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Exhibit 10.20
SECURITY AGREEMENT
DATE: November 27, 1996
DEBTOR SECURED PARTY
The Delicious Frookie Company, Inc. Republic Acceptance Corporation
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1. SECURITY INTEREST AND COLLATERAL. To secure the payment and performance
of each and every debt, liability and obligation of every type and description
which Debtor may now or at any time hereafter owed to Secured Party (whether
such debt, liability or obligation now exists or is hereafter created or
incurred, and whether it is or may be direct or indirect, due or to become due,
absolute or contingent, primary or secondary, liquidated or unliquidated, or
joint, several or joint and several), including without limitation the aggregate
sum of up to Three Million Five Hundred Thousand No/100 Dollars ($3,500,000.00)
due and payable to Secured Party under the terms of a certain Financing
Agreement of even date herewith between the Debtor and Secured Party, as the
same may be amended, modified, restated or replaced from time to time (the
"Financing Agreement") pursuant to which Secured Party may extend loans and
advances to the Debtor as follows, each subject to terms, conditions and
limitations contained in the Financing Agreement: (i) advances of up to Three
Million Five Hundred Thousand and No/100 Dollars ($3,500,000.00) in the
aggregate outstanding at any one time limited to availability based upon a
percentage of the value of certain of the Debtor's accounts deemed eligible by
the Secured Party; (ii) advances of up to Five Hundred Thousand and No/100
Dollars ($500,000.00) in the aggregate outstanding at any one time against a
percentage of the value of the Debtor's inventory deemed eligible by the Secured
Party and (iii) advances of up to Six Hundred Fifty Thousand and No/100 Dollars
($650,000.00) in the aggregate outstanding at any one time based on (A) a
percentage of the value of Debtor's owing by WB Distributing Company and Jersey
Snacks deemed eligible by Secured Party and (B) a percentage of Debtor's certain
settled account receivable balance owing by WB Distributing Company and Jersey
Snacks, which advances based on such settled account shall not exceed $375,000
(hereinafter referred to collectively as the "Loans"); provided that at no time
shall all advances in the aggregate exceed the sum of $3,500,000; all such
debts, liabilities and obligations being herein collectively referred to as the
"Obligations"). Debtor hereby grants to Secured Party a security interest and
first lien (the "Security Interest") in all property of Debtor, whether now
owned or hereafter acquired, and all additions and accessions thereto and
replacements thereof, including, without limitation, the property described
below (the "Collateral"):
1.1 ACCOUNTS, CONTRACT RIGHTS AND OTHER RIGHTS TO PAYMENT. Each and
every right of Debtor to the payment of money, whether such right to
payment now exists or hereafter arises, whether such right to payment
arises out of (i) a sale, lease or other disposition of goods or other
property by Debtor, (ii) a rendering of
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services by Debtor, (iii) a loan by Debtor or (iv) the overpayment of
taxes or other liabilities of Debtor, or otherwise arises under any
contract or agreement, whether such right to payment is or is not already
earned by performance, and howsoever such right to payment may be
evidenced, together with all other rights and interests (including all
liens and security interests) which Debtor may at any time have by law or
agreement against any account debtor or other obligor obligated to make
any such payment or against any of the property of such account debtor or
other obligor; all including but not limited to all present and future
debt instruments, chattel papers, accounts and contract rights of Debtor.
1.2 INVENTORY. All of Debtor's inventory, wherever located, whether
now owned or hereafter acquired, all additions and accessions thereto and
replacements thereof and whether deemed eligible or ineligible by Secured
Party for purposes of the Loans;
1.3 MACHINERY AND EQUIPMENT. All of Debtor's machinery and
equipment, wherever located, whether now owned or hereafter acquired and
all additions and accessions thereto and replacements thereof;
1.4 GENERAL INTANGIBLES. All of Debtor's general intangibles,
whether now owned or hereafter acquired, including, but not limited to,
all contract rights, chattel paper, instruments, deposit accounts,
investment property, documents, equipment leases, office leases, supply
and distributorship agreements, non-competition agreements, employment
contracts, collective bargaining agreements, income tax refunds,
applications for patents, patents, copyrights and trademarks, good will
and going concern value;
together with all (i) proceeds (including proceeds of insurance, eminent domain
and other governmental taking and tort claims) and products of the property
described above and (ii) books and records pertaining to the property described
above.
2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. Debtor represents, warrants
and agrees that:
(a) Debtor is a corporation and Debtor's principal place of business
and chief executive office are located at the address of Debtor shown at
the beginning of the Agreement.
(b) The Collateral will be used primarily for business purposes.
(c) Debtor's records concerning its accounts and contract rights are
kept at Debtor's chief place of business.
3. ADDITIONAL REPRESENTATIONS, WARRANTIES AND AGREEMENTS. Debtor
represents, warrants and agrees that:
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3.1 Debtor has (or will have at the time Debtor acquires rights in
Collateral hereafter arising) absolute title to each item of Collateral
free and clear of all security interests, liens and encumbrances (except
the Security Interest), and will defend the Collateral against all claims
or demands of all persons other than Secured Party. Debtor will not sell
or otherwise dispose of the Collateral or any interest therein without the
prior written consent of Secured Party, except that, until the occurrence
of an Event of Default (as defined herein) and the revocation by Secured
Party of Debtor's right to do so, Debtor may sell any (i) inventory
constituting Collateral to buyers in the ordinary course of business and
(ii) Collateral other than inventory having a gross book value not
exceeding $40,000 (whether individually or in the aggregate). This
Agreement has been duly and validly authorized by all necessary corporate
action.
3.2 Debtor will not permit any tangible Collateral to be located in
any state (and, if county filing is required, in any county) in which a
financing statement covering such Collateral is required to be, but has
not in fact been, filed in order to perfect the Security Interest.
3.3 Each right to payment and each instrument, document, chattel
paper and other agreement constituting or evidencing Collateral is (or
will be when arising or issued) the valid, genuine and legally enforceable
obligation, subject to no defense, set-off or counterclaim (other than
those arising in the ordinary course of business) of the account debtor or
other obligor named therein or in Debtor's records pertaining thereto as
being obligated to pay such obligation. Debtor will neither agree to any
material modification or amendment nor agree to any cancellation of any
such obligation without Secured Party's prior written consent and will not
subordinate any such right to payment to claims of another creditors of
such account debtor or other obligor.
3.4 (a) Debtor will (i) keep all tangible Collateral in good repair,
working order and condition and will, from time to time, replace any worn,
broken or defective parts thereof; (ii) promptly pay all taxes and other
governmental charges levied or assessed upon or against any Collateral or
upon or against the creation, perfection or continuance of the Security
Interest; (iii) keep all Collateral free and clear of all security
interest, liens and encumbrances except the Security Interest; (iv) at all
reasonable times, permit Secured Party or its representatives to examine
or inspect any Collateral, wherever located, and to examine, inspect and
copy Debtor's books and records pertaining to the Collateral and its
business and financial condition; (v) keep accurate and complete records
pertaining to the Collateral and pertaining to Debtor's business and
financial condition and submit to Secured Party such periodic reports
concerning the Collateral and Debtor's business and financial condition as
Secured Party may from time to time reasonably request; (vi) promptly
notify Secured Party of any loss of or material damage to any Collateral
or of any adverse change, known to Debtor, in the prospect of payment of
any sums due on or under any instrument, chattel paper, account or
contract right constituting Collateral; (vii) if Secured Party at any time
so requests (whether the request is made before or after the occurrence of
any Event of Default), promptly delivery to Secured
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Party any instrument, document or chattel paper constituting Collateral,
duly endorsed or assigned by Debtor; (viii) at all times keep tangible
Collateral insured against risks or fire (including so-called extended
coverage), theft, collision (in case of Collateral consisting of motor
vehicles) and such other risks and in such amounts as Secured Party may
reasonably request, with any loss payable to Secured Party to the extent
of its interest; (ix) from time to time execute such financing statements
as Secured Party may require in order to perfect the Security Interest
and, if any Collateral exists of a motor vehicle, execute such documents
as may be required to have the Security Interest properly noticed on a
certificate of title, (x) pay when due or reimburse Secured Party on
demand for all costs of collection of any of the Obligations and all other
out-of-pocket expenses (including in each case all attorneys' fees)
incurred by Secured Party in connection with the creation, perfection,
satisfaction or enforcement of the Security Interest or the creation,
continuance or enforcement of this Agreement or any or all of the
Obligations; and Debtor will indemnify and save Secured Party and its
agents, representatives and employees harmless from all loss, costs,
damage, liability or expense, including attorney fees that it may sustain
or incur by reason of defending or protecting the Security Interest or the
priority thereof, or in the prosecution or defense of any action or
proceeding concerning any matter growing out of or connected with this
Agreement and/or the obligations and/or the Collateral; (xi) execute,
deliver or endorse any and all instruments, documents, assignments,
security agreements and other agreements, and writings which Secured Party
at any time may request in order to secure, protect, perfect or enforce
the Security Interest and Secured Party's rights under this Agreement;
(xii) not use or keep any Collateral, or permit it to be used or kept, for
any unlawful purpose or in violation of any federal, state or local law,
statute or ordinance; and (xiii) not permit any tangible Collateral to
become part of or to be affixed to any real property without first
assuring to the satisfaction of Secured Party that the Security Interest
will be prior and senior to any interest or lien then held or thereafter
acquired by any mortgagee of such real property or the owner or purchaser
of any interest therein.
(b) If Debtor at any time fails to perform or observe any agreement
contained in this Section 3.4, and if such failure shall continue for a
period of five (5) calendar days after Secured Party gives Debtor written
notice thereof (or, in the case of the agreements contained in clauses
(viii) and (ix) of paragraph (a) of Section 3.4, immediately upon the
occurrence of such failure, without notice or lapse of time), Secured
Party may (but need not) perform or observe such agreement on behalf and
in the name, place and stead of Debtor (or at Secured Party's option, in
Secured Party's own name) and may (but need not) take any and all other
actions which Secured Party may deem necessary to cure or correct such
failure (including, without limitation, the payment of taxes, the
satisfaction of security interest, liens, or encumbrances, the performance
of obligations under contracts or agreements with account debtors or other
obligations, the procurement and maintenance of insurance, the execution
of financing statements, the endorsement of instruments and the
procurement of repairs, transportation or insurance); and, except to the
extent that the effect of such payment would be to render any loan or
forbearance of money usurious or otherwise illegal under any applicable
law, Debtor shall thereupon pay Secured Party on
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demand the amount of all monies expended and all costs and expenses
(including reasonable attorneys' fees) incurred by Secured Party in
connection with or as a result of Secured Party's performing or observing
such agreements or taking such actions, together with interest thereon
from the date expended or incurred by Secured Party at the highest rate
then applicable to any of the obligations. To facilitate the performance
or observance by Secured Party of such agreements of Debtor, Debtor hereby
irrevocably appoints (which appointment is coupled with an interest)
Secured Party, or its delegate, as the proxy and attorney-in-fact of
Debtor with the right (but not the duty) from time to time create,
prepare, complete, execute, deliver, endorse or file, in the name and on
behalf of Debtor, any and all instruments, documents, financing
statements, applications for insurance and other agreements and writings
required to be obtained, executed, delivered or endorsed by Debtor under
this Section 3 and Section 4. Debtor acknowledges that the constitution
and appointment of such proxy and attorney-in-fact are irrevocable until
all the Obligations are paid and performed in full.
3.5 Debtor shall pay promptly when due all indebtedness, liability
or obligation secured hereby with interest thereon.
4. LOCK BOX; COLLATERAL ACCOUNT. Pursuant to the terms of paragraphs B and
C of Section V of the Financing Agreement, Debtor shall direct each of its
account debtors to make payments due under the relevant account or chattel paper
directly to a special lock box to be under the sole control of Secured Party.
Debtor hereby authorizes and directs Secured Party to deposit in a special
collateral account to be established and maintained with Secured Party or other
financial institution selected by the Secured Party all checks, drafts and cash
payments received in said lock box. All deposits in said collateral account
shall constitute proceeds of Collateral and shall not constitute payment of any
Obligation. At its option, Secured Party may, at any time, apply finally
collected funds on deposit in said collateral account to the payment of the
Obligations in such order of application as Secured Party may determine, or
permit Debtor to withdraw all or any part of the balance on deposit in said
collateral account. If a collateral account is so established, Debtor agrees
that it will promptly deliver to Secured Party, for deposit in said collateral
account, all payments on accounts and chattel paper received by it. All such
payments shall be delivered to Secured Party in the form received (except for
Debtor's endorsement where necessary). Until so deposited, all payments on
accounts and chattel paper received by Debtor shall be held in trust by Debtor
for and as the property of Secured Party and shall not be commingled with any
funds or property of Debtor.
5. COLLECTION RIGHTS OF SECURED PARTY. Notwithstanding Secured Party's
rights under Section 4 with respect to any and all debt instruments, chattel
papers, accounts and other rights to payment constituting Collateral (including
proceeds of same), Secured Party at any time (both before and after the
occurrence of an Event of Default) may notify any account debtor, or any other
person obligated to pay any amount due, that such chattel paper, account or
other right to payment has been assigned or transferred to Secured Party for
security and shall be paid directly to Secured Party. If Secured Party so
requests at any time, Debtor shall so notify such account debtors and other
obligors in writing and will indicate on all invoices to
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such account debtors or other obligors that the amount due is payable directly
to Secured Party. At any time after Secured Party or Debtor gives such notice to
an account debtor or other obligor, Secured Party may (but need not), in its own
name or in Debtor's name, demand, ▇▇▇ for, collect or receive any money or
property at any time payable or receivable on account of, or securing, any such
chattel paper, account, or other right to payment, or grant any extension to,
make any compromise or settlement with or otherwise agree to waive, notify,
amend or change the obligations (including collateral obligations) of any such
account debtor or other obligor.
6. ASSIGNMENT OF INSURANCE. Debtor hereby assigns to Secured Party, as
additional security for the payment of the obligations, any and all moneys
(including, but not limited to, proceeds of insurance and refunds of unearned
premiums) due or to become due under, and all other rights of Debtor under or
with respect to, any and all policies of insurance covering the Collateral, and
Debtor hereby directs the issuer of any such policy to pay any such monies
directly to Secured Party. Both before and after the occurrence of an Event of
Default, Secured Party may (but need not), in its own name or in Debtor's name,
execute and deliver proofs of claim, receive all such monies, endorse checks and
other instruments representing payment of such monies, and adjust, litigate,
compromise or release any claim against the issuer of any such policy.
7. EVENTS OF DEFAULT. Each of the following occurrences shall constitute
an event of default under this Agreement (herein called an "Event of Default"):
(i) Debtor shall fail to pay any or all of the Obligations when due or (if
payable on demand) on demand, or shall fail to observe or perform any covenant
or agreement herein binding on it; (ii) any representation or warranty by Debtor
set forth this Agreement or made to Secured Party in any financial statements or
reports submitted to Secured Party by or on behalf of Debtor shall prove
materially false or misleading; (iii) Debtor or any guarantor of any Obligation
shall (A) fail to conduct its business substantially as now conducted; (B) be or
become insolvent (however defined); (C) have entered against it any judgment;
(D) file or have filed against it, voluntarily or involuntarily, a petition in
bankruptcy or for reorganization under the United States Bankruptcy Code; (E)
initiate or have initiated against it voluntarily or involuntarily, any act,
process or proceeding under any insolvency law or other statute or law providing
for the modification or adjustment of the rights of creditors; or (F) if a
corporation, partnership or organization, be dissolved or liquidated or, if
partnership, suffer the death of a partner or, if an individual die; or (iv)
Secured Party shall in good faith believe the prospects of due and punctual
payment of any or all of the Obligations is impaired. THE FOREGOING EVENTS OF
DEFAULT, AND REMEDIES UPON THE OCCURRENCE OF AN EVENT OF DEFAULT AS SET FORTH
BELOW IN SECTION 8, ARE IN ADDITION TO AND SUPPLEMENT THE RIGHTS OF THE SECURED
PARTY UNDER THAT CERTAIN FINANCING AGREEMENT OF EVEN DATE HEREWITH BETWEEN THE
DEBTOR AND THE SECURED PARTY (THE "FINANCING AGREEMENT"), INCLUDING, WITHOUT
LIMITATION, THE RIGHT OF SECURED PARTY TO DEMAND PAYMENT OF THE OBLIGATIONS
UNDER THE FINANCING AGREEMENT IN FULL AT ANY TIME IN ITS ABSOLUTE DISCRETION.
NOTHING SET FORTH IN THIS AGREEMENT (INCLUDING THE PROVISIONS OF THIS SECTION 7
OR THE REMEDIES WITH RESPECT THERETO AS SET FORTH IN SECTION 8) SHALL IN
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ANY WAY LIMIT THE SECURED PARTY'S DISCRETION TO MAKE OR NOT MAKE LOANS TO THE
BORROWER OR THE SECURED PARTY'S RIGHT TO DEMAND PAYMENT OF THE OBLIGATIONS.
8. REMEDIES UPON EVENT OF DEFAULT. Upon the occurrence of an Event of
Default under Section 7 and at any time thereafter, Secured Party may exercise
any one or more of the following rights and remedies: (i) declare all unmatured
Obligations to be immediately due and payable, and the same shall thereupon be
immediately due and payable, without presentment or other notice or demand; (ii)
exercise and enforce any or all rights and remedies available upon default to a
secured party under the Uniform Commercial Code as adopted and in effect in the
State of Minnesota, including but not limited to the right to take possession of
any Collateral, proceeding without judicial process or by judicial process
(without a prior hearing or notice thereof, which Debtor hereby expressly
waives), and the right to sell, lease or otherwise dispose of any or all of the
Collateral and, in connection therewith, Secured Party may require Debtor to
assemble the Collateral and make it available to Secured Party at a place to be
designated by Secured Party which is reasonably convenient to both parties, and
if notice to Debtor of any intended disposition of collateral or any other
intended action is required by law in a particular instance, such notice shall
be deemed commercially reasonable if given (in the manner specified in Section
10) at least ten (10) calendar days prior to the date of intended disposition or
other action; and (iii) exercise or enforce any or all other rights or remedies
available to Secured Party by law or agreement against the Collateral, against
Debtor or against any other person or property. Upon the occurrence of an Event
of Default described in Sections 7(iii)(C), 7(iii)(D) or 7(iii)(E), all
unmatured Obligations automatically shall become immediately due and payable
without any action by Secured Party.
9. OTHER PERSONAL PROPERTY. Unless at the time Secured Party takes
possession of any tangible Collateral, or within seven (7) days thereafter,
Debtor gives written notice to Secured Party of the existence of any goods,
papers or other property of Debtor not affixed to or constituting a part of such
Collateral but which are located or found upon or within such Collateral and
which describes such property, Secured Party shall not be responsible or liable
to Debtor for any action taken or omitted by or on behalf of Secured Party with
respect to such property without actual knowledge of the existence of any such
property or without actual knowledge that it was located or to be found upon or
within such Collateral.
10. MISCELLANEOUS. This Agreement does not contemplate a sale of accounts,
contract rights or chattel paper and, as provided by law, Debtor is entitled to
any surplus and shall remain liable for any deficiency. This Agreement can be
waived, modified, amended, terminated or discharged and the Security Interest
can be released only explicitly in a writing signed by Secured Party. A waiver
signed by Secured Party shall be effective only in the specific instance and for
the specific purpose given. Mere delay or failure to act shall not preclude the
exercise of enforcement of any of Secured Party's rights or remedies. All rights
and remedies of Secured Party shall be cumulative and may be exercised
singularly or concurrently, at Secured Party's option, and the exercise or
enforcement of any one such right or remedy shall neither be a condition to nor
bar the exercise of enforcement of any other. All notices to be given to Debtor
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shall be deemed sufficiently given if delivered or mailed by registered or
certified mail, postage prepaid, to Debtor at its address set forth above or at
the most recent address shown on Secured Party's records. Secured Party's duty
of care with respect to Collateral in its possession (as imposed by law) shall
be deemed fulfilled if Secured Party exercises reasonable case in physically
safekeeping such Collateral or, in the case of Collateral in the custody or
possession of a bailee or other third person, exercises reasonable care in the
selection of the bailee or other third person, and Secured Party need not
otherwise preserve, protect, insure or care for any Collateral. Secured Party
shall not be obligated to preserve any rights Debtor may have against prior
parties, to realize on the Collateral at all or in any particular manner or
order, or to apply any cash proceeds of Collateral in any particular order of
application. This Agreement shall be binding upon and inure to the benefit of
Debtor and Secured Party and their respective heirs, representatives, successors
and assigns and shall take effect when signed by Debtor and delivered to Secured
Party, and Debtor waives notice of Secured Party's acceptance hereof. Secured
Party may execute this Agreement if appropriate for the purpose of filing, but
the failure of Secured Party to execute this Agreement shall not affect or
impair the validity or effectiveness of this Agreement. Except to the extent
otherwise required by law, this Agreement shall be governed by the internal laws
of the state named as part of Secured Party's address above. If any provision or
application of this Agreement is held unlawful or unenforceable in any respect,
such illegality or unenforceability shall not affect other provisions or
applications which can be given effect, and this Agreement shall be construed
herein or prescribed hereby. All representations and warranties contained in
this Agreement shall survive the execution, delivery and performance of this
Agreement and the creation and payment of the Obligations.
11. OTHER AGREEMENT. The terms of the Financing Agreement are incorporated
herein by reference and made a part hereof, and any default under or
misrepresentation contained in the Financing Agreement shall be an Event of
Default hereunder.
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IN WITNESS WHEREOF, each of the undersigned have caused this Agreement to
be executed on the date first set forth above.
THE DELICIOUS FROOKIE COMPANY, INC., a
Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
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Its: Chief Executive Officer
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REPUBLIC ACCEPTANCE CORPORATION, a
Minnesota corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Its: Regional Manager
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