LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") made this 25th day of
February, 1998 by and between LASALLE NATIONAL BANK, a national banking
association ("Bank"), 135 South LaSalle Street, Chicago, Illinois 60603-4105,
and FOOD FOR HEALTH CO., INC. ("Borrower"), an Arizona corporation, with its
principal place of business being located at 3655 West Washington Street,
Phoenix, Arizona 85009.
WITNESSETH:
WHEREAS, Borrower may, from time to time, request Loans and Letters of Credit
from Bank, and the parties wish to provide for the terms and conditions upon
which such Loans and Letters of Credit shall be made;
NOW, THEREFORE, in consideration of any Loan (including any Loan by renewal or
extension) or Letter of Credit hereafter made to or issued for the benefit of
Borrower by Bank, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged by Borrower, the parties
agree as follows:
1. DEFINITIONS.
(a) "Account," "Account Debtor," "Chattel Paper," "Documents,"
"Equipment," "General Intangibles," "Goods," "Instruments," and "Inventory,"
and "Investment Property" shall have the respective meanings assigned to such
terms, as of the date of this Agreement, in the Illinois Uniform Commercial
Code.
(b) "Acquisition Loan Agreement" shall mean that certain Loan Agreement
dated as of November 10, 1997 between AMCON and Bank, as amended or modified
from time to time.
(c) "Acquisition Loan Documents" shall mean the collective reference to
the Acquisition Loan Agreement and each of the Loan Documents (as defined
therein).
(d) "Affiliate" shall mean any Person directly or indirectly controlling,
controlled by or under common control with Borrower.
(e) "AMCON" shall mean AMCON Distributing company, a Delaware corporation
and an Affiliate of Borrower on the date hereof.
(f) "AMCON Documents" shall mean the collective reference to the AMCON
Loan Agreement and each of the Other Agreements (as defined therein).
(g) "AMCON Loan Agreement" shall mean that certain Loan and Security
Agreement dated as of the date hereof between AMCON and Bank (including
Exhibit A thereto), as amended or modified from time to time.
(h) "Business Day" shall mean any day other than a Saturday, a Sunday or
(i) with respect to all matters, determinations, fundings and payments in
connection with LIBOR Rate Loans, any day on which banks in London, England or
Chicago, Illinois are required or permitted to close, and (ii) with respect to
all other matters, any day that banks in Chicago, Illinois are permitted or
required to close.
(i) "Collateral" shall mean all of the property of Borrower described in
paragraph 4 hereof, together with all other real or personal property of any
Obligor (including, without limitation, AMCON) or any other Person now or
hereafter pledged to Bank to secure, either directly or indirectly, repayment
of any of the Liabilities.
(j) "Eligible Account" shall mean an Account owing to Borrower which is
acceptable to Bank in its sole discretion for lending purposes. Without
limiting Bank's discretion, Bank shall, in general, consider an Account to be
an Eligible Account if it meets, and so long as it continues to meet, the
following requirements:
(i) it is genuine and in all respects what it purports to be;
(ii) it is owned by Borrower, and Borrower has the right to subject it
to a security interest in favor of Bank or assign it to Bank and it is subject
to a first priority perfected security interest in favor of Bank and to no
other claim, lien, security interest or encumbrance whatsoever, other than
Permitted Liens;
(iii) it arises from (A) the performance of services by Borrower and
such services have been fully performed and acknowledged and accepted by the
Account Debtor thereunder; or (B) the sale or lease of Goods by Borrower, and
such Goods have been completed in accordance with the Account Debtor's
specifications (if any) and delivered to and accepted by the Account Debtor,
such Account Debtor has not refused to accept any of the Goods, returned or
offered to return any of the Goods which are the subject of such Account, and
Borrower has possession of, or Borrower has delivered to Bank (at Bank's
request) shipping and delivery receipts evidencing delivery of such Goods;
(iv) it is evidenced by an invoice rendered to the Account Debtor
thereunder, and does not remain unpaid ninety (90) days past the due invoice
date thereof; provided, however, that if more than ten percent (10%) of the
aggregate dollar amount of invoices owing by a particular Account Debtor
remain unpaid ninety (90) days after the respective invoice dates thereof,
then all Accounts owing by that Account Debtor shall be deemed ineligible;
(v) it is a valid, legally enforceable and unconditional obligation of
the Account Debtor thereunder, and is not subject to setoff, counterclaim,
credit, allowance or adjustment by such Account Debtor, or to any claim by
such Account Debtor denying liability thereunder in whole or in part;
(vi) it does not arise out of a contract or order which fails in any
material respect to comply with the requirements of applicable law;
(vii) the Account Debtor thereunder is not a director, officer,
employee or agent of Borrower, a Subsidiary, Parent or Affiliate;
(viii) it is not an Account with respect to which the Account Debtor
is the United States of America or any department, agency or instrumentality
thereof, unless Borrower assigns its right to payment of such Account to Bank
pursuant to, and in full compliance with, the Assignment of Claims Act of
1940, as amended;
(ix) it is not an Account with respect to which the Account Debtor is
physically located in a state which requires Borrower, as a precondition to
commencing or maintaining an action in the courts of that state, either to (A)
receive a certificate of authority to do business and be in good standing in
such state, or (B) file a notice of business activities report or similar
report with such state's taxing authority, unless (x) Borrower has taken one
of the actions described in clauses (A) or (B), (y) the failure to take one of
the actions described in either clause (A) or (B) may be cured retroactively
by Borrower at its election or (z) Borrower has proven, to Bank's
satisfaction, that it is exempt from any such requirements under any such
state's laws;
(x) it is an Account which arises out of a sale made in the ordinary
course of Borrower's business;
(xi) the Inventory the sale of which gave rise to such Account was
delivered by Borrower to an Account Debtor at a location of Borrower
identified on Exhibit B or shipped to an Account Debtor at an address located
within the United States of America and, to the knowledge of Borrower, no such
Inventory was to be shipped out of the United States of America by such
Account Debtor;
(xii) it is not an Account with respect to which the Account Debtor's
obligation to pay is conditional upon the Account Debtor's approval of the
Goods or services or is otherwise subject to any repurchase obligation or
return right, as with sales made on a bill-and-hold, guaranteed sale, sale on
approval, sale or return or consignment basis;
(xiii) it is not an Account (A) with respect to which any
representation or warranty contained in this Agreement is untrue or (B) which
violates any of the covenants of Borrower contained in this Agreement;
(xiv) it is not an Account which, when added to a particular Account
Debtor's other indebtedness to Borrower, exceeds a credit limit determined by
Bank in the due exercise of its credit judgment for that Account Debtor
(except that Accounts excluded from Eligible Accounts solely by reason of this
subparagraph 1(e)(xiv) shall be Eligible Accounts to the extent of such credit
limit); and
(xv) it is not an Account with respect to which the prospect of
payment or performance by the Account Debtor is or will be impaired, as
determined by Bank in its sole discretion.
(k) "Eligible Inventory" shall mean Inventory of Borrower which is
acceptable to Bank in its sole discretion for lending purposes. Without
limiting Bank's discretion, Bank shall, in general, consider Inventory
consisting of finished goods to be Eligible Inventory if it meets, and so long
as it continues to meet, the following requirements:
(i) is owned by Borrower, and Borrower has the right to subject it to
a security interest in favor of Bank and it is subject to a first priority
perfected security interest in favor of Bank and to no other claim, lien,
security interest or encumbrance whatsoever, other than Permitted Liens;
(ii) it is located on the premises listed on Exhibit B and is not in
transit, except to the extent that it may be in transit to another location
listed on Exhibit B on vehicles owned by Borrower;
(iii) it is held for sale or lease or furnishing under contracts of
service, and is (except as Bank may otherwise consent in writing) new and
unused and free from defects which would, in Bank's sole determination, affect
its market value;
(iv) it is not stored with a bailee, consignee, warehouseman,
processor or similar party unless Bank has given its prior written approval
and Borrower has caused any such bailee, consignee, warehouseman, processor or
similar party to issue and deliver to Bank, in form and substance acceptable
to Bank, such Uniform Commercial Code financing statements, warehouse
receipts, waivers and other documents as Bank shall require;
(v) it is not Inventory consisting of perishable, non-frozen foods;
(vi) it is not Inventory purchased by Borrower pursuant to any license
or distribution agreement which would, in Bank's sole discretion, prohibit,
restrict or hinder the ability of Bank to sell or otherwise dispose of such
Inventory;
(vii) Bank has determined in accordance with Bank's customary business
practices that it is not unacceptable due to age, type, category or quantity;
and
(viii) it is not Inventory (A) with respect to which any of the
representations and warranties contained in this Agreement are untrue or (B)
which violates any of the covenants of Borrower contained in this Agreement.
(l) "Environmental Laws" shall mean all federal, state, district, local
and foreign laws, rules, regulations, ordinances, and consent decrees relating
to health, safety, hazardous substances, pollution and environmental matters,
as now or at any time hereafter in effect, applicable to Borrower's business
or facilities owned or operated by Borrower, including laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contamination, chemicals, or hazardous, toxic or dangerous substances,
materials or wastes into the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata)
or otherwise relating to the generation, manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials.
(m) "Event of Default" shall have the meaning specified in paragraph 12
hereof.
(n) "Exhibit A" shall mean the exhibit entitled Exhibit A - Special Pro-
visions which is attached hereto and made a part hereof.
(o) "Exhibit B" shall mean the exhibit entitled Exhibit B - Business and
Collateral Locations which is attached hereto and made a part hereof.
(p) "Guaranty" shall mean that certain Continuing Unconditional Guaranty
dated the date hereof made by Borrower in favor of Bank.
(q) "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substance, materials and wastes, including, without limitation, hydrocarbons
(including naturally occurring or man-made petroleum and hydrocarbons),
flammable explosives, asbestos, urea formaldehyde insulation, radioactive
materials, biological substances, polychlorinated biphenyls, pesticides,
herbicides and any other kind and/or type of pollutants or contaminants
(including, without limitation, materials which include hazardous
constituents), sewage, sludge, industrial slag, solvents and/or any other
similar substances, materials, or wastes and including any other substances,
materials or wastes that are or become regulated under any Environmental Law
(including, without limitation any that are or become classified as hazardous
or toxic under any Environmental Law).
(r) "Indemnified Party" shall have the meaning specified in paragraph 14
hereof.
(s) "Interest Period" shall have the meaning specified in subparagraph
(3)(b) of Exhibit A of the Agreement.
(t) "Letter of Credit" shall mean any Letter of Credit issued by Bank on
behalf of Borrower.
(u) "Liabilities" shall mean any and all obligations, liabilities and
indebtedness of Borrower to Bank or to any parent, affiliate or subsidiary of
Bank of any and every kind and nature, howsoever created, arising or evidenced
and howsoever owned, held or acquired, whether now or hereafter existing,
whether now due or to become due, whether primary, secondary, direct,
indirect, absolute, contingent or otherwise (including, without limitation,
obligations of performance), whether several, joint or joint and several, and
whether arising or existing under written or oral agreement or by operation of
law, including, without limitation, all obligations, liabilities and
indebtedness of Borrower to Bank under this Agreement, the Other Agreements
and the Guaranty.
(v) "LIBOR Rate Loans" shall mean the Loans bearing interest at the rate
set forth in subparagraph (3)(b) of Exhibit A of the Agreement.
(w) "Loans" shall mean all loans and advances made by Bank to or on behalf
of Borrower hereunder.
(x) "Loan Limit" shall have the meaning specified in paragraph 1 of
Exhibit A.
(y) "Obligor" shall mean Borrower and each other Person who is or shall
become primarily or secondarily liable for any of the Liabilities.
(z) "Other Agreements" shall mean all agreements, instruments and
documents, other than this Agreement, including, without limitation,
guaranties, mortgages, trust deeds, pledges, powers of attorney, consents,
assignments, contracts, notices, security agreements, leases, financing
statements and all other writings heretofore, now or from time to time
hereafter executed by or on behalf of Borrower or any other Person and
delivered to Bank or to any parent, affiliate or subsidiary of Bank in
connection with the Liabilities or the transactions contemplated hereby.
(aa) "Parent" shall mean any Person now or at any time or times hereafter
owning or controlling (alone or with any other Person) at least a majority of
the issued and outstanding equity of Borrower.
(ab) "Permitted Liens" shall mean (i) statutory liens of landlord's,
carriers, warehousemen, processors, mechanics, materialmen or suppliers
incurred in the ordinary course of business and securing amounts not yet due
or declared to be due by the claimant thereunder; (ii) liens or security
interests in favor of Bank; (iii) zoning restrictions and easements, licenses,
covenants and other restrictions affecting the use of real property that do
not individually or in the aggregate have a material adverse effect on
Borrower's ability to use such real property for its intended purpose in
connection with Borrower's business; (iv) liens specifically permitted by Bank
in writing; and (v) liens securing purchase money obligations and capitalized
lease obligations permitted under this Agreement, provided that such liens
only attach to the assets so acquired or leased; (vi) pledges or deposits in
connection with worker's compensation, unemployment insurance and other social
security legislation, or to secure the performance of bids, tenders, contracts
(other than for the repayment of borrowed money) or leases or to secure
statutory obligations or surety, appeal or stay bonds, or to secure indemnity,
performance or other similar bonds in the ordinary course of business; and
(vii) liens for taxes not yet due or for taxes which are being contested in
good faith and by appropriate proceedings and for which adequate reserves are
being maintained.
(ac) "Prime Rate Loans" shall mean the Loans bearing interest at the rates
set forth in subparagraph (3)(a) of Exhibit A of the Agreement.
(ad) "Person" shall mean any individual, sole proprietorship, partnership,
joint venture, limited liability company, trust, unincorporated organization,
association, corporation, institution, entity, party or foreign or United
States government (whether federal, state, county, city, municipal or
otherwise), including, without limitation, any instrumentality, division,
agency, body or department thereof.
(ae) "Restricted Account" shall have the meaning specified in subparagraph
7(a) hereof.
(af) "Subsidiary" shall mean any corporation of which more than fifty
percent (50%) of the outstanding capital stock having ordinary voting power to
elect a majority of the board of directors of such corporation (irrespective
of whether at the time stock of any other class of such corporation shall have
or might have voting power by reason of the happening of any contingency) is
at the time, directly or indirectly, owned by Borrower or any partnership,
joint venture or limited liability company of which more than fifty percent
(50%) of the outstanding equity interests are at the time, directly or
indirectly, owned by Borrower or of which Borrower is a general partner.
(ag) "Tangible Net Worth" shall have the meaning specified in subparagraph
11(o) hereof.
(ah) "Term" shall have the meaning specified in paragraph 9 hereof.
(ai) "Type" of Loan shall mean either a Prime Rate Loan or a LIBOR Loan.
2. LOANS. Subject to the terms and conditions of this Agreement (including
Exhibit A) and the Other Agreements, Bank shall, during the Term and absent
the occurrence of an Event of Default, make such Loans to Borrower as Borrower
shall from time to time request. The aggregate unpaid principal of all Loans
outstanding at any one time shall not exceed the Loan Limit (or any sub-limit)
set forth in Exhibit A and shall bear interest at the rates set forth in
Exhibit A. All Liabilities shall be repaid upon the earlier to occur of (i)
the end of the Term and (ii) the acceleration of the Liabilities pursuant to
paragraph 13 of this Agreement. If at any time the outstanding principal
balance of the Loans exceeds the Loan Limit, or any portion of the Loans
exceeds any applicable sublimit set forth in Exhibit A, Borrower shall
immediately, and without the necessity of a demand by Bank, pay to Bank such
amount as may be necessary to eliminate such excess and Bank shall apply such
payment to the Liabilities in such order as Bank shall determine in its sole
discretion. Borrower hereby authorizes Bank, in its sole discretion, to
charge any of Borrower's accounts or advance Loans to make any payments of
principal, interest, fees, costs and expenses required by this Agreement. All
Loans shall, in Bank's sole discretion, be evidenced by one or more promissory
notes in form and substance satisfactory to Bank. However, if such Loans are
not so evidenced, such Loans may be evidenced solely by entries upon the books
and records maintained by Bank.
3. FEES AND CHARGES. Borrower shall pay to Bank, in addition to all other
amounts payable hereunder, the fees and charges set forth in Exhibit A. It is
the intent of the parties that the rate of interest and the other charges to
Borrower under this Agreement shall be lawful; therefore, if for any reason
the interest or other charges payable under this Agreement are found by a
court of competent jurisdiction, in a final, non-appealable determination, to
exceed the limit which Bank may lawfully charge Borrower, then the obligation
to pay interest and other charges shall automatically be reduced to such limit
and, if any amount in excess of such limit shall have been paid, then such
amount shall be refunded to Borrower.
4. GRANT OF SECURITY INTEREST TO BANK. As security for the payment of all
Loans now or in the future made by Bank to Borrower hereunder and for the
payment or other satisfaction of all other Liabilities, Borrower hereby
assigns to Bank and grants to Bank a continuing security interest in the
following property of Borrower, whether now or hereafter owned, existing,
acquired or arising and wherever now or hereafter located: (a) all Accounts
(whether or not Eligible Accounts) and all Goods whose sale, lease or other
disposition by Borrower has given rise to Accounts and have been returned to,
or repossessed or stopped in transit by, Borrower; (b) all Chattel Paper,
Instruments, Documents and General Intangibles (including, without limitation,
all patents, patent applications, trademarks, trademark applications,
tradenames, trade secrets, goodwill, copyrights, copyright applications,
registrations, licenses, franchises, customer lists, tax refund claims, claims
against carriers and shippers, guarantee claims, contracts rights, security
interests, security deposits and any rights to indemnification); (c) all
Inventory (whether or not Eligible Inventory); (d) all Goods (other than
Inventory), including, without limitation, Equipment, vehicles and fixtures;
(e) all Investment Property; (f) all deposits and cash; (g) any other property
of Borrower now or hereafter in the possession, custody or control of Bank or
any agent or any parent, affiliate or subsidiary of Bank or any participant
with Bank in the Loans for any purpose (whether for safekeeping, deposit,
collection, custody, pledge, transmission or otherwise) and (h) all additions
and accessions to, substitutions for, and replacements, products and proceeds
of the foregoing property, including, without limitation, proceeds of all
insurance policies insuring the foregoing property, and all of Borrower's
books and records relating to any of the foregoing and to Borrower's business.
5. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS THEREIN.
Borrower shall, at Bank's request, at any time and from time to time, execute
and deliver to Bank such financing statements, documents and other agreements
and instruments (and pay the cost of filing or recording the same in all
public offices deemed necessary or desirable by Bank) and do such other acts
and things as Bank may deem necessary or desirable in its sole discretion in
order to establish and maintain a valid, attached and perfected security
interest in the Collateral in favor of Bank (free and clear of all other
liens, claims, encumbrances and rights of third parties whatsoever, whether
voluntarily or involuntarily created, except Permitted Liens) to secure
payment of the Liabilities, and in order to facilitate the collection of the
Collateral. Borrower irrevocably hereby makes, constitutes and appoints Bank
(and all Persons designated by Bank for that purpose) as Borrower's true and
lawful attorney and agent-in-fact to execute such financing statements,
documents and other agreements and instruments and do such other acts and
things as may be necessary to preserve and perfect Bank's security interest in
the Collateral. Borrower further agrees that a carbon, photographic,
photostatic or other reproduction of this Agreement or of a financing
statement shall be sufficient as a financing statement.
6. POSSESSION OF COLLATERAL AND RELATED MATTERS. Until an Event of Default
has occurred, Borrower shall have the right, except as otherwise provided in
this Agreement, (i) in the ordinary course of Borrower's business, to (a)
sell, lease or furnish under contracts of service any of Borrower's Inventory
normally held by Borrower for any such purpose, and (b) use and consume any
raw materials, work in process or other materials normally held by Borrower
for such purpose; provided, however, that a sale in the ordinary course of
business shall not include any transfer or sale in satisfaction, partial or
complete, of a debt owed by Borrower and (ii) to consummate such other sales
and dispositions of Collateral permitted under subparagraph 11(k) hereof.
7. COLLECTIONS.
(a) Borrower shall establish one or more accounts (the "Restricted
Account") in Bank's name with Bank or such other financial institution(s)
acceptable to Bank, into which all payments received by Borrower for
Inventory, services or the disposition of other Collateral will be deposited
by Borrower with in two (2) Business Days after receipt by Borrower in the
identical form in which such payments were received, whether by cash or check.
If Borrower, any Affiliate or Subsidiary, or any shareholder, officer,
director, employee or agent of Borrower or any Affiliate or Subsidiary, or any
other Person acting for or in concert with Borrower shall receive any monies,
checks, notes, drafts or other payments relating to or as proceeds of Accounts
or other Collateral, Borrower and each such Person shall receive all such
items in trust for, and as the sole and exclusive property of, Bank and,
immediately upon receipt thereof, shall remit the same (or cause the same to
be remitted) in kind to the Restricted Account or such other account as Bank
may from time to time direct (each, an "Other Account"). If the Restricted
Account or any Other Account is not established with Bank, the financial
institution with which such account is established shall acknowledge and
agree, in a manner satisfactory to Bank, that the amounts on deposit in such
Restricted Account or Other Account are the sole and exclusive property of
Bank, that such financial institution has no right to setoff against such
Restricted Account or Other Account or against any other account maintained by
such financial institution into which the contents of such Restricted Account
or Other Account are transferred, and that such financial institution shall
wire, or otherwise transfer in immediately available funds in a manner
satisfactory to Bank, funds deposited in such Restricted Account or Other
Account on a daily basis as such funds are collected. Borrower agrees that
all payments made to the Restricted Account or any Other Account or otherwise
received by Bank, whether in respect of the Accounts or as proceeds of other
Collateral or otherwise, will be applied on account of the Liabilities in
accordance with the terms of this Agreement. If any Restricted Account or
Other Account is established with Bank, Borrower agrees to pay all fees, costs
and expenses in connection with opening and maintaining such Restricted
Account or Other Account and depositing for collection by Bank any check or
other item of payment received by Bank on account of the Liabilities. All of
such fees, costs and expenses shall constitute Loans hereunder, shall be
payable to Bank by Borrower upon demand, and, until paid, shall bear interest
at the highest rate then applicable to Loans hereunder. All checks, drafts,
instruments and other items of payment or proceeds of Collateral shall be
endorsed by Borrower to Bank, and, if that endorsement of any such item shall
not be made for any reason, Bank is hereby irrevocably authorized to endorse
the same on Borrower's behalf. For the purpose of this paragraph, Borrower
irrevocably hereby makes, constitutes and appoints Bank (and all Persons
designated by Bank for that purpose) as Borrower's true and lawful attorney
and agent-in-fact (i) to endorse Borrower's name upon said items of payment
and/or proceeds of Collateral and upon any Chattel Paper, Document,
Instrument, invoice or similar document or agreement relating to any Account
of Borrower or Goods pertaining thereto; (ii) to take control in any manner of
any item of payment or proceeds thereof; and (iii) to have access to any lock
box or postal box into which any of Borrower's mail is deposited, and open and
process all mail addressed to Borrower and deposited therein.
(b) Bank may, at any time and from time to time after an Event of Default
has occurred, whether before or after notification to any Account Debtor and
whether before or after the maturity of any of the Liabilities, (i) enforce
collection of any of Borrower's Accounts or other amounts owed to Borrower by
suit or otherwise; (ii) exercise all of Borrower's rights and remedies with
respect to proceedings brought to collect any Accounts or other amounts owed
to Borrower; (iii) surrender, release or exchange all or any part of any
Accounts or other amounts owed to Borrower, or compromise or extend or renew
for any period (whether or not longer than the original period) any
indebtedness thereunder; (iv) sell or assign any Account of Borrower or other
amount owed to Borrower upon such terms, for such amount and at such time or
times as Bank deems advisable; (v) prepare, file and sign Borrower's name on
any proof of claim in bankruptcy or other similar document against any Account
Debtor or other Person obligated to Borrower; and (vi) do all other acts and
things which are necessary, in Bank's sole discretion, to fulfill Borrower's
obligations under this Agreement and to allow Bank to collect the Accounts or
other amounts owed to Borrower. In addition to any other provision hereof,
Bank may at any time, whether before or after the occurrence of an Event of
Default, at Borrower's expense, notify any parties obligated on any of the
Accounts to make payment directly to Bank of any amounts due or to become due
thereunder.
(c) For purposes of calculating interest, Bank shall, on the day of
receipt by Bank at its office in Chicago, Illinois of cash or other
immediately available funds from collections of items of payment and proceeds
of any Collateral, apply the whole or any part of such collections or proceeds
against the Liabilities in such order as Bank shall determine in its sole
discretion. For purposes of determining the amount of Loans available for
borrowing purposes, cash or other immediately available funds from collections
of items of payment and proceeds of any Collateral shall be applied in whole
or in part against the Liabilities, in such order as Bank shall determine in
its sole discretion, on the day of receipt, subject to actual collection.
(d) Bank, in its sole discretion, without waiving or releasing any
obligation, liability or duty of Borrower under this Agreement or the Other
Agreements or any Event of Default, may at any time or times hereafter, but
shall not be obligated to, pay, acquire or accept an assignment of any
security interest, lien, encumbrance or claim asserted by any Person in, upon
or against the Collateral. All sums paid by Bank in respect thereof and all
costs, fees and expenses including, without limitation, reasonable attorney
fees, all court costs and all other charges relating thereto incurred by Bank
shall constitute Loans, payable by Borrower to Bank on demand and, until paid,
shall bear interest at the highest rate then applicable to Loans hereunder.
(e) Immediately upon Borrower's receipt of any portion of the Collateral
evidenced by Chattel Paper, an Instrument or a Document, Borrower shall
deliver the original thereof to Bank together with an appropriate endorsement
or other specific evidence of assignment thereof to Bank (in form and
substance acceptable to Bank). If an endorsement or assignment of any such
items shall not be made for any reason, Bank is hereby irrevocably authorized,
as Borrower's attorney and agent-in-fact, to endorse or assign the same on
Borrower's behalf.
8. SCHEDULES AND REPORTS.
(a) Within ten (10) Business Days after the close of each calendar month,
and at such other times as may be reasonably requested by Bank from time to
time hereafter, Borrower shall deliver to Bank (i) a schedule identifying each
Account and which Accounts constitute Eligible Accounts together with an aging
with respect to each Account and copies of the invoices when requested by Bank
(with evidence of shipment attached) pertaining to each such Eligible Account
for the month (or other applicable period) immediately preceding; and (ii)
such additional schedules, certificates, reports and information with respect
to the Collateral as Bank may from time to time require. Bank, through its
officers, employees or agents, shall have the right, at any time and from time
to time in Bank's name, in the name of a nominee of Bank or in Borrower's
name, to verify the validity, amount or any other matter relating to any of
Borrower's Accounts, by mail, telephone, telegraph or otherwise. Borrower
shall reimburse Bank, on demand, for all costs, fees and expenses incurred by
Bank in this regard.
(b) Without limiting the generality of the foregoing, Borrower shall
deliver to Bank, at least once a month (or more frequently when requested by
Bank), a report with respect to Borrower's Inventory. Borrower shall
immediately notify Bank of any event causing loss or depreciation in value of
Borrower's Inventory in excess of $25,000.
(c) All schedules, certificates, reports and other items delivered by
Borrower to Bank hereunder shall be executed by an authorized representative
of Borrower and shall be in such form and contain such information as Bank
shall specify.
9. TERMINATION. This Agreement shall be in effect from the date hereof
until February 25, 2002 (the "term"), provided, however, that Bank shall
review the Loans and the facility provided for in this Agreement annually and
provided, further, that the security interests and liens created under this
Agreement and the Other Agreements shall survive until the payment in full of
the Liabilities. At such time as Borrower has repaid all of the Liabilities
and this Agreement has terminated, Borrower shall deliver to Bank a release,
in form and substance satisfactory to Bank, of all obligations and liabilities
of Bank and its officers, directors, employees, agents, parents, subsidiaries
and affiliates to Borrower. At such time as Borrower has repaid all of the
Liabilities and this Agreement has terminated and Borrower has delivered such
release to Bank, Bank shall release its liens in the Collateral and deliver to
Borrower such lien releases, terminations and reassignment as Borrower shall
reasonably request and deliver any Collateral then in its possession to
Borrower.
10. REPRESENTATIONS, WARRANTIES AND COVENANTS. Borrower hereby represents,
warrants and covenants that:
(a) the financial statements delivered or to be delivered by Borrower to
Bank at or prior to the date of this Agreement and at all times subsequent
thereto accurately reflect the financial condition of Borrower, and there has
been no material adverse change in the financial condition or operations of
Borrower since the date of the financial statements delivered to Bank most
recently prior to the date of this Agreement;
(b) the office where Borrower keeps its books, records and accounts (or
copies thereof) concerning the Collateral, Borrower's principal place of
business and all of Borrower's other places of business, locations of
Collateral and post office boxes are as set forth in Exhibit B; and (ii)
Borrower shall promptly (but in no event less than ten (10) days prior
thereto) advise Bank in writing of the proposed opening of any new place of
business or new location of Collateral, the closing of any existing place of
business or location of Collateral, any change in the location of Borrower's
books, records and accounts (or copies thereof) or the opening or closing of
any post office box of Borrower;
(c) the Collateral, including, without limitation, the Equipment (except
any part thereof which Borrower shall have advised Bank in writing consists of
Collateral normally used in more than one state) is and shall be kept, or, in
the case of vehicles, based, only at the addresses set forth on Exhibit B, and
at other locations within the continental United States of which Bank has been
advised by Borrower in writing;
(d) if any of the Collateral consists of Goods of a type normally used in
more than one state, whether or not actually so used, (i) Borrower shall
immediately give written notice to Bank of any use of any such Goods in any
state other than a state in which Borrower has previously advised Bank such
Goods shall be used, and (ii) such Goods shall not, unless Bank shall
otherwise consent in writing, be used outside of the continental United
States;
(e) Borrower has not made any loans or advances that are outstanding on
the date hereof, and shall not after the date hereof make any loans or
advances to any Affiliate or other Person except for advances to employees,
officers and directors of Borrower for travel and other expenses arising in
the ordinary course of Borrower's business;
(f) each Account or item of Inventory which Borrower shall, expressly or
by implication, request Bank to classify as an Eligible Account or as Eligible
Inventory, respectively, shall, as of the time when such request is made,
conform in all respects to the requirements of such classification as set
forth in the respective definitions of "Eligible Account" and "Eligible
Inventory" as set forth herein and as otherwise established by Bank from time
to time, and Borrower shall promptly notify Bank in writing if any such
Eligible Account or Eligible Inventory shall subsequently become ineligible;
(g) Borrower is and shall at all times during the Term be the lawful owner
of all Collateral now purportedly owned or hereafter purportedly acquired by
Borrower, free from all liens, claims, security interests and encumbrances
whatsoever, whether voluntarily or involuntarily created and whether or not
perfected, other than the Permitted Liens;
(h) Borrower has the right and power and is duly authorized and empowered
to enter into, execute and deliver this Agreement and the Other Agreements and
perform its obligations hereunder and thereunder. Borrower's execution,
delivery and performance of this Agreement and the Other Agreements does not
and shall not conflict with the provisions of any statute, regulation,
ordinance or rule of law, or any agreement, contract or other document which
may now or hereafter be binding on Borrower, and Borrower's execution,
delivery and performance of this Agreement and the Other Agreements shall not
result in the imposition of any lien or other encumbrance upon any of
Borrower's property under any existing indenture, mortgage, deed of trust,
loan or credit agreement or other agreement or instrument by which Borrower or
any of its property may be bound or affected;
(i) there are no actions or proceedings which are pending or threatened
against Borrower which might result in any material adverse change in its
financial condition or materially adversely affect the Collateral and Borrower
shall, promptly upon becoming aware of any such pending or threatened action
or proceeding, give written notice thereof to Bank;
(j) Borrower has obtained and shall maintain all licenses, authorizations,
approvals and permits, the lack of which would have a material adverse effect
on the operation of its business, and (ii) Borrower is and shall remain in
compliance in all material respects with all applicable federal, state, local
and foreign statutes, orders, regulations, rules and ordinances (including,
without limitation, Environmental Laws and statutes, orders, regulations,
rules and ordinances relating to taxes, employer and employee contributions
and similar items, securities, ERISA (as defined in subparagraph 10(y)) or
employee health and safety) the failure to comply with which would have a
material adverse effect on its business, property, assets, operations or
condition, financial or otherwise;
(k) all written information now, heretofore or hereafter furnished by
Borrower to Bank is and shall be true and correct as of the date with respect
to which such information, was or is furnished;
(l) Borrower is not conducting, permitting or suffering to be conducted,
nor shall it conduct, permit or suffer to be conducted, any activities
pursuant to or in connection with which any of the Collateral is now, or will
(while any Liabilities remain outstanding) be owned by any Affiliate;
provided, however, that Borrower may enter into transactions with Affiliates
for the purchase or sale of Inventory or services in the ordinary course of
business pursuant to terms that are no less favorable to Borrower than the
terms upon which such transfers or transactions would have been made had they
been made to or with a Person that is not an Affiliate and, in connection
therewith, may transfer cash or property to Affiliates for fair value;
(m) Borrower's name has always been as set forth on the first page of this
Agreement and Borrower uses no tradenames or division names in the operation
of its business, except as otherwise disclosed in writing to Bank; Borrower
shall notify Bank in writing within ten (10) days of the change of its name or
the use of any tradenames or division names not previously disclosed to Bank
in writing;
(n) with respect to Borrower's Equipment: (i) Borrower has good and
indefeasible and merchantable title to and ownership of all Equipment; (ii)
Borrower shall keep and maintain the Equipment in good operating condition and
repair and shall make all necessary replacements thereof and repairs thereto
so that the value and operating efficiency thereof shall at all times be
preserved and maintained; and (iii) Borrower shall not permit any such items
to become a fixture to real estate or an accession to other personal property;
(o) this Agreement and the Other Agreements to which Borrower is a party
are the legal, valid and binding obligations of Borrower and are enforceable
against Borrower in accordance with their respective terms;
(p) Borrower is and shall remain solvent, is and shall be able to pay its
debts as they become due, has and shall continue to have capital sufficient to
carry on its business, now owns and shall continue to own property having a
value both at book value and at present fair saleable value greater than the
amount required to pay its debts, and will not be rendered insolvent by the
execution and delivery of this Agreement or any of the Other Agreements or by
completion of the transactions contemplated hereunder or thereunder;
(q) Borrower is not now obligated, nor shall it create, incur, assume or
become obligated (directly or indirectly), for any loans or other indebtedness
for borrowed money or any lease obligations other than the Loans, except that
Borrower may (i) borrow money from a Person other than Bank on an unsecured
and subordinated basis if a subordination agreement in favor of Bank and in
form and substance satisfactory to Bank is executed and delivered to Bank
relative thereto; (ii) maintain any present indebtedness to any Person which
has been disclosed to Bank in writing and consented to in writing by Bank;
(iii) incur unsecured indebtedness to trade creditors in the ordinary course
of Borrower's business; and (iv) incur purchase money indebtedness or
capitalized lease obligations in connection with capital expenditures
permitted under this Agreement;
(r) Borrower does not own any margin securities except as disclosed in
Borrower's Form 10-K for the period ending September 30, 1997, and none of the
proceeds of the Loans hereunder shall be used for the purpose of purchasing or
carrying any margin securities or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase any margin securities
or for any other purpose not permitted by Regulation G or Regulation U of the
Board of Governors of the Federal Reserve System as in effect from time to
time;
(s) except as otherwise disclosed in writing to Bank, Borrower has no
Parents, Subsidiaries or other Affiliates or divisions, nor is Borrower
engaged in any joint venture or partnership with any other Person;
(t) Borrower is duly organized, validly existing and in good standing in
its state of organization and Borrower is duly qualified and in good standing
in all states where the nature and extent of the business transacted by it or
the ownership of its assets makes such qualification necessary;
(u) Borrower is not in default under any material contract, lease or
commitment to which it is a party or by which it is bound, nor does Borrower
know of any dispute regarding any contract, lease or commitment which is
material to the continued financial success and well-being of Borrower;
(v) there are no controversies pending or threatened between Borrower and
any of its employees, other than employee grievances arising in the ordinary
course of business which are not, in the aggregate, material to the continued
financial success and well-being of Borrower, and Borrower is in compliance in
all material respects with all federal and state laws respecting employment
and employment terms, conditions and practices;
(w) Borrower possesses, and shall continue to possess, adequate licenses,
patents, patent applications, copyrights, service marks, trademarks, trademark
applications, tradestyles and tradenames to continue to conduct its business
as heretofore conducted by it;
(x) Borrower has not generated, used, stored, treated, transported,
manufactured, handled, produced or disposed of any Hazardous Materials, on or
off its premises (whether or not owned by it) in any manner which at any time
violates any Environmental Law or any license, permit, certificate, approval
or similar authorization thereunder and the operations of Borrower comply in
all material respects with all Environmental Laws and all licenses, permits,
certificates, approvals and similar authorizations thereunder; (ii) there has
been no investigation, proceeding, complaint, order, directive, claim,
citation or notice by any governmental authority or any other Person, nor is
any pending or to the best of Borrower's knowledge threatened, and Borrower
shall immediately notify Bank upon becoming aware of any such investigation,
proceeding, complaint, order, directive, claim, citation or notice and take
prompt and appropriate actions to respond thereto, with respect to any non-
compliance with or violation of the requirements of any Environmental Law by
Borrower or the release, spill or discharge, threatened or actual, of any
Hazardous Material or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials or
any other environmental, health or safety matter, which affects Borrower or
its business, operations or assets or any properties at which Borrower has
transported, stored or disposed of any Hazardous Materials; (iii) Borrower has
no material liability (contingent or otherwise) in connection with a release,
spill or discharge, threatened or actual, of any Hazardous Materials or the
generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials; and (iv) without limiting
the generality of the foregoing, Borrower shall, following the determination
by Bank that there is non-compliance, or any condition which requires any
action by or on behalf of Borrower in order to avoid any non-compliance, with
any Environmental Law, at Borrower's expense, cause an independent
environmental engineer acceptable to Bank to conduct such tests of the
relevant site as are appropriate and prepare and deliver a report setting
forth the result of such tests, a proposed plan for remediation and an
estimate of the costs thereof; and
(y) Borrower has paid and discharged, and shall at all times hereafter
promptly pay and discharge all obligations and liabilities arising under the
Employee Retirement Income Security Act of 1974 (as amended, modified or
restated from time to time, "ERISA") of a character which if unpaid or
unperformed might result in the imposition of a lien against any of its
properties or assets and will promptly notify Bank of (i) the occurrence of
any "reportable event" (as defined in ERISA) which might result in the
termination by the Pension Benefit Guaranty Corporation ("PBGC") of any
employee benefit plan ("Plan") covering any officers or employees of Borrower,
any benefits of which are, or are required to be, guaranteed by PBGC, (ii)
receipt of any notice from PBGC of its intention to seek termination of any
Plan or appointment of a trustee therefor, and (iii) its intention to
terminate or withdraw from any Plan; provided, that Borrower shall not
terminate any Plan or withdraw therefrom if such withdrawal or termination
shall result in any liability to Borrower.
Borrower represents, warrants and covenants to Bank that all representations
and warranties of Borrower contained in this Agreement (whether appearing in
paragraphs 10 or 11 hereof or elsewhere) shall be true at the time of
Borrower's execution of this Agreement, shall survive the execution, delivery
and acceptance hereof by the parties hereto and the closing of the
transactions described herein or related hereto, shall remain true until the
repayment in full and satisfaction of all of the Liabilities and termination
of this Agreement, and shall be remade by Borrower at the time each Loan is
made pursuant to this Agreement.
11. ADDITIONAL COVENANTS OF BORROWER. Until payment and satisfaction in
full of all Liabilities and termination of this Agreement, unless Borrower
obtains Bank's prior written consent waiving or modifying any of Borrower's
covenants hereunder in any specific instance, Borrower agrees as follows:
(a) Borrower shall at all times keep accurate and complete books, records
and accounts with respect to all of Borrower's business activities, in
accordance with sound accounting practices and generally accepted accounting
principles consistently applied, and shall keep such books, records and
accounts, and any copies thereof, only at the addresses indicated for such
purpose on Exhibit B;
(b) Borrower agrees to deliver to Bank the following financial
information, all of which shall be prepared in accordance with generally
accepted accounting principles consistently applied: (i) no later than forty-
five (45) days after the end of each of the first three quarters of Borrower's
fiscal year a balance sheet, operating statement and reconciliation of surplus
of Borrower, which quarterly financial statements may be unaudited but shall
be certified by the Chief Financial Officer of Borrower; (ii) no later than
one hundred twenty (120) days after the end of each of Borrower's fiscal
years, audited annual financial statements with an unqualified opinion by
independent certified public accountants selected by Borrower and reasonably
satisfactory to Bank and (iii) contemporaneously with the furnishing of each
of the foregoing quarterly and annual financial statements, a duly completed
certificate dated the date of such financial statements, in form and substance
satisfactory to Bank and signed by an authorized officer of Borrower,
containing calculations of Borrower's compliance with the financial covenants
contained in subparagraph 11(o) of this Agreement and subparagraphs 5, 6 and 7
of Exhibit A;
(c) Borrower shall promptly, after obtaining knowledge thereof, advise
Bank in writing of any material adverse change in the business, assets or
condition, financial or otherwise, of Borrower, the occurrence of any Event of
Default hereunder or the occurrence of any event which, if uncured, will
become an Event of Default hereunder after notice or lapse of time (or both);
(d) Bank, or any Persons designated by it, shall have the right, at any
time, to call at Borrower's places of business at any reasonable times, and,
without hindrance or delay, to inspect the Collateral and to inspect, audit,
check and make extracts from Borrower's books, records, journals, orders,
receipts and any correspondence and other data relating to Borrower's
business, the Collateral or any transactions between the parties hereto, and
shall have the right to make such verification concerning Borrower's business
as Bank may consider reasonable under the circumstances. Bank agrees,
provided no Event of Default has occurred, to limit its collateral audits and
field exams to two such audit/exams during any calendar year after the date
hereof. Borrower shall furnish to Bank such information relevant to Bank's
rights under this Agreement as Bank shall at any time and from time to time
request. Borrower authorizes Bank to discuss the affairs, finances and
business of Borrower with any officers, employees or directors of Borrower or
with any Affiliate or the officers, employees or directors of any Affiliate,
and to discuss the financial condition of Borrower with Borrower's independent
public accountants. Any such discussions shall be without liability to Bank
or to Borrower's independent public accountants. Borrower shall pay to Bank
all fair and reasonable fees and out-of-pocket expenses incurred by Bank in
the exercise of its rights hereunder (provided that such fees and out-of-
pocket expenses incurred by Bank pursuant to this subparagraph 11(d) and
subparagraph 11(d) of the AMCON Loan Agreement after the date hereof when no
Event of Default exists shall not exceed $15,000 in any calendar year), and
all of such fees and expenses shall constitute Loans hereunder, shall be
payable on demand and, until paid, shall bear interest at the highest rate
then applicable to Loans hereunder;
(e) Borrower shall:
(i) keep the Collateral properly housed and insured for the full
insurable value thereof against loss or damage by fire, theft, explosion,
sprinklers, collision (in the case of motor vehicles) and such other risks as
are customarily insured against by Persons engaged in businesses similar to
that of Borrower, with such companies, in such amounts, with such deductibles,
and under policies in such form as shall be satisfactory to Bank. Original
(or certified) copies of such policies of insurance have been or shall be
delivered to Bank within ninety (90) days after the date hereof, together with
evidence of payment of all premiums therefor, and shall contain an
endorsement, in form and substance acceptable to Bank, showing loss under such
insurance policies payable to Bank. Such endorsement, or an independent
instrument furnished to Bank, shall provide that the insurance company shall
give Bank at least thirty (30) days written notice before any such policy of
insurance is altered or canceled and that no act, whether willful or
negligent, or default of Borrower or any other Person shall affect the right
of Bank to recover under such policy of insurance in case of loss or damage.
In addition, Borrower shall cause to be executed and delivered to Bank an
assignment of proceeds of its business interruption insurance policies.
Borrower hereby directs all insurers under all such policies of insurance to
pay all proceeds payable thereunder in excess of $100,000 for any occurrence
directly to Bank. Borrower irrevocably, makes, constitutes and appoints Bank
(and all officers, employees or agents designated by Bank) as Borrower's true
and lawful attorney (and agent-in-fact) for the purpose of making, settling
and adjusting claims under such policies of insurance, endorsing the name of
Borrower on any check, draft, instrument or other item of payment for the
proceeds of such policies of insurance and making all determinations and
decisions with respect to such policies of insurance; and
(ii) maintain, at its expense, such public liability and third party
property damage insurance as is customary for Persons engaged in businesses
similar to that of Borrower with such companies and in such amounts, with such
deductibles and under policies in such form as shall be satisfactory to Bank
and original (or certified) copies of such policies have been or shall be
delivered to Bank within ninety (90) days after the date hereof, together with
evidence of payment of all premiums therefor; each such policy shall contain
an endorsement showing Bank as additional insured thereunder and providing
that the insurance company shall give Bank at least thirty (30) days written
notice before any such policy shall be altered or canceled.
If Borrower at any time or times hereafter shall fail to obtain or maintain
any of the policies of insurance required above or to pay any premium relating
thereto, then Bank, without waiving or releasing any obligation or default by
Borrower hereunder, may (but shall be under no obligation to) obtain and
maintain such policies of insurance and pay such premiums and take such other
actions with respect thereto as Bank deems advisable. All sums disbursed by
Bank in connection with any such actions, including, without limitation, court
costs, expenses, other charges relating thereto and reasonable attorneys'
fees, shall constitute Loans hereunder, shall be payable on demand by Borrower
to Bank and, until paid, shall bear interest at the highest rate then
applicable to Loans hereunder;
(f) Borrower shall not use the Collateral, or any part thereof, in any
unlawful business or for any unlawful purpose or use or maintain any of the
Collateral in any manner that does or could result in material damage to the
environment or a violation of any applicable environmental laws, rules or
regulations; shall keep the Collateral in good condition, repair and order;
shall permit Bank to examine any of the Collateral at any time and wherever
the Collateral may be located; shall not permit the Collateral, or any part
thereof, to be levied upon under execution, attachment, distraint or other
legal process; shall not sell, lease, grant a security interest in or
otherwise dispose of any of the Collateral except as expressly permitted by
this Agreement; shall not settle or adjust any Account identified by Borrower
as an Eligible Account or with respect to which the Account Debtor is an
Affiliate without the consent of Bank, provided, that following the occurrence
of an Event of Default, Borrower shall not settle or adjust any Account
without the consent of Bank; and shall not secrete or abandon any of the
Collateral, or remove or permit removal of any of the Collateral from any of
the locations listed on Exhibit B, except for the removal of Inventory sold in
the ordinary course of Borrower's business as permitted herein;
(g) all monies and other property obtained by Borrower from Bank pursuant
to this Agreement shall be used solely for business purposes of Borrower;
(h) Borrower shall, at the request of Bank, indicate on its records
concerning the Collateral a notation, in form satisfactory to Bank, of the
security interest of Bank hereunder;
(i) Borrower shall file all required tax returns and pay all of its taxes
when due, including, without limitation, taxes imposed by federal, state or
municipal agencies, and shall cause any liens for taxes to be promptly
released; provided, that Borrower shall have the right to contest the payment
of such taxes in good faith by appropriate proceedings so long as (i) the
amount so contested is shown on Borrower's financial statements, (ii) the
contesting of any such payment does not give rise to a lien for taxes and
(iii) Borrower has reserved against availability under the Loans an amount
which, in the sole judgment of Bank, is sufficient to pay such taxes and any
interest or penalties that may accrue thereon. If Borrower fails to pay any
such taxes and in the absence of any such contest by Borrower, Bank may (but
shall be under no obligation to) advance and pay any sums required to pay any
such taxes and/or to secure the release of any lien therefor, and any sums so
advanced by Bank shall constitute Loans hereunder, shall be payable by
Borrower to Bank on demand, and, until paid, shall bear interest at the
highest rate then applicable to Loans hereunder;
(j) Borrower shall not assume, guarantee or endorse, or otherwise become
liable in connection with, the obligations of any Person, except by
endorsement of instruments for deposit or collection or similar transactions
in the ordinary course of business;
(k) Borrower shall not without the prior written consent of Bank (i) enter
into any merger or consolidation, or (ii) sell, lease or otherwise dispose of
any of its assets other than in the ordinary course of business and other than
asset sales and dispositions involving assets with a value of less than
$250,000 in any transaction or series of related transactions; (iii) purchase
all or substantially all of the assets of any Person or division of such
Person, or (iv) enter into any other transaction outside the ordinary course
of Borrower's business, including, without limitation, any purchase,
redemption or retirement of any shares of any class of its or any other
Obligor's stock or any other equity interest (including any rights, options or
warrants with respect thereto), and any issuance of any shares of, or warrants
or other rights to receive or purchase any shares of, any class of its stock
or any other equity interest;
(l) Borrower shall not declare or pay any dividend or other distribution
(whether in cash or in kind) on any class of its stock (if Borrower is a
corporation) or on account of any equity interest in Borrower (if Borrower is
a partnership, limited liability company or other type of entity);
(m) Borrower shall not purchase or otherwise acquire, or contract to
purchase or otherwise acquire, the obligations or stock of any Person, other
than direct obligations of the United States;
(n) Borrower shall not amend its organizational documents in any manner
which could have an adverse effect on Bank or its interest in any of the
Collateral or change its fiscal year or enter into a new line of business
materially different from Borrower's current business;
(o) Borrower's Tangible Net Worth shall at all times be greater than
$2,000,000.00. "Tangible Net Worth" shall mean, as of any time the same is to
be determined, an amount equal to shareholder's equity in Borrower reflected
on the most recent balance sheet of Borrower prepared in accordance with
generally accepted accounting principles consistently applied, less the
aggregate book value of all assets which would be classified as intangible
assets under generally accepted accounting principles, including, without
limitation, goodwill, patents, trademarks, trade names, copyrights, franchises
and deferred charges (including, without limitation, unamortized debt discount
and expense, organization and cost and deferred research and development
expense) and similar assets.
(p) Borrower shall reimburse Bank for all costs and expenses, including,
without limitation, legal expenses and reasonable attorneys' fees, incurred by
Bank in connection with the (i) documentation and consummation of this
transaction and any other transactions between Borrower and Bank, including,
without limitation, Uniform Commercial Code and other public record searches
and filings, overnight courier or other express or messenger delivery,
appraisal costs, surveys, title insurance and environmental audit or review
costs, (ii) collection, protection or enforcement of any rights in or to the
Collateral; (iii) collection of any Liabilities; and (iv) administration and
enforcement of any of Bank's rights under this Agreement. Borrower shall also
pay all normal service charges with respect to all accounts maintained by
Borrower with Bank and any additional services requested by Borrower from
Bank. All such costs, expenses and charges shall constitute Loans hereunder,
shall be payable by Borrower to Bank on demand, and, until paid, shall bear
interest at the highest rate then applicable to Loans hereunder; and
(q) neither Borrower nor any Affiliate shall use any portion of the
proceeds of the Loans, either directly or indirectly, for the purpose of (i)
purchasing any securities underwritten or privately placed by ABN AMRO
Securities (USA) Inc. ("AASI"), an affiliate of Bank, or (ii) purchasing from
AASI any securities in which AASI makes a market, or (iii) refinancing or
making payments of principal, interest or dividends on any securities issued
by Borrower or any Affiliate, and underwritten, privately placed or dealt in
by AASI.
12. DEFAULT. The occurrence of any one or more of the following events
shall constitute an "Event of Default" by Borrower hereunder:
(a) the failure of any Obligor to pay when due, declared due, or demanded
by Bank, any of the Liabilities;
(b) the failure of any Obligor to perform, keep or observe (i) any of its
covenants contained in paragraphs 4 or 6 hereof, subparagraphs 10(b), 10(c),
10(e) 10(g), 10(q), 11(c), 11(k) or 11(o) hereof or subparagraphs (5), (6) or
(7) of Exhibit A or (ii) any of its other covenants, conditions, promises,
agreements or obligations of such Obligor under this Agreement or any of the
Other Agreements and such failure shall continue for ten (10) Business Days
after Bank's notice to Borrower of such failure;
(c) the failure of any Obligor to perform, keep or observe any of the
covenants, conditions, promises, agreements or obligations of such Obligor
under any other agreement with any Person if such failure may have a material
adverse effect on such Obligor's business, property, assets, operations or
condition, financial or otherwise;
(d) any "Event of Default" under and as defined in any AMCON Document or
any Acquisition Document shall occur;
(e) the making or furnishing by any Obligor to Bank of any representation,
warranty, certificate, schedule, report or other communication within or in
connection with this Agreement or the Other Agreements or in connection with
any other agreement between such Obligor and Bank, which is untrue or
misleading in any material respect;
(f) the loss, theft, damage or destruction of any of the Collateral with a
value in excess of $50,000 (to the extent not covered by insurance), or
(except as permitted hereby) the sale, lease or furnishing under a contract of
service of, any of the Collateral;
(g) the creation (whether voluntary or involuntary) of, or any attempt to
create, any lien or other encumbrance upon any of the Collateral, other than
the Permitted Liens, or the making or any attempt to make any levy, seizure or
attachment thereof;
(h) the commencement of any proceedings in bankruptcy by or against any
Obligor or for the liquidation or reorganization of any Obligor, or alleging
that such Obligor is insolvent or unable to pay its debts as they mature, or
for the readjustment or arrangement of any Obligor's debts, whether under the
United States Bankruptcy Code or under any other law, whether state or
federal, now or hereafter existing for the relief of debtors, or the
commencement of any analogous statutory or non-statutory proceedings involving
any Obligor; provided, however, that if such commencement of proceedings
against such Obligor is involuntary, such action shall not constitute an Event
of Default unless such proceedings are not dismissed within thirty (30) days
after the commencement of such proceedings;
(i) the appointment of a receiver or trustee for any Obligor, for any of
the Collateral or for any substantial part of any Obligor's assets or the
institution of any proceedings for the dissolution, or the full or partial
liquidation, or the merger or consolidation, of any Obligor which is a
corporation, limited liability company or a partnership; provided, however,
that if such appointment or commencement of proceedings against such Obligor
is involuntary, such action shall not constitute an Event of Default unless
such appointment is not revoked or such proceedings are not dismissed within
thirty (30) days after the commencement of such proceedings;
(j) the entry of any judgment or order against any Obligor which remains
unsatisfied or undischarged and in effect for thirty (30) days after such
entry without a stay of enforcement or execution;
(k) the death of any Obligor who is a natural Person, or of any general
partner of any Obligor which is a partnership, or any member of a limited
liability company or the dissolution of any Obligor which is a partnership,
limited liability company or corporation;
(l) the occurrence of an event of default under, or the revocation or
termination of, any agreement, instrument or document executed and delivered
by any Person to Bank pursuant to which such Person has guaranteed to Bank the
payment of all or any of the Liabilities or has granted Bank a security
interest in or lien upon some or all of such Person's real and/or personal
property to secure the payment of all or any of the Liabilities;
(m) the institution in any court of a criminal proceeding against any
Obligor, or the indictment of any Obligor for any crime; or
(n) AMCON shall cease to own, legally and beneficially, 100% of each class
of the capital stock of Borrower.
13. REMEDIES UPON AN EVENT OF DEFAULT.
(a) Upon the occurrence of an Event of Default described in subparagraph
12(h) or (i) hereof, all of Borrower's Liabilities shall immediately and
automatically become due and payable, without notice of any kind. Upon the
occurrence of any other Event of Default, all Liabilities may, at the option
of Bank, and without demand, notice or legal process of any kind, be declared,
and immediately shall become, due and payable.
(b) Upon the occurrence of an Event of Default, Bank may exercise from
time to time any rights and remedies available to it under the Uniform
Commercial Code and any other applicable law in addition to, and not in lieu
of, any rights and remedies expressly granted in this Agreement or in any of
the Other Agreements and all of Bank's rights and remedies shall be cumulative
and non-exclusive to the extent permitted by law. In particular, but not by
way of limitation of the foregoing, Bank may, without notice, demand or legal
process of any kind, take possession of any or all of the Collateral (in
addition to Collateral of which it already has possession), wherever it may be
found, and for that purpose may pursue the same wherever it may be found, and
may enter onto any of Borrower's premises where any of the Collateral may be,
and search for, take possession of, remove, keep and store any of the
Collateral until the same shall be sold or otherwise disposed of, and Bank
shall have the right to store the same at any of Borrower's premises without
cost to Bank. At Bank's request, Borrower shall, at Borrower's expense,
assemble the Collateral and make it available to Bank at one or more places to
be designated by Bank and reasonably convenient to Bank and Borrower.
Borrower recognizes that if Borrower fails to perform, observe or discharge
any of its Liabilities under this Agreement or the Other Agreements, no remedy
at law will provide adequate relief to Bank, and agrees that Bank shall be
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving actual damages. Any notification of intended
disposition of any of the Collateral required by law will be deemed reasonably
and properly given if given at least five (5) calendar days before such
disposition. Any proceeds of any disposition by Bank of any of the Collateral
may be applied by Bank to the payment of expenses in connection with the
Collateral, including, without limitation, legal expenses and reasonable
attorneys' fees, and any balance of such proceeds may be applied by Bank
toward the payment of such of the Liabilities, and in such order of
application, as Bank may from time to time elect.
14. INDEMNIFICATION. Borrower agrees to defend (with counsel satisfactory
to Bank), protect, indemnify and hold harmless Bank, each affiliate or
subsidiary of Bank, and each of their respective officers, directors,
employees, attorneys and agents (each an "Indemnified Party") from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements of any kind or
nature (including, without limitation, the disbursements and the reasonable
fees of counsel for each Indemnified Party in connection with any
investigative, administrative or judicial proceeding, whether or not the
Indemnified Party shall be designated a party thereto), which may be imposed
on, incurred by, or asserted against, any Indemnified Party (whether direct,
indirect or consequential and whether based on any federal, state or local
laws or regulations, including, without limitation, securities, Environmental
Laws and commercial laws and regulations, under common law or in equity, or
based on contract or otherwise) in any manner relating to or arising out of
this Agreement or any Other Agreement, or any act, event or transaction
related or attendant thereto, the making or issuance and the management of the
Loans or any Letters of Credit or the use or intended use of the proceeds of
the Loans or any Letters of Credit; provided, however, that Borrower shall not
have any obligation hereunder to any Indemnified Party with respect to matters
caused by or resulting from the willful misconduct or gross negligence of such
Indemnified Party. To the extent that the undertaking to indemnify set forth
in the preceding sentence may be unenforceable because it is violative of any
law or public policy, Borrower shall satisfy such undertaking to the maximum
extent permitted by applicable law. Any liability, obligation, loss, damage,
penalty, cost or expense covered by this indemnity shall be paid to each
Indemnified Party on demand, and, failing prompt payment, shall, together with
interest thereon at the highest rate then applicable to Loans hereunder from
the date incurred by each Indemnified Party until paid by Borrower, be added
to the Liabilities of Borrower and be secured by the Collateral. The
provisions of this paragraph 14 shall survive the satisfaction and payment of
the other Liabilities and the termination of this Agreement.
15. NOTICE. All written notices and other written communications with
respect to this Agreement shall be sent by ordinary, certified or overnight
mail, by facsimile or delivered in person, and in the case of Bank shall be
sent to it at 135 South LaSalle Street, Chicago, Illinois 60603-4105,
Attention: Asset Based Lending Division, and in the case of Borrower shall be
sent to it at its principal place of business set forth on the first page of
this Agreement or as otherwise directed by Borrower in writing.
16. CHOICE OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION. THIS AGREEMENT
AND THE OTHER AGREEMENTS SHALL BE GOVERNED AND CONTROLLED BY THE INTERNAL LAWS
OF THE STATE OF ILLINOIS AS TO INTERPRETATION, ENFORCEMENT, VALIDITY,
CONSTRUCTION, EFFECT, AND IN ALL OTHER RESPECTS, INCLUDING, WITHOUT
LIMITATION, THE LEGALITY OF THE INTEREST RATE AND OTHER CHARGES, BUT EXCLUDING
PERFECTION OF THE SECURITY INTERESTS IN THE COLLATERAL LOCATED OUTSIDE OF THE
STATE OF ILLINOIS, WHICH SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE
RELEVANT JURISDICTION IN WHICH SUCH COLLATERAL IS LOCATED. If any provision
of this Agreement shall be held to be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such
provision or remaining provisions of this Agreement.
To induce Bank to accept this Agreement, Borrower irrevocably agrees that,
subject to Bank's sole and absolute election, ALL ACTIONS OR PROCEEDINGS IN
ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS
AGREEMENT, THE OTHER AGREEMENTS OR THE COLLATERAL SHALL BE LITIGATED IN COURTS
HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS. BORROWER HEREBY
CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURTS
LOCATED WITHIN SAID CITY AND STATE. Borrower hereby irrevocably appoints and
designates the Secretary of State of Illinois, whose address is Springfield,
Illinois (or any other person having and maintaining a place of business in
such state whom Borrower may from time to time hereafter designate upon ten
(10) days written notice to Bank and whom Bank has agreed in its sole
discretion in writing is satisfactory and who has executed an agreement in
form and substance satisfactory to Bank agreeing to act as such attorney and
agent), as Borrower's true and lawful attorney and duly authorized agent for
acceptance of service of legal process. Borrower agrees that service of such
process upon such person shall constitute personal service of such process
upon Borrower. BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR
CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST BORROWER BY BANK IN
ACCORDANCE WITH THIS PARAGRAPH.
17. MODIFICATION AND BENEFIT OF AGREEMENT. This Agreement and the Other
Agreements may not be modified, altered or amended except by an agreement in
writing signed by Borrower or such other person who is a party to such Other
Agreement and Bank. Borrower may not sell, assign or transfer this Agreement,
or the Other Agreements or any portion thereof, including, without limitation,
Borrower's rights, titles, interest, remedies, powers or duties hereunder and
thereunder. Borrower hereby consents to Bank's sale, assignment, transfer or
other disposition, at any time and from time to time hereafter, of this
Agreement, or the Other Agreements, or of any portion thereof, or
participations therein, including, without limitation, Bank's rights, titles,
interest, remedies, powers and/or duties and agrees that it shall execute and
deliver such documents as Bank may request in connection with any such sale,
assignment, transfer or other disposition.
18. HEADINGS OF SUBDIVISIONS. The headings of subdivisions in this
Agreement are for convenience of reference only, and shall not govern the
interpretation of any of the provisions of this Agreement.
19. POWER OF ATTORNEY. Borrower acknowledges and agrees that its
appointment of Bank as its attorney and agent-in-fact for the purposes
specified in this Agreement is an appointment coupled with an interest and
shall be irrevocable until all of the Liabilities are satisfied and paid in
full and this Agreement is terminated.
20. CONFIDENTIALITY. Borrower and Bank hereby agree and acknowledge that
any and all information relating to Borrower which is (i) furnished by
Borrower to Bank (or to any affiliate of Bank); and (ii) non-public,
confidential or proprietary in nature, shall be kept confidential by Bank or
such affiliate in accordance with applicable law, provided, however, that such
information and other credit information relating to Borrower may be
distributed by Bank or such affiliate to Bank's or such affiliate's directors,
officers, employees, attorneys, affiliates, assignees, participants, auditors
and regulators, and upon the order of a court or other governmental agency
having jurisdiction over Bank or such affiliate, to any other party. Borrower
and Bank further agree that this provision shall survive the termination of
this Agreement.
21. WAIVER OF JURY TRIAL; OTHER WAIVERS.
BORROWER AND BANK EACH HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION
OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, ANY OF
THE OTHER AGREEMENTS, THE LIABILITIES, THE COLLATERAL, ANY ALLEGED TORTUOUS
CONDUCT BY BORROWER OR BANK OR WHICH, IN ANY WAY, DIRECTLY OR INDIRECTLY,
ARISES OUT OF OR RELATES TO THE RELATIONSHIP BETWEEN BORROWER AND BANK. IN NO
EVENT SHALL BANK BE LIABLE FOR LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL
DAMAGES.
Borrower hereby waives demand, presentment, protest and notice of nonpayment,
and further waives the benefit of all valuation, appraisal and exemption laws.
BORROWER HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND PRIOR TO
THE EXERCISE BY BANK OF ITS RIGHTS TO REPOSSESS THE COLLATERAL OF BORROWER
WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON SUCH COLLATERAL
WITHOUT PRIOR NOTICE OR HEARING.
Bank's failure, at any time or times hereafter, to require strict performance
by Borrower of any provision of this Agreement or any of the Other Agreements
shall not waive, affect or diminish any right of Bank thereafter to demand
strict compliance and performance therewith. Any suspension or waiver by Bank
of an Event of Default under this Agreement or any default under any of the
Other Agreements shall not suspend, waive or affect any other Event of Default
under this Agreement or any other default under any of the Other Agreements,
whether the same is prior or subsequent thereto and whether of the same or of
a different kind or character. No delay on the part of Bank in the exercise
of any right or remedy under this Agreement or any Other Agreement shall
preclude other or further exercise thereof or the exercise of any right or
remedy. None of the undertakings, agreements, warranties, covenants and
representations of Borrower contained in this Agreement or any of the Other
Agreements and no Event of Default under this Agreement or default under any
of the Other Agreements shall be deemed to have been suspended or waived by
Bank unless such suspension or waiver is in writing, signed by a duly
authorized officer of Bank and directed to Borrower specifying such suspension
or waiver.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day first above written.
LASALLE NATIONAL BANK
By: Mark A. Ryle
-----------------------
Title: First Vice President
FOOD FOR HEALTH CO., INC.
By: Jerry Fleming
-----------------------
Title: President
EXHIBIT A-SPECIAL PROVISIONS
Attached to and made a part of that certain Loan and Security Agreement of
even date herewith between Food For Health Co., Inc. ("Borrower") and LaSalle
National Bank ("Bank")
CREDIT TERMS
(1) LOAN LIMIT: Subject to the terms and conditions of the Agreement and
the Other Agreements, Bank shall, absent the occurrence of an Event of
Default, advance an amount up to the sum of the following sublimits (the "Loan
Limit"):
(a) Up to eighty-five percent (85%) of the face amount (less maximum
discounts, credits and allowances which may be taken by or granted to Account
Debtors in connection therewith) of Borrower's Eligible Accounts; plus
(b) Up to seventy percent (70%) of the lower of the cost or market value
of Borrower's Eligible Inventory; minus
(c) Such reserves as Bank elects, in its sole discretion, to establish
from time to time;
provided, that (i) the aggregate amount of advances made pursuant to
subparagraphs (a) and (b) above shall in no event exceed Five Million and
No/100 Dollars ($5,000,000)
(2) LETTERS OF CREDIT: Subject to the terms and conditions of this
Agreement, including Exhibit A and the Other Agreements, during the Term, Bank
may, in its sole discretion from time to time issue, upon Borrower's request,
Standby Letters of Credit; provided, that the aggregate undrawn face amount of
all such Letters of Credit shall at no time exceed Six Hundred Five Thousand
Dollars ($605,000.00). Bank's contingent liability under the Letters of
Credit shall automatically reduce, dollar for dollar, the amount which
Borrower may borrow based upon the Loan Limit. Payments made by Bank to any
Person on account of any Letter of Credit shall constitute Loans hereunder.
At no time shall the aggregate of direct Loans by Bank to Borrower plus the
contingent liability of Bank under the outstanding Letters of Credit be in
excess of the Loan Limit. Borrower shall remit to Bank a Letter of Credit fee
equal to one and one-half percent (1.5%) per annum on the aggregate undrawn
face amount of all Letters of Credit outstanding, which fee shall be payable
monthly in arrears on each day that interest is payable hereunder. Borrower
shall also pay on demand Bank's normal and customary administrative charges
for issuance of any Letter of Credit and Bank's normal and customary
administrative charges in effect from time to time for issuing and
administering letters of credit.
(b) Borrower agrees to reimburse Bank on demand by Bank for each payment
made by Bank under or pursuant to any Letter of Credit.
(3) INTEREST RATE:
Subject to the terms and conditions set forth below, the Loans shall bear
interest at any applicable per annum rate of interest set forth in
subparagraph (a) or (b) below as selected by Borrower:
(a) One-half of one percent (1/2 of 1%) per annum below Bank's publicly
announced prime rate (which is not intended to be Bank's lowest or most
favorable rate in effect at any time) (the "Prime Rate") in effect from time
to time, payable on the last Business Day of each month in arrears. Said rate
of interest shall increase or decrease by an amount equal to each increase or
decrease in the Prime Rate effective on the effective date of each such change
in the Prime Rate.
(b) The two percent (2.0%) per annum in excess of the per annum rate of
interest at which U.S. Dollar deposits of an amount comparable to the amount
of the Loans and for a period equal to the relevant Interest Period (as
hereinafter defined) are offered generally to Bank (rounded upward if
necessary to the nearest 1/16th of one percent) in the London Interbank
Eurodollar market at 11:00 a.m. (London time) two (2) Business Days prior to
the commencement of each Interest Period ("LIBOR"), such rate to remain fixed
for such Interest Period. "Interest Period" shall mean any continuous period
of thirty (30), sixty (60), ninety (90) or one hundred eighty (180) days, as
selected from time to time by Borrower by irrevocable notice (in writing, by
telex, telegram or cable) given to Bank not less than three (3) Business Days
prior to the first day of each respective Interest Period commencing on the
date hereof; provided that: (i) each such period occurring after such initial
period shall commence on the day on which the immediately preceding period
expires; (ii) the final Interest Period shall be such that its expiration
occurs on or before the end of the Term (or such earlier date on which such
Loan must be repaid under this Agreement); and (iii) if for any reason
Borrower shall fail to timely select a period, then such Loans shall continue
as, or revert to, Prime Rate Loans.
Interest shall be payable on the last Business Day of each month and on
the date of any payment hereon by Borrower.
Upon the occurrence of an Event of Default, all LIBOR Rate Loans shall
bear interest at the rate of two percent (2.0%) per annum in excess of the
interest rate otherwise payable thereon and all Prime Rate Loans shall bear
interest at the rate of one percent (1.0%) per annum in excess of the interest
rate otherwise payable thereon, which interest shall be payable on demand.
All interest shall be calculated on the basis of a 360-day year.
(3).(1) OTHER LIBOR PROVISIONS:
(a) Subject to the provisions of this Agreement, Borrower shall have the
option (i) as of any date, to convert all or any part of the Prime Rate Loans
to, or request that new Loans be made as, LIBOR Rate Loans of various Interest
Periods, (ii) as of the last day of any Interest Period related thereto, to
continue all or any portion of the relevant LIBOR Rate Loans as LIBOR Rate
Loans; (iii) as of the last day of any Interest Period, to convert all or any
portion of the LIBOR Rate Loans to Prime Rate Loans; and (iv) at any time, to
request new Loans as Prime Rate Loans; provided, that Loans may not be
borrowed as, or continued as or converted to, LIBOR Rate Loans, if any such
continuation or conversion thereof would violate the provisions of
subparagraphs (3).(1)(b) or (3).(1)(c) of this Exhibit A or if an Event of
Default has occurred.
(b) Bank's determination of LIBOR as provided above shall be conclusive,
absent manifest error. Furthermore, if Bank determines, in good faith (which
determination shall be conclusive, absent manifest error), prior to the
commencement of any Interest Period that (i) U.S. Dollar deposits of
sufficient amount and maturity for funding the Loans are not available to Bank
in the London Interbank Eurodollar market in the ordinary course of business,
or (ii) by reason of circumstances affecting the London Interbank Eurodollar
market, adequate and fair means do not exist for ascertaining the rate of
interest to be applicable to the Loans requested by Borrower to be LIBOR Rate
Loans or the Loans bearing interest at the rates set forth in subparagraph
(3)(b) of this Exhibit A shall not represent the effective pricing to Bank for
U.S. Dollar deposits of a comparable amount for the relevant period (such as
for example, but not limited to, official reserve requirements required by
Regulation D to the extent not given effect in determining the rate), Bank
shall promptly notify Borrower and (x) all existing LIBOR Rate Loans shall
convert to Prime Rate Loans upon the end of the applicable Interest Period,
and (y) no additional LIBOR Rate Loans shall be made until such circumstances
are cured.
(c) If, after the date hereof, the introduction of, or any change in any
applicable law, treaty, rule, regulation or guideline or in the interpretation
or administration thereof by any governmental authority or any central bank or
other fiscal, monetary or other authority having jurisdiction over Bank or its
lending offices (a "Regulatory Change"), shall, in the opinion of counsel to
Bank, make it unlawful for Bank to make or maintain LIBOR Rate Loans, then
Bank shall promptly notify Borrower and (i) the LIBOR Rate Loans shall
immediately convert to Prime Rate Loans on the last Business Day of the then
existing Interest Period or on such earlier date as required by law and (ii)
no additional LIBOR Rate Loans shall be made until such circumstance is cured.
(d) If, for any reason, a LIBOR Rate Loan is paid prior to the last
Business Day of any Interest Period or if a LIBOR Rate Loan does not occur on
a date specified by Borrower in its request (other than as a result of a
default by Bank), Borrower agrees to indemnify Bank against any loss
(including any loss on redeployment of the funds repaid), cost or expense
incurred by Bank as a result of such prepayment.
(e) If any Regulatory Change (whether or not having the force of law)
shall (i) impose, modify or deem applicable any assessment, reserve, special
deposit or similar requirement against assets held by, or deposits in or for
the account of or loans by, or any other acquisition of funds or disbursements
by, Bank; (ii) subject Bank or the LIBOR Rate Loans to any tax, duty, charge,
stamp tax or fee or change the basis of taxation of payments to Bank of
principal or interest due from Borrower to Bank hereunder (other than a change
in the taxation of the overall net income of Bank); or (c) impose on Bank any
other condition regarding the LIBOR Rate Loans or Bank's funding thereof, and
Bank shall determine (which determination shall be conclusive, absent any
manifest error) that the result of the foregoing is to increase the cost to
Bank of making or maintaining the LIBOR Rate Loans or to reduce the amount of
principal or interest received by Bank hereunder, then Borrower shall pay to
Bank, on demand, one-half of such additional amounts as Bank shall, from time
to time, determine are sufficient to compensate and indemnify Bank from such
increased cost or reduced amount.
(f) Each request for LIBOR Rate Loans shall be in an amount not less than
Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00), or in an integral
multiple thereof.
(g) Unless otherwise specified by Borrower, all Loans shall be Prime Rate
Loans.
(h) No more than four Interest Periods may be in effect with respect to
outstanding LIBOR Rate Loans at any one time.
(4) FEES AND CHARGES:
Borrower shall pay to Bank an unused line fee equal to one-quarter of one
percent (0.25%) of the difference between Five Million Dollars ($5,000,000)
and the average annual loan balance plus the annual average undrawn face
amount of all Letters of Credit issued by Bank, which fee shall be fully
earned by Bank on each day after the date hereof and shall be payable by
Borrower in arrears on each anniversary of the date hereof. Said fee shall be
calculated on the basis of a 360 day year.
ADDITIONS AND CHANGES TO COVENANTS:
(5) FIXED CHARGE COVERAGE RATIO COVENANT: Borrower shall maintain a Fixed
Charge Coverage Ratio (as defined below) of not less than 1.5 to 1.0 as
determined on the last day of each fiscal quarter of Borrower for the four
fiscal quarter period ending on such date. For the purposes hereof, (i)
"Fixed Charge Coverage Ratio" shall mean, for any period, the ratio of EBITDA
for such period to Fixed Charges for such period, (ii) "EBITDA" shall mean,
for any period, the sum of (A) net income (or loss) for the applicable period
of measurement determined in accordance with generally accepted accounting
principles, plus (B) any provision for (or less any benefit from) income and
franchise taxes included in the determination of net income, plus (C) interest
expense deducted in the determination of net income, plus (D) amortization and
depreciation deducted in the determination of net income and (iii) "Fixed
Charges" shall mean, for any period the sum of, without duplication (A)
scheduled payments of principal and all credit availability reductions during
such period with respect to all indebtedness (including capitalized leases) of
Borrower, plus (B) scheduled payments of interest during such period with
respect to all indebtedness (including capitalized leases) of Borrower, plus
(C) all capital expenditures during such period for the purchase or other
acquisition of fixed or capital assets, plus (D) payments during such period
in respect of income or franchise taxes.
(6) DEBT SERVICE COVERAGE RATIO COVENANT: Borrower shall not permit the
Debt Service Coverage Ratio (as defined below) determined at the last day of
each fiscal quarter of Borrower for the four fiscal quarter period ending on
such date to be less than 2.0 to 1.0. For the purposes hereof, (i) "Debt
Service Coverage Ratio" shall mean, for any period, the ratio of Net Cash Flow
for such period to Debt Service for such period, (ii) "Net Cash Flow" shall
mean, for any period, the sum of (A) net income (or loss) for the applicable
period of measurement determined in accordance with generally accepted
accounting principles, plus (B) depreciation deducted in the determination of
net income and (iii) "Debt Service" shall mean, for any period, the sum of,
without duplication (A) scheduled payments of principal and all credit
availability reductions during such period with respect to all indebtedness
(including capitalized leases) of Borrower, plus (B) scheduled payments of
interest during such period with respect to all indebtedness (including
capitalized leases) of Borrower.
(7) DEBT TO EQUITY RATIO COVENANT: Borrower shall maintain a Debt to Equity
Ratio (as defined below) of less than 4.0 to 1.0 at all times. For the
purposes hereof, "Debt to Equity Ratio" shall mean, at any time of
determination, the ratio of (i) the principal amount of all indebtedness
(including capitalized leases) of Borrower outstanding at such time to (ii)
the shareholders' equity of Borrower at such time, each as determined in
accordance with generally accepted accounting principles.
(8) CALCULATIONS: All calculations of the financial covenants contained in
paragraphs 5, 6 and 7 of this Exhibit A shall be made in conformity with
generally accepted accounting principles consistently applied.
(9) DELIVERY OF BORROWING BASE CERTIFICATE: Borrower shall, on or before
Wednesday of each week, deliver to Bank a duly completed certificate (in form
and substance satisfactory to Bank) signed by the chief financial officer of
Borrower certifying the Eligible Inventory and Eligible Accounts of Borrower
as of the last day of the immediately preceding week (each such certificate
being a "Borrowing Base Certificate").
(10) [RESERVED]
(11) [RESERVED]
(12) CERTAIN RESTRICTIONS: Borrower shall not enter into any agreement
which restricts the ability of Borrower to (a) enter into amendments,
modifications or waivers of this Agreement or any of the Other Agreements, (b)
sell, transfer or otherwise dispose of its assets, (c) create, incur, assume
or suffer to exist any lien upon any of its properties, (d) create, incur,
assume, suffer to exist or otherwise become liable with respect to any
indebtedness or (e) pay any dividend, provided that capital leases or
agreements governing purchase money indebtedness which contain restrictions of
the types referred to in clauses (b) or (c) with respect to the property
covered thereby shall be permitted.
(13) ACCOUNT PROVISIONS: Borrower shall maintain its general checking and a
controlled disbursement account with Bank. Normal charges shall be assessed
thereon. Although no compensating balance is required, Borrower must keep
monthly balances in order to merit earnings credits which will cover Bank's
service charges for demand deposit account activities.
CONDITIONS PRECEDENT
(14) ADDITIONAL CONDITIONS TO CLOSING: Bank shall be under no obligation to
consummate the transactions contemplated by this Agreement until each of the
conditions listed in this paragraph 14 has been satisfied. Whenever a
condition contained herein requires delivery of an agreement or other document
to Bank, each such agreement or other document shall be in form and substance
satisfactory to Bank in its sole discretion.
(a) Landlord's Agreements: Borrower shall assist Bank in obtaining a
Landlord's Agreement from each lessor of property(ies) set forth on Exhibit B,
which Landlord's Agreement shall include a copy of the relevant lease.
(b) Guaranty: Borrower shall cause to be executed in favor of Bank and
delivered to Bank by AMCON a guaranty of the Liabilities of Borrower to Bank.
(c) Consummation of Related Transactions: Each of the parties thereto
(including Bank) shall have executed and delivered each of the amendments to
the Acquisition Documents requested by Bank and each of the AMCON Documents to
which they are a party and each of the transactions contemplated thereby shall
have been consummated.
(d) Trademark Security Agreement: Borrower shall execute and deliver to
Bank a Trademark Security Agreement.
(e) Mortgagee's Waiver: Borrower shall cause to be executed in favor of
Bank and delivered to Bank a Mortgagee's Waiver from each mortgagee, if any,
of Borrower's owned real property(ies) set forth on Exhibit B.
(f) Attorney's Opinion Letter: Borrower shall cause to be executed and
delivered to Bank an Attorney's Opinion Letter.
(g) Promissory Notes: Borrower shall have executed and delivered to Bank
such promissory notes evidencing the Loans as the bank shall request.
(h) Resolutions: Bank shall have received from each corporate Obligor,
copies of resolutions of each Obligor's Board of Directors authorizing the
execution, delivery and performance of this Agreement and the Other Agreements
to which it is a party, certified by its corporate secretary.
(i) Consents: Bank shall have received certified copies of all documents
evidencing any necessary corporate action, consents and governmental
approvals, if any, with respect to this Agreement and the Other Agreements.
(j) Incumbency and Signatures: Bank shall have received certificates of
the Secretary of each of the corporate Obligors certifying the names of the
officer or officers of such Obligor authorized to sign this Agreement and the
Other Agreements to which it is a party, together with a sample of the true
signature of each such officer. Bank may conclusively rely on each such
certificate, until formally advised by a like certificate of any changes
therein.
(k) Lock Box and other Account Agreements: Bank shall have received the
Lock Box Agreements and other depository account agreements required under
paragraph 7 of the Agreement, duly executed and delivered by Borrower and each
financial institution party thereto.
(l) Forms UCC-1 and UCC-2; Termination Statements; Searches: Bank shall
have received UCC-1 Financing Statements naming Borrower as debtor and Bank as
secured party with respect to the Collateral, together with such UCC-2
Termination Statements necessary to release any and all liens and other rights
of any Person in any of the Collateral (other than with respect to Permitted
Liens), and other documents as Bank deems necessary or appropriate shall have
been filed in all jurisdictions that Bank deems necessary or advisable.
Certified copies of Uniform Commercial Code Requests for Information or Copies
(Form UCC-11), dated a date reasonably near to the Closing Date, listing all
effective financing statements (including financing statements filed by Bank)
which name Borrower as debtor (under its corporate and trade names), together
with copies of such financing statements. Results of on-line searches of the
records of the United States Patent and Trademark Office for Borrower's
trademarks and patents.
(m) Insurance Certificates, etc.: Bank shall have received certificates
from Borrower's insurance carrier evidencing that all required insurance
coverage is in effect, designating Bank as an additional insured and as a loss
payee thereunder pursuant to a loss payee endorsement in form and substance
satisfactory to Bank in its sole discretion.
(n) Constitutive Documents: Bank shall have received certified copies of
each corporate Obligor's Certificate or Articles of Incorporation, certified
by the Secretary of State of its state of incorporation as of a recent date,
together with good standing certificates from such Secretary of State and good
standing certificates from the Secretaries of State of each other State in
which such Obligor is qualified to transact business, and By-laws of each
corporate Obligor certified by the Secretary of such Obligor as of the date
hereof.
(o) No Adverse Change Certificate: Bank shall have received a certificate
of the president or chief financial officer of Borrower, certifying that there
have been no material adverse changes in the financial condition of Borrower
since September 27, 1997, and that there is no litigation pending which would
prevent or seek to prevent consummation of the financing arrangements
contemplated by the Agreement and the Other Agreements.
(p) Solvency Certificates: Bank shall have received, from each Obligor, a
certificate as to the solvency of such Obligor executed by the president or
chief financial officer of such Obligor.
(q) Termination of Liens; Payoff Letters: Bank shall have received
evidence satisfactory to it in its sole discretion of the termination of all
existing liens on the assets of Borrower (including any mortgages on
Borrower's real property) other than Permitted Liens and the repayment of all
indebtedness of Borrower other than indebtedness permitted hereunder.
(15) CONDITIONS TO ALL LOANS AND ADVANCES. Bank's obligation to make the
initial Loans and each subsequent Loan and to continue, or convert any Loan
into any other Type of Loan or issued, at its discretion, any Letter of Credit
is subject to the following additional conditions precedent:
(a) No Default, etc.: (i) No Event of Default or event or condition
which, with the giving of notice or passage of time or both would constitute
an Event of Default shall have occurred or will result from such Loan and
(ii) the representations and warranties contained in this Agreement and each
Other Agreement shall be true and correct in all material respects as of the
date hereof, and shall be true and correct as of the date of any subsequent
Loan with the same effect as though made on the date thereof.
(b) Litigation: Bank shall not have determined that any existing or
threatened claims, litigation, arbitration proceedings or governmental
proceedings could have an adverse impact on the ability of any Obligor to
perform its obligations under this Agreement or any Other Agreement to which
it is a party.
(c) No Injunction: No law or regulation shall have been adopted, no
order, judgment or decree of any governmental authority shall have been
issued, and no litigation shall be pending or threatened, which in the
judgment of Bank could enjoin, prohibit or restrain, or impose or result in
the imposition of any material adverse condition upon, the making or repayment
of the Loans or the consummation of the transactions contemplated hereby and
by the Other Agreements.
(d) Borrowing Base Certificate: Bank shall have received the duly
completed Borrowing Base Certificate most recently required to be delivered
under subparagraph (9) of this Exhibit A.
IN WITNESS WHEREOF, the parties hereto have duly executed this Exhibit
A to Loan and Security Agreement of the 25th day of February, 1998.
FOOD FOR HEALTH CO., INC. LASALLE NATIONAL BANK
By: Jerry Fleming By: Mark A. Ryle
---------------------- ---------------------------
Title: President Title: First Vice President
EXHIBIT B - BUSINESS AND COLLATERAL LOCATIONS
Attached to and made a part of that certain Loan and Security Agreement of
even date herewith between FOOD FOR HEALTH CO., INC. ("Borrower") and LASALLE
NATIONAL BANK ("Bank").
A. Borrower's Business Locations (please indicate which location is the
principal place of business and at which locations originals and all copies of
Borrower's books, records and accounts are kept).
1.
2.
3.
B. Other locations of Collateral (including, without limitation, warehouse
locations, processing locations, consignment locations) and all post office
boxes of Borrower. Please indicate the relationship of such location to
Borrower (i.e. public warehouse, processor, etc.).
1.
2.
3.