EXHIBIT 10.14
Addendum to Business Loan Agreement (Asset Based) between Registrant and KeyBank
National Association dated June 1, 2004 [revolver]
ADDENDUM TO BUSINESS LOAN AGREEMENT (ASSET BASED)
DATED JUNE 1, 2004
BETWEEN
KAHIKI FOODS, INC. AND KEYBANK NATIONAL ASSOCIATION
The Business Loan Agreement (the "Agreement") between Kahiki Foods, Inc.
("Borrower") and KEYBANK National Association ("Lender") dated June 1, 2004 (the
"Agreement") is hereby amended and supplemented as follows:
Section 1. The section of the Agreement entitled "DEFINITIONS" is hereby amended
by adding the following definitions thereto:
"Affiliate" means any Person controlling or under common control with
another Person, any officer or director of a Person, and any Person owning,
beneficially or of record, or controlling with power to vote in excess of five
percent of the outstanding shares of equity securities of a Person or securities
convertible into in excess of five percent of the outstanding shares (giving
effect to such conversion) of the equity securities of a Person.
"Borrowing Base" means the lesser of $2,500,000 or the sum of (i) the Net
Value of Eligible Accounts plus (ii) the Net Value of Eligible Inventory.
"Borrowing Base Certificate" means the certificate delivered by the
Borrower to the Bank showing the Borrowing Base, submitted within twenty (20)
days of each month-end.
"Customer" means any Person who is obligated as an Account debtor or other
obligor on, under, or in connection with any Account.
"Defaulted Account" means an Account that the Customer has not satisfied in
full on or before the 90th day after the date an invoice is issued.
"Eligible Account" means each Account of the Borrower which, at the time of
determination, meets all the following qualifications: (a) the Borrower has
lawful and absolute title to such Account, subject only to the Security Interest
of the Bank given by the Agreement; such Security Interest constitutes a
perfected Security Interest in the Account prior to the rights of any other
Person and such Account is not subject to any other Security Interest
whatsoever; (b) the Borrower has the full unqualified right to grant a Security
Interest in such Account to the Bank as security and collateral for the
Indebtedness; (c) the Account is evidenced by an invoice issued to the proper
Customer and is not evidenced by any instrument or chattel paper; (d) the
Account arose from the sale of goods by the Borrower in the ordinary course of
business, which goods have been shipped or delivered to the Customer under such
Account; and such sale was an absolute sale and not on consignment, approval or
a sale-and-return basis; (e) no notice of the bankruptcy, receivership,
reorganization, insolvency, or financial embarrassment of the Customer has been
received by the Borrower; (f) the Account is a valid, legally enforceable
obligation of the Customer, and is not subject to any dispute, offset,
counterclaim, or other defense on the part of such Customer other than an offset
for promotion, slotting or similar standard business reason that is reflected in
the net amount of the Account; (g) it is not a Defaulted Account; (h) the terms
of the Account require payment no more than 90 days from the date an invoice is
issued; (i) the Customer on the Account is not (1) the United States of America
or any foreign government, or any department, agency or instrumentality thereof
(unless the Borrower and the Bank shall have fully complied with the Assignment
of Claims Act of 1940, as amended, or any other applicable law governing
government Accounts, with respect to such Account), (2) the Borrower, or any
Affiliate, or (3) located outside the United States or Canada, unless the sale
is secured by a letter of credit on which the Bank is the sole beneficiary and
the form, substance and issuer of which are acceptable to the Bank; (j) the
Borrower is not indebted to the Customer on the Account (or any affiliate of
such Customer) for any goods provided or services rendered to the Borrower; (k)
the Account is not owing by any Customer with 50% or more of the value of its
outstanding Accounts not qualifying as Eligible Accounts; (l) the Account is
denominated and payable only in United States dollars in the United States; and
(m) the Bank, acting in its reasonable discretion, has not notified the Borrower
the Account may not be considered as an Eligible Account.
"Eligible Inventory" means Inventory of the Borrower which, at the time of
determination, meets all the following qualifications: (a) the Inventory is
finished goods or raw materials; (b) the Borrower has lawful and absolute title
to the Inventory, subject only to the Security Interest of the Bank given by the
Agreement; such Security Interest constitutes a perfected Security Interest in
the Inventory prior to the rights of any other Person and the Inventory is not
subject to any other Security Interest whatsoever; (c) the Borrower has the full
unqualified right to grant a Security Interest in the Inventory to the Bank as
security and collateral for the Indebtedness; (d) the Inventory is not obsolete,
unsaleable, damaged or unfit for further processing; (e) the Inventory is
located at the Collateral Locations listed on the Collateral Locations Exhibit
attached hereto; (f) the Inventory is not Inventory that is (i) consigned to a
third party, (ii) in transit or (iii) in the possession of a third party in any
manner; and (g) the Bank, acting in its sole discretion, has not notified the
Borrower the Inventory may not be considered as Eligible Inventory.
"Inventory" means all raw materials, work in process, finished goods and
materials and supplies of any kind, nature or description which are or might be
used or consumed in the business of the Borrower or used in connection with the
manufacturing, packing, shipping, advertising, selling or finishing of such
goods, merchandise and other personal property, and all goods, merchandise and
other personal property wherever located, to be furnished by the Borrower under
any contract or contract for service or held for sale or Lease, whether now
owned or hereafter acquired, and all documents of title or other documents
representing the foregoing.
"Net Value of Eligible Accounts" means 85% of the lower of the book value
or collectible value of Eligible Accounts, as reflected on the Borrower's
records in accordance with GAAP, net of all credits, discounts, and allowances
(including all unissued credits in the form of a competitive allowance or
otherwise).
"net Value of Eligible Inventory" means (a) until September 30, 2004, 60%
of the lower of book value or prevailing market value of Eligible Inventory, as
reflected on the Borrower's records in accordance with GAAP and (b) thereafter,
40% of the lower of book value or prevailing market value of Eligible Inventory,
as reflected on the Borrower's records in accordance with GAAP.
The definitions set forth herein shall prevail for any term that is defined
both herein and in the Agreement, and the corresponding definition in the
Agreement shall be deleted.
Section 2. The subsection of the Agreement titled "Continuity of Operations"
under the heading entitled "NEGATIVE COVENANTS" is hereby amended by deleting
condition 3 that relates to a restriction on the payment of dividends.
Section 3. Under the section of the Agreement entitled "DEFAULT":
3.1 The subparagraph entitled "Defaults in Favor of Third Parties" shall
have the following language added to the end thereof: "provided, however, that
no Default shall exist if the Borrower (x) disputes the Default in good faith
and (y) and is diligently pursuing action to resolve the alleged Default."
3.2 The subparagraph entitled "Change in Ownership" shall be deleted in its
entirety and replaced with a subparagraph entitled "Change in Executive
Management" that reads: "the failure of (a) Xxxxxxx Xxxx to serve as President
of Borrower or (b) Xxxxx Xxxxxxxxx to serve as Chief Financial Officer of
Borrower.
3.3 The subparagraph entitled "Adverse Change" shall be amended and
restated in its entirety as follows: "A material adverse change occurs in
Borrower's financial condition, or Lender believes in good faith that the
prospect of payment or performance of the Loan is impaired."
3.4 The subparagraph entitled "Insecurity" shall be deleted.
Section 4. Under the section of the Agreement entitled "MISCELLANEOUS
PROVISIONS", the subparagraph entitled "Attorneys' Fees; Expenses" shall be
amended by adding the following sentence to the end thereof: "All such fees,
costs and expenses to be paid by Borrower must be reasonable as judged by normal
commercial standards."
IN WITNESS WHEREOF, Borrower and Lender have each executed this Addendum To
Business Loan Agreement (Asset Based) at Columbus, Ohio as of the 1st day of
June, 2004.
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
KAHIKI FOODS, INC.
By: /s/ Xxxxxxx Xxxx
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Name: Xxxxxxx Xxxx, President
KEYBANK NATIONAL ASSOCIATION
By: /s/ Xxxx X. Xxxxxx
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Name: Xxxx X. Xxxxxx
Its: Vice President
