<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB - QUARTERLY OR TRANSITIONAL REPORT
(Added by Rel. No. 34-30968, eff. 8/13/92, as amended)
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended JANUARY 31, 1998
-----------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT
For the transition period From ___________ to ____________
Commission file number 0-22556
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UNCLE B'S BAKERY, INC.
(Exact name of small business issuer as specified in its charter)
IOWA 42-1267239
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
441 DUBUQUE STREET, ELLSWORTH, IOWA 50075
-----------------------------------------
(Address of principal executive offices)
(515) 836-4000
----------------------------
(Issuer's telephone number)
- --------------------------------------------------------------------------------
(Former name, former address & former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [_]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Sections 12, 13, or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by the court. Yes [_] No [_]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date: 3,656,258 SHARES AS OF FEBRUARY 27
1998.
Page 1 of 11
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INDEX
UNCLE B'S BAKERY, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Balance Sheets - January 31, 1998 and July 31, 1997
Condensed Statements of Operations - Three months ended January 31, 1998
and 1997; Six months ended January 31, 1998 and 1997.
Condensed Statements of Cash Flows - Six months ended January 31, 1998 and
1997
Notes to Condensed Financial Statements
Item 2. Management's Discussion and Analysis
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
Page 2 of 11
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
UNCLE B'S BAKERY, INC.
CONDENSED BALANCE SHEETS
JANUARY 31 JULY 31
1998 1997
(Unaudited) (Note)
------------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ -- $ 6,441
Accounts receivable 1,044,232 1,023,606
Inventories-Note 2 465,132 552,420
Prepaid expenses 173,181 137,873
------------ ------------
Total current assets 1,682,545 1,720,340
Property, plant and equipment 18,568,757 18,246,658
Less accumulated depreciation 4,342,469 3,874,816
------------ ------------
Net property, plant and equipment 14,226,288 14,371,842
Intangible assets and deferred costs, net 467,147 461,858
------------ ------------
Total assets $ 16,375,980 $ 16,554,040
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,741,274 $ 2,000,631
Accrued expenses 515,694 1,077,274
Long-term debt due within one year-Note 3 13,497,686 12,065,759
------------ ------------
Total current liabilities 15,754,654 15,143,664
Long-term debt due after one year -- 760,187
Stockholders' equity
Common stock, $.01 par value: 40,000,000
shares authorized, 3,656,258 shares
issued and outstanding 36,563 36,563
Stock purchase warrants-Note 3 791,800 --
Additional paid-in capital 7,987,701 7,987,701
Deficit (8,194,738) (7,374,075)
------------ ------------
Total stockholders' equity 621,326 650,189
------------ ------------
Total liabilities and stockholders' equity $ 16,375,980 $ 16,554,040
============ ============
Note: The balance sheet at July 31, 1997 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to condensed financial statements.
Page 3 of 11
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UNCLE B'S BAKERY, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JANUARY 31 JANUARY 31
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 3,399,781 $ 5,589,613 $ 7,251,380 $ 11,970,892
Cost of goods sold 2,103,335 3,565,080 4,587,067 7,500,899
------------ ------------ ------------ ------------
Gross profit 1,296,446 2,024,533 2,664,313 4,469,993
Distribution expense 286,406 367,016 612,982 928,606
Selling, general and
administrative expense 974,613 1,519,303 2,192,998 3,009,787
------------ ------------ ------------ ------------
1,261,019 1,886,319 2,805,980 3,938,393
------------ ------------ ------------ ------------
Income (loss) from operations 35,427 138,214 (141,667) 531,600
Other income (expense):
Interest expense (343,530) (134,916) (670,739) (258,554)
Other (6,126) 12,032 (8,256) 10,278
------------ ------------ ------------ ------------
(349,656) (122,884) (678,995) (248,276)
------------ ------------ ------------ ------------
Income (loss) before income taxes (314,229) 15,330 (820,662) 283,324
Income taxes -- -- -- --
------------ ------------ ------------ ------------
Net income (loss) $ (314,229) $ 15,330 $ (820,662) $ 283,324
============ ============ ============ ============
Net income (loss) per share $ (0.09) $ 0.00 $ (0.22) $ 0.08
Weighted average number of common
and common equivalent
shares outstanding 3,656,258 3,670,605 3,656,258 3,644,987
============ ============ ============ ============
</TABLE>
See notes to condensed financial statements.
Page 4 of 11
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UNCLE B'S BAKERY, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
SIX MONTHS ENDED JANUARY 31
---------------------------
1998 1997
----------- -----------
OPERATING ACTIVITIES
Net income (loss) $ (820,662) $ 283,324
Depreciation and amortization 575,810 544,048
Loss on sale of equipment 2,469 14,441
Change in operating assets and liabilities (789,584) 190,400
----------- -----------
Net cash provided (used) by
operating activities (1,031,967) 1,032,213
INVESTING ACTIVITIES
Net additions of property, plant
and equipment (368,048) (1,745,655)
Proceeds from sale of equipment 6,310 32,165
Payments for other assets (39,736) (14,772)
----------- -----------
Net cash used by investing activities (401,474) (1,728,262)
FINANCING ACTIVITIES
Proceeds from revolving note payable -- 50,000
Proceeds from long-term debt and warrants 1,550,000 250,000
Decrease in construction fund balance -- 485,067
Payments of long-term debt (123,000) (81,725)
Proceeds from sale of common stock -- 250,000
----------- -----------
Net cash provided by
financing activities 1,427,000 953,342
----------- -----------
Net increase (decrease) in cash
and cash equivalents (6,441) 257,293
Cash and cash equivalents at beginning
of period 6,441 65,565
----------- -----------
Cash and cash equivalents at end
of period $ -- $ 322,858
=========== ===========
See notes to condensed financial statements.
Page 5 of 11
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UNCLE B'S BAKERY, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310 of Regulation
S-B. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three month and six month periods ended
January 31, 1998 are not necessarily indicative of the results that may be
expected for the year ending July 31, 1998. For further information, refer to
the financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-KSB for the year ended July 31, 1997.
NOTE 2 - INVENTORIES
Inventories consist of the following:
January 31 July 31
1998 1997
---------- --------
Raw ingredients and packaging $412,719 $414,266
Finished goods 52,413 138,154
-------- --------
Total inventories $465,132 $552,420
======== ========
NOTE 3 - LONG - TERM DEBT AND WARRANTS
In August 1997, the Company obtained an additional term loan from its principal
senior lender with cash proceeds of $750,000. The new term loan bears interest
at 3% payable in-kind and is due in August 2002. In connection with this
transaction, the Company also issued warrants and repriced certain existing
warrants held by the lender. The total cash proceeds received were allocated
based on fair value to the new term loan and the related warrants, resulting in
a warrant value and equivalent debt discount of $609,900. The related debt
discount is amortized over the loan term.
In December 1997, the Company obtained an over-advance note of its revolving
credit facility under which the Company may borrow up to an additional
$1,300,000. Each advance under the new facility is subject to the lender's prior
approval. To date, the Company has drawn $800,000 however, further advances have
been denied. All advances will bear interest at 12% of which 3% will be payable
monthly in arrears and 9% may either be paid monthly or, at the Company's
option, deferred and paid (with interest on the deferred amount) at maturity.
All principal and unpaid interest is due December 17, 1999. The Company also
repriced certain existing warrants held by the lender which increased the
warrant value and related debt discount by $181,900.
Page 6 of 11
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UNCLE B'S BAKERY, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS:
RESULTS OF OPERATIONS
Net sales decreased 39.2% in the second quarter ended January 31, 1998 to
$3,399,781, a decrease of $2,189,832 over the same period of the prior year.
Almost all of the net sales decrease was attributed to the mutual cancellation
of a food service contract in the third quarter of the prior fiscal year. Year
to date net sales for the first six months were $7,251,380, a decrease of 39.4%
over the same period of the prior year.
Gross profit in the fiscal 1998 second quarter decreased to $1,296,446 from
$2,024,533 for the same period of the prior year. The decrease in gross profit
for the second quarter reflects lower sales volume. Gross profit as a percent of
net sales in the second quarter was 38.1% versus 36.2% in the same period of the
prior year. This improvement reflects the impact of the higher margin from the
branded product sales, which was a higher portion of the sales mix in fiscal
1998, and cost reduction efforts implemented to lower the Company's break-even
point. Gross profit for the first half was $2,664,313 or 36.7% of net sales
versus 37.3% for the same period of the prior year.
For the second quarter ended January 31, 1998, distribution expense totaled
$286,406 compared to $367,016 in the prior year or 8.4% of net sales versus 6.6%
in the prior year. The decrease in distribution expenses is primarily due to
decreased warehouse costs resulting from the cancellation of the food service
contract described above. Distribution expenses for the six months ended January
31, 1998 were 8.5% of net sales versus 7.8% for the same period of the prior
year.
Selling, general and administrative expenses in the second quarter of 1998 were
$974,613, a decrease of $544,690 or 35.9% from the same period of the prior
year. The decrease reflects reduced salary, travel, advertising, trade
allowances and promotions. The lower salary expense is attributed to the
reduction of executive and management salaries and management personnel.
Advertising, trade allowances, promotion and slotting expenses decreased 40.1%
to $526,559 from $879,375 for the same period of the prior year, while net
branded sales, which account for the majority of such costs, remained unchanged.
The Company has instituted a program of selective advertising and promotional
spending that focuses on market penetration and profitability. First half fiscal
1998 selling, general and administrative expenses were $2,192,998, a decrease of
$816,789 from the same period of the prior year. The decrease is primarily due
to the factors previously mentioned.
Income from operations for the second quarter of 1998 was $35,427, compared to a
loss from operations of $177,094 in the first quarter, an improvement of
$212,521. This reflects the successful impact of the Company's aggressive cost
reduction steps taken as discussed above.
Interest expense in the second quarter ended January 31, 1998 increased $208,614
from $134,916 for the same period of the prior year and interest expense for the
six months ended January 31, 1998 was $670,739 versus $258,554 for the same
period of the prior year. The principal reason for the increase is due to the
fact that there was no interest capitalized for the three and six months ended
January 31, 1998, whereas, in the prior year interest was capitalized due to the
plant expansion project.
As a result of the factors described above, net loss for the second quarter
ended January 31, 1998 was $314,229 compared to a net income of $15,330 for the
same period of the prior year. The net loss for the first six months was
$820,662 compared to a net income of $283,324 for the same period of the prior
year.
Page 7 of 11
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LIQUIDITY AND SOURCES OF CAPITAL
Cash used by operating activities was $1,031,967 for the six months ended
January 31, 1998, compared to cash provided by operations of $1,032,213 for the
same period of the prior year. The net loss and impact of an increase in working
capital accounts for this change.
Cash used by investing activities was $401,474 for the six months ended January
31, 1998, a decrease of $1,326,788 over the same period of the prior year. The
primary uses of investment funds were paying for completing certain plant
projects.
Cash provided by financing activities was $1,427,000 for the six months ended
January 31, 1998, primarily representing the proceeds from long term debt and
warrants.
In December 1997, the Company entered into agreements with its principal lender
pursuant to which (a) the lender waived all existing defaults under the credit
agreements, (b) the financial covenants were amended by removing existing
covenants and substituting a covenant requiring the Company to maintain certain
monthly levels of cash flow, and (c) the lender established a new credit
facility pursuant to which the Company may borrow up to an additional
$1,300,000. Each advance under the new facility is subject to the lender's prior
approval. To date, the Company has drawn $800,000 however, further advances have
been denied. All advances will bear interest at 12%, of which 3% will be payable
monthly in arrears and 9% may either be paid monthly or, if not paid,
deferred and paid (with interest on the deferred amount) at maturity. All
principal and unpaid interest is due on December 17, 1999. Through February 1998
the Company has complied with the defined cash flow covenants as set forth by
the lender.
The Company did not make a scheduled monthly interest payment to the lender for
January and February 1998 accrued interest. The Company has experienced losses
and resulting cash flow difficulties as a result of the factors described under
"Management's Discussion and Analysis - Results of Operations," including the
reduction in sales as a result of the mutual cancellation of a substantial food
service contract during the third quarter of fiscal 1997.
In order to manage its working capital, the Company has routinely extended
payment of certain trade creditors and trade payables beyond standard terms. To
date, this practice has not adversely affected the delivery of goods from
suppliers. The Company expects to continue the practice of extending payment of
payables over the near term. However, the Company projects it will able to
reduce the aging of past due payables over the balance of the fiscal year.
The Company has implemented a number of steps to maintain adequate cash flow as
reported in Form 10-KSB for the year ended July 31, 1997. The Company has
engaged a management consulting firm to review and recommend ways to improve
performance and cash flow. As a result, the Company is continuing to implement
additional steps which include improving manufacturing and direct labor
efficiencies along with further reduction in selling expenses, salaried
personnel and salaries of corporate officers. The Company has also retained the
services of investment banking firms to advise on and explore possible
additional approaches to improving the Company's financial situation including
possible mergers and acquisitions.
Page 8 of 11
<PAGE>
As mentioned above, the Company has engaged a management consulting firm and
has implemented a number of actions to assist in improving profitability and
cash flow. The Company and the consultant are presently evaluating various
possible alternatives to maximize the use and value of the Company's capital and
other assets. This review, when complete, could result in the sale and/or
possible write down of certain assets. If necessary, appropriate adjustments to
long-lived assets in accordance with FASB Statement 121, or any other necessary
accounting adjustments, would be recognized upon completion of the review.
There can be no assurance as to the outcome of the current constraint on the
Company's cash flow. The last two advance requests under the over advance note
have been denied. The Company believes that while cash flow will be constrained,
it expects it should be sufficient to meet the Company's liquidity needs except
for monthly interest payments for the remainder of fiscal 1998. At this time the
Company does not intend to make any further interest payments during the fiscal
year. The liquidity needs include trade obligations being paid on extended
payment terms as noted above.
Page 9 of 11
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
None
ITEM 2. CHANGES IN SECURITIES:
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES:
As described under Management's Discussion and Analysis "Liquidity and
Sources of Capital," in January and February 1998 the Company did not
make scheduled monthly interest payments to its lender. The amount of
the January interest payment was $78,667, and the total arrearage at
the date of this report is $149,827.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
None
ITEM 5. OTHER INFORMATION:
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) The following exhibits are included herein:
10.21 Waiver and Fourth Amendment to Loan and Security Agreement with
Creditanstalt American Corporation, dated December 17, 1997.
10.22 Third Amendment to Warrant Agreement, dated December 17, 1997.
10.23 Over Advance Agreement, dated December 17, 1997
11 Statement re: computation of earnings per share
27 Financial Data Schedule (included in electronic filing only)
(b) The Company did not file any reports on Form 8-K during the
six months ended January 31, 1998.
Page 10 of 11
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNCLE B'S BAKERY, INC.
-------------------------------------
(Registrant)
Date MARCH 17, 1998 /S/ WM. HOWARD MCCLENNAN, JR.
------------------------- -----------------------------------------
Wm. Howard McClennan, Jr.
Chief Financial Officer
Date MARCH 17, 1998 /S/ WILLIAM T. ROSE, JR.
------------------------- -----------------------------------------
William T. Rose, Jr.
Chairman and CEO
Page 11 of 11
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EXHIBIT 10.21
-------------
WAIVER AND FOURTH AMENDMENT
TO LOAN AND SECURITY AGREEMENT
THIS WAIVER AND FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (the
"Amendment") is made and entered into the 17th day of December, 1997 by and
between UNCLE B'S BAKERY, INC., an Iowa corporation ("Borrower"), and
CREDITANSTALT CORPORATE FINANCE, INC., a Delaware corporation ("Lender").
W I T N E S S E T H :
WHEREAS, Borrower and Lender are parties to a certain Loan and Security
Agreement, dated as of July 12, 1995 (the "Loan Agreement"), which Loan
Agreement was amended on October 28, 1996 pursuant to the Waiver and First
Amendment to the Loan and Security Agreement, was further amended on November
15, 1996 pursuant to that certain Second Amendment to Loan and Security
Agreement, and was further amended on August 25, 1997 pursuant to that certain
Waiver and Third Amendment to Loan Agreement, and which Loan Agreement currently
provides for term loans in the aggregate original principal amount of Seven
Million One Hundred Fifty Thousand Dollars ($7,900,000) and for a revolving
credit facility from Lender to Borrower in the aggregate principal amount of up
to One Million Five Hundred Thousand Dollars ($1,500,000) at any one time
outstanding; and
WHEREAS, Borrower has requested that Lender waive any Event of Default
arising out of (i) the Borrower's failure comply with the financial covenants
contained therein, (ii) the Borrower's failure to make interest payments as
required under the Loan Agreement on November 1, 1997 and December 1, 1997, and
(iii) certain other Events of Default more specifically identified herein, and
has further requested that Lender further amend the Loan Agreement, among other
things, to revise the financial covenants contained therein; and
WHEREAS, Lender has agreed to grant Borrower's request, subject to the terms and
conditions set forth herein;
NOW, THEREFORE, for and in consideration of the premises, the terms and
conditions set forth herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. DEFINED TERMS. Capitalized terms used herein and not otherwise
defined shall have the meanings ascribed to such terms in the Loan Agreement, to
the extent defined therein.
2. AMENDMENTS.
2.1 The definition of "Borrowing Base" contained in Section
1.1 of the Loan Agreement is hereby amended by deleting the reference to
"January 31, 1998" contained therein,
<PAGE>
and substituting in lieu thereof a reference to "December 31, 1998".
2.1 Sections 8.1 through 8.4 of the Loan Agreement are hereby
amended by deleting such Sections in their entirety and by substituting in lieu
thereof new Sections 8.1 through 8.4, to read as follows:
8.1 MINIMUM CASH FLOW. Borrower shall maintain as of the end
of each month during the applicable periods set forth below, a minimum
monthly Cash Flow of not less than the amount set forth opposite each
such applicable period:
APPLICABLE PERIOD AMOUNT
12/01/97 - 12/31/97 $60,000
01/01/98 - 01/31/98 $75,000
02/01/98 - 12/31/98 $125,000
8.3 [INTENTIONALLY DELETED].
8.2 [INTENTIONALLY DELETED].
8.4 [INTENTIONALLY DELETED].
3. WAIVER. Lender hereby waives any Event of Default under the Loan
Agreement prior to the date hereof arising solely out of (i) the Borrower's
failure to comply with the financial covenant set forth in Section 8.1 for the
period beginning on August 25, 1997 and ending on the Fourth Amendment Effective
Date, and the financial covenants set forth in Sections 8.2 and 8.4 of the Loan
Agreement for the fiscal quarter ending October 31, 1997, (ii) the Borrower's
failure to make payments of accrued interest on November 1, 1997 or December 1,
1997, (iii) the Borrower's failure to pay real property taxes totaling
approximately $24,500, which were due on September 1, 1997, and (iv) the
Borrower's execution and delivery of, and the filing of, that certain UCC-1
financing statement listing the Borrower as debtor, the State of Iowa,
Department of Economic Development as Borrower, filed with the Secretary of
State of Iowa on or about October 28, 1995.
4. EXPENSES. Borrower agrees to pay, immediately upon demand by Lender,
all costs, expenses, attorneys' fees, and other charges and expenses incurred by
Lender in connection with the negotiation, preparation, execution and delivery
of this Amendment.
5. DEFAULTS HEREUNDER. The breach of any representation, warranty or
covenant contained herein or in any document executed in connection herewith, or
the failure to observe or comply with any term or agreement contained herein or
in any document executed in conjunction herewith, shall constitute an Event of
Default under the Loan Documents and Lender shall be entitled to exercise all
rights and remedies it may have under the Loan Agreement, any of the other Loan
Documents and applicable law.
6. REPRESENTATIONS AND WARRANTIES. All of the representations and
warranties made
2
<PAGE>
by Borrower under the Loan Agreement and the Loan Documents shall be true and
correct in all material respects as of the date hereof with the same force and
effect as if made on and as the date hereof, except as has been disclosed to the
Lender in writing and except for such changes in such representations and
warranties which do not constitute a Default or Event of Default, which do not,
individually or in the aggregate, have a Material Adverse Effect and which have,
to the extent required, been disclosed to the Bank pursuant to Section 6.2 of
the Loan Agreement or otherwise. Borrower further represents and warrants to
Lender on and as of the date of this Amendment, and after giving effect thereto,
no Default or Event of Default has occurred and is continuing.
7. NO MATERIAL ADVERSE CHANGE. Since October 31, 1997, and other than
as set forth on EXHIBIT A attached hereto, there has not occurred any material
adverse change in the assets, liabilities, business, operations or condition
(financial or otherwise) of the Borrower, or any event, condition, or state of
facts which would be expected to have a Material Adverse Effect subsequent to
the date hereof.
8. CONDITIONS PRECEDENT. This Amendment shall not become effective
unless and until (the date of such effectiveness being the "Fourth Amendment
Effective Date"):
(i) the Lender shall have received the following documents, each duly
executed and delivered to Lender, and each to be satisfactory in form and
substance to Lender and its counsel:
(a) the Amendment;
(b) the Over Advances Agreement, of even date herewith, between the
Borrower and the Lender (the "Over Advances Agreement");
(c) the Over Advances Note (as defined in the Over Advances
Agreement);
(d) the Over Advances Capitalized Interest Note (as defined in the
Over Advances Agreement);
(e) a certificate signed by the president and chief financial officer
of Borrower, stating that, giving effect to this Amendment, the
representations and warranties set forth in ARTICLE 5 of the Loan
Agreement are true and correct in all material respects on the
date hereof, Borrower is on the date hereof in compliance with
all the terms and conditions set forth in the Loan Agreement, as
amended hereby, and the Loan Documents on its part to be observed
or performed, and on the date hereof, after giving effect to this
Amendment, no Default or Event of Default has occurred or is
continuing;
(f) a certificate of the Secretary of Borrower certifying that
attached thereto is a true and correct copy of the resolutions
adopted by its Board of Directors, authorizing the execution,
delivery and performance of the Amendment, the Over Advances
Agreement and the other documents contemplated hereby;
3
<PAGE>
(g) the written opinion of Dorsey & Whitney LLP, counsel to Borrower,
in form and substance satisfactory to Lender;
(h) the Written Direction to Trustee to Waive Default, executed by
Creditanstalt Municipal Leasing Company ("CMLC") and acknowledged
by Norwest Bank Iowa, National Association, as Trustee (the
"Trustee"), pursuant to which CMLC shall direct the Trustee to
waive certain events of default thereunder and to cause the City
of Ellsworth, Iowa, as issuer of the Bonds, to amend the Bond
Loan Agreement to reflect the amendments to the financial
covenants contained in the Loan Agreement contained therein;
(i) such other documents, instruments and agreements with respect to
the transactions contemplated by this Amendment, in each case in
such form and containing such additional terms and conditions as
may be reasonably satisfactory to Lender, and containing, without
limitation, representations and warranties which are customary
and usual in such documents.
9. REFERENCES IN LOAN DOCUMENTS. All references in the Loan Agreement
and the other Loan Documents to the Loan Agreement shall hereafter be deemed to
be references to the Loan Agreement as amended hereby and as the same may
hereafter be amended from time to time.
10. NO CLAIMS, OFFSET. Borrower hereby represents, warrants,
acknowledges and agrees to and with Lender that (a) Borrower does not hold or
claim any right of action, claim, cause of action or damages, either at law or
in equity, against Lender which arises from, may arise from, allegedly arise
from, are based upon or are related in any manner whatsoever to the Loan
Agreement and the Loan Documents or which are based upon acts or omissions of
Lender in connection therewith and (b) the Obligations are absolutely owed to
Lender, without offset, deduction or counterclaim.
11. NO NOVATION. The terms of this Amendment are not intended to and do
not serve to effect a novation as to the Loan Agreement. The parties hereto
expressly do not intend to extinguish any debt or security interest created
pursuant to the Loan Agreement. Instead, it is the express intention of the
parties hereto to affirm the Loan Agreement and the security created thereby.
12. LIMITATION OF AMENDMENT. Except as expressly set forth herein, this
Amendment shall not be deemed to waive, amend or modify any term or condition of
the Loan Agreement or any of the other Loan Documents, each of which is hereby
ratified and reaffirmed, and which shall remain in full force and effect, nor to
serve as a consent to any matter prohibited by the terms and conditions thereof.
13. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, and any party hereto may execute any counterpart, each of which,
when executed and delivered, will be deemed to be an original and all of which,
taken together, will be deemed to be but one and the same agreement. Any
signature page to this Amendment may be witnessed by a telecopy or
4
<PAGE>
other facsimile of any original signature page or any counterpart hereof may be
appended to any other counterpart hereof to form a completely executed
counterpart hereof.
14. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon and
inure to the benefit of the successors and permitted assigns of the parties
hereto.
15. SECTION REFERENCES. Section titles and references used in this
Amendment shall be without substantive meaning or content of any kind whatsoever
and are not a part of the agreements among the parties hereto evidenced hereby.
16. GOVERNING LAW. This Amendment shall be governed by, and construed
in accordance with, the laws of the State of New York, without regard to
principles of conflicts of law.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first written above.
"BORROWER"
UNCLE B'S BAKERY, INC.
By: /s/ William T. Rose, Jr.
----------------------------------
William T. Rose, Jr.
President
Attest: /s/ Wm. Howard McClennan, Jr.
------------------------------
Wm. Howard McClennan, Jr.
Secretary
"LENDER"
CREDITANSTALT CORPORATE FINANCE, INC.
By: /s/ Robert M. Biringer
----------------------------------
Robert M. Biringer
Executive Vice President
By: /s/ John G. Taylor
----------------------------------
John G. Taylor
Senior Associate
<PAGE>
EXHIBIT A
TO WAIVER AND FOURTH AMENDMENT TO
LOAN AND SECURITY AGREEMENT
Lender has been provided with a copy of the Situation Analysis Report,
dated November 1997, prepared by The Scotland Group, Inc. with respect to
Borrower. Due to the factors described in that report, including the termination
of the contract with Heinz Bakery Products, the termination of the agreement
with Metz Baking for distribution of Millspring bagels, manufacturing
inefficiencies relating to Borrower's plant expansion project coupled with
Borrower's overhead structure, Borrower has experienced liquidity difficulties.
This liquidity situation has resulted in a variety of material adverse effects
on Borrower, some of which have been manifested after October 31, 1997,
including the items described in the letter from Borrower's counsel to Lender's
counsel dated December 15, 1997 and the mechanic's lien filed on December 12,
1997 by Newell Machinery Co., Inc. against Borrower, a copy of which has been
provided to Lender's counsel.
<PAGE>
EXHIBIT 10.22
-------------
THIRD AMENDMENT TO WARRANT AGREEMENT
THIS THIRD AMENDMENT TO WARRANT AGREEMENT (the "Amendment") is made and
entered into as of the 17th day of December, 1997 between UNCLE B'S BAKERY,
INC., an Iowa corporation (the "Issuer"), and CREDITANSTALT-BANKVEREIN, an
Austrian banking corporation ("Creditanstalt").
W I T N E S S E T H:
WHEREAS, pursuant to Loan and Security Agreement dated as of July 12,
1995 between the Issuer and Creditanstalt Corporate Finance, Inc. ("CFI") (the
Loan Agreement"), CFI made a loan to the Issuer upon the terms set forth in the
Loan Agreement; and
WHEREAS, in order to induce CFI to structure and provide the loan
pursuant to the Loan Agreement, the Issuer executed and delivered a Warrant
Agreement dated as of July 12, 1995 (as amended by the First Amendment (as
defined below) and the Second Amendment (as defined below) and as may be
amended, supplemented or otherwise modified from time to time (the "Warrant
Agreement")) and issued to CFI Series A Warrants to purchase 215,000 shares of
Common Stock or Convertible Preferred Stock of the Issuer, which warrants were
later transferred by CFI to Creditanstalt American Corporation ("CAC"), an
affiliate of CFI; and
WHEREAS, on October 28, 1996, the Issuer and CFI entered into a Waiver
and First Amendment to Loan and Security Agreement which modified certain
definitions and covenants and waived certain defaults, and on November 15, 1996,
the Issuer and CFI entered into a Second Amendment to Loan and Security
Agreement (the "Second Loan Agreement Amendment") to provide for the loan of
additional funds; and
WHEREAS, on August 25, 1997, the Issuer and CFI entered into a Waiver
and Third Amendment to Loan and Security Agreement (the "Third Loan Agreement
Amendment") which modified certain definitions and covenants and waived certain
defaults; and
WHEREAS, in connection with and to induce CFI to enter into the Second
Loan Agreement Amendment, the Issuer amended the Warrant Agreement on November
15, 1996 (the "First Amendment") and issued to CAC Series B Warrants to purchase
205,000 shares of Common Stock or Convertible Preferred Stock of the Issuer; and
WHEREAS, also on November 15, 1996, Creditanstalt made an equity
investment in 111,111 shares of Common Stock of the Issuer; and
<PAGE>
WHEREAS, in connection with the Third Loan Agreement Amendment, the
Issuer agreed to substitute Creditanstalt as the Warrant Holder of the Series A
Warrants and the Series B Warrants, and to amend the Warrant Agreement, in order
to provide for the issuance of additional warrants to Creditanstalt and make
certain other changes set forth herein; and
WHEREAS, the Issuer and CFI wish to enter into a Waiver and Fourth
Amendment to Loan and Security Agreement and an Overadvance Agreement each dated
as of December 17, 1997 (as the same may be amended, supplemented or otherwise
modified from time to time, the "Fourth Loan Agreement Amendment"); and
WHEREAS, in connection with and to induce CFI to enter into the Fourth
Loan Agreement Amendment, the Issuer has agreed to reduce the Exercise Price of
the Warrants from $0.55 per Warrant to $0.01 per Warrant.
NOW, THEREFORE, in consideration of the premises, the terms and
conditions contained herein, and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the parties
hereby agree as follows:
1. DEFINITIONS. All capitalized terms used herein and not expressly
defined herein shall have the same respective meanings given to such terms in
the Warrant Agreement.
2. AMENDMENT OF DEFINITION OF "EXEMPTED SECURITIES." The term "Exempted
Securities", as set forth in Section 1 of the Warrant Agreement, is hereby
deleted in its entirety and the following definition is substituted in lieu
thereof:
"EXEMPTED SECURITIES" shall mean (A) Warrant Shares,
(B) shares of the Issuer's capital stock issued as a stock
dividend described in subsection 12(b), (C) options and
warrants granted as of the date hereof to purchase up to
1,010,200 shares of Common Stock of the Issuer and shares of
Common Stock issuable upon exercise of such options and
warrants, (D) up to 750,000 shares of Issuer's Common Stock to
be sold to an Employee Stock Ownership Plan to be established
by Issuer at a purchase price not less than the fair market
value of such shares as determined in accordance with the
applicable provisions of the Internal Revenue Code of 1986, as
amended, or the regulations promulgated thereunder, (E)
employee options granted after the date hereof at not less
than Current Market Price Per Share to purchase up to 388,600
shares of Common Stock and shares of Common Stock issuable
upon the exercise of such options, and (F) shares of Common
Stock issued as compensation under agreements with Cybus
Capital Markets, L.C. or The Scotland Group, Inc. or other
consultants or investment banking firms retained by Issuer and
approved by Creditanstalt; provided, that (i) any shares of
Common Stock shall be issued at a price not less than the
price which would be the Current Market Price Per Share of the
Company's Common Stock on the applicable date under such
agreement, if the definition of Current Market Price Per Share
used the price on the immediately preceding one (1) trading
day rather than a 20-day average, (ii) any warrants to
purchase Common Stock may have an exercise price to be
determined by Issuer but not less than $.01 per share of
Common Stock, and (iii) any shares of Common Stock issued
pursuant to the exercise of warrants shall be issued for not
less than the exercise price then in effect under such
warrants. The limits in clauses (A) through (F) shall be
proportionately adjusted for dividends and other distributions
payable in and for subdivisions and combinations of shares of
Common Stock.
3. AMENDMENT OF DEFINITION OF "EXERCISE PRICE". The term "Exercise
Price", as set forth in Section 1 of the Warrant Agreement, is hereby deleted in
its entirety and the following definition is substituted in lieu thereof:
"EXERCISE PRICE" shall mean the exercise price of a
Warrant, which shall be $0.01 per Warrant.
4. Exhibit A. The Warrant Agreement is hereby further amended by
deleting Exhibits A-1, A-2 and A-3 in their entirety and substituting in lieu
thereof new Exhibits A-1, A-2 and A-3 in the forms attached hereto as Exhibits
A-1, A-2 and A-3.
5. ISSUANCE AND REGISTRATION OF WARRANTS. The Issuer hereby agrees to
issue and deliver to Creditanstalt or, at the option of Creditanstalt, an
Affiliate thereof, new Warrant Certificates evidencing the outstanding Warrants
as hereby amended. Upon receipt of such new Warrant Certificates, Creditanstalt
shall deliver to the Issuer for cancellation the old Warrant Certificates. On
the date hereof, the Issuer shall register the new Warrant Certificates in the
Warrant Register in the name of Creditanstalt or an Affiliate thereof as the
case may be.
2
<PAGE>
6. RESTATEMENT OF REPRESENTATIONS AND WARRANTIES.
(a) Issuer hereby reaffirms each and every representation and warranty
heretofore made under or in connection with the execution and delivery of the
Warrant Agreement (including, without limitation, those representations and
Warranties set forth in Section 2 of the Warrant Agreement), as such
representations and warranties are amended in Sections 5(b) and 5(c) of this
Amendment, as fully as though such representations and warranties have been made
on the date hereof and with specific reference to this Amendment.
(b) The Issuer has authorized capital stock consisting of (i) 40,000,000
Class A shares, par value $0.01 per share, of which, as of December 17, 1997,
3,656,258 shares are issued and outstanding; (ii) 8,295,000 Class B shares, par
value $0.01 per share, no shares of which are issued and outstanding; (iii)
215,000 shares of Class B, Series 1 Convertible Preferred Stock, $0.01 par
value, no shares of which are issued and outstanding; (iv) 420,000 shares of
Class B, Series 2 Preferred Stock, $0.01 par value, no shares of which are
issued and outstanding; and (v) 1,070,000 shares of Class B, Series 3 Preferred
Stock, $0.01 par value, no shares of which are issued and outstanding. Except as
set forth on Schedule I hereto, there are no outstanding options, warrants,
subscriptions, rights, convertible or exchangeable securities or other
agreements or plans under which the Issuer may be or become obligated to issue,
sell or transfer shares of its capital stock or other securities. The
Convertible Preferred Stock has no voting rights, except as required by law, and
is convertible on a share-for-share basis into Common Stock of the Issuer. To
the Issuer's best knowledge, there are no voting agreements, voting trusts,
proxies or other agreements or understandings with respect to the voting of any
capital stock of the Issuer or any Subsidiary, other than the Voting Agreement
between William T. Rose, Jr. and William T. Rose, Sr. dated August 14, 1993, the
provisions of Section 9(c) of the Warrant Agreement, and the provisions of
Section 3 of the Subscription Agreement dated November 15, 1996 between the
Issuer and Creditanstalt.
(c) Item 4 of Schedule II to the Warrant Agreement is amended to read as
follows: Warrant Agreement dated July 12, 1995 by and between Uncle B's Bakery,
Inc. and Creditanstalt Corporate Finance, Inc., as amended by the First
Amendment to Warrant Agreement, Second Amendment to Warrant Agreement, and Third
Amendment to Warrant Agreement.
7. EFFECT OF AMENDMENT. Except as expressly set forth hereinabove, the
Warrant Agreement shall remain in full force and effect as originally written,
and shall constitute the legal, valid, binding and enforceable obligation of
Issuer to Creditanstalt, and Issuer hereby restates, ratifies and reaffirms each
and every term and condition set forth in the Warrant Agreement, as amended
hereby, effective as of the date hereof. This Amendment shall not entitle
Creditanstalt to any increase in the number of Warrants by reason of Section 12
of the Warrant Agreement.
8. COUNTERPARTS. This Amendment 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
one and the same instrument.
3
<PAGE>
9. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon and
inure to the benefit of the successors and permitted assigns of the parties
hereto.
10. SECTION REFERENCES. Section titles and references used in this
Amendment shall be without substance and meaning or content of any kind
whatsoever and are not a part of the agreement among the parties hereto
evidenced hereby.
11. FURTHER ASSURANCES. Issuer agrees to take such further action as
Creditanstalt shall reasonably request in connection herewith evidencing the
Amendment herein contained to the Warrant Agreement.
12. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers,
effective as of the date and year first above written.
"Issuer"
UNCLE B'S BAKERY, INC.
By: /s/ William T. Rose, Jr.
----------------------------------
Name: William T. Rose, Jr.
Title: CEO
Attest: /s/ Wm. Howard McClennan, Jr.
------------------------------
Name: Wm. Howard McClennan, Jr.
Title: Corporate Secretary & CFO
"Creditanstalt"
CREDITANSTALT-BANKVEREIN
By: /s/ Robert M. Biringer
----------------------------------
Name: Robert M. Biringer
Title: Executive Vice President
By: /s/ Scott Kray
----------------------------------
Name: Scott Kray
Title: Vice President
5
<PAGE>
EXHIBIT A-1
FORM OF SERIES A WARRANT CERTIFICATE
THE WARRANTS AND SHARES REPRESENTED BY THIS SERIES A WARRANT CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAW AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT OR LAW.
SUCH WARRANTS AND SHARES MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH THE
CONDITIONS SPECIFIED IN AND ARE SUBJECT TO OTHER PROVISIONS OF THE WARRANT
AGREEMENT, DATED AS OF JULY 12, 1995, (AS AMENDED) BETWEEN THE ISSUER AND
CREDITANSTALT CORPORATE FINANCE, INC., A COMPLETE AND CORRECT COPY OF WHICH IS
AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE ISSUER AND WILL BE
FURNISHED TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE.
THE WARRANTS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN MANDATORY
REDEMPTION AND EXCHANGE RIGHTS MORE FULLY SET FORTH IN THE WARRANT AGREEMENT.
Certificate No. A-______
[Date]
EXERCISABLE ONLY ON OR BEFORE
July 12, 2005
Warrant Certificate
This Series A Warrant Certificate (this "Warrant Certificate")
certifies that Creditanstalt-Bankverein ("Creditanstalt"), or registered
assigns, is the registered holder of 215,000 Warrants (the "Warrants") to
purchase Common Stock or Convertible Preferred Stock of Uncle B's Bakery, Inc.,
an Iowa corporation (the "Issuer"). Each Warrant entitles the holder, but only
subject to the conditions set forth herein and in the Warrant Agreement referred
to below, to purchase from the Issuer before 5:00 P.M., New York time, on July
12, 2005 (the "Expiration Date"), one (1) fully paid and nonassessable share of
the Common Stock or Convertible Preferred Stock of the Issuer (the "Warrant
Shares") in the percentages and to the extent set forth in the Warrant
Agreement, at a price (the "Exercise Price") of $0.01 per Warrant payable in
lawful money of the United States of America, upon surrender of this Warrant
Certificate, execution of the annexed Form of Election to Purchase and payment
of the Exercise Price at the office of the Issuer
A-1-1
<PAGE>
at 441 Dubuque Street, Ellsworth, Iowa 50075, or such other address as the
Issuer may specify in writing to the registered holder of Warrants evidenced
hereby (the "Warrant Office"). In lieu of exercising Warrants pursuant to the
immediately preceding sentence, the Warrant holder shall have the right to
require the Issuer to convert the Warrants, in whole or in part and at any time
or times, into Warrant Shares, by surrendering to the Issuer the Warrant
Certificate evidencing the Warrants to be converted, accompanied by the annexed
Form of Notice of Conversion which has been duly completed and signed. The
Exercise Price and number of Warrant Shares purchasable upon exercise of the
Warrants are subject to adjustment prior to the Expiration Date as set forth in
the Warrant Agreement. In no event shall this Warrant be exercisable for shares
of Common Stock or Convertible Preferred Stock which, when aggregated with all
other capital stock of the Issuer (other than shares of Non-Attributable Stock)
then held or previously held by or currently issuable without restriction to
Creditanstalt or its Affiliates would, upon issuance, represent in excess of
24.99% of the Equity of the Issuer (defined in the Warrant Agreement) unless
such shares, when issued, would constitute Non-Attributable Stock (as defined in
the Warrant Agreement).
No Warrant may be exercised after 5:00 P.M., New York time, on the
Expiration Date and (except as otherwise provided in the Warrant Agreement) all
rights of the registered holders of the Warrants shall cease after 5:00 P.M.,
New York time, on the Expiration Date.
The Issuer may deem and treat the registered holders of the Warrants
evidenced hereby as the absolute owners thereof (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof and of any distribution to the holders hereof and for all other
purposes, and the Issuer shall not be affected by any notice to the contrary.
Warrant Certificates, when surrendered at the office of the Issuer at
the Warrant Office by the registered holder hereof in person or by a legal
representative duly authorized in writing, may be exchanged, in the manner and
subject to the limitations provided in the Warrant Agreement, but without
payment of any service charge, for another Warrant Certificate or Warrant
Certificates of like tenor evidencing in the aggregate a like number of
Warrants.
Upon due presentment for registration of transfer of this Warrant
Certificate at the Warrant Office, a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants shall be issued in exchange for this Warrant Certificate to the
transferee(s) and, if less than all the Warrants evidenced hereby are to be
transferred, to the registered holder hereof, subject to the limitations
provided in the Warrant Agreement, without charge except for any tax or other
governmental charge imposed in connection therewith.
A-1-2
<PAGE>
This Warrant Certificate is one of the Warrant Certificates referred to
in the Warrant Agreement, dated as of July 12, 1995, (as amended) between the
Issuer and Creditanstalt Corporate Finance, Inc. Said Warrant Agreement is
hereby incorporated by reference in and made a part of this instrument and is
hereby referred to for a description of the rights, limitation of rights,
obligations, duties and immunities thereunder of the Issuer and the holders.
IN WITNESS WHEREOF the Issuer has caused this Warrant Certificate to be
signed by its duly authorized officers.
ATTEST: UNCLE B'S BAKERY, INC.
By:
- --------------------------- ---------------------------
________________, Secretary ________________, President
[CORPORATE SEAL]
A-1-3
<PAGE>
ANNEX to Form
of Series A Warrant
Certificate
FORM OF ELECTION TO PURCHASE
(To be executed upon exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase _____ Warrant Shares* and
herewith tenders payment for such Warrant Shares to the order of the Issuer in
the amount of $_______________________ in accordance with the terms hereof. The
undersigned requests that a certificate for such Warrant Shares be registered in
the name of ________________ whose address is ____________________ and that such
certificate be delivered to __________________ whose address is
_____________________. If said number of Warrant Shares is less than all of the
Warrant Shares purchasable hereunder, the undersigned requests that a new
Warrant Certificate representing the remaining balance of the Warrant Shares be
registered in the name of _______________ whose address is _______________ and
that such Warrant Certificate be delivered to ____________________ whose address
is ____________________.
Signature:
- ------------------------------------------
(Signature must conform in all respects to name of holder as specified on the
face of the Warrant Certificate.)
Date:_____________
* Consisting of:
_____ shares of Common Stock
_____ shares of Convertible Preferred Stock
A-1-4
<PAGE>
ANNEX to Form
of Series A Warrant
Certificate
FORM OF NOTICE OF CONVERSION
(To be executed upon conversion of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to convert Warrants represented hereby
into ____ Warrant Shares* in accordance with the terms hereof. The undersigned
requests that a certificate for such Warrant Shares be registered in the name of
______________ whose address is ______________________ and that such certificate
be delivered to ______________ whose address is _______________. If said number
of Warrant Shares is less than all of the Warrant Shares obtainable hereunder,
the undersigned requests that a new Warrant Certificate representing the
remaining balance of the Warrant Shares be registered in the name of
___________________ whose address is _______________ and that such Warrant
Certificate be delivered to __________________ whose address is
________________.
Signature:
- ------------------------------------------
(Signature must conform in all respects to name of holder as specified on the
face of the Warrant Certificate.)
Date:_____________
* Consisting of:
_____ shares of Common Stock
_____ shares of Convertible Preferred Stock
A-1-5
<PAGE>
EXHIBIT A-2
FORM OF SERIES B WARRANT CERTIFICATE
THE WARRANTS AND SHARES REPRESENTED BY THIS SERIES B WARRANT CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAW AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT OR LAW.
SUCH WARRANTS AND SHARES MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH THE
CONDITIONS SPECIFIED IN AND ARE SUBJECT TO OTHER PROVISIONS OF THE WARRANT
AGREEMENT, DATED AS OF JULY 12, 1995, (AS AMENDED) BETWEEN THE ISSUER AND
CREDITANSTALT CORPORATE FINANCE, INC., A COMPLETE AND CORRECT COPY OF WHICH IS
AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE ISSUER AND WILL BE
FURNISHED TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE.
THE WARRANTS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN MANDATORY
REDEMPTION AND EXCHANGE RIGHTS MORE FULLY SET FORTH IN THE WARRANT AGREEMENT.
Certificate No. B-_____
[Date]
EXERCISABLE ONLY ON OR BEFORE
November 15, 2006
Series B Warrant Certificate
This Series B Warrant Certificate (this "Warrant Certificate")
certifies that Creditanstalt-Bankverein ("Creditanstalt"), or registered
assigns, is the registered holder of 205,000 Warrants (the "Warrants") to
purchase Common Stock or Convertible Preferred Stock of Uncle B's Bakery, Inc.,
an Iowa corporation (the "Issuer"). Each Warrant entitles the holder, but only
subject to the conditions set forth herein and in the Warrant Agreement referred
to below, to purchase from the Issuer before 5:00 P.M., New York time, on
November 15, 2006 (the "Expiration Date"), one (1) fully paid and nonassessable
share of the Common Stock or Convertible Preferred Stock of the Issuer (the
"Warrant Shares") in the percentages and to the extent set forth in the Warrant
Agreement, at a price (the "Exercise Price") of $0.01 per Warrant payable in
lawful money of the United States of America, upon surrender of this Warrant
Certificate, execution of the annexed Form of Election to Purchase and payment
of the Exercise Price
A-2-1
<PAGE>
at the office of the Issuer at 441 Dubuque Street, Ellsworth, Iowa 50075, or
such other address as the Issuer may specify in writing to the registered holder
of Warrants evidenced hereby (the "Warrant Office"). In lieu of exercising
Warrants pursuant to the immediately preceding sentence, the Warrant holder
shall have the right to require the Issuer to convert the Warrants, in whole or
in part and at any time or times, into Warrant Shares, by surrendering to the
Issuer the Warrant Certificate evidencing the Warrants to be converted,
accompanied by the annexed Form of Notice of Conversion which has been duly
completed and signed. The Exercise Price and number of Warrant Shares
purchasable upon exercise of the Warrants are subject to adjustment prior to the
Expiration Date as set forth in the Warrant Agreement. In no event shall this
Warrant be exercisable for shares of Common Stock or Convertible Preferred Stock
which, when aggregated with all other capital stock of the Issuer (other than
shares of Non-Attributable Stock) then held or previously held by or currently
issuable without restriction to Creditanstalt or its Affiliates would, upon
issuance, represent in excess of 24.99% of the Equity of the Issuer (defined in
the Warrant Agreement) unless such shares, when issued, would constitute
Non-Attributable Stock (as defined in the Warrant Agreement).
No Warrant may be exercised after 5:00 P.M., New York time, on the
Expiration Date and (except as otherwise provided in the Warrant Agreement) all
rights of the registered holders of the Warrants shall cease after 5:00 P.M.,
New York time, on the Expiration Date.
The Issuer may deem and treat the registered holders of the Warrants
evidenced hereby as the absolute owners thereof (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof and of any distribution to the holders hereof and for all other
purposes, and the Issuer shall not be affected by any notice to the contrary.
Warrant Certificates, when surrendered at the office of the Issuer at
the Warrant Office by the registered holder hereof in person or by a legal
representative duly authorized in writing, may be exchanged, in the manner and
subject to the limitations provided in the Warrant Agreement, but without
payment of any service charge, for another Warrant Certificate or Warrant
Certificates of like tenor evidencing in the aggregate a like number of
Warrants.
Upon due presentment for registration of transfer of this Warrant
Certificate at the Warrant Office, a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants shall be issued in exchange for this Warrant Certificate to the
transferee(s) and, if less than all the Warrants evidenced hereby are to be
transferred, to the registered holder hereof, subject to the limitations
provided in the Warrant Agreement, without charge except for any tax or other
governmental charge imposed in connection therewith.
A-2-2
<PAGE>
This Warrant Certificate is one of the Warrant Certificates referred to
in the Warrant Agreement, dated as of July 12, 1995, (as amended) between the
Issuer and Creditanstalt Corporate Finance, Inc. Said Warrant Agreement is
hereby incorporated by reference in and made a part of this instrument and is
hereby referred to for a description of the rights, limitation of rights,
obligations, duties and immunities thereunder of the Issuer and the holders.
IN WITNESS WHEREOF the Issuer has caused this Warrant Certificate to be
signed by its duly authorized officers.
ATTEST: UNCLE B'S BAKERY, INC.
By:
- ---------------------------- -----------------------------
________________, Secretary ________________, President
[CORPORATE SEAL]
A-2-3
<PAGE>
ANNEX to Form
of Series B Warrant
Certificate
FORM OF ELECTION TO PURCHASE
(To be executed upon exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase _____ Warrant Shares* and
herewith tenders payment for such Warrant Shares to the order of the Issuer in
the amount of $_____ in accordance with the terms hereof. The undersigned
requests that a certificate for such Warrant Shares be registered in the name of
____________________ whose address is _______________________ and that such
certificate be delivered to ___________________ whose address is
_______________________. If said number of Warrant Shares is less than all of
the Warrant Shares purchasable hereunder, the undersigned requests that a new
Warrant Certificate representing the remaining balance of the Warrant Shares be
registered in the name of _______________________ whose address is
________________________ and that such Warrant Certificate be delivered to
_________________________ whose address is ________________________________.
Signature:
- ------------------------------------------
(Signature must conform in all respects to name of holder as specified on the
face of the Warrant Certificate.)
Date:_____________
* Consisting of:
_____ shares of Common Stock
_____ shares of Convertible Preferred Stock
A-2-4
<PAGE>
ANNEX to Form
of Series B Warrant
Certificate
FORM OF NOTICE OF CONVERSION
(To be executed upon conversion of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to convert Warrants represented hereby
into _______ Warrant Shares* in accordance with the terms hereof. The
undersigned requests that a certificate for such Warrant Shares be registered in
the name of ______________ whose address is ____________________ and that such
certificate be delivered to _____________ whose address is ________________. If
said number of Warrant Shares is less than all of the Warrant Shares obtainable
hereunder, the undersigned requests that a new Warrant Certificate representing
the remaining balance of the Warrant Shares be registered in the name of
_____________ whose address is ______________ and that such Warrant Certificate
be delivered to _____________ whose address is ______________________.
Signature:
- ------------------------------------------
(Signature must conform in all respects to name of holder as specified on the
face of the Warrant Certificate.)
Date:_____________
* Consisting of:
_____ shares of Common Stock
_____ shares of Convertible Preferred Stock
A-2-5
<PAGE>
EXHIBIT A-3
FORM OF SERIES C WARRANT CERTIFICATE
THE WARRANTS AND SHARES REPRESENTED BY THIS SERIES C WARRANT CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAW AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT OR LAW.
SUCH WARRANTS AND SHARES MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH THE
CONDITIONS SPECIFIED IN AND ARE SUBJECT TO OTHER PROVISIONS OF THE WARRANT
AGREEMENT, DATED AS OF JULY 12, 1995, (AS AMENDED) BETWEEN THE ISSUER AND
CREDITANSTALT CORPORATE FINANCE, INC., A COMPLETE AND CORRECT COPY OF WHICH IS
AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE ISSUER AND WILL BE
FURNISHED TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE.
THE WARRANTS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN MANDATORY
REDEMPTION AND EXCHANGE RIGHTS MORE FULLY SET FORTH IN THE WARRANT AGREEMENT.
Certificate No. C-_____
[Date]
EXERCISABLE ONLY ON OR BEFORE
August 22, 2007
Series C Warrant Certificate
This Series C Warrant Certificate (this "Warrant Certificate")
certifies that Creditanstalt-Bankverein ("Creditanstalt"), or registered
assigns, is the registered holder of 650,000 Warrants (the "Warrants") to
purchase Common Stock or Convertible Preferred Stock of Uncle B's Bakery, Inc.,
an Iowa corporation (the "Issuer"). Each Warrant entitles the holder, but only
subject to the conditions set forth herein and in the Warrant Agreement referred
to below, to purchase from the Issuer before 5:00 P.M., New York time, on August
22, 2007 (the "Expiration Date"), one (1) fully paid and nonassessable share of
the Common Stock or Convertible Preferred Stock of the Issuer (the "Warrant
Shares") in the percentages and to the extent set forth in the Warrant
Agreement, at a price (the "Exercise Price") of $0.01 per Warrant payable in
lawful money of the United States of America, upon surrender of this Warrant
Certificate, execution of the annexed Form of Election to Purchase and payment
of the Exercise Price
A-3-1
<PAGE>
at the office of the Issuer at 441 Dubuque Street, Ellsworth, Iowa 50075, or
such other address as the Issuer may specify in writing to the registered holder
of Warrants evidenced hereby (the "Warrant Office"). In lieu of exercising
Warrants pursuant to the immediately preceding sentence, the Warrant holder
shall have the right to require the Issuer to convert the Warrants, in whole or
in part and at any time or times, into Warrant Shares, by surrendering to the
Issuer the Warrant Certificate evidencing the Warrants to be converted,
accompanied by the annexed Form of Notice of Conversion which has been duly
completed and signed. The Exercise Price and number of Warrant Shares
purchasable upon exercise of the Warrants are subject to adjustment prior to the
Expiration Date as set forth in the Warrant Agreement. In no event shall this
Warrant be exercisable for shares of Common Stock or Convertible Preferred Stock
which, when aggregated with all other capital stock of the Issuer (other than
shares of Non-Attributable Stock) then held or previously held by or currently
issuable without restriction to Creditanstalt or its Affiliates would, upon
issuance, represent in excess of 24.99% of the Equity of the Issuer (defined in
the Warrant Agreement) unless such shares, when issued, would constitute
Non-Attributable Stock (as defined in the Warrant Agreement).
No Warrant may be exercised after 5:00 P.M., New York time, on the
Expiration Date and (except as otherwise provided in the Warrant Agreement) all
rights of the registered holders of the Warrants shall cease after 5:00 P.M.,
New York time, on the Expiration Date.
The Issuer may deem and treat the registered holders of the Warrants
evidenced hereby as the absolute owners thereof (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof and of any distribution to the holders hereof and for all other
purposes, and the Issuer shall not be affected by any notice to the contrary.
Warrant Certificates, when surrendered at the office of the Issuer at
the Warrant Office by the registered holder hereof in person or by a legal
representative duly authorized in writing, may be exchanged, in the manner and
subject to the limitations provided in the Warrant Agreement, but without
payment of any service charge, for another Warrant Certificate or Warrant
Certificates of like tenor evidencing in the aggregate a like number of
Warrants.
Upon due presentment for registration of transfer of this Warrant
Certificate at the Warrant Office, a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants shall be issued in exchange for this Warrant Certificate to the
transferee(s) and, if less than all the Warrants evidenced hereby are to be
transferred, to the registered holder hereof, subject to the limitations
provided in the Warrant Agreement, without charge except for any tax or other
governmental charge imposed in connection therewith.
A-3-2
<PAGE>
This Warrant Certificate is one of the Warrant Certificates referred to
in the Warrant Agreement, dated as of July 12, 1995, (as amended) between the
Issuer and Creditanstalt Corporate Finance, Inc. Said Warrant Agreement is
hereby incorporated by reference in and made a part of this instrument and is
hereby referred to for a description of the rights, limitation of rights,
obligations, duties and immunities thereunder of the Issuer and the holders.
IN WITNESS WHEREOF the Issuer has caused this Warrant Certificate to be
signed by its duly authorized officers.
ATTEST: UNCLE B'S BAKERY, INC.
By:
- --------------------------- ----------------------
________________, Secretary ________________, President
[CORPORATE SEAL]
A-3-3
<PAGE>
ANNEX to Form
of Series C Warrant
Certificate
FORM OF ELECTION TO PURCHASE
(To be executed upon exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase _____ Warrant Shares* and
herewith tenders payment for such Warrant Shares to the order of the Issuer in
the amount of $_______ in accordance with the terms hereof. The undersigned
requests that a certificate for such Warrant Shares be registered in the name of
_________________ whose address is ____________________ and that such
certificate be delivered to ___________________ whose address is
______________________. If said number of Warrant Shares is less than all of the
Warrant Shares purchasable hereunder, the undersigned requests that a new
Warrant Certificate representing the remaining balance of the Warrant Shares be
registered in the name of ______________________ whose address is
______________________ and that such Warrant Certificate be delivered to
________________________ whose address is _________________________.
Signature:
- ------------------------------------------
(Signature must conform in all respects to name of holder as specified on the
face of the Warrant Certificate.)
Date:_____________
* Consisting of:
_____ shares of Common Stock
_____ shares of Convertible Preferred Stock
A-3-4
<PAGE>
ANNEX to Form
of Series C Warrant
Certificate
FORM OF NOTICE OF CONVERSION
(To be executed upon conversion of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to convert Warrants represented hereby
into ____ Warrant Shares* in accordance with the terms hereof. The undersigned
requests that a certificate for such Warrant Shares be registered in the name of
________________ whose address is __________________________ and that such
certificate be delivered to _______________ whose address is _________________.
If said number of Warrant Shares is less than all of the Warrant Shares
obtainable hereunder, the undersigned requests that a new Warrant Certificate
representing the remaining balance of the Warrant Shares be registered in the
name of________________ whose address is _________________ and that such Warrant
Certificate be delivered to ____________________ whose address is
__________________________________.
Signature:
- ------------------------------------------
(Signature must conform in all respects to name of holder as specified on the
face of the Warrant Certificate.)
Date:_____________
* Consisting of:
_____ shares of Common Stock
_____ shares of Convertible Preferred Stock
A-3-5
<PAGE>
SCHEDULE I
OUTSTANDING OPTIONS, WARRANTS, SUBSCRIPTIONS, RIGHTS, CONVERTIBLE OR
EXCHANGEABLE SECURITIES OR OTHER AGREEMENTS OF PLANS UNDER WHICH ISSUER MAY BE
OR BECOME OBLIGATED TO ISSUE, SELL OR TRANSFER SHARES OF CAPITAL STOCK OR OTHER
SECURITIES
<PAGE>
EXHIBIT 10.23
OVER ADVANCE AGREEMENT
THIS OVER ADVANCE AGREEMENT ("Agreement") is made as of the 17th day of
December, 1997, by and among UNCLE B'S BAKERY, INC., an Iowa corporation (the
"Borrower"), and CREDITANSTALT CORPORATE FINANCE, INC. (the "Lender").
W I T N E S S E T H:
WHEREAS, Borrower and the Lender are party to that certain Loan and
Security Agreement dated as of July 12, 1995, as amended (as amended, the "Loan
Agreement") pursuant to which the Lender made available to Borrower a revolving
credit facility permitting advances (each a "Revolving Credit Loan") of up to
One Million Five Hundred Thousand Dollars ($1,500,000) at any one time
outstanding and term loans having an aggregate outstanding principal balance, as
of the date hereof, of Seven Million Nine Hundred Thousand Dollars ($7,900,000);
WHEREAS, under the terms of the Loan Agreement, the Borrower is not
entitled to request or to receive any Revolving Credit Loans if either (a) there
then exists a Default or Event of Default (as defined in the Loan Agreement) or
(b) giving effect to such Revolving Credit Loan, the aggregate principal amount
of Revolving Credit Loans outstanding would exceed the Borrowing Base (as
defined in the Loan Agreement); and
WHEREAS, there currently exists one or more Events of Default under the
Loan Agreement and the aggregate principal amount of the Revolving Credit Loans
currently outstanding is equal to or in excess of the Borrowing Base and,
accordingly, Borrower has no right to request or receive any Revolving Credit
Loans under the Loan Agreement; and
WHEREAS, Borrower has requested that the Lender waive such Events of
Default and make additional loans to the Borrower (each such Loan being
hereinafter referred to as an "Over Advance") notwithstanding that the aggregate
principal amount of outstanding Revolving Credit Loans is in excess of the
Borrowing Base; and
WHEREAS, the Lender is willing to consider making such Over Advances,
in its sole discretion, subject to the terms and conditions contained herein;
NOW THEREFORE, to induce the Lender to make such Over Advances, in
consideration of the mutual covenants herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. RECITALS; DEFINED TERMS. The foregoing recitals are confirmed by the
parties as true and correct and are incorporated herein by reference. The
recitals are substantive and a contractual part of this Agreement. Capitalized
terms used herein without being defined shall have the meanings ascribed to such
terms in the Loan Agreement.
2. OVER ADVANCES. Borrower may request Over Advances from time to time
in accordance with the terms of Section 2.3 of the Loan Agreement up to an
aggregate cumulative amount of One Million Three Hundred Thousand Dollars
($1,300,000) (exclusive of capitalized
<PAGE>
interest), provided that any such request shall also include a description of
how the Borrower will use the proceeds of such Over Advance. Borrower
acknowledges and agrees that (a) Over Advances will be made only in the Lender's
sole discretion and without any obligation of any kind or nature on the Lender's
part to make any requested Over Advance; (b) any and all Over Advances made by
the Lender shall be repayable on December 16, 1999 (the "Over Advance Maturity
Date") or, if earlier, upon the occurrence of a Change of Control or upon the
occurrence of a sale or transfer of all, or a substantial portion of, the
Borrower's assets; (c) the Over Advances shall bear interest as set forth in
paragraph 3 below; and (d) any and all Over Advances shall constitute Revolving
Credit Loans under the Loan Agreement (regardless of whether the sum of the
aggregate principal amount of the Revolving Credit Loans and the Over Advances
exceeds the Commitment), shall be included in the Obligations and shall be
secured by the Collateral. Although the Over Advances shall constitute Revolving
Credit Loans, the Over Advances, once borrowed and repaid, may not be
reborrowed, unless the Lender, in its sole discretion, agrees otherwise. Over
Advances shall be evidenced by a promissory note, in the form of Exhibit A
attached hereto, payable to the Lender in the amount of such Over Advances
(together with any and all amendments, modifications and supplements thereto,
and any renewals, replacements or extensions thereof, in whole or in part, the
"Over Advance Note").
3. (a) INTEREST. The average daily outstanding principal amount of the
Over Advances shall bear interest at a fixed rate of interest per annum equal to
twelve percent (12%), calculated daily on the basis of a 360 day year and actual
days elapsed. Of this,. interest accruing at a rate of three percent (3%) per
annum shall be payable as set forth in paragraph (b) below ("Non-Capitalized
Interest"), and interest accruing at a rate of nine percent (9%) per annum shall
be payable as set forth in paragraph (c) below ("Capitalized Interest").
(b) Non-Capitalized Interest shall be payable in arrears on the first
day of each month, for the preceding month.
(c) On the first day of each month, unless the Lender shall have
otherwise received payment of such accrued interest, Capitalized Interest shall
be paid by the deemed making of an advance from the Lender in an amount equal to
such accrued interest. All such deemed advances under this subsection (c) shall
be evidenced by a promissory note, substantially in the form of Exhibit B
attached hereto, payable to the Lender in the aggregate amount of all such
deemed advances (together with any and all amendments, modifications and
supplements thereto, and any renewals, replacements or extensions thereof, in
whole or in part, the "Over Advance Capitalized Interest Note"). The Lender
shall record each such deemed advance in its books and records, such records to
be prima facie evidence of amounts advances hereunder; PROVIDED, HOWEVER, that
the failure of the Borrower to so record such deemed advances shall in no way
affect the obligation of the Borrower to repay such deemed advances. For all
purposes under this Agreement, such deemed advances shall be treated as
additional principal of the Over Advances, and shall bear interest at the rate
then in effect for the Over Advances, and shall be repaid on the Over Advance
Maturity Date, or, if earlier, on such earlier date as the Over Advances may
become due and payable.
4. CONFIRMATION OF LOAN AGREEMENT TERMS. Except as set forth herein to the
contrary, all terms and conditions contained in the Loan Agreement applicable to
Revolving Credit Loans, which are hereby incorporated by reference in this
Agreement, shall apply to the
-2-
<PAGE>
Over Advances. Such terms and conditions include, among other things and without
limitation, the availability of acceleration of the Over Advances, and certain
other remedies, upon the occurrence and during the continuation of an Event of
Default.
5. REPRESENTATIONS AND WARRANTIES. In order to further induce the
Lender to execute this Agreement and to make Over Advances, Borrower hereby
warrants and represents to the Lender that:
(a) Borrower has the power and authority to enter into this
Agreement and to perform all of its obligations hereunder and the
execution and delivery of this Agreement have been duly authorized by
all necessary action (corporate or otherwise) on the part of Borrower;
(b) The execution and delivery of this Agreement and
performance thereof by Borrower does not and will not violate the
Articles of Incorporation, By-laws or other organizational documents of
Borrower and does not and will not violate or conflict with any law,
order, writ, injunction, or decree of any court, administrative agency
or other governmental authority applicable to Borrower or its
properties;
(c) This Agreement constitutes the valid and binding
obligation of Borrower, enforceable against Borrower in accordance with
its terms;
(d) no action or proceeding, including without limitation, a
voluntary or involuntary petition for bankruptcy under any chapter of
the Federal Bankruptcy Code, has been instituted or threatened by or
against Borrower or any Guarantor;
(e) all information provided by Borrower to the Lender prior
to the date hereof, including, without limitation, all financial
statements, balance sheets, and cash flow statements, was, at the date
of delivery, and is, as of the date hereof, true and correct in all
respects. Borrower recognizes and acknowledges that the Lender is
entering into this Agreement based in part on the information provided
to the Lender by Borrower and that the truth or correctness of that
information is a material inducement to the Lender in entering into
this Agreement. During the term of this Agreement, Borrower agrees to
advise the Lender promptly in writing of all new information, facts, or
occurrences which would in any way materially supplement, contradict,
or affect any information previously furnished to the Lender.
6. LIMITATION OF AGREEMENT. Except as expressly set forth herein, this
Agreement shall not be deemed to waive, amend or modify any term or condition of
the Loan Agreement or any other Loan Documents, each of which is hereby ratified
and reaffirmed and which shall remain in full force and effect, nor to serve as
a consent to any matter prohibited by the terms and conditions thereof, nor to
waive any existing Default or Event of Default thereunder. In addition, nothing
contained herein shall limit, impair or affect the right of the Lender to
exercise any of its rights and remedies arising with respect to such existing
Defaults and Events of Default, all of which may be exercised at any time and
from time to time in the Lender's sole discretion.
-3-
<PAGE>
7. NO CLAIMS; OFFSET. Borrower hereby represents, warrants,
acknowledges and agrees to and with the Lender that (a) Borrower does not hold
or claim any right of action, claim, cause of action or damages, either at law
or in equity, against the Lender which arises from, may arise from, allegedly
arise from, are based upon or are related in any manner whatsoever to the Loan
Agreement and the Loan Documents or which are based upon acts or omissions of
the Lender in connection therewith, including without limitation, usury claims
or claims arising in tort or in contract by Borrower and that arise out of any
one or more circumstances or events that occurred prior to the date of this
Agreement; (b) excepted as expressly set forth in this Agreement, there has been
no mutual departure from the terms and conditions of the Loan Agreement and the
Loan Documents; and (c) the Obligations are absolutely owed to the Lender,
without offset, deduction or counterclaim.
8. WAIVERS. Borrower hereby waives (a) any and all rights to other
notice of payment default or any other default, protest and notice of protest,
dishonor, diligence in collecting and bringing of suit against any party, and
any other similar notice whatsoever regarding the Obligations; (b) any claims
that any notices previously given are insufficient for any reason; and (c) any
and all claims now or hereafter arising from or related to any delay by the
Lender in exercising any rights or remedies under the Loan Documents, including,
without limitation, any delay in foreclosing on the Collateral or the Realty or
any other collateral securing the Obligations.
9. CONDITIONS PRECEDENT. As a condition precedent to the making of Over
Advances by the Lender pursuant to this Agreement, the Lender shall have
received the following agreements, documents and instruments, each duly executed
and delivered by Borrower in favor of the Lender, and each in form and substance
satisfactory to the Lender:
(a) the Waiver and Fourth Amendment to Loan and Security
Agreement, of even date herewith, between the Borrower and the Lender
(the "Fourth Amendment");
(b) the Over Advance Note, dated the date hereof and executed
by the Borrower in favor of the Lender;
(c) the Over Advance Capitalized Interest Note, dated the date
hereof and executed by the Borrower in favor of the Lender;
(d) a Certificate of No Default and Related Matters, dated as
of the date hereof and executed by an officer of the Borrower;
(e) A certificate of the Secretary of Borrower (i) attaching
thereto a complete copy of Resolutions adopted by the Board of
Directors of Borrower authorizing the execution, delivery and
performance of this Agreement, the Fourth Amendment, and the other
instruments, documents or agreements to be executed pursuant thereto or
in connection herewith or therewith, and such other and further
documents as are reasonably requested by the Lender to protect its
security interest in the Collateral, (ii) certifying as to the
Borrower's By-Laws and Articles of Incorporation, and (iii) certifying
as to the incumbency and genuineness of the signatures of the officers
of Borrower executing this
-4-
<PAGE>
Agreement, the Fourth Amendment, and any other instruments, documents
or agreements executed in connection herewith or therewith; and
(f) an Opinion of Counsel of Dorsey & Whitney LLP as to this
Agreement, the Fourth Amendment, and the documents, agreements and
instruments to be executed in connection therewith; and
(g) All such further, instruments, documents or agreements as
the Lender shall request in connection with this Agreement.
10. MISCELLANEOUS.
(a) This Agreement may be executed in a number of identical
counterparts which, taken together, shall constitute collectively one
(1) agreement; but in making proof of this Agreement, it shall not be
necessary to produce or account for more than one such counterpart
executed by the party to be charged.
(b) Any future waiver, alteration, amendment or modification
of any of the provisions of this Agreement shall not be valid or
enforceable unless in writing and signed by all parties, it being
expressly agreed that neither the Loan Agreement, the Loan Documents,
nor this Agreement can be modified orally, by course of dealing or by
implied agreement. Moreover, any delay by the Lender in enforcing its
rights after an Event of Default shall not be a release or waiver of
the Event of Default and shall not be relied upon by the Borrower as a
release or waiver of the Event of Default.
(c) This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto, their heirs, executors,
administrators, successors, legal representatives and assigns.
(d) The headings of paragraphs in this Agreement are for
convenience of reference only and shall not in any way affect the
interpretation or construction of this Agreement.
(e) The warranties and representations of the parties to this
Agreement shall survive the execution and delivery of this Agreement.
11. FINAL AGREEMENT. THIS AGREEMENT, TOGETHER WITH THE AGREEMENTS,
DOCUMENTS AND INSTRUMENTS EXECUTED IN CONNECTION HEREWITH AND THE LOAN AGREEMENT
AND THE LOAN DOCUMENTS AS IN EFFECT AS OF THE DATE HEREOF, REPRESENTS THE FINAL
AGREEMENT AMONG THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR ORAL OR WRITTEN, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS AMONG THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENT AMONG THE PARTIES.
-5-
<PAGE>
12. GOVERNING LAW; JURISDICTION. THIS AGREEMENT, AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER, SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW. THE BORROWER HEREBY (A) SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY FOR THE
PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT;
(B) AGREES THAT SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE
STATE OF NEW YORK SHALL APPLY TO THIS AGREEMENT; AND (C) IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT
AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM. NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY,
NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE LENDER TO BRING PROCEEDINGS AGAINST
BORROWER IN THE COURTS OF ANY OTHER JURISDICTION.
13. WAIVER OF JURY TRIAL. AFTER REVIEWING THIS PROVISION SPECIFICALLY
WITH ITS RESPECTIVE COUNSEL, BORROWER AND THE LENDER EACH HEREBY KNOWINGLY,
INTELLIGENTLY AND INTENTIONALLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LEGAL PROCEEDING BASED ON OR ARISING OUT OF, UNDER, IN
CONNECTION WITH, OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED
HEREBY, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN), OR ACTIONS OF BORROWER OR THE LENDER. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE LENDER TO ENTER INTO THIS AGREEMENT WITH BORROWER.
-6-
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the day and year first above written.
UNCLE B'S BAKERY, INC.
By: /s/ William T. Rose, Jr.
----------------------------------
Attest: /s/ Wm. Howard McClennan, Jr.
------------------------------
CREDITANSTALT CORPORATE
FINANCE, INC.
By: /s/ Robert M. Biringer
----------------------------------
Robert M. Biringer
Executive Vice President
By: /s/ John G. Taylor
----------------------------------
John G. Taylor
Senior Associate
<PAGE>
EXHIBIT A
FORM OF
OVER ADVANCE NOTE
$1,300,000.00 GREENWICH, CONNECTICUT
DECEMBER __, 1997
FOR VALUE RECEIVED, the undersigned, UNCLE B'S BAKERY, INC., an Iowa
corporation (hereinafter referred to as "Maker"), promises to pay to the order
of CREDITANSTALT CORPORATE FINANCE, INC. (hereinafter referred to as the
"Holder"), at the office of Creditanstalt Corporate Finance, Inc. located at Two
Greenwich Plaza, Greenwich, Connecticut 06830 or at such other place as Holder
may from time to time designate in writing, the principal sum of ONE MILLION
THREE HUNDRED THOUSAND AND 00/100 United States Dollars (U.S. $1,300,000) or, if
less, the aggregate outstanding principal amount of Over Advances, as such term
is defined in the Over Advance Agreement referred to hereinbelow, made or issued
by Holder to Maker, in lawful money of the United States, payable in full on the
Over Advance Maturity Date.
Interest on the principal balance from time to time outstanding
hereunder shall accrue at the rates and shall be payable in the manner set forth
in that certain Over Advance Agreement dated as of December ___, 1997 (as the
same has been, and as the same may be further amended, restated, supplemented or
otherwise modified from time to time, the "Over Advance Agreement"; capitalized
terms contained herein and not otherwise defined herein shall have the
respective meanings given to such terms in the Loan Agreement) by and among
Maker and Holder. In no contingency or event whatsoever shall the interest rate
charged pursuant to the terms of this Note exceed the highest rate permissible
under any law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto. In the event that such a court determines
that Holder has received interest hereunder in excess of the highest applicable
rate, Holder shall promptly refund such excess interest to Maker.
The date and amount of each Over Advance made by the Holder to the
Maker of this Note under the Over Advance Agreement, and each payment of
principal thereof, shall be recorded by Holder on its books and, prior to any
transfer of this Note, endorsed by Holder on the Schedule attached hereto or on
any continuation thereof.
This Note is the "Over Advance Note" referred to in the Over Advance
Agreement, and is subject to all of the terms and conditions of the Over Advance
Agreement, and that certain Loan and Security Agreement dated as of July 12,
1995 between the Maker and the Holder, as amended (as so amended, and as further
amended, the "Loan Agreement"), including, but not limited to, those related to
the acceleration of the indebtedness represented hereby upon the occurrence of
an Event of Default. Payment of this Note is secured by the Collateral, the
Realty and the Additional Realty.
In the event that all or any portion of the indebtedness evidenced
hereby shall be collected by or through an attorney-at-law, Holder shall be
entitled to collect from Maker all costs of collection, including reasonable
attorneys' fees.
<PAGE>
Maker hereby waives presentment, demand for payment, protest and notice
of protest, notice of dishonor and all other notices in connection with this
Note. This Note shall be payable without right of setoff, any defense of want or
failure of consideration, nonperformance of any condition precedent, nondelivery
or delivery for a special purpose or any other defense of any nature whatsoever.
THIS NOTE, AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER,
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW). MAKER HEREBY (A)
SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW
YORK CITY FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING
TO THIS NOTE AND (B) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE REGARDING THE LAYING OF THE
VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, NOTHING HEREIN SHALL LIMIT THE
RIGHT OF THE HOLDER TO BRING PROCEEDINGS AGAINST MAKER IN THE COURTS OF ANY
OTHER JURISDICTION WITHIN THE UNITED STATES OF AMERICA OR IN WHICH ANY
COLLATERAL IS LOCATED.
AFTER REVIEWING THIS PROVISION SPECIFICALLY WITH ITS COUNSEL, MAKER
HEREBY KNOWINGLY, INTELLIGENTLY AND INTENTIONALLY WAIVES ANY AND ALL RIGHTS IT
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL PROCEEDING BASED ON OR
ARISING OUT OF, UNDER, IN CONNECTION WITH, OR RELATING TO THIS NOTE, THE
TRANSACTIONS CONTEMPLATED HEREBY, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF MAKER OR HOLDER. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE HOLDER TO MAKE THE LOANS EVIDENCED BY
THIS NOTE TO MAKER.
-2-
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Note to be executed
by its duly authorized officer as of the day and year first written above.
"MAKER"
UNCLE B'S BAKERY, INC.
By:
----------------------------------
Title:
Attest:
------------------------------
Title:
-3-
<PAGE>
Schedule to
Over Advance Note
Dated as of December ___, 1997
PRINCIPAL PRINCIPAL
AMOUNT OF INTEREST AMOUNT OF OUTSTANDING
DATE OVER ADVANCES RATE PAYMENT BALANCE
- ---- ------------- -------- --------- -----------
<PAGE>
EXHIBIT B
FORM OF OVER ADVANCE
CAPITALIZED INTEREST NOTE
GREENWICH, CONNECTICUT
AS OF DECEMBER ___, 1997
FOR VALUE RECEIVED, the undersigned UNCLE B'S BAKERY, INC., an Iowa
corporation (hereinafter referred to as "Maker"), promises to pay to the order
of CREDITANSTALT CORPORATE FINANCE, INC. (hereinafter to as the "Holder"), at
Holder's office located at Two Greenwich Plaza, Greenwich, Connecticut 06830, or
at such other place as Holder may from time to time designate in writing, the
aggregate outstanding amount of all advances deemed made to the Holder in
respect of Capitalized Interest, as such term is defined in the Over Advance
Agreement referred to below, payable on the Over Advance Maturity Date, as
defined in the Over Advance Agreement.
Interest on capitalized interest from time to time outstanding
hereunder shall accrue at the rates and shall be payable in the manner set forth
in the Over Advance Agreement. In no contingency or event whatsoever shall the
interest rate charged pursuant to the terms of this Note exceed the highest rate
permissible under any law which a court of competent jurisdiction shall, in a
final determination, deem applicable hereto. In the event that such a court
determines that Holder has received interest hereunder in excess of the highest
applicable rate, Holder shall promptly refund such excess interest to Maker.
This Note is subject to all of the terms and conditions of (i) the Over
Advance Agreement dated as December __, 1997, between Holder and Maker (as
amended from time to time, the "Over Advance Agreement"), and (ii) the Loan and
Security Agreement dated as of July 12, 1995, between Holder and Maker (as
amended from time to time, the "Loan Agreement"), including, but not limited to,
those relating to prepayments hereon, and those relating to the acceleration of
the indebtedness represented hereby upon the occurrence of an Event of Default
(as such term is defined in the Loan Agreement). Payment of this Note is secured
by the "Collateral", the "Realty" and any "Additional Realty" (as such terms are
defined in the Loan Agreement).
In the event that all or any portion of the indebtedness evidenced
hereby shall be collected by or through an attorney-at-law, Holder shall be
entitled to collect from Maker all costs of collection, including reasonable
attorneys'fees.
Maker hereby waives presentment, demand for payment, protest and notice
of protest, notice of dishonor and all other notices in connection with this
Note. This Note shall be payable without right of setoff, any defense or want or
failure of consideration, nonperformance of any condition precedent, nondelivery
or delivery for a special purpose or any other defense of any nature whatsoever.
<PAGE>
THIS NOTE, AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER,
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW). MAKER HEREBY (A)
SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW
YORK CITY FOR THE PURPOSE OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO
THIS NOTE AND (B) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE REGARDING THE LAYING OF THE
VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, NOTHING
HEREIN SHALL LIMIT THE RIGHT OF THE HOLDER TO BRING PROCEEDINGS AGAINST MAKER IN
THE COURTS OF ANY OTHER JURISDICTION WITHIN THE UNITED STATES OF AMERICA OR IN
WHICH ANY COLLATERAL IS LOCATED.
MAKER HEREBY KNOWINGLY, INTELLIGENTLY AND INTENTIONALLY WAIVES ANY AND
ALL RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL PROCEEDING
BASED ON OR ARISING OUT OF, UNDER, IN CONNECTION WITH, OR RELATING TO THIS NOTE,
THE TRANSACTIONS CONTEMPLATED HEREBY, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF MAKER OR HOLDER.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE HOLDER TO MAKE THE LOANS
EVIDENCED BY THIS NOTE TO MAKER.
-2-
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Note to be executed
by its duly authorized officer as of the day and year first written above.
"MAKER"
UNCLE B'S BAKERY, INC.
By:
----------------------------------
Title:
Attest:
------------------------------
Title:
-3-
<PAGE>
EXHIBIT 11
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
THREE MONTHS ENDED SIX MONTHS ENDED
JANUARY 31 JANUARY 31
1998 1997 1998 1997
--------- --------- --------- ---------
Primary:
Average shares outstanding 3,656,258 3,639,350 3,656,258 3,592,248
Net effect of dilutive common
stock equivalents - based on
treasury stock method (A) -- 31,255 -- 52,739
--------- --------- --------- ---------
Total weighted average number of
common and common equivalent
shares outstanding 3,656,258 3,670,605 3,656,258 3,644,987
========= ========= ========= =========
Net income (loss) $(314,229) $ 15,330 $(820,662) $ 283,324
========= ========= ========= =========
Per share amount $ (0.09) $ 0.00 $ (0.22) $ 0.08
========= ========= ========= =========
(A) Common stock equivalents are excluded in January 1998 periods due to anti
dilutive effect.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SECOND
QUARTER 1998 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> NOV-1-1997
<PERIOD-END> JAN-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 1,044,232
<ALLOWANCES> 0
<INVENTORY> 465,132
<CURRENT-ASSETS> 1,682,545
<PP&E> 18,568,757
<DEPRECIATION> 4,342,469
<TOTAL-ASSETS> 16,375,980
<CURRENT-LIABILITIES> 15,754,654
<BONDS> 0
0
0
<COMMON> 36,563
<OTHER-SE> 584,763
<TOTAL-LIABILITY-AND-EQUITY> 16,375,980
<SALES> 3,399,781
<TOTAL-REVENUES> 3,399,781
<CGS> 2,103,335
<TOTAL-COSTS> 2,103,335
<OTHER-EXPENSES> 286,406
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 343,530
<INCOME-PRETAX> (314,229)
<INCOME-TAX> 0
<INCOME-CONTINUING> (314,229)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (314,229)
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
