Collateral Repurchase Agreement - Krispy Kreme Doughnut Corp., Midwest Doughnuts LLC and Bank of Blue Valley
COLLATERAL REPURCHASE AGREEMENT
THIS COLLATERAL REPURCHASE AGREEMENT (the "Agreement") is made and
entered into this 31st day of March, 1998 by and among KRISPY KREME DOUGHNUT
CORPORATION, a North Carolina corporation, with its principal office and place
of business at 370 Knollwood Street, Suite 500, Winston-Salem, North Carolina,
27103 ("Krispy Kreme"), MIDWEST DOUGHNUTS, L.L.C., a North Carolina limited
liability company (the "Borrower") and BANK OF BLUE VALLEY (the "Bank").
R E C I T A L S :
1. The Borrower has requested a loan from the Bank to finance
the purchase of certain equipment, signage, furniture and fixtures for
use at the Krispy Kreme Doughnut Shop to be established by Borrower at
8703 West 63rd Street, Merriam, Kansas.
2. The Bank has agreed to lend to Borrower Seven Hundred
Sixty-Five Thousand and 00/100 Dollars ($765,000) secured in part by a
security interest in the Equipment (as defined below) (the "Bank Loan")
as evidenced by the Note (as defined below); and
3. Therefore, the parties desire to enter into this Agreement.
NOW THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties hereto do agree as follows:
1. A copy of the Note is attached hereto as EXHIBIT A and
incorporated herein by reference (the "Note").
2. Bank shall provide Krispy Kreme with a copy of any notice
to Borrower declaring a default under the Note and demanding payment in
full and a copy of any notice to Borrower after which Bank will
exercise its remedies under the Note. Such copies shall be sent to
Krispy Kreme within three (3) business days of the sending of the same
to Borrower.
3. In the event of a default under the Note, as long as Bank
has fully complied with the terms of this Agreement, Bank shall have
the right, but not the obligation, to demand by notice to Krispy Kreme
(the "Notification") that Krispy Kreme repurchase the Equipment at a
price equal to the lesser of (i) Three Hundred Thirty-Five Thousand and
00/100 Dollars ($335,000.00) or (ii) the unpaid balance of the
applicable portion of the Bank Loan (the "Unpaid Balance"). Such lesser
amount is sometimes herein referred to as the "Purchase Price." The
parties acknowledge that the Bank Loan is for Borrower's entire project
for the construction, equipping and fixturing of a Krispy Kreme
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Doughnut Shop and includes, but is not limited to, the purchase of the
Equipment. Consequently, the unpaid Bank Loan balance will be prorated
in relationship to the amount of the Loan for the purchase of the
Equipment to determine the Unpaid Balance as such term is used in this
Agreement. For example, purchase price of the Equipment is $335,000 and
the Bank Loan is $765,000, then the Unpaid Balance, for purposes of
this Agreement, shall be equal to 43.7% of the actual unpaid balance of
the Bank Loan at the time of the Notification.
4. The parties acknowledge and agree that any default by
Borrower under the Note or any other documents related to the Bank
Loan, whether or not waived by the Bank, shall, at the option of Krispy
Kreme, constitute a default under the Franchise Agreement, Development
Agreement and any and all other agreements between Borrower and Krispy
Kreme.
5. The liability of Krispy Kreme hereunder shall be subject
to, and conditioned upon, full and complete compliance by Bank with the
following:
(a) Bank shall obtain and perfect a first priority
security interest in the Equipment (the "Security Interest")
and shall continuously maintain such perfected Security
Interest from the moment Borrower acquires any interest in the
Equipment. All filings and indicia of such Security Interest
shall state that they are subject to the terms of this
Agreement.
(b) Bank shall notify Krispy Kreme of each advance
under the Bank Loan for any purchase of Equipment not from
Krispy Kreme within thirty (30) days after such advance is
made and Krispy Kreme's obligations to Bank hereunder shall be
reduced by the amount of any advances for which Krispy Kreme
does not receive such notice.
(c) The Security Interest shall be perfected separate
and apart from any other security interest of Bank in and to
any and all other property of Borrower.
(d) Any transfer of the Security Interest or any
interest therein to any other party shall provide that it is
subject to the terms of this Agreement and the transferee
thereof shall enter into an agreement with Krispy Kreme
agreeing to abide by the terms hereof.
(e) Bank shall not release the Security Interest in
the Equipment nor shall Bank take any action, or fail to take
any action, which action or failure to act will compromise or
diminish the Security Interest in any way. Provided, however,
Bank may release the Security Interest in portions of the
Equipment if Bank, at Bank's election, either (i) releases
Krispy Kreme from liability under this Agreement or (ii)
determines that Borrower reasonably desires to replace the
Equipment with new or different equipment (the "New
Equipment") of value and function comparable to that in which
the Security Interest is to be released and
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ensures that the New Equipment is obtained by Borrower prior
to such release and that the Security Interest applies to such
New Equipment as a first priority Security Interest. Upon such
replacement, the New Equipment shall be deemed to be
"Equipment" under this Agreement. Bank shall provide notice to
Krispy Kreme of any such release and shall provide Krispy
Kreme with a list of the New Equipment and evidence that the
Security Interest applies thereto.
6. Upon election by Bank to require repurchase of the
Equipment by Krispy Kreme hereunder, Bank shall assign and transfer the
Security Interest together with an interest in the Note equal to the
Purchase Price to Krispy Kreme or such entity as Krispy Kreme may
designate in writing. Borrower shall transfer all of its right, title
and interest in the Equipment to Krispy Kreme at the same time. The
Security Interest is agreed by the parties to also secure all of
Borrower's obligations under this Agreement and Borrower hereby grants
to Bank and to Krispy Kreme a security interest (which is agreed to be
a part of the Security Interest) in the Equipment to secure Borrower's
obligations under this Agreement. In no event shall the Security
Interest be permitted to merge with ownership of the Equipment.
7. Except as permitted under subparagraph 5(e) hereof,
Borrower shall not sell or transfer, and bank shall not consent to the
sale or transfer, whether by gift or with or without consideration, of
all or any part of the Equipment. Bank shall not sell or transfer the
Equipment or any portion thereof through exercise of its rights under
the Bank Loan and any documents executed in connection therewith, or
otherwise, without first giving Krispy Kreme the option to purchase the
Equipment in an amount equal to the Purchase Price. bank shall provide
notice to Krispy Kreme of its proposed transfer and thirty (30) days in
which to exercise its right to purchase said Equipment. At the time
Krispy Kreme purchases the Equipment, Bank shall also transfer the
Security Interest as provided under Paragraph 6 above. In no event
shall the Security Interest be permitted to merge with ownership of the
Equipment.
8. As used herein, the term Equipment shall mean all
furniture, fixtures, equipment, doughnut making equipment and signage
purchased by Borrower and reasonably necessary for the operation of a
Krispy Kreme Doughnut Shop to be located at 8703 West 63rd Street,
Merriam, Kansas, and as to which the Security Interest is effective.
Krispy Kreme must approve the purchase of each item of Equipment.
9. Borrower consents and agrees to the terms of this Agreement
and agrees to transfer the Equipment to Krispy Kreme immediately and at
the same time as Krispy Kreme makes a payment of the Purchase Price to
Bank or at the time Krispy Kreme elects to purchase the Equipment under
Paragraph 7 hereof or as otherwise provided herein. Any such transfer
shall be free and clear of all liens, claims or interests other than
the Security Interest. In no event shall the Security Interest be
permitted to merge with ownership of the Equipment.
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10. A partial list of the Equipment is attached as EXHIBIT B
hereto and incorporated herein by reference. The parties agree to amend
such list as each item of Equipment is purchased, upon the completion
of the purchase of the Equipment, and again upon the purchase of any
New Equipment. No New Equipment shall be considered a part of the
Equipment until added to this EXHIBIT B.
11. All notices required or desired to be sent hereunder shall
be sent by certified mail, return receipt requested, postage prepaid,
or by a recognized overnight courier such as Airborne Express, FedEx,
etc. and shall be effective on receipt. Any party may change the
address for notices to it by notice sent in accordance herewith.
Notices shall be sent the parties hereto at their respective addresses
set forth below (or at such address may be changed as permitted
herein):
IF TO KRISPY KREME: Krispy Kreme Doughnut Corporation
By Mail: P.O. Box 83
Winston-Salem, NC 27102-0083
Attention: Stephen A. Johnson
By Overnight: 370 Knollwood Street
Suite 500
Winston-Salem, NC 27103
Attention: Stephen A. Johnson
IF TO BORROWER: MIDWEST DOUGHNUTS, L.L.C.
620 Staffordshire Road
Winston-Salem, NC 27104
Attention: Philip R.S. Waugh, Jr.
IF TO BANK: Bank of Blue Valley
By Mail: P.O. Box 26128
Overland Park, KS 66225
Attention: Lanny Drummond
By Overnight: 11935 Riley
Overland Park, KS 66225
Attention: Lanny Drummond
12. No failure of Bank to provide Krispy Kreme with a copy of
any notice sent to Borrower shall relieve Krispy Kreme of its liability
hereunder.
13. This Agreement shall be binding upon, and inure to the
benefit of, the parties hereto and to the successors and assigns of
Bank and Krispy Kreme. Borrower shall not have any right to assign this
Agreement or any interest herein without the prior written consent of
Bank and Krispy Kreme. Bank and Krispy Kreme shall each provide the
other with a copy of any assignment of this Agreement. Any such
assignment by Bank may be whole or partial, shall only be to a holder
of an interest in the Note, and shall contain an agreement by the
assignee to abide by the terms hereof. No assignment
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hereof by Krispy Kreme shall relieve it of its obligations hereunder
without Bank's consent to such release.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective the day and year first above written.
KRISPY KREME DOUGHNUT CORPORATION
By: /s/ Scott A. Livengood
Printed Name: Scott A. Livengood
Printed Title: President
BORROWER:
MIDWEST DOUGHNUTS, L.L.C.
By: /s/ Jimmy B. Strickland
Jimmy B. Strickland,
Managing Member
BANK:
BANK OF BLUE VALLEY
By: /s/ Lanny Drummond
Printed Name: Lanny Drummond
Printed Title: Vice President
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