EXHIBIT 10.1
LOAN AND SECURITY AGREEMENT
DATED AS OF SEPTEMBER 5, 2003
BY AND AMONG
LASALLE BANK NATIONAL ASSOCIATION
AND
VITA FOOD PRODUCTS, INC.,
VIRGINIA HONEY COMPANY, INC.,
THE HALIFAX GROUP, INC.
AND
VITA SPECIALTY FOODS, INC.
LASALLE BANK NATIONAL ASSOCIATION/
VITA FOOD PRODUCTS, INC., VIRGINIA HONEY COMPANY, INC., THE HALIFAX GROUP, INC.
AND VITA SPECIALTY FOODS, INC.
LOAN AND SECURITY AGREEMENT
TABLE OF CONTENTS
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1. Definitions And Terms............................................... 1
2. Loans: Disbursements, Interest Rates, Loan Requests and Fees....... 10
2.1 Loans....................................................... 10
2.2 Interest Rates and Fees..................................... 12
2.3 LIBOR Rate Provisions....................................... 13
2.4 Letters of Credit........................................... 14
2.5 Computation of Interest..................................... 15
3. Loans: General Terms............................................... 15
3.1 Payments.................................................... 15
3.2 Late Payment Provision...................................... 16
3.3 Notes....................................................... 16
3.4 One Loan.................................................... 16
3.5 Use of Loan Proceeds........................................ 16
3.6 Maximum Revolving Loans..................................... 16
3.7 Representation and Warranty................................. 17
3.8 Authorization to Disburse................................... 17
3.9 Bank Charges................................................ 17
3.10 Payment of Costs, Fees and Expenses......................... 17
3.11 Debit of Accounts........................................... 17
3.12 Application of Payments..................................... 17
3.13 Co-Obligor Provisions....................................... 17
4. Collateral: General Terms.......................................... 19
4.1 Grant of Security Interest.................................. 19
4.2 Supplemental Documentation.................................. 19
4.3 Inspections and Verifications............................... 20
4.4 Liens/Collateral Locations.................................. 20
4.5 Lockbox..................................................... 20
4.6 Account Earnings Credit..................................... 21
4.7 Assignment of Competing Security Interest................... 21
4.8 Special Collateral.......................................... 21
4.9 Additional Collateral....................................... 21
4.10 No Custom or Waiver......................................... 21
4.11 Lien on Realty.............................................. 21
5. Collateral: Accounts............................................... 22
5.1 Eligible Accounts........................................... 22
5.2 Notice of Ineligible Accounts............................... 23
5.3 Additional Representations, Warranties and Covenants........ 24
5.4 Revolving Loans............................................. 24
5.5 Verification of Accounts.................................... 24
5.6 Notices Regarding Account Debtors........................... 24
5.7 Notice Regarding Disputed Accounts.......................... 25
5.8 Attorney and Agent-In-Fact.................................. 25
6. Collateral: Inventory.............................................. 25
6.1 Eligible Inventory.......................................... 25
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6.2 Additional Representations, Warranties and Covenants........ 26
6.3 Sale of Inventory........................................... 26
6.4 Responsibility for Inventory................................ 26
7. Equipment........................................................... 26
7.1 Representations, Warranties and Covenants................... 26
7.2 Maintenance of Equipment.................................... 27
7.3 Evidence of Ownership....................................... 27
7.4 Records and Schedules of Equipment.......................... 27
8. Insurance and Taxes................................................. 27
8.1 Insurance................................................... 27
8.2 Taxes....................................................... 28
9. Representations, Warranties and Covenants: General................. 28
9.1 Representations and Warranties.............................. 28
9.2 Covenants................................................... 31
9.3 Negative Covenants.......................................... 34
9.4 Financial Covenants......................................... 35
9.5 Financial Reporting......................................... 35
10. Conditions Precedent................................................ 36
10.1 Conditions to Initial Funding............................... 36
10.2 Conditions to Subsequent Fundings........................... 37
11. Event of Default; Remedies.......................................... 38
11.1 Events of Default........................................... 38
11.2 Cumulative Remedies......................................... 39
11.3 Discontinuing Advances...................................... 39
11.4 Remedies.................................................... 40
11.5 Assembling Collateral....................................... 40
11.6 Notice of Sale.............................................. 40
11.7 Postponement of Sale........................................ 40
12. General............................................................. 40
12.1 Bank Accounts............................................... 40
12.2 Application of Payments..................................... 40
12.3 Additional Representations, Warranties and Covenants........ 41
12.4 Modification and Assignment of Loan Documents............... 41
12.5 Waiver of Defaults.......................................... 41
12.6 Severability................................................ 41
12.7 Successors and Assigns...................................... 41
12.8 Incorporation of Other Agreements; Exhibits; and Schedules.. 42
12.9 Survival of Termination..................................... 42
12.10 Waiver of Notices........................................... 42
12.11 Authority to Execute and Borrow............................. 42
12.12 Costs, Fees and Expenses.................................... 42
12.13 Binding Agreement; Governing Law............................ 43
12.14 Notices..................................................... 43
12.15 Release of Claims........................................... 44
12.16 Capital Adequacy Charge..................................... 44
12.17 Headings.................................................... 44
12.18 Maximum Interest............................................ 44
12.19 Construction................................................ 44
12.20 Revival of Liabilities...................................... 45
12.21 General Indemnity........................................... 45
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12.22 Environmental and Safety and Health Indemnity............... 45
12.23 Completion of Loan Agreement and Other Agreements........... 46
12.24 Joint and Several Liability................................. 46
12.25 Disclosure of Information................................... 46
12.26 Merger Clause............................................... 46
12.27 SERVICE OF PROCESS.......................................... 46
12.28 JURISDICTION; VENUE......................................... 46
12.29 JURY WAIVER................................................. 47
Schedule 1.1 - Permitted Liens........................................... 49
Schedule 4.1 - Commercial Tort Claims.................................... 52
Schedule 4.4 - Chief Executive Office and Collateral Locations........... 53
Schedule 4.11 - Real Property Owned by Borrowers......................... 56
Schedule 9.1(Q) - Borrowers and its Subsidiaries' Corporate Information;. 57
Schedule 9.1(S) - Labor Relations........................................ 58
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LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement (this "Loan Agreement") is made and
entered into as of September 5, 2003, by and among LaSalle Bank National
Association, a national banking association, with its principal office located
at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Lender"), Vita Food
Products, Inc., a Nevada corporation, with its chief executive office located at
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Vita Food"), Virginia Honey
Company, Inc., a Virginia corporation, with its chief executive office located
at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Virginia Honey"), The
Halifax Group, Inc., a Georgia corporation, with its chief executive office
located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Halifax"), and Vita
Specialty Foods, Inc., a Delaware corporation, with its chief executive office
located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Specialty Foods")
(Vita Food, Virginia Honey, Halifax and Specialty Foods are individually a
"Borrower" and collectively the "Borrowers").
W I T N E S S E T H:
WHEREAS, Borrowers desire Lender to provide certain extensions of
credit, loans or other financial accommodations to Borrowers (the "Financial
Accommodations"); and
WHEREAS, Lender is willing to provide the Financial Accommodations to
Borrowers, but solely on the terms and subject to the conditions set forth in
this Loan Agreement and the other documents, instruments and agreements executed
and delivered pursuant to this Loan Agreement or referenced herein.
NOW THEREFORE, in consideration of the Financial Accommodations, the
mutual promises and understandings of Lender and Borrowers set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, Lender and Borrowers hereby agree as set forth in this Loan
Agreement.
1. DEFINITIONS AND TERMS
The following words, terms or phrases shall have the following meanings:
"ACCOUNT", " ACCOUNT DEBTOR", "CHATTEL PAPER", "COMMERCIAL TORT
CLAIMS", "DEPOSIT ACCOUNT", "DOCUMENT", "DOCUMENT OF TITLE", "ELECTRONIC CHATTEL
PAPER", " EQUIPMENT", "FIXTURE", "GENERAL INTANGIBLES", "GOODS", "INSTRUMENT",
"INVENTORY", "INVESTMENT PROPERTY", "LETTER OF CREDIT RIGHTS", "PAYMENT
INTANGIBLES", "PROCEEDS", "SUPPORTING OBLIGATIONS" and "TANGIBLE CHATTEL PAPER":
shall have their respective meanings as set forth in the Illinois Uniform
Commercial Code, as amended or restated from time to time.
"AFFILIATE": shall mean any Person that directly or indirectly, through
one or more intermediaries, owns, controls or is controlled by, or is under
common control with, any Borrower. A Person shall be presumed to control a
Borrower if such Person is the direct or indirect legal or beneficial owner of
more than fifteen percent (15%) of the outstanding Equity Interests of such
Borrower.
"ASSIGNMENT OF RENTS AND LESSOR'S INTEREST IN LEASES": shall mean that
certain Assignment of Rents and Lessor's Interest in Leases of even date
herewith executed and delivered by Vita Food to Lender, as amended, renewed or
restated from time to time.
"BORROWING BASE": shall mean the total, without duplication, of the
following:
(1) eighty percent (80%) of the face amount of all then
existing Eligible Accounts as set forth on the Borrowing Base
Certificate delivered by Borrowers to Lender from time to time, minus
all finance charges and prompt payment, volume and all other discounts,
credits or allowances which may be taken by or granted to Account
Debtors,
(2) plus, without duplication, the lesser of (a) the sum of
(I) sixty percent (60%) of the Value of all then existing Eligible
Inventory consisting of raw materials and packaged goods, (II)
twenty-five percent (25%) of the Value of all then existing Eligible
Inventory consisting of packaging inventory, and (III) fifty percent
(50%) of the Value of In-Transit Inventory; or (b) $4,250,000.00,
(3) plus the Overadvance,
(4) less all Letter of Credit Obligations.
"BORROWING BASE CERTIFICATE": shall mean the certificate summarizing
the combined Borrowing Base delivered from time to time by Borrowers to Lender
in accordance with the terms of this Loan Agreement, in form and substance
acceptable to Lender, which shall, among other things, certify to Lender each
Borrower's state of formation.
"BUSINESS DAY": shall mean any day other than a Saturday, a Sunday or
(1) with respect to all matters, determinations, fundings and payments in
connection with LIBOR Loans, any day on which banks in London, England or
Chicago, Illinois are required or permitted to close, and (2) with respect to
all other matters, any day that banks in Chicago, Illinois are required or
permitted to close.
"CAPITAL EXPENDITURES": shall mean, as to any Person, any and all
expenditures of such Person for fixed or capital assets, including, without
limitation, the incurrence of Capitalized Lease Obligations, all as determined
in accordance with GAAP; provided, however, Capital Expenditures shall not
include expenditures for fixed or capital assets to the extent such expenditures
are paid for or reimbursed from the proceeds of insurance.
"CAPITALIZED LEASE OBLIGATIONS": shall mean all obligations or
liabilities created or arising under any capitalized lease of real or personal
property, or conditional sale or other title retention agreement, whether or not
the rights and remedies of the lessor, seller or lender thereof are limited to
repossession of the property giving rise to such obligations or liabilities.
"CASH FLOW COVERAGE RATIO": shall mean the ratio of Borrowers'
consolidated (a) EBITDA, less the sum of Capital Expenditures not financed by
long-term debt, cash dividends paid to such Person's Equity Interest holders,
cash payments made to repurchase or redeem any Borrower's Equity interests and
income taxes paid in cash, to (b) Fixed Charges, calculated on a rolling four
(4) quarters basis.
"CHARGES": shall mean all national, federal, state, county, city,
municipal or other governmental, including, but not limited to, any
instrumentality, division, agency, body or department thereof, taxes, levies,
assessments, charges, liens, claims or encumbrances upon or relating to the
Collateral, the Liabilities, each Borrower's business, ownership or use of any
of its assets, or each Borrower's income or gross receipts.
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"COLLATERAL": shall have the meaning ascribed to such term in Section
4.1 below.
"CONSTITUENT DOCUMENTS": shall mean, for each Borrower, as applicable,
such Borrower's articles or certificate of incorporation or formation, by-laws,
operating agreement, limited partnership agreement, general partnership
agreement and any other similar documents, agreements or certificates relating
to such Borrower's legal formation.
"COVENANTS": shall mean all now existing and hereafter arising
covenants, duties, obligations and agreements of Borrowers or any Borrower to
and with Lender, whether pursuant to this Loan Agreement, the Other Agreements
or otherwise.
"DEFAULT RATE": shall mean, for each Loan, four percent (4%) per annum
in excess of the otherwise applicable interest rate for such Loan, and for all
other Liabilities, shall mean four percent (4%) per annum in excess of the Prime
Rate.
"DESIGNATED PERSON": for each Borrower, shall mean any officer of such
Borrower and any other Person designated in writing by any Borrower to Lender as
a "Designated Person".
"EBITDA": shall mean, determined on a consolidated basis for any
period, the net earnings of Borrowers plus, to the extent deducted in
calculating net earnings, expenses for interest, income taxes, depreciation and
amortization, all as determined in accordance with GAAP consistently applied.
"ELIGIBLE ACCOUNTS": shall have the meaning ascribed to such term in
Section 5.1 below.
"ELIGIBLE INVENTORY": shall have the meaning ascribed to such term in
Section 6.1 below.
"ENVIRONMENTAL INDEMNITY AGREEMENT": shall mean that certain
Environmental Indemnity Agreement of even date herewith executed and delivered
by Borrowers to Lender, as amended, renewed or restated from time to time.
"ENVIRONMENTAL LAWS": shall mean all federal, state and local laws,
rules, regulations, ordinances, programs, permits, guidances, orders and consent
decrees relating to health, safety and environmental matters, as may be amended
from time to time, including, but not limited to, the Resource Conservation and
Recovery Act, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Toxic Substances Control Act, the Clean Water Act,
the River and Harbor Act, Water Pollution Control Act, the Marine Protection
Research and Sanctuaries Act, the Deep-Water Port Act, the Safe Drinking Water
Act, the SuperFund Amendments and Reauthorization Act of 1986, the Federal
Insecticide, Fungicide and Rodenticide Act, the Mineral Lands and Leasing Act,
the Surface Mining Control and Reclamation Act, state and federal superlien and
environmental clean up programs and laws, and U.S. Department of Transportation
regulations.
"EQUITY INTERESTS": shall mean any and all shares and other equity and
ownership interests, however designated, of or in a Person, whether or not
voting, including, but not limited to, common stock, warrants, membership
interests, preferred stock, convertible debentures and all agreements,
instruments and documents convertible, in whole or in part, into any one or more
of the foregoing.
"ERISA": shall mean the Employee Retirement Income Security Act of 1974
and all rules and regulations from time to time promulgated thereunder.
"EVENT OF DEFAULT": shall have the meaning ascribed to such term in
Section 11.1 below.
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"FINANCIALS": shall mean all year-end financial statements,
projections, interim financial statements, tax returns, reports and similar
documentation, together with all information previously delivered by Borrowers
to Lender and the documents described in Section 9.5 below, individually or
collectively.
"FIXED CHARGES": shall mean, for any period, the sum of (1) interest
expense for such period, plus (2) payments of principal with respect to all
Indebtedness and Liabilities (including, without limitation, payments on
Capitalized Lease Obligations and permitted payments of principal on
Subordinated Debt) scheduled, paid or otherwise required to be paid during such
period.
"FUNDED DEBT" shall mean, for any Person (without duplication) (1) all
Indebtedness and Liabilities created, assumed or incurred in any manner by such
Person representing money borrowed (including but not limited to the issuance of
debt securities), (2) all Indebtedness for the deferred purchase price of
property or services (other than trade accounts payable arising in the ordinary
course of business which are not more than thirty (30) days past due), (3) all
Indebtedness secured by any lien upon property of such Person, whether or not
such Person has assumed or become liable for the payment of such Indebtedness,
(4) all Capitalized Lease Obligations of such Person, and (5) all obligations of
such Person on or with respect to letters of credit, bankers' acceptances and
other extensions of credit whether or not representing obligations for borrowed
money.
"FUNDED DEBT TO EBITDA RATIO" shall mean, for each fiscal year, the
ratio of Borrowers' consolidated Funded Debt to EBITDA.
"GAAP": shall mean generally accepted accounting principles
consistently applied from time to time.
"HAZARDOUS SUBSTANCES": shall have the meaning set forth in 42
USC Section 9601(14), 42 USC Section 9601(33) and 42 USC Section 6991(8) or any
state or local counterpart Environmental Law.
"INDEBTEDNESS": shall mean all obligations and liabilities of each
Borrower to any Person other than Lender, including, but not limited to, (1) all
indebtedness whether primary or secondary, direct or indirect, absolute or
contingent, liquidated or unliquidated, insured or uninsured, fixed or
otherwise, heretofore, now or from time to time hereafter owing, due or payable,
however evidenced, created, incurred or acquired, and howsoever arising, whether
by written or oral agreement, operation of law or otherwise; (2) all obligations
or liabilities of any Person that are secured by any lien, claim, encumbrance or
security interest upon the Collateral or other assets of any Borrower, whether
or not such Borrower has assumed or become liable for the payment thereof; (3)
all Capitalized Lease Obligations; (4) all unfunded pension obligations; and (5)
all deferred taxes.
"INDEMNIFIED LIABILITIES": shall have the meaning ascribed to such term
in Section 12.21 below.
"INDEMNITEES": shall have the meaning ascribed to such term in Section
12.21 below.
"INTEREST PERIOD": shall mean the period commencing on the date a LIBOR
Loan is made and ending, as Borrowers shall select in advance, thirty (30),
sixty (60) or ninety (90) days thereafter.
"IN-TRANSIT INVENTORY": shall mean Inventory that is in-transit to a
Borrower which (i) is in the process of being imported into the United States by
the seller thereof, (ii) such Borrower has issued a documentary Letter of Credit
to the seller thereof for the full purchase price, (iii) has been placed on a
4
shipping vessel for direct shipment to the United States, (iv) is properly
insured, (v) the only condition to such Borrower's receipt of possession thereof
is the presentment of the proper shipping documentation to the party shipping
such Inventory, which shipping documentation is under the control of such
Borrower, and (vi) if requested by Lender at any time, such Borrower has
delivered the originals of such shipping documentation or copies thereof to
Lender.
"INVENTORY REPORT": shall mean a report certified as to accuracy and
completeness by the chief financial officer or any Designated Person of each
Borrower and (A) describing the Value of each Borrower's Inventory, (B)
describing the status of the Inventory as more fully described in Section 6.2(B)
below, and, showing the location, composition, quantity and Value thereof, and
(C) describing such other matters relating to the Inventory as Lender may
reasonably request.
"LETTERS OF CREDIT": shall mean any letters of credit which are now or
at any time hereafter issued by Lender at the request of and for the account of
any Borrower.
"LETTER OF CREDIT OBLIGATIONS": shall mean the sum of the aggregate
outstanding face amount available to be drawn under all of the Letters of
Credit, plus the aggregate outstanding face amount of any unpaid drafts
presented under any of the Letters of Credit.
"LIABILITIES": shall mean any and all obligations, liabilities,
indebtedness, fees, costs and expenses, now or hereafter owed or owing by
Borrowers or any Borrower to Lender, including, but not limited to, all
principal, interest, debts, claims and indebtedness of any and every kind and
nature, howsoever created, arising or evidenced, whether primary or secondary,
direct or indirect, absolute or contingent, insured or uninsured, liquidated or
unliquidated, or otherwise, and whether arising or existing under written or
oral agreement or by operation of law, together with all costs, fees and
expenses of Lender arising hereunder, including, but not limited to, (1) the
indebtedness evidenced by the Revolving Note, Term Note A and Term Note B, (2)
reasonable attorneys' and paralegals' fees or charges relating to the
preparation of this Loan Agreement and the Other Agreements and the enforcement
of Lender's rights and remedies pursuant to this Loan Agreement and the Other
Agreements, and (3) all liabilities and obligations arising under or in
connection with Rate Hedging Transactions.
"LIBOR LOAN": shall mean any Loan bearing interest based upon the LIBOR
Rate, plus the applicable margin.
"LIBOR RATE": shall mean the per annum rate of interest at which United
States dollar deposits in an amount comparable to the principal balance of the
applicable LIBOR Loan and for a period equal to the relevant Interest Period are
offered in the London Interbank Eurodollar market at 11:00 a.m. (London time)
two Business Days prior to the commencement of each Interest Period, as
displayed in the Bloomberg Financial Markets system, or other authoritative
source selected by the Lender in its sole discretion, divided by a number
determined by subtracting from 1.00 the maximum reserve percentage for
determining reserves to be maintained by member banks of the Federal Reserve
System for Eurocurrency liabilities, such rate to remain fixed for such Interest
Period. Lender's determination of LIBOR Rate shall be conclusive, absent
manifest error.
"LOAN OR LOANS": shall mean, individually and collectively, the
Revolving Loan, Term Loan A, Term Loan B and any other loans provided by Lender
to the Borrowers from time to time.
"LOAN DOCUMENTS": shall mean this Loan Agreement, as amended, renewed,
restated or replaced from time to time, together with the Other Agreements.
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"MAXIMUM REVOLVING LOAN": shall mean an amount equal to Eight Million
Five Hundred Thousand and no/100 Dollars ($8,500,000.00).
"MORTGAGE AND SECURITY AGREEMENT": shall mean that certain Mortgage and
Security Agreement of even date herewith executed and delivered by Vita Food to
Lender, as amended, renewed or restated from time to time.
"MULTIEMPLOYER PLAN": shall have the meaning ascribed to such term in
Section 4001(a)(3) of ERISA.
"OBLIGOR": shall mean each Borrower and each other Person who is or
shall become primarily or secondarily liable for any of the Liabilities or has
provided collateral to secure all or any portion of the Liabilities.
"OTHER AGREEMENTS": shall mean all agreements, instruments and
documents, including, but not limited to, guaranties, mortgages, deeds of trust,
pledges, powers of attorney, consents, assignments, contracts, notices, security
agreements, leases, financing statements and all other writings heretofore, now
or from time to time hereafter executed by or on behalf of Borrowers, any
Borrower or any other Person and delivered to Lender in connection with the
Liabilities or any of the transactions contemplated herein, together with any
amendments, modifications, extensions or renewals thereto, including, but not
limited to, the documents, instruments and agreements described in Section
10.1(A) of this Loan Agreement.
"OVERADVANCE": shall mean, subject to the terms and conditions of
Section 2.1(A)(4) below, for each Overadvance Notice, an amount equal to (1)
Eight Hundred Thousand and no/100 Dollars ($800,000.00) from the first day of
the month immediately following Lender's receipt of such Overadvance Notice
through the last day of the fifth month immediately following Lender's receipt
of such Overadvance Notice, (2) Six Hundred Thousand and no/100 Dollars
($600,000.00) from the first day of the sixth month immediately following
Lender's receipt of such Overadvance Notice through the last day of the sixth
month immediately following Lender's receipt of such Overadvance Notice, (3)
Four Hundred Thousand and no/100 Dollars ($400,000.00) from the first day of the
seventh month immediately following Lender's receipt of such Overadvance Notice
through the last day of the seventh month immediately following Lender's receipt
of such Overadvance Notice, (4) Two Hundred Thousand and no/100 Dollars
($200,000.00) from the first day of the eighth month immediately following
Lender's receipt of such Overadvance Notice through the last day of the eighth
month immediately following Lender's receipt of such Overadvance Notice, and (5)
zero Dollars ($0) from the first day of the ninth month immediately following
Lender's receipt of such Overadvance Notice and thereafter.
"OVERADVANCE NOTICE": shall mean a notice from Borrowers to Lender
indicating Borrowers' intention to utilize the Overadvance and otherwise meeting
the requirements set forth in Section 2.1(A)(4) below.
"PARENT": shall mean any Person, now or at any time or times hereafter,
owning or controlling, directly or indirectly, at least a majority of the issued
and outstanding Equity Interests of any Borrower or any Subsidiary.
"PERMITTED INDEBTEDNESS": shall mean (1) existing Indebtedness set
forth and described in the most recent Financials delivered to Lender, (2) trade
payables arising in the ordinary course of each
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Borrower's business, (3) other Indebtedness of Borrowers incurred in the
ordinary course of Borrowers' businesses as presently conducted that are not (a)
past due, or (b) incurred through the borrowing of money or the obtaining of
credit, (4) Indebtedness in respect of taxes, assessments, governmental charges
or levies and claims for labor, materials and supplies that is incurred in the
ordinary course of Borrowers' businesses as presently conducted and is not past
due, (5) Indebtedness in respect of judgments or awards which do not constitute
an Event of Default hereunder, (6) Indebtedness in respect of employee benefit
plans and programs that is incurred in the ordinary course of Borrowers'
businesses as presently conducted and is not past due, (7) the Indebtedness set
forth and described on the Financial Statements dated as of June 30, 2003,
previously delivered to Lender, and (8) Capitalized Lease Obligations not in
excess of $1,000,000 outstanding at any time.
"PERMITTED LIENS": shall mean (1) liens for current taxes and duties
not delinquent or for taxes being contested in good faith, by appropriate
proceedings which do not involve, in the sole determination of Lender, any
material danger of the sale or loss of any of the Collateral and with respect to
which Borrowers have provided for and are maintaining adequate reserves in
accordance with GAAP, (2) liens in Lender's favor, (3) liens incurred in the
ordinary course of business in connection with workers' compensation,
unemployment insurance and other statutory obligations, provided that such
obligations are not past due and owing, (4) easements, rights of way,
restrictions and other similar charges or encumbrances with respect to real
property not interfering in any material respect with the ordinary conduct of
each Borrower's business, and (5) the security interests and liens listed on
Schedule 1.1 attached hereto, and (6) deposits to secure public or statutory
obligations.
"PERSON": shall mean any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, entity, party or foreign or United States
government, whether federal, state, county, city, municipal or otherwise,
including, but not limited to, any instrumentality, division, agency, body or
department thereof.
"PLAN": shall mean an employee benefit plan now or hereafter maintained
for employees of Borrowers that is covered by Title IV of ERISA.
"PRIME RATE": shall mean a rate per annum equal to the prime rate of
interest announced from time to time by Lender (which is not necessarily the
lowest rate charged to any customer), changing when and as said prime rate
changes.
"PROHIBITED TRANSACTION": shall mean any transaction set forth in
Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1986.
"RATE HEDGING TRANSACTION" : shall mean any transaction (including an
agreement with respect thereto) now existing or hereafter entered into between
any Borrower or Borrowers and Lender which is a rate swap, basis swap, forward
rate transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
forward transaction, currency swap transaction, cross-currency rate swap
transaction, currency option or any other similar transaction (including any
option with respect to any of these transactions) or any combination thereof,
whether linked to one or more interest rates, foreign currencies, commodity
prices, equity prices or other financial measure.
"REPORTABLE EVENT": shall mean any of the events set forth in Section
4043(b) of ERISA.
7
"RESTRICTED PAYMENTS": shall mean any of the following: (1) any
dividend, distribution or return of capital to any shareholder, member or other
owner of any Equity Interests in a Borrower, or any other payment or delivery of
property or cash to any of Borrowers' shareholders or other Equity Interest
owners, or any redemption, retirement, purchase or other acquisition of all or
any portion of the Equity Interests of any Borrower, except pursuant to any
repurchase obligations with respect to departing employees in an amount not to
exceed $250,000.00 each fiscal year, provided that no Event of Default exists at
the time of such payment and such payment would not cause an Event of Default,
and (2) any distribution, loan, or advance to any Affiliate, Subsidiary, Parent,
employee, officer, director, shareholder, member or manager of any Borrower,
other than advances or loans to another Borrower.
"REVOLVING LOAN": shall mean, individually and collectively, the loans
provided by Lender from time to time to Borrowers pursuant to Section 2.1(A)
below.
"REVOLVING LOAN LIBOR RATE MARGIN": shall mean, from the date hereof
through the date upon which Lender receives Borrowers' audited consolidated
Financials for the period ending December 31, 2003, two hundred (200) basis
points. Effective as of the first Business Day after the date upon which Lender
receives Borrowers' audited consolidated Financials for the period ending
December 31, 2003, and as of the first Business Day after the date upon which
Lender receives Borrowers' audited consolidated Financial for the periods ending
as of the last day of each fiscal year thereafter, "Revolving Loan LIBOR Rate
Margin" shall be adjusted in accordance with the matrix set forth below based
upon Borrowers' consolidated Funded Debt to EBITDA Ratio calculated as of the
last day of each fiscal year:
FUNDED DEBT TO EBITDA RATIO REVOLVING LOAN LIBOR RATE MARGIN
------------------------------------- --------------------------------
Less than 2.65 to 1.0 175 Basis Points
------------------------------------- --------------------------------
Greater than or equal to 2.65 to 1.0, 200 Basis Points
but less than or equal to 4.35 to 1.0
------------------------------------- --------------------------------
Greater than 4.35 to 1.0 225 Basis Points
------------------------------------- --------------------------------
"REVOLVING LOAN PRIME RATE MARGIN": shall mean negative one-half of one
percent (-1/2%) per annum.
"REVOLVING LOAN TERMINATION DATE": shall mean September 4, 2005.
"REVOLVING NOTE": shall mean that certain Revolving Note of even date
herewith executed and delivered by Borrowers to Lender in a maximum aggregate
principal amount not to exceed $8,500,000.00, as amended, renewed, restated or
replaced from time to time.
"SPECIAL COLLATERAL": shall mean that portion of the Collateral
evidenced by Chattel Paper, Instruments or Documents.
"SUBORDINATED DEBT": shall mean Borrowers' Indebtedness which is
subordinated to the payment of all of the Liabilities to Lender pursuant to a
written subordination agreement in form and substance acceptable to Lender,
which Subordination Agreement specifically states that such Borrowers'
Indebtedness is Subordinated Debt under this Loan Agreement.
"SUBSIDIARY": shall mean any Person who is under the direct or indirect
ownership or control of any Borrower.
8
"SUPPLEMENTAL DOCUMENTATION": shall have the meaning set forth in
Section 4.2 below.
"TANGIBLE NET WORTH": shall mean, as of any particular date for any
Person, the difference between (1) total assets as they would normally be shown
on the balance sheet of such Person, but excluding therefrom all values
attributable to goodwill, patents, copyrights, trademarks, licenses, capitalized
lease or other General Intangibles and loans and accounts due from officers,
employees, subsidiaries and Affiliates, and (2) such Person's total liabilities,
indebtedness and deferred charges as they would normally be shown on such
Person's balance sheet.
"TANGIBLE NET WORTH BENCHMARK": shall initially mean negative Two
Million Five Hundred Thousand and no/100 Dollars (-$2,500,000.00), and shall
increase by Eight Hundred Thousand and no/100 Dollars ($800,000.00) as of
December 31, 2003, and as of the last day of each fiscal year thereafter.
"TAX" shall mean, in relation to any LIBOR Loans and the applicable
LIBOR Rate, any tax, levy, impost, duty, deduction, withholding or charges of
whatever nature required to be paid by Lender and/or to be withheld or deducted
from any payment otherwise required hereby to be made by a Borrower to Lender;
provided, that the term "Tax" shall not include any taxes imposed upon the net
income of Lender.
"TERM LOAN A" shall have the meaning set forth in Section 2.1(B) below.
"TERM LOAN B" shall have the meaning set forth in Section 2.1(C) below.
"TERM LOAN LIBOR RATE MARGIN": shall mean, from the date hereof through
the date upon which Lender receives Borrowers' audited consolidated Financials
for the period ending December 31, 2003, two hundred twenty-five (225) basis
points. Effective as of the first Business Day after the date upon which Lender
receives Borrowers' audited consolidated Financials for the period ending
December 31, 2003, and as of the first Business Day after the date upon which
Lender receives Borrowers' audited consolidated Financial for the periods ending
as of the last day of each fiscal year thereafter, "Term Loan LIBOR Rate Margin"
shall be adjusted in accordance with the matrix set forth below based upon
Borrowers' consolidated Funded Debt to EBITDA Ratio calculated as of the last
day of each fiscal year:
FUNDED DEBT TO EBITDA RATIO TERM LOAN LIBOR RATE MARGIN
------------------------------------- ---------------------------
Less than 2.65 to 1.0 200 Basis Points
------------------------------------- ---------------------------
Greater than or equal to 2.65 to 1.0, 225 Basis Points
but less than or equal to 4.35 to 1.0
------------------------------------- ---------------------------
Greater than 4.35 to 1.0 250 Basis Points
------------------------------------- ---------------------------
"TERM LOAN PRIME RATE MARGIN": shall mean negative one-half of one
percent (-1/2%) per annum.
"TERM NOTE A": shall mean that certain Term Note A of even date
herewith in the principal amount of Six Million Five Hundred Thousand and no/100
Dollars ($6,500,000.00) executed and delivered by Borrowers to Lender, as
amended, renewed, restated or replaced from time to time.
9
"TERM NOTE B": shall mean that certain Term Note B of even date
herewith in a maximum aggregate principal amount not to exceed Three Million and
no/100 Dollars ($3,000,000.00) executed and delivered by Borrowers to Lender, as
amended, renewed, restated or replaced from time to time.
"TRADEMARK SECURITY AGREEMENT": shall mean that certain Trademark
Security Agreement of even date herewith executed and delivered by Borrowers to
Lender, as amended, renewed or restated from time to time.
"UNMATURED EVENT OF DEFAULT": shall mean the occurrence or existence of
any event or condition which with notice, lapse of time or both would constitute
an Event of Default.
"VALUE": shall mean, from time to time, the lesser of (1) Borrowers'
cost of Inventory determined on a FIFO basis, or (2) the current market value,
as may be determined by Lender in its reasonable discretion.
1.2 Except as otherwise defined in this Loan Agreement or the Other
Agreements, any accounting terms used in this Loan Agreement which are not
specifically defined herein shall have the meanings customarily given them in
accordance with GAAP. Unless the context indicates otherwise, all other words,
terms or phrases used herein shall be defined by the applicable definition
therefor, if any, in the Uniform Commercial Code as adopted by the State of
Illinois from time to time.
2. LOANS: DISBURSEMENTS, INTEREST RATES, LOAN REQUESTS AND FEES
2.1 LOANS.
(A) Revolving Loans.
(1) Provided that an Unmatured Event of Default or Event
of Default does not then exist or would not be created by such
Revolving Loan advance, and all of the conditions precedent in Section
10 of this Loan Agreement have been satisfied, from the date hereof
through and including the Revolving Loan Termination Date, Lender shall
loan to Borrowers on a revolving credit basis, the lesser of (a) the
Maximum Revolving Loan, less the outstanding Letter of Credit
Obligations from time to time, or (b) the Borrowing Base. The Revolving
Loan shall be evidenced by and repaid in accordance with the Revolving
Note. Notwithstanding anything contained in this Loan Agreement or the
Other Agreements to the contrary, Lender may, in its discretion, upon
not less than fifteen (15) days prior written notice to Borrower,
change, at any time and from to time, the method of calculating the
Borrowing Base, including, but not limited to, reducing advance rates
against Eligible Accounts and Eligible Inventory and deducting
additional or other reserves from the Borrowing Base.
(2) A request for a Revolving Loan shall be made, or
shall be deemed made, in the following manner: (a) any Borrower may
give Lender notice of its intention to borrow in accordance with the
provisions of this Section 2.1(A), or (b) if any amount required to be
paid under this Loan Agreement or the Other Agreements becomes due,
such occurrence shall be deemed irrevocably to be a request for a
Revolving Loan on the due date in the amount then due and such
Revolving Loan advance will be deemed an advance to Borrowers.
(3) Each request for a Revolving Loan, other than LIBOR
Loans (the borrowing of which shall be governed by Section 2.3), shall
be made by notice, given not later than 11:00 A.M. (Chicago time) on
the Business Day of the proposed Revolving Loan, from any Borrower
10
to Lender. If requested by Lender, such notice shall be accompanied by
a Borrowing Base Certificate in form and substance satisfactory to
Lender.
(4) Borrowers' ability to access the Overadvance shall be
subject to the following terms and conditions: Borrowers shall provide
Lender with prior written notice of their intent to utilize the
Overadvance. Such notice shall be accompanied by (a) a covenant
compliance certificate that demonstrates that Borrowers are in
compliance with all of the financial covenants set forth in Section 9.4
below immediately prior to such date, and (b) a pro-forma covenant
compliance certificate that demonstrates that Borrowers will be in
compliance with the financial covenants set forth in Section 9.4 below
immediately after the usage of such Overadvance assuming full usage of
such Overadvance. Upon the date that the Overadvance automatically
reduces to zero Dollars in accordance with the definition of
"Overadvance" set forth in Section 1.1 above, and for a period of sixty
(60) consecutive days thereafter, Borrowers shall not be entitled to
deliver to Lender a new Overadvance Notice and accordingly, during such
sixty (60) day period, Borrowers shall not be entitled to utilize the
Overadvance.
(B) Term Loan A. Provided that an Unmatured Event of Default or
Event of Default does not then exist and all of the conditions precedent in
Section 10 of this Loan Agreement have been satisfied, Lender shall loan to
Borrower the principal amount of Six Million Five Hundred Thousand and no/100
Dollars ($6,500,000.00), which loan shall be evidenced by and repaid in
accordance with Term Note A ("Term Loan A").
(C) Term Loan B.
(1) Provided that an Unmatured Event of Default or Event
of Default does not then exist and all of the conditions precedent in
Section 10 of this Loan Agreement have been satisfied, from the date of
this Loan Agreement through September 4, 2004, Lender shall provide a
multi-draw line of credit to Borrower in a maximum aggregate principal
amount not to exceed Three Million and no/100 Dollars ($3,000,000.00)
("Term Loan B"). Term Loan B shall be evidenced by Term Note B. Term
Loan B shall be advanced to Borrower in not more than six (6) draws.
Term Loan B will be used by Borrower to finance up to eighty percent
(80%) of the total invoice cost of new Equipment and real estate
improvements, less any "Soft Costs" (hereinafter defined) included
therein, in each case to expand Vita Food's current facility located at
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇. "Soft Costs" shall mean costs
associated with surveys, drawings, software, shipping, freight,
insurance, installation and other incidental costs of such new
Equipment. Prior to each advance under Term Loan B, Borrower shall
provide Lender with evidence of the purchase price of such Equipment or
real estate improvement in form and substance reasonable satisfactory
to Lender. Lender shall classify each such advance as either a "real
estate improvement" advance or an "equipment" advance.
(2) Interest on Term Loan B shall be paid by Borrowers to
Lender on the last Business Day of each month after the initial Term
Loan B draw until Term Loan B is indefeasibly paid in full. The
principal portion of Term Loan B shall be repaid by Borrowers to Lender
in fifty-nine (59) consecutive monthly principal installments each in
the amount of the sum of 1/240 of the total Term Loan B advances
classified by Lender as "real estate improvement" advances, plus 1/60
of the total Term Loan B advances classified by Lender as "equipment"
advances, beginning on the last Business Day of September, 2004, and
continuing on the last Business Day of each month thereafter through
and including the last Business Day of July, 2009. Borrowers shall make
a final payment of all outstanding Liabilities evidenced by Term Note B
on last Business Day of August, 2009.
11
2.2 INTEREST RATES AND FEES.
(A) Revolving Loan. Borrowers hereby jointly and severally promise
to pay interest on the unpaid principal amount of the Revolving Loan as provided
in Section 3.1 below at the floating per annum rate of interest equal to the
Prime Rate plus the Revolving Loan Prime Rate Margin for the period commencing
on the date such Loan is disbursed until the date such Loan is paid in full.
Provided, however, Borrowers shall have the option of designating Revolving Loan
advances as Loans which bear interest at the LIBOR Rate, plus the Revolving Loan
LIBOR Rate Margin, or converting the interest rate for all or a portion of the
Revolving Loan to the LIBOR Rate, plus the Revolving Loan LIBOR Rate Margin, in
accordance with Section 2.3 below. Notwithstanding the foregoing, upon the
occurrence and during the continuance of an Event of Default, the unpaid
principal amount of the Revolving Loan shall, at Lender's option bear interest
at the Default Rate.
(B) Term Loan A. Borrowers hereby jointly and severally promise to
pay interest on the unpaid principal amount of Term Loan A as provided in
Section 3.1 below at the floating per annum rate of interest equal to the Prime
Rate plus the Term Loan Prime Rate Margin for the period commencing on the date
such Loan is disbursed until the date such Loan is paid in full. Provided,
however, Borrowers shall have the option of designating a portion of Term Loan A
as a Loan which bears interest at the LIBOR Rate, plus the Term Loan LIBOR Rate
Margin, or converting the interest rate for all or a portion of Term Loan A to
the LIBOR Rate, plus the Term Loan LIBOR Rate Margin, in accordance with Section
2.3 below. Notwithstanding the foregoing, upon the occurrence and during the
continuance of an Event of Default, the unpaid principal amount of Term Loan A
shall, at Lender's option, bear interest at the Default Rate.
(C) Term Loan B. Borrowers hereby jointly and severally promise to
pay interest on the unpaid principal amount of Term Loan B as provided in
Section 3.1 below at the floating per annum rate of interest equal to the Prime
Rate plus the Term Loan Prime Rate Margin for the period commencing on the date
such Loan is disbursed until the date such Loan is paid in full. Provided,
however, Borrowers shall have the option of designating a portion of Term Loan B
as a Loan which bears interest at the LIBOR Rate, plus the Term Loan LIBOR Rate
Margin, or converting the interest rate for all or a portion of Term Loan B to
the LIBOR Rate, plus the Term Loan LIBOR Rate Margin, in accordance with Section
2.3 below. Notwithstanding the foregoing, upon the occurrence and during the
continuance of an Event of Default, the unpaid principal amount of Term Loan B
shall, at Lender's option, bear interest at the Default Rate.
(D) Unused Line of Credit Fee. Borrowers shall pay to Lender an
unused line of credit fee equal to the daily rate equivalent of one-quarter of
one percent per annum (1/4%) of the difference between the Maximum Revolving
Loan and the average daily balance of the sum of the Revolving Loan and the
Letter of Credit Obligations for each calendar quarter or part thereof, which
fee shall be fully earned by Lender and payable quarterly in arrears on the
fifth (5th) Business Day of each calendar quarter. Said fee shall be calculated
on the basis of a 360-day year.
(E) Letter of Credit Fees. Prior to the issuance of each standby
Letter of Credit and on each annual anniversary of the issuance thereof,
Borrowers shall pay to Lender, a fee computed on a daily basis equal to the
amount of such Letter of Credit multiplied by one hundred fifty (150) basis
points per annum. Prior to the issuance of each documentary Letter of Credit,
Borrowers shall remit to Lender a Letter of Credit fee at the rate quoted by
Lender to Borrowers at the time of issuance. In addition, Borrowers shall pay to
and/or reimburse Lender for any costs, fees and expenses incurred by Lender in
12
connection with the application for, issuance of or amendment to any Letter of
Credit upon Lender's demand therefor and any amounts not so paid shall bear
interest at the Default Rate until paid.
2.3 LIBOR RATE PROVISIONS.
(A) Each LIBOR Loan shall be in the minimum amount of Five Hundred
Thousand and no/100 Dollars ($500,000.00), with increments of One Hundred
Thousand and no/100 Dollars ($100,000.00) thereafter. Not more than five (5) nor
less than two (2) Business Days prior to the requested date of any LIBOR Loan,
Borrowers shall deliver to Lender an irrevocable written or telephonic notice
setting forth the requested date and amount of such LIBOR Loan and the duration
of the Interest Period applicable thereto. Each such notice shall be accompanied
by a Request for Advance at or Conversion to the LIBOR Rate in the form of
Schedule 2.3 to this Loan Agreement. Unless a Borrower notifies Lender to the
contrary, upon the expiration of any Interest Period for a LIBOR Loan, such
LIBOR Loan shall automatically convert to a Loan at the Prime Rate plus the
Revolving Loan Prime Rate Margin for the Revolving Loan, or a Loan at the Prime
Rate plus the Term Loan Prime Rate Margin for Term Loan A and Term Loan B.
Borrowers shall not (1) request a LIBOR Loan for an Interest Period that expires
on any date after the repayment date of all or any portion of such LIBOR Loan,
(2) request, nor permit to be in effect, more than five (5) LIBOR Loans at any
time, nor (3) prepay any advance bearing interest at the LIBOR Rate unless
Borrowers pay to Lender all breakage costs incurred by Lender as a result of
such prepayment. If Borrowers pay any LIBOR Loan on any day other than the last
day of the Interest Period, then Borrowers shall pay to Lender all of Lender's
costs, fees and expenses incurred in connection therewith, including, without
limitation, charges or costs associated with changing LIBOR Rates prior to the
expiration of their scheduled Interest Period.
(B) If Lender determines, in good faith (which determination shall
be conclusive, absent manifest error), prior to the commencement of any Interest
Period that (1) U.S. Dollar deposits of sufficient amount and maturity for
funding the LIBOR Loans are not available to Lender in the London Interbank
Eurodollar market in the ordinary course of business, or (2) by reason of
circumstances affecting the London Interbank Eurodollar market, adequate and
fair means do not exist for ascertaining the rate of interest to be applicable
to the Loans requested by a Borrower to be LIBOR Loans or the LIBOR Loans shall
not represent the effective pricing to Lender for U.S. Dollar deposits of a
comparable amount for the relevant period (such as, for example, but not limited
to, official reserve requirements required by Regulation D to the extent not
given effect in determining the rate), Lender shall promptly notify such
Borrower and (1) all existing Revolving Loan LIBOR Loans shall convert to Loans
bearing interest at the Prime Rate plus Revolving Loan Prime Rate Margin upon
the end of the applicable Interest Period, (2) all existing Term Loan A and Term
Loan B LIBOR Loans shall convert to Loans bearing interest at the Prime Rate
plus Term Loan Prime Rate Margin upon the end of the applicable Interest Period,
and (3) no additional LIBOR Loans shall be made until such circumstances are
cured.
(C) If, after the date hereof, the introduction of, or any change
in any applicable law, treaty, rule, regulation or guideline or in the
interpretation or administration thereof by any governmental authority or any
central bank or other fiscal, monetary or other authority having jurisdiction
over Lender or its lending offices (a "Regulatory Change"), shall, in the
opinion of counsel to Lender, make it unlawful for Lender to make or maintain
LIBOR Loans, then Lender shall promptly notify Borrowers thereof, and (1) the
Revolving Loan LIBOR Loans shall immediately convert to Loans bearing interest
at the Prime Rate plus Revolving Loan Prime Rate Margin upon the end of the
applicable Interest Period or on such earlier date as required by law, (2) the
Term Loan A and Term Loan B LIBOR Loans shall immediately convert to Loans
bearing interest at the Prime Rate plus Term Loan Prime Rate Margin
13
upon the end of the applicable Interest Period or on such earlier date as
required by law, and (3) no additional LIBOR Rate Loans shall be made until such
circumstance is cured.
(D) If any Regulatory Change (whether or not having the force of
law) shall (1) impose, modify or deem applicable any assessment, reserve,
special deposit or similar requirement against assets held by, or deposits in or
for the account of or loans by, or any other acquisition of funds or
disbursements by, Lender; (2) subject Lender or the LIBOR Loans to any Tax or
change the basis of taxation of payments to Lender of principal or interest due
from a Borrower to Lender hereunder (other than a change in the taxation of the
overall net income of Lender); or (3) impose on Lender any other condition
regarding the LIBOR Loans or Lender's funding thereof, and Lender shall
determine (which determination shall be conclusive, absent any manifest error)
that the result of the foregoing is to increase the cost to Lender of making or
maintaining the LIBOR Loans or to reduce the amount of principal or interest
received by Lender hereunder, then Borrowers shall pay to Lender, on demand,
such additional amounts as Lender shall, from time to time, determine are
sufficient to compensate and indemnify Lender from such increased cost or
reduced amount.
(E) Lender shall receive payments of amounts of principal of and
interest with respect to the LIBOR Loans free and clear of, and without
deduction for, any Taxes. If (1) Lender shall be subject to any Tax in respect
of any LIBOR Loans or any part thereof or, (2) Borrowers shall be required to
withhold or deduct any Tax from any such amount, the LIBOR Rate applicable to
such LIBOR Loans shall be adjusted by Lender to reflect all additional costs
incurred by Lender in connection with the payment by Lender or the withholding
by a Borrower of such Tax and Borrowers shall provide Lender with a statement
detailing the amount of any such Tax actually paid by Borrowers. Determination
by Lender of the amount of such costs shall be conclusive, absent manifest
error. If after any such adjustment any part of any Tax paid by Lender is
subsequently recovered by Lender, Lender shall reimburse Borrowers to the extent
of the amount so recovered. A certificate of an officer of Lender setting forth
the amount of such recovery and the basis therefor shall be conclusive, absent
manifest error.
2.4 LETTERS OF CREDIT.
(A) Provided that an Unmatured Event of Default or Event of
Default does not then exist and all of the conditions precedent in Section 10 of
this Loan Agreement have been satisfied, Lender may, at any Borrower's request
and for the account of Borrowers, issue one or more Letters of Credit in an
aggregate undrawn face amount outstanding at any one time not to exceed in the
aggregate the lesser of (1) the total of subsections (1), (2) and (3) under the
definition of "Borrowing Base", less the outstanding amount of the Revolving
Loans, or (2) Two Million and no/100 Dollars ($2,000,000.00). The Letters of
Credit shall have an expiration date of the earlier of (a) one (1) year from the
date of issuance, or (b) 180 days after the Revolving Loan Termination Date.
Borrowers shall reimburse Lender, immediately upon demand, for any payments made
by Lender to any Person with respect to any Letter of Credit and until Lender
shall be so reimbursed by Borrowers such payments by Lender shall be deemed to
be a part of the Revolving Loans. The obligation of Borrowers to reimburse
Lender for payments and disbursements made by Lender under or on account of the
Letters of Credit shall be absolute and unconditional irrespective of any
setoff, counterclaim or defense to payment which Borrowers may have or have had
against Lender or such beneficiary, including, but not limited to, any defense
based on the failure of such demand for payment to conform to the terms of the
Letters of Credit, any non-application or misapplication by such beneficiary of
the proceeds of such demand for payment or the legality, validity, regularity or
enforceability of the Letters of Credit or any document or contract related to
or required to be presented under the terms of the Letters of Credit; provided,
however, that Borrowers shall not be obligated to reimburse Lender for any
wrongful payment or
14
disbursement made by Lender under or on account of the Letters of Credit as a
result of acts or omissions constituting gross negligence or willful misconduct
on the part of Lender or any of its officers, employees or agents. If any of the
terms and provisions set forth in this Section 2.4 contradict or conflict with
the terms and provisions of any reimbursement agreement or master letter of
credit agreement executed and delivered prior hereto, contemporaneously herewith
or hereafter by Borrowers or any Borrower to Lender, the terms of such
reimbursement agreement or master letter of credit agreement shall govern and
control.
(B) In the event that Lender has issued any Letters of Credit for
the account of Borrowers, Lender may, at any time after (1) the occurrence and
during the continuation of an Event of Default, (2) this Loan Agreement shall
terminate for any reason, or (3) the sum of the outstanding principal balance of
the Revolving Loans and the Letter of Credit Obligations exceeds the total of
subsections (1), (2) and (3) under the definition of Borrowing Base, request of
Borrowers, and Borrowers shall thereupon deliver to Lender, cash collateral for
any Letter of Credit issued for the account of Borrowers. If Borrowers fail to
deliver such cash to Lender promptly upon Lender 's request therefor, Lender
may, without limiting Lender's rights or remedies arising from such failure to
deliver cash, retain, as cash collateral, cash proceeds of the Collateral in an
amount equal to the aggregate undrawn face amount of all Letters of Credit then
outstanding. Lender may at any time apply any or all of such cash and cash
collateral to the payment of any or all of the Liabilities, including, without
limitation, to the payment of any or all of Borrowers' reimbursement obligations
with respect to any Letter of Credit. Pending such application, Lender may (but
shall not be obligated to) (a) invest the same in a savings account, under which
deposits are available for immediate withdrawal, with Lender or such other bank
as Lender may, in its sole discretion select, or (b) hold the same as a credit
balance in an account with Lender in any Borrower's name. Interest payable on
any such savings account described in the foregoing sentence shall be collected
by Lender and shall be paid to Borrowers as it is received by Lender, less any
fees owing by Borrowers to Lender with respect to any Letter of Credit and less
any amounts necessary to pay any of the Liabilities which may be due and payable
at such time.
2.5 COMPUTATION OF INTEREST. Interest on the Loans shall be
computed for the actual number of days elapsed on the basis of a three hundred
sixty (360) day year.
3. LOANS: GENERAL TERMS
3.1 PAYMENTS.
(A) Scheduled Payments. Except as otherwise provided in this Loan
Agreement or the Other Agreements, that portion of the Liabilities consisting
of: (1) the principal portion of the Revolving Loan shall be payable in full by
Borrowers to Lender on or before the Revolving Loan Termination Date; (2)
interest on the Revolving Loan, other than LIBOR Loans, shall be payable by
Borrowers to Lender in arrears on the last Business Day of each month, as
debited by Lender; (3) principal on Term Loan A and Term Loan B shall be payable
by Borrowers to Lender as set forth in Section 2 above and in Term Note A and
Term Note B; (4) interest on Term Loan A and Term Loan B, other than that
portion of Term Loan A and Term Loan B designated as a LIBOR Loan, shall be
payable by Borrowers to Lender in arrears on the last Business Day of each month
as debited by Lender; (5) interest on the thirty (30), sixty (60) and ninety
(90) day LIBOR Loans shall be payable in arrears by Borrowers to Lender on the
last day of the Interest Period for such LIBOR Loans; (6) all costs, fees and
expenses payable pursuant to this Loan Agreement and the Other Agreements shall
be payable by Borrowers to Lender, or to such other Persons designated by
Lender, on demand; and (7) the balance of the Liabilities, if any, shall be
payable by Borrowers to Lender on demand. All such payments to Lender shall be
payable at Lender's principal office in Chicago, Illinois, or at such other
place or places as Lender may designate in writing
15
to Borrowers. All such payments to Persons other than Lender shall be payable at
such place or places as Lender may designate in writing to Borrowers. All such
payments made to Lender shall be paid by Borrowers without offset or other
reduction.
(B) Revolving Loan Mandatory Prepayments. Each Borrower agrees
that if at any time the aggregate unpaid principal amount of all Revolving Loans
shall exceed the Borrowing Base, it will forthwith make a mandatory prepayment
of principal in an amount equal to such excess. Each such mandatory prepayment
shall be without premium or penalty except with respect to LIBOR Loans, as to
which the provisions of Section 2.3 shall apply, or Rate Hedging Transaction
agreements.
(C) Prepayment Premium. Except as otherwise provided under any
Rate Hedging Transaction agreements or LIBOR Loans, the Borrowers may from time
to time prepay the Loans at any time, in whole or in part, without premium or
penalty.
3.2 LATE PAYMENT PROVISION. If any payment required under this
Loan Agreement is twenty (20) days or more late, Borrowers will be charged five
percent (5.0%) of the regularly scheduled payment or Twenty-Five and no/100
Dollars ($25.00), whichever is greater.
3.3 NOTES. Loans made by Lender to Borrowers pursuant to this Loan
Agreement may or may not, at Lender's discretion, be evidenced by notes or other
instruments issued or executed and delivered by Borrowers to Lender, including,
but not limited to, the Revolving Note, Term Note A and Term Note B. Where such
Loans are not so evidenced, such Loans shall be evidenced by entries upon the
ledgers, books, records or computer records of Lender maintained for that
purpose. Lender's failure to record any portion of the Liabilities on such books
and records shall not limit or otherwise affect the obligations and liabilities
of Borrowers to repay the Liabilities due and owing to Lender pursuant to this
Loan Agreement and the Other Agreements.
3.4 ONE LOAN. All of the Liabilities shall constitute one loan
secured by Lender's security interest and lien in the Collateral and by all
other security interests, liens, mortgages, claims and encumbrances heretofore,
now or from time to time hereafter granted by Borrowers to Lender.
3.5 USE OF LOAN PROCEEDS. Each Borrower represents, warrants and
covenants unto Lender that each Borrower shall use the proceeds of all Loans
made by Lender to such Borrower pursuant to this Loan Agreement and the Other
Agreements as follows: (A) proceeds of the Revolving Loan and Term Loan A shall
be used to fully satisfy all Indebtedness of Borrowers to Bank One, NA, (B) from
time to time hereafter, the Revolving Loan shall be used to meet Borrowers'
general operating capital needs to the extent consistent with this Loan
Agreement, and (C) proceeds of the Loans shall be used solely for proper
business purposes and consistent with all applicable laws and statutes,
including, but not limited to, Illinois Compiled ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇,
Section 4 (815 ILCS 205/4). Each Borrower further represents and warrants to
Lender that such Borrower does not and will not at any time hereafter own any
margin securities, and that none of the proceeds of the Loans shall be used for
the purpose of (1) purchasing or carrying any margin securities, (2) reducing or
retiring any indebtedness which was originally incurred to purchase any margin
securities, or (3) any other purpose not permitted by Regulation U of the Board
of Governors of the Federal Reserve System, as in effect from time to time.
3.6 MAXIMUM REVOLVING LOANS. Notwithstanding anything contained in
this Loan Agreement or the Other Agreements to the contrary, the principal
amount of the Revolving Loans outstanding at any one time, or from time to time,
plus the aggregate outstanding Letter of Credit Obligations from time to time,
shall not exceed the Maximum Revolving Loan.
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3.7 REPRESENTATION AND WARRANTY. Each request for a Loan advance
made by Borrowers to Lender pursuant to this Loan Agreement and the Other
Agreements shall constitute an automatic representation and warranty by
Borrowers to Lender that there does not then exist an Unmatured Event of Default
or Event of Default.
3.8 AUTHORIZATION TO DISBURSE. Each Borrower hereby authorizes and
directs Lender to disburse for and on behalf of such Borrower, and for the
Borrowers' account, the proceeds of Loans made by Lender to Borrowers pursuant
to this Loan Agreement to such Person or Persons as any Borrower or any Person
specified in Paragraph 12.11 of this Loan Agreement shall direct, whether in
writing or orally.
3.9 BANK CHARGES. Borrowers shall pay to Lender, on demand, any
and all charges customarily asserted by a bank or similar institution against
Lender for or with respect to Lender's forwarding to Borrowers proceeds of Loans
made by Lender to Borrowers pursuant to this Loan Agreement or the Other
Agreements, or for or with respect to Lender's depositing for collection any
check or item of payment received by or delivered to Lender on account of the
Liabilities.
3.10 PAYMENT OF COSTS, FEES AND EXPENSES. Lender, in its
discretion, may disburse any or all proceeds of Loans made to Borrowers pursuant
to this Loan Agreement or the Other Agreements to pay any costs, fees, expenses
or other amounts required to be paid by Borrowers hereunder and not timely paid,
or to pay any Person as Lender deems reasonably necessary to insure that the
security interest and lien granted to Lender in the Collateral shall at all
times be a first priority, perfected security interest and lien. All monies so
disbursed by Lender shall be part of the Liabilities, secured by the Collateral
and payable by Borrowers to Lender on demand.
3.11 DEBIT OF ACCOUNTS. Each Borrower hereby authorizes Lender to
debit such Borrower's accounts with Lender for (A) the principal, interest and
other costs, fees and expenses arising under or pursuant to this Loan Agreement
and the Other Agreements, and (B) all amounts due Lender, and any principal,
interest and other costs, fees and expenses arising under or pursuant to this
Loan Agreement, the Other Agreements or otherwise.
3.12 APPLICATION OF PAYMENTS. Any check, draft, wire transfer or
similar item of payment by or for the account of Borrowers delivered to Lender
on account of the Liabilities shall be applied by Lender to the Liabilities as
follows: (A) wire transfers of immediately available funds and other cash
deposits will be credited on the day of receipt by Lender, and (B) checks and
other instruments will be credited by Lender, provided the same is honored by
Lender and final settlement thereof is reflected by irrevocable credit to
Lender, on account of the Liabilities two (2) Business Days after such check or
other instrument is actually received by Lender.
3.13 CO-OBLIGOR PROVISIONS.
(A) Each Borrower shall be jointly and severally liable for all amounts
due to Lender under this Loan Agreement and the Other Agreements, regardless of
which Borrower actually receives Loans or other extensions of credit hereunder
or the amount of such Loans received or the manner in which Lender accounts for
such Loans or other extensions of credit on its books and records.
(B) Lender shall not be required or obligated to take any of the following
action prior to pursuing any rights or remedies Lender may have against any
Borrower: (1) take any action to collect from, or to file any claim of any kind
against, any other Borrower, any guarantor, or any other person or entity
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liable, jointly or severally, for the full and timely performance of the
Covenants or the full and timely payment of any of the Liabilities; (2) take any
steps to protect, enforce, take possession of, perfect any interest in,
foreclose or realize on any collateral or security, if any, securing the
Covenants or the Liabilities; or (3) in any other respect, exercise any
diligence whatsoever in enforcing, collecting or attempting to collect any of
the Liabilities by any means.
(C) Each Borrower unconditionally and irrevocably waives each and every
defense which would otherwise impair, restrict, diminish or affect any of the
Liabilities. Without limiting the foregoing, Lender shall have the exclusive
right from time to time without impairing, restricting, diminishing or affecting
any of the Liabilities, and without notice of any kind to all Borrowers, to (1)
provide additional financial accommodations to Borrowers; (2) accept partial
payments on the Liabilities; (3) take and hold collateral or security to secure
the Covenants and the Liabilities, or take any other guaranty to secure the
Covenants and the Liabilities; (4) in its sole discretion, apply any such
collateral or security, and direct the order or manner of sale thereof, and the
application of the proceeds thereof; (5) release any guarantor or co-obligor of
the Liabilities; and (6) settle, release, compromise, collect or otherwise
liquidate the Liabilities or exchange, enforce, sell, lease, use, maintain,
impair and release any collateral or security therefor in any manner, without
affecting or impairing any of the Liabilities hereunder.
(D) Each Borrower hereby unconditionally waives (1) notice of any default
by Borrowers in the full and prompt performance of the Covenants or the full and
prompt payment of the Liabilities, and (2) presentment, notice of dishonor,
protest, demand for payment and any other notices of any kind.
(E) Each Borrower assumes full responsibility for keeping informed of (1)
the financial condition of the other Borrowers; (2) the extent of the
Liabilities; and (3) all other circumstances bearing upon Borrowers or the risk
of non-payment of the Liabilities. Each Borrower agrees that Lender shall have
no duty or obligation to advise, furnish or supply such Borrower of or with any
information known to Lender, including, but not limited to, the financial
condition of the other Borrowers, any other circumstances relating to
non-payment of the Liabilities or otherwise. If Lender, in its sole discretion,
provides any advice or information to any Borrower, Lender shall be under no
obligation to investigate the matters contained in such advice or information,
or to correct such advice or information if Lender thereafter knows or should
have known that such advice or information is misleading or untrue, in whole or
in part, or to update or provide any other advice or information in the future.
(F) Each Borrower acknowledges and agrees that it may have a right of
indemnification, subrogation, contribution and reimbursement from the other
Borrowers, Lender or any guarantor of the Liabilities based upon its execution
of this Loan Agreement. Each Borrower understands the benefits of having such
rights, including, but not limited to, (1) such Borrower's right to
reimbursement from the other Borrowers of all monies expended for the payment of
the Liabilities; and (2) such Borrower's subrogation to the rights of Lender
after payment of the Liabilities. No Borrower shall exercise any such rights of
indemnification, subrogation, contribution or reimbursement from any other
Borrower, Lender or any guarantor of the Liabilities prior to the indefeasible
payment and satisfaction in full to Lender of the Liabilities.
(G) Each Borrower appoints each other Borrower as its agent for all
purposes relevant to this Loan Agreement and the Other Agreements, including,
without limitation, the giving and receipt of notices and execution and delivery
of all documents, instruments and certificates contemplated herein and all
modifications hereto. Any acknowledgment, consent, direction, certification or
other action which might otherwise be valid or effective only if given or taken
by all of the Borrowers or any Borrower acting singly, shall be valid and
effective if given or taken only by one Borrower, whether or not the other
Borrowers join therein.
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4. COLLATERAL: GENERAL TERMS
4.1 GRANT OF SECURITY INTEREST. To secure the full and timely
payment and performance by Borrowers or any Borrower to Lender of the
Liabilities and the Covenants, each Borrower hereby grants to Lender a first
position priority security interest and lien in and right of setoff against all
of each Borrower's assets, personal property, fixtures, rights and interests of
such Borrower, now existing or owned and hereafter arising or acquired and
wherever located, including, without limitation, all of the each Borrower's: (1)
Accounts; (2) Goods for sale, lease or other disposition by such Borrower which
have given rise to Accounts and have been returned to or repossessed or stopped
in transit by such Borrower; (3) contract rights and documents, instruments,
contracts or other writings executed in connection therewith, including, but not
limited to, all real and personal property lease rights; (4) Chattel Paper,
Electronic Chattel Paper, Tangible Chattel Paper, Documents of Title,
Instruments, Documents, General Intangibles, Payment Intangibles, Letter of
Credit Rights, letters of credit and Supporting Obligations; (5) patents,
trademarks, trade names, trademark registrations and copyrights, all
applications therefor, service marks, trade secrets, goodwill, inventions,
processes, designs, formulas, and other intellectual or proprietary rights or
interests, of any kind, nature or description whatsoever, and all registrations,
licenses, franchises, customer lists, tax refund claims, claims against carrier
and shippers, insurance claims, guaranty claims, all other claims, proof of
claims filed in any bankruptcy, insolvency or other proceeding, contract rights,
choses in action, security interests, security deposits and rights to
indemnification; (6) Goods, including, without limitation, Inventory, Equipment,
Fixtures, trade fixtures and vehicles; (7) Investment Property; (8) deposits,
cash and cash equivalents and any other property of each Borrower now or
hereafter in the possession, custody or control of Bank, whether for
safekeeping, deposit, collection, custody, pledge, transmission or otherwise;
(9) Commercial Tort Claims listed on Schedule 4.1 hereto, as amended from time
to time; (10) deposit accounts held with Bank or any other depository
institution, including, without limitation, any depository institution which is
a participant in the Loans; (11) all other personal property of each Borrower of
any kind or nature; and (12) additions and accessions to, substitutions for and
replacements, products and cash and non-cash Proceeds of all of the foregoing
property, including, but not limited to, Proceeds of all insurance policies
insuring the foregoing and all of each Borrower's books and records relating to
any of the foregoing and to each Borrower's business (all of the foregoing
property, together with all other real or personal property of any other Person
now or hereafter pledged to Lender to secure, either directly or indirectly,
repayment of any of the Liabilities, is collectively referred to as the
"Collateral"). Borrowers shall make appropriate entries upon their financial
statements and books and records disclosing Lender's first position priority
security interest and lien in the Collateral.
4.2 SUPPLEMENTAL DOCUMENTATION. Borrowers shall execute and
deliver to Lender, at any time and from time to time, all agreements,
instruments, documents and other written matter (the "Supplemental
Documentation") that Lender may request, in form and substance acceptable to
Lender, to perfect and maintain perfected Lender's first position priority
security interest and lien in the Collateral and to consummate the transactions
contemplated by this Loan Agreement and the Other Agreements. Each Borrower,
irrevocably, hereby makes, constitutes and appoints Lender, and all Persons
designated by Lender for that purpose, as such Borrower's true and lawful
attorney and agent-in-fact, to sign the name of such Borrower on the
Supplemental Documentation and to deliver such Supplemental Documentation to
such Persons as Lender may reasonably elect. To the extent permitted by law,
each Borrower agrees that a carbon, photographic, photostatic copy or other
reproduction of this Loan Agreement or of any financing statement shall be
sufficient as a financing statement.
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4.3 INSPECTIONS AND VERIFICATIONS. Borrowers shall permit Lender,
or any Persons designated by Lender, to call at each Borrower's places of
business at any reasonable times, upon not less than one (1) Business Day's
prior written or oral notice, and, without hindrance or delay, to inspect the
Collateral and to inspect, audit, check and make extracts from each Borrower's
books, records, journals, orders, receipts and any correspondence and other data
relating to each Borrower's business, the Collateral or any transactions between
the parties hereto, and shall have the right to make such verification
concerning each Borrower's business as Lender may consider reasonable under the
circumstances. Lender, at its discretion, will perform field audits on an annual
basis, or more frequently as determined by Lender. Borrowers shall furnish to
Lender such information relevant to Lender's rights under this Loan Agreement as
Lender shall at any time and from time to time request. Lender, through its
officers, employees or agents shall have the right, at any time and from time to
time, in Lender's name, to verify the validity, amount or any other matter
relating to any of each Borrower's Accounts, by mail, telephone, telegraph or
otherwise; provided, however, if no Unmatured Event of Default or Event of
Default then exists, such verifications shall not occur more frequently than
twice during any 12 month period. Each Borrower authorizes Lender to discuss the
affairs, finances and business of Borrowers with any officers, employees or
directors of any Borrower or with its Parent or any Affiliate or the officers,
employees or directors of its Parent or any Affiliate, and to discuss the
financial condition of Borrowers with Borrowers' independent public accountants.
Any such discussions shall be without liability to Lender or to Borrowers'
independent public accountants. Borrowers shall pay to Lender all fees and all
costs and out-of-pocket expenses incurred by Lender in the exercise of its
rights hereunder, and all of such fees, costs and expenses shall constitute
Liabilities hereunder, shall be payable on demand and, until paid, shall bear
interest at the Default Rate.
4.4 LIENS/COLLATERAL LOCATIONS. Each Borrower represents, warrants
and covenants unto Lender that: (A) to the best of Borrower's knowledge,
Lender's security interest and lien in the Collateral is now and at all times
hereafter shall be perfected and have a first priority; (B) except for the
Permitted Liens, the Collateral is and shall remain free and clear of all
security interests, liens and other encumbrances; (C) each Borrower's respective
chief executive office, all other offices and places of business and the offices
and locations where each Borrower keeps the Collateral are at the locations
specified on Schedule 4.4; (D) Borrowers shall not remove the Collateral from
the locations specified on Schedule 4.4 and shall not keep any of the Collateral
at any other office or location unless Borrowers give Lender thirty (30) days
prior written notice or pursuant to sales of Inventory in the ordinary course of
business; and (E) the Collateral is and shall remain within the continental
United States of America. Each Borrower shall provide Lender with thirty (30)
days prior written notice of the opening of any new office or place of business,
the closing of any existing office or place of business or delivering any
Collateral to a warehouse or other storage facility not listed on Schedule 4.4.
Each Borrower covenants unto and agrees with Lender that any new office or place
of business shall be within the continental United States of America.
4.5 LOCKBOX
(A) At each Borrower's option, each Borrower may direct all Account
Debtors to make payments on Accounts directly into a lockbox established by
Borrowers over which Lender shall have sole control and authority pursuant to a
Lockbox Agreement between Borrowers or any Borrower and Lender (the "Lockbox").
Lender, now or at any time or times hereafter, may take control of and endorse
any Borrower's name to any of the items of payment or proceeds described in this
Section 4.5. For the purposes of this Section, each Borrower irrevocably, hereby
makes, constitutes and appoints Lender, and all persons designated by Lender for
that purpose, as such Borrower's true and lawful attorney and agent-in-fact to
take any such actions. Prior to the occurrence of an Event of Default, all such
items of
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payment or proceeds received through the Lockbox or directly from Borrowers
shall be deposited into Borrowers' operating accounts maintained with Lender.
(B) Borrowers shall execute all documents requested by Lender with respect
to the Lockbox and agree to pay to Lender promptly upon demand for any and all
fees, costs and expenses which Lender incurs or customarily charges in
connection with the opening and maintaining of the Lockbox and depositing for
collection by Lender any monies, checks, notes, drafts or other items of payment
received and/or delivered on account of the Liabilities.
4.6 ACCOUNT EARNINGS CREDIT. Should Lender's operating costs
relating to Borrowers' operating accounts and any lockbox exceed the earnings
credit rate associated with the account balances in any one month, such
deficiency shall be part of the Liabilities, secured by the Collateral and
payable by Borrowers to Lender on demand.
4.7 ASSIGNMENT OF COMPETING SECURITY INTEREST. Lender, in its
discretion, without waiving or releasing any obligation, liability or duty of
Borrowers under this Loan Agreement and the Other Agreements or any Unmatured
Event of Default or Event of Default, may at any time or times hereafter, but
shall not be obligated to do so, pay, acquire or accept an assignment of any
security interest, lien, encumbrance or claim asserted by any Person against the
Collateral. All sums paid by Lender in connection therewith and all costs, fees
and expenses, including, but not limited to, attorneys' fees, court costs,
expenses and other charges relating thereto incurred by Lender on account
thereof shall be part of the Liabilities, secured by the Collateral and payable
by Borrowers to Lender on demand.
4.8 SPECIAL COLLATERAL. Immediately upon any Borrower's receipt of
any Special Collateral, such Borrower shall ▇▇▇▇ the same to show that such
Special Collateral is subject to a first position security interest and lien in
favor of Lender and shall deliver the original thereof to Lender, together with
an appropriate endorsement or other specific evidence of assignment in form and
substance acceptable to Lender.
4.9 ADDITIONAL COLLATERAL. Upon the occurrence of an Event of
Default, Lender may, in its discretion, retain as additional Collateral, such
portion of the monies, reserves and proceeds received by Lender with respect to
the Collateral as Lender may determine. Each Borrower hereby grants to Lender a
first position priority security interest and lien in all such monies, reserves
and proceeds and other property of such Borrower in the possession of Lender at
any time or times hereafter as additional Collateral hereunder, and, in Lender's
discretion, may be held by Lender until the Liabilities are indefeasibly paid in
full or be applied by Lender on account of the Liabilities.
4.10 NO CUSTOM OR WAIVER. No authorization given by Lender pursuant
to this Loan Agreement or the Other Agreements to sell any specified portion of
the Collateral or any items thereof, and no waiver by Lender in connection
therewith, shall establish a custom or constitute a waiver of the prohibition
contained in this Loan Agreement or the Other Agreements against such sales,
with respect to any portion of the Collateral or any item thereof not covered by
said authorization.
4.11 LIEN ON REALTY. Each Borrower represents and warrants to
Lender that such Borrower is not the direct or indirect legal or beneficial
owner of any real property, except the real property set forth on Schedule 4.11
hereto. If any Borrower shall acquire at any time or times hereafter an interest
in any real property other than as set forth on Schedule 4.11 hereto, such
Borrower agrees promptly to execute and deliver to Lender as additional security
and Collateral for the Liabilities, deeds of trust, security deeds, mortgages or
other collateral assignments satisfactory in form and substance to Lender, and
its counsel (herein collectively referred to as "New Mortgages" ) covering such
real property. Each New
21
Mortgage shall be duly recorded in each office where such recording is required
to constitute a valid lien on the real property covered thereby. Borrowers shall
deliver to Lender at Borrowers' expense, mortgagee title insurance policies
issued by a title insurance company satisfactory to Lender insuring Lender as
mortgagee; such policies shall be in form and substance reasonably satisfactory
to Lender and shall insure a valid lien in favor of Lender and the property
covered thereby, subject only to those exceptions acceptable to Lender and its
counsel. Borrowers shall deliver to Lender such other documents as Lender and
its counsel may reasonably request relating to any such New Mortgages.
5. COLLATERAL: ACCOUNTS
5.1 ELIGIBLE ACCOUNTS. An "Eligible Account" is an Account that,
when scheduled to Lender and at all times thereafter, does not violate the
negative covenants and other provisions of this Section 5 and does satisfy the
positive covenants and other provisions of this Section 5. The following
Accounts are not and shall not be considered Eligible Accounts:
(A) Accounts which remain unpaid for more than ninety (90) days after
their invoice date;
(B) Accounts owing by a single Account Debtor, including a currently
scheduled Account, if fifty percent (50%) of the balance owing by said Account
Debtor remains unpaid more than ninety (90) days after the invoice date;
(C) Accounts which are not due and payable within at least thirty (30)
days after their invoice dates, provided, however that (i) the following
Accounts may be due and payable within forty-five (45) days after their invoice
dates: Accounts in which the Account Debtor is Sam's Club, Wal-Mart or CostCo
Alaska; (ii) if the Account Debtor is Sam's Mexico, Accounts may be due and
payable within sixty (60) days after their invoice dates; and (iii) if the
Account Debtor is Houston Harvest, Accounts may be due and payable within ninety
(90) days after their invoice dates;
(D) Accounts with respect to which the Account Debtor is a director,
officer, employee or agent of any Borrower or is a Parent, a Subsidiary or an
Affiliate of any Borrower;
(E) Except with respect to normal warranty claims in an amount not to
exceed $200,000.00, Accounts with respect to which payment by the Account Debtor
is or becomes conditional upon the Account Debtor's approval of the Goods or
services, or is otherwise subject to any repurchase obligation or return right,
as with sales made on a ▇▇▇▇-and-hold, guaranteed sale, sale on approval, sale
or return or consignment basis;
(F) Accounts with respect to which the Account Debtor (1) is not a
resident, a citizen of or otherwise located in the United States of America; or
(2) is not subject to service of process in the United States of America,
unless, in each case, such Accounts are supported by foreign credit insurance in
form and substance acceptable to Lender, provided however, foreign credit
insurance shall not be required for the following foreign Account Debtors: Kraft
Canada, Sam's Mexico and Technologias;
(G) Accounts with respect to which the Account Debtor is (1) the United
States of America or any department, agency or instrumentality thereof, unless
Borrowers assign their right to payment of such Accounts to Lender in accordance
with the Assignment of Claims Act of 1940, as amended, or (2) any country other
than the United States of America or any department, agency or instrumentality
thereof;
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(H) The face amount of any Accounts with respect to which any Borrower is
or may become liable to the Account Debtor for Goods sold or services rendered
by such Account Debtor to such Borrower, but only to the extent of the maximum
aggregate amount of Borrowers' liability to such Account Debtor;
(I) Accounts with respect to which (1) the Goods giving rise thereto have
not been shipped and delivered to and accepted as satisfactory by the Account
Debtor, or (2) the services performed have not been completed and accepted as
satisfactory by the Account Debtor;
(J) Accounts which are not invoiced, dated as of such date and sent to the
Account Debtor concurrently with the shipment and delivery to and acceptance by
said Account Debtor of the goods or the performance of the services giving rise
thereto;
(K) Accounts with respect to which possession or control of the goods sold
is held, maintained or retained by any Borrower, or by any agent or custodian of
any Borrower, for the account of or subject to further or future direction from
the Account Debtor;
(L) Accounts which are owing by any Account Debtor involved as a debtor in
any bankruptcy or insolvency proceeding, whether voluntary or involuntary;
(M) Accounts as to which Lender, at any time or times hereafter,
determines in good faith that the prospect of payment or performance by the
Account Debtor is or will be impaired;
(N) Accounts with respect to which the Account Debtor is located in a
state which requires any Borrower, as a precondition to commencing or
maintaining an action in the courts of that state, either to (1) receive a
certificate of authority to do business and be in good standing in such state,
or (2) file a notice of business activities report or similar report with such
state' s taxing authority, unless (a) such Borrower has taken one of the actions
described in clauses (1) or (2), (b) the failure to take one of the actions
described in either clause (1) or (2) may be cured retroactively by such
Borrower at its election, or (c) such Borrower has proven, to Lender's
satisfaction, that it is exempt from any such requirements under any such
state's laws;
(O) All or any portion of an Account to the extent there exists or the
Account Debtor has asserted a counterclaim or dispute; provided, however, if the
amount of such counterclaim or dispute is equal to or greater than ten percent
(10%) of the total Account owing from such Account Debtor to the applicable
Borrower, then the full amount of such Account shall be deemed an ineligible
Account; for purposes of this Section 5.1(O), the term "dispute" shall not
include deductions taken by Account Debtors in the ordinary course of Borrowers'
businesses which Borrowers have not challenged and do not intend to challenge.
(P) Accounts for any Account Debtor which exceed a credit limit
established by Lender for such Account Debtor, but only to the extent of such
excess; and
(Q) Accounts as to which any covenant, representation or warranty with
respect to such Account has been breached.
5.2 NOTICE OF INELIGIBLE ACCOUNTS. Immediately upon learning
thereof, Borrowers shall notify Lender that an Account is no longer an Eligible
Account if the effect thereof is to require Borrowers to make a mandatory
prepayment in accordance with Section 3.1(B). Borrowers shall immediately pay to
Lender an amount of money equal to the monies theretofore advanced by Lender to
23
Borrowers upon an Account that is no longer an Eligible Account, if any, and
Lender shall apply such payment to and on account of the Liabilities, or Lender,
in its discretion, may pay to itself, for the account of Borrowers, from (A)
future loans or advances to be made by Lender to Borrowers pursuant to this Loan
Agreement and the Other Agreements, and (B) monies, reserves and proceeds
received or collected by Lender pursuant to Section 4.9 above, in an amount
necessary to satisfy in whole or in part the foregoing requirement. If Borrowers
do not fully and timely make such payment or if the funds referred to in clauses
(A) and (B) above are not sufficient therefor, the same shall be deemed an
immediate Event of Default by Borrowers under this Loan Agreement.
5.3 ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS. With
respect to each of the Eligible Accounts, each Borrower represents, warrants and
covenants unto Lender that: (A) they are and shall be genuine, in all respects
what they purport to be and are not evidenced by a judgment; (B) they represent
undisputed, bona fide transactions completed in accordance with the terms and
provisions contained in the invoices and other documents delivered to Lender
with respect thereto; (C) the amounts thereof, which may be shown on any
Borrowing Base Certificate or invoices and statements delivered to Lender with
respect thereto, are and shall be actually and absolutely owing to Borrowers and
are not contingent for any reason; (D) no payments have been or shall be made
thereon except payments immediately delivered to Lender pursuant to this Loan
Agreement and the Other Agreements; (E) there are no setoffs, counterclaims or
disputes existing or asserted with respect thereto and Borrowers have not made
and will not make any agreement with any Account Debtor for any deduction
therefrom, except regular discounts allowed by Borrowers in the ordinary course
of their respective businesses for prompt payment; (F) there are no facts,
events or occurrences which in any way impair the validity or enforcement
thereof or tend to reduce the amount payable thereunder; (G) all Account Debtors
have the capacity to contract and are solvent; (H) the services furnished or
Goods sold giving rise thereto are not subject to any lien, claim, encumbrance
or security interest, except the first position priority security interest and
lien of Lender; (I) Borrowers have no knowledge of any fact or circumstance
which would impair the validity or collectibility thereof; and (J) there are no
proceedings or actions which are threatened or pending against any Account
Debtor which might result in any material adverse change in its financial
condition.
5.4 REVOLVING LOANS. Borrowers shall not request nor permit Lender
to make any Revolving Loans with respect to any Account contained on any
Borrowing Base Certificate, except and only so long as such Account is an
Eligible Account.
5.5 VERIFICATION OF ACCOUNTS. Any of Lender's officers, employees
or agents shall have the right, at any time or times hereafter, in Lender's name
or in the name of a nominee of Lender, to verify the validity, amount or any
other matter relating to any Accounts by mail, telephone, facsimile
transmission, telegraph or otherwise. All costs, fees and expenses relating
thereto incurred by Lender, or for which Lender becomes obligated, shall be part
of the Liabilities, secured by the Collateral and payable by Borrowers to Lender
on demand.
5.6 NOTICES REGARDING ACCOUNT DEBTORS. Each Borrower shall: (A)
promptly upon any Borrower learning thereof, inform Lender, in writing, of any
material delay in such Borrower's performance of any of its obligations to any
Account Debtor and of any assertion of any claims, offsets or counterclaims by
any Account Debtor and of any allowances, credits or other monies granted by
such Borrower to any Account Debtor; (B) not permit or agree to any extension,
compromise or settlement or make any change or modification of any kind or
nature with respect to any Account, including, but not limited to, any of the
terms relating thereto, other than in the ordinary course of business as
presently conducted; and (C) promptly upon any Borrower's receipt or learning
thereof, furnish to and inform Lender of all material adverse information
relating to the financial condition of any Account Debtor.
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5.7 NOTICE REGARDING DISPUTED ACCOUNTS. In the event any amount
due and owing in excess of Fifty Thousand and no/100 Dollars ($50,000.00) is in
dispute for a period of thirty (30) days or more after any Borrower receives
notice or obtains knowledge thereof between any Borrower and an Account Debtor,
such Borrower shall provide Lender with written notice thereof at the time of
submission of the next Borrowing Base Certificate explaining in detail the
reason for the dispute, all claims related thereto and the amount in
controversy; provided, however, in the event the aggregate total of such amounts
in dispute exceeds Two Hundred Thousand and no/100 Dollars ($200,000.00), such
written notice must be provided to Lender immediately upon such Borrower having
knowledge of such disputes.
5.8 ATTORNEY AND AGENT-IN-FACT.
Each Borrower irrevocably hereby designates, makes, constitutes and
appoints Lender, and all Persons designated by Lender, as such Borrower's true
and lawful attorney and agent-in fact, in such Borrower's or Lender's name, to
at any time after the occurrence and during the continuance of an Event of
Default: (A) demand payment of the Accounts and Special Collateral; (B) enforce
payment of the Accounts and Special Collateral by legal proceedings or
otherwise; (C) exercise all of such Borrower's rights and remedies with respect
to the collection of the Accounts and Special Collateral; (D) settle, adjust,
compromise, extend or renew the Accounts and Special Collateral; (E) settle,
adjust or compromise any legal proceedings brought to collect the Accounts and
Special Collateral; (F) sell or assign the Accounts and Special Collateral upon
such terms, for such amounts and at such time or times as Lender deems
advisable; (G) discharge and release the Accounts and Special Collateral; (H)
prepare, file and sign such Borrower's name on any notice of lien, assignment or
satisfaction of lien or similar document in connection with the Accounts and
Special Collateral; (I) prepare, file and sign such Borrower's name on any Proof
of Claim in bankruptcy or similar document against any Account Debtor; (J)
endorse the name of such Borrower upon any Chattel Paper, Document, Instrument,
invoice, freight ▇▇▇▇, ▇▇▇▇ of lading or similar document or agreement relating
to the Accounts and Special Collateral; and (K) do all acts and things
necessary, in Lender's sole discretion, to fulfill such Borrower's obligations
under this Loan Agreement.
(B) Each Borrower irrevocably hereby designates, makes,
constitutes and appoints Lender, and all Persons designated by Lender, as such
Borrower's true and lawful attorney and agent-in fact, in such Borrower's or
Lender's name, to at any time, whether before or after the occurrence of an
Event of Default: (A) take control, in any manner, of any item of payment or
proceeds referred to in Section 4.5 above; (B) endorse the name of such Borrower
upon any of the items of payment or proceeds referred to in Section 4.5 above
and to deposit the same on account of the Liabilities; and (C) sign the name of
such Borrower to verifications of the Accounts and Special Collateral and
notices thereof to Account Debtors.
6. COLLATERAL: INVENTORY
6.1 ELIGIBLE INVENTORY. "Eligible Inventory" means the portion of
Inventory that: (A) consists of (i) raw materials, (ii) work-in-process, (iii)
finished goods, or (iv) packaging materials; (B) is not more than three hundred
sixty-five (365) days old; (C) is not consigned to or from any Person; (D) does
not violate the negative covenants and similar provisions of this Section 6 and
does satisfy the positive covenants and similar provisions of this Section 6;
(E) Lender has in good faith determined, in accordance with its customary
business practices, is not unacceptable due to age, type, category or quantity;
(F) is subject to Lender's first position priority perfected security interest
and lien; and (G) is located at one of the locations specified on Schedule 4.4
and if located at a warehouse, other storage facility or a leased facility,
Lender has (i) received an original Warehouse Agreement or Landlord
25
Agreement in form and substance acceptable to Lender, (ii) filed its Uniform
Commercial Code financing statements in accordance with applicable law with
regard to the respective location of each such warehouse, leased facility or
other storage facility, and (iii) as evidenced by then currently dated Uniform
Commercial Code judgment and lien searches satisfactory to Lender, there are no
security interests or liens in and to the Collateral located at such warehouse,
other storage facility or leased facility other than Lender' s first position
priority security interest and lien.
6.2 ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS.
Borrowers represent and warrant to and covenant with Lender that: (A) the
Inventory shall be kept only at the locations specified on Schedule 4.4; (B)
Borrowers now keep and hereafter at all times shall keep correct and accurate
records itemizing and describing the age, kind, type and quantity of Inventory
and Borrowers' stated actual cost therefor, together with withdrawals therefrom
and additions thereto for each month, all of which records shall be available,
upon demand, to any of Lender' s officers, employees or agents for inspection
and copying thereof; (C) all Inventory is now and hereafter at all times shall
be of good and merchantable quality, free from defects; (D) any of Lender's
officers, employees or agents shall, now and at any time or times hereafter,
have the right, upon demand, to inspect and examine the Inventory and to check
and test the same as to quality, quantity, value and condition; and (E) all
Eligible Inventory set forth on the Borrowing Base Certificate (1) consists of
(i) raw materials, (ii) work-in-process, (iii) finished goods, or (iv) packaging
materials; (2) is not more than three hundred sixty-five (365) days old; (3) is
not consigned to any Person; (4) does not violate the negative covenants and
similar provisions of this Section 6 and does satisfy the positive covenants,
and similar provisions of this Section 6; (5) is subject to Lender's first
position priority preferred security interest and lien; and (7) is located at
one of the locations specified on Schedule 4.4, and, if located at a warehouse,
other storage facility or leased facility, Lender has (i) received an original
executed Warehouse Agreement or Landlord Agreement in form and substance
acceptable to Lender, (ii) filed its Uniform Commercial Code financing
statements in accordance with applicable law with regard to the respective
location of each such warehouse, other storage facility or leased facility, and
(iii) as evidenced by then currently dated Uniform Commercial Code judgment and
lien searches satisfactory to Lender, there are no security interests or liens
in and to the Collateral located at such warehouse, other storage facility or
leased facility, other than Lender's first position priority security interest
and lien. All costs, fees and expenses incurred by Lender in connection with
this Section 6, or which Lender becomes obligated to pay, shall be part of the
Liabilities, secured by the Collateral and payable by Borrowers to Lender on
demand.
6.3 SALE OF INVENTORY. Until an Event of Default has occurred,
Borrowers may sell Inventory in the ordinary course of business, but may not
transfer any Inventory in partial or total satisfaction of any of the
Indebtedness. In no event shall Borrowers make any sale of Inventory which would
violate the terms and provisions of the Loan Agreement and the Other Agreements.
6.4 RESPONSIBILITY FOR INVENTORY. Borrowers shall be liable and
responsible for: (A) the safekeeping of Inventory; (B) any loss, damage or
destruction to the Inventory occurring or arising in any manner or fashion; (C)
any diminution in the value thereof; or (D) any act or event of default of any
carrier, warehouseman, bailee or forwarding agency thereof or any other Person.
7. EQUIPMENT
7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. Each Borrower
represents and warrants to and covenants with Lender that (A) Borrowers have and
shall have good, indefeasible and merchantable title, free and clear of all
security interests, claims and encumbrances to and ownership of
26
the Equipment, except for the Permitted Liens; and (B) the Equipment shall be
kept and maintained solely at each Borrower's respective places of business
specified on Schedule 4.4.
7.2 MAINTENANCE OF EQUIPMENT. Each Borrower shall keep and
maintain the Equipment in good operating condition and repair and shall make all
necessary replacements thereof and renewals thereto so that the value and
operating efficiency of the Equipment shall at all times be maintained and
preserved. No Borrower shall permit any of the Equipment to become a Fixture to
real estate or accession to other personal property.
7.3 EVIDENCE OF OWNERSHIP. Upon Lender's request, each Borrower
shall deliver to Lender any and all evidence of ownership to, including, without
limitation, certificates of title to and applications for title to, any of the
Equipment.
7.4 RECORDS AND SCHEDULES OF EQUIPMENT. Each Borrower shall
maintain accurate records itemizing and describing the kind, type, quality,
quantity and value of its Equipment and all dispositions thereof, and shall
furnish Lender with a current schedule containing the foregoing information upon
request by Lender.
8. INSURANCE AND TAXES
8.1 INSURANCE.
(A) Borrowers, at their sole cost and expense, shall keep and
maintain: (1) the Collateral insured for the full insurable value against loss
or damage by fire, theft, explosion, sprinklers and all other hazards and risks
ordinarily insured against by other owners or users of such properties in
similar businesses; and (2) business interruption insurance, workmen's
compensation insurance, public liability insurance and property damage insurance
relating to Borrowers' businesses and ownership and use of their assets.
(B) All such policies of insurance shall be in form and substance,
in such amounts and with insurers recognized as adequate by prudent business
persons, as may be satisfactory to Lender. Borrowers shall deliver to Lender the
original, or certified copy, of each policy of insurance or a certificate of
insurance, and evidence of payment of all premiums for each such policy. All
property insurance policies shall contain an endorsement, in form and substance
acceptable to Lender, showing Lender as lender's loss payee and all liability
insurance policies shall contain an endorsement, in form and substance
acceptable to Lender, showing Lender as additional insured. Such endorsement or
independent instrument furnished to Lender shall provide that the insurance
companies will give Lender at least thirty (30) days written notice before any
such policy or policies of insurance shall be altered or canceled and that no
act or default of Borrowers or any other person shall affect the right of Lender
to recover under such policy or policies of insurance in case of loss or damage.
(C) Borrowers hereby direct all insurers under such policies of
insurance to pay all proceeds payable thereunder directly to Lender. Each
Borrower irrevocably, makes, constitutes and appoints Lender, and all officers,
employees or agents designated by Lender, as such Borrower's true and lawful
attorney and agent-in-fact for the purpose of making, settling and adjusting
claims in excess of $150,000.00 under such policies of insurance with respect to
the Collateral, endorsing the name of such Borrower on any check, draft,
instrument or other item of payment in excess of $10,000.00 constituting the
proceeds of such policies of insurance with respect to the Collateral at any
time or times hereafter, and for making all determinations and decisions with
respect to such policies of insurance for claims in excess of $150,000.00.
27
If Borrowers at any time or times hereafter shall fail to obtain or maintain
any of the policies of insurance required above or to pay any premium in whole
or in part relating thereto, then Lender, without waiving or releasing any
obligation, Unmatured Event of Default or Event of Default by Borrowers
hereunder, may at any time or times thereafter, but shall not be obligated to do
so, obtain and maintain such policies of insurance, pay such premium and take
any other action with respect thereto which Lender deems advisable. All sums so
disbursed by Lender, including, but not limited to, attorneys' fees, court
costs, expenses and other charges relating thereto, shall be part of the
Liabilities, secured by the Collateral and payable by Borrowers to Lender on
demand.
(D) Each Borrower hereby acknowledges that the following notice by
Lender is required by and given in full compliance with the Illinois Collateral
Protection Act, 815 ILCS 180/15:
Unless Borrowers provide Lender with evidence of the insurance coverage
required by this Loan Agreement, Lender may purchase insurance at
Borrowers' expense to protect Lender's interest in the Collateral. This
insurance may, but need not, protect Borrowers' interests. The coverage
that Lender purchases may not pay any claim that Borrowers make or any
claim that is made against Borrowers in connection with the Collateral.
Borrowers may later cancel any insurance purchased by Lender, but only
after providing Lender with evidence that Borrowers have obtained
insurance as required by this Loan Agreement. If Lender purchases
insurance for the Collateral, Borrowers will be responsible for the
cost of that insurance, including interest and any other charges Lender
may impose in connection with the placement of the insurance, until the
effective date of the cancellation or expiration of the insurance. The
cost of the insurance may be added to Borrowers' total outstanding
balance or obligation. The cost of insurance may be more than the cost
of insurance Borrowers may be able to obtain on their own.
8.2 TAXES. Each Borrower represents, warrants and covenants unto
Lender that it shall fully and timely pay, when due, all of the Charges, and
that it shall not permit the Charges to arise, or to remain, and will promptly
discharge the same. In the event Borrowers, at any time or times hereafter,
shall fail to pay the Charges or to obtain such discharges, Borrowers shall so
advise Lender thereof in writing. Lender may, without waiving or releasing any
obligation or liability of Borrowers hereunder or any Event of Default, at any
time or times thereafter, make such payment, or any part thereof, obtain such
discharge or take any other action with respect thereto which Lender deems
advisable. All sums so paid by Lender and any expenses, including, but not
limited to, attorneys' fees, court costs, expenses and other charges relating
thereto, shall be part of the Liabilities, secured by the Collateral and payable
by Borrowers to Lender on demand.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS: GENERAL
9.1 REPRESENTATIONS AND WARRANTIES. To induce Lender to enter into
this Loan Agreement and to make Loans hereunder, each Borrower represents and
warrants to Lender that:
(A) Organization and Qualification. Each Borrower is the type of
legal entity set forth in the first paragraph of this Loan Agreement for such
Borrower, duly organized and existing and in good standing under the laws of the
State of its formation reflected in the first paragraph of this Loan Agreement,
and qualified or licensed to do business in all states in which the laws thereof
require Borrowers to be so qualified or licensed, except where failure to
qualify would not have a material adverse effect on the financial condition of
Borrower.
28
(B) Corporate Power and Authority. Each Borrower has the right,
power and capacity and is duly authorized and empowered to enter into, execute,
deliver and perform this Loan Agreement and the Other Agreements.
(C) No Violation of Law. The execution, delivery and performance
by Borrowers of this Loan Agreement and the Other Agreements do not and shall
not, by the lapse of time, the giving of notice or otherwise, constitute a
breach of any provision contained in any Borrower's Constituent Documents or, to
the best of Borrower's knowledge, constitute a violation of any applicable law,
or contained in any agreement, instrument or document to which any Borrower is a
party or by which it is bound.
(D) Title to Collateral. Borrowers have good, indefeasible and
merchantable title to and ownership of the Collateral, free and clear of all
liens, claims, security interests and encumbrances, except for the Permitted
Liens.
(E) Solvency. Each Borrower (1) is solvent, (2) had and has
adequate cash flow to pay its debts as they mature or otherwise become due, (3)
had and has sufficient capital to conduct its business in the ordinary course,
and (4) to the best of Borrower's knowledge, has property and assets which, if
valued at fair market valuation, are greater than the sum of such Borrower's
debts and liabilities.
(F) Litigation. There are no actions or proceedings which are
pending or, to the best of Borrower's knowledge, threatened against any Borrower
which might result in any material or adverse change in its financial condition
or materially affect such Borrower's assets or the Collateral.
(G) Indebtedness. No Borrower has Indebtedness, except Permitted
Indebtedness.
(H) Government Contracts. No Borrower is subject to the
renegotiation of any material government contracts.
(I) Adequate Assets/Trademarks/Copyrights/Patents. Each Borrower
possesses adequate assets, licenses, patents, copyrights, trademarks and trade
names to continue to conduct its respective business as previously conducted by
it. Borrowers do not own any patents, trademarks or copyrights, except as
otherwise specifically identified in a separate collateral assignment of
patents, trademarks or copyrights executed and delivered by Borrowers to Lender
contemporaneously herewith.
(J) Good Standing. Each Borrower has been and is in good standing
with respect to all governmental permits, certificates, consents and franchises
necessary to continue to conduct its business as previously conducted by it and
to own or lease and operate its properties as now owned or leased by it and to
the best of Borrower's knowledge, none of said permits, certificates, consents
or franchises contain any term, provision, condition or limitation more
burdensome than such as are generally applicable to Persons engaged in the same
or similar business as such Borrower.
(K) Burdensome Agreements. No Borrower is a party to any contract
or agreement or subject to any charge, restriction, judgment, decree or order
materially and adversely affecting its business, property, assets, operations or
condition, financial or otherwise.
(L) Violation of Law. No Borrower is in violation of any
applicable statute, regulation or ordinance of the United States of America, any
state, city, town, municipality, county, or any other jurisdiction, or any
agency thereof, in any material respect affecting its business, property,
assets, operations or condition, financial or otherwise.
29
(M) Breach of Other Loan Documents. No Borrower is in material
default with respect to any indenture, loan agreement, mortgage, deed or other
similar agreement relating to the borrowing of monies to which it is a party or
by which it is bound.
(N) Financial Information. The Financials delivered to Lender
prior hereto or contemporaneously herewith fairly and accurately present the
information set forth therein which may include, but is not limited to, the
assets, liabilities, financial conditions and results of operations of Borrowers
and such other Persons described therein as of and for the period ending on such
dates and have been prepared in accordance with GAAP and such principles have
been applied on a basis consistently followed in all material respects
throughout the periods involved.
(O) Material Adverse Change. There has been no material adverse
change in the assets, liabilities or financial condition of any Borrower since
the date of the most recent Financials for the Borrowers delivered to Lender.
(P) Change of Corporate Name or Structure. No Borrower has within
the previous two (2) years changed its name, state of formation, identity,
corporate structure or chief executive office.
(Q) Capital Structure. Schedule 9.1(Q) attached hereto and made a
part hereof states (1) the correct name of each of the Subsidiaries of each
Borrower, and the jurisdiction of incorporation and the percentage of voting
Equity Interests owned by Borrowers, (2) the name of each Borrower's corporate
or joint venture Affiliates and the nature of the affiliation, and (3) the
number of authorized and issued Equity Interests of each Borrower and each
Subsidiary of each Borrower. Each Borrower has good and marketable title to all
of the Equity Interests it purports to own of each Subsidiary, free and clear in
each case of any lien other than Permitted Liens. All such Equity Interests have
been duly issued and are fully paid and non-assessable. Except as described on
Schedule 9.1(Q), there are not outstanding any agreements or instruments binding
upon any Borrower's shareholders relating to the ownership of its Equity
Interests.
(R) Pension Plans. No Borrower has received any notice to the
effect that it is not in full compliance with any of the requirements of ERISA
and the regulations promulgated thereunder. To the best of Borrower's knowledge,
no fact or situation that could lead to a material adverse change in the
financial condition of any Borrower, including, but not limited to, any
Reportable Event or Prohibited Transaction, exists in connection with any Plan.
Borrowers have no withdrawal liability in connection with a Multiemployer Plan.
(S) Labor Relations. Except as described on Schedule 9.1(S)
attached hereto and made a part hereof, no Borrower is a party to any collective
bargaining agreement, and there are no material grievances, disputes or
controversies with any union or any other organization of any Borrower's
employees, or threats of strikes, work stoppages or any asserted pending demands
for collective bargaining by any union or organization.
(T) Trade Relations. There exists no actual or to the best of
Borrower's knowledge, threatened termination, cancellation or limitation of, or
any modification or change in, the business relationship between any Borrower
and any customer or any group of customers whose purchases individually or in
the aggregate are material to the business of such Borrower, or with any
material supplier, and to the best of Borrower's knowledge, there exists no
present condition or state of facts or circumstances which would materially
adversely affect any Borrower or prevent any Borrower
30
from conducting such business after the consummation of the transaction
contemplated by this Loan Agreement in substantially the same manner in which it
has heretofore been conducted.
(U) Environmental Matters. To the best of Borrower's knowledge,
each Borrower is in compliance in all respects with all applicable Environmental
Laws.
(V) Encumbrances. There are no liens, claims or other encumbrances
upon any of the Collateral, except for the Permitted Liens.
(W) Levies and Attachments. There are no levies, attachments or
restraints affecting any of Borrowers' assets or the Collateral.
(X) Receiver, Trustee or Assignee. There is no receiver, trustee
or assignee for the benefit of creditors currently appointed to take possession
of all or any portion of any Borrower's assets or any of the Collateral.
(Y) Surety. Except for guarantees in favor of Lender, no Borrower
is liable, whether through the execution of a guaranty or otherwise, with
respect to the obligations or liabilities of any other Person except by
endorsement of instruments or items of payment for deposit to the general
account of Borrowers or for delivery to Lender on account of the Liabilities.
(Z) Affiliate Transactions. No Borrower has entered into any
transaction with an Affiliate, except for transactions in the ordinary course of
business pursuant to the reasonable requirements of each such Borrower's
business and upon fair and reasonable terms no less favorable to such Borrower
than such Borrower would obtain in a comparable arms-length transaction.
(AA) Commercial Tort Claims. All Commercial Tort Claims in which a
Borrower is a claimant are set forth on Schedule 4.1 attached hereto.
9.2 COVENANTS. Until the termination of this Loan Agreement and
thereafter until all Liabilities are paid in full, each Borrower agrees that,
unless at any time Lender shall otherwise expressly consent in writing:
(A) Organization and Qualification. Each Borrower at all times (1)
shall be the type of legal entity specified for such Borrower in the first
paragraph of this Loan Agreement, duly organized and existing and in good
standing under the laws of the State of its formation reflected in the first
paragraph of this Loan Agreement, and (2) shall be qualified or licensed to do
business in all states in which the laws thereof require Borrowers to be so
qualified or licensed.
(B) No Violation of Law. The execution, delivery and performance
by Borrowers of this Loan Agreement and the Other Agreements shall not
hereafter, by the lapse of time, the giving of notice or otherwise, constitute a
violation of any applicable law or breach of any provision contained in any
Borrower's Constituent Documents, or contained in any agreement, instrument or
document to which any Borrower is now or hereafter a party or by which it is or
may become bound.
(C) Title to Collateral. Borrowers at all times hereafter shall
have good, indefeasible and merchantable title to and ownership of the
Collateral, free and clear of all liens, claims, security interests and
encumbrances, except for the Permitted Liens.
31
(D) Solvency. Each Borrower shall at all times hereafter (1)
remain solvent, (2) have adequate cash flow to pay its debts as they mature or
otherwise become due, (3) have sufficient capital to conduct its business in the
ordinary course, and (4) have property and assets which, if valued at fair
market valuation, are greater than the sum of such Borrower's debts and
liabilities.
(E) Litigation. There shall exist no actions or proceedings
against any Borrower which might result in any material or adverse change in its
financial condition or materially affect such Borrower's assets or the
Collateral.
(F) Adequate Assets/Trademarks/Copyrights/Patents. Each Borrower
shall continue to possess adequate assets, licenses, patents, copyrights,
trademarks and trade names to continue to conduct its respective business as
previously conducted by it. Borrowers shall notify Lender if any Borrower
acquires ownership of or a license or other interest in any patents, trademarks
or copyrights and shall execute and deliver such documents to Lender as Lender
shall request to assign to Lender as security such Borrower's interest in such
patents, copyrights and trademarks.
(G) Good Standing. Each Borrower shall remain in good standing
with respect to all governmental permits, certificates, consents and franchises
necessary to continue to conduct its business as previously conducted by it and
to own or lease and operate its properties as now owned or leased by it and none
of said permits, certificates, consents or franchises contain any term,
provision, condition or limitation more burdensome than such as are generally
applicable to persons engaged in the same or similar business as such Borrower.
(H) Violation of Law. No Borrower shall be in violation of any
applicable statute, regulation or ordinance of the United States of America, any
state, city, town, municipality, county, or any other jurisdiction, or any
agency thereof, in any material respect affecting its business, property,
assets, operations or condition, financial or otherwise.
(I) Breach of Other Loan Documents. No Borrower shall be in
default with respect to any indenture, loan agreement, mortgage, deed or other
similar agreement relating to the borrowing of monies to which it is a party or
by which it is bound.
(J) Financial Statements. Borrowers shall, from time to time,
provide Financials to Lender pursuant to Section 9.5 which fairly and accurately
present the assets, liabilities and financial conditions and results of
operations of Borrowers and such other Persons described therein as of and for
the period ending on the dates described therein. Such Financials will be,
unless otherwise indicated therein, prepared in accordance with GAAP and such
principles will be applied on a basis consistently followed in all material
respects throughout the periods involved.
(K) Material Adverse Change. There shall be no material adverse
change in the assets, liabilities or financial condition of any Borrower since
the date of the most recent Financials for the Borrowers delivered to Lender.
(L) Change of Corporate Name or Structure. No Borrower shall at
any time hereafter, without Lender's prior written consent, change its name,
identity, corporate structure, ownership, chief executive office or state of
formation.
(M) Pension Plans. No fact or situation that could lead to a
material adverse change in the financial condition of any Borrower, including,
but not limited to, any Reportable Event or Prohibited
32
Transaction, shall exist in connection with any Plan. Borrowers shall continue
to have no withdrawal liability in connection with a Multiemployer Plan.
(N) Notices to Lender. Each Borrower shall notify Lender in
writing: (1) promptly after any Borrower learns thereof, of the commencement of
any litigation affecting a Borrower or any of its real or personal property,
whether or not the claim is considered by such Borrower to be covered by
insurance, and of the institution of any administrative proceeding which may
materially and adversely affect such Borrower's operations, financial condition,
real or personal property or business or Lender's Lien upon any of the
Collateral; (2) at least thirty (30) days prior thereto, of any Borrower's
opening of any new office or place of business or any Borrower's closing of any
existing office or place of business; (3) promptly after any Borrower learns
thereof, of any labor dispute to which a Borrower may become a party, any
strikes or walkouts relating to any of its plants or other facilities, and the
expiration of any labor contract to which it is a party or by which it is bound;
(4) promptly after any Borrower learns thereof, of any material default by a
Borrower under any note, indenture, loan agreement, mortgage, lease, deed,
guaranty or other similar agreement relating to any Indebtedness of such
Borrower exceeding Fifty Thousand and no/100 Dollars ($50,000.00); (5) promptly
after the occurrence thereof, of any Unmatured Event of Default or Event of
Default; (6) promptly after the occurrence thereof, of any default by any
obligor under any note or other evidence of Indebtedness payable to a Borrower;
(7) promptly after the rendition thereof, of any judgment rendered against a
Borrower or any of its Subsidiaries; and (8) promptly after any Borrower learns
thereof, of any material adverse finding of any state or federal government
entity in connection with all or any part of the Collateral.
(O) Landlord and Storage Agreements. Each Borrower shall provide
Lender with copies of all agreements between such Borrower and any landlord or
warehouseman which owns or operates any premises at which any Collateral may,
from time to time, be located, and shall deliver to Lender an original executed
landlord's agreement or warehouse agreement, as the case may be, in form and
substance satisfactory to Lender.
(P) Subordinations. Each Borrower shall provide Lender with debt
subordination agreements, in form and substance satisfactory to Lender, executed
by Borrowers and any Person who is an officer, director, member, manager or
Affiliate of Borrowers to whom any Borrower is or hereafter becomes indebted for
borrowed money.
(Q) Environmental Matters.
(1) Each Borrower shall and shall cause each of its
Subsidiaries to (a) comply strictly and in all respects with all applicable
Environmental Laws, (b) take promptly any remediation and/or corrective action
necessary to cure any violation of Environmental Laws of which a Borrower has
knowledge, (c) notify the proper governmental agency promptly in the event of
any release of any Hazardous Substances reportable under 42 USC Section 9603, 42
USC Section 11044, 33 USC Section 1321(b)(5) or any counterpart or similar state
or local requirements, (d) promptly forward to Lender, upon its request, a copy
of any order, notice, permit, application, or any other communication or report
in connection with any such release of any Hazardous Substance or any other
material matter relating to the Environmental Laws as they may affect their
premises.
(2) Borrowers shall provide Lender with such evidence,
reports and/or other documentation as reasonably requested by Lender to insure
that Borrowers are in compliance with the terms of this Section 9.2(Q).
33
(R) Commercial Tort Claims. Each Borrower will advise Lender of
any new Commercial Tort Claim upon the filing of any such action. Each Borrower
hereby authorizes Lender to amend Schedule 4.1 from time to time to reflect such
new Commercial Tort Claims and to prepare and file any required Uniform
Commercial Code financing statements or amendments and take any other actions
necessary for Lender to perfect its security interest in such Commercial Tort
Claims.
9.3 NEGATIVE COVENANTS. Each Borrower covenants unto Lender that
such Borrower shall not now or at any time hereafter, unless such Borrower
obtains the prior written consent of Lender:
(A) Additional Encumbrances. Grant a security interest in, assign,
sell or transfer any of the Collateral to any Person except as permitted herein
or permit, grant, or suffer a lien, claim or encumbrance upon any of the
Collateral, except for the Permitted Liens.
(B) Levies and Attachments. Permit or suffer any levy, attachment
or restraint to be made affecting any of its assets or the Collateral.
(C) Receiver, Trustee or Assignee. Permit or suffer any receiver,
trustee or assignee for the benefit of creditors to be appointed to take
possession of all or any of such Borrower's assets or any of the Collateral.
(D) Mergers and Acquisitions. Merge, consolidate with or acquire
any Person.
(E) Ordinary Course of Business. Enter into any transaction not in
the ordinary course of its business as presently conducted.
(F) Investments. Other than in the ordinary course of business,
make any investment in the securities of any Person; provided, however,
notwithstanding the foregoing, Borrowers may make investments in certificates of
deposit of Lender or any of its affiliates or such other banking institution
having a net worth in excess of $100,000,000, or in securities of the United
States of America or commercial paper with a P1 rating (all of the foregoing
maturing within one year).
(G) Surety. Except for guarantees in favor of Lender, guaranty or
otherwise, in any way, become liable with respect to the obligations or
liabilities of any Person except by endorsement of instruments or items of
payment for deposit to the general account of Borrowers or for delivery to
Lender on account of the Liabilities.
(H) Capital Structure. Make any material change in such Borrower's
capital structure or in any of its business objectives, purposes and operations
which might in any way adversely affect the repayment of the Liabilities.
(I) Encumbrance or Sale. Encumber, sell, pledge, mortgage, lease,
or otherwise dispose of or transfer, whether by merger, consolidation or
otherwise, any of such Borrower's assets, except Permitted Liens, sales of
Inventory in the ordinary course of business and as otherwise expressly
permitted herein.
(J) [Intentionally Left Blank]
(K) Indebtedness. Incur Indebtedness, except Permitted
Indebtedness.
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(L) Restricted Payments. Make any Restricted Payments, other than
intercompany loans between Borrowers in the ordinary course of Borrowers'
business.
(M) Constituent Documents/Fiscal Year End. Amend or restate such
Borrower's Constituent Documents or change Borrowers' fiscal year-end from
December 31.
(N) Affiliate Transactions. Enter into any transaction with an
Affiliate, except for transactions in the ordinary course of business pursuant
to the reasonable requirements of each such Borrower's business and upon fair
and reasonable terms no less favorable to such Borrower than such Borrower would
obtain in a comparable arms-length transaction.
9.4 FINANCIAL COVENANTS. During the term of this Loan Agreement,
and thereafter for so long as there are any outstanding Liabilities owed to
Lender, Borrowers covenant that they shall:
(1) Tangible Net Worth. Maintain a minimum Tangible Net
Worth of not less than the Tangible Net Worth Benchmark tested as of the last
day of each calendar quarter.
(2) Cash Flow Coverage Ratio. Not permit Borrowers' Cash
Flow Coverage Ratio to be less than 1.10 to 1.00, tested as of the last day of
each calendar quarter.
9.5 FINANCIAL REPORTING. Borrowers represent, warrant and covenant
unto Lender that they will deliver to Lender the following financial
information, all of which shall accurately reflect the financial condition of
Borrowers at and for the periods of time described therein and shall be prepared
in accordance with GAAP:
(A) As soon as available but in no event later than ninety (90)
days after the close of each fiscal year of Borrowers, the audited consolidated
and consolidating financial statements of Borrowers, including, but not limited
to, (1) a balance sheet, (2) a statement of income and retained earnings, and
(3) a statement of cash flows, together with an unqualified opinion of a firm of
independent certified public accountants selected by Borrowers and reasonably
approved by Lender.
(B) Concurrently with the delivery of the financial statements
described in Section 9.5(A) above, certificates of the chief financial officer
or any Designated Person of each Borrower in form and substance acceptable to
Lender, certifying to Lender that, based upon such financial statements, (1)
Borrowers are in compliance with all financial covenants and ratios contained in
this Loan Agreement, together with the calculations for the financial covenants
and ratios described therein; and (2) the chief financial officer or such
Designated Person, as the case may be, is not aware of any event or occurrence
which constitutes an Unmatured Event of Default or Event of Default.
(C) As soon as available but in no event later than twenty (20)
days after the end of each calendar month, Borrowers' internally prepared
consolidated and consolidating financial statements, including, but not limited
to, (1) a balance sheet, (2) a statement of income and retained earnings, and
(3) a statement of cash flows all for the previous calendar month, and the
year-to-date statement for that portion of Borrowers' fiscal year then elapsed.
(D) Concurrently with the delivery of Borrowers' internally
prepared financial statements pursuant to Section 9.5(C) above for each calendar
quarter-end period, certificates of the chief financial officer or any
Designated Person of each Borrower, in form and substance acceptable to Lender,
certifying to Lender that, based upon the internally prepared financial
statements, (1) Borrowers are in compliance with all financial covenants
contained in this Loan Agreement, together with the
35
calculations for the financial covenants and ratios described herein, and (2)
the chief financial officer or such Designated Person, as the case may be, is
not aware of any event or occurrence which constitutes an Unmatured Event of
Default or Event of Default.
(E) As soon as available, but in no event later than twenty (20)
days after the end of each month, the following reports dated as of the last day
of the immediately preceding month: (1) Accounts receivable aging, (2) accounts
payable aging, (3) Accounts receivable summary report, and (4) Inventory Report.
(F) As soon as available, but in no event later than fifteen (15)
days after the end of each month, a Borrowing Base Certificate dated as of the
last day of the immediately preceding month.
(G) From and after the time that any Borrower or any Subsidiary is
a public company, promptly upon the furnishing or receipt thereof to the
Securities and Exchange Commission or to the Equity Interest holders of any
Borrower or any Subsidiary, copies of all financial statements, reports,
registration statements, proxy statements, statements of beneficial ownership
and Forms 3 and 4.
(H) As soon as available, but in no event later than March 1st of
each year, Borrowers' internally prepared financial projections and business
plans for the forthcoming year, including, without limitation, (1) a balance
sheet, (2) a statement of income and retained earnings, and (3) a statement of
cash flows, all for the forthcoming year prepared on a month by month and
year-to-date basis.
(I) Such other data and information, financial and otherwise as
Lender, from time to time, may reasonably request.
10. CONDITIONS PRECEDENT
10.1 CONDITIONS TO INITIAL FUNDING. Lender's obligation to make the
initial Loan pursuant to this Loan Agreement and the Other Agreements is subject
to the full and timely performance of the following covenants prior to or
contemporaneously with the making of the initial Loan.
(A) Lender shall have received each of the following, in form and
substance satisfactory to Lender and its counsel:
(1) A fully executed original of a Company General
Certificate for each Borrower.
(2) A fully executed original of this Loan Agreement.
(3) A fully executed original of the Revolving Note.
(4) A fully executed original of Term Note A and Term
Note B.
(5) A fully executed Trademark Security Agreement.
(6) A fully executed Mortgage and Security Agreement.
(7) A fully executed Assignment of Rents and Lessor's
Interest in Leases.
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(8) A fully executed Environmental Indemnity Agreement.
(9) A favorable written opinion from Borrowers' counsel.
(10) A fully executed Master Letter of Credit Agreement by
and between Borrowers and Lender.
(11) Copies of the Uniform Commercial Code, tax lien and
pending suit and judgment searches from such jurisdictions as Lender deems
necessary, which shall not have disclosed any prior lien or security interest in
the Collateral, except for the Permitted Liens.
(12) An initial Borrowing Base Certificate, Accounts
receivable summary report and Inventory Report dated as of the date of this Loan
Agreement.
(13) Certificates of insurance with lender's loss payable,
additional insured and mortgagee clauses covering all collateral for the
Liabilities and meeting the requirements of this Loan Agreement and the Other
Agreements, each set forth on ▇▇▇▇▇ Form No. 27 or such other form acceptable to
Lender.
(14) A fully executed original of a landlord's agreement
for each location leased by Borrowers, if any.
(15) A fully executed original of a warehouse agreement
for all warehouses not owned by Borrowers, if any, where the Collateral is
located.
(16) Such other documents, instruments or agreements as
Lender may reasonably request.
(B) No Unmatured Event of Default or Event of Default shall have
occurred and be continuing.
(C) There shall have been no material or adverse change in the
business, financial condition or results of operations since the date of
Borrowers' then most recently delivered Financials.
(D) The representations and warranties contained in this Loan
Agreement shall be true and correct as of the making of the initial Loan.
10.2 CONDITIONS TO SUBSEQUENT FUNDINGS. Lender's obligation to make
any subsequent Loans pursuant to this Loan Agreement and the Other Agreements is
subject to the full and timely performance of each of the following covenants
either prior to or contemporaneously with the making of each subsequent Loan.
(A) No Unmatured Event of Default or Event of Default shall have
occurred and be continuing.
(B) No claims, litigation, arbitration proceedings or governmental
proceedings not disclosed in writing to Lender prior to the date of the last
previous Loan shall be pending or known to be threatened against any Borrower
and no known material development not so disclosed shall have occurred in any
claims, litigation, arbitration proceedings or governmental proceedings so
disclosed
37
which in the reasonable opinion of Lender is likely to materially or adversely
affect the financial position or business of Borrowers or capability of
Borrowers to pay the Liabilities.
(C) There shall have been no material or adverse change in the
business, financial condition or results of operations since the date of
Borrowers' then most recently delivered Financials or the previous Loan advance.
(D) The representations and warranties of Borrowers contained in
this Loan Agreement shall be true and correct as of the making of any subsequent
Loan, with the same effect as though made on such date of each subsequent Loan.
11. EVENT OF DEFAULT; REMEDIES
11.1 EVENTS OF DEFAULT. The occurrence of any one of the following
events shall constitute a default (an "Event of Default") by Borrowers under
this Loan Agreement:
(A) Borrowers fail to fully and timely pay the Liabilities, when
due and payable or declared due and payable and such failure continues for a
period of ten (10) days after the occurrence thereof;
(B) any Obligor fails or neglects to perform, keep or observe any
of the Covenants; provided however, Borrowers shall have a period of ten (10)
Business Days after the occurrence thereof to cure any failure or neglect to
perform, keep or observe any of the Covenants set forth in section 7.2 above, or
subsections 9.2(A)(2), (E), (F), (G), (H), (I), (M), (O), (P) and (Q) of this
Loan Agreement;
(C) any representation, warranty, statement, report or certificate
made or delivered by any Obligor, or any of its officers, members, managers,
employees, or agents, to Lender is not true and correct in all material
respects, whether made in this Loan Agreement, the Other Agreements or
otherwise;
(D) any assets of any Obligor are attached, seized, subjected to a
writ or distress warrant, or are levied upon, or come within the possession of
any receiver, trustee, custodian or assignee for the benefit of creditors;
(E) a petition under the United States Bankruptcy Code or any
similar federal, state or local law, statute or regulation shall be filed by any
Obligor;
(F) a petition under the United States Bankruptcy Code or any
similar federal, state or local law, statute or regulation shall be filed
against any Obligor which is granted or is not dismissed within thirty (30) days
after the filing thereof;
(G) any Obligor shall make an assignment for the benefit of
creditors, or an application is made by any Obligor for the appointment of a
receiver, trustee, custodian or conservator for such Obligor or any of its
assets;
(H) an application is made against any Obligor for the appointment
of a receiver, trustee, custodian or conservator for such Obligor or any of its
assets;
(I) Any Obligor is enjoined, restrained or in any way prevented by
court order from conducting any part of its business affairs;
38
(J) a lawsuit or other proceeding is filed against any Obligor
claiming in the aggregate, more than Five Hundred Thousand and no/100 Dollars
($500,000.00) in damages;
(K) a notice of a lien, levy or assessment is filed of record with
respect to any of the assets of any Obligor by the United States of America or
any department, agency or instrumentality thereof, or by any state, county,
municipal or other governmental department, agency, or instrumentality,
including without limitation, the Pension Benefit Guaranty Corporation;
(L) any Obligor defaults in the payment of any of its other
obligations or liabilities which are in excess of One Hundred Thousand and
no/100 Dollars ($100,000.00), and such default is not cured within the time, if
any, specified therefor;
(M) the occurrence of a breach, default or event of default under
any agreement, instrument or document executed and delivered by any Person to
Lender pursuant to which such Person has guarantied to Lender the payment of all
or any portion of the Liabilities or provided collateral to secure all or any
portion of the Liabilities and such breach, default or event of default is not
cured within the applicable grace or cure period, if any, or such Person
terminates or purports to terminate its guaranty of the Liabilities to Lender;
(N) a breach, default or event of default occurs under any of the
Other Agreements or any agreement, document or instrument executed and delivered
by any Obligor to Lender or any of its subsidiaries or affiliates, after the
expiration of applicable grace or cure periods;
(O) there shall be entered against any Obligor one or more
judgments or decrees in excess of Two Hundred Fifty Thousand and no/100 Dollars
($250,000.00) in the aggregate at any one time outstanding for such Obligor,
excluding those judgments or decrees (i) that shall have been stayed, vacated or
bonded, (ii) that shall have been outstanding less than 30 days from the entry
thereof, or (iii) for and to the extent to which such Obligor is insured and
with respect to which the insurer specifically has assumed responsibility in
writing; or
(P) the failure of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, and ▇▇▇▇▇▇ ▇. ▇▇▇▇, or number of them to
constitute at least 51% of Vita Food's Board of Directors.
11.2 CUMULATIVE REMEDIES. All of Lender's rights and remedies under
this Loan Agreement and the Other Agreements are cumulative and non-exclusive.
11.3 DISCONTINUING ADVANCES. Upon the occurrence of an Unmatured
Event of Default or Event of Default, without notice or demand by Lender to
Borrowers, Lender shall have no further obligation to and may immediately cease
advancing monies or extending credit to or for the benefit of Borrowers under
this Loan Agreement and the Other Agreements. Upon the occurrence of an Event of
Default under Sections 11.1(E) or 11.1(F) hereof, without notice or demand by
Lender to Borrowers, the Liabilities shall be immediately due and payable,
including, without limitation, all of Borrowers' contingent liabilities with
respect to any Letters of Credit. Upon the occurrence of any Event of Default
(other than an Event of Default under Sections 11.1(E) or 11.1(F)), at the
election of Lender, upon notice or demand by Lender to Borrowers, the
Liabilities shall be immediately due and payable, including, without limitation,
all of Borrowers' contingent liabilities with respect to any Letters of Credit.
ANY ADVANCES MADE BY LENDER TO BORROWERS AFTER THE OCCURRENCE OF AN UNMATURED
EVENT OF DEFAULT OR AN EVENT OF DEFAULT SHALL NOT
39
ESTABLISH A CUSTOM OR COURSE OF DEALING AND LENDER SHALL BE ENTITLED TO CEASE
MAKING ADVANCES AT ANY TIME THEREAFTER.
11.4 REMEDIES. Upon the occurrence of an Event of Default, Lender,
in its discretion, may: (A) exercise any one or more of the rights and remedies
accruing to a "secured party" under the Uniform Commercial Code of Illinois and
any other applicable law upon a default by a debtor; (B) enter, with or without
process of law and without breach of the peace, any premises where the
Collateral is or may be located, and without charge or liability to Lender
therefor, seize and remove the Collateral from said premises or remain upon said
premises and use the same for the purpose of collecting, preparing and disposing
of the Collateral; (C) sell or otherwise dispose of the Collateral at public or
private sale for cash or credit, provided, however, that Borrowers shall be
credited with the net proceeds of such sale only when such proceeds are actually
received by Lender; (D) take control, in any manner, of any item of payment or
proceeds of the Collateral and to direct all Account Debtors to make payments
directly to Lender; (E) notify any or all Account Debtors that the Accounts and
Special Collateral have been assigned to Lender and that Lender has a first
position priority security interest and lien therein; (F) direct such Account
Debtors to make all payments due from them to Borrowers upon the Accounts and
Special Collateral directly to Lender; and (G) enforce payment of and collect,
by legal proceedings or otherwise, the Accounts and Special Collateral in the
name of Lender and Borrowers.
11.5 ASSEMBLING COLLATERAL. Upon an Event of Default, each
Borrower, immediately upon demand by Lender, shall assemble the Collateral and
make it available to Lender at a place or places to be designated by Lender
which are reasonably convenient to Lender and Borrowers. Each Borrower
recognizes that if it fails to perform, observe or discharge any of its
obligations or liabilities under this Loan Agreement or the Other Agreements, no
remedy of law will provide adequate relief to Lender, and each Borrower agrees
that Lender shall be entitled to temporary and permanent injunctive relief in
any such case without the necessity of proving actual damages.
11.6 NOTICE OF SALE. Any notice required to be given by Lender of a
sale, lease or other disposition of the Collateral or any other intended action
by Lender, if provided not less than ten (10) days prior to such proposed
action, shall constitute commercially reasonable and fair notice to Borrowers
thereof.
11.7 POSTPONEMENT OF SALE. Each Borrower agrees that Lender may, if
Lender deems it reasonable, postpone or adjourn any such sale of the Collateral
from time to time by an announcement at the time and place of sale, without
being required to give a new notice of sale. Further, each Borrower agrees that
Lender has no obligation to preserve rights against prior parties to the
Collateral.
12. GENERAL
12.1 BANK ACCOUNTS. Borrowers shall keep and maintain all of their
checking, depository and other bank accounts with Lender or with such other
financial institutions consented to in writing by Lender in its discretion
except for convenience accounts in locations outside of Chicago, Illinois. If
Lender consents to the establishment of bank accounts with another financial
institution, Borrower shall take all actions, and cause such other financial
institutions to take all actions, requested by Lender to grant to Lender a first
position priority security interest in such bank accounts and the funds held
therein.
12.2 APPLICATION OF PAYMENTS. Each Borrower waives the right to
direct the application of any and all payments at any time or times hereafter
received by Lender on account of the Liabilities and each Borrower agrees that
Lender shall have the continuing exclusive right to apply and re-apply any
40
and all such payments in such manner and in such order as Lender may deem
advisable, including, without limitation, to the payment of any costs, fees and
expenses payable by Borrowers under this Loan Agreement, notwithstanding any
entry by Lender upon any of its books and records.
12.3 ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS. Each
Borrower represents, warrants and covenants unto Lender that (A) all
representations and warranties of Borrowers contained in this Loan Agreement and
the Other Agreements shall be true at the time of Borrowers' execution of this
Loan Agreement and the Other Agreements, shall survive the execution, delivery
and acceptance thereof by the parties thereto and the closing of the
transactions described therein and shall be true as of the date of each
borrowing under this Loan Agreement, and (B) Borrowers shall fully and timely
comply and maintain all covenants set forth in this Loan Agreement and the Other
Agreements.
12.4 MODIFICATION AND ASSIGNMENT OF LOAN DOCUMENTS. This Loan
Agreement and the Other Agreements may not be modified, altered or amended,
except by an agreement in writing signed by Borrowers and Lender. Borrowers may
not sell, assign or transfer this Loan Agreement or the Other Agreements or any
portion thereof, including, without limitation, Borrowers' rights, titles,
interests, remedies, powers or duties thereunder. Each Borrower hereby consents
to Lender's sale, assignment, grant of participations, transfer or other
disposition, at any time and from time to time hereafter, of this Loan Agreement
and the Other Agreements or of any portion thereof, including, without
limitation, Lender's rights, titles, interests, remedies, powers or duties.
12.5 WAIVER OF DEFAULTS. Lender's failure at any time or times
hereafter to require strict performance by Borrowers of any provision of this
Loan Agreement shall not waive, affect or diminish any right of Lender
thereafter to demand strict compliance and performance therewith. Any suspension
or waiver by Lender of an Unmatured Event of Default or Event of Default by
Borrowers under this Loan Agreement or the Other Agreements shall not suspend,
waive or affect any other Unmatured Event of Default or Event of Default by
Borrowers under this Loan Agreement or the Other Agreements, whether the same is
prior or subsequent thereto and whether of the same or of a different type. NONE
OF THE UNDERTAKINGS, AGREEMENTS, WARRANTIES, COVENANTS AND REPRESENTATIONS OF
BORROWERS CONTAINED IN THIS LOAN AGREEMENT OR THE OTHER AGREEMENTS AND NO EVENT
OF DEFAULT BY BORROWERS UNDER THIS LOAN AGREEMENT OR THE OTHER AGREEMENTS SHALL
BE DEEMED TO HAVE BEEN SUSPENDED OR WAIVED BY LENDER UNLESS SUCH SUSPENSION OR
WAIVER IS IN WRITING SIGNED BY AN OFFICER OF LENDER AND DIRECTED TO BORROWERS
SPECIFYING SUCH SUSPENSION OR WAIVER.
12.6 SEVERABILITY. Wherever possible, each provision of this Loan
Agreement shall be interpreted in such manner as to be valid and enforceable
under applicable law, but if any provision of this Loan Agreement is held to be
invalid or unenforceable by a court of competent jurisdiction, such provision
shall be severed herefrom and such invalidity or unenforceability shall not
affect any other provision of this Loan Agreement, the balance of which shall
remain in and have its intended full force and effect. Provided, however, if
such provision may be modified so as to be valid and enforceable as a matter of
law, such provision shall be deemed to be modified so as to be valid and
enforceable to the maximum extent permitted by law.
12.7 SUCCESSORS AND ASSIGNS. This Loan Agreement and the Other
Agreements shall be binding on each Borrower and upon the successors of each
Borrower, and shall inure to the benefit of Lender, its successors, assigns,
affiliates, divisions and parents and may be assigned by Lender without notice
to Borrowers. This provision, however, shall not be deemed to modify Section
12.4 hereof.
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12.8 INCORPORATION OF OTHER AGREEMENTS; EXHIBITS; AND SCHEDULES.
The terms and provisions of the Other Agreements are incorporated herein by this
reference thereto. The Exhibits and Schedules referred to herein are attached
hereto, made a part hereof and incorporated herein by this reference thereto.
12.9 SURVIVAL OF TERMINATION. Except as otherwise provided in this
Loan Agreement or the Other Agreements, no termination or cancellation of this
Loan Agreement or the Other Agreements shall in any way affect or impair the
powers, obligations, duties, rights and liabilities of Borrowers or Lender in
any way or respect relating to (A) any transaction or event occurring prior to
such termination or cancellation, (B) the Collateral, or (C) any of the
undertakings, agreements, covenants, warranties and representations of Borrowers
contained in this Loan Agreement or the Other Agreements. All such undertakings,
agreements, representations, warranties and covenants shall survive such
termination or cancellation.
12.10 WAIVER OF NOTICES. Except as otherwise expressly provided
herein, each Borrower waives any and all notices or demands which such Borrower
might be entitled to receive with respect to this Loan Agreement or the Other
Agreements by virtue of any applicable law, statute or regulation, and waives
presentment, demand, protest, notice, default, dishonor, non-payment, maturity,
release, compromise, settlement, extension or renewal of any or all commercial
paper, Accounts, contract rights, Documents, Instruments, Chattel Paper and
guaranties at any time held by Lender on which Borrowers may in any way be
liable, and hereby ratifies and confirms whatever Lender may do in this regard.
12.11 AUTHORITY TO EXECUTE AND BORROW. Until Lender is notified by
Borrowers to the contrary, the signature upon this Loan Agreement or upon any of
the Other Agreements of (A) a Designated Person, or (B) any other Person
designated in writing to Lender by any of the foregoing, shall bind all
Borrowers and be deemed to be the duly authorized act of all Borrowers. Each
Designated Person shall have the authority to Borrow funds on behalf of all
Borrowers pursuant to the terms of this Loan Agreement.
12.12 COSTS, FEES AND EXPENSES. Borrowers shall reimburse Lender for
all costs, fees and expenses incurred by Lender, or for which Lender becomes
obligated, whether before or after the occurrence of an Unmatured Event of
Default or Event of Default, in connection with the negotiation, preparation,
administration, enforcement and conclusion of this Loan Agreement and the Other
Agreements, including, but not limited to, reasonable attorneys' and paralegals'
fees, costs and expenses, other reasonable professional fees, search fees, costs
and expenses, filing and recording fees, all taxes payable in connection with
this Loan Agreement or the Other Agreements, and any reasonable costs and fees
incurred in connection with any proceeding to protect, collect, sell, liquidate
or otherwise dispose of any of the Collateral. Borrowers shall further reimburse
Lender, upon demand, for the reasonable costs, fees and expenses incurred or
charged by Lender, its agents or employees, with respect to audits or other
business analysis performed in the administration of this Loan Agreement, plus
all of the reasonable out-of-pocket costs or expenses incurred by Lender in the
performance of such audit or analysis. All such costs, fees and expenses
referenced in this Section shall be part of the Liabilities payable by Borrowers
to Lender upon demand with interest at the Default Rate until actually paid.
Without limiting the generality of the foregoing, such costs and expenses shall
include the fees, expenses and charges of attorneys, paralegals, accountants,
investment bankers, appraisers, valuation and other specialists, experts, expert
witnesses, auctioneers, court reporters, telegram, management consultants, telex
and telefax charges, overnight delivery services, messenger services and
expenses for travel, lodging and meals.
42
12.13 BINDING AGREEMENT; GOVERNING LAW. This Loan Agreement and the
Other Agreements are submitted by Borrowers to Lender, for Lender's acceptance
or rejection thereof, at Lender's office in Chicago, Illinois, as an offer by
Borrowers to borrow monies from Lender and shall not be binding upon Lender or
become effective until and unless accepted by Lender, in writing, at said place
of business. THIS LOAN AGREEMENT AND THE OTHER AGREEMENTS SHALL BE INTERPRETED,
CONSTRUED AND GOVERNED BY AND UNDER THE LAWS OF THE STATE OF ILLINOIS AS TO
INTERPRETATION, ENFORCEMENT, VALIDITY, CONSTRUCTION, EFFECT, AND IN ALL OTHER
RESPECTS INCLUDING, BUT NOT LIMITED TO, THE LEGALITY OF THE INTEREST RATE AND
OTHER CHARGES, BUT EXCLUDING ILLINOIS' CHOICE OF LAW PROVISIONS.
12.14 NOTICES. Any and all notices, demands, requests, consents,
designations, waivers and other communications required or desired hereunder
shall be in writing and shall be deemed effective upon personal delivery, upon
confirmed facsimile transmission, upon receipted delivery by reputable overnight
carrier, or three (3) days after mailing if mailed by registered or certified
mail, return receipt requested, postage prepaid, to Borrowers or Lender at the
following addresses or facsimile numbers or such other addresses and facsimile
numbers as Borrowers or Lender may specify in like manner; provided, however,
that notices of a change of address or facsimile number shall be effective only
upon receipt thereof.
If to Borrowers, then to: If to Lender, then to:
Vita Food Products, Inc. LaSalle Bank National Association
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Attention: ▇▇. ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Virginia Honey Company, Inc. With a copy to:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ FagelHaber LLC
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. Des ▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
The Halifax Group, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Vita Specialty Foods, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
43
with a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
Much Shelist Freed ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ - Telephone Number
(▇▇▇) ▇▇▇-▇▇▇▇ - Facsimile Number
12.15 RELEASE OF CLAIMS. Excepting only causes of action or claims
for Lender's willful misconduct, each Borrower hereby releases Lender from any
and all causes of action or claims which Borrowers may now or hereafter have for
any asserted loss or damage to any Borrower caused by or arising from: (A) any
failure of Lender to protect, enforce or collect in whole or in part any of the
Collateral; (B) Lender's notification to any Account Debtor of Lender 's
security interest and lien in the Accounts and Special Collateral; (C) Lender
directing any Account Debtor to pay any sums owing to any Borrower directly to
Lender; and (D) any other act or omission to act on the part of Lender, its
officers, agents or employees.
12.16 CAPITAL ADEQUACY CHARGE. In the event that Lender shall have
determined that the adoption of any law, rule or regulation regarding capital
adequacy, or any change therein or in the interpretation or application thereof
or compliance by Lender with any directive regarding capital adequacy (whether
or not having the force of law) from any central bank or governmental authority
does or shall have the 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 Lender's policies with respect to capital adequacy) by an amount
deemed by Lender, in its sole discretion, to be material, then from time to
time, after submission by Lender to Borrowers of a written demand therefor,
Borrowers shall pay to Lender such additional amount or amounts as will
compensate Lender for such reduction. A certificate of Lender claiming
entitlement to payment as set forth above shall be conclusive in the absence of
manifest error. Such certificate shall set forth the nature of the occurrence
giving rise to such payment, the additional amount or amounts to be paid to
Lender, and the method by which such amounts were determined. In determining
such amount, Lender may use any reasonable averaging and attribution method.
12.17 HEADINGS. The captions contained in this Loan Agreement are
inserted only as a matter of convenience and shall in no way define, limit or
extend the scope or intent of this Loan Agreement or any provision of this Loan
Agreement, and shall not affect the construction or interpretation of this Loan
Agreement.
12.18 MAXIMUM INTEREST. It is the intent of Borrowers and Lender
that the rate of interest and the other charges of Borrowers under this Loan
Agreement shall be lawful; therefore, if for any reason, the interest or other
charges payable under this Loan Agreement are found by a court of competent
jurisdiction to exceed the limit which Lender may lawfully charge Borrowers,
then the obligation to pay interest and other charges shall automatically be
reduced to such limits. If Borrowers have paid an amount in excess of such
limit, then such amount shall be applied to reduce the principal portion of the
Liabilities.
12.19 CONSTRUCTION. Any provision of this Loan Agreement which
requires a party to perform any act shall be construed as requiring the party to
perform the act or cause such act to be performed. Any provision of this Loan
Agreement which requires a party to refrain from taking any act shall be
44
construed as requiring the party to refrain from taking the act, to refrain from
causing such act to be taken and to cause those under his/her control from
taking the act. Wherever the term "including" is used, the same shall be deemed
to mean, "including, but not limited to". "Any" shall be deemed to mean "any and
all " whenever applicable. The singular shall be deemed to include the plural,
and the plural shall be deemed to include the singular. The masculine pronoun
shall be deemed to include the feminine and neuter pronouns, and vice versa.
"Copies" means photostatic or other reproduced originals which accurately,
truly, correctly and completely present the original of the document copied.
References to "this Loan Agreement" shall mean this Loan Agreement as amended
from time to time.
12.20 REVIVAL OF LIABILITIES. To the extent that Lender receives any
payment on account of the Liabilities, or any proceeds of the Collateral are
applied on account of the Liabilities, and any such payment or proceeds or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid by Lender to any Borrower, its
estate, trustee, receiver or any other party under the United States Bankruptcy
Code or any similar federal, state or local law, statute or regulation, then, to
the extent of such payment or proceeds received, the Liabilities shall be
revived and continue in full force and effect, as if such payment or proceeds
had not been received by Lender and applied on account of the Liabilities.
12.21 GENERAL INDEMNITY. In addition to the payment of expenses
pursuant to Section 12.12, whether or not the transactions contemplated hereby
shall be consummated, Borrowers agree to jointly and severally indemnify, pay
and hold Lender and its successors and assigns and the officers, directors,
employees, agents, and affiliates of Lender and its successors and assigns
(collectively the "Indemnitees"), harmless from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever
(including, without limitation, the reasonable fees and disbursements of counsel
for any of such Indemnitees in connection with any investigative, administrative
or judicial proceeding commenced or threatened, whether or not any of such
Indemnitees shall be designated a party thereto) that may be imposed on,
incurred by, or asserted against any Indemnitee in any manner relating to or
arising out of the Loan Documents or any other agreements executed and delivered
by any Borrower or any guarantor of the Liabilities in connection herewith, the
statements contained in any commitment or proposal letter delivered by Lender,
Lender's agreement to make the Loans or the use or intended use of the proceeds
of any of the Loans hereunder (collectively the "Indemnified Liabilities");
provided that Borrowers shall have no obligation to an Indemnitee hereunder with
respect to Indemnified Liabilities arising from the gross negligence or willful
misconduct of such Indemnitee. To the extent that the undertaking to indemnify,
pay and hold harmless set forth in the preceding sentence may be unenforceable
because it is violative of any law or public policy, Borrowers shall contribute
the maximum portion that it is permitted to pay and satisfy under applicable law
to the payment and satisfaction of all Indemnified Liabilities incurred by the
Indemnitees or any of them. The provisions of the undertakings and
indemnification set out in this Section shall survive satisfaction and payment
of the Liabilities and termination of this Loan Agreement.
12.22 ENVIRONMENTAL AND SAFETY AND HEALTH INDEMNITY. Each Borrower
hereby jointly and severally agrees to indemnify Lender and agrees to hold
Lender and its predecessors and successors in interest, and its affiliates,
employees, agents, directors and officers harmless from and against any and all
losses, liabilities, damages, injuries, costs, expenses and claims of any and
every kind whatsoever (including, without limitation, court costs, reasonable
consulting fees, costs of investigation and reasonable attorneys' fees) which at
any time or from time to time may be paid, incurred or suffered by, or asserted
against, Lender for, with respect to, or as a direct or indirect result of (A)
the violation or alleged violation by Borrowers or any of their predecessors in
interest of any Environmental Laws regarding past, present or future property or
operations; (B) the presence on or under, or the release
45
from, at or to, properties utilized by Borrowers and/or any predecessor in
interest of any Hazardous Substances; (C) the existence of any unsafe or
unhealthful condition on or at any premises utilized by Borrowers or any
predecessor in interest in the past, present or future; (D) transport,
treatment, recycling, storage, disposal, or release or threatened release, or
arrangement therefor, to, at or from any facility owned or operated by another
Person, of any Hazardous Substances generated by Borrowers or their predecessors
in interest; (E) any remedial action or corrective action arising out of,
related to, or in connection with any past, present or future property or
operations of Borrowers or any of their predecessors in interest; (F)
asbestos-containing material, in or at any past, present or future property of
Borrowers or any of their predecessors in interest; (G) failure to comply with
any representations, warranties, covenants, terms or conditions of this Loan
Agreement that relate to Environmental Laws or Hazardous Substances; and (H) any
environmental, health or safety investigation or review conducted by or on
behalf of Lender in connection with this Loan Agreement; provided that Borrowers
shall have no obligation to Lender hereunder with respect to any such
liabilities arising from the gross negligence or willful misconduct of Lender.
The provisions of and undertakings and indemnification set out in this Section
shall survive satisfaction and payment of the Liabilities and termination of
this Loan Agreement and shall expressly cover time periods when Lender may have
come into possession or control of any of the property of Borrowers at any time
thereafter.
12.23 COMPLETION OF LOAN AGREEMENT AND OTHER AGREEMENTS. Borrowers
hereby authorize Lender to correct any patent errors set forth in this Loan
Agreement and the Other Agreements and to complete all blanks in this Loan
Agreement and the Other Agreements.
12.24 JOINT AND SEVERAL LIABILITY. All references to Borrowers shall
mean Vita Food, Virginia Honey, Halifax and Specialty Foods, both individually
and collectively, and jointly and severally, and all representations,
warranties, duties, covenants, agreements and obligations of Borrowers shall be
the individual and collective representations, warranties, duties, covenants,
agreements and obligations of Vita Food, Virginia Honey, Halifax and Specialty
Foods.
12.25 DISCLOSURE OF INFORMATION. Borrowers agree that Lender may
provide any information Lender may have about Borrowers or about any matter
relating to this Loan Agreement, the Other Agreements and all or any portion of
the Liabilities to Lender's subsidiaries or affiliates or their successors, or
to any one or more purchasers or potential purchasers of this Loan Agreement,
the Other Agreements and all or any portion of the Liabilities.
12.26 MERGER CLAUSE. This Loan Agreement constitutes the entire
agreement between Lender and Borrowers with regard to the subject matter hereof,
and supersedes all prior and contemporaneous communications, agreements and
assurances, whether verbal or written.
12.27 SERVICE OF PROCESS. EACH BORROWER HEREBY WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY
BE MADE BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO THE BORROWERS
AS SET FORTH HEREIN IN THE MANNER PROVIDED BY APPLICABLE STATUTE, LAW, RULE OF
COURT OR OTHERWISE.
12.28 JURISDICTION; VENUE. BORROWERS AND LENDER IRREVOCABLY AGREE,
AND HEREBY CONSENT AND SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE CIRCUIT
COURT OF ▇▇▇▇ COUNTY, ILLINOIS, AND THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS, EASTERN DIVISION, WITH REGARD TO ANY ACTIONS OR
PROCEEDINGS ARISING FROM, RELATING TO OR IN CONNECTION WITH THE LIABILITIES,
THIS LOAN AGREEMENT, THE OTHER
46
AGREEMENTS OR THE COLLATERAL. BORROWERS HEREBY WAIVE ANY RIGHT BORROWERS MAY
HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION FILED IN THE CIRCUIT
COURT OF ▇▇▇▇ COUNTY, ILLINOIS, OR THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS, EASTERN DIVISION.
12.29 JURY WAIVER. EACH BORROWER AND LENDER HEREBY VOLUNTARILY,
KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT OR
OTHERWISE) BETWEEN OR AMONG ALL OR ANY BORROWERS AND LENDER ARISING OUT OF OR IN
ANY WAY RELATED TO THIS LOAN AGREEMENT OR ANY OF THE OTHER AGREEMENTS. THIS
PROVISION IS A MATERIAL INDUCEMENT TO LENDER TO PROVIDE THE FINANCING DESCRIBED
HEREIN AND IN THE OTHER AGREEMENTS. EACH BORROWER HEREBY REPRESENTS AND WARRANTS
TO LENDER THAT IT HAS CONSULTED WITH AND BEEN COUNSELED BY COMPETENT COUNSEL
CONCERNING THE WAIVER SET FORTH IN THIS SECTION AND HAS KNOWINGLY MADE SUCH
WAIVER.
[signature page follows]
47
IN WITNESS WHEREOF, Lender and Borrowers have caused this Loan
Agreement to be executed and delivered by their duly authorized officers as of
the date first set forth above.
LASALLE BANK NATIONAL ASSOCIATION, VITA FOOD PRODUCTS, INC.,
a national banking association a Nevada corporation
By: /s/ ▇▇▇▇▇ ▇'▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
Name: ▇▇▇▇▇ ▇'▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Senior Vice President Title: President
VIRGINIA HONEY COMPANY, INC.,
a Virginia corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: President
THE HALIFAX GROUP, INC.,
a Georgia corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chairman
VITA SPECIALTY FOODS, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chairman
48
SCHEDULE 1.1
PERMITTED LIENS
VITA FOOD PRODUCTS, INC.
1. Debtor: Vita Food Products, Inc.
Secured Party: American National Bank
File: # ▇▇▇▇▇▇▇
Date: 12/30/98
Jurisdiction: SOS Illinois
Collateral: Sonic Blower
2. Debtor: Vita Food Products, Inc.
Secured Party: American National Bank
File: # ▇▇▇▇▇▇▇
Date: 01/12/98
Jurisdiction: SOS Illinois
Collateral: Labeling Machine
3. Debtor: Vita Food Products, Inc.
Secured Party: Citicorp Del Lease, Inc.
File: # 4136773
Date: 12/28/99
Jurisdiction: SOS Illinois
Collateral: Specific equipment
4. Debtor: Vita Food Products, Inc.
Secured Party: Citicorp Del Lease, Inc.
File: # 4181632
Date: 03/30/00
Jurisdiction: SOS Illinois
Collateral: Specific Equipment
5. Debtor: Vita Food Products, Inc.
Secured Party: Citicorp Del Lease, Inc.
File: # 4181634
Date: 03/30/00
Jurisdiction: SOS Illinois
Collateral: Specific equipment
VITA SPECIALTY FOODS, INC.
None
THE HALIFAX GROUP, INC.
1. Debtor: The Halifax Group, Inc.
Secured Party: Citicorp Del Lease, Inc.
49
File: # ▇▇▇-▇▇▇▇-▇▇▇▇▇▇
Date: 11/07/00
Jurisdiction: DeKalb County, Georgia
Collateral: Specific equipment
VIRGINIA HONEY COMPANY, INC.
1. Debtor: Virginia Honey Company, Inc.
Secured Party: China Products North America, Inc.
File: # 0105307085
Date: 05/30/01
Jurisdiction: State Corporate Commission, Virginia
Collateral: ▇▇▇▇▇▇ of honey
2. Debtor: Virginia Honey Company, Inc.
Secured Party: China Products North America, Inc.
File: # 6478
Date: 05/30/01
Jurisdiction: ▇▇▇▇▇▇ County, Virginia
Collateral: ▇▇▇▇▇▇ of honey
50
SCHEDULE 2.3
REQUEST FOR ADVANCE AT OR CONVERSION TO THE LIBOR RATE
LaSalle Bank National Association
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇
Dear ▇▇. ▇'▇▇▇▇:
________________________ [Indicate which Borrower] ("Borrower"),
requests (select one):
_______ an advance at the LIBOR Rate plus the Revolving Loan LIBOR Rate Margin
or Term Loan LIBOR Rate Margin, or
_______ a conversion of all or a portion of the __________________________
[insert Revolving Loan, Term Loan A or Term Loan B] to the LIBOR Rate plus the
Revolving Loan LIBOR Rate Margin or Term Loan LIBOR Rate Margin, as the case may
be,
as set forth in the "Loan Agreement" (hereinafter defined) pursuant to the terms
and provisions of that certain Loan and Security Agreement dated as of August
__, 2003, by and among LaSalle Bank National Association, a national banking
association ("Lender"), Vita Food Products, Inc., a Nevada corporation ("Vita
Food"), Virginia Honey Company, Inc., a Virginia corporation ("Virginia Honey"),
The Halifax Group, Inc., a Georgia corporation ("Halifax"), and Vita Specialty
Foods, Inc., a Delaware corporation ("Specialty Foods") (Vita Food, Virginia
Honey, Halifax and Specialty Foods are individually a "Borrower" and
collectively the "Borrowers") (as amended or restated from time to time, the
"Loan Agreement").
AMOUNT OF REQUESTED ADVANCE OR CONVERSION: $___________, but in no event less
than Five Hundred Thousand and no/100 Dollars ($500,000.00), with increments of
One Hundred Thousand and no/100 Dollars ($100,000.00) thereafter.
INTEREST PERIOD (30, 60 OR 90 DAYS): ______
DATE OF PROPOSED BORROWING: __________, _____.
Borrower hereby acknowledges and agrees that (a) no Unmatured Event of
Default or Event of Default has occurred under the terms and provisions of the
Loan Agreement, and (b) there are not more than five (5) outstanding LIBOR
Loans, including the LIBOR Loan requested herein. Borrower hereby affirms,
confirms and ratifies all of the terms and provisions contained in the Loan
Agreement.
Capitalized terms used but not otherwise defined herein shall have the
meanings ascribed to them in the Loan Agreement.
_________________________________
By: ___________________________
Name: ___________________________
Title:___________________________
51
SCHEDULE 4.1
COMMERCIAL TORT CLAIMS
None.
52
SCHEDULE 4.4
CHIEF EXECUTIVE OFFICE AND COLLATERAL LOCATIONS
I. VITA FOOD PRODUCTS, INC.
Executive Office:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Other Collateral Locations:
▇▇▇▇▇▇ Co., Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Richwill Warehouse
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ashland Cold Storage Co.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Cold Ocean (Barry's Ltd.)
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇ Market Cold Storage
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Sau Sea Foods c/o Neptune Fisheries
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Level Valley Dairy
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Greylawn Coastal Refrigeration
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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Preferred Freezer Service South Florida
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▇▇▇▇▇▇ Cold Storage
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▇. ▇. ▇▇▇▇▇ Co.
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Fidelity Container Corp.
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Winchester Cold Storage
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Hammersmith, Inc.
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II. VIRGINIA HONEY COMPANY, INC.
Executive Office:
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Other Collateral Locations:
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(See warehouses listed in I above.)
III. THEHALIFAX GROUP, INC.
Executive Office:
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Other Collateral Locations:
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54
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(See warehouses listed in I above.)
IV. VITA SPECIALTY FOODS, INC.
Executive Office:
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Other Collateral Locations: None.
55
SCHEDULE 4.11
REAL PROPERTY OWNED BY BORROWERS
I. VITA FOOD PRODUCTS, INC.
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II. VIRGINIA HONEY COMPANY, INC.
None
III. THE HALIFAX GROUP, INC.
None
IV. VITA SPECIALTY FOODS, INC.
None
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SCHEDULE 9.1(Q)
BORROWERS AND ITS SUBSIDIARIES' CORPORATE INFORMATION;
I. VITA FOOD PRODUCTS, INC.
(1) Subsidiaries: Vita Specialty Foods, Inc., a Delaware corporation
(100% owned)
(2) No corporate Affiliates other than other Borrowers.
(3) 10,000,000 shares of common stock and 1,000,000 shares of preferred
stock authorized, 3,785,022 shares of common stock and no shares of
preferred stock issued and outstanding as of June 30, 2003
II. VIRGINIA HONEY COMPANY, INC.
(1) No subsidiaries.
(2) No corporate Affiliates other than other Borrowers.
(3) 5,000 shares capital stock authorized, 1 share issued and
outstanding
III. THE HALIFAX GROUP, INC.
(1) No subsidiaries.
(2) No corporate Affiliates other than other Borrowers.
(3) 1,000 shares common stock authorized, 100 shares issued and
outstanding
IV. VITA SPECIALTY FOODS, INC.
(1) Subsidiaries: Virginia Honey Company, Inc., a Virginia corporation,
and The Halifax Group, Inc., a Georgia corporation (each 100% owned)
(2) No corporate Affiliates other than other Borrowers.
(3) 1,000 shares common stock authorized, 100 shares issued and
outstanding
57
SCHEDULE 9.1(S)
LABOR RELATIONS
Borrower is party to a three-year Collective Bargaining Agreement with the Food
Workers Union relating to non-management plant employees at its Chicago plant
entered into in June 2003.
Doc ID: 326502.7
58