage in, or manage any other business or
activity, or liquidate or dissolve the Company (or suffer any liquidation or
dissolution) or change the name of the Company.
(k) Guarantees. Assume, endorse, be or become liable for, or
----------
guarantee, the obligations of any third person or entity, including, without
limitation, any agreement, whether such agreement is on a contingency basis or
otherwise, to purchase, repurchase, or otherwise acquire indebtedness of any
other person or entity, or to purchase, sell or lease, as lessee or lessor,
property or services, in any such case primarily for the purpose of enabling any
other person or entity to make payment of any indebtedness, or to make any
payment (whether as an advance, capital contribution, purchase of any equity
interest or otherwise) to assure a minimum equity, asset base, working capital
or other balance sheet or financial condition, in connection with the
indebtedness of any other person or entity or to supply funds to or in any
manner invest in another person or entity in connection with such person's or
entity's indebtedness.
(l) Prepayments. Make any voluntary or optional prepayment of any
-----------
indebtedness incurred or permitted to exist under the terms of this Agreement or
any of the other Loan Documents, other than indebtedness evidenced by the Notes
or the Loan Documents.
(m) Investments. Make or suffer to exist, investments in any person
-----------
or entity including, without limitation, any stockholder, director, officer or
employee of the Company, except investments in:
(i) obligations issued or guaranteed by the United Stated of
America;
(ii) Certificates of Deposit, time deposits, banker's acceptances
or other "money market instruments" issued by any federally insured bank or
trust company organized under the laws of the United States of America or
any state thereof at having a combined capital and surplus in an aggregate
amount not less than $100,000,000 in each
INVESTMENT AND LOAN AGREEMENT PAGE 22
case maturing or being due or payable in full not more than ninety (90)
days after the acquisition thereof.
(n) Fiscal Year of the Company. Change the Company's fiscal years.
--------------------------
(o) ERISA Obligations. Be or become obligated to the PBGC, other than
-----------------
an annual premium payment, in excess of $10,000; or be or become obligated to
the IRS with respect to excise or other penalty taxes provided for in those
provisions of Section 4975 of the Internal Revenue Code, as in effect or
hereafter amended or supplemented, in excess of $10,000.
(p) Transactions With Affiliates; Mangement Agreements.
--------------------------------------------------
(i) Make any investment in any Affiliate or transfer, sell,
lease, assign or otherwise dispose of any assets to an Affiliate, or merge
into or consolidate with or purchase or acquire assets or capital stock
from an Affiliate, or enter into any other transaction directly or
indirectly with or for the benefit of any Affiliate (including, without
limitation, any management agreement or similar agreement, and guarantees
and assumptions of obligations of an affiliate). "Affiliate" shall mean any
director (or person holding the equivalent position) or officer (or person
holding the equivalent position) of the Company; and any other person
which, directly or indirectly, controls or is controlled by or under common
control with the Company or any Affiliate of the Company (excluding any
trustee under, or any committee with responsibility for administering, any
Pension Plan). "Person" includes any natural person, corporation, limited
liability company, firm, trust, association, government, government agency
or other entity whether acting in an individual, fiduciary or other
capacity. BET shall be deemed not to be an Affiliate of the Company. For
the purposes of this Agreement, each Member of the Company and La-Xxx
Xxxxxxx and any entity controlled by La-Xxx Xxxxxxx shall be an Affiliate
of the Company. A person shall be deemed to be
(1) "controlled by" any other person if such other Person
possesses, directly or indirectly, power
a. to vote 10% or more of the securities having at the time
of any determination hereunder voting power for the election of
directors of such person (or persons holding equivalent
positions); or
INVESTMENT AND LOAN AGREEMENT PAGE 23
b. to direct or cause the direction of the management
and policies of such person whether by contract or otherwise; or
(2) "controlled by" or "under common control with" such
other person if such other person is a member of the immediate family
of such person or is the executor, administrator, or other personal
representative of such person.
(ii) Pay or become obligated to pay, any management or other
similar fees to any Affiliate (whether or not a stockholder, director,
officer or employee of the Company) or any interest on any deferred
obligation therefor, other than as contemplated under the Management
Agreement, which shall not be amended or modified without the written
consent of BET.
6.3 REPORTING REQUIREMENTS. So long as the Notes remain outstanding or
-----------------------
BET holds an equity interest in the Company and until payment in full of the
Notes and full and complete performance of all of the Company's obligations
under any of the Loan Documents, the Company shall furnish to BET:
(a) Default Notice. As soon as possible and in any event within ten
--------------
(10) days after the occurrence of each Event of Default (as defined in Article 7
below), or each event which would be an Event of Default but for a requirement
that notice be given after, or a lapse of time occur, or both, or which
constitutes a material or adverse change in the condition, financial or
otherwise, or the operations of the Company, the statement of the Company's
President setting forth details of the Event of Default or such other event and
the action which the Company proposes to take with respect thereto.
(b) Monthly Variance Operating Statements. On a monthly basis, a
-------------------------------------
comparison of operations, on a year-to-date basis, reflecting income, cash flow,
EBITDA, store acquisitions and operations compared to the Projections and the
Business Plan.
(c) Quarterly Financial Statements. As soon as available, but in any
------------------------------
event, within twenty (20) days after the end of each quarter of the Company's
fiscal year, a balance sheet of the Company, as of the last day of such quarter,
and statements of income, retained earnings, and cash flow, for such quarter all
in reasonable detail, setting forth in each case in comparative form to
corresponding figures for the corresponding month in the preceding year, each
statement to be certified in a certificate of the President or Chief Financial
Officer of
INVESTMENT AND LOAN AGREEMENT PAGE 24
the Company as fairly presenting the financial position and the results of
operations of the Company as at its date and for such quarter and as having been
prepared in accordance with generally accepted accounting principles
consistently applied (subject to year-end audit adjustments). Such financial
statements shall include, in a separately itemized schedule, any single
expenditure made by the Company of One Hundred Thousand Dollars ($100,000) or
more.
(d) Audited Annual Financial Statements. Annually, as soon as
-----------------------------------
available, but in any event within ninety (90) days after the end of each fiscal
year, a balance sheet of the Company, as at such last day of the fiscal year,
and statements of income, retained earnings, and cash flow, for such fiscal
year, each prepared in accordance with generally accepted accounting principles
consistently applied, in reasonable detail, and certified without qualification
by a firm of independent certified public accountants satisfactory to BET, as
fairly presenting the financial position and results of operations of the
Company for the year ending on its date and as having been prepared in
accordance with generally accepted accounting principles.
(e) Projections of Operations. On or before thirty (30) days before
-------------------------
the end of each fiscal year of the Company, projections, approved by the
Company's Board of Directors, of income and expense of the Company for the next
12-month period, prepared on a consolidated basis and prepared in good faith and
after reasonable analysis utilizing such assumptions management of the Company
believes to be reasonable, and in form consistent with the quarterly financial
statements provided under Section 6.3(c).
(f) Taxes. Copies of all of the Company's federal, state, and local
-----
tax returns, in a form acceptable to BET, and evidence acceptable to BET in its
sole discretion that all such tax obligations are being met in a timely manner.
(g) No Default Certificate. At least quarterly certificates, in a
----------------------
form acceptable to BET, of the President or Chief Executive Officer of the
Company to the effect that no Event of Default hereunder and that no default
under any other agreement to which the Company is a party or by which it is
bound, or by which any of its properties or assets may be affected, and no event
which, with the giving of notice or the lapse of time, or both, would constitute
a default, has occurred, or, if such can not be so certified, specifying in
reasonable detail the exceptions, if any, to such statement.
INVESTMENT AND LOAN AGREEMENT PAGE 25
(h) Certificate of Accountants. At the same time that the financial
--------------------------
statements required under the provisions of this Section 6.3(d) are delivered,
(i) a certificate of the Chief Financial Officer and independent certified
public accountants of the Company, specifically addressed to the Company and
BET, to the effect that during the course of their audit of the operations of
the Company and its conditions as of the end of the fiscal year, to the best of
their knowledge, nothing has come to their attention which would indicate that
an Event of Default or default hereunder or under any of the Loan Documents has
occurred or that there was any violation of the covenants of the Company
contained in Section 6.1 or in Section 6.2 of this Agreement, or, if such can
not be so certified, specifying in reasonable detail the exceptions, if any, to
such statements and (ii) in every odd-numbered year, a management report of the
independent certified accountants of the Company regarding the Company's
operations.
(i) Other Accountant's Reports. Promptly upon receipt thereof, copies
--------------------------
of all other reports submitted to the Company by its independent certified
public accountants in connection with any annual or interim audit of the books
and records of the Company made by such accountants.
(j) Copies of Other Documents. Promptly upon their becoming
-------------------------
available, copies of any:
(i) financial statements, projections, material non-routine
reports, notices (other than routine correspondence), requests for waivers
and proxy statements, in each case, delivered by the Company to any lending
institution other than BET or to its Members or directors;
(ii) material non-routine correspondence or official notices
received by the Company form any federal, state or local governmental
authority which regulates the operations of the Company;
(iii) registration statements and any amendments and supplements
thereto, and any regular or periodic reports, if any, filed by the Company
with any securities exchange or with the Securities and Exchange Commission
or any governmental authority succeeding to any or all of the functions of
the said Commission;
(iv) letters of comments or correspondence sent to the Company
by the Securities and Exchange Commission in relation to the Company and
its respective affairs, and
INVESTMENT AND LOAN AGREEMENT PAGE 26
(v) materials to be received or sent to the Members or directors
of the Company.
(k) ERISA Notices.
-------------
(i) Concurrently with such filing, a copy of each annual report
which is filed with respect to each Plan with the Secretary of Labor or the
PBGC;
(ii) promptly upon their becoming available, copies of all
material non-routine correspondence with the PBGC, the Secretary of Labor
or any representative of the IRS with respect to any Plan;
(iii)copies of all actuarial valuations received by the Company
with respect to any Plan; and
(iv) copies of any notices of Plan termination filed by any Plan
administrator (as those terms are used in ERISA) with the PBGC and of any
notices from the PBGC to institute involuntary termination procedures.
(l) Corporate Overhead Budget. On or before thirty (30) days
-------------------------
before the end of each fiscal year of the Company, a corporate overhead budget,
approved by the Company's Board of Directors, for the next 12-month period
prepared on a consolidated basis and in good faith and after reasonable analysis
utilizing such assumptions management of the Company believes to be reasonable.
(m) Other Information. Such other information respecting the
-----------------
business, properties or the condition of operations, financial or otherwise, of
the Company as BET may from time to time reasonably request.
ARTICLE 7
EVENTS OF DEFAULT
-----------------
7.1 EVENTS OF DEFAULT. Under this Agreement an Event of Default shall be
-----------------
any of the following:
(a) The Company shall fail to make any payment of principal or
interest upon any of the Notes or any amount due under any other obligation
between BET and the Company to BET when due, whether at the due date thereof or
by acceleration or
INVESTMENT AND LOAN AGREEMENT PAGE 27
otherwise, and such failure remain unremedied for five (5) days after written
notice thereof shall have been given by BET to the Company.
(b) Any representation or warranty made by the Company herein, in any
other Loan Document, agreement, certificate, instrument, statement or report
contemplated by or made or delivered pursuant to or in connection with this
Agreement or any of the other Loan Documents shall prove to have been false or
misleading in any material respect when made.
(c) The Company shall fail to perform, observe or comply with any
material term, covenant or agreement contained in any of the Loan Documents and
such failure remains unremedied for thirty (30) days after written notice
thereof shall have been given by BET to the Company.
(d) The Company shall default under, or fail to fulfill any
obligation of any bond, note, debenture, loan agreement, indenture, guaranty,
trust agreement, equipment lease, mortgage or similar instrument to which the
Company is a party or by which any of them is bound, or by which any of their
properties or assets may be affected (each, a "Debt Instrument"), so that, as a
result of any such failure to perform (assuming the giving of appropriate notice
thereof, if required), the indebtedness included therein or secured or covered
thereby may be declared due and payable prior to the date on which such
indebtedness would otherwise become due and payable; or any event or condition
referred to in any Debt Instrument shall occur or fail to occur, so that, as a
result thereof, the indebtedness included therein or secured or covered thereby
may be declared due and payable prior to the date on which such indebtedness
would otherwise become due and payable; or failure to pay any indebtedness for
borrowed money due at final maturity or pursuant to demand under any Debt
Instrument.
(e) Any of the Loan Documents shall, for any reason, cease to be in
full force and effect, or shall be declared to be null and void, or the validity
or enforceability thereof shall be contested by the Company; or the Company
shall deny that it has any further liability or obligation under the Loan
Documents.
(f) The Company shall make an assignment for the benefit of
creditors, file a petition in bankruptcy, be adjudicated insolvent, petition or
apply to any tribunal for the appointment of a receiver, custodian, or any
trustee for itself or a substantial part of its assets, or shall commence any
proceeding under any bankruptcy, reorganization, arrangement, readjustment of
debt, dissolution or liquidation law or statute
INVESTMENT AND LOAN AGREEMENT PAGE 28
of any jurisdiction, whether now or hereafter in effect, or the Company shall
take any action to authorize the foregoing; or there shall have been filed any
such petition or application, or any such proceeding shall be commenced against
it, which remains undismissed for a period of sixty (60) days or more; or any
order for relief shall be entered in any such proceeding; or the Company by any
act or omission shall indicate its consent to, approval of or acquiescence in
any such petition, application or proceeding or the appointment of a custodian,
receiver or any trustee for it or any substantial part of its property, or shall
suffer any custodianship, receivership or trusteeship to continue undischarged
for a period of sixty (60) days or more; or the Company shall have concealed,
removed, or permitted to be concealed or removed, any part of its property, with
intent to hinder, delay or defraud its creditors or any of them or made or
suffered a transfer of any of its property which may be fraudulent under any
bankruptcy, fraudulent conveyance or similar law; or shall have made any
transfer of its property to or for the benefit of a creditor at a time when
other creditors similarly situated have not been paid; or shall have suffered
or permitted, while insolvent, any creditor to obtain lien a or other
encumbrance of any nature whatsoever upon any of its property through legal
proceedings or distraint which is not vacated within thirty (30) days from the
date hereof.
(g) Any judgement against the Company or any attachment, levy or
execution against its property, subsequent to the Closing Date, for any amount
in excess of $25,000 shall remain unpaid, unstayed, unappealed, undischarged,
unbonded or dismissed for a period of thirty (30) days or more.
(h) The termination of any Plan or the institution by the PBGC of
proceedings for the involuntary termination of any Plan, in either case, by
reason of, or which results or could result in, a "material accumulated funding
deficiency" under Section 412 of the Internal Revenue Code, or the failure by
the Company to make required contributions, in accordance with the applicable
provisions of ERISA, to each of the plans hereafter established or assumed by
it.
(i) Any of the liens created and granted to BET hereunder or under
any of the other Loan Documents shall at any time fail to be valid, perfected
liens.
(j) La-Xxx Xxxxxxx shall cease for any reason, whatsoever, including
without limitation, death or disability (as such disability shall be determined
in the reasonable judgement of BET) to be and continuously perform the duties of
Chairman of the Company or, if such cessation shall occur as a result of death
or
INVESTMENT AND LOAN AGREEMENT PAGE 29
disability, no successor reasonably satisfactory to BET shall have become and
shall have commenced to perform the duties of Chairman of the Company within
thirty (30) days after such cessation; provided, however, that if any reasonably
satisfactory successor, shall have been approved by BET, shall have been duly
elected, and shall have commenced performance of such duties within such period,
the name of such successor or successors shall be deemed to have been inserted
in place of La-Xxx Xxxxxxx in this subsection 7.1(j);
(k) An event occurs which is defined as a Default or an Event of
Default under any of the Loan Documents;
(l) A controlling interest in Management is sold, transferred or
pledged without the prior written consent of BET;
7.2 EFFECT OF EVENT OF DEFAULT. Should any Event of Default occur, BET, by
--------------------------
notice to the Company, may at its option terminate its commitment to provide any
proceeds of the Loan hereunder, and declare the entire unpaid principal amount
of the Notes, together with all other amounts payable, hereunder or under the
other Loan Documents, including without limitation, unpaid interest, and legal
fees associated with enforcing the Loan Documents and accompanying Notes, and
every other obligation of the Company to BET, immediately due and payable,
whereupon the Notes and all other such obligations shall become and be forthwith
due and payable, without presentment, demand for payment, notice of non-payment,
protest or further notice or demand of any kind, all of which are hereby
expressly waived by the Company, anything contained herein or in the Notes or in
such other note or evidence of indebtedness to the contrary notwithstanding. BET
shall have, in addition to all other rights and remedies allowed by law, the
rights and remedies of a secured party under the Uniform Commercial Code as in
effect in the State of Maryland, and without limiting the generality of the
foregoing, the rights and remedies provided for in any of the Loan Documents,
the provisions of which are hereby incorporated by reference.
ARTICLE 8
MISCELLANEOUS
-------------
8.1 SPECIFIC PERFORMANCE. BET, in addition to being entitled to exercise
--------------------
all rights provided herein, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement, including but not
limited to the right to make the First Advance, the Second Advance, and receive
INVESTMENT AND LOAN AGREEMENT PAGE 30
the convertible instruments contemplated hereunder. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by any of them of the provisions of this Agreement and hereby
agrees to waive the defense in any action for specific performance that remedy
at law would be adequate.
8.2 NO WAIVER; CUMULATIVE REMEDIES. Each and every right granted to BET
------------------------------
hereunder or under any other document delivered hereunder or in connection
herewith, or allowed it by law or equity, shall be cumulative and may be
exercised from time to time. No failure on the part of BET or the holder of the
Notes to exercise, and no delay in exercising, any right shall operate as a
waiver thereof, nor shall any single or partial exercise of any right preclude
any other or future exercise thereof or the exercise of any other right. The due
payment and performance of the Company's obligations hereunder or under the
other Loan Documents shall be without regard to any counterclaim, right or
offset or any other claim whatsoever which the Company has or may have against
BET and without regard to any other obligation of any nature whatsoever which
BET may have to the Company and no such counterclaim or offset shall be asserted
by the Company in any action, suit or proceeding instituted by BET for payment
or performance of the Company's obligations hereunder.
8.3 AMENDMENTS/ENTIRE AGREEMENT. No modification, amendment or waiver of
---------------------------
or with respect to any provision of this Agreement or any of the other Loan
Documents, nor consent to any departure by the Company from any of the terms or
conditions hereof or thereof, shall in any event be effective unless it shall be
in writing and signed by BET. Any such waiver or consent shall be effective
only in the specific instance and for the purpose for which given. No consent to
or demand on the Company in any case shall, of itself, entitle it or any of them
to any other or further notice or demand in similar or other circumstances. This
Agreement together with the other Loan Documents embodies the entire agreement
and understanding between the Company and BET with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to the
subject matter hereof.
8.4 NOTICES. All notices, requests, reports and other communications
-------
pursuant to this Agreement or any of the other Loan Documents shall be in
writing, either by letter (delivered by hand or commercial delivery service or
sent by certified mail, return receipt requested, except for routine reports
which shall be by ordinary first-class mail) or facsimile or telegram, addressed
as follows:
INVESTMENT AND LOAN AGREEMENT PAGE 31
If to the Company: La-Xxx Xxxxxxx UrbanCityFoods, LLC
000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Mr. La-Xxx Xxxxxxx, Chairman
With a copy to:
Xxxxxxxxx X. Xxxxx, Xx., Esq.
Xxxxx & Associates, P.C.
Xxxx Xxxxx Tower, Suite 2700
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
If to BET BET Holdings, Inc.
One BET Plaza
0000 X Xxxxx, X.X.
Xxxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx, Chairman
With a copy to:
Arent Fox Xxxxxxx Xxxxxxx & Xxxx
0000 Xxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000-0000
Attn: Xxxxxxx X. Xxxx, Esq.
Any notice, request or communication hereunder shall be deemed to have been
given on the day on which it is delivered by hand or facsimile to such party at
its address specified above, or, if sent by mail, on the third day after it is
deposited in the mail, postage prepaid, or in the case of facsimile notice, when
acknowledgement of transmission is received by the transmitting fax machine. Any
party may change the person to whom or address to which notices are to be given
hereunder, by notice duly given hereunder, provided, however, that any such
notice shall be deemed to have been given hereunder only when actually received
by the party to whom it is address.
8.5 FEES; CONDITIONS OF CLOSING.
---------------------------
(a) Expenses: Indemnity.
--------------------
(i) The Company will promptly pay to BET
(1) all out-of-pocket costs or BET
(A) in connection with the filing or recording
of any assignments, mortgages, financing statements
and other documents), (B) incurred as reasonable
legal fees and expenses and
INVESTMENT AND LOAN AGREEMENT PAGE 32
disbursements of counsel to BET, Arent, Fox, Kitner, Xxxxxxx &
Xxxx in connection with the preparation, negotiation, execution
and delivery, administration, interpretation and enforcement of
the Loan Documents and the consummation of the transactions
contemplated by this Agreement and the Loan Documents (whether
or not the closing on the Loan occurs on the Closing Date), (C)
in connection with the negotiation, preparation and execution and
delivery of any amendment, modification or supplement of or to,
or any consent or waiver under, any of the Loan Documents or any
other document (or any such instrument which is proposed but not
executed and delivered) and (D) in connection with any claim or action
threatened, made or brought against BET arising out of or relating to
any extent to this Agreement, the other Loan Documents or the
transactions contemplated hereby or thereby, except in the case of
BET's willful misconduct; and
(2) all costs and expenses (including, without
limitaion, reasonable fees and disbursements of counsel) suffered
or incurred by BET in connection with its enforcement of the
payment of the Notes or any other sum due to them under this
Agreement or any of the other Loan Documents or any of its other
rights hereunder or thereunder.
(ii) The provisions of this Section 8.5 shall survive the payment
of the Notes and the termination of this Agreement.
(b) Conditions of Closing. The obligations of BET to close under
---------------------
this Agreement shall be subject to (i) completion by BET of due diligence on the
business and affairs of the Company satisfactory to BET, in its sole
discretion, and (ii) no material adverse change in the business, affairs,
prospects or financial conditions of the Company during the period commencing on
the date of this Agreement and expiring on the Closing Date.
8.6 TAXES. If, under any law in effect on the date of the closing
-----
of any loan hereunder, or under any retroactive provision of the law
subsequently enacted, it shall be determined that any federal, state or local
tax is payable in respect of the issuance of the Notes, or in connection with
the filing or recording of
INVESTMENT AND LOAN AGREEMENT PAGE 33
any assignments, mortgages, financing statements, or other documents (whether
measured by the amount of indebtedness secured or otherwise) as contemplated by
this Agreement, then the Company will pay any such tax and all interest and
penalties, if any, and will indemnify BET against and save them harmless from
any federal Internal Revenue Service form 1099 or damage resulting from or
arising out of the nonpayment or delay in payment of any such tax. If any such
tax or taxes shall be assessed or levied against BET, then BET may notify the
Company and make immediate payment thereof, together with interest or penalties
in connection therewith, and shall thereupon be entitled to and shall receive
immediate reimbursement therefor from the Company. Notwithstanding any other
provision contained in this Agreement, the covenants and agreements of the
Company in this Section 8.6 shall survive payment of the Notes and the
termination of this Agreement.
8.7 PAYMENTS. All payments by the Company on account of principal,
--------
interest and other charges (including any indemnities) shall be made to BET at
the principal office of BET in lawful money of the United States of America in
immediately available funds on the date such payment is due in accordance with
the provisions of the Notes. If any payment of principal or interest becomes
due on a day other than a business day, such payment may be made on the next
succeeding business day and such extension shall be included in computing
interest in connection with such payment. All payments hereunder, under any
other Loan Document, and under the Notes shall be made without set-off or
counterclaim and in such amounts as may be necessary in order that all such
payments shall not be less than the amounts otherwise specified to be paid under
this Agreement, any other Loan Document, and the Notes (after withholding for or
on account of (a) any present or future taxes, levies, imposts, duties or other
similar charges of whatever nature imposed by any government or any political
subdivision or taxing authority thereof, other than any tax (except those
referred to in clause (b) below) on or measured by the net income of BET to
which any such payment is due pursuant to applicable federal, state and local
income tax laws, and (b) deduction of amounts equal to the taxes on or measured
by the net income of BET payable by BET with respect to the amount by which the
payments required to be made under this sentence exceed the amounts otherwise
specified to be paid in this Agreement, any other Loan Document, and the Notes).
Upon payment in full of each Note, BET shall xxxx such Note "Paid" and return
it to the Company.
8.8 BINDING EFFECT; ASSIGNMENT. This Agreement shall become effective when
--------------------------
executed and thereafter shall be binding upon and inure to the benefit of the
Company, BET and their
INVESTMENT AND LOAN AGREEMENT PAGE 34
respective successors and assigns, except that the Company shall not have the
right to assign or delegate any rights or obligations hereunder without the
prior written consent of BET and any purported assignment or delegation without
such consent shall be null and void.
8.9 CONSTRUCTION; GOVERNING LAW. The section headings used in this
---------------------------
Agreement are for convenience only and shall not affect the meaning or
interpretation of this Agreement. All terms used herein of any gender or of a
singular or plural term shall be deemed to include uses of the masculine,
feminine or neuter gender or plural or singular terms, as the context may
require. This Agreement shall be interpreted, and the rights and liabilities of
the parties hereto determined, in accordance with the laws and decisions of the
State of Maryland.
8.10 JURISDICTION; VENUE; AND PERSONAL SERVICE. The Company irrevocably
-----------------------------------------
consents that any legal action or proceeding against it under, arising out of or
in any manner relating to this Agreement, the notes, or any of the other Loan
Documents may be brought in the United States District Court for the District of
Maryland or any other appropriate Federal District Court, determined by BET
where jurisdiction is proper. The Company expressly and irrevocably assents and
submits to the personal jurisdiction of any of such courts in any such action or
proceeding. The Company irrevocably consents to the service of any complaint,
summons, notice or other process relating to any such action or proceeding by
delivery thereof to any of the by hand or by mail in the manner provided for in
Section 8.4 hereof. The Company hereby expressly and irrevocably waives any
claim or defense in any such action or proceeding based on any alleged lack of
personal jurisdiction, improper venue or forum non conveniens or any similar
basis. The Company shall not be entitled in any such action or proceeding to
assert any defense given or allowed under the laws of any state other than the
State of Maryland. Nothing in this Section 8.10 shall affect or impair in any
manner or to any extent the right of BET to commence legal proceedings or
otherwise proceed against the Company in any jurisdiction or to serve process in
any manner permitted by law.
8.11 WAIVER OF JURY TRIAL. The Company waives any right to have a jury
--------------------
participate in resolving any dispute, whether sounding in contract, tort, or
otherwise, among BET, the Company or any of the other parties arising out of,
in connection with, related to, or incidental to the relationship established
among the parties hereto in connection with the loan documents or any other
agreement among them.
INVESTMENT AND LOAN AGREEMENT PAGE 35
8.12 SURVIVAL OF AGREEMENT AND REPRESENTATIONS. All agreements,
-----------------------------------------
representations and warranties made herein shall survive the delivery of this
Agreement, any of the other Loan Documents and the Notes.
8.13 SEVERABILITY OF PROVISIONS. The provisions of this Agreement are
--------------------------
severable, and if any clause or provision hereof shall be held invalid or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision, or part thereof,
in such jurisdiction and shall not in any manner affect such clause or provision
in any other jurisdiction, or any other clause or provision in this Agreement
in any jurisdiction. Each of the covenants, agreements and conditions contained
in this Agreement is independent and compliance by the Company with any of them
shall not excuse non-compliance by the Company with any other. The Company shall
not take any action the effect of which shall constitute a breach or violation
of any provision of this Agreement.
8.14 RIGHTS AFFECTED BY EXTENSIONS. The rights of BET and its assigns
-----------------------------
granted hereunder shall not be impaired by any indulgence, release, renewal,
extension or modification which BET may grant with respect to the indebtedness
or any part thereof, or with respect to the collateral or with respect to any
endorser, guarantor or surety without notice or consent of the Company, or any
endorser, guarantor or surety.
8.15 COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts, and all such counterparts shall constitute one and the same
Agreement.
INVESTMENT AND LOAN AGREEMENT PAGE 36
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
BET HOLDINGS, INC.
By: [SIGNATURE APPEARS HERE]
--------------------------
Name:
Title:
LA-XXX XXXXXXX URBANCITYFOODS, LLC
By: [SIGNATURE APPEARS HERE]
--------------------------
Name:
Title:
LA-XXX XXXXXXX, individually as to
Article 5
[SIGNATURE APPEARS HERE]
------------------------------
INVESTMENT AND LOAN AGREEMENT PAGE 37
