Exhibit 10.3
2005 LINE OF CREDIT LOAN
AGREEMENT
THIS 2005 LINE OF CREDIT LOAN
AGREEMENT (this “ Agreement” or “Loan
Agreement”) is made effective this 31 st day of
May 2005, by and between DNA Dreamfields Company, LLC, an Ohio
limited liability company (the “Borrower”) and Dakota
Growers Pasta Company, Inc., a North Dakota corporation (the
“Lender”).
Borrower desires that Lender lend
Borrower the sum of up to Five Million and no/100 Dollars
($5,000,000.00) (the “Loan ”). In
connection with the Loan, the Borrower will execute and deliver for
the Lender’s benefit: (i) a Promissory Note, dated of
even date; (ii) this Loan Agreement; and (iii) a LLC Unit Pledge
Agreement signed by each owner of an equity interest in the
Borrower; and (iv) any other documents necessary to document and
secure the Loan. All the documents listed in (i)-(iv) above,
shall be collectively referred to as the “Loan
Documents”.
This Agreement sets forth certain
additional obligations undertaken by Borrower to induce Lender to
make the Loan.
ACCORDINGLY, to induce Lender to
make the Loan to Borrower, and for good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged,
Borrower hereby represents, warrants and agrees for the benefit of
Lender that:
1.
THE LOAN
. Provided that there is no Event of
Default and subject to the conditions set forth hereinafter
(including, without limitations, the conditions set forth in
Section 2 hereof), Lender agrees to lend to the Borrower from
time to time an aggregate amount not to exceed Five Million Dollars
($5,000,000.00). Such amounts shall be advanced by Lender to
Borrower as requested in writing by Borrower. Subject to the
terms and conditions of this Agreement, amounts borrowed hereunder
may be repaid and reborrowed from time to time. The Loan
shall be evidenced by the Promissory Note of the Borrower which
will be made payable to the order of the Lender. The maximum
principal amount of the Loan shall be FIVE MILLION AND NO/100
DOLLARS ($5,000,000.00). Interest at the annual rate
determined in accordance with Schedule 1 hereto shall accrue
on amount of the Loan then outstanding until such amounts are paid
in full. Interest shall be payable on the thirtieth day of
each month. The Loan shall be payable in full on May 31,
2010; provided, however, that payment of the principal amounts
outstanding from time to time shall commence upon the earlier to
occur of a) ten (10) months after the date of the first advance
from the Lender to the Borrower pursuant to this Loan Agreement and
the associated Promissory Note and b) the principal amount
outstanding under this Loan Agreement and the associated Promissory
Note equals the maximum loan amount of Five Million Dollars
($5,000,000). The date of the earlier event to occur of a) or
b) above shall be referred to as the “Principal Reduction
Date”. Commencing thirty (30) days after
the end of the calendar month in which the Principal Reduction Date
occurred and continuing each month thereafter while any principal
amounts remain outstanding hereunder, the Borrower shall pay to the
Lender an amount equal to the “Net Income” of Borrower
as determined pursuant to generally accepted accounting principles
with respect to a particular calendar month less any cash or other
reserve established by the Borrower pursuant to the decision of the
“Managing Member” (as defined in the Borrower’s
Amended and Restated Operating Agreement).
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Whenever the Borrower desires that
the Lender make an advance, the Borrower shall provide notice to
the Lender, setting forth the date on which the proposed advance
will be made and the aggregate principal amount of such proposed
advance.
Each request for an advance under
the Loan shall be deemed a representation and warranty by the
Borrower that on the advance date and after giving effect to the
advance, the applicable conditions specified in Section 2
below have been and will be satisfied.
If the Promissory Note is not paid
in full on the Maturity Date (or the date as extended), payments
received shall be applied first against costs of collection and
late fees, if any, then to accrued interest, and then to unpaid
principal.
For purposes of this Agreement, a
“Material Adverse Effect” shall mean either (1) a
material adverse change in, or a material adverse effect upon, the
operations, business, properties, condition (financial or
otherwise) or prospects of the Borrower or (ii) a material adverse
effect on the ability of the Borrower to perform or comply with in
any material respect any term or condition of any of the Loan
Documents or avoid any Event of Default.
2.
CONDITIONS
PRECEDENT . The
obligations of the Lender hereunder and the obligation of the
Lender to make advances to Borrower of the Loan is subject to the
satisfaction of the following conditions:
(a)
The Lender shall have received the
following:
(i)
a Promissory Note in the form of
Exhibit A hereto (the “Promissory Note”), duly
executed by the Borrower;
(ii)
a copy of the resolution of the
Board of Managers of the Borrower authorizing the execution,
delivery and performance by the Borrower of this Agreement and each
of the Loan Documents applicable to the Borrower;
(iii)
a LLC Unit Pledge Agreement in the
form of Exhibit B hereto (the “LLC Unit Pledge
Agreement”);
(iv)
With each request for an advance, a
compliance certificate as described in Section 24.
(b)
The representations and warranties
of Borrower contained herein, and in each other Loan Document,
shall be true and correct in all material respects on and as of
each advance date, with the same force and effect as if made on
such date.
(c)
No Event of Default shall exist on
any advance date or will exist after giving effect to the advance
under the Loan made on such date.
(d)
No event, change, or development has
occurred which has had or that could reasonably be expected to
result in a Material Adverse Effect on Borrower after
the
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date hereof.
3.
REPRESENTATIONS AND
WARRANTIES . The Borrower represents and warrants to
Lender that:
(a)
Organizational
Status/Corporate Powers/Qualification. Borrower is a limited liability company
duly organized, validly existing and in good standing under the
laws of the State of Ohio. Borrower has all the necessary power to
own its property and to carry on its business as now
conducted. The Borrower is duly qualified and authorized to
do business and is in good standing in each jurisdiction in which
the nature of the business conducted or property owned by it makes
such qualification necessary, except where the failure to be so
qualified or in good standing could not, individually or in the
aggregate, have or reasonably be expected to result in a Material
Adverse Effect.
(b)
Authorization of
Borrowing/Validity of Loan Documents. The Borrower is duly authorized and
empowered to execute, deliver and perform all Loan Documents
applicable to the Borrower and to borrow money from Lender. The
execution and delivery of all Loan Documents applicable to the
Borrower, and the performance by Borrower of its obligations
thereunder, do not and will not violate or conflict with any
provision of law, regulation or rule, any order, judgment,
injunction, decree or other restriction of any court or other
agency of government, or organizational documents of Borrower and
do not or will not violate or conflict with, or cause any default
or event of default to occur under, any agreement to which the
Borrower is a party or by which it or any of its properties is
bound, or result in the creation or imposition of any lien upon any
of the properties or assets of the Borrower other than liens in
favor of the Lender. The execution and delivery of all Loan
Documents applicable to the Borrower have been duly approved by all
necessary action of the Board of Managers of Borrower; and all Loan
Documents applicable to the Borrower have in fact been duly
executed and delivered by Borrower and constitute its lawful and
binding obligations, legally enforceable against it in accordance
with their respective terms (subject, as to enforceability, to
limitations resulting from bankruptcy, insolvency and other similar
laws affecting creditors’ rights generally).
(c)
No Usury.
The transaction evidenced by
this Agreement does not violate any applicable law pertaining to
usury or the payment of interest on loans.
(d)
No
Prohibitions.
No officer, employee or agent of, or consultant to Borrower is
prohibited by law, by regulation, by contract, or by the terms of
any license, franchise, permit, certificate, approval or consent
from participating in the business of Borrower as officer, employee
or agent of, or as consultant to, Borrower or is the subject of any
pending or, to Borrower’s best knowledge based upon
reasonable inquiry, threatened proceeding which, if determined
adversely, would or could result in such a prohibition.
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(e)
Consents and
Approvals. The
execution, delivery and performance of the Loan Documents by the
Borrower are not and will not be subject to the approval or consent
of, or to any requirement of registration with or notification to,
any federal, state or local regulatory body, administrative agency
or other person.
(f)
Financial
Statements.
All financial statements, as of the dates of such statements, of
the Borrower heretofore furnished to the Lender are complete and
correct in all material respects and fairly present the financial
condition, operating results and cash flows of the Borrower, as of
and for the period ended on said dates, and have been prepared in
accordance with generally accepted accounting principles
(“GAAP”), consistently applied (except for the absence
of notes and subject to immaterial year-end audit adjustments as to
the interim statements). Since the date of the most recent
set of financial statements delivered by the Borrower to the
Lender, there has been no event, change or development that has had
or that could reasonably be expected to result in a Material
Adverse Effect.
(g)
Litigation.
There is no action, suit or
proceeding at law or in equity pending or, to the knowledge of
Borrower, threatened against or affecting the Borrower, or any
basis therefor, which, if adversely determined: (i) could
have or reasonably be expected to result in a Material Adverse
Effect or would question the validity or enforceability of any of
the Loan Documents or any instrument, document, or other agreement
related hereto or required hereby; or (ii) would impair the ability
of the Borrower to perform its obligations under the Loan Documents
applicable to the Borrower.
(h)
Liabilities
. The Borrower has no material liabilities
and, to the best of its knowledge, has no material contingent
liabilities, except as reflected or expressly reserved against in
the financial statements referred to in Section 3(f) above and
except liabilities, obligations, commitments and losses incurred
after March 31, 2005 in the ordinary course of business,
which, in both cases, have not had or could reasonably be expected
to result in, either individually or in the aggregate, a Material
Adverse Effect.
(i)
Title to Properties and
Assets; Liens . The Borrower has good and marketable title
to its properties and assets, and holds a valid leasehold interest
with respect to the property and assets it leases, in each case
subject to no mortgage, pledge, lien, lease, encumbrance or charge,
other than (i) the lien created by this Agreement, (ii) those
resulting from taxes that have not yet become delinquent, (iii)
liens and encumbrances that do not materially detract from the
value of the property subject thereto or materially impair the
operations of the Borrower and (iv) those that have otherwise
arisen in the ordinary course of business.
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(j)
Patents and
Trademarks . All U.S. and foreign patents and patent
applications, and U.S. and foreign trademarks and service marks and
applications therefor, owned by, assigned to or licensed to the
Borrower are valid. The Borrower owns or has a valid right to
use all patents, trademarks, service marks, trade names,
copyrights, trade secrets, information and other proprietary rights
and processes (collectively, the “Intellectual Property
Rights”) necessary for its business as now conducted and as
proposed to be conducted. The Borrower has not received a
written notice that the Intellectual Property Rights used by the
Borrower violates or infringes upon the rights of any person.
To the knowledge of the Borrower, all such Intellectual Property
Rights are enforceable and there is no existing infringement by
another person of any of the Intellectual Property
Rights.
(k)
Tax Returns and
Payments . The Borrower has filed all tax returns
(federal, state and local) required to be filed by it. All
taxes shown to be due and payable on such returns, any assessments
imposed, and, to the Borrower’s knowledge, all other taxes
due and payable by the Borrower have been paid or will be paid
prior to the time they become delinquent. The Borrower has
not been advised (i) that any of its returns, federal, state
or other, have been or are being audited as of the date hereof or
(ii) of any deficiency in assessment or proposed judgment to
its federal, state or other taxes. The Borrower has no
knowledge of any liability of any tax to be imposed upon the
properties or assets of the Borrower as of the date of this
Agreement that is not adequately provided for.
(l)
Insurance
. The Borrower has insurance relating to its
business and covering property, fire, casualty, liability,
workers’ compensation and all other forms of insurance
customarily obtained by businesses in the same industry. Such
insurance (i) is in full force and effect, (ii) insures against
risks of the kind customarily insured against and in amounts
customarily carried by businesses similarly situated and (iii)
provides adequate insurance coverage for the activities of the
Borrower.
(m)
True and Correct
Information.
All financial and other information provided to the Lender by or on
behalf of the Borrower in connection with the Borrower’s
request for the Loan are true and correct in all material respects
and do not contain any untrue statements of a material fact or omit
to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which
they were made, not misleading; and, as to projections or
valuations, present a good faith opinion as to such projections and
valuations.
(n)
Agreements.
The Borrower is not in
default under or in violation of any agreement or instrument to
which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been
waived.)
4.
AFFIRMATIVE
COVENANTS . In addition to the covenants and
agreements of the Borrower set forth and contained in the Loan
Documents applicable to the Borrower and the
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documents related thereto, the Borrower hereby
covenants and agrees to and with the Lender that, so long as the
Promissory Note remains unpaid, the Borrower will:
(a)
Conduct of
Business.
Preserve all of the rights, privileges and franchises necessary or
desirable in the normal conduct of its business; conduct its
business in an orderly, efficient and regular manner; and keep all
of the assets and properties necessary in its business in good
working order and condition, ordinary wear and tear
excepted.
(b)
Inspections/Books and
Records. At
all times keep proper books of record and accounts for itself and
its operations thereon, in which full and correct entries will be
made of its transactions, business and affairs, pursuant to a
system of accounting established and administered in accordance
with generally accepted accounting principles. Upon 24 hours
oral or written request of the Lender, the Borrower shall provide
any duly authorized representative of the Lender access during
normal business hours to, and permit such representative to
reasonably examine, copy or make extracts from, any and all books,
records and documents in the Borrower’s possession or control
relating to any of the representations or covenants of the Borrower
hereunder or in the Loan Documents applicable to the Borrower (such
access to be given immediately upon request in the case of any
emergency or a material change in financial or other condition of
the Borrower). Lender shall maintain the confidentiality of
such books, records, and documents, except for disclosure to
Lender’s accountants and lawyers, except as may be necessary
to enforce Lender’s rights hereunder or under the Loan
Documents applicable to the Borrower, and except for information
that is generally available to the public.
(c)
Change in Nature of
Business. Not
make any material change in the nature of the business of the
Borrower as carried on at the date hereof or as contemplated at the
date hereof as previously disclosed in writing to
Lender.
(d)
Collection of
Proceeds.
Cooperate with Lender in obtaining for Lender the benefits of any
proceeds lawfully or equitably payable to it in connection with the
transaction contemplated hereby and the collection of any
indebtedness or obligation of Borrower to Lender incurred
hereunder.
(e)
Expenses
. Reimburse Lender, as provided in
Section 8 hereof. The obligations of Borrower under this
Section 4(e) shall survive the repayment of the Promissory
Note and the Loan.
5.
NEGATIVE
COVENANTS . Borrower covenants and agrees that,
without the prior consent of Lender, and so long as the Promissory
Note remains unpaid, it will not:
(a)
No Merger.
Consolidate or merge with any
other entity where the Borrower is not the surviving entity of such
consolidation or merger or where the Borrower’s
sharehol
