EXHIBIT 10.1
LOAN AGREEMENT
THIS AGREEMENT, dated as of May 11, 2000, is between Gaiam, Inc.
and its subsidiaries (the "Company"), 000 Xxxxxxxxxxx Xxxx.,
Xxxxx 000, Xxxxxxxxxx, Xxxxxxxx 00000 (address), and Norwest Bank
Colorado N. A.- Boulder (the "Bank"), 0000 Xxxxx Xxxxxx, X.X. Xxx
000, Xxxxxxx, Xxxxxxxx.
ARTICLE I
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DEFINITIONS
Section 1.1 The terms defined in this Article shall have the meanings
specified for all purposes of this Agreement.
(a) "Borrowing Base" shall mean an amount equal to the sum of the following:
(1) 75% of the Company's total accounts receivable which are less than 60
days past due according to their assigned selling terms; plus
(2) 40% of the Company's total finished goods inventory, excluding any
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goods being manufactured, subject to further manufacturing processes by the
Company, and inventory considered obsolete.
(b) "Commitment Expiration Date" shall mean January 31, 2002.
(c) "Consolidated Debt to Worth Ratio" shall mean the ratio of (i) the
aggregate debt of the Company, determined in accordance with generally accepted
accounting principles, less any debt formally subordinated by a creditor to the
indebtedness of the Company to the Bank, to (ii) the Company's net equity,
determined in accordance with generally accepted accounting principles, less any
notes due from stockholders, plus any debt formally subordinated by a creditor
to the indebtedness of the Company to the Bank. Debt to trade creditors that
subordinate their lien positions to the Bank, if any, shall not be deemed
subordinated debt for purposes of the foregoing calculation.
(d) "Current Ratio" shall mean the ratio of current assets of the Company to
its current liabilities, determined in accordance with generally accepted
accounting principles.
(e) "Equity Equivalent Investments" shall mean cash provided to the Company
either by the purchase of common or preferred stock or by the making of Loans to
the Company that are formally subordinated to the indebtedness of the Company to
the Bank.
(f) "ERISA" shall mean the Employment Retirement Income Security Act of 1974,
as amended.
(g) "Event of Default" shall mean any of the events listed in Section 5.1
below.
(h) "Loan" or "Loans" mean all advances and draws on Letters of Credit that the
Bank agrees to make or issue hereunder.
ARTICLE II
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THE COMMITMENT
Section 2.1 The Bank agrees, on the terms herein set forth, to make Loans to
the Company under a Revolving Line of Credit in an aggregate amount not
exceeding the lesser of the Borrowing Base or $5,000,000.00. The Loans may be in
the form of cash advances as requested by the Company on or before the
Commitment Expiration Date, when said Loans, together with interest thereon,
shall be due and payable. The amount available for Loans at any time shall be
the lesser of $5,000,000.00 or the Borrowing Base, minus the aggregate principal
amount of all outstanding cash advances. Calculations of the Borrowing Base
shall be submitted to the Bank quarterly or with each Loan advance, on the basis
of the information and certificates provided pursuant to Sections 4.1(a) and (b)
below; however, compliance with the Borrowing Base limitation is a continuing
obligation throughout each month. If any time the aggregate balance outstanding
on the Loans exceeds the Borrowing Base, the excess shall become immediately due
and payable and shall be paid to the Bank within five business days after
written notice to the Company.
Section 2.2 The Loan shall be evidenced by a Promissory Note in the maximum
principal amount of $5,000,000.00, payable to the order of the Bank on or before
January 31, 2002.
Section 2.3 The Loans shall bear interest at a rate equal to the Norwest Bank
Colorado National Association Prime Rate (the "Prime Rate") as in effect from
time to time, which rate shall change, without notice, whenever the Prime Rate
changes, to and including maturity. Overdue principal and (to the extent legally
enforceable) overdue interest, whether caused by acceleration of maturity or
otherwise, shall bear interest at a rate four percentage points above the rate
in effect at the time such principal or interest becomes due. Interest shall be
payable monthly in arrears on the last day of each month, beginning May 31,
2000.
Section 2.4 The Company shall have the right to repay the Loans in part or in
whole at any time without penalty; however, prepayment in full must be
accompanied by payment of all accrued interest then due.
Section 2.5 All payments made by the Company on account of principal and of
interest shall be made in immediately available funds to the Bank.
Section 2.6 The Bank's commitment to make the initial and all subsequent Loans
hereunder shall be subject to the following conditions:
(a) Prior to the initial Loan, payment by the Company of a $6,250.00 loan
commitment fee.
(b) Prior to the initial Loan, delivery to the Bank of the Note and all
security agreements, financing statements and related documents necessary to
confirm or create liens and security interests in favor of the Bank on all the
Company's accounts, equipment and inventory as security for the Loan.
(c) As of the dates of the initial and any subsequent Loans, all
representations and warranties of the Company contained herein shall be true and
no Event of Default shall have occurred and be continuing.
ARTICLE III
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REPRESENTATION AND WARRANTIES
The company represents and warrants to the Bank as follows:
Section 3.1 The Company is duly organized, validly existing, and in good
standing under the laws of the State of Colorado, and is duly qualified to do
business wherever necessary to carry on its present operations.
Section 3.2 The making and performance of this Agreement is within the
Company's corporate powers; has been duly authorized by all necessary corporate
action; does not require any stockholder consent; does not require the approval
of any federal or state regulatory authority; does not contravene any law,
regulation or agreement to which the Company is a party or by which it or its
assets may be bound; and will not conflict with any provision of the articles of
incorporation, bylaws or other governing documents of the Company.
Section 3.3 This Agreement is the legal, valid and binding obligation of the
Company, enforceable in accordance with its terms.
Section 3.4 There is no pending or threatened action or proceedings before any
court or administrative agency which may materially adversely affect the
Company's financial condition or operations.
Section 3.5 The Company has good and marketable title to all of its properties
or assets (except leased assets), and none of such properties or assets
included in the Borrowing Base are subject to any mortgage, pledge, loan
security interest, encumbrance or any other security agreement or arrangement of
any type whatsoever except the security interests, liens and encumbrances
permitted by this Agreement.
Section 3.6 To the best of the Company's knowledge and information no material
claim for taxes, whether federal, state or local, are presently being assessed
against the Company with respect to any past due taxes, nor are there any tax
disputes being litigated or determined by governmental proceedings at the
present time that have not been reflected in the financial statements of the
Company previously furnished to the Bank.
Section 3.7 The Company or property of the Company is not currently the subject
of any threatened or ongoing litigation, judgment, decree, order, citation,
compliant, or notice of violation relating to or arising out of environmental
laws or issues. For purposes of this Agreement, Contamination and Contaminated
shall mean the presence of solid or hazardous wastes, hazardous substances,
pollutants or contaminants, petroleum, toxic or hazardous constituents, or
similar materials, as such terms are defined under any federal, state, or local
statute, whether currently or subsequently enacted, or under common law.
ARTICLE IV
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COVENANTS OF THE BORROWER
SECTION 4.1 So long as the Company may borrow hereunder and until payment in
full of the Note and performance of all other obligations of the Company, the
Company shall:
(a) (i) Furnish to the Bank within 45 days after the end of each quarter during
each fiscal year a consolidated balance sheet and income statement; (ii) furnish
to the Bank within 150 days after the end of each fiscal year of the Company an
audited consolidated balance sheet and income statement, supported by
consolidating balance sheets and income statements; (iii) furnish to the Bank
within 150 days after the end of each fiscal year of the Company projections for
the ensuing year; (iv) permit or cause to permit the Bank at any reasonable time
to have access to the books and records of the Company, and to inspect or
otherwise check the properties of the Company' (v) furnish to the Bank from time
to time with reasonable promptness such further information relating to the
financial condition and operations of the Company as the Bank may reasonably
request; and (vi) reimburse the Bank for any reasonable costs incurred through
the performance by the Bank of inspections of the Company's book's or
operations.
(b) Furnish to the Bank within 30 days after the end of each calendar quarter
and at the time of each request for an advance on the Loan a completed and
signed Borrowing Base Certificate a blank copy of which is attached as Exhibit
A, accompanied by copies of the same month's end accounts receivable aging and
summary inventory lists. The inventory lists so provided shall include separate
listings for inventory deemed discontinued or obsolete by the Company.
(c) Maintain a Current Ratio of at least 1.0 to 1.
(d) Maintain a Consolidated Debt to Worth Ratio not to exceed 2.0 to 1.
(e) Use the Bank as its principal depository for all demand and savings
business accounts.
(f) Allow the Bank the opportunity to bid on all short term investments
including certificates of deposit and repurchase agreements.
(g) Maintain insurance with responsible companies on such of its properties, in
such amounts and against such amounts and against such risks as is reasonable
and customarily maintained by similar businesses operating in the same vicinity,
and file with the Bank evidence of such coverage which names the Bank as Loss
Payee.
(h) Comply in all material respects with all laws and regulations applicable to
its business and operations.
(i) Promptly provide notice to the Bank of (i) the occurrence of an Event of
Default; (ii) the occurrence of a "Reportable Event" (as defined in ERISA) ; or
(iii) the institution of steps by the Company to withdraw from or terminate any
employee benefit plan as to which the Company may have any liability.
(j) Permit the Bank to perform inspections of the Company's accounts
receivable, inventory, and other pertinent financial records. It is agreed that
the cost of said inspections shall be reimbursed by the Company to the Bank.
(k) Promptly furnish to the Bank copies of all documents filed by it with the
Securities and Exchange Commission, the National Association of Securities
Dealers, Inc., any securities exchange or any state securities commission,
limited to all registration statements, annual reports on Form 10K, quarterly
reports on Form 1OQ, reports on Form 8K, proxy statements and annual reports to
shareholders, and all amendments there to.
Section 4.2 So long as the Company may borrow hereunder and until payment in
full of the Note and performance of all other obligations of the Company
hereunder, the Company shall not, without the consent of the Bank, which consent
shall not be unreasonably withheld;
(a) Pay a cash dividend on capital stock now or hereafter outstanding, or
redeem, retire, purchase or otherwise acquire directly or indirectly any shares
of the debtor's stock now or hereafter outstanding.
(b) Enter into any mergers, acquisitions or consolidations unless the Company
is the surviving entity.
(c) Sell, lease or otherwise dispose of all or any substantial part of its
assets or operation.
(d) Make any loans or advances to another person or entity, enter into any
direct borrowings other than purchase money security agreements for equipment
acquisitions or assume, guarantee or otherwise become contingently liable on any
borrowings or indebtedness of another person or entity without prior written
notice to the Bank.
(i) Advances not to exceed $100,000.00 in aggregate are expressly
permitted.
(e) Permit any Pension and/or Profit Sharing Plan maintained by it to:
(i) Engage in any "prohibited transaction" as such term is defined in
section 4975 of the Internal Revenue Code of 12954, as amended;
(ii) Incur any "accumulated funding deficiency" as such term is defined in
section 302 of ERISA; or
(iii) Terminate in a manner which could result in the imposition of a lien
on the property of the Company pursuant to section 4068 to ERISA.
(f) Create, incur or permit to exist any material lien, security interest or
other encumbrance upon any of its properties or assets included in the Borrowing
Base except (i) liens for taxes or other items not yet overdue or being
contested in good faith, (ii) pursuant to purchase money security agreements for
equipment acquisitions, or (iii) liens filed unilaterally by third parties.
ARTICLE V
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EVENTS OF DEFAULT
Section 5.1 The occurrence of any of the following events shall be an "Event of
Default", unless cured within 10 business days of written notice to the Company
by the Bank:
a) Any payment of principal or interest shall not be made when due and not be
cured within ten business days thereafter; or
(b) Any representation or warranty made by the Company in connection with the
execution and delivery of this Agreement, or in any certificate furnished
pursuant hereto, shall prove to be at any time incorrect in any material
respect; or
(c) The Company shall fail to perform or observe any other term, covenant or
agreement contained in this Agreement and such failure shall continue for a
period of ten business days after written notice to the Company from the Bank;
which failure to perform or observe any covenant having occurred subsequent to
review of the occasion with the Bank; or
(d) Any obligation of the Company f or the payment of borrowed money is not
made at maturity, whether by acceleration or otherwise, or is declared to be due
and payable prior to the stated maturity thereof by reason of default or other
violation of the terms thereof; or
(e) A default shall have occurred under any other security held by the Bank for
the Loans; or
(f) In the opinion of the Bank there shall occur a material adverse change in
the financial condition of the Company.
Section 5.2 Upon the occurrence of an Event of Default, the obligation of the
Bank to make advances under this Agreement or any other loan commitment to the
Company and to issue Letters of Credit shall terminate and the Bank may declare
the principal balance, together with accrued interest thereon, to be immediately
due and payable, and the same shall forthwith become immediately due and payable
without presentment, protest, notice or demand of any kind, all of which are
hereby expressly waived by the Company Upon any such Event of Default, the Bank
may proceed with each and every remedy provided for it in this Agreement, the
Note, or security agreements and other instruments executed in connection with
the Loans, anything in said instruments to the contrary not-withstanding, and
may pursue any other remedy available to the Bank, whether in law or equity, to
enforce collection of all sums due and owing to the Bank, all of such right and
remedies being cumulative and not exclusive of all rights and remedies which the
Bank has or may have against the Company.
ARTICLE VI
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MISCELLANEOUS
Section 6.1 No failure on the part of the Bank in exercising any power or right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power preclude any other or further exercise
thereof or the exercise of any other right or power hereunder. No modification
or waiver of any provision of this Agreement nor consent to any departure by the
Company therefrom shall in any event be effective unless the same shall be in
writing and then such a waiver or consent shall be effective only in the
specific instance and for the purposes for which it was given. No notice or
demand on the
Company in any case shall entitle it to any other or further notice or demand in
similar or other circumstances.
Section 6.2 No modification of this Agreement shall be effective unless the
same be in writing and mutually agreeable between the two parties.
Section 6.3 The Company agrees to pay all costs incurred by both parties in
connection with preparation of this Agreement, the enforcement of any provision
of this Agreement, the collection of the Note or the foreclosure or realization
upon any security therefor.
Section 6.4 This Loan Agreement supercedes a document of the same name dated
January 29, 1999.
Section 6.5 The Company agrees to defend, indemnify, and hold harmless the Bank
for, from, and against and to reimburse the Bank with respect to any and all
claims, actions, costs and expenses whatsoever (including, without limitation,
attorneys fees and expenses and costs reasonably incurred), known or unknown,
asserted against or incurred by the Bank at any time by reason of or arising out
of or relating to any actual or alleged violation of any existing or future
environmental law or actual or threatened Contamination relating to the property
or activities of the Company, whether or not such contamination was in violation
of any environmental statute. This indemnity shall last indefinitely and is
specifically intended to survive this Agreement.
Section 6.6 All notices or other communication s required or permitted under
this Agreement shall be in writing and shall be deemed given when personally
delivered or mailed to the respective parties' addresses as set forth above.
Section 6.7 This Agreement and the rights and obligations of the parties
hereunder shall be construed and interpreted in accordance with the laws of the
State of Colorado.
Norwest Bank Colorado, N.A. Boulder Gaiam, Inc.
By: /s/ Xxxxxx X. Xxxxxxxx By: /s/ Xxxxx Xxxxxx
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Xxxxxx X. Xxxxxxxx Xxxxx Xxxxxx
Vice President Chairman & CEO
EXHIBIT "A'
BORROWING BASE CERTIFICATE
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Norwest Bank Colorado, N. A. - Boulder
(hereinafter referred to as the Bank)
0000 Xxxxx Xxxxxx, X.X. Xxx 000
Xxxxxxx, Xxxxxxxx 00000-0000
COMPANY NAME: Gaiam, Inc.
COLLATERAL:
1. Accounts Receivable as of ________________
Total uncollected balances due on open book
Accounts Receivable ________________
Less:
Assigned accounts which are more than sixty days
past due according to the assigned selling terms or to
which there exists a dispute with the debtor ________________
Less: Receivables from affiliated companies ________________
Less: Receivables from officers and employees ________________
Less: Unassigned Receivables from Federal Govt. ________________
Total eligible amount of Accounts Receivable ________________
75% of eligible Accounts Receivable ________________
2. Eligible inventory, as described in
Section 1.1 (a) ________________
40% of eligible amount of Merchandise
Inventory allowed ________________
3. Total eligible collateral Assigned to the Bank
(Accounts Receivable + Inventory) ________________
BORROWINGS:
4. Amount outstanding previous to this date ________________
5. Today's Borrowings ________________
6. Total Borrowings outstanding as of today ________________
7. Total Borrowing Availability under the
Security Agreement ________________
Amount Available for Borrowing After Today
(subtract (6) from the lessor of (7) or (3) ________________
We further certify that there have been no sales, returns, allowances or
rebates, or other adjustments or credits in connection with the above mentioned
assigned accounts and that the above mentioned assigned accounts represent valid
indebtedness which the respective debtors are under legal valid obligation to
pay when due, and that none of such accounts is subject to any right of
deduction, set-off or counter-claim, and that we have not accepted any note,
trade acceptance or other form of settlement of any of the above Accounts
Receivable, except as above noted and that the above merchandise inventory is
unencumbered except to the Bank and that said inventory has been kept in good
condition and repair.
We further certify that there is no default in the conditions set forth in the
Security Agreement and Loan Agreement dated May 11, 2000.
COMPANY: Gaiam, Inc.
OFFICER OF COMPANY: ____________________________________
