Loan and Security Agreement
by and between
CONGRESS FINANCIAL CORPORATION (Central)
as Lender
and
ALL-AMERICAN BOTTLING CORPORATION
as Borrower
Dated: August 7, 1997
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS -1-
SECTION 2. CREDIT FACILITIES -13-
2.1 Revolving Loans -13-
2.2 Letter of Credit Accommodations -14-
2.3 Availability Reserves -16-
SECTION 3. INTEREST AND FEES -18-
3.1 Interest -18-
3.2 Closing Fee -19-
3.3 Renewal Fee -19-
3.4 Servicing Fee -19-
3.5 Unused Line Fee -19-
3.6 Changes in Laws and Increased Costs of Loans -20-
SECTION 4. CONDITIONS PRECEDENT -20-
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations -21-
4.2 Conditions Precedent to All Loans and Letter of Credit
Accommodations -22-
SECTION 5. GRANT OF SECURITY INTEREST -23-
SECTION 6. COLLECTION AND ADMINISTRATION -24-
6.1 Borrower's Loan Account -24-
6.2 Statements -24-
6.3 Collection of Accounts -24-
6.4 Payments -25-
6.5 Authorization to Make Loans -26-
6.6 Use of Proceeds -26-
SECTION 7. COLLATERAL REPORTING AND COVENANTS -27-
7.1 Collateral Reporting -27-
7.2 Accounts Covenants -28-
7.3 Inventory Covenants -30-
7.4 Equipment Covenants -30-
7.5 Power of Attorney -31-
7.6 Right to Cure -31-
7.7 Access to Premises -32-
SECTION 8. REPRESENTATIONS AND WARRANTIES -32-
8.1 Corporate Existence, Power and Authority; Subsidiaries -32-
8.2 Financial Statements; No Material Adverse Change -32-
8.3 Chief Executive Office; Collateral Locations -33-
8.4 Priority of Liens; Title to Properties -33-
8.5 Tax Returns -33-
8.6 Litigation -33-
8.7 Compliance with Other Agreements and Applicable Laws -34-
8.8 Environmental Compliance -34-
8.9 Employee Benefits -34-
8.10 Bank Accounts -35-
8.11 Accuracy and Completeness of Information -35-
8.12 Survival of Warranties; Cumulative -36-
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS -36-
9.1 Maintenance of Existence -36-
9.2 New Collateral Locations -36-
9.3 Compliance with Laws, Regulations, Etc. -36-
9.4 Payment of Taxes and Claims -38-
9.5 Insurance -39-
9.6 Financial Statements and Other Information -39-
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. -41-
9.8 Encumbrances -41-
9.9 Indebtedness -42-
9.10 Loans, Investments, Guarantees, Etc. -42-
9.11 Dividends and Redemptions -43-
9.12 Transactions with Affiliates -44-
9.13 Additional Bank Accounts -44-
9.14 Compliance with ERISA -44-
9.15 Maintenance of Agreements -45-
9.16 Maintenance of Property -45-
9.17 Acquisition Expenditures -45-
9.18 Senior Bond Interest -45-
9.19 Working Capital -46-
9.20 Adjusted Pre-Tax Net Income -46-
9.21 Costs and Expenses -46-
9.22 Further Assurances -47-
SECTION 10. EVENTS OF DEFAULT AND REMEDIES -47-
10.1 Events of Default -47-
10.2 Remedies -49-
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVER AND CONSENTS; GOVERNING LAW -50-
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver -50-
11.2 Waiver of Notices -52-
11.3 Amendments and Waivers -52-
11.4 Waiver of Counterclaims -52-
11.5 Indemnification -52-
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS -53-
12.1 Term -53-
12.2 Notices -55-
12.3 Partial Invalidity -55-
12.4 Successors -56-
12.5 Confidentiality -56-
12.6 Entire Agreement -56-
INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Information Certificate
Exhibit B Daily/Weekly Borrowing Base Certificate
Exhibit C Monthly Borrowing Base Certificate
Exhibit D 1997 Budget Income Statement
Schedule 8.4 Existing Liens
Schedule 8.8 Environmental Compliance
Schedule 8.9 Multiemployer Plans
Schedule 8.10 Bank Accounts
Schedule 9.10 Existing Loans, Advances and Guarantees
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated as of August 7, 1997 is entered
into by and between Congress Financial Corporation (Central), an Illinois
corporation ("Lender") and All-American Bottling Corporation, a Delaware
corporation ("Borrower").
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender enter into certain financing
arrangements with Borrower pursuant to which Lender may make loans and provide
other financial accommodations to Borrower; and
WHEREAS, Lender is willing to make such loans and provide such financial
accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS
All terms used herein which are defined in Article 1 or Article 9 of the
Uniform Commercial Code shall have the meanings given therein unless otherwise
defined in this Agreement. All references to the plural herein shall also mean
the singular and to the singular shall also mean the plural unless the context
otherwise requires. All references to Borrower and Lender pursuant to the
definitions set forth in the recitals hereto, or to any other person herein,
shall include their respective successors and assigns. The words "hereof",
"herein", "hereunder", "this Agreement" and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not any
particular provision of this Agreement and as this Agreement now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced. The word "including" when used in this Agreement shall mean
"including, without limitation". An Event of Default shall exist or continue
or be continuing until such Event of Default is waived in accordance with
Section 11.3 or is cured in a manner satisfactory to Lender, if such Event of
Default is capable of being cured as determined by Lender. Any accounting term
used herein unless otherwise defined in this Agreement shall have the meanings
customarily given to such term in accordance with GAAP. For purposes of this
Agreement, the following terms shall have the respective meanings given to them
below:
1.1 "Accounts" shall mean all present and future rights of Borrower to
payment for goods sold or leased or for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not earned by
performance.
1.2 "Adjusted Eurodollar Rate" shall mean, with respect to each Interest
Period for any Eurodollar Rate Loan, the rate per annum (rounded upwards, if
necessary, to the next one-sixteenth (1/16) of one (1%) percent) determined by
dividing (a) the Eurodollar Rate for such Interest Period by (b) a percentage
equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes hereof,
"Reserve Percentage" shall mean the reserve percentage, expressed as a decimal,
prescribed by any United States or foreign banking authority for determining
the reserve requirement which is or would be applicable to deposits of United
States dollars in a non-United States or an international banking office of
Reference Bank used to fund a Eurodollar Rate Loan or any Eurodollar Rate Loan
made with the proceeds of such deposit, whether or not the Reference Bank
actually holds or has made any such deposits or loans. The Adjusted Eurodollar
Rate shall be adjusted on and as of the effective day of any change in the
Reserve Percentage.
1.3 "Adjusted Pre-Tax Net Income" shall mean as to any Person, at any
time, in accordance with GAAP (except as otherwise specifically set forth
below), on a consolidated basis for such Person and its subsidiaries (if any),
the amount equal to: (a) the income [loss] before income taxes for the period
in question, plus (b) extraordinary gains for such period, and minus (c) any
non-cash extraordinary losses for such period (to the extent, in the case of
both (b) and (c) that the same are not included in the calculation of the
amount reflected by (a) above).
1.4 "Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such Person. For purposes of this definition, ownership
of, or control of the votes with respects to, 10% or more of the voting common
equity (on a fully diluted basis) or warrants to purchase such equity (whether
or not currently exercisable) of a Person will be deemed to be control of such
Person.
1.5 "Availability Reserves" shall mean, as of any date of determination,
such amounts as Lender may from time to time establish and revise in good faith
reducing the amount of Revolving Loans and Letter of Credit Accommodations
which would otherwise be available to Borrower under the lending formula(s)
provided for herein: (a) to reflect events, conditions, contingencies or risks
which, as determined by Lender in good faith, do or may affect either (i) the
Collateral or any other property which is security for the Obligations or its
value, (ii) the assets, business or prospects of Borrower or any Obligor or
(iii) the security interests and other rights of Lender in the Collateral
(including the enforceability, perfection and priority thereof) or (b) to
reflect Lender's good faith belief that any collateral report or financial
information furnished by or on behalf of Borrower or any Obligor to Lender is
or may have been incomplete, inaccurate or misleading in any material respect
or (c) to reflect outstanding Letter of Credit Accommodations as provided in
Section 2.2 hereof or (d) in respect of any state of facts which Lender
determines in good faith constitutes an Event of Default or may, with notice or
passage of time or both, constitute an Event of Default.
1.6 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.7 "Borrowing Base Certificate" shall mean a certificate substantially
in the form of Exhibit B or C hereto, as such form may from time to time be
modified by Lender, which is duly completed (including all schedules thereto)
and executed by the chief financial officer or other appropriate financial
officer of Borrower acceptable to Lender and delivered to Lender.
1.8 "Budget Income Statement" shall have the meaning set forth in Section
9.6(a) hereof.
1.9 "Business Day" shall mean any day other than a Saturday, Sunday, or
other day on which commercial banks are authorized or required to close under
the laws of the States of New York or Illinois or the Commonwealth of
Pennsylvania, and a day on which the Reference Bank and Lender are open for the
transaction of business, except that if a determination of a Business Day shall
relate to any Eurodollar Rate Loans, the term Business Day shall also exclude
any day on which banks are closed for dealings in dollar deposits in the London
interbank market or other applicable Eurodollar Rate market.
1.10 "Code" shall mean the Internal Revenue Code of 1986, as the same now
exists or may from time to time hereafter be amended, modified, recodified or
supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.11 "Collateral" shall have the meaning set forth in Section 5 hereof.
1.12 "Comparison Income Statement" shall have the meaning set forth in
Section 9.6(a) hereof.
1.13 "Consolidated Net Income" of Borrower for any fiscal period shall
mean the consolidated net earnings or loss of Borrower and its Subsidiaries as
it would appear on a consolidated statement of earnings of Borrower for such
fiscal period prepared in accordance with GAAP, provided, that (i) the results
of operations of any Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisitions shall be excluded; (ii) the
net income of any Person (other than a Subsidiary of Borrower of which 80% of
the capital stock having ordinary voting power for the election of directors or
other governing body of such Subsidiary is owned by Borrower directly or
indirectly through one or more wholly-owned Subsidiaries of Borrower) shall be
included only to the extent of the amount of cash, property, dividends or
distributions actually paid to Borrower or a wholly-owned Subsidiary of
Borrower during such period; (iii) any gain on the forgiveness of Indebtedness
shall be excluded; and (iv) any one time or extraordinary gain shall be
excluded.
1.14 "Eligible Accounts" shall mean Accounts created by Borrower which
are and continue to be acceptable to Lender based on the criteria set forth
below. In general, Accounts shall be Eligible Accounts if:
(a) such Accounts arise from the actual and bona fide sale and
delivery of goods by Borrower or rendition of services by Borrower in the
ordinary course of its business which transactions are completed in accordance
with the terms and provisions contained in any documents related thereto;
(b) such Accounts are not unpaid more than ninety (90) days after the
date of the original invoice for them;
(c) such Accounts comply with the terms and conditions contained in
Section 7.2(c) of this Agreement;
(d) such Accounts do not arise from sales on consignment, guaranteed
sale, sale and return, sale on approval, or other terms under which payment by
the account debtor may be conditional or contingent;
(e) the chief executive office of the account debtor with respect to
such Accounts is located in the United States of America, or, at Lender's
option, either: (i) the account debtor has delivered to Borrower an
irrevocable letter of credit issued or confirmed by a bank satisfactory to
Lender and payable only in the United States of America and in U.S. dollars,
sufficient to cover such Account, in form and substance satisfactory to Lender
and, if required by Lender, the original of such letter of credit has been
delivered to Lender or Lender's agent and the issuer thereof notified of the
assignment of the proceeds of such letter of credit to Lender, or (ii) such
Account is subject to credit insurance payable to Lender issued by an insurer
and on terms and in an amount acceptable to Lender, or (iii) such Account is
otherwise acceptable in all respects to Lender (subject to such lending formula
with respect thereto as Lender may determine);
(f) such Accounts do not consist of progress billings, bill and hold
invoices or retainage invoices, except as to bill and hold invoices, if Lender
shall have received an agreement in writing from the account debtor, in form
and substance satisfactory to Lender, confirming the unconditional obligation
of the account debtor to take the goods related thereto and pay such invoice;
(g) the account debtor with respect to such Accounts has not asserted
a counterclaim, defense or dispute and does not have, and does not engage in
transactions which may give rise to, any right of setoff against such Accounts
(but the portion of the Accounts of such account debtor in excess of the amount
at any time and from time to time owed by Borrower to such account debtor or
claimed owed by such account debtor may be deemed Eligible Accounts);
(h) there are no facts, events or occurrences which would impair the
validity, enforceability or collectability of such Accounts or reduce the
amount payable or delay payment thereunder;
(i) such Accounts are subject to the first priority, valid and
perfected security interest of Lender and any goods giving rise thereto are
not, and were not at the time of the sale thereof, subject to any liens except
those permitted in this Agreement;
(j) neither the account debtor nor any officer or employee of the
account debtor with respect to such Accounts is an officer, employee or agent
of or affiliated with Borrower directly or indirectly by virtue of family
membership, ownership, control, management or otherwise; provided, however, any
Accounts of Full Service Beverage Corporation which are supported by a letter
of credit or third party credit enhancement acceptable to Lender shall not be
excluded from Eligible Accounts solely on the basis of this Section 1.14(j);
(k) the account debtors with respect to such Accounts are not any
foreign government, the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, unless, if the
account debtor is the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, upon Lender's
request, the Federal Assignment of Claims Act of 1940, as amended or any
similar State or local law, if applicable, has been complied with in a manner
satisfactory to Lender;
(l) to the best of Borrower's knowledge, there are no proceedings or
actions which are threatened or pending against the account debtors with
respect to such Accounts which might result in any material adverse change in
any such account debtor's financial condition;
(m) such Accounts are not owed by an account debtor which is a
Franchisor (or an Affiliate of a Franchisor) which has terminated the franchise
or distribution agreement or any rights with respect to which such Account
arose;
(n) such Accounts of a single account debtor or its Affiliates do not
constitute more than fifteen (15%) percent of all otherwise Eligible Accounts
(but the portion of the Accounts not in excess of such percentage may be deemed
Eligible Accounts);
(o) such Accounts are not owed by an account debtor who has Accounts
unpaid more than ninety (90) days after the date of the original invoice for
them which constitute more than fifty (50%) percent of the total Accounts of
such account debtor;
(p) Lender determines in its reasonable discretion that collection of
such Accounts is not insecure and that such Accounts are not likely to be
unpaid by reason of the account debtor's financial inability; and
(q) such Accounts are owed by account debtors deemed creditworthy at
all times by Lender, as determined by Lender.
General criteria for Eligible Accounts may be established and revised from time
to time by Lender in good faith. Any Accounts which are not Eligible Accounts
shall nevertheless be part of the Collateral.
1.15 "Eligible Inventory" shall mean Inventory consisting of finished
goods held for resale in the ordinary course of the business of Borrower and
raw materials, packaging materials, pallets and shells for such finished goods
which are acceptable to Lender based on the criteria set forth below. In
general, Eligible Inventory shall not include (a) work-in-process; (b)
components which are not part of finished goods; (c) spare parts for equipment;
(d) supplies used or consumed in Borrower's business; (e) Inventory at premises
other than those owned and controlled by Borrower, except if Lender shall have
received an agreement in writing from the person in possession of such
Inventory and/or the owner or operator of such premises in form and substance
satisfactory to Lender acknowledging Lender's first priority security interest
in the Inventory, waiving security interests and claims by such person against
the Inventory and permitting Lender access to, and the right to remain on, the
premises so as to exercise Lender's rights and remedies and otherwise deal with
the Collateral; (f) Inventory subject to a security interest or lien in favor
of any person other than Lender except those permitted in this Agreement; (g)
bill and hold goods; (h) unserviceable, obsolete or slow moving Inventory; (i)
Inventory which is not subject to the first priority, valid and perfected
security interest of Lender; (j) returned, damaged and/or defective Inventory;
and (k) Inventory purchased or sold on consignment. General criteria for
Eligible Inventory may be established and revised from time to time by Lender
in good faith. Any Inventory which is not Eligible Inventory shall
nevertheless be part of the Collateral.
1.16 "Environmental Laws" shall mean all foreign, Federal, State and
local laws (including common law), legislation, rules, codes, licenses, permits
(including any conditions imposed therein), authorizations, judicial or
administrative decisions, injunctions or agreements between Borrower and any
governmental authority, (1) relating to pollution and the protection,
preservation or restoration of the environment (including air, water vapor,
surface water, ground water, drinking water, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural resource), or
to human health or safety, (2) relating to the exposure to, or the use,
storage, recycling, treatment, generation, manufacture, processing,
distribution, transportation, handling, labeling, production, release or
disposal, or threatened release, of Hazardous Materials, or (3) relating to all
laws with regard to recordkeeping, notification, disclosure and reporting
requirements respecting Hazardous Materials. The term "Environmental Laws"
includes (i) the Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Federal Superfund Amendments and Reauthorization
Act, the Federal Water Pollution Control Act of 1972, the Federal Clean Water
Act, the Federal Clean Air Act, the Federal Resource Conservation and Recovery
Act of 1976 (including the Hazardous and Solid Waste Amendments thereto), the
Federal Solid Waste Disposal and the Federal Toxic Substances Control Act, the
Federal Insecticide, Fungicide and Rodenticide Act, and the Federal Safe
Drinking Water Act of 1974, (ii) applicable state counterparts to such laws,
and (iii) any common law or equitable doctrine that may impose liability or
obligations for injuries or damages due to, or threatened as a result of, the
presence of or exposure to any Hazardous Materials.
1.17 "Equipment" shall mean all of Borrower's equipment now or at any
time hereafter located at 2110 Harrison Street, Oshkosh, Wisconsin (excluding
vehicles, but including without limitation, machinery, equipment, furniture,
furnishings, tools, tooling, jigs, dies, fixtures and other equipment), and any
and all substitutions and replacements thereof.
1.18 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, as the same now exists or may hereafter from time to time
be amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.
1.19 "ERISA Affiliate" shall mean any person required to be aggregated
with Borrower or any of its Subsidiaries under Sections 414(b), 414(c), 414(m)
or 414(o) of the Code.
1.20 "Eurodollar Rate" shall mean with respect to the Interest Period for
a Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary, to
the next one-sixteenth (1/16) of one (1%) percent) at which Reference Bank is
offered deposits of United States dollars in the London interbank market (or
other Eurodollar Rate market selected by Borrower and approved by Lender) on or
about 9:00 a.m. (New York time) two (2) Business Days prior to the commencement
of such Interest Period in amounts substantially equal to the principal amount
of the Eurodollar Rate Loans requested by and available to Borrower in
accordance with this Agreement, with a maturity of comparable duration to the
Interest Period selected by Borrower.
1.21 "Eurodollar Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Adjusted Eurodollar Rate in accordance
with the terms hereof.
1.22 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.23 "Excess Availability" shall mean the amount, as determined by
Lender, calculated at any time, equal to: (a) the lesser of (i) the amount of
the Revolving Loans available to Borrower as of such time based on the
applicable lending formulas multiplied by the Net Amount of Eligible Accounts
and Value of Eligible Inventory, as determined by Lender, and subject to the
sublimits and Availability Reserves from time to time established by Lender
hereunder and (ii) the Maximum Credit, minus (b) the sum of: (i) the amount of
all then outstanding and unpaid Obligations, plus (ii) the aggregate amount of
all trade payables of Borrower which are more than sixty (60) days past due as
of such time.
1.24 "Excluded Contract Rights" shall mean (i) all rights of Borrower
under contracts, leases and other agreements, to the extent that such contract,
lease or other agreement contains an enforceable prohibition against the grant
of the security interest to Lender, but such rights shall only constitute
"Excluded Contract Rights" until the necessary consents have been obtained or
such prohibition has been rendered unenforceable or ineffective by reason of
law, court proceeding, court order or otherwise and (ii) other than rights to
payment, if any, for the production, delivery or sale of goods or the rendition
of services arising thereunder and rights to payment arising under promotional
or other marketing agreements, all franchises, franchise agreements, contract
packing agreements, distributor agreements, license agreements (other than
license agreements relating to the use of patents, trademarks, copyrights, or
other intellectual property or applications therefor), contract manufacturing
agreements, fountain syrup agreements, bottling agreements, license and
bottling agreements, production and marketing agreements and all other similar
agreements and all rights of Borrower thereunder; provided, that "Excluded
Contract Rights" shall not include the proceeds of any of the foregoing.
1.25 "Financing Agreements" shall mean, collectively, this Agreement and
all notes, guarantees, security agreements and other agreements, documents and
instruments now or at any time hereafter executed and/or delivered by Borrower
or any Obligor in connection with this Agreement, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.26 "Franchisors" shall mean each of the Persons party with Borrower to
any franchise agreement, contract packing agreement, distributor agreement,
license agreement (other than license agreements relating to the use of
patents, trademarks, copyrights, or other intellectual property or applications
therefor), contract manufacturing agreement, fountain syrup agreement, bottling
agreement, license and bottling agreement, production and marketing agreement
and all other similar agreements.
1.27 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board which are applicable to the
circumstances as of the date of determination consistently applied, except
that, for purposes of Sections 9.15 and 9.17 hereof, GAAP shall be determined
on the basis of such principles in effect on the date hereof and consistent
with those used in the preparation of the audited financial statements
delivered to Lender prior to the date hereof.
1.28 "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including hydrocarbons (including naturally
occurring or man-made petroleum and hydrocarbons), flammable explosives,
asbestos, urea formaldehyde insulation, radioactive materials, biological
substances, polychlorinated biphenyls, pesticides, herbicides and any other
kind and/or type of pollutants or contaminants (including materials which
include hazardous constituents), sewage, sludge, industrial slag, solvents
and/or any other similar substances, materials, or wastes and including any
other substances, materials or wastes that are or become regulated under any
Environmental Law (including any that are or become classified as hazardous or
toxic under any Environmental Law).
1.29 "Indenture" shall mean that certain Indenture, dated as of August
15, 1993 among Borrower, Browne Bottling Company, and Bank of Oklahoma,
National Association, as amended, modified or supplemented from time to time.
1.30 "Information Certificate" shall mean the Information Certificate of
Borrower constituting Exhibit A hereto containing material information with
respect to Borrower, its business and assets provided by or on behalf of
Borrower to Lender in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.
1.31 "Interest Period" shall mean for any Eurodollar Rate Loan, a period
of approximately one (1), two (2), or three (3) months duration as Borrower may
elect, the exact duration to be determined in accordance with the customary
practice in the applicable Eurodollar Rate market; provided, that, Borrower may
not elect an Interest Period which will end after the last day of the then-
current term of this Agreement.
1.32 "Interest Rate" shall mean, as to Prime Rate Loans, a rate of one-
half of one (0.5%) percent per annum in excess of the Prime Rate and, as to
Eurodollar Rate Loans, a rate of three (3.0%) percent per annum in excess of
the Adjusted Eurodollar Rate (based on the Eurodollar Rate applicable for the
Interest Period selected by Borrower as in effect three (3) Business Days after
the date of receipt by Lender of the request of Borrower for such Eurodollar
Rate Loans in accordance with the terms hereof, whether such rate is higher or
lower than any rate previously quoted to Borrower); provided, that, in either
case, as long as no Event of Default has occurred and is continuing, the
Interest Rate shall be reduced by one-quarter of one (0.25%) percent per annum
effective the first Business Day of the month following receipt of, and so long
as, Borrower's audited consolidated financial statements as provided in
accordance with Section 9.6(a) hereof reflect that Borrower's Consolidated Net
Income for the previous twelve (12) month period is greater than zero (0);
provided further, that, the Interest Rate shall mean the rate of two and one-
half (2.5%) percent per annum in excess of the Prime Rate as to Prime Rate
Loans and the rate of five (5.0%) percent per annum in excess of the Adjusted
Eurodollar Rate as to Eurodollar Rate Loans, at Lender's option, without
notice, (a) for the period from and after the date of the occurrence of an
Event of Default for so long as such Event of Default is continuing as
determined by Lender, and (b) on the Revolving Loans at any time outstanding in
excess of the amounts available to Borrower under Section 2 (whether or not
such excess(es), arise or are made with or without Lender's knowledge or
consent and whether made before or after an Event of Default).
1.33 "Inventory" shall mean all of Borrower's now owned and hereafter
existing or acquired raw materials, work in process, finished goods, packaging
materials, pallets and shells for such finished goods and all other inventory
of whatsoever kind or nature, wherever located.
1.34 "Letter of Credit Accommodations" shall mean the letters of credit,
merchandise purchase guarantees or other guarantees which are from time to time
either (a) issued or opened by Lender for the account of Borrower or (b) with
respect to which Lender has agreed to indemnify the issuer or guaranteed to the
issuer the performance by Borrower of its obligations to such issuer.
1.35 "Loans" shall mean the Revolving Loans.
1.36 "Maximum Credit" shall mean the amount of $20,000,000; provided,
that, Borrower may, from time to time, reduce this amount by written notice,
which shall be effective three (3) Business Days after receipt, to Lender in
any increment of $1,000,000 or any multiple thereof as long as after giving
effect thereto, there shall be no Event of Default, the Maximum Credit shall
not be less than $5,000,000 and the Obligations outstanding at that time do not
exceed the Maximum Credit as so revised.
1.37 "Mortgages" shall mean, the Wisconsin Mortgage and Assignment of
Rents, dated of even date herewith, by Borrower in favor of Lender with respect
to the Real Property and related assets of Borrower located at 2110 Harrison
Street, Oshkosh, Wisconsin, as the same now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.
1.38 "Net Amount of Eligible Accounts" shall mean the gross amount of
Eligible Accounts less (a) sales, excise or similar taxes included in the
amount thereof and (b) returns, discounts, claims, credits and allowances of
any nature at any time issued, owing, granted, outstanding, available or
claimed with respect thereto.
1.39 "Obligations" shall mean any and all Revolving Loans, Letter of
Credit Accommodations and all other obligations, liabilities and indebtedness
of every kind, nature and description owing by Borrower to Lender and/or its
Affiliates, including principal, interest, charges, fees, costs and expenses,
however evidenced, whether as principal, surety, endorser, guarantor or
otherwise, whether arising under this Agreement or otherwise, whether now
existing or hereafter arising, whether arising before, during or after the
initial or any renewal term of this Agreement or after the commencement of any
case with respect to Borrower under the United States Bankruptcy Code or any
similar statute (including the payment of interest and other amounts which
would accrue and become due but for the commencement of such case, whether or
not such amounts are allowed or allowable in whole or in part in such case),
whether direct or indirect, absolute or contingent, joint or several, due or
not due, primary or secondary, liquidated or unliquidated, secured or
unsecured, and however acquired by Lender.
1.40 "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner
of any property which is security for the Obligations, other than Borrower.
1.41 "Payment Account" shall have the meaning set forth in Section 6.3
hereof.
1.42 "Permitted Tax Payment" shall mean, with respect to any taxable year
of Borrower in which it joins in filing a consolidated federal income tax
return with its parent company, a payment by Borrower to its parent in an
amount not in excess of the lesser of (a) the hypothetical consolidated federal
income tax liability (if any) of the affiliated group (within the meaning of
Section 1504 of the Internal Revenue Code) of which Borrower would be the
common parent (the "Borrower Group") if it were not a member of another
affiliated group for that or any other taxable year and (b) the actual tax
liability (if any) of the affiliated group of which Borrower is actually a
member (the "Parent Group") for such year properly allocable to the Borrower
Group; provided, however, that such payment shall be made by Borrower no
earlier than the date on which the Parent Group is required to make federal
income tax payments for such year to the Internal Revenue Service. In the
event that Borrower's parent and any member of the Borrower Group join in
filing any combined or consolidated (or similar) foreign, state or local income
or franchise tax returns, then "Permitted Tax Payment" shall include payments
with respect to such foreign, state or local income or franchise taxes
determined in a manner as similar as possible to that provided in the preceding
sentence for federal income taxes.
1.43 "Person" or "person" shall mean any individual, sole proprietorship,
partnership, corporation (including any corporation which elects subchapter S
status under the Internal Revenue Code of 1986, as amended), limited liability
company, limited liability partnership, business trust, unincorporated
association, joint stock corporation, trust, joint venture or other entity or
any government or any agency or instrumentality or political subdivision
thereof.
1.44 "Prime Rate" shall mean the rate from time to time publicly
announced by CoreStates Bank, N.A., or its successors, at its office in
Philadelphia, Pennsylvania, as its prime rate, whether or not such announced
rate is the best rate available at such bank.
1.45 "Prime Rate Loans" shall mean any Loans or portion thereof on which
interest is payable based on the Prime Rate in accordance with the terms
thereof.
1.46 "Real Property" shall mean all now owned and hereafter acquired real
property of Borrower located at 2110 Harrison Street, Oshkosh, Wisconsin,
including leasehold interests, together with all buildings, structures, and
other improvements located thereon and all licenses, easements and
appurtenances relating thereto, wherever located, including the real property
and related assets more particularly described in and subject to the Mortgages.
1.47 "Records" shall mean all of Borrower's present and future books of
account of every kind or nature, purchase and sale agreements, invoices, ledger
cards, bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any
account debtor, together with the tapes, disks, diskettes and other data and
software storage media and devices, file cabinets or containers in or on which
the foregoing are stored, wherever the foregoing Records are maintained
(including any rights of Borrower with respect to the foregoing maintained with
or by any other person).
1.48 "Reference Bank" shall mean CoreStates Bank, N.A., or such other
bank as Lender may from time to time designate.
1.49 "Renewal Date" shall have the meaning provided in Section 12.1(a)
hereof.
1.50 "Revolving Loans" shall mean the loans now or hereafter made by
Lender to or for the benefit of Borrower on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 2.1 hereof.
1.51 "Seasonal Advance Rate" shall have the meaning provided in Section
2.1(a)(ii) hereof.
1.52 "Seasonal Period" shall have the meaning provided in Section
2.1(a)(ii) hereof.
1.53 "Senior Bond Repurchases" shall mean the purchase by All-American
Bottling Financial Corporation of any of the Senior Bonds at a price not to
exceed the lesser of market value thereof at the time of purchase or one
hundred one (101%) percent of the face value of such Senior Bonds; provided,
that at the time of such purchase, no Event of Default has occurred and is
continuing, Borrower shall have given Lender written notice of such purchase at
the time thereof and the Excess Availability after any such purchase exceeds
(a) $1,000,000, and (b) during any period in which the Seasonal Advance Rate is
in effect, $2,000,000.
1.54 "Senior Bonds" shall mean those certain 13% Senior Secured Notes due
2001 issued pursuant to the Indenture.
1.55 "Subsidiary" shall mean as to any Person, a corporation, partnership
or other entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such corporation,
partnership or other entity are at the time owned, or the management of which
is otherwise controlled, directly or indirectly through one or more
intermediaries, or both, by such Person. Unless otherwise qualified, all
references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer
to a Subsidiary or Subsidiaries of Borrower.
1.56 "Value" shall mean, as determined by Lender in good faith, with
respect to Inventory, the lower of (a) cost computed on a first-in-first-out
basis in accordance with GAAP or (b) market value.
1.57 "Working Capital" shall mean as to any Person, at any time, in
accordance with GAAP, on a consolidated basis for such Person and its
Subsidiaries (if any), the amount equal to: current assets (excluding cash)
less current liabilities (excluding current portion of long-term debt, non-
compete and deferred compensation agreements associated with acquisitions);
provided, that, as to Borrower, for purposes of Section 9.19 hereof, the
liabilities of Borrower and its Subsidiaries to Lender under this Agreement
shall not be considered current liabilities (whether or not classified as
current liabilities in accordance with GAAP).
SECTION 2. CREDIT FACILITIES
2.1 Revolving Loans.
(a) Subject to and upon the terms and conditions contained herein,
Lender agrees to make Revolving Loans to Borrower from time to time in amounts
requested by Borrower up to the amount equal to the sum of:
(i) eighty-five (85%) percent of the Net Amount of Eligible
Accounts, plus
(ii) the lesser of: (A) the sum of sixty-five (65%) percent of
the Value of Eligible Inventory; provided, that the availability of
Revolving Loans attributable solely to pallets shall not exceed $350,000
and the availability of Revolving Loans attributable solely to shells
shall not exceed $1,000,000; provided further, that if no Event of
Default has occurred and is continuing and if the Comparison Income
Statement reflects actual pre-tax income (excluding extraordinary or one-
time gains and non-cash extraordinary losses from the write-down/write-
off of fixed assets or intangibles) in excess of seventy-five (75%)
percent of pre-tax income shown on the Budget Income Statement for the
preceding nine (9) months ending September 30, seventy-five (75%) percent
(the "Seasonal Advance Rate") shall be used in place of sixty-five (65%)
percent in the calculations provided for in this Section 2.1(a)(ii)(A)
for the period beginning on the later of November 1 or fifteen (15) days
after Lender's receipt of the Comparison Income Statement and ending on
the next March 31 (the "Seasonal Period") (provided that in no event
shall the use of seventy-five (75%) percent as provided in this section
result in an increase in the amount of Revolving Loans available of more
than $1,000,000), or (B) $10,000,000, less
(iii) any Availability Reserves.
(b) Lender may, in its discretion, from time to time, upon not less
than five (5) days prior notice to Borrower, (i) reduce the lending formula
with respect to Eligible Accounts to the extent that Lender determines in good
faith that: (A) the dilution with respect to the Accounts for any period
(based on the ratio of (1) the aggregate amount of reductions in Accounts other
than as a result of payments in cash to (2) the aggregate amount of total sales
for the ninety (90) day period then ended) has increased in any material
respect over the prior month's dilution, or (B) the general creditworthiness of
account debtors has declined or (ii) reduce the lending formula(s) with respect
to Eligible Inventory to the extent that Lender determines that: (A) the
number of days of the turnover of the Inventory for any period has increased in
any material respect or (B) the liquidation value of the Eligible Inventory, or
any category thereof, has decreased in any material respect, or (C) the salable
value (for sales in the ordinary course of Borrower's business) of the
Inventory has deteriorated in any material respect. In determining whether to
reduce the lending formula(s), Lender may consider events, conditions,
contingencies or risks which are also considered in determining Eligible
Accounts, Eligible Inventory or in establishing Availability Reserves.
(c) Except in Lender's discretion, the aggregate amount of the Loans
and the Letter of Credit Accommodations outstanding at any time shall not
exceed the Maximum Credit. In the event that the outstanding amount of any
component of the Loans, or the aggregate amount of the outstanding Loans and
Letter of Credit Accommodations, exceed the amounts available under the lending
formulas, the sublimits for Letter of Credit Accommodations set forth in
Section 2.2(d) or the Maximum Credit, as applicable, such event shall not
limit, waive or otherwise affect any rights of Lender in that circumstance or
on any future occasions and Borrower shall, upon demand by Lender, which may be
made at any time or from time to time, immediately repay to Lender the entire
amount of any such excess(es) for which payment is demanded.
(d) For purposes only of applying the sublimit on Revolving Loans
based on Eligible Inventory pursuant to Section 2.1(a)(ii)(B), Lender may treat
the then undrawn amounts of outstanding Letter of Credit Accommodations for the
purpose of purchasing Eligible Inventory as Revolving Loans to the extent
Lender is in effect basing the issuance of the Letter of Credit Accommodations
on the Value of the Eligible Inventory being purchased with such Letter of
Credit Accommodations. In determining the actual amounts of such Letter of
Credit Accommodations to be so treated for purposes of the sublimit, the
outstanding Revolving Loans and Availability Reserves shall be attributed first
to any components of the lending formulas in Section 2.1(a) that are not
subject to such sublimit, before being attributed to the components of the
lending formulas subject to such sublimit.
2.2 Letter of Credit Accommodations.
(a) Subject to and upon the terms and conditions contained herein, at
the request of Borrower, Lender agrees to provide or arrange for Letter of
Credit Accommodations for the account of Borrower containing terms and
conditions acceptable to Lender and the issuer thereof. Any payments made by
Lender to any issuer thereof and/or related parties in connection with the
Letter of Credit Accommodations shall constitute additional Revolving Loans to
Borrower pursuant to this Section 2.
(b) In addition to any charges, fees or expenses charged by any bank
or issuer in connection with the Letter of Credit Accommodations, Borrower
shall pay to Lender a letter of credit fee at a rate equal to one and one-half
(1.5%) percent per annum on the daily outstanding balance of the Letter of
Credit Accommodations for the immediately preceding month (or part thereof),
payable in arrears as of the first day of each succeeding month, except that
Borrower shall pay to Lender such letter of credit fee, at Lender's option,
without notice, at a rate equal to three and one-half (3.5%) percent per annum
on such daily outstanding balance for: (i) the period from and after the date
of termination or non-renewal hereof until Lender has received full and final
payment of all Obligations (notwithstanding entry of a judgment against
Borrower) and (ii) the period from and after the date of the occurrence of an
Event of Default for so long as such Event of Default is continuing as
determined by Lender. Such letter of credit fee shall be calculated on the
basis of a three hundred sixty (360) day year and actual days elapsed and the
obligation of Borrower to pay such fee shall survive the termination or non-
renewal of this Agreement.
(c) No Letter of Credit Accommodations shall be available unless on
the date of the proposed issuance of any Letter of Credit Accommodations, the
Revolving Loans available to Borrower (subject to the Maximum Credit and any
Availability Reserves) are equal to or greater than: (i) if the proposed
Letter of Credit Accommodation is for the purpose of purchasing Eligible
Inventory, the sum of (A) the percentage equal to one hundred (100%) percent
minus the then applicable percentage set forth in Section 2.1(a)(ii)(A) above
of the Value of such Eligible Inventory, plus (B) freight, taxes, duty and
other amounts which Lender estimates must be paid in connection with such
Inventory upon arrival and for delivery to one of Borrower's locations for
Eligible Inventory within the United States of America and (ii) if the proposed
Letter of Credit Accommodation is for any other purpose, an amount equal to one
hundred (100%) percent of the face amount thereof and all other commitments and
obligations made or incurred by Lender with respect thereto. Effective on the
issuance of each Letter of Credit Accommodation, an Availability Reserve shall
be established in the applicable amount set forth in Section 2.2(c)(i) or
Section 2.2(c)(ii).
(d) Except in Lender's discretion, the amount of all outstanding
Letter of Credit Accommodations and all other commitments and obligations made
or incurred by Lender in connection therewith shall not at any time exceed
$5,000,000. At any time an Event of Default exists or has occurred and is
continuing, upon Lender's request, Borrower will either furnish cash collateral
to secure the reimbursement obligations to the issuer in connection with any
Letter of Credit Accommodations or furnish cash collateral to Lender for the
Letter of Credit Accommodations, and in either case, the Revolving Loans
otherwise available to Borrower shall not be reduced as provided in Section
2.2(c) to the extent of such cash collateral.
(e) Borrower shall indemnify and hold Lender harmless from and
against any and all losses, claims, damages, liabilities, costs and expenses
which Lender may suffer or incur in connection with any Letter of Credit
Accommodations and any documents, drafts or acceptances relating thereto,
including any losses, claims, damages, liabilities, costs and expenses due to
any action taken by any issuer or correspondent with respect to any Letter of
Credit Accommodation. Borrower assumes all risks with respect to the acts or
omissions of the drawer under or beneficiary of any Letter of Credit
Accommodation and for such purposes the drawer or beneficiary shall be deemed
Borrower's agent. Borrower assumes all risks for, and agrees to pay, all
foreign, Federal, State and local taxes, duties and levies relating to any
goods subject to any Letter of Credit Accommodations or any documents, drafts
or acceptances thereunder. Borrower hereby releases and holds Lender harmless
from and against any acts, waivers, errors, delays or omissions, whether caused
by Borrower, by any issuer or correspondent or otherwise with respect to or
relating to any Letter of Credit Accommodation. The provisions of this Section
2.2(e) shall survive the payment of Obligations and the termination or non-
renewal of this Agreement.
(f) Nothing contained herein shall be deemed or construed to grant
Borrower any right or authority to pledge the credit of Lender in any manner.
Lender shall have no liability of any kind with respect to any Letter of Credit
Accommodation provided by an issuer other than Lender unless Lender has duly
executed and delivered to such issuer the application or a guarantee or
indemnification in writing with respect to such Letter of Credit Accommodation.
Borrower shall be bound by any interpretation made in good faith by Lender, or
any other issuer or correspondent under or in connection with any Letter of
Credit Accommodation or any documents, drafts or acceptances thereunder,
notwithstanding that such interpretation may be inconsistent with any
instructions of Borrower. Lender shall have the sole and exclusive right and
authority to, and Borrower shall not: (i) at any time an Event of Default
exists or has occurred and is continuing, (A) approve or resolve any questions
of non-compliance of documents, (B) give any instructions as to acceptance or
rejection of any documents or goods or (C) execute any and all applications for
steamship or airway guarantees, indemnities or delivery orders, and (ii) at all
times, (A) grant any extensions of the maturity of, time of payment for, or
time of presentation of, any drafts, acceptances, or documents, and (B) agree
to any amendments, renewals, extensions, modifications, changes or
cancellations of any of the terms or conditions of any of the applications,
Letter of Credit Accommodations, or documents, drafts or acceptances thereunder
or any letters of credit included in the Collateral. Lender may take such
actions either in its own name or in Borrower's name.
(g) Any rights, remedies, duties or obligations granted or undertaken
by Borrower to any issuer or correspondent in any application for any Letter of
Credit Accommodation, or any other agreement in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed
to have been granted or undertaken by Borrower to Lender. Any duties or
obligations undertaken by Lender to any issuer or correspondent in any
application for any Letter of Credit Accommodation, or any other agreement by
Lender in favor of any issuer or correspondent relating to any Letter of Credit
Accommodation, shall be deemed to have been undertaken by Borrower to Lender
and to apply in all respects to Borrower.
2.3 Availability Reserves. All Revolving Loans otherwise available to
Borrower pursuant to the lending formulas and subject to the Maximum Credit and
other applicable limits hereunder shall be subject to Lender's continuing right
to establish and revise Availability Reserves.
SECTION 3. INTEREST AND FEES
3.1 Interest.
(a) Borrower shall pay to Lender interest on the outstanding
principal amount of the non-contingent Obligations at the Interest Rate
applicable to Prime Rate Loans. All interest accruing hereunder on and after
the date of any Event of Default or termination or non-renewal hereof shall be
payable on demand.
(b) Borrower may from time to time request that Prime Rate Loans be
converted to Eurodollar Rate Loans or that any existing Eurodollar Rate Loans
continue for an additional Interest Period. Such request from Borrower shall
specify the amount of the Prime Rate Loans which will constitute Eurodollar
Rate Loans (subject to the limits set forth below) and the Interest Period to
be applicable to such Eurodollar Rate Loans. Subject to the terms and
conditions contained herein, three (3) Business Days after receipt by Lender of
such a request from Borrower, such Prime Rate Loans shall be converted to
Eurodollar Rate Loans or such Eurodollar Rate Loans shall continue, as the case
may be, provided, that, (i) no Event of Default, or event which with notice or
passage of time or both would constitute an Event of Default exists or has
occurred and is continuing, (ii) no party hereto shall have sent any notice of
termination or non-renewal of this Agreement, (iii) Borrower shall have
complied with such customary procedures as are established by Lender and
specified by Lender to Borrower from time to time for requests by Borrower for
Eurodollar Rate Loans, (iv) no more than four (4) Interest Periods may be in
effect at any one time, (v) the aggregate amount of the Eurodollar Rate Loans
must be in an amount not less than $4,000,000 or an integral multiple of
$1,000,000 in excess thereof, (vi) the maximum amount of the Eurodollar Rate
Loans at any time requested by Borrower shall not exceed the amount equal to
eighty (80%) percent of the lowest principal amount of the Revolving Loans
which it is anticipated will be outstanding during the applicable Interest
Period, in each case as determined by Lender (but with no obligation of Lender
to make such Revolving Loans) and (vii) Lender shall have determined that the
Interest Period or Adjusted Eurodollar Rate is available to Lender through the
Reference Bank and can be readily determined as of the date of the request for
such Eurodollar Rate Loan by Borrower. Any request by Borrower to convert
Prime Rate Loans to Eurodollar Rate Loans or to continue any existing
Eurodollar Rate Loans shall be irrevocable. Notwithstanding anything to the
contrary contained herein, Lender and Reference Bank shall not be required to
purchase United States Dollar deposits in the London interbank market or other
applicable Eurodollar Rate market to fund any Eurodollar Rate Loans, but the
provisions hereof shall be deemed to apply as if Lender and Reference Bank had
purchased such deposits to fund the Eurodollar Rate Loans.
(c) Any Eurodollar Rate Loans shall automatically convert to Prime
Rate Loans upon the last day of the applicable Interest Period, unless Lender
has received and approved a request to continue such Eurodollar Rate Loan at
least three (3) Business Days prior to such last day in accordance with the
terms hereof. Any Eurodollar Rate Loans shall, at Lender's option, upon notice
by Lender to Borrower, convert to Prime Rate Loans in the event that (i) an
Event of Default or event which, with the notice or passage of time, or both,
would constitute an Event of Default, shall exist, (ii) this Agreement shall
terminate or not be renewed, or (iii) the aggregate principal amount of the
Prime Rate Loans which have previously been converted to Eurodollar Rate Loans
or existing Eurodollar Rate Loans continued, as the case may be, at the
beginning of an Interest Period shall at any time during such Interest Period
exceed the Revolving Loans then available to Borrower under Section 2 hereof.
Borrower shall pay to Lender, upon demand by Lender (or Lender may, at its
option, charge any loan account of Borrower) any amounts required to compensate
Lender, the Reference Bank or any participant with Lender for any loss
(including loss of anticipated profits), cost or expense incurred by such
person, as a result of the conversion of Eurodollar Rate Loans to Prime Rate
Loans pursuant to any of the foregoing.
(d) Interest shall be payable by Borrower to Lender monthly in
arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed. The interest rate on non-contingent Obligations (other than
Eurodollar Rate Loans) shall increase or decrease by an amount equal to each
increase or decrease in the Prime Rate effective on the first day of the month
after any change in such Prime Rate is announced based on the Prime Rate in
effect on the last day of the month in which any such change occurs. In no
event shall charges constituting interest payable by Borrower to Lender exceed
the maximum amount or the rate permitted under any applicable law or
regulation, and if any such part or provision of this Agreement is in
contravention of any such law or regulation, such part or provision shall be
deemed amended to conform thereto.
3.2 Closing Fee. Borrower shall pay to Lender as a closing fee the
amount of $100,000, of which $50,000 shall be payable on the date hereof and
$50,000 shall be fully earned as of the date hereof and payable on the earlier
of the first anniversary of the date hereof or the date on which this Agreement
is terminated.
3.3 Renewal Fee. Borrower shall pay to Lender a renewal fee in an amount
equal to one-tenth of one (0.1%) percent of the Maximum Credit at any time that
Lender extends the Renewal Date hereof in accordance with Section 12.1(a)
hereof, payable on the effective date of any such extension.
3.4 Servicing Fee. Borrower shall pay to Lender quarterly a servicing
fee in an amount equal to $12,500 in respect of Lender's services for each
quarter (or part thereof) while this Agreement remains in effect and for so
long thereafter as any of the Obligations are outstanding, which fee shall be
fully earned as of and payable in advance on the date hereof and on the first
day of each quarter hereafter.
3.5 Unused Line Fee. Borrower shall pay to Lender monthly an unused line
fee at a rate equal to one-quarter of one (0.25%) percent per annum (calculated
based on a three hundred sixty (360) day year) calculated upon the amount by
which $20,000,000 exceeds the average daily principal balance of the
outstanding Revolving Loans and Letter of Credit Accommodations during the
immediately preceding month (or part thereof) while this Agreement is in effect
and for so long thereafter as any of the Obligations are outstanding, which fee
shall be payable on the first day of each month in arrears.
3.6 Changes in Laws and Increased Costs of Loans.
(a) Notwithstanding anything to the contrary contained herein, all
Eurodollar Rate Loans shall, upon notice by Lender to Borrower, convert to
Prime Rate Loans in the event that (i) any change in applicable law or
regulation (or the interpretation or administration thereof) shall either (A)
make it unlawful for Lender, Reference Bank or any participant to make or
maintain Eurodollar Rate Loans or to comply with the terms hereof in connection
with the Eurodollar Rate Loans, or (B) shall result in the increase in the
costs to Lender, Reference Bank or any participant of making or maintaining any
Eurodollar Rate Loans by an amount deemed by Lender to be material, or (C)
reduce the amounts received or receivable by Lender in respect thereof, by an
amount deemed by Lender to be material or (ii) the cost to Lender, Reference
Bank or any participant of making or maintaining any Eurodollar Rate Loans
shall otherwise increase by an amount deemed by Lender to be material. Borrower
shall pay to Lender, upon demand by Lender (or Lender may, at its option,
charge any loan account of Borrower) any amounts required to compensate Lender,
the Reference Bank or any participant with Lender for any loss (including loss
of anticipated profits), cost or expense incurred by such person as a result of
the foregoing, including, without limitation, any such loss, cost or expense
incurred by reason of the liquidation or reemployment of deposits or other
funds acquired by such person to make or maintain the Eurodollar Rate Loans or
any portion thereof. A certificate of Lender setting forth the basis for the
determination of such amount necessary to compensate Lender as aforesaid shall
be delivered to Borrower and shall be conclusive, absent manifest error.
(b) If any payments or prepayments in respect of the Eurodollar Rate
Loans are received by Lender other than on the last day of the applicable
Interest Period (whether pursuant to acceleration, upon maturity or otherwise),
including any payments pursuant to the application of collections under Section
6.3 or any other payments made with the proceeds of Collateral, Borrower shall
pay to Lender upon demand by Lender (or Lender may, at its option, charge any
loan account of Borrower) any amounts required to compensate Lender, the
Reference Bank or any participant with Lender for any additional loss
(including loss of anticipated profits), cost or expense incurred by such
person as a result of such prepayment or payment, including, without
limitation, any loss, cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such person to make or
maintain such Eurodollar Rate Loans or any portion thereof.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations. Each of the following is a condition precedent to Lender making
the initial Loans and providing the initial Letter of Credit Accommodations
hereunder:
(a) Lender shall have received, in form and substance satisfactory to
Lender, all releases, terminations and such other documents as Lender may
request to evidence and effectuate the termination by the existing lender or
lenders to Borrower of their respective financing arrangements with Borrower
and the termination and release by it or them, as the case may be, of any
interest in and to any assets and properties of Borrower and each Obligor, duly
authorized, executed and delivered by it or each of them, including, but not
limited to, (i) UCC termination statements for all UCC financing statements
previously filed by it or any of them or their predecessors, as secured party
and Borrower or any Obligor, as debtor and (ii) satisfactions and discharges of
any mortgages, deeds of trust or deeds to secure debt by Borrower or any
Obligor in favor of such existing lender or lenders, in form acceptable for
recording in the appropriate government office;
(b) Lender shall have received, in form and substance satisfactory to
Lender, a valid and effective title insurance policy issued by a company and
agent acceptable to Lender (i) insuring the priority, amount and sufficiency of
the Mortgages, (ii) insuring against matters that would be disclosed by surveys
and (iii) containing any legally available endorsements, assurances or
affirmative coverage requested by Lender for protection of its interests;
(c) Lender shall have received a Borrowing Base Certificate setting
forth the Loans available to Borrower as of the date hereof as completed in a
manner satisfactory to Lender and duly authorized, executed and delivered on
behalf of Borrower;
(d) the Excess Availability as determined by Lender, as of the date
hereof, shall be not less than $2,000,000 after giving effect to the initial
Loans made or to be made and Letter of Credit Accommodations issued or to be
issued in connection with the initial transactions hereunder;
(e) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has valid perfected and first priority
security interests in and liens upon the Collateral and any other property
which is intended to be security for the Obligations or the liability of any
Obligor in respect thereof, subject only to the security interests and liens
permitted herein or in the other Financing Agreements;
(f) all requisite corporate action and proceedings in connection with
this Agreement and the other Financing Agreements shall be satisfactory in form
and substance to Lender, and Lender shall have received all information and
copies of all documents, including records of requisite corporate action and
proceedings which Lender may have requested in connection therewith, such
documents where requested by Lender or its counsel to be certified by
appropriate corporate officers or governmental authorities;
(g) no material adverse change shall have occurred in the assets,
business or prospects of Borrower since the date of Lender's latest field
examination and no change or event shall have occurred which would impair the
ability of Borrower or any Obligor to perform its obligations hereunder or
under any of the other Financing Agreements to which it is a party or of Lender
to enforce the Obligations or realize upon the Collateral;
(h) Lender shall have completed a field review of the Records and
such other information with respect to the Collateral as Lender may require to
determine the amount of Revolving Loans available to Borrower, the results of
which shall be satisfactory to Lender, not more than five (5) Business Days
prior to the date hereof;
(i) Lender shall have received, in form and substance satisfactory to
Lender, all consents, waivers, acknowledgments and other agreements from third
persons which Lender may deem necessary or desirable in order to permit,
protect and perfect its security interests in and liens upon the Collateral or
to effectuate the provisions or purposes of this Agreement and the other
Financing Agreements, including acknowledgements by lessors, mortgagees and
warehousemen of Lender's security interests in the Collateral, waivers by such
persons of any security interests, liens or other claims by such persons to the
Collateral and agreements permitting Lender access to, and the right to remain
on, the premises to exercise its rights and remedies and otherwise deal with
the Collateral;
(j) Lender shall have received evidence of insurance and loss payee
endorsements required hereunder and under the other Financing Agreements, in
form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee;
(k) Lender shall have received, in form and substance satisfactory to
Lender, such opinion letters of counsel to Borrower with respect to the
Financing Agreements and such other matters as Lender may request; and
(l) the other Financing Agreements and all instruments and documents
hereunder and thereunder shall have been duly executed and delivered to Lender,
in form and substance satisfactory to Lender.
4.2 Conditions Precedent to All Loans and Letter of Credit
Accommodations. Each of the following is an additional condition precedent to
Lender making Loans and/or providing Letter of Credit Accommodations to
Borrower, including the initial Loans and Letter of Credit Accommodations and
any future Loans and Letter of Credit Accommodations:
(a) all representations and warranties contained herein and in the
other Financing Agreements shall be true and correct in all material respects
with the same effect as though such representations and warranties had been
made on and as of the date of the making of each such Loan or providing each
such Letter of Credit Accommodation and after giving effect thereto; and
(b) no Event of Default and no event or condition which, with notice
or passage of time or both, would constitute an Event of Default, shall exist
or have occurred and be continuing on and as of the date of the making of such
Loan or providing each such Letter of Credit Accommodation and after giving
effect thereto.
SECTION 5. GRANT OF SECURITY INTEREST
To secure payment and performance of all Obligations, Borrower hereby
grants to Lender a continuing security interest in, a lien upon, and a right of
set off against, and hereby assigns to Lender as security, the following
property and interests in property of Borrower, whether now owned or hereafter
acquired or existing, and wherever located (collectively, the "Collateral"):
5.1 Accounts;
5.2 all present and future contract rights, general intangibles
(including insurance refunds, tax and duty refunds, registered and unregistered
patents, trademarks, service marks, copyrights, trade names, applications for
the foregoing, trade secrets, goodwill, processes, drawings, blueprints,
customer lists, licenses, whether as licensor or licensee, choses in action and
other claims and existing and future leasehold interests in Equipment and Real
Property), chattel paper, documents, instruments, letters of credit, bankers'
acceptances and guarantees;
5.3 all present and future monies, securities, credit balances,
deposits, deposit accounts and other property of Borrower now or hereafter held
or received by or in transit to Lender or its Affiliates or at any other
depository or other institution from or for the account of Borrower, whether
for safekeeping, pledge, custody, transmission, collection or otherwise, and
all present and future liens, security interests, rights, remedies, title and
interest in, to and in respect of Accounts and other Collateral, including (a)
rights and remedies under or relating to guarantees, contracts of suretyship,
letters of credit and credit and other insurance related to the Collateral, (b)
rights of stoppage in transit, replevin, repossession, reclamation and other
rights and remedies of an unpaid vendor, lienor or secured party, (c) goods
described in invoices, documents, contracts or instruments with respect to, or
otherwise representing or evidencing, Accounts or other Collateral, including
returned, repossessed and reclaimed goods, and (d) deposits by and property of
account debtors or other persons securing the obligations of account debtors;
5.4 Inventory;
5.5 Equipment;
5.6 Real Property;
5.7 Records; and
5.8 all products and proceeds of the foregoing, in any form, including
insurance proceeds and any claims against third parties for loss or damage to
or destruction of any or all of the foregoing;
provided, that in no event shall the Collateral include Excluded Contract
Rights.
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrower's Loan Account. Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all
payments made by or on behalf of Borrower and (c) all other appropriate debits
and credits as provided in this Agreement, including fees, charges, costs,
expenses and interest. All entries in the loan account(s) shall be made in
accordance with Lender's customary practices as in effect from time to time.
6.2 Statements. Lender shall render to Borrower each month a statement
setting forth the balance in Borrower's loan account(s) maintained by Lender
for Borrower pursuant to the provisions of this Agreement, including principal,
interest, fees, costs and expenses. Each such statement shall be subject to
subsequent adjustment by Lender but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrower and conclusively binding
upon Borrower as an account stated except to the extent that Lender receives a
written notice from Borrower of any specific exceptions of Borrower thereto
within thirty (30) days after the date such statement has been mailed by
Lender. Until such time as Lender shall have rendered to Borrower a written
statement as provided above, the balance in Borrower's loan account(s) shall be
presumptive evidence of the amounts due and owing to Lender by Borrower.
6.3 Collection of Accounts.
(a) Borrower shall establish and maintain, at its expense, blocked
accounts ("Blocked Accounts"), as Lender may specify, with such banks as are
acceptable to Lender into which Borrower shall promptly deposit and direct its
agents, employees and independent contractors to directly deposit all payments
received with respect to Accounts and all payments constituting proceeds of
Inventory or other Collateral in the identical form in which such payments are
made, whether by cash, check or other manner. Borrower shall also cause all
amounts received with respect to the sale or other disposition of any of
Borrower's assets, including any proceeds of Excluded Contract Rights, to be
paid or deposited directly to the Blocked Accounts. The banks at which the
Blocked Accounts are established shall enter into an agreement, in form and
substance satisfactory to Lender, providing that all items received or
deposited in the Blocked Accounts are the property of Lender, that the
depository bank has no lien upon, or right to setoff against, the Blocked
Accounts, the items received for deposit therein, or the funds from time to
time on deposit therein and that the depository bank will wire, or otherwise
transfer, in immediately available funds, on a daily basis, all funds received
or deposited into the Blocked Accounts to such bank account of Lender as Lender
may from time to time designate for such purpose ("Payment Account"). Borrower
agrees that all payments made to such Blocked Accounts or other funds received
and collected by Lender, whether on the Accounts or as proceeds of Inventory or
other Collateral or otherwise shall be the property of Lender.
(b) For purposes of calculating the amount of the Loans available to
Borrower, such payments will be applied (conditional upon final collection) to
the Obligations on the Business Day of receipt by Lender of immediately
available funds in the Payment Account provided such payments and notice
thereof are received in accordance with Lender's usual and customary practices
as in effect from time to time and within sufficient time to credit Borrower's
loan account on such day, and if not, then on the next Business Day. For the
purposes of calculating interest on the Obligations, such payments or other
funds received will be applied (conditional upon final collection) to the
Obligations on the date of receipt of immediately available funds by Lender in
the Payment Account provided such payments or other funds and notice thereof
are received in accordance with Lender's usual and customary practices as in
effect from time to time and within sufficient time to credit Borrower's loan
account on such day, and if not, then on the next Business Day.
(c) Borrower and all of its Affiliates, Subsidiaries, shareholders,
directors, employees or agents shall, acting as trustee for Lender, receive, as
the property of Lender, any monies, checks, notes, drafts or any other payment
relating to and/or proceeds of Accounts or other Collateral which come into
their possession or under their control and immediately upon receipt thereof,
shall deposit or cause the same to be deposited in the Blocked Accounts, or
remit the same or cause the same to be remitted, in kind, to Lender. In no
event shall the same be commingled with Borrower's own funds. Borrower agrees
to reimburse Lender on demand for any amounts owed or paid to any bank at which
a Blocked Account is established or any other bank or person involved in the
transfer of funds to or from the Blocked Accounts arising out of Lender's
payments to or indemnification of such bank or person. The obligation of
Borrower to reimburse Lender for such amounts pursuant to this Section 6.3
shall survive the termination or non-renewal of this Agreement.
6.4 Payments. All Obligations shall be payable to the Payment Account as
provided in Section 6.3 or such other place as Lender may designate from time
to time. Lender may apply payments received or collected from Borrower or for
the account of Borrower (including the monetary proceeds of collections or of
realization upon any Collateral) to such of the Obligations, whether or not
then due, in such order and manner as Lender determines. At Lender's option,
all principal, interest, fees, costs, expenses and other charges provided for
in this Agreement or the other Financing Agreements may be charged directly to
the loan account(s) of Borrower. Borrower shall make all payments to Lender on
the Obligations free and clear of, and without deduction or withholding for or
on account of, any setoff, counterclaim, defense, duties, taxes, levies,
imposts, fees, deductions, withholding, restrictions or conditions of any kind.
If after receipt of any payment of, or proceeds of Collateral applied to the
payment of, any of the Obligations, Lender is required to surrender or return
such payment or proceeds to any Person for any reason, then the Obligations
intended to be satisfied by such payment or proceeds shall be reinstated and
continue and this Agreement shall continue in full force and effect as if such
payment or proceeds had not been received by Lender. Borrower shall be liable
to pay to Lender, and does hereby indemnify and hold Lender harmless for the
amount of any payments or proceeds surrendered or returned. This Section 6.4
shall remain effective notwithstanding any contrary action which may be taken
by Lender in reliance upon such payment or proceeds. This Section 6.4 shall
survive the payment of the Obligations and the termination or non-renewal of
this Agreement.
6.5 Authorization to Make Loans. Lender is authorized to make the Loans
and provide the Letter of Credit Accommodations based upon telephonic or other
instructions received from anyone purporting to be an officer of Borrower or
other authorized person or, at the discretion of Lender, if such Loans are
necessary to satisfy any Obligations. All requests for Loans or Letter of
Credit Accommodations hereunder shall specify the date on which the requested
advance is to be made or Letter of Credit Accommodations established (which day
shall be a Business Day) and the amount of the requested Loan. Requests
received after 11:30 a.m. Chicago time on any day shall be deemed to have been
made as of the opening of business on the immediately following Business Day.
All Loans and Letter of Credit Accommodations under this Agreement shall be
conclusively presumed to have been made to, and at the request of and for the
benefit of, Borrower when deposited to the credit of Borrower or otherwise
disbursed or established in accordance with the instructions of Borrower or in
accordance with the terms and conditions of this Agreement.
6.6 Use of Proceeds. Borrower shall use the initial proceeds of the
Loans provided by Lender to Borrower hereunder only for: (a) payments to each
of the persons listed in the disbursement direction letter furnished by
Borrower to Lender on or about the date hereof and (b) costs, expenses and fees
in connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Financing Agreements. All other Loans made or Letter
of Credit Accommodations provided by Lender to Borrower pursuant to the
provisions hereof shall be used by Borrower only for general operating, working
capital and other proper corporate purposes of Borrower not otherwise
prohibited by the terms hereof. None of the proceeds will be used, directly or
indirectly, for the purpose of purchasing or carrying any margin security or
for the purposes of reducing or retiring any indebtedness which was originally
incurred to purchase or carry any margin security or for any other purpose
which might cause any of the Loans to be considered a "purpose credit" within
the meaning of Regulation G of the Board of Governors of the Federal Reserve
System, as amended.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting.
(a) Borrower shall provide Lender with the following documents in a form
satisfactory to Lender:
(i) on a weekly basis (by 3:00 p.m. Chicago time on the second
Business Day of each week) a Borrowing Base Certificate with attachments, in
the form of Exhibit B attached hereto, setting forth Borrower's calculation of
the Revolving Loans and Letter of Credit Accommodations available to Borrower
pursuant to the terms and conditions contained herein as of the last Business
Day of the immediately preceding week as to (A) the Accounts and (B) Inventory
in total cases, duly completed and executed by the chief financial officer or
other appropriate financial officer acceptable to Lender, together with all
schedules required by Lender; provided, that, without limiting any other rights
of Lender, upon Lender's request, Borrower shall provide Lender on a daily
basis with a Borrowing Base Certificate with attachments, in the form of
Exhibit B (including total net sales, updated accounts receivable aging totals,
agings by invoice or customer and Inventory in case totals by location) in the
event that at any time either: (1) an Event of Default or event which with
notice or passage of time or both would constitute an Event of Default, shall
exist or have occurred, or (2) Borrower shall have failed to deliver any
Borrowing Base Certificate in accordance with the terms hereof, or (3) upon
Lender's good faith belief, any information contained in any Borrowing Base
Certificate is incomplete, inaccurate or misleading, or (4) Excess Availability
shall be less than $1,000,000 or five (5%) of the Maximum Credit;
(ii) on a monthly basis (within fifteen (15) Business Days after the
last Business Day of the previous month), a Borrowing Base Certificate with
attachments, in the form of Exhibit C attached hereto, setting forth Borrower's
calculation of the Revolving Loans and Letter of Credit Accommodations
available to Borrower pursuant to the terms and conditions contained herein as
of the last Business Day of the immediately preceding month as to (A) the
Accounts and (B) Inventory in total dollars by location, duly completed and
executed by the chief financial officer or other appropriate financial officer
acceptable to Lender, together with all schedules required by Lender, and on a
monthly basis (within ten (10) days after the last Business Day of the previous
month) accounts receivable agings by customer and location;
(iii) on a monthly basis or more frequently as Lender may reasonably
request, (A) perpetual inventory reports, (B) inventory reports by category and
(C) agings of accounts payable;
(iv) upon Lender's request, (A) copies of customer invoices,
statements and credit memos, remittance advices and reports, and copies of
deposit slips and bank statements, (B) copies of shipping and delivery
documents, and (C) copies of purchase orders, invoices and delivery documents
for Inventory and Equipment acquired by Borrower;
(v) such other reports as to the Collateral as Lender shall request
from time to time, including without limitation, an aging of accounts
receivable detailed by invoice.
(b) Nothing contained in any Borrowing Base Certificate shall be deemed
to limit, impair or otherwise affect the rights of Lender contained herein and
in the event of any conflict or inconsistency between the calculation of the
Revolving Loans and Letter of Credit Accommodations available to Borrower as
set forth in any Borrowing Base Certificate and as determined by Lender, the
determination of Lender shall govern and be conclusive and binding upon
Borrower. Without limiting the foregoing, Borrower shall furnish to Lender any
information which Lender may reasonably request regarding the determination and
calculation of any of the amounts set forth in the Borrowing Base Certificate.
If any of Borrower's records or reports of the Collateral are prepared or
maintained by an accounting service, contractor, shipper or other agent,
Borrower hereby irrevocably authorizes such service, contractor, shipper or
agent to deliver such records, reports and related documents to Lender and to
follow Lender's instructions with respect to further services at any time that
an Event of Default exists or has occurred and is continuing.
7.2 Accounts Covenants.
(a) Borrower shall notify Lender promptly of: (i) any material delay
in Borrower's performance of any of its material obligations to any account
debtor or the assertion of any claims, offsets, defenses or counterclaims by
any account debtor, or any disputes with account debtors, or any settlement,
adjustment or compromise thereof, (ii) all material adverse information
relating to the financial condition of any account debtor and (iii) any event
or circumstance which, to Borrower's knowledge would cause Lender to consider
any then existing Accounts as no longer constituting Eligible Accounts. No
credit, discount, allowance or extension or agreement for any of the foregoing
shall be granted to any account debtor without Lender's consent, except in the
ordinary course of Borrower's business in accordance with practices and
policies previously disclosed in writing to Lender. So long as no Event of
Default exists or has occurred and is continuing, Borrower shall settle, adjust
or compromise any claim, offset, counterclaim or dispute with any account
debtor. At any time that an Event of Default exists or has occurred and is
continuing, Lender shall, at its option, have the exclusive right to settle,
adjust or compromise any claim, offset, counterclaim or dispute with account
debtors or grant any credits, discounts or allowances.
(b) Without limiting the obligation of Borrower to deliver any other
information to Lender, Borrower shall promptly report to Lender (i) any return
of Inventory by any one account debtor if the Inventory so returned in such
case has a value in excess of $25,000 and (ii) any recall by Borrower of any
shipment of Inventory for quality control or health reasons or due to any
reason which applies to more than one account debtor. At any time that
Inventory is returned, reclaimed or repossessed, the Account (or portion
thereof) which arose from the sale of such returned, reclaimed or repossessed
Inventory shall not be deemed an Eligible Account. In the event any account
debtor returns Inventory when an Event of Default exists or has occurred and is
continuing, Borrower shall, upon Lender's request, (i) hold the returned
Inventory in trust for Lender, (ii) segregate all returned Inventory from all
of its other property, (iii) dispose of the returned Inventory solely according
to Lender's instructions, and (iv) not issue any credits, discounts or
allowances with respect thereto without Lender's prior written consent.
(c) With respect to each Account: (i) the amounts shown on any
invoice delivered to Lender or schedule thereof delivered to Lender shall be
true and complete, (ii) no payments shall be made thereon except payments
immediately delivered to Lender pursuant to the terms of this Agreement, (iii)
no credit, discount, allowance or extension or agreement for any of the
foregoing shall be granted to any account debtor except as reported to Lender
in accordance with this Agreement and except for credits, discounts, allowances
or extensions made or given in the ordinary course of Borrower's business in
accordance with practices and policies previously disclosed to Lender, (iv)
there shall be no setoffs, deductions, contras, defenses, counterclaims or
disputes existing or asserted with respect thereto except as reported to Lender
in accordance with the terms of this Agreement, (v) none of the transactions
giving rise thereto will violate any applicable State or Federal laws or
regulations, all documentation relating thereto will be legally sufficient
under such laws and regulations and all such documentation will be legally
enforceable in accordance with its terms.
(d) Lender shall have the right at any time or times, in Lender's
name or in the name of a nominee of Lender, to verify the validity, amount or
any other matter relating to any Account or other Collateral, by mail,
telephone, facsimile transmission or otherwise.
(e) Borrower shall deliver or cause to be delivered to Lender, with
appropriate endorsement and assignment, with full recourse to Borrower, all
chattel paper and instruments which Borrower now owns or may at any time
acquire immediately upon Borrower's receipt thereof, except as Lender may
otherwise agree.
(f) Lender may, at any time or times that an Event of Default exists
or has occurred and is continuing, (i) notify any or all account debtors that
the Accounts have been assigned to Lender and that Lender has a security
interest therein and Lender may direct any or all accounts debtors to make
payment of Accounts directly to Lender, (ii) extend the time of payment of,
compromise, settle or adjust for cash, credit, return of merchandise or
otherwise, and upon any terms or conditions, any and all Accounts or other
obligations included in the Collateral and thereby discharge or release the
account debtor or any other party or parties in any way liable for payment
thereof without affecting any of the Obligations, (iii) demand, collect or
enforce payment of any Accounts or such other obligations, but without any duty
to do so, and Lender shall not be liable for its failure to collect or enforce
the payment thereof nor for the negligence of its agents or attorneys with
respect thereto and (iv) take whatever other action Lender may deem necessary
or desirable for the protection of its interests. At any time that an Event of
Default exists or has occurred and is continuing, at Lender's request, all
invoices and statements sent to any account debtor shall state that the
Accounts and such other obligations have been assigned to Lender and are
payable directly and only to Lender and Borrower shall deliver to Lender such
originals of documents evidencing the sale and delivery of goods or the
performance of services giving rise to any Accounts as Lender may require.
7.3 Inventory Covenants. With respect to the Inventory: (a) Borrower
shall at all times maintain inventory records reasonably satisfactory to
Lender, keeping correct and accurate records itemizing and describing the kind,
type, quality and quantity of Inventory, Borrower's cost therefor and daily
withdrawals therefrom and additions thereto; (b) Borrower shall conduct a
physical count of the Inventory at least once each year, but at any time or
times as Lender may request on or after an Event of Default, and promptly
following such physical inventory shall supply Lender with a report in the form
and with such specificity as may be reasonably satisfactory to Lender
concerning such physical count; (c) Borrower shall not remove any Inventory
from the locations set forth or permitted herein, without the prior written
consent of Lender, except for sales of Inventory in the ordinary course of
Borrower's business and except to move Inventory directly from one location set
forth or permitted herein to another such location; (d) upon Lender's request
on or after an Event of Default, Borrower shall, at its expense, deliver or
cause to be delivered to Lender written reports or appraisals as to the
Inventory in form, scope and methodology acceptable to Lender and by an
appraiser acceptable to Lender, addressed to Lender or upon which Lender is
expressly permitted to rely; (e) Borrower shall produce, use, store and
maintain the Inventory with all reasonable care and caution and in accordance
with applicable standards of any insurance and in conformity with applicable
laws (including the requirements of the Federal Fair Labor Standards Act of
1938, as amended and all rules, regulations and orders related thereto);
(f) Borrower assumes all responsibility and liability arising from or relating
to the production, use, sale or other disposition of the Inventory; (g)
Borrower shall not sell Inventory to any customer on approval, or any other
basis which entitles the customer to return or may obligate Borrower to
repurchase such Inventory; (h) Borrower shall keep the Inventory in good and
marketable condition; and (i) Borrower shall not, without prior written notice
to Lender, acquire or accept any Inventory on consignment or approval.
7.4 Equipment Covenants. With respect to the Equipment: (a) upon
Lender's request, Borrower shall, at its expense, at any time or times as
Lender may request on or after an Event of Default, deliver or cause to be
delivered to Lender written reports or appraisals as to the Equipment in form,
scope and methodology acceptable to Lender and by an appraiser acceptable to
Lender; (b) Borrower shall keep the Equipment in good order, repair, running
and marketable condition (ordinary wear and tear excepted); (c) Borrower shall
use the Equipment with all reasonable care and caution and in accordance with
applicable standards of any insurance and in conformity with all applicable
laws; (d) the Equipment is and shall be used in Borrower's business and not for
personal, family, household or farming use; (e) Borrower shall not remove any
Equipment from the locations set forth or permitted herein, except to the
extent necessary to have any Equipment repaired or maintained in the ordinary
course of the business of Borrower; and (f) Borrower assumes all responsibility
and liability arising from the use of the Equipment.
7.5 Power of Attorney. Borrower hereby irrevocably designates and
appoints Lender (and all persons designated by Lender) as Borrower's true and
lawful attorney-in-fact, and authorizes Lender, in Borrower's or Lender's name,
to: (a) at any time an Event of Default or event which with notice or passage
of time or both would constitute an Event of Default exists or has occurred and
is continuing (i) demand payment on Accounts or other proceeds of Inventory or
other Collateral, (ii) enforce payment of Accounts by legal proceedings or
otherwise, (iii) exercise all of Borrower's rights and remedies to collect any
Account or other Collateral, (iv) sell or assign any Account upon such terms,
for such amount and at such time or times as Lender deems advisable, (v)
settle, adjust, compromise, extend or renew an Account, (vi) discharge and
release any Account, (vii) prepare, file and sign Borrower's name on any proof
of claim in bankruptcy or other similar document against an account debtor,
(viii) notify the post office authorities to change the address for delivery of
Borrower's mail to an address designated by Lender, and open and dispose of all
mail addressed to Borrower, and (ix) do all acts and things which are
necessary, in Lender's determination, to fulfill Borrower's obligations under
this Agreement and the other Financing Agreements and (b) at any time to (i)
take control in any manner of any item of payment or proceeds thereof,
(ii) have access to any lockbox or postal box into which Borrower's mail is
deposited, (iii) endorse Borrower's name upon any items of payment or proceeds
thereof and deposit the same in Lender's account for application to the
Obligations, (iv) endorse Borrower's name upon any chattel paper, document,
instrument, invoice, or similar document or agreement relating to any Account
or any goods pertaining thereto or any other Collateral, (v) sign Borrower's
name on any verification of Accounts and notices thereof to account debtors and
(vi) execute in Borrower's name and file any UCC financing statements or
amendments thereto. Borrower hereby releases Lender and its officers,
employees and designees from any liabilities arising from any act or acts under
this power of attorney and in furtherance thereof, whether of omission or
commission, except as a result of Lender's own gross negligence or wilful
misconduct as determined pursuant to a final non-appealable order of a court of
competent jurisdiction.
7.6 Right to Cure. Lender may, at its option, (a) cure any default by
Borrower under any agreement with a third party or pay or bond on appeal any
judgment entered against Borrower, (b) discharge taxes, liens, security
interests or other encumbrances at any time levied on or existing with respect
to the Collateral and (c) pay any amount, incur any expense or perform any act
which, in Lender's judgment, is necessary or appropriate to preserve, protect,
insure or maintain the Collateral and the rights of Lender with respect
thereto. Lender may add any amounts so expended to the Obligations and charge
Borrower's account therefor, such amounts to be repayable by Borrower on
demand. Lender shall be under no obligation to effect such cure, payment or
bonding and shall not, by doing so, be deemed to have assumed any obligation or
liability of Borrower. Any payment made or other action taken by Lender under
this Section shall be without prejudice to any right to assert an Event of
Default hereunder and to proceed accordingly.
7.7 Access to Premises. From time to time as requested by Lender, at the
cost and expense of Borrower, (a) Lender or its designee shall have complete
access to all of Borrower's premises during normal business hours and after
notice to Borrower, or at any time and without notice to Borrower if an Event
of Default exists or has occurred and is continuing, for the purposes of
inspecting, verifying and auditing the Collateral and all of Borrower's books
and records, including the Records, and (b) Borrower shall promptly furnish to
Lender such copies of such books and records, including the Records, or
extracts therefrom as Lender may request, and (c) use during normal business
hours such of Borrower's personnel, equipment, supplies and premises as may be
reasonably necessary for the foregoing and if an Event of Default exists or has
occurred and is continuing for the collection of Accounts and realization of
other Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Borrower, with respect to itself and each of its Subsidiaries, hereby
represents and warrants to Lender the following (which shall survive the
execution and delivery of this Agreement), the truth and accuracy of which are
a continuing condition of the making of Loans and providing Letter of Credit
Accommodations by Lender to Borrower:
8.1 Corporate Existence, Power and Authority; Subsidiaries. Borrower,
and each of its Subsidiaries, is a corporation duly organized and in good
standing under the laws of its state of incorporation and is duly qualified as
a foreign corporation and in good standing in all states or other jurisdictions
where the nature and extent of the business transacted by it or the ownership
of assets makes such qualification necessary, except for those jurisdictions in
which the failure to so qualify would not have a material adverse effect on
Borrower's financial condition, results of operation or business or the rights
of Lender in or to any of the Collateral. The execution, delivery and
performance of this Agreement, the other Financing Agreements and the
transactions contemplated hereunder and thereunder are all within Borrower's
corporate powers, have been duly authorized and are not in contravention of law
or the terms of Borrower's certificate of incorporation, by-laws, or other
organizational documentation, or any indenture, agreement or undertaking to
which Borrower is a party or by which Borrower or its property are bound,
including without limitation, the Indenture and any and all agreements with
Franchisors. This Agreement and the other Financing Agreements constitute
legal, valid and binding obligations of Borrower enforceable in accordance with
their respective terms. Borrower does not have any Subsidiaries or Affiliates
except as set forth on the Information Certificate.
8.2 Financial Statements; No Material Adverse Change. All financial
statements relating to Borrower which have been or may hereafter be delivered
by Borrower to Lender have been prepared in accordance with GAAP and fairly
present the financial condition and the results of operation of Borrower as at
the dates and for the periods set forth therein. Except as disclosed in any
interim financial statements furnished by Borrower to Lender prior to the date
of this Agreement, there has been no material adverse change in the assets,
liabilities, properties and condition, financial or otherwise, of Borrower,
since the date of the most recent audited financial statements furnished by
Borrower to Lender prior to the date of this Agreement.
8.3 Chief Executive Office; Collateral Locations. The chief executive
office of Borrower and Borrower's Records concerning Accounts are located only
at the address set forth below and its only other places of business and the
only other locations of Collateral, if any, are the addresses set forth in the
Information Certificate, subject to the right of Borrower to establish new
locations in accordance with Section 9.2 below. The Information Certificate
correctly identifies any of such locations which are not owned by Borrower and
sets forth the owners and/or operators thereof and to the best of Borrower's
knowledge, the holders of any mortgages on such locations.
8.4 Priority of Liens; Title to Properties. The security interests and
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens indicated on Schedule 8.4
hereto and the other liens permitted under Section 9.8 hereof. Borrower has
good and marketable title to all of its properties and assets subject to no
liens, mortgages, pledges, security interests, encumbrances or charges of any
kind, except those granted to Lender and such others as are specifically listed
on Schedule 8.4 hereto or permitted under Section 9.8 hereof.
8.5 Tax Returns. Borrower, and each of its Subsidiaries, has filed, or
caused to be filed, in a timely manner all tax returns, reports and
declarations which are required to be filed by it (without requests for
extension except as previously disclosed in writing to Lender). All
information in such tax returns, reports and declarations is complete and
accurate in all material respects. Borrower, and each of its Subsidiaries, has
paid or caused to be paid all taxes due and payable or claimed due and payable
in any assessment received by it, except taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to Borrower or any Subsidiary, as the case may be, and with respect
to which adequate reserves have been set aside on its books. Adequate
provision has been made for the payment of all accrued and unpaid Federal,
State, county, local, foreign and other taxes whether or not yet due and
payable and whether or not disputed.
8.6 Litigation. Except as set forth on the Information Certificate,
there is no present investigation by any governmental agency pending, or to the
best of Borrower's knowledge threatened, against or affecting Borrower, its
Subsidiaries, any of their assets or business and there is no action, suit,
proceeding or claim by any Person pending, or to the best of Borrower's
knowledge threatened, against Borrower, its Subsidiaries or any their assets or
goodwill, or against or affecting any transactions contemplated by this
Agreement, which if adversely determined against Borrower or any such
Subsidiaries would result in any material adverse change in the assets,
business or prospects of Borrower or would impair the ability of Borrower to
perform its obligations hereunder or under any of the other Financing
Agreements to which it is a party or of Lender to enforce any Obligations or
realize upon any Collateral.
8.7 Compliance with Other Agreements and Applicable Laws. Neither
Borrower nor any of its Subsidiaries is in default in any material respect
under, or in violation in any material respect of any of the terms of, any
agreement, contract, instrument, lease or other commitment to which it is a
party or by which it or any of its assets are bound, including without
limitation, the Indenture and any and all agreements with Franchisors, and
Borrower, and each of its Subsidiaries, is in compliance in all material
respects with all applicable provisions of laws, rules, regulations, licenses,
permits, approvals and orders of any foreign, Federal, State or local
governmental authority.
8.8 Environmental Compliance.
(a) Except as set forth on Schedule 8.8 hereto, neither Borrower nor
any Subsidiary has generated, used, stored, treated, transported, manufactured,
handled, produced or disposed of any Hazardous Materials, on or off its
premises (whether or not owned by it) in any manner which at any time violates
any applicable Environmental Law or any license, permit, certificate, approval
or similar authorization thereunder and the operations of Borrower and each of
its Subsidiaries comply in all material respects with all Environmental Laws
and all licenses, permits, certificates, approvals and similar authorizations
thereunder.
(b) Except as set forth on Schedule 8.8 hereto, there has been no
investigation, proceeding, complaint, order, directive, claim, citation or
notice by any governmental authority or any other person nor is any pending or
to the best of Borrower's knowledge threatened, with respect to any
non-compliance with or violation of the requirements of any Environmental Law
by Borrower or any Subsidiary or the release, spill or discharge, threatened or
actual, of any Hazardous Material or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials or any other environmental, health or safety matter, which affects
Borrower, any of its Subsidiaries or their business, operations or assets or
any properties at which Borrower or any Subsidiary has transported, stored or
disposed of any Hazardous Materials.
(c) Neither Borrower nor any Subsidiary has any material liability
(contingent or otherwise) in connection with a release, spill or discharge,
threatened or actual, of any Hazardous Materials or the generation, use,
storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials.
(d) Borrower, and each of its Subsidiaries, has all licenses,
permits, certificates, approvals or similar authorizations required to be
obtained or filed in connection with the operations of Borrower and each
Subsidiary, as the case may be, under any Environmental Law and all of such
licenses, permits, certificates, approvals or similar authorizations are valid
and in full force and effect.
8.9 Employee Benefits.
(a) Neither Borrower nor any of its Subsidiaries has engaged in any
transaction in connection with which Borrower, any Subsidiary or any of its
ERISA Affiliates could be subject to either a civil penalty assessed pursuant
to Section 502(i) of ERISA or a tax imposed by Section 4975 of the Code,
including any accumulated funding deficiency described in Section 8.9(c) hereof
and any deficiency with respect to vested accrued benefits described in Section
8.9(d) hereof.
(b) No liability to the Pension Benefit Guaranty Corporation has been
or is expected by Borrower to be incurred with respect to any employee benefit
plan of Borrower, any Subsidiary or any of its ERISA Affiliates. There has
been no reportable event (within the meaning of Section 4043(b) of ERISA) or
any other event or condition with respect to any employee pension benefit plan
of Borrower, any Subsidiary or any of its ERISA Affiliates which presents a
risk of termination of any such plan by the Pension Benefit Guaranty
Corporation.
(c) Full payment has been made of all amounts which Borrower, any
Subsidiary or any of its ERISA Affiliates is required under Section 302 of
ERISA and Section 412 of the Code to have paid under the terms of each employee
benefit plan as contributions to such plan as of the last day of the most
recent fiscal year of such plan ended prior to the date hereof, and no
accumulated funding deficiency (as defined in Section 302 of ERISA and Section
412 of the Code), whether or not waived, exists with respect to any employee
benefit plan, including any penalty or tax described in Section 8.9(a) hereof
and any deficiency with respect to vested accrued benefits described in Section
8.9(d) hereof.
(d) The current value of all vested accrued benefits under all
employee benefit plans maintained by Borrower or any Subsidiary that are
subject to Title IV of ERISA does not exceed the current value of the assets of
such plans allocable to such vested accrued benefits, including any penalty or
tax described in Section 8.9(a) hereof and any accumulated funding deficiency
described in Section 8.9(c) hereof. The terms "current value" and "accrued
benefit" have the meanings specified in ERISA.
(e) Neither Borrower, any Subsidiary nor any of its ERISA Affiliates
is or has ever been obligated to contribute to any "multiemployer plan" (as
such term is defined in Section 4001(a)(3) of ERISA) that is subject to Title
IV of ERISA, except as described on Schedule 8.9 attached hereto.
8.10 Bank Accounts. All of the deposit accounts, investment accounts or
other accounts in the name of or used by Borrower maintained at any bank or
other financial institution are set forth on Schedule 8.10 hereto, subject to
the right of Borrower to establish new accounts in accordance with Section 9.13
below.
8.11 Accuracy and Completeness of Information. All information furnished
by or on behalf of Borrower or any of its Subsidiaries in writing to Lender in
connection with this Agreement or any of the other Financing Agreements or any
transaction contemplated hereby or thereby, including all information on the
Information Certificate is true and correct in all material respects on the
date as of which such information is dated or certified and does not omit any
material fact necessary in order to make such information not misleading. No
event or circumstance has occurred which has had or could reasonably be
expected to have a material adverse affect on the business, assets or prospects
of Borrower, which has not been fully and accurately disclosed to Lender in
writing.
8.12 Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Lender on the date of each additional borrowing or
other credit accommodation hereunder and shall be conclusively presumed to have
been relied on by Lender regardless of any investigation made or information
possessed by Lender. The representations and warranties set forth herein shall
be cumulative and in addition to any other representations or warranties which
Borrower shall now or hereafter give, or cause to be given, to Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence. Borrower shall at all times preserve,
renew and keep in full force and effect its corporate existence, and the
corporate, partnership or other existence of each of its Subsidiaries (in
accordance with the respective organizational documents, as they may be
amended, of each Subsidiary) and all rights and franchises with respect to
Borrower and its Subsidiaries and maintain in full force and effect all
permits, licenses, trademarks, tradenames, approvals, authorizations, leases
and contracts necessary to carry on their businesses as presently or proposed
to be conducted. Borrower shall give Lender thirty (30) days prior written
notice of any proposed change in its corporate name, which notice shall set
forth the new name and Borrower shall deliver to Lender a copy of the amendment
to the Certificate of Incorporation of Borrower providing for the name change
certified by the Secretary of State of the jurisdiction of incorporation of
Borrower as soon as it is available.
9.2 New Collateral Locations. Borrower may open any new location within
the continental United States provided Borrower (a) gives Lender ten (10) days
prior written notice of the intended opening of any such new location and (b)
executes and delivers, or causes to be executed and delivered, to Lender such
agreements, documents, and instruments as Lender may deem reasonably necessary
or desirable to protect its interests in the Collateral at such location,
including UCC financing statements.
9.3 Compliance with Laws, Regulations, Etc.
(a) Borrower and each of its Subsidiaries shall, at all times, comply
in all material respects with all laws, rules, regulations, licenses, permits,
approvals and orders applicable to it and duly observe all requirements of any
Federal, State or local governmental authority, including the Employee
Retirement Income Security Act of 1974, as amended, the Occupational Safety and
Health Act of 1970, as amended, the Fair Labor Standards Act of 1938, as
amended, and all statutes, rules, regulations, orders, permits and stipulations
relating to environmental pollution and employee health and safety, including
all of the Environmental Laws.
(b) Borrower shall establish and maintain, at its expense, a system
to assure and monitor its (and its Subsidiaries') continued compliance with all
Environmental Laws in all of its operations, which system shall include annual
reviews of such compliance by employees or agents of Borrower who are familiar
with the requirements of the Environmental Laws. Copies of all environmental
surveys, audits, assessments, feasibility studies and results of remedial
investigations shall be promptly furnished, or caused to be furnished, by
Borrower to Lender. Borrower shall take prompt and appropriate action to
respond to any non-compliance with any of the Environmental Laws and shall
regularly report to Lender on such response.
(c) Borrower shall give both oral and written notice to Lender
immediately upon Borrower's receipt of any notice of, or Borrower's otherwise
obtaining knowledge of, (i) the occurrence of any event involving the release,
spill or discharge, threatened or actual, of any Hazardous Material or (ii) any
investigation, proceeding, complaint, order, directive, claims, citation or
notice with respect to: (A) any non-compliance with or violation of any
Environmental Law by Borrower or any Subsidiary or (B) the release, spill or
discharge, threatened or actual, of any Hazardous Material or (C) the
generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials or (D) any other
environmental, health or safety matter, which affects Borrower, any Subsidiary
or their business, operations or assets or any properties at which Borrower or
any Subsidiary transported, stored or disposed of any Hazardous Materials.
(d) Without limiting the generality of the foregoing and solely with
respect to the Real Property, whenever Lender reasonably determines that there
is non-compliance, or any condition which requires any action by or on behalf
of Borrower in order to avoid any material non-compliance, with any
Environmental Law, Borrower shall, at Lender's request and Borrower's expense:
(i) cause an independent environmental engineer acceptable to Lender to conduct
such tests of the site where Borrower's or any Subsidiary's non-compliance or
alleged non-compliance with such Environmental Laws has occurred as to such
non-compliance and prepare and deliver to Lender a report as to such non-
compliance setting forth the results of such tests, a proposed plan for
responding to any environmental problems described therein, and an estimate of
the costs thereof and (ii) provide to Lender a supplemental report of such
engineer whenever the scope of such non-compliance, or Borrower's response
thereto or the estimated costs thereof, shall change in any material respect.
(e) Borrower and its Subsidiaries will conduct their businesses so as
to comply in all material respects with all Environmental Laws in all
jurisdictions in which any of them is or may at any time be doing business,
including, without limitation, environmental, land use, occupational safety or
health laws in all jurisdictions in which any of them is or may at any time be
doing business, except to the extent that (i) Borrower or any of its
Subsidiaries are contesting, in good faith by appropriate legal proceedings,
any such Environmental Law or application thereof and (ii) any non-compliance
therewith could not reasonably be expected to have a material adverse effect on
Borrower, any of its Subsidiaries or any of their business or material
properties; provided, that Borrower and each of its Subsidiaries shall comply
with the order of any court or other governmental authority relating to such
laws unless Borrower or its Subsidiaries shall currently be prosecuting an
appeal or proceedings for review and shall have secured a stay of enforcement
or execution or other arrangement postponing enforcement or execution pending
such appeal or proceedings for review. Within thirty (30) days after Borrower
learns of the enactment or promulgation of any Environmental Law which could
reasonably be expected to have a material adverse effect on Borrower, any of
its Subsidiaries or any of their business or properties, Borrower shall provide
Lender with notice thereof. At the request of Lender, Borrower shall provide
Lender with any additional information relating to environmental matters and
any potential related liability resulting therefrom as Lender may reasonably
request.
(f) Borrower shall indemnify and hold harmless Lender, its directors,
officers, employees, agents, invitees, representatives, successors and assigns,
from and against any and all losses, claims, damages, liabilities, costs, and
expenses (including attorneys' fees and legal expenses) directly or indirectly
arising out of or attributable to the use, generation, manufacture,
reproduction, storage, release, threatened release, spill, discharge, disposal
or presence of a Hazardous Material, including the costs of any required or
necessary repair, cleanup or other remedial work with respect to any property
of Borrower or any Subsidiary and the preparation and implementation of any
closure, remedial or other required plans. All representations, warranties,
covenants and indemnifications in this Section 9.3 shall survive the payment of
the Obligations and the termination or non-renewal of this Agreement.
9.4 Payment of Taxes and Claims. Borrower shall, and shall cause its
Subsidiaries to, duly pay and discharge all taxes, assessments, contributions
and governmental charges upon or against it or its properties or assets, except
for taxes the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower or any
Subsidiary and with respect to which adequate reserves have been set aside on
its books. Borrower shall be liable for any tax or penalties imposed on Lender
as a result of the financing arrangements provided for herein and Borrower
agrees to indemnify and hold Lender harmless with respect to the foregoing, and
to repay to Lender on demand the amount thereof, and until paid by Borrower
such amount shall be added and deemed part of the Loans, provided, that,
nothing contained herein shall be construed to require Borrower to pay any
income or franchise taxes attributable to the income of Lender from any amounts
charged or paid hereunder to Lender. The foregoing indemnity shall survive the
payment of the Obligations and the termination or non-renewal of this
Agreement.
9.5 Insurance. Borrower shall, and shall cause each of its Subsidiaries
to, at all times, maintain with financially sound and reputable insurers
insurance with respect to the Collateral against loss or damage and all other
insurance of the kinds and in the amounts customarily insured against or
carried by corporations of established reputation engaged in the same or
similar businesses and similarly situated. Said policies of insurance shall be
satisfactory to Lender as to form, amount and insurer. Borrower shall furnish
certificates, policies or endorsements to Lender as Lender shall require as
proof of such insurance, and, if Borrower fails to do so, Lender is authorized,
but not required, to obtain such insurance at the expense of Borrower. All
policies shall provide for at least thirty (30) days prior written notice to
Lender of any cancellation or reduction of coverage and that Lender may act as
attorney for Borrower in obtaining, and at any time an Event of Default exists
or has occurred and is continuing, adjusting, settling, amending and canceling
such insurance. Borrower shall cause Lender to be named as a loss payee and an
additional insured (but without any liability for any premiums) under such
insurance policies and Borrower shall obtain non-contributory lender's loss
payable endorsements to all insurance policies in form and substance
satisfactory to Lender. Such lender's loss payable endorsements shall specify
that the proceeds of such insurance shall be payable to Lender as its interests
may appear and further specify that Lender shall be paid regardless of any act
or omission by Borrower or any of its Affiliates. At its option, Lender may
apply any insurance proceeds received by Lender at any time to the cost of
repairs or replacement of Collateral and/or to payment of the Obligations,
whether or not then due, in any order and in such manner as Lender may
determine or hold such proceeds as cash collateral for the Obligations.
9.6 Financial Statements and Other Information.
(a) Borrower shall keep, and cause each of its Subsidiaries to keep,
proper books and records in which true and complete entries shall be made of
all dealings or transactions of or in relation to the Collateral and the
business of Borrower and its Subsidiaries (if any) in accordance with GAAP and
Borrower shall furnish or cause to be furnished to Lender: (i) within thirty
(30) days after the end of each fiscal month, monthly unaudited consolidated
financial statements, and, if Borrower has any Subsidiaries, unaudited
consolidating financial statements (including in each case balance sheets,
statements of income and loss, statements of cash flow, and statements of
shareholders' equity), all in reasonable detail, fairly presenting the
financial position and the results of the operations of Borrower and its
Subsidiaries as of the end of and through such fiscal month; (ii) within ninety
(90) days after the end of each fiscal year, audited consolidated financial
statements and, if Borrower has any Subsidiaries, unaudited consolidating
financial statements of Borrower and its Subsidiaries (including in each case
balance sheets, statements of income and loss, statements of cash flow and
statements of shareholders' equity), and the accompanying notes thereto, all in
reasonable detail, fairly presenting the financial position and the results of
the operations of Borrower and its Subsidiaries as of the end of and for such
fiscal year, together with the unqualified opinion of independent certified
public accountants, which accountants shall be an independent accounting firm
selected by Borrower and reasonably acceptable to Lender, that such financial
statements have been prepared in accordance with GAAP, and present fairly the
results of operations and financial condition of Borrower and its Subsidiaries
as of the end of and for the fiscal year then ended; (iii) prior to the
beginning of each fiscal year, budgeted financial statements prepared in
substantially the form of and on the same basis as that prepared for 1997,
which is attached hereto as Exhibit D (the "Budgeted Financial Statements");
and (iv) as early as Borrower elects, a comparison of actual results of
operations to the budgeted income statements set forth in the Budgeted
Financial Statements for the nine (9) month period ending September 30 of such
year (the "Comparison Income Statement").
(b) Borrower shall promptly notify Lender in writing of the details
of (i) any loss, damage, investigation, action, suit, proceeding or claim
relating to the Collateral or any other property which is security for the
Obligations or which would result in any material adverse change in Borrower's
business, properties, assets, goodwill or condition, financial or otherwise and
(ii) the occurrence of any Event of Default or event which, with the passage of
time or giving of notice or both, would constitute an Event of Default.
(c) Borrower shall promptly notify Lender in writing in the event
that at any time after the delivery of a Borrowing Base Certificate by Borrower
to Lender but prior to the delivery of the next Borrowing Base Certificate to
be delivered by Borrower to Lender in accordance with the terms hereof: (i)
the amount of Revolving Loans and Letter of Credit Accommodations available to
Borrower pursuant to the terms and conditions contained herein (calculated
without regard to the then outstanding Revolving Loans and Letter of Credit
Accommodations) has decreased in any material respect due to an interruption of
production or other material change with respect to Borrower's business, (ii)
the Revolving Loans made by Lender to Borrower and/or Letter of Credit
Accommodations outstanding at such time exceed the amount of the Revolving
Loans and Letter of Credit Accommodations then available to Borrower under the
terms hereof as a result of any decrease in the amount of Revolving Loans and
Letter of Credit Accommodations then available and the amount of such excess,
or (iii) Excess Availability is less than five (5.0%) percent of the Maximum
Credit as a result of any decrease in the amounts of Revolving Loans and Letter
of Credit Accommodations available to Borrower pursuant to the terms and
conditions contained herein.
(d) Borrower shall promptly, after the sending or filing thereof,
furnish or cause to be furnished to Lender copies of all reports which Borrower
sends to its stockholders generally and copies of all reports and registration
statements which Borrower files with the Securities and Exchange Commission,
any national securities exchange or the National Association of Securities
Dealers, Inc.
(e) Borrower shall furnish or cause to be furnished to Lender such
budgets, forecasts, projections and other information respecting the Collateral
and the business of Borrower and its Subsidiaries, as Lender may, from time to
time, reasonably request. Lender is hereby authorized to deliver a copy of any
financial statement or any other information relating to the business of
Borrower or any Subsidiary to any court or other government agency or to any
participant or assignee or prospective participant or assignee. Borrower
hereby irrevocably authorizes and directs all accountants or auditors to
deliver to Lender, at Borrower's expense, copies of the financial statements of
Borrower and its Subsidiaries and any reports or management letters prepared by
such accountants or auditors on behalf of Borrower and any Subsidiaries and to
disclose to Lender such information as they may have regarding the business of
Borrower and any Subsidiaries. Any documents, schedules, invoices or other
papers delivered to Lender may be destroyed or otherwise disposed of by Lender
one (1) year after the same are delivered to Lender, except as otherwise
designated by Borrower to Lender in writing.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Borrower
shall not, and shall not permit any Subsidiary to, directly or indirectly, (a)
merge into or with or consolidate with any other Person or permit any other
Person to merge into or with or consolidate with it, except that any Subsidiary
may be merged or consolidated with or into Borrower or any wholly-owned
Subsidiary (provided that Borrower or such other wholly-owned Subsidiary shall
be the surviving corporation), or (b) sell, assign, lease, transfer, abandon or
otherwise dispose of any stock or indebtedness to any other Person or any of
its assets to any other Person (except for (i) sales of Inventory in the
ordinary course of business and (ii) the disposition of worn-out or obsolete
equipment or equipment no longer used in the business of Borrower so long as
(A) if an Event of Default exists or has occurred and is continuing, any
proceeds are paid to Lender and (B) such sales do not involve Equipment having
an aggregate fair market value in excess of $100,000 or equipment (including
the Equipment) having an aggregate fair market value in excess of $200,000
disposed of in any fiscal year of Borrower), or (c) form or acquire any
Subsidiaries, or (d) wind up, liquidate or dissolve or (e) agree to do any of
the foregoing.
9.8 Encumbrances. Borrower shall not, and shall not permit any
Subsidiary to, create, incur, assume or suffer to exist any security interest,
mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever on
any of its assets or properties, including the Collateral, except: (a) the
liens and security interests of Lender; (b) liens securing the payment of
taxes, either not yet overdue or the validity of which are being contested in
good faith by appropriate proceedings diligently pursued and available to
Borrower or any Subsidiary and with respect to which adequate reserves have
been set aside on its books; (c) non-consensual statutory liens (other than
liens securing the payment of taxes) arising in the ordinary course of
Borrower's or any Subsidiary's business to the extent: (i) such liens secure
indebtedness which is not overdue or (ii) such liens secure indebtedness
relating to claims or liabilities which are fully insured and being defended at
the sole cost and expense and at the sole risk of the insurer or being
contested in good faith by appropriate proceedings diligently pursued and
available to Borrower or any Subsidiary, in each case prior to the commencement
of foreclosure or other similar proceedings and with respect to which adequate
reserves have been set aside on its books; (d) zoning restrictions, easements,
licenses, covenants and other restrictions affecting the use of real property
which do not interfere in any material respect with the use of such real
property or ordinary conduct of the business of Borrower or any Subsidiary as
presently conducted thereon or materially impair the value of the real property
which may be subject thereto; and (e) purchase money security interests in
equipment (including capital leases) and purchase money mortgages on real
estate not to exceed $3,000,000 in the aggregate at any time outstanding so
long as such security interests and mortgages do not apply to any property of
Borrower or any Subsidiary other than the equipment or real estate so acquired,
and the indebtedness secured thereby is on terms no less favorable than would
be obtained in an arms-length transaction and does not exceed the cost of the
equipment or real estate so acquired, as the case may be.
9.9 Indebtedness. Borrower shall not, and shall not permit any
Subsidiary to, incur, create, assume, become or be liable in any manner with
respect to, or permit to exist, any obligations or indebtedness, except:
(a) the Obligations;
(b) trade obligations and normal accruals in the ordinary course of
business not yet due and payable, or with respect to which Borrower or any
Subsidiary is contesting in good faith the amount or validity thereof by
appropriate proceedings diligently pursued and available to Borrower or any
Subsidiary, and with respect to which adequate reserves have been set aside on
its books;
(c) purchase money indebtedness (including capital leases) to the
extent not incurred or secured by liens (including capital leases) in violation
of any other provision of this Agreement;
(d) Senior Bonds; provided, that: (i) Borrower may only make regular
scheduled payments of interest in accordance with the terms of the Indenture,
(ii) Borrower shall not, directly or indirectly, (A) amend, modify, alter or
change any terms of the Indenture or any agreement, document or instrument
related thereto without the prior written consent of Lender which will not
unreasonably be withheld, or (B) except for Senior Bond Repurchases permitted
pursuant to Section 9.10 hereof, redeem, retire, defease, purchase or otherwise
acquire such indebtedness, or set aside or otherwise deposit or invest any sums
for such purpose, and (iii) Borrower shall furnish to Lender all notices,
demands or other materials concerning such indebtedness either received by
Borrower or on its behalf, promptly after receipt thereof, or sent by Borrower
or on its behalf, concurrently with the sending thereof, as the case may be;
(e) loans made by financial institutions under margin arrangements to
All-American Bottling Financial Corporation not to exceed $10,000,000 in the
aggregate at any time outstanding and on terms and conditions acceptable to
Lender for the purpose of making Senior Bond Repurchases; and
(f) any other unsecured loans made by an officer or director of
Borrower to Borrower or any of its Subsidiaries pursuant to an agreement
acceptable to Lender and do not exceed an aggregate amount of $3,000,000 at any
time outstanding.
9.10 Loans, Investments, Guarantees, Etc. Except in accordance with
Section 9.17 hereof, Borrower shall not, and shall not permit any Subsidiary
to, directly or indirectly, make any loans or advance money or property to any
person, or invest in (by capital contribution, dividend or otherwise) or
purchase or repurchase the stock or indebtedness or all or a substantial part
of the assets or property of any person, or guarantee, assume, endorse, or
otherwise become responsible for (directly or indirectly) the indebtedness,
performance, obligations or dividends of any Person or agree to do any of the
foregoing, except: (a) the endorsement of instruments for collection or deposit
in the ordinary course of business; (b) investments in: (i) short-term direct
obligations of the United States Government, (ii) negotiable certificates of
deposit issued by any bank satisfactory to Lender, payable to the order of
Borrower or to bearer and delivered to Lender, and (iii) commercial paper rated
A1 or P1; provided, that, as to any of the foregoing, unless waived in writing
by Lender, Borrower shall take such actions as are deemed necessary by Lender
to perfect the security interest of Lender in such investments; (c) the loans,
advances and guarantees set forth on Schedule 9.10 hereto; provided, that, as
to such loans, advances and guarantees, (i) Borrower shall not, directly or
indirectly, (A) amend, modify, alter or change the terms of such loans,
advances or guarantees or any agreement, document or instrument related
thereto, or (B) as to such guarantees, redeem, retire, defease, purchase or
otherwise acquire the obligations arising pursuant to such guarantees, or set
aside or otherwise deposit or invest any sums for such purpose, and (ii)
Borrower shall furnish to Lender all notices or demands in connection with such
loans, advances or guarantees or other indebtedness subject to such guarantees
either received by Borrower or on its behalf, promptly after the receipt
thereof, or sent by Borrower or on its behalf, concurrently with the sending
thereof, as the case may be; (d) Borrower may make investments in or loans to
its wholly-owned Subsidiary, All-American Bottling Financial Corporation, to
the extent necessary to fund Senior Bond Repurchases; (e) All-American Bottling
Financial Corporation may make Senior Bond Repurchases so long as no default
under this Agreement or any of the other Financing Agreements shall have
occurred and be continuing or occur as a result thereof; and (f) any other
loans, advances of money or property, investments in or purchases of stock,
indebtedness, assets or property, or guarantees or endorsements not to exceed
$250,000 in the aggregate at any time.
9.11 Dividends and Redemptions. Borrower shall not, and shall not permit
any Subsidiary to, directly or indirectly, declare or pay any dividends on
account of any shares of class of capital stock of Borrower or such Subsidiary
now or hereafter outstanding, or set aside or otherwise deposit or invest any
sums for such purpose, or redeem, retire, defease, purchase or otherwise
acquire any shares of any class of capital stock (or set aside or otherwise
deposit or invest any sums for such purpose) for any consideration other than
common stock or apply or set apart any sum, or make any other distribution (by
reduction of capital or otherwise) in respect of any such shares or agree to do
any of the foregoing; provided, that the foregoing shall not prohibit, so long
as no Event of Default shall have occurred and be continuing or shall occur as
a consequence thereof, (a) the payment by Borrower to its parent company of
dividends or other payments (or the making of loans or advances thereto)
constituting Permitted Tax Payments or (b) the payment by Borrower of up to an
additional $100,000 of dividends per annum in order to permit the parent to pay
its directors' fees and other general and administrative expenses.
9.12 Transactions with Affiliates. Borrower shall not, and shall not
permit any Subsidiary to, directly or indirectly, (a) purchase, acquire or
lease any property from, or sell, transfer or lease any property to, any
officer, director, agent or other person affiliated with Borrower or such
Subsidiary, except in the ordinary course of and pursuant to the reasonable
requirements of Borrower's or such Subsidiary's business and upon fair and
reasonable terms no less favorable to Borrower or such Subsidiary than Borrower
or such Subsidiary would obtain in a comparable arm's length transaction with
an unaffiliated person or (b) make any payments of management, consulting or
other fees for management or similar services, or of any indebtedness owing to
any officer, employee, shareholder, director or other person affiliated with
Borrower or any Subsidiary except, (i) reasonable compensation to officers,
employees and directors for services rendered to Borrower or any Subsidiary in
the ordinary course of business and so long as no Event of Default has occurred
and is continuing or shall occur as a result thereof, (ii) repayment of amounts
owing pursuant to Section 9.9(f) hereof.
9.13 Additional Bank Accounts. Borrower shall not, and shall not permit
any Subsidiary to, directly or indirectly, open, establish or maintain any
deposit account, investment account or any other account with any bank or other
financial institution, other than the Blocked Accounts and the accounts set
forth in Schedule 8.10 hereto, except: (a) as to any new or additional Blocked
Accounts and other such new or additional accounts which contain any Collateral
or proceeds thereof, with the prior written consent of Lender and subject to
such conditions thereto as Lender may establish and (b) as to any accounts used
by Borrower or such Subsidiary to make payments of payroll, taxes or other
obligations to third parties, after prior written notice to Lender.
9.14 Compliance with ERISA.
(a) Borrower shall not, and shall not permit any Subsidiary to, with
respect to any "employee benefit plans" maintained by Borrower or any of its
ERISA Affiliates: (i) terminate any of such employee benefit plans so as to
incur any liability to the Pension Benefit Guaranty Corporation established
pursuant to ERISA, (ii) allow or suffer to exist any prohibited transaction
involving any of such employee benefit plans or any trust created thereunder
which would subject Borrower, any such Subsidiary or such ERISA Affiliate to a
tax or penalty or other liability on prohibited transactions imposed under
Section 4975 of the Code or ERISA, (iii) fail to pay to any such employee
benefit plan any contribution which it is obligated to pay under Section 302 of
ERISA, Section 412 of the Code or the terms of such plan, (iv) allow or suffer
to exist any accumulated funding deficiency, whether or not waived, with
respect to any such employee benefit plan, (v) allow or suffer to exist any
occurrence of a reportable event or any other event or condition which presents
a material risk of termination by the Pension Benefit Guaranty Corporation of
any such employee benefit plan that is a single employer plan, which
termination could result in any liability to the Pension Benefit Guaranty
Corporation or (vi) incur any withdrawal liability with respect to any
multiemployer pension plan.
(b) Borrower shall, and shall cause its Subsidiaries to,
promptly forward to Lender any notices it receives (i) from the Pension Benefit
Guaranty Corporation or the trustee of any "multiemployer plan" with respect to
any "multiemployer plan" to which it is obligated to contribute or (ii) from
any governmental authority or any member of any pension plan, with respect to
any pension to which it is obligated to contribute.
(c) As used in this Section 9.14, the terms "employee benefit
plans", "accumulated funding deficiency" and "reportable event" shall have the
respective meanings assigned to them in ERISA, and the term "prohibited
transaction" shall have the meaning assigned to it in Section 4975 of the Code
and ERISA.
9.15 Maintenance of Agreements. Borrower shall (a) maintain all
agreements with Franchisors entered into before or during the term of this
Agreement (including any renewal periods) and will not cancel, suspend,
terminate or modify any such agreement in any material respect without the
prior written consent of Lender and (b) promptly notify Lender of the
termination, material amendment, or entering into (in which event Borrower
shall provide a copy of such agreement to Lender) of any material agreement of
Borrower.
9.16 Maintenance of Property. Borrower agrees to keep, and to cause each
of its Subsidiaries to keep, all property useful and necessary to its
respective businesses in good working order and condition (ordinary wear and
tear excepted) in accordance with their past operating practices and not to
commit or suffer any waste with respect to any of its properties.
9.17 Acquisition Expenditures. Borrower shall not make, and shall not
permit any Subsidiary to make, (a) any acquisition of additional business
segments, franchise, contract packing or distribution rights, (b) any capital
contribution or acquisition of capital stock or other similar interests in any
other Person pursuant to which such Person shall become a Subsidiary of, or be
merged into, Borrower or any of Borrower's Subsidiaries, or (c) any acquisition
of the assets of any Person which constitute substantially all of an operating
unit or business of such Person (individually and collectively, "Acquisition
Expenditures") or a series of related Acquisition Expenditures in any year
unless (i) both prior to and after giving effect thereto (and any Loans
incurred in connection therewith) no Event of Default shall have occurred and
be continuing and (ii) the amount of cash consideration paid by Borrower and
its Subsidiaries at the closing of any single transaction in connection with
which Acquisition Expenditures are made, less the net increase in the Revolving
Loans available under Section 2.1(a) hereof as a result of any Inventory and
Accounts purchased by Borrower in connection with such Acquisition
Expenditures, shall not exceed $250,000.
9.18 Senior Bond Interest. To the extent that the interest paid by
Borrower in respect of the Senior Bonds pledged pursuant to Borrower's margin
account (the "Margin Account") exceeds the interest due in respect of
Borrower's indebtedness in the Margin Account (the "Excess"), Borrower shall
cause All-American Bottling Financial Corporation, its wholly-owned Subsidiary,
to request within two (2) Business Days after the payment by Borrower of
interest on the Senior Bonds, that the financial institution holding such
Senior Bonds immediately repay the Excess to All-American Bottling Financial
Corporation. Notwithstanding the provisions of Section 9.12 hereof, Borrower
shall cause All-American Bottling Corporation to pay, by dividend or otherwise,
the Excess received in accordance with Section 9.12 hereof, to Borrower
immediately upon its receipt.
9.19 Working Capital. Borrower shall maintain Working Capital of not
less than (a) $5,600,000 at September 30, 1997; (b) $3,000,000 at December 31,
1997; and (c) at the end of each quarterly period thereafter, amounts to be
determined by Lender (based on seventy-five (75%) of the working capital levels
set forth on the latest Budgeted Financial Statements delivered pursuant to
Section 9.6), provided, that, if Lender does not approve the latest Budgeted
Financial Statements, and if Borrower and Lender do not agree upon revision
thereto by January 31 of such year, Borrower shall be in default under this
covenant.
9.20 Adjusted Pre-Tax Net Income. Borrower's Adjusted Pre-Tax Net Income
for (a) the quarter ending on September 30, 1997, shall be $100,000; (b) the
six month period ending on December 31, 1997, shall be a loss of $1,100,000;
and (c) at the end of each quarterly period thereafter, amounts (calculated on
a cumulative basis for each fiscal year) to be determined by Lender (based on
seventy-five (75%) of the Adjusted Pre-Tax Net Income set forth on the latest
Budgeted Financial Statements delivered pursuant to Section 9.6), provided,
that, if Lender does not approve the latest Budgeted Financial Statements, and
if Borrower and Lender do not agree upon revision thereto by January 31 of such
year, Borrower shall be in default under this covenant.
9.21 Costs and Expenses. Borrower shall pay to Lender on demand all
costs, expenses, filing fees and taxes paid or payable in connection with the
preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Obligations, Lender's
rights in the Collateral, this Agreement, the other Financing Agreements and
all other documents related hereto or thereto, including any amendments,
supplements or consents which may hereafter be contemplated (whether or not
executed) or entered into in respect hereof and thereof, including: (a) all
costs and expenses of filing or recording (including Uniform Commercial Code
financing statement filing taxes and fees, documentary taxes, intangibles taxes
and mortgage recording taxes and fees, if applicable); (b) costs and expenses
and fees for insurance premiums, environmental audits, surveys, assessments,
engineering reports and inspections, appraisal fees and search fees; (c) costs
and expenses of remitting loan proceeds, collecting checks and other items of
payment, and establishing and maintaining the Blocked Accounts, together with
Lender's customary charges and fees with respect thereto; (d) charges, fees or
expenses charged by any bank or issuer in connection with the Letter of Credit
Accommodations; (e) costs and expenses of preserving and protecting the
Collateral; (f) costs and expenses paid or incurred in connection with
obtaining payment of the Obligations, enforcing the security interests and
liens of Lender, selling or otherwise realizing upon the Collateral, and
otherwise enforcing the provisions of this Agreement and the other Financing
Agreements or defending any claims made or threatened against Lender arising
out of the transactions contemplated hereby and thereby (including preparations
for and consultations concerning any such matters); (g) at any time after an
Event of Default has occurred and is continuing, all out-of-pocket expenses and
costs incurred by Lender from time to time during the course of periodic field
examinations of the Collateral and Borrower's operations, plus a per diem
charge at the rate of $650 per person per day for Lender's examiners in the
field and office; and (h) the fees and disbursements of counsel (including
legal assistants) to Lender in connection with any of the foregoing.
9.22 Further Assurances. At the request of Lender at any time and from
time to time, Borrower shall, at its expense, duly execute and deliver, or
cause to be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary
or proper to evidence, perfect, maintain and enforce the security interests and
the priority thereof in the Collateral and to otherwise effectuate the
provisions or purposes of this Agreement or any of the other Financing
Agreements. Lender may at any time and from time to time request a certificate
from an officer of Borrower representing that all conditions precedent to the
making of Loans and providing Letter of Credit Accommodations contained herein
are satisfied. In the event of such request by Lender, Lender may, at its
option, cease to make any further Loans or provide any further Letter of Credit
Accommodations until Lender has received such certificate and, in addition,
Lender has determined that such conditions are satisfied. Where permitted by
law, Borrower hereby authorizes Lender to execute and file one or more UCC
financing statements signed only by Lender.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any one or more of
the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) Borrower fails to pay when due any of the Obligations or fails to
perform any of the terms, covenants, conditions or provisions contained in this
Agreement or any of the other Financing Agreements;
(b) any representation, warranty or statement of fact made by
Borrower to Lender in this Agreement, the other Financing Agreements or any
other agreement, schedule, confirmatory assignment or otherwise, including
without limitation, the Indenture and any and all material agreements with
Franchisors, shall when made or deemed made be false or misleading in any
material respect;
(c) any Obligor revokes, terminates or fails to perform any of the
terms, covenants, conditions or provisions of any guarantee, endorsement or
other agreement of such party in favor of Lender;
(d) any judgment for the payment of money is rendered against
Borrower or any Obligor in excess of $250,000 in any one case or in excess of
$500,000 in the aggregate with all other outstanding judgments and which
remains undischarged or unvacated for a period in excess of thirty (30) days or
execution shall at any time not be effectively stayed, or any judgment other
than for the payment of money, or injunction, attachment, garnishment or
execution is rendered against Borrower or any Obligor or any of their assets
which individually or in the aggregate with all other outstanding judgments (i)
adversely affects a material amount of Borrower's assets or (ii) materially
interferes with Borrower's ability to conduct its business;
(e) any Obligor (being a natural person or a general partner of an
Obligor which is a partnership) dies or Borrower or any Obligor, which is a
partnership, limited liability company, limited liability partnership or a
corporation, dissolves or suspends or discontinues doing business;
(f) Borrower or any Obligor becomes insolvent (however defined or
evidenced), makes an assignment for the benefit of creditors, makes or sends
notice of a bulk transfer or calls a meeting of its creditors or principal
creditors;
(g) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law
or in equity) is filed against Borrower or any Obligor or all or any part of
its properties and such petition or application is not dismissed within thirty
(30) days after the date of its filing or Borrower or any Obligor shall file
any answer admitting or not contesting such petition or application or
indicates its consent to, acquiescence in or approval of, any such action or
proceeding or the relief requested is granted sooner;
(h) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by Borrower or any Obligor or for all or any part of its
property; or
(i) any default by Borrower or any Obligor under any agreement,
document or instrument relating to any indebtedness for borrowed money owing to
any person other than Lender, or any capitalized lease obligations, contingent
indebtedness in connection with any guarantee, letter of credit, indemnity or
similar type of instrument in favor of any person other than Lender, in any
case in an amount in excess of $200,000, which default continues for more than
the applicable cure period, if any, with respect thereto, or any default by
Borrower or any Obligor under the Indenture, any agreement with a Franchisor,
any other material contract, lease, license or other obligation to any person
other than Lender, which default continues for more than the applicable cure
period, if any, with respect thereto;
(j) any change in the controlling ownership of Borrower;
(k) the indictment or threatened indictment of Borrower or any
Obligor under any criminal statute, or commencement or threatened commencement
of criminal or civil proceedings against Borrower or any Obligor, pursuant to
which statute or proceedings the penalties or remedies sought or available
include forfeiture of any of the property of Borrower or such Obligor;
(l) there shall be a material adverse change in the business, assets
or prospects of Borrower or any Obligor after the date hereof; or
(m) there shall be an event of default under any of the other
Financing Agreements.
10.2 Remedies.
(a) At any time an Event of Default exists or has occurred and is
continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial Code and
other applicable law, all of which rights and remedies may be exercised without
notice to or consent by Borrower or any Obligor, except as such notice or
consent is expressly provided for hereunder or required by applicable law. All
rights, remedies and powers granted to Lender hereunder, under any of the other
Financing Agreements, the Uniform Commercial Code or other applicable law, are
cumulative, not exclusive and enforceable, in Lender's discretion,
alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for
an injunction to restrain a breach or threatened breach by Borrower of this
Agreement or any of the other Financing Agreements. Lender may, at any time or
times, proceed directly against Borrower or any Obligor to collect the
Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, Lender may, in its discretion and
without limitation, (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender (provided, that, upon the occurrence of any
Event of Default described in Sections 10.1(g) and 10.1(h), all Obligations
shall automatically become immediately due and payable), (ii) with or without
judicial process or the aid or assistance of others, enter upon any premises on
or in which any of the Collateral may be located and take possession of the
Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (iii) require Borrower, at Borrower's expense, to
assemble and make available to Lender any part or all of the Collateral at any
place and time designated by Lender, (iv) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral, (v) remove any or
all of the Collateral from any premises on or in which the same may be located
for the purpose of effecting the sale, foreclosure or other disposition thereof
or for any other purpose, (vi) sell, lease, transfer, assign, deliver or
otherwise dispose of any and all Collateral (including entering into contracts
with respect thereto, public or private sales at any exchange, broker's board,
at any office of Lender or elsewhere) at such prices or terms as Lender may
deem reasonable, for cash, upon credit or for future delivery, with Lender
having the right to purchase the whole or any part of the Collateral at any
such public sale, all of the foregoing being free from any right or equity of
redemption of Borrower, which right or equity of redemption is hereby expressly
waived and released by Borrower and/or (vii) terminate this Agreement. If any
of the Collateral is sold or leased by Lender upon credit terms or for future
delivery, the Obligations shall not be reduced as a result thereof until
payment therefor is finally collected by Lender. If notice of disposition of
Collateral is required by law, five (5) days prior notice by Lender to Borrower
designating the time and place of any public sale or the time after which any
private sale or other intended disposition of Collateral is to be made, shall
be deemed to be reasonable notice thereof and Borrower waives any other notice.
In the event Lender institutes an action to recover any Collateral or seeks
recovery of any Collateral by way of prejudgment remedy, Borrower waives the
posting of any bond which might otherwise be required.
(c) Lender may apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other disposition of
the Collateral to payment of the Obligations, in whole or in part and in such
order as Lender may elect, whether or not then due. Borrower shall remain
liable to Lender for the payment of any deficiency with interest at the highest
rate provided for herein and all costs and expenses of collection or
enforcement, including attorneys' fees and legal expenses.
(d) Without limiting the foregoing, upon the occurrence of an Event
of Default or an event which with notice or passage of time or both would
constitute an Event of Default, Lender may, at its option, without notice, (i)
cease making Loans or arranging for Letter of Credit Accommodations or reduce
the lending formulas or amounts of Revolving Loans and Letter of Credit
Accommodations available to Borrower and/or (ii) terminate any provision of
this Agreement providing for any future Loans or Letter of Credit
Accommodations to be made by Lender to Borrower.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a) The validity, interpretation and enforcement of this Agreement
and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of Illinois
(without giving effect to principles of conflicts of law).
(b) Borrower and Lender irrevocably consent and submit to the non-
exclusive jurisdiction of the courts of the State of Illinois and the United
States District Court for the Northern District of Illinois and waive any
objection based on venue or forum non conveniens with respect to any action
instituted therein arising under this Agreement or any of the other Financing
Agreements or in any way connected with or related or incidental to the
dealings of the parties hereto in respect of this Agreement or any of the other
Financing Agreements or the transactions related hereto or thereto, in each
case whether now existing or hereafter arising, and whether in contract, tort,
equity or otherwise, and agree that any dispute with respect to any such
matters shall be heard only in the courts described above (except that Lender
shall have the right to bring any action or proceeding against Borrower or its
property in the courts of any other jurisdiction which Lender deems necessary
or appropriate in order to realize on the Collateral or to otherwise enforce
its rights against Borrower or its property).
(c) Borrower hereby waives personal service of any and all process
upon it and consents that all such service of process may be made by certified
mail (return receipt requested) directed to its address set forth on the
signature pages hereof and service so made shall be deemed to be completed five
(5) days after the same shall have been so deposited in the U.S. mails, or, at
Lender's option, by service upon Borrower in any other manner provided under
the rules of any such courts. Within thirty (30) days after such service,
Borrower shall appear in answer to such process, failing which Borrower shall
be deemed in default and judgment may be entered by Lender against Borrower for
the amount of the claim and other relief requested.
(d) BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT
OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER AND
LENDER EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT
BORROWER OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) Lender shall not have any liability to Borrower (whether in tort,
contract, equity or otherwise) for losses suffered by Borrower in connection
with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and non-
appealable judgment or court order binding on Lender, that the losses were the
result of acts or omissions constituting gross negligence or willful
misconduct. In any such litigation, Lender shall be entitled to the benefit of
the rebuttable presumption that it acted in good faith and with the exercise of
ordinary care in the performance by it of the terms of this Agreement.
11.2 Waiver of Notices. Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the
Collateral and this Agreement, except such as are expressly provided for
herein. No notice to or demand on Borrower which Lender may elect to give
shall entitle Borrower to any other or further notice or demand in the same,
similar or other circumstances.
11.3 Amendments and Waivers. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender, and as to amendments, as also signed by an authorized officer of
Borrower. Lender shall not, by any act, delay, omission or otherwise be deemed
to have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only to the extent specifically
set forth therein. A waiver by Lender of any right, power and/or remedy on any
one occasion shall not be construed as a bar to or waiver of any such right,
power and/or remedy which Lender would otherwise have on any future occasion,
whether similar in kind or otherwise.
11.4 Waiver of Counterclaims. Borrower waives all rights to interpose any
claims, deductions, setoffs or counterclaims of any nature (other then
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
11.5 Indemnification. Borrower shall indemnify and hold Lender, and its
directors, agents, employees and counsel, harmless from and against any and all
losses, claims, damages, liabilities, costs or expenses imposed on, incurred by
or asserted against any of them in connection with any litigation,
investigation, claim or proceeding commenced or threatened related to the
negotiation, preparation, execution, delivery, enforcement, performance or
administration of this Agreement, any other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated
hereby or any act, omission, event or transaction related or attendant thereto,
including amounts paid in settlement, court costs, and the fees and expenses of
counsel. To the extent that the undertaking to indemnify, pay and hold
harmless set forth in this Section may be unenforceable because it violates any
law or public policy, Borrower shall pay the maximum portion which it is
permitted to pay under applicable law to Lender in satisfaction of indemnified
matters under this Section. The foregoing indemnity shall survive the payment
of the Obligations and the termination or non-renewal of this Agreement.
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 Term.
(a) This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall continue
in full force and effect for a term ending on the date three (3) years from the
date hereof (the "Renewal Date"), and from year to year thereafter, unless
sooner terminated pursuant to the terms hereof; provided, that, Lender may, at
its option, extend the Renewal Date for a period of one (1) year beginning on
the third anniversary of the date hereof and on each anniversary thereafter by
giving Borrower notice at least sixty (60) days prior to the third anniversary
of this Agreement, or any such anniversary thereafter, as the case may be.
Lender or Borrower (subject to Lender's right to extend the Renewal Date as
provided above) may terminate this Agreement and the other Financing Agreements
effective on the Renewal Date or on the anniversary of the Renewal Date in any
year by giving to the other party at least sixty (60) days prior written
notice; provided, that, this Agreement and all other Financing Agreements must
be terminated simultaneously. Upon the effective date of termination or non-
renewal of the Financing Agreements, Borrower shall pay to Lender, in full, all
outstanding and unpaid Obligations and shall furnish cash collateral to Lender
in such amounts as Lender determines are reasonably necessary to secure Lender
from loss, cost, damage or expense, including attorneys' fees and legal
expenses, in connection with any contingent Obligations, including issued and
outstanding Letter of Credit Accommodations and checks or other payments
provisionally credited to the Obligations and/or as to which Lender has not yet
received final and indefeasible payment. Such payments in respect of the
Obligations and cash collateral shall be remitted by wire transfer in Federal
funds to such bank account of Lender, as Lender may, in its discretion,
designate in writing to Borrower for such purpose. Interest shall be due until
and including the next Business Day, if the amounts so paid by Borrower to the
bank account designated by Lender are received in such bank account later than
2:00 p.m., Chicago time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge Borrower of its respective duties,
obligations and covenants under this Agreement or the other Financing
Agreements until all Obligations have been fully and finally discharged and
paid, and Lender's continuing security interest in the Collateral and the
rights and remedies of Lender hereunder, under the other Financing Agreements
and applicable law, shall remain in effect until all such Obligations have been
fully and finally discharged and paid.
(c) If for any reason this Agreement is terminated prior to the end
of the then current term or renewal term of this Agreement, in view of the
impracticality and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Lender's lost
profits as a result thereof, Borrower agrees to pay to Lender, upon the
effective date of such termination, an early termination fee in the amount set
forth below if such termination is effective in the period indicated below;
provided, however, no such termination fee shall be due or payable if (i)
Borrower repays all outstanding Revolving Loans and Letter of Credit
Accommodations within the one hundred twenty (120) day time period ending on
the third anniversary of the date hereof or within the sixty (60) day time
period ending on any renewal period as provided in Section 12.1(a) hereof, (ii)
repayment of all Revolving Loans and Letter of Credit Accommodations is made
from the proceeds of an initial public offering of securities issued by
Borrower, or (iii) if Borrower refinances the loans contemplated by this
Agreement with CoreStates Bank, N.A.:
AMOUNT PERIOD
(i) 2.0% of Maximum Credit From the date hereof
to and including the
first anniversary
hereof
(ii) 1.0% of Maximum Credit From the first
anniversary hereof to
and including the
second anniversary
hereof
(iii) 0.5% of Maximum Credit From the second
anniversary hereof to
and including the
third anniversary
hereof
(iv) 0.25% of Maximum Credit If the term of this
Agreement is extended
for one (1) or more
additional one (1)
year periods as
provided above, from
the third anniversary
hereof to and
including the fourth
anniversary hereof
and for all one (1)
year periods
thereafter
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrower agrees
that it is reasonable under the circumstances currently existing. In addition,
Lender shall be entitled to such early termination fee upon the occurrence of
any Event of Default described in Sections 10.1(g) and 10.1(h) hereof, even if
Lender does not exercise its right to terminate this Agreement, but elects, at
its option, to provide financing to Borrower or permit the use of cash
collateral under the United States Bankruptcy Code. The early termination fee
provided for in this Section 12.1 shall be deemed included in the Obligations.
12.2 Notices. All notices, requests and demands hereunder shall be in
writing and (a) made to Lender at its address set forth below and to Borrower
at its chief executive office set forth below, or to such other address as
either party may designate by written notice to the other in accordance with
this provision, and (b) deemed to have been given or made: if delivered in
person, immediately upon delivery; if by telex, telegram or facsimile
transmission, immediately upon sending and upon confirmation of receipt; if by
nationally recognized overnight courier service with instructions to deliver
the next Business Day, one (1) Business Day after sending; and if by certified
mail, return receipt requested, five (5) days after mailing.
12.3 Partial Invalidity. If any provision of this Agreement is held to be
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
12.4 Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Lender, Borrower and their respective
successors and assigns, except that Borrower may not assign its rights under
this Agreement, the other Financing Agreements and any other document referred
to herein or therein without the prior written consent of Lender. Lender may,
after notice to Borrower, assign its rights and delegate its obligations under
this Agreement and the other Financing Agreements and further may assign, or
sell participations in, all or any part of the Loans, the Letter of Credit
Accommodations or any other interest herein to another financial institution or
other person, in which event, the assignee or participant shall have, to the
extent of such assignment or participation, the same rights and benefits as it
would have if it were Lender hereunder, except as otherwise provided by the
terms of such assignment or participation.
12.5 Confidentiality.
(a) Lender shall use all reasonable efforts to keep confidential, in
accordance with its customary procedures for handling confidential information
and safe and sound lending practices, any non-public information supplied to it
by Borrower pursuant to this Agreement which is clearly and conspicuously
marked as confidential at the time such information is furnished by Borrower to
Lender, provided, that, nothing contained herein shall limit the disclosure of
any such information: (i) to the extent required by statute, rule, regulation,
subpoena or court order, (ii) to bank examiners and other regulators, auditors
and/or accountants, (iii) in connection with any litigation to which Lender is
a party, (iv) to any assignee or participant (or prospective assignee or
participant) so long as such assignee or participant (or prospective assignee
or participant) shall have first agreed in writing to treat such information as
confidential in accordance with this Section 12.5, or (v) to counsel for Lender
or any participant or assignee (or prospective participant or assignee).
(b) In no event shall this Section 12.5 or any other provision of
this Agreement or applicable law be deemed: (i) to apply to or restrict
disclosure of information that has been or is made public by Borrower or any
third party without breach of this Section 12.5 or otherwise become generally
available to the public other than as a result of a disclosure in violation
hereof, (ii) to apply to or restrict disclosure of information that was or
becomes available to Lender on a non-confidential basis from a person other
than Borrower, (iii) require Lender to return any materials furnished by
Borrower to Lender or (iv) prevent Lender from responding to routine
informational requests in accordance with the Code of Ethics for the Exchange
of Credit Information promulgated by The Robert Morris Associates or other
applicable industry standards relating to the exchange of credit information.
The obligations of Lender under this Section 12.5 shall supersede and replace
the obligations of Lender under any confidentiality letter signed prior to the
date hereof.
12.6 Entire Agreement. This Agreement, the other Financing Agreements,
any supplements hereto or thereto, and any instruments or documents delivered
or to be delivered in connection herewith or therewith represents the entire
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written. In the event of any inconsistency between the
terms of this Agreement and any schedule or exhibit hereto, the terms of this
Agreement shall govern.
IN WITNESS WHEREOF, Lender and Borrower have caused these presents to be
duly executed as of the day and year first above written.
LENDER BORROWER
CONGRESS FINANCIAL CORPORATION (Central) ALL-AMERICAN BOTTLING CORPORATION
By: RICHARD A. DICKARD By: STEPHEN R. KERR
Richard A. Dickard Stephen R. Kerr
Title: Senior Vice President Title: Vice President and Chief
Financial Officer
Address: Chief Executive Office:
150 South Wacker Drive 15 North Robinson
Suite 2200 Suite 1200
Chicago, Illinois 60606-4204 Oklahoma City, Oklahoma 73102
EXHIBIT A
INFORMATION CERTIFICATE
EXHIBIT B
FORM OF DAILY/WEEKLY BORROWING BASE CERTIFICATE
EXHIBIT C
FORM OF MONTHLY BORROWING BASE CERTIFICATE
EXHIBIT D
1997 BUDGET INCOME STATEMENT
SCHEDULE 8.4
EXISTING LIENS
SCHEDULE 8.8
ENVIRONMENTAL COMPLIANCE
SCHEDULE 8.9
MULTIEMPLOYER PLANS
SCHEDULE 8.10
BANK ACCOUNTS
SCHEDULE 9.10
EXISTING LOANS, ADVANCES AND GUARANTEES