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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NUMBER 0-15320
THE FRESH JUICE COMPANY, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
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DELAWARE 11-2771046
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
35 WALNUT AVENUE, SUITE 4,
CLARK, NEW JERSEY 07066
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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ISSUER'S TELEPHONE NUMBER: (908) 396-1112
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, $.01 par value
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90
days. Yes X No
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Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
STATE ISSUER'S REVENUES FOR ITS MOST RECENT FISCAL YEAR: $19,958,022
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock as of a specified date within the past 60
days (See definition of affiliate in Rule 12b-2 of the Exchange Act): $5,787,797
(based on the $1 7/8 closing sale price of the Common Stock of the Company
quoted on the NASDAQ System on February 24, 1997).
State the number of shares outstanding of each of the issuer's class of
common equity as of the latest practicable date: 6,467,731 (as of February 24,
1997).
DOCUMENTS INCORPORATED BY REFERENCE
NONE.
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TABLE OF CONTENTS
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PART I
ITEM 1. Description of Business.................................................. 1
ITEM 2. Description of Property.................................................. 5
ITEM 3. Legal Proceedings........................................................ 6
ITEM 4. Submission of Matters to a Vote of Security-Holders...................... 7
PART II
ITEM 5. Market for Common Equity and Related Stockholder Matters................. 7
ITEM 6. Management's Discussion and Analysis or Plan of Operations............... 7
ITEM 7. Financial Statements..................................................... 11
ITEM 8. Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure............................................................... 11
PART III
ITEM 9. Directors, Executive Officers, Promoters and Control Persons............. 12
ITEM 10. Executive Compensation................................................... 15
ITEM 11. Security Ownership of Certain Beneficial Owners and Management........... 17
ITEM 12. Certain Relationships and Related Transactions........................... 18
PART IV
ITEM 13. Exhibits and Reports on Form 8-K......................................... 20
INDEX TO FINANCIAL STATEMENTS.......................................................... 21
SIGNATURES............................................................................. 22
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ITEM 1. DESCRIPTION OF BUSINESS
1. INTRODUCTION
The Fresh Juice Company, Inc. (the "Company") was incorporated in the State
of New York on July 15, 1985. Immediately prior to the closing of the Company's
initial public offering on November 19, 1986, the Company was merged into its
wholly-owned Delaware subsidiary so as to relocate its state of incorporation.
The Company produces, markets and sells fresh squeezed and frozen "fresh
squeezed" orange juice, grapefruit juice, fresh fruit smoothies and other
non-carbonated beverages under the brand names "Just Pik't(R)", "Fresh
Pik't(R)", "Florida Pik't(R)", "Ultimate(R)" and "Hansen's(R)". The majority of
the juice produced by the Company is fresh squeezed orange juice.
2. RECENT DEVELOPMENTS
The Company acquired The Ultimate Juice Company, Inc. ("Ultimate") by
merger effective April 1, 1996 (the "Ultimate Merger"), and as a result thereof,
Ultimate became a wholly-owned subsidiary of the Company. In connection with the
Ultimate Merger, all of the issued and outstanding capital stock of Ultimate was
exchanged for 1,140,000 shares of the Company's, $.01 par value, common stock
(the "Common Stock"). In connection with this transaction, Steven M. Bogen, the
President of Ultimate, became Co-Chairman, Chief Executive Officer and Secretary
of the Company. Steven Smith, the Company's founder, continues as Co-Chairman
and President and was also named Assistant Secretary of the Company. The
Ultimate Merger was accounted for as a purchase. Ultimate subsequently changed
its name to The Fresh Juice Company of New York, Inc.
The Company subsequently acquired Clear Springs Citrus, Inc. ("Clear
Springs"), a privately held fresh citrus juice production facility, affiliated
with Ultimate, that produced the majority of the fresh citrus juice distributed
by Ultimate. The acquisition was accomplished by a merger effective September 1,
1996 (the "Clear Springs Merger") in which Clear Springs was merged into the
Company's wholly-owned subsidiary, The Fresh Juice Company of Florida, Inc.
("Fresh Juice of Florida"). In connection with the Clear Springs Merger, all of
the issued and outstanding capital stock of Clear Springs was exchanged for
1,160,000 shares of the Company's Common Stock. During a transitional period
following the acquisition, Fresh Juice of Florida maintained operations at both
the production facility owned by the Company at 1000 American Superior
Boulevard, Winter Haven, Florida (the "Florida Plant") and Clear Springs'
(leased) plant in Winter Garden, Florida. The assets of Clear Springs were
subsequently incorporated into Fresh Juice of Florida's operations at the
Company's Florida Plant. The Clear Springs Merger was also accounted for as a
purchase.
On December 2, 1996, the Company acquired by merger (the "Hansen's Merger")
all of the outstanding capital stock of Hansen's Juices, Inc. ("Hansen's") in
exchange for $90,000 in cash, 597,443 shares of the Company's Common Stock,
warrants to purchase 300,000 shares of the Company's Common Stock for $3.00 per
share and the assumption of Hansen's debt. The cash portion of the purchase
price paid by the Company was funded from cash flow from the Company's
operations. Hansen's was merged with and into The Fresh Juice Company of
California, Inc. ("Fresh Juice of California"), a newly formed Delaware
corporation and a wholly-owned subsidiary of the Company. Fresh Juice of
California operates its business from the offices and plant leased by Hansen's
in Azusa, California. The Hansen's Merger was also accounted for as a purchase.
Simultaneously with the merger, the Company also restructured a portion of
Hansen's existing debt obligations owed to Hansen's former stockholders and in
connection therewith delivered $60,000 in cash and 20,226 shares of the
Company's Common Stock to a former Hansen's stockholder.
INFORMATION ABOUT THE COMPANY
DESCRIPTION OF BUSINESS
Products and Market
As stated above, the Company produces, markets and distributes fresh and
frozen "fresh squeezed" orange juice, grapefruit juice, fresh fruit smoothies
and other non-carbonated beverages to both food service
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and retail customers under the brand names "Just Pik't(R)", "Fresh Pik't(R)",
"Florida Pik't(R)", "Ultimate(R)" and "Hansen's(R)". The majority of the juice
produced by the Company is fresh squeezed orange juice.
Processed orange juice generates sales in the United States in excess of
three billion dollars per year. The market is currently divided principally
between chilled pasteurized orange juice, reconstituted concentrated orange
juice and frozen concentrate. A number of companies, produce chilled pasteurized
orange juice, including "Tropicana(R)", which is marketed as a premium product.
Pasteurization is used to increase shelf life, since chilled fresh juices will
ferment between seventeen to twenty days after bottling. However, because
pasteurization involves cooking or heating the juice, the natural flavor and
aroma of the juice is adversely affected. Further, as a nutritional matter,
pasteurizing orange juice destroys valuable nutrients, and when sold in cartons,
the juice loses its Vitamin C value while it is awaiting sale and consumption.
The production of concentrate also involves cooking or heating, resulting in an
adverse effect on the natural flavor, aroma and nutritional value of the juice.
In addition, concentration involves the removal of water, resulting in a product
containing a large percentage of sugar, thereby making it difficult to freeze
completely. In order to eliminate this freezing problem, a natural element in
the juice, pectinesterase (an enzyme which produces pectin), is eliminated, and
when the concentrate is reconstituted there is a watery texture.
As a result of the consumer demand for fresh squeezed orange juice
remaining unsatisfied, certain retail food stores attempt to squeeze and bottle
their own juice. Typically, such endeavors fail to produce a consistent product
as it is difficult for such stores either to obtain quality juice oranges or to
monitor the quality of the oranges they receive. In addition, the juice machines
used by such stores often squeeze the rind, resulting in a bitter, oily taste.
The Company sells its products directly or indirectly to supermarket-owned
and independent warehouse distributors that distribute to supermarkets,
institutions or retail outlets. No customer accounts for more than 10% of the
Company's total revenues.
The Company's major product lines, which feature orange, grapefruit,
cranberry, lemonade, lemon, lime and other fresh juices and smoothies, are as
follows:
Fresh squeezed non-pasteurized juices. Sales of fresh squeezed
non-frozen juice account for the majority of the Company's revenues. Due to
the limited shelf life of fresh juice products, the Company distributed
fresh juice primarily on the East Coast prior to the Hansen's Merger. The
acquisition of Hansen's has provided the Company with a presence on the
West Coast and the ability to distribute fresh juice products from a
western distribution point. The majority of the Company's fresh squeezed
juice is sold to food service customers including hotel chains and numerous
restaurant chains and independent restaurants. The balance of the Company's
fresh juice sales are through retail outlets including supermarkets and
numerous convenience stores, delicatessens and corporate cafeterias. The
Company's fresh squeezed juices are distributed under the "Fresh Pik't(R)",
"Ultimate(R)", "Clear Springs(R)" and "Hansen's(R)" labels.
Frozen fresh squeezed non-pasteurized juices. To produce frozen fresh
squeezed juices, extracted fresh juice is packaged and flash frozen for
distribution. The retail outlet or consumer defrosts the juice for retail
sale or consumption. The freezing process eliminates the need for expedient
distribution. The Company has a patent with respect to its process of
preparing frozen juice products and the container used in such a process.
The Company distributes the majority of its frozen fresh squeezed juice to
retail outlets including supermarkets, natural food stores, warehouse clubs
and convenience stores with the balance of sales to food service customers.
The Company's frozen fresh squeezed juices are distributed under the "Just
Pik't(R)" label.
Other Products.
In order to satisfy all of the juice needs of its fresh juice
customers, the Company distributes pasteurized juices under the
"Ultimate(R)" name. Additionally, the Company produces and ships full
tankers of fresh squeezed juices for use by other juice producers outside
of the Company's market areas.
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The Company also distributes certain related products such as waters and
other noncompeting juices in limited market areas through its direct store
delivery network.
New Products.
Smoothies and Nutritionally Fortified Juices. The Company has
introduced its own line of smoothies and nutritionally fortified juices,
which are blends of various fresh juices and purees. The Company believes
that smoothies are a fast growing product segment. Originally introduced on
the West Coast, the Company believes that smoothies are becoming
increasingly popular due to their unique flavors and healthful qualities.
This line includes a variety of blended fresh juices, including citrus
based juices, antioxidants, vitamin enriched juices and banana based juice
products. The smoothies are marketed under the "Just Pik't(R)" label. In
addition, as a result of the Hansen's Merger, the Company now markets and
distributes smoothies, nutritionally fortified and carrot based juices on
the West Coast under the "Hansen's(R)" label through its wholly owned
subsidiary, Fresh Juice of California.
Organic Juices. In December 1995, to leverage its sales, marketing
and distribution capability, the Company introduced a new line of
non-pasteurized frozen fresh squeezed organic juices. The Company is
marketing organic juices under the "Florida Pik't(R)" brand name. Organic
juices are extracted from organically grown fruit, and the Company believes
that this is a growing market niche. Organic juices provide the Company
with an entree into a number of health food and other retail outlets
augmenting the Company's existing line of fresh frozen juices. The Company
currently offers both organic orange and grapefruit juice in one liter
containers for both retail and institutional accounts.
Fresh Juice Pre-made Cocktail Mixers. The Company has developed and
begun marketing non-alcoholic natural juice cocktail mixers, including
daiquiri and margarita mixers.
Lemonade and Other Signature Beverages. The Company is developing
specialty lemonades and other signature drinks for national food service
accounts. Management is currently working with national restaurant chains
to develop custom fruit beverages for their restaurants.
Marketing and Advertising
As stated above, "Just Pik't(R)", "Fresh Pik't(R)" and "Florida Pik't(R)"
are currently sold in numerous supermarket chains in the New York area and other
major markets throughout the United States. The Company's marketing of "Just
Pik't(R)" and its other products are intended to emphasize their fresh taste and
nutritional value. The Company is developing brand recognition for "Just
Pik't(R)" as a superpremium fresh squeezed juice, and is utilizing its brand
recognition to market other juices as well as other product line extensions.
Distribution
Prior to the acquisition of the Florida Plant, "Just Pik't(R)" was shipped
by the Company to its independent distributors throughout the United States from
its Florida processor using unaffiliated trucking companies. As a result of the
acquisition of the Florida Plant, the Ultimate Merger and the Hansen's Merger,
shipping of the majority of the Company's products now originates out of the
Company's own production facilities, thereby providing the Company with
increased control and flexibility over the distribution process.
Production
On December 1, 1995, the Company began production at the Florida Plant. As
of November 30, 1996, the assets and production volume of Clear Springs have
been fully incorporated into the Florida Plant. Substantially all of the
Company's products are now produced at its own production facilities in Florida
and California.
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Competition
The market for orange juice and fruit beverages generally is highly
competitive and is dominated by major companies such as Seagram of Canada
("Tropicana(R)") and The Coca-Cola Company ("Minute Maid(R)"), although
presently the major orange juice companies are primarily involved in the
production of chilled pasteurized juice and frozen or reconstituted concentrate
juice. The Company views its niche in the fruit beverage industry as a producer,
distributor and marketer or fresh squeezed, minimally processed juices and
juice-based beverages. The Company believes that it competes effectively with
its competitors on the basis of the quality of its products and its commitment
to meeting its customer's needs.
Patents and Proprietary Protection
The Company was granted U.S. Patent No. 4,816,273 on March 28, 1989 related
to a process for preparing a frozen whole juice product which upon defrosting
has the taste and nutritional content of freshly squeezed whole juice, the
process including filling a self-supporting bottle-like container with the whole
juice. The U.S. Patent and Trademark Office recently reissued this patent with a
broader claim coverage RE 35038. The trademarks "Just Pik't(R)", "Fresh
Pik't(R)", "Florida Pik't(R)", "Ultimate(R)" and "Hansen's(R)" have been
registered by the Company in the U.S. Patent and Trademark Office and with
appropriate agencies in various foreign countries.
Raw Material
The only ingredient used to produce "Just Pik't(R)", "Fresh Pik't(R)",
"Florida Pik't(R)," "Ultimate(R)" and "Hansen's(R)" orange and grapefruit juice
is fresh citrus fruit. Similarly, "Hansen's(R)" and "Just Pik't(R)" Smoothie's
are made with a blend of orange juice, apple juice (pasteurized or from
concentrate), bananas, berries and other fruit purees. A lack of availability of
quality fruit and higher cost of citrus and other fruits would hamper the
Company's ability to maintain its rate of growth and its gross margin. The
Company has expanded its product line from citrus juices only to other
non-carbonated beverages, which to some extent will provide the Company with
flexibility in the event that the price of a certain fruit should be
dramatically increased. Although it can give no assurances, the Company expects
the 1997 orange crop to be of exceptional flavor and in sufficient supply to
meet its orders.
The containers the Company uses for its frozen fresh juices are made of
plastic and are manufactured by a major "blow molding" manufacturer. The Company
owns the molds that are used to make the 1/3 liter, 1/4 liter and 1 liter
bottles for its frozen fresh squeezed juices and the machines that fill the
bottles and apply the tamper evident caps. The other bottles used by the Company
are standard high density polyethylene containers. As there are several major
independent plastic bottle manufacturers, the Company does not believe that it
is dependent upon any one manufacturer for the production of the bottles it
uses.
Employees and Consultants
The Company currently employs approximately two hundred and seventy one
(271) individuals. There are forty-one (41) employees working out of the
Company's Northeast operations, including thirty (30) in New Jersey and eleven
(11) in New York. Additionally, the Company employs approximately one hundred
and fifty (150) full-time, part-time and seasonal workers at its Florida Plant
and eighty (80) employees at Fresh Juice of California's (Hansen's) production
facility and offices in Azusa, California. The Company believes that this number
of employees is sufficient to operate the Company. The Company's employees are
not represented by a labor union, none of the Company's employees are subject to
collective bargaining agreements and management believes employee relations to
be good.
Government Regulations
The Company and its subsidiaries are subject to certain regulations of
federal, state and local government authorities regarding distribution and sale
of food products. Although the Company believes that it currently has all
material government permits, licenses, qualifications and approvals for its
operations, there can be no assurance that the Company will be able to continue
to comply with or maintain the same.
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The State of Florida and the United States Department of Agriculture
undertake an extensive inspection and sampling program of Florida citrus fruit
before and during processing in an effort to maintain the quality and good name
of Florida citrus products. The Company believes that this program provides it
with an excellent means of quality control for its product.
In December, 1996, the Food and Drug Administration (the "FDA") held
hearings to determine whether additional safety measures were necessary to
prevent food borne illnesses from occurring in fresh juice products. The
hearings were a consequence of an outbreak of food borne illnesses on the West
Coast, which were linked to fresh pressed apple juice produced by a West Coast
juice producer. Preliminary indications are that the FDA will require certain
manufacturing practices to insure the safety of fresh squeezed juices. Although
it can give no assurances, the Company believes that the manufacturing practices
likely to be required by the FDA will be no more stringent that those presently
in place at the Company and already required by the Florida Department of
Citrus. Since these safety measures are presently in place, the anticipated
regulations from the FDA are not likely to have a material effect on the
Company's business.
The Company believes that it is in compliance with all environmental
regulations affecting its operations.
DESCRIPTION OF PROPERTY
Property Leased
Northeast Offices and Warehouse
The Company leases approximately 2,000 square feet of office space for its
headquarters in Clark, New Jersey on a month to month basis. The Company also
leases approximately 1,000 square feet of office space located at 350 Northern
Boulevard, Great Neck, New York. The Great Neck lease terminates in November,
1997, and the Company plans to consolidate its Northeast Offices prior to such
date. In addition, the Company leases a 10,000 square feet (6,000 square feet
refrigerated) warehouse in Linden, New Jersey on a month-to-month basis.
Florida Production Facility
The Florida Plant, which is owned by the Company, is more fully described
under the "Property Owned" section below.
The Company continues to lease the production facility in Winter Garden
where the business of Clear Springs Citrus, Inc. was located. The machinery and
equipment from the Clear Springs production facility have been incorporated into
the Florida Plant, and the building in Winter Garden is now being used as a
distribution center for local deliveries in Florida. The lease on the Winter
Garden facility terminates on December 31, 1998.
West Coast Offices, Production Facility and Warehouse
The Company's subsidiary, Fresh Juice of California, leases commercial
space in Azusa, California, in which its offices, warehouse and production
facility are located. The total amount of space leased is 37,000 square feet,
consisting of 3,000 square feet of office space and 34,000 square feet of
production and refrigerated warehouse space. The Fresh Juice of California lease
is a 10 year lease with one five year option. The fourth year of the lease term
begins on March 1, 1997.
Property Owned
The Florida Plant
On August 3, 1995, the Company acquired the Florida Plant. The Florida
Plant is located at 1000 American Superior Boulevard, Winter Haven, Florida and
consists of a 70,000 square foot facility on four acres; 20,000 square feet of
which consist of either chilled or freezer space. The Florida Plant contains the
first spiral quick freeze system in the citrus industry. The Company acquired
the Florida Plant from Universal Flavors, Inc. for an aggregate purchase price
of $625,000, of which $150,000 was paid in cash on August 3, 1995 and the
remaining $475,000 is payable pursuant to a promissory note and purchase money
mortgage,
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bearing interest at the rate of seven per cent per annum and having a three year
maturity with a balloon payment of $458,754 due on August 1, 1998. The land and
building (exclusive of equipment) have an aggregate federal tax basis of
$627,155, and the building (with a federal tax basis of $597,155) is being
depreciated over thirty-nine (39) years on a straight line basis. The annual
real estate taxes are approximately $19,000 and the realty tax rate is
approximately 2%.
The Company designed the Florida Plant to be capable of producing fresh
squeezed juice, fresh frozen juice and pasteurized juice, in addition to other
juice-based beverages. All processing in the Florida Plant is performed under
refrigerated and sanitary conditions. The Company believes that the Florida
Plant is one of the first facilities capable of producing such a variety of
juices under completely refrigerated conditions. Each segment of the production
process is separate and distinct with separate extraction rooms, filling rooms,
blending rooms and a separate spiral freeze system for the frozen fresh squeezed
juice.
The Company believes that one of the most critical elements of producing
quality fresh squeezed juice is the proper sorting of fruit to eliminate any
fruit that would create impurities in such juice. The Company believes that the
Florida Plant is one of the first facilities equipped with a pre-and
post-screening system designed to eliminate impure fruit from reaching the
extraction process. The Florida Plant is equipped with a laboratory designed to
provide an additional measure of quality control to assist in the Company's goal
of providing optimal flavor and shelf life for its customers. In addition, the
Company maintains continuous USDA inspection.
The initial budgeted cost of renovating and equipping the Florida Plant was
approximately $2,300,000. Near completion of the initial phase of renovations,
the Company acquired Clear Springs, and the Florida Plant was further renovated
and improved to incorporate the assets from Clear Springs and to prepare for
increased production levels. These additional renovations and improvements
(phase two) were budgeted at approximately $800,000. As of the date hereof, the
Florida Plant is fully operational and phase one and phase two of the renovation
plan are substantially completed. However, repairs and regular maintenance are
expected during fiscal year 1997 and some additional modifications may be
required as production volume increases. As of November 30, 1996, $3,100,000 has
been expended on the Florida Plant for renovations and equipment. Upon
completion, the Company will have financed approximately $2,000,000 of such cost
from working capital. In September, 1995, Fresh Juice of Florida, the
wholly-owned subsidiary of the Company which operates and maintains the Florida
Plant, entered into a loan agreement with Chemical Bank in the aggregate
principal amount of $1,100,000 (the "Chemical Loan") to finance the remaining
costs of renovating and equipping the Florida Plant. Of the aggregate $1,100,000
borrowed under the Chemical Loan, approximately $250,000 was used to finance
certain leasehold improvements to the Florida Plant and approximately $850,000
was used to finance the purchase of machinery and equipment. The loan from
Chemical Bank was refinanced in August 1996 with a $1,100,000 loan from Fleet
Bank, N.A. bearing interest at a floating rate equal to Fleet Bank's Prime Rate
(8.25% at November 30, 1996), which floating rate, at the Company's election,
may be fixed, for one to three month periods throughout the term, based on
current Libor contracts plus 175 basis points. The Fleet Bank loan is a sixty
eight month loan maturing on March 1, 2002 and is scheduled to fully amortize by
the maturity date.
The Company believes that the properties it owns or leases are suitable and
adequate to support the Company's present business level and that each of its
properties is adequately covered by insurance.
LEGAL PROCEEDINGS
In January 1996, Fresh Pik't Natural Foods, Inc., a wholly-owned subsidiary
of the Company, was named as a defendant in a legal matter seeking damages in
excess of $250,000. Pending court approval of same, the Company has settled the
matter and is obligated to pay $10,000 over 6 months pursuant to the terms of
the settlement. Under the terms of the settlement, payments will begin following
court approval of the settlement, which is expected within the next sixty (60)
days.
The Company is subject to routine claims and lawsuits which arise in the
ordinary course of business and are incidental to the Company's business. In
addition, the Company's subsidiary, The Fresh Juice Company of California, Inc.
(Hansen's), has been named as one of many defendants in a lawsuit filed by the
Franchise
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Holders of Southland Corporation ("Southland"), against Southland and a large
number of the purveyors to the Franchisees of Southland, i.e., 7-Eleven stores.
Hansen's was one of the purveyors that has been sued under that lawsuit.
However, there is only one cause of action which pertains to Hansen's, and
Hansen's is coupled in that count with Southland, The Coca-Cola Company and
Pepsi-Cola Company. The basis of the cause of action is that each of the named
purveyors conspired to fix prices on soft drinks by trying to set the
Franchisees' retail price of their respective products in order for the
Franchisee(s) to obtain a discount off the wholesale price. In the count in
which Hansen's was named, the plaintiffs seek total damages in excess of
$50,000.00. The case was filed in September, 1993 and is venued in the Superior
Court of the State of California for the County of Alameda. Management of the
Company believes that the ultimate resolution of this matter will not have a
material impact on the financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY-HOLDERS
No matters have been submitted to a vote of security-holders during the
fourth quarter of the 1996 fiscal year.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock, $.01 par value, is traded in the
over-the-counter market under the symbol "FRSH". Price quotations are available
through the NASDAQ system. The following tabulation sets forth the high and low
ask price quotations by quarter as reported by the NASDAQ System. The prices
shown in the tabulation reflect actual transactions.
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1996
Fourth fiscal quarter.................................................. $31/8 $1 /16
Third fiscal quarter................................................... $4 $2 1/8
Second fiscal quarter.................................................. $43/4 $2 1/4
First fiscal quarter................................................... $33/8 $1 3/8
1995
Fourth fiscal quarter.................................................. $31/8 $1 3/4
Third fiscal quarter................................................... $33/4 $2
Second fiscal quarter.................................................. $23/16 $1 7/8
First fiscal quarter................................................... $21/8 $1 /16
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The Company has not paid any dividends on its Common Stock and does not
anticipate paying any cash dividends in the foreseeable future. The Company
plans to retain its future earnings, if any, to finance the growth and
development of its operations.
As of February 24, 1997, there were approximately 165 holders of record of
the Company's Common Stock
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
RESULTS OF OPERATIONS
As more fully discussed in Item 1 of this Annual Report on Form 10-KSB, the
Company acquired both Ultimate and Clear Springs during the year ended November
30, 1996. The Ultimate Merger became effective on April 1, 1996 and as such,
Ultimate closed its previous fiscal year on March 31, 1996 and began its new
fiscal year on April 1, 1996. The Clear Springs Merger became effective on
September 1, 1996, and Clear Springs closed its previous fiscal year on August
31, 1996 and began its new fiscal year on September 1, 1996.
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Accordingly, the consolidated statements of operations for the year ended
November 30, 1996 consist of a consolidation of eight moths of operations (April
1, 1996-November 30, 1996) for Ultimate, three months of operations (September
1, 1996-November 30, 1996) for Clear Springs and twelve months (December 1,
1995-November 30, 1996) for the Company.
Primarily as a result of the Ultimate Merger and the Clear Springs Merger
(hereinafter the "Acquisitions"), the Company's net sales which were $8,171,803
in 1994 and $9,219,184 in 1995, respectively, have increased to $19,958,022 in
1996, representing a 116% increase in net sales over 1995 net sales.
As a result of the increase in net sales due to the Acquisitions, gross
profit, which was $3,007,997 in 1994 and $3,183,701 in 1995, increased to
$4,071,605 in 1996, representing a 28% increase over gross profit in 1995. The
gross profit increase was not as significant as the increase in net sales, due
to a decrease in gross margin from 34.5% in 1995 to 20.4% in 1996. This decrease
in gross margin was attributable to an increase in costs of goods sold from
$6,035,483 in 1995 to $15,886,417 in 1996, an increase of 163%.
In addition to a proportionate increase in costs of goods sold relating to
increased revenues, costs of goods sold also increased due to higher fruit costs
in Florida and on the west coast and a change in the product mix sold by the
Company. Prior to fiscal year 1996, the Company was primarily a distributor of
frozen fresh squeezed juices. However, as a result of the Acquisitions and the
purchase of the Florida Plant, the Company's revenue mix has changed, and the
Company is now a manufacturer and distributor of fresh squeezed frozen and
non-frozen juices and other juice and non carbonated beverages, with the
majority of the Company's revenues derived from the sale of fresh, non-frozen
juices. The acquisition of the fresh, non-frozen product lines and the operation
of the Florida Plant have brought significant new costs.
The Company's frozen juices are produced only during the Florida harvest
season when fruit costs are generally lower than they are outside of the Florida
harvest season. Fruit for the fresh non-frozen juices is also purchased in
Florida during the Florida harvest season, however, when high quality Florida
fruit is not in season, the Company purchases juice for its fresh (non-frozen)
juice from growers on the west coast. During these periods, costs of goods sold
are usually higher than during the Florida season due to increased fruit costs
and additional freight costs. During this past season, west coast juice costs
and freight costs exceeded the typical seasonal increase experienced by Ultimate
and Clear Springs in the same period of the previous year. During this period,
packaged juice purchased from the west coast increased approximately 14% from
1995 to 1996 and raw juice purchased from the west coast, to be packaged in
Florida, increase approximately 61% from 1995 to 1996. Accordingly, because of
increased sales, the Company was purchasing more west coast product despite its
increased costs. In addition, although purchased during the Florida harvest
season, Florida fruit costs were up during fiscal year 1996, and the Company's
costs of fruit, used to produce its frozen juice inventory, increased by
approximately twenty percent (20%) in 1996 when compared to 1995 fruit prices.
The Company's selling, general and administrative expenses have also
increased as a result of the Acquisitions and the operation of the Florida
Plant. Selling, general and administrative expenses, which were $2,451,055 and
$2,820,356 in 1994 and 1995, respectively, have increased to $4,984,642 in 1996,
representing a 77% increase over 1995 selling, general and administrative
expenses. Prior to December of 1995, the Company was not a manufacturer and
distributor of fresh squeezed juices. In December 1995, the Company began
operations in its Florida Plant, thereby first becoming a manufacturer of fresh
squeezed juices. The Fresh Juice Company of Florida, Inc., the wholly owned
manufacturing subsidiary of the Company, incurred approximately $1.1 million in
selling, general and administration expenses for the year ended November 30,
1996, including approximately $400,000 relating to the Clear Springs
Acquisition. In addition, the acquisition of Ultimate and its consolidation into
the Company's financial statements added approximately $2.0 million in selling,
general and administrative expenses for the period.
A significant portion of the increase in the Company's selling, general and
administration expenses was incurred during the Company's fourth fiscal quarter,
due in part to the acquisition of Clear Springs on September 1, 1996. Clear
Springs was primarily a production company that historically had no material
gross profits for the fourth quarter. Despite the fact that during the majority
of the fourth quarter the Company's fresh squeezed juice was being purchased on
the west coast, the consolidation of the Clear Springs' equipment and operations
into the Florida Plant required the Company to maintain a labor force
approximately
8
<PAGE> 11
equivalent to the labor force necessary when the Florida Plant is running at its
normal Florida harvest season production volume. As a result, the labor costs
during the fourth fiscal quarter far exceeded those that would have been
incurred had the plants already been consolidated and running at staff levels
consistent with production volumes outside of the Florida harvest season.
The fourth quarter increase in selling, general and administrative expenses
combined with the increased juice and freight costs experienced in the fourth
quarter have resulted in a $1,007,552 loss from operations during the Company's
fourth fiscal quarter. This fourth quarter loss combined with the $94,515 income
from operations for the nine months ended August 31, 1996 have resulted in a
$913,037 net loss from operations for the year ended November 30, 1996 as
compared to earnings from operations of $556,942 and $363,345 for the fiscal
year ended November 30, 1994 and 1995, respectively.
The interest paid on the outside financing obtained in connection with
purchasing and equipping the Florida Plant, as well as the Company's $2,500,000
line of credit for working capital, has caused interest expense to increase
$115,147 from $24,355 in 1995 to $139,502 in 1996. These additional expenses
have also contributed to the loss sustained by the Company during fiscal year
1996.
FINANCIAL CONDITION
On August 3, 1995, the Company acquired the Florida Plant. In connection
therewith, during the latter part of fiscal year 1995 and fiscal year 1996, the
Company, through its wholly-owned subsidiary, The Fresh Juice Company of
Florida, Inc., purchased approximately $3,550,000 of building improvements,
fixtures and equipment which have been installed in the Florida Plant.
Approximately $2,450,000 of such costs have been financed from the Company's
working capital and line of credit, and the balance was financed through a bank
loan. Primarily as a result of these construction and equipment costs, the
Company's cash balance as of November 30, 1996 has decreased to $133,768 as
compared to $1,998,063 as of November 30, 1995. The Company also incurred one
time costs related to the Acquisitions in the amount of approximately $350,000,
of which $293,000 have been capitalized. These additional expenses have also
contributed to the reduction in the Company's cash balance as of November 30,
1996.
As a result of the Acquisitions, both the current and total assets of the
Company have increased to $4,425,756 and $15,281,472, respectively, as of
November 30, 1996 compared to $4,258,358 and $6,508,237, respectively, as of
November 30, 1995. Specifically, the Company's trade accounts receivable have
increased to $2,236,781 as of November 30, 1996 as compared to $591,727 as of
November 30, 1995.
In addition, the Company now generally maintains a fresh squeezed juice
inventory of approximately $175,000 to $225,000 in addition to the fresh-frozen
juice inventory generally maintained by the Company prior to the Acquisitions.
As a result, the Company's inventory has increased to $1,759,200 as of November
30, 1996 as compared to $1,544,821 as of November 30, 1995.
As a result of the Acquisitions and the completion of the Florida Plant,
the Company's balances for equipment, building and improvements have increased
to $4,877,640 as of November 30, 1996 as compared to $950,949 as of November 30,
1996, while reducing construction in progress from $1,437,887 as of November 30,
1995 to $0 as of November 30, 1996.
Accounts payable and accrued expenses have increased to $2,836,582 as of
November 30, 1996 as compared to $244,697 as of November 30, 1995. This increase
results from the consolidation of Ultimate's and Clear Springs' accounts payable
and accrued expenses into the Company's financial statements and the increased
payables associated with operating a manufacturing facility.
LIQUIDITY
The Company had working capital of $624,104 at November 30, 1996 compared
to $3,919,590 at November 30, 1995. The Company requires capital to support its
capital improvements and the level of inventory required to meet current demand
as well as expected future increases in demand for its products. To provide
additional liquidity, in August 1996, the Company obtained a $2,500,000 line of
credit with Fleet Bank. At year end, the amount drawn on the line was $705,000,
leaving $1,795,000 available as of such date.
9
<PAGE> 12
As of February 28, 1997, approximately $1,200,000 of the line of credit is still
available, depending upon qualified levels of accounts receivable and
inventories as defined in the Loan Agreement. The Company typically invests
approximately $2.5 million from January through June to replenish its yearly
fresh-frozen juice inventory. The Company believes that it has sufficient
liquidity to conduct its business and to build its fresh-frozen inventory during
the remainder of the Florida harvest season to meet the Company's current
customers' demand for fresh frozen products. A lack of availability of quality
fruit and higher cost of citrus would hamper the Company's ability to maintain
its rate of growth and its current gross profit level. In connection with the
Hansen's Merger, discussed in Item 1 of this Annual Report on Form 10-KSB, the
Company assumed the debt obligations of Hansen's. The Company believes that the
results of its operations (inclusive of Hansen's), will be sufficient to meet
these additional debt obligations.
RECENTLY ISSUED ACCOUNTING STANDARDS
The Financial Accounting Standards Board issued Statement No. 123,
Accounting for Stock-Based Compensation (SFAS No. 123). Under this new standard,
a new fair value based method of accounting for stock-based compensation
arrangements with employees is established. Entities may continue to use the
Opinion 25 method or adopt the SFAS No. 123 fair value based method. The Company
will continue to use the Opinion 25 method, and therefore SFAS No. 123 requires
footnote disclosure of proforma net income and earnings per share information as
if the fair value based method had been adopted. This Statement is effective for
financial statements for fiscal years beginning after December 15, 1995, or for
the fiscal year for which the Statement is initially adopted for recognizing
compensation expense, whichever comes first.
The Financial Accounting Standards Board issued Statement No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed (SFAS No. 121). This new standard requires the assessment of the
recoverability of long-lived assets and certain intangibles and related goodwill
and recognition of any impairment losses. The Company does not believe the
adoption of SFAS No. 121 will have a material effect on the Company's
consolidated financial statements. This Statement is effective for fiscal years
beginning after December 15, 1995.
10
<PAGE> 13
ITEM 7. FINANCIAL STATEMENTS
See Index to Financial Statements following Item 13 of this Annual Report
on Form 10-KSB.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
11
<PAGE> 14
THE FRESH JUICE COMPANY, INC.
1996 FORM 10-KSB
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.
(a) Set forth below is certain information concerning the directors and
executive officers of the Company:
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED PRINCIPAL OCCUPATION
NAME AGE TO BOARD DURING THE PAST FIVE YEARS POSITION
- --------------------- ---- ---------- -------------------------------- -----------------------------
<S> <C> <C> <C> <C>
Steven M. Bogen 40 1996 Chief Executive Officer of The Co-Chairman of Board of
Ultimate Juice Company, Inc. Directors, Chief Executive
(now known as The Fresh Juice Officer and Secretary of the
Company of New York, Inc.) from Company.
1988 through present; Chairman
of the Board of The Ultimate
Juice Company, Inc. from 1989
through March 31, 1996; Chairman
of the Board of Clear Springs
Citrus, Inc. from July 27, 1993
through August 31, 1996;
President of Clear Springs
Citrus, Inc. from July 27, 1993
through March 11, 1994; Co-
Chairman of the Board, Chief
Executive Officer, and Secretary
of the Company since April 1,
1996
Steven Smith 49 1985 Chairman of the Board, President Co-Chairman of the Board of
and Chief Executive Officer of Directors, President and
the Company from 1985 through Assistant Secretary.
March 31, 1996. Co-Chairman of
the Board, President and
Assistant Secretary of the
Company since April 1, 1996.
Jeffrey Smith 25 1996 Graduate of the Wharton School Director and Vice President
at University of Pennsylvania in of Strategic Development and
May 1994. Investment Banking Investor Relations.
Analyst at LSG Advisors, a
division of Societe Generale
Securities Corporation from
August 1994 through December
1995. Vice President of
Strategic Development and
Investor Relations of the
Company since February, 1996.
Director of the Company since
April 1, 1996. Son of Steven
Smith.
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED PRINCIPAL OCCUPATION
NAME AGE TO BOARD DURING THE PAST FIVE YEARS POSITION
- --------------------- ---- ---------- -------------------------------- -----------------------------
<S> <C> <C> <C> <C>
Brian Duffy 51 1996 President and Director of Director, Vice President --
Natural Juice Company since National Operations,
August, 1984; Director of Clear President of The Fresh Juice
Springs Citrus, Inc. from Company of Florida, Inc.
January 22, 1993 to August 31,
1996; President of Clear Springs
Citrus, Inc. from March 11, 1994
to August 31, 1996; Director of
the Company since April 1, 1996
Mark Feldman 34 N/A Controller of The Ultimate Juice Chief Financial Officer,
Company, Inc. from 1989 to Controller and Treasurer.
present; Chief Financial Officer
of The Ultimate Juice Company,
Inc. from February 1995 through
March 31, 1996; Treasurer and
Controller of the Company since
April 1, 1996, Chief Financial
Officer of the Company since
August 8, 1996
Jeffrey Heavirland 36 N/A Director of Sales of Hansen's President and Chief
from July 1988 to December 1993; Executive Officer of The
Vice President of Sales and a Fresh Juice Company of
Director of Hansen's from California, Inc.
December 1993 to January 1994;
Director, Vice President and
Secretary of Hansen's from
January 1994 to December 2,
1996. President, Chief Executive
Officer and Assistant Secretary
of The Fresh Juice Company of
California, Inc. from December
2, 1996 to present
</TABLE>
Steven M. Bogen has been Co-Chairman of the Board of Directors, Chief
Executive Officer and Secretary of the Company since April 1, 1996. Mr. Bogen
was a founder of The Ultimate Juice Company, Inc. (now known as The Fresh Juice
Company of New York, Inc.) and has served as its Chief Executive Officer since
1988. Mr. Bogen was the Chairman of the Board of The Ultimate Juice Company,
Inc. from 1989 through March 31, 1996. He was the President of Clear Springs
Citrus, Inc. from July 1993 through March 1994 and Chairman of the Board of
Clear Springs Citrus, Inc. from July 1993 through August 31, 1996.
Steven Smith is the founder of the Company and presently serves as a
Co-Chairman of the Board of Directors and as the President and Assistant
Secretary of the Company. Mr. Smith has been involved for more than 27 years of
his business career in the marketing and distribution of various food products
for major food companies. From 1969 to 1983 he was Executive Vice President and
a significant shareholder of Calip Dairies, participating from its inception in
the marketing of Frusen Gladje ice cream and Dolly Madison ice cream. From 1983
to 1985, Mr. Smith was General Manager of Elmhurst Milk & Cream, a major dairy
operating in the New York City metropolitan area. From the Company's
organization in July 1985 through April 1, 1996, the effective date of the
Company's merger with The Ultimate Juice Company, Inc., Mr. Smith served as the
Company's Chairman of the Board, President and Chief Executive Officer.
Brian Duffy has been a Director of the Company since April 1, 1996. He has
been the Vice President -- National Operations since August 1996 and President
of The Fresh Juice Company of Florida, Inc. since October 1996. Mr. Duffy was
President of Clear Springs Citrus, Inc. from March 1994 through September
13
<PAGE> 16
1996 and Director of Clear Springs Citrus, Inc. from January 1993 to September
1996. Mr. Duffy has also been the President and a Director of the Natural Juice
Company, a Chicago, Illinois juice distributor, since August 1984.
Jeffrey Smith has been Vice President of Strategic Development and Investor
Relations of the Company since February 1996 and a Director of the Company since
April 1996. Prior to joining the Company, Mr. Smith was an investment banking
financial analyst with LSG Advisors, a division of Societe Generale Securities
Corporation, from August 1994 to January 1996. Mr. Smith is a graduate of the
Wharton School at the University of Pennsylvania, May 1994 with concentrations
in finance and accounting. Mr. Smith is the son of the founder of the Company,
Steven Smith.
Mark Feldman, CPA has been Chief Financial Officer of the Company since
August 1996 and Treasurer and Controller of the Company since April 1, 1996. Mr.
Feldman was Chief Financial Officer of The Ultimate Juice Company, Inc. from
February 1995 through March 1996 and Controller of The Ultimate Juice Company,
Inc. since 1989.
Jeffrey Heavirland has been the President, Chief Executive Officer and
Assistant Secretary of The Fresh Juice Company of California, Inc. since
December 2, 1996. Mr. Heavirland was Vice President, Secretary and a Director of
Hansen's Juices Inc. from January 1994 to December 2, 1996. Mr. Heavirland was
Vice President of Sales and a Director of Hansen's Juices Inc. from December
1993 to January 1994. Mr. Heavirland was Director of Sales of Hansen's Juices
Inc. from July 1988 to December 1993. Prior to joining Hansen's Juices Inc. in
July of 1988, Mr. Heavirland owned and operated Hansen's Distributorships with
combined territories covering 17 California counties and 2 counties in the state
of Arizona.
Executive officers serve until the next annual meeting of the Company's
Board of Directors and until their respective successors are elected.
COMPLIANCE WITH SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act of 1934 requires the Company's directors,
executive officers, and persons who own more than 10% of the Company's equity
securities to file with the SEC initial reports of ownership and reports of
changes in ownership of such securities. To the Company's knowledge, based
solely on a review of the copies of such reports furnished to it, during the
fiscal year ending November 30, 1996, Section 16(a) filing requirements with
respect to the Company's equity securities were met, except that, through
inadvertence, (a) a Form 3 Initial Statement of Beneficial Ownership for Carol
Smith, a former director of the Company, was never filed, which omission has
been corrected and was previously reported in the Company's Proxy Statement
relating to its annual meeting of stockholders held on August 29, 1996, and (b)
a Form 4 Statement of Changes in Beneficial Ownership was not filed in
connection with the purchase by Jeffrey Smith, a director of the Company, of
2000 shares of the Company's Common Stock in June 1996. This omission will be
corrected.
14
<PAGE> 17
ITEM 10. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the cash compensation in each of the last
three completed fiscal years of (i) Steven M. Bogen, the Company's Co-Chairman,
Chief Executive Officer and Secretary, and (ii) Steven Smith, the Company's
Co-Chairman and President. The table omits other executive officers employed by
the Company on November 30, 1996 because none of those officers received total
annual salary and bonus from the Company in excess of $100,000 in the fiscal
year ended November 30, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------------
AWARDS
ANNUAL COMPENSATION ------------------
------------------------------------------------ SECURITIES
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) COMPENSATION($) OPTIONS/SARS(#)(2) COMPENSATION($)(3)
- ------------------- ----- ------------ -------- --------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Steven M. Bogen.... 1996 241,385(4) -- -- -- --
Co-Chairman and 1995 -- -- -- -- --
Chief Executive 1994 -- -- -- -- --
Officer
Steven Smith....... 1996 348,750 -- -- -- 22,500
Co-Chairman and 1995 369,500 -- -- -- 22,500
President 1994 348,700 -- -- 60,000(5) 22,500
</TABLE>
- ---------------
(1) This amount does not include perquisites and other personal benefits,
securities or property because the aggregate amount thereof in each fiscal
year did not exceed the lesser of $50,000 or 10% of the total annual salary
and bonus reported for the named executive officer.
(2) During the last three completed fiscal years, the Company granted no
restricted stock awards or stock appreciation rights (whether freestanding
or in tandem with stock options).
(3) Reflects Company contributions for the account of Mr. Smith under the
Company's employee pension plan.
(4) This amount represents the salary paid to Mr. Bogen by the Company during
the fiscal year ended November 30, 1996. Between December 1, 1995 and March
31, 1996, Mr. Bogen served as the Chief Executive Officer and President of
Ultimate. During such period, Mr. Bogen was paid salary in the aggregate
amount of $53,400 and a bonus of $235,000.
(5) Reflects grant under Company's Stock Option Plan of presently exercisable
option to purchase 60,000 shares of Company Common Stock at $3.50 per share.
STOCK OPTION GRANTS IN 1996
During the last fiscal year, the Company granted no restricted stock
awards, stock options or stock appreciation rights (whether freestanding or in
tandem with stock options) to any of its named executive officers.
AGGREGATED STOCK OPTION/SAR EXERCISES IN 1996 AND OPTION/SAR VALUES AT NOVEMBER
30, 1996
The following table shows stock options exercised by the Company's
executive officers during 1996, including the aggregate value of any gains on
the date of exercise. In addition, this table includes the number of shares
covered by both exercisable and non-exercisable stock options as of November 30,
1996. Also reported are values for "in-the-money" options which represent the
positive spread between the exercise price of outstanding stock options and the
year-end price of the Company's common stock. Values for "out-of-the-money"
options are not reported.
15
<PAGE> 18
1996 FISCAL YEAR END OPTIONS
<TABLE>
<CAPTION>
VALUE OF IN-THE-MONEY
NUMBER OF SECURITIES UNDERLYING UNEXERCISED
UNEXERCISED OPTIONS AT 11/30/96 STOCK OPTIONS AT 12/31/96($)
SHARES ACQUIRED VALUE -------------------------------- --------------------------------
NAME ON EXERCISE REALIZED EXERCISABLE(1) NOT EXERCISABLE EXERCISABLE(2) NOT EXERCISABLE
- -------------------- --------------- -------- -------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Steven Smith........ 0 $0 160,000 -- $125,000 --
</TABLE>
- ---------------
(1) Includes options to purchase (i) 100,000 shares of Common Stock exercisable
at $1.375 per share and (ii) 60,000 shares of Common Stock exercisable at
$3.50 per share.
(2) Amount reflects valuation of options to purchase 100,000 shares of the
Company's Common Stock at $1.375 per share, calculated by determining the
difference between 2 5/8, the value of the Company's Common Stock at
November 30, 1996 (as quoted on the NASDAQ System for such date) and the
exercise price.
DIRECTORS' FEES.
The Company's Directors do not receive any compensation for serving on its
Board of Directors. Presently all of the members of the Company's Board of
Directors are officers of the Company and receive compensation only for serving
as officers of the Company. The following table sets forth the compensation paid
or provided to all directors who are not named executive officers.
<TABLE>
<CAPTION>
CASH COMPENSATION SECURITY GRANTS
----------------------------------------- --------------------------------------
ANNUAL MEETING CONSULTING NUMBER OF NUMBER OF SECURITIES
NAME RETAINER FEES FEES FEES/OTHER FEES SHARES(#) UNDERLYING OPTIONS/SARS(#)
- ---------------------------- ------------- ------- --------------- --------- --------------------------
<S> <C> <C> <C> <C> <C>
Jeffrey Smith............... $0.00 $0.00 $68,750(1) 0 50,000(2)
Brian Duffy................. $0.00 $0.00 $50,000(1) 0 0
</TABLE>
- ---------------
(1) The Company's directors do not receive any fees or other compensation for
serving as directors. The dollar amounts set forth above represent the
salary and bonus paid to such director for serving as an officer of the
Company or one of its subsidiaries during the fiscal year ended November 30,
1996.
(2) The Company's directors do not receive any fees or other compensation for
serving as directors. The options were granted to Mr. Smith under the
Company's 1996 Incentive Stock Option Plan to induce Mr. Smith to continue
to remain in the Company's employ.
EMPLOYMENT AGREEMENTS
On April 1, 1996, the Company entered into a new three-year agreement with
Mr. Smith providing for an initial annual salary of $360,000, subject to
adjustments to reflect increases in the consumer price index. Such agreement
provides that the parties may extend the agreement for up to two additional
terms of three years each for a total of six additional years.
On April 1, 1996 the Company also entered into a three-year agreement with
Mr. Bogen providing for an initial annual salary of $360,000, subject to
adjustments to reflect increases in the consumer price index. Such agreement
provides that the parties may extend the agreement for up to two additional
terms of three years each for a total of six additional years.
INCENTIVE STOCK OPTION PLANS.
In October, 1988, the Company's Board of Directors adopted The Fresh Juice
Company, Inc. Incentive Stock Option Plan (the "Plan"). Pursuant to the Plan,
options covering a maximum of 175,000 shares of the Company's Common Stock may
be offered to key employees of the Company. At the date hereof, the Company has
issued the full amount of such options. The exercise price of any stock option
issued under the Plan is equal to at least 100% of the fair market value of the
Company's Common Stock at the time the option is granted. All options granted
expire 10 years from the date of the grant. At February 21, 1996, options to buy
16
<PAGE> 19
160,000 shares of Common Stock had been granted to Steven Smith. Of such amount,
options to buy 100,000 shares of Common Stock at the price of $1.375 per share
are exercisable until October 15, 1998 and options to buy 60,000 such shares at
a price of $3.50 per share are exercisable until December 15, 1998. In addition,
options to buy 15,000 such shares at the price of $1.25, exercisable until 1998,
have been granted to Kathy Siegel. Neither Mr. Smith nor Ms. Siegel have
exercised any of their options as of the date hereof. On July 23, 1996, the
Company's Board of Directors unanimously adopted the Company's 1996 Incentive
Stock Option Plan (the "1996 Plan"), subject to stockholder approval thereof.
Adoption of the 1996 Plan was approved by the Company's stockholders at the
Company's annual meeting of stockholders held on August 29, 1996. Pursuant to
the 1996 Plan, options covering a maximum of 500,000 shares of the Company's
Common Stock may be offered to key employees. As of November 30, 1996, the
Company had issued options covering 50,000 shares of the Company's Common Stock.
The exercise price of any stock option issued or to be issued under the 1996
Plan is or shall be equal to at least 100% of the fair market value of the
Company's Common Stock at the time the option is granted. All options granted or
to be granted under the 1996 Plan expire 10 years from the date of the grant.
The Board of Directors has not yet appointed a Stock Option Plan Committee, and
presently, the Board of Directors recommends the key employees to receive
options, the exercise price of such options and the number of shares subject to
such options. At November 30, 1996, options to buy 50,000 shares of the
Company's Common Stock, with an exercise price of $3.125, had been granted to
Jeffrey Smith. The options granted to Jeffrey Smith are exercisable until July
22, 2001. The Company had also granted options to purchase 60,000 shares of the
Company's Common Stock, exercisable at $3.125, to a former employee Paul
Ballantine. However, Mr. Ballantine has resigned and his options have expired
unexercised.
PENSION PLANS
During the 1988 fiscal year the Company instituted an employee pension plan
then covering all of its employees. Only employees who have been employed by the
Company for three years are eligible to participate in the pension plan. Under
the pension plan, contributions may not exceed 15% of the covered employee's
salary. The amount of contributions for each employee is determined by the Board
of Directors. In fiscal 1996, Mr. Smith was allocated $22,500 and all other
eligible employees, as a group, were allocated $32,609.
The Fresh Juice Company of New York, Inc., formerly known as The Ultimate
Juice Company, Inc., maintains a 401(k) Plan for its employees with
discretionary contributions by the Employer. The amount of discretionary
contributions, if any, is determined by the Board of Directors of the Company.
No contribution was made by the Company during the fiscal year ended November
30, 1996. The Company is in the process of bringing all of its employees under
the 401(k) Plan presently in existence at The Fresh Juice Company of New York,
Inc., and the Company's existing employee pension plan described above will
terminate on December 31, 1997.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following tables set forth, as of February 24, 1997, information
concerning (a) the number and percentage of existing securities of the Company
beneficially owned by (i) each director, (ii) each executive officer of the
Company, (iii) the shares of common stock owned by all directors and executive
officers as a group; and (iv) each person or group known to the Company to be
the beneficial owner of more than 5% of the outstanding shares of Common Stock.
Each person named or included in a group has sole voting and investment power
with respect to his shares.
17
<PAGE> 20
SECURITY OWNERSHIP OF MANAGEMENT.
<TABLE>
<CAPTION>
COMMON STOCK PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OR NUMBER OF PERSONS IN BENEFICIALLY OWNED AS OF COMMON
GROUP DECEMBER 3, 1996 STOCK OWNED
- -------------------------------------------------------------- ------------------------ -----------
<S> <C> <C>
Steven Smith.................................................. 1,633,362(1) 24.6%
c/o The Fresh Juice Company, Inc.
35 Walnut Avenue
Clark, New Jersey 07066
Steven M. Bogen............................................... 1,449,408 22.4%
c/o The Fresh Juice Company, Inc.
35 Walnut Avenue
Clark, New Jersey 07066
Brian Duffy................................................... 300,000 4.6%
c/o The Fresh Juice Company, Inc.
35 Walnut Avenue
Clark, New Jersey 07066
Jeffrey Heavirland............................................ 120,524(2) 1.9%
c/o The Fresh Juice Company, Inc.
35 Walnut Avenue
Clark, New Jersey 07066
Jeffrey Smith................................................. 71,919(3) 1.1%
c/o The Fresh Juice Company, Inc.
35 Walnut Avenue
Clark, New Jersey 07066
Mark Feldman.................................................. 58,550 0.9%
c/o The Fresh Juice Company, Inc.
35 Walnut Avenue
Clark, New Jersey 07066
All directors and executive officers as a group (6 in
number)..................................................... 3,633,763 54.1%
</TABLE>
- ---------------
(1) This amount includes Steven Smith's options to purchase (i) 100,000 shares
of Common Stock at $1.375 per share, exercisable until 1998 and (ii) 60,000
shares of Common Stock at $3.50 per share, exercisable until 1998.
(2) This amount includes Jeffrey Heavirland's warrant to purchase 42,857 shares
of the Company's Common Stock at $3.00, exercisable until November 30, 2001.
(3) This amount includes Jeffrey Smith's options to purchase 50,000 shares of
Common Stock at $3.125 per share, exercisable until July 22, 2001.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
1. Merger with The Ultimate Juice Company, Inc. On March 31, 1996, the
Company entered into a Merger Agreement (the "Merger Agreement") with and among
the Company, Ultimate, the stockholders of Ultimate (the "Selling Stockholders")
and The Fresh Juice Acquisition Company, Inc., a Delaware corporation and a
wholly-owned subsidiary of the Company ("Merger Sub"). The Merger Agreement
provided for the merger of Merger Sub with and into Ultimate (the "Ultimate
Merger"), with all of the issued and outstanding common stock of Ultimate being
exchanged for 1,140,000 shares of the Company's Common Stock (the "Merger
Shares").
The Ultimate Merger became effective on April 1, 1996 and was (1) accounted
for as a purchase and (2) a "reorganization" under the Internal Revenue Code.
Pursuant to the Merger Agreement, the Merger Shares were not registered
with the Securities and Exchange Commission (the "Commission") and constitute
restricted stock under Rule 144 of the Commission. However, the Company and the
Selling Stockholders have entered into a Registration Rights Agreement dated
March 31, 1996, which gives the Selling Stockholders the right to demand
registration of a portion of the Merger Shares under certain circumstances.
18
<PAGE> 21
Steven M. Bogen, the President of Ultimate, became Co-Chairman, Chief
Executive Officer and Secretary of the Company. Steven Smith continued as
Co-Chairman and President and was also named Assistant Secretary of the Company.
Jeffrey Smith, the Company's Vice President of Strategic Development and
Investor Relations was elected as a director of the Company. Mark Feldman, a
stockholder, Chief Financial Officer, Controller and Director of The Ultimate
Juice Company, Inc., was named Treasurer of the Company.
In connection with the Merger Agreement, Steven M. Bogen and Steven Smith
entered into a Stockholder's Agreement (the "Stockholder's Agreement") whereby
each agreed, among other things, to (a) keep the number of directors of the
Company at an even number, (b) each nominate one-half of the number of directors
eligible for election each year, (c) vote for the other's nominees for director,
and (d) not sell their respective stock in the Company other than pursuant to
broker sales or an effective Registration Statement. Upon consummation of the
Ultimate Merger, Steven M. Bogen and Steven Smith owned in the aggregate
2,218,108 shares of the Company's Common Stock (approximately 47.3% of the
issued and outstanding Common Stock of the Company at such time).
2. Merger With Clear Springs Citrus, Inc. On March 31, 1996, the Company
entered into a Merger Agreement with and among the Company, its wholly owned
subsidiary, The Fresh Juice Company of Florida, Inc., Clear Springs, Brian Duffy
and The Bogen Group, L.L.C. (the "Clear Springs Merger Agreement"). The Clear
Springs Merger Agreement provided for the merger of Clear Springs with and into
The Fresh Juice Company of Florida, Inc. (the "Clear Springs Merger"), with all
of the issued and outstanding common stock of Clear Springs being exchanged for
1,160,000 shares of the Company's Common Stock (the "Clear Springs Merger
Shares"). The Clear Spring's merger closed and became effective on September 1,
1996 and was (1) accounted for as a purchase and (2) a "reorganization" under
the Internal Revenue Code. Upon consummation of the Clear Springs Merger, Steven
M. Bogen and Steven Smith owned in the aggregate 2,938,008 shares of the
Company's Common Stock (approximately 50.4% of the issued and outstanding Common
Stock of the Company at such time).
Pursuant to the Clear Springs Merger Agreement, the Clear Springs Merger
Shares were not registered with the Commission and constitute restricted stock
under Rule 144 of the Commission. However, the Company and each of the
recipients of the Clear Springs Merger Shares (the "Clear Springs Selling
Stockholders") have entered into a Registration Rights Agreement dated August
29, 1996, which gives the Clear Springs Selling Stockholders the right to demand
registration of a portion of the Clear Springs Merger Shares under certain
circumstances.
3. Supply Agreement with Natural Juice Company. By agreement dated March
31, 1996, the Company entered into a supply, distribution and requirements
agreement (the "Supply Agreement") with Natural Juice Company, an Illinois
corporation controlled by Brian Duffy, a director and stockholder of the Company
and the President of The Fresh Juice Company of Florida, Inc. The Supply
Agreement has an initial term of five (5) years with two (2) five (5) year
renewals at Natural Juice Company's option. The Company sold $458,972 of product
to Natural Juice Company during fiscal 1996.
4. Merger with Hansen's Juices, Inc. On November 18, 1996, the Company
entered into a merger agreement with and among the Company, its wholly owned
subsidiary, The Fresh Juice Company of California, Inc., Hansen's, Gary Hansen,
Jeffrey Heavirland, Burton S. Rosky and Leatrice J. Rosky Family Trust of 1995,
Gary Todd, David Burger and Timothy Kane (the "Hansen's Merger Agreement"). The
Hansen's Merger Agreement provided for the merger of Hansen's with and into The
Fresh Juice Company of California, Inc. (the "Hansen's Merger"), with all the
issued and outstanding common stock of Hansen's being exchanged for 597,443
shares of the Company's Common Stock (the "Hansen's Merger Shares"), $90,000 in
cash, warrants to purchase 300,000 shares of the Company's Common Stock for
$3.00 per share and the assumption of Hansen's debt. The Hansen's Merger closed
and became effective on December 2, 1996 and was (1) accounted for as a purchase
and (2) a "reorganization" under the Internal Revenue Code.
Pursuant to the Hansen's Merger Agreement, the Hansen's Merger Shares were
not registered with the Commission and constitute restricted stock under Rule
144 of the Commission. However, the Company and each of the recipients of the
Hansen's Merger Shares (the "Hansen's Selling Stockholders") have entered
19
<PAGE> 22
into a Registration Rights Agreement dated November 27, 1996, which gives the
Hansen's Selling Stockholders the right to demand registration of a portion of
the Hansen's Merger Shares under certain circumstances.
ITEM 13. EXHIBIT AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<S> <C>
2(i) Certificate of Amendment to Certificate of Incorporation -- incorporated by
reference to Exhibit 3(i) to the Company's 10-QSB for the quarter ended August
31, 1996, filed October 15, 1996, SEC File No. 0-15320.
3(ii) By-laws -- incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement, SEC File NO. 33-8878-NY on Form S-18.
9 Stockholders Agreement dated March 31, 1996 between Steven Smith and Steven M.
Bogen -- incorporated by reference to Exhibit 10(b) of the Company's Current
Report on form 8-K dated March 31, 1996, SEC File No. 0-15320, (the "March 31,
1996 8-K")
10(a) Stockholder's Agreement dated March 31, 1996 between Steven Smith and Steven M.
Bogen -- incorporated by reference to Exhibit 10(b) of the March 31, 1996 8-K
10(b) 1996 Incentive Stock option Plan -- incorporated by reference to Exhibit 10(b)
of the Company's Definitive Proxy Statement filed in connection with the
Company's Annual Stockholders meeting held on August 29, 1996, SEC File No.
0-15320.
10(c) Employment Agreement effective April 1, 1996 with Steven Smith -- incorporated
by reference to Exhibit 10(d) of the March 31, 1996 8-K
10(d) Employment Agreement effective April 1, 1996 with Steven M.
Bogen -- incorporated by reference to Exhibit 10(e) of the March 31, 1996 8-K
10(e) Supply Agreement dated March 31, 1996 with Natural Juice Company,
Inc. -- incorporated by reference to Exhibit 10(f) of the March 31, 1996 8-K
10(f)* Loan Agreement dated August 5, 1996 among the Company, The Fresh Juice Company
of Florida, Inc., The Fresh Juice Company of New York, Inc. and Fleet Bank, N.A.
21* Subsidiaries of small business issuer
27* Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K.
None.
- ---------------
* Exhibits filed herewith
20
<PAGE> 23
INDEX TO FINANCIAL STATEMENTS
THE FRESH JUICE COMPANY, INC. AND SUBSIDIARIES
Audited consolidated financial statements and related documents as of
November 30, 1996 and 1995 and for the three years ended November 30, 1996 are
presented herein on the following pages:
<TABLE>
<S> <C>
Independent Auditors' Report.................................................. F-1
Consolidated Balance Sheets as of November 30, 1996 and 1995.................. F-2
Consolidated Statements of Earnings for the years ended November 30, 1996,
1995 and 1994............................................................... F-3
Consolidated Statements of Shareholders' Equity for the years ended November
30, 1996, 1995 and 1994..................................................... F-4
Consolidated Statements of Cash Flows for the years ended November 30, 1996,
1995 and 1994............................................................... F-5
Notes to Consolidated Financial Statements.................................... F-6
</TABLE>
21
<PAGE> 24
In accordance with Section 13 and 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
THE FRESH JUICE COMPANY, INC.
(Registrant)
By: /s/ STEVEN M. BOGEN
------------------------------------
Steven M. Bogen, Co-Chairman of
Board
and Chief Executive Officer
By: /s/ STEVEN SMITH
------------------------------------
Steven Smith, Co-Chairman of the
Board
and President
Date: March 17, 1997
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ------------------------------------------ -------------------------------- ---------------
<S> <C> <C>
/s/ STEVEN M. BOGEN Co-Chairman of the Board, Chief March 17, 1997
- ------------------------------------------ Executive Officer and Secretary
Steven M. Bogen (principal executive officer)
/s/ STEVEN SMITH Co-Chairman of the Board and March 17, 1997
- ------------------------------------------ President
Steven Smith
/s/ BRIAN DUFFY Director March 17, 1997
- ------------------------------------------
Brian Duffy
/s/ JEFFREY SMITH Director March 17, 1997
- ------------------------------------------
Jeffrey Smith
/s/ MARK FELDMAN Chief Financial Officer and March 17, 1997
- ------------------------------------------ Treasurer (principal financial
Mark Feldman officer and principal accounting
officer)
</TABLE>
22
<PAGE> 25
INDEPENDENT AUDITORS' REPORT
The Board of Directors
The Fresh Juice Company, Inc.
and Subsidiaries:
We have audited the accompanying consolidated balance sheets of The Fresh
Juice Company, Inc. and subsidiaries as of November 30, 1996 and 1995, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the years in the three-year period ended November 30, 1996.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The Fresh
Juice Company, Inc. and subsidiaries as of November 30, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended November 30, 1996 in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
February 28, 1997
Short Hills, New Jersey
F-1
<PAGE> 26
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
NOVEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 133,768 $1,998,063
Trade accounts receivable, net of allowance for doubtful accounts
of $50,000 in 1996 and $0 in 1995............................. 2,236,781 591,727
Inventories...................................................... 1,759,200 1,544,821
Current portion of notes receivable.............................. -- 120,000
Prepaid and other current assets................................. 296,007 3,747
----------- ----------
Total current assets..................................... 4,425,756 4,258,358
----------- ----------
Property, plant and equipment, at cost:
Land............................................................. 30,000 30,000
Building and improvements........................................ 1,740,229 597,155
Equipment........................................................ 3,137,411 353,794
Molds............................................................ 224,333 196,338
Automobiles...................................................... 143,358 103,058
Construction-in-progress......................................... -- 1,437,887
----------- ----------
5,275,331 2,718,232
Less accumulated depreciation.................................... 820,646 499,256
----------- ----------
Net property, plant and equipment........................ 4,454,685 2,218,976
Note receivable, net of current portion............................ -- 20,000
Excess cost over estimated fair values of net assets acquired, net
of accumulated amortization of $126,748 in 1996.................. 6,110,947 --
Trademarks, patents, and other intangibles, net of accumulated
amortization of $23,108 and $11,059 in 1996 and 1995,
respectively..................................................... 140,084 10,903
Other assets....................................................... 150,000 --
----------- ----------
Total assets............................................. $15,281,472 $6,508,237
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Note payable..................................................... 705,000 --
Current installments of long-term debt........................... 260,070 45,832
Accounts payable and accrued expenses............................ 2,836,582 244,697
Income taxes payable............................................. -- 48,239
----------- ----------
Total current liabilities................................ 3,801,652 338,768
Long-term debt, net of current installments........................ 1,524,562 1,529,168
Deferred income taxes.............................................. 34,000 --
----------- ----------
Total liabilities........................................ 5,360,214 1,867,936
----------- ----------
Shareholders' equity:
Series preferred stock par value $10. Authorized 7,000,000
shares; none issued........................................... -- --
Common stock, par value $.01. Authorized 30,000,000 shares;
issued 6,062,000 and 3,762,000 shares; in 1996 and 1995,
respectively.................................................. 60,620 37,620
Additional paid-in capital....................................... 8,583,490 2,396,490
Retained earnings................................................ 1,560,441 2,489,484
----------- ----------
10,204,551 4,923,594
Less cost of common shares held in treasury: 211,938 shares in
1996 and 1995................................................. 283,293 283,293
----------- ----------
Total shareholders' equity............................... 9,921,258 4,640,301
Commitments and contingency (notes 5, 8 and 11)
----------- ----------
Total liabilities and shareholders' equity............... $15,281,472 $6,508,237
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE> 27
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ---------- ----------
<S> <C> <C> <C>
Net sales............................................. $19,958,022 $9,219,184 $8,171,803
Cost of goods sold.................................... 15,886,417 6,035,483 5,163,806
----------- --------- ---------
4,071,605 3,183,701 3,007,997
Selling, general and administrative expenses.......... 4,984,642 2,820,356 2,451,055
----------- --------- ---------
Earnings (loss) from operations............. (913,037) 363,345 556,942
Interest and other income, net........................ 63,496 104,104 88,292
Interest expense...................................... (139,502) (24,355) --
----------- --------- ---------
Earnings (loss) before provision for income
taxes..................................... (989,043) 443,094 645,234
Provision (benefit) for income taxes.................. (60,000) 172,051 256,396
----------- --------- ---------
Net earnings (loss)......................... $ (929,043) $ 271,043 $ 388,838
=========== ========= =========
Net earnings (loss) per common share.................. $ (.20) $ .07 $ .11
=========== ========= =========
Weighted average number of common and common
equivalent shares outstanding....................... 4,601,349 3,889,740 3,612,679
=========== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 28
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------------- PAID-IN RETAINED TREASURY SHAREHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS STOCK EQUITY
--------- ------- ---------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at November 30, 1993........... 3,762,000 $37,620 $2,396,490 $ 1,829,603 $(273,360) $ 3,990,353
Net earnings for the year end November
30, 1994............................. -- -- -- 388,838 -- 388,838
--------- ------- --------- ----------- --------- -----------
Balance at November 30, 1994........... 3,762,000 37,620 2,396,490 2,218,441 (273,360) 4,379,191
Purchase of 4,800 shares of treasury
stock................................ -- -- -- -- (9,933) (9,933)
Net earnings for the year ended
November 30, 1995.................... -- -- -- 271,043 -- 271,043
--------- ------- --------- ----------- --------- -----------
Balance at November 30, 1995........... 3,762,000 37,620 2,396,490 2,489,484 (283,293) 4,640,301
Net loss for the year ended November
30, 1996............................. -- -- -- (929,043) -- (929,043)
Shares of common stock issued to
acquire The Ultimate Juice Company,
Inc.................................. 1,140,000 11,400 3,066,600 -- -- 3,078,000
Shares of common stock issued to
acquire Clear Springs Citrus, Inc.... 1,160,000 11,600 3,120,400 -- -- 3,132,000
--------- ------- --------- ----------- --------- -----------
Balance at November 30, 1996........... 6,062,000 $60,620 $8,583,490 $ 1,560,441 $(283,293) $ 9,921,258
========= ======= ========= =========== ========= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 29
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss)................................ $ (929,043) $ 271,043 $ 388,838
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization................. 467,458 68,101 52,727
Changes in assets and liabilities:
Decrease (increase) in trade accounts
receivable............................... (371,417) 87,665 11,513
Decrease (increase) in inventories......... 101,962 (171,109) (140,359)
Decrease (increase) in prepaid and other
current assets........................... (106,286) 12,774 (799)
Decrease in other assets................... (10,107) --
Increase (decrease) in accounts payable and
accrued expenses......................... 1,038,602 (234,911) 77,290
Increase (decrease) in income taxes
receivable/payable....................... (161,228) 118,733 (451,004)
----------- ----------- ----------
Net cash provided by (used in) operating
activities............................ 40,048 142,189 (61,794)
----------- ----------- ----------
Cash flows from investing activities:
Increase in advances and note receivable........... (363,932) -- (300,000)
Installments from note receivable.................. -- 120,000 40,000
Decrease in short-term investments................. -- 789,116 208,207
Acquisitions of property, building and equipment... (1,885,245) (1,685,893) (84,468)
Escrow advance -- Hansen's Juices, Inc............. (150,000) -- --
Acquisition costs.................................. (293,000) -- --
Acquisition of cash................................ 82,834 -- --
----------- ----------- ----------
Net cash used in investing activities.... (2,609,343) (776,777) (136,261)
----------- ----------- ----------
Cash flows from financing activities:
Proceeds on note payable........................... 705,000 -- --
Purchase of treasury stock......................... -- (9,933) --
Proceeds from long-term debt....................... 1,100,000 1,100,000 --
Payments on long-term debt......................... (1,100,000) -- --
----------- ----------- ----------
Net cash provided by financing
activities............................ 705,000 1,090,067 --
----------- ----------- ----------
Net increase (decrease) in cash and cash
equivalents........................... (1,864,295) 455,479 (198,055)
Cash and cash equivalents at beginning of year....... 1,998,063 1,542,584 1,740,639
----------- ----------- ----------
Cash and cash equivalents at end of year............. $ 133,768 $ 1,998,063 $1,542,584
=========== =========== ==========
Supplemental cash flow and non cash investing and
financing activities information:
Income taxes paid.................................. $ 53,914 $ 53,318 $ 706,900
=========== =========== ==========
Interest paid...................................... $ 129,735 $ 16,542 $ --
=========== =========== ==========
Fair value of assets acquired........................ $ 8,691,518 $ -- $ --
Debt and liabilities assumed......................... 2,481,518 -- --
----------- ----------- ----------
Fair value of common stock issued.................... $ 6,210,000 $ -- $ --
=========== =========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 30
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996, 1995 AND 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization
The Fresh Juice Company Inc. (the Company), produces, markets and sells
fresh and frozen fresh-squeezed fruit juices and other non-carbonated beverages
to both food service and retail customers. The majority of the juice produced by
the Company is fresh squeezed orange juice.
Effective April 1, 1996, the Company acquired all of the outstanding
capital stock of The Ultimate Juice Company, Inc. (Ultimate) in exchange for
1,140,000 shares of the Company's common stock valued at $3,078,000. This merger
has been accounted for as a purchase.
Effective September 1, 1996, the Company acquired all of the outstanding
capital stock of Clear Springs Citrus, Inc. (Clear Springs) in exchange for
1,160,000 shares of the Company's common stock valued at $3,132,000. This merger
has been accounted for as a purchase.
(b) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
The Fresh Juice Company, Inc. and its subsidiaries, (the Company). All material
intercompany accounts and transactions have been eliminated. The operating
results of Ultimate and Clear Springs are included in the consolidated results
of operations from their respective dates of acquisition.
(c) Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and other securities with a
maturity at time of purchase of three months or less.
(d) Financial Instruments
The carrying values of financial instruments (principally cash and cash
equivalents, accounts receivable, accounts payable, notes payable and long-term
debt) included in the Company's consolidated balance sheets approximated fair
value at November 30, 1996 and 1995. Fair values were determined through a
combination of management estimates and information obtained from independent
third parties.
(e) Inventories
Inventories are stated at the lower of cost or market, with cost determined
by using the first-in, first-out (FIFO) method.
(f) Depreciation
Depreciation is provided over the estimated useful lives of the respective
assets: seven years for the equipment and molds and five years for the
automobiles using accelerated methods and 39 years for the building using the
straight-line method.
(g) Intangible Assets
Excess of cost over the estimated fair values of net assets acquired
(goodwill) is being amortized using the straight-line method over 20 years.
Trademarks, patents and other intangibles (primarily customer lists and
covenants not to compete) are being amortized using the straight-line method
over periods of three to fifteen years.
F-6
<PAGE> 31
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The carrying value of intangible assets is periodically reviewed by the
Company and impairments are recognized when the estimated future net cash flows
derived from such intangible assets are less than their carrying value.
Measurement of the impairment, if any, is based upon the excess of the carrying
value over the fair value of such assets.
(h) Long-Lived Assets
The Company has not yet adopted Statement of Financial Accounting Standards
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of (SFAS No. 121) which is effective for fiscal years
beginning after December 15, 1995. The Company believes that the adoption of
this accounting standard will not have a material effect on the Company's
consolidated financial position or results of operations.
(i) Net Earnings (loss) Per Common Share
Net loss per share in 1996 is based on the weighted average number of
common shares outstanding. Common share equivalents are not included in the
calculation as their inclusion would be antidilutive. Net earnings per common
share in 1995 and 1994 is based on the weighted average number of common and
common equivalent shares outstanding, using the treasury stock method. In 1995
and 1994 common share equivalents used in the computation of earnings per share
represent the options granted to key employees under the Company's Incentive
Stock Option Plan if their exercise would have had a dilutive effect on net
earnings per common share.
In 1996, 1995 and 1994, net earnings per common share assuming full
dilution has not been presented since the average market price for each period
exceeded the market price of the Company's stock at the end of each period.
(j) Income Taxes
The provision for income taxes is based on earnings reported in the
financial statements under the asset and liability approach, in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS No. 109). Under the asset and liability method of SFAS No. 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under SFAS No. 109, the
effect on deferred taxes of a change in tax rates is recognized in income in the
period that includes the enactment date.
(k) Reclassifications
Certain reclassifications were made to the prior year balances to conform
to the presentation adopted in the current year.
(l) Use of Estimates
In conformity with generally accepted accounting principles, the
preparation of financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the
F-7
<PAGE> 32
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
(m) Risks and Uncertainties
The Company's revenues are dependent on the continued operation of its
manufacturing facility and its various distribution centers and the ready source
of supply of harvested fresh fruits and juice supplies. The operation of these
facilities involves many risks, including the breakdown, failure or substandard
performance of equipment, natural disasters and the need to comply with
directives of governmental agencies. The occurrence of material operational
problems, including but not limited to the above events, may have a material
adverse effect on the productivity and profitability of a particular facility or
with respect to certain facilities, the Company as a whole, during the period of
such operational difficulty. A lack of availability of quality fruit and higher
cost of citrus would hamper the Company's ability to maintain its rate of growth
and its current gross profit level.
None of the Company's customers accounted for more than 10% of the net
sales in 1996, 1995 and 1994. The Company estimates an allowance for doubtful
accounts based on the creditworthiness of its customers as well as general
economic conditions. The Company as a policy, does not require collateral from
its customers.
(2) ACQUISITIONS
The estimated fair value of Ultimates' and Clear Springs assets' and
liabilities at the respective dates of acquisition are presented as follows:
<TABLE>
<CAPTION>
CLEAR
ULTIMATE SPRINGS
---------- ----------
<S> <C> <C>
Cash........................................................ $ 70,936 $ 11,898
Trade accounts receivable................................... 779,179 494,458
Inventory................................................... 135,660 180,681
Prepaid expenses............................................ 47,020 56,636
Note receivable -- Clear Springs Citrus..................... 150,000 (150,000)
Property, plant and equipment............................... 44,657 634,468
Goodwill, representing excess of cost over estimated fair
values of net assets acquired............................. 2,517,156 3,427,539
Intangible assets........................................... 33,427 107,803
Advances and note payable -- Fresh Juice Company............ (110,000) (393,932)
Accounts payable and accrued expenses....................... (559,364) (993,919)
Income taxes payable........................................ (30,671) --
Advances -- related party................................... -- (209,632)
Deferred income taxes....................................... -- (34,000)
---------- ----------
Total purchase price, excluding total acquisition
costs of $293,000............................... $3,078,000 $3,132,000
========== ==========
</TABLE>
In each of the Company's aforementioned acquisitions, the common stock
delivered as consideration is unregistered and contains certain restrictions as
well as having several large blocks of stock being issued to certain sellers in
the transactions. Management is in the process of evaluating the fair values of
the assets acquired and liabilities assumed, and has previously made preliminary
assessments of the fair values of assets acquired and liabilities assumed in
connection with the Ultimate merger. Management of the company, upon receiving
advice from its investment banker, has recently made an updated assessment of
the fair value of the
F-8
<PAGE> 33
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) ACQUISITIONS (CONTINUED)
common stock issued in connection with the Ultimate and Clear Springs'
acquisitions at the approximate dates of the merger agreements which fair value
approximates 80% of the publicly traded market prices.
Management's preliminary assessments of fair values for assets acquired and
liabilities assumed to date result in tentative allocations of amounts to the
excess of costs over the fair values of net assets acquired. Management
continues to be in a discovery and assessment period, and is evaluating the
possible existence of other identifiable intangible assets that may exist. No
adjustments have been made to the consolidated financial statements with respect
to a final determination as to the existence and fair values of other
identifiable intangible assets, should any exist. The final fair values of
property, plant and equipment acquired in the mergers will be determined by
management upon the completion of the independent appraisal process, which is in
progress.
At November 30, 1995, the Company had a note receivable from Ultimate for
$140,000. Prior to the acquisition, the Company purchased approximately
$3,500,000 of product from Clear Springs in 1996.
The following table presents selected unaudited financial information for
the Company, Ultimate and Clear Springs on a pro-forma basis assuming the three
companies had been combined for the years ended November 30, 1996 and 1995.
Pro-forma results for the year ended November 30, 1996 include the results of
the Company for the year ended November 30, 1996 combined with the results of
Ultimate and Clear Springs for the periods prior to their respective dates of
acquisition. Pro-forma results for the year ended November 30, 1995 include the
results of the Company for the year ended November 30, 1995 combined with the
results of Ultimate and Clear Springs for the year ended December 31, 1995. The
pro forma financial information does not necessarily reflect the results of
operations that would have occurred had the Company, Ultimate and Clear Springs
constituted a single entity during such periods. Pro-forma results in each
period include necessary pro-forma adjustments:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Net sales................................................. $29,724,000 $29,520,000
Net earnings (loss)....................................... (1,333,000) 214,000
Net earnings (loss) per common share...................... (.23) .03
=========== ==========
</TABLE>
(3) INVENTORIES
Inventories at November 30, 1996 and 1995 consist of the following:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Raw materials............................................... $ 375,351 $ 138,062
Finished goods.............................................. 1,383,849 1,406,759
---------- ---------
$1,759,200 $1,544,821
========== =========
</TABLE>
F-10
<PAGE> 34
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following at November
30, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---------- --------
<S> <C> <C>
Accounts payable............................................. $2,195,754 $ 82,859
Compensation................................................. 101,654 57,560
Sales and marketing.......................................... 73,684 65,703
Professional fees............................................ 202,487 25,000
Other........................................................ 263,003 13,575
---------- -------
$2,836,582 $244,697
========== =======
</TABLE>
(5) NOTE PAYABLE AND LONG-TERM DEBT
In August 1996, the Company entered into a $2,500,000 revolving credit loan
with a bank expiring August 1998, of which $705,000 is outstanding at November
30, 1996. Interest is at a floating rate equal to the bank's prime rate (8.25%
at November 30, 1996), which floating rate, at the Company's election, may be
fixed, for one to three month periods throughout the term, based on current
Libor plus 150 basis points. The Company can borrow against the revolving credit
loan based on the allowable borrowing base, defined in the loan agreement as 80%
of eligible accounts receivable plus the lesser of $1,500,000 or 50% of eligible
inventory.
At November 30, 1996 and 1995, long-term debt consists of the following:
<TABLE>
<S> <C> <C>
$475,000 mortgage note with a third party, due in monthly
installments of $3,683 representing principal and interest
beginning March 1, 1997 with a final balloon payment due August 1,
1998, interest at 7%, secured by the Company's Florida Plant...... $ 475,000 $ 475,000
Note payable to a former stockholder of Clear Springs, due in annual
amounts of approximately of $105,000 through August 1998, interest
at 7%. ........................................................... 209,632 --
$1,100,000 term loan with a bank, due in monthly principal
installments of $18,333 commencing April 1, 1997 through March 1,
2002 with interest at a floating rate equal to the bank's prime
rate (8.25% at November 30, 1996), which floating rate, at the
Company's election, may be fixed, for one to three month periods
throughout the term, based on current Libor plus 175 basis
points............................................................ 1,100,000 --
$1,100,000 term loan with a bank, interest at the 8.75%. ........... -- 1,100,000
---------- ---------
Total long-term debt...................................... 1,784,632 1,575,000
Less current maturities........................................... 260,070 45,832
---------- ---------
Long-term debt, excluding current maturities.............. $1,524,562 $1,529,168
========== =========
</TABLE>
The revolving credit loan and term loan contain covenants including
financial covenants (tangible net worth and minimum debt service coverage
ratios). The Company is in compliance with all such covenants at November 30,
1996. The loans are secured by substantially all of the assets of the Company.
The aggregate fair value of the Company's debt approximates its carrying value
due to the variable nature and frequent repricing of the debt which is based on
market conditions.
The aggregate annual maturities of long-term debt for each of the next five
years ended November 30 are as follows: 1997, $260,070; 1998, $791,228; 1999,
$220,000; 2000, $220,000; 2001, $220,000; and 2002 $73,334.
F-11
<PAGE> 35
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(6) INCOME TAXES
Components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Federal............................................ $(80,000) $139,266 $184,721
State.............................................. 20,000 32,785 71,675
------- ------- -------
$(60,000) $172,051 $256,396
======= ======= =======
</TABLE>
The temporary differences which give rise to deferred tax assets and
liabilities as of November 30, 1996 are as follows:
<TABLE>
<S> <C>
Deferred tax assets:
Accounts receivable.................................................... $ 17,000
Inventory.............................................................. 20,000
Net operating loss carrying forwards................................... 328,000
---------
Gross deferred tax assets...................................... 365,000
Valuation allowance...................................................... (365,000)
---------
Net deferred tax assets........................................ --
---------
Deferred tax liability -- property, plant and equipment.................. (34,000)
---------
Net deferred tax assets income taxes........................... $ (34,000)
=========
</TABLE>
A valuation allowance is provided when it is more likely then not that some
portion or all of the deferred tax assets will not be realized. The charge in
the valuation allowance from November 30, 1995 to November 30, 1996 is comprised
of approximately $70,000 relating to the acquisition of Clear Springs and
$317,000 related to the current year activity. Net operating losses of
approximately $1,000,000 expire in fiscal 2011.
The reconciliation of the Company's effective income tax rate and the
Federal statutory rate is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Federal statutory rate.......................................... (34)% 34% 34%
State taxes, net of Federal benefit............................. 1 5 7
Amortization of goodwill........................................ 4 -- --
Increase in valuation allowance................................. 29 -- --
Other, net...................................................... (6) -- (1)
---
-- --
(6)%
39% 40%
===
== ==
</TABLE>
(7) INCENTIVE STOCK OPTIONS
At November 30, 1995, there were stock options outstanding entitling key
employees to purchase 100,000 shares and 15,000 shares of common stock at $1.375
and $1.25, respectively, per share. These options are exercisable until October
15, 1998. Additionally, there were stock options, exercisable until December
1998, to purchase 60,000 shares of common stock at $3.50 per share. This grant
of 60,000 options was made during fiscal year 1994 at a option price equal to
the fair market value at date of grant. The remaining options were granted prior
to fiscal year 1994. In 1996, the Company adopted The Fresh Juice Company, Inc.
Incentive Stock Option Plan (the 1996 Stock Plan). The number of shares of
common stock with respect to which grants may be made under the 1996 Stock Plan
is 500,000. During 1996, the Company granted 110,000 options at $3.125, of which
60,000 options expired in 1996, unexercised. The remaining 50,000 options are
exercisable until July 22, 2001. At November 30, 1996, no options have been
exercised.
F-12
<PAGE> 36
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) INCENTIVE STOCK OPTIONS (CONTINUED)
In 1996, the Company issued 75,000 warrants at $3.00 per share to a third
party. The warrants are exercisable beginning June 1997 and they expire June
2001. The value of those warrants is not material to the Company's consolidated
financial statements.
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation (Statement 123), was issued. Under
Statement 123, the Company is required to choose either the new fair value
method or the current intrinsic value method of accounting for its stock-based
compensation arrangements. Using the fair value method, the Company would
measure the compensation cost recognized in the consolidated financial
statements based upon the estimated fair value of the stock-based compensation
arrangements as of the date they are granted. The intrinsic value method, under
APB Opinion No. 25, "Accounting for Stock Issued to Employees (APB 25), requires
the recognition of compensation cost only if the exercisable price of options is
less than the market value of the underlying stock on the measurement date. The
Company will continue to account for all employee stock-based compensation plans
under APB 25 and adopt the provisions of Statement 123, as required, for all
stock-based arrangements issued to nonemployees. Even though the Company has
opted not to change its method of accounting, Statement 123 requires pro forma
disclosures of net earnings and earnings per share computed as if the fair value
method had been applied. The accounting requirements of Statement 123 are
effective for transactions entered into in fiscal years beginning after December
15, 1995 and the disclosure, including pro forma, requirements are effective for
financial statements for fiscal years beginning after December 15, 1995. The
provisions of Statement 123 will be implemented by the Company in fiscal year
1997.
(8) COMMITMENTS AND CONTINGENCY
The Company is obligated under various operating leases covering its office
space, warehouse and vehicles. Rent expense for the years ended November 30,
1996, 1995 and 1994 was $253,280, $102,944 and $79,449, respectively. The
aggregate future minimum lease commitments under leases that have initial or
remaining noncancelable lease terms in excess of one year as of November 30,
1996 are approximately $65,000 in 1997, $55,000 in 1998 and less than $10,000
for the years 1999 to 2001.
On April 1, 1996, the Company entered into three year employment agreements
with two of its executive officers. Each agreement provides for, among other
things, annual compensation aggregating a minimum salary of $360,000 ($720,000
on a combined basis), subject to annual increases. The agreement provides that
the parties may extend the agreement for up to a total of six additional years.
On March 31, 1996, the Company entered into a supply, distribution and
requirements agreement (the Agreement) with Natural Juice Company which
corporation is controlled by a director of the Company. The agreement has an
initial term of five years with two five year renewals at Natural Juice
Company's option. The Company sold approximately $460,000 of product to the
Natural Juice Company in 1996.
In January 1996, the Company was named as a defendant in a legal matter
which seeks damages in excess of $250,000. Pending court approval, the Company
has settled the matter and is obligated to pay $10,000 over six months, pursuant
to the terms of the agreement.
F-13
<PAGE> 37
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(8) COMMITMENTS AND CONTINGENCY (CONTINUED)
From time to time, the Company is party to legal action arising in the
ordinary course of business. Management believes that such litigation and claims
will be resolved without material effect on the Company's financial position.
(9) COMMON STOCK AND SERIES PREFERRED STOCK
During 1996, the Company obtained shareholder approval and amended the
Company's Certificate of Incorporation to increase the number of authorized
shares of common stock and preferred stock to 30,000,000 and 7,000,000 shares,
respectively.
The Company's Board of Directors may, without further action by the
Company's shareholders, from time to time direct the issuance of preferred stock
in series and, at the time of issuance, determine the rights, preferences and
limitations of each series. Satisfaction of any dividend preferences of
outstanding preferred stock would reduce the amount of funds available for the
payment of dividends on common stock. Also, holders of preferred stock would
normally be entitled to receive a preference payment in the event of any
liquidation, dissolution or winding-up of the Company before any payment is made
to the holders of common stock.
(10) BENEFIT PLANS
The Company maintains a simplified employee pension (S.E.P.) plan covering
certain of its employees. Contributions to the plan, which are discretionary,
cannot exceed 15% of the covered employee's salary. Pension expense for the
years ended November 30, 1996, 1995 and 1994 was $55,109, $46,358 and $45,889,
respectively.
Ultimate maintains a defined contribution (401(k) Plan) for its employees
with discretionary contributions by the Company. No contribution was made to the
401(k) Plan by the Company during 1996. The Company is in the process of
bringing all of its employees under the 401(k) Plan.
(11) SUBSEQUENT EVENT (UNAUDITED)
Effective December 2, 1996, the Company acquired all of the outstanding
capital stock of Hansen's Juices, Inc. (Hansen's) in exchange for $90,000 in
cash, 597,443 shares of the Company's common stock, warrants to purchase 300,000
shares of the Company's common stock for $3.00 per share and assumption of debt.
This merger will be accounted for as a purchase. Simultaneously with the merger,
the Company also restructured a portion of Hansen's existing debt obligations
owed to Hansen's former stockholders and in connection therewith delivered
$60,000 in cash and 20,226 shares of the Company's common stock to a former
Hansen's stockholder. Hansen's reported sales of $11,554,829 and a net loss of
$14,843 for their fiscal year ended June 30, 1996. Hansen's has been named as
one of many defendants in a lawsuit filed by the Franchise Holders of Southland
Corporation ("Southland"), against Southland and a large number of the purveyors
to the Franchisees of Southland, i.e., 7-Eleven stores. Hansen's was one of the
purveyors that has been sued under that lawsuit. However, there is only one
cause of action which pertains to Hansen's, and Hansen's is coupled in that
count with Southland, The Coca-Cola Company and Pepsi-Cola Company. The basis of
the cause of action is that each of the named purveyors conspired to fix prices
on soft drinks by trying to get the Franchisees' retail price of their
respective products in order for the Franchisee(s) to obtain a discount off the
wholesale price. In the count in which Hansen's was named, the plaintiffs seek
total damages in excess of $50,000.00. The case was filed in September, 1993 and
is venued in the Superior Court of the State of California for the County of
Alameda. Management of the Company believes that the ultimate resolution of this
matter will not have a material impact on the financial position of the Company.
F-14
<PAGE> 38
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
2(i) Certificate of Amendment to Certificate of Incorporation -- incorporated by
reference to Exhibit 3(i) to the Company's 10-QSB for the quarter ended August
31, 1996, filed October 15, 1996, SEC File No. 0-15320.
3(ii) By-laws -- incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement, SEC File NO. 33-8878-NY on Form S-18.
9 Stockholders Agreement dated March 31, 1996 between Steven Smith and Steven M.
Bogen -- incorporated by reference to Exhibit 10(b) of the Company's Current
Report on form 8-K dated March 31, 1996, SEC File No. 0-15320, (the "March 31,
1996 8-K")
10(a) Stockholder's Agreement dated March 31, 1996 between Steven Smith and Steven M.
Bogen -- incorporated by reference to Exhibit 10(b) of the March 31, 1996 8-K
10(b) 1996 Incentive Stock option Plan -- incorporated by reference to Exhibit 10(b)
of the Company's Definitive Proxy Statement filed in connection with the
Company's Annual Stockholders meeting held on August 29, 1996, SEC File No.
0-15320.
10(c) Employment Agreement effective April 1, 1996 with Steven Smith -- incorporated
by reference to Exhibit 10(d) of the March 31, 1996 8-K
10(d) Employment Agreement effective April 1, 1996 with Steven M.
Bogen -- incorporated by reference to Exhibit 10(e) of the March 31, 1996 8-K
10(e) Supply Agreement dated March 31, 1996 with Natural Juice Company,
Inc. -- incorporated by reference to Exhibit 10(f) of the March 31, 1996 8-K
10(f)* Loan Agreement dated August 5, 1996 among the Company, The Fresh Juice Company
of Florida, Inc., The Fresh Juice Company of New York, Inc. and Fleet Bank, N.A.
21* Subsidiaries of small business issuer
27* Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K.
None.
- ---------------
* Exhibits filed herewith
<PAGE> 1
EXHIBIT 10(f)
LOAN AGREEMENT
Loan Agreement dated as of August 5, 1996 among THE FRESH JUICE COMPANY,
INC., a Delaware corporation, THE FRESH JUICE COMPANY OF FLORIDA, INC., a
Florida corporation, the FRESH JUICE COMPANY OF NEW YORK, INC., a New Jersey
corporation, each with its chief executive office at 35 Walnut Avenue, Suite 4,
Clark, New Jersey 07066 (collectively, the "Borrowers") and FLEET BANK, N.A., a
national banking association, having an office at 208 Harristown Road, Glen
Rock, New Jersey 07452 (the "Bank").
The parties hereto hereby agree as follows:
Section 1. Definitions.
1.1 Defined Terms. As used herein the following terms shall have the
following meanings:
"Accounts" shall mean those accounts arising out of the sale or lease of
goods or the rendition of services by any Borrower.
"Account Debtor" shall mean the person who is obligated on or under an
Account.
"Adjusted Equipment Valuation" shall mean 80% of the value of the Equipment
as determined by the Equipment Valuation; provided, however, that in the event
of the merger of Clear Springs Citrus, Inc. with and into The Fresh Juice
Company of Florida, Inc. no later than 30 days after receipt by the Bank of the
Equipment Valuation, then, in such event, Adjusted Equipment Valuation shall
mean 80% of the value of the Equipment plus 80% of the value of the Clear
Springs Equipment.
"Adjusted Libor Rate" means with respect to any LIBOR Loan Interest Period,
the rate per annum at which U.S. dollar deposits are offered by a Reference Bank
(as selected by the Bank) in the London interbank market for Eurodollars at
approximately 11:00 a.m. (London time) two (2) Business Days before the first
day of such Interest Period in an amount approximately equal to the principal
amount of the Eurodollar Loan to which such Interest Period is to apply and for
a period of time comparable to such Interest Period divided by one minus the
Eurodollar Reserve Percentage.
"Affiliate" as applied to any Person, means any other Person directly or
indirectly through one or more intermediaries controlling, controlled by, or
under common control with, that Person. For the purposes of this definition,
"control" (including with correlative meanings, the terms "controlling",
"controlled by" and "under common control with"), as applied to any Person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that Person, whether through the
ownership of voting securities or by contract or otherwise.
"Agreement" shall mean this Loan Agreement, as the same from time to time
may be amended, supplemented or modified.
"Assessment Rate" shall mean for any Interest Period, the net annual
assessment rate (rounded upwards, if necessary, to the next higher 1/100 of 1%)
then currently charged to the Bank by the Federal Deposit Insurance Corporation
(or any successor) for such Corporation's (or such successor's) insuring time
deposits at offices of the bank in the United States during the most recent
period for which such rate has been determined prior to the commencement of such
Interest Period.
"Borrowing Base" shall mean (a) 80% of the Borrowers' Eligible Accounts
Receivable from time to time outstanding plus (b) the lesser of (i) $1,500,000
or (ii) 50% of the value of the Borrowers' Eligible Inventory from time to time
on hand.
"Borrowing Base Certificate" shall mean a certificate substantially in the
form of Exhibit C hereto.
"Business Day" shall mean a day other than a Saturday, Sunday or other day
on which commercial banks in New Jersey are required or permitted by law to
remain closed.
1
<PAGE> 2
"Capital Expenditures" shall mean for any period, the aggregate amount of
all payments made by any Person directly or indirectly for the purpose of
acquiring, constructing or maintaining fixed assets, real property or equipment
which, in accordance with GAAP, would be added as a debit to the fixed asset
account of such Person, including, without limitation, all amounts paid or
payable with respect to Capitalized Lease Obligations and interest which are
required to be capitalized in accordance with generally accepted accounting
principles.
"Capitalized Lease" shall mean any lease the obligations to pay rent or
other amounts under which constitute Capitalized Lease Obligations.
"Capitalized Lease Obligations" shall mean as to any Person, the
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) real and/or personal property which
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP and, for purposes of this
Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.
"Cleanup Laws" shall mean any federal, state or local statute or regulation
relating to hazardous or toxic wastes or substances or the removal thereof.
"Clear Springs Equipment" shall mean all equipment owned by Clear Springs
Citrus, Inc. on which the Bank shall receive a security interest in the event of
the merger of Clear Springs Citrus, Inc. with and into The Fresh Juice Company
of Florida, Inc.
"Collateral" shall mean the collateral described in Section 9 of this
Agreement.
"Commitment" shall mean the obligation of the Bank to make Revolving Credit
Loans to the Borrowers during the Commitment Period pursuant to the terms hereof
as such Commitment is described in Section 2.1 hereof and as subject to
reduction in accordance with the terms hereof.
"Commitment Letter" shall mean the letter agreement between the Borrowers
and the Bank dated July 24, 1996.
"Commitment Period" shall mean the period from and including the date
hereof to and including the Termination Date or such earlier date as the
Commitment shall terminate as provided herein.
"Contractual Obligations" shall mean as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or undertaking to
which such Person is a party or by which it or any of its property is bound.
"Controlled" and "Control" shall mean any partnership, corporation or other
entity of which the Borrowers, alone, or the Borrowers and/or one or more of
their Subsidiaries, either have the power to direct the management thereof or
the power to direct at least a majority of the voting interests.
"Default" shall mean any of the events specified in this Agreement under
"Events of Default", whether or not any requirement for the giving of notice,
the lapse of time, or both, has been satisfied.
"Deficiency Note" shall mean the Deficiency Note referred to in Section
2.14 hereof. "Dollars" and "$" shall mean dollars in lawful currency of the
United States of America.
"Eligible Accounts Receivable" shall mean those Accounts (i) arising in the
ordinary course of business to Persons which have been outstanding for not more
than 90 days from invoice date, and (ii) have been validly assigned to the Bank
and comply with all of the terms, conditions, warranties and representations
made to the Bank under this Agreement and the other Loan Documents; but Eligible
Accounts Receivable shall not include the following: (a) Accounts with respect
to which the Account Debtor is an officer, director, employee, or agent of any
Borrower or an Affiliate; (b) Accounts with respect to which the Account Debtor
is not domiciled in the United States of America, unless such Account Debtor is
domiciled in Canada; (c) Accounts with respect to which the Account Debtor is a
federal, state, local or foreign governmental authority unless such governmental
authority is the United States of America or any department, agency or
instrumentality of the United States, and the Borrowers comply with the
Assignment of Claims Act of 1940,
2
<PAGE> 3
as amended (31 U.S.C. Section 203 et seq.); (d) all Accounts owing by any
Account Debtor if fifty percent (50%) or more of the Accounts due from such
Account Debtor are deemed not to be Eligible Accounts hereunder; (e) Accounts
(except for Accounts with Natural Juice of Chicago, which shall be Eligible
Accounts Receivable) with respect to which the Account Debtor is a Subsidiary
of, Affiliate of, or has common officers or directors with any Borrower; and (f)
Accounts with respect to which the Bank does not for any reason have a perfected
first priority Lien. References to percentages of all Accounts are based on
dollar amount of Accounts, and not number of Accounts.
"Eligible Inventory" shall mean that portion of the Borrowers' inventory of
frozen fresh citrus juice held for sale by the Borrowers, normally and currently
saleable in the ordinary course of the Borrowers' business, and which at all
times pertinent hereto is of good and merchantable quality, free from defects,
as to which the Bank has a perfected first priority Lien, and which is located
at the locations set forth in the Security Agreements, and as to which Borrowers
have satisfied all terms, conditions, warranties and representations of this
Agreement and the other Loan Documents. Eligible Inventory shall be valued at
the lower of (a) cost, (b) market value, or (c) the valuation consistent with
that employed in the preparation of the financial statements of the Borrowers
referred to in this Agreement.
"Environmental Laws" shall mean any federal, state or local statute or
regulation relating to hazardous or toxic wastes or substances or the removal
thereof.
"Equipment" shall mean the equipment comprising part of the Collateral
granted to the Bank as security for the Loans; provided, however, Equipment
shall not include any equipment subject to any Lien, other than the Lien of the
Bank granted pursuant to the Security Agreements, unless such Lien has been
subordinated to the Lien of the Bank on terms satisfactory to the Bank, at its
sole discretion.
"Equipment Valuation" shall mean the valuation/appraisal of the Equipment
and the Clear Springs Equipment, to be provided by the Borrowers to the Bank in
a form acceptable to the Bank, by an appraiser or valuation expert selected by
the Bank, and which shall specify the portion of the value attributable to the
Equipment and the Clear Springs Equipment.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurodollar Loans" shall mean Loans hereunder that bear interest for the
Interest Period applicable thereto at a rate of interest based upon the Adjusted
Libor Rate.
"Eurodollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding one billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Eurodollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of the Bank to United
States residents). With respect to increases in the Eurodollar Reserve
Percentage, the Adjusted Libor Rate shall be adjusted automatically on and as of
the effective date of any such increase.
"Event of Default" shall mean any of the events specified in this Agreement
under "Events of Default", provided that any requirement for the giving of
notice, the lapse of time, or both, or any other condition, has been satisfied.
"Fixed Rate Loans" shall mean any Eurodollar Loans.
"Fluctuating Rate Loans" shall mean Loans hereunder that bear interest at a
rate of interest based upon the Prime Rate.
"GAAP" shall mean generally accepted accounting principals applied in a
manner consistent with that employed in the preparation of the financial
statements described in Section 3.1.
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"Governmental Authority" shall mean any nation or government, any state or
other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled (through
stock or capital ownership or otherwise) by any of the foregoing.
"Indebtedness" shall mean, with respect to any Person, (a) all obligations
of such Person for borrowed money or with respect to deposits or advances of any
kind, (b) all obligations of such Person evidenced by bonds, debentures, notes
or other similar instruments, (c) all obligations of such Person for the
deferred purchase price of property or services, except current accounts payable
arising in the ordinary course of business and not overdue beyond such period as
is commercially reasonable for such Person's business, (d) all obligations of
such Person under conditional sale or other title retention agreements relating
to property purchased by such Person, (e) all payment obligations of such Person
with respect to interest rate or currency protection agreements, (f) all
obligations of such Person as an account party under any letter of credit or in
respect of bankers' acceptances, (g) all obligations of any third party secured
by property or assets of such Person (regardless of whether or not such Person
is liable for repayment of such obligations), (h) all guarantees of such Person,
(i) the redemption price of all redeemable preferred stock of such Person, but
only to the extent that such stock is redeemable at the option of the holder or
requires sinking fund or similar payments at any time prior to the Termination
Date and (j) Capitalized Lease Obligations.
"Insider Shareholders" shall mean the Insider Shareholders referred to in
Section 7.12 hereof.
"Installment Payment Date" shall mean any date on which all or any portion
of the principal amount of the Term Loan is due and payable.
"Interest Period" shall mean any period during which a Loan bears interest
at a fixed rate as elected by the Borrowers in accordance with the terms of this
Agreement.
(a) If any Interest Period would otherwise end on a day which is not a
Business Day, that Interest Period shall be extended to the next succeeding
Business Day unless the result of such extension would be to extend such
Interest Period into another calendar month, in which event such Interest
Period shall end on the immediately preceding Business Day.
(b) No Interest Period shall extend beyond a stated Maturity Date.
(c) No portion of the Term Loan shall be continued as or converted
into a Fixed Rate Loan with an Interest Period which extends beyond an
Installment Payment Date if, after giving effect to the continuation or
conversion of such Fixed Rate Loan, the amount payable on any Installment
Payment Date would exceed the sum of (i) the aggregate principal amount of
the outstanding portion of the Term Loan constituting Fixed Rate Loans with
Interest Periods ending prior to such Installment Payment Date and (ii) the
aggregate outstanding portion of the Term Loan constituting Fluctuating
Rate Loans.
"Lien" shall mean any mortgage, pledge, security interest, hypothecation,
assignment, deposit arrangement, encumbrance, or preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing, and the filing of any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction).
"Loan" or "Loans" shall mean any loan made by the Bank to the Borrowers
hereunder whether a Revolving Credit Loan or the Term Loan, and, if applicable,
the loan evidenced by the Deficiency Note.
"Loan Documents" shall mean this Agreement and each document, agreement and
instrument executed in connection herewith or pursuant hereto together with each
document, agreement and instrument made by any Borrower with or in favor of or
owing to the Bank.
"Maturity Date" shall mean the date that all or a portion of the
outstanding principal balance of a Loan is due and payable pursuant to the terms
hereof which shall include without limitation (i) with respect to Revolving
Credit Loans, the Termination Date, and (ii) with respect to the Term Loan, each
Installment Payment Date and the final Maturity Date of the Term Loan.
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"Notes" shall mean collectively the Revolving Credit Note referred to in
Section 2.2 hereof, the Term Note referred to in Section 2.5 hereof and, if
applicable, the Deficiency Note referred to in Section 2.14 hereof.
"Obligations" shall mean any and all sums owing under the Loan Documents
and all other obligations, direct or contingent, joint, several or independent,
of any Borrower now or hereafter existing due or to become due to, or held or to
be held by the Bank, whether created directly or acquired by assignment or
otherwise.
"Person" shall mean any individual, corporation, limited liability company,
partnership, joint venture, trust, unincorporated organization or any other
juridical entity, or a government or state or any agency or political
subdivision thereof.
"Plan" shall mean any plan of a type described in Section 4021(a) of ERISA
in respect of which any Borrower is an "employer" as defined in Section 3(5) of
ERISA.
"Post Default Rate" shall mean at any time a rate of interest equal to 3%
per annum in excess of the rate that would then be applicable to Fluctuating
Rate Loans.
"Prime Rate" shall mean the rate of interest established from time to time
by the Bank as its "prime rate".
"Real Property" shall mean any real property owned or leased by any
Borrower or any of their Subsidiaries.
"Reference Bank" means a bank appearing on the display designated as page
"LIBOR" on the Retires Monitor Money Rates Service (or such other page as may
replace the LIBOR page on that service for the purpose of displaying London
interbank offered rates of major banks); provided that if no such offered rate
shall appear on such display, "Reference Bank" shall mean a bank in the London
interbank market as selected by the Bank.
"Reportable Event" shall mean any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder.
"Requirements of Law" shall mean as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation, or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"Revolving Credit Loan" shall mean a Loan made pursuant to Section 2.1
hereof.
"Revolving Credit Note" shall mean the Note referred to in Section 2.2
hereof.
"Security Agreement(s)" shall mean the Security Agreement(s) referred to in
this Agreement.
"Specified Person" shall mean any Borrower or any of their Subsidiaries.
"Subsidiary" or "Subsidiaries" of any Person shall mean any corporation or
corporations of which the Person alone, or the Person and/or one or more of its
Subsidiaries, owns, directly or indirectly, at least a majority of the
securities having ordinary voting power for the election of directors.
"Tangible Net Worth" shall mean the sum of capital surplus, earned surplus
and capital stock minus deferred charges, intangibles and treasury stock, all
determined in accordance with GAAP.
"Termination Date" shall mean August 5, 1998 or, if such date is not a
Business Day, the Business Day next succeeding such date.
"Term Loan" shall mean the Loan made pursuant to Section 2.5 hereof.
"Term Note" shall mean the Note referred to in Section 2.5 hereof.
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1.2 Accounting Terms. As used herein and in any certificate or other
document made or delivered pursuant hereto, accounting terms not specifically
defined herein shall have the respective meanings given to them under generally
accepted accounting principles.
Section 2. Amount and Terms of Revolving Credit Commitment and Term Note.
2.1 Revolving Credit Commitment. Subject to the terms and conditions
hereof, the Bank agrees to make revolving credit loans to the Borrowers (the
"Revolving Credit Loans"), for the account of the Borrowers from time to time
during the Commitment Period of which the aggregate principal amount of
Revolving Credit Loans at any one time outstanding shall not exceed the lesser
of (a) the Borrowing Base or (b) $2,500,000 (the "Commitment"). During the
Commitment Period the Borrowers may use the Commitment for obtaining Loans by
borrowing, paying, prepaying in whole or in part and reborrowing on a revolving
basis, all in accordance with the terms and conditions hereof. Revolving Credit
Loans may be outstanding as either Fixed Rate Loans or Fluctuating Rate Loans.
2.2 Revolving Credit Note. The Revolving Credit Loans made by the Bank to
the Borrowers pursuant to Section 2.1 hereof shall be evidenced by a promissory
note of the Borrowers substantially in the form of Exhibit A hereto with
appropriate insertions (the "Revolving Credit Note"), payable to the order of
the Bank and representing the obligation of the Borrowers to pay the aggregate
unpaid principal amount of all Revolving Credit Loans made by the Bank to the
Borrowers, with interest thereon as hereinafter prescribed. The Revolving Credit
Note shall (i) be dated the date hereof, (ii) be stated to mature on the
Termination Date and (iii) bear interest with respect to the unpaid principal
balance thereof from time to time outstanding at a rate per annum to be elected
by the Borrowers in accordance with the notice provisions set forth in Section
2.3 hereof, and in the case of Fixed Rate Loans for the Interest Period therein
specified, equal to 150 basis points in excess of the Adjusted Libor Rate, and
in the case of Fluctuating Rate Loans, equal to the Prime Rate (which interest
rate will change when and as the Prime Rate changes). In all cases interest
shall be computed on the basis of a 360-day year for actual days elapsed and
shall be payable as provided in this Agreement. After any stated or accelerated
maturity, the Revolving Credit Note shall bear interest at the Post Default Rate
set forth in this Agreement.
2.3 Procedure for Loans. The Borrowers may borrow under the Commitment
during the Commitment Period on any Business Day by giving the Bank irrevocable
notice of a request for a Loan hereunder (a) in the case of Fixed Rate Loans
three (3) Business Days before a proposed borrowing or continuation or
conversion and (b) in the case of Fluctuating Rate Loans not less than one (1)
nor more than five (5) Business Days before a proposed borrowing or continuation
or conversion, setting forth (i) the amount of the Loan requested, which shall
not be less than $100,000 in the case of Fixed Rate Loans and $25,000 in the
case of Fluctuating Rate Loans (ii) the requested borrowing date or Interest
Period commencement date, as the case may be, and (iii) whether the borrowing or
Interest Period is to be for a Fixed Rate Loan, Fluctuating Rate Loan or a
combination thereof, and (iv) if entirely or partially a Fixed Rate Loan, the
length of the Interest Period therefor, which shall be one (1), two (2) or three
(3) months. As used in this Section 2.3, "conversion" shall mean the conversion
from one interest rate to another interest rate as more fully described in this
Agreement. Such notice shall be written (including, without limitation, via
facsimile transmission) and shall be sufficient if received by 1 p.m. on the
date on which such notice is to be given. If any such request is sent by
facsimile it shall be confirmed in writing sent by the Borrowers to the Bank
within two (2) Business Days thereafter. Unless notification is otherwise
furnished by the Borrowers to the Bank (in a manner consistent with the
requirements of this Section), Loans will be made by credits to any Borrowers'
demand deposit account maintained with the Bank. If the Borrowers furnish such
notice but no election is made as to the type of Loan or the Interest Period to
be applicable thereto, the Loan will automatically then be made as a Fluctuating
Rate Loan until such required information is furnished pursuant to the terms
hereof. At no time shall there by more than nine (9) Fixed Rate Loans
outstanding.
2.4 Regulatory Changes in Capital Requirements. If any existing or future
law, regulation or guideline or the interpretation thereof by any court or
administrative or governmental authority charged with the administration
thereof, or compliance by the Bank with any request or directive (whether or not
having the force of law) of any such authority, imposes, modifies, deems
applicable or results in the application of, any
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capital maintenance, capital ratio or similar requirement against loan
commitments made by the Bank (or participation therein) or the Bank in
anticipation of the effectiveness of any capital maintenance, capital ratio or
similar requirement takes reasonable action to enable itself to comply
therewith, and the result thereof is to impose upon the Bank or increase any
capital requirement applicable as a result of the making or maintenance of the
Commitment or participation therein (which imposition of or increase in capital
requirements may be determined by the Bank's reasonable allocation of the
aggregate of such capital impositions or increases) then, upon demand by the
Bank, the Borrowers shall immediately pay to the Bank from time to time as
specified by the Bank additional commitment fees which shall be sufficient to
compensate the Bank for such impositions of or increases in capital
requirements, together with interest on each such amount from the date demanded
until payment in full thereof at the Post Default Rate. A certificate setting
forth in reasonable detail the amounts necessary to compensate the Bank as a
result of an imposition of or increase in capital requirements submitted by the
Bank to the Borrowers shall be conclusive, absent manifest error or bad faith,
as to the amount thereof. For purposes of this Section, (a) in calculating the
amount necessary to compensate the Bank for any imposition of or increase in
capital requirements, the Bank shall be deemed to be entitled to a rate of
return on capital (after federal, state and local taxes) of fifteen per cent per
annum, and (b) all references to the "Bank" shall be deemed to include any
participant in the Commitment.
2.5 Term Loan. The Bank agrees, on the terms and conditions set forth in
this Agreement to make a term loan (The "Term Loan") to the Borrowers on the
date of this Agreement in the principal amount of $1,100,000. The Term Loan may
be outstanding as either Fixed Rate Loans or Fluctuating Rate Loans. The Term
Loan shall be evidenced by a promissory note of the Borrowers substantially in
the form of Exhibit B hereto with appropriate insertions (the "Term Note") and
dated the date hereof. The principal amount of the Term Note shall be payable in
sixty (60) consecutive monthly installments, which shall each be in an amount of
$18,333.33, with the final installment to be in an amount equal to the then
unpaid principal balance, payable on the first day of each month commencing
April 1, 1997 until March 1, 2002, when the entire unpaid principal balance of
the Term Note together with all interest accrued and unpaid shall be paid in
full. The Term Note shall bear interest on the unpaid principal amount thereof
from time to time outstanding at a rate per annum, to be elected pursuant to the
provisions of this Agreement equal to, in the case of Fixed Rate Loans for the
Interest Period therein specified, equal to 175 basis points in excess of the
Adjusted Libor Rate, and, in the case of Fluctuating Rate Loans, equal to the
Prime Rate (which interest rate shall change when and as the Prime Rate
changes). In all cases interest shall be computed on the basis of a 360 day year
for actual days elapsed and shall be payable as provided in this Agreement.
After any stated or accelerated maturity thereof, the Term Note shall bear
interest at the Post Default Rate set forth in this Agreement.
2.6 Continuation and Conversion of Loans. The Borrowers shall have the
right at any time on prior irrevocable written or telex notice to the Bank as
specified in this Agreement (i) to continue any Fixed Rate Loan into a
subsequent Interest Period, (ii) to convert any Fixed Rate Loan into another
Fixed Rate Loan with a different Interest Period or a Fluctuating Rate Loan
(specifying, in the case of a Fixed Rate Loan, the Interest Period to be
applicable thereto), and (iii) to convert any Fluctuating Rate Loan into a Fixed
Rate Loan (specifying the Interest Period to be applicable thereto), subject to
the following:
(a) in the case of a conversion of less than all of the outstanding
Loans, the aggregate principal amount of Loans converted shall not be less
than $100,000 and shall be an integral multiple thereof;
(b) no Fixed Rate Loan shall be converted at any time other than at
the end of an Interest Period applicable thereto; and
(c) any portion of a Loan maturing or required to be prepaid in less
than one (1) month may not be converted into or continued as a Fixed Rate
Loan.
In the event that the Borrowers shall not give notice to continue any Fixed Rate
Loan into a subsequent Interest Period or convert any such Loan into another
Fixed Rate Loan or a Fluctuating Rate Loan, on the last day of the Interest
Period thereof, such Loan (unless prepaid) shall automatically be converted into
a Fluctuating Rate Loan. The Interest Period applicable to any Fixed Rate Loan
resulting from a conversion or continuation shall be specified by the Borrowers
in the irrevocable notice delivered by the Borrowers pursuant to this Agreement;
provided, however, that, if such notice does not specify either the type of Loan
or the
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Interest Period to be applicable thereto, the Loan shall automatically be
converted into, or continued as, as the case may be, a Fluctuating Rate Loan
until such required information is furnished pursuant to the terms hereof.
Notwithstanding anything to the contrary contained above, if an Event of Default
shall have occurred and is continuing, no Fixed Rate Loan may be continued into
a subsequent Interest Period and no Fluctuating Rate Loan may be converted into
a Fixed Rate Loan.
2.7 Prepayment.
(a) Voluntary. The Borrowers may prepay any Fluctuating Rate Loan in whole
or in part without premium or penalty; provided, however, that each partial
prepayment on account of any Fluctuating Rate Loan shall be in an amount not
less than $25,000. Except as provided otherwise in this Agreement, the Borrowers
may not prepay any Fixed Rate Loan prior to the last day of the Interest Period
therefor. Any amount prepaid on account of a Revolving Credit Loan may be
reborrowed in accordance with the provisions of Section 2.1 hereof. Such payment
shall be applied by the Bank first to repayment of Fluctuating Rate Loans, then
to repayment of Fixed Rate Loans. Any partial prepayment of the Term Loan shall
be applied to the last maturing installments in inverse order of their
respective maturities.
(b) Mandatory. If, at any time, the aggregate outstanding principal
balance of Revolving Credit Loans exceeds the Borrowing Base, within five (5)
days after receipt by the Borrower of notice from the Bank that there exists
such excess, the Borrowers shall make payment to the Bank in an amount equal to
such excess together with any amounts payable pursuant to Section 2.11 in
connection therewith. Such payment shall be applied by the Bank first to
repayment of Fluctuating rate Loans, then to repayment of Fixed Rate Loans. Any
partial prepayment of the Term Loan shall be applied to the last maturing
installments in inverse order of their respective maturities.
Each prepayment shall be made together with payment of accrued interest on
the amount prepaid to and including the date of prepayment.
2.8 Interest Payments; Manner of Payments; Rate After Default; Schedule to
Note.
(a) Interest accrued on each Loan shall be payable on:
(i) the Maturity Date of such Loan (excluding any Installment
Payment Date unless interest would otherwise be payable on such
Installment Payment Date pursuant to subsections (ii) - (v) below);
(ii) with respect to any portion of any Loan repaid or prepaid
pursuant to this Agreement, the date of such repayment or prepayment, as
the case may be;
(iii) with respect to that portion of the outstanding principal
amount of all Loans maintained as Fluctuating Rate Loans, the first day
of each month, commencing with the first such date following the date of
the making of such Loans;
(iv) with respect to that portion of the outstanding principal
amount of all Loans maintained as Eurodollar Loans, the last day of each
applicable Interest Period, but in no event more frequently than
monthly;
(v) with respect to that portion of the outstanding principal
amount converted into Fluctuating Rate Loans or Fixed Rate Loans on a
day when interest would not otherwise have been payable pursuant to
Subsections (a)(iii) or (a)(iv), the date of such conversion.
(b) All payments (including prepayments) to be made by the Borrowers
on account of principal or interest with respect to any Loan or on account
of fees or any other obligations of the Borrowers to the Bank hereunder
shall be made to the Bank at the office of the Bank set forth in Section
10.1 hereof or at such other place as the Bank may from time to time
designate in writing in lawful money of the United States of America in
immediately available funds. The Borrowers hereby authorize and direct the
Bank to charge any account of any Borrower maintained at any office of the
Bank for any such payments; provided, however, the Bank shall first charge
such account, if any, designated in writing by the Borrowers, prior to
charging any other accounts of any Borrower. Subject to the provisions of
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subparagraph (a) in the definition of Interest Period set forth in Section
1.1 hereof, if any payment to be so made hereunder, or under either Note,
becomes due and payable on a day other than a Business Day, such payment
shall be extended to the next succeeding Business Day and, to the extent
permitted by applicable law, interest thereon shall be payable at the then
applicable rate during such extension.
(c) Upon and following an Event of Default, all Loans, and any and all
accrued and unpaid interest, fee or amount due hereunder, to the extent
permitted by applicable law, shall bear interest (payable on demand, and in
any event on the last day of each month, and computed daily on the basis of
a 360-day year for actual days elapsed) (i) in all cases other than Fixed
Rate Loans at the Post Default Rate until paid and (ii) in the case of
Fixed Rate Loans at a rate which shall be the greater of the Post Default
Rate or 3% per annum in excess of the rate applicable to such Fixed Rate
Loan until the expiration of the Interest Period applicable to such Loan,
at which time the Loan will automatically be converted into a Fluctuating
Rate Loan and until paid shall bear interest at the Post Default Rate. In
no event, however, shall interest payable hereunder be in excess of the
maximum rate of interest permitted under applicable law. The obligation to
so pay interest upon any obligation of the Borrowers to the Bank shall not
be construed so as to waive the requirement for payment on the same date
that payment is to be made to the Bank as set forth in this Agreement.
(d) The Borrowers hereby expressly authorize the Bank to record on the
schedule attached to the Revolving Credit Note the amount and date of each
Revolving Credit Loan, the rate of interest thereon, the date and amount of
each payment of principal and the unpaid principal balance; provided,
however, that the failure of the Bank to make any such notation shall not
in any manner affect the obligation of the Borrowers to repay any Loan in
accordance with the terms hereof. All such notations shall be presumed to
be correct.
2.9 Use of Proceeds. The proceeds of Loans hereunder shall be used to
refinance the Borrowers' term loan from Chemical Bank, N.A. and to finance
working capital requirements and general business purposes of the Borrowers.
2.10 Increased Costs. If the Bank determines that the effect of any
applicable law or government regulation, guideline or order or the
interpretation thereof by any Governmental Authority charged with the
administration thereof (such as, for example, a change in official reserve
requirements which the Bank is required to maintain in respect of loans or
deposits or other funds procured for funding such loans) is to increase the cost
to the Bank of making or continuing Fixed Rate Loans hereunder or to reduce the
amount of any payment of principal or interest receivable by the Bank thereon,
then the Borrowers will pay to the Bank on demand such additional amounts as the
Bank may determine to be required to compensate the Bank for such additional
costs or reduction. Any additional payment under this section will be computed
from the effective date at which such additional costs have to be borne by the
Bank. A certificate as to any additional amounts payable pursuant to this
Section setting forth the basis and method of determining such amounts shall be
conclusive, absent manifest error, as to the determination by the Bank set forth
therein if made reasonably and in good faith. The Borrowers shall pay any
amounts so certified to it by the Bank within 10 days of receipt of any such
certificate. For purposes of this Section, all references to the "Bank" shall be
deemed to include any participant in the Commitment and/or loans.
2.11 Indemnities. The Borrowers hereby indemnify the Bank against any and
all loss and reasonable expenses which the Bank may sustain or incur as a
consequence of any of the following:
(a) default in payment of the principal amount of any Fixed Rate Loan
or any part thereof or interest accrued thereon, or any other amount due in
connection with the Loan Documents;
(b) the occurrence of any other Default under this Agreement; or
(c) the failure of the Borrowers to borrow a Fixed Rate Loan after
sending notice of the amount and requested interest rate with respect to
the making of any such Loan;
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(d) the receipt or recovery by the Bank of all or any part of a Fixed
Rate Loan on any date other than an Installment Payment Date or prior to
the maturity or the last day of the Interest Period thereof (whether by
prepayment, acceleration or otherwise); or
(e) the conversion, prior to the last day of an applicable Interest
Period, of one type of Fixed Rate Loan into another type of Fixed Rate Loan
or into a Fluctuating Rate Loan.
Without limiting the effect of the foregoing, the amount to be paid by the
Borrowers to the Bank in order to so indemnify the Bank for any loss occasioned
by any of the events described in the preceding paragraph, and as liquidated
damages therefor, shall be equal to the excess, discounted to its present value
as of the date paid to the Bank, of (i) the amount of interest which otherwise
would have accrued on the principal amount so received, recovered, converted or
not borrowed during the period (the "Indemnity Period") commencing with the date
of such receipt, recovery, conversion, or failure to borrow to the last day of
the applicable Interest Period for such Fixed Rate Loan at the rate of interest
applicable to such Loan (or the rate of interest agreed to in the case of a
failure to borrow) provided for herein (prior to a Default) over (ii) the amount
of interest which would be earned by the Bank during the Indemnity Period if it
invested the principal amount so received, recovered, converted or not borrowed
at the rate per annum determined by the Bank as the rate it would bid in the
London interbank market for a deposit of eurodollars in an amount approximately
equal to such principal amount for a period of time comparable to the Indemnity
Period.
A certificate as to any additional amounts payable pursuant to this Section
setting forth the basis and method of determining such amounts shall be
conclusive, absent manifest error, as to the determination by the Bank set forth
therein if made reasonably and in good faith. The Borrowers shall pay any
amounts so certified to it by the Bank within 10 days of receipt of any such
certificate. For purposes of this Section, all references to the "Bank" shall be
deemed to include any participant in the Commitment and/or Loans.
2.12 Alternate Rate of Interest. In the event, and on each occasion, that
on the day two (2) Business Days prior to the commencement of any Interest
Period for a Eurodollar Loan, the Bank shall have determined (i) that dollar
deposits in the amount of the requested principal amount of such Eurodollar Loan
are not generally available in the London Interbank Market, (ii) that the rate
at which such dollar deposits are being offered will not adequately and fairly
reflect the cost to the Bank of making or maintaining such Eurodollar Loan
during such Interest Period, or (iii) that reasonable means do not exist for
ascertaining the Adjusted Libor Rate, the Bank shall, as soon as practicable
thereafter, give written or telex notice of such determination to the Borrowers.
In the event of any such determination, until the circumstances giving rise to
such notice no longer exist, no Eurodollar Loans will be made hereunder. Each
determination by the Bank hereunder shall be conclusive absent manifest error.
2.13 Change in Legality.
(a) Notwithstanding anything to the contrary herein contained, if any
change in any law or regulation or in the interpretation thereof by any
governmental authority charged with the administration or interpretation
thereof shall make it unlawful for the Bank to make or maintain any
Eurodollar Loan, then, by written notice to the Borrowers, the Bank may:
(i) declare that Eurodollar Loans will not thereafter be made by
the Bank hereunder, whereupon the Borrowers shall be prohibited from
requesting Eurodollar Loans from the Bank hereunder unless such
declaration is subsequently withdrawn; and
(ii) require that all outstanding Eurodollar Loans made by it be
converted to Fluctuating Rate Loans, in which event (x) all such
Eurodollar Loans shall be automatically converted to Fluctuating Rate
Loans as of the effective date of such notice as provided in paragraph
(b) below and (y) all payments and prepayments of principal which would
otherwise have been applied to repay the converted Eurodollar Loans
shall instead be applied to repay the Fluctuating Rate Loans resulting
from the conversion of such Eurodollar Loans.
(b) For purposes of this Section, (i) a notice to the Borrowers by the
Bank pursuant to paragraph (a) above shall be effective, if lawful, on the
last day of the then current Interest Period; in all other
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cases, such notice shall be effective on the day of receipt by the
Borrowers and (ii) all references to the "Bank" shall be deemed to include
any participant in the Commitment and/or the loans.
2.14 Deficiency Note. On or before September 6, 1996, the Borrowers shall
have delivered to the Bank the Equipment Valuation. In the event the outstanding
principal amount of the Term Loan exceeds the Adjusted Equipment Valuation, then
Borrowers shall execute a deficiency note similar in form to the Term Note (the
"Deficiency Note"), in an amount equal to the difference between the outstanding
principal amount of the Term Loan and the Adjusted Equipment Valuation, as
determined on the date of the Equipment Valuation. The Borrowers agree to
execute the Deficiency Note within 30 days after receipt by the Bank of the
Equipment Valuation, together with a modification of the Term Note, and such
other agreements, documents, certifications and affidavits reasonably required
by the Bank in connection therewith, including, but not limited to, corporate
resolutions approving the transaction contemplated. The principal amount of the
Deficiency Note shall be payable in thirty six (36) consecutive monthly
installments, which shall each be in an amount equal to 1/36 of the Deficiency
Note, with the final installment to be in the amount equal to the then unpaid
principal balance, payable on the first day of the month following the seventy
fifth day (or such earlier date selected by the Borrowers) after receipt by the
Bank of the Equipment Valuation, and on the first day of each month thereafter
until the third anniversary of the Deficiency Note, when the entire unpaid
principal balance of the Deficiency Note together with all interest accrued and
unpaid shall be paid in full. The Deficiency Note shall bear interest on the
unpaid principal amount thereof from time to time outstanding at a rate per
annum, to be elected pursuant to the provisions of this Agreement equal to, in
the case of Fixed Rate Loans for the Interest Period therein specified, equal to
175 basis points in excess of the Adjusted Libor Rate, and, in the case of
Fluctuating Rate Loans, equal to the Prime Rate (which interest rate shall
change when and as the Prime Rate changes). In all cases interest shall be
computed on the basis of a 360 day year for actual days elapsed and shall be
payable as provided in this Agreement. After any stated or accelerated maturity
thereof, the Deficiency Note shall bear interest at the Post Default Rate set
forth in this Agreement. In the event the merger of Clear Springs Citrus, Inc.
with and into The Fresh Juice Company of Florida, Inc. occurs after the date of
execution of the Deficiency Note, but prior to the due date of the first payment
under the Deficiency Note, the Bank and the Borrowers shall modify the
Deficiency Note, if necessary, to take into account any change in the Adjusted
Equipment Valuation.
Section 3. Representations And Warranties.
In order to induce the Bank to enter into this Agreement and to make the
financial accommodations herein provided for, the Borrowers hereby covenant,
represent and warrant to the Bank that:
3.1 Financial Condition. The consolidated balance sheet of the Borrowers
as at November 30, 1995, and the related consolidated statements of operations
and retained earnings and cash flows for the fiscal year ended on such date,
certified by KPMG Peat Marwick L.L.P., copies of which certified statements have
heretofore been furnished to the Bank, are complete and correct and present
fairly the financial condition of the Borrowers as at such date, and the results
of its operations and changes in financial position for the fiscal year then
ended. Such certified financial statements, including schedules and notes
thereto, have been prepared in accordance with generally accepted accounting
principles. The Borrowers do not have any material contingent obligations,
contingent liabilities or liabilities for taxes, long-term leases or unusual
forward or long-term commitments, which are not reflected in the foregoing
certified statements or in the notes thereto. Since the date of the
aforementioned financial statements, there has been no material adverse change
in the business operations, assets or financial or other condition of the
Borrowers.
3.2 Corporate Existence; Compliance with Law. Each Borrower and each of
their Subsidiaries (a) is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation, (b) has the corporate
power and authority and the legal right to own and operate its property, and to
conduct the business in which it is currently engaged, (c) is duly qualified or
is in the process of qualifying as a foreign corporation and in good standing
under the laws of each jurisdiction where its ownership or operation of property
or the conduct of its business require such qualification, and (d) is in
compliance with all Requirements of Law; except to the extent that the failure
to so qualify as a foreign corporation as required by clause (c) of this Section
or to comply with all Requirements of Law as required by clause (d) of this
Section
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<PAGE> 12
could not, in the aggregate, have a material adverse effect on the business,
operations, property or financial or other condition of any such Person, and
could not materially adversely affect the ability of any Borrower to perform its
obligations under this Agreement, the Notes and its Security Agreement.
3.3 Corporate Power; Authorization; Enforceable Obligations. Each Borrower
has the corporate power and authority and the legal right to make, execute,
deliver and perform its obligations under this Agreement, its Security Agreement
and the Notes, and to borrow hereunder and has taken all necessary corporate
action to authorize the borrowings on the terms and conditions of this
Agreement, its Security Agreement and the Notes and to authorize the execution,
delivery and performance of this Agreement, its Security Agreement and the
Notes. No consent or authorization of, filing with, or other act by or in
respect of any other Person (including stockholders and creditors of such
Borrowers) or any Governmental Authority, is required in connection with the
borrowings hereunder or with the execution, delivery, performance, validity or
enforceability of this Agreement, its Security Agreement or the Notes. This
Agreement, its Security Agreement and the Notes will be duly executed and
delivered on behalf of each Borrower and this Agreement, its Security Agreement
and the Notes, when executed and delivered, will each constitute a legal, valid
and binding obligation of each Borrower enforceable against such Borrower in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally.
3.4 No Legal Bar. The execution, delivery and performance of this
Agreement, the Security Agreements and the Notes and the borrowings hereunder
and the use of the proceeds thereof by the Borrowers, will not violate any
Requirement of Law or any Contractual Obligation of any Borrower, and will not
result in, or require, the creation or imposition of any Lien on any of its
properties or revenues pursuant to any Requirement of Law or Contractual
Obligation except those in favor of the Bank provided herein.
3.5 No Material Litigation. No litigation, investigation or proceeding of
or before any arbitrator or Governmental Authority is pending by or against any
Specified Person or against any of their properties or revenues (a) with respect
to this Agreement, the Security Agreements, the Notes, or any of the
transactions contemplated hereby or thereby, or (b) which if adversely
determined, would have a material adverse effect on the business, operations,
property or financial or other condition of any Borrower and its Subsidiaries
except for the matter entitled Washington Natural Foods & Co. v. Fresh Pik'T
Natural Foods, Inc., et al. (case No. 941-6077-PM) in the U.S. Bankruptcy Court
(D. Md), wherein the amount at issue is less than $260,000.
3.6 No Default. No Specified Person is in default under or with respect to
any Contractual Obligation in any respect which could be materially adverse to
the business, operations, property or financial or other condition of the
Borrowers or any of their subsidiaries, or which could materially and adversely
affect the liability of any Borrower to perform its obligations under this
Agreement, its Security Agreement or the Notes. No Default or Event of Default
has occurred and is continuing.
3.7 No Burdensome Restrictions. No Contractual Obligation of any Specified
Person and no Requirement of Law materially adversely affects, or insofar as the
Borrowers may reasonably foresee may so affect, the business, operations,
property or financial or other condition of any such Specified Person.
3.8 Taxes. Each Borrower has filed or caused to be filed all tax returns
which to the knowledge of such Borrower are required to be filed, and have paid
all taxes shown to be due and payable on said returns or on any assessments made
against them or any of their property, except for the State of Florida tangible
tax return of The Fresh Juice Company of Florida, Inc., which such Borrower
agrees to file within sixty (60) days hereof.
3.9 Federal Regulations. No Borrower is engaged or will engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin stock" within
the respective meanings of each of the quoted terms under Regulation U of the
Board of Governors of the Federal Reserve System as now and from time to time
hereafter in effect. No part of the proceeds of any Loans hereunder will be used
"purchasing" or "carrying" "margin stock" as so defined or for any purpose which
violates, or which would be inconsistent with, the provisions of the Regulations
of such Board of Governors.
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<PAGE> 13
3.10 Environmental Matters.
(a) To the best knowledge of each Borrower, after due inquiry, none of
the Real Property contains, or has previously contained, any hazardous or
toxic waste or substances or underground storage tanks.
(b) To the best knowledge of each Borrower, after due inquiry, the
Real Property is in compliance with all applicable federal, state and local
environmental standards and requirements affecting such Real Property, and
there are no environmental conditions which could interfere with the
continued use of the Real Property.
(c) Neither the Borrowers nor any of their Subsidiaries have received
any notices of violations or advisory action by regulatory agencies
regarding environmental control matters or permit compliance.
(d) To the best knowledge of each Borrower, after due inquiry, no
hazardous waste has not been transferred from any of the Real Property to
any other locations which are not in compliance with all applicable
environmental laws, regulations or permit requirements.
(e) With respect to the Real Property, there are no proceedings,
governmental administrative actions or judicial proceedings pending or, to
the best knowledge of any Borrower, contemplated under any federal, state
or local law regulating the discharge of hazardous or toxic materials or
substances into the environment, to which any Borrower or any of their
Subsidiaries is named as a party.
Section 4. Conditions Precedent.
4.1 Conditions to Initial Extension of Credit. The obligation of the Bank
to make the initial extension of credit to the Borrowers hereunder is subject to
the satisfaction of the following conditions precedent:
(a) Notes and Agreements. The Bank shall have received the Revolving
Credit Note and the Term Note conforming to the requirements hereof and
duly executed by the Borrowers.
(b) Security Agreements. The Bank shall have received a Security
Agreement from each Borrower, together with UCC-1 financing statements
executed by each such entity in favor of the Bank.
(c) Borrowing Base Certificate. The Bank shall have received and
satisfactorily reviewed a Borrowing Base Certificate as set forth in
Section 5.2 (f) hereof.
(d) Legal Opinion. The Bank shall have received a favorable opinion
of counsel to the Borrowers. Such opinion shall also cover such other
matters incident to the transactions contemplated by this Agreement as the
Bank shall reasonably require.
(e) Certificates and Resolutions. The Bank shall have received (i)
copies of the resolutions of the board of directors of each Borrower
authorizing the execution, delivery and performance of this Agreement and
the Loan Documents certified by the Secretary or an Assistant Secretary of
such corporation; and (ii) a certificate of the Secretary or an Assistant
Secretary of each Borrower certifying the names and true signatures of the
officers of each such corporation authorized to sign any and all documents
to be delivered by each such corporation or as required or contemplated
hereunder.
(f) Commitment Letter. The Borrowers shall have satisfied all the
terms and conditions of the Commitment Letter.
(g) Additional Matters. All other documents and legal matters in
connection with the transactions contemplated by this Agreement shall be
satisfactory in form and substance to the Bank and its counsel.
4.2 Conditions to All Extensions of Credit. The obligation of the Bank to
make any Loan (including the initial Loan) to be made by it hereunder is subject
to the satisfaction of the following conditions precedent:
(a) Representations and Warranties. The representations and
warranties made by the Borrowers herein or which are contained in any
certificate, document or financial or other statement furnished at any time
under or in connection herewith, shall be correct on and as of the
borrowing date for such extension of credit as if made on and as of such
date.
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<PAGE> 14
(b) No Default or Event of Default. No Default or Event of Default
shall have occurred and be continuing on the date an extension of credit is
to be made or after giving effect to the extension of credit to be made on
such date.
(c) Compliance with Borrowing Base. After taking into account the
Loan or extension of credit to be made, all outstanding extensions of
credit together with the requested extension of credit shall not exceed the
Borrowing Base.
Each borrowing by the Borrowers hereunder shall constitute a representation
and warranty by each Borrower as of the date of each such borrowing that the
conditions in clauses (a), (b) and (c) of this Section have been satisfied.
Section 5. Affirmative Covenants.
Each Borrower hereby agrees that, so long as the Commitment remains in
effect, any Note remain outstanding and unpaid, or any other amount is owing to
the Bank hereunder, each Borrower will and will cause each Specified Person as
applicable to:
5.1 Corporate Existence and Qualification. Take the necessary steps to
preserve its corporate existence and its right to conduct business in all states
in which the nature of its business requires qualification to do business. In
the event of dispute between any Borrower and the Bank as to when qualification
is necessary, the decision of the Bank shall control.
5.2 Financial Information and Compliance Certificates.
(a) Keep its books of account in accordance with good accounting
practices and furnish to the Bank (i) within 90 days after the last day of
each of its fiscal years, the consolidated balance sheets of the Borrowers
and their Subsidiaries as at such last day of the fiscal year and
consolidated statements of income and retained earnings and cash flows for
such fiscal year each prepared in accordance with GAAP and certified by a
firm of independent certified public accountants satisfactory to the Bank;
(ii) within 90 days after the last day of each of its fiscal years, the
consolidating balance sheets of the Borrowers and their Subsidiaries as at
such last day of the fiscal year and consolidating statements of income and
retained earnings and cash flows for such fiscal year each prepared in
accordance with GAAP by a firm of independent certified public accountants
satisfactory to the Bank; (iii) within 45 days after the close of each
fiscal half-year consolidated and consolidating balance sheets, statements
of income and retained earnings and cash flows of the Borrowers and their
Subsidiaries as of the last day of and for such half-year and for the
period of the fiscal year ended as of the close of the fiscal half-year,
each prepared in accordance with GAAP on a compilation basis by a firm of
independent certified public accountants satisfactory to the Bank; and (iv)
within 45 days after the close of each of the first and third quarters of
each fiscal year consolidated balance sheets, statements of income and
retained earnings and cash flows of the Borrowers and their Subsidiaries as
of the last day of and for such quarter and for the period of the fiscal
year ended as of the close of the particular quarter, all such quarterly
statements to be in reasonable detail, and certified by the chief financial
or accounting officer of the Borrowers as having been prepared in
accordance with GAAP (subject to year-end adjustments). The Borrowers will
also, with reasonable promptness, furnish such other data as may be
reasonably requested by the Bank and will at all times and from time to
time permit the Bank by or through any of its officers, agents, employees,
attorneys or accountants to inspect and make extracts from such Borrowers'
books and records at reasonable times and upon prior written notice given
by the Bank to the Borrowers.
(b) Within thirty (30) days after the end of each fiscal quarter,
deliver a certificate of the chief financial or accounting officer of the
Borrowers evidencing a computation of compliance with the provisions of
Section 6 hereof and stating that in each case except as disclosed in such
certificate, the person making such certificate has no knowledge of any
Default or Event of Default. Together with their delivery of annual
certified financial statements, the Borrowers' certified public accountants
shall also deliver such a certificate, which shall be addressed to the
Borrowers and the Bank.
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<PAGE> 15
(c) Prior to the first extension of credit hereunder and from time to
time as requested by the Bank, provide the Bank with a written
acknowledgment, in form and substance satisfactory to the Bank, from the
Borrowers' accountant preparing the Borrowers' fiscal year-end financial
statements acknowledging that the Bank is relying on the accountant s
professional accounting services to the Borrowers and the Borrowers
knowledge of the Bank's reliance.
(d) Deliver to the Bank an accounts receivable agings, an accounts
payable agings and inventory report (all prepared and certified by the
chief financial officer of the Borrowers) (i) monthly, provided there are
Revolving Credit Loans outstanding at any time during such month, otherwise
quarterly (not later than 30 days after the last day of each month or
quarter, as the case may be, from the date hereof through May 31, 1997 and
thereafter not later than twenty one (21) days after the last day of each
month or quarter, as the case may be), covering the period ending the last
day of the immediately preceding month or quarter, as the case may be, and
(ii) on the date a Loan is requested, covering the period commencing with
the first day of the month such Loan is requested through the date thereof.
(e) Within ten (10) days of any officer of any Borrower obtaining
knowledge of any Default, if such Default is then continuing, Borrowers
shall furnish to the Bank a certificate of the chief financial or
accounting officer of the Borrowers setting forth the details thereof and
the action which the Borrowers are taking or propose to take with respect
thereto.
(f) Deliver to the Bank a Borrowing Base Certificate indicating a
computation of the Borrowing Base (i) monthly, provided there are Revolving
Credit Loans outstanding (not later than fifteen (15) days after the last
day of each month) covering the period ending the last day of the
immediately preceding month, and (ii) on the date a Loan is requested,
covering the period commencing with the first day of the month such Loan is
requested through the date thereof.
(g) Within ninety (90) days after the last day of each of each of
their fiscal year ends, quarterly financial projections for the Borrowers
on a consolidating basis, in a form satisfactory to Lender, covering the
next fiscal year.
(h) Promptly after the sending or filing thereof, but in no event
later than thirty (30) days thereafter, copies of all proxy statements,
financial statements, and reports which any Borrower or any Subsidiary
sends to its shareholders, and copies of all regular, periodic, and special
reports, and all registration statements which any Borrower or any
Subsidiary files with the Securities and Exchange Commission or any
governmental authority which may be substituted therefor, or with any
national securities exchange.
(i) Within fifteen (15) days after the preparation thereof, deliver to
the Bank a copy of any private placement memorandum and any other relevant
agreements, documents, or information related thereto prepared by an
investment bank or any other Person in connection therewith.
(j) Deliver to the Bank such other information respecting the
condition or operations, financial or otherwise, of any Borrower or any
Subsidiary as the Bank may from time to time reasonably request.
5.3 Insurance. Maintain insurance with responsible and reputable insurance
companies or associations in such amounts and covering such risks as is usually
carried by companies engaged in similar businesses and owning similar properties
in the same general areas in which any Borrower operate and naming the Bank as
an additional insured and loss payee thereon as its interest may appear under a
lender's loss payable endorsement.
5.4 Preservation of Properties; Compliance with Law. Maintain and preserve
all of its properties which are used or which are useful in the conduct of its
business in good working order and condition, ordinary wear and tear excepted
and comply with all Requirements of Law.
5.5 Taxes. Duly pay and discharge all taxes or other claims which might
become a lien upon any of its property except to the extent that any thereof are
being in good faith appropriately contested with adequate reserves provided
therefor.
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<PAGE> 16
5.6 Maintain Operating Accounts. Except for The Fresh Juice Company of
Florida, Inc., maintain all of its primary operating and deposit accounts with
the Bank; provided, however, any monies in excess of $750,000 may be maintained
at another bank or financial institution.
5.7 Notice of Litigation. Promptly notify the Bank in writing of any
litigation, legal proceeding or dispute, other than disputes in the ordinary
course of business or, whether or not in the ordinary course of business,
involving amounts in excess of Fifty Thousand ($50,000) Dollars, affecting any
Borrower or any Subsidiary whether or not fully covered by insurance, and
regardless of the subject matter thereof (excluding, however, any actions
relating to workers' compensation claims or negligence claims relating to use of
motor vehicles, if fully covered by insurance, subject to deductibles).
5.8 Indemnity (Environmental Matters). Indemnify the Bank against any
liability, loss, cost, damage, or expense (including, without limitation,
reasonable attorneys' fees) arising from (i) the imposition or recording of a
lien by any local, state, or federal government or governmental agency or
authority pursuant to any Cleanup Laws; (ii) claims of any private parties
regarding violations of Cleanup Laws; and (iii) costs and expenses (including,
without limitation, reasonable attorneys' fees and fees incidental to the
securing of repayment of such costs and expenses) incurred by any Specified
Person or the Bank in connection with compliance by any Specified Person or the
Bank with any statute, regulation or order issued pursuant to any Cleanup Laws
by any local, state or federal government or governmental agency or authority.
Section 6. Financial Covenants.
Each Borrower hereby agrees that, so long as the Commitment remains in
effect or any Note remains outstanding and unpaid, or any other amount is owing
to the Bank hereunder, each Borrower and their Subsidiaries on a consolidated
basis will:
6.1 Debt to Worth Ratio. Maintain at all times, to be tested quarterly,
during the periods designated below a ratio of total consolidated liabilities to
consolidated Tangible Net Worth in a proportion not more than that set forth
opposite each such period:
<TABLE>
<CAPTION>
PERIOD MAXIMUM
- ----------------------------------------------- DEBT TO
FROM THROUGH WORTH RATIO
- ------------------ ---------------------------- -----------
<S> <C> <C>
Date hereof -- November 29, 1997 1.50 to 1.0
November 30, 1997 -- November 29, 1998 1.35 to 1.0
November 30, 1998 and at all times thereafter 1.25 to 1.0
</TABLE>
(total consolidated liabilities to be determined in accordance with GAAP).
6.2 Minimum Debt Service Coverage Ratio. Maintain at all times for the
periods designated below, calculated on a rolling four (4) quarter basis, to be
tested quarterly, a ratio of (i) net profit before taxes plus depreciation,
amortization, interest expense and lease/rent expense minus unfunded Capital
Expenditures and dividends to (ii) the current portion of long term debt plus
interest expense and lease/rent expense (exclusive of the $600,000 in Capital
Expenditures related to the expansion of the Winter Haven facility) ("long term
debt" means indebtedness for borrowed money which by its terms matures more than
12 months after the date incurred or if maturing sooner, the maturity thereof
may be extended at the option of the debtor beyond such 12 month period) in a
proportion not more than that set forth opposite each such period:
<TABLE>
<CAPTION>
PERIOD MAXIMUM
- ----------------------------------------------- DEBT SERVICE
FROM THROUGH COVERAGE RATIO
- ------------------ ---------------------------- --------------
<S> <C> <C>
February 28, 1997 -- August 31, 1997 1.15 to 1.0
September 1, 1997 and at all times thereafter 1.25 to 1.0
</TABLE>
Section 7. Negative Covenants.
Each Borrower hereby agrees that, so long as the Commitment remains in
effect or any Note remains in effect or any Note remains outstanding and unpaid,
or any other amount is owing to the Bank hereunder it will
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<PAGE> 17
not, nor will it permit any of its Subsidiaries, without the prior written
consent of the Bank, in its sole and absolute discretion, to:
7.1 Indebtedness. Incur, or permit to exist, any Indebtedness in an amount
greater than $500,000 in any fiscal year on a non-cumulative basis, including
any Indebtedness incurred in connection with any merger or acquisition, except
(i) Indebtedness incurred pursuant to borrowings hereunder and under any other
loans made by the Bank in its discretion to the Borrowers or any Subsidiary,
(ii) Indebtedness existing on the date hereof and reflected in the financial
statements referred to in Section 3.1 hereof, (iii) Indebtedness assumed in
connection with a merger or acquisition, and (iv) Indebtedness in the form of a
guarantee in an aggregate amount less than or equivalent to $500,000 at any time
outstanding.
7.2 Mergers, Acquisitions and Sales of Assets. Enter into any merger or
consolidation or liquidate, windup or dissolve itself or sell, transfer or lease
or otherwise dispose of all or any substantial part of its assets (other than
sales of inventory and obsolescent equipment in the ordinary course of business)
or acquire by purchase or otherwise the business or assets of, or stock of,
another business entity; except that (i) any Subsidiary may merge into or
consolidate with any other Subsidiary which is wholly-owned by the Borrowers,
(ii) any Borrower or Subsidiary which is wholly-owned by any Borrower may merge
with or consolidate into a Borrower or other wholly-owned Subsidiary of any
Borrower, with the reasonable consent of the Bank, provided that the surviving
corporation, if not a Borrower, executes and delivers a modification to this
Agreement, the Notes, and such other security agreements, UCC-1 financing
statements and other documents, certificates and agreements reasonably required
by the Bank to protect its interests, all at the sole cost and expense of the
Borrowers, and (iii) the Borrowers may acquire by merger, purchase of assets or
otherwise, the business or assets of another business entity having an aggregate
purchase price (including cash, assumption of indebtedness, stock and any other
consideration) less than $5,000,000. The Bank acknowledges that Borrowers' are
contemplating the acquisition of a business that may involve the assumption of
debt in contravention of the foregoing covenant. The Bank agrees to review the
written details of this transaction when available and to reasonably (for this
transaction only) consider the granting of its consent to the proposed
transaction.
7.3 Loans; Investments. Lend or advance money, credit or property to or
invest in (by capital contribution, loan, purchase or otherwise) any firm,
corporation, or other Person except (i) investments in United States Government
obligations, certificates of deposit of any banking institution with combined
capital and surplus of at least $200,000,000, (ii) accounts receivable arising
out of sales of inventory in the ordinary course of business, and (iii) a
loan(s) to Clear Springs Citrus, Inc. in an amount less than or equivalent to
$500,000 at any time outstanding from the date hereof through October 15, 1996.
7.4 Liens. Create, assume or permit to exist, any Lien on any of its
property or assets now owned or hereafter acquired, including, but not limited
to the Winter Haven, Florida facility, except (i) Liens in favor of the Bank;
(ii) other Liens incidental to the conduct of its business or the ownership of
its property and assets which were not incurred in connection with the borrowing
of money or the obtaining of advances or credit and which do not materially
impair the use thereof in the operation of its business; (iii) Liens for taxes
or other governmental charges which are not delinquent or which are being
contested in good faith and for which a reserve shall have been established in
accordance with generally accepted accounting principles; and (iv) Liens on Real
Property in an aggregate amount less than or equal to $500,000.
7.5 Contingent Liabilities. Assume, endorse, be or become liable for or
guarantee the obligations of any Person in an aggregate amount greater than
$500,000 at any time outstanding, excluding however, the endorsement of
negotiable instruments for deposit or collection in the ordinary course of
business.
7.6 Sales of Receivables. Sell, discount or otherwise dispose of notes,
accounts receivable or other obligations owing to any Borrowers, with or without
recourse, except for the purpose of collection in the ordinary course of
business.
7.7 Nature of Business. Materially alter the nature of its business.
7.8 ERISA. (i) Terminate any Plan so as to result in any material
liability to the Pension Benefit Guaranty Corporation established pursuant to
Subtitle A of Title IV of ERISA (the "PBGC"), (ii) engage in
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<PAGE> 18
or permit any person to engage in any "prohibited transaction" (as defined in
Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1954, as
amended) involving any Plan which would subject a Borrowers to any material tax,
penalty or other liability, (iii) incur or suffer to exist any material
"accumulated funding deficiency" (as defined in Section 302 of ERISA), whether
or not waived, involving any Plan, or (iv) allow or suffer to exist any event or
condition, which presents a material risk of incurring a material liability to
the PBGC by reason of termination of any Plan.
7.9 Accounting Changes. Make, or permit any Subsidiary to make any change
in their accounting treatment or financial reporting practices except as
required or permitted by GAAP in effect from time to time.
7.10 Transactions with Affiliates. Except as otherwise specifically set
forth in this Agreement, directly or indirectly purchase, acquire or lease any
property from, or sell, transfer or lease any property to, or enter into any
other transaction, with any Affiliate except in the ordinary course of business
and at prices and on terms not less favorable to it than those which would have
been obtained in an arm's-length transaction with a non-affiliated third party.
7.11 Changes in Management or Ownership. Make or permit to exist any
material change in the management or ownership of any Borrower. A material
change in management shall be deemed to have occurred if any two (2) of Steven
M. Bogen, Steve Smith or Mark Feldman are not in positions with any Borrower
having at least equal or greater responsibility relative to the positions such
individuals hold as of the date hereof. A material change of ownership shall be
deemed to have occurred (i) in the event Steven M. Bogen, Steve Smith, Mark
Feldman, Brian Duffy, Albert Rountree, IV and Daniel Petry (the "Insider
Shareholders") shall fail to collectively own at least 20% of the outstanding
common stock of The Fresh Juice Company, Inc.; or (ii) in the event any Person
shall beneficially own at any time a greater percentage of the issued and
outstanding common stock of the Fresh Juice Company, Inc. than the percentage
collectively owned by the Insider Shareholders.
7.12 Liens on Assets of Clear Springs Citrus, Inc. Create, assume or
permit to exist or allow any Person to create, assume or permit to exist, any
Lien on any of the property or assets of Clear Springs Citrus, Inc., except for
the Lien in favor of H. Stuart Hall on specific pieces of equipment previously
disclosed to the Bank.
Section 8. Events of Default.
Upon the occurrence and during the continuance of any of the following
events (each an Event of Default):
(a) Borrowers shall fail to pay any interest on or principal of any of
the Notes when due, or shall fail to pay any other amount payable hereunder
or an Event of Default shall have occurred under any other Loan Document;
or
(b) Any representation or warranty made or deemed made by any Borrower
herein or which is contained in any certificate, document or financial or
other statement furnished at any time under or in connection with this
Agreement shall prove to have been false in any material respect on or as
of the date made or deemed made; or
(c) Any Borrower shall default in the observance or performance of any
covenant or provision contained in Sections 5 or 7 hereof and such default
shall continue unremedied for a period of 10 days; or
(d) Any Borrower shall default in the observance or performance of any
covenant or provision contained in Section 6 hereof; or
(e) Any Specified Person shall (i) default in any payment of any
indebtedness for borrowed money (other than the Notes) beyond the period of
grace, if any, provided in the instrument or agreement under which such
indebtedness was created, provided that the aggregate amount of such
indebtedness exceeds $100,000; or (ii) default in the observance or
performance of any other agreement or condition relating to any such
indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto or any other event shall occur or condition
exist, in each case the effect of which default or other
18
<PAGE> 19
event or condition is to cause or permit the holder or holders of such
indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause such indebtedness to become due prior to its stated maturity; or
(f) (i) Any Specified Person shall commence any case, proceeding or
other action (A) under any existing or future law of any jurisdiction,
domestic or foreign, relating to bankruptcy, insolvency, reorganization or
relief of debtors, seeking to have an order for relief entered with respect
to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts,
or (B) seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its assets,
or any Specified Person shall make a general assignment for the benefit of
its creditors; or (ii) there shall be commenced against any Specified
Person any case, proceeding or other action of a nature referred to in
clause (i) above which (A) results in the entry of an order for relief or
any such adjudication or appointment or (B) remains undismissed,
undischarged or unbonded for a period of 60 days; or (iii) there shall be
commenced against any Specified Person any case, proceeding or other action
seeking issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its assets which
results in the entry of an order for any such relief which shall have not
been vacated, discharged, or stayed or bonded pending appeal within 20 days
from the entry thereof; or (iv) any Specified Person shall take any action
in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii) or (iii) of
this Section 8(f); or (v) any Specified Person shall generally not, or
shall be unable to, or shall admit in writing its inability to, pay its
debts as they become due; or
(g) (i) any Specified Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the
Code) involving any Plan, (ii) any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived, shall exist with
respect to any Plan, (iii) a Reportable Event shall occur with respect to,
or proceedings shall commence to have a trustee appointed, or a trustee
shall be appointed, to administer or to terminate, any Plan, which
Reportable Event or institution of proceedings is, in the reasonable
opinion of the Bank, likely to result in the termination of such Plan for
purposes of Title IV of ERISA, and, in the case of a Reportable Event, the
continuance of such Reportable Event unremedied for 10 days after notice of
such Reportable Event pursuant to Section 4043(a), (c) or (d) of ERISA is
given or the continuance of such proceedings for ten days after
commencement thereof, as the case may be, (iv) any Plan shall terminate for
purposes of Title IV of ERISA, and in each case in clauses (i) through (iv)
above, such event or condition could subject any Borrower to any tax,
penalty or other liabilities in the aggregate material in relation to the
business, operations or property of such Borrowers; or
(h) the rendition by any court of a final judgment or judgments in an
aggregate amount in excess of $100,000 against any Specified Person which
shall not be satisfactorily stayed, discharged, vacated or set aside within
60 days of the making thereof; or the attachment of any property of any
Specified Person which has not been released or provided for to the
reasonable satisfaction of the Bank within 60 days after the making
thereof; or
(i) any of the Liens created and granted pursuant to the Security
Agreements shall fail to be valid, first, perfected Liens subject to no
prior or equal Lien except as permitted by this Agreement; or
(j) Any Borrower shall default in the observance or performance of any
other provision contained in this Agreement and such default shall continue
unremedied for a period of 10 days;
then, in any such event, any or all of the following actions may be taken: (i)
the Bank may, at its option, declare the Commitment to be terminated forthwith,
whereupon the Commitment and all obligations to the Bank to make Loans for the
Borrowers shall immediately terminate; (ii) the Bank may, at its option, declare
the Loans hereunder (with accrued interest thereon) and all other amounts owing
under this Agreement and the Notes to be due and payable and the same, and all
interest accrued thereon, shall forthwith become due and payable without
presentment, demand, protest or notice of any kind, all of which are hereby
waived, anything contained herein or in any instrument evidencing the Loans to
the contrary notwithstanding.
19
<PAGE> 20
Section 9. Collateral Security.
9.1 General Loan and Collateral Agreement. As collateral security for the
payment of the Obligations, the Borrowers hereby grant to the Bank a lien on and
security interest in any and all deposits or other sums at any time credited by
or due from the Bank to the Borrowers, whether in regular or special depository
accounts or otherwise, and any and all monies, securities and other property of
the Borrowers, and the proceeds thereof, now or hereafter held or received by or
in transit to the Bank from or for the Borrowers, whether for safekeeping,
custody, pledge, transmission, collection or otherwise, and any such deposits,
sums, monies, securities and other property, may at any time after the
occurrence of any Event of Default be set-off, appropriated and applied by the
Bank against any of the Obligations whether or not such Obligations are then due
or are secured by any collateral, or, if they are so secured, whether or not
such collateral held by the Bank is considered to be adequate.
9.2 Additional Collateral Security. In addition to the collateral
described in Section 9.1 hereof, payment of the Obligations is also secured by a
first priority security interest in all collateral described in the Security
Agreements of the Borrowers whether now owned or hereafter acquired, as provided
in Security Agreements executed or to be executed and delivered by the Borrowers
to the Bank.
Section 10. Miscellaneous.
10.1 Notices. All notices, requests and demands to or upon the respective
parties hereto to be effective shall be in writing unless otherwise expressly
provided herein and shall be deemed to have been duly given or made when
delivered by hand, or by telegram or telecopy, or when deposited in the mail
addressed as follows, or to such address as may be hereafter notified in writing
by the respective parties hereto and any future holders of any Note:
<TABLE>
<S> <C>
The Borrowers: The Fresh Juice Company, Inc.
The Fresh Juice Company of Florida, Inc.
The Fresh Juice Company of New York, Inc.
35 Walnut Avenue, Suite 4
Clark, New Jersey 07066
Attn: Mark Feldman
Fax: 908-388-2954
with a copy to: Bourne, Noll & Kenyon
282 Springfield Avenue
Summit, New Jersey 07901
Attn: Craig M. Lessner, Esq.
Fax: 908-277-6808
The Bank: Fleet Bank, N.A.
208 Harristown Road
Glen Rock, New Jersey 07452
Attn: John P. Cole, Vice President
Fax: 201-251-5388
with a copy to: Windels, Marx, Davis & Ives
120 Albany Street Plaza
New Brunswick, New Jersey 08901
Attn: Howard P. Lakind, Esq.
Fax: 908-846-8877
</TABLE>
10.2 No Waiver; Cumulative Remedies. No failure to exercise and no delay
in exercising, on the part of the Bank, any right, remedy, power or privilege
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right.
20
<PAGE> 21
10.3 Survival of Representations and Warranties. All representations and
warranties made hereunder and in any document, certificate or statement
delivered pursuant hereto or in connection herewith shall survive the execution
and delivery of this Agreement and the Notes.
10.4 Payment of Expenses; Examination.
(a) The Borrowers agree to pay or reimburse the Bank for all its costs
and expenses (including, without limitation, the reasonable fees and
expenses of attorneys for the Bank) incurred in connection with (i) the
enforcement or preservation of any rights under this Agreement or any Note
or any other Loan Document or any other instrument or agreement entered
into in connection herewith or therewith including, without limitation, the
reasonable fees and disbursements of attorneys for the Bank; (ii) any claim
or action threatened, made or brought against the Bank arising out of or
relating to any extent to this Agreement, the Security Agreement, any Note
or Loan Documents or any instrument or agreement entered into in connection
with the transactions contemplated hereby or thereby; (iii) the perfection
of any security interest in the Collateral or in the maintenance of the
Collateral; (iv) any amendment or modification of any Loan Document; (v)
the payment of any tax, assessment, recording fee or similar charge; (vi)
any waiver of any right of the Bank under any Loan Document and (vii) the
reasonable fees and disbursements of any counsel to the Bank incurred after
the date hereof in connection with the transactions contemplated by this
Agreement (except for the Deficiency Note).
(b) The Borrowers agree that at any time and from time to time the
Bank may conduct, an examination of the Borrowers' books and records. The
obligations set forth in this Section 10.4 shall be in addition to any
other obligations or liabilities of the Borrowers to the Bank hereunder or
at common law or otherwise. The provisions of this Section 10.4 shall
survive the payment of the Notes and the termination of this Agreement.
10.5 WAIVER OF JURY TRIAL, SET-OFF AND COUNTERCLAIM. EACH BORROWER AND THE
BANK IN ANY LITIGATION (WHETHER OR NOT ARISING OUT OF OR RELATING TO THIS
AGREEMENT) IN WHICH THEY SHALL BE ADVERSE PARTIES WAIVE THE RIGHT OF TRIAL BY
JURY AND EACH BORROWER WAIVES THE RIGHT TO INTERPOSE ANY SET-OFF OR COUNTERCLAIM
OF ANY KIND OR DESCRIPTION IN ANY SUCH LITIGATION.
10.6 WAIVER OF AUTOMATIC STAY. EACH BORROWER AGREES THAT, IN THE EVENT
THAT ANY BORROWERS, SHALL (i) FILE WITH ANY BANKRUPTCY COURT OF COMPETENT
JURISDICTION OR BE THE SUBJECT OF ANY PETITION UNDER TITLE 11 OF THE U.S. CODE,
AS AMENDED ("BANKRUPTCY CODE"), (ii) BE THE SUBJECT OF ANY ORDER FOR RELIEF
ISSUED UNDER THE BANKRUPTCY CODE, (iii) FILE OR BE THE SUBJECT OF ANY PETITION
SEEKING ANY REORGANIZATION, ARRANGEMENT, COMPOSITION, READJUSTMENT, LIQUIDATION,
DISSOLUTION, OR SIMILAR RELIEF UNDER ANY PRESENT OR FUTURE FEDERAL OR STATE ACT
OR LAW RELATING TO BANKRUPTCY, INSOLVENCY, OR OTHER RELIEF FOR DEBTORS, (iv)
HAVE SOUGHT OR CONSENTED TO OR ACQUIESCED IN THE APPOINTMENT OF ANY TRUSTEE,
RECEIVER, CONSERVATOR, OR LIQUIDATOR, OR (v) BE THE SUBJECT OF ANY ORDER,
JUDGMENT, OR DECREE ENTERED BY ANY COURT OF COMPETENT JURISDICTION APPROVING A
PETITION FILED AGAINST SUCH PARTY FOR ANY REORGANIZATION, ARRANGEMENT,
COMPOSITION, READJUSTMENT, LIQUIDATION, DISSOLUTION, OR SIMILAR RELIEF UNDER ANY
PRESENT OR FUTURE FEDERAL OR STATE ACT OR LAW RELATING TO BANKRUPTCY,
INSOLVENCY, OR RELIEF FOR DEBTORS, THE BANK SHALL THEREUPON BE ENTITLED AND EACH
BORROWER IRREVOCABLY CONSENT TO IMMEDIATE AND UNCONDITIONAL RELIEF FROM ANY
AUTOMATIC STAY IMPOSED BY SECTION 362 OF THE BANKRUPTCY CODE, OR OTHERWISE, ON
OR AGAINST THE EXERCISE OF THE RIGHTS AND REMEDIES OTHERWISE AVAILABLE TO THE
BANK AS PROVIDED FOR HEREIN, IN ANY NOTE, OTHER LOAN DOCUMENTS DELIVERED IN
CONNECTION HEREWITH AND AS OTHERWISE PROVIDED BY LAW, AND EACH BORROWER HEREBY
IRREVOCABLY WAIVE ANY RIGHT TO OBJECT TO SUCH RELIEF AND WILL NOT CONTEST ANY
MOTION BY THE
21
<PAGE> 22
BANK SEEKING RELIEF FROM THE AUTOMATIC STAY AND THE BORROWERS WILL COOPERATE
WITH THE BANK, IN ANY MANNER REQUESTED BY THE BANK, IN ITS EFFORTS TO OBTAIN
RELIEF FROM ANY SUCH STAY OR OTHER PROHIBITION.
10.7 LIMITATION OF LIABILITY. NO CLAIM MAY BE MADE BY ANY BORROWER, ANY
SPECIFIED PERSON, OR ANY OTHER PERSON AGAINST THE BANK OR THE AFFILIATES,
DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS OR AGENTS OF THE BANK FOR ANY SPECIAL,
INDIRECT OR CONSEQUENTIAL DAMAGES OR, TO THE FULLEST EXTENT PERMITTED BY LAW,
FOR ANY PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM OR CAUSE OF ACTION (WHETHER
BASED ON CONTRACT, TORT, STATUTORY LIABILITY, OR ANY OTHER GROUND) BASED ON,
ARISING OUT OF OR RELATED TO ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION
THEREWITH, AND EACH BORROWER (FOR THEMSELVES AND ON BEHALF OF EACH SPECIFIED
PERSON) HEREBY WAIVES, RELEASES AND AGREES NEVER TO SUE UPON ANY CLAIM FOR ANY
SUCH DAMAGES, WHETHER SUCH CLAIM NOW EXISTS OR HEREAFTER ARISES AND WHETHER OR
NOT IT IS NOW KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.
10.8 Modification and Waiver. No modification or waiver of, or with
respect to any provision of this Agreement or any document or instrument
delivered in connection therewith shall be effective unless and until it shall
be in writing and signed by the Bank, and then such modification or waiver shall
be effective only in the specific instance and for the purpose for which given.
No notice to or demand on any Borrower in any case shall, of itself, entitle it
to any other or further notice or demand in similar or other circumstances.
10.9 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of each Borrower, the Bank, all future holders of the Note
and their respective successors and assigns, except that no Borrower may assign
or transfer any of its rights under this Agreement without the prior written
consent of the Bank. The term "Bank" as used herein shall be deemed to include
the Bank and its successors, endorsees and assigns.
10.10 Governing Law; Consent to Jurisdiction. This Agreement, the Notes
and any documents and instruments delivered in connection herewith and therewith
and the rights and duties of the parties hereunder and thereunder shall be
governed by, and construed and interpreted in accordance with, the law of the
State of New Jersey and each Borrower consents to the jurisdiction of the courts
of the State of New Jersey in any action brought to enforce any rights of the
Bank under this Agreement and any document or instrument related hereto.
10.11 Entire Agreement. This Agreement and any other agreements, documents
and instruments executed and delivered pursuant to or in connection with the
Obligations contain the entire agreement between the parties relating to the
subject matter hereof and thereof. Each Borrower expressly acknowledges that the
Bank has not made and such Borrower is not relying on any oral representations,
agreements or commitments of the Bank or any officer, employee, agent or
representative thereof.
10.12 Interest Adjustment. Notwithstanding anything to the contrary
contained in this Agreement or any Note, the rate of interest payable on any
Note shall never exceed the maximum rate of interest permitted under applicable
law. If at any time the rate of interest otherwise prescribed herein shall
exceed such maximum rate, and such prescribed rate is thereafter below such
maximum rate, the prescribed rate shall be increased to the maximum rate for
such period of time as is required so that the total amount of interest received
by the Bank is that which would have been received by the Bank except for the
operation of the first sentence of this Section 10.12.
10.13 Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures thereto and hereto were
upon the same instrument.
10.14 Severability of Provisions. Any provision of this Agreement or any
Loan Document which is prohibited or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such
22
<PAGE> 23
prohibition or unenforceability without invalidating the remaining provisions of
this Agreement or such Loan Document or affecting the validity or enforceability
of such provision in any other jurisdiction.
10.15 Headings. Section and paragraph headings in this Agreement and the
Loan Documents are included in this Agreement and the Loan Documents for the
convenience of reference only and shall not constitute a part of the application
of this Agreement and such Loan Documents for any other purpose.
10.16 Joint and Several Liability. The liabilities of the Borrowers' under
this Agreement shall be joint and several.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in New Brunswick, New Jersey by their proper and
duly authorized officer as of the day and year first above written.
<TABLE>
<S> <C>
Attest: THE FRESH JUICE COMPANY, INC.
/s/ MARK FELDMAN By: /s/ STEVE M. BOGEN
- --------------------------------------------- -----------------------------------------
Name: Mark Feldman Name: Steven M. Bogen
Title: Assistant Secretary Title: Chief Executive Officer
Attest: THE FRESH JUICE COMPANY OF FLORIDA, INC.
/s/ MARK FELDMAN By: /s/ STEVEN M. BOGEN
- --------------------------------------------- -----------------------------------------
Name: Mark Feldman Name: Steven M. Bogen
Title: Assistant Secretary Title: Vice President
Attest: THE FRESH JUICE COMPANY OF NEW YORK, INC.
/s/ MARK FELDMAN By: /s/ STEVEN M. BOGEN
- --------------------------------------------- -----------------------------------------
Name: Mark Feldman Name: Steven M. Bogen
Title: Assistant Secretary Title: Chief Executive Officer
FLEET BANK, N.A.
By: /s/ JOHN P. COLE
-----------------------------------------
Name: John P. Cole
Title: Vice President
</TABLE>
23
<PAGE> 24
EXHIBIT A
FORM OF REVOLVING CREDIT NOTE
2,500,000 New Brunswick, New Jersey
August 5, 1996
THE FRESH JUICE COMPANY, INC., a Delaware corporation, THE FRESH JUICE
COMPANY OF FLORIDA, INC., a Florida corporation, and THE FRESH JUICE COMPANY OF
NEW YORK, INC., a New Jersey corporation, each having its chief executive office
at c/o The Fresh Juice Company, Inc., 35 Walnut Avenue, Clark, New Jersey 07066
(collectively, the "Borrowers"), for value received, hereby jointly and
severally promise to pay to the order of FLEET BANK, N.A.. (the "Bank") on
August 5, 1998, at the office of the Bank specified in Section 10.1 of the Loan
Agreement dated as of August 5, 1996, between the Borrowers and the Bank, as
amended from time to time (as so amended, the "Agreement"; terms defined in the
Agreement shall have their defined meanings when used in this Note), in lawful
money of the United States of America and in immediately available funds, the
principal amount of TWO MILLION FIVE HUNDRED THOUSAND AND 00/100 DOLLARS
($2,500,000) or, if less than such principal amount, the aggregate principal
amount of all Revolving Credit Loans made by the Bank to the Borrowers pursuant
to Section 2.1 of the Agreement. The Borrowers further promise to pay interest
in like money on the unpaid principal balance of this Note from time to time
outstanding at an annual rate as selected by the Borrowers pursuant to the terms
of Section 2 of the Agreement. Interest shall be computed on the basis of a
360-day year for the actual days elapsed and shall be payable as provided in the
Agreement.
The amount of each Revolving Credit Loan and each payment of principal and
interest received by the Bank for the account of the Revolving Credit Loans
shall be evidenced by the Bank's records, which shall be presumptive as to the
outstanding balance of the Revolving Credit Loans and interest thereon. After
the stated or any accelerated maturity hereof, this Note shall bear interest at
a rate as set forth in the Agreement, payable on demand, but in no event in
excess of the maximum rate of interest permitted under any applicable law. If
Borrowers shall fail to make payment of any installment of principal or interest
within fifteen (15) calendar days after the date when due, the Borrowers shall
pay to the Bank a late charge of three (3%) percent of the amount so overdue in
order to defray part of the expense incident to handling such delinquent payment
or payments.
This Note is the Revolving Credit Note referred to in the Agreement, and is
entitled to the benefits thereof and may be prepaid, and is required to be
prepaid, in whole or in part (subject to the indemnity provided in the
Agreement) as provided therein. This Note is secured by the Collateral described
in the Security Agreements.
Upon the occurrence of any one or more of the Events of Default specified
in the Agreement, all amounts then remaining unpaid on this Note may be declared
to be immediately due and payable as provided in the Agreement.
24
<PAGE> 25
This Note shall be construed in accordance with and governed by the laws of
the State of New Jersey.
THE FRESH JUICE COMPANY, INC.
By:
------------------------------------
Name: Steven M. Bogen
Title: Chief Executive Officer
THE FRESH JUICE COMPANY OF
FLORIDA, INC.
By:
------------------------------------
Name: Steven M. Bogen
Title: Vice President
THE FRESH JUICE COMPANY OF NEW YORK,
INC.
By:
------------------------------------
Name: Steven M. Bogen
Title: Chief Executive Officer
25
<PAGE> 26
EXHIBIT B
FORM OF TERM NOTE
$1,100,000 New Brunswick, New Jersey
August 5, 1996
THE FRESH JUICE COMPANY, INC., a Delaware corporation, THE FRESH JUICE
COMPANY OF FLORIDA, INC., a Florida corporation, and THE FRESH JUICE COMPANY OF
NEW YORK, INC., a New Jersey corporation, each having its chief executive office
at c/o The Fresh Juice Company, Inc., 35 Walnut Avenue, Clark, New Jersey 07066
(collectively, the "Borrowers"), for value received, hereby jointly and
severally promise to pay to the order of FLEET BANK, N.A. (the "Bank") at its
office specified in Section 10.1 of the Loan Agreement dated as of August 5,
1996 between the Borrowers and the Bank, as amended from time to time (as so
amended, the "Agreement"; terms defined in the Agreement shall have their
defined meanings when used in this Note) in lawful money of the United States of
America and in immediately available funds, the principal amount of ONE MILLION
ONE HUNDRED THOUSAND AND 00/100 DOLLARS ($1,100,000) payable in sixty (60)
consecutive monthly installments in the amount of $18,333.33 each, payable on
the 1st day of each monthly commencing April 1, 1997 until March 1, 2002, when
the entire unpaid principal balance of this Term Note, together with all
interest accrued and unpaid, shall be paid in full. The Borrowers further
promise to pay interest at said office in like money on the unpaid principal
balance of this Note from time to time outstanding (computed on the basis of a
360 day year for actual days elapsed) at an annual rate as selected by the
Borrowers pursuant to the terms of Section 2 of the Agreement. Interest shall be
payable as provided in the Agreement. Whenever the entire unpaid principal
amount of this Note becomes due and payable (whether at the stated maturity
hereof, by acceleration or otherwise) interest hereon shall thereafter be
payable on demand at a rate as set forth in the Agreement, but in no event in
excess of the maximum rate of interest permitted under any applicable law. If
Borrowers shall fail to make payment of any installment of principal or interest
within fifteen (15) calendar days after the date when due, the Borrowers shall
pay to the Bank a late charge of three (3%) percent of the amount so overdue in
order to defray part of the expense incident to handling such delinquent payment
or payments.
This Note is the Term Note referred to in the Agreement, and is entitled to
the benefits and subject to the terms thereof and may be prepaid in whole or in
part (subject to the indemnity provided in the Agreement) as provided therein.
This Note is secured by the Collateral described in the Security Agreements.
Upon the occurrence of any one or more of the Events of Default specified
in the Agreement, all amounts then remaining unpaid under the Note may be
declared immediately due and payable as provided in the Agreement.
This Note shall be construed in accordance with and governed by the laws of
the State of New Jersey.
THE FRESH JUICE COMPANY, INC.
By:
------------------------------------
Name: Steven M. Bogen
Title: Chief Executive Officer
26
<PAGE> 27
THE FRESH JUICE COMPANY OF
FLORIDA, INC.
By:
------------------------------------
Name: Steven M. Bogen
Title: Vice President
THE FRESH JUICE COMPANY OF
NEW YORK, INC.
By:
------------------------------------
Name: Steven M. Bogen
Title: Chief Executive Officer
27
<PAGE> 28
EXHIBIT C
BORROWING BASE CERTIFICATE
28
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE SMALL
BUSINESS ISSUER
The Fresh Juice Company of New York, Inc.
State of Incorp.: New Jersey
Doing Business As: The Ultimate Juice Company
The Fresh Juice Company of Florida, Inc.
State of Incorp.: Florida
Doing Business As: The Fresh Juice Company of Florida, Inc.
The Fresh Juice Company of California, Inc.
State of Incorp.: Delaware
Doing Business As: Hansen's Juices
Hansen's Fresh Juice Company
Manalba Foods, Inc.
State of Incorp.: New York
Doing Business As: Manalba Foods, Inc.
Fresh Pik't Natural Foods, Inc.
State of Incorp.: Delaware
Doing Business As: Fresh Pik't Natural Foods, Inc.
29
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED NOVEMBER 30, 1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<CASH> 133,768
<SECURITIES> 0
<RECEIVABLES> 2,236,781
<ALLOWANCES> 0
<INVENTORY> 1,759,200
<CURRENT-ASSETS> 4,425,756
<PP&E> 5,275,331
<DEPRECIATION> 820,646
<TOTAL-ASSETS> 15,281,472
<CURRENT-LIABILITIES> 3,801,652
<BONDS> 1,524,562
0
0
<COMMON> 60,620
<OTHER-SE> 10,143,931
<TOTAL-LIABILITY-AND-EQUITY> 15,281,472
<SALES> 19,958,022
<TOTAL-REVENUES> 19,958,022
<CGS> 15,886,417
<TOTAL-COSTS> 15,886,417
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 139,502
<INCOME-PRETAX> (989,043)
<INCOME-TAX> (60,000)
<INCOME-CONTINUING> (989,043)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (929,043)
<EPS-PRIMARY> (.20)
<EPS-DILUTED> (.20)
</TABLE>
