EXHIBIT 10.2
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$3,000,000
BRIDGE LOAN AGREEMENT
dated as of
June 9, 1998
among
THE HAMLET GROUP, INC.
as Borrower
▇▇▇ ▇▇▇ ROO, INC.,
H.H.K. OF VIRGINIA, INC.
and
H.H. OF MARYLAND, INC.,
as Guarantors
and
FRI-MRD CORPORATION,
as Lender
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TABLE OF CONTENTS
Page
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ARTICLE I
Definitions
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Section 1.1 Defined Terms................................................... 1
Section 1.2 Terms Generally................................................. 11
Section 1.3 Accounting Terms; GAAP.......................................... 12
ARTICLE II
The Bridge Loan
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Section 2.1 Bridge Loan..................................................... 12
Section 2.2 Funding of Borrowings........................................... 12
Section 2.3 Notes........................................................... 12
Section 2.4 Repayment of Loan on Maturity Date; Mandatory Prepayment........ 13
Section 2.5 Optional Prepayment of Loan..................................... 13
Section 2.6 Interest........................................................ 13
Section 2.7 Taxes........................................................... 14
Section 2.8 Payments Generally; Pro Rata Treatment; Sharing of Set-offs..... 14
ARTICLE III
Guarantee
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Section 3.1 The Guarantee................................................... 15
Section 3.2 Obligations Unconditional....................................... 15
Section 3.3 Reinstatement................................................... 16
Section 3.4 Subrogation..................................................... 17
Section 3.5 Remedies........................................................ 17
Section 3.6 Continuing Guarantee............................................ 17
Section 3.7 General Limitation on Guarantee Obligations..................... 17
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ARTICLE IV
Representations and Warranties
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Section 4.1 Borrower's Representations and Warranties..................... 18
Section 4.2 Lender's Representations and Warranties....................... 19
ARTICLE V
Conditions.................................... 20
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ARTICLE VI
Affirmative Covenants
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Section 6.1 Financial Statements and Other Information.................... 21
Section 6.2 Notices of Material Events.................................... 22
Section 6.3 Existence; Conduct of Business................................ 23
Section 6.4 Payment of Obligations........................................ 23
Section 6.5 Maintenance of Properties; Insurance.......................... 23
Section 6.6 Books and Records; Inspection Rights.......................... 23
Section 6.7 Compliance with Laws.......................................... 23
Section 6.8 Use of Proceeds............................................... 24
Section 6.9 Further Assurances............................................ 24
Section 6.10 Conduct of Business........................................... 24
ARTICLE VII
Negative Covenants
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Section 7.1 Debt.......................................................... 24
Section 7.2 Liens......................................................... 25
Section 7.3 Fundamental Changes........................................... 25
Section 7.4 Investments, Loans, Advances, Suretyship Liabilities and
Acquisitions.................................................. 26
Section 7.5 Hedging Agreements............................................ 26
Section 7.6 Restricted Payments........................................... 26
Section 7.7 Transactions with Affiliates.................................. 26
Section 7.8 Restrictive Agreements........................................ 26
ARTICLE VIII
Events of Default............................... 27
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ARTICLE IX
Miscellaneous
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Section 9.1 Notices....................................................... 29
Section 9.2 Waivers; Amendments........................................... 31
Section 9.3 Expenses; Indemnity; Damage Waiver............................ 31
Section 9.4 Successors and Assigns........................................ 31
Section 9.5 Survival...................................................... 32
Section 9.6 Counterparts; Integration; Effectiveness...................... 32
Section 9.7 Marshalling; Recapture........................................ 32
Section 9.8 Severability.................................................. 33
Section 9.9 Right of Setoff............................................... 33
Section 9.10 Governing Law; Jurisdiction; Consent to Service of Process.... 33
Section 9.11 Headings...................................................... 34
SCHEDULES AND EXHIBITS
Schedule 6.1 Additional Information
Schedule 7.1 Debt
Schedule 7.2 Liens
Schedule 7.4 Investments
Schedule 7.8 Restrictive Agreements
Exhibit A Bridge Note
Exhibit B Opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, Counsel to the Borrower
Exhibit C Pledge Agreement
Exhibit D Security Agreement
Exhibit E Assignment of Leases
iii
BRIDGE LOAN AGREEMENT dated as of June 9, 1998, among THE HAMLET
GROUP, INC., as Borrower, H.H.K. OF VIRGINIA, INC., H.H. OF MARYLAND, INC. and
▇▇▇ ▇▇▇ ROO, INC., as Guarantors, and FRI-MRD CORPORATION, as Lender.
The parties hereto agree as follows:
ARTICLE I
Definitions
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Section 1.1 Defined Terms. As used in this Agreement, the following
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terms have the meanings specified below:
"Affiliate" means, with respect to a specified Person, another Person
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that directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
"Agreement" means this Bridge Loan Agreement, as amended from time to
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time.
"Assignment of Leases" means that certain Assignment of Leases, dated
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as of the date hereof, executed by the Borrower and the Subsidiary Guarantors in
favor of Lender, in substantially the form of Exhibit E.
"Bankruptcy Code" means Title 11 of the United States Code entitled
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Bankruptcy, as now or hereafter in effect.
"Board" means the Board of Governors of the Federal Reserve System of
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the United States of America.
"Borrower" means The Hamlet Group, Inc., a California corporation.
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"Bridge Note" has the meaning assigned to such term in Section 2.3(a).
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"Business Day" means any day that is not a Saturday, Sunday or other
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day on which commercial banks in Los Angeles, California are authorized or
required by law to remain closed.
BRIDGE LOAN AGREEMENT
"Capital Lease Obligations" of any Person means the obligations of
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such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"Change in Control" means (a) the acquisition of ownership, directly
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or indirectly, beneficially or of record, by any Person or group (within the
meaning of Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934
and the rules of the Securities and Exchange Commission thereunder as in effect
on the date hereof), of shares representing more than 25% of the aggregate
ordinary voting power represented by the issued and outstanding capital stock of
KKR (other than Lender or any Affiliate of Lender); (b) occupation of a majority
of the seats (other than vacant seats) on the board of directors of KKR by
Persons who were neither (i) nominated by the board of directors of KKR nor (ii)
appointed by directors so nominated; or (c) the failure by KKR to beneficially
own 100% of the outstanding capital stock of the Borrower and each Subsidiary
Guarantor.
"Closing Date" means the date on which the Loan is advanced hereunder.
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"Code" means the Internal Revenue Code of 1986, as amended from time
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to time.
"Collateral" means the collateral identified in the Security Agreement
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and the Pledge Agreement.
"Compliance Certificate" means a certificate signed by a Responsible
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Officer of the Borrower certifying as to the matters set forth in subsection (c)
of Article V.
"Control" means the possession, directly or indirectly, of the power
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to direct or cause the direction of the management or policies of a Person,
whether through the ability to exercise voting power, by contract or otherwise;
provided that beneficial ownership of 10% or more of the voting stock or equity
interests of a Person will be deemed to be Control of such Person. "Controlling"
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and "Controlled" have meanings correlative thereto.
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"Debt" of any Person means, without duplication, (a) all obligations
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of such Person for borrowed money, whether or not evidenced by bonds,
debentures, notes or similar instruments, (b) all Capital Lease Obligations of
such Person, (c) all obligations of such Person to pay the deferred purchase
price of property or services (other than current accounts payable in the
ordinary course of business), (d) all indebtedness secured by a Lien on the
property of such Person, whether or not such indebtedness shall have been
assumed by such
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BRIDGE LOAN AGREEMENT
Person (it being understood that if such Person has not assumed or otherwise
become personally liable for any such indebtedness, the amount of the Debt of
such Person in connection therewith shall be limited to the lesser of the face
amount of such indebtedness or the fair market value of all property of such
Person securing such indebtedness), (e) all obligations, contingent or
otherwise, with respect to the face amount of all letters of credit (whether or
not drawn) and banker's acceptances issued for the account of such Person, (f)
all Suretyship Liabilities of such Person, (g) all other obligations of such
Person upon which interest charges are customarily paid (other than accounts
payable in the ordinary course of business which are not more than 90 days past
due), (h) all obligations of such Person under conditional sale or other title
retention agreements relating to property acquired by such Person and (i) all
Debt (as defined above) of any partnership in which such Person is a general
partner (except to the extent such Debt is not recourse to such Person).
"Debt for Borrowed Money" of any Person means all Debt of such Person
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described in (without duplication) clauses (a), (b), (c), (d), (g) and, to the
extent constituting a Suretyship Liability in respect of Debt for Borrowed Money
of another Person, (f), of the definition of Debt.
"Default" means any event or condition which constitutes an Event of
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Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"Default Rate" has the meaning assigned such term in Section 2.6(b).
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"dollars" or "$" refers to lawful money of the United States of
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America.
"Environmental Laws" means all laws, statutes, ordinances, judgments,
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injunctions, decrees, writs, regulations, notice requirements, rules or orders
of any court or Governmental Authority relating to pollution or the protection
of human health or the environment or to emissions, discharges, releases or
threatened releases of any Hazardous Materials into the environment (including
without limitation ambient air, surface water, ground water, or land), or
otherwise relating to the manufacture, processing, distribution, generation,
treatment, storage, disposal, transport or handling of any Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
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amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" means with respect to any Person, any other Person
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that is a member of such Person's controlled group, or under common control with
such Person, within the meaning of the Code, and includes any trade or business
whether or not incorporated, that
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BRIDGE LOAN AGREEMENT
together with such Person would be deemed a "single employer" within the meaning
of Section 4001 of ERISA.
"ERISA Event" means (a) any "reportable event", as defined in Section
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4043 of ERISA or the regulations issued thereunder with respect to a Plan (other
than an event for which the 30-day notice period is waived); (b) the existence
with respect to any Plan of an "accumulated funding deficiency" (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan
administrator of any notice relating to an intention to terminate any Plan or
Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the
Borrower or any of its ERISA Affiliates of any liability with respect to the
withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the
receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by
any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.
"Event of Default" has the meaning assigned to such term in Article
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VIII.
"Exchange Act" has the meaning assigned to such term in Section
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6.1(a).
"Financial Officer" means the chief financial officer, principal
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accounting officer, treasurer or controller of the Borrower.
"FRI-Sub" means FRI-Sub, Inc., a Delaware corporation and an indirect
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subsidiary of Lender, and its successors and assigns.
"GAAP" means generally accepted accounting principles in the United
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States of America.
"Governmental Authority" means the government of the United States of
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America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
"Guaranteed Obligations" has the meaning assigned to such term in
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Section 3.1 hereof.
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BRIDGE LOAN AGREEMENT
"Guarantors" means, collectively, KKR and the Subsidiary Guarantors
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and each of their respective successors and assigns.
"Hazardous Materials" means any regulated quantity of asbestos in any
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form, urea formaldehyde, lead-based paint, PCBs, radon gas, crude oil or any
fraction thereof, all regulated forms of natural gas, petroleum products or by-
products, any regulated radioactive substance, any regulated toxic, infectious,
reactive, corrosive, ignitable or flammable chemical or chemical compound and
any other regulated hazardous substance, material or waste (as defined in or for
purposes of any Environmental Law), whether solid, liquid or gas.
"Hedging Agreement" means any interest rate protection agreement,
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foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging arrangement.
"Initial Period" means the period from the Closing Date until the
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later of the Maturity Date and the date all Obligations are paid in full;
provided, that if the Maturity Date is extended pursuant to clause (a) or (b) of
the definition thereof, Initial Period shall mean the period from the Closing
Date until the date the Merger Agreement is terminated.
"Interest Payment Date" means the last day of each March, June,
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September and December.
"KKR" means ▇▇▇ ▇▇▇ Roo, Inc., a Delaware corporation.
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"Lender" means FRI-MRD Corporation, a Delaware corporation and its
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permitted successors and assigns hereunder.
"Lien" means, with respect to any asset, (a) any mortgage, deed of
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trust, lien, pledge, hypothecation, encumbrance, charge or security interest in,
on or of such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
Capital Lease Obligation having substantially the same economic effect as any of
the foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.
"Loan Documents" means this Agreement, the Bridge Note and the
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Security Documents.
"Loan" has the meaning assigned to such term in Section 2.1(a).
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"Margin Stock" shall have the meaning provided such term in Regulation
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U of the Federal Reserve Board.
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BRIDGE LOAN AGREEMENT
"Material Adverse Change" means, with respect to any Person, the
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occurrence of any event or condition that has, or could reasonably be expected
to have, a Material Adverse Effect.
"Material Adverse Effect" means, with respect to any Person, a
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material adverse effect on (i) the financial position, results of operations,
revenues, assets, liabilities, or business of such Person and its Subsidiaries,
taken as a whole, (ii) the ability of such Person or any of its Affiliates to
perform its material obligations hereunder or under any other Loan Document or
(iii) the validity or enforceability of this Agreement or any other Loan
Document; provided, that, in the case of KKR, a fluctuation or fluctuations in
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the trading price of the KKR Common Shares occurring other than as a result of
KKR's willful misconduct cannot, in and of itself, constitute a Material
Adverse Effect.
"Maturity Date" means the Effective Time (as defined in the Merger
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Agreement); provided, that (a) (x) if the Merger Agreement is terminated due to
a material breach by Lender of any of its representations, warranties or
covenants contained therein, Maturity Date shall mean the earlier of (i) June 9,
2000 and (ii) the date on which KKR enters into an agreement that includes any
substantive terms with respect to an Acquisition Proposal (as defined in the
Merger Agreement) with any other Person (other than an agreement relating solely
to the treatment of confidential information), and (y) if the Merger Agreement
is terminated pursuant to Section 10.1(b) of the Merger Agreement and any of the
consents set forth on Schedule 4.4 to the Merger Agreement have not been
obtained, Maturity Date shall mean June 9, 2000, (b) if the Merger Agreement is
terminated pursuant to Section 10.1(d) of the Merger Agreement, Maturity Date
shall mean June 9, 1999, (c) if the Merger Agreement is terminated pursuant to
Section 10.1(e) of the Merger Agreement, Maturity Date shall mean thirty (30)
days after the date on which the Merger Agreement is terminated, and (d) if the
Merger Agreement is terminated for any other reason, Maturity Date shall mean
sixty (60) days after the date on which the Merger Agreement is terminated.
"Merger" means the merger of FRI-Sub with and into KKR, as
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contemplated by the Merger Agreement.
"Merger Agreement" means that certain Agreement and Plan of Merger,
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dated as of the date hereof, among Lender, FRI-Sub and KKR, as the same may be
amended from time to time.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc.
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"Multiemployer Plan" means with respect to any Person, on any date, a
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multiemployer plan defined as such in Section 3(37) of ERISA to which
contributions have
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BRIDGE LOAN AGREEMENT
been made at any time during the six-year period ending on or prior to such
date, by such Person or any of its ERISA Affiliates and that is covered by Title
IV of ERISA.
"Obligations" means all obligations, liabilities and indebtedness of
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every nature of the Borrower from time to time owing to Lender under or in
connection with any Loan Documents, excluding, however, Obligations owing to
Lender under the Merger Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
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defined in ERISA and any successor entity performing similar functions.
"Permitted Affiliate Transactions" means (i) advances of payroll
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payments and expenses to employees in the ordinary course of business, (ii) the
provision of administrative or management services by KKR or any of its officers
to any of its Subsidiaries in the ordinary course of business, (iii) any
employment agreement entered into by KKR or any of its Subsidiaries in the
ordinary course of business and (iv) Permitted Transfers.
"Permitted Encumbrances" means:
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(a) Liens imposed by law for taxes that are not yet due or are
being contested in compliance with Section 6.4;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's and other like Liens imposed by law, arising in the ordinary course
of business and securing obligations that are not overdue by more than 30 days
or are being contested in compliance with Section 6.4;
(c) pledges and deposits made in the ordinary course of business
in compliance with workers' compensation, unemployment insurance and other
social security laws or regulations;
(d) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature, in each case in the ordinary course of
business; provided that the aggregate amount of deposits at any time permitted
under this clause (d) shall not exceed $50,000;
(e) customary rights of landlords under the leases; and
(f) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary course
of business that do not secure any monetary obligations and do not materially
detract from the value of the
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BRIDGE LOAN AGREEMENT
affected property or interfere with the ordinary conduct of business of KKR, the
Borrower or any Subsidiary;
provided that the term "Permitted Encumbrances" shall not include any Lien
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securing Debt for Borrowed Money.
"Permitted Investments" means:
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(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are backed by
the full faith and credit of the United States of America), in each case
maturing within one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days
from the date of acquisition thereof and having, at such date of acquisition,
the two highest credit ratings obtainable from S&P or from Moody's;
(c) investments in certificates of deposit, banker's acceptances
and time deposits maturing within 180 days from the date of acquisition thereof
issued or guaranteed by or placed with, and money market deposit accounts issued
or offered by, any domestic office of any commercial bank organized under the
laws of the United States of America or any State thereof which has a combined
capital and surplus and undivided profits of not less than $500,000,000;
(d) fully collateralized repurchase agreements with a term of
not more than 30 days for securities described in clause (a) above and entered
into with a financial institution satisfying the criteria described in clause
(c) above; and
(e) intercompany notes payable by KKR issued in connection with
Permitted Transfers.
"Permitted Transfers" means transfers of cash between KKR and the
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Borrower for cash management purposes, whether by intercompany note, capital
contribution or dividend; provided that the net aggregate amount of cash
transferred to KKR by the Borrower during any period shall not exceed the
Borrower's current operating earnings during such period.
"Person" means any natural person, corporation, limited liability
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company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
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BRIDGE LOAN AGREEMENT
"Plan" means any employee pension benefit plan (other than a
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Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or
any ERISA Affiliate is, or, if such plan were terminated, would under Section
4069 of ERISA be deemed to be, an "employer" as defined in Section 3(5) of
ERISA.
"Pledge Agreement" means that certain Pledge Agreement, dated as of
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the date hereof, in substantially the form of Exhibit C executed by the Borrower
in favor of Lender.
"Prime Rate" means the rate of interest per annum publicly announced
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from time to time by Bank of America National Trust and Savings Association as
its prime rate in effect at its principal office in Los Angeles (the Prime Rate
not being intended to be the lowest rate of interest charged by Bank of America
National Trust and Savings Association in connection with extensions of credit
to debtors); each change in the Prime Rate shall be effective on the date such
change is publicly announced as effective.
"Related Parties" means, with respect to any specified Person, such
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Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person's Affiliates.
"Responsible Officer" means any of the following directors or officers
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of the Borrower: the Chairman or Vice Chairman of the Board of Directors, the
Chairman or Vice Chairman of the Executive Committee of the Board of Directors,
the President, any Senior Vice President or Executive Vice President, the Chief
Financial Officer, the Chief Operating Officers, the Chief Accounting Officer,
the Vice President/Treasurer or any Assistant Treasurer responsible for
compliance with this Agreement.
"Restricted Payment" means, with respect to any Person, any dividend
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or other distribution (whether in cash, securities or other property, but
excluding any payment made solely in non-redeemable common stock of such Person)
with respect to any shares of any class of capital stock of such Person or any
subsidiary of such Person, or any payment (whether in cash, securities or other
property, but excluding any payment made solely in non-redeemable common stock
of such Person), including any sinking fund or similar deposit, on account of
the purchase, redemption, retirement, acquisition, cancellation or termination
of any such shares of capital stock of such Person or any subsidiary of such
Person or any option, warrant or other right to acquire any such shares of
capital stock of such Person or any subsidiary of such Person.
"Security Agreement" means that certain Security Agreement, dated as
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of the date hereof, executed by the Borrower and the Subsidiary Guarantors in
favor of Lender, in substantially the form of Exhibit D.
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BRIDGE LOAN AGREEMENT
"Security Documents" means (i) the Security Agreement, (ii) the Pledge
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Agreement, (iii) the Assignment of Leases, and (iv) the Trademark Security
Agreement, if any, executed by the Borrower and the Subsidiary Guarantors in
favor of Lender, substantially in the form of Exhibit I to the Security
Agreement.
"Significant Subsidiary" means (a) any "significant subsidiary" within
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the meaning provided in Article 1, Rule 1-02 of Regulation S-X promulgated by
the Securities and Exchange Commission and (b) any other subsidiary that is
material to the applicable Person's condition (financial or otherwise), results
of operations, revenues, assets, liabilities, prospects or business.
"Solvent" as to any Person, as of any date, means (i) the sum of the
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assets of such Person, at present fair salable value, will exceed its
liabilities, including contingent liabilities as they become absolute and
matured, (ii) such Person has, in its reasonable judgment, sufficient capital
with which to conduct its business as presently conducted and (iii) such Person
has not incurred debts, and does not intend to incur debts, beyond its ability
to pay such debts as they mature. For purposes of this definition, "debt" means
any liability on a claim, and "claim" means (x) a right to payment, whether or
not such right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, legal, equitable, secured or unsecured, or (y) a right to an
equitable remedy for breach of performance if such breach gives rise to a
payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured,
or unsecured. With respect to any contingent liabilities, such liabilities
shall be computed at the amount which, in light of all the facts and
circumstances existing at the time, represents the amount which can reasonably
be expected to become an actual or matured liability.
"S&P" means Standard & Poor's Corporation.
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"subsidiary" means, with respect to any Person (the "parent") at any
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date, any corporation, limited liability company, partnership, association or
other entity the accounts of which are required to be consolidated with those of
the parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as,
with respect to any Person, any Person of which such Person and/or its
subsidiaries own, directly or indirectly, such number of outstanding shares (or
similar equity interest) as have more than 50% of the ordinary voting power for,
in the case of a corporation, the election of directors or, in all other cases,
the management of such Person.
"Subsidiary" means any subsidiary of KKR other than Color Me Mine,
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Inc., Arrosto Coffee Company and their respective subsidiaries.
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BRIDGE LOAN AGREEMENT
"Subsidiary Guarantors" means H.H.K. of Virginia, Inc., a Virginia
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corporation, and H.H. of Maryland, Inc., a Maryland corporation.
"Suretyship Liability" means any agreement, undertaking or other
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contractual arrangement by which any Person guarantees, endorses or otherwise
becomes or is contingently liable upon (by direct or indirect agreement,
contingent or otherwise, to provide funds for payment, to supply funds to or
otherwise to invest in a debtor, or otherwise to assure a creditor against loss)
any Debt of any other Person (other than by endorsements of instruments in the
course of collection), or guarantees the payment of dividends or other
distributions upon the shares of any other Person. The amount of any Person's
obligation under any Suretyship Liability shall (subject to any limitation set
forth therein) be deemed to be the principal amount of the indebtedness,
obligation or other liability guaranteed thereby.
"Taxes" means any and all present or future taxes, levies, imposts,
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duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"Transactions" means the execution, delivery and performance by the
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Borrower and the Guarantors of this Agreement and the other Loan Documents, the
borrowing of the Loan and the use of the proceeds thereof.
"Withdrawal Liability" means liability to a Multiemployer Plan as a
--------------------
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
Section 1.2 Terms Generally. The definitions of terms herein shall
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apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
"asset" and "property" shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.
11
BRIDGE LOAN AGREEMENT
Section 1.3 Accounting Terms; GAAP. Except as otherwise expressly
----------------------
provided herein, all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time; provided that
--------
for purposes of determining compliance with any covenant set forth in Article
VII, such terms shall be construed in accordance with GAAP as in effect on the
date of this Agreement applied on a basis consistent with the application used
in preparing the Borrower's audited financial statements referred to in Section
6.1.
ARTICLE II
The Bridge Loan
---------------
Section 2.1 Bridge Loan. (a) Subject to the terms and conditions
-----------
set forth herein, Lender agrees to make a term loan (the "Loan") to the Borrower
----
on the Closing Date, which Loan shall not exceed $3,000,000 in aggregate
principal amount at any time outstanding.
(b) All or any portion of the Loan may be voluntarily prepaid
pursuant to Section 2.5. The Loan shall mature on and be payable in full on the
Maturity Date, without further action on the part of the Lender.
Section 2.2 Funding of Borrowings. Subject to the terms hereof,
---------------------
Lender shall make the Loan by wire transfer of immediately available funds by
2:00 p.m., Los Angeles time, on the Closing Date to the account of the Borrower
set forth below:
Union Bank of California
ABA # 121000496
LA Headquarters Office
Account # ▇▇▇▇▇▇▇▇▇▇
ref: The Hamlet Group, Inc. - concentration
Section 2.3 Notes. (a) The Loan shall be evidenced by a non-
-----
negotiable promissory note in the form of Exhibit A (the "Bridge Note"). The
-----------
Bridge Note shall be dated the Closing Date and mature on the Maturity Date.
(b) Lender is hereby authorized, at its option, either (i) to
endorse on the schedule attached to the Bridge Note (or on a continuation of
such schedule attached to such Bridge Note and made a part thereof) an
appropriate notation evidencing the date and amount of the Loan evidenced
thereby and the date and amount of each principal and interest payment in
respect thereof, or (ii) to record such Loan and such payments in its books and
records.
12
BRIDGE LOAN AGREEMENT
Such schedule or such books and records, as the case may be, shall constitute
prima facie evidence of the accuracy of the information contained therein;
provided that any errors with respect to such schedule, books or records shall
not affect the Borrower's obligations to repay amounts owing hereunder.
Section 2.4 Repayment of Loan on Maturity Date; Mandatory Prepayment.
--------------------------------------------------------
(a) Subject to paragraphs (b) and (c) of this Section 2.4, the Borrower hereby
unconditionally promises to pay to Lender the then unpaid principal amount of
the Loan, all accrued and unpaid interest thereon, and all other Obligations on
the Maturity Date.
(b) If the Maturity Date is determined pursuant to clause (d) of
the definition thereof, the Borrower hereby unconditionally promises to pay to
Lender $1.0 million principal amount of the Loan and all accrued and unpaid
interest thereon on the thirtieth day after the date on which the Merger
Agreement is terminated.
(c) If the Maturity Date is determined pursuant to clause (a)(y)
of the definition thereof, the principal amount of the Loan shall be reduced by
$2.0 million on the date on which the Merger Agreement is terminated (with the
reduction constituting a forgiveness of such principal). Interest shall accrue
on such reduced principal amount from and after the date on which the Merger
Agreement is terminated until the Maturity Date.
Section 2.5 Optional Prepayment of Loan. (a) The Borrower shall
---------------------------
have the right at any time and from time to time to prepay, without penalty, the
Loan in whole or in part, subject to prior notice in accordance with paragraph
(b) of this Section.
(b) The Borrower shall notify Lender in writing of any
prepayment hereunder not later than 12:00 p.m. (noon), Los Angeles time, one
Business Day before the date of prepayment. Each such notice shall be
irrevocable and shall specify the prepayment date and the principal amount of
the Loan or portion thereof to be prepaid. Each partial prepayment of principal
of the Loan shall be in an amount of at least $300,000 or an integral multiple
of $50,000 in excess thereof. Prepayments shall be accompanied by accrued
interest on the principal amount prepaid.
Section 2.6 Interest. (a) The Loan shall bear interest at an annual
--------
rate of interest equal to the Prime Rate; provided, however, that if the
-------- -------
Maturity Date is extended pursuant to clauses (b) or (c) of the definition
thereof, the Loan shall, from and after the date on which the Merger Agreement
is terminated, bear interest at an annual rate of interest equal to the Prime
Rate plus 3%.
----
(b) Notwithstanding the foregoing, if any principal of or
interest on the Loan or any fee or other amount payable by the Borrower
hereunder is not paid when due,
13
BRIDGE LOAN AGREEMENT
whether at stated maturity, upon acceleration or otherwise, such overdue amount
shall bear interest, after as well as before judgment, at a rate per annum equal
to 1.5% plus the rate otherwise applicable to the Loan as provided in the
preceding paragraph of this Section (the "Default Rate").
------------
(c) Accrued interest on the Loan shall be payable in arrears on
each Interest Payment Date for the Loan and upon termination of this Agreement;
provided that (i) interest accrued pursuant to paragraph (b) of this Section
--------
shall be payable on demand and (ii) in the event of any repayment or prepayment
of the Loan, accrued interest on the principal amount repaid or prepaid shall be
payable on the date of such repayment or prepayment.
(d) All interest hereunder shall be computed on the basis of a
year of 360 days of twelve 30-day months, provided, however, that in the case of
a payment on any day other than an Interest Payment Date, interest shall be
payable for the actual number of days elapsed since the last Interest Payment
Date (including the first day but excluding the last day).
Section 2.7 Taxes. Any and all payments by or on account of any
-----
Obligation of the Borrower or the Guarantors hereunder shall be made free and
clear of and without deduction for any Taxes (other than taxes based on the net
income of Lender). Lender confirms that it is a United States Person for
federal income tax purposes.
Section 2.8 Payments Generally. (a) The Borrower shall make each
------------------
payment required to be made by it hereunder (whether of principal, interest,
fees, or of amounts payable under Section 2.9, or otherwise) prior to 12:00
noon, Los Angeles time, on the date when due, by wire transfer, in immediately
available funds, without set-off or counterclaim. Any amounts received after
such time on any date may, in the discretion of Lender, be deemed to have been
received on the next succeeding Business Day for purposes of calculating
interest thereon. All such payments shall be made to the account of Lender
specified below or to such other account designated by Lender in a written
notice to the Borrower not later than two Business Days prior to the date such
amount is due:
Bank of America
Concord, California
ABA # ▇▇▇▇▇▇▇▇▇
Account Name: FRI-MRD Corporation
Account # 12359-00417
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Account Administration, No. 5693
14
BRIDGE LOAN AGREEMENT
(b) If any payment hereunder shall be due on a day that is not a
Business Day, the date for payment shall be extended to the next succeeding
Business Day, and, in the case of any payment accruing interest, interest
thereon shall be payable for the period of such extension. All payments
hereunder shall be made in dollars.
ARTICLE III
Guarantee
---------
Section 3.1 The Guarantee. Each Guarantor hereby jointly and
-------------
severally guarantees to Lender (a) the prompt payment in full when due (whether
at stated maturity, by acceleration or otherwise) of the principal and interest
payable on the Loan, (b) the payment of all other Obligations (including,
without limitation, indemnities, fees and interest thereon and all Obligations
which, but for the automatic stay under Section 362(a) of the Bankruptcy Code
and the operation of Sections 502(b) and 506(b) of the Bankruptcy Code would
become due, and all interest accruing on the Obligations after the filing of a
petition by or against the Borrower or any of its subsidiaries under the
Bankruptcy Code, in accordance with and at the rate (including the Default Rate)
specified in this Agreement whether or not the claim for such interest is
allowed as a claim after such filing in any proceeding under the Bankruptcy
Code) of the Borrower now existing or hereafter incurred under, arising out of,
or in connection with any of the Loan Documents, (c) the due performance and
compliance by the Borrower with all of the terms, conditions and agreements
contained in any of the Loan Documents, (d) the payment of all sums advanced by
Lender under or pursuant hereto, with interest thereon from the due date
thereof, until paid, at the applicable rate specified in Section 2.6 and (e) all
renewals, extensions, amendments and changes of, or substitutions or
replacements for, all or any part of the foregoing (all such principal,
interest, obligations, indebtedness, performance, compliance and payments,
collectively, the "Guaranteed Obligations"). Each Guarantor hereby jointly and
----------------------
severally further agrees that if the Borrower shall fail to pay in full when due
(after giving effect to any cure periods) (whether at stated maturity, by
acceleration or otherwise) any of the Guaranteed Obligations, such Guarantor
will promptly pay the same, without any demand or notice whatsoever. Each
Guarantor's guarantee provided herein is a guarantee of payment and not of
collection.
Section 3.2 Obligations Unconditional. The joint and several
-------------------------
obligations of the Guarantors under Section 3.1 are absolute and unconditional,
irrespective of the value, genuineness, validity, regularity or enforceability
of the obligations of the Borrower under this Agreement or any other agreement
or instrument referred to herein or therein, or any substitution, release or
exchange of any other guarantee of or security for any of the Guaranteed
Obligations, and, to the fullest extent permitted by applicable law and subject
to Section 3.7 hereof, irrespective of any other circumstance whatsoever that
might otherwise
15
BRIDGE LOAN AGREEMENT
constitute a legal or equitable discharge or defense of a surety or guarantor,
it being the intent of this Section that the joint and several obligations of
the Guarantors hereunder shall be absolute and unconditional under any and all
circumstances. Without limiting the generality of the foregoing, it is agreed
that the occurrence of any one or more of the following shall not alter or
impair the liability of any Guarantor hereunder, which shall remain absolute and
unconditional as described above:
(a) at any time or from time to time, without notice to any
Guarantor, the time for any performance of or compliance with any of the
Guaranteed Obligations shall be extended, or such performance or compliance
shall be waived;
(b) any of the acts mentioned in any of the provisions of this
Agreement or any other agreement or instrument referred to herein shall be done
or omitted;
(c) any invalidity, irregularity or unenforceability of all or
part of the Guaranteed Obligations or of any security therefor;
(d) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under this Agreement or any
other agreement or instrument referred to herein shall be waived or any other
guarantee of any of the Guaranteed Obligations or any security therefor shall be
released or exchanged in whole or in part or otherwise dealt with;
(e) any lien or security interest granted to, or in favor of,
Lender as security for any of the Guaranteed Obligations shall fail to be
perfected or shall be released;
(f) the bankruptcy or insolvency of the Borrower; or
(g) any of the Guaranteed Obligations or any security therefor
shall be settled, compromised or released.
Each Guarantor hereby expressly waives diligence, presentment, demand of
payment, protest and all notices whatsoever, and any requirement that Lender
exhaust any right, power or remedy or proceed against the Borrower under this
Agreement or any other agreement or instrument referred to herein, or against
any other Person under any other guarantee of, or security for, any of the
Guaranteed Obligations.
Section 3.3 Reinstatement. If claim is ever made upon Lender for
-------------
repayment or recovery of any amount or amounts received in payment or on account
of any of the Guaranteed Obligations and Lender repays all or part of said
amount by reason of (a) any
16
BRIDGE LOAN AGREEMENT
judgment, decree or order of any court or administrative body having
jurisdiction over such payee or any of its property or (b) any settlement or
compromise of any such claim effected by Lender with any such claimant
(including the Borrower), then and in such event each Guarantor jointly and
severally agrees that any such judgment, decree, order, settlement or compromise
shall be binding upon it, notwithstanding any revocation hereof or the
cancellation of this Agreement or other instrument evidencing any liability of
the Borrower, and each Guarantor shall be and remain jointly and severally
liable to Lender hereunder for the amount so repaid or recovered to the same
extent as if such amount had never originally been received by Lender.
Section 3.4 Subrogation. Each Guarantor hereby agrees that until the
-----------
Maturity Date and the payment and satisfaction in full of all Guaranteed
Obligations, it shall not exercise any right or remedy arising by reason of any
performance by it of their guarantee in Section 3.1, whether by subrogation or
otherwise, against the Borrower or any other guarantor of any of the Guaranteed
Obligations or any security for any of the Guaranteed Obligations.
Section 3.5 Remedies. Each Guarantor agrees that, as between it and
--------
Lender, the obligations of the Borrower under this Agreement may be declared to
be forthwith due and payable as provided in Article VIII (and shall be deemed to
have become automatically due and payable as provided in Article VIII) for
purposes of Section 3.1 notwithstanding any stay, injunction or other
prohibition preventing such declaration (or such obligations from becoming
automatically due and payable) as against the Borrower and that, in the event of
such declaration (or such obligations being deemed to have become automatically
due and payable), such obligations (whether or not due and payable by the
Borrower) shall forthwith become due and payable by such Guarantor for purposes
of Section 3.1.
Section 3.6 Continuing Guarantee. The guarantee in this Article is a
--------------------
continuing guarantee and shall apply to all Guaranteed Obligations whenever
arising.
Section 3.7 General Limitation on Guarantee Obligations. Each
-------------------------------------------
Guarantor confirms that it is the intention of all parties to this Agreement
that neither the guarantee by such Guarantor nor any liability or payment by it
hereunder shall (i) render such Guarantor "insolvent," or (ii) constitute a
fraudulent transfer or conveyance, or (iii) constitute a transaction at an
undervalue or preference, or (iv) give rise to any similar or analogous event,
thing or circumstance, in each case, for purposes of the Bankruptcy Code, the
Uniform Fraudulent Conveyances Act, the Uniform Fraudulent Transfer Act or any
similar federal or state law. To effectuate the foregoing intention, Lender and
each Subsidiary Guarantor hereby irrevocably agree that the Guaranteed
Obligations shall be limited to the maximum amount as will, after giving effect
to all other contingent and fixed liabilities of such Subsidiary Guarantor and
after giving effect to any collections from or payments made by or on behalf of
any other guarantor in respect of the Guaranteed Obligations, result in the
Guaranteed
17
BRIDGE LOAN AGREEMENT
Obligations of such Subsidiary Guarantor hereunder neither rendering such
Subsidiary Guarantor "insolvent" nor constituting such fraudulent transfer or
conveyance, such transaction at an undervalue or preference or such other event,
thing or circumstance, in each case, under any such law.
ARTICLE IV
Representations and Warranties
------------------------------
Section 4.1 Borrower's Representations and Warranties. Each of the
-----------------------------------------
Borrower and the Guarantors jointly and severally represent and warrant to
Lender that:
(a) Authorization; Enforceability. Each of the Borrower and
-----------------------------
each of the Guarantors has all requisite power and authority to enter into each
of the Loan Documents such Person is party to and to consummate the
Transactions. The use of proceeds of the Loan will be within the Borrower's
corporate powers and will have been duly authorized as of the time of such use.
Each of the Loan Documents has been duly authorized, executed and delivered by
the Borrower and each Guarantor and constitutes a legal, valid and binding
obligation of the Borrower and each Guarantor, enforceable in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights generally and subject to
general principles of equity, regardless of whether considered in a proceeding
in equity or at law. The Borrower has no equity interest in any Person other
than the Subsidiary Guarantors.
(b) Financial Condition. KKR has heretofore made available to
-------------------
Lender consolidated balance sheets and statements of operations, stockholders
equity and cash flows for KKR and its Subsidiaries, as of and for the fiscal
year ended December 31, 1997, reported on by BDO ▇▇▇▇▇▇▇ LLP, independent public
accountants of KKR, and the condensed consolidated balance sheet and statements
of operations and cash flows for KKR and its Subsidiaries, as of and for the
fiscal quarter and the portion of the fiscal year ended March 31, 1998, as filed
in KKR's Forms 10-K and 10-Q with the Securities and Exchange Commission. Such
financial statements present fairly, in all material respects, the financial
position and results of operations and cash flows of KKR and its Subsidiaries as
of such dates and for such periods in accordance with GAAP, subject to year-end
audit adjustments and the limited condensed footnotes in the case of the
condensed statements for the fiscal quarter ended March 31, 1998.
(c) Solvency. On the Closing Date and after giving effect to
--------
the Transactions, each of the Borrower and each of the Guarantors will be
Solvent.
18
BRIDGE LOAN AGREEMENT
(d) Use of Proceeds; Margin Regulations. All proceeds of the
-----------------------------------
Loan will be used by the Borrower only in accordance with the provisions of
Section 6.8. No part of the proceeds of the Loan will be used by the Borrower to
purchase or carry any Margin Stock or to extend credit to others for the purpose
of purchasing or carrying any Margin Stock. Neither the making of the Loan nor
the use of the proceeds thereof will violate or be inconsistent with the
provisions of Regulations T, U or X of the Federal Reserve Board.
(e) Security Interests. (i) The provisions of the Security
------------------
Agreement are effective to create in favor of the Lender a legal, valid and
enforceable security interest in all right, title and interest of the Borrower
in the Collateral described therein, and the Security Agreement, upon the filing
of Form UCC-1 financing statements or the appropriate equivalent, creates a
fully perfected first lien on, and security interest in, all right, title and
interest in all of the Collateral described therein, subject to no Liens other
than Permitted Liens. The Borrower and the Subsidiary Guarantors have good and
indefeasible title to all Collateral described in the Security Agreement free
and clear of all Liens.
(ii) The security interests created in favor of Lender under the
Pledge Agreement constitute first priority perfected security interests in the
Collateral described in the Pledge Agreement, subject to no security interests
of any other Person. No filings or recordings are required in order to perfect
(or maintain the perfection or priority of) the security interests created in
the Collateral described in the Pledge Agreement and the proceeds thereof.
(f) Additional Representations and Warranties. As of the date
-----------------------------------------
hereof, the representations and warranties contained in the Merger Agreement are
true and correct in all material respects and are incorporated herein by
reference with the same force and effect as though herein set forth in full
(regardless of any termination of the Merger Agreement).
Section 4.2 Lender's Representations and Warranties. Lender
---------------------------------------
represents and warrants to the Borrower and the Guarantors that (a) it has all
requisite power and authority to enter into each of the Loan Documents to which
it is a party and to consummate the Transactions contemplated hereby and
thereby; (b) each of the Loan Documents to which it is a party has been duly
authorized, executed and delivered by Lender and constitutes a legal, valid and
binding obligation of Lender, enforceable in accordance with its terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally and subject to general principles of
equity, regardless of whether considered in a proceeding in equity or at law and
(c) the execution and performance by Lender of each of the Loan Documents to
which it is a party will not constitute a breach or a violation under the
charter or bylaws of Lender or constitute a violation of any Applicable Law (as
defined in the Merger Agreement).
19
BRIDGE LOAN AGREEMENT
ARTICLE V
Conditions
----------
The obligations of Lender to make the Loan hereunder shall not become
effective until the date on which each of the following conditions is satisfied
(or waived in accordance with Section 9.2):
(a) Lender shall have received from each party hereto and thereto a
counterpart of the Merger Agreement and each of the Loan Documents signed on
behalf of such party.
(b) Lender shall have received a favorable written opinion (addressed
to Lender and dated the Closing Date) of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel for the
Borrower, substantially in the form of Exhibit B. The Borrower hereby requests
such counsel to deliver such opinion.
(c) Lender shall have received such documents and certificates as
Lender or its counsel may reasonably request relating to the organization,
existence and good standing of the Borrower and each Guarantor, the
authorization of the Transactions and any other legal matters relating to the
Borrower, each Guarantor, the Loan Documents or the Transactions, all in form
and substance reasonably satisfactory to Lender and its counsel.
(d) Lender shall have received a certificate from the Borrower and
each Guarantor, dated the Closing Date and executed on behalf of the Borrower by
the President, a Vice President or a Financial Officer of the Borrower and each
Guarantor, respectively, confirming compliance with the conditions set forth in
paragraphs (h), (i) and (j) of this Article V.
(e) Lender shall have received acknowledgment copies (or other
evidence of filing) of each filed UCC-1 financing statement signed by the
Borrower as debtor naming Lender as secured party. Such UCC-1 financing
statements shall have been filed in each jurisdiction as may be necessary or, in
the reasonable opinion of Lender, desirable to perfect the security interests
created by the Security Agreement.
(f) Lender shall have received the original stock certificates
evidencing the stock pledged pursuant to the Pledge Agreement, together with
undated stock powers duly executed in blank in connection therewith.
(g) The Closing Date shall occur on or prior to June 30, 1998.
20
BRIDGE LOAN AGREEMENT
(h) The representations and warranties of the Borrower and the
Guarantors set forth in Article IV shall be true and correct on and as of the
date of the Loan (other than those, if any, which by their terms specifically
relate only to a different date).
(i) At the time of and immediately after giving effect to the Loan,
no Default or Event of Default shall have occurred and be continuing.
(j) From March 31, 1998 through the date of the Loan, neither the
Borrower nor any Guarantor shall have suffered a Material Adverse Change.
The Loan shall be deemed to constitute a representation and warranty by the
Borrower on the date thereof as to the matters specified in paragraphs (h), (i)
and (j) of this Article V.
ARTICLE VI
Affirmative Covenants
---------------------
Until the Maturity Date and the principal of and interest on the Loan
and all other Obligations payable hereunder shall have been paid in full, the
Borrower and each Guarantor jointly and severally covenant and agree with Lender
that:
Section 6.1 Financial Statements and Other Information. KKR will
------------------------------------------
furnish to Lender:
(a) within 90 days after the end of each fiscal year, its
audited consolidated balance sheet and related statements of operations,
stockholders' equity and cash flows as of the end of and for such year, setting
forth in each case in comparative form the figures for the previous fiscal year,
all reported on by independent public accountants of recognized national
standing (without a "going concern" or like qualification or exception and
without any qualification or exception as to the scope of such audit) to the
effect that such consolidated financial statements present fairly in all
material respects the financial condition and results of operations of KKR and
its consolidated Subsidiaries on a consolidated basis in accordance with GAAP;
provided, however, that for as long as KKR is subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the obligation of KKR to deliver the reports referenced in this Section
6.1(a) shall be satisfied by the timely filing by ▇▇▇▇▇ of its Form 10-K with
respect to such fiscal year;
(b) within 45 days after the end of each of the first three
fiscal quarters of each fiscal year, its condensed consolidated balance sheet
and related statements of operations, stockholders' equity and cash flows as of
the end of and for such fiscal quarter and
21
BRIDGE LOAN AGREEMENT
the then elapsed portion of the fiscal year, setting forth in each case in
comparative form the figures for the corresponding period or periods of (or, in
the case of the balance sheet, as of the end of) the previous fiscal year, all
certified by one of its Financial Officers as presenting fairly in all material
respects the financial condition and results of operations of KKR and its
consolidated Subsidiaries on a consolidated basis in accordance with GAAP,
subject to normal year-end audit adjustments and the absence of footnotes;
provided, however, that for as long as KKR is subject to the reporting
requirements of the Exchange Act, the obligation of KKR to deliver the reports
referenced in this Section 6.1(b) shall be satisfied by the timely filing by
▇▇▇▇▇ of its Form 10-Q with respect to such fiscal quarter;
(c) concurrently with any delivery of financial statements under
clause (a) above, a Compliance Certificate (i) certifying as to whether a
Default or Event of Default has occurred and, if a Default or Event of Default
has occurred, specifying the details thereof and any action taken or proposed to
be taken with respect thereto and (ii) stating whether any change in GAAP or in
the application thereof has occurred since December 31, 1997 and, if any such
change has occurred, specifying the effect of such change on the financial
statements accompanying such certificate;
(d) promptly after the same become publicly available, copies
of all periodic and other reports, proxy statements and other materials filed by
KKR or any Subsidiary with the Securities and Exchange Commission, or any
Governmental Authority succeeding to any or all of the functions of said
Commission, or with any national securities exchange, or distributed by KKR to
its shareholders generally, as the case may be; provided, however, that the
obligation of KKR or any such Subsidiary to deliver the reports, proxy
statements and materials referenced in this Section 6.1(d) shall be satisfied by
the filing by ▇▇▇▇▇ of such materials with the Securities and Exchange
Commission or the dissemination of such materials by Business Wire; and
(e) as promptly as practicable, such other information set forth
on Schedule 6.1.
Section 6.2 Notices of Material Events. The Borrower will furnish to
---------------------------
Lender prompt written notice of the following:
(a) the occurrence of any Default or Event of Default upon
actual knowledge of a Responsible Officer of the Borrower;
(b) the filing or commencement of any action, suit or proceeding
by or before any arbitrator or Governmental Authority against or affecting the
Borrower or any Affiliate thereof that, if adversely determined, would
reasonably be expected to result in a Material Adverse Effect; and
22
BRIDGE LOAN AGREEMENT
(c) the occurrence of any ERISA Event that, alone or together
with any other ERISA Events that have occurred, would reasonably be expected to
result in material liability of KKR or any Subsidiary.
Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Borrower setting forth the
details of the event or development requiring such notice and any action taken
or proposed to be taken with respect thereto.
Section 6.3 Existence; Conduct of Business. The Borrower and each
------------------------------
Guarantor will, and will cause each of the Subsidiaries to, do or cause to be
done all things necessary to preserve, renew and keep in full force and effect
its legal existence and the rights, licenses, permits, privileges and franchises
material to the conduct of the business of the Borrower and its subsidiaries,
taken as a whole.
Section 6.4 Payment of Obligations. The Borrower and each Guarantor
----------------------
will, and will cause each of the Subsidiaries to, pay its obligations, including
Tax liabilities before the same shall become delinquent or in default, except
where (a) the validity or amount thereof is being contested in good faith by
appropriate proceedings, (b) KKR has set aside on its books adequate reserves
with respect thereto in accordance with GAAP and (c) the failure to make payment
pending such contest could not reasonably be expected to result in a Material
Adverse Effect.
Section 6.5 Maintenance of Properties; Insurance. The Borrower and
------------------------------------
each Guarantor will, and will cause each of the Subsidiaries to, (a) keep and
maintain all property material to the conduct of its business in good working
order and condition in all material respects, ordinary wear and tear excepted,
and (b) maintain, with financially sound and reputable insurance companies,
insurance in such amounts and against such risks (and having such deductibles
and self-insurance) as are customarily maintained by companies engaged in the
same or similar businesses operating in the same or similar locations.
Section 6.6 Books and Records; Inspection Rights. The Borrower and
------------------------------------
each Guarantor will, and will cause each of the Subsidiaries to, keep proper
books of record and account in which full, true and correct entries in
accordance with GAAP are made of all dealings and transactions in relation to
its business and activities.
Section 6.7 Compliance with Laws. The Borrower and each Guarantor
--------------------
will, and will cause each of the Subsidiaries to, comply in all material
respects with all laws, rules, regulations and orders of any Governmental
Authority applicable to it or its property, including without limitation ERISA
and all Environmental Laws.
23
BRIDGE LOAN AGREEMENT
Section 6.8 Use of Proceeds. The proceeds of the Loan will be used
---------------
only for general corporate purposes. No part of the proceeds of any Loan will
be used, whether directly or indirectly, for any purpose that entails a
violation of any of the Regulations of the Board, including Regulations U and X.
Section 6.9 Further Assurances. The Borrower and each Guarantor
------------------
will, and will cause each of the Subsidiaries to, cooperate with Lender and
shall execute and pay for the filing of all such further instruments and
documents, including UCC financing statements and other security documents, as
Lender shall reasonably deem appropriate in order to effectuate the grant of the
Liens and security interests to Lender contemplated by the Loan Documents.
Section 6.10 Conduct of Business. During the Initial Period, the
-------------------
Borrower and each Guarantor will, and will cause each of the Subsidiaries to,
comply in all material respects with the covenants set forth in Section 7.3 of
the Merger Agreement, which covenants are incorporated herein by reference with
the same force and effect as though herein set forth in full; provided, however,
that a violation of such Section 7.3 after the termination of the Merger
Agreement for the purpose of completing a financing, the proceeds of which are
used to repay the Borrower's Obligations hereunder, shall not violate this
Section 6.10.
ARTICLE VII
Negative Covenants
------------------
Until the Maturity Date and the principal of and interest on each Loan
and all other Obligations payable hereunder shall have been paid in full, the
Borrower and each Guarantor jointly and severally covenant and agree with Lender
that:
Section 7.1 Debt. The Borrower and the Subsidiary Guarantors will
----
not create, incur, assume or permit to exist any Debt, except:
(a) Debt owed to the Borrower or any Subsidiary Guarantor;
(b) Debt owed to KKR in connection with Permitted Transfers;
(c) Debt existing on the date hereof, which is identified in
Schedule 7.1;
(d) Debt secured by Permitted Encumbrances;
(e) Capital Lease Obligations not to exceed $50,000 in the
aggregate at any time outstanding; and
24
BRIDGE LOAN AGREEMENT
(f) other Debt not to exceed $50,000 in the aggregate at any
time outstanding.
Section 7.2 Liens. The Borrower and the Subsidiary Guarantors will
-----
not, and will not permit any of the Subsidiaries to, create, incur, assume or
permit to exist any Lien on any property or asset now owned or hereafter
acquired by it, or assign or sell any income or revenues (including accounts
receivable) or rights in respect of any thereof, except:
(a) Permitted Encumbrances; and
(b) any Lien on any property or asset of any Subsidiary
Guarantor existing on the date hereof (including Liens created pursuant to the
Security Agreement) and set forth in Schedule 7.2; provided that (i) such Lien
--------
shall not apply to any other property or asset of any Subsidiary and (ii) such
Lien shall secure only those obligations which it secures on the date hereof.
Section 7.3 Fundamental Changes. The Borrower and the Guarantors
-------------------
will not:
(a) merge into or consolidate with any other Person, or permit
any other Person to merge into or consolidate with it, or sell, transfer, lease
or otherwise dispose of (in one transaction or in a series of transactions) all
or any substantial part of its assets, or all or substantially all of the stock
of any of its subsidiaries (in each case, whether now owned or hereafter
acquired), or liquidate or dissolve, except that, if at the time thereof and
immediately after giving effect thereto no Default shall have occurred and be
continuing (i) any Subsidiary Guarantor may merge into any other Subsidiary
Guarantor in a transaction in which the surviving entity is a Subsidiary
Guarantor, (ii) any Subsidiary Guarantor may sell, transfer, lease or otherwise
dispose of its assets to the Borrower or to any other Subsidiary Guarantor,
(iii) any Subsidiary Guarantor may liquidate or dissolve if the Borrower
determines in good faith that such liquidation or dissolution is in the best
interests of the Borrower and is not materially disadvantageous to Lender, (iv)
this covenant shall not prohibit KKR from taking any of the foregoing actions if
(1) the successor corporation is KKR or a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia; (2) the successor corporation expressly assumes the Obligations of KKR
hereunder and (3) the successor corporation shall have consolidated net worth,
immediately after such transaction equal to or greater than the consolidated net
worth of KKR immediately preceding such transaction, and (v) the provisions of
this clause (a) shall not apply to the transactions contemplated by the Merger
Agreement; or
(b) engage in any business other than restaurant businesses and
related ancillary businesses of the type conducted by the Borrower and the
Guarantors on the date of execution of this Agreement.
25
BRIDGE LOAN AGREEMENT
Section 7.4 Investments, Loans, Advances, Suretyship Liabilities and
--------------------------------------------------------
Acquisitions. The Borrower and the Subsidiary Guarantors will not purchase,
------------
hold or acquire (including pursuant to any merger) any capital stock, evidences
of indebtedness or other securities (including any option, warrant or other
right to acquire any of the foregoing) of, make or permit to exist any loans or
advances to, incur Suretyship Liabilities in respect of any obligations of, or
make or permit to exist any investment or any other interest in, any other
Person, or purchase or otherwise acquire (in one transaction or a series of
transactions) any assets of any other Person constituting a business unit,
except:
(a) Permitted Investments;
(b) investments by the Borrower or any Subsidiary Guarantor in
any Subsidiary Guarantor; and
(c) investments existing on the date hereof and identified in
Schedule 7.4.
Section 7.5 Hedging Agreements. The Borrower and the Subsidiary
------------------
Guarantors will not enter into any Hedging Agreement.
Section 7.6 Restricted Payments. (a) The Borrower and the Subsidiary
-------------------
Guarantors will not declare or make, or agree to pay or make, directly or
indirectly, any Restricted Payment, except that, so long as no Default or Event
of Default has occurred and is continuing, (i) any Subsidiary Guarantor may
declare and pay Restricted Payments to the Borrower and (ii) the Borrower may
make Permitted Transfers to KKR.
(b) KKR will, and will cause each of the Subsidiaries to, comply
with Section 7.5 of the Securities Purchase Agreement, dated as of August 12,
1997 (the "Securities Purchase Agreement"), as in effect on the date hereof, by
and between KKR and B III Capital Partners, L.P., regardless of whether such
Securities Purchase Agreement is in effect or is subsequently amended or
modified.
Section 7.7 Transactions with Affiliates. The Borrower and the
----------------------------
Subsidiary Guarantors will not sell, lease or otherwise transfer any property or
assets to, or purchase, lease or otherwise acquire any property or assets from,
or otherwise engage in any other transactions with, any of their Affiliates,
except (a) transactions between or among the Borrower and the Subsidiary
Guarantors not involving any other Affiliate and (b) Permitted Affiliate
Transactions.
Section 7.8 Restrictive Agreements. The Borrower and the Subsidiary
----------------------
Guarantors will not, directly or indirectly, enter into, incur or permit to
exist any agreement
26
BRIDGE LOAN AGREEMENT
or other arrangement that prohibits, restricts or imposes any condition upon the
ability of any Subsidiary Guarantor to pay dividends or other distributions with
respect to any shares of its capital stock or to make or repay loans or advances
to the Borrower or any other Subsidiary Guarantor; provided that the foregoing
--------
shall not apply to (i) restrictions and conditions imposed by law or by this
Agreement and (ii) restrictions and conditions existing on the date hereof and
identified on Schedule 7.8 (but shall apply to any extension or renewal of, or
any amendment or modification expanding the scope of, any such restriction or
condition).
ARTICLE VIII
Events of Default
-----------------
If any of the following events ("Events of Default") shall occur:
-----------------
(a) the Borrower shall fail to pay any principal of any Loan
when and as the same shall become due and payable, whether at the due date
thereof or at a date fixed for prepayment thereof or otherwise; or
(b) the Borrower shall fail to pay any interest on any Loan or
any other amount (other than an amount referred to in clause (a) of this
Article) payable under this Agreement, when and as the same shall become due and
payable, and such failure shall continue unremedied for a period of ten (10)
Business Days; or
(c) any Guarantor shall fail to pay any amount owing pursuant to
Article III hereof when due or shall disavow or disaffirm any of its obligations
under Article III hereof;
(d) any representation or warranty made by or on behalf of the
Borrower or any Guarantor in or in connection with any Loan Document or any
amendment or modification hereof or thereof or waiver hereunder or thereunder,
or in any report, certificate, financial statement or other document furnished
pursuant to or in connection with any Loan Document or any amendment or
modification hereof or thereof or waiver hereunder or thereunder, shall prove to
have been incorrect in any material respect when made or deemed made; or
(e) the Borrower or any Guarantor shall fail to observe or
perform any covenant, condition or agreement contained in Sections 6.3 or 6.8 or
in Article VII; or
(f) the Borrower or any Guarantor shall fail to observe or
perform any covenant, condition or agreement contained in this Agreement (other
than those specified
27
BRIDGE LOAN AGREEMENT
in clauses (a), (b), (d) or (e) of this Article), and such failure shall
continue unremedied for a period of 30 days; or
(g) KKR or any Subsidiary shall default in any obligation
(payment or otherwise) that results in any Debt of $1,500,000 or more in the
aggregate becoming due prior to its scheduled maturity or that results in the
holder or holders of any Debt of $1,500,000 or more in the aggregate or any
trustee or agent on its or their behalf causing any such Debt to become due, or
requiring the prepayment, repurchase, redemption or defeasance thereof, prior to
its scheduled maturity; or
(h) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed seeking (i) liquidation, reorganization or
other relief in respect of the Borrower, any Guarantor or any Significant
Subsidiary of KKR or their respective debts, or of a substantial part of their
respective assets, under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect or (ii) the appointment
of a receiver, trustee, custodian, sequestrator, conservator or similar official
for the Borrower, any Guarantor or any Significant Subsidiary of KKR or for a
substantial part of their respective assets, and, in any such case, such
proceeding or petition shall continue undismissed for 90 days or an order or
decree approving or ordering any of the foregoing shall be entered; or
(i) the Borrower, any Guarantor or any Significant Subsidiary of
KKR shall (i) voluntarily commence any proceeding or file any petition seeking
liquidation, reorganization or other relief under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in effect,
(ii) consent to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or petition described in clause (h) of this
Article, (iii) apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for the Borrower, any
Guarantor or any Significant Subsidiary of KKR or for a substantial part of
their respective assets, (iv) file an answer admitting the material allegations
of a petition filed against it in any such proceeding, (v) make a general
assignment for the benefit of creditors or (vi) take any action for the purpose
and intent of effecting any of the foregoing; or
(j) the Borrower, any Guarantor, or any Significant Subsidiary
of KKR shall become unable, admit in writing or fail generally to pay its debts
as they become due; or
(k) one or more judgments for the payment of money in an
aggregate amount in excess of $1,500,000 shall be rendered against KKR, any
Subsidiary or any combination thereof and the same shall remain undischarged for
a period of 90 consecutive days during which execution shall not be effectively
stayed, or any action shall be legally taken by a judgment creditor to attach or
levy upon any assets of KKR or any Subsidiary to enforce any such judgment; or
28
BRIDGE LOAN AGREEMENT
(l) an ERISA Event shall have occurred that, in the opinion of
Lender, when taken together with all other ERISA Events that have occurred,
could reasonably be expected to result in liability of KKR and its Subsidiaries
in an aggregate amount exceeding $1,500,000; or
(m) a Change in Control shall occur; or
(n) any of the Security Documents shall for any reason cease to
be in full force and effect (other than in accordance with its terms), or shall
cease to give Lender the Liens, rights, powers and privileges purported to be
created thereby including, without limitation, a perfected first priority
security interest in, and Lien on, all of the Collateral in accordance with the
terms thereof;
then, and in every such event (other than an event described in clause (h) or
(i) of this Article), and at any time thereafter during the continuance of such
event, Lender may, by notice to the Borrower, take any or all of the following
actions, at the same or different times: (i) terminate its obligation to make
the Loan and (ii) declare the Loan then outstanding to be due and payable in
whole or in part (in which case any principal not so declared to be due and
payable may thereafter be declared to be due and payable), and thereupon (a) the
principal of the Loan so declared to be due and payable, together with accrued
interest thereon and all fees and other obligations of the Borrower accrued
hereunder, shall become due and payable immediately, without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower and (b) Lender shall have no further obligations hereunder; and in
case of any event described in clause (h) or (i) of this Article, (a) Lender's
obligation to make the Loan shall automatically terminate and the principal of
the Loan then outstanding, together with accrued interest thereon, and all fees
and other obligations of the Borrower accrued hereunder, shall automatically
become due and payable, without presentment, demand, protest or other notice of
any kind, all of which are hereby waived by the Borrower and (b) Lender shall
have no further obligations hereunder.
ARTICLE XI
Miscellaneous
-------------
Section 9.1 Notices. Except in the case of notices and other
-------
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by facsimile, as follows:
(a) if to the Borrower or any Guarantor, to it at:
29
BRIDGE LOAN AGREEMENT
c/o ▇▇▇ ▇▇▇ Roo, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: A. ▇▇▇▇▇▇▇ ▇▇▇▇▇, III, Chief Executive Officer and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire, General Counsel
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
J. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Lender, to it at:
FRI-MRD Corporation
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇/▇▇/ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Secretary and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.,
President
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Any party hereto may change its address or facsimile number for notices and
other communications hereunder by notice to the other parties hereto. All
notices and other communications given to any party hereto in accordance with
the provisions of this Agreement shall be deemed to have been at the time
delivered by hand, if personally delivered; the date receipt is acknowledged, if
mailed by registered or certified mail; when answered back, if telecopied; and
the next Business Day after timely delivery to the courier, if sent by overnight
air courier guaranteeing next day delivery. It is understood and agreed that
the delivery of copies of notices to counsel as set forth above is for courtesy
purposes only and any failure to
30
BRIDGE LOAN AGREEMENT
deliver such copy shall not constitute failure with respect to any obligation to
provide notices hereunder.
Section 9.2 Waivers; Amendments. Neither this Agreement nor any
-------------------
terms hereof may be changed, waived, discharged, or terminated, nor any
Collateral released, unless such change, waiver, discharge, termination or
release is in writing signed by Lender. No failure or delay by Lender in
exercising any right or power hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of Lender hereunder are cumulative and
are not exclusive of any rights or remedies that Lender would otherwise have. A
waiver of any provision of this Agreement or consent to any departure by the
Borrower or any Guarantor therefrom shall be effective only in the specific
instance and for the specific purpose for which given. Without limiting the
generality of the foregoing, the making of a Loan shall not be construed as a
waiver of any Default or Event of Default regardless of whether Lender may have
had notice or knowledge of such Default or Event of Default at the time.
Section 9.3 Expenses. The Borrower shall pay (i) all reasonable out-
--------
of-pocket expenses incurred by Lender and its Affiliates, including the
reasonable fees, charges and disbursements of counsel for Lender, in connection
with any amendments, modifications or waivers of the provisions hereof (but not
origination) and (ii) all out-of-pocket expenses reasonably incurred by Lender,
including the fees, charges and disbursements of any counsel for Lender, in
connection with the enforcement or protection of its rights in connection with
the Loan Documents, including its rights under this Section, or in connection
with the Loan made hereunder, including all such out-of-pocket expenses
reasonably incurred during any workout, restructuring or negotiations in
respect of such Loan.
Section 9.4 Successors and Assigns. The provisions of this Agreement
----------------------
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby, except that neither the
Borrower nor any Guarantor may assign, encumber or otherwise transfer any of its
rights or obligations hereunder without the prior written consent of Lender (and
any attempted assignment or transfer by the Borrower or any Guarantor without
such consent shall be null and void). Lender may not, without the consent of
the Borrower (which may be withheld in its sole discretion), assign or otherwise
transfer any of its rights and obligations to any other Person other than a
wholly-owned Subsidiary of Lender or Family Restaurants, Inc.; provided,
--------
however, that the foregoing restriction shall not prohibit the pledge of the
-------
Bridge Note or any rights, duties or obligations in connection therewith, as
collateral security in a bona fide loan transaction. The Borrower shall,
promptly following a request therefor by Lender, exercise such additional or
replacement Bridge Notes as may be requested in connection with any such
permitted assignment or transfer. Nothing in
31
BRIDGE LOAN AGREEMENT
this Agreement, expressed or implied, shall be construed to confer upon any
Person (other than the parties hereto, their respective successors and assigns
permitted hereby and, to the extent expressly contemplated hereby, any Related
Party of Lender) any legal or equitable right, remedy or claim under or by
reason of this Agreement.
Section 9.5 Survival. All covenants, agreements, representations and
--------
warranties made by the Borrower and the Guarantors herein and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement shall be considered to have been relied upon by Lender and shall
survive the execution and delivery of this Agreement and the making of any Loan,
regardless of any investigation made by Lender or on its behalf and
notwithstanding that Lender may have had notice or knowledge of any Default or
Event of Default or incorrect representation or warranty at the time any credit
is extended hereunder, and shall continue in full force and effect through the
Maturity Date as long as the principal of or any accrued interest on any Loan or
any fee or any other amount payable under this Agreement is outstanding and
unpaid. The provisions of Sections 2.9 and 9.3 shall survive and remain in full
force and effect regardless of the consummation of the transactions contemplated
hereby, the repayment of the Loan or the termination of this Agreement or any
provision hereof.
Section 9.6 Counterparts; Integration; Effectiveness. This Agreement
----------------------------------------
may be executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement and the other
Loan Documents constitute the entire contract among the parties relating to the
subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof.
Delivery of an executed counterpart of a signature page of this Agreement by
facsimile shall be as effective as delivery of a manually executed counterpart
of this Agreement.
Section 9.7 Marshalling; Recapture. Lender shall not be under any
----------------------
obligation to ▇▇▇▇▇▇▇▇ any assets in favor of the Borrower or any of the
Guarantors or any other party or against or in payment of any or all of the
obligations, liabilities and indebtedness of every nature of the Borrower or any
of the Guarantors from time to time owing to Lender under or in connection with
this Agreement or the other Loan Documents. To the extent Lender receives any
payment by or on behalf of the Borrower or any of the Guarantors, which payment
or any part thereof is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to such Borrower or Guarantors
or its estate, trustee, receiver, custodian or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then to the
extent of such payment or repayment, the obligation or part thereof which has
been paid, reduced or satisfied by the amount so repaid shall be reinstated by
the amount so repaid and shall be included within the liabilities of the
32
BRIDGE LOAN AGREEMENT
Borrower and the Guarantors to Lender as of the date such initial payment,
reduction or satisfaction occurred.
Section 9.8 Severability. Any provision of this Agreement held to be
------------
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
Section 9.9 Right of Setoff. If a Default or Event of Default shall
---------------
have occurred and be continuing, Lender and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other obligations at any time
owing by Lender or such Affiliate to or for the credit or the account of the
Borrower or any Guarantor against any and all of the obligations of the Borrower
or any Guarantor now or hereafter existing under this Agreement held by Lender,
irrespective of whether or not Lender shall have made any demand under this
Agreement and although such obligations may be unmatured. The rights of Lender
under this Section are in addition to other rights and remedies (including other
rights of setoff) which Lender may have.
Section 9.10 Governing Law; Jurisdiction; Consent to Service of
--------------------------------------------------
Process.
-------
(a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF CALIFORNIA (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO
CONFLICTS OF LAW).
(b) Any legal action or proceeding with respect to this
Agreement and any action for enforcement of any judgment in respect thereof may
be brought in the courts of the State of California or of the United States of
America for the Central District of California, and, by execution and delivery
of this Agreement, each of the Borrower and the Guarantors hereby accepts for
itself and in respect of its property, generally and unconditionally, the non-
exclusive jurisdiction of the aforesaid courts and any appellate courts from any
thereof. Each of the parties hereto agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that Lender may otherwise have
to bring any action or proceeding relating to this Agreement against the
Borrower, any Guarantor or their properties in the courts of any jurisdiction.
33
BRIDGE LOAN AGREEMENT
(c) Each of the Borrower and each Guarantor hereby irrevocably
and unconditionally waives, to the fullest extent it may legally and effectively
do so, any objection which it may now or hereafter have to the laying of venue
of any suit, action or proceeding arising out of or relating to this Agreement
in any court referred to in paragraph (b) of this Section. Each of the parties
hereto hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.
(d) Each party to this Agreement irrevocably consents to service
of process in the manner provided for notices in Section 9.1. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
Section 9.11 Headings. Article and Section headings and the Table of
--------
Contents used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
[Remainder of page intentionally left blank]
34
BRIDGE LOAN AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
THE HAMLET GROUP, INC.,
as Borrower
By: /s/ A. ▇▇▇▇▇▇▇ ▇▇▇▇▇ III
--------------------------
Name: A. ▇▇▇▇▇▇▇ ▇▇▇▇▇ III
Title: C.E.O.
▇▇▇ ▇▇▇ ROO, INC.,
as Guarantor
By: /s/ A. ▇▇▇▇▇▇▇ ▇▇▇▇▇ III
----------------------------
Name: A. ▇▇▇▇▇▇▇ ▇▇▇▇▇ III
Title: C.E.O.
H.H.K. OF VIRGINIA, INC.,
as Subsidiary Guarantor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Corporate Secretary
H.H. OF MARYLAND, INC.,
as Subsidiary Guarantor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Corporate Secretary
S-1
FRI-MRD CORPORATION,
as Lender
By: /s/ ▇.▇. ▇▇▇▇▇▇▇, ▇▇.
----------------------------
Name: ▇.▇. ▇▇▇▇▇▇▇, ▇▇.
Title: President
S-2