LOAN AND SECURITY AGREEMENT

 

TABLE OF CONTENTS

 

		Page
SECTION 1. DEFINITIONS		1
SECTION 2. CREDIT FACILITIES		31
2.1	Loans	31
2.2	Letters of Credit	32
SECTION 3. INTEREST AND FEES		35
3.1	Interest	35
3.2	Unused Line Fee	36
3.3	Letter of Credit Fees	36
3.4	Additional Fees	37
3.5	Changes in Laws and Increased Costs of Loans	37
SECTION 4. CONDITIONS PRECEDENT		39
4.1	Conditions Precedent to Initial Loans and Letters of Credit	39
4.2	Conditions Precedent to All Loans and Letters of Credit	43
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST		43
5.1	Grant of Security Interest	43
5.2	Perfection of Security Interests	45
5.3	Special Provisions Regarding Collateral	49
SECTION 6. COLLECTION AND ADMINISTRATION		49
6.1	Borrowers’ Loan Accounts	49
6.2	Statements	49
6.3	Collection of Accounts	50
6.4	Payments	51
6.5	Taxes	52
6.6	Authorization to Make Loans and Provide Letters of Credit	54

 

 

6.7	Use of Proceeds	54
6.8	Appointment of Administrative Borrower as Agent for Requesting Loans and Receipts of Loans and Statements	54
6.9	Bank Products	55
SECTION 7. COLLATERAL REPORTING AND COVENANTS		55
7.1	Collateral Reporting	55
7.2	Accounts Covenants	57
7.3	Inventory Covenants	57
7.4	Equipment and Real Property Covenants	58
7.5	Power of Attorney	59
7.6	Right to Cure	60
7.7	Access to Premises	60
SECTION 8. REPRESENTATIONS AND WARRANTIES		61
8.1	Corporate or Limited Liability Company Existence, Power and Authority	61
8.2	Name; State of Organization; Chief Executive Office; Collateral Locations	61
8.3	Financial Statements; No Material Adverse Change	62
8.4	Priority of Liens; Title to Properties	62
8.5	Tax Returns	63
8.6	Litigation	63
8.7	Compliance with Other Agreements and Applicable Laws	63
8.8	Environmental Compliance	64
8.9	Employee Benefits	64
8.10	Bank Accounts	65
8.11	Intellectual Property	65
8.12	Subsidiaries; Affiliates; Capitalization; Solvency	66
8.13	Labor Disputes	67
8.14	Restrictions on Subsidiaries	67
8.15	Material Contracts	67
8.16	Payable Practices	67

 

 

8.17	OFAC	68
8.18	Acquisition of Purchased Assets	68
8.19	ESOP/ESOT	68
8.20	ESOP Loan Documents	69
8.21	Accuracy and Completeness of Information	69
8.22	Survival of Warranties; Cumulative	70
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS		70
9.1	Maintenance of Existence	70
9.2	New Collateral Locations	71
9.3	Compliance with Laws, Regulations, Etc.	71
9.4	Payment of Taxes and Claims	72
9.5	Insurance	73
9.6	Financial Statements and Other Information	74
9.7	Sale of Assets, Consolidation, Merger, Dissolution, Etc.	77
9.8	Encumbrances	80
9.9	Indebtedness	82
9.10	Loans, Investments, Etc.	85
9.11	Dividends and Redemptions	90
9.12	Transactions with Affiliates	92
9.13	Compliance with ERISA	92
9.14	End of Fiscal Years; Fiscal Quarters	93
9.15	Change in Business	93
9.16	Limitation of Restrictions Affecting Subsidiaries	93
9.17	Capital Expenditures	94
9.18	Fixed Charge Coverage Ratio	94
9.19	Minimum Adjusted EBITDA	95
9.20	Liquidity Trigger Event	96
9.21	ESOP/ESOT; ESOP Loan Documents	96
9.22	Preferred Stock Portfolio	97
9.23	License Agreements	97
9.24	Foreign Assets Control Regulations, Etc.	98

 

 

9.25	After Acquired Real Property	99
9.26	Costs and Expenses	99
9.27	Inactive Subsidiaries	100
9.28	Further Assurances	101
SECTION 10. EVENTS OF DEFAULT AND REMEDIES		101
10.1	Events of Default	101
10.2	Remedies	103
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW		107
11.1	Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver	107
11.2	Waiver of Notices	108
11.3	Amendments and Waivers	108
11.4	Waiver of Counterclaims	109
11.5	Indemnification	109
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS		110
12.1	Term	110
12.2	Interpretative Provisions	111
12.3	Notices	113
12.4	Partial Invalidity	114
12.5	Successors	114
12.6	Confidentiality	115
12.7	Entire Agreement	116
12.8	USA Patriot Act	116
12.9	Counterparts, Etc.	116

 

 

INDEX
TO
EXHIBITS AND SCHEDULES

 

Exhibit A	Form of Borrowing Base Certificate
Exhibit B	Information Certificate
Exhibit C	Form of Compliance Certificate
Exhibit D	Form of Investment Liquidity Certificate
Schedule 1.56	Existing Letter of Credit
Schedule 1.100	Permitted Holders

 

 

LOAN AND SECURITY AGREEMENT

 

This Loan and Security Agreement dated March 2, 2009 is entered into by and among Wachovia Bank, National Association, a national banking association (“Lender” as hereinafter further defined) and Farmer Bros. Co., a Delaware corporation (“Farmer”) and Coffee Bean International, Inc., an Oregon corporation (“CBI” and together with Farmer, each individually a “Borrower” and collectively, “Borrowers” as hereinafter further defined), Coffee Bean Holding Co., Inc., a Delaware corporation (“Coffee Holding”), FBC Finance Company, a California corporation (“Finance”), SL Realty, LLC, a Delaware limited liability company (“Realty” and together with Coffee Holding, Finance, each individually a “Guarantor” and collectively, “Guarantors” as hereinafter further defined).

 

W I T N E S S E T H :

 

WHEREAS, Borrowers and Guarantors have requested that Lender enter into financing arrangements with Borrowers pursuant to which Lender may make loans and provide other financial accommodations to Borrowers; and

 

WHEREAS, Lender is willing to agree to make such loans and provide such financial accommodations on the terms and conditions set forth herein;

 

NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

 

SECTION  1.  DEFINITIONS

 

For purposes of this Agreement, the following terms shall have the respective meanings given to them below:

 

1.1           “Accounts” shall mean, as to each Borrower and Guarantor, all present and future rights of such Borrower and Guarantor to payment of a monetary obligation, whether or not earned by performance, which is not evidenced by chattel paper or an instrument, (a) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (b) for services rendered or to be rendered, (c) for a secondary obligation incurred or to be incurred, or (d) arising out of the use of a credit or charge card or information contained on or for use with the card.

 

1.2           “Acquisition” shall mean the purchase by Farmer of all of the Purchased Assets pursuant to the Purchase Agreements.

 

1.3           “Adjusted EBITDA” shall mean, as to any Person, with respect to any period, an amount equal to (a) EBITDA, plus (b) the amount of all non-cash contributions to employee stock ownership plans by such Person during such period net of all interest income paid by such employee stock ownership plans to such Person with respect to such non-cash contributions, plus

 

 

(c) the amount of all unrealized losses (or minus the amount of all unrealized gains) during such period arising from investments being marked to market, plus , (d) the amount of all losses (or minus the amount of all gains) realized during such period upon the sale or other disposition of any of any investments, plus (e) the amount of all losses (or minus the amount of all gains) realized during such period upon the sale or other disposition of property or assets that are sold or otherwise disposed of outside the ordinary course of business; minus (f) the amount of any interest income of such Person during such period on investment property of such Person, minus , (g) the amount of all dividend income of and equity in earnings of investments to the extent received in cash during such period, plus (h) the amount of all non-cash losses (or minus the amount of all non-cash gains) included in the calculation of Consolidated Net Income as a result of the application of any non-cash LIFO adjustment, plus (i) any extraordinary, one-time or non-recurring losses or charges during such period, minus (j) any extraordinary, one time or non-recurring gains during such period.

 

1.4           “Adjusted Eurodollar Rate” shall mean, with respect to each Interest Period for any Eurodollar Rate Loan comprising part of the same borrowing (including conversions, extensions and renewals), the greater of (a) the rate per annum determined by dividing (i) the London Interbank Offered Rate for such Interest Period by (ii) a percentage equal to: (A) one (1)  minus (B) the Reserve Percentage and (b) one and one quarter (1.25%) percent per annum.  For purposes hereof, “Reserve Percentage” shall mean for any day, that percentage (expressed as a decimal) which is in effect from time to time under Regulation D of the Board of Governors of the Federal Reserve System (or any successor), as such regulation may be amended from time to time or any successor regulation, as the maximum reserve requirement (including, without limitation, any basic, supplemental, emergency, special, or marginal reserves) applicable with respect to Eurocurrency liabilities as that term is defined in Regulation D (or against any other category of liabilities that includes deposits by reference to which the interest rate of Eurodollar Rate Loans is determined), whether or not Lender has any Eurocurrency liabilities subject to such reserve requirement at that time.  Eurodollar Rate Loans shall be deemed to constitute Eurocurrency liabilities and as such shall be deemed subject to reserve requirements without benefits of credits for proration, exceptions or offsets that may be available from time to time to Lender.  The Adjusted Eurodollar Rate shall be adjusted automatically on and as of the effective date of any change in the Reserve Percentage.

 

1.5           “Administrative Borrower” shall mean Farmer Bros. Co., a Delaware corporation, in its capacity as Administrative Borrower on behalf of itself and the other Borrowers pursuant to Section 6.8 hereof and it successors and assigns in such capacity.

 

1.6           “Affiliate” shall mean, with respect to a specified Person, any other Person which directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with such Person, and without limiting the generality of the foregoing, includes (a) any Person which beneficially owns or holds five (5%) percent or more of any class of Voting Stock of such Person or other equity interests in such Person, (b) any Person of which such Person beneficially owns or holds five (5%) percent or more of any class of Voting Stock or

 

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in which such Person beneficially owns or holds five (5%) percent or more of the equity interests and (c) any director or executive officer of such Person.  For the purposes of this definition, the term “control” (including with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by agreement or otherwise.

 

1.7           “Applicable Margin” shall mean, with respect to Prime Rate Loans and Eurodollar Rate Loans, subject to the provisions below, the applicable percentage (on a per annum basis) set forth below if the Monthly Average Excess Availability for the immediately preceding calendar month is at or within the amounts indicated for such percentage as of the last day of the immediately preceding calendar month:

 

Tier		Monthly Average Excess Availability		Applicable Margin with respect to Eurodollar Rate Loans		Applicable Margin with respect to Prime Rate Loans
1		Greater than $20,000,000		2.25	%	.25	%
2		Less than or equal to $20,000,000 and greater than $12,500,000		2.50	%	.50	%
3		Less than or equal to $12,500,000		2.75	%	.75	%

 

provided , that , (i) the Applicable Margin shall be calculated and established once each calendar month (commencing with the month beginning April 1, 2009) based on the Monthly Average Excess Availability and shall remain in effect until adjusted thereafter after the end of the next calendar month, (ii) each adjustment of the Applicable Margin shall be effective as of the first day of each such calendar month based on the Monthly Average Excess Availability for the immediately preceding calendar month, (iii) the Applicable Margin through August 31, 2009 shall be the amount for Tier 2 set forth above and (iv) in the event that Borrowers fail to provide any Borrowing Base Certificate or other information with respect thereto for any period on the date required hereunder, effective as of the date on which such Borrowing Base Certificate or other information was otherwise required, at Lender’s option, the Applicable Margin shall be based on the highest rate above until the next Business Day after the Borrowing Base Certificate or other information is provided for the applicable period at which time the Applicable Margin shall be adjusted as otherwise provided herein.  In the event that at any time after the end of any calendar month the Monthly Average Excess Availability for such calendar month used for the determination of the Applicable Margin was greater than the actual amount of the Monthly Average Excess Availability for such calendar month as a result of the inaccuracy of information provided by or on behalf of Borrowers to Lender for the calculation of Excess Availability, the Applicable Margin for such prior period shall be adjusted to the applicable percentage based on

 

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such actual Monthly Average Excess Availability and any additional interest for the applicable period as a result of such recalculation shall be promptly paid to Lender.  The foregoing shall not be construed to limit the rights of Lender with respect to the amount of interest payable after a Default or Event of Default whether based on such recalculated percentage or otherwise.

 

1.8            “Asset Purchase Agreement” shall mean the Asset Purchase Agreement, dated December 2, 2008, between Farmer and Sellers, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

 

1.9            “Bank Products” shall mean any one or more of the following types or services or facilities provided to any Borrower or any Guarantor by Lender or any Affiliate of Lender: (a) credit cards, procurement cards, debit cards or stored value cards or the processing of credit card sales or receipts, (b) cash management or related services, including (i) the automated clearinghouse transfer of funds for the account of any Borrower or any Guarantor pursuant to agreement or overdraft for any accounts of any Borrower or any Guarantor maintained at Lender or any Affiliate of Lender, and (ii) controlled disbursement services and (c) Hedge Agreements if and to the extent permitted hereunder.

 

1.10          “Borrowers” shall mean, collectively, the following (together with their respective successors and assigns):  (a) Farmer Bros. Co., a Delaware corporation; (b) Coffee Bean International, Inc., an Oregon corporation; and (c) any other Person that at any time after the date hereof becomes a Borrower; each sometimes being referred to herein individually as a “Borrower”.

 

1.11          “Borrowing Base” shall mean, at any time, the amount equal to:

 

(a)           the amount equal to: (i) eighty-five (85%) percent of the Eligible Accounts, plus (ii) the lesser of (A) the Inventory Loan Limit or (B) the sum of  (1) the lesser of sixty-five (65%) percent multiplied by the Value of the Eligible Inventory consisting of finished goods or eighty-five (85%) percent of the Net Recovery Percentage multiplied by the Value of such Eligible Inventory and (2) the lesser of sixty-five (65%) percent multiplied by the Value of the Eligible Inventory consisting of raw materials or eighty-five (85%) percent of the Net Recovery Percentage multiplied by the Value of such Eligible Inventory, minus

 

(b)           Reserves.

 

For purposes only of applying the Inventory Loan Limit, Lender may treat the then undrawn amounts of outstanding Letters of Credit for the purpose of purchasing Eligible Inventory as Revolving Loans to the extent Lender is in effect basing the issuance of the Letter of Credit on the Value of the Eligible Inventory being purchased with such Letter of Credit.  In determining the actual amounts of such Letter of Credit to be so treated for purposes of the sublimit, the outstanding Revolving Loans and Reserves shall be attributed first to any components of the lending formulas set forth above that are not subject to such sublimit, before being attributed to the components of the lending formulas subject to such sublimit.  The amounts of Eligible

 

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Inventory of any Borrower shall, at Lender’s option, be determined based on the lesser of the amount of Inventory set forth in the general ledger of such Borrower or the perpetual inventory record maintained by such Borrower.

 

1.12         “Borrowing Base Certificate” shall mean a certificate by the chief financial officer, vice president of finance, treasurer or controller of Administrative Borrower, substantially in the form of Exhibit A (or another form reasonably acceptable to Lender) setting forth the calculation of the Borrowing Base, including a calculation of each component thereof, all in such detail as shall be reasonably satisfactory to Lender.  All calculations of the Borrowing Base in connection with the preparation of any Borrowing Base Certificate shall originally be made by Borrowers and certified to Lender; provided , that , Lender shall have the right to review and adjust any such calculation to the extent that Lender determines that such calculation is not in accordance with this Agreement.

 

1.13         “Business Day” shall mean any day other than a Saturday, Sunday, or other day on which commercial banks are authorized or required to close under the laws of the State of California or the State of North Carolina, and a day on which Lender is open for the transaction of business, except that if a determination of a Business Day shall relate to any Eurodollar Rate Loans, the term Business Day shall also exclude any day on which banks are closed for dealings in dollar deposits in the London interbank market or other applicable Eurodollar Rate market.

 

1.14         “Capital Expenditures” shall mean with respect to any Person for any period the aggregate of all expenditures by such Person and its Subsidiaries made during such period that in accordance with GAAP are or should be included in “property, plant and equipment” or in a similar fixed asset account on its balance sheet, whether such expenditures are paid in cash or financed and including all obligations under Capital Leases paid or payable during such period.  Notwithstanding the foregoing Capital Expenditures shall not include, without duplication, (a) consideration paid for assets purchased as part of the Acquisition, (b) expenditures for assets made in connection with the replacement, substitution, restoration or repair of assets to the extent (i) financed with insurance proceeds paid on account of the loss of or damage to the assets being replaced, repaired, restored or substituted therefor, (ii) expressly permitted to be so applied in accordance with this Agreement, and (c) expenditures to the extent paid for with the proceeds of any disposition permitted under this Agreement consisting of a sale of like Equipment or like Real Property.

 

1.15         “Capital Leases” shall mean, as applied to any Person, any lease of (or any agreement conveying the right to use) any property (whether real, personal or mixed) by such Person as lessee which in accordance with GAAP, is required to be reflected as a liability on the balance sheet of such Person.

 

1.16         “Capital Stock” shall mean, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of such Person’s capital stock or partnership, limited liability company or other equity interests at any time outstanding, and any and all rights, warrants or options exchangeable for or convertible into such capital stock or

 

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other interests (but excluding any debt security that is exchangeable for or convertible into such capital stock).

 

1.17         “Cash Dominion Event” shall mean (a) an Event of Default exists or has occurred and is continuing, or (b) Excess Availability has been less than $10,000,000 for three (3) or more consecutive Business Days, or (c) Excess Availability is less than $5,000,000 on any day, or (d) a Liquidity Trigger Event has occurred.

 

1.18         “Cash Equivalents” shall mean, at any time, (a) any evidence of Indebtedness with a maturity date of ninety (90) days or less issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof; provided , that , the full faith and credit of the United States of America is pledged in support thereof; (b) certificates of deposit or bankers’ acceptances with a maturity of ninety (90) days or less of any financial institution that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $1,000,000,000; (c) commercial paper (including variable rate demand notes) with a maturity of ninety (90) days or less issued by a corporation (except an Affiliate of any Borrower or Guarantor) organized under the laws of any State of the United States of America or the District of Columbia and rated at least A-1 by Standard & Poor’s Ratings Service, a division of The McGraw-Hill Companies, Inc. or at least P-1 by Moody’s Investors Service, Inc.; (d) repurchase obligations with a term of not more than thirty (30) days for underlying securities of the types described in clause (a) above entered into with any financial institution having combined capital and surplus and undivided profits of not less than $1,000,000,000; (e) repurchase agreements and reverse repurchase agreements relating to marketable direct obligations issued or unconditionally guaranteed by the United States of America or issued by any governmental agency thereof and backed by the full faith and credit of the United States of America, in each case maturing within ninety (90) days or less from the date of acquisition; provided , that , the terms of such agreements comply with the guidelines set forth in the Federal Financial Agreements of Depository Institutions with Securities Dealers and Others, as adopted by the Comptroller of the Currency on October 31, 1985; and (f) investments in money market funds and mutual funds which invest substantially all of their assets in securities of the types described in clauses (a) through (e) above.

 

1.19         “Cash Investment Accounts” shall mean, collectively, deposit or investment accounts (other than Cash Management Accounts and Concentration Accounts) as may be established and maintained from time to time by Parent with Lender containing solely cash and Cash Equivalents.

 

1.20         “Cash Management Accounts” shall have the meaning set forth in Section 6.3(a).

 

1.21         “Change of Control” shall mean (a) the transfer (in one transaction or a series of transactions) of all or substantially all of the assets of any Borrower or Guarantor to any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act), other than as permitted in Section 9.7 hereof; (b) the liquidation or dissolution of any Borrower or Guarantor or the adoption of a plan by the stockholders of any Borrower or Guarantor relating to the dissolution

 

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or liquidation of such Borrower or Guarantor, other than as permitted in Section 9.7 hereof; (c) the acquisition by any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act), except for one or more Permitted Holders, of beneficial ownership, directly or indirectly, of more than fifty (50%) percent of the voting power of the total outstanding Voting Stock of Parent; (d) during any period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board of Directors of Parent (together with any new directors who have been appointed by any Permitted Holder, or whose nomination for election by the stockholders of Parent was approved by a vote of at least sixty-six and two-thirds (66 2/3%) percent of the nominating committee members who were either nominating committee members at the beginning of such period or whose election or nomination for election or direction was previously so approved) cease for any reason to constitute a majority of the Board of Directors of Parent then still in office; or (e) the failure of Parent to own directly or indirectly one hundred (100%) percent of the voting power of the total outstanding Voting Stock of any other Borrower or Guarantor.

 

1.22         “Code” shall mean the Internal Revenue Code of 1986, as the same now exists or may from time to time hereafter be amended, modified, recodified or supplemented, together with all rules, regulations and interpretations thereunder or related thereto.

 

1.23         “Coffee Brewing Equipment” shall mean brewed and liquid coffee equipment, including coffee brewers and grinders, cocoa and cappuccino dispensing machines, and similar machines, and all spare parts relating to any of the foregoing.

 

1.24         “Collateral” shall have the meaning set forth in Section 5 hereof.

 

1.25         “Collateral Access Agreement” shall mean an agreement in writing, in form and substance reasonably satisfactory to Lender, from any lessor of premises to any Borrower or Guarantor, or any other person to whom any Collateral is consigned or who has custody, control or possession of any such Collateral or is otherwise the owner or operator of any premises on which any of such Collateral is located, in favor of Lender with respect to the Collateral at such premises or otherwise in the custody, control or possession of such lessor, consignee or other person.

 

1.26         “Concentration Accounts” shall mean, collectively, the deposit accounts of Borrowers identified on Schedule 8.10 of the Information Certificate as the concentration accounts and such other accounts as may be established after the date of this Agreement in accordance with the terms hereof used to receive funds from the Cash Management Accounts; sometimes being referred to herein individually as a “Concentration Account”.

 

1.27         “Consolidated Net Income” shall mean, with respect to any Person for any period, the aggregate of the net income (loss) of such Person and its Subsidiaries, on a consolidated basis, for such period, all as determined in accordance with GAAP; provided , that ,

 

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(a)            the net income of any Person that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid or payable to such Person or a Subsidiary of such Person;

 

(b)            except to the extent included pursuant to the foregoing clause, the net income of any Person accrued prior to the date it becomes a Subsidiary of such Person or is merged into or consolidated with such Person or any of its Subsidiaries or that Person’s assets are acquired by such Person or by any of its Subsidiaries shall be excluded;

 

(c)            the net income (if positive) of any wholly-owned Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such wholly-owned Subsidiary to such Person or to any other wholly-owned Subsidiary of such Person is not at the date of determination permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such wholly-owned Subsidiary shall be excluded.

 

For the purposes of this definition, net income excludes any gain and non-cash loss together with any related Provision for Taxes for such gain and non-cash loss realized upon the sale or other disposition of any assets that are not sold in the ordinary course of business or of any Capital Stock of such Person or a Subsidiary of such Person, and any net income or non-cash loss realized as a result of changes in accounting principles or the application thereof to such Person and any net income or non-cash loss realized as the result of the extinguishment of debt.

 

1.28         “Credit Facility” shall mean the Loans and Letters of Credit provided to or for the benefit of any Borrower pursuant to Sections 2.1 and 2.2 hereof.

 

1.29         “Default” shall mean an act, condition or event which with notice or passage of time or both would constitute an Event of Default.

 

1.30         “Deposit Account Control Agreement” shall mean an agreement in writing, in form and substance reasonably satisfactory to Lender, by and among Lender, the Borrower or Guarantor with a deposit account at any bank and the bank at which such deposit account is at any time maintained which provides that such bank will comply with instructions originated by Lender directing disposition of the funds in the deposit account without further consent by such Borrower or Guarantor and has such other terms and conditions as Lender may reasonably  require.

 

1.31         “EBITDA” shall mean, as to any Person, with respect to any period, an amount equal to (a) the Consolidated Net Income of such Person and its Subsidiaries for such period determined in accordance with GAAP, plus (b) each of the following, in each case to the extent deducted in the calculation of such Consolidated Net Income for such period: (i) depreciation and amortization (including, but not limited to, imputed interest and deferred compensation) of such Person and its Subsidiaries for such period, all in accordance with GAAP, plus (ii) the Interest Expense of such Person and its Subsidiaries for such period, plus (iii) Provision for

 

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Taxes for such period.

 

1.32         “Eligible Accounts” shall mean Accounts created by a Borrower that in each case satisfy the criteria set forth below as determined by Lender.

 

(a)           In general, Accounts shall be Eligible Accounts if:

 

(i)  such Accounts arise from the actual and bona fide sale and delivery of goods by such Borrower in the ordinary course of its business which transactions are completed in accordance with the terms and provisions contained in any documents related thereto;

 

(ii)  such Accounts are not unpaid more than ninety (90) days after the date of the original invoice for them or more than sixty (60) days after the original due date for them;

 

(iii)  such Accounts comply with the terms and conditions contained in Section 7.2(b) of this Agreement;

 

(iv)  such Accounts do not arise from sales on consignment, guaranteed sale, sale and return, sale on approval, or other terms under which payment by the account debtor may be conditional or contingent;

 

(v)  the chief executive office of the account debtor with respect to such Accounts is located in the United States of America or Canada ( provided , that , at any time promptly upon Lender’s request, such Borrower shall execute and deliver, or cause to be executed and delivered, such other agreements, documents and instruments as may be reasonably required by Lender to perfect the security interests of Lender in those Accounts of an account debtor with its chief executive office or principal place of business in Canada in accordance with the applicable laws of the Province of Canada in which such chief executive office or principal place of business is located and take or cause to be taken such other and further actions as Lender may reasonably request to enable Lender as secured party with respect thereto to collect such Accounts under the applicable Federal or Provincial laws of Canada) or, at Lender’s option, if the chief executive office and principal place of business of the account debtor with respect to such Accounts is located other than in the United States of America or Canada, then if either:  (A) the account debtor has delivered to such Borrower an irrevocable letter of credit issued or confirmed by a bank reasonably satisfactory to Lender and payable only in the United States of America and in U.S. dollars, sufficient to cover such Account, in form and substance reasonably satisfactory to Lender and if reasonably required by Lender, the original of such letter of credit has been delivered to Lender or Lender’s agent and the issuer thereof, and such Borrower has complied with the terms of Section 5.2(f) hereof with respect to the assignment of the proceeds of such letter of credit to Lender or naming Lender as transferee beneficiary thereunder, as Lender may specify, or (B) such Account is subject to credit insurance payable to Lender issued by an insurer and on terms and in an amount reasonably acceptable to Lender, or (C) such

 

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Account is otherwise acceptable in all respects to Lender (subject to such lending formula with respect thereto as Lender may reasonably determine);

 

(vi)  such Accounts do not consist of progress billings (such that the obligation of the account debtors with respect to such Accounts is conditioned upon such Borrower’s satisfactory completion of any further performance under the agreement giving rise thereto), bill and hold invoices or retainage invoices, except as to bill and hold invoices, if Lender shall have received an agreement in writing from the account debtor, in form and substance reasonably satisfactory to Lender, confirming the unconditional obligation of the account debtor to take the goods related thereto and pay such invoice;

 

(vii)  the account debtor with respect to such Accounts has not asserted a counterclaim, defense or dispute and is not owed or does not claim to be owed any amounts that may give rise to any right of setoff or recoupment against such Accounts (but the portion of the Accounts of such account debtor in excess of the amount at any time and from time to time owed by such Borrower to such account debtor or claimed owed by such account debtor may be deemed Eligible Accounts);

 

(viii)  there are no facts, events or occurrences which would impair the validity, enforceability or collectability of such Accounts or reduce the amount payable or delay payment thereunder;

 

(ix)  such Accounts are subject to the first priority, valid and perfected security interest of Lender and any goods giving rise thereto are not, and were not at the time of the sale thereof, subject to any liens except those permitted in this Agreement that are subject to an intercreditor agreement in form and substance satisfactory to Lender between the holder of such security interest or lien and Lender;

 

(x)  neither the account debtor nor any officer or employee of the account debtor with respect to such Accounts is an officer, employee, agent or other Affiliate of any Borrower or Guarantor;

 

(xi)  the account debtors with respect to such Accounts are not any foreign government, the United States of America, any State, political subdivision, department, agency or instrumentality thereof, unless, if the account debtor is the United States of America, any State, political subdivision, department, agency or instrumentality thereof, upon Lender’s request, the Federal Assignment of Claims Act of 1940, as amended or any similar State or local law, if applicable, has been complied with in a manner reasonably satisfactory to Lender;

 

(xii)  there are no proceedings or actions which are threatened or pending against the account debtors with respect to such Accounts which might result in any material adverse change in any such account debtor’s financial condition (including, without limitation, any bankruptcy, dissolution, liquidation, reorganization or similar proceeding);

 

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(xiii)  the aggregate amount of such Accounts owing by a single account debtor do not constitute more than twenty (20%) percent of the aggregate amount of all otherwise Eligible Accounts (but the portion of the Accounts not in excess of the applicable percentages may be deemed Eligible Accounts);

 

(xiv)  such Accounts are not owed by an account debtor who has Accounts unpaid more than ninety (90) days after the original invoice date for them or more than sixty (60) days after the original due date for them which constitute more than fifty (50%) percent of the total Accounts of such account debtor;

 

(xv)  the account debtor is not located in a state requiring the filing of a Notice of Business Activities Report or similar report in order to permit such Borrower to seek judicial enforcement in such State of payment of such Account, unless such Borrower has qualified to do business in such state or has filed a Notice of Business Activities Report or equivalent report for the then current year or such failure to file and inability to seek judicial enforcement is capable of being remedied without any material delay or material cost;

 

(xvi)  such Accounts are owed by account debtors whose total indebtedness to such Borrower does not exceed the credit limit with respect to such account debtors as determined by such Borrower from time to time, to the extent such credit limit as to any account debtor is established consistent with the current practices of such Borrower as of the date hereof and such credit limit is acceptable to Lender (but the portion of the Accounts not in excess of such credit limit may be deemed Eligible Accounts); and

 

(xvii)  such Accounts do not arise from servicing coffee equipment or from rentals or sales of coffee equipment to any account debtor;

 

(xviii)  such Accounts are not owed by a Seller or any Affiliate of any Seller;

 

(xix)  such Accounts are not Sara Lee DSD Business Accounts until such time as the conditions set forth in clause (b) of this definition below are satisfied;

 

(xx)  such Accounts are owed by account debtors deemed creditworthy at all times by Lender in good faith.

 

(b)          Sara Lee DSD Business Accounts shall not be deemed Eligible Accounts until such time as (i) Lender shall have completed a field examination with respect to the Collateral, including the Purchased Assets, in accordance with Lender’s customary procedures and practices, including as required by the nature and circumstances of the business of the Sara Lee DSD Business, the scope and results of which shall be satisfactory to Lender, and (ii) the criteria for Eligible Accounts set forth in this Agreement are satisfied with respect thereto in accordance with this Agreement (or such other or additional criteria as Lender may, at its option, establish with respect thereto in accordance with clause (c) below and subject to such Reserves

 

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as Lender may establish in connection with the Sara Lee DSD Business Accounts); provided , that , in any event such Sara Lee DSD Business Accounts shall not in any event be Eligible Accounts prior to the six (6) month anniversary of the date of this Agreement.

 

(c)           The criteria for Eligible Accounts set forth above may only be changed and any new criteria for Eligible Accounts may only be established by Lender in good faith based on either:  (i) an event, condition or other circumstance arising after the date hereof, or (ii) an event, condition or other circumstance existing on the date hereof to the extent Lender has no written notice thereof from a Borrower prior to the date hereof, in either case under clause (i) or (ii) which adversely affects or could reasonably be expected to adversely affect the Accounts in the good faith determination of Lender.  Any Accounts that are not Eligible Accounts shall nevertheless be part of the Collateral.

 

1.33         “Eligible Domestic In-Transit Inventory” shall mean Inventory (other than Eligible Route Sales Inventory) that would otherwise be Eligible Inventory (other than for its location) that has been shipped from (a) any manufacturing facility or distribution center of any Borrower or Guarantor within the United States of America for receipt at a branch location of any Borrower or Guarantor within the United States of America and permitted hereunder, (b) any branch location of any Borrower or Guarantor within the United States of America for receipt at another branch location of any Borrower or Guarantor within the United States of America and permitted hereunder, or (c) any supplier of any Borrower or Guarantor on a vehicle of any Borrower or Guarantor for receipt at a manufacturing facility or distribution center of any Borrower or Guarantor within the United States of America and permitted hereunder, in each case within five (5) days of shipment, but in any case, which has not yet been received at such manufacturing facility or distribution center and which is insured in accordance with the terms of this Agreement; provided , that , the aggregate amount of Inventory constituting Eligible Domestic In-Transit Inventory for purposes of the calculation of the Borrowing Base at any time will not exceed $3,000,000.

 

1.34         “Eligible Inventory” shall mean, as to each Borrower, Inventory of such Borrower consisting of finished goods held for resale in the ordinary course of the business of such Borrower and raw materials for such finished goods, that in each case satisfy the criteria set forth below as determined by Lender.  In general, Eligible Inventory shall not include: (a) work-in-process; (b) components which are not part of finished goods; (c) spare parts for equipment; (d) packaging and shipping materials; (e) supplies used or consumed in such Borrower’s business; (f) any Inventory that is not located at premises owned or leased and controlled by any Borrower, except (i) for Eligible Domestic In-Transit Inventory, (ii) for Eligible Route Sales Inventory and (iii) Inventory which would otherwise be deemed Eligible Inventory that is not located at premises owned and operated by such Borrower may nevertheless be considered Eligible Inventory: (A) as to locations which are leased by any Borrower, if Lender shall have received a Collateral Access Agreement from the owner and lessor of such location, duly authorized, executed and delivered by such owner and lessor, or if Lender shall not have received such Collateral Access Agreement (or Lender shall determine to accept a Collateral Access

 

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Agreement that does not include all required provisions or provisions in the form otherwise required by Lender), Lender may, at its option, nevertheless consider Inventory at such location to be Eligible Inventory to the extent Lender shall have established such Reserves in respect of amounts at any time payable by such Borrower to the owner and lessor thereof as Lender shall determine in good faith; provided , that , Inventory located in any manufacturing plant, distribution center or warehouse (other than any branch warehouse) leased by any Borrower or Guarantor with respect to which Lender has not obtained a Collateral Access Agreement within thirty (30) days after the date hereof shall not be Eligible Inventory, (B) as to locations owned and operated by a third person, (1) if Lender shall have received a Collateral Access Agreement from such owner and operator with respect to such location, duly authorized, executed and delivered by such owner and operator or if Lender shall not have received such Collateral Access Agreement (or Lender shall determine to accept a Collateral Access Agreement that does not include all required provisions or provisions in the form otherwise required by Lender), Lender may, at its option, nevertheless consider Inventory at such location to be Eligible Inventory to the extent Lender shall have established such Reserves in respect of amounts at any time payable by such Borrower to the owner and operator thereof as Lender shall determine, and (2) in addition, if required by Lender, if Lender shall have received: (x) UCC financing statements between the owner and operator, as consignee or bailee and such Borrower, as consignor or bailor, in form and substance satisfactory to Lender, which are duly assigned to Lender and (y) a written notice to any lender to the owner and operator of the first priority security interest in such Inventory of Lender; (g) Inventory subject to a security interest or lien in favor of any Person other than Lender except those permitted in this Agreement that are subject to an intercreditor agreement in form and substance satisfactory to Lender between the holder of such security interest or lien and Lender; (h) bill and hold goods; (i) unserviceable, obsolete or slow moving Inventory; (j) Inventory that is not subject to the first priority, valid and perfected security interest of Lender; (k) returned Inventory which is not held for sale in the ordinary course of business, or damaged and/or defective Inventory; (l) Inventory purchased or sold on consignment; (m) Inventory located outside the United States of America, (n) any Inventory that contains or bears any intellectual property rights licensed to such Borrower unless Lender is satisfied that it may sell or otherwise dispose of such Inventory without (i) infringing the rights of such licensor, (ii) violating any contract with such licensor, or (iii) incurring any liability with respect to payment of royalties other than royalties incurred pursuant to sale of such Inventory under the current licensing agreement, (o) Inventory located at any owned or leased locations of any Borrower at which Inventory with a net book value of less than $100,000 is stored, (p) Inventory of such Borrower associated with “Brewmatic” division, (q) any Inventory consisting of equipment, including Coffee Brewing Equipment, and (r) any Inventory that has not been subject to at least one periodic cycle count or wall to wall counts during the previous fiscal year.  The criteria for Eligible Inventory set forth above may only be changed and any new criteria for Eligible Inventory may only be established by Lender in good faith based on either: (i) an event, condition or other circumstance arising after the date hereof, or (ii) an event, condition or other circumstance existing on the date hereof to the extent Lender has no written notice thereof from a Borrower prior to the date hereof, in either case under clause (i) or (ii) which adversely affects or

 

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could reasonably be expected to adversely affect the Inventory in the good faith determination of Lender.  Any Inventory that is not Eligible Inventory shall nevertheless be part of the Collateral.  Notwithstanding the foregoing, no portion of the Inventory acquired in connection with the Acquisition shall be Eligible Inventory until Lender shall have completed a field examination with respect to such Inventory in accordance with Lender’s customary procedures and practices and as otherwise reasonably required, and the criteria for Eligible Inventory set forth herein are satisfied with respect thereto in accordance with this Agreement (or such other or additional criteria as Lender may, at its option, reasonably establish with respect thereto in accordance with this Agreement and subject to such Reserves as Lender may reasonably establish in connection therewith).

 

1.35         “Eligible Route Sales Inventory” shall mean Inventory (other than Eligible Domestic In-Transit Inventory) that would otherwise be Eligible Inventory (other than for its location) that has been shipped from a branch location of any Borrower or Guarantor within the United States of America and is located on vehicles making route sales in the ordinary course of business; provided , that , the aggregate amount of Inventory constituting Eligible Route Sales Inventory for purposes of the calculation of the Borrowing Base at any time will not exceed $5,000,000.

 

1.36         “Environmental Laws” shall mean all foreign, Federal, State and local laws (including common law), legislation, rules, codes, licenses, permits (including any conditions imposed therein), authorizations, judicial or administrative decisions, injunctions or agreements between any Borrower or Guarantor and any Governmental Authority, (a) relating to pollution and the protection, preservation or restoration of the environment (including air, water vapor, surface water, ground water, drinking water, drinking water supply, surface land, subsurface land, plant and animal life or any other natural resource), or to human health or safety, (b) relating to the exposure to, or the use, storage, recycling, treatment, generation, manufacture, processing, distribution, transportation, handling, labeling, production, release or disposal, or threatened release, of Hazardous Materials, or (c) relating to all laws with regard to recordkeeping, notification, disclosure and reporting requirements respecting Hazardous Materials.  The term “Environmental Laws” includes (i) the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Federal Superfund Amendments and Reauthorization Act, the Federal Water Pollution Control Act of 1972, the Federal Clean Water Act, the Federal Clean Air Act, the Federal Resource Conservation and Recovery Act of 1976 (including the Hazardous and Solid Waste Amendments thereto), the Federal Solid Waste Disposal and the Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide Act, and the Federal Safe Drinking Water Act of 1974, (ii) applicable state counterparts to such laws and (iii) any common law or equitable doctrine that may impose liability or obligations for injuries or damages due to, or threatened as a result of, the presence of or exposure to any Hazardous Materials.

 

1.37         “Equipment” shall mean, as to each Borrower and Guarantor, all of such Borrower’s and Guarantor’s now owned and hereafter acquired equipment, wherever located,

 

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including machinery, data processing and computer equipment (whether owned or licensed and including embedded software), vehicles, tools, furniture, fixtures, all attachments, accessions and property now or hereafter affixed thereto or used in connection therewith, and substitutions and replacements thereof, wherever located.

 

1.38                            “ERISA” shall mean the Employee Retirement Income Security Act of 1974, together with all rules, regulations and interpretations thereunder or related thereto.

 

1.39                            “ERISA Affiliate” shall mean any person required to be aggregated with any Borrower, any Guarantor or any of its or their respective Subsidiaries under Sections 414(b), 414(c), 414(m) or 414(o) of the Code.

 

1.40                            “ERISA Event” shall mean (a) any “reportable event”, as defined in Section 4043(c) of ERISA or the regulations issued thereunder, with respect to a Pension Plan, other than events as to which the requirement of notice has been waived in regulations by the Pension Benefit Guaranty Corporation; (b) the adoption of any amendment to a Pension Plan that would require the provision of security pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (c) a complete or partial withdrawal by any Borrower, Guarantor or any ERISA Affiliate from a Multiemployer Plan or a cessation of operations which is treated as such a withdrawal or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Pension Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the Pension Benefit Guaranty Corporation to terminate a Pension Plan; (e) an event or condition which could reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan; (f) the imposition of any liability under Title IV of ERISA, other than the Pension Benefit Guaranty Corporation premiums due but not delinquent under Section 4007 of ERISA, upon any Borrower, Guarantor or any ERISA Affiliate in excess of $250,000 and (g) any other event or condition with respect to a Plan including any Pension Plan subject to Title IV of ERISA maintained, or contributed to, by any ERISA Affiliate that could reasonably be expected to result in liability of any Borrower in excess of $250,000.

 

1.41                            “ESOP” shall mean Farmer Bros. Co. Amended and Restated Employee Stock Ownership Plan, effective January 1, 2000, as the same now exists and may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

 

1.42                            “ESOP Documents” shall mean, collectively, the ESOP, the ESOT Trust Agreement and all other agreements, documents and instruments executed and/or delivered in connection with any of the foregoing, as each of the foregoing now exists and may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

 

1.43                            “ESOP Indebtedness” shall mean the Indebtedness owing by the ESOP to Parent pursuant to the ESOP Loan Documents and all interest, fees, reimbursement obligations, expenses, indemnification and other obligations with respect thereto.

 

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1.44                            “ESOP Loan Agreements” shall mean the (a) ESOP Loan Agreement, dated as of March 28, 2000, between Parent, as lender and the ESOT and (b) ESOP Loan Agreement No. 2, dated as of July 21, 2003, between Parent, as lender, and the ESOT, in each case as the same now exists and may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

 

1.45                            “ESOP Loan Documents” shall mean, collectively, the ESOP Loan Agreements, the ESOP Notes and all other agreements, documents and instruments executed and/or delivered in connection with any of the foregoing, as each of the foregoing now exists and may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced

 

1.46                            “ESOP Notes” means the (a) Promissory Note, dated March 28, 2000 and (b) Promissory Note, dated July 21, 2003, in each case payable by the ESOT to Parent, as the same now exists and may hereafter be amended, modified, supplemented, executed, renewed, restated or replaced.

 

1.47                            “ESOP Shares” shall mean Company Stock, as defined in the ESOP as in effect on the date of this Agreement.

 

1.48                            “ESOT” shall mean Farmer Bros. Co. Employee Stock Ownership Benefit Trust, created by Borrower pursuant to the ESOT Trust Agreement to implement the ESOP, as the same now exists and may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

 

1.49                            “ESOT Trust Agreement” shall mean the Farmer Bros. Co. Employee Stock Ownership Trust Agreement, dated September 28, 2005, between Parent and the ESOT Trustee, as the same now exists and may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

 

1.50                            “ESOT Trustee” shall mean Greatbanc Trust Company and any successors in such capacity.

 

1.51                            “Eurodollar Rate Loans” shall mean any Loans or portion thereof on which interest is payable based on the Adjusted Eurodollar Rate in accordance with the terms hereof.

 

1.52                            “Event of Default” shall mean the occurrence or existence of any event or condition described in Section 10.1 hereof.

 

1.53                            “Excess Availability” shall mean the amount, as determined by Lender, calculated at any date of determination in accordance with the terms hereof, equal to: (a) the lesser of:  (i)  the Borrowing Base and (ii) the Maximum Credit (in each case under (i) or (ii) after giving effect to any Reserves other than any Reserves in respect of Letter of Credit Obligations), minus (b) the sum of:  (i) the amount of all then outstanding and unpaid Obligations (but not including for this purpose Obligations of a Borrower arising pursuant to any guarantees in favor of Lender of the

 

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Obligations of the other Borrowers or any outstanding Letter of Credit Obligations), plus (ii) the amount of all Reserves then established in respect of Letter of Credit Obligations, plus (iii) the aggregate amount of all then outstanding and unpaid trade payables and other obligations of such Borrower which are outstanding more than thirty (30) days past due as of the end of the immediately preceding month (other than trade payables or other obligations being contested or disputed by such Borrower in good faith), plus (iv) without duplication, the amount of checks issued by such Borrower to pay trade payables and other obligations which are more than thirty (30) days past due as of the end of the immediately preceding month (other than trade payables or other obligations being contested or disputed by such Borrower in good faith), but not yet sent.

 

1.54                    “Exchange Act” shall mean the Securities Exchange Act of 1934, together with all rules, regulations and interpretations thereunder or related thereto.

 

1.55                    “Excluded Property” shall mean:

 

(a)                                   motor vehicles subject to certificates of title in accordance with applicable State law;

 

(b)                                Real Property owned by Borrowers and Guarantors on the date hereof; and .

 

(c)                                 any rights or interests in any contract, lease, permit, license, charter or license agreement covering real or personal property, as such, if under the terms of such contract, lease, permit, license, charter or license agreement, or applicable law with respect thereto, the valid grant of a security interest or lien therein to Lender is prohibited and such prohibition has not been or is not waived or the consent of the other party to such contract, lease, permit, license, charter or license agreement has not been or is not otherwise obtained or under applicable law such prohibition cannot be waived; provided , that , the foregoing exclusion shall in no way be construed (i) to apply if any such prohibition is unenforceable under Sections 9-406, 9-407 or 9-408 of the UCC or other applicable law or (ii) so as to limit, impair or otherwise affect Lender’s unconditional continuing security interests in and liens upon any rights or interests of a Borrower in or to monies due or to become due under any such contract, lease, permit, license, charter or license agreement (including any Receivables).

 

1.56                            “Existing Letter of Credit” shall mean the letter of credit issued for the account of Parent listed on Schedule 1.56 hereto, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

 

1.57                            “Fee Letter” shall mean the letter agreement, dated of even date herewith, by and between Borrowers and Lender, setting forth certain fees payable by Borrowers to Lender, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

 

1.58                            “Financing Agreements” shall mean, collectively, this Agreement and all notes,

 

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guarantees, security agreements, deposit account control agreements, investment property control agreements, intercreditor agreements and all other agreements, documents and instruments now or at any time hereafter executed and/or delivered by any Borrower or Guarantor in connection with this Agreement; provided , that , in no event shall the term Financing Agreements be deemed to include any Hedge Agreement.

 

1.59                            “Fixed Charge Coverage Ratio” shall mean, as to any Person, with respect to any period, the ratio of (a) the amount equal to the Adjusted EBITDA of such Person and its Subsidiaries, on a consolidated basis, for such period, to (b) Fixed Charges of such Person and its Subsidiaries, on a consolidated basis, for such period.

 

1.60                            “Fixed Charges” shall mean, as to any Person and its Subsidiaries, on a consolidated basis, with respect to any period, the sum of, without duplication, (a) all Interest Expense paid in cash, plus (b) all principal payments of Indebtedness for borrowed money, and payments of Indebtedness for the deferred purchase price of any property or services (including, without limitation, any indemnification, adjustment of purchase price, earn-outs or other similar obligations incurred in connection with the Acquisition or any acquisition or sale or other disposition of assets) and Capital Leases (and without duplication of items (a) and (b) of this definition, the interest component with respect to Indebtedness under Capital Leases), plus (c) the amount of Capital Expenditures of such Person and its Subsidiaries during such period to the extent not financed by Indebtedness permitted hereunder for such purpose, plus (d) all taxes paid (less all tax refunds received) by such person and its Subsidiaries in cash during such period, plus (e) all dividends, distributions, repurchases and redemptions in respect of Capital Stock paid by such Person and its Subsidiaries during such period in cash.

 

1.61                            “Funding Bank” shall have the meaning given to such term in Section 3.5 hereof.

 

1.62                            “GAAP” shall mean generally accepted accounting principles in the United States of America as in effect from time to time as set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and the statements and pronouncements of the Financial Accounting Standards Board which are applicable to the circumstances as of the date of determination consistently applied, except that, for purposes of Sections 9.18 and 9.19 hereof, GAAP shall be determined on the basis of such principles in effect on the date hereof and consistent with those used in the preparation of the most recent audited financial statements delivered to Lender prior to the date hereof.

 

1.63                            “Governmental Authority” shall mean any nation or government, any state, province, or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

 

1.64                            “Guarantors” shall mean, collectively, the following (together with their respective successors and assigns):  (a) Coffee Bean Holding Co., Inc., a Delaware corporation; (b) FBC Finance Company, a California corporation; (c) SL Realty, LLC, a Delaware limited

 

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liability company; and (d) any other Person that at any time after the date hereof becomes party to a guarantee in favor of Lender or otherwise liable on or with respect to the Obligations or who is the owner of any property which is security for the Obligations (other than Borrowers); each sometimes being referred to herein individually as a “Guarantor”.

 

1.65                            “Hazardous Materials” shall mean any hazardous, toxic or dangerous substances, materials and wastes, including hydrocarbons (including naturally occurring or man-made petroleum and hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation, radioactive materials, biological substances, polychlorinated biphenyls, pesticides, herbicides and any other kind and/or type of pollutants or contaminants (including materials which include hazardous constituents), sewage, sludge, industrial slag, solvents and/or any other similar substances, materials, or wastes and including any other substances, materials or wastes that are or become regulated under any Environmental Law (including any that are or become classified as hazardous or toxic under any Environmental Law).

 

1.66                            “Hedge Agreement” shall mean an agreement between Borrower and Lender or any Affiliate of Lender that is a swap agreement as such term is defined in 11 U.S.C. Section 101, and including any rate swap agreement, basis swap, forward rate agreement, commodity swap, interest rate option, forward foreign exchange agreement, spot foreign exchange agreement, rate cap agreement rate, floor agreement, rate collar agreement, currency swap agreement, cross-currency rate swap agreement, currency option, any other similar agreement (including any option to enter into any of the foregoing or a master agreement for any the foregoing together with all supplements thereto) for the purpose of protecting against or managing exposure to fluctuations in interest or exchange rates, currency valuations or commodity prices; sometimes being collectively referred to herein as “Hedge Agreements”.

 

1.67                            “Inactive Subsidiary” shall mean Sierra Herb Company, Inc., a California corporation.

 

1.68                            “Indebtedness” shall mean, with respect to any Person, any liability, whether or not contingent, (a) in respect of borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof) or evidenced by bonds, notes, debentures or similar instruments; (b) representing the balance deferred and unpaid of the purchase price of property or services purchased by such Person which are due six (6) months or more from the date after such property is acquired or such services are completed, and including, without limitation, customary indemnification, adjustment of purchase price or similar obligations, earn-outs or other similar obligations, in each case, incurred in connection with the Acquisition, any acquisition permitted under Section 9.10(i) of this Agreement (but excluding trade debt and accrued expenses incurred in the ordinary course of business on normal trade terms and not overdue by more than ninety (90) days) which would appear as liabilities on a balance sheet of such Person in accordance with GAAP, (c) all obligations as lessee under leases which have been, or should be, in accordance with GAAP recorded as Capital Leases; (d) any contractual obligation, contingent or otherwise, of such Person to pay or be liable for the payment of any indebtedness described in this definition of another Person, including, without

 

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limitation, any such indebtedness, directly or indirectly guaranteed, or any agreement to purchase, repurchase, or otherwise acquire such indebtedness, obligation or liability or any security therefor, or to provide funds for the payment or discharge thereof, or to maintain solvency, assets, level of income, or other financial condition; (e) all obligations with respect to redeemable stock and redemption or repurchase obligations under any Capital Stock or other equity securities issued by such Person; (f) all reimbursement obligations and other liabilities of such Person with respect to surety bonds (whether bid, performance or otherwise), letters of credit, banker’s acceptances, drafts or similar documents or instruments issued for such Person’s account; (g) all indebtedness of such Person in respect of indebtedness of another Person for borrowed money or indebtedness of another Person otherwise described in this definition which is secured by any consensual lien, security interest, collateral assignment, conditional sale, mortgage, deed of trust, or other encumbrance on any asset of such Person, whether or not such obligations, liabilities or indebtedness are assumed by or are a personal liability of such Person, all as of such time; (h) all obligations, liabilities and indebtedness of such Person (marked to market) arising under swap agreements, cap agreements and collar agreements and other agreements or arrangements designed to protect such person against fluctuations in interest rates or currency or commodity values; (i) all obligations owed by such Person under License Agreements with respect to non-refundable, advance or minimum guarantee royalty payments; (j) indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer to the extent such Person is liable therefor as a result of such Person’s ownership interest in such entity, except to the extent that the terms of such indebtedness expressly provide that such Person is not liable therefor or such Person has no liability therefor as a matter of law and (k) the principal and interest portions of all rental obligations of such Person under any synthetic lease or similar off-balance sheet financing where such transaction is considered to be borrowed money for tax purposes but is classified as an operating lease in accordance with GAAP.

 

1.69                            “Information Certificate” shall mean, collectively, the Information Certificates of Borrowers and Guarantors constituting Exhibit B hereto containing material information with respect to Borrowers and Guarantors, their respective businesses and assets provided by or on behalf of Borrowers and Guarantors to Lender in connection with the preparation of this Agreement and the other Financing Agreements and the financing arrangements provided for herein.

 

1.70                            “Intellectual Property” shall mean, as to each Borrower and Guarantor, such Borrower’s and Guarantor’s now owned and hereafter arising or acquired:  patents, patent rights, patent applications, copyrights, works which are the subject matter of copyrights, copyright applications, copyright registrations, trademarks, servicemarks, trade names, trade styles, trademark and service mark applications, and licenses and rights to use any of the foregoing and all applications, registrations and recordings relating to any of the foregoing as may be filed in the United States Copyright Office, the United States Patent and Trademark Office or in any similar office or agency of the United States of America, any State thereof, any political subdivision thereof or in any other country or jurisdiction, together with all rights and privileges

 

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arising under applicable law with respect to any Borrower’s or Guarantor’s use of any of the foregoing; all extensions, renewals, reissues, divisions, continuations, and continuations-in-part of any of the foregoing; all rights to sue for past, present and future infringement of any of the foregoing; inventions, trade secrets, formulae, processes, compounds, drawings, designs, blueprints, surveys, reports, manuals, and operating standards; goodwill (including any goodwill associated with any trademark or servicemark, or the license of any trademark or servicemark); customer and other lists in whatever form maintained; delivery routes; trade secret rights, copyright rights, rights in works of authorship, domain names and domain name registrations; software and contract rights relating to computer software programs, in whatever form created or maintained.

 

1.71                            “Interest Expense” shall mean, for any period, as to any Person, as determined in accordance with GAAP, the amount equal to the total interest expense of such Person and its Subsidiaries on a consolidated basis for such period, whether paid or accrued (including the interest component of any Capital Lease for such period), and in any event, including, without limitation, (a) discounts in connection with the sale of any Accounts, (b) bank fees,  commissions, discounts and other fees and charges owed with respect to letters of credit, banker’s acceptances or similar instruments or any factoring, securitization or similar arrangements, (c) interest payable by addition to principal or in the form of property other than cash and any other interest expense not payable in cash, and (d) the costs or fees for such period associated with Hedge Agreements to the extent not otherwise included in such total interest expense (excluding breakage costs incurred in connection with the termination of Hedge Agreements on or about the date hereof, if any), provided , that , Interest Expense shall not include, to the extent treated as interest in accordance with GAAP, all non-cash amounts in connection with borrowed money (including paid-in-kind interest).

 

1.72                            “Interest Period” shall mean for any Eurodollar Rate Loan, a period of approximately one (1), two (2), or three (3) months duration as any Borrower (or Administrative Borrower on behalf of such Borrower) may elect, the exact duration to be determined in accordance with the customary practice in the applicable Eurodollar Rate market; provided, that, such Borrower (or Administrative Borrower on behalf of such Borrower) may not elect an Interest Period which will end after the last day of the then-current term of this Agreement.

 

1.73                            “Interest Rate” shall mean,

 

(a)                                   Subject to clause (b) of this definition below:

 

(i)                  as to Prime Rate Loans, a rate equal to the then Applicable Margin for Prime Rate Loans on a per annum basis plus the Prime Rate, and

 

(ii)               as to Eurodollar Rate Loans, a rate equal to the then Applicable Margin for Eurodollar Rate Loans on a per annum basis plus the Adjusted Eurodollar Rate.

 

(b)                                Notwithstanding anything to the contrary contained herein,

 

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---

 

(i)                  Lender may, at its option, increase the Applicable Margin otherwise used to calculate the Interest Rate for Prime Rate Loans and Eurodollar Rate Loans in each case to the highest percentage set forth in the definition of the term Applicable Margin for each category of Loans (without regard to the amount of Monthly Average Excess Availability) plus two (2%) percent per annum, for the period from and after the date of the occurrence of an Event of Default but only for so long as such Event of Default is continuing; and

 

(ii)               Lender may, at its option, increase the Applicable Margin otherwise used to calculate the Interest Rate for Prime Rate Loans and Eurodollar Rate Loans, in each case to the highest percentage set forth in the definition of the term Applicable Margin for each category of Loans (without regard to the amount of Monthly Average Excess Availability) plus two (2%) percent per annum, on Revolving Loans at any time outstanding in the aggregate in excess of the Borrowing Base (in each case whether or not such excess(es) arise or are made with or without the knowledge or consent of Lender and whether made before or after an Event of Default).

 

1.74                            “Inventory” shall mean, as to each Borrower and Guarantor, all of such Borrower’s and Guarantor’s now owned and hereafter existing or acquired goods, wherever located, which (a) are leased by such Borrower or Guarantor as lessor; (b) are held by such Borrower for sale or lease or to be furnished under a contract of service; (c) are furnished by such Borrower or Guarantor under a contract of service; or (d) consist of raw materials, work in process, finished goods or materials used or consumed in its business.

 

1.75                            “Inventory Loan Limit” shall mean, at any time on and after the date on which the Sara Lee DSD Business Accounts have become Eligible Accounts, the amount equal to $25,000,000.

 

1.76                            “Investment Property Control Agreement” shall mean an agreement in writing, in form and substance reasonably satisfactory to Lender, by and among Lender, any Borrower or Guarantor (as the case may be) and any securities intermediary, commodity intermediary or other person who has custody, control or possession of any investment property of such Borrower or Guarantor acknowledging that such securities intermediary, commodity intermediary or other person has custody, control or possession of such investment property on behalf of Lender, that it will comply with entitlement orders originated by Lender with respect to such investment property, or other instructions of Lender, and has such other terms and conditions as Lender may reasonably require.

 

1.77                            “Lender” shall mean Wachovia Bank, National Association, a national banking association, and its successors and assigns.

 

1.78                            “Lender Payment Account” shall mean account no. 5000000030266 of Lender at Wachovia Bank, National Association or such other account of Lender as Lender may from time to time designate to Administrative Borrower as the Lender Payment Account for purposes of this Agreement and the other Financing Agreements.

 

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1.79                            “Letter of Credit Documents” shall mean, with respect to any Letter of Credit, such Letter of Credit, any amendments thereto, any documents delivered in connection therewith, any application therefor, and any agreements, instruments, guarantees or other documents (whether general in application or applicable only to such Letter of Credit) governing or providing for (a) the rights and obligations of the parties concerned or at risk or (b) any collateral security for such obligations.

 

1.80                            “Letter of Credit Limit” shall mean $10,000,000.

 

1.81                            “Letter of Credit Obligations” shall mean, at any time, the sum of (a) the aggregate undrawn amount of all Letters of Credit outstanding at such time, plus (b) the aggregate amount of all drawings under Letters of Credit for which Lender has not at such time been reimbursed.

 

1.82                            “Letters of Credit” shall mean all letters of credit (whether documentary or stand-by and whether for the purchase of inventory, equipment or otherwise) issued by Lender for the account of any Borrower pursuant to this Agreement, and all amendments, renewals, extensions or replacements thereof.

 

1.83                            “License Agreements” shall have the meaning set forth in Section 8.11 hereof.

 

1.84                            “Liquidity Trigger Event” shall mean the determination by Lender that the sum of (a) the aggregate dollar value of the Preferred Stock Portfolio plus (b) the aggregate amount of cash and Cash Equivalents in the Cash Investment Accounts, is less than $35,000,000; it being understood that Lender shall only require one deposit of cash collateral pursuant to Section 9.20 of this Agreement regardless of the number of Liquidity Trigger Events that occur during the term of this Agreement.

 

1.85                            “Loans” shall mean the Revolving Loans.

 

1.86                            “London Interbank Offered Rate” shall mean, with respect to any Eurodollar Rate Loan for the Interest Period applicable thereto, the rate appearing on Reuters Screen LIBOR01 Page (or on any successor or substitute page of such service, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such page of such service, as determined by Lender from time to time for purposes of providing quotations of interest rates applicable to eurodollar deposits in dollars in the London interbank market) at approximately 11:00 A.M. (London time) two (2) Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, that, if more than one rate is specified on such Page for such comparable period, the applicable rate shall be the arithmetic mean of all such rates.  In the event that such rate is not available at such time for any reason, then the term “London Interbank Offered Rate” shall mean, with respect to any Eurodollar Rate Loan for the Interest Period applicable thereto, the rate of interest per annum at which dollar deposits of $5,000,000 and for a term comparable to such Interest Period are offered by the principal London office of Lender in immediately available funds in the London

 

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interbank market at approximately 11:00 a.m. London time two (2) Business Days prior to the commencement of such Interest Period.

 

1.87                            “Material Adverse Effect” shall mean a material adverse effect on (a) the financial condition, business, performance or operations of any Borrower or of Borrowers and Guarantors (taken as a whole) (b) the legality, validity or enforceability of this Agreement or any of the other Financing Agreements; (c) the legality, validity, enforceability, perfection or priority of the security interests and liens of Lender upon the Collateral; (d) the Collateral or its value; (e) the ability of Borrowers and Guarantors (taken as a whole) to repay the Obligations or of any Borrower to perform its obligations under this Agreement or any of the other Financing Agreements as and when to be performed; or (f) the ability of Lender to enforce the Obligations or realize upon the Collateral or otherwise with respect to the rights and remedies of Lender under this Agreement or any of the other Financing Agreements.

 

1.88                            “Material Contract” shall mean: (a) the Asset Purchase Agreement, (b) each of the Operational Agreements (as defined in the Asset Purchase Agreement as in effect on the date hereof), (c) the Option Agreement; (d) any contract or other agreement (other than the Financing Agreements), written or oral, of any Borrower or Guarantor involving monetary liability of or to any Person in an amount in excess of $500,000 in any fiscal year and (e) any other contract or other agreement (other than the Financing Agreements), whether written or oral, to which any Borrower or Guarantor is a party as to which the breach, nonperformance, cancellation or failure to renew by any party thereto would have a Material Adverse Effect.

 

1.89                            “Maturity Date” shall have the meaning set forth in Section 12.1 hereof.

 

1.90                            “Maximum Credit” shall mean the amount of $50,000,000.

 

1.91                            “Monthly Average Excess Availability” shall mean, at any time, the daily average of the Excess Availability for the immediately preceding calendar month as calculated by Lender.

 

1.92                            “Multiemployer Plan” shall mean a “multi-employer plan” as defined in Section 4001(a)(3) of ERISA which is or was at any time during the current year or the immediately preceding six (6) years contributed to by any Borrower, Guarantor or any ERISA Affiliate or with respect to which any Borrower, Guarantor or any ERISA Affiliate may incur any liability.

 

1.93                            “Net Cash Proceeds” shall mean the aggregate cash proceeds payable to Parent or any of its Subsidiaries in respect of any sale, lease, transfer or other disposition of any assets or properties, or interest in assets and properties or as proceeds of any loans or other financial accommodations provided to it or as proceeds from the issuance and/or sale of any Capital Stock, in each case net of the reasonable and customary direct costs relating to such sale, lease, transfer or other disposition or loans or other financial accommodation or issuance and/or sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and taxes paid or payable as a result thereof (after taking into account any available tax credits or

 

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deductions and any tax sharing arrangements), and amounts applied to the repayment of indebtedness secured by a valid and enforceable lien on the asset or assets that are the subject of such sale or other disposition required to be repaid in connection with such transaction.

 

1.94                            “Net Recovery Percentage” shall mean the fraction, expressed as a percentage, (a) the numerator of which is the amount equal to the amount of the recovery in respect of the Inventory at such time on a “net orderly liquidation value” basis as set forth in the most recent acceptable appraisal of Inventory received by Lender in accordance with Section 7.3, net of operating expenses, liquidation expenses and commissions, and (b) the denominator of which is the applicable original cost of the aggregate amount of the Inventory subject to such appraisal.

 

1.95                            “Obligations” shall mean (a) any and all Loans, Letter of Credit Obligations and all other obligations, liabilities and indebtedness of every kind, nature and description owing by any or all of Borrowers to Lender and/or any of its Affiliates, including principal, interest, charges, fees, costs and expenses, however evidenced, whether as principal, surety, endorser, guarantor or otherwise, arising under this Agreement or any of the other Financing Agreements or on account of any Letter of Credit and all other Letter of Credit Obligations, whether now existing or hereafter arising, whether arising before, during or after the initial or any renewal term of this Agreement or after the commencement of any case with respect to such Borrower under the United States Bankruptcy Code or any similar statute (including the payment of interest and other amounts which would accrue and become due but for the commencement of such case, whether or not such amounts are allowed or allowable in whole or in part in such case), whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, or secured or unsecured and (b) for purposes only of Section 5.1 hereof and the Security Provisions and subject to the priority in right of payment set forth in Section 6.4 hereof, all obligations, liabilities and indebtedness of every kind, nature and description owing by any Borrower to Lender or any Affiliate of Lender arising under or pursuant to any Bank Products, whether now existing or hereafter arising (and in the case of any Affiliate of Lender, Lender shall be deemed to act as agent for such Affiliate for purposes of Section 5.1 hereof and references to Lender shall include such Affiliate).

 

1.96                            “OFAC” means the U.S. Department of the Treasury’s Office of Foreign Assets Control.

 

1.97                            “Option Agreement” shall mean the Right of First Offer and Purchase Option Agreement, dated the date hereof, by and between Sara Lee and Farmer.

 

1.98                            “Parent” shall mean Farmer Bros. Co., a Delaware corporation, and its successors and assigns.

 

1.99                            “Participant” shall mean any financial institution that acquires and holds a participation in the interest of Lender in any of the Loans and Letters of Credit in conformity with the provisions of Section 12.5 of this Agreement governing participations.

 

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1.100                      “Permitted Holders” shall mean the persons listed on Schedule 1.100 hereto.

 

1.101                      “Person” or “person” shall mean any individual, sole proprietorship, partnership, corporation (including any corporation which elects subchapter S status under the Code), limited liability company, limited liability partnership, business trust, unincorporated association, joint stock corporation, trust, joint venture or other entity or any government or any agency or instrumentality or political subdivision thereof.

 

1.102                      “Pension Plan” shall mean a pension plan (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA which any Borrower or Guarantor sponsors, maintains, or to which any Borrower, Guarantor or ERISA Affiliate makes, is making, or is obligated to make contributions, other than a Multiemployer Plan.

 

1.103                      “Plan” shall mean an employee benefit plan (as defined in Section 3(3) of ERISA) which any Borrower or Guarantor sponsors, maintains, or to which it makes, is making, or is obligated to make contributions, or in the case of a Multiemployer Plan has made contributions at any time during the immediately preceding six (6) plan years or with respect to which any Borrower or Guarantor may incur liability.

 

1.104                      “Preferred Stock Portfolio” shall mean investment property owned by Finance consisting of preferred stock in publicly filed companies (other than Parent) to the extent such preferred stock is held in the Specified Investment Account.

 

1.105                      “Prime Rate” shall mean, on any date, the greatest of (a) the rate from time to time publicly announced by Lender, or its successors, as its prime rate, whether or not such announced rate is the best rate available at such bank, (b) the Federal Funds Effective Rate in effect on such day plus one-half (1/2%) percent, (c) the Adjusted Eurodollar Rate for a one month Interest Period on such day plus one (1%) percent and (d) three and one quarter (3.25%) percent per annum  The term “Federal Funds Effective Rate” shall mean, for any period, a fluctuating interest rate per annum equal, for each day during such period, 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 published for any day that is a Business Day, the average of the quotations for such day on such transactions received by Lender from three Federal Funds brokers of recognized standing selected by it.

 

1.106                      “Prime Rate Loans” shall mean any Loans or portion thereof on which interest is payable based on the Prime Rate in accordance with the terms thereof.

 

1.107                      “Property Loss Event” means (a) any loss of or damage to any assets or property of any Borrower or Guarantor that results in a claim to proceeds of insurance or (b) any condemnation or other taking of any assets or property of any Borrower or Guarantor.

 

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1.108                      “Provision for Taxes” shall mean an amount equal to all taxes imposed on or measured by, or determined by reference to, net income, whether Federal, State, Provincial, county or local, and whether foreign or domestic, that are paid or payable by any Person in respect of any period in accordance with GAAP.

 

1.109                      “Purchase Agreements” shall mean, collectively, the following (as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced): (a) the Asset Purchase Agreement, (b) each of the Operational Agreements (as defined in the Asset Purchase Agreement as in effect on the date hereof), (c) the Option Agreement, and (d) all other agreements of transfer as are referred to therein and all side letters with respect thereto, and all agreements, documents and instruments executed and/or delivered in connection with any of the foregoing; in each case sometimes being referred to herein individually as a “Purchase Agreement”.

 

1.110                      “Purchased Assets” shall mean all of the assets and properties acquired by Farmer from Sellers pursuant to the Purchase Agreements.

 

1.111                      “Real Property” shall mean all now owned and hereafter acquired real property of each Borrower and Guarantor, including leasehold interests, together with all buildings, structures, and other improvements located thereon and all licenses, easements and appurtenances relating thereto, wherever located.

 

1.112                      “Receivables” shall mean all of the following now owned or hereafter arising or acquired property of each Borrower and Guarantor: (a) all Accounts; (b) all interest, fees, late charges, penalties, collection fees and other amounts due or to become due or otherwise payable in connection with any Account; (c) all payment intangibles of such Borrower or Guarantor; (d)  letters of credit, indemnities, guarantees, security or other deposits and proceeds thereof issued payable to any Borrower or Guarantor or otherwise in favor of or delivered to any Borrower or Guarantor in connection with any Account; or (e) all other accounts, contract rights, chattel paper, instruments, notes, general intangibles and other forms of obligations owing to any Borrower or Guarantor, whether from the sale and lease of goods or other property, licensing of any property (including Intellectual Property or other general intangibles), rendition of services or from loans or advances by any Borrower or Guarantor or to or for the benefit of any third person (including loans or advances to any Affiliates or Subsidiaries of any Borrower or Guarantor) or otherwise associated with any Accounts, Inventory or general intangibles of any Borrower or Guarantor (including, without limitation, choses in action, causes of action, tax refunds, tax refund claims, any funds which may become payable to any Borrower or Guarantor in connection with the termination of any Plan or other employee benefit plan and any other amounts payable to any Borrower or Guarantor from any Plan or other employee benefit plan, rights and claims against carriers and shippers, rights to indemnification, business interruption insurance and proceeds thereof, casualty or any similar types of insurance and any proceeds thereof and proceeds of insurance covering the lives of employees on which any Borrower or Guarantor is a beneficiary).

 

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1.113                      “Records” shall mean, as to each Borrower and Guarantor, all of such Borrower’s and Guarantor’s present and future books of account of every kind or nature, purchase and sale agreements, invoices, ledger cards, bills of lading and other shipping evidence, statements, correspondence, memoranda, credit files and other data relating to the Collateral or any account debtor, together with the tapes, disks, diskettes and other data and software storage media and devices, file cabinets or containers in or on which the foregoing are stored (including any rights of any Borrower or Guarantor with respect to the foregoing maintained with or by any other person).

 

1.114                      “Reserves” shall mean as of any date of determination, such amounts as Lender may from time to time establish and revise in good faith reducing the amount of Loans and Letters of Credit that would otherwise be available to any Borrower under the lending formula(s) provided for herein: (a) to reflect events, conditions, contingencies or risks which, as determined by Lender in good faith, adversely affect, or would have a reasonable likelihood of adversely affecting, either (i) the Collateral or any other property which is security for the Obligations or its value or (ii) the assets, business or prospects of any Borrower or Guarantor or (iii) the security interests and other rights of Lender in the Collateral (including the enforceability, perfection and priority thereof) or (b) to reflect Lender’s good faith belief that any collateral report or financial information furnished by or on behalf of any Borrower or Guarantor to Lender is or may have been incomplete, inaccurate or misleading in any material respect or (c) to reflect outstanding Letter of Credit Obligations as provided in Section 2.2 hereof or (d) in respect of any state of facts which Lender determines in good faith constitutes a Default or an Event of Default. Without limiting the generality of the foregoing, Reserves may, at Lender’s option, be established to reflect: (a) dilution with respect to the Accounts (based on the ratio of the aggregate amount of non-cash reductions in Accounts for any period to the aggregate dollar amount of the sales of such Borrower for such period) as calculated by Lender for any period is or is reasonably anticipated to be greater than five (5%) percent; (b) returns, rebates, discounts, claims, credits and allowances of any nature that are not paid pursuant to the reduction of Accounts; (c) sales, excise or similar taxes included in the amount of any Accounts reported to Lender; (d) a change in the turnover, age or mix of the categories of Inventory that adversely affects the aggregate value of all Inventory; (e) amounts due or to become due in respect of employee payroll and benefits, including, incentives and retention bonuses; (f) amounts due or to become due to owners and lessors of premises where any Collateral is located, other than for those locations where Lender has received a Collateral Access Agreement that Lender has accepted in writing; (g) amounts due or to become due to owners and licensors of trademarks and other Intellectual Property used by any Borrower or Guarantor; (h) reserves for in-transit Inventory, including freight, taxes, duty and other amounts which Lender estimates must be paid in connection with such Inventory upon arrival and for delivery to one of such Borrower’s locations for Eligible Inventory within the United States of America, and (i) obligations, liabilities or indebtedness (contingent or otherwise) of any Borrower or Guarantor to Lender or any Affiliate of Lender arising under or in connection with any Bank Products to the extent that such obligations, liabilities or indebtedness constitute Obligations as such term is defined herein or otherwise receive the benefit of the security interest of Lender in any Collateral.  The amount

 

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of any Reserve established by Lender shall have a reasonable relationship to the event, condition or other matter which is the basis for such reserve as determined by Lender in good faith and to the extent that such Reserve is in respect of amounts that may be payable to third parties Lender may, at its option, deduct such Reserve from the Maximum Credit, at any time that such limit is less than the amount of the Borrowing Base.

 

1.115                      “Revolving Loans” shall mean the loans now or hereafter made by or on behalf of Lender for the account of any Borrower on a revolving basis (involving advances, repayments and readvances) as set forth in Section 2.1 hereof.

 

1.116                      “Sanctioned Entity” shall mean (a) an agency of the government of, (b) an organization directly or indirectly controlled by, or (c) a person resident in, a country that is subject to a sanctions program identified on the list maintained and published by OFAC and available at http://www.treas.gov/offices/enforcement/ofac/programs, or as otherwise published from time to time as such program may be applicable to such agency, organization or person.

 

1.117                      “Sanctioned Person” shall mean a person named on the list of Specially Designated Nationals or Blocked Persons maintained by OFAC available at http://www.treas.gov/offices/enforcement/ofac/sdn/index.html, or as otherwise published from time to time.

 

1.118                      “Sara Lee DSD Business” shall mean the DSD Business (as such term is defined in the Asset Purchase Agreement as in effect on the date hereof).

 

1.119                      “Sara Lee DSD Business Accounts” shall mean Accounts created by any Borrower after the date of this Agreement in respect of the Sara Lee DSD Business.

 

1.120                      “Security Provisions” shall mean the following provisions of the Financing Agreements (as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced): (a) Section 1(a) of the Guarantee, dated even date herewith, by Guarantors in favor of Lender; (b) Section 2 of each Pledge and Security Agreement, dated even date herewith, by Farmer in favor of Lender; (c) Section 2 of the Pledge and Security Agreement, dated even date herewith, by Coffee Holding in favor of Lender; (d) Section 2 of the Collateral Assignment of Acquisition Agreements, dated of even date herewith, by Farmer in favor of Lender; and (e) such other sections of such other Financing Agreements as Lender may from time to time designate as a Security Provision in a writing delivered by Lender to Administrative Borrower.

 

1.121                      “Sellers” shall mean collectively, the following (together with their respective successors and assigns): (a) Sara Lee Corporation, a Maryland corporation and (b) Saramar, LLC, a Delaware limited liability company; each sometimes being referred to herein individually as a “Seller”.

 

1.122                      “Solvent” shall mean, at any time with respect to any Person, that at such time

 

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such Person (a) is able to pay its debts as they mature and has (and has a reasonable basis to believe it will continue to have) sufficient capital (and not unreasonably small capital) to carry on its business consistent with its practices as of the date hereof, and (b) the assets and properties of such Person at a fair valuation (and including as assets for this purpose at a fair valuation all rights of subrogation, contribution or indemnification arising pursuant to any guarantees given by such Person) are greater than the Indebtedness of such Person, and including subordinated and contingent liabilities computed at the amount which, such person has a reasonable basis to believe, represents an amount which can reasonably be expected to become an actual or matured liability (and including as to contingent liabilities arising pursuant to any guarantee the face amount of such liability as reduced to reflect the probability of it becoming a matured liability).

 

1.123                      “Specified Investment Account” shall mean account number 10135600 maintained by Finance at Wells Fargo Bank, N.A.

 

1.124                      “Subsidiary” or “subsidiary” shall mean, with respect to any Person, any corporation, limited liability company, limited liability partnership or other limited or general partnership, trust, association or other business entity of which an aggregate of at least a majority of the outstanding Capital Stock or other interests entitled to vote in the election of the board of directors of such corporation (irrespective of whether, at the time, Capital Stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency), managers, trustees or other controlling persons, or an equivalent controlling interest therein, of such Person is, at the time, directly or indirectly, owned by such Person and/or one or more subsidiaries of such Person.

 

1.125                      “UCC” shall mean the Uniform Commercial Code as in effect in the State of California, and any successor statute, as in effect from time to time (except that terms used herein which are defined in the Uniform Commercial Code as in effect in the State of California on the date hereof shall continue to have the same meaning notwithstanding any replacement or amendment of such statute except as Lender may otherwise determine).

 

1.126                      “Value” shall mean, as determined by Lender in good faith, with respect to Inventory, the lower of (a) cost computed on a first-in first-out basis in accordance with GAAP or (b) market value, provided , that , (i) for purposes of the calculation of the Borrowing Base, (A) the Value of the Inventory shall not include:  (1) the portion of the value of Inventory equal to the profit earned by any Affiliate on the sale thereof to any Borrower or (2)  write-ups or write-downs in value with respect to currency exchange rates and (B) notwithstanding anything to the contrary contained herein, the cost of the Inventory shall be computed in the same manner and consistent with the most recent appraisal of the Inventory received and accepted by Lender prior to the date hereof, if any and (ii) Lender may from time to time, in its discretion, value the portion of the Inventory consisting of “green coffee” to market based on the market value thereof as determined by the New York Board of Trade or any other mutually agreed upon source.

 

1.127                      “Voting Stock” shall mean with respect to any Person, (a) one (1) or more classes of Capital Stock of such Person having general voting powers to elect at least a majority of the

 

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board of directors, managers or trustees of such Person, irrespective of whether at the time Capital Stock of any other class or classes have or might have voting power by reason of the happening of any contingency, and (b) any Capital Stock of such Person convertible or exchangeable without restriction at the option of the holder thereof into Capital Stock of such Person described in clause (a) of this definition.

 

1.128                      “Weighted Average Life to Maturity” shall mean, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the then outstanding principal amount of such Indebtedness into (b) the total of the product obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment.

 

SECTION  2.                   CREDIT FACILITIES

 

2.1                                Loans .

 

(a)                                   Subject to and upon the terms and conditions contained herein, Lender agrees to make Revolving Loans to each Borrower from time to time in amounts requested by such Borrower (or Administrative Borrower on behalf of such Borrower) up to the amount outstanding at any time equal to the lesser of: (i) the Borrowing Base at such time or (ii) the Maximum Credit at such time.

 

(b)                                  Except in Lender’s discretion or as otherwise provided herein, (i) the aggregate amount of the Loans and the Letter of Credit Obligations outstanding at any time shall not exceed the Maximum Credit, (ii) the aggregate principal amount of the Revolving Loans and Letter of Credit Obligations outstanding at any time shall not exceed the Borrowing Base, and (iii) the aggregate principal amount of the Revolving Loans outstanding based on the Eligible Inventory shall not exceed the Inventory Loan Limit.

 

(c)                                   In the event that (i) the aggregate amount of the Loans and the Letter of Credit Obligations outstanding at any time exceed the Maximum Credit, or (ii) except as otherwise provided herein, the aggregate principal amount of the Revolving Loans and Letter of Credit Obligations outstanding exceed the Borrowing Base, or (iii) the aggregate principal amount of Revolving Loans and Letter of Credit Obligations based on the Eligible Inventory exceed the Inventory Loan Limit, such event shall not limit, waive or otherwise affect any rights of Lender in such circumstances or on any future occasions and Borrowers shall, upon demand by Lender, which may be made at any time or from time to time, immediately repay to Lender the entire amount of any such excess(es) for which payment is demanded.

 

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2.2                                Letters of Credit .

 

(a)                                   Subject to and upon the terms and conditions contained herein and in the Letter of Credit Documents, at the request of a Borrower (or Administrative Borrower on behalf of such Borrower), Lender agrees to issue for the account of such Borrower one or more Letters of Credit, containing terms and conditions acceptable to Lender.

 

(b)                                  The Borrower requesting such Letter of Credit (or Administrative Borrower on behalf of such Borrower) shall give Lender three (3) Business Days’ prior written notice of such Borrower’s request for the issuance of a Letter of Credit.  Such notice shall be irrevocable and shall specify the original face amount of the Letter of Credit requested, the effective date (which date shall be a Business Day and in no event shall be a date less than ten (10) days prior to the end of the then current term of this Agreement) of issuance of such requested Letter of Credit, whether such Letter of Credit may be drawn in a single or in partial draws, the date on which such requested Letter of Credit is to expire (which date shall be a Business Day and shall not be more than one year from the date of issuance), the purpose for which such Letter of Credit is to be issued, and the beneficiary of the requested Letter of Credit.  The Borrower requesting the Letter of Credit (or Administrative Borrower on behalf of such Borrower) shall attach to such notice the proposed terms of the Letter of Credit.  The renewal or extension of any Letter of Credit shall, for purposes hereof, be treated in all respects the same as the issuance of a new Letter of Credit hereunder.

 

(c)                                   In addition to being subject to the satisfaction of the applicable conditions precedent contained in Section 4 hereof and the other terms and conditions contained herein, no Letter of Credit shall be available unless each of the following conditions precedent have been satisfied in a manner satisfactory to Lender:  (i) the Borrower requesting such Letter of Credit (or Administrative Borrower on behalf of such Borrower) shall have delivered to the Lender at such times and in such manner Lender may require, an application, in form and substance satisfactory to Lender, for the issuance of the Letter of Credit and such other Letter of Credit Documents as may be required pursuant to the terms thereof, and the form and terms of the proposed Letter of Credit shall be satisfactory to Lender, (ii) as of the date of issuance, no order of any court, arbitrator or other Governmental Authority shall purport by its terms to enjoin or restrain money center banks generally from issuing letters of credit of the type and in the amount of the proposed Letter of Credit, and no law, rule or regulation applicable to money center banks generally and no request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over money center banks generally shall prohibit, or request that Lender refrain from, the issuance of letters of credit generally or the issuance of such Letter of Credit, (iii) after giving effect to the issuance of such Letter of Credit, the Letter of Credit Obligations shall not exceed the Letter of Credit Limit, and (iv) the Excess Availability, prior to giving effect to any Reserves with respect to such Letter of Credit, on the date of the proposed issuance of any Letter of Credit shall be equal to or greater than: (A) if the proposed Letter of Credit is for the purpose of purchasing Eligible Inventory and the documents of title with respect thereto are consigned to Lender, the sum of (1) the percentage equal to one hundred (100%) percent minus the then applicable percentage with respect to Eligible Inventory set forth in the definition of the term Borrowing Base multiplied by the Value of such Eligible Inventory,

 

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plus (2) freight, taxes, duty and other amounts which Lender estimates must be paid in connection with such Inventory upon arrival and for delivery to one of such Borrower’s locations for Eligible Inventory within the United States of America and (B) if the proposed Letter of Credit is for any other purpose or the documents of title are not consigned to Lender in connection with a Letter of Credit for the purpose of purchasing Inventory, an amount equal to one hundred (100%) percent of the Letter of Credit Obligations with respect thereto.  Effective on the issuance of each Letter of Credit, a Reserve shall be established in the applicable amount set forth in Section 2.2(c)(iv)(A) or Section 2.2(c)(iv)(B).

 

(d)                                  Except in Lender’s discretion,  the amount of all outstanding Letter of Credit Obligations shall not at any time exceed the Letter of Credit Limit.

 

(e)                                   Each Borrower shall reimburse immediately Lender for any draw under any Letter of Credit issued for the account of such Borrower and pay Lender the amount of all other charges and fees payable to Lender in connection with any Letter of Credit issued for the account of such Borrower immediately when due, irrespective of any claim, setoff, defense or other right which such Borrower may have at any time against Lender or any other Person.  Each drawing under any Letter of Credit or other amount payable in connection therewith when due shall constitute a request by the Borrower for whose account such Letter of Credit was issued to Lender for a Prime Rate Loan in the amount of such drawing or other amount then due. The date of such Loan shall be the date of the drawing or as to other amounts, the due date therefor.  Any payments made to reimburse Lender in connection with any Letter of Credit shall constitute additional Revolving Loans to such Borrower pursuant to this Section 2.

 

(f)                                     Borrowers and Guarantors shall indemnify and hold Lender harmless from and against any and all losses, claims, damages, liabilities, costs and expenses which Lender may suffer or incur in connection with any Letter of Credit and any documents, drafts or acceptances relating thereto, including any losses, claims, damages, liabilities, costs and expenses due to any action taken by Lender or correspondent with respect to any Letter of Credit, except for such losses, claims, damages, liabilities, costs or expenses that are a direct result of the gross negligence or willful misconduct of Lender as determined pursuant to a final non-appealable order of a court of competent jurisdiction.  Each Borrower and Guarantor assumes all risks with respect to the acts or omissions of the drawer under or beneficiary of any Letter of Credit and for such purposes the drawer or beneficiary shall be deemed such Borrower’s agent.  Each Borrower and Guarantor assumes all risks for, and agrees to pay, all foreign, Federal, State and local taxes, duties and levies relating to any goods subject to any Letter of Credit or any documents, drafts or acceptances thereunder.  Each Borrower and Guarantor hereby releases and holds Lender harmless from and against any acts, waivers, errors, delays or omissions, with respect to or relating to any Letter of Credit, except for the gross negligence or willful misconduct of Lender as determined pursuant to a final, non-appealable order of a court of competent jurisdiction.  The provisions of this Section 2.2(f) shall survive the payment of Obligations and the termination of this Agreement.

 

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(g)                                  In connection with Inventory purchased pursuant to any Letter of Credit, Borrowers shall, at Lender’s request, instruct all suppliers, carriers, forwarders, customs brokers, warehouses or others receiving or holding cash, checks, Inventory, documents or instruments in which Lender holds a security interest that upon Lender’s request, such items are to be delivered to Lender and/or subject to Lender’s order, and if they shall come into such Borrower’s possession, to deliver them, upon Lender’s request, to Lender in their original form.  Except as otherwise provided herein, Lender shall not exercise such right to request such items so long as no Default or Event of Default shall exist or have occurred and be continuing.  Except as Lender may otherwise specify, Borrowers shall designate Lender as the consignee on all bills of lading and other negotiable and non-negotiable documents.

 

(h)                                  Each Borrower and Guarantor hereby irrevocably authorizes and directs Lender to name such Borrower or Guarantor as the account party therein and to deliver to Lender all instruments, documents and other writings and property received by issuer pursuant to the Letter of Credit and to accept and rely upon Lender’s instructions and agreements with respect to all matters arising in connection with the Letter of Credit or the Letter of Credit Documents with respect thereto.  Nothing contained herein shall be deemed or construed to grant any Borrower or Guarantor any right or authority to pledge the credit of Lender in any manner.  Borrowers and Guarantors shall be bound by any reasonable interpretation made in good faith by Lender under or in connection with any Letter of Credit or any documents, drafts or acceptances thereunder, notwithstanding that such interpretation may be inconsistent with any instructions of any Borrower or Guarantor.

 

(i)                                      So long as no Event of Default exists or has occurred and is continuing, a Borrower may (i) approve or resolve any questions of non-compliance of documents, (ii) give any instructions as to acceptance or rejection of any documents or goods, (iii) execute any and all applications for steamship or airway guaranties, indemnities or delivery orders, and (iv) with Lender’s consent, grant any extensions of the maturity of, time of payment for, or time of presentation of, any drafts, acceptances, or documents, and agree to any amendments, renewals, extensions, modifications, changes or cancellations of any of the terms or conditions of any of the applications, Letters of Credit, or documents, drafts or acceptances thereunder or any letters of credit included in the Collateral.

 

(j)                                      At any time an Event of Default exists or has occurred and is continuing, Lender shall have the right and authority to, and Borrowers shall not, without the prior written consent of Lender, (i)approve or resolve any questions of non-compliance of documents, (ii) give any instructions as to acceptance or rejection of any documents or goods, (iii) execute any and all applications for steamship or airway guaranties, indemnities or delivery orders, (iv) grant any extensions of the maturity of, time of payments for, or time of presentation of, any drafts, acceptances, or documents, and (v) agree to any amendments, renewals, extensions, modifications, changes or cancellations of any of the terms or conditions of any of the applications, Letters of Credit, or documents, drafts or acceptances thereunder or any letters of

 

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credit included in the Collateral.  Lender may take such actions either in its own name or in any Borrower’s name.

 

(k)                                   The obligations of Borrowers to pay each Letter of Credit Obligations shall be absolute, unconditional and irrevocable and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances, whatsoever.

 

SECTION  3.         INTEREST AND FEES

 

3.1                                  Interest .

 

(a)                                   Borrowers shall pay to Lender interest on the outstanding principal amount of the Loans at the Interest Rate.  All interest accruing hereunder on and after the date of any Event of Default for so long as the same is continuing or on or after the date of termination hereof shall be payable on demand.

 

(b)                                Each Borrower (or Administrative Borrower on behalf of such Borrower) may from time to time request Eurodollar Rate Loans or may request that Prime Rate Loans be converted to Eurodollar Rate Loans or that any existing Eurodollar Rate Loans continue for an additional Interest Period.  Such request from a Borrower (or Administrative Borrower on behalf of such Borrower) shall specify the amount of the Eurodollar Rate Loans or the amount of the Prime Rate Loans to be converted to Eurodollar Rate Loans or the amount of the Eurodollar Rate Loans to be continued (subject to the limits set forth below) and the Interest Period to be applicable to such Eurodollar Rate Loans (and if it does not specify an Interest Period, the Interest Period shall be deemed to be a one (1) month period).  Subject to the terms and conditions contained herein, three (3) Business Days after receipt by Lender of such a request from a Borrower (or Administrative Borrower on behalf of such Borrower) which may be telephonic (and followed by a confirmation in writing if requested by Lender), such Eurodollar Rate Loans shall be made or Prime Rate Loans shall be converted to Eurodollar Rate Loans or such Eurodollar Rate Loans shall continue, as the case may be, provided , that , (i) no Default or Event of Default shall exist or have occurred and be continuing, (ii) no Borrower or Administrative Borrower shall have sent any notice of termination of this Agreement, (iii) such Borrower (or Administrative Borrower on behalf of such Borrower) shall have complied with such customary procedures as are established by Lender and specified by Lender to Administrative Borrower from time to time for requests by Borrowers for Eurodollar Rate Loans, (iv) no more than ten (10) Interest Periods may be in effect at any one time, (v) the aggregate amount of the Eurodollar Rate Loans must be in an amount not less than $1,000,000 or an integral multiple of $500,000 in excess thereof, and (vi) Lender shall have determined that the Interest Period or Adjusted Eurodollar Rate is available to Lender and can be readily determined as of the date of the request for such Eurodollar Rate Loan by Borrower.  Any request by or on behalf of a Borrower for Eurodollar Rate Loans or to convert Prime Rate Loans to Eurodollar Rate Loans or to continue any existing Eurodollar Rate Loans shall be irrevocable.  Notwithstanding anything to the contrary contained herein, Lender shall not be required to purchase United States Dollar deposits in the London interbank market or other applicable

 

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Eurodollar Rate market to fund any Eurodollar Rate Loans, but the provisions hereof shall be deemed to apply as if Lender had purchased such deposits to fund the Eurodollar Rate Loans.

 

(c)                                   Any Eurodollar Rate Loans shall automatically convert to Prime Rate Loans upon the last day of the applicable Interest Period, unless Lender has received and approved a request to continue such Eurodollar Rate Loan at least three (3) Business Days prior to such last day in accordance with the terms hereof and Borrowers are entitled to such Eurodollar Rate Loan under the terms hereof.  Any Eurodollar Rate Loans shall, at Lender’s option, upon notice by Lender to Administrative Borrower, be subsequently converted to Prime Rate Loans in the event that this Agreement shall terminate or not be renewed.  Borrowers shall pay to Lender, upon demand by Lender (or Lender may, at its option, charge any loan account of any Borrower) any amounts required to compensate Lender or Participant for any loss (including loss of anticipated profits), cost or expense incurred by such person, as a result of the conversion of Eurodollar Rate Loans to Prime Rate Loans pursuant to any of the foregoing.

 

(d)                                  Interest shall be payable by Borrowers to Lender monthly in arrears not later than the first day of each calendar month and shall be calculated on the basis of a three hundred sixty (360) day year and actual days elapsed, other than for Prime Rate Loans which shall be calculated on the basis of three hundred sixty-five (365) or three hundred sixty-six (366) day year, as applicable, and actual days elapsed.  The interest rate on non-contingent Obligations (other than Eurodollar Rate Loans) shall increase or decrease by an amount equal to each increase or decrease in the Prime Rate effective on the date any change in such Prime Rate is effective.  In no event shall charges constituting interest payable by Borrowers to Lender exceed the maximum amount or the rate permitted under any applicable law or regulation, and if any such part or provision of this Agreement is in contravention of any such law or regulation, such part or provision shall be deemed amended to conform thereto.

 

3.2                                  Unused Line Fee .  Borrowers shall pay to Lender, monthly an unused line fee at a rate equal to three-eighths (.375%) of one percent per annum calculated upon the amount by which the Maximum Credit exceeds the average daily principal balance of the outstanding Revolving Loans and Letters of Credit during the immediately preceding month (or part thereof) so long as any Obligations are outstanding and this Agreement has not been terminated.  Such fees shall be payable on the first Business Day of each month in arrears and calculated based on a three hundred sixty (360) day year and actual days elapsed.

 

3.3                                  Letter of Credit Fees .

 

(a)                                   Borrowers shall pay to Lender, monthly a fee at the LC Fee Rate determined as provided below (on a per annum basis), on the average daily outstanding balance of the Letters of Credit for the immediately preceding month (or part thereof), payable in arrears as of the first day of each month, computed for each day from the date of issuance to the date of expiration.  Such percentages shall be increased or decreased, as the case may be, to the applicable percentage (on a per annum basis) set forth below based on the Monthly Average

 

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Excess Availability for the immediately preceding calendar month is at or within the amounts indicated for such percentage as of the last day of the immediately preceding calendar month:

 

Tier		Monthly Average Excess Availability		LC Fee Rate
1		Greater than $20,000,000		2.25	%
2		Less than or equal to $20,000,000 and greater than $12,500,000		2.50	%
3		Less than or equal to $12,500,000		2.75	%

 

provided , that , (i) the applicable percentage shall be calculated and established once each calendar month (commencing with the month beginning April 1, 2009) based on the Monthly Average Excess Availability and shall remain in effect until adjusted after the end of the next calendar month, (ii) each adjustment of the applicable percentage shall be effective as of the first day of each such calendar month based on the Monthly Average Excess Availability for the immediately preceding calendar month, and (iii) notwithstanding anything to the contrary contained herein, the applicable percentages through August 31, 2009 shall be the amount for Tier 2 set forth above and (iv) Borrowers shall, at Lender’s option, pay such fees at a rate two (2%) percent greater than the highest rate above on such average daily maximum amount for: (A) the period from and after the date of termination or non-renewal hereof until Lenders have received full and final payment of all Obligations (notwithstanding entry of a judgment against any Borrower or Guarantor) and (B) the period from and after the date of the occurrence of an Event of Default for so long as such Event of Default is continuing.  Such letter of credit fees shall be calculated on the basis of a three hundred sixty (360) day year and actual days elapsed and the obligation of Borrowers to pay such fee shall survive the termination or non-renewal of this Agreement.

 

(b)                                In addition to the letter of credit fees provided above, Borrowers shall pay to Lender the letter of credit fronting and negotiation fees agreed to by Borrowers and Lender from time to time and the customary charges from time to time of Lender with respect to the issuance, amendment, transfer, administration, cancellation and conversion of, and drawings under, such Letters of Credit.

 

3.4                                  Additional Fees .  Borrowers shall pay to Lender the other fees and amounts set forth in the Fee Letter in the amounts and at the times specified therein.

 

3.5                                  Changes in Laws and Increased Costs of Loans .

 

(a)                                   If after the date hereof, either (i) any change in, or in the interpretation of, any law or regulation is introduced, including, without limitation, with respect to reserve requirements, applicable to Lender or any banking or financial institution from whom Lender

 

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borrows funds or obtains credit (a “Funding Bank”), or (ii) a Funding Bank or Lender complies with any future guideline or request from any central bank or other Governmental Authority or (iii) a Funding Bank or Lender determines that the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof has or would have the effect described below, or a Funding Bank or Lender complies with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, and in the case of any event set forth in this clause (iii), such adoption, change or compliance has or would have the direct or indirect effect of reducing the rate of return on Lender’s capital as a consequence of its obligations hereunder to a level below that which Lender could have achieved but for such adoption, change or compliance (taking into consideration the Funding Bank’s or Lender’s policies with respect to capital adequacy) by an amount deemed by Lender in good faith to be material, and the result of any of the foregoing events described in clauses (i), (ii) or (iii) is or results in an increase in the cost to Lender of funding or maintaining the Loans or the Letters of Credit, then Borrowers and Guarantors shall from time to time upon demand by Lender pay to Lender additional amounts sufficient to indemnify Lender against such increased cost on an after-tax basis (after taking into account applicable deductions and credits in respect of the amount indemnified).  A certificate as to the amount of such increased cost and showing in reasonable detail the computation thereof shall be submitted to Administrative Borrower by Lender and shall be conclusive, absent manifest error.

 

(b)                                  If prior to the first day of any Interest Period, (i) Lender shall have determined in good faith (which determination shall be conclusive and binding upon Borrowers and Guarantors) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Adjusted Eurodollar Rate for such Interest Period, (ii) Lender reasonably determines that the Adjusted Eurodollar Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to Lender of making or maintaining Eurodollar Rate Loans during such Interest Period, or (iii) Dollar deposits in the principal amounts of the Eurodollar Rate Loans to which such Interest Period is to be applicable are not generally available in the London interbank market, Lender shall give telecopy or telephonic notice thereof to Administrative Borrower as soon as practicable thereafter, and will also give prompt written notice to Administrative Borrower when such conditions no longer exist.  If such notice is given (A) any Eurodollar Rate Loans requested to be made on the first day of such Interest Period shall be made as Prime Rate Loans, (B) any Loans that were to have been converted on the first day of such Interest Period to or continued as Eurodollar Rate Loans shall be converted to or continued as Prime Rate Loans and (C) each outstanding Eurodollar Rate Loan shall be converted, on the last day of the then-current Interest Period thereof, to Prime Rate Loans.  Until such notice has been withdrawn by Lender, no further Eurodollar Rate Loans shall be made or continued as such, nor shall any Borrower (or Administrative Borrower on behalf of any Borrower) have the right to convert Prime Rate Loans to Eurodollar Rate Loans.

 

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(c)                                   Notwithstanding any other provision herein, if the adoption of or any change in any law, treaty, rule or regulation or final, non-appealable determination of an arbitrator or a court or other Governmental Authority or in the interpretation or application thereof occurring after the date hereof shall make it unlawful for Lender to make or maintain Eurodollar Rate Loans as contemplated by this Agreement, (i) Lender shall promptly give written notice of such circumstances to Administrative Borrower (which notice shall be withdrawn whenever such circumstances no longer exist), (ii) the commitment of Lender hereunder to make Eurodollar Rate Loans, continue Eurodollar Rate Loans as such and convert Prime Rate Loans to Eurodollar Rate Loans shall forthwith be canceled and, until such time as it shall no longer be unlawful for Lender to make or maintain Eurodollar Rate Loans, Lender shall then have a commitment only to make a Prime Rate Loan when a Eurodollar Rate Loan is requested and (iii) Loans then outstanding as Eurodollar Rate Loans, if any, shall be converted automatically to Prime Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law.  If any such conversion of a Eurodollar Rate Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, Borrowers and Guarantors shall pay to such Lender such amounts, if any, as may be required pursuant to Section 3.3(d) below.

 

(d)                                Borrowers and Guarantors shall indemnify Lender and hold Lender harmless from any loss or expense which Lender may sustain or incur as a consequence of (i) default by any Borrower in making a borrowing of, conversion into or extension of Eurodollar Rate Loans after such Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (ii) default by any Borrower in making any prepayment of a Eurodollar Rate Loan after such Borrower (or Administrative Borrower on behalf of such Borrower) has given a notice thereof in accordance with the provisions of this Agreement, and (iii) the making of a prepayment of Eurodollar Rate Loans on a day which is not the last day of an Interest Period with respect thereto.  With respect to Eurodollar Rate Loans, such indemnification may include an amount equal to the excess, if any, of (A) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or extended, for the period from the date of such prepayment or of such failure to borrow, convert or extend to the last day of the applicable Interest Period (or, in the case of a failure to borrow, convert or extend, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Eurodollar Rate Loans provided for herein over (B) the amount of interest (as determined by such Lender) which would have accrued to Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank Eurodollar market.  This covenant shall survive the termination or non-renewal of this Agreement and the payment of the Obligations.

 

SECTION  4.         CONDITIONS PRECEDENT

 

4.1                                  Conditions Precedent to Initial Loans and Letters of Credit .  The obligation of Lender to make the initial Loans or to issue the initial Letters of Credit hereunder is subject to

 

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the satisfaction of, or waiver of, immediately prior to or concurrently with the making of such Loan or the issuance of such Letter of Credit of each of the following conditions precedent:

 

(a)                                   all requisite corporate and limited liability company action and proceedings in connection with this Agreement and the other Financing Agreements shall be satisfactory in form and substance to Lender, and Lender shall have received all information and copies of all documents, including records of requisite corporate and limited liability company action and proceedings which Lender may have reasonably requested in connection therewith, such documents where requested by Lender or its counsel to be certified by appropriate corporate officers or limited liability company managers or Governmental Authority (and including a copy of the certificate of incorporation or formation of each Borrower and Guarantor certified by the Secretary of State (or equivalent Governmental Authority) which shall set forth the same complete corporate or limited liability company name of such Borrower or Guarantor as is set forth herein and such document as shall set forth the organizational identification number of each Borrower or Guarantor, if one is issued in its jurisdiction of incorporation or formation);

 

(b)                                  Lender shall have received, in form and substance reasonably satisfactory to Lender, a pro-forma balance sheet of Parent and its Subsidiaries dated January 23, 2009 reflecting the initial transactions contemplated hereunder and under the Purchase Agreements, including, but not limited to (i) the consummation of the acquisition of the Purchased Assets by Farmer from Sellers and the other transactions contemplated by the Purchase Agreements and (ii) the Loans and Letters of Credit provided by Lender to Borrowers on the date hereof and the use of the proceeds of the initial Loans as provided herein, accompanied by a certificate, dated of even date herewith, of the chief financial officer of Parent stating that such pro-forma balance sheet was prepared in good faith by Parent and based on assumptions that are reasonable in light of all facts and circumstances known to Parent at such time;

 

(c)                                   no material adverse change shall have occurred in the assets, business or prospects of Borrowers since the date of Lender’s latest field examination (not including for this purpose the field review referred to in clause (d) below) and no change or event shall have occurred which would impair in any material respect the ability of any Borrower or Guarantor to perform its obligations hereunder or under any of the other Financing Agreements to which it is a party or of Lender to enforce the Obligations or realize upon the Collateral;

 

(d)                                  Lender shall have completed a field review of the Records and such other information with respect to the Collateral as Lender may reasonably require to determine the amount of Loans available to Borrowers (including, without limitation, current perpetual inventory records and/or roll-forwards of Accounts and Inventory through the date of closing and test counts of the Inventory in a manner satisfactory to Lender, together with such supporting documentation as may be necessary or appropriate, and other documents and information that will enable Lender to accurately identify and verify the Collateral), the results of which each case shall be satisfactory to Lender, not more than three (3) Business Days prior to the date hereof or such earlier date as Lender may agree;

 

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(e)                                   Lender shall have received, in form and substance satisfactory to Lender, evidence that the Purchase Agreements have been duly executed and delivered by and to the appropriate parties thereto and the transactions contemplated under the terms of the Purchase Agreements have been consummated prior to or contemporaneously with the execution of this Agreement;

 

(f)                                     Lender shall have received, in form and substance satisfactory to Lender, true and complete copies of the Purchase Agreements duly executed by the parties thereto;

 

(g)                                  Lender shall have received, in form and substance satisfactory to Lender, evidence that Borrowers have paid an amount of not less than $12,000,000 from its own funds to the cash portion of the purchase price of the Purchased Assets payable pursuant to the Purchase Agreements;

 

(h)                                  Lender shall have received, in form and substance reasonably satisfactory to Lender, the agreement of the Sellers consenting to the collateral assignment by Borrowers to Lender of all of Borrowers’ rights and remedies and claims for damages or other relief under the Purchase Agreements and granting Lender such other rights as Lender may require, duly authorized, executed and delivered by Sellers;

 

(i)                                      Lender shall (i) be satisfied that, immediately after giving effect to the transactions contemplated to occur under this Agreement and the consummation of the transactions contemplated by the Purchase Agreements on or before the date hereof, each Borrower is and Borrowers and Guarantors (taken as a whole) are Solvent and (ii) have received an officer’s certificate prepared by the chief financial officer of Parent as to the financial condition, solvency and related matters of Borrowers and Guarantors after giving effect to the initial borrowings under the Financing Agreements and the consummation of the transactions contemplated by the Purchase Agreements, in form and substance reasonably satisfactory to Lender;

 

(j)                                      Lender shall have received, in form and substance reasonably satisfactory to Lender, all consents, waivers, acknowledgments and other agreements from third persons which Lender may deem necessary or desirable in order to permit, protect and perfect its security interests in and liens upon the Collateral or to effectuate the provisions or purposes of this Agreement, the other Financing Agreements and the Acquisition, including, without limitation, Collateral Access Agreements;

 

(k)                                   the Excess Availability as determined by Lender in good faith, as of the date hereof, shall be not less than $20,000,000 after giving effect to the initial Loans made or to be made and Letters of Credit issued or to be issued in connection with the initial transactions hereunder;

 

(l)                                      Lender shall have received, in form and substance reasonably satisfactory to Lender, Deposit Account Control Agreements and Investment Property Control Agreements

 

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by and among Lender, each Borrower and Guarantor, as the case may be and each bank, securities intermediary or other Person where such Borrower (or Guarantor) has a deposit account, investment account or other account, in each case, duly authorized, executed and delivered by such bank, securities intermediary or other Person and Borrower or Guarantor, as the case may be (or Lender shall be the bank’s customer with respect to such deposit account as Lender may specify);

 

(m)                                Lender shall have received evidence, in form and substance reasonably satisfactory to Lender, that Lender has a valid perfected first priority security interest in all of the Collateral (other than, with respect to perfection only, the Excluded Property);

 

(n)                                  Lender shall have received and reviewed lien and judgment search results for the jurisdiction of organization of each Borrower and Guarantor, the jurisdiction of the chief executive office of each Borrower and Guarantor and all jurisdictions in which assets of Borrowers and Guarantors are located, which search results shall be in form and substance reasonably satisfactory to Lender;

 

(o)                                  Lender shall have received originals of the stock certificates and membership interest certificates representing all of the issued and outstanding shares of the Capital Stock of each Borrower and Guarantor (other than Parent) and owned by any Borrower or Guarantor, in each case together with stock powers duly executed in blank with respect thereto;

 

(p)                                  Lender shall have received a borrowing request and a Borrowing Base Certificate setting forth the Revolving Loans and Letters of Credit available to Borrowers as of the date of this Agreement as completed in a manner reasonably satisfactory to Lender and duly authorized, executed and delivered on behalf of Borrowers;

 

(q)                                  Lender shall have received evidence of insurance and loss payee endorsements required hereunder and under the other Financing Agreements, in form and substance reasonably satisfactory to Lender, and certificates of insurance policies and/or endorsements naming Lender as loss payee;

 

(r)                                     Lender shall have received, in form and substance reasonably satisfactory to Lender, such opinion letters of counsel to Borrowers and Guarantors with respect to the Purchase Agreements, the Financing Agreements and the security interests and liens of Lender with respect to the Collateral and such other matters as Lender may reasonably request;

 

(s)                                   Lender shall have received evidence, in form and substance satisfactory to Lender, that the ESOP is an “employee stock ownership plan” (as defined in Section 4975(e)(7) of the Code and Section 407(d)(6) of ERISA) and is qualified under Section 401(a) of the Code; and

 

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(t)                                     the other Financing Agreements and all instruments and documents hereunder and thereunder shall have been duly executed and delivered to Lender, in form and substance reasonably satisfactory to Lender.

 

4.2                                  Conditions Precedent to All Loans and Letters of Credit .  The obligation of Lender to make the Loans, including the initial Loans, or to issue any Letter of Credit, including the initial Letters of Credit, is subject to the further satisfaction of, or waiver of, immediately prior to or concurrently with the making of each such Loan or the issuance of such Letter of Credit of each of the following conditions precedent:

 

(a)                                   all representations and warranties contained herein and in the other Financing Agreements that are qualified as to materiality or Material Adverse Effect shall be true and correct and the representations and warranties that are not so qualified shall be true and correct in all material respects, in each case with the same effect as though such representations and warranties had been made on and as of the date of the making of each such Loan or providing each such Letter of Credit and after giving effect thereto, except to the extent that such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true and correct to the extent required hereunder or under the other Financing Agreements on and as of such earlier date);

 

(b)                                  no law, regulation, order, judgment or decree of any Governmental Authority shall exist, and no action, suit, investigation, litigation or proceeding shall be pending or threatened in any court or before any arbitrator or Governmental Authority, which (i) purports to enjoin, prohibit, restrain or otherwise affect (A) the making of the Loans or providing the Letter of Credit, or (B) the consummation of the transactions contemplated pursuant to the terms hereof or the other Financing Agreements or (ii) has or has a reasonable likelihood of having a Material Adverse Effect; and

 

(c)                                   no Default or Event of Default shall exist or have occurred and be continuing on and as of the date of the making of such Loan or providing each such Letter of Credit and after giving effect thereto.

 

SECTION  5.         GRANT AND PERFECTION OF SECURITY INTEREST

 

5.1                                  Grant of Security Interest .  To secure payment and performance of all Obligations, each Borrower and Guarantor hereby grants to Lender, a continuing security interest in, a lien upon, and a right of set off against, and hereby assigns to Lender, as security, all personal and real property and fixtures, and interests in property and fixtures, of each Borrower and Guarantor, whether now owned or hereafter acquired or existing, and wherever located (together with all other collateral security for the Obligations at any time granted to or held or acquired by Lender, collectively, the “Collateral”), including:

 

(a)                                   all Accounts;

 

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(b)                                  all general intangibles, including, without limitation, all Intellectual Property;

 

(c)                                   all goods, including, without limitation, Inventory and Equipment;

 

(d)                                  all Real Property and fixtures;

 

(e)                                   all chattel paper, including, without limitation, all tangible and electronic chattel paper;

 

(f)                                     all instruments, including, without limitation, all promissory notes;

 

(g)                                  all documents;

 

(h)                                  all deposit accounts;

 

(i)                                      all letters of credit, banker’s acceptances and similar instruments and including all letter-of-credit rights;

 

(j)                                      all supporting obligations and all present and future liens, security interests, rights, remedies, title and interest in, to and in respect of Receivables and other Collateral, including (i) rights and remedies under or relating to guaranties, contracts of suretyship, letters of credit and credit and other insurance related to the Collateral, (ii) rights of stoppage in transit, replevin, repossession, reclamation and other rights and remedies of an unpaid vendor, lienor or secured party, (iii) goods described in invoices, documents, contracts or instruments with respect to, or otherwise representing or evidencing, Receivables or other Collateral, including returned, repossessed and reclaimed goods, and (iv) deposits by and property of account debtors or other persons securing the obligations of account debtors;

 

(k)                                   all (i) investment property (including securities, whether certificated or uncertificated, securities accounts, security entitlements, commodity contracts or commodity accounts) other than the Preferred Stock Portfolio and (ii) monies, credit balances, deposits and other property of any Borrower or Guarantor now or hereafter held or received by or in transit to Lender or its Affiliates or at any other depository or other institution from or for the account of any Borrower or Guarantor, whether for safekeeping, pledge, custody, transmission, collection or otherwise;

 

(l)                                      all commercial tort claims, including, without limitation, those identified in the Information Certificate;

 

(m)                                to the extent not otherwise described above, all Receivables;

 

(n)                                  all Records; and

 

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(o)            all products and proceeds of the foregoing, in any form, including insurance proceeds and all claims against third parties for loss or damage to or destruction of or other involuntary conversion of any kind or nature of any or all of the other Collateral.

 

5.2            Perfection of Security Interests .

 

(a)            Each Borrower and Guarantor irrevocably and unconditionally authorizes Lender (or its agent) to file at any time and from time to time such financing statements with respect to the Collateral naming Lender or its designee as the secured party and such Borrower or Guarantor as debtor, as Lender may require, and including any other information with respect to such Borrower or Guarantor or otherwise required by part 5 of Article 9 of the Uniform Commercial Code of such jurisdiction as Lender may determine, together with any amendment and continuations with respect thereto, which authorization shall apply to all financing statements filed on, prior to or after the date hereof.  Each Borrower and Guarantor hereby ratifies and approves all financing statements naming Lender or its designee as secured party and such Borrower or Guarantor, as the case may be, as debtor with respect to the Collateral (and any amendments with respect to such financing statements) filed by or on behalf of Lender prior to the date hereof and ratifies and confirms the authorization of Lender to file such financing statements (and amendments, if any).  Each Borrower and Guarantor hereby authorizes Lender to adopt on behalf of such Borrower and Guarantor any symbol required for authenticating any electronic filing.  In the event that the description of the collateral in any financing statement naming Lender or its designee as the secured party and any Borrower or Guarantor as debtor includes assets and properties of such Borrower or Guarantor that do not at any time constitute Collateral, whether hereunder, under any of the other Financing Agreements or otherwise, the filing of such financing statement shall nonetheless be deemed authorized by such Borrower or Guarantor to the extent of the Collateral included in such description and it shall not render the financing statement ineffective as to any of the Collateral or otherwise affect the financing statement as it applies to any of the Collateral.  Until such time as the Credit Facility shall have been terminated and all of the Obligations have been paid in full in accordance with Section 12.1(a) hereof, in no event shall any Borrower or Guarantor at any time file, or permit or cause to be filed,  any correction statement or termination statement with respect to any financing statement (or amendment or continuation with respect thereto) naming Lender or its designee as secured party and such Borrower or Guarantor as debtor.

 

(b)            Each Borrower and Guarantor does not have any chattel paper (whether tangible or electronic) or instruments as of the date hereof, except as set forth in the Information Certificate.  In the event that any Borrower or Guarantor shall be entitled to or shall receive any chattel paper or instrument after the date hereof, Borrowers and Guarantors shall promptly notify Lender thereof in writing.  Promptly upon the receipt thereof by or on behalf of any Borrower or Guarantor (including by any agent or representative), such Borrower or Guarantor shall deliver, or cause to be delivered to Lender, all tangible chattel paper and instruments that such Borrower or Guarantor has or may at any time acquire, accompanied by such instruments of transfer or assignment duly executed in blank as Lender may from time to time specify, in each case except

 

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as Lender may otherwise agree.  At Lender’s option, each Borrower and Guarantor shall, or Lender may at any time on behalf of any Borrower or Guarantor, cause the original of any such instrument or chattel paper to be conspicuously marked in a form and manner acceptable to Lender with the following legend referring to chattel paper or instruments as applicable: “This chattel paper]instrument] is subject to the security interest of Wachovia Bank, National Association and any sale, transfer, assignment or encumbrance of this chattel paper]instrument] violates the rights of such secured party.”

 

(c)            In the event that any Borrower or Guarantor shall at any time hold or acquire an interest in any electronic chattel paper or any “transferable record” (as such term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction) with a value in excess of $100,000, such Borrower or Guarantor shall promptly notify Lender thereof in writing.  Promptly upon Lender’s request, such Borrower or Guarantor shall take, or cause to be taken, such actions as Lender may request to give Lender control of such electronic chattel paper under Section 9-105 of the UCC and control of such transferable record under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as in effect in such jurisdiction.

 

(d)            Each Borrower and Guarantor does not have any deposit accounts as of the date of this Agreement, except as set forth in the Information Certificate.  Borrowers and Guarantors shall not, directly or indirectly, after the date of this Agreement open, establish or maintain any deposit account other than at Lender, unless each of the following conditions is satisfied:  (i) Lender shall have received not less than five (5) Business Days prior written notice of the intention of any Borrower or Guarantor to open or establish such account which notice shall specify in reasonable detail and specificity acceptable to Lender the name of the account, the owner of the account, the name and address of the bank at which such account is to be opened or established, the individual at such bank with whom such Borrower or Guarantor is dealing and the purpose of the account, (ii)  the bank where such account is opened or maintained shall be reasonably acceptable to Lender, and (iii) on or before the opening of such deposit account, such Borrower or Guarantor shall as Lender may specify either (A) deliver to Lender a Deposit Account Control Agreement with respect to such deposit account duly authorized, executed and delivered by such Borrower or Guarantor and the bank at which such deposit account is opened and maintained or (B) arrange for Lender to become the customer of the bank with respect to the deposit account on terms and conditions reasonably acceptable to Lender.  The terms of this subsection (d) shall not apply to deposit accounts specifically and exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of any Borrower’s or Guarantor’s salaried employees or to the cash deposit referred to in Section 9.8(m) of this Agreement.

 

(e)            No Borrower or Guarantor owns or holds, directly or indirectly, beneficially or as record owner or both, any investment property, as of the date hereof, or have

 

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any investment account, securities account, commodity account or other similar account with any bank or other financial institution or other securities intermediary or commodity intermediary as of the date hereof, in each case except as set forth in the Information Certificate.

 

(i)             (A) in the event that any Borrower or Guarantor shall be entitled to or shall