LOAN & SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY
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OBLIGOR # NOTE # AGREEMENT DATE
June 12, 2003
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CREDIT LIMIT INTEREST RATE OFFICER NO./INITIALS
$7,000,000 Base Rate + 0%/ LIBOR + 2.25 49571 / MN
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THIS AGREEMENT is entered into as of June 12, 2003, between COMERICA
BANK-CALIFORNIA ("Bank") as secured party, whose Western Division headquarters
office is ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ and SPECTRUM ORGANIC
PRODUCTS, INC., a California corporation ("Borrower"), whose sole place of
business (if it has only one), chief executive office (if it has more than one
place of business) or residence (if an individual) is located at the address set
forth below its name on the signature page to this Agreement. The parties agree
as follows:
1. DEFINITIONS.
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1.1 "Accounts" shall mean and includes all presently existing and hereafter
arising accounts, including without limitation all accounts receivable, contract
rights and other forms of right to payment for monetary obligations or
receivables for property sold or to be sold, leased, licensed, assigned or
otherwise disposed of, or for services rendered or to be rendered (including
without limitation all health-care-insurance receivables) owing to Borrower, and
any supporting obligations, credit insurance, guaranties or security therefor,
irrespective of whether earned by performance.
1.2 "Affiliate" shall mean, as applied to any Person, any other Person who,
directly or indirectly, controls, is controlled by, is under common control
with, or is a director or officer of such Person. For purposes of this
definition, "control" means the possession, directly or indirectly, of the power
to vote 5% or more of the Stock having ordinary voting power for the election of
directors (or comparable managers) or the direct or indirect power to direct the
management and policies of a Person.
1.3 "Agreement" shall mean and includes this Loan and Security Agreement
(Accounts and Inventory), any concurrent or subsequent rider to this Loan and
Security Agreement (Accounts and Inventory) and any extensions, supplements,
amendments or modifications to this Loan and Security Agreement (Accounts and
Inventory) and/or to any such rider.
1.4 "Bank Expenses" shall mean and includes: all costs or expenses required
to be paid by Borrower under this Agreement which are paid or advanced by Bank;
taxes and insurance premiums of every nature and kind of Borrower paid by Bank;
filing, recording, publication and search fees, appraiser fees, auditor fees and
costs, and title insurance premiums paid or incurred by Bank in connection with
Bank's transactions with Borrower; costs and expenses incurred by Bank in
collecting the Accounts (with or without suit) to correct any default or enforce
any provision of this Agreement, or in gaining possession of, maintaining,
handling, preserving, storing, shipping, selling, disposing of, preparing for
sale and/or advertising to sell the Collateral, whether or not a sale is
consummated; costs and expenses of suit incurred by Bank in enforcing or
defending this Agreement or any portion hereof, including, but not limited to,
expenses incurred by Bank in attempting to obtain relief from any stay,
restraining order, injunction or similar process which prohibits Bank from
exercising any of its rights or remedies; and reasonable attorneys' fees and
expenses incurred by Bank in advising, structuring, drafting, reviewing,
amending, terminating, enforcing, defending or concerning this Agreement, or any
portion hereof or any agreement related hereto, whether or not suit is brought.
Bank Expenses shall include Bank's in-house legal charges at reasonable rates.
1.5 "Base Rate" shall mean that variable rate of interest so announced by
Bank at its headquarters office in Detroit, Michigan as its "Base Rate" from
time to time and which serves as the basis upon which effective rates of
interest are calculated for those loans making reference thereto.
1.6 "Borrower's Books" shall mean and includes all of Borrower's books and
records including but not limited to minute books; ledgers; records indicating,
summarizing or evidencing Borrower's assets (including, without limitation, the
Accounts), liabilities, business operations or financial condition, and all
information relating thereto, computer programs; computer disk or tape files;
computer printouts; computer runs; and other computer prepared information and
equipment of any kind.
1.7 "Borrowing Base" shall mean the sum of: (1) eighty percent (80%) of the
net amount of Eligible Accounts after deducting therefrom all payments,
adjustments and credits applicable thereto; and (2) the lesser of (i) sixty
percent (60%) of the net amount of Eligible Inventory after deducting therefrom
all applicable Growers' Payables incurred in connection with the acquisition of
such Eligible Inventory and after all adjustments for age and seasonality or
other factors affecting the value of such Inventory, or (ii) One Million Five
Hundred Thousand Dollars ($1,500,000) in excess of the aggregate amount of all
outstanding Indebtedness consisting of that portion of the Credit advanced to
Borrower on the basis of Eligible Accounts. Anything contained in the foregoing
LOAN & SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
to the contrary notwithstanding, that at all times that the aggregate amount of
all Dilution (as calculated by Bank on the basis of Bank's most recent audit of
Borrower's Books conducted under Section 6.25 hereof), as a percentage of all
Accounts, is five percent (5%) or less, then the percentage of Eligible Accounts
that shall be included in the Borrowing Base shall be increased to eighty five
percent (85%) of the net amount of Eligible Accounts after deducting therefrom
all payments, adjustments and credits applicable thereto.
1.8 "Business Day" means any day that is not a Saturday, Sunday, or other
day on which national banks are authorized or required to close.
1.9 "Cash Flow" shall mean, for any applicable period of determination, the
Net Income (after deduction for income taxes and other taxes of such Person, or
its subsidiaries, determined by reference to income or profits of such Person,
or its subsidiaries) for such period, plus, to the extent deducted in
computation of such Net Income, the amount of depreciation and amortization
expense and the amount of deferred tax liability during such period, together
with such other non-cash expenses as are determined appropriate for inclusion in
the "Cash Flow" of such Person by Bank from time to time, in its sole
discretion, all as determined in accordance with GAAP.
1.10 "Cash Flow Coverage Ratio" shall mean the ratio, as of any applicable
period of determination, the ratio of Cash Flow to Current Maturities of Long
Term Indebtedness determined on the basis of the four fiscal quarters
immediately preceding the date of determination.
1.11 "Collateral" shall mean and includes all personal property of
Borrower, including without limitation each and all of the following: the
Accounts; the Inventory; the Equipment; the Farm Products, the General
Intangibles; the Negotiable Collateral; Borrower's Books; all Borrower's deposit
accounts; all Borrower's investment property (including without limitation
securities and securities entitlements); all goods, instruments, documents,
policies and certificates of insurance, deposits, money or other personal
property of Borrower in which Bank receives a security interest and which now or
later come into the possession, custody or control of Bank; all Borrower's
Equipment and fixtures; all additions, accessions, attachments, parts,
replacements, substitutions, renewals, interest, dividends, distributions or
rights of any kind for or with respect to any of the foregoing (including
without limitation any stock splits, stock rights, voting rights and
preferential rights); any supporting obligations for any of the foregoing; and
the products and proceeds of any of the foregoing, including, but not limited
to, proceeds of insurance covering the Collateral, and any and all Accounts,
General Intangibles, Negotiable Collateral, Inventory, Equipment, Farm Products,
money, deposit accounts, investment property, fixtures or other tangible and
intangible property of Borrower resulting from the sale or other disposition of
the Collateral and the proceeds thereof and any supporting obligations or
security therefor and any right to payment thereunder, and including, without
limitation, cash or other property which were proceeds and are recovered by a
bankruptcy trustee or otherwise as a preferential transfer by Borrower.
Notwithstanding anything to the contrary contained herein, Collateral shall not
include any waste or other materials which have been or may be designated as
toxic or hazardous by Bank.
1.12 "Credit" shall mean all Indebtedness, except that Indebtedness arising
pursuant to any other separate contract, instrument, note, or other separate
agreement which, by its terms, provides for a specified interest rate and term.
1.13 "Credit Limit" shall mean Seven Million Dollars ($7,000,000).
1.14 "Current Assets" shall mean, in respect of a Person and as of any
applicable date of determination, all current assets of such Person determined
in accordance with GAAP.
1.15 "Current Liabilities" shall mean, in respect of a Person and as of any
applicable date of determination, all liabilities of such Person that should be
classified as current in accordance with GAAP.
1.16 "Current Maturities of Long Term Indebtedness" shall mean, in respect
of a Person and as of any applicable date of determination thereof, that portion
of Long Term Indebtedness that should be classified as current in accordance
with GAAP.
1.17 "Current Ratio" shall mean, in respect of a Person and as of any
applicable date of determination, Current Assets divided by Current Liabilities.
1.18 "Daily Balance" shall mean the amount determined by taking the amount
of the Credit owed at the beginning of a given day, adding any new Credit
advanced or incurred on such date, and subtracting any payments or collections
which are deemed to be paid and are applied by Bank in reduction of the Credit
on that date under the provisions of this Agreement.
LOAN & SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
1.19 "Debt" shall mean, as of any applicable date of determination, all
items of indebtedness, obligation or liability of a Person, whether matured or
unmatured, liquidated or unliquidated, direct or indirect, absolute or
contingent, joint or several, that should be classified as liabilities in
accordance with GAAP. In the case of Borrower, the term "Debt" shall include,
without limitation, the Indebtedness.
1.20 "Dilution" shall mean, as of any applicable date of determination, all
amounts and circumstances which have or may result in a reduction to the amount
collected on the Accounts, includes but is not limited to all returns,
charge-backs, trade allowances, concentrations, slow pays, bad debts and other
similar factors.
1.21 "Eligible Accounts" shall mean and includes those Accounts of Borrower
which are due and payable within thirty (30) days, or less, from the date of
invoice, have been validly assigned to Bank and strictly comply with all of
Borrower's warranties and representations to Bank; but Eligible Accounts shall
not include the following: (a) Accounts with respect to which the account debtor
is an officer, employee, partner, joint venturer or agent of Borrower; (b)
Accounts with respect to which goods are placed on consignment, guaranteed sale
or other terms by reason of which the payment by the account debtor may be
conditional; (c) Accounts with respect to which the account debtor is not a
resident of the United States; (d) Accounts with respect to which the account
debtor is the United States or any department, agency or instrumentality of the
United States; (e) Accounts with respect to which the account debtor is any
State of the United States or any city, county, town, municipality or division
thereof; (f) Accounts with respect to which the account debtor is a Subsidiary
or an Affiliate of Borrower, provided, however, that with respect to any
Accounts due to Borrower from United Natural Food, Inc., the existence of any
common shareholders or a common directorship with Borrower shall not exclude any
such Accounts from the Eligible Accounts; (g) Accounts with respect to which
Borrower is or may become liable to the account debtor for goods sold or
services rendered by the account debtor to Borrower; (h) Accounts not paid by an
account debtor within ninety (90) days from the date of the invoice; (i)
Accounts with respect to which account debtors dispute liability or make any
claim, or have any defense, crossclaim, counterclaim, or offset (other than
Growers' Liens or Production Liens); (j) Accounts with respect to which any
Insolvency Proceeding is filed by or against the account debtor, or if an
account debtor becomes insolvent, fails or goes out of business; and (k)
Accounts owed by any single account debtor which exceed twenty percent (20%) of
all of the Eligible Accounts, provided, that with respect to Accounts due to
Borrower from United Natural Food, Inc., that portion in excess of fifty percent
(50%) of all Eligible Accounts shall be ineligible, and provided, further, that
with respect to Accounts due to Borrower from Tree of Life, Inc., that portion
in excess of thirty percent (30%) of all Eligible Accounts shall be ineligible;
and (I) Accounts with a particular account debtor on which over twenty-five
percent (25%) of the aggregate amount owing is greater than ninety (90) days
from the date of the invoice.
1.22 "Eligible Inventory" shall mean Borrower's raw materials and Farm
Products, packaging materials and all finished goods or processed Inventory, as
may be adjusted by Bank, in Bank's discretion, for age and seasonality or other
factors affecting the value of such Inventory or Farm Products (including
without limitation all private label goods), and that have been validly pledged
to Bank and strictly comply with all of Borrower's warranties and
representations to Bank; but Eligible Inventory shall not include the following:
(a) supplies; (b) raw materials or purchased parts not in saleable form; (c)
work in process; (d) Inventory or Farm Products consigned to sales
representatives or consigned to Borrower by a vendor; (e) obsolete, stale or
spoiled Inventory or Farm Products; (f) Inventory reserve amounts; (g) finished
goods with no/low liquidation value; (h) Inventory or Farm Products located or
stored with a bailee, warehouseman or other third party without Bank's prior
written consent and unless a bailment agreement in form and substance
satisfactory to Bank and any documents required in accordance with Section 6.5
of this Agreement are in place; (i) defective Inventory or Farm Products or
Inventory under repair; (j) Inventory or Farm Products not insured naming Bank
as loss payee; (k) Inventory or Farm Products not located at an address set
forth in Section 6.5 of this Agreement or any schedule provided in connection
therewith; and (l) all other Inventory or Farm Products deemed ineligible by
Bank.
1.23 "Equipment" shall mean and includes all of Borrower's machinery,
machine tools, apparatus, motors, equipment, fittings, furniture, furnishings,
fixtures, vehicles (including motor vehicles and trailers), tools, parts, goods
(including software imbedded in such goods) and other tangible personal property
(other than Inventory) of every kind and description used in Borrower's
operations or owned by Borrower or in which Borrower has an interest, whether
now owned or hereafter acquired by Borrower and wherever located, and all parts,
accessories, and special tools, and all increases and accessions thereto and
substitutions and replacements therefor.
1.24 "Event of Default" shall mean one or more of those events described in
Section 7 contained herein below.
LOAN & SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
1.25 "Farm Products" means any and all of any Debtor's farm products, as
such term is defined in Section 9-102 of the UCC.
1.26 "GAAP" shall mean, as of any applicable period, generally accepted
accounting principles in effect in the United States during such period.
1.27 "General Intangibles" shall mean and includes all of Borrower's
present and future general intangibles and other personal property (including
without limitation all payment intangibles, electronic chattel paper, contract
rights, rights arising under common law, statutes, or regulations, choses or
things in action, goodwill, patents, trade names, trademarks, servicemarks,
copyrights, blueprints, drawings, plans, diagrams, schematics, purchase orders,
customer lists, monies due or recoverable from pension funds, route lists,
rights to payment (including without limitation, rights to payment evidenced by
chattel paper, documents or instruments) and other rights under any royalty or
licensing agreements, infringement claims, software (including without
limitation any computer program that is embedded in goods that consist solely of
the medium in which the program is embedded), information contained on computer
disks or tapes, literature, reports, catalogs, insurance premium rebates, tax
refunds, and tax refund claims), other than goods, Accounts, Inventory,
Equipment, Farm Products, Negotiable Collateral, and Borrowers Books.
1.28 "Grower Payables" means the aggregate amount due from Borrower to any
other Person on account of any crops, produce, or other farm products supplied
by such Person to Borrower as to which crops, produce or other farm products
such Person has statutory lien rights.
1.29 "Growers' Liens" means statutory Liens securing the payment of amounts
due from Borrower to any other Person on account of any crops, produce or other
farm products supplied by such Person to Borrower, including but not limited to,
Liens in favor of growers arising pursuant to Article 9 (commencing with Section
55631), Chapter 6, Division 20 of the California Food and Agricultural Code, or
under the Perishable Agricultural Commodities Act (7 United States Code,
commencing with Section 499a-499t), in each case as now in effect or hereafter
amended.
1.30 "Indebtedness" shall mean and includes any and all loans, advances,
Letter of Credit Obligations, overdrafts, debts, liabilities (including, without
limitation, any and all amounts charged to Borrower's loan account pursuant to
any agreement authorizing Bank to charge Borrower's loan account), obligations,
lease payments, guaranties, covenants and duties owing by Borrower to Bank of
any kind and description whether advanced pursuant to or evidenced by this
Agreement; by any note or other Instrument; or by any other agreement between
Bank and Borrower and whether or not for the payment of money, whether direct or
indirect, absolute or contingent, due or to become due now existing or hereafter
arising, including, without limitation, any interest, fees, expenses, costs and
other amounts owed to Bank that but for the provisions of the United States
Bankruptcy Code would have accrued after the commencement of any Insolvency
Proceeding, and including, without limitation, any debt, liability, or
obligations owing from Borrower to others which Bank may have obtained by
assignment, participation, purchase or otherwise, and further including, without
limitation, all interest not paid when due and all Bank Expenses which Borrower
is required to pay or reimburse by this Agreement, by law, or otherwise.
1.31 "Insolvency Proceeding" shall mean and includes any proceeding or case
commenced by or against Borrower, or any guarantor of Borrower's Indebtedness,
or any of Borrower's account debtors, under any provisions of the Bankruptcy
Code, as amended, or any other bankruptcy or insolvency law, including, but not
limited to assignments for the benefit of creditors, formal or informal
moratoriums, composition or extensions with some or all creditors, any
proceeding seeking a reorganization, arrangement or any other relief under the
Bankruptcy Code, as amended, or any other bankruptcy or insolvency law.
1.32 "Inventory" shall mean and includes all present and future inventory
in which Borrower has any interest, including, but not limited to, goods held by
Borrower for sale or lease or to be furnished under a contract of service and
all of Borrower's present and future raw materials, work in process, finished
goods (including without limitation any computer program embedded in any of the
foregoing goods and any supporting information provided in connection therewith
that (i) is associated with the goods in such a manner that the program
customarily is considered part of the goods or that (ii) by becoming the owner
of the goods, a person acquires a right to use the program in connection with
the goods), together with any advertising materials and packing and shipping
materials, wherever located and any documents of title representing any of the
above, and any equipment, fixtures or other property used in the storing,
moving, preserving, identifying, accounting for and shipping or preparing for
the shipping of inventory, and any and all other items hereafter acquired by
Borrower by way of substitution, replacement, return, repossession or otherwise,
and all additions and accessions thereto, and the resulting product or mass, and
any documents of title respecting any of the above.
LOAN & SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
1.33 "Judicial Officer or Assignee" shall mean and includes any trustee,
receiver, controller, custodian, assignee for the benefit of creditors or any
other person or entity having powers or duties like or similar to the powers and
duties of trustee, receiver, controller, custodian or assignee for the benefit
of creditors.
1.34 "Letter of Credit Obligations" shall mean, as of any applicable date
of determination, the sum of the undrawn amount of any letter(s) of credit
issued by Bank upon the application of and/or for the account of Borrower, plus
any unpaid reimbursement obligations owing by Borrower to Bank in respect of any
such letter(s) of credit.
1.35 "Lien" means any interest in property securing an obligation owed to,
or a claim by, any Person other than the owner of the property, whether such
interest shall be based on the common law, statute, or contract, whether such
interest shall be recorded or perfected, and whether such interest shall be
contingent upon the occurrence of some future event or events or the existence
of some future circumstance or circumstances, including the lien or security
interest arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, security agreement, adverse
claim or charge, conditional sale or trust receipt, or from a lease,
consignment, or bailment for security purposes and also including reservations,
exceptions, encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases, and other title exceptions and encumbrances affecting real
property.
1.36 "Long Term Indebtedness" shall mean, in respect of a Person and as of
any applicable date of determination thereof, all Debt which should be
classified as "funded indebtedness" or "long term indebtedness" on a balance
sheet of such Person as of such date in accordance with GAAP.
1.37 "Material Adverse Change" shall mean a material adverse effect on: (a)
the business, prospects, operations, results of operations, assets, liabilities
or condition (financial or otherwise) of Borrower, or any Subsidiary or
Affiliate of Borrower (other than any director or officer of Borrower), or any
guarantor of the Indebtedness; (b) the ability of Borrower, or any Subsidiary or
Affiliate of Borrower, or any guarantor of the Indebtedness, to perform its
obligations under this Agreement or any other document, instrument or agreement
entered into in connection herewith to which it is a party or of Bank to enforce
the Indebtedness or realize upon the Collateral; (c) the value of the Collateral
or the amount that Bank would be likely to receive (after giving consideration
to delays in payment and costs of enforcement) in the liquidation of such
Collateral; (d) the validity or enforceability of this Agreement or any other
document, instrument or agreement entered into in connection herewith, or the
rights and remedies of Bank hereunder or thereunder; or (e) the priority of
Bank's liens with respect to the Collateral.
1.38 "Maturity Date" shall mean June 30, 2005.
1.39 "Net Income" shall mean the net income (or loss) of a person for any
period of determination, determined in accordance with GAAP but excluding in any
event:
a. any gains or losses on the sale or other disposition, not in the
ordinary course of business, of investments or fixed or capital assets, and
any taxes on the excluded gains and any tax deductions or credits on
account on any excluded losses; and
b. in the case of Borrower, net earnings of any Person in which Borrower
has an ownership interest, unless such net earnings shall have actually
been received by Borrower in the form of cash distributions.
1.40 "Negotiable Collateral" shall mean and include all of Borrower's
present and future letters of credit, advises of credit, letter-of-credit
rights, certificates of deposit, notes, drafts, money, documents (including
without limitation all negotiable documents), instruments (including without
limitation all promissory notes), tangible chattel paper or any other similar
property.
1.41 "Person" or "person" shall mean and includes any individual,
corporation, partnership, joint venture, firm, association, trust,
unincorporated association, joint stock company, government, municipality,
political subdivision or agency or other entity.
1.42 "Production Liens" means statutory liens securing the right of Persons
who have rendered services for the storage, protection, improvement,
safekeeping, carriage, alteration, repair, harvest or crushing of any Inventory
or Farm Products, including without limitation any grapes, and other related
liens including without limitation artisans and service liens under California
Civil Code Section 3051, thresher's liens under California Civil Code Section
3061, and harvesters liens under California Civil Code Section 3061.5.
LOAN & SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
1.43 "Permitted Indebtedness" means and includes all (a) Debt to trade
creditors incurred in the ordinary course of Borrower's business; (b)
Indebtedness of Borrower in favor of Bank arising under this Agreement, any
document, instrument or agreement entered into in connection herewith or
otherwise; (c) Debt existing on the date of this Agreement and disclosed in
Schedule 1.42; (d) operating facility leases entered into in the ordinary course
of Borrower's business; (e) Debt to any other Person secured by a lien described
in clause (c) of the defined term "Permitted Liens," provided such Debt does not
exceed the lesser of the cost or fair market value of the equipment financed
with such Debt; and (f) Subordinated Debt.
1.44 "Permitted Investments" means and includes all (a) (i) marketable
securities or other direct obligations issued or unconditionally guaranteed by
the United States government or its agencies maturing within one (1) year from
its acquisition, (ii) commercial paper maturing no more than 1 year after its
creation and having the highest rating from either Standard & Poor's Corporation
or ▇▇▇▇▇'▇ Investors Service, Inc., and (iii) certificates of deposit issued by
Bank or by any other United States commercial bank with capital, surplus and
undivided profits in excess of One Hundred Million Dollars ($100,000,000)
maturing no more than one (1) year after issue; (b) investments consisting of
the endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of Borrower's business; (c) loans, advances
or extensions of credit permitted by Section 6.7(k); (d) investments by Borrower
in the Stock of any Subsidiaries owned by Borrower on the date of this
Agreement; (e) investments (including debt obligations) received in connection
with the bankruptcy or reorganization of customers or suppliers and in
settlement of delinquent obligations of, and other disputes with, customers or
suppliers arising in the ordinary course of business; (f) investments consisting
of notes receivable of, or prepaid royalties and other credit extensions, to
customers and suppliers who are not Affiliates, in the ordinary course of
business; provided that this paragraph (f) shall not apply to investments of
Borrower in any Subsidiary.
1.45 "Permitted Liens" means and includes any: (a) Liens existing on the
date of this Agreement and disclosed in Schedule 1.44 or arising under this
Agreement, any document, instrument or agreement entered into in connection
herewith or otherwise in favor of Bank; (b) Liens for taxes, fees, assessments
or other governmental charges or levies, either not delinquent or being
contested in good faith by appropriate proceedings, provided the same have no
priority over any of Bank's security interests; (c) Liens (i) upon or in any
equipment acquired or held by Borrower or any of its Subsidiaries to secure the
purchase price of such equipment or Debt incurred solely for the purpose of
financing the acquisition of such equipment, or (ii) existing on such equipment
at the time of its acquisition, provided that the Lien is confined solely to the
equipment so acquired and improvements and additions thereto, and the proceeds
of such equipment to the extent that the acquisition of such equipment is
otherwise permitted under this Agreement; (d) Liens incurred in connection with
the extension, renewal or refinancing of the Debt secured by Liens of the type
described in clauses (a) through (c) above, provided that any extension, renewal
or replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the Debt being extended, renewed or refinanced
does not increase, (e) Grower's Liens; and (f) Production Liens.
1.46 "Quick Assets" shall mean, as of any applicable date of determination,
unrestricted cash, certificates of deposit or marketable securities and net
accounts receivable arising from the sale of goods and services, and United
States government securities and/or claims against the United States government
of Borrower and its Subsidiaries.
1.47 "Quick Ratio" shall mean, as of an applicable date of determination,
Quick Assets divided by Current Liabilities, excluding Subordinated Debt.
1.48 "Stock" means all shares, options, warrants, interests,
participations, or other equivalents (regardless of how designated) of or in a
corporation or equivalent entity, whether voting or nonvoting, including common
stock, preferred stock, or any other "equity security" (as such term is defined
in Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under
the Exchange Act).
1.49 "Subordinated Debt" shall mean indebtedness of Borrower set forth on
Schedule 1.48 to this Agreement, attached hereto and incorporated herein by this
reference, as such may be modified, amended, supplemented or replaced from time
to time with the prior written consent of Bank which has been subordinated to
the Indebtedness pursuant to a subordination agreement in form and content
satisfactory to Bank, and each other Person that enters into any such
subordination agreement in favor of Bank from time after the date of this
Agreement.
LOAN & SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
1.50 "Subordination Agreement" shall mean a subordination agreement in form
satisfactory to Bank making all present and future indebtedness of Borrower to
each of the Persons set forth on Schedule 1.48 to this Agreement, attached
hereto and incorporated herein by this reference, as such may be modified,
amended, supplemented or replaced from time to time with the prior written
consent of Bank, and each other Person that enters into any such subordination
agreement in favor of Bank from time to time after the date of this Agreement,
subordinate to the Indebtedness.
1.51 "Subsidiary" of a Person means a corporation, partnership, limited
liability company, or other entity in which that Person directly or indirectly
owns or controls the shares of Stock having ordinary voting power to elect a
majority of the board of directors (or appoint other comparable managers) of
such corporation, partnership, limited liability company, or other entity.
1.52 "Tangible Effective Net Worth" shall mean, with respect to any Person
and as of any applicable date of determination, Tangible Net Worth plus
Subordinated Debt.
1.53 "Tangible Net Worth" shall mean, with respect to any Person and as of
any applicable date of determination, the excess of:
a. the net book value of all assets of such Person (excluding Subsidiary
and Affiliate receivables, patents, patent rights, trademarks, trade names,
franchises, copyrights, licenses, goodwill, and all other intangible assets
of such Person) after all appropriate deductions in accordance with GAAP
(including, without limitation, reserves for doubtful receivables,
obsolescence, depreciation and amortization), over
b. all Debt of such Person at such time.
1.54 "Working Capital" shall mean, as of any applicable date of
determination, Current Assets less Current Liabilities.
Any and all terms used in the foregoing definitions and elsewhere in this
Agreement shall be construed and defined in accordance with the meaning and
definition of such terms under and pursuant to the California Uniform Commercial
Code (hereinafter referred to as the "Uniform Commercial Code") as amended,
revised or replaced from time to time. Notwithstanding the foregoing, the
parties intend that the terms used herein which are defined in the Uniform
Commercial Code have, at all times, the broadest and most inclusive meanings
possible. Accordingly, if the Uniform Commercial Code shall in the future be
amended or held by a court to define any term used herein more broadly or
inclusively than the Uniform Commercial Code in effect on the date of this
Agreement, then such term, as used herein, shall be given such broadened
meaning. If the Uniform Commercial Code shall in the future be amended or held
by a court to define any term used herein more narrowly, or less inclusively,
than the Uniform Commercial Code in effect on the date of this Agreement, such
amendment or holding shall be disregarded in defining terms used in this
Agreement.
2. LOAN AND TERMS OF PAYMENT.
--------------------------
For value received, Borrower promises to pay to the order of Bank such amount,
as provided for below, together with interest, as provided for below.
2.1 Upon the request of Borrower, made at any time and from time to time
prior to the Maturity Date, and so long as no Event of Default has occurred and
is continuing, Bank shall lend to Borrower an amount equal to the Borrowing
Base; provided, however, that the Daily Balance shall not exceed the lesser of
either the Credit Limit or the Borrowing Base, minus all Letter of Credit
Obligations. If at any time for any reason, the amount of Indebtedness owed by
Borrower to Bank pursuant to this Section 2.1 and Section 2.3 of this Agreement
is greater than the aggregate amount available to be drawn under this Section
2.1, Borrower shall immediately pay to Bank, in cash, the amount of such excess.
2.2 Except as hereinbelow provided, the Credit shall bear interest, on the
Daily Balance owing, at a fluctuating rate of interest equal to the Base Rate
plus zero ( 0.00%) percentage points per annum, or at the rate of interest set
forth in the LIBOR Addendum to this Agreement, attached hereto and incorporated
herein by this reference.
All interest chargeable under this Agreement that is based upon a per annum
calculation shall be computed on the basis of a three hundred sixty (360) day
year for actual days elapsed. The Base Rate as of the date of this Agreement is
four and one quarter (4.25%) per annum. In the event that the Base Rate
announced is, from time to time hereafter, changed, adjustment in the Base Rate
shall be made and based on the Base Rate in effect on the date of such change.
The Base Rate, as adjusted, shall apply to the Credit until the Base Rate is
adjusted again.
LOAN & SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
Except as hereinbelow provided, all interest payable by Borrower under the
Credit shall be due and payable on the first day of each calendar month during
the term of this Agreement. A late payment charge equal to five percent (5%) of
each late payment may be charged on any payment not received by Bank within ten
(10) calendar days after the payment due date, but acceptance of payment of this
charge shall not waive any Event of Default under this Agreement. Upon the
occurrence of an Event of Default hereunder, and without constituting a waiver
of any such Event of Default, then during the continuation thereof, at Bank's
option, the Credit shall bear interest, on the Daily Balance owing, at a rate
equal to three percent (3%) per year in excess of the rate applicable
immediately prior to the occurrence of the Event of Default, and such rate of
interest shall fluctuate thereafter from time to time at the same time and in
the same amount as any fluctuation in the rate of interest applicable
immediately prior to any such occurrence.
2.3 Subject to the terms and conditions of this Agreement, upon request of
Borrower, made at any time and from time to time prior to the Maturity Date, and
so long as no Event of Default has occurred and is continuing, Bank agrees to
issue or cause to be issued letters of credit for the account of Borrower during
the term of this Agreement in the aggregate outstanding face amount not to
exceed (i) the lesser of the Credit Limit or the Borrowing Base, minus (ii) the
then outstanding Daily Balance, provided that the Letter of Credit Obligations
shall not in any case exceed Two Hundred Fifty Thousand Dollars ($250,000). All
letters of credit shall be, in form and substance, acceptable to Bank in its
sole discretion and shall be subject to the terms and conditions of Bank's form
of standard Letter of Credit Application and Agreement.
The obligation of Borrower to immediately reimburse Bank for drawings made under
letters of credit shall be absolute, unconditional and irrevocable in accordance
with the terms of this Agreement and the Letter of Credit Application and
Agreement with respect to each such letter of credit. Borrower shall indemnify,
defend, protect and hold Bank harmless from any loss, cost, expense, or
liability, including, without limitation, reasonable attorney's fees incurred by
Bank, whether in-house or outside counsel is used, arising out of or in
connection with any letters of credit, other than as a result of its gross
negligence or willful misconduct.
2.4 Subject to the terms and conditions of this Agreement, Bank shall make
available to Borrower a term loan in the amount of One Million Two Hundred Fifty
Thousand Dollars ($1,250,000 ) (the "Term Loan"), and the outstanding balance
due thereunder from time to time shall at all times be included in the
Indebtedness.
a. The proceeds of the Term Loan shall be used solely for the repayment
in full of Borrower's existing Debt owing to ▇▇▇▇▇ Fargo Bank.
b. The principal amount of the Term Loan shall be payable in sixty (60)
fully amortizing payments plus interest, due and payable on the last day of each
month. The interest rate, payment terms, maturity date and certain other terms
of the Term Loan shall be contained in a promissory note dated the date of this
Agreement, as such may be amended or replaced from time to time.
c. Anything contained in the foregoing to the contrary notwithstanding,
the maximum amount of the Term Loan shall not exceed eighty percent (80%) of the
appraised orderly liquidation value for all Borrower's existing equipment (such
value determined by the appraisal performed by Loeb Equipment & Appraisal
Company, dated October 2, 2002) or other fixed assets approved by Bank purchased
on or before December 31, 2002, and (90%) of the invoice amount for all
Borrower's existing equipment or other fixed assets approved by Bank purchased
between January 1, 2003 and the date of this Agreement.
2.5 Subject to the terms and conditions of this Agreement, Bank shall make
available to Borrower a converting non-revolving loan in the amount of One
Million Dollars ($1,000,000 ) (the "Non-Revolving Loan"), and the outstanding
balance due thereunder from time to time shall at all times be included in the
Indebtedness.
a. The proceeds of Non-Revolving Loan shall be used solely for capital
expenditures, including without limit the purchase of equipment or other fixed
assets.
b. Subject to all of the limitations, terms and conditions contained
herein or in the promissory note representing the Non-Revolving Loan, Borrower
may, from time to time through the term of this Agreement, repay its outstanding
borrowings in part or in whole; provided, however, that any amount of the
Non-Revolving Loan so repaid may not be reborrowed.
LOAN & SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
c. Drawings under Non-Revolving Loan shall be available from the date
of this Agreement through June 30, 2004, at which time the entire outstanding
principal amount of all such drawings shall be repaid in forty eight (48) fully
amortizing payments plus interest, due and payable on the last day of each month
through June 30, 2008. The interest rate, payment terms, maturity date and
certain other terms of Non-Revolving Loan shall be contained in a promissory
note dated the date of this Agreement, as such may be amended or replaced from
time to time.
d. Each request for a drawing under Non-Revolving Loan shall be in
writing, duly executed by Borrower in form satisfactory to Bank, and shall be
irrevocable upon receipt by Bank. Each such notice shall be received by Bank no
later than 3:00 p.m. Pacific time three (3) business days prior to the date on
which the requested drawing is to be made. The notice shall include a copy of
the invoice for the equipment or other fixed assets to be financed. Drawings
under Non-Revolving Loan shall only be used to purchase new and used equipment
and other fixed assets approved by Bank from time to time, and shall be limited
to ninety percent (90%) of the invoice amount for such equipment or other fixed
assets approved by Bank (inclusive of any taxes, freight or installation costs
included in the invoice amount).
2.6 In addition to any other amounts due or to become due under this
Agreement concurrent with the execution hereof, Borrower shall pay to Bank the
following fees:
a. In connection with the financial accommodations provided under
Section 2.1 of this Agreement, an unused commitment fee in an amount equal to
one eighth percent (0.125%) per annum shall be due and payable on the last day
of each quarter. The unused commitment fee shall be calculated on the difference
between the average Daily Balance of the Credit consisting of advances under
Section 2.1 and the Credit Limit and shall be fully earned and non-refundable on
the date of payment thereof.
b. In connection with the financial accommodations provided under
Section 2.5 of this Agreement, an unused commitment fee in an amount equal to
one eighth percent (0.125%) per annum shall be due and payable on the last day
of each quarter through the quarter ending June 30, 2004. The unused commitment
fee shall be calculated on the difference between the average Daily Balance of
the Credit consisting of loans Non-Revolving Loans made under Section 2.1 and
One Million Dollars ($1,000,000) and shall be fully earned and non-refundable on
the date of payment thereof.
c. In addition to any other amounts due, or to become due, concurrently
with the execution hereof, Borrower agrees to pay to Bank a legal documentation
fee in the amount of One Thousand Five Hundred Dollars ($1,500) and all other
costs and expenses incurred by Bank in the preparation of this Agreement, the
other documents, instruments and agreements entered into in connection herewith,
and the perfection of any security interest granted to Bank by Borrower.
3. TERM.
-----
3.1 This Agreement shall remain in full force and effect until the Maturity
Date or until terminated by notice by Borrower. Notice of such termination by
Borrower shall be effectuated by mailing of a registered or certified letter not
less than fifteen (15) Business Days prior to the effective date of such
termination, addressed to Bank at the address set forth herein and the
termination shall be effective as of the date so fixed in such notice.
3.2 Notwithstanding the foregoing, should Borrower be in default of one or
more of the provisions of this Agreement, Bank may terminate this Agreement at
any time without notice. Notwithstanding the foregoing, should either Bank or
Borrower become insolvent or unable to meet its debts as they mature, or fail,
suspend, or go out of business, the other party shall have the right to
terminate this Agreement at any time without notice. On the date of termination
all Indebtedness shall become immediately due and payable without notice or
demand; provided, however, that no such notice of termination by Borrower shall
be effective until the payment in full in cash of all Indebtedness to Bank
(including without limitation the expiration or cash collateralization of all
Letter of Credit Obligations in accordance with the terms and conditions of this
Agreement). Any notice of termination given by Borrower shall be irrevocable
unless Bank otherwise agrees in writing, and Bank shall have no obligation to
make any loans or issue any letters of credit on or after the termination date
stated in such notice. Borrower may elect to terminate this Agreement in its
entirety only. No section of this Agreement or type of loan available hereunder
may be terminated singly.
LOAN & SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
3.3 All undertakings, agreements, covenants, warranties, and
representations of Borrower contained in this Agreement or any other document,
instrument or agreement entered into with or in favor of Bank in connection
herewith shall survive any such termination, and Bank shall retain its security
interest in and to all existing Collateral and Collateral arising thereafter,
any and all liens thereon, and all of its rights and remedies under this
Agreement or any other document, instrument or agreement entered into with or in
favor of Bank in connection herewith notwithstanding such termination until the
payment in full in cash of all Indebtedness to Bank (including, without
limitation, the expiration or cash collateralization of all Letter of Credit
Obligations in accordance with the terms and conditions of this Agreement and
the payment in full of all applicable termination charges, if any).
Notwithstanding the satisfaction in full of the Indebtedness, Bank shall not be
required to terminate its security interests in the Collateral unless, with
respect to any loss or damage Bank may incur as a result of dishonored checks or
other items of payment received by Bank and applied to the Indebtedness, Bank
shall, at its option, (a) have received a written agreement, executed by
Borrower and by any Person whose loans or other advances to Borrower are used in
whole or in part to satisfy the Indebtedness, indemnifying Bank from any such
loss or damage, or (b) have retained such monetary reserves and liens on the
Collateral for such period of time as Bank, in its reasonable discretion, may
deem necessary to protect Bank from any such loss or damage.
3.4 After termination and when Bank has received payment in full of
Borrower's Indebtedness to Bank, Bank shall reassign to Borrower all Collateral
held by Bank, and shall promptly (a) execute a termination of all security
agreements and security interests given by Borrower to Bank and (b) file or
authorize the filing of by Borrower, at Borrower's expense, any UCC Financing
Statement Amendment(s) (Form UCC3) and any other documents or instruments
reasonably necessary to evidence the termination and release of Bank's security
interest in the Collateral.
4. CREATION OF SECURITY INTEREST.
------------------------------
4.1 Borrower hereby grants to Bank a continuing security interest in all
presently existing and hereafter arising Collateral in order to secure prompt
repayment of any and all Indebtedness owed by Borrower to Bank and in order to
secure prompt performance by Borrower of each and all of its covenants and
obligations under this Agreement and otherwise created. Bank's security interest
in the Collateral shall attach to all Collateral without further act on the part
of Bank or Borrower. In the event that any Collateral, including proceeds, is
evidenced by or consists of Negotiable Collateral, Borrower, promptly upon the
request of Bank, shall (a) endorse or assign such Negotiable Collateral to Bank,
(b) deliver actual physical possession of such Negotiable Collateral to Bank,
and (c) ▇▇▇▇ conspicuously all of its records pertaining to such Negotiable
Collateral with a legend, in form and substance satisfactory to Bank (and in the
case of Negotiable Collateral consisting of tangible chattel paper, immediately
▇▇▇▇ all such tangible chattel paper with a conspicuous legend in form and
substance satisfactory to Bank), indicating that the Negotiable Collateral is
subject to the security interest granted to Bank hereunder.
4.2 Bank's security interest in the Accounts shall attach to all Accounts
without further act on the part of Bank or Borrower. Upon request from Bank,
Borrower shall provide Bank with schedules describing all Accounts created or
acquired by Borrower (including without limitation agings listing the names and
addresses of, and amounts owing by date by account debtors), and shall execute
and deliver written assignments of all Accounts to Bank all in a form acceptable
to Bank; provided, however, Borrower's failure to execute and deliver such
schedules and/or assignments shall not affect or limit Bank's security interest
and other rights in and to the Accounts. Together with each schedule, Borrower
shall furnish Bank with copies of Borrower's customers' invoices or the
equivalent, and original shipping or delivery receipts for all merchandise sold,
and Borrower warrants the genuineness thereof. Upon the occurrence and during
the continuation of an Event of Default, Bank or Bank's designee may notify
customers or account debtors of Bank's security interest in the Collateral and
direct such customers or account debtors to make payments directly to Bank, but
unless and until Bank does so or gives Borrower other written instructions,
Borrower shall collect all Accounts for Bank, receive in trust all payments
thereon as Bank's trustee, and, if so requested to do so from Bank, Borrower
shall immediately deliver said payments to Bank in their original form as
received from the account debtor and all letters of credit, advices of credit,
instruments, documents, chattel paper or any similar property evidencing or
constituting Collateral. Notwithstanding anything to the contrary contained
herein, if sales of Inventory and or Equipment are made for cash, Borrower shall
promptly deliver to Bank, in identical form, all such cash, checks, or other
forms of payment which Borrower receives. The receipt of any check or other item
of payment by Bank shall not be considered a payment on account until such check
or other item of payment is honored when presented for payment, in which event,
said check or other item of payment shall be deemed to have been paid to Bank
two (2) calendar days after the date Bank actually receives such check or other
item of payment.
LOAN & SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
4.3 Bank's security interest in Inventory and Farm Products shall attach to
all Inventory and Farm Products without further act on the part of Bank or
Borrower. Borrower will at Borrower's expense pledge, assemble and deliver such
Inventory and Farm Products to Bank or to a third party as Bank's bailee; or
hold the same in trust for Bank's account or store the same in a warehouse in
Bank's name; or deliver to Bank documents of title representing said Inventory;
or evidence of Bank's security interest in some other manner acceptable to Bank.
Until the occurrence and during the continuation of an Event of Default,
Borrower may, subject to the provisions hereof and consistent herewith, sell the
Inventory and Farm Products, but only in the ordinary course of Borrower's
business. A sale of Inventory or Farm Products in Borrower's ordinary course of
business does not include an exchange or a transfer in partial or total
satisfaction of a debt owing by Borrower.
4.4 Concurrently with Borrower's execution of this Agreement, and at any
time or times hereafter at the request of Bank, Borrower shall (a) execute and
deliver to Bank security agreements, mortgages, assignments, certificates of
title, affidavits, reports, notices, schedules of accounts, letters of authority
and all other documents that Bank may reasonably request, in form satisfactory
to Bank, to perfect and maintain perfected Bank's security interest in the
Collateral and in order to fully consummate all of the transactions contemplated
under this Agreement, (b) cooperate with Bank in obtaining a control agreement
in form and substance satisfactory to Bank with respect to all deposit accounts,
electronic chattel paper, investment property, and letter-of-credit rights, and
(c) in the event that any Collateral is in the possession of a third party,
Borrower shall join with Bank in notifying such third party of Bank's security
interest and obtaining an acknowledgment from such third party that it is
holding such Collateral for the benefit of Bank. By authenticating or becoming
bound by this Agreement, Borrower authorizes the filing of initial financing
statement(s), and any amendment(s) covering the Collateral to perfect and
maintain perfected Bank's security interest in the Collateral. Upon the
occurrence and during the continuation of an Event of Default, and until full
and final payment of the Indebtedness in cash and the termination of any and all
obligations of Bank to make loans or otherwise extend financial accommodations
to Borrower, Borrower hereby irrevocably makes, constitutes and appoints Bank
(and any of Bank's officers, employees or agents designated by Bank) as
Borrower's true and lawful attorney-in-fact with power to sign the name of
Borrower on any security agreement, mortgage, assignment, certificate of title,
affidavit, letter of authority, notice of other similar documents which must be
executed and/or filed in order to perfect or continue perfected Bank's security
interest in the Collateral, and to take such actions in its own name or in
Borrower's name as Bank, in its sole discretion, deems necessary or appropriate
to establish exclusive possession or control (as defined in the Uniform
Commercial Code) over any Collateral of such nature that perfection of Bank's
security interest may be accomplished by possession or control.
4.5 Borrower shall make appropriate entries in Borrower's Books disclosing
Bank's security interest in the Accounts. Bank (through any of its officers,
employees or agents) shall have the right at any time or times hereafter,
provided that reasonable notice is provided, during Borrower's usual business
hours, or during the usual business hours of any third party having control over
the records of Borrower, to inspect and verify Borrower's Books in order to
verify the amount or condition of, or any other matter, relating to, said
Collateral and Borrower's financial condition; provided, however, that, so long
as no Event of Default has occurred and is continuing, any such inspections
shall occur no more than two (2) times in each calendar year.
4.6 Effective only upon the occurrence and during the continuation of an
Event of Default, and until full and final payment of the Indebtedness in cash
and the termination of any and all obligations of Bank to make loans or
otherwise extend financial accommodations to Borrower, Borrower appoints Bank or
any other person whom Bank may designate as Borrower's attorney-in-fact, with
power: to endorse Borrower's name on any checks, notes, acceptances, money
order, drafts or other forms of payment or security that may come into Bank's
possession; to sign Borrower's name on any invoice or ▇▇▇▇ of lading relating to
any Accounts, on drafts against account debtors, on schedules and assignments of
Accounts, on verifications of Accounts and on notices to account debtors; to
establish a lock box arrangement and/or to notify the post office authorities to
change the address for delivery of Borrower's mail addressed to Borrower to an
address designated by Bank, to receive and open all mail addressed to Borrower,
and to retain all mail relating to the Collateral and forward all other mail to
Borrower; to send, whether in writing or by telephone, requests for verification
of Accounts; and to do all things necessary to carry out this Agreement.
Borrower ratifies and approves all acts of the attorney-in-fact. Neither Bank
nor its attorney-in-fact will be liable for any acts or omissions or for any
error of judgement or mistake of fact or law. This power being coupled with an
interest, is irrevocable so long as any Accounts in which Bank has a security
interest remain unpaid and until the Indebtedness has been fully satisfied.
LOAN & SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
4.7 In order to protect or perfect any security interest which Bank is
granted hereunder, Bank may, in its sole discretion, discharge any lien or
encumbrance or bond the same, pay any insurance, maintain guards, warehousemen,
or any personnel to protect the Collateral, pay any service bureau, or, obtain
any records, and all costs for the same shall be added to the Indebtedness and
shall be payable on demand.
4.8 Borrower agrees that Bank may provide information relating to this
Agreement or relating to Borrower to Bank's parent, affiliates, subsidiaries and
service providers.
5. CONDITIONS PRECEDENT.
---------------------
5.1 Conditions precedent to the making of the loans and the extension of
the financial accommodations hereunder, Borrower shall execute, or cause to be
executed, and deliver to Bank, in form and substance satisfactory to Bank and
its counsel, the following:
a. This Agreement and other documents, instruments and agreements
required by Bank;
b. If Borrower is a corporation, limited liability company, limited
partnership or other such entity, certified copies of all actions taken by
Borrower, any grantor of a security interest to Bank to secure the Indebtedness,
and any guarantor of the Indebtedness, authorizing the execution, delivery and
performance of this Agreement and any other documents, instruments or agreements
entered into in connection herewith, and authorizing specific officers to
execute and deliver any such documents, instruments and agreements;
c. If Borrower is a corporation, limited liability company, limited
partnership or other such entity, then a certificate of good standing showing
that Borrower is in good standing under the laws of the state of its
incorporation or formation and certificates indicating that Borrower is
qualified to transact business and is in good standing in any other state in
which it conducts business;
d. UCC searches and financing statements, tax lien and litigation
searches, fictitious business statement filings, insurance certificates, notices
or other similar documents which Bank may require and in such form as Bank may
require, in order to reflect, perfect or protect Bank's first priority security
interest in the Collateral (subject to any Permitted Liens) and in order to
fully consummate all of the transactions contemplated under this Agreement;
e. Evidence that Borrower has obtained insurance and acceptable
endorsements;
f. Such control agreements from each Person as Bank may require;
g. Duly executed certificates of title with respect to that portion of
the Collateral that is subject to certificates of title;
h. Such collateral access agreements from each lessor, warehouseman,
bailee, and other Person as Bank may require, duly executed by each such Person;
and
i. Warranties and representations of officers.
6. WARRANTIES. REPRESENTATIONS AND COVENANTS.
------------------------------------------
6.1 If so requested by Bank, Borrower shall, at such intervals designated
by Bank, during the term hereof execute and deliver a Report of Accounts
Receivable or similar report, in form customarily used by Bank. The aggregate
amount of the Borrowing Base at all times during the effectiveness of this
Agreement shall not be less than the advances made hereunder. Bank shall have
the right to recompute the Borrowing Base in conformity with this Agreement,
Agreement and shall provide the Borrower with notice of any such recomputations
that result in a change in the amount of the Borrowing Base.
LOAN & SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
6.2 If any warranty is breached as to any Account, or any Account is not
paid in full by an account debtor within ninety (90) days from the date of
invoice, or an account debtor disputes liability or makes any claim with respect
thereto, or a petition in bankruptcy or other application for relief under the
Bankruptcy Code or any other insolvency law is filed by or against an account
debtor, or an account debtor makes an assignment for the benefit of creditors,
becomes insolvent, fails or goes out of business, then Bank may deem ineligible
any and all Accounts owing by that account debtor, and reduce the Borrowing Base
by the amount thereof. Bank shall retain its security interest in all Accounts,
whether eligible or ineligible, until all Indebtedness has been fully paid and
satisfied. Returns and allowances, if any, as between Borrower and its
customers, will be on the same basis and in accordance with the usual customary
practices of Borrower, as they exist at this time. Any merchandise which is
returned by an account debtor or otherwise recovered shall be set aside and
identified as the property of Bank, and Bank shall retain a security interest
therein. Borrower shall promptly notify Bank of all disputes and claims and
settle or adjust them on terms approved by Bank. After the occurrence and during
the continuation of an Event of Default, no discount, credit or allowance shall
be granted to any account debtor by Borrower and no return of merchandise shall
be accepted by Borrower without Bank's consent. Bank may, after the occurrence
and during the continuation of an Event of Default, settle or adjust disputes
and claims directly with account debtors for amounts and upon terms which Bank
considers advisable, and in such cases Bank will credit Borrower's loan account
with only the net amounts received by Bank in payment of the Accounts, after
deducting all Bank Expenses in connection therewith.
6.3 Borrower warrants, represents, covenants and agrees that:
a. Borrower has good and marketable title to the Collateral. Bank has
and shall continue to have a first priority perfected security interest in and
to the Collateral, subject to any Permitted Liens. The Collateral shall at all
times remain free and clear of all liens, encumbrances and security interests
(except for any Permitted Liens);
b. All Accounts are and will, at all times pertinent hereto, be bona
fide existing obligations created by the sale and delivery of merchandise or the
rendition of services to account debtors in the ordinary course of business,
free of liens, claims, encumbrances and security interests (except Permitted
Liens and except as may be consented to, in writing, by Bank) and are
unconditionally owed to Borrower without defenses, disputes, offsets
counterclaims, rights of return or cancellation, and Borrower shall have
received no notice of actual or imminent bankruptcy or insolvency of any account
debtor at the time an Account due from such account debtor is assigned to Bank;
and
c. At the time each Account is assigned to Bank, all property giving
rise to such Account shall have been delivered to the account debtor or to the
agent for the account debtor for immediate shipment to, and unconditional
acceptance by, the account debtor. Borrower shall deliver to Bank, as Bank may
from time to time reasonably require, delivery receipts, customer's purchase
orders, shipping instructions, bills of lading and any other evidence of
shipping arrangements. Absent such a request by Bank, copies of all such
documentation shall be held by Borrower as custodian for Bank.
6.4 At the time each eligible Account is assigned to Bank, all such
Eligible Accounts will be due and payable on terms set forth in Section 1.21, or
on such other terms approved in writing by Bank in advance of the creation of
such Accounts and which are expressly set forth on the face of all invoices,
copies of which shall be held by Borrower as custodian for Bank, and no such
Eligible Account will then be past due.
6.5 Borrower shall keep the Inventory only at the locations set forth on
Schedule 6.5 to this Agreement, attached hereto and incorporated herein by this
reference, or in any replacement schedule submitted to Bank by Borrower from
time to time after the date of this Agreement and approved by Bank in its sole
discretion. The owner or mortgagees of the respective locations are as set forth
in Schedule 6.5.
a. Borrower, promptly upon request by Bank therefor, shall now and from
time to time hereafter, at such intervals as are reasonably requested by Bank,
deliver to Bank, designations of Inventory specifying Borrower's cost of
Inventory, the wholesale market value thereof and such other matters and
information relating to the Inventory as Bank may request;
b. All of the Inventory and Farm Products are and shall remain free
from all purchase money or other security interests, liens or encumbrances
(other than Permitted Liens);
LOAN & SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
c. Borrower does now keep and hereafter at all times shall keep correct
and accurate records itemizing and describing the kind, type, quality and
quantity of the Inventory, its cost therefor and selling price thereof, and the
daily withdrawals therefrom and additions thereto, all of which records shall be
available to any of Bank's officers, agents and employees for inspection and
copying upon receipt of reasonable notice to Borrower, provided, however, that,
so long as no Event of Default has occurred and is continuing, any such
inspections or copying shall occur no more than two (2) times in each calendar
year;
d. All Inventory, now and hereafter at all times, shall be new
Inventory of good and merchantable quality free from material defects;
e. Inventory and Farm Products are not now and shall not at any time or
times hereafter be located or stored with a bailee, warehouseman or other third
party without Bank's prior written consent, and, in such event, Borrower will
concurrently therewith cause any such bailee, warehouseman or other third party
to issue and deliver to Bank, warehouse receipts in Bank's name evidencing the
storage of Inventory and/or Farm Products and/or an acknowledgment by such
bailee of Bank's prior rights in the Inventory and Farm Products, in each case
in form and substance reasonably acceptable to Bank, and in any event, Borrower
shall instruct any third party to hold all such Inventory or Farm Products for
Bank's account subject to Bank's security interests and its instructions;
f. Bank shall have the right upon demand now and/or at all times
hereafter, during Borrower's usual business hours, after reasonable notice, to
inspect and examine the Inventory and Farm Products and to check and test the
same as to quality, quantity, value and condition and Borrower agrees to
reimburse Bank for Bank's reasonable costs and expenses in so doing, provided,
however, that, so long as no Event of Default has occurred and is continuing,
any such inspections, examination or testing shall occur no more than two (2)
times in each calendar year;
g. All Eligible Inventory is in all material respects of good and
merchantable quality, free from all material defects; and
h. All advances made and to be made pursuant to this Agreement with
respect to the Eligible Inventory are solely and exclusively to enable Borrower
to acquire rights in and purchase new Inventory and Farm Products, and Borrower
represents and warrants that all advances by Bank pursuant to this Agreement
with respect to the Eligible Inventory will be used solely and exclusively for
such purpose; and since such advances will be used for the foregoing purposes,
Bank's security interest in Borrower's Inventory and Farm Products is and shall
be at all times a purchase-money security interest as that term is described in
Section 9103 of the California Uniform Commercial Code.
6.6 Borrower warrants, represents, covenants and agrees that:
a. All of the Equipment is used or held for use in Borrower's business
and is fit for such purposes;
b. it has good and indefeasible title to the Equipment (except for
Permitted Liens);
c. the Equipment is and will be free and clear of all liens, security
interests, encumbrances and claims, except for Permitted Liens;
d. other than temporary relocations of Equipment that is by its nature
mobile, including, but not limited to, laptop computers, cell phones, test
equipment and samples, Borrower shall keep the Equipment only at the locations
set forth on Schedule 6.5 to this Agreement, attached hereto and incorporated
herein by this reference. The owner or mortgagees of the respective locations
are as set forth in Schedule 6.5;
e. Bank shall have the right upon reasonable notice now and/or at all
times hereafter, during Borrower's usual business hours to inspect and examine
the Equipment and Borrower agrees to reimburse Bank for its reasonable costs and
expenses in so doing, provided, however, that, so long as no Event of Default
has occurred and is continuing, any such inspections and examinations shall
occur no more than two (2) times in each calendar year; and
f. Borrower shall keep and maintain the Equipment in good operating
condition and repair except for normal wear and tear, make all necessary
replacements thereto so that the value and operating efficiency thereof shall at
all times be maintained and preserved. Borrower shall not permit any items of
Equipment to become a fixture to real estate or accession to other property, and
the Equipment is now and shall at all times remain and be personal property.
LOAN & SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
6.7 Borrower represents, warrants and covenants with Bank that Borrower
will not, without Bank's prior written consent:
▇. ▇▇▇▇▇ a security interest in or permit a lien, claim or encumbrance
upon any of the Collateral to any person, association, firm, corporation, entity
or governmental agency or instrumentality (other than Permitted Liens);
b. Permit any levy, attachment or restraint to be made affecting any of
Borrower's assets;
c. Permit any Judicial Officer or Assignee to be appointed or to take
possession of any or all of Borrower's assets;
d. Sell, lease, or otherwise dispose of, move, or transfer, whether by
sale or otherwise, any of Borrower's properties or assets, (i) other than sales
of Inventory and Farm Products in the ordinary course of Borrower's business,
and (ii) sales or other dispositions of worn-out, surplus or obsolete Equipment
in the ordinary course of Borrower's business;
e. Change its name, the location of its sole place of business, chief
executive office or residence, business structure, corporate identity or
structure, form of organization or the state in which it has been formed or
organized; add any new fictitious names, liquidate, merge or consolidate with or
into any other business organization;
f. Except as may be permitted pursuant to Section 6.7 d., move or
relocate any Collateral to any location not set forth on Schedule 6.5;
g. Acquire any other business organization;
h. Enter into any transaction not in the usual course of Borrower's
business;
i. Make any change in Borrower's financial structure or in any of its
business objectives, purposes or operations which would materially adversely
affect the ability of Borrower to repay Borrower's Indebtedness;
j. Incur any Debts except for Permitted Indebtedness;
k. Make loans, advances or extensions of credit to any Person, except
for Permitted Investments;
l. Guarantee or otherwise, directly or indirectly, in any way be or
become responsible for obligations of any other Person, whether by agreement to
purchase the indebtedness of any other Person, agreement for the furnishing of
funds to any other Person through the furnishing of goods, supplies or services,
by way of stock purchase, capital contribution, advance or loan, for the purpose
of paying or discharging (or causing the payment or discharge of) the
indebtedness of any other Person, or otherwise, except as may be permitted under
the definition of Permitted Indebtedness;
m. Make any payment on account of any Subordinated Debt except for
regularly scheduled payments of interest and principal in accordance with the
provisions of any Subordination Agreement executed by Bank and the subordinated
debt holder, or amend any provision contained in any documentation relating to
any such Subordinated Debt without Bank's prior written consent;
n. Change its name, consolidate with or merge into any other
corporation, permit another corporation to merge into it, acquire all or
substantially all the properties or assets of any other Person, enter into any
reorganization or recapitalization or reclassify its capital stock, or enter
into any sale-leaseback transaction;
o. Purchase or hold beneficially any stock or other securities of, or
make any investment or acquire any securities or other interest whatsoever in,
any other Person, except for Permitted Investments;
p. Allow any fact, condition or event to occur or exist with respect to
any employee pension or profit sharing plans established or maintained by it
which might constitute grounds for termination of any such plan or for the court
appointment of a trustee to administer any such plan; and
LOAN & SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
q. Use any loan or other extension of credit under this Agreement or
any other document, instrument or agreement entered into by Borrower with or in
favor of Bank in connection with this Agreement for any purpose other than to
refinance existing revolving debt, to provide working capital for its operations
and for other general business purposes. In no event shall the funds from any
such loan or other extension of credit be used directly or indirectly by any
Person for personal, family, household or agricultural purposes or for the
purpose, whether immediate, incidental or ultimate, of purchasing, acquiring or
carrying any "margin stock" or any "margin securities" (as such terms are
defined respectively in Regulation U and Regulation G promulgated by the Board
of Governors of the Federal Reserve System) or to extend credit to others
directly or indirectly for the purpose of purchasing or carrying any such margin
stock or margin securities. Borrower hereby represents and warrants that
Borrower is not engaged principally, or as one of Borrower's important
activities, in the business of extending credit to others for the purpose of
purchasing or carrying such margin stock or margin securities.
6.8 Borrower represents, warrants, covenants and agrees that:
a. Borrower's true and correct legal name is that set forth on the
signature page to this Agreement. Except as disclosed in writing to Bank on or
before the date of this Agreement, Borrower has not done business under any name
other than that set forth on the signature page to this Agreement; and
b. Borrower's form of organization and the state in which it has been
organized are those set forth immediately following Borrower's name on the
signature page to this Agreement.
6.9 Borrower represents, warrants and covenants as follows:
a. Borrower will not make any distribution or declare or pay any
dividend (in stock or in cash) to any shareholder or on any of its capital
stock, of any class, whether now or hereafter outstanding, or purchase, acquire,
repurchase, or redeem or retire any such capital stock; provided, however, (i)
Borrower may pay dividends payable solely in Stock consisting of Borrower common
stock; (ii) Borrower may make repurchases of Stock pursuant to the terms of
employee stock purchase plans, employee restricted stock agreements or similar
agreements; and (iii) to the extent that and so long as Borrower is an entity
that is not directly subject to Federal income taxation and with respect to
which any earnings are attributable ratably to each Person with an ownership
interest in Borrower, Borrower may make distributions to each such Person in an
amount necessary to pay each such Person's income tax resulting from such
ownership interest in Borrower, provided, further, that, promptly upon request
of Bank, Borrower shall cause each such Person to provide Bank with copies of
its tax return to substantiate any such distribution;
b. Borrower is and shall at all times hereafter be a corporation duly
organized and existing in good standing under the laws of the state of its
incorporation and qualified and licensed to do business in California or any
other state in which it conducts its business;
c. Borrower has the right and power and is duly authorized to enter
into this Agreement; and
d. The execution by Borrower of this Agreement shall not constitute a
breach of any provision contained in Borrower's articles of incorporation or
by-laws.
6.10 The execution of and performance by Borrower of all of the terms and
provisions contained in this Agreement shall not result in a breach of or
constitute an event of default under any agreement to which Borrower is now or
hereafter becomes a party which could reasonably be expected to cause a Material
Adverse Change.
6.11 Borrower shall promptly notify Bank in writing of its acquisition by
purchase, lease or otherwise of any after acquired property of the type included
in the Collateral, with the exception of purchases of Inventory and Farm
Products in the ordinary course of business.
LOAN & SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
6.12 All assessments and taxes, whether real, personal or otherwise, due or
payable by, or imposed, levied or assessed against, Borrower or any of its
property have been paid, and shall hereafter be paid in full, before
delinquency, except as may be contested in good faith by the appropriate
procedures, provided that if so contested, the same shall not or could not
result in a Lien which would have priority over any of Bank's security interests
in the Collateral. Borrower shall make due and timely payment or deposit of all
federal, state and local taxes, assessments or contributions required of it by
law, except as may be contested in good faith by the appropriate procedures, and
will execute and deliver to Bank, on demand, appropriate certificates attesting
to the payment or deposit thereof, provided that if so contested, the same shall
not or could not result in a Lien which would have priority over any of Bank's
security interests in the Collateral. Borrower will make timely payment or
deposit of all F.I.C.A. payments and withholding taxes required of it by
applicable laws, except as may be contested in good faith by the appropriate
procedures, and will upon request furnish Bank with proof satisfactory to it
that Borrower has made such payments or deposit, provided that if so contested,
the same shall not or could not result in a Lien which would have priority over
any of Bank's security interests in the Collateral. If Borrower fails to pay any
such assessment, tax, contribution, or make such deposit, or furnish the
required proof, Bank may, in its sole and absolute discretion and without notice
to Borrower, (i) make payment of the same or any part thereof, or (ii) set up
such reserves in Borrower's loan account as Bank deems necessary to satisfy the
liability therefor, or both. Bank may conclusively rely on the usual statements
of the amount owing or other official statements issued by the appropriate
governmental agency. Each amount so paid or deposited by Bank shall constitute a
Bank Expense and an additional advance to Borrower.
6.13 There are no actions or proceedings pending by or against Borrower or
any guarantor of Borrower before any court or administrative agency and Borrower
has no knowledge of any pending, threatened or imminent litigation, governmental
investigations or claims, complaints, actions or prosecutions involving Borrower
or any guarantor of Borrower in which the granting of the relief requested could
reasonably be expected to cause a Material Adverse Change, except as heretofore
specifically disclosed in writing to Bank. If any of the foregoing arise during
the term of the Agreement, Borrower shall immediately notify Bank in writing.
6.14 Insurance.
a. Borrower, at its expense, shall keep and maintain its assets
insured against loss or damage by fire, theft, explosion, sprinklers and all
other hazards and risks ordinarily insured against by other owners who use such
properties in similar businesses for the full insurable value thereof. Borrower
shall also keep and maintain business interruption insurance and public
liability and property damage insurance relating to Borrower's ownership and use
of the Collateral and its other assets. All such policies of insurance shall be
in such form, with such companies, and in such amounts as may be reasonably
satisfactory to Bank. Borrower shall deliver to Bank certified copies of such
policies of insurance and satisfactory evidence of the payments of all premiums
therefor. All such policies of insurance (except those of public liability and
property damage) shall contain an endorsement in a form reasonably satisfactory
to Bank showing Bank as a loss payee thereof, with a waiver of warranties
satisfactory to Bank, and all proceeds payable thereunder shall be payable to
Bank and, upon receipt by Bank, shall be applied on account of the Indebtedness
owing to Bank. To secure the payment of the Indebtedness, Borrower grants Bank a
security interest in and to all such policies of insurance (except those of
public liability and property damage) and the proceeds thereof, and Borrower
shall direct all insurers under such policies of insurance to pay all proceeds
thereof directly to Bank; provided, however, that so long as no Event of Default
has occurred and is continuing, proceeds payable under any casualty policy
shall, at Bank's option, be payable to Borrower to replace the property subject
to the claim, provided, further, that any such replacement property shall
included in the Collateral.
b. Borrower hereby irrevocably appoints Bank (and any of Bank's
officers, employees or agents designated by Bank), until the full and final
payment of the Indebtedness in cash and the termination of any and all
obligations of Bank to make loans or otherwise extend financial accommodations
to Borrower, as Borrower's attorney for the purpose of making, selling and
adjusting claims under such policies of insurance, endorsing the name of
Borrower on any check, draft, instrument or other item of payment for the
proceeds of such policies of insurance and for making all determinations and
decisions with respect to such policies of insurance. Borrower will not cancel
any of such policies without Bank's prior written consent. Each such insurer
shall agree by endorsement upon the policy or policies of insurance issued by it
to Borrower as required above, or by independent instruments furnished to Bank,
that it will give Bank at least ten (10) days written notice before any such
policy or policies of insurance shall be altered or canceled, and that no act or
default of Borrower, or any other person, shall affect the right of Bank to
recover under such policy or policies of insurance required above or to pay any
premium in whole or in part relating thereto. Bank, without waiving or releasing
LOAN & SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
any Indebtedness or any Event of Default, may, but shall have no obligation to
do so, obtain and maintain such policies of insurance and pay such premiums and
take any other action with respect to such policies which Bank deems advisable.
All sums so disbursed by Bank, as well as reasonable attorneys' fees incurred by
Bank, whether in-house or outside counsel is used, court costs, expenses and
other charges relating thereto, shall constitute Bank Expenses and are payable
on demand.
6.15 All (i) interim financial statements and information relating to
Borrower which have been or may hereafter be delivered by Borrower to Bank are
true and correct in all material respects for the period reflected in such
financial statements or information, (ii) annual financial statements and
information relating to Borrower which have been or may hereafter be delivered
by Borrower to Bank are true and correct in all respects for the period
reflected in such financial statements or information, and (iii) such financial
statements have been prepared in accordance with GAAP consistently applied and
there has been no Material Adverse Change since the submission of such financial
information to Bank.
6.16 Financial Reporting.
a. Borrower at all times hereafter shall maintain a standard and
modern system of accounting in accordance with GAAP consistently applied and
keep such books and records and accounts (which shall be true and correct in all
material respects) as may be required or as may be necessary to permit the
preparation of financial statements in accordance with GAAP consistently applied
and in compliance with the regulations of any governmental authority having
jurisdiction over it or any of its assets or properties, and not modify or
change its method of accounting or reporting practices unless required by GAAP,
or enter into, or terminate any agreement presently existing, or at any time
hereafter entered into with any third party accounting firm for the preparation
of Borrower's accounting records without the prior written consent of Bank, and
shall permit Bank and any of its employees, officers or agents, upon demand,
during Borrower's usual business hours, or the usual business hour of third
persons having control thereof, to have access to and examine all of Borrower's
Books relating to the Collateral, Borrower's Indebtedness to Bank, Borrower's
financial condition and the results of Borrower's operations and in connection
therewith, permit Bank or any of its agents, employees or officers to copy and
make extracts therefrom, provided, however, that, so long as no Event of Default
has occurred and is continuing, any such inspections, examinations and copying
shall occur no more than two (2) times in each calendar year.
b. Borrower shall deliver to Bank within thirty (30) days after the
end of each month, a company prepared balance sheet and profit and loss
statement covering Borrower's operations and deliver to Bank within ninety (90)
days after the end of each of Borrower's fiscal years an audited statement of
the financial condition of Borrower for each such fiscal year, including but not
limited to, a balance sheet and profit and loss statement and any other report
requested by Bank relating to the Collateral and the financial condition of
Borrower, audited by a certified public accountant satisfactory to Bank,
together with a certificate signed by an authorized employee of Borrower to the
effect that all reports, statements, computer disk or tape files, computer
printouts, computer runs, or other computer prepared information of any kind or
nature relating to the foregoing or documents delivered or caused to be
delivered to Bank under this subparagraph are complete, correct and thoroughly
present the financial condition of Borrower for the periods covered in such
financial statements or documents and that there exists on the date of delivery
to Bank no condition or event which constitutes a breach or Event of Default
under this Agreement.
c. In addition to the financial statements requested above, Borrower
agrees to provide Bank with the following schedules:
(1) Accounts Receivable Agings on a monthly basis, within twenty
(20) days of the end of each month;
(2) Accounts Payable Agings on a monthly basis (including a
separate aging of all Grower Payables and amounts due to any Persons
who have rendered services for the storage, protection, improvement,
safekeeping, carriage, alteration, repair, harvest or processing of
any Inventory or Farm Products) within twenty (20) days of the end of
each month;
(3) Inventory Reports on a monthly basis, within twenty (20) days
of the end of each month;
(4) Borrowing Base Certificate on a monthly basis, within twenty
(20) days of the end of each month; and
(5) Compliance Certifications on a monthly basis, within thirty
(30) days of the end of each month.
LOAN & SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
d. Promptly after the same are available (i) copies of all reports on
Forms 10-K, 10-Q, and 8-K or otherwise filed by Borrower with the Securities and
Exchange Commission or any governmental authority at any time substituted
therefor, and (ii) promptly upon request by Bank, copies of all proxy
statements, financial statements and reports as Borrower shall send to its
members or stockholders or to any holders of Subordinated Debt as applicable, if
any, that have not otherwise previously been provided to Bank under the terms
and conditions of this Agreement.
6.17 Borrower shall maintain the following financial ratios and covenants
on a consolidated and non-consolidated basis, which shall be monitored on a
monthly basis, except as noted below:
a. a ratio of Debt to Tangible Effective Net Worth of not more than
2.75:1.00;
b. Cash Flow Coverage Ratio of not less than 1.25:1.00, measured on an
annualized basis as of the end of each fiscal quarter; and
c. Minimum Net Income of not less than One Dollar ($1), measured on a
quarterly basis as of the end of each fiscal quarter.
All financial covenants shall be computed in accordance with GAAP
consistently applied except as otherwise specifically set forth in this
Agreement. All monies due from any Subsidiaries or Affiliates (including
officers, directors and shareholders) shall be excluded from Borrower's
assets for all purposes hereunder.
6.18 Borrower shall promptly supply Bank (and cause any guarantor to supply
Bank) with such other information (including tax returns) concerning its
financial affairs (or that of any guarantor) as Bank may reasonably request from
time to time hereafter, and shall promptly notify Bank of any Material Adverse
Change and of any condition or event which constitutes a breach of or an event
which constitutes an Event of Default under this Agreement.
6.19 Borrower is now and shall be at all times hereafter solvent and able
to pay its debts (including trade debts) as they mature.
6.20 Borrower shall promptly and without demand reimburse Bank for all sums
expended by Bank in connection with any action brought by Bank to correct any
default or enforce any provision of this Agreement, including all Bank Expenses;
Borrower authorizes and approves all advances and payments by Bank for items
described in this Agreement as Bank Expenses.
6.21 Each warranty, representation and agreement contained in this
Agreement shall be automatically deemed repeated with each advance and shall be
conclusively presumed to have been relied on by Bank regardless of any
investigation made or information possessed by Bank. The warranties,
representations and agreements set forth herein shall be cumulative and in
addition to any and all other warranties, representations and agreements which
Borrower shall give, or cause to be given, to Bank, either now or hereafter.
6.22 Borrower shall keep all of its principal bank accounts with Bank and
shall notify Bank immediately in writing of the existence of any other bank
account, deposit account, or any other account into which money can be
deposited.
6.23 Borrower shall furnish to Bank: (a) as soon as possible, but in no
event later than thirty (30) days after Borrower knows or has reason to know
that any reportable event with respect to any deferred compensation plan has
occurred, a statement of the chief financial officer of Borrower setting forth
the details concerning such reportable event and the action which Borrower
proposes to take with respect thereto, together with a copy of the notice of
such reportable event given to the Pension Benefit Guaranty Corporation, if a
copy of such notice is available to Borrower; (b) promptly after the filing
thereof with the United States Secretary of Labor or the Pension Benefit
Guaranty Corporation, copies of each annual report with respect to each deferred
compensation plan; (c) promptly after receipt thereof, a copy of any notice
Borrower may receive from the Pension Benefit Guaranty Corporation or the
Internal Revenue Service with respect to any deferred compensation plan;
provided, however, this subparagraph shall not apply to notice of general
application issued by the Pension Benefit Guaranty Corporation or the Internal
Revenue Service; and (d) when the same is made available to participants in the
deferred compensation plan, all notices and other forms of information from time
to time disseminated to the participants by the administrator of the deferred
compensation plan.
6.24 Borrower is now and shall at all times hereafter remain in compliance
with all applicable federal, state and municipal laws, regulations and
ordinances relating to the handling, treatment and disposal of toxic substances,
wastes and hazardous material and shall maintain all necessary authorizations
and permits.
LOAN & SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
6.25 Upon reasonable notice Borrower shall permit representatives of Bank
to conduct audits of Borrower's Books relating to the Accounts and other
Collateral and make extracts therefrom, with results satisfactory to Bank,
provided that Bank shall use its best efforts to not interfere with the conduct
of Borrower's business, and to the extent possible to arrange for verification
of the Accounts directly with the account debtors obligated thereon or
otherwise, all under reasonable procedures acceptable to Bank and at Borrower's
sole expense; provided, however, that, unless an Event of Default has occurred
and is continuing, Borrower shall not be responsible for more than two (2) such
audits in each calendar year. Notwithstanding any of the provisions contained in
Sections 1.7, 1.21, 1.22, or 2.1 of this Agreement or otherwise, Borrower hereby
acknowledges and agrees that upon completion of any such audit Bank shall have
the right to adjust the Borrowing Base percentage or the definition of Eligible
Accounts or Eligible Inventory, in its sole and reasonable discretion, based on
its review of the results of such collateral audit.
7. EVENTS OF DEFAULT.
------------------
Any one or more of the following events shall constitute an Event of Default by
Borrower under this Agreement:
a. If Borrower fails or neglects to perform, keep or observe any term,
provision, condition, covenant, agreement, warranty or representation contained
in this Agreement, or any other present or future document, instrument or
agreement between Borrower and Bank;
b. If any representation, statement, report or certificate made or
delivered by Borrower, or any of its officers, employees or agents to Bank is
not true and correct in all material respects on and as of the date made or
delivered (except to the extent that any such representations statements,
reports or certificates are made on a continuing basis);
c. If Borrower fails to pay within five (5) days after when due and
payable or declared due and payable, all or any portion of Borrower's
Indebtedness (whether of principal, interest, taxes, reimbursement of Bank
Expenses, or otherwise);
d. Any change that, in the opinion of Bank, has resulted or could
result in a Material Adverse Change;
e. If all or any of Borrower's assets are attached, seized, subject to
a writ or distress warrant, or are levied upon, or come into the possession of
any Judicial Officer or Assignee and the same are not released, discharged or
bonded against within ten (10) Business Days thereafter;
f. If any Insolvency Proceeding is filed or commenced by or against
Borrower without being dismissed within ten (10) Business Days thereafter;
g. If any proceeding is filed or commenced by or against Borrower for
its dissolution or liquidation;
h. If Borrower is enjoined, restrained or in any way prevented by court
order from continuing to conduct all or any material part of its business
affairs;
i. If a notice of lien, levy or assessment is filed of record with
respect to any or all of Borrower's assets by the United States Government, or
any department, agency or instrumentality thereof, or by any state, county,
municipal or other government agency, or if any taxes or debts owing at any time
hereafter to any one or more of such entities becomes a lien, whether inchoate
or otherwise, upon any or all of Borrower's assets and the same is not paid
within five (5) Business Days of the payment date thereof;
j. If a judgment or other claim becomes a lien or encumbrance upon any
or all of Borrower's assets and the same is not satisfied, dismissed or bonded
against within ten (10) Business Days thereafter;
k. If Borrower permits a default in any material agreement to which
Borrower is a party with third parties so as to result in an acceleration of the
maturity of Borrower's indebtedness to others in excess of One Hundred Thousand
Dollars ($100,000), whether under any indenture, agreement or otherwise;
l. If Borrower makes any payment on account of indebtedness which has
been subordinated to Borrower's Indebtedness to Bank except as otherwise
permitted under the terms of this Agreement;
m. If any material misrepresentation exists now or hereafter in any
warranty or representation made to Bank by any officer or director of Borrower,
or if any such warranty or representation is withdrawn by any officer or
director on and as of the date made (except to the extent that any such
representation is made on a continuing basis);
LOAN & SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
n. If any party subordinating its claims to that of Bank's or any
guarantor of Borrower's Indebtedness dies, terminates its subordination or
guaranty, violates the terms of the subordination or guaranty, becomes
insolvent, or an Insolvency Proceeding is commenced by or against any such
subordinating party or guarantor;
o. Until the initial offer and sale of Borrower's equity securities to
the public, enter into any transaction where any Person or two or more Persons,
who are not shareholders of Borrower prior to such transaction, acting in
concert shall have acquired beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission) of more than fifty percent
(50%) of the outstanding shares of voting Stock of Borrower immediately after
giving effect to such transaction; or
p. If any reportable event, which Bank determines constitutes grounds
for the termination of any deferred compensation plan by the Pension Benefit
Guaranty Corporation or for the appointment by the appropriate United States
District Court of a trustee to administer any such plan, shall have occurred and
be continuing thirty (30) days after written notice of such determination shall
have been given to Borrower by Bank, or any such Plan shall be terminated within
the meaning of Title IV of the Employment Retirement Income Security Act
("ERISA"), or a trustee shall be appointed by the appropriate United States
District Court to administer any such plan, or the Pension Benefit Guaranty
Corporation shall institute proceedings to terminate any plan and in case of any
event described in this Section 7, the aggregate amount of Borrower's liability
to the Pension Benefit Guaranty Corporation under Sections 4062, 4063 or 4064 of
ERISA shall exceed five percent (5%) of Borrower's Tangible Effective Net Worth.
7.2 An Event of Default under this Agreement shall "continue" or be
"continuing" until such Event of Default has been waived in writing by Bank.
7.3 Notwithstanding anything contained in Section 7 to the contrary, Bank
shall refrain from exercising its rights and remedies and Event of Default shall
thereafter not be deemed to have occurred by reason of the occurrence of any of
the events set forth in Sections 7.e, 7.f or 7.j of this Agreement if, within
ten (10) Business Days from the date thereof, the same is released, discharged,
dismissed, bonded against or satisfied; provided, however, if the event is the
institution of Insolvency Proceedings against Borrower, Bank shall not be
obligated to make advances to Borrower during such cure period.
8. BANK'S RIGHTS AND REMEDIES.
---------------------------
8.1 Upon the occurrence of an Event of Default by Borrower under this
Agreement, Bank may, at its election, without notice of its election and without
demand, do any one or more of the following, all of which are authorized by
Borrower:
a. Declare Borrower's Indebtedness, whether evidenced by this
Agreement, installment notes, demand notes or otherwise, immediately due and
payable to Bank;
b. Cease advancing money or extending credit to or for the benefit of
Borrower under this Agreement, or any other agreement between Borrower and Bank;
c. Terminate this Agreement as to any future liability or obligation of
Bank, but without affecting Bank's rights and security interests in the
Collateral, and the Indebtedness of Borrower to Bank;
d. Without notice to or demand upon Borrower or any guarantor, make
such payments and do such acts as Bank considers necessary or reasonable to
protect its security interest in the Collateral. Borrower agrees to assemble the
Collateral if Bank so requires and to make the Collateral available to Bank at a
location that is reasonably convenient to Borrower and Bank as Bank may
designate. Borrower authorizes Bank to enter the premises where the Collateral
is located, take and maintain possession of the Collateral and the premises (and
Borrower shall pay any and all expenses of Bank incurred in connection
therewith), or any part thereof, and to pay, purchase, contest or compromise any
encumbrance, charge or lien which in the opinion of Bank appears to be prior or
superior to its security interest and to pay all expenses incurred in connection
therewith;
e. Without limiting Bank's rights under any security interest, Bank is
hereby granted a license or other right to use, without charge, Borrower's
labels, patents, copyrights, rights of use of any name, trade secrets, trade
names, trademarks and advertising matter, or any property of a similar nature as
it pertains to the Collateral, in completing production of, advertising for sale
and selling any Collateral and Borrower's rights under all licenses and all
franchise agreement shall inure to Bank's benefit, and Bank shall have the right
and power to enter into sublicense agreements with respect to all such rights
with third parties on terms acceptable to Bank;
LOAN & SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
f. Promptly upon demand by Bank, Borrower shall immediately deliver to
Bank and properly endorse, any and all evidences of ownership, certificates of
title or applications for title to any and all items of Equipment;
g. Ship, reclaim, recover, store, finish, maintain, repair, prepare for
sale, advertise for sales and sell (in the manner provided for herein) the
Inventory and the Equipment;
h. Sell or dispose the Collateral at either a public or private sale,
or both, by way of one or more contracts or transactions, for cash or on terms,
in such manner and at such places (including Borrower's premises) as is
commercially reasonable in the opinion of Bank. It is not necessary that the
Collateral be present at any such sale. At any sale or other disposition of the
Collateral pursuant to this Section, Bank disclaims all warranties which would
otherwise be given under the Uniform Commercial Code, including without
limitation a disclaimer of any warranty relating to title, possession, quiet
enjoyment or the like, and Bank may communicate these disclaimers to a purchaser
at such disposition. This disclaimer of warranties will not render the sale
commercially unreasonable;
i. Bank shall give notice of the disposition of the Collateral as
follows:
(1) Bank shall give Borrower and each holder of a security interest
in the Collateral who has filed with Bank a written request for
notice, a notice in writing of the time and place of public sale,
or, if the sale is a private sale or some disposition other than a
public sale is to be made of the Collateral, the time on or after
which the private sale or other disposition is to be made;
(2) The notice shall be personally delivered or mailed, postage
prepaid, to Borrower's address appearing in this Agreement, at least
ten (10) calendar days before the date fixed for the sale, or at
least ten (10) calendar days before the date on or after which the
private sale or other disposition is to be made, unless the
Collateral is perishable or threatens to decline speedily in value.
Notice to persons other than Borrower claiming an interest in the
Collateral shall be sent to such addresses as have been furnished to
Bank or as otherwise determined in accordance with Section 9611 of
the Uniform Commercial Code; and
(3) If the sale is to be a public sale, Bank shall also give notice
of the time and place by publishing a notice one time at least ten
(10) calendar days before the date of the sale in a newspaper of
general circulation in the county in which the sale is to be held;
and
(4) Bank may credit bid and purchase at any public sale.
j. Borrower shall pay all Bank Expenses incurred in connection with
Bank's enforcement and exercise of any of its rights and remedies as herein
provided, whether or not suit is commenced by Bank;
k. Any deficiency which exists after disposition of the Collateral as
provided above will be paid promptly by Borrower. Any excess will be returned,
without interest and subject to the rights of third parties, to Borrower by
Bank, or, in Bank's discretion, to any party who Bank believes, in good faith,
is entitled to the excess;
l. Without constituting a retention of Collateral in satisfaction of an
obligation within the meaning of 9620 of the Uniform Commercial Code or an
action under California Code of Civil Procedure 726, apply any and all amounts
maintained by Borrower as deposit accounts (as that term is defined under 9102
of the Uniform Commercial Code) or other accounts that Borrower maintains with
Bank against the Indebtedness;
m. The proceeds of any sale or other disposition of Collateral
authorized by this Agreement shall be applied by Bank first upon all expenses
authorized by the Uniform Commercial Code and all reasonable attorneys' fees and
legal expenses incurred by Bank, whether in-house or outside counsel is used,
the balance of the proceeds of the sale or other disposition shall be applied in
the payment of the Indebtedness, first to interest, then to principal, then to
remaining Indebtedness and the surplus, if any, shall be paid over to Borrower
or to such other person(s) as may be entitled to it under applicable law.
Borrower shall remain liable for any deficiency, which it shall pay to Bank
immediately upon demand. Borrower agrees that Bank shall be under no obligation
to accept any noncash proceeds in connection with any sale or disposition of
Collateral unless failure to do so would be commercially unreasonable. If Bank
agrees in its sole discretion to accept noncash proceeds (unless the failure to
do so would be commercially unreasonable), Bank may ascribe any commercially
reasonable value to such proceeds. Without limiting the foregoing, Bank may
apply any discount factor in determining the present value of proceeds to be
received in the future or may elect to apply proceeds to be received in the
future only as and when such proceeds are actually received in cash by Bank; and
LOAN & SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
n. The following shall be the basis for any finder of fact's
determination of the value of any Collateral which is the subject matter of a
disposition giving rise to a calculation of any surplus or deficiency under
Section 9615(f) of the Uniform Commercial Code: (i) The Collateral which is the
subject matter of the disposition shall be valued in an "as is" condition as of
the date of the disposition, without any assumption or expectation that such
Collateral will be repaired or improved in any manner; (ii) the valuation shall
be based upon an assumption that the transferee of such Collateral desires a
resale of the Collateral for cash promptly (but no later than 30 days) following
the disposition; (iii) all reasonable closing costs customarily borne by the
seller in commercial sales transactions relating to property similar to such
Collateral shall be deducted including, without limitation, brokerage
commissions, tax prorations, attorney's fees, whether in-house or outside
counsel is used, and marketing costs; (iv) the value of the Collateral which is
the subject matter of the disposition shall be further discounted to account for
any estimated holding costs associated with maintaining such Collateral pending
sale (to the extent not accounted for in (iii) above), and other maintenance,
operational and ownership expenses; and (v) any expert opinion testimony given
or considered in connection with a determination of the value of such Collateral
must be given by persons having at least 5 years experience in appraising
property similar to the Collateral and who have conducted and prepared a
complete written appraisal of such Collateral taking into consideration the
factors set forth above. The "value" of any such Collateral shall be a factor in
determining the amount of proceeds which would have been realized in a
disposition to a transferee other than a secured party, a person related to a
secured party or a secondary obligor under Section 9615(f) of the Uniform
Commercial Code.
8.2 In addition to any and all other rights and remedies available to Bank
under or pursuant to this Agreement or any other documents, instrument or
agreement contemplated hereby, Borrower acknowledges and agrees that (i) at any
time following the occurrence and during the continuance of any Event of
Default, and/or (ii) termination of Bank's commitment or obligation to make
loans or advances or otherwise extend credit to or in favor of Borrower
hereunder, in the event that and to the extent that there are any Letter of
Credit Obligations outstanding at such time, upon demand of Bank, Borrower shall
deliver to Bank, or cause to be delivered to Bank, cash collateral in an amount
not less than such Letter of Credit Obligations, which cash collateral shall be
held and retained by Bank as cash collateral for the repayment of such Letter of
Credit Obligations, together with any and all other Indebtedness of Borrower to
Bank remaining unpaid, and Borrower pledges to Bank and grants to Bank a
continuing first priority security interest in such cash collateral so delivered
to Bank. Alternatively, Borrower shall cause to be delivered to Bank an
irrevocable standby letter of credit issued in favor of Bank by a bank
acceptable to Bank, in its sole discretion, in an amount not less than such
Letter of Credit Obligations, and upon terms acceptable to Bank, in its sole
discretion.
8.3 Bank's rights and remedies under this Agreement and all other
agreements shall be cumulative. Bank shall have all other rights and remedies
not inconsistent herewith as provided by law or in equity. No exercise by Bank
of one right or remedy shall be deemed an election, and no waiver by Bank of any
default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election or acquiescence by Bank.
9. TAXES AND EXPENSES REGARDING BORROWER'S PROPERTY.
-------------------------------------------------
If Borrower fails to pay promptly when due to another person or entity, monies
which Borrower is required to pay by reason of any provision in this Agreement,
Bank may, but need not, pay the same and charge Borrower's loan account
therefor, and Borrower shall promptly reimburse Bank therefor upon notice of the
amount thereof. All such sums shall become additional Indebtedness owing to
Bank, shall bear interest at the rate hereinabove provided, and shall be secured
by all Collateral. Any payments made by Bank shall not constitute (i) an
agreement by it to make similar payments in the future, or (ii) a waiver by Bank
of any default under this Agreement. Bank need not inquire as to, or contest the
validity of, any such expense, tax, security interest, encumbrance or lien and
the receipt of the usual official notice of the payment thereof shall be
conclusive evidence that the same was validly due and owing. Such payments shall
constitute Bank Expenses and additional advances to Borrower.
10. WAIVERS.
--------
10.1 Borrower agrees that checks and other instruments received by Bank in
payment or on account of Borrower's Indebtedness constitute only conditional
payment until such items are actually paid to Bank and Borrower waives the right
to direct the application of any and all payments at any time or times hereafter
received by Bank on account of Borrower's Indebtedness and Borrower agrees that
Bank shall have the continuing exclusive right to apply and reapply such
payments in any manner as Bank may deem advisable, notwithstanding any entry by
Bank upon its books.
LOAN & SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
10.2 Borrower waives demand, protest, notice of protest, notice of default
or dishonor, notice of payment and nonpayment, notice of any default, nonpayment
at maturity, release, compromise, settlement, extension or renewal of any or all
commercial paper, accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be liable.
10.3 Bank shall not in any way or manner be liable or responsible for (a)
the safekeeping of the Inventory or the Equipment; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency or other person whomsoever. All risk of
loss, damage or destruction of Inventory and the Equipment shall be borne by
Borrower.
10.4 Borrower waives the right and the right to assert a confidential
relationship, if any, it may have with any accountant, accounting firm and/or
service bureau or consultant in connection with any information requested by
Bank pursuant to or in accordance with this Agreement, and agrees that a Bank
may contact directly any such accountants, accounting firm and/or service bureau
or consultant in order to obtain such information.
10.5 Co-Borrowers. Each Borrower agrees as follows:
a. Each Borrower agrees that it is jointly and severally, directly,
and primarily liable to Bank for payment in full of the Indebtedness and that
such liability is independent of the duties, obligations and liabilities of the
other Borrower. The Agreement and each other document, instrument and agreement
entered into by any one or more of the Borrowers in connection therewith
(collectively, hereinafter, the "Loan Documents") are a primary and original
obligation of each Borrower, are not the creation of a surety relationship, and
are an absolute, unconditional, and continuing promise of payment and
performance which shall remain in full force and effect without respect to
future changes in conditions, including any change of law or any invalidity or
irregularity with respect to the Loan Documents. Each Borrower acknowledges that
the obligations of such Borrower undertaken herein might be construed to
consist, at least in part, of the guaranty of obligations of persons or entities
other than such Borrower (including any other Borrower party hereto) and, in
full recognition of that fact, each Borrower consents and agrees that Bank may,
at any time and from time to time, without notice or demand, whether before or
after any actual or purported termination, repudiation, or revocation of the
Agreement and the other Loan Documents by any one or more Borrowers, and without
affecting the enforceability or continuing effectiveness hereof as to each
Borrower: (a) supplement, restate, modify, amend, increase, decrease, extend,
renew, accelerate, or otherwise change the time for payment or the terms of the
Indebtedness or any part thereof, including any increase or decrease of the
rate(s) of interest thereon; (b) supplement, restate, modify, amend, increase,
decrease or waive, or enter into or give any agreement, approval, or consent
with respect to, the Indebtedness or any part thereof, or any of the Loan
Documents or any additional security or guaranties, or any condition, covenant,
default, remedy, right, representation or term thereof or thereunder; (c) accept
new or additional instruments, documents or agreements in exchange for or
relative to any of the Loan Documents or the Indebtedness or any part thereof;
(d) accept partial payments on the Indebtedness; (e) receive and hold additional
security or guaranties for the Indebtedness or any part thereof; (f) release,
reconvey, terminate, waive, abandon, fail to perfect, subordinate, exchange,
substitute, transfer, or enforce any security or guaranties, and apply any
security and direct the order or manner of sale thereof as Bank in its sole and
absolute discretion may determine; (g) release any Person from any personal
liability with respect to the Indebtedness or any part thereof; (h) settle,
release on terms satisfactory to Bank or by operation of applicable laws, or
otherwise liquidate or enforce any Indebtedness and any security therefor or
guaranty thereof in any manner, consent to the transfer of any security and bid
and purchase at any sale; or (i) consent to the merger, change, or any other
restructuring or termination of the corporate or partnership existence of any
Borrower or any other Person, and correspondingly restructure the Indebtedness,
and any such merger, change, restructuring, or termination shall not affect the
liability of any Borrower or the continuing effectiveness hereof, or the
enforceability hereof with respect to all or any part of the Indebtedness.
b. Upon the occurrence and during the continuance of any Event of
Default, Bank may enforce the Agreement and the other Loan Documents
independently as to each Borrower and independently of any other remedy or
security Bank at any time may have or hold in connection with the Indebtedness,
and it shall not be necessary for Bank to marshal assets in favor of any
Borrower or any other Person or to proceed upon or against or exhaust any
security or remedy before proceeding to enforce the Agreement and the other Loan
Documents. Each Borrower expressly waives any right to require Bank to marshal
assets in favor of any Borrower or any other Person or to proceed against any
other Borrower or any Collateral provided by any Person, and agrees that Bank
may proceed against Borrowers or any Collateral in such order as it shall
determine in its sole and absolute discretion.
LOAN & SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
c. Bank may file a separate action or actions against any Borrower,
whether action is brought or prosecuted with respect to any security or against
any other person, or whether any other person is joined in any such action or
actions. Each Borrower agrees that Bank and any Borrower and any Subsidiary or
Affiliate of any Borrower may deal with each other in connection with the
Indebtedness or otherwise, or alter any contracts or agreements now or hereafter
existing between any of them, in any manner whatsoever, all without in any way
altering or affecting the continuing efficacy of the Agreement or the other Loan
Documents.
d. Bank's rights under the Loan Documents shall be reinstated and
revived, and the enforceability of the Agreement and the other Loan Documents
shall continue, with respect to any amount at any time paid on account of the
Indebtedness which thereafter shall be required to be restored or returned by
Bank, all as though such amount had not been paid. The rights of Bank created or
granted herein and the enforceability of the Agreement and the other Loan
Documents at all times shall remain effective to cover the full amount of all
the Indebtedness even though the Indebtedness, including any part thereof or any
other security or guaranty therefor, may be or hereafter may become invalid or
otherwise unenforceable as against any Borrower and whether or not any other
Borrower shall have any personal liability with respect thereto.
e. To the maximum extent permitted by applicable law and to the extent
that a Borrower is deemed a guarantor, each Borrower expressly waives any and
all defenses now or hereafter arising or asserted by reason of (a) any
disability or other defense of any other Borrower with respect to the
Indebtedness, (b) the unenforceability or invalidity of any security or guaranty
for the Indebtedness or lack of perfection or continuing perfection or failure
of priority of any security for the Indebtedness, (c) the cessation for any
cause whatsoever of the liability of any other Borrower (other than by reason of
the full payment and performance of all Indebtedness), (d) any failure of the
Bank to marshal assets in favor of Bank or any Borrower or any other person, (e)
any failure of Bank to give notice of sale or other disposition of collateral to
any Borrower or any other Person or any defect in any notice that may be given
in connection with any sale or disposition of collateral, (f) any failure of
Bank to comply with applicable law in connection with the sale or other
disposition of any collateral or other security for any Obligation, including
any failure of Bank to conduct a commercially reasonable sale or other
disposition of any collateral or other security for any Obligation, (g) any act
or omission of Bank or others that directly or indirectly results in or aids the
discharge or release of any Borrower or the Indebtedness or any security or
guaranty therefor by operation of law or otherwise, (h) any law which provides
that the obligation of a surety or guarantor must neither be larger in amount
nor in other respects more burdensome than that of the principal or which
reduces a surety's or guarantor's obligation in proportion to the principal
obligation, (i) any failure of Bank to file or enforce a claim in any bankruptcy
or other proceeding with respect to any Person, (j) the election by Bank of the
application or non-application of Section 1111(b)(2) of the United States
Bankruptcy Code, (k) any extension of credit or the grant of any lien under
▇▇▇▇▇▇▇ ▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Bankruptcy Code, (1) any use of cash collateral
under Section 363 of the United States Bankruptcy Code, (m) any agreement or
stipulation with respect to the provision of adequate protection in any
bankruptcy proceeding of any Person, (n) the avoidance of any lien in favor of
Bank for any reason, or (o) any action taken by Bank that is authorized by the
Agreement or any other provision of any Loan Document. Until such time as all of
the Indebtedness have been fully, finally, and indefeasibly paid in full in
cash: (i) each Borrower hereby waives and postpones any right of subrogation it
has or may have as against any other Borrower with respect to the Indebtedness;
and (ii) in addition, each Borrower also hereby waives and postpones any right
to proceed or to seek recourse against or with respect to any property or asset
of any other Borrower. Each Borrower expressly waives all setoffs and
counterclaims and all presentments, demands for payment or performance, notices
of nonpayment or nonperformance, protests, notices of protest, notices of
dishonor and all other notices or demands of any kind or nature whatsoever with
respect to the Indebtedness, and all notices of acceptance of the Agreement or
the other Loan Documents or of the existence, creation or incurring of new or
additional Indebtedness.
f. In the event that all or any part of the Indebtedness at any time
are secured by any one or more deeds of trust or mortgages or other instruments
creating or granting liens on any interests in real property, each Borrower
authorizes Bank, upon the occurrence of and during the continuance of any Event
of Default, at its sole option, without notice or demand and without affecting
the obligations of any Borrower, the enforceability of the Agreement and the
other Loan Documents, or the validity or enforceability of any liens of Bank, to
foreclose any or all of such deeds of trust or mortgages or other instruments by
judicial or nonjudicial sale.
LOAN & SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
g. Without limiting the generality of any other waiver or other
provision set forth in this Agreement, each Borrower waives all rights and
defenses that such Borrower may have because the Indebtedness is secured by real
property. This means, among other things:
(1) Bank may collect from any Borrower without first foreclosing on any real or
personal property pledged as Collateral by any other Borrower to secure the
Indebtedness.
(2) If Bank forecloses on any real property pledged as Collateral by any
Borrower:
(a) the amount of the debt may be reduced only by the price for which that
Collateral is sold at the foreclosure sale, even if the collateral is worth
more than the sale price.
(b) Bank may collect from any Borrower even if Bank, by foreclosing on the real
property pledged as Collateral, has destroyed any right that Borrower may
have to collect from any other Borrower.
This is an unconditional and irrevocable waiver of any
rights and defenses each Borrower may have because the
Indebtedness is secured by Real Property. These rights and
defenses include, but are not limited to, any rights or
defenses based upon Section 580a, 580b, 580d, or 726 of the
California Code of Civil Procedure.
h. To the fullest extent permitted by applicable law, to the extent
that a Borrower is deemed a guarantor, each Borrower expressly waives any
defenses to the enforcement of the Agreement and the other Loan Documents or any
rights of Bank created or granted hereby or to the recovery by Bank against any
Borrower or any other Person liable therefor of any deficiency after a judicial
or nonjudicial foreclosure or sale, even though such a foreclosure or sale may
impair the subrogation rights of Borrowers and may preclude Borrowers from
obtaining reimbursement or contribution from other Borrowers. To the fullest
extent permitted by applicable law, each Borrower expressly waives any
suretyship defenses or benefits that it otherwise might or would have under
applicable law. WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER
PROVISION SET FORTH IN THIS AGREEMENT, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, EACH BORROWER WAIVES ALL RIGHTS AND DEFENSES ARISING OUT OF AN
ELECTION OF REMEDIES BY BANK, EVEN THOUGH THAT ELECTION OF REMEDIES, SUCH AS A
NONJUDICIAL FORECLOSURE WITH RESPECT TO SECURITY FOR THE INDEBTEDNESS, HAS
DESTROYED SUCH BORROWER'S RIGHTS OF SUBROGATION AND REIMBURSEMENT AGAINST THE
OTHER BORROWERS BY OPERATION OF LAW, INCLUDING BUT NOT LIMITED TO SECTION 580d
OF THE CALIFORNIA CODE OF CIVIL PROCEDURE, OR OTHERWISE.
10.6 THE UNDERSIGNED AND THE BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY
JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER
CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR
CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY
RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR
ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT OR THE INDEBTEDNESS.
10.7 In the event that Bank elects to waive any rights or remedies
hereunder, or compliance with any of the terms hereof, or delays or fails to
pursue or enforce any term, such waiver, delay or failure to pursue or enforce
shall only be effective with respect to that single act and shall not be
construed to affect any subsequent transactions or Bank's right to later pursue
such rights and remedies.
11. ONE CONTINUING LOAN TRANSACTION.
--------------------------------
All loans and advances heretofore, now or
at any time or times hereafter made by Bank to Borrower under this Agreement or
any other agreement between Bank and Borrower, shall constitute one loan secured
by Bank's security interests in the Collateral and by all other security
interests, liens, encumbrances heretofore, now or from time to time hereafter
granted by Borrower to Bank.
Notwithstanding the above, (i) to the extent that any portion of the
Indebtedness is a consumer loan, that portion shall not be secured by any deed
of trust or mortgage on or other security interest in Borrower's principal
dwelling which is not a purchase money security interest as to that portion,
unless expressly provided to the contrary in another place, or (ii) if Borrower
(or any of them) has (have) given or give(s) Bank a deed of trust or mortgage
covering real property, that deed of trust or mortgage shall not secure the loan
and any other Indebtedness of Borrower (or any of them), unless expressly
provided to the contrary in another place.
LOAN & SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
12. NOTICES.
--------
Unless otherwise provided in this Agreement, all notices or demands by either
party on the other relating to this Agreement shall be in writing and sent by
regular United States mail, postage prepaid, properly addressed to Borrower or
to Bank at the addresses stated in this Agreement, or to such other addresses as
Borrower or Bank may from time to time specify to the other in writing. Requests
for information made to Borrower by Bank from time to time hereunder may be made
orally or in writing, at Bank's discretion.
13. AUTHORIZATION TO DISBURSE.
--------------------------
Bank is hereby authorized to make loans and advances hereunder upon telephonic
or other instructions received from anyone purporting to be an officer,
employee, or representative of Borrower, or at the discretion of Bank if said
loans and advances are necessary to meet any Indebtedness of Borrower to Bank.
Bank shall have no duty to make inquiry or verify the authority of any such
party, and Borrower shall hold Bank harmless from any damage, claims or
liability by reason of Bank's honor of, or failure to honor, any such
instructions.
14. PAYMENTS.
---------
Borrower hereby authorizes Bank to deduct the full amount of any interest, fees,
costs, or Bank Expenses due under this Agreement and not paid or collected when
due in accordance with the terms and conditions hereof from any account
maintained by Borrower with Bank. Should there be insufficient funds in any such
account to pay all such sums when due, the full amount of such deficiency shall
be immediately due and payable by Borrower; provided, however, that Bank shall
not be obligated to advance funds to cover any such payment.
15. DESTRUCTION OF BORROWER'S DOCUMENTS.
------------------------------------
Any documents, schedules, invoices or other papers delivered to Bank, may be
destroyed or otherwise disposed of by Bank six (6) months after they are
delivered to or received by Bank, unless Borrower requests, in writing, the
return of the said documents, schedules, invoices or other papers and makes
arrangements, at Borrower's expense, for their return.
16. CHOICE OF LAW.
--------------
The validity of this Agreement, its construction, interpretation and
enforcement, and the rights of the parties hereunder and concerning the
Collateral, shall be determined according to the laws of the State of
California. The parties agree that all actions or proceedings arising in
connection with this Agreement shall be tried and litigated only in the state
and federal courts in the Northern District of California or the County of Santa
▇▇▇▇▇.
17. GENERAL PROVISIONS.
-------------------
17.1 This Agreement shall be binding and deemed effective when executed by
Borrower and accepted and executed by Bank at its Western Division headquarters
office.
17.2 This Agreement shall bind and inure to the benefit of the respective
successors and assigns of each of the parties; provided, however, that Borrower
may not assign this Agreement or any rights hereunder without Bank's prior
written consent and any prohibited assignment shall be absolutely void. No
consent to an assignment by Bank shall release Borrower or any guarantor from
their obligations to Bank. Bank may assign this Agreement and its rights and
duties hereunder. Bank reserves the right to sell, assign, transfer, negotiate
or grant participations in all or any part of, or any interest in Bank's rights
and benefits hereunder. In connection therewith, Bank may disclose all documents
and information which Bank now or hereafter may have relating to Borrower or
Borrower's business.
17.3 Paragraph headings and paragraph numbers have been set forth herein
for convenience only; unless the contrary is compelled by the context,
everything contained in each paragraph applies equally to this entire Agreement.
Unless the context of this Agreement clearly requires otherwise, references to
the plural include the singular, references to the singular include the plural,
and the term "including" is not limiting. The words "hereof," "herein,"
"hereby," "hereunder," and similar terms in this Agreement refer to this
Agreement as a whole and not to any particular provision of this Agreement.
LOAN & SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
17.4 Neither this Agreement nor any uncertainty or ambiguity herein shall
be construed or resolved against Bank or Borrower, whether under any rule of
construction or otherwise; on the contrary, this Agreement has been reviewed by
all parties and shall be construed and interpreted according to the ordinary
meaning of the words used so as to fairly accomplish the purposes and intentions
of all parties hereto.
17.5 Each provision of this Agreement shall be severable from every other
provision of this Agreement for the purpose of determining the legal
enforceability of any specific provision.
17.6 This Agreement cannot be changed or terminated orally. This Agreement
contains the entire agreement of the parties hereto and supersedes all prior
agreements, understandings, representations, warranties and negotiations, if
any, related to the subject matter hereof, and none of the parties shall be
bound by anything not expressed in writing.
17.7 The parties intend and agree that their respective rights, duties,
powers, liabilities, obligations and discretions shall be performed, carried
out, discharged and exercised reasonably and in good faith.
17.8 In addition, if this Agreement is secured by a deed of trust or
mortgage covering real property, then the trustor or mortgagor shall not
mortgage or pledge the mortgaged premises as security for any other indebtedness
or obligations. This Agreement, together with all other indebtedness secured by
said deed of trust or mortgage, shall become due and payable immediately,
without notice, at the option of Bank, (a) if said trustor or mortgagor shall
mortgage or pledge the mortgaged premises for any other indebtedness or
obligations or shall convey, assign or transfer the mortgaged premises by deed,
installment sale contract or other instrument; (b) if the title to the mortgaged
premises shall become vested in any other person or party in any manner
whatsoever, or (c) if there is any disposition (through one or more
transactions) of legal or beneficial title to a controlling interest of said
trustor or mortgagor.
17.9 Each undersigned Borrower hereby agrees that it is jointly and
severally, directly, and primarily liable to Bank for payment and performance in
full of all duties, obligations and liabilities under this Agreement and each
other document, instrument and agreement entered into by Borrower with or in
favor of Bank in connection herewith, and that such liability is independent of
the duties, obligations and liabilities of any other Borrower or any other
guarantor of the Indebtedness, as applicable. Each reference herein to Borrower
shall mean each and every Borrower party hereto, individually and collectively,
jointly and severally.
IN WITNESS WHEREOF, the parties hereto have caused this Loan and Security
Agreement (Accounts and Inventory) to be executed as of the date first
hereinabove written.
BORROWER:
Accepted and effective as of: SPECTRUM ORGANIC PRODUCTS, INC.
---------- a California corporation
at Bank's Western Division Headquarters
Office
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
COMERICA BANK-CALIFORNIA ----------------------------
Title: Chairman of the Board
----------------------------
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------ ----------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇ Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
Title: Vice President Title: CFO
----------------------------
Address for Notices: Address for Notices:
▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Credit Manager Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Fax number: (▇▇▇) ▇▇▇-▇▇▇▇ Fax number: (▇▇▇) ▇▇▇-▇▇▇▇
Schedule 1.48
-------------
Subordinated Debt
-----------------
Subordinated Creditor Subordinated Debt Amount 1
--------------------- ------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ $1,621,716
▇▇▇▇▇▇ ▇▇▇▇▇ $ 265,000
1 Original principal amount.
Schedule 6.5
------------
Collateral Locations
Address Owner/Lessor of Location Mortgagee
------- ------------------------ ---------
Borrower Locations
------------------
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Bailee Locations
----------------
Adobe Creek Storage Same N/A
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
American Natural Soy Same N/A
▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
The ▇▇▇▇▇▇ Company Same N/A
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Blossom Valley Foods Same N/A
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Specialty Distributing Same N/A
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇-▇▇▇▇▇▇ Corp. Same N/A
▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Custom Park Same N/A
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇
Cotati Egg Farm Same N/A
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ Development Co. Same N/A
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Interpac Technologies, Inc. Same N/A
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Liberty Vegetable Oil Same N/A
15306 So. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇
Manzana Products Same N/A
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Partners Mira Loma Old Storage Same N/A
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Q & B Foods Same N/A
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ Pharma Same N/A
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Swiss Caps Same N/A
▇▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Collateral Locations(Continued)
Address Owner/Lessor of Location Mortgagee
------- ------------------------ ---------
U.S. Cold Storage Same N/A
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Terminal Freezers Same N/A
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇ Food Processors Same N/A
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇-▇▇▇▇▇ Seed Storage Same N/A
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Schedule 1.42
-------------
Permitted Indebtedness
-------------------- -------------- -------------- ----------------- -------------
Creditor Original Amt. Maturity Date Monthly Payment Collateral
-------------------- --------------- -------------- ----------------- -------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ $ 102,243.47 10/01/04 $2,170.35 (a) None
-------------------- --------------- -------------- ----------------- -------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ $ 110,423.32 10/10/04 $2,343.99 (a) None
-------------------- --------------- -------------- ----------------- -------------
Term Life
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ $1,621,716.00 03/20/04 $ 15,625 (b) Ins. Policy
-------------------- --------------- -------------- ----------------- -------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ $ 613,284.00 02/31/11 None None
-------------------- --------------- -------------- ----------------- -------------
▇▇▇▇▇▇ ▇▇▇▇▇ $ 265,000.00 10/06/05 $4,259.04 (a) None
-------------------- --------------- -------------- ----------------- -------------
(a) Includes amounts representing interest
(b) ▇▇. ▇▇▇▇▇▇▇▇ retains the unilateral right to return to monthly principal
payments of $31,250 upon 60 days prior written notice to the Company.
Schedule 1.44
-------------
Permitted Liens
---------------- ------------- ---------- ----------- --------------------
Creditor Original Maturity Monthly Collateral
Amt. Date Payment*
---------------- ------------- ---------- ----------- --------------------
Nitsuko America $ 52,442.85 09/10/04 $1,139.64 Telephone System
---------------- ------------- ---------- ----------- --------------------
Conseco Finance $110,423.32 09/06/04 $ 274.80 Voicemail System
---------------- ------------- ---------- ----------- --------------------
2 Red Lion
SFC Capital $ 74,712.50 09/27/05 $1,718.00 Expeller Presses
---------------- ------------- ---------- ----------- --------------------
Nitrogen Injection
GE Capital $ 27,120.00 06/15/04 $1,020.04 System
---------------- ------------- ---------- ----------- --------------------
▇▇▇▇▇▇▇ Leasing
Corp. $ 25,262.50 12/03/04 $ 781.10 Forklift
---------------- ------------- ---------- ----------- --------------------
(*) Includes amounts representing interest
