Exhibit 10.55
FIRST MODIFICATION TO
LOAN AND SECURITY AGREEMENT
AND PROMISSORY NOTE
This First Modification to Loan and Security Agreement and Promissory Note
(this "Modification") is entered into by and between SPECTRUM ORGANIC PRODUCTS,
INC., a California corporation ("Borrower") and COMERICA BANK, successor by
merger to Comerica Bank-California ("Bank"), whose Western Division Headquarters
is located at 333 West Santa Clara Street, San Jose, California as of June 4,
2004.
RECITALS
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This Modification is entered into upon the basis of the following facts and
understandings of the parties, which facts and understandings are acknowledged
by the parties to be true and accurate:
Bank and Borrower previously entered into that certain Loan and Security
Agreement (Accounts and Inventory), dated June 12, 2003. The Loan and Security
Agreement (Accounts and Inventory) as such may be modified, amended, restated,
revised, supplemented or replaced from time to time prior to the date hereof
shall collectively be referred to herein as the "Agreement."
Contemporaneously with the Agreement, Borrower has entered into that
certain Variable Rate-Single Payment Note (Advancing-Optional Advances), dated
June 12, 2003 in the original principal amount of One Million Dollars
($1,000,000). The certain Variable Rate-Single Payment Note (Advancing-Optional
Advances), as such may be modified, amended, restated, revised, supplemented or
replaced from time to time prior to the date hereof shall collectively be
referred to herein as the "Note."
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as set forth
below.
AGREEMENT
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1. Incorporation by Reference. The Recitals and the documents referred to
therein are incorporated herein by this reference. Except as otherwise
noted, the terms not defined herein shall have the meaning set forth in the
Agreement.
2. Modification to the Agreement. Subject to the satisfaction of the
conditions precedent as set forth in Section 4 hereof, the Agreement is
hereby modified as set forth below.
(a) The definition of "Borrowing Base" set forth in Section 1.7 of the
Agreement hereby is deleted in its entirety and replaced with the
following:
"1.7 "Borrowing Base" shall mean the sum of:
(1) Eighty percent (80%) of the net amount of Eligible
Accounts after deducting therefrom all payments, adjustments and
credits applicable thereto; and
(2) The lesser of (i) sixty percent (60%) of the net amount
of Eligible Inventory after deducting therefrom all applicable
Growers' Payables incurred in connection with the acquisition of
such Eligible Inventory and after all adjustments for age and
seasonality or other factors affecting the value of such
Inventory, or (ii) One Million Five Hundred Thousand Dollars
($1,500,000) in excess of the aggregate amount of all outstanding
Indebtedness consisting of that portion of the Credit advanced to
Borrower on the basis of Eligible Accounts; provided, however,
that, commencing on the first date following June 30, 2004 on
which Borrower shall have delivered satisfactory evidence to Bank
of Borrower's compliance with the minimum Net Income covenant set
forth in Section 6.17 c. of this Agreement, the maximum amount of
all advances on the basis of Eligible Inventory shall be Two
Million Dollars ($2,000,000) in excess of the aggregate amount of
all outstanding Indebtedness advanced on the basis of Eligible
Accounts.
Anything contained in the foregoing to the contrary
notwithstanding, that at all times that the aggregate amount of
all Dilution (as calculated by Bank on the basis of Bank's most
recent audit of Borrower's Books conducted under Section 6.25
hereof), as a percentage of all Accounts, is five percent (5%) or
less, then the percentage of Eligible Accounts that shall be
included in the Borrowing Base shall be increased to eighty five
percent (85%) of the net amount of Eligible Accounts after
deducting therefrom all payments, adjustments and credits
applicable thereto."
(b) The definition of "Credit Limit" set forth in Section 1.13 of the
Agreement hereby is deleted in its entirety and replaced with the
following:
"1.13 "Credit Limit" shall mean Seven Million Dollars
($7,000,000); provided, however, that, commencing on the first date
following June 30, 2004 on which Borrower shall have delivered
satisfactory evidence to Bank of Borrower's compliance with the
minimum Net Income covenant set forth in Section 6.17 c. of this
Agreement, the Credit Limit shall be Nine Million Dollars
($9,000,000)."
(c) The definition of "Maturity Date" set forth in Section 1.38 of the
Agreement hereby is deleted in its entirety and replaced with the
following:
"1.38 "Maturity Date" shall mean June 30, 2006."
(d) Section 2.5 c. of the Agreement hereby is deleted in its entirety
and replaced with the following:
"c. Drawings under Non-Revolving Loan shall be available from the
date of this Agreement through December 31, 2004, at which time the
entire outstanding principal amount of all such drawings shall be
repaid in forty eight (48) fully amortizing payments plus interest,
due and payable on the last day of each month through December 31,
2008. The interest rate, payment terms, maturity date and certain
other terms of Non-Revolving Loan shall be contained in a promissory
note dated the date of this Agreement, as such may be amended or
replaced from time to time."
(e) Section 2.6 b. of the Agreement hereby is deleted in its entirety
and replaced with the following:
"b. In connection with the financial accommodations provided
under Section 2.5 of this Agreement, an unused commitment fee in an
amount equal to one eighth percent (0.125%) per annum shall be due and
payable on the last day of each quarter through the quarter ending
December 31, 2004. The unused commitment fee shall be calculated on
the difference between the average Daily Balance of the Credit
consisting of loans Non-Revolving Loans made under Section 2.5 and One
Million Dollars ($1,000,000) and shall be fully earned and
non-refundable on the date of payment thereof."
(f) Section 6.17 b. of the Agreement hereby is deleted in its entirety
and replaced with the following:
"b. Cash Flow Coverage Ratio of not less than 1.25:1.00, measured
quarterly as of the end of each fiscal quarter of Borrower; and"
(g) The following new Section 10.7 hereby is inserted into the
Agreement in its entirety immediately following existing Section 10.6
thereof, and shall read as follows, and each subsequent section of the
Agreement shall be renumbered accordingly, mutatis, mutandis:
"10.7 Reference Provision.
a. The parties prefer that any dispute between them be resolved
in litigation subject to a Jury Trial Waiver as set forth in the Loan
Documents (defined below), but the availability of that process is in
doubt because of the opinion of the California Court of Appeal in
Grafton Partners LP v. Superior Court, 9 Cal.Rptr.3d 511. This
Reference Provision will be applicable until the California Supreme
Court completes its review of that case, and will continue to be
applicable if either that court or a California Court of Appeal
publishes a decision holding that a pre-dispute Jury Trial Waiver
provision similar to that contained in the Loan Documents is invalid
or unenforceable. Delay in requesting appointment of a referee pending
review of any such decision, or participation in litigation pending
review, will not be deemed a waiver of this Reference Provision.
b. Other than (i) nonjudicial foreclosure of security interests
in real or personal property, (ii) the appointment of a receiver or
(iii) the exercise of other provisional remedies (any of which may be
initiated pursuant to applicable law), any controversy, dispute or
claim (each, a "Claim") between the parties arising out of or relating
to this Agreement or any other document, instrument or agreement
between the Bank and the undersigned (collectively in this Section,
the "Loan Documents"), will be resolved by a reference proceeding in
California in accordance with the provisions of Section 638 et seq. of
the California Code of Civil Procedure ("CCP"), or their successor
sections, which shall constitute the exclusive remedy for the
resolution of any Claim, including whether the Claim is subject to the
reference proceeding. Except as otherwise provided in the Loan
Documents, venue for the reference proceeding will be in the Superior
Court or Federal District Court in the County or District where the
real property, if any, is located or in a County or District where
venue is otherwise appropriate under applicable law (the "Court").
c. The referee shall be a retired Judge or Justice selected by
mutual written agreement of the parties. If the parties do not agree,
the referee shall be selected by the Presiding Judge of the Court (or
his or her representative). A request for appointment of a referee may
be heard on an ex parte or expedited basis, and the parties agree that
irreparable harm would result if ex parte relief is not granted. The
referee shall be appointed to sit with all the powers provided by law.
Each party shall have one peremptory challenge pursuant to CCP
ss.170.6. Pending appointment of the referee, the Court has power to
issue temporary or provisional remedies.
d. The parties agree that time is of the essence in conducting
the reference proceedings. Accordingly, the referee shall be requested
to (a) set the matter for a status and trial- setting conference
within fifteen (15) days after the date of selection of the referee,
(b) if practicable, try all issues of law or fact within ninety (90)
days after the date of the conference and (c) report a statement of
decision within twenty (20) days after the matter has been submitted
for decision. Any decision rendered by the referee will be final,
binding and conclusive, and judgment shall be entered pursuant to CCP
ss.644.
e. The referee will have power to expand or limit the amount and
duration of discovery. The referee may set or extend discovery
deadlines or cutoffs for good cause, including a party's failure to
provide requested discovery for any reason whatsoever. Unless
otherwise ordered, no party shall be entitled to "priority" in
conducting discovery, depositions may be taken by either party upon
seven (7) days written notice, and all other discovery shall be
responded to within fifteen (15) days after service. All disputes
relating to discovery which cannot be resolved by the parties shall be
submitted to the referee whose decision shall be final and binding.
f. Except as expressly set forth in this Agreement, the referee
shall determine the manner in which the reference proceeding is
conducted including the time and place of hearings, the order of
presentation of evidence, and all other questions that arise with
respect to the course of the reference proceeding. All proceedings and
hearings conducted before the referee, except for trial, shall be
conducted without a court reporter, except that when any party so
requests, a court reporter will be used at any hearing conducted
before the referee, and the referee will be provided a courtesy copy
of the transcript. The party making such a request shall have the
obligation to arrange for and pay the court reporter. Subject to the
referee's power to award costs to the prevailing party, the parties
will equally share the cost of the referee and the court reporter at
trial.
g. The referee shall be required to determine all issues in
accordance with existing case law and the statutory laws of the State
of California. The rules of evidence applicable to proceedings at law
in the State of California will be applicable to the reference
proceeding. The referee shall be empowered to enter equitable as well
as legal relief, provide all temporary or provisional remedies, enter
equitable orders that will be binding on the parties and rule on any
motion which would be authorized in a trial, including without
limitation motions for summary judgment or summary adjudication . The
referee shall issue a decision at the close of the reference
proceeding which disposes of all claims of the parties that are the
subject of the reference. The referee's decision shall be entered by
the Court as a judgment or an order in the same manner as if the
action had been tried by the Court. The parties reserve the right to
appeal from the final judgment or order or from any appealable
decision or order entered by the referee. The parties reserve the
right to findings of fact, conclusions of laws, a written statement of
decision, and the right to move for a new trial or a different
judgment, which new trial, if granted, is also to be a reference
proceeding under this provision.
h. If the enabling legislation which provides for appointment of
a referee is repealed (and no successor statute is enacted), any
dispute between the parties that would otherwise be determined by
reference procedure will be resolved and determined by arbitration.
The arbitration will be conducted by a retired judge or Justice, in
accordance with the California Arbitration Act ss.1280 through
ss.1294.2 of the CCP as amended from time to time. The limitations
with respect to discovery set forth above shall apply to any such
arbitration proceeding.
i. THE PARTIES RECOGNIZE AND AGREE THAT ALL DISPUTES
RESOLVED UNDER THIS REFERENCE PROVISION WILL BE DECIDED BY A
REFEREE AND NOT BY A JURY, AND THAT THEY ARE IN EFFECT WAIVING
THEIR RIGHT TO TRIAL BY JURY IN AGREEING TO THIS REFERENCE
PROVISION. AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO
CONSULT) WITH COUNSEL OF THEIR OWN CHOICE, EACH PARTY KNOWINGLY
AND VOLUNTARILY AND FOR THEIR MUTUAL BENEFIT AGREES THAT THIS
REFERENCE PROVISION WILL APPLY TO ANY DISPUTE BETWEEN THEM WHICH
ARISES OUT OF OR IS RELATED TO THIS AGREEMENT OR THE LOAN
DOCUMENTS."
(h) Schedule 6.5 to the Agreement hereby is deleted and replaced
in its entirety with Amended and Restated Schedule 6.5, attached
hereto as Exhibit A to this Modification and incorporated herein by
this reference, and each reference to Schedule 6.5 contained in the
Agreement shall be a reference thereto.
3. Modification to the Agreement. Subject to the satisfaction of the
conditions precedent as set forth in Section 4 hereof, the Note is hereby
modified as set forth below.
(a) The Maturity Date (as that term is defined in the Note) hereby is
extended from June 30, 2008 to December 31, 2008.
(b) The end date of the Draw Period (as that term is defined in
Addendum "A" to the Note) hereby is extended from June 30, 2004 to December
31, 2004.
4. Legal Effect. Except as specifically set forth in this Modification, all of
the terms and conditions of the Agreement and the Note remain in full force
and effect. Except as expressly set forth herein, the execution, delivery,
and performance of this Modification shall not operate as a waiver of, or
as an amendment of, any right, power, or remedy of Bank under the Agreement
or the Note, as in effect prior to the date hereof. Borrower ratifies and
reaffirms the continuing effectiveness of all promissory notes, guaranties,
security agreements, mortgages, deeds of trust, environmental agreements,
and all other instruments, documents and agreements entered into in
connection with the Agreement and the Note. Borrower represents and
warrants that the Representations and Warranties contained in the Agreement
and the Note are true and correct as of the date of this Modification, and
that no Event of Default has occurred and is continuing. The effectiveness
of this Modification and each of the documents, instruments and agreements
entered into in connection with this Modification, including without limit
any replacement promissory note entered into in connection herewith, is
conditioned upon receipt by Bank of this Modification, any other documents
which Bank may require to carry out the terms hereof, and including but not
limited to each of the following:
(a) A non-refundable legal documentation fee of $750, plus any Bank
expenses incurred through the date of this Modification.
5. Miscellaneous Provisions.
(a) This is an integrated Modification and supersedes all prior
negotiations and agreements regarding the subject matter hereof. All
amendments hereto must be in writing and signed by the parties.
(b) This Modification may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one instrument.
IN WITNESS WHEREOF, the parties have agreed as of the date first set
forth above.
SPECTRUM ORGANIC PRODUCTS, INC., COMERICA BANK
a California corporation
By: /s/ Robert B. Fowles By: /s/ Misako Noda
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Name: Robert B. Fowles Name: Misako Noda
Title: Chief Financial Officer Its: Vice President -
Western Division
Exhibit A
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Amended and Restated
Schedule 6.5
Collateral Locations
Address Owner/Lessor of Mortgagee
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Location
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Borrower Locations
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5341 Old Redwood Highway Spectrum Organic Products, Inc. N/A
Petaluma, California 94954
133 Copeland Street Spectrum Organic Products, Inc. N/A
Petaluma, California 94952
260 North Pioneer Avenue Interpac Technologies, Inc. N/A
Woodland, California 95776
1250 North McDowell Blvd. Interpac Technologies, Inc. N/A
Petaluma, California 95954
BIOWA Nutraceuticals, LLC American Natural Soy N/A
1510 South Second Street Processors, LLC
Cherokee, Iowa 51012
3345 Warbler Avenue American Natural Soy N/A
Hartley, Iowa 51346 Processors, LLC
Bailee Locations
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Adobe Creek Storage Same N/A
3800 Lakeville Highway
Petaluma, California 94954
American Natural Soy Same N/A
1510 South 2nd Street
Cherokee, Iowa 51012
The Barlow Company Same N/A
200 Morris Street
Sebastopol, California 94573
Blossom Valley Foods Same N/A
20 Casey Street
Gilroy, California 95020
Specialty Distributing Same N/A
207 Tobin Crescent
Saskatoon, Canada
Catania-Spagna Corp. Same N/A
1 Nemco Way
Ayer, Massachusetts 01432
Custom Park Same N/A
620 Spring Street
North Dighton, Massachusetts 02764
Cotati Egg Farm Same N/A
441 Houser Street
Cotati, California 94931
Follmer Development Co. Same N/A
850 Tourmaline Drive
Newbury Park, California 91320
Liberty Vegetable Oil Same N/A
15306 So. Carmenita Road
Santa Fe Springs, California 90670
Address Owner/Lessor of Mortgagee
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Location
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Manzana Products Same N/A
9141 Green Valley Road
Sebastopol, California 95473
Partners Mira Loma Old Storage Same N/A
4705 Brook Hollow Circle
Mira Loma, California 92509
Q & B Foods Same N/A
15547 First Street
Irwindale, California 91706
Robinson Pharma Same N/A
3330 S. Harbor Boulevard
Santa Ana, California 92704
Swiss Caps Same N/A
14193 S.W. 119th Avenue
Miami, Florida 33186
U.S. Cold Storage Same N/A
33400 Dowe Avenue
Union City, California 94587
Terminal Freezers Same N/A
908 East 3rd Street
Oxnard, California 93030
Triple H Food Processors Same N/A
5821 Wilderness Avenue
Riverside, California 92504
Wilbur-Ellis Seed Storage Same N/A
10660 Houston Avenue
Hanford, California 93230