EXHIBIT 10.3
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CREDIT AND SECURITY AGREEMENT
BY AND BETWEEN
▇▇▇▇▇ BROTHERS, INC., ▇▇▇▇▇ BROTHERS ARIZONA, INC.,
▇▇▇▇▇ BROTHERS DISTRIBUTING, INC.
AND
TEJAS PB DISTRIBUTING, INC.
AND
NORWEST BUSINESS CREDIT, INC.
Dated as of: October 23, 1998
NORWEST
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TABLE OF CONTENTS
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PAGE
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ARTICLE 1. Definitions..................................................................................1
Section 1.1 Definitions...........................................................................1
Section 1.2 Cross References.....................................................................11
ARTICLE 2. Amount and Terms of the Credit Facility.....................................................11
Section 2.1 Revolving Advances and Term Loan Advance.............................................11
Section 2.2 Monthly Payments; Minimum Interest Charge; Default Interest;
Participations; Usury................................................................12
Section 2.3 Fees.................................................................................14
Section 2.4 Computation of Interest and Fees; When Interest Due and Payable......................15
Section 2.5 Capital Adequacy.....................................................................15
Section 2.6 Voluntary Prepayment; Termination of the Credit Facility by the
Borrower.............................................................................16
Section 2.7 Termination Fee; Waiver of Termination Fee...........................................16
Section 2.8 Mandatory Prepayment.................................................................17
Section 2.9 Payment..............................................................................17
Section 2.10 Payment on Non-Banking Days..........................................................17
Section 2.11 Use of Proceeds......................................................................17
Section 2.12 Liability Records....................................................................18
ARTICLE 3. Security Interest; Occupancy; Setoff........................................................18
Section 3.1 Grant of Security Interest...........................................................18
Section 3.2 Notification of Account Debtors and Other Obligors...................................18
Section 3.3 Assignment of Insurance..............................................................18
Section 3.4 Occupancy............................................................................19
Section 3.5 License..............................................................................19
Section 3.6 Financing Statement..................................................................19
Section 3.7 Setoff...............................................................................20
Section 3.8 Assignment of Asset Purchase Agreement...............................................20
ARTICLE 4. Conditions of Lending.......................................................................21
Section 4.1 Conditions Precedent to the Initial Revolving Advance................................21
Section 4.2 Conditions Precedent to Term Loan Advance............................................23
Section 4.2 Conditions Precedent to All Advances.................................................25
ARTICLE 5. Representations and Warranties..............................................................25
Section 5.1 Corporate Existence and Power; Name; Chief Executive Office;
Inventory and Equipment Locations; Tax Identification Number.........................25
Section 5.2 Authorization of Borrowing; No Conflict as to Law or Agreements......................25
Section 5.3 Legal Agreements.....................................................................26
Section 5.4 Subsidiaries.........................................................................26
Section 5.5 Financial Condition; No Adverse Change...............................................26
Section 5.6 Litigation...........................................................................26
Section 5.7 Regulation U.........................................................................27
Section 5.8 Taxes................................................................................27
Section 5.9 Titles and Liens.....................................................................27
Section 5.10 Plans................................................................................27
Section 5.11 Default..............................................................................28
Section 5.12 Environmental Matters................................................................28
Section 5.13 Submissions to Lender................................................................29
Section 5.14 Financing Statements.................................................................29
Section 5.15 Rights to Payment....................................................................29
Section 5.16 Financial Solvency...................................................................30
Section 5.17 Year 2000 Compliance.................................................................30
ARTICLE 6. Borrower's Affirmative Covenants............................................................31
Section 6.1 Reporting Requirements...............................................................31
Section 6.2 Books and Records; Inspection and Examination........................................33
Section 6.3 Account Verification.................................................................34
Section 6.4 Compliance with Laws.................................................................34
Section 6.5 Payment of Taxes and Other Claims....................................................34
Section 6.6 Maintenance of Properties............................................................35
Section 6.7 Insurance............................................................................35
Section 6.8 Preservation of Existence............................................................35
Section 6.9 Delivery of Instruments, etc.........................................................35
Section 6.10 Collateral Account...................................................................35
Section 6.11 INTENTIONALLY DELETED................................................................36
Section 6.12 Performance by the Lender............................................................36
Section 6.13 Year 2000 Compliance.................................................................37
Section 6.14 Minimum Debt Service Coverage Ratio..................................................37
Section 6.15 Minimum Net Income or Maximum Net Loss From Ordinary Operations......................38
Section 6.16 Minimum Book Net Worth Increase......................................................38
ARTICLE 7. Negative Covenants..........................................................................39
Section 7.1 Liens................................................................................39
Section 7.2 Indebtedness.........................................................................40
Section 7.3 Guaranties...........................................................................40
Section 7.4 Investments and Subsidiaries.........................................................41
Section 7.5 Dividends and Voluntary Redemption Payments..........................................41
Section 7.6 Sale or Transfer of Assets; Suspension of Business Operations........................41
Section 7.7 Consolidation and Merger; Asset Acquisitions.........................................42
Section 7.8 Sale and Leaseback...................................................................42
Section 7.9 Restrictions on Nature of Business...................................................42
Section 7.10 Capital Expenditures.................................................................42
Section 7.11 Accounting...........................................................................42
Section 7.12 Discounts, etc.......................................................................42
Section 7.13 Defined Benefit Pension Plans........................................................42
Section 7.14 Other Defaults.......................................................................43
Section 7.15 Place of Business; Name..............................................................43
Section 7.16 Organizational Documents; C Corporation Status.......................................43
Section 7.17 Salaries.............................................................................43
Table of Contents -ii-
ARTICLE 8. Events of Default, Rights and Remedies......................................................43
Section 8.1 Events of Default....................................................................43
Section 8.2 Rights and Remedies..................................................................45
Section 8.3 Certain Notices......................................................................46
ARTICLE 9. Miscellaneous...............................................................................46
Section 9.1 No Waiver; Cumulative Remedies.......................................................46
Section 9.2 Amendments, Etc......................................................................47
Section 9.3 Addresses for Notices, Etc...........................................................47
Section 9.4 INTENTIONALLY DELETED................................................................47
Section 9.5 Further Documents....................................................................47
Section 9.6 Collateral...........................................................................48
Section 9.7 Costs and Expenses...................................................................48
Section 9.8 Indemnity............................................................................48
Section 9.9 Participants.........................................................................49
Section 9.10 Execution in Counterparts............................................................49
Section 9.11 Binding Effect; Assignment; Complete Agreement; Exchanging Information...............49
Section 9.12 Confidential Information.............................................................50
Section 9.13 Severability of Provisions...........................................................50
Section 9.14 Headings.............................................................................50
Section 9.15 Governing Law; Jurisdiction, Venue; Waiver of Jury Trial.............................50
ARTICLE 10. Joint Borrower Provisions...................................................................51
Section 10.1 Reliance on Acts of any Borrower.....................................................51
Section 10.3 Single Obligation....................................................................51
Section 10.3 Knowing Waiver.......................................................................54
Section 10.4 Information..........................................................................54
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CREDIT AND SECURITY AGREEMENT
Dated as of October 23, 1998
▇▇▇▇▇ BROTHERS, INC., a Delaware corporation, ▇▇▇▇▇ BROTHERS ARIZONA,
INC., an Arizona corporation, ▇▇▇▇▇ BROTHERS DISTRIBUTING, INC., an Arizona
corporation, and TEJAS PB DISTRIBUTING, INC., an Arizona corporation
(individually and collectively, the "Borrower"), and NORWEST BUSINESS CREDIT,
INC., a Minnesota corporation (the "Lender"), hereby agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1 DEFINITIONS. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular; and
(b) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP.
"Accounts" means all of the Borrower's accounts, as such term
is defined in the UCC, whether now existing or hereafter arising, and all
proceeds thereof, including, without limitation, the aggregate unpaid
obligations of customers and other account debtors to the Borrower arising out
of the sale or lease of goods or rendition of services by the Borrower on an
open account or deferred payment basis.
"Advance" means a Revolving Advance and/or the Term Loan
Advance.
"Affiliate" or "Affiliates" mean with respect to any Person,
any other Person controlled by, controlling or under common control with such
Person. With respect to each Borrower, individually, "Affiliate" or "Affiliates"
means each other Borrower and ▇▇ ▇▇▇▇▇▇ Properties, Inc., an Arizona
corporation, and any other Person controlled by, controlling or under common
control with the Borrower, including (without limitation) any Subsidiary of the
Borrower. For purposes of this definition, "control," when used with respect to
any specified Person, means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.
"Agreement" means this Credit and Security Agreement, as
amended, modified, supplemented, replaced or restated from time to time.
"Asset Purchase Agreement" means the Agreement for Purchase
and Sale of Assets dated October 29, 1998 between Tejas Snacks, L.P., ▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ Brothers, Inc., as amended, modified, supplemented,
restated or replaced from time to time with the prior written consent of Lender.
"Banking Day" means a day other than a Saturday, Sunday or
other day on which banks are generally not open for business in Phoenix, Arizona
or Minneapolis, Minnesota.
"Base Rate" means the rate of interest publicly announced from
time to time by Norwest Bank Minnesota as its "base rate" or, if such bank
ceases to announce a rate so designated, any similar successor rate designated
by the Lender.
"Book Net Worth" means the aggregate of the common and
preferred stockholders' equity in the Borrower and its Subsidiaries, determined
in accordance with GAAP, without giving effect to the conversion of any
Debentures to capital stock.
"Borrowing Base" means, at any time the lesser of:
(a) the Maximum Line; or
(b) subject to change from time to time in the
Lender's sole discretion,
(i) 85% of Eligible Accounts, plus
(ii) the lesser of (A) 60% of Eligible
Inventory or (B) $350,000, minus
(iii) the aggregate amount, without
duplication, of all claims under
PACA or any other federal, state or
local law, statute or ordinance
granting a lien or security interest
on perishable agricultural
commodities.
"Capital Expenditures" for a period means any expenditure of
money for the lease, purchase or other acquisition of any capital asset, or for
the lease of any other asset whether payable currently or in the future.
"Change of Control" means the occurrence of any of the
following: (i) the sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Borrower taken as
a whole as to any Person (as such term is used in Section 13(d)(3) of the
Exchange Act), or group of related Persons, together with any affiliates
thereof, (ii) the adoption by the Borrower of a plan relating to the liquidation
or dissolution of the Borrower taken as a whole, (iii) the first day on which a
majority of the members of the Board of Directors of any Borrower are not
Continuing Directors, or (iv) the consummation of any transaction (including,
without limitation, any merger or consolidation) the result of which is that any
Person or group of related Persons, together with any affiliates thereof becomes
the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5
under the Exchange Act), directly or indirectly, of more than 50% of the common
capital stock of ▇▇▇▇▇ Brothers, Inc. (measured by voting power rather than
number of shares) .
"Collateral" means all of the Borrower's Equipment, General
Intangibles, Inventory, Receivables, Investment Property, all sums on deposit in
any Collateral Account, and any items in any Lockbox; together with (i) all
substitutions and replacements for and products of any of the foregoing; (ii)
proceeds of any and all of the foregoing; (iii) in the case of all tangible
goods, all accessions; (iv) all accessories, attachments, parts, equipment and
repairs now or hereafter attached or affixed to or used in connection with any
tangible goods; and (v) all warehouse receipts, bills of lading and other
documents of title now or hereafter covering such goods.
"Collateral Account" has the meaning given in the Collateral
Account Agreement.
"Collateral Account Agreement" means the Collateral Account
Agreement of even date herewith by and among the Borrower, Norwest Bank Arizona
and the Lender.
"Commitment" means the Lender's commitment to make Advances to
or for the Borrower's account pursuant to Article 2.
"Continuing Director" means, as of any date of determination,
any member of the Board of Directors of such Borrower who (i) was a member of
such Board of Directors on the date twelve (12) months prior to the date of
determination or (ii) was nominated for election or elected to such Board of
Directors with the approval of a majority of the Continuing Directors who were
members of such Board at the time of such nomination or election.
"Conversion Date" means each date on which any holder of the
Debentures notifies Borrower in writing of its intent to exercise all or any
portion of the conversion rights granted under the Debentures.
"Credit Facility" or "Credit Facilities" means, individually,
the Term Loan or the Revolving Advances, and, collectively, the Term Loan and
the Revolving Advances.
"Current Maturities of Long Term Debt" as of a given date
means the amount of the Borrower's and its Subsidiaries' long-term debt and
capitalized leases which became due during the period ending on the designated
date.
"Debenture Holders" means ▇▇▇▇▇ Fargo Small Business
Investment Co., Inc., formerly known as First Interstate Equity Corporation, and
Renaissance Capital Growth & Income Fund III, Inc., a Texas corporation, and
their successors and permitted assigns.
"Debentures" means that certain 9.00% Convertible Debenture
No. 1 dated May 31, 1995 issued by ▇▇▇▇▇ Brothers, Inc. and its Subsidiaries in
favor of Renaissance Capital Growth & Income Fund III, Inc., that certain 9.00%
Convertible Debenture No. 2 dated May 31, 1995 issued by ▇▇▇▇▇ Brothers, Inc.
and its Subsidiaries in favor of First Interstate Equity Corporation, now known
as ▇▇▇▇▇ Fargo Small Business Investment Co., Inc., and that certain Convertible
Debenture Loan Agreement dated May 31, 1995 between ▇▇▇▇▇ Brothers, Inc. and its
Subsidiaries, as co-borrowers, and Renaissance Capital Growth & Income Fund III,
Inc. and First Interstate Equity Corporation, as lenders, as any of the above
may be amended, modified, supplemented, restated or replaced from time to time.
"Debt" of any Person means all items of indebtedness or
liability which in accordance with GAAP would be included in determining total
liabilities as shown on the liabilities side of a balance sheet of that Person
as of the date on which the Debt is to be determined. For purposes of
determining a Person's aggregate Debt at any time, "Debt" shall also include the
aggregate payments required to be made by such Person at any time under any
lease that is considered a capitalized lease under GAAP.
"Debt Service Coverage Ratio" means the ratio of (i) the sum
of (A) Funds from Operations and (B) Interest Expense minus (C) Unfinanced
Capital Expenditures to (ii) the sum of (A) Current Maturities of Long Term Debt
and (B) Interest Expense.
"Default" means an event that, with giving of notice or
passage of time, or both, would constitute an Event of Default.
"Default Period" means (a) in the case of a Default or Event
of Default caused solely by Borrower's non-performance of its obligations under
Section 6.1, the period of time beginning on the date that such Default or Event
of Default occurs and ending on the date the Lender notifies the Borrower in
writing that such Default or Event of Default has been cured or waived, and (b)
in the case of any other Default or Event of Default, the period of time
beginning on the first day of any month during which a Default or Event of
Default occurs and ending on the date the Lender notifies the Borrower in
writing that such Default or Event of Default has been cured or waived.
"Default Rate" means, with respect to the Revolving Note, an
annual rate equal to the Floating Rate plus 300 basis points (3%), which rate
shall change when and as the Floating Rate changes, and, with respect to the
Term Loan Note, an annual rate equal to the Term Loan Rate plus 300 basis
points, which rate shall change when and as the Term Loan Rate changes.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Eligible Accounts" means all unpaid Accounts, net of any
credits, except the following shall not in any event be deemed Eligible
Accounts:
(i) That portion of Accounts unpaid 90 days or more
after the invoice date;
(ii) That portion of Accounts that is disputed or
subject to a claim of offset or a contra account;
(iii) That portion of Accounts not yet earned by the
final delivery of goods or rendition of services, as applicable, by the Borrower
to the customer;
(iv) Accounts owed by any unit of government, whether
foreign or domestic (provided, however, that there shall be included in Eligible
Accounts that portion of Accounts owed by such units of government for which the
Borrower has provided evidence satisfactory to the Lender that (A) the Lender
has a first priority perfected security interest and (B) such Accounts may be
enforced by the Lender directly against, and payments with respect to such
Accounts received by the Lender directly from, such unit of government under all
applicable laws);
(v) Accounts owed by an account debtor located
outside the United States which are not (A) backed by a bank letter of credit
naming the Lender as beneficiary or assigned to the Lender, in the Lender's
possession and acceptable to the Lender in all respects, in its sole discretion,
(B) covered by a foreign receivables insurance policy acceptable to the Lender
in its sole discretion;
(vi) Accounts owed by an account debtor that is
insolvent, the subject of bankruptcy proceedings or has gone out of business;
(vii) Accounts owed by a shareholder, Subsidiary,
Affiliate, officer or employee of the Borrower;
(viii) Accounts not subject to a duly perfected
security interest in the Lender's favor or which are subject to any lien,
security interest or claim in favor of any Person other than the Lender,
including, without limitation, any payment or performance bond;
(ix) That portion of Accounts that has been
restructured, extended, amended or modified;
(x) That portion of Accounts that constitutes
advertising, finance charges, service charges or sales or excise taxes;
(xi) Accounts owed by an account debtor, regardless
of whether otherwise eligible, if 15% or more of the total amount due under
Accounts from such debtor is ineligible under clauses (i), (ii)or (ix) above;
(xii) That portion of an otherwise Eligible Account
that exceeds 20% of total Accounts; and
(xiii) Accounts, or portions thereof, otherwise
deemed ineligible by the Lender in its sole discretion.
"Eligible Inventory" means all Inventory of the Borrower, at
the lower of cost or market value as determined in accordance with GAAP;
provided, however, that the following shall not in any event be deemed Eligible
Inventory:
(i) Inventory that is: in-transit; located
at any warehouse, job site or other premises not approved by the Lender
in writing; located outside of the states, or localities, as
applicable, in which the Lender has filed financing statements to
perfect a first priority security interest in such Inventory; covered
by any negotiable or non-negotiable warehouse receipt, ▇▇▇▇ of lading
or other document of title; on consignment from any Person; on
consignment to any Person or subject to any bailment unless such
consignee or bailee has executed an agreement with the Lender;
(ii) Supplies, film and packaging or sample
Inventory;
(iii) Work-in-process Inventory;
(iv) Inventory that is damaged, obsolete,
slow moving or not currently saleable in the normal course of the
Borrower's operations;
(v) Inventory that the Borrower has
returned, has attempted to return, is in the process of returning or
intends to return to the vendor thereof;
(vi) Inventory that is raw materials or that
has not been sold prior to its expiration date;
(vii) Inventory manufactured by the Borrower
pursuant to a license unless the applicable licensor has agreed in
writing to permit the Lender to exercise its rights and remedies
against such Inventory;
(viii) Inventory that is subject to any
lien, security interest or claim in favor of any Person other than the
Lender, including, without limitation, any payment or performance bond;
(ix) Private Label Inventory in excess of
$50,000 of cost in the aggregate; and
(x) Inventory otherwise deemed ineligible by
the Lender in its sole discretion.
"Environmental Law" has the meaning specified in Section 5.12.
"Equipment" means all of the Borrower's equipment, as such
term is defined in the UCC, whether now owned or hereafter acquired, including
but not limited to all present and future machinery, vehicles, furniture,
fixtures, manufacturing equipment, shop equipment, office and recordkeeping
equipment, parts, tools, computers, hardware and software and related items,
supplies, and including specifically (without limitation) the goods described in
any equipment schedule or list herewith or hereafter furnished to the Lender by
the Borrower.
"Event of Default" has the meaning specified in Section 8.1.
"Floating Rate" means an annual rate equal to the sum of the
Base Rate plus one-hundred fifty (150) basis points, which annual rate shall
change when and as the Base Rate changes.
"Funding Date" has the meaning given in Section 2.1.
"Funds From Operations" for a given period means the sum of
(i) Net Income, (ii) depreciation and amortization, and (iii) other non-cash
items, each as determined for such period in accordance with GAAP.
"GAAP" means generally accepted accounting principles, applied
on a basis consistent with the accounting practices applied in the financial
statements described in Section 5.5, and, with respect to the interim financial
statements, subject to normal and customary non-material year-end adjustments.
"General Intangibles" means all of the Borrower's general
intangibles, as such term is defined in the UCC, whether now owned or hereafter
acquired, and all proceeds thereof, including (without limitation) all present
and future patents, patent applications, copyrights, trademarks, trade names,
trade secrets, customer or supplier lists and contracts, manuals, operating
instructions, permits, franchises, the right to use Borrower's names, and the
goodwill of Borrower's business .
"Hazardous Substance" has the meaning given in Section 5.12.
"Intercreditor Agreement" means the Intercreditor Agreement of
even date herewith, executed by the Debenture Holders and Lender, and
acknowledged by the Borrower, and any other intercreditor agreement accepted by
the Lender from time to time, as the same may hereafter be amended, modified,
supplemented, replaced or restated from time to time.
"Interest Expense" means, for the period of determination, the
Borrower's and its Subsidiaries' total gross interest expense during such period
(excluding interest income), and shall in any event include, without limitation,
(i) interest expensed (whether or not paid) on all Debt, (ii) the amortization
of debt discounts, (iii) the amortization of all fees payable in connection with
the incurrence of Debt to the extent included in interest expense, and (iv) the
portion of any capitalized lease obligation allocable to interest expense.
"Inventory" means all of the Borrower's inventory, as such
term is defined in the UCC, whether now owned or hereafter acquired, whether
consisting of whole goods, spare parts or components, supplies or materials,
whether acquired, held or furnished for sale, for lease or under service
contracts or for manufacture or processing, and wherever located.
"Investment Property" means all of the Borrower's investment
property, as such term is defined in the UCC, whether now owned or hereafter
acquired, including but not limited to all securities, security entitilements,
securities accounts, commodity contracts, commodity accounts, stocks, bonds,
mutual fund shares, money market shares and U.S. Government securities.
"Loan Documents" means this Agreement, the Notes, the Warrant
and the Security Documents.
"Lockbox" has the meaning given in the Lockbox Agreement.
"Lockbox Agreement" means the Lockbox Agreement by and among
the Borrower, Norwest Bank Arizona and the Lender, of even date herewith.
"Maturity Date" means, with respect to the Revolving Advances,
November 4, 2001, and, with respect to the Term Loan, the Term Loan Maturity
Date.
"Maximum Line" means $2,000,000.
"Minimum Interest Charge" has the meaning given in Section
2.2(c).
"Mortgagee" means ▇▇▇▇▇▇ Guaranty Trust Company of New York, a
New York banking corporation, its successors and assigns, as beneficiary under
that certain Deed of Trust and Security Agreement dated June 4, 1997, recorded
on June 5, 1997 as Instrument No. 97-0381371, Records of Maricopa County,
Arizona, encumbering the Premises.
"Net Income" or "Net Loss" means after-tax net income or net
loss from continuing operations of Borrower and its Subsidiaries, as determined
in accordance with GAAP.
"Norwest Bank Arizona" means Norwest Bank Arizona, National
Association, its successors and assigns.
"Norwest Bank Minnesota" means Norwest Bank Minnesota,
National Association, its successors and assigns.
"Note" or "Notes" means, individually, the Revolving Note or
the Term Loan Note, and, collectively, the Revolving Note and the Term Loan
Note.
"Obligations" means the Notes and each and every other debt,
liability and obligation of every type and description which the Borrower may
now or at any time hereafter owe to the Lender, whether such debt, liability or
obligation now exists or is hereafter created or incurred, whether it arises in
a transaction involving the Lender alone or in a transaction involving other
creditors of the Borrower, and whether it is direct or indirect, due or to
become due, absolute or contingent, primary or secondary, liquidated or
unliquidated, or sole, joint, several or joint and several, and including
specifically, but not limited to, all indebtedness of the Borrower arising under
this Agreement, the Notes or any other loan or credit agreement or guaranty
between the Borrower and the Lender, whether now in effect or hereafter entered
into.
"PACA" means the Perishable Agricultural Commodities Act,
1930, 7 U.S.C. ss. 499a through 499t, as it may be amended, restated or replaced
from time to time, and any regulations, orders, decrees, standards, policies and
guidelines now or hereafter relating thereto.
"Patent and Trademark Security Agreement" means the Patent and
Trademark Security Agreement by the Borrower in favor of the Lender of even date
herewith, as it may be amended, modified, supplemented, restated or replaced
from time to time.
"Permitted Lien" has the meaning given in Section 7.1.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Plan" means an employee benefit plan or other plan maintained
for the Borrower's employees and covered by Title IV of ERISA.
"Premises" means all premises where the Borrower conducts its
business and has any rights of possession, including (without limitation) the
premises legally described in Exhibit D attached hereto.
"Private Label Inventory" means Inventory manufactured for the
account of other wholesalers, distributors, retailers or third parties or
otherwise intended to be marketed and sold under a tradename other than that
owned by, or licensed to, Borrower.
"Receivables" means each and every and every right of Borrower
to the payment of money, whether such right to payment now exists or hereafter
arises, and all proceeds thereof, whether such right to payment arises out of a
sale, lease or other disposition of goods or other property, out of a rendering
of services, out of a loan, out of the overpayment of taxes or other
liabilities, or otherwise arises under any contract or agreement, whether such
right to payment is created, generated or earned by the Borrower or by some
other person who subsequently transfers such person's interest to Borrower,
whether such right to payment is or is not already earned by performance, and
howsoever such right to payment may be evidenced, together with all other rights
and interests (including all liens and security interests) which Borrower may at
any time have by law or agreement against any account debtor or other obligor
obligated to make any such payment or against any property of such account
debtor or other obligor; all including but not limited to all present and future
accounts, contract rights, loans and obligations receivable, chattel paper,
bonds, notes and other debt instruments, tax refunds and rights to payment in
the nature of general intangibles; and those documents, General Intangibles,
chattel papers, instruments, contracts, licenses, ledger sheets, files, records,
computer programs, tapes and agreements relating to Borrower's right to receive
payment, all as such items are defined in the UCC.
"Reportable Event" shall have the meaning assigned to that
term in Title IV of ERISA.
"Revolving Advance" has the meaning given in Section 2.1(a).
"Revolving Note" means the Borrower's revolving promissory
note, payable to the order of the Lender in substantially the form of Exhibit A
hereto, as the same may hereafter be amended, modified, supplemented, replaced
or restated from time to time, and any note or notes issued in substitution
therefor, as the same may hereafter be amended, modified, supplemented, replaced
or restated from time to time and any note or notes issued in substitution
therefor.
"Security Documents" means this Agreement, the Collateral
Account Agreement, the Lockbox Agreement, the Patent and Trademark Security
Agreement, and any other document delivered to the Lender from time to time to
secure the Obligations, as the same may hereafter be amended, supplemented or
restated from time to time.
"Security Interest" has the meaning given in Section 3.1.
"Seller" means Tejas Snacks, L.P., a Texas limited
partnership.
"Subordinated Debt" means Debt of the Borrower and its
Subsidiaries which is expressly subordinated and made junior to the payment and
performance in full of the Borrower's Obligations to the Lender, and is
evidenced by written instruments containing subordination provisions and in an
amount approved by the Lender in its sole discretion.
"Subordination Agreement" means any subordination agreement
accepted by the Lender from time to time, as the same may thereafter be amended,
modified, supplemented, replaced or restated from time to time.
"Subordinated Creditors" means any Person now or hereafter
executing a Subordination Agreement accepted by Lender.
"Subsidiary" means any corporation of which more than 50% of
the outstanding shares of capital stock having general voting power under
ordinary circumstances to elect a majority of the board of directors of such
corporation, irrespective of whether or not at the time stock of any other class
or classes shall have or might have voting power by reason of the happening of
any contingency, is at the time directly or indirectly owned by the Borrower, by
the Borrower and one or more other Subsidiaries, or by one or more other
Subsidiaries.
"Term Loan Maturity Date" means the first day of the
nineteenth (19th) month (including the month in which the Term Loan Advance is
made) after the making of the Term Loan Advance.
"Term Loan Note" means the Borrower's term loan promissory
note, payable to the order of the Lender in substantially the form of Exhibit B
hereto, as the same may hereafter be amended, modified, supplemented, replaced
or restated from time to time, and any note or notes issued in substitution
therefor, as the same may hereafter be amended, modified, supplemented, replaced
or restated from time to time and any note or notes issued in substitution
therefor.
"Term Loan Rate" means an annual rate equal to the sum of the
Base Rate plus three hundred (300) basis points, which annual rate shall change
when and as the Base Rate changes.
"Termination Date" means the earliest of (i) the Maturity
Date, (ii) the date the Borrower terminates the Credit Facilities, or (iii) the
date the Lender demands payment of the Obligations after an Event of Default
pursuant to Section 8.2.
"UCC" means the Uniform Commercial Code as in effect from time
to time in the state designated in Section 9.15 as the state whose laws shall
govern this Agreement, or in any other state whose laws are held to govern this
Agreement or any portion hereof.
"Unfinanced Capital Expenditures" means, for the period of
determination, any Capital Expenditures or the portion of any Capital
Expenditures paid or payable by Borrower and its Subsidiaries during such period
and not constituting Debt.
"Warrant" means that certain Warrant to Purchase Common Stock
of ▇▇▇▇▇ Brothers, Inc. No. 3 dated November 4, 1998 issued to Lender, as it may
be amended, modified, supplemented, restated or replaced from time to time.
SECTION 1.2 CROSS REFERENCES. All references in this Agreement to
Articles, Sections and subsections, shall be to Articles, Sections and
subsections of this Agreement unless otherwise explicitly specified.
ARTICLE 2
AMOUNT AND TERMS OF THE CREDIT FACILITIES
SECTION 2.1 REVOLVING ADVANCES AND TERM LOAN ADVANCE.
(a) REVOLVING ADVANCES. The Lender agrees, on the
terms and subject to the conditions herein set forth, to make advances to the
Borrower from time to time from the date all of the conditions set forth in
Section 4.1 are satisfied (the "Funding Date") to the Termination Date, on the
terms and subject to the conditions herein set forth (the "Revolving Advances").
The Lender shall have no obligation to make a Revolving Advance if, after giving
effect to such requested Revolving Advance, the sum of the outstanding and
unpaid Revolving Advances would exceed the Borrowing Base. The Borrower's
obligation to pay the Revolving Advances shall be evidenced by the Revolving
Note and shall be secured by the Collateral as provided in Article 3. Within the
limits set forth in this Section 2.1(a), the Borrower may borrow, prepay
pursuant to Section 2.6 and reborrow Revolving Advances. The Borrower agrees to
comply with the following procedures in requesting Revolving Advances under this
Section 2.1(a):
(i) The Borrower shall make each request for
a Revolving Advance to the Lender before 11:00 a.m. (Phoenix time) of the day of
the requested Revolving Advance. Requests may be made in writing or by
telephone, specifying the date of the requested Revolving Advance and the amount
thereof. Each request shall be by (i) any officer of the Borrower; or (ii) any
person designated as the Borrower's agent by any officer of the Borrower in a
writing delivered to the Lender; or (iii) any person whom the Lender reasonably
believes to be an officer of the Borrower or such a designated agent.
(ii) Upon fulfillment of the applicable
conditions set forth in Article 4, the Lender shall disburse the proceeds of the
requested Revolving Advance by crediting the same to the Borrower's demand
deposit account maintained with Norwest Bank Arizona, unless the Lender and the
Borrower shall agree in writing to another manner of disbursement. Upon the
Lender's request, the Borrower shall promptly confirm each telephonic request
for an Advance by executing and delivering an appropriate confirmation
certificate to the Lender. The Borrower shall repay all Advances even if the
Lender does not receive such confirmation and even if the person requesting an
Advance was not in fact authorized to do so. Any request for an Advance, whether
written or telephonic, shall be deemed to be a representation by the Borrower
that the conditions set forth in Section 4.3 have been satisfied as of the time
of the request.
(b) TERM LOAN ADVANCE. The Lender agrees, on the
terms and subject to the conditions herein set forth, to make a single advance
in the amount of $500,000 (the "Term Loan" or the "Term Loan Advance") to the
Borrower upon the written request of Borrower and on the date that all of the
conditions set forth in Section 4.2 are satisfied, and otherwise on the terms
and subject to the conditions herein set forth. The Borrower's obligation to pay
the Term Loan shall be evidenced by the Term Loan Note and shall be secured by
the Collateral as provided in Article 3. If all of the conditions to the Term
Loan Advance set forth in Section 4.2 have not been satisfied, or Borrower has
not given written notice to Lender to make the Term Loan Advance by November 30,
1998, Lender shall have no further obligation to make the Term Loan Advance to
Borrower, although Lender, in its sole, absolute and unfettered discretion, may
thereafter make the Term Loan Advance.
SECTION 2.2 MONTHLY PAYMENTS; MINIMUM INTEREST CHARGE; DEFAULT
INTEREST; PARTICIPATIONS; USURY. Interest accruing on the Notes shall be due and
payable in arrears on the first day of each month.
(a) REVOLVING NOTE. Except as set forth in Sections
2.2(d) and 2.2(e), the outstanding principal balance of the Revolving Note shall
bear interest at the Floating Rate.
(b) TERM LOAN NOTE. Except as set forth in Sections
2.2(d) and 2.2(e), the outstanding principal balance of the Term Loan Note shall
bear interest at the Term Loan Rate. The Term Loan Note will be payable in equal
monthly installments of principal of $27,777.78, plus interest, payable on the
first day of each month, commencing on the first day of the month immediately
succeeding the Term Loan Advance and continuing on the first day of each
succeeding month until the Term Loan Date or the Termination Date, whichever is
earlier, at which time the entire outstanding principal balance of the Term
Loan, all accrued and unpaid interest and all other charges shall be due and
payable; provided, however, commencing on the first day of the month immediately
following any Conversion Date (or on the first payment date if any Conversion
Date occurs before the first payment date), the Term Loan Note level principal
payments will be increased as provided below and the increased level principal
payment amount (not to exceed $41,667.67), plus interest, shall be payable on
the first day of such month and shall continue on the first day of each
succeeding month until the Term Loan Maturity Date or the Termination Date,
whichever is earlier, at which time the entire outstanding principal balance of
the Term Loan, all accrued and unpaid interest and all other charges shall be
due and payable, or until the Term Loan is earlier paid in full. The amount of
the increase of the Term Loan Note level principal payment shall be calculated
as follows: the quotient of the Principal Amount of the Debenture converted to
common stock divided by the Principal Amount of the Debenture immediately prior
to such conversion, multiplied by the difference between $41,667.67 (the maximum
Term Loan Note principal payment amount) and less the Term Loan Note principal
payment for the month immediately preceding such Conversion Date. An example of
the calculation of the Term Loan Note level principal payment increase and Term
Loan Note level principal payment amount is attached hereto as Exhibit E and
incorporated herein by this reference.
(c) MINIMUM INTEREST CHARGE. Notwithstanding the
interest payable pursuant to Section 2.2(a), the Borrower shall pay to the
Lender interest on the Revolving Advances and Term Loan Advances of not less
than $3,500 per calendar month in the aggregate (the "Minimum Interest Charge")
during the term of this Agreement, and the Borrower shall pay any deficiency
between the Minimum Interest Charge and the amount of interest otherwise
calculated under Sections 2.2(a), 2.2(b), 2.2(d) and 2.2(e) on the date and in
the manner provided in Section 2.4.
(d) DEFAULT INTEREST RATE. At any time during any
Default Period, in the Lender's sole discretion and without waiving any of its
other rights and remedies, the principal of the Advances outstanding from time
to time shall bear interest at the Default Rate, effective for any periods
designated by the Lender from time to time during that Default Period.
(e) USURY. In any event no rate change shall be put
into effect which would result in a rate greater than the highest rate permitted
by law. Notwithstanding anything to the contrary contained in any Loan Document,
all agreements which either now are or which shall become agreements between the
Borrower and the Lender are hereby limited so that in no contingency or event
whatsoever shall the total liability for payments in the nature of interest,
additional interest and Additional Sums (as defined below) exceed the applicable
limits imposed by any applicable usury laws. If any payments in the nature of
interest, additional interest and Additional Sums made under any Loan Document
are held to be in excess of the limits imposed by any applicable usury laws, it
is agreed that in compliance with the desires of the Borrower and the Lender the
amount of interest, additional interest and Additional Sums payable pursuant to
this lending transaction shall be reduced to the maximum amount permitted by
law, any excess amount previously collected from Borrower in connection with
this lending transaction that exceeded the maximum amount permitted by law,
shall be credited against the principal balance of the Obligations then
outstanding, and, if the outstanding principal balance hereunder has been paid
in full, the excess amount paid shall be refunded to Borrower and Borrower
agrees to accept such refund. This provision shall never be superseded or waived
and shall control every other provision of the Loan Documents and all agreements
between the Borrower and the Lender, or their successors and assigns. For
purposes hereof, all fees, charges, goods, things in action or any other sums or
things of value (other than the interest resulting from the interest rate or the
Default Rate paid or payable by Borrower (collectively, the "Additional Sums"),
whether pursuant to this Agreement, the Notes or any other document or
instrument in any way pertaining to this lending transaction, or otherwise with
respect to this lending transaction, that, under the laws of the State of
Arizona, may be deemed to be interest with respect to this lending transaction,
for the purpose of any laws of the State of Arizona that may limit the maximum
amount of interest to be charged with respect to this lending transaction, shall
be payable by Borrower as, and shall be deemed to be, additional interest, and
for such purposes only, the agreed upon and "contracted for rate of interest" of
this lending transaction shall be deemed to be increased by the rate of interest
resulting from the Additional Sums.
SECTION 2.3 FEES.
(a) ORIGINATION FEE. The Borrower hereby agrees to
pay the Lender a fully earned and non-refundable origination fee of $25,000, due
and payable upon the execution of this Agreement.
(b) UNUSED LINE FEE. For the purposes of this Section
2.3(b), "Unused Amount" means the Maximum Line reduced by outstanding Revolving
Advances. The Borrower agrees to pay to the Lender an unused line fee at the
rate of one-half of one percent (0.5%) per annum on the average daily Unused
Amount from the date of this Agreement to and including the Termination Date,
due and payable monthly in arrears on the first day of the month and on the
Termination Date.
(c) AUDIT FEES. The Borrower hereby agrees to pay the
Lender, on demand, audit fees in connection with any audits or inspections
conducted by the Lender of any Collateral or the Borrower's operations or
business at the rates established from time to time by the Lender as its audit
fees (which fees are currently $60 per hour per auditor), together with all
actual out-of-pocket costs and expenses incurred in conducting any such audit or
inspection.
SECTION 2.4 COMPUTATION OF INTEREST AND FEES; WHEN INTEREST DUE AND
PAYABLE. Interest accruing on the outstanding principal balance of the Advances
and fees hereunder outstanding from time to time shall be computed on the basis
of actual number of days elapsed in a year of 360 days. Interest shall be
payable in arrears on the first day of each month and on the Termination Date.
SECTION 2.5 CAPITAL ADEQUACY. If any Related Lender determines at any
time that its Return has been reduced as a result of any Rule Change, such
Related Lender may require the Borrower to pay it the amount necessary to
restore its Return to what it would have been had there been no Rule Change. For
purposes of this Section 2.5:
(a) "Capital Adequacy Rule" means any law, rule,
regulation, guideline, directive, requirement or request regarding capital
adequacy, or the interpretation or administration thereof by any governmental or
regulatory authority, central bank or comparable agency, whether or not having
the force of law, that applies to any Related Lender. Such rules include rules
requiring financial institutions to maintain total capital in amounts based upon
percentages of outstanding loans, binding loan commitments and letters of
credit.
(b) "Return", for any period, means the return as
determined by such Related Lender on the Advances based upon its total capital
requirements and a reasonable attribution formula that takes account of the
Capital Adequacy Rules then in effect. Return may be calculated for each
calendar quarter and for the shorter period between the end of a calendar
quarter and the date of termination in whole of this Agreement.
(c) "Rule Change" means any change in any Capital
Adequacy Rule occurring after the date of this Agreement, but the term does not
include any changes in applicable requirements that at the Closing Date are
scheduled to take place under the existing Capital Adequacy Rules or any
increases in the capital that any Related Lender is required to maintain to the
extent that the increases are required due to a regulatory authority's
assessment of the financial condition of such Related Lender.
(d) "Related Lender" includes (but is not limited to)
the Lender, any parent corporation of the Lender and any assignee of any
interest of the Lender hereunder and any participant in the loans made
hereunder.
Certificates of any Related Lender sent to the Borrower from time to time
claiming compensation under this Section 2.5, stating the reason therefor and
setting forth in reasonable detail the calculation of the additional amount or
amounts to be paid to the Related Lender hereunder to restore its Return shall
be conclusive absent manifest error. In determining such amounts, the Related
Lender may use any reasonable averaging and attribution methods.
SECTION 2.6 VOLUNTARY PREPAYMENT; TERMINATION OF THE CREDIT FACILITIES
BY THE BORROWER.
(a) VOLUNTARY PREPAYMENT. Except as otherwise
provided herein, the Borrower may prepay the Revolving Advances in whole at any
time or from time to time in part. The Borrower may terminate the Credit
Facilities (Revolving Advances and Term Loan) at any time if it (i) gives the
Lender at least 30 days' prior written notice and (ii) pays the Lender
termination fees in accordance with Section 2.7. Borrower may not terminate the
Revolving Advances unless the Term Loan is contemporaneously or previously
terminated. If the Borrower terminates the Credit Facilities, all Obligations
shall be immediately due and payable. Upon termination of the Credit Facilities
and payment and performance of all Obligations, the Lender shall release or
terminate the Security Interest and the Security Documents to which the Borrower
is entitled by law.
(b) TERM LOAN PREPAYMENT. The Borrower may prepay the
Term Loan in whole at any time or from time to time in part, without premium
except as provided in Section 2.7(a). Provided that no Default or Event of
Default has occurred and is continuing, all prepayments under the Term Loan will
be applied first, to outstanding charges due under the Term Loan; second, to
accrued and unpaid interest on the then outstanding principal balance of the
Term Loan; and the remainder to the installment payments due under the Term
Loan, in the inverse order of maturity. During a Default Period, any payment
received by the Lender under this Section 2.6(b) may be applied to the
Obligations in such order and in such amounts as the Lender, in its discretion,
may from time to time determine.
(c) TERMINATION OF CREDIT FACILITIES. Upon
termination of the Credit Facilities (Revolving Advances and Term Loan) and
payment and performance of all Obligations, the Lender shall release or
terminate the Security Interest and the Security Documents to which the Borrower
is entitled by law.
SECTION 2.7 TERMINATION FEE; WAIVER OF TERMINATION FEE.
(a) TERMINATION FEE. If the Revolving Advances are
terminated for any reason as of a date or dates other than the Maturity Date,
including, without limitation, acceleration upon the occurrence of an Event of
Default, the Borrower shall pay to the Lender a fee in an amount equal to a
percentage of the Maximum Line plus the original principal amount of the Term
Loan as follows: (A) three percent (3%) if the termination occurs on or before
the first anniversary of the Funding Date; (B) two percent (2%) if the
termination occurs after the first anniversary of the Funding Date but on or
before the second anniversary of the Funding Date; and (C) one percent (1%) if
the termination occurs after the second anniversary of the Funding Date. So long
as the Revolving Advances are not terminated as of a date other than the
Maturity Date, the termination of the Term Loan will not, in and of itself,
obligate Borrower to pay a termination fee to Lender.
(b) WAIVER OF TERMINATION FEE. The Borrower will not
be required to pay the termination fee otherwise due under Section 2.7(a) if the
Credit Facilities are (i) voluntarily terminated due to a refinancing by an
Affiliate of the Lender; or (ii) voluntarily terminated on or before six (6)
months after the date on which Lender notifies Borrower in writing of a
discretionary reduction of Eligible Accounts in excess of 25% pursuant to clause
(xiii) of the definition of "Eligible Accounts"; or (iii) terminated during the
continuance of a declared Event of Default based solely on Borrower's breach of
the financial covenants in Sections 6.14, 6.15 or 6.16.
SECTION 2.8 MANDATORY PREPAYMENT. Without notice or demand, if the
outstanding principal balance of the Revolving Advances shall at any time exceed
the Borrowing Base, the Borrower shall immediately prepay the Revolving Advances
to the extent necessary to eliminate such excess. Except as otherwise provided
in Section 2.6(b), provided that no other Default or Event of Default has
occurred and is continuing, any payment received by the Lender under this
Section 2.8 or under Section 2.6 shall be applied first, to reimbursable costs
and expenses incurred by Lender and not yet paid; second, to accrued and unpaid
interest (or Default Interest) on the Revolving Advances then due and payable;
and the remainder to the principal balance of the Revolving Obligations. During
a Default Period, any payment received by the Lender under this Section 2.8 or
under Section 2.6 may be applied to the Obligations in such order and in such
amounts as the Lender, in its discretion, may from time to time determine. For
each day or portion thereof that the Revolving Advances shall exceed the
Borrowing Base, the Borrower shall pay to the Lender an overadvance charge in
the amount of $100; provided, however, that if such day occurs during a Default
Period, the overadvance charge for such day shall be $200.
SECTION 2.9 PAYMENT. All payments to the Lender shall be made in
immediately available funds and shall be applied to the Obligations upon receipt
by the Lender. The Lender may hold all payments not constituting immediately
available funds for three (3) days before applying them to the Obligations.
Notwithstanding anything in Section 2.1(a), the Borrower hereby authorizes the
Lender, in its discretion at any time or from time to time without the
Borrower's request and even if the conditions set forth in Section 4.3 would not
be satisfied, to make a Revolving Advance in an amount equal to the portion of
the Obligations from time to time due and payable.
SECTION 2.10 PAYMENT ON NON-BANKING DAYS. Whenever any payment to be
made hereunder shall be stated to be due on a day which is not a Banking Day,
such payment may be made on the next succeeding Banking Day, and such extension
of time shall in such case be included in the computation of interest on the
Advances or the fees hereunder, as the case may be.
SECTION 2.11 USE OF PROCEEDS. The Borrower shall use the proceeds of
the initial Revolving Advance and the Term Loan Advance to refinance Borrower's
existing indebtedness to First Community Financial Corporation and to acquire
certain assets of Tejas Snacks L.P. and, thereafter, Borrower shall use the
proceeds of the Revolving Advances for general working capital purposes.
SECTION 2.12 LIABILITY RECORDS. The Lender may maintain from time to
time, at its discretion, liability records as to the Obligations. All entries
made on any such record shall be presumed correct until the Borrower establishes
the contrary. Upon the Lender's demand, the Borrower will admit and certify in
writing the exact principal balance of the Obligations that the Borrower then
asserts to be outstanding. Any billing statement or accounting rendered by the
Lender shall be conclusive and fully binding on the Borrower unless the Borrower
gives the Lender specific written notice of exception within 30 days after
receipt.
ARTICLE 3
SECURITY INTEREST; OCCUPANCY; SETOFF
SECTION 3.1 GRANT OF SECURITY INTEREST. The Borrower hereby pledges,
assigns and grants to the Lender a security interest (collectively referred to
as the "Security Interest") in the Collateral, as security for the payment and
performance of the Obligations.
SECTION 3.2 NOTIFICATION OF ACCOUNT DEBTORS AND OTHER OBLIGORS. Without
limiting Lender's rights under Sections 6.2 and 6.3 below, the Lender may at any
time after an Event of Default and, at any other time upon prior written notice
to Borrower, notify any account debtor or other person obligated to pay the
amount due that such right to payment has been assigned or transferred to the
Lender for security and shall be paid directly to the Lender. The Borrower will
join in giving such notice if the Lender so requests. At any time after the
Borrower or the Lender gives such notice to an account debtor or other obligor,
the Lender may, but need not, in the Lender's name or in the Borrower's name,
(a) demand, ▇▇▇ for, collect or receive any money or property at any time
payable or receivable on account of, or securing, any such right to payment, or
grant any extension to, make any compromise or settlement with or otherwise
agree to waive, modify, amend or change the obligations (including collateral
obligations) of any such account debtor or other obligor; and (b) as the
Borrower's agent and attorney-in-fact, notify the United States Postal Service
to change the address for delivery of the Borrower's mail to any address
designated by the Lender, otherwise intercept the Borrower's mail, and receive,
open and dispose of the Borrower's mail, applying all Collateral as permitted
under this Agreement and holding all other mail for the Borrower's account or
forwarding such mail to the Borrower's last known address.
SECTION 3.3 ASSIGNMENT OF INSURANCE. As additional security for the
payment and performance of the Obligations, the Borrower hereby assigns to the
Lender any and all monies (including, without limitation, proceeds of insurance
and refunds of unearned premiums) due or to become due under, and all other
rights of the Borrower with respect to, any and all policies of insurance now or
at any time hereafter covering the Collateral or any evidence thereof or any
business records or valuable papers pertaining thereto, and the Borrower hereby
directs the issuer of any such policy to pay all such monies directly to the
Lender. At any time, whether or not a Default Period then exists, with respect
to any Collateral in which Lender now or hereafter holds a first lien consensual
security interest (or is intended to hold a first lien consensual security
interest under the Loan Documents), the Lender may (but need not), in the
Lender's name or in the Borrower's name, execute and deliver proof of claim,
receive all such monies, endorse checks and other instruments representing
payment of such monies, and adjust, litigate, compromise or release any claim
against the issuer of any such policy.
SECTION 3.4 OCCUPANCY.
(a) Subject to the rights of the Mortgagee, if any,
the Borrower hereby irrevocably grants to the Lender the right to take
possession of the Premises at any time during a Default Period.
(b) The Lender may use the Premises only to hold,
process, manufacture, sell, use, store, liquidate, realize upon or otherwise
dispose of goods that are Collateral and for other purposes that the Lender may
in good ▇▇▇▇▇ ▇▇▇▇ to be related or incidental purposes.
(c) The Lender's right to hold the Premises shall
cease and terminate upon the earlier of (i) payment in full and discharge of all
Obligations and termination of the Commitment, and (ii) final sale or
disposition of all goods constituting Collateral and delivery of all such goods
to purchasers.
(d) The Lender shall not be obligated to pay or
account for any rent or other compensation for the possession, occupancy or use
of any of the Premises; provided, however, that if the Lender does pay or
account for any rent or other compensation for the possession, occupancy or use
of any of the Premises, the Borrower shall reimburse the Lender promptly for the
full amount thereof. In addition, the Borrower will pay, or reimburse the Lender
for, all taxes, fees, duties, imposts, charges and expenses at any time incurred
by or imposed upon the Lender by reason of the execution, delivery, existence,
recordation, performance or enforcement of this Agreement or the provisions of
this Section 3.4.
SECTION 3.5 LICENSE. Without limiting the generality of the Patent and
Trademark Security Agreement, the Borrower hereby grants to the Lender a
non-exclusive, worldwide and royalty-free license to use or otherwise exploit
all trademarks, franchises, trade names, copyrights and processes of the
Borrower for the purpose of selling, leasing or otherwise disposing of any or
all Collateral during any Default Period.
SECTION 3.6 FINANCING STATEMENT. A carbon, photographic or other
reproduction of this Agreement or of any financing statements signed by the
Borrower is sufficient as a financing statement and may be filed as a financing
statement in any state to perfect the security interests granted hereby. For
this purpose, the following information is set forth:
Name and address of Debtor:
▇▇▇▇▇ Brothers, Inc.
Federal Tax Identification No. ▇▇-▇▇▇▇▇▇▇
▇▇▇▇▇ Brothers Arizona, Inc.
Federal Tax Identification No. ▇▇-▇▇▇▇▇▇▇
▇▇▇▇▇ Brothers Distributing, Inc.
Federal Tax Identification No. ▇▇-▇▇▇▇▇▇▇
Tejas PB Distributing, Inc.
Federal Tax Identification No. ▇▇-▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Name and address of Secured Party:
Norwest Business Credit, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Federal Tax Identification No. ▇▇-▇▇▇▇▇▇▇
SECTION 3.7 SETOFF. The Borrower agrees that the Lender may at any time
or from time to time, at its sole discretion and without demand and without
notice to anyone, setoff any liability owed to the Borrower by the Lender,
whether or not due, against any Obligation, whether or not due. In addition, any
assignee of Lender of which Borrower has received written notice and any loan
participant of which Borrower has received written notice shall have the right
to appropriate or setoff any deposit or other liability then owed by such Person
to the Borrower, whether or not due, and apply the same to the payment of the
Obligations or the loan participant's interest, as fully as if such Person had
lent directly to the Borrower the Obligations or the amount of such loan
participant's interest. Lender or such other Person shall endeavor to provide
written notice of any such appropriation or setoff as soon as reasonably
practicable after the occurrence of such appropriation or setoff, but neither
Lender nor such other Person shall have any liability to Borrower or any other
Person for its failure to provide such notice.
SECTION 3.8 ASSIGNMENT OF ASSET PURCHASE AGREEMENT.. As additional
security for the payment and performance of the Obligations, the Borrower hereby
assigns to the Lender, and grants a security interest in favor of the Lender in
and to, all of its right, title, interest and privileges under the Asset
Purchase Agreement and all agreements, instruments and documents delivered by
Seller or any other Person in favor of Borrower in connection with the Asset
Purchase Agreement, including, without limitation all of Borrower's rights and
remedies with respect to a breach or non-performance of the Seller's
representations, warranties, covenants and agreements, all of Seller's indemnity
obligations to Borrower and all of Borrower's right, title and interest in the
Escrow Agreement (as defined in the Asset Purchase Agreement) and any security
entitlement and proceeds held therein, and all of Borrower's right, title and
interest in the Assignment (as defined in the Asset Purchase Agreement). From
time to time, upon the written request of Lender, Borrower shall execute, and
shall cause the securities intermediary to execute, such agreements, documents
and instruments as the Lender shall reasonably require to evidence and perfect
the collateral assignment and security interest granted by Borrower in favor of
the Lender.
ARTICLE 4
CONDITIONS OF LENDING
SECTION 4.1 CONDITIONS PRECEDENT TO THE INITIAL REVOLVING ADVANCE. The
Lender's obligation to make the initial Revolving Advance hereunder shall be
subject to the condition precedent that the Lender shall have received all of
the following, each in form and substance satisfactory to the Lender in its sole
and absolute discretion:
(a) This Agreement, properly executed by the
Borrower.
(b) The Revolving Note, properly executed by the
Borrower.
(c) The Term Loan Note, properly executed by the
Borrower.
(d) The Warrant, properly executed by the Borrower.
(e) A true and correct copy of any and all leases
pursuant to which the Borrower is leasing the Premises, together with a
landlord's disclaimer, consent and subordination with respect to each such
lease.
(f) A true and correct copy of any and all mortgages
pursuant to which the Borrower or any Affiliate has mortgaged the Premises,
together with a mortgagee's disclaimer and consent with respect to each such
mortgage.
(g) A true and correct copy of any and all agreements
pursuant to which the Borrower's property is in the possession of any Person
other than the Borrower, together with, in the case of any goods held by such
Person for resale, (i) a consignee's acknowledgment and waiver of liens, (ii)
UCC financing statements sufficient to protect the Borrower's and the Lender's
interests in such goods, and (iii) UCC searches showing that no other secured
party has filed a financing statement against such Person and covering property
similar to the Borrower's other than the Borrower, or if there exists any such
secured party, evidence that each such secured party has received notice from
the Borrower and the Lender sufficient to protect the Borrower's and the
Lender's interests in the Borrower's goods from any claim by such secured party.
(h) An acknowledgment and waiver of liens from each
warehouse in which the Borrower is storing Inventory, if any.
(i) A true and correct copy of any and all agreements
pursuant to which the Borrower's property is in the possession of any Person
other than the Borrower, together with, (i) an acknowledgment and waiver of
liens from each subcontractor who has possession of the Borrower's goods from
time to time, (ii) UCC financing statements sufficient to protect the Borrower's
and the Lender's interests in such goods, and (iii) UCC searches showing that no
other secured party has filed a financing statement covering such Person's
property other than the Borrower, or if there exists any such secured party,
evidence that each such secured party has received notice from the Borrower and
the Lender sufficient to protect the Borrower's and the Lender's interests in
the Borrower's goods from any claim by such secured party.
(j) An acknowledgment and agreement from each
licensor in favor of the Lender, together with a true, correct and complete copy
of all license agreements.
(k) The Collateral Account Agreement, properly
executed by the Borrower and Norwest Bank Arizona.
(l) The Lockbox Agreement, properly executed by the
Borrower and Norwest Bank Arizona.
(m) The Patent and Trademark Security Agreement,
properly executed by the Borrower.
(n) The Intercreditor Agreement, properly executed by
the Debenture Holders and acknowledged by the Borrower.
(o) Current searches of appropriate filing offices
showing that (i) no state or federal tax liens or judgments have been filed or
recorded and remain in effect against the Borrower or the Collateral, (ii) no
financing statements or assignments of patents, trademarks or copyrights have
been filed and remain in effect against the Borrower or the Collateral, except
those financing statements and assignments of patents, trademarks or copyrights
relating to Permitted Liens or to liens held by Persons who have agreed in
writing that upon receipt of proceeds of the Advances, they will deliver UCC
releases and/or terminations and releases of such assignments of patents,
trademarks or copyrights satisfactory to the Lender, and (iii) the Lender has
duly filed all financing statements necessary to perfect the Security Interest,
to the extent the Security Interest is capable of being perfected by filing.
(p) A certificate of each Borrower's Secretary or
Assistant Secretary certifying as to (i) the resolutions of the Borrower's
directors and, if required, shareholders, authorizing the execution, delivery
and performance of the Loan Documents, (ii) the Borrower's articles of
incorporation and bylaws, and (iii) the signatures of the Borrower's officers or
agents authorized to execute and deliver the Loan Documents and other
instruments, agreements and certificates, including Advance requests, on the
Borrower's behalf.
(q) A current certificate issued by the applicable
governmental authorities of each Borrower's state of incorporation or formation,
certifying that the Borrower is in compliance with all applicable organizational
requirements of such states and has paid all franchise and other taxes necessary
to be in good standing in such jurisdiction.
(r) Evidence that the Borrower is duly licensed or
qualified to transact business in all jurisdictions where the character of the
property owned or leased or the nature of the business transacted by it makes
such licensing or qualification necessary.
(s) A certificate of an officer of the Borrower
confirming the representations and warranties set forth in Article 5.
(t) An opinion of counsel to the Borrower, addressed
to the Lender.
(u) Certificates of the insurance required hereunder,
with all hazard insurance containing a lender's loss payable endorsement in the
Lender's favor and with all liability insurance naming the Lender as an
additional insured.
(v) Payment of the fees due to Lender through the
date of the initial Advance under Section 2.3 and expenses incurred by the
Lender through such date and required to be paid by the Borrower under Section
9.7, including all legal expenses incurred through the date of this Agreement.
(w) A current update of the status of any pending
material litigation from Borrower's counsel.
(x) A written waiver from the Debenture Holders with
respect to the financial covenant defaults and any other existing defaults (that
have not been previously waived) under the Debentures.
(y) A written agreement from Renaissance Capital
Growth & Income Fund III, Inc. to waive all mandatory principal redemption
installments under its Debenture through October 31, 1999.
(z) Such other documents as the Lender in its sole
discretion may require.
SECTION 4.2 CONDITIONS PRECEDENT TO TERM LOAN ADVANCE. The Lender's
obligation to make the Term Loan Advance hereunder shall be subject to the
condition precedent that the Lender shall have received all of the following,
each in form and substance satisfactory to the Lender in its sole and absolute
discretion, and shall be subject to the further conditions precedent that on
such date:
(a) All of the conditions precedent to the making of
the Initial Revolving Advance have been satisfied or waived in writing by
Lender.
(b) Evidence that the transactions contemplated by
the Asset Purchase Agreement will concurrently be consummated and that all
filings necessary to effect the transfer of the assets from Seller to Borrower
will concurrently occur, together with copies of the fully executed Asset
Purchase Agreement and all instruments, agreements, bills of sale, assignments,
certificates and other documents required to be delivered by Borrower or Seller
under the Asset Purchase Agreement, including, without limitation, lien releases
and payoff letters from any Person holding a lien on the assets acquired by
Borrower pursuant to the Asset Purchase Agreement, certified as true, correct
and complete copies of the original of such items by the Secretary or Assistant
Secretary of Borrower, together with evidence of all payments pursuant to the
payoff letters.
(c) An assignment of all of Borrower's right, title
and interest in, to and under the Asset Purchase Agreement, including, without
limitation, any representations, warranties, covenants, agreements and
indemnities of Seller that survive the closing of the transaction.
(d) Current searches of appropriate filing offices
showing that (i) no state or federal tax liens or judgments have been filed or
recorded and remain in effect against the Seller or the assets to be acquired by
Borrower from Seller, (ii) no financing statements or assignments of patents,
trademarks or copyrights have been filed and remain in effect against the Seller
or the assets to be acquired by Borrower from Seller, except those financing
statements and assignments of patents, trademarks or copyrights relating to
Permitted Liens or to liens held by Persons who have agreed in writing that upon
receipt of proceeds of the Advances, they will deliver UCC releases and/or
terminations and releases of such assignments of patents, trademarks or
copyrights satisfactory to the Lender, and (iii) the Lender has duly filed all
financing statements necessary to perfect the Security Interest, to the extent
the Security Interest is capable of being perfected by filing.
(e) An opinion of counsel to the Seller, addressed to
the Lender, or a separate reliance letter in favor of Lender with respect to
such opinion from counsel to the Seller, in the form required by the Asset
Purchase Agreement.
(f) Payment of the fees due to Lender through the
date of the Term Loan Advance under Section 2.3 and expenses incurred by the
Lender through such date and required to be paid by the Borrower under Section
9.7, including all legal expenses incurred through the date of this Agreement.
(g) The representations and warranties contained in
Article 5 are correct on and as of the date of such Advance as though made on
and as of such date, except to the extent that such representations and
warranties relate solely to an earlier date.
(h) No event has occurred and is continuing, or would
result from such Advance which constitutes a Default or an Event of Default.
(i) Such other documents as the Lender in its sole
discretion may require.
SECTION 4.3 CONDITIONS PRECEDENT TO ALL ADVANCES. The Lender's
obligation to make each Advance shall be subject to the further conditions
precedent that on such date:
(a) the representations and warranties contained in
Article 5 are correct on and as of the date of such Advance as though made on
and as of such date, except to the extent that such representations and
warranties relate solely to an earlier date; and
(b) no event has occurred and is continuing, or would
result from such Advance which constitutes a Default or an Event of Default.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
Each Borrower individually, and all of the Borrowers jointly, represent
and warrant to the Lender as follows:
SECTION 5.1 CORPORATE EXISTENCE AND POWER; NAME; CHIEF EXECUTIVE
OFFICE; INVENTORY AND EQUIPMENT LOCATIONS; TAX IDENTIFICATION NUMBER. Each
Borrower is a corporation, duly organized, validly existing and in good standing
under the laws of its state of incorporation or formation and is duly licensed
or qualified to transact business in all jurisdictions where the character of
the property owned or leased or the nature of the business transacted by it
makes such licensing or qualification necessary. Each Borrower has all requisite
power and authority, corporate or otherwise, to conduct its business, to own its
properties and to execute and deliver, and to perform all of its obligations
under, the Loan Documents, including, with respect to ▇▇▇▇▇ Brothers, Inc., the
Warrant. During its existence, each Borrower has done business solely under the
names set forth in Schedule 5.1 hereto. Each Borrower's chief executive office
and principal place of business is located at the address set forth in Schedule
5.1 hereto, and each of the Borrower's records relating to its business or the
Collateral are kept at that location. All Inventory and Equipment is located at
that location or at one of the other locations set forth in Schedule 5.1 hereto.
Each Borrower's tax identification number is correctly set forth in Section 3.6
hereto.
SECTION 5.2 AUTHORIZATION OF BORROWING; NO CONFLICT AS TO LAW OR
AGREEMENTS. The execution, delivery and performance by each Borrower of the Loan
Documents (including, with respect to ▇▇▇▇▇ Brothers, Inc. only, the Warrant)
and the borrowings from time to time hereunder have been duly authorized by all
necessary corporate action and do not and will not (i) require any consent or
approval of the Borrower's stockholders; (ii) require any authorization, consent
or approval by, or registration, declaration or filing with, or notice to, any
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, or any third party, except such authorization, consent,
approval, registration, declaration, filing or notice as has been obtained,
accomplished or given prior to the date hereof and any normal and customary
subsequent disclosure filings required under the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder, that do
not affect the validity or enforceability of the Loan Documents; (iii) violate
any provision of any law, rule or regulation (including, without limitation,
Regulation X of the Board of Governors of the Federal Reserve System) or of any
order, writ, injunction or decree presently in effect having applicability to
the Borrower or of the Borrower's articles of incorporation or bylaws; (iv)
result in a breach of or constitute a default under any indenture or loan or
credit agreement or any other material agreement, lease or instrument to which
the Borrower is a party or by which it or its properties may be bound or
affected; or (v) result in, or require, the creation or imposition of any
mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance of any nature (other than the Security Interest) upon or with
respect to any of the properties now owned or hereafter acquired by the
Borrower.
SECTION 5.3 LEGAL AGREEMENTS. This Agreement constitutes and, upon due
execution by the Borrower, the other Loan Documents will constitute the legal,
valid and binding obligations of the Borrower, enforceable against the Borrower
in accordance with their respective terms.
SECTION 5.4 SUBSIDIARIES. Except as set forth in Schedule 5.4, the
Borrower has no Subsidiaries.
SECTION 5.5 FINANCIAL CONDITION; NO ADVERSE CHANGE. The Borrower has
heretofore furnished to the Lender audited financial statements of the Borrower
for its fiscal year ended December 31, 1997 and unaudited financial statements
of the Borrower for the fiscal year-to-date period ended September 30, 1998, and
those statements fairly present the Borrower's financial condition on the dates
thereof and the results of its operations and cash flows for the periods then
ended and were prepared in accordance with GAAP. Since the date of the most
recent financial statements, there has been no material adverse change in the
Borrower's business, properties or condition (financial or otherwise), except as
disclosed in public disclosure filings with the United States Securities and
Exchange Commission after September 30, 1998 and received by Lender.
SECTION 5.6 LITIGATION. There are no actions, suits or proceedings
pending or, to the Borrower's knowledge, threatened against or affecting the
Borrower or any of its Affiliates or the properties of the Borrower or any of
its Affiliates before any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which, if determined
adversely to the Borrower or any of its Affiliates, would have a material
adverse effect on the financial condition, properties or operations of the
Borrower or any of its Affiliates, except as disclosed in public disclosure
filings with the Securities and Exchange Commission after September 30, 1998 and
received by Lender, and except as disclosed in the letter dated March 3, 1998
from Mariscal, Weeks, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇, P.A. to ▇▇▇▇▇ Brothers, Inc.
responding to the auditor's request for information (the "Audit Response
Letter").
SECTION 5.7 REGULATION U. The Borrower is not engaged in the business
of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System), and no part of the proceeds of any Advance will be used by
Borrower to purchase or carry any margin stock or to extend credit to others for
the purpose of purchasing or carrying any margin stock.
SECTION 5.8 TAXES. The Borrower and its Affiliates have paid or caused
to be paid to the proper authorities when due all federal, state and local taxes
withheld by each of them. The Borrower and its Affiliates have paid or caused to
be paid to the proper authorities when due all federal, state and local taxes
which to the knowledge of the officers of the Borrower or any Affiliate, as the
case may be, are required to be withheld by each of them and neither Borrower
nor any of its Affiliates has any information or reason to believe that it has
failed to properly withhold any federal, state or local taxes required to be
withheld under applicable law. The Borrower and its Affiliates have filed all
federal, state and local tax returns which to the knowledge of the officers of
the Borrower or any Affiliate, as the case may be, are required to be filed, and
the Borrower and its Affiliates have paid or caused to be paid to the respective
taxing authorities all taxes as shown on said returns or on any assessment
received by any of them to the extent such taxes have become due.
SECTION 5.9 TITLES AND LIENS. The Borrower has good and absolute title
to all Collateral described in the collateral reports provided to the Lender and
all other Collateral, properties and assets reflected in the latest financial
statements referred to in Section 5.5 and all proceeds thereof, free and clear
of all mortgages, security interests, liens and encumbrances, except for
Permitted Liens, and upon the consummation of the Asset Purchase Agreement, the
Borrower will have good and absolute title to all of the property and assets
intended to be assigned, transferred or conveyed pursuant to the Asset Purchase
Agreement, free and clear of all mortgages, security interests, liens and
encumbrances, except for Permitted Liens. No financing statement naming the
Borrower or the Seller (with respect to the property and assets intended to be
assigned, transferred or conveyed pursuant to the Asset Purchase Agreement) as
debtor is on file in any office except to perfect only Permitted Liens.
SECTION 5.10 PLANS. Except as disclosed to the Lender in writing prior
to the date hereof, neither the Borrower nor any of its Affiliates maintains or
has maintained any Plan. Neither the Borrower nor any Affiliate has received any
notice or has any knowledge to the effect that it is not in full compliance with
any of the requirements of ERISA. No Reportable Event or other fact or
circumstance which may have an adverse effect on the Plan's tax qualified status
exists in connection with any Plan. Neither the Borrower nor any of its
Affiliates has:
(a) Any accumulated funding deficiency within the
meaning of ERISA; or
(b) Any liability or knows of any fact or
circumstances which could result in any liability to the Pension Benefit
Guaranty Corporation, the Internal Revenue Service, the Department of Labor or
any participant in connection with any Plan (other than accrued benefits which
or which may become payable to participants or beneficiaries of any such Plan).
SECTION 5.11 DEFAULT. To the best of the Borrower's knowledge after due
and diligent inquiry, the Borrower is in compliance (or any such non-compliance
has been waived in writing) with all provisions of all agreements, instruments,
decrees and orders to which it is a party or by which it or its property is
bound or affected, the breach or default of which could have a material adverse
effect on the Borrower's financial condition, properties or operations.
SECTION 5.12 ENVIRONMENTAL MATTERS.
(a) Definitions. As used in this Agreement, the
following terms shall have the following meanings:
(i) "Environmental Law" means any federal,
state, local or other governmental statute, regulation, law or ordinance dealing
with the protection of human health and the environment.
(ii) "Hazardous Substances" means
pollutants, contaminants, hazardous substances, hazardous wastes, petroleum and
fractions thereof, and all other chemicals, wastes, substances and materials
listed in, regulated by or identified in any Environmental Law.
(b) To the Borrower's best knowledge, there are not
present in, on or under the Premises any Hazardous Substances in such form or
quantity as to create any liability or obligation for either the Borrower or the
Lender under common law of any jurisdiction or under any Environmental Law, and
no Hazardous Substances have ever been stored, buried, spilled, leaked,
discharged, emitted or released in, on or under the Premises in such a way as to
create any such liability.
(c) To the Borrower's best knowledge, the Borrower
has not disposed of Hazardous Substances in such a manner as to create any
liability under any Environmental Law.
(d) There are not and there never have been any
requests, claims, notices, investigations, demands, administrative proceedings,
hearings or litigation, relating in any way to the Premises or the Borrower,
alleging liability under, violation of, or noncompliance with any Environmental
Law or any license, permit or other authorization issued pursuant thereto. To
the Borrower's best knowledge, no such matter is threatened or impending.
(e) To the Borrower's best knowledge, the Borrower's
businesses are, and since Borrower's acquisition of the business and operations
of the Borrower have always been, conducted in accordance with all Environmental
Laws, and all licenses, permits and other authorizations required pursuant to
any Environmental Law and necessary for the lawful and efficient operation of
such businesses are in the Borrower's possession and are in full force and
effect. No permit required under any Environmental Law is scheduled to expire
within 12 months and, to the Borrower's best knowledge, there is no threat that
any such permit will be withdrawn, terminated, limited or materially changed.
(f) To the Borrower's best knowledge, the Premises
are not and never have been listed on the National Priorities List, the
Comprehensive Environmental Response, Compensation and Liability Information
System or any similar federal, state or local list, schedule, log, inventory or
database.
(g) The Borrower has delivered to Lender all
environmental assessments, audits, reports, permits, licenses and other
documents describing or relating in any way to the Premises or Borrower's
businesses.
SECTION 5.13 SUBMISSIONS TO LENDER. All financial and other information
provided to the Lender by or on behalf of the Borrower in connection with the
Borrower's request for the credit facilities contemplated hereby is true and
correct in all material respects and, as to projections, valuations or proforma
financial statements, are based on assumptions that Borrower believes in good
faith are likely to be true and present a good faith opinion as to such
projections, valuations and proforma financial statements.
SECTION 5.14 FINANCING STATEMENTS. The Borrower has provided to the
Lender signed financing statements sufficient when filed to perfect the Security
Interest and the other security interests created by the Security Documents.
When such financing statements are filed in the offices noted therein, the
Lender will have a valid and perfected security interest in all Collateral and
all other collateral described in the Security Documents which is capable of
being perfected by filing financing statements. None of the Collateral or other
collateral covered by the Security Documents is or will become a fixture on real
estate, unless a sufficient fixture filing is in effect with respect thereto.
SECTION 5.15 RIGHTS TO PAYMENT. Each right to payment and each
instrument, document, chattel paper and other agreement constituting or
evidencing Collateral or other collateral covered by the Security Documents is
(or, in the case of all future Collateral or such other collateral, will be when
arising or issued) the valid, genuine and legally enforceable obligation,
subject to no defense, setoff or counterclaim known to Borrower (or in the
course of Borrower's normal and customary diligence should have been known), of
the account debtor or other obligor named therein or in the Borrower's records
pertaining thereto as being obligated to pay such obligation.
SECTION 5.16 FINANCIAL SOLVENCY. Both before and after giving effect to
the acquisition and all of the transactions contemplated in the Loan Documents,
none of the Borrower or its Affiliates:
(a) was or will be insolvent, as that term is used
and defined in Section 101(32) of the United States Bankruptcy Code and Section
2 of the Uniform Fraudulent Transfer Act;
(b) has unreasonably small capital or is engaged or
about to engage in a business or a transaction for which any remaining assets of
the Borrower or such Affiliate are unreasonably small;
(c) by executing, delivering or performing its
obligations under the Loan Documents or other documents to which it is a party
or by taking any action with respect thereto, intends to, nor believes that it
will, incur debts beyond its ability to pay them as they mature;
(d) by executing, delivering or performing its
obligations under the Loan Documents or other documents to which it is a party
or by taking any action with respect thereto, intends to hinder, delay or
defraud either its present or future creditors; and
(e) at this time contemplates filing a petition in
bankruptcy or for an arrangement or reorganization or similar proceeding under
any law any jurisdiction, nor, to the best knowledge of the Borrower, is the
subject of any actual, pending or threatened bankruptcy, insolvency or similar
proceedings under any law of any jurisdiction.
SECTION 5.17 YEAR 2000 COMPLIANCE. Borrower and its Subsidiaries have
conducted a comprehensive internal review and assessment of Borrower's state of
readiness, the costs to address Borrower's Year 2000 issues, the risks of
Borrower's Year 2000 issues and the Borrower's contingency plans, in accordance
with the Securities and Exchange Commission's Release No. 33-7558, DISCLOSURE OF
YEAR 2000 ISSUES AND CONSEQUENCES BY PUBLIC COMPANIES, INVESTMENT ADVISERS,
INVESTMENT COMPANIES AND MUNICIPAL SECURITIES ISSUERS (issued August 5, 1998)
(the "SEC Year 2000 Release") and, subject to the qualifications, exceptions and
discussion in Borrower's June 30, 1998 Form 10-QSB quarterly report, Borrower
has determined that its computer systems and applications, microprocessor based
goods and equipment owned or used by Borrower and its Subsidiaries in their
business, and all products currently sold by Borrower and its Subsidiaries are
Year 2000 compliant and as such will calculate and perform prior to, during, and
after the Year 2000 and, to Borrower's best knowledge, third parties providing
services or materials to Borrower that are material to Borrower will continue to
provide such service or materials without interruption caused by Year 2000
compliance. For purposes of this Agreement, Year 2000 compliant is defined as
accurately processing date-related data (including, but not limited to,
calculating, comparing and sequencing) from, into and between the year 1999 and
the Year 2000, including leap year calculations, and specifically including any
error relating to, or the product of, date data or date information that
represents or references different centuries or more than one century. Based on
the foregoing review, assessment and inquiry, Borrower reasonably believes that
any problem related to Year 2000 compliance will not result in a material
adverse effect on any of the operations, business or properties of Borrower or
its Subsidiaries.
ARTICLE 6
BORROWER'S AFFIRMATIVE COVENANTS
So long as the Obligations shall remain unpaid, or either Credit
Facility shall remain outstanding, the Borrower will comply with the following
requirements, unless the Lender shall otherwise consent in writing:
SECTION 6.1 REPORTING REQUIREMENTS. The Borrower will deliver, or cause
to be delivered, to the Lender each of the following, which shall be in form and
detail acceptable to the Lender:
(a) as soon as available, and in any event within 90
days after the end of each fiscal year of the Borrower, the Borrower's and its
Subsidiaries' audited financial statements with the unqualified opinion of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (or any other so-called "Big 5" accounting firm or any other
independent certified public accountants selected by the Borrower and, if not a
so-called "Big 5" accounting firm, acceptable to the Lender), which annual
financial statements shall include the Borrower's and its Subsidiaries' balance
sheet as of the end of such fiscal year and the related statements of the
Borrower's and its Subsidiaries' income, retained earnings and cash flows for
the fiscal year then ended, prepared, if the Lender so requests, on a
consolidating and consolidated, all in reasonable detail and prepared in
accordance with GAAP, together with (i) copies of all management letters
prepared by such accountants; (ii) a report signed by such accountants stating
that in making the investigations necessary for said opinion nothing has come to
their attention, except as specifically stated, that would cause them to believe
that a Default or Event of Default has occurred hereunder, and all relevant
facts in reasonable detail to evidence, and the computations as to, whether or
not the Borrower is in compliance with the requirements set forth in Sections
6.14, 6.15 and 6.16; and (iii) a certificate of the Borrower's chief financial
officer stating that such financial statements have been prepared in accordance
with GAAP and whether or not such officer has knowledge of the occurrence of any
Default or Event of Default hereunder and, if so, stating in reasonable detail
the facts with respect thereto;
(b) as soon as available and in any event within 20
days after the end of each month, an unaudited/internal balance sheet and
statements of income and retained earnings of the Borrower as of the end of and
for such month and for the year to date period then ended, prepared, if the
Lender so requests, on a consolidating and consolidated basis to include any
Subsidiaries, in reasonable detail and stating in comparative form the figures
for the corresponding date and periods in the previous year, all prepared in
accordance with GAAP; and accompanied by a certificate of the Borrower's chief
financial officer, substantially in the form of Exhibit C hereto stating (i)
that such financial statements have been prepared in accordance with GAAP, (ii)
whether or not such officer has knowledge of the occurrence of any Default or
Event of Default hereunder not theretofore reported and remedied and, if so,
stating in reasonable detail the facts with respect thereto, and (iii) all
relevant facts in reasonable detail to evidence, and the computations as to,
whether or not the Borrower is in compliance with the requirements set forth in
Sections 6.14, 6.15 and 6.16;
(c) within 15 days after the end of each month or
more frequently if the Lender so requires, agings of the Borrower's accounts
receivable and its accounts payable, and a calculation of the Borrower's
Accounts and Eligible Accounts as of the end of such month or such shorter time
period, and within 15 days after the end of each month (or more frequently
during a Default Period if the Lender so requires), an inventory certification
report and a calculation of the Borrower's Inventory and Eligible Inventory as
of the end of such month or, during a Default Period, such shorter time period
if the Lender so requires;
(d) within 30 days after the end of Borrower's 1998
fiscal year and at least 30 days before the beginning of each fiscal year of the
Borrower thereafter, the projected balance sheets and income statements for each
month of such year, each in reasonable detail, representing the Borrower's good
faith projections and certified by the Borrower's chief financial officer as
being the most accurate projections available and identical to the projections
used by the Borrower for internal planning purposes, together with such
supporting schedules and information as the Lender may in its discretion
require;
(e) immediately after the commencement thereof,
notice in writing of all litigation and of all proceedings before any
governmental or regulatory agency affecting the Borrower of the type described
in Section 5.12 or which seek a monetary recovery against the Borrower in excess
of $10,000;
(f) as promptly as practicable (but in any event not
later than 5 business days) after an officer of the Borrower obtains knowledge
of the occurrence of any breach, default or event of default under any Security
Document or any event which constitutes a Default or Event of Default hereunder,
notice of such occurrence, together with a detailed statement by a responsible
officer of the Borrower of the steps being taken by the Borrower to cure the
effect of such breach, default or event;
(g) as soon as possible and in any event within 30
days after the Borrower knows or has reason to know that any Reportable Event
with respect to any Plan has occurred, the statement of the Borrower's chief
financial officer setting forth details as to such Reportable Event and the
action which the Borrower proposes to take with respect thereto, together with a
copy of the notice of such Reportable Event to the Pension Benefit Guaranty
Corporation;
(h) as soon as possible, and in any event within 10
days after the Borrower fails to make any quarterly contribution required with
respect to any Plan under Section 412(m) of the Internal Revenue Code of 1986,
as amended, the statement of the Borrower's chief financial officer setting
forth details as to such failure and the action which the Borrower proposes to
take with respect thereto, together with a copy of any notice of such failure
required to be provided to the Pension Benefit Guaranty Corporation;
(i) promptly upon knowledge thereof, notice of (i)
any disputes or claims by the Borrower's customers exceeding $10,000
individually or $25,000 in the aggregate during any fiscal year; (ii) credit
memos; (iii) any goods returned to or recovered by the Borrower; and (iv) any
change in the persons constituting the Borrower's officers and directors;
(j) promptly upon knowledge thereof, notice of any
loss of or material damage to any Collateral or other collateral covered by the
Security Documents or of any substantial adverse change in any Collateral or
such other collateral or the prospect of payment thereof;
(k) promptly upon their distribution, copies of all
financial statements, reports and proxy statements which the Borrower shall have
sent to its stockholders;
(l) promptly after the sending or filing thereof,
copies of all regular and periodic and special reports which the Borrower shall
file with the Securities and Exchange Commission or any national securities
exchange and copies of all press releases prepared by or on behalf of Borrower;
(m) promptly upon knowledge thereof, notice of the
Borrower's violation of any law, rule or regulation, the non-compliance with
which could materially and adversely affect the Borrower's business or its
financial condition; and
(n) from time to time, with reasonable promptness,
any and all receivables schedules, collection reports, deposit records,
equipment schedules, copies of invoices to account debtors, shipment documents
and delivery receipts for goods sold, and such other material, reports, records
or information as the Lender may request.
SECTION 6.2 BOOKS AND RECORDS; INSPECTION AND EXAMINATION. The Borrower
will keep accurate books of record and account for itself pertaining to the
Collateral and pertaining to the Borrower's and its Subsidiaries' business and
financial condition and such other matters as the Lender may from time to time
request in which true and complete entries will be made in accordance with GAAP
and, upon the Lender's request, will permit any officer, employee, attorney or
accountant for the Lender to audit, review, make extracts from or copy any and
all corporate and financial books and records of the Borrower and its
Subsidiaries at all times during ordinary business hours, to send and discuss
with account debtors and other obligors requests for verification of amounts
owed to the Borrower or its Subsidiaries, and to discuss the Borrower's affairs
with any of its directors, officers, employees or agents. The Borrower will
permit the Lender, or its employees, accountants, attorneys or agents, to
examine and inspect any Collateral, other collateral covered by the Security
Documents or any other property of the Borrower or its Subsidiaries at any time
during ordinary business hours.
SECTION 6.3 ACCOUNT VERIFICATION. The Lender may at any time and from
time to time send or require the Borrower to send requests for verification of
accounts or notices of assignment to account debtors and other obligors. The
Lender may also at any time and from time to time telephone account debtors and
other obligors to verify accounts.
SECTION 6.4 COMPLIANCE WITH LAWS.
(a) The Borrower will (i) comply with, and cause its
Subsidiaries to comply with, the requirements of applicable laws and
regulations, the non-compliance with which would materially and adversely affect
its or their business or its or their financial condition and (ii) use and keep
the Collateral, and require that others use and keep the Collateral, only for
lawful purposes, without violation of any federal, state or local law, statute
or ordinance.
(b) Without limiting the foregoing undertakings, the
Borrower specifically agrees that it will comply with, and cause its
Subsidiaries to comply with, all applicable Environmental Laws and obtain and
comply with all permits, licenses and similar approvals required by any
Environmental Laws, and Borrower will not, nor will it permit its Subsidiaries
to, generate, use, transport, treat, store or dispose of any Hazardous
Substances in such a manner as to create any liability or obligation under the
common law of any jurisdiction or any Environmental Law.
(c) The Borrower will comply with the reporting
requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), so long as it is required to do so pursuant to the
1934 Act. Until the earlier of (i) two years from the issuance date of the
Warrant, or (ii) the sale by Lender of all of the securities to be issued under
the Warrant and the termination of the Warrant, the Borrower shall comply with
the disclosure obligations set forth Paragraph (c) of Rule 144 promulgated under
the Securities Act of 1933, as amended ("Rule 144"), or any successor rule or
regulation thereto or any statute hereafter adopted to replace or establish the
exemption that is now covered by Rule 144.
SECTION 6.5 PAYMENT OF TAXES AND OTHER CLAIMS. The Borrower and its
Subsidiaries will pay or discharge, when due, (a) all taxes, assessments and
governmental charges levied or imposed upon it or upon its income or profits,
upon any properties belonging to it (including, without limitation, the
Collateral) or upon or against the creation, perfection or continuance of the
Security Interest, prior to the date on which penalties attach thereto, (b) all
federal, state and local taxes required to be withheld by it, and (c) all lawful
claims for labor, materials and supplies which, if unpaid, might by law become a
lien or charge upon any properties of the Borrower or its Subsidiaries;
provided, that neither the Borrower nor its Subsidiaries shall be required to
pay any such tax, assessment, charge or claim whose amount, applicability or
validity is being contested in good faith by appropriate proceedings and for
which proper reserves have been made.
SECTION 6.6 MAINTENANCE OF PROPERTIES.
(a) The Borrower will keep and maintain the
Collateral, the other collateral covered by the Security Documents and all of
its other properties necessary or useful in its business in good condition,
repair and working order (normal wear and tear excepted) and will from time to
time replace or repair any worn, defective or broken parts; provided, however,
that nothing in this Section 6.6 shall prevent the Borrower from discontinuing
the operation and maintenance of any of its properties if such discontinuance
is, in the Lender's reasonable judgment, desirable in the conduct of the
Borrower's business and not disadvantageous in any material respect to the
Lender.
(b) The Borrower will defend the Collateral against
all claims or demands of all persons (other than the Lender) claiming the
Collateral or any interest therein.
(c) The Borrower will keep all Collateral and other
collateral covered by the Security Documents free and clear of all security
interests, liens and encumbrances except Permitted Liens.
SECTION 6.7 INSURANCE. The Borrower and its Subsidiaries will obtain
and at all times maintain insurance with insurers believed by the Borrower to be
responsible and reputable, in such amounts and against such risks as may from
time to time be required by the Lender, but in all events in such amounts and
against such risks as is usually carried by companies engaged in similar
business and owning similar properties in the same general areas in which the
Borrower operates. Without limiting the generality of the foregoing, the
Borrower and its Subsidiaries will at all times maintain business interruption
insurance including coverage for force majeure and keep all tangible Collateral
insured against risks of fire (including so-called extended coverage), theft,
collision (for Collateral consisting of motor vehicles) and such other risks and
in such amounts as the Lender may reasonably request, with any loss payable to
the Lender to the extent of its interest, and all policies of such insurance
shall contain a lender's loss payable endorsement for the Lender's benefit
acceptable to the Lender. All policies of liability insurance required hereunder
shall name the Lender as an additional insured.
SECTION 6.8 PRESERVATION OF EXISTENCE. The Borrower and its
Subsidiaries will preserve and maintain their existence and all of their rights,
privileges and franchises necessary or desirable in the normal conduct of their
business and shall conduct their business in an orderly, efficient and regular
manner.
SECTION 6.9 DELIVERY OF INSTRUMENTS, ETC. Upon request by the Lender,
the Borrower will promptly deliver to the Lender in pledge all instruments,
documents and chattel papers constituting Collateral, duly endorsed or assigned
by the Borrower.
SECTION 6.10 COLLATERAL ACCOUNT.
(a) If, notwithstanding the instructions to debtors
to make payments to the Lockbox, the Borrower receives any payments on
Receivables, the Borrower shall deposit such payments into the Collateral
Account. Until so deposited, the Borrower shall hold all such payments in trust
for and as the property of the Lender and shall not commingle such payments with
any of its other funds or property.
(b) Amounts deposited in the Collateral Account shall
not bear interest and shall not be subject to withdrawal by the Borrower, except
after full payment and discharge of all Obligations.
(c) All deposits in the Collateral Account shall
constitute proceeds of Collateral and shall not constitute payment of the
Obligations. Subject to Section 2.9 and provided that no Default or Event of
Default has occurred and is continuing, after confirmation of good, collected
funds, the Lender shall apply deposited funds in the Collateral Account to the
payment of the Obligations in the following order by transferring such funds to
the Lender's general account: first, to outstanding charges due under the Credit
Facilities; second, to accrued and unpaid interest then due and payable on the
Revolving Advances; third; to the principal installment payments and accrued and
unpaid interest then due and payable under the Term Loan; and fourth, to the
principal amount of the Revolving Advances. Any remaining funds in the
Collateral Account shall be transferred to Borrower's general account. During
the continuance of a Default or Event of Default, after confirmation of good,
collected funds, the Lender may hold all funds in the Collateral Account as
additional security for the Obligations and/or may apply deposited funds in the
Collateral Account to the payment of the Obligations by transferring such funds
to the Lender's general account in such order and in such amounts as the Lender,
in its discretion, may from time to time determine.
(d) All items deposited in the Collateral Account
shall be subject to final payment. If any such item is returned uncollected, the
Borrower will immediately pay the Lender, or, for items deposited in the
Collateral Account, the bank maintaining such account, the amount of that item,
or such bank at its discretion may charge any uncollected item to the Borrower's
commercial account or other account. The Borrower shall be liable as an endorser
on all items deposited in the Collateral Account, whether or not in fact
endorsed by the Borrower.
SECTION 6.11 INTENTIONALLY DELETED
SECTION 6.12 PERFORMANCE BY THE LENDER. Without limiting Lender's
remedies in Section 8.2, if the Borrower at any time fails to perform or observe
any of the foregoing covenants contained in this Article 6 or elsewhere herein,
and if such failure shall continue for a period of thirty (30) calendar days
after the Lender gives the Borrower written notice thereof (or in the case of
the agreements contained in Sections 6.4, 6.5, 6.6, 6.7 and 6.10, immediately
upon the occurrence of such failure, without notice or lapse of time), the
Lender may, but need not, perform or observe such covenant on behalf and in the
name, place and stead of the Borrower (or, at the Lender's option, in the
Lender's name) and may, but need not, take any and all other actions which the
Lender may reasonably deem necessary to cure or correct such failure (including,
without limitation, the payment of taxes, the satisfaction of security
interests, liens or encumbrances, the performance of obligations owed to account
debtors or other obligors, the procurement and maintenance of insurance, the
execution of assignments, security agreements and financing statements, and the
endorsement of instruments); and the Borrower shall thereupon pay to the Lender
on demand the amount of all monies expended and all costs and expenses
(including reasonable attorneys' fees and legal expenses) incurred by the Lender
in connection with or as a result of the performance or observance of such
agreements or the taking of such action by the Lender, together with interest
thereon from the date expended or incurred at the Term Loan Rate. To facilitate
the Lender's performance or observance of such covenants of the Borrower, the
Borrower hereby irrevocably appoints the Lender, or the Lender's delegate,
acting alone, as the Borrower's attorney in fact (which appointment is coupled
with an interest) with the right (but not the duty) from time to time to create,
prepare, complete, execute, deliver, endorse or file in the name and on behalf
of the Borrower any and all instruments, documents, assignments, security
agreements, financing statements, applications for insurance and other
agreements and writings required to be obtained, executed, delivered or endorsed
by the Borrower under this Section 6.12.
SECTION 6.13 YEAR 2000 COMPLIANCE. Borrower will diligently and
continuously comply with the disclosure obligations, and update requirements
with respect to material changes in the Borrower's Year 2000 issues, pursuant to
the SEC Year 2000 Release. Borrower and its Subsidiaries will continue to follow
their Year 2000 Compliance Plan, and promptly notify Lender of any amendments
thereto. Borrower and its Subsidiaries shall promptly notify Lender of (1) any
material non-compliance with its Year 2000 Compliance Plan; (2) any material
negative testing of its hardware or software systems; (3) any third party
providing services or materials to Borrower or its Subsidiaries that are
material to Borrower or its Subsidiaries and is either not Year 2000 Compliant
or Borrower reasonably believes is not or will not be Year 2000 compliant; or
(4) any other matters that Borrower is required to disclose regarding Year 2000
issues under the SEC Year 2000 Release. Borrower shall promptly provide such
additional information as Lender shall reasonably request concerning Borrower's
Year 2000 Compliance Plan. In addition, Borrower and its Subsidiaries shall give
representatives of Lender access during all business hours to, and permit such
representatives to examine, copy, any and all books, records and documents in
possession of Borrower relating to Year 2000 compliance and to permit Lender or
its representatives to project test all computer systems of Borrower and its
Subsidiaries to determine if they are Year 2000 Compliant in an integrated
environment, all at the sole cost and expense of Borrower.
SECTION 6.14 MINIMUM DEBT SERVICE COVERAGE RATIO. The Borrower and its
Subsidiaries (including ▇▇ ▇▇▇▇▇▇ Properties, Inc.), on a consolidated basis,
will maintain a Debt Service Coverage Ratio of not less than 0.50:1.00 for the
four-quarter period ending December 31, 1998, determined as of December 31,
1998; a Debt Service Coverage Ratio of not less than 1.00:1.00 for the
one-quarter period ending March 31, 1999, determined as of March 31, 1999; a
Debt Service Coverage Ratio of not less than 1.00:1.00 for the two-quarter
period ending June 30, 1999, determined as of June 30, 1999; a Debt Service
Coverage Ratio of not less than 1.00:1.00 for the three-quarter period ending
September 30, 1999; a Debt Service Coverage Ratio of not less than 1.00:1.00 for
the four-quarter period ending December 31, 1999; and a Debt Service Coverage
Ratio of not less than 1.00:1.00, determined as of the end of each fiscal
quarter thereafter for the immediately preceding four-quarter period.
SECTION 6.15 MINIMUM NET INCOME OR MAXIMUM NET LOSS FROM ORDINARY
OPERATIONS. The Borrower's and its Subsidiaries' (including ▇▇ ▇▇▇▇▇▇
Properties, Inc.) Net Income or Net Loss, as the case may be, on a consolidated
basis, determined as of the end of each fiscal quarter for such fiscal quarter,
shall not be less than or more than the following:
---------------------------------------- ----------------------------------
Quarter Ending Net Income or Net Loss
-------------- ----------------------
---------------------------------------- ----------------------------------
12/31/98 ($50,000)
---------------------------------------- ----------------------------------
3/31/99 $50,000
---------------------------------------- ----------------------------------
6/30/99 $50,000
---------------------------------------- ----------------------------------
9/30/99 $50,000
---------------------------------------- ----------------------------------
12/31/99 $50,000
---------------------------------------- ----------------------------------
and each quarter thereafter $50,000
---------------------------------------- ----------------------------------
and the Borrower's and its Subsidiaries' (including ▇▇ ▇▇▇▇▇▇ Properties, Inc.)
Net Income or Net Loss, as the case may be, on a consolidated basis, determined
as of the end of each fiscal year for such fiscal year, shall not be less than
or more than the following:
---------------------------------------- ----------------------------------
Year Ending Net Income
----------- ----------
---------------------------------------- ----------------------------------
12/31/98 ($780,000)
---------------------------------------- ----------------------------------
12/31/99 $200,000
---------------------------------------- ----------------------------------
and each fiscal year thereafter $200,000
---------------------------------------- ----------------------------------
and the Borrower's and its Subsidiaries' (including ▇▇ ▇▇▇▇▇▇ Properties, Inc.)
Net Loss, on a consolidated basis, shall not be more than $50,000, determined as
of the end of any fiscal month, for such fiscal month, and the Borrower's and
its Subsidiaries' (including ▇▇ ▇▇▇▇▇▇ Properties, Inc.) Net Loss, on a
consolidated basis, shall not be more than $75,000 in the aggregate, determined
as of the end of any fiscal month, for the immediately preceding two fiscal
months.
SECTION 6.16 MINIMUM BOOK NET WORTH INCREASE. The Borrower's
and its Subsidiaries' (including ▇▇ ▇▇▇▇▇▇ Properties, Inc.) Book Net Worth, on
a consolidated basis, determined as of the end of each such period, shall have
increased from the Borrower's and its Subsidiaries' (including ▇▇ ▇▇▇▇▇▇
Properties, Inc.) Book Net Worth, on a consolidated basis, determined as of the
end of the immediately preceding period, by the amount set forth opposite such
period:
------------------------------------- ---------------------------------------
Quarter Ending Increase in Book Net Worth from Prior
-------------- -------------------------------------
Fiscal Quarter End
------------------
------------------------------------- ---------------------------------------
3/31/99 $50,000
------------------------------------- ---------------------------------------
6/30/99 $50,000
------------------------------------- ---------------------------------------
9/30/99 $50,000
------------------------------------- ---------------------------------------
12/31/99 $50,000
------------------------------------- ---------------------------------------
and each fiscal quarter thereafter $50,000
------------------------------------- ---------------------------------------
and the Borrower's and its Subsidiaries' (including ▇▇ ▇▇▇▇▇▇ Properties, Inc.)
Book Net Worth, on a consolidated basis, determined as of the end of each fiscal
year, shall have increased from the Borrower's and its Subsidiaries' (including
▇▇ ▇▇▇▇▇▇ Properties, Inc.) Book Net Worth, on a consolidated basis, determined
as of the end of the immediately preceding fiscal year, by the amount set forth
opposite such period (or in the case of December 31, 1998, shall not have
decreased by more than the amount set forth opposite such period):
------------------------------------- ---------------------------------------
Fiscal Year Ending Increase (or Decrease) in Book Net
------------------ ----------------------------------
Worth from Prior Fiscal Year End
--------------------------------
------------------------------------- ---------------------------------------
12/31/98 ($780,000)
------------------------------------- ---------------------------------------
12/31/99 $200,000
------------------------------------- ---------------------------------------
and each fiscal year thereafter $200,000
------------------------------------- ---------------------------------------
ARTICLE 7
NEGATIVE COVENANTS
So long as the Obligations shall remain unpaid, or either Credit
Facility shall remain outstanding, the Borrower agrees that, without the
Lender's prior written consent:
SECTION 7.1 LIENS. The Borrower will not create, incur or suffer to
exist any mortgage, deed of trust, pledge, lien, security interest, assignment
or transfer upon or of any of its assets, now owned or hereafter acquired, to
secure any indebtedness; excluding, however, from the operation of the
foregoing, the following (collectively, "Permitted Liens"):
(a) in the case of any of the Borrower's property
which is not Collateral or other collateral described in the Security Documents,
covenants, restrictions, rights, easements and minor irregularities in title
which do not materially interfere with the Borrower's business or operations as
presently conducted;
(b) mortgages, deeds of trust, pledges, liens,
security interests and assignments in existence on the date hereof and listed in
Schedule 7.1 hereto, securing indebtedness for borrowed money permitted under
Section 7.2;
(c) the Security Interest and liens and security
interests created by the Security Documents; and
(d) purchase money security interests relating to the
acquisition of machinery and equipment of the Borrower not exceeding the cost or
fair market value thereof and so long as no Default Period is then in existence
and none would exist immediately after such acquisition.
SECTION 7.2 INDEBTEDNESS. The Borrower will not incur, create, assume
or permit to exist any indebtedness or liability on account of deposits or
advances or any indebtedness for borrowed money or letters of credit issued on
the Borrower's behalf, or any other indebtedness or liability evidenced by
notes, bonds, debentures or similar obligations, except:
(a) indebtedness arising hereunder;
(b) indebtedness of the Borrower in existence on the
date hereof and listed in Schedule 7.2 hereto; and
(c) indebtedness relating to liens permitted in
accordance with Section 7.1.
SECTION 7.3 GUARANTIES. The Borrower will not assume, guarantee,
endorse or otherwise become directly or contingently liable in connection with
any obligations of any other Person, except:
(a) the endorsement of negotiable instruments by the
Borrower for deposit or collection or similar transactions in the ordinary
course of business;
(b) guarantees of indebtedness intended to be
incurred for normal and customary business purposes by the Borrower's executive
officers, such as company-issued credit cards, telephone calling cards, cellular
phone service charges or the like; and
(c) guaranties, endorsements and other direct or
contingent liabilities in connection with the obligations of other Persons, in
existence on the date hereof and listed in Schedule 7.2 hereto.
SECTION 7.4 INVESTMENTS AND SUBSIDIARIES.
(a) The Borrower will not purchase or hold
beneficially any stock or other securities or evidences of indebtedness of, make
or permit to exist any loans or advances to, or make any investment or acquire
any interest whatsoever in, any other Person, including specifically but without
limitation any partnership or joint venture, except:
(i) investments in direct obligations of the
United States of America or any agency or instrumentality thereof whose
obligations constitute full faith and credit obligations of the United States of
America having a maturity of one year or less, commercial paper issued by U.S.
corporations rated "A-1" or "A-2" by Standard & Poors Corporation or "P-1" or
"P-2" by ▇▇▇▇▇'▇ Investors Service or certificates of deposit or bankers'
acceptances having a maturity of one year or less issued by members of the
Federal Reserve System having deposits in excess of $100,000,000 (which
certificates of deposit or bankers' acceptances are fully insured by the Federal
Deposit Insurance Corporation);
(ii) travel advances or loans to the
Borrower's officers and employees not exceeding at any one time an aggregate of
$15,000; and
(iii) advances in the form of progress
payments, prepaid rent not exceeding one month or security deposits not
exceeding one month's rent.
(b) The Borrower will not create or permit to exist
any new Subsidiaries and will not conduct any business in or through ▇▇▇▇▇
Brothers Southeast, Inc. or ▇▇▇▇▇ Brothers Texas, Inc.
SECTION 7.5 DIVIDENDS AND VOLUNTARY REDEMPTION PAYMENTS. The Borrower
will not declare or pay any dividends (other than dividends payable solely in
stock of the Borrower) on any class of its stock or make any payment on account
of the purchase, redemption or other retirement of any shares of such stock or
make any distribution in respect thereof, either directly or indirectly, or give
notice of, or directly or indirectly make, any voluntary principal redemption
payment to any Debenture Holder, except that any Subsidiary may declare and pay
dividends or make other distributions to any Borrower, and (ii) Borrower may
repurchase stock or options from former directors, officers and employees (or
their legal representatives) in the ordinary course of business in accordance
with any stock option plan, stock repurchase agreement, employment agreement or
similar agreement existing as of the date of this Agreement, provided that at
the time of such repurchase and immediately after giving effect to such
repurchase no Default or Event of Default shall have occurred and be continuing.
SECTION 7.6 SALE OR TRANSFER OF ASSETS; SUSPENSION OF BUSINESS
OPERATIONS. The Borrower will not sell, lease, assign, transfer or otherwise
dispose of (i) the stock of any Subsidiary, (ii) all or a substantial part of
its assets, or (iii) any Collateral or any interest therein (whether in one
transaction or in a series of transactions) to any other Person other than the
sale of Inventory in the ordinary course of business and the annual aggregate
sale of not more than $25,000 of excess or obsolete equipment not required for
the continuation of Borrower's business to bona fide third party purchasers in
an arm's length transactions, and Borrower will not liquidate, dissolve or
suspend business operations. The Borrower will not in any manner transfer any
property without prior or present receipt of full and adequate consideration.
SECTION 7.7 CONSOLIDATION AND MERGER; ASSET ACQUISITIONS. The Borrower
will not consolidate with or merge into any Person, or permit any other Person
to merge into it, or acquire (in a transaction analogous in purpose or effect to
a consolidation or merger) all or substantially all the assets of any other
Person, except for the transactions contemplated by the Asset Purchase
Agreement.
SECTION 7.8 SALE AND LEASEBACK. The Borrower will not enter into any
arrangement, directly or indirectly, with any other Person whereby the Borrower
shall sell or transfer any real or personal property, whether now owned or
hereafter acquired, and then or thereafter rent or lease as lessee such property
or any part thereof or any other property which the Borrower intends to use for
substantially the same purpose or purposes as the property being sold or
transferred, except for the sale and leaseback of equipment occurring within
thirty (30) days after Borrower's purchase of such equipment.
SECTION 7.9 RESTRICTIONS ON NATURE OF BUSINESS. The Borrower will not
engage in any line of business other than the manufacturing and distribution of
salted snack foods, and Borrower will not purchase, lease or otherwise acquire
assets not related to its business.
SECTION 7.10 CAPITAL EXPENDITURES. The Borrower will not incur or
contract to incur total Capital Expenditures (including Unfinanced Capital
Expenditures) of more than $250,000 in the aggregate during any fiscal year or
Unfinanced Capital Expenditures of more than $200,000 in the aggregate during
any fiscal year.
SECTION 7.11 ACCOUNTING. The Borrower will not adopt any material
change in accounting principles other than as required by GAAP, provided that
Borrower may adopt changes in its accounting principles permitted by GAAP so
long as such changes, either individually or in the aggregate, do not have a
material effect on the measurement of the financial covenants in this Agreement
and the comparison of such financial covenants to periods prior to such changes.
The Borrower will not adopt, permit or consent to any change in its fiscal year.
SECTION 7.12 DISCOUNTS, ETC. The Borrower will not, after notice from
the Lender, grant any discount, credit or allowance to any customer of the
Borrower or accept any return of goods sold, or at any time (whether before or
after notice from the Lender) modify, amend, subordinate, cancel or terminate
the obligation of any account debtor or other obligor of the Borrower.
SECTION 7.13 DEFINED BENEFIT PENSION PLANS. The Borrower will not
adopt, create, assume or become a party to any defined benefit pension plan,
unless disclosed to the Lender pursuant to Section 5.10.
SECTION 7.14 OTHER DEFAULTS. The Borrower will not permit any breach,
default or event of default to continue beyond the expiration of the applicable
period of grace, if any, specified under any note, loan agreement, indenture,
lease, mortgage, contract for deed, security agreement or other contractual
obligation binding upon the Borrower.
SECTION 7.15 PLACE OF BUSINESS; NAME. The Borrower will not transfer
its chief executive office or principal place of business, or move, relocate,
close or sell any business location. The Borrower will not permit any tangible
Collateral or any records pertaining to the Collateral to be located in any
state or area in which, in the event of such location, a financing statement
covering such Collateral would be required to be, but has not in fact been,
filed in order to perfect the Security Interest. The Borrower will not change
its name.
SECTION 7.16 ORGANIZATIONAL DOCUMENTS; C CORPORATION STATUS. The
Borrower will not amend its certificate of incorporation, articles of
incorporation or bylaws, except for non-material changes or changes required by
applicable law. The Borrower shall not change or rescind its status as a C
Corporation.
SECTION 7.17 SALARIES. The Borrower will not pay excessive or
unreasonable salaries, bonuses, commissions, consultant fees or other
compensation; or increase the salary, bonus, commissions, consultant fees or
other compensation of any director, officer or consultant, or any member of
their families, by more than 20% in any one year, either individually or for all
such persons in the aggregate, or pay any such increase from any source other
than profits earned in the year of payment. Borrower may issue stock options to
any director, officer or consultant pursuant to a duly instituted stock option
plan and provided that Borrower reserves sufficient shares for such options.
ARTICLE 8
EVENTS OF DEFAULT, RIGHTS AND REMEDIES
SECTION 8.1 EVENTS OF DEFAULT. "Event of Default", wherever used
herein, means any one of the following events:
(a) Default in the payment of the Obligations when
they become due and payable;
(b) Default in the payment of any fees, commissions,
costs or expenses required to be paid by the Borrower under this Agreement;
(c) Default in the performance, or breach, of any
covenant or agreement of the Borrower contained in this Agreement;
(d) The Borrower or any Subsidiary, guarantor, surety
or accommodation party shall be or become insolvent, or admit in writing its or
his inability to pay its or his debts as they mature, or make an assignment for
the benefit of creditors; or the Borrower or any Subsidiary, guarantor, surety
or accommodation party shall apply for or consent to the appointment of any
receiver, trustee, or similar officer for it or him or for all or any
substantial part of its or his property; or such receiver, trustee or similar
officer shall be appointed without the application or consent of the Borrower or
such Subsidiary, guarantor, surety or accommodation party, as the case may be;
or the Borrower or any Subsidiary, guarantor, surety or accommodation party
shall institute (by petition, application, answer, consent or otherwise) any
bankruptcy, insolvency, reorganization, arrangement, readjustment of debt,
dissolution, liquidation or similar proceeding relating to it or him under the
laws of any jurisdiction; or any such proceeding shall be instituted (by
petition, application or otherwise) against the Borrower or any such Subsidiary,
guarantor, surety or accommodation party; or any judgment, writ, warrant of
attachment or execution or similar process shall be issued or levied against a
substantial part of the property of the Borrower or any Subsidiary, guarantor,
surety or accommodation party;
(e) The occurrence of a Change of Control;
(f) Any representation or warranty made by the
Borrower in this Agreement, by any guarantor, surety or accommodation party in
any guaranty delivered to the Lender, or by the Borrower (or any of its
officers) or any Subsidiary, guarantor, surety or accommodation party in any
agreement, certificate, instrument or financial statement or other statement
contemplated by or made or delivered pursuant to or in connection with this
Agreement or any such guaranty shall prove to have been incorrect in any
material respect when deemed to be effective;
(g) The rendering against the Borrower or any
Subsidiary of a final judgment, decree or order for the payment of money in
excess of $25,000 and the continuance of such judgment, decree or order
unsatisfied and in effect for any period of 30 consecutive days without a stay
of execution;
(h) A default under any bond, debenture, convertible
debenture, note or other evidence of indebtedness of the Borrower or any
Subsidiary owed to any Person other than the Lender, or under any indenture or
other instrument under which any such evidence of indebtedness has been issued
or by which it is governed, or under any lease of any of the Premises, or under
any material license, contract, warrant or other agreement, and the expiration
of the applicable period of grace, if any, specified in such evidence of
indebtedness, indenture, other instrument, lease, material license, contract,
warrant or other agreement;
(i) Any Reportable Event, which the Lender determines
in good faith might constitute grounds for the termination of any Plan or for
the appointment by the appropriate United States District Court of a trustee to
administer any Plan, shall have occurred and be continuing 30 days after written
notice to such effect shall have been given to the Borrower by the Lender; or a
trustee shall have been appointed by an appropriate United States District Court
to administer any Plan; or the Pension Benefit Guaranty Corporation shall have
instituted proceedings to terminate any Plan or to appoint a trustee to
administer any Plan; or the Borrower shall have filed for a distress termination
of any Plan under Title IV of ERISA; or the Borrower shall have failed to make
any quarterly contribution required with respect to any Plan under Section
412(m) of the Internal Revenue Code of 1986, as amended, which the Lender
determines in good faith may by itself, or in combination with any such failures
that the Lender may determine are likely to occur in the future, result in the
imposition of a lien on the Borrower's assets in favor of the Plan;
(j) An event of default shall occur under any Loan
Document or under any other security agreement, mortgage, deed of trust,
assignment or other instrument or agreement securing the Borrower's Obligations
hereunder;
(k) The Borrower or any Subsidiary shall liquidate,
dissolve, terminate or suspend its business operations or otherwise fail to
operate its business in the ordinary course, or sell all or substantially all of
its assets, without the Lender's prior written consent;
(l) The Borrower or any Subsidiary shall fail to pay,
withhold, collect or remit any tax or tax deficiency when assessed or due (other
than any tax deficiency which is being contested in good faith and by proper
proceedings and for which it shall have set aside on its books adequate reserves
therefor) or notice of any state or federal tax liens shall be filed or issued;
(m) Default in the payment of any amount owed by the
Borrower to the Lender other than any indebtedness arising hereunder;
(n) Any Subsidiary, guarantor, surety or
accommodation party shall repudiate, purport to revoke or fail to perform any
such Subsidiary's, guarantor's, surety's or accommodation party's obligations
under any agreement in favor of the Lender, any individual guarantor, surety or
accommodation party shall die or any other guarantor, surety or accommodation
party shall cease to exist;
(o) The Borrower shall take or participate in any
action which would be prohibited under the provisions of any Subordination
Agreement or make any payment on the Subordinated Debt that any Person was not
entitled to receive under the provisions of the Subordination Agreement, or
Borrower shall take or participate in any action which would be prohibited under
the provisions of the Intercreditor Agreement, or give notice of, or directly or
indirectly make, any voluntary principal redemption payment to any Debenture
Holder or directly or indirectly make any mandatory principal redemption
installment payment to any Debenture Holder before its due date; or
(p) Any breach, default or event of default by or
attributable to any Affiliate under any agreement between such Affiliate and the
Lender.
SECTION 8.2 RIGHTS AND REMEDIES. During any Default Period, the Lender
may exercise any or all of the following rights and remedies:
(a) the Lender may, by notice to the Borrower,
declare the Commitment to be terminated, whereupon the same shall forthwith
terminate;
(b) the Lender may, by notice to the Borrower,
declare the Obligations to be forthwith due and payable, whereupon all
Obligations shall become and be forthwith due and payable, without presentment,
notice of dishonor, protest or further notice of any kind, all of which the
Borrower hereby expressly waives;
(c) the Lender may, without notice to the Borrower
and without further action, apply any and all money owing by the Lender to the
Borrower to the payment of the Obligations;
(d) the Lender may exercise and enforce any and all
rights and remedies available upon default to a secured party under the UCC,
including, without limitation, the right to take possession of Collateral, or
any evidence thereof, proceeding without judicial process or by judicial process
(without a prior hearing or notice thereof, which the Borrower hereby expressly
waives) and the right to sell, lease or otherwise dispose of any or all of the
Collateral, and, in connection therewith, the Borrower will on demand assemble
the Collateral and make it available to the Lender at a place to be designated
by the Lender which is reasonably convenient to both parties;
(e) the Lender may exercise and enforce its rights
and remedies under the Loan Documents; and
(f) the Lender may exercise any other rights and
remedies available to it by law or agreement.
Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in Sections 8.1(d) or (e), the Obligations shall be immediately due
and payable automatically without presentment, demand, protest or notice of any
kind.
SECTION 8.3 CERTAIN NOTICES. If notice to the Borrower of any intended
disposition of Collateral or any other intended action is required by law in a
particular instance, such notice shall be deemed commercially reasonable if
given (in the manner specified in Section 9.3) at least ten calendar days before
the date of intended disposition or other action.
ARTICLE 9
MISCELLANEOUS
SECTION 9.1 NO WAIVER; CUMULATIVE REMEDIES. No failure or delay by the
Lender in exercising any right, power or remedy under the Loan Documents shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further exercise thereof or
the exercise of any other right, power or remedy under the Loan Documents. The
remedies provided in the Loan Documents are cumulative and not exclusive of any
remedies provided by law.
SECTION 9.2 AMENDMENTS, ETC. No amendment, modification, termination or
waiver of any provision of any Loan Document or consent to any departure by the
Borrower therefrom or any release of a Security Interest shall be effective
unless the same shall be in writing and signed by the Lender, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given. No notice to or demand on the Borrower in any
case shall entitle the Borrower to any other or further notice or demand in
similar or other circumstances.
SECTION 9.3 ADDRESSES FOR NOTICES, ETC. Except as otherwise expressly
provided herein, all notices, requests, demands and other communications
provided for under the Loan Documents shall be in writing and shall be (a)
personally delivered, (b) sent by first class United States mail, (c) sent by
overnight courier of national reputation, or (d) transmitted by telecopy, in
each case addressed or telecopied to the party to whom notice is being given at
its address or telecopier number as set forth below:
If to the Borrower:
▇▇▇▇▇ Brothers, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇,
Vice President and Chief Financial Officer
If to the Lender:
Norwest Business Credit, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
or, as to each party, at such other address or telecopier number as may
hereafter be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section. All such notices,
requests, demands and other communications shall be deemed to have been given on
(a) the date received if personally delivered, (b) when deposited in the mail if
delivered by mail, (c) the date sent if sent by overnight courier, or (d) the
date of transmission if delivered by telecopy, except that notices or requests
to the Lender pursuant to any of the provisions of Article 2 shall not be
effective until received by the Lender.
SECTION 9.4 INTENTIONALLY DELETED
SECTION 9.5 FURTHER DOCUMENTS. The Borrower will from time to time
execute and deliver or endorse any and all instruments, documents, conveyances,
assignments, security agreements, financing statements and other agreements and
writings that the Lender may reasonably request in order to secure, protect,
perfect or enforce the Security Interest or the Lender's rights under the Loan
Documents (but any failure to request or assure that the Borrower executes,
delivers or endorses any such item shall not affect or impair the validity,
sufficiency or enforceability of the Loan Documents and the Security Interest,
regardless of whether any such item was or was not executed, delivered or
endorsed in a similar context or on a prior occasion).
SECTION 9.6 COLLATERAL. This Agreement does not contemplate a sale of
accounts, contract rights or chattel paper, and, as provided by law, the
Borrower is entitled to any surplus and shall remain liable for any deficiency.
The Lender's duty of care with respect to Collateral in its possession (as
imposed by law) shall be deemed fulfilled if it exercises reasonable care in
physically keeping such Collateral, or in the case of Collateral in the custody
or possession of a bailee or other third person, exercises reasonable care in
the selection of the bailee or other third person, and the Lender need not
otherwise preserve, protect, insure or care for any Collateral. The Lender shall
not be obligated to preserve any rights the Borrower may have against prior
parties, to realize on the Collateral at all or in any particular manner or
order or to apply any cash proceeds of the Collateral in any particular order of
application.
SECTION 9.7 COSTS AND EXPENSES. The Borrower agrees to pay on demand
all costs and expenses, including (without limitation) attorneys' fees, incurred
by the Lender in connection with the Obligations, this Agreement, the Loan
Documents, and any other document or agreement related hereto or thereto, and
the transactions contemplated hereby, including without limitation all such
costs, expenses and fees incurred in connection with the negotiation,
preparation, execution, amendment, administration, performance, collection and
enforcement of the Obligations and all such documents and agreements and the
creation, perfection, protection, satisfaction, foreclosure or enforcement of
the Security Interest.
SECTION 9.8 INDEMNITY. In addition to the payment of expenses pursuant
to Section 9.7, the Borrower agrees to indemnify, defend and hold harmless the
Lender, and any of its participants, parent corporations, subsidiary
corporations, affiliated corporations, successor corporations, and all present
and future officers, directors, employees, attorneys and agents of the foregoing
(the "Indemnitees") from and against any of the following, unless caused solely
by the gross negligence or willful malfeasance of any Indemnitee (collectively,
"Indemnified Liabilities"):
(a) any and all transfer taxes, documentary taxes,
assessments or charges made by any governmental authority by reason of the
execution and delivery of the Loan Documents or the making of the Advances;
(b) any and all liabilities, losses, damages,
penalties, judgments, suits, claims, costs and expenses of any kind or nature
whatsoever (including, without limitation, the reasonable fees and disbursements
of counsel) to which any Indemnitee may be subjected under Environmental Laws in
any manner related to or arising out of or in connection with the transactions
contemplated under this Agreement; and
(c) any and all other liabilities, losses, damages,
penalties, judgments, suits, claims, costs and expenses of any kind or nature
whatsoever (including, without limitation, the reasonable fees and disbursements
of counsel) in connection with the foregoing and any other investigative,
administrative or judicial proceedings, whether or not such Indemnitee shall be
designated a party thereto, which may be imposed on, incurred by or asserted
against any such Indemnitee, in any manner related to or arising out of or in
connection with the making of the Advances and the Loan Documents or the use or
intended use of the proceeds of the Advances.
If any investigative, judicial or administrative proceeding arising from any of
the foregoing is brought against any Indemnitee, upon such Indemnitee's request,
the Borrower, or counsel designated by the Borrower and satisfactory to the
Indemnitee, will resist and defend such action, suit or proceeding to the extent
and in the manner directed by the Indemnitee, at the Borrower's sole costs and
expense. Each Indemnitee will use its best efforts to cooperate in the defense
of any such action, suit or proceeding. If the foregoing undertaking to
indemnify, defend and hold harmless may be held to be unenforceable because it
violates any law or public policy, the Borrower shall nevertheless make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The Borrower's obligation
under this Section 9.8 shall survive the termination of this Agreement and the
discharge of the Borrower's other obligations hereunder. BORROWER UNDERSTANDS
AND IT IS THE INTENT OF BORROWER AND THE INDEMNITEES THAT THE INDEMNITY
OBLIGATIONS IN THIS PARAGRAPH INCLUDE ANY CLAIMS RELATING IN ANY WAY TO THE
NEGLIGENCE OF THE INDEMNITEE.
SECTION 9.9 PARTICIPANTS. The Lender and its participants, if any, are
not partners or joint venturers, and the Lender shall not have any liability or
responsibility for any obligation, act or omission of any of its participants.
All rights and powers specifically conferred upon the Lender may be transferred
or delegated to any of the Lender's participants, successors or assigns.
SECTION 9.10 EXECUTION IN COUNTERPARTS. This Agreement and other Loan
Documents may be executed in any number of counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same instrument.
SECTION 9.11 BINDING EFFECT; ASSIGNMENT; COMPLETE AGREEMENT; EXCHANGING
INFORMATION. The Loan Documents shall be binding upon and inure to the benefit
of the Borrower and the Lender and their respective successors and assigns,
except that the Borrower shall not have the right to assign its rights
thereunder or any interest therein without the Lender's prior written consent.
Lender will endeavor to provide written notice of any assignment or grant of
participation rights to any Person, but the failure to provide such notice shall
not affect the validity or enforceability of this Agreement or such assignment
or grant of participation rights, except that no assignee or participant may
setoff any liability owed to the Borrower by such assignee or participant unless
and until Borrower receives written notice of such assignment or participation
interest. This Agreement, together with the Loan Documents, comprises the
complete and integrated agreement of the parties on the subject matter hereof
and supersedes all prior agreements, written or oral, on the subject matter
hereof. Without limiting the Lender's right to share information regarding the
Borrower and its Affiliates with the Lender's participants, accountants, lawyers
and other advisors, the Lender, Norwest Corporation, and all direct and indirect
subsidiaries of Norwest Corporation, may exchange any and all information they
may have in their possession regarding the Borrower and its Affiliates, and the
Borrower waives any right of confidentiality it may have with respect to such
exchange of such information.
SECTION 9.12 CONFIDENTIAL INFORMATION. Lender agrees to keep
confidential (and to use its reasonable efforts to cause its respective agents
and representatives to keep confidential) the Confidential Information (as
defined below) and all copies thereof, extracts therefrom and analyses or other
materials based thereon, except that Lender shall be permitted to disclose
Confidential Information (a) to such of its respective officers, directors,
employees, attorneys, accountants, agents, Affiliates and representatives as
need to know such Confidential Information, (b) to the extent requested by any
regulatory authority, (c) to the extent otherwise required by applicable laws
and regulations or by any subpoena or similar legal process, (d) in connection
with any suit, action or proceeding relating to the enforcement of its rights
hereunder or under the other Loan Documents or (e) to the extent such
Confidential Information (i) becomes publicly available other than as a result
of a breach of this Section 9.12 or (ii) becomes available to Lender on a
non-confidential basis from a source other than Borrower. For the purposes of
this Section, "Confidential Information" means all non-public information
relating to the Borrower or its Subsidiaries received from the Borrower or its
attorneys, accountants, officers, directors, employees or agents which are
clearly identified at the time of delivery as confidential. The provisions of
this Section 9.12 shall remain operative and in full force and effect regardless
of the expiration of the term of this Agreement. Lender may, in connection with
any assignment or participation, proposed assignment or participation, or
merger, consolidation or sale involving the Lender or any Affiliate disclose to
such Persons any Confidential Information, provided that Lender advises such
Person of this confidentiality agreement.
SECTION 9.13 SEVERABILITY OF PROVISIONS. Any provision of this
Agreement which is prohibited or unenforceable shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
SECTION 9.14 HEADINGS. Article and Section headings in this Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
SECTION 9.15 GOVERNING LAW; JURISDICTION, VENUE; WAIVER OF JURY TRIAL.
The Loan Documents shall be governed by and construed in accordance with the
substantive laws (other than conflict laws) of the State of Arizona. The parties
hereto hereby (i) consents to the personal jurisdiction of the state and federal
courts located in the State of Arizona in connection with any controversy
related to this Agreement; (ii) waives any argument that venue in any such forum
is not convenient, (iii) agrees that any litigation initiated by the Lender or
the Borrower in connection with this Agreement or the other Loan Documents shall
be venued in either the Superior Court of Maricopa County or the United States
District Court, District of Arizona (Division 1); and (iv) agrees that a final
judgment in any such suit, action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.
THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED
ON OR PERTAINING TO THIS AGREEMENT.
ARTICLE 10
JOINT BORROWER PROVISIONS
SECTION 10.1 RELIANCE ON ACTS OF ANY BORROWER. Lender is entitled to
rely, and shall be exonerated from any liability for relying upon, any request
for a Revolving Advance or similar request made by any Borrower without the need
for any consent or other authorization of any other Borrower and upon any
information or certificate provided on behalf of any Borrower by an officer,
partner, manager or other representative of such Borrower.
SECTION 10.2 SINGLE OBLIGATION. The parties hereto intend that all of
the Obligations shall constitute one indebtedness, and that each Borrower shall
constitute a borrower (and not a guarantor, surety or accommodation party), with
respect to all of the Obligations. In the event that (and only to the extent
that), notwithstanding the contrary intent of the parties, any court of
competent jurisdiction determines that any Borrower is a guarantor, surety or
accommodation party with respect to any portion of the Obligations, or has
granted a lien or security interest on its property to secure the debt of
another, the waivers and other provisions of this Section 10.2 shall apply to
such Borrower in connection with the portion(s) of the Obligations (the
"Guaranteed Obligations") with respect to which such Borrower is held not to be
a borrower.
(a) Each Borrower consents and agrees that Lender
may, at any time and from time to time, agree with any one Borrower, without
notice or demand to any other Borrower, and without affecting the enforceability
of or security for the Guaranteed Obligations under any Loan Document, to:
(i) supplement, modify, amend, extend,
renew, or otherwise change the time for payment or the terms of the Guaranteed
Obligations or any part thereof, including any increase or decrease of the
rate(s) of interest thereon;
(ii) supplement, modify, amend or waive, or
enter into or give any agreement, approval or consent with respect to, the
Guaranteed Obligations or any part thereof or any of the Loan Documents or any
additional security or guaranties, or any condition, covenant, default, remedy,
right, representation or term thereof or thereunder;
(iii) accept new or additional instruments,
documents or agreements relative to any of the Loan Documents or the Guaranteed
Obligations or any part thereof;
(iv) accept partial payments on the
Guaranteed Obligations;
(v) receive and hold additional security or
guaranties for the Guaranteed Obligations or any part thereof;
(vi) release, reconvey, terminate, waive,
abandon, subordinate, exchange, substitute, transfer and enforce any security or
guaranties for the Guaranteed Obligations, and apply any security and direct the
order or manner of sale thereof, in its sole and absolute discretion may
determine;
(vii) release any Person or any guarantor
from any personal liability with respect to the Guaranteed Obligations or any
part thereof;
(viii) settle, release on terms satisfactory
to Lender or by operation of applicable laws or otherwise liquidate or enforce
any Guaranteed Obligations and any security or guaranty therefor in any manner,
consent to the transfer of any security and bid and purchase at any sale; and
(ix) consent to the merger, change or any
other restructuring or termination of the corporate existence of any Borrower or
any other Person, and correspondingly restructure the Guaranteed Obligations,
and any such merger, change, restructuring or termination shall not affect the
liability of any other Borrower or the continuing existence of any Security
Interest securing the Guaranteed Obligations under any Loan Document to which
any such Borrower is a party or the enforceability hereof or thereof with
respect to all or any part of the Guaranteed Obligations.
(b) Upon the occurrence of and during the
continuance of any Event of Default, Lender may enforce each Loan Document
independently as to each Borrower and independently of any other remedy or
security Lender at any time may have or hold in connection with the Guaranteed
Obligations, and it shall not be necessary for Lender to marshal assets in favor
of any Borrower or any other Person or to proceed upon or against and/or exhaust
any other security or remedy before proceeding to enforce such Loan Document.
Each Borrower expressly waives any right to require Lender to marshal assets in
favor of any Borrower or any other Person or to proceed against any other Person
or any Collateral provided by any other Person, and agrees that Lender may
proceed against any Persons and/or Collateral in such order as it shall
determine in its sole and absolute discretion. The Lender may file a separate
action or actions against any Borrower, whether any action is brought or
prosecuted with respect to any other Collateral or against any other Person, or
whether any other Person is joined in any such action or actions. Each Borrower
expressly waives the benefit of any statute(s) of limitations affecting its
liability under the Loan Documents or the enforcement of the Guaranteed
Obligations or any Security Interests created or granted by any Loan Document.
The rights of Lender hereunder and under the Loan Documents shall be reinstated
and revived, and the enforceability of this Agreement and the Loan Documents
shall continue, with respect to any amount at any time paid on account of the
Obligations which thereafter shall be required to be restored or returned by
Lender upon the bankruptcy, insolvency or reorganization of any Borrower or any
other Person, or otherwise, all as though such amount had not been paid. The
enforceability of the Loan Documents at all times shall remain effective as to
each Borrower as to the Guaranteed Obligations of such Borrower even though such
Guaranteed Obligations, including any part thereof, may be or hereafter may
become invalid or otherwise unenforceable as against any other Borrower or any
other Person and whether or not any other Borrower or any other Person shall
have any personal liability with respect thereto.
(c) Each Borrower expressly waives in respect of the
Guaranteed Obligations any and all defenses now or hereafter arising or asserted
by reason of (a) any disability or other defense of any other Borrower or any
other Person with respect to the Guaranteed Obligations, (b) the
unenforceability or invalidity of any security or guaranty for the Guaranteed
Obligations or the lack of perfection or continuing perfection or failure of
priority of any security for the Guaranteed Obligations, (c) the cessation for
any cause whatsoever of the liability of any other Borrower or any other Person
(other than by reason of the full payment and performance of all Obligations),
(d) any failure of Lender to marshal assets in favor of any Borrower or any
other Person, (e) except as otherwise required by law or as provided in any Loan
Document, any failure of Lender to give notice of sale or other disposition of
Collateral to any other Borrower or any other Person or any defect in any notice
that may be given in connection with any sale or disposition of Collateral, (f)
except as otherwise required by law or as provided in any Loan Document, any
failure of Lender to comply with applicable laws in connection with the sale or
other disposition of any Collateral or other security for any Obligation,
including, without limitation, any failure of Lender to conduct a commercially
reasonable sale or other disposition of any Collateral or other security for any
Guaranteed Obligation, (g) any act or omission of Lender or others that directly
or indirectly results in or aids the discharge or release of any other Borrower
or any other Person or any other security or guaranty for the Guaranteed
Obligations by operation of law or otherwise, (h) any law which provides that
the obligation of a surety or guarantor must neither be larger in amount nor in
other respects more burdensome than that of the principal or which reduces a
surety's or guarantor's obligation in proportion to the principal obligation,
(i) any failure of Lender to file or enforce a claim in any bankruptcy or other
proceeding with respect to any Person, (j) the election by Lender in any
bankruptcy proceeding of any Person of the application or non-application of
Section 1111(b)(2) of the United States Bankruptcy Code, (k) any extension of
credit or the grant of any Security Interest under Section 364 of the United
States Bankruptcy Code, (l) any use of cash collateral under Section 363 of the
United States Bankruptcy Code, (m) any agreement or stipulation with respect to
the provision of adequate protection in any bankruptcy proceeding of any Person,
(n) the avoidance of any Security Interest in favor Lender for any reason, or
(o) any bankruptcy, insolvency, reorganization, arrangement, readjustment of
debt, liquidation or dissolution proceeding commenced by or against any Person,
including any discharge of, or bar or stay against collecting, all or any of the
Guaranteed Obligations (or any interest thereon) in or as a result of any such
proceeding.
(d) Each Borrower waives all rights and defenses
arising out of an election of remedies by Lender, even though that election of
remedies with respect to security for a Guaranteed Obligation, has destroyed
such Borrower's rights of subrogation and reimbursement against the principal.
(e) Notwithstanding anything to the contrary
elsewhere contained herein or in any other Loan Document to which any Borrower
is a party, each Borrower hereby waives with respect to each other Borrower and
its respective successors and assigns (including any surety) and any other party
any and all rights at law or in equity, to subrogation, to reimbursement, to
exoneration, to contribution, to setoff or to any other rights that could accrue
to a surety against a principal, to a guarantor against a maker or obligor, to
an accommodation party against the party accommodated, or to a holder or
transferee against a maker and which each Borrower may have or hereafter acquire
against any other Borrower or any other party in connection with or as a result
of any Borrower's execution, delivery and/or performance of this Agreement or
any other Loan Document to which any such Borrower is a party until payment in
full of all Obligations. Each Borrower agrees that it shall not have or assert
any such rights against any other Borrower or any such Borrower's successors and
assigns or any other Person (including any surety), either directly or as an
attempted setoff to any action commenced against such Borrower by such other
Borrower (as borrower or in any other capacity) or any other Person. Each
Borrower hereby acknowledges and agrees that this waiver is intended to benefit
Lender and shall not limit or otherwise affect any of such Borrower's liability
hereunder, under any other Loan Document to which any Borrower is a party, or
the enforceability hereof or thereof.
(f) Without limiting the generality of the foregoing
and to the extent otherwise applicable, each Borrower hereby waives discharge by
waiving all defenses based on suretyship or impairment of collateral securing
the Guaranteed Obligations and, to the extent permitted by applicable law,
waives the provisions of Arizona Revised Statutes, Sections 12-1566, 12-1641 et
seq., 44-142 and 16 Arizona Revised Statutes, Rules of Civil Procedure, Rule
17(f), and Guarantor agrees that its obligations shall not be affected by any
circumstances, whether or not referred to herein, which might otherwise
constitute a legal or equitable discharge of a guarantor, surety or
accommodation party.
SECTION 10.3 KNOWING WAIVER. Each Borrower warrants and agrees that
each of the waivers and consents set forth herein is made with full knowledge of
its significance and consequences, with the understanding that events giving
rise to any defense waived may diminish, destroy or otherwise adversely affect
rights which each Borrower otherwise may have against each other Borrower,
Lender, or others, or against any Collateral securing the Guaranteed
Obligations. If any of the waivers or consents herein are determined to be
contrary to any applicable law or public policy, such waivers and consents shall
be effective to the maximum extent permitted by law.
SECTION 10.4 INFORMATION. Each Borrower represents and warrants to
Lender that such Borrower has established adequate means of obtaining from each
other Borrower, on a continuing basis, financial and other information
pertaining to the businesses, operations and condition (financial and otherwise)
of each other Borrower and their respective properties, and each Borrower now is
and hereafter will be completely familiar with the businesses, operations and
condition (financial and otherwise) of each other Borrower and its respective
properties. Each Borrower hereby expressly waives and relinquishes any duty on
the part of Lender to disclose to such Borrower any matter, fact or thing
related to the businesses, operations or condition (financial or otherwise) of
any other Borrower or such other Borrower's properties, whether now known or
hereafter known by Lender during the term of this Agreement.
[THE REMAINDER OF THIS PAGE
IS LEFT INTENTIONALLY BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
LENDER:
NORWEST BUSINESS CREDIT, INC., a
Minnesota corporation
By:
-------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------
Title: Vice President
----------------------------------
BORROWER:
▇▇▇▇▇ BROTHERS, INC., a Delaware
corporation
By:
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Title: Vice President
----------------------------------
▇▇▇▇▇ BROTHERS ARIZONA, INC., an Arizona
corporation
By:
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Title: Vice President
----------------------------------
▇▇▇▇▇ BROTHERS DISTRIBUTING, INC., an
Arizona corporation
By:
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Title: Vice President
----------------------------------
TEJAS PB DISTRIBUTING, INC., an Arizona
corporation
By:
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Title: Vice President
----------------------------------
Table of Exhibits and Schedules
Exhibit A Form of Revolving Note
Exhibit B Form of Term Loan Note
Exhibit C Compliance Certificate
Exhibit D Premises
Exhibit E Example Calculation of Term Loan Principal
Payment Increase and Amount
-------------------
Schedule 2.11 Use of Proceeds
Schedule 5.1 Trade Names, Chief Executive Office, Principal
Place of Business, and Locations of Collateral
Schedule 5.4 Subsidiaries
Schedule 7.1 Permitted Liens
Schedule 7.2 Permitted Indebtedness and Guaranties
Exhibit A to Credit and Security Agreement
REVOLVING NOTE
$2,000,000.00 PHOENIX, ARIZONA
OCTOBER 23, 1998
For value received, the undersigned, ▇▇▇▇▇ BROTHERS, INC., a Delaware
corporation, ▇▇▇▇▇ BROTHERS ARIZONA, INC., an Arizona corporation, ▇▇▇▇▇
BROTHERS DISTRIBUTING, INC., an Arizona corporation, and TEJAS PB DISTRIBUTING,
INC., an Arizona corporation (individually and collectively, the "Borrower"),
hereby jointly and severally promise to pay on the Termination Date under the
Credit Agreement (defined below), to the order of NORWEST BUSINESS CREDIT, INC.,
a Minnesota corporation (the "Lender"), at its main office in Phoenix, Arizona,
or at any other place designated at any time by the holder hereof, in lawful
money of the United States of America and in immediately available funds, the
principal sum of TWO MILLION AND NO/100 DOLLARS ($2,000,000.00) or, if less, the
aggregate unpaid principal amount of all Revolving Advances made by the Lender
to the Borrower under the Credit Agreement, together with interest on the
principal amount hereunder remaining unpaid from time to time, computed on the
basis of the actual number of days elapsed and a 360-day year, from the date
hereof until this Note is fully paid at the rate from time to time in effect
under the Credit and Security Agreement of even date herewith by and between the
Lender and the Borrower (as the same may hereafter be amended, supplemented or
restated from time to time, the "Credit Agreement"). The principal hereof and
interest accruing thereon shall be due and payable as provided in the Credit
Agreement. This Note may be prepaid only in accordance with the Credit
Agreement.
This Note is issued pursuant, and is subject, to the Credit Agreement,
which provides, among other things, for acceleration hereof. This Note is the
Revolving Note referred to in the Credit Agreement. This Note is secured, among
other things, pursuant to the Credit Agreement and the Security Documents, as
therein defined, and may now or hereafter be secured by one or more other
security agreements, mortgages, deeds of trust, assignments or other instruments
or agreements.
The Borrower, jointly and severally, hereby agree to pay all costs of
collection, including attorneys' fees and legal expenses in the event this Note
is not paid when due, whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor and protest
are expressly waived.
IN WITNESS WHEREOF, this Note is executed as of the date first above
written.
BORROWER:
▇▇▇▇▇ BROTHERS, INC., a Delaware
corporation
By:
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Title: Vice President
----------------------------------
▇▇▇▇▇ BROTHERS ARIZONA, INC., an Arizona
corporation
By:
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Title: Vice President
----------------------------------
▇▇▇▇▇ BROTHERS DISTRIBUTING, INC., an
Arizona corporation
By:
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Title: Vice President
----------------------------------
TEJAS PB DISTRIBUTING, INC., an Arizona
corporation
By:
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Title: Vice President
----------------------------------
Exhibit B to Credit and Security Agreement
TERM LOAN NOTE
$500,000.00 PHOENIX, ARIZONA
OCTOBER 23, 1998
For value received, the undersigned, ▇▇▇▇▇ BROTHERS, INC., a Delaware
corporation, ▇▇▇▇▇ BROTHERS ARIZONA, INC., an Arizona corporation, ▇▇▇▇▇
BROTHERS DISTRIBUTING, INC., an Arizona corporation, and TEJAS PB DISTRIBUTING,
INC., an Arizona corporation (individually and collectively, the "Borrower"),
hereby jointly and severally promise to pay to the order of NORWEST BUSINESS
CREDIT, INC., a Minnesota corporation (the "Lender"), at its main office in
Phoenix, Arizona, or at any other place designated at any time by the holder
hereof, in lawful money of the United States of America and in immediately
available funds, the principal sum of FIVE HUNDRED THOUSAND AND NO/100 DOLLARS
($500,000.00), together with interest on the principal amount hereunder
remaining unpaid from time to time, computed on the basis of the actual number
of days elapsed and a 360-day year, from the date hereof until this Note is
fully paid at the rate from time to time in effect under the Credit and Security
Agreement of even date herewith by and between the Lender and the Borrower (as
the same may hereafter be amended, supplemented or restated from time to time,
the "Credit Agreement"). The principal hereof and interest accruing thereon
shall be due and payable as provided in the Credit Agreement. This Note may be
prepaid only in accordance with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit Agreement,
which provides, among other things, for acceleration hereof. This Note is the
Term Loan Note referred to in the Credit Agreement.
This Note is secured, among other things, pursuant to the Credit
Agreement and the Security Documents, as therein defined, and may now or
hereafter be secured by one or more other security agreements, mortgages, deeds
of trust, assignments or other instruments or agreements.
The Borrower, jointly and severally, hereby agree to pay all costs of
collection, including attorneys' fees and legal expenses in the event this Note
is not paid when due, whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor and protest
are expressly waived.
IN WITNESS WHEREOF, this Note is executed as of the date first above
written.
BORROWER:
▇▇▇▇▇ BROTHERS, INC., a Delaware
corporation
By:
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Title: Vice President
----------------------------------
▇▇▇▇▇ BROTHERS ARIZONA, INC., an Arizona
corporation
By:
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Title: Vice President
----------------------------------
▇▇▇▇▇ BROTHERS DISTRIBUTING, INC., an
Arizona corporation
By:
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Title: Vice President
----------------------------------
TEJAS PB DISTRIBUTING, INC., an Arizona
corporation
By:
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Title: Vice President
----------------------------------
Exhibit D to Credit and Security Agreement
PREMISES
The Premises referred to in the Credit and Security Agreement are
commonly known as and legally described as follows:
▇▇▇▇ ▇. ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇ ▇▇▇ ▇▇, ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ SUBDIVISION No. 3 AMENDED, according to
the plat of record in the office of the County Recorder of Maricopa County,
Arizona, recorded in Book 287 of Maps, Page 1.
Exhibit E to Credit and Security Agreement
EXAMPLE CALCULATION OF TERM LOAN PRINCIPAL PAYMENT INCREASE AND AMOUNT
----------------------------------------------------------------------
The following are examples of the recalculation of the Term Loan Note payments
upon the exchange of all or any part of the Principal Amount of the Debentures
for common stock of ▇▇▇▇▇ Brothers, Inc.:
EXAMPLE 1: On November 15, 1998, prior to the making of the Term Loan Advance,
the Principal Amount of the Debentures is $2,700,000 and a Conversion Date
occurs due to a Debenture Holder notifying Borrower of its election to exchange
$500,000 of the Principal Amount for common stock.. On November 20, 1998, Lender
makes the Term Loan Advance to Borrower. Therefore, the Term Loan Note level
principal payment commencing on December 1, 1998 will be calculated as follows:
$500,000 / $2,700,000 = .185; $41,667.67 - $27,777.78 = $13,889.89; $13,889.89 x
.185 = $2,569.63; $27,777.78 + $2,569.63 = $30,347.41. Thus, the Term Loan Note
level principal payment commencing on December 1, 1998 will be $30,347.41, and
such level principal payment, plus interest, shall be payable on the first day
of such month and shall continue on the first day of each succeeding month
(subject to further increases following a subsequent Conversion Date) until the
Term Loan Maturity Date or the Termination Date, whichever is earlier, at which
time the entire outstanding principal balance of the Term Loan, all accrued and
unpaid interest and all other charges shall be due and payable, or until the
Term Loan is earlier paid in full.
EXAMPLE 2: On February 5, 1999, the Principal Amount of the Debentures has been
reduced to $2,200,000 due to the exchange referenced in example 1 above and a
Conversion Date occurs due to a Debenture Holder notifying Borrower of its
election to exchange $300,000 of the remaining Principal Amount for common
stock. Therefore, the Term Loan Note level principal payment commencing on March
1, 1999 will be calculated as follows: $300,000 / $2,200,000 = .136; $41,667.67
- $30,347.41 = $11,320.26; $11,320.26 x .136 = $1,539.56; $30,347.41 + $1,539.56
= $31,886.97. Thus, the Term Loan Note level principal payment commencing on
March 1, 1999 will be $31,886.97, and such level principal payment, plus
interest, shall be payable on the first day of such month and shall continue on
the first day of each succeeding month (subject to further increases following a
subsequent Conversion Date) until the Term Loan Maturity Date or the Termination
Date, whichever is earlier, at which time the entire outstanding principal
balance of the Term Loan, all accrued and unpaid interest and all other charges
shall be due and payable, or until the Term Loan is earlier paid in full.
EXAMPLE 3: On December 15, 1999, the Principal Amount of the Debentures has been
reduced to $1,800,000 due to the exchanges referenced in examples 1 and 2 and
the mandatory principal redemption installments made by Borrower, and a
Conversion Date occurs due to a Debenture Holder notifying Borrower of its
election to exchange $100,000 of the remaining Principal Amount for common
stock. Therefore, the Term Loan Note level principal payment commencing on
January 1, 2000 will be calculated as follows: $100,000 / $1,800,000 = .056;
$41,667.67 - $31,886.97 = $9,780.70; $9,780.70 x .056 = $547.72; $31,886.97 +
$547.72 = $32,434.69. Thus, the Term Loan Note level principal payment
commencing on January 1, 2000 will be $32,434.69, and such level principal
payment, plus interest, shall be payable on the first day of such month and
shall continue on the first day of each succeeding month (subject to further
increases following a subsequent Conversion Date) until the Term Loan Maturity
Date or the Termination Date, whichever is earlier, at which time the entire
outstanding principal balance of the Term Loan, all accrued and unpaid interest
and all other charges shall be due and payable, or until the Term Loan is
earlier paid in full.
EXAMPLE 4: On February 1, 2000, the Principal Amount of the Debentures has been
reduced to $1,600,000 due to the exchanges referenced in examples 1, 2 and 3 and
the mandatory principal redemption installments made by Borrower, and a
Conversion Date occurs due to a Debenture Holder notifying Borrower of its
election to exchange the remaining Principal Amount of $1,600,000 for common
stock. Therefore, the Term Loan Note level principal payment commencing on March
1, 2000 will be calculated as follows: $1,600,000 / $1,600,000 = 1; $41,667.67 -
$32,434.69 = $9,232.98; $9,232.98 x 1 = $9,232.98; $32,434.69 + $9,232.98 =
$41,667.67. Thus, the Term Loan Note level principal payment commencing on March
1, 2000 will be $41,667.67, and such level principal payment, plus interest,
shall be payable on the first day of such month and shall continue on the first
day of each succeeding month (subject to further increases following a
subsequent Conversion Date) until the Term Loan Maturity Date or the Termination
Date, whichever is earlier, at which time the entire outstanding principal
balance of the Term Loan, all accrued and unpaid interest and all other charges
shall be due and payable, or until the Term Loan is earlier paid in full.
Schedule 2.11 to Credit and Security Agreement
Sources and Uses of Funds
---------------------------------------------- ------------------------- -------------------------
SOURCES AMOUNT USES AMOUNT
-------------------------- -------------------- ------------------------- -------------------------
-------------------------- -------------------- ------------------------- -------------------------
Advance on NBCI ROLOC $1,000,000.00 Payoff FCFC $344,526.54
-------------------------- -------------------- ------------------------- -------------------------
NBCI Overadvance* 500,000.00 Cash to Tejas Snacks* 275,000.00
-------------------------- -------------------- ------------------------- -------------------------
Cash on hand 400,000.00 Cash to Bob's, Inc.* 245,000.00
-------------------------- -------------------- ------------------------- -------------------------
Cash to Prime Bank* 585,654.65
-------------------------- -------------------- ------------------------- -------------------------
Closing costs
-------------------------- -------------------- ------------------------- -------------------------
Origination fee 25,000.00
-------------------------- -------------------- ------------------------- -------------------------
Other payables
-------------------------- -------------------- ------------------------- -------------------------
Total Sources $1,900,000.00 Total Uses $1,475,181.19
-------------------------- -------------------- ------------------------- -------------------------
Excess Availability $424,818.81
-------------------------- -------------------- ------------------------- -------------------------
*to be funded upon compliance with conditions to Term Loan Advance
Schedule 5.1 to Credit and Security Agreement
Trade Names, Chief Executive Office, Principal Place of Business, and Locations
of Collateral
TRADE NAMES
-----------
▇▇▇▇▇ BROTHERS
IF WE DIDN'T TELL YOU - YOU WOULDN'T KNOW!
AN INTENSELY DIFFERENT TASTE
TEJAS SNACKS
TEJAS DISTRIBUTING
TEJAS MERCHANDISING
BOB'S TEXAS STYLE POTATO CHIPS
TEXAS STYLE POTATO CHIPS
TEXAS STYLE
LONGHORN STYLE
COLORADO STYLE
CHIEF EXECUTIVE OFFICE/PRINCIPAL PLACE OF BUSINESS
--------------------------------------------------
▇▇▇▇ ▇. ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
OTHER INVENTORY AND EQUIPMENT LOCATIONS
---------------------------------------
NONE
Schedule 5.4 to Credit and Security Agreement
SUBSIDIARIES
------------
▇▇▇▇▇ Brothers Southeast, Inc., an Arizona corporation (no operations)
▇▇▇▇▇ Brothers Texas, Inc., a Texas corporation (no operations)
▇▇ ▇▇▇▇▇▇ Properties, Inc., an Arizona corporation (owns Premises)
▇▇▇▇▇ Brothers Arizona, Inc., an Arizona corporation (manufactures and
distributes snack foods)
▇▇▇▇▇ Brothers Distributing, Inc., an Arizona corporation (distributes snack
foods)
Tejas PB Distributing, Inc., an Arizona corporation (distributes snack foods)
Schedule 7.1 to Credit and Security Agreement
PERMITTED LIENS
---------------
====================================================================================================================================
Creditor(s) Collateral Jurisdiction Filing Date Filing No.
----------- ---------- ------------ ----------- ----------
------------------------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ Machinery Company of Arizona Lien on Specific Equipment Arizona 08/27/93 756209-0
Hyster Credit Company
------------------------------------------------------------------------------------------------------------------------------------
First Interstate Equity Corporation Blanket Lien on all Assets Arizona 05/31/95 833113-0
Renaissance Capital Growth & Income (Lien on Inventory, Accounts and
Fund III Inc. General Intangibles subordinated per
Intercreditor Agreement)
------------------------------------------------------------------------------------------------------------------------------------
First Interstate Equity Corporation Blanket Lien on all Assets Arizona 05/31/95 833114-0
Renaissance Capital Growth & Income (Lien on Inventory, Accounts and
Fund III Inc. General Intangibles subordinated per
Intercreditor Agreement)
------------------------------------------------------------------------------------------------------------------------------------
First Interstate Equity Corporation Blanket Lien on all Assets Arizona 05/31/95 833115-0
Renaissance Capital Growth & Income (Lien on Inventory, Accounts and
Fund III Inc. General Intangibles subordinated per
Intercreditor Agreement)
------------------------------------------------------------------------------------------------------------------------------------
Renaissance Capital Growth & Income Blanket Lien on all Assets Arizona 05/31/95 833117-0
Fund III Inc. (Lien on Inventory, Accounts and
▇▇▇▇▇ Fargo Small Business General Intangibles subordinated per
Investment Co. Inc. Intercreditor Agreement)
------------------------------------------------------------------------------------------------------------------------------------
Bank One Arizona NA Blanket Lien on All Equipment, Arizona 08/02/95 841015-0
Except Specifically Released
Equipment
------------------------------------------------------------------------------------------------------------------------------------
Banc One Arizona Leasing Corporation Lien on Specific Leased Equipment Arizona 09/29/95 848668-0
(Precautionary Filing)
------------------------------------------------------------------------------------------------------------------------------------
Finova Capital Corporation Lien on Specific Leased Equipment Arizona 12/18/95 858348-0
(Precautionary Filing)
------------------------------------------------------------------------------------------------------------------------------------
Banc One Arizona Lease Corporation Lien on Specific Leased Equipment Arizona 12/22/95 859712-0
(Precautionary Filing)
------------------------------------------------------------------------------------------------------------------------------------
LCA Lien on Specific Equipment Arizona 02/20/96 867041-0
------------------------------------------------------------------------------------------------------------------------------------
Associates Commercial Corporation Lien on Specific Leased Equipment Arizona 04/04/96 892074-0
LCA and All Chattel Paper, General
Intangibles, Instruments, Accounts
and Contract Rights Arising with
Respect Thereto (Precautionary
Filing)
------------------------------------------------------------------------------------------------------------------------------------
Inter Tel Leasing Inc. Lien on Specific Leased Equipment Arizona 11/04/96 942274-0
(Precautionary Filing)
------------------------------------------------------------------------------------------------------------------------------------
Finova Capital Corporation Lien on Specific Equipment Arizona 05/02/97 966189-0
------------------------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ Guaranty Trust Company of Lien on Specific Real Property Maricopa County, AZ 06/05/97 97-0381371
New York
------------------------------------------------------------------------------------------------------------------------------------
Finova Capital Corporation Lien on Specific Equipment Arizona 06/26/97 973996-0
------------------------------------------------------------------------------------------------------------------------------------
Finova Capital Corporation Lien on Specific Equipment Arizona 10/08/97 988041-0
====================================================================================================================================
Schedule 7.2 to Credit and Security Agreement
PERMITTED INDEBTEDNESS AND GUARANTIES
INDEBTEDNESS
Creditor Principal Amount Maturity Date Monthly Payment Collateral
-------- ---------------- ------------- --------------- ----------
NONE
GUARANTIES
Primary Obligor Amount and Description of Obligation Beneficiary of Guaranty
--------------- ------------------------------------ -----------------------
Guaranteed
----------
NONE
