1
Exhibit 10.2
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
BY AND BETWEEN
CONGRESS FINANCIAL CORPORATION (SOUTHERN)
AS LENDER
AND
TOM'S FOODS INC.
AS BORROWER
DATED: AS OF OCTOBER 14, 1997
2
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINITIONS................................................. -1-
SECTION 2. CREDIT FACILITIES........................................... -16-
2.1 Revolving Loans............................................... -16-
2.2 Letter of Credit Accommodations............................... -17-
2.3 Availability Reserves......................................... -20-
2.4 Restatement................................................... -21-
SECTION 3. INTEREST AND FEES........................................... -23-
3.1 Interest...................................................... -23-
3.2 Amendment Fee................................................. -24-
3.3 Servicing Fee................................................. -24-
3.4 Unused Line Fee............................................... -24-
3.5 Maximum Interest.............................................. -24-
SECTION 4. CONDITIONS PRECEDENT........................................ -26-
4.1 Conditions Precedent to Effectiveness of
Agreement..................................................... -26-
4.2 Conditions Precedent to All Loans and Letter of
Credit Accommodations......................................... -29-
SECTION 5. GRANT OF SECURITY INTEREST.................................. -30-
5.1 Collateral.................................................... -30-
5.2 Release of Certain Collateral................................. -31-
SECTION 6. COLLECTION AND ADMINISTRATION............................... -32-
6.1 Borrower's Loan Account....................................... -32-
6.2 Statements.................................................... -32-
6.3 Collection of Accounts........................................ -32-
6.4 Payments...................................................... -34-
6.5 Authorization to Make Loans................................... -35-
6.6 Use of Proceeds............................................... -36-
SECTION 7. COLLATERAL REPORTING AND COVENANTS.......................... -36-
7.1 Collateral Reporting.......................................... -36-
7.2 Accounts Covenants............................................ -37-
7.3 Inventory Covenants........................................... -39-
7.4 Equipment Covenants........................................... -40-
7.5 Power of Attorney............................................. -40-
7.6 Right to Cure................................................. -41-
7.7 Access to Premises............................................ -41-
7.8 Purchases of Farm Products.................................... -42-
SECTION 8. REPRESENTATIONS AND WARRANTIES.............................. -43-
8.1 Corporate Existence, Power and Authority;
Subsidiaries.................................................. -43-
8.2 Financial Statements; No Material Adverse
Effect........................................................ -43-
(i)
3
Page
----
8.3 Chief Executive Office; Collateral Locations................ -44-
8.4 Priority of Liens; Title to Properties...................... -44-
8.5 Tax Returns................................................. -44-
8.6 Litigation.................................................. -44-
8.7 Compliance with Other Agreements and Applicable
Laws........................................................ -45-
8.8 Environmental Compliance.................................... -45-
8.9 Employee Benefits........................................... -46-
8.10 Accuracy and Completeness of Information.................... -47-
8.11 Survival of Warranties; Cumulative.......................... -47-
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS........................ -47-
9.1 Maintenance of Existence.................................... -47-
9.2 New Collateral Locations.................................... -48-
9.3 Compliance with Laws, Regulations, Etc...................... -48-
9.4 Payment of Taxes and Claims................................. -50-
9.5 Insurance................................................... -50-
9.6 Financial Statements and Other Information.................. -51-
9.7 Sale of Assets, Consolidation, Merger,
Dissolution, Etc............................................ -52-
9.8 Encumbrances................................................ -53-
9.9 Indebtedness................................................ -55-
9.10 Loans, Investments, Guarantees, Etc......................... -57-
9.11 Dividends and Redemptions................................... -59-
9.12 Transactions with Affiliates................................ -60-
9.13 Working Capital............................................. -60-
9.14 Tangible Net Worth.......................................... -60-
9.15 Compliance with ERISA....................................... -61-
9.16 Costs and Expenses.......................................... -61-
9.17 Further Assurances.......................................... -62-
SECTION 10. EVENTS OF DEFAULT AND REMEDIES............................ -62-
10.1 Events of Default........................................... -62-
10.2 Remedies.................................................... -64-
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW............................... -66-
11.1 Governing Law; Choice of Forum; Service of
Process; Jury Trial Waiver.................................. -66-
11.2 Waiver of Notices........................................... -68-
11.3 Amendments and Waivers...................................... -68-
11.4 Waiver of Counterclaims..................................... -68-
11.5 Indemnification............................................. -68-
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS.......................... -69-
12.1 Term........................................................ -69-
12.2 Notices..................................................... -70-
12.3 Partial Invalidity.......................................... -70-
12.4 Successors.................................................. -71-
12.5 Confidentiality............................................. -71-
12.6 Entire Agreement............................................ -72-
(ii)
4
INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Information Certificate
Exhibit B Borrowing Base Certificate
Exhibit C Eligible Inventory Locations
Exhibit D Form of Distributor Agreement
Schedule 8.4 Existing Liens
Schedule 8.8 Environmental Disclosure
5
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This Amended and Restated Loan and Security Agreement dated as of October
14, 1997 is entered into by and between Congress Financial Corporation
(Southern), a Georgia corporation ("Lender") and Tom's Foods Inc., a Delaware
corporation ("Borrower").
W I T N E S S E T H:
WHEREAS, Borrower and Lender have previously entered into certain
financing arrangements pursuant to a certain Loan and Security Agreement, dated
August 30, 1996, as amended (the "Existing Loan Agreement");
WHEREAS, Borrower and Lender wish to amend and restate the Existing Loan
Agreement on the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS
All terms used herein which are defined in Article 1 or Article 9 of the
Uniform Commercial Code shall have the meanings given therein unless otherwise
defined in this Agreement. All references to the plural herein shall also mean
the singular and to the singular shall also mean the plural. All references to
Borrower and Lender pursuant to the definitions set forth in the recitals
hereto, or to any other person herein, shall include their respective
successors and assigns. The words "hereof", "herein", "hereunder", "this
Agreement" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not any particular provision of this Agreement
and as this Agreement now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced. An Event of Default
shall exist or continue or be continuing until such Event of Default is waived
in accordance with Section 11.3 or cured in a manner satisfactory to Lender, as
determined in good faith. Any accounting term used herein unless otherwise
defined in this Agreement shall have the meanings customarily
given to such term in accordance with GAAP. For purposes of this Agreement,
the following terms shall have the respective meanings given to them below:
6
1.1 "Accounts" shall mean all present and future rights of Borrower to
payment for goods sold or leased or for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not earned by
performance.
1.2 "Affiliate" shall mean with respect to any Person, (a) any other
Person which, directly or indirectly, controls, is controlled by or is under
common control with, such Person; (b) any other Person which beneficially owns
or holds, directly or indirectly, ten (10%) percent or more of any class of
voting stock of such Person; or (c) any other Person, ten (10%) percent or more
of any class of the voting stock (or if such Person is not a corporation, ten
(10%) percent or more of the equity interest) of which is beneficially owned or
held, directly or indirectly, by such Person. The term "control" (including,
with correlative meanings, the terms "controlled by" and "under common control
with"), as used herein, means the possession, directly or indirectly, of the
power in any form to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities or
by contract or otherwise.
1.3 "Availability Reserves" shall mean, as of any date of determination,
such amounts as Lender may from time to time establish and revise in good faith
reducing the amount of Revolving Loans and Letter of Credit Accommodations
which would otherwise be available to Borrower under the lending formula(s)
provided for herein: (a) to reflect events, conditions, contingencies or risks
which, as determined by Lender in good faith, do or may affect either (i) the
Collateral or any other property which is security for the Obligations or its
value, (ii) the assets or business of Borrower or any Obligor or (iii) the
security interests and other rights of Lender in the Collateral (including the
enforceability, perfection and priority thereof) or (b) to reflect Lender's
good faith belief that any Borrowing Base Certificate, collateral report or
financial information furnished by or on behalf of Borrower or any Obligor to
Lender is or may have been incomplete, inaccurate or misleading in any material
respect or (c) to reflect outstanding Letter of Credit Accommodations as
provided in Section 2.2 hereof, or (d) in respect of the matters set forth in
Sections 2.3(b) or 2.3(c) hereof or as provided elsewhere in this Agreement, or
(e) in respect of any state of facts which Lender determines in good faith
constitutes an Event of Default or may, with notice or passage of time or both,
constitute an Event of Default.
1.4 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.5 "Borrowing Base Certificate" shall mean a certificate substantially in
the form of Exhibit B hereto, as such form may from time to time be modified by
Lender, which is duly completed
-2-
7
and executed by Borrower and delivered to Lender from time to
time in accordance with the terms hereof.
1.6 "Change in Control or Ownership" shall mean (i) the failure of the
▇▇▇▇▇▇▇ Group, at any time, to have beneficial and record ownership of and
power to vote at least 24% of the outstanding shares of voting stock of TFCC,
or (ii) the failure of the ▇▇▇▇▇▇▇ Group, at any time, to have beneficial and
record ownership of and power to vote at least 55% of the outstanding shares of
voting stock of TFH, or (iii) the failure of TFH and the ▇▇▇▇▇▇▇ Group, at any
time, to have beneficial and record ownership of and power to vote at least 80%
of the outstanding shares of capital stock of Borrower, or (iv) the failure of
TFCC, TFH and the ▇▇▇▇▇▇▇ Group, at any time, to own beneficially and of record
and have the power to vote, collectively, 100% of the outstanding capital stock
of Borrower, or (v) the failure of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and his immediate family
and entities wholly owned and controlled by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and his
immediate family, at any time, to have beneficial and record ownership of and
power to vote at least 100% of the outstanding shares of voting stock of Heico
Holding, or (vi) the failure of Heico Holding, at any time, to have the right
(or the failure by Heico Holding to exercise the right) to designate at least a
majority of the Boards of Directors of TFH and TFCC or (vii) the failure of at
least the majority of the members of the Board of Directors of Borrower, at any
time, to be comprised of the same persons appointed by Heico Holding to be
members of the Board of Directors of TFH and/or other persons designated by
Heico Holding or ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, or (viii) the applicability to TFH or
Borrower, at any time, of any requirement that any action by the Board of
Directors of TFH or Borrower shall require a greater affirmative vote than that
of the number of directors designated by the ▇▇▇▇▇▇▇ Group, or shall require a
consent by any stockholder(s) of TFH, except for such matters requiring consent
of certain stockholders of TFH as shall be acceptable to Lender.
1.7 "Class A Preferred Stock" shall mean Borrower's Exchangeable
Preferred Stock, $.01 par value per share, Class A, having the terms, rights
and preferences as in effect on the date hereof.
1.8 "Class B Preferred Stock" shall mean Borrower's Preferred Stock, $.01
par value per share, Class B, having the terms, rights and preferences as in
effect on the date hereof.
1.9 "Code" shall mean the Internal Revenue Code of 1986, as the same now
exists or may from time to time hereafter be amended, modified, recodified or
supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
-3-
8
1.10 "Collateral" shall have the meaning set forth in Section 5 hereof.
1.11 "Direct Remittance Event" shall have the meaning set forth in Section
6.3(a) hereof.
1.12 "Distributor/Franchisee Receivables" shall mean, individually and
collectively, the Distributor Notes and the Franchisee Notes, together with any
property or guarantees at any time securing the respective Distributor Notes
and Franchise Notes.
1.13 "Distributor Notes" shall mean all present and future promissory
notes and other instruments and agreements now or hereafter evidencing or
relating to obligations owed to Borrower by its distributors, including,
without limitation, obligations owed for purchases by such distributors from
Borrower of vehicles, equipment, distributorship rights, vending machines, and
parts, equipment and services relating to vending machines, and obligations
relating thereto, and obligations owed by distributors for the purchase of
snack foods.
1.14 "Eligible Accounts" shall mean Accounts created by Borrower which
are and continue to be acceptable to Lender in good faith based on the criteria
set forth below. In general, Accounts shall be Eligible Accounts if:
(a) such Accounts arise from the actual and bona fide sale and delivery
of packaged snack food products and performance of contract manufacturing
services for other snack food manufacturers by Borrower in the ordinary course
of its business, which transactions are completed in accordance with the terms
and provisions contained in any documents related thereto;
(b) such Accounts are not unpaid more than sixty (60) days past their
original due date and are not more than ninety (90) days past their original
invoice date;
(c) such Accounts comply with the terms and conditions contained in
Section 7.2(c) of this Agreement;
(d) such Accounts do not arise from sales on consignment, guaranteed
sale, sale and return, sale on approval, or other terms under which payment by
the account debtor may be conditional or contingent;
(e) the chief executive office of the account debtor with respect to such
Accounts is located in the United States of
America, or, with Lender's consent, either: (i) the account debtor has
delivered to Borrower an irrevocable letter of credit issued or confirmed by a
bank satisfactory to Lender, sufficient to cover such Account, in form and
substance satisfactory to
-4-
9
Lender and, if required by Lender, the original of such letter of credit has
been delivered to Lender or Lender's agent and the issuer thereof notified of
the assignment of the proceeds of such letter of credit to Lender, or (ii) such
Account is subject to credit insurance payable to Lender issued by an insurer
and on terms and in an amount acceptable to Lender, or (iii) such Account is
otherwise acceptable in all respects to Lender (subject to such lending formula
with respect thereto as Lender may determine);
(f) such Accounts do not consist of progress ▇▇▇▇▇▇▇▇, ▇▇▇▇ and hold
invoices or retainage invoices, except as to ▇▇▇▇ and hold invoices, if Lender
shall have received an agreement in writing from the account debtor, in form
and substance reasonably satisfactory to Lender, confirming the unconditional
obligation of the account debtor to take the goods related thereto and pay such
invoice;
(g) the account debtor with respect to such Accounts has not asserted a
counterclaim, defense or dispute and does not have, and does not engage in
transactions (including, without limitation, the supplying of raw materials,
packaging or supplies in connection with contract manufacturing by Borrower)
which may give rise to, any right of setoff against such Accounts (but the
portion of the Accounts of such account debtor in excess of the amount at any
time and from time to time owed by Borrower to such account debtor or claimed
owed by such account debtor may be deemed Eligible Accounts);
(h) there are no facts, events or occurrences which would impair the
validity, enforceability or collectability of such Accounts or reduce the
amount payable or delay payment thereunder;
(i) such Accounts are subject to the first priority, valid and perfected
security interest of Lender and any goods giving rise thereto are not, and were
not at the time of the sale thereof, subject to any liens except those
permitted in this Agreement;
(j) neither the account debtor nor any officer of the account debtor with
respect to such Accounts is an Affiliate or an officer, employee or agent of an
Affiliate;
(k) the account debtors with respect to such Accounts are not any foreign
government, the United States of America, any State, political subdivision,
department, agency or instrumentality thereof, unless, if the account debtor is
the United States of America, any State, political subdivision,
department, agency or instrumentality thereof, upon Lender's request, the
Federal Assignment of Claims Act of 1940, as amended
-5-
10
or any similar State or local law, if applicable, has been complied with in a
manner satisfactory to Lender;
(l) there are no proceedings or actions which are threatened or pending
against the account debtors with respect to such Accounts which, if adversely
determined, could reasonably be expected to result in any material adverse
change in any such account debtor's financial condition;
(m) such Accounts of a single account debtor or its affiliates do not
constitute more than twenty (20%) percent of all otherwise Eligible Accounts
(but the portion of the Accounts not in excess of such percentage may be deemed
Eligible Accounts);
(n) such Accounts are not owed by an account debtor who has Accounts
unpaid more than sixty (60) days past their original due date or more than
ninety (90) days past their original invoice date which constitute more than
fifty (50%) percent of the total Accounts of such account debtor;
(o) such Accounts are owed by account debtors whose total indebtedness to
Borrower does not exceed the credit limit with respect to such account debtors
as determined by Lender from time to time (but the portion of the Accounts not
in excess of such credit limit may still be deemed Eligible Accounts); and
(p) such Accounts are owed by account debtors deemed creditworthy at all
times by Lender, as determined by Lender.
General criteria for Eligible Accounts may be established and revised from time
to time by Lender in good faith. Any Accounts which are not Eligible Accounts
shall nevertheless be part of the Collateral.
1.15 "Eligible Inventory" shall mean Inventory consisting of finished
goods consisting of packaged snack food products held for resale in the
ordinary course of the business of Borrower and raw materials for such finished
goods consisting of commercially saleable quantities of, without limitation,
shelled peanuts, potatoes, sugar, corn, flour, cooking oil and seasonings, each
to the extent acceptable to Lender, based on the criteria set forth below. In
general, Eligible Inventory shall not include (a) work-in-process; (b)
components (other than raw materials that would otherwise constitute Eligible
Inventory) which are not part of finished goods; (c) spare parts for equipment;
(d) packaging and shipping materials; (e) supplies used or consumed in
Borrower's business; (f) Inventory at premises other than those locations set
forth on Exhibit C hereto, as such Exhibit C shall from time to time be
amended or supplemented by Borrower; provided, however, Eligible Inventory
shall not include any Inventory located at those premises described in
Exhibit C that
-6-
11
are not owned and operated by Borrower unless Lender shall have received an
agreement in writing from the person in possession of such Inventory and/or the
owner or operator of such premises in form and substance satisfactory to Lender
acknowledging Lender's first priority security interest in the Inventory,
waiving security interests and claims by such person against the Inventory and
permitting Lender access to, and the right to remain on, the premises and the
right to remove such Inventory, so as to exercise Lender's rights and remedies
and otherwise deal with the Collateral; (g) Inventory subject to a security
interest or lien in favor of any person other than Lender, except those (if
any) permitted in this Agreement; (h) ▇▇▇▇ and hold goods; (i) unserviceable,
obsolete or slow moving Inventory; (j) Inventory which is not subject to the
first priority, valid and perfected security interest of Lender; (k) returned,
damaged and/or defective Inventory; (l) Inventory purchased or sold on
consignment; and (m) shelled peanuts that are not saleable for domestic edible
use pursuant to applicable law and regulations. General criteria for Eligible
Inventory may be established and revised from time to time by Lender in good
faith. Any Inventory which is not Eligible Inventory shall nevertheless be
part of the Collateral.
1.16 "Environmental Laws" shall mean all federal, state, district, local
and foreign laws, rules, regulations, ordinances, and consent decrees relating
to health, safety, hazardous substances, pollution and environmental matters,
as now or at any time hereafter in effect, applicable to Borrower's business
and facilities (whether or not owned by it), including laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contamination, chemicals, or hazardous, toxic or dangerous substances,
materials or wastes into the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata) or
otherwise relating to the generation, manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of pollutants,
contaminants, chemicals, or hazardous, toxic or dangerous substances, materials
or wastes.
1.17 "Equipment" shall mean all of Borrower's now owned and hereafter
acquired equipment, machinery, computers and computer hardware and software
(whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or used
in connection therewith, and substitutions and replacements thereof, wherever
located.
1.18 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, as the same now exists or may hereafter from time to
time be amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.
-7-
12
1.19 "ERISA Affiliate" shall mean any person required to be aggregated
with Borrower or any of its Subsidiaries under Sections 414(b), 414(c), 414(m)
or 414(o) of the Code.
1.20 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.21 "Excess Availability" shall mean the amount, as determined by
Lender, calculated at any time, equal to:
(a) the lesser of: (i) the amount of the Revolving Loans available to
Borrower as of such time based on the applicable lending formulas multiplied by
the Net Amount of Eligible Accounts and the Value of Eligible Inventory, as
determined by Lender, and subject to the sublimits and Availability Reserves
from time to time established by Lender hereunder, and (ii) the Maximum Credit,
minus
(b) the sum of: (i) the amount of all then outstanding and unpaid
Obligations, plus (ii) the aggregate amount of all then outstanding and unpaid
trade payables of Borrower which are more than sixty (60) days past their
original due date or more than ninety (90) days past their original invoice
date as of such time.
1.22 "Exchange Notes" shall mean those senior secured notes of the
Borrower issued in exchange for the Senior Notes, which Exchange Notes shall be
substantially identical to the Senior Notes, except for the removal of certain
securities law transfer restrictions.
1.23 "Existing Financing Agreements" shall mean the Existing Loan
Agreement, together with the other Financing Agreements (as defined in the
Existing Loan Agreement) as in effect immediately prior to the effectiveness
hereof.
1.24 "Existing Loan Agreement" shall have the meaning set forth in the
Recitals hereto.
1.25 "Financing Agreements" shall mean, collectively, this Agreement, the
Existing Financing Agreements (other than the Existing Loan Agreement, the Term
Notes, the Mortgages and the TFH Subordination Agreement), and all other notes,
guarantees, security agreements, intercreditor agreements, and all other
agreements, documents and instruments now or at any time hereafter executed
and/or delivered by Borrower or any Obligor in connection with this Agreement,
as the same now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
-8-
13
1.26 "Food Security Act" shall mean the Food Security Act, 7 U.S.C.A.
Section 1631, as the same now exists or may hereafter be amended or
supplemented, together with all regulations now or hereafter promulgated
thereunder.
1.27 "Food Security Act Notices" shall have the meaning set forth in
Section 7.8(b) hereof.
1.28 "Four Week Period" shall mean each of Borrower's thirteen (13) fiscal
periods in each fiscal year, each of which is four (4) weeks in duration,
except for a single five (5) week period in leap years.
1.29 "Franchisee Notes" shall mean all present and future promissory notes
and other instruments and agreements now or hereafter evidencing or relating to
obligations owed to Borrower by its franchisees, including, without limitation,
obligations owed for fees and other amounts in respect of distribution rights
granted to such franchisees by Borrower, and obligations relating thereto, and
obligations owed by franchisees for the purchase of snack foods.
1.30 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Boards which are applicable to the
circumstances as of the date of determination consistently applied, except
that, for purposes of Sections 9.13 and 9.14 hereof, GAAP shall be determined
on the basis of such principles in effect on the date hereof and consistent
with those used in the preparation of the audited financial statements
delivered to Lender prior to the date hereof.
1.31 "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including, without limitation, hydrocarbons
(including naturally occurring or man-made petroleum and hydrocarbons),
flammable explosives, asbestos, urea formaldehyde insulation, radioactive
materials, biological substances, polychlorinated biphenyls, pesticides,
herbicides and any other kind and/or type of pollutants or contaminants
(including, without limitation, materials which include hazardous
constituents), sewage, sludge, industrial slag, solvents and/or any other
similar substances, materials, or wastes and including any other substances,
materials or wastes that are or become regulated under any Environmental Law
(including, without limitation any that are or become classified as hazardous
or toxic under any Environmental Law).
-9-
14
1.32 "▇▇▇▇▇▇▇ Group" shall mean Heico Holding, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and
members of his immediate family and any trusts for the benefit of any of the
foregoing, T.F. Partners L.P. and any entities of which the beneficial and
record ownership and power to vote one hundred (100%) percent of the capital
stock and/or other voting interests is held by any one or more of the
foregoing.
1.33 "Heico Holding" shall mean Heico Holding, Inc., a Delaware
corporation, formerly known as ▇▇▇▇▇▇▇▇▇ Corporation, and its successors and
assigns.
1.34 "Industrial Revenue Bonds" shall mean (i) the $4,200,000 aggregate
principal amount of Industrial Development Revenue Bonds of the Industrial
Development Board of the County of ▇▇▇▇ (General Mill, Inc. Project) Series
1979, together with the existing real property and fixtures of Borrower located
in Knoxville, Tennessee securing such Bonds; and (ii) the $5,800,000 aggregate
principal amount of Industrial Development Revenue Bonds of ▇▇▇▇▇▇ County,
Florida, together with the existing real property, fixtures and Equipment of
Borrower located in Perry, Florida, securing such Bonds.
1.35 "Information Certificate" shall mean the Information Certificate of
Borrower constituting Exhibit A hereto containing information with respect to
Borrower, its business and assets provided by or on behalf of Borrower to
Lender in connection with the preparation of this Agreement and the other
Financing Agreements and the financing arrangements provided for herein.
1.36 "Insolvent" shall mean with respect to any person, that such person
(i) has total liabilities (including contingent liabilities) exceeding the fair
saleable value of its assets or (ii) is generally unable to pay its debts as
the same become due.
1.37 "Inventory" shall mean all of Borrower's now owned and hereafter
existing or acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located.
1.38 "Letter of Credit Accommodations" shall mean the letters of credit,
merchandise purchase or other guaranties which are from time to time either (a)
issued or opened by Lender for the account of Borrower or any Obligor or (b)
with respect to which Lender has agreed to indemnify the issuer or guaranteed
to the issuer the performance by Borrower of its obligations to such issuer.
1.39 "Loans" shall mean the Revolving Loans.
1.40 "Material Adverse Effect" shall mean any material adverse effect upon
the business, assets or financial condition
-10-
15
of Borrower, or any material adverse effect upon the Collateral or
Lender's rights or interests in or with respect to the Collateral or Borrower's
ability to pay and perform the Obligations.
1.41 "Maximum Credit" shall mean the amount of $17,000,000.
1.42 "Maximum Interest Rate" shall mean the maximum non-usurious rate of
interest under applicable Federal or State law as in effect from time to time
that may be contracted for, taken, reserved, charged or received in respect of
the indebtedness of Borrower to Lender, or to the extent that at any time such
applicable law may thereafter permit a higher maximum non-usurious rate of
interest, then such higher rate. Notwithstanding any other provision hereof,
the Maximum Interest Rate shall be calculated on a daily basis (computed on the
actual number of days elapsed over a year of three hundred sixty-five (365) or
three hundred sixty-six (366) days, as the case may be).
1.43 "Mortgages" shall have the meaning set forth in the Existing Loan
Agreement.
1.44 "Net Amount of Eligible Accounts" shall mean the gross amount of
Eligible Accounts less (a) sales, excise or similar taxes included in the
amount thereof and (b) returns, discounts, claims, credits and allowances of
any nature at any time issued, owing, granted, outstanding, available or
claimed with respect thereto.
1.45 "Obligations" shall mean any and all Revolving Loans, Letter of
Credit Accommodations and all other obligations, liabilities and indebtedness
of every kind, nature and description owing by Borrower to Lender and/or its
affiliates, including principal, interest, charges, fees, costs and expenses,
however evidenced, whether as principal, surety, endorser, guarantor or
otherwise, to the extent arising under this Agreement or the other Financing
Agreements, whether now existing or hereafter arising, whether arising before,
during or after the initial or any renewal term of this Agreement or after the
commencement of any case with respect to Borrower under the United States
Bankruptcy Code or any similar statute (including, without limitation, the
payment of interest and other amounts which would accrue and become due but for
the commencement of such case), whether direct or indirect, absolute or
contingent, joint or several, due or not due, primary or secondary, liquidated
or unliquidated, secured or unsecured, and however acquired by Lender.
1.46 "Obligor" shall mean TFCC, TFH and any other guarantor, endorser,
acceptor, surety or other person liable on or with respect to the Obligations
or who is the owner of any
-11-
16
property which is security for the Obligations, other than Borrower.
1.47 "PACA" shall mean the Perishable Agricultural Commodities Act, 7
U.S.C.A. Section 499A et seq., as the same now exists or may hereafter be
amended or supplemented, together with all regulations now or hereafter
promulgated thereunder.
1.48 "Payment Account" shall have the meaning set forth in Section 6.3
hereof.
1.49 "Person" or "person" shall mean any individual, sole proprietorship,
partnership, corporation (including, without limitation, any corporation which
elects subchapter S status under the Internal Revenue Code of 1986, as
amended), limited liability company, limited liability partnership, business
trust, unincorporated association, joint stock corporation, trust, joint
venture or other entity or any government or any agency or instrumentality or
political subdivision thereof.
1.50 "Prime Rate" shall mean the rate from time to time publicly
announced by CoreStates Bank, N.A., or its successors, at its office in
Philadelphia, Pennsylvania, as its prime rate, whether or not such announced
rate is the best rate available at such bank.
1.51 "Records" shall mean all of Borrower's present and future books of
account of every kind or nature, purchase and sale agreements, invoices, ledger
cards, bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data to the extent relating to the other
Collateral or any account debtor, together with the tapes, disks, diskettes and
other data and software storage media and devices, file cabinets or containers
in or on which the foregoing are stored (including any rights of Borrower with
respect to the foregoing maintained with or by any other person).
1.52 "Registration Rights Agreements" shall mean, collectively, the
Registration Rights Agreement, dated on or about the date hereof, between
Borrower and PaineWebber Incorporated, and the Registration Rights Agreement,
dated on or about the date hereof, between TFH and Borrower, as the same now
exists or may hereafter be amended, modified, supplemented, amended, renewed,
restated or replaced.
1.53 "Revolving Loans" shall mean the loans now or hereafter made by
Lender to or for the benefit of Borrower on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 2.1 hereof.
1.54 "Sellers" shall have the meaning set forth in Section 7.8(b) hereof.
-12-
17
1.55 "Senior Note Agreements" shall mean the Indenture dated on or about
the date hereof between Borrower and the Senior Note Trustee, pursuant to which
the Senior Notes are issued, together with the Senior Notes, and all
instruments and agreements, guaranteeing or granting collateral security for
the Senior Notes, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, exchanged, restated or replaced.
1.56 "Senior Note Intercreditor Agreement" shall mean the Intercreditor
Agreement dated on or about the date hereof between Lender and the Senior Note
Trustee, for itself and on behalf of the present and future holders of Senior
Notes, acknowledged and agreed to by Borrower, as the same now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced, and also including any notes issued in exchange therefor pursuant to
the terms of the Registration Rights Agreements as in effect on the date
hereof.
1.57 "Senior Notes" shall mean (i) the 10 1/2% Senior Secured Notes of
Borrower due 2004, issued on or about the date hereof by Borrower in the
aggregate original principal amount of $60,000,000, (ii) the Exchange Notes,
and (iii) any additional Senior Notes (up to an aggregate of $10,000,000 in
original principal amount) issued upon conversion of the Class A Preferred
Stock as provided under the rights and preferences in effect for such stock, as
the foregoing now exist or may hereafter be amended, modified, supplemented,
extended, renewed, exchanged, restated or replaced.
1.58 "Senior Note Trustee" shall mean IBJ ▇▇▇▇▇▇▇▇ Bank & Trust Company, a
New York banking corporation, in its capacities as Trustee and Collateral Agent
for the holders of Senior Notes under the Senior Note Agreements, together with
any successor or replacement trustee, and their respective successors and
assigns.
1.59 "SunTrust" shall mean, STI Credit Corporation, a Nevada corporation,
and its successors and assigns.
1.60 "SunTrust Financing Agreement" shall mean, collectively, the
Agreement dated March 2, 1990, Distributor and Franchisee Financing Agreement,
dated June 7, 1990, as modified by a letter agreement, dated May 21, 1993, a
letter agreement, dated January 21, 1994, a letter agreement dated December 23,
1994, the Amendment to Distributor and Franchisee Financing Agreement, dated
July 25, 1994, and the Amendment to Portfolio Agreement and Financing
Agreement, dated as of August 30, 1996, as amended by the Addendum to Amendment
to Portfolio Agreement and Financing Agreement dated December 13, 1996, each
presently between Borrower and SunTrust.
-13-
18
1.61 "SunTrust Purchased Receivables" shall mean the
Distributor/Franchisee Receivables heretofore purchased by SunTrust (or its
predecessors) from Borrower pursuant to the SunTrust Financing Agreement.
1.62 "SunTrust Termination Agreement" shall mean the Settlement and
Release Agreement, dated as of September 12, 1997, between Borrower and
SunTrust, together with all agreements, documents and instruments delivered
thereunder or relating thereto.
1.63 "Tangible Net Worth" shall mean as to any Person, at any time, in
accordance with GAAP (except as otherwise specifically set forth below), on a
consolidated basis for such Person and its subsidiaries (if any), the amount
equal to: (a) the difference between: (i) the aggregate net book value of all
assets of such Person and its subsidiaries, calculating the book value of
inventory for this purpose on a first-in-first-out basis, after deducting from
such book values goodwill and other intangible assets and all appropriate
reserves in accordance with GAAP (including all reserves for doubtful
receivables, obsolescence, depreciation and amortization) and (ii) the
aggregate amount of the indebtedness and other liabilities of such Person and
its subsidiaries (including tax and other proper accruals) plus (b)
indebtedness of such Person and its subsidiaries which is subordinated in right
of payment to the full and indefeasible payment of all of the Obligations on
terms and conditions acceptable to Lender plus (c) unpaid accrued dividends on
preferred stock of Borrower, if any, which have been accrued as a liability in
accordance with GAAP.
1.64 "Term Notes" shall have the meaning set forth in the Existing Loan
Agreement.
1.65 "TFCC" shall mean Tom's Foods Capital Corporation, a Delaware
corporation, and its successors and assigns.
1.66 "TFH" shall mean TFH Corp., a Delaware corporation, and its
successors and assigns.
1.67 "TFH Existing Debt" shall mean all liabilities, indebtedness and
obligations of Borrower and/or any Obligor to TFH, its successors and assigns,
including, without limitation, all such liabilities, indebtedness and
obligations comprised of the Existing Bank Debt and the TFH Subordinated Debt
(as such terms are defined in the Existing Loan Agreement), in each case
outstanding on the date hereof, immediately prior to the effectiveness hereof
and prior to the issuance of the Senior Notes.
1.68 "TFH Intercreditor Agreement" shall mean the Intercreditor and
Subordination Agreement, dated August 30, 1996,
-14-
19
between TFH and Lender, and acknowledged by Borrower, as amended by Amendment
to Intercreditor Agreement dated as of the date hereof between TFH and Lender,
and acknowledged by Borrower, as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
1.69 "TFH Investor L/C's" shall mean the letters of credit provided by the
shareholders of TFH in the aggregate face amount of $10,000,000, in favor of
Nestle U.K. Limited, as guarantor of the Industrial Revenue Bonds, under which
the beneficiary may draw for amounts paid by the beneficiary, as guarantor of
the Industrial Revenue Bonds, to the holders of the Industrial Revenue Bonds or
the trustee(s) for such holders, together with all extensions, substitutions or
replacements of such letters of credit provided by the TFH or its shareholders
(and not by Borrower).
1.70 "TFH L/C Obligations" shall mean the obligations of Borrower (i) to
reimburse TFH for amounts drawn by the beneficiary under the TFH Investor L/C's
to reimburse such beneficiary, as guarantor of the Industrial Revenue Bonds,
for amounts paid to the holders of the Industrial Revenue Bonds or the
trustee(s) for such holders, and (ii) to pay or reimburse TFH for amounts
payable or paid by TFH to the providers of the TFH Investor L/C's for out of
pocket fees or expenses paid by them to the issuers of the TFH Investor L/C's.
1.71 "TFH Subordination Agreement" shall mean the Subordination
Agreement, dated August 30, 1996, between TFH and Lender, and acknowledged by
Borrower.
1.72 "Value" shall mean, as determined by Lender in good faith, with
respect to Inventory, the lower of (a) cost computed on a first-in-first-out
basis in accordance with GAAP or (b) market value.
1.73 "Working Capital" shall mean as to any Person, at any time, in
accordance with GAAP, on a consolidated basis for such Person and its
subsidiaries (if any), the amount equal to the difference between: (a) the
aggregate net book value of all current assets of such Person and its
subsidiaries (as determined in accordance with GAAP), calculating the book
value of inventory for this purpose on a first-in-first-out basis, and (b) all
current liabilities of such Person and its subsidiaries (as determined in
accordance with GAAP), provided, that, as to Borrower, for purposes of Section
9.13, the liabilities of Borrower and its subsidiaries to Lender under this
Agreement shall not be considered current liabilities (whether or not
classified as current liabilities in accordance with GAAP).
-15-
20
SECTION 2. CREDIT FACILITIES
2.1 Revolving Loans.
(a) Subject to, and upon the terms and conditions contained herein,
Lender agrees to make Revolving Loans to Borrower from time to time in amounts
requested by Borrower up to the amount equal to the sum of:
(i) eighty-five (85%) percent of the Net Amount of Eligible
Accounts, plus
(ii) the lesser of: (A) fifty (50%) percent of the Value of
Eligible Inventory, or (B) the amount equal to: (1) $7,500,000
minus (2) fifty (50%) percent of the then undrawn amounts of the
outstanding Letter of Credit Accommodations for the purpose of
purchasing Eligible Inventory, less
(iii) any Availability Reserves.
(b) Lender may, in its discretion, from time to time, upon not less than
five (5) days prior notice to Borrower, (i) reduce the lending formula with
respect to Eligible Accounts to the extent that Lender determines in good faith
that: (A) the dilution with respect to the Accounts for any period (based on
the ratio (expressed as a percentage) of (1) the aggregate amount of reductions
in Accounts other than as a result of payments in cash to (2) the aggregate
amount of total sales) exceeds five (5%) percent or may be reasonably
anticipated to exceed five (5%) percent, or (B) the general creditworthiness of
account debtors has declined or (ii) reduce the lending formula(s) with respect
to Eligible Inventory to the extent that Lender determines that: (A) the number
of days of the turnover of the Inventory for any period has changed in any
material respect or (B) the liquidation value of the Eligible Inventory, or any
category thereof, has decreased, or (C) the nature and quality of the Inventory
has deteriorated. In determining whether to reduce the lending formula(s),
Lender may consider events, conditions, contingencies or risks which are also
considered in determining Eligible Accounts, Eligible Inventory or in
establishing Availability Reserves. To the extent Lender shall have
established an Availability Reserve which Lender determines is sufficient to
address any particular event, state of facts, contingency or risk in a manner
satisfactory to Lender, then Lender shall not exercise its rights under this
Section 2.1(b) to reduce the lending formula(s) to address the same event,
state of facts, contingency or risk.
(c) Except in Lender's discretion, the aggregate amount of the Loans and
the Letter of Credit Accommodations outstanding at any time shall not exceed
the Maximum Credit. In
-16-
21
the event that the outstanding amount of any component of the Loans, or the
aggregate amount of the outstanding Loans and Letter of Credit Accommodations,
exceeds the amount available under the lending formulas, the sublimit set forth
in Section 2.1(d), the sublimits for Letter of Credit Accommodations set forth
in Section 2.2(d), or the Maximum Credit, as applicable, such event shall not
limit, waive or otherwise affect any rights of Lender in that circumstance or
on any future occasions and Borrower shall, upon demand by Lender, which may be
made at any time or from time to time, immediately repay to Lender (except as
otherwise provided below) the entire amount of any such excess(es) for which
payment is demanded. Notwithstanding the foregoing, if the outstanding amount
of any component of the Loans exceeds the amount available under the lending
formula(s) and such excess(es) arise solely as a result of Lender either
establishing Availability Reserves pursuant to Section 2.3 hereof or reducing
the lending formula(s) pursuant to Section 2.1(b) hereof, then Borrower shall,
within seven (7) business days after demand by Lender, repay to Lender the
entire amount of any such excess(es) for which payment is demanded, but Lender
shall have no obligation to make any further Loans or provide further Letter of
Credit Accommodations until such excess(es) have been fully repaid; provided,
that, if any Event of Default, or condition or event, which with notice or
lapse of time or both would constitute an Event of Default, shall exist or have
occurred and be continuing, then such excess(es) shall in any event be payable
immediately on demand.
(d) Except in Lender's sole discretion, the aggregate amount of Revolving
Loans or Letter of Credit Accommodations which Lender may make available to
Borrower based on the lending formulas set forth in this Agreement in respect
of Eligible Inventory consisting of shelled peanuts shall not exceed $750,000,
at any one time outstanding.
2.2 Letter of Credit Accommodations.
(a) Subject to, and upon the terms and conditions contained herein, at
the request of Borrower, Lender agrees to provide or arrange for Letter of
Credit Accommodations for the account of Borrower containing terms and
conditions acceptable to Lender, Borrower and the issuer thereof. Any payments
made by Lender to any issuer thereof and/or related parties in connection with
the Letter of Credit Accommodations shall constitute additional Revolving Loans
to Borrower pursuant to this Section 2.
(b) In addition to any charges, fees or expenses charged by any bank or
issuer in connection with the Letter of Credit Accommodations, Borrower shall
pay to Lender a letter of credit fee at a rate equal to one and three-quarters
(1.75%) percent per annum on the daily outstanding balance of the Letter
-17-
22
of Credit Accommodations for the immediately preceding month (or part thereof),
payable in arrears as of the first day of each succeeding month, except that,
unless Borrower shall have furnished Lender with cash collateral pursuant to
Section 2.2(d) hereof, Borrower shall pay to Lender such letter of credit fee,
at Lender's option, without notice, at a rate equal to three and three-quarters
(3.75%) percent per annum on such daily outstanding balance for: (i) the
period from and after the date of termination or non-renewal hereof until
Lender has received full and final payment of all Obligations (notwithstanding
entry of a judgment against Borrower) and (ii) the period from and after the
date of the occurrence of an Event of Default for so long as such Event of
Default is continuing as determined by Lender. After cash collateral has been
furnished by Borrower to Lender with respect to any outstanding Letter of
Credit Accommodations pursuant to Section 2.2(d) hereof, the fee for such
outstanding Letter of Credit Accommodations shall revert prospectively to the
pre-default rate provided for in this Section. Such letter of credit fee shall
be calculated on the basis of a three hundred sixty (360) day year and actual
days elapsed and the obligation of Borrower to pay such fee shall survive the
termination or non-renewal of this Agreement.
(c) No Letter of Credit Accommodations shall be available unless on the
date of the proposed issuance of any Letter of Credit Accommodations, the
Revolving Loans available to Borrower (subject to the Maximum Credit, the
sublimits set forth in Sections 2.1(a)(ii)(B) and 2.1(d) and any Availability
Reserves) are equal to or greater than: (i) if the proposed Letter of Credit
Accommodation is for the purpose of purchasing Eligible Inventory, the sum of
(A) fifty (50%) percent of the cost of such Eligible Inventory, plus (B)
freight, taxes, duty and other amounts which Lender estimates must be paid in
connection with such Inventory upon arrival and for delivery to one of
Borrower's locations for Eligible Inventory listed in Exhibit C hereto within
the United States of America and (ii) if the proposed Letter of Credit
Accommodation is for any other purpose, an amount equal to one hundred (100%)
percent of the face amount thereof and all other commitments and obligations
made or incurred by Lender with respect thereto. Effective on the issuance of
each Letter of Credit Accommodation, the amount of Revolving Loans which might
otherwise be available to Borrower shall be reduced by the applicable amount
set forth in Section 2.2(c)(i) or Section 2.2(c)(ii).
(d) Except in Lender's discretion, (i) the amount of all outstanding
Letter of Credit Accommodations and all other commitments and obligations made
or incurred by Lender in connection therewith, shall not at any time exceed
$6,000,000 and (ii) the amount of all outstanding Letter of Credit
Accommodations for the purpose of purchasing Eligible Inventory and all other
commitments and obligations made or incurred by Lender
-18-
23
in connection therewith shall not at any time exceed: (A) $7,500,000 minus (B)
the amount of the then outstanding Revolving Loans based on Eligible Inventory
pursuant to Section 2.1(a)(ii) hereof and subject to the sublimit set forth in
Section 2.1(d). At any time an Event of Default exists or has occurred and is
continuing, upon Lender's request, Borrower will either furnish cash collateral
to secure the reimbursement obligations to the issuer in connection with any
Letter of Credit Accommodations or furnish cash collateral to Lender for the
Letter of Credit Accommodations, and in either case, the Revolving Loans
otherwise available to Borrower shall not be reduced as provided in Section
2.2(c) to the extent of such cash collateral.
(e) Borrower shall indemnify and hold Lender harmless from and against
any and all losses, claims, damages, liabilities, costs and expenses which
Lender may suffer or incur in connection with any Letter of Credit
Accommodations and any documents, drafts or acceptances relating thereto,
including, but not limited to, any losses, claims, damages, liabilities, costs
and expenses due to any action taken by any issuer or correspondent with
respect to any Letter of Credit Accommodation, except for any such losses,
claims, damages, liabilities, costs and expenses suffered or incurred by Lender
as a result of its own gross negligence or wilful misconduct as determined
pursuant to a final, non-appealable judgment of a court of competent
jurisdiction. Borrower assumes all risks with respect to the acts or omissions
of the drawer under or beneficiary of any Letter of Credit Accommodation and
for such purposes the drawer or beneficiary shall be deemed Borrower's agent.
Borrower assumes all risks for, and agrees to pay, all foreign, Federal, State
and local taxes, duties and levies relating to any goods subject to any Letter
of Credit Accommodations or any documents, drafts or acceptances thereunder.
Borrower hereby releases and holds Lender harmless from and against any acts,
waivers, errors, delays or omissions, whether caused by Borrower, by any issuer
or correspondent or otherwise with respect to or relating to any Letter of
Credit Accommodation, except for any such acts, waivers, errors, delays or
omissions constituting Lender's own gross negligence or wilful misconduct as
determined pursuant to a final, non-appealable judgment of a court of competent
jurisdiction. The provisions of this Section 2.2(e) shall survive the payment
of Obligations and the termination or non-renewal of this Agreement.
(f) Nothing contained herein shall be deemed or construed to grant
Borrower any right or authority to pledge the credit of Lender in any manner.
Lender shall have no liability of any kind with respect to any Letter of Credit
Accommodation provided by an issuer other than Lender unless Lender has duly
executed and delivered to such issuer the application or a guarantee or
indemnification in writing with respect to such Letter of Credit Accommodation.
Borrower shall be bound by any
-19-
24
interpretation made in good faith by Lender, or any other issuer or
correspondent under or in connection with any Letter of Credit Accommodation or
any documents, drafts or acceptances thereunder, notwithstanding that such
interpretation may be inconsistent with any instructions of Borrower. Lender
shall have the sole and exclusive right and authority to, and Borrower shall
not: (i) at any time an Event of Default exists or has occurred and is
continuing, (A) approve or resolve any questions of non-compliance of
documents, (B) give any instructions as to acceptance or rejection of any
documents or goods or (C) execute any and all applications for steamship or
airway guaranties, indemnities or delivery orders, and (ii) at all times, (A)
grant any extensions of the maturity of, time of payment for, or time of
presentation of, any drafts, acceptances, or documents, and (B) agree to any
amendments, renewals, extensions, modifications, changes or cancellations of
any of the terms or conditions of any of the applications, Letter of Credit
Accommodations, or documents, drafts or acceptances thereunder or any letters
of credit included in the Collateral. Lender may take such actions either in
its own name or in Borrower's name.
(g) Any rights, remedies, duties or obligations granted or undertaken by
Borrower to any issuer or correspondent in any application for any Letter of
Credit Accommodation, or any other agreement in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed
to have been granted or undertaken by Borrower to Lender. Any duties or
obligations undertaken by Lender to any issuer or correspondent in any
application for any Letter of Credit Accommodation, or any other agreement by
Lender in favor of any issuer or correspondent relating to any Letter of Credit
Accommodation, shall be deemed to have been undertaken by Borrower to Lender
and to apply in all respects to Borrower.
2.3 Availability Reserves.
(a) All Revolving Loans otherwise available to Borrower pursuant to the
lending formulas and subject to the Maximum Credit and other applicable limits
hereunder shall be subject to Lender's continuing right to establish and revise
Availability Reserves. Lender shall not establish an Availability Reserve with
respect to an event, state of facts, contingency or risk if Lender has reduced
the lending formula(s) hereunder to address the same event, state of facts,
contingency or risk in a manner satisfactory to Lender.
(b) In addition to any other Availability Reserves, Lender shall have the
right from time to time to establish and revise Availability Reserves to cover
amounts owed by Borrower to growers or other sellers or suppliers or their
agents for farm products directly or indirectly purchased by Borrower from such
growers or other sellers or suppliers or their agents, (i) if the
-20-
25
farm products or any proceeds thereof are or may become subject to a lien,
security interest or statutory trust claim in favor of, or created by, any such
grower or other seller or supplier or their agents, or (ii) if a purported
lien, security interest or statutory trust claim has been asserted by any such
grower or other seller or supplier or their agents, with respect to any farm
products or any Accounts of Borrower, or, as to any such farm products or
Accounts or the proceeds thereof, a security interest in farm products
purchased by Borrower is sought to be preserved under the Food Security Act,
or a claim is asserted or remedy is sought under PACA against Borrower or
Lender by the Secretary of Agriculture or other governmental authority, or
(iii) if Lender determines that Lender and its interests in the Collateral are
not fully and effectively protected against and entitled to priority over, all
potential liens, security interests and statutory trust claims upon farm
products purchased by Borrower directly or indirectly from growers or other
sellers, suppliers or agents involved in the transaction, or upon Accounts or
other proceeds thereof.
(c) In addition to any other Availability Reserves, Lender shall have the
right from time to time to establish and revise Availability Reserves to cover
(i) the projected monthly amount owed by Borrower to SunTrust for collections
of any money or other property received either directly by Borrower or in any
account of Borrower (including any of the Blocked Accounts) that represent
payments by Borrower's distributors and franchisees or other persons of amounts
owed to SunTrust; and (ii) at all times, the greater of the projected monthly
amount or actual amount owed by Borrower to Golden Peanut Company for the
purchase of shelled peanuts by Borrower from Golden Peanut Company.
2.4 Restatement.
(a) All loans and advances to Borrower outstanding under the Existing Loan
Agreement immediately prior to the effectiveness hereof, other than the
principal balances of the Term Loans (as defined in the Existing Loan
Agreement) which are to be repaid in full concurrently herewith, shall be
deemed outstanding Revolving Loans, and such Revolving Loans, together with all
accrued interest, fees, charges and expenses under the Existing Loan Agreement,
shall in all respects be deemed Obligations hereunder and shall be subject to
and governed by the terms hereof and of the other Financing Agreements and,
subject to Section 2.4(d) hereof, shall no longer be subject to or governed by
the Existing Loan Agreement, which is being amended and restated by this
Agreement.
(b) All letters of credit, acceptances, merchandise purchase or other
guarantees issued or opened by Lender under the Existing Loan Agreement or with
respect to which Lender has, pursuant to the Existing Loan Agreement,
indemnified the issuer
-21-
26
or guaranteed to the issuer the performance by Borrower of its obligations to
such issuer, shall, to the extent the same are outstanding immediately prior to
the effectiveness hereof, be deemed Letter of Credit Accommodations to Borrower
hereunder and shall be subject to and governed by the terms hereof and of the
other Financing Agreements, and, subject to Section 2.4(d) hereof, shall no
longer be subject to or governed by the Existing Loan Agreement, which is being
amended and restated by this Agreement.
(c) Pursuant to the Existing Loan Agreement (and as defined therein),
Lender has previously made "Term Loans" to Borrower in the aggregate original
principal amount of $9,840,000 comprised of the "Initial Term Loans" in the
aggregate original principal amount of $9,000,000, and an "Additional Equipment
Term Loan" in the original principal amount of $840,000. Such Term Loans have
an aggregate outstanding principal balance of $8,336,190.53 as of the date
hereof and such balance shall be repaid, concurrently herewith, out of the
proceeds of the issuance of the Senior Notes, as provided herein. Interest
accrued on such balance shall be charged to the Revolving Loan account of
Borrower as of October 31, 1997.
(d) Notwithstanding the amendment and restatement of the Existing Loan
Agreement pursuant to this Agreement, and except as expressly provided in
Sections 5.2 and 5.3 hereof, nothing contained in this Agreement or any other
Financing Agreements executed and delivered in connection herewith shall
extinguish, impair or limit the liens, security interests, assignments, pledges
and rights of setoff in or with respect to the existing and future property of
Borrower and TFCC granted to or held by Lender pursuant to the Existing
Financing Agreements or the perfection or priority thereof. In addition, no
right or remedy of Lender as against any third party under any of the Existing
Financing Agreements, and no obligation of any Borrower or Obligor to any third
party or to Lender under any Existing Financing Agreement to which a third
party is a signatory, shall be discharged, impaired or otherwise affected by
the amendment and restatement contained in this Agreement or any other
Financing Agreement executed and delivered in connection herewith, and,
accordingly, all Existing Financing Agreements to which a third party is a
signatory shall continue in full force and effect. Such Existing Financing
Agreements to which a third party is a signatory include, without limitation,
all intercreditor agreements, subordination agreements, landlord and mortgagee
waivers, bailee acknowledgment and notification letters, lockbox and blocked
account agreements and insurance endorsements; provided, that the TFH
Subordination Agreement is being terminated contemporaneously with the
effectiveness of this Agreement.
-22-
27
SECTION 3. INTEREST AND FEES
3.1 Interest.
(a) Borrower shall pay to Lender interest on the outstanding principal
amount of the non-contingent Obligations at the rate of one and three-eighths
(1.375%) percent per annum in excess of the Prime Rate.
(b) Notwithstanding Section 3.1(a), Borrower shall pay to Lender
interest, at Lender's option, without notice, at the rate of three and
three-eighths (3.375%) percent per annum in excess of the Prime Rate on all
non-contingent Obligations, for the period from and after the date of
termination or non-renewal hereof, or the date of the occurrence of an Event of
Default, and for so long as such Event of Default is continuing and until such
time as Lender has received full and final payment of all such Obligations
(notwithstanding entry of any judgment against Borrower). In addition,
Borrower shall pay to Lender interest, at Lender's option, without notice, at
the rate of three and three-eighths (3.375%) percent per annum in excess of the
Prime Rate on the portion of the Revolving Loans at any time outstanding in
excess of the amounts available to Borrower under Section 2 (whether or not
such excess(es), arise or are made with or without Lender's knowledge or
consent and whether made before or after an Event of Default, unless such
excess(es) arises solely as a direct result of Lender establishing an
Availability Reserve or reducing the lending formula(s) in which case the
increased rate shall commence only if and after such excess(es) have not been
repaid after seven (7) business days from the date of notice by Lender that
such excess(es) exist). All interest accruing hereunder on and after the
occurrence of any of the events referred to in Section 3.1(b) shall be payable
ON DEMAND.
(c) Interest shall be payable by Borrower to Lender monthly in arrears
not later than the first day of each calendar month and shall be calculated on
the basis of a three hundred sixty (360) day year and actual days elapsed.
Borrower acknowledges and understands that the calculation of interest on the
basis of the actual days elapsed over the period of a three hundred sixty (360)
day year as opposed to a year of three hundred sixty-five (365) or three
hundred sixty-six (366) days results in a higher effective rate of interest.
The interest rate shall increase or decrease by an amount equal to each
increase or decrease in the Prime Rate effective on the first day of the month
after any change in such Prime Rate is announced based on the Prime Rate in
effect on the last day of the month in which any such change occurs.
(d) On the date hereof, the Prime Rate is eight and one-half (8 1/2%)
percent and, therefore, the rate of interest in effect hereunder for Revolving
Loans outstanding on the date of
-23-
28
this Agreement, expressed in simple interest terms, is nine and seven-eighths
(9 7/8%) percent.
3.2 Amendment Fee. Borrower shall pay to Lender as a facility amendment
fee the amount of $50,000, which shall be fully earned as of and payable on the
date hereof. Such fee and the closing fee paid under the Existing Loan
Agreement shall not be subject to rebate upon any prepayment of the Obligations
except to the extent required by Section 3.5 of this Agreement or applicable
law. Such fees shall compensate Lender for the costs associated with the
origination, structuring, processing, approving and closing of the transactions
contemplated by the Existing Loan Agreement and this Agreement, exclusive of
any expenses for which Borrower has agreed to reimburse Lender pursuant to any
other provision of this Agreement or the other Financing Agreements or pursuant
to the Existing Financing Agreements (such as reasonable attorneys' fees).
3.3 Servicing Fee. Borrower shall pay to Lender monthly a servicing fee
in an amount equal to $6,500 in respect of Lender's services for each month (or
part thereof) while this Agreement remains in effect and for so long thereafter
as any of the Obligations are outstanding, which fee shall be fully earned as
of and payable in advance commencing on November 1, 1997 and on the first day
of each month thereafter.
3.4 Unused Line Fee. Borrower shall pay to Lender monthly an unused line
fee equal at a rate equal to one-half of one (0.5%) percent per annum
calculated upon the amount (if any) by which $17,000,000 exceeds the average
daily principal balance of the outstanding Revolving Loans and Letter of Credit
Accommodations during the immediately preceding month (or part thereof) while
this Agreement is in effect (or, in the case of the unused line fee calculation
for the month of October, 1997, outstanding for a portion of such month under
(and as defined in) the Existing Loan Agreement), and for so long thereafter as
any of the non-contingent Obligations or any Letter of Credit Accommodations
are outstanding, which fee shall be payable on the first day of each month in
arrears.
3.5 Maximum Interest.
(a) Notwithstanding anything to the contrary contained in this Agreement
or any of the other Financing Agreements, in no event whatsoever shall the
aggregate of all amounts that are contracted for, charged or received by Lender
pursuant to the terms of this Agreement or any of the other Financing
Agreements and that are deemed interest under applicable law exceed the Maximum
Interest Rate (including, to the extent applicable, the provisions of Section
5197 of the Revised Statutes of the United States of America as amended,
12 U.S.C. Section 85, as amended). No agreements, conditions, provisions or
stipulations contained
-24-
29
in this Agreement or any of the other Financing Agreements, or any Event of
Default, or the exercise by Lender of the right to accelerate the payment or
the maturity of all or any portion of the Obligations, or the exercise of any
option whatsoever contained in this Agreement or any of the other Financing
Agreements, or the prepayment by Borrower of any of the Obligations, or the
occurrence of any event or contingency whatsoever, shall entitle Lender to
contract for, charge or receive in any event, interest or any charges, amounts,
premiums or fees deemed interest by applicable law in excess of the Maximum
Interest Rate. In no event shall Borrower be obligated to pay interest or such
amounts as may be deemed interest under applicable law in amounts which exceed
the Maximum Interest Rate. All agreements, conditions or stipulations, if any,
which may in any event or contingency whatsoever operate to bind, obligate or
compel Borrower to pay interest or such amounts which are deemed to constitute
interest in amounts which exceed the Maximum Interest Rate shall be without
binding force or effect, at law or in equity, to the extent of the excess of
interest or such amounts which are deemed to constitute interest over such
Maximum Interest Rate.
(b) In the event any Interest is charged or received in excess of the
Maximum Interest Rate ("Excess"), Borrower acknowledges and stipulates that any
such charge or receipt shall be the result of an accident and bona fide error,
and that any Excess received by Lender shall be applied, first, to the payment
of the then outstanding and unpaid principal hereunder; second to the payment
of the other Obligations then outstanding and unpaid; and third, returned to
Borrower, it being the intent of the parties hereto not to enter into a
usurious or otherwise illegal relationship. The right to accelerate the
maturity of any of the Obligations does not include the right to accelerate any
interest that has not otherwise accrued on the date of such acceleration, and
Lender does not intend to collect any unearned interest in the event of any
such acceleration. Borrower recognizes that, with fluctuations in the rates of
interest set forth in Section 3.1 of this Agreement and the Maximum Interest
Rate, such an unintentional result could inadvertently occur. All monies paid
to Lender hereunder or under any of the other Financing Agreements, whether at
maturity or by prepayment, shall be subject to any rebate of unearned interest
as and to the extent required by applicable law.
(c) By the execution of this Agreement, Borrower agrees that (A) the
credit or return of any Excess shall constitute the acceptance by Borrower of
such Excess, and (B) Borrower shall not seek or pursue any other remedy, legal
or equitable, against Lender, based in whole or in part upon
contracting for, charging or receiving any interest or such amounts which are
deemed to constitute interest in excess of the Maximum Interest Rate. For the
purpose of determining whether or
-25-
30
not any Excess has been contracted for, charged or received by Lender, all
interest at any time contracted for, charged or received from Borrower in
connection with this Agreement or any of the other Financing Agreements shall,
to the extent permitted by applicable law, be amortized, prorated, allocated
and spread during the entire term of this Agreement in accordance with the
amounts outstanding from time to time hereunder and the Maximum Interest Rate
from time to time in effect in order to lawfully charge the maximum amount of
interest permitted under applicable laws.
(d) Borrower and Lender shall, to the maximum extent permitted under
applicable law, (i) characterize any non-principal payment as an expense, fee
or premium rather than as interest and (ii) exclude voluntary prepayments and
the effects thereof.
(e) The provisions of this Section 3.5 shall be deemed to be incorporated
into each of the other Financing Agreements (whether or not any provision of
this Section is referred to therein). Each of the Financing Agreements and
communications relating to any interest owed by Borrower and all figures set
forth therein shall, for the sole purpose of computing the extent of the
Obligations, be automatically recomputed by Borrower, and by any court
considering the same, to give effect to the adjustments or credits required by
this Section.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Effectiveness of Agreement. Each of the
following is a condition precedent to the effectiveness of this Agreement,
including Lender making any Revolving Loans or providing any Letter of Credit
Accommodations hereunder:
(a) Lender shall have received evidence, in form and substance
satisfactory to Lender, that concurrently herewith, all of the TFH Existing
Debt, other than the TFH L/C Obligations, shall have been fully paid and
satisfied with proceeds of the Senior Notes or converted to preferred stock of
Borrower having rights, preferences and other terms satisfactory to Lender.
(b) Lender shall have received, in form and substance satisfactory to
Lender, all releases, terminations and such other documents as Lender may
request to evidence and effectuate the termination by TFH of its financing
arrangements with Borrower and the termination and release by TFH of any
security interest, lien or other interest in and to any assets and properties
of Borrower, TFCC and each other Obligor, duly authorized, executed and
delivered by it or each of them, including, but not limited to, (i) UCC
termination statements for all UCC financing
-26-
31
statements previously filed by it or any of them or their predecessors, as
secured party and Borrower or any Obligor, as debtor and (ii) satisfactions and
discharges of any mortgages, deeds of trust or deeds to secure debt by Borrower
or any Obligor in favor of TFH, in form acceptable for recording in the
appropriate government office;
(c) Lender shall have received (i) copies of the TFH Investor L/C's as in
effect on the date hereof, and (ii) an original agreement and acknowledgment by
each of the account parties in respect of the TFH Investor L/C's and by TFH, in
form and substance satisfactory to Lender addressed to Lender or upon which
Lender is expressly permitted to rely, agreeing, among other things, that such
account parties shall look solely to TFH and do not have, and shall not
acquire, any claim or interest against Borrower or any of its properties by
reason of or in connection with the TFH Investor L/C's or drawings thereunder
or any fees or expenses payable or reimbursable in connection therewith, and,
in the case of TFH, containing a waiver of claims through December 31, 2005,
such agreement and acknowledgment being duly authorized, executed and delivered
by the parties thereto;
(d) Lender shall have received, in form and substance satisfactory to
Lender (i) a Termination Agreement between TFH and Lender, acknowledged by
Borrower, with respect to the TFH Subordination Agreement and (ii)
supplementing the agreement and acknowledgment by TFH delivered under Section
4.1(c), an Amended and Restated Intercreditor and Subordination Agreement
between TFH and Lender, acknowledged by Borrower and TFCC, with respect to the
TFH Intercreditor Agreement, each of the foregoing being duly authorized,
executed and delivered by TFH and Borrower;
(e) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has valid perfected and first priority
security interests in and liens upon the Collateral and any other property
which is intended to be security for the Obligations or the liability of any
Obligor in respect thereof, subject only to the security interests and liens
(if any) permitted herein or in the other Financing Agreements;
(f) all requisite corporate action and proceedings in connection with
this Agreement and the other Financing Agreements shall be satisfactory in form
and substance to Lender, and Lender shall have received all information and
copies of all documents, including, without limitation, records of requisite
corporate action and proceedings which Lender may have requested in connection
therewith, such documents where requested by Lender or its counsel to be
certified by appropriate corporate officers or governmental authorities;
-27-
32
(g) no material adverse change shall have occurred in the assets or
business of Borrower since the date of Lender's latest field examination and no
change or event shall have occurred which would materially impair the ability
of Borrower or any Obligor to perform its obligations hereunder or under any of
the other Financing Agreements to which it is a party or of Lender to enforce
the Obligations or realize upon the Collateral;
(h) Lender shall have received, in form and substance satisfactory to
Lender, all consents, waivers, acknowledgments and other agreements from third
persons which Lender may deem necessary or desirable in order to permit,
protect and perfect its security interests in and liens upon the Collateral or
to effectuate the provisions or purposes of this Agreement and the other
Financing Agreements, including, without limitation, acknowledgements by
lessors, mortgagees and warehousemen of Lender's security interests in the
Collateral, waivers by such persons of any security interests, liens or other
claims by such persons to the Collateral and agreements permitting Lender
access to, and the right to remain on, the premises to exercise its rights and
remedies and otherwise deal with the Collateral;
(i) Lender shall have received, in form and substance satisfactory to
Lender, a pro forma balance sheet of Borrower prepared as of November 1, 1997
reflecting the initial transactions hereunder, the payment and satisfaction or
conversion to preferred stock (as aforesaid) of all of the TFH Existing Debt,
other than the TFH L/C Obligations, the satisfaction and discharge of all
indebtedness to SunTrust, and the conveyance to Borrower by SunTrust of certain
SunTrust Purchased Receivables (as provided in the SunTrust Termination
Agreement), the issuance and sale of the Senior Notes and the receipt and
application of the proceeds thereof in accordance herewith and all related
transactions occurring at or about the initial closing of the amendment and
restatement of the financing arrangements hereunder and all related writeoffs
and adjustments under GAAP in connection with all of the foregoing, accompanied
by a certificate of the chief financial officer of Borrower with respect
thereto;
(j) Lender shall have received, in form and substance satisfactory to
Lender, the SunTrust Termination Agreement, duly executed and delivered by
Borrower and SunTrust, together with instruments of assignment by SunTrust in
favor of Borrower and UCC partial releases and/or termination statements to be
filed with respect to the SunTrust Purchased Receivables being conveyed to
Borrower by SunTrust pursuant to the SunTrust Termination Agreement;
(k) Lender shall have received evidence satisfactory to Lender that the
Senior Note Agreements have been duly executed and delivered by the parties
thereto, the Senior Notes have been
-28-
33
duly issued, executed and delivered by Borrower, and Lender shall have received
payment from Borrower, out of the proceeds of the issuance and sale of the
Senior Notes, of the aggregate principal balance of the Term Loans outstanding
under the Existing Loan Agreement on the date hereof, immediately prior to the
effectiveness hereof;
(l) Lender shall have received, in form and substance satisfactory to
Lender, the Senior Note Intercreditor Agreement executed and delivered by the
Senior Note Trustee, for itself and on behalf of the present and future holders
of Senior Notes, in favor of Lender, as acknowledged and agreed to by Borrower;
(m) Lender shall have received, in form and substance reasonably
satisfactory to Lender, (i) a written confirmation and acknowledgement by TFCC
of the continued effectiveness of its existing guarantee of payment in favor of
Lender of all Obligations, secured by a first and only security interest in
favor of Lender granted by TFCC in all of its existing and future assets and
(ii) a written confirmation and acknowledgement by TFH of the continued
effectiveness of its existing guarantee of payment in favor of Lender of all
Obligations;
(n) Lender shall have received evidence of continued effectiveness of
insurance and loss payee endorsements required hereunder and under the other
Financing Agreements, in form and substance satisfactory to Lender, and
certificates of insurance policies and/or endorsements naming Lender as loss
payee and additional insured;
(o) Lender shall have received, in form and substance satisfactory to
Lender, such opinion letters of counsel to Borrower, TFCC and TFH with respect
to this Agreement, the other Financing Agreements, the Senior Note Agreements
and such other matters as Lender may request; and
(p) the other Financing Agreements and all instruments and documents
hereunder and thereunder shall have been duly executed and delivered to Lender
and/or confirmed and ratified in favor of Lender, in form and substance
satisfactory to Lender.
4.2 Conditions Precedent to All Loans and Letter of Credit
Accommodations. Each of the following is an additional condition precedent to
Lender making Loans and/or providing Letter of Credit Accommodations to
Borrower, including the initial Loans and Letter of Credit Accommodations
following the amendment and restatement of the financing arrangements
hereunder, and any future Loans and Letter of Credit Accommodations:
(a) all representations and warranties contained herein and in the other
Financing Agreements shall be true and correct in all material respects with
the same effect as though
-29-
34
such representations and warranties had been made on and as of the date of the
making of each such Loan or providing each such Letter of Credit Accommodation
and after giving effect thereto (except in the case of any representations and
warranties that are expressly limited by their terms to an earlier date, which
shall be deemed repeated as of such earlier date); and
(b) no Event of Default and no event or condition which, with notice or
passage of time or both, would constitute an Event of Default, shall exist or
have occurred and be continuing on and as of the date of the making of such
Loan or providing each such Letter of Credit Accommodation and after giving
effect thereto.
SECTION 5. GRANT OF SECURITY INTEREST
5.1 Collateral. To secure payment and performance of all Obligations,
and confirming its prior grants and assignments of security to Lender with
respect thereto, Borrower hereby grants to Lender a continuing security
interest in, a lien upon, and a right of set off against, and hereby assigns to
Lender as security, the following property and interests in property, whether
now owned or hereafter acquired or existing, and wherever located
(collectively, the "Collateral"):
(a) Accounts;
(b) all present and future contract rights, chattel paper, documents,
instruments, letters of credit, bankers' acceptances and guaranties to the
extent relating to Accounts or other Collateral, all present and future
Distributor/Franchisee Receivables and all present and future general
intangibles for the payment of money (including claims and choses in action) to
the extent relating to Accounts, Inventory or other Collateral;
(c) all present and future monies, securities, credit balances, deposits,
deposit accounts and other property of Borrower now or hereafter held or
received by or in transit to Lender or its affiliates, or, to the extent
relating to Accounts, Inventory or other Collateral, held at or received by or
in transit to any other depository or other institution from or for the account
of Borrower, in each case whether for safekeeping, pledge, custody,
transmission, collection or otherwise, and all present and future liens,
security interests, rights, remedies, title and interest in, to and in respect
of Accounts, Inventory and other Collateral, including, without limitation, (i)
rights and remedies under or relating to guaranties, contracts of suretyship,
letters of credit and credit and other insurance related to Accounts, Inventory
or other Collateral, (ii) rights of stoppage in transit, replevin,
repossession, reclamation and other rights and remedies of an unpaid vendor,
lienor or secured
-30-
35
party relating to Account, Inventory or other Collateral, (iii) goods described
in invoices, documents, contracts or instruments with respect to, or otherwise
representing or evidencing, Accounts, Inventory or other Collateral, including,
without limitation, returned, repossessed and reclaimed goods, and (iv)
deposits by and property of account debtors or other persons securing the
obligations of account debtors;
(d) Inventory;
(e) all present and future trademarks and tradenames, service marks
(together with the goodwill of the business symbolized thereby), patents,
copyrights and other intellectual property affixed to or appearing on or
relating to any Inventory or the products thereof or other Collateral or
otherwise used in the manufacturing, processing, marketing, preparation for
sale, distribution or sale of Inventory or the products thereof or other
Collateral; provided, that the security interests hereby granted in the
property described in this Section 5.1(e) shall be limited to such right, title
and interest as may be required in order for Lender to exercise its rights and
remedies hereunder with respect to the fulfillment of orders, the manufacturing
and processing of Inventory and the products thereof, and the marketing,
preparation for sale, distribution, sale or other disposition of Inventory and
the products thereof, including the receipt and retention by Lender of the
proceeds thereof;
(f) Records; and
(g) all products and proceeds of the foregoing, in any form, including,
without limitation, insurance proceeds and all claims against third parties for
loss or damage to or destruction of any or all of the foregoing property
described in Sections 5.1(a) through (f), and also including all proceeds of
business interruption insurance and, to the extent relating to Accounts,
Inventory or other Lender Collateral, all other insurance proceeds, whether or
not constituting proceeds of any Collateral.
5.2 Release of Certain Collateral. Concurrently with the effectiveness
hereof, Lender shall execute and deliver, at Borrower's sole expense (i)
appropriate UCC-3 amendments conforming the types of collateral described in
UCC financing statements previously filed by Lender against Borrower to the
Collateral, and (ii) appropriate lien release instruments, in recordable form
for recording in the applicable real estate records, evidencing Lender's
release of its security interests in and liens upon the Equipment of Borrower,
any and all real property interests of Borrower and any and all other items or
types of property of Borrower previously included in the
"Collateral" granted under the Existing Financing Agreements that do not, upon
the effectiveness thereof, constitute part of the Collateral hereunder or under
the other Financing Agreements, in
-31-
36
each case that are now subject to the "Mortgages" (as defined in and pursuant
to the Existing Loan Agreement) granted by Borrower and related UCC fixture
filings.
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrower's Loan Account. Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all
payments made by or on behalf of Borrower and (c) all other appropriate debits
and credits as provided in this Agreement, including, without limitation, fees,
charges, costs, expenses and interest. All entries in the loan account(s)
shall be made in accordance with Lender's customary practices as in effect from
time to time.
6.2 Statements. Lender shall render to Borrower each month a statement
setting forth the balance in the Borrower's loan account(s) maintained by
Lender for Borrower pursuant to the provisions of this Agreement, including
principal, interest, fees, costs and expenses. Each such statement shall be
subject to subsequent adjustment by Lender but shall, absent manifest errors or
omissions, be considered correct and deemed accepted by Borrower and
conclusively binding upon Borrower as an account stated except to the extent
that Lender receives a written notice from Borrower of any specific exceptions
of Borrower thereto within forty-five (45) days after the date such statement
has been mailed by Lender. Until such time as Lender shall have rendered to
Borrower a written statement as provided above, the balance in Borrower's loan
account(s) shall be presumptive evidence of the amounts due and owing to Lender
by Borrower.
6.3 Collection of Accounts.
(a) Borrower shall establish and maintain, at its expense, blocked
accounts or lockboxes and related blocked accounts (in either case, "Blocked
Accounts"), as Lender may specify, with such banks as are acceptable to Lender
into which Borrower shall promptly deposit and direct its account debtors to
directly remit all payments on Accounts and all payments constituting proceeds
of Inventory or other Collateral in the identical form in which such payments
are made, whether by cash, check or other manner. The banks at which the
Blocked Accounts are established shall enter into an agreement, in form and
substance satisfactory to Lender, providing that all items received or
deposited in the Blocked Accounts are the property of Lender, that the
depository bank has no lien upon, or right to setoff against, the Blocked
Accounts, the items received for deposit therein, or the funds from time to
time on deposit therein and that the depository bank will wire, or otherwise
transfer, in immediately available funds, on a daily basis, all funds received
or deposited into the Blocked Accounts to such
-32-
37
bank account of Lender as Lender may from time to time designate for such
purpose ("Payment Account"). Borrower agrees that all payments made to such
Blocked Accounts or other funds received and collected by Lender, whether on
the Accounts or as proceeds of Inventory or other Collateral or otherwise shall
be the property of Lender. Notwithstanding the foregoing, unless and until (i)
Excess Availability at any time hereafter shall fall below $5,000,000
(provided, however, that in determining Excess Availability for this purpose
only, clause (a)(ii) of the definition of Excess Availability shall not apply),
or (ii) an Event of Default or condition or event which, with notice or passage
of time or both, would constitute an Event of Default, then exists or has
occurred and is continuing, or (iii) Borrower shall have failed to deliver
timely a Borrowing Base Certificate in accordance with the provisions hereof,
or (iv) Lender believes in good faith that any information contained in any
Borrowing Base Certificate is incomplete, inaccurate or misleading in any
material respect (each of the foregoing under clauses (i), (ii), (iii) or (iv),
a "Direct Remittance Event"), Lender shall direct the depository bank or banks
maintaining such Blocked Accounts to transfer any deposits or other amounts
transferred to the Blocked Accounts to an operating account of Borrower as
directed by Borrower. After the occurrence of a Direct Remittance Event,
Lender may notify the depository bank or banks maintaining such Blocked
Accounts to remit the funds received into the Blocked Accounts to the Payment
Account of Lender pursuant to the instructions set forth in the Blocked Account
Agreement(s) among Lender, Borrower and the banks at which the Blocked Accounts
are established. Following a Direct Remittance Event, no elimination
of the Direct Remittance Event or other change in circumstance shall require
Lender to direct that amounts in the Blocked Accounts be transferred to an
operating account of Borrower in lieu of the Payment Account.
(b) For purposes of calculating the amount of Revolving Loans available to
Borrower, payments will be applied (conditional upon final collection) to the
Obligations on the business day of receipt by Lender in the Payment Account, if
such payments are received within sufficient time (in accordance with Lender's
usual and customary practices as in effect from time to time) to credit
Borrower's Revolving Loan account on such day, and if not, then on the next
business day. For purposes of calculating interest hereunder, all payments or
other funds received by Lender will be applied (conditional upon final
collection) to the Obligations one (1) business day following the date of
receipt of immediately available funds by Lender in the Payment Account. With
respect to all amounts deposited or transferred to the Blocked Accounts that
are not remitted to the Payment Account (which shall only be in accordance with
Section 6.3(a) hereof), Borrower shall pay Lender a collection fee, on
the first day of each month, in an amount equal to interest at the rate payable
in respect of Revolving Loans hereunder, calculated upon the amounts deposited
in or transferred to the
-33-
38
Blocked Accounts during the immediately preceding month. Such collection fee
calculated at such rate shall accrue for the period commencing on the business
day such amounts are deposited or transferred to the Blocked Accounts through
the first business day following the business day on which such funds so
deposited or transferred first become immediately available funds. Borrower
shall provide Lender with a weekly report of the daily amounts deposited to and
transferred to the Blocked Accounts, the daily amounts which have become
immediately available funds in the Blocked Accounts, and such other information
as Lender requests to permit the calculation of the collection fee payable
under this Section.
(c) In addition to the Direct Remittance Events referred to in Section
6.3(a) hereof, Lender shall be entitled to declare a Direct Remittance Event
and exercise the rights set forth in Section 6.3 hereof following a Direct
Remittance Event, based on Lender's determination, on a quarterly basis,
whether or not to continue, in Lender's discretion, the provisions of Section
6.3(a) otherwise permitting the funds deposited or transferred to the Blocked
Accounts to be transferred to an operating account of Borrower.
(d) Borrower and all of its affiliates, subsidiaries, shareholders,
directors, employees or agents shall, acting as trustee for Lender, receive, as
the property of Lender, any monies, checks, notes, drafts or any other payment
relating to and/or proceeds of Accounts or other Collateral which come into
their possession or under their control and immediately upon receipt thereof,
shall deposit or cause the same to be deposited in the Blocked Accounts, or
remit the same or cause the same to be remitted, in kind, to Lender. In no
event shall the same be commingled with Borrower's own funds. Borrower agrees
to reimburse Lender on demand for any amounts owed or paid to any bank at which
a Blocked Account is established or any other bank or person involved in the
transfer of funds to or from the Blocked Accounts arising out of Lender's
payments to or indemnification of such bank or person. The obligation of
Borrower to reimburse Lender for such amounts pursuant to this Section 6.3
shall survive the termination or non-renewal of this Agreement.
6.4 Payments. All Obligations shall be payable to the Payment Account as
provided in Section 6.3 or such other place as Lender may designate from time
to time. Lender may apply payments received or collected from Borrower or for
the account of Borrower (including, without limitation, the monetary proceeds
of collections or of realization upon any Collateral and expressly including,
without limitation, amounts received in the Payment Account after Lender
exercises its rights under Section 6.3(a) following a Direct Remittance Event)
to such of the Obligations in respect of the Revolving Loans, whether or not
-34-
39
then due, and to such of the other Obligations then due, in such order and
manner as Lender determines. At Lender's option, all principal, fees, costs,
expenses and other charges provided for in this Agreement or the other
Financing Agreements may be charged directly to the loan account(s) of
Borrower. Without limiting the generality of the foregoing, as an
administrative convenience to Borrower and to ensure the timely payment of
interest owing by Borrower each month hereunder or under any of the other
Financing Agreements, Borrower hereby irrevocably requests and authorizes
Lender, in its discretion, to make a Revolving Loan the proceeds of which shall
be applied to the payment of the interest accrued on the principal amount of
Obligations during the immediately preceding month as and when such interest
becomes due and payable by Borrower to Lender. Borrower shall make all
payments to Lender on the Obligations free and clear of, and without deduction
or withholding for or on account of, any setoff, counterclaim, defense, duties,
taxes, levies, imposts, fees, deductions, withholding, restrictions or
conditions of any kind. If after receipt of any payment of, or proceeds of
Collateral applied to the payment of, any of the Obligations, Lender is
required to surrender or return such payment or proceeds to any Person for any
reason, then the Obligations intended to be satisfied by such payment or
proceeds shall be reinstated and continue and this Agreement shall continue in
full force and effect as if such payment or proceeds had not been received by
Lender. Borrower shall be liable to pay to Lender, and does hereby indemnify
and hold Lender harmless for the amount of any payments or proceeds surrendered
or returned. This Section 6.4 shall remain effective notwithstanding any
contrary action which may be taken by Lender in reliance upon such payment or
proceeds. This Section 6.4 shall survive the payment of the Obligations and
the termination or non-renewal of this Agreement.
6.5 Authorization to Make Loans. Lender is authorized to make the Loans
and provide the Letter of Credit Accommodations based upon telephonic or other
instructions received from anyone purporting to be an officer of Borrower or
other authorized person or, at the discretion of Lender, if such Loans are
necessary to satisfy any Obligations. All requests for Loans or Letter of
Credit Accommodations hereunder shall specify the date on which the requested
advance is to be made or Letter of Credit Accommodations established (which day
shall be a business day) and the amount of the requested Loan. Requests
received after 11:00 a.m. Atlanta, Georgia time on any day shall be deemed to
have been made as of the opening of business on the immediately following
business day. All Loans and Letter of Credit Accommodations under this
Agreement shall be conclusively presumed to have been made to, and at the
request of and for the benefit of, Borrower when deposited to the credit of
Borrower or otherwise disbursed or established in accordance with the
-35-
40
instructions of Borrower or in accordance with the terms and conditions of this
Agreement.
6.6 Use of Proceeds. All Loans made or Letter of Credit Accommodations
provided by Lender to Borrower pursuant to the provisions hereof shall be used
by Borrower only for general operating, working capital and other proper
corporate purposes of Borrower not otherwise prohibited by or inconsistent with
the terms hereof. None of the proceeds will be used, directly or indirectly,
for the purpose of purchasing or carrying any margin security or for the
purposes of reducing or retiring any indebtedness which was originally incurred
to purchase or carry any margin security or for any other purpose which might
cause any of the Loans to be considered a "purpose credit" within the meaning
of Regulation G of the Board of Governors of the Federal Reserve System, as
amended.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting. Borrower shall provide Lender with the
following documents in a form satisfactory to Lender: (a) on a regular basis as
required by Lender, a schedule of Accounts, credits issued and cash received;
(b) on a periodic basis, but no less frequently than once in each Four Week
Period, or more frequently as Lender may reasonably request, (i) perpetual
inventory reports, (ii) inventory reports by category, and (iii) agings of
accounts payable; (c) on a weekly basis (i) a Borrowing Base Certificate
setting forth Borrower's calculation of the Revolving Loans and Letter of
Credit Accommodations available to Borrower pursuant to the terms and
conditions contained herein as of the last day of the preceding week, duly
completed and executed by the chief financial officer or other appropriate
financial officer acceptable to Lender, together with all schedules required
pursuant to the terms of the Borrowing Base Certificate, duly completed and
(ii) prior to Lender's exercise of its rights under Section 6.3(a) following a
Direct Remittance Event, the report on collections referred to in the last
sentence of Section 6.3(b) hereof; (d) upon Lender's request, (i) copies of
customer statements and credit memos, remittance advices and reports, and
copies of deposit slips and bank statements, (ii) copies of shipping and
delivery documents, and (iii) copies of purchase orders, invoices and delivery
documents for Inventory acquired by Borrower; (e) weekly summary agings of
accounts receivable and detail agings of accounts receivable on a monthly basis
or more frequently as Lender may request; and (f) such other reports as to the
Collateral as Lender shall reasonably request from time to time. If any of
Borrower's records or reports of the Collateral are prepared or maintained by
an accounting service, contractor, shipper or other agent, Borrower hereby
irrevocably authorizes such service, contractor, shipper or agent to deliver
such records, reports,
-36-
41
and related documents to Lender and to follow Lender's instructions with
respect to further services at any time that an Event of Default exists or has
occurred and is continuing. Nothing contained in any Borrowing Base
Certificate shall be deemed to limit, impair or otherwise affect the rights of
Lender contained herein and in the event of any conflict or inconsistency
between the calculation of the Revolving Loans and Letter of Credit
Accommodations available to Borrower as set forth in any Borrowing Base
Certificate and as determined by Lender, the determination of Lender shall
govern and be conclusive and binding upon Borrower. Without limiting the
foregoing, Borrower shall furnish to Lender any information which Lender may
reasonably request regarding the determination and calculation of any of the
amounts set forth in the Borrowing Base Certificate.
7.2 Accounts Covenants.
(a) Borrower shall notify Lender promptly of: (i) any material delay in
Borrower's performance of any of its obligations to any account debtor or the
assertion of any claims, offsets, defenses or counterclaims by any account
debtor or any disputes with account debtors known to Borrower, or any
settlement, adjustment or compromise thereof, (ii) all material adverse
information known to Borrower relating to the financial condition of any
account debtor and (iii) any event or circumstance which, to Borrower's
knowledge would cause Lender to consider any then existing Accounts as no
longer constituting Eligible Accounts. No credit, discount, allowance or
extension or agreement for any of the foregoing shall be granted to any account
debtor without Lender's consent, except in the ordinary course of Borrower's
business in accordance with practices and policies disclosed in writing to
Lender prior to the granting thereof. So long as no Event of Default exists or
has occurred and is continuing, Borrower shall settle, adjust or compromise any
claim, offset, counterclaim or dispute with any account debtor. At any time
that an Event of Default exists or has occurred and is continuing, Lender
shall, at its option, have the exclusive right to settle, adjust or compromise
any claim, offset, counterclaim or dispute with account debtors or grant any
credits, discounts or allowances.
(b) Without limiting Borrower's other reporting obligations hereunder,
Borrower shall promptly report to Lender on a separate basis any return by an
account debtor of Inventory having a Value in excess of $15,000. At any time
that Inventory is returned, reclaimed or repossessed, the Account (or portion
thereof) which arose from the sale of such returned, reclaimed or
repossessed Inventory shall not be deemed an Eligible Account. In the event
any account debtor returns Inventory when an Event of Default exists or has
occurred and is continuing, Borrower shall, upon Lender's request, (i) hold the
returned Inventory in
-37-
42
trust for Lender, (ii) segregate all returned Inventory from all of its other
property, (iii) dispose of the returned Inventory solely according to Lender's
instructions, and (iv) not issue any credits, discounts or allowances with
respect thereto without Lender's prior written consent.
(c) With respect to each Account: (i) the amounts shown on any invoice
delivered to Lender or schedule thereof delivered to Lender shall be true and
complete, (ii) no payments shall be made thereon except payments delivered to
Lender on the date of receipt or remitted to the Blocked Account(s) directly by
the account debtor pursuant to the terms of this Agreement, (iii) no credit,
discount, allowance or extension or agreement for any of the foregoing shall be
granted to any account debtor except as reported to Lender in accordance with
this Agreement and except for credits, discounts, allowances or extensions made
or given in the ordinary course of Borrower's business in accordance with
practices and policies disclosed in writing to Lender prior to the making or
giving thereof, (iv) there shall be no setoffs, deductions, contras, defenses,
counterclaims or disputes existing or asserted with respect thereto except as
periodically reported to Lender in accordance with the terms of this Agreement
and separately reported to Lender if the aggregate amount thereof not yet
reported to Lender at any time exceeds $50,000, (v) none of the transactions
giving rise thereto will violate any applicable State or Federal laws or
regulations, all documentation relating thereto will be legally sufficient
under such laws and regulations and all such documentation will be legally
enforceable in accordance with its terms.
(d) Lender shall have the right at any time or times, in Lender's name or
in the name of a nominee of Lender, to verify the validity, amount or any other
matter relating to any Account or other Collateral, by mail, telephone,
facsimile transmission or otherwise.
(e) If an Event of Default exists or has occurred (whether or not
thereafter cured or waived as provided herein) or if, at any time, Borrower
shall have Excess Availability, as determined by Lender, in an amount less than
$1,000,000, Borrower shall, at Lender's request, deliver or cause to be
delivered to Lender, with appropriate endorsement and assignment, with full
recourse to Borrower, all chattel paper and instruments that are included in
the Collateral that Borrower then owns or may at any time thereafter acquire
immediately upon Borrower's receipt thereof, except as Lender may otherwise
agree in writing.
(f) Lender may, at any time or times that an Event of Default exists or
has occurred and is continuing, (i) notify any or all account debtors that the
Accounts have been assigned to Lender and that Lender has a security interest
therein and Lender may direct any or all accounts debtors to make payment of
-38-
43
Accounts directly to Lender, (ii) extend the time of payment of, compromise,
settle or adjust for cash, credit, return of merchandise or otherwise, and upon
any terms or conditions, any and all Accounts or other obligations included in
the Collateral and thereby discharge or release the account debtor or any other
party or parties in any way liable for payment thereof without affecting any of
the Obligations, (iii) demand, collect or enforce payment of any Accounts or
such other obligations, but without any duty to do so, and Lender shall not be
liable for its failure to collect or enforce the payment thereof nor for the
negligence of its agents or attorneys with respect thereto and (iv) take
whatever other action Lender may deem necessary or desirable for the protection
of its interests. At any time that an Event of Default exists or has occurred
and is continuing, at Lender's request, all invoices and statements sent to any
account debtor shall state that the Accounts and such other obligations have
been assigned to Lender and are payable directly and only to Lender and
Borrower shall deliver to Lender such originals of documents evidencing the
sale and delivery of goods or the performance of services giving rise to any
Accounts as Lender may require.
7.3 Inventory Covenants. With respect to the Inventory: (a) Borrower
shall at all times maintain inventory records reasonably satisfactory to
Lender, keeping correct and accurate records itemizing and describing the kind,
type, quality and quantity of Inventory, Borrower's cost therefor and daily
withdrawals therefrom and additions thereto; (b) Borrower shall conduct a
physical count of the Inventory at least once each year, but at any time or
times as Lender may request on or after the occurrence and during the
continuance of an Event of Default, and promptly following such physical
inventory shall supply Lender with a report in the form and with such
specificity as may be reasonably satisfactory to Lender concerning such
physical count; (c) Borrower shall not remove any Inventory from the locations
set forth or permitted herein, without the prior written consent of Lender,
except for sales of Inventory in the ordinary course of Borrower's business and
except to move Inventory directly from one location set forth or permitted
herein to another such location; (d) upon Lender's request, Borrower shall, at
Lender's expense at any time or times as Lender may request, but at Borrower's
expense, at any time or times as Lender may request on or after and during the
continuance of an Event of Default, deliver or cause to be delivered to Lender
written reports or appraisals as to the Inventory in form, scope and
methodology acceptable to Lender and by an appraiser acceptable to Lender,
addressed to Lender or upon which Lender is expressly permitted to rely; (e)
Borrower shall produce, use, store and maintain the Inventory, with all
reasonable care and caution and in accordance with applicable standards of any
insurance and in conformity with applicable laws (including, but not limited
to, the requirements of the Federal
-39-
44
Fair Labor Standards Act of 1938, as amended and all rules, regulations and
orders related thereto); (f) Borrower assumes all responsibility and liability
arising from or relating to the production, use, sale or other disposition of
the Inventory; (g) Borrower shall not sell Inventory to any customer on
approval, or any other basis which entitles the customer to return or may
obligate Borrower to repurchase such Inventory; (h) Borrower shall keep the
Inventory in good and marketable condition; and (i) Borrower shall not, without
prior written notice to Lender, acquire or accept any Inventory on consignment
or approval.
7.4 Equipment Covenants. With respect to the Equipment: (a) Borrower
shall keep the Equipment, other than obsolete Equipment, in good order, repair,
running and marketable condition (ordinary wear and tear excepted); (b)
Borrower shall use the Equipment with all reasonable care and caution and in
accordance with applicable standards of any insurance and in conformity with
all applicable laws; (c) the Equipment is and shall be used in Borrower's
business and not for personal, family, household or farming use; and (d)
Borrower assumes all responsibility and liability arising from the use of the
Equipment, except for actual use of the Equipment by Lender in a grossly
negligent manner, as determined by a final, non-appealable judgment of a court
of competent jurisdiction.
7.5 Power of Attorney. Borrower hereby irrevocably designates and
appoints Lender (and all persons designated by Lender) as Borrower's true and
lawful attorney-in-fact, and authorizes Lender, in Borrower's or Lender's name,
to: (a) at any time an Event of Default or event which with notice or passage
of time or both would constitute an Event of Default exists or has occurred and
is continuing (i) demand payment on Accounts or other proceeds of Inventory or
other Collateral, (ii) enforce payment of Accounts by legal proceedings or
otherwise, (iii) exercise all of Borrower's rights and remedies to collect any
Account or other Collateral, (iv) sell or assign any Account upon such terms,
for such amount and at such time or times as the Lender deems advisable, (v)
settle, adjust, compromise, extend or renew an Account, (vi) discharge and
release any Account, (vii) prepare, file and sign Borrower's name on any proof
of claim in bankruptcy or other similar document against an account debtor,
(viii) notify the post office authorities to change the address for delivery of
Borrower's mail to an address designated by Lender, and open and dispose of all
mail addressed to Borrower, and (ix) do all acts and things which are
necessary, in Lender's good faith determination, to fulfill Borrower's
obligations under this Agreement and the other Financing Agreements and (b) at
any time after the occurrence of a Direct Remittance Event to (i)
take control in any manner of any item of payment or proceeds thereof, (ii)
have access to any lockbox or postal box into which Borrower's mail is
deposited, (iii) endorse Borrower's name upon any items of payment or proceeds
thereof and deposit the same in
-40-
45
the Lender's account for application to the Obligations, (iv) endorse
Borrower's name upon any chattel paper, document, instrument, invoice, or
similar document or agreement relating to any Account or any goods pertaining
thereto or any other Collateral, (v) sign Borrower's name on any verification
of Accounts and notices thereof to account debtors and (vi) execute in
Borrower's name and file any UCC financing statements or amendments thereto.
Borrower hereby releases Lender and its officers, employees and designees from
any liabilities arising from any act or acts under this power of attorney and
in furtherance thereof, whether of omission or commission, except as a result
of Lender's own gross negligence or wilful misconduct as determined pursuant to
a final non-appealable judgment of a court of competent jurisdiction.
7.6 Right to Cure. Lender may, at its option, (a) cure any default by
Borrower under any agreement with a third party or pay or bond on appeal any
judgment entered against Borrower, (b) discharge taxes, liens, security
interests or other encumbrances at any time levied on or existing with respect
to the Collateral and (c) pay any amount, incur any expense or perform any act
which, in Lender's good faith judgment, is necessary or appropriate to
preserve, protect, insure or maintain the Collateral and the rights of Lender
with respect thereto. Lender may add any amounts so expended to the
Obligations and charge Borrower's account therefor, such amounts to be
repayable by Borrower ON DEMAND. Lender shall be under no obligation to effect
such cure, payment or bonding and shall not, by doing so, be deemed to have
assumed any obligation or liability of Borrower. Any payment made or other
action taken by Lender under this Section shall be without prejudice to any
right to assert an Event of Default hereunder and to proceed accordingly.
7.7 Access to Premises. From time to time as requested by Lender, at the
cost and expense of Borrower, (a) Lender or its designee shall have complete
access to all of Borrower's premises during normal business hours and after
notice to Borrower, or at any time and without notice to Borrower if an Event
of Default exists or has occurred and is continuing, for the purposes of
inspecting, verifying and auditing the Collateral and all of Borrower's books
and records, including, without limitation, the Records, and (b) Borrower shall
promptly furnish to Lender such copies of such books and records or extracts
therefrom as Lender may request, and (c) use during normal business hours such
of Borrower's personnel, equipment, supplies and premises as may be reasonably
necessary for the foregoing and if an Event of Default exists or has occurred
and is continuing for the collection of Accounts and realization of other
Collateral.
-41-
46
7.8 Purchases of Farm Products.
(a) Borrower shall not purchase any farm products unless Borrower acquires
title to such goods free and clear of all security interests and other liens
(except in favor of Lender) and, in particular, free from any statutory or
other grower's or producer's liens or any security interests in favor of any
secured party or lienholder who has taken steps under the Food Security Act or
any other Federal or state statute to preserve its security interest or other
lien rights upon such goods notwithstanding the passage of title directly or
indirectly to Borrower.
(b) Borrower has not within the one (1) year period prior to the date
hereof, received written notice pursuant to the applicable provisions of the
Food Security Act or pursuant to the Uniform Commercial Code or any other
applicable local laws from (i) any of its suppliers or sellers (collectively,
"Sellers") of farm products or (ii) any secured party or secured parties of any
such Sellers of farm products or (iii) the Secretary of State (or equivalent
official) of any State in which farm products purchased by Borrower are grown
or produced, advising or notifying Borrower of a lien or security interest, or
of the intention of a Seller's secured party to maintain a lien or other
security interest in and to any farm products which may be purchased by
Borrower (all of the foregoing, the "Food Security Act Notices").
(c) Borrower has complied with and shall, in all respects, continue to
comply with all existing and future Food Security Act Notices during their
periods of effectiveness under the Food Security Act, including, without
limitation, directions to make payments to the Sellers by issuing payment
instruments directly to the secured party or jointly payable to the Seller and
the Seller's secured party, as specified in the Food Security Act Notice, so as
to terminate or release the security interests in farm products maintained
under the Food Security Act. In addition, with respect to any farm products
purchased by or for resale to Borrower, Borrower shall take all other steps as
may be required, if any, to ensure that all farm products are purchased free
and clear of all security interests, liens and other claims by the Sellers
thereof or their secured parties. Borrower shall notify Lender in writing
within five (5) business days after receipt by Borrower of any such Food
Security Act Notice or amendment to a previous Food Security Act Notice or
amendment or notice.
(d) If, at any time, any jurisdiction where farm products purchased by
Borrower are grown or produced has implemented or implements the provisions of
the Food Security Act with respect to the creation of a "central filing
system", Borrower shall promptly register with the Secretary of State (or
-42-
47
equivalent official) of each such jurisdiction, pursuant to the registration
requirements of the Food Security Act, and shall promptly notify Lender in
writing of such registration with the central filing system and provide Lender
with copies of any Food Security Act Notices, master lists, supplements thereto
or other materials then or thereafter received from the Secretary of State (or
other official) of the central filing system by Borrower.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender the following (which
shall survive the execution and delivery of this Agreement), the truth and
accuracy of which are a continuing condition of the making of Loans and
providing Letter of Credit Accommodations by Lender to Borrower:
8.1 Corporate Existence, Power and Authority; Subsidiaries. Borrower is
a corporation duly organized and in good standing under the laws of its state
of incorporation and is duly qualified as a foreign corporation and in good
standing in all states or other jurisdictions where the nature and extent of
the business transacted by it or the ownership of assets makes such
qualification necessary, except for those jurisdictions in which the failure to
so qualify has not and cannot reasonably be expected to result in a Material
Adverse Effect. The execution, delivery and performance of this Agreement, the
other Financing Agreements and the transactions contemplated hereunder and
thereunder are all within Borrower's corporate powers, have been duly
authorized and are not in contravention of law or the terms of Borrower's
certificate of incorporation, by-laws, or other organizational documentation,
or any indenture, agreement or undertaking to which Borrower is a party or by
which Borrower or its property are bound. This Agreement and the other
Financing Agreements constitute legal, valid and binding obligations of
Borrower enforceable in accordance with their respective terms. As of the date
hereof, Borrower does not have any subsidiaries except as set forth on the
Information Certificate. As of the date hereof, Borrower is the only
subsidiary of TFH and/or TFCC.
8.2 Financial Statements; No Material Adverse Effect. All financial
statements relating to Borrower which have been or may hereafter be delivered
by Borrower to Lender have been prepared in accordance with GAAP and fairly
present the financial condition and the results of operation of Borrower as at
the dates and for the periods set forth therein. Except as disclosed in the
certified financial statements for Borrower's fiscal year ended December 28,
1996, or in any interim financial statements furnished by Borrower to Lender
prior to the date of this Agreement, no event has occurred or condition exists
that has resulted in or could reasonably be expected to result in a Material
Adverse Effect since the date of the most recent audited
-43-
48
financial statements furnished by Borrower to Lender prior to the date of this
Agreement.
8.3 Chief Executive Office; Collateral Locations. The chief executive
office of Borrower and Borrower's Records concerning Accounts are located only
at the address set forth below and its only other places of business and the
only other locations of Collateral, if any, are the addresses set forth in the
Information Certificate, subject to the right of Borrower to establish new
locations in accordance with Section 9.2 below. The Information Certificate
correctly identifies as of the date hereof any of such locations which are not
owned by Borrower and sets forth the owners and/or operators thereof and to the
best of Borrower's knowledge, the holders of any mortgages on such locations.
8.4 Priority of Liens; Title to Properties. The security interests and
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens indicated on Schedule 8.4
hereto and the other liens permitted under Section 9.8 hereof. Borrower has
good and marketable title to all of its properties and assets subject to no
liens, mortgages, pledges, security interests, encumbrances or charges of any
kind, except those granted to Lender and such others as are specifically listed
on Schedule 8.4 hereto or permitted under Section 9.8 hereof.
8.5 Tax Returns. Borrower has filed, or caused to be filed, in a timely
manner all tax returns, reports and declarations which are required to be filed
by it. All information in such tax returns, reports and declarations is
complete and accurate in all material respects as of the date of filing.
Borrower has paid or caused to be paid all taxes due and payable or claimed due
and payable in any assessment received by it, except taxes the validity of
which are being contested in good faith by appropriate proceedings diligently
pursued and available to Borrower and with respect to which adequate reserves
have been set aside on its books. Adequate provision has been made for the
payment of all accrued and unpaid Federal, State, county, local, foreign and
other taxes whether or not yet due and payable and whether or not disputed.
8.6 Litigation. Except as set forth on the Information Certificate,
there is, as of the date hereof, no present investigation by any governmental
agency pending, or to the best of Borrower's knowledge threatened, against or
affecting Borrower, its assets or business, and there is no action, suit,
proceeding or claim by any Person pending, or to the best of Borrower's
knowledge threatened, against Borrower or its assets or goodwill, or against
or affecting any transactions contemplated by this Agreement, which if
adversely determined
-44-
49
against Borrower could reasonably be expected to result in a Material Adverse
Effect.
8.7 Compliance with Other Agreements and Applicable Laws. Except as set
forth on the Information Certificate, Borrower is not in default in any
material respect under, or in violation in any material respect of any of the
terms of, any agreement, contract, instrument, lease or other commitment to
which it is a party or by which it or any of its assets are bound and Borrower
is in compliance in all material respects with all applicable provisions of
laws, rules, regulations, licenses, permits, approvals and orders of any
foreign, Federal, State or local governmental authority.
8.8 Environmental Compliance.
(a) Except as set forth on Schedule 8.8 hereto, Borrower has not
generated, used, stored, treated, transported, manufactured, handled, produced
or disposed of any Hazardous Materials, on or off its premises (whether or not
owned by it) in any manner which at any time violates any applicable
Environmental Law or any license, permit, certificate, approval or similar
authorization thereunder and the operations of Borrower comply in all material
respects with all Environmental Laws and all licenses, permits, certificates,
approvals and similar authorizations thereunder.
(b) Except as set forth on Schedule 8.8 hereto, there has been no
investigation, proceeding, complaint, order, directive, claim, citation or
notice by any governmental authority or any other person nor is any pending or
to the best of Borrower's knowledge threatened, with respect to any
non-compliance with or violation of the requirements of any Environmental Law
by Borrower or the release, spill or discharge, threatened or actual, of any
Hazardous Material or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials or any
other environmental, health or safety matter, which affects Borrower or its
business, operations or assets or any properties at which Borrower has
transported, stored or disposed of any Hazardous Materials.
(c) Borrower has no material liability (contingent or otherwise) in
connection with a release, spill or discharge, threatened or actual, of any
Hazardous Materials or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials;
provided, that, in any event, the liability of Borrower and the aggregate
remediation costs in connection with all matters disclosed on Schedule 8.8
hereto shall not exceed $500,000 in the aggregate.
-45-
50
(d) Borrower has all licenses, permits, certificates, approvals or
similar authorizations required to be obtained or filed in connection with the
operations of Borrower under any Environmental Law and all of such licenses,
permits, certificates, approvals or similar authorizations are valid and in
full force and effect.
(e) Each of subsections (a), (b), (c) and (d) of this Section 8.8 (other
than the proviso to Section 8.8(c)) are subject to an additional exception for
conditions, events or circumstances that, individually or in the aggregate,
have not and cannot reasonably be expected to result in a Material Adverse
Effect.
8.9 Employee Benefits.
(a) Borrower has not engaged in any transaction in connection with which
Borrower or any of its ERISA Affiliates could be subject to either a civil
penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by
Section 4975 of the Code, including any accumulated funding deficiency
described in Section 8.9(c) hereof and any deficiency with respect to vested
accrued benefits described in Section 8.9(d) hereof.
(b) No liability to the Pension Benefit Guaranty Corporation has been or
is expected by Borrower to be incurred with respect to any employee benefit
plan of Borrower or any of its ERISA Affiliates. There has been no reportable
event (within the meaning of Section 4043(b) of ERISA) or any other event or
condition with respect to any employee benefit plan of Borrower or any of its
ERISA Affiliates which presents a risk of termination of any such plan by the
Pension Benefit Guaranty Corporation.
(c) Full payment has been made of all amounts which Borrower or any of
its ERISA Affiliates is required under Section 302 of ERISA and Section 412 of
the Code to have paid under the terms of each employee benefit plan as
contributions to such plan as of the last day of the most recent fiscal year of
such plan ended prior to the date hereof, and no accumulated funding deficiency
(as defined in Section 302 of ERISA and Section 412 of the Code), whether or
not waived, exists with respect to any employee benefit plan, including any
penalty or tax described in Section 8.9(a) hereof and any deficiency with
respect to vested accrued benefits described in Section 8.9(d) hereof.
(d) The current value of all vested accrued benefits under all employee
benefit plans maintained by Borrower that are subject to Title IV of ERISA does
not exceed the current value of the assets of such plans allocable to such
vested accrued benefits, including any penalty or tax described in Section
8.9(a) hereof and any accumulated funding deficiency described in
-46-
51
Section 8.9(c) hereof. The terms "current value" and "accrued benefit" have
the meanings specified in ERISA.
(e) Neither Borrower nor any of its ERISA Affiliates is or has ever been
obligated to contribute to any "multiemployer plan" (as such term is defined in
Section 4001(a)(3) of ERISA) that is subject to Title IV of ERISA.
8.10 Accuracy and Completeness of Information. All information furnished
by or on behalf of Borrower in writing to Lender in connection with this
Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby, including, without limitation, all information
on the Information Certificate is true and correct in all material respects on
the date as of which such information is dated or certified and does not omit
any material fact necessary in order to make such information not misleading.
No event or circumstance has occurred or exists which has had or could
reasonably be expected to have a Material Adverse Effect and which has not been
fully and accurately disclosed to Lender in writing.
8.11 Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Lender on the date of each additional borrowing or
other credit accommodation hereunder with the same effect as though made on
such date (except for representations that are expressly limited by their terms
to an earlier date, which shall be deemed repeated as of such earlier date) and
shall be conclusively presumed to have been relied on by Lender regardless of
any investigation made or information possessed by Lender. The representations
and warranties set forth herein shall be cumulative and in addition to any
other representations or warranties which Borrower shall now or hereafter give,
or cause to be given, to Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence. Borrower shall at all times preserve,
renew and keep in full, force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
permits, licenses, trademarks, tradenames, approvals, authorizations, leases
and contracts necessary to carry on the business as presently or proposed to be
conducted. Borrower shall give Lender fifteen (15) days prior written notice
of any proposed change in its corporate name, which notice shall set forth the
new name and Borrower shall deliver to Lender a copy of the amendment to the
Certificate of Incorporation of Borrower providing for the name
-47-
52
change certified by the Secretary of State of the jurisdiction of incorporation
of Borrower as soon as it is available.
9.2 New Collateral Locations. Borrower may open any new location within
the continental United States provided Borrower (a) gives Lender thirty (30)
days prior written notice of the intended opening of any such new location or,
if the new location has and is expected to have Collateral having a fair market
value of no more than $50,000 at any one time, Borrower notifies Lender in
writing of such new location within seven (7) days after opening such new
location and (b) executes and delivers, or causes to be executed and delivered,
to Lender such agreements, documents, and instruments as Lender may deem
reasonably necessary or desirable to protect its interests in the Collateral at
such location, including, without limitation, UCC financing statements and, if
the new location has or is expected to have Collateral having a fair market
value of more than $50,000 at any one time, additional acknowledgements and
agreements in Lender's favor of the types referred to in Section 4.1(h) hereof
(which additional acknowledgments and agreements shall be an additional
condition of treating any of the Inventory at such location as Eligible
Inventory, regardless of the value the Inventory or other assets at such
location).
9.3 Compliance with Laws, Regulations, Etc.
(a) Borrower shall, at all times, comply in all material respects with
all laws, rules, regulations, licenses, permits, approvals and orders
applicable to it and duly observe all requirements of any Federal, State or
local governmental authority, including, without limitation, the Employee
Retirement Security Act of 1974, as amended, the Occupational Safety and Hazard
Act of 1970, as amended, the Fair Labor Standards Act of 1938, as amended, and
all statutes, rules, regulations, orders, permits and stipulations relating to
environmental pollution and employee health and safety, including, without
limitation, all of the Environmental Laws, except where failure to so comply
does not and could not reasonably be expected to result in a Material Adverse
Effect.
(b) Borrower shall establish and maintain, at its expense, a system to
assure and monitor its continued compliance with all Environmental Laws in all
of its operations, which system shall include annual reviews of such compliance
by employees or agents of Borrower who are familiar with the requirements of
the Environmental Laws. Copies of all environmental surveys, audits,
assessments, feasibility studies and results of remedial investigations shall
be promptly furnished, or caused to be furnished, by Borrower to Lender.
Borrower shall take prompt and appropriate action to respond to any
non-compliance with any of the Environmental Laws and shall regularly report to
Lender on such response.
-48-
53
(c) Borrower shall give both oral and written notice to Lender as soon as
practicable after Borrower's receipt of any notice of, or Borrower's otherwise
obtaining knowledge of, (i) the occurrence of any event involving the release,
spill or discharge, threatened or actual, of any Hazardous Material or (ii) any
investigation, proceeding, complaint, order, directive, claims, citation or
notice with respect to: (A) any non-compliance with or violation of any
Environmental Law by Borrower or (B) the release, spill or discharge,
threatened or actual, of any Hazardous Material or (C) the generation, use,
storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials or (D) any other environmental, health or
safety matter which does or could reasonably be expected to result in a
Material Adverse Effect as to Borrower or a material adverse effect on any
properties at which Borrower transported, stored or disposed of any Hazardous
Materials.
(d) Without limiting the generality of the foregoing, whenever Lender
reasonably determines that there is non-compliance, or any condition which
requires any action by or on behalf of Borrower in order to avoid any material
non-compliance, with any Environmental Law, Borrower shall, at Lender's request
and Borrower's expense: (i) cause an independent environmental engineer
acceptable to Lender to conduct such tests of the site where Borrower's
non-compliance or alleged non-compliance with such Environmental Laws has
occurred as to such non-compliance and prepare and deliver to Lender a report
as to such non-compliance setting forth the results of such tests, a proposed
plan for responding to any environmental problems described therein, and an
estimate of the costs thereof and (ii) provide to Lender a supplemental report
of such engineer whenever the scope of such non-compliance, or Borrower's
response thereto or the estimated costs thereof, shall change in any material
respect.
(e) Borrower shall indemnify and hold harmless Lender, its directors,
officers, employees, agents, invitees, representatives, successors and assigns,
from and against any and all losses, claims, damages, liabilities, costs, and
expenses (including attorneys' fees and legal expenses) directly or indirectly
arising out of or attributable to the use, generation, manufacture,
reproduction, storage, release, threatened release, spill, discharge, disposal
or presence of a Hazardous Material, including, without limitation, the costs
of any required or necessary repair, cleanup or other remedial work with
respect to any property of Borrower and the preparation and implementation of
any closure, remedial or other required plans. All representations,
warranties, covenants and indemnifications in this Section 9.3 shall survive
the payment of the Obligations and the termination or non-renewal of this
Agreement.
-49-
54
9.4 Payment of Taxes and Claims. Borrower shall duly pay and discharge
all taxes, assessments, contributions and governmental charges upon or against
it or its properties or assets, except for taxes the validity of which are
being contested in good faith by appropriate proceedings diligently pursued and
available to Borrower and with respect to which adequate reserves have been set
aside on its books. Borrower shall be liable for any tax or penalties imposed
on Lender as a result of the financing arrangements provided for herein and
Borrower agrees to indemnify and hold Lender harmless with respect to the
foregoing, and to repay to Lender on demand the amount thereof, and until paid
by Borrower such amount shall be added and deemed part of the Loans, provided,
that, nothing contained herein shall be construed to require Borrower to pay
any income or franchise taxes attributable to the income of Lender from any
amounts charged or paid hereunder to Lender. The foregoing indemnity shall
survive the payment of the Obligations and the termination or non-renewal of
this Agreement.
9.5 Insurance.
(a) Borrower shall, at all times, maintain with financially sound and
reputable insurers insurance with respect to the Collateral against loss or
damage and all other insurance of the kinds and in the amounts customarily
insured against or carried by corporations of established reputation engaged in
the same or similar businesses and similarly situated. Said policies of
insurance shall be satisfactory to Lender as to form, amount and insurer, as
determined by Lender in good faith. Borrower shall furnish certificates,
policies or endorsements to Lender as Lender shall require as proof of such
insurance, and, if Borrower fails to do so, Lender is authorized, but not
required, to obtain such insurance at the expense of Borrower. All policies
insuring against loss or damage to the Collateral and all business interruption
insurance policies shall provide for at least thirty (30) days prior written
notice to Lender of any cancellation or reduction of coverage and that Lender
may act as attorney for Borrower in obtaining, and at any time an Event of
Default exists or has occurred and is continuing, adjusting, settling, amending
and canceling such insurance. Borrower shall cause Lender to be named as a
loss payee and an additional insured (but without any liability for any
premiums) under such insurance policies and Borrower shall obtain
non-contributory lender's loss payable endorsements to all insurance policies
in form and substance satisfactory to Lender. Such lender's loss payable
endorsements shall specify that the proceeds of such insurance shall be payable
to Lender as its interests may appear and further specify that Lender shall be
paid regardless of any act or omission by Borrower or any of its affiliates.
(b) At its option, Lender may apply any insurance proceeds received by
Lender at any time to the cost of
-50-
55
replacement of Collateral and/or to payment of the Obligations, whether or not
then due, in any order and in such manner as Lender may determine or hold such
proceeds as cash Collateral for the Obligations; provided, however, that if no
Event of Default or event or state of facts, which with notice or passage of
time, or both, would constitute an Event of Default, exists or has occurred and
is continuing and no component of the Revolving Loans exceeds the amount
determined by Lender to be then available under the applicable lending
formula(s) and subject to all applicable sublimits and Availability Reserves,
Lender shall make available to Borrower all insurance proceeds so received by
Lender with respect to Inventory, in each case under arrangements satisfactory
to Lender for the replacement of the Inventory with Inventory having a Value
equal to the Value, prior to the event causing the insured loss, of the
Inventory to which the insurance proceeds relate, and upon which replacement
Inventory, Lender shall have a first priority security interest and lien to
secure the Obligations.
(c) Pending the disposition of any insurance proceeds in accordance
herewith, Lender may hold the same as cash Collateral, or may, at Lender's
option, apply the same to the Revolving Loan account of Borrower and establish
Availability Reserves in the amount so applied. Any amount of such insurance
proceeds not released within sixty (60) days following Lender's receipt thereof
may be applied by Lender to such of the Obligations, whether or not then due,
in such order and manner as Lender shall determine, or, at Lender's option, may
continue to be held as cash Collateral, or maintained as an Availability
Reserve hereunder.
9.6 Financial Statements and Other Information.
(a) Borrower shall keep proper books and records in which true and
complete entries shall be made of all dealings or transactions of or in
relation to the Collateral and the business of Borrower and its subsidiaries
(if any) in accordance with GAAP and Borrower shall furnish or cause to be
furnished to Lender: (i) within twenty (20) business days after the end of
each Four Week Period, monthly unaudited consolidated and consolidating
financial statements of Borrower (including balance sheets, statements of
income and loss, statements of cash flow and statements of shareholders'
equity), all in reasonable detail, fairly presenting the financial position and
the results of the operations of Borrower and its subsidiaries (if any) as of
the end of and through such fiscal month and (ii) within ninety (90) days after
the end of each fiscal year, audited consolidated financial statements of
Borrower and its subsidiaries (if any) (including balance sheets, statements
of income and loss, statements of cash flow and statements of shareholders'
equity), and the accompanying notes thereto, all in reasonable detail, fairly
presenting the financial position and the results of the
-51-
56
operations of Borrower and its subsidiaries (if any), as of the end of and for
such fiscal year, together with the opinion of independent certified public
accountants, which accountants shall be an independent accounting firm selected
by Borrower and reasonably acceptable to Lender, that such financial statements
have been prepared in accordance with GAAP, and present fairly the results of
operations and financial condition of Borrower and its subsidiaries, as of the
end of and for the fiscal year then ended.
(b) Borrower shall promptly notify Lender in writing of the details of
(i) any loss, damage, investigation, action, suit, proceeding or claim relating
to the Collateral or any other property which is security for the Obligations
having a value in excess of $50,000 or which does, or could reasonably be
expected to, result in any Material Adverse Effect not involving any Collateral
and (ii) the occurrence of any Event of Default or event which, with the
passage of time or giving of notice or both, would constitute an Event of
Default.
(c) Borrower shall promptly after the sending or filing thereof furnish
or cause to be furnished to Lender copies of all reports which Borrower or any
Obligor sends to its stockholders generally and copies of all reports and
registration statements which Borrower or any Obligor files with the Securities
and Exchange Commission, any national securities exchange or the National
Association of Securities Dealers, Inc.
(d) Borrower shall furnish or cause to be furnished to Lender such
budgets, forecasts, projections and other information respecting the Collateral
and the business of Borrower, as Lender may, from time to time, reasonably
request. Subject to Section 12.5 hereof (as applicable), Lender is hereby
authorized to deliver a copy of any financial statement or any other
information relating to the business of Borrower to any court or other
government agency or to any participant or assignee or prospective participant
or assignee. Borrower hereby irrevocably authorizes and directs all
accountants or auditors to deliver to Lender, at Borrower's expense, copies of
the financial statements of Borrower and any reports or management letters
prepared by such accountants or auditors on behalf of Borrower and to disclose
to Lender such information as they may have regarding the business of Borrower.
Any documents, schedules, invoices or other papers delivered to Lender may be
destroyed or otherwise disposed of by Lender one (1) year after the same are
delivered to Lender, except as otherwise designated by Borrower to Lender in
writing.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Borrower
shall not, without the prior written consent of Lender, directly or indirectly:
-52-
57
(a) merge into or with or consolidate with any other Person or permit any
other Person to merge into or with or consolidate with it, or
(b) sell, assign, lease, transfer, abandon or otherwise dispose of any
stock or indebtedness to any other Person or any of its assets to any other
Person, except for:
(i) sales of Inventory in the ordinary course of business, and
(ii) the sale of Equipment or real property, after not less
than twenty (20) days prior written notice to Lender (except no
prior notice shall be required as to sale of Equipment or real
property in or at in which no Inventory is being or has been stored
or located within thirty (30) days prior to such sale and having a
fair market value of not more than $750,000 in any transaction or
series of related transactions), so long as (A) the proceeds are
reinvested or otherwise used in the business of Borrower in such
manner and to such extent such that no offer to repurchase any
Senior Notes shall be required to be made by reason thereof or
relating thereto, and (B) arrangements satisfactory to Lender are
made for the relocation of any Inventory stored in the Equipment or
located at real property so sold (including the execution and/or
delivery of further instruments and agreements of the kinds
required under Section 9.2(b), whether or not such Section is
otherwise applicable), or
(c) form or acquire any subsidiaries, or
(d) wind up, liquidate or dissolve, or
(e) agree to do any of the foregoing.
9.8 Encumbrances. Borrower shall not create, incur, assume or suffer to
exist any security interest, mortgage, pledge, lien, charge or other
encumbrance of any nature whatsoever on any of its assets or properties,
including, without limitation, the Collateral, except:
(a) liens and security interests of Lender;
(b) liens securing the payment of taxes, either not yet overdue or the
validity of which are being contested in good faith by appropriate proceedings
diligently pursued and available to Borrower and with respect to which
adequate reserves have been set aside on its books;
-53-
58
(c) non-consensual statutory liens (other than liens securing the payment
of taxes) arising in the ordinary course of Borrower's business to the extent:
(i) such liens secure indebtedness which is not overdue or
(ii) such liens secure indebtedness relating to claims or
liabilities which are fully insured and being defended at the sole
cost and expense and at the sole risk of the insurer or being
contested in good faith by appropriate proceedings diligently
pursued and available to Borrower, in each case prior to the
commencement of foreclosure or other similar proceedings and with
respect to which adequate reserves have been set aside on its
books;
(d) zoning restrictions, easements, licenses, covenants and other
restrictions affecting the use of real property which do not interfere in any
material respect with the use of such real property or ordinary conduct of the
business of Borrower as presently conducted thereon or materially impair the
value of the real property which may be subject thereto;
(e) security interests and liens held by the Senior Note Trustee on assets
of Borrower, other than the Collateral (except for the Collateral described in
Section 5.1(e) hereof and the proceeds thereof), to secure the Senior Notes as
permitted under Section 9.9(d), but only to the extent such security interests
and liens are subject to the terms of the Senior Note Intercreditor Agreement;
(f) liens on the Equipment and real property of Borrower described in the
definition of "Industrial Revenue Bonds" contained herein to secure the
indebtedness described in such definition, and, subject to the TFH
Intercreditor Agreement, to TFH, to the extent TFH becomes the holder of or
otherwise is or becomes entitled to assert any such liens by reason of drawings
made under the TFH Investor L/C's;
(g) rights (if any) of sellers, suppliers or agents involved in the
transaction as a statutory trust beneficiary under PACA in respect of sales of
fresh fruits and fresh vegetables to Borrower in the ordinary course of
business, provided no amounts owed to any such persons are past due,; provided,
that, the inclusion of statutory trust rights in this Section 9.8(g) shall in
no way impair or limit any of Lender's
rights under Section 2.3(b);
(h) purchase money security interests in assets purchased by Borrower from
distributors/franchisees, so long as the indebtedness incurred by Borrower in
any fiscal year that is
-54-
59
so secured is permitted to be incurred under Section 9.9(g) hereof, and such
security interests do not extend to any property of Borrower other than the
assets and rights so purchased;
(i) purchase money security interests in Equipment (including capital
leases but not operating leases) and purchase money mortgages on real estate
not to exceed $500,000 in the aggregate at any time outstanding, to the extent
the applicable Equipment and/or real estate are acquired other than through
purchases from distributor/franchisees as described in Section 9.8(h) hereof,
and so long as such security interests and mortgages do not apply to any
property of Borrower other than the Equipment or real estate so acquired, and
the indebtedness secured thereby does not exceed the cost of the Equipment or
real estate so acquired, as the case may be; and
(j) the security interests and liens set forth on Schedule 8.4 hereto or
in the Information Certificate.
9.9 Indebtedness. Borrower shall not incur, create, assume, become or be
liable in any manner with respect to, or permit to exist, any obligations or
indebtedness, except
(a) the Obligations;
(b) trade obligations and normal accruals in the ordinary course of
business not yet due and payable, or with respect to which the Borrower is
contesting in good faith the amount or validity thereof by appropriate
proceedings diligently pursued and available to Borrower, and with respect to
which adequate reserves have been set aside on its books;
(c) purchase money indebtedness (including capital leases) to the extent
not incurred or secured by liens (including capital leases) in violation of any
other provision of this Agreement;
(d) indebtedness of Borrower to the holders of Senior Notes and to the
Senior Note Trustee under the Senior Note Agreements, but not to exceed
$60,000,000 in aggregate original principal amount, plus up to an additional
$10,000,000 in aggregate original principal amount evidenced by Senior Notes
issued upon conversion of the Class A Preferred Stock as provided under the
rights and preferences for such stock as in effect on the date hereof;
provided, that with respect to all indebtedness described in this Section
9.9(d), whether arising under or in connection with the Exchange Notes or other
Senior Notes or otherwise:
(i) Borrower shall not, directly or indirectly, make
any payments in respect of such indebtedness, including, but
not limited to, any payments or
-55-
60
prepayments of principal, interest or other amounts, except as
required under the terms of the Senior Note Agreements as in effect
on the date hereof,
(ii) Borrower shall not, directly or indirectly, (A) amend, modify,
alter or change any terms of such indebtedness or any agreement,
document or instrument related thereto, in any manner adverse to
Borrower or to Lender (as determined by Lender in good faith), or
(B) redeem, retire, defease, or, except as required under the terms
of the Senior Note Agreements as in effect on the date hereof,
purchase or otherwise acquire such indebtedness, or set aside or
otherwise deposit or invest any sums for such purpose (the
immediately preceding exception under clause (B) for purchases or
acquisition of such indebtedness not to constitute a consent by
Lender under, or other modification of any provisions of, or any of
Lender's rights under, Sections 9.7(b) or 10.1(j) hereof), and
(iii) Borrower shall furnish to Lender all notices, demands or
other materials concerning such indebtedness either received by
Borrower or on its behalf, promptly after receipt thereof, or sent
by Borrower or on its behalf, concurrently with the sending
thereof, as the case may be;
(e) contingent reimbursement obligations to TFH in respect of the TFH L/C
Obligations, subordinated in favor of Lender to the extent provided in the TFH
Intercreditor Agreement;
(f) indebtedness of Borrower secured by purchase money security interests
(including capital leases) or purchase money mortgages permitted by Section
9.8(i) hereof (subject to the limitation on the amount of such indebtedness so
secured as provided in such Section) and further subject to the proviso to
Section 9.9(g);
(g) contingent indebtedness of Borrower incurred in connection with the
potentially required repurchase by Borrower of franchise and distributorship
rights and related assets pursuant to the exercise by distributors/franchisees
of their rights requiring Borrower to effect such repurchase pursuant to the
terms of Distributor Agreements in substantially the form annexed hereto as
Exhibit D, entered into between Borrower and its distributors/franchisees, and
non-contingent indebtedness of Borrower, not to exceed $2,000,000 in the
aggregate incurred by Borrower in any fiscal year in respect of such required
repurchases and/or other purchases by Borrower of assets and/or
distributorship/franchise rights from Borrower's distributors/franchisees or
others engaged in similar lines of business; provided, that, with respect to
such indebtedness
-56-
61
described in Sections 9.9(f) or (g) hereof, (A) Borrower may only make
regularly scheduled payments of principal and interest in respect of such
indebtedness in accordance with the terms of the agreement or instrument
evidencing or giving rise to such indebtedness as in effect on the date of
issuance thereof, together with voluntary prepayments of principal in respect
of such indebtedness in the aggregate amount of up to $500,000 in the aggregate
in any consecutive twelve (12) month period, (B) Borrower shall not, directly
or indirectly, (I) amend, modify, alter or change the terms of such
indebtedness or any agreement, document or instrument related thereto as in
effect on the date of issuance thereof, or (II) redeem, retire, defease,
purchase or otherwise acquire such indebtedness, or set aside or otherwise
deposit or invest any sums for such purpose, and (C) Borrower shall furnish to
Lender all notices or demands in connection with such indebtedness either
received by Borrower or on its behalf, promptly after the receipt thereof, or
sent by Borrower or on its behalf, concurrently with the sending thereof, as
the case may be;
(h) indebtedness of Borrower (if any) existing by reason of the
classification of the Class A Preferred Stock as debt under GAAP; provided,
however that the only payments, dividends or other distributions that may be
made on or with respect to the Class A Preferred Stock shall be those (if any)
otherwise permitted under Section 9.11 hereof; and
(i) obligations or indebtedness of Borrower set forth on the Information
Certificate; provided, that, with respect to such indebtedness in this clause
(i), (A) Borrower may only make regularly scheduled payments of principal and
interest in respect of such indebtedness in accordance with the terms of the
agreement or instrument evidencing or giving rise to such indebtedness as in
effect on the date hereof, (B) Borrower shall not, directly or indirectly, (I)
amend, modify, alter or change the terms of such indebtedness or any agreement,
document or instrument related thereto as in effect on the date hereof, or (II)
redeem, retire, defease, purchase or otherwise acquire such indebtedness, or
set aside or otherwise deposit or invest any sums for such purpose, and (C)
Borrower shall furnish to Lender all notices or demands in connection with such
indebtedness either received by Borrower or on its behalf, promptly after the
receipt thereof, or sent by Borrower or on its behalf, concurrently with the
sending thereof, as the case may be.
9.10 Loans, Investments, Guarantees, Etc. Borrower shall not, directly
or indirectly, make any loans or advance money or property to any person, or
invest in (by capital contribution, dividend or otherwise) or purchase or
repurchase the stock or indebtedness or all or a substantial part of the assets
or property of any person, or guarantee, assume, endorse, or otherwise become
responsible for (directly or indirectly) the
-57-
62
indebtedness, performance, obligations or dividends of any Person or agree to
do any of the foregoing, except: (a) the endorsement of instruments for
collection or deposit in the ordinary course of business; (b) investments in:
(i) short-term direct obligations of the United States Government, (ii)
negotiable certificates of deposit issued by any bank satisfactory to Lender,
payable to the order of the Borrower or to bearer and delivered to Lender, and
(iii) commercial paper rated A1 or P1; provided, that, as to any of the
foregoing, unless waived in writing by Lender, Borrower shall take such actions
as are deemed necessary by Lender to perfect the security interest of Lender in
such investments, (c) voluntary payments in the ordinary course of business in
accordance with past practices made by Borrower to SunTrust on behalf of
Borrower's distributors and franchisees in respect of defaulted obligations of
such distributors and franchisees owed to SunTrust arising under SunTrust
Purchased Receivables or under loans or other financing arrangements provided
by SunTrust to Borrower's distributors and franchisees; provided, that, no
Event of Default, and no condition or event which, with notice or lapse of
time, or both, would constitute an Event of Default, shall exist or have
occurred and be continuing; (d) voluntary purchases or repurchases by Borrower
in the ordinary course of business in accordance with past practices of
SunTrust Purchased Receivables or of loans or advances owed by Borrower's
distributors and franchisees to SunTrust arising in connection with financing
arrangements provided by SunTrust directly to such distributors and
franchisees; provided, that, no Event of Default, and no condition or event
which, with notice or lapse of time or both would constitute an Event of
Default, shall exist or have occurred and be continuing; (e) mandatory
repurchases of SunTrust Purchased Receivables to the extent required under the
SunTrust Financing Agreement as in effect on the date hereof, or as amended
with Lender's prior written consent, (f) loans and advances by Borrower to
officers and employees made after the date hereof in a manner consistent with
the most recent past practices of Borrower, provided, that, (i) no Event of
Default or condition or event which, with notice or passage of time, or both,
would constitute an Event of Default shall exist or have occurred and be
continuing, (ii) in no event shall the total amount of such loans and advances
outstanding in any one time exceed $200,000 and (iii) in no event shall any
such loans or advances outstanding to any one officer or employee at any one
time exceed $25,000; (g) loans, investments and guarantees, not otherwise
permitted under this Section 9.10, that do not exceed, in the aggregate, the
sum of $250,000 made at any time after the date hereof, provided that no Event
of Default or condition or event which, with notice or passage of time, or
both, would constitute an Event of Default, shall exist or have
occurred and be continuing; (h) acquisitions by Borrower, in the ordinary
course of business in accordance with past practices and in accordance with
applicable law, of assets of distributors and franchisees who have defaulted
in their obligations to Borrower;
-58-
63
provided, that, such acquisitions are engaged in primarily for the purposes of
recovering the unpaid obligations owed to Borrower through restructuring and
remarketing such acquired assets; provided, further, that, at the time of
acquisition, no Event of Default or condition or event which, with notice or
passage of time, or both, would constitute an Event of Default, shall exist or
have occurred and be continuing; (i) the guarantees, loans, advances and
investments set forth in the Information Certificate; provided, that, (i)
Borrower shall not, directly or indirectly, (A) amend, modify, alter or change
the terms of such guarantees as in effect on the date hereof, or (B) redeem,
retire, defease, purchase or otherwise acquire the obligations arising pursuant
to such guarantees, or set aside or otherwise deposit or invest any sums for
such purpose, and (ii) Borrower shall furnish to Lender all notices or demands
in connection with such guarantee or other indebtedness subject to such
guarantee either received by Borrower or on its behalf, promptly after the
receipt thereof, or sent by Borrower or on its behalf, concurrently with the
sending thereof, as the case may be.
9.11 Dividends and Redemptions. Borrower shall not, directly or
indirectly, declare or pay any dividends on account of any shares of class of
capital stock of Borrower now or hereafter outstanding, or set aside or
otherwise deposit or invest any sums for such purpose, or redeem, retire,
defease, purchase or otherwise acquire any shares of any class of capital stock
(or set aside or otherwise deposit or invest any sums for such purpose) for any
consideration other than common stock or apply or set apart any sum, or make
any other distribution (by reduction of capital or otherwise) in respect of any
such shares or agree to do any of the foregoing, except that Borrower may, out
of legally available funds therefor, and provided, that no Event of Default,
and no event that would, with notice or passage of time, or both, constitute an
Event of Default, exists or has occurred and is continuing at the time of
issuance under clause (i) below or payment under clause (ii) below or would
arise as a result thereof,
(i) pay stock dividends in the form of additional shares of
its Class A Preferred Stock or Class B Preferred Stock to the
holders of shares of such Preferred Stock or increase the
liquidation preference of such Preferred Stock, in each case in
lieu of cash dividends as permitted by the existing terms, rights
and preferences of such Preferred Stock as in effect on the date
hereof, and
(ii) on not less than twenty (20) days' prior written notice
to Lender, pay cash dividends on each of (x) the shares of its
Class A Preferred Stock, outstanding on the date hereof, (y) the
shares of its
-59-
64
Class B Preferred Stock, outstanding as of the date hereof, and (z)
additional shares of such Class A Preferred Stock and Class B
Preferred Stock issued as stock dividends as permitted under clause
(i), in each case limited to an amount equal to 10.5% or 9.5% per
annum upon the liquidation preference of each such share of Class A
Preferred Stock and Class B Preferred Stock, respectively, upon
which such cash dividend is payable;
provided, further, that each such dividend under clauses (i) and (ii) would be
permitted to be issued or paid (as the case may be) under the terms of the
Senior Note Agreements as in effect on the date hereof (and without regard to
any waiver or modification of any such terms that may otherwise exist or be
obtained and whether or not the Senior Notes Agreements remain in effect for
such or any other purpose).
9.12 Transactions with Affiliates. Borrower shall not, directly or
indirectly, (a) purchase, acquire or lease any property from, or sell, transfer
or lease any property to, any officer, director, agent or other Affiliate of
Borrower, except in the ordinary course of and pursuant to the reasonable
requirements of Borrower's business and upon fair and reasonable terms no less
favorable to the Borrower than Borrower would obtain in a comparable arm's
length transaction with a person who is not an Affiliate or (b) make any
payments of management, consulting or other fees for management or similar
services, or of any indebtedness owing to any officer, employee, shareholder,
director or other Affiliate of Borrower, except reasonable compensation to
officers, employees and directors for services rendered to Borrower in the
ordinary course of business. Borrower shall not enter into any transaction for
the purchase, sale or exchange of property or the rendering of any service to
or by any Affiliate, except in the ordinary course of and pursuant to the
reasonable requirements of Borrower's business and upon fair and reasonable
terms no less favorable to the Borrower than Borrower would obtain in a
comparable arm's length transaction with a person who is not an Affiliate, and
(iii) Borrower may pay management fees to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ in the amount not to exceed $300,000 in the aggregate in any fiscal
year; provided, that, at the time of each payment of any such management fee,
no Event of Default or condition or event which, with notice or passage of
time, or both, would constitute an Event of Default, shall exist or have
occurred and be continuing.
9.13 Working Capital. Borrower shall, at all times, maintain Working
Capital of not less than $6,000,000.
9.14 Tangible Net Worth. Borrower shall, at all times, maintain Tangible
Net Worth of not less than $17,000,000.
-60-
65
9.15 Compliance with ERISA. Borrower shall not with respect to any
"employee benefit plans" maintained by Borrower or any of its ERISA Affiliates:
(a) (i) terminate any of such employee benefit plans so as to incur any
liability in excess of $250,000 to the Pension Benefit Guaranty Corporation
established pursuant to ERISA, (ii) allow or suffer to exist any prohibited
transaction involving any of such employee benefit plans or any trust created
thereunder which would subject Borrower or such ERISA Affiliate to a tax or
penalty or other liability on prohibited transactions imposed under Section
4975 of the Code or ERISA, (iii) fail to pay to any such employee benefit plan
any contribution which it is obligated to pay under Section 302 of ERISA,
Section 412 of the Code or the terms of such plan, (iv) allow or suffer to
exist any accumulated funding deficiency, whether or not waived, with respect
to any such employee benefit plan, (v) allow or suffer to exist any occurrence
of a reportable event or any other event or condition which presents a material
risk of termination by the Pension Benefit Guaranty Corporation of any such
employee benefit plan that is a single employer plan, which termination could
result in any liability to the Pension Benefit Guaranty Corporation or (vi)
incur any withdrawal liability with respect to any multiemployer pension plan.
(b) As used in this Section 9.15, the term "employee benefit plans",
"accumulated funding deficiency" and "reportable event" shall have the
respective meanings assigned to them in ERISA, and the term "prohibited
transaction" shall have the meaning assigned to it in Section 4975 of the Code
and ERISA.
9.16 Costs and Expenses. Borrower shall pay to Lender on demand all
out-of-pocket costs, expenses, filing fees and taxes paid or payable in
connection with the preparation, negotiation, execution, delivery, recording,
administration, collection, liquidation, enforcement and defense of the
Obligations, Lender's rights in the Collateral, this Agreement, the other
Financing Agreements and all other documents related hereto or thereto,
including any amendments, supplements or consents which may hereafter be
contemplated (whether or not executed) or entered into in respect hereof and
thereof, including, but not limited to: (a) all costs and expenses of filing
or recording (including Uniform Commercial Code financing statement filing
taxes and fees, documentary taxes, intangibles taxes and mortgage recording
taxes and fees, if applicable); (b) costs, expenses and fees for appraisals and
searches; (c) costs and expenses of remitting loan proceeds, collecting checks
and other items of payment, and establishing and maintaining the Blocked
Accounts, together with Lender's customary charges and fees with respect
thereto; (d) charges, fees or expenses charged by any bank or issuer in
connection with the Letter of Credit Accommodations; (e) costs and expenses of
preserving and protecting the Collateral; (f)
-61-
66
costs and expenses paid or incurred in connection with obtaining payment of the
Obligations, enforcing the security interests and liens of Lender, selling or
otherwise realizing upon the Collateral, and otherwise enforcing the provisions
of this Agreement and the other Financing Agreements or defending any claims
made or threatened against Lender arising out of the transactions contemplated
hereby and thereby (including, without limitation, preparations for and
consultations concerning any such matters); (g) all out-of-pocket expenses and
costs heretofore and from time to time hereafter incurred by Lender during the
course of periodic field examinations of the Collateral and Borrower's
operations, plus a per diem charge at the rate of $600 per person per day for
Lender's examiners in the field and office; and (h) the reasonable fees and
disbursements of counsel (including legal assistants) to Lender in connection
with any of the foregoing.
9.17 Further Assurances. At the request of Lender at any time and from
time to time, Borrower shall, at its expense, duly execute and deliver, or
cause to be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary
or proper to evidence, perfect, maintain and enforce the security interests and
the priority thereof in the Collateral and to otherwise effectuate the
provisions or purposes of this Agreement or any of the other Financing
Agreements. Lender may at any time and from time to time request a certificate
from an officer of Borrower representing that all conditions precedent to the
making of Loans and providing Letter of Credit Accommodations contained herein
are satisfied. In the event of such request by Lender, Lender may, at its
option, cease to make any further Loans or provide any further Letter of
Credit Accommodations until Lender has received such certificate and, in
addition, Lender has determined that such conditions are satisfied. Where
permitted by law, Borrower hereby authorizes Lender to execute and file one or
more UCC financing statements signed only by Lender.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any one or more
of the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) (i) Borrower fails to pay any of the Obligations after the same
becomes due and payable or (ii) Borrower or any Obligor fails to perform any of
the terms, covenants, conditions or provisions contained in this Agreement or
any of the other Financing Agreements other than as described in Section
10.1(a)(i) and such failure shall continue for fifteen (15) days;
-62-
67
provided, that, such fifteen (15) day period shall not apply in the case of:
(A) any failure to observe any such term, covenant, condition or provision
which is not capable of being cured at all or within such fifteen (15) day
period or which has been the subject of a prior failure within a six (6) month
period or (B) an intentional breach by Borrower or any Obligor of any such
term, covenant, condition or provision, or (C) the failure to observe or
perform any of the covenants or provisions contained in Section 6.3, 7.1, 7.2,
7.3, 7.4, 7.7, 7.8, 9.1, 9.2, 9.5, 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, 9.13 or
9.14 of this Agreement or any covenants or agreements covering substantially
the same matter as such sections in any of the other Financing Agreements; or
(b) any representation, warranty or statement of fact made by Borrower to
Lender in this Agreement, the other Financing Agreements or any other
agreement, schedule, confirmatory assignment or otherwise shall when made or
deemed made be false or misleading in any material respect;
(c) any Obligor revokes, terminates or fails to perform any of the terms,
covenants, conditions or provisions of any guarantee, endorsement or other
agreement of such party in favor of Lender;
(d) any judgment for the payment of money is rendered against Borrower or
any Obligor in excess of $250,000 in any one case or in excess of $500,000 in
the aggregate and shall remain unbonded, undischarged or unvacated for a period
in excess of thirty (30) days or execution shall at any time not be effectively
stayed, or any judgment other than for the payment of money, or injunction,
attachment, garnishment or execution is rendered against Borrower or any
Obligor or any of their assets;
(e) any Obligor (being a natural person or a general partner of an
Obligor which is a partnership) dies or Borrower or any Obligor, which is a
partnership, limited liability company, limited liability partnership or
corporation, dissolves or suspends or discontinues doing business;
(f) Borrower or any Obligor becomes Insolvent, makes an assignment for
the benefit of creditors or makes or sends notice of a bulk transfer;
(g) a case or proceeding under the bankruptcy laws of the United States
of America now or hereafter in effect or under any insolvency, reorganization,
receivership, readjustment of debt, dissolution or liquidation law or statute
of any jurisdiction now or hereafter in effect (whether at law or in
equity) is filed against Borrower or any Obligor or all or any part of its
properties and such petition or application is not dismissed within thirty (30)
days after the date of its filing or Borrower or any Obligor shall file any
answer admitting or not
-63-
68
contesting such petition or application or indicates its consent to,
acquiescence in or approval of, any such action or proceeding or the relief
requested is granted sooner;
(h) a case or proceeding under the bankruptcy laws of the United States
of America now or hereafter in effect or under any insolvency, reorganization,
receivership, readjustment of debt, dissolution or liquidation law or statute
of any jurisdiction now or hereafter in effect (whether at a law or equity) is
filed by Borrower or any Obligor or for all or any part of its property;
(i) any default by Borrower or any Obligor under any agreement, document
or instrument relating to any indebtedness for borrowed money owing to any
person other than Lender, or any capitalized lease obligations, contingent
indebtedness in connection with any guarantee, letter of credit, indemnity or
similar type of instrument in favor of any person other than Lender, in any
case in an amount in excess of $250,000, which default continues for more than
the applicable cure period, if any, with respect thereto, or any default by
Borrower or any Obligor under any material contract, lease, license or other
obligation to any person other than Lender, which default continues for more
than the applicable cure period, if any, with respect thereto;
(j) any Change in Control or Ownership occurs or any "Change of Control"
(as defined in the Senior Note Agreements occurs;
(k) the indictment or threatened indictment of Borrower or any Obligor
under any criminal statute, or commencement or threatened commencement of
criminal or civil proceedings against Borrower or any Obligor, pursuant to
which statute or proceedings the penalties or remedies sought or available
include forfeiture of any of the property of Borrower or such Obligor;
(l) there shall be a material adverse change in the business, assets or
prospects of Borrower or any Obligor after the date hereof; or
(m) there shall be an event of default under any of the other Financing
Agreements which continues after the applicable cure period, if any.
10.2 Remedies.
(a) At any time an Event of Default exists or has occurred and is
continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial Code and
other applicable law,
-64-
69
all of which rights and remedies may be exercised without notice to or consent
by Borrower or any Obligor, except as such notice or consent is expressly
provided for hereunder or required by applicable law. All rights, remedies and
powers granted to Lender hereunder, under any of the other Financing
Agreements, the Uniform Commercial Code or other applicable law, are
cumulative, not exclusive and enforceable, in Lender's discretion,
alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for
an injunction to restrain a breach or threatened breach by Borrower of this
Agreement or any of the other Financing Agreements. Lender may, at any time or
times, proceed directly against Borrower or any Obligor to collect the
principal balance of the Obligations and all interest accrued thereon without
prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, Lender may, in its discretion and
without limitation, (A) accelerate the payment of the principal balance of the
Obligations and all interest accrued thereon and demand immediate payment
thereof to Lender (provided, that, upon the occurrence of any Event of Default
described in Sections 10.1(g) and 10.1(h), the principal balance of the
Obligations and all interest accrued thereon shall automatically become
immediately due and payable), (B) with or without judicial process or the aid
or assistance of others, enter upon any premises on or in which any of the
Collateral may be located and take possession of the Collateral or complete
processing, manufacturing and repair of all or any portion of the Collateral,
(C) require Borrower, at Borrower's expense, to assemble and make available to
Lender any part or all of the Collateral at any place and time designated by
Lender, (D) collect, foreclose, receive, appropriate, setoff and realize upon
any and all Collateral, (E) remove any or all of the Collateral from any
premises on or in which the same may be located for the purpose of effecting
the sale, foreclosure or other disposition thereof or for any other purpose,
(F) sell, lease, transfer, assign, deliver or otherwise dispose of any and all
Collateral (including, without limitation, entering into contracts with respect
thereto, public or private sales at any exchange, broker's board, at any office
of Lender or elsewhere) at such prices or terms as Lender may deem reasonable,
for cash, upon credit or for future delivery, with the Lender having the right
to purchase the whole or any part of the Collateral at any such public sale,
all of the foregoing being free from any right or equity of redemption of
Borrower, which right or equity of redemption is hereby expressly waived and
released by Borrower and/or (G) terminate this Agreement. If any of the
Collateral is sold or leased by Lender upon credit terms or for future
delivery, the Obligations shall not be reduced as a result thereof until
payment therefor is finally collected by Lender. If notice of disposition of
Collateral is required by law, five (5)
-65-
70
days prior notice by Lender to Borrower designating the time and place of any
public sale or the time after which any private sale or other intended
disposition of Collateral is to be made, shall be deemed to be reasonable
notice thereof and Borrower waives any other notice. In the event Lender
institutes an action to recover any Collateral or seeks recovery of any
Collateral by way of prejudgment remedy, Borrower waives the posting of any
bond which might otherwise be required.
(c) Lender may apply the cash proceeds of Collateral actually received by
Lender from any sale, lease, foreclosure or other disposition of the Collateral
to payment of the Obligations, in whole or in part and in such order as Lender
may elect, whether or not then due. Borrower shall remain liable to Lender for
the payment of any deficiency with interest at the highest rate provided for
herein and all costs and expenses of collection or enforcement, including
attorneys' fees and legal expenses.
(d) Without limiting the foregoing, upon the occurrence of an Event of
Default or an event which with notice or passage of time or both would
constitute an Event of Default, Lender may, at its option, without notice, (i)
cease making loans or arranging for Letter of Credit Accommodations or reduce
the lending formulas or amounts of Revolving Loans and Letter of Credit
Accommodations available to Borrower and/or (ii) terminate any provision of
this Agreement providing for any future Loans or Letter of Credit
Accommodations to be made by Lender to Borrower.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a) The validity, interpretation and enforcement of this Agreement and
the other Financing Agreements and any dispute arising out of the relationship
between the parties hereto, whether in contract, tort, equity or otherwise,
shall be governed by the internal laws of the State of Georgia (without giving
effect to principles of conflicts of law).
(b) Borrower and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of the Superior Court of ▇▇▇▇▇▇ County, Georgia and
the United States District Court for the Northern District of Georgia and waive
any objection based on venue or forum non conveniens with respect to any action
instituted therein arising under this Agreement or any of the other Financing
Agreements or in any way connected with or related or incidental to the
dealings of the parties hereto in respect of this Agreement or any of the other
Financing
-66-
71
Agreements or the transactions related hereto or thereto, in each case whether
now existing or hereafter arising, and whether in contract, tort, equity or
otherwise, and agree that any dispute with respect to any such matters shall be
heard only in the courts described above (except that Lender shall have the
right to bring any action or proceeding against Borrower or its property in the
courts of any other jurisdiction which Lender deems necessary or appropriate in
order to realize on the Collateral or to otherwise enforce its rights against
Borrower or its property).
(c) Borrower hereby waives personal service of any and all process upon
it and consents that all such service of process may be made by certified mail
(return receipt requested) directed to its address set forth on the signature
pages hereof and service so made shall be deemed to be completed five (5) days
after the same shall have been so deposited in the U.S. mails, or, at Lender's
option, by service upon Borrower in any other manner provided under the rules
of any such courts. Within thirty (30) days after such service, Borrower shall
appear in answer to such process, failing which Borrower shall be deemed in
default and judgment may be entered by Lender against Borrower for the amount
of the claim and other relief requested.
(d) BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF
ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT
OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED
HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER AND LENDER EACH
HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT BORROWER OR
LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY.
(e) Lender shall not have any liability to Borrower (whether in tort,
contract, equity or otherwise) for losses suffered by Borrower in connection
with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and
non-appealable judgment binding on Lender, that the losses were the result of
acts or omissions constituting gross negligence or willful misconduct. In any
such litigation, Lender shall be entitled to the benefit of the rebuttable
presumption that it acted in good faith and with the exercise of ordinary care
in the performance by it of the terms of this Agreement.
-67-
72
11.2 Waiver of Notices. Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the
Collateral and this Agreement, except such as are expressly provided for
herein. No notice to or demand on Borrower which Lender may elect to give
shall entitle Borrower to any other or further notice or demand in the same,
similar or other circumstances. Without limiting the generality of the
foregoing, Borrower waives (i) notice prior to Lender's taking possession or
control of any of the Collateral or any bond or security which might be
required by any court prior to allowing Lender to exercise any of Lender's
remedies, including the issuance of an immediate writ of possession and (ii)
the benefit of all valuation, appraisement and exemption laws.
11.3 Amendments and Waivers. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender, and as to amendments, as also signed by an authorized officer of
Borrower. Lender shall not, by any act, delay, omission or otherwise be deemed
to have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only to the extent specifically
set forth therein. A waiver by Lender of any right, power and/or remedy on any
one occasion shall not be construed as a bar to or waiver of any such right,
power and/or remedy which Lender would otherwise have on any future occasion,
whether similar in kind or otherwise.
11.4 Waiver of Counterclaims. Borrower waives all rights to interpose
any claims, deductions, setoffs or counterclaims of any nature (other then
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
11.5 Indemnification. Borrower shall indemnify and hold Lender, and its
directors, agents, employees and counsel, harmless from and against any and all
losses, claims, damages, liabilities, costs or expenses imposed on, incurred by
or asserted against any of them in connection with any litigation,
investigation, claim or proceeding commenced or threatened related to the
negotiation, preparation, execution, delivery, enforcement, performance or
administration of this Agreement, any other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated
hereby or any act, omission, event or transaction related or attendant thereto,
including, without limitation, amounts paid in settlement, court
-68-
73
costs, and the fees and expenses of counsel. To the extent that the
undertaking to indemnify, pay and hold harmless set forth in this Section may
be unenforceable because it violates any law or public policy, Borrower shall
pay the maximum portion which it is permitted to pay under applicable law to
Lender in satisfaction of indemnified matters under this Section. The
foregoing indemnity shall survive the payment of the Obligations and the
termination or non-renewal of this Agreement.
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 Term.
(a) This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall continue
in full force and effect for a term ending on the date three (3) years from
August 30, 1996 (the "Renewal Date"), and from year to year thereafter, unless
sooner terminated pursuant to the terms hereof. Lender or Borrower may
terminate this Agreement and the other Financing Agreements effective on the
Renewal Date or on the anniversary of the Renewal Date in any year by giving to
the other party at least sixty (60) days prior written notice; provided, that,
this Agreement and all other Financing Agreements must be terminated
simultaneously. Upon the effective date of termination or non-renewal of the
Financing Agreements, Borrower shall pay to Lender, in full, all outstanding
and unpaid Obligations and shall furnish cash collateral to Lender in such
amounts as Lender determines are reasonably necessary to secure Lender from
loss, cost, damage or expense, including attorneys' fees and legal expenses, in
connection with any contingent Obligations, including issued and outstanding
Letter of Credit Accommodations and checks or other payments provisionally
credited to the Obligations and/or as to which Lender has not yet received
final and indefeasible payment. Such payments in respect of the obligations
and cash collateral shall be remitted by wire transfer in Federal funds to such
bank account of Lender, as Lender may, in its discretion, designate in writing
to Borrower for such purpose. Interest shall be due until and including the
next business day, if the amounts so paid by Borrower to the bank account
designated by Lender are received in such bank account later than 12:00 noon,
Atlanta, Georgia time.
(b) No termination of this Agreement or the other Financing Agreements
shall relieve or discharge Borrower of its respective duties, obligations and
covenants under this Agreement or the other Financing Agreements until all
Obligations have been fully and finally discharged and paid, and Lender's
continuing security interest in the Collateral and the rights and remedies of
Lender hereunder, under the other Financing Agreements and
-69-
74
applicable law, shall remain in effect until all such Obligations have been
fully and finally discharged and paid.
(c) If for any reason this Agreement is terminated prior to the end of
the then current term of this Agreement, in view of the impracticality and
extreme difficulty of ascertaining actual damages and by mutual agreement of
the parties as to a reasonable calculation of Lender's lost profits as a result
thereof, Borrower agrees to pay to Lender, upon the effective date of such
termination, an early termination fee in the amount set forth below if such
termination is effective in the period indicated:
Amount Period
------ ------
(i) 2% of Maximum Credit the date hereof to and including August 29, 1998
(ii) 1% of Maximum Credit August 30, 1998 to and including August 29, 1999
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrower agrees
that it is reasonable under the circumstances currently existing. The early
termination fee provided for in this Section 12.1 shall be deemed included in
the Obligations.
12.2 Notices. All notices, requests and demands hereunder shall be in
writing and (a) made to Lender at its address set forth below and to Borrower
at its chief executive office set forth below, or to such other address as
either party may designate by written notice to the other in accordance with
this provision, and (b) deemed to have been given or made: if delivered in
person, immediately upon delivery; if by telex, telegram or facsimile
transmission, immediately upon sending and upon confirmation of receipt; if by
nationally recognized overnight courier service with instructions to deliver
the next business day, one (1) business day after sending; and if by certified
mail, return receipt requested, five (5) days after mailing.
12.3 Partial Invalidity. If any provision of this Agreement is held to
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
-70-
75
12.4 Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Lender, Borrower and their respective
successors and assigns, except that Borrower may not assign its rights under
this Agreement, the other Financing Agreements and any other document referred
to herein or therein without the prior written consent of Lender. Lender may,
after notice to Borrower, assign its rights and delegate its obligations under
this Agreement and the other Financing Agreements and further may assign, or
sell participations in, all or any part of the Loans, the Letter of Credit
Accommodations or any other interest herein to another financial institution or
other person, in which event, the assignee or participant shall have, to the
extent of such assignment or participation, the same rights and benefits as it
would have if it were the Lender hereunder, except as otherwise provided by the
terms of such assignment or participation.
12.5 Confidentiality.
(a) Lender shall use all reasonable efforts to keep confidential, in
accordance with its customary procedures for handling confidential information
and safe and sound lending practices, any non-public information supplied to it
by Borrower pursuant to this Agreement which is clearly and conspicuously
marked as confidential at the time such information is furnished by Borrower to
Lender, provided, that, nothing contained herein shall limit the disclosure of
any such information: (i) to the extent required by statute, rule, regulation,
subpoena or court order, (ii) to bank examiners and other regulators, auditors
and/or accountants, (iii) in connection with any litigation to which Lender is
a party, (iv) to any assignee or participant (or prospective assignee or
participant) so long as such assignee or participant (or prospective assignee
or participant) shall have first agreed in writing to treat such information as
confidential in accordance with this Section 12.5, or (v) to counsel for Lender
or any participant or assignee (or prospective participant or assignee).
(b) In no event shall this Section 12.5 or any other provision of this
Agreement or applicable law be deemed: (i) to apply to or restrict disclosure
of information that has been or is made public by Borrower or any third party
without breach of this Section 12.5 or otherwise become generally available to
the public other than as a result of a disclosure in violation hereof, (ii) to
apply to or restrict disclosure of information that was or becomes available to
Lender on a non-confidential basis from a person other than Borrower, (iii)
require Lender to return any materials furnished by Borrower to Lender or (iv)
prevent Lender from responding to routine informational requests in accordance
with the Code of Ethics for the Exchange of Credit Information promulgated by
The ▇▇▇▇▇▇ ▇▇▇▇▇▇ Associates or other
-71-
76
applicable industry standards relating to the exchange of credit information.
The obligations of Lender under this Section 12.5 shall supersede and replace
the obligations of Lender under any confidentiality letter signed prior to the
date hereof.
12.6 Entire Agreement. This Agreement, the other Financing Agreements,
any supplements hereto or thereto, and any instruments or documents delivered
or to be delivered in connection herewith or therewith represents the entire
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written. In the event of any inconsistency between the
terms of this Agreement and any schedule or exhibit hereto, the terms of this
Agreement shall govern.
IN WITNESS WHEREOF, Lender and Borrower have caused these presents to be
duly executed as of the day and year first above written.
LENDER
------
CONGRESS FINANCIAL BORROWER
CORPORATION (SOUTHERN) --------
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ TOM'S FOODS INC.
-------------------------
Title: Senior Vice President By: /s/ S. ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------- -------------------------
Title: Senior Vice President
----------------------
Address: Chief Executive Office:
-------- -----------------------
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
-72-