CREDIT AND SECURITY AGREEMENT
Dated as of April 15, 1999
MINNESOTA BREWING COMPANY, a Minnesota corporation (the
"Borrower"), and XXXXX FARGO BUSINESS CREDIT, INC., a Minnesota corporation
(the "Lender"), hereby agree as follows:
1 ARTICLE
DEFINITIONS
1.1 Section DEFINITIONS. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
1.2
"Accounts" means the aggregate unpaid obligations of customers and other
account debtors to the Borrower arising out of the sale or lease of goods or
rendition of services by the Borrower on an open account or deferred payment
basis, whether now existing or hereafter arising.
"Advance" has the meaning given in Section
"Book Net Income" or "Book Net Loss", as the case may be, means the
Borrower's year-to-date net income or loss, determined in accordance with
GAAP except for the exclusion of extraordinary items.
"Borrowing Base" means, at any time and subject to change from time to
time in the Lender's sole discretion, the lesser of:
(a) the Maximum Line; or
(b)
(c) the sum of:
(d)
(i) 75% of Eligible Accounts, plus
(ii) 60% of Eligible Raw Material Inventory, plus
(iii) 60% of Eligible Packaged Finished Goods Inventory, plus
(iv) 50% of Eligible Keg Inventory, plus
(v) 25% of Eligible Packaging Inventory;
provided, however, that the Borrowing Base component for Eligible Packaging
Inventory shall be limited to $400,000 from February through July of each
year and to $200,000 from August to January of each year, and further
provided that the Borrowing Base component for the sum of all types of
Eligible Inventory shall be limited to $1,200,000 from February through July
of each year and to $900,000 from August to January of each year.
"Collateral" has the meaning given in Section .
"Default Rate" means an annual rate equal to 2% over the Floating Rate,
which rate shall change when and as the Floating Rate changes.
"Eligible Accounts" means all unpaid Accounts, net of any credits,
except the following shall not in any event be deemed Eligible Accounts:
(1) That portion of Accounts over 90 days past invoice date;
(1) That portion of Accounts that are disputed or subject to a claim
of offset or a contra account;
(1) That portion of Accounts not yet earned by the final delivery of
goods or rendition of services, as applicable, by the Borrower to the
customer;
(1) Accounts owed by any unit of government, whether foreign or
domestic (provided, however, that there shall be included in Eligible
Accounts that portion of Accounts owed by such units of government for
which the Borrower has provided evidence satisfactory to the Lender that
(A) the Lender has a first priority perfected security interest and
(B) such Accounts may be enforced by the Lender directly against such unit
of government under all applicable laws);
(1) Accounts owed by an account debtor located outside the United
States which are not backed by a bank letter of credit assigned to the
Lender, in the possession of the Lender and acceptable to the Lender in all
respects, in its sole discretion;
(1) Accounts owed by an account debtor that is the subject of
bankruptcy proceedings, has gone out of business;
(1) Accounts owed by a shareholder, subsidiary, affiliate, officer or
employee of the Borrower;
(1) Accounts not subject to a duly perfected security interest in
favor of the Lender or which are subject to any lien, security interest or
claim in favor of any Person other than the Lender;
(1) That portion of Accounts that have been restructured, extended,
amended or modified;
(1) That portion of Accounts that constitutes finance charges,
service charges or sales taxes;
(1) Accounts owed by an account debtor, regardless of whether
otherwise eligible, if 10% or more of the total amount due under Accounts
from such debtor is ineligible under clauses (1), (2) or (9) above; and
(1) Accounts, or portions thereof, otherwise deemed ineligible by the
Lender in its sole discretion.
"Eligible Inventory" means all Inventory of the Borrower, at the lower
of cost or market value as determined in accordance with GAAP; provided,
however, that the following shall not in any event be deemed Eligible
Inventory:
(1) Inventory that is: in-transit; located at any warehouse or other
premises not approved by the Lender in writing; located outside of the
states, or localities, as applicable, in which the Lender has filed
financing statements to perfect a first priority security interest in such
Inventory; covered by any negotiable or non-negotiable warehouse receipt,
xxxx of lading or other document of title; on consignment from any Person;
on consignment to any Person or subject to any bailment unless such
consignee or bailee has executed an agreement with the Lender located at
job sites;
(1) Work-in-process Inventory;
(1) Inventory that is slow moving, damaged, obsolete or not currently
saleable in the normal course of the Borrower's operations, including but
not limited to product greater than 180 days old;
(1) Inventory that the Borrower has returned, has attempted to
return, is in the process of returning or intends to return to the vendor
thereof;
(1) Inventory that is subject to a security interest in favor of any
Person other than the Lender;
(1) Sample Inventory, syrups, returnable bottles, pallets, contract
packaging, brews-in-process , gift shop materials point of sale materials,
proprietary bottle pads, partitions, cartons, trays, slip sheets, dust
covers, keg bung and caps;
(1) Inventory not located at Borrower's premises in St. Xxxx,
Minnesota;
2
(1) Inventory purchased or manufactured pursuant to a license
agreement not owned by the Borrower: and
(1) Inventory otherwise deemed ineligible by the Lender in its sole
discretion.
"Eligible Keg Inventory" means Eligible Inventory consisting of empty
kegs.
"Eligible Packaged Finished Goods Inventory" means Eligible Inventory
consisting of packaged finished goods.
"Eligible Packaging Inventory" means Eligible Inventory consisting of
proprietary packaging materials.
"Eligible Raw Material Inventory" means Eligible Inventory consisting of
raw materials.
"Event of Default" has the meaning specified in Section .
"Floating Rate" means an annual rate equal to the sum of the Prime Rate
plus one and one-half percent (1.5%) which annual rate shall change when and
as the Prime Rate changes.
"GAAP" means generally accepted accounting principles, applied on a
basis consistent with the accounting practices applied in the financial
statements described in Section .
"Guarantor" means any person guaranteeing payment of the Note or any of
the other Obligations and any person executing any liquidation support
agreement in favor of the Lenders.
"Inventory" means all of the Borrower's inventory, as such term is
defined in the UCC, whether now owned or hereafter acquired.
"Loan Documents" means this Agreement, the Note, the Disclosure, the
Security Documents and any and all other related instruments, agreements and
documents executed by the Borrower, any Guarantor or any other party and
delivered to the Lender.
"Maximum Line" means $3,000,000.
"Note" means the Borrower's revolving promissory note, payable to the
order of the Lender in form and content satisfactory to Lender.
"Obligations" means each and every debt, liability and obligation of
every type and description which the Borrower may now or at any time
hereafter owe to the Lender, including all indebtedness arising under this
Agreement, the Note or any other loan or credit agreement or guaranty between
the Borrower and the Lender, whether now in effect or hereafter entered into.
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Prime Rate" means the rate of interest publicly announced from time to
time by Xxxxx Fargo Bank, N.A. as its "prime rate" or, if such bank ceases to
announce a rate so designated, any similar successor rate designated by the
Lender.
"Security Documents" means the Collateral Account Agreement and the
Lockbox Agreement, each of even date herewith and by and among the Borrower,
the Lender and Norwest Bank Minnesota, National Association, and any and all
other documents, instruments and agreements executed by the Borrower or any
other party and delivered to the Lender as amended from time to time, as
security for the Obligations.
"Security Interest" has the meaning given in Section .
"Termination Date" has the meaning given in Section .
"UCC" means the Uniform Commercial Code as in effect from time to time
in the State of Minnesota.
2 ARTICLE
3
AMOUNT AND TERMS OF THE CREDIT FACILITY
3.1 Section REVOLVING ADVANCES . The Lender may, in its sole
discretion, make advances to the Borrower from time to time from the date this
Agreement is signed and delivered to the Termination Date, on the terms and
subject to the conditions herein set forth (each an "Advance"). The Lender
shall not consider any request for an Advance if, after giving effect to such
requested Advance, the sum of the outstanding and unpaid Advances would exceed
the Borrowing Base. The Borrower's obligation to pay the Advances shall be
evidenced by the Note. Within the limits set forth in this Section , the
Borrower may request Advances, prepay, and request additional Advances. The
Borrower shall make each request for an Advance to the Lender before 11:00 a.m.
(Minneapolis time) of the day of the requested Advance. Requests may be made in
writing or by telephone.
3.2
3.3 Section INTEREST; DEFAULT INTEREST.
3.4
(a) REVOLVING NOTE. Except as set forth in Sections and the
outstanding principal balance of the Advances shall bear interest at the
Floating Rate. All interest shall be payable monthly in arrears on the first
day of the month and on demand.
(b)
(c) MINIMUM INTEREST CHARGE. Notwithstanding the interest payable
pursuant to Section , the Borrower shall pay to the Lender interest of not less
than $80,000 per year during the term of this Agreement and on each anniversary
of the execution of this Agreement, the Borrower shall pay any deficiency
between such minimum interest charge and the amount of interest otherwise
calculated under Sections and .
(d)
(e) DEFAULT INTEREST RATE. From the first day of any month during
which Borrower is not in compliance with its agreements set forth in this
Agreement or the Note, in the Lender's discretion and without waiving any of its
other rights and remedies, the outstanding principal balance of the Advances
shall bear interest at the Default Rate.
(f)
3.5 Section FEES.
3.6
(a) CLOSING FEE. The Borrower agrees to pay the Lender a closing fee
of $ 30,000 upon the execution of this Agreement.
(b)
(c) MONITORING FEES. The Borrower agrees to pay the Lender
collateral monitoring fees for the expense of auditors (not to exceed the then
current standard applicable rate, which on the date of this Agreement is $75.00
per hour per auditor, plus out-of-pocket expenses).
(d)
3.7 Section DISCRETIONARY NATURE OF CREDIT FACILITY; AUTOMATIC
RENEWAL. THE LENDER MAY AT ANY TIME AND FOR ANY REASON REFUSE TO MAKE AN
ADVANCE AND/OR DEMAND PAYMENT OF THE ADVANCES AND TERMINATE THIS AGREEMENT
WHETHER BORROWER IS OR IS NOT IN COMPLIANCE WITH THIS AGREEMENT. The Lender
need not show that an adverse change has occurred in the Borrower's condition,
financial or otherwise, in order to refuse to make any requested Advance or to
demand payment of the Advances. Unless terminated by the Lender at any time or
by the Borrower pursuant to Section , this Agreement shall remain in effect
until the three-year anniversary of the date of this Agreement and, thereafter,
shall automatically renew for successive one year periods. Each such
anniversary date is herein referred to as a "Termination Date".
3.8
3.9 Section TERMINATION BY BORROWER.
3.10
(a) TERMINATION BY BORROWER. The Borrower may terminate this
Agreement at any time subject to payment and performance of all Obligations, may
obtain any release or termination of the Security Interest to which the Borrower
is otherwise entitled by law by giving at least 30 days' prior written notice
to the Lender of the Borrower's intention to terminate this Agreement, and
paying the Lender a prepayment fee in accordance with Section if the Borrower
terminates this Agreement effective as of any date other than a Termination
Date.
(b)
(c) PREPAYMENT FEE. (a) If the Borrower desires to terminate this
Agreement as of a Termination Date but without giving at least 30 days' prior
written notice thereof, or if the Borrower desires to terminate this Agreement
as of any date other than a Termination Date upon giving at least 30 days'
prior written notice to the Lender of the Borrower's intention to do so,
Borrower shall pay to the Lender a prepayment fee of the greater of (i) during
the first year of this Agreement, 3% of the Maximum Line, during the
4
second year of this Agreement, 2% of the Maximum Line and during the third or
later year of this Agreement, 1% of the Maximum Line, or (ii) the Minimum
Interest Charge pursuant to subsection 2.2(b) above less the amount of
interest actually paid by the Borrower during the then current year of this
Agreement; provided that (i) no prepayment penalty shall be due if the
Borrower shall prepay the Obligations solely from cash flow generated from
the Borrower's operations in the ordinary course and (ii) no prepayment fee
shall be required if the prepayment is wholly made pursuant to a refinancing
with another "Xxxxx Fargo" affiliated entity.
(d)
(e) (b) Lender shall have the right of first refusal with regard
to a revolving credit facility with Borrower's affiliate Gopher State
Ethanol, LLC, which revolving credit facility would be cross-defaulted and
cross-collateralized with this Agreement. If Lender declines to provide such
revolving credit facility to Gopher States Ethanol and Borrower obtains a
revolving credit facility with another lender, this Agreement shall be
terminated and all amounts owing shall be prepaid prior to or concurrently
with the closing of such revolving credit facility and the prepayment fee set
forth in (a) above shall be due, provided that if such termination and
repayment occurs during the first three months following the closing of this
Agreement, then in lieu of the prepayment fee set forth in (a) above,
Borrower shall pay to the Lender a prepayment fee of 1.5% of the average loan
balance calculated from the date of this Agreement to the prepayment date.
(f)
3.11 Section MANDATORY PREPAYMENT/NON-USAGE PERIOD. Without notice
or demand, if the outstanding principal balance of the Advances shall at any
time exceed the Borrowing Base, the Borrower shall immediately prepay the
Advances to the extent necessary to eliminate such excess.
3.12
3.13 Section ADVANCES WITHOUT REQUEST. The Borrower hereby
authorizes the Lender, in its discretion, at any time or from time to time
without the Borrower's request, to make Advances to pay accrued interest, fees,
uncollected items that have been applied to the Obligations, and other
Obligations due and payable from time to time.
3.14
Section 2.8 USE OF PROCEEDS. The Borrower shall use the proceeds
of Advances for ordinary working capital purposes or the first Advance hereunder
shall be used to pay off the Borrower's existing working capital account with
that portion of its line with Minnesota Brewing Limited Partnership in excess of
$1,000,000, provided that the Borrower shall have minimum excess Borrowing Base
availability of at least $100,000 prior to the initial Advance.
3 ARTICLE
SECURITY INTEREST
3.1 Section GRANT OF SECURITY INTEREST . The Borrower hereby grants
to the Lender a security interest (the "Security Interest") in the following
collateral (the "Collateral"), as security for the payment and performance of
the Obligations:
INVENTORY: All inventory of Borrower, as such term is defined in the UCC,
whether now owned or hereafter acquired, whether consisting of whole goods,
spare parts or components, supplies or materials, whether acquired, held or
furnished for sale, for lease or under service contracts or for manufacture
or processing, and wherever located; and
ACCOUNTS AND OTHER RIGHTS TO PAYMENT: Each and every right of Borrower to
the payment of money, whether such right to payment now exists or hereafter
arises, whether such right to payment arises out of a sale, lease or other
disposition of goods or other property, out of a rendering of services, out
of a loan, out of the overpayment of taxes or other liabilities, or otherwise
arises under any contract or agreement, whether such right to payment is
created, generated or earned by Borrower or by some other person who
subsequently transfers such person's interest to Borrower, whether such right
to payment is or is not already earned by performance, and howsoever such
right to payment may be evidenced, together with all other rights and
interests (including all liens and security interests) which Borrower may at
any time have by law or agreement against any account debtor or other obligor
obligated to make any such payment or against any property of such account
debtor or other obligor; all including all of Borrower's rights to payment in
the form of all present and future accounts, contract rights, loans and
obligations receivable, chattel papers, bonds, notes and other debt
instruments, tax refunds and rights to payment in the nature of general
intangibles; and
EQUIPMENT: All of the Borrower's goods and equipment, as such term is
defined in the UCC whether now or hereafter owned, including all present and
future machinery, vehicles, furniture, fixtures, manufacturing equipment,
shop equipment, office and recordkeeping equipment, parts, tools, supplies,
and including specifically the goods described in any equipment schedule or
list herewith or hereafter furnished to the Lender by the Borrower;
INVESTMENT PROPERTY: All of the Borrower's investment property, as such term
is defined in the UCC, including without limitation securities, securities
accounts, securities entitlements, financial assets and certificates of
deposit of the Borrower and all
5
funds of the Borrower on deposit with and all property in the possession of
the Lender or any depository institution, each whether now owned or hereafter
acquired EXCEPT FOR approximately $500,000 in United States Treasury
obligations held as collateral by the Federal Reservie Bank of Minneapolis
for the benefit of the Bureau of Alcohol, Tobacco and Firearms; and
GENERAL INTANGIBLES: All of the Borrower's general intangibles, as such term
is defined in the UCC, whether now owned or hereafter acquired, including all
present and future contract rights, patents, patent applications, copyrights,
trademarks, trade names, trade secrets, customer or supplier lists and
contracts, manuals, operating instructions, permits, franchises, the right to
use the Borrower's name, and the goodwill of Borrower's business; and
PROCEEDS: Together with all substitutions and replacements for and products
of any of the foregoing property and together with proceeds of any and all of
the foregoing property and, in the case of all tangible property, together
with all accessions and together with (i) all accessories, attachments,
parts, equipment and repairs now or hereafter attached or affixed to or used
in connection with any such tangible property, and (ii) all warehouse
receipts, bills of lading and other documents of title now or hereafter
covering such tangible property.
3.1 Section NOTIFICATION OF ACCOUNT DEBTORS AND OTHER OBLIGORS. The
Lender may at any time (either before or after the occurrence of an Event of
Default) notify any account debtor or other person obligated to pay the amount
due that such right to payment has been assigned or transferred to the Lender
for security and shall be paid directly to the Lender. The Borrower will join
in giving such notice if the Lender so requests. At any time after the Borrower
or the Lender gives such notice to an account debtor or other obligor, the
Lender may, but need not, as the Borrower's agent and attorney-in-fact, notify
the United States Postal Service to change the address for delivery of the
Borrower's mail to any address designated by the Lender, otherwise intercept the
Borrower's mail, and receive, open and dispose of the Borrower's mail, applying
all Collateral as permitted under this Agreement and holding all other mail for
the Borrower's account or forwarding such mail to the Borrower's last known
address.
3.2
3.3 Section OCCUPANCY.
3.4
(a) The Borrower hereby irrevocably grants to the Lender the right to
take possession of each premises where Borrower conducts its business and has
any rights of possession (the "Premises") at any time after the occurrence and
during the continuance of an Event of Default.
(b)
(c) The Lender may use the Premises only to hold, process,
manufacture, sell, use, store, liquidate, realize upon or otherwise dispose of
goods that are Collateral and for other purposes that the Lender in good faith
considers related.
(d)
(e) The Lender's right to hold the Premises shall terminate upon the
earlier of payment in full of all Obligations, or final sale or disposition of
all goods constituting Collateral and delivery of all such goods to purchasers.
(f)
(g) The Lender shall not be obligated to pay or account for any rent
or other compensation for the possession or use of any of the Premises;
provided, however, that if the Lender does pay or account for any rent or other
compensation for the possession or use of any of the Premises, the Borrower
shall reimburse the Lender promptly for the full amount thereof.
(h)
3.5 Section LICENSE/MAINTENANCE OF INTELLECTUAL PROPERTY. The
Borrower hereby grants to the Lender a non-exclusive, worldwide and royalty-free
license to use or otherwise exploit all trademarks, franchises, trade names,
copyrights and patents owned by or licensed to the Borrower for the purpose of
selling, leasing or otherwise disposing of any or all Collateral following an
Event of Default. The Borrower shall not sell, transfer, assign (by operation
of law or otherwise), exchange, lease, license, allow to go abandoned or
otherwise dispose of all or any portion of said intellectual property and shall
maintain and protect all of such property in accordance with all applicable
state, federal and foreign laws.
3.6
3.7 Section FILING A COPY. A carbon, photographic, or other
reproduction of this Agreement or of a financing statement signed by Borrower is
sufficient as a financing statement.
3.8
4 ARTICLE
CONDITIONS OF LENDING
In view of the fact that Advances may be made in the sole discretion
of the Lender, this Agreement does not set forth conditions precedent to
Advances. The Lender will advise the Borrower of the Lender's documentation and
other requirements
6
before considering any Advance.
3 ARTICLE
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender as follows:
3.1 Section NAME; LOCATIONS; TAX ID NO., SUBSIDIARIES. During
its existence, the Borrower has done business solely under its corporate name
as set forth herein and under such trade names and such other corporate names
as disclosed to Lender in writing before this Agreement is signed and
delivered. The address of Borrower's chief executive office and principal
place of business and its federal tax identification number are set forth
below its signature to this Agreement. All Inventory is located at that
location or at one of the other locations disclosed to Lender in writing
before this Agreement is signed and delivered. The Borrower has no
subsidiaries except as disclosed to Lender in writing before this Agreement
is signed and delivered. The Borrower owns 27.5% of Gopher State Ethanol,
LLC, a Delaware limited liability company.
3.1 Section FINANCIAL CONDITION; NO ADVERSE CHANGE. Before this
Agreement was signed and delivered, the Borrower furnished the Lender certain of
its unaudited financial statements certified by the Borrower. Those statements
fairly present the Borrower's financial condition as the dates indicated therein
and the results of its operations for the period ended December 31, 1998 and
were prepared in accordance with generally accepted accounting principles.
Since December 31, 1998, there has been no material adverse change in the
business, properties or condition (financial or otherwise) of the Borrower.
3.2
4 ARTICLE
AFFIRMATIVE COVENANTS OF THE BORROWER
So long as the Advances or any other obligations shall remain
unpaid, the Borrower will comply with the requirements in this Article,
unless the Lender shall otherwise consent in writing.
3.1 Section REPORTING REQUIREMENTS. The Borrower will deliver to
the Lender each of the following in form and detail acceptable to the Lender:
3.2
(a) as soon as available, and in any event within ninety (90) days
after the end of each fiscal year of the Borrower, the Borrower's audited
financial statements prepared in accordance with GAAP;
(b)
(c) as soon as available and in any event within twenty (20) days
after the end of each month, an unaudited/internal balance sheet and statement
of income and retained earnings of the Borrower as at the end of and for such
month and for the year to date period then ended, prepared in accordance with
GAAP, subject to year-end audit adjustments, together with a completed
compliance certificate in the form attached hereto;
(d)
(e) within twenty (20) days after the end of each month, agings of
the Borrower's accounts receivable, together with a certificate of ineligible
accounts, and agings of the Borrower's accounts payable, each as of the end of
such month;
(f)
(g) not later than twenty (20) days after each month end or more
frequently if requested by the Lender, inventory certifications and a detailed
inventory report by the Borrower, each in form acceptable to the Lender, for
such month and/or other period, as applicable;
(h)
(i) as soon as available, and within twenty (20) days of receipt
thereof, a copy of the bank account statements of the Borrower from each bank
with which Borrower maintains an account;
(j)
(k) from time to time, with reasonable promptness, any and all
receivables schedules, collection reports, deposit records, equipment schedules,
copies of invoices to account debtors, shipment documents and delivery receipts
for goods sold, and such other material, reports, records or information as the
Lender may request;
(l)
(m) within three (3) days of Borrower's payment of or deposit for
taxes, including but not limited to payroll taxes, proof of such payment in form
acceptable to the Lender;
(n)
(o) at least thirty (30) days before the beginning of each of
Borrower's fiscal years, projections of Borrower's monthly
7
balance sheets and income statements for such fiscal year;
(p)
(q) immediately after the commencement thereof, notice in writing of
all litigation and of all proceedings before any governmental or regulatory
agency affecting the Borrower or which seek a monetary recovery against the
Borrower in excess of $50,000;
(r) immediately after Borrower's knowledge thereof, notice in writing
of all disputes and claims in excess of $15,000 individually; and
(s)
(t) within (3) days of Borrower's payment of state beverage and
alcohol taxes, proof of such payment in form acceptable to the Lender.
(u)
3.3 Section INSPECTION. Upon the Lender's request, the Borrower
will permit any officer, employee, attorney, agent or accountant for the Lender
to audit, review, make extracts from or copy any and all records of the Borrower
and to inspect the Collateral at all times during ordinary business hours.
3.4
3.5 Section ACCOUNT VERIFICATION. The Borrower will at any time and
from time to time upon request of the Lender send requests for verification of
Accounts or notices of assignment to account debtors and other obligors. The
Borrower authorizes the Lender to verify Accounts directly with account debtors
or other obligors from time to time, including on a daily basis (and the
Borrower understands the Lender intends to do so by telephone and/or in
writing).
3.6
3.7 Section NO OTHER LIENS. The Borrower will keep all Collateral
free and clear of all security interests, liens and encumbrances except the
Security Interest, purchase money security interests in equipment, and those
security interests (if any) evidenced by the following UCC-1 Financing
Statements filed with the Secretary of State of Minnesota: File No. 1656153,
filed March 8, 1995; File No. 1874860, filed September 3, 1996; File No.
1988133, filed November 12, 1997; and File No. 2052896, filed July 14, 1998.
3.8
3.9 Section INSURANCE . The Borrower will at all times keep all
tangible Collateral insured against risks of fire (including so-called extended
coverage), theft, collision (for Collateral consisting of motor vehicles) and
such other risks and in such amounts as the Lender may reasonably request, with
a lender's loss payable clause in favor of Lender to the extent of its interest.
3.10
3.11 Section LOCKBOX; COLLATERAL ACCOUNT. The Borrower has provided
the Lender with agreements regarding a lockbox and a collateral account in
connection with the collection of Accounts.
3.12
3.13 Section MINIMUM BOOK NET INCOME. The Borrower will at all times
maintain during each period described below, a Book Net Income (bracketed
figures indicate maximum Book Net Loss):
3.14
Month Minimum Year-to-Date Book Net Income
----- ------------------------------------
April 1999 < $795,000 >
May 1999 < $895,000 >
June 1999 < $795,000 >
July 1999 < $895,000 >
August 1999 < $995,000 >
September 1999 < $1,095,000 >
October 1999 < $1,195,000 >
November 1999 < $1,295,000 >
December 1999 < $1,440,000 >
The Lender has the right to adjust the Minimum Book Net Income covenant
levels based upon Borrower's fiscal year-end results. Failure by Borrower
and Lender to establish covenant levels for fiscal year 2000 by April 30,
2000 shall be an Event of Default.
3.1 Section NO SALE OR TRANSFER OF COLLATERAL AND OTHER ASSETS .
The Borrower will not sell, lease, assign, transfer or otherwise dispose of
(i) the stock of any subsidiary, (ii) all or a substantial part of its
assets, or (iii) any Collateral or any interest therein (whether in one
transaction or in a series of transactions) to anyone other than the sale of
Inventory in the ordinary course of business or the sale or other disposal of
obsolete equipment.
8
3.2
3.3 Section PLACE OF BUSINESS; NAME . The Borrower will not change
the location of its chief executive office or principal place of business from
that disclosed pursuant to Section . The Borrower will not permit any tangible
Collateral to be located in any state or area in which, in the event of such
location, a financing statement covering such Collateral would be required to
be, but has not in fact been, filed in order to perfect the Security Interest.
The Borrower will not change its name without at least thirty (30) days prior
written notice to the Lender.
3.4
3.5 Section CAPITAL EXPENDITURE LIMITATIONS. The Borrower will not
expend or contract to expend more than $100,000 for any item or $350,000 in the
aggregate during any calendar year for fixed assets, including Equipment,
whether by way of purchase, capital lease or otherwise, and whether payable
currently or in the future.
3.6
3.7 Section PROHIBITION ON DISTRIBUTIONS. The Borrower will not
purchase or redeem any shares of Borrower's stock or declare or pay any
dividends (other than dividends payable in capital stock) or make any
distribution to stockholders of any assets of Borrower or make any distribution
which would result in an Event of Default.
3.8
3.9 Section LOANS TO AFFILIATE. The Borrower will not permit any
amount to be owing to Borrower Gopher States Ethanol as a result of any
borrowings, purchases, investments, advances or other transactions or events in
excess of the amount owing on the date hereof.
3.10
3.11 Section MANAGEMENT CHANGE. The Borrower will not make any
substantial change in the present management of Borrower without the prior
written approval of Lender.
3 ARTICLE
EVENTS OF DEFAULT, RIGHTS AND REMEDIES
3.1 Section EVENTS OF DEFAULT . An "Event of Default" as used
herein shall mean any of the following:
3.2
(a) Failure to pay the Note when demanded, and in this connection
Borrower hereby waives presentment, notice of dishonor and protest;
(a) A petition shall be filed by or against the Borrower or any
Guarantor under the United States Bankruptcy Code naming the Borrower or such
Guarantor as debtor;
(b)
(c) Default in the performance, or breach, of any covenant or
agreement of the Borrower, any Guarantor or any other related party contained in
this Agreement or any other Loan Document, including, without limitation, any
support agreement.
(d)
(e) Default in the performance, or breach, of any covenant or
agreement of Gopher States Ethanol contained in any agreement with Lender.
(f)
3.2 Section RIGHTS AND REMEDIES. As provided in Section , the
Lender may, at any time and for any reason, refuse to make any requested Advance
or demand payment of the Advances. Upon such demand or upon the occurrence of
an Event of Default or at any time thereafter, the Lender may exercise any or
all of the following rights and remedies:
3.3
(a) The Lender may exercise and enforce any and all rights and
remedies available upon default to a secured party under the UCC, including the
right to take possession of Collateral, or any evidence thereof, proceeding
without judicial process or by judicial process (without a prior hearing or
notice thereof, which the Borrower hereby expressly waives) and the right to
sell, lease or otherwise dispose of any or all of the Collateral, and in
connection therewith, the Borrower will on demand assemble the Collateral and
make it available to the Lender at a place to be designated by the Lender which
is reasonably convenient to both parties;
(b)
(c) The Lender may exercise any other rights and remedies available
to it by law or agreement; and
(d)
(e) The Lender may demand an appraisal of the Borrower's tradenames
and trademarks at Borrower's expense.
(f)
(g) The remedies provided hereunder are cumulative.
3.4 Section CERTAIN NOTICES. If notice to the Borrower of any
intended disposition of Collateral or any other intended
9
action is required by law in a particular instance, such notice shall be
deemed commercially reasonable if given (in the manner specified in Section )
at least 10 calendar days before the date of intended disposition or other
action.
3.5
4 ARTICLE
MISCELLANEOUS
3.1 Section ADDRESSES FOR NOTICES, ETC . Except as otherwise
expressly provided herein, all notices, requests, demands and other
communications provided for hereunder shall be in writing and shall be (a)
personally delivered, (b) sent by first class United States mail, (c) sent by
overnight courier of national reputation, or (d) transmitted by telecopy, in
each case addressed or telecopied to the party to whom notice is being given
at its address or telecopy number as set forth below its signature to this
Agreement.
3.1 Section COSTS AND EXPENSES . The Borrower agrees to pay on
demand all costs and expenses (including legal fees) incurred by the Lender
in connection with the Loan Documents, and any other document or agreement
related thereto, and the transactions contemplated hereby, including wire
transfer and ACH charges, the cost of credit reports, overadvance fees, the
expense of any auditors (not to exceed the then current standard applicable
rate, which on the date of this Agreement is $75.00 per hour per auditor,
plus out of pocket expenses), and fees and expenses in enforcing this
Agreement.
3.1 Section INDEMNITY. In addition to the payment of expenses
pursuant to Section , the Borrower agrees to indemnify, defend and hold harmless
the Lender, and any of its participants, parent corporations, subsidiary
corporations, affiliated corporations, successor corporations, and all present
and future officers, directors, employees, attorneys and agents of the foregoing
(the "Indemnitees") from and against any of the following (collectively,
"Indemnified Liabilities"):
3.2
(a) any and all transfer taxes, documentary taxes, assessments or
charges made by any governmental authority by reason of the execution and
delivery of this Agreement and the other Loan Documents or the making of the
Advances;
(b)
(c) any and all liabilities, losses, damages, penalties, judgments,
suits, claims, costs and expenses of any kind or nature whatsoever (including,
without limitation, the reasonable fees and disbursements of counsel) in
connection with any investigative, administrative or judicial proceedings,
whether or not such Indemnitee shall be designated a party thereto, which may be
imposed on, incurred by or asserted against any such Indemnitee, in any manner
related to or arising out of or in connection with the making of the Advances,
this Agreement and the other Loan Documents or the use or intended use of the
proceeds of the Advances; and
(d)
(e) any claim, loss or damage to which any Indemnitee may be
subjected as a result of any violation of any federal, state, local or other
governmental statute, regulation, law, or ordinance dealing with the protection
of human health and the environment, in any manner related to or arising out of
or in connection with the making of the Advances, this Agreement and the other
Loan Documents or the use or intended use of the proceeds of the Advances.
(f)
(g) If any investigative, judicial or administrative proceeding arising from
any of the foregoing is brought against any Indemnitee, the Borrower, or counsel
designated by the Borrower and satisfactory to the Indemnitee, will resist and
defend such action, suit or proceeding to the extent and in the manner directed
by the Indemnitee. Each Indemnitee will use its best efforts to cooperate in
the defense of any such action, suit or proceeding. If the foregoing
undertaking to indemnify, defend and hold harmless may be held to be
unenforceable because it violates any law or public policy, the Borrower shall
nevertheless make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities which is permissible under applicable law.
The Borrower's obligation under this Section shall survive the termination of
this Agreement and the discharge of the Borrower's other obligations hereunder.
(h)
3.3 Section BINDING EFFECT; ASSIGNMENT; SHARING OF INFORMATION .
The Loan Documents shall be binding upon and inure to the benefit of the
Borrower and the Lender and their respective successors and assigns, except that
the Borrower shall not have the right to assign its rights thereunder or any
interest therein without the prior written consent of the Lender. Without
limitation of the Lender's right to share information regarding the Borrower and
its Affiliates with Lender's participants, accountants, lawyers and other
advisors, the Lender may share at any time with Xxxxx Fargo Corporation, and all
direct and indirect subsidiaries of Xxxxx Fargo Corporation, any and all
information the Lender may have in its possession regarding the Borrower and its
Affiliates, and the Borrower waives any right of confidentiality it may have
with respect to such sharing of information.
3.4
3.5 Section GOVERNING LAW; JURISDICTION, VENUE; WAIVER OF JURY
TRIAL. This Agreement and the Note shall be governed by and construed in
accordance with the laws (other than conflict laws) of the State of
Minnesota. Each party consents to
10
the personal jurisdiction of the state and federal courts located in the
State of Minnesota in connection with any controversy related to this
Agreement, waives any argument that venue in any such forum is not convenient
and agrees that any litigation initiated by any of them in connection with
this Agreement shall be venued in either the District Court of Hennepin
County, Minnesota located in Minneapolis, Minnesota, or the United States
District Court, District of Minnesota, Fourth Division. THE PARTIES WAIVE
ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED ON OR PERTAINING
TO THIS AGREEMENT.
3.6
3.7
3.8
3.9
3.10
3.11
3.12
3.13
[SIGNATURE PAGE FOLLOWS]
11
IN WITNESS WHEREOF, the parties hereto have signed this Agreement
as of the date first above written.
XXXXX FARGO BUSINESS CREDIT, INC. MINNESOTA BREWING COMPANY
By By
-------------------------------- --------------------------------
Xxxx Xxxx Xxxx Xxx
Its Assistant Vice President Its Chief Executive Officer
Address: Address:
Norwest Center 000 Xxxx 0xx Xxxxxx
Xxxxx Xxxxxx and Xxxxxxxxx Xxxxxx Xx. Xxxx, XX 00000
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
Telecopy No. (000) 000-0000
Telecopy No. (000) 000-0000 Federal Tax I.D. No. 00-0000000
Federal Tax ID No. 00-0000000
[Signature Page to Credit and Security Agreement]
12
COMPLIANCE CERTIFICATE
To: Xxxx Xxxx
Xxxxx Fargo Business Credit, Inc.
Date: , 199
------------------------- ---
Subject: Minnesota Brewing Company
Financial Statements
In accordance with our Credit and Security Agreement dated as of
April 15, 1999 (the "Credit Agreement"), attached are the financial
statements of Minnesota Brewing Company (the "Borrower") as of and for
________________, 19___ (the "Reporting Date") and the year-to-date period
then ended (the "Current Financials"). All terms used in this certificate
have the meanings given in the Credit Agreement.
I certify that the Current Financials have been prepared in
accordance with GAAP, subject to year-end audit adjustments, and fairly
present the Borrower's financial condition as of the date thereof.
EVENTS OF DEFAULT. (Check one):
/ / The undersigned does not have knowledge of the occurrence of a Default
or Event of Default under the Credit Agreement.
/ / The undersigned has knowledge of the occurrence of a Default or Event of
Default under the Credit Agreement and attached hereto is a statement of
the facts with respect to thereto.
REPRESENTATION AND WARRANTIES. (Check one):
/ / The undersigned hereby reaffirms the representations and warranties as
set forth in the Credit Agreement, each of which are true and correct as of
the date hereof.
/ / The undersigned hereby reaffirms the representations and warranties
set forth in the Credit Agreement, each of which are true and correct as of
the date hereof except as described in the statement attached hereto.
FINANCIAL COVENANTS. I further hereby certify as follows:
1 . MINIMUM BOOK NET INCOME Pursuant to Section of the Credit
Agreement, as of the Reporting Date, the Borrower's Book Net Income was
$____________, which / / satisfies / / does not satisfy the requirement that
such amount be not less than $_____________ on the Reporting Date as set
forth in table below (bracketed numbers indicate maximum Book Net Loss):
Month Minimum Book Net Income
----- ------------------------
April 1999 < $795,000 >
May 1999 < $895,000 >
June 1999 < $795,000 >
July 1999 < $895,000 >
August 1999 < $995,000 >
September 1999 < $1,095,000 >
October 1999 < $1,195,000 >
November 1999 < $1,295,000 >
December 1999 < $1,440,000 >
13
Attached hereto are all relevant facts in reasonable detail to
evidence, and the computations of the financial covenants referred to above.
These computations were made in accordance with GAAP.
MINNESOTA BREWING COMPANY
By
-------------------------------------------------
Xxxxxxx X. Xxxx
Its Chief Financial Officer
14
