SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1998
OR
/ / Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
------------------------------
COMMISSION FILE NUMBER 0-24708
------------------------------
AMCON DISTRIBUTING COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of Incorporation)
10228 "L" Street
Omaha, NE 68127
(Address of principal executive offices)
(Zip Code)
47-0702918
(I.R.S. Employer Identification No.)
(402) 331-3727
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
------- -------
The Registrant had 2,449,903 shares of its $.01 par value common stock
outstanding as of April 30, 1998.
Form 10-Q
2nd Quarter
INDEX
-------
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
---------------------
Balance sheets at March 31, 1998
and at September 30, 1997 3
Statements of income for the three and six-month
periods ended March 31, 1998 and March 31, 1997 4
Statements of cash flows for the three and six-month
periods ended March 31, 1998 and March 31, 1997 5
Notes to unaudited financial statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
PART II - OTHER INFORMATION
Item 2. Changes in Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
AMCON Distributing Company
Balance Sheets
March 31, 1998 and September 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Unaudited)
March 31, September 30,
1998 1997
----------- -------------
ASSETS
<S> <C> <C>
Current assets:
Cash $ 19,452 $ 26,973
Marketable securities - 127,786
Accounts receivable, less allowance
for doubtful accounts of $504,733
and $206,249 14,188,647 10,788,979
Note and interest receivable from officer - 130,795
Inventories 15,769,869 7,183,245
Deferred income taxes 119,017 119,017
Other 179,837 84,616
------------ ------------
Total current assets 30,276,822 18,461,411
Fixed assets, net 4,844,194 3,608,891
Investments 487,625 560,250
Other assets 2,844,207 866,749
------------ ------------
$ 38,452,848 $ 23,497,301
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 7,127,070 $ 4,764,816
Accrued expenses 1,282,318 906,282
Accrued wages, salaries and bonuses 634,053 719,962
Income taxes payable 872,682 579,802
Current portion of long-term debt 1,032,427 332,338
------------ ------------
Total current liabilities 10,948,550 7,303,200
------------ ------------
Deferred income taxes 164,956 195,458
Long-term debt, less current portion 19,178,575 8,790,524
Shareholders' equity:
Preferred stock, $.01 par value, 1,000,000
shares authorized
Common stock, $.01 par value, 15,000,000
shares authorized, 2,450,000 shares
issued and outstanding 24,500 24,500
Additional paid-in capital 2,268,578 2,213,828
Unrealized gain on investments available-
for-sale, net of $141,483 and $171,985 tax 195,381 237,503
Retained earnings 5,672,623 4,732,603
------------ ------------
8,161,082 7,208,434
Less treasury stock, 97 shares, at cost (315) (315)
------------ ------------
Total shareholders' equity 8,160,767 7,208,119
------------ ------------
$ 38,452,848 $ 23,497,301
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
AMCON Distributing Company
Statements of Income
for the three and six months ended March 31, 1998 and 1997
(Unaudited)
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the three months For the six months
ended March 31 ended March 31
------------------------- ---------------------------
1998 1997 1998 1997
----------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Sales (including excise taxes
of $10.9 million and $9.9 million,
and $23.8 million and $19.7
million, respectively) $68,946,009 $40,020,268 $133,894,568 $81,395,529
Cost of sales 61,533,784 35,648,916 119,316,333 72,333,114
----------- ----------- ------------ -----------
Gross profit 7,412,225 4,371,352 14,578,235 9,062,415
Selling, general and
administrative expenses 6,231,594 3,803,024 11,669,525 7,600,886
Depreciation and amortization 254,970 213,745 531,712 410,709
----------- ----------- ------------ -----------
6,486,564 4,016,769 12,201,237 8,011,595
----------- ----------- ------------ -----------
Income from operations 925,661 354,583 2,376,998 1,050,820
Other expense (income):
Interest expense 552,947 199,061 955,457 391,866
Other expense (income), net (33,032) (67,482) (139,280) (1,219,927)
----------- ----------- ------------ -----------
519,915 131,579 816,177 (828,061)
----------- ----------- ------------ -----------
Income before income taxes 405,746 223,004 1,560,821 1,878,881
Income tax expense 137,502 91,431 620,801 770,341
----------- ----------- ------------ -----------
Net income $ 268,244 $ 131,573 $ 940,020 $ 1,108,540
=========== =========== ============ ===========
Earnings share
Basic $ 0.11 $ 0.05 $ 0.38 $ 0.45
=========== =========== ============ ===========
Diluted $ 0.11 $ 0.05 $ 0.38 $ 0.45
=========== =========== ============ ===========
Weighted average shares
outstanding:
Basic 2,449,903 2,445,903 2,449,903 2,445,903
=========== =========== ============ ===========
Diluted 2,526,365 2,451,529 2,504,195 2,450,080
=========== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
AMCON Distributing Company
Statements of Cash Flows
for the six months ended March 31, 1998 and 1997
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 940,020 $ 1,108,540
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 531,712 410,709
Gain on sales of fixed assets and securities (39,844) (52,950)
Gain on sale of Denver beer distributorship - (1,102,205)
Proceeds from sale of trading securities 157,206 24,600
Deferred income taxes 69,430 -
Changes in assets and liabilities, net of
effects from acquisitions:
Accounts receivable (174,634) 33,380
Inventories (1,935,676) (695,919)
Other current assets 23,746 57,709
Other assets (199,452) (22,497)
Accounts payable 322,931 1,395,310
Accrued expenses and accrued wages,
salaries, and bonuses (119,053) (127,107)
Income taxes payable 292,879 151,741
----------- -----------
Net cash provided by (used in) operating activities (130,735) 1,181,311
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets (591,751) (516,508)
Purchases of water bottling company assets - (456,705)
Purchase of assets of Marcus Distributors, Inc. (2,664,916) -
Purchase of Food For Health Co., Inc. net
of cash acquired (4,454,338) -
Proceeds from sales of fixed assets 41,708 71,662
Proceeds from sales of available-for-sale securities - 33,967
Proceeds from sale of Denver beer distributorship - 2,371,994
----------- -----------
Net cash provided by (used in) investing activities (7,669,297) 1,504,410
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 4,500,000 363,961
Net (payments) proceeds on bank credit agreement 3,666,595 (1,662,244)
Payments on long-term and subordinated debt (374,084) (184,263)
Redemption of preferred stock - (1,200,000)
----------- -----------
Net cash provided by (used in) financing activities 7,792,511 (2,682,546)
----------- -----------
Net increase (decrease)in cash (7,521) 3,175
Cash, beginning of period 26,973 21,497
----------- -----------
Cash, end of period $ 19,452 $ 24,672
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
AMCON Distributing Company
Notes to Financial Statements
March 31, 1998 and 1997
- ----------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The accompanying unaudited financial statements of AMCON Distributing Company
and subsidiary (the "Company") have been prepared on the same basis as the
audited financial statements for the year ended September 30, 1997, and, in
the opinion of management, contain all adjustments necessary to fairly present
the financial information included therein, such adjustments consist of normal
recurring items. It is suggested that these financial statements be read in
conjunction with the audited financial statements and notes thereto, for the
fiscal year ended September 30, 1997, which are included in the Company's
Annual Report to Stockholders filed with Form 10-K. Results for the interim
period are not necessarily indicative of results to be expected for the entire
year.
2. EARNINGS PER SHARE:
Earnings per share was computed as presented below in accordance with
Statement of Accounting Standards No. 128, Earnings Per Share. Prior year
amounts have been restated to conform to the new standard. Basic earnings per
share is calculated by dividing net income by the weighted average common
shares outstanding for each period. Diluted earnings per share is calculated
by dividing net income by the sum of the weighted average common shares
outstanding and the weighted average dilutive options, using the treasury
stock method.
<TABLE>
<CAPTION>
For the three months For the three months
ended March 31, 1998 ended March 31, 1997
----------------------- -----------------------
Basic Diluted Basic Diluted
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
1. Weighted average common
shares outstanding 2,450,000 2,450,000 2,450,000 2,450,000
2. Weighted average treasury
shares (97) (97) (4,097) (4,097)
3. Weighted average of net
additional shares outstanding
assuming dilutive options and
warrants exercised and proceeds
used to purchase treasury stock - 76,462 - 5,626
--------- --------- --------- ---------
4. Weighted average number of
shares outstanding 2,449,903 2,526,365 2,445,903 2,451,529
========= ========= ========= =========
5. Net income $ 268,244 $ 268,244 $ 131,573 $ 131,573
========= ========= ========= =========
6. Earnings per share $ 0.11 $ 0.11 $ 0.05 $ 0.05
========= ========= ========= =========
<CAPTION>
For the six months For the six months
ended March 31, 1998 ended March 31, 1997
----------------------- -----------------------
Basic Diluted Basic Diluted
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1. Weighted average common
shares outstanding 2,450,000 2,450,000 2,450,000 2,450,000
2. Weighted average treasury
shares (97) (97) (4,097) (4,097)
3. Weighted average of net
additional shares outstanding
assuming dilutive options and
warrants exercised and proceeds
used to purchase treasury stock - 54,292 - 4,987
---------- --------- ---------- ----------
4. Weighted average number of
shares outstanding 2,449,903 2,504,195 2,445,903 2,450,080
========== ========== ========== ==========
5. Net income $ 940,020 $ 940,020 $1,108,540 $1,108,540
========== ========== ========== ==========
6. Earnings per share $ 0.38 $ 0.38 $ 0.45 $ 0.45
========== ========== ========== ==========
</TABLE>
3. PURCHASE OF DISTRIBUTORSHIP ASSETS:
On October 10, 1997, the Company purchased certain inventory and fixed assets
from Marcus Distributors, Inc. ("Marcus") of St. Louis, Missouri for $2.7
million in cash and warrants to acquire 30,000 shares of the Company's common
stock at an exercise price of $0.10 per share. In addition, the Company
entered into a five year lease agreement with Marcus to lease a distribution
facility in St. Louis, Missouri. The acquisition was funded through
borrowings on the Facility, which was increased in October 1997 to accommodate
the purchase.
4. PURCHASE OF STOCK OF FOOD FOR HEALTH COMPANY, INC.:
On November 10, 1997, the Company purchased all of the outstanding stock of
Food For Health Company, Inc. ("FFH"), a distributor of health and natural
foods based in Phoenix, AZ, for $4.4 million in cash. The acquisition was
funded by a $4.5 million five year term loan from a bank. The loan bears
interest at LIBOR plus 1.75% and requires monthly payments of accrued interest
with monthly principal payments of $85,096 plus accrued interest beginning in
August 1998. The loan is collateralized by the common stock of FFH and a
personal guarantee from the Chairman of the Company. The assets and
liabilities assumed as a result of the acquisition are as follows:
Fair value of assets............... $10,189,108
Cash paid.......................... (4,400,000)
-----------
Liabilities assumed................ $ 5,789,108
===========
Based on a preliminary allocation of the purchase price, goodwill is estimated
to be $1.9 million and will be amortized over 25 years.
5. LONG-TERM DEBT:
In March 1998, the Company refinanced its Revolving Credit Facility with a new
bank (the "Facility") in order to obtain more favorable lending terms to
support operations and to finance any future acquisitions. The Facility
increased the Company's borrowing limit to $20 million and decreased the
interest rate on the New Facility to LIBOR plus 1.75%. The Facility also
provided for an additional $10 million facility to be collateralized by
specific inventory and a $1.5 million facility to be used for transportation
equipment purchases. As of March 31, 1998, the Company had borrowed
approximately $11.8 million under the Facility.
In March 1998, the FFH refinanced its Revolving Credit Facility with a new
bank (the "FFH Facility") in order to obtain more favorable lending terms to
support operations. The borrowings under the FFH Facility are secured by the
assets of FFH and are guaranteed by the Company. The FFH Facility established
a borrowing limit of $5 million and decreased the interest rate on the FFH
Facility to LIBOR plus 1.75%. As of March 31, 1998, FFH had borrowed
approximately $2.8 million under the FFH Facility.
In November 1997, the Company borrowed $4.5 million from a bank to finance the
purchase of the common stock of FFH. The loan bears interest at LIBOR plus
1.75% and requires monthly payments of accrued interest with monthly principal
payments of $85,096 plus accrued interest beginning in August 1998.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
Comparison of the three-month and six-month periods ended March 31, 1998 and
March 31, 1997
Sales for the three months ended March 31, 1998 increased 72.3% to $68.9
million, compared to $40.0 million for the same period in prior fiscal year.
Sales attributable to the new St. Louis distribution center and Food For
Health Company, Inc. ("FFH"), a distributor of health foods and related
products, were $21.1 million, of which $8.6 million related to cigarette
sales. Sales from the core distribution business increased by $7.8 million
during the second quarter as compared to the prior year as follows: Cigarette
sales increased approximately $2.9 million over the prior year due to price
increases and approximately $3.5 million due to increased volume to current
and new customers. Tobacco sales increased $594,000, food service sales
increased $294,000, candy sales increased $188,000, sales from health and
beauty care products increased $131,000 and all other product sales increased
by $173,000 due to increase in the demand for such products from the customer
base.
Sales for the six months ended March 31, 1998 increased 64.5% to $133.9
million compared to $81.4 million for the six months ended March 31, 1997.
Sales attributable to the new St. Louis distribution center and to FFH were
$37.3 million, of which $18.1 million related to cigarette sales. Sales from
the core distribution business increased by $15.2 million during the six
months ended March 31, 1998 as compared to the prior year as follows:
Cigarette sales increased approximately $5.4 million over the prior year due
to price increases and approximately $6.8 million due to increased volume to
current and new customers. Tobacco sales increased $1.2 million, food service
sales increased $589,000, candy sales increased $574,000, sales from health
and beauty care products increased $557,000 and all other product sales
increased by $659,000 due to increase in the demand for such products from the
customer base. There were no sales of beer products during the six months
ended March 31, 1998 due to the sale of the Denver beer distributorship in
October 1996. This accounted for a $538,000 decrease in sales of beer
products as compared to the prior year.
Gross profit increased 69.6% to $7.4 million for the three months ended March
31, 1998 from $4.4 million over the same period during the prior year. Gross
profit as a percent of sales declined to 10.7% for the quarter ended March 31,
1998 compared to 10.9% for the quarter ended March 31, 1997. The increase in
gross profit was primarily attributable to the new St. Louis distribution
center and FFH, which accounted for $3.0 of the increase in gross profit for
the quarter. The decrease in gross profit margin percentage was primarily
attributable to a decline in per-carton purchase discounts paid by cigarette
manufacturers for the quarter combined with a large increase in cigarette
sales, principally in the St. Louis market. Purchase discount programs vary
by manufacturer. Although all of the purchase discount programs offered by
manufacturers are computed on a cents-per-carton-sold basis, the programs vary
on the criteria necessary for meeting the higher purchase discount brackets,
such as, market share by cigarette category. Therefore, it is possible to
have increased sales in certain product categories, but receive less purchase
discounts.
Gross profit increased 60.9% to $14.6 million for the six months ended March
31, 1998 from $9.1 million over the same period during the prior year. Gross
profit as a percent of sales declined to 10.9% for the six months ended March
31, 1998 compared to 11.1% to the six months ended March 31, 1997. The
increase in gross profit was primarily attributable to the new St. Louis
distribution center and FFH, which accounted for $4.7 million of the increase
in gross profit for the six months. The decrease in gross profit margin
percentage was primarily attributable to the large increase in cigarette
sales, principally in the St. Louis market. Cigarettes have historically, and
continue to have, a lower profit margin percentage than the Company's other
products.
Sales of the Company's private label cigarette have continued to decline since
1993 when cigarette manufacturers substantially reduced the price of premium
brand cigarettes. Management anticipates that the volume of private label
cigarettes could continue to decline by as much as 20% to 30%. If such a
decline is realized, gross profit from private label cigarette sales could
decrease annually by $200,000 to $300,000 in fiscal 1998 and 1999.
Total operating expense, which includes selling, general and administrative
expenses and depreciation and amortization, increased 61.5% or $2.5 million to
$6.5 million for the quarter ended March 31, 1998 compared to the same period
in fiscal 1997. The increase was primarily due to expenses associated with the
new St. Louis distribution center and FFH which accounted for $2.5 million in
operating expenses. As a percentage of sales, total operating expense
decreased to 9.4% from 10.0% during the same period in the prior year.
For the six month period ended March 31, 1998, total operating expense
increased 52.3% or $4.2 million to $12.2 million, compared to the same period
in the prior year. The increase was primarily due to expenses associated with
the new St. Louis distribution center and FFH which accounted for $4.2 million
in operating expenses. As a percentage of sales, total operating expense
decreased to 9.1% from 9.8% during the same period in the prior year. The
decrease in operating expenses as a percentage of sales is due to efficiencies
gained through increased volume.
As a result of the above, income from operations for the quarter ended March
31, 1998 increased $571,000 to $926,000. Income from operations for the six
month period ended March 31, 1998 increased $1.3 million to $2.4 million.
Interest expense for the three months ended March 31, 1998 increased 177.8%,
or $354,000, over the same period in the prior year. Interest expense for the
six month period ended March 31, 1998 increased 143.8%, or $564,000, compared
to the six month period ended March 31, 1997. The increase was primarily due
to interest expense associated with FFH's revolving credit facility, which
accounted for $196,000 and $240,000 of interest expense during the three and
six month periods ended March 31, 1998, respectively and a $7.7 million and
$7.0 million increase in the average amount borrowed under the Company's
revolving credit facility with a bank (the "Facility") during the three and
six month periods ended March 31, 1998, respectively. The Facility was
utilized to finance the acquisition of the new St. Louis distribution center,
the expansion of the Bismarck, ND distribution center and to finance an
increase in inventory during the period. In addition, the Company borrowed
$4.5 million in November 1997 to finance the acquisition of FFH.
Other income of $33,000 for the three months ended March 31, 1998 consisted
primarily of royalty payments associated with the sale of the Denver non-
alcoholic beverage business, rent income and gains on sales of fixed assets.
Other income of $139,000 for the six months ended March 31, 1998 was generated
primarily by a gain of $29,000 from the sale of marketable securities, royalty
payments associated with the sale of the Denver non-alcoholic beverage
business of $17,000, and rent income and gains on sales of fixed assets.
Other income of $1.2 million for the six months ended March 31, 1997 was
generated primarily by the gain associated with the sale of the Denver beer
distributorship of $1.1 million.
As a result of the above factors, net income during the three months ended
March 31, 1998 was $337,675 compared to $131,573 for the three months ended
March 31, 1997. Net income during the six months ended March 31, 1998 was
$1,009,452 compared to $1,108,540 for the six months ended March 31, 1997.
As described in Management's Discussion and Analysis in the Company's Annual
Report to Shareholders for the Fiscal Year Ended September 30, 1997, the
Company's operating income is subject to a number of factors which are beyond
the control of management, such as changes in manufacturers' cigarette pricing
which affects the market for generic and private label cigarettes. The
Company continues to remain dependent on cigarette sales which now represent
approximately 63% of its revenue (66% in fiscal 1997). Net income remains
heavily dependent on sales of the Company's private label cigarettes and
volume discounts received in connection with such sales. The Company continues
to evaluate various steps it may take to improve net income in future periods,
including acquisitions of distributing companies such as the new St. Louis
distribution center and FFH which were purchased in the first quarter and
continued sales of assets that are no longer essential to its primary business
activities, such as, investments and certain real estate. An analysis of such
assets held at March 31, 1998 is as follows:
ESTIMATE OF GAIN
-------------------------------
March 31, September 30,
DESCRIPTION OF ASSET 1998 1997
-------------------- ------------ -------------
Investments (available-for-sale) $337,000 $409,000
Condominium & furnishings 480,000 480,000
Investments consist of 83,000 shares of Cayman Water Company Limited (CWC), a
public company which is listed on NASDAQ, at March 31, 1998 and September 30,
1997, respectively. The Company's basis in the securities was $151,000 and
the fair market value of the securities was $488,000 and $560,000 on March 31,
1998 and September 30, 1997, respectively. The fair market value of the
securities on April 30, 1998 was $571,000.
The condominium and furnishings consist of a condominium in the Cayman Islands
which is used in furtherance of the Company's business marketing strategies.
The costs and benefits associated with retaining the condominium are being
evaluated in relation to the current business strategies of the Company.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended March 31, 1998, the Company utilized cash flow in
operating activities to finance increases in inventory in all branches in
anticipation of calendar year-end price increases. Cash was utilized in
investing activities during the six month period ended March 31, 1998
primarily to purchase the assets of Marcus Distributors, Inc. in St. Louis, MO
in October 1997 and the stock of FFH in November 1997 for $2.7 million and
$4.5 million respectively. Cash was provided in financing activities through
increases in the Facility and from a term note to finance the purchase of FFH.
The Company had working capital of approximately $19.3 million as of March 31,
1998 compared to $11.2 million as of September 30, 1997. The Company's debt
to equity ratio was 3.68 at March 31, 1998 compared to 2.26 at September 30,
1997.
In March 1998, the Company refinanced its Revolving Credit Facility with a new
bank (the "Facility") in order to obtain more favorable lending terms to
support operations and to finance any future acquisitions. The Facility
increased the Company's borrowing limit to $20 million and decreased the
interest rate on the new Facility to LIBOR plus 1.75%. The Facility also
provided for an additional $10 million facility collateralized by specific
inventory and a $1.5 million facility to be used for transportation equipment
purchases. As of March 31, 1998, the Company had borrowed approximately $11.8
million under the Facility.
In March 1998, the FFH refinanced its Revolving Credit Facility with a new
bank (the "FFH Facility") in order to obtain more favorable lending terms to
support operations. The borrowings under the FFH Facility are secured by the
assets of FFH and are guaranteed by the Company. The FFH Facility established
a borrowing limit of $5 million and decreased the interest rate on the FFH
Facility to LIBOR plus 1.75%. As of March 31, 1998, FFH had borrowed
approximately $2.8 million under the FFH Facility.
In November 1997, the Company borrowed $4.5 million from a bank to finance the
purchase of the common stock of FFH. The loan bears interest at LIBOR plus
1.75% and requires monthly payments of accrued interest with monthly principal
payments of $85,096 plus accrued interest beginning in August 1998.
The Company also maintains a $1,250,000 non-revolving line of credit used to
finance the purchase of trucks and delivery equipment. Advances against the
non-revolving line of credit were $680,000 through March 31, 1998. The amount
available on the non-revolving line of credit was $570,000 at March 31, 1998.
The line of credit is secured by a first lien on the delivery vehicles
purchased with the loan proceeds.
The Company believes that funds generated from operations, supplemented as
necessary with funds available under the Facility, the FFH Facility and the
non-revolving line of credit, will provide sufficient liquidity to cover its
debt service and any reasonably foreseeable future working capital and capital
expenditure requirements.
CONCERNING FORWARD LOOKING STATEMENTS
This Quarterly Report, including the Management's Discussion and Analysis and
other sections, contains forward looking statements that are subject to risks
and uncertainties and which reflect management's current beliefs and estimates
of future economic circumstances, industry conditions, company performance and
financial results. Forward looking statements include information concerning
the possible or assumed future results of operations of the Company and those
statements preceded by, followed by or include the words "future," "position,"
"anticipate(s)," "expect," "believe(s)," "see," "plan," "further improve,"
"outlook," "should" or similar expressions. For these statements, we claim
the protection of the safe harbor for forward looking statements contained in
the Private Securities Litigation Reform Act of 1995. You should understand
that the following important factors, in addition to those discussed elsewhere
in this document, could affect the future results of the Company and could
cause those results to differ materially from those expressed in our forward
looking statements: changing market conditions with regard to cigarettes and
the demand for the Company's products, domestic regulatory risks, competitive
and other risks over which the Company has little or no control. Any changes
in such factors could result in significantly different results.
Consequently, future results may differ from management's expectations.
Moreover, past financial performance should not be considered a reliable
indicator of future performance.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The information required by this item will not be applicable to the Company
before its Annual Report on Form 10-K for the year ending September 30, 1998.
PART II - OTHER INFORMATION
Item 2. Changes in Securities.
The Loan and Security Agreement, dated February 25, 1998, between the Company
and LaSalle National Bank restricts the Company from declaring or paying
dividends on any class of its stock or on account of any equity interest in
the Company. This restriction is consistent with restrictions contained in
the Company's previous Credit and Security Agreement, dated July 25, 1994,
between the Company and Norwest Bank Minnesota.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company held its Annual Meeting of Stockholders on March 19, 1998 for
the purpose of electing two directors, ratifying the appointment of its
auditors, amending its restated certificate of incorporation to increase the
number of authorized shares of Common Stock and amending the Company's 1994
Stock Option Plan so that awards under the Plan will comply with Section
162(m) of the Internal Revenue Code of 1986, as amended.
The following sets forth the results of the election of directors:
NAME OF NOMINEE FOR WITHHELD
William Wright 1,646,578 67.21% 723 0.03%
Jerry Fleming 1,646,587 67.21% 714 0.03%
There was no solicitation in opposition to the nominees proposed to be
elected by the Stockholders in the Proxy Statement.
The ratification of the appointment of Coopers & Lybrand as independent
auditors for the Company for the fiscal year ending September 26, 1998 was
approved by the Stockholders with 1,645,832 votes FOR (approximately 67%),
1,016 votes AGAINST, and 453 votes ABSTAINED OR BROKER NON-VOTES.
The Board of Directors had proposed that the Company's Restated
Certificate of Incorporation be amended to increase the total number of
authorized Common Stock from 5,000,000 to 15,000,000. The amendment to the
Restated Certificate of Incorporation was approved by the Stockholders with
1,564,418 votes FOR (approximately 64%), 82,250 votes AGAINST, and 633 votes
ABSTAINED OR BROKER NON-VOTES.
The proposal to approve the amendment to the Company's 1994 Stock Option
Plan so that awards under the Plan will comply with the requirements of
Section 162(m) of the Internal Revenue Code of 1986, as amended was approved
by the Stockholders with 1,639,843 votes FOR (approximately 67%), 6,779 votes
AGAINST, and 679 votes ABSTAINED OR BROKER NON-VOTES.
Further information regarding these matters is contained in the Company's
Proxy Statement dated February 23, 1998.
Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBITS
2.1 Stock Purchase Agreement dated November 3, 1997, between the
Company and FFH Holdings, Inc. (incorporated by reference to
Exhibit 2.1 of the Company's Current Report on Form 8-K filed on
November 25, 1997)
3.1 Restated Certificate of Incorporation of the Company, as amended
March 19, 1998
3.3 Bylaws of the Company (incorporated by reference to Exhibit 3.2
of the Company's Registration Statement on Form S-1 (Registration
No. 33-82848) filed on August 15, 1994)
4.1 Specimen Common Stock Certificate (incorporated by reference to
Exhibit 4.1 of the Company's Registration Statement on Form S-1
(Registration No. 33-82848) filed on August 15, 1994)
10.1 Grant of Exclusive Manufacturing Rights, dated October 1, 1993,
between the Company and Famous Value Brands, a division of Philip
Morris Incorporated, including Private Label Manufacturing
Agreement and Amended and Restated Trademark License Agreement
(incorporated by reference to Exhibit 10.1 of Amendment No. 1 to
the Company's Registration Statement on Form S-1 (Registration
No. 33-82848) filed on November 8, 1994)
10.2 Credit and Security Agreement, dated July 25, 1994, between the
Company and Norwest Bank Minnesota, National Association
(incorporated by reference to Exhibit 10.4 of the Company's
Registration Statement on Form S-1 (Registration No. 33-82848)
filed on August 15, 1994)
10.3 Amendment to Credit and Security Agreement, dated October 10,
1997, between the Company and Norwest Bank Minnesota, National
Association
10.4 Loan Agreement, dated November 10, 1997, between the Company and
LaSalle National Bank (incorporated by reference to Exhibit 10.1
of the Company's Current Report on Form 8-K filed on November 25,
1997)
10.5 Amended Loan Agreement, dated February 25, 1998, between the Company
and LaSalle National Bank
10.6 Note, dated November 10, 1997, between the Company and LaSalle
National Bank (incorporated by reference to Exhibit 10.2 of the
Company's Current Report on Form 8-K filed on November 25, 1997)
10.7 First Allonge to Note, dated February 25, 1998, between the Company
and LaSalle National Bank
10.8 Loan and Security Agreement, dated February 25, 1998, between the
Company and LaSalle National Bank
10.9 Promissory Note, dated February 25, 1998, between the Company and
LaSalle National Bank
10.10 Loan and Security Agreement, dated February 25, 1998, between Food
For Health Co., Inc. and LaSalle National Bank
10.11 Promissory Note, dated February 25, 1998, between Food For Health
Co., Inc. and LaSalle National Bank
10.12 Unconditional Guarantee, dated February 25, 1998, between the
Company and LaSalle National Bank
10.13 AMCON Distributing Company 1994 Stock Option Plan (incorporated
by reference to Exhibit 10.7 of the Company's Registration
Statement on Form S-1 (Registration No. 33-82848) filed on August
15, 1994)
10.14 AMCON Distributing Company Profit Sharing Plan (incorporated by
reference to Exhibit 10.8 of Amendment No. 1 to the Company's
Registration Statement on Form S-1 (Registration No. 33-82848)
filed on November 8, 1994)
10.15 Employment Agreement, dated July 1, 1994, between the Company and
William F. Wright (incorporated by reference to Exhibit 10.9 of
the Company's Registration Statement on Form S-1 (Registration
No. 33-82848) filed on August 15, 1994)
10.16 Employment Agreement, dated July 1, 1994, between the Company and
Kathleen M. Evans (incorporated by reference to Exhibit 10.9 of
the Company's Registration Statement of Form S-1 (Registration
No. 33-82848) filed on August 15, 1994)
10.17 Consulting Agreement, dated July 1, 1994, between the Company
and Nebraska Distributing Company relating to services of J.
Tony Howard (incorporated by reference to Exhibit 10.10 of the
Company's Registration Statement on Form S-1 (Registration No.
33-82848) filed on August 15, 1994)
10.18 Asset Purchase Agreement, dated October 2, 1996, between the
Company and Western Distributing Company (incorporated by
reference to the Company's Current Report on Form 8-K filed on
October 15, 1996)
10.19 Purchase Agreement, dated September 6, 1997, between the Company
and Marcus Distributors, Inc. (incorporated by reference to the
Company's Current Report on Form 8-K filed on October 24, 1997)
11.1 Statement re: computation of per share earnings (incorporated by
reference to footnote 2 to the financial statements included in
Item 1 herein)
27.0 Financial Data Schedules
(b) Reports on Form 8-K
No reports on Form 8-K were filed for the quarter ended March 31, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
AMCON DISTRIBUTING COMPANY
(registrant)
Date: May 11, 1998 Kathleen M. Evans
----------------- -------------------------
Kathleen M. Evans
President & CEO and
Principal Executive Officer
Date: May 11, 1998 Michael D. James
----------------- -------------------------
Michael D. James
Treasurer & CFO and
Principal Financial and
Accounting Officer
CERTIFICATE OF INCORPORATION
OF
AMCON DISTRIBUTING COMPANY,
AS AMENDED MARCH 19, 1998
AMCON Distributing Company, a corporation organized and existing under the
laws of the State of Delaware (the "Corporation") hereby certifies as follows:
1. The Corporation's original Certificate of Incorporation was filed
with the Secretary of State of the State of Delaware on June 17, 1986.
2. On June 2, 1994, the Board of Directors of the Corporation
unanimously adopted a resolution authorizing the amendment and restatement of
the Corporation's Certificate of Incorporation in accordance with the
provisions of Sections 242 and 245 of the General Corporation Law of the State
of Delaware. On July 5, 1994, the Stockholders of the Corporation approved
the amendment and restatement of the Certificate of Incorporation and the
taking of the actions contemplated thereby by written consent given in
accordance with the provisions of Section 228 of the General Corporation Law
of the State of Delaware, and such consent has been filed with the minutes of
the proceedings of stockholders of the Corporation. Written notice of such
action has been given to all stockholders who have not consented in writing in
accordance with the provisions of Section 228 of the General Corporation Law
of the State of Delaware.
3. Pursuant to Sections 242 and 245 of the General Corporation Law of
the State of Delaware, this Restated Certificate of Incorporation amends and
restates the provisions of the Certificate of Incorporation of the
Corporation. The amendments have the effect of (i) increasing the authorized
shares of Common Stock to 5,000,000; (ii) authorizing the issuance of
1,000,000 shares of Preferred Stock; (iii) classifying the Board of Directors;
and (iv) making such other changes as are proper under Delaware Law and deemed
necessary or appropriate by the Board of Directors.
4. Accordingly, the text of the Certificate of Incorporation is hereby
amended and restated in its entirety to read as follows:
ARTICLE I
The name of the Corporation is AMCON Distributing Company.
ARTICLE II
The address of the registered office of the Corporation in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington,
County of New Castle, Delaware 19805, and the name of its registered agent at
the address of the Corporation's registered office is The Corporation Trust
Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
the State of Delaware.
ARTICLE IV
Section 1. The total number of shares of capital stock which the
Corporation shall have the authority to issue is 16,000,000, consisting of (a)
15,000,000 shares of Common Stock, par value $.01 per share and (b) 1,000,000
shares of Preferred Stock, par value $.01 per share.
Section 2. Each holder of Common Stock shall be entitled to one vote for
each share of Common Stock held of record by such holder and shall be entitled
to vote with respect to all matters as to which a stockholder of a Delaware
corporation would be entitled to vote.
Section 3. The Preferred Stock may be issued at any time and from time to
time in one or more series. The Board of Directors is hereby authorized to
provide for the issuance of shares of Preferred Stock in series and, by filing
a certificate of designation pursuant to the applicable provisions of the
General Corporation Law of the State of Delaware (hereinafter referred to as a
"Preferred Stock Certificate of Designation"), to establish from time to time
the number of shares to be included in each such series and to fix the
designation, powers, preferences and rights of shares of each such series and
the qualifications, limitations and restrictions thereof. The authority of
the Board of Directors with respect to each series shall include, but not be
limited to, determination of the following:
(a) The designation of the series, which may be by distinguishing
number, letter or title;
(b) The number of shares of the series, which number the Board of
Directors may thereafter (except where otherwise provided in the applicable
Preferred Stock Certificate of Designation) increase or decrease (but not
below the number of shares thereof then outstanding);
(c) Whether dividends, if any, shall be cumulative or noncumulative
and the dividend rate of the series;
(d) The dates on which dividends, if any, shall be payable;
(e) The redemption rights and price or prices, if any, for shares of
the series;
(f) The terms and amount of any sinking fund provided for the
purchase or redemption of shares of the series;
(g) The amounts payable on shares of the series in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the affairs
of the Corporation;
(h) Whether the shares of the series shall be convertible or
exchangeable into shares of any other class or series, or any other security,
of the Corporation or any other corporation, and, if so, the specification of
such other class or series or such other security, the conversion or exchange
price or prices or rate or rates, any adjustments thereof, the date or dates
as of which such shares shall be convertible or exchangeable and all other
terms and conditions upon which such conversion or exchange may be made;
(i) Restrictions on the issuance of shares of the same series or of
any other class or series; and
(j) The voting rights, if any, of the holders of shares of the series.
Section 4. The Common Stock shall be subject to the express terms of the
Preferred Stock and any series thereof.
Section 5. Except as may be provided in this Restated Certificate of
Incorporation or in a Preferred Stock Certificate of Designation, the Common
Stock shall have the exclusive right to vote for the election of directors and
for all other purposes, and holders of Preferred Stock shall not be entitled
to receive notice of any meeting of stockholders at which they are not
entitled to vote.
Section 6. The Corporation shall be entitled to treat the person in whose
name any share of its stock is registered as the owner thereof for all
purposes and shall not be bound to recognize any equitable or other claim to,
or interest in, such share on the part of any other person, whether or not the
Corporation shall have notice thereof, except as expressly provided by
applicable law.
ARTICLE V
The Board of Directors is hereby authorized to create and issue, whether
or not in connection with the issuance and sale of any of its stock or other
securities or property, rights entitling the holders thereof to purchase from
the Corporation shares of stock or other securities of the Corporation or any
other corporation. The times at which and the terms upon which such rights
are to be issued will be determined by the Board of Directors and set forth in
the contracts or instruments that evidence such rights. The authority of the
Board of Directors with respect to such rights shall include, but not be
limited to, determination of the following:
(a) the initial purchase price per share or other unit of the stock or
other securities or property to be purchased upon exercise of such rights;
(b) Provisions relating to the times at which and the circumstances under
which such rights may be exercised or sold or otherwise transferred, either
together with or separately from any other stock or other securities of the
Corporation;
(c) Provisions which adjust the number or exercise price of such rights,
or amount or nature of the stock or other securities or property receivable
upon exercise of such rights, in the event of a combination, split or
recapitalization of any stock of the Corporation, a change in ownership of the
Corporation's stock or other securities or a reorganization, merger,
consolidation, sale of assets or other occurrence relating to the Corporation
or any stock of the Corporation and provisions restricting the ability of the
Corporation to enter into any such transaction absent an assumption by the
other party or parties thereto of the obligations of the Corporation under
such rights;
(d) Provisions which deny the holder of a specified percentage of the
outstanding stock or other securities of the Corporation the right to exercise
such rights and/or cause the rights held by such holder to become void;
(e) Provisions which permit the Corporation to redeem such rights; and
(f) The appointment of a rights agent with respect to such rights.
ARTICLE VI
In furtherance and not in limitation of the powers conferred upon it by
law, the Board of Directors is expressly authorized to adopt, repeal, alter or
amend the By-laws of the Corporation by the vote of a majority of the entire
Board of Directors. In addition to any requirements of law and any other
provision of this Restated Certificate of Incorporation, the stockholders of
the Corporation may adopt, repeal, alter or amend any provision of the By-laws
upon the affirmative vote of the holders of 75% or more of the combined voting
power of the then outstanding stock of the Corporation entitled to vote
generally in the election of directors.
ARTICLE VII
Section 1. The business and affairs of the Corporation shall be managed
by or under the direction of its Board of Directors, which may exercise all
such powers of the Corporation and do all such lawful acts and things as are
not by law or by this Restated Certificate of Incorporation directed or
required to be exercised or done by the stockholders.
Section 2. The number of directors constituting the initial Board of
Directors shall be five, and thereafter the number of directors shall be fixed
from time to time by resolution of the Board of Directors pursuant to the
By-laws of the Corporation, but shall not be more than fifteen. The Board of
Directors shall be divided into three classes, designated Classes I, II and
III, which shall be as nearly equal in number as possible. Directors of
Class I shall be elected to hold office for a term expiring at the annual
meeting of stockholders to be held in 1995; directors of Class II shall be
elected to hold office for a term expiring at the annual meeting of
stockholders to be held in 1996; and directors of Class III shall be elected
to hold office for a term expiring at the annual meeting of stockholders to be
held in 1997. At each succeeding annual meeting of stockholders following
such initial classification and election, the respective successors of each
class shall be elected for three-year terms. The holders of a majority of the
shares then entitled to vote at an election of directors may remove any
director or the entire Board of Directors, but only for cause.
Section 3. Advance notice of nominations for elections for the election
of directors shall be given in the manner and to the extent provided in the
By-laws of the Corporation.
ARTICLE VIII
Section 1. A director shall not be personally liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, provided that this provision shall not eliminate or limit the
liability of a director (i) for any breach of his duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of the law,
(iii) under Section 174 of the General Corporation Law of the State of
Delaware or (iv) for any transaction from which the director derives an
improper personal benefit. If the General Corporation Law of the State of
Delaware is amended after the filing of this Restated Certificate of
Incorporation to authorize corporate action further eliminating or limiting
the personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the General Corporation Law of the State of Delaware, as so amended.
Section 2. Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director or the Corporation existing at the time of such
repeal or modification.
ARTICLE IX
Section 1. Each person who was or is made a party or is threatened to be
made a party to or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she, or a person of whom he or
she is the legal representative, is or was a director or officer of the
Corporation or is or was serving at the request of the Corporation as a
director or officer of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to an employee
benefit plan (hereinafter an "indemnitee"), whether the basis of such
proceeding is alleged action or omission in an official capacity as a director
or officer or in any other capacity while serving as a director or officer,
shall be indemnified and held harmless by the Corporation to the fullest
extent authorized by the General Corporation Law of the State of Delaware, as
the same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than permitted prior thereto), against
all expense, liability and loss (including, without limitation, attorneys'
fees, judgments, fines, excise taxes or penalties and amounts paid or to be
paid in settlement) incurred or suffered by such indemnitee in connection
therewith, and such indemnification shall continue with respect to an
indemnitee who has ceased to be a director or officer and shall inure to the
benefit of the indemnitee's heirs, executors and administrators; provided,
however, that, except as provided in Section 2 of this Article IX with respect
to proceedings to enforce rights to indemnification, the Corporation shall
indemnify any such indemnitee in connection with a proceeding initiated by
such indemnitee only if such proceeding was authorized by the Board of
Directors of the Corporation. The right to indemnification conferred in this
Article IX shall be a contract right and shall include the right to be paid by
the Corporation the expenses incurred in defending any such proceeding in
advance of its final disposition (hereinafter an "advancement of expenses");
provided, further, that, if required by the General Corporation Law of the
State of Delaware, an advancement of expenses incurred by an indemnitee shall
be made only upon delivery to the Corporation of an undertaking (hereinafter,
an "undertaking"), by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal (hereinafter, a "final
adjudication") that such indemnitee is not entitled to be indemnified for such
expenses under this Article IX or otherwise.
Section 2. If a claim under Section 1 of this Article IX is not paid in
full by the Corporation within 60 days after a written claim has been received
by the Corporation (except in the case of a claim for an advancement of
expenses, in which case the applicable period shall be 20 days), the
indemnitee may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim. If successful in whole or in part in
any such suit, the indemnitee shall also be entitled to be paid the expense of
prosecuting or defending such suit. In (i) any suit brought by the indemnitee
to enforce a right to indemnification hereunder (but not in a suit brought by
the indemnitee to enforce a right to an advancement of expenses), it shall be
a defense that, and (ii) in any suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the
Corporation shall be entitled to recover such expenses upon a final
adjudication that, the indemnitee has not met the applicable standard of
conduct set forth in the General Corporation Law of the State of Delaware.
Neither the failure of the Corporation (including its Board of Directors,
independent legal counsel or its stockholders) to have made a determination
prior to the commencement of such suit that indemnification of the indemnitee
is proper in the circumstances because the indemnitee has met the applicable
standard of conduct set forth in the General Corporation Law of the State of
Delaware nor an actual determination by the Corporation (including its Board
of Directors, independent legal counsel, or its stockholders) that the
indemnitee has not met the applicable standard of conduct shall create a
presumption that the indemnitee has not met the applicable standard of conduct
or, in the case of such a suit brought by the indemnitee, be a defense to such
suit. In any suit brought by the indemnitee to enforce a right to
indemnification or to an advancement of expenses hereunder or by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that the indemnitee is not entitled under
this Article IX or otherwise to be indemnified, or to such advancement of
expenses, shall be on the Corporation.
Section 3. The rights to indemnification and to the advancement of
expenses conferred in this Article IX shall not be exclusive of any other
right which any person may have or hereafter acquire under this Restated
Certificate of Incorporation or any bylaw, contract, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 4. The Corporation may maintain insurance, at its expense, to
protect itself and any indemnitee against any expense, liability or loss,
whether or not the Corporation would have the power to indemnify such person
against such expense, liability or loss under the General Corporation Law of
the State of Delaware.
Section 5. The Corporation may, to the extent authorized from time to
time by the Board of Directors, grant rights to indemnification and to the
advancement of expenses to any employee or agent of the Corporation to the
fullest extent of the provisions of this Article IX or as otherwise permitted
under the General Corporation Law of the State of Delaware with respect to the
indemnification and advancement of expenses of directors and officers of the
Corporation.
ARTICLE X
A director of the Corporation, in determining what he reasonably believes
to be in the best interests of the Corporation, shall consider the interests
of the Corporation's stockholders and, in his discretion, may consider any of
the following:
(a) The interests of the Corporation's employees, independent
contractors, agents, suppliers, creditors and customers;
(b) The economy of the nation;
(c) Community and societal interests; and
(d) The long-term as well as short-term interests of the Corporation and
its stockholders, including the possibility that these interests may be best
served by the continued independence of the Corporation.
ARTICLE XI
Election of directors at an annual or special meeting of stockholders need
not be by written ballot unless the By-laws of the Corporation shall so
provide.
ARTICLE XII
Cumulative voting for the election of directors shall not be permitted.
ARTICLE XIII
Any action required or permitted to be taken by the stockholders of the
Corporation must be effected at a duly called annual or special meeting of
stockholders of the Corporation, and the ability of the stockholders to
consent in writing to the taking of any action is hereby specifically denied.
The foregoing sentence shall take effect on the day following the date on
which the Corporation first has more than twenty-five stockholders of record.
Except as otherwise required by law, special meetings of stockholders of the
Corporation may be called only by the Chairman of the Board, the Board of
Directors pursuant to a resolution approved by a majority of the entire Board
of Directors, by the President or as otherwise provided in the By-laws of the
Corporation.
ARTICLE XIV
The vote of stockholders of the Corporation required to approve Business
Combinations (as hereinafter defined) shall be as set forth in this
Article XIV.
Section 1. In addition to any affirmative vote required by law or by this
Restated Certificate of Incorporation, and except as otherwise expressly
provided in Section 3 of this Article XIV:
(a) any merger or consolidation of the Corporation with (i) any
Interested Stockholder or (ii) any other corporation (whether or not itself an
Interested Stockholder) which is, or after such merger or consolidation would
be, an Affiliate or Associate of an Interested Stockholder;
(b) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with any
Interested Stockholder or any Affiliate or Associate of any Interested
Stockholder of (i) all or substantially all the assets of the Corporation or
(ii) assets of the Corporation or any of its Subsidiaries representing in the
aggregate more than 75% of the total value of the assets of the Corporation
and its consolidated Subsidiaries as reflected on the most recent consolidated
balance sheet of the Corporation and its consolidated Subsidiaries prepared in
accordance with generally accepted accounting principles then in effect;
(c) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with any
Interested Stockholder or any Affiliate or Associate of any Interested
Stockholder of any assets of the Corporation or of any Subsidiary having an
aggregate Fair Market Value of $10,000,000 or more, but less than the amount
referred to in clause (ii) of paragraph (b) of this Section 1 or (ii) any
merger or consolidation of any Subsidiary of the Corporation having assets
with an aggregate Fair Market Value of $10,000,000 or more in a transaction
not covered by paragraph (b) of this Section 1 with (x) any Interested
Stockholder or (y) any other corporation (whether or not itself an Interested
Stockholder) which is, or after such merger or consolidation would be, an
Affiliate or Associate of an Interested Stockholder;
(d) the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of transactions) to any Interested Stockholder or
any Affiliate or Associate of any Interested Stockholder of any securities of
the Corporation or any Subsidiary in exchange for cash, securities or other
property (or a combination thereof) having an aggregate Fair Market Value of
$10,000,000 or more, other than the issuance of securities upon the conversion
of convertible securities of the Corporation or any Subsidiary which were not
acquired by such Interested Stockholder (or such Affiliate or Associate) from
the Corporation or a Subsidiary;
(e) The adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of any Interested
Stockholder or any Affiliate or Associate of any Interested Stockholder; or
(f) any reclassification of securities (including any reverse stock
split) or recapitalization of the Corporation, or any merger or consolidation
of the Corporation with any of its Subsidiaries or any other transaction
(whether or not with or into or otherwise involving any Interested
Stockholder), which in any such case has the effect, directly or indirectly,
of increasing the proportionate share of the outstanding shares of any class
or series of stock or securities convertible into stock of the Corporation or
any Subsidiary which is directly or indirectly beneficially owned by any
Interested Stockholder or any Affiliate or Associate of any Interested
Stockholder shall not be consummated without (i) the affirmative vote of the
holders of at least 75% of the combined voting power of the then outstanding
shares of stock of all classes and series of the Corporation entitled to vote
generally in the election of directors (the "Voting Stock") and (ii) the
affirmative vote of a majority of the combined voting power of the then
outstanding shares of Voting Stock held by Disinterested Stockholders, in each
case voting together as a single class. Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that a
lesser percentage may be specified, by law or by this Restated Certificate of
Incorporation or by a registered securities association or in any agreement
with any national securities exchange or otherwise.
Section 2. The term "Business Combination" as used in this Article XIV
shall mean any transaction which is referred to in any one or more of
paragraphs (a) through (f) of Section 1 of this Article XIV.
Section 3. The provisions of Section 1 of this Article XIV shall not be
applicable to any particular Business Combination, and such Business
Combination shall require only such affirmative vote as is required by law and
any other provision of this Restated Certificate of Incorporation, if all the
conditions specified in any of the following paragraphs (a), (b) or (c) are
met:
(a) such Business Combination shall have been approved by a majority
of the Disinterested Directors and (ii) the Interested Stockholder involved in
such Business Combination (x) acquired such status as an Interested
Stockholder in a manner substantially consistent with an agreement or
memorandum of understanding approved by the Board of Directors (including a
majority of the Disinterested Directors) prior to the time such Interested
Stockholder became an Interested Stockholder and (y) has complied with all
requirements imposed by such agreement or memorandum of understanding; or
(b) in the case of any Business Combination described in
paragraph (a) or (f) of Section 1 of this Article XIV, (i) such Business
Combination shall have been approved by a majority of the Disinterested
Directors, (ii) such Business Combination shall not have resulted, directly or
indirectly, in an increase of more than 10% in the total amount of shares of
any class or series of stock or securities convertible into stock of the
Corporation or any Subsidiary which was directly or indirectly beneficially
owned by an Interested Stockholder and all Affiliates and Associates of such
Interested Stockholder at the time of the approval of such Business
Combination by a majority of the Disinterested Directors and (iii) such
Business Combination shall not have been consummated within a period of two
years after the consummation of any other Business Combination described in
paragraph (a), (b), (c), (d), (e) or (f) of Section 1 of this Article XIV
(whether or not such other Business Combination shall have been approved by a
majority of the Disinterested Directors) which had the effect, directly or
indirectly, of increasing the proportionate share of the outstanding shares of
any class or series of stock or securities convertible into stock of the
Corporation or any Subsidiary which was directly or indirectly beneficially
owned by such Interested Stockholder or any Affiliate or Associate of such
Interested Stockholder; or
(c) in the case of any Business Combination described in
paragraph (c) or (d) of Section 1 of this Article XIV, such Business
Combination shall have been approved by a majority of the Disinterested
Directors.
Section 4. For the purposes of this Article XIV:
(a) A "person" shall mean any individual, group, firm, corporation,
partnership, trust or other entity.
(b) "Interested Stockholder" shall mean any person (other than the
Corporation, any Subsidiary and other than any group consisting of the
directors and officers of the Corporation which may be deemed to be a group
solely by reason of each of them being directors or officers of the
Corporation or members of a slate proposed by the Corporation as directors)
who or which:
(1) is the beneficial owner, directly or indirectly, of 10% or
more of the combined voting power of the then outstanding shares of Voting
Stock; or
(2) is an Affiliate of the Corporation and at any time within the
two-year period immediately prior to the date in question was the beneficial
owner, directly or indirectly, of 10% or more of the combined voting power of
the then outstanding shares of Voting Stock; or
(3) is an assignee of or has otherwise succeeded to the
beneficial ownership of any shares of Voting Stock which were at any time
within the two-year period immediately prior to the date in question
beneficially owned by any Interested Stockholder, if such assignment or
succession shall have occurred in the course of a transaction or series of
transactions not involving a public offering within the meaning of the
Securities Act of 1933.
(c) "Disinterested Stockholder" shall mean a stockholder of the
Corporation who is not an Interested Stockholder or an Affiliate or an
Associate of an Interested Stockholder.
(d) a person shall be a "beneficial owner" of any Voting Stock:
(1) which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly; or
(2) which such person or any of its Affiliates or Associates has
(a) the right to acquire (whether such right is exercisable immediately or
only after the passage of time) pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise or (b) the right to vote or to direct the
vote pursuant to any agreement, arrangement or understanding; or
(3) which are beneficially owned, directly or indirectly, by any
other person with which such person or any of its Affiliates or Associates has
any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of Voting Stock.
(e) For the purposes of determining whether a person is an Interested
Stockholder pursuant to paragraph (b) of this Section 4, the number of shares
of Voting Stock deemed to be outstanding shall include shares deemed owned by
such person through application of paragraph (d) of this Section 4 but shall
not include any other shares of Voting Stock which may be issuable to other
persons pursuant to any agreement, arrangement or understanding or upon
exercise of conversion rights, exchange rights, warrants or options or
otherwise.
(f) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on February 1, 1993.
(g) "Subsidiary" shall mean any Corporation more than 50% of whose
outstanding stock having ordinary voting power in the election of directors is
owned by the Corporation, by a Subsidiary or by the Corporation and one or
more Subsidiaries; provided, however, that for the purposes of the definition
of Interested Stockholder set forth in paragraph (b) of this Section 4, the
term "Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned by the Corporation, by a Subsidiary or by
the Corporation and one or more Subsidiaries.
(h) "Disinterested Director" means any member of the Board of
Directors of the Corporation who is unaffiliated with, and not a nominee of,
the Interested Stockholder and was a member of the Board of Directors prior to
the time that the Interested Stockholder became an Interested Stockholder, and
any successor of a Disinterested Director who is unaffiliated with, and not a
nominee of, the Interested Stockholder and who is recommended to succeed a
Disinterested Director by a majority of Disinterested Directors then on the
Board of Directors.
(i) "Fair Market Value" means: (1) in the case of stock, the highest
closing sale price during the 30-day period immediately preceding the date in
question of a share of such stock on the New York Stock Exchange Composite
Tape or, if such stock is not quoted on the Composite Tape, on the New York
Stock Exchange or, if such stock is not listed on such Exchange, on the
principal United States securities exchange registered under the Securities
Exchange Act of 1934 on which such stock is listed or, if such stock is not
listed on any such exchange, the highest closing sales price or bid quotation
with respect to a share of such stock during the 30-day period preceding the
date in question on the National Association of Securities Dealers, Inc.
Automated Quotations System or any system then in use or, if no such
quotations are available, the fair market value on the date in question of a
share of such stock as determined by a majority of the Disinterested Directors
in good faith; and (2) in the case of stock of any class or series which is
not traded on any securities exchange or in the over-the-counter market or in
the case of property other than cash or stock, the fair market value of such
stock or property, as the case may be, on the date in question as determined
by a majority of the Disinterested Directors in good faith.
Section 5. A majority of the Disinterested Directors of the Corporation
shall have the power and duty to determine, on the basis of information known
to them after reasonable inquiry, all facts necessary to determine compliance
with this Article XIV, including, without limitation, (a) whether a person is
an Interested Stockholder, (b) the number of shares of Voting Stock
beneficially owned by any person, (c) whether a person is an Affiliate or
Associate of another person, (d) whether the requirements of Section 3 of this
Article XIV have been met with respect to any Business Combination and
(e) whether the assets which are the subject of any Business Combination have,
or the consideration to be received for the issuance or transfer of securities
by the Corporation or any Subsidiary in any Business Combination has, (i) an
aggregate Fair Market Value of $10,000,000 or more or (ii) represent in the
aggregate more than 75% of the total value of the assets of the Corporation
and its consolidated Subsidiaries prepared in accordance with generally
accepted accounting principles then in effect; and the good faith
determination of a majority of the Disinterested Directors on such matters
shall be conclusive and binding for all purposes of this Article XIV.
Section 6. Nothing contained in this Article XIV shall be construed to
relieve an Interested Stockholder from any fiduciary obligation imposed by
law.
ARTICLE XV
The Corporation reserves the right at any time and from time to time to
amend, alter, change or repeal any provision contained in this Restated
Certificate of Incorporation, and any other provisions authorized by the laws
of the State of Delaware at the time in force may be added or inserted, in the
manner now or hereafter prescribed herein or by applicable law, and all
rights, preferences and privileges of whatsoever nature conferred upon
stockholders, directors or any other persons whomsoever by and pursuant to
this Restated Certificate of Incorporation in its present form or as hereafter
amended are granted subject to the right reserved in this Article XV;
provided, however, that any amendment or repeal of Article VIII or Article IX
of this Restated Certificate of Incorporation shall not adversely affect any
right or protection existing hereunder immediately prior to such amendment or
repeal; and provided, further, that Articles V, VI, VII, VIII, IX, X, XII,
XIII, XIV and XV of this Restated Certificate of Incorporation shall not be
amended, altered, changed or repealed without the affirmative vote of the
holders of at least 75% of the then outstanding stock of the Corporation
entitled to vote generally in the election of directors.
<PAGE>
IN WITNESS WHEREOF, the undersigned, President and Chief Executive Officer
and Secretary of AMCON Distributing Company, hereby further certify that the
facts hereinabove stated are true and that the execution hereof is their
voluntary act and deed and the voluntary act and deed of said Corporation,
under penalties of perjury.
DATED this 19th day of March, 1998.
AMCON DISTRIBUTING COMPANY
By: /s/ Kathleen M. Evans
-----------------------
Kathleen M. Evans, President and
Chief Executive Officer
Attest:
By: /s/ Michael D. James
-------------------------
Michael D. James, Secretary
FIRST AMENDMENT TO
LOAN AGREEMENT
This FIRST AMENDMENT TO LOAN AGREEMENT dated as of February 25, 1998 (this
"Amendment"), is by and between AMCON DISTRIBUTING COMPANY, a Delaware
corporation (the "Borrower"), and LASALLE NATIONAL BANK, a national banking
association (together with its successors and assigns, "Bank").
RECITALS
WHEREAS, Borrower and Bank are parties to that certain Loan Agreement,
dated as of November 10, 1997 (the "Loan Agreement"); and
WHEREAS, Borrower and Bank are entering into additional financial
transactions on the date hereof and, in connection therewith, desire to amend
the Loan Agreement as set forth herein.
NOW, THEREFORE, in consideration of the premises herein contained, the
loans and other financial accommodations heretofore or hereafter made to
Borrower by Bank, and for other good and valuable consideration (the receipt,
sufficiency and adequacy of which are hereby acknowledged), the parties hereto
hereby agree as follows:
1. Definitions. Terms capitalized herein and not otherwise defined
herein shall have the meanings ascribed to such terms in the Loan Agreement.
2. Amendments to Loan Agreement. Subject to the terms and conditions
contained herein,
(a) Borrower and Bank hereby amend Section 3(a) of the Loan Agreement (i)
by deleting clauses (viii) and (ix) thereof in their entirety and (ii) by
inserting a new clause (viii) thereto which shall read in its entirety as
follows:
"(viii) Borrower shall comply in all respects with all of its
agreements and covenants contained in that certain Loan and Security Agreement
dated as of February 25, 1998 between Borrower and Bank, as the same may be
amended or modified from time to time (the "New Loan Agreement")."
(b) Borrower and Bank hereby amend and restate Section 4(c) of the Loan
Agreement to read in its entirety as follows:
"(c) If an Event of Default shall occur under any of the Loan
Documents or under the New Loan Agreement, and the same is not cured within
such cure, grace or other period, if any, provided in such applicable
agreement; or"
(c) Borrower and Bank hereby amend and restate Section 4(m) of the Loan
Agreement to read in its entirety as follows:
"(m) Guarantor shall cease to own and/or control with power to
directly vote more than 23% of the issued and outstanding stock of Borrower;
or"
3. Conditions Precedent. The effectiveness of the amendment contained
in Section 2 above are subject to, and contingent upon, the execution and
delivery by each of the parties hereto of duly executed counterparts hereof.
4. Representations and Warranties. Borrower hereby represents and
warrants to Bank that:
(a) this Amendment and the Loan Agreement as amended hereby constitute the
legal, valid, and binding obligations of Borrower, enforceable in accordance
with their respective terms, subject to the effect of any applicable
bankruptcy, insolvency, reorganization, receivership or similar law affecting
creditors' rights generally and general principles of equity;
(b) the representations and warranties of Borrower contained in the Loan
Agreement and the Loan Documents are true and correct on and as of the date
hereof to the same extent as though made on and as of the date hereof except
to the extent such representations and warranties specifically relate to an
earlier date, in which case they are true and correct as of such earlier date;
and
(c) after giving effect to this Amendment, no Event of Default or event or
condition which, with the giving of notice the lapse of time or both, would
constitute an Event of Default, exists and is continuing.
5. Miscellaneous.
(a) This Amendment shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
(b) Borrower affirms and acknowledges that this Amendment shall be a Loan
Document for all purposes of the Loan Agreement.
(c)Any reference to the Loan Agreement contained in the Loan Agreement,
any Loan Document or any notice, request, certificate or other document shall
be deemed to be a reference to the Loan Agreement as amended by this Amendment
unless the context shall otherwise specify.
(d) This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which
taken together shall constitute but one and the same instrument.
(e) Except as expressly provided herein, the Loan Agreement and the Loan
Documents shall remain unmodified and in full force and effect and are hereby
ratified and confirmed.
(f) The execution, delivery and effectiveness of this Amendment shall not
operate as a waiver of any right, power or remedy of Bank under the Loan
Agreement or any of the Loan Documents.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
(g) THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAW PROVISIONS) OF THE STATE
OF ILLINOIS.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
AMCON DISTRIBUTING COMPANY
By: Kathleen M. Evans
-------------------------
Name: Kathleen M. Evans
Title: President
LASALLE NATIONAL BANK
By: Mark A. Ryle
-------------------------
Name: Mark A. Ryle
Its: First Vice President
The undersigned hereby reaffirms its obligations under that certain
Guaranty dated as of November 10, 1997 made by the undersigned in favor of
LaSalle National Bank (the "Guaranty"), and agrees and confirms that the
"Obligations" (as such term is used in the Guaranty) include all of Borrower's
obligations under the Loan Agreement as amended hereby.
By: William F. Wright
---------------------
WILLIAM F. WRIGHT, in his individual capacity
FIRST ALLONGE TO NOTE
This FIRST ALLONGE TO NOTE dated as of February 25, 1998 (this "Allonge"),
is by and between AMCON DISTRIBUTING COMPANY, a Delaware corporation (the
"Borrower"), and LASALLE NATIONAL BANK, a national banking association
(together with its successors and assigns, "Bank").
RECITALS
WHEREAS, Borrower has executed that certain Note dated November 10, 1997
(the "Note") in the principal amount of $4,500,000 to the order of Bank; and
WHEREAS, Borrower and Bank are entering into additional financial
transactions on the date hereof and, in connection therewith, desire to amend
the Note as set forth herein.
NOW, THEREFORE, in consideration of the premises herein contained, the
loans and other financial accommodations heretofore or hereafter made to
Borrower by Bank, and for other good and valuable consideration (the receipt,
sufficiency and adequacy of which are hereby acknowledged), the parties hereto
hereby agree as follows:
1. Definitions. Terms capitalized herein and not otherwise defined
herein shall have the meanings ascribed to such terms in the Note.
2. Amendment to Note. Subject to the terms and conditions contained
herein, Borrower and Bank hereby amend and restate Section 2(a) of the Note to
read in its entirety as follows:
(a) (i) On December 10, 1997 a payment equal to $75,000 plus accrued and
unpaid interest at the Loan Rate and (ii) commencing on August 10, 1998 and on
the 10th day of each month thereafter through and including the month on which
the Maturity Date occurs (the "Payment Date"), a payment equal to the sum of
$85,096.15 plus accrued and unpaid interest at the Loan Rate (as defined in
the Note); and
3. Conditions Precedent. The effectiveness of the amendment contained in
Section 2 above are subject to, and contingent upon, the execution and
delivery by each of the parties hereto of duly executed counterparts hereof.
4. Representations and Warranties. Borrower hereby represents and
warrants to Bank that:
(a) this Allonge and the Note as amended hereby constitute the legal,
valid, and binding obligations of Borrower, enforceable in accordance with
their respective terms, subject to the effect of any applicable bankruptcy,
insolvency, reorganization, receivership or similar law affecting creditors'
rights generally and general principles of equity;
(b) the representations and warranties of Borrower contained in the Loan
Agreement and the Loan Documents are true and correct on and as of the date
hereof to the same extent as though made on and as of the date hereof except
to the extent such representations and warranties specifically relate to an
earlier date, in which case they are true and correct as of such earlier date;
and
(c) after giving effect to this Allonge, no Event of Default or event or
condition which, with the giving of notice the lapse of time or both, would
constitute an Event of Default, exists and is continuing.
5. Miscellaneous.
(a) This Allonge shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
(b) Borrower affirms and acknowledges that this Allonge shall be a Loan
Document for all purposes of the Loan Agreement.
(c) Any reference to the Note contained in the Note, any Loan Document or
any notice, request, certificate or other document shall be deemed to be a
reference to the Note as amended by this Allonge unless the context shall
otherwise specify.
(d) This Allonge may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which
taken together shall constitute but one and the same instrument.
(e) Except as expressly provided herein, the Note and the Loan Documents
shall remain unmodified and in full force and effect and are hereby ratified
and confirmed.
(f) The execution, delivery and effectiveness of this Allonge shall not
operate as a waiver of any right, power or remedy of Bank under the Note, Loan
Agreement or any of the Loan Documents.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
(g) THIS ALLONGE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAW PROVISIONS) OF THE STATE OF
ILLINOIS.
IN WITNESS WHEREOF, the parties hereto have caused this Allonge to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
AMCON DISTRIBUTING COMPANY
By: Kathleen M. Evans
------------------------
Name: Kathleen M. Evans
Title: President
LASALLE NATIONAL BANK
By: Mark A. Ryle
------------------------
Name: Mark A. Ryle
Its: First Vice President
The undersigned hereby reaffirms its obligations under that certain
Guaranty dated as of November 10, 1997 made by the undersigned in favor of
LaSalle National Bank (the "Guaranty"), and agrees and confirms that the
"Obligations" (as such term is used in the Guaranty) include all of Borrower's
obligations under the Note as amended hereby.
By: William F. Wright
------------------
WILLIAM F. WRIGHT, in his individual capacity
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 AMCON DISTRIBUTING COMPANY ("BORROWER"), a Delaware corporation, with its
principal place of business being located at 10228 L Street, Omaha, Nebraska
68127.
WITNESSETH:
WHEREAS, Borrower may, from time to time, request Loans from Bank, and the
parties wish to provide for the terms and conditions upon which such Loans
shall be made;
NOW, THEREFORE, in consideration of any Loan (including any Loan by renewal or
extension) hereafter made to 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 Borrower 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) "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.
(f) "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, FFH) or any other Person now or
hereafter pledged to Bank to secure, either directly or indirectly, repayment
of any of the Liabilities.
(g) "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 (other than a right to return dated cigarette inventory which
can, in turn, be returned by Borrower to the manufacturer thereof for a full
refund), 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.
(h) "Eligible Cigarette Inventory" shall mean (i) Eligible Inventory of
Borrower consisting of cigarettes which are acceptable to Bank in its sole
discretion for lending purposes and (ii) cigarette tax stamps which are
acceptable to Bank in its sole discretion for lending purposes. Without
limiting Bank's discretion, Bank shall, in general, consider:
(i) Eligible Inventory consisting of cigarettes to be Eligible
Cigarette Inventory unless such cigarettes have cigarette tax stamps affixed
thereto which have been issued by any State or political subdivisions thereof
where Bank determines, in its sole discretion, that the affixing of such
jurisdictions tax stamps thereto renders such cigarette inventory ineligible;
and
(ii) cigarette tax stamps to be Eligible Cigarette Inventory unless
such tax stamps have been issued by any State or political subdivisions
thereof where Bank determines in its sole discretion that Bank would be unable
to affix or redeem such cigarette tax stamps or otherwise determines that such
tax stamps shall be ineligible.
(i) "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.
(j) "Eligible Vehicle" shall mean those Vehicles which, as of the date of
the acquisition of such Vehicle by Borrower (or, with respect to Vehicles
owned by Borrower on the date hereof, as of the date hereof): (a) are owned
by Borrower free and clear of all Liens (other than Liens of the bank);
(b) are each in good working order and condition; (c) are each subject to a
first priority perfected security interest in favor of Bank; (d) are each paid
for in full with the proceeds of Loans made, or loans refinanced, hereunder;
and (e) were not purchased by Borrower in or as part of a "bulk" transfer or
sale of assets unless Borrower complied with all applicable bulk sales or bulk
transfer laws relating thereto.
(k) "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.
(l) "Event of Default" shall have the meaning specified in paragraph 12
hereof.
(m) "Exhibit A" shall mean the exhibit entitled Exhibit A - Special Pro-
visions which is attached hereto and made a part hereof.
(n) "Exhibit B" shall mean the exhibit entitled Exhibit B - Business and
Collateral Locations which is attached hereto and made a part hereof.
(o) "Existing Equipment Loan Agreement" shall mean that certain Loan
Agreement dated as of October 28, 1994 between Borrower and Norwest Bank
Nebraska, National Association, as amended.
(p) "FFH" shall mean Food for Health Co., Inc., an Arizona corporation and
an Affiliate of Borrower on the date hereof.
(q) "FFH Documents" shall mean the collective reference to the FFH Loan
Agreement and each of the Other Agreements (as defined therein).
(r) "FFH Loan Agreement" shall mean that certain Loan and Security
Agreement dated as of the date hereof between FFH and Bank (including Exhibit
A thereto), as amended or modified from time to time.
(s) "Guaranty" shall mean that certain Continuing Unconditional Guaranty
dated the date hereof made by Borrower in favor of Bank.
(t) "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).
(u) "Indemnified Party" shall have the meaning specified in paragraph 14
hereof.
(v) "Interest Period" shall mean either a LIBOR Interest Period or a
Treasury Interest Period, as the context requires.
(w) "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.
(x) "LIBOR Interest Period" shall have the meaning specified in
subparagraph (3)(b) of Exhibit A of the Agreement.
(y) "LIBOR Rate Loans" shall mean the Loans bearing interest at the rate
set forth in subparagraph (3)(b) of Exhibit A of the Agreement.
(z) "Loans" shall mean all loans and advances made by Bank to or on behalf
of Borrower hereunder.
(aa) "Loan Limit" shall have the meaning specified in paragraph 1 of
Exhibit A.
(ab) "Lock Box" and "Lock Box Account" shall have the meanings specified
in paragraph 7 hereof.
(ac) "Obligor" shall mean Borrower and each other Person who is or shall
become primarily or secondarily liable for any of the Liabilities.
(ad) "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.
(ae) "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.
(af) "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; (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; and (iv) liens arising in connection with a Permitted Real Estate
Financing, provided that such liens only attach to the real estate financed
thereby.
(ag) "Permitted Real Estate Financing" shall mean any sale and leaseback
of any real estate owned in fee simple by Borrower on the date hereof and any
financing secured solely by real estate owned by Borrower in fee simple on the
date hereof; provided, that in connection with any such financing, Borrower
shall have caused the Person providing such financing to executed landlord
and/or mortgagee agreements in favor of, and in form and substance
satisfactory to, Bank.
(ah) "Prime Rate Loans" shall mean the Loans bearing interest at the rates
set forth in subparagraph (3)(a) of Exhibit A of the Agreement.
(ai) "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.
(aj) "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.
(ak) "Tangible Net Worth" shall have the meaning specified in subparagraph
11(o) hereof.
(al) "Term" shall have the meaning specified in paragraph 9 hereof.
(am) "Title" shall mean any certificate of origin, document, instrument,
certificate or agreement specified by the applicable jurisdiction that
evidences the interest in a Vehicle (whether new or used, owned or leased) of
Borrower.
(an) "Treasury Interest Period" shall have the meaning specified in
subparagraph (3)(c) of Exhibit A of the Agreement.
(ao) "Treasury Rate" shall have the meaning specified in subparagraph
(3)(c) of Exhibit A of the Agreement.
(ap) "Treasury Rate Loans" shall mean the Loans bearing interest at the
rate set forth in subparagraph (3)(c) of Exhibit A of the Agreement.
(aq) "Type" of Loan shall mean either a Prime Rate Loan, a LIBOR Loan or a
Treasury Rate Loan.
(ar) "Vehicle" shall mean any automobile, cargo van, delivery truck or
trailer to which title thereto is evidenced by a Title.
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 direct all of its Account Debtors serviced out of its
Omaha, Nebraska and St. Louis, Missouri locations to make all payments on the
Accounts directly to one or more post office boxes (each, a "Lock Box")
designated by, and under the exclusive control of, Bank or other financial
institution(s) acceptable to Bank. Borrower shall establish one or more
accounts (the "Lock Box Account") in Bank's name with Bank or such other
financial institution(s) acceptable to Bank (which shall include those
institutions at which Borrower maintains Lock Box Accounts on the date
hereof), into which all payments received in a particular Lock Box shall be
deposited, and into which Borrower will immediately deposit all payments
received by Borrower at such locations for Inventory, services or the
disposition of other Collateral 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 a Lock Box
Account or such other account as Bank may from time to time direct (each, an
"Other Account"). If any Lock Box Account or Other Account is not established
with Bank, the financial institution with which such Lock Box Account is
established shall acknowledge and agree, in a manner satisfactory to Bank,
that the amounts on deposit in such Lock Box Account or Other Account are the
sole and exclusive property of Bank, that such financial institution has no
right to setoff against such Lock Box Account or Other Account or against any
other account maintained by such financial institution into which the contents
of such Lock Box Account or Other Account are transferred, and that such
financial institution (or, to the extent consistent with Borrower's existing
practice, Borrower) shall wire, or otherwise transfer in immediately available
funds in a manner satisfactory to Bank (which shall include automatic clearing
house transfers initiated by Borrower), funds deposited in such Lock Box
Account or Other Account on a daily basis as such funds are collected.
Borrower agrees that all payments made to any Lock Box Account or 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 Lock
Box Account or Other Account is established with Bank, Borrower agrees to pay
all fees, costs and expenses in connection with opening and maintaining such
Lock Box 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, 2003 (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, as Eligible
Inventory or as Eligible Cigarette 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", "Eligible Inventory" and "Eligible Cigarette 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, Eligible
Inventory or Eligible Cigarette 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, immediately on demand by Bank,
shall deliver to Bank any and all evidence of ownership of, including, without
limitation, certificates of title and applications of title to, any of the
Equipment;
(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; (iv) incur purchase money indebtedness or capitalized
lease obligations in connection with capital expenditures permitted under this
Agreement; and (v) incur indebtedness constituting a Permitted Real Estate
Financing;
(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 FFH 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) for consideration in excess of $100,000 in the
aggregate during any calendar year, 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 other than such issuances made pursuant
to the terms of Borrower's employee stock option plan;
(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) Other than the shares of capital stock of FFH and Cramond Investment
Company, Ltd. owned by Borrower on the date hereof, 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
$4,500,000.00. "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 FFH 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; or
(m) the institution in any court of a criminal proceeding against any
Obligor, or the indictment of any Obligor for any crime.
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
AMCON DISTRIBUTING COMPANY
By: Kathleen M. Evans
------------------------
Title: President
<PAGE>
EXHIBIT A-SPECIAL PROVISIONS
Attached to and made a part of that certain Loan and Security Agreement of
even date herewith between AMCON Distributing Company ("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) Subject to subparagraph 2(b) of this Exhibit 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) Subject to subparagraph 2(b) of this Exhibit A, up to seventy percent
(70%) of the lower of the cost or market value of Borrower's Eligible
Inventory (other than Eligible Cigarette Inventory); plus
(c) Subject to subparagraph 2(b) of this Exhibit A, up to eighty-five
percent (85%) of the lower of the cost or market value of Borrower's Eligible
Cigarette Inventory other than Eligible Cigarette Inventory purchased with
advances made under subparagraph 1(d) of this Exhibit A; plus
(d) Subject to subparagraph 2(c) of this Exhibit A, up to one hundred
percent (100%) of the cost of Eligible Cigarette Inventory purchased with
advances designated by Borrower as advances to be made under this subparagraph
1(d) ("Accommodation Advances"); plus
(e) Subject to subparagraph 2(d) of this Exhibit A, up to one hundred
percent (100%) of the purchase price of Vehicles purchased by Borrower and
upon which Bank has a first perfected security interest, to be used by
Borrower from time to time to purchase Vehicles (provided that an amount equal
to the outstanding principal amount of the loans outstanding under the
Existing Vehicle Loan Agreement on the date of the initial Loan under the
Agreement (the "Existing Vehicle Purchase Amount") shall be used to repay the
outstanding principal amount of Loans under the Existing Equipment Loan
Agreement); provided, that prior to any advance under this subparagraph for
any Vehicle to be purchased after the date hereof, Borrower shall furnish to
Bank a purchase invoice for each Vehicle to be purchased with the proceeds of
such advance and shall have delivered such documents and agreement and taken
such other steps as required under subparagraphs 11 and 18 of this Exhibit A
with respect to such Vehicles and the related Titles (such advances being
referred to herein as "Vehicle Advances"); minus
(f) 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), (b) and (c) above shall in no event exceed (A) prior to
June 25, 1998, Twenty Million and No/100 Dollars ($20,000,000) and (B) on and
after June 25, 1998, Fifteen Million and No/100 Dollars ($15,000,000), (ii)
the aggregate amount of advances made pursuant to subparagraph (d) above shall
in no event exceed (A) prior to June 25, 1998, Five Million and No/100 Dollars
($5,000,000) and (B) on and after June 25, 1998, Ten Million and No/100
Dollars ($10,000,000) and (iii) the aggregate amount of advances made pursuant
to subparagraph (e) above shall in no event exceed One Million Five Hundred
Thousand and No/100 Dollars ($1,500,000), except as such amounts may be
increased by Bank, in its sole discretion, from time to time or decreased
pursuant to the terms of this Agreement;
provided further, that the aggregate Loan Limit shall in no event
exceed Twenty Six Million Five Hundred Thousand and No/100 Dollars
($26,500,000), except as such amounts may be increased by Bank, in its sole
discretion, from time to time or decreased pursuant to the terms of this
Agreement.
(2) ACCOMMODATION ADVANCE REPAYMENT; AVAILABILITY REDUCTIONS:
(a) Each Accommodation Advance made pursuant to subparagraph (1)(d) above
shall be repaid on each date that any Eligible Cigarette Inventory is sold in
an amount equal to the cost of the Eligible Cigarette Inventory so sold.
(b) The availability described in subparagraphs (1)(a), (1)(b) and (1)(c)
of this Exhibit A shall be automatically reduced to zero on the earliest to
occur of (i) February 25, 2002 and (ii) acceleration of the Liabilities or the
suspension or termination of such availability pursuant to the provisions of
paragraph 13 of the Agreement.
(c) The availability described in subparagraph (1)(d) of this Exhibit A
shall be automatically reduced to zero on the earliest to occur of (i) date
that is six month after the date of the initial Accommodation advance; (ii)
February 24, 1999; and (iii) acceleration of the Liabilities or the suspension
or termination of such availability pursuant to the provisions of paragraph 13
of the Agreement.
(d) The availability described in subparagraph (1)(e) of this Exhibit A
shall be curtailed monthly by an amount equal to the sum of (i) an amount
sufficient (assuming a like curtailment each month) to reduce the Existing
Vehicle Purchase Amount to zero at the end of sixty (60) months plus (ii) an
amount, with respect to each advance made under subparagraph 1(e) of this
Exhibit A after the date hereof, equal to one sixtieth (1/60) of each such
advance made after the date hereof. Each such curtailment shall automatically
occur on the last day of each calendar month following the date of the initial
Vehicle Advance until the earliest to occur of (i) the date on which said
availability shall be reduced in full; (ii) the last day of the Term; and
(iii) acceleration of the Liabilities or the suspension or termination of such
availability pursuant to the provisions of paragraph 13 of the Agreement.
(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), (b) or (c) 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 Applicable Margin (as defined below) 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 LIBOR 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 LIBOR Interest Period. "LIBOR 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 LIBOR
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 LIBOR 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. "Applicable
Margin" shall mean (i) with respect to all Loans and advances other than
Vehicle Advances, one and three-quarters percent (1.75%) per annum and (ii)
with respect to all Vehicle Advances, two percent (2.00%) per annum.
(c) With respect to Vehicle Advances only, a rate equal to two percent
(2.0%) in excess of the Treasury Rate (as defined below) applicable to such
Vehicle Advance for the applicable Treasury Interest Period (as defined below)
relating to such Vehicle Advance. "Treasury Rate" shall mean, with respect to
any Vehicle Advance for any Treasury Interest Period, the rate of interest per
annum, as determined by Bank (rounded upwards, if necessary, to the nearest
1/16 of one percent), equal to the yield on the shortest term United States
treasury security then outstanding maturing on or about the last day of such
Treasury Interest Period, determined as of the date that is two (2) Business
Days prior to the first day in such Treasury Interest Period, such rate to
remain fixed for such Treasury Interest Period. "Treasury Interest Period"
shall mean, with respect to any Treasury Rate Loan, a period commencing on the
date such Treasury Rate Loan was made or converted from a Loan of a different
Type, or continued upon the expiration of the immediately preceding Treasury
Interest Period for such Treasury Rate Loan, and shall end on either (i) the
last day of the Term or (ii) if such date is prior to the last day of the
Term, the date that is one (1) year after the first day of such Treasury
Interest Period, 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 Treasury
Interest Period; 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 Treasury Interest Period shall be such that its
expiration occurs on or before the end of the Term; 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 and
Treasury 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 AND TREASURY RATE 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 or (if such Loans
constitute Vehicle Advances) Treasury 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 related thereto, to continue all or
any portion of the relevant Treasury Rate Loans as Treasury Rate Loans; (iv)
as of the last day of any Interest Period, to convert all or any portion of
the LIBOR Rate Loans and/or Treasury Rate Loans to Prime Rate Loans; (v) as of
the last day of any Interest Period, to convert (A) all or any portion of any
LIBOR Rate Loans constituting Vehicle Advances to Treasury Rate Loans and (B)
all or any portion of any Treasury Rate Loans to LIBOR Rate Loans; and (vi) 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 or
Treasury 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 and any Treasury Rate 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 LIBOR 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 LIBOR 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 LIBOR 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 LIBOR 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. Each request for Treasury Rate Loans shall be in an amount
not less than One Hundred Thousand and No/100 Dollars ($100,000.00).
(g) Unless otherwise specified by Borrower, all Loans shall be Prime Rate
Loans.
(h) No more than eight Interest Periods may be in effect with respect to
outstanding LIBOR Rate Loans at any one time. No more than eight Interest
Periods may be in effect with respect to outstanding Treasury Rate Loans at
any one time.
(4) FEES AND CHARGES:
Borrower shall pay to Bank a facilities fee equal to one-eighth of one percent
(0.125%) of the maximum amount of Loans available pursuant to subparagraph
(1)(d) above, which fee shall be fully earned by Bank and payable on the date
that Bank makes its initial disbursement under this Agreement.
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 1.1 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 set forth below for the four fiscal quarter
period ending on such date to be less than the ratio set forth below opposite
such period:
Fiscal Quarter Minimum Ratio
-------------- -------------
Each fiscal quarter ending
on or before September 26, 1998 1.25:1.0
Each fiscal quarter ending
after September 26, 1998 1.50:1.0
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 but excluding the outstanding principal amount
of the indebtedness under the Acquisition Loan Agreement and the outstanding
principal amount of all Accommodation Advances) 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
the second Business Day 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, Eligible
Cigarette 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) CRAMOND: Borrower shall (i) not sell, transfer or encumber any of the
capital stock of Cramond Investment Company, Ltd., a Cayman Islands
corporation ("Cramond"), or permit Cramond to issue any additional equity
interests to, or incur any indebtedness with, any Person or (ii) take all
actions necessary to ensure that Cramond will continue to own fee simple title
to the real property owned by Cramond on the date hereof in the Cayman Islands
free and clear of all liens, claims and encumbrances other than those in
existence on the date hereof securing amounts not greater than the amounts
outstanding on the date hereof.
(11) VEHICLES: Borrower shall execute such financing statements and other
documents or instruments (and pay all taxes (other than nominal filing fees)
and all other extraordinary costs of filing or recording the same in all
public offices being necessary by Bank) and do such other acts and things, as
Bank may from time to time request to establish and maintain a valid first
priority security interest in any of the Vehicles, free of all other liens,
claims and rights of third parties whatsoever (other than Permitted Liens), to
secure the payment of the Liabilities.
(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 FFH 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 FFH Documents to
which they are a party and each of the transactions contemplated thereby shall
have been consummated.
(d) [INTENTIONALLY OMITTED]
(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 and UCC-2 Financing Statement naming
Borrower as debtor and Bank as secured party with respect to the Collateral,
together with such UCC-3 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.
(r) Existing Equipment Loan Agreement and Vehicle Titles: Either (i) Bank
shall have reviewed all documents and other materials relating to the Existing
Vehicle Loan Agreement and determined in its sole discretion that the
indebtedness and liens thereunder, and the terms thereof, are satisfactory to
it or (ii) Bank shall have received evidence satisfactory to Bank that (A) all
liens on Vehicles purchased with proceeds of loans under the Existing
Equipment Loan Agreement (other than liens in favor of Bank) have been
released, (B) such release shall have been indicated on the Title to each such
Vehicle and (C) the Title relating to the Trailers owned by Borrower on the
date hereof identify teach such Vehicle indicates Bank as sole lienholder
thereon.
(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 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.
(e) Designation of Accommodation Advances: In connection with any
borrowing of an Accommodation Advance, a written notice from Borrower
notifying Bank that such Loan is to constitute an Accommodation Advance.
SPECIAL PROVISIONS RELATING TO VEHICLE ADVANCES:
(16) INITIAL VEHICLE ADVANCE: Prior to the disbursement of the initial
Vehicle Advance, Bank shall have received evidence satisfactory to Bank that
(A) the all of Borrower's obligations under the Existing Equipment Loan
Agreement shall have been paid in full (or will be paid in full with the
proceeds of such initial Vehicle Advance), and the Existing Equipment Loan
Agreement and all documents, instruments and agreements executed in connection
therewith shall have been terminated, (B) all liens on Vehicles purchased with
proceeds of loans under the Existing Equipment Loan Agreement (other than
liens in favor of Bank) have been released, (C) such release shall have been
indicated on the Title to each such Vehicle and (D) the Title relating to the
each such Vehicle indicates Bank as sole lienholder thereon.
(17) FAILURE OF TITLE: Notwithstanding anything contained in this Agreement
to the contrary, if Bank has not obtained the appropriate Titles within forty-
five (45) days after making the disbursement of the initial Vehicle Advance,
Borrower shall immediately, upon request of Bank, pay the full principal
amount of the such Vehicle Advance, together with any accrued interest thereon
and any costs, fees, disbursements and expenses incurred thereby.
(18) SUBSEQUENT VEHICLE ADVANCES: Prior to the disbursement of any Vehicle
Advance made after the initial Vehicle Advance, Borrower shall deliver to Bank
a copy of the purchase invoice for each Vehicle to be acquired with the
proceeds thereof and shall deliver the Title to Bank to be held by Bank, which
the Title shall indicate that such Vehicle is registered in the name of
Borrower and shall list Bank as sole lienholder thereon.
IN WITNESS WHEREOF, the parties hereto have duly executed this Exhibit
A to Loan and Security Agreement of the 25th day of February, 1998.
AMCON DISTRIBUTING COMPANY LASALLE NATIONAL BANK
By: Kathleen M. Evans 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 AMCON DISTRIBUTING COMPANY ("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.
NOTE
$26,500,000 Chicago, Illinois
February 25, 1998
FOR VALUE RECEIVED, the undersigned, AMCON Distributing Company, a
Delaware corporation ("AMCON Distributing"), promises to pay to the order of
LASALLE NATIONAL BANK (the "Bank"), at the main office of the Bank, the
principal sum of Twenty Six Million Five Hundred Thousand Dollars
($26,500,000) plus the aggregate unpaid principal amount of all advances made
by Bank to AMCON Distributing pursuant to and in accordance with Paragraph 2
of the Loan Agreement (as hereinafter defined) in excess of such amount, or,
if less, the aggregate unpaid principal amount of all advances made by Bank to
AMCON Distributing pursuant to and in accordance with Paragraph 2 of the Loan
Agreement. AMCON Distributing further promises to pay interest on the
outstanding principal amount hereof on the dates and at the rates provided in
the Loan Agreement from the date hereof until payment in full hereof.
This Note is referred to in and was delivered pursuant to that certain
Loan and Security Agreement, as it may be amended from time to time, together
with all exhibits thereto, dated as of February 25, 1998, by and between Bank
and AMCON Distributing (the "Loan Agreement"). All terms which are
capitalized and used herein (which are not otherwise defined herein) shall
have the meaning ascribed to such terms in the Loan Agreement.
The outstanding principal balance of AMCON Distributing's liabilities to
the Bank under this Note shall be payable pursuant to the terms of the Loan
Agreement.
AMCON Distributing hereby authorizes the Bank to charge any account of
AMCON Distributing for all sums due hereunder. If payment hereunder becomes
due and payable on a Saturday, Sunday or legal holiday under the laws of the
United States or the State of Illinois, the due date thereof shall be extended
to the next succeeding business day, and interest shall be payable thereon at
the rate specified during such extension. Credit shall be given for payments
made in the manner and at the times provided in the Loan Agreement. It is the
intent of the parties that the rate of interest and other charges to AMCON
Distributing under this Note shall be lawful; therefore, if for any reason the
interest or other charges payable hereunder are found by a court of competent
jurisdiction, in a final determination, to exceed the limit which Bank may
lawfully charge AMCON Distributing, then the obligation to pay interest or
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 AMCON Distributing.
The principal and all accrued interest hereunder may be prepaid by AMCON
Distributing, in part or in full, at any time.
AMCON Distributing waives the benefit of any law that would otherwise
restrict or limit Bank in the exercise of its right, which is hereby
acknowledged, to set-off against the Liabilities, without notice and at any
time hereafter, any indebtedness matured or unmatured owing from Bank to AMCON
Distributing. AMCON Distributing waives every defense, counterclaim or setoff
which AMCON Distributing may now have or hereafter may have to any action by
Bank in enforcing this Note and/or any of the other Liabilities, or in
enforcing Bank's rights in the Collateral and ratifies and confirms whatever
Bank may do pursuant to the terms hereof and of the Loan Agreement and with
respect to the Collateral and agrees that Bank shall not be liable for any
error in judgment or mistakes of fact or law.
This Note shall inure to the benefit of the Bank and its successors and
assigns and shall be binding upon AMCON Distributing and its successors and
permitted assigns. As used herein, the term "Bank" shall mean and include the
successors and assigns of the identified payee and the holder or holders of
this Note from time to time.
AMCON Distributing, any other party liable with respect to the Liabilities
and any and all endorsers and accommodation parties, waive any and all
presentment, demand, notice of dishonor, protest, and all other notices and
demands in connection with the enforcement of Bank's rights hereunder.
The loan evidenced hereby has been made at Chicago, Illinois. THIS NOTE
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, and shall be binding upon AMCON Distributing and AMCON
Distributing's successors and assigns. Wherever possible, each provision of
this Note shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Note shall be prohibited by
or be invalid under such law, such provision shall be severable, and be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remaining provisions of this Note.
The Bank shall not by any act of omission or commission be deemed to waive
any of its rights or remedies hereunder unless such waiver be in writing and
signed by the Bank, and then only to the extent specifically set forth herein.
A waiver of any one event shall not be construed as continuing or as a bar to
or waiver of such right or remedy on a subsequent event.
To induce the Bank to make the loan evidenced by this Note, AMCON
Distributing (i) irrevocably agrees that, subject to Bank's sole and absolute
election, all actions arising directly or indirectly as a result or in
consequence of this Note or any other agreement with the Bank, or the
Collateral, shall be instituted and litigated only in courts having situs in
the City of Chicago, Illinois; (ii) hereby consents to the exclusive
jurisdiction and venue of any State or Federal Court located and having its
situs in said city; and (iii) waives any objection based on forum non-
conveniens. IN ADDITION, BANK AND AMCON DISTRIBUTING HEREBY WAIVE TRIAL BY
JURY IN ANY ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS
NOTE, THE LIABILITIES, THE COLLATERAL, ANY ALLEGED TORTUOUS CONDUCT BY AMCON
DISTRIBUTING OR BANK OR WHICH IN ANY WAY, DIRECTLY OR INDIRECTLY, ARISES OUT
OF OR RELATES TO THE RELATIONSHIP BETWEEN AMCON DISTRIBUTING AND BANK. In
addition, AMCON Distributing agrees that all service of process shall be made
as provided in the Loan Agreement.
IN WITNESS WHEREOF, AMCON Distributing has executed this Note on the
date above set forth.
AMCON DISTRIBUTING COMPANY
By: Kathleen M. Evans
------------------------
Title: President
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.
NOTE
$5,000,000 Chicago, Illinois
February 25, 1998
FOR VALUE RECEIVED, the undersigned, Food For Health Co., Inc., an Arizona
corporation ("FFH"), promises to pay to the order of LASALLE NATIONAL BANK
(the "Bank"), at the main office of the Bank, the principal sum of Five
Million Dollars ($5,000,000) plus the aggregate unpaid principal amount of all
advances made by Bank to FFH pursuant to and in accordance with Paragraph 2 of
the Loan Agreement (as hereinafter defined) in excess of such amount, or, if
less, the aggregate unpaid principal amount of all advances made by Bank to
FFH pursuant to and in accordance with Paragraph 2 of the Loan Agreement. FFH
further promises to pay interest on the outstanding principal amount hereof on
the dates and at the rates provided in the Loan Agreement from the date hereof
until payment in full hereof.
This Note is referred to in and was delivered pursuant to that certain
Loan and Security Agreement, as it may be amended from time to time, together
with all exhibits thereto, dated as of February 25, 1998, by and between Bank
and FFH (the "Loan Agreement"). All terms which are capitalized and used
herein (which are not otherwise defined herein) shall have the meaning
ascribed to such terms in the Loan Agreement.
The outstanding principal balance of FFH's liabilities to the Bank under
this Note shall be payable pursuant to the terms of the Loan Agreement.
FFH hereby authorizes the Bank to charge any account of FFH for all sums
due hereunder. If payment hereunder becomes due and payable on a Saturday,
Sunday or legal holiday under the laws of the United States or the State of
Illinois, the due date thereof shall be extended to the next succeeding
business day, and interest shall be payable thereon at the rate specified
during such extension. Credit shall be given for payments made in the manner
and at the times provided in the Loan Agreement. It is the intent of the
parties that the rate of interest and other charges to FFH under this Note
shall be lawful; therefore, if for any reason the interest or other charges
payable hereunder are found by a court of competent jurisdiction, in a final
determination, to exceed the limit which Bank may lawfully charge FFH, then
the obligation to pay interest or 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 FFH.
The principal and all accrued interest hereunder may be prepaid by FFH, in
part or in full, at any time.
FFH waives the benefit of any law that would otherwise restrict or limit
Bank in the exercise of its right, which is hereby acknowledged, to set-off
against the Liabilities, without notice and at any time hereafter, any
indebtedness matured or unmatured owing from Bank to FFH. FFH waives every
defense, counterclaim or setoff which FFH may now have or hereafter may have
to any action by Bank in enforcing this Note and/or any of the other
Liabilities, or in enforcing Bank's rights in the Collateral and ratifies and
confirms whatever Bank may do pursuant to the terms hereof and of the Loan
Agreement and with respect to the Collateral and agrees that Bank shall not be
liable for any error in judgment or mistakes of fact or law.
This Note shall inure to the benefit of the Bank and its successors and
assigns and shall be binding upon FFH and its successors and permitted
assigns. As used herein, the term "Bank" shall mean and include the
successors and assigns of the identified payee and the holder or holders of
this Note from time to time.
FFH, any other party liable with respect to the Liabilities and any and
all endorsers and accommodation parties, waive any and all presentment,
demand, notice of dishonor, protest, and all other notices and demands in
connection with the enforcement of Bank's rights hereunder.
The loan evidenced hereby has been made at Chicago, Illinois. THIS NOTE
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, and shall be binding upon FFH and FFH's successors and
assigns. Wherever possible, each provision of this Note shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited by or be invalid under such law,
such provision shall be severable, and be ineffective to the extent of such
prohibition or invalidity, without invalidating the remaining provisions of
this Note.
The Bank shall not by any act of omission or commission be deemed to waive
any of its rights or remedies hereunder unless such waiver be in writing and
signed by the Bank, and then only to the extent specifically set forth herein.
A waiver of any one event shall not be construed as continuing or as a bar to
or waiver of such right or remedy on a subsequent event.
To induce the Bank to make the loan evidenced by this Note, FFH (i)
irrevocably agrees that, subject to Bank's sole and absolute election, all
actions arising directly or indirectly as a result or in consequence of this
Note or any other agreement with the Bank, or the Collateral, shall be
instituted and litigated only in courts having situs in the City of Chicago,
Illinois; (ii) hereby consents to the exclusive jurisdiction and venue of any
State or Federal Court located and having its situs in said city; and (iii)
waives any objection based on forum non-conveniens. IN ADDITION, BANK AND FFH
HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY
OR INDIRECTLY TO THIS NOTE, THE LIABILITIES, THE COLLATERAL, ANY ALLEGED
TORTUOUS CONDUCT BY FFH OR BANK OR WHICH IN ANY WAY, DIRECTLY OR INDIRECTLY,
ARISES OUT OF OR RELATES TO THE RELATIONSHIP BETWEEN FFH AND BANK. In
addition, FFH agrees that all service of process shall be made as provided in
the Loan Agreement.
IN WITNESS WHEREOF, FFH has executed this Note on the date above set
forth.
Food For Health Co., Inc.
By: Jerry Fleming
------------------------
Title: President
CONTINUING UNCONDITIONAL GUARANTY
THIS GUARANTY (this "Guaranty") is made as of February 25, 1998, by AMCON
DISTRIBUTING COMPANY, a Delaware corporation (hereinafter, together with its
successors and permitted assigns, the "Guarantor"), to and for the benefit of
LASALLE NATIONAL BANK, a national banking association (hereinafter, together
with its successors and assigns, the "Bank").
R E C I T A L S:
WHEREAS, Food For Health Co., Inc. (the "Borrower") has entered into a
Loan and Security Agreement dated as of the date hereof (the "Loan Agreement")
with Bank pursuant to which Bank has made or may from time to time hereafter
make loans and advances to or extend other financial accommodations to
Borrower;
WHEREAS, the undersigned is desirous of having Bank extend and/or continue
the extension of credit to Borrower and Bank has required that Guarantor
execute and deliver this Guaranty to Bank as a condition to the extension and
continuation of credit by Bank; and
WHEREAS, the extension and/or continued extension of credit, as aforesaid,
by Bank is necessary and desirable to the conduct and operation of the
business of Borrower and will inure to the financial benefit of Guarantor;
NOW, THEREFORE, for value received and in consideration of any loan,
advance, or financial accommodation of any kind whatsoever heretofore, now or
hereafter made, given or granted to the Borrower by Bank (including, without
limitation, the Loans as defined in, and made or to be made by Bank to
Borrower pursuant to the Loan Agreement), Guarantor unconditionally guaranties
(i) the full and prompt payment when due, whether at maturity or earlier, by
reason of acceleration or otherwise, and at all times thereafter, of all of
the indebtedness, liabilities and obligations of every kind and nature of
Borrower to Bank or any parent, affiliate or subsidiary of Bank (the term
"Bank" as used hereafter shall include such parents, affiliates and
subsidiaries), howsoever created, arising or evidenced, whether direct or
indirect, absolute or contingent, joint or several, now or hereafter existing,
or due or to become due, and howsoever owned, held or acquired by Bank,
whether through discount, overdraft, purchase, direct loan or as collateral or
otherwise, including without limitation all Liabilities (as defined in the
Loan Agreement) and (ii) the prompt, full and faithful discharge by Borrower
of each and every term, condition, agreement, representation and warranty now
or hereafter made by Borrower to Bank (all such indebtedness, liabilities and
obligations being hereinafter referred to as the "Guarantied Liabilities").
Guarantor further agrees to pay all costs and expenses, including, without
limitation, all court costs and reasonable attorneys' and paralegals' fees
paid or incurred by Bank in endeavoring to collect all or any part of the
Guarantied Liabilities from, or in prosecuting any action against, Guarantor
or any other guarantor of all or any part of the Guarantied Liabilities. All
amounts payable by Guarantor under this Guaranty shall be payable upon demand
by Bank.
Notwithstanding any provision of this Guaranty to the contrary, it is
intended that this Guaranty, and any liens and security interests granted by
Guarantor to secure this Guaranty, not constitute a "Fraudulent Conveyance".
For purposes hereof, "Fraudulent Conveyance" means a fraudulent conveyance
under Section 548 of the "Bankruptcy Code" (as hereinafter defined) or a
fraudulent conveyance or fraudulent transfer under the provisions of any
applicable fraudulent conveyance or fraudulent transfer law or similar law of
any state, nation or other governmental unit, as in effect from time to time.
Consequently, Guarantor agrees that if the Guaranty, or any liens or security
interests securing this Guaranty, would, but for the application of this
sentence, constitute a Fraudulent Conveyance, this Guaranty and each such lien
and security interest shall be valid and enforceable only to the maximum
extent that would not cause this Guaranty or such lien or security interest to
constitute a Fraudulent Conveyance, and this Guaranty shall automatically be
deemed to have been amended accordingly at all relevant times.
Guarantor hereby agrees that, except as hereinafter provided, its
obligations under this Guaranty shall be unconditional, irrespective of (i)
the validity or enforceability of the Guarantied Liabilities or any part
thereof, or of any promissory note or other document evidencing all or any
part of the Guarantied Liabilities, (ii) the absence of any attempt to
collect the Guarantied Liabilities from Borrower or any other guarantor or
other action to enforce the same, (iii) the waiver or consent by Bank with
respect to any provision of any instrument evidencing the Guarantied
Liabilities, or any part thereof, or any other agreement heretofore, now or
hereafter executed by a Borrower and delivered to Bank, (iv) failure by Bank
to take any steps to perfect and maintain its security interest in, or to
preserve its rights to, any security or collateral for the Guarantied
Liabilities, (v) the institution of any proceeding under Chapter 11 of Title
11 of the United States Code (11 U.S.C. Sec. 101 et seq.), as amended (the
"Bankruptcy Code"), or any similar proceeding, by or against Borrower, or
Bank's election in any such proceeding of the application of Section
1111(b)(2) of the Bankruptcy Code, (vi) any borrowing or grant of a security
interest by Borrower as debtor-in-possession, under Section 364 of the
Bankruptcy Code, (vii) the disallowance, under Section 502 of the Bankruptcy
Code, of all or any portion of Bank's claim(s) for repayment of the Guarantied
Liabilities, or (viii) any other circumstance which might otherwise constitute
a legal or equitable discharge or defense of a guarantor.
Guarantor hereby waives diligence, presentment, demand of payment, filing
of claims with a court in the event of receivership or bankruptcy of Borrower,
protest or notice with respect to the Guarantied Liabilities and all demands
whatsoever, and covenants that this Guaranty will not be discharged, except by
complete performance of the obligations and liabilities contained herein.
Upon any default by Borrower as provided in any instrument or document
evidencing all or any part of the Guarantied Liabilities, including without
limitation the Loan Agreement, Bank may, at its sole election, proceed
directly and at once, without notice, against Guarantor to collect and recover
the full amount or any portion of the Guarantied Liabilities, without first
proceeding against Borrower, or any other person, firm, or corporation, or
against any security or collateral for the Guarantied Liabilities.
Bank is hereby authorized, without notice or demand and without affecting
the liability of Guarantor hereunder, to at any time and from time to time (i)
renew, extend, accelerate or otherwise change the time for payment of, or
other terms relating to, the Guarantied Liabilities or otherwise modify, amend
or change the terms of any promissory note or other agreement, document or
instrument now or hereafter executed by Borrower and delivered to Bank; (ii)
accept partial payments on the Guarantied Liabilities; (iii) take and hold
security or collateral for the payment of the Guarantied Liabilities
guaranteed hereby, or for the payment of this Guaranty, or for the payment of
any other guaranties of the Guarantied Liabilities or other liabilities of
Borrower, and exchange, enforce, waive and release any such security or
collateral; (iv) apply such security or collateral and direct the order or
manner of sale thereof as in its sole discretion it may determine; and (v)
settle, release, compromise, collect or otherwise liquidate the Guarantied
Liabilities and any security or collateral therefor in any manner, without
affecting or impairing the obligations of Guarantor hereunder. Bank shall
have the exclusive right to determine the time and manner of application of
any payments or credits, whether received from Borrower or any other source,
and such determination shall be binding on Guarantor. All such payments and
credits may be applied, reversed and reapplied, in whole or in part, to any of
the Guarantied Liabilities as Bank shall determine in its sole discretion
without affecting the validity or enforceability of this Guaranty.
Guarantor hereby assumes responsibility for keeping itself informed of the
financial condition of Borrower, and any and all endorsers and/or other
guarantors of any instrument or document evidencing all or any part of the
Guarantied Liabilities and of all other circumstances bearing upon the risk of
nonpayment of the Guarantied Liabilities or any part thereof that diligent
inquiry would reveal. Guarantor hereby agrees that Bank shall have no duty to
advise Guarantor of information known to Bank regarding such condition or any
such circumstances or to undertake any investigation not a part of its regular
business routine. If Bank, in its sole discretion, undertakes at any time or
from time to time to provide any such information to any Guarantor, Bank shall
be under no obligation to update any such information or to provide any such
information to Guarantor on any subsequent occasion.
Guarantor consents and agrees that Bank shall be under no obligation to
marshall any assets in favor of Guarantor or against or in payment of any or
all of the Guarantied Liabilities. Guarantor further agrees that, to the
extent that Borrower makes a payment or payments to Bank, or Bank receives any
proceeds of collateral, which payment or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to Borrower, its estate, trustee, receiver or any other
party, including, without limitation, Guarantor, under any bankruptcy law,
state or federal law, common law or equitable theory, then to the extent of
such payment or repayment, the Guarantied Liabilities or the part thereof
which has been paid, reduced or satisfied by such amount, and Guarantor's
obligations hereunder with respect to such portion of the Guarantied
Liabilities shall be reinstated and continued in full force and effect as of
the date such initial payment, reduction or satisfaction occurred.
Guarantor agrees that any and all claims of Guarantor against Borrower,
any endorser or any other guarantor of all or any part of the Guarantied
Liabilities, or against any of Borrower's properties, whether arising by
reason of any payment by Guarantor to Bank pursuant to the provisions hereof,
or otherwise, shall be subordinate and subject in right of payment to the
prior payment, in full, of all of the Guarantied Liabilities.
Bank may, without notice to anyone, sell or assign the Guarantied
Liabilities or any part thereof, or grant participations therein, and in any
such event each and every immediate or remote assignee or holder of, or
participant in, all or any of the Guarantied Liabilities shall have the right
to enforce this Guaranty, by suit or otherwise for the benefit of such
assignee, holder, or participant, as fully as if herein by name specifically
given such right, but Bank shall have an unimpaired right, prior and superior
to that of any such assignee, holder or participant, to enforce this Guaranty
for the benefit of Bank, as to any part of the Guarantied Liabilities retained
by Bank.
This Guaranty shall be binding upon Guarantor and upon the successors
(including without limitation, any receiver, trustee or debtor in possession
of or for Guarantor) of Guarantor and shall inure to the benefit of Bank and
its successors and assigns. Guarantor hereby represents and warrants that it
has all necessary corporate authority to execute and deliver this Guaranty and
to perform its obligations hereunder.
This Guaranty shall continue in full force and effect, and Bank shall be
entitled to make loans and advances and extend financial accommodations to
Borrower on the faith hereof until such time as Bank has, in writing, notified
Guarantor that all of the Guarantied Liabilities have been paid in full and
discharged and the Loan Agreement has been terminated.
Wherever possible, each provision of this Guaranty shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Guaranty shall be prohibited by or invalid under such law,
such provision shall be ineffective to the extent of such prohibition or
invalidity without invalidating the remainder of such provision or the
remaining provisions of this Guaranty.
THIS GUARANTY SHALL BE GOVERNED AND CONTROLLED BY THE INTERNAL LAWS OF THE
STATE OF ILLINOIS.
Guarantor 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 GUARANTY SHALL BE LITIGATED IN COURTS HAVING
SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS. GUARANTOR HEREBY
CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURTS
LOCATED WITHIN SAID CITY AND STATE. Guarantor hereby irrevocably appoints and
designates the Secretary of State of Illinois, whose address is 17 North State
Street, Chicago, Illinois 60603 (or any other person having and maintaining a
place of business in such state whom Guarantor may from time to time hereafter
designate upon ten (10) days written notice to Bank and who 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 Guarantor's true and lawful attorney and duly
authorized agent for acceptance of service of legal process. Guarantor agrees
that service of such process upon such person shall constitute personal
service of such process upon Guarantor. GUARANTOR HEREBY WAIVES ANY RIGHT IT
MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST
GUARANTOR BY BANK IN ACCORDANCE WITH THIS PARAGRAPH.
GUARANTOR HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS GUARANTY.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, this Guaranty has been duly executed by the
undersigned as of the date first above written.
AMCON DISTRIBUTING COMPANY
By: Kathleen M. Evans
-------------------------
Title: President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Balance Sheet at March 31, 1998 and the Statement of Income for the Six Months
Ended March 31, 1998 (Unaudited) and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 19
<SECURITIES> 0
<RECEIVABLES> 14,693
<ALLOWANCES> 505
<INVENTORY> 15,770
<CURRENT-ASSETS> 30,276
<PP&E> 10,223
<DEPRECIATION> 5,379
<TOTAL-ASSETS> 38,452
<CURRENT-LIABILITIES> 10,949
<BONDS> 19,179
0
0
<COMMON> 25
<OTHER-SE> 8,136
<TOTAL-LIABILITY-AND-EQUITY> 38,452
<SALES> 133,895
<TOTAL-REVENUES> 133,895
<CGS> 119,316
<TOTAL-COSTS> 119,316
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 955
<INCOME-PRETAX> 1,561
<INCOME-TAX> 621
<INCOME-CONTINUING> 940
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 940
<EPS-PRIMARY> .38
<EPS-DILUTED> .38
</TABLE>
