EXHIBIT 10.70
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XXXXXX FIVE CENTS SAVINGS BANK
LOAN AND SECURITY AGREEMENT
BETWEEN XXXXXX FIVE CENTS SAVINGS BANK
AND
ANNIE'S HOMEGROWN, INC.
June _____, 2001
P R E A M B L E
ANNIE'S HOMEGROWN, INC. ("Borrower") is a Delaware corporation
qualified to conduct business in the Commonwealth of Massachusetts with a
principal place of business and chief executive office at 000 Xxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxxxxxxxx 00000, and has requested that XXXXXX FIVE CENTS SAVINGS
BANK, a Massachusetts banking corporation with a mailing address of 00 Xxxx
Xxxxxx, Xxxxxxx, Xxxxxxxxxxxxx 00000 (the "Bank") make certain credit facilities
available to it, including a revolving line of credit, the proceeds of which
shall be available for general business purposes, secured by the personal
property owned by the Borrower.
1. GRANT OF SECURITY INTEREST.
The Borrower for valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, hereby grants to the Bank a continuing security
interest in the Collateral (as defined in Section 3) and in the products and
proceeds thereof. The security interest granted hereby is to secure payment and
performance of all Obligations (as defined in Section 3) of Borrower to the
Bank, now existing or hereafter arising.
2. LOANS.
(A) ____ Revolving Loans. The Bank hereby establishes a revolving line
of credit in the Borrower's favor pursuant to which Bank shall from time to
time, in the absence of a demand for payment or an Event of Default (as defined
herein), and based upon circumstances existing at the time of any request, make
such loans to Borrower as Borrower may request (the "Revolving Loans"). Borrower
agrees that the aggregate principal amount of loans outstanding will not exceed
at any time the lesser of (i) $1,500,000.00 (the "Credit Limit"), or (ii) the
Borrowing Base (as defined in Section 3). The Borrower acknowledges that the
Borrowing Base is designated for monitoring purposes and that the Bank is not
obligated to make any Revolving Loans, and may choose to make Revolving Loans,
in excess thereof. The revolving line of credit established hereby shall be
payable on demand. The revolving line of credit shall be evidenced by a
Revolving Note (the "Revolving Note") in the form annexed as Exhibit 2(a). All
Revolving Loans will bear interest, calculated on the basis of actual days
elapsed and a 360-day year and payable monthly in arrears at a fluctuating per
annum rate equal to the Bank's Base Rate from time to time (as defined in
Section 3) plus one (1.00%) percent. The proceeds of the Revolving Loans shall
be used for short term working capital for the Borrower.
(B) ____ Borrower hereby authorizes and directs Bank, in Bank's sole
discretion (provided, however, Bank shall have no obligation to do so), (i) to
pay accrued interest as the same becomes due and payable pursuant to this
Agreement or pursuant to any note or other agreement between Borrower and Bank,
and to treat the same as a loan to Borrower which shall be added to Borrower's
respective loan balances pursuant to this Agreement; or (ii) to apply the
proceeds of Collateral, including without limitation, payments on Account
Receivables, and other payments from sales or leases of Equipment or Inventory
and any other funds to the payment of such items or to the payment of any other
amounts then due to Bank from Borrower.
3. CERTAIN DEFINITIONS. As used herein the following terms have the
meanings set forth below:
"Accounts Receivable" means all Borrower's accounts, accounts
receivable, contract rights, notes, bills, drafts, acceptances, instruments,
documents, chattel paper and all other debts, obligations and liabilities in
whatever form owing to Borrower from any Person (as defined below) for goods
sold by it or for services rendered by it, or however otherwise established or
created, all guaranties and security therefor, all right, title and interest of
Borrower in the goods or services which gave rise thereto, including rights to
reclamation and stoppage in transit and all rights of an unpaid seller of goods
or services; whether any of the foregoing be now existing or hereafter arising,
now or hereafter received by or owing or belonging to Borrower.
"Base Rate" means the rate per annum from time to time announced by
Bank as its Base Rate, it being understood that such rate is a reference rate,
not necessarily the lowest, established from time to time which serves as the
basis upon which effective interest rates are calculated for loans making
reference thereto. The effective interest rate applicable to Borrower's
Revolving Loans shall change on the date of each change in the Base Rate.
Principal and interest shall be payable at Bank's office in Peabody in lawful
money of the United States of America without set-off, deduction or
counterclaim. Borrower authorizes Bank to charge any of its deposit account(s)
with Bank for all payments hereunder. Borrower also agrees and acknowledges that
all loans are secured by the Collateral and constitute Obligations.
"Borrowing Base" means the sum of the following (as shown on Bank's
records at any time):
(a) eighty (80%) percent of the unpaid face amount of all Eligible
Accounts (as defined below), PLUS
(b) thirty (30%) percent of Eligible Inventory, but not to exceed
$200,000.00.
"Cash Flow" means on a trailing four quarters' basis, earnings before
gross interest expense, depreciation, amortization and income taxes, less
unfinanced capital expenditures, less member distributions, less related company
payments, loans and advances (if applicable), less cash taxes paid for the
period.
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"Collateral" means all Accounts Receivable, Inventory, Equipment and
Related Collateral and all other property of the Borrower or another Person (as
defined below), now owned or hereafter acquired, in which Bank is granted a Lien
hereunder, or which is designated as Collateral or in which Bank is granted a
Lien to secure any of the Obligations pursuant to an agreement supplemental
hereto or otherwise (whether or not such agreement makes reference to this
Agreement or Obligations of the Borrower hereunder).
"Current Assets" means, at any date as of which the amount thereof
shall be determined, all assets that should, in accordance with GAAP, be
classified as current assets on the balance sheet of Borrower, which shall
include cash and cash equivalents net of Accounts Receivable and Inventory.
"Current Liabilities" means, at any date as of which the amount thereof
shall be determined, all liabilities that should, in accordance with GAAP, be
classified as current liabilities on the balance sheet of Borrower.
"Current Ratio" shall mean Borrower's Current Assets divided by
Borrower's Current Liabilities.
"Debt Service Coverage Ratio" shall mean Borrower's Cash Flow divided
by Total Debt Service Requirements.
"Debt to Worth Ratio" shall mean Borrower's Total Liabilities divided
by Tangible Net Worth, determined in accordance with GAAP.
"Eligible Account" means an Account Receivable of the Borrower which
initially and at all times until collected in full:
(A) ____ is not more than ninety (90) days from the date of invoice;
provided that if at any time fifty (50%) percent or more of the aggregate amount
of the Accounts Receivable due from any account debtor are unpaid in whole or in
part more than ninety (90) days from the respective dates of invoice, from and
after such time none of the Accounts Receivable (then existing or thereafter
arising) due from such account debtor shall be deemed to be Eligible Accounts
until such time as less than fifty (50%) percent of Accounts Receivable due from
such account debtor are (as a result of actual payments received thereon) no
more than ninety (90) days from the date of invoice; accounts payable by
Borrower to an account debtor shall be netted against Eligible Accounts due from
such account debtor, and the difference (if positive) shall constitute Eligible
Accounts from such account debtor for purposes of determining the Borrowing Base
(notwithstanding paragraphs (C) and (F) below);
(B) ____ arose in the ordinary course of business from the domestic
performance of services or the outright sale of goods (excluding conditional
sale or sale and return); such services have been performed or such goods have
been shipped to the account debtor; and in the case of goods,
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the Borrower has possession of or has delivered to Bank shipping and delivery
receipts evidencing shipment;
(C) is not owed by an account debtor who is a supplier, employee or
parent, subsidiary or other affiliate of the Borrower;
(D) ____ is not evidenced by a promissory note or other instrument, is
subject to a perfected security interest in favor of Bank and is not subject to
any other Lien (as defined below);
(E) ____ is not owed by an account debtor whose principal place of
business is located outside of the United States of America; provided, however,
that such Account may constitute a Eligible Account (i) if foreign credit
insurance (satisfactory to Bank in all respects) is obtained for such Account
Receivable listing the Bank as an additional insured, or (ii) if it is supported
by letter(s) of credit issued to the Borrower by financial institution(s)
acceptable to Bank;
(F) ____ is a non-contingent obligation that is not subject to set-off,
credit, defense, warranty claim, allowance or adjustment by the account debtor
except normal discount allowed in the ordinary course for prompt payment, and
such account debtor has not complained as to its liability thereon nor returned
any of the subject goods;
(G) ____ did not arise out of any sale made on an advanced billing,
xxxx and hold, dating or delayed shipment basis the receivable for which is more
than thirty (30) days past due;
(H) ____ is owed by an account debtor as to which Borrower has received
no notice and has no knowledge of bankruptcy, insolvency or other facts which
make collection doubtful, and has not been turned over to a collection agency or
attorney;
(I) ____ the account debtor is not located in the State of New Jersey,
or the State of Minnesota or any other state denying creditors access to its
courts in the absence of such creditor's qualification to conduct business as a
foreign corporation in such state or complying with other filing or reporting
requirements unless Borrower has filed all legally required filings and reports,
obtained any necessary authorities or certificates to do business, and paid any
applicable taxes and/or fees to the applicable state agency in such state;
(J) ____ if owed by the United States of America, has been properly
assigned to the Bank pursuant to the Federal Assignment of Claims Act, and is
not subject to any right of offset or other claims;
(K) has not been designated by Bank in its sole discretion as
unacceptable for any reason by notice to the Borrower;
Characterization of any Account Receivable due from an account debtor
as an Eligible Account shall not be deemed a determination by Bank as to its
actual value nor in any way obligate Bank to accept any Account Receivable
subsequently arising from such account debtor to be, or to continue to deem such
Account Receivable to be, an Eligible Account; it is the
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Borrower's responsibility to determine the creditworthiness of account debtors
and all risks concerning the same and collection of Accounts Receivable are with
the Borrower. All Accounts Receivable which are not Eligible Accounts also
constitute Collateral.
"Eligible Inventory" means Inventory of the Borrower which initially
and at all times until sold is:
(a) new and unused in first-class condition, merchantable and salable
through normal trade channels;
(b) at a location which has been identified in writing to Bank;
(c) subject to a perfected security interest in favor of Bank and owned
by Borrower free and clear of any lien except in favor of Bank;
(d) not obsolete; not scrap, waste, defective goods and the like;
(e) ______ has been produced by Borrower in accordance with the Federal
Fair Labor Standards Act of 1938, as amended, and all rules, regulations and
order promulgated thereunder;
(f) ____ not stored with a bailee, warehouseman, processor or similar
party unless Bank has given its prior written consent thereto and Borrower has
caused each such bailee, warehouseman, processor or similar party to issue and
deliver to Bank warehouse receipts and lien waivers in Bank's name for such
inventory, and in the case of processors, unless such are goods segregated and
labeled as belonging to Borrower or Borrower has perfected its interest therein
by retaining a security interest therein and filing financing statements against
such processor pursuant to ss.9-315 of the Uniform Commercial Code;
(g) has not been designated by Bank in its reasonable discretion as
unacceptable for any reason by notice to Borrower;
(h) ____ is and has been since the date of this Agreement valued for
financial reporting purposes on a basis consistent with the basis applied for
prior financial periods and net of all reserves established by Borrower; and
(i) ____ not held on consignment by a customer unless (i) Borrower has
perfected its interest therein by filing financing statements against such
customer and by prior notification of secured parties of such customer as
required by ss.2-326(3)(c) and 9-114 of the Uniform Commercial Code, (ii) Bank
has consented in writing that such Inventory is eligible, and (iii) such
consignor has acknowledged Bank's first priority claim in such Inventory. The
provisions of this paragraph shall not be deemed a consent by bank to Borrower's
establishment of any consignment relationship.
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"Equipment" means Borrower's machinery, equipment, furnishings,
fixtures and other goods (as defined in Article 9 of the Uniform Commercial
Code) which is not Inventory, whether now owned or thereafter acquired by
Borrower and wherever located, all replacements and substitutions therefor or
accessions thereto and all proceeds thereof, and including, also without
limitation, all proceeds of fire or other insurance covering the aforesaid
property.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended. "Plan" means any employee plan subject to provisions of Title IV of
ERISA maintained for employees of Borrower, any subsidiary of Borrower or any
other trade or business under common control with Borrower within the meaning of
Section 414(c) of the Internal Revenue Code or the regulations thereunder.
"Reportable Event" means any reportable event as defined in ERISA. "PBGC" means
the Pension Benefit Guaranty Corporation.
"Financial Statements" means the balance sheet of Borrower as of
______, 2001, statement of income, and changes in financial position, and notes
thereto, of Borrower for the years or, as appropriate, quarter ended on such
dates, reviewed by independent certified public accountants of recognized
standing to present fairly the financial position and results of operations of
Borrower at such dates and for such periods in accordance with GAAP, together
with all future financial statements whether prepared by management of the
Borrower or certified public accountants on behalf of Borrower.
"GAAP" means generally accepted accounting principles applies
consistently as was done in the preparation of the Financial Statements, with
such changes or modifications thereto as may be approved in writing by the Bank.
"Indebtedness" shall mean, with respect to any Person (as defined
below), (i) all indebtedness for borrowed money or for the deferred purchase
price of property or services, and all obligations under leases which are or
should be, under generally accepted accounting principles, recorded as capital
leases, in respect of which such Person is directly or contingently liable as
obligor, guarantor, endorser or otherwise, or in respect of which such Person
otherwise assures a creditor against loss, (ii) all indebtedness for borrowed
money or for the deferred purchase price of property or services secured by (or
for which the holder has an existing right, contingent or otherwise, to be
secured by) any Lien upon property (including without limitation accounts
receivable and contract rights) owned by such Person, whether or not such Person
has assumed or become liable for the payment thereof, and (iii) all other
liabilities or obligations which would, in accordance with generally accepted
accounting principles, be classified as liabilities of such Person.
"Inventory" means all inventory of the Borrower of whatever name,
nature, kind or description, all goods held for sale or lease or to be furnished
under contracts of service, finished goods, work in process, raw materials,
materials used or consumed by Borrower, parts, supplies, all wrapping,
packaging, advertising, labelling, and shipping materials, devices, names and
marks, all contracts rights and documents relating to any of the foregoing,
whether any of the foregoing be now existing or hereafter arising, wherever
located, now owned or hereafter acquired by Borrower.
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"Lien" means any mortgage, pledge, assignment, lien, charge,
encumbrance or security interest of any kind whatsoever, or the interest of a
vendor or lessor under a conditional sale, title retention or capital lease
agreement.
"Obligation(s)" means all loans, advances, debts, liabilities,
obligations (including without limitation for reimbursement in connection with
guaranties and letters of credit), agreements, undertakings, covenants and
duties owing or to be performed or observed by the Borrower to or in favor of
Bank, of every kind and description (whether or not evidenced by any note or
other instrument; for the payment or money; arising out of this Agreement or any
other agreement between Bank and the Borrower or any other instrument of
Borrower in favor of Bank; arising out of or relating or similar to transactions
described herein; or contemplated as of the date hereof), direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising.
"Person" means any individual, partnership, firm, association, business
enterprise, trust, estate, company, joint venture, governmental authority,
corporation or other entity.
"Related Collateral" means all Borrower's general intangibles; trade
names, marks and secrets; patents, trademarks, copyrights and other intellectual
property; customer lists; goodwill; cash; deposit accounts; tax refunds; claims
under insurance policies (whether or not proceeds of other Collateral); rights
of set off; rights under judgments; tort claims and choses in action; computer
programs and software; books and records including without limitation all
electronically recorded data); contract rights; and all contracts and agreements
to or of which it is a party or beneficiary, whether any of the foregoing be now
existing or hereafter arising, now or hereafter received by or belonging to
Borrower.
"Tangible Net Worth" shall mean Borrower's Total Assets determined in
accordance with GAAP, consistently applied, subtracting therefrom Total
Liabilities and intangibles, including goodwill ( as determined in accordance
with such principles so applied).
"Total Assets" means, at any date as of which the amount thereof shall
be determined, all assets that should, in accordance with GAAP, be classified as
all assets on the balance sheet of the Borrower.
"Total Debt Service Requirements" means on a trailing four quarters'
basis regularly scheduled payments of principal and/or interest and amounts due
under any capitalized leases.
"Total Liabilities" means at any date as of which the amount thereof
shall be determined, all obligations that shall, in accordance with GAAP, be
classified as liabilities on the balance sheet of the Borrower, including, in
any event, all Indebtedness.
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"Uniform Commercial Code". The following terms which are defined in the
Massachusetts Uniform Commercial Code shall, unless the context otherwise
requires, have the same meanings herein: "account", "account debtor", "chattel
paper", "document", "general intangible", "inventory", "instrument", and
"proceeds".
Accounting terms used and not otherwise defined in this Agreement have
the meanings determined by, and all calculations with respect to accounting or
financial matters unless otherwise provided herein shall be computed in
accordance with, GAAP.
4. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants
(and at the time of each loan hereunder shall be deemed to represent and
warrant) to Bank that:
(A) ____ Borrower is a corporation duly organized and validly existing
in good standing under the laws of the State of Delaware and is duly qualified
to do business and is in good standing in every other state in which such
qualification may be necessary by reason of the nature or location of Borrower's
assets or operations;
(B) ____ The execution, delivery and performance of Borrower's
obligations hereunder are within its powers, have been duly authorized by all
necessary corporate action and other action, require no action by or in respect
of, or filing with, any governmental authority, and do not contravene or
constitute a default under any of the charter, by-laws, or other constituent
documents of Borrower or, to the knowledge of Borrower under any provision of
applicable law or regulation or any judgment, order, decree, injunction or
material agreement or other instrument by which it or any of its properties may
be bound, or result in creation or imposition of any Lien on any of their assets
except in favor of Bank;
(C) ____ This Agreement has been duly executed and delivered by and
constitutes a valid and binding agreement of the Borrower, enforceable against
Borrower in accordance with its terms, except as enforceability may be limited
by bankruptcy, insolvency or other similar law affecting creditors' rights
generally;
(D) ____ Borrower's Financial Statements which have been furnished to
Bank have been prepared in accordance with GAAP applied on a basis consistent
with that of prior financial periods and are true and correct and fairly present
its financial position as at the close of business on the date(s) thereof and
the results of its operations during the period(s) covered thereby. Borrower has
no liabilities, contingent or otherwise, involving material amounts which are
not disclosed in said statements or the notes thereto. Since the date of the
most recent of such statements there has occurred no material adverse change in
its financial condition or business;
(E) ____ It owns all of the assets reflected in the most recent of such
Financial Statements, except assets sold or otherwise disposed of in the
ordinary course of business since the date thereof, and such assets together
with any assets acquired since such date, including without limitation the
Collateral, are subject to no Liens except (i) as reflected in such statement or
the notes thereto or (ii) in favor of Bank;
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(F) ____ Borrower's charter documents have been duly filed and are in
proper order. All its respective books and records are accurate and up-to-date;
(G) ____ Borrower has made or filed all tax returns, reports and
declarations relating to any material tax liability required by any jurisdiction
to which it is subject (any tax liability which may result in a Lien on any
Collateral being hereby deemed material); has paid all taxes shown or determined
to be due thereon except those being contested in good faith; and has made
adequate provision for the payment of all taxes so contested or in respect of
subsequent periods;
(H) ____ To Borrower's knowledge, it (i) is subject to no charter,
corporate or other legal restriction, or any judgment, award, decree, order,
governmental rule or regulation or contractual restriction which could have a
material adverse effect on its financial condition, business or prospects, and
(ii) is in compliance with its charter documents, and by-laws, all contractual
requirements by which it or any of its properties may be bound and all
applicable laws, rules and regulations (including without limitation those
relating to environmental protection) other than laws, rules or regulations the
validity or applicability of which it is contesting in good faith or provisions
of any of the foregoing the failure to comply with which cannot reasonably be
expected to materially adversely affect its financial condition, business or
prospects or the value of any Collateral;
(I) ____ There is no action, suit, proceeding or investigation pending
or, to its knowledge, threatened against or affecting it or any of its assets
before or by any court or other governmental authority which, if determined
adversely to it, would have a material adverse effect on its financial
condition, business or prospects or the value, title or extent of any
Collateral;
(J) ____ It is in compliance with ERISA; no Reportable Event has
occurred and is continuing with respect to any Plan; and it has no unfunded
vested liability under any Plan.
(K) ____ Its principal executive office and the office where it keeps
its records concerning its Accounts Receivable and other assets is (and has been
for more than four (4) months prior to the date of this Agreement) that shown at
the beginning of this Agreement, and all of its Equipment and other goods are
stored at that location and the locations set forth on Schedule 4(m);
(L) ____ To the best of its knowledge, Borrower has taken all necessary
action to assess, evaluate and correct all of the hardware, software, embedded
microchips and other processing capabilities it uses in its primary business
operations, to ensure that it will be able to function accurately and without
interruption or ambiguity using date information before, during and after
January 1, 2000.
5. BORROWER'S REPORTS AND NOTICES. Borrower will deliver to Bank:
(A) ____ at the time of each Revolving Loan and within twenty (20) days
after the close of each monthly fiscal period, a Borrowing Base Certificate for
the Borrower in form reasonably acceptable to Bank containing a summary and
reconciliation of Accounts Receivable created
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since the prior such certificate, together with (if required and as frequently
as requested by Bank) copies of invoices, sales journals and schedules of credit
memorandums relating to such Accounts Receivable and an Inventory valuation
report;
(B) ____ within twenty (20) days after the close of each monthly fiscal
period of Borrower, monthly Accounts Receivable and Accounts Payable aging
reports in form reasonably satisfactory to Bank showing a total amount due to
and payable by the Borrower from each account debtor, breaking down the
receivables and payables by days past due as follows: 0-30 days, 31-60 days,
61-90 days and 91 days plus;
(C) ____ within thirty (30) days after the close of each quarterly
fiscal period of Borrower, quarterly financial statements including a balance
sheet and statement of profit and loss reflecting the financial condition of the
Borrower at the end of such period and the results of its operations during such
period, such balance sheet and statement of profit and loss to be certified by
Borrower's chief financial officer to fairly present its financial condition at
the end of such period and the results of its operations during such period in
accordance with GAAP, consistently applied, subject to changes resulting from
year-end audit adjustments;
(D) ____ annually, as soon as available but in any event within ninety
(90) days after the close of each fiscal year of Borrower, a full and complete
signed copy of a financial statement or statements prepared on an audited basis,
by independent certified public accountants reasonably acceptable to Bank, which
shall include a balance sheet of Borrower and all of its related affiliates and
subsidiaries as at the end of such year, a statement of profit and loss, a
statement of cash flows of Borrower and all of its related affiliates and
subsidiaries reflecting the results of its operations during such year, and
annually within thirty (30) days of filing with taxing authorities, copies of
the state and federal tax returns for the Borrower and all of its related
affiliates and subsidiaries;
(E) ____ promptly, such other information concerning the Borrower, the
Collateral, the operation of Borrower's business or its financial condition and
copies of such governmental filings and other documentation as Bank may from
time to time reasonably request;
(F) promptly notice of:
(a) any event described in Section 10 or any event which, with
notice or lapse of time or both, might become such an event;
(b) ____ any change of Borrower's officers, directors, and key
employees, change of location of its principal offices, change of
Borrower's name, any sale or purchase out of the ordinary course of
Borrower's business and any other material change in the business or
financial affairs of Borrower or any change in the legal status of the
Borrower;
(c) ____ the institution or commencement of any action, suit,
proceeding or investigation against or affecting Borrower or any of its
assets which, if determined
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adversely to Borrower, could have a material adverse effect on the
financial condition, business or prospects of Borrower or the value,
title or extent of any Collateral;
(d) any judgment, award, decree, order or determination
relating thereto;
(e) ____ the imposition or creation of any Lien, other than
taxes that are not yet due and payable, against any asset of Borrower
except in favor of Bank;
(f) any Reportable Event, together with a statement of
Borrower's Manager as to the details thereof and a copy of its notice
thereof to the PBGC;
(g) ____ any potential or known release or threat of release
of hazardous or toxic chemicals, materials or oil from any site owned
or operated by Borrower or the incurrence of any expense or loss in
connection therewith or upon Borrower's obtaining knowledge of any
investigation, action or the incurrence of any expense or loss by any
governmental authority in connection with the containment or removal of
any hazardous or toxic chemical, material or oil for which expense or
loss Borrower may be liable or potentially responsible; or
(h) any loss or destruction of Collateral or other material
assets whether or not covered by insurance;
(G) ____ immediately after receipt or filing, a copy of (i) any notice
it may receive from the PBGC relating to the PBGC's intention to terminate or
appoint a trustee to administer any Plan and (ii) any report or notice relating
to any Reportable Event which Borrower may file under ERISA with the PBGC, the
Internal Revenue Service or the United States Department of Labor; and
(H) ____ if requested by Bank, within five (5) days after the accrual
in accordance with applicable law of Borrower's obligation to make deposits for
F.I.C.A and withholding taxes, evidence reasonably satisfactory to Bank that
such deposits have been made as required.
6. _____ BANK'S REPORTS. After the end of each month, Bank will render
to Borrower a statement of Borrower's loan account with Bank hereunder, showing
all applicable credits and debits. Each statement shall be considered correct
and to have been accepted by Borrower and shall be conclusively binding upon
Borrower in respect of all charges, debits and credits of whatsoever nature
contained therein under this Agreement, and the closing balance shown therein,
unless Borrower notifies Bank in writing of any discrepancy within thirty (30)
days from the date of any such statement.
7. BORROWER'S AFFIRMATIVE COVENANTS. Borrower agrees that it will:
(A) ____ maintain property and liability insurance with responsible
insurance companies (and with deductibles) satisfactory to Bank in such amounts
and covering such risks as is usually
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carried by companies engaged in similar businesses and owning similar properties
in the same general areas as Borrower operates;
(B) ____ maintain insurance naming Bank as first mortgagee and/or loss
payee with responsible insurance companies (and with deductibles) satisfactory
to Bank covering Borrower's Equipment, Inventory, and other insurable Related
Collateral, in such amounts as is usually carried by companies engaged in
similar businesses and in any event not less than Bank may from time to time
require, and deliver to Bank copies of such insurance policies (and all renewals
thereof) together with lender's loss payable endorsements naming Bank as secured
party, executed by the insurer(s), such policies to provide that coverage may
not be modified or terminated without thirty (30) days prior notice to the Bank;
(C) ____ maintain its existence in good standing, and its qualification
to do business in good standing in every state in which such qualification may
be necessary by reason of the nature or location of its assets or operations,
and comply with its operating agreement, charter documents, and by-laws, all
contractual requirements by which it or any of its properties may be bound and
all applicable laws, rules and regulations (including without limitation ERISA
and those relating to environmental protection) other than laws, rules or
regulations the validity or applicability of which the Borrower shall contest in
good faith or provisions of any of the foregoing the failure to comply with
which cannot reasonably be expected to materially adversely affect the financial
condition, business or prospects of Borrower or the value, title or extent of
any Collateral;
(D) ____ continue to engage primarily in its respective present
business and maintain and preserve all of its properties necessary for the
conduct thereof in good working order and condition, ordinary wear and tear
excepted;
(E) ____ pay and discharge all taxes, assessments and governmental
charges or levies imposed upon it or upon its income or property, or upon this
Agreement or any notes evidencing Obligations, including without limitation
taxes, assessments, charges or levies relating to real and personal property,
the Collateral, franchises, income, unemployment, old age benefits, withholding,
or sales or use, prior to the date on which penalties attach thereto, and all
lawful claims (whether for any of the foregoing or otherwise) which, if unpaid,
might give rise to a Lien upon any property of Borrower, except any of the
foregoing which is being contested in good faith and by appropriate proceedings
and for which Borrower has established adequate reserves; and
(F) ____ establish and maintain its primary operating and deposit
accounts and deposit relationship with the Bank.
8. BORROWER'S NEGATIVE COVENANTS. Without the prior written consent
of Bank:
(A) ____ Borrower will not permit its Debt To Worth Ratio to be greater
than 1.00 to 1.00 as of each fiscal year end, to be tested at each fiscal year
end;
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(B) ____ Borrower will not permit its Tangible Net Worth to be less
than $1,800,000.00 as of each fiscal year end, to be tested at each fiscal year
end;
(C) ____ Borrower will not permit its Current Ratio to be less than
1.85 to 1.00 as of each fiscal year end, to be tested at each fiscal year end;
(D) Borrower will achieve and maintain a minimum net profit at each
fiscal year end of $100,000.00;
(E) ____ Borrower will not sell, assign, exchange or otherwise dispose
of any of the Collateral (other than Collateral consisting of (i) scrap, waste,
defective goods and the like; (ii) obsolete goods; and (iii) finished goods,
including used equipment, sold in the ordinary course of business) or any
interest therein to any other Person;
(F) ____ Borrower will not create, permit to be created or suffer to
exist any Lien upon any of the Collateral or any other property of Borrower, now
owned or hereafter acquired, except: (i) landlord's carriers', warehousemen's,
mechanics and other similar Liens arising by operation of law in the ordinary
course of Borrower's business; (ii) arising out of pledges or deposits under
workmen's compensation, unemployment insurance, old age pension, social
security, retirement benefits or other similar legislation; (iii) purchase money
Liens arising in the ordinary course of business (so long as the Indebtedness
secured thereby does not exceed $5,000.00 in the aggregate and such Lien extends
to no other property); or (iv) in favor of Bank;
(G) ____ Borrower will not pay any dividends on or make any
distribution on account of any of Borrower's stock; or redeem, purchase or
otherwise acquire, directly or indirectly, any of such interest; provided,
however, that if the Borrower is in compliance with all the covenants, terms,
and provisions of this Agreement, Borrower may make distributions to its
shareholders during any fiscal year of Borrower to satisfy in whole or in part
the amount necessary to pay federal and state income taxes upon Borrower's
undistributed income for such year (so long as such distribution will not cause
Borrower to be in default of any of the foregoing financial covenants);
(H) ____ Borrower will not enter into any lease or other transaction
with any director, shareholder, officer or affiliate on terms any less favorable
than those which might be obtained at the time from persons who (or entities
which) are not such a director, shareholder, officer or affiliate;
(I) ____ Borrower will not make any loans or advances to any Person,
including without limitation Borrower's directors, shareholders, officers, and
employees, except advances to directors, officers, or employees with respect to
expenses incurred by them in the ordinary course of their duties which are
properly reimbursable by Borrower;
(J) ____ Borrower will not assume, guaranty, endorse or otherwise
become directly or contingently liable in respect of (including without
limitation by way of agreement, contingent or otherwise, to purchase, provide
funds to or otherwise invest in a debtor or otherwise to assure a
13
creditor against loss), any Indebtedness (except guaranties by endorsement of
instruments for deposit or collection in the ordinary course of business) of any
Person;
(K) ____ Borrower will not merge or consolidate with or into any
corporation, or enter into any joint venture or partnership with any person,
firm or corporation; convey, lease or transfer or otherwise dispose of any
substantial part of its assets or business (whether in one or more transactions)
except for the sale of Inventory in the ordinary course of its business;
(L) ____ Borrower will not incur any Indebtedness exceeding $10,000.00
in the aggregate other than (i) trade debt and ordinary operating expenses
incurred in the ordinary course of Borrower's business, or (ii) Obligations owed
to the Bank.
9. ADDITIONAL COVENANTS AS TO FURTHER SECURITY AND ASSURANCES.
(A) ____ Borrower will at all times maintain sufficient Collateral in
which Bank has a perfected first-rank security interest to ensure that loans
outstanding hereunder do not in the aggregate exceed the Borrowing Base from
time to time in effect, and shall immediately make such principal payments as
may at any time to be necessary to eliminate any such excess.
(B) ____ Borrower will notify Bank, at least thirty (30) days prior to
any such event, of any change in Borrower's exact legal name, any change in its
place(s) of business or locations(s) of Equipment, or other goods as set forth
in Section 4 or its establishment of any new place of business or location of
Inventory or office where its records concerning Accounts Receivable and other
assets are kept.
(C) ____ At Bank's request, Borrower at its expense (i) will promptly
and duly execute and deliver such documents and assurances and take such actions
as may be necessary or desirable or as Bank may request in order to correct any
defect, error or omission which may at any time be discovered or in order to
more effectively carry out the intent and purpose of this Agreement and to
establish, perfect and protect Bank's security interest, rights and remedies
created or intended to be created hereunder and (ii) without limiting the
generality of the above, will join with Bank in executing financing and
continuation statements pursuant to the Uniform Commercial Code or other notices
appropriate under applicable Federal or state law in form satisfactory to Bank
and filing the same in all public offices and jurisdictions wherever and
whenever requested by Bank (including without limitation upon the occurrence of
any event referred to in paragraph (B) above or (F) below).
(D) ____ Upon an Event of Default under the Revolving Loans and
expiration of applicable grace or cure periods (if any), if the Bank shall so
require, Borrower will, immediately upon receipt of all checks, drafts, cash and
other remittances in payment of any Collateral sold or on account of Borrower's
Accounts Receivable (including without limitation tax refunds, insurance
proceeds and notes), hold the same in trust for Bank and deliver the same to
Bank in the form received together with Borrower's endorsement thereon where
necessary to permit collection thereof. Bank will credit all such payments
(conditional upon final collection) against interest
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accrued on or principal of loans outstanding hereunder; PROVIDED THAT for
purposes of computing interest, Borrower shall not be given credit for items
subject to collection until three (3) business days after their receipt by Bank
(For purposes of determining the Borrowing Base, Borrower shall be given
immediate credit for the same). The order and method of application shall be in
Bank's sole discretion and proceeds which in Bank's discretion are not so
applied shall be credited to Borrower's deposit account(s) with Bank. Bank will
at all times have the right to require Borrower (i) to enter into a lockbox
arrangement with Bank for the collection of such remittances and payments or
(ii) to maintain its deposit accounts at Bank or, in the alternative, at another
financial institution which has agreed to accept drafts drawn on it by Bank
under a written depository transfer agreement with Bank, and to block Borrower's
account and waive its own rights as against such account.
(E) ____ Bank will at any time following the occurrence of any Event of
Default hereunder have the right to take physical possession of the Collateral
and to maintain such possession on Borrower's premises or to remove the
Collateral or any part thereof to such other places as Bank may desire. If Bank
exercises such right, Borrower shall upon Bank's request assemble the same and
make it available to Bank at a place reasonably convenient to Bank. If any
Collateral is in the possession or control of any of Borrower's agents or
processors, Borrower shall at Bank's request (before or after Demand) notify
them of Bank's security interest therein and, at Bank's request, instruct them
to hold the same for Bank's account and subject to Bank's instructions.
(F) ____ Borrower shall perform any and all further steps requested by
Bank to perfect Bank's security interest in Equipment and Inventory. A physical
listing of all Inventory, Equipment, and other goods, wherever located, shall be
taken by Borrower at least annually and whenever reasonably requested by Bank,
the cost of which shall be borne by the Bank.
(G) ____ Bank may at any time (i) in its own name or in the name of
others communicate with account debtors in order to verify with them to Bank's
satisfaction the existence, amount and terms of any Accounts Receivable and the
absence of any reductions, discounts, defenses or offsets with respect thereto
or (ii) notify account debtors that Collateral has been assigned to Bank and
that payments by such account debtors shall be made directly to Bank. At Bank's
request Borrower will notify any or all such account debtors of such assignment,
give instructions and/or indicate on xxxxxxxx to such account debtors that their
Accounts Receivable shall be paid to Bank and/or supply such account debtors
with a copy of this Agreement.
(H) ____ Bank shall have full power, in its own name or that of
Borrower, to collect, endorse, compromise, settle, sell or otherwise deal with
any or all of the Collateral or proceeds thereof. Borrower does hereby make,
constitute and appoint any officer or agent of Bank as Borrower's true and
lawful attorney-in-fact, with power of substitution: (i) to endorse the name of
Borrower or any of its trustees, officers, or agents upon any notes, checks,
drafts, money orders, or other instruments of payment (including under any
policy of insurance on Collateral) or Collateral that may come into possession
of Bank in full or part payment of any amounts owing to Bank; (ii) to sign and
endorse the name of Borrower or any of its members, trustees, officers, or
agents upon any invoice, freight or express xxxx, xxxx of lading, storage or
warehouse receipts, drafts against debtors, assignments, verifications and
notices in connection with Accounts Receivable, and any
15
instruments or documents relating thereto or to Borrower's rights therein; (iii)
to give written notice to such offices and officials of the United States Postal
Service to effect such change or changes of address so that all mail addressed
to Borrower may be delivered directly to Bank; (iv) to take any and all other
actions necessary or appropriate to collect, compromise, settle, sell or
otherwise deal with any or all of the Collateral or proceeds thereof; and (v) to
obtain, adjust, settle and cancel any insurance referred to in this Agreement;
hereby granting to each said attorney-in-fact or his substitute full power to do
any and all things necessary or appropriate to be done in and about the premises
as fully and effectually as Borrower might or could do, and hereby ratifying all
that any said attorney-in-fact or his substitute shall lawfully do or cause to
be done by virtue hereof. Provided, however, that except to the extent
reasonably necessary to Bank's usual and good faith administration of the loans,
the foregoing powers and appointment shall not be exercised until after the
occurrence of an event described in Section 10.
(I) ____ Borrower hereby assigns to Bank all sums, including without
limitation return of premiums, which may become payable under any policy of
insurance on Collateral and directs each insurance company issuing any such
policy to make payment thereof directly to Bank.
(J) ____ If any Accounts Receivable arise from contracts with the
United States or any department, agency or instrumentality thereof, Borrower
will immediately notify Bank thereof and execute any instruments and take any
steps requested by Bank in order that all monies due and to become due
thereunder shall be assigned to Bank and notice thereof given to the Federal
authorities under the Federal Assignment of Claims Act.
(K) ____ In its sole discretion if Borrower has not done so prior to
cancellation or imposition of any penalties (as applicable), Bank may: (i)
discharge taxes and Liens levied or placed on Collateral; (ii) pay for insurance
thereon or the maintenance and preservation thereof; or (iii) if Borrower shall
fail to make deposits in respect of F.I.C.A. and withholding taxes referred to
in Section 5, make such deposits or pay such taxes, in whole or in part, or set
up such reserves as sank shall in its sole discretion deem necessary in respect
of Borrower's liability on any of the foregoing. Any amount so paid, deposited
or reserved for shall constitute a loan for all purposes hereunder. Nothing
herein shall be deemed to obligate Bank to do any of the foregoing and the
making of any one or more such payments, deposits or reserves shall not
constitute an agreement by Bank to take any further or similar action or a
waiver of any right of Bank hereunder.
(L) ____ Borrower will at all times keep accurate records of the
Collateral and will permit Bank or its agents or representatives at any
reasonable time, (using Bank's usual reasonable examination practices and
procedures) and from time to time to visit Borrower's place(s) of business,
without hindrance or delay, to inspect Inventory and other goods and examine,
check, audit and make copies and abstracts from Borrower's records and books of
account (including without limitation corporate minutes, and records, journals,
orders, receipts and correspondence relating to Collateral, account debtors,
transactions unrelated to Collateral and Borrower's general financial condition,
business and affairs); to remove any of such books and records temporarily for
the purpose of having copies made; and to discuss with any of Borrower's
appropriate directors, officers and employees the Collateral and Borrower's
general financial condition, business and affairs.
16
(M) ____ Borrower hereby grants to Bank, for a term commencing on the
date hereof and continuing so long as any of the Obligations remain outstanding,
at a rental of $1.00 for such entire term, the right to the use of all premises
or places of business which Borrower now or hereafter may have and where any
Collateral may be located; PROVIDED THAT Bank agrees not to exercise such right
unless and until after the occurrence of any one or more of the events described
in Section 10 hereof or until Bank determines to exercise its rights against
Collateral hereunder.
(N) ____ Borrower hereby grants to Bank for a term to commence on the
date of this Agreement and continuing thereafter until all debts and Obligations
of any kind or character owed to Bank are fully paid and discharged, a
non-exclusive, irrevocable, royalty-free license in connection with the Bank's
exercise of its rights hereunder, to use, apply or affix any trademark,
servicemark, tradename, logo or the like and to use any patents, franchises,
licenses, and goodwill in which the Borrower now or hereafter has rights, which
license may be used by Bank upon and after the occurrence of any one or more of
the events described in Section 10 hereof. This license shall be in addition to,
and not in lieu of, the inclusion of all of Borrower's trademarks, servicemarks,
tradenames, logos, goodwill, patents, franchises and licenses in the related
Collateral.
(O) ____ If any Accounts Receivable are at any time evidenced by
promissory notes, trade acceptances or other instruments for the payment of
money, Borrower will immediately deliver the same to Bank appropriately endorsed
to Bank's order and, regardless of the form of such endorsement, Borrower hereby
waives presentment, demand, notice of dishonor, protest, notice of protest and
all other notices with respect thereto.
(P) Intentionally Deleted.
(Q) ____ In the event of the sale, exchange or disposition of any of
the Collateral, other than finished goods in the ordinary course of business, or
any interest therein (and no such sale, exchange or other disposition is hereby
authorized or consented to), Bank's security interest shall nevertheless
continue in such Collateral (including without limitation all proceeds, cash and
non-cash) notwithstanding such sale, exchange or other disposition; all of said
proceeds shall remain Collateral hereunder and shall be transferred and paid
over to Bank immediately, and shall be applied at Bank's option to the payment
of Obligations; and Bank's receipt of any such proceeds shall not be deemed or
construed to be an authorization of or consent to any such sale, exchange or
other disposition.
(R) ____ Any and all deposits or other sums at anytime credited by or
due from Bank to Borrower shall at all times constitute security for Obligations
and may be set-off against any Obligations at any time whether or not they are
then due or other security held by Bank is considered by Bank to be adequate.
Any and all instruments, documents, policies and certificates of insurance,
securities, goods, accounts, choses in action, general intangibles, chattel
paper, cash, property and the proceeds thereof (whether or not the same are
Collateral or proceeds thereof) owned by Borrower or in which Borrower has an
interest, which now or hereafter are at
17
any time in possession or control of Bank or in transit by mail or carrier to or
from Bank or in the possession of any third party acting in Bank's behalf,
without regard to whether Bank received the same in pledge, for safekeeping, as
agent for collection or transmission or otherwise or whether Bank had
conditionally released the same, shall constitute security for Obligations and
may be applied at any time to Obligations which are then owing, whether due or
not due. Bank shall be entitled to presume, in the absence of clear and specific
written notice to the contrary hereinafter provided by Borrower to Bank that any
and all deposits maintained by Borrower with Bank are general accounts as to
which no person or entity other than Borrower has any legal or equitable
interest whatsoever.
(S) ____ All advances by Bank to Borrower under this Agreement and
under any other agreement constitute one general loan, and all indebtedness of
Borrower to Bank under this and under any other agreement constitute one general
Obligation. Each advance to Borrower hereunder or otherwise shall be made upon
the security of all of the Collateral held and to be held by Bank. It is
expressly understood and agreed that all of the rights of Bank contained in this
Agreement shall likewise apply, insofar as applicable, to any modification of or
supplement to this Agreement and to any other agreements between Bank and
Borrower. Any default of this Agreement by Borrower shall constitute, likewise,
a default by Borrower of any other existing agreement with Bank, and any default
by Borrower of any other agreement with Bank shall constitute a default of this
Agreement. The entire Obligation of Borrower to Bank shall become due and
payable when payments become due and payable hereunder upon termination of the
Agreement.
10. ____ EVENTS OF DEFAULT. Although the Bank may demand payment of all
sums due under the Note at any time, the Bank, at its option may also declare
the entire principal balance of the Revolving Loans and all accrued unpaid
interest thereon to be immediately due and payable without demand, notice or
protest (which is hereby waived) upon the occurrence of any more of the
following events ("Events of Default").
(A) ____ failure by Borrower to pay any amount when due under this
Agreement or any note, including, but not limited to, the notes referred to in
Section 2 of this Agreement, after the expiration of any applicable grace
period;
(B) failure by Borrower to pay upon demand (or when due, if not payable
on demand) any other Obligation;
(C) ____ failure by Borrower to perform, discharge, observe or comply
with any Obligation (other than for payment) in accordance with the terms
thereof;
(D) ____ any representation, warranty or statement of Borrower to Bank
heretofore, now or hereafter made in connection with any Obligation (including
without limitation any made in a document provided by Borrower under Section 5)
is found to have been false or misleading in any material respect as of the time
when made;
18
(E) ____ occurrence of any event of default as defined in any other
instrument evidencing or governing Indebtedness of Borrower (other than
Obligations) now or hereafter outstanding, or any event or condition which
entitles any holder or trustee of such Indebtedness to accelerate its maturity;
(F) ____ Borrower's dissolution, liquidation, termination, dissolution
or ceasing to carry on actively any substantial part of its current business;
(G) ____ commencement by Borrower of a voluntary proceeding seeking
relief with respect to itself or its debts under any bankruptcy, insolvency or
other similar law, or seeking appointment of a trustee, receiver, liquidator or
other similar official for it or any substantial part of its assets; or its
consent to any of the foregoing in an involuntary proceeding against it; or
Borrower shall generally not be paying its debts as they become due or admit in
writing its inability to do so; or an assignment for the benefit of, or the
offering to or entering into by Borrower of any composition, extension,
reorganization or other agreement or arrangement with, its creditors;
(H) ____ commencement of an involuntary proceeding against Borrower
seeking relief with respect to it or its debts under any bankruptcy, insolvency
or other similar law, or seeking appointment of a trustee, receiver, liquidator
or other similar official for it or any substantial part of its assets, which
proceeding remains undismissed and unstayed for sixty (60) days; or entry of an
order for relief against Borrower in any such proceeding;
(I) ____ service upon Bank of a writ naming Bank as trustee for
Borrower, or of any other similar process of attachment;
(J) entry of any uninsured judgment or judgments against Borrower which
is not dissolved within thirty (30) days of entry;
(K) ____ attachment of any Lien not permitted hereunder upon property
of Borrower not in favor of Bank without Bank's prior written consent and such
lien is not dissolved or bonded over to the satisfaction of the Bank within
thirty (30) days of its attachment;
(L) ____ entry of any court order which enjoins, restrains or in any
way prevents Borrower from conducting all or any part of its business;
(M) ____ any change in the legal or beneficial ownership of the shares
of Borrower from that existing at the date hereof;
(N) any loss, theft, damage or destruction to or of any material
asset(s) of Borrower not covered by insurance;
(O) ____ reclamation or repossession of, or any action by a creditor to
reclaim or repossess not dismissed within 30 days, any material asset(s) of
Borrower;
19
(P) ____ there shall occur and be continuing any Reportable Event which
constitutes grounds for termination of or for appointment by a United States
district court of a trustee to administer any Plan; the PBGC shall institute
proceedings to terminate or to appoint a trustee to administer any Plan; a
United States district court shall appoint a trustee to administer any Plan; or
any Plan shall be terminated in circumstances giving rise to liabilities having
a material adverse effect on Borrower's financial condition; or
(Q) ____ termination of, failure to make any payment required under or
any other default under any guaranty of or other instrument or agreement
securing any of the Obligations.
11. BANK'S RIGHTS AND REMEDIES UPON DEFAULT. Following the occurrence
of any one or more of the events described in Section 10 above:
(A) ____ (i) If it has not already done so, Bank may decline to make
any or all further loans hereunder; (ii) All Obligations shall become
immediately due and payable at Bank's option without notice to Borrower; (iii)
Borrower shall be obligated to deliver to Bank cash collateral in an amount
equal to the aggregate amounts then undrawn on all letters of credit or
outstanding on acceptances issued by Bank for Borrower's account; (iv) Bank may
proceed to enforce payment of any of the foregoing and shall have and may
exercise any and all rights under the Uniform Commercial Code or which are
afforded to Bank herein or otherwise; and (v) all Obligations (including without
limitation principal, interest accrued to the time of demand, amounts payable
under Section 12 or upon entry of any judgment) shall bear interest payable on
demand at the rate per annum five (5.00%) percent in excess of the contract rate
of interest otherwise payable; and
(B) ____ Bank may sell, lease or otherwise dispose of and deliver any
or all Collateral at public or private sale, for cash, upon credit or otherwise,
at such prices and upon such terms as Bank deems advisable in its sole
discretion. Any requirement of reasonable notice shall be met if such notice is
mailed postage prepaid to Borrower at its address set forth herein at least ten
(10) days before the time of sale or other disposition. Bank may be the
purchaser at any such sale, if it is public, and in such event Bank shall have
all rights of a good faith, bona fide purchaser for value from a secured party
after default. The proceeds of any sale may be applied (in whatever order and
manner Bank elects in its sole discretion) to all costs and expenses of sale
(including without limitation reasonable attorneys fees and disbursements) and
to the payment of Obligations, and any remaining proceeds shall be applied in
accordance with Article 9, Part 5, of the Uniform Commercial Code. Borrower
shall remain liable to Bank for any deficiency.
12. ATTORNEYS FEES, INDEMNIFICATION, ETC.
(A) ____ Borrower shall pay to Bank on demand any and all expenses,
including, but not limited to, a collection charge on all Accounts collected,
all attorneys' fees and expenses, and all other expenses of like or unlike
nature which may be expended by the Bank to obtain or enforce payment of any
Account Receivable either as against the account debtor, Borrower, or any
20
guarantor or surety of Borrower or in the prosecution or defense of any action
or concerning any matter growing out of or connected with the subject matter of
this Agreement, the Obligations or the Collateral or any of Bank's rights or
interests therein or thereto, including, without limiting the generality of the
foregoing, any counsel fees or expenses incurred in any bankruptcy or insolvency
proceedings, and all costs and expenses incurred or paid by Bank in connection
with the administration, supervision, protection or realization on any security
held by Bank for the debt secured hereby, whether such security was granted by
Borrower or by any other person primarily or secondarily liable (with or without
recourse) with respect to such debt, and all costs and expenses incurred by Bank
in connection with the defense, settlement or satisfaction of any action, claim
or demand asserted against Bank in connection with the debt secured hereby, all
of which amounts shall be considered advances to protect Bank's security, and
shall be secured hereby. At its option, and without limiting any other rights or
remedies, Bank may at any time pay or discharge any taxes, liens, security
interests or other encumbrances at any time levied against or placed on any of
the Collateral, and may procure and pay any premiums on any insurance required
to be carried by Borrower, and provide for the maintenance and preservation of
any of the Collateral, and otherwise take any action reasonably deemed necessary
to Bank to protect its security, and all amounts expended by Bank in connection
with any of the foregoing matters, including reasonable attorneys' fees, shall
be considered Obligations of Borrower and shall be secured hereby.
(B) ____ Bank shall be authorized to make loans hereunder upon the oral
or written request in the name of Borrower of (i) the Person executing this
Agreement on Borrower's behalf; (ii) the Person(s) from time to time holding the
office of Manager of Borrower; and (iii) such other Persons as Borrower may from
time to time designate in appropriate certificates of resolutions delivered to
Bank. All such loans shall be conclusively deemed to have been authorized by
Borrower and to have been made pursuant to duly authorized requests therefor on
its behalf. Bank shall further be entitled to rely on any communication,
instrument or document believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person(s), and with respect to all legal
matters shall be entitled to rely on advice of legal counsel.
(C) ____ In the absence of gross negligence or willful misconduct,
neither Bank nor any attorney-in-fact pursuant to Section 9 shall be liable to
Borrower or any other Person for any act or omission, any mistake of fact or any
error of judgment in exercising any right or remedy granted herein.
(D) ____ Bank shall be entitled to retain Collateral or require
substitution therefor to the extent required to assure Bank of satisfaction of
Borrower's Obligations under this Section 12.
13. MISCELLANEOUS PROVISIONS.
(A) ____ Unless otherwise specified herein, all notices hereunder shall
be in writing, if to Borrower, addressed to it at its address recited in the
Preamble of this Agreement, and if to Bank, at 00 Xxxx Xxxxxx, Xxxxxxx,
Xxxxxxxxxxxxx 00000, Attention: Xxxxx X. Xxxxxx, Vice President. Written notices
and communications shall be effective and shall be deemed received on the day
21
when delivered by hand or sent by facsimile transmission; on the next day if by
commercial courier and on the third day after sending if by registered or
certified mail, postage prepaid.
(B) ____ No failure to exercise and no delay in exercising on the part
of Bank, any right or remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right or remedy. Waiver by Bank of
any right or remedy on any one occasion shall not be construed as a bar to or
waiver thereof or of any other right or remedy on any future occasion. Without
limiting the generality of the foregoing, Borrower expressly agrees that no
failure by Bank to detect or to communicate with Borrower or take action in
response to any failure by Borrower to perform of observe any Obligation shall
operate as a waiver of any right or remedy of Bank; Bank's rights and remedies
hereunder, under any agreement or instrument supplemental hereto or under any
other agreement or instrument shall be cumulative, may be exercised singly or
concurrently and are not exclusive of any rights or remedies provided by law.
(C) ____ This Agreement shall be binding upon and shall inure to the
benefit of Borrower and Bank and their respective successors and assigns;
PROVIDED THAT Borrower may not assign or transfer any rights or Obligation
hereunder without Bank's prior written consent.
(D) ____ The headings contained herein are for convenience only and
shall not affect the construction hereof. If one or more provisions of this
Agreement (or the application thereof) shall be invalid, illegal or
unenforceable in any respect in any jurisdiction, the same shall not, to the
fullest extent permitted by applicable law, invalidate or render illegal or
unenforceable such provision (or its application) in any other jurisdiction or
any other provision of this Agreement (or its application). This Agreement is
the entire agreement of the parties with respect to the subject matter hereof
and supersedes any prior written or verbal communications or instruments
relating thereto.
(E) ____ This Agreement shall continue in full force and effect so long
as any of the Obligations remains outstanding or has not been fully and finally
paid, performed or satisfied.
(F) ____ Borrower acknowledges that the transactions contemplated
hereby are commercial transactions and waives, to the fullest extent it may do
so under applicable law, such rights as it may have or hereafter have to notices
and/or hearings under applicable Federal or state laws relating to exercise of
any of Bank's rights, including without limitation the right to deprive Borrower
of or affect its use, possession or enjoyment of property prior to rendition of
a final judgment against Borrower.
14. GOVERNING LAW; JURISDICTION; ARTICLE 9 CHANGES.
(A) ____ This Agreement shall take effect as a sealed instrument and
shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts.
(B) ____ Borrower irrevocably submits to the non-exclusive jurisdiction
of any Federal or state court sitting in Massachusetts over any suit, action or
proceeding arising out of or relating
22
to this Agreement. Borrower irrevocably waives, to the fullest extent it may
effectively do so under applicable law, any objection it may have or hereafter
have to the laying of the venue of any such suit, action or proceeding brought
it may have or hereafter have to the laying of the venue of any such suit,
action or proceeding brought in any such court and any claim that the same has
been brought in an inconvenient forum. Any Borrower not located in Massachusetts
irrevocably appoints the Secretary of State of the Commonwealth of Massachusetts
as its authorized agent to accept and acknowledge on its behalf any and all
process which may be served in any such suit, action or proceeding, consents to
such process being served either (i) by mailing a copy thereof by registered or
certified mail, postage prepaid, return receipt requested, to Borrower's address
in the preamble to this Agreement or (ii) by serving the same upon such agent
and agrees that such service shall in every respect be deemed effective service
upon Borrower, but only if and in the event the Bank is unable to effect regular
service upon Borrower at the address set forth herein or at such other address
as Borrower may subsequently designate as its principal place of business.
(C). ___ The parties acknowledge and agree to the following provisions
of this Agreement in anticipation of the possible application, in one or more
jurisdictions to the transactions contemplated hereby, of the revised Article 9
of the Uniform Commercial Code in the form or substantially in the form approved
by the American Law Institute and the National Conference of Commissioners on
Uniform State Law and contained in the 2000 Official Text of the Uniform
Commercial Code ("REVISED ARTICLE 9").
(a) ____ Attachment. In applying the law of any jurisdiction in which
Revised Article 9 is in effect, the Collateral is all assets of the Borrower,
whether or not within the scope of Revised Article 9. The Collateral shall
include, without limitation, the following categories of assets as defined in
Revised Article 9: goods (including inventory, equipment and any accessions
thereto), instruments (including promissory notes), documents, accounts
(including health-care-insurance receivables), chattel paper (whether tangible
or electronic), deposit accounts, letter-of-credit rights (whether or not the
letter of credit is evidenced by a writing), commercial tort claims, securities
and all other investment property, general intangibles (including payment
intangibles and software), supporting obligations and any and all proceeds of
any thereof, wherever located, whether now owned and hereafter acquired. If the
Borrower shall at any time, whether or not Revised Article 9 is in effect in any
particular jurisdiction, acquire a commercial tort claim, as defined in Revised
Article 9, the Borrower shall immediately notify the Bank in a writing signed by
the Borrower of the brief details thereof and grant to the Bank in such writing
a security interest therein and in the proceeds thereof, all upon the terms of
this Agreement, with such writing to be in form and substance satisfactory to
the Bank; (b) Perfection by Filing. The Bank may at any time and from time to
time, file financing statements, continuation statements and amendments thereto
that describe the Collateral as all assets of the Borrower or words of similar
effect and which contain any other information required by Part 5 of Revised
Article 9 for the sufficiency or filing office acceptance of any financing
statement, continuation statement or amendment, including whether the Borrower
is an organization, the type of organization and any organization identification
number issued to the Borrower. The Borrower agrees to furnish any such
information to the Bank promptly upon request. Any such financing statements,
continuation statements or amendments may be signed by the Bank on behalf of the
Borrower,
23
and may be filed at any time in any jurisdiction whether or not Revised Article
9 is then in effect in that jurisdiction. (c) Other Perfection, etc. The
Borrower shall at any time and from time to time, whether or not Revised Article
9 is in effect in any particular jurisdiction, take such steps as the Bank may
reasonably request for the Bank (i) to obtain an acknowledgement, in form and
substance satisfactory to the Bank, of any bailee having possession of any of
the Collateral that the bailee holds such Collateral for the Bank, (ii) to
obtain "control" of any investment property, deposit accounts, letter-of-credit
rights or electronic chattel paper (as such terms are defined in Revised Article
9 with corresponding provisions in Rev. xx.xx. 9-104, 9-105, 9-106 and 9-107
relating to what constitutes "control" for such items of Collateral), with any
agreements establishing control to be in form and substance satisfactory to the
Bank, and (iii) otherwise to insure the continued perfection and priority of the
Bank's security interest in any of the Collateral and of the preservation of its
rights therein, whether in anticipation and following the effectiveness of
Revised Article 9 in any jurisdiction. (d) Other Provisions. In applying the law
of any jurisdiction in which Revised Article 9 is in effect, the following
references to sections in this Agreement to existing Article 9 of that
jurisdiction shall be to the Revised Article 9 Section of that jurisdiction
indicated below: (e) Savings Clause. Nothing contained in this ss.14 shall be
construed to narrow the scope of the Bank's security interest in any of the
Collateral or the perfection or priority thereof or to impair or otherwise limit
any of the rights, powers, privileges or remedies of the Bank hereunder except
(and then only to the extent) mandated by Revised Article 9 to the extent then
applicable.
Executed as an instrument under seal on the date first above written.
Signed in the presence of: ANNIE'S HOMEGROWN, INC.
/s/ XXXXX X. XXXXXX By /s/ XXXX X. XXXXXXX
------------------------- --------------------------------
XXXX X. XXXXXXX, President
XXXXXX FIVE CENTS SAVINGS BANK
By /s/ XXXXX X. XXXXXX
--------------------------------
XXXXX X. XXXXXX, Vice President
24
EXHIBIT "A"
XXXXXX FIVE CENTS SAVINGS BANK
BORROWING BASE CERTIFICATE
[Note: the Borrowing Base Certificate has been superceded by a version provided
by the Bank]
EXHIBIT "B"
COMPLIANCE CERTIFICATE
I, __________________________, Chief Financial Officer of Annie's
Homegrown, Inc. a Massachusetts corporation (the "Company"), do hereby certify,
pursuant to Section 5 of the Loan and Security Agreement dated as of
______________, 200_, by and among the Company and Xxxxxx Five Cents Savings
Bank (the "Bank") (as amended from time to time, the "Loan Agreement"), as
follows:
1. _____ I have reviewed and am familiar with the terms of the Loan
Agreement and have made, or have caused to be made under my supervision, a
reasonable review of the transactions and conditions (financial or otherwise) of
the Company during the accounting period covered by the attached financial
statements (the "Financial Statements").
2. _____ The examinations described in paragraph 1, above, did not
disclose the existence or continuance of any condition or event, and no such
condition or event exists, which constitutes an Event of Default or an event
which, with the giving of notice or lapse of time or both, would constitute an
Event of Default during or at the end of the accounting period covered by the
attached Financial Statements or as of the date of this Certificate, except as
forth below.
3. _____ The Financial Statements, as of _________, ____, have been
prepared in accordance with GAAP applied on a basis consistent with the
application of those principles in the preparation of the Company's
____________, _____, financial statements referred to in the Loan Agreement.
4. _____ Schedule 1, attached hereto, sets forth true, complete and
accurate computations used in determining compliance with the various financial
covenants to be satisfied by the Company under the Loan Agreement as of the date
of each such computation as disclosed on Schedule 1.
Capitalized terms used herein, but not defined herein, shall have the
meanings ascribed thereto in the Loan Agreement.
The foregoing certifications, together with the computations set forth in
Schedule 1 attached hereto and the financial statements delivered with this
Certificate in support hereof, are made and delivered this _____ day of
___________, ____.
ANNIE'S HOMEGROWN, INC.
By__________________________
Name________________________
Title_______________________
ANNIE'S HOMEGROWN, INC.
SCHEDULE 1 - COMPLIANCE CERTIFICATE
Financial Statements as of __________________
EXHIBIT 4(M)
NONE
SCHEDULE 3
ACCOUNT DEBTOR OR SUPPLIER, ETC. RECEIVABLES
See attached
