Exhibit 10.5
BUSINESS LOAN AGREEMENT
This Agreement, dated as of July 12, 2001, is between Bank of America,
N.A. (the "Bank") and Odwalla, Inc., a California corporation ("Odwalla") and
Fresh Samantha, Inc., a Maine corporation ("Fresh Samantha") (Odwalla and Fresh
Samantha are sometimes referred to collectively as "Borrowers" and individually
as a "Borrower"), (the "Borrower").
1. DEFINITIONS
In addition to the terms which are defined elsewhere in this Agreement, the
following terms have the meanings indicated for the purposes of this Agreement:
1.1 "Borrowing Base" means 75% of the balance due on Acceptable
Receivables, minus the amount of the Reserves.
1.2 "Acceptable Receivable" means an account receivable which satisfies
the following requirements:
(a) The account has resulted from the sale of goods by any
Borrower in the ordinary course of such Borrower's business and without
any further obligation on the part of such Borrower to service, repair,
or maintain any such goods sold other than pursuant to any applicable
warranty.
(b) There are no conditions which must be satisfied before a
Borrower is entitled to receive payment of the account. Accounts arising
from COD sales, consignments or guaranteed sales are not acceptable.
(c) To the extent the debtor upon the account claims any defense
to payment of the account, whether well founded or otherwise, the
account balance does not include the amount of such claim.
(d) The account balance does not include the amount of any
counterclaims or offsets which have been or may be asserted against the
Borrowers by the account debtor (including offsets for any "contra
accounts" owed by the Borrowers to the account debtor for goods
purchased by the Borrowers or for services performed for the Borrowers).
To the extent any counterclaims, offsets, or contra accounts exist in
favor of the debtor, such amounts shall be deducted from the account
balance.
(e) The account represents a genuine obligation of the debtor
for goods sold to and accepted by the debtor. To the extent any credit
balances exist in favor of the debtor, such credit balances shall be
deducted from the account balance.
(f) A Borrower has invoiced the debtor in the amount of the
account.
(g) A Borrower is not prohibited by the laws of the state where
the account debtor is located from bringing an action in the courts of
that state to enforce the debtor's obligation to pay the account. Such
Borrower has taken all appropriate actions to ensure
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access to the courts of the state where the account debtor is located,
including, where necessary, the filing of a Notice of Business
Activities Report or other similar filing with the applicable state
agency or the qualification by such Borrower as a foreign corporation
authorized to transact business in such state.
(h) The account is owned by such Borrower free of any title
defects or any liens or interests of others except the security interest
in favor of the Bank.
(i) The debtor upon the account is not any of the following:
(i) an employee or Affiliate of any Borrower, to the
extent the amount owed by the account debtor exceeds $50,000.00.
(ii) the U.S. government or any agency or department of
the U.S. government unless the Bank accepts the obligation and
such Borrower complies with the procedures in the Federal
Assignment of Claims Act of 1940 (41 U.S.C. Section 15) with
respect to the obligation.
(iii) any person or entity located in a foreign country
unless (A) the account is supported by an irrevocable letter of
credit issued by a bank acceptable to the Bank, and, if
requested by the Bank, the original of such letter of credit
and/or any usance drafts drawn under such letter of credit and
accepted by the issuing or confirming bank have been delivered
to the Bank, or (B) the account is covered by foreign credit
insurance acceptable to the Bank and the account is otherwise an
Acceptable Receivable; provided that accounts from persons and
entities located in Canada may be included as Acceptable
Receivables to the extent the aggregate amount of such accounts
do not at any time exceed $150,000.00.
(j) The account is not in default. An account will be considered
in default if any of the following occur:
(i) The account is not paid within 45 days from its
invoice date;
(ii) The debtor obligated upon the account suspends
business, makes a general assignment for the benefit of
creditors, or fails to pay its debts generally as they come due;
or
(iii) Any petition is filed by or against the debtor
obligated upon the account under any bankruptcy law or any other
law or laws for the relief of debtors.
(k) The account is not the obligation of a debtor who is in
default (as defined above) on 25% or more of the accounts upon which
such debtor is obligated.
(l) The account does not arise from the sale of goods which
remain in any Borrower's possession or under any Borrower's control.
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(m) The account is not evidenced by a promissory note or chattel
paper, nor is the account debtor obligated to any Borrower under any
other obligation which is evidenced by a promissory note.
(n) The account is otherwise acceptable to the Bank, in its
exercise of reasonable business judgment.
In addition to the foregoing limitations, the dollar amount of accounts included
as Acceptable Receivables which are the obligations of a single debtor shall not
exceed the concentration limit established for that debtor. To the extent the
total of such accounts exceeds a debtor's concentration limit, the amount of any
such excess shall be excluded. The concentration limit for each debtor shall be
equal to 10% of the total amount of the Borrowers' Acceptable Receivables at
that time.
It is provided, however, that if the debtor obligated upon an account is one of
the debtors listed below, the concentration limit applicable to each such debtor
will be increased to the percentage set forth below:
Debtor Concentration Limit
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Safeway 20%
Kroger 20%
1.3 "Affiliate" means, as to any person, any other person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such person or which owns, directly or indirectly, ten percent
(10%) or more of the outstanding voting interest of such person. A person shall
be deemed to control another person if the controlling person possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of the other person, whether through the ownership of
voting securities, by contract, or otherwise.
1.4 "ACH Transactions" means any cash management or related services
including the automatic clearing house transfer of funds by the Bank for the
account of the Borrower pursuant to agreement or overdrafts.
1.5 "Bank Products" means any one or more of the following types of
services or facilities extended to the Borrowers by the Bank or any affiliate of
the Bank in reliance on Bank's agreement to indemnify such affiliate: (i) credit
cards; (ii) ACH Transactions; (iii) cash management, including controlled
disbursement services; and (iv) Hedge Agreements.
1.6 "Bank Product Reserves" means all reserves which the Bank from time
to time establishes in its reasonable discretion for the Bank Products then
provided or outstanding.
1.7 "Credit Limit" means the amount of Ten Million and no/100 Dollars
($10,000,000.00).
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1.8 "Dilution Reserve" means the reserve established by Bank in its
reasonable judgment to reflect the amount of receivables which are not
collected. On the date of this Agreement the Dilution Reserve shall be $350,000,
which shall be subject to adjustment from time to time by the Bank in its
reasonable judgment to reflect historical receivable dilution as determined by
the Bank in its reasonable judgment.
1.9 "Grower Payables" means, as of any date of determination, all
amounts then payable by any Borrower to growers of agricultural products which
such Borrower has purchased, whether for processing, for use in producing
inventory or otherwise.
1.10 "Hedge Agreement" means any and all transactions, agreements or
documents now existing or hereafter entered into, which provide for an interest
rate, credit, commodity or equity swap, cap, floor, collar, forward foreign
exchange transaction, currency swap, cross currency rate swap, currency option,
or any combination or option with respect to, these or similar transactions, for
the purpose of hedging the Borrowers' exposure to fluctuations in interest or
exchange rates, loan, credit exchange, security or currency valuations or
commodity prices.
1.11 "PACA" means the Perishable Agricultural Commodities Act, 7 U.S.C.
Section 499 et seq., as amended or replaced and as in effect from time to time.
1.12 "Plea Agreement" means the agreement set forth in that certain
Memorandum of Plea Agreement Pursuant to Rule 11(e) of the Federal Rules of
Criminal Procedure, dated July 23, 0000, Xxxxxx Xxxxxx xx Xxxxxxx v. Odwalla,
Inc., United States District Court for the Eastern District of California; CR.
F. No. 98 5261-SMS.
1.13 "Plea Agreement Reserve" means the amount of any payments due or to
become due from Odwalla to the United States of America (the "Government") or
any other entities in accordance with the Plea Agreement in the event the
Government takes any action which the Bank, in its reasonable discretion,
determines is likely to result in a lien in favor of the Government on any of
Borrower's assets which is prior to the Bank's lien.
1.14 "Reserves" means the amount established by the Bank from time to
time in the Bank's reasonable judgment as a reserve against the Borrowing Base.
Without limiting the generality of the foregoing and the right of the Bank to
establish additional reserves in its reasonable judgment, Reserves shall
include, without limitation, the sum of (a) Bank Product Reserves, (b) the
amount of Grower Payables (i) which is subject to the trust established in favor
of growers by PACA or otherwise or (ii) which has a lien priority on the
Collateral senior to the lien granted to the Bank, (c) the Dilution Reserve, and
(d) the Plea Agreement Reserve.
2. LINE OF CREDIT: AMOUNT AND TERMS
2.1 Line of Credit Amount.
(a) During the availability period described below, the Bank
will provide a line of credit to the Borrowers. The amount of the line
of credit (the "Commitment") is equal to the lesser of (i) the Credit
Limit or (ii) the Borrowing Base as determined by the Bank from time to
time in accordance with this Agreement.
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(b) This is a revolving line of credit providing for cash
advances and letters of credit. During the availability period, the
Borrowers may repay principal amounts and reborrow them.
(c) The Borrowers agree not to permit the outstanding principal
balance of advances under the line of credit plus the outstanding
amounts of any letters of credit, including amounts drawn on letters of
credit and not yet reimbursed, to exceed the Commitment. If the
Borrowers exceed this limit, the Borrowers will immediately pay the
excess to the Bank upon the Bank's demand. The Bank may apply payments
received from the Borrowers under this paragraph to the obligations of
the Borrowers to the Bank in the order and the manner as the Bank, in
its discretion, may determine.
2.2 Availability Period. The line of credit is available between the
date of this Agreement and July 1, 2003, or such earlier date as the
availability may terminate as provided in this Agreement (the "Expiration
Date").
2.3 Conditions to Availability of Credit. In addition to the items
required to be delivered to the Bank under the paragraph entitled "Financial
Information" in the "Covenants" section of this Agreement and subject to Section
9.2, the Borrowers will promptly deliver the following to the Bank at such times
as may be requested by the Bank:
(a) a Borrowing Base certificate, in form and detail
satisfactory to the Bank, summarizing the Borrowers' accounts receivable
on which the requested extension of credit is to be based, together with
all supporting documentation required by the Bank in order to calculate
the Borrowing Base.
(b) copies of the record of invoices from each Borrower's sales
journal for such accounts receivable.
(c) copies of the purchase orders, shipping instructions, bills
of lading and other documentation pertaining to such accounts
receivable.
(d) copies of the cash receipts journal pertaining to the
Borrowing Base certificate.
2.4 Calculation of Borrowing Base. The Borrowing Base will be calculated
by the Bank upon receipt of the Borrowing Base certificate and all supporting
documentation required under this Agreement. The Bank will provide a borrowing
base calculation to the Borrowers setting forth its determination of the
Borrowing Base, which calculation will be conclusive and binding in the absence
of manifest error. The Borrowing Base as determined by the Bank will become
effective upon calculation by the Bank and will remain in effect until a new
Borrowing Base is calculated by the Bank in accordance with this Agreement.
2.5 Interest Rate.
(a) Unless the Borrowers elect an optional interest rate as
described below, the interest rate is a rate per year equal to the
Bank's Prime Rate plus the Applicable Margin as defined below.
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(b) The Prime Rate is the rate of interest publicly announced
from time to time by the Bank as its Prime Rate. The Prime Rate is set
by the Bank based on various factors, including the Bank's costs and
desired return, general economic conditions and other factors, and is
used as a reference point for pricing some loans. The Bank may price
loans to its customers at, above, or below the Prime Rate. Any change in
the Prime Rate shall take effect at the opening of business on the day
specified in the public announcement of a change in the Bank's Prime
Rate.
2.6 Repayment Terms.
(a) The Borrowers will pay interest on August 1, 2001, and then
monthly thereafter on the first banking day of each month until payment
in full of any principal outstanding under this line of credit.
(b) The Borrowers will repay in full all principal and any
unpaid interest or other charges outstanding under this line of credit
no later than the Expiration Date. Any interest period for an optional
interest rate (as described below) shall expire no later than the
Expiration Date.
(c) The Borrowers may prepay the loan in full or in part at any
time.
2.7 Optional Interest Rates. Instead of the interest rate based on the
Bank's Prime Rate, the Borrowers may elect the optional interest rates listed
below during interest periods agreed to by the Bank and the Borrowers. The
optional interest rates shall be subject to the terms and conditions described
later in this Agreement. Any principal amount bearing interest at an optional
rate under this Agreement is referred to as a "Portion." The following optional
interest rates are available:
(a) the IBOR Rate plus the Applicable Margin as defined below.
(b) the LIBOR Rate plus the Applicable Margin as defined below.
2.8 Applicable Margin. The Applicable Margin shall be the following
amounts per annum, based upon the ratio of total liabilities to tangible net
worth (as defined in the "Covenants" section of this Agreement), as set forth in
the most recent compliance certificate received by the Bank as required in the
Covenants section; provided, however, that, until the Bank receives the first
compliance certificate, such amounts shall be those indicated for pricing level
2 set forth below:
Applicable Margin
(in basis points per annum)
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Total Liabilities/
Pricing Level Tangible Net Worth Prime + IBOR or LIBOR +
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1 X < .90 00 275
2 .90
