UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) : August 24, 1999
NEW WORLD COFFEE - MANHATTAN BAGEL, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 0-27148 13-3690261
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(State of other jurisdiction (Commission File Number) (IRS Employer
of incorporation Identification Number)
246 INDUSTRIAL WAY WEST, EATONTOWN, NJ 07724
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (732) 544-0155
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ITEM 5. Other Events.
a) On August 17, 1999, the stockholders of the Company approved a
one-for-two reverse split (the "Reverse Split") of the outstanding Common Stock
of the Company. The Reverse Split was effective as of August 24, 1999. Pursuant
to the terms of the Reverse Split, each share of Common Stock held by a
stockholder at the close of business on August 23, 1999 will, from and after
August 24, 1999, represent one-half of a share (e.g.: a stockholder holding
1,000 shares of Common Stock on August 23, 1999 would be the holder of 500
shares on August 24, 1999). The symbol "NWCID" will be in effect for a period of
approximately twenty days from August 24, 1999 and then will revert to "NWCI".
The new CUSIP number for the Common Stock is 648904 20 9.
Stockholders holding their stock in brokerage accounts need take no action.
Stockholders holding stock in their own name may obtain new certificates in the
reduced amount. In order to receive new certificates, stockholders may surrender
their old certificates to the Company's transfer agent at: American Stock
Transfer & Trust Co., 40 Wall Street, New York, New York 10005, Attn:
Reorganization. If the combination results in a fractional share (i.e., 59
shares become 29.5 shares), the Company has directed that the fractional share
be "rounded up" to a whole share (i.e., 30 shares).
A Restated Certificate of Incorporation, which reflects the approval of (i)
the Reverse Split; (ii) a staggered Board of Directors; and (iii) various
procedural provisions related to the Board of Directors and stockholder voting
discussed in this Form 8-K, was filed with the State of Delaware on August 17,
1999. A copy of such Restated Certificate of Incorporation is annexed as Exhibit
3.1.1 to this Report on Form 8-K.
(b)On August 31, 1999, the Company acquired the assets of the Chesapeake
Bagel Bakery franchise business from Atlanta-based AFC Enterprises, Inc. The
acquisition (the "Chesapeake Acquisition") adds more than 70 franchised
Chesapeake locations to the Company's Manhattan Bagel system. The Chesapeake
Acquisition is being financed through a combination of cash and debt.
(c)The Company has completed a senior debt financing with BankBoston, N.A.
(the "Lender") dated as of August 31, 1999, pursuant to which the Lender has
provided a term loan of $12,000,000 and a revolving line of credit of up to
$3,000,000. Proceeds were used for (i) payment of the cash portion and the
closing costs of the Chesapeake Acquisition; (ii) repayment of certain existing
indebtedness to BET Associates, L.P. and the Manhattan Bagel Company Unsecured
Creditor's Trust; and (iii) working capital and general corporate purposes.
To secure payment of this indebtedness, the Company and its active
subsidiaries have granted security interests on all of their assets and the
stock of such active subsidiaries has been pledged with the Lender. Accordingly,
if the Company defaults under the loan documents, an exercise of such security
interest and pledge could effect a change in control of the Company's business.
A copy of the credit agreement is annexed as Exhibit 10.16 to this Report on
Form 8-K.
ITEM 7. Exhibits.
The following exhibits are hereby filed with this Form 8-K:
Exhibit
Number Description
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3.1.1 Restated Certificate of Incorporation.
10.16 Credit Agreement dated August 31, 1999 by and among the
Company, its active subsidiaries and BankBoston, N.A.
99.1.1 Press Release dated August 23, 1999.
99.1.2 Press Release dated August 31, 1999.
99.1.3 Press Release dated September 1, 1999.
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 hereunto duly authorized.
NEW WORLD COFFEE -
MANHATTAN BAGEL, INC.
By: /s/ Jerold E. Novack
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JEROLD E. NOVACK
Chief Financial Officer
Date: September 7, 1999
Exhibit 3.1.1
RESTATED CERTIFICATE OF INCORPORATION
New World Coffee-Manhattan Bagel, Inc., a corporation organized and
existing under the laws of the State of Delaware, hereby certifies as follows:
1. The present name of the corporation is New World Coffee-Manhattan Bagel,
Inc. The original Certificate of Incorporation of the corporation, under
the name "World Coffee, Inc.," was filed with the Secretary of State of
Delaware on October 21, 1992.
2. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, this Restated Certificate of Incorporation restates and
integrates and further amends the provisions of the Certificate of
Incorporation of this corporation.
3. The text of the Restated Certification of Incorporation as heretofore
amended or supplemented is hereby restated and further amended to read in
its entirety as set forth in Exhibit A attached hereto.
4. This Restated Certificate of Incorporation shall become effective on and as
of August 24, 1999
IN WITNESS WHEREOF, this Restated Certificate of Incorporation has been
signed under the seal of the corporation this 17th day of August, 1999.
NEW WORLD COFFEE-MANHATTAN
BAGEL, INC.
By: /s/ Jerold E. Novack
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Secretary
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EXHIBIT "A"
RESTATED CERTIFICATE OF INCORPORATION
OF
NEW WORLD COFFEE-MANHATTAN BAGEL, INC.
FIRST: The name of the Corporation is New World Coffee-Manhattan Bagel,
Inc.
SECOND: The address of its registered office in the State of Delaware is 25
Greystone Manor, Lewes, DE 19958-9776, County of Sussex. The name of its
registered agent at such address is Harvard Business Services, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares which the Corporation shall have
authority to issue is Fifty-Two Million (52,000,000), consisting of Fifty
Million (50,000,000) shares of common stock, and Two Million (2,000,000) shares
of preferred stock, all of par value of $.001) per share.
A. Preferred Stock
1. The preferred stock of the Corporation may be issued from time to time
in one or more series of any number of shares, provided that the aggregate
number of shares issued and not cancelled in any and all such series shall not
exceed the total number of shares of preferred stock hereinabove authorized.
2. Authority is hereby vested in the Board of Directors from time to time
to authorize the issuance of one or more series of preferred stock and, in
connection with the creation of such series, to fix by resolution or resolutions
providing for the issuance of shares thereof the characteristics of each such
series including, without limitation, the following:
(a) the maximum number of shares to constitute such series, which may
subsequently be increased or decreased (but not below the number of shares
of that series then outstanding) by resolution of the Board of Directors,
the distinctive designation thereof and the stated value thereof if
different than the par value thereof;
(b) whether the shares of such series shall have voting powers, full
or limited, together with any other series of preferred stock or common
stock, or as a separate class, or no voting powers, and if any, the terms
of such voting powers;
(c) the dividend rate, if any, on the shares of such series, the
conditions and dates upon which such dividends shall be payable, the
preference or relation which such dividends shall bear to the dividends
payable on any other class or classes or on any other series of capital
stock and whether such dividend shall be cumulative or noncumulative;
(d) whether the shares of such series shall be subject to redemption
by the Corporation, and, if made subject to redemption, the times, prices
and other terms, limitations, restrictions or conditions of such
redemption;
(e) the relative amounts, and the relative rights or preference, if
any, of payment in respect of shares of such series, which the holders of
shares of such series shall be entitled to receive upon the liquidation,
dissolution or winding-up of the Corporation;
(f) whether or not the shares of such series shall be subject to the
operation of a retirement or sinking fund and, if so, the extent to and
manner in which any such retirement or sinking fund shall be applied to the
purchase or redemption of the shares of such series for retirement or to
other corporate purposes and the terms and provisions relative to the
operation thereof;
(g) whether or not the shares of such series shall be convertible
into, or exchangeable for, shares of any other class, classes or series, or
other securities, whether or not issued by the Corporation, and if so
convertible or exchangeable, the price or prices or the rate or rates of
conversion or exchange and the method, if any, of adjusting same;
(h) the limitations and restrictions, if any, to be effective while
any shares of such series are outstanding upon the payment of dividends or
the making of other distributions on, and upon the purchase, redemption or
other acquisition by the Corporation of, the Common Stock (as defined
below) or any other class or classes of stock of the Corporation ranking
junior to the shares of such series either as to dividends or upon
liquidation, dissolution or winding-up;
(i) the conditions or restrictions, if any, upon the creation of
indebtedness of the Corporation or upon the issuance of any additional
stock (including additional shares of such series or of any other series or
of any other class) ranking on a parity with or prior to the shares of such
series as to dividends or distributions of assets upon liquidation,
dissolution or winding-up; and
(j) any other preference and relative, participating, optional or
other special rights, and the qualifications, limitations or restrictions
thereof, as shall not be inconsistent with law, this Article Fourth or any
resolution of the Board of Directors pursuant hereto.
In connection with the above, a Certificate of Designation of Series B
Convertible Preferred Stock filed on January 22, 1997 and a Certificate of
Designation of Series A Junior Participating Preferred Stock filed on June 16,
1999, are hereby confirmed.
B. Common Stock
1. The common stock of the Corporation may be issued from time to time in
any number of shares, provided that the aggregate number of shares issued and
not cancelled shall not exceed the total number of shares of common stock
hereinabove authorized ("Common Stock").
2. Unless expressly provided by the Board of Directors of the Corporation
in fixing the voting rights of any series of Preferred Stock, the holders of the
outstanding shares of Common Stock shall exclusively possess all voting power
for the election of directors and for all other purposes, each holder of record
of shares of Common Stock being entitled to one vote for each share of such
stock standing in his name on the books of the Corporation.
3. Subject to the prior rights of the holders of Preferred Stock now or
hereafter granted pursuant to Article Fourth, the holders of Common Stock shall
be entitled to receive, when and as declared by the Board of Directors, out of
funds legally available for that purpose, dividends payable either in cash,
stock or otherwise.
4. In the event of any liquidation, dissolution or winding-up of the
Corporation, either voluntary or involuntary, after payment shall be made in
full to the holders of Preferred Stock of any amounts to which they may be
entitled, the holders of Common Stock shall be entitled to the exclusion of the
holders of Preferred Stock of any and all series to share, ratably according to
the number of shares of Common Stock held by them, in all remaining assets of
the Corporation available for distribution to its stockholders.
5. Each share of Common Stock outstanding immediately prior to the filing
of this Restated Certificate of Incorporation shall, upon the filing of this
Restated Certificate of Incorporation, represent one half (1/2) share of Common
Stock, such that the 20,485,047 shares of Common Stock outstanding immediately
prior to the filing of this Restated Certificate of Incorporation shall, upon
the filing of this Amended Certificate of Incorporation, be combined into
10,242,523 shares of Common Stock .
FIFTH: The Corporation is to have perpetual existence.
SIXTH: The private property of the stockholders shall not be subject to the
payment of the Corporation's debts to any extent whatever.
SEVENTH: The following provisions are included for the management of the
business and for the conduct of the affairs of the Corporation and for defining
and regulating the powers of the Corporation and its directors and stockholders
and are in furtherance and not in limitation of the powers conferred upon the
Corporation by statute:
A. 1. The business and affairs of the Corporation shall be managed by or
under the direction of a Board of Directors consisting of such number of
directors as is determined from time to time by resolution adopted by
affirmative vote of a majority of the entire Board of Directors; provided,
however, that in no event shall the number of directors be less than three nor
more than nine. The directors shall be divided into three classes, designated
Class I, Class II and Class III. Each class shall consist, as nearly as may be
possible, of one-third (1/3) of the total number of directors constituting the
entire Board of Directors. By unanimous written consent of the Board of
Directors, the initial classes shall be elected as follows: Class I directors
shall be elected for a one-year term, Class II directors for a two-year term and
Class III directors for a three-year term. At each succeeding annual meeting of
stockholders, successors to the class of directors whose terms expires at that
annual meeting shall be elected for three-year terms. If the number of directors
is changed, any increase or decrease shall be apportioned among the classes so
as to maintain the number of directors in each class as nearly equal as
possible, and any additional director of any class elected to fill a vacancy
resulting from an increase in such class shall hold office for a term that shall
coincide with the remaining term of that class, but in no case will a decrease
in the number of directors shorten the term of any incumbent director. A
director shall hold office until the annual meeting for the year in which his or
her term expires and until his or her successor shall be elected and shall
qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal from office as set forth herein. Except as otherwise
required by law, any vacancy on the Board of Directors that results from an
increase in the number of directors and any other vacancy occurring in the Board
of Directors shall be filled only by a majority of the directors then in office,
even if less than a quorum, or by a sole remaining director. Any director
elected to fill a vacancy not resulting from an increase in the number of
directors shall have the same remaining term as that of his or her predecessor.
2. Any director, or the entire Board of Directors, may be removed from
office only for cause and only by the affirmative vote of not less than
two-thirds (2/3) of the votes entitled to be cast by the holders of all of the
then outstanding shares of Voting Stock (as defined in Article Ninth, Section
C), voting together as one class; provided, however, that if a proposal to
remove a director is made by or on behalf of an Interested Person (as defined in
Article Ninth, Section C) or a director who is not an Independent Director (as
defined in Article Ninth, Section C), then such removal shall also require the
affirmative vote of not less than two-thirds (2/3) of the votes entitled to be
cast by the holders of all of the then outstanding shares of Voting Stock,
voting together as one class, excluding Voting Stock beneficially owned by such
Interested Person.
3. Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of stock issued by the Corporation shall have the right,
voting separately by class or series, to elect directors, the election, term of
office, filling of vacancies and other features of such directorships shall be
governed by the terms of this Certificate of Incorporation applicable thereto,
and such directors so elected shall not be divided into classes pursuant to
Article Seventh, Section A unless expressly provided by such terms.
B. In furtherance and not limitation of the powers conferred by statute,
the Board of Directors is expressly authorized:
1. To make, alter, amend or repeal the By-Laws of the Corporation. The
holders of shares of Voting Stock shall, to the extent such power is at the time
conferred on them by applicable law, also have the power to make, alter, amend
or repeal the By-Laws of the Corporation, provided that any proposal by or on
behalf of an Interested Person or a director who is not an Independent Director
to make, alter, amend or repeal the By-Laws shall require approval by the
affirmative vote described in Article Ninth, Section A, unless either (a) such
action has been approved by a majority of the Board of Directors as constituted
prior to such Interested Person first becoming an Interested Person; or (b)
prior to such Interested Person first becoming an Interested Person, a majority
of the Board of Directors shall have approved such Interested Person becoming an
Interested Person and, subsequently, a majority of the Independent Directors has
approved such action.
2. To set apart out of any of the funds of the Corporation available for
dividends a reserve or reserves for any proper purpose and to abolish any such
reserve in the manner in which it was created.
3. By a majority of the whole Board of Directors, to designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. The By-Laws may provide that in the
absence or disqualification of a member of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board of Directors, or in the By-Laws of the Corporation,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation (except that a committee may, to
the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the Board of Directors as provided in
Article Fourth hereof, fix the designations and any of the preferences or rights
of such shares relating to dividends, redemption, dissolution, any distribution
of assets of the Corporation or the conversion into, or the exchange of such
shares for, shares of any other class or classes or any other series of the same
or any other class or classes of stock of the Corporation or fix the number of
shares of any series of stock or authorize the increase or decrease of the
shares of any series), adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amending the By-Laws of the Corporation; and, unless the resolution or
By-Laws expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of the State of Delaware.
4. When and as authorized by the stockholders in accordance with statute,
to sell, lease or exchange all or substantially all of the property and assets
of the Corporation, including its goodwill and its corporate franchises, upon
such terms and conditions and for such consideration, which may consist in whole
or in part of money or property including shares of stock in, and/or other
securities of, any other corporation or corporations, as the Board of Directors
shall deem expedient and for the best interests of the Corporation.
5. To the full extent permitted or not prohibited by law, and without the
consent of or other action by the stockholders, to authorize or create
mortgages, pledges or other liens or encumbrances upon any or all of the assets,
real, personal or mixed, and franchises of the Corporation, including
after-acquired property, and to exercise all of the powers of the Corporation in
connection therewith.
C. In addition to any other considerations which the Board of Directors may
lawfully take into account, in determining whether to take or to refrain from
taking corporate action on any matter, including proposing any matter to the
stockholders of the Corporation, the Board of Directors may take into account
the long-term as well as the short-term interests of the Corporation and its
stockholders (including the possibility that these interests may be best served
by the continued independence of the Corporation), customers, employees and
other constituencies of the Corporation and its subsidiaries, including the
effect upon communities in which the Corporation and its subsidiaries do
business. In so evaluating any such determination, the Board of Directors shall
be deemed to be performing their duties and acting in good faith and in the best
interests of the Corporation within the meaning of Section 145 of the General
Corporation Law of the State of Delaware, or any successor provision.
D. Subject to the rights of holders of any class or series of stock having
a preference over the Common Stock as to dividends or upon liquidation,
dissolution or winding-up, nominations for the election of directors may be made
by the Board of Directors or by any stockholder entitled to vote in the election
of directors generally. However, any stockholder entitled to vote in the
election of directors generally may nominate one or more persons for election as
directors at an annual meeting only pursuant to the Corporation's notice of such
meeting or if written notice of such stockholder's intent to make such
nomination or nominations has been received by the Secretary of the Corporation
not less than sixty nor more than ninety days prior to the first anniversary of
the preceding year's annual meeting; provided, however, that in the event that
the date of the annual meeting is advanced by more than thirty (30) days or
delayed by more than sixty (60) days from such anniversary, notice by the
stockholder to be timely must be so received not earlier than the ninetieth day
prior to such annual meeting and not later than the close of business on the
later of (1) the sixtieth day prior to such annual meeting; or (2) the tenth day
following the day on which notice of the day of the annual meeting was mailed or
public disclosure thereof was made by the Corporation, whichever first occurs.
For purposes of calculating the first such notice period following adoption of
this Certificate of Incorporation, the first anniversary of the 1999 annual
meeting shall be deemed to be July 31, 2000. Each such notice shall set forth:
(a) the name and address of the stockholder who intends to make the nomination
and of the person or person to be nominated; (b) a representation that the
stockholder is a holder of record of stock of the Corporation entitled to vote
at such meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (c) a description of all
arrangements or understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) relating to the
nomination or nominations; (d) the class and number of shares of the Corporation
which are beneficially owned by such stockholder and the person to be nominated
as of the date of such stockholder's notice and by any other stockholders known
by such stockholder to be supporting such nominees as of the date of such
stockholder's notice; (e) such other information regarding each nominee proposed
by such stockholder as would be required to be included in a proxy statement
filed pursuant to the proxy rules of the Securities and Exchange Commission; and
(f) the consent of each nominee to serve as a director of the Corporation if so
elected as evidenced by the signature of such nominee.
In addition, in the event the Corporation calls a special meeting of
stockholders for the purpose of electing one or more directors, any stockholder
entitled to vote in the election of directors generally may nominate one or more
persons for election as directors at a special meeting only pursuant to the
Corporation's notice of meeting or if written notice of such stockholder's
intent to make such nomination or nominations, setting forth the information and
complying with the form described in the immediately preceding paragraph, has
been received by the Secretary of the Corporation not earlier than the ninetieth
day prior to such special meeting and not later than the close of business on
the later of (i) the sixtieth day prior to such meeting; or (ii) the tenth day
following the day on which notice of the date of the special meeting was mailed
or public disclosure thereof was made by the Corporation, whichever comes first.
No person shall be eligible for election as a director of the Corporation
unless nominated in accordance with the procedures set forth in this Article
Seventh, Section D. The presiding officer of the meeting shall, if the facts
warrant, determine and declare to the meeting that nomination was not made in
accordance with the procedures prescribed by Article Eighth, Section D, and if
he or she should so determine, the defective nomination shall be disregarded.
Elections of directors need not be by written ballot unless the By-Laws of
the Corporation shall so provide.
EIGHTH:
A. Meetings of the stockholders may be held within or without the State of
Delaware, as the By-Laws may provide. Any action required or permitted to be
taken by the stockholders of the Corporation must be effected at a duly called
annual or special meeting of such stockholders and shall not be effected by a
consent in writing by any such holders. Subject to the express rights of holders
of any class or series of stock having preference over the Common Stock as to
dividends or upon liquidation, dissolution or winding-up, special meetings of
the stockholders of the Corporation may be called only by the holders of a
majority of the outstanding shares of Common Stock or by a majority of the Board
of Directors.
Except as otherwise required by law or by this Certificate of
Incorporation, the holders of not less than one-third (1/3) in voting power of
the shares entitled to vote at any meeting of stockholders, present in person or
by proxy, shall constitute a quorum, and the act of the holders of a majority in
voting power of the shares present in person or by proxy and entitled to vote on
the subject matter shall be deemed the act of the stockholders. If a quorum
shall fail to attend any meeting, the presiding officer may adjourn the meeting
to another place, date or time. If a notice of any adjourned special meeting of
stockholders is sent to all stockholders entitled to vote thereat, stating that
it will be held with one-quarter (1/4) in voting power of the shares entitled to
vote thereat constituting a quorum, then except as otherwise required by law,
one-quarter (1/4) in voting power of the shares entitled to vote at such
adjourned meeting, present in person or by proxy, shall constitute a quorum,
and, except as otherwise required by law or this Certificate of Incorporation,
all matters shall be determined by the holders of a majority in voting power of
the shares present in person or by proxy and entitled to vote on the subject
matter.
B. At any meeting of the stockholders, only such business shall be
conducted as shall have been properly bought before such meeting. To be properly
bought before an annual meeting, business must be (1) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors; (2) otherwise properly brought before the meeting by or at the
direction of the Board of Directors; or (3) otherwise properly brought before
the meeting by a stockholder. For business to be properly brought before an
annual meeting by a stockholder, the stockholders must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be received not less than sixty (60) days nor more
than ninety (90) days prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that the date of the annual
meeting is advanced by more than thirty (30) days or delayed by more than sixty
(60) days from such anniversary, notice by the stockholder to be timely must be
so received not earlier than the ninetieth day prior to such annual meeting and
not later than the close of business on the later of (1) the sixtieth day prior
to such annual meeting; or (2) the tenth day following the date on which notice
of the date of the annual meeting was mailed or public disclosure thereof was
made, whichever first occurs. For purposes of calculating the first such notice
period following adoption of this Certificate of Incorporation, the first
anniversary of the 1999 annual meeting shall be July 31, 2000. Each such notice
shall set forth as to each matter the stockholder proposes to bring before the
annual meeting: (a) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
meeting; (b) the name and address, as they appear on the Corporation's books, of
the stockholder proposing such business; (c) the class, series and number of
shares of the Corporation which are beneficially owned by the stockholder; and
(d) and material interest of the stockholder in such business.
No business shall be conducted at any meeting of the stockholders except in
accordance with the procedures set forth in Article Eighth, Section B. The
presiding officer of the meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly bought before the meeting
and in accordance with the provisions of Article Eighth, Section B, and if he or
she should so determine, any such business not properly brought before the
meeting shall not be transacted. Nothing herein shall be deemed to affect the
Corporation's proxy statement pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (the "Exchange Act") and Rule 14a-8 thereunder.
The books of the Corporation may be kept outside of the State of Delaware
at such place or places as may be designated from time to time by the Board of
Directors or in the By-Laws of the Corporation.
NINTH:
A. In addition to any affirmative vote required by law or this Certificate
of Incorporation or the By-Laws of the Corporation, and except as otherwise
expressly provided in Section B of this Article Ninth, a Business Transaction
(as hereinafter defined) with, or proposed by or on behalf of, any Interested
Person (as hereinafter defined) or any Affiliate (as hereinafter defined) of any
Interested Person or any person who thereafter would be an Affiliate of such
Interested Person shall require approval by the affirmative vote of not less
than two-thirds (2/3) of the votes entitled to be cast by holders of all the
then outstanding Voting Stock, voting together as one class, excluding Voting
Stock beneficially owned by such Interested Person in accordance with Section
203 of the General Corporation Law of the State of Delaware. Such affirmative
vote shall be required notwithstanding the fact that no vote may be required, or
that a lesser percentage may be specified, by law or in any agreement with any
national securities exchange or otherwise.
B. The provisions of this Article Ninth, Section A, shall not be applicable
to any particular Business Transaction, and such Business Transaction shall
require only such affirmative vote, if any, as is required by law or by any
other provision of this Certificate of Incorporation or the By-Laws of the
Corporation, or any agreement with any national securities exchange, if either
(1) the Business Transaction shall have been approved by a majority of the Board
of Directors as constituted prior to such Interested Person first becoming an
Interested Person or (2) prior to such Interested Person first becoming an
Interested Person, a majority of the Board of Directors shall have approved such
Interested Person becoming an Interested Person and, subsequently, a majority of
the Independent Directors (as hereinafter defined) shall have approved the
Business Transaction.
C. The following definitions shall apply with respect to Article Tenth.
1. The term "Affiliate" shall mean a person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, a specified person.
2. A person shall be a "Beneficial Owner" of any Capital Stock (a) which
such person or any of its Affiliates beneficially owns, directly or indirectly;
(b) which such person or any of its Affiliates has, directly or indirectly, (i)
the right to acquire (whether such right is exercisable immediately or subject
only to the passage of time or the occurrence of one or more events), pursuant
to any agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or understanding;
provided, however, that a person shall not be deemed the beneficial owner of any
security if the agreement, arrangement or understanding to vote such security
arises solely from a revocable proxy or consent solicitation made pursuant to
and in accordance with the Exchange Act, and is not also then reportable on
Schedule 13D under the Exchange Act (or a comparable or successor report); or
(c) which is beneficially owned, directly or indirectly, by any other person
with which such person or any of its Affiliates has any agreement, arrangement
or understanding for the purpose of acquiring, holding, voting or disposing of
any shares of Capital Stock (except to the extent permitted by the proviso of
clause (b)(ii) above). For the purposes of determining whether a person is an
Interested Person pursuant to paragraph (7) of this Section C, the number of
shares of Capital Stock deemed to be outstanding shall include shares deemed
beneficially owned by such person through application of this paragraph (2) of
Section C, but shall not include any other shares of Capital Stock that may be
issuable pursuant to any agreement, arrangement or understanding, or upon
exercise of conversion rights, warrants or options, or otherwise.
3. The term "Business Transaction" shall mean any of the following
transactions when entered into by the Corporation or a subsidiary of the
Corporation with, or upon a proposal by or on behalf of, any Interested Person
or any Affiliate of any Interested Person:
(a) any merger or consolidation of the Corporation or any subsidiary
with (i) any Interested Person or (ii) any other corporation which is, or
after such merger or consolidation would be, an Affiliate of an Interested
Person;
(b) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions), except
proportionately as a stockholder of the Corporation, to or with the
Interested Person of assets of the Corporation (other than Capital Stock
(as hereinafter defined)) or of any subsidiary of the Corporation which
assets have an aggregate market value equal to ten percent (10%) or more of
the aggregate market value of all the outstanding stock of the Corporation;
(c) any transaction that results in the issuance of shares or the
transfer of treasury shares by the Corporation or by any subsidiary of the
Corporation of any Capital Stock or any capital stock of such subsidiary to
the Interested Person, except (i) pursuant to the exercise, exchange or
conversion of securities exercisable for, exchangeable for or convertible
into stock of the Corporation or any such subsidiary which securities were
outstanding prior to the time that the Interested Person became such, (ii)
pursuant to a dividend or distribution paid or made, or the exercise,
exchange or conversion of securities exercisable for, exchangeable for or
convertible into stock of the Corporation or any such subsidiary which
security is distributed, pro rata to all holders of a class or series of
stock of the Corporation subsequent to the time the Interested Person
became such, (iii) pursuant to an exchange offer by the Corporation to
purchase stock made on the same terms to all holders of said stock, (iv)
any issuance of shares or transfer of treasury shares of Capital Stock by
the Corporation, provided, however, that in the case of each of clauses
(ii) through (iv) above there shall be no increase of more than one percent
(1%) in the Interested Person's proportionate share of the Capital Stock of
any class or series or of the Voting Stock or (v) pursuant to a public
offering or private placement by the Corporation to an Institutional
Investor;
(d) any reclassification of securities, recapitalization or other
transaction involving the Corporation or any subsidiary of the Corporation
which has the effect, directly or indirectly, of (i) increasing the
proportionate share of the stock of any class or series, or securities
convertible into the stock of any class or series, of the Corporation or of
any such subsidiary which is owned by the Interested Person, except as a
result of immaterial changes due to fractional share adjustments or as a
result of any purchase or redemption of any shares of stock not caused,
directly or indirectly, by the Interested Person or (ii) increasing the
voting power, whether or not then exercisable, of an Interested Person in
any class or series of stock of the Corporation or any subsidiary of the
Corporation;
(e) the adoption of any plan or proposal by or on behalf of an
Interested Person for the liquidation or dissolution of the Corporation; or
(f) any receipt by the Interested Person of the benefit, directly or
indirectly (except proportionately as a stockholder of the Corporation), of
any loans, advances, guarantees, pledges, tax benefits or other financial
benefits (other than those expressly permitted in subparagraphs (a) through
(e) above) provided by or through the Corporation or any subsidiary.
4. The term "Capital Stock" shall mean all capital stock of the Corporation
authorized to be issued from time to time under Article Fourth of this
Certificate of Incorporation.
5. The term "Independent Directors" shall mean the members of the Board of
Directors who are not Affiliates or representatives of, or associated with, an
Interested Person and who were either directors of the Corporation prior to any
person becoming an Interested Person or were recommended for election or elected
to succeed such directors by a vote which includes the affirmative vote of a
majority of the Independent Directors.
6. The term "Institutional Investor" shall mean a person that (a) has
acquired, or will acquire, all of its securities of the Corporation in the
ordinary course of its business and not with the purpose nor with the effect of
changing or influencing the control of the Corporation, nor in connection with
or as a participant in any transaction having such purpose or effect, including
any transaction subject to Section 13 of the Exchange Act and Rule 13d-3(b)
thereunder, and (b) is a registered broker dealer; a bank as defined in Section
3(a)(6) of the Exchange Act; an insurance company as defined in, or an
investment company registered under, the Investment Company Act of 1940; an
investment advisor registered under the Investment Advisors Act of 1940; an
employee benefit plan or pension fund subject to the Employee Retirement Income
Security Act of 1974 or an endowment fund; a parent holding company, provided
that the aggregate amount held directly by the parent and directly and
indirectly by its subsidiaries which are not persons specified in the foregoing
subclauses of this clause (b) does not exceed one percent (1%) of the securities
of the subject class; or a group, provided that all the members are persons
specified in the foregoing subclauses of this clause (b).
7. The term "Interested Person" shall mean any person (other than the
Corporation, any subsidiary, any profit-sharing, employee stock ownership or
other employee benefit plan of the Corporation or any subsidiary or any trustee
of or fiduciary with respect to any such plan when acting in such capacity) who
(a) is the beneficial owner of Voting Stock representing ten percent (10%) or
more of the votes entitled to be cast by the holders of all of the then
outstanding shares of Voting Stock; or (b) has stated in a filing with any
governmental agency or press release or otherwise publicly disclosed a plan or
intention to become or consider becoming the beneficial owner of Voting Stock
representing ten percent (10%) or more of the votes entitled to be cast by the
holders of all then outstanding shares of Voting Stock and has not expressly
abandoned such plan, intention or consideration more than two years prior to the
date in question; or (c) is an Affiliate of the Corporation and at any time
within the two-year period immediately prior to the date in question was the
beneficial owner of Voting Stock representing ten percent (10%) or more of the
votes entitled to be cast by holders of all then outstanding shares of Voting
Stock.
8. The term "person" shall mean individual, corporation, partnership,
unincorporated association, trust or other entity.
9. The term "subsidiary" means any company of which a majority of the
voting securities are owned, directly or indirectly, by the Corporation.
10. The term "Voting Stock" shall mean Capital Stock of any class or series
entitled to vote in the election of directors generally.
D. A majority of the Independent Directors shall have the power and duty to
determine, on the basis of information known to them after reasonable inquiry,
for the purposes of (1) this Article Ninth, all questions arising under Article
Ninth including, without limitation (a) whether a person is an Interested
Person, (b) the number of shares of Capital Stock or other securities
beneficially owned by any person; and (c) whether a person is an Affiliate of
another; and (2) this Certificate of Incorporation, the question of whether a
person is an Interested Person. Any such determination made in good faith shall
be binding and conclusive on all parties.
E. Nothing contained in this Article Ninth shall be construed to relieve
any Interested Person from any fiduciary obligation imposed by law.
TENTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for the Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of the Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of the Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of the Corporation, as the case may be,
and also on the Corporation.
ELEVENTH: The Corporation shall, to the fullest extent permitted by the
provisions of Section 145 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented, indemnify any and all
persons whom it shall have power to indemnify under said section from and
against any and all of the expenses, liabilities or other matters referred to in
or covered by said section, and the indemnification provided for herein shall
not be deemed exclusive of any other rights to which those indemnified may be
entitled under any By-Law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee, or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
The Board of Directors of the Corporation may, in its discretion, authorize
the Corporation to purchase and maintain insurance on behalf of any person who
is or was a director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against any liabilities asserted against him or incurred by him in
any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnity him against such liability under
the foregoing paragraph of this Article Eleventh.
TWELFTH: No director of the Corporation shall be personally liable to the
Corporation or any stockholder of the Corporation for monetary damages for
breach of fiduciary duty as a director, provided that this Article Twelfth shall
not eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of Title 8 of the Delaware
Code, or (iv) for any transaction from which the director derived an improper
personal benefit. No amendment to or repeal of this Article Thirteenth shall
apply to or have an effect on the liability or alleged liability of any director
of the Corporation for or with respect to any acts or omissions of such director
occurring prior to the effective date of such amendment or repeal.
THIRTEENTH: The Corporation reserves the right to amend, alter, change or
repeal any provisions contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
----------------------------------
Exhibit 10.16
----------------------------------------------------------
CREDIT AGREEMENT
among
BANKBOSTON, N.A.,
NEW WORLD COFFEE-MANHATTAN BAGEL, INC.
and
its DIRECT AND INDIRECT Subsidiaries Who Are Parties HERETO
Dated as of August 31, 1999
----------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 1. DEFINITIONS...........................................................................................1
SECTION 2. THE CREDIT FACILITIES................................................................................16
2.1 THE LOANS AND NOTES..........................................................................................16
2.2 SCHEDULED PRINCIPAL REPAYMENTS ON THE LOANS..................................................................16
2.3 CLOSING FEE; COMMITMENT FEES; INTEREST; DEFAULT RATE.........................................................17
2.4 REQUESTS FOR LOANS...........................................................................................19
2.5 CONVERSION AND CONTINUANCE OF LOANS..........................................................................20
2.6 REDUCTION OR TERMINATION OF THE REVOLVER COMMITMENT..........................................................20
2.7 MANDATORY PAYMENTS AND PREPAYMENTS...........................................................................21
2.8 LETTERS OF CREDIT............................................................................................22
2.9 CHANGED CIRCUMSTANCES........................................................................................26
2.10 CAPITAL ADEQUACY............................................................................................29
2.11 PAYMENTS BEFORE END OF EURODOLLAR PERIOD....................................................................29
2.12 SECURITY....................................................................................................30
2.13 USE OF PROCEEDS.............................................................................................30
2.14 TIME AND METHOD OF PAYMENTS.................................................................................31
SECTION 3. CONDITIONS OF CREDIT EXTENSIONS......................................................................31
3.1 CONDITIONS TO INITIAL CREDIT EXTENSION.......................................................................31
3.2 CONDITIONS TO ALL CREDIT EXTENSIONS..........................................................................33
SECTION 4. REPRESENTATIONS AND WARRANTIES.......................................................................33
4.1 ORGANIZATION AND QUALIFICATION...............................................................................33
4.2 CORPORATE OR PARTNERSHIP AUTHORITY...........................................................................34
4.3 VALID OBLIGATIONS............................................................................................34
4.4 APPROVALS....................................................................................................34
4.5 TITLE TO PROPERTIES; ABSENCE OF LIENS........................................................................34
4.6 LICENSES, PATENTS, TRADEMARKS AND INTELLECTUAL PROPERTY......................................................35
4.7 COMPLIANCE WITH LAWS AND AGREEMENTS..........................................................................35
4.8 MATERIAL AGREEMENTS..........................................................................................35
4.9 ENVIRONMENTAL MATTERS........................................................................................35
4.10 COMPLIANCE WITH ERISA.......................................................................................37
4.11 FINANCIAL STATEMENTS........................................................................................37
4.12 SOLVENCY....................................................................................................38
4.13 TAXES.......................................................................................................38
4.14 LITIGATION..................................................................................................38
4.15 MARGIN RULES................................................................................................38
4.16 RESTRICTIONS ON THE BORROWERS...............................................................................38
4.17 CAPITALIZATION..............................................................................................39
4.18 FULL DISCLOSURE.............................................................................................39
4.19 INVESTMENT COMPANY ACT......................................................................................39
4.20 LABOR DISPUTES; COLLECTIVE BARGAINING AGREEMENTS; EMPLOYEE GRIEVANCES.......................................39
4.21 YEAR 2000 COMPLIANCE........................................................................................40
SECTION 5. FINANCIAL COVENANTS..................................................................................40
5.1 MAXIMUM LEVERAGE RATIO.......................................................................................40
5.2 MINIMUM CONSOLIDATED CASH FLOW RATIO.........................................................................40
5.3 MINIMUM INTEREST COVERAGE RATIO..............................................................................40
5.4 MAXIMUM CAPITAL EXPENDITURES.................................................................................41
SECTION 6. AFFIRMATIVE COVENANTS................................................................................42
6.1 FINANCIAL REPORTING..........................................................................................42
6.2 CONDUCT OF BUSINESS..........................................................................................44
6.3 MAINTENANCE AND INSURANCE....................................................................................44
6.4 TAXES........................................................................................................45
6.5 INSPECTION BY THE LENDER.....................................................................................45
6.6 ACCOUNTING SYSTEM............................................................................................45
6.7 FURTHER ASSURANCES...........................................................................................45
6.8 ENVIRONMENTAL LAWS...........................................................................................45
6.9 DEPOSITORY...................................................................................................45
6.10 INTEREST RATE PROTECTION....................................................................................46
6.11 WILLOUGHBY'S SELLER NOTE....................................................................................46
6.12 FRANCHISE AGREEMENTS........................................................................................46
SECTION 7. NEGATIVE COVENANTS...................................................................................46
7.1 INDEBTEDNESS; CONTINGENT LIABILITIES.........................................................................46
7.2 SALE AND LEASEBACK...........................................................................................47
7.3 ENCUMBRANCES.................................................................................................47
7.4 DISPOSITION OF ASSETS, ETC...................................................................................48
7.5 AMENDMENT TO CHARTER OR PARTNERSHIP DOCUMENTS................................................................49
7.6 MERGERS; CONSOLIDATIONS; ISSUANCE OF SECURITIES; ETC.........................................................49
7.7 RESTRICTED PAYMENTS..........................................................................................49
7.8 INVESTMENTS, LOANS AND ACQUISITIONS..........................................................................50
7.9 ERISA........................................................................................................50
7.10 TRANSACTIONS WITH AFFILIATES................................................................................50
7.11 AMENDMENT OF CERTAIN AGREEMENTS.............................................................................51
7.12 NEGATIVE PLEDGES, ETC.......................................................................................51
7.13 NEW SUBSIDIARIES............................................................................................51
SECTION 8. DEFAULTS..............................................................................................51
8.1 EVENTS OF DEFAULT............................................................................................51
8.2 REMEDIES.....................................................................................................53
8.3 LETTERS OF CREDIT............................................................................................54
SECTION 9. MISCELLANEOUS.........................................................................................54
9.1 NOTICES......................................................................................................54
9.2 EXPENSES.....................................................................................................55
9.3 INDEMNIFICATION..............................................................................................55
9.4 TERM OF AGREEMENT............................................................................................56
9.5 NO WAIVERS...................................................................................................56
9.6 GOVERNING LAW................................................................................................56
9.7 ENTIRE AGREEMENT; AMENDMENTS.................................................................................56
9.8 ASSIGNMENTS; PARTICIPATIONS.................................................................................56
9.9 COUNTERPARTS; PARTIAL INVALIDITY.............................................................................57
9.10 WAIVER OF JURY TRIAL........................................................................................57
9.11 CONSENT TO JURISDICTION.....................................................................................57
9.12 JOINT AND SEVERAL LIABILITY.................................................................................58
</TABLE>
<PAGE>
EXHIBITS
Exhibit 2.1(a) Form of Revolving Note
Exhibit 2.1(b) Form of Term Note
Exhibit 2.4 Form of Loan Request
Exhibit 2.5 Form of Interest Rate Option Notice
Exhibit 2.9 Exemption Certificate
Exhibit 6.1 Form of Covenant Compliance Report
SCHEDULES
Schedule 1 Quarterly Dates
Schedule 2.13 Sources and Uses of Funds
Schedule 4.1 Qualifications
Schedule 4.4 Approvals
Schedule 4.5 Title to Properties; Absence of Liens; Stores
Schedule 4.6 Intellectual Property; Trademarks, Etc.
Schedule 4.9 Environmental Matters
Schedule 4.14 Litigation
Schedule 4.17 Capitalization
Schedule 7.1 Indebtedness
Schedule 7.3 Encumbrances
Schedule 7.8 Investments
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made as of August 31, 1999, among NEW WORLD
COFFEE-MANHATTAN BAGEL, INC., a Delaware corporation (the "Parent"), and its
Subsidiaries, CBB ACQUISITION CORP., a New Jersey corporation ("CBB
Acquisition"), WILLOUGHBY'S, INC., a Connecticut corporation ("Willoughby's"),
MANHATTAN BAGEL COMPANY, INC., a New Jersey corporation ("Bagel") and I. & J.
BAGEL, INC., a California corporation, wholly-owned by Bagel ("I&J") (the Parent
and such Subsidiaries and such other Subsidiaries who hereafter become parties
hereto being collectively referred to herein as the "Borrowers" and individually
as a "Borrower"), and BANKBOSTON, N.A., a national banking association, or any
successor thereto (the "Lender").
RECITALS
A. The Borrowers are in the business of owning and franchising retail
coffee bars and bagel bakeries and manufacturing for sale through such coffee
bars and bagel bakeries coffee, bagels and cream cheese and the wholesale sale
and distribution of such products and related products.
B. CBB Acquisition has entered into an Asset Purchase Agreement dated July
26, 1999, as amended by a certain First Amendment to Asset Purchase Agreement
dated as of August 27, 1999 (as amended, the "Acquisition Agreement") with AFC
Enterprises, Inc. (the "Seller") to acquire all of the assets used exclusively
in Seller's business of franchising retail bagel stores (the "Acquired Assets")
under the name "Chesapeake Bagel Bakery" and all derivatives of such name (the
"Chesapeake Acquisition").
C. The Borrowers have requested that the Lender provide a term loan of
$12,000,000 and a revolving line of credit of up to $3,000,000 to be used for
payment of the purchase price and closing costs in connection with the
Chesapeake Acquisition, repayment of certain existing indebtedness as disclosed
to Lender, working capital, letters of credit and general corporate purposes.
D. The Lender is willing, subject to the terms and conditions set forth
herein, to provide such credit facilities to the Borrowers.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS. As used herein, the terms shall have the following
meanings:
Accountants: Arthur Andersen or other independent certified public
accountants acceptable to the Lender.
Acquired Assets: See the Recitals.
Acquisition: The acquisition by any Borrower, whether by way of the
purchase of assets or equity interests, by merger or consolidation or otherwise,
of substantially all of the assets of or equity interests in any Person,
including, without limitation, specialty coffee retail or bagel bakery Store or
Stores. Acquisition Agreement: See the Recitals.
Adjusted Eurodollar Rate: As applied to any Interest Period, the rate per
annum determined pursuant to the following formula:
AER = [ IOR ]*
--------------
[1.00 - RP]
AER = Adjusted Eurodollar Rate
IOR = Interbank Offered Rate
RP = Reserve Percentage
* The amount in brackets shall be rounded upwards, if necessary, to the
next higher 1/100th of 1%.
Where:
The "Interbank Offered Rate" applicable to any Eurodollar Loan for any
Interest Period means the rate of interest determined by the Lender to be the
prevailing rate per annum at which deposits in U.S. dollars are offered to the
Lender by first-class banks in the interbank Eurodollar market in which it
regularly participates on or about 10:00 a.m. (Boston time) two Business Days
before the first day of such Interest Period in an amount approximately equal to
the principal amount of the Eurodollar Loan to which such Interest Period is to
apply for a period of time approximately equal to such Interest Period; and
The "Reserve Percentage" applicable to any Interest Period means the rate
(expressed as a decimal) applicable to the Lender during such Interest Period
under regulations issued from time to time by the Board of Governors of the
Federal Reserve System for determining the maximum reserve requirement
(including, without limitation, any basic, supplemental, emergency or marginal
reserve requirement) of the Lender with respect to "Eurocurrency liabilities" as
that term is defined under such regulations.
The Adjusted Eurodollar Rate shall be adjusted automatically as of the
effective date of any change in the Reserve Percentage.
AFC Debt Instruments: The Promissory Note (as defined in the Acquisition
Agreement) issued by CBB Acquisition to the Seller, the Security Agreement dated
on or about the date hereof from CBB Acquisition in favor of the Seller, the New
World Guaranty (as defined in the Acquisition Agreement) and all other related
documents.
Affiliates: As applied to any Person, (a) if an individual, a spouse or
relative of such person; (b) if a business entity, any partner, shareholder,
member, director, officer or manager of such Person (except an equityholder of
not more than 10% of the outstanding stock of any company listed on a national
securities exchange or actively traded in the over-the-counter securities
market); (c) any corporation, association, partnership, joint venture, firm or
other entity of which such Person is a partner, stockholder (except an
equityholder of not more than 10% of the outstanding stock of any company listed
on a national securities exchange or actively traded in the over-the-counter
securities market), venturer, member, director, officer or manager; and (d) any
other Person directly or indirectly controlling, controlled by, or under common
control with, such Person.
Applicable Margin: See Section 2.3.
Asset Sale: Any sale, lease, assignment, conveyance, transfer or other
disposition ("Disposition") of property or a series of any such related
Dispositions of property (excluding (i) any such Disposition permitted by clause
(a) of Section 7.4; and (ii) any Equity Issuances) for which any Company
receives (valued at the initial principal amount thereof in the case of non-cash
proceeds consisting of notes or other debt, securities and valued at fair market
value in the case of other non-cash proceeds) $100,000 or more.
Audited Financial Statements: See Section 2.3.
Available Revolver Commitment: At any time, the Revolver Commitment, minus
the Revolving Credit Outstandings.
Bagel: See the Preamble.
Base Rate: The higher of (i) the annual rate of interest announced from
time to time by the Lender at its head office as its Base Rate, and (ii) the
Federal Funds Effective Rate plus .50% per annum (rounded upwards, if necessary,
to the next .125%). The Base Rate is not necessarily intended to be the lowest
rate of interest determined by the Lender in connection with extensions of
credit.
Base Rate Loan: Any Loan bearing interest calculated by reference to the
Base Rate.
Borrower; and Borrowers: See the Preamble.
Business Day: (i) For all purposes other than as covered by clause (ii)
below, any day other than a Saturday, Sunday or legal holiday on which banks in
Boston, Massachusetts are open for the transaction of a substantial part of
their commercial banking business; and (ii) with respect to all notices and
determinations in connection with, and payments of principal and interest on,
Eurodollar Loans, any day that is a Business Day described in clause (i) and
that is also a day for trading by and between banks in the U.S. Dollar deposits
in the interbank Eurodollar market.
Capital Expenditures: As to any Person for any period, the sum of all
amounts which would, in accordance with GAAP consistently applied, be included
as additions to property, plant and equipment and other capital expenditures for
such Person for such period, including without limitation amounts with respect
to Capitalized Leases.
Capital Stock: Any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all
similar ownership interests in any Person which is not a corporation, and any
and all warrants, options or other rights to acquire any of the foregoing.
Capitalized Leases: Leases under which any Company is the lessee or
obligor, the discounted future rental payment obligations under which are
required to be capitalized on the balance sheet of the lessee or obligor in
accordance with GAAP.
Casualty Event: Any loss or damages to, or any condemnation or other taking
of any assets or property of the Companies for which any Company receives
insurance proceeds, proceeds of a condemnation award or other compensation.
CBB Acquisition: See the Preamble.
Change in Control: for any reason (a) any "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes
the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a Person shall be deemed to have "beneficial ownership" of all
securities that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 35% of the total outstanding Capital Stock (on a
fully-diluted basis) of the Parent entitled to vote in the election of
directors; (b) any Borrower shall cease to own of record and beneficially 100%
of the issued and outstanding Capital Stock in each of its Subsidiaries (unless
otherwise permitted hereunder); or (c) during any period of up to 24 consecutive
months, commencing after the date of this Agreement, individuals who at the
beginning of such 24 month period were directors of the Parent (together with
any new director whose election by its Board of Directors or whose nomination
for election by its shareholders was approved by a vote of at least two-thirds
of the directors then still in office who either were directors at the beginning
of such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the directors of the
Parent then in office.
Chesapeake Acquisition: See the Recitals.
Code: The Internal Revenue Code of 1986 and the rules and regulations
promulgated thereunder, collectively, as the same may from time to time be
supplemented or amended and remain in effect.
Collateral: Collectively, any and all collateral referred to herein and in
the Security Documents.
Commitment Fee: See Section 2.3.
Commitments: The Revolver Commitment and the Term Loan Commitment.
Companies: The Borrowers and each of their Subsidiaries from time to time.
Company Store: Any Store owned or controlled directly or indirectly by any
Company.
Company Store Sale Payment: See Section 2.7.
Consolidated Cash Flow: For any period, without duplication, the sum of (a)
the Consolidated EBITDA of the Companies for such period, minus (b) cash taxes
in respect of income and profits for such period, minus (c) the aggregate amount
of Capital Expenditures during such period; in each case determined on a
consolidated basis in accordance with GAAP.
Consolidated EBITDA: For any period determined on a consolidated basis in
accordance with GAAP, without duplication, the sum of (a) the Consolidated Net
Income of the Companies for such period, plus (b) taxes in respect of income and
profits, if any, paid or accrued by the Companies for such period, plus (c)
Consolidated Interest Expense of the Companies for such period, plus (d)
consolidated depreciation and amortization expenses of the Companies for such
period (including amortization of goodwill and other intangibles and
organizational costs), plus (e) other consolidated non-cash charges of the
Companies for such period, plus (f) consolidated nonrecurring charges of the
Companies for such period related to mergers and acquisitions, minus (g) other
consolidated non-cash credits of the Companies for such period; provided that if
during such Reference Period an Acquisition shall have occurred, Consolidated
EBITDA for such Reference Period shall exclude the acquired Stores or other
business for the period prior to the date of such Acquisition.
Consolidated Excess Operating Cash Flow: For any fiscal year, without
duplication, the sum of (a) the Consolidated Net Income of the Companies for
such fiscal year, plus (b) consolidated depreciation and amortization expenses
of the Companies for such fiscal year (including amortization of goodwill and
other intangibles and organizational costs), minus (c) Capital Expenditures of
the Companies made during such fiscal year which were not financed by the
Companies by Indebtedness permitted pursuant to Section 7.1(a), below, minus (d)
cash taxes in respect of income and profits paid by the Companies during such
period, minus (e) all principal payments which were required to be made by the
Companies in respect of its Indebtedness during such fiscal year, minus (f)
voluntary prepayments of the Term Loan made by the Companies during such fiscal
year.
Consolidated Financial Obligations: For any period, without duplication,
the sum of all scheduled payments (including without limitation, principal and
Consolidated Interest Expense) on Consolidated Funded Indebtedness of the
Companies (including without limitation with respect to Capitalized Leases)
which came due during such period, in each case determined on a consolidated
basis in accordance with GAAP.
Consolidated Funded Indebtedness: At any time, without duplication, as to
any Company, the sum of (a) all Indebtedness of such Person for borrowed money,
(b) all obligations of such Person for the deferred purchase price of property
or services (other than trade payables incurred in the ordinary course of such
Person's business), (c) all obligations of such Person evidenced by notes,
bonds, debentures or other similar instruments, (d) Indebtedness created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default are limited
to repossession or sale of such property), (e) the principal portion of
Capitalized Leases of such Person, (f) all obligations of such Person,
contingent or otherwise, as an account party under acceptance, letter of credit
(as to the face amount thereof plus, without duplication, LC Draw Obligations)
or similar facilities, (g) all Guarantees of such Person in respect of
Indebtedness of another Person (other than another Company), (h) all
Indebtedness of another Person secured by (or for which the holder of such
obligation has an existing right, contingent or otherwise, to be secured by) any
Lien on property owned by such Person, whether or not such Person has assumed or
become liable for the payment of such obligation, (i) all obligations of such
Person in respect of Interest Rate Protection Agreements, (j) all obligations of
such Person under take-or-pay or similar arrangements or under commodities
agreements, (k) all preferred Capital Stock issued by such Person and which by
the terms thereof could be (at the request of the holders thereof or otherwise)
subject to mandatory sinking fund payments, redemption or other acceleration
(other than as a result of a Change of Control or an Asset Sale that does not in
fact result in a redemption of such preferred Capital Stock) at any time during
the term of this Agreement, (l) the principal portion of all obligations of such
Person under synthetic leases, (m) the Indebtedness of any partnership or
unincorporated joint venture in which such Person is a general partner or a
joint venturer, and (n) the outstanding attributed principal amount under any
securitization transaction, in each case determined on a consolidated basis in
accordance with GAAP.
Consolidated Interest Expense: For any period, without duplication, the sum
of (a) interest expense (including amortization or write-off of debt discount
and debt issuance costs) of the Companies for such period, (b) the interest
component of all Capitalized Leases of the Companies for such period, and (c)
all commitment fees, Letter of Credit Fees, fees relating to Interest Rate
Protection Agreements and other fees, discounts, commissions and other charges
incurred or payable by the Companies during such period relating to
Indebtedness; in each case determined on a consolidated basis in accordance with
GAAP; provided, however, Consolidated Interest Expense shall exclude any
amortization or write-off of debt discount and debt issuance costs in connection
with the repayment of the obligations of the Parent to BET Associates, L.P.
Consolidated Net Assets: As of any date on which the amount thereof is to
be determined, the net book value of all assets of the Companies as determined
on a consolidated basis in accordance with GAAP.
Consolidated Net Income: For any period, the net income (or loss) of the
Companies, excluding any extraordinary income (or loss) for such period (taken
as a cumulative whole), after deducting all operating expenses, provisions for
all taxes and reserves (including reserves for deferred income taxes) and all
other proper deductions; all determined on a consolidated basis in accordance
with GAAP.
Consolidated Net Worth: As of any date on which the amount thereof is to be
determined, the net worth of the Companies determined on a consolidated basis in
accordance with GAAP.
Controlled Group: All trades or businesses (whether or not incorporated)
under common control that, together with the Companies, are treated as a single
employer under Section 414(b) or 414(c) of that Code or Section 4001 of ERISA.
Credit Extensions: The Loans and the Letters of Credit.
Debt Proceeds Payments: See Section 2.7.
Debt Issuance: The issuance of Consolidated Funded Indebtedness
subordinated to the obligations of the Borrowers to pay principal of and
interest on and other amounts due with respect to the Loans, the Notes, the Fee
Letter and other Obligations on terms of subordination satisfactory to the
Lender, and pursuant to documentation containing other terms and including,
without limitation, interest, amortization, mandatory prepayments, covenants and
events of default in form and substance satisfactory to the Lender.
Default: An Event of Default or event or condition that, but for the
requirement that time elapse or notice be given, or both, would constitute an
Event of Default.
Distribution: As to any Person, any direct or indirect: (i) declaration or
payment of any dividend on or in respect of any Capital Stock of such Person
(except, in the case of the Parent, a dividend payable solely in shares of
Permitted Capital Stock); (ii) redemption, purchase or other retirement or
acquisition of any Capital Stock of such Person, through a Subsidiary of such
Person or otherwise; or (iii) return of capital by such Person to its
shareholders or other equityholders as such; or (iv) other distribution on or in
respect of any Capital Stock of such Person (except, in the case of the Parent,
any distribution made by the Parent solely in shares of Permitted Capital Stock
in connection with any stock split or reverse stock split).
Encumbrances: See Section 7.3.
Environmental Laws: Any and all applicable foreign, federal, state and
local environmental, health or safety statutes, laws, regulations, rules,
ordinances, policies and rules or common law (whether now existing or hereafter
enacted or promulgated), of all governmental agencies, bureaus or departments
which may now or hereafter have jurisdiction over any Borrower and all
applicable judicial and administrative and regulatory decrees, judgments and
orders, including common law rulings and determinations, relating to injury to,
or the protection of, real or personal property or human health or the
environment, including, without limitation, all requirements pertaining to
reporting, licensing, permitting, investigation, remediation and removal of
emissions, discharges, releases or threatened releases of Hazardous Materials,
chemical substances, pollutants or contaminants whether solid, liquid or gaseous
in nature, into the environment or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of such
Hazardous Materials, chemical substances, pollutants or contaminants. Without
limiting the generality of the foregoing, the term shall encompass each of the
following statutes and regulations promulgated thereunder, and amendments and
successors to such statutes and regulations, as enacted and promulgated from
time to time: (a) the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (codified in scattered sections of 26 U.S.C.; 33 U.S.C.;
42 U.S.C. and 42 U.S.C. ss.9601 et seq.); (b) the Resource Conservation and
Recovery Act of 1976 (42 U.S.C. ss.6901 et seq. ); (c) the Hazardous Materials
Transportation Act (49 U.S.C. ss.1801 et seq.); (d) the Toxic Substances Control
Act (15 U.S.C. ss.2601 et seq.); (e) the Clean Water Act (33 U.S.C. ss.1251 et
seq.); (f) the Clean Air Act (42 U.S.C. ss.7401 et seq.); (g) the Safe Drinking
Water Act (21 U.S.C. ss.349; 42 U.S.C. ss.201 and ss.300 et seq.); (h) the
National Environmental Policy Act of 1969 (42 U.S.C. ss.4321); (i) the Superfund
Amendment and Reauthorization Act of 1986 (codified in scattered sections of 10
U.S.C.; 29 U.S.C.; 33 U.S.C. and 42 U.S.C.); and (j) Title III of the Superfund
Amendment and Reauthorization Act (40 U.S.C. ss.1101 et seq.).
Equity Issuance: Any issuance or sale by any Company of (i) any of its
Capital Stock, (ii) any warrants or options exercisable in respect of Capital
Stock, or (iii) any other security or instrument if representing any Capital
Stock (or the right to obtain any Capital Stock) in any Company, specifically
excluding, however, any issuance by the Parent of its Capital Stock to the
Willoughby's Sellers in connection with the cancellation of the Willoughby's
Seller Note.
Equity Proceeds Payment: See Section 2.7.
ERISA: The Employee Retirement Income Security Act of 1974 and the rules
and regulations thereunder, collectively, as the same may from time to time be
supplemented or amended and remain in effect.
Eurodollar Loan: Any Revolving Loan bearing interest at a rate calculated
by reference to the Adjusted Eurodollar Rate.
Event of Default: See Section 8.1.
Excess Operating Cash Flow Payment: See Section 2.7.
Expiration Date: December 31, 2002, or such earlier date on which the
Revolver Commitment of the Lender shall terminate in accordance with the terms
hereof.
Federal Funds Effective Rate: For any day, a fluctuating interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is not a Business Day,
for the next preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day that is a Business Day, the
average of the quotations for such day on such transactions received by the
Lender from three Federal funds brokers of recognized standing selected by the
Lender.
Fee Letter: The Fee Letter among the Lender and the Borrowers dated as of
August 30, 1999.
Franchise Agreements: The franchise agreements between the Borrowers and
their Franchisees in effect from time to time.
Franchisees: Each of the franchisees which is a party to a Franchise
Agreement with any Borrower pursuant to a Franchise Agreement from time to time.
Franchised Stores: Any Store franchised to a Franchisee by any Company, as
franchisor pursuant to a Franchise Agreement.
FTC: The Federal Trade Commission, and any successor agency thereof.
GAAP: For all purposes other than the financial statements contemplated by
Sections 6.1(a), (b) and (c) of this agreement, GAAP shall mean generally
accepted accounting principles in effect as of December 27, 1998, applied on a
consistent basis. With respect to the financial statements contemplated by
Sections 6.1(a) and (b) of this Agreement, GAAP shall mean generally accepted
accounting principles in effect at the time of the effective dates thereof,
applied on a consistent basis with past financial statements (unless otherwise
mutually agreed to in writing by the parties hereto).
Guaranty or Guarantees: All guarantee(s), endorsement(s) or other
contingent or surety obligation(s) of any Company with respect to obligations of
others, whether or not reflected on its balance sheet, including any obligation
to furnish funds, directly or indirectly (whether by virtue of partnership
arrangements, by agreement to keep-well or otherwise), through the purchase of
goods, supplies or services, or by way of stock purchase, capital contribution,
advance or loan, or to enter into a contract for any of the foregoing, for the
purpose of payment of obligations of any other Person.
Hazardous Material: Any substance (a) the presence of which requires or may
hereafter require notification, investigation or remediation under any
Environmental Law; (b) which is or becomes defined as a "hazardous waste",
"hazardous material", "hazardous material or oil" or "hazardous substance" or
"controlled industrial waste" or "pollutant" or "contaminant" or "chemical
substance or mixture" under any present or future Environmental Law or
amendments thereto including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (43 U.S.C. Section 9601
et seq.) and any applicable local statutes and the regulations promulgated
thereunder; (c) which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is or becomes
regulated by any governmental authority, agency, department, commission, board,
agency or instrumentality of any foreign country, and the United States, any
state of the United States, or any political subdivision thereof to the extent
any of the foregoing has or had jurisdiction over the Companies; or (d) without
limitation, which contains gasoline, diesel fuel or other petroleum products,
asbestos or polychlorinated biphenyls.
Hedging Agreement: Any commodity swap or other agreement designed to
protect against fluctuations in the price of coffee or coffee-related products.
I&J: See the Preamble.
Indebtedness: As to any Person, all obligations, contingent or otherwise,
that in accordance with GAAP should be classified on a Person's balance sheet as
liabilities, on a consolidated basis in accordance with GAAP.
Initial Financial Statements: See Section 4.11.
Insolvent or Insolvency: As applied to any Person, a Person as to which
there has occurred one or more of the following events, as applicable: (a)
dissolution (except for dissolution of Subsidiaries to the extent permitted
hereunder); (b) termination of existence (except for mergers, consolidations or
dissolutions to the extent permitted hereunder); (c) insolvency within the
meaning of the United States Bankruptcy Code or other applicable statute; (d)
such Person's inability to pay his or its debts as they come due; or (e)
appointment of a receiver of any part of the property of, execution of a trust
mortgage or an assignment for the benefit of creditors by, of the filing of a
petition in bankruptcy or the commencement of any proceedings under any
bankruptcy or insolvency laws, or any laws relating to the relief of debtors,
readjustment or indebtedness or reorganization of debtors, or the offering of a
plan to creditors for composition or extension, except for an involuntary
proceeding commenced against such Person which is dismissed within 90 days after
the commencement thereof without the entry of an order for relief or the
appointment of a trustee.
Insurance Proceeds: With respect to any Casualty Event, any proceeds of
insurance, condemnation award or other compensation in respect thereof.
Insurance Proceeds Payment: See Section 2.7.
Intercompany Notes: See Section 7.1.
Interest Adjustment Date: See Section 2.3.
Interest Period: (a) With respect to each Eurodollar Loan, the period
commencing on the date of the making or continuation of or conversion to such
Eurodollar Loan and ending one, two, three or six months thereafter, as the
Borrowers may elect in the applicable Loan Request or Interest Rate Option
Notice; and (b) with respect to each Base Rate Loan, the period commencing on
the date of the making or continuation of or conversion to such Base Rate Loan
and ending on each March 31, June 30, September 30 and December 31 thereafter
provided that, in each case:
(i) any Interest Period (other than an Interest Period determined pursuant
to clause (iv) below) that would otherwise end on a day that is not a Business
Day shall be extended to the next succeeding Business Day unless, in the case of
Eurodollar Loans, such Business Day falls in the next calendar month, in which
case such Interest Period shall end on the immediately preceding Business Day;
(ii) if the Borrowers shall fail to give notice as provided in Section 2.5,
the Borrowers shall be deemed to have requested a conversion of the affected
Eurodollar Loan to a Base Rate Loan on the last day of the then current Interest
Period with respect thereto;
(iii) any Interest Period relating to a Eurodollar Loan that begins on the
last Business Day of a calendar month (or on a day for which there is not
numerically corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (iv) below, end on the last Business Day of a
calendar month;
(iv) any Interest Period that would otherwise end after the Expiration Date
shall end on the Expiration Date; and
(v) notwithstanding clause (iv) above, no Interest Period relating to a
Eurodollar Loan shall have a duration of less than one month.
Interest Rate Option Notice: See Section 2.5.
Interest Rate Protection Agreement: Any interest rate swap agreement or
other financial agreement or arrangement designed to protect any Company against
fluctuations in interest rate.
LC Draw Obligation: The Borrowers' obligation to reimburse the Lender on
account of any drawing under any Letter of Credit as provided in Section 2.8(c).
LC Exposure Amount: At any time, the sum of (i) the aggregate undrawn face
amount of all Letters of Credit outstanding at such time, and (ii) the aggregate
amount of all drawings under Letters of Credit for which the Lender shall not
have been reimbursed by the Borrowers as provided in Section 2.8(c).
Lease: Any Operating Lease or Capitalized Lease.
Lender: See the Preamble.
Letter of Credit: See Section 2.8(a).
Letter of Credit Documents: See Section 2.8(a).
Letter of Credit Fee: See Section 2.8(g).
Loan Documents: Collectively, this Agreement, the Fee Letter, the Notes,
the Letters of Credit, the Letter of Credit Documents, the Security Documents
and any and all other agreements, instruments, certificates, Loan Requests,
Interest Rate Option Notices or reports executed or delivered from time to time
in connection with this Agreement, in each case as may be amended or restated
from time to time.
Loan Request: See Section 2.4.
Loans: The Term Loan and the Revolving Loans.
Margin Regulations: See Section 4.15.
Margin Stock: See Section 4.15.
Material Adverse Effect: A material adverse effect on (a) the business,
assets, property, operations, condition (financial or otherwise) or liabilities
of the Borrowers taken as a whole, (b) the ability of the Borrowers taken as a
whole to perform any material obligation under any of the Loan Documents to
which they are bound, or (c) the validity or enforceability of (i) this
Agreement, (ii) any of the other Transaction Documents, or (iii) any of the
rights or remedies of the Lender hereunder or thereunder.
Net Company Store Sale Proceeds: With respect to any sale of any Company
Store, the aggregate amount of all cash received by any Company in respect
thereof, net of reasonable, customary fees, commissions and expenses incurred by
the Companies for such sale and taxes paid or reasonably estimated to be payable
and for which reserves have been provided as a result thereof.
Net Debt Proceeds: In the case of any Debt Issuance, the aggregate amount
of all cash received by any Company in respect thereof, net of reasonable,
customary fees, discounts, commissions and expenses incurred by the Companies
for such Debt Issuance.
Net Equity Proceeds: In the case of any Equity Issuance (other than an
Equity Issuance constituting an Asset Sale), the aggregate amount of all cash
received by any Company in respect thereof, net of reasonable, customary fees,
discounts, commissions and expenses incurred by the Companies for such Equity
Issuance.
Net Sale Proceeds: With respect to any Asset Sale, the aggregate amount of
all cash received by any Company in respect thereof, net of reasonable,
customary fees, commissions and expenses incurred by the Companies for such
Asset Sale net of taxes paid or reasonably estimated to be payable and for which
reserves have been provided as a result thereof.
Obligations: Any and all obligations (whether payment or performance
related or otherwise) of any Company to the Lender or any of its affiliates of
every kind and description, direct or indirect, absolute or contingent, primary
or secondary, due or to become due, now existing or hereafter arising, which may
arise under, out of, or in connection with, this Agreement (as may be amended or
restated from time to time), any other Loan Document (as may be amended or
restated from time to time), the Fee Letter, any Interest Rate Protection
Agreement entered into with the Lender or any affiliate of the Lender or any
other document made, delivered or given in connection herewith or therewith,
whether on account of principal (including any increases thereto), interest,
reimbursement obligations, fees, indemnities, costs, expenses (including all
fees, charges and disbursements of counsel to the Lender that are required to be
paid by the Borrowers pursuant to any Loan Document) or otherwise (including
interest accruing after the maturity of the Credit Extensions and interest
accruing after the filing of any petition in bankruptcy, or the commencement of
any insolvency, reorganization or like proceeding, relating to any Company,
whether or not a claim for post-filing or post-petition interest is allowed in
such proceeding).
Opening Balance Sheet: See Section 4.11.
Operating Leases: Leases or other periodic payment arrangements for the use
of real or personal property, other than Capitalized Leases.
Organizational Documents: See Section 4.2.
Parent. See the Preamble.
PBGC: The Pension Benefit Guaranty Corporation or any entity succeeding to
any or all of its functions under ERISA
Permitted Capital Stock: Capital Stock of the Parent with respect to which
the Parent has no obligation to make any Distributions prior to the indefeasible
payment in full in cash of all Obligations.
Permitted Encumbrances: See Section 7.3.
Permitted Sale: See Section 7.4.
Person: Any individual, corporation, partnership, joint venture, trust or
unincorporated organization or any government or any agency or political
subdivision thereof.
Plan: At any time, an employee pension or other benefit plan that is
subject to Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is either (a) maintained by any Company or any
member of the Controlled Group for employees of any Company or any member of the
Controlled Group or (b) if such Plan is established maintained pursuant to a
collective bargaining agreement or any other arrangement under which more than
one employer makes contributions and to which any Company or any member of the
Controlled Group is then making or accruing an obligation to make contributions
or has within the preceding five Plan years made contributions.
Projections: See Section 4.11.
Qualified Investments: As applied to any Company, investments in (a) notes,
bonds or other obligations of the United States of America or any agency thereof
that as to principal and interest constitute direct obligations or are
guaranteed by the United States of America, with maturities of one year or less
from the date of issuance, (b) certificates of deposit or other deposit
instruments or accounts of banks or trust companies organized under the laws of
the United States or any state thereof that have capital and surplus of at least
$500,000,000 and are members of the Federal Deposit Insurance Corporation, with
maturities of one year or less from the date of issuance, (c) commercial paper
of the Lender or commercial paper of other issuers that is rated not less than
prime-one or A-1 or their equivalents by Moody's Investors Service, Inc. or
Standard & Poor's Corporation, respectively, or their successors or municipal
bonds with at least the equivalent rating, (d) any repurchase agreement secured
by any one or more of the foregoing, (e) securities with maturities of one year
or less from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States, by any political subdivision or
taxing authority of any such state, commonwealth or territory or by any foreign
government, the securities of which state, commonwealth, territory, political
subdivision, taxing authority or foreign government (as the case may be) are
rated at least A by S&P or A by Moody's; (f) securities with maturities of six
months or less from the date of acquisition backed by standard letters of credit
issued by the Lender or any commercial bank satisfying the requirements of
clause (b) of this definition; or (g) shares of money market mutual or similar
funds which invest exclusively in assets satisfying the requirements of clauses
(a) through (f) of this definition; and (h) with the Lender's prior written
consent, any Subsidiary provided such Company and such Subsidiary comply with
the provisions of the Loan Documents applicable to it (including without
limitation Section 2.12 hereof).
Quarterly Dates: The last day of each fiscal quarter of the Borrowers,
using their fiscal year accounting as in effect with respect to the Initial
Financial Statements of the Parent. The Quarterly Dates for the period from the
date hereof through fiscal year end 2002 are listed on Schedule 1 hereto.
Reference Period: Commencing with the period of four consecutive fiscal
quarters of the Borrowers ending on the Quarterly Date of December 26, 1999,
each period of four consecutive fiscal quarters ending on each Quarterly Date.
Remedial Work: All activities, including, without limitation, cleanup
design and implementation, removal activities, investigation, field and
laboratory testing and analysis, monitoring and other remedial and response
actions, taken or to be taken, arising out of or in connection with Hazardous
Materials, including without limitation (a) all activities included within the
meaning of the terms "removal," "remedial action" or "response," as defined in
42 U.S.C. Section 9601(23), (24) and (25), and (b) all activities included
within the meaning of the terms "remedial response actions" and "Remedial
Response Implementation Plan (RRIP)," as defined in 310 CMR 40.
Restricted Payment: With reference to any Company any (i) Distribution or
(ii) any retirement, repurchase, defeasance or redemption of, any acquisition
for value of, or any repayment of, any Debt Issuance (including, without
limitation, any Subordinated Debt) other than as expressly permitted in writing
by the Lender.
Revolver Commitment: See Section 2.1.
Revolving Credit Outstandings: At any time, the sum of (i) the aggregate
principal amount of Revolving Loans outstanding at such time, plus (ii) the LC
Exposure Amount at such time.
Revolving Loans: See Section 2.1.
Revolving Note: See Section 2.1.
Sale Leaseback: See Section 7.2.
Sale Proceeds Payment: See Section 2.7.
SEC: The Securities and Exchange Commission, or any successor agency
thereto.
SEC Reports: The Companies' quarterly reports filed with the SEC on Form
10-Q, annual reports filed with the SEC on Form 10-K and all such other SEC
public filings made by the Companies pursuant to the Securities Act of 1933, as
amended, and the Securities and Exchange Act of 1934, as amended.
Security Documents: Collectively, the agreements and instruments referred
to in Section 2.12 and any and all other agreements, documents and instruments
executed by any Company or other Affiliates, to secure, or otherwise in
connection with, the Obligations, all as amended from time to time.
Seller: See the Recitals.
Shareholder Rights Agreement: That certain Rights Agreement dated as of
June 7, 1999 between the Parent and American Stock Transfer & Trust Company.
Store(s): Collectively, the Company Stores and the Franchised Stores.
Subordinated Debt: (a) The Consolidated Funded Indebtedness under the
Subordinated Loan Agreements and (b) any hereafter arising unsecured
Consolidated Funded Indebtedness of any of the Borrowers, the principal amount
of, the interest rate on and all other terms of which shall have been approved
in writing by the Lender, in its sole and absolute discretion prior to the date
of incurrence thereof; all of which Consolidated Indebtedness shall in each case
be subordinated to the Obligations in right of payment and exercise of remedies
upon terms satisfactory to the Lender in its sole and absolute discretion,
pursuant to the applicable Subordination Agreement(s).
Subordinated Loan Agreements: The Promissory Note issued by the Borrowers
dated as of December 23, 1998 to NJEDA, the Subordination Agreement dated as of
December 23, 1998 from NJEDA and all related documents.
Subordination Agreements: Written subordination agreements satisfactory to
the Lender in form and substance, providing for the subordination to the
Obligations of Subordinated Debt of one or more of the Borrowers, including,
without limitation, Indebtedness owed to Affiliates of any Borrower and the
Seller.
Subsidiary: (a) Any corporation, association, joint stock company, business
trust or other similar organization of which 50% or more of the ordinary voting
power for the election of a majority of the members of the board of directors or
other governing body of such entity is held or controlled by any Borrower or a
Subsidiary of any Borrower; (b) any other such organization the management of
which is directly or indirectly controlled by any Borrower or a Subsidiary of
any Borrower through the exercise of voting power or otherwise; or (c) any joint
venture, association, partnership or other entity in which any Borrower or any
Subsidiary thereof has a 50% or greater equity interest.
Term Loan: See Section 2.1.
Term Loan Commitment: See Section 2.1.
Term Loan Maturity Date: December 31, 2002, or such earlier date on which
all the Commitments of the Lender shall terminate in accordance with the terms
hereof.
Term Note: See Section 2.1.
Transaction Documents: See Section 4.2.
Willoughby's. See the Recitals.
Willoughby's Seller Note. See Section 2.12.
Willoughby's Sellers. See Section 2.12.
SECTION 2. THE CREDIT FACILITY.
2.1 The Loans and Notes.
(a) Revolving Loans. The Lender agrees, subject to the terms of this
Agreement, to make revolving credit loans (the "Revolving Loans") to the
Borrower from time to time from and after the date hereof until the Expiration
Date in an aggregate principal amount at any time outstanding up to, but not
exceeding, $3,000,000 (the "Revolver Commitment"), minus the LC Exposure Amount
at such time. Subject to the terms and conditions of this Agreement, from time
to time from and after the date hereof until the Expiration Date, the Borrowers
may borrow, repay and reborrow Revolving Loans. The Revolving Loans shall be
evidenced by a promissory note in the form of Exhibit 2.1(a) hereto delivered to
the Lender on the date hereof (as the same may be amended, restated, renewed,
substituted or replaced from time to time, the "Revolving Note").
(b) Term Loan. The Lender agrees, subject to the terms of this Agreement,
to make a term loan (the "Term Loan") to the Borrowers on or about the date
hereof in the principal amount of $12,000,000. The Borrowers shall not be
entitled to reborrow all or any part of the principal of the Term Loan which
shall be paid or prepaid at any time in accordance with the terms and conditions
of this Agreement. The Term Loan shall be evidenced by a promissory note in the
form of Exhibit 2.1(b) hereto delivered to the Lender on the date hereof (as the
same may be amended, restated, renewed, substituted or replaced from time to
time, the "Term Note").
(c) Notations on Notes. The Borrowers irrevocably authorize the Lender to
make an appropriate notation on the applicable Note reflecting the making of
each Loan and each payment on the Loans. The outstanding amount of the Loans
entered in the computer records of the Lender shall be prima facie evidence of
the principal amount thereof owing and unpaid to the Lender, but the failure to
enter, or any error in so entering, any such amount shall not limit or otherwise
affect the obligations of the Borrowers hereunder or under the Notes to make
payments of principal, interest and other amounts due thereunder.
2.2 Scheduled Principal Repayments on the Loans.
(a) Revolving Loans. The Borrowers shall pay jointly and severally to the
Lender on the Expiration Date all then outstanding principal on the Revolving
Loans.
(b) Term Loan. The Borrowers shall pay jointly and severally to the Lender
the principal of the Term Loan in 10 consecutive quarterly installments, payable
on each date set forth below in the amounts set forth below opposite such date:
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
September 30, 2000 $ 1,000,000
December 31, 2000 1,000,000
March 31, 2001 1,000,000
June 30, 2001 1,000,000
September 30, 2001 1,000,000
December 31, 2001 1,000,000
March 31, 2002 1,500,000
June 30, 2002 1,500,000
September 30, 2002 1,500,000
December 31, 2002 1,500,000
</TABLE>
2.3 Closing Fee; Commitment Fees; Interest; Default Rate.
(a) Fee Letter. The Borrowers shall pay jointly and severally to the Lender
a fully-earned nonrefundable closing fee on the date hereof as set forth in the
Fee Letter. The Borrowers shall pay jointly and severally all other fees when
due pursuant to the Fee Letter.
(b) Commitment Fees. The Borrowers shall pay jointly and severally to the
Lender a commitment fee (the "Commitment Fee") on the daily unused portion of
the Revolver Commitment (taking into account the LC Exposure Amount as usage) at
a per annum rate equal to .50%.
(c) Interest Rate. The Borrowers may elect an interest rate for each Loan
(or one or more portions thereof) based on either the Base Rate or the
applicable Adjusted Eurodollar Rate and determined as follows: (i) the rate for
any Base Rate Loan shall be the Base Rate plus the Applicable Margin; and (ii)
the rate for any Eurodollar Loan shall be the applicable Adjusted Eurodollar
Rate plus the Applicable Margin.
(d) Applicable Margin. For purposes of this Agreement, the term "Applicable
Margin" shall mean:
(i) from and after the date hereof until the first Interest Adjustment Date
identified below, the Applicable Margins shall be based on Level V below; and
(ii) from and after the tenth day after each date the Lender receives the
quarterly financial statements required by Section 6.1(b) and the covenant
compliance certificate required by Section 6.1(c) (beginning with the financial
statements for the fiscal quarter ending on the Quarterly Date of September 30,
1999) (each, an "Interest Adjustment Date"), subject to the provisions of
paragraph (iii) below, the Applicable Margin shall be determined from the
following table based upon the Leverage Ratio (as defined below) for the
Reference Period ending on the Quarterly Date immediately preceding such
Interest Adjustment Date:
<TABLE>
<CAPTION>
Applicable Margin
Level Leverage Ratio -----------------
----- -------------- Base Eurodollar
---- ----------
<S> <C> <C>
I Less than 1.00:1.00 0.50% 2.00%
II Greater than or equal to 1.00% 2.50%
1.00:1.00 but less than
1.50:1.00
III Greater than or equal to 1.50% 3.00%
1.50:1.00 but less than 2.00
:1.00
IV Greater than or equal to 2.00% 3.50%
2.00:1.00 but less than
2.50:1.00
V Greater than 2.50:1.00 2.50% 4.00%
</TABLE>
(iii) As used herein, "Leverage Ratio" shall mean the ratio of Consolidated
Funded Indebtedness as of the last day of the most recently ended Reference
Period prior to the Interest Adjustment Date to Consolidated EBITDA for such
Reference Period. Notwithstanding the foregoing, no downward adjustment of the
Applicable Margin hereunder shall be permitted unless (A) all of the required
financial statements for the relevant Reference Period have been delivered to
the Lender as required in Section 6.1; and (B) there shall exist no Default at
the time of such proposed downward adjustment.
(iv) The determination of the Applicable Margin hereunder as of any
Quarterly Date shall be based on unaudited quarterly financial statements for
the relevant Reference Period; provided, however, that in the event of any
discrepancy between computations based upon any unaudited quarterly financial
statements and the related audited financial statements furnished pursuant to
Section 6.1(a) (the "Audited Financial Statements") in favor of the Lender, the
computation based upon the Audited Financial Statements shall govern
(retroactive to the relevant Interest Adjustment Date), and the amount of
interest thereby overdue and payable by the Borrowers shall be paid to the
Lender within three Business Days after demand therefor.
(e) Interest and Commitment Fees Payment Dates. Interest on Base Rate Loans
shall be due and payable, without setoff, deduction or counterclaim, quarterly
in arrears on each March 31, June 30, September 30 and December 31, commencing
on September 30, 1999, and when such Base Rate Loan is due (whether at maturity,
by reason of acceleration or otherwise). The rate of interest on Base Rate Loans
shall change on the date of any change in the applicable Base Rate. Interest on
each Eurodollar Loan shall be payable, without setoff, deduction or
counterclaim, for the related Interest Period on the last day thereof and when
such Eurodollar Loan is due (whether at maturity, by reason of acceleration or
otherwise) and, if such Interest Period is longer than three months, at
intervals of three months after the first day of such Interest Period.
Commitment Fees shall be due and payable in arrears on each March 31, June 30,
September 30 and December 31 and on the Expiration Date.
(f) Default Rate; Late Fee. During the existence of any Event of Default,
the outstanding principal under the Notes and, to the extent permitted by
applicable law, any interest (under this Section 2.3) and fees or any other
amounts due and payable hereunder (including without limitation overadvances)
shall bear interest, from and including the date such Event of Default occurred
at a rate per annum equal to the sum of (x) the Base Rate plus (y) the
Applicable Margin for Base Rate Loans plus (z) 2.00%, which interest shall be
compounded daily and payable on demand. If any payment of principal, interest or
other amount due hereunder (other than principal, interest or other amounts due
at maturity of the Loans (by reason of acceleration or otherwise)) is not paid
in full within 10 days after the same is due, the Borrowers shall also jointly
and severally pay to the Lender a late fee in the amount of 5.0% of the amount
not paid when due. Nothing in this Section 2.3(f) shall affect the Lender's
right to exercise any of its rights or remedies, including those provided in
Section 8.2 and in the Security Documents, arising upon the occurrence of an
Event of Default.
(g) Computations. Interest on the Loans and on fees and expenses shall be
computed on the basis of the actual number of days elapsed over a 360-day year.
Except as otherwise provided in the definition of the term "Interest Period"
with respect to the Eurodollar Loans, if any payment hereunder or under the
Notes shall be due and payable on a day which is not a Business Day, such
payment shall be deemed due on the next following Business Day and interest
shall be payable at the applicable rate specified herein through such extension
period.
2.4 Requests for Loans. The Parent shall give the Lender telephonic notice
confirmed in writing in the form of Exhibit 2.4 of each Loan requested hereunder
(a "Loan Request") no later than (a) 1:00 PM (Boston time) on the same Business
Day as the proposed date of any Base Rate Loan and (b) 1:00 PM (Boston time) on
the third Business Day prior to the proposed date of any Eurodollar Loan. Each
such notice shall specify (i) the principal amount thereof requested and the use
or uses thereof, (ii) the proposed date of such Loan, (iii) the Interest Period
for such Loan, if a Eurodollar Loan, and (iv) whether such Loan shall be a Base
Rate Loan or a Eurodollar Loan. Each Loan Request shall be irrevocable and
binding on the Borrowers and shall obligate the Borrowers to accept the Loan
requested on the proposed date. Each Loan Request for a Base Rate Loan shall be
in a minimum amount of $50,000 (and integrals thereof) and each Loan Request for
a Eurodollar Loan shall be in a minimum amount of $250,000 (and integrals
thereof); provided, that at no time shall there be more than five Eurodollar
Loans outstanding. The Lender shall disburse Revolving Loans to the Borrowers by
depositing them in a joint account of the Borrowers with the Lender.
2.5 Conversion and Continuance of Loans.
(a) Conversion to a Different Type of Loan. The Borrowers may elect from
time to time to convert any outstanding Loan to a Base Rate Loan or Eurodollar
Loan, as the case may, be provided that (i) with respect to any such conversion
of a Eurodollar Loan to a Base Rate Loan, the Borrowers shall provide the
appropriate Interest Rate Option Notice in the form of Exhibit 2.5 hereto (an
"Interest Rate Option Notice") to the Lender by 1:00 PM (Boston time) on the
date of such proposed conversion; (ii) with respect to any such conversion of a
Base Rate Loan to a Eurodollar Rate Loan, the Borrowers shall provide the
appropriate Interest Rate Option Notice to the Lender by 1:00 PM (Boston time)
at least three Business Days' prior to the date of such proposed conversion;
(iii) with respect to any such conversion of a Eurodollar Loan into a Base Rate
Loan, such conversion shall only be made on the last day of the related Interest
Period; (iv) no Loans may be converted into a Eurodollar Loan when any Default
has occurred and is continuing; (v) at no time shall there be more than five
Eurodollar Loans outstanding; and (vi) any conversion of less than all of the
outstanding Loans of either type into Loans of the other type shall be in a
minimum principal amount of $250,000, provided that a conversion of a Eurodollar
Loan to a Base Rate Loan shall be in a minimum principal amount of $50,000.
(b) Continuance of an Interest Rate Option. The Borrowers may continue any
Loan of either type as a Loan of the same type upon the expiration of the
related Interest Period by providing an Interest Rate Option Notice to the
Lender in compliance with the notice provisions set forth in Section 2.5(a);
provided that no Eurodollar Loan may be continued as such when any Default has
occurred and is continuing, but shall be automatically converted to a Base Rate
Loan on the last day of the first applicable Interest Period which ends during
the continuance of such Default; provided further that if the Borrowers fail to
give a timely Interest Rate Option Notice, the affected Loan shall be
automatically converted to a Base Rate Loan on the last day of the applicable
Interest Period.
2.6 Reduction or Termination of the Revolver Commitment.
(a) At any time prior to the Expiration Date, upon at least 10 days prior
written notice, the Borrowers may permanently terminate or permanently reduce
the Revolver Commitment. Any such reduction shall be in an amount of not less
than $250,000 (or multiples thereof) or such lesser amount as equals the
Available Revolver Commitment. Simultaneously with any such termination or
reduction of the Revolver Commitment, the Borrowers shall (i) make any
prepayments of principal required under Section 2.7(a), together with any
payments required under Section 2.11 and (ii) pay to the Lender any then accrued
unpaid Commitment Fees and interest on the terminated Revolver Commitment or on
the portion of the Revolver Commitment terminated pursuant to any reduction
thereof.
(b) The Revolver Commitment shall be automatically and permanently reduced
to -0- on the Expiration Date, when all outstanding principal, accrued interest
and other amounts due on the Revolving Note shall be due and payable in full.
2.7 Mandatory Payments and Prepayments.
(a) Overdraws. If at any time the Revolving Credit Outstandings exceed the
sum of the Revolver Commitment (including, without limitation, as a result of a
reduction of the Revolver Commitment pursuant to Section 2.6), the Borrowers
shall immediately pay to the Lender the amount of such excess, which excess
shall be first applied to any unpaid LC Draw Obligations or, if a Default then
exists and is continuing, applied at the Lender's sole and absolute discretion.
(b) Mandatory Excess Operating Cash Flow Payments. Commencing with the
fiscal year ending December 31, 2000, the Borrowers shall, not later than 15
days following the date their Audited Financial Statements are required to be
delivered to the Lender under Section 6.1, pay to the Lender 50% of the amount
of Consolidated Excess Operating Cash Flow for the fiscal year most recently
ended (each such payment to the Lender being referred to herein as an "Excess
Operating Cash Flow Payment"). Notwithstanding the foregoing, payment by the
Borrowers of the Excess Operating Cash Flow Payment is hereby waived by the
Lender so long as the Leverage Ratio as of both the end of the most recently
ended fiscal year and the most recently ended fiscal quarter is less than
2.00:1.00.
(c) Mandatory Payments in Connection with Prepayment Events. The Borrowers
shall, not later than 30 days following each day any Net Sale Proceeds
(excluding any Net Company Store Sale Proceeds) are received by any Borrower or
any of its Subsidiaries in excess of $100,000 in the aggregate as to all Asset
Sales occurring after the date hereof, pay to the Lender the amount of such Net
Sale Proceeds (each such payment to the Lender being referred to herein as a
"Sale Proceeds Payment"). Notwithstanding the foregoing, payment by the
Borrowers of the Sale Proceeds Payment is hereby waived by the Lender so long as
the Leverage Ratio as of both the end of the most recently ended fiscal year and
the most recently ended fiscal quarter is less than 2.00:1.00.
(d) Mandatory Payments in Connection with Company Store Sales. The
Borrowers shall, within twelve months following the date any Net Company Store
Sale Proceeds are received by any Borrower or any of it Subsidiaries, pay to the
Lender an amount equal to the excess of Net Company Store Sale Proceeds not
theretofore expended as a Capital Expenditure; provided, however, that Borrowers
shall pay to the Lender the full amount of such Net Company Store Sale Proceeds
if Borrowers are not, or after giving effect to this provision will not be, in
compliance with Section 5.4 hereof (each such payment to the Lender being
referred to herein as a "Company Store Sale Payment").
(e) Mandatory Payments in Connection with Debt Issuances. The Borrowers
shall, not later than 30 days following each day any Net Debt Proceeds are
received by any Borrower or any of its Subsidiaries, pay to the Lender the
amount of such Net Debt Proceeds (each such payment to the Lender being referred
to herein as a "Debt Proceeds Payment").
(f) Mandatory Payments in Connection with Equity Issuances. The Borrowers
shall, not later than 30 days following each day any Net Equity Proceeds are
received by any Borrower or any of its Subsidiaries, pay to the Lender 50% of
the amount of such Net Equity Proceeds (each such payment to the Lender being
referred to herein as an "Equity Proceeds Payment"). Notwithstanding the
foregoing, payment by the Borrowers of the Equity Proceeds Payment is hereby
waived by the Lender so long as the Leverage Ratio as of both the end of the
most recently ended fiscal year and the most recently ended fiscal quarter is
less than 2.00:1.00.
(g) Mandatory Payments in Connection with Insurance Proceeds. The Borrowers
shall, within twelve months following the date any Insurance Proceeds are
received by any Borrower or any of its Subsidiaries in respect of any Casualty
Event, pay to the Lender an amount equal to the excess Insurance Proceeds not
theretofore expended as a Capital Expenditure; provided, however, that Borrowers
shall pay to the Lender the full amount of the Insurance Proceeds if Borrowers
have not applied such Insurance Proceeds within such twelve month period (each
such payment to the Lender being referred to herein as a "Insurance Proceeds
Payment").
(h) Voluntary Prepayments. Subject to the provisions hereof, including
without limitation the provisions of Section 2.11, the Borrowers may at any time
voluntarily prepay the Loans in whole or in part from time to time upon not less
than the one Business Day's prior notice by 1:00 PM to the Lender with respect
to Base Rate Loans and three Business Days' prior notice by 1:00 PM to the
Lender with respect to Eurodollar Loans; provided, however, that (i) Eurodollar
Loans may be repaid only on the last day of an Interest Period therefor, (ii)
such repayments shall be in minimum amount of $250,000 and (iii) all repayments
of Loans or any portion thereof shall be made together with payment of all
interest accrued on the amount repaid and other amounts due with respect thereto
through the date of such repayment.
(i) Application of Payments.
(i) If no Default then exists hereunder, all Excess Operating Cash Flow
Payments, Sale Proceeds Payments, Company Store Sale Proceeds Payments, Debt
Proceeds Payments, Equity Proceeds Payments and Insurance Proceeds Payments
shall be applied to principal of the Term Loan in inverse order of maturity and
then (after all principal of the Term Loan has been paid in full), to
automatically and permanently reduce the Revolver Commitment.
(ii) Except as set forth in subparagraph (i) above (or if a Default exists
in which case all payments and prepayments may be applied as the Lender elects),
all payments and repayments made pursuant to the terms hereof shall be applied
(A) first to all (if any) amounts (except principal, interest and fees) due and
payable under this Agreement at such time, (B) then to payment of all fees due
and payable at such time, (C) then to interest due and payable at such time, (D)
then to accrued interest, (E) then to principal of Base Rate Loans, (F) then to
principal of Eurodollar Loans, and (G) finally, to all other Obligations.
2.8 Letters of Credit.
(a) Letter of Credit Commitment. Subject to the execution and delivery by
the Borrowers of a letter of credit application and any other related documents
on the Lender's customary forms in effect from time to time (collectively, the
"Letter of Credit Documents") and in reliance upon the representations and
warranties of the Borrowers contained herein, the Lender agrees from time to
time until the Expiration Date to issue, extend and renew for the account of any
Borrower one or more standby letters of credit (each individually, a "Letter of
Credit"), in such form as may be requested from time to time by the Borrowers
and agreed to by the Lender. In the event and to the extent that any provision
of any Letter of Credit Document shall be inconsistent with any provision of
this Agreement, then the provisions of this Agreement shall govern.
<PAGE>
(b) Conditions to Issuance of Letters of Credit; Etc.
(i) The obligation of the Lender to issue, extend or renew any Letter of
Credit hereunder shall be subject to the conditions for Loans set forth in
Section 3 and to the following conditions:
(A) Such Letter of Credit shall provide for payment in U.S. Dollars and
shall expire by its terms no later than the earlier to occur of (A) 30 days
prior to the Expiration Date and (b) one year from the date of its issuance;
(B) After giving effect to such issuance, extension or renewal, (1) the
aggregate outstanding principal amount of the Revolving Loans shall not exceed
the Available Revolver Commitment and (2) the sums of the aggregate LC Exposure
Amount shall not exceed $1,000,000;
(C) The form and terms of each Letter of Credit and the related Letter of
Credit Documents shall be acceptable to the Lender; and
(D) Each Letter of Credit shall be issued to support obligations of one or
more of the Borrowers incurred in the ordinary course of its or their business.
(ii) Whenever the Borrowers desire to have a Letter of Credit issued,
extended or renewed, the Borrowers will furnish to the Lender a written
application therefor which shall (A) be received by the Lender not less than
three Business Days prior to the proposed date of issuance, extension or renewal
and (B) specify (1) such proposed date (which must be a Business Day), (2) the
expiration date of such Letter of Credit, (3) the name and address of the
beneficiary of the Letter of Credit, (4) the amount of such Letter of Credit,
and (5) the purpose and proposed form of such Letter of Credit. Each Letter of
Credit shall be subject to the International Standby Practices (1998) and, to
the extent not inconsistent therewith, the laws of the State of New York.
(c) LC Draw Obligations of the Borrowers. In order to induce the Lender to
issue, extend and renew each Letter of Credit, the Borrowers hereby jointly and
severally agree to reimburse or pay to the Lender:
(i) except as otherwise expressly provided in paragraph (ii) below, on the
Business Day immediately following each date that any draft presented under such
Letter of Credit is honored by the Lender or the Lender otherwise makes a
payment with respect thereto, as indicated in the notice thereof from the Lender
to the Borrowers (A) the amount paid by the Lender under or with respect to such
Letter of Credit, and (B) the amount of any taxes, fees, charges or other
reasonable costs and expenses whatsoever incurred by the Lender in connection
with any payment made by the Lender under or with respect to such Letter of
Credit; and
(ii) upon the termination or reduction of the Revolver Commitment, or the
acceleration of the LC Draw Obligations in accordance with Section 8.1, an
amount equal to the LC Exposure Amount (or with respect to a reduction, the
excess thereof over the reduced Revolver Commitment), which amount shall be held
by the Lender as cash collateral for all LC Draw Obligations.
Interest shall accrue on any and all amounts remaining unpaid by the
Borrowers under this Section 2.8 from the date of any draw under a Letter of
Credit until the Business Day immediately following such draw at the rate
specified in Section 2.3 for principal on the Revolving Loans and, thereafter,
until payment in full (whether before or after judgment) at the default rate set
forth in Section 2.3, and shall be payable to the Lender on demand.
(d) Revolving Loans to Satisfy LC Draw Obligations. The Borrowers may elect
to satisfy any LC Draw Obligation arising under paragraph (c)(i) of this Section
by borrowing a Base Rate Loan in the amount thereof and applying the proceeds
thereto, provided that (i) all conditions to such Revolving Loan set forth in
Section 3 shall have been satisfied in full and (ii) after giving effect to such
Revolving Loan and the application of proceeds thereof, the Revolving Credit
Outstandings will not exceed the Revolver Commitment.
(e) Borrowers' Obligations Absolute. The Borrowers assume all risks in
connection with the Letters of Credit. The Borrowers' obligations under this
Section 2.8 shall be absolute and unconditional under any and all circumstances
and irrespective of the occurrence of any Default or any condition precedent
whatsoever or any setoff, counterclaim or defense to payment which any Borrower
may have or have had against the Lender or any beneficiary of a Letter of
Credit. The Borrowers also agree that the Lender shall not be responsible for,
and the Borrowers' LC Draw Obligations shall not be affected by, among other
things, (i) the validity, genuineness or enforceability of documents or of any
endorsements thereon, even if such documents should in fact prove to be in any
or all respects invalid, insufficient (provided all such documents conform on
their face), fraudulent or forged, or (ii) any dispute between or among any
Borrower, any of its Subsidiaries, the beneficiary of any Letter of Credit or
any financing institution or other party to which any Letter of Credit may be
transferred or any claims or defenses whatsoever of any Borrower or any of its
Subsidiaries against the beneficiary of any Letter of Credit or any such
transferee. The Lender shall not be liable for any error, omission, interruption
or delay in transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit. The Borrowers agree that
any action taken or omitted to be taken by the Lender under or in connection
with each Letter of Credit and the related drafts and documents, if done in good
faith without gross negligence or willful misconduct, shall be binding upon the
Borrowers and shall not subject the Lender to any liability.
(f) Reliance by Lender. The Lender shall be entitled to rely, and shall be
fully protected in relying upon, any Letter of Credit, draft, writing,
resolution, notice, consent, certificate, affidavit, letter, telegram, telecopy,
telex or teletype message, statement, order or other document believed by it to
be genuine and correct and to have been signed, sent or made by the proper
Person and upon advice and statements of legal counsel, independent accountants
and other experts selected by the Lender.
(g) Letter of Credit Fee. In order to induce the Lender to issue, extend
and renew each Letter of Credit, the Borrowers hereby agree jointly and
severally to pay to the Lender quarterly in arrears on the Quarterly Dates with
respect to each such issuance, extension and renewal a fee (in each case, a
"Letter of Credit Fee") on the stated amount of such Letter of Credit at a rate
per annum equal to the Applicable Margin for Eurodollar Loans as of such
Quarterly Date. In addition, the Borrowers shall pay to the Lender any and all
standard charges customarily made by the Lender in connection with such
issuance, extension or renewal.
2.9 Changed Circumstances.
(a) Eurodollar Loans. In the event that:
(i) on any date on which the Adjusted Eurodollar Rate would otherwise be
set, the Lender shall have determined in good faith (which determination shall
be final and conclusive) that adequate and fair means do not exist for
ascertaining the Interbank Offered Rate, or
(ii) at any time the Lender shall have determined in good faith (which
determination shall be final and conclusive) that:
(A) the making or continuation of, or conversion of any Base Rate Loan to,
a Eurodollar Loan has been made impracticable or unlawful by (1) the occurrence
of a contingency that materially and adversely affects the interbank Eurodollar
market or (2) compliance by the Lender in good faith with any applicable law or
governmental regulation, guideline or order or interpretation or change thereof
by any governmental authority charged with the interpretation or administration
thereof or with any request or directive of any such governmental authority
(whether or not having the force of law); or
(B) the Adjusted Eurodollar Rate shall no longer represent the effective
cost to the Lender for U.S. dollar deposits in the interbank Eurodollar market
for deposits in which they regularly participate; then, and in any such event,
the Lender shall notify the Borrowers. Until the Lender notifies the Borrowers
that the circumstances giving rise to such notice no longer apply, the
obligation of the Lender to allow selection by the Borrowers of Eurodollar Loans
shall be suspended. If at the time the Lender so notifies the Borrowers, the
Borrowers have previously given the Lender a Loan Request or Interest Rate
Option Notice with respect to one or more Eurodollar Loans but such Loan or
Loans have not yet gone into effect, such notification by the Borrowers shall be
deemed to be void and the Loan or Loans shall bear interest at the rate then
applicable to Base Rate Loans. Upon such date as the Lender shall specify in
such notice (which shall be the last day of applicable Interest Period, if an
earlier date is not required), the Borrowers shall be deemed to have converted
all outstanding Eurodollar Loans to Base Rate Loans in accordance with this
Agreement. In the event that the Lender determines at any time following the
giving of notice pursuant to this clause that it may lawfully make Eurodollar
Loans, the Lender shall give notice thereof to the Borrowers of such
determination, whereupon the Borrowers' right to request, and the Lender's
obligation to make, Eurodollar Loans shall be restored.
(b) All Credit Extensions. After the date hereof, in case any change in any
existing or any new law, regulation, treaty or official directive or the
interpretation or application thereof by any court or by any governmental
authority charged with the administration thereof or the compliance with any
guideline or request of any central bank or other governmental authority
(whether or not having the force of law):
(i) subject to (c) below, subjects the Lender to any tax with respect to
payments of principal or interest or any other amounts payable hereunder by any
Borrower or otherwise with respect to the transactions contemplated hereby
(except for taxes on the overall net income of such Persons imposed by the
United States of America or any political subdivision thereof), or
(ii) imposes, modifies or deems applicable any deposit insurance, reserve,
special deposit or similar requirement against assets held by, or deposits in or
for the account of, or Loans or Letters of Credit issued by the Lender (other
than such requirements as are already included in the determination of the
Adjusted Eurodollar Rate), or
(iii) imposes upon the Lender any other condition with respect to the Loans
or the Letters of Credit or otherwise with respect to its performance under this
Agreement, and the result of any of the foregoing is to increase the cost to the
Lender, reduce the income receivable by the Lender or impose any expense with
respect to any Loan or Letter of Credit (in each case without duplication of
amounts described in Section 2.10), the Lender shall so notify the Borrowers.
The Borrowers agree to pay to the Lender the amount of such increase in cost,
reduction in income or additional expense as and when such cost, reduction or
expense is incurred or determined, upon demand after presentation by the Lender
of a statement in the amount and setting forth the Lender's calculation thereof,
which statement shall be deemed true and correct absent manifest error.
(c) All payments made by the Borrowers under the Loan Documents shall be
made free and clear of, and without deduction or withholding for or on account
of, any present or future income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, now or hereafter imposed, levied,
collected, withheld or assessed by any governmental authority, excluding net
income taxes and franchise taxes (imposed in lieu of net income taxes) imposed
on the Lender as a result of a present or former connection between the Lender
and the jurisdiction of the governmental authority imposing such tax or any
political subdivision or taxing authority thereof or therein (other than any
such connection arising solely from the Lender having executed, delivered or
performed its obligations or received a payment under, or enforced, any Loan
Document). If any such non-excluded taxes, levies, imposts, duties, charges,
fees, deductions or withholdings ("Non-Excluded Taxes") or other stamp or
documentary taxes or excise or property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement or any other Loan Document
("Other Amounts") are required to be withheld from any amounts payable to the
Lender hereunder, the amounts so payable to the Lender shall be increased to the
extent necessary to yield to the Lender (after payment of all Non-Excluded Taxes
and Other Amounts) interest or any such other amounts payable hereunder at the
rates or in the amounts specified in this Agreement or such other Loan Document,
provided, however, that the Borrowers shall not be required to increase any such
amounts payable to the Lender with respect to any Non-Excluded Taxes (i) that
are attributable to the Lender's failure to comply with the requirements of
paragraph (e) or (f) of this Section or (ii) that are United States withholding
taxes imposed on amounts payable to the Lender at the time the Lender becomes a
party to this Agreement, except to the extent that the Lender's assignor (if
any) was entitled, at the time of assignment, to receive additional amounts from
the Borrowers with respect to such Non-Excluded Taxes pursuant to this Section.
In addition, the Borrowers shall pay any Other Amounts to the relevant
governmental authority in accordance with applicable law.
(d) Whenever any Non-Excluded Taxes or Other Amounts are payable by the
Borrowers, as promptly as possible thereafter the Borrowers shall send to the
Lender a certified copy of an original official receipt received by the
Borrowers showing payment thereof. If the Borrowers fail to pay any Non-Excluded
Taxes or Other Amounts when due to the appropriate taxing authority or fails to
remit to the Lender the required receipts or other required documentary
evidence, the Borrowers hereby indemnify the Lender for any incremental taxes,
interest or penalties that may become payable by the Lender as a result of any
such failure.
(e) The Lender or any participant or successor or assignee of the Lender
that is not a citizen or resident of the United States of America, a
corporation, partnership or other entity created or organized in or under the
laws of the United States of America (or any jurisdiction thereof), or any
estate or trust that is subject to federal income taxation regardless of the
source of its income (a "Non-U.S. Lender") shall deliver to the Borrowers (or,
in the case of a participant, to the Lender) two copies of either U.S. Internal
Revenue Service Form 1001 or Form 4224, or, in the case of a Non-U.S. Lender
claiming exemption from U.S. federal withholding tax under Section 871(h) or 88
1 (c) of the Code with respect to payments of "portfolio interest", a statement
substantially in the form of Exhibit 2.9 (an "Exemption Certificate") and a Form
W-8, or any subsequent versions thereof or successors thereto, properly
completed and duly executed by such Non-U.S. Lender claiming complete exemption
from, or a reduced rate of, U.S. federal withholding tax on all payments by the
Borrowers under this Agreement and the other Loan Documents. Such forms shall be
delivered by each Non-U.S. Lender on or before the date it becomes a party to
this Agreement (or, in the case of any participant, on or before the date such
participant purchases the related participation). In addition, each Non-U.S.
Lender shall deliver such forms promptly upon the obsolescence or invalidity of
any form previously delivered by such Non-U.S. Lender. Each Non-U.S. Lender
shall promptly notify the Borrowers at any time it determines that it is no
longer in a position to provide any previously delivered certificate to the
Borrowers (or any other form of certification adopted by the U.S. taxing
authorities for such purpose). Notwithstanding any other provision of this
Section, a Non-U.S. Lender shall not be required to deliver any form pursuant to
this Section that such Non-U.S. Lender is not legally able to deliver.
(f) The Lender or any participant or successor or assignee of the Lender
that is entitled to an exemption from or reduction of non-U.S. withholding tax
under the law of the jurisdiction in which any Borrower is located, or any
treaty to which such jurisdiction is a party, with respect to payments under
this Agreement shall deliver to the Borrowers (with a copy to the Lender), at
the time or times prescribed by applicable law or reasonably requested by the
Borrowers, such properly completed and executed documentation prescribed by
applicable law as will permit such payments to be made without withholding or at
a reduced rate, provided that such Person is legally entitled to complete,
execute and deliver such documentation and in such Person's judgment such
completion, execution or submission would not materially prejudice its legal
position.
(g) If the Lender determines that it has recovered or used as a credit any
amount withheld on its account pursuant to this section, it shall reimburse the
Borrowers to the extent of such amount so determined to have been recovered or
used as a credit, provided that nothing contained in this paragraph (g) shall
require the Lender to make available its tax returns (or any other information
relating to its taxes which it deems to be confidential).
(h) The agreements in this Section shall survive the termination of this
Agreement and the payment of the Obligations.
2.10 Capital Adequacy. The Lender shall notify the Borrowers if, after the
date hereof, the Lender determines that (a) the adoption of or change in any
law, rule, regulation or guideline regarding capital requirements for banks or
bank holding companies, or any change in the interpretation or application
thereof by any governmental authority charged with the administration thereof,
or (b) compliance by any such Person or its parent bank holding company with any
guideline, request or directive of any such entity regarding capital adequacy
(whether or not having the force of law), has the effect of reducing the return
on such Person's or such holding company's capital as a consequence of such
Person's commitment to make Loans or issue Letters of Credit hereunder to a
level below that which such Person or such holding company could have achieved
but for such adoption, change or compliance (taking into consideration such
Person's or such holding company's then existing policies with respect to
capital adequacy and assuming the full utilization of such entity's capital and
excluding any such reduction resulting from a decline in such Person's capital
or capital ratios) by any amount reasonably deemed by such Person to be
material. The Borrowers agree to pay to the Lender the amount of such reduction
of return of capital within 30 days after presentation by the Lender of a
statement in the amount and setting forth the Lender's calculation thereof,
which statement shall be deemed true and correct absent manifest error. In
determining such amount, the Lender may use any reasonable averaging and
attribution methods used in similar circumstances.
2.11 Payments Before End of Eurodollar Period. If any Borrower for any
reason makes any payment or prepayment (whether voluntary or mandatory) of
principal with respect to any Eurodollar Loan on any day other than the last day
of the applicable Interest Period, or fails to borrow, continue or convert to a
Eurodollar Loan after giving a Loan Request or Interest Rate Option Notice
pursuant to Section 2.4 or 2.5, or if any Eurodollar Loan is accelerated
pursuant to Section 8.1, the Borrowers shall pay to the Lender a makewhole
payment pursuant to the following formula:
L = (R - T) x P x D
--------------
360
L = amount payable to the Lender
R = interest rate on such Loan
T = effective interest rate per annum at which any readily marketable bond
or other obligation of the United States, selected at the Lender's sole
discretion, maturing on or near the last day of the then applicable Interest
Period and in approximately the same amount as such Loan can be purchased by the
Lender on the day of such payment of principal or failure to borrow, continue or
convert P = the amount of principal prepaid or the amount of the requested Loan
D = the number of days remaining in the Interest Period as of the date of such
payment or the number of days of the requested Interest Period
The Borrowers shall pay such amount upon demand upon presentation by the
Lender of a statement setting forth the amount and the Lender's calculation
thereof pursuant hereto, which statement shall be deemed true and correct absent
manifest error.
2.12 Security. The Obligations, whether under this Agreement, the Notes,
the Fee Letter, the Letter of Credit Documents, the other Loan Documents or
otherwise, shall be secured at all times by:
(a) a first priority perfected security interest in all presently owned and
hereafter acquired tangible and intangible personal property and fixtures of the
Borrowers and their Subsidiaries (including without limitation all Intercompany
Notes and trademarks and service marks and licenses), subject only to Permitted
Encumbrances, together with any landlord waivers with respect to the locations
of such personal property and fixtures (provided that landlord waivers will not
be required for individual Stores) and, after an Event of Default has been
declared by the Lender, lock box or agency account agreements with respect to
cash receipts; and
(b) except as set forth in the next succeeding paragraph, a first priority
perfected pledge of all of the issued and outstanding shares of Capital Stock of
all of the Borrowers other than the Parent.
(c) The Lender acknowledges and agrees that as of the date hereof the
Parent has pledged _________ shares of Capital Stock of Willoughby's to
______________ and _____________ (collectively, the "Willoughby's Sellers") as
security for the promissory notes described on Schedule 7.1 (collectively, the
"Willoughby's Seller Note"). On or before October 20, 1999, the Parent shall
cause the Lender to have a first priority perfected pledge of all of the issued
and outstanding shares of Capital Stock of Willoughby's.
The Borrowers agree to take such actions (and to cause their Subsidiaries,
if any, to take such actions) as the Lender may reasonably request from time to
time in order to cause the Lender to be secured at all times as described in
this Section.
2.13 Use of Proceeds. Each of the Borrowers hereby covenants, warrants
and represents that proceeds of the Term Loan and the Revolving Loans shall be
used for the payment of the purchase price in respect of the Chesapeake
Acquisition, closing costs, the repayment of certain outstanding indebtedness as
disclosed to the Lender and as described on Schedule 2.13 hereto, working
capital and general corporate purposes (excluding Acquisitions). Attached as
Schedule 2.13 hereto is the Borrowers' current projection, as of the date
hereof, of its sources and uses of funds.
2.14 Time and Method of Payments. All payments of principal, interest, fees
and other amounts (including indemnities) payable by the Borrowers hereunder
shall be made in U.S. Dollars, in immediately available funds, without
deduction, setoff or counterclaim, to the Lender at its principal office on the
date on which such payment shall become due; provided, however, that any payment
not received by the Lender by 3:00 PM, (Boston time) on the date made shall be
deemed received on the next Business Day (but no Default shall be deemed to have
occurred as a result thereof under Section 8.1 if payment is received after 3:00
PM (Boston time) but prior to 5:00 PM (Boston time) on the date on which such
payment shall become due). The Lender may, but shall not be obligated to, debit
the amount of any such payment which is not made by such time to any deposit
account of any of the Borrowers with the Lender. Except as otherwise provided in
the definition of the term "Interest Period" with respect to the Eurodollar
Loans, if any payment of principal or interest becomes due on a day other than a
Business Day, such payment may be made on the next succeeding Business Day, and
such extension shall be included in computing interest in connection with such
payment. All payments hereunder and under the Notes shall be made without setoff
or counterclaim.
SECTION 3. CONDITIONS OF CREDIT EXTENSIONS.
3.1 Conditions to Initial Credit Extension. The obligations of the Lender
to make the initial Credit Extensions hereunder are subject to the fulfillment
of the following conditions precedent:
(a) The Lender and its counsel shall have completed their due diligence
review with respect to the Chesapeake Acquisition and shall be satisfied with
the results of such review.
(b) Receipt by the Lender of the following documents, certificates and
opinions in form and substance satisfactory to the Lender, duly executed and
delivered as follows:
(i) This Agreement, executed and delivered by all Borrowers;
(ii) The Notes executed and delivered by all Borrowers;
(iii) The Security Documents executed and delivered by all Borrowers and
such stock certificates, stock powers, assignments, consents, landlord waivers,
UCC financing statements and other instruments and documents as the Lender shall
deem necessary to satisfy the requirements of Section 2.12, provided the
Borrowers need use only best efforts in obtaining such landlord waivers;
(iv) An officer's certificate executed by the President of each of the
Borrowers in the form provided by the Lender, including all attachments thereto;
(v) Certificates of insurance or insurance binders evidencing compliance
with Section 6.3 (including the required lender's loss payable endorsements);
(vi) The Opening Balance Sheet, accompanied by a certificate from the Chief
Financial Officer of the Parent demonstrating compliance by the Companies on a
pro forma basis with Sections 5.1-5.6 hereof.
(vii) A favorable legal opinion satisfactory to the Lender, addressed to
the Lender and its counsel, from Ruskin, Moscou, Evans & Faltischek, P.C.,
general counsel to the Borrowers and their Subsidiaries; and
(viii) A favorable legal opinion satisfactory to the Lender, addressed to
the Lender and its counsel, from Buchanan Ingersoll Professional Corporation and
Lerner, David, Littenberg, Krumholz & Mentlik, trademark counsel to the
Borrowers and their Subsidiaries.
(c) The Borrowers shall have paid the initial fee required by the Fee
Letter and the other fees required to be paid as of the date of such Credit
Extension and all reasonable fees and expenses of the Lender's counsel through
the date of such Credit Extension.
(d) The Borrowers shall have provided the Lender with such payoff letters,
payment instructions and other additional instruments, certificates, opinions
and other documents as the Lender or its counsel shall reasonably request.
(e) The Lender shall have received evidence that (i) the principal of and
interest on, and all other amounts owing in respect of, Consolidated Funded
Indebtedness indicated on Schedule 2.13, if any, which is to be repaid on the
date of the initial Credit Extensions shall have been (or shall simultaneously
be) paid in full in cash, (ii) any commitments to extend credit under the
agreements related to such Consolidated Funded Indebtedness have been terminated
or canceled and (iii) all Guarantees in respect of, and liens securing, any such
Consolidated Funded Indebtedness have been released (or arrangements for such
releases have been made to the reasonable satisfaction to the Lender), which
requirement shall include receipt by the Lender of all such executed payoff
letters, UCC Termination Statements and other instruments as the Lender shall
have requested to release and terminate of record any Encumbrances.
(f) The closing of the Chesapeake Acquisition (including all conditions
precedent thereto) shall have been consummated in accordance with the terms of
the Acquisition Agreement (except for that portion of the purchase price being
repaid with proceeds of the Term Loan) and the Parent shall have furnished to
the Lender a certificate, signed by the President or the Chief Financial Officer
of the Parent, to the effect that the closing of the Chesapeake Acquisition has
occurred under the Acquisition Agreement.
(g) All governmental or other third party approvals necessary or advisable
for this Agreement, the Chesapeake Acquisition or any transactions contemplated
thereby shall have been obtained and be in full force and effect (including
without limitation any consent of the shareholders of the Parent and Seller, the
FTC and the U.S. Department of Justice).
(h) The Lender shall be satisfied that no litigation or other legal
proceeding exists which could reasonably be expected to result in a Material
Adverse Effect or which restrains or attempts to restrain or undo the
consummation of the Chesapeake Acquisition or any portion thereof.
(i) All corporate, partnership and other proceedings, and all documents,
instruments and other legal, diligence and financial matters in connection with
the transactions contemplated by the Loan Documents shall be reasonably
satisfactory in form and substance to the Lender and its counsel.
3.2 Conditions to All Credit Extensions. The obligation of the Lender to
make any Credit Extension (including the initial Credit Extension) is also
subject to the following additional conditions:
(a) All representations and warranties contained in this Agreement or
otherwise made in writing by or on behalf of any of the Borrowers or any of
their Subsidiaries in connection with the transactions contemplated hereby shall
be true and correct in all material respects at the time of each such Credit
Extension (except to the extent such representations and warranties were
expressly made only as of a specific date and except to the extent affected by
transactions occurring after the date hereof and permitted hereunder), with and
without giving effect to the Credit Extension at such time and the application
of the proceeds thereof.
(b) At the time of each such Credit Extension (i) the Borrowers and their
Subsidiaries shall have performed and complied with all covenants required in
this Agreement to be performed or complied with by it prior to the making of
such Credit Extension, (ii) no Default shall have occurred and be continuing or
would result from such Credit Extension, and (iii) no event or condition shall
have occurred which could reasonably be likely to have a Material Adverse
Effect.
(c) As to any such Credit Extension, the Lender shall have received a
properly completed Loan Request or Letter of Credit Documents, as appropriate.
(d) The Lender shall have received such other supporting documents and
certificates as it may reasonably request.
The Borrowers' request for the initial Credit Extensions shall be deemed to
constitute the Borrowers' representation and warranty that all of the foregoing
conditions in Sections 3.1 and 3.2 have been satisfied in full. Each request for
a Credit Extension (other than the initial Credit Extensions) shall be deemed to
constitute the Borrowers' representation and warranty that all of the foregoing
conditions in Section 3.2 have been satisfied in full.
SECTION 4. REPRESENTATIONS AND WARRANTIES. In order to induce the Lender to
enter into this Agreement and make the Credit Extensions hereunder, each of the
Borrowers hereby confirms the representations and warranties set forth in the
Security Documents (which are incorporated by reference herein) and, further,
represents and warrants (all of which representations and warranties assume the
making of the initial Credit Extensions hereunder) as follows:
4.1 Organization and Qualification. Each of the Companies (a) is a
corporation duly organized, validly existing and in good standing under the laws
of its state of formation (as designated on Schedule 4.1); (b) has all requisite
corporate power and authority to own its property and conduct its business as
now conducted and as presently contemplated; and (c) is duly qualified and in
good standing in each jurisdiction where the nature of its properties or its
business requires such qualification, as specified in Schedule 4.1, except to
the extent that the failure to be so qualified could not reasonably be expected
to have a Material Adverse Effect. Schedule 4.1 also sets forth each of the
Organizational Documents to which any Company is a party.
4.2 Corporate Authority. The execution, delivery and performance of each of
the Loan Documents and the Acquisition Agreement and each of the documents
contemplated thereby (together with the Loan Documents, the "Transaction
Documents") and the transactions contemplated thereby (including without
limitation the granting of security interests thereunder in favor of the Lender)
are within the corporate authority of each of the Companies, have been
authorized by all necessary corporate proceedings on the part of each of the
Companies, and do not and will not contravene any provision of law (including
without limitation the rules and provision of law or the charter documents or
by-laws (collectively, "Organizational Documents")) of any of the Companies, or
contravene any provisions of, or constitute a Default hereunder or a default
under any other material agreement (including any Lease, any shareholder
agreement, any license agreement or any supplier contracts), instrument,
judgment, order, decree, permit, license or undertaking binding upon or
applicable to any of the Companies or any of its properties, or result in the
creation, other than in favor of the Lender, of any Encumbrance upon any of the
properties of any of the Companies.
4.3 Valid Obligations. Each of the Transaction Documents and all of its
terms and provisions (including the security interests granted thereunder to the
Lender) are legal, valid and binding obligations of each of the Companies who
are named as parties thereto, enforceable in accordance with its respective
terms.
4.4 Approvals. The execution, delivery and performance of the Transaction
Documents and the transactions contemplated thereby do not require any approval
or consent of, or filing or registration with, any governmental or other agency
or authority or any other Person, except as disclosed on Schedule 4.4 and all of
such approvals or consents and filings or registrations have been obtained or
completed, as applicable, as of the date hereof to the extent material to the
business of any of the Companies.
4.5 Title to Properties; Absence of Liens. Schedule 4.5 (as updated from
time to time as required hereunder) lists all of the Stores of each of the
Companies, including the owner thereof, the address thereof, and whether such
Store is a Company Store or a Franchised Store. Except as set forth in Schedule
4.5 (as updated from time to time as required hereunder), as of the date of this
Agreement and after giving effect to the application of the proceeds of the
Loans as provided in Section 2.13, or as of the date of the latest quarterly
financial statements as required under Section 6.1, as applicable, each of the
Companies has good and marketable title to all of its material properties of
every name and nature now purported to be owned by it, including without
limitation all material assets of the Company Stores listed on Schedule 4.5 (as
updated from time to time as required hereunder), all rights under each of the
Franchise Agreements to which any Company is a party (including without
limitation all rights to development and royalty payments thereunder), the
Collateral and the properties reflected in the Initial Financial Statements, in
each case free from all Encumbrances whatsoever except for Permitted
Encumbrances.
4.6 Licenses, Patents, Trademarks and Intellectual Property. Except as
otherwise described in Schedule 4.6, each of the Companies has all necessary
permits, approvals, authorizations, consents, license (including liquor
licenses), franchises, registrations, patents, trademarks, trade names and
copyrights, recipes and other rights and privileges to allow it to own and
operate its respective business and to operate or franchise, as applicable, the
Stores listed on Schedule 4.5 (as updated from time to time as required
hereunder) without any violation of law or the rights of others. All trademarks,
service marks, trade names, patents and patent applications in which any Company
has an ownership or licensee interest, and all United States, state and foreign
registrations thereof and applications therefor in the name of any Company, are
listed on Schedule 4.6 (as updated from time to time as required hereunder), and
the Parent is and will at all times hereafter be the owner thereof, free of all
Encumbrances except in favor of the Lender. No interest in any of such
intellectual property has been licensed or sublicensed to any other Person
except to Franchisees pursuant to the Franchise Agreements.
4.7 Compliance with Laws and Agreements. No Company is in violation of any
material provision of its Organizational Documents and no Company is in
violation of any material provision of any material indenture, agreement or
instrument to which it is a party or by which it is bound (including without
limitation any material lease) or of any provision of law (including without
limitation, ERISA, Environmental Laws, SEC and FTC Laws, and franchising laws),
the violation of which could reasonably be expected to have a Material Adverse
Effect or any order, judgment or decree of any court or other agency of
government. Without limiting the scope of the foregoing, each Company is in
compliance in all material respects with all federal and state laws and
regulations, the violation of which could reasonably be expected to have a
Material Adverse Effect. To Borrowers' knowledge, third parties to any material
agreements are not in violation of any material provision thereof to the extent
that such violations in the aggregate could reasonably be expected to result in
a Material Adverse Effect.
4.8 Material Agreements. As of the date hereof, each of the material
agreements to which any Company is a party is in full force and effect and
constitutes the legally valid and binding obligation of the Company identified
with it thereon and, to Borrowers' knowledge, the other parties thereto,
enforceable against each of them in accordance with its respective terms. None
of the Franchise Agreements under which any Company is a franchisor prohibit the
granting of a security interest by such Company therein to the Lender, including
without limitation a security interest in all development fees, royalties and
other amounts payable thereunder.
4.9 Environmental Matters. Except as specified in Schedule 4.9:
(a) Each Company has obtained all material permits, licenses and other
authorizations which are required under all Environmental Laws, except to the
extent failure to have any such permit, license or authorization could not
reasonably be likely to have a Material Adverse Effect. To the Borrowers'
knowledge, each Company is in compliance with the terms and conditions of all
such permits, licenses and authorizations, and is also in material compliance
with all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in any applicable
Environmental Law or in any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder, except to the extent failure to comply would not have a Material
Adverse Effect.
(b) No notice, notification, demand, request for information, citation,
summons or order has been issued, no complaint has been filed, no penalty has
been assessed and to the Borrowers' knowledge, no investigation or review is
pending or threatened by any governmental or other entity with respect to any
alleged failure by any Company to have any material permit, license or
authorization required in connection with the conduct of its business or with
respect to any Environmental Laws, including, without limitation, Environmental
Laws relating to the generation, treatment, storage, recycling, transportation,
disposal or release of any Hazardous Materials, except to the extent that such
notice, complaint, penalty or investigation did not result in the remediation of
any property costing in excess of $250,000 in the aggregate in each fiscal year
prior to the date of this Agreement and, for any periods after such date, except
for matters that individually and in the aggregate could not reasonably be
expected to have a Material Adverse Effect.
(c) To the Borrowers' knowledge no material oral or written notification of
a release of a Hazardous Material has been filed by or on behalf of any Company
and no property now or previously owned, leased or used by any Company is listed
or proposed for listing on the National Priorities List under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, or
on any similar state list of sites requiring investigation or clean-up.
(d) To the Borrowers' knowledge there are no Encumbrances arising under or
pursuant to any Environmental Laws on any of the material real properties owned,
leased or used by any Company, and no governmental actions have been taken or
are in process which could subject any of such properties to any Encumbrances
or, as a result of which any Company would be required to place any notice or
restriction relating to the presence of Hazardous Materials at any property
owned by it or in any deed to such property.
(e) To the Borrowers' knowledge no Company has (i) engaged in or permitted
any operations or activities upon or any use or occupancy of any property owned,
leased or used by it, or any portion thereof, for the purpose of or in any way
involving the handling, manufacture, treatment, storage, use generation,
release, discharge, refining, dumping or disposal (whether legal or illegal,
accidental or intentional) of any Hazardous Materials on, under, in or about
such property, except to the extent commonly used in day-to-day operations of
such property and in such case only in compliance with all Environmental Laws,
or (ii) transported any Hazardous Materials to, from or across such property
except to the extent commonly used in day-to-day operations of such property
and, in such case, in compliance with, all Environmental Laws; nor to the
knowledge of any of the Borrowers have any Hazardous Materials migrated from
other properties upon, about or beneath such property, nor are any Hazardous
Materials presently constructed, deposited, stored or otherwise located on,
under, in or about such property except to the extent commonly used in
day-to-day operations, and, in such case, in compliance with, all Environmental
Laws.
4.10 Compliance with ERISA. Each of the Companies and each member of the
Controlled Group have fulfilled their obligations under the minimum funding
standards of ERISA and the Code with respect to each Plan and are in compliance
in all material respects with the applicable provisions of ERISA and the Code,
and have not incurred any material liability to the PBGC or a Plan under Title
IV of ERISA; and no "prohibited transaction" or "reportable event" (as such
terms are defined in ERISA and other than reportable events as to which the 30
day notice period is waived) has occurred with respect to any Plan.
4.11 Financial Statements. (a) The Parent has furnished to the Lender (i)
its consolidated audited balance sheet as of December 27, 1998 audited by the
Accountants and its related consolidated audited statements of operations and
cash flow for the fiscal year then ended, and related consolidating financial
statement, and (ii) its management-prepared consolidated and consolidating
balance sheet as of June 27, 1999 and related statements of operations and cash
flows for the six-month period then ended (collectively, the "Initial Financial
Statements"). Such Initial Financial Statements were prepared in accordance with
GAAP and as to such fiscal year statements audited by the Accountants. Such
Initial Financial Statements fairly present the financial position of the
respective Companies as at such dates and the results of operations for such
periods covered thereby.
(b) The Parent has furnished to the Lender the Parent's estimated balance
sheet as of the date hereof (the "Opening Balance Sheet"), showing the Parent's
pro forma financial condition based on reasonable good faith estimates after the
consummation of the Chesapeake Acquisition. The Opening Balance Sheet fairly
presents the pro forma financial position of the Parent at such date.
(c) The Borrowers have reviewed the projections for the future results of
operations of the Companies dated May 1999 for the period commencing January 1,
1999 and ending December 31, 2003 (the "Projections"), after giving effect to
the Chesapeake Acquisition, and the Borrowers hereby certify to the Lender that
the Projections are based upon good faith estimates and assumptions believed by
management of the Parent to be reasonable at the time made, it being recognized
by the Lender that such financial information as it relates to future events is
not to be viewed as fact and that actual results during the periods covered
thereby may differ from the projected results set forth therein by a material
amount.
(d) Except as reflected in the Initial Financial Statements and the SEC
Reports, as of the date hereof none of the Companies has any material contingent
obligations, liabilities for taxes or unusual forward or long-term commitments.
Since the effective date of the latest audited Initial Financial Statements,
there have been no changes in the assets, liabilities, financial condition,
business or prospects of any Company, the effect of which has, individually or
in the aggregate, could reasonably be likely to have a Material Adverse Effect.
(e) The Parent has also furnished to the Lender the Seller's (i) statement
of cash flows for sales and royalties collected, all on a store by store basis,
for the Acquired Assets, for the fiscal years ending December, 1997 and
December, 1998 and for six four week periods ending in June, 1998 and June, 1999
and (ii) other financial information comprising the Financial Statements (as
defined in the Acquisition Agreement) for the Acquired Assets. Such Financial
Statements, to any Borrower's knowledge, solely based on Seller's representation
to the Borrowers, correctly and completely reflect the Seller's books and
records relating to the Acquired Assets, and were represented by Seller to
Borrowers as accurate and complete in all material respects for the periods
indicated.
4.12 Solvency. The Borrowers have assets (both tangible and intangible)
having a fair salable value in excess of the amount required to pay the probable
liability on its respective existing debts (whether matured or unmatured,
liquidated or unliquidated, fixed or contingent); the Borrowers have access to
adequate capital for the conduct of its respective business for the foreseeable
future and the discharge of its debts incurred in connection therewith as such
debts mature; the Borrowers are not Insolvent and, immediately prior to the
consummation of the Term Loan hereunder, the Borrowers were not Insolvent; and
the Borrowers do not intend to or believe that they will collectively incur
debts beyond their ability to pay them at their maturity.
4.13 Taxes. Each of the Companies has filed all federal, state and other
material tax returns required to be filed (or has filed extensions therefor) and
has paid or made adequate provision for the payment of all taxes, assessments
and other such governmental charges due have been fully paid (other than any
taxes the amount or validity of which are currently being contested in good
faith by appropriate proceedings and with respect to which reserves in
conformity with GAAP have been provided for on the books of the Companies). No
Company has executed any waiver that would have the effect of extending the
applicable statute of limitations in respect of tax liabilities (other than any
taxes the amount or validity of which are currently being contested in good
faith by appropriate proceedings and with respect to which reserves in
conformity with GAAP have been provided for on the books of the Companies).
4.14 Litigation. Except as otherwise described in Schedule 4.14, there is
no litigation, proceeding or governmental investigation, administrative or
judicial, pending or, to any of the Borrowers' knowledge, threatened against or
affecting any Company or its properties which could reasonably be expected to
result in a Material Adverse Effect.
4.15 Margin Rules. None of the Borrowers or any of their Subsidiaries is
engaged principally, or as one of its important activities, in the business of
extending credit for the purposes of purchasing or carrying any "margin
security" or "margin stock" ("Margin Stock") as such terms are used in
Regulations U or X (the "Margin Regulations") of the Board of Governors of the
Federal Reserve System. The value of all Margin Stock held by the Borrowers and
their Subsidiaries constitutes less than 25% of the value, as determined in
accordance with the Margin Regulations, of all assets of the Borrowers and their
Subsidiaries.
4.16 Restrictions on the Borrowers. No Company is a party to or bound by
any contract, agreement or instrument, nor subject to any charter or other
corporate restriction, that has or could reasonably be expected to have a
Material Adverse Effect.
4.17 Capitalization. All of the Subsidiaries of each of the Companies are
listed on Schedule 4.17 and a Borrower owns all of the issued and outstanding
Capital Stock thereof as noted thereon. The Borrowers have supplied the Lender
with true and complete copies of their Organizational Documents. Except as
otherwise set forth in Schedule 4.17: (a) no Capital Stock of any Company
carries preemptive rights; (b) there are no outstanding subscriptions, warrants
or options to purchase any Capital Stock of the Parent as of the date hereof or
of any other Company; (c) no Company is obligated to redeem or repurchase any of
its Capital Stock; and (d) there is no other agreement, arrangement or plan
which could directly or indirectly affect the equity structure of any Company.
All Capital Stock of each Subsidiary is validly issued and fully paid and
non-assessable, free of any Encumbrance, except for Encumbrances on the Capital
Stock granted to the Lender and otherwise permitted herein and restrictions on
transfer indicated on the certificates evidencing such Capital Stock pursuant to
applicable Federal or state securities regulations. There are no restrictions
upon the voting rights of any Capital Stock of the Subsidiaries of the Companies
(other than as may be imposed by any state or local governmental authorities).
No Company owns any minority interest in any Person, except as set forth in
Schedule 4.17.
4.18 Full Disclosure. No statement of fact made by or on behalf of any
Company or any Principal in this Agreement or any of the other Loan Documents or
in any certificate or schedule furnished to the Lender pursuant hereto or
thereto in light of all information provided to the Lender, as of the date such
statement, certificate or schedule was so furnished contains any untrue
statement of a material fact or omits, when considered as a whole, to state any
material fact necessary to make statements contained therein or herein not
misleading as of the date such statement, certificate or schedule was so
furnished. As of the date hereof, there is no fact known to any Borrower which
has not been disclosed to the Lender in writing which could reasonably be likely
to have a Material Adverse Effect.
4.19 Investment Company Act. No Company is an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, or a "holding
company," or a "subsidiary company" of a "holding company," or an "affiliate" of
a "holding company," or of a "subsidiary company" of a "holding company," within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
4.20 Labor Disputes; Collective Bargaining Agreements; Employee Grievances.
Except for matters that individually and in the aggregate could not reasonably
be expected to have a Material Adverse Effect (a) there are no collective
bargaining agreements or other organized labor contracts covering any Company or
any Company Store; (b) no union or other labor organization is seeking to
organize, or to be recognized as bargaining representative for, a bargaining
unit of employees of any Company or any Company Store; (c) there is no material
labor dispute pending or threatened against or affecting any Company or any
Company Store; (d) there has not been, during the five year period prior to the
date hereof, any material labor dispute against or affecting any Company or any
Company Store, other than employee grievances arising in the ordinary course of
business which are not, in the aggregate, material; and (e) each of the
Companies and each Company Store has complied with (or corrected in full any
prior noncompliance) and is in compliance with the provisions of the Fair Labor
Standards Act and regulations thereunder.
4.21 Year 2000 Compliance. The Borrowers have (a) reviewed the areas within
their business and operations which could be adversely affected by failure to
become "Year 2000 Compliant" (that is that computer application, imbedded
microchips and other systems used by the Borrowers will be able properly to
recognize and perform date sensitive functions involving certain dates prior to
and any date after December 31, 1999); (b) developed a detailed plan and
timetable to become Year 2000 Compliant in a timely manner; and (c) committed
adequate resources to support its Year 2000 plan. Based on such review and plan,
the Borrowers reasonably believe that they will become Year 2000 Compliant on a
timely basis except to the extent that a failure to do so is not likely to have
a Material Adverse Effect.
SECTION 5. FINANCIAL COVENANTS. Each of the Borrowers covenants and agrees
that, until all Commitments have been terminated, all Letters of Credit have
terminated or expired, and all Obligations have been indefeasibly paid in full
in cash, the Borrowers will not cause or permit:
5.1 Maximum Leverage Ratio. The ratio of Consolidated Funded Indebtedness
of the Companies as of the last day of each Reference Period set forth below to
Consolidated EBITDA for such Reference Period to be greater than the ratio
specified below opposite such Reference Period:
<TABLE>
<CAPTION>
- ----------------------------------------------------------- ---------------------------------------------------------
Reference Period Ending Maximum Leverage Ratio
----------------------- ----------------------
- ----------------------------------------------------------- ---------------------------------------------------------
<S> <C>
12/26/99 and 3/26/00 4.00:1.00
- ----------------------------------------------------------- ---------------------------------------------------------
6/25/00 and 9/24/00 3.00:1.00
- ----------------------------------------------------------- ---------------------------------------------------------
12/24/00, 3/25/01, 6/24/01 and 9/30/01 2.25:1.00
- ----------------------------------------------------------- ---------------------------------------------------------
12/30/01 and all Reference 1.50:1.00
Periods ending thereafter
- ----------------------------------------------------------- ---------------------------------------------------------
</TABLE>
5.2 Minimum Consolidated Cash Flow Ratio. Commencing December 26, 1999, the
ratio of Consolidated Cash Flow for any Reference Period to Consolidated
Financial Obligations for such Reference Period to be less than 1.25:1.00.
5.3 Minimum Interest Coverage Ratio. The ratio of Consolidated EBITDA of
the Companies as of the last day of each Reference Period as set forth below to
Consolidated Interest Expense, for such Reference Period to be less than the
ratio specified below opposite such Reference Period:
<TABLE>
<CAPTION>
----------------------------------------------------- -----------------------------------------
Reference Period Ending Ratio
----------------------- -----
<S> <C> <C>
12/26/99 and 3/26/00 3.00:1.00
6/25/00 and 9/24/00 3.50:1.00
12/24/00 and all Reference 4.00:1.00
Periods thereafter
----------------------------------------------------- -----------------------------------------
</TABLE>
5.4 Maximum Capital Expenditures. Make or agree to make, or incur any
obligations with respect to, any Capital Expenditures (x) in excess of
$2,000,000 in the aggregate during any fiscal year and (y) in excess of
$5,000,000 in the aggregate during the term of this Agreement; provided,
however, any Insurance Proceeds applied to Capital Expenditures shall not be
counted against the limitations in clauses (x) and (y), above.
5.5 Maximum Liabilities Ratio. The ratio of the Companies' aggregate
Indebtedness on the last day of each Reference Period set forth below to
Consolidated EBITDA for such Reference Period to be greater than the ratio
specified below opposite such Reference Period:
<PAGE>
<TABLE>
<CAPTION>
Reference Period Ending Ratio
- ----------------------------------------------------------- ---------------------------------------------------------
<S> <C>
12/26/99 and 3/26/00 6.00:1.00
- ----------------------------------------------------------- ---------------------------------------------------------
6/25/00 and 9/24/00 5.00:1.00
- ----------------------------------------------------------- ---------------------------------------------------------
12/24/00, 12/26/99 and 3/26/003/25/01, 6/24/01 and 9/30/01 4.00:1.00
- ----------------------------------------------------------- ---------------------------------------------------------
12/31/01 and all Reference Periods ending thereafter 3:00:1.00
</TABLE>
5.6 Consolidated Net Worth. The Companies' Consolidated Net Worth at any
time to be less than the sum of (a) an amount equal to (i) the Companies'
Consolidated Net Worth on the Closing Date as set forth in the Opening Balance
Sheet, minus (ii) $500,000, plus (b) on a cumulative basis, 50% of positive
Consolidated Net Income for each fiscal quarter beginning with the fiscal
quarter ended September 26, 1999, plus (c) the Net Debt/Equity Proceeds with
respect to any Equity Issuance after the date hereof.
SECTION 6. AFFIRMATIVE COVENANTS. Each of the Borrowers covenants and
agrees that, until all Commitments have been terminated, all Letters of Credit
have terminated or expired, and all Obligations have been indefeasibly paid in
full in cash:
6.1 Financial Reporting. The Borrowers will furnish to the Lender:
(a) as soon as available, but in any event within 90 days after each fiscal
year-end, the Parent's consolidated balance sheet as at the end of, and related
consolidated statements of operations and cash flow for, such year, prepared in
accordance with GAAP consistently applied and audited by the Accountants; and
concurrently with such financial statements, consolidating financial statements
and a written statement by the Accountants that, in conducting such audit, they
have obtained no knowledge of any Default or Event of Default (or, if such an
event exists, a statement as to its nature and status), provided that the
Accountants shall not be liable to the Lender for failure to obtain knowledge of
any Default or Event of Default;
(b) as soon as available, but in any event within 45 days after the end of
each fiscal quarter, the Parent's consolidated and consolidating balance sheet
as at the end of, and related consolidated and consolidating statements of
operations and cash flow for, the portion of the year then ended and the fiscal
quarter then ended, prepared in accordance with GAAP, together with a comparison
of such results to budgeted results and to the results for the comparable period
in the prior fiscal year, prepared on a consolidated and consolidating basis, in
each case certified by the Parent's chief financial officer or controller;
together with updated Schedules 4.1, 4.5 and 4.6 hereto, if any changes thereto;
(c) as soon as available, but in any event within 45 days after the end of
each fiscal quarter, a covenant compliance report in substantially the form of
Exhibit 6.1, signed by the Parent's chief financial officer or controller, and
updated Schedules 4.1, 4.5 and 4.6 if any changes thereto;
(d) as soon as available, but in any event within 30 days after the end of
each month, the Parent's consolidated and consolidating balance sheet as at the
end of, and related consolidated and consolidating statements of operations and
cash flow for, the month then ended and year-to-date period then ended, prepared
in accordance with GAAP;
(e) promptly as they become available, a copy of each report (including any
so-called management letters) submitted to any Company by the Accountants in
connection with each annual, interim or special audit of its books;
(f) promptly as they become available, copies of all such financial
statements, proxy material and reports as any Company shall send or make
available to its stockholders and copies of all material reports filed with the
FTC or state or local franchising authorities and all SEC Reports;
(g) promptly following the date on which approval by the Parent's Board of
Directors is granted with respect thereto or, within 45 days after the beginning
of each fiscal year, whichever shall occur sooner, pro forma projections for the
Companies for such fiscal year, prepared on a quarterly basis, consisting of a
projected balance sheet, projected statements of income, cash flow and
projections of Capital Expenditures, all prepared on a basis consistent with the
financial statements required by Section 6.1(a);
(h) no more than five Business Days after any Company gives or is required
to give notice to the PBGC of any "Reportable Event" (as defined in Section 4043
of ERISA) with respect to any Plan that might constitute grounds for a
termination of such Plan under Title IV of ERISA, or knows that any member of
the Controlled Group or the plan administrator of any Plan has given or is
required to give notice of any such Reportable Event, a copy of the notice of
such Reportable Event given or required to be given to the PBGC;
(i) promptly upon becoming aware of the existence of any condition or event
that constitutes an Event of Default or would reasonably be likely to result in
a Material Adverse Effect, written notice thereof specifying the nature and
duration thereof and the action being or proposed to be taken with respect
thereto;
(j) no more than five Business Days after becoming aware of any litigation
or of any investigative proceedings by a governmental agency or authority
commenced or threatened against any Company, the outcome of which could
reasonably be likely to have a Material Adverse Effect, written notice thereof
and of the action being or proposed to be taken with respect thereto;
(k) no more than five Business Days after becoming aware of any
investigative proceedings by a governmental agency or authority commenced or
threatened against any Company regarding any potential violation of
Environmental Laws, any spill, release, discharge or disposal of any Hazardous
Material or any other material event required to be reported to any such
governmental agency or authority in respect of Environmental Laws or Hazardous
Material, written notice thereof and of the action being proposed to be taken
with respect thereto;
(l) Prior to the consummation of any Asset Sale, if the Net Sale Proceeds
of all Asset Sales received by the Companies during the term of this Agreement
are equal to or in excess of $1,000,000, written notice thereof, specifying the
purchase price, payment terms and closing date thereof;
(m) At the same time as written notice, if any, is required to be given to
the Lender concerning an Asset Sale, updated Schedules 4.1, 4.5 and 4.6 to this
Agreement, giving effect to such Permitted Sale; and
(n) as soon as reasonably possible and in any event within 10 days after
request therefor, such other information regarding the operations, assets,
business, affairs and financial condition of any Company or any Store as the
Lender may reasonably request.
6.2 Conduct of Business. Each of the Companies will (a) duly observe and
comply in all material respects with its Organizational Documents and all
applicable laws and all requirements of any governmental authorities relative to
its corporate existence, rights and franchises, to the conduct of its business
and to its property and assets (including without limitation all applicable
health laws, restaurant licensing laws, FTC laws, SEC laws, Environmental Laws
and ERISA); (b) maintain and keep in full force and effect all licenses and
permits necessary to the proper conduct of its business; (c) comply in all
material respects with all material agreements (including without limitation
material leases and supplier contracts) to which it is a party; (d) maintain its
corporate existence except for mergers and consolidations to the extent
permitted hereunder; and (e) remain or engage in the business of owning and
franchising coffee and bagel retail Stores and manufacturing, selling and
distribution of specialty coffees, bagels, cream cheese and related products
wholesale, and in no other business. No Company will engage in any business
unless it is a Borrower hereunder.
6.3 Maintenance and Insurance. Each of the Companies will maintain and keep
its properties in good repair, working order and condition, and from time to
time make all needful and proper repairs, renewals, replacements, additions and
improvements thereto so that its business may be properly and advantageously
conducted at all times. Each of the Companies and each Company Store at all
times will maintain, or cause to be maintained, insurance covering it and its
tangible property in such amounts (including, without limitation, so-called "all
perils" coverage at replacement value, "broad form" liability coverage, and
fidelity and business interruption insurance), against such hazards and
liabilities and for such purposes as is customary in the industry for companies
of established reputation engaged in the same or similar businesses and owning
or operating similar properties. The Lender shall be named as loss payee
(pursuant to a standard "lender's loss payable" endorsement) on property
insurance policies and additional insured on liability insurance policies and
shall be given at least 30 days' advance notice of any cancellation, change in
form or renewal of insurance. Such insurance shall insure the Lender's interest
regardless of any breach or violation of the underlying policies by any Company
or any other Person. Each of the Companies shall insure, or cause to be insured,
its assets in amounts sufficient to prevent the application of any co-insurance
provisions. The Borrowers shall evidence their compliance with this Section by
delivering a certificate with respect to each policy concurrently with the
execution hereof, annually thereafter and at any time upon the Lender's
reasonable request. If any Company fails to provide or cause to be provided such
insurance, the Lender, in its sole discretion, may provide such insurance and
charge the cost to any of the Borrowers' deposit accounts with the Lender.
6.4 Taxes. Each of the Companies will pay or cause to be paid all taxes,
assessments or governmental charges on or against it or its properties prior to
such taxes becoming delinquent; except for any tax, assessment or charge (other
than any charge for required environmental cleanup costs) which is being
contested in good faith by appropriate legal or other proceedings or actions and
with respect to which adequate reserves have been established and are being
maintained in accordance with GAAP, if no Encumbrance shall have been filed to
secure such tax, assessment or charge.
6.5 Inspection by the Lender. Each of the Companies will at all reasonable
times (and upon reasonable notice if no Event of Default exists), during normal
business hours permit the Lender or its designees, provided that it does not
interfere with the normal business operation of the Borrowers, to (a) visit and
inspect the Company Stores and other properties of the Companies and (b) examine
and make copies of and take abstracts from the Companies' and the Company
Stores' books and records. Without limiting the foregoing, the Lender may
conduct as many commercial credit examinations of the Companies and the Company
Stores as it reasonably deems necessary (but not more than one such examination
per calendar year if no Event of Default exists), whether or not an Event of
Default exists, and the Borrowers will reimburse the Lender the reasonable costs
of all such credit examinations.
6.6 Accounting System. The Companies will maintain an accurate system of
accounting in accordance with GAAP, will at all times be part of a consolidated
group for accounting purposes, and, without the Lender's prior written consent,
will not change (i) their fiscal year from the last Sunday in December fiscal
year end used in the preparation of the Initial Financial Statements and (ii)
the Quarterly Dates set forth on Schedule 1 hereto.
6.7 Further Assurances. From time to time hereafter, the Companies will
execute and deliver, or cause to be executed and delivered, such additional
instruments, certificates and documents, and take all such actions, as the
Lender shall reasonably request for the purpose of implementing or effectuating
the provisions of this Agreement, the Notes, the Fee Letter, the Letter of
Credit Documents or the other Loan Documents, and upon the exercise by the
Lender of any power, right, privilege or remedy pursuant to this Agreement, the
Notes, the Fee Letter, the Letter of Credit Documents or the other Loan
Documents which requires any consent, approval, registration, qualification or
authorization of any governmental authority or instrumentality, exercise and
deliver all applications, certifications, instruments and other documents and
papers that the Lender may be so required to obtain.
6.8 Environmental Laws. Each of the Companies will comply in all material
respects with, and perform or cause to be performed any and all Remedial Work
necessary under, all Environmental Laws applicable (now or in the future) to it
or to its business.
6.9 Depository. The Borrowers shall maintain a depository account or
accounts with the Lender to facilitate borrowings and payments hereunder. Each
of the Companies hereby irrevocably authorizes the Lender to debit such
depository account or accounts in order to effect the making of any such
payments not paid when due.
6.10 Interest Rate Protection Within 15 days after the Closing Date, the
Borrowers shall procure Interest Rate Protection Agreements with respect to the
Term Loan, in form and substance satisfactory to the Lender providing for the
rates of interest applicable to the Loans to be capped at a rate satisfactory to
the Lender. The Borrowers shall maintain such Interest Rate Protection
Agreements in full force and effect during the term of this Agreement and shall
not, without the prior written consent of the Lender, modify, terminate or
transfer such arrangements.
6.11 Willoughby's Seller Note. On or before October 20, 1999, either (x)
the Parent shall have repaid in full the Willoughby's Seller Note and have
obtained a discharge of the related pledge or (y) the Willoughby's Seller Note
shall have been cancelled in consideration of an Equity Issuance, and in each
case, the Parent shall have complied with the provisions of Section 2.12 with
respect to the Capital Stock of Willoughby's.
6.12. Franchise Agreements. Each Company will include in every Franchise
Agreement entered into after the date hereof a provision which shall permit
(without the need for any franchisee's consent) such Company to grant to the
Lender a security interest in or the collateral assignment of any general
intangibles, rights or remedies of such Company under such Franchise Agreement,
including, without limitation, the right to collect development fees, royalties
and other payments thereunder.
SECTION 7. NEGATIVE COVENANTS. Each of the Borrowers covenants and agrees
that, until all Commitments have been terminated, all Letters of Credit have
terminated or expired, and all Obligations have been indefeasibly paid in full
in cash:
7.1 Indebtedness; Contingent Liabilities. No Company will create, incur,
assume, guarantee or be or remain liable with respect to any Consolidated Funded
Indebtedness except:
(a) Indebtedness of the Companies to the Lender;
(b) Indebtedness not constituting Capitalized Leases or purchase money
Indebtedness in the amounts existing on the date hereof and described in
Schedule 7.1 (but no refinancings, renewals or extensions thereof without the
Lender's prior written consent);
(c) Guarantees in respect of endorsements of negotiable instruments for
collections in the ordinary course of business (and refinancings, renewals or
extensions thereof);
(d) Capitalized Leases and purchase money Indebtedness which relate to
outstanding Indebtedness in the aggregate not exceeding $1,000,000 at any time
secured by Permitted Encumbrances under Section 7.3(f);
(e) unsecured Indebtedness of any Borrower to any other Borrower hereunder,
evidenced by promissory notes pledged and delivered to the Lender pursuant to
the Security Documents (the "Intercompany Notes");
(f) Guarantees incurred by the Parent (1) of Indebtedness otherwise
permitted hereunder of any other Borrower and (2) of real estate Leases of
Franchisees of the Borrowers in the ordinary course of business;
(g) Indebtedness in respect of Hedging Arrangements not exceeding $200,000
in aggregate net exposure at any one time outstanding, provided such Hedging
Arrangements are entered into for legitimate business purposes related to the
business of the Companies and not for speculative purposes;
(h) unsecured Indebtedness in respect of contractual commitments related to
future purchases of inventory;
(i) provided no Default then exists or could reasonably be expected to
result therefrom, Debt Issuance, provided the Net Debt Proceeds therefrom are
paid to the Lender to the extent required hereunder;
(j) Indebtedness in respect of the AFC Debt Instruments; and
(k) Subordinated Debt.
7.2 Sale and Leaseback. No Company will enter into any arrangement (a "Sale
Leaseback"), directly or indirectly whereby any of them shall sell or transfer
any of its property acquired prior to the date of this Agreement in order to
lease such property or lease other property that any Company intends to use for
substantially the same purpose as such property being sold or transferred.
7.3 Encumbrances. No Company will create, incur, assume or suffer to exist
any mortgage, pledge, security interest, lien or other charge or encumbrance,
including the lien or retained security title of a conditional vendor upon or
with respect to any of its property or assets ("Encumbrances"), or assign or
otherwise convey any right to receive income, including the sale or discount of
accounts receivable with or without recourse, except the following ("Permitted
Encumbrances"):
(a) Encumbrances in favor of the Lender under the Loan Documents;
(b) Encumbrances existing as of the date of this Agreement and disclosed in
Schedule 7.3;
(c) liens for taxes, fees, assessments and other governmental charges to
the extent that payment of the same may be postponed or is not required in
accordance with the provisions of Section 6.4;
(d) landlord's and lessors' liens in respect of rent not in default or
liens in respect of pledges or deposits under worker's compensation,
unemployment insurance, social security laws, or similar legislation (other than
ERISA) or in connection with appeal and similar bonds incidental to litigation;
mechanics', laborers' and materialmen's and similar liens, if the obligations
secured by such liens are not then delinquent or are released by appropriate
statutory release bonds; liens securing the performance of bids, tenders,
contracts (other than for the payment of money); and statutory obligations
incidental to the conduct of its business and that do not in the aggregate
materially detract from the value of its property or materially impair the use
thereof in the operation of its business;
(e) judgment liens that shall not have been in existence for a period of
longer than 30 days after the creation thereof or, if a stay of execution shall
have been obtained, for a period longer than 30 days after the expiration of
such stay;
(f) Encumbrances in respect of Capital Leases and purchase money
obligations incurred within 120 days of purchase which in the aggregate do not
secure Indebtedness in excess of $1,000,000 as provided in Section 7.1(d),
provided that any such Encumbrances shall not extend to property and assets not
financed by such Capitalized Lease or purchase money obligation and shall not
secure Indebtedness greater than the lesser of the cost or fair market value of
such tangible personal property so acquired;
(g) easements, rights of way, restrictions and other similar Encumbrances
relating to real property and not interfering in a material way with the
ordinary conduct of its business;
(h) Encumbrances granted by CBB Acquisition in the Acquired Assets pursuant
to the AFC Debt Instruments; and
(i) Encumbrances granted pursuant to the Subordinated Loan Agreements.
7.4 Disposition of Assets, Etc. No Company will make a Disposition of any
of its properties, assets, rights, licenses or franchises to any Person, except
the following:
(a) Dispositions of inventory in the ordinary course of business (which
dispositions may be made free from the Encumbrances of the Loan Documents);
(b) the Disposition in the ordinary course of business, without
replacement, of equipment which is obsolete or no longer needed in the conduct
of its business;
(c) the Disposition and replacement in the ordinary course of business of
equipment or other tangible personal property with other equipment of at least
equal utility and value (provided that, except for purchase money security
interests and rights of lessors of equipment if permitted hereunder, the
Lender's lien upon such newly acquired equipment shall have the same priority as
the Lender's lien upon the replaced equipment);
(d) so long as no Default exists or could reasonably be expected to result
therefrom, any other sale of tangible assets (other than the sale of all or
substantially all of the assets of any Company and other than, in any
four-quarter period, the sale of greater than 5% of the value of Consolidated
Net Assets as of any date therein) for not less than the fair market value
thereof (each such permitted sale being referred to as a "Permitted Sale"),
provided that prior notice thereof is given to the Lender, if required, pursuant
to Section 6.1(l) and the Sale Proceeds Payment with respect thereto is made, if
and to the extent required, pursuant to Section 2.7 of this Agreement; and
(e) so long as no Default exists or could reasonably be expected to result
therefrom, except as otherwise provided in Section 7.4(d) above, Dispositions of
any Company Stores (which Dispositions may be made free from the Encumbrances of
the Loan Documents).
7.5 Amendment to Charter or Partnership Documents. Except for mergers or
consolidations to the extent permitted hereunder, each of the Companies will not
permit or suffer any material amendment of its Organizational Documents without
the Lender's prior written consent, which consent shall not be unreasonably
withheld. Without limiting the foregoing, no Company will amend any
Organizational Document in any manner which could materially adversely affect
its financial condition or adversely affect (in light of the entire transaction
in which it is a part) the rights of the Lender hereunder or under the Loan
Documents (it being expressly agreed that the inclusion in any such
Organizational Documents of any provision similar to those set forth in Section
102(b)(2) of Title 8 of the Delaware General Corporation Law is prohibited under
this Section).
7.6 Mergers; Consolidations; Issuance of Securities; Etc. Without receiving
the consent of the Lender, which consent shall be provided in the Lender's sole
discretion, no Company will dissolve, liquidate, merge or consolidate into or
with any other Person; provided that any Borrower may merge with any other
Borrower (so long as the Parent is the surviving entity of any merger to which
it is a party). Without receiving the consent of the Lender, which consent shall
be provided in the Lender's sole discretion, no Company other than the Parent
will issue any additional shares of Capital Stock or any securities convertible
thereto.
7.7 Restricted Payments. No Company will make any Restricted Payment;
provided, that (a) so long as no Default or Event of Default exists or could
reasonably be likely to result therefrom, the Parent may make Distributions to
the extent required for any repurchase, redemption or other acquisition for
value of any Capital Stock of the Parent held by any member of the Parent's
management pursuant to any management equity subscription agreement or stock
option agreement or similar agreement upon their death, disability, retirement
or termination of employment or departure from the Board of Directors of the
Parent (provided that the aggregate price paid for all such repurchased,
redeemed, acquired or retired Capital Stock shall not exceed $50,000 in any
twelve-month period), (b) the Subsidiaries of the Borrowers may make
Distributions to the Borrowers, and the Subsidiaries of the Borrowers shall
declare and pay cash distributions to the Borrowers, if the same comply with
applicable law, to the extent required to ensure that the Borrowers at all times
pay and perform when due their Obligations under the Loan Documents, (c) the
Borrowers may make regularly scheduled payments of principal and interest on
Subordinated Debt or other Debt Issuance to the extent expressly permitted by
the applicable terms of the applicable Subordination Agreement and (d) so long
as no Default or Event of Default exists or could reasonably be likely to result
therefrom, the Parent may make Distributions to the extent required for
redemption pursuant to Section 23(a) of the Shareholder Rights Agreement of the
then outstanding Rights (as defined in the Shareholder Rights Agreement).
7.8 Investments, Loans and Acquisitions. No Company will (a) purchase or
acquire any share of capital stock, partnership interest, evidence of
Indebtedness or other equity security of any other Person, (b) make any
Acquisition, (c) make any loan, advance or extension of credit to, or
contribution to the capital of, any other Person other than (i) loans to
employees not to exceed $100,000 in the aggregate at any time outstanding, (ii)
advances pursuant to customary indemnification provisions in favor of officers
and directors of the Borrowers, (iii) extensions of trade credit in the ordinary
course of business consistent with past practices, (iv) Interest Rate Protection
Agreements permitted under Section 7.1 and (v) notes received as part of the
settlement of litigation or satisfaction of debts owed by any other Person in
the ordinary course of business, (d) purchase any real estate for sale or
investment, (e) purchase any commodities futures contracts other than in
connection with bona fide hedging transactions in the ordinary course of
business, (f) make any other investment in any Person, or (g) make any
commitment or acquisition of any option or enter into any other arrangement for
the purpose of making any of the foregoing investments, loans or acquisitions,
except the following:
(i) the Chesapeake Acquisition;
(ii) Qualified Investments;
(iii) Loans permitted pursuant to Section 7.1(e); and
(iv) Capital contributions from any Borrower to its Subsidiaries; and
(v) the existing investments referred to in Schedule 7.8 hereto.
7.9 ERISA. No Company nor any member of the Controlled Group shall permit
any Plan maintained by it to (a) engage in any "prohibited transaction" (as
defined in Section 4975 of the Code), (b) incur any "accumulated funding
deficiency" (as defined in Section 302 of ERISA) whether or not waived, or (c)
terminate any Plan in a manner that could result in the imposition of a lien or
encumbrance on the assets of any Company pursuant to Section 4068 of ERISA.
7.10 Transactions with Affiliates. Except as otherwise expressly permitted
by this Agreement, no Company will directly or indirectly (i) make any
Investment in any Affiliate, (ii) sell, lease or otherwise dispose of any assets
or services to, or purchase, lease or otherwise acquire any Assets or services
from, any Affiliate, or (iii) directly or indirectly engage in any other
transaction with or for the benefit of, or make any payment or distribution to,
any Affiliate; provided, that (x) any employee (or former employee) of any
Company owning any Capital Stock of the Parent may serve as an employee or
director of the Parent and receive reasonable compensation (including stock
options and other customary incentive compensation) and customary indemnities,
and (y) any Borrower may enter into any transaction with any Affiliate providing
for the rendering or receipt of services or the purchase, sale or lease of
assets in the ordinary course of business if the monetary or business
consideration arising therefrom would be as advantageous to the Borrowers taken
as a whole as the monetary or business consideration which it would obtain in a
comparable arm's length transaction with a Person not an Affiliate, and such
transaction is accurately reflected on the books of the Borrowers.
7.11 Amendment of Certain Agreements. No Company will amend or modify any
of its material agreements if the same would be likely to have a Material
Adverse Effect.
7.12 Negative Pledges, Etc. No Company will enter into any agreement,
amendment or arrangement (excluding this Agreement or any other Loan Document)
prohibiting or restricting (a) it from amending or otherwise modifying this
Agreement or any other Loan Document, (b) the creation or assumption of any
Encumbrances upon its properties, revenues or assets, whether now owned or
hereafter acquired, except as set forth herein or (c) the ability of any
Subsidiary to make any payment or distribution, directly or indirectly, to the
Parent; provided that this Section 7.12 shall not apply to (i) purchase money
obligations or Capitalized Leases (or refinancings thereof that impose no more
restrictive restrictions than those applicable to the obligation being
refinanced) for property acquired in accordance with Section 7.1 that impose
restrictions solely on the property so acquired which are in effect at the time
of acquisition of such property and (ii) restrictions arising by reason of
customary non-assignment or no-subletting clauses in leases or other contracts
entered into in the ordinary course of business.
7.13 New Subsidiaries . No Company will form any new Subsidiary unless, on
the date of such formation, the Loan Documents are revised pursuant to
amendments satisfactory in form and substance to the Lender providing for such
Subsidiary to become a "Borrower" hereunder.
SECTION 8. DEFAULTS.
8.1 Events of Default. There shall be an Event of Default hereunder if any
of the following events occurs:
(a) any Borrower shall fail to pay when due (whether on the date fixed for
such payment, mandatory prepayment, by acceleration or otherwise) any amount of
principal of any Loan, any LC Draw Obligation or any principal on any other
Obligation or to pay within five Business Days of when due (whether on the date
fixed for such payment, mandatory prepayment, by acceleration or otherwise) any
interest thereon, or fees or expenses constituting any Obligation; or
(b) any Company shall fail to perform any term, covenant or agreement
contained in Section 5, Section 6.1 (other than Section 6.1(m)), or Section 7
hereof;
(c) any Company shall fail to perform any term, covenant or agreement
contained in this Agreement or any default shall occur on the part of any
Company under any other Loan Document, other than those referred to in Sections
8.1(a) and (b) above, and such default shall continue for 30 days after the
earlier of (i) written notice thereof from the Lender to the Borrowers, or (ii)
actual knowledge thereof by any executive officer of any Company; or
(d) any representation or warranty by or on behalf of any Company made in
this Agreement or any other Loan Document or in any report, certificate or
financial statement delivered hereunder shall prove to have been false in any
material respect upon the date when made or deemed to have been made; or
(e) any Company shall fail to pay at maturity, or within any applicable
period of grace, any obligations which, together with all other such obligations
of the Companies, exceed $500,000 in the aggregate, or any Company shall fail to
observe or perform any term, covenant or agreement evidencing or securing such
obligations, the result of which failure is to permit the holder or holders of
such obligations to cause the indebtedness relating thereto to become due prior
to its stated maturity upon delivery of required notice, if any; or
(f) any Company shall (i) apply for or consent to the appointment of, or
the taking of possession by, a receiver, custodian, trustee, liquidator or
similar official of itself or of all or a substantial part of its property, (ii)
be generally not paying its debts as such debts become due, (iii) make a general
assignment for the benefit of its creditors, (iv) commence a voluntary case
under the Federal Bankruptcy Code (as now or hereafter in effect), (v) take any
action or commence any case or proceeding under any law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of debts, or
any other law providing for the relief of debtors, (vi) fail to contest in a
timely or appropriate manner, or acquiesce in writing to, any petition filed
against it in an involuntary case under the Federal Bankruptcy Code or other
law, (vii) take any action under the laws of its jurisdiction of incorporation
or organization similar to any of the foregoing, or (viii) take any action for
the purpose of effecting any of the foregoing; or
(g) a proceeding or case shall be commenced with respect to any Company,
without the application or consent of such in any court of competent
jurisdiction, seeking (i) the liquidation, reorganization, dissolution, winding
up, or composition or readjustment of its debts, (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of it or of all or any
substantial part of its assets, or (iii) similar relief in respect of it, under
any law relating to bankruptcy, insolvency, reorganization, winding-up or
composition or adjustment of debts or any other law providing for the relief of
debtors, and such proceeding or case shall continue undismissed, or unstayed and
in effect, for a period of 90 days; or an order for relief shall be entered in
an involuntary case under the Federal Bankruptcy Code, against any Company; or
action under the laws of the jurisdiction of incorporation or organization of
any Company similar to any of the foregoing shall be taken with respect to any
Company and shall continue unstayed and in effect for any period of 90 days; or
(h) a judgment or order for the payment of money shall be entered against
any Company by any court, or a warrant of attachment or execution or similar
process shall be issued or levied against property of any Company, that,
together with all other such judgments and attachments against the Companies
exceeds $250,000 (exclusive of amounts covered by insurance or actually
contributed in cash by third party obligors with respect to such judgments) in
the aggregate in value and such judgment, order, warrant or process shall
continue undischarged, unstayed or not bonded over in full for 30 days, any
action shall be legally taken by a judgment creditor to levy upon assets or
properties of any Company to enforce any such judgment; or
(i) any Company or any member of the Controlled Group shall fail to pay
when due an amount or amount that it shall have become liable to pay to the PBGC
or to a Plan under Title IV of ERISA and which, together with all such amounts,
exceeds $500,000 in the aggregate; or notice of intent to terminate a Plan or
Plans shall be filed under Title IV of ERISA by any Company, any member of the
Controlled Group, any plan administrator or any combination of the foregoing and
such action could reasonably be expected to have a Material Adverse Effect; or
the PBGC shall institute proceedings under Title IV of ERISA to terminate or to
cause a trustee to be appointed to administer any such Plan or Plans or a
proceeding shall be instituted by a fiduciary of any such Plan or Plans against
any Company and such proceedings shall not have been dismissed within 30 days
thereafter; or a condition shall exist by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any such Plan or Plans must be
terminated and such action could reasonably be expected to have a Material
Adverse Effect; or
(j) for any reason, there shall have occurred a Change in Control; or
(k) for any reason, any Security Documents shall not be in full force or
effect in all material respects, or any party thereto shall contest the validity
thereof or disaffirm its obligations thereunder or default with respect to any
of its material obligations thereunder.
8.2 Remedies. Upon the occurrence of an Event of Default described in
Section 8.1(f) or (g), immediately and automatically, and upon the occurrence
and continuance of any other Event of Default, or if on any date that a draft is
presented under a Letter of Credit or any date that a Letter of Credit is sought
to be issued, extended or renewed, the conditions precedent to the issuance,
extension or renewal of Letters of Credit are not satisfied, at the Lender's
option and upon the Lender's declaration by written notice to the Borrowers: (a)
the Commitments and any obligation to issue, extend or renew Letters of Credit
shall terminate; and (b) the unpaid principal amount of the Loans, together with
accrued interest, all LC Draw Obligations and all other Obligations shall become
immediately due and payable without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived. Upon termination
of the Commitments and acceleration of the Loans and the LC Draw Obligations,
the Lender may exercise any and all rights it has under this Agreement, the
Security Documents or any other Loan Documents, or at law or in equity, and
proceed to protect and enforce the Lender's rights by any action at law, in
equity or other appropriate proceeding. In the event that the Lender shall apply
for the appointment of, or the taking of possession by, a trustee, receiver or
liquidator of any Company or of any other similar official to hold or liquidate
all or any substantial part of the properties or assets of any Company following
the occurrence of a default in payment of any amount owed hereunder and
following any applicable notice or cure period, each of the Companies hereby
consents to such appointment and taking of possession and agrees to execute and
deliver any and all documents requested by the Lender relating thereto (whether
by joining in a petition for the voluntary appointment of, or entering no
contest to a petition for the appointment of, such an official or otherwise, as
appropriate under applicable law).
8.3 Letters of Credit. If any one or more Events of Default shall at any
time occur, the Lender may also, by written notice to the Borrowers, take any or
all of the following actions, at the same or different times:
(a) The Lender may send notices to all or any of the beneficiaries of the
Letters of Credit advising such beneficiaries of the intention and desire of the
Lender to effect the termination, cancellation and surrender of such Letters of
Credit in 30 days; provided, however, that the Lender shall not send any such
notice to any beneficiary unless the Lender has requested that the Borrowers
deliver cash collateral to the Lender pursuant to paragraph (b) below and the
Borrowers have failed to deliver such cash collateral to the Lender within 10
days after such request; and
(b) The Lender may require that the Borrowers deliver to the Lender first
priority perfected cash collateral in an amount equal to the face amount of all
Letters of Credit which remain outstanding.
SECTION 9. MISCELLANEOUS.
9.1 Notices. All notices, requests, demands and other communications
provided for hereunder (including without limitation Loan Requests) shall be in
writing (including telecopied communication) and mailed, telecopied or delivered
to the applicable party at its respective address indicated below:
(a) If to the Borrowers:
New World Coffee - Manhattan Bagel, Inc.
246 Industrial Way West
Eatontown, NJ 07724
Attention: R. Ramin Kamfar, CEO
Telecopier No.: (732) 544-4503
with a copy (which shall not constitute notice) to:
Stuart M. Sieger, Esq.
Ruskin, Moscou, Evans & Faltischek, P.C.
170 Old Country Road
Mineola, NY 11501
Telecopier No.: (516) 663-6447
(c) If to the Lender:
BankBoston, N.A.
100 Federal Street
Mail Stop: 01-09-05
Boston, MA 02110
Attention: Thomas F. Farley, Jr., Managing Director
Telecopier No.: (617) 434-0637
with a copy (which shall not constitute notice) to:
James I. Rubens, Esq.
Edwards & Angell, LLP
101 Federal Street, 23rd Floor
Boston, MA 02110
Telecopier No.: (617) 439-4170
or to any other address specified by such party in writing, complying as to
delivery with the terms of this Section. All such notices, requests, demands and
other communication shall be deemed given upon receipt by the party to whom such
notice is directed.
9.2 Expenses. The Borrowers will pay jointly and severally on demand all
reasonable expenses of the Lender in connection with the preparation, waiver or
amendment of this Agreement or any other Loan Documents or the default or
collection of the Loans, the LC Draw Obligations or any other Obligation or in
connection with the Lender's exercise, preservation or enforcement of any of its
rights, remedies or options thereunder, including without limitation the
reasonable fees and expenses of outside legal counsel or the allocated costs of
in-house legal counsel, accounting, consulting, brokerage or other similar
professionals and any reasonable fees or expense associated with any travel or
other costs relating to any appraisals or credit or other examinations conducted
in connection with the Obligations or any Collateral therefor, and the amount of
all such expenses shall, unless paid within 30 days after submission of
statements therefor to the Borrowers, thereafter bear interest until paid in
full at the highest rate applicable to principal hereunder (including any
default rate). All such expenses may be charged against any deposit account
maintained by any Borrower with the Lender.
9.3 Indemnification. Each of the Borrowers shall absolutely and
unconditionally indemnify and hold the Lender harmless against any and all
claims, demands, suits, actions, causes of action, expenses and all other
liabilities whatsoever which shall at any time or times be incurred or sustained
by it or by any of its shareholders, directors, officers, employees,
subsidiaries, affiliates or agents (except any of the foregoing incurred or
sustained as a result of the gross negligence or willful misconduct of such
Person) on account of, or in relation to, or in any way in connection with, any
of the arrangements or transactions contemplated by, associated with or
ancillary to any of the Loan Documents, whether or not all or any of the
transactions contemplated by, associated with or ancillary to this Agreement or
any of such documents are ultimately consummated.
9.4 Term of Agreement. This Agreement shall continue in force and effect
until all Commitments have been terminated, all Letters of Credit have been
terminated or expired, and all Obligations have been indefeasibly paid in full
in cash.
9.5 No Waivers. No failure or delay by the Lender in exercising any right,
power or privilege hereunder or under any other documents or agreements executed
in connection herewith shall operate as a waiver thereof; nor shall any single
or partial exercise thereof preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The rights and remedies
herein, in the Notes and in the other Loan Documents are cumulative and not
exclusive of any rights or remedies otherwise provided by agreement or law.
9.6 Governing Law. This Agreement shall be deemed to be a contract made
under seal and shall be construed in accordance with and governed by the laws of
the State of New York (without giving effect to any conflicts of laws provisions
contained therein).
9.7 Entire Agreement; Amendments. This Agreement, the Notes and the other
Loan Documents constitute the final agreement of the parties hereto and
supersede any prior agreement or understanding, written or oral, with respect to
the matters contained herein and therein. No modification or waiver of any
provision hereof or of the Notes or any other Loan Document, nor consent to the
departure by any Borrower or any of its Subsidiaries therefrom, shall be
effective unless the same is in writing, and then such waiver or consent shall
be effective only in the specific instance, and for the purpose, for which
given. The Lender's failure to insist upon the strict performance of any term,
condition or other provision of this Agreement, the Notes, or any of the other
Loan Documents, or to exercise any right or remedy hereunder or thereunder,
shall not constitute a waiver by the Lender of any such term, condition or other
provision or Default or Event of Default in connection therewith, nor shall a
single or partial exercise of any such right or remedy preclude any other or
future exercise, or the exercise of any other right or remedy; and any waiver of
any such term condition or other provision or of any such Default or Event of
Default shall not affect or alter this Agreement, the Notes or any of the other
Loan Documents, and each and every term, condition and other provision of this
Agreement, the Notes and the other Loan Documents shall, in such event, continue
in full force and effect and shall be operative with respect to any other then
existing or subsequent Default or Event of Default in connection therewith. An
Event of Default hereunder and a Default under the Notes or under any of the
other Loan Documents shall be deemed to be continuing unless and until cured to
the Lender's reasonable satisfaction or waived in writing by the Lenders.
9.8 Assignments; Participations. This Agreement shall be binding upon and
inure to the benefit of the Borrowers and their successors and to the benefit of
the Lender and their respective successors and assigns. Except pursuant to
mergers in which a Borrower is the surviving entity to the extent permitted
hereunder, the rights and obligations of the Borrowers under this Agreement
shall not be assigned or delegated without the prior written consent of the
Lender, and any purported assignment or delegation without such consent shall be
void. The Lender may, with the consent of the Parent (which consent shall not be
unreasonably withheld or delayed and which consent shall not be required for any
proposed participation or assignment made after the occurrence of an Event of
Default and during the continuance thereof), assign or grant participations in
the Loans and Commitments to one or more banks or other financial institutions,
provided that each such assignment or participation shall be in an amount that
is a minimum amount of $2,500,000. Each of the Borrowers authorizes the Lender
to disclose to any participant or assignee any prospective participant or
assignee of any and all information in the Lender's possession concerning the
Companies which has been delivered to the Lender by or on behalf of the
Companies pursuant to this Agreement or which has been delivered to such Lender
by or on behalf of the Companies in connection with the Lender's credit
evaluation prior to becoming a party to this Agreement and such assignee or
participant shall treat such information as confidential. The Lender may at any
time pledge or assign all or any portion of such Lender's rights under this
Agreement and the other Loan Documents to a Federal Reserve bank; provided,
however, that no such pledge or assignment shall release such Lender from its
obligations hereunder or any other Loan Document.
9.9 Counterparts; Partial Invalidity. This Agreement may be signed in any
number of counterparts with the same effect as if the signatures hereto and
thereto were upon the same instrument. The invalidity or unenforceability of any
one or more phrases, clauses or sections of this Agreement shall not affect the
validity or enforceability of the remaining portions of it.
9.10 WAIVER OF JURY TRIAL. EACH OF BORROWERS AND THE LENDER AGREES THAT
NEITHER IT NOR ANY ASSIGNEE OR SUCCESSOR SHALL (A) SEEK A JURY TRIAL IN ANY
LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED UPON, OR ARISING OUT
OF, THIS AGREEMENT, EITHER NOTE, ANY SECURITY DOCUMENT OR ANY OTHER LOAN
DOCUMENT, ANY COLLATERAL OR THE DEALINGS OR THE RELATIONSHIP BETWEEN ANY
BORROWER OR THE LENDER, OR (B) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY
OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE
PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY THE PARTIES HERETO,
AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER THE LENDER NOR
ANY BORROWER HAS AGREED WITH OR REPRESENTED TO ANY OTHER THAT THE PROVISIONS OF
THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
9.11 CONSENT TO JURISDICTION. EACH OF THE BORROWERS HEREBY SUBMITS TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF THE STATE OF NEW YORK, AS WELL AS TO
THE JURISDICTION OF ALL COURTS FROM WHICH AN APPEAL MAY BE TAKEN OR OTHER REVIEW
SOUGHT FROM THE AFORESAID COURTS, FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER
PROCEEDING ARISING OUT OF ANY BORROWERS' OBLIGATIONS UNDER OR WITH RESPECT TO
THE NOTES, ANY SECURITY DOCUMENT OR ANY OTHER LOAN DOCUMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREBY, AND EXPRESSLY WAIVES ANY AND ALL OBJECTIONS
IT MAY HAVE AS TO VENUE IN ANY OF SUCH COURTS.
9.12 Joint and Several Liability. Each of the Borrowers acknowledges and
agrees that it is jointly and severally liable for all Obligations under the
Loan Documents.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
under seal by their duly authorized officers as of the day and year first above
written.
LENDER:
BANKBOSTON, N.A.
By:
----------------
Title:
BORROWERS:
NEW WORLD COFFEE-MANHATTAN BAGEL, INC.
By:
----------------
Title:
CCB ACQUISITION CORP.
By:
----------------
Title:
WILLOUGHBY'S, INC.
By:
-----------------
Title:
MANHATTAN BAGEL COMPANY, INC.
By:
-----------------
Title:
I. & J. BAGEL, INC.
By:
-----------------
Title:
Exhibit 99.1.1
For Immediate Release
NEW WORLD SHAREHOLDERS APPROVE STOCK SPLIT
EATONTOWN, NJ (8/23/99)--New World Coffee-Manhattan Bagel Inc. (NASDAQ: NWCI)
today announced that its shareholders have ratified a one-for-two combination of
the Company's common stock.
Each outstanding share of common stock will become one-half share, and the total
number of shares of common stock outstanding will be reduced from 20,485,047 to
10,242,523 effective August 24, 1999. This action was part of a Restated
Certificate of Incorporation approved by shareholders, which also included
provisions for a staggered Board of Directors and various procedural provisions
related to the operation of the Board of Directors and stockholders voting,
which will also become effective August 24, 1999. New World Coffee-Manhattan
Bagel, Inc. has been advised that its Common Stock will trade under the symbol
"NWCID" for approximately 20 days commencing August 24, 1999, following which
the symbol will again be "NWCI".
New World Coffee-Manhattan Bagel Inc. currently owns, operates, franchises or
licenses stores under its two brands in 18 states, and internationally. The
Company is vertically integrated in bagel dough and cream cheese manufacturing,
and coffee roasting, with plants in New Jersey, California and Connecticut.
****
Certain statements in this press release constitute forward-looking statements
or statements which may be deemed or construed to be forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. The
words "forecast," "estimate," "project," "intend," "expect," "should," "would"
and similar expressions and all statements which are not historical facts are
intended to identify forward-looking statements. These forward-looking
statements involve and are subject to known and unknown risks, uncertainties and
other factors which could cause the Company's actual results, performance
(financial or operating), or achievements to differ from the future results,
performance (financial or operating), or achievements expressed or implied by
such forward-looking statements. The above factors are more fully discussed in
the Company's SEC filings.
####
Press Contacts: At New World Coffee-Manhattan Bagel, Ramin Kamfar, (732)
544-0155, ext. 108, [email protected]; or Bill Parness, Parness & Associates
Public Relations, (732) 290-0121, [email protected]. Web site:
http://www.nwcb.com
Exhibit 99.1.2
Tuesday August 31, 2:15 pm Eastern Time
Company Press Release
SOURCE: New World Coffee-Manhattan Bagel Inc.
NEW WORLD COMPLETES ACQUISITION OF CHESAPEAKE BAGEL;
ACQUISITION OF STORES WILL POSITION NEW WORLD AS INDUSTRY'S
NO. 2 PLAYER
EATONTOWN, N.J., Aug. 31 /PRNewswire/ -- New World Coffee-Manhattan Bagel Inc.
(Nasdaq: NWCID - news) today announced that it has completed the acquisition of
Chesapeake Bagel Bakery from Atlanta-based AFC Enterprises.
As previously announced, the addition of Chesapeake will make New World's
Manhattan Bagel subsidiary the second largest company in the retail bagel
industry, with approximately 350 stores from coast to coast. Expected to be
accretive to earnings immediately, the acquisition adds more than 70 franchised
Chesapeake locations to the Manhattan Bagel system. All are expected to continue
to be operated by franchisees. New World is financing the acquisition through a
combination of cash and debt; no new stock is being issued.
"Adding this store network solidifies our position as the No. 2 player in the
industry while leveraging our investment in Manhattan Bagel's infrastructure,"
said Ramin Kamfar, New World Chairman and Chief Executive Officer. "With 60% of
Chesapeake's units located in Virginia, the District of Columbia, Maryland and
Pennsylvania, the acquisition greatly strengthens our share in those key core
markets."
The Chesapeake stores are located in 23 states extending from the East Coast to
the Rocky Mountains. While strengthening existing markets, the acquisition also
allows New World-Manhattan Bagel to penetrate Arizona, Colorado, Illinois,
Kansas, Louisiana, Minnesota, Missouri, Utah, West Virginia and Wyoming.
Chesapeake was founded in the Washington, D.C. area in 1981.
New World Coffee-Manhattan Bagel Inc. currently owns, operates, franchises or
licenses stores under its three brands in 28 states. The Company is vertically
integrated in bagel dough and cream cheese manufacturing, and coffee roasting,
with plants in New Jersey, California and Connecticut.
AFC Enterprises is the parent company of Churchs Chicken, Popeyes Chicken &
Biscuits, Seattle Coffee Company and Cinnabon.
Certain statements in this press release constitute forward-looking statements
or statements which may be deemed or construed to be forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. The
words "forecast," "estimate," "project," "intend," "expect," "should," "would"
and similar expressions and all statements which are not historical facts are
intended to identify forward-looking statements. These forward-looking
statements involve and are subject to known and unknown risks, uncertainties and
other factors which could cause the Company's actual results, performance
(financial or operating), or achievements to differ from the future results,
performance (financial or operating), or achievements expressed or implied by
such forward-looking statements. The above factors are more fully discussed in
the Company's SEC filings.
Exhibit 99.1.3
NEW WORLD COMPLETES $15 MILLION SENIOR DEBT FINANCING
- BERWIND FINANCIAL AND RODMAN & RENSHAW SERVE AS
INVESTMENT BANKERS -
EATONTOWN, N.J., Sep 1, 1999 /PRNewswire via COMTEX/ -- New World
Coffee-Manhattan Bagel Inc. (Nasdaq: NWCID) today announced that it has it has
completed a $15 million senior debt financing with BankBoston, NA.
Proceeds will be utilized to repay the BET Associates, L.P. senior debt; to
repurchase the Manhattan Bagel Company Unsecured Creditors Trust note at an
$850,000 discount; to partially finance the Chesapeake Bagel Bakery acquisition
completed yesterday; as well as for working capital and general corporate
purposes.
Berwind Financial and Rodman & Renshaw acted as the Company's investment bankers
on the financing. Rodman & Renshaw is expected to continue to provide investment
banking services to New World.
Under the new financing, BankBoston will provide a $12 million term loan and a
$3 million revolving credit line. "The term loan allows us to refinance our
senior debt at a significantly more favorable rate and amortization schedule
than under our prior agreements, which provides us with substantially more
operational flexibility," said New World Chief Financial Officer Jerold Novack.
"In addition, unlike our previous senior financing, there is no equity component
to the BankBoston agreement."
New World Coffee-Manhattan Bagel Inc. currently owns, operates, franchises or
licenses stores under its three brands in 28 states. The Company is vertically
integrated in bagel dough and cream cheese manufacturing, and coffee roasting,
with plants in New Jersey, California and Connecticut.
Certain statements in this press release constitute forward-looking statements
or statements which may be deemed or construed to be forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. The
words "forecast," "estimate," "project," "intend," "expect," "should," "would"
and similar expressions and all statements which are not historical facts are
intended to identify forward-looking statements. These forward-looking
statements involve and are subject to known and unknown risks, uncertainties and
other factors which could cause the Company's actual results, performance
(financial or operating), or achievements to differ from the future results,
performance (financial or operating), or achievements expressed or implied by
such forward-looking statements. The above factors are more fully discussed in
the Company's SEC filings.
CONTACT: Ramin Kamfar of New World Coffee-Manhattan Bagel, 732-544-0155, ext.
108, [email protected]; or Bill Parness of Parness & Associates Public Relations,
732-290-0121, [email protected], for New World Coffee-Manhattan Bagel
