EXHIBIT 10.29
CREDIT AGREEMENT
BETWEEN
INTELLICOAT CORPORATION
AND
AMERICAN NATIONAL BANK D/B/A
OLD NATIONAL BANK,
DATED AS OF
JUNE 5, 2000
TABLE OF CONTENTS
CREDIT AGREEMENT.............................................................................................Page 1
Section 1. ACCOUNTING TERMS -- DEFINITIONS.........................................................Page 1
Section 2. THE LOANS...............................................................................Page 7
a. The Revolving Loan................................................................Page 7
(i) The Commitment -- Use of Proceeds........................................Page 7
(ii) Method of Borrowing......................................................Page 7
(iii) Interest on the Revolving Loan...........................................Page 9
(iv) Extensions of Revolving Loan Maturity Date...............................Page 9
(v) Special Repayments of Principal ........................................Page 10
b. The Capital Expenditure Line of Credit...........................................Page 10
(i) The Capital Expenditure of Line Commitment --
Use of Proceeds.................................................Page 10
(ii) Method of Borrowing.....................................................Page 11
(iii) Interest on the Capital Expenditure Line of Credit......................Page 12
(iv) Extensions of Capital Expenditure Line of Credit
Maturity Date...................................................Page 13
c. The Capital Expenditure Term Loan................................................Page 13
(i) Amount..................................................................Page 13
(ii) The Capital Expenditure Term Note.......................................Page 13
(iii) Interest on the Capital Expenditure Term Loan...........................Page 14
(iv) Use of Proceeds of the Capital Expenditure Term Loan....................Page 15
d. Provisions Applicable to All of the Loans........................................Page 15
(i) Calculation of Interest.................................................Page 15
(ii) Manner of Payment -- Application........................................Page 15
(iii) Commitment Fee..........................................................Page 15
(iv) Automatic Debit.........................................................Page 15
(v) Prepayment..............................................................Page 16
Section 3. REPRESENTATIONS AND WARRANTIES.........................................................Page 16
a. Organization of the Company......................................................Page 16
b. Authorization; No Conflict.......................................................Page 16
c. Validity and Binding Nature......................................................Page 17
d. Financial Statements.............................................................Page 17
e. Litigation and Contingent Liabilities............................................Page 17
f. Liens............................................................................Page 18
g. Employee Benefit Plans...........................................................Page 18
h. Payment of Taxes.................................................................Page 18
i. Investment Company Act...........................................................Page 19
i
j. Regulation U and other Federal Regulations.......................................Page 19
k. Hazardous Substances.............................................................Page 19
l. Subsidiaries.....................................................................Page 20
m. Organization of Landec...........................................................Page 20
n. Landec Authorization; No Conflict................................................Page 20
o. Landec Validity and Binding Nature...............................................Page 21
Section 4 COLLATERAL FOR THE OBLIGATIONS..........................................................Page 21
a. Security Agreement...............................................................Page 21
b. Mortgage.........................................................................Page 21
(i) Title Search............................................................Page 22
(ii) Flood Hazard Determination Form.........................................Page 22
c. Subordination Agreement..........................................................Page 22
(i) Ratio of Liabilities to Tangible Capital Base...........................Page 23
d. Guaranty Agreement...............................................................Page 23
e. Assignment of Licensing Agreement................................................Page 23
f. Intercreditor Agreement..........................................................Page 23
Section 5. AFFIRMATIVE COVENANTS OF THE COMPANY...................................................Page 24
a. Corporate Existence..............................................................Page 24
b. Reports, Certificates and Other Information......................................Page 24
(i) Annual Statements.......................................................Page 24
(ii) Interim Statements......................................................Page 24
(iii) Guarantor's Financial Statements........................................Page 25
(iv) Borrowing Base Certificates.............................................Page 25
(v) Orders..................................................................Page 25
(vi) Notice of Default or Litigation.........................................Page 26
(vii) Registration Statements and Reports.....................................Page 26
(viii) Other Information.......................................................Page 26
c. Books, Records and Inspections...................................................Page 26
d. Insurance........................................................................Page 26
e. Taxes and Liabilities............................................................Page 27
f. Compliance with Legal and Regulatory Requirements................................Page 27
g. Primary Banking Relationship.....................................................Page 27
h. Employee Benefit Plans...........................................................Page 27
i. Hazardous Substances.............................................................Page 27
j. Annual Cleanup...................................................................Page 29
Section 6. NEGATIVE COVENANTS OF THE COMPANY......................................................Page 29
a. Restricted Payments..............................................................Page 29
(i) Ratio of Liabilities to Tangible Capital Base...........................Page 29
(ii) Cash Flow Coverage Ratio................................................Page 30
b. Liens............................................................................Page 30
ii
c. Guaranties.......................................................................Page 31
d. Loans or Advances................................................................Page 32
e. Mergers, Consolidations, Sales, Acquisition or Formation
of Subsidiaries ........................................................Page 32
f. Margin Stock.....................................................................Page 32
g. Other Agreements.................................................................Page 32
h. Judgments........................................................................Page 33
i. Principal Office.................................................................Page 33
j. Hazardous Substances.............................................................Page 33
k. Debt.............................................................................Page 33
Section 7. CONDITIONS OF LENDING..................................................................Page 33
a. No Default.......................................................................Page 34
b. Documents to be Furnished at Closing.............................................Page 34
Section 8. EVENTS OF DEFAULT......................................................................Page 37
a. Nonpayment of the Loans..........................................................Page 37
b. Nonpayment of Other Indebtedness for Borrowed Money..............................Page 37
c. Other Material Obligations.......................................................Page 37
d. Bankruptcy, Insolvency, etc......................................................Page 37
e. Warranties and Representations...................................................Page 38
f. Violations of Negative Covenants.................................................Page 38
g. Noncompliance With Other Provisions of this Agreement............................Page 38
Section 9. EFFECT OF EVENT OF DEFAULT.............................................................Page 38
Section 10. WAIVER -- AMENDMENTS..................................................................Page 39
Section 11. NOTICES...............................................................................Page 39
Section 12. COSTS, EXPENSES AND TAXES.............................................................Page 40
Section 13. SEVERABILITY..........................................................................Page 41
Section 14. CAPTIONS..............................................................................Page 41
Section 15. GOVERNING LAW -- JURISDICTION.........................................................Page 41
Section 16. PRIOR AGREEMENTS, ETC.................................................................Page 41
Section 17. SUCCESSORS AND ASSIGNS................................................................Page 42
Section 18. WAIVER OF JURY TRIAL..................................................................Page 42
Section 19. ARBITRATION...........................................................................Page 42
iii
Exhibit "A" Promissory Note (Revolving Loan)($3,000,000.00)
Exhibit "B" Promissory Note (Capital Expenditure Line of Credit)
($1,000,000.00)
Exhibit "C" Promissory Note (Capital Expenditure Term Loan)
($1,000,000.00)
Exhibit "D" Schedule of Exceptions
Exhibit "E" Security Agreement (Equipment, Inventory, Accounts
Receivable and General Intangibles)
Exhibit "F" Mortgage, Security Agreement, Assignment of Rents and
Fixture Filing
Exhibit "G" Subordination Agreement (Landec Corporation)
Exhibit "H" Guaranty Agreement (Landec Corporation)
Exhibit "I" Collateral Assignment of Licensing Agreement
Exhibit "J" Intercreditor Agreement
iv
CREDIT AGREEMENT
INTELLICOAT CORPORATION, a Delaware corporation (the "Company"), and
AMERICAN NATIONAL BANK D/B/A OLD NATIONAL BANK, a national banking association
with its principal office in Indianapolis, Indiana (the "Bank"), agree as
follows:
SECTION 1. ACCOUNTING TERMS -- DEFINITIONS. All accounting and financial
terms used in this Agreement are used with the meanings such terms would be
given in accordance with generally accepted accounting principles except as may
be otherwise specifically provided in this Agreement. The following terms have
the meanings indicated when used in this Agreement with the initial letter
capitalized:
- "ADVANCE" means a disbursement of proceeds of the Revolving Loan
or the Capital Expenditure Line of Credit, as the context
requires.
- "AGREEMENT" means this Credit Agreement between the Company and
the Bank, as it may from time to time be amended.
- "ASSIGNMENT OF LICENSING AGREEMENTS" is used as defined in Section
4(e).
- "AUTHORIZED OFFICER" means the Chief Financial Officer or the
Controller of the Company or such other officer whose authority to
perform acts to be performed only by an Authorized Officer under
the terms of this Agreement is evidenced to the Bank by a
certified copy of an appropriate resolution of the Board of
Directors of the Company.
- "BANK" is used as defined in the preamble.
- "BANKING DAY" means a day on which the principal office of the
Bank in the City of Indianapolis, Indiana, is open for the purpose
of conducting substantially all of the Bank's business activities.
- "BORROWING BASE" means an amount equal to the sum of seventy
percent (70%) of the book value of the Company's Eligible
Inventory.
- "BORROWING BASE CERTIFICATE" means a certificate of the Company
signed by an appropriate officer indicating the amount of the
Borrowing Base as of a stated date and in such form and showing
such detail as the Bank may reasonably require.
- "CAPITAL EXPENDITURE LINE OF CREDIT" is used as defined in Section
2(b)(i).
- "CAPITAL EXPENDITURE LINE OF CREDIT COMMITMENT" means the
agreement of the Bank to extend the Capital Expenditure Line of
Credit to the Company until the Capital Expenditure Line of
Credit Maturity Date, and if the context so requires, the term
may also refer to the maximum principal amount which is
permitted to be outstanding under the Capital Expenditure Line
of Credit at any time.
- "CAPITAL EXPENDITURE LINE OF CREDIT MATURITY DATE" means
initially June 30, 2001, and thereafter any subsequent date to
which the Capital Expenditure Line of Credit Commitment may be
extended by the Bank pursuant to the terms of Section 2(b)(iv).
- "CAPITAL EXPENDITURE LINE OF CREDIT NOTE" is used as defined in
Section 2(b)(ii).
- "CAPITAL EXPENDITURE TERM LOAN" is used as defined in Section
2(c).
- "CAPITAL EXPENDITURE TERM NOTE" is used as defined in Section
2(c)(ii).
- "CODE" means the Internal Revenue Code of 1986, as amended.
- "COMMITMENT" means the agreement of the Bank to extend the
Revolving Loan to the Company until the Revolving Loan Maturity
Date, and if the context so requires, the term may also refer to
the maximum principal amount which is permitted to be outstanding
under the Revolving Loan at any time, assuming the Borrowing Base
is equal to or in excess of such amount.
- "COMPANY" is used as defined in the Preamble.
2
- "EBITDA" means earnings before interest, taxes, depreciation, and
amortization, all determined in accordance with GAAP.
- "ELIGIBLE INVENTORY" means seed corn inventory :(i) for which the
Company has made payment, (ii) that is held in a warehouse in
Illinois or Indiana approved in advance by the Bank, or at
Hubner's plant located in West Lebanon, Indiana (each of the
foregoing called a "Warehouse"), (iii) which is segregated at each
such Warehouse from other non-Xxxxxxx'x Choice Direct seed corn
inventory that is clearly marked in bags or other containers with
the words "Xxxxxxx'x Choice Direct" or another name clearly
identifying the Company's seed corn supported by the books and
records of the Company as being owned by the Company, (iv) as to
which all creditors of the owner or lessee of the Warehouse where
such inventory is located have entered into an Ownership
Acknowledgment Agreement or similar agreement, appropriate lien
waivers have been executed, and appropriate UCC financing
statements disclaiming any interest in such seed corn inventory
have been filed, complete copies of which have been provided to
the Bank, and (v) as to which the Bank has filed the appropriate
UCC financing statements giving notice of the Bank's security
interest in the Company's seed corn inventory located at such
Warehouse and perfecting the Bank's lien thereon.
- "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
- "EVENT OF DEFAULT" means any of the events described in Section 8.
- "GAAP" means generally accepted account principles as then in
effect, which shall include the official interpretations thereof
by the Financial Accounting Standards Board, consistently applied.
- "GUARANTY AGREEMENT" is used as defined in Section 4(d).
- "HAZARDOUS SUBSTANCE" means any hazardous or toxic substance
regulated by any federal, state or local statute or regulation
including but not limited
3
to the Comprehensive Environmental Response, Compensation and
Liability Act, the Resource Conservation and Recovery Act and the
Toxic Substance Control Act, or by any federal, state or local
governmental agencies having jurisdiction over the control of any
such substance including but not limited to the United States
Environmental Protection Agency.
- "HUBNER" means Hubner Industries, LLC, together with its
successors and assigns.
- "INFORMAL REQUEST" has the meaning set forth in Section 2(a)(ii)
herein.
- "INTERCREDITOR AGREEMENT" is used as defined in Section 4(f)
herein.
- "INTEREST PERIOD" means each consecutive one year period for which
the Company shall have selected the T-Xxxx Rate, effective as of
the first day of each Interest Period and ending on the last day
of each Interest Period.
- "LANDEC" means Landec Corporation, a California corporation,
together with its successors and assigns.
- "LOAN" means any of the Revolving Loan, the Capital Expenditure
Line of Credit, or the Capital Expenditure Term Loan, as the
context requires, and when used in the plural form refers to all
of the Loans.
- "LOAN DOCUMENT" means any of this Agreement, the Revolving Note,
the Capital Expenditure Line of Credit Note, the Capital
Expenditure Term Note, the Mortgage, the Security Agreement, the
Subordination Agreement, the Guaranty Agreement, the Assignment of
Licensing Agreements, the Intercreditor Agreement, and any other
instrument or document which evidences or secures the Loans or any
of them or which expresses an agreement as to terms applicable to
the Loans or any of them, and in the plural means any two or more
of the Loan Documents, as the context requires.
- "MORTGAGE" is used as defined in Section 4(b).
4
- "NOTE" means any of the Revolving Note, the Capital Expenditure
Line of Credit Note, or the Equipment Term Note, as the context
requires, and when used in the plural form refers to all of the
Notes.
- "OBLIGATIONS" means all obligations of the Company in favor of the
Bank of every type and description, direct or indirect, absolute
or contingent, due or to become due, now existing or hereafter
arising pursuant to this Agreement and the other Loan Documents,
including but not limited to: (i) all of such obligations on
account of the Loans, including any Advances made pursuant to any
extension of the Commitment beyond the initial Revolving Loan
Maturity Date, any extension of the Capital Expenditure Line of
Credit Commitment beyond the initial Capital Expenditure Line of
Credit Maturity Date, or pursuant to any other amendment of this
Agreement, and (ii) all other obligations arising under any Loan
Document as amended from time to time.
- "OWNERSHIP ACKNOWLEDGMENT AGREEMENT" means that certain Ownership
Acknowledgment Agreement entered into by and among the Company,
Hubner, and Civitas Bank, now known as Fifth Third Bank, Indiana,
dated as of November 1, 1998, as it may be amended.
- "PLAN" means an employee pension benefit plan as defined in ERISA.
- "PLEDGE AGREEMENT" is used as defined in Section 4(e).
- "PRIME RATE" means the interest rate announced from time to time
in the Money Section of the WALL STREET JOURNAL (MidWest Edition)
as the "Prime Rate." Any change in such Prime Rate shall take
effect on the date specified in the published change in such rate.
- "PRIME-BASED RATE" means any variable rate at which interest may
accrue on all or a portion of any of the Loans under the terms of
this Agreement determined by reference to the Prime Rate.
- "REVOLVING LOAN" is used as defined in Section 2(a)(i).
5
- "REVOLVING LOAN MATURITY DATE" means initially June 30, 2003, and
thereafter any subsequent date to which the Commitment may be
extended by the Bank pursuant to the terms of Section 2(a)(iv).
- "REVOLVING NOTE" is used as defined in Section 2(a)(ii).
- "SECURITY AGREEMENT" is used as defined in Section 4(a).
- "SEED AGREEMENT" means that certain Hybrid Seed Corn Production
and Sales Agreement entered into by and between Hubner and the
Company dated as of November 1, 1998, pursuant to which, among
other things, Hubner has agreed to supply seed corn to the Company
(as amended, and as further amended, restated or otherwise
modified from time to time).
- "SUBORDINATED DEBT" means indebtedness of the Company which is
subordinated to the indebtedness of the Company to the Bank under
the terms of the Subordination Agreement and any other
indebtedness of the Company which is subordinated to the Company's
indebtedness to the Bank on substantially similar terms.
- "SUBORDINATION AGREEMENT" is used as defined in Section 4(c).
- "SUBSIDIARY" means any corporation, partnership, joint venture or
other business entity over which the Company owns, directly or
indirectly fifty-one percent (51%) or more of the equity of such
entity having ordinary voting power to elect a majority of the
board of directors.
- "T-XXXX RATE" means the sum of the 5-Year T-Xxxx Rate plus two and
three-quarters percent (2-3/4%) per annum.
- "5-YEAR T-XXXX RATE" means the 5-Year T-Xxxx Rate as published in
the "Money Section" of the WALL STREET JOURNAL (MidWest Edition)
two (2) Banking Days prior to the first day of Capital Expenditure
Term Loan.
- "TANGIBLE CAPITAL BASE" means the shareholders' equity of the
Company less any recorded goodwill, patents, trademarks, trade
secrets, and any other assets which would be classified as
intangible assets under generally
6
accepted accounting principles, plus the principal amount of the
Company's Subordinated Debt.
- "UNMATURED EVENT OF DEFAULT" means any event specified in Section
8, which is not initially an Event of Default, but which would, if
uncured, become an Event of Default with the giving of notice or
the passage of time or both.
- "WAREHOUSE" is used as defined in the definition of Eligible
Inventory.
SECTION 2. THE LOANS. Subject to all of the terms and conditions of this
Agreement, the Bank will make the Loans described in this Section to the
Company.
a. THE REVOLVING LOAN. The Bank will make a revolving loan to the
Company on the following terms and subject to the following
conditions:
(i) THE COMMITMENT -- USE OF PROCEEDS. From the date of this
Agreement and until the Revolving Loan Maturity Date, the
Bank agrees to make Advances (collectively, the "Revolving1
Loan") under a revolving line of credit from time to time
to the Company of amounts not exceeding in the aggregate at
any time outstanding the lesser of Three Million and 00/100
Dollars ($3,000,000.00) (the "Commitment") or the Borrowing
Base, provided that all of the conditions of lending stated
in Section 7 of this Agreement as being applicable to the
Revolving Loan have been fulfilled at the time of each
Advance. Proceeds of the Revolving Loan may be used by the
Company only for working capital purposes.
(ii) METHOD OF BORROWING. The obligation of the Company to repay
the Revolving Loan shall be evidenced by a promissory note
(the "Revolving Note") of the Company in the form of
EXHIBIT "A" attached hereto. So long as no Event of Default
or Unmatured Event of Default shall have occurred and be
continuing and until the Revolving Loan Maturity Date, the
Company may borrow,
7
repay and reborrow (subject to the "annual cleanup
requirements set forth in Section 5(j)) under the Revolving
Note on any Banking Day; provided, that no borrowing may
cause the principal balance of the Loan to exceed the
lesser of the Commitment or the Borrowing Base or may
result in an Event of Default or an Unmatured Event of
Default, and provided further, that the Company may receive
the proceeds of only one Advance per Banking Day. Each
Advance under the Revolving Loan shall be conditioned upon
receipt by the Bank from the Company of a Borrowing Base
Certificate completed as of the date of the request. The
Bank shall make a disbursement upon the oral request of the
Company made by an Authorized Officer, or upon a request
transmitted to the Bank by telephone facsimile ("fax")
machine, or by any other form of written electronic
communication (all such requests for Advances being
hereafter referred to as "Informal Requests"). In so doing,
the Bank may rely on any Informal Request which shall have
been received by it in good faith from a person reasonably
believed to be an Authorized Officer. Upon making each
Informal Request, the Company shall promptly deliver to the
Bank a Borrowing Base Certificate completed as of the date
of such Informal Request, and shall in and of itself
constitute the representation of the Company that no Event
of Default or Unmatured Event of Default has occurred and
is continuing or would result from the making of the
requested Advance, and that the making of the requested
Advance shall not cause the principal balance of the
Revolving Loan to exceed the lesser of the Commitment or
the Borrowing Base. All borrowings and reborrowings and all
repayments shall be in amounts of not less than One
Thousand Dollars ($1,000.00), except for repayment
8
of the entire principal balance of the Revolving Loan and
except for special prepayments of principal required under
the terms of Section 2(a)(v). Upon receipt of a request for
an Advance, a Borrowing Base Certificate, and upon
compliance with any other conditions of lending stated in
Section 7 of this Agreement applicable to the Revolving
Loan, the Bank shall disburse the amount of the requested
Advance to the Company. All Advances by the Bank and
payments by the Company shall be recorded by the Bank on
its books and records, and the principal amount outstanding
from time to time, plus interest payable thereon, shall be
determined by reference to the books and records of the
Bank. The Bank's books and records shall be presumed PRIMA
FACIE to be correct as to such matters.
(iii) INTEREST ON THE REVOLVING LOAN. The principal amount of the
Revolving Loan outstanding from time to time shall bear
interest until maturity of the Revolving Note at a rate per
annum equal to the Prime Rate plus three-quarters percent
(3/4%). After maturity, whether on the Revolving Loan
Maturity Date or on account of acceleration upon the
occurrence of an Event of Default, and until paid in full,
the Revolving Loan shall bear interest at a per annum rate
equal to the Prime Rate plus four and three-quarters
percent (4-3/4%). Accrued interest shall be due and payable
monthly on the last Banking Day of each month prior to
maturity. After maturity, interest shall be payable as
accrued and without demand.
(iv) EXTENSIONS OF REVOLVING LOAN MATURITY DATE. The Bank may,
upon the request of the Company, but at the Bank's sole
discretion, extend the Revolving Loan Maturity Date from
time to time to such date or dates as the Bank may elect by
notice in writing to
9
the Company, and upon any such extension and upon execution
and delivery by the Company of a Revolving Note reflecting
the extended maturity date, the date to which the
Commitment is then extended will become the "Revolving Loan
Maturity Date" for purposes of this Agreement.
(v) SPECIAL REPAYMENTS OF PRINCIPAL. At any time the principal
balance of the Revolving Loan exceeds the Borrowing Base,
as determined on the basis of the most recent Borrowing
Base Certificate furnished by the Company or as determined
by the Bank upon an inspection of the books and records of
the Company, the Company shall immediately repay that
portion of the principal balance of the Revolving Loan
which is in excess of the Borrowing Base. Such repayment
shall be due without demand.
b. THE CAPITAL EXPENDITURE LINE OF CREDIT. The Bank will make a
Capital Expenditure Line of Credit to the Company on the following
terms and subject to the following conditions:
(i) THE CAPITAL EXPENDITURE LINE OF CREDIT COMMITMENT -- USE OF
PROCEEDS. From the date of this Agreement and until the
Capital Expenditure Line of Credit Maturity Date, the Bank
agrees to make Advances (collectively, the "Capital
Expenditure Line of Credit") from time to time to the
Company of amounts not exceeding in the aggregate during
the term of the Capital Expenditure Line of Credit the
amount of One Million and 00/100 Dollars ($1,000,000.00)
(the "Capital Expenditure Line of Credit Commitment");
provided, that all of the conditions of lending stated in
Section 7 of this Agreement as being applicable to the
Capital Expenditure Line of Credit have been fulfilled at
the time of each Advance; and provided further, that no
Advance of the Capital Expenditure Line of Credit shall
exceed one hundred
10
percent (100%) of the amount of the invoice evidencing the
cost to the Company of each piece of equipment (including
without limitation, freight and installation costs and
expenses, and taxes, all as evidenced on the invoice)
purchased with proceeds of the Loan. Proceeds of the
Capital Expenditure Line of Credit may be used by the
Company only for capital expenditures.
(ii) METHOD OF BORROWING. The obligation of the Company to repay
the Capital Expenditure Line of Credit shall be evidenced
by a promissory note (the "Capital Expenditure Line of
Credit Note") of the Company in the form of EXHIBIT "B"
attached hereto. So long as no Event of Default or
Unmatured Event of Default shall have occurred and be
continuing and until the Capital Expenditure Line of Credit
Maturity Date, the Company may borrow under the Capital
Expenditure Line of Credit Note on any Banking Day;
provided, that no borrowing may cause the principal amount
of the Loan disbursed to the Company during the term of the
Loan to exceed in the aggregate the Capital Expenditure
Line of Credit Commitment or may result in an Event of
Default or an Unmatured Event of Default. Each Advance
under the Capital Expenditure Line of Credit shall be
conditioned upon receipt by the Bank from the Company of a
copy of the invoice for the equipment to be purchased with
the proceeds of the Advance. The Bank shall make a
disbursement upon receipt of an Informal Request. In so
doing, the Bank may rely on any Informal Request which
shall have been received by it in good faith from a person
reasonably believed to be an Authorized Officer. Upon
making each Informal Request, the Company shall promptly
deliver to the Bank an invoice for the equipment to be
purchased with proceeds of the Advance, and shall in and of
itself constitute the representation
11
of the Company that no Event of Default or Unmatured Event
of Default has occurred and is continuing or would result
from the making of the requested Advance and that the
making of the requested Advance shall not cause the
aggregate principal amount disbursed under of the Capital
Expenditure Line of Credit to exceed the Capital
Expenditure Line of Credit Commitment. All borrowings and
all repayments shall be in amounts of not less than One
Thousand Dollars ($1,000.00), except for repayment of the
entire principal balance of the Capital Expenditure Line of
Credit. Upon receipt of receipt of a request for an Advance
and the associated invoice or invoices, and upon compliance
with any other conditions of lending stated in Section 7 of
this Agreement applicable to the Capital Expenditure Line
of Credit, the Bank shall disburse the amount of the
requested Advance to the Company. All Advances by the Bank
and payments by the Company shall be recorded by the Bank
on its books and records, and the principal amount
outstanding from time to time, plus interest payable
thereon, shall be determined by reference to the books and
records of the Bank. The Bank's books and records shall be
presumed PRIMA FACIE to be correct as to such matters.
(iii) INTEREST ON THE CAPITAL EXPENDITURE LINE OF CREDIT. The
principal amount of the Capital Expenditure Line of Credit
outstanding from time to time shall bear interest until
maturity of the Capital Expenditure Line of Credit Note at
a rate per annum equal to the Prime Rate plus
three-quarters percent (3/4%). After maturity, whether on
the Capital Expenditure Line of Credit Maturity Date or on
account of acceleration upon the occurrence of an Event of
Default, and until paid in full, the Capital Expenditure
Line of Credit shall bear interest at a per annum rate
equal to the Prime
12
Rate plus four and three-quarters percent (4-3/4%). Accrued
interest shall be due and payable monthly on the last
Banking Day of each month prior to maturity. After
maturity, interest shall be payable as accrued and without
demand.
(iv) EXTENSIONS OF CAPITAL EXPENDITURE LINE OF CREDIT MATURITY
DATE. The Bank may, upon the request of the Company, but at
the Bank's sole discretion, extend the Capital Expenditure
Line of Credit Maturity Date from time to time to such date
or dates as the Bank may elect by notice in writing to the
Company, and upon any such extension and upon execution and
delivery by the Company of a Capital Expenditure Line of
Credit Note reflecting the extended maturity date, the date
to which the Capital Expenditure Line of Credit Commitment
is then extended will become the "Capital Expenditure Line
of Credit Maturity Date" for purposes of this Agreement.
c. THE CAPITAL EXPENDITURE TERM LOAN. The Bank will make a Capital
Expenditure Term Loan (the "Capital Expenditure Term Loan") to the
Company on the Capital Expenditure Line of Credit Maturity Date on
the following terms and subject to the following conditions:
(i) AMOUNT. The principal amount of the Capital Expenditure
Term Loan shall be equal to the lesser of One Million and
00/100 Dollars ($1,000,000.00), or the amount of the
aggregate principal amount of the Capital Expenditure Line
of Credit outstanding on the Capital Expenditure Line of
Credit Maturity Date.
(ii) THE CAPITAL EXPENDITURE TERM NOTE. The obligation of the
Company to repay the Capital Expenditure Term Loan shall be
evidenced by a promissory note (the "Capital Expenditure
Term Note") in the form of EXHIBIT "C" attached hereto.
Principal and interest of the Capital Expenditure Term Loan
shall be repayable
13
in equal monthly installments, each of which shall be equal
to one-forty-eighth (1/48th) of the sum of the initial
principal amount of the Capital Expenditure Line of Credit
outstanding on the Capital Expenditure Line of Credit
Maturity Date plus interest calculated at the rate provided
in Section 2(c)(iii) herein for the entire scheduled term
of the Capital Expenditure Term Loan , which monthly
payments shall be due commencing on the last Banking Day of
the month in which the Capital Expenditure Term Loan is
made, and continuing thereafter on the last Banking Day of
each month thereafter until the fourth anniversary of the
making of the Capital Expenditure Term Loan, on which date
the entire principal balance of the Capital Expenditure
Term Loan shall be due and payable together with all
accrued and unpaid interest. The principal of the Capital
Expenditure Term Loan may be prepaid at any time in whole
or in part without premium or penalty, provided that: (A)
any partial prepayment shall be in an amount which is an
integral multiple of $1,000.00, and (B) all partial
prepayments shall be applied to the latest maturing
scheduled installments of principal in inverse order of
maturity.
(iii) INTEREST ON THE CAPITAL EXPENDITURE TERM LOAN. The unpaid
principal balance from time to time of the Capital
Expenditure Term Loan shall bear interest from the date the
Loan is made prior to the maturity of the Capital
Expenditure Term Note at a rate per annum equal to the
T-Xxxx Rate. After maturity, whether scheduled maturity or
maturity by virtue of acceleration on account of the
occurrence of an Event of Default, interest will accrue on
the Capital Expenditure Term Loan at a rate per annum equal
to the T-Xxxx Rate plus four percent (4%). Prior to
maturity, interest shall be due and payable on the last
Banking Day of each
14
month together with payment of principal due on such dates
as provided in Section 2(c)(ii) above. After maturity,
interest shall be payable as accrued and without demand.
(iv) USE OF PROCEEDS OF THE CAPITAL EXPENDITURE TERM LOAN. The
proceeds of the Capital Expenditure Term Loan shall be used
in their entirety to refinance the Capital Expenditure Line
of Credit on the Capital Expenditure Line of Credit
Maturity Date.
d. PROVISIONS APPLICABLE TO ALL OF THE LOANS. The following
provisions are applicable to both of the Loans:
(i) CALCULATION OF INTEREST. Interest on the Loans shall be
calculated by applying the ratio of the annual interest
rate over a year of 360 days, multiplied by the outstanding
principal balance, multiplied by the actual number of days
the principal balance is outstanding.
(ii) MANNER OF PAYMENT - APPLICATION. All payments of principal
and interest on the Loans shall be payable at the principal
office of the Bank in Indianapolis, Indiana, in funds
available for the Bank's immediate use in that city and no
payment will be considered to have been made until received
in such funds. All payments received on account of each
Loan will be applied first to the satisfaction of any
interest which is then due and payable on account of such
Loan, and to principal only after all interest which is due
and payable has been satisfied.
(iii) COMMITMENT FEE. The Bank acknowledges receipt from the
Company of the sum of $5,000.00, either previous to or
contemporaneously with the execution of this Agreement, as
a fee for the Bank's commitment to make the Loans.
(iv) AUTOMATIC DEBIT. Upon prior notice to the Company, the Bank
may debit when due all payments of principal and interest
due under
15
the terms of this Agreement to any deposit account of the
Company carried with the Bank without further authority.
(v) PREPAYMENT. The Loans may be prepaid at any time in whole
or in part without penalty or premium.
SECTION 3. REPRESENTATIONS AND WARRANTIES. To induce the Bank to make the
Loans, the Company represents and warrants to the Bank that:
a. ORGANIZATION OF THE COMPANY. The Company is a corporation
organized, existing and in good standing under the laws of the
State of Delaware. The Company is qualified to do business in
every jurisdiction in which: (i) the nature of the business
conducted or the character or location of properties owned or
leased, or the residences or activities of employees make such
qualification necessary, and (ii) failure so to qualify might
impair the title of the Company to material properties or the
Company's right to enforce material contracts or result in
exposure of the Company to liability for material penalties in
such jurisdiction. No jurisdiction in which the Company is not
qualified to do business has asserted in writing that the Company
is required to be qualified therein. The principal office of the
Company is located at 000 Xxxxx Xxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxx
00000. The Company does not conduct any material operations or
keep any material amounts of property at any other location,
except the Warehouses. The Company has not done business under any
name other than its present corporate name at any time during the
six years preceding the date of this Agreement except for the
names "Xxxxxxx'x Choice Direct," "Xxxxxxx'x Choice," and "Xxxxxxxx
& Sun, Inc."
b. AUTHORIZATION; NO CONFLICT. The execution and delivery of this
Agreement, the borrowings hereunder, the execution and delivery of
all of the other Loan Documents and the performance by the Company
of its obligations under this Agreement and all of the other Loan
Documents are within the Company's corporate powers, have been
duly authorized by all necessary
16
corporate action, have received any required governmental or
regulatory agency approvals and do not and will not contravene or
conflict with any provision of law or of the Articles of
Incorporation or ByLaws of the Company or of any agreement binding
upon the Company or its properties.
c. VALIDITY AND BINDING NATURE. This Agreement and all of the other
Loan Documents are the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their
respective terms, except to the extent that enforcement thereof
may be limited by bankruptcy, insolvency, reorganization,
moratorium and other laws enacted for the relief of debtors
generally and other similar laws affecting the enforcement of
creditors' rights generally or by equitable principles which may
affect the availability of specific performance and other
equitable remedies.
d. FINANCIAL STATEMENTS. The Company has delivered to the Bank the
audited financial statements of Landec (which includes the Company
as a separate segment) as of October 31, 1999, and for the fiscal
year of Landec then ended and its unaudited interim financial
statements as of March 31, 2000, and for the month and partial
fiscal year then ended. Such statements have been prepared in
accordance with generally accepted accounting principles
consistently applied except, as to the interim statements, for the
absence of a statement of cash flows, footnotes and adjustments
normally made at year end which are not material in amount. Such
statements present fairly the financial position of the Company as
of the dates thereof and the results of its operations for the
periods covered and since the date of the latest of such
statements there has been no material adverse change in the
financial position of the Company or in the results of its
operations.
e. LITIGATION AND CONTINGENT LIABILITIES. No litigation, arbitration
proceedings or governmental proceedings are pending or to the
Company's knowledge threatened against the Company which would, if
adversely
17
determined, materially and adversely affect its financial position
or continued operations. The Company has no material contingent
liabilities not provided for or disclosed in the financial
statements referred to in Section 3(d) or in the "Schedule of
Exceptions" attached as EXHIBIT "D."
f. LIENS. None of the assets of the Company are subject to any
mortgage, pledge, title retention lien, or other lien, encumbrance
or security interest except for liens and security interests
described in the exceptions enumerated in Section 6(b).
g. EMPLOYEE BENEFIT PLANS. Each Plan maintained by the Company is in
material compliance with ERISA, the Code, and all applicable rules
and regulations adopted by regulatory authorities pursuant
thereto, and the Company has filed all reports and returns
required to be filed by ERISA, the Code and such rules and
regulations. No Plan maintained by the Company and no trust
created under any such Plan has incurred any "accumulated funding
deficiency" within the meaning of Section 412(c)(1) of the Code,
and the present value of all benefits vested under each Plan did
not exceed, as of the last annual valuation date, the value of the
assets of the respective Plans allocable to such vested benefits.
The Company has no knowledge that any "reportable event" as
defined in ERISA has occurred with respect to any Plan.
h. PAYMENT OF TAXES. The Company has filed all federal, state and
local tax returns and tax related reports which the Company is
required to file by any statute or regulation and all taxes and
any tax related interest payments and penalties that are due and
payable have been paid, except for such as are being contested in
good faith and by appropriate proceedings and as to which
appropriate reserves have been established. Adequate provision has
been made for the payment when due of all tax liabilities which
have been incurred, but are not as yet due and payable.
18
i. INVESTMENT COMPANY ACT. The Company is not an "investment company"
or a company "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
j. REGULATION U AND OTHER FEDERAL REGULATIONS. The Company is not
engaged principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or
carrying margin stock within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System. Not more than
twenty-five percent (25%) of the assets of the Company consists of
margin stock, within the contemplation of Regulation U, as
amended. No portion of any Loan made hereunder shall be used
directly or indirectly to purchase ineligible securities, as
defined by applicable regulations of the Federal Reserve Board,
underwritten by any affiliate of the Bank during the underwriting
period and for thirty (30) days thereafter.
k. HAZARDOUS SUBSTANCES. Except as disclosed on the "Schedule of
Exceptions" attached as EXHIBIT "D", to the knowledge of the
Company after reasonable inquiry and investigation; (i) there are
no underground storage tanks of any kind on any premises owned or
occupied by or under lease to the Company; (ii) there are no
tanks, drums or other containers of any kind on premises owned or
occupied by or under lease to the Company, the contents of which
are unknown to the Company; (iii) no premises owned or occupied by
or under lease to the Company have ever been used, and as of the
date of this Agreement, no such premises are being used for any
activities involving the use, treatment, transportation,
generation, storage or disposal of any Hazardous Substances in
reportable quantities, and (iv) no Hazardous Substances in
reportable quantities have been released on any such premises nor
is there any threat of release of any Hazardous Substances in
reportable quantities on any such premises.
19
l. SUBSIDIARIES. The Company has no Subsidiaries as of the date of
this Agreement.
m. ORGANIZATION OF LANDEC. Landec is a corporation organized,
existing and in good standing under the laws of the State of
California. Landec is qualified to do business in every
jurisdiction in which: (i) the nature of the business conducted or
the character or location of properties owned or leased, or the
residences or activities of employees make such qualification
necessary, and (ii) failure so to qualify might impair the title
of Landec's material properties or Landec's right to enforce
material contracts or result in exposure of Landec to liability
for material penalties in such jurisdiction. No jurisdiction in
which Landec is not qualified to do business has asserted in
writing that Landec is required to be qualified therein. The
principal office of Landec is located at 0000 Xxxxx Xxxxxx, Xxxxx
Xxxx, Xxxxxxxxxx 00000-0000. Landec does not conduct any material
operations or keep any material amounts of property at any other
location, except at the principal office of its subsidiary, Apio,
Inc. located at 0000 Xxxx Xxxx, Xxxxxxxxx, Xxxxxxxxxx 00000 and
00000 Xxxx 00, Xxxxxx, Xxxxxxxxxx 00000, and its subsidiary Dock
Resins Corporation at 0000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxxx, Xxx
Xxxxxx 00000. Landec has not done business under any name other
than its present corporate name at any time during the six years
preceding the date of this Agreement.
n. LANDEC AUTHORIZATION; NO CONFLICT. The execution and delivery of
the Guaranty and the performance thereunder, and the execution and
delivery of all of the other Loan Documents to which Landec is a
party and the performance by Landec of its obligations under the
Guaranty and all of the other Loan Documents to which Landec is a
party are within Landec's corporate powers, have been duly
authorized by all necessary corporate action, have received any
required governmental or regulatory agency approvals and do not
and will not contravene or conflict with any provision
20
of law or of the Articles of Incorporation or ByLaws of Landec or
of any agreement binding upon Landec or its properties.
o. LANDEC VALIDITY AND BINDING NATURE. The Guaranty and all of the
other Loan Documents to which Landec is a party are the legal,
valid and binding obligations of Landec, enforceable against
Landec in accordance with their respective terms, except to the
extent that enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium and other laws enacted for
the relief of debtors generally and other similar laws affecting
the enforcement of creditors' rights generally or by equitable
principles which may affect the availability of specific
performance and other equitable remedies.
SECTION 4. COLLATERAL FOR THE OBLIGATIONS. The Obligations shall be
secured and supported as provided in this Section.
a. SECURITY AGREEMENT. The Obligations shall be secured by a security
interest in all equipment, inventory, accounts receivable, chattel
paper and general intangibles of the Company now owned and
hereafter acquired and in the proceeds thereof, which security
interest will be created by a Security Agreement (the "Security
Agreement") in the form attached as EXHIBIT "E." The Security
Agreement will provide a security interest in the collateral
described therein subject only to liens and security interests
described in the exceptions enumerated in Section 6(b).
b. MORTGAGE. The Obligations will further be secured by the mortgage
lien and security interests created by a Mortgage, Security
Agreement, Assignment of Rents and Fixture Filing (the "Mortgage")
on the real estate in White County, Indiana, owned by the Company
and commonly known as 000 Xxxxx Xxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxx
00000, (referred to in this Section as the "Real Estate"). The
Real Estate is more particularly described in the form of the
Mortgage which is attached as EXHIBIT "F." In
21
support of the Mortgage, the Company shall provide to the Bank at
the Bank's expense the following documentation:
(i) TITLE SEARCH. The Bank shall obtain a title search which
shall show no liens or encumbrances on the Real Estate
other than (i) the Bank's Mortgage, if recorded at the time
such search is conducted, (ii) standard exceptions as to
rights of parties in possession and matters which would be
disclosed by survey which do not materially and adversely
affect the value or marketability of the Real Estate or the
usefulness of the Real Estate in the operations of the
Company, (iii) easements not shown by the public records
and mechanic's liens not shown by the public records, and
(iv) those liens described in the exceptions enumerated in
Section 6(b).
(ii) FLOOD HAZARD DETERMINATION FORM. The Bank shall obtain the
completion of a Flood Hazard Determination Form from a
registered land surveyor or engineer pursuant to the
requirements of the Office of the Comptroller of the
Currency and the Federal Emergency Management Agency. If
such form shows that the Real Estate is in a flood plain,
the Company shall be required to obtain flood hazard
insurance as required by the Office of the Comptroller of
the Currency in order to close the Loans.
c. SUBORDINATION AGREEMENT. The indebtedness of the Company to Landec
in an amount not less than $7,000,000 shall be subordinated to the
indebtedness of the Company to the Bank under the terms of a
Subordination Agreement (the "Subordination Agreement") in the
form of EXHIBIT "G" attached hereto. The Subordination Agreement
shall not allow payments of principal to be made by Landec unless
the Company is in compliance with the following financial
covenants:
22
(i) RATIO OF LIABILITIES TO TANGIBLE CAPITAL BASE. The Company
shall maintain at all times the ratio of its total
liabilities less Subordinated Debt to its Tangible Capital
Base at a level not greater than 2.00 to1.00. For purposes
of testing compliance with this covenant, the term
"liabilities" shall include the present value of all
capital lease obligations of the Company, determined as of
any date the ratio is to be tested.
(ii) CASH FLOW COVERAGE RATIO. Semiannually on a year-to-date
basis measured as of the end of each April and October, the
Company shall maintain a cash flow coverage ratio of not
less than 1.50 to1.00. For purposes of this covenant, the
phrase "cash flow coverage ratio" means the ratio of: (A)
the Company's EBITDA over (B) the sum of the principal paid
plus interest expense.
d. GUARANTY AGREEMENT. The Obligations shall be supported by the
unconditional guaranty of prompt payment of Landec, which guaranty
shall be evidenced by a Guaranty Agreement (the "Guaranty
Agreement") in the form of EXHIBIT "H."
e. ASSIGNMENT OF LICENSING AGREEMENT. The Obligations shall further
be secured by an assignment by the Company to the Bank of all of
the Company's rights, title, and interest in the Licensing
Agreements entered into between the Company and Landec which
assignment shall be evidenced by the Collateral Assignment of
Licensing Agreement (the "Assignment of Licensing Agreement") in
the form attached hereto as EXHIBIT "I."
f. INTERCREDITOR AGREEMENT. The Bank and Fifth Third Bank, Indiana
shall enter into an Intercreditor Agreement substantially in the
form of EXHIBIT "J" attached hereto (the "Intercreditor
Agreement") setting forth terms
23
which, among other things, provide for the acknowledgment by Fifth
Third Bank, Indiana, as lender to Hubner, of the first priority
lien rights of the Bank in the Eligible Inventory.
SECTION 5. AFFIRMATIVE COVENANTS OF THE COMPANY. Until all Obligations of
the Company terminate or are paid and satisfied in full, and so long as the
Commitment or the Capital Expenditure Line of Credit Commitment is outstanding,
the Company shall strictly observe the following covenants.
a. CORPORATE EXISTENCE. The Company shall preserve its corporate
existence, and shall cause Landec to preserve its corporate
existence.
b. REPORTS, CERTIFICATES AND OTHER INFORMATION. The Company shall
furnish to the Bank copies of the following financial statements,
certificates and other information:
(i) ANNUAL STATEMENTS. As soon as available and in any event
within one hundred twenty (120) days after the close of
each fiscal year, the consolidated and consolidating
financial statements of Landec, which shall have a segment
broken out for the Company, for such fiscal year prepared
and presented in accordance with generally accepted
accounting principles, consistently applied (except for
changes in which the independent accountants of Landec
concur) in each case setting forth in comparative form
corresponding figures for the preceding fiscal year for
Landec and for the Company, together with the audit report,
unqualified as to scope, of independent certified public
accountants approved by the Bank, which approval shall not
be unreasonably withheld, together with the management
letter, if any, issued by such independent certified public
accountants.
(ii) INTERIM STATEMENTS. As soon as available and in any event
within thirty (30) days after the end of each month, a copy
of the interim financial statements of the Company,
consisting at a minimum of:
24
A. the balance sheet as of the end of the month, and
B. a statement of income for the month and for the
partial or full fiscal year ended as of the end of
the month,
all in reasonable detail and accompanied by the written
representation of the chief financial officer of the
Company that such financial statements have been prepared
in accordance with generally accepted accounting principles
(except that they need not include a statement of cash
flows and footnotes and need not reflect adjustments
normally made at year end, if such adjustments are not
material in amount), consistently applied, (except for
changes in which the independent accountants of the Company
concur) and present fairly the financial position of the
Company and the results of its operation as of the dates of
such statements and for the fiscal periods then ended.
(iii) GUARANTOR'S FINANCIAL STATEMENTS. The Company shall provide
the Bank within one hundred twenty (120) days after the
close of each fiscal year with a copy of Landec's Form
10-K. Within forty-five (45) days after the end of each of
Landec's fiscal quarters, the Company shall provide to the
Bank a copy of Landec's Form 10-Q.
(iv) BORROWING BASE CERTIFICATES. At the time of each request
for an Advance of the Revolving Loan, within thirty (30)
days after the end of each month, a Borrowing Base
Certificate as of the date of the Advance or such month
end, as applicable, and promptly as of such other dates as
the Bank may reasonably require.
(v) ORDERS. Prompt notice of any orders in any material
proceedings to which the Company is a party, issued by any
court or regulatory agency, federal or state, and if the
Bank should so request, a copy of any such order.
25
(vi) NOTICE OF DEFAULT OR LITIGATION. Immediately upon learning
of the occurrence of an Event of Default or Unmatured Event
of Default, or the institution of or any adverse
determination in any litigation, arbitration proceeding or
governmental proceeding which is material to the Company,
or the occurrence of any event which could have a material
adverse effect upon the Company, written notice thereof
describing the same and the steps being taken with respect
thereto.
(vii) REGISTRATION STATEMENTS AND REPORTS. Within five (5)
Banking Days of the filing by the Company or Landec with
the Securities and Exchange Commission or any state
securities regulatory authority, complete copies of all
registration statements or periodic and special reports
filed under federal or state securities laws and
regulations.
(viii) OTHER INFORMATION. From time to time such other information
concerning the Company or Landec as the Bank may reasonably
request.
c. BOOKS, RECORDS AND INSPECTIONS. The Company shall maintain
complete and accurate books and records. The Company shall permit
the Bank to inspect such books and records for purposes of copying
and audit, and inspect its properties and operations, upon
reasonable notice and all at reasonable times during normal
business hours; provided, however, that unless there is an Event
of Default or Unmatured Event of Default, the Bank shall not
perform more than three (3) such inspections per year.
d. INSURANCE. In addition to any insurance required by the Mortgage
and the Security Agreement, the Company shall maintain such
insurance as may be required by law and such other insurance, to
such extent and against such hazards and liabilities, as is
customarily maintained by companies similarly situated. The
Company agrees to name the Bank as additional
26
loss payee on any such insurance policy under a standard lender's
loss payable clause and to provide a copy of any such policy to
the Bank.
e. TAXES AND LIABILITIES. The Company shall pay when due all taxes,
license fees, assessments and other liabilities except such as are
being contested in good faith and by appropriate proceedings and
for which appropriate reserves have been established.
f. COMPLIANCE WITH LEGAL AND REGULATORY REQUIREMENTS. The Company
shall maintain material compliance with the applicable provisions
of all federal, state and local statutes, ordinances and
regulations and any court orders or orders of regulatory
authorities issued thereunder.
g. PRIMARY BANKING RELATIONSHIP. The Company shall maintain its
primary concentration and depository accounts with the Bank.
h. EMPLOYEE BENEFIT PLANS. The Company shall maintain and shall cause
any Subsidiary to maintain any Plan in material compliance with
ERISA, the Code, and all rules and regulations of regulatory
authorities pursuant thereto and shall file and shall cause any
Subsidiary to file all reports required to be filed pursuant to
ERISA, the Code, and such rules and regulations.
i. HAZARDOUS SUBSTANCES. If the Company or any Subsidiary should
commence the use, treatment, transportation, generation, storage
or disposal of any Hazardous Substance in reportable quantities in
its operations in addition to those noted in EXHIBIT "D", the
Company shall immediately notify the Bank of the commencement of
such activity with respect to each such Hazardous Substance. The
Company shall cause any Hazardous Substances which are now or may
hereafter be used or generated in the operations of the Company or
any Subsidiary in reportable quantities to be accounted for and
disposed of in compliance with all applicable federal, state and
local laws and regulations. The Company shall notify the Bank
immediately upon obtaining actual knowledge that:
27
(i) any premises which have at any time been owned or occupied
by or have been under lease to the Company or any
Subsidiary are the subject of an environmental
investigation by any federal, state or local governmental
agency having jurisdiction over the regulation of any
Hazardous Substances, the purpose of which investigation is
to quantify the levels of Hazardous Substances located on
such premises, or
(ii) the Company or any Subsidiary has been named or is
threatened to be named as a party responsible for the
possible contamination of any real property or ground water
with Hazardous Substances, including, but not limited to
the contamination of past and present waste disposal sites.
If the Company or any Subsidiary is notified of any event
described at items (i) or (ii) above, the Company shall
immediately engage or cause the Subsidiary to engage a firm or
firms of engineers or environmental consultants appropriately
qualified to determine as quickly as practical the extent of
contamination and the potential financial liability of the Company
or the Subsidiary with respect thereto, and the Bank shall be
provided with a copy of any report prepared by such firm or by any
governmental agency as to such matters as soon as any such report
becomes available to the Company, and Company shall immediately
take appropriate steps to establish reserves in the amount of the
potential financial liability of the Company or the Subsidiary
identified by such environmental consultants or engineers. The
selection of any engineers or environmental consultants engaged
pursuant to the requirements of this Section shall be subject to
the approval of the Bank, which approval shall not be unreasonably
withheld.
28
j. ANNUAL CLEANUP. The outstanding principal balance of the Revolving
Loan shall be $0 for a period of thirty (30) consecutive days in
each fiscal year of the Company.
SECTION 6. NEGATIVE COVENANTS OF THE COMPANY. Until all Obligations of
the Company terminate or are paid and satisfied in full, and so long as the
Commitment or the Capital Expenditure Line of Credit Commitment is outstanding,
the Company shall strictly observe the following covenants.
a. RESTRICTED PAYMENTS. The Company shall not purchase or redeem any
shares of the capital stock of the Company or declare or pay any
dividends thereon except for dividends payable entirely in capital
stock, and the Company shall not make any other distributions to
shareholders as shareholders, or set aside any funds for any such
purpose, or prepay, purchase or redeem any Subordinated Debt of
the Company; provided, however, that notwithstanding the
foregoing, such distributions, redemptions, dividends and payments
(each hereinafter called a "Shareholder Payment") may be made at
any time that no Event of Default or Unmatured Event of Default
exists at the time of the making of such Shareholder Payment or
would result from the making thereof, and upon compliance with the
following financial covenants at the time of the making of such
Shareholder Payments:
(i) RATIO OF LIABILITIES TO TANGIBLE CAPITAL BASE. The Company
shall maintain at all times the ratio of its total
liabilities less Subordinated Debt to its Tangible Capital
Base at a level not greater than 2.00 to 1.00. For purposes
of testing compliance with this covenant, the term
"liabilities" shall include the present value of all
capital lease obligations of the Company, determined as of
any date the ratio is to be tested.
29
(ii) CASH FLOW COVERAGE RATIO. Semiannually on a year-to-date
basis measured at the end of each April and October, the
Company shall maintain a cash flow coverage ratio of not
less than 1.50 to1.00. For purposes of this covenant, the
phrase "cash flow coverage ratio" means the ratio of: (A)
the Company's EBITDA over (B) the sum of the principal paid
plus interest expense.
b. LIENS. The Company shall not create or permit to exist any
mortgage, pledge, title retention lien or other lien, encumbrance
or security interest (all of which are hereafter referred to in
this subsection as a "lien" or "liens") with respect to any
property or assets now owned or hereafter acquired except:
(i) liens in favor of the Bank created pursuant to the
requirements of this Agreement or otherwise;
(ii) any lien or deposit with any governmental agency required
or permitted to qualify the Company to conduct business or
exercise any privilege, franchise or license, or to
maintain self-insurance or to obtain the benefits of or
secure obligations under any law pertaining to worker's
compensation, unemployment insurance, old age pensions,
social security or similar matters, or to obtain any stay
or discharge in any legal or administrative proceedings, or
any similar lien or deposit arising in the ordinary course
of business;
(iii) any mechanic's, worker's, repairmen's, carrier's,
warehousemen's or other like liens arising in the ordinary
course of business for amounts not yet due and for the
payment of which adequate reserves have been established,
or deposits made to obtain the release of such liens;
30
(iv) easements, licenses, minor irregularities in title or minor
encumbrances on or over any real property which do not, in
the judgment of the Bank, materially detract from the value
of such property or its marketability or its usefulness in
the business of the Company;
(v) liens for taxes and governmental charges which are not yet
due or which are being contested in good faith and by
appropriate proceedings and for which appropriate reserves
have been established;
(vi) liens created by or resulting from any litigation or legal
proceeding which is being contested in good faith and by
appropriate proceedings and for which appropriate reserves
have been established;
(vii) liens securing indebtedness not exceeding $100,000.00 in
the aggregate, provided such liens are subordinated at all
times to liens in favor of the Bank securing the
Obligations; and
(viii) those specific liens now existing described on the
"Schedule of Exceptions" attached as EXHIBIT "D."
c. GUARANTIES. The Company shall not be a guarantor or surety of, or
otherwise be responsible in any manner with respect to any
undertaking of any other person or entity, whether by guaranty
agreement or by agreement to purchase any obligations, stock,
assets, goods or services, or to supply or advance any funds,
assets, goods or services, or otherwise, except for:
(i) guaranties in favor of the Bank;
(ii) guaranties by endorsement of instruments for deposit made
in the ordinary course of business; and
(iii) those specific existing guaranties listed in the "Schedule
of Exceptions" attached as EXHIBIT "D."
31
d. LOANS OR ADVANCES. The Company shall not make or permit to exist
any loans or advances to any other person or entity, except for:
(i) extensions of credit or credit accommodations to customers
or vendors made by the Company in the ordinary course of
its business as now conducted;
(ii) reasonable salary advances to non-executive employees, and
other advances to agents and employees for anticipated
expenses to be incurred on behalf of the Company in the
course of discharging their assigned duties; and
(iii) the specific items listed in the "Schedule of Exceptions"
attached as EXHIBIT "D."
e. MERGERS, CONSOLIDATIONS, SALES, ACQUISITION OR FORMATION OF
SUBSIDIARIES. The Company shall not be a party to any
consolidation or to any merger and shall not purchase the capital
stock of or otherwise acquire any equity interest in any other
business entity without the prior written consent of the Bank
which shall not be unreasonably withheld. The Company shall not
acquire any material part of the assets of any other business
entity, except in the ordinary course of business. The Company
shall not sell, transfer, convey or lease all or any material part
of its assets, except in the ordinary course of business, or sell
or assign with or without recourse any receivables. The Company
shall not cause to be created or otherwise acquire any
Subsidiaries.
f. MARGIN STOCK. The Company shall not use or cause or permit the
proceeds of the Loans to be used, either directly or indirectly,
for the purpose, whether immediate, incidental or ultimate, of
purchasing or carrying any margin stock within the meaning of
Regulation U of the Board of Governors of the Federal Reserve
System, as amended from time to time.
g. OTHER AGREEMENTS. The Company shall not enter into any agreement
containing any provision which would be violated or breached in
material
32
respect by the performance of its obligations under this Agreement
or under any other Loan Document.
h. JUDGMENTS. The Company shall not permit any uninsured judgment or
monetary penalty rendered against it in any judicial or
administrative proceeding to remain unsatisfied for a period in
excess of forty-five (45) days unless such judgment or penalty is
being contested in good faith by appropriate proceedings and
execution upon such judgment has been stayed, and unless an
appropriate reserve has been established with respect thereto.
i. PRINCIPAL OFFICE. The Company shall not change the location of its
principal office unless it gives not less than ten (10) days prior
written notice of such change to the Bank.
j. HAZARDOUS SUBSTANCES. The Company shall not allow or permit to
continue the release or threatened release of any Hazardous
Substance on any premises owned or occupied by or under lease to
the Company or any Subsidiary.
k. DEBT. The Company shall not incur nor permit to exist any
indebtedness for borrowed money except:
(i) to the Bank;
(ii) indebtedness permitted to be secured under Section
6(b)(vii) herein; and
(iii) except for those existing obligations disclosed on the
"Schedule of Exceptions" attached as EXHIBIT "D."
For purposes of this covenant, the phrase "indebtedness for borrowed
money," shall be construed to include capital lease obligations.
SECTION 7. CONDITIONS OF LENDING. The obligation of the Bank to make any
Advance and to make the Capital Expenditure Term Loan shall be subject to
fulfillment of each of the following conditions precedent:
33
a. NO DEFAULT. No Event of Default or Unmatured Event of Default
shall have occurred and be continuing, and the representations and
warranties of the Company contained in Section 3 shall be true and
correct as of the date of this Agreement and as of the date of
each Advance (except for representations and warranties expressly
made as of a specific time and correct as of such date), except
that after the date of this Agreement: (i) the representations
contained in Section 3(d) will be construed so as to refer to the
latest financial statements furnished to the Bank by the Company
or Landec pursuant to the requirements of this Agreement, (ii) the
representations contained in Section 3(k) (with respect to
Hazardous Substances) will be construed so as to apply not only to
the Company, but also to any Subsidiaries, (iii) the
representation contained in Section 3(l) will be construed so as
to except any Subsidiary which may hereafter be formed or acquired
by the Company with the consent of the Bank, and (iv) all other
representations will be construed to have been amended to conform
with any changes of which the Bank shall previously have been
given notice in writing by the Company.
b. DOCUMENTS TO BE FURNISHED AT CLOSING. The Bank shall have received
contemporaneously with the execution of this Agreement, the
following, each duly executed, currently dated and in form and
substance satisfactory to the Bank:
(i) The Revolving Note, the Capital Expenditure Line of Credit,
and the Capital Expenditure Term Note.
(ii) The Mortgage and requisite Uniform Commercial Code
financing statements.
(iii) The Security Agreement and requisite Uniform Commercial
Code financing statements.
(iv) The Subordination Agreement together with a photocopy of
the Subordinated Note with the subordination legend
thereon.
34
(v) The Guaranty Agreement.
(vi) The Collateral Assignment of Licensing Agreement together
with complete copies of the Licensing Agreement.
(vii) The Schedule of Exceptions.
(viii) A certified copy of a Resolution of the Board of Directors
of the Company authorizing the execution, delivery and
performance, respectively, of this Agreement and the other
Loan Documents provided for in this Agreement to which the
Company is a party.
(ix) A certificate of the Secretary of the Board of Directors of
the Company certifying the names of the officer or officers
authorized to sign this Agreement and the other Loan
Documents provided for in this Agreement to which the
Company is a party, together with a sample of the true
signature of each such officer.
(x) A copy of the file-marked Articles of Incorporation of the
Company certified as complete and correct as of a recent
date by the Secretary of State of Delaware, and a copy of
the By-Laws of the Company, certified as complete and
correct by the Secretary of the Board of Directors of the
Company.
(xi) A currently dated Certificate of Good Standing of the
Company issued by the Secretary of State of Delaware.
(xii) A currently dated Certificate of Existence of the Company
issued by the Secretary of State of Indiana.
(xiii) A certified copy of a Resolution of the Board of Directors
of Landec authorizing the execution, delivery and
performance, respectively, of the Guaranty , the
Subordination Agreement, the Collateral Assignment of
Licensing Agreement and the other Loan Documents provided
for in this Agreement to which Landec is a party.
35
(xiv) A certificate of the Secretary of the Board of Directors of
Landec certifying the names of the officer or officers
authorized to sign the Guaranty and the other Loan
Documents provided for in this Agreement to which Landec is
a party, together with a sample of the true signature of
each such officer.
(xv) A copy of the file-marked Articles of Incorporation of
Landec certified as complete and correct as of a recent
date by the Secretary of State of California, and a copy of
the By-Laws of Landec, certified as complete and correct by
the Secretary of the Board of Directors of Landec.
(xvi) A currently dated Certificate of Good Standing of Landec
issued by the Secretary of State of California.
(xvii) A currently dated Certificate of Existence of Landec issued
by the Secretary of State of Indiana.
(xviii) The results of the title search required under the terms
of Section 4(b)(i).
(xix) Certificates evidencing the existence of all insurance
required under the terms of this Agreement or any other
Loan Documents.
(xx) The commitment fee required under the terms of Section
2(d)(iii).
(xxi) The Flood Hazard Determination Form required under the
terms of Section 4(b)(ii).
(xxii) A complete copy of the Ownership Acknowledgment Agreement
and all amendments thereto, together with all lien waivers
and UCC filings by creditors of Hubner.
(xxiii) The Intercreditor Agreement.
(xxiv) A complete copy of the Seed Agreement.
(xxv) Such other documents as the Bank may reasonably require.
(xxvi) Fees of legal counsel for the Bank incurred in connection
with the drafting, negotiation, and execution of this
Agreement.
36
SECTION 8. EVENTS OF DEFAULT. Each of the following shall constitute an
Event of Default under this Agreement:
a. NONPAYMENT OF THE LOANS. Default in the payment, within five (5)
Banking Days of being due, of any amount payable under the terms
of either of the Notes, or otherwise payable to the Bank or any
other holder of the Notes under the terms of this Agreement.
b. NONPAYMENT OF OTHER INDEBTEDNESS FOR BORROWED MONEY. Default by
the Company in the payment when due, whether by acceleration or
otherwise, of any other material indebtedness for borrowed money,
or default in the performance or observance of any obligation or
condition with respect to any such other indebtedness if the
effect of such default is to accelerate the maturity of such other
indebtedness or to permit the holder or holders thereof, or any
trustee or agent for such holders, to cause such indebtedness to
become due and payable prior to its scheduled maturity, unless the
Company is contesting the existence of such default in good faith
and by appropriate proceedings.
c. OTHER MATERIAL OBLIGATIONS. Subject to the expiration of any
applicable grace period, default by the Company in the payment
when due, or in the performance or observance of any material
obligation of, or condition agreed to by the Company with respect
to any material purchase or lease of goods, securities or services
except only to the extent that the existence of any such default
is being contested in good faith and by appropriate proceedings
and that appropriate reserves have been established with respect
thereto.
d. BANKRUPTCY, INSOLVENCY, ETC. The Company admitting in writing its
inability to pay its debts as they mature or an administrative or
judicial order of dissolution or determination of insolvency being
entered against the Company; or the Company applying for,
consenting to, or acquiescing in the appointment of a trustee or
receiver for the Company or any property
37
thereof, or the Company making a general assignment for the
benefit of creditors; or, in the absence of such application,
consent or acquiescence, a trustee or receiver being appointed for
the Company or for a substantial part of its property and not
being discharged within forty-five (45) days; or any bankruptcy,
reorganization, debt arrangement, or other proceeding under any
bankruptcy or insolvency law, or any dissolution or liquidation
proceeding being instituted by or against the Company, and, if
involuntary, being consented to or acquiesced in by the Company or
remaining for forty-five (45) days undismissed.
e. WARRANTIES AND REPRESENTATIONS. Any warranty or representation
made by the Company in this Agreement proving to have been false
or misleading in any material respect when made, or any schedule,
certificate, financial statement, report, notice, or other writing
furnished by the Company to the Bank proving to have been false or
misleading in any material respect when made or delivered.
f. VIOLATIONS OF NEGATIVE COVENANTS. Failure by the Company to comply
with or perform any covenant stated in Section 6 of this Agreement
g. NONCOMPLIANCE WITH OTHER PROVISIONS OF THIS AGREEMENT. Failure of
the Company to comply with or perform any covenant or other
provision of this Agreement or to perform any other Obligation
(which failure does not constitute an Event of Default under any
of the preceding provisions of this Section 8) and continuance of
such failure for forty-five (45) days after notice thereof to the
Company from the Bank.
SECTION 9. EFFECT OF EVENT OF DEFAULT. If any Event of Default described
in Section 8(d) shall occur, the maturity of the Loans shall immediately be
accelerated and the Notes and the Loans evidenced thereby, and all other
indebtedness and any other payment Obligations of the Company to the Bank shall
become immediately due and payable, and the Commitment and the Capital
Expenditure Line of Credit Commitment shall immediately terminate, all without
notice of any kind.
38
When any other Event of Default has occurred and is continuing, the Bank or any
other holder of the Notes may accelerate payment of the Loans and declare the
Notes and all other payment Obligations due and payable, whereupon maturity of
the Loans shall be accelerated and the Notes and the Loans evidenced thereby,
and all other payment Obligations shall become immediately due and payable and
the Commitment shall immediately terminate, all without notice of any kind. The
Bank or such other holder shall promptly advise the Company of any such
declaration, but failure to do so shall not impair the effect of such
declaration. The remedies of the Bank specified in this Agreement or in any
other Loan Document shall not be exclusive, and the Bank may avail itself of any
other remedies provided by law as well as any equitable remedies available to
the Bank.
SECTION 10. WAIVER -- AMENDMENTS. No delay on the part of the Bank, or
any holder of the Notes in the exercise of any right, power or remedy shall
operate as a waiver thereof, nor shall any single or partial exercise by any of
them of any right, power or remedy preclude any other or further exercise
thereof, or the exercise of any other right, power or remedy. No amendment,
modification or waiver of, or consent with respect to any of the provisions of
this Agreement or the other Loan Documents or otherwise of the Obligations shall
be effective unless such amendment, modification, waiver or consent is in
writing and signed by the Bank.
SECTION 11. NOTICES. Any notice given under or with respect to this
Agreement to the Company or the Bank shall be in writing and, if delivered by
hand or sent by overnight courier service, shall be deemed to have been given
when delivered and, if mailed, shall be deemed to have been given five (5) days
after the date when sent by registered or certified mail, postage prepaid, and
addressed to the Company or the Bank (or other holder of the Notes) at its
address shown below, or at such other address as any such party may, by written
notice to the other party to this Agreement, have designated as its address for
such purpose. The addresses referred to are as follows:
39
As to the Company: Intellicoat Corporation
000 Xxxxx Xxxx Xxxxxx
X.X. Xxx 000 (for mail)
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Chief
Financial Officer
As to the Bank: Old National Bank
000 Xxxx Xxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxxxx, Vice President
and Senior Lender
with copy to: Xxxxxxx X. Xxxxxx, Esquire
KROGER, GARDIS & XXXXX
Bank One Center/Circle
Suite 900
000 Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
SECTION 12. COSTS, EXPENSES AND TAXES. The Company shall pay or reimburse
the Bank on demand for all reasonable out-of-pocket costs and expenses of the
Bank including reasonable attorneys' fees and legal expenses incurred by it in
connection with the drafting, negotiation, execution, and delivery of this
Agreement and the other Loan Documents, and in connection with the enforcement,
or restructuring in the nature of a workout, of this Agreement or any other Loan
Document. The Company shall also reimburse the Bank for expenses incurred by the
Bank in connection with any audit of the books and records or physical assets of
the Company conducted pursuant to any right granted to the Bank under the terms
of this Agreement or any other Loan Document. Such reimbursement shall include,
without limitation, reimbursement of the Bank for its overhead expenses
reasonably allocated to such audits. In addition, the Company shall pay or
reimburse the Bank for all expenses incurred by the Bank in connection with the
perfection of any security interests or mortgage liens granted to the Bank by
the Company and for any stamp or similar documentary or transaction taxes which
may be payable in connection with the execution or delivery of this Agreement or
any other Loan Document or in connection with any other instruments or documents
provided for herein or delivered or required
40
in connection herewith including, without limitation, expenses incident to any
lien or title search or title insurance commitment or policy. All obligations
provided for in this Section shall survive termination of this Agreement.
SECTION 13. SEVERABILITY. If any provision of this Agreement or any other
Loan Document is determined to be illegal or unenforceable, such provision shall
be deemed to be severable from the balance of the provisions of this Agreement
or such Document and the remaining provisions shall be enforceable in accordance
with their terms.
SECTION 14. CAPTIONS. Section captions used in this Agreement are for
convenience only and shall not affect the construction of this Agreement.
SECTION 15. GOVERNING LAW -- JURISDICTION. Except as may otherwise be
expressly provided in any other Loan Document, this Agreement and all other Loan
Documents are made under and will be governed in all cases by the substantive
laws of the State of Indiana, notwithstanding the fact that Indiana conflicts of
law rules might otherwise require the substantive rules of law of another
jurisdiction to apply. The Company consents to the jurisdiction of any state or
federal court located within Xxxxxx County, Indiana, and waives personal service
of any and all process upon the Company. All service of process may be made by
messenger, by certified mail, return receipt requested, or by registered mail
directed to the Company at the address stated in Section 11. The Company waives
any objection which the Company may have to any proceeding commenced in a
federal or state court located within Xxxxxx County, Indiana, based upon
improper venue or FORUM NON CONVENIENS. Nothing contained in this Section shall
affect the right of the Bank to serve legal process in any other manner
permitted by law or to bring any action or proceeding against the Company or its
property in the courts of any other jurisdiction.
SECTION 16. PRIOR AGREEMENTS, ETC. This Agreement supersedes all previous
agreements and commitments made by the Bank and the Company with respect to the
Loans and all other subjects of this Agreement, including, without limitation,
any oral or written proposals or commitments made or issued by the Bank.
41
SECTION 17. SUCCESSORS AND ASSIGNS. This Agreement and the other Loan
Documents shall be binding upon and shall inure to the benefit of the Company
and the Bank and their respective successors and assigns, provided that the
Company's rights under this Agreement shall not be assignable without the prior
written consent of the Bank.
SECTION 18. WAIVER OF JURY TRIAL. THE BANK (BY ITS ACCEPTANCE HEREOF)AND
THE COMPANY HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE
ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE OR CLAIM, WHETHER
BASED UPON CONTRACT, TORT, OR OTHERWISE, BETWEEN THE BANK AND THE COMPANY
ARISING OUT OF, OR IS ANY WAY RELATED TO THE RELATIONSHIP ESTABLISHED BETWEEN
THE COMPANY AND THE BANK BY THIS OR ANY OTHER LOAN DOCUMENT, OR ANY RELATIONSHIP
BETWEEN THE BANK AND THE COMPANY. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE
BANK TO ENTER INTO THIS AGREEMENT AND TO PROVIDE THE FINANCING DESCRIBED HEREIN.
SECTION 19. ARBITRATION. BANK AND THE COMPANY AGREE THAT UPON THE WRITTEN
DEMAND OF EITHER PARTY, WHETHER MADE BEFORE OR AFTER THE INSTITUTION OF ANY
LEGAL PROCEEDINGS, BUT PRIOR TO THE RENDERING OF ANY JUDGMENT IN THAT
PROCEEDING, ALL DISPUTES, CLAIMS AND CONTROVERSIES BETWEEN THEM, WHETHER
INDIVIDUAL, JOINT, OR CLASS IN NATURE, ARISING FROM THIS AGREEMENT, OR ANY LOAN
DOCUMENT OR OTHERWISE, INCLUDING WITHOUT LIMITATION CONTRACT AND TORT DISPUTES,
SHALL BE RESOLVED BY BINDING ARBITRATION PURSUANT TO THE COMMERCIAL RULES OF THE
AMERICAN ARBITRATION ASSOCIATION ("AAA"). ANY ARBITRATION PROCEEDING HELD
PURSUANT TO THIS ARBITRATION PROVISION SHALL BE CONDUCTED IN THE CITY NEAREST
THE COMPANY'S ADDRESS HAVING AN AAA REGIONAL OFFICE, OR AT ANY OTHER PLACE
SELECTED BY MUTUAL AGREEMENT OF
42
THE PARTIES. NO ACT TO TAKE OR DISPOSE OF ANY COLLATERAL SHALL CONSTITUTE A
WAIVER OF THIS ARBITRATION AGREEMENT OR BE PROHIBITED BY THIS ARBITRATION
AGREEMENT.
THIS ARBITRATION PROVISION SHALL NOT LIMIT THE RIGHT OF EITHER PARTY
DURING ANY DISPUTE TO SEEK, USE, AND EMPLOY ANCILLARY OR PRELIMINARY RIGHTS
AND/OR REMEDIES, JUDICIAL OR OTHERWISE, FOR THE PURPOSES OF REALIZING UPON,
PRESERVING, PROTECTING, FORECLOSING UPON OR PROCEEDING UNDER FORCIBLE ENTRY AND
DETAINER FOR POSSESSION OF ANY REAL OR PERSONAL PROPERTY, AND ANY SUCH ACTION
SHALL NOT BE DEEMED AN ELECTION OF REMEDIES. SUCH REMEDIES INCLUDE, WITHOUT
LIMITATION, OBTAINING INJUNCTIVE RELIEF OR A TEMPORARY RESTRAINING ORDER,
INVOKING A POWER OF SALE UNDER ANY DEED OF TRUST OR MORTGAGE; OBTAINING A WRIT
OF ATTACHMENT OR IMPOSITION OF A RECEIVERSHIP; OR EXERCISING ANY RIGHTS RELATING
TO PERSONAL PROPERTY, INCLUDING EXERCISING THE RIGHT OF SETOFF, OR TAKING OR
DISPOSING OF SUCH PROPERTY WITH OR WITHOUT JUDICIAL PROCESS PURSUANT TO THE
UNIFORM COMMERCIAL CODE. ANY DISPUTES, CLAIMS, OR CONTROVERSIES CONCERNING THE
LAWFULNESS OR REASONABLENESS OF ANY ACT, OR EXERCISE OF ANY RIGHT OR REMEDY,
CONCERNING ANY COLLATERAL, INCLUDING ANY CLAIM TO RESCIND, REFORM, OR OTHERWISE
MODIFY ANY AGREEMENT RELATING TO THE COLLATERAL, SHALL ALSO BE ARBITRATED;
PROVIDED, HOWEVER THAT NO ARBITRATOR SHALL HAVE THE RIGHT OR THE POWER TO ENJOIN
OR RESTRAIN ANY ACT OF ANY PARTY. JUDGMENT UPON ANY AWARD RENDERED BY ANY
ARBITRATOR MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. THE STATUTE OF
LIMITATIONS, ESTOPPEL, WAIVER, LACHES AND SIMILAR DOCTRINES WHICH WOULD
OTHERWISE BE APPLICABLE IN AN ACTION BROUGHT BY A PARTY SHALL BE APPLICABLE IN
ANY ARBITRATION
43
PROCEEDING, AND THE COMMENCEMENT OF AN ARBITRATION PROCEEDING
SHALL BE DEEMED THE COMMENCEMENT OF ANY ACTION FOR THESE PURPOSE. THE FEDERAL
ARBITRATION ACT (TITLE 9 OF THE UNITED STATES CODE) SHALL APPLY TO THE
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT OF THIS ARBITRATION PROVISION.
Dated as of June 5, 2000.
INTELLICOAT CORPORATION, a Delaware
corporation
By:________________________________________
Xxxxxxx X. Xxxxxxx, Chief Financial Officer
AMERICAN NATIONAL BANK d/b/a OLD NATIONAL
BANK, a national banking association
By:_______________________________________
Xxxx X. Xxxxxx, Vice President and
Senior Lender
44
SCHEDULE OF EXHIBITS
Exhibit "A" - Promissory Note (Revolving Loan)($3,000,000.00)
Exhibit "B" - Promissory Note (Capital Expenditure Line of Credit)
($1,000,000.00)
Exhibit "C" - Promissory Note (Capital Expenditure Term Loan)
($1,000,000.00)
Exhibit "D" - Schedule of Exceptions
Exhibit "E" - Security Agreement (Equipment, Inventory, Accounts
Receivable, Chattel Paper, and General Intangibles)
Exhibit "F" - Mortgage, Security Agreement, Assignment of Rents and
Fixture Filing
Exhibit "G" - Subordination Agreement (Landec Corporation)
Exhibit "H" - Guaranty Agreement (Landec Corporation)
Exhibit "I" - Collateral Assignment of Licensing Agreement
Exhibit "J" - Intercreditor Agreement
45
FIRST AMENDMENT TO CREDIT AGREEMENT
LANDEC AG, INC., formerly know as Intellicoat Corporation, a Delaware
corporation (the "Company") and OLD NATIONAL BANK, formerly known as American
National Bank, a national banking association (the "Bank"), being parties to
that certain Credit Agreement dated as of June 5, 2000 (the "Agreement"), hereby
agree to amend the Agreement by this First Amendment to Credit Agreement (this
"Amendment"), on the terms and subject to the conditions set forth as follows.
1. DEFINITIONS. Terms used in this Amendment with their initial letters
capitalized are used as defined in the Agreement, unless otherwise
defined herein.
a. AMENDED DEFINITIONS. The following definitions are hereby amended and
restated in their respective entireties as follows:
- "ADVANCE" means a disbursement of proceeds of the Revolving Loan,
the Capital Expenditure Line of Credit, or the Overline, as the
context requires.
- "LOAN" means any of the Revolving Loan, the Capital Expenditure
Line of Credit, the Overline, or the Capital Expenditure Term
Loan, as the context requires, and when used in the plural form
refers to all of the Loans.
- "LOAN DOCUMENT" means any of this Agreement, the Revolving Note,
the Capital Expenditure Line of Credit Note, the Overline Note,
the Capital Expenditure Term Note, the Mortgage, the Security
Agreement, the Subordination Agreement, the Guaranty Agreement,
the Assignment of Licensing Agreements, the Intercreditor
Agreement, and any other instrument or document which evidences
or secures the Loans or any of them or which expresses an
agreement as to terms applicable to the Loans or any of them, and
in the plural means any two or more of the Loan Documents, as the
context requires.
- "NOTE" means any of the Revolving Note, the Capital Expenditure
Line of Credit Note, the Overline Note, or the Capital
Expenditure Term Note, as the context requires, and when used in
the plural form refers to all of the Notes.
Page 1 of 9
- "OBLIGATIONS" means all obligations of the Company in favor of
the Bank of every type and description, direct or indirect,
absolute or contingent, due or to become due, now existing or
hereafter arising pursuant to this Agreement and the other
Loan Documents, including but not limited to: (i) all of such
obligations on account of the Loans, including any Advances
made pursuant to any extension of the Commitment beyond the
initial Revolving Loan Maturity Date, any extension of the
Capital Expenditure Line of Credit Commitment beyond the
initial Capital Expenditure Line of Credit Maturity Date, any
extension of the Overline Commitment beyond the initial
Overline Maturity Date, or pursuant to any other amendment of
this Agreement, and (ii) all other obligations arising under
any Loan Document as amended from time to time.
b. NEW DEFINITIONS. The following definitions are hereby added to Section
1 of the Agreement as follows:
- "FIRST AMENDMENT" means that agreement entitled "First Amendment
to Credit Agreement" between the Company and the Bank dated as of
December 15, 2000.
- "OVERLINE" is used as defined in Section 2(e)(i).
- "OVERLINE COMMITMENT" means the agreement of the Bank to extend
the Overline to the Company until the Overline Maturity Date, and
if the context so requires, the term may also refer to the
maximum principal amount which is permitted to be outstanding
under the Overline at any time.
- "OVERLINE MATURITY DATE" means January 15, 2001, and thereafter
any subsequent date to which the Overline Commitment may be
extended by the Bank pursuant to the terms of Section 2(e)(iv).
- "OVERLINE NOTE" is used as defined in Section 2(e)(ii).
2. OVERLINE. A new Section 2(e) is hereby added to the Agreement as
follows:
e. THE OVERLINE. The Bank will make a revolving loan to the Company on
the following terms and subject to the following conditions:
Page 2 of 9
(i) THE OVERLINE COMMITMENT -- USE OF PROCEEDS. From the date of the
First Amendment and until the Overline Maturity Date, the Bank
agrees to make Advances (collectively, the "Overline") under a
revolving line of credit from time to time to the Company of
amounts not exceeding in the aggregate at any time outstanding
the lesser of (A) Two Million Four Hundred Thousand and 00/100
Dollars ($2,400,000.00) (the "Overline Commitment") or (B) the
remainder of the Borrowing Base minus the aggregate outstanding
principal amount of the Revolving Loan, provided that all of the
conditions of lending stated in this Agreement as being
applicable to the Overline have been fulfilled at the time of
each Advance. Proceeds of the Overline may be used by the Company
only for working capital purposes.
(ii) METHOD OF BORROWING. The obligation of the Company to repay the
Overline shall be evidenced by a promissory note (the "Overline
Note") of the Company in the form of EXHIBIT "A" attached to the
First Amendment. So long as no Event of Default or Unmatured
Event of Default shall have occurred and be continuing and until
the Overline Maturity Date, the Company may borrow, repay and
reborrow under the Overline Note on any Banking Day; provided,
that no borrowing may cause the principal balance of the Overline
to exceed the lesser of the Overline Commitment or the Borrowing
Base or may result in an Event of Default or an Unmatured Event
of Default, and provided further, that the Company may receive
the proceeds of only one Advance per Banking Day. Each Advance
under the Overline shall be conditioned upon receipt by the Bank
from the Company of a Borrowing Base Certificate completed as of
the date of the request. The Bank shall make a disbursement upon
the oral request of the Company made by an Authorized Officer, or
upon a request transmitted to the Bank by telephone facsimile
("fax") machine, or by any other form of written electronic
communication (all such requests for Advances being hereafter
referred to as "Informal Requests"). In so doing, the Bank may
rely on any Informal Request which shall have been received by it
in good faith from a person reasonably believed to be an
Authorized Officer. Upon making each Informal Request, the
Company shall promptly deliver to the Bank a Borrowing Base
Certificate completed as of the date of such Informal Request,
and shall in and of itself constitute the representation of the
Company that no Event of Default or Unmatured Event of Default
has occurred and is continuing or would result from the making of
the requested
Page 3 of 9
Advance, and that the making of the requested Advance shall not
cause the principal balance of the Overline to exceed the lesser
of the Overline Commitment or the Borrowing Base. All borrowings
and reborrowings and all repayments shall be in amounts of not
less than One Thousand Dollars ($1,000.00), except for repayment
of the entire principal balance of the Overline and except for
special prepayments of principal required under the terms of
Section 2(e)(v). Upon receipt of a request for an Advance, a
Borrowing Base Certificate, and upon compliance with any other
conditions of lending stated in Section 7 of this Agreement
applicable to the Overline, the Bank shall disburse the amount of
the requested Advance to the Company. All Advances by the Bank
and payments by the Company shall be recorded by the Bank on its
books and records, and the principal amount outstanding from time
to time, plus interest payable thereon, shall be determined by
reference to the books and records of the Bank. The Bank's books
and records shall be presumed PRIMA FACIE to be correct as to
such matters.
(iii) INTEREST ON THE OVERLINE. The principal amount of the Overline
outstanding from time to time shall bear interest until maturity
of the Overline Note at a rate per annum equal to the Prime Rate
plus three-quarters percent (3/4%). After maturity, whether on
the Overline Maturity Date or on account of acceleration upon the
occurrence of an Event of Default, and until paid in full, the
Overline shall bear interest at a per annum rate equal to the
Prime Rate plus four and three-quarters percent (4-3/4%). Accrued
interest shall be due and payable monthly on the last Banking Day
of each month prior to maturity. After maturity, interest shall
be payable as accrued and without demand.
(iv) EXTENSIONS OF THE OVERLINE MATURITY DATE. The Bank may, upon the
request of the Company, but at the Bank's sole discretion, extend
the Overline Maturity Date from time to time to such date or
dates as the Bank may elect by notice in writing to the Company,
and upon any such extension and upon execution and delivery by
the Company of a Overline Note reflecting the extended maturity
date, the date to which the Commitment is then extended will
become the "Overline Maturity Date" for purposes of this
Agreement.
(v) SPECIAL REPAYMENTS OF PRINCIPAL. At any time the outstanding
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principal balance of the Overline exceeds the maximum amount
permitted pursuant to Section 2(e)(i)(B) herein (such amount
hereinafter called the "Maximum Amount"), as determined on the
basis of the most recent Borrowing Base Certificate furnished by
the Company or as determined by the Bank upon an inspection of
the books and records of the Company, the Company shall
immediately repay that portion of the principal balance of the
Overline which is in excess of such Maximum Amount. Such
repayment shall be due without demand.
(vi) COMMITMENT FEE. The Bank acknowledges receipt from the Company of
the sum of $12,500.00, either previous to or contemporaneously
with the execution of this First Amendment, as a fee for the
Bank's commitment to make the Overline.
3. REPRESENTATIONS AND WARRANTIES. To induce the Bank to enter into this
Amendment, the Company affirms that the representations and warranties continued
in the Agreement are correct and accurate as of the date of this Amendment,
except that (i) they shall be deemed also to refer this Amendment, as well as
all documents named herein, and (ii) Section 3(d) shall be deemed also to refer
to the most recent audited and unaudited financial statements of the Company
furnished to the Bank.
4. EVENTS OF DEFAULT. The Company certifies to the Bank that no Event of
Default or Unmatured Event of Default under the Agreement has occurred and is
continuing as of the date of this Amendment.
5. CONDITIONS PRECEDENT. This Amendment shall become effective upon
receipt of the following by the Bank, duly executed and in form and substance
satisfactory to the Bank:
a. This Amendment.
b. The Overline Note.
c. The Amendment to Mortgage, Security Agreement, Assignment of Rents and
Fixture Filing in the form attached hereto as EXHIBIT "B."
d. The Reaffirmation of Guaranty Agreement in the form attached hereto as
EXHIBIT "C."
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e. The Acknowledgment and Consent of Subordinated Creditor in the form
attached hereto as EXHIBIT "D."
f. UCC-1 Financing Statement to be filed with the Delaware Secretary of
State.
g. UCC-3 Amendment to UCC-1 Financing Statement to be filed with the
Indiana Secretary of State to amend UCC-1 Financing Statement Number
2329223 filed on June 8, 2000.
h. UCC-4 Amendment to UCC-2 Financing Statement to be filed with the
Recorder of White County, Indiana to amend UCC-2 Financing Statement
Number 060000873 filed on June 14, 2000.
i. A certified copy of a Resolution of the Board of Directors of the
Company authorizing the execution, delivery and performance of this
Amendment and the other Loan Documents named herein to which the
Company is a party.
j. A certificate of the Secretary of the Board of Directors of the
Company certifying the names of the officer or officers authorized to
sign this Amendment and other Loan Documents named herein to which the
Company is a party.
k. A certified copy of a Resolution of the Board of Directors of Landec
authorizing the execution, delivery and performance of the
Reaffirmation of Guaranty Agreement, the Acknowledgment and Consent of
Subordinated Creditor, and the other Loan Documents named herein to
which Landec is a party.
l. A certificate of the Secretary of the Board of Directors of the Landec
certifying the names of the officer or officers authorized to sign the
Reaffirmation of Guaranty Agreement, the Acknowledgment and Consent of
Subordinated Creditor, and other Loan Documents named herein to which
Landec is a party.
m. A certified copy of the Articles of Amendment to the Articles of
Incorporation filed with the Delaware Secretary of State to evidence
the change of the name of the Company.
n. A certified copy of the Application for Amended Certificate of
Authority approved by the Indiana Secretary of State to evidence the
change of the
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name of the Company.
o. Certificate of Good Standing issued as of a recent date by the
Delaware Secretary of State evidencing the change of the name of
the Company
p. Certificate of Existence issued as of a recent date by the
Indiana Secretary of State evidencing the change of the name of
the Company.
q. Payment of the commitment fee required under the terms of Section
2(e)(vi).
r. Payment of the reasonable attorneys' fees of counsel for the Bank
incurred in connection with the drafting and negotiation of this
Amendment; and
s. Such other instruments, agreements, and documents as may be
required by the Bank pursuant hereto.
6. EFFECT OF FIRST AMENDMENT. Except as amended by this Amendment,
all of the terms and conditions of the Agreement shall continue unchanged and in
full force and effect together with this Amendment.
IN WITNESS WHEREOF, the Company and the Bank, by their respective duly
authorized officers, have executed and delivered in Indiana this First Amendment
to Credit Agreement as of December 15, 2000.
LANDEC AG, INC., formerly known as
Intellicoat Corporation, a Delaware corporation
By: ________________________________
Xxxxxxx X. Xxxxxxx, Chief Financial Officer
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OLD NATIONAL BANK, formerly known as
American National Bank, a national banking
association
By: ________________________________
Xxxx X. Xxxxxx, Vice President and
Senior Lender
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SCHEDULE OF EXHIBITS
--------------------
Exhibit "A" - Promissory Note (Overline) ($2,400,000.00)
Exhibit "B" - Amendment to Mortgage, Security Agreement,
Assignment of Rents and Fixture Filing
Exhibit "C" - Reaffirmation of Guaranty Agreement (Landec
Corporation)
Exhibit "D" - Acknowledgment and Consent of Subordinated
Creditor (Landec Corporation)
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