Credit Agreement - Wild Oats Markets Inc. and Bank One Indianapolis NA
CREDIT AGREEMENT
WILD OATS MARKETS, INC., a Delaware corporation (the "Company"), and
BANK ONE, INDIANAPOLIS, NATIONAL ASSOCIATION, a national banking association
with its principal office in Indianapolis, Indiana, (the "Bank") agree as
follows:
Section 1. ACCOUNTING TERMS -- DEFINITIONS. All accounting and
financial terms used in this Agreement are used with the meanings such terms
would be given in accordance with generally accepted accounting principles
except as may be otherwise specifically provided in this Agreement. The
following terms have the meanings indicated when used in this Agreement with
the initial letter capitalized:
o "Adjusted Earnings" means an amount equal to the excess of (a)
the product of three times the lesser of (i) the Company's
Adjusted EBITDA for the twelve consecutive months ending as of
the end of the month immediately preceding the date as of which
the Adjusted Earnings is being calculated or (ii) the product of
two times the Company's Adjusted EBITDA for the six consecutive
months ending as of the end of the month immediately preceding
the date as of which the Adjusted Earnings is being calculated
over (b) the Company's aggregate Subordinated Debt.
o "Adjusted Earnings Certificate" means a certificate of the
Company signed by an appropriate officer indicating the amount
of the Adjusted Earnings as of a stated date and in such form
and showing such detail as the Bank may reasonably require.
o "Adjusted EBITDA" means the amount equal to EBITDA for any
accounting period plus all pre-opening expenses incurred during
such accounting period, provided that pre-opening expenses in
excess of $250,000.00 for any one store shall not be included in
such calculation.
o "Advance" means a disbursement of proceeds of the Revolving
Loan.
o "Agreement" means this Credit Agreement between the Company and
the Bank, as it may from time to time be amended.
o "Applicable Rate" means any of the Applicable Commission Rate,
the Applicable Unused Fee or the Applicable Spread, as the
context requires, and when used in the plural form refers to two
or more of the Applicable Commission Rate, the Applicable Unused
Fee and the Applicable Spread, as the context requires. The
Applicable Rate
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shall be determined by reference to the ratio of the Company's
Total Funded Debt to its Total Capitalization in accordance with
the following table:
Unused Applicable Spread Commission
Ratio Fee Prime Rate LIBOR Rate
----- ------ -------------------- ---------
.40 to 1.0 or
greater .375% .50% 2.50% 1.50%
.35 to 1.0 or
greater, but less
than .40 to 1.0 .375% .25% 2.25% 1.375%
.30 to 1.0 or
greater, but less
than .35 to 1.0 .250% .00% 2.00% 1.250%
less than .30 to 1.0 .250% .00% 1.75% 1.000%
Initially the Applicable Rate shall be the largest spread shown
on the above table. After the Closing Date, the Applicable Rate
shall be determined on the basis of the financial statements of
the Company for each fiscal quarter furnished to the Bank
pursuant to the requirements of the Credit Agreement, with
prospective effect for the following fiscal quarter; provided
that a reduction in the Applicable Rate shall only be effective
if the Company meets the requirements for a decreased Applicable
Rate for at least two (2) consecutive fiscal quarters, and
provided further that at any time the Company makes an
acquisition, the Applicable Rate shall be determined on the
basis of the pro-forma financial statements of the Company
furnished to the Bank at the time of such acquisition with
prospective effect for the remainder of the fiscal quarter in
which such acquisition occurred. Interest or fees will accrue
and be payable in any fiscal quarter on the basis of the
Applicable Rate in effect during the preceding fiscal quarter or
partial fiscal quarter until an adjustment is made under the
provisions of this subsection. The Applicable Rate shall be
adjusted on the first day of the calendar month which follows
receipt by the Bank of the financial statements upon which such
adjustment is based, but such adjustment shall not be effective
as to any LIBOR-based Rate elected prior to the date of such
adjustment until the expiration of the period of time for which
such LIBOR-based Rate shall have been elected by the Company.
In the
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event that the Company fails to deliver the financial statements
and compliance certificates required under the Credit Agreement
for any month which ends a fiscal quarter, then the Applicable
Rate shall be the largest spread shown on the above table from
the date such financial statements were required to be delivered
until the first day of the calendar month which follows delivery
to the Bank of such financial statements.
o "Applicable Commission Rate" means the rate at which the fee for
each letter of credit issued for the account of the Company
under the terms of this Agreement will be calculated.
o "Applicable Spread" means the number of percentage points to be
taken into account in calculating the per annum rate at which
interest will accrue on the Loan.
o "Applicable Unused Fee" means the percentage to be taken into
account in calculating the unused facility fee.
o "Application for Revolving Loan Advance" or "Application" means
a written application of the Company for a disbursement of
proceeds of the Revolving Loan substantially in the form of
Exhibit "A" attached hereto.
o "Authorized Officer" means the President, Vice
President/Secretary or the Treasurer/Chief Financial Officer of
the Company or such other officer whose authority to perform
acts to be performed only by an Authorized Officer under the
terms of this Agreement is evidenced to the Bank by a certified
copy of an appropriate resolution of the Board of Directors of
the Company.
o "Bank" is used as defined in the preamble.
o "Banking Day" means a day on which the principal office of the
Bank in the City of Indianapolis, Indiana, is open for the
purpose of conducting substantially all of the Bank's business
activities.
o "Code" means the Internal Revenue Code of 1986, as amended.
o "Commitment" means the agreement of the Bank to extend the
Revolving Loan to the Company until the Revolving Loan Maturity
Date, and if the context so requires, the term may also refer to
the maximum principal amount which is permitted to be
outstanding under the Revolving Loan at any time.
o "Companies" means, collectively, the Company and all of its
Subsidiaries.
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o "Company" is used as defined in the Preamble.
o "EBITDA" means the net income of the Company for any accounting
period plus the sum of (i) income tax expense and (ii) interest,
depreciation and amortization expense for such accounting
period, all determined in accordance with generally accepted
accounting principles.
o "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
o "Event of Default" means any of the events described in Section
8.
o "Fiscal Quarter" means a fiscal quarter of the Company
consisting of thirteen (13) consecutive weeks.
o "Guaranty Agreement" is used as defined in Section 4.d.
o "Hazardous Substance" means any hazardous or toxic substance
regulated by any federal, state or local statute or regulation
including but not limited to the Comprehensive Environmental
Response, Compensation and Liability Act, the Resource
Conservation and Recovery Act and the Toxic Substance Control
Act, or by any federal, state or local governmental agencies
having jurisdiction over the control of any such substance
including but not limited to the United States Environmental
Protection Agency.
o "Letter of Credit" is used as defined in Section 2.a(vii).
o "LIBOR-based Rate" means that per annum rate of interest which
is equal to the sum of the LIBOR Applicable Spread per annum
plus the London Interbank Offered Rate.
o "LIBOR Applicable Spread" means the number of percentage points
to be taken into account in calculating the LIBOR-based Rate.
o "London Interbank Offered Rate" means the per annum rate of
interest, as determined by the Bank, at which dollar deposits in
immediately available funds are offered to the principal banks
in the London interbank market by other principal banks in that
market two Banking Days prior to the commencement of a period of
either one month, three months or six months for which the
Company shall have requested a quotation of the rate in amounts
equal to the amount for which the Company shall have requested a
quotation of the rate, increased by an amount equal to any
increase, as determined by the Bank, in the cost to the Bank of
obtaining such deposits resulting from the imposition of any
additional reserves or from any increase in the amount of
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reserves presently required by any United States or foreign
governmental authority including, but not limited to, any
marginal or extraordinary reserves imposed to give effect to
monetary policy. Any determination by the Bank of increased
costs of maintaining deposits made pursuant to the provisions of
the preceding sentence shall be final, absent manifest error.
o "Loan" means the Revolving Loan.
o "Loan Document" means any of this Agreement, the Revolving Note,
the Security Agreement, the Guaranty Agreement, any and all
Reimbursement Agreements and any other instrument or document
which evidences or secures the Loan or which expresses an
agreement as to terms applicable to the Loan, and in the plural
means any two or more of the Loan Documents, as the context
requires.
o "Note" means the Revolving Note.
o "Obligations" means all obligations of the Company in favor of
the Bank of every type and description, direct or indirect,
absolute or contingent, due or to become due, now existing or
hereafter arising, including but not limited to: (i) all of
such obligations on account of the Loan, including any Advances
made pursuant to any extension of the Commitment beyond the
initial Revolving Loan Maturity Date or pursuant to any other
amendment of this Agreement, (ii) the duty of the Company under
Section 2.a(vii) to reimburse the Bank with interest for all
amounts paid by the Bank on account of a Letter of Credit and to
pay all commissions and fees on account thereof and (iii) all
other obligations arising under any Loan Document as amended
from time to time.
o "Officer's Certificate" means a certificate in the form included
as a part of Exhibit "A" attached hereto signed by the chief
executive officer or the chief financial officer of the Company,
confirming that all of the representations and warranties
contained in Section 3 of this Agreement are true and correct as
of the date of such certificate except as specified therein and
with the further exceptions that: (i) the representation
contained in Section 3.d shall be construed so as to refer to
the latest financial statements which have been furnished to the
Bank as of the date of any Officer's Certificate, (ii) the
representations contained in Section 3.k (with respect to
Hazardous Substances) will be construed so as to apply not
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only to the Company, but also to any Subsidiaries, whether now
owned or hereafter acquired, (iii) the representation contained
in Section 3.l shall be deemed to be amended to reflect the
existence of any Subsidiary hereafter formed or acquired by the
Company with the consent of the Bank, and (iv) all other
representations will be construed to have been amended to
conform with any changes of which the Company shall have
previously given the Bank notice in writing. The Certificate
shall further confirm that no Event of Default or Unmatured
Event of Default shall have occurred and be continuing as of the
date of the Certificate or shall describe any such event which
shall have occurred and be then continuing and the steps being
taken by the Company to correct it.
o "Optional Rate" means a LIBOR-based Rate.
o "Plan" means an employee pension benefit plan as defined in
ERISA.
o "Prepayment Premium" means the excess, if any, as determined by
the Bank of: (i) the present value at the time of prepayment of
the interest payments which would have been payable on account
of an amount prepaid from the date of prepayment until the end
of the period during which interest would have accrued at an
Optional Rate but for prepayment over (ii) the present value at
the time of prepayment of interest payments calculated at the
rate (the "Reinvestment Rate") which the Bank then estimates it
would receive upon reinvesting the principal amount of the
prepayment in an obligation which presents a credit risk
substantially similar (as determined in accordance with the
commercial credit rating system then used by the Bank) to that
which is then presented by the Loan for a period approximately
equal to the balance of the period during which interest would
accrue on the portion of the Loan prepaid at an Optional Rate,
but for prepayment. The discount rate used by the Bank in
determining such present values shall be the Reinvestment Rate.
o "Prime-based Rate" means any variable rate at which interest may
accrue on all or a portion of either of the Loans under the
terms of this Agreement, which rate is determined by reference
to the Prime Rate.
o "Prime Rate" means a variable per annum interest rate equal at
all times to the rate of interest established and quoted by the
Bank as
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its Prime Rate, such rate to change contemporaneously with each
change in such established and quoted rate, provided that it is
understood that the Prime Rate shall not necessarily be
representative of the rate of interest actually charged by the
Bank on any loan or class of loans.
o "Prime Rate Applicable Spread" means the number of percentage
points to be taken into account in calculating the Prime-based
Rate at which interest will accrue on the Loan.
o "Reimbursement Agreement" is used as defined in Section
2.a(vii).
o "Reinvestment Rate" is used as defined in the text of the
definition of "Prepayment Premium" in this Section.
o "Revolving Loan" is used as defined in Section 2.a(i).
o "Revolving Loan Maturity Date" means initially February 28,
2002, and hereafter any other date to which the Commitment may
be extended by the Bank pursuant to the terms of Section
2.a(iv).
o "Revolving Note" is used as defined in Section 2.a(ii).
o "Security Agreement" is used as defined in Section 4.a.
o "Subordinated Debt" means indebtedness of the Company which is
subordinated to the indebtedness of the Company to the Bank
under the terms of the Subordination Agreement and any other
indebtedness of the Company which is subordinated to the
Company's indebtedness to the Bank on substantially similar
terms.
o "Subordination Agreement" is used as defined in Section 4.c.
o "Subsidiary" means any corporation, partnership, joint venture
or other business entity over which the Company exercises
control, provided that it shall be conclusively presumed that
the Company exercises control over any such entity 51% or more
of the equity interest in which is owned by the Company,
directly or indirectly.
o "Tangible Capital Base" means the shareholders' equity of the
Company less any allowance for goodwill, patents, trademarks,
trade secrets, and any other assets which would be classified as
intangible assets under generally accepted accounting
principles, plus the principal amount of the Company's
Subordinated Debt.
o "Total Capitalization" means, as of any date, the sum of the
Total Funded Debt plus shareholders' equity.
o "Total Funded Debt" means, as of any date, the sum of the
following (without duplication): (i) all interest-bearing
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indebtedness of the Company and its Subsidiaries as of such date
which would be reflected on a consolidated balance sheet of the
Company and its Subsidiaries prepared as of such date in
accordance with generally accepted accounting principles and
(ii) the present value of all obligations in respect of capital
leases incurred by the Company and its Subsidiaries.
o "Unmatured Event of Default" means any event specified in
Section 8, which is not initially an Event of Default, but which
would, if uncured, become an Event of Default with the giving of
notice or the passage of time or both.
Section 2. THE LOANS. Subject to all of the terms and conditions of
this Agreement, the Bank will make the Loan described in this Section to the
Company.
a. The Revolving Loan. The Bank will make a revolving loan to the
Company on the following terms and subject to the following
conditions:
(i) The Commitment -- Use of Proceeds -- Principal
Reductions. From this date and until the Revolving
Loan Maturity Date, the Bank agrees to make Advances
(collectively, the "Revolving Loan") under a revolving
line of credit from time to time to the Company of
amounts not exceeding in the aggregate at any time
outstanding the lesser of Twenty Million and 00/100
Dollars ($20,000,000.00) (the "Commitment") or the
Adjusted Earnings, provided that all of the conditions
of lending stated in Section 7 of this Agreement as
being applicable to the Revolving Loan have been
fulfilled at the time of each Advance and provided
further that the Commitment shall decrease to Fifteen
Million and 00/100 Dollars ($15,000,000.00) on March
31, 1998, and shall decrease by $937,500.00 at each
calendar quarter end thereafter (each such amount
referred to in this subsection as a "Principal
Reduction"). The Company shall pay such amounts as are
required to reduce the outstanding principal balance of
the Revolving Loan to the Commitment less the aggregate
amount of the scheduled Principal Reductions, including
the Principal Reduction due on such date, on each date
that a Principal Reduction is required. Proceeds of
the Revolving Loan may be
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used by the Company only to fund general working
capital requirements of the Company, to finance capital
expenditures and acquisitions and to repay existing
indebtedness of the Company.
(ii) Method of Borrowing. The obligation of the Company to
repay the Revolving Loan shall be evidenced by a
promissory note (the "Revolving Note") of the Company
in the form of Exhibit "B." So long as no Event of
Default or Unmatured Event of Default shall have
occurred and be continuing and until the Revolving Loan
Maturity Date, the Company may borrow, repay (subject
to the requirements of Section 2.b(i)B) and reborrow
under the Revolving Note on any Banking Day, provided
that no borrowing may cause the principal balance of
the Loan to exceed the lesser of the Commitment or the
Adjusted Earnings or may result in an Event of Default
or an Unmatured Event of Default. Each Advance under
the Revolving Loan shall be conditioned upon receipt by
the Bank from the Company of an Application for
Revolving Loan Advance and an Officer's Certificate,
provided that the Bank may, at its discretion, make a
disbursement upon the oral request of the Company made
by an Authorized Officer, or upon a request transmitted
to the Bank by telephone facsimile ("fax") machine, or
by any other form of written electronic communication
(all such requests for Advances being hereafter
referred to as "informal requests"). In so doing, the
Bank may rely on any informal request which shall have
been received by it in good faith from a person
reasonably believed to be an Authorized Officer. Each
informal request shall be promptly confirmed by a duly
executed Application and Officer's Certificate if the
Bank so requires and shall in and of itself constitute
the representation of the Company that no Event of
Default or Unmatured Event of Default has occurred and
is continuing or would result from the making of the
requested Advance and that the making of the requested
Advance shall not cause the principal balance of the
Revolving Loan to exceed the lesser of the Commitment
or the Adjusted Earnings. All borrowings and
reborrowings and all repayments shall be in amounts of
not less than One Hundred Thousand Dollars
($100,000.00) and increments of Ten Thousand Dollars
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($10,000.00) thereafter, except for repayment of the
entire principal balance of the Revolving Loan and
except for special prepayments of principal required
under the terms of Section 2.a(v). Upon receipt of an
Application, or at the Bank's discretion upon receipt
of an informal request for an Advance and upon
compliance with any other conditions of lending stated
in Section 7 of this Agreement applicable to the
Revolving Loan, the Bank shall disburse the amount of
the requested Advance to the Company. All Advances by
the Bank and payments by the Company shall be recorded
by the Bank on its books and records, and the principal
amount outstanding from time to time, plus interest
payable thereon, shall be determined by reference to
the books and records of the Bank. The Bank's books
and records shall be presumed prima facie to be correct
as to such matters.
(iii) Interest on the Revolving Loan. The principal amount
of the Revolving Loan outstanding from time to time
shall bear interest until maturity of the Revolving
Note at a rate per annum equal to the Prime Rate plus
the Prime Rate Applicable Spread, except that at the
option of the Company, exercised from time to time as
provided in Section 2.b(i), interest may accrue prior
to maturity on any Advance or on the entire outstanding
balance of the Revolving Loan which Advance or balance
is not less than One Million Dollars ($1,000,000.00)
and increments of One Hundred Thousand Dollars
($100,000.00) thereafter and as to which no Optional
Rate previously elected remains in effect, at a
LIBOR-based Rate for a period of 30, 90 or 180 days,
provided that an election of an Optional Rate for a
period extending beyond the Revolving Loan Maturity
Date shall be permitted only at the discretion of the
Bank. After maturity, whether on the Revolving Loan
Maturity Date or on account of acceleration of maturity
upon the occurrence of an Event of Default, and until
paid in full, the Revolving Loan shall bear interest at
a per annum rate equal to the Prime Rate plus two
percent (2%) plus the Prime Rate Applicable Spread,
except that as to any portion of the Loan for which the
Company may have elected an Optional Rate for a period
of time that has not expired at maturity, such portion
shall, during the remainder of such period, bear
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interest at a per annum rate equal to the greater of
the Prime Rate plus two percent (2%) plus the Prime
Rate Applicable Spread or the Optional Rate then in
effect plus two percent (2%) per annum. Accrued
interest shall be due and payable monthly on the last
Banking Day of each month prior to maturity. After
maturity, interest shall be payable as accrued and
without demand.
(iv) Extensions of Revolving Loan Maturity Date. The Bank
may, upon the request of the Company, but at the Bank's
sole discretion, extend the Revolving Loan Maturity
Date from time to time to such date or dates as the
Bank may elect by notice in writing to the Company, and
upon any such extension and upon execution and delivery
by the Company of a Revolving Note reflecting the
extended maturity date, the date to which the
Commitment is then extended will become the "Revolving
Loan Maturity Date" for purposes of this Agreement.
(v) Special Repayments of Principal. At any time the
principal balance of the Revolving Loan exceeds the
Adjusted Earnings, as determined on the basis of the
most recent Adjusted Earnings Certificate furnished by
the Company or as determined by the Bank upon an
inspection of the books and records of the Company, the
Company shall immediately repay that portion of the
principal balance of the Revolving Loan which is in
excess of the Adjusted Earnings. Such repayment shall
be due without demand. For purposes of this
subsection, the principal balance of the Revolving Loan
shall be deemed to include an amount equal to the total
amount of all Letters of Credit which are outstanding
from time to time.
(vi) Facility Fee. In addition to interest on the Revolving
Loan, the Company shall pay to the Bank a facility fee
for each partial or full calendar quarter during which
the Commitment is outstanding equal to the Applicable
Unused Fee per annum of the average daily excess of the
Commitment over the principal balance of the Revolving
Loan. Facility fees for each calendar quarter shall be
due and payable within ten (10) days following the
Bank's submission of a statement of the amount due.
Such
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fees may be debited by the Bank when due to any demand
deposit account of the Company carried with the Bank
without further authority.
(vii) Standby Letters of Credit. At any time that the
Company is entitled to an Advance under the Revolving
Loan, the Bank shall, upon the application of the
Company, issue for the account of the Company, a
standby letter of credit (each a "Letter of Credit") in
an amount not in excess of the maximum Advance that the
Company would then be entitled to obtain under the
Revolving Loan, provided that (A) the total amount of
Letters of Credit which are outstanding at any time
shall not exceed $2,500,000.00, (B) the issuance of any
Letter of Credit with a maturity date beyond the
Revolving Loan Maturity Date shall be entirely at the
discretion of the Bank, (C) the form of the requested
Letter of Credit shall be satisfactory to the Bank in
the reasonable exercise of the Bank's discretion, and
(D) the Company shall have executed an application and
reimbursement agreement for the Letter of Credit (a
"Reimbursement Agreement") in the Bank's standard form.
While any Letter of Credit is outstanding, the maximum
amount of Advances which may be outstanding under the
Revolving Loan shall be reduced by the maximum amount
available to be drawn under the Letter of Credit. The
Company shall pay the Bank a commission for each
standby Letter of Credit issued calculated at the
Applicable Commission Rate per annum of the maximum
amount available to be drawn under the standby Letter
of Credit. Such commissions shall be calculated on the
basis of a 360 day year and the actual number of days
in the period during which the standby Letter of Credit
will be outstanding. The Company shall pay the Bank's
standard transaction fees with respect to any
transactions occurring on account of any Letter of
Credit. Commissions shall be payable when the related
Letters of Credit are issued and transaction fees shall
be payable upon completion of the transaction as to
which they are charged. All such commissions and fees
may be debited by the Bank to any deposit account of
the Company carried with the Bank without further
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authority, and in any event, shall be paid by the
Company within ten (10) days following billing.
b. Additional Provisions Applicable to the Loan. The following
provisions are applicable to the Loan:
(i) Procedures for Electing Optional Rates -- Certain
Effects of Election. Optional Rates may be elected
only in accordance with the following procedures, shall
be subject to the following conditions and the election
of an Optional Rate shall have the following
consequences in addition to other consequences stated
in this Agreement:
A. No Optional Rate may be elected at any time
that an Event of Default or Unmatured Event of
Default has occurred and is continuing.
B. Voluntary prepayment prior to scheduled
maturity of all or any portion of the Loan on
which interest is accruing at an Optional Rate
shall be subject to contemporaneous payment of
the Prepayment Premium if, at the time of
prepayment, the Reinvestment Rate is less than
the Optional Rate at which interest accrues on
the Loan. A Prepayment Premium shall also be
due and payable on prepayment of all or any
portion of the Loan prior to scheduled maturity
because of acceleration of maturity on account
of an Event of Default if, at the time of
acceleration of maturity, the Reinvestment Rate
is less than the Optional Rate at which
interest is accruing on the Loan. If any
portion of the principal balance of the
Revolving Loan is required to be prepaid in
order to reduce the balance of the Revolving
Loan to an amount equal to the Adjusted
Earnings or if any portion of the Revolving
Loan is required to be paid on account of a
Principal Reduction required under the
provisions of Section 2.a(i), and while
interest is accruing on such portion at an
Optional Rate, then a Prepayment Premium shall
be due and payable in addition to the principal
amount required to be prepaid, if, at the time
such principal payment is required,
Reinvestment Rate is less than the Optional
Rate at which interest is accruing on such
portion of the Loan. If at the time of
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any voluntary or mandatory prepayment of any
portion of the principal of the Loan, interest
accrues at both an Optional Rate or Rates and
at a Prime-based Rate on portions of the Loan,
then any prepayment of principal will be
applied first to the portion of the Loan on
which interest accrues at the Prime-based Rate
and next to the portion or portions at which
interest accrues at an Optional Rate or Rates,
and if interest accrues on the Loan at more
than one Optional Rate, first to that portion
or those portions on which interest accrues at
a Rate or Rates which results in no Prepayment
Premium or the lowest Prepayment Premium or
Premiums.
C. On any Banking Day, the Company may request a
quotation of the Optional Rates then in effect
from the Bank. As soon as possible, and in any
event before the close of business on the next
following Banking Day, the Bank shall quote
such Optional Rates. The Company shall then
have until the end of the Banking Day on which
such quotation is given or within such shorter
time as the Bank may specify, to exercise its
option to elect any Optional Rate quoted,
subject to all other conditions and limitations
stated in this Agreement. The period for which
any Optional Rate is effective shall begin on
the second Banking Day following the day on
which the quotation is given.
D. An election of an Optional Rate may be
communicated to the Bank on behalf of the
Company only by an Authorized Officer. Such
election may be communicated by telephone, or
by telephone facsimile (fax) machine or any
other form of written electronic communication,
or by a writing delivered to the Bank. At the
request of the Bank, the Company shall confirm
any election in writing and such written
confirmation shall be signed by an Authorized
Officer. The Bank shall be entitled to rely on
any oral or written electronic communication of
an election of an Optional Rate which is
received by an appropriate Bank employee from
anyone reasonably believed in good faith by
such employee to be an Authorized Officer.
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E. Notwithstanding any other provision of this
Agreement, the Bank may elect not to quote a
LIBOR-based Rate on any day on which the Bank
has determined that it is not practical to
quote such rate because of the unavailability
of sufficient funds to the Bank for appropriate
terms at rates approximating the relevant
London Interbank Offered Rate, or because of
legal or regulatory changes which make it
impractical or burdensome for the Bank to lend
money at a LIBOR-based Rate.
(ii) Calculation of Interest, Fees and Commissions.
Interest on the Loan and any fees or commissions
payable under the terms of this Agreement shall be
calculated on the basis of a year of 360 days.
(iii) Manner of Payment - Application. All payments of
principal and interest on the Loan and all payments of
fees and commissions shall be payable at the principal
office of the Bank in Indianapolis, Indiana, in funds
available for the Bank's immediate use in that city and
no payment will be considered to have been made until
received in such funds. All payments received on
account of the Loan will be applied first to the
satisfaction of any interest which is then due and
payable, and to principal only after all interest which
is due and payable has been satisfied.
(iv) Commitment Fee. The Bank acknowledges receipt from the
Company of the sum of $100,000.00, either previous to
or contemporaneously with the execution of this
Agreement, as a fee for the Bank's commitment to make
the Loan.
Section 3. REPRESENTATIONS AND WARRANTIES. To induce the Bank to make
the Loans, the Company represents and warrants to the Bank that:
a. Organization of the Company and the Subsidiaries. The Company
is a corporation organized, existing and in good standing under
the laws of the State of Delaware and each Subsidiary is a
corporation organized, existing and in good standing under the
laws of the State of its respective incorporation. The
Companies are each qualified to do business in every
jurisdiction in which: (i) the nature of the business conducted
or the character or location of properties owned or leased, or
the residences or activities of employees make such
qualification necessary, and (ii) failure so to qualify might
impair
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<PAGE> 16
the title of any of the Companies to material properties or any
right to enforce material contracts or result in exposure any of
the Companies to liability for material penalties in such
jurisdiction. No jurisdiction in which any of the Companies is
not qualified to do business has asserted that such corporation
is required to be qualified therein. The principal office of
each of the Company and the Subsidiaries is located at 1668
Valtec Lane, Boulder, Colorado 80301. The Company does not
conduct any material operations or keep any material amounts of
property at any other location, except the locations listed in
Schedule I of Exhibit "D" attached to this Agreement. Neither
the Company nor any Subsidiary has done business under any name
other than its present corporate name at any time during the six
years preceding the date of this agreement except as listed in
the "Schedule of Exceptions" attached as Exhibit "C."
b. Authorization; No Conflict. The execution and delivery of this
Agreement, the borrowings hereunder, the execution and delivery
of all of the other Loan Documents and the performance by the
Company of its obligations under this Agreement and the
performance by the Company and each Subsidiary of its respective
obligations under all of the other Loan Documents to which it is
a party are within the corporate powers of the Company and each
Subsidiary, have been duly authorized by all necessary corporate
action, have received any required governmental or regulatory
agency approvals and do not and will not contravene or conflict
with any provision of law or of the articles of incorporation or
bylaws of the Company or any Subsidiary or of any agreement
binding upon the Company or any Subsidiary or the properties of
the Company or any Subsidiary.
c. Validity and Binding Nature. This Agreement and all of the
other Loan Documents to which each is a party are the legal,
valid and binding obligations of the Company and each
Subsidiary, enforceable against the Company and each Subsidiary
in accordance with their respective terms, except to the extent
that enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium and other laws enacted
for the relief of debtors generally and other similar laws
affecting the enforcement of creditors' rights generally or by
equitable principles which may affect the availability of
specific performance and other equitable remedies.
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<PAGE> 17
d. Financial Statements. The Company has delivered to the Bank its
audited financial statements as of January 1, 1994, and for the
fiscal year of the Company then ended and its unaudited interim
financial statements as of December 31, 1994, and for the fiscal
year then ended. Such statements have been prepared in
accordance with generally accepted accounting principles
consistently applied except, as to the interim statements, for
the absence of footnotes and adjustments normally made at year
end which are not material in amount. Such statements present
fairly the financial position of the Company as of the dates
thereof and the results of its operations for the periods
covered and since the date of the latest of such statements
there has been no material adverse change in the financial
position of the Company or in the results of its operations.
e. Litigation and Contingent Liabilities. No litigation,
arbitration proceedings or governmental proceedings are pending
or threatened against the Company or any Subsidiary which would,
if adversely determined, materially and adversely affect its
financial position or continued operations. Neither the Company
nor any Subsidiary has any material contingent liabilities not
provided for or disclosed in the financial statements referred
to in Section 3.d or in the "Schedule of Exceptions" attached as
Exhibit "C."
f. Liens. None of the assets of the Company or any Subsidiary are
subject to any mortgage, pledge, title retention lien, or other
lien, encumbrance or security interest except for liens and
security interests described in the exceptions enumerated in
Section 6.b.
g. Employee Benefit Plans. Each Plan maintained by the Company and
each Subsidiary is in material compliance with ERISA, the Code,
and all applicable rules and regulations adopted by regulatory
authorities pursuant thereto, and the Company and each
Subsidiary have filed all reports and returns required to be
filed by ERISA, the Code and such rules and regulations. No
Plan maintained by the Company or any Subsidiary and no trust
created under any such Plan has incurred any "accumulated
funding deficiency" within the meaning of Section 412(c)(1) of
the Code, and the present value of all benefits vested under
each Plan did not exceed, as of the last annual valuation date,
the value of the assets of the respective Plans allocable to
such
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<PAGE> 18
vested benefits. Neither the Company nor any Subsidiary has any
knowledge that any "reportable event" as defined in ERISA has
occurred with respect to any Plan.
h. Payment of Taxes. The Company and each Subsidiary have filed
all federal, state and local tax returns and tax related reports
which each is required to file by any statute or regulation and
all taxes and any tax related interest payments and penalties
that are due and payable have been paid, except for such as are
being contested in good faith and by appropriate proceedings and
as to which appropriate reserves have been established.
Adequate provision has been made for the payment when due of
all tax liabilities which have been incurred, but are not as yet
due and payable.
i. Investment Company Act. Neither the Company nor any Subsidiary
is an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment
Company Act of 1940, as amended.
j. Regulation U. Neither the Company nor any Subsidiary is engaged
principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or
carrying margin stock within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System. Not more than
twenty-five percent (25%) of the consolidated assets of the
Company or of any Subsidiary of the Company consists of margin
stock, within the contemplation of Regulation U, as amended.
k. Hazardous Substances. Except as disclosed on the "Schedule of
Exceptions" attached as Exhibit "C", to the best knowledge of
the Company after due inquiry and investigation; (i) there are
no underground storage tanks of any kind on any premises owned
or occupied by or under lease to the Company or any Subsidiary;
(ii) there are no tanks, drums or other containers of any kind
on premises owned or occupied by or under lease to the Company
or any Subsidiary, the contents of which are unknown to the
Company; (iii) no premises owned or occupied by or under lease
to the Company or any Subsidiary have ever been used, and as of
the date of this Agreement, no such premises are being used for
any activities involving the use, treatment, transportation,
generation, storage or disposal of any Hazardous Substances in
reportable quantities, and (iv) no Hazardous
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<PAGE> 19
Substances in reportable quantities have been released on any
such premises nor is there any threat of release of any
Hazardous Substances in reportable quantities on any such
premises.
l. Subsidiaries. The only Subsidiaries of the Company as of the
date of this Agreement are The Wild Side, Inc., a Colorado
corporation, Kathy's Natural Food Ranch Market, Inc., a Nevada
corporation ("Kathy's East"), and Kathy's Natural Food Ranch
Market-West, Inc., a Nevada corporation ("Kathy's West").
Section 4. COLLATERAL FOR THE OBLIGATIONS. The Obligations will be
secured and supported as provided in this Section:
a. Security Agreement. The Obligations will be secured by a
security interest in all equipment, inventory, accounts
receivable and general intangibles of the Company now owned and
hereafter acquired and in the proceeds thereof, which security
interest will be created by a Security Agreement (the "Security
Agreement") in the form attached as Exhibit "D." The Security
Agreement will provide a security interest in the collateral
described therein subject only to liens and security interests
described in the exceptions enumerated in Section 6.b.
b. Guaranty Agreements. The Obligations will be supported by the
unconditional guaranty of prompt payment of each of the
Subsidiaries, each of which guaranty shall be evidenced by a
Guaranty Agreement (collectively, the "Guaranty Agreements") in
the form of Exhibit "E."
c. Subsidiary Security Agreements. The obligations of each
Subsidiary under its respective Guaranty Agreement will be
secured by a security interest in all equipment, inventory,
accounts receivable and general intangibles of such Subsidiary
now owned and hereafter acquired and in the proceeds thereof,
which security interest will be created by a Security Agreement
(collectively, the "Subsidiary Security Agreements") in the form
attached as Exhibit "F." Each Subsidiary Security Agreement
will provide a security interest in the collateral described
therein subject only to liens and security interests described
in the exceptions enumerated in Section 6.b.
d. Subordination. The indebtedness of the Company to shareholders
existing on the date of this Agreement and not paid
contemporaneously herewith will be subordinated to the
indebtedness of the Company to
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<PAGE> 20
the Bank under the terms of a Subordination Agreement (the
"Subordination Agreement") in the form of Exhibit "G" attached
hereto.
Section 5. AFFIRMATIVE COVENANTS OF THE COMPANY. Until all Obligations
of the Company terminate or are paid and satisfied in full, and so long as the
Commitment or any Letter of Credit is outstanding, the Company shall strictly
observe the following covenants, unless at any time the Bank shall otherwise
expressly consent in writing, which consent shall not be unreasonably withheld:
a. Corporate Existence. The Company shall preserve, and shall
cause each Subsidiary to preserve, its corporate existence,
except that Kathy's East and Kathy's West may be merged into the
Company so long as the Company is the surviving entity.
b. Reports, Certificates and Other Information. The Company shall
furnish to the Bank copies of the following financial
statements, certificates and other information:
(i) Annual Statements. As soon as available and in any
event within one hundred twenty (120) days after the
close of each fiscal year, consolidated financial
statements of the Company and its Subsidiaries for such
fiscal year prepared and presented in accordance with
generally accepted accounting principles, consistently
applied (except for changes in which the independent
accountants of the Company concur) in each case setting
forth in comparative form corresponding figures for the
preceding fiscal year, together with the audit report,
unqualified as to scope, of independent certified
public accountants approved by the Bank, which approval
shall not be unreasonably withheld. In the event
that any Subsidiary is formed after the date of this
Agreement as provided herein, the Company shall provide
supplementary consolidating financial statements of the
Company and its Subsidiaries prepared by the Company.
(ii) Interim Statements. As soon as available and in any
event within thirty (30) days after the end of each
month, a copy of the consolidated, and in the event
that any Subsidiary is formed as provided herein after
the date of this Agreement consolidating, interim
financial statements of the Company and its
Subsidiaries, consisting at a minimum of:
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<PAGE> 21
A. the balance sheet as of the end of the month,
B. a statement of income for the month and for the
partial or full fiscal year ended as of the end
of the month, and
C. the operating performance of each
store/kitchen/bakery,all in reasonable detail,
in each case setting forth in comparative form
corresponding figures for the same period in
the preceding fiscal year and for the current
year's budget, and accompanied by the written
representation of the chief financial officer
of the Company that such financial statements
have been prepared in accordance with generally
accepted accounting principles (except that
they need not include footnotes and need not
reflect adjustments normally made at year end,
if such adjustments are not material in
amount), consistently applied, (except for
changes in which the independent accountants of
the Company concur) and present fairly the
financial position of the Company and the
results of its operation as of the dates of
such statements and for the fiscal periods then
ended.
(iii) Certificates. Contemporaneously with the furnishing of
each set of financial statements provided for in
Sections 5.b(i) and 5.b(ii), an Officer's Certificate.
(iv) Management Letter. As soon as available and in any
event within sixty (60) days after receipt, a copy of
any management letter from the Company's independent
certified public accountants, together with a copy of
any response by the Company to such letter.
(v) Annual Budget. As soon as available and in any event
within sixty (60) days after the close of each fiscal
year, a summary of the Budget (including, without
limitation, projected capital expenditures, balance
sheets, statements of income and of cash flows on a
monthly basis) for the following fiscal year.
(vi) Adjusted Earnings Certificates. Within thirty (30)
days after the end of each month, an Adjusted Earnings
Certificate as of that month end and promptly as of
such other dates as the Bank may reasonably require.
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<PAGE> 22
(vii) Orders. Prompt notice of any orders in any material
proceedings to which the Company or any Subsidiary is a
party, issued by any court or regulatory agency,
federal or state, and if the Bank should so request, a
copy of any such order.
(viii) Notice of Default or Litigation. Immediately upon
learning of the occurrence of an Event of Default or
Unmatured Event of Default, or the institution of or
any adverse determination in any litigation,
arbitration proceeding or governmental proceeding which
is material to the Company or any Subsidiary, or the
occurrence of any event which could have a material
adverse effect upon the Company or any Subsidiary,
written notice thereof describing the same and the
steps being taken with respect thereto.
(ix) Compliance Certificates. Within thirty (30) days
following each month end, a certificate of the Chief
Financial Officer or other appropriate officer of the
Company demonstrating compliance with the applicable
financial covenants stated in Section 5.g and
compliance with the covenant limiting new store
openings of the Company stated in Section 6.k. Such
certificate shall relate the covenants to the month-end
figures and shall otherwise be in such form and provide
such detail as may be reasonably satisfactory to the
Bank.
(x) Registration Statements and Reports. Promptly upon
filing with the Securities and Exchange Commission or
any state securities regulatory authority, copies of
all registration statements and all periodic and
special reports required or permitted to be filed under
federal or state securities laws and regulations.
(xi) Other Information. From time to time such other
information concerning the Company or any Subsidiary as
the Bank may reasonably request.
c. Books, Records and Inspections. The Company shall maintain, and
shall cause each Subsidiary to maintain, complete and accurate
books and records, and permit access thereto by the Bank for
purposes of inspection, copying and audit. The Company shall
permit, and shall cause each Subsidiary to permit, the Bank to
inspect its properties and operations at all reasonable times.
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<PAGE> 23
d. Insurance. In addition to any insurance required by the
Security Agreement and the Subsidiary Security Agreements, the
Company shall maintain, and shall cause each Subsidiary to
maintain, such insurance as may be required by law and such
other insurance, to such extent and against such material
hazards and liabilities, as is customarily maintained by
companies similarly situated. The Company shall name, and shall
cause each Subsidiary to name, the Bank as additional loss payee
on any such insurance policy under a standard lender's loss
payable clause and shall provide a copy of any such policy to
the Bank.
e. Taxes and Liabilities. The Company shall pay, and shall cause
each Subsidiary to pay, when due all taxes, material license
fees, assessments and other liabilities except such as are being
contested in good faith and by appropriate proceedings and for
which appropriate reserves have been established.
f. Compliance with Legal and Regulatory Requirements. The Company
shall maintain, and shall cause each Subsidiary to maintain,
material compliance with the applicable provisions of all
federal, state and local statutes, ordinances and regulations
and any court orders or orders of regulatory authorities issued
thereunder.
g. Financial Covenants. The Company shall observe, on a
consolidated basis, each of the following financial covenants:
(i) Net Worth. Commencing at the end of the 26-week period
ending as of the end of the second Fiscal Quarter of
fiscal year 1995 and thereafter for each period of 26
weeks ending as of the end of the second and fourth
Fiscal Quarters of each fiscal year, the Company shall
maintain its shareholders' equity at a level not less
than the shareholders' equity required at the end of the
immediately prior 26-week period plus seventy-five
percent (75%) of the net income of the Company for the
26-week period then ended, exclusive of any loss.
(ii) Tangible Capital Base. The Company shall maintain its
Tangible Capital Base at a level not less than zero
($0) at the end of each fiscal month.
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<PAGE> 24
(iii) Ratio of Total Funded Debt to Total Capitalization.
The Company shall maintain at all times the ratio of
Total Funded Debt less Subordinated Debt to Total
Capitalization at a level not less than .50 to 1.0.
(iv) Interest Coverage. For each period of four consecutive
Fiscal Quarters ending during any fiscal year, the
Company shall maintain an interest coverage ratio of
not less than 3.0 to 1.0. For purposes of this
covenant, the phrase "interest coverage ratio" means
the sum of net income plus, without duplication and to
the extent deducted in determining such net income, (A)
interest expense and (B) income tax expense; divided by
interest expense.
(v) Fixed Charge Coverage. Commencing March 31, 1998, for
each period of four consecutive Fiscal Quarters ending
during any fiscal year, the Company shall maintain a
fixed charge coverage ratio of not less than 1.25 to
1.0. For purposes of this covenant, the phrase "fixed
charge coverage ratio" means EBITDA divided by the sum
of (A) principal payments paid on term debt during such
fiscal period, including capital lease payments, (B)
required principal payments made under the Revolving
Loan, (C) income taxes paid, (D) interest expense and
(E) expenditures for fixed assets.
h. Primary Banking Relationship. The Company shall maintain its
primary concentration and, where practical, its deposit accounts
with the Bank or, at the Company's option, with an affiliate of
the Bank.
i. Employee Benefit Plans. The Company shall maintain and shall
cause any Subsidiary to maintain, any Plan in material
compliance with ERISA, the Code, and all rules and regulations
of regulatory authorities pursuant thereto and shall file and
shall cause any Subsidiary to file all reports required to be
filed pursuant to ERISA, the Code, and such rules and
regulations.
j. Hazardous Substances. If the Company or any Subsidiary should
commence the use, treatment, transportation, generation, storage
or disposal of any Hazardous Substance in reportable quantities
in its operations in addition to those noted in Exhibit "C", the
Company shall immediately notify the Bank of the commencement of
such
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<PAGE> 25
activity with respect to each such Hazardous Substance. The
Company shall cause any Hazardous Substances which are now or
may hereafter be used or generated in the operations of the
Company or any Subsidiary in reportable quantities to be
accounted for and disposed of in compliance with all applicable
federal, state and local laws and regulations. The Company
shall notify the Bank immediately upon obtaining knowledge that:
(i) any premises which have at any time been owned or
occupied by or have been under lease to the Company or
any Subsidiary are the subject of an environmental
investigation by any federal, state or local
governmental agency having jurisdiction over the
regulation of any Hazardous Substances, the purpose of
which investigation is to quantify the levels of
Hazardous Substances located on such premises, or
(ii) the Company or any Subsidiary has been named or is
threatened to be named as a party responsible for the
possible contamination of any real property or ground
water with Hazardous Substances, including, but not
limited to the contamination of past and present waste
disposal sites.
If the Company or any Subsidiary is notified of any event
described at items (i) or (ii) above, the Company shall
immediately engage, or shall cause the Subsidiary to engage, a
firm or firms of engineers or environmental consultants
appropriately qualified to determine as quickly as practical the
extent of contamination and the potential financial liability of
the Company or the Subsidiary with respect thereto, and the Bank
shall be provided with a copy of any report prepared by such
firm or by any governmental agency as to such matters as soon as
any such report becomes available to the Company. The selection
of any engineers or environmental consultants engaged pursuant
to the requirements of this Section shall be subject to the
approval of the Bank, which approval shall not be unreasonably
withheld.
Section 6. NEGATIVE COVENANTS OF THE COMPANY. Until all Obligations of
the Company terminate or are paid and satisfied in full, and so long as the
Commitment or any Letter of Credit is outstanding, the Company shall strictly
observe the following covenants, unless at any time the Bank shall otherwise
expressly consent in writing:
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<PAGE> 26
a. Restricted Payments. The Company shall not purchase or redeem
anymore than ten percent (10%) of the issued and outstanding
shares of the capital stock of the Company during the term of
this Agreement or declare or pay any dividends thereon except
for dividends payable entirely in capital stock, provided that
the Company may redeem any class of Preferred Stock at the time
of any election by the holders of such Preferred Stock under the
provisions of the Company's Articles of Incorporation, as
amended or restated from time to time, a certified copy of which
shall have been provided to the Bank contemporaneously with the
execution of this Agreement, so long as no Event of Default or
Unmatured Event of Default shall have occurred and be continuing
or would result from such redemption. The Company shall not
make any other distributions to shareholders as shareholders, or
set aside any funds for any such purpose, or prepay, purchase or
redeem any subordinated indebtedness of the Company.
b. Liens. The Company shall not create or permit, and shall not
permit any Subsidiary to create or permit, to exist any
mortgage, pledge, title retention lien or other lien,
encumbrance or security interest (all of which are hereafter
referred to in this subsection as a "lien" or "liens") with
respect to any property or assets now owned or hereafter
acquired except:
(i) liens in favor of the Bank created pursuant to the
requirements of this Agreement or otherwise;
(ii) any lien or deposit with any governmental agency
required or permitted to qualify the Company or such
Subsidiary to conduct business or exercise any
privilege, franchise or license, or to maintain
self-insurance or to obtain the benefits of or secure
obligations under any law pertaining to workmen's
compensation, unemployment insurance, old age pensions,
social security or similar matters, or to obtain any
stay or discharge in any legal or administrative
proceedings, or any similar lien or deposit arising in
the ordinary course of business;
(iii) any mechanic's, workmen's, repairmen's, carrier's,
warehousemen's or other like liens arising in the
ordinary course of business for amounts not yet due and
for the payment of which adequate reserves have been
established, or deposits made to obtain the release of
such liens;
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<PAGE> 27
(iv) easements, licenses, minor irregularities in title or
minor encumbrances on or over any real property which
do not, in the judgment of the Bank, materially detract
from the value of such property or its marketability or
its usefulness in the business of the Company or such
Subsidiary;
(v) liens for taxes and governmental charges which are not
yet due or which are being contested in good faith and
by appropriate proceedings and for which appropriate
reserves have been established;
(vi) liens created by or resulting from any litigation or
legal proceeding which is being contested in good faith
and by appropriate proceedings and for which
appropriate reserves have been established;
(vii) purchase-money liens on any equipment hereafter
acquired, or the assumption of any lien on equipment
existing at the time of such acquisition, or a lien
incurred in connection with any conditional sale or
other title retention agreement or a finance lease;
provided that (A) any equipment subject to any of the
foregoing is acquired by the Company or any Subsidiary
in the ordinary course of their respective business,
(B) the lien on any such equipment is created
contemporaneously with such acquisition and attaches
only to the equipment so acquired and fixed
improvements thereon, and (C) the total indebtedness
secured by all such liens shall not exceed Five Million
Dollars ($5,000,000.00) at any time outstanding in the
aggregate; and
(viii) those specific liens now existing described on the
"Schedule of Exceptions" attached as Exhibit "C."
c. Guaranties. The Company shall not be, and shall permit any
Subsidiary to be, a guarantor or surety of, or otherwise be
responsible in any manner with respect to any undertaking of any
other person or entity, whether by guaranty agreement or by
agreement to purchase any obligations, stock, assets, goods or
services, or to supply or advance any funds, assets, goods or
services, or otherwise, except for:
(i) guaranties in favor of the Bank;
(ii) guaranties by endorsement of instruments for deposit
made in the ordinary course of business;
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<PAGE> 28
(iii) guaranties which do not exceed the aggregate amount of
$500,000.00 at any time outstanding; and
(iv) those specific existing guaranties listed in the
"Schedule of Exceptions" attached as Exhibit "C."
d. Loans or Advances. The Company shall not make or permit, and
shall not permit any Subsidiary to make or permit, to exist any
loans or advances to any other person or entity, except for:
(i) extensions of credit or credit accommodations to
customers or vendors made by the Company or such
Subsidiary in the ordinary course of its business as
now conducted;
(ii) reasonable salary advances to non-executive employees,
and other advances to agents and employees for
anticipated expenses to be incurred on behalf of the
Company or such Subsidiary in the course of discharging
their assigned duties;
(iii) loans or advances which do not exceed the aggregate
amount of $100,000.00 at any time outstanding; and
(iv) the specific items listed in the "Schedule of
Exceptions" attached as Exhibit "C";
e. Mergers, Consolidations, Sales, Acquisition or Formation of
Subsidiaries. The Company shall not be, and shall not permit
any Subsidiary to be, a party to any consolidation or to any
merger and shall not purchase the capital stock of or otherwise
acquire any equity interest in any other business entity. The
Company shall not acquire any material part of the assets of any
other business entity, except in the ordinary course of
business. The Company shall not sell, transfer, convey or lease
all or any material part of its assets, except in the ordinary
course of business, or sell or assign with or without recourse
any receivables. The Company shall not cause to be created or
otherwise acquire any Subsidiaries. Notwithstanding any
provision of this subsection to the contrary, the Company may
make (i) individual acquisitions in any fiscal year which do not
exceed Six Million Dollars ($6,000,000.00) in total cost to the
Company and which will not have revenues in excess of twenty
percent (20%) of the Company's consolidated pro-forma revenues
and (ii) total acquisitions in any fiscal year which do not
exceed the aggregate amount of Twelve Million Dollars
($12,000,000.00) in total
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<PAGE> 29
cost to the Company and which will not have revenues in excess
of forty percent (40%) of the Company's consolidated pro-forma
revenues.
f. Margin Stock. The Company shall not use or cause or permit, and
shall not permit any Subsidiary to use or cause or permit, the
proceeds of the Loan to be used, either directly or indirectly,
for the purpose, whether immediate, incidental or ultimate, of
purchasing or carrying any margin stock within the meaning of
Regulation U of the Board of Governors of the Federal Reserve
System, as amended from time to time.
g. Other Agreements. The Company shall not enter, and shall not
permit any Subsidiary to enter, into any agreement containing
any provision which would be violated or breached in material
respect by the performance of its obligations under this
Agreement or under any other Loan Document.
h. Judgments. The Company shall not permit, and shall not allow
any Subsidiary to permit, any uninsured judgment or monetary
penalty rendered against it in any judicial or administrative
proceeding to remain unsatisfied for a period in excess of
forty-five (45) days unless such judgment or penalty is being
contested in good faith by appropriate proceedings and execution
upon such judgment has been stayed, and unless an appropriate
reserve has been established with respect thereto.
i. Principal Office. The Company shall not change, and shall not
permit any Subsidiary to change, the location of its principal
office unless it gives not less than ten (10) days prior written
notice of such change to the Bank.
j. Hazardous Substances. The Company shall not allow or permit,
and shall not permit any Subsidiary to allow or permit, to
continue the release or threatened release of any Hazardous
Substance on any premises owned or occupied by or under lease to
the Company or any Subsidiary.
k. New Store Opening Limitation. The Company shall not open more
than seven (7) stores in fiscal year 1995, nine (9) stores in
fiscal year 1996, and ten (10) stores in fiscal year 1997; and,
in any fiscal year thereafter, the Company shall not open any
number of stores in
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excess of the number identified in a plan presented by the
Company and approved by the Bank, which approval shall not be
unreasonably withheld.
l. Debt. The Company shall not incur nor permit to exist any
indebtedness for borrowed money except (i) to the Bank, (ii) for
indebtedness secured by purchase-money liens as provided under
the provisions of Section 6.b(vii) of this Agreement, (iii) for
Subordinated Debt and (iv) for those existing obligations
disclosed on the "Schedule of Exceptions" attached as Exhibit
"C." For purposes of this covenant, the phrase "indebtedness
for borrowed money," shall be construed to include capital lease
obligations.
Section 7. CONDITIONS OF LENDING. The obligation of the Bank to make
any Advance shall be subject to fulfillment of each of the following conditions
precedent:
a. No Default. No Event of Default or Unmatured Event of Default
shall have occurred and be continuing, and the representations
and warranties of the Company contained in Section 3 shall be
true and correct as of the date of this Agreement and as of the
date of each Advance, except that after the date of this
Agreement: (i) the representations contained in Section 3.d
will be construed so as to refer to the latest financial
statements furnished to the Bank by the Company pursuant to the
requirements of this Agreement, (ii) the representations
contained in Section 3.k (with respect to Hazardous Substances)
will be construed so as to apply not only to the Company, but
also to any Subsidiaries, (iii) the representation contained in
Section 3.l will be construed so as to except any Subsidiary
which may hereafter be formed or acquired by the Company with
the consent of the Bank, and (iv) all other representations will
be construed to have been amended to conform with any changes of
which the Bank shall previously have been given notice in
writing by the Company.
b. Documents to be Furnished at Closing. The Bank shall have
received contemporaneously with the execution of this Agreement,
the following, each duly executed, currently dated and in form
and substance satisfactory to the Bank:
(i) The Revolving Note.
(ii) The Security Agreement.
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<PAGE> 31
(iii) The Subsidiary Security Agreements.
(iv) The Subordination Agreements.
(v) The Guaranty Agreements.
(vi) A certified copy of a Resolution of the Board of
Directors of the Company authorizing the execution,
delivery and performance, respectively, of this
Agreement and the other Loan Documents provided for in
this Agreement to which the Company is a party.
(vii) A certificate of the Secretary of the Company
certifying the names of the officer or officers
authorized to sign this Agreement and the other Loan
Documents provided for in this Agreement to which the
Company is a party, together with a sample of the true
signature of each such officer.
(viii) A copy of the file-marked Articles of Incorporation of
the Company and a copy of the By-Laws of the Company,
certified as complete and correct by the Secretary of
the Company.
(ix) A certified copy of a Resolution of the respective
Board of Directors of each Subsidiary authorizing the
execution, delivery and performance, respectively, of
its Guaranty Agreement, its Subsidiary Security
Agreement, and any other Loan Documents provided for in
this Agreement to which such Subsidiary is a party.
(x) A certificate of the respective Secretary of each
Subsidiary certifying the names of the officer or
officers authorized to sign its Guaranty Agreement, its
Subsidiary Security Agreement, and any other Loan
Documents provided for in this Agreement to which such
Subsidiary is a party, together with a sample of the
true signature of each such officer.
(xi) A currently dated certificate of existence or good
standing of the Company and each Subsidiary issued by
the Secretary of State of its incorporation and of each
State in which the Company or any Subsidiary is
registered to transact business.
(xii) The opinion of counsel for the Company addressed to the
Bank to the effect that the representations stated in
Sections 3.a, 3.b, 3.c, 3.e, 3.f, and 3.i are correct.
Such opinion shall be in such form as may be reasonably
acceptable to the Bank.
-31-
<PAGE> 32
(xiii) Certificates evidencing the existence of all insurance
required under the terms of this Agreement or any other
Loan Document.
(xiv) Such other documents as the Bank may reasonably
require.
c. Documents to be Furnished at Time of Each Advance. The Bank
shall have received the following prior to making any Advance,
each duly executed and currently dated, unless waived at the
Bank's discretion as provided in Section 2.a(ii):
(i) An Application for the Advance.
(ii) An Officer's Certificate.
(iii) Such other documents as the Bank may reasonably
require.
Section 8. EVENTS OF DEFAULT. Each of the following shall constitute
an Event of Default under this Agreement:
a. Nonpayment of the Loan. Default in the payment when due of any
amount payable under the terms of the Note, or otherwise payable
to the Bank or any other holder of the Note under the terms of
this Agreement.
b. Nonpayment of Other Indebtedness for Borrowed Money. Default by
the Company in the payment when due, whether by acceleration or
otherwise, of any other material indebtedness for borrowed
money, or default in the performance or observance of any
obligation or condition with respect to any such other
indebtedness if the effect of such default results in the
acceleration of the maturity of such other indebtedness or
permits the holder or holders thereof, or any trustee or agent
for such holders, to cause such indebtedness to become due and
payable prior to its scheduled maturity, unless the Company is
contesting the existence of such default in good faith and by
appropriate proceedings.
c. Other Material Obligations. Subject to the expiration of any
applicable grace period, default by the Company in the payment
when due, or in the performance or observance of any material
obligation of, or condition agreed to by the Company with
respect to any material purchase or lease of goods, securities
or services if such default materially adversely affects the
business, operations or financial condition of the Company,
except only to the
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<PAGE> 33
extent that the existence of any such default is being contested
in good faith and by appropriate proceedings and that
appropriate reserves have been established with respect thereto.
d. Bankruptcy, Insolvency, etc. The Company or any Subsidiary
admitting in writing its inability to pay its debts as they
mature or an administrative or judicial order of dissolution or
determination of insolvency being entered against the Company or
such Subsidiary; or the Company or any Subsidiary applying for,
consenting to, or acquiescing in the appointment of a trustee or
receiver for the Company or such Subsidiary or any property
thereof, or the Company or any Subsidiary making a general
assignment for the benefit of creditors; or, in the absence of
such application, consent or acquiescence, a trustee or receiver
being appointed for the Company or such Subsidiary or for a
substantial part of its property and not being discharged within
sixty (60) days; or any bankruptcy, reorganization, debt
arrangement, or other proceeding under any bankruptcy or
insolvency law, or any dissolution or liquidation proceeding
being instituted by or against the Company or any Subsidiary,
and, if involuntary, being consented to or acquiesced in by the
Company or such Subsidiary or remaining for sixty (60) days
undismissed.
e. Warranties and Representations. Any warranty or representation
made by the Company in this Agreement proving to have been false
or misleading in any material respect when made, or any
schedule, certificate, financial statement, report, notice, or
other writing furnished by the Company to the Bank proving to
have been false or misleading in any material respect when made
or delivered.
f. Violations of Negative and Financial Covenants. Failure by the
Company to comply with or perform any covenant stated in Section
5.g or Section 6 of this Agreement.
g. Noncompliance With Other Provisions of this Agreement or any
other Loan Document. Failure of the Company to comply with or
perform any covenant or other provision of this Agreement or to
perform any other Obligation (which failure does not constitute
an Event of Default under any of the preceding provisions of
this Section 8) or failure of the Company or any Subsidiary to
comply with or perform any
-33-
<PAGE> 34
provision of any other Loan Document and continuance of such
failure for thirty (30) days after notice thereof to the Company
from the Bank.
Section 9. EFFECT OF EVENT OF DEFAULT. If any Event of Default
described in Section 8.d shall occur, maturity of the Loan shall immediately be
accelerated and the Note and the Loan evidenced thereby, and all other
indebtedness and any other payment Obligations of the Company to the Bank shall
become immediately due and payable, and the Commitment shall immediately
terminate, all without notice of any kind. When any other Event of Default has
occurred and is continuing, the Bank or any other holder of the Note may
accelerate payment of the Loan and declare the Note and all other payment
Obligations due and payable, whereupon maturity of the Loan shall be
accelerated and the Note and the Loan evidenced thereby, and all other payment
Obligations shall become immediately due and payable and the Commitment shall
immediately terminate, all without notice of any kind. The Bank or such other
holder shall promptly advise the Company of any such declaration, but failure
to do so shall not impair the effect of such declaration. The remedies of the
Bank specified in this Agreement or in any other Loan Document shall not be
exclusive, and the Bank may avail itself of any other remedies provided by law
as well as any equitable remedies available to the Bank.
Section 10. WAIVER -- AMENDMENTS. No delay on the part of the Bank, or
any holder of the Note in the exercise of any right, power or remedy shall
operate as a waiver thereof, nor shall any single or partial exercise by any of
them of any right, power or remedy preclude any other or further exercise
thereof, or the exercise of any other right, power or remedy. No amendment,
modification or waiver of, or consent with respect to any of the provisions of
this Agreement or the other Loan Documents or otherwise of the Obligations
shall be effective unless such amendment, modification, waiver or consent is in
writing and signed by the Bank.
Section 11. NOTICES. Any notice given under or with respect to this
Agreement to the Company or the Bank shall be in writing and, if delivered by
hand or sent by overnight courier service, shall be deemed to have been given
when delivered and, if mailed, shall be deemed to have been given five (5) days
after the date when sent by registered or certified mail, postage prepaid, and
addressed to the Company or the Bank (or other holder of the
-34-
<PAGE> 35
Notes) at its address shown below, or at such other address as any such party
may, by written notice to the other party to this Agreement, have designated as
its address for such purpose. The addresses referred to are as follows:
As to the Company: Wild Oats Markets, Inc.
1668 Valtec Lane
Boulder, Colorado 80301
Attention: Treasurer and Chief Financial Officer
As to the Bank: Bank One, Indianapolis, NA
Bank One Center/Tower - Suite 1911
lll Monument Circle
P.O. Box 7700
Indianapolis, Indiana 46277-0119
Attention: Manager, Mid America Department A
Section 12. COSTS, EXPENSES AND TAXES. The Company shall pay or
reimburse the Bank on demand for all reasonable out-of-pocket costs and
expenses of the Bank (including reasonable attorneys' fees and legal expenses)
incurred by it in connection with the enforcement of this Agreement or any
other Loan Document. The Company shall also reimburse the Bank for expenses
incurred by the Bank in connection with any audit of the books and records or
physical assets of the Company conducted pursuant to any right granted to the
Bank under the terms of this Agreement or any other Loan Document, provided
that the expenses reimbursed on account of any and all such audits shall not
exceed, in the aggregate amount, $6,000.00 in any fiscal year. Such
reimbursement shall include, without limitation, reimbursement of the Bank for
its overhead expenses reasonably allocated to such audits. In addition, the
Company shall pay or reimburse the Bank for all expenses incurred by the Bank
in connection with the perfection of any security interests or mortgage liens
granted to the Bank by the Company and for any stamp or similar documentary or
transaction taxes which may be payable in connection with the execution or
delivery of this Agreement or any other Loan Document or in connection with any
other instruments or documents provided for herein or delivered or required in
connection herewith including, without limitation, expenses incident to any
lien or title search or title insurance commitment or policy. All obligations
provided for in this Section shall survive termination of this Agreement.
Section 13. SEVERABILITY. If any provision of this Agreement or any
other Loan Document is determined to be illegal or unenforceable, such
-35-
<PAGE> 36
provision shall be deemed to be severable from the balance of the provisions of
this Agreement or such Document and the remaining provisions shall be
enforceable in accordance with their terms.
Section 14. CAPTIONS. Section captions used in this Agreement are
for convenience only and shall not affect the construction of this Agreement.
Section 15. GOVERNING LAW -- JURISDICTION. Except as may otherwise
be expressly provided in any other Loan Document, this Agreement and all other
Loan Documents are made under and will be governed in all cases by the
substantive laws of the State of Indiana, notwithstanding the fact that Indiana
conflicts of law rules might otherwise require the substantive rules of law of
another jurisdiction to apply. The Company consents to the jurisdiction of any
state or federal court located within Marion County, Indiana, and waives
personal service of any and all process upon the Company. All service of
process may be made by messenger, by certified mail, return receipt requested,
or by registered mail directed to the Company at the address stated in Section
11. The Company waives any objection which the Company may have to any
proceeding commenced in a federal or state court located within Marion County,
Indiana, based upon improper venue or forum non conveniens. Nothing contained
in this Section shall affect the right of the Bank to serve legal process in
any other manner permitted by law or to bring any action or proceeding against
the Company or its property in the courts of any other jurisdiction.
Section 16. PRIOR AGREEMENTS, ETC. This Agreement supersedes all
previous agreements and commitments made by the Bank and the Company with
respect to the Loan and all other subjects of this Agreement, including,
without limitation, any oral or written proposals or commitments made or issued
by the Bank.
Section 17. SUCCESSORS AND ASSIGNS. This Agreement and the other
Loan Documents shall be binding upon and shall inure to the benefit of the
Company and the Bank and their respective successors and assigns, provided that
the Company's rights under this Agreement shall not be assignable without the
prior written consent of the Bank.
Section 18. WAIVER OF JURY TRIAL. THE BANK AND THE COMPANY
IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY DISPUTE
OR CLAIM, WHETHER BASED UPON CONTRACT OR ALLEGED WRONGFUL ACT OR OMISSION,
WHICH DISPUTE
-36-
<PAGE> 37
OR CLAIM ARISES OUT OF, OR IS INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN THE COMPANY AND THE BANK BY THIS OR ANY OTHER LOAN DOCUMENT. THIS
PROVISION IS A MATERIAL INDUCEMENT TO THE BANK TO ENTER INTO THIS AGREEMENT.
Dated: March 15, 1995
WILD OATS MARKETS, INC.
By: /s/ MICHAEL C. GILLILAND
--------------------------------
MICHAEL C. GILLILAND
--------------------------------
(printed name and title)
BANK ONE, INDIANAPOLIS,
NATIONAL ASSOCIATION
By: /s/ EFTHIMIOS P. SOTOS
--------------------------------
Efthimios P. Sotos
Assistant Vice President
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<PAGE> 38
LIST OF EXHIBITS
Exhibit A Officer's Certificate
Exhibit B Revolving Note
Exhibit C Schedule of Exceptions
Exhibit D Security Agreement
Exhibit E Guaranty Agreement
Exhibit F Subsidiary Security Agreement
Exhibit G Subordination Agreement
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<PAGE> 39
APPLICATION FOR REVOLVING LOAN ADVANCE
Date: ________________________
BANK ONE, INDIANAPOLIS,
National Association
111 Monument Circle
Indianapolis, Indiana 46277
Ladies and Gentlemen:
We request an advance in the amount of $______________ under the
Revolving Loan provided for in the Credit Agreement dated March 15, 1995,
between WILD OATS MARKETS, INC., and BANK ONE, INDIANAPOLIS, NATIONAL
ASSOCIATION. Please disburse this Advance by crediting the amount thereof to
our Account No. _____________ maintained with you.
Very truly yours,
WILD OATS MARKETS, INC.
By:
------------------------------
------------------------------
(Printed Name and Title)
OFFICER'S CERTIFICATE
I represent that I am the (chief executive officer or chief financial
officer) of Wild Oats Markets, Inc. (the "Company").
In support of the above Application for a Revolving Loan Advance and
pursuant to the terms of the Credit Agreement mentioned therein, I certify to
you that:
1. Each of the representations contained in Sections 3.a through
3.c, inclusive, and 3.e through 3.l, inclusive, of the Credit
Agreement are true and correct as of this date.
2. The financial statements of the Company as of ________________,
19__, and for the fiscal year then ended, and the financial
statements as of ___________, 19__, and for the partial fiscal
year then ended, present fairly the financial condition of the
Company and the results of its operations as of the dates of
such statements and for the fiscal periods then ended, and since
the date of the latest of such statements there has been no
material adverse change in its financial position or its
operations.
Exhibit "A"
Page 1 of 2 Pages
<PAGE> 40
3. No Event of Default or Unmatured Event of Default, as those
terms are defined in the Credit Agreement, has occurred and is
continuing.
------------------------------
------------------------------
(Printed Name and Title)
of WILD OATS MARKETS, INC.
Exhibit "A"
Page 2 of 2 Pages
<PAGE> 41
PROMISSORY NOTE
(Revolving Loan)
Indianapolis, Indiana
$20,000,000.00 Dated: March 15, 1995
Final Maturity: February 28, 2002
On or before February 28, 2002 ("Final Maturity"), WILD OATS MARKETS, INC. (the
"Maker") promises to pay to the order of BANK ONE, INDIANAPOLIS, National
Association (the "Bank") at the principal office of the Bank at Indianapolis,
Indiana, the principal sum of Twenty Million and No/100 Dollars
($20,000,000.00) or so much of the principal amount of the Loan represented by
this Note as may be disbursed by the Bank under the terms of the Credit
Agreement described below, and to pay interest on the unpaid principal balance
outstanding from time to time as provided in this Note.
This Note evidences indebtedness (the "Loan") incurred or to be incurred
by the Maker under a revolving line of credit extended to the Maker by the Bank
under a Credit Agreement dated the date of this Note. All references in this
Note to the Credit Agreement shall be construed as references to that Agreement
as it may be amended from time to time. The Loan is referred to in the Credit
Agreement as the "Revolving Loan." Subject to the terms and conditions of the
Credit Agreement, the proceeds of the Loan may be advanced and repaid and
re-advanced until Final Maturity. The principal amount of the Loan outstanding
from time to time shall be determined by reference to the books and records of
the Bank on which all Advances under the Loan and all payments by the Maker on
account of the Loan shall be recorded. Such books and records shall be deemed
prima facie to be correct as to such matters.
The terms "Advance" and "Banking Day" are used in this Note as defined
in the Credit Agreement.
Interest on the unpaid principal balance of the Loan outstanding from
time to time prior to and after maturity will accrue at the rate or rates
provided in the Credit Agreement. Prior to maturity, accrued interest shall be
due and payable on the last Banking Day of each month commencing on the last
Banking Day of the month in which this Note is executed. After maturity,
interest shall be due and payable as accrued and without demand. Interest will
be calculated on the basis that an entire year's interest is earned in 360
days.
The entire outstanding principal balance of this Note shall be due and
payable, together with accrued interest, at Final Maturity. Reference is made
to the Credit Agreement for provisions requiring prepayment of principal under
certain circumstances. Principal may be prepaid but only as provided in the
Credit Agreement.
If any installment of interest due under the terms of this Note is not
paid when due, then the Bank or any subsequent holder of this Note may, subject
to the terms of the Credit Agreement, at its option and without notice, declare
the entire principal amount of the Note and all accrued interest immediately
due and payable. Reference is made to the Credit
Exhibit "B"
Page 1 of 2 pages
<PAGE> 42
Agreement which provides for acceleration of the maturity of this Note upon the
happening of other "Events of Default" as defined therein.
If any installment of interest due under the terms of this Note prior to
maturity is not paid in full when due, then the Bank at its option and without
prior notice to the Maker, may assess a late payment fee in an amount equal to
the greater of $50.00 or five percent (5%) of the amount past due. Each late
payment fee assessed shall be due and payable on the earlier of the next
regularly scheduled interest payment date or the maturity of this Note. Waiver
by the Bank of any late payment fee assessed, or the failure of the Bank in any
instance to assess a late payment fee shall not be construed as a waiver by the
Bank of its right to assess late payment fees thereafter.
All payments on account of this Note shall be applied first to expenses of
collection, next to any late payment fees which are due and payable, next to
interest which is due and payable, and only after satisfaction of all such
expenses, fees and interest, to principal.
The Maker and any endorsers severally waive demand, presentment for
payment and notice of nonpayment of this Note, and each of them consents to any
renewals or extensions of the time of payment of this Note without notice.
All amounts payable under the terms of this Note shall be payable with
expenses of collection, including attorneys' fees, and without relief from
valuation and appraisement laws.
This Note is made under and will be governed in all cases by the
substantive laws of the State of Indiana, notwithstanding the fact that
Indiana conflicts of law rules might otherwise require the substantive
rules of law of another jurisdiction to apply.
WILD OATS MARKETS, INC.
By:
---------------------------------
---------------------------------
(printed name and title)
Exhibit "B"
Page 2 of 2 pages
<PAGE> 43
SCHEDULE OF EXCEPTIONS
This Schedule is part of the Credit Agreement between WILD OATS
MARKETS, INC., a Delaware corporation (the "Company"), and BANK ONE,
INDIANAPOLIS, NATIONAL ASSOCIATION (the "Bank") dated as of the date of this
Schedule.
1. Litigation and Contingent Liabilities. There are no exceptions
to the representations contained in Section 3.e with respect to
litigation and contingent liabilities, except the following:
PASADENA STORE: Lease dated September 1, 1993, between
Jurgensen's Market, Inc. ("Jurgensen's") and Wild Oats
Markets, Inc. ("Wild Oats")/603 South Lake Avenue,
Pasadena, California. A dispute has arisen between
Jurgensen's and Wild Oats with regard to the above lease.
Jurgensen's is a debtor-in-possession in a Chapter 11
bankruptcy proceeding known as In re Jurgensen's Market,
Inc., United States Bankruptcy Court, Central District of
California, Case No. LA-93-47229 VP. In its suit,
Jurgensen's contends that Wild Oats is in default under the
lease for failure to pay various amounts due and for breach
of various of its obligations under the lease. However, the
Bankruptcy Court judge recently granted Wild Oats' motion
to compel binding arbitration. Wild Oats' maximum exposure
for obligations under the lease is $50,000.00.
OTHER: Wild Oats is also contesting three former employees'
unrelated administrative claims filed with the EEOC. Wild
Oats believes all three claims are without merit and has
rebuffed all settlement offers with the charging parties.
2. Hazardous Substances. There are no exceptions to the
representation contained in Section 3.k., except the following:
The Company has conducted the following levels of inquiry and
investigation with respect to hazardous substances at its various
locations:
The Company has not conducted any inquiry or investigation with
respect to hazardous substances at the following locations:
Wild Oats Boulder; Wild Oats Vegetarian Market; Wild Oats
Fort Collins; Wild Oats Aurora; Wild Oats Denver; Wild Oats
Kansas City; Wild Oats Las Vegas East and Wild Oats Las
Vegas West.
The Company has reviewed Level 1 environmental studies (or
comparable studies) on the following locations: Wild Oats
Mission and Wild Oats Washington Park.
Exhibit "C"
Page 1 of 2 Pages
<PAGE> 44
The Company has reviewed Level 2 environmental studies (or
comparable studies) on the following locations: Wild Oats
St. Francis and Wild Oats Lawrence.
The Company has relied on indemnification or assurance from the
landlord(s) of the following locations that there is no
presence of any kind of hazardous substance and, therefore,
the Company did not make any further inquiry or
investigation into the matter: Wild Oats Orchard; Wild Oats
Pasadena; Wild Oats St. Michaels; Wild Oats Juan Tabo; Wild
Oats Colorado Springs; Wild Oats Santa Monica; and Wild
Oats Albuquerque.
3. Liens. There are no "liens" (as defined in Section 6.b) on any
property of the Company except for liens of the types described
in items (i) through (vi) of the enumeration contained in Section
6.b., and except for the following: See attached Schedule.
4. Guaranties. The Company is not a guarantor or surety of, or
otherwise responsible in any manner with respect to any
undertaking of any other person or entity, except for the items
of the type described in items (i) and (ii) of the enumeration
contained in Section 6.c., except for the following: NONE.
5. Loans and Advances. The Company does not have outstanding any
loans or advances to any person or entity except for items of a
type described in items (i) and (ii) of the enumeration contained
in Section 6.d., and except for the following: NONE.
6. Indebtedness and Capital Leases. The Company presently has no
indebtedness for borrowed money nor is the Company a lessee under
any capital lease except for such obligations to the Bank, and
except for the following: See Item 3 above.
7. Other Names used by Company or Subsidiaries. Neither the
Company nor any Subsidiary has done business under any name
other than its present corporate name at any time during the six
years preceding the date of the Credit Agreement, except for the
following:
Agora Markets, Inc.; Wild Oats Market, Inc.; Wild Oats of Santa
Fe, Inc.; Wild Oats of Denver, Inc.; and Agora Management.
By its execution of this Schedule, the Company acknowledges that it was
prepared in accordance with information provided by the Company.
Dated: March 15, 1995
WILD OATS MARKETS, INC.
By:
-----------------------------------
---------------------------------------
(printed name and title)
Exhibit "C"
Page 2 of 2 Pages
<PAGE> 45
WILD OATS MARKETS, INC.
DEBT SUMMARY AS OF 02/25/95
BALANCE MONTHLY
LENDER ORIGINATION MATURITY AMOUNT INTEREST % 2/25/95 PAYMENT USE OF PROCEEDS
----------------------------------------------------------------------------------------------------------------------------------
Term Notes
--------------------
Gerald Segal 8/29/88 1/1/96 $300,000 10.00% 119,073 Interest only Purchase of Fort Collins
store
Bank of Boulder 9/17/91 9/9/96 $20,000 prime + 2.5% 0 445 Truck
Sunwest 8/10/92 4/10/95 $400,000 9.00% 34,932 17,662 Albuquerque construction
Norwest 8/11/92 3/1/98 $400,000 prime + 1.5% 239,992 6,667 Colorado Springs
construction
Norwest 12/15/92 12/15/96 $13,700 8.00% 6,823 334 Car
United Missouri 4/1/93 3/1/98 $425,000 9.00% 396,936 4,311 Lawrence building
Premark 4/1/93 3/1/96 $100,000 9.00% 4,546 4,568 Purchase of Kansas City
store
Chase Manhattan 7/15/93 6/15/96 $16,090 6.75% 11,542 318 Car
United Missouri 8/20/93 2/20/95 $400,000 prime + 1% 0 Interest only Seasonal working capital
line
Merrill Lynch 9/15/93 9/15/95 $750,000 prime + 1% 0 Interest only Seasonal working capital
line
Bank of Boulder 11/1/93 10/31/97 $22,000 7.50% 15,801 533 Truck
Norwest 12/1/93 10/31/97 $24,411 7.75% 21,475 715 Truck
Merrill Lynch 7/94 7/99 $750,000 prime + 2% 687,500 12,500 + interest Pasadena equipment
Kathy's Sellers* 7/94 4/95 $1,708,741 0.00% 208,741 0 Purchase of Kathy's
Kathy's Sellers* 7/94 10/95 $1,711,400 0.00% 1,711,400 0 Purchase of Kathy's
Heller Financial 11/94 10/98 $1,300,000 prime + 1.75% 1,245,833 27,083 + interest Refinance Kathy's
equipment
CU Credit Union 12/94 2/97 $12,046 14.60% 11,371 482 Libby's car
CU Credit Union 12/94 2/99 $15,548 3.80% 14,972 337 Mike's car
Bank of Boulder 12/94 12/99 $12,000 8.95% 11,680 249 Jim Ware's car
Ron Hemelgam* 7/94 8/97 $143,298 10.00% 119,570 4,500 Existing Kathy's debt -
expansion funding
Ken Melby* 7/94 3/97 $132,929 10.00% 108,581 4,500 Existing Kathy's debt -
expansion funding
Holiday Village* 7/94 3/97 $81,891 10.00% 71,350 2,151 Existing Kathy's debt -
expansion funding
Ron Hemelgam* 7/94 8/97 $198,058 10.00% 190,740 2,670 Existing Kathy's debt -
expansion funding
Ken Melby* 7/94 3/97 $198,058 10.00% 190,740 2,670 Existing Kathy's debt -
expansion funding
Nature's Best 7/94 3/95 $101,000 0.00% 59,000 6,000 Existing Kathy's debt -
expansion funding
---------- -----------------
$5,482,598 $35,553
========== =================
Stockholder Notes
--------------------
ECC & MCG (Rose Real) 8/1/90 7/31/95 $20,000 12.00% $2,570 $445 Kitchen/bakery remodel
ECC & MCG (Rainbow) 2/1/90 2/1/97 $250,000 9.00% 87,388 3,992 Purchase of Aurora &
Denver stores
MRC* 6/1/92 6/1/95 $50,000 10.00% 3,984 1,613 Expansion funding
ECC & MCG & MRC* 8/31/92 8/31/97 $300,000 9.00% 34,338 Interest only Expansion funding
ECC & MCG & MRC* 6/30/93 5/31/95 $63,000 9.00% 48,000 Interest only Lawrence building
ECC & MCG* 7/31/93 6/30/95 $55,798 9.00% 55,798 Interest only Retroactive tax adjustment
MRC* 7/31/93 6/30/95 $27,000 9.00% 27,000 Interest only Retroactive tax adjustment
<PAGE> 46
SECURITY AGREEMENT
(Equipment, Inventory, Accounts Receivable and General Intangibles)
WILD OATS MARKETS, INC., a Delaware corporation (the "Company"), grants
to BANK ONE, INDIANAPOLIS, NATIONAL ASSOCIATION (the "Bank") a security
interest in the Company's Equipment, Inventory, Accounts Receivable and General
Intangibles, whether now owned and hereafter acquired, and in the proceeds
thereof to secure the payment and performance of all of the Obligations. Such
security interest is granted on the terms stated in this Security Agreement.
1. DEFINITIONS. As used in this Security Agreement, the following
terms have the meanings indicated when used with the initial letter
capitalized:
(a) "Account Debtor" means a party who is obligated to the
Company with respect to any Account Receivable, or General Intangible.
(b) "Accounts Receivable" or "Account" means any right of
the Company to payment for goods sold or leased or for services
rendered, whether or not earned by performance.
(c) "Collateral" means all property or rights in which a
security interest is granted under this Security Agreement.
(d) "Collateral Account" is used as defined in Paragraph
10(a).
(e) "Credit Agreement" means the Credit Agreement between
the Company and the Bank dated the date of this Security Agreement, as
it may be amended from time to time.
(f) "Default" means an "Event of Default" as defined in the
Credit Agreement.
(g) "Equipment" means all of the furniture, fixtures,
machinery and equipment of the Company together with all tools,
accessories, parts and accessions now in, attached to or hereafter
placed in or added to such property, and any replacements of any such
property.
(h) "General Intangibles" means any personal property
(including things in action) other than goods, Accounts, chattel paper,
documents, instruments and money.
(i) "Inventory" means all goods which are held for sale or
lease to customers or which are furnished, have been furnished or are to
be furnished under contracts of service, or which are raw materials,
work in process or materials used or consumed in the Company's business.
(j) "Obligations" is used as defined in the Credit
Agreement.
2. FINANCING STATEMENTS. The Company authorizes the Bank at the
expense of the Company to execute on its behalf and file a financing statement
or statements in those public offices deemed necessary by the Bank to perfect
its security interest. Such financing statements may be signed by the Bank
alone.
Exhibit "D"
Page 1 of 6 pages
<PAGE> 47
In addition, the Company shall execute and deliver any financing statement or
other document that the Bank may request to perfect or to further evidence the
security interest created by this Security Agreement including, without
limitation, any certificate or certificates of title to the Collateral with the
security interest of the Bank noted thereon or executed applications for such
certificates of title.
3. LOCATION, INSPECTION AND PROTECTION OF COLLATERAL. Unless the
Company gives the Bank not less than ten (10) days prior written notice of
additional locations at which Inventory and Equipment shall be kept, all
Inventory and Equipment is kept and shall be kept at the addresses listed in
Schedule I attached hereto. Unless the Company gives the Bank written notice
of the location of additional offices where records of the Company relative to
Accounts Receivable and General Intangibles are kept, all such records of the
Company shall be kept at 1668 Valtec Lane, Boulder, Colorado 80301 which, the
Company represents, is also the address of its principal office. The Company
shall not keep duplicate Accounts Receivable records at any other address or
change the location of its principal office unless the Company gives the Bank
not less than 10 days prior written notice of such event. The Company shall,
at all reasonable times and in a reasonable manner, allow the officers,
attorneys and accountants of the Bank to examine, inspect, photocopy and make
abstracts from the Company's books and records and to verify Equipment and
Inventory, the latter both as to quantity and quality, and to arrange for
verification of Accounts Receivable, under reasonable procedures, directly with
the Account Debtors or by other methods. The Company shall also deliver to the
Bank upon request any promissory notes or other papers evidencing any Account
and any guaranty or collateral together with appropriate endorsements and
assignments and any information relating thereto and shall do anything else the
Bank may reasonably require to further protect the Bank's interest in the
Collateral. If any of the Collateral consists of Equipment normally used in
more than one state and the Company intends to use any of such Collateral in
any jurisdiction other than a state in which the Company shall have previously
advised the Bank such Collateral is to be used, the Company shall not commence
use in such other jurisdiction except upon ten (10) days prior written notice
to the Bank.
4. FIXTURES. None of the Collateral is attached to real estate,
other than real estate described in Schedule I, so as to constitute a fixture.
If any Collateral is hereafter so attached to any real estate, other than real
estate described in Schedule I, notice of the common address, legal
description, and name of the owner of record of such real estate shall be
furnished to the Bank at least ten (10) days prior to such attachment. If any
Collateral is hereafter attached to real estate prior to the perfection of the
security interest created by this Security Agreement in such Collateral, the
Company shall, on demand, furnish the Bank with a disclaimer of interest in the
Collateral executed by each person having an interest in such real estate.
5. THE COMPANY'S TITLE. The Company has full and clear title to
all of the Collateral presently owned and shall have such title to all
Collateral hereafter acquired except for the security interest granted by this
Security Agreement and any other lien or security interest permitted under the
terms of the Credit Agreement, and the Company shall keep the Collateral free
at all times from any lien or encumbrance except those permitted by the Credit
Exhibit "D"
Page 2 of 6 pages
<PAGE> 48
Agreement. No financing statements covering all or any portion of the
Collateral is on file at any public office except as may be required or
permitted by this Security Agreement and the Credit Agreement.
6. THE COMPANY'S DUTY TO MAINTAIN THE COLLATERAL. The Company
shall keep all tangible Collateral in good order and repair and shall not waste
or destroy any of the Collateral. The Company shall not use the Collateral in
violation of any statute or ordinance or contrary to the provisions of any
policy of insurance thereon.
7. INSURANCE. In addition to maintaining such insurance on the
Collateral as is required by the Credit Agreement, the Company shall, upon the
reasonable request of the Bank, keep the Collateral insured against such
additional risks, in such amounts and under such policies as the Bank may
reasonably require and with such companies as shall be reasonably acceptable to
the Bank. All policies providing insurance on the Collateral shall, provide
that any loss thereunder shall be payable to the Bank under a standard form of
secured lender's loss payable endorsement. The Company authorizes the Bank to
endorse on the Company's behalf and to negotiate drafts reflecting proceeds of
insurance on the Collateral, provided that the Bank shall remit to the Company
such surplus, if any, as remains after the proceeds have been applied at the
Bank's option, (a) to the satisfaction of all of the Obligations or to the
establishment of a cash collateral account for the Obligations, or (b) to the
replacement or repair of the Collateral; provided, however, that so long as no
Default exists, and provided further that the Company can demonstrate to the
Bank's satisfaction that any proposed replacement or repair of collateral is
economically and physically feasible, such proceeds shall be applied, at the
Company's option and to the extent necessary, as provided in the foregoing
clause (b). Certificates evidencing the existence of all of the insurance
required under the Credit Agreement or this Security Agreement shall be
furnished to the Bank by the Company and the original policies providing such
insurance shall be delivered to the Bank at its request.
8. ADVANCES TO PROTECT COLLATERAL. Upon failure of the Company to
procure any required insurance or to remove any prohibited encumbrance upon the
Collateral or if any policy providing any required insurance is cancelled, the
Bank may procure such insurance or remove any encumbrance on the Collateral and
any amounts expended by the Bank for such purposes shall be immediately due and
payable by the Company to the Bank and shall be added to and become a part of
the Obligations secured hereby and shall bear interest at the Prime Rate, as
defined in the Credit Agreement, plus three percent (3%) per annum.
9. DEALING WITH COLLATERAL PRIOR TO DEFAULT. Prior to Default and
thereafter until the Bank shall notify the Company of the revocation of such
authority:
(a) the Company may, in the ordinary course of business, at its
own expense, sell, lease or furnish under contracts of service, any of
the Inventory normally held by the Company for such purposes, provided
that a sale in the ordinary course of business shall not include a
transfer in total or partial satisfaction of a debt, and the Company may
use and consume, in the ordinary course of its business, any raw
materials, work in process or materials normally held by it for such
purposes;
Exhibit "D"
Page 3 of 6 pages
<PAGE> 49
(b) the Company shall, at its own expense, endeavor to collect,
when due, all amounts due with respect to any Accounts or General
Intangibles, and shall take such action with respect to collection as
the Bank may reasonably request or, in the absence of such request, as
the Company may deem advisable in accordance with sound business
practice, and
(c) the Company may grant, in the ordinary course of business,
to any Account Debtor, any rebate, refund or adjustment to which such
Account Debtor may be entitled, and may accept, in connection therewith,
the return of the goods, the sale or lease of which shall have given
rise to the obligation of the Account Debtor.
10. DEALING WITH COLLATERAL AFTER DEFAULT. After Default and upon
the request of the Bank:
(a) the Company shall upon receipt of any checks, drafts, cash
or other remittances in payment of Inventory sold or in payment of
Accounts Receivable of the Company, deposit the same in a special
collateral account (the "Collateral Account") maintained with the Bank;
such proceeds shall be deposited in the form received except for the
indorsement of the Company when required, which indorsement the Bank is
authorized to make on the Company's behalf, and shall be held by the
Bank as security for all Obligations;
(b) the Company shall deliver to the Bank all other instruments
and chattel paper which constitute proceeds from the sale of Collateral,
whether then held or thereafter acquired, and
(c) the Company shall keep segregated any such checks, drafts,
cash, other instruments, chattel paper or other remittances from any of
the Company's other funds or property and shall hold such items in trust
for the benefit of the Bank until delivery to the Bank or deposit in the
Collateral Account and the Bank may apply all or any portion of the
funds on deposit in the Collateral Account against any Obligations in
the order of application provided for in the Credit Agreement or, absent
such provision, at the discretion of the Bank.
After Default, the Bank may notify any Account Debtor to make payment directly
to the Bank of any amounts due or to become due under any Account Receivable,
General Intangible instrument or chattel paper and the Bank may enforce the
collection of any Account Receivable, General Intangible, instrument or chattel
paper in its name or in the name of the Company, by suit or otherwise, and may
surrender, release or exchange all or any part thereof or compromise or extend
or renew for any period, whether or not longer than the original period, any
indebtedness thereunder or evidenced thereby, and any Account Debtor will be
fully protected in relying upon the representation of the Bank that it has
authority under the terms of this Security Agreement to deal with any Account
Receivable, General Intangible, instrument or chattel paper and need not look
beyond this Security Agreement and such representation of the Bank to establish
the Bank's authority in that regard.
Exhibit "D"
Page 4 of 6 pages
<PAGE> 50
11. SUBSTITUTION AND SALE OF EQUIPMENT. The Company may from time
to time so long as no Default has occurred and is continuing, substitute items
of Equipment so long as any new Equipment becomes subject to the security
interest created by this Security Agreement and is subject to no prior liens or
security interest other than those permitted by the Credit Agreement. So long
as no Default has occurred and is continuing, the Company may, in the ordinary
course of its business, sell or otherwise dispose of any items of Equipment for
which substitutes have been obtained or which are no longer useful to the
Company in its operations, provided that at least 10 days prior written notice
of any proposed disposition of any material amount of Equipment in a single or
a planned series of transactions is given to the Bank. Upon the request of the
Company, the Bank will deliver an appropriate release of its security interest
in any item of Equipment disposed of by the Company pursuant to the provisions
of this paragraph.
12. REMEDIES UPON DEFAULT. Upon the occurrence of any Default the
Bank shall have with respect to the Collateral, in addition to all rights and
remedies specified in the Credit Agreement, this Security Agreement or any
other agreement between the Company and the Bank, the remedies of a secured
party under the Uniform Commercial Code as in force from time to time in
Indiana, regardless of whether the Code in such form has been enacted in the
jurisdiction in which any such right or remedy is asserted. Any notice
required by law, including but not limited to notice of the intended
disposition of all or any portion of the Collateral, shall be deemed reasonably
and properly given if given at least l0 days prior to such disposition in the
manner prescribed for the giving of notices in the Credit Agreement. Any
proceeds of the disposition of any of the Collateral shall be applied first to
the payment of the expenses of the retaking, holding, repairing, preparing for
sale and sale of the Collateral, including reasonable attorneys' fees and legal
expenses in connection therewith and any balance of such proceeds shall be
applied by the Bank to the Obligations in such order as the Bank shall
determine.
13. RELATION TO CREDIT AGREEMENT. This Security Agreement is given
pursuant to the terms of the Credit Agreement and shall be deemed a part
thereof and subject to the terms and conditions of the Credit Agreement.
14. NOTICES. Any notice required or otherwise given concerning this
Security Agreement by either party to the other shall be given as notices are
required to be given under the terms of the Credit Agreement.
Dated: March 15, 1995
WILD OATS MARKETS, INC.
By:
-------------------------------------
-------------------------------------
(Printed Name and Title)
Exhibit "D"
Page 5 of 6 pages
<PAGE> 51
SCHEDULE I
Names and addresses of all stores,
warehouses, bakeries and kitchens
WILD OATS MARKETS, INC. STORE LISTING
WILD OATS WILD OATS LAS VEGAS WILD OATS VEGETARIAN
ALBUQUERQUE EAST MARKET
6300 A San Mateo NE 3455 East Flamingo 1823 Pearl Street
Albuquerque, NM 87109-3530 Las Vegas, NV 89121-5099 Boulder, CO 80302-5518
WILD OATS AURORA WILD OATS LAS VEGAS WILD OATS HOME OFFICE
12131 East Iliff Ave. WEST 1668 Valtec Lane
Aurora, CO 80014-1238 6720 West Sahara Boulder, CO 80301
Las Vegas, NV 89102-2964
WILD OATS BOULDER BOULDER KITCHEN
2584 Baseline Road WILD OATS MISSION 649 - 27th Street
Boulder, CO 80303-3324 5101 Johnson Drive Boulder, CO 80303
Mission, KS 66205-2906
WILD OATS COLORADO WILD BAKERY
SPRINGS WILD OATS ORCHARD 647 - 27th Street
5075 N. Academy Blvd. 6000 S. Holly Boulder, CO 80303
Colorado Springs, CO 80918-3684 Greenwood Village, CO 80111
SANTA FE KITCHEN
WILD OATS DENVER WILD OATS PASADENA 1130 Agua Fria Street
2260 East Colfax Ave. 603 South Lake Ave. Santa Fe, NM 87501
Denver, CO 80206-1312 Pasadena, CA 91106-3915
LOS ANGELES KITCHEN
WILD OATS FORT WILD OATS SANTA 17732 1/2 Sherman Way
COLLINS MONICA Reseda, CA 91335
1611 S. College Ave. 1425 Montana Ave.
Fort Collins, CO 80525-1074 Santa Monica, CA 90403 WILD OATS WAREHOUSE
6763 E. 50th Avenue
WILD OATS JUAN TABO WILD OATS ST. FRANCIS Commerce City, CO 80022
11035 Menual Blvd. NE 1010 St. Francis Dr.
Albuquerque, New Mexico 87112-2432 Santa Fe, NM 87501-4254 DENVER WAREHOUSE
3000 Clarkson Street, Unit D
WILD OATS KANSAS CITY WILD OATS ST. MICHAELS Denver, CO
4301 Main Street 1708 Llano Street
Kansas City, MO 64111-7710 Santa Fe, NM 87505-5460 SANTA FE WAREHOUSE
950 West Cordova Road
WILD OATS LAWRENCE WILD OATS WASH. PARK Santa Fe, NM 87501
1040 Vermont 1111 South Washington
Lawrence, KS 66044-2982 Denver, CO 80210-1615
Exhibit "D"
Page 6 of 6 pages
<PAGE> 52
GUARANTY AGREEMENT
This undertaking and agreement (this "Guaranty") is made by THE WILD
SIDE, INC., a Colorado corporation (the "Guarantor"), in favor of BANK ONE,
INDIANAPOLIS, NATIONAL ASSOCIATION (the "Bank") in consideration of the loan
described in this Guaranty made or to be made by the Bank to WILD OATS MARKETS,
INC., a Delaware corporation (the "Borrower"). This Guaranty is on the
following terms:
1. Background of this Guaranty -- Certain Definitions. The Bank
and the Borrower are parties to a Credit Agreement dated the date of this
Guaranty (the "Credit Agreement") under the terms of which the Bank has agreed
to extend a revolving line of credit (referred to in the Credit Agreement as
the "Revolving Loan") to the Borrower subject to the fulfillment of certain
conditions, one of which is the execution and delivery by the Guarantor of this
Guaranty. This Guaranty is made by the Guarantor in consideration of the
agreement of the Bank to make the Revolving Loan. In addition to the term
"Revolving Loan," the terms "Advances," "Commitment," "Revolving Loan Maturity
Date" and "Loan Document" are used in this Guaranty as defined in the Credit
Agreement. The term "Obligations" as used in this Guaranty means all of the
obligations of the Borrower in favor of the Bank of every type and description,
direct or indirect, absolute or contingent, due or to become due, now existing
or hereafter arising, including but not limited to the Borrower's obligation to
repay the principal of, interest on and expenses of collection of the Loans as
provided in the Credit Agreement and the other Loan Documents, including any
Advances under the Revolving Loan made after this date and after the initial
Revolving Loan Maturity Date pursuant to any extension or extensions of the
Revolving Loan Maturity Date, and all other obligations incurred pursuant to
the terms of the Credit Agreement and any other Loan Document including any
obligations arising on account of any amendment to or extension of the Credit
Agreement or any other Loan Document. The term "Default" means an "Event of
Default" as defined in the Credit Agreement.
2. The Guaranty. The Guarantor guarantees the full and prompt
payment of all of the Obligations when due, whether at scheduled maturity or at
maturity by virtue of acceleration on account of a Default. The Guarantor
further agrees to pay to the Bank an amount equal to all expenses, including
reasonable attorneys' fees, paid or incurred by the Bank after Default in
endeavoring to enforce this Guaranty.
Notwithstanding any other provision of this Guaranty, the Guarantor's liability
hereunder shall be limited to the lesser of the following amounts minus, in
either case, One Dollar ($1.00):
a. the lowest amount which would render this Guaranty a fraudulent
transfer under Section 548 of the Bankruptcy Code of 1978, as
amended, or
b. if this Guaranty is subject to the Uniform Fraudulent Transfer
Act (the "UFTA") or the Uniform Fraudulent Conveyance Act (the
"UFCA") or any similar or analogous statute or rule of law, then
the lowest amount which would render this Guaranty a fraudulent
conveyance or a fraudulent transfer under the UFTA, the UFCA, or
any such similar or analogous statute or rule of law.
Exhibit "E-1"
Page 1 of 5 pages
<PAGE> 53
The amount of the limitation imposed upon the Guarantor's liability under the
terms of the preceding sentence shall be subject to redetermination as of each
date a "transfer" is deemed to have been made on account of this Guaranty under
applicable law. The Guarantor acknowledges that information concerning the
Guarantor's financial condition is under the control of the Guarantor and is
more readily available to the Guarantor than to the Bank, and for that reason
the Guarantor agrees that should the Guarantor claim that the amount of its
liability under this Guaranty is less than the full amount of the Obligations
because of the provisions of this paragraph, then the burden of proving the
facts which would result in such limitation shall be upon the Guarantor.
3. Financial Information. As long as this Guaranty is in effect
the Guarantor shall furnish to the Bank the following:
a. Certificates Regarding Solvency. At such times as the Bank may
reasonably require, a "Certificate Regarding Solvency" in the
form of the attached "Annex."
b. Other Information. Such other information relating to the
financial condition of the Guarantor as the Bank may reasonably
require.
4. Guaranty Absolute. This Guaranty shall be absolute, continuing
and unconditional, irrespective of the irregularity, invalidity or
unenforceability of any other Loan Document and shall not be affected or
impaired by any failure, negligence or omission on the part of the Bank to
realize upon and protect any collateral for any of the Obligations. This
Guaranty shall remain in full force and effect until all of the Obligations
have been satisfied in full and the Commitment of the Bank to make Advances
under the Revolving Loan has expired. The Bank may from time to time, without
notice to the Guarantor and without affecting the Guarantor's liability under
this Guaranty:
a. obtain a security interest in any property to secure any of the
Obligations;
b. obtain the primary or secondary liability of any party or
parties in addition to the Borrower and the Guarantor with
respect to any of the Obligations;
c. extend or renew any of the Obligations for any period beyond
their original due dates;
d. release or compromise the liability of any other party or
parties which are now or may hereafter become primarily or
secondarily liable with respect to any of the Obligations;
e. release any security interest which the Bank now has or may
hereafter obtain in any property securing any of the Obligations
and permit any substitution or exchange of any such property;
Exhibit "E-1"
Page 2 of 5 pages
<PAGE> 54
f. proceed against the Guarantor for payment of the Obligations,
whether or not the Bank shall have resorted to any property
securing any of the Obligations or shall have proceeded against
the Borrower or any other party primarily or secondarily liable
with respect to any of the Obligations;
g. amend the terms of the Credit Agreement from time to time in any
particulars, or
h. extend loans and other credit accommodations to the Borrower in
addition to the Revolving Loan and increase the maximum amount
which may be loaned to the Borrower under the Revolving Loan.
5. Assignments and Participations. The Bank may, without notice to
the Borrower or the Guarantor, sell or otherwise assign all or any portion of
the Obligations and any participations therein, and upon any such sale or
assignment, the transferee shall have the right to enforce this Guaranty to the
extent of the transferee's interest directly against the Guarantor as fully as
if the transferee were specifically named in the Guaranty as the holder of such
interest, but the Bank shall have the unimpaired right to enforce this Guaranty
for the benefit of the Bank and for the benefit of any participant in respect
of whose participation the Bank has retained such right.
6. Subrogation Waiver. In order to induce the Bank to make the
Loans in reliance, in part, upon this Guaranty, notwithstanding the fact that
the Guarantor is an "insider" with respect to the Borrower, as the term
"insider" is defined in the Bankruptcy Code, the Guarantor waives for itself,
its legal representatives and assigns any right of indemnity, reimbursement or
contribution from the Borrower or any other person obligated with respect to
any of the Obligations (any such other person being referred to hereafter in
this paragraph as a "Co-Obligor") or from the property of the Borrower or from
the property of any Co-Obligor, and the Guarantor further waives any right of
subrogation to the rights of the Bank against the Borrower or any Co-Obligor or
the property of the Borrower or any Co-Obligor which would otherwise arise by
virtue of any payment made by the Guarantor to the Bank on account of this
Guaranty, whether any such right of indemnity, reimbursement, contribution or
subrogation would otherwise arise by virtue of contract, whether express or
implied, with any person or as a matter of law or equity, and the Guarantor
undertakes on behalf of itself, its legal representatives and assigns that
neither the Guarantor nor the Guarantor's legal representatives or assigns will
attempt to exercise or accept the benefits of any such right and should the
Guarantor or the Guarantor's legal representative or assigns receive any
payment or distribution of money or other property on account of such right
notwithstanding the provisions of this paragraph, such money or other property
shall be held in trust by the recipient for the Bank and shall immediately be
delivered to the Bank for application to the Obligations in the same form as
received, with the addition only of such endorsements or assignments as may be
necessary to perfect the title of the Bank thereto.
7. Other Waivers. The Guarantor waives: (i) notice of the
acceptance of this Guaranty, (ii) notice of the existence and creation of all
or any of the Obligations, (iii) notice of nonpayment of any of the Obligations
and (iv) diligence by the Bank in collection of the Obligations and the
protection of or realization upon any collateral for the Obligations.
Exhibit "E-1"
Page 3 of 5 pages
<PAGE> 55
8. Reinstatement. If any amount which is paid to the Bank by the
Borrower or any other party and which is applied by the Bank to the
satisfaction of any of the Obligations, is returned by the Bank to the Borrower
or such other party or a trustee in Bankruptcy or other legal representative of
the Borrower or such other party by virtue of a claim that such payment
constituted a voidable preference under the Bankruptcy Code or under any state
insolvency law, whether such amount is returned under court order or pursuant
to settlement of the claim of preference, then this Guaranty shall be
reinstated as to such amount as though such payment to the Bank had never been
made and notwithstanding any intervening return or cancellation of any note or
other instrument or agreement evidencing the reinstated Obligations.
9. Miscellaneous. This Guaranty shall be binding upon the
Guarantor, upon the Guarantor's legal representatives, successors and assigns.
If any provision of this Guaranty is determined to be illegal or unenforceable,
such provision shall be deemed to be severable from the balance of the
provisions of this Guaranty and the remaining provisions shall be enforceable
in accordance with their terms.
10. Choice of Law. This Guaranty is made under and will be governed
in all cases by the substantive laws of the State of Indiana, notwithstanding
the fact that Indiana conflicts of law rules might otherwise require the
substantive rules of law of another jurisdiction to apply.
11. Corporate Authority. In order to induce the Bank to accept this
Guaranty and to make the Loans to the Borrower, the Guarantor represents and
warrants to the Bank that: (i) the Guarantor is a corporation organized,
existing and in good standing under the laws of the State of Colorado; (ii)
execution and delivery of this Guaranty are within the Guarantor's corporate
powers, have been duly authorized by all necessary corporate action and do not
contravene or conflict with any provision of law or of the Articles of
Incorporation or By-laws of the Guarantor or of any agreement binding upon the
Guarantor or its properties, and (iii) this Guaranty is the legal, valid and
binding obligation of the Guarantor, enforceable against the Guarantor in
accordance with its terms.
Dated: March 15, 1995
THE WILD SIDE, INC.
Witness
Signature: By:
------------------------------ ------------------------------
----------------------------- ------------------------------
(printed name of Witness) (printed name and title)
Witness
Signature:
------------------------------
-------------------------------
(printed name of Witness)
Exhibit "E-1"
Page 4 of 5 pages
<PAGE> 56
ANNEX
CERTIFICATE REGARDING SOLVENCY
THE WILD SIDE, INC., a Colorado corporation (the "Guarantor"), by its
duly authorized officer, makes the following representations to BANK ONE,
INDIANAPOLIS, NATIONAL ASSOCIATION (the "Bank") and acknowledges that the Bank
is entitled to rely and will rely upon these representations, in providing
certain financial accommodations to WILD OATS MARKETS, INC., a Delaware
corporation, pursuant to a certain Credit Agreement dated March 15, 1995, (the
"Credit Agreement").
1. The assets of the Guarantor at a "fair valuation" within the
meaning of the Bankruptcy Code of 1978, as amended, (the "Code")
are worth approximately $______________________as of this date.
2. The liabilities of the Guarantor, including without limitation
contingent liabilities to the extent appropriate for
consideration in determining whether the Guarantor is
"insolvent", within the meaning of the Code, but excluding the
Guarantor's contingent liability under the Guaranty Agreement
(the "Guaranty") required to be given by the Guarantor under the
terms of the Credit Agreement, total approximately
$______________________ as of __________________, 19__, the end
of the last fiscal quarter of the Guarantor.
3. The Guarantor is not insolvent within the meaning of the Code,
after taking into account its contingent liability under the
Guaranty.
4. After taking into account its contingent liability under the
Guaranty, the Guarantor has sufficient capital for the operation
of its business as presently conducted and at the level of
operations contemplated for the foreseeable future. The minimum
amount of capital required to support the Guarantor's operations
at the level planned for the foreseeable future is
$_______________________.
5. The Guarantor is currently paying its debts as they become due
in the ordinary course of its business. After taking into
account its contingent liability under the Guaranty, the
Guarantor believes that it will be able to continue to pay its
debts as they become due in the ordinary course of its business.
Dated: ____________________, 19___.
THE WILD SIDE, INC.
By:
------------------------------
------------------------------
(printed name and title)
Exhibit "E-1"
Page 5 of 5 pages
<PAGE> 57
GUARANTY AGREEMENT
This undertaking and agreement (this "Guaranty") is made by KATHY'S
NATURAL FOOD RANCH MARKET, INC., a Nevada corporation (the "Guarantor"), in
favor of BANK ONE, INDIANAPOLIS, NATIONAL ASSOCIATION (the "Bank") in
consideration of the loan described in this Guaranty made or to be made by the
Bank to WILD OATS MARKETS, INC., a Delaware corporation (the "Borrower"). This
Guaranty is on the following terms:
1. Background of this Guaranty -- Certain Definitions. The Bank
and the Borrower are parties to a Credit Agreement dated the date of this
Guaranty (the "Credit Agreement") under the terms of which the Bank has agreed
to extend a revolving line of credit (referred to in the Credit Agreement as
the "Revolving Loan") to the Borrower subject to the fulfillment of certain
conditions, one of which is the execution and delivery by the Guarantor of this
Guaranty. This Guaranty is made by the Guarantor in consideration of the
agreement of the Bank to make the Revolving Loan. In addition to the term
"Revolving Loan," the terms "Advances," "Commitment," "Revolving Loan Maturity
Date" and "Loan Document" are used in this Guaranty as defined in the Credit
Agreement. The term "Obligations" as used in this Guaranty means all of the
obligations of the Borrower in favor of the Bank of every type and description,
direct or indirect, absolute or contingent, due or to become due, now existing
or hereafter arising, including but not limited to the Borrower's obligation to
repay the principal of, interest on and expenses of collection of the Loans as
provided in the Credit Agreement and the other Loan Documents, including any
Advances under the Revolving Loan made after this date and after the initial
Revolving Loan Maturity Date pursuant to any extension or extensions of the
Revolving Loan Maturity Date, and all other obligations incurred pursuant to
the terms of the Credit Agreement and any other Loan Document including any
obligations arising on account of any amendment to or extension of the Credit
Agreement or any other Loan Document. The term "Default" means an "Event of
Default" as defined in the Credit Agreement.
2. The Guaranty. The Guarantor guarantees the full and prompt
payment of all of the Obligations when due, whether at scheduled maturity or at
maturity by virtue of acceleration on account of a Default. The Guarantor
further agrees to pay to the Bank an amount equal to all expenses, including
reasonable attorneys' fees, paid or incurred by the Bank after Default in
endeavoring to enforce this Guaranty.
Notwithstanding any other provision of this Guaranty, the Guarantor's liability
hereunder shall be limited to the lesser of the following amounts minus, in
either case, One Dollar ($1.00):
a. the lowest amount which would render this Guaranty a fraudulent
transfer under Section 548 of the Bankruptcy Code of 1978, as
amended, or
b. if this Guaranty is subject to the Uniform Fraudulent Transfer
Act (the "UFTA") or the Uniform Fraudulent Conveyance Act (the
"UFCA") or any similar or analogous statute or rule of law, then
the lowest amount which would render this Guaranty a fraudulent
conveyance or a fraudulent transfer under the UFTA, the UFCA, or
any such similar or analogous statute or rule of law.
Exhibit "E-2"
Page 1 of 5 pages
<PAGE> 58
The amount of the limitation imposed upon the Guarantor's liability under the
terms of the preceding sentence shall be subject to redetermination as of each
date a "transfer" is deemed to have been made on account of this Guaranty under
applicable law. The Guarantor acknowledges that information concerning the
Guarantor's financial condition is under the control of the Guarantor and is
more readily available to the Guarantor than to the Bank, and for that reason
the Guarantor agrees that should the Guarantor claim that the amount of its
liability under this Guaranty is less than the full amount of the Obligations
because of the provisions of this paragraph, then the burden of proving the
facts which would result in such limitation shall be upon the Guarantor.
3. Financial Information. As long as this Guaranty is in effect
the Guarantor shall furnish to the Bank the following:
a. Certificates Regarding Solvency. At such times as the Bank may
reasonably require, a "Certificate Regarding Solvency" in the
form of the attached "Annex."
b. Other Information. Such other information relating to the
financial condition of the Guarantor as the Bank may reasonably
require.
4. Guaranty Absolute. This Guaranty shall be absolute, continuing
and unconditional, irrespective of the irregularity, invalidity or
unenforceability of any other Loan Document and shall not be affected or
impaired by any failure, negligence or omission on the part of the Bank to
realize upon and protect any collateral for any of the Obligations. This
Guaranty shall remain in full force and effect until all of the Obligations
have been satisfied in full and the Commitment of the Bank to make Advances
under the Revolving Loan has expired. The Bank may from time to time, without
notice to the Guarantor and without affecting the Guarantor's liability under
this Guaranty:
a. obtain a security interest in any property to secure any of the
Obligations;
b. obtain the primary or secondary liability of any party or
parties in addition to the Borrower and the Guarantor with
respect to any of the Obligations;
c. extend or renew any of the Obligations for any period beyond
their original due dates;
d. release or compromise the liability of any other party or
parties which are now or may hereafter become primarily or
secondarily liable with respect to any of the Obligations;
e. release any security interest which the Bank now has or may
hereafter obtain in any property securing any of the Obligations
and permit any substitution or exchange of any such property;
Exhibit "E-2"
Page 2 of 5 pages
<PAGE> 59
f. proceed against the Guarantor for payment of the Obligations,
whether or not the Bank shall have resorted to any property
securing any of the Obligations or shall have proceeded against
the Borrower or any other party primarily or secondarily liable
with respect to any of the Obligations;
g. amend the terms of the Credit Agreement from time to time in any
particulars, or
h. extend loans and other credit accommodations to the Borrower in
addition to the Revolving Loan and increase the maximum amount
which may be loaned to the Borrower under the Revolving Loan.
5. Assignments and Participations. The Bank may, without notice to
the Borrower or the Guarantor, sell or otherwise assign all or any portion of
the Obligations and any participations therein, and upon any such sale or
assignment, the transferee shall have the right to enforce this Guaranty to the
extent of the transferee's interest directly against the Guarantor as fully as
if the transferee were specifically named in the Guaranty as the holder of such
interest, but the Bank shall have the unimpaired right to enforce this Guaranty
for the benefit of the Bank and for the benefit of any participant in respect
of whose participation the Bank has retained such right.
6. Subrogation Waiver. In order to induce the Bank to make the
Loans in reliance, in part, upon this Guaranty, notwithstanding the fact that
the Guarantor is an "insider" with respect to the Borrower, as the term
"insider" is defined in the Bankruptcy Code, the Guarantor waives for itself,
its legal representatives and assigns any right of indemnity, reimbursement or
contribution from the Borrower or any other person obligated with respect to
any of the Obligations (any such other person being referred to hereafter in
this paragraph as a "Co-Obligor") or from the property of the Borrower or from
the property of any Co-Obligor, and the Guarantor further waives any right of
subrogation to the rights of the Bank against the Borrower or any Co-Obligor or
the property of the Borrower or any Co-Obligor which would otherwise arise by
virtue of any payment made by the Guarantor to the Bank on account of this
Guaranty, whether any such right of indemnity, reimbursement, contribution or
subrogation would otherwise arise by virtue of contract, whether express or
implied, with any person or as a matter of law or equity, and the Guarantor
undertakes on behalf of itself, its legal representatives and assigns that
neither the Guarantor nor the Guarantor's legal representatives or assigns will
attempt to exercise or accept the benefits of any such right and should the
Guarantor or the Guarantor's legal representative or assigns receive any
payment or distribution of money or other property on account of such right
notwithstanding the provisions of this paragraph, such money or other property
shall be held in trust by the recipient for the Bank and shall immediately be
delivered to the Bank for application to the Obligations in the same form as
received, with the addition only of such endorsements or assignments as may be
necessary to perfect the title of the Bank thereto.
7. Other Waivers. The Guarantor waives: (i) notice of the
acceptance of this Guaranty, (ii) notice of the existence and creation of all
or any of the Obligations, (iii) notice of nonpayment of any of the Obligations
and (iv) diligence by the Bank in collection of the Obligations and the
protection of or realization upon any collateral for the Obligations.
Exhibit "E-2"
Page 3 of 5 pages
<PAGE> 60
8. Reinstatement. If any amount which is paid to the Bank by the
Borrower or any other party and which is applied by the Bank to the
satisfaction of any of the Obligations, is returned by the Bank to the Borrower
or such other party or a trustee in Bankruptcy or other legal representative of
the Borrower or such other party by virtue of a claim that such payment
constituted a voidable preference under the Bankruptcy Code or under any state
insolvency law, whether such amount is returned under court order or pursuant
to settlement of the claim of preference, then this Guaranty shall be
reinstated as to such amount as though such payment to the Bank had never been
made and notwithstanding any intervening return or cancellation of any note or
other instrument or agreement evidencing the reinstated Obligations.
9. Miscellaneous. This Guaranty shall be binding upon the
Guarantor, upon the Guarantor's legal representatives, successors and assigns.
If any provision of this Guaranty is determined to be illegal or unenforceable,
such provision shall be deemed to be severable from the balance of the
provisions of this Guaranty and the remaining provisions shall be enforceable
in accordance with their terms.
10. Choice of Law. This Guaranty is made under and will be governed
in all cases by the substantive laws of the State of Indiana, notwithstanding
the fact that Indiana conflicts of law rules might otherwise require the
substantive rules of law of another jurisdiction to apply.
11. Corporate Authority. In order to induce the Bank to accept this
Guaranty and to make the Loans to the Borrower, the Guarantor represents and
warrants to the Bank that: (i) the Guarantor is a corporation organized,
existing and in good standing under the laws of the State of Nevada; (ii)
execution and delivery of this Guaranty are within the Guarantor's corporate
powers, have been duly authorized by all necessary corporate action and do not
contravene or conflict with any provision of law or of the Articles of
Incorporation or By-laws of the Guarantor or of any agreement binding upon the
Guarantor or its properties, and (iii) this Guaranty is the legal, valid and
binding obligation of the Guarantor, enforceable against the Guarantor in
accordance with its terms.
Dated: March 15, 1995
KATHY'S NATURAL FOOD RANCH
MARKET, INC.
Witness
Signature: By:
------------------------------ ------------------------------
------------------------------ ------------------------------
(printed name of Witness) (printed name and title)
Witness
Signature:
------------------------------
------------------------------
(printed name of Witness)
Exhibit "E-2"
Page 4 of 5 pages
<PAGE> 61
ANNEX
CERTIFICATE REGARDING SOLVENCY
KATHY'S NATURAL FOOD RANCH MARKET, INC., a Nevada corporation (the
"Guarantor"), by its duly authorized officer, makes the following
representations to BANK ONE, INDIANAPOLIS, NATIONAL ASSOCIATION (the "Bank")
and acknowledges that the Bank is entitled to rely and will rely upon these
representations, in providing certain financial accommodations to WILD OATS
MARKETS, INC., a Delaware corporation, pursuant to a certain Credit Agreement
dated March 15, 1995, (the "Credit Agreement").
1. The assets of the Guarantor at a "fair valuation" within the
meaning of the Bankruptcy Code of 1978, as amended, (the "Code")
are worth approximately $______________________as of this date.
2. The liabilities of the Guarantor, including without limitation
contingent liabilities to the extent appropriate for
consideration in determining whether the Guarantor is
"insolvent", within the meaning of the Code, but excluding the
Guarantor's contingent liability under the Guaranty Agreement
(the "Guaranty") required to be given by the Guarantor under the
terms of the Credit Agreement, total approximately
$______________________ as of __________________, 19__, the end
of the last fiscal quarter of the Guarantor.
3. The Guarantor is not insolvent within the meaning of the Code,
after taking into account its contingent liability under the
Guaranty.
4. After taking into account its contingent liability under the
Guaranty, the Guarantor has sufficient capital for the operation
of its business as presently conducted and at the level of
operations contemplated for the foreseeable future. The minimum
amount of capital required to support the Guarantor's operations
at the level planned for the foreseeable future is
$_______________________.
5. The Guarantor is currently paying its debts as they become due
in the ordinary course of its business. After taking into
account its contingent liability under the Guaranty, the
Guarantor believes that it will be able to continue to pay its
debts as they become due in the ordinary course of its business.
Dated: ____________________, 19___.
KATHY'S NATURAL FOOD RANCH
MARKET, INC.
By:
------------------------------
------------------------------
(printed name and title)
Exhibit "E-2"
Page 5 of 5 pages
<PAGE> 62
GUARANTY AGREEMENT
This undertaking and agreement (this "Guaranty") is made by KATHY'S
NATURAL FOOD RANCH MARKET-WEST, INC., a Nevada corporation (the "Guarantor"),
in favor of BANK ONE, INDIANAPOLIS, NATIONAL ASSOCIATION (the "Bank") in
consideration of the loan described in this Guaranty made or to be made by the
Bank to WILD OATS MARKETS, INC., a Delaware corporation (the "Borrower"). This
Guaranty is on the following terms:
1. Background of this Guaranty -- Certain Definitions. The Bank
and the Borrower are parties to a Credit Agreement dated the date of this
Guaranty (the "Credit Agreement") under the terms of which the Bank has agreed
to extend a revolving line of credit (referred to in the Credit Agreement as
the "Revolving Loan") to the Borrower subject to the fulfillment of certain
conditions, one of which is the execution and delivery by the Guarantor of this
Guaranty. This Guaranty is made by the Guarantor in consideration of the
agreement of the Bank to make the Revolving Loan. In addition to the term
"Revolving Loan," the terms "Advances," "Commitment," "Revolving Loan Maturity
Date" and "Loan Document" are used in this Guaranty as defined in the Credit
Agreement. The term "Obligations" as used in this Guaranty means all of the
obligations of the Borrower in favor of the Bank of every type and description,
direct or indirect, absolute or contingent, due or to become due, now existing
or hereafter arising, including but not limited to the Borrower's obligation to
repay the principal of, interest on and expenses of collection of the Loans as
provided in the Credit Agreement and the other Loan Documents, including any
Advances under the Revolving Loan made after this date and after the initial
Revolving Loan Maturity Date pursuant to any extension or extensions of the
Revolving Loan Maturity Date, and all other obligations incurred pursuant to
the terms of the Credit Agreement and any other Loan Document including any
obligations arising on account of any amendment to or extension of the Credit
Agreement or any other Loan Document. The term "Default" means an "Event of
Default" as defined in the Credit Agreement.
2. The Guaranty. The Guarantor guarantees the full and prompt
payment of all of the Obligations when due, whether at scheduled maturity or at
maturity by virtue of acceleration on account of a Default. The Guarantor
further agrees to pay to the Bank an amount equal to all expenses, including
reasonable attorneys' fees, paid or incurred by the Bank after Default in
endeavoring to enforce this Guaranty.
Notwithstanding any other provision of this Guaranty, the Guarantor's liability
hereunder shall be limited to the lesser of the following amounts minus, in
either case, One Dollar ($1.00):
a. the lowest amount which would render this Guaranty a fraudulent
transfer under Section 548 of the Bankruptcy Code of 1978, as
amended, or
b. if this Guaranty is subject to the Uniform Fraudulent Transfer
Act (the "UFTA") or the Uniform Fraudulent Conveyance Act (the
"UFCA") or any similar or analogous statute or rule of law, then
the lowest amount which would render this Guaranty a fraudulent
conveyance or a fraudulent transfer under the UFTA, the UFCA, or
any such similar or analogous statute or rule of law.
Exhibit "E-3"
Page 1 of 5 pages
<PAGE> 63
The amount of the limitation imposed upon the Guarantor's liability under the
terms of the preceding sentence shall be subject to redetermination as of each
date a "transfer" is deemed to have been made on account of this Guaranty under
applicable law. The Guarantor acknowledges that information concerning the
Guarantor's financial condition is under the control of the Guarantor and is
more readily available to the Guarantor than to the Bank, and for that reason
the Guarantor agrees that should the Guarantor claim that the amount of its
liability under this Guaranty is less than the full amount of the Obligations
because of the provisions of this paragraph, then the burden of proving the
facts which would result in such limitation shall be upon the Guarantor.
3. Financial Information. As long as this Guaranty is in effect
the Guarantor shall furnish to the Bank the following:
a. Certificates Regarding Solvency. At such times as the Bank may
reasonably require, a "Certificate Regarding Solvency" in the
form of the attached "Annex."
b. Other Information. Such other information relating to the
financial condition of the Guarantor as the Bank may reasonably
require.
4. Guaranty Absolute. This Guaranty shall be absolute, continuing
and unconditional, irrespective of the irregularity, invalidity or
unenforceability of any other Loan Document and shall not be affected or
impaired by any failure, negligence or omission on the part of the Bank to
realize upon and protect any collateral for any of the Obligations. This
Guaranty shall remain in full force and effect until all of the Obligations
have been satisfied in full and the Commitment of the Bank to make Advances
under the Revolving Loan has expired. The Bank may from time to time, without
notice to the Guarantor and without affecting the Guarantor's liability under
this Guaranty:
a. obtain a security interest in any property to secure any of the
Obligations;
b. obtain the primary or secondary liability of any party or
parties in addition to the Borrower and the Guarantor with
respect to any of the Obligations;
c. extend or renew any of the Obligations for any period beyond
their original due dates;
d. release or compromise the liability of any other party or
parties which are now or may hereafter become primarily or
secondarily liable with respect to any of the Obligations;
e. release any security interest which the Bank now has or may
hereafter obtain in any property securing any of the Obligations
and permit any substitution or exchange of any such property;
Exhibit "E-3"
Page 2 of 5 pages
<PAGE> 64
f. proceed against the Guarantor for payment of the Obligations,
whether or not the Bank shall have resorted to any property
securing any of the Obligations or shall have proceeded against
the Borrower or any other party primarily or secondarily liable
with respect to any of the Obligations;
g. amend the terms of the Credit Agreement from time to time in any
particulars, or
h. extend loans and other credit accommodations to the Borrower in
addition to the Revolving Loan and increase the maximum amount
which may be loaned to the Borrower under the Revolving Loan.
5. Assignments and Participations. The Bank may, without notice to
the Borrower or the Guarantor, sell or otherwise assign all or any portion of
the Obligations and any participations therein, and upon any such sale or
assignment, the transferee shall have the right to enforce this Guaranty to the
extent of the transferee's interest directly against the Guarantor as fully as
if the transferee were specifically named in the Guaranty as the holder of such
interest, but the Bank shall have the unimpaired right to enforce this Guaranty
for the benefit of the Bank and for the benefit of any participant in respect
of whose participation the Bank has retained such right.
6. Subrogation Waiver. In order to induce the Bank to make the
Loans in reliance, in part, upon this Guaranty, notwithstanding the fact that
the Guarantor is an "insider" with respect to the Borrower, as the term
"insider" is defined in the Bankruptcy Code, the Guarantor waives for itself,
its legal representatives and assigns any right of indemnity, reimbursement or
contribution from the Borrower or any other person obligated with respect to
any of the Obligations (any such other person being referred to hereafter in
this paragraph as a "Co-Obligor") or from the property of the Borrower or from
the property of any Co-Obligor, and the Guarantor further waives any right of
subrogation to the rights of the Bank against the Borrower or any Co-Obligor or
the property of the Borrower or any Co-Obligor which would otherwise arise by
virtue of any payment made by the Guarantor to the Bank on account of this
Guaranty, whether any such right of indemnity, reimbursement, contribution or
subrogation would otherwise arise by virtue of contract, whether express or
implied, with any person or as a matter of law or equity, and the Guarantor
undertakes on behalf of itself, its legal representatives and assigns that
neither the Guarantor nor the Guarantor's legal representatives or assigns will
attempt to exercise or accept the benefits of any such right and should the
Guarantor or the Guarantor's legal representative or assigns receive any
payment or distribution of money or other property on account of such right
notwithstanding the provisions of this paragraph, such money or other property
shall be held in trust by the recipient for the Bank and shall immediately be
delivered to the Bank for application to the Obligations in the same form as
received, with the addition only of such endorsements or assignments as may be
necessary to perfect the title of the Bank thereto.
7. Other Waivers. The Guarantor waives: (i) notice of the
acceptance of this Guaranty, (ii) notice of the existence and creation of all
or any of the Obligations, (iii) notice of nonpayment of any of the Obligations
and (iv) diligence by the Bank in collection of the Obligations and the
protection of or realization upon any collateral for the Obligations.
Exhibit "E-3"
Page 3 of 5 pages
<PAGE> 65
8. Reinstatement. If any amount which is paid to the Bank by the
Borrower or any other party and which is applied by the Bank to the
satisfaction of any of the Obligations, is returned by the Bank to the Borrower
or such other party or a trustee in Bankruptcy or other legal representative of
the Borrower or such other party by virtue of a claim that such payment
constituted a voidable preference under the Bankruptcy Code or under any state
insolvency law, whether such amount is returned under court order or pursuant
to settlement of the claim of preference, then this Guaranty shall be
reinstated as to such amount as though such payment to the Bank had never been
made and notwithstanding any intervening return or cancellation of any note or
other instrument or agreement evidencing the reinstated Obligations.
9. Miscellaneous. This Guaranty shall be binding upon the
Guarantor, upon the Guarantor's legal representatives, successors and assigns.
If any provision of this Guaranty is determined to be illegal or unenforceable,
such provision shall be deemed to be severable from the balance of the
provisions of this Guaranty and the remaining provisions shall be enforceable
in accordance with their terms.
10. Choice of Law. This Guaranty is made under and will be governed
in all cases by the substantive laws of the State of Indiana, notwithstanding
the fact that Indiana conflicts of law rules might otherwise require the
substantive rules of law of another jurisdiction to apply.
11. Corporate Authority. In order to induce the Bank to accept this
Guaranty and to make the Loans to the Borrower, the Guarantor represents and
warrants to the Bank that: (i) the Guarantor is a corporation organized,
existing and in good standing under the laws of the State of Nevada; (ii)
execution and delivery of this Guaranty are within the Guarantor's corporate
powers, have been duly authorized by all necessary corporate action and do not
contravene or conflict with any provision of law or of the Articles of
Incorporation or By-laws of the Guarantor or of any agreement binding upon the
Guarantor or its properties, and (iii) this Guaranty is the legal, valid and
binding obligation of the Guarantor, enforceable against the Guarantor in
accordance with its terms.
Dated: March 15, 1995
KATHY'S NATURAL FOOD RANCH
MARKET-WEST, INC.
Witness
Signature: By:
------------------------------ ------------------------------
------------------------------ ------------------------------
(printed name of Witness) (printed name and title)
Witness
Signature:
------------------------------
------------------------------
(printed name of Witness)
Exhibit "E-3"
Page 4 of 5 pages
<PAGE> 66
ANNEX
CERTIFICATE REGARDING SOLVENCY
KATHY'S NATURAL FOOD RANCH MARKET-WEST, INC., a Nevada corporation (the
"Guarantor"), by its duly authorized officer, makes the following
representations to BANK ONE, INDIANAPOLIS, NATIONAL ASSOCIATION (the "Bank")
and acknowledges that the Bank is entitled to rely and will rely upon these
representations, in providing certain financial accommodations to WILD OATS
MARKETS, INC., a Delaware corporation, pursuant to a certain Credit Agreement
dated March 15, 1995, (the "Credit Agreement").
1. The assets of the Guarantor at a "fair valuation" within the
meaning of the Bankruptcy Code of 1978, as amended, (the "Code")
are worth approximately $______________________as of this date.
2. The liabilities of the Guarantor, including without limitation
contingent liabilities to the extent appropriate for
consideration in determining whether the Guarantor is
"insolvent", within the meaning of the Code, but excluding the
Guarantor's contingent liability under the Guaranty Agreement
(the "Guaranty") required to be given by the Guarantor under the
terms of the Credit Agreement, total approximately
$______________________ as of __________________, 19__, the end
of the last fiscal quarter of the Guarantor.
3. The Guarantor is not insolvent within the meaning of the Code,
after taking into account its contingent liability under the
Guaranty.
4. After taking into account its contingent liability under the
Guaranty, the Guarantor has sufficient capital for the operation
of its business as presently conducted and at the level of
operations contemplated for the foreseeable future. The minimum
amount of capital required to support the Guarantor's operations
at the level planned for the foreseeable future is
$_______________________.
5. The Guarantor is currently paying its debts as they become due
in the ordinary course of its business. After taking into
account its contingent liability under the Guaranty, the
Guarantor believes that it will be able to continue to pay its
debts as they become due in the ordinary course of its business.
Dated: ____________________, 19___.
KATHY'S NATURAL FOOD RANCH
MARKET-WEST, INC.
By:
------------------------------
------------------------------
(printed name and title)
Exhibit "E-3"
Page 5 of 5 pages
<PAGE> 67
SECURITY AGREEMENT
(Equipment, Inventory, Accounts Receivable and General Intangibles)
THE WILD SIDE, INC., a Colorado corporation (the "Company"), grants to
BANK ONE, INDIANAPOLIS, NATIONAL ASSOCIATION (the "Bank") a security interest
in the Company's Equipment, Inventory, Accounts Receivable and General
Intangibles, whether now owned and hereafter acquired, and in the proceeds
thereof to secure the payment and performance of all of the Obligations. Such
security interest is granted on the terms stated in this Security Agreement.
1. DEFINITIONS. As used in this Security Agreement, the following
terms have the meanings indicated when used with the initial letter
capitalized:
(a) "Account Debtor" means a party who is obligated to the
Company with respect to any Account Receivable, or General Intangible.
(b) "Accounts Receivable" or "Account" means any right of
the Company to payment for goods sold or leased or for services
rendered, whether or not earned by performance.
(c) "Collateral" means all property or rights in which a
security interest is granted under this Security Agreement.
(d) "Collateral Account" is used as defined in Paragraph
10(a).
(e) "Credit Agreement" means the Credit Agreement between
Wild Oats Markets, Inc. and the Bank dated the date of this Security
Agreement, as it may be amended from time to time.
(f) "Default" means an "Event of Default" as defined in the
Credit Agreement.
(g) "Equipment" means all of the furniture, fixtures,
machinery and equipment of the Company together with all tools,
accessories, parts and accessions now in, attached to or hereafter
placed in or added to such property, and any replacements of any such
property.
(h) "General Intangibles" means any personal property
(including things in action) other than goods, Accounts, chattel paper,
documents, instruments and money.
(i) "Guaranty Agreement" means the Guaranty Agreement
executed by the Company in favor of the Bank and dated the date of this
Security Agreement.
(j) "Inventory" means all goods which are held for sale or
lease to customers or which are furnished, have been furnished or are to
be furnished under contracts of service, or which are raw materials,
work in process or materials used or consumed in the Company's business.
(k) "Obligations" means all of the obligations of the
Company under the Guaranty Agreement.
Exhibit "F-1"
Page 1 of 6 pages
<PAGE> 68
2. FINANCING STATEMENTS. The Company authorizes the Bank at the
expense of the Company to execute on its behalf and file a financing statement
or statements in those public offices deemed necessary by the Bank to perfect
its security interest. Such financing statements may be signed by the Bank
alone. In addition, the Company shall execute and deliver any financing
statement or other document that the Bank may request to perfect or to further
evidence the security interest created by this Security Agreement including,
without limitation, any certificate or certificates of title to the Collateral
with the security interest of the Bank noted thereon or executed applications
for such certificates of title.
3. LOCATION, INSPECTION AND PROTECTION OF COLLATERAL. Unless the
Company gives the Bank not less than ten (10) days prior written notice of
additional locations at which Inventory and Equipment shall be kept, all
Inventory and Equipment is kept and shall be kept at the address listed in
Schedule I attached hereto. Unless the Company gives the Bank written notice
of the location of additional offices where records of the Company relative to
Accounts Receivable and General Intangibles are kept, all such records of the
Company shall be kept at 1668 Valtec Lane, Boulder, Colorado 80301, which, the
Company represents, is also the address of its principal office. The Company
shall not keep duplicate Accounts Receivable records at any other address or
change the location of its principal office unless the Company gives the Bank
not less than 10 days prior written notice of such event. The Company shall,
at all reasonable times and in a reasonable manner, allow the officers,
attorneys and accountants of the Bank to examine, inspect, photocopy and make
abstracts from the Company's books and records and to verify Equipment and
Inventory, the latter both as to quantity and quality, and to arrange for
verification of Accounts Receivable, under reasonable procedures, directly with
the Account Debtors or by other methods. The Company shall also deliver to the
Bank upon request any promissory notes or other papers evidencing any Account
and any guaranty or collateral together with appropriate endorsements and
assignments and any information relating thereto and shall do anything else the
Bank may reasonably require to further protect the Bank's interest in the
Collateral. If any of the Collateral consists of Equipment normally used in
more than one state and the Company intends to use any of such Collateral in
any jurisdiction other than a state in which the Company shall have previously
advised the Bank such Collateral is to be used, the Company shall not commence
use in such other jurisdiction except upon ten (10) days prior written notice
to the Bank.
4. FIXTURES. None of the Collateral is attached to real estate
other than real estate described in Schedule I, so as to constitute a fixture.
If any Collateral is hereafter so attached to any real estate other than real
estate described in Schedule I, notice of the common address, legal
description, and name of the owner of record of such real estate shall be
furnished to the Bank at least ten (10) days prior to such attachment. If any
Collateral is hereafter attached to real estate prior to the perfection of the
security interest created by this Security Agreement in such Collateral, the
Company shall, on demand, furnish the Bank with a disclaimer of interest in the
Collateral executed by each person having an interest in such real estate.
5. THE COMPANY'S TITLE. The Company has full and clear title to
all of the Collateral presently owned and shall have such title to all
Collateral hereafter acquired except for the security interest granted by this
Security Agreement and any other lien or security interest permitted under the
terms of
Exhibit "F-1"
Page 2 of 6 pages
<PAGE> 69
the Credit Agreement, and the Company shall keep the Collateral free at all
times from any lien or encumbrance except those permitted by the Credit
Agreement. No financing statements covering all or any portion of the
Collateral is on file at any public office except as may be required or
permitted by this Security Agreement and the Credit Agreement.
6. THE COMPANY'S DUTY TO MAINTAIN THE COLLATERAL. The Company
shall keep all tangible Collateral in good order and repair and shall not waste
or destroy any of the Collateral. The Company shall not use the Collateral in
violation of any statute or ordinance or contrary to the provisions of any
policy of insurance thereon.
7. INSURANCE. In addition to maintaining such insurance on the
Collateral as is required by the Credit Agreement, the Company shall, upon the
reasonable request of the Bank, keep the Collateral insured against such
additional risks, in such amounts and under such policies as the Bank may
reasonably require and with such companies as shall be reasonably acceptable to
the Bank. All policies providing insurance on the Collateral shall, provide
that any loss thereunder shall be payable to the Bank under a standard form of
secured lender's loss payable endorsement. The Company authorizes the Bank to
endorse on the Company's behalf and to negotiate drafts reflecting proceeds of
insurance on the Collateral, provided that the Bank shall remit to the Company
such surplus, if any, as remains after the proceeds have been applied at the
Bank's option, (a) to the satisfaction of all of the Obligations or to the
establishment of a cash collateral account for the Obligations, or (b) to the
replacement or repair of the Collateral; provided, however, that so long as no
Default exists, and provided further that the Company can demonstrate to the
Bank's satisfaction that any proposed replacement or repair of collateral is
economically and physically feasible, such proceeds shall be applied, at the
Company's option and to the extent necessary, as provided in the foregoing
clause (b). Certificates evidencing the existence of all of the insurance
required under the Credit Agreement or this Security Agreement shall be
furnished to the Bank by the Company and the original policies providing such
insurance shall be delivered to the Bank at its request.
8. ADVANCES TO PROTECT COLLATERAL. Upon failure of the Company to
procure any required insurance or to remove any prohibited encumbrance upon the
Collateral or if any policy providing any required insurance is cancelled, the
Bank may procure such insurance or remove any encumbrance on the Collateral and
any amounts expended by the Bank for such purposes shall be immediately due and
payable by the Company to the Bank and shall be added to and become a part of
the Obligations secured hereby and shall bear interest at the Prime Rate, as
defined in the Credit Agreement, plus three percent (3%) per annum.
9. DEALING WITH COLLATERAL PRIOR TO DEFAULT. Prior to Default and
thereafter until the Bank shall notify the Company of the revocation of such
authority:
(a) the Company may, in the ordinary course of business, at its
own expense, sell, lease or furnish under contracts of service, any of
the Inventory normally held by the Company for such purposes, provided
that a sale in the ordinary course of business shall not include a
transfer in
Exhibit "F-1"
Page 3 of 6 pages
<PAGE> 70
total or partial satisfaction of a debt, and the Company may use and
consume, in the ordinary course of its business, any raw materials, work
in process or materials normally held by it for such purposes;
(b) the Company shall, at its own expense, endeavor to collect,
when due, all amounts due with respect to any Accounts or General
Intangibles, and shall take such action with respect to collection as
the Bank may reasonably request or, in the absence of such request, as
the Company may deem advisable in accordance with sound business
practice, and
(c) the Company may grant, in the ordinary course of business,
to any Account Debtor, any rebate, refund or adjustment to which such
Account Debtor may be entitled, and may accept, in connection therewith,
the return of the goods, the sale or lease of which shall have given
rise to the obligation of the Account Debtor.
10. DEALING WITH COLLATERAL AFTER DEFAULT. After Default and upon
the request of the Bank:
(a) the Company shall upon receipt of any checks, drafts, cash
or other remittances in payment of Inventory sold or in payment of
Accounts Receivable of the Company, deposit the same in a special
collateral account (the "Collateral Account") maintained with the Bank;
such proceeds shall be deposited in the form received except for the
indorsement of the Company when required, which indorsement the Bank is
authorized to make on the Company's behalf, and shall be held by the
Bank as security for all Obligations;
(b) the Company shall deliver to the Bank all other instruments
and chattel paper which constitute proceeds from the sale of Collateral,
whether then held or thereafter acquired, and
(c) the Company shall keep segregated any such checks, drafts,
cash, other instruments, chattel paper or other remittances from any of
the Company's other funds or property and shall hold such items in trust
for the benefit of the Bank until delivery to the Bank or deposit in the
Collateral Account and the Bank may apply all or any portion of the
funds on deposit in the Collateral Account against any Obligations in
the order of application provided for in the Credit Agreement or, absent
such provision, at the discretion of the Bank.
After Default, the Bank may notify any Account Debtor to make payment directly
to the Bank of any amounts due or to become due under any Account Receivable,
General Intangible instrument or chattel paper and the Bank may enforce the
collection of any Account Receivable, General Intangible, instrument or chattel
paper in its name or in the name of the Company, by suit or otherwise, and may
surrender, release or exchange all or any part thereof or compromise or extend
or renew for any period, whether or not longer than the original period, any
indebtedness thereunder or evidenced thereby, and any Account Debtor will be
fully protected in relying upon the representation of the Bank that it has
authority under the terms of this Security Agreement to deal with any Account
Receivable, General Intangible, instrument or chattel paper and need not look
beyond this Security Agreement and such representation of the Bank to establish
the Bank's authority in that regard.
Exhibit "F-1"
Page 4 of 6 pages
<PAGE> 71
11. SUBSTITUTION AND SALE OF EQUIPMENT. The Company may from time
to time so long as no Default has occurred and is continuing, substitute items
of Equipment so long as any new Equipment becomes subject to the security
interest created by this Security Agreement and is subject to no prior liens or
security interest other than those permitted by the Credit Agreement. So long
as no Default has occurred and is continuing, the Company may, in the ordinary
course of its business, sell or otherwise dispose of any items of Equipment for
which substitutes have been obtained or which are no longer useful to the
Company in its operations, provided that at least 10 days prior written notice
of any proposed disposition of any material amount of Equipment in a single or
a planned series of transactions is given to the Bank. Upon the request of the
Company, the Bank will deliver an appropriate release of its security interest
in any item of Equipment disposed of by the Company pursuant to the provisions
of this paragraph.
12. REMEDIES UPON DEFAULT. Upon the occurrence of any Default the
Bank shall have with respect to the Collateral, in addition to all rights and
remedies specified in the Credit Agreement, this Security Agreement or any
other agreement between the Company and the Bank, the remedies of a secured
party under the Uniform Commercial Code as in force from time to time in
Indiana, regardless of whether the Code in such form has been enacted in the
jurisdiction in which any such right or remedy is asserted. Any notice
required by law, including but not limited to notice of the intended
disposition of all or any portion of the Collateral, shall be deemed reasonably
and properly given if given at least l0 days prior to such disposition in the
manner prescribed for the giving of notices in the Credit Agreement. Any
proceeds of the disposition of any of the Collateral shall be applied first to
the payment of the expenses of the retaking, holding, repairing, preparing for
sale and sale of the Collateral, including reasonable attorneys' fees and legal
expenses in connection therewith and any balance of such proceeds shall be
applied by the Bank to the Obligations in such order as the Bank shall
determine.
13. RELATION TO CREDIT AGREEMENT. This Security Agreement is given
pursuant to the terms of the Credit Agreement and shall be deemed a part
thereof and subject to the terms and conditions of the Credit Agreement.
14. NOTICES. Any notice required or otherwise given concerning this
Security Agreement by either party to the other shall be given as notices are
required to be given under the terms of the Credit Agreement.
Dated: March 15, 1995
THE WILD SIDE, INC.
By:
-------------------------------------
-------------------------------------
(Printed Name and Title)
Exhibit "F-1"
Page 5 of 6 pages
<PAGE> 72
SCHEDULE I
Exhibit "F-1"
Page 6 of 6 pages
<PAGE> 73
SECURITY AGREEMENT
(Equipment, Inventory, Accounts Receivable and General Intangibles)
KATHY'S NATURAL FOOD RANCH MARKET, INC., a Nevada corporation (the
"Company"), grants to BANK ONE, INDIANAPOLIS, NATIONAL ASSOCIATION (the "Bank")
a security interest in the Company's Equipment, Inventory, Accounts Receivable
and General Intangibles, whether now owned and hereafter acquired, and in the
proceeds thereof to secure the payment and performance of all of the
Obligations. Such security interest is granted on the terms stated in this
Security Agreement.
1. DEFINITIONS. As used in this Security Agreement, the following
terms have the meanings indicated when used with the initial letter
capitalized:
(a) "Account Debtor" means a party who is obligated to the
Company with respect to any Account Receivable, or General Intangible.
(b) "Accounts Receivable" or "Account" means any right of
the Company to payment for goods sold or leased or for services
rendered, whether or not earned by performance.
(c) "Collateral" means all property or rights in which a
security interest is granted under this Security Agreement.
(d) "Collateral Account" is used as defined in Paragraph
10(a).
(e) "Credit Agreement" means the Credit Agreement between
Wild Oats Markets, Inc. and the Bank dated the date of this Security
Agreement, as it may be amended from time to time.
(f) "Default" means an "Event of Default" as defined in the
Credit Agreement.
(g) "Equipment" means all of the furniture, fixtures,
machinery and equipment of the Company together with all tools,
accessories, parts and accessions now in, attached to or hereafter
placed in or added to such property, and any replacements of any such
property.
(h) "General Intangibles" means any personal property
(including things in action) other than goods, Accounts, chattel paper,
documents, instruments and money.
(i) "Guaranty Agreement" means the Guaranty Agreement
executed by the Company in favor of the Bank and dated the date of this
Security Agreement.
(j) "Inventory" means all goods which are held for sale or
lease to customers or which are furnished, have been furnished or are to
be furnished under contracts of service, or which are raw materials,
work in process or materials used or consumed in the Company's business.
(k) "Obligations" means all of the obligations of the
Company under the Guaranty Agreement.
Exhibit "F-2"
Page 1 of 6 pages
<PAGE> 74
2. FINANCING STATEMENTS. The Company authorizes the Bank at the
expense of the Company to execute on its behalf and file a financing statement
or statements in those public offices deemed necessary by the Bank to perfect
its security interest. Such financing statements may be signed by the Bank
alone. In addition, the Company shall execute and deliver any financing
statement or other document that the Bank may request to perfect or to further
evidence the security interest created by this Security Agreement including,
without limitation, any certificate or certificates of title to the Collateral
with the security interest of the Bank noted thereon or executed applications
for such certificates of title.
3. LOCATION, INSPECTION AND PROTECTION OF COLLATERAL. Unless the
Company gives the Bank not less than ten (10) days prior written notice of
additional locations at which Inventory and Equipment shall be kept, all
Inventory and Equipment is kept and shall be kept at the address listed in
Schedule I attached hereto. Unless the Company gives the Bank written notice
of the location of additional offices where records of the Company relative to
Accounts Receivable and General Intangibles are kept, all such records of the
Company shall be kept at 1668 Valtec Lane, Boulder, Colorado 80301, which, the
Company represents, is also the address of its principal office. The Company
shall not keep duplicate Accounts Receivable records at any other address or
change the location of its principal office unless the Company gives the Bank
not less than 10 days prior written notice of such event. The Company shall,
at all reasonable times and in a reasonable manner, allow the officers,
attorneys and accountants of the Bank to examine, inspect, photocopy and make
abstracts from the Company's books and records and to verify Equipment and
Inventory, the latter both as to quantity and quality, and to arrange for
verification of Accounts Receivable, under reasonable procedures, directly with
the Account Debtors or by other methods. The Company shall also deliver to the
Bank upon request any promissory notes or other papers evidencing any Account
and any guaranty or collateral together with appropriate endorsements and
assignments and any information relating thereto and shall do anything else the
Bank may reasonably require to further protect the Bank's interest in the
Collateral. If any of the Collateral consists of Equipment normally used in
more than one state and the Company intends to use any of such Collateral in
any jurisdiction other than a state in which the Company shall have previously
advised the Bank such Collateral is to be used, the Company shall not commence
use in such other jurisdiction except upon ten (10) days prior written notice
to the Bank.
4. FIXTURES. None of the Collateral is attached to real estate
other than real estate described in Schedule I, so as to constitute a fixture.
If any Collateral is hereafter so attached to any real estate other than real
estate described in Schedule I, notice of the common address, legal
description, and name of the owner of record of such real estate shall be
furnished to the Bank at least ten (10) days prior to such attachment. If any
Collateral is hereafter attached to real estate prior to the perfection of the
security interest created by this Security Agreement in such Collateral, the
Company shall, on demand, furnish the Bank with a disclaimer of interest in the
Collateral executed by each person having an interest in such real estate.
5. THE COMPANY'S TITLE. The Company has full and clear title to
all of the Collateral presently owned and shall have such title to all
Collateral hereafter acquired except for the security interest granted by this
Security Agreement and any other lien or security interest permitted under the
terms of
Exhibit "F-2"
Page 2 of 6 pages
<PAGE> 75
the Credit Agreement, and the Company shall keep the Collateral free at all
times from any lien or encumbrance except those permitted by the Credit
Agreement. No financing statements covering all or any portion of the
Collateral is on file at any public office except as may be required or
permitted by this Security Agreement and the Credit Agreement.
6. THE COMPANY'S DUTY TO MAINTAIN THE COLLATERAL. The Company
shall keep all tangible Collateral in good order and repair and shall not waste
or destroy any of the Collateral. The Company shall not use the Collateral in
violation of any statute or ordinance or contrary to the provisions of any
policy of insurance thereon.
7. INSURANCE. In addition to maintaining such insurance on the
Collateral as is required by the Credit Agreement, the Company shall, upon the
reasonable request of the Bank, keep the Collateral insured against such
additional risks, in such amounts and under such policies as the Bank may
reasonably require and with such companies as shall be reasonably acceptable to
the Bank. All policies providing insurance on the Collateral shall, provide
that any loss thereunder shall be payable to the Bank under a standard form of
secured lender's loss payable endorsement. The Company authorizes the Bank to
endorse on the Company's behalf and to negotiate drafts reflecting proceeds of
insurance on the Collateral, provided that the Bank shall remit to the Company
such surplus, if any, as remains after the proceeds have been applied at the
Bank's option, (a) to the satisfaction of all of the Obligations or to the
establishment of a cash collateral account for the Obligations, or (b) to the
replacement or repair of the Collateral; provided, however, that so long as no
Default exists, and provided further that the Company can demonstrate to the
Bank's satisfaction that any proposed replacement or repair of collateral is
economically and physically feasible, such proceeds shall be applied, at the
Company's option and to the extent necessary, as provided in the foregoing
clause (b). Certificates evidencing the existence of all of the insurance
required under the Credit Agreement or this Security Agreement shall be
furnished to the Bank by the Company and the original policies providing such
insurance shall be delivered to the Bank at its request.
8. ADVANCES TO PROTECT COLLATERAL. Upon failure of the Company to
procure any required insurance or to remove any prohibited encumbrance upon the
Collateral or if any policy providing any required insurance is cancelled, the
Bank may procure such insurance or remove any encumbrance on the Collateral and
any amounts expended by the Bank for such purposes shall be immediately due and
payable by the Company to the Bank and shall be added to and become a part of
the Obligations secured hereby and shall bear interest at the Prime Rate, as
defined in the Credit Agreement, plus three percent (3%) per annum.
9. DEALING WITH COLLATERAL PRIOR TO DEFAULT. Prior to Default and
thereafter until the Bank shall notify the Company of the revocation of such
authority:
(a) the Company may, in the ordinary course of business, at its
own expense, sell, lease or furnish under contracts of service, any of
the Inventory normally held by the Company for such purposes, provided
that a sale in the ordinary course of business shall not include a
transfer in
Exhibit "F-2"
Page 3 of 6 pages
<PAGE> 76
total or partial satisfaction of a debt, and the Company may use and
consume, in the ordinary course of its business, any raw materials, work
in process or materials normally held by it for such purposes;
(b) the Company shall, at its own expense, endeavor to collect,
when due, all amounts due with respect to any Accounts or General
Intangibles, and shall take such action with respect to collection as
the Bank may reasonably request or, in the absence of such request, as
the Company may deem advisable in accordance with sound business
practice, and
(c) the Company may grant, in the ordinary course of business,
to any Account Debtor, any rebate, refund or adjustment to which such
Account Debtor may be entitled, and may accept, in connection therewith,
the return of the goods, the sale or lease of which shall have given
rise to the obligation of the Account Debtor.
10. DEALING WITH COLLATERAL AFTER DEFAULT. After Default and upon
the request of the Bank:
(a) the Company shall upon receipt of any checks, drafts, cash
or other remittances in payment of Inventory sold or in payment of
Accounts Receivable of the Company, deposit the same in a special
collateral account (the "Collateral Account") maintained with the Bank;
such proceeds shall be deposited in the form received except for the
indorsement of the Company when required, which indorsement the Bank is
authorized to make on the Company's behalf, and shall be held by the
Bank as security for all Obligations;
(b) the Company shall deliver to the Bank all other instruments
and chattel paper which constitute proceeds from the sale of Collateral,
whether then held or thereafter acquired, and
(c) the Company shall keep segregated any such checks, drafts,
cash, other instruments, chattel paper or other remittances from any of
the Company's other funds or property and shall hold such items in trust
for the benefit of the Bank until delivery to the Bank or deposit in the
Collateral Account and the Bank may apply all or any portion of the
funds on deposit in the Collateral Account against any Obligations in
the order of application provided for in the Credit Agreement or, absent
such provision, at the discretion of the Bank.
After Default, the Bank may notify any Account Debtor to make payment directly
to the Bank of any amounts due or to become due under any Account Receivable,
General Intangible instrument or chattel paper and the Bank may enforce the
collection of any Account Receivable, General Intangible, instrument or chattel
paper in its name or in the name of the Company, by suit or otherwise, and may
surrender, release or exchange all or any part thereof or compromise or extend
or renew for any period, whether or not longer than the original period, any
indebtedness thereunder or evidenced thereby, and any Account Debtor will be
fully protected in relying upon the representation of the Bank that it has
authority under the terms of this Security Agreement to deal with any Account
Receivable, General Intangible, instrument or chattel paper and need not look
beyond this Security Agreement and such representation of the Bank to establish
the Bank's authority in that regard.
Exhibit "F-2"
Page 4 of 6 pages
<PAGE> 77
11. SUBSTITUTION AND SALE OF EQUIPMENT. The Company may from time
to time so long as no Default has occurred and is continuing, substitute items
of Equipment so long as any new Equipment becomes subject to the security
interest created by this Security Agreement and is subject to no prior liens or
security interest other than those permitted by the Credit Agreement. So long
as no Default has occurred and is continuing, the Company may, in the ordinary
course of its business, sell or otherwise dispose of any items of Equipment for
which substitutes have been obtained or which are no longer useful to the
Company in its operations, provided that at least 10 days prior written notice
of any proposed disposition of any material amount of Equipment in a single or
a planned series of transactions is given to the Bank. Upon the request of the
Company, the Bank will deliver an appropriate release of its security interest
in any item of Equipment disposed of by the Company pursuant to the provisions
of this paragraph.
12. REMEDIES UPON DEFAULT. Upon the occurrence of any Default the
Bank shall have with respect to the Collateral, in addition to all rights and
remedies specified in the Credit Agreement, this Security Agreement or any
other agreement between the Company and the Bank, the remedies of a secured
party under the Uniform Commercial Code as in force from time to time in
Indiana, regardless of whether the Code in such form has been enacted in the
jurisdiction in which any such right or remedy is asserted. Any notice
required by law, including but not limited to notice of the intended
disposition of all or any portion of the Collateral, shall be deemed reasonably
and properly given if given at least l0 days prior to such disposition in the
manner prescribed for the giving of notices in the Credit Agreement. Any
proceeds of the disposition of any of the Collateral shall be applied first to
the payment of the expenses of the retaking, holding, repairing, preparing for
sale and sale of the Collateral, including reasonable attorneys' fees and legal
expenses in connection therewith and any balance of such proceeds shall be
applied by the Bank to the Obligations in such order as the Bank shall
determine.
13. RELATION TO CREDIT AGREEMENT. This Security Agreement is given
pursuant to the terms of the Credit Agreement and shall be deemed a part
thereof and subject to the terms and conditions of the Credit Agreement.
14. NOTICES. Any notice required or otherwise given concerning this
Security Agreement by either party to the other shall be given as notices are
required to be given under the terms of the Credit Agreement.
Dated: March 15, 1995
KATHY'S NATURAL FOOD RANCH MARKET, INC.
By:
-------------------------------------
-------------------------------------
(Printed Name and Title)
Exhibit "F-2"
Page 5 of 6 pages
<PAGE> 78
SCHEDULE I
--------------------------------------------------------------------------------
Schedule I
Names and addresses of all stores,
warehouses, bakeries and kitchens
KATHY'S NATURAL FOOD RANCH MARKET, INC.
STORE LISTING
--------------------------------------------------------------------------------
WILD OATS LAS VEGAS
EAST
3455 East Flamingo
Las Vegas, NV 89121-5099
Exhibit "F-2"
Page 6 of 6 pages
<PAGE> 79
SECURITY AGREEMENT
(Equipment, Inventory, Accounts Receivable and General Intangibles)
KATHY'S NATURAL FOOD RANCH MARKET-WEST, INC., a Nevada corporation (the
"Company"), grants to BANK ONE, INDIANAPOLIS, NATIONAL ASSOCIATION (the "Bank")
a security interest in the Company's Equipment, Inventory, Accounts Receivable
and General Intangibles, whether now owned and hereafter acquired, and in the
proceeds thereof to secure the payment and performance of all of the
Obligations. Such security interest is granted on the terms stated in this
Security Agreement.
1. DEFINITIONS. As used in this Security Agreement, the following
terms have the meanings indicated when used with the initial letter
capitalized:
(a) "Account Debtor" means a party who is obligated to the
Company with respect to any Account Receivable, or General Intangible.
(b) "Accounts Receivable" or "Account" means any right of
the Company to payment for goods sold or leased or for services
rendered, whether or not earned by performance.
(c) "Collateral" means all property or rights in which a
security interest is granted under this Security Agreement.
(d) "Collateral Account" is used as defined in Paragraph
10(a).
(e) "Credit Agreement" means the Credit Agreement between
Wild Oats Markets, Inc. and the Bank dated the date of this Security
Agreement, as it may be amended from time to time.
(f) "Default" means an "Event of Default" as defined in the
Credit Agreement.
(g) "Equipment" means all of the furniture, fixtures,
machinery and equipment of the Company together with all tools,
accessories, parts and accessions now in, attached to or hereafter
placed in or added to such property, and any replacements of any such
property.
(h) "General Intangibles" means any personal property
(including things in action) other than goods, Accounts, chattel paper,
documents, instruments and money.
(i) "Guaranty Agreement" means the Guaranty Agreement
executed by the Company in favor of the Bank and dated the date of this
Security Agreement.
(j) "Inventory" means all goods which are held for sale or
lease to customers or which are furnished, have been furnished or are to
be furnished under contracts of service, or which are raw materials,
work in process or materials used or consumed in the Company's business.
(k) "Obligations" means all of the obligations of the
Company under the Guaranty Agreement.
Exhibit "F-3"
Page 1 of 6 pages
<PAGE> 80
2. FINANCING STATEMENTS. The Company authorizes the Bank at the
expense of the Company to execute on its behalf and file a financing statement
or statements in those public offices deemed necessary by the Bank to perfect
its security interest. Such financing statements may be signed by the Bank
alone. In addition, the Company shall execute and deliver any financing
statement or other document that the Bank may request to perfect or to further
evidence the security interest created by this Security Agreement including,
without limitation, any certificate or certificates of title to the Collateral
with the security interest of the Bank noted thereon or executed applications
for such certificates of title.
3. LOCATION, INSPECTION AND PROTECTION OF COLLATERAL. Unless the
Company gives the Bank not less than ten (10) days prior written notice of
additional locations at which Inventory and Equipment shall be kept, all
Inventory and Equipment is kept and shall be kept at the address listed in
Schedule I attached hereto. Unless the Company gives the Bank written notice
of the location of additional offices where records of the Company relative to
Accounts Receivable and General Intangibles are kept, all such records of the
Company shall be kept at 1668 Valtec Lane, Boulder, Colorado 80301, which, the
Company represents, is also the address of its principal office. The Company
shall not keep duplicate Accounts Receivable records at any other address or
change the location of its principal office unless the Company gives the Bank
not less than 10 days prior written notice of such event. The Company shall,
at all reasonable times and in a reasonable manner, allow the officers,
attorneys and accountants of the Bank to examine, inspect, photocopy and make
abstracts from the Company's books and records and to verify Equipment and
Inventory, the latter both as to quantity and quality, and to arrange for
verification of Accounts Receivable, under reasonable procedures, directly with
the Account Debtors or by other methods. The Company shall also deliver to the
Bank upon request any promissory notes or other papers evidencing any Account
and any guaranty or collateral together with appropriate endorsements and
assignments and any information relating thereto and shall do anything else the
Bank may reasonably require to further protect the Bank's interest in the
Collateral. If any of the Collateral consists of Equipment normally used in
more than one state and the Company intends to use any of such Collateral in
any jurisdiction other than a state in which the Company shall have previously
advised the Bank such Collateral is to be used, the Company shall not commence
use in such other jurisdiction except upon ten (10) days prior written notice
to the Bank.
4. FIXTURES. None of the Collateral is attached to real estate
other than real estate described in Schedule I, so as to constitute a fixture.
If any Collateral is hereafter so attached to any real estate other than real
estate described in Schedule I, notice of the common address, legal
description, and name of the owner of record of such real estate shall be
furnished to the Bank at least ten (10) days prior to such attachment. If any
Collateral is hereafter attached to real estate prior to the perfection of the
security interest created by this Security Agreement in such Collateral, the
Company shall, on demand, furnish the Bank with a disclaimer of interest in the
Collateral executed by each person having an interest in such real estate.
5. THE COMPANY'S TITLE. The Company has full and clear title to
all of the Collateral presently owned and shall have such title to all
Collateral hereafter acquired except for the security interest granted by this
Security Agreement and any other lien or security interest permitted under the
terms of
Exhibit "F-3"
Page 2 of 6 pages
<PAGE> 81
the Credit Agreement, and the Company shall keep the Collateral free at all
times from any lien or encumbrance except those permitted by the Credit
Agreement. No financing statements covering all or any portion of the
Collateral is on file at any public office except as may be required or
permitted by this Security Agreement and the Credit Agreement.
6. THE COMPANY'S DUTY TO MAINTAIN THE COLLATERAL. The Company
shall keep all tangible Collateral in good order and repair and shall not waste
or destroy any of the Collateral. The Company shall not use the Collateral in
violation of any statute or ordinance or contrary to the provisions of any
policy of insurance thereon.
7. INSURANCE. In addition to maintaining such insurance on the
Collateral as is required by the Credit Agreement, the Company shall, upon the
reasonable request of the Bank, keep the Collateral insured against such
additional risks, in such amounts and under such policies as the Bank may
reasonably require and with such companies as shall be reasonably acceptable to
the Bank. All policies providing insurance on the Collateral shall, provide
that any loss thereunder shall be payable to the Bank under a standard form of
secured lender's loss payable endorsement. The Company authorizes the Bank to
endorse on the Company's behalf and to negotiate drafts reflecting proceeds of
insurance on the Collateral, provided that the Bank shall remit to the Company
such surplus, if any, as remains after the proceeds have been applied at the
Bank's option, (a) to the satisfaction of all of the Obligations or to the
establishment of a cash collateral account for the Obligations, or (b) to the
replacement or repair of the Collateral; provided, however, that so long as no
Default exists, and provided further that the Company can demonstrate to the
Bank's satisfaction that any proposed replacement or repair of collateral is
economically and physically feasible, such proceeds shall be applied, at the
Company's option and to the extent necessary, as provided in the foregoing
clause (b). Certificates evidencing the existence of all of the insurance
required under the Credit Agreement or this Security Agreement shall be
furnished to the Bank by the Company and the original policies providing such
insurance shall be delivered to the Bank at its request.
8. ADVANCES TO PROTECT COLLATERAL. Upon failure of the Company to
procure any required insurance or to remove any prohibited encumbrance upon the
Collateral or if any policy providing any required insurance is cancelled, the
Bank may procure such insurance or remove any encumbrance on the Collateral and
any amounts expended by the Bank for such purposes shall be immediately due and
payable by the Company to the Bank and shall be added to and become a part of
the Obligations secured hereby and shall bear interest at the Prime Rate, as
defined in the Credit Agreement, plus three percent (3%) per annum.
9. DEALING WITH COLLATERAL PRIOR TO DEFAULT. Prior to Default and
thereafter until the Bank shall notify the Company of the revocation of such
authority:
(a) the Company may, in the ordinary course of business, at its
own expense, sell, lease or furnish under contracts of service, any of
the Inventory normally held by the Company for such purposes, provided
that a sale in the ordinary course of business shall not include a
transfer in
Exhibit "F-3"
Page 3 of 6 pages
<PAGE> 82
total or partial satisfaction of a debt, and the Company may use and
consume, in the ordinary course of its business, any raw materials, work
in process or materials normally held by it for such purposes;
(b) the Company shall, at its own expense, endeavor to collect,
when due, all amounts due with respect to any Accounts or General
Intangibles, and shall take such action with respect to collection as
the Bank may reasonably request or, in the absence of such request, as
the Company may deem advisable in accordance with sound business
practice, and
(c) the Company may grant, in the ordinary course of business,
to any Account Debtor, any rebate, refund or adjustment to which such
Account Debtor may be entitled, and may accept, in connection therewith,
the return of the goods, the sale or lease of which shall have given
rise to the obligation of the Account Debtor.
10. DEALING WITH COLLATERAL AFTER DEFAULT. After Default and upon
the request of the Bank:
(a) the Company shall upon receipt of any checks, drafts, cash
or other remittances in payment of Inventory sold or in payment of
Accounts Receivable of the Company, deposit the same in a special
collateral account (the "Collateral Account") maintained with the Bank;
such proceeds shall be deposited in the form received except for the
indorsement of the Company when required, which indorsement the Bank is
authorized to make on the Company's behalf, and shall be held by the
Bank as security for all Obligations;
(b) the Company shall deliver to the Bank all other instruments
and chattel paper which constitute proceeds from the sale of Collateral,
whether then held or thereafter acquired, and
(c) the Company shall keep segregated any such checks, drafts,
cash, other instruments, chattel paper or other remittances from any of
the Company's other funds or property and shall hold such items in trust
for the benefit of the Bank until delivery to the Bank or deposit in the
Collateral Account and the Bank may apply all or any portion of the
funds on deposit in the Collateral Account against any Obligations in
the order of application provided for in the Credit Agreement or, absent
such provision, at the discretion of the Bank.
After Default, the Bank may notify any Account Debtor to make payment directly
to the Bank of any amounts due or to become due under any Account Receivable,
General Intangible instrument or chattel paper and the Bank may enforce the
collection of any Account Receivable, General Intangible, instrument or chattel
paper in its name or in the name of the Company, by suit or otherwise, and may
surrender, release or exchange all or any part thereof or compromise or extend
or renew for any period, whether or not longer than the original period, any
indebtedness thereunder or evidenced thereby, and any Account Debtor will be
fully protected in relying upon the representation of the Bank that it has
authority under the terms of this Security Agreement to deal with any Account
Receivable, General Intangible, instrument or chattel paper and need not look
beyond this Security Agreement and such representation of the Bank to establish
the Bank's authority in that regard.
Exhibit "F-3"
Page 4 of 6 pages
<PAGE> 83
11. SUBSTITUTION AND SALE OF EQUIPMENT. The Company may from time
to time so long as no Default has occurred and is continuing, substitute items
of Equipment so long as any new Equipment becomes subject to the security
interest created by this Security Agreement and is subject to no prior liens or
security interest other than those permitted by the Credit Agreement. So long
as no Default has occurred and is continuing, the Company may, in the ordinary
course of its business, sell or otherwise dispose of any items of Equipment for
which substitutes have been obtained or which are no longer useful to the
Company in its operations, provided that at least 10 days prior written notice
of any proposed disposition of any material amount of Equipment in a single or
a planned series of transactions is given to the Bank. Upon the request of the
Company, the Bank will deliver an appropriate release of its security interest
in any item of Equipment disposed of by the Company pursuant to the provisions
of this paragraph.
12. REMEDIES UPON DEFAULT. Upon the occurrence of any Default the
Bank shall have with respect to the Collateral, in addition to all rights and
remedies specified in the Credit Agreement, this Security Agreement or any
other agreement between the Company and the Bank, the remedies of a secured
party under the Uniform Commercial Code as in force from time to time in
Indiana, regardless of whether the Code in such form has been enacted in the
jurisdiction in which any such right or remedy is asserted. Any notice
required by law, including but not limited to notice of the intended
disposition of all or any portion of the Collateral, shall be deemed reasonably
and properly given if given at least l0 days prior to such disposition in the
manner prescribed for the giving of notices in the Credit Agreement. Any
proceeds of the disposition of any of the Collateral shall be applied first to
the payment of the expenses of the retaking, holding, repairing, preparing for
sale and sale of the Collateral, including reasonable attorneys' fees and legal
expenses in connection therewith and any balance of such proceeds shall be
applied by the Bank to the Obligations in such order as the Bank shall
determine.
13. RELATION TO CREDIT AGREEMENT. This Security Agreement is given
pursuant to the terms of the Credit Agreement and shall be deemed a part
thereof and subject to the terms and conditions of the Credit Agreement.
14. NOTICES. Any notice required or otherwise given concerning this
Security Agreement by either party to the other shall be given as notices are
required to be given under the terms of the Credit Agreement.
Dated: March 15, 1995
KATHY'S NATURAL FOOD RANCH
MARKET-WEST, INC.
By:
-------------------------------------
-------------------------------------
(Printed Name and Title)
Exhibit "F-3"
Page 5 of 6 pages
<PAGE> 84
SCHEDULE I
--------------------------------------------------------------------------------
Schedule I
Names and addresses of all stores,
warehouses, bakeries and kitchens
KATHY'S NATURAL FOOD RANCH MARKET-WEST,
INC. STORE LISTING
--------------------------------------------------------------------------------
WILD OATS LAS VEGAS
WEST
6720 West Sahara
Las Vegas, NV 89102-2964
Exhibit "F-3"
Page 6 of 6 pages
<PAGE> 85
SUBORDINATION AGREEMENT
WILD OATS MARKETS, INC., a Delaware corporation (the "Company"), BANK
ONE, INDIANAPOLIS, NATIONAL ASSOCIATION, a national banking association (the
"Bank"), and _____________________________, a resident of _______________ (the
"Junior Creditor"), agree as follows:
1. Background -- Definitions. This Agreement is made in the
context of the following agreed state of facts:
a. The Bank and the Company are parties to a Credit Agreement dated
the date of this Subordination Agreement under the terms of
which the Bank will extend a revolving line of credit (the
"Revolving Loan") to the Company for loans up to a maximum
outstanding principal amount of $20,000,000.00. The Revolving
Loan is hereafter referred to as the "Loan." All obligations of
the Company to the Bank on account of the Loan, whether such
obligations now exist or arise hereafter, including principal,
interest and expenses of collection, and including any
obligations on account of any extension, renewal or
restructuring of the Loan, are hereafter referred to as the
"Senior Obligations."
b. The Company is indebted to the Junior Creditor in the principal
amount of $________________. The indebtedness of the Company to
the Junior Creditor is represented by the promissory note of the
Company dated ____________________ (the "Subordinated Note").
Any promissory note which may hereafter be given by the Company
to the Junior Creditor to replace the Subordinated Note or to
represent any extension, renewal or restructuring of the
indebtedness now represented by the Subordinated Note is
hereafter referred to as a "Substitute Subordinated Note." All
obligations of the Company to the Junior Creditor now
represented by the Subordinated Note or any Substitute
Subordinated Note are hereafter referred to as the "Junior
Obligations."
As used in this Agreement, the term "Loan Document" means any instrument or
document which evidences or secures the Loan or which expresses an agreement
between the Company and the Bank as to terms applicable to the Loan. As used
in this Agreement, the term "Default" means an Event of Default or Unmatured
Event of Default as those terms are defined in the Credit Agreement and
includes, without limitation, not only failure of the Company to pay any
installment of principal or interest on the Loan when due, but also failure of
the Company to observe certain covenants contained in the Credit Agreement,
including financial covenants. As used in this Agreement, the term "Insolvency
Proceeding" means any proceeding, whether voluntary or involuntary, for the
distribution, division or application of assets of the Company or the proceeds
thereof, regardless of whether such proceeding is for the liquidation,
dissolution, winding up of affairs, reorganization or arrangement of the
obligations of the Company, or for a composition among the creditors of the
Company and whether in bankruptcy or in connection with a receivership or under
an assignment for the benefit of the Creditors of the Company or otherwise
including, without limitation, any meeting of Creditors of the Company in
connection with any such proceeding.
Exhibit "G"
Page 1 of 4 pages
<PAGE> 86
2. Subordination. The Junior Obligations are and shall hereafter
be subordinate and inferior in right of payment to all of the Senior
Obligations. Notwithstanding any provision to the contrary contained in the
Subordinated Note or any other agreement between the Company and the Junior
Creditor with respect to the Junior Obligations, the Company shall not make and
shall not be required to make any payment on account of the principal of or
interest on the Junior Obligations until the Senior Obligations have been paid
in full and the Bank has no further obligation to make additional advances to
the Company under the Revolving Loan, including advances made pursuant to any
extension of the term of the Revolving Loan, provided that the Company may make
the regularly scheduled payments of principal and interest provided for under
the terms of the Subordinated Note so long as no Default has occurred and is
continuing or would occur as a result of such payment, and provided further
that no such payment shall be made more than ten (10) days prior to its
regularly scheduled due date. The Company shall not be required to perform or
omit any other act otherwise required to be performed or omitted under the
terms of the Subordinated Note or otherwise with respect to the Junior
Obligations at any time such performance or omission would result in the
occurrence of a Default. The due date for any payment or performance of any
Junior Obligation shall be deemed to be extended during any period in which
such payment or performance is prevented by the provisions of this Agreement,
and no cause of action against the Company will accrue to the Junior Creditor
or any subsequent holder of the Junior Obligations during the continuance of
any such extension.
3. Improper Payment. Any amount paid by the Company to the Junior
Creditor in violation of any provision of this Agreement shall be received in
trust by the Junior Creditor for the benefit of the Bank and shall, with or
without demand, be immediately delivered by the Junior Creditor to the Bank in
the same form in which received, with the addition only of such endorsements or
assignments as may be necessary to perfect the title of the Bank to such
payment. Such amounts may be applied by the Bank to any item of the Senior
Obligations in such order as the Bank in its discretion shall determine or may
be returned to the Company at the Bank's discretion. Upon the request of the
Bank, the Company and the Junior Creditor will execute such documents and
perform all such other acts as may reasonably be required to rescind premature
performance of any Junior Obligation and to reestablish, to the maximum extent
practical, the status quo prior to such premature performance.
4. Authority of Bank to Act for Junior Creditor. The Junior
Creditor appoints the Bank or, at the Bank's discretion any officer of the
Bank, as the Junior Creditor's attorney-in-fact, with full power of
substitution, and with the exclusive right and power to enforce claims arising
on account of the Junior Obligations by proof of debt, proof of claim or
otherwise in any Insolvency Proceeding; to collect any assets of the Company
distributed in any such Proceeding by way of dividend or otherwise, and to
receive any securities of the Company or of any reorganized entity emerging
from any Insolvency Proceeding, which securities are issued and distributed on
account of the Junior Obligations; to vote claims of the Junior Creditor
arising on account of the Junior Obligations in any Insolvency Proceeding and
to accept or reject any plan of partial or complete liquidation,
reorganization, arrangement, composition or extension in any Insolvency
Proceeding; to execute any endorsement or assignment of the Subordinated Note
or any Substitute Subordinated Note required in connection with any Insolvency
Proceeding, and
Exhibit "G"
Page 2 of 4 pages
<PAGE> 87
generally to take any action in connection with any Insolvency Proceeding which
the Junior Creditor would be authorized to take but for this Agreement. Any
action taken by the Bank or the Bank's officer pursuant to the power of
attorney granted under the terms of this Paragraph shall be taken for the use
and benefit of the Bank, and may be taken in the name of the Bank or in the
name of the Junior Creditor and without notice to the Junior Creditor. Such
power of attorney is a power coupled with an interest and shall be irrevocable
until all of the Senior Obligations have been satisfied in full and until the
Bank is no longer under any obligation under the terms of the Credit Agreement
to make any further loan or advance to the Company.
5. Distributions in Liquidation. In the event of the liquidation
of the Company or the distribution of any of its assets or the securities of
any successor on account of any liquidation, bankruptcy, receivership,
reorganization, assignment for the benefit of creditors or similar proceeding,
the Junior Creditor shall not be entitled to any payment or distribution on
account of any Junior Obligation until all Senior Obligations have been
satisfied in full, and the Junior Creditor shall receive any money, securities
or other property distributed in any such proceeding to the Junior Creditor on
account of Junior Obligations in trust for the benefit of the Bank and shall
deliver any such property to the Bank in the same form as received, adding only
such endorsements or assignments as may be necessary to perfect the title of
the Bank to such property, for application to the satisfaction of the Senior
Obligations in such order as the Bank in its discretion may determine. Any
excess of such property remaining after satisfaction of all of the Senior
Obligations shall be returned to the Junior Creditor. The Bank may liquidate
any noncash property received from the Junior Creditor because of any provision
of this Section in the manner in which collateral may be liquidated under the
terms of the Uniform Commercial Code as enacted in the State of Indiana, and
such property may be liquidated in any order that the Bank shall determine in
the exercise of the Bank's sole discretion.
6. Subordination Absolute. The subordination of the Junior
Obligations to the Senior Obligations effected by this Subordination Agreement
shall be absolute and the Bank may from time to time, without the consent of or
notice to the Junior Creditor and without affecting the subordination of the
Junior Obligations to the Senior Obligations: (i) obtain a security interest
in any property to secure any of the Senior Obligations; (ii) obtain the
primary or secondary liability of any party or parties in addition to the
Company with respect to any of the Senior Obligations; (iii) extend or renew
any of the Senior Obligations for any period beyond their original due dates;
(iv) release or compromise any liability of any other party or parties
primarily or secondarily liable with respect to any of the Senior Obligations;
(v) release any security interest that the Bank might now have or hereafter
obtain in any property securing any of the Senior Obligations and permit any
substitution or exchange of any such property; (vi) extend loans and other
credit accommodations to the Company in addition to the Revolving Loan and
increase the maximum amount which may be loaned to the Company under the
Revolving Loan.
7. Notice of Subordination. The Company and the Junior Creditor
shall, contemporaneously with the execution of this Agreement, cause the
following legend to be placed on the face of the Subordinated Note:
Exhibit "G"
Page 3 of 4 pages
<PAGE> 88
This Promissory Note is subject to a Subordination Agreement
dated March 15, 1995, in favor of BANK ONE, INDIANAPOLIS,
National Association.
A photocopy of the Note with such legend endorsed thereon shall
immediately be delivered to the Bank. The same legend shall be placed on any
Substitute Subordinated Note before it is delivered to the Junior Creditor and
a photocopy of any Substitute Subordinated Note shall be delivered to the Bank
immediately upon its execution and delivery to the Junior Creditor.
8. Successors and Assigns. This Agreement shall be binding upon
the Company and the Junior Creditor and the Junior Creditor's successors in
interest to the Subordinated Note and any Substitute Subordinated Note and the
Junior Obligations and shall inure to the benefit of the Bank and its
successors and assigns.
9. Severability. If any provision of this Agreement is determined
to be illegal or unenforceable, such provision shall be deemed to be severable
from the balance of the provisions of this Agreement and the remaining
provisions shall be enforceable in accordance with their terms.
10. Governing Law. This Agreement is made under and will be
governed in all cases by the substantive laws of the State of Indiana,
notwithstanding the fact that Indiana conflicts of law rules might otherwise
require the substantive rules of law of another jurisdiction to apply.
Dated: March 15, 1995
WILD OATS MARKETS, INC.
By:
-------------------------------
-------------------------------
(Printed Name and Title)
BANK ONE, INDIANAPOLIS,
NATIONAL ASSOCIATION
By:
-----------------------------
Efthimios P. Sotos, Assistant
Vice President
(Printed Name) (Junior Creditor)
Exhibit "G"
Page 4 of 4 pages