SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
BY AND AMONG
XXX. XXXXXX' ORIGINAL COOKIES, INC.
AS BORROWER,
AND
FOOTHILL CAPITAL CORPORATION
AS LENDER
DATED AS OF JANUARY 16, 2003
SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this
"Agreement"), is entered into as of January 16, 2003 between FOOTHILL CAPITAL
CORPORATION, a California corporation ("Lender"), and XXX. XXXXXX' ORIGINAL
COOKIES, INC., a Delaware corporation ("Borrower").
WHEREAS, Borrower and LaSalle National Bank, a national banking association
(the "Existing Lender") are parties to that certain Amended and Restated Loan
Agreement dated as of February 28, 1998, (as amended, modified or supplemented
as of the date hereof, the "Credit Facility");
WHEREAS, Borrower and the Existing Lender have agreed to refinance the
Credit Facility and Lender has agreed to provide additional financial
accommodations to Borrower as permitted under Sections 4.09 (vii) and (xi) of
the Borrower's Indenture (as hereinafter defined);
WHEREAS, in connection with the refinancing of the Credit Facility the
Existing Lender has assigned all of its right, title and interest in and to the
Credit Facility to Lender;
WHEREAS, to effectuate the refinancing the parties desire to amend and
restate the Credit Facility in its entirety on the terms and conditions set
forth herein and amend and restate the other agreements between Borrower, any
guarantor and Existing Lender; and
WHEREAS, subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents (as hereinafter defined), Lender shall (i) continue to provide the
Credit Facility of up to $9,900,000 and (ii) provide Letters of Credit (as
hereinafter defined) up to $2,000,000 available upon Borrower's request therefor
for an aggregate total of up to $11,900,000 and the parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. As used in this Agreement, the following terms shall have
the following definitions:
"ACCOUNT DEBTOR" means any Person who is or who may become obligated
under, with respect to, or on account of, an Account, chattel paper, or a
General Intangible.
"ACCOUNTS" means all of Borrower's now owned or hereafter acquired
right, title, and interest with respect to "accounts" (as that term is defined
in the Code), and any and all supporting obligations in respect thereof.
"ACH TRANSACTIONS" means any cash management or related services
(including the Automated Clearing House processing of electronic funds transfers
through the direct Federal
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Reserve Fedline system) provided by Xxxxx Fargo or its Affiliates for the
account of Borrower or its Subsidiaries.
"ACTUAL TAX PAYABLE" has the meaning set forth in SECTION 7.11(a)(iv).
"ADDITIONAL DOCUMENTS" has the meaning set forth in SECTION 4.4.
"ADJUSTED EBITDA" means with respect to any Person, EBITDA PLUS (a) to
the extent and only to the extent deducted from earnings used in calculating
EBITDA, the sum of $5,300,000 related to the Wal-Mart store impairment charges
incurred in June 2002 for any period that includes the month of June 2002, (b)
to the extent and only to the extent deducted from earnings used in calculating
EBITDA, non-cash charges in compensation expense attributable to stock options
granted by Parent in the aggregate amount over the term of this Agreement of up
to $2,000,000, (c) to the extent and only to the extent deducted from earnings
used in calculating EBITDA and only to the extent not already deducted from
earnings as a result of CLAUSE (a) above, charges related to the closure of
Borrower's operations in Wal-Mart stores in an aggregate amount of up to
$1,950,000, (d) to the extent and only to the extent deducted from earnings used
in calculating EBITDA, charges related to the impairment of goodwill under the
Statement of Financial Accounting Standards No. 142 for Fiscal Year 2002 of up
to $39,111,000, and (e) to the extent and only to the extent not already
included in the calculation of EBITDA, the amounts received by Borrower as
proceeds from the sale of TCBY Americana up to the amount of $2,500,000 whether
or not such sale would be considered an "extraordinary gain" under GAAP; and
LESS the sum of $1,500,000 in insurance proceeds received in July 2002 for any
period that includes the month of July 2002.
"ADVANCES" has the meaning set forth in SECTION 2.1.
"AFFILIATE" means, as applied to any Person, any other Person who,
directly or indirectly, controls, is controlled by, or is under common control
with, such Person. For purposes of this definition, "control" means the
possession, directly or indirectly, of the power to direct the management and
policies of a Person, whether through the ownership of Stock, by contract, or
otherwise; PROVIDED, HOWEVER, that, for purposes of SECTION 7.14 hereof: (a) any
Person which owns directly or indirectly 10% or more of the securities having
ordinary voting power for the election of directors or other members of the
governing body of a Person or 10% or more of the partnership or other ownership
interests of a Person (other than as a limited partner of such Person) shall be
deemed to control such Person, (b) each director (or comparable manager) of a
Person shall be deemed to be an Affiliate of such Person, and (c) each
partnership or joint venture in which a Person is a partner or joint venturer
shall be deemed to be an Affiliate of such Person.
"AGREEMENT" has the meaning set forth in the preamble hereto.
"AIRPORT COOKIES" means Airport Cookies, an Ohio corporation.
"APPLICABLE PREPAYMENT PREMIUM" means, as of any date of
determination, an amount equal to the product of (i) 0.10% of the Maximum
Revolver Amount plus the Maximum L/C Amount MULTIPLIED BY (ii) the number of
calendar months (including partial months) remaining until the Maturity Date.
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"ASSIGNED CONTRACTS" has the meaning set forth in SECTION 3.1(c)(xvi).
"ASSIGNEE" has the meaning set forth in SECTION 14.1(a).
"AUTHORIZED PERSON" means any officer or other employee of Borrower.
"AVAILABILITY" means, as of any date of determination, if such date is
a Business Day, and determined at the close of business on the immediately
preceding Business Day, if such date of determination is not a Business Day, the
amount that Borrower is entitled to borrow as Advances under SECTION 2.1 (after
giving effect to all then outstanding Obligations (other than Bank Products
Obligations) and all sublimits and reserves applicable hereunder).
"BANK PRODUCT AGREEMENTS" means those certain cash management service
agreements entered into from time to time by Borrower or its Subsidiaries in
connection with any of the Bank Products.
"BANK PRODUCT OBLIGATIONS" means all obligations, liabilities,
contingent reimbursement obligations, fees, and expenses owing by Borrower or
its Subsidiaries to Xxxxx Fargo or its Affiliates pursuant to or evidenced by
the Bank Product Agreements and irrespective of whether for the payment of
money, whether direct or indirect, absolute or contingent, due or to become due,
now existing or hereafter arising, and including all such amounts that Borrower
is obligated to reimburse to Lender as a result of Lender purchasing
participations or executing indemnities or reimbursement obligations with
respect to the Bank Products provided to Borrower or its Subsidiaries pursuant
to the Bank Product Agreements.
"BANK PRODUCTS" means any service or facility extended to Borrower or
its Subsidiaries by Xxxxx Fargo or any Affiliate of Xxxxx Fargo including: (a)
credit cards, (b) credit card processing services, (c) debit cards, (d) purchase
cards, (e) ACH Transactions, (f) cash management, including controlled
disbursement, accounts or services, or (g) Hedge Agreements.
"BANK PRODUCT RESERVES" means, as of any date of determination, the
amount of reserves that Lender has established (based upon Xxxxx Fargo's or its
Affiliate's reasonable determination of the credit exposure in respect of then
extant Bank Products) for Bank Products then provided or outstanding.
"BANKRUPTCY CODE" means the United States Bankruptcy Code, as in
effect from time to time.
"BASE RATE" means, the rate of interest announced within Xxxxx Fargo
at its principal office in San Francisco as its "prime rate," with the
understanding that the "prime rate" is one of Xxxxx Fargo's base rates (not
necessarily the lowest of such rates) and serves as the basis upon which
effective rates of interest are calculated for those loans making reference
thereto and is evidenced by the recording thereof after its announcement in such
internal publication or publications as Xxxxx Fargo may designate.
"BASE RATE MARGIN" means 1.75 percentage points.
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"BENEFIT PLAN" means a "defined benefit plan" (as defined in SECTION
3(35) of ERISA) for which Borrower or any Subsidiary or ERISA Affiliate of
Borrower has been an "employer" (as defined in Section 3(5) of ERISA) within the
past six years.
"BOARD OF DIRECTORS" means the board of directors (or comparable
managers) of each of Borrower and the Guarantors, as applicable, or any
committee thereof duly authorized to act on behalf of the board.
"BOOKS" means Borrower's and its Subsidiaries' now owned or hereafter
acquired books and records (including all of its Records indicating,
summarizing, or evidencing its assets (including the Collateral) or liabilities,
all of Borrower's or its Subsidiaries' Records relating to its or their business
operations or financial condition, and all of its or their goods or General
Intangibles related to such information).
"BORROWER" has the meaning set forth in the preamble to this
Agreement.
"BORROWER'S ENTERPRISE VALUE" means $97,000,000 or such other value of
Borrower's business and assets as determined by Lender or a third party
qualified appraiser acceptable to Lender, all as determined in Lender's sole
discretion.
"BORROWER'S INDENTURE" means that certain Indenture dated as of
November 26, 1997, by and among Borrower, as issuer, MFBI, as guarantor, and The
Bank of New York, as trustee.
"BORROWER'S SHARE" means a fraction, (x) the numerator of which is the
sum of the amounts that would be the net taxable income of Borrower and each
direct and indirect Subsidiary of Borrower that is a member of the Group
(without duplication) that have net taxable income for such Taxable Period
calculated by taking into account only income, gain, loss, deduction and credit
of such amounts for such Taxable Period and (y) the denominator of which is the
sum of the amounts that would be the net taxable income of each of the members
of the Group (without duplication) that have net taxable income for such Taxable
Period calculated by taking into account only income, gain, loss, deduction and
credit of such amounts for such Taxable Period.
"BORROWING" means a borrowing hereunder of an Advance.
"BORROWING BASE" has the meaning set forth in SECTION 2.1.
"BORROWING BASE CERTIFICATE" means a certificate in the form of
EXHIBIT B-1 executed and delivered by a Certifying Officer.
"BUSINESS DAY" means any day that is not a Saturday, Sunday, or other
day on which national banks are authorized or required to close.
"CAPITAL EXPENDITURES" means, with respect to any Person, all
expenditures (by the expenditure of cash or the incurrence of Indebtedness) by
such Person during any measuring
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period for any fixed asset or improvements or for replacements, substitutions or
additions thereto that are required or permitted to be capitalized under GAAP.
"CAPITAL LEASE" means a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
"CAPITALIZED LEASE OBLIGATION" means any Indebtedness represented by
obligations under a Capital Lease.
"CASH EQUIVALENTS" means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within 1 year from the date of acquisition thereof; (b) marketable
direct obligations issued by any state of the United States or any political
subdivision of any such state or any public instrumentality thereof maturing
within 1 year from the date of acquisition thereof and, at the time of
acquisition, having the highest rating obtainable from either S&P or Xxxxx'x;
(c) commercial paper maturing no more than 270 days from the date of acquisition
thereof and, at the time of acquisition, having a rating of A-1 or P-1, or
better, from S&P or Xxxxx'x, (d) certificates of deposit or bankers' acceptances
and time deposits maturing within 1 year from the date of acquisition thereof
either (i) issued by any bank (A) organized under the laws of the United States
or any state thereof or the District of Columbia which bank has a rating of A or
A2, or better, from S&P or Xxxxx'x, or (B) any U.S. branch of a foreign bank
which has at the date of acquisition thereof a combined capital and surplus of
at least $100,000,000, or (ii) certificates of deposit less than or equal to
$100,000 in the aggregate issued by any other bank insured by the Federal
Deposit Insurance Corporation; (e) repurchase agreements with a term of not more
than 7 days entered into with (i) a bank organized under the laws of the United
States or any state thereof which has a rating of A or A2, or better, from S&P
or Xxxxx'x, or (ii) any U.S. branch of a foreign bank which has at the date of
the repurchase agreement a combined capital and surplus of at least
$100,000,000; and (f) investments in money market funds that invest
substantially all their assets in Cash Equivalents.
"CASH MANAGEMENT BANK" has the meaning set forth in SECTION 2.7(a).
"CASH MANAGEMENT ACCOUNT" has the meaning set forth in SECTION 2.7(a).
"CASH MANAGEMENT AGREEMENTS" means those certain cash management
service agreements, in form and substance reasonably satisfactory to Lender,
each of which is among Borrower or a Guarantor, as the case may be, Lender, and
one of the Cash Management Banks.
"CERTIFYING OFFICER" means the chief financial officer or treasurer of
Borrower.
"CHANGE OF CONTROL" means (a) any "person" or "group" (within the
meaning of Sections 13(d) and 14(d) of the Exchange Act), (other than Parent)
becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of 15%, or more, of the Stock of Borrower having the
right to vote for the election of members of the Board of Directors, or (b) a
majority of the members of the Board of Directors of Borrower do not constitute
Continuing Directors, or (c) Borrower ceases to directly own and control 100% of
the
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outstanding capital Stock of each of its Subsidiaries extant as of the Closing
Date other than LV-H&M LLC, a Nevada limited liability company and UVEST, LLC, a
Utah limited liability
"CLOSING DATE" means the date of the making of the initial Advance (or
other extension of credit) hereunder or the date on which Lender sends Borrower
a written notice that each of the conditions precedent set forth in SECTION 3.1
either have been satisfied or have been waived.
"CLOSING DATE BUSINESS PLAN" means the set of Projections of Borrower
for the 2 year period following the Closing Date (on a year by year basis and on
a month by month basis), in form and substance (including as to scope and
underlying assumptions) reasonably satisfactory to Lender which are attached
hereto as SCHEDULE C-2.
"CMBC" means CMBC, Inc.
"CODE" means the Uniform Commercial Code, as in effect in the State of
California from time to time.
"COLLATERAL" means all of Borrower's now owned or hereafter acquired
right, title, and interest in and to each of the following:
(a) Accounts,
(b) Books,
(c) Commercial Tort Claims (including, without limitation, the
Commercial Tort Claims listed on SCHEDULE C-1),
(d) Deposit Accounts,
(e) Equipment,
(f) General Intangibles,
(g) Inventory,
(h) Investment Property,
(i) Negotiable Collateral,
(j) Real Property Collateral,
(k) money or other assets of Borrower that now or hereafter come into
the possession, custody, or control of Lender,
(l) the proceeds and products, whether tangible or intangible, of any
of the foregoing, including proceeds of insurance or Commercial Tort Claims
covering any or all of the foregoing, and any and all Accounts, Books, Deposit
Accounts, Equipment, General Intangibles, Inventory, Investment Property,
Negotiable Collateral, Real Property, money, or other tangible
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or intangible property resulting from the sale, exchange, collection, or other
disposition of any of the foregoing, or any portion thereof or interest therein,
and the proceeds thereof, and
(m) to the extent not included in the foregoing, all other personal
property of any kind or description.
"COLLATERAL ACCESS AGREEMENT" means a landlord waiver, bailee letter,
or acknowledgement agreement of any lessor, warehouseman, processor, consignee,
or other Person in possession of, having a Lien upon, or having rights or
interests in the Equipment or Inventory, in each case, in form and substance
satisfactory to Lender.
"COLLATERAL ASSIGNMENT" means that certain collateral assignment
agreement between Borrower and Lender, in form and substance reasonably
satisfactory to Lender.
"COLLECTIONS" means all cash, checks, notes, instruments, and other
items of payment (including insurance proceeds, proceeds of cash sales, rental
proceeds, franchise royalties, licensing royalties, dividends and tax refunds)
of Borrower and its Subsidiaries.
"COMMERCIAL TORT CLAIMS" means all of Borrower's now owned or
hereafter acquired right, title and interest with respect to any "commercial
tort claim" as that term is defined in the Code.
"COMPANY STORES" means the retail outlets owned or leased and operated
by Borrower and its Subsidiaries.
"COMPANY STORE CLOSING EXPENSES" means the expenses incurred by
Borrower and its Subsidiaries in connection with the closure of any Company
Store.
"COMPANY STORE SALE" means the sale of a Company Store to a franchisee
which is not an Affiliate of Parent, Borrower and any Subsidiary.
"COMPANY STORE SALE COMPLIANCE CERTIFICATE" means a certificate
substantially in the form of EXHIBIT C-2 executed and delivered by a Certifying
Officer of Borrower to Lender.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the form
of EXHIBIT C-1 executed and delivered by a Certifying Officer of Borrower to
Lender.
"CONSENT TO ASSIGNMENT" means a consent to assignment delivered by the
applicable third party(ies) as required hereunder, the form and substance of
which is reasonably satisfactory to Lender.
"CONTINUING DIRECTOR" means (a) any member of the Board of Directors
who was a director (or comparable manager) of Borrower on the Closing Date, and
(b) any individual who becomes a member of the Board of Directors after the
Closing Date if such individual was appointed or nominated for election to the
Board of Directors by a majority of the Continuing Directors, but excluding any
such individual originally proposed for election in opposition to the Board of
Directors in office at the Closing Date in an actual or threatened election
contest relating to the election of the directors (or comparable managers) of
Borrower (as such terms are
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used in Rule 14a-11 under the Exchange Act) and whose initial assumption of
office resulted from such contest or the settlement thereof.
"CONTROL AGREEMENT" means a control agreement, in form and substance
satisfactory to Lender, executed and delivered by Borrower or a Guarantor, as
applicable, Lender, and the applicable securities intermediary with respect to a
Securities Account or bank with respect to a deposit account.
"CORKY'S ACCOUNT" has the meaning set forth in SECTION 7.13.
"CORKY'S SECURITY AGREEMENT" means that certain Security Agreement
dated as of October 30, 2000 among Borrower, Parent, Peachtree Pretzel, Sunshine
Pretzel, CMBC and the Corky's Shareholders.
"CORKY'S SHAREHOLDERS" means each of Xxxxxxx X. I. Xxxxxxx, Xxxxx X.
Xxxxxxx, Xxxxxx Xxxxxxx, Xxxxxx Xxxxxxx, Xxxxx Xxxxxxx, Xxxxxxx Xxxxxxx, Xxxxx
Xxxxxxx, Xxxx Xxxxxxx, Xxxxxx X. Xxxxx, Xxxx Xxxx Xxxxx, Xxxxxx Xxxxxxx, Xxxxxx
Xxxxxxx, Xxxxxx Xxxxxxxxxxx, Xxxxxxxx Xxxxxxxxxxx, Xxxxx X. Xxxxxx Xxxxx X.
Xxxxxx, Xxxxxx Xxxx, Xxx Xxxxx, and Xxxxxxx Xxxxx.
"CREDIT CARD AGREEMENTS" means those irrevocable assignment agreements
between Lender and credit card clearinghouses and processors of Borrower, the
form and substance of which are reasonably satisfactory to Lender.
"CREDIT FACILITY" has the meaning set forth in the preamble of this
Agreement.
"DAILY BALANCE" means, with respect to each day during the term of
this Agreement, the amount of an Obligation owed at the end of such day.
"DEFAULT" means an event, condition, or default that, with the giving
of notice, the passage of time, or both, would be an Event of Default.
"DEPOSIT ACCOUNT" means all of Borrower's now owned or hereafter
acquired right, title, and interest with respect to any "deposit account" as
that term is defined in the Code.
"DESIGNATED ACCOUNT" means that certain Deposit Account of Borrower
identified on SCHEDULE D-1.
"DESIGNATED ACCOUNT BANK" means LaSalle Bank, whose office is located
at 000 Xxxxx XxXxxxx Xxxxxx, Xxxxxxx, XX 00000, and whose ABA number is
000000000.
"DISBURSEMENT LETTER" means an instructional letter executed and
delivered by Borrower to Lender regarding the extensions of credit to be made on
the Closing Date, the form and substance of which is reasonably satisfactory to
Lender.
"DOLLARS" or "$" means United States dollars.
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"DUE DILIGENCE LETTER" means the due diligence letter sent by Lender's
counsel to Borrower, together with Borrower's completed responses to the
inquiries set forth therein, the form and substance of such responses to be
reasonably satisfactory to Lender.
"EBITDA" means, with respect to any fiscal period, Borrower's and its
Subsidiaries consolidated net earnings (or loss), MINUS extraordinary gains and
interest income, PLUS interest expense, income taxes, and depreciation and
amortization for such period, as determined in accordance with GAAP.
"ECONOMIC ANALYSIS" means that certain economic analysis as calculated
in the Store/Franchise Sale Summary Information report form provided to Lender
and substantially in the form of EXHIBIT E-1 attached hereto.
"ENVIRONMENTAL ACTIONS" means any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation, judicial or
administrative proceeding, judgment, letter, or other communication from any
Governmental Authority, or any third party involving violations of Environmental
Laws or releases of Hazardous Materials from (a) any assets, properties, or
businesses of Borrower, any of its Subsidiaries or any predecessor in interest,
(b) from adjoining properties or businesses, or (c) from or onto any facilities
which received Hazardous Materials generated by Borrower, any of its
Subsidiaries or any predecessor in interest.
"ENVIRONMENTAL INDEMNITY AGREEMENT" means that certain Environmental
Indemnity Agreement executed and delivered by Borrower in favor of Lender, in
form and substance reasonably satisfactory to Lender.
"ENVIRONMENTAL LAW" means any applicable federal, state, provincial,
foreign or local statute, law, rule, regulation, ordinance, code, binding and
enforceable guideline, binding and enforceable written policy, or rule of common
law now or hereafter in effect and in each case as amended, or any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, to the extent binding on Borrower or any of
its Subsidiaries, relating to the environment, employee health and safety, or
Hazardous Materials, including CERCLA; RCRA; the Federal Water Pollution Control
Act, 33 USC Section 1251 ET SEQ.; the Toxic Substances Control Act, 15 USC
Section 2601 ET SEQ.; the Clean Air Act, 42 USC Section 7401 ET SEQ.; the Safe
Drinking Water Act, 42 USC Section 3803 ET SEQ.; the Oil Pollution Act of 1990,
33 USC Section 2701 ET SEQ.; the Emergency Planning and the Community
Right-to-Know Act of 1986, 42 USC Section 11001 ET SEQ.; the Hazardous Material
Transportation Act, 49 USC Section 1801 ET SEQ.; and the Occupational Safety and
Health Act, 29 USC Section 651 ET SEQ. (to the extent it regulates occupational
exposure to Hazardous Materials); any state and local or foreign counterparts or
equivalents, in each case as amended from time to time.
"ENVIRONMENTAL LIABILITIES AND COSTS" means all liabilities, monetary
obligations, Remedial Actions, losses, damages, punitive damages, consequential
damages, treble damages, costs and expenses (including all reasonable fees,
disbursements and expenses of counsel, experts, or consultants, and costs of
investigation and feasibility studies), fines, penalties, sanctions, and
interest incurred as a result of any claim or demand by any Governmental
Authority or any third party, and which relate to any Environmental Action.
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"ENVIRONMENTAL LIEN" means any Lien in favor of any Governmental
Authority for Environmental Liabilities and Costs.
"EQUIPMENT" means all of Borrower's now owned or hereafter acquired
right, title, and interest with respect to equipment, machinery, machine tools,
motors, furniture, furnishings, fixtures, vehicles (including motor vehicles),
tools, parts, goods (other than consumer goods, farm products, or Inventory),
wherever located, including all attachments, accessories, accessions,
replacements, substitutions, additions, and improvements to any of the
foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute thereto.
"ERISA AFFILIATE" means (a) any Person subject to ERISA whose
employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any organization subject to ERISA that is a
member of an affiliated service group of which Borrower is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section
412 of the IRC, any Person subject to ERISA that is a party to an arrangement
with Borrower and whose employees are aggregated with the employees of Borrower
under IRC Section 414(o).
"EVENT OF DEFAULT" has the meaning set forth in SECTION 8.
"EXCESS AVAILABILITY" means the amount, as of the date any
determination thereof is to be made, equal to Availability MINUS the aggregate
amount, if any, of all trade payables of Borrower aged in excess of historical
levels with respect thereto and all book overdrafts in excess of historical
practices with respect thereto, in each case as determined by Lender in its
Permitted Discretion.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as in effect
from time to time.
"EXISTING LENDER" has the meaning set forth in the preamble of this
Agreement.
"EXISTING L/C" has the meaning set forth in SECTION 2.12(f).
"FAIRFIELD FOODS" means Fairfield Foods, Inc., a New Jersey
corporation.
"FEIN" means Federal Employer Identification Number.
"FISCAL CALENDAR" means that certain fiscal calendar prepared by
Borrower and attached hereto as Schedule F-1.
"FISCAL MONTH" means each month of Borrower's Fiscal Year as reflected
on the Fiscal Calendar.
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"FISCAL QUARTER" means each fiscal quarter of Borrower's Fiscal Year
as reflected on the Fiscal Calendar.
"FISCAL YEAR" means each fiscal year of Borrower as reflected on the
Fiscal Calendar.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
fiscal period, the ratio of (a) Adjusted EBITDA for such period plus Company
Store Closing Expenses incurred during such period to (b) Fixed Charges for such
period.
"FIXED CHARGES" means, with respect to any Person for any fiscal
period, (a) the aggregate of all Interest Expense paid in cash during such
period and with respect to Borrower, scheduled payments of interest made by
Borrower on the notes issued pursuant to the Parent's Indenture, PLUS (b)
scheduled payments of principal with respect to Indebtedness during such period
and with respect to Borrower, scheduled payments of principal made by Borrower
on the notes issued pursuant to the Parent's Indenture, PLUS (c) the aggregate
amount of any Taxes paid in cash during such period PLUS (d) Capital
Expenditures, PLUS (e) cash paid in connection with Company Store Closing
Expenses during such period.
"FRANCHISE AGREEMENTS" means the franchise agreements related to
Borrower's and its Subsidiaries' business.
"FUNDING DATE" means the date on which a Borrowing occurs.
"GAAP" means generally accepted accounting principles as in effect
from time to time in the United States, consistently applied.
"GACC" means Great American Cookie Company, Inc., a Delaware
corporation.
"GACC FRANCHISE SUBSIDIARY" has the meaning set forth in SECTION
7.3(d).
"GENERAL INTANGIBLES" means all of Borrower's now owned or hereafter
acquired right, title, and interest with respect to general intangibles
(including payment intangibles, contract rights (including rights under all
royalty and licensing agreements), rights to payment, rights arising under
common law, statutes, or regulations, choses or things in action, Intellectual
Property Rights, goodwill, purchase orders, customer lists, monies due or
recoverable from pension funds, rights to payment and other rights under any
royalty or licensing agreements, infringement claims, computer programs,
information contained on computer disks or tapes, software, literature, reports,
catalogs, money, Deposit Accounts, insurance premium rebates, tax refunds, and
tax refund claims), and any and all supporting obligations in respect thereof,
and any other personal property other than goods, Accounts, Investment Property,
and Negotiable Collateral.
"GOVERNING DOCUMENTS" means, with respect to any Person, the
certificate or articles of incorporation, by-laws, or other organizational
documents of such Person.
"GOVERNMENTAL AUTHORITY" means any federal, state, local, or other
governmental or administrative body, instrumentality, department, or agency or
any court, tribunal,
11
administrative hearing body, arbitration panel, commission, or other similar
dispute-resolving panel or body.
"GROUP" has the meaning set forth in the Tax Allocation Agreement.
"GUARANTOR" means each of GACC, Pretzelmaker, MFC(Australia), Pretzel
Time, Inc., a Utah corporation and Xxx. Xxxxxx Gifts, together with all domestic
Subsidiaries formed after the Closing Date.
"GUARANTY" means that certain general continuing guaranty executed and
delivered by each Guarantor in favor of Lender, in form and substance reasonably
satisfactory to Lender.
"HAZARDOUS MATERIALS" means (a) substances that are defined or listed
in, or otherwise classified pursuant to, any applicable laws or regulations as
"hazardous substances," "hazardous materials," "hazardous wastes," "toxic
substances," or any other formulation intended to define, list, or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity," (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.
"HEDGE AGREEMENT" means any and all transactions, agreements, or
documents now existing or hereafter entered into between Borrower or its
Subsidiaries and Xxxxx Fargo or its Affiliates, which provide for an interest
rate, credit, commodity or equity swap, cap, floor, collar, forward foreign
exchange transaction, currency swap, cross currency rate swap, currency option,
or any combination of, or option with respect to, these or similar transactions,
for the purpose of hedging Borrower's or its Subsidiaries' exposure to
fluctuations in interest or exchange rates, loan, credit exchange, security or
currency valuations or commodity prices.
"INACTIVE SUBSIDIARY" means a Subsidiary which does not have any
operations and does not have any assets worth more than $100,000 in the
aggregate.
"INDEBTEDNESS" means, without duplication, (a) all obligations for
borrowed money, (b) all obligations evidenced by bonds, debentures, notes, or
other similar instruments and all reimbursement or other obligations in respect
of letters of credit, bankers acceptances, interest rate swaps, or other
financial products (other than debt incurred in the ordinary course of business
for workers' compensation insurance repayable in accordance with customary
practices), (c) all obligations under Capital Leases, (d) all obligations or
liabilities of others secured by a Lien on any asset of Borrower or its
Subsidiaries, irrespective of whether such obligation or liability is assumed,
(e) all obligations for the deferred purchase price of assets (other than trade
debt incurred in the ordinary course of business for the delivery of goods and
services and repayable in accordance with customary trade practices), and (f)
any obligation
12
guaranteeing or intended to guarantee (whether directly or indirectly
guaranteed, endorsed, co-made, discounted, or sold with recourse) any obligation
of any other Person.
"INDEMNIFIED LIABILITIES" has the meaning set forth in SECTION 11.3.
"INDEMNIFIED PERSON" has the meaning set forth in SECTION 11.3.
"INDENTURES" means, collectively, the Borrower's Indenture and the
Parent's Indenture.
"INSOLVENCY PROCEEDING" means any proceeding commenced by or against
any Person under any provision of the Bankruptcy Code or under any other state
or federal bankruptcy or insolvency law, assignments for the benefit of
creditors, formal or informal moratoria, compositions, extensions generally with
creditors, or proceedings seeking reorganization, arrangement, or other similar
relief.
"INTELLECTUAL PROPERTY RIGHTS" means all rights in, arising out of or
associated with any trademark, service xxxx, trade name, logo and the goodwill
associated with each of the foregoing, copyright, patent (including any
registrations or applications for registration of any of the foregoing),
license, recipe, trade secret, know-how or proprietary information.
"INTEREST EXPENSE" means, with respect to any Person for any fiscal
period, interest expense (whether cash or non-cash) of such Person determined in
accordance with GAAP for the relevant period ended on such date, including
interest expense with respect to any Indebtedness of such Person and interest
expense for the relevant period that has been capitalized on the balance sheet
of such Person.
"INTERNATIONAL LICENSING AGREEMENTS" means the master licensing
agreements for foreign territories (except for Australia) and the licensing
agreements for Canada.
"INVENTORY" means all Borrower's now owned or hereafter acquired
right, title, and interest with respect to inventory, including goods held for
sale or lease or to be furnished under a contract of service, goods that are
leased by Borrower as lessor, goods that are furnished by Borrower under a
contract of service, and raw materials, work in process, or materials used or
consumed in Borrower's business.
"INVESTMENT" means, with respect to any Person, (a) any investment by
such Person in any other Person (including Affiliates) in the form of loans,
guarantees, advances, or capital contributions (excluding (i) commission,
travel, and similar advances to officers and employees of such Person made in
the ordinary course of business, and (ii) BONA FIDE Accounts arising in the
ordinary course of business consistent with past practices), (b) purchases or
acquisitions of assets of or equity in another Person whether for cash,
Indebtedness or Stock (excluding purchases of Inventory, goods or services made
in the ordinary course of business), and (c) any other items that are or would
be classified as investments on a balance sheet prepared in accordance with
GAAP.
13
"INVESTMENT PROPERTY" means all of Borrower's now owned or hereafter
acquired right, title, and interest with respect to "investment property" as
that term is defined in the Code, and any and all supporting obligations in
respect thereof.
"IRC" means the Internal Revenue Code of 1986, as in effect from time
to time.
"L/C" has the meaning set forth in SECTION 2.12(a).
"L/C ADVANCE" has the meaning set forth in SECTION 2.12(a).
"L/C DISBURSEMENT" means a payment made by Lender pursuant to a Letter
of Credit.
"L/C UNDERTAKING" has the meaning set forth in SECTION 2.12(a).
"LANDLORD'S CONSENT TO LEASEHOLD MORTGAGE" means that certain
Landlord's Consent to Leasehold Mortgage executed and delivered by the lessor of
the real property located at 0000 X. Xxxxxxxxxx Xxxxxxx, Xxxxx 000, Xxxx Xxxx
Xxxx, Xxxx.
"LENDER" has the meaning set forth in the preamble to this Agreement.
"LENDER EXPENSES" means all (a) costs or expenses (including taxes,
and insurance premiums) required to be paid by Borrower or any Guarantor under
any of the Loan Documents that are paid or properly incurred by Lender, (b)
reasonable out-of-pocket fees or charges paid or incurred by Lender in
connection with Lender's transactions with Borrower, including, fees or charges
for photocopying, notarization, couriers and messengers, telecommunication,
public record searches (including tax lien, litigation, and UCC searches and
including searches with the patent and trademark office, the copyright office,
or the department of motor vehicles), filing, recording, publication, appraisal
(including periodic Collateral appraisals or business valuations to the extent
of the fees and charges (and up to the amount of any limitation) contained in
this Agreement), real estate surveys, real estate title policies and
endorsements, and environmental audits, (c) costs and expenses incurred by
Lender in the disbursement of funds to Borrower (by wire transfer or otherwise),
(d) charges paid or properly incurred by Lender resulting from the dishonor of
checks, (e) reasonable costs and expenses paid or incurred by Lender to correct
any default or enforce any provision of the Loan Documents, or in gaining
possession of, maintaining, handling, preserving, storing, shipping, selling,
preparing for sale, or advertising to sell the Collateral, or any portion
thereof, irrespective of whether a sale is consummated, (f) audit fees and
expenses of Lender related to audit examinations of the Books to the extent of
the fees and charges (and up to the amount of any limitation) contained in this
Agreement, (g) reasonable costs and expenses of third party claims or any other
suit paid or incurred by Lender in enforcing or defending the Loan Documents or
in connection with the transactions contemplated by the Loan Documents or
Lender's relationship with Borrower or any guarantor of the Obligations, (h)
Lender's reasonable out-of-pocket fees and expenses (including reasonable
attorneys fees) incurred in advising, structuring, drafting, reviewing,
administering, or amending the Loan Documents, and (i) Lender's reasonable fees
and expenses (including attorneys fees) incurred in terminating, enforcing
(including attorneys fees and expenses incurred in connection with a "workout,"
a "restructuring," or an Insolvency Proceeding concerning Borrower or in
exercising rights or remedies under the Loan Documents), or defending the Loan
14
Documents, irrespective of whether suit is brought, or in taking any Remedial
Action concerning the Collateral.
"LENDER-RELATED PERSON" means Lender, Lender's Affiliates, and the
officers, directors, employees, and agents of Lender.
"LENDER'S ACCOUNT" means the account identified on SCHEDULE L-1.
"LENDER'S LIENS" means the Liens granted by Borrower to Lender under
this Agreement or the other Loan Documents.
"LETTER OF CREDIT" means an L/C or an L/C Undertaking, as the context
requires.
"LETTER OF CREDIT USAGE" means, as of any date of determination, the
aggregate undrawn amount of all outstanding Letters of Credit PLUS 100% of the
amount of outstanding time drafts accepted by an Underlying Issuer as a result
of drawings under Underlying Letters of Credit.
"LEVERAGE RATIO" means with respect to any Person the ratio of (a)
Indebtedness as of any date of determination to (b) Adjusted EBITDA as of any
date of determination.
"LIEN" means any interest in an asset securing an obligation owed to,
or a claim by, any Person other than the owner of the asset, whether such
interest shall be based on the common law, statute, or contract, whether such
interest shall be recorded or perfected, and whether such interest shall be
contingent upon the occurrence of some future event or events or the existence
of some future circumstance or circumstances, including the lien or security
interest arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, security agreement, conditional
sale or trust receipt, or from a lease, consignment, or bailment for security
purposes and also including reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases, and other title
exceptions and encumbrances affecting Real Property.
"LOAN ACCOUNT" has the meaning set forth in SECTION 2.10.
"LOAN DOCUMENTS" means this Agreement, the Bank Product Agreements,
the Borrowing Base Certificates, the Cash Management Agreements, the Collateral
Assignment, the Consents to Assignment, the Control Agreements, the Compliance
Certificate, the Credit Card Agreements, the Disbursement Letter, the Due
Diligence Letter, the Environmental Indemnity Agreement, each Guaranty, the
Letters of Credit, the Mortgages, the Officers' Certificate, the Preliminary
Borrowing Base Certificates, the Stock Pledge Agreement, the Trademark Security
Agreements, the Subsidiary Security Agreements, any note or notes executed by
Borrower in connection with this Agreement and payable to Lender, and any other
agreement entered into, now or in the future, by Borrower and Lender in
connection with this Agreement.
"MATERIAL ADVERSE CHANGE" means (a) a material adverse change in the
business, operations, results of operations, assets, liabilities or condition
(financial or otherwise) of Borrower or any Guarantor, taken as a whole, (b) a
material impairment of Borrower's or any Guarantor's ability to perform its
obligations under the Loan Documents to which it is a party or
15
of Lender's ability to enforce the Obligations or realize upon the Collateral,
or (c) a material impairment of the enforceability or priority of the Lender's
Liens with respect to the Collateral as a result of an action or failure to act
on the part of Borrower or any Guarantor (other than as a result of Borrower's
or any Guarantor's failure to deliver a legal opinion with respect to the pledge
of Stock of any foreign Subsidiary).
"MATURITY DATE" has the meaning set forth in SECTION 3.4.
"MAXIMUM REVOLVER AMOUNT" means $9,900,000.
"MAXIMUM L/C AMOUNT" means $2,000,000.
"MFBI" means The Xxx. Xxxxxx' Brands, Inc., a Delaware corporation.
"MFC(AUSTRALIA)" means Xxx. Xxxxxx Cookies Australia, a Utah
corporation.
"MFFB" means Xxx. Xxxxxx' Famous Brands, Inc. a Delaware corporation.
"MORTGAGE POLICY" and "MORTGAGE POLICIES" have the meanings set forth
in SECTION 3.1(s).
"MORTGAGES" means, individually and collectively, one or more
mortgages, leasehold mortgages, deeds of trust, or deeds to secure debt,
executed and delivered by Borrower in favor of Lender, in form and substance
reasonably satisfactory to Lender, that encumber the Real Property Collateral
and the related improvements thereto.
"XXX. XXXXXX GIFTS" means Xxx. Xxxxxx Gifts, Inc., a Utah corporation.
"NEGOTIABLE COLLATERAL" means all of Borrower's now owned and
hereafter acquired right, title, and interest with respect to letters of credit,
letter of credit rights, instruments, promissory notes, drafts, documents, and
chattel paper (including electronic chattel paper and tangible chattel paper),
and any and all supporting obligations in respect thereof.
"OBLIGATIONS" means (a) all loans, Advances, L/C Advances, debts,
principal, interest (including any interest that, but for the provisions of the
Bankruptcy Code, would have accrued), contingent reimbursement obligations with
respect to outstanding Letters of Credit, premiums, liabilities (including all
amounts charged to Borrower's Loan Account pursuant hereto), obligations, fees,
charges, costs, Lender Expenses (including any fees or out-of-pocket expenses
that, but for the provisions of the Bankruptcy Code, would have accrued), lease
payments, guaranties, covenants, and duties of any kind and description owing by
Borrower to Lender pursuant to or evidenced by the Loan Documents and
irrespective of whether for the payment of money, whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising,
and including all interest not paid when due and all Lender Expenses that
Borrower is required to pay or reimburse by the Loan Documents, by law, or
otherwise, and (b) all Bank Product Obligations. Any reference in this Agreement
or in the Loan Documents to the Obligations shall include all amendments,
changes, extensions, modifications, renewals replacements, substitutions, and
supplements, thereto and thereof, as applicable, both prior and subsequent to
any Insolvency Proceeding.
16
"OFFICERS' CERTIFICATE" means the representations and warranties of
officers form submitted by Lender to Borrower, together with Borrower's and each
Guarantor's completed responses to the inquiries set forth therein, the form and
substance of such responses to be satisfactory to Lender.
"ORGANIZATIONAL I.D. NUMBER" means with respect to any Person, the
organizational identification number assigned to such Person by the applicable
governmental unit or agency of the jurisdiction of organization/formation of
such Person.
"OVERADVANCE" has the meaning set forth in SECTION 2.5.
"PARENT" means Xxx. Xxxxxx' Holding Company, Inc., a Delaware
corporation.
"PARENT'S INDENTURE" means that certain Indenture dated as of August
24, 1998, between Parent, as issuer, and The Bank of New York, as Trustee.
"PARTICIPANT" has the meaning set forth in SECTION 14.1(d).
"PEACHTREE PRETZEL" means Peachtree Pretzel Time, Inc.
"PERMITTED DISCRETION" means a determination made in good faith and in
the exercise of reasonable (from the perspective of a secured asset-based
lender) business judgment.
"PERMITTED DISPOSITIONS" means (a) sales or other dispositions by
Borrower or its Subsidiaries of Equipment that is substantially worn, damaged,
or obsolete in the ordinary course of business, (b) the lapse of Intellectual
Property Rights in accordance with SECTION 6.16, (c) sales by Borrower or its
Subsidiaries of Inventory to buyers in the ordinary course of business, (d) the
use or transfer of money or Cash Equivalents by Borrower or its Subsidiaries in
a manner that is not prohibited by the terms of this Agreement or the other Loan
Documents, (e) the licensing by Borrower or its Subsidiaries, on a non-exclusive
basis, of Intellectual Property Rights in the ordinary course of business, (f)
the sale or disposition of Inventory or Equipment arising out of the
transactions permitted under SECTIONS 7.21 and 7.22, (g) the licensing by
Borrower or its Subsidiaries of Intellectual Property Rights to non-Affiliated
third parties in foreign territories, on an exclusive basis, in the ordinary
course of business so long as all payments and fees arising from or related to
such foreign license agreements are deposited in the Cash Management Account,
(h) the licensing by Borrower or its Subsidiaries, on an exclusive basis, of
Intellectual Property Rights within the United States or its territories with
Lender's prior written consent and so long as (1) all payments and fees arising
from or related to such license are deposited in the Cash Management Account and
(2) Lender receives an assignment of Borrower's or such Guarantor's, as the case
may be, rights under the exclusive license and a consent to such assignment from
the licensee, all in form and substance reasonably satisfactory to Lender, and
(i) the transfer of assets by a Subsidiary of Borrower to another Subsidiary of
Borrower so long as (1) in the case of the transfer of assets from a Guarantor
to another Subsidiary of Borrower such transfer remains and is expressly made
subject to Lender's Lien by documentation in form and substance reasonably
acceptable to Lender and (2) Lender receives at least fifteen (15) Business
Days' notice of such proposed transfer.
17
"PERMITTED INVESTMENTS" means:
(a) investments in Cash Equivalents,
(b) investments in negotiable instruments for collection,
(c) advances made in connection with purchases of goods or services
and the payment of accounts receivables and trade debt arising in the ordinary
course of business,
(d) investments permitted as Capital Expenditures under SECTION 7.20,
(e) investments consisting of any deferred portion of the sales price
received by Borrower or any Subsidiary of Borrower in connection with any
Permitted Disposition,
(f) without duplication, investments permitted as Indebtedness under
SECTION 7.1,
(g) investments existing on the Closing Date and set forth on
SCHEDULE 7.13,
(h) investments received in connection with the bankruptcy or
reorganization of, or settlement of delinquent accounts and disputes with,
Account Debtors and suppliers, in each case in the ordinary course of business,
(i) investments by way of contributions to capital purchases of
capital securities by Borrower in any Subsidiary of Borrower (except for
Guarantors which are covered by CLAUSE (j) of this definition); PROVIDED that
(1) no Event of Default has occurred or is continuing, (2) no Event of Default
would result after giving effect to any investment contemplated by this CLAUSE
(i), (3) the aggregate amount of investments permitted under this CLAUSE (i)
made by Borrower in Subsidiaries which are not Guarantors shall not exceed
$500,000 during any Fiscal Year, and (4) all such investments are recorded in
the Books and Records in a manner reasonably satisfactory to Lender,
(j) investments by way of contributions to capital or purchases of
capital securities by Borrower in Guarantors; PROVIDED that (1) no Event of
Default has occurred or is continuing, (2) no Event of Default would result
after giving effect to any investment contemplated by this CLAUSE (j), (3) the
revenue and including, without duplication, Collections for each Guarantor
exceed the amount of such Guarantor's respective expenses as actually paid by
such Guarantor and as reflected on the reports required under SECTION 6.2 (e),
(4) the aggregate amount of investments permitted under this CLAUSE (j) shall
not exceed the amount of expenses incurred by the Guarantors in the ordinary
course of business on a trailing twelve (12) month basis, and (5) all such
investments are recorded in the Books and Records in a manner reasonably
satisfactory to Lender,
(k) investments by way of loans, advances, contributions to capital
or purchases of capital securities by any Subsidiary of Borrower in Borrower,
and
(l) investments by way of loans, advances, contributions to capital
or purchases of capital security by any Subsidiary of Borrower in any other
Subsidiary of Borrower.
18
"PERMITTED LIENS" means (a) Liens held by Lender, (b) Liens for unpaid
taxes that either (i) are not yet delinquent, or (ii) do not constitute an Event
of Default hereunder and are the subject of Permitted Protests, (c) Liens set
forth on Schedule P-1, (d) any interest or title of a lessor or sublessor and
any restriction or encumbrance to which the interest or title of such lessor or
sublessor may be subject that is incurred in the ordinary course of business,
(e) purchase money Liens or the interests of lessors under Capital Leases to the
extent that such Liens or interests secure Permitted Purchase Money Indebtedness
and so long as such Lien attaches only to the asset purchased or acquired and
the proceeds thereof, (f) Liens arising by operation of law in favor of
warehousemen, landlords, carriers, mechanics, materialmen, laborers, or
suppliers, incurred in the ordinary course of business and not in connection
with the borrowing of money, and which Liens either (i) are for sums not yet
delinquent, or (ii) are the subject of Permitted Protests, (g) Liens arising
from deposits made in connection with obtaining worker's compensation or other
unemployment insurance, (h) Liens securing the performance of, or payment in
respect of, bids, tenders, leases, or contracts (other than for the repayment of
borrowed money), incurred in the ordinary course of business, (i) Liens granted
as security for surety or appeal bonds in connection with obtaining such bonds
in the ordinary course of business, (j) Liens resulting from any judgment or
award that is not an Event of Default hereunder, (k) Liens with respect to the
Real Property Collateral that are exceptions to the commitments for title
insurance issued in connection with the Mortgages, as accepted by Lender, (l)
with respect to any Real Property that is not part of the Real Property
Collateral, easements, operating agreements, covenants, conditions, rights of
way, survey exceptions, sewers, electric lines, licenses, telegraph and
telephone lines, zoning restrictions and other encumbrances on title to, or
restrictions on the use of, real property that do not render title to the
property encumbered thereby unmarketable or adversely affect the use of such
property for its present purposes in any material manner, (m) Liens in favor of
customs and revenue authorities arising as a matter of law and only if pursuant
to a bond to secure payment of customs duties in connection with the importation
of goods, and (n) customary rights of setoff upon deposits of cash in favor of
banks or other depository institutions in which such cash is maintained in the
ordinary course of business (other than with respect to the Cash Management
Banks or banks or other depository institutions where Deposit Accounts or
Securities Accounts subject to Control Agreements are maintained).
"PERMITTED PROTEST" means the right of Borrower or any of its
Subsidiaries, as applicable, to protest any Lien (other than any such Lien that
secures the Obligations), taxes (other than payroll taxes or taxes that are the
subject of a United States federal tax lien), or rental payment, provided that
(a) a reserve with respect to such obligation is established on the Books in
such amount as is required under GAAP, (b) any such protest is instituted
promptly and prosecuted diligently by Borrower or any of its Subsidiaries, as
applicable, in good faith, and (c) Lender is satisfied that, while any such
protest is pending, there will be no impairment of the enforceability, validity,
or priority of any of the Lender's Liens.
"PERMITTED PURCHASE MONEY INDEBTEDNESS" means, as of any date of
determination, Purchase Money Indebtedness incurred after the Closing Date in an
aggregate principal amount outstanding at any one time not in excess of
$5,000,000.
"PERSON" means natural persons, corporations, limited liability
companies, limited partnerships, general partnerships, limited liability
partnerships, joint ventures, trusts, land trusts,
19
business trusts, or other organizations, irrespective of whether they are legal
entities, and governments and agencies and political subdivisions thereof.
"PERSONAL PROPERTY COLLATERAL" means all Collateral other than Real
Property.
"PRELIMINARY BORROWING BASE CERTIFICATE" means a certificate in the
form of Exhibit B-1 for the months of December and January which represents the
best preliminary financial information for such months available to Borrower and
which is subject to final adjustments based upon the final financial information
for such months, all such adjustments to be reflected in the Borrowing Base
Certificate for such months delivered in accordance with SECTION 6.2.
"PRETZELMAKER" means Pretzelmaker, Inc., a Utah corporation.
"PROJECTIONS" means Borrower's forecasted (a) balance sheets, (b)
profit and loss statements, and (c) cash flow statements, all prepared on a
basis consistent with Borrower's historical financial statements, together with
appropriate supporting details and a statement of underlying assumptions (it
being understood that Projections are subject to significant uncertainties and
contingencies, many of which are beyond Borrower's control and no assurance can
be given that the Projections will be realized).
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness (other than the
Obligations, but including Capitalized Lease Obligations) incurred at the time
of, or within 120 days after, the acquisition of any fixed assets for the
purpose of financing all or any part of the acquisition cost thereof.
"REAL PROPERTY" means any estates or interests in real property now
owned or hereafter acquired by Borrower and the improvements thereto.
"REAL PROPERTY COLLATERAL" means the parcel or parcels of Real
Property identified on SCHEDULE R-1 and any Real Property hereafter acquired by
Borrower or any Guarantor.
"RECORD" means information that is inscribed on a tangible medium or
which is stored in an electronic or other medium and is retrievable in
perceivable form.
"REFINANCING LETTER AGREEMENT" means a letter agreement, in form and
substance reasonably satisfactory to Lender, from Existing Lender to Lender
respecting the amount necessary to refinance in full all of the obligations of
Borrower owing to Existing Lender with an assignment to Lender of all of the
Liens existing in favor of Existing Lender in and to the assets of Borrower or
any Guarantor.
"REMEDIAL ACTION" means all actions taken to (a) clean up, remove,
remediate, contain, treat, monitor, assess, evaluate, or in any way address
Hazardous Materials in the indoor or outdoor environment, (b) prevent or
minimize a release or threatened release of Hazardous Materials so they do not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment, (c) perform any pre-remedial studies,
investigations, or post-remedial operation and maintenance activities, or (d)
conduct any other actions authorized by 42 USC Section 9601.
20
"REQUIRED AVAILABILITY" means Excess Availability and unrestricted
cash and Cash Equivalents in an amount of not less than $1,000,000.
"REVOLVER USAGE" means, as of any date of determination, the then
extant amount of outstanding Advances.
"SEC" means the United States Securities and Exchange Commission and
any successor thereto.
"SECURITIES ACCOUNT" means a "securities account" as that term is
defined in the Code.
"SOLVENT" means, with respect to any Person on a particular date, that
such Person is not insolvent (as such term is defined in the Uniform Fraudulent
Transfer Act).
"STOCK" means all shares, options, warrants, interests,
participations, or other equivalents (regardless of how designated) of or in a
Person, whether voting or nonvoting, including common stock, preferred stock, or
any other "equity security" (as such term is defined in Rule 3a11-1 of the
General Rules and Regulations promulgated by the SEC under the Exchange Act).
"STOCK PLEDGE AGREEMENT" means a stock pledge agreement, in form and
substance reasonably satisfactory to Lender, executed and delivered by Borrower
to Lender with respect to the pledge of the Stock owned by Borrower.
"STORE CLOSING COMPLIANCE CERTIFICATE" means a certificate
substantially in the form of EXHIBIT S-1 delivered by a Certifying Officer of
Borrower to Lender.
"STORE CONTRIBUTION MARGIN" means for each Company Store, the amount
of the gross revenues less returns for such Company Store LESS the sum of cost
of sales, labor, rent and other operating store expenses directly attributable
to such Company Store.
"SUBSIDIARY" of a Person means a corporation, partnership, limited
liability company, or other entity in which that Person directly or indirectly
owns or controls the shares of Stock having ordinary voting power to elect a
majority of the board of directors (or appoint other comparable managers) of
such corporation, partnership, limited liability company, or other entity.
"SUBSIDIARY SECURITY AGREEMENTS" means the security agreements
executed and delivered by each Guarantor, the form and substance of which are
reasonably satisfactory to Lender.
"SUNSHINE PRETZEL" means Sunshine Pretzel Time, Inc.
"TAX ALLOCATION AGREEMENT" means that certain Amended and Restated Tax
Allocation Agreement dated as of September 29, 2001, by and among Parent, TCBY
Holding Company, Inc., MFFB, and all direct and indirect Subsidiaries of MFFB as
described therein.
21
"TAXABLE PERIOD" has the meaning set forth in the Tax Allocation
Agreement.
"TAXES" has the meaning set forth in SECTION 16.5.
"TCBY ENTITIES" means TCBY Holding Company, Inc., and TCBY Systems,
LLC.
"TCBY MANAGEMENT AGREEMENT" means that certain agreement dated as of
May 31, 2000 among Borrower and the TCBY Entities.
"TERMINATION DATE" has the meaning set forth in SECTION 2.11(b).
"TRADEMARK SECURITY AGREEMENT" means the trademark security agreements
executed and delivered by Borrower, each Guarantor and Lender, the form and
substance of which are reasonably satisfactory to Lender.
"UNDERLYING ISSUER" means a third Person which is the beneficiary of
an L/C Undertaking and which has issued a letter of credit at the request of
Lender for the benefit of Borrower.
"UNDERLYING LETTER OF CREDIT" means a letter of credit that has been
issued by an Underlying Issuer.
"VOIDABLE TRANSFER" has the meaning set forth in SECTION 16.8.
"XXXXX FARGO" means Xxxxx Fargo Bank, National Association, a national
banking association.
1.2 ACCOUNTING TERMS. All accounting terms not specifically defined herein
shall be construed in accordance with GAAP. When used herein, the term
"financial statements" shall include the notes and schedules thereto. Whenever
the term "Borrower" is used in respect of a financial covenant or a related
definition, it shall be understood to mean Borrower and its Subsidiaries on a
consolidated basis unless the context clearly requires otherwise.
1.3 CODE. Any terms used in this Agreement that are defined in the Code
shall be construed and defined as set forth in the Code unless otherwise defined
herein.
1.4 CONSTRUCTION. Unless the context of this Agreement or any other Loan
Document clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the term "including" is
not limiting, and the term "or" has, except where otherwise indicated, the
inclusive meaning represented by the phrase "and/or." The words "hereof,"
"herein," "hereby," "hereunder," and similar terms in this Agreement or any
other Loan Document refer to this Agreement or such other Loan Document, as the
case may be, as a whole and not to any particular provision of this Agreement or
such other Loan Document, as the case may be. Section, subsection, clause,
schedule, and exhibit references herein are to this Agreement unless otherwise
specified. Any reference in this Agreement or in the other Loan Documents to any
agreement, instrument, or document shall include all alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and
22
supplements, thereto and thereof, as applicable (subject to any restrictions on
such alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements set forth herein). Any
reference herein to any Person shall be construed to include such Person's
successors and assigns. Any requirement of a writing contained herein or in the
other Loan Documents shall be satisfied by the transmission of a Record and any
Record transmitted shall constitute a representation and warranty as to the
accuracy and completeness of the information contained therein.
1.5 SCHEDULES AND EXHIBITS. All of the schedules and exhibits attached to
this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 REVOLVER ADVANCES.
(a) Subject to the terms and conditions of this Agreement, and during
the term of this Agreement, Lender agrees to make advances ("ADVANCES") to
Borrower in an amount at any one time outstanding not to exceed an amount equal
to THE LESSER OF (i) the Maximum Revolver Amount or (ii) the Borrowing Base LESS
the Letter of Credit Usage LESS L/C Advances. For purposes of this Agreement,
"BORROWING BASE," as of any date of determination, shall mean the result of:
(x) the lesser of
(i) 60% of Borrower's Adjusted EBITDA for the trailing 12
month period for the then most recently ended calendar month ,
and
(ii) 15% of Borrower's Enterprise Value, MINUS
(y) the sum of (i) the Bank Products Reserve, and (ii) the
aggregate amount of reserves, if any, established by Lender under
SECTION 2.1(b).
(b) Anything to the contrary in this SECTION 2.1 notwithstanding,
Lender shall have the right to establish reserves in such amounts, and with
respect to such matters, as Lender in its Permitted Discretion shall deem
necessary or appropriate, against the Borrowing Base, including reserves with
respect to (i) sums that Borrower is required to pay (such as taxes,
assessments, insurance premiums, or, in the case of leased assets, rents or
other amounts payable under such leases) and has failed to pay under any Section
of this Agreement or any other Loan Document, (ii) amounts owing by Borrower to
any Person to the extent secured by a Lien on, or trust over, any of the
Collateral (other than any existing Permitted Lien set forth on SCHEDULE P-1)
which Lien or trust, in the Permitted Discretion of Lender likely would have a
priority superior to the Lender's Liens in and to such item of the Collateral
and, (iii) reserves established pursuant to SECTION 2.12(a). In addition to the
foregoing, if an Event of Default shall have occurred or be continuing or if
Borrower shall fail to meet EBITDA as projected in the Closing Date Business
Plan at any time, Lender shall have the right to redetermine or have the
Borrower's Enterprise Value reappraised from time to time by a third party
qualified appraiser selected by
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Lender after the Closing Date for the purpose of redetermining the Borrower's
Enterprise Value and, as a result, redetermining the Borrowing Base.
(c) Lender shall have no obligation to make additional Advances
hereunder to the extent such additional Advances would cause the Revolver Usage
to exceed the Maximum Revolver Amount or to the extent the Preliminary Borrowing
Base Certificate or the Borrowing Base Certificate is not timely delivered
pursuant to SECTION 6.2.
(d) Amounts borrowed pursuant to this Section may be repaid and,
subject to the terms and conditions of this Agreement, reborrowed at any time
during the term of this Agreement.
2.2 [Intentionally left blank.]
2.3 BORROWING PROCEDURES AND SETTLEMENTS.
(a) PROCEDURE FOR BORROWING. Each Borrowing shall be made by a
request by an Authorized Person delivered to Lender which notice must be
received by Lender no later than 10:00 a.m. (California time) on the Business
Day that is the requested Funding Date specifying (i) the amount of such
Borrowing, which shall be for an amount of not less than $500,000 or an integral
multiple thereof, and (ii) the requested Funding Date, which shall be a Business
Day. At Lender's request, Borrower shall confirm any telephonic request for a
Borrowing in writing by an Authorized Person within 24 hours of the giving of
such telephonic notice.
(b) MAKING OF ADVANCES. If Lender has received a timely request for a
Borrowing in accordance with the provisions hereof, and subject to the
satisfaction of the applicable terms and conditions set forth herein or express
written waiver by Lender thereof, Lender shall make the proceeds of such Advance
available to Borrower on the applicable Funding Date by transferring immediately
available funds equal to such proceeds to Borrower's Designated Account.
2.4 PAYMENTS.
(a) PAYMENTS BY BORROWER.
(i) Except as otherwise expressly provided herein, all payments
by Borrower shall be made to Lender's Account and shall be made in
immediately available funds, no later than 11:00 a.m. (California
time) on the date specified herein. Any payment received by Lender
later than 11:00 a.m. (California time) shall be deemed to have been
received on the following Business Day and any applicable interest or
fee shall continue to accrue until such following Business Day.
(b) APPLICATION OF PAYMENTS.
(i) All payments shall be remitted to Lender and all such
payments (other than payments received while no Default or Event of
Default has occurred
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and is continuing and which relate to the payment of principal or
interest of specific Obligations or which relate to the payment of
specific fees), and all proceeds of Accounts or other Collateral
received by Lender, shall be applied as follows:
(A) FIRST, to pay any Lender Expenses then due to Lender
under the Loan Documents, until paid in full,
(B) SECOND, to pay any fees then due to Lender under the
Loan Documents until paid in full,
(C) THIRD, ratably to pay interest due in respect of the
Advances and L/C Advances until paid in full,
(D) FOURTH, so long as no Event of Default has occurred and
is continuing, and at Lender's election, to pay amounts then due
and owing by Borrower or its Subsidiaries in respect of Bank
Products, until paid in full,
(E) FIFTH, so long as no Event of Default has occurred and
is continuing, to pay the principal of all Advances and L/C
Advances until paid in full,
(F) SIXTH, if an Event of Default has occurred and is
continuing, ratably (i) to pay the principal of all Advances and
L/C Advances until paid in full, and (ii) to Lender, to be held
by Lender, for the benefit of Xxxxx Fargo or its Affiliates, as
applicable, as cash collateral in an amount up to the amount of
the Bank Products Reserve established prior to the occurrence of,
and not in contemplation of, the subject Event of Default until
Borrower's and its Subsidiaries' obligations in respect of the
then extant Bank Products have been paid in full or the cash
collateral amount has been exhausted,
(G) SEVENTH, if an Event of Default has occurred and is
continuing, to be held by Lender as cash collateral in an amount
up to 105% of the then extant Letter of Credit Usage until paid
in full,
(H) EIGHTH, to pay any other Obligations until paid in
full, and
(I) NINTH, to Borrower (to be wired to the Designated
Account) or such other Person entitled thereto under applicable
law.
(ii) In each instance, so long as no Default or Event of Default
has occurred and is continuing, SECTION 2.4(b) shall not be deemed to
apply to any payment by Borrower specified by Borrower to be for the
payment of specific Obligations then due and payable (or prepayable)
under any provision of this Agreement.
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(iii) For purposes of the foregoing, "paid in full" means payment
of all amounts owing under the Loan Documents according to the terms
thereof, including loan fees, service fees, professional fees,
interest (and specifically including interest accrued after the
commencement of any Insolvency Proceeding), default interest, interest
on interest, and expense reimbursements, whether or not the same would
be or is allowed or disallowed in whole or in part in any Insolvency
Proceeding.
(iv) In the event of a direct conflict between the priority
provisions of this SECTION 2.4 and other provisions contained in any
other Loan Document, it is the intention of the parties hereto that
such priority provisions in such documents shall be read together and
construed, to the fullest extent possible, to be in concert with each
other. In the event of any actual, irreconcilable conflict that cannot
be resolved as aforesaid, the terms and provisions of this SECTION 2.4
shall control and govern.
2.5 OVERADVANCES. If, at any time or for any reason (including, without
limitation, based on adjustments to the calculation of the Borrowing Base as set
forth in any Preliminary Borrowing Base Certificate or Borrowing Base
Certificate), the amount of Obligations (other than Bank Product Obligations)
owed by Borrower to Lender pursuant to SECTIONS 2.1 AND 2.12 is greater than
either the Dollar or percentage limitations set forth in SECTIONS 2.1 OR 2.12,
(an "OVERADVANCE"), Borrower immediately shall pay to Lender, in cash, the
amount of such excess, which amount shall be used by Lender to reduce the
Obligations in accordance with the priorities set forth in SECTION 2.4(b). In
addition, Borrower hereby promises to pay the Obligations (including principal,
interest, fees, costs, and expenses) in Dollars in full to Lender as and when
due and payable under the terms of this Agreement and the other Loan Documents.
2.6 INTEREST RATES AND LETTER OF CREDIT FEE: RATES, PAYMENTS, AND
CALCULATIONS.
(a) INTEREST RATES. Except as provided in clause (c) below, all
Obligations (except for undrawn Letters of Credit and except for Bank Product
Obligations) that have been charged to the Loan Account pursuant to the terms
hereof shall bear interest on the Daily Balance thereof at a per annum rate
equal to the Base Rate plus the Base Rate Margin.
(b) LETTER OF CREDIT FEE. Borrower shall pay Lender a Letter of
Credit fee (in addition to the charges, commissions, fees, and costs set forth
in SECTION 2.12(d)) which shall accrue at a rate equal to 4% per annum TIMES the
Daily Balance of the undrawn amount of all outstanding Letters of Credit.
(c) DEFAULT RATE. Upon the occurrence and during the continuation of
an Event of Default,
(i) all Obligations (except for undrawn Letters of Credit and
except for Bank Products Obligations) that have been charged to the
Loan Account pursuant to the terms hereof shall bear interest on the
Daily Balance thereof at a per annum rate equal to 3 percentage points
above the per annum rate otherwise applicable hereunder, and
26
(ii) the Letter of Credit fee provided for above shall be
increased to 3 percentage points above the per annum rate otherwise
applicable hereunder.
(d) PAYMENT. Interest, Letter of Credit fees, and all other fees
payable hereunder shall be due and payable, in arrears, on the first day of each
month at any time that Obligations or obligation to extend credit hereunder are
outstanding. Borrower hereby authorizes Lender, from time to time without prior
notice to Borrower, to charge such interest and fees, all Lender Expenses (as
and when properly incurred), the charges, commissions, fees, and costs provided
for in SECTION 2.12(e) (as and when accrued or properly incurred), the fees and
costs provided for in SECTION 2.11 (as and when accrued or properly incurred),
and all other payments as and when due and payable under any Loan Document
(including any amounts due and payable to Xxxxx Fargo or its Affiliates in
respect of Bank Products up to the amount of the then extant Bank Products
Reserve) to Borrower's Loan Account, which amounts thereafter shall constitute
Advances hereunder and shall accrue interest at the rate then applicable to
Advances hereunder. Any interest not paid when due shall be compounded by being
charged to Borrower's Loan Account and shall thereafter constitute Advances
hereunder and shall accrue interest at the rate then applicable to Advances.
(e) COMPUTATION. All interest and fees chargeable under the Loan
Documents shall be computed on the basis of a 360 day year for the actual number
of days elapsed. In the event the Base Rate is changed from time to time
hereafter, the rates of interest hereunder based upon the Base Rate
automatically and immediately shall be increased or decreased by an amount equal
to such change in the Base Rate.
(f) INTENT TO LIMIT CHARGES TO MAXIMUM LAWFUL RATE. In no event shall
the interest rate or rates payable under this Agreement, plus any other amounts
paid in connection herewith, exceed the highest rate permissible under any law
that a court of competent jurisdiction shall, in a final determination, deem
applicable. Borrower and Lender, in executing and delivering this Agreement,
intend legally to agree upon the rate or rates of interest and manner of payment
stated within it; PROVIDED, HOWEVER, that, anything contained herein to the
contrary notwithstanding, if said rate or rates of interest or manner of payment
exceeds the maximum allowable under applicable law, then, IPSO FACTO, as of the
date of this Agreement, Borrower is and shall be liable only for the payment of
such maximum as allowed by law, and payment received from Borrower in excess of
such legal maximum, whenever received, shall be applied to reduce the principal
balance of the Obligations to the extent of such excess.
2.7 CASH MANAGEMENT.
(a) Borrower shall, and shall cause each of the Guarantors to, (i)
establish and maintain cash management services of a type and on terms
satisfactory to Lender at one or more of the banks set forth on SCHEDULE 2.7(a)
(each, a "CASH MANAGEMENT BANK"), and shall request in writing and otherwise
take such reasonable steps to ensure that all of its Account Debtors and other
obligors (including without limitation, credit card processors, franchisees and
licensees) forward payment of the amounts owed by them directly to such Cash
Management Bank, and (ii) deposit or cause to be deposited promptly, and in any
event no later than the first Business Day after the date of receipt thereof,
all Collections (including those sent directly by Account
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Debtors to a Cash Management Bank) into a bank account (a "CASH MANAGEMENT
ACCOUNT") at one of the Cash Management Banks.
(b) Each Cash Management Bank shall establish and maintain Cash
Management Agreements with Lender and Borrower and each Guarantor, as the case
may be, in form and substance reasonably acceptable to Lender. Each such Cash
Management Agreement shall provide, among other things, that (i) all items of
payment deposited in such Cash Management Account and proceeds thereof are held
by such Cash Management Bank as agent or bailee-in-possession for Lender, (ii)
the Cash Management Bank has no rights of setoff or recoupment or any other
claim against the applicable Cash Management Account other than for payment of
its service fees and other charges directly related to the administration of
such Cash Management Account and for returned checks or other items of payment,
and (iii) immediately upon notice from Lender following an Event of Default,
such Cash Management Bank will forward by daily sweep all amounts in the
applicable Cash Management Account to the Lender's Account.
(c) So long as no Default or Event of Default has occurred and is
continuing, Borrower may amend SCHEDULE 2.7(a) to add or replace a Cash
Management Bank or Cash Management Account; PROVIDED, HOWEVER, that (i) such
prospective Cash Management Bank shall be reasonably satisfactory to Lender and
Lender shall have consented in writing in advance to the opening of such Cash
Management Account with the prospective Cash Management Bank, and (ii) prior to
the time of the opening of such Cash Management Account, Borrower or the
applicable Guarantor and such prospective Cash Management Bank shall have
executed and delivered to Lender a Cash Management Agreement. Borrower or the
applicable Guarantor shall close any of its Cash Management Accounts (and
establish replacement cash management accounts in accordance with the foregoing
sentence) promptly and in any event within 30 days of notice from Lender that
the creditworthiness of any Cash Management Bank is no longer acceptable in
Lender's reasonable judgment, or as promptly as practicable and in any event
within 60 days of notice from Lender that the operating performance, funds
transfer, or availability procedures or performance of the Cash Management Bank
with respect to Cash Management Accounts or Lender's liability under any Cash
Management Agreement with such Cash Management Bank is no longer acceptable in
Lender's reasonable judgment.
(d) The Cash Management Accounts shall be cash collateral accounts,
with all cash, checks and similar items of payment in such accounts securing
payment of the Obligations, and in which Borrower and the applicable Guarantor
is hereby deemed to have granted a Lien to Lender.
2.8 CREDITING PAYMENTS. The receipt of any payment item by Lender (whether
from transfers to Lender by the Cash Management Banks pursuant to the Cash
Management Agreements or otherwise) shall not be considered a payment on account
unless such payment item is a wire transfer of immediately available federal
funds made to the Lender's Account or unless and until such payment item is
honored when presented for payment. Should any payment item not be honored when
presented for payment, then Borrower shall be deemed not to have made such
payment and interest shall be calculated accordingly. Anything to the contrary
contained herein notwithstanding, any payment item shall be deemed received by
Lender only if it is received into the Lender's Account on a Business Day on or
before 11:00 a.m. (California
28
time). If any payment item is received into the Lender's Account on a
non-Business Day or after 11:00 a.m. (California time) on a Business Day, it
shall be deemed to have been received by Lender as of the opening of business on
the immediately following Business Day.
2.9 DESIGNATED ACCOUNT. Lender is authorized to make the Advances, and
Lender is authorized to issue the Letters of Credit, under this Agreement based
upon telephonic or other instructions received from anyone purporting to be an
Authorized Person, or without instructions if pursuant to SECTION 2.6(d).
Borrower agrees to establish and maintain the Designated Account with the
Designated Account Bank for the purpose of receiving the proceeds of the
Advances requested by Borrower and made by Lender hereunder. Unless otherwise
agreed by Lender and Borrower, any Advance requested by Borrower and made by
Lender hereunder shall be made to the Designated Account.
2.10 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF OBLIGATIONS. Lender shall
maintain an account on its books in the name of Borrower (the "LOAN ACCOUNT") on
which Borrower will be charged with, all Advances and L/C Advances made by
Lender to Borrower or for Borrower's account, the Letters of Credit issued by
Lender for Borrower's account, and with all other payment Obligations hereunder
or under the other Loan Documents (except for Bank Product Obligations),
including, accrued interest, fees and expenses, and Lender Expenses. In
accordance with SECTION 2.8, the Loan Account will be credited with all payments
received by Lender from Borrower or for Borrower's account, including all
amounts received in the Lender's Account from any Cash Management Bank. Lender
shall render statements regarding the Loan Account to Borrower, including
principal, interest, fees, and including an itemization of all charges and
expenses constituting Lender Expenses owing, and such statements shall be
conclusively presumed to be correct and accurate and constitute an account
stated between Borrower and Lender unless, within 30 days after receipt thereof
by Borrower, Borrower shall deliver to Lender written objection thereto
describing the error or errors contained in any such statements.
2.11 FEES. Borrower shall pay to Lender the following fees and charges,
which fees and charges shall be non-refundable when paid (irrespective of
whether this Agreement is terminated thereafter):
(a) CLOSING FEE. A closing fee of $400,000, which fee shall be due
and payable in full on the Closing Date.
(b) ANNIVERSARY FEE. An anniversary fee of $200,000, which fee shall
be due and payable in full on each anniversary of the Closing Date through the
date on which all of the Obligations are paid in full in accordance with the
terms of this Agreement and Lender's obligation to provide additional credit
hereunder is terminated (the "TERMINATION DATE").
(c) SERVICING FEE. On the first day of each month, commencing with
the first day of the month immediately following the Closing Date, through the
Termination Date, a servicing fee payable in arrears in an amount equal to
$5,000.
(d) AUDIT, APPRAISAL, AND VALUATION CHARGES. Audit, appraisal, and
valuation fees and charges as follows (i) the actual charges paid or incurred by
Lender if it elects
29
to employ the services of one or more third Persons to perform financial audits
of Borrower, to appraise the Collateral, or any portion thereof, or to assess
Borrower's Enterprise Value or business valuation (ii) a fee of $1,500 per day
per appraiser, plus out-of-pocket expenses, for each appraisal of the Collateral
performed by personnel employed by Lender, and (iii) a fee of $850 per day, per
auditor, plus out-of-pocket expenses for each financial audit of Borrower
performed by personnel employed by Lender.
2.12 LETTERS OF CREDIT.
(a) Subject to the terms and conditions of this Agreement, Lender
agrees to issue letters of credit for the account of Borrower (each, an "L/C")
or to purchase participations or execute indemnities or reimbursement
obligations (each such undertaking, an "L/C UNDERTAKING") with respect to
letters of credit issued by an Underlying Issuer (as of the Closing Date, such
issuing bank to be Xxxxx Fargo) for the account of Borrower. To request the
issuance of an L/C or an L/C Undertaking (or the amendment, renewal, or
extension of an outstanding L/C or L/C Undertaking), Borrower shall hand deliver
or telecopy (or transmit by electronic communication, if arrangements for doing
so have been approved by Lender) to Lender (reasonably in advance of the
requested date of issuance, amendment, renewal, or extension) a notice
requesting the issuance of an L/C or L/C Undertaking, or identifying the L/C or
L/C Undertaking to be amended, renewed, or extended, the date of issuance,
amendment, renewal, or extension, the date on which such L/C or L/C Undertaking
is to expire, the amount of such L/C or L/C Undertaking, the name and address of
the beneficiary thereof (or the beneficiary of the Underlying Letter of Credit,
as applicable), and such other information as shall be necessary to prepare,
amend, renew, or extend such L/C or L/C Undertaking. If requested by Lender,
Borrower also shall be an applicant under the application with respect to any
Underlying Letter of Credit that is to be the subject of an L/C Undertaking.
Lender shall have no obligation to issue a Letter of Credit if either of the
following would result after giving effect to the requested Letter of Credit:
(i) the Letter of Credit Usage would exceed the Maximum L/C
Amount; or
(ii) the Letter of Credit Usage would exceed the Borrowing Base
LESS the then extant amount of Obligations.
Anything to the contrary in this SECTION 2.12 notwithstanding, Lender
shall have the right to establish reserves in such amounts, and with respect to
such matters, as Lender in its Permitted Discretion shall deem necessary or
appropriate.
Borrower and Lender acknowledge and agree that certain Underlying
Letters of Credit may be issued to support letters of credit that already are
outstanding as of the Closing Date. Each Letter of Credit (and corresponding
Underlying Letter of Credit) shall be in form and substance reasonably
acceptable to Lender (in the exercise of its Permitted Discretion), including
the requirement that the amounts payable thereunder must be payable in Dollars.
If Lender is obligated to advance funds under a Letter of Credit, Borrower
immediately shall reimburse such L/C Disbursement to Lender by paying to Lender
an amount equal to such L/C Disbursement not later than 11:00 a.m., California
time, on the date that such L/C Disbursement is made, if
30
Borrower shall have received written or telephonic notice of such L/C
Disbursement prior to 10:00 a.m., California time, on such date, or, if such
notice has not been received by Borrower prior to such time on such date, then
not later than 11:00 a.m., California time, on the Business Day that Borrower
receives such notice, if such notice is received prior to 10:00 a.m., California
time, on the date of receipt, and, in the absence of such reimbursement, the L/C
Disbursement immediately and automatically shall be deemed to be an advance
hereunder (a "L/C ADVANCE") and, thereafter, shall bear interest at the rate
then applicable to Advances. To the extent an L/C Disbursement is deemed to be
an L/C Advance hereunder, Borrower's obligation to reimburse such L/C
Disbursement shall be discharged and replaced by the resulting L/C Advance.
Under any and all circumstances Borrower must pay all L/C Advances immediately
in cash.
(b) Borrower hereby agrees to indemnify, save, defend, and hold
Lender harmless from any loss, cost, expense, or liability, and reasonable
attorneys fees incurred by Lender arising out of or in connection with any
Letter of Credit; PROVIDED, HOWEVER, that Borrower shall not be obligated
hereunder to indemnify for any loss, cost, expense, or liability that is caused
by the gross negligence or willful misconduct of Lender. Borrower agrees to be
bound by the Underlying Issuer's regulations and interpretations of any
Underlying Letter of Credit or by Lender's interpretations of any L/C issued by
Lender to or for Borrower's account, even though this interpretation may be
different from Borrower's own, and Borrower understands and agrees that Lender
shall not be liable for any error, negligence, or mistake, whether of omission
or commission, in following Borrower's instructions or those contained in the
Letter of Credit or any modifications, amendments, or supplements thereto.
Borrower understands that the L/C Undertakings may require Lender to indemnify
the Underlying Issuer for certain costs or liabilities arising out of claims by
Borrower against such Underlying Issuer. Borrower hereby agrees to indemnify,
save, defend, and hold Lender harmless with respect to any loss, cost, expense
(including reasonable attorneys fees), or liability incurred by Lender under any
L/C Undertaking as a result of Lender's indemnification of any Underlying
Issuer; PROVIDED, HOWEVER, that Borrower shall not be obligated hereunder to
indemnify for any loss, cost, expense, or liability that is caused by the gross
negligence or willful misconduct of Lender.
(c) Borrower hereby authorizes and directs any Underlying Issuer to
deliver to Lender all instruments, documents, and other writings and property
received by such Underlying Issuer pursuant to such Underlying Letter of Credit
and to accept and rely upon Lender's instructions with respect to all matters
arising in connection with such Underlying Letter of Credit and the related
application.
(d) Any and all charges, commissions, fees, and costs incurred by
Lender relating to Underlying Letters of Credit shall be Lender Expenses for
purposes of this Agreement and immediately shall be reimbursable by Borrower to
Lender; it being acknowledged and agreed by Borrower that, as of the Closing
Date, the issuance charge imposed by the prospective Underlying Issuer is 0.85%
per annum times the face amount of each Underlying Letter of Credit, that such
issuance charge may be changed from time to time, and that the Underlying Issuer
also imposes a schedule of charges for amendments, extensions, drawings, and
renewals.
(e) If by reason of (i) any change in any applicable law, treaty,
rule, or regulation or any change in the interpretation or application thereof
by any Governmental Authority, or (ii) compliance by the Underlying Issuer or
Lender with any direction, request, or
31
requirement (irrespective of whether having the force of law) of any
Governmental Authority or monetary authority including, Regulation D of the
Federal Reserve Board as from time to time in effect (and any successor
thereto):
(i) any reserve, deposit, or similar requirement is or shall be
imposed or modified in respect of any Letter of Credit issued
hereunder, or
(ii) there shall be imposed on the Underlying Issuer or Lender
any other condition regarding any Underlying Letter of Credit or any
Letter of Credit issued pursuant hereto,
and the result of the foregoing is to increase, directly or indirectly, the cost
to Lender of issuing, making, guaranteeing, or maintaining any Letter of Credit
or to reduce the amount receivable in respect thereof by Lender, then, and in
any such case, Lender may, at any time within a reasonable period after the
additional cost is incurred or the amount received is reduced, notify Borrower,
and Borrower shall promptly pay such amounts as Lender may specify to be
necessary to compensate Lender for such additional cost or reduced receipt,
together with interest on such amount from the date of such demand until payment
in full thereof at the rate then applicable to Advances. The determination by
Lender of any amount due pursuant to this Section, as set forth in a certificate
setting forth the calculation thereof in reasonable detail, shall, in the
absence of manifest or demonstrable error, be final and conclusive and binding
on all of the parties hereto.
(f) On the Closing Date, each outstanding letter of credit issued by
Existing Lender under the Credit Facility (individually, an "EXISTING L/C" and
collectively, the "EXISTING L/CS"), including each letter of credit described on
SCHEDULE 5.24 hereof, shall be deemed for all purposes, as of such date, without
further action by any Person, to have been issued hereunder and be deemed a
Letter of Credit for all purposes, and each such issuer of the Existing L/Cs
shall be deemed to be an "Underlying Issuer" hereunder for all purposes but
solely with respect to, and until the termination, expiration or replacement of,
such Existing L/Cs. Each such Existing L/C shall be subject to the terms and
conditions of this Agreement, and all obligations under or in connection with
such Existing L/C shall constitute Obligations hereunder.
2.13 [Intentionally left blank.]
2.14 CAPITAL REQUIREMENTS. If, after the date hereof, Lender determines
that (i) the adoption of or change in any law, rule, regulation or guideline
regarding capital requirements for banks or bank holding companies, or any
change in the interpretation or application thereof by any Governmental
Authority charged with the administration thereof, or (ii) compliance by Lender
or its parent bank holding company with any guideline, request, or directive of
any such entity regarding capital adequacy (whether or not having the force of
law), the effect of reducing the return on Lender's or such holding company's
capital as a consequence of Lender's obligations hereunder to a level below that
which Lender or such holding company could have achieved but for such adoption,
change, or compliance (taking into consideration Lender's or such holding
company's then existing policies with respect to capital adequacy and assuming
the full utilization of such entity's capital) by any amount deemed by Lender to
be material, in each case that would be complied with generally by similarly
situated banks, financial or lending institutions acting reasonably, then Lender
may notify Borrower thereof. Following receipt of
32
such notice, Borrower agrees to promptly pay Lender the amount of such reduction
of return of capital as and when such reduction is determined, payable within 90
days after presentation by Lender of a statement in the amount and setting forth
in reasonable detail Lender's calculation thereof and the assumptions upon which
such calculation was based (which statement shall be deemed true and correct
absent manifest error), and shall certify that the claim for additional amounts
referred to therein is generally consistent with Lender's treatment of similarly
situated customers of Lender whose transactions with Lender are similarly
affected by the change in circumstances giving rise to such payment, provided,
however, that Lender shall not be required to disclose any confidential or
proprietary information therein. In determining such amount, Lender may use any
reasonable averaging and attribution methods.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 CONDITIONS PRECEDENT TO THE INITIAL EXTENSION OF CREDIT. The
obligation of Lender to make the initial Advance or L/C Advance (or otherwise to
extend any credit provided for hereunder), is subject to the fulfillment, to the
reasonable satisfaction of Lender, of each of the conditions precedent set forth
below or the express written waiver thereof by Lender:
(a) the Closing Date shall occur on or before January 16, 2003;
(b) Lender shall have received all financing statements required by
Lender, and Lender shall have received searches reflecting the filing of all
such financing statements;
(c) Lender shall have received each of the following documents, in
form and substance reasonably satisfactory to Lender, duly executed, and each
such document shall be in full force and effect:
(i) the Collateral Assignment;
(ii) the Control Agreements,
(iii) [Intentionally left blank],
(iv) the Credit Card Agreements,
(v) the Disbursement Letter,
(vi) the Due Diligence Letter,
(vii) the Environmental Indemnity Agreement,
(viii) each Guaranty,
(ix) [Intentionally left blank],
(x) the Mortgages for the Real Property owned by GACC and
Borrower's corporate headquarters,
(xi) the Officers' Certificate,
33
(xii) the Refinancing Letter Agreement, together with a UCC
assignment and other documentation evidencing the assignment by
Existing Lender of its Liens in and to the properties and assets of
Borrower or any Guarantor,
(xiii) the Stock Pledge Agreement, together with all certificates
representing the shares of Stock pledged thereunder, including,
without limitation, the shares of each Guarantor and the warrants
issued by Nonni's Food Company, Inc., as well as Stock powers with
respect thereto endorsed in blank,
(xiv) the Trademark Security Agreements,
(xv) the Subsidiary Security Agreements, and
(xvi) a Consent to Assignment for each of the contracts listed on
SCHEDULE 3.1(c)(xvi) (collectively the "ASSIGNED CONTRACTS"); and
(d) Lender shall have received a certificate from the Secretary of
Borrower attesting to the resolutions of Borrower's Board of Directors
authorizing its execution, delivery, and performance of this Agreement and the
other Loan Documents to which Borrower is a party and authorizing specific
officers of Borrower to execute the same;
(e) Lender shall have received copies of Borrower's Governing
Documents, as amended, modified, or supplemented to the Closing Date, certified
by the Secretary of Borrower;
(f) Lender shall have received a certificate of status with respect
to Borrower, dated within 10 days of the Closing Date, such certificate to be
issued by the appropriate officer of the jurisdiction of organization of
Borrower, which certificate shall indicate that Borrower is in good standing in
such jurisdiction;
(g) Lender shall have received certificates of status with respect to
Borrower, each dated within 30 days of the Closing Date, such certificates to be
issued by the appropriate officer of the jurisdictions (other than the
jurisdiction of organization of Borrower) in which its failure to be duly
qualified or licensed would constitute a Material Adverse Change, which
certificates shall indicate that Borrower is in good standing in such
jurisdictions;
(h) Lender shall have received a certificate from the Secretary of
each Guarantor attesting to the resolutions of such Guarantor's Board of
Directors authorizing its execution, delivery, and performance of the Loan
Documents to which such Guarantor is a party and authorizing specific officers
of such Guarantor to execute the same;
(i) Lender shall have received copies of each Guarantor's Governing
Documents, as amended, modified, or supplemented to the Closing Date, certified
by the Secretary of such Guarantor;
(j) Lender shall have received a certificate of status with respect
to each Guarantor, dated within 10 days of the Closing Date, such certificate to
be issued by the
34
appropriate officer of the jurisdiction of organization of such Guarantor, which
certificate shall indicate that such Guarantor is in good standing in such
jurisdiction;
(k) Lender shall have received certificates of status with respect to
each Guarantor, each dated within 30 days of the Closing Date, such certificates
to be issued by the appropriate officer of the jurisdictions (other than the
jurisdiction of organization of such Guarantor) in which its failure to be duly
qualified or licensed would constitute a Material Adverse Change, which
certificates shall indicate that such Guarantor is in good standing in such
jurisdictions;
(l) Lender shall have received a certificate of insurance, together
with the endorsements thereto, as are required by SECTION 6.8, the form and
substance of which shall be reasonably satisfactory to Lender;
(m) Lender shall have received an opinion of Skadden, Arps, Slate,
Xxxxxxx & Xxxx LLP, special California, Delaware and New York counsel to
Borrower and Guarantors, in form and substance reasonably satisfactory to
Lender, and an opinion of the general counsel of Borrower and Guarantors in form
and substance reasonably satisfactory to Lender;
(n) Lender shall have received satisfactory evidence (including a
certificate of the chief financial officer of Borrower) that all tax returns
required to be filed by Borrower and its Subsidiaries have been timely filed and
all taxes upon Borrower, its Subsidiaries or their respective properties,
assets, income, and franchises (including Real Property taxes and payroll taxes)
have been paid prior to delinquency, except such taxes that are the subject of a
Permitted Protest;
(o) Borrower shall have the Required Availability after giving effect
to the initial extensions of credit hereunder;
(p) Lender shall have completed its business, legal, and collateral
due diligence, including (i) a collateral audit and review of Borrower's books
and records (including, without limitation, a review of Borrower's payment or
resolution of all material past due payables, the minute books for Borrower and
its Subsidiaries and the audit work papers for the year 2001), (ii) verification
of Borrower's representations and warranties to Lender, (iii) a review of the
financial results of Borrower and its Subsidiaries for the quarter ended
September 2002, and (iv) interviews of loan officers for lenders to Affiliates
of Borrower, the results of which all shall be reasonably satisfactory to
Lender;
(q) Lender shall have received completed reference checks with
respect to Borrower's senior management, the results of which are reasonably
satisfactory to Lender in its sole discretion;
(r) Borrower shall pay all Lender Expenses properly incurred in
connection with the transactions evidenced by this Agreement;
(s) Lender shall have received mortgagee title insurance policies (or
marked commitments to issue the same) for the Real Property Collateral owned by
GACC and issued by
35
a title insurance company reasonably satisfactory to Lender (each a "MORTGAGE
POLICY" and, collectively, the "MORTGAGE POLICIES") in amounts reasonably
satisfactory to Lender assuring Lender that the Mortgages on such Real Property
Collateral are valid and enforceable first priority mortgage Liens on such Real
Property Collateral free and clear of all defects and encumbrances except
Permitted Liens, and the Mortgage Policies otherwise shall be in form and
substance reasonably satisfactory to Lender;
(t) Lender shall have received copies of each of the Indentures, each
of the Assigned Contracts, and the Tax Allocation Agreement, together with a
certificate of the Secretary of Borrower certifying each such document as being
a true, correct, and complete copy thereof;
(u) Lender shall have reviewed each of the Indentures, each of the
Assigned Contracts, and the Tax Allocation Agreement, the results of which shall
be reasonably satisfactory to Lender;
(v) Borrower shall have received all licenses, approvals or evidence
of other actions required by any Governmental Authority in connection with the
execution and delivery by Borrower of this Agreement or any other Loan Document
or with the consummation of the transactions contemplated hereby and thereby;
(w) Lender shall have received Borrower's Closing Date Business Plan;
(x) MFBI and Fairfield Foods shall have been merged into Borrower,
such mergers shall have been consummated and Lender shall have received evidence
of such mergers all in form and substance reasonably satisfactory to Lender;
(y) Borrower shall have recorded evidence of the merger of MFBI into
Borrower with the U.S. Patent and Trademark Office and Lender shall have
received evidence of such recordation in form and substance reasonably
satisfactory to Lender;
(z) Lender shall have received duly executed releases from Bank of
New York and NationsBank of Texas, N.A. with respect to the Liens on the
Intellectual Property Rights listed on SCHEDULE 3.1(z) and evidence of the
filing of such releases with the U.S. Patent and Trademark Office, all in form
and substance reasonably satisfactory to Lender;
(aa) Lender shall have received duly executed releases or other
evidence satisfactory to Lender from Wachovia Bank, National Association,
Georgia Department of Labor and Georgia Department of Revenue with respect to
the Liens on the real property owned by GACC and evidence of the filing of such
releases, all in form and substance reasonably satisfactory to Lender;
(bb) Borrower shall have filed with the U.S. Patent and Trademark
Office evidence of its ownership of the "Hot Xxx" and "Original Cookie"
trademarks and Lender shall have received evidence of such filing in form and
substance reasonably satisfactory to Lender;
(cc) Lender shall have received evidence in form and substance
reasonably satisfactory to Lender that not less than $2,500,000 of the sale
proceeds from the sale of
36
American Food Limited Partnership, a Texas limited partnership (aka TCBY
Americana), shall have been paid to Borrower and Borrower shall have deposited
such proceeds in a Cash Management Account;
(dd) Lender shall have received an amendment to the Corky's Security
Agreement in form and substance reasonably satisfactory to Lender and duly
executed by all parties to the Corky's Security Agreement including, without
limitation, the Corky's Shareholders;
(ee) Lender shall have received a duly executed Cash Management
Agreement from LaSalle Bank with respect to Account No. 5800290503 together with
an opinion of counsel in form and substance reasonably satisfactory to Lender;
and
(ff) all other documents and legal matters in connection with the
transactions contemplated by this Agreement shall have been delivered, executed,
or recorded and shall be in form and substance reasonably satisfactory to
Lender.
3.2 CONDITIONS SUBSEQUENT TO THE INITIAL EXTENSION OF CREDIT. The
obligation of Lender to continue to make Advances and L/C Advances (or otherwise
extend credit hereunder) is subject to the fulfillment, on or before the date
applicable thereto, of each of the conditions subsequent set forth below (the
failure by Borrower to so perform or cause to be performed constituting an Event
of Default) or the express prior written waiver thereof by Lender:
(a) within 60 days of the Closing Date, deliver to Lender copies of
the policies of insurance, together with the endorsements thereto, as are
required by SECTION 6.8, the form and substance of which shall be reasonably
satisfactory to Lender and its counsel;
(b) within fifteen (15) days of the Closing Date, Borrower shall have
filed termination statements with respect to the Liens on the real property
owned by GACC in favor of Bank of America, N.A. and T&W Financial Services
Company LLC and with respect to the Liens listed on Schedule 3.2(b) and
delivered copies of such termination statements to Lender and within forty-five
(45) days of the Closing Date Lender shall have received evidence in form and
substance reasonably satisfactory that such Liens have been released;
(c) Borrower shall use commercially best efforts to obtain and
deliver to Lender within thirty (30) days of the Closing Date a Collateral
Access Agreement duly executed by the lessors of the facilities located at 000
X. Xxxxxxxx Xxxxx, Xxxx Xxxx Xxxx, Xxxx and 000 X. Xxxxxxxx Xxxxx, Xxxx Xxxx
Xxxx, Xxxx (which efforts shall not include monetary expenditures in excess of
nominal amounts); ;
Borrower shall use commercially best efforts to obtain and deliver to
Lender within fifteen (15) days of the Closing Date, a Landlord's Consent to
Leasehold Mortgage duly executed by the lessor of Borrower's corporate
headquarters (which efforts shall not include monetary expenditures in excess of
nominal amounts);;
(d) within thirty (30) days of the Closing Date, Airport Cookies
shall have been merged into Borrower and Lender shall have received evidence of
such merger in form and substance reasonably satisfactory to Lender;
37
(e) within fifteen (15) days of the Closing Date, Lender shall have
received warrants for Nonni's Inc., reissued in the name of Borrower; and
(f) within fifteen (15) days of the Closing Date, Lender shall have
received evidence that the UCC financing statements filed by Peachtree Pretzel,
Sunshine Pretzel and CMBC have been amended in form and substance reasonably
satisfactory to Lender.
3.3 CONDITIONS PRECEDENT TO ALL EXTENSIONS OF CREDIT. The obligation of
Lender to make all Advances or L/C Advances (or to extend any other credit
hereunder) shall be subject to the following conditions precedent or the express
prior written waiver thereof by Lender:
(a) the representations and warranties contained in this Agreement
and the other Loan Documents shall be true and correct in all material respects
on and as of the date of such extension of credit, as though made on and as of
such date (except to the extent that such representations and warranties relate
solely to an earlier date);
(b) no Default or Event of Default shall have occurred and be
continuing on the date of such extension of credit, nor shall either result from
the making thereof;
(c) no injunction, writ, restraining order, or other order of any
nature prohibiting, directly or indirectly, the extending of such credit shall
have been issued and remain in force by any Governmental Authority against
Borrower, Lender, or any of their Affiliates; and
(d) no Material Adverse Change shall have occurred.
3.4 TERM. This Agreement shall become effective upon the execution and
delivery hereof by Borrower and Lender and shall continue in full force and
effect for a term ending on November 1, 2004 (the "MATURITY DATE"). The
foregoing notwithstanding, Lender shall have the right to terminate its
obligations under this Agreement immediately and without notice upon the
occurrence and during the continuation of an Event of Default.
3.5 EFFECT OF TERMINATION. On the date of termination of this Agreement,
all Obligations (including contingent reimbursement obligations of Borrower with
respect to outstanding Letters of Credit and including all Bank Products
Obligations) immediately shall become due and payable without notice or demand
(including (a) either (i) providing cash collateral to be held by Lender in an
amount equal to 105% of the then extant Letter of Credit Usage, or (ii) causing
the original Letters of Credit to be returned to Lender, and (b) providing cash
collateral to be held by Lender for the benefit of Xxxxx Fargo or its Affiliates
with respect to the then extant Bank Products Obligations). No termination of
this Agreement, however, shall relieve or discharge Borrower of its duties,
Obligations, or covenants hereunder and the Lender's Liens in the Collateral
shall remain in effect until all Obligations have been fully and finally
discharged and Lender's obligations to provide additional credit hereunder have
been terminated. When this Agreement has been terminated and all of the
Obligations have been fully and finally discharged and Lender's obligations to
provide additional credit under the Loan Documents have been terminated
irrevocably, Lender will, at Borrower's sole expense, execute and deliver any
UCC termination statements, lien releases, mortgage releases, re-assignments of
trademarks, discharges of security interests, and other similar discharge or
release documents (and, if applicable, in recordable form) as are reasonably
necessary to release, as of record, the Lender's
38
Liens and all notices of security interests and liens previously filed by Lender
with respect to the Obligations.
3.6 EARLY TERMINATION BY BORROWER. Borrower has the option, at any time
upon 90 days prior written notice to Lender, to terminate this Agreement by
paying to Lender, in cash, the Obligations (including (a) either (i) providing
cash collateral to be held by Lender in an amount equal to 105% of the then
extant Letter of Credit Usage, or (ii) causing the original Letters of Credit to
be returned to Lender, and (b) providing cash collateral to be held by Lender
for the benefit of Xxxxx Fargo or its Affiliates with respect to the then extant
Bank Products Obligations), in full, together with the Applicable Prepayment
Premium. If Borrower has sent a notice of termination pursuant to the provisions
of this Section, then Lender's obligations to extend credit hereunder shall
terminate and Borrower shall be obligated to repay the Obligations (including
(a) either (i) providing cash collateral to be held by Lender in an amount equal
to 105% of the then extant Letter of Credit Usage, or (ii) causing the original
Letters of Credit to be returned to Lender, and (b) providing cash collateral to
be held by Lender for the benefit of Xxxxx Fargo or its Affiliates with respect
to the then extant Bank Products Obligations), in full, together with the
Applicable Prepayment Premium, on the date set forth as the date of termination
of this Agreement in such notice. In the event of the termination of this
Agreement and repayment of the Obligations at any time prior to the Maturity
Date, for any other reason, including (a) termination upon the election of
Lender to terminate after the occurrence of an Event of Default, (b) foreclosure
and sale of Collateral, (c) sale of the Collateral in any Insolvency Proceeding,
or (iv) restructure, reorganization, or compromise of the Obligations by the
confirmation of a plan of reorganization or any other plan of compromise,
restructure, or arrangement in any Insolvency Proceeding, then, in view of the
impracticability and extreme difficulty of ascertaining the actual amount of
damages to Lender or profits lost by Lender as a result of such early
termination, and by mutual agreement of the parties as to a reasonable
estimation and calculation of the lost profits or damages of Lender, Borrower
shall pay the Applicable Prepayment Premium to Lender, measured as of the date
of such termination. Notwithstanding any provision to the contrary herein
provided, Borrower shall not be liable for an Applicable Prepayment Premium if
this Agreement is terminated as a direct result of Borrower refinancing the
Obligations or the notes issued pursuant to the Borrower's Indenture through
Lender.
4. CREATION OF SECURITY INTEREST.
4.1 GRANT OF SECURITY INTEREST. Borrower hereby grants to Lender a
security interest in and a continuing lien on all of its right, title, and
interest in all currently existing and hereafter acquired or arising Personal
Property Collateral in order to secure prompt repayment of any and all of the
Obligations in accordance with the terms and conditions of the Loan Documents
and in order to secure prompt performance by Borrower of each of its covenants
and duties under the Loan Documents. The Lender's Liens in and to the Personal
Property Collateral shall attach to all Personal Property Collateral without
further act on the part of Lender or Borrower. Anything contained in this
Agreement or any other Loan Document to the contrary notwithstanding, except for
Permitted Dispositions, Borrower has no authority, express or implied, to
dispose of any item or portion of the Collateral.
39
Notwithstanding anything herein to the contrary, in no event shall the
security interest granted under SECTION 4.1 hereof attach to any lease, license,
contract or agreement to which Borrower is a party or any of its rights or
interests thereunder to the extent and solely to the extent that the proximate
result of the grant of such security interest shall constitute or result in (i)
the abandonment, invalidation or unenforceability of any right, title or
interest of Borrower therein or (ii) if Borrower would be deemed to have
breached or terminated pursuant to the terms of, or defaulted under, any such
lease, license, contract, or agreement, and in each case under CLAUSES (i) AND
(ii) above such abandonment, invalidation, unenforceability, breach, termination
or default would not be rendered ineffective pursuant to Sections 9-406, 9-407,
9-408 or 9-409 of the Uniform Commercial Code (or any successor provision or
provisions) of any relevant jurisdiction or any other applicable law (including
the Bankruptcy Code) or principles of equity; PROVIDED, HOWEVER, that such
security interest shall attach immediately (1) at such time as the condition
causing such abandonment, invalidation, unenforceability, breach, termination or
default shall be remedied (2) to the extent severable, to any portion of such
lease, license, contract, or agreement that does not result in any of the
consequences specified in CLAUSES (i) OR (ii) above, and (3) any and all
proceeds of such lease, license, contract or agreement to the extent that the
assignment or encumbrance of such proceeds is not restricted.
4.2 NEGOTIABLE COLLATERAL. In the event that any Collateral, including
proceeds, is evidenced by or consists of Negotiable Collateral, and if and to
the extent that perfection or priority of Lender's security interest is
dependent on or enhanced by possession, Borrower, promptly upon the reasonable
request of Lender, shall endorse and deliver physical possession of such
Negotiable Collateral to Lender.
4.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, AND NEGOTIABLE
COLLATERAL. At any time after the occurrence and during the continuation of an
Event of Default, Lender or Lender's designee may (a) notify Account Debtors and
other obligors of Borrower that the Accounts, Negotiable Collateral, or General
Intangibles have been assigned to Lender or that Lender has a security interest
therein, or (b) collect the Accounts, chattel paper, or General Intangibles
directly and charge the collection costs and expenses to the Loan Account.
Borrower agrees that it will hold in trust for Lender, as Lender's trustee, any
Collections that it receives and promptly will deliver said Collections to
Lender or a Cash Management Bank in their original form as received by Borrower.
4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. Borrower authorizes
Lender to file, transmit, or communicate, as applicable, Uniform Commercial Code
financing statements, in lieu financing statements and amendments describing the
Collateral as "all personal property of debtor" or "all assets of debtor,
wherever located and whether now owned or hereafter acquired" or words of
similar effect, in order to perfect Lender's Liens on the Collateral without
Borrower's signature. Notwithstanding the foregoing, at any time upon the
request of Lender, Borrower shall execute (or cause to be executed) and deliver
to Lender, any and all financing statements, original financing statements in
lieu of continuation statements, Consents to Assignments, fixture filings,
security agreements, pledges, assignments, endorsements of certificates of
title, and all other documents (the "ADDITIONAL DOCUMENTS") that Lender may
request in its Permitted Discretion, in form and substance reasonably
satisfactory to Lender, to perfect and continue perfected or better perfect the
Lender's Liens in the Collateral (whether now owned or hereafter arising or
acquired), to create and perfect Liens in favor of
40
Lender in any Real Property acquired after the Closing Date, and in order to
fully consummate all of the transactions contemplated hereby and under the other
Loan Documents. To the maximum extent permitted by applicable law, Borrower
authorizes Lender to execute any such Additional Documents in Borrower's name
and authorizes Lender to file such executed Additional Documents in any
appropriate filing office. Borrower also hereby ratifies its authorization for
Lender to have filed in any jurisdiction any financing statements or amendments
thereto if filed prior to the date hereof. Borrower shall not terminate, amend
or file a correction statement with respect to any Uniform Commercial Code
financing statement filed pursuant to this SECTION 4.4 without Lender's prior
written consent. In addition, Borrower agrees that, upon acquiring any interest
in a Commercial Tort Claim, Borrower shall, in writing, describe the details of
such claim and assign an interest thereto pursuant to documentation reasonably
acceptable to Lender, and upon acquiring any Negotiable Collateral after the
date hereof (electronic, tangible or otherwise), Borrower shall assign to Lender
a security interest in such Negotiable Collateral pursuant to documentation
reasonably acceptable to Lender, or if applicable, deliver such Negotiable
Collateral to Lender as Collateral hereunder.
4.5 POWER OF ATTORNEY. Borrower hereby irrevocably makes, constitutes, and
appoints Lender (and any of Lender's officers, employees, or agents designated
by Lender) as Borrower's true and lawful attorney, with power to (a) if Borrower
refuses to, or fails timely to execute and deliver any of the documents
described in SECTION 4.4, sign the name of Borrower on any of the documents
described in SECTION 4.4, (b) at any time that an Event of Default has occurred
and is continuing, sign Borrower's name on any invoice or xxxx of lading
relating to the Collateral, drafts against Account Debtors, or notices to
Account Debtors or other obligors, (c) send requests for verification of
Accounts, (d) endorse Borrower's name on any Collection item that may come into
Lender's possession, (e) at any time that an Event of Default has occurred and
is continuing, make, settle, and adjust all claims under Borrower's policies of
insurance and make all determinations and decisions with respect to such
policies of insurance, and (f) at any time that an Event of Default has occurred
and is continuing, settle and adjust disputes and claims respecting the
Accounts, Negotiable Collateral, or General Intangibles directly with Account
Debtors or other obligors, for amounts and upon terms that Lender determines to
be reasonable, and Lender may cause to be executed and delivered any documents
and releases that Lender determines to be necessary. The appointment of Lender
as Borrower's attorney, and each and every one of its rights and powers, being
coupled with an interest, is irrevocable until all of the Obligations have been
fully and finally repaid and performed and Lender's obligations to extend credit
hereunder are terminated. In accordance with the Code, Lender shall use
reasonable care in the custody and preservation of the Collateral in its
possession.
4.6 RIGHT TO INSPECT. Lender and its officers, employees, or agents shall
have the right, from time to time hereafter to inspect the Books and to check,
test, and appraise the Collateral during normal business hours in order to
verify Borrower's financial condition or the amount, quality, value, condition
of, or any other matter relating to, the Collateral.
4.7 CONTROL AGREEMENTS. Borrower agrees that it will not transfer assets
out of any Securities Accounts other than as permitted under SECTION 7.19 and,
if to another securities intermediary, unless each of Borrower, Lender, and the
substitute securities intermediary have entered into a Control Agreement. No
arrangement contemplated hereby or by any Control
41
Agreement in respect of any Securities Accounts or other Investment Property
shall be modified by Borrower without the prior written consent of Lender. Upon
the occurrence and during the continuance of a Default or Event of Default,
Lender may notify any securities intermediary to liquidate the applicable
Securities Account or any related Investment Property maintained or held thereby
and remit the proceeds thereof to the Lender's Account.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce Lender to enter into this Agreement, Borrower makes the
following representations and warranties to Lender which shall be true, correct,
and complete, in all material respects, as of the date hereof, and shall be
true, correct, and complete, in all material respects, as of the Closing Date,
and at and as of the date of the making of each Advance or L/C Advance (or other
extension of credit) made thereafter, as though made on and as of the date of
such Advance or L/C Advance (or other extension of credit) (except to the extent
that such representations and warranties relate solely to an earlier date) and
such representations and warranties shall survive the execution and delivery of
this Agreement:
5.1 NO ENCUMBRANCES. Borrower has good and indefeasible title to the
Collateral and the Real Property, free and clear of Liens except for Permitted
Liens.
5.2 ACCOUNTS. The Accounts are BONA FIDE existing payment obligations of
Account Debtors created by the sale and delivery of Inventory or the rendition
of services to such Account Debtors in the ordinary course of Borrower's
business, owed to Borrower without defenses, disputes, offsets, counterclaims,
or rights of return or cancellation.
5.3 INVENTORY. All Inventory is of good and merchantable quality, free
from material defects.
5.4 EQUIPMENT. Substantially all of the Equipment is used or held for use
in Borrower's business and is fit for such purposes.
5.5 LOCATION OF INVENTORY AND EQUIPMENT. The Inventory and Equipment are
not stored with a bailee, warehouseman, or similar party and are located only at
Company Stores and the other locations identified on SCHEDULE 5.5.
5.6 INVENTORY RECORDS. Borrower keeps correct and accurate records
itemizing and describing the type, quality, and quantity of its Inventory and
the book value thereof.
5.7 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN AND ORGANIZATIONAL I.D.
NUMBER. The chief executive office of Borrower is located at the address
indicated in SCHEDULE 5.7 and Borrower's FEIN and Organizational I.D. Number are
identified in SCHEDULE 5.7. Borrower's exact legal name is identified on the
signature pages hereof and Borrower has not been known by any other name other
than those specified on SCHEDULE 5.7.
42
5.8 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Borrower is duly organized and existing and in good standing
under the laws of the jurisdiction of its organization and qualified to do
business in any state where the failure to be so qualified reasonably could be
expected to have a Material Adverse Change.
(b) Set forth on SCHEDULE 5.8(b), is a complete and accurate
description of the authorized capital Stock of Borrower, by class, and, as of
the Closing Date, a description of the number of shares of each such class that
are issued and outstanding. Other than as described on SCHEDULE 5.8(b), there
are no subscriptions, options, warrants, or calls relating to any shares of
Borrower's capital Stock, including any right of conversion or exchange under
any outstanding security or other instrument. Borrower is not subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital Stock or any security convertible into or
exchangeable for any of its capital Stock.
(c) Set forth on SCHEDULE 5.8(c), is a complete and accurate list of
Borrower's direct and indirect Subsidiaries, showing: (i) the jurisdiction of
their organization, (ii) the number of shares of each class of common and
preferred Stock authorized for each of such Subsidiaries, and (iii) the number
and the percentage of the outstanding shares of each such class owned directly
or indirectly by Borrower. All of the outstanding capital Stock of each such
Subsidiary has been validly issued and is fully paid and non-assessable.
(d) Except as set forth on SCHEDULE 5.8(c), there are no
subscriptions, options, warrants, or calls relating to any shares of Borrower's
Subsidiaries' capital Stock, including any right of conversion or exchange under
any outstanding security or other instrument. Neither Borrower nor any of its
Subsidiaries is subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of Borrowers' Subsidiaries'
capital Stock or any security convertible into or exchangeable for any such
capital Stock.
5.9 DUE AUTHORIZATION; NO CONFLICT.
(a) The execution, delivery, and performance by Borrower of this
Agreement and the other Loan Documents to which it is a party have been duly
authorized by all necessary action on the part of Borrower.
(b) The execution, delivery, and performance by Borrower of this
Agreement and the other Loan Documents to which it is a party do not and will
not (i) violate any provision of federal, state, or local law or regulation
applicable to Borrower, the Governing Documents of Borrower, or any order,
judgment, or decree of any court or other Governmental Authority binding on
Borrower, (ii) conflict with, result in a breach of, or constitute (with due
notice or lapse of time or both) a default under any material contractual
obligation of Borrower (including the Indentures), (iii) result in or require
the creation or imposition of any Lien of any nature whatsoever upon any
properties or assets of Borrower, other than Permitted Liens, or (iv) require
any approval of Borrower's interestholders or any approval or consent not
already obtained of any Person under any material contractual obligation of
Borrower (including the Indentures).
(c) Other than the filing of financing statements, the registration
of unregistered copyrights, recording of the security interest in the applicable
intellectual property
43
registries, fixture filings, Mortgages and consents already obtained, the
execution, delivery, and performance by Borrower of this Agreement and the other
Loan Documents to which Borrower is a party do not and will not require any
registration with, consent, or approval of, or notice to, or other action with
or by, any Governmental Authority or other Person.
(d) This Agreement and the other Loan Documents to which Borrower is
a party, and all other documents contemplated hereby and thereby, when executed
and delivered by Borrower will be the legally valid and binding obligations of
Borrower, enforceable against Borrower in accordance with their respective
terms, except as enforcement may be limited by equitable principles or by
bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to
or limiting creditors' rights generally.
(e) The Lender's Liens under the Loan Documents are validly created,
perfected, and first priority Liens (except with respect to the Liens on those
certain Intellectual Property Rights the protection of which is governed solely
by laws of jurisdictions other than the United States), subject only to
Permitted Liens.
(f) The execution, delivery, and performance by each Guarantor of the
Loan Documents to which it is a party have been duly authorized by all necessary
action on the part of such Guarantor.
(g) The execution, delivery, and performance by each Guarantor of the
Loan Documents to which it is a party do not and will not (i) violate any
provision of federal, state, or local law or regulation applicable to such
Guarantor, the Governing Documents of such Guarantor, or any order, judgment, or
decree of any court or other Governmental Authority binding on such Guarantor,
(ii) conflict with, result in a breach of, or constitute (with due notice or
lapse of time or both) a default under any material contractual obligation of
such Guarantor (including the Borrower's Indenture), (iii) result in or require
the creation or imposition of any Lien of any nature whatsoever upon any
properties or assets of such Guarantor, other than Permitted Liens, or (iv)
require any approval of such Guarantor's interestholders or any approval or
consent not already obtained of any Person under any material contractual
obligation of such Guarantor.
(h) Other than the filing of financing statements, the registration
of unregistered copyrights, recording of the security interest in the applicable
intellectual property registries, fixture filings, Mortgages and consents
already obtained, the execution, delivery, and performance by each Guarantor of
the Loan Documents to which such Guarantor is a party do not and will not
require any registration with, consent, or approval of, or notice to, or other
action with or by, any Governmental Authority or other Person.
(i) The Loan Documents to which each Guarantor is a party, and all
other documents contemplated hereby and thereby, when executed and delivered by
such Guarantor will be the legally valid and binding obligations of such
Guarantor, enforceable against such Guarantor in accordance with their
respective terms, except as enforcement may be limited by equitable principles
or by bankruptcy, insolvency, reorganization, moratorium, or similar laws
relating to or limiting creditors' rights generally.
44
5.10 LITIGATION. Other than those matters disclosed on SCHEDULE 5.10, there
are no actions, suits, or proceedings pending or, to the best knowledge of
Borrower, threatened against Borrower, or any of its Subsidiaries, as applicable
or any judgments or consent decrees against Borrower or any of its Subsidiaries,
except for (a) matters that are fully covered by insurance (subject to customary
deductibles), and (b) matters arising after the Closing Date that, if decided
adversely to Borrower, or any of its Subsidiaries, as applicable, reasonably
could not be expected to result in a Material Adverse Change.
5.11 NO MATERIAL ADVERSE CHANGE. All financial statements relating to
Borrower or any Guarantor that have been delivered by Borrower or such Guarantor
to Lender have been prepared in accordance with GAAP (except, in the case of
unaudited financial statements, for the lack of footnotes and being subject to
year-end audit adjustments) and present fairly in all material respects,
Borrower's (or such Guarantor's, as applicable) financial condition as of the
date thereof and results of operations for the period then ended. There has not
been a Material Adverse Change with respect to Borrower (or any Guarantor, as
applicable) since the date of the latest financial statements submitted to
Lender on or before the Closing Date.
5.12 FRAUDULENT TRANSFER.
(a) Borrower is Solvent.
(b) No transfer of property is being made by Borrower and no
obligation is being incurred by Borrower in connection with the transactions
contemplated by this Agreement or the other Loan Documents with the intent to
hinder, delay, or defraud either present or future creditors of Borrower.
5.13 EMPLOYEE BENEFITS. None of Borrower, any of its Subsidiaries, or any
of their ERISA Affiliates maintains or contributes to any Benefit Plan.
5.14 ENVIRONMENTAL CONDITION. Except as set forth on SCHEDULE 5.14, (a) to
Borrower's knowledge, none of Borrower's assets has ever been used by Borrower
or by previous owners or operators in the disposal of, or to produce, store,
handle, treat, release, or transport, any Hazardous Materials, where such
production, storage, handling, treatment, release or transport was in violation,
in any material respect, of applicable Environmental Law, (b) to Borrower's
knowledge, none of Borrower's properties or assets has ever been designated or
identified in any manner pursuant to any environmental protection statute as a
Hazardous Materials disposal site, (c) Borrower has not received notice that a
Lien arising under any Environmental Law has attached to any revenues or to any
Real Property owned or operated by Borrower, and (d) Borrower has not received a
summons, citation, notice, or directive from the Environmental Protection Agency
or any other federal or state governmental agency concerning any action or
omission by Borrower resulting in the releasing or disposing of Hazardous
Materials into the environment.
5.15 [Intentionally left blank.]
5.16 INTELLECTUAL PROPERTY. (a) Borrower owns, or holds licenses in, or
otherwise has rights to use all Intellectual Property Rights that are necessary
to the conduct of its business as currently conducted. Attached hereto as
SCHEDULE 5.16(a) is a true, correct, and complete listing
45
of all registrations and applications for Intellectual Property Rights as to
which Borrower is the owner or as to which Borrower is an exclusive licensee.
Other than the Intellectual Property Rights listed on SCHEDULE 5.16(a), there
are no other registrations or applications for Intellectual Property Rights
which are necessary in the operation of or to the conduct of Borrower's business
as currently conducted. No other Person has any right, title, claim or interest
in or against the registrations or applications for Intellectual Property Rights
listed on SCHEDULE 5.16(a).
(b) Borrower represents and warrants that it has taken all reasonably
necessary actions to protect and maintain the Intellectual Property Rights owned
by Borrower (except with respect to those Intellectual Property Rights which are
not in use or which have no realizable economic value), including, without
limitation, (i) protecting the secrecy and confidentiality of Borrower's
confidential information and trade secrets by having and enforcing a policy
requiring all current and former employees, consultants, licensees, vendors, and
contractors to execute appropriate confidentiality and invention assignment
agreements; (ii) taking all actions reasonably necessary to ensure that no trade
secret of Borrower falls or has fallen into the public domain; and (iii) making
all necessary payments, filings and recordations.
(c) To the best of Borrower's knowledge, no past or present employee
or contractor of Borrower has any proprietary, financial or other interest,
direct or indirect, including any rights to royalties or other compensation in
or to any Intellectual Property Rights listed on SCHEDULE 5.16(a).
(d) All Intellectual Property Rights listed on SCHEDULE 5.16(a) are
valid and enforceable and in full force and effect.
(e) To the best of Borrower's knowledge, no claim has been made and
is continuing or threatened that the use by Borrower of any item of Intellectual
Property Rights is invalid or unenforceable or that the use by Borrower of any
Intellectual Property Rights does violate the Intellectual Property Rights of
any Person, other than any such claim which would not cause a Material Adverse
Change.
(f) SCHEDULE 5.16(f) sets forth a list of all license fees, rents,
royalties or other charges that Borrower is required or obligated to pay under
any agreement with respect to any Intellectual Property Rights owned, licensed
or utilized by Borrower. SCHEDULE 5.16(f) also identifies all contracts pursuant
to which Borrower's Intellectual Property Rights are licensed to any other
Person.
5.17 LEASES. Borrower enjoys peaceful and undisturbed possession under all
leases material to the business of Borrower and to which it is a party or under
which it is operating. The lease for the mail-order facility located at 000
Xxxxxxx, Xxxx Xxxx Xxxx, Xxxx and the lease for Borrower's corporate
headquarters located at 0000 X. Xxxxxxxxxx Xxxxxxx, Xxxx Xxxx Xxxx, Xxxx are
valid and subsisting, and no material default by Borrower exists under either
lease.
5.18 DEPOSIT ACCOUNTS. Set forth on SCHEDULE 5.18 are all of Borrower's and
each Guarantor's Deposit Accounts, including, with respect to each depository
(i) the name and address of such depository, and (ii) the account numbers of the
accounts maintained with such depository.
46
5.19 COMPLETE DISCLOSURE. All factual information (taken as a whole)
furnished by or on behalf of Borrower in writing to Lender (including all
information contained in the Schedules hereto or in the other Loan Documents)
for purposes of or in connection with this Agreement, the other Loan Documents,
or any transaction contemplated herein or therein is, and all other such factual
information (taken as a whole) hereafter furnished by or on behalf of Borrower
in writing to Lender will be, true and accurate, in all material respects, on
the date as of which such information is dated or certified and not incomplete
by omitting to state any fact necessary to make such information (taken as a
whole) not misleading in any material respect at such time in light of the
circumstances under which such information was provided. On the Closing Date,
the Closing Date Business Plan represents, and as of the date on which any other
Projections are delivered to Lender, such additional Projections represent
Borrower's good faith best estimate of its future performance for the periods
covered thereby.
5.20 INDEBTEDNESS. Set forth on SCHEDULE 5.20 is a true and complete list
of all Indebtedness of Borrower outstanding immediately prior to the Closing
Date that is to remain outstanding after the Closing Date and such Schedule
accurately reflects the aggregate principal amount of such Indebtedness and the
principal terms thereof.
5.21 FRANCHISE AGREEMENTS. SCHEDULE 5.21 sets forth the top 10 (measured in
terms of gross aggregate franchise royalty revenues) Franchise Agreements.
Borrower has provided Lender with complete and accurate copies of all Franchise
Agreements for each of its top 10 (measured in terms of gross aggregate
franchise royalty revenue) franchisees. There are no pending or threatened
litigation, actions or other proceedings against Borrower or any of its
Subsidiaries by any other party to the Franchise Agreements. To the best of
Borrower's knowledge, no franchisee is in material breach of any representation,
warranty, covenant, obligation or other provision of any Franchise Agreement,
including, without limitation, the obligation to make royalty payments or any
other payments under such Franchise Agreements.
5.22 FRANCHISING LAWS. Borrower and each of its Subsidiaries is, and has
been for all applicable statutes of limitations, in material compliance with all
applicable federal and state laws and regulations regulating franchises and the
offer, sale, termination, renewal or non-renewal thereof, including, but not
limited to, the Trade Regulation Rule of the Federal Trade Commission regarding
Disclosure Requirements and Prohibitions Concerning Franchising and Business
Opportunity Ventures, 16 C.F.R. Sections 436 ET seq., the California Franchise
Relations Act, Cal. Bus. & Prof. Code Sections 20000 ET SEQ., the California
Franchise Investment Law, CaL. Corp. Code Sections 31000 ET SEQ., and all
similar laws, rules or regulations in all states that have enacted such laws,
rules anD regulations.
5.23 INDENTURES. The Obligations hereunder constitute "Permitted
Indebtedness" as defined under the Indentures; the Lender's Liens are "Permitted
Liens" as defined under the Indentures; and the facility contemplated by this
Agreement is a "Credit Facility" as defined under the Borrower's Indenture.
5.24 EXISTING L/CS. SCHEDULE 5.24 lists all Existing L/Cs.
5.25 FRANCHISE LIENS. Each Uniform Commercial Code financing statement
listed on SCHEDULE 5.25 is a filing against a franchisee and not a filing
against Borrower or any Guarantor.
47
Neither Borrower nor any Guarantor is indebted to any of the secured parties
listed on SCHEDULE 5.25.
5.26 COMPANY OWNED STORES. SCHEDULE 5.26 lists all Company Stores.
5.27 PERMITTED INDEBTEDNESS. All Indebtedness of Borrower and its
Subsidiaries is "Permitted Indebtedness" as defined under the Indentures.
5.28 INACTIVE SUBSIDIARIES. Each of Airport Cookies, LV-H&M LLC, a Nevada
limited liability company and UVEST, LLC, a Utah limited liability is an
Inactive Subsidiary.
48
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder shall
be available and until full and final payment of the Obligations, Borrower shall
and shall cause each of its Subsidiaries to do all of the following:
6.1 ACCOUNTING SYSTEM. Maintain a system of accounting that enables
Borrower and each of its Subsidiaries to produce financial statements in
accordance with GAAP and maintain records pertaining to the Collateral that
contain information as from time to time reasonably may be requested by Lender.
6.2 COLLATERAL REPORTING. Provide Lender with the following documents at
the following times in form satisfactory to Lender:
45 days after the end of (a) a detailed preliminary calculation of the Borrowing
the Fiscal Month of Base set forth on a Preliminary Borrowing Base Certificate
December for the month of December of the prior year,
45 days after the end of (b) a detailed preliminary calculation of the Borrowing Base set forth
the Fiscal Month of on a Preliminary Borrowing Base Certificate for the month of January
January
90 days after the end of (c) a detailed calculation of the Borrowing Base set
each Fiscal Year forth on a Borrowing Base Certificate for the months of
December and January with a report explaining any
adjustments from the Preliminary Borrowing Base Certificates
previously delivered
Monthly (not later than (d) a detailed calculation of the Borrowing Base set
45 days after forth on a Borrowing Base the end of Certificate (except with
each Fiscal Month) respect to the Fiscal Months of December and January which
certificates are to be delivered by the dates set forth above),
(e) a detailed report of the revenue, Collections and
expenses of each Guarantor along with a detailed report of
any investments made by Borrower to any Guarantor and any
loans, advances, investments or distributions made by any
Subsidiary of Borrower to any other Subsidiary of Borrower,
(f) a detailed calculation of EBITDA on a monthly basis
calculated in the same manner as in and reconciled to the
Closing Date Business Plan,
(g) a summary aging, by total, of the Accounts,
(h) a summary aging of Borrower's accounts payable and any
book overdraft,
49
(i) a report regarding all completed, pending and
anticipated Company Store Sale transactions and specifying
the Economic Analysis for each transaction for such month on
a store by store basis and a consolidated basis and
(j) a report setting forth the Store Contribution Margin for
the Company Stores on a store by store basis and on a
consolidated basis which specifies the sales, cost of sales,
labor costs, rent costs, operating store expenses and store
contribution.
Quarterly (not later (k) a detailed list of Borrower's franchisees and licensees,
than 45 days after the
end of each Fiscal (l) a list of all current operating Company Stores and a list of
Quarter and 90 days any Company Store closings during such quarter, and
after the end of each
Fiscal Year) (m) a report regarding Borrower's accrued, but unpaid, AD VALOREM
Real Property, sales and payroll taxes.
50
Upon request by Lender (n) such other reports as to the Collateral, or the financial
condition of Borrower and its Subsidiaries, as Lender may request.
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.
Deliver to Lender:
(a) as soon as available, but in any event within 45 days after the
end of each Fiscal Month,
(i) a company prepared unaudited consolidated balance sheet,
income statement, and statement of cash flow covering Borrower's
operations during such period,
(ii) a certificate signed by a Certifying Officer of Borrower to
the effect that:
(A) the consolidated financial statements delivered
hereunder have been prepared in accordance with GAAP (except for
the lack of footnotes and being subject to year-end audit
adjustments) and fairly present in all material respects the
financial condition of Borrower,
(B) the representations and warranties of Borrower
contained in this Agreement and the other Loan Documents are true
and correct in all material respects on and as of the date of
such certificate, as though made on and as of such date (except
to the extent that such representations and warranties relate
solely to an earlier date), and
(C) there does not exist any condition or event that
constitutes a Default or Event of Default (or, to the extent of
any non-compliance, describing such non-compliance as to which he
or she may have knowledge and what action Borrower has taken, is
taking, or proposes to take with respect thereto), and
(iii) for each month that is the date on which a financial
covenant in SECTION 7.20 is to be tested, a Compliance Certificate
demonstrating, in reasonable detail, compliance at the end of such
period with the applicable financial covenants contained in SECTION
7.20, and
(b) as soon as available, but in any event within 90 days after the
end of each of Borrower's Fiscal Years,
(i) consolidated financial statements of Borrower for each such
Fiscal Year, audited by independent certified public accountants
reasonably acceptable to Lender and certified, without any
qualifications, by such accountants to have been prepared in
accordance with GAAP (such audited financial statements to
51
include a balance sheet, income statement, and statement of cash flow
and, if prepared, such accountants' letter to management),
(ii) a certificate of such accountants addressed to Lender
stating that such accountants do not have knowledge of the existence
of any Default or Event of Default under SECTION 7.20,
(c) as soon as available, but in any event within 30 days prior to
the start of each of Borrower's Fiscal Years,
(i) copies of the Projections, in form and substance reasonably
satisfactory to Lender, for the forthcoming 2 years, year by year, and
for the forthcoming Fiscal Year, month by month, certified by the
chief financial officer of Borrower as being such officer's good faith
best estimate of the financial performance of Borrower during the
period covered thereby,
(d) if and when filed by Borrower or any of its Subsidiaries,
(i) Form 10-Q quarterly reports, Form 10-K annual reports, and
Form 8-K current reports,
(ii) any other filings made by Borrower or any of its
Subsidiaries with the SEC,
(iii) copies of the federal income tax returns of MFFB and Parent
and any amendments thereto, filed with the Internal Revenue Service,
and
(iv) any other material information that is provided by Borrower
or any of its Subsidiaries to its shareholders generally,
(e) if and when filed by Borrower or any of its Subsidiaries and as
requested by Lender, reasonably satisfactory evidence of payment of applicable
excise taxes in each jurisdictions in which (i) Borrower or such Subsidiary
conducts business or is required to pay any such excise tax, (ii) where
Borrower's failure to pay any such applicable excise tax would result in a Lien
on the properties or assets of Borrower or such Subsidiary, or (iii) where
Borrower's or such Subsidiary's failure to pay any such applicable excise tax
reasonably could be expected to result in a Material Adverse Change,
(f) as soon as Borrower has knowledge of any event or condition that
constitutes a Default or an Event of Default hereunder or an "Event of Default"
under the Indentures, notice thereof and a statement of the curative action that
Borrower proposes to take with respect thereto,
(g) upon the request of Lender, copies of any financial statements,
reports or other documents required to be delivered to the trustees under the
Indentures, and
(h) upon the request of Lender, any other report reasonably requested
relating to the financial condition of Borrower.
52
In addition to the financial statements referred to above, Borrower
agrees on a quarterly basis to deliver financial statements prepared on both a
consolidated and consolidating basis and agrees that no Subsidiary of Borrower
will have a fiscal year different from that of Borrower. Borrower agrees that
its independent certified public accountants are authorized to communicate with
Lender and to release to Lender whatever financial information concerning
Borrower Lender reasonably may request. Borrower waives the right to assert a
confidential relationship, if any, it may have with any accounting firm or
service bureau in connection with any information requested by Lender pursuant
to or in accordance with this Agreement, and agrees that Lender may contact
directly any such accounting firm or service bureau in order to obtain such
information.
6.4 [Intentionally left blank.]
6.5 [Intentionally left blank.]
6.6 MAINTENANCE OF PROPERTIES. Maintain and preserve all of its properties
which are necessary or material in the proper conduct to its business in good
working order and condition, ordinary wear and tear excepted, and comply at all
times with the provisions of all leases to which it is a party as lessee so as
to prevent any loss or forfeiture thereof or thereunder.
6.7 TAXES. Cause all assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against Borrower
or any of its assets to be paid in full, before delinquency or before the
expiration of any extension period, except to the extent that the validity of
such assessment or tax shall be the subject of a Permitted Protest and those
taxes, levies, assessments or governmental charges that do not exceed $25,000
and do not constitute a Lien on any property of Borrower or its Subsidiaries.
Borrower will make timely payment or deposit of all tax payments and withholding
taxes required of it by applicable laws, including those laws concerning
F.I.C.A., F.U.T.A., state disability, and local, state, and federal income
taxes, and will, upon request, furnish Lender with proof satisfactory to Lender
indicating that Borrower has made such payments or deposits. Borrower shall
deliver satisfactory evidence of payment of applicable excise taxes in each
jurisdictions in which Borrower is required to pay any such excise tax.
6.8 INSURANCE.
(a) At Borrower's expense, maintain insurance respecting its assets
wherever located, covering loss or damage by fire, theft, explosion, and all
other hazards and risks as ordinarily are insured against by other Persons
engaged in the same or similar businesses. Borrower also shall maintain business
interruption, public liability, and product liability insurance, as well as
insurance against larceny, embezzlement, and criminal misappropriation. All such
policies of insurance shall be in such amounts and with such insurance companies
as are reasonably satisfactory to Lender. Borrower shall deliver copies of all
such policies to Lender with a satisfactory lender's loss payable endorsement
naming Lender as sole loss payee or additional insured, as appropriate. Each
policy of insurance or endorsement shall contain a clause requiring the insurer
to give not less than 30 days prior written notice to Lender in the event of
cancellation of the policy for any reason whatsoever.
53
(b) Borrower shall give Lender prompt notice of any loss in excess of
$375,000 (excluding workers' compensation claims) covered by such insurance. At
all times, Lender shall have the exclusive right to adjust any losses payable
under any such insurance policies in excess of $375,000 for all claims
(excluding workers' compensation claims), losses and damages of Borrower,
including, without limitation, all casualty losses and claims for lost profits.
Absent an Event of Default, Borrower may compromise or settle claims (excluding
workers' compensation claims) or litigation brought against Borrower by third
parties if such claim or litigation is covered by liability insurance. Upon the
occurrence and the continuance of an Event of Default, Lender shall have the
exclusive right to adjust any losses payable under any such insurance policies
(even for losses less than $375,000 and claims covered by liability insurance).
Lender shall have no liability to Borrower whatsoever in respect of such
adjustments. Any monies received as payment for any loss under any insurance
policy mentioned above (other than liability insurance policies) or as payment
of any award or compensation for condemnation or taking by eminent domain, shall
be paid over to Lender to be applied at the option of Lender either to the
prepayment of the Obligations (without a reduction in the Maximum Revolver
Amount or the Maximum L/C Amount) or shall be disbursed to Borrower under staged
payment terms reasonably satisfactory to Lender for application to the cost of
repairs, replacements, or restorations. Any such repairs, replacements, or
restorations shall be effected with reasonable promptness and shall be of a
value at least equal to the value of the items of property destroyed prior to
such damage or destruction.
(c) Borrower will not take out separate insurance concurrent in form
or contributing in the event of loss with that required to be maintained under
this SECTION 6.8, unless Lender is included thereon as named insured with the
loss payable to Lender under a lender's loss payable endorsement or its
equivalent. Borrower immediately shall notify Lender whenever such separate
insurance is taken out, specifying the insurer thereunder and full particulars
as to the policies evidencing the same, and copies of such policies promptly
shall be provided to Lender.
6.9 LOCATION OF INVENTORY AND EQUIPMENT. Keep the Inventory and Equipment
only at Company Stores and the other locations identified on SCHEDULE 5.5;
PROVIDED, HOWEVER, that Borrower may amend SCHEDULE 5.5 so long as such
amendment occurs by written notice to Lender not less than 30 days prior to the
date on which Inventory or Equipment is moved to such new location, so long as
such new location is within the continental United States, and so long as, at
the time of such written notification, Borrower provides any financing
statements or fixture filings necessary to perfect and continue perfected the
Lender's Liens on such assets and also provides to Lender a Collateral Access
Agreement.
6.10 COMPLIANCE WITH LAWS. Comply with the requirements of all applicable
laws, rules, regulations, and orders of any Governmental Authority, including
the Fair Labor Standards Act and the Americans With Disabilities Act, Trade
Regulation Rule of the Federal Trade Commission regarding Disclosure
Requirements and Prohibitions Concerning Franchising and Business Opportunity
Ventures (and related state laws, rules and regulations referenced in SECTION
5.22), other than laws, rules, regulations, and orders the non-compliance with
which, individually or in the aggregate, would not result in and reasonably
could not be expected to result in a Material Adverse Change.
54
6.11 LEASES. Pay when due all rents and other amounts payable under any
leases to which Borrower is a party or by which Borrower's properties and assets
are bound, unless (a) such payments are the subject of a Permitted Protest or
(b) such failure to pay when due for any location (other than the mail-order
facility located at 000 Xxxxxxx, Xxxx Xxxx Xxxx, Xxxx and Borrower's corporate
headquarters located at 0000 X. Xxxxxxxxxx Xxxxxxx, Xxxx Xxxx Xxxx, Xxxx) would
not result in a Material Adverse Change.
6.12 BROKERAGE COMMISSIONS. Pay any and all brokerage commission or finders
fees incurred in connection with or as a result of Borrower's obtaining
financing from Lender under this Agreement. Borrower agrees and acknowledges
that payment of all such brokerage commissions or finders fees shall be the sole
responsibility of Borrower, and Borrower agrees to indemnify, defend, and hold
Lender harmless from and against any claim of any broker or finder arising out
of Borrower's obtaining financing from Lender under this Agreement except for
those claims of any broker or finder arising out of Lender's gross negligence or
wilful misconduct.
6.13 EXISTENCE. At all times preserve and keep in full force and effect
Borrower's valid existence and good standing and any rights and franchises
material to Borrower's businesses.
6.14 ENVIRONMENTAL.
(a) Keep any property either owned or operated by Borrower free of
any Environmental Liens or post bonds or other financial assurances sufficient
to satisfy the obligations or liability evidenced by such Environmental Liens,
(b) comply, in all material respects, with Environmental Laws and provide to
Lender documentation of such compliance which Lender reasonably requests, (c)
promptly notify Lender after Borrower becomes aware of any release of a
Hazardous Material in any reportable quantity from or onto property owned or
operated by Borrower or any of its Subsidiaries and take any Remedial Actions
required to xxxxx said release or otherwise to come into compliance with
applicable Environmental Law, and (d) promptly provide Lender with written
notice within 10 days of the receipt of any of the following: (i) notice that an
Environmental Lien has been filed against any of the real or personal property
of Borrower or any of its Subsidiaries, (ii) commencement of any Environmental
Action or notice that an Environmental Action will be filed against Borrower or
any of its Subsidiaries, and (iii) notice of a violation, citation, or other
administrative order which reasonably could be expected to result in a Material
Adverse Change.
6.15 DISCLOSURE UPDATES. Promptly and in no event later than 5 Business
Days after obtaining knowledge thereof, (a) notify Lender if any written
information, schedule exhibit, or report furnished to Lender contained any
untrue statement of a material fact or omitted to state any material fact
necessary to make the statements contained therein not misleading in light of
the circumstances in which made, and (b) correct any defect or error that may be
discovered therein or in any Loan Document or in the execution, acknowledgement,
filing, or recordation thereof.
55
6.16 INTELLECTUAL PROPERTY RIGHTS.
(a) Borrower agrees that, should it at any time obtain an interest in
any Intellectual Property Right, (i) any such Intellectual Property Right shall
automatically become Collateral and (ii) with respect to any registration or
application in connection with such Intellectual Property Right that Borrower
should obtain, it shall give written notice on the first Business Day of each
month thereof to Lender in accordance with SECTION 12 hereof. Borrower
authorizes Lender to modify this Agreement by amending SCHEDULE 5.16(a) (and
will cooperate with Lender in effecting any such amendment) to include all
Intellectual Property Rights which become part of the Collateral under this
SECTION 6.16. Borrower shall execute and deliver any and all agreements,
instruments and documents Lender may reasonably request to evidence Lender's
interest in such Intellectual Property Rights. Borrower hereby authorizes Lender
to execute and file all such writings for the foregoing as Borrower's
attorney-in-fact in the event Borrower fails to deliver or file any such
writing, all acts of attorney being hereby ratified and confirmed, such power
coupled with an interest and irrevocable until the Obligations are indefeasibly
paid and satisfied in full.
(b) Borrower agrees to take all reasonable and necessary actions to
maintain all Intellectual Property Rights other than those Intellectual Property
Rights which are not in use or which have no realizable economic value. Borrower
agrees to take corresponding steps with respect to each new or acquired
Intellectual Property Right to which it is now or later becomes entitled. Any
expenses incurred in connection with such activities shall be borne solely by
Borrower. Following abandonment no Affiliate of Borrower may use or assert any
interest in such abandoned Intellectual Property Right.
(c) Borrower shall continue to take all actions reasonably necessary
to protect Intellectual Property Rights other than those Intellectual Property
Rights which are not in use or which have no realizable economic value. Except
for Intellectual Property Rights which are not in use or which have no
realizable economic value, Borrower shall continue to use the Intellectual
Property Rights in order to maintain the Intellectual Property Rights in full
force and effect and shall not (and will not permit any licensee thereof) do any
act or knowingly omit to do any act whereby any Intellectual Property Right may
become invalidated. Borrower agrees that should it obtain after the Closing Date
any interest in any Intellectual Property Right which may have realizable
economic value, Borrower shall promptly after such obtainment file applications
and take any and all actions reasonably necessary to register such Intellectual
Property Right in accordance with the procedures and regulations of the U.S.
Copyright Office, the U.S. Patent and Trademark Office, or any similar office of
any other jurisdiction in which such Intellectual Property Rights are used.
Borrower authorizes Lender to modify this Agreement by amending SCHEDULE
5.16(f)
(and will cooperate reasonably with Lender in effecting any such amendment) to
include any such additional license grant(s).
(d) Borrower agrees to notify Lender promptly and in writing if it
learns (i) that any item of the Intellectual Property Rights contained on
SCHEDULE 5.16(a) is likely to be determined to have become cancelled or
abandoned other than those Intellectual Property Rights which are not in use or
which have no realizable economic value or (ii) of any adverse determination or
the institution of any proceeding (including, without limitation, the
institution of any proceeding in the U.S. Copyright Office, U.S. Patent and
Trademark Office and any other
56
appropriate government agencies in foreign jurisdictions, or any court)
regarding any Intellectual Property Rights the loss of which would cause a
Material Adverse Change.
(e) In the event that Borrower becomes aware that any item of the
Intellectual Property Rights owned by Borrower or exclusively licensed to
Borrower is likely to be infringed upon or misappropriated by a third party,
Borrower shall promptly notify Lender and shall take such reasonable actions as
Borrower or Lender deems appropriate under the circumstances to protect such
Intellectual Property Rights, unless any such infringement or misappropriation
would not cause a Material Adverse Change or such Intellectual Property Rights
which are not in use or which have no realizable economic value. Any expense
incurred in connection with such activities shall be borne solely by Borrower.
(f) For purposes of this Agreement (including, without limitation
this SECTION 6.16) and throughout the term of this Agreement, Borrower
acknowledges, covenants and agrees that any tradename, trademark, service xxxx,
design or logo containing "Xxx. Xxxxxx'", "Great American Cookie Company",
"Pretzel Time", and "Pretzelmaker" in either stylized or word form shall remain
in use and does have realizable economic value.
6.17 ESCROWED STOCK. Borrower shall execute and deliver a supplement to the
Stock Pledge Agreement and deliver the Stock of Sunshine Pretzel, Peachtree
Pretzel and CMBC together with Stock powers endorsed in blank to Lender promptly
upon the release of such Stock from that certain escrow held by Xxxxx X. Xxxxxx,
Esq., as Escrow Agent, 0000 Xxxxx Xxxxx Xxxxxx, X.X. Xxx 0000, Xxxxxxxxxx, XX
00000-0000.
6.18 CASH AND CASH EQUIVALENTS. Borrower shall and shall cause each of its
Subsidiaries to deposit into the Cash Management Account all cash and Cash
Equivalents in excess of $50,000 in the aggregate held by, on behalf of, or in
the name of such Subsidiary except for the cash and Cash Equivalents held in the
Corky's Account.
6.19 XXXXX SUBSIDIARIES. Promptly upon payment of the obligations to the
Corky's Shareholders, Borrower shall merge each of CMBC, Peachtree Pretzel and
Sunshine Pretzel into Borrower and shall deliver evidence in form and substance
reasonably satisfactory to Lender of such merger to Lender.
6.20 COUNTRYSIDE LICENSE AGREEMENT. Borrower shall use commercially best
efforts to obtain the consent of Countryside, Inc. ("Countryside") to the
Borrower's assignment of all its rights and interest under that certain
trademark license agreement dated January 1, 2003 between Countryside and
Borrower (which efforts shall not include monetary expenditures in excess of
nominal amounts).
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder shall
be available and until full and final payment of the Obligations, Borrower will
not and will not permit any of its Subsidiaries to do any of the following:
7.1 INDEBTEDNESS. Create, incur, assume, permit, guarantee, or otherwise
become or remain, directly or indirectly, liable with respect to any
Indebtedness, except the following;
57
provided, however, in each case, that any of the following also must constitute
"Permitted Indebtedness" under and as defined in the Borrower's Indenture.
(a) Indebtedness evidenced by this Agreement and the other Loan
Documents, together with Indebtedness owed to Underlying Issuers with respect to
Underlying Letters of Credit,
(b) Indebtedness set forth on SCHEDULE 5.20,
(c) Permitted Purchase Money Indebtedness,
(d) refinancings, renewals, or extensions of Indebtedness permitted
under clauses (b) and (c) of this SECTION 7.1 (including accrued and unpaid
interest thereon and customary fees, expenses and costs incurred in connection
with the refinancing of such Indebtedness) (and continuance or renewal of any
Permitted Liens associated therewith) so long as: (i) the terms and conditions
of such refinancings, renewals, or extensions do not, in Lender's judgment,
materially impair the prospects of repayment of the Obligations by Borrower or
materially impair Borrower's creditworthiness, (ii) such refinancings, renewals,
or extensions do not result in an increase in the principal amount of, or
interest rate with respect to, the Indebtedness so refinanced, renewed, or
extended, (iii) such refinancings, renewals, or extensions do not result in a
shortening of the average weighted maturity of the Indebtedness so refinanced,
renewed, or extended, nor are they on terms or conditions that, taken as a
whole, are materially more burdensome or restrictive to Borrower, and (iv) if
the Indebtedness that is refinanced, renewed, or extended was subordinated in
right of payment to the Obligations, then the terms and conditions of the
refinancing, renewal, or extension Indebtedness must include subordination terms
and conditions that are at least as favorable to Lender as those that were
applicable to the refinanced, renewed, or extended Indebtedness;
(e) Indebtedness comprising Permitted Investments;
(f) Indebtedness represented by the notes issued pursuant to the
Borrower's Indenture;
(g) The guaranty by Borrower or any of the Guarantors of Indebtedness
of Borrower or a Guarantor that was permitted to be incurred by another clause
in this SECTION 7.1 except clause (e);
(h) Indebtedness represented by the prepayment of Company Store
leases permitted under SECTIONS 7.8(e) and 7.21;
(i) the guaranty by Borrower of operating store lease obligations in
the ordinary course of business so long as Borrower is the primary obligor of
such lease obligations; and
(j) additional Indebtedness of Borrower or any of its Subsidiaries in
an aggregate principal amount (for Borrower and all Subsidiaries) at any one
time outstanding not to exceed $1,000,000 so long as such Indebtedness is not
secured by any assets of Borrower or its Subsidiaries.
58
7.2 LIENS. Create, incur, assume, or permit to exist, directly or
indirectly, any Lien on or with respect to any of its assets, of any kind,
whether now owned or hereafter acquired, or any income or profits therefrom,
except for Permitted Liens (including Liens that are replacements of Permitted
Liens to the extent that the original Indebtedness is refinanced, renewed, or
extended under SECTION 7.1(d) and so long as the replacement Liens only encumber
those assets that secured the refinanced, renewed, or extended Indebtedness).
7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES.
(a) Enter into any merger, consolidation, reorganization, or
recapitalization, or reclassify its Stock, except:
(i) a Subsidiary of Borrower may merge with another Subsidiary
of Borrower; PROVIDED, that in connection with any merger involving a
Guarantor the following conditions are satisfied: (1) Lender shall
receive at least 20 Business Days' prior written notice of such
proposed merger which notice shall include a detailed description of
the proposed merger, (2) the surviving entity shall be a Guarantor,
(3) Lender will be granted a first priority Lien in all assets
acquired pursuant to the merger and such Guarantor and Subsidiary
shall have executed and delivered all documents and taken all actions
as required by Lender, and (4) on or prior to such merger, Lender
shall have received, in form and substance reasonably satisfactory to
Lender, copies of all merger documents, opinions, certificates, lien
search results and other documents reasonably requested by Lender; and
(ii) a Subsidiary of Borrower may merge with Borrower; PROVIDED,
that the following conditions are satisfied: (1) Lender shall receive
at least 20 Business Days' prior written notice of such proposed
merger which notice shall include a detailed description of the
proposed merger, (2) the surviving entity shall be Borrower, (3)
Lender will be granted a first priority Lien in all assets acquired
pursuant to the merger and such Subsidiary and Borrower shall have
executed and delivered all documents and taken all actions as required
by Lender, and (4) on or prior to such merger, Lender shall have
received, in form and substance reasonably satisfactory to Lender,
copies of all merger documents, opinions, certificates, lien search
results and other documents reasonably requested by Lender
(b) Liquidate, wind up, or dissolve itself (or suffer any liquidation
or dissolution) provided that Borrower may liquidate, wind up, or dissolve
Inactive Subsidiaries which are not Guarantors.
(c) Other than Permitted Dispositions, convey, sell, lease, license,
assign, transfer, or otherwise dispose of, in one transaction or a series of
transactions, all or any substantial part of its assets.
(d) Create, form or acquire any Subsidiary other than those
Subsidiaries existing as of the Closing Date except that Borrower may form a
wholly-owned Subsidiary for
59
the franchise business of GACC after the Closing Date (the "GACC FRANCHISE
SUBSIDIARY") so long as the following conditions are satisfied (1) no Event of
Default shall have occurred or be continuing, (2) the GACC Franchise Subsidiary
principally operates the franchise business related to GACC, (3) the assets
transferred to the GACC Franchise Subsidiary are transferred subject to Lender's
Lien and Lender is granted a first priority Lien in all assets of the GACC
Franchise Subsidiary, (4) Borrower executes and delivers a supplement to the
Stock Pledge Agreement with respect to the Stock of the GACC Franchise
Subsidiary together with the Stock certificates and Stock powers endorsed in
blank to Lender, (5) the GACC Franchise Subsidiary executes and delivers a
Guaranty and Subsidiary Security Agreement, (6) counsel for Borrower delivers an
opinion to Lender in form and substance satisfactory to Lender, which includes,
among other opinions, an opinion that the formation of the GACC Franchise
Subsidiary, the transactions contemplated by this SECTION 7.3(d) and the
transfer of assets to the GACC Franchise Subsidiary subject to the Lender's
Liens do not conflict in or result in a breach of the Indentures and do not
require the GACC Franchise Subsidiary to xxxxx x Xxxx on its assets to the
holders of the Indebtedness under the Indentures and (7) Lender shall have
received, in form and substance reasonably satisfactory to Lender, copies of all
certificates, lien search results and other documents reasonably requested by
Lender.
7.4 DISPOSAL OF ASSETS. Other than Permitted Dispositions, convey, sell,
lease, license, assign, transfer, or otherwise dispose of any of Borrower's or
any of its Subsidiaries' assets.
7.5 CHANGE NAME. Change Borrower's name, FEIN, corporate structure,
jurisdiction of organization or identity, or add any new fictitious name;
PROVIDED, HOWEVER, that Borrower may change its name or jurisdiction of
organization or add any new fictitious name upon at least 30 days prior written
notice to Lender of such change and so long as, at the time of such written
notification, Borrower provides any financing statements or fixture filings
necessary to perfect and continue perfected the Lender's Liens.
7.6 GUARANTEE. Except as permitted under SECTION 7.1, guarantee or
otherwise become in any way liable with respect to the obligations of any third
Person except by endorsement of instruments or items of payment for deposit to
the account of Borrower or which are transmitted or turned over to Lender.
7.7 NATURE OF BUSINESS. Make any change in the principal nature of its
business.
7.8 PREPAYMENTS AND AMENDMENTS; TERMINATIONS.
(a) Except in connection with a refinancing permitted by SECTION
7.1(d), prepay, redeem, defease, purchase, or otherwise acquire any Indebtedness
of Borrower (including Indebtedness under the notes issued pursuant to the
Borrower's Indenture) or any of its Subsidiaries, other than the Obligations in
accordance with this Agreement,
(b) Except in connection with a refinancing permitted by SECTION
7.1(d), directly or indirectly, amend, modify, alter, increase, or change any of
the terms or conditions of any agreement, instrument, document, indenture or
other writing evidencing or concerning Indebtedness permitted under SECTIONS
7.1(b), (c) or (e),
60
(c) Directly or indirectly, amend, modify, alter, increase, or change
any of the terms or conditions of any Assigned Contract, the Borrower's
Indenture, the Parent's Indenture or the Tax Allocation Agreement without
Lender's prior written consent,
(d) Directly or indirectly, materially amend, modify, alter or change
any of the terms or conditions of any Franchise Agreement or any of Borrower's
or any of its Subsidiaries form franchising and licensing agreements (other than
any International Licensing Agreement) existing as of the Closing Date in any
manner that would (i) in the aggregate, materially adversely affect Lender, (ii)
prohibit the assignment, hypothecation or transfer of Borrower's or any of its
Subsidiaries' rights under such agreement or (iii) conflict with Borrower's, or
such Subsidiary's obligations under any Loan Document. Notwithstanding anything
to the contrary contained herein, Borrower may terminate any Franchise Agreement
in the ordinary course of its business in accordance with customary practice;
and
(e) Directly or indirectly, prepay, redeem or otherwise buyout any
leases of any Company Stores except in connection with Company Store closings
permitted under SECTION 7.21 and only if no Event of Default has occurred or is
continuing or would result after giving effect to such prepayment.
7.9 CHANGE OF CONTROL. Cause, permit, or suffer, directly or indirectly,
any Change of Control or a "Change of Control" as defined in the Borrower's
Indenture.
7.10 [INTENTIONALLY LEFT BLANK.]
7.11 DISTRIBUTIONS.
(a) Make any payment, distribution or declare or pay any dividends
(in cash or other property, other than common Stock) on, or purchase, acquire,
redeem, or retire any of Borrower's Stock, of any class, whether now or
hereafter outstanding, or make any distributions or payments to Affiliates,
except that:
(i) any Subsidiary of Borrower may make any payment,
distributions and declare and pay dividends to Borrower or to any of
Borrower's other Subsidiaries;
(ii) Borrower may make payments to Parent or MFFB for
administrative expenses made in the ordinary course of business; SO
LONG AS (1) no Event of Default shall have occurred or be continuing,
(2) no Event of Default would occur as result of any such payments and
(3) such payments do not exceed $100,000 annually;
(iii) Borrower may make payments in an amount equal to the
current amount necessary to make regularly scheduled interest payments
at the specified contractual rate (but not default interest payments)
under the Parent's Indenture;
(iv) Borrower may make payments to Parent or MFFB with respect to
a Taxable Period equal to the LESSER of (1) the actual amount of taxes
payable by Parent with respect to its consolidated Federal income tax
liability (and any
61
unitary, combined, consolidated or similar state and local taxes) of
the Group for such Taxable Period ("ACTUAL TAX PAYABLE") and (2) an
amount equal to the product of (x) the Borrower's Share and (y) the
Actual Tax Payable; PROVIDED THAT AND SUBJECT TO THE FOLLOWING
CONDITIONS: (A) no Event of Default shall have occurred or be
continuing, (B) no Event of Default shall result after giving effect
to any such payment, and (C) Borrower provides 5 Business Days' prior
written notice to Lender of any proposed payment with a calculation
demonstrating compliance with this Section. The form of any payment
permitted under this CLAUSE (iv) may be made by check or wire as
required under Section 4 of the Tax Allocation Agreement and any
payments permitted under this CLAUSE (iv) shall be made no earlier
than five (5) days prior to the due date of such tax payment. To the
extent that the amount paid by Borrower to Parent or MFFB pursuant to
this CLAUSE (iv) is greater than Borrower's Share of the actual taxes
paid by Parent on the due date, then Parent or MFFB, as the case may
be, shall immediately return such excess amounts to Borrower;
(v) Borrower may make payments to the TCBY Entities or in
account of the TCBY Entities pursuant to the TCBY Management Agreement
for reimbursable obligations thereunder so long as (1) no Event of
Default shall have occurred or be continuing, (2) no Event of Default
would occur as result of any such payments, and (3) the TCBY Entities
reimburse Borrower for such payment within fifteen (15) days of the
date Borrower made such payment. In the event the TCBY Entities do not
fully reimburse Borrower within such 15 day time period then Borrower
shall not make any further payments to the TCBY Entities, whether
under the TCBY Management Agreement or otherwise;
(vi) Borrower may make payments to Affiliates for goods, services
and licensing transactions that are in the ordinary course of
Borrower's business, upon fair and reasonable terms, that are fully
disclosed to Lender, and that are no less favorable to Borrower than
would be obtained in an arm's length transaction with a non-Affiliate;
(vii) Borrower make payments, distributions and declare and pay
dividend to its Subsidiaries but only to the extent such payments,
distributions and dividends are permitted under CLAUSES (i) AND (j) of
the definition of Permitted Investments; and
(viii) Borrower may make interest payments and payments of
principal equal to the outstanding principal balance of $607,000 to
Parent pursuant to that certain intercompany note dated as of December
29, 2001 so long as such payments are in accordance with that certain
pledge agreement dated as of August 24, 1998 by Parent in favor of The
Bank of New York.
(b) make any payments under the Tax Allocation Agreement other than
(i) payments up to $4,200,000 for the payments set forth in CLAUSE (a)(ii) AND
(iii) above and
62
(ii) the payments set forth in CLAUSE (iv) above so long as such payments do not
exceed amounts permitted under the Tax Allocation Agreement.
Without limiting the generality of the forgoing, Borrower shall not
make any payments, distributions or dividends nor shall it permit any of its
Subsidiaries to make any payments, distributions or dividends under the Tax
Allocation Agreement or any other agreement or transaction (including those
listed on Schedule 7.14) except as permitted by this SECTION 7.11.
7.12 ACCOUNTING METHODS. Modify or change its method of accounting (other
than as may be required to conform to GAAP) or enter into, modify, or terminate
any agreement currently existing, or at any time hereafter entered into with any
third party accounting firm or service bureau for the preparation or storage of
Borrower's or any of its Subsidiaries' accounting records without Borrower
instructing said accounting firm or service bureau to agree to provide Lender
information regarding the Collateral or Borrower's or such Subsidiary's
financial condition.
7.13 INVESTMENTS. Except for Permitted Investments, directly or indirectly,
make or acquire any Investment or incur any liabilities (including contingent
obligations) for or in connection with any Investment; PROVIDED, HOWEVER, that
Borrower and its Subsidiaries shall not have Permitted Investments (other than
in the Cash Management Accounts) in any Deposit Account or Securities Account in
excess of $50,000 outstanding at any one time or in excess of $115,000 in that
certain Deposit Account No. 00000-00000 with Bank of America, N.A. (the "Corky's
Account") unless Borrower or its Subsidiary, as applicable, and the applicable
securities intermediary or bank have entered into Control Agreements governing
such Permitted Investments, as Lender shall determine in its Permitted
Discretion, to perfect (and further establish) the Lender's Liens in such
Permitted Investments; and PROVIDED, FURTHER that Borrower and the applicable
bank shall enter into a Control Agreement governing the Corky's Account once the
obligations to the Corky's Shareholders have been satisfied.
7.14 TRANSACTIONS WITH AFFILIATES. Other than as set forth on SCHEDULE
7.14, directly or indirectly enter into or permit to exist any transaction with
any Affiliate of Borrower except for transactions that are in the ordinary
course of Borrower's business, upon fair and reasonable terms, that are fully
disclosed to Lender, and that are no less favorable to Borrower than would be
obtained in an arm's length transaction with a non-Affiliate.
7.15 SUSPENSION. Suspend or go out of a substantial portion of its business
except as permitted under SECTIONS 7.21 and 7.22.
7.16 [INTENTIONALLY LEFT BLANK.]
7.17 USE OF PROCEEDS. Use the proceeds of the Advances or the L/C Advances
for any purpose other than (a) on the Closing Date, (i) to repay, in full, the
outstanding principal, accrued interest, and accrued fees and expenses owing to
Existing Lender, and (ii) to pay transactional fees, costs, and expenses
incurred in connection with this Agreement, the other Loan Documents, and the
transactions contemplated hereby and thereby, and (b) thereafter, consistent
with the terms and conditions hereof and permitted hereunder, for its lawful and
permitted purposes
63
(including making interest payments (other than default interest) due under the
Borrower's Indenture).
7.18 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; INVENTORY AND EQUIPMENT
WITH BAILEES. Relocate its chief executive office to a new location without
providing 30 days prior written notification thereof to Lender and so long as,
at the time of such written notification, Borrower provides any financing
statements or fixture filings necessary to perfect and continue perfected the
Lender's Liens and uses commercially reasonable efforts to provide to Lender a
Collateral Access Agreement with respect to such new location.
7.19 SECURITIES ACCOUNTS. Establish or maintain any Securities Account
unless Lender shall have received a Control Agreement in respect of such
Securities Account. Borrower shall not transfer assets out of any Securities
Account; PROVIDED, HOWEVER, that, so long as no Event of Default has occurred
and is continuing or would result therefrom, Borrower may use such assets (and
the proceeds thereof) to the extent not prohibited by this Agreement.
7.20 FINANCIAL COVENANTS.
(a) Fail to maintain:
(i) MINIMUM ADJUSTED EBITDA. Adjusted EBITDA, measured on a
Fiscal Quarter-end basis, for the trailing twelve (12) month period
most recently ended, of Borrower and its Subsidiaries, of not less
than the required amount set forth in the following table for the
applicable period set forth opposite thereto;
APPLICABLE AMOUNT FISCAL PERIOD ENDING
----------------- --------------------
$20,600,000 December 2002
$20,600,000 March 2003
$22,300,000 June 2003
$23,300,000 September 2003
$22,000,000 December 2003
$22,300,000 March 2004
$22,800,000 June 2004
$23,600,000 September 2004
$23,800,000 December 2004
64
(ii) LEVERAGE RATIO. A Leverage Ratio, measured on a Fiscal
Quarter-end basis, for the trailing twelve (12) month period most
recently ended of Borrower and its Subsidiaries of not more than:
QUARTER ENDING APPLICABLE AMOUNT
----------------------------------------- -----------------
December 2002 7.5
March 2003 7.5
June 2003 and for each quarter thereafter 7.0
through and including June 2004
September 2004 6.5
December 2004 6.5
(iii) FIXED CHARGE COVERAGE RATIO. A Fixed Charge Coverage Ratio,
measured on a Fiscal Quarter-end basis for the trailing twelve (12)
month period most recently ended of Borrower and its Subsidiaries of
not less than:
QUARTER ENDING APPLICABLE AMOUNT
------------------------------ -----------------
December 2002 0.77
March 2003 0.77
June 2003 0.87
September 2003 0.89
December 2003 0.82
March 2004 0.89
June 2004 0.94
September 2004 0.99
December 2004 1.03
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(b) Make:
(i) CAPITAL EXPENDITURES. Capital expenditures in excess of the
amount set forth in the following table for the applicable period:
December 2002 Fiscal Year 2003 Fiscal Year 2004
------------- ---------------- ----------------
$350,000 $4,300,000 for the $4,300,000 for the Fiscal
Fiscal Year Year but no more than
$1,500,000 in any one
Fiscal Quarter
PROVIDED, THAT to the extent the capital expenditures are less than
$4,300,000 for Fiscal Year 2003 the amount of permissible capital
expenditures for Fiscal Year 2004 shall be increased by the difference
between $4,300,000 and the actual amount of capital expenditures for
Fiscal Year 2003.
7.21 STORE CLOSINGS. Close any of the Company Stores, provided that so long
as no Event of Default shall have occurred or be continuing, (a) Borrower and
any of its Subsidiaries may close those Company Stores whose store location
leases have expired pursuant to the terms thereof and not as a result of any
action by Borrower or such Subsidiary that directly or indirectly causes any
such lease to terminate before its stated term and Borrower delivers a Store
Closing Compliance Certificate to Lender five (5) Business Days prior to such
closing and (b) Borrower and any of its Subsidiaries may close up to an
aggregate of 40 Company Stores per calendar year (but not more than an aggregate
of 15 Company Stores during any calendar quarter) so long as each Company Store
closed pursuant to this CLAUSE (b) generated a negative Store Contribution
Margin for the preceding 12 month period, determined as of the date of such
Company Store's closure and Borrower delivers a Store Closing Compliance
Certificate to Lender five (5) Business Days prior to such closing.
7.22 COMPANY STORE SALE TRANSACTIONS. Enter into, either, directly or
indirectly, any Company Store Sale; PROVIDED, HOWEVER, that Borrower or any of
its Subsidiaries may enter into Company Store Sale transactions (a) for the
period from the Closing Date through and including December 31 2003 involving up
to an aggregate of 80 Company Stores during such period and (b) for the period
of January 1, 2003 through and including the Maturity Date involving up to an
aggregate of 80 Company Stores during such period but no more than an aggregate
of 20 Company Stores during any calendar quarter so long as in each case:
(i) no Event of Default shall have occurred or be continuing,
(ii) on the date of any such proposed Company Store Sale,
Borrower has at least $2,000,000 in Availability or unrestricted cash
on hand after giving effect to such Company Store Sale,
(iii) on a cumulative basis commencing on the Closing Date,
Borrower shall receive cash proceeds equal to at least 3 times (3x)
the Store Contribution
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Margin for the preceding 12 month period less the pro forma royalty
rate which would have been paid by the franchisee in the preceding 12
month period had the franchisee owned the Company Store,
(iv) with respect to all Company Store Sales that have been
consummated pursuant to this SECTION 7.22, the pro-forma present value
of the aggregate future royalty payments (which shall include the
initial cash purchase price) generated by all such outlets subject to
a Company Store Sale for the 60 month period following the date of any
such proposed Company Store Sale shall exceed the pro-forma present
value of all such sold retail outlets' Store Contribution Margins for
such 60 month period, and
(v) Borrower delivers a Company Store Sale Compliance
Certificate to Lender five (5) Business Days prior to such Company
Store Sale.
7.23 INTELLECTUAL PROPERTY. Without limiting the generality of SECTIONS 7.2
AND 7.4, create, incur, assume or permit to exist, directly or indirectly, any
Lien with respect to or convey, sell, lease, license, assign, transfer or
otherwise dispose of any interest (except for Permitted Dispositions) in any
Intellectual Property Rights owned or exclusively licensed by Borrower or any of
its Subsidiaries, including, without limitation, those Intellectual Property
Rights listed on SCHEDULE 5.16(a).
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of
default (each, an "EVENT OF DEFAULT") under this Agreement:
(a) If Borrower fails to pay when due and payable, or when declared
due and payable, all or any portion of the Obligations (whether of principal,
interest (including any interest which, but for the provisions of the Bankruptcy
Code, would have accrued on such amounts), fees and charges due Lender,
reimbursement of Lender Expenses, or other amounts constituting Obligations);
(b) (i) If Borrower or any of its Subsidiaries or any Guarantor fails
to perform, keep or observe any term, provision, condition, covenant, or
agreement contained in SECTION 6.6 (Maintenance of Properties) of this
Agreement, and such failure continues for a period of five (5) days; (ii) if
Borrower or any of its Subsidiaries or any Guarantor fails to perform, keep or
observe any term, provision, condition, covenant, or agreement contained in
SECTION 6.1 (Accounting System), 6.9 (Location of Inventory and Equipment), 6.10
(Compliance with Laws), 6.11 (Leases), or 6.12 (Broker Commissions) of this
Agreement, and such failure continues for a period of ten (10) days; or (iii) if
Borrower or any of its Subsidiaries or any Guarantor fails to perform, keep, or
observe, in any material respect, any other term, provision, condition,
covenant, or agreement contained in this Agreement or in any of the other Loan
Documents other than any such term, provision, condition, covenant or agreement
that is the subject of another provision of this SECTION 8 in which such other
provision of this SECTION 8 shall govern;
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(c) If any material portion of Borrower's or any Guarantor's assets
is attached, seized, subjected to a writ or distress warrant, levied upon, or
comes into the possession of any third Person;
(d) If an Insolvency Proceeding is commenced by Borrower, any
Guarantor or any of their Subsidiaries;
(e) If an Insolvency Proceeding is commenced against Borrower, any
Guarantor or any of their Subsidiaries, and any of the following events occur:
(a) Borrower or such Guarantor or Subsidiary consents to the institution of such
Insolvency Proceeding against it, (b) the petition commencing the Insolvency
Proceeding is not timely controverted, (c) the petition commencing the
Insolvency Proceeding is not dismissed or vacated within 60 calendar days of the
date of the filing thereof; provided, however, that, during the pendency of such
period, Lender shall be relieved of its obligations to extend credit hereunder,
(d) an interim trustee is appointed to take possession of all or any substantial
portion of the properties or assets of, or to operate all or any substantial
portion of the business of, Borrower, any Guarantor or any of their
Subsidiaries, or (e) an order for relief shall have been entered therein;
(f) If Borrower or any Guarantor is enjoined, restrained, or in any
way prevented by court order from continuing to conduct all or any material part
of its business affairs;
(g) If a notice of Lien, levy, or assessment is filed of record with
respect to any of Borrower's or any Guarantor's assets with a value in excess of
$100,000 by the United States, or any department, agency, or instrumentality
thereof, or by any state, county, municipal, or governmental agency, or if any
taxes or debts owing at any time hereafter to any one or more of such entities
becomes a Lien, whether xxxxxx or otherwise, upon any of Borrower's or any
Guarantor's assets and the same is not paid before such payment is delinquent;
(h) If a judgment or other claim becomes a Lien or encumbrance upon
any material portion of Borrower's or any Guarantor's assets;
(i) If (a) an "Event of Default" (as defined in the Parent's
Indenture) has occurred and is continuing under the Parent's Indenture, (b) an
"Event of Default" (as defined in the Borrower's Indenture) has occurred and is
continuing under the Borrower's Indenture, or (c) there is a default in any
other material agreement to which Borrower, or any Guarantor is a party and such
default (x) occurs at the final maturity of the obligations thereunder, or (y)
results in a right by the other party thereto, irrespective of whether
exercised, to accelerate the maturity of Borrower's or any Guarantor's
obligations thereunder, to terminate such agreement, or to refuse to renew such
agreement pursuant to an automatic renewal right therein;
(j) If Borrower or any Guarantor makes any payment on account of
Indebtedness that has been contractually subordinated in right of payment to the
payment of the Obligations, except to the extent such payment is permitted by
the terms of the subordination provisions applicable to such Indebtedness;
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(k) If any material misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or Record made to Lender
by Borrower or any Guarantor or any officer, employee, agent, or director of
Borrower or any Guarantor;
(l) If the obligation of any Guarantor under the Guaranty is limited
or terminated by operation of law or by such Guarantor thereunder; or
(m) If this Agreement or any other Loan Document that purports to
create a Lien, shall, for any reason, fail or cease to create a valid and
perfected and, except to the extent permitted by the terms hereof or thereof,
first priority Lien on or security interest in the Collateral covered hereby or
thereby; or
(n) Any provision of any Loan Document shall at any time for any
reason be declared to be null and void, or the validity or enforceability
thereof shall be contested by Borrower or any Guarantor, or a proceeding shall
be commenced by Borrower, any Guarantor or by any Governmental Authority having
jurisdiction over Borrower or any Guarantor, seeking to establish the invalidity
or unenforceability thereof, or Borrower or any Guarantor shall deny that
Borrower or any Guarantor has any liability or obligation purported to be
created under any Loan Document.
9. LENDER'S RIGHTS AND REMEDIES.
9.1 RIGHTS AND REMEDIES. Upon the occurrence, and during the continuation,
of an Event of Default, Lender (at its election but without notice of its
election and without demand) may do any one or more of the following, all of
which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this Agreement, by
any of the other Loan Documents, or otherwise, immediately due and payable;
(b) Cease advancing money or extending credit to or for the benefit
of Borrower under this Agreement, under any of the Loan Documents, or under any
other agreement between Borrower and Lender;
(c) Terminate this Agreement and any of the other Loan Documents as
to any future liability or obligation of Lender, but without affecting any of
the Lender's Liens in the Collateral and without affecting the Obligations;
(d) Settle or adjust disputes and claims directly with Account
Debtors for amounts and upon terms which Lender considers advisable, and in such
cases, Lender will credit Borrower's Loan Account with only the net amounts
received by Lender in payment of such disputed Accounts after deducting all
Lender Expenses properly incurred or expended in connection therewith;
(e) Cause Borrower to hold all returned Inventory in trust for
Lender, segregate all returned Inventory from all other assets of Borrower or in
Borrower's possession and conspicuously label said returned Inventory as the
property of Lender;
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(f) Without notice to or demand upon Borrower or any Guarantor, make
such payments and do such acts as Lender considers necessary or reasonable to
protect its security interests in the Collateral. Borrower agrees to assemble
the Personal Property Collateral if Lender so requires, and to make the Personal
Property Collateral available to Lender at a place that Lender may designate
which is reasonably convenient to both parties. Borrower authorizes Lender to
enter the premises where the Personal Property Collateral is located, to take
and maintain possession of the Personal Property Collateral, or any part of it,
and to pay, purchase, contest, or compromise any Lien that in Lender's
determination appears to conflict with the Lender's Liens and to pay all
expenses properly incurred in connection therewith and to charge Borrower's Loan
Account therefor. With respect to any of Borrower's owned or leased premises,
Borrower hereby grants Lender a license to enter into possession of such
premises and to occupy the same, without charge, in order to exercise any of
Lender's rights or remedies provided herein, at law, in equity, or otherwise;
(g) Without notice to Borrower (such notice being expressly waived),
and without constituting a retention of any collateral in satisfaction of an
obligation (within the meaning of the Code), set off and apply to the
Obligations any and all (i) balances and deposits of Borrower held by Lender
(including any amounts received in the Cash Management Accounts), or (ii)
Indebtedness at any time owing to or for the credit or the account of Borrower
held by Lender;
(h) Hold, as cash collateral, any and all balances and deposits of
Borrower held by Lender, and any amounts received in the Cash Management
Accounts, to secure the full and final repayment of all of the Obligations;
(i) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell (in the manner provided for herein) the
Personal Property Collateral. Borrower hereby grants to Lender a license or
other right to use, without charge, Borrower's labels, patents, copyrights,
trade secrets, trade names, trademarks, service marks, and advertising matter,
or any property of a similar nature, as it pertains to the Personal Property
Collateral, in completing production of, advertising for sale, and selling any
Personal Property Collateral and Borrower's rights under all licenses and all
franchise agreements shall inure to Lender's benefit;
(j) Sell the Personal Property Collateral at either a public or
private sale, or both, by way of one or more contracts or transactions, for cash
or on terms, in such manner and at such places (including Borrower's premises)
as Lender determines is commercially reasonable. It is not necessary that the
Personal Property Collateral be present at any such sale;
(k) Lender shall give notice of the disposition of the Personal
Property Collateral as follows:
(i) Lender shall give Borrower a notice in writing of the time
and place of public sale, or, if the sale is a private sale or some
other disposition other than a public sale is to be made of the
Personal Property Collateral, the time on or after which the private
sale or other disposition is to be made; and
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(ii) The notice shall be personally delivered or mailed, postage
prepaid, to Borrower as provided in SECTION 12, at least 10 days
before the earliest time of disposition set forth in the notice; no
notice needs to be given prior to the disposition of any portion of
the Personal Property Collateral that is perishable or threatens to
decline speedily in value or that is of a type customarily sold on a
recognized market;
(l) Lender may credit bid and purchase at any public sale; and
(m) Lender may seek the appointment of a receiver or keeper to take
possession of all or any portion of the Collateral or to operate same and, to
the maximum extent permitted by law, may seek the appointment of such a receiver
without the requirement of prior notice or a hearing;
(n) Lender shall have all other rights and remedies available at law
or in equity or pursuant to any other Loan Document; and
(o) Any deficiency that exists after disposition of the Personal
Property Collateral as provided above will be paid immediately by Borrower. Any
excess will be returned, without interest and subject to the rights of third
Persons, by Lender to Borrower.
9.2 REMEDIES CUMULATIVE. The rights and remedies of Lender under this
Agreement, the other Loan Documents, and all other agreements shall be
cumulative. Lender shall have all other rights and remedies not inconsistent
herewith as provided under the Code, by law, or in equity. No exercise by Lender
of one right or remedy shall be deemed an election, and no waiver by Lender of
any Event of Default shall be deemed a continuing waiver. No delay by Lender
shall constitute a waiver, election, or acquiescence by it.
10. TAXES AND EXPENSES.
If Borrower fails to pay any monies (whether taxes, assessments, insurance
premiums, or, in the case of leased properties or assets, rents or other amounts
payable under such leases) due to third Persons, or fails to make any deposits
or furnish any required proof of payment or deposit, all as required under the
terms of this Agreement, then, Lender, in its sole discretion and without prior
notice to Borrower, may do any or all of the following: (a) make payment of the
same or any part thereof, (b) set up such reserves in Borrower's Loan Account as
Lender deems necessary to protect Lender from the exposure created by such
failure, or (c) in the case of the failure to comply with SECTION 6.8 hereof,
obtain and maintain insurance policies of the type described in SECTION 6.8 and
take any action with respect to such policies as Lender deems prudent. Any such
amounts paid by Lender shall constitute Lender Expenses and any such payments
shall not constitute an agreement by Lender to make similar payments in the
future or a waiver by Lender of any Event of Default under this Agreement.
Lender need not inquire as to, or contest the validity of, any such expense,
tax, or Lien and the receipt of the usual official notice for the payment
thereof shall be conclusive evidence that the same was validly due and owing.
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11. WAIVERS; INDEMNIFICATION.
11.1 DEMAND; PROTEST. Borrower waives demand, protest, notice of protest,
notice of default or dishonor, notice of payment and nonpayment, nonpayment at
maturity, release, compromise, settlement, extension, or renewal of documents,
instruments, chattel paper, and guarantees at any time held by Lender on which
Borrower may in any way be liable.
11.2 LENDER'S LIABILITY FOR COLLATERAL. Borrower hereby agrees that: (a) so
long as Lender complies with its obligations, if any, under the Code, Lender
shall not in any way or manner be liable or responsible for: (i) the safekeeping
of the Collateral, (ii) any loss or damage thereto occurring or arising in any
manner or fashion from any cause, (iii) any diminution in the value thereof, or
(iv) any act or default of any carrier, warehouseman, bailee, forwarding agency,
or other Person, and (b) all risk of loss, damage, or destruction of the
Collateral shall be borne by Borrower.
11.3 INDEMNIFICATION. Borrower shall pay, indemnify, defend, and hold the
Lender-Related Persons, each Participant, and each of their respective officers,
directors, employees, agents, and attorneys-in-fact (each, an "INDEMNIFIED
PERSON") harmless (to the fullest extent permitted by law) from and against any
and all claims, demands, suits, actions, investigations, proceedings, and
damages, and all reasonable attorneys fees and disbursements and other costs and
expenses actually incurred in connection therewith (as and when they are
incurred and irrespective of whether suit is brought), at any time asserted
against, imposed upon, or incurred by any of them (a) in connection with or as a
result of or related to the execution, delivery, enforcement, performance, or
administration of this Agreement, any of the other Loan Documents, or the
transactions contemplated hereby or thereby, and (b) with respect to any
investigation, litigation, or proceeding related to this Agreement, any other
Loan Document, or the use of the proceeds of the credit provided hereunder
(irrespective of whether any Indemnified Person is a party thereto), or any act,
omission, event, or circumstance in any manner related thereto (all the
foregoing, collectively, the "INDEMNIFIED LIABILITIES"). Without limitation, the
foregoing indemnity shall apply to each Indemnified Person with respect to
Indemnified Liabilities which in whole or in part are caused by or arise out of
any negligent act or omission of such Indemnified Person or of any other Person.
The foregoing to the contrary notwithstanding, Borrower shall have no obligation
to any Indemnified Person under this SECTION 11.3 with respect to any
Indemnified Liability that a court of competent jurisdiction finally determines
to have resulted from the gross negligence or willful misconduct of such
Indemnified Person. This provision shall survive the termination of this
Agreement and the repayment of the Obligations. If any Indemnified Person makes
any payment to any other Indemnified Person with respect to an Indemnified
Liability as to which Borrower was required to indemnify the Indemnified Person
receiving such payment, the Indemnified Person making such payment is entitled
to be indemnified and reimbursed by Borrower with respect thereto.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by
Borrower or Lender to the other relating to this Agreement or any other Loan
Document shall be in writing and (except for financial statements and other
informational documents which may be sent by first-class mail, postage prepaid)
shall be personally delivered or sent by registered or certified
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mail (postage prepaid, return receipt requested), overnight courier, electronic
mail (at such email addresses as Borrower or Lender, as applicable, may
designate to each other in accordance herewith), or telefacsimile to Borrower or
Lender, as the case may be, at its address set forth below:
If to Borrower: XXX. XXXXXX' ORIGINAL COOKIES, INC.
0000 Xxxx Xxxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Attn: General Counsel and Treasurer
Fax No. 000.000.0000
If to Lender: FOOTHILL CAPITAL CORPORATION
0000 Xxxxxxxx Xxxxxx
Xxxxx 0000 Xxxx
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Attn: Structured Finance Group Manager
Fax No. 000.000.0000
with copies to: PAUL, HASTINGS, XXXXXXXX & XXXXXX LLP
000 Xxxxx Xxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxxxx, Esq.
Fax No. 000.000.0000
Lender and Borrower may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other party. All notices or demands sent in accordance with this SECTION 12,
other than notices by Lender in connection with enforcement rights against the
Collateral under the provisions of the Code, shall be deemed received on the
earlier of the date of actual receipt or 3 Business Days after the deposit
thereof in the mail. Borrower acknowledges and agrees that notices sent by
Lender in connection with the exercise of enforcement rights against Collateral
under the provisions of the Code shall be deemed sent when deposited in the mail
or personally delivered, or, where permitted by law, transmitted by
telefacsimile or any other method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
(a) THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT
OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT
HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH
RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR
THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF CALIFORNIA.
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(b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND
LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT LENDER'S
OPTION, IN THE COURTS OF ANY JURISDICTION WHERE LENDER ELECTS TO BRING SUCH
ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. BORROWER AND
LENDER WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY
HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE
EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13(b).
(c) BORROWER AND LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF
THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. BORROWER AND LENDER REPRESENT THAT EACH HAS REVIEWED THIS
WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.
14.1 ASSIGNMENTS AND PARTICIPATIONS.
(a) Lender may assign and delegate to one or more assignees (each an
"ASSIGNEE") all, or any ratable part of all, of the Obligations and the other
rights and obligations of Lender hereunder and under the other Loan Documents
and, subject to the last sentence of this SECTION 14.1(a), may do so with the
prior written consent of Borrower (which such consent shall not be unreasonably
withheld or delayed); PROVIDED, HOWEVER, that Borrower may continue to deal
solely and directly with Lender in connection with the interest so assigned to
an Assignee until (i) written notice of such assignment, together with payment
instructions, addresses, and related information with respect to the Assignee,
have been given to Borrower by Lender and the Assignee, and (ii) Lender and its
Assignee have delivered to Borrower an appropriate assignment and acceptance
agreement. Lender may assign all or any ratable part of all of the Obligations
without Borrower's consent if (i) an Event of Default shall have occurred or be
continuing, (ii) substantially all of the assets of Lender are being sold or
otherwise transferred, or (iii) the proposed Assignee is an Affiliate of Lender.
(b) From and after the date that Lender provides Borrower with such
written notice and executed assignment and acceptance agreement, (i) the
Assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such assignment and
acceptance agreement, shall have the assigned and delegated
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rights and obligations of Lender under the Loan Documents, and (ii) Lender
shall, to the extent that rights and obligations hereunder and under the other
Loan Documents have been assigned and delegated by it pursuant to such
assignment and acceptance agreement, relinquish its rights (except with respect
to SECTION 11.3 hereof) and be released from its obligations under this
Agreement (and in the case of an assignment and acceptance covering all or the
remaining portion of Lender's rights and obligations under this Agreement and
the other Loan Documents, Lender shall cease to be a party hereto and thereto),
and such assignment shall affect a novation between Borrower and the Assignee.
(c) Immediately upon Borrower's receipt of such fully executed
assignment and acceptance agreement, this Agreement shall be deemed to be
amended to the extent, but only to the extent, necessary to reflect the addition
of the Assignee and the resulting adjustment of the rights and duties of Lender
arising therefrom.
(d) Lender may at any time sell to one or more commercial banks,
financial institutions, or other Persons not Affiliates of such Lender (a
"PARTICIPANT") participating interests in the Obligations and the other rights
and interests of Lender hereunder and under the other Loan Documents; PROVIDED,
HOWEVER, that (i) Lender shall remain the "Lender" for all purposes of this
Agreement and the other Loan Documents and the Participant receiving the
participating interest in the Obligations and the other rights and interests of
Lender shall not constitute a "Lender" hereunder or under the other Loan
Documents and Lender's obligations under this Agreement shall remain unchanged,
(ii) Lender shall remain solely responsible for the performance of such
obligations, (iii) Borrower and Lender shall continue to deal solely and
directly with each other in connection with Lender's rights and obligations
under this Agreement and the other Loan Documents, (iv) Lender shall not
transfer or grant any participating interest under which the Participant has the
right to approve any amendment to, or any consent or waiver with respect to,
this Agreement or any other Loan Document, except to the extent such amendment
to, or consent or waiver with respect to this Agreement or of any other Loan
Document would (A) extend the final maturity date of the Obligations hereunder
in which such Participant is participating, (B) reduce the interest rate
applicable to the Obligations hereunder in which such Participant is
participating, (C) release all or a material portion of the Collateral or
guaranties (except to the extent expressly provided herein or in any of the Loan
Documents) supporting the Obligations hereunder in which such Participant is
participating, (D) postpone the payment of, or reduce the amount of, the
interest or fees payable to such Participant through Lender, or (E) change the
amount or due dates of scheduled principal repayments or prepayments or
premiums, and (v) all amounts payable by Borrower hereunder shall be determined
as if Lender had not sold such participation, except that, if amounts
outstanding under this Agreement are due and unpaid, or shall have been declared
or shall have become due and payable upon the occurrence and continuation of an
Event of Default, each Participant shall be deemed to have the right of set-off
in respect of its participating interest in amounts owing under this Agreement
to the same extent as if the amount of its participating interest were owing
directly to it as Lender under this Agreement. The rights of any Participant
only shall be derivative through Lender and no Participant shall have any rights
under this Agreement or the other Loan Documents or any direct rights as to
Borrower, the Collections, the Collateral, or otherwise in respect of the
Obligations. No Participant shall have the right to participate directly in the
making of decisions by Lender.
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(e) In connection with any such assignment or participation or
proposed assignment or participation, a Lender may disclose all documents and
information which it now or hereafter may have relating to Borrower or
Borrower's business and such Participant shall be bound by the confidentiality
provisions set forth in SECTION 16.10.
(f) Any other provision in this Agreement notwithstanding, Lender may
at any time create a security interest in, or pledge, all or any portion of its
rights under and interest in this Agreement in favor of any Federal Reserve Bank
in accordance with Regulation A of the Federal Reserve Bank or U.S. Treasury
Regulation 31 CFR Section 203.14, and such Federal Reserve Bank may enforce such
pledge oR security interest in any manner permitted under applicable law.
14.2 SUCCESSORS. This Agreement shall bind and inure to the benefit of the
respective successors and assigns of each of the parties; PROVIDED, HOWEVER,
that Borrower may not assign this Agreement or any rights or duties hereunder
without Lender's prior written consent and any prohibited assignment shall be
absolutely void AB INITIO. No consent to assignment by Lender shall release
Borrower from its Obligations. Lender may assign this Agreement and the other
Loan Documents and its rights and duties hereunder and thereunder pursuant to
SECTION 14.1 hereof and, except as expressly required pursuant to SECTION 14.1
hereof, no consent or approval by Borrower is required in connection with any
such assignment.
15. AMENDMENTS; WAIVERS.
15.1 AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent with respect to any
departure by Borrower therefrom, shall be effective unless the same shall be in
writing and signed by Lender, any Assignee, as applicable, and Borrower and then
any such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given.
15.2 NO WAIVERS. No failure by Lender to exercise any right, remedy, or
option under this Agreement or any other Loan Document, or delay by Lender in
exercising the same, will operate as a waiver thereof. No waiver by Lender will
be effective unless it is in writing, and then only to the extent specifically
stated. No waiver by Lender on any occasion shall affect or diminish Lender's
rights thereafter to require strict performance by Borrower of any provision of
this Agreement. Lender's rights under this Agreement and the other Loan
Documents will be cumulative and not exclusive of any other right or remedy that
Lender may have.
16. GENERAL PROVISIONS.
16.1 EFFECTIVENESS. This Agreement shall be binding and deemed effective
when executed by Borrower and Lender.
16.2 SECTION HEADINGS. Headings and numbers have been set forth herein for
convenience only. Unless the contrary is compelled by the context, everything
contained in each Section applies equally to this entire Agreement.
16.3 INTERPRETATION. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed against Lender or Borrower, whether under
any rule of construction or otherwise. On the contrary, this Agreement has been
reviewed by all parties and shall be
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construed and interpreted according to the ordinary meaning of the words used so
as to accomplish fairly the purposes and intentions of all parties hereto.
16.4 SEVERABILITY OF PROVISIONS. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
16.5 WITHHOLDING TAXES. All payments made by Borrower hereunder or under
any note will be made without setoff, counterclaim, or other defense, except as
required by applicable law other than for Taxes (as defined below). All such
payments will be made free and clear of, and without deduction or withholding
for, any present or future taxes, levies, imposts, duties, fees, assessments or
other charges of whatever nature now or hereafter imposed by any jurisdiction
(other than the United States) or by any political subdivision or taxing
authority thereof or therein (other than of the United States) with respect to
such payments (but excluding, any tax imposed by any jurisdiction or by any
political subdivision or taxing authority thereof or therein (i) measured by or
based on the net income or net profits of Lender, or (ii) to the extent that
such tax results from a change in the circumstances of Lender, including a
change in the residence, place of organization, or principal place of business
of Lender, or a change in the branch or lending office of Lender participating
in the transactions set forth herein) and all interest, penalties or similar
liabilities with respect thereto (all such non-excluded taxes, levies, imposts,
duties, fees, assessments or other charges being referred to collectively as
"TAXES"). If any Taxes are so levied or imposed, Borrower agrees to pay the full
amount of such Taxes, and such additional amounts as may be necessary so that
every payment of all amounts due under this Agreement or under any note,
including any amount paid pursuant to this SECTION 16.5 after withholding or
deduction for or on account of any Taxes, will not be less than the amount
provided for herein; PROVIDED, HOWEVER, that Borrower shall not be required to
increase any such amounts payable to Lender if the increase in such amount
payable results from Lender's own willful misconduct or gross negligence. Any
request by Lender for payment of any amount under this Section 16.5 shall be
accompanied by a certification that (i) Lender's claim for said amount is
generally consistent with Lender's treatment of similarly situated customers of
Lender whose transactions with Lender are similarly affected by the change in
circumstances giving rise to such payment, and (ii) identifies with reasonable
specificity the basis for calculation of such amount, but such Lender shall not
be required to disclose any confidential or proprietary information therein.
Borrower will furnish to Lender as promptly as possible after the date the
payment of any Taxes is due pursuant to applicable law certified copies of tax
receipts evidencing such payment by Borrower.
16.6 [Intentionally left blank.]
16.7 COUNTERPARTS; TELEFACSIMILE EXECUTION. This Agreement may be executed
in any number of counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, shall be deemed to be an original,
and all of which, when taken together, shall constitute but one and the same
Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity,
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enforceability, and binding effect of this Agreement. The foregoing shall apply
to each other Loan Document MUTATIS MUTANDIS.
16.8 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the incurrence or payment
of the Obligations by Borrower or any Guarantor or the transfer to Lender of any
property should for any reason subsequently be declared to be void or voidable
under any state or federal law relating to creditors' rights, including
provisions of the Bankruptcy Code relating to fraudulent conveyances,
preferences, or other voidable or recoverable payments of money or transfers of
property (collectively, a "VOIDABLE TRANSFER"), and if Lender is required to
repay or restore, in whole or in part, any such Voidable Transfer, or elects to
do so upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that Lender is required or elects to repay or
restore, and as to all reasonable costs, expenses, and attorneys fees of Lender
related thereto, the liability of Borrower or such Guarantor automatically shall
be revived, reinstated, and restored and shall exist as though such Voidable
Transfer had never been made.
16.9 INTEGRATION. This Agreement, together with the other Loan Documents,
reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
16.10 CONFIDENTIALITY. Lender agrees to maintain as confidential all
confidential information provided to it by Borrower and designated as
confidential, except that Lender may disclose such information (a) to Persons
employed or engaged by Lender in evaluating, approving, structuring or
administering the Obligations; (b) to any bona fide assignee or participant or
potential assignee or participant that has agreed to comply with the covenant
contained in this SECTION 16.10 (and any such bona fide assignee or participant
or potential assignee or participant may disclose such information to Persons
employed or engaged by them as described in CLAUSE (a) above); (c) as required
or requested by any Governmental Authority or reasonably believed by Lender to
be compelled by any court decree, subpoena or legal or administrative order or
process; (d) as, on the advise of such Lender's counsel, is required by law; (e)
in connection with the exercise of any right or remedy under the Loan Documents
or in connection with any litigation to which Lender is a party; or (f) that
ceases to be confidential through no fault of Lender or that has become public
by disclosures made by Persons other than Lender.
[SIGNATURE PAGE TO FOLLOW.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
XXX. XXXXXX' ORIGINAL COOKIES, INC.,
a Delaware corporation
By: /s/ XXXXXXX X. XXXX
----------------------------
Name: Xxxxxxx X. Xxxx
Title: Senior Vice President
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /s/ XXXXXX XXXXX
----------------------------
Name: Xxxxxx Xxxxx
Title: Senior Vice President
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