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Loan and Security Agreement and Guaranty

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Title:

Loan and Security Agreement and Guaranty

Entities:

Ableco Finance LLC; Wells Fargo Bank, NA; International Brotherhood of Teamsters; Schulte Roth & Zabel LLP; Laura Secord Holdings Corp.; Archibald Candy (Canada) Corporation; Archibald Candy Corp.

Date:

2002

Size:

Preview shows 70KB of 366KB total

Price:

$79

ID:

#154872

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LOAN AND SECURITY AGREEMENT AND GUARANTY

by and among

ARCHIBALD CANDY CORPORATION,

as Borrower,

LAURA SECORD HOLDINGS CORP.

and

ARCHIBALD CANDY (CANADA) CORPORATION

as Guarantors

THE LENDERS THAT ARE SIGNATORIES HERETO

as the Lenders,

and

FOOTHILL CAPITAL CORPORATION

as the Arranger and Administrative Agent

Dated as of November 1, 2002

TABLE OF CONTENTS

1. DEFINITIONS AND CONSTRUCTION.			1
	1.1	Definitions	1
	1.2	Accounting Terms	18
	1.3	Code	18
	1.4	Construction	18
	1.5	Schedules and Exhibits	18
2. LOAN AND TERMS OF PAYMENT.			18
	2.1	Revolver Advances	18
	2.2	Term Loans	19
	2.3	Borrowing Procedures and Settlements	20
	2.4	Payments	24
	2.5	Overadvances	27
	2.6	Interest Rates and Letter of Credit Fee: Rates, Payments, and Calculations	27
	2.7	Cash Management	28
	2.8	Crediting Payments; Float Charge	29
	2.9	Designated Account	29
	2.10	Maintenance of Loan Account; Statements of Obligations	29
	2.11	Fees	30
	2.12	Letter of Credit	30
	2.13	LIBOR Option	33
	2.14	Capital Requirements	34
3. CONDITIONS; TERM OF AGREEMENT.			34
	3.1	Conditions Precedent to the Initial Extension of Credit	34
	3.2	Conditions Subsequent to the Initial Extension of Credit	36
	3.3	Conditions Precedent to all Extensions of Credit	37
	3.4	Term	37
	3.5	Effect of Termination	37
	3.6	Early Termination by Borrower	37
4. CREATION OF SECURITY INTEREST.			38
	4.1	Grant of Security Interest	38
	4.2	Negotiable Collateral	38
	4.3	Collection of Accounts, General Intangibles, and Negotiable Collateral	38
	4.4	Delivery of Additional Documentation Required	38
	4.5	Power of Attorney	39
	4.6	Right to Inspect	39
	4.7	Control Agreements	39
	4.8	Commercial Tort Claim	39
5. REPRESENTATIONS AND WARRANTIES.			40
	5.1	No Encumbrances	40
	5.2	Eligible Accounts	40
	5.3	Eligible Inventory	40
	5.4	Equipment	40
	5.5	Location of Inventory and Equipment	40
	5.6	Inventory Records	40
	5.7	Location of Chief Executive Office; FEIN	40
	5.8	Due Organization and Qualification; Subsidiaries	40
	5.9	Due Authorization; No Conflict	41
	5.10	Litigation	41
	5.11	No Material Adverse Change	41
	5.12	Fraudulent Transfer	41
	5.13	Employee Benefits	42
	5.14	Environmental Condition	42
	5.15	Brokerage Fees	42
	5.16	Intellectual Property	42

	5.17	Leases	42
	5.18	DDAs	42
	5.19	Complete Disclosure	42
	5.20	Indebtedness	42
6. AFFIRMATIVE COVENANTS.			43
	6.1	Accounting System	43
	6.2	Collateral Reporting	43
	6.3	Financial Statements, Reports, Certificates, Appraisals	44
	6.4	[Intentionally left blank.]	46
	6.5	Return	46
	6.6	Maintenance of Properties	46
	6.7	Taxes	46
	6.8	Insurance	46
	6.9	Location of Inventory and Equipment	47
	6.10	Compliance with Laws	47
	6.11	Leases	47
	6.12	Brokerage Commissions	47
	6.13	Existence	47
	6.14	Environmental	47
	6.15	Disclosure Updates	47
	6.16	[Intentionally left blank]	48
	6.17	Bailee Letters	48
	6.18	Real Property in Quebec	48
7. NEGATIVE COVENANTS.			48
	7.1	Indebtedness	48
	7.2	Liens	48
	7.3	Restrictions on Fundamental Changes	48
	7.4	Disposal of Assets	49
	7.5	Change Name	49
	7.6	Guarantee	49
	7.7	Nature of Business	49
	7.8	Prepayments, Amendments and Restricted Payments	49
	7.9	Change of Control	49
	7.10	Consignments	49
	7.11	Distributions	49
	7.12	Accounting Methods	49
	7.13	Investments	49
	7.14	Transactions with Affiliates	50
	7.15	Suspension	50
	7.16	Compensation	50
	7.17	Use of Proceeds	50
	7.18	Change in Location of Chief Executive Office; Inventory and Equipment with Bailees	50
	7.19	Securities Accounts	50
	7.20	Financial Covenants	50
8. EVENTS OF DEFAULT.			52
9. THE LENDER GROUP'S RIGHTS AND REMEDIES.			53
	9.1	Rights and Remedies	53
	9.2	Remedies Cumulative	54
10. TAXES AND EXPENSES.			54
11. WAIVERS; INDEMNIFICATION.			55
	11.1	Demand; Protest; etc.	55
	11.2	The Lender Group's Liability for Collateral	55
	11.3	Indemnification	55
12. NOTICES.			56
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.			57
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.			57
	14.1	Assignments and Participations	57

	14.2	Successors	59
15. AMENDMENTS; WAIVERS.			60
	15.1	Amendments and Waivers	60
	15.2	Replacement of Holdout Lender	60
	15.3	No Waivers; Cumulative Remedies	61
16. AGENT; THE LENDER GROUP.			61
	16.1	Appointment and Authorization of Agent	61
	16.2	Delegation of Duties	61
	16.3	Liability of Agent	62
	16.4	Reliance by Agent	62
	16.5	Notice of Default or Event of Default	62
	16.6	Credit Decision	62
	16.7	Costs and Expenses; Indemnification	63
	16.8	Agent in Individual Capacity	63
	16.9	Successor Agent	63
	16.10	Lender in Individual Capacity	64
	16.11	Withholding Taxes	64
	16.12	Collateral Matters	65
	16.13	Restrictions on Actions by Lenders; Sharing of Payments	66
	16.14	Agency for Perfection	66
	16.15	Payments by Agent to the Lenders	66
	16.16	Concerning the Collateral and Related Loan Documents	66
	16.17	Field Audits and Examination Reports; Confidentiality; Disclaimers by Lenders; Other Reports and Information	66
	16.18	Several Obligations; No Liability	67
17. GUARANTY.			67
18. GENERAL PROVISIONS.			69
	18.1	Effectiveness	69
	18.2	Section Headings	69
	18.3	Interpretation	69
	18.4	Severability of Provisions	69
	18.5	Counterparts; Telefacsimile Execution	69
	18.6	Revival and Reinstatement of Obligations	69
	18.7	Integration	69

iii

EXHIBITS AND SCHEDULES

Exhibit A-1		Form of Assignment and Acceptance
Exhibit C-1		Form of Compliance Certificate
Exhibit L-1		Form of LIBOR Notice
Exhibit W		Form of Bailee Letter
Schedule A-1		Agent's Account
Schedule C-1		Commitments
Schedule D-1		Designated Account
Schedule E-1		Eligible Inventory Locations
Schedule P-1		Permitted Liens
Schedule R-1		Real Property Collateral
Schedule 2.7(a)		Cash Management Banks
Schedule 5.5		Locations of Inventory and Equipment
Schedule 5.7		Chief Executive Office; FEIN
Schedule 5.8(b)		Capitalization of Borrower
Schedule 5.8(c)		Capitalization of Borrower's Subsidiaries
Schedule 5.10		Litigation
Schedule 5.13		Benefit Plans
Schedule 5.14		Environmental Matters
Schedule 5.16		Intellectual Property
Schedule 5.18		Demand Deposit Accounts
Schedule 5.20		Permitted Indebtedness
Schedule 7.6		Guarantees

LOAN AND SECURITY AGREEMENT AND GUARANTY

THIS LOAN AND SECURITY AGREEMENT AND GUARANTY (this "Agreement"), is entered into as of November 1, 2002, between and among, on the one hand, the lenders identified on the signature pages hereof (such lenders, together with their respective successors and assigns, are referred to hereinafter each individually as a "Lender" and collectively as the "Lenders"), FOOTHILL CAPITAL CORPORATION, a California corporation, as the arranger and administrative agent for the Lenders ("Agent"), and, on the other hand, ARCHIBALD CANDY CORPORATION, a Delaware corporation (as the "Borrower"), LAURA SECORD HOLDINGS CORP., a Delaware corporation ("LSHC") and ARCHIBALD CANDY (CANADA) CORPORATION, a Canadian corporation ("ACC Canada" and, together with LSHC, collectively, the "Guarantors").

W I T N E S S E T H:

WHEREAS, on June 12, 2002 (the "Filing Date"), Fannie May Holdings, Inc., a Delaware corporation ("Fannie May") and Archibald Candy Corporation, an Illinois corporation ("Archibald", and together with Fannie May, collectively, "Debtors") filed voluntary petitions for relief under chapter 11 of title 11 of the United States Code in the United States Bankruptcy Court for the District of Delaware;

WHEREAS, on the Filing Date, Debtors, ACC Canada, the Agent and the Lenders entered into the Post-Petition Loan Agreement (as hereinafter defined) to pursue a financial restructuring of Debtors;

WHEREAS, in connection with the Plan (as hereinafter defined), Debtors have requested that the Lenders extend emergence financing and provide the Borrower (as a reorganized Debtor) with a revolving credit facility and certain term loans in the aggregate principal amount not exceeding $50 million at any time outstanding, and subject to the terms and conditions set forth herein, the Lenders are willing to provide such facility and term loans; and

WHEREAS, the Lenders desire to appoint Foothill as the Agent for the Lenders hereunder.

NOW, THEREFORE, in consideration of the terms and conditions contained herein, and of any loans or extensions of credit heretofore, now or hereafter made to or for the benefit of Borrower by the Agent and the Lenders, the parties to this Agreement agree as follows:

1. DEFINITIONS AND CONSTRUCTION.

1.1 Definitions.

As used in this Agreement, the following terms shall have the following definitions:

"Ableco" means Ableco Finance LLC, a Delaware limited liability company, any of its Affiliates, or any fund, money market account, investment account or other account managed by Ableco Finance LLC or one of its Affiliates or its investment manager.

"ACC Canada" means Archibald Candy (Canada) Corporation, a Guarantor under this Agreement.

"Account Debtor" means any Person who is or who may become obligated under, with respect to, or on account of, an Account, chattel paper, or a General Intangible.

"Accounts" means all of any Loan Party's now owned or hereafter acquired right, title, and interest with respect to "accounts" (as that term is defined in the Code), and any and all supporting obligations in respect thereof.

"ACH Transactions" means any cash management or related services (including the Automated Clearing House processing of electronic funds transfers through the direct Federal Reserve Fedline system) provided by Wells Fargo or its Affiliates for the account of Borrower or its Subsidiaries.

"Additional Documents" has the meaning set forth in Section 4.4.

"Advances" has the meaning set forth in Section 2.1.

"Affiliate" means, as applied to any Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" means the possession, directly or indirectly, of the power to direct the management and policies of a Person, whether through the ownership of Stock, by contract, or otherwise; provided, however, that, for purposes of the definition of Eligible Accounts and Section 7.14 hereof: (a) any Person which owns directly or indirectly 10% or more of the securities having ordinary voting power for the election of directors or other members

of the governing body of a Person or 10% or more of the partnership or other ownership interests of a Person (other than as a limited partner of such Person) shall be deemed to control such Person, (b) each director (or comparable manager) of a Person shall be deemed to be an Affiliate of such Person, and (c) each partnership or joint venture in which a Person is a partner or joint venturer shall be deemed to be an Affiliate of such Person.

"Agent" means Foothill, solely in its capacity as administrative agent for the Lenders hereunder, and any successor thereto.

"Agent's Account" means the account identified on Schedule A-1.

"Agent Advances" has the meaning set forth in Section 2.3(e)(i).

"Agent's Liens" means the Liens granted by the Loan Parties to Agent for the benefit of the Lender Group under this Agreement or the other Loan Documents.

"Agent-Related Persons" means Agent together with its Affiliates, officers, directors, employees, and agents.

"Agreement" has the meaning set forth in the preamble hereto.

"Applicable Prepayment Premium" means, as of any date of determination, an amount equal to (a) during the period of time from and after the date of the execution and delivery of this Agreement to but not including the first anniversary of the Closing Date, 2.25% times the Maximum Revolver Amount, (b) during the period of time from and including the first anniversary of the Closing Date to but not including the second anniversary of the Closing Date, 1.00% times the Maximum Revolver Amount, and (c) during the period of time from and including the second anniversary of the Closing Date to but not including the Maturity Date, 0.50% times the Maximum Revolver Amount. If the Obligations are repaid at any time prior to the Maturity Date from the proceeds of an initial public offering of the Stock of Borrower or in connection with a sale of all or substantially all of the Stock or assets of Borrower, "Applicable Prepayment Premium" means, as of any date of determination, an amount equal to 50% times the Applicable Prepayment Premium that would otherwise be due and owing pursuant to the foregoing clauses (a), (b) and (c), provided, however, if Wells Fargo or its Affiliates (i) refinances the credit facility set forth in this Agreement or (ii) enters into a new credit facility in connection with an acquisition by any third party of all or substantially all of the Stock or assets of Borrower, the Applicable Prepayment Premium means zero (0).

"Archibald" means Archibald Candy Corporation, an Illinois corporation.

"Assignee" has the meaning set forth in Section 14.1.

"Assignment and Acceptance" means an Assignment and Acceptance in the form of Exhibit A-1.

"Authorized Person" means any officer or other employee of any Loan Party.

"Availability" means, as of any date of determination, if such date is a Business Day, and determined at the close of business on the immediately preceding Business Day, if such date of determination is not a Business Day, the amount that Borrower is entitled to borrow as Advances under Section 2.1 (after giving effect to all then outstanding Obligations (other than Bank Product Obligations) and all sublimits and reserves applicable hereunder).

"Bank Product Agreements" means those certain cash management service agreements entered into from time to time by Borrower or its Subsidiaries in connection with any of the Bank Products.

"Bank Product Obligations" means all obligations, liabilities, contingent reimbursement obligations, fees, and expenses owing by Borrower or its Subsidiaries to Wells Fargo or its Affiliates pursuant to or evidenced by the Bank Product Agreements and irrespective of whether for the payment of money, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, and including all such amounts that Borrower is obligated to reimburse to Agent or any member of the Lender Group as a result of Agent or such member of the Lender Group purchasing participations or executing indemnities or reimbursement obligations with respect to the Bank Products provided to Borrower or its Subsidiaries pursuant to the Bank Product Agreements.

"Bank Products" means any service or facility extended to Borrower or its Subsidiaries by Wells Fargo or any Affiliate of Wells Fargo including: (a) credit cards, (b) credit card processing services, (c) debit cards,

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