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EXHIBIT 10.33
LOAN AGREEMENT
AMONG
BRANCH BANKING AND TRUST COMPANY,
KRISPY KREME DOUGHNUT CORPORATION,
XXXXXXXX'X XXXX-X-XXXX BAKERY, INCORPORATED,
KRISPY KREME DISTRIBUTING COMPANY, INCORPORATED,
KRISPY KREME SUPPORT OPERATIONS COMPANY,
HD CAPITAL CORPORATION,
HDN DEVELOPMENT CORPORATION
AND
KRISPY KREME DOUGHNUTS, INC.
$40,000,000.00
REVOLVING LINE OF CREDIT
$12,000,000.00
TERM LOAN
DECEMBER 29, 1999
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ANNEX I - Lender's Commitment dated October 26, 1999
EXHIBITS
Exhibit A - Forms of Conversion Notes
Exhibit A-1 - Conversion Interbank Rate Promissory Note
Exhibit A-2 - Fixed Swap Rate Promissory Note
Exhibit B - Revolving Line of Credit Note
Exhibit C - Term Note
Exhibit D - Disbursement Authorization
Exhibit E - Stock Purchase Agreement
SCHEDULES
Schedule 1.1 - Permitted Liens
Schedule 6.2 - Litigation; Governmental Regulation
Schedule 6.18 - Environmental Matters
Schedule 8.6 - Borrower's Existing Loans/Obligations and
Liabilities
Schedule 8.18 - Management Personnel
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LOAN AGREEMENT
THIS LOAN AGREEMENT, dated effective as of the 29th day of December,
1999 (the "Loan Agreement" or "Agreement"), is by and among
BRANCH BANKING AND TRUST COMPANY, a North Carolina banking corporation
(the "Lender"); and
KRISPY KREME DOUGHNUT CORPORATION, a North Carolina corporation
("Krispy Kreme"), XXXXXXXX'X XXXX-X-XXXX BAKERY, INCORPORATED, a North Carolina
corporation ("Xxxxxxxx'x"), KRISPY KREME DISTRIBUTING COMPANY, INCORPORATED, a
North Carolina corporation ("Distributing"), KRISPY KREME SUPPORT OPERATIONS
COMPANY, a North Carolina corporation ("Operations"), KRISPY KREME DOUGHNUTS,
INC., a North Carolina corporation ("KKDI"), all with their principal offices in
Winston-Salem, North Carolina, HD CAPITAL CORPORATION, a Delaware corporation
("HD Capital") with its principal office in Wilmington, Delaware, and HDN
DEVELOPMENT CORPORATION, a Kentucky corporation ("HD Development") with its
principal office in Florence, Kentucky.
R E C I T A L S:
A. Krispy Kreme owns all of the issued and outstanding shares of
Stock of Xxxxxxxx'x, Distributing, Operations and KKDI. Xxxxxxxx'x owns all of
the issued and outstanding shares of stock of HD Capital and HD Capital owns all
of the issued and outstanding shares of stock of HD Development.
B. The Borrowers have applied to the Lender for a revolving
credit facility in the aggregate principal amount of up to $40,000,000, to be
adjusted and advanced by the Lender pursuant to the terms and conditions of this
Agreement.
C. The Borrowers and Lender have executed Lender's Commitment
Letter dated October 26, 1999, pursuant to which Lender is willing to make a
revolving credit facility in the aggregate principal amount of up to $40,000,000
available to the Borrowers on the terms and conditions set forth in this
Agreement.
D. The Lender has previously extended a term loan in the original
principal amount of $12,000,000 to the Borrowers, which the parties have agreed
will be subject to the terms and conditions of this Agreement.
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E. The Borrowers will use availability under the revolving credit
facility and the proceeds of the Loans (i) to refinance certain indebtedness;
(ii) to provide working capital; (iii) to provide financing for capital
expenditures; (iv) the issuance of letters of credit on behalf of the Borrowers;
(v) the issuance of credit cards to the Borrowers; and (vi) for such other
corporate purposes as are permitted hereunder, all as more fully set forth
herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the Borrowers and the Lender agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. For purposes of this Loan Agreement, in
addition to the terms defined elsewhere herein, the following terms shall have
the meanings set forth below:
"Affiliate" shall mean, as to any Person, each of the Persons that
directly or indirectly, through one or more intermediaries, owns or controls, or
is controlled by or under common control with, such Person. For the purpose of
this definition, "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of management and policies, whether
through the ownership of voting securities, by contract or otherwise.
"Agreement" or "Loan Agreement" shall mean this Loan Agreement and all
amendments, modifications and supplements hereto, and restatements hereof, and
all schedules and exhibits hereto, and shall refer to this Agreement as the same
may be in effect at the time such reference becomes operative.
"Bankruptcy Code" shall mean 11 X.X.X.xx. 101 et seq., as amended, and
any successor statute or statutes having substantially the same function.
"Borrower" or "Borrowers" shall mean Krispy Kreme, Xxxxxxxx'x,
Distributing, Operations, KKDI, HD Capital and HD Development, or any or all of
them, and each Subsidiary formed, activated or acquired after the date hereof
which becomes a party hereto pursuant to Section 8.15, and each and all of their
respective successors and assigns.
"Business Day" shall mean any day (excluding Saturday, Sunday and legal
holidays) on which commercial banks in Winston-Salem, North Carolina are open.
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"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C.A. ss. 9601 et seq., as amended
from time to time, and all rules and regulations from time to time promulgated
thereunder.
"Capital Asset" shall mean any asset that would, in accordance with
Generally Accepted Accounting Principles, be required to be classified and
accounted for as a capital asset.
"Capital Lease" shall mean, as applied to any Person, any lease of any
property (whether real, personal or mixed) that would, in accordance with
Generally Accepted Accounting Principles, be required to be classified and
accounted for as a capital lease on a balance sheet of the lessee.
"Capital Lease Obligation" shall mean, with respect to any Capital
Lease, the amount of the obligation of the lessee thereunder that would, in
accordance with Generally Accepted Accounting Principles, appear on a balance
sheet as a liability of such lessee in respect of such Capital Lease.
"Closing" shall mean the execution and delivery of this Agreement and
such of the other Loan Documents, which is to occur at the time and place
specified in Section 5.1.
"Closing Date" shall mean the date referred to in Section 5.1.
"Consolidated Tangible Net Worth" shall mean, at any date, the
shareholders' equity of the Borrowers and their Subsidiaries, decreased by all
(i) assets of whatever kind or nature of each Subsidiary (that is not a
Borrower) and (ii) intangible assets of the Borrowers; and increased by all
intercompany receivables to a Borrower from a Subsidiary (which is not a
Borrower) which are subordinated to the rights of Lender pursuant to Section
8.3, as determined in accordance with Generally Accepted Accounting Principles.
"Conversion Loan" shall mean that portion of the principal amount
outstanding under the Revolving Line of Credit which is converted to a term loan
pursuant to Article III.
"Conversion Note" shall mean any promissory note issued by the
Borrowers to the Lender in connection with a Conversion Loan pursuant to Article
III, the forms of which are attached as EXHIBITS A-1 and A-2.
"Credit Card Obligations" shall mean all obligations of all or any of
the Borrowers and any Affiliate or Subsidiary of a Borrower to repay Lender all
amounts advanced, or subject to advance, by Lender in connection with any credit
cards or similar
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arrangements, whether heretofore, now or hereafter issued on behalf of any
Borrower or any of its or their Affiliates or Subsidiaries.
"Current Assets" shall mean, at any date, the aggregate of the current
assets of the Borrowers and their Subsidiaries on a consolidated basis appearing
on the asset side of the Borrowers' consolidated balance sheet, decreased by all
current assets, of whatever kind or nature, of each Subsidiary (that is not a
Borrower), and increased by all intercompany receivables to a Borrower from a
Subsidiary (which is not a Borrower) which are subordinated to the rights of
Lender pursuant to Section 8.3, but only to the extent that such subordinated
receivables constitute current assets, as determined in accordance with
Generally Accepted Accounting Principles.
"Current Liabilities" shall mean, at any date, the aggregate of the
current liabilities of the Borrowers and their Subsidiaries on a consolidated
basis appearing on the liability side of Borrowers' consolidated balance sheet,
determined in accordance with Generally Accepted Accounting Principles.
"Debt Service Requirements" shall mean, for any period, the sum of (a)
Interest Expense, (b) such portions of Long-Term Indebtedness which are or were
due and payable during such period, and (c) such portions of Capital Lease
Obligations which are or were due and payable during such period.
"Default" shall mean any of the events specified in Article IX,
regardless of whether there shall have occurred any passage of time or giving of
notice or both that would be necessary in order to constitute such default an
Event of Default.
"Default Rate" shall mean, with respect to any Loan, the Note Rate
thereof, plus two (2) percentage points.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and all rules and regulations from time to time
promulgated thereunder.
"Employee Plan" shall mean any "employee benefit plan" within the
meaning of Section 3(3) of ERISA maintained by any Borrower or Subsidiary.
"Event of Default" shall have the meaning specified in Article IX.
"Financials" or "Financial Statements" shall mean the audited
consolidated balance sheets and consolidated statements of income, retained
earnings and cash flows of the Borrowers for the fiscal years ended January 29,
1995, January 28, 1996, January 26, 1997, January 25, 1998, and January 31,
1999, and all interim financial statements of the Borrowers and/or their
Subsidiaries that have previously been delivered by any Borrower or Subsidiary
to the Lender.
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"Generally Accepted Accounting Principles" shall mean generally
accepted accounting principles, as recognized by the American Institute of
Certified Public Accountants, consistently applied and maintained on a
consistent basis for the Borrowers and each of the Borrowers' Subsidiaries
throughout the period indicated and consistent with the prior financial
practices of the Borrowers and each of their Subsidiaries as reflected on the
Financials so as to properly reflect the financial condition, and the results of
operations and changes in financial position, of the Borrowers and their
Subsidiaries.
"Hazardous Substances" shall have the meaning given in Section 6.18.
"Indebtedness" shall mean all liabilities, obligations and indebtedness
of the Borrowers or any of them or of any of their Subsidiaries of any and every
kind and nature, including, without limitation, the Obligations and all
obligations to trade creditors, whether heretofore, now or hereafter owing,
arising, due or payable from any Borrower or Subsidiary to any Person and
howsoever evidenced, created, incurred, acquired or owing, whether primary,
secondary, direct, contingent, fixed or otherwise, and whether matured or
unmatured. Without in any way limiting the generality of the foregoing,
Indebtedness specifically includes the following:
(a) All obligations or liabilities that are secured by
any lien, claim, encumbrance or security interest upon property owned
by any Borrower or Subsidiary even though such Borrower or Subsidiary
has not assumed or become liable for the payment thereof;
(b) All obligations or liabilities created or arising
under any Capital Lease of real or personal property, or conditional
sale or other title retention agreement with respect to property used
or acquired by any Borrower or Subsidiary, even though the rights and
remedies of the lessor, seller or lender thereunder are limited to
repossession of such property;
(c) All unfunded pension fund obligations and
liabilities; and
(d) Deferred taxes.
"Interbank Rate" (also known as "LIBOR") shall mean the interest rate
as quoted in the Wall Street Journal (Credit Markets Section) or on Bloomberg
Screen MMR2 (or any successor or comparable reporting service) by 9:00 A.M. on
the Business Day of each month which either is or is closest to the tenth day of
such month, for the offering of dollar deposits by leading banks in the London
interbank market for amounts comparable to the maximum amount of the Loans or
the outstanding principal balance of any Conversion Loan, as the case may be. In
the event that the Interbank Rate or the practice of announcing it shall be
abolished or abandoned, or should the same be unascertainable,
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the Lender and the Borrowers shall agree in writing on a comparable reference
rate, which shall be deemed to be the Interbank Rate under this Loan Agreement
and the other Loan Documents; provided, if such agreement is not reached within
a reasonable period of time (in Lender's judgment), it shall be a rate
reasonably determined by Lender in its sole discretion as a rate being paid, as
of the date of determination, by first class banking organizations (as
determined by Lender) in the London interbank market for the offering of dollar
deposits.
"Interest Expense" shall mean, for any period, total interest expense
of the Borrowers and their Subsidiaries on a consolidated basis (including,
without limitation, interest expense attributable to Capital Leases) determined
in accordance with Generally Accepted Accounting Principles.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as the same may be amended from time to time.
"Lender" shall mean Branch Banking and Trust Company and its successors
and assigns.
"Letter of Credit Obligations" shall mean all obligations of all or any
of the Borrowers and any Affiliate or Subsidiary of a Borrower to repay Lender
all amounts advanced, or subject to advance, by Lender in connection with any
letter(s) of credit or similar arrangements, whether heretofore, now or
hereafter issued on behalf of any Borrower or any of its or their Affiliates or
Subsidiaries.
"Letter of Credit Reserve" shall mean an undisbursed reserve against
the Revolving Line of Credit in an amount equal to all Letter of Credit
Obligations.
"Loan" or "Loans" shall mean the Revolving Line of Credit, the Term
Loan and/or any Conversion Loan.
"Loan Documents" shall mean and collectively refer to this Agreement,
the Revolving Line of Credit Note, the Term Note, any Conversion Note and any
and all agreements, instruments and other documents, including, without
limitation, consents, contracts, notices, trust account agreements and all other
written matters (excluding however general correspondence) whether heretofore,
now or hereafter executed by or on behalf of the Borrowers or any of them and
delivered to Lender, which evidence or relate to this Agreement or the
transactions contemplated hereby, and all other documents, instruments and other
written matters required by this Agreement to be delivered by any Borrower or
any third party and any and all amendments, modifications, restatements,
replacements, substitutes and supplements to any of the foregoing documents.
"Long-Term Indebtedness" shall mean all outstanding Indebtedness of the
Borrowers and their Subsidiaries on a consolidated basis that by its terms or by
the terms
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of any instrument or agreement relating thereto matures more than one year
from, or is renewable or extendable at the option of any Borrower or Subsidiary
to a date more than one year from (including an option of any Borrower or
Subsidiary under a revolving credit or similar arrangement obligating the lender
or lenders to extend credit over a period of one year or more) the date of
creation thereof, and includes current maturities of any such Indebtedness.
"Multiemployer Plan" shall mean any "multiemployer plan" within the
meaning of Section 4001(a)(3) of ERISA to which any Borrower or Subsidiary is
required to make contributions.
"Net Income" shall mean, for any period, the net income (or loss) of
the Borrowers and their Subsidiaries, on a consolidated basis for such period,
determined in accordance with Generally Accepted Accounting Principles.
"Note Rate" shall mean, at any time, and as the context requires, the
interest rate in effect on the Revolving Line of Credit Note, the Term Note or
any Conversion Note at such time.
"OSHA" shall mean the Occupational Safety and Health Act, as amended
from time to time, and all rules and regulations from time to time promulgated
thereunder.
"Obligations" shall mean and include the Revolving Line of Credit, the
Term Loan, each Conversion Loan and all other loans, advances, indebtedness,
liabilities, obligations, covenants and duties (including post-petition interest
on the foregoing, to the extent lawful) owing, arising, due or payable from any
Borrower or Subsidiary to the Lender of any kind or nature, present or future,
arising under this Agreement, the Revolving Line of Credit Note, the Term Note,
any Conversion Note or any of the other Loan Documents or otherwise (including
all Letter of Credit Obligations), whether direct or indirect (including those
acquired by assignment), absolute or contingent, primary or secondary, due or to
become due, now existing or hereafter arising, as the same may be modified,
extended or renewed from time to time. The term includes, without limitation,
all interest, charges, expenses, fees, attorneys' fees and any other sums
chargeable to any Borrower or Subsidiary by the Lender under this Agreement or
any of the other Loan Documents.
"Operating Cash Flow" shall mean, for any period, the Borrowers'
consolidated Net Income for such period, after deduction of income taxes and all
amounts paid or payable to a Subsidiary (that is not a Borrower) for or during
such period, plus depreciation expense, amortization of intangibles, Interest
Expense, all intercompany receivables arising during such period which are
subordinated to the rights of Lender pursuant to Section 8.3 and dividends paid
or payable from any Subsidiary (which is not a Borrower) for or during such
period, all as determined in accordance with Generally
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Accepted Accounting Principles, less all dividends, distributions and advances
to shareholders of Krispy Kreme.
"Pension Plan" shall mean any employee pension benefit plan within the
meaning of Section 3(2) of ERISA which is maintained by any Borrower or
Subsidiary, except that Pension Plan shall not include any Multiemployer Plan
that is subject to the provisions of Title IV of ERISA.
"Permitted Liens" shall mean any of the following liens securing any
Indebtedness of any Borrower or Subsidiary with the property of any Borrower or
Subsidiary, whether real or personal, and whether now owned or hereafter
acquired:
(a) Liens of carriers, warehousemen, mechanics,
materialmen and vendors imposed by mandatory provisions of law and
incurred in the ordinary course of business for sums not yet due and
payable; provided, however, that the Borrowers or any Subsidiary may,
in good faith, by appropriate proceedings and with due diligence
contest any such lien, and against which, Borrowers will establish and
maintain such reserves as may be required, and in such amounts, as
provided for in Section 11.15;
(b) Liens with respect to personal property only incurred
in the ordinary course of business in connection with worker's
compensation, unemployment insurance or other forms of governmental
insurance or benefits, or liens arising from good faith deposits in
connection with bids, tenders, statutory obligations and contracts
(other than for borrowed funds) entered into in the ordinary course of
business or to secure obligations on surety or appeal bonds;
(c) Liens for current taxes, assessments or other
governmental charges that are not delinquent or remain payable without
any penalty or that are being contested in good faith and with due
diligence by appropriate proceedings and against which the Borrowers
will establish and maintain such reserves as may be required, and in
such amounts, as provided for in Section 11.15;
(d) Liens upon personal property leased under a Capital
Lease (which is currently existing) or any other lease and placed upon
such leased property in connection with such lease to secure the lease
payments of such lease, provided (i) any such lien shall not encumber
any other property of a Borrower or a Subsidiary, and (ii) Lender shall
have been notified in advance of such lease.
(e) Liens, if any, securing the Obligations in favor of
the Lender;
(f) Applicable statutory and contractual liens in favor
of lessors of real property leased by any Borrower or Subsidiary;
provided that any such contractual
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liens (i) are granted in connection with such lease to secure only the
lease payments and other obligations to the Lessor of such lease, (ii)
any such liens shall encumber only leasehold improvements and tangible
personal property physically located upon such leased real property,
and in the case of multiple properties leased from the same lessor or
an Affiliate of such lessor, shall not serve as cross-collateral for
any other lease or lease payments with respect to any other property;
(iii) Lender shall be notified of each such lien within thirty (30)
days after the grant thereof (except for any such liens that presently
exist or have arisen by operation of law), and (iv) that the aggregate
book value of all tangible assets and properties subject to all such
liens shall not exceed 2.5% of the aggregate book value of all tangible
assets and properties, before accumulated depreciation and
amortization, owned by the Borrowers and their Subsidiaries;
(g) Liens, if any, securing any letter of credit issued
by the Lender for the benefit of Lumbermens Mutual Casualty Company et
al. or pursuant to the Automated Clearing House Customer Participation
Agreement by and between the Lender and certain of the Borrowers, or
other credit or contractual arrangements with Lender; and
(h) The liens set forth on SCHEDULE 1.1.
"Person" shall mean a corporation, an association, a joint venture, a
partnership, an organization, a business, an individual, a trust or a government
or political subdivision thereof or any government agency or any other legal
entity.
"Prime Rate" shall mean the per annum interest rate publicly announced
from time to time by Lender, from its office in Winston-Salem, North Carolina,
to be its prime rate, which may not necessarily be its best lending rate, as
adjusted to conform to changes as of the opening of business on the date of any
such change in the Prime Rate. The Prime Rate pertains to an internal index or
reference rate which is used by the Lender as a basis for both commercial and
consumer lending rates. This rate is recorded and maintained by the Lender and
changed by Lender from time-to-time in accordance with money market conditions,
loan demand and various other factors. Loans to other customers of Lender may
bear interest rates at, above or below the Prime Rate, which is but one of
several interest indices used by Lender. In the event Lender shall abolish or
abandon the practice of announcing its prime rate or should the same be
unascertainable, the Lender and Borrower shall agree in writing on a comparable
reference rate, which shall be deemed to be the Prime Rate under this Loan
Agreement and the other Loan Documents.
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"Prohibited Transaction" shall mean any transaction described in (i)
Section 406 of ERISA that is not exempt by reason of Section 408 of ERISA or
(ii) Section 4975(c) of the Internal Revenue Code that is not exempt by reason
of Section 4975(c)(2) or 4975(d), or in any successor statute or regulation or
in any statute or regulation having substantially the same function.
"RCRA" shall mean the Resource Conservation and Recovery Act, 42
X.X.X.X.xx. 6901 et seq., as amended from time to time, and all rules and
regulations from time to time promulgated thereunder.
"Realty" shall mean all of those certain tracts or parcels of land
currently owned or leased by any Borrower or Subsidiary, and hereafter acquired
or leased by any Borrower or Subsidiary.
"Regulation U" shall mean Regulation U promulgated by the Board of
Governors of the Federal Reserve System, 12 C.F.R. Part 221, or any successor or
other regulation hereafter promulgated by said Board to replace the prior
Regulation U and having substantially the same function.
"Regulation X" shall mean Regulation X promulgated by the Board of
Governors of the Federal Reserve System, 12 C.F.R. Part 224, or any successor or
other regulation hereafter promulgated by said Board to replace the prior
Regulation X and having substantially the same function.
"Reportable Event" shall mean a reportable event as defined in Section
4043(b) of ERISA and the regulations thereunder.
"Revolving Line of Credit" shall mean and refer to the revolving credit
facility from Lender to the Borrowers in the aggregate principal amount of up to
$40,000,000.00 as contemplated by this Agreement.
"Revolving Line of Credit Note" shall mean the promissory note dated
the date hereof and issued by the Borrowers to the Lender in the principal
amount of up to $40,000,000.00, a copy of which is attached as EXHIBIT B.
"Stock" shall mean all shares, options, interests or other equivalents
(howsoever designated) of or in a corporation, or other legal entity, whether
voting or non-voting, including, without limitation, common stock, warrants,
preferred stock, convertible debentures and all agreements, instruments and
documents convertible, in whole or in part, into any one or more or all of the
foregoing, except for phantom share units, if any, allocable to participants
under Borrowers' Long-Term Incentive Plan.
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"Subsidiary" shall mean any corporation or other legal entity, domestic
or foreign, whether now existing or hereafter formed or acquired, of which more
than fifty percent (50%) of the outstanding Stock having ordinary voting power
to elect a majority of the board of directors (or other controlling or governing
body) is at the time, directly or indirectly, owned by a Borrower, Subsidiary or
Affiliate of any Borrower or Subsidiary or any combination thereof (irrespective
of whether, at the time, Stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency).
"Swap Rate" shall mean the five (5)-year, seven (7)-year or ten (10)-
year Interbank interest rate swap rate that Lender is able to obtain from
Lender's third party dealer at the time of the making of a Conversion Loan or
any other relevant time.
"Termination Date" shall mean the earliest of: (i) July 10, 2002; (ii)
the date of termination of the Revolving Line of Credit by the Lender after the
occurrence of an Event of Default; (iii) such date of termination of the
Revolving Line of Credit as is mutually agreed upon by the Lender and the
Borrowers; or (iv) the date after all Obligations have been paid in full and
Lender is no longer obligated to make advances hereunder.
"Term Loan" shall mean and refer to the term loan from Lender to the
Borrowers in the original principal amount of $12,000,000.00, dated July 12,
1996, the approximate current outstanding principal balance of which is
$3,800,000.00.
"Term Note" shall mean the promissory note dated July 12, 1996 and
issued by the Borrowers to the Lender in the principal amount of $12,000,000.00,
a copy of which is attached as EXHIBIT C, as amended of even date herewith.
"Total Liabilities" shall mean, at any date, the aggregate of all
liabilities of the Borrowers and their Subsidiaries on a consolidated basis
appearing on the liability side of their consolidated balance sheet, determined
in accordance with Generally Accepted Accounting Principles.
1.2 Accounting Terms. Any accounting terms used in this Agreement
that are not specifically defined shall have the meanings customarily given them
in accordance with Generally Accepted Accounting Principles; provided, however,
that, in the event that changes in Generally Accepted Accounting Principles
shall be mandated by the Financial Accounting Standards Board, or any similar
accounting body of comparable standing, or shall be recommended by the
Borrowers' certified public accountants and accepted by the Borrowers and
Lender, to the extent that such changes would or could modify such accounting
terms or the interpretation or computation thereof, such changes shall be
followed in defining such accounting terms only from and after the date the
Borrowers and the Lender shall have amended this Agreement to the extent
necessary to reflect any such changes in the financial covenants and other terms
and conditions of this Agreement.
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1.3 Singular/Plural. Unless the context otherwise requires, words
used herein in the singular include the plural and words in the plural include
the singular. Reference to "Borrower" or "Borrowers" shall be deemed to refer to
each Borrower, both collectively and individually, as the context requires.
ARTICLE II
REVOLVING CREDIT FACILITY
2.1 Revolving Loan.
(a) The Lender hereby establishes, subject to the terms
and conditions of this Agreement and in reliance upon the
representations and warranties made herein by the Borrowers, a
revolving line of credit in favor of the Borrowers, as a group and not
individually, in the aggregate principal amount of up to FORTY MILLION
AND 00/100 DOLLARS ($40,000,000.00); provided, however, Lender shall
retain as a non-disbursed reserve from the Revolving Line of Credit an
amount equal to the sum of the Letter of Credit Reserve and Credit Card
Obligations, and agrees to make and remake advances thereunder to the
Borrowers, upon the terms and conditions set forth in this Agreement,
from time to time on any Business Day during the period from the date
hereof through the Termination Date. Subject to Section 2.6 and Article
III, the Borrowers may borrow, repay and reborrow any amount of the
Revolving Line of Credit at any time prior to the Termination Date. The
Borrowers shall give the Lender prior notice of the amount of any
desired advance and the date the funds are to be received by any
Borrower. In the event that the Borrowers desire to receive the
proceeds of an advance of the Revolving Line of Credit on the same
banking day of its request therefor, the Borrowers must give the Lender
notice of such advance not later than 12:00 noon, North Carolina time.
Notwithstanding the foregoing, the Lender shall have no obligation to
lend funds at any time when (i) a Default has occurred and the
Borrowers have not commenced with diligence all efforts to remedy such
Default; (ii) an Event of Default exists, or (iii) the making of such
advance would or could result in the occurrence of a Default or an
Event of Default.
(b) Requests for an advance under the Revolving Line of
Credit may be oral or written. The Borrowers hereby irrevocably
authorize the Lender to disburse the proceeds of each draw under this
Agreement in accordance with the terms of any (i) written instructions
received by the Lender from any duly authorized officer of any
Borrower, or (ii) telephone instructions from any Borrower's duly
authorized officers or other authorized persons. The Borrowers shall
designate from time to time in writing to Lender which of its officers
or other
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representatives shall be duly authorized to request advances pursuant
to this Agreement. Such notification shall be pursuant to the
disbursement authorization attached as EXHIBIT D.
(c) The Lender shall not charge any interest, fee or other charge
for the unadvanced portion of the Revolving Line of Credit.
2.2 Term. The term of the Revolving Line of Credit will be from
the date hereof to and including the Termination Date, unless terminated sooner
in accordance with the terms and conditions of this Agreement.
2.3 Interest.
(a) The Borrowers, jointly and severally, covenant and
agree to pay to the Lender interest on the unpaid principal amount of
the advances under the Revolving Line of Credit outstanding from time
to time at the Note Rate, determined as described below. Provided no
Default shall have occurred and be continuing or no Event of Default
shall have occurred which has not been expressly waived in writing by
Lender, the Borrowers, acting jointly, shall have the right, on a
monthly basis during the term of the Revolving Line of Credit, to
designate the computation of the Note Rate from the following two
alternatives:
(i) Prime Rate Based. The Lender's Prime Rate
less 110 basis points. As the Prime Rate increases or
decreases, the Note Rate shall increase (up to but never in
excess of the maximum amount allowed by law) or decrease, as
of the opening of business on the effective date of such
change, by an amount equal to the change in the Prime Rate.
(ii) Interbank Rate Based. The one-month
Interbank Rate plus 100 basis points. As the Interbank Rate
increases or decreases, the Note Rate shall increase (up to
but never in excess of the maximum amount allowed by law) or
decrease, by an amount equal to the change in the Interbank
Rate as of the opening of business on the Business Day which
is or is closest to the tenth day of each month from the
Interbank Rate effective for the immediately preceding month.
The Interbank Rate shall change only once each month, if at
all. The parties may modify the one-month Interbank Rate plus
100 basis points to the three, six or twelve-month Interbank
Rate plus such number of basis points added thereto as the
parties shall mutually agree to in writing.
The Borrowers, acting jointly, shall provide written or oral notice of
their election as to the computation of interest on the Revolving Line
of Credit on the Business Day which is or is closest to the tenth day
of each month. Any notice given after
16
the Business Day which is or is closest to the tenth day of each month
shall only be effective as of the tenth day of the following month.
Following the Borrowers' election concerning the computation of the
Note Rate, the Note Rate shall continue to be computed upon the same
basis until the Borrowers give written or oral notice of any election
to change.
(b) All interest accrued on the Revolving Line of Credit
shall be due and payable on the tenth day of each month or the Business
Day which is or is closest to the tenth day of each calendar month, in
arrears.
(c) Interest on the Revolving Line of Credit shall be
computed on the basis of the actual days elapsed in a year consisting
of 360 days.
2.4 Repayment. The Borrowers shall repay the Revolving Line of
Credit:
(a) In full, on the Termination Date;
(b) In full, upon the occurrence of any Event of Default
and acceleration of the Revolving Line of Credit by the Lender pursuant
to Article X; and
(c) In part, immediately in the event that the total
principal amount outstanding at any time under the Revolving Line of
Credit exceeds the maximum amount permitted under Section 2.1 (taking
into consideration the Letter of Credit Reserve, the reserve for the
Credit Card Obligations and as adjusted pursuant to Article III) at
such time, in the amount of such excess.
2.5 The Revolving Line of Credit Note. At the Closing, each of the
Borrowers shall execute and deliver to the Lender the Revolving Line of Credit
Note payable to the order of the Lender. The Revolving Line of Credit Note shall
be in the form of EXHIBIT B attached hereto and dated as of the Closing Date.
The amount of principal owing on the Revolving Line of Credit Note at any given
time shall be the aggregate amount of all advances made under the Revolving Line
of Credit, less all payments of principal theretofore paid by the Borrowers,
less any principal amount thereof which has been converted to a Conversion Loan.
2.6 Voluntary Commitment Reductions. Upon at least five (5)
Business Days' prior notice, the Borrowers, acting jointly, may cause the Lender
to ratably reduce the unutilized portion of the Revolving Line of Credit in part
in amounts of $100,000.00. After any such reduction, the Revolving Line of
Credit may not thereafter be increased without the prior written consent of the
Lender.
2.7 Letter of Credit and Credit Card Obligations. The Borrowers
authorize Lender to effect reimbursement of all amounts due and payable to
Lender with regard to the Letter of Credit Obligations and/or the Credit Card
Obligations by drawing an amount
17
equal to all such amounts from the Revolving Line of Credit, in which event
Lender shall provide prior notice thereof to the Borrowers; provided, however,
that Lender shall have no obligation to provide prior notice to the Borrowers
under this provision after the occurrence and during the continuance of a
Default or an Event of Default, in which case Lender shall provide written
notice thereof to the Borrowers within thirty (30) days thereafter. This right
shall be in addition to any other rights available to Lender for reimbursement
of such amounts.
ARTICLE II-A
THE TERM LOAN
2A.1 Term Loan.
(a) Loan Amount. The Lender previously established a term
loan in favor of the Borrowers, as a group and not individually, in the
original principal amount of TWELVE MILLION AND 00/100 DOLLARS
($12,000,000.00). The Term Loan shall remain outstanding and be
governed by the terms of this Agreement from and after the date hereof.
2A.2 Interest.
(a) The Borrowers, jointly and severally, covenant and
agree to pay to Lender interest on the unpaid principal amount of the
Term Loan at the Note Rate, determined in the same fashion as described
in Section 2.3, including the right to designate the computation of the
Note Rate from the two alternatives specified therein. Notwithstanding
anything to the contrary set forth in this Agreement, the Note Rate
with respect to the Term Loan shall not exceed 8.125%, nor be less than
5.5%, regardless of the alternative computation of the Note Rate chosen
by the Borrowers.
(b) All interest accrued on the Term Loan shall be due
and payable on the twentieth (20th) day of each month or the Business
Day which is or is closest to the twentieth (20th) day of each calendar
month, in arrears.
(c) Interest on the Term Loan shall be computed on the
basis of the actual days elapsed in a year consisting of 360 days.
2A.3 Repayment. The Borrowers shall repay the principal balance of
the Term Loan in fifty-nine (59) equal monthly installments of TWO HUNDRED
THOUSAND AND 00/100 DOLLARS ($200,000.00), which installments commenced on July
20, 1996, or the Business Day which was or was closest to the twentieth (20th)
day of July, 1996, with succeeding installments continuing thereafter and being
due on the twentieth
18
(20th) day of each such month, with one final payment of all remaining principal
and accrued, but unpaid, interest due on June 20, 2001 (or the Business Day
which is or is closest to the twentieth (20th) day of such month).
2A.4 Prepayment. The Borrowers may prepay the Term Loan at anytime,
without penalty or premium.
2A.5 Term Note. The Term Note is in the form of EXHIBIT C attached
hereto and dated as of July 12, 1996, and shall be amended of even date by the
form of Amendment attached as EXHIBIT C.
ARTICLE III
CONVERSION OF REVOLVING LINE OF CREDIT TO TERM LOAN(S)
3.1 Conversion Privilege. At any time or times on or before the
Termination Date, provided no Default shall have occurred and be continuing or
no Event of Default shall have occurred which has not been expressly waived in
writing by Lender, the Borrowers, acting jointly, shall have the right to
convert all or any portion of the outstanding principal balance of the Revolving
Line of Credit to a term loan or loans for a period or periods of 60, 84 or 120
months from the date of conversion pursuant to the provisions of this Article.
Each Borrower shall be jointly and severally liable on each Conversion Loan.
Upon the conversion of any portion of the principal balance outstanding under
the Revolving Line of Credit and the Revolving Line of Credit Note, the maximum
amount available under the Revolving Line of Credit and the outstanding
principal sum of the Revolving Line of Credit Note shall be decreased by an
amount equal to the principal sum of such Conversion Loan. Notwithstanding any
other provision of this Agreement to the contrary, in the event a Conversion
Loan is outstanding as of the Termination Date, and such Conversion Loan shall
continue following the Termination Date, then with respect to each such
outstanding and continuing Conversion Loan, this Agreement shall remain in full
force and effect as to the Borrowers until all Obligations of the Borrowers to
Lender have been paid in full, but, except with respect to such outstanding
Conversion Loans, Lender shall have no further obligations hereunder.
Notwithstanding the foregoing, in the event the parties desire to extend or
renew the Revolving Line of Credit, and a new loan agreement or an amendment to
this Agreement is entered into between the parties in connection with such
extension or renewal, the parties agree that such new loan agreement or this
Agreement as amended, rather than this Agreement, shall control each such
outstanding and continuing Conversion Loan. Upon the conversion of all or any
portion of the outstanding principal balance of the Revolving Line of Credit to
any Conversion Loan, the Borrowers shall either pay all accrued, but unpaid,
interest on such portion of the Revolving Line of Credit subject to such
Conversion Loan, or Borrower may roll such accrued, but unpaid, interest into
the principal balance of such Conversion Loan.
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3.2 Interest Rate. The Borrowers, acting jointly, at the time of
conversion, shall select either an Interbank Rate based or Swap Rate based
method for the computation of the Note Rate on any such Conversion Loan, which
election shall continue for the term of such Conversion Loan. Interest on each
Conversion Loan shall be computed on the basis of the actual number of days
elapsed in a year consisting of 360 days. The interest rate options are as
follows:
Fixed Interbank
Term Interbank Rate Swap Rate
--------- --------------------------------- --------------------------
60 months The one-month Interbank Rate plus Swap Rate plus 125 basis
100 basis points points
84 months The one-month Interbank Rate plus Swap Rate plus 135 basis
110 basis points points
120 months The one-month Interbank Rate plus Swap Rate plus 155 basis
130 basis points points
If the Interbank Rate is chosen, as the Interbank Rate increases or decreases,
the Note Rate shall increase (up to but never in excess of the maximum amount
allowed by law) or decrease on the Business Day of each month which is or is
closest to the tenth day of such month, by an amount equal to the change in the
Interbank Rate from that effective for the immediately preceding month. The
parties may modify the interest rate based on the one-month Interbank Rate plus
applicable basis points to an interest rate based on the three, six or
twelve-month Interbank Rate plus such number of basis points added thereto as
the parties shall mutually agree to in writing. If the Swap Rate is chosen, the
Note Rate shall be fixed for the term of such Conversion Loan. Lender recommends
a minimum block of TWO MILLION FIVE HUNDRED THOUSAND AND 00/100 DOLLARS
($2,500,000.00) for pricing purposes when selecting the fixed Swap Rate option
described above; provided, however, the Borrowers may enter into a Conversion
Loan of more or less than the foregoing amount if they so choose. The Borrowers
acknowledge that Lender's recommendation is based on the fact that a Conversion
Loan of less than the recommended minimum will incur a higher Swap Rate based on
pricing practices in the marketplace for interest rate swap arrangements on such
smaller amounts.
3.3 Payment. All interest accrued on any Conversion Loan shall be
due and payable on the Business Day of each calendar month which is or is
closest to the tenth day of such month, in arrears. The principal sum of each
Conversion Loan shall be paid in equal monthly installments in an amount
sufficient to amortize the principal sum thereof over the term of such
Conversion Loan, and payments of principal shall be due and payable with
payments of interest on the Business Day of each month which is or is most
closest to the tenth day of each month. The Borrowers shall have no right to
re-amortize the principal sum of any Conversion Loan. The Lender shall submit a
statement to the Borrowers each month as to the payment of interest due for such
month. Except as set forth below, any Conversion Loan may be prepaid at any time
without penalty or
20
premium. Any prepayment of the principal amount of any Conversion Loan shall be
applied to principal in the inverse order of maturity. In the event the
Borrowers select the fixed Swap Rate for a Conversion Loan, the Borrowers
acknowledge that Lender will be entering into either an interest rate swap or
matched funds agreement with a third party dealer, and the Borrowers agree to
execute such additional documentation as Lender shall reasonably request in
connection with such Conversion Loan, including a rate lock agreement. In the
event of any prepayment on any such Conversion Loan, Borrowers shall be subject
to a termination fee/prepayment penalty equal to Lender's cost to terminate the
interest rate swap or matched funds agreement or other similar agreement with
its third party dealer.
3.4 Conversion Note. Upon the closing of each Conversion Loan, the
Borrowers shall execute and deliver to the Lender a Conversion Note payable to
the order of the Lender for the full amount of the Conversion Loan. The
Conversion Note shall be in substantially the form of either EXHIBIT A-1
(Conversion Interbank Rate Promissory Note) or EXHIBIT A-2 (Fixed Swap Rate
Promissory Note), as appropriate, and shall be dated as of the effective date of
such conversion, subject to such necessary modifications as are required due to
changes in the law.
ARTICLE IV
PROVISIONS APPLICABLE TO THE REVOLVING LINE OF CREDIT,
THE TERM LOAN AND ANY CONVERSION LOAN
4.1 Default Rate; Post Petition Interest. Notwithstanding any
other provision of this Agreement, following the occurrence of any Event of
Default which has not been expressly waived in writing by Lender, all
outstanding principal amounts under any Loan shall bear interest at the Default
Rate, and shall be payable on demand. To the fullest extent permitted by
applicable law, interest shall continue to accrue on any Loan after the filing
by or against any Borrower of a petition seeking relief in bankruptcy or under
any act or law pertaining to insolvency or debtor relief, whether state, federal
or foreign.
4.2 Maximum Interest Rate. Nothing contained in this Agreement, in
the Revolving Line of Credit Note, the Term Note or any Conversion Note shall be
deemed to establish or require the payment of interest to Lender at a rate in
excess of the maximum rate permitted in the jurisdiction of enforcement of this
Agreement, the Revolving Line of Credit Note, the Term Note or any Conversion
Note. In the event that the rate of interest required to be paid under the
provisions of this Agreement, the Revolving Line of Credit Note, the Term Note
or any Conversion Note exceeds the maximum rate permitted in such jurisdiction,
the rate of interest required to be paid hereunder and thereunder shall be
automatically reduced to the maximum rate permitted in such jurisdiction and any
amounts collected in excess of the permissible amount shall be deemed a
prepayment of principal thereon.
4.3 Payment.
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(a) All payments (including prepayments) by the Borrowers
on account of principal, interest, costs and expenses on each Loan
shall be made in immediately available funds to the Lender, at its
principal office at Winston-Salem, North Carolina, prior to 2:00 P.M.,
North Carolina time on the date payment is due, or at such other place
as is designated in writing by the Lender. Any payments received by the
Lender later than 2:00 P.M. shall be deemed to have been made on the
next banking day. If any payment of principal or interest falls due on
a day that is not a Business Day, then such due date shall be extended
to the next succeeding Business Day, and interest shall continue to
accrue on the outstanding principal for such period of extension, but
interest for the period of extension shall not be due or payable until
the next payment date.
(b) The Borrowers hereby irrevocably authorize the Lender
to pay all interest and principal, and after the occurrence of an Event
of Default all costs and expenses, payable by the Borrowers or any of
them pursuant to this Loan Agreement by drafting such amounts from any
Borrower's accounts with Lender (other than fiduciary accounts) if such
funds are available or by drawing such amounts under the Revolving Line
of Credit as of the respective due dates of such interest, principal,
costs and expenses, but the failure of the Lender to so draft or draw
will not affect the Borrowers' obligation to pay such interest,
principal, costs and expenses.
(c) All payments made by the Borrowers shall be applied
(i) first, to the payment of accrued and unpaid fees, if applicable,
and interest on the Revolving Line of Credit Note, the Term Note and
each Conversion Note, as applicable and (ii) second, to the payment of
unpaid principal on the Revolving Line of Credit Note, the Term Note or
the Conversion Note(s), as applicable; provided, however, that,
following the occurrence of an Event of Default which has not been
expressly waived in writing by Lender, the Lender may apply all such
payments to the Obligations in any amounts and in any fashion or
priority as the Lender in its sole discretion may determine.
4.4 Use of Proceeds. The proceeds of the Loans will be used by the
Borrowers solely (i) to retire Borrowers' existing credit facilities with Lender
except for the Term Loan; (ii) to provide financing for the expansion of stores;
(iii) to provide working capital for the Borrowers; (iv) to provide financing
for the acquisition of Capital Assets of the Borrowers; and (v) for any other
lawful corporate purpose; provided, however, that no proceeds of any Loan shall
be loaned, distributed or advanced to Subsidiaries which are not Borrowers.
Lender acknowledges that an additional Subsidiary of Krispy Kreme may be formed
in the near future to purchase the assets of Krispy Kreme's current franchisee
for the metropolitan New York City area, and that certain of the funds used to
finance that purchase may originate from the Revolving Line of Credit. Lender
further acknowledges
22
that it is contemplated that the existence of this potential new Subsidiary is
expected to be temporary in nature, with the objective that the acquired assets
(or the Subsidiary itself) would be sold to a successor franchisee for that
territory. Due to the contemplated temporary existence of this Subsidiary,
Lender initially agrees that such Subsidiary need not become a Borrower
hereunder as would otherwise be required by SECTION 8.15, and Lender further
agrees that the use of proceeds from the Revolving Line of Credit to fund this
Subsidiary and acquisition shall not constitute a violation of this provision;
provided, however, Lender expressly reserves the right to require such new
Subsidiary to become a Borrower hereunder (including with respect to the Term
Loan) if, in Lender's judgment, its existence appears to be of a longer duration
than currently contemplated.
4.5 Disbursement of Loan Proceeds. The Borrowers hereby authorize
and direct the Lender to disburse, for and on behalf of the Borrowers and for
each of the Borrowers' accounts, the proceeds of any Loan made by the Lender
pursuant to this Agreement to such Person or Persons as the President, Chief
Executive Officer, Executive Vice President - Corporate Development, Finance and
Administration or Senior Vice President - Finance of Krispy Kreme shall direct
in writing.
4.6 [Intentionally Omitted]
4.7 Taxes.
(a) The Borrowers agree to pay any present or future
stamp or documentary taxes or any other excise or property taxes,
charges or similar levies of the United States or any state or
political subdivision thereof or any applicable foreign jurisdiction
that may arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this
Agreement (hereinafter referred to as "Taxes").
(b) The Borrowers hereby agree, jointly and severally, to
indemnify the Lender for the full amount of Taxes (including without
limitation, any Taxes imposed by any jurisdiction on amounts payable
under this Section) paid by the Lender and any liability (including
penalties, interest and expenses) arising therefrom or with respect
thereto. This indemnification shall be made within thirty (30) days
from the date the Lender makes written demand therefor.
4.8 Register. The Lender shall maintain a register on which it may
record the advances made by it to the Borrowers from time to time, and each
payment in respect thereof. If Lender maintains such a register, such
recordation shall be conclusive, absent error therein. Failure to make any such
recordation, or any error in such recordation, shall not affect the Borrowers'
obligations with respect to the Loans.
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4.9 Release of Collateral, Parties Liable, etc. Each Borrower
agrees that the whole or any part of the security, if any, now or hereafter held
for the Obligations, or any part thereof, may be exchanged, compromised or
surrendered from time to time; that Lender shall have no obligation to protect,
perfect, secure or insure any such security interest, liens or encumbrances now
or hereafter held for the Obligations, or any part thereof, or the properties
subject thereto; that the time or place of payment of the Obligations, or any
part thereof, may be changed or extended, in whole or in part, to a time certain
or otherwise, and may be renewed or accelerated by agreement among Lender and
any Borrower, in whole or in part; any Borrower may be granted indulgences
generally; that any of the provisions of any of the Obligations may be modified,
amended or waived; that any party liable for the payment thereof, including,
without limitation, any co-obligor and guarantors, may be granted indulgences or
released; all without notice to or further assent by any other Borrower, and
each of the other Borrower(s) shall remain bound thereon, notwithstanding any
such exchange, compromise, surrender, extension, renewal, acceleration,
modification, indulgence or release.
4.10 Waiver of Rights. Each Borrower expressly waives: (a) notice
of extensions of credit to any other Borrower by Lender; (b) presentment and
demand for payment of any of the Obligations; (c) protest and notice of dishonor
or of default to such Borrower or to any other party with respect to the
Obligations or with respect to any security therefor; (d) notice of Lender
obtaining, amending, substituting for, releasing, waiving or modifying any
security interest, liens or encumbrances now or hereafter securing the
Obligations or any part thereof, or Lender's subordinating, compromising,
discharging or releasing any such security interests, liens or encumbrances; (e)
all other notices to which each such Borrower might otherwise be entitled; (f)
demand for payment hereunder and under the other Loan Documents; and (g) any
right to assert against Lender, as a defense, counterclaim (excluding mandatory
counterclaims), set-off or cross-claim, any defense (legal or equitable),
set-off, counterclaim or claim which each such Borrower may now or hereafter
have against Lender or any other Borrower, but such waiver shall not prevent
such Borrower from asserting against Lender in a separate action, any claim,
action, cause of action or demand that such Borrower might have, whether or not
arising out of this Agreement; the Borrowers acknowledging and agreeing that
their obligations to pay and perform under and pursuant to the Loans and each of
the Loan Documents are obligations independent of any and all claims and
defenses which any Borrower may now or hereafter have against Lender or any
other Borrower.
4.11 Primary Liability of Borrowers. Each Borrower agrees that this
Agreement and the other Loan Documents may be enforced by Lender without the
necessity at any time of resorting to or exhausting any security and without the
necessity at any time of having recourse to the Revolving Line of Credit Note,
the Term Note, any Conversion Note, any other Loan Document or any co-obligor,
guarantor or any security, if any, held with respect to the Obligations. Each
Borrower waives the right to require Lender to proceed against any co-obligor or
guarantor or to require Lender to pursue any other
24
remedy or enforce any other right. Each Borrower further agrees that it shall
not exercise any right of subrogation, reimbursement or indemnity whatsoever,
nor any right of recourse to security, if any, for the Obligations of any
Borrower to Lender, unless and until all of the Obligations of the Borrowers and
their respective Subsidiaries to Lender have been paid in full. Each Borrower
further agrees that nothing contained herein shall prevent Lender from suing on
or proceeding under this Agreement, the Revolving Line of Credit Note, the Term
Note or any Conversion Note, or exercising any other rights available to it
under any other Loan Document if the Borrowers do not timely perform their
obligations hereunder and thereunder, and the exercise of any of the aforesaid
rights and the completion of any proceedings thereunder shall not constitute a
discharge of any Borrower's obligations hereunder; it being the purpose and
intent of each Borrower that its obligations hereunder and thereunder shall be
primary, absolute, independent and unconditional under any and all
circumstances. The Borrowers' obligations under this Agreement, the Revolving
Line of Credit, the Term Loan, any Conversion Loan or any Loan Document, or any
remedy for the enforcement thereof, shall not be impaired, modified, changed or
released in any manner whatsoever by an impairment, modification, change,
release or limitation of the liability of any Borrower or any other co-obligor
or guarantor or by reason of any Borrower's or any co-obligor's or guarantor's
bankruptcy or insolvency. Each Borrower acknowledges that the term "Obligations"
as used herein includes any payments made by it or any other Borrower or other
co-obligor or guarantor to Lender and subsequently recovered by such Borrower,
any other Borrower, co-obligor or guarantor or a trustee for any of them
pursuant to any bankruptcy, insolvency or other proceedings. Lender may, in its
sole and reasonable discretion, elect to demand payment or performance at any
time Lender is entitled to exercise such remedies hereunder or under any other
Loan Documents. In the event Lender elects to demand performance, it shall at
all times thereafter have the right to demand payment until all of the
Obligations have been paid in full. In the event Lender elects to demand
payment, it shall at all times thereafter have the right to demand performance
until all of the Obligations have been paid in full.
4.12 Subrogation and Subordinating. Nothing herein contained shall
operate as a release or discharge, in whole or in part, of any claim of any
Borrower against any other Borrower, by subrogation or otherwise, by reason of
any act done or payment made by any Borrower pursuant to the provisions of this
Agreement; but all such claims shall be subordinate to the Obligations of the
Borrowers or any of them to Lender, and, so long as no Default or Event of
Default shall have occurred and be continuing, the Borrowers may make payments
under or pursuant to any such claim as they become due and payable in the
ordinary course of business.
ARTICLE V
CLOSING; CONDITIONS OF CLOSING AND BORROWING
25
5.1 Closing. The Closing of this transaction shall take place at
the offices of Krispy Kreme, Winston-Salem, North Carolina at 10:00 p.m. on
December 29, 1999, or at such other time as the parties shall mutually agree.
5.2 Conditions of Loans and Advances at Closing. The obligations
of the Lender to make the Loans available to the Borrowers and to make advances
thereunder at the Closing, are subject to the: (a) accuracy and correctness of
the representations and warranties of the Borrowers contained herein and in the
other Loan Documents and in any certificate delivered pursuant to this Agreement
or the other Loan Documents, in all respects as if made on the date of such Loan
or advance; and (b) satisfaction of each of the following conditions:
5.2.1 Executed Loan Documents. This Agreement and all Loan Documents
required by this Agreement by the Lender shall have been duly authorized,
executed and delivered to the Lender by the Borrowers and shall be in full force
and effect and no Default or Event of Default shall exist hereunder or
thereunder.
5.2.2 Closing Certificates, etc.
(a) Certificate of the Borrowers. The Lender shall have
received a certificate at Closing from the Presidents of the Borrowers
and the Executive Vice President - Corporate Development, Finance and
Administration of Krispy Kreme and the Vice President or Treasurer of
each other Borrower, in form and substance satisfactory to the Lender,
to the effect that, to the best of their knowledge: (i) all
representations and warranties of the Borrowers contained in this
Agreement and the other Loan Documents are true, correct and complete;
(ii) neither the Borrowers nor their Subsidiaries are in violation of
any of the covenants contained in this Agreement or the other Loan
Documents; (iii) after giving effect to the transactions contemplated
by this Agreement, no Default or Event of Default has occurred; and
(iv) the Borrowers and their Subsidiaries, if applicable, have
satisfied each of the other closing conditions set forth in this
Agreement.
(b) Certificates of Secretaries of the Borrowers. The
Lender shall have received, at Closing, a certificate in form and
substance satisfactory to the Lender, from the Secretary or Assistant
Secretary of each of the Borrowers, certifying: (1) that attached
thereto is a true and complete copy of the bylaws of the Borrowers as
in effect on the date of such certification; (2) that attached thereto
is a true and complete copy of resolutions adopted by the Board of
Directors of the Borrowers authorizing the execution, delivery and
performance of this Agreement and the other Loan Documents, as
applicable; (3) as to the incumbency and genuineness of the signature
of each officer of the Borrowers executing this Agreement or any of the
other Loan Documents; and (4) that, to the best of the Borrowers'
knowledge as of the time delivered, all written information, copies of
documents, agreements and
26
contracts, and any other written material furnished or made available
to Lender in connection with the making of any Loan or the negotiation,
preparation or execution of this Agreement and the other Loan Documents
are true, correct and complete and did not or do not contain any untrue
statement of a material fact or omit a material fact necessary to make
the statements contained therein not misleading, and with respect to
each agreement or contract, a copy of which was provided to Lender,
each such contract and agreement is in full force and effect, no party
thereto has delivered any notice of default thereunder which remains
uncured and to the best of the Borrowers' knowledge, there exists no
default or event of default which, with the giving of notice or the
passage of time or both, would constitute a default of any of the
terms, conditions or provisions of any such contract or agreement, and
no other agreements relate thereto, whether oral, written, expressed or
implied, between the parties thereto or any other Person which could
materially adversely affect the rights, duties and obligations of any
Borrower.
(c) Articles of Incorporation. The Lender shall have
received, at Closing, a copy of the articles or certificate of
incorporation and all amendments thereto (excluding statements of
change of registered office and/or agent) of each Borrower and
Subsidiary, certified as of a recent date by the Secretary of State of
the state of incorporation of each such Borrower and Subsidiary,
together with a certification by the Secretary or Assistant Secretary
of each Borrower and Subsidiary that such articles or certificate of
incorporation have not been amended since such date.
(d) Certificates of Good Standing. The Lender shall have
received, at Closing, long-form (or short form if long forms are not
provided by the certifying authority) certificates as of a recent date
of either the good standing, existence or authorization (as may be
provided by the certifying authority) of each Borrower and each of its
Subsidiaries under the laws of each such corporation's state of
incorporation, which certificates shall be in form and content
reasonably satisfactory to Lender.
(e) Opinions of Counsel to the Borrower and the Borrower.
The Lender shall have received, at Closing, favorable legal opinion(s)
as to such matters as Lender may require.
5.2.3 Consents; No Adverse Change.
(a) Governmental Approvals. All necessary approvals,
authorizations and consents, if any, which are required, of all
governmental bodies (including courts) having jurisdiction with respect
to the transactions contemplated by this Agreement shall have been
obtained.
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(b) No Injunction, Etc. No action, proceeding,
investigation, regulation or legislation shall have been instituted,
threatened or proposed before any court, governmental agency or
legislative body to enjoin, restrain or prohibit, or to obtain
substantial damages in respect of, or which is related to or arises out
of this Agreement or the consummation of the transactions contemplated
hereby or which, in the Lender's sole and reasonable discretion, would
make it inadvisable to consummate the transactions contemplated by this
Agreement.
(c) No Material Adverse Change. There shall not have
occurred, in the reasonable judgment of the Lender, any material
adverse change in the business, business prospects, condition
(financial or otherwise) or results of operations of any Borrower or
Subsidiary, or any event, condition or state of facts that could
materially and adversely affect the business, business prospects,
financial condition or results of operations of any Borrower or any
Subsidiary.
(d) Event of Default. No Event of Default nor any
Default shall have occurred which has not been expressly waived in
writing by Lender.
5.2.4 Financial Matters. The Borrowers shall have delivered to the
Lender the Financial Statements specifically described in the definition of
"Financial Statements" appearing in Section 1.1 and, with respect to the
Financial Statements that have been audited by independent certified public
accountants, the Financial Statements shall be accompanied by a report thereon
containing an opinion that is not qualified, and such Financial Statements shall
be in a form satisfactory to the Lender in its sole and reasonable discretion.
5.2.5 Miscellaneous.
(a) Disbursement Instructions. The Lender shall have
received written or oral instructions from the Borrower directing the
payment of any proceeds of the Revolving Line of Credit made under this
Agreement.
(b) Proceedings and Documents. All opinions, certificates
and other instruments and all proceedings in connection with the
transactions contemplated by this Agreement shall be satisfactory in
form and substance to the Lender. The Lender shall have received copies
of all other documents, instruments and opinions as the Lender may
reasonably request, in form and substance satisfactory to the Lender,
with respect to the transactions contemplated by this Agreement and the
taking of all actions in connection therewith.
(c) Litigation Review. There shall not be any material
pending or threatened litigation against any Borrower or Subsidiary,
and the Borrowers shall
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have provided the Lender with access to all documentation relating to
any litigation involving any Borrower or Subsidiary.
5.3 Loan Payoffs. Except as set forth on SCHEDULE 8.6, all
Indebtedness not permitted by this Agreement shall be paid and satisfied in full
prior to Closing or shall be paid with a draw on the Revolving Line of Credit on
the Closing Date. In addition, each Borrower shall, and shall cause each of its
Subsidiaries to, terminate and cancel all arrangements and agreements with
respect to money borrowed (by which any Borrower or Subsidiary is a debtor) with
any Persons other than Lender, except as set forth on SCHEDULE 8.6.
5.4 Conditions of Closing Conversion Loans. The obligations of the
Lender to close any Conversion Loan are subject to: (a) the condition that no
representation or warranty of the Borrowers contained herein or in the other
Loan Documents or in any certificate or Schedule delivered pursuant to this
Agreement or the other Loan Documents has become incorrect or inaccurate in any
respect which would have a material adverse effect on the Borrowers and their
Subsidiaries considered together; (b) all Loan Documents required by this
Agreement by the Lender shall have been duly authorized, executed and delivered
to the Lender by the Borrowers and shall be in full force and effect and no
Default shall have occurred and be continuing or no Event of Default shall have
occurred hereunder or thereunder which has not been expressly waived in writing
by Lender; and (c) the satisfaction of each of the following conditions: (i) the
Lender shall have received the certificate called for in Section 5.2.2(a)(i)
(subject to the standard of Section 5.4(a) above), (ii), (iii) and (iv) above
and the certificates called for in Section 5.2.2(d) above, (ii) the conditions
set forth in Sections 5.2.3, 5.2.4 and 5.2.5, and (iii) Lender shall have
received a certificate in form and substance satisfactory to Lender, from the
Secretary or Assistant Secretary of each of the Borrowers, certifying: (1) that
attached thereto is a true and complete copy of resolutions adopted by the Board
of Directors of the Borrowers authorizing the execution, delivery and
performance of the Loan Documents with respect to such Conversion Loan and that
such resolutions have not been altered, amended or rescinded; and (2) as to the
incumbency and genuineness of the signature of each officer of the Borrowers
executing any of the Loan Documents to be executed in connection with such
Conversion Loan.
5.5 Conditions of Making the Revolving Line of Credit Available to
the Borrowers and Making Advances Thereunder. The obligations of the Lender to
make the Revolving Line of Credit available to the Borrowers and to make
advances (other than any advance made at Closing) thereunder are subject to: (a)
the condition that no representation or warranty of the Borrowers contained
herein or in the other Loan Documents or in any certificate or Schedule
delivered pursuant to this Agreement or the other Loan Documents has become
incorrect or inaccurate in any respect which would have a material adverse
effect on the Borrowers and their Subsidiaries considered together; (b) all Loan
Documents required by this Agreement by the Lender shall have
29
been duly authorized, executed and delivered to the Lender by the Borrowers and
shall be in full force and effect and no Default shall have occurred and be
continuing or no Event of Default shall have occurred hereunder or thereunder
which has not been expressly waived in writing by Lender; and (c) the
satisfaction of each of the following conditions: (i) the Lender shall have
received the certificate called for in 5.2.2(a)(i) (subject to the standard of
Section 5.5(a) above), and (ii) the conditions set forth in Sections 5.2.3,
5.2.4 and 5.2.5. Each request for an advance under the Revolving Line of Credit
and each advance made by Lender to the Borrowers pursuant to this Agreement
shall constitute the certification under Section 5.5(c)(i) above as of the date
of such request or advance.
5.6 Waiver of Conditions Precedent. If the Lender makes any
advance hereunder prior to the fulfillment of any of the conditions precedent
set forth in this Article, the making of such advance shall constitute only an
extension of time for the fulfillment of such condition and not a waiver
thereof, and the Borrowers shall thereafter use their best efforts to fulfill
each such condition promptly unless the Lender otherwise indicates in writing.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Loan Agreement and to
make available (or continue to make available) to Borrowers the Revolving Line
of Credit, the Term Loan and any Conversion Loan, the Borrowers, jointly and
severally, make the following representations, warranties and covenants to the
Lender, each of which shall be true and correct as of the Closing Date, and as
of the date of each advance under the Revolving Line of Credit and as of the
date of any Conversion Loan (in which case the standard for advances under the
Revolving Line of Credit [other than the advance thereof made at Closing] and
Conversion Loans shall be as set forth in Sections 5.4(a) and 5.5(a)), and each
of which shall survive the execution of this Agreement and the making of the
initial or any other advance or loan hereunder.
6.1 Corporate Organization and Power. Each of the Borrowers and
each of their Subsidiaries (i) is a corporation duly organized, validly existing
and in good standing under the laws of the state of its incorporation; (ii) is
qualified to do business and is in good standing in every jurisdiction where the
nature of its business or activities require qualification and where the failure
to qualify would have a material adverse effect on its business taken as a
whole; and (iii) has no Subsidiaries other than the Borrowers and, subject to
the establishment in the future of permissible partnerships, joint ventures and
alliances as described in Section 8.15, is not a partner or joint venturer in
any partnership or joint venture. Each of the Borrowers and each of their
Subsidiaries has the power to own its properties and to engage in the
transactions contemplated hereby; and each Borrower has the full power,
authority and legal right to execute and deliver this
30
Agreement and the Loan Documents executed by it and to perform and observe the
terms and provisions hereof and thereof. No Borrower or Subsidiary has, during
the preceding five (5) years, been known as or used any other corporate,
fictitious or trade names (which was material to its business) in the United
States except.
6.2 Litigation; Government Regulation. Except as set forth on
SCHEDULE 6.2, there are no material actions, suits, investigations or
proceedings pending or, to the knowledge of the Borrowers, threatened against or
affecting any Borrower or Subsidiary, or that question the validity of this
Agreement or any of the Loan Documents, at law or in equity before any court or
administrative officer or agency and, to their knowledge, neither the Borrowers
nor any of their Subsidiaries is in violation of or in default under any
applicable statute, rule, order, decree, writ, injunction or regulation of any
governmental body (including any court) where such violation may have a material
adverse effect upon the business, property, assets, operations or condition,
financial or otherwise, of any Borrower or Subsidiary.
6.3 Taxes. No Borrower or Subsidiary is delinquent in the payment
of any taxes in an aggregate amount that would have a material adverse effect
upon the business, property, assets, operations or condition, financial or
otherwise of any Borrower or Subsidiary that have been levied or assessed by any
governmental authority against it or its assets. Each Borrower and Subsidiary
has timely filed all tax returns that are required by law to be filed prior to
the date hereof where failure to file would have a material adverse affect upon
any Borrower or Subsidiary, and they have paid all taxes shown on said returns
and all other assessments or fees levied upon any Borrower or Subsidiary or upon
any of their respective properties to the extent that such taxes, assessments or
fees have become due and, if not due, such taxes have been adequately provided
for and sufficient reserves therefor have been established on such Borrower's or
Subsidiary's books of account. No material controversy in respect of income
taxes of any Borrower or Subsidiary is pending or, to the knowledge of the
Borrowers, threatened.
6.4 Enforceability of Loan Documents; Compliance With Other
Instruments. Each of the Loan Documents is the legal, valid and binding
obligation of each Borrower, enforceable against each Borrower in accordance
with its terms assuming the exercise by the Lender of commercial reasonableness
in the exercise of the remedies thereunder and except as enforceability may be
limited by bankruptcy, insolvency and other similar laws affecting creditor's
rights generally or by general equitable principles. No Borrower or Subsidiary
is in default in any material respect with respect to any indenture, loan
agreement, mortgage, lease, deed or similar agreement related to the borrowing
of monies to which any Borrower or Subsidiary is a party or by which it, or any
of its property, is bound. Neither the execution, delivery or performance of
this Agreement and of the Loan Documents by the Borrowers, nor compliance by the
Borrowers herewith or therewith (a) conflicts or will conflict with or results
or will result in any breach of, or constitutes or will constitute with the
passage of time or the giving of notice or both, a default under, (i)
31
the articles or certificate of incorporation or bylaws of any Borrower or
Subsidiary, (ii) any indenture, loan agreement, mortgage, lease or similar
agreement, or (iii) any law, order, writ, injunction or decree of any court or
governmental authority, or (b) results or will result in the creation or
imposition of any lien, charge or encumbrance upon the properties of any
Borrower or Subsidiary pursuant to any such agreement or instrument.
6.5 Governmental Authorization. No authorization, consent or
approval of, or declaration or filing with, any governmental authority is
required for the valid execution, delivery and performance by the Borrowers of
this Agreement and the Loan Documents or the consummation by the Borrowers of
the transactions contemplated hereby and thereby. Each of the Borrowers and
Subsidiaries has, and is in good standing with respect to, all material
governmental approvals, permits, certificates, inspections, consents and
franchises necessary to continue to conduct business as heretofore conducted and
to own or lease and operate its respective properties as now owned or leased by
it. To their knowledge, none of such approvals, permits, certificates, consents
or franchises contain any term, provision, condition or limitation more
burdensome than such as are generally applicable to Persons engaged in the same
or similar business as any Borrower or Subsidiary.
6.6 Event of Default. No Default shall have occurred and be
continuing or no Event of Default shall have occurred which has not been
expressly waived in writing by Lender.
6.7 Margin Securities. No Borrower or Subsidiary owns any "margin
stock" as such term is defined in Regulation U. None of the proceeds of the
Loans will be used, directly or indirectly, for the purpose of purchasing or
carrying any margin stock or for the purposes of maintaining, reducing or
retiring any Indebtedness that was originally incurred to purchase or carry
margin stock or for any other purpose that might constitute the transactions
contemplated hereby as a "purpose credit" within the meaning of Regulation U,
Regulation X or Regulation G or any other regulations of the Board of Governors
of the Federal Reserve System.
6.8 Franchise Matters. To the Borrowers' knowledge, Krispy Kreme
is the exclusive franchisor of the "Krispy Kreme" concept for the operation of
retail doughnut and coffee shops utilizing certain of the trademarks and service
marks used by the Borrowers or any of them. To the Borrowers' knowledge, neither
Krispy Kreme's Uniform Franchise Offering Circular nor any other franchise
disclosure statement of similar import (whether now or previously existing) nor
any statements (whether oral or written) furnished by the Borrowers or by any
Person acting on the Borrowers' behalf in connection with the sale, management,
administration or termination of a franchise contains or contained any untrue
statement of a material fact or omits or omitted a material fact necessary to
make the statements made or contained therein or made in connection therewith
not misleading. None of the Borrowers are aware of any fact,
32
circumstance or condition related to franchising activities which might
materially adversely affect any Borrower or Subsidiary, their assets, business,
prospects or condition (financial or otherwise), or the ability of any Borrower
to perform any of its obligations hereunder or under any of the Loan Documents.
Each agreement between Krispy Kreme and its franchisees is valid, subsisting and
in full force and effect, and, to the Borrowers' knowledge, Krispy Kreme is not
in default with respect to any material term or condition thereof, nor has any
event occurred which, through the passage of time or the giving of notice, or
both, would constitute a default by Krispy Kreme thereunder.
6.9 Principal Places of Business. The chief executive office and
principal place of business of each Borrower (with the exception of HD Capital
and HD Development) is currently 000 Xxxxxxxxx Xx., Xxxxx 000, Xxxxxxx-Xxxxx,
Xxxxx Xxxxxxxx 00000. The chief executive office and principal place of business
of HD Capital is 000 Xxxxx Xxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxx 00000. The
chief executive office and principal place of business of HD Development is 0000
Xxxxxxx Xx., Xxxxxxxx, Xxxxxxxx 00000. The Borrowers shall promptly notify
Lender of the relocation thereof by a party hereto.
6.10 ERISA.
(a) None of the Borrowers maintains or has ever
maintained a defined benefit plan subject to ERISA. The present value
of all accrued benefits under each Employee Plan (based on those
assumptions used to fund such Employee Plan) did not, as of the most
recent valuation date, exceed the then current value of the assets of
such Employee Plan allocable to such benefits. Full payment has been
made on or before the due date thereof of all amounts that any Borrower
or Subsidiary is required under the terms of each Employee Plan to have
paid as contributions to such plan.
(b) Borrowers' Profit-Sharing and 401(k) plan is tax
qualified pursuant to a currently effective determination letter issued
by the Internal Revenue Service (the "Service"), and is not under
investigation by either the Service or the United States Department of
Labor.
(c) No Borrower or Subsidiary has participated in any
Prohibited Transaction, which has subjected, or may subject, it to any
material civil penalty or tax imposed by Section 502(i) of ERISA or
Section 4975 of the Internal Revenue Code, respectively.
(d) To the knowledge of the Borrowers and based on
actuarial reports, the present value (determined using actuarial and
other assumptions that are reasonable in respect of the benefits
provided and the employees participating) of the liability of any
Borrower or Subsidiary for post-retirement benefits to be provided to
its current and former employees under all welfare benefit plans (as
33
defined in Section 3(1) of ERISA) does not, in the aggregate, exceed
the assets under all such plans allocable to such benefits by an amount
which would materially and adversely affect the financial condition of
any Borrower or Subsidiary or its ability to perform its obligations
hereunder.
(e) The execution and delivery of this Agreement will not
involve any transaction that is subject to the prohibitions of Section
406 of ERISA or in connection with which a tax could be imposed
pursuant to Section 4975 of the Internal Revenue Code.
(f) Neither the Borrowers nor any Subsidiary is making or
has ever made or been required to make any contributions to a
Multiemployer Plan.
6.11 Financial Statements. The Financial Statements delivered to
the Lender have been prepared in accordance with Generally Accepted Accounting
Principles by the Borrowers and, in the case of the annual Financial Statements,
audited by independent certified public accountants. The Financial Statements
contain no material misstatement or omission and fairly present the financial
condition, assets and liabilities of the Borrowers and their Subsidiaries on a
consolidated basis, as of the respective dates thereof and the results of
operations of the Borrowers and their Subsidiaries on a consolidated basis, as
of the respective dates thereof and the results of operations of the Borrowers
and their Subsidiaries on a consolidated basis, for the respective periods then
ended. Since the date of the most recent of the Financial Statements, there has
been no material adverse change in the assets, liabilities or financial
condition of any Borrower or Subsidiary or in the results of the operations of
any Borrower or Subsidiary, and no Borrower or Subsidiary has incurred any
obligation or liability that could materially and adversely affect its financial
condition, business operations or properties, or has entered into any material
contracts not contemplated by this Agreement and not in the ordinary course of
business consistent with past practice.
6.12 Title to Assets. The Borrowers and their Subsidiaries have
good, indefeasible and merchantable title in fee simple (or its equivalent under
applicable law) to, and ownership of, the assets reflected in the most recent
Financial Statements, and all of their other assets, free and clear of all
liens, claims, security interests and encumbrances. To the Borrowers' knowledge,
no financing statement that names any Borrower or any Subsidiary as debtor has
been filed and is still in effect, other than those evidencing any of the
Permitted Liens, and no Borrower or Subsidiary has signed any financing
statement or any security agreement authorizing any secured party thereunder to
file any such financing statement.
6.13 Solvency. The Borrowers and each of their Subsidiaries is
solvent.
34
6.14 Use of Proceeds. Subject to Section 4.4, the Borrowers' use of
the proceeds of the Revolving Line of Credit, the Term Loan and any Conversion
Loan made by the Lender to the Borrowers pursuant to this Agreement are, and
will continue to be, legal and proper corporate uses and such uses are and will
be consistent with all applicable laws and statutes, as in effect from time to
time.
6.15 Assets for Conduct of Business. The Borrowers and each of
their Subsidiaries possess adequate assets, licenses, patents, patent
applications, copyrights, trademarks, service marks and trade names to continue
to conduct their respective businesses as heretofore conducted, without any
material conflict with the rights of others.
6.16 Trade Relations. There exists no actual or, to the Borrowers'
knowledge, threatened termination, cancellation or limitation of, or any
modification or change in, the business relationship of any Borrower or
Subsidiary with any customer or any group of customers whose purchases
individually or in the aggregate are material to the business of a Borrower or
Subsidiary, or with any material supplier, and there exists no present condition
or state of facts or circumstances that would materially adversely affect any
Borrower or Subsidiary or prevent any Borrower or Subsidiary from conducting
such business after the consummation of the transactions contemplated by this
Agreement in substantially the same manner in which it has heretofore been
conducted.
6.17 Compliance With Laws. Each Borrower and Subsidiary has duly
complied in all material respects with, and their assets, properties, business
operations and leaseholds are in compliance in all material respects with, the
provisions of all federal, state and local laws, rules and regulations
applicable to such Borrower or Subsidiary, their assets and properties or the
conduct of their businesses, including, without limitation, all federal and
state securities laws, business opportunity and franchise laws, ERISA and OSHA,
the violation of which would have a material adverse impact on a Borrower or
Subsidiary, and there have been no material citations, notices or orders of
noncompliance issued to any Borrower or Subsidiary under any such law, rule or
regulation.
6.18 Environmental Matters. To the Borrowers' knowledge, and
except as may be set forth on SCHEDULE 6.18:
(a) (i) No dangerous, hazardous or toxic substances,
pollutants, contaminants, chemicals, wastes or materials, within the
meaning of any applicable federal, state or local laws, regulations or
orders (collectively "Hazardous Substances"), and including without
limitation urea-formaldehyde, polychlorinated byphenyls (PCB's),
nuclear fuel or waste, and petroleum, including but not limited to
crude oil, natural gas, natural gas liquids, gasoline and synthetic
gas, are unlawfully stored or located on the Realty, and no part of the
Realty, including the groundwater located thereon and thereunder, is
presently contaminated by any such
35
substance; (ii) no improvements on the Realty contain any friable
asbestos or substances containing asbestos and deemed hazardous by any
federal, state or local laws, regulations or orders respecting such
material; and (iii) there were no releases of any Hazardous Substances,
materials or wastes on any Realty previously owned by any Borrower or
any Subsidiary.
(b) The Realty has never been used during the period of
ownership or lease by any Borrower or Subsidiary as or for a mine, a
landfill, a dump or other disposal facility, industrial or
agricultural, a gasoline service station or a petroleum products
storage facility and has never been used for such purposes prior to the
period of ownership or lease by any Borrower or Subsidiary; and none of
the Realty is located on a site which, pursuant to CERCLA or any
similar state law, has been placed on the "National Priorities List" or
"CERCLIS List" (or any similar state list) of hazardous wastes;
(c) There are no underground storage tanks situated on
any of the Realty and no underground storage tanks have ever been
situated on any of the Realty;
(d) All activities and operations of the Borrowers and
each of their Subsidiaries meet the requirements of all applicable
environmental laws and regulations of all federal, state and local
governmental or regulatory bodies having jurisdiction over any Borrower
or Subsidiary or their properties, including without limitation, RCRA
and CERCLA;
(e) No Borrower or Subsidiary has ever sent a Hazardous
Substance to a site which, pursuant to CERCLA or any similar state law,
(i) has been placed on the "National Priorities List" or "CERCLIS List"
of hazardous wastes (or any similar state list) and (ii) is currently
the subject of a pending claim, administrative order or other request
against any Borrower or Subsidiary to take "removal" or "remedial"
action (as defined under CERCLA) or to pay for the costs of cleaning up
such a site;
(f) No Borrower or Subsidiary is involved in any suit or
proceeding or has received any notice from any governmental agency with
respect to a release of Hazardous Substances or has received notice of
any claims from any Person relating to personal injuries from exposure
to Hazardous Substances; and
(g) Each Borrower and Subsidiary has timely filed all
reports required to be filed, has acquired all necessary certificates,
approvals and permits and has generated and maintained in all material
respects all required data, documentation and records under any
applicable state, federal or local environmental laws, regulations or
rules.
36
For purposes of this Section 6.18, "knowledge" means the knowledge of Xxxxx
Xxxxxxx, Director of Safety and Environmental Services, for Krispy Kreme.
6.19 Authorization. The execution, performance and delivery of this
Agreement and the Loan Documents by the Borrowers are within the corporate
powers of each of the Borrowers and have been duly authorized by all necessary
and appropriate corporate action and validly executed and delivered.
6.20 Withholding Taxes. The Borrowers and each of their
Subsidiaries are, and at all times shall remain, current in respect to payment
of all federal and state withholding taxes, social security taxes and other
payroll taxes in an aggregate amount that, if were unpaid, would have a material
adverse effect upon a Borrower or Subsidiary and, upon the Lender's request, the
Borrowers shall promptly deliver to the Lender satisfactory evidence of such
payments. The Borrowers and each of their Subsidiaries currently accrue, and
will continue to accrue, their respective payroll tax obligations and maintain
sufficient available funds (which may include available funds under the
Revolving Line of Credit), to satisfy their payroll tax liabilities.
6.21 [Intentionally Omitted]
6.22 Leased Property. The Borrowers enjoy peaceful and undisturbed
possession of all of their leased property and all such leases are valid and
subsisting and in full force and effect.
6.23 Contracts; Labor Disputes. No Borrower or Subsidiary is a
party to any collective bargaining contract or agreement with its employees. No
Borrower or Subsidiary is a party to, and there is not pending or, to their
knowledge, threatened, any labor dispute, strikes, lock-out, grievance, work
stoppage or walkouts relating to any labor contracts to which any Borrower or
Subsidiary is a party. The Borrowers and each of their Subsidiaries have, to
their knowledge, complied with, and will continue to comply with, the provisions
of the Fair Labor Standards Act of 1938, as amended, and no Borrower or
Subsidiary, or any of their officers, directors or employees, has committed any
unfair labor practice, as defined in the National Labor Relations Act of 1947,
as amended.
6.24 Full Disclosure. Neither this Agreement nor any of the Loan
Documents, nor any statements furnished to the Lender by or on behalf of any
Borrower or Subsidiary in connection with the Revolving Line of Credit, the Term
Loan, any Conversion Loan or the Loan Documents, contain any untrue statement of
a material fact or omit a material fact necessary to make the statements
contained therein or herein not misleading. To the knowledge of the Borrowers,
there is no fact (as opposed to hypothetical situations based on current facts)
that the Borrowers have not disclosed to the Lender in writing that materially
adversely affects or will materially adversely affect the assets, business,
profits, prospects or conditions (financial or otherwise) of the Borrowers and
any of their
37
Subsidiaries, considered together, or the ability of the Borrowers to perform
their obligations hereunder or under any of the Loan Documents.
ARTICLE VII
AFFIRMATIVE COVENANTS
Until payment in full of all the Obligations, each Borrower covenants
and agrees that, unless the Lender otherwise consents in writing:
7.1 Repayment of Obligations. The Borrowers will, jointly and
severally, promptly repay the Obligations when due, including without limitation
the amounts due under the Revolving Line of Credit Note, the Term Note and each
Conversion Note according to their respective terms and the terms of this
Agreement and the other Loan Documents.
7.2 Performance Under Loan Documents. The Borrowers will perform,
or cause their Subsidiaries to perform, all obligations required to be performed
by them, or any of them under the terms of this Agreement and the other Loan
Documents.
7.3 Financial and Business Information about the Borrower. The
Borrowers shall deliver to the Lender:
(a) As soon as practicable and in any event within thirty
(30) days after the end of each fiscal month, beginning with the close
of the current month, a consolidated and consolidating balance sheet of
the Borrowers and their Subsidiaries as of the close of such fiscal
month and statements of income, retained earnings and cash flows for
the fiscal month then ended and for that portion of the fiscal year
then ended, prepared on a basis consistent with that of the preceding
month or containing disclosure of the effect on the results of
operations of any change in the application of accounting principles
and practices during the month, and certified by the President or
Senior Vice President- Finance of Krispy Kreme to present fairly in all
material respects the financial condition of the Borrowers and their
Subsidiaries as of their respective dates and the results of operations
of the Borrowers and their Subsidiaries for the respective periods then
ended, subject to normal year-end adjustments;
(b) As soon as practicable and in any event within 120
days after the close of each fiscal year of the Borrowers, beginning
with the close of the current fiscal year, an audited consolidated and
consolidating balance sheet of the Borrowers and their Subsidiaries as
of the close of such fiscal year and audited statements of income,
retained earnings and cash flows for the fiscal year then ended,
audited by PriceWaterhouseCoopers or another independent certified
public
38
accountant acceptable to the Lender in accordance with Generally
Accepted Accounting Principles applied on a basis consistent with those
of the preceding year or containing disclosure of the effect on the
financial position or results of operation of any change in the
application of accounting principles and practices during the year, and
accompanied by a report thereon by such certified public accountants,
containing an opinion that is not qualified with respect to scope
limitations imposed by the Borrowers or with respect to accounting
principles followed by the Borrowers not in accordance with Generally
Accepted Accounting Principles;
(c) Concurrently with the delivery of the financial
statements described in subsection (b) above, a certificate from the
independent certified public accountants that, in making their
examination of the financial statements of the Borrowers and their
Subsidiaries, they obtained no knowledge of the occurrence or existence
of any Default or any Event of Default, or a statement specifying the
nature and period of existence of any such condition or event disclosed
by their examination, in a form satisfactory to the Lender;
(d) Concurrently with the delivery of the financial
statements described in subsection (b) above, a certificate from the
President or Senior Vice President - Finance of Krispy Kreme certifying
to the Lender, that to such officer's knowledge after such inquiry as
such officer deems appropriate, the Borrowers have kept, observed,
performed and fulfilled in all material respects each and every
covenant, obligation and agreement binding upon them that is contained
in this Agreement or the other Loan Documents, and that no Default or
Event of Default has occurred or specifying any such Default or Event
of Default, together with a financial covenant compliance worksheet, in
a form satisfactory to the Lender, reflecting the computation of the
financial covenants set forth in Sections 8.9 through 8.13 as of the
end of the period covered by such financial statements;
(e) If prepared and promptly upon completion, an annual
operating budget and cash flow projections for the current fiscal year,
indicating projected earnings and significant cash sources and uses for
the Borrowers and their Subsidiaries on a consolidated basis, in the
form presently prepared and utilized by the Borrowers, accompanied by a
certificate from the President or Senior Vice President - Finance of
Krispy Kreme to the effect that the financial projections are good
faith estimates of the financial condition and operations of the
Borrowers and their Subsidiaries for such periods; and
(f) Written notice at the end of each fiscal quarter of
the Borrowers, beginning with the close of the current fiscal quarter,
of the preparation or modification of any material strategic business,
operational or financial plan, not addressed in subsection (e) above,
and Lender shall have the right, in accordance with the provisions of
Section 7.8, to review and examine any such plan.
39
7.4 Notice of Certain Events. The Borrowers shall promptly, but in
no event later than five (5) Business Days after any Borrower obtains knowledge
thereof, give written notice to the Lender of any:
(a) Default or Event of Default; or
(b) Matter, including litigation or any investigation,
government regulation or enforcement, that has resulted in, or might
reasonably be expected to result in, a material adverse change in the
financial condition, prospects, operations or business affairs of any
Borrower or Subsidiary.
7.5 Corporate Existence and Maintenance of Properties.
(a) The Borrowers shall, and shall cause each of their
Subsidiaries who are Borrowers to, maintain and preserve their
corporate existence and all rights, privileges and franchises now
enjoyed.
(b) The Borrowers shall, and shall cause each of their
Subsidiaries to, conduct their business in an orderly, efficient and
customary manner, and keep their assets and properties in good working
order and condition (normal wear and tear excepted).
(c) The Borrowers shall, and shall cause each of their
Subsidiaries to, file or cause to be filed in a timely manner, all
reports, applications and licenses that shall be required by any
governmental authority and that, if not timely filed, might have a
material adverse effect on any Borrower or Subsidiary.
7.6 Payment of Indebtedness; Performance of Other Obligations. The
Borrowers shall, and shall cause each of their Subsidiaries to, pay all
Indebtedness when due and all other obligations in accordance with customary
trade practices, and to comply with all acts, rules, regulations and orders of
any legislative, administrative or judicial body or official applicable to any
Borrower or Subsidiary, or their assets or properties, or any part thereof or to
the operation of any Borrower's or Subsidiary's business; provided, however,
that the Borrowers or any Subsidiary may, in good faith, by appropriate
proceedings and with due diligence contest any such Indebtedness, rules,
regulations, orders and directions, and against which the Borrowers will
establish and maintain such reserves as may be required, and in such amounts, as
provided for in Section 11.15. The Borrowers shall, and shall cause each of
their Subsidiaries to, observe and remain in compliance with all laws,
ordinances, governmental rules and regulations to which they are subject and
obtain and maintain all licenses, permits, franchises or other governmental
authorizations necessary to the ownership of their properties or the conduct of
their businesses, and all covenants and conditions of all agreements and
instruments to which
40
any Borrower or Subsidiary is a party, to the extent the failure to observe, be
in compliance with and/or obtain and maintain would have a material adverse
effect on the applicable Borrower or Subsidiary.
7.7 Maintenance of Insurance. Borrowers agree to, and shall cause
each of their Subsidiaries to, maintain workers compensation insurance,
liability insurance and insurance on their properties, assets and business, now
owned or hereafter acquired, against such casualties, risks and contingencies
and in such types and amounts which are adequate to fully insure against risks
to which Borrowers and their Subsidiaries, and their properties, assets and
business, are normally exposed in the operation of their businesses, with such
insurance companies as are satisfactory to Lender, and shall deliver to the
Lender, upon its request therefor, a certificate from the President or Senior
Vice President - Finance of Krispy Kreme certifying to the Lender the existence
of all of such policies and which summarizes all of such policies. Each policy
of insurance shall contain a clause requiring the insurer to give not less than
thirty (30) days prior written notice to the Lender before any cancellation of
any of such policies for any reason whatsoever, except for nonpayment in which
case there shall be ten (10) days prior written notice. If any Borrower or
Subsidiary fails to obtain and maintain any of the policies of insurance
required to be maintained hereunder or to pay any premium in whole or in part,
then the Lender may, at the Borrowers' expense, without waiving or releasing any
obligation or default by the Borrowers hereunder, procure the same, but the
Lender shall have no obligation to do so. All sums so disbursed by the Lender,
including reasonable attorney's fees, court costs, expenses and other charges
related hereto, shall be payable, jointly and severally, by the Borrowers to the
Lender on demand and shall be additional Obligations hereunder.
7.8 Maintenance of Books and Records; Inspection. The Borrowers
shall, and shall cause each of their Subsidiaries to, maintain adequate books,
accounts and records, and prepare all financial statements required under this
Agreement in accordance with Generally Accepted Accounting Principles and in
compliance, in all material respects, with the regulations of any governmental
regulatory body having jurisdiction over any Borrower or Subsidiary. The
Borrowers shall permit employees or agents of the Lender, upon reasonable notice
and during normal business hours, to inspect the properties of any Borrower or
Subsidiary and to examine or audit the books, records and accounts of any
Borrower or Subsidiary and make copies of and memoranda of the same in
connection with the administration of the Loans and this Agreement and the other
Loan Documents and to monitor compliance herewith and therewith, and to discuss
the affairs, finances and accounts of any Borrower or Subsidiary with its
officers and employees and, upon notice to such Borrower or Subsidiary, the
independent public accountants of the Borrowers or any Subsidiary (and by this
provision the Borrowers authorize, and shall cause each of their Subsidiaries to
authorize, such accountants to discuss the finances and affairs of any such
Borrower or Subsidiary), all at such reasonable times and as often as may be
reasonably requested. Any confidential information made available to the Lender
41
shall be kept confidential by the Lender, its employees and agents; provided,
however, that the Lender may disclose any such information (i) to the extent
deemed necessary by Lender in connection with the enforcement by Lender of this
Loan Agreement or any of the other Loan Documents, which disclosure may only be
made in appropriate proceedings and not otherwise publicly, (ii) if it is
otherwise publicly available, or (iii) if Lender is required by law to make
disclosure thereof.
7.9 Compliance with ERISA. The Borrowers shall, and shall cause
each of their Subsidiaries to: (i) make timely payment of contributions required
to meet the minimum funding standards set forth in ERISA with respect to any
Employee Plan; and (ii) promptly after the filing thereof, furnish to the
Lender, upon its request, copies of any annual report required to be filed under
ERISA in connection with each Employee Plan. The Borrowers shall not, nor shall
they permit any of their Subsidiaries to, participate in any Prohibited
Transaction that could subject any Borrower or Subsidiary to any material civil
penalty under ERISA or material tax under the Internal Revenue Code. The
Borrowers shall furnish to the Lender, upon the Lender's request, such
additional information about any Employee Plan or other employee benefit plan as
may be reasonably requested by the Lender.
7.10 COBRA. The Employee Plans of each Borrower and Subsidiary
shall be operated in such a manner that no Borrower or Subsidiary will incur any
material tax liability under Section 4980B of the Internal Revenue Code or any
material liability to any qualified beneficiary as defined in Section 4980B of
the Internal Revenue Code.
7.11 Payment of Taxes. The Borrowers shall, and shall cause each of
their Subsidiaries to, pay and discharge all taxes, assessments and governmental
charges or levies imposed upon them or upon their income or profits, or upon any
properties belonging to any of them, prior to the date on which penalties attach
thereto, and all lawful claims which, if unpaid, might become a lien or charge
upon any assets or properties of any Borrower or Subsidiary; provided, however,
that the Borrowers or any Subsidiary may, in good faith and with due diligence
in appropriate proceedings contest any such tax, assessment, charge, levy or
claim, and against which the Borrowers will establish and maintain such reserves
as may be required, and in such amounts, as provided for in Section 11.15.
7.12 Compliance with Statutes, etc. The Borrowers shall, and shall
cause each of their Subsidiaries to, comply in all material respects with all
applicable statutes, regulations and orders of, and all applicable restrictions
imposed by, all governmental bodies, domestic or foreign, the noncompliance with
which would be materially adverse to the conduct of their business and the
ownership of their property (including applicable statutes, regulations, orders
and restrictions relating to environmental standards and controls and Krispy
Kreme's franchising activities) except where any Borrower contests such
compliance in good faith and with due diligence in appropriate proceedings, and
42
against which the Borrowers will establish and maintain such reserves as may be
required, and in such amounts, as provided for in Section 11.15.
7.13 Assets in Borrowers. Except as otherwise permitted herein, all
assets relating to the business of the Borrowers shall continue to be owned by
the Borrowers during the term hereof as presently owned.
7.14 Primary Deposit Relationship. Each Borrower shall, and shall
cause each of its Subsidiaries to, maintain its primary deposit relationship
with Lender. Notwithstanding the foregoing, neither Xxxxxxxx'x, HD Capital nor
HD Development shall be required to maintain its primary deposit relationship
with Lender.
ARTICLE VIII
NEGATIVE COVENANTS
Until payment in full of all the Obligations, the Borrowers covenant
and agree that, unless the Lender otherwise consents in writing, the Borrowers
will not, and the Borrowers will not permit any of their Subsidiaries to,
individually or in the aggregate:
8.1 Merger and Dissolution. (a) Wind-up, liquidate or dissolve;
provided, however, that a Subsidiary may wind-up, liquidate or dissolve into the
corporation owning and controlling such Subsidiary, (b) except with respect to a
merger, consolidation or reorganization in which a Borrower or Subsidiary is the
surviving corporation (including the merger described below), enter into any
consolidation, merger, syndicate or other combination, provided that the number
of voting shares of capital stock of such Borrower or Subsidiary, outstanding
immediately after any such consolidation, merger, syndicate or other
combination, plus the number of voting shares of capital stock issuable as a
result of such transaction by such Borrower or Subsidiary, will not exceed by
more than twenty percent (20%) the total number of voting shares of capital
stock of such Borrower or Subsidiary outstanding immediately prior to such
transaction, or (c) sell, lease or dispose of, in a single transaction or a
series of related transactions, its business or assets as a whole or such part
as in the opinion of the Lender constitutes a substantial portion of a
Borrower's or Subsidiary's business or assets.
Notwithstanding the foregoing or anything to the contrary contained in
this Agreement, the Lender acknowledges that it is currently contemplated that a
public distribution of shares of Stock by KKDI is planned (the "IPO"). Lender
further acknowledges that the Borrowers are desirous of reorganizing their
corporate structure into one involving a holding company, and KKDI was
established to eventually serve as the new holding company for the other
Borrowers. KKDI has been initially formed as a wholly-owned subsidiary of Krispy
Kreme, and it is contemplated that, simultaneously with the effectiveness of the
IPO, Krispy Kreme will merge with and into KKDI, with
43
KKDI being the surviving corporation of the merger, and the public distribution
of shares will involve the issuance of Stock by KKDI rather than Krispy Kreme.
Lender consents to the merger of KKDI and Krispy Kreme as generally described
above, and agrees that the effectiveness of such merger shall not violate the
terms and provisions of this Agreement. For all purposes of this Agreement,
reference to "Krispy Kreme" shall be deemed reference to KKDI following the
effectiveness of this merger.
8.2 Acquisitions. Acquire the business or all or a substantial
portion of the assets of any Person, whether by purchase of stock, assets or
otherwise, except for acquisitions of bakery and franchise operations.
8.3 Indebtedness. Be liable, directly or indirectly, contingently
(whether or not pursuant to any suretyship arrangement, endorsement or guaranty)
or otherwise, in respect of any obligation for money borrowed or owed, including
Capital Lease Obligations, except for: (a) the Obligations owed under this
Agreement, the other Loan Documents and other credit arrangements with the
Lender; (b) business expenses and current trade accounts payable incurred or
accrued by a Borrower or a Subsidiary in the ordinary course of its business,
including liabilities under operating leases (but not Capital Leases) of real or
personal property, and non-extraordinary expenses and payables; provided that
the same shall be paid when due in accordance with customary trade terms unless
contested by appropriate proceedings and against which the Borrowers will
establish and maintain such reserves as may be required, and in such amounts, as
provided for in Section 11.15, (c) indebtedness secured by Permitted Liens; (d)
vehicle financing; (e) the liabilities and obligations set forth on SCHEDULE 8.6
or otherwise permitted under SECTION 8.6; (f) unsecured obligations for money
borrowed after the Termination Date, except for intercompany obligations between
the Borrowers and Subsidiaries as addressed in (g) below; and (g) unsecured
obligations for money borrowed from a Subsidiary (which is not a Borrower) in
connection with which the rights of such Subsidiary with respect to such
obligations are subordinated in full to Lender and Lender's rights to receive
payment in full of all of the Obligations.
8.4 Liens and Encumbrances. Except for Permitted Liens, create,
assume or suffer to exist any deed of trust, mortgage, encumbrance or other lien
(including a lien of attachment, judgment or execution) or security interest
(including the interest of a conditional seller of goods), securing a charge or
obligation on any of its property, real or personal, whether now owned or
hereafter acquired.
8.5 Disposition of Assets. Sell, lease, transfer, convey or
otherwise dispose of any of its assets or properties, including, without
limitation, the Realty, except for (a) sales of inventory and other assets in
the ordinary course of business; (b) the trade-in or disposition of used
equipment for replacement equipment or the disposition of obsolete equipment,
regardless of its replacement; (c) sales or leases of surplus Realty and other
surplus assets from time to time, in connection with the closing and/or
relocation of
44
doughnut shops and other facilities or otherwise; (d) sales or leases of Realty
and other assets to franchisees in connection with its franchising practices in
effect from time to time; and (e) sales of Realty, signage, equipment, fixtures
and other assets in connection with the immediate leaseback of each such item so
sold from the party to whom such items were sold, but only if each such lease
shall be treated under Generally Accepted Accounting Principles as an operating
lease rather than a Capital Lease; provided, however, that the sales or other
dispositions permitted in subparts (a) through (e) above shall not be a part of
or related to (1) a plan or a series of related plans by which any Borrower is
closing, in the opinion of Lender, a substantial portion of its doughnut shops
or other facilities, or transferring such to another Person, or (2) the
cessation of business operations by such Borrower or Subsidiary. Lender reserves
the right, with respect to the sale/leaseback transactions referred to in
subpart (e) above, to review all such transactions from the standpoint of the
asset base of the Borrowers and the overall leverage of each such Borrower, and
to modify or eliminate subpart (e) above.
8.6 Restricted Loans. Make loans or advances to, or guaranty or
otherwise become liable for the obligations of, any Person except for: (i) loans
or advances to employees, directors or franchisees not exceeding $5,000,000.00
in the aggregate amount outstanding which loans are contemporaneously properly
documented and are reflected in such Borrower's or Subsidiary's records, or for
reasonable travel and business expenses incurred in the ordinary course of
business; (ii) deposits and prepaid expenses incurred in the ordinary course of
business; (iii) equipment and stock repurchase agreements not exceeding
$10,000,000.00 in the aggregate amount outstanding, without the consent of
Lender, with respect to which the Borrowers' shall provide monthly detailed
reporting as to such matters related thereto as Lender shall require; and (iv)
in addition to the repurchase agreements described in (iii), other guaranties
not exceeding $7,000,000.00 in the aggregate amount outstanding, without the
consent of Lender, with respect to which the Borrowers' shall provide monthly
detailed reporting as to such matters related thereto as Lender shall require.
Notwithstanding the foregoing, the $10,000,000.00 limitation described in
subpart (iii) above may be increased by the amount by which the $7,000,000.00
limitation described in subpart (iv) above exceeds the actual amount of all such
guaranties described in such subpart outstanding from time to time, in which
event the amount over $10,000,000.00 shall be used in determining compliance
with the $7,000,000.00 limitation in (iv). The limitations described in subparts
(iii) and (iv) above shall apply to any and all loans or other advances made by
Lender (other than pursuant to this Agreement), in addition to loans and
advances by third parties. The amounts of permitted loans, advances or
guaranties described in this Section shall not serve to reduce availability
under the Revolving Line of Credit. SCHEDULE 8.6 sets forth a detailed listing
of all such loans, advances, guaranties and other obligations as of the date
thereof.
8.7 Restrictions on Dividends. Except as set forth below, declare
or pay any dividends (other than dividends payable solely in its own Stock) upon
any of its Stock, except that annual cash dividends in the aggregate amount of
up to fifty percent (50%) of
45
the Borrowers' Net Income (after tax) for the immediate preceding fiscal year
may be distributed annually to Krispy Kreme's shareholders. Notwithstanding the
foregoing, Lender acknowledges that Krispy Kreme contemplates making a cash
capital distribution to its shareholders in connection with the IPO in an amount
up to $10,000,000.00, which cash capital distribution of up to such amount is
consented and agreed to by Lender.
8.8 Restrictions on Redemptions. Purchase, redeem, retire or
otherwise acquire, directly or indirectly, any shares of its Stock or, except as
provided in Section 8.7, make any distribution of cash, property or assets among
the holders of shares of its Stock or make any material change in its capital
structure except that Krispy Kreme may redeem, retire, purchase or otherwise
acquire any shares of its Stock pursuant to (i) the Stock Purchase Agreement
dated July 1, 1984, as amended, by and among Krispy Kreme and all of its current
shareholders, a copy of which is attached as EXHIBIT E, or (ii) any similar
agreement by and among Krispy Kreme and any permitted transferee of shares of
Stock of Krispy Kreme which was or will be entered into after the execution of
the Stock Purchase Agreement described in subpart (i), so long as such
additional agreements or arrangements serve the same principal purpose as the
Stock Purchase Agreement described above. The provisions of this Section 8.8
shall terminate and be of no further force or effect upon the effectiveness of
the IPO.
8.9 Capital Expenditures. Make any expenditure for Capital Assets
during any fiscal year if, after giving effect to such expenditures, the
aggregate amount of all such expenditures on a consolidated basis during such
fiscal year shall exceed the sum of $35,000,000.00.
8.10 Consolidated Tangible Net Worth. Permit Consolidated Tangible
Net Worth as of the last day of any fiscal month of the Borrowers during the
following periods to be less than the following amounts:
Period Amount
------ ------
As of Closing - 1/26/2001 $41,000,000
As of 1/27/2001 and at all $41,000,000 plus (i) 75% of the
times thereafter during the net IPO Proceeds, and (ii)
term of this Agreement 50% of the Borrower's Net
Income (after tax) for each fiscal
year during the testing period.
8.11 Cash Flow. Permit the ratio of Operating Cash Flow to Debt
Service Requirements at the end of any fiscal year to be less than 1.5 to 1.0.
46
8.12 Current Ratio. Permit the ratio of Current Assets to Current
Liabilities as of the last day of any fiscal month to be less than 1.5 to 1.0.
8.13 Total Liabilities to Net Worth. Permit the ratio of Total
Liabilities to Consolidated Tangible Net Worth as of the last day of any fiscal
month (i) as of and after January 29, 2000 to be greater than 1.5 to 1.0; and
(ii) as of and after January 27, 2001 to be greater than 0.75 to 1.0.
8.14 New Business. Except for the development and sale of new products
and the sale and leasing of doughnut shops and equipment to franchisees and
others, engage in any business other than the business in which the Borrowers
are currently engaged or a business reasonably related thereto, or change its
name or do business under any other name other than their corporate names.
8.15 Subsidiaries or Partnerships. Except as set forth below or
otherwise described in Section 4.4, become a partner or joint venturer in any
partnership or joint venture or create or acquire any Subsidiary or transfer any
assets to a Subsidiary which does not become a party to this Agreement and the
other Loan Documents as a joint and several co-obligor with the Borrowers. The
foregoing restriction shall not apply to any partnership, joint venture or other
similar arrangement pursuant to which new doughnut shops are developed or
alliances are made with either existing or future franchisees (which entities
shall not be considered Subsidiaries for purposes of this Agreement if the
Borrowers, in the aggregate, own less than 50% of the issued and outstanding
interests of such entity). The Borrowers shall promptly notify Lender of the
formation or acquisition of any Subsidiary. At the time any new Subsidiary
becomes a party to this Agreement and the other Loan Documents, the Subsidiary's
liability hereunder shall be primary and unconditional (as described in Section
4.11) as to all Obligations, whether such Obligations were incurred prior to the
formation or acquisition of such Subsidiary and it becoming a party to this
Agreement and the other Loan Documents or thereafter, as if such Subsidiary was
an original party to this Agreement and the other Loan Documents. All
representations and warranties made in this Agreement and in any other Loan
Document shall be deemed to refer to any such new Subsidiary as if it were an
original party hereto and to the other Loan Documents.
8.16 Material Adverse Transactions. Enter into any transaction that
materially and adversely affects or would or could materially adversely affect
the ability of any Borrower to repay any Indebtedness or the Obligations.
8.17 Hazardous Wastes. Permit any Hazardous Substances, the removal of
which is required or the maintenance of which is restricted, prohibited or
penalized by any federal, state or local agency, authority or governmental unit,
to be brought on to or located on the Realty or any other real property owned or
leased by any Borrower or
47
Subsidiary, except in full compliance with all applicable laws; and if any such
material is brought or found located thereon in violation of any applicable law,
it shall be immediately removed, with proper disposal, and all required
environmental cleanup procedures shall be diligently undertaken pursuant to all
such laws, ordinances and regulations except where contested in good faith and
with due diligence in appropriate proceedings, and against which the Borrowers
will establish and maintain such reserves as may be required, and in such
amounts, as provided for in Section 11.15; provided,
48
however, nothing in the Loan Documents shall require any Borrower to undertake
remediation activities with respect thereto unless any Borrower is required by
applicable law to do so.
8.18 Change in Management. Allow any material change to occur in the
composition of the executive management personnel of Krispy Kreme as set forth
on SCHEDULE 8.18. For purposes of this provision, a material change shall be
deemed to occur if the employment relationship of any two of the individuals
identified on the SCHEDULE 8.18 with Krispy Kreme is terminated for any reason.
8.19 Share Ownership of Subsidiaries. Except as otherwise permitted and
as described in Section 8.1., allow the issued and outstanding Stock of any
Borrower (other than Krispy Kreme) to be owned by any Person other than a
Borrower.
ARTICLE IX
EVENTS OF DEFAULT
9.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default":
(a) Any Borrower fails to pay when due any principal of, interest
on or any other costs or fees relating to the Obligations as and when
the same become due and payable and the same is not cured within ten
(10) Business Days after written notice from the Lender of such
failure;
(b) Any Borrower or Subsidiary fails or neglects to observe,
perform or comply with any term, provision, condition or covenant
contained in Section 7.4 (but only if an intent to deceive exists) or
Article VIII (with the exception of Section 8.4) of this Agreement upon
written notice from the Lender;
(c) Any Borrower or Subsidiary fails or neglects to observe,
perform or comply, in any material respect, with any other term,
provision, condition or covenant contained in this Agreement or the
Loan Documents, and the same is not cured to the Lender's satisfaction
within thirty (30) days after written notice from the Lender;
(d) If any representation or warranty made in writing by or on
behalf of the Borrowers in this Agreement, the other Loan Documents or
any certificate, financial statement or instrument or document
delivered in connection therewith, or in any other agreement now
existing or hereafter executed between any
49
Borrower and the Lender, or in connection with the transactions
contemplated hereby or thereby, shall prove to have been false or
incorrect in any material respect;
(e) The occurrence of any default or event of default on the part
of any Borrower or Subsidiary under the terms of any agreement or
contract that is material to the affairs, financial or otherwise, of
such Borrower or Subsidiary and such agreement or contract is
terminated as a result of such default or event of default;
(f) The occurrence of a default under any of the Loan Documents or
in any other material agreement between Lender and any Borrower or
Subsidiary, now existing or hereafter executed;
(g) The filing by any Borrower or Subsidiary of any voluntary
petition seeking liquidation, reorganization, arrangement, readjustment
of debts or for any other relief under the Bankruptcy Code or under any
other act or law pertaining to insolvency or debtor relief, whether
state, federal or foreign, now or hereafter existing;
(h) The filing against any Borrower or Subsidiary of any
involuntary petition seeking liquidation, reorganization, arrangement,
readjustment of debts or for any other relief under the Bankruptcy Code
or under any other act or law pertaining to insolvency or debtor
relief, whether state, federal or foreign, now or hereafter existing,
which petition is not dismissed within sixty (60) days of the date of
filing;
(i) Any Borrower or Subsidiary is enjoined, restrained or in any
way prevented by court order from conducting all or any material part
of its business affairs;
(j) A notice of lien, levy or assessment is filed of record against
any material portion of the assets of any Borrower or Subsidiary by the
United States, or any department, agency or instrumentality thereof, or
by any state, county, municipal or other governmental agency, and such
lien, levy or assessment is not dismissed, released or discharged
within seventy-five (75) days, or if any taxes (in the amount of
$100,000 or greater) or debts owing at any time or times hereafter by
any one of them becomes a lien or encumbrance upon any asset of any
Borrower or Subsidiary and the same is not dismissed, released or
discharged within thirty (30) days after the same becomes a lien or
encumbrance or, in the case of ad valorem taxes, prior to the last day
when payment may be made without penalty, except with respect to liens,
levies, assessments, taxes or debts being
50
contested in good faith and with due diligence, and with respect
thereto the Borrowers have established such reserves, if any, as may be
required by this Agreement;
(k) The entry of a judgment or the issuance of a warrant of
attachment, execution or similar process against any Borrower or
Subsidiary or involving or respecting any material asset or material
portion of the assets of any Borrower or Subsidiary, which shall not be
dismissed, discharged or bonded within forty-five (45) days;
(l) A custodian, trustee, receiver or assignee for the benefit of
creditors is appointed or takes possession of any material asset or
material portion of the assets of any Borrower or Subsidiary;
(m) The transfer, pledge or other disposition of any of the Stock
of any Subsidiary by Krispy Kreme or any Subsidiary which is the owner
thereof after the Closing;
(n) Any Borrower or Subsidiary shall be required under applicable
federal, state or local laws, rules, regulations or orders to clean-up
or cause to be cleaned up or bear the cost of cleaning up, any
Hazardous Substance, the cost of which may reasonably be expected to
exceed five percent (5%) of Consolidated Tangible Net Worth; or
(o) Except as set forth below, the occurrence of any "change of
control" of Krispy Kreme. For purposes of this provision, the term
"change of control" shall mean the occurrence of a change in the power
to direct the voting rights of greater than twenty- five percent (25%)
of any class of outstanding voting shares of Stock of Krispy Kreme,
which includes a sale, exchange, transfer or other disposition of the
Stock of Krispy Kreme. Excluded from the foregoing definition shall be
(i) inter vivos and testamentary transfers to lineal decedents of
existing shareholders, and (ii) any change of control which results
solely by virtue of a public distribution of Stock by Krispy Kreme in
compliance with the Securities Act of 1933, as amended, and all
applicable state "blue sky" laws, the primary purpose of which is to
increase Krispy Kreme's working capital and to provide liquidity to its
shareholders, provided that the Borrowers remain in compliance with all
other terms and conditions of this Agreement following any such change
of control.
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ARTICLE X
RIGHTS AND REMEDIES AFTER EVENT OF DEFAULT
10.1 Rights and Remedies. Following the occurrence of any Event of
Default which has not been expressly waived in writing by Lender:
(a) Termination of Commitment. The Lender may terminate its
obligation to make continued credit available to the Borrowers
hereunder; and upon the occurrence of an Event of Default pursuant to
Sections 9.1(g), (h) or (l), the Lender's obligation to make Loans or
advances hereunder shall automatically be deemed terminated.
(b) Acceleration of Indebtedness. The Lender may declare all or
any part of the Obligations immediately due and payable, whereupon such
Obligations shall become immediately due and payable without
presentment, demand, protest, notice or legal process of any kind, all
of which are hereby expressly waived by the Borrowers; provided,
however, that all Obligations shall automatically become due and
payable upon the occurrence of an Event of Default pursuant to Sections
9.1(g), (h) or (l).
(c) Rights of Collection. The Lender shall have the right to
exercise all of its rights and remedies under this Agreement, the other
Loan Documents and applicable law, in order to satisfy the Obligations.
(d) Right of Set-Off. The Lender may, and is hereby authorized by
the Borrowers, and the Borrowers shall cause each of their Subsidiaries
to authorize the Lender to, at any time and from time to time, to the
fullest extent permitted by applicable laws, without advance notice to
any Borrower or Subsidiary (any such notice being expressly waived by
each Borrower and Subsidiary), set-off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time
held in other than a fiduciary account and any other indebtedness at
any time owing by Lender to or for the credit or the account of any
Borrower or Subsidiary against any or all of the Obligations of any
Borrower or Subsidiary now or hereafter existing, whether or not such
Obligations have matured. The Lender agrees promptly to notify the
applicable Borrower or Subsidiary after the occurrence of any such
setoff, provided that the failure to give such notice shall not affect
the validity of such setoff.
10.2 Rights and Remedies Cumulative; Non-Waiver; etc. The enumeration
of the Lender's rights and remedies set forth in this Agreement is not intended
to be exhaustive and the exercise by the Lender of any right or remedy shall not
preclude the exercise of any other rights or remedies, all of which shall be
cumulative, and shall be in addition to any other right or remedy given
hereunder, under the Loan Documents or
52
under any other agreement between any Borrower and the Lender, which may now or
hereafter exist, or at law or in equity or by suit or otherwise. No delay or
failure to take action on the part of the Lender in exercising any right, power
or privilege shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or privilege preclude any other or further
exercise thereof or the exercise of any other right, power or privilege or shall
be construed to be a waiver of any Event of Default. No course of dealing
between any Borrower and the Lender or their agents or employees shall be
effective to change, modify or discharge any provision of this Agreement or to
constitute a waiver of any Event of Default.
ARTICLE XI
MISCELLANEOUS
11.1 Survival of Agreements. All agreements, representations and
warranties contained herein or made in writing by or on behalf of the parties in
connection with the transactions contemplated hereby shall survive the execution
and delivery of this Agreement and the other Loan Documents. No termination or
cancellation (regardless of cause or procedure) of this Agreement shall in any
way affect or impair the powers, obligations, duties, rights and liabilities of
the parties hereto in any way with respect to (a) any transaction or event
occurring prior to such termination or cancellation, or (b) the Borrowers' (on
their own behalf and on behalf of their Subsidiaries) undertakings, agreements,
covenants, warranties and representations contained in this Agreement and the
other Loan Documents and all such undertakings, agreements, covenants,
warranties and representations shall survive such termination or cancellation
until payment in full of the Obligations. Each Borrower further agrees that to
the extent any Borrower makes a payment or payments to the Lender, which payment
or payments or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a trustee,
receiver or any other party under any bankruptcy, insolvency or similar state or
federal law, common law or equitable cause, then, to the extent of such payment
or repayment, the Obligation or part thereof intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
received by the Lender. Notwithstanding any other provision of this Agreement to
the contrary, in the event any Letter of Credit Obligation or Credit Card
Obligation is outstanding as of the Termination Date, and such Letter of Credit
Obligation or Credit Card Obligation shall remain outstanding, then with respect
to each such outstanding and continuing Letter of Credit Obligation or Credit
Card Obligation, this Agreement shall remain in full force and effect as to the
Borrowers until all such Letter of Credit Obligations, Credit Card Obligations
and other Obligations of the Borrowers to Lender have been paid in full, and in
the event that there are no other Obligations of the Borrowers to Lender
remaining outstanding as of such time except for the Letter of Credit
Obligations or Credit Card Obligations, Lender shall have no further obligations
hereunder. All Letter of Credit
53
Obligations and Credit Card Obligations shall be subject to the terms and
conditions of this Agreement, in addition to the terms and conditions of any
other agreement, document or instrument entered into between Lender and any such
Borrower with respect thereto.
11.2 Governing Law; Jurisdiction. THIS AGREEMENT HAS BEEN EXECUTED,
DELIVERED AND ACCEPTED AT, AND SHALL BE DEEMED TO HAVE BEEN MADE IN, NORTH
CAROLINA AND SHALL BE INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE PARTIES
HERETO DETERMINED, IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS
OF LAW PROVISIONS) OF THE STATE OF NORTH CAROLINA. AS PART OF THE CONSIDERATION
FOR NEW VALUE THIS DAY RECEIVED, THE BORROWERS CONSENT TO THE JURISDICTION OF
ANY STATE COURT WITHIN FORSYTH
54
COUNTY, NORTH CAROLINA OR ANY FEDERAL COURT LOCATED WITHIN THE MIDDLE DISTRICT
OF THE STATE OF NORTH CAROLINA, FOR ANY PROCEEDING TO WHICH THE LENDER IS A
PARTY, AND CONSENTS THAT ALL SERVICE OF PROCESS BE MADE BY REGISTERED OR
CERTIFIED MAIL DIRECTED TO THE BORROWERS OR ANY OF THEM AT THE ADDRESS STATED IN
SECTION 11.3 BELOW AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE
ACTUAL RECEIPT THEREOF. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF THE
LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE
RIGHT OF THE LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST ANY BORROWER OR
ANY BORROWER'S PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION THAT HAS
JURISDICTION OVER ANY BORROWER OR ITS PROPERTY OR THE RIGHT OF ANY SUCH BORROWER
TO CONTEST SUCH JURISDICTION.
11.3 Notice. All notices and other communications hereunder shall be in
writing and shall be deemed to have been validly served, given or delivered
three (3) Business Days after deposit in the United States mail, certified mail,
return receipt requested, with postage prepaid, and addressed to the party to be
notified as follows:
To Any Borrower: 000 Xxxxxxxxx Xx., Xxxxx 000
Xxxxxxx-Xxxxx, XX 00000
Attn: President
With Copies To: Krispy Kreme Doughnut Corporation (if Krispy
Kreme is not the Borrower to whom the
original notice was intended)
000 Xxxxxxxxx Xx., Xxxxx 000
Xxxxxxx-Xxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxxxx,
Xx. Vice-President - Finance
To Lender: Branch Banking and Trust Company
000 Xxxxx Xxxxxxxxx Xxxx
Xxxxxxx-Xxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx
or to such other address as each party may designate for itself by like notice,
or shall be deemed to have been validly served, given or delivered on the date
of delivery to such party at such address if notice is given or delivered by
overnight delivery service or by hand delivery.
55
11.4 Indemnification of the Lender. From and at all times after the
date of this Agreement, and in addition to all of the Lender's other rights and
remedies against the Borrowers or any Subsidiary, the Borrowers, jointly and
severally, agree to indemnify and hold harmless the Lender and each director,
officer, employee, agent and Affiliate of the Lender against any and all claims,
losses, damages, liabilities, costs, and expenses of any kind or nature
whatsoever (including without limitation attorneys' fees, costs and expenses)
incurred by or asserted against the Lender or any such director, officer,
employee, agent or Affiliate of the Lender, from and after the date hereof, as a
result of or arising from or any way relating to (a) any breach or violation of
this Agreement or any other Loan Document by any Borrower or Subsidiary; (b) any
breach of any of the representations, warranties or covenants made in this
Agreement or any other Loan Document by any Borrower; (c) any breach of any of
the representations, warranties or covenants made in this Agreement or any other
Loan Document by any Borrower in connection with the closing of any Conversion
Loan or the making of any advance, other than any advances to be made at Closing
under the Revolving Line of Credit, subject to the standards set forth in
Sections 5.4(a) and 5.5(a); or (d) any inaccuracy or misrepresentation in any of
the Schedules attached to this Agreement or in any other Loan Document delivered
in connection with this Agreement (whether delivered at Closing or thereafter).
11.5 Fees and Expenses. Whether or not the transactions contemplated by
this Agreement shall be consummated, the Borrowers shall, jointly and severally,
be obligated:
(a) Fees and Expenses. As provided below, to pay or reimburse the
Lender upon demand for all expenses (including, without limitation,
attorneys' fees) incurred or paid by the Lender (except salaries of the
Lender's regularly employed personnel) in connection with: (i) the
preparation, execution, delivery, modification or amendment of this
Agreement or the other Loan Documents; (ii) following an Event of
Default, charges for appraisers, examiners, environmental consultants,
auditors or similar Persons whom the Lender may engage with respect to
rendering opinions concerning the financial condition of the Borrowers
and their Subsidiaries or the condition of any of their assets; (iii)
any attempt to enforce, or the enforcement of, any rights of the Lender
against any Borrower or any other Person that may be obligated to the
Lender by virtue of this Agreement or the other Loan Documents; and (v)
any refinancing or restructuring of the credit arrangements provided
under this Loan Agreement in the nature of a "work-out" or in any
insolvency or bankruptcy proceeding. Lender will submit invoices to
Borrowers for all such fees and expenses which will be mutually agreed
upon and paid by the Borrowers.
56
(b) Brokerage Fees. To hold the Lender harmless from and against
any and all finder's or brokerage fees and commissions that may be
payable in connection with the transactions contemplated by this
Agreement other than any fees or commissions of finders or brokers
engaged by the Lender.
11.6 Waivers by the Borrower. Except as otherwise provided for in this
Agreement or the other Loan Documents, each Borrower hereby waives (a)
presentment, demand and protest and notice of presentment, protest, default,
non-payment, maturity, intent to accelerate and all other notices; and (b) the
benefit of all valuation, appraisement and exemption laws.
11.7 Assignment and Sale. No Borrower may sell, assign or transfer this
Agreement, or the other Loan Documents or any portion thereof, including without
limitation, any Borrower's rights, title, interests, remedies, powers and duties
hereunder or thereunder.
11.8 Amendment. This Agreement and the other Loan Documents may only be
amended, changed, discharged or terminated by an instrument in writing signed by
the Lender and each of the Borrowers. Any provision hereof or thereof may be
waived by an instrument signed by the party to be charged.
11.9 Severability. To the extent any provision of this Agreement is
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
11.10 Entire Agreement. This Agreement and the other documents,
certificates and instruments referred to herein constitute the entire
understanding and agreement between the parties and supersede and rescind any
prior agreements relating to the subject matter hereof.
11.11 Binding Effect. All of the terms of this Agreement and the other
Loan Documents, as the same may from time to time be amended, shall be binding
upon, inure to the benefit of and be enforceable by the successors and assigns
of the Lender and the successors and permitted assigns of the Borrowers.
11.12 Captions. The captions to the various sections and subsections of
this Agreement have been inserted for convenience only and shall not limit or
affect any of the terms hereof.
57
11.13 Conflicts of Terms. The provisions of the Exhibits and Schedules
hereto and the other Loan Documents are incorporated in this Agreement by this
reference thereto. Except as otherwise provided in this Agreement and except as
otherwise provided in the other Loan Documents, if any provision contained in
this Agreement is in conflict with, or inconsistent with, any provision of the
other Loan Documents, the provisions contained in this Agreement shall control.
11.14 Injunctive Relief. The Borrowers recognize that in the event any
of them fail to perform, observe or discharge any of their obligations or
liabilities under this Agreement, any remedy at law may prove to be inadequate
relief to the Lender. Each Borrower therefore agrees that Lender, if the Lender
so requests, shall be entitled to temporary and permanent injunctive relief in
any case where a remedy at law may prove to be inadequate relief.
58
11.15 Reserves. Whenever this Agreement requires the establishment and
maintenance of reserves by a Borrower or Subsidiary, such reserves shall be
reasonable and adequate under the circumstances and may, at the Borrower's
option, include available funds under the Revolving Line of Credit.
11.16 Third Parties Not Benefited. All conditions to the obligations of
Lender, including the obligation to make advances, are imposed solely and
exclusively for the benefit of the Borrowers and no other person or entity shall
have standing to require satisfaction of such conditions in accordance with
their terms or be entitled to assume that Lender will refuse to make advances in
the absence of strict compliance with any or all thereof, and no other person or
entity shall, under any circumstances, be deemed to be a beneficiary of such
conditions, any and all of which may be freely waived in whole or in part by
Lender at any time if in its sole discretion it deems it desirable to do so.
11.17 No Agency. Lender is not the agent or representative of any
Borrower or Subsidiary, and no Borrower or Subsidiary is the agent or
representative of Lender, and nothing in this Agreement shall be construed to
make Lender liable to anyone with whom any Borrower or Subsidiary deals.
11.18 No Partnership or Joint Venture. Nothing herein nor the acts of
the parties hereto shall be construed to create a partnership or joint venture
between any Borrower or Subsidiary and Lender.
59
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed in their corporate names by their duly authorized corporate officers as
of the date first above written.
LENDER:
BRANCH BANKING AND TRUST COMPANY
By:
----------------------------------------------
Xxxxxx X. Xxxxxxx, Vice President
BORROWERS:
KRISPY KREME DOUGHNUT CORPORATION
By:
----------------------------------------------
Name: J. Xxxx Xxxxxxxxx
Title: Executive Vice President - Corporate
Development, Finance and Administration
KRISPY KREME DOUGHNUTS, INC.
By:
----------------------------------------------
Name: J. Xxxx Xxxxxxxxx
Title: Executive Vice President - Corporate
Development, Finance and Administration
XXXXXXXX'X XXXX-X-XXXX BAKERY, INCORPORATED
By:
----------------------------------------------
Name: Xxxxxx X. XxXxxx
Title: Vice President
KRISPY KREME DISTRIBUTING COMPANY, INCORPORATED
By:
----------------------------------------------
Name: Xxxxxx X. XxXxxx
Title: Vice President
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KRISPY KREME SUPPORT OPERATIONS COMPANY
By:
----------------------------------------------
Name: Xxxx X. Xxxxx
Title: President
HD CAPITAL CORPORATION
By:
----------------------------------------------
Name: Xxxx X. Xxxxx
Title: President
HDN DEVELOPMENT CORPORATION
By:
----------------------------------------------
Name: Xxxx X. Xxxxx
Title: President
