UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 0-19263
SUPREMA SPECIALTIES, INC.
(Exact Name of Registrant as
specified in its charter)
New York 11-2662625
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
510 EAST 35TH STREET
PATERSON, NEW JERSEY 07543-0280
(Address of principal executive offices)
(Zip Code)
(973) 684-2900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes __X__ No_____
As of November 5, 1999 there were 4,390,526 outstanding shares of the issuer's
Common Stock, $.01 par value.
1
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SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets as of 3
September 30, 1999 and June 30, 1999
Consolidated Statements of Earnings 4
For The Three Month Periods Ended
September 30, 1999 and 1998
Consolidated Statements of Cash Flows 5
For the Three Month Periods Ended
September 30, 1999 and 1998
Notes to Consolidated Financial 6
Statements
ITEM 2. Management's Discussion and Analysis of 9
Financial Condition and Results of
Operations
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 12
Signatures 13
2
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SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
Sept. 30, June 30,
1999 1999
------------ ------------
(unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 428,267 $ 358,214
Accounts receivable, net of allowances
of $570,290 at Sept. 30, 1999 and
$570,290 at June 30, 1999 44,744,770 36,007,542
Inventories 38,281,722 35,918,720
Prepaid expenses and other current assets 1,121,209 596,023
Deferred income taxes 228,000 228,000
------------ ------------
Total current assets 84,803,968 73,108,499
PROPERTY AND EQUIPMENT, NET 7,172,751 7,085,948
OTHER ASSETS 1,433,003 1,804,528
------------ ------------
$ 93,409,722 $ 81,998,975
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 17,075,598 $ 12,123,099
Current portion of long-term obligations 564,932 550,761
Mortgage payable - current 50,192 49,220
Income taxes payable 942,945 1,710,000
Accrued expenses and other current
liabilities 2,343,185 2,409,839
------------ ------------
Total current liabilities 20,976,852 16,842,919
DEFERRED INCOME TAXES 1,120,000 1,120,000
REVOLVING CREDIT LOAN 37,500,000 30,441,599
SUBORDINATED DEBT 10,500,000 10,500,000
LONG-TERM CAPITAL LEASES 1,568,667 1,715,327
MORTGAGE PAYABLE 855,549 868,468
------------ ------------
72,521,068 61,488,313
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 10,000,000
shares authorized, 4,602,230 and 4,598,897
issued and outstanding at Sept. 30, 1999
and June 30, 1999, respectively 46,022 45,988
Additional paid-in capital 11,257,953 11,247,154
Retained earnings 11,027,299 9,613,890
Treasury stock at cost, 213,370 at Sept. 30,
1999 and 78,370 at June 30, 1999 (1,442,620) (396,370)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 20,888,654 20,510,662
------------ ------------
$ 93,409,722 $ 81,998,975
============ ============
See notes to consolidated financial statements.
3
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SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
Three Months Ended
September 30,
--------------------------
1999 1998
----------- -----------
NET SALES $61,381,116 $35,898,828
COST OF SALES 51,397,315 29,773,379
----------- -----------
GROSS MARGIN 9,983,801 6,125,449
----------- -----------
EXPENSES:
Selling and shipping expenses 5,123,237 2,913,963
General and administrative expenses 1,247,465 792,900
----------- -----------
6,370,702 3,706,863
----------- -----------
INCOME FROM OPERATIONS 3,613,099 2,418,586
OTHER INCOME (EXPENSE)
Interest expense, net (1,259,690) (1,036,550)
Other -- --
----------- -----------
(1,259,690) (1,036,550)
EARNINGS BEFORE INCOME TAXES 2,353,409 1,382,036
INCOME TAXES 940,000 567,000
----------- -----------
NET EARNINGS 1,413,409 815,036
=========== ===========
EARNINGS PER SHARE OF COMMON STOCK:
BASIC EARNINGS PER SHARE $ .31 $ .18
=========== ===========
DILUTED EARNINGS PER SHARE $ .27 $ .17
=========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 4,480,775 4,561,514
=========== ===========
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 5,206,658 4,683,897
=========== ===========
See notes to consolidated financial statements.
4
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SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-----------------------------
1999 1998
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN CASH:
CASH FLOW FROM OPERATING ACTIVITIES:
Net Earnings $ 1,413,409 $ 815,036
Adjustments to reconcile net earnings
to net cash provided by (used in)
operating activities:
Depreciation and amortization 150,676 133,721
Provision for doubtful accounts -- --
(Increase) decrease in assets:
Accounts receivable (8,737,228) (1,946,357)
Inventories (2,363,002) (2,510,560)
Prepaid expenses and other
current assets (525,186) (518,119)
Prepaid Income Taxes -- --
Other assets 371,525 101,045
Increase (decrease) in liabilities:
Accounts payable 4,952,499 389,131
Income taxes payable (767,055) 400,279
Accrued expenses and other current
liabilities (66,654) 393,380
Deferred income taxes -- --
------------ ------------
Net cash used in operating
activities (5,571,016) (2,742,444)
------------ ------------
CASH FLOW FROM INVESTING ACTIVITIES:
Net payments for purchase of
property and equipment (237,479) (193,366)
Net cash used in investing
activities (237,479) (193,366)
------------ ------------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from revolving credit loan $ 24,052,000 $ 11,557,334
Principal payments of revolving credit loan (16,993,599) (8,634,000)
Principal payments of capital leases (132,489) (120,496)
Principal payments of mortgage (11,947) (10,516
Proceeds from options 10,833 --
Acquisition of treasury stock (1,046,250) (13,863)
------------ ------------
Net cash provided by financing
activities 5,878,548 2,778,459
------------ ------------
NET DECREASE IN CASH 70,053 (157,351)
CASH, BEGINNING OF PERIOD 358,214 489,890
------------ ------------
CASH, END OF PERIOD $ 428,267 $ 332,539
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid during the period for:
Interest $ 1,261,150 $ 917,550
============ ============
Income Taxes $ 1,673,866 $ --
============ ============
Noncash investing and financing
transactions:
Purchases of property and equipment through
capital leases $ -- $ --
============ ============
</TABLE>
5
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SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL INFORMATION
The unaudited consolidated balance sheet as of September 30, 1999, the
unaudited consolidated statements of earnings for the three month periods
ended September 30, 1999 and 1998, and the unaudited consolidated
statements of cash flows for the three month periods ended September 30,
1999 and 1998 have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion
of management, all adjustments (which include normal recurring accruals)
necessary to present fairly the financial position, results of operations
and cash flows at September 30, 1999 and 1998 and for the three month
periods presented, have been included.
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted in this quarterly
financial statement. The attached financial statements should be read in
connection with the consolidated financial statements and notes thereto
included in the Company's 1999 Annual Report on Form 10-K for the year
ended June 30, 1999.
The results of operations for the three months ended September 30, 1999 are
not necessarily indicative of the results to be expected for the entire
fiscal year.
2. INVENTORIES
Inventories are summarized as follows:
Sept. 30, 1999 June 30, 1999
-------------- -------------
Finished goods $28,316,232 $25,848,208
Raw materials 8,902,646 9,110,302
Packaging 1,062,844 960,210
----------- -----------
$38,281,722 $35,918,720
=========== ===========
3. SUBORDINATED DEBT FACILITY
In October 1995, the Company entered into a Loan and Security Agreement
(the "1995 Loan Agreement") with CoreStates Enterprise Fund (the "Fund"), a
division of CoreStates Bank, N.A. pursuant to which the Fund loaned
$5,000,000 to the Company. In connection with the execution and delivery of
the 1995 Loan Agreement, the Company delivered a warrant to the Fund
exercisable for nominal additional consideration to purchase 354,990 shares
of the Company's Common Stock. After October 1, 2000, or upon the
occurrence of certain other rights, the Fund had the right to put the
warrant to the Company on a formula basis. The warrant was recorded at its
relative fair value at date of issue, $1,100,000. The corresponding debt
discount was being amortized over the life of the loan on the interest rate
method. At June 30, 1997, the value of the put option was approximately
$1,171,000.
In October 1997, the Company entered into an agreement with Fleet Bank,
pursuant to which the bank provided bridge financing of $10 million to the
Company. Approximately $6.7 million of the proceeds from such financing was
used to retire $5.0 million of subordinated debt with the Fund and
repurchase from the Fund warrants to purchase 354,990 shares of the
Company's Common Stock. The balance of the proceeds was used for general
working capital purposes. These transactions resulted in an extraordinary
6
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loss of approximately $1,011,000, net, during the second quarter of fiscal
year 1998. The extraordinary loss was comprised of the prepayment penalty
of $1,279,000 and the write-off of deferred financing costs and debt
discount of $494,000,net of the combined tax benefit of $762,000. The fair
value of the warrants was determined pursuant to the contractually agreed
value among the relevant parties.
In March, 1998, the Company entered into a Loan and Security Agreement the
"1998 Loan Agreement") with Albion Alliance Mezzanine Fund, L.P. and the
Equitable Life Assurance Society of the United States ("Alliance") pursuant
to which Alliance loaned $10,500,000 to the Company. The loan is unsecured
and is subordinated to the loan of the Company's senior lender. The loan
bears interest at 16.5% with 12% interest payable currently and the balance
deferred until February 1, 2003 when it is due in full. The principal
amount of the loan is payable in three installments of $3,500,000 on each
March 1, beginning in the year 2004. In addition, in connection with the
execution and delivery of the 1998 Loan Agreement, the Company delivered a
Warrant to Alliance to purchase up to 150,000 shares of the Company's
Common stock at an exercise price of $4.12 per share. The warrant is
exercisable until March 1, 2006. Proceeds of the Alliance loan were used to
retire the bridge loan facility agreement with Fleet Bank, N.A.
4. EARNINGS PER SHARE
During 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share," which
provides for the calculation of "basic" and "diluted" earnings per share.
This statement effective for financial statements issued for periods ending
after December 15,1997, requires restatement of all prior period EPS data
presented. Basic earnings per share includes no dilution and is computed by
dividing income available to common shareholders by the weighted average
number of common shares outstanding for the period. Diluted earnings per
share reflect, in periods in which they have a dilutive effect, the effect
of common shares issuable upon exercise of stock options. All periods
presented have been restated to comply with provisions of SFAS No. 128
The earnings per share for the three month periods ended September 30, 1999
and 1998 were computed by dividing the weighted average number of shares
outstanding into net earnings.
The weighted average number of issued and outstanding common shares for the
three months ended September 30, 1999, is based upon the 4,519,621 shares
outstanding at the beginning of the year less a pro-rata portion of the
135,000 shares of treasury stock repurchased during the first quarter of
fiscal year 1999, as well as the pro-rata portion of 3,333 shares issued
upon the exercise of employee stock options. Also included in the weighted
average number of common shares are incremental shares attributable to
assumed exercise of options and warrants.
The weighted average number of issued and outstanding common shares for the
three month period ended September 30, 1998 is based upon the 4,562,800
shares outstanding at the beginning of the year less a proration of the
4,500 shares of treasury stock repurchased during the first quarter of
fiscal year 1999. Also included in the weighted average number of common
shares are incremental shares attributable to assumed exercise of options
and warrants.
Basic and diluted earnings per share for the three month periods ended
September 30, 1999 and September 30, 1998:
7
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<TABLE>
<CAPTION>
Three months ended Sept 30, 1999 Three months ended Sept. 30,1998
------------------------------------ ------------------------------------
Net Income Shares Per Share Net Income Shares Per Share
---------- ---------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic earnings per share $1,413,409 4,480,775 $.31 $ 815,036 4,561,514 $.18
Effect of assumed conversion
of warrants and employee
stock options 725,883 122,383
---------- ---------- ---- ---------- ---------- ----
Diluted earnings per share $1,413,409 5,206,658 $.27 $ 815,036 4,683,897 $.17
========== ========== ==== ========== ========== ====
</TABLE>
5. TREASURY STOCK
During the three months ended September 30, 1999, the Company in accordance
with its stock repurchase plan, purchased 135,000 shares of its common
stock at a cost of $1,046,250.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
report contains statements that are forward-looking, such as statements relating
to plans for future activities. Such forward-looking information involves
important known and unknown risks and uncertainties that could significantly
affect actual results, performance or achievements of the Company in the future
and, accordingly, such actual results, performance or achievements may
materially differ from those expressed or implied in any forward-looking
statements made by or on behalf of the Company. These risks and uncertainties
include, but are not limited to, those relating to the Company's growth
strategy, customer concentration, outstanding indebtedness, seasonality,
expansion and other activities of competitors, changes in federal or state laws
and the administration of such laws, protection of trademarks and other
proprietary rights, and the general condition of the economy and its effect on
the securities markets and other risks detailed in the Company's other filings
with the Securities and Exchange Commission. The words "believe," "expect,"
"anticipate," "intend," and "plan," and similar expressions identify
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements which speak only as of the date the statement
was made.
Results of Operations - Three months ended September 30, 1999 vs. three months
ended September 30, 1998.
Net sales for the three months ended September 30, 1999 were approximately
$61,381,000 as compared to approximately $35,898,000 for the three months ended
September 30, 1998, an increase of approximately $25,483,000 or 71%. This
increase reflects an increase in the average selling price for cheese (as a
result of the higher CME Block Cheddar Market, the commodity index on which bulk
cheese prices are based) as well as an increase in sales volume for food service
products manufactured by the Company.
The Company's gross margin increased by approximately $3,858,000, from
approximately $6,125,000 for the three months ended September 30, 1998 to
approximately $9,983,000 for the three months ended September 30, 1999,
primarily as a result of an increase in the average selling price as a result of
the higher CME Block Cheddar Market, as well as an increase in the Company's
sales volume. The Company's gross margin as a percentage of sales decreased to
16.3% for the three months ended September 30, 1999 as compared to 17.1% for the
three months ended September 30, 1998. The decrease in gross margin as a
percentage of sales was due to higher cost of raw materials during the three
months ended September 30, 1999 as well as the shift toward lower margin sales
associated with the food service industry.
Selling and shipping expenses increased from approximately $2,914,000 during the
three months ended September 30, 1998 to approximately $5,123,000 during the
three months ended September 30, 1999, an increase of approximately $2,209,000.
This increase was primarily due to an increase in advertising and promotional
allowances, commission expenses, as well as shipping expenses associated with
the Company's increased sales. As a percentage of sales, selling and shipping
expenses increased slightly to 8.3% for the three months ended September 30,
1999 as compared to 8.1% for the three month period ended September 30, 1998.
The increase in selling and shipping expenses as a percentage of sales is
primarily due to increases in advertising and promotional expenses, commission
expenses and shipping expenses in support of the Company's increased revenue
growth.
General and administrative expenses increased from approximately $793,000 during
the three months ended September 30, 1998 to approximately $1,247,000 for the
three months ended September 30, 1999, or an increase of approximately $454,000.
The increase in general and administrative expenses is primarily a result of an
increase in personnel and other administrative expenses associated with the
Company's revenue growth. As a percentage of sales general and administrative
expenses decreased slightly from 2.2% during the three months ended September
30, 1998 to 2.0% for the three months ended September 30, 1999. The decrease in
general and administrative expenses as a percentage of sales is primarily due to
the increase in the company's revenue growth partially offset by increases in
personnel and other administrative expenses in support of the Company's revenue
growth.
9
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Net interest expense increased to approximately $1,259,000 for the three months
ended September 30, 1999 as compared to approximately $1,037,000 for the three
month period ended September 30, 1998, or an increase of approximately $222,000.
The increase was the result of the Company's expanded borrowing requirements
necessary for working capital needs.
The provision for income taxes for the three months ended September 30, 1999
increased to $940,000 from $567,000 during the three months ended September 30,
1998. The increase is primarily a result of increased taxable income during the
three months ended September 30, 1999.
Net earnings increased by approximately $598,000 to approximately $1,413,000 in
the three month period ended September 30, 1999 from approximately $815,000
during the three month period ended September 30, 1998. The increase in net
earnings is due to the increase in sales, partially offset by the increases in
selling and shipping, general and administrative expenses and interest expense.
10
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Financial Position, Liquidity and Capital Resources
At September 30, 1999, the Company had working capital of approximately
$63,827,000, as compared with $56,265,000 at June 30, 1999, an increase of
approximately $7,562,000. The increase in working capital is primarily due to
the increase in accounts receivable and inventory levels in support of the
Company's increased sales as well as an increase in pre-paid expenses and other
current assets, partially offset by an increase in accounts payable.
The Company previously entered into certain capital lease financing transactions
to purchase equipment. At September 30, 1999, the Company had obligations of
approximately $2,133,000 under capital leases.
In March, 1996, the company purchased its Paterson New Jersey production
facility which it previously had leased. The purchase was financed through a
mortgage on the property. Proceeds of the loan were $1,050,000, of which
$686,250 was used to pay the remaining obligation to the landlord. The balance
of the proceeds was used to complete the expansion of a 7,800 square foot
refrigerated storage facility. The five year note which bore interest at 8.51%
per annum was being amortized at a fifteen year rate and required a balloon
payment at the end of year five of approximately $840,000. On March 29, 1999 the
Company refinanced its mortgage on its Paterson facility for the principal
amount of $929,573. The seven year note which bears interest at 7.85% per annum
is being amortized at a fifteen year rate and requires a balloon payment at the
end of year seven of approximately $501,000. At September 30, 1999, the Company
had outstanding obligations of approximately $905,000 under the mortgage
financing the purchase of the Paterson facility.
The Company has a bank revolving credit facility that, in September 1999, was
amended to increase the line to $55,000,000 through November 2, 2001. The rate
of interest on amounts borrowed under the revolving credit facility is the LIBOR
rate plus 1.75%. The interest rate at September 30, 1999 was 7.375%. The
facility is collateralized by all existing and acquired assets of the Company,
as defined in the facility agreement, and is guaranteed by Suprema Specialties
West, Inc. and Suprema Specialties Northeast, Inc., the Company's wholly owned
subsidiaries. In connection with obtaining the facility, the Company has agreed
to pay a commitment fee on the average daily unused portion of the facility,
equal to 1/4 of 1% per annum. The revolving credit loan agreement expires on
November 2, 2001. Advances under this facility are limited to 80% of eligible
accounts receivable and 40% of most inventory. The agreement contains
restrictive covenants, including the maintenance of certain total debt to
tangible net worth and debt service coverage ratios, the maintainence of certain
minimum levels of tangible net worth, and certain limitations on capital
expenditure. As of September 30, 1999, the Company is in compliance with these
covenants. At September 30, 1999, the Company had $37,500,000 outstanding under
the long-term revolving credit facility with approximately $7,963,000 available
to borrow under the facility.
Management believes that the Company has adequate working capital to meet its
reasonably foreseeable cash requirements.
Net cash used in operating activities for the first quarter of Fiscal 2000 was
approximately $5,571,000 as compared to $2,742,000 in the comparable period of
Fiscal 1999. The use of cash in operations was primarily the result of increases
in accounts receivable and inventory levels in support of the Company's
increased sales and prepaid expenses and other current assets, partially offset
by an increase in net earnings as adjusted for non-cash expenses, and increases
in accounts payable. The cash used in operations was financed through cash flow
from financing activities. Net cash used in investing activities for the first
quarter of fiscal 2000 was approximately $237,000, as compared with $193,000 in
the first quarter of fiscal 1999. As a result, at September 30, 1999 the Company
had cash of $428,267, as compared to $332,539 at September 30, 1998.
In May 1999, the Board of Directors approved a stock repurchase program to
acquire up to $3,200,000 of the Company's common stock. As of September 30,
1999, the company has repurchased 213,370 shares of its common stock for a cost
of approximately $1,442,620.
Year 2000 Issue
The Company has assessed the potential issues associated with the year 2000 and
believes that its costs to address such issues would not be material. The
Company anticipates that all of its operating systems are Year 2000 compliant.
The Company also believes that costs or consequences of an incomplete or
untimely resolution would not result in the occurrence of a material event or
uncertainty reasonably likely to have a material adverse effect on the Company.
However, the company has not determined whether its principal suppliers and
customers are Year 2000 compliant. In the event any of the Company's principal
suppliers and customers are not Year 2000 compliant, it may have a material
adverse effect on the Company. The Company has not developed any contingincy
plan in the event the Company experiences any Y2K difficulties.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
Exhibits
10.1. Third Amended and Restated Revolving Loan, Guaranty and Security
Agreement among the Company, Fleet Bank, N.A. (as successor to
NatWest Bank N.A. and National Westminister Bank NJ), Sovereign
Bank, Mellon Bank, N.A., Suprema Specialties West, Inc. and
Suprema Specialties Northeast, Inc., dated as of September 23,
1999.
10.2 Secured Revolving Note from the Company to Mellon Bank, N.A.,
dated September 23, 1999.
27. Financial Data schedule
Reports on Form 8-K
None
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUPREMA SPECIALTIES, INC.
(registrant)
Date: November 5, 1999 By: /s/ Mark Cocchiola
---------------------------------
Mark Cocchiola
President &
Chief Executive Officer
Date: November 5, 1999 By: /s/ Steven Venechanos
---------------------------------
Steven Venechanos
Chief Financial Officer &
Secretary
13
================================================================================
THIRD AMENDED AND RESTATED
REVOLVING LOAN, GUARANTY AND SECURITY AGREEMENT
among
FLEET BANK, N.A. (as successor to NatWest Bank, N.A. and
National Westminster Bank NJ),
SOVEREIGN BANK,
and
MELLON BANK, N.A., collectively, the Banks,
and
FLEET BANK, N.A., as Agent,
and
SUPREMA SPECIALTIES, INC., as Borrower,
and
SUPREMA SPECIALTIES WEST, INC.,
and
SUPREMA SPECIALTIES NORTHEAST, INC., collectively, the
Guarantors
dated as of
September 23, 1999
================================================================================
<PAGE>
THIRD AMENDED AND RESTATED REVOLVING LOAN,
GUARANTY AND SECURITY AGREEMENT
THIS THIRD AMENDED AND RESTATED REVOLVING LOAN, GUARANTY AND SECURITY
AGREEMENT dated as of September 23, 1999 is by and among FLEET BANK, N.A. (as
successor to NatWest Bank, N.A. and National Westminster Bank NJ, "Fleet"),
having an office at 208 Harristown Road, Glen Rock, New Jersey 07452, SOVEREIGN
BANK ("Sovereign"), having an office at 901 West Park Avenue, Ocean, New Jersey
07712, MELLON BANK, N.A. ("Mellon"), having an office at Raritan Plaza I,
Raritan Center, Edison, New Jersey 08837 (Fleet, Sovereign and Mellon are
individually referred to herein as a "Bank" and collectively as the "Banks"),
FLEET BANK, N.A., as agent for the Banks hereunder (in such capacity, the
"Agent"), having an office at 208 Harristown Road, Glen Rock, New Jersey 07452,
SUPREMA SPECIALTIES, INC. (the "Borrower"), a New York corporation, with its
principal place of business at 510 East 35th Street, Paterson, New Jersey 07543,
SUPREMA SPECIALTIES WEST, INC. ("Suprema West"), a California corporation, with
its principal place of business at 14253 South Airport Way, Manteca, California
95336 and SUPREMA SPECIALTIES NORTHEAST, INC. ("Suprema Northeast"), a New York
corporation, with its principal place of business at 30 Main Street, Ogdensburg,
New York 13669 (Suprema West and Suprema Northeast are collectively referred to
as the "Guarantor"). Capitalized terms used herein without definition shall have
the meanings assigned to such terms in Section 1.
W I T N E S S E T H:
WHEREAS, Borrower, Suprema West, as guarantor, and Fleet were parties to
that certain Revolving Loan, Guaranty and Security Agreement dated February 15,
1994, as amended by, among other letter agreements, letter agreements dated as
of February 15, 1994, March 14, 1994, April 21, 1994, November 23, 1994 and
March 13, 1997 (effective as of January 31, 1997) and as further amended by
those certain Amendments dated December 20, 1994, March 30, 1995, June 30, 1995,
February 1, 1996, January 31, 1997, which, inter alia, added Suprema Northeast,
as a guarantor, and May 29, 1997 (collectively, the Revolving Loan, Guaranty and
Security Agreement as amended through the date hereof is referred to herein as
the "Original Loan Agreement"); and
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WHEREAS, pursuant to a certain Amended and Restated Revolving Loan,
Guaranty and Security Agreement dated as of January 5, 1998 by and among Fleet,
the Borrower and the Guarantor (the "First Restated Loan Agreement"), the
Original Loan Agreement was modified and restated for the purpose of, among
other things, providing for an increase of the Commitment to $25,000,000 and
certain other mutually agreeable modifications; and
WHEREAS, the First Restated Loan Agreement was amended by certain letter
agreements dated as of January 28, 1998 and February 23, 1998 and March 9, 1998,
respectively, as amended pursuant to an Amendment thereto dated as of August 31,
1998 for the purpose of, among other things, providing for an increase of the
Commitment to $30,000,000 and certain other mutually agreeable modifications;
and
WHEREAS, pursuant to a certain Second Amended and Restated Revolving Loan,
Guaranty and Security Agreement dated as of December 16, 1998 by and among
Fleet, Sovereign, Fleet (as agent), the Borrower and the Guarantor (the "Second
Restated Loan Agreement"), the First Restated Loan Agreement was modified and
restated for the purpose of, among other things, providing for an increase of
the Commitment to $35,000,000 and certain other mutually agreeable
modifications; and
WHEREAS, the Second Restated Loan Agreement was amended by a First
Amendment to Second Amended and Restated Revolving Loan, Guaranty and Security
Agreement dated as of a date in May, 1999, a Second Amendment to Second Amended
and Restated Revolving Loan, Guaranty and Security Agreement dated as of June
30, 1999 and a Third Amendment to Second Amended and Restated Revolving Loan,
Guaranty and Security Agreement dated as of July 23, 1999 for the purpose of,
among other things, providing for an increase of the Commitment to $40,000,000
and certain other mutually agreeable modifications; and
WHEREAS, the Borrower and the Guarantor have requested that the revolving
credit facility maintained pursuant to the Second Restated Loan Agreement, as
amended, be further amended to increase the maximum Commitment by $15,000,000 to
$55,000,000; and
WHEREAS, Fleet and Sovereign are agreeable to said amendment provided that
Mellon agrees to make Loans to the Borrower on a several basis with Fleet and
Sovereign, as provided in Section 2.1 of this Agreement.
NOW, THEREFORE, in consideration of the premises, the mutual covenants set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby
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acknowledged, the terms and conditions of the Second Restated Loan Agreement are
hereby amended and restated in their entirety to read as follows:
SECTION 1: DEFINITIONS.
When used herein, the following terms shall have the following meanings
(such definitions to be equally applicable to both singular and plural forms):
"Accounts" means all "accounts" (as defined in the UCC) now owned or
hereafter acquired by the Borrower and/or the Guarantor, and also means and
includes, without limitation or duplication, all Receivables, all right, title
and interest of the Borrower and/or the Guarantor in, to and under any accounts
receivable, chattel paper, contract rights (including rights under the
agreements pursuant to which the Borrower and/or the Guarantor acquired any
Subsidiary, division or operating entity or other Assets and all documents,
instruments, agreements and understandings relating thereto), bonds, securities,
book debts, notes, drafts and other obligations or indebtedness owing to the
Borrower and /or the Guarantor arising from the sale, lease or exchange of
goods, services or other property by any of them (including, without limitation,
any such obligation which might be characterized as an account, contract right
or general intangible under the Uniform Commercial Code as in effect in any
jurisdiction), purchase orders for goods, services or other property (and any
goods, services or other property represented by any of the foregoing (including
returned and repossessed goods and unpaid seller's rights of rescission,
replevin, reclamation and rights of stoppage in transit)), monies due or to
become due to the Borrower and/or the Guarantor under contracts for the sale,
lease or exchange of goods or other property and/or performance of services
(whether or not earned by performance on the part of the Borrower and/or the
Guarantor), including, without limitation, the right to receive the proceeds of
any such purchase orders and/or contracts, tax refunds, insurance proceeds
and/or condemnation awards, amounts refunded or paid to the Borrower and/or the
Guarantor as a result of such amounts being deemed voidable transfers in any
insolvency or bankruptcy proceeding, rights to receive tax refunds, insurance
proceeds and/or condemnation awards, investments, in each case whether now
existing or hereafter arising or acquired, and all collateral security and
guarantees of any kind given by any Person with respect to any of the foregoing.
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"Affiliate" of any Person means any other Person who, directly or
indirectly, controls or is controlled by or is under common control with such
Person. A Person shall be deemed to be "controlled by" any other Person who
possesses, directly or indirectly, power: (a) to vote 10% or more of the
securities having ordinary voting power for the election of directors of such
Person; or (b) to direct or cause the direction of the management and policies
of such Person, whether by contract or otherwise.
"Agreement" means this Third Amended and Restated Revolving Loan, Guaranty
and Security Agreement, as the same may from time to time be amended, modified,
supplemented or renewed.
"Assets" means all "assets" (as defined in and within the meaning of GAAP)
and, without duplication, any and all interests whether direct or indirect, in
real or personal property, whether tangible or intangible, now owned or
hereafter acquired by the Borrower and/or the Guarantor, and shall include any
and all Collateral.
"Borrowing Base" means the sum, as reasonably determined by the Agent, of
(i) 80% of Eligible Receivables, and (ii) 40% of the book value of Eligible
Inventory; provided, however, in no event shall the number arrived at in clause
(ii) above exceed 50% of the aggregate amount of Loans outstanding.
For purposes of calculating the value of Inventory included in the
Borrowing Base, such value shall not include Inventory capital costs, packaging
and supplies.
"Borrowing Base Certificate" means a certificate (substantially in the form
of Exhibit B annexed hereto) appropriately completed and duly executed by the
chief financial officer of the Borrower.
"Borrowing Notice" means, a written or telecopied notice to the Agent by
the Borrower specifying (i) the date of a proposed borrowing, (ii) the amount of
the Loan requested, (iii) the type of Loan requested (i.e., Eurodollar or
Fluctuating Rate Loan), and (iv) in the case of a requested Eurodollar Loan, the
desired Interest Period.
"Business Day" means a day on which commercial banks settle payments in New
York or London if the payment obligation is calculated by reference to any (i)
LIBOR Rate, or (ii) New York, if the payment obligation is calculated by
reference to any Prime Rate.
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"Capital Expenditures" means, as to any Person, without duplication, and
for any period, the cost attributed in accordance with GAAP consistent with
those applied in preparation of the financial statements referred to in Section
10.1 hereof to acquisitions during such period by such Persons, of any asset,
tangible or intangible, or replacements or substitutes therefor or additions
thereto (including, without limitation, Capitalized Leases and operating leases
but excluding leases associated with the Borrower's and/or Guarantor's operating
facilities and warehouses) which such Person treated as a noncurrent asset on
such Person's financial statements, including, without limitation, the
acquisition or construction of assets having a useful life of more than one (1)
year.
"Capital Expenditures (Non-Operating Leases)" means the aggregate of all
expenditures on a consolidated basis for the Borrower and its Subsidiaries
including deposits and capital leases made by the Borrower and its Subsidiaries
that, in conformity with GAAP, are required to be included in the property
plant, equipment, or similar fixed asset account.
"Capitalized Leases" means any lease obligation which is capitalized on a
balance sheet of a Person prepared in accordance with GAAP.
"Closing" means September 23, 1999.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral" is defined in Section 8.1.
"Commitment" means for the period from and including the Closing to, but
excluding the Commitment Expiration Date, the commitment of the Banks to make
Loans to the Borrower pursuant to this Agreement in an aggregate principal
amount not to exceed at any time outstanding $55,000,000, as such amount may be
reduced pursuant to Section 5.2.
"Commitment Expiration Date" means November 2, 2001.
"Consolidated Cash Flow" means, for any period, Consolidated Net Earnings
of the Borrower and its Subsidiaries before taxes and interest, depreciation and
amortization expense and any other non-cash charges, including amortization
expenses associated with Slotting Fees, finance charges and other non-cash
charges items, for such period.
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"Consolidated Fixed Charges" means, for any period, the sum of Consolidated
Interest Expense of the Borrower and its Subsidiaries and consolidated expenses
in connection with Equipment Operating Leases of the Borrower and its
Subsidiaries, in each case for such period.
"Consolidated Interest Expense" means, for any period, the amount of
interest accrued on, or with respect to, interest bearing obligations of the
Borrower and its Subsidiaries, including, without limitation, amortization of
debt discount, imputed interest on Capitalized Leases and interest on the
Obligations and other Indebtedness of the Borrower and its Subsidiaries,
determined on a consolidated basis for such period, but only to the extent
deducted from revenues of the Borrower and its Subsidiaries in computing
consolidated Net Earnings for such period. For purposes of calculating
Consolidated Interest Expense, any interest capitalized pursuant to the specific
terms of the New Senior Subordinated Notes shall not be included.
"Consolidated Net Earnings" means, for any period, total accrual earnings
of the Borrower and its Subsidiaries calculated in accordance with GAAP,
excluding: (i) extraordinary gains and losses; and (ii) any equity interest of
the Borrower on the unremitted earnings of any corporation which is not a
Subsidiary of the Borrower for such period.
"Consolidated Net Worth" means at any time consolidated stockholders'
equity as would be reflected on a balance sheet of the Borrower and Subsidiaries
prepared on a consolidated basis in accordance with GAAP at such time.
"Consolidated Total Assets" means at any time the total assets of the
Borrower and its Subsidiaries which would be shown as assets on a consolidated
balance sheet of the Borrower and its Subsidiaries prepared in accordance with
GAAP at such time.
"Consolidated Total Debt" means, at any time, an amount equal to all
Indebtedness of the Borrower and its Subsidiaries, determined on a consolidated
basis at such time.
"Contingent Obligation" means, as to any Person, any obligation of such
Person guaranteeing or in effect guaranteeing any Indebtedness, lease, dividend
or other obligation (the "primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent (a)
to purchase any such primary obligation or any property constituting direct or
indirect security therefor, (b) to
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advance or supply funds (i) for the purchase or payment of any such primary
obligation or (ii) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency of the primary
obligor or to permit the primary obligor to meet financial covenants, (c) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation, or (d) otherwise to assure or hold
harmless the owner of any such primary obligation against loss in respect
thereof; provided, however, that the term Contingent Obligation shall not
include endorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Contingent Obligation shall be deemed to
be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by the Borrower in good faith.
"Contractual Obligation" means, 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.
"Default" means any event which, if it continues uncured will, with lapse
of time or the giving of notice, or both, constitute an Event of Default.
"Default Rate" means a per annum rate of interest equal to the lesser of
(a) Lending Rate plus an additional three percent (3%) per annum, or (b) the
highest rate permissible under applicable law.
"Dollars" and "$" means dollars in lawful currency of the United States of
America.
"Eligible Inventory" means, at any date of determination, the raw
materials, work-in-progress and finished goods Inventory, exclusive of (a) any
Inventory warehoused at any warehouse location for which the Agent has not
received a warehouse lien waiver in form and substance acceptable to the Agent,
subordinating the warehouseman's Lien to the Lien of the Agent, and (b) any
Inventory that is not in good merchantable condition.
"Eligible Receivable" means, at any date of determination thereof, the
aggregate amount of all Receivables at such date and as to which the
representations and warranties herein are true and correct when created and at
all times thereafter. Notwithstanding
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the above and without limiting the Agent's discretion to determine eligibility,
the following shall not be Eligible Receivables (determined without
duplication):
(a) (i) any Receivable which is not due and payable within sixty (60) days
after the date created, (ii) any Receivable which remains unpaid for more than
ninety (90) days after its invoice date (to the extent so unpaid), and/or (iii)
all Receivables owing by any account debtor (including a currently existing
Receivable) if 50% of the aggregate balance of all Receivables of such account
debtor have remained unpaid for more than ninety (90) days after their original
invoice dates or are otherwise not Eligible Receivables hereunder;
(b) any Receivable with respect to which the account debtor is a director,
officer, employee, agent, Affiliate or Subsidiary of the Borrower or the
Guarantor;
(c) any Receivable with respect to which and to the extent payment by the
account debtor is or may be conditional and accounts receivable commonly known
as "bill and hold," progress billings or any similar or like arrangement;
(d) any Receivable with respect to which the account debtor is not a
resident or citizen of or otherwise located in the United States or Canada, or
with respect to which the account debtor is not subject to service of process in
the United States or Canada;
(e) any Receivable with respect to which the account debtor is the United
States or any department, agency or instrumentality thereof or any State of the
United States or any political subdivision, department, agency or
instrumentality thereof, except to the extent compliance with the Federal
Assignment of Claims Act or similar applicable State or local law has been
completed to the satisfaction of the Agent;
(f) any Receivable with respect to which the Borrower or the Guarantor is
or may become liable to the account debtor for goods sold or services rendered
by such account debtor to the Borrower or the Guarantor;
(g) any Receivable (i) with respect to which the goods giving rise thereto
have not been shipped and delivered, (ii) to which there are setoffs,
counterclaims, chargebacks or disputes existing or as to which there are facts,
events or occurrences which in any manner would impair the validity,
enforceability or collectibility of such Receivable or reduce the amount payable
or
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delay payment thereunder except such Receivable shall be deemed Eligible by the
Agent to the extent of the amount of the Receivable which is not affected
thereby, (iii) with respect to which the services performed giving rise thereto
have not been completed, or (iv) which is subject to a claim of reduction or for
credit by the account debtor thereof by reason of such services being
unsatisfactory;
(h) any Receivable which is not invoiced (and dated as of the date of the
shipment and delivery of goods or the performance of services, as the case may
be) and sent to the account debtor thereof concurrently with or not later than
seven (7) days after the shipment and delivery to and acceptance by such account
debtor of the goods giving rise thereto or the performance of the services
giving rise thereto;
(i) any Receivable with respect to which possession and/or control of the
goods sold giving rise thereto is held, maintained or retained by the Borrower
or the Guarantor (or by any agent or custodian of the Borrower or the Guarantor)
for the account of or subject to further and/or future direction from the
account debtor thereof;
(j) any Receivable which arises from a "sale on approval" or a "sale or
return" (except for customary shelf-life restrictions and other return policies
consistent with the ordinary and usual in course of business);
(k) any Receivable which the Agent, at any time or times hereafter,
determines, reasonably and in good faith, that the prospect of payment or
performance by the account debtor is or will be impaired; and
(l) any Receivable which is owed by account debtors deemed uncreditworthy
and unacceptable at all times by the Agent in exercise of its reasonable
discretion.
"Environmental Laws" shall mean all Requirements of Law relating to the
environment and workplace safety including, without limitation, the Industrial
Site Recovery Act of New Jersey ("ISRA") the Clean Air Act ("CAA"), the Clean
Water Act ("CWA"), the Toxic Substances Control Act ("TSCA"), the Hazardous
Materials Transportation Act ("HMTA"), the Resource Conservation and Recovery
Act, as amended ("RCRA"), the Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA"), as modified by the Superfund Amendments and
Reauthorization Act of 1986 ("SARA"), the Emergency Planning and Community Right
to Know Act ("EPCRA"), the Noise Control Act ("NCA"), the Occupational Health
and Safety Act
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("OSHA"), the Safe Drinking Water Act and the Federal Insecticide, Fungicide and
Rodenticide Act, as any such Requirements of Laws may be amended, supplemented
or otherwise modified from time to time.
"Environmental Liabilities" means any and all claims, demands, penalties,
fines, liabilities, settlements, damages, losses, costs and expenses (including,
without limitation, reasonable attorneys' and reasonable consultants' fees and
reasonable disbursements, remedial investigation and feasibility study costs,
clean-up costs and other response costs under the Environmental Laws, currently
in existence or which may be enacted in the future, reasonable laboratory fees,
court costs and litigation expenses) of whatever kind or nature, known or
unknown, contingent or otherwise, arising out of or in any way related to (i)
the presence, disposal, release or threatened release of any Hazardous Materials
which are on, from or which affect the Premises or any part thereof, including,
without limitation, soil, water, vegetation, buildings, equipment, personal
property, or which affect Persons, animals or otherwise; (ii) any personal
injury (including wrongful death) or property damage (real or personal) arising
out of or related to such Hazardous Materials or damage to wetlands whether or
not relating to Hazardous Materials; (iii) any lawsuit brought or threatened,
settlement reached, or government order or directive relating to such Hazardous
Materials; and/or (iv) any violation of any Requirement of Law or requirements
or demands of any Governmental Authority, which are based upon or in any way
related to such Hazardous Materials and which are paid or incurred by the Agent,
any Bank or any other Indemnitee.
"Equipment" means all "equipment" (as defined in the UCC) now owned or
hereafter acquired by the Borrower and/or the Guarantor.
"Equipment Lease Obligations Present Value Schedule" means a schedule
substantially in the form of Exhibit E attached hereto to be delivered to the
Banks pursuant to Section 10.2 (a)(ii) hereof for the purpose of determining
compliance with Section 10.14(b) hereof.
"Equipment Operating Leases" means all leases other than (a) Capitalized
Leases and (b) leases associated with the leasing of the operating facilities
and warehouse of the Borrower and its Subsidiaries.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.
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"ERISA Affiliate" means each trade or business (whether or not
incorporated) which together with the Borrower would be deemed to be a single
employer under Section 414 of the Code.
"Eurodollar Loans" means Loans hereunder that bear interest for the
Interest Period applicable thereto at a rate of interest based upon the LIBOR
Rate.
"Event of Default" means any of the events described in Section 12.1 of
this Agreement.
"Fiscal Year" means, in respect of the Borrower, the twelve (12) calendar
months ending June 30.
"Fleet Mortgage" means the first mortgage dated March 29, 1996 given by the
Borrower to Fleet on the Borrower's facility in Paterson, New Jersey and
recorded on April 17, 1996 in the Passaic County Register's Office in Volume
159, Page 53, et seq., to secure the Fleet Mortgage Loan, as same has been and
may hereafter be amended and modified.
"Fleet Mortgage Loan" means the mortgage loan dated March 29, 1996 given by
Fleet to the Borrower in the original principal amount of $1,050,000.
"Fleet Mortgage Loan Documents" means the Fleet Mortgage, the Absolute
Assignment of Leases and Rents and all other documents, agreements and
instruments executed in connection with the Fleet Mortgage Loan.
"Fluctuating Rate Loans" means Loans hereunder that bear interest at a rate
of interest based upon the Prime Rate.
"FNB" means Fleet National Bank, a national banking association.
"GAAP" means generally accepted accounting principles in the United States
of America in effect from time to time, applied on a consistent basis.
"General Intangibles" means "general intangibles" (as defined in the UCC)
now owned or hereafter acquired by the Borrower and/or the Guarantor, and also
means and includes, without limitation, (i) all obligations or indebtedness
owing to the Borrower and/or the Guarantor (other than Accounts), (ii) all
know-how, patents and patent applications, copyrights, licenses, royalties,
computer tapes, programs and software, trademarks, trade names, service marks
and names, logos, goodwill, causes of action, choses in
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action, judgements, corporate and other business records, trade secrets,
customer lists, together with all instruments, all documents of title
representing any of the foregoing, and all books, ledgers, files and records
with respect thereto, (iii) all rights or claims in respect of insurance
refunds, indemnification, contribution and/or subrogation, and (iv) all rights
or claims in respect of refunds for taxes paid.
"Goods" means all "goods" (as defined in the UCC) now owned or hereafter
acquired by the Borrower and/or the Guarantor.
"Governmental Authority" means any sovereign state, nation or government,
any state or other political subdivision, commission, board, bureau,
instrumentality or agency thereof and any authority exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, including, without limitation, the Board of Governors of the
Federal Reserve System.
"Guaranteed Obligations" shall have the meaning assigned to such term in
Section 7.2 hereof.
"Guarantor" means collectively, Suprema Specialties West, Inc., and Suprema
Specialties Northeast, Inc., jointly and severally.
"Guaranty" means the joint and several guaranty of the Guaranteed
Obligations of the Borrower by the Guarantor provided for in Section 7, as the
same may from time to time be amended, modified or supplemented.
"Hazardous Materials" means, without limitation, any flammable material,
explosives, radioactive materials, gasoline, petroleum products, asbestos, urea
formaldehyde, polychlorinated biphenyls, hazardous materials, hazardous wastes,
hazardous or toxic substances, pollutants, contaminants, materials containing
hazardous constituents, or related materials as defined in the Environmental
Laws.
"Indebtedness" of any Person, means, at a particular date, the sum (without
duplication and in conformity with GAAP) at such date of all (a) indebtedness of
such Person for borrowed money or for the deferred purchase price of property or
services (including, without limitation, all notes payable and all obligations
evidenced by bonds, debentures, notes or other similar instruments but excluding
trade payables incurred in the ordinary course of business not overdue by more
than 90 days), (b) obligations with respect to any installment sale or
conditional sale agreement or
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title retention agreement with respect to property acquired by such Person, (c)
indebtedness arising under acceptance facilities, (d) unpaid reimbursement
obligations arising in connection with surety, performance or other similar
bonds and in connection with standby letters of credit issued in lieu of such
bonds, (e) the outstanding amount of all other letters of credit (other than
those referred to in clause (d)) issued for the account of such Person and,
without duplication, all unpaid reimbursement obligations thereunder, (f) any
obligations of such Person under Capitalized Leases, (g) any obligation of such
Person under Equipment Operating Leases, (h) payment obligations with respect to
interest rate swap, floating rate or similar agreements and (i) Contingent
Obligations of such Person.
"Instruments" means all "instruments," "chattel paper" or "letters of
credit" (each as defined in the UCC) evidencing, representing, arising from or
existing in respect of, relating to, securing or otherwise supporting the
payment of, any Account, including, without limitation, promissory notes,
drafts, bills of exchange and trade acceptances, now owned or hereafter acquired
by the Borrower and/or the Guarantor.
"Intangibles" means, at a particular date, all Assets of the Borrower and
its Subsidiaries, on a consolidated basis, determined at such date, that would
be classified as intangible assets in accordance with GAAP, including, without
limitation, any value attributable to Marketing Service Agreements, Product
Licensing Agreements and Slotting Fees.
"Interest Period" means the 1, 2, 3, 4 and 6 month period selected by the
Borrower during which the relevant Loan bears interest at the LIBOR Rate as
elected by the Borrower in accordance with the terms of this Agreement; subject,
however to the following:
(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) If any Interest Period begins on the last Business Day of a calendar
month or on a day on which there is no numerically corresponding day in the
calendar month in which such Interest Period would otherwise expire, then such
Interest Period shall end on the last Business Day of such calendar month.
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(c) No Interest Period shall extend beyond the Termination Date.
"Inventory" means all "inventory" (as such term is defined in the UCC) now
owned or hereafter acquired by the Borrower and/or the Guarantor of every kind
and description, wherever located, including, without limitation, all
merchandise, raw materials, parts, supplies, work-in-process and finished goods,
together with all containers, packing, packaging, shipping and similar materials
relating thereto or any products made or processed therefrom.
"Lending Rate" means, on any date, a rate of interest per annum (based on a
three hundred sixty (360) day year and the actual number of days elapsed) equal
to, in the case of Fluctuating Rate Loans, the Prime Rate and, in the case of
Eurodollar Loans for the Interest Period therein specified, equal to 1.75% in
excess of the LIBOR Rate.
"LIBOR Rate" means the rate per annum (rounded upward, if necessary, to the
nearest 1/32 of one percent) as determined by the Agent on the basis of the
offered rates for deposits in U.S. dollars, for a period of time comparable to
such Eurodollar Loan which appears on the Telerate page 3750 at 11:00 a.m.
London time on the day that is two London Banking Days preceding the first day
of such Eurodollar Loan; provided, however, if the rate described above does not
appear on the Telerate System on any applicable interest determination date, the
LIBOR Rate shall be the rate (rounded upward as described above, if necessary)
for deposits in dollars for a period substantially equal to the interest period
on the Reuters Page "LIBO" (or such other page as may replace the LIBO Page on
that service for the purpose of displaying such rates), as of 11:00 a.m. (London
Time), on the day that is two (2) London Banking Days prior to the beginning of
such interest period. "Banking Day" shall mean in respect of any city, any date
on which commercial banks are open for business in that city.
If both the Telerate and Reuters system are unavailable, then the rate for
that date will be determined by the Agent on the basis of the offered rates for
deposits in U.S. dollars for a period of time comparable to such Eurodollar Loan
which are offered by four major banks in the London interbank market at
approximately 11:00 a.m. London time, on the day that is two (2) London Banking
Days preceding the first day of such Eurodollar Loan as selected by the Agent.
The principal London office of each of the four major London banks will be
requested to provide a quotation of its U.S. Dollar deposit offered rate. If at
least two such quotations are provided, the rate for that date will be the
arithmetic mean of the quotations. If fewer than two quotations are provided as
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requested, the rate for that date will be determined on the basis of the rates
quoted for loans in U.S. dollars to leading European banks for a period of time
comparable to such Eurodollar Loan offered by major banks in New York City at
approximately 11:00 a.m. New York City time, on the day that is two (2) London
Banking Days preceding the first day of such Eurodollar Loan. In the event that
the Agent is unable to obtain any such quotation as provided above, it will be
deemed that LIBOR pursuant to a Eurodollar Loan cannot be determined.
In the event that the Board of Governors of the Federal Reserve System
shall impose a Reserve Percentage with respect to LIBOR deposits then for any
period during which such Reserve Percentage shall apply, LIBOR shall be equal to
the amount determined above divided by an amount equal to 1 minus the Reserve
Percentage.
"Lien" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other), 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, and the filing of
any financing statement (but only to the extent any such financing statement
purports to record the grant of a security interest and not including any
financing statements filed for notice purposes only) under the Uniform
Commercial Code or comparable law of any jurisdiction in respect of any of the
foregoing).
"Loan" and "Loans" are defined in Section 2.1.
"Loan Documents" means, collectively, this Agreement and each document,
agreement and instrument executed in connection herewith or pursuant hereto
together with each document, agreement and instrument made by the Borrower or
any Guarantor with or in favor of or owing to the Agent or any Bank specifically
related to the Loan or the Collateral.
"Marketing Services Agreements" means any and all agreements entered into
by the Borrower and/or the Guarantor and a Person, pursuant to which the
Borrower and/or Guarantor retains the services of such Person to expand the
marketing, distribution and sales network for existing products of the Borrower
and/or Guarantor and to assist in the introduction of new products to market.
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"Master Agreement" means that certain Master Agreement dated April 29, 1998
entered into between the Borrower and FNB, which amended the original master
agreement dated June 5, 1995 between the Borrower and NatWest Bank, N.A., copy
of which is attached as Exhibit D.
"Master Agreement Obligations" means the obligation to reimburse Fleet for
any amount paid to FNB on account of any of Borrower's obligations under the
Master Agreement, as described in Section 2.6
"Material Adverse Effect" means a material adverse effect on the business,
operations, property or financial or other condition of the Borrower and
Guarantor, taken as a whole, or on the ability of the Borrower and/or the
Guarantor, jointly and severally, to perform their respective obligations under
this Agreement and the other Loan Documents.
"Maximum Credit" is defined in Section 2.1; provided, however, that in no
event shall the Maximum Credit exceed the amount which may be incurred by the
Borrower pursuant to Section 4.7 (a) of the Note Agreement.
"Multiemployer Plan" shall mean a multiemployer plan as defined in Section
4001(a)(3) of ERISA contributed to by Borrower or an ERISA Affiliate or to which
the Borrower or an ERISA Affiliate has any obligation or liability.
"New Senior Subordinated Notes" means the 16.5% Senior Subordinated Notes
due March 1, 2006 of the Borrower issued pursuant to the Note Agreement.
"Note Agreement" means the Note Agreement dated as of March 9, 1998, among
the Borrower, Albion Alliance Mezzanine Fund, L.P. and The Equitable Life
Assurance Society of the United States, in an aggregate principal amount not in
excess of $10,500,000, and the Unconditional Guaranty, dated March 9, 1998, of
the obligations thereunder by the Guarantors
"Notes" means those certain Secured Revolving Notes dated December 16, 1998
in favor of Fleet and July __, 1999 in favor of Sovereign, which Notes were
given in substitution for certain notes dated October 19, 1998 and June 30,
1999, but not in cancellation, discharge or extinguishment of the indebtedness
formerly evidenced by such notes, and that certain Secured Revolving Note dated
September 23, 1999 in favor of Mellon, made by the Borrower in the aggregate
principal amount as to all such notes of up to $55,000,000.
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"Obligations" means all of Borrower's liabilities, obligations and
Indebtedness to the Agent and the Banks of any and every kind and nature
(including, without limitation, any and all interest, commitment fees, charges,
expenses, attorneys' fees and other sums chargeable to Borrower by the Banks
and/or the Agent and future advances made to or for the benefit of Borrower),
arising under the Notes, this Agreement, any other Loan Document and/or the
Master Agreement (including, without limitation, the Master Agreement
Obligations), whether heretofore, now or hereafter owing, arising, due, or
payable from Borrower to the Banks and/or the Agent and howsoever evidenced,
created, incurred, acquired or owing, whether primary, secondary, direct,
contingent, fixed, or otherwise, including obligations of performance, and
including but not limited to, all such liabilities and obligations arising in
connection with the Fleet Mortgage Loan.
"Payment Office" means 208 Harristown Road, Glen Rock, New Jersey 07452.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Liens" is defined in Section 10.15.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Plan" means any employee benefit plan as defined in Section 3(3) of ERISA
which covers the employees or former employees of the Borrower or an ERISA
Affiliate, under which the Borrower or an ERISA Affiliate has any obligation or
liability or under which the Borrower or an ERISA Affiliate has made
contributions within the preceding five years, other than a Multiemployer Plan.
"Prime Rate" means the variable per annum rate of interest so designated
from time to time by the Fleet National Bank as its "prime rate". The Prime Rate
is a reference rate and does not necessarily represent the lowest or best rate
being charged to any customer.
"Proceeds" means all "proceeds" (as defined in the UCC) of, and all other
profits, rentals, or receipts, in whatever form, arising from the collection,
sale, lease, exchange, assignment, licensing or other disposition of, or
realization upon, any Collateral, including, without limitation, all claims of
the Borrower and/or the Guarantor against third parties for loss of, damage to
or destruction of, or proceeds payable under, or unearned
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premiums with respect to, policies of insurance in respect of, any Collateral,
and any condemnation or requisition payments with respect to any Collateral or
any other Asset of the Borrower and/or the Guarantor, in each case whether now
existing or hereafter arising.
"Product Licensing Agreements" means any and all agreements entered into by
the Borrower and/or the Guarantor and a Person for the retail use of products
developed by the Borrower or Guarantor.
"Receivable" means, as at any date of determination thereof, the unpaid
portion of the obligation, as stated in the invoice therefor, of a customer of
the Borrower or a Guarantor in respect of Inventory or services rendered in the
ordinary course of business, which amount has been earned by performance under
the terms of the related contract or purchase order and recognized as revenue on
the books of the Borrower or a Guarantor, as the case may be, net of any
credits, rebates or offsets owed to the customer.
"Reportable Event" means any event set forth in Section 4043(b) of ERISA or
the regulations thereunder.
"Required Banks" means the unanimous consent of the Banks.
"Requirement of Law" means as to any Person, the certificate of
incorporation and bylaws or other organizational or governing documents of such
Person, and any law (including, without limitation, any Environmental Law),
treaty, rule, regulation, code, directive, policy, order or requirement or
determination of an arbitrator or a court or other Governmental Authority
whether now or hereafter enacted or in effect, 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.
"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). With
respect to increases in the Reserve Percentage, the LIBOR Rate shall be adjusted
automatically on and as of the effective date of any such increase.
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"Responsible Officer" means the chief executive officer or the chief
financial officer of the Borrower.
"Slotting Fees" means fees payable by the Borrower or Guarantor in
connection with any arrangement whereby vendors of products of the Borrower or
any Guarantor have agreed to make available such products for commercial
distribution in retail or wholesale stores of such vendors.
"Subordinated Debt" means any Indebtedness of the Borrower or any of its
Subsidiaries, subordinate to the Obligations hereunder, the terms (including,
without limitation, interest rate, equity participation, principal amount,
amortization, collateralization, covenants, events of default, subordination and
lien priority) of which are in form and substance acceptable to the Required
Banks in their sole discretion.
"Subsidiary" means any Person (including the Guarantor) as to which the
Borrower shall at the time, directly or indirectly through a Subsidiary, (i)
have sufficient voting power to entitle it to elect immediately or to have had
elected a majority of the board of directors or similar governing body of such
Person, or (ii) own 50% or more of the equity interests issued by such Person.
"Tangible Net Worth" means, at a particular date, the excess, if any, of
(a) all amounts which would be included under shareholders' equity on a
consolidated balance sheet of the Borrower and its consolidated Subsidiaries
determined in accordance with GAAP as at such date, less (b) Intangibles as at
such date.
"Termination Date" means the earlier of (i) the day the Loans are
accelerated pursuant to Section 12.2, or (ii) the Commitment Expiration Date.
"Trademark Collateral Assignment" means the Trademark Collateral Assignment
dated even date herewith given by the Borrower in favor of the Agent for the
benefit of the Banks, as the same may from time to time be amended, modified,
supplemented or renewed.
"Uniform Commercial Code" or "UCC" means the Uniform Commercial Code as
from time to time in effect in the State of New Jersey; provided, that if by
reason of mandatory provisions of law, the perfection or the effect of
perfection or non-perfection of any Lien on any Collateral is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than New Jersey,
"UCC" means the Uniform Commercial Code as in effect in such other jurisdiction
for purposes of the provisions hereof relating to such
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perfection or the effect of perfection or non-perfection. References to sections
of the UCC shall be construed to refer to any successor sections of the UCC.
SECTION 2: TERMS OF BORROWINGS
2.1 Commitment; Maximum Credit. Subject to the terms and conditions of this
Agreement, each Bank severally (but not jointly) agrees to make loans to the
Borrower (hereinafter collectively referred to as "Loans" and individually as a
"Loan"), from time to time before the Termination Date, in such amounts as
Borrower may from time to time request, not to exceed at any time outstanding
the amount set opposite such Bank's name below; provided, however, that the
aggregate outstanding principal amount of Loans at any time outstanding shall at
no time exceed the lesser of (A) the Commitment, or (B) the Borrowing Base (the
"Maximum Credit"):
Name of Bank Amount
------------ ------
Fleet Bank, N.A. $25,000,000.00
Sovereign Bank $15,000,000.00
Mellon Bank, N.A. $15,000,000.00
--------------
TOTAL $55,000,000.00
Each Loan shall be made by each Bank in the proportion which that Bank's
Commitment bears to the total amount of all the Banks' Commitments; provided,
however, that the failure of any Bank to make any requested Loan to be made by
it on the date specified for such Loan shall not relieve each other Bank of its
obligation (if any) to make such Loan on such date, but no Bank shall be
responsible for the failure of any other Bank to make any Loan to be made by
such other Bank. Subject to the terms hereof, the Borrower may borrow, prepay
and reborrow, and may continue and convert any Loan in accordance with Section
2.5, until the Termination Date. The Banks have no obligation to make any Loan
on or after the Termination Date.
2.2 Procedure for Loans. The Borrower may borrow under the Commitment prior
to the Commitment Expiration Date on any Business Day by giving the Agent
irrevocable notice of a request for a Loan hereunder (a) in the case of
Eurodollar Loans two (2) Business Days before a proposed borrowing or
continuation or conversion and (b) in the case of Fluctuating Rate Loans not
less than one (1) and not more than five (5) Business Days before a proposed
borrowing or continuation or conversion, setting forth (i) the amount of the
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Loan requested, which shall not be less than $100,000, and, if greater, shall be
in an integral multiple of $10,000 (except that any Loan, subject to Section 5,
may be in the aggregate amount of the unused Commitment), (ii) the requested
borrowing date or Interest Period commencement date, as the case may be, (iii)
whether the borrowing or Interest Period is to be for a Eurodollar Loan or
Fluctuating Rate Loan or a combination thereof, and (iv) if entirely or
partially a Eurodollar Loan, the length of the Interest Period therefor, which
shall be 1, 2, 3, 4 or 6 months. As used in this section 2.2, "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. New York time on the date on which such notice is to be
given.
The Agent shall promptly notify each Bank of each such notice received by it.
Not later than 2 p.m. New York time on the date of such Loan, each Bank will
make available to the Agent at its Payment Office in immediately available
funds, such Bank's pro-rata share of such Loans. Unless prior written notice is
otherwise received by the Agent from the Borrower, Loans will be made by credits
to the Borrower's demand deposit account maintained with the Agent. If the
Borrower furnishes 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 thereof.
2.3 Non-Receipt of Funds by Agent. Unless the Agent shall have received
notice from a Bank prior to the date on which such Bank is to provide funds to
the Agent for a Loan to be made by such Bank that such Bank will not make
available to the Agent such funds, the Agent may assume that such Bank has made
such funds available to the Agent on the date of such Loan in accordance with
Section 2.2 and the Agent in its sole discretion may, but shall not be obligated
to, in reliance upon such assumption, make available to the Borrower on such
date a corresponding amount. If and to the extent such Bank shall not have so
made such funds available to the Agent, such Bank agrees to repay to the Agent
forthwith on demand such corresponding amount together with interest thereon,
for each day from the date such amount is made available to the Borrower until
the date such amount is repaid to the Agent, at the customary rate set by the
Agent for the correction of errors among banks for three (3) Business Days, and
thereafter at the Prime Rate. If such Bank shall repay to the Agent such
corresponding amount, such amount so repaid shall constitute such Bank's Loan
for purposes of this Agreement. If such Bank does not pay such corresponding
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amount forthwith upon Agent's demand therefor, the Agent shall promptly notify
Borrower, and Borrower shall immediately pay such corresponding amount to the
Agent with interest thereon, for each day from the date such amount is made
available to the Borrower until the date such amount is repaid to the Agent, at
the rate of interest applicable at the time to such proposed Loan.
Unless the Agent shall have received notice from the Borrower prior to the
date on which any payment is due to the Banks hereunder that the Borrower will
not make such payment in full, the Agent may assume that the Borrower has made
such payment in full to the Agent on such date and the Agent in its sole
discretion may, but shall not be obligated to, in reliance upon such assumption,
cause to be distributed to each Bank on such due date an amount equal to the
amount then due such Bank. If and to the extent the Borrower shall not have so
made such payment in full to the Agent, each Bank shall repay to the Agent
forthwith on demand such amount distributed to such Bank together with interest
thereon, for each day from the date such amount is distributed to such Bank
until the date such Bank repays such amount to the Agent, at the customary rate
set by the Agent for the correction of errors among banks for three (3) Business
Days, and thereafter at the Prime Rate.
2.4 Borrowing Warranty; Conditions. Each Borrowing Notice delivered to the
Agent pursuant to Section 2.2 shall constitute a warranty and representation to
the Agent and the Banks that, as of the date of such Borrowing Notice and the
date of the borrowing proposed in such Borrowing Notice, all of the following
are true and correct: (a) the representations and warranties of the Borrower and
the Guarantor set forth in Sections 8 and 9 below are true and correct in all
material respects, (b) the covenants of the Borrower and the Guarantor set forth
in Section 10 below have been complied with and are true and correct, (c) no
Event of Default or Default shall have occurred or will result from the Loan
described in or the transaction contemplated by such Borrowing Notice, and (d)
after giving effect to the Loan so requested, the aggregate amount of all Loans
outstanding shall not exceed the Maximum Credit. Notwithstanding anything
contained in this Agreement to the contrary, no Bank shall have any obligation
to make any Loan if an Event of Default or Default (a) shall exist on the date
of such proposed borrowing or (b) shall result from the making of such Loan.
2.5 Continuation and Conversion of Loans. The Borrower shall have the right
at any time on prior irrevocable written or telex notice to the Agent as
specified in this Agreement (i) to continue any Eurodollar Loan into a
subsequent Interest Period, (ii) to convert any Eurodollar Loan into a
Fluctuating Rate Loan, and (iii)
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to convert any Fluctuating Rate Loan into a Eurodollar 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 Eurodollar 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 month may not be converted into or continued as a Eurodollar Loan.
The Agent shall promptly notify each Bank of each such notice. All
conversions and renewals shall be made in the proportion that each Bank's Loan
bears to the total amount of all the Banks' Loans.
In the event that the Borrower shall not give notice to continue any
Eurodollar Loan in to a subsequent Interest Period on the last day of the
Interest Period thereof, such Eurodollar Loan (unless prepaid) shall
automatically be converted into a Fluctuating Rate Loan. The Interest Period
applicable to any Eurodollar Loan resulting from a conversion or continuation
shall be specified by the Borrower in the irrevocable notice delivered by the
Borrower pursuant to this Agreement; provided, however, that, if such notice
does not specify the 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 Eurodollar Loan
may be continued into a subsequent Interest Period and no Fluctuating Rate Loan
may be converted into a Eurodollar Loan.
2.6 Master Agreement. In the event that Borrower fails to pay any amount
that is due and owing to FNB under and pursuant to the Master Agreement (after
giving effect to any applicable grace period), then upon demand by FNB, in its
sole discretion, Fleet shall pay such amount directly to FNB for the account of
the Borrower and the Borrower hereby authorizes and consents to such payment by
Fleet. The Borrower agrees that (i) FNB shall have no obligation to demand Fleet
to advance such funds on behalf of the Borrower, (ii) the making of such a
demand by FNB will not create any obligation to make such a demand in the future
and (iii) at all
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times, FNB may choose not to make such demand and choose, instead, to exercise
its rights under the Master Agreement. It shall be an additional Obligation of
Borrower to reimburse Fleet for any amount Fleet may pay on account of any
amount that is due and owing by Borrower to FNB. Such additional Obligation
shall be due upon demand and shall bear interest at a rate per annum equal to
the Default Rate from, and including, the date of payment by Fleet to, but
excluding, the date Borrower reimburses Fleet for such additional Obligation.
FNB is an intended third-party beneficiary of Fleet's obligations under this
Section 2.6. For the avoidance of doubt, the Borrower, FNB and Fleet each
acknowledge that none of the Banks (other than Fleet) shall have any obligation
to fund any portion of any such payment by Fleet to FNB.
SECTION 3: NOTES EVIDENCING LOANS
3.1 Promissory Notes. The Loans shall be evidenced by the Secured Revolving
Notes in the principal amount equal to such Bank's Commitment made by the
Borrower in favor of each Bank and otherwise in substantially the form of
Exhibit A, appropriately completed. The Notes shall be stated to mature on the
Termination Date, shall bear interest on the unpaid principal amount thereof at
the rate per annum as set forth herein, shall be payable as to principal and
interest in the manner and on the dates specified in this Agreement until
payment in full. The outstanding principal amount of the Notes plus all accrued
and unpaid interest thereon shall be due and payable on the Termination Date.
3.2 Recordkeeping. The Banks shall record, in accordance with its usual and
customary practices, the date and amount of each Loan, and the interest rate.
The Banks may, at their option, record such information on the schedule attached
to the Notes. Each Bank's records (including such schedule) shall be presumptive
evidence of the subject matter thereof. A Bank's failure to so record any such
amount or any error in so recording any such amount shall not limit or otherwise
affect the Obligations or any part thereof.
SECTION 4: INTEREST; FEES; ADMINISTRATION OF LOANS
4.1 Interest Rate. (a) With respect to each Loan, the Borrower promises to
pay interest on the unpaid principal amount thereof for the period commencing on
the date of such Loan until such Loan is paid in full at a rate per annum equal
to the Lending Rate; provided, that any amounts which are not paid when due
hereunder (whether at maturity, by acceleration or otherwise), shall bear
interest, payable on demand, from the due date thereof
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until such amount shall be paid, at a rate per annum equal to the Default Rate.
(b) All computations of interest and fees shall be calculated on the basis
of a 360 day year for the actual number of days elapsed. Each determination by
the Agent of an interest rate hereunder shall be conclusive and binding, absent
demonstrative error.
4.2 Payment of Interest. Interest on the Loans shall be payable in lawful
money of the United States in immediately available funds on the last Business
Day of each calendar month and on the Termination Date, except that interest on
Eurodollar Loans shall not be payable on the last Business Day of each calendar
month but on the last day of each Interest Period for said Eurodollar loan and,
for any Interest Period in excess of three months, at three month intervals
after the first day of such Interest Period.
4.3 Late Payment. Any payment of principal or interest not received within
ten (10) days of its due date shall be accompanied by a late charge of five
percent (5%) of the amount of such payment.
4.4 Maximum Interest. In no contingency or event whatsoever, whether by
reason of acceleration of maturity of the Loan or otherwise, shall the amount
paid or agreed to be paid to any Bank for the use of the forbearance of the
Obligations incurred herein exceed the maximum permissible under applicable law.
As used herein, the term "applicable law" shall mean the law in effect as of the
date hereof, provided, however that in the event there is a change in the law
which results in a higher permissible rate of interest, then this Agreement and
the Notes shall be governed by such new law as of its effective date. In this
regard, it is expressly agreed that it is the intent of the Borrower, the Agent
and the Banks in the execution, delivery and acceptance of this Agreement to
contract in strict compliance with the laws of the State of New Jersey from time
to time in effect. If, under or from any circumstances whatsoever, fulfillment
of any provision hereof or of any of the Loan Documents at the time of
performance of such provision shall be due, shall involve transcending the limit
of such validity prescribed by applicable law, then the obligation to be
fulfilled shall automatically be reduced to the limits of such validity, and if
under or from circumstances whatsoever the Agent or any Bank should ever receive
as interest any amount which would exceed the highest lawful rate, such amount
which would be excessive interest shall be applied to the reduction of the
principal balance of the Loan and not to the payment of interest.
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This provision shall control every other provision of all agreements between the
Borrower, the Guarantor, the Agent and the Banks.
4.5 Utilization Fees. The Borrower agrees to pay to the Agent for the
account of each Bank a utilization fee on the average daily unused portion of
the Commitment from the Closing until the Termination Date at the rate of
one-quarter (.25%) percent per annum, payable on the last Business Day of each
March, June, September and December and on the Termination Date, and, with
respect to any such fee which has accrued upon a portion of the Commitment to be
reduced pursuant to Section 5.2, on the date of such increase or reduction, as
the case may be. Upon receipt of any commitment fees, the Agent will promptly
thereafter cause to be distributed such payments to the Banks in the proportion
that each Bank's unused Commitment bears to the total of all of the Banks unused
Commitments.
4.6 Increased Costs. If a 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 such 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 such Bank of making or continuing
Eurodollar Loans hereunder or to reduce the amount of any payment of principal
or interest receivable thereon, then the Borrower will pay to such Bank such
additional amounts as will compensate such 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 (with
a copy to the Agent) setting forth in reasonable detail the basis and method of
determining such amounts shall be presumptive as to the determination by such
Bank set forth therein if made reasonably and in good faith. The Borrower shall
pay any amounts so certified to it by the Bank within ten (10) days of receipt
of any such certificate. Notwithstanding the foregoing, no Bank shall have any
right to seek additional compensation hereunder unless and until it shall have
allocated the same fairly and equitably among all of its similarly situated
customers generally affected thereby.
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4.7 Alternate Rate of Interest. In the event, any on each occasion, that on
the day two (2) Business Days prior to the commencement of any Interest Period
for a Eurodollar Loan,(i) the Agent shall have determined 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) any Bank shall have
determined that the rate at which such dollar deposits are being offered will
not adequately and fairly reflect the cost to such Bank of making or maintaining
such Eurodollar Loan during such Interest Period, or (iii) the Agent shall have
determined that reasonable means do not exist for ascertaining the LIBOR Rate,
the Bank (with a copy to the Agent) and/or the Agent, as the case may be, shall
as soon as practicable thereafter give written or facsimile notice of such
determination to the Banks and the Borrower. 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 any
Bank and/or the Agent as provided hereunder shall be conclusive, absent
demonstrative error.
4.8 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 any Bank to make or maintain
any Eurodollar Loan, then, by written notice to the Borrower (with a copy to the
Agent), such Bank may:
(i) declare that Eurodollar Loans will not thereafter be made by such Bank
hereunder, whereupon the Borrower shall be prohibited from requesting Eurodollar
Loans from such 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, a notice to the Borrower by any Bank
pursuant to paragraph (a) above shall be effective, if lawful, on the last day
of the then current Interest Period; in all other cases, such notice shall be
effective on the day of receipt by the Borrower.
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SECTION 5: REDUCTIONS OR TERMINATION OF COMMITMENT; PREPAYMENT
5.1 Reduction or Termination of Commitment. Borrower may, from time to time
prior to the Termination Date and on at least five (5) Business Days prior
written notice to the Agent, permanently reduce the amount of the Commitment to
an amount not less than the aggregate outstanding principal balance of the Loans
outstanding at such time. Any such reduction shall be in the amount of $50,000
or an integral multiple thereof; any such reduction in the Commitment shall be
permanent. Any reduction in part of the unused portion of the Commitment shall
be made in the proportion that each Bank's Commitment bears to the total amount
of all the Banks' Commitments. The Borrower may at any time on like notice prior
to the Termination Date terminate the Commitment upon payment in full of the
Obligations thereunder; provided, however that in connection with any
termination and payment, the Banks shall have the option to terminate any other
credit facility made available to the Borrower by any Bank (including, without
limitation, acceleration of the Fleet Mortgage Loan) and demand payment in full
of the Obligations of the Borrower owed to such Bank thereunder.
5.2 Voluntary Prepayments. The Borrower 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
amount not less than $50,000. Except as provided otherwise in this Agreement,
the Borrower may not prepay any Eurodollar Loan prior to the last day of the
Interest Period therefor. Each prepayment shall be made together with prepayment
of accrued interest on the amount prepaid to and including the date of
prepayment.
5.3 Mandatory Prepayments. If, at any time, the aggregate outstanding
principal balance of Loan(s) exceeds the Commitment, or the aggregate
outstanding principal balance of Loan(s) exceeds the Maximum Credit, the
Borrower shall make payment to the Agent in an amount equal to such excess
together with any amounts payable pursuant to Section 5.4 in connection
therewith. Each prepayment shall be made together with payment of accrued
interest on the amount prepaid to and including the date of prepayment.
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5.4 Indemnities. The Borrower hereby indemnifies the Banks against any and
all loss and reasonable expenses which the Banks may sustain or incur as a
consequence of any of the following:
(a) the failure of the Borrower to borrow a Eurodollar Loan after sending
notice of the amount and requested interest rate with respect to the making of
any such Loan;
(b) the receipt or recovery by any Bank of all or any part of a Eurodollar
Loan prior to the maturity or the last day of the Interest Period thereof
(whether by prepayment, acceleration or otherwise); or
(c) the conversion, prior to the last day of an applicable Interest Period,
of a Eurodollar Loan into a Fluctuating Rate Loan.
Without limiting the effect of the foregoing, the amount to be paid by the
Borrower to the Banks in order to so indemnify the Banks for any loss occasioned
by any of the events described in the preceding paragraph, and as liquidated
damages therefor, shall be equal to a yield maintenance fee in an amount
computed as follows: the current rate for United States Treasury securities
(bills on a discounted basis shall be converted to a bond equivalent) with a
maturity date closest to the last day of the applicable Interest Period chosen
pursuant to the Fixed Rate Election as to which the prepayment is made, shall be
subtracted from the "cost of funds" component of the fixed rate on such
Eurodollar Loan in effect at the time of prepayment. If the result is zero or a
negative number, there shall be no yield maintenance fee. If the result is a
positive number, then the resulting percentage shall be multiplied by the amount
of the principal balance being prepaid. The resulting amount shall be divided by
360 and multiplied by the number of days remaining in the applicable Interest
Period chosen pursuant to the Fixed Rate Election as to which the prepayment is
made. Said amount shall be reduced to a present value calculated by using the
number of days remaining in the designated Interest Period using the above
referenced United States Treasury security rate and the number of days remaining
in the applicable Interest Period chosen pursuant to the Fixed Rate Election as
to which the prepayment is made. The resulting amount shall be the yield
maintenance fee due to a Bank upon prepayment of the Eurodollar Loan. Each
reference in this paragraph to "Fixed Rate Election" shall mean the election by
the Borrower to borrow at the LIBOR Rate pursuant to Section 2.2 or convert a
Loan to a Eurodollar Loan pursuant to Section 2.5.
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If by reason of an Event of Default the Agent declares the Loans to be
immediately due and payable, then any yield maintenance fee with respect to the
Loans shall become due and payable in the same manner as though the Borrower had
exercised such right of prepayment.
Notwithstanding the foregoing, the Borrower shall not be required to
indemnify the Banks for any losses or expenses resulting from any of the events
described in subparagraphs (a), (b) or (c) of this Section 5.4 following a
conversion of a Eurodollar Loan into a Fluctuating Rate Loan pursuant to
Sections 4.7 or 4.8(a)(ii) hereof.
A certificate as to any additional amounts payable pursuant to this Section
setting forth in reasonable detail the basis and method (including calculations
made by any Bank) of determining such amounts shall be presumptive as to the
determination by such Bank set forth therein if made reasonably and in good
faith. The Borrower shall pay any amounts so certified to it by the Banks within
ten (10) days of receipt of any such certificate. The determination set forth on
any such certificate shall be conclusive and binding absent demonstrative error.
SECTION 6: PAYMENTS
6.1 Making of Payments. All payments of principal of, or interest on, or
fees associated with, the Notes, shall be made by the Borrower without setoff,
counterclaim or deductions of any kind in lawful money of the United States and
in immediately available funds to the Agent for the account of the Banks at the
Payment Office or such other location as the Agent may from time to time
designate. The Agent will promptly distribute to each Bank it's pro-rata share
of each such payment received by the Agent. The Borrower agrees to maintain its
main operating account (the "Operating Account") at the Agent continuously until
the Obligations due hereunder are paid in full. The Agent shall, and the
Borrower authorizes the Agent to, debit the Operating Account for the amount of
any payment as and when such payment becomes due hereunder. Such authorization
shall not affect the Borrower's obligation to pay when due all amounts payable
hereunder, whether or not there are sufficient funds in the Operating Account.
The Borrower agrees to fund the Operating Account from time to time in amounts
sufficient to make the payments hereunder as and when they become due. The
foregoing rights of the Agent to debit the Operating Account shall be in
addition to, and not in limitation of, any rights of set-off which the Agent,
any Bank, and/or any Affiliate of any Bank may have hereunder or under any Loan
Document.
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6.2 Due Date. If any payment of principal, interest or fees with respect to
the Loans falls due on a day which is not a Business Day, then such date shall
be extended to the next Business Day and such extension of time shall in such
case be included in the computation of the payment of interest or fees, as the
case may be. Any payment received after 2:00 p.m. on any day shall be deemed to
have been received on the following Business Day.
6.3 Payments in Respect of Increased Costs. In the event that any Bank
shall have reasonably determined that any Requirement of Law regarding reserves,
capital adequacy, special deposit or other similar requirement(s) or any change
therein or in the interpretation or application thereof or compliance by any
Bank or any Affiliate of such Bank with any request or directive regarding any
such requirements (whether or not having the force of law, so long as such Bank
reasonably believes that compliance therewith is necessary) from any central
bank or other Governmental Authority, does or shall have the effect of reducing
the rate of return on such Bank's capital as a consequence of its obligations
hereunder to a level below that which such Bank could have achieved but for such
law or change or compliance (taking into consideration such Bank's policies with
respect to capital adequacy or other similar requirements) by an amount deemed
by such Bank in the exercise of reasonable discretion to be material, then from
time to time, upon submission by such Bank (with a copy to the Agent) to the
Borrower of a written demand a certificate therefor which sets forth in
reasonable detail the basis for such request and the computation of the amount
requested (the amounts set forth in any such demand shall be presumptive
evidence thereof, absent manifest error), the Borrower shall pay to such Bank
such additional amount or amounts as will compensate such Bank for such
reduction relating to this Agreement from the date of such event and thereafter
such similar payments requested by any Bank on the basis set forth above.
Notwithstanding the foregoing, a Bank shall have no right to seek additional
compensation hereunder unless and until it shall have allocated the same fairly
and equitably among all of its similarly situated customers generally affected
thereby.
SECTION 7: THE GUARANTY
7.1 Guarantor's Special Representations and Warranties. In order to induce
the Banks to enter into this Agreement and make the Loans contemplated
hereunder, each Guarantor represents and warrants as follows:
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(a) Guarantor and the Borrower regularly transact business with each other
and the Borrower provides benefits to and for the Guarantor, including loans and
advances for working capital purposes;
(b) Borrower owns, directly, all of the issued and outstanding common stock
of the Guarantor and the effective continuance of the Guarantor's business is
dependent upon the continued business and success of the Borrower;
(c) The Guarantor is not insolvent (as such term is defined in the New
Jersey Uniform Fraudulent Transfer Act); and
(d) the execution, delivery and performance of this Guaranty will not
violate any provision of any Requirement of Law or Contractual Obligation of the
Guarantor and will not result in or require the creation or imposition of any
Lien on any of the properties or revenues of the Guarantor pursuant to any
Requirement of Law or Contractual Obligation of the Guarantor.
7.2 Guaranty. The Guarantor hereby unconditionally and irrevocably
guarantees the due and punctual payment to the Agent, for the benefit of the
Banks, when stated to be due of all present and future amounts (including
amounts that, but for the initiation of any proceeding under any insolvency or
bankruptcy law, would become due) now or at any time or from time to time
hereafter due or owing to the Agent and the Banks whether at maturity or earlier
by reason of acceleration or otherwise by or from the Borrower arising under
this Agreement and the other Loan Documents including, without limitation, the
principal amount of the Loans together with accrued and unpaid interest thereon
(including interest that, but for the initiation of any proceeding under any
insolvency or bankruptcy law, would accrue) and any and all fees, expenses and
costs payable to the Agent and the Banks in connection therewith (all such
amounts collectively referred to in this Section 7 as the "Guaranteed
Obligations"). The Guarantor also agrees to pay any and all costs and expenses
(including, without limitation, all reasonable fees and disbursements of
counsel) which may be paid or incurred by the Agent or any Bank in connection
with the enforcement of this Guaranty.
7.3 Guaranty Absolute. The Guarantor guarantees that the Guaranteed
Obligations will be paid strictly in accordance with the terms of the Loan
Documents regardless of any law, regulation or order now or hereafter in effect
in any jurisdiction affecting any of such terms or the rights of the Agent and
the Banks with respect thereto. The liability of the Guarantor hereunder shall
be absolute and unconditional irrespective of:
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(a) any lack of validity or enforceability of the Loan Documents or any
other agreement between the Borrower and the Agent and/or any Bank relating
thereto;
(b) any change in the time, manner, place of payment of the indebtedness
under, or in any other term of, or any other amendment or waiver of, or any
consent to, departure from, any agreement between the Borrower and the Agent
and/or any Bank, including, without limitation, the Loan Documents;
(c) the insolvency of, or voluntary or involuntary bankruptcy, assignment
for the benefit of creditors, reorganization or other similar proceedings
affecting, the Borrower or any of its assets; or
(d) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, the Borrower in respect of the Obligations or
of the Guarantor in respect of this Guaranty.
Neither the Agent nor the Banks shall be required to inquire into the
powers of the Borrower or any of its directors, officers, partners, managers or
other agents acting or purporting to act on their behalf, and monies, advances,
renewals or credits described in Section 7.2 hereof in fact borrowed or obtained
from the Banks in professed exercise of such powers shall be deemed to form part
of the debts and liabilities hereby guaranteed, notwithstanding that such
borrowing or obtaining of monies, advances, renewals, or credits shall be in
excess of the powers of the Borrower, or of its directors, officers, partners,
managers or other agents aforesaid, or be in any way irregular, defective or
informal. This Guaranty shall continue to be effective or be reinstated, as the
case may be, if at any time any payment of any of the Guaranteed Obligations is
rescinded or must otherwise be returned by the Agent or the Banks upon the
insolvency, bankruptcy or reorganization of the Borrower, or otherwise, all as
though such payment had not been made.
7.4 Dealing with the Borrower and Others.
(a) The obligations and liabilities of the Guarantor hereunder shall not be
released, discharged, limited or in any way affected by anything done, suffered
or permitted by the Agent or the Banks in connection with any monies advanced by
the Banks to the Borrower or any security therefor, including any loss of or in
respect of any security received by the Agent or any Bank from the Borrower. It
is agreed that the Agent, without releasing, discharging, limiting or otherwise
affecting in whole or in part
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the Guarantor's obligations and liabilities hereunder, may, without limiting the
generality of the foregoing:
(i) grant time, renewals, extensions, indulgences, releases and
discharges to the Borrower;
(ii) take or abstain from taking securities or collateral from the
Borrower or from perfecting securities or collateral of the Borrower;
(iii) accept compromises from the Borrower;
(iv) apply all monies at any time received from the Borrower upon such
part of the Guaranteed Obligations as the Agent may see fit; or
(v) otherwise deal with the Borrower as the Agent may see fit.
(b) Any account settled by or between the Agent and the Borrower shall be
accepted by the Guarantor as conclusive evidence that the balance or amount
thereby appearing due to the Agent is so due.
7.5 Subrogation. The Guarantor shall not exercise any right of subrogation
with respect to payments made to the Agent or any Bank hereunder until such time
as all Indebtedness of the Borrower to the Banks shall have been irrevocably
paid in full in cash. In the case of the liquidation, winding-up or bankruptcy
of the Borrower (whether voluntary or involuntary) or in the event that the
Borrower shall make an arrangement or composition with its creditors, the Agent,
on behalf of the Banks, shall have the right to rank first for the full claim of
the Banks and to receive all payments in respect thereof until such claims have
been paid in full and the Guarantor shall continue to be liable to the Agent and
the Banks for any balance of the Guaranteed Obligations which may be owing to
the Agent or the Banks by the Borrower.
7.6 Demand for Payment. The Guarantor shall make payment of the amount of
the liability of the Guarantor hereunder forthwith after demand therefor is made
by the Agent to the Guarantor in writing. The Agent shall not be required to
seek payment of the Guaranteed Obligations from Borrower, prior to demanding
payment from the Guarantor.
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7.7 Waiver of Notice of Acceptance. The Guarantor hereby waives notice of
acceptance of this Guaranty.
7.8 Additional Guaranties. This Guaranty is in addition and without
prejudice to any guaranties of any kind (including, without limitation,
guaranties whether or not in the same form as this instrument) now or hereafter
held by the Agent and/or any Bank. The Agent shall not be obligated to proceed
against any particular guarantor, or under any other guaranty or security with
respect to any or all of the Obligations before being entitled to payment from
the Guarantor under this Guaranty.
7.9 Benefit and Binding Nature. This Guaranty is a continuing guaranty of
payment and performance and shall (a) remain in full force and effect until
irrevocable payment in full of the Guaranteed Obligations and all other amounts
payable hereunder, (b) be binding upon the Guarantor, its successors and
assigns, and (c) inure to the benefit of and be enforceable by the Agent and its
successors and assigns.
7.10 Set-off. In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, each Bank is
hereby authorized by the Guarantor at any time or from time to time, without
notice to the Guarantor, or to any other Person, any such notice being hereby
expressly waived, to set off and to appropriate and to apply any and all
deposits (general or special, including, but not limited to, indebtedness
evidenced by certificates of deposit, whether matured or unmatured but not
including trust accounts) and any other indebtedness at any time held or owing
by such Bank to or for the credit or the account of the Guarantor against and on
account of the Guaranteed Obligations including, but not limited to, all claims
of any nature or description arising out of or connected with the Guaranteed
Obligations, irrespective of whether or not (a) the Agent or such Bank shall
have made any demand hereunder or (b) the Agent shall have declared the
Guaranteed Obligations due and payable and although the Guaranteed Obligations,
or any of them, may be contingent or unmatured.
7.11 Joint and Several Obligations. The obligations and liabilities of the
Guarantor pursuant to this Section 7 are joint and several and the Agent may, in
its sole and absolute discretion, enforce any such obligations or liabilities
against either Guarantors or both Guarantors without affecting or impairing the
further enforcement of such obligations or liabilities against the other
Guarantor or both Guarantors, as the case may be.
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SECTION 8: COLLATERAL
8.1 Security Interests. (a) To secure to the Banks the prompt and full
payment of all of the Obligations, the Borrower and the Guarantor each, jointly
and severally, hereby grant to the Agent for the ratable benefit of the Banks, a
first priority continuing security interest and Lien (further encumbered only by
the Permitted Liens, if any, existing on the date hereof) in and to all of the
Assets of all kinds and descriptions, wherever the same may now or hereafter be
located, now existing and/or owned and hereafter arising or acquired, or in
which the Borrower and/or the Guarantor may acquire an interest (to the extent
of such interest) including, without limitation: (i) all Accounts; (ii) all
Chattel Paper; (iii) all contract rights; (iv) all Documents; (v) all General
Intangibles, including, without limitation, all trade secrets, tradenames,
copyrights, copyright applications, patent applications, patents, trademarks,
trademark registrations and applications therefor; (vi) all Instruments; (vii)
all Equipment; (viii) all Inventory; (ix) all Goods; (x) to the extent not
otherwise included in clause (vii) above, all other machinery, apparatus,
equipment, fittings, Fixtures, furniture and furnishings now or hereafter
located upon the real property owned or occupied by the Borrower and/or the
Guarantor, or any part thereof, and used or usable in connection with any future
occupancy or use of such property; (xi) any and all deposits (general or
special, including, but not limited to, indebtedness evidenced by certificates
of deposit, whether matured or unmatured but not including trust accounts) and
any other indebtedness at any time held or owing by the Agent and/or any Bank to
or for the credit or the account of the Borrower and/or the Guarantor, as the
case may be; (xii) any and all claims or payments made under any insurance
policy; (xiii) all interest of the Borrower in any goods the sale or lease of
which shall have given or shall give rise to, and in all guaranties and other
property securing the payment of or performance under, any Accounts, contracts,
General Intangibles or any Chattel Paper or Instruments referred to above; (xiv)
all replacements, substitutions, additions or accessions to or for any of the
foregoing; (xv) to the extent related to the property described above, all
books, correspondence, credit files, records, invoices and other papers and
documents, including, without limitation, to the extent so related, all tapes,
cards, computer runs, computer programs and other papers and documents in the
possession or control of the Borrower and/or the Guarantor, as the case may be,
or any computer bureau from time to time acting for the Borrower and/or the
Guarantor, as the case may be; (xvi) all property or interests in property of
the Borrower and/or the Guarantor which now may be owned or hereafter may come
into the possession, custody or control of the Agent and/or any Bank, or any
agent or affiliate
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of the Agent and/or any Bank (whether for safekeeping, deposit, custody, pledge,
transmission, collection or otherwise), including, without limitation, all
rights and interests of the Borrower and/or the Guarantor, as the case may be,
in respect of any and all (a) notes, drafts, letters of credit, stocks, bonds,
and debt and equity securities, whether or not certificated, and warrants,
options, puts, calls and other rights to acquire or otherwise relating to the
same, (b) cash, and (c) proceeds of loans, advances and other financial
accommodations, including, without limitation, loans, advances and other
financial accommodations made or extended by any Bank; (xvii) all right, title
and interest of Borrower in the Master Agreement and each transaction entered
into thereunder (including, without limitation, all amounts payable or
deliverable thereunder; and (xviii) to the extent not otherwise included, all
Proceeds and Products of any and all of the foregoing (the "Collateral"). The
Borrower and the Guarantor shall make appropriate entries upon its financial
statements disclosing Agent's security interest in the Collateral. The Agent
shall file, and Borrower consents to such filing, the appropriate forms to
perfect its security interest in the Collateral in accordance with the UCC. All
capitalized terms used in this Section 8.1 and not otherwise defined herein
shall have the meanings set forth in the UCC. For purposes hereof, Equipment
under a capital lease shall not be Collateral at all times during which the
rights of the Borrower or any Guarantor with respect to such Equipment exist
solely pursuant to any such capital lease.
(b) Upon the reasonable request of the Agent and in any event, upon the
occurrence and during the continuance of an Event of Default, the Borrower or
the Guarantor, as the case may be, shall deliver the original of any written
agreement, Instrument, Chattel Paper and/or document creating an obligation to
pay a Receivable or in respect of any of the other Collateral to the Agent,
together with appropriate endorsement or other specific evidence of assignment
(in form and substance satisfactory to the Agent and its counsel) and until so
delivered, such agreement, instrument or other evidence of such obligation shall
be deemed to be held by the Borrower or the Guarantor for the benefit of, and in
trust for, the Agent.
8.2 Trademarks and Licenses. The Borrower and the Guarantor, jointly and
severally, each further grant to the Agent, for the ratable benefit of the
Banks, an irrevocable, non-exclusive license at no charge to use the trademarks,
patents, copyrights and licenses used in connection with the sale of Goods
including, without limitation, those listed on Schedule 8.2 annexed hereto (the
latter, the "Trademarks") associated with the Collateral in connection with any
foreclosure or liquidation together with the
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right to grant a nonexclusive sublicense without charge to any buyer of such
Collateral for the purpose of resale. As used herein, the term "Trademarks"
includes all computer programs, equipment formulations, manufacturing
procedures, quality control procedures and product specifications and other
Collateral used in connection with such Trademarks.
8.3 Tradenames. Certain Accounts may be and/or certain of the Borrower's
and/or the Guarantor's invoices may be, from time to time, rendered to customers
under the trade names listed on Schedule 8.3 (which together with any new trade
names used after the date hereof are referred to collectively, as the "Trade
Names" and individually, as a "Trade Name"). As to such Trade Names and the
related Accounts, the Borrower hereby warrants and agrees that:
(a) each Trade Name is a trade name and style (and not the name of an
independent corporation or other legal entity) by which the Borrower and/or the
Guarantor may identify and sell certain of its goods or services and conduct a
portion of its business and Borrower and/or the Guarantor, as the case may be,
has filed or made all public or other notices in any jurisdiction required to
lawfully operate under such Trade Names except in those jurisdictions, if any,
where the failure to file would not have a Material Adverse Effect on (a) the
ability of the Borrower and/or the Guarantor to perform its Obligations
hereunder or (b) the Lien granted in favor of the Agent for the ratable benefit
of the Banks hereunder;
(b) all Accounts, Chattel Paper and proceeds thereof and returned
merchandise which arise from the sale of Goods invoiced under the Trade Names
are and shall be (x) owned solely by the Borrower and/or the Guarantor, as the
case may be, and (y) subject to the security interest and other terms of this
Agreement and the other Loan Documents;
(c) new Trade Names may only be used by the Borrower and/or the Guarantor,
as the case may be, after the Agent is given fifteen (15) days prior written
notice of the use of any such new Trade Name, which notice shall set forth the
name of such new Trade Name; and
(d) neither the Borrower nor the Guarantor uses any Trade Name other than
the Trade Names listed on Schedule 8.3 hereto.
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8.4 Accounts, Inventory and Equipment. Each of the Borrower and the
Guarantor represent and warrant to the Banks that all of its Inventory and
Equipment is kept, from time to time, at the locations listed on Schedule 8.4
hereto and at no other locations (all premises listed on Schedule 8.4 which are
leased and/or are warehouse locations are hereinafter referred to as the "Leased
and Warehouse Premises"); provided, however, that some Inventory may, upon
purchase by the Borrower and/or the Guarantor, be in transit and in all such
cases, upon the request of the Agent, all actions necessary to perfect the
Agent's security interest in such Inventory shall be taken by the Borrower,
including, without limitation, delivery to the Agent (with any necessary
endorsements) of all documents of title, bills of lading and warehouse receipts
in respect thereof. The place where the Borrower and the Guarantor keeps its
books and records concerning the Accounts is as set forth on Schedule 8.4(B).
8.5 Chief Executive Office. The Borrower's and Guarantor's chief executive
offices are as set forth on Schedule 8.5 annexed hereto.
8.6 Other Places of Business. The Borrower's and Guarantor's other places
of business are as set forth on Schedule 8.6 annexed hereto.
8.7 Right of Setoff. The Borrower and the Guarantor each hereby grant to
the Agent for the ratable benefit of the Banks a contractual possessory security
interest in and hereby assigns, conveys, delivers, pledges and transfers to the
Agent all Borrower's and Guarantor's, as the case may be, right, title and
interest in and to, Borrower's and Guarantor's, as the case may be, accounts
with the Agent or any Bank, or any of their respective affiliates, whether
existing now or hereafter arising, including, without limitation, all accounts
held jointly with a third party. Borrower and Guarantor each authorize the Agent
or any Bank, or any of their respective affiliates, to charge or setoff any
Obligations against any such accounts whether or not an Event of Default has
occurred.
8.8 Further Documentation. At any time and from time to time, upon the
written request of the Agent and at the sole expense of the Borrower and/or the
Guarantor, the Borrower and/or the Guarantor will promptly and duly execute and
deliver such further instruments and documents and take such further action as
the Agent may reasonably request for the purpose of obtaining or preserving the
full benefits of this Agreement and the rights and powers herein granted,
including, without limitation, the filing of any financing or continuation
statements under the UCC in effect in any
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jurisdiction with respect to the Liens created hereby. The Borrower and/or the
Guarantor also hereby authorize the Agent or any agent acting for the benefit
and on behalf of the Agent to file any such financing or continuation statement
without the signature of the Borrower and/or the Guarantor, as the case may be,
to the extent permitted by applicable law. A carbon, photographic or other
reproduction of this Agreement shall be sufficient as a financing statement for
filing in any jurisdiction. The Agent shall furnish to the Borrower a copy of
any such filing made pursuant to this Section 8.8.
8.9 Indemnification. The Borrower and the Guarantor, jointly and severally,
agree to pay, and to save the Agent and the Banks harmless from, any and all
liabilities, costs and expenses (including without limitation, reasonable legal
fees and expenses) (i) with respect to, or resulting from, any delay in paying,
any and all excise, sales or other taxes which may be payable or determined to
be payable with respect to any of the Collateral, (ii) with respect to, or
resulting from, any delay in complying with any Requirement of Law applicable to
any of the Collateral, (iii) with respect to fees, taxes or other costs incurred
with respect to recording UCC financing statements or other public recordings or
notices of security interests, or (iv) in connection with any of the
transactions contemplated by this Agreement or the enforcement of the Agent's
and each Bank's rights hereunder, except those liabilities, costs and expenses
arising out of the Agent's and any Bank's gross negligence or willful
misconduct. In any suit, proceeding or action brought by the Agent and/or any
Bank under any Account for any sum owing thereunder or to enforce any provisions
of any Account or contract the Borrower and the Guarantor, jointly and
severally, will save, indemnify and keep the Agent and the Banks harmless from
and against all expense, loss or damage suffered by the Agent and any Bank in
such action commenced in connection with the enforcement of any provision of any
Account or contract except for expenses, loss or damage arising out of the gross
negligence or willful misconduct of the Agent and any Bank (in the case of
indemnified amounts which would otherwise be owing to the Agent and any Bank).
8.10 Maintenance of Records. Each of the Borrower and the Guarantor will
keep and maintain at its own cost and expense, complete records of the
Collateral, including, without limitation, a record of all payments received and
all credits granted with respect to the Collateral. For the further security of
the Agent for the ratable benefit of the Banks, the Agent shall have a security
interest in all of the Borrower's and the Guarantor's books and records
pertaining to the Collateral. Each shall turn over no more than one of any such
books and records, on a
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confidential basis, to the Agent or to its representatives during normal
business hours at the request of the Agent.
8.11 Maintenance of Equipment. The Borrower and/or the Guarantor, as the
case may be, will maintain each item of Equipment in good operating condition,
ordinary wear and tear and normal impairments of value and damage by the
elements excepted, and will provide all maintenance, service and repairs
necessary for such purpose.
8.12 Changes in Locations, Name, etc. The Borrower and/or the Guarantor
will not (i) change the location of its chief executive office or other places
of business from that specified in Sections 8.5 and 8.6, respectively, or remove
its books and records from the location specified in Section 8, (ii) permit any
of the Equipment or Inventory to be kept at a location other than that listed in
Schedule 8.4 hereto (except for Inventory sold in the normal course of business
and Equipment of a kind which is usually mobile or movable in the ordinary
course of business), or (iii) change its name, taxpayer identification number,
identity or corporate structure to such an extent that any financing statement
filed by the Agent or any agent acting for the benefit and on behalf of the
Agent, in connection with this Agreement would become misleading, unless, in
each of the foregoing cases it shall have given the Agent at least 30 days prior
written notice thereof and shall do all things necessary to maintain the first
priority status of the Agent's Liens and, further, in the cases of the changes
described in clauses (i) and (ii) above, the same is within the United States of
America.
8.13 Representations, Warranties and Covenants with Respect to Accounts. To
induce the Agent to enter into this Agreement, and each Bank to make each Loan
hereunder and to otherwise extend credit as provided herein, the Borrower and
the Guarantor, jointly and severally, represent and warrant to and covenant with
the Agent and the Banks that with respect to the Accounts which are Receivables:
(a) they are genuine, are owned free and clear of all Liens in favor of any
Person other than the Agent, are in all respects what they purport to be and are
not evidenced by a judgement;
(b) they represent undisputed, bona fide transactions completed in the
ordinary course of business and in accordance with the terms and provisions
contained in the documents, if any, giving rise thereto;
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(c) the amounts thereof shown on their respective books and records are
actually and absolutely owing and are not contingent for any reason;
(d) to the best of their knowledge (i) there are no defenses, set-offs,
counterclaims or disputes existing or asserted with respect thereto and neither
has made any agreement with any account debtor thereof for any deduction
therefrom, (ii) there are no facts, events, circumstances or occurrences which
in any way impair the validity, enforceability or collectibility thereof or tend
to reduce the amount payable thereunder from the amount thereof as shown on its
books and records, (iii) each such Account was (and will continue to be) created
in accordance with applicable Requirements of Law, is (and will continue to be)
a legal, valid and binding obligation of the account debtor thereof, (iv) all
account debtors thereof have the capacity to contract and are solvent, and (v)
there are no proceedings or actions which are threatened or pending against any
account debtor thereof which might result in any material adverse change in such
account debtor's financial condition; and
(e) each of the Receivables indicated on the Borrowing Base Certificate as
constituting a part of the Borrowing Base is an Eligible Receivable.
8.14 Agent's Right to Verify Validity of Accounts. Any officer or employee
of the Agent shall have the right, at any time or times after the Closing (upon
oral notice to the Borrower and at any time upon and after the occurrence of an
Event of Default without notice), in the Agent's name or in the name of a
nominee of the Agent, to verify the validity, amount or any other matter
relating to any Accounts of the Borrower or the Guarantor by mail, telephone,
telegraph or otherwise.
8.15 Relationships with Account Debtors. Unless the Agent notifies the
Borrower in writing that the Agent has suspended any one or more of the
following requirements, the Borrower and the Guarantor shall each:
(a) promptly upon its learning thereof, inform the Agent, in writing, of
any assertion of any material defenses, claims, offsets or counterclaims by any
account debtor obligated under Eligible Receivables in an aggregate amount in
excess of $25,000; and
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(b) promptly upon its receipt or learning thereof, furnish to and inform
the Agent of all material adverse information relating to the financial
condition of any account debtor obligated under Eligible Receivables in an
aggregate amount in excess of $25,000.
8.16 Limitations on Modifications, Waivers and Extensions of Agreements
Giving Rise to Accounts. Each of the Borrower and the Guarantor will not (i)
amend, modify, terminate or waive any provision of any material agreement giving
rise to an Account in any manner which could reasonably be expected to
materially adversely affect the value of such material Account as Collateral,
(ii) fail to exercise promptly and diligently and accordance with its historical
prior practices, each and every material right which it may have under each
agreement giving rise to an Account or (iii) fail to deliver to the Agent a copy
of each material demand, notice or document received by it relating in any way
to any agreement giving rise to any Eligible Receivables.
8.17 Limitation on Discounts, Compromises and Extensions of Accounts. Upon
the occurrence and during the continuance of an Event of Default, each of the
Borrower and the Guarantor will not grant any extension of the time of payment
of any of the Accounts or compromise, compound or settle the same for less than
the full amount thereof, release, wholly or partially, any Person liable for the
payment thereof, or allow any credit or discount whatsoever thereon.
SECTION 9: REPRESENTATIONS AND WARRANTIES
Borrower and Guarantor, jointly and severally, make the following
representations and warranties:
9.1 . Each (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 to own and operate its Assets, to lease the property it
operates as lessee and to conduct the business in which it is currently engaged,
(c) is duly qualified as a foreign corporation and is in good standing under the
laws of each jurisdiction where its ownership, lease or operation of property or
the conduct of its business requires such qualification except where failure to
so qualify would not have a Material Adverse Effect and (d) is in material
compliance with all Requirements of Law.
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9.2 . Each has the requisite corporate power and authority to make, deliver
and perform this Agreement and the other Loan Documents to which it is a party
and, in the case of the Borrower, to borrow hereunder and each has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Agreement and the other Loan Documents. No shareholder vote is necessary
to authorize the execution, delivery and performance of this Agreement and the
other Loan Documents. No consent or authorization of, filing with or other act
by or in respect of any Governmental Authority is required in connection with
the borrowings hereunder or the Guaranty or with the execution, delivery,
performance, validity or enforceability of this Agreement and the other Loan
Documents. Each of the Loan Documents has been duly executed and delivered on
behalf of the Borrower/or and the Guarantor, as the case may be. This Agreement
constitutes, and each of the other Loan Documents constitutes, a legal, valid
and binding obligation of the Borrower and the Guarantor, enforceable against
each of them in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
9.3 No Conflict. The execution and delivery of the Loan Documents and the
performance by the Borrower and/or the Guarantor, as the case may be, of all
Obligations under the Loan Documents do not and will not contravene or conflict
with any material Requirements of Law or of any material agreement binding upon
the Borrower and/or the Guarantor, as the case may be. Without limiting the
generality of the foregoing, (a) the execution and delivery of this Agreement
shall not result in a breach, nor constitute a default under the terms and
conditions of the New Senior Subordinated Notes or the Note Agreement, (b) no
consent, waiver or modification is necessary thereunder in order to execute and
deliver this Agreement and the Notes, or for the Borrower to perform its
obligations under this Agreement or the Notes, and (c) the Obligations
constitute, and shall continue to constitute, "Senior Debt" (as defined in the
Note Agreement) and this Agreement constitutes, and shall continue to
constitute, a "Senior Credit Facility" (as defined in the Note Agreement).
9.4 Title; No Other Liens. (a) Each of the Borrower and the Guarantor, as
the case may be, has good title to the Collateral. The Agent's Lien on the
Collateral now and at all times hereafter will be perfected and further
encumbered only by Permitted Liens, if any, and the Agent has and at all times
hereafter will have a
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first priority Lien on all of its Assets for the ratable benefit of the Banks.
Other than with respect permitted to Permitted Liens, no security agreement,
financing statement or other public notice with respect to all or any part of
the Collateral is on file or of record in any public office except as to which
UCC-3 termination statements have been received or which have expired and not
been renewed. The Liens granted pursuant to this Agreement constitute perfected
Liens (to the extent such Liens can be perfected by filing) on the Collateral in
favor of the Agent, which are prior to all other Liens on the Collateral created
by the Borrower and in existence on the date hereof other than Permitted Liens
and which are enforceable as such against all creditors of the Borrower.
(b) Except for Permitted Liens and the Liens in favor of the Agent, the
Borrower and the Guarantor own all right, title and interest in all of the
Assets reflected in the June 30, 1999 financial statements which they purport to
own (except for those Assets disposed of or acquired, as the case may be, in the
ordinary course of business since such date), free and clear of all Liens.
9.5 Environmental Matters. Each of the Borrower and the Guarantor, to the
best of its knowledge, uses its property and does not permit any tenants or
other users thereof to use such property other than in compliance with all
Environmental Laws. There are no Liens or, to the best of its knowledge,
threatened Liens against the Borrower or the Guarantor, as the case may be, its
property or its tenants, users and uses pursuant to any Environmental Law. If it
is revealed that the Borrower or the Guarantor, as the case may be, or its
property, tenants, users or uses, are not in full compliance with any
Environmental Law or that conditions exist, or may exist, at the property which
are not satisfactory to the Agent in its reasonable discretion, the Borrower
and/or the Guarantor, as the case may be, will undertake, at its reasonable cost
and expense, whatever actions are necessary to bring each of the Borrower and
the Guarantor, its property, tenants, users and uses into compliance with
Environmental Law and to correct any environmental condition unsatisfactory to
the Agent to the satisfaction of the Agent in its sole discretion and to the
satisfaction of federal, state, county and local environmental authorities.
9.6 ERISA. (a) Compliance with ERISA. The Borrower and each of its ERISA
Affiliates is in compliance in all material respects with the applicable
provisions of ERISA and the Code with respect to each Plan.
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(b) Prohibited Transactions. Neither the Borrower nor any ERISA Affiliate
has engaged in a transaction in connection with which the Borrower or any ERISA
Affiliate could be subject to a material liability for either a civil penalty
assessed pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of
the Code.
(c) Plan Termination. There has been no termination of a Multiemployer Plan
or trust created under any Multiemployer Plan that would give rise to liability
to the PBGC on the part of the Borrower or any ERISA Affiliate. No liability to
the PBGC has been or is expected to be incurred with respect to any
Multiemployer Plan by the Borrower or an ERISA Affiliate. Neither the Borrower
nor the Guarantor is aware of any pending or threatened proceedings by the PBGC
to terminate any Multiemployer Plan. Neither the Borrower nor the Guarantor is
aware of any condition or set of circumstances which presents a material risk of
termination of any Multiemployer Plan by the PBGC.
(d) Employee Pension Benefit Plans. Neither the Borrower nor any ERISA
Affiliate has any obligation or liability under, or contributed within the
preceding five years to, an employee pension benefit plan with the meaning of
Section 3(2) of ERISA.
(e) Withdrawal Liability. Neither the Borrower nor an ERISA Affiliate has
made a complete or partial withdrawal from a Multiemployer Plan. To the best
knowledge of the Borrower, the aggregate liability to which the Borrower or any
ERISA Affiliate would become subject under ERISA if the Borrower and all ERISA
Affiliates were to withdraw completely from all Multiemployer Plans as of the
most recent valuation date, together with any secondary liability for withdrawal
liability the Borrower and any ERISA Affiliate may have as of the date hereof,
would not have a Material Adverse Effect on the business, operations, property
or financial or other condition of the Borrower and its ERISA Affiliates, taken
as a whole. To the best knowledge of the Borrower, no such Multiemployer Plan is
in reorganization (as such term is defined in Section 4241 of ERISA) or is
insolvent (as such term is defined in Section 4245 of ERISA).
(f) Retiree Welfare Benefits. The Borrower does not provide post-retirement
health, medical and other welfare benefits for retired employees of the
Borrower.
9.7 No Change. Since June 30, 1999, there has been no material adverse
change in the business, operations, property or financial or other condition of
the Borrower or the Guarantor as such business, operations, property, or
financial or other
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condition of the Borrower and its Subsidiaries existed on such date.
9.8 No Bar. The execution, delivery and performance of this Agreement and
the other Loan Documents, the borrowings hereunder and the use of the proceeds
thereof, will not violate any material Requirement of Law or any material
Contractual Obligation, of the Borrower or the Guarantor, and will not result
in, or require, the creation or imposition of any Lien on any of its or their
respective properties or assets pursuant to any Requirement of Law or
Contractual Obligation except for the Liens granted pursuant to the Loan
Documents.
9.9 No Litigation. To the best knowledge of each of the Borrower and the
Guarantor, no litigation, investigation, or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge of the
Borrower or the Guarantor, threatened by or against the Borrower or any of its
Subsidiaries or against any of its or their respective properties or revenues
(i) with respect to this Agreement or the other Loan Documents or any of the
transactions contemplated hereby, or (ii) which is likely to have a Material
Adverse Effect.
9.10 No Default. Neither the Borrower nor any of its Subsidiaries is in
default under or with respect to any Contractual Obligation in any respect which
is likely to have a Material Adverse Effect. No Default or Event of Default has
occurred and is continuing.
9.11 No Burdensome Restrictions. No Contractual Obligation of the Borrower
or any of its Subsidiaries in effect on the date hereof and no Requirement of
Law in effect on the date hereof materially adversely affects, or insofar as the
Borrower may reasonably foresee may so affect, the business, operations,
property or financial or other condition of the Borrower and the Guarantor or
the ability of the Borrower and/or the Guarantor, as the case may be, to perform
any of its obligations under this Agreement or the other Loan Documents.
9.12 Taxes. Each of the Borrower and its Subsidiaries has filed or caused
to be filed all tax returns which to the knowledge of the Borrower are required
to be filed and has paid all taxes shown to be due and payable on said returns
or on any assessments made against it or any of its property and all other
taxes, fees or other charges imposed on it and any of its property by any
Governmental Authority (other than those the amount or validity of which is
currently being contested in good faith by appropriate proceedings and, if
applicable, with respect to which reserves in
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conformity with GAAP have been provided on the books of the Borrower or its
Subsidiaries, as the case may be); and no tax Liens have been filed and, to the
knowledge of the Borrower, no claims are being asserted with respect to any such
taxes, fees or other charges.
9.13 Financial Condition. The consolidated balance sheet of the Borrower
and its consolidated Subsidiaries as of June 30, 1999 and the related
consolidated statements of operations and the related consolidated statement of
shareholders' equity for the Fiscal Year ended on such date (certified by BDO
Seidman), present fairly in all material respects the consolidated financial
condition of the Borrower and its consolidated Subsidiaries as at such dates,
and the consolidated results of their operations for the Fiscal Year and the
interim period then ended. Neither the Borrower nor any of its consolidated
Subsidiaries had, at the date of the balance sheet for the period ended June 30,
1999 referred to above, any material Contingent Obligation, contingent liability
or liability for taxes, long term lease or unusual forward or long term
commitment, which is required to be reflected on such financial statements other
than such obligation which are so reflected or adequately reserved against in
the foregoing statements or in the notes thereto.
9.14 Subsidiaries. At the date of this Agreement the Borrower has no
Subsidiaries other than the Guarantor, and the Borrower owns all of the
outstanding voting shares of each such Subsidiary.
9.15 Government Regulation. (a) Neither the Borrower nor any of its
Subsidiaries is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or a "holding company", or a "subsidiary
company" of a "holding company", or an "affiliate" of a "holding company", or of
a "subsidiary company" or a "holding company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
(b) No part of the proceeds of any Loans hereunder will be used as "purpose
credit" within the meaning of such term under Regulations U or G of the Board of
Governors of the Federal Reserve System as now and from time to time hereafter
in effect, if such use would violate the provisions of Regulations U or G.
9.16 Licenses, Permits. Each has all permits, certificates, licenses
(including patent and copyright licenses), approvals and other authorizations
required in connection with the operation of their businesses, except any such
permits the ineffectiveness of which is not likely to have a Material Adverse
Effect.
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9.17 No Federal Tax or ERISA Liens. No notice of or any other document or
instrument creating any federal tax Lien or Lien under Section 412 of the Code
or Section 4068 of ERISA has been issued, recorded or filed with respect to the
assets of the Borrower or any of its Subsidiaries.
9.18 Existing and Additional Indebtedness; Contingent Obligations. There
exists no (i) Indebtedness of the Borrower or the Guarantor secured by a Lien on
any of its Assets, except, without duplication, for the Obligations, and
Indebtedness secured by Permitted Liens, or (ii) Contingent Obligation of the
Borrower or the Guarantor secured by a Lien on any of its Assets, except,
without duplication, for the Obligations.
9.19 Marketing Services and Product Licensing Agreements. Neither the
Borrower nor the Guarantor is a party to any Marketing Services Agreements or
Product Licensing Agreements, and each of the Existing Marketing Service
Agreements and Product Licensing Agreements have been terminated and are of no
further force and effect.
9.20 Leased and Warehouse Premises. Other than the locations specified on
Schedule 8.4(A), no assets of the Borrower or the Guarantor are kept at any
warehouse other than warehouses of warehousemen which have executed
warehousemen's notification of security interest and waiver of lien letters, in
form and substance satisfactory to the Agent.
9.21 Farm Products. Neither the Borrower nor the Guarantor has received,
within one (1) year before the sale of any farm products (as such term is
defined in the Uniform Commercial Code) to the Borrower or the Guarantor, notice
from the secured party of the seller or the seller of such farm products of the
existence of any security interest in such farm products.
SECTION 10: COVENANTS OF BORROWER
So long as the Commitment remains in effect, any Loan is outstanding, or
any other Obligation remains unpaid, the Borrower and the Guarantor, jointly and
severally, shall:
10.1 Financial Statements. Furnish to each Bank substantially
contemporaneously, each of the following materials in identical form and
substance:
(a) as soon as available, but in any event within ninety (90) days after
the last day of each of its Fiscal Year ends, the Form 10-K report of the
Borrower and its Subsidiaries as at the end
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of such Fiscal Year and statements of income and retained earnings and cash
flows for such Fiscal Year each prepared in accordance with GAAP and audited by
a firm of independent certified public accountants reasonably satisfactory to
the Banks (with such audit to be accompanied by an unqualified opinion of such
independent certified public accountant (other than immaterial qualifications)
without limitation as to the scope of such audit), together with management
prepared consolidated and consolidating balance sheets. Management shall provide
an itemized statement of capitalized expenses, including, but not limited to,
Slotting Fees, which shall be broken out on the management balance sheet, and
any expenses related thereto shall be itemized on the management income
statement. Management shall also provide a breakdown of selling, general and
administrative expenses. Notwithstanding the foregoing, if the Borrower has been
granted an extension from filing its Form 10-K report by the Securities and
Exchange Commission, then the reports required hereunder shall be due
simultaneously with the filing thereof, but in no event later than one hundred
and ten (110) days from the last day of its Fiscal Year.
(b) as soon as available, but in any event within forty-five (45) days
after the close of each of the first three quarters of each Fiscal Year, Form
10-Q report and management prepared consolidated and consolidating balance
sheets, statements of income and retained earnings and cash flows of the
Borrower and its 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 certified by the chief financial or
accounting officer of the Borrower as having been prepared in accordance with
GAAP (subject to year-end adjustments and other exceptions specified therein).
Management shall provide an itemized statement of capitalized expenses,
including, but not limited to, Slotting Fees, which shall be broken out on the
prepared balance sheet, and any expenses related thereto shall be itemized on
the prepared income statement. Management shall also provide a breakdown of
selling, general and administrative expenses. Notwithstanding the foregoing, if
the Borrower has been granted an extension from filing its Form 10-Q report by
the Securities and Exchange Commission, then the reports required hereunder
shall be due simultaneously with the filing thereof, but in no event later than
fifty (50) days from the last day of its Fiscal Year.
All such financial statements required by this Section 10.1 are to be
prepared in reasonable detail and in accordance with GAAP applied consistently
throughout the periods reflected therein (except (i) as approved by such
accountants or the chief financial
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officer of the Borrower, as the case may be, and disclosed therein and (ii) with
respect to any interim statements which may not include all disclosure required
by GAAP).
10.2 Certificates; Other Information. Furnish to each Bank:
(a) at the same time as it delivers the financial statements called for by
subparagraphs (a) and (b) of Section 10.1, the Borrower shall deliver (i) a
certificate of the chief financial or accounting officer of the Borrower
substantially in the form of Exhibit C annexed hereto, demonstrating compliance
with the financial covenants set forth in Section 10.14, 10.20 and 10.27,
together with the computations necessary in order to determine said compliance
(such computation to be presented in a format, and conducted based on a
methodology, in each case acceptable to the Banks), and (ii) an Equipment Lease
Obligations Present Value Schedule;
(b) from time to time as requested by the Agent or any Bank, but no more
often than twice a year, provide each Bank with a written acknowledgment, in
form and substance satisfactory to each Bank, from the Borrower's and the
Guarantor's accountant acknowledging that the Banks are relying on the
accountant's professional accounting services to the Borrower and Guarantor, and
the Borrower's and Guarantor's knowledge of each Bank's reliance;
(c) within one hundred twenty (120) days after the Fiscal Year end of the
Borrower, furnish annual projections for the next succeeding Fiscal Year in a
form reasonably acceptable to the Banks;
(d) by the fifteenth (15th) day of each calendar month, a complete
Receivables and accounts payable aging report and a report of the aggregate
dollar value of all Inventory held by the Borrower for the month just ended,
such reports to be in form and substance reasonably satisfactory to the Banks;
supporting documentation shall include evidence of payment made thereon;
(e) by the fifteenth (15th) day of each month, furnish a monthly Borrowing
Base Certificate certified by the chief financial or accounting officer of the
Borrower;
(f) from time to time, provide to the Agent and the Banks the information
described in Section 10.30(b);
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(g) promptly upon the filing or dissemination of the same, copies of any
and all public disclosures of the Borrower of a financial nature, whether
required by the Securities and Exchange Commission or otherwise, including,
without limitation any reports on Form 8-K (or successor form), or any press
releases, proxy or registration statements; and
(h) furnish such other reports and information as the Agent or any Bank may
reasonably require.
10.3. Payment of Obligations. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all its
material obligations of whatever nature, except when the amount or validity
thereof is currently being contested in good faith and reserves in conformity
with GAAP with respect thereto have been provided on the books of the Borrower
or its Subsidiaries.
10.4 Conduct of Business and Maintenance of Existence. Continue to engage
principally in the businesses of the same general type now conducted by it and
preserve, renew and keep in full force and effect its corporate existence and
take all reasonable action to maintain all rights, privileges, licenses and
franchises necessary or desirable as determined in the normal conduct of its
business and comply in all material respects with all material Contractual
Obligations and Requirements of Law.
10.5 Inspection of Property; Books and Records; Discussions. Keep proper
books of records and account in which full, true and correct entries in
conformity in all material respects with GAAP and all Requirements of Law shall
be made of all dealings and transactions in relation to its business and
activities; and permit representatives of the Agent and/or each Bank, including,
without limitation, any consulting/accounting firm, auditors, appraisers or
other professionals engaged by the Agent and/or such Bank to visit and inspect
any of its properties and examine and make abstracts from any of its books and
records upon reasonable notice and at any reasonable time during normal business
hours; provided, however that unless a Default shall have occurred and be
continuing, such visits shall not exceed more than two (2) per year, and to
discuss the business, operations, properties and financial and other condition
of the Borrower and its Subsidiaries with officers and employees of the Borrower
and its Subsidiaries and with its independent certified public accountants. The
Borrower and the Guarantor shall, at the request of the Agent and/or any Bank,
each take all steps necessary to facilitate any such inspection, audit,
appraisal and/or verification and, without limiting the generality of the
foregoing, shall each use its best efforts to cause its
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employees to cooperate with the Agent and/or any such Bank in this regard, and
the Agent and/or any such Bank shall use reasonable efforts not to disrupt the
day-to-day business of the Borrower and/or the Guarantor. The Agent and the
Banks agree to take appropriate measures to protect any proprietary and/or
confidential information of the Borrower and its Subsidiaries consistent with
the Agent's and such Bank's internal policies and procedures with respect to the
maintenance of customer's confidential information. The Agent may, from time to
time, engage a consulting/accounting firm, auditors, appraisers and/or other
professionals to conduct a review of the operations of the Borrower and
Subsidiaries or to assist the Agent in connection with the exercise or
enforcement of any right, power, privilege or remedy under this Agreement, the
Loan Documents and/or applicable law. Upon request, the Agent shall provide the
Borrower with such reasonable assurances that such other professionals shall
adhere to the aforementioned policies and procedures regarding customer
confidential information. The reasonable costs of any such reviews shall be paid
by the Borrower upon demand.
In addition to the foregoing, the Borrower and Guarantor agree that the
Agent shall be permitted to conduct Asset based audits twice each calendar year
upon reasonable notice from the Agent to the Borrower; the costs of such audits
to be paid by the Borrower.
10.6 Notices. Promptly give notice to the Agent and the Banks of:
(a) the occurrence of any Default or Event of Default;
(b) the occurrence of any default (howsoever characterized or defined)
under or in connection with the New Senior Subordinated Notes;
(c) any (i) default or event of default under any Contractual Obligation
(including under the Loan Documents) of the Borrower or any of its Subsidiaries
or (ii) litigation, investigation or proceeding which may exist at any time
between the Borrower or any of its Subsidiaries and any Governmental Authority
and (iii) any other material litigation or proceeding affecting the Borrower or
any of its Subsidiaries, and in addition, will furnish to the Agent within
ninety (90) days after the end of each Fiscal Year, a summary of all such
litigation, investigations or proceedings;
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(d) the following events, as soon as possible and in any event within
thirty days after the Borrower knows or has reason to know thereof: (1) the
occurrence of any Reportable Event with respect to any Plan; (ii) the occurrence
of a prohibited transaction (as defined in Section 406 of ERISA or Section 4975
of the Code) with respect to any Plan, (iii) the institution of proceedings or
the taking or expected taking of any other action by PBGC or the Borrower or any
ERISA Affiliate to terminate or withdraw or partially withdraw from any Plan
and, with respect to a Multiemployer Plan, the Reorganization or Insolvency of
such Multiemployer Plan (as such terms are defined in ERISA), (iv) the failure
of the Borrower or a ERISA Affiliate to make a required installment under
Section 412(m) of the Code or any other payment required under Section 412 of
the Code on or before the due date or (v) the adoption of an amendment with
respect to a Plan so that the Borrower or a ERISA Affiliate is required to
provide security to the Plan under Section 401(a)(29) of the Code, and in
addition to such notice, delivery to the Agent of a certificate of a Responsible
Officer setting forth details relating thereto, and the action that the
Borrower, ERISA Affiliate or ERISA Affiliate proposes to take with respect
thereto and when known, any action taken or threatened by the Internal Revenue
Service or the PBGC, together with a copy of any notice to the PBGC or IRS or
any notice delivered by the PBGC or IRS; and
(e) a material adverse change in the business, operations, property or
financial or other condition of the Borrower and Subsidiaries from that which
existed on June 30, 1999. Each notice pursuant to this Section shall be
accompanied by a statement of a Responsible Officer setting forth details of the
occurrence referred to therein and stating what action the Borrower and/or
Subsidiary proposes to take with respect thereto.
10.7 Use of Proceeds. Use the proceeds of the Loans for general operating
and working capital purposes in the conduct of its business.
10.8 Other Agreements. Not enter into any agreement containing any
provision which would be violated or breached by the performance of Borrower's
obligations hereunder.
10.9 Insurance. Maintain insurance (with respect to the Collateral as well
as comprehensive liability and casualty insurance) of such types, in such
amounts and against such risks as is customary in the case of companies engaged
in a similar business with financially sound and reputable insurance companies,
and in form and substance reasonably satisfactory to the Agent, which policy
shall name the Agent as loss payee and include a thirty (30)
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day notice of cancellation clause. Borrower shall furnish to the Agent, upon
request of the Agent a copy of such policy and proof that all premiums
theretofore owing have been paid in full.
10.10 Taxes. Pay when due all federal, state or local or foreign taxes,
levies, assessments, charges or claims except when the amount or validity
thereof is currently being contested in good faith and reserves in conformity
with GAAP with respect thereto have been provided for on its books.
10.11 ERISA. The Borrower and any ERISA Affiliate will not:
(i) knowingly engage in any transaction in connection with which the
Borrower could be subject to either a material civil penalty assessed pursuant
to Section 502(i) of ERISA or a tax imposed by Section 4975 of the Code; or
(ii) fail to make any payments when due to any Multiemployer Plan which the
Borrower or any ERISA Affiliate may be required to make under any agreement
relating to such Multiemployer Plan or any law pertaining thereto. The Borrower
agrees (x) upon the request of the Agent to obtain a current statement of
withdrawal liability from each Multiemployer Plan to which the Borrower or an
ERISA Affiliate contributes or to which the Borrower or an ERISA Affiliate has
an obligation to contribute and (y) to transmit a copy of such statement to the
Agent within fifteen (15) days after the Borrower receives the same.
10.12 Further Documentation. At any time and from time to time, upon the
request of the Agent and at the sole expense of the Borrower, the Borrower shall
promptly and duly execute and deliver such further instruments and documents and
take such further action as the Agent may reasonably request for the purpose of
obtaining or preserving the security interest granted to the Agent hereunder and
of the rights and powers granted herein, including, without limitation, the
filing of any financing, amendment or continuation statements under the Uniform
Commercial Code. The Borrower hereby irrevocably constitutes and appoints the
Agent with full power of substitution, as its true and lawful attorney-in-fact
with full irrevocable power and authority in the place and stead of the Borrower
and in the name of the Borrower or in its own name, from time to time in the
Agent's discretion, to execute and file, in Borrower's name and on its behalf,
any Uniform Commercial Code financing, amendment or continuation statement. The
Borrower hereby ratifies all that said attorney shall lawfully do or cause to be
done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
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10.13 Intentionally Deleted
10.14 Financial Covenants.
(a) Tangible Net Worth. Not permit its Tangible Net Worth to be less than
$20,000,000, which Tangible Net Worth Requirement shall be increased each fiscal
quarter, commencing with the fiscal quarter ending September 30, 1999 by the
greater of (i) 75% of Consolidated Net Earnings for such fiscal quarter, and
(ii) $0; provided, however, that the minimum Tangible Net Worth requirements set
forth above shall be reduced by any reduction in Tangible Net Worth resulting
solely from the purchase by the Borrower of treasury stock during the relevant
fiscal quarters, provided that the aggregate amount of all such reductions may
not exceed $3,200,000.
(b) Leverage Ratio. Maintain at all times, to be tested at the end of each
fiscal quarter, a ratio of total consolidated liabilities of the Borrower and
its Subsidiaries plus the present value of future minimum Equipment Operating
Lease payments (said present value to be determined based on a discount rate
determined based on the rates utilized to determine the rental obligation under
the relevant Equipment Operating Leases, as demonstrated on the most recent
Equipment Lease Obligation Present Value Schedule delivered by the Borrower to
the Banks) less Subordinated Debt to consolidated Tangible Net Worth of the
Borrower and its Subsidiaries plus Subordinated Debt in a proportion not more
than 2.50 to 1.00 (total consolidated liabilities to be determined in accordance
with GAAP). Notwithstanding the foregoing, a failure to comply with the ratio
set forth in this covenant which occurs solely from the purchase by the Borrower
of treasury stock shall not constitute an Event of Default under Section
12.1(c), so long as the ratio set forth in this covenant (i) is less than 2.75
to 1.00 at all times, and (ii) returns to a ratio of less than 2.50 to 1.00
within two (2) fiscal quarters following the fiscal quarter in which Borrower
first failed to comply.
(c) Minimum Debt Service Coverage Ratio. Maintain at all times, to be
tested at the end of each fiscal quarter on a rolling four (4) quarter basis, a
ratio of earnings, before interest, dividends (including interest to preferred
stockholders, if any), taxes, depreciation and amortization and Equipment
Operating Leases obligations and non-cash transactions, divided by the current
portion of long-term debt at such time, plus cash interest expense, plus
dividends (including interest to preferred stockholders, if any), of not less
than 1.30 to 1.00 ("long term debt" means indebtedness for borrowed money which
by its terms matures more than 12 months after the date incurred or if maturing
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sooner, the maturity thereof may be extended at the option of the debtor beyond
such 12 month period; for purposes hereof, long term debt shall include
obligations under Capitalized Leases and Equipment Operating Leases).
(d) Fixed Charge Ratio. Not permit to be tested at the end of each fiscal
quarter on a rolling four (4) quarter basis, the ratio of Consolidated Cash Flow
and Operating Lease Expense to Consolidated Fixed Charges to be less than 1.25
to 1 at any time prior to the Fiscal Year ending June 30, 2001, and 1.5 to 1 at
all times thereafter.
(e) Consolidated Net Worth. Maintain at all times a Consolidated Net Worth
of not less than $10,703,000, which Consolidated Net Worth requirement shall be
increased commencing with the Fiscal Year ending June 30, 1999 (and which shall
be maintained during each fiscal quarter of the ensuing Fiscal Year) by the
greater of (i) 50% of Consolidated Net Earnings for such Fiscal Year, and (ii)
$0.
10.15 Limitation on Liens. (i) Not create, incur, assume or suffer to exist
any Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except Liens in favor of the Agent for the ratable benefit
of the Banks, and:
(a) Liens for taxes not yet due or which are being contested in good faith
and by appropriate proceedings if adequate reserves with respect thereto are
maintained on the books of the Borrower or the appropriate Subsidiary, as the
case may be, in accordance with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's,
vendor's, lessor's or other like Liens arising in the ordinary course of
business which are not overdue or which are being contested in good faith and by
appropriate proceedings and for which adequate reserves have been made;
(c) pledges or deposits in connection with worker's compensation,
unemployment insurance and other social security legislation;
(d) deposits to secure the performance of bids, trade contracts (other than
for borrowed money), leases, letters of credit, statutory obligations, custom,
surety and appeal bonds, performance bonds and other obligations of a like
nature incurred in the ordinary course of business;
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(e) easements, rights-of-way, restrictions and other similar encumbrances
incurred in the ordinary course of business which, in the aggregate, are not
substantial in amount, and which do not in any case materially detract from the
value of the property subject thereto or interfere with the ordinary course of
the business of the Borrower or any of its Subsidiaries;
(f) Liens on the assets of Subsidiaries securing Indebtedness owing to the
Borrower so long as such Indebtedness and Liens are assigned to the Agent;
(g) Liens granted with respect to real and/or tangible or intangible
personal property, which property is acquired after the date hereof (by
purchase, construction or otherwise) by the Borrower or any Subsidiary, each of
which Liens were incurred solely to finance, refinance or refund, the cost
(including the cost of construction) of the respective property; provided that
no such Lien shall extend to or cover any property of the Borrower or any such
Subsidiary other than the respective property so acquired and improvements
thereon;
(h) Liens granted to Persons in respect of Capitalized Leases of Equipment
and Equipment Operating Leases solely upon the equipment so leased; and
(i) the Liens created by, or in connection with, the Fleet Mortgage
(collectively, the Liens described in clauses (a) through (i) above are referred
to herein as the "Permitted Liens").
(ii) Not permit to exist any Contractual Obligation binding upon it which
would preclude, limit or otherwise restrict the ability of the Borrower to
pledge, or otherwise grant or create a Lien on, any class of stock of any
Subsidiary.
10.16 Limitation on Fundamental Changes. (a) Not enter into any transaction
of merger or consolidation (other than in a transaction to which the Borrower
and the Guarantor are the only parties and provided, that, the Borrower is the
surviving entity of any such merger or consolidation or amalgamation); or
liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution).
(b) Not form or acquire any Subsidiaries other than the Guarantor which
would have a Material Adverse Effect, provided that the foregoing shall not
apply to the formation under the laws of any State of the United States of any
new wholly-owned Subsidiary of the Borrower to do business in the United States,
so long as such new subsidiary executes and delivers in favor of the Agent a
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guaranty and security agreement on substantially the same terms as set forth in
Section 7 and 8, respectively, as well as resolutions of its board of directors
authorizing same.
10.17 Limitation on Sale of Assets. Not sell, lease, assign, transfer or
otherwise dispose of, or give options to purchase any of its Assets (including,
without limitation, Receivables and leasehold interests) whether now owned or
hereafter acquired, and whether or not leased back except (i) dispositions of
Inventory or used-worn out, obsolete or surplus Equipment in the ordinary course
of business and (ii) dispositions of Assets to or from the Guarantor to or from
the Borrower, as the case may be, so long as such dispositions are in the
ordinary course of business consistent with past practices.
10.18 Limitation on Dividends. Not (i) declare or pay any dividends (other
than lawful dividends to the Borrower from the Guarantor, dividends to
stockholders of the Borrower payable in shares of common stock and cash
dividends to holders of the preferred stock of the Borrower (if the issuance of
preferred stock is permitted pursuant to Section 10.21(c) hereof), so long as no
Event of Default has occurred), (ii) purchase, redeem, retire, or otherwise
acquire for value any of its stock now or hereafter outstanding in excess of
$3,200,000 in the aggregate for the Borrower and Guarantor, or (iii) make any
distribution of Assets to its stockholders as such, whether in the form of other
Assets or obligations, (iv) allocate or otherwise set apart any sum for the
payment of any dividend (other than lawful dividends to the Borrower from the
Guarantor) or distribution on, or for the purchase, redemption, or retirement
of, any shares of its stock, or (v) make any other distribution by reduction of
capital or otherwise in respect of any shares of its stock, or (vi) permit the
Guarantor to purchase or otherwise acquire for value any stock of the Borrower
in excess of $3,200,000 in the aggregate for the Borrower and Guarantor.
10.19 Investments. Not directly or indirectly, make or suffer to exist any
investment (by way of transfer of Assets, contributions to capital, purchase of
Stock or other securities or evidence of Indebtedness, acquisition of the
business or assets, or otherwise) in, or make or suffer to exist any advances or
loans to, any Person, except for:
(i) loans by the Borrower to the Guarantor in the ordinary course of
business consistent with past practices;
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(ii) loans or advances by the Borrower to shareholders or employees of the
Borrower outstanding on June 30, 1999, which amount is acknowledged to be
$12,618;
(iii) advances to employees for business related purposes; such advances
not to exceed $50,000 in the aggregate for the Borrower and the Guarantor, taken
as a whole, in each Fiscal Year;
(iv) Accounts arising in the ordinary course of business;
(v) investments in certificates of deposit of a banking institution having
assets in excess of $100,000,000 or in securities of the United States of
America or commercial paper with not less than a Pl (or equivalent) rating (all
of the foregoing maturing within one (1) year), which investments, in the
aggregate, do not exceed $100,000 at any time and are not made with the proceeds
of any Loan; and
(vi) transactions permitted by Sections 10.16 and 10.21 hereof.
10.20 Existing and Additional Indebtedness. (a) Not in any way, directly or
indirectly, create, incur, assume, guaranty, or suffer to exist, agree to
purchase or repurchase, pay or provide funds in respect of, or otherwise become,
be or remain liable, contingently, directly or indirectly, with respect to any
Indebtedness other than:
(i) Indebtedness of the Borrower or the Guarantor owing to the Agent under
this Agreement, the Notes or any other Loan Document;
(ii) other Indebtedness of the Borrower or the Guarantor owing to Fleet;
(iii) Indebtedness arising from the New Senior Subordinated Notes;
(iv) Indebtedness existing on the date of Closing that is described on
Schedule 10.20 hereof; and
(v) Indebtedness secured by the Permitted Liens permitted to exist pursuant
to clauses (g) or (h) of Section 10.15 hereof; provided, however, that in no
event shall the Borrower and the Guarantor be permitted to incur additional
Indebtedness under this clause (v) for the period commencing June 30, 1999,
through and
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including November 2, 2001, in excess of $15,000,000 in the aggregate.
(b) Not cancel any Account, claim or other debt, except for adequate
consideration or in the ordinary course of business; provided, however, that the
foregoing shall not prohibit the compromise or discount of Accounts in the
ordinary course of business consistent with past practice.
10.21 Other Transactions. (a) Not knowingly enter into any transaction
which (if not otherwise prohibited by the terms of the Loan Documents)
materially and adversely affects its ability to repay the Obligations or its
other Indebtedness and other liabilities.
(b) Not enter into any transaction with any Affiliate, or with any of its
shareholders or an Affiliate thereof, except on an arms'-length basis.
(c) Not make any material change in its capital structure, except
transactions allowed by Section 10.16 hereof or in any of its businesses or
their objectives, purposes and operations; provided, however that, the foregoing
shall be deemed not to prohibit (i) a secondary offering of the Borrower's
common stock and (ii) offerings of its preferred stock in an amount not to
exceed $3,000,000 in the aggregate, and in either case the foregoing shall only
be permitted if after giving effect to any such transaction, the covenants set
forth in Section 10.14 would not be violated.
10.22 Environmental Liabilities. Not violate any Requirement of Law, rule
or regulation regarding Hazardous Material; and, without limiting the foregoing,
dispose of (or permit any Person to dispose of) any Hazardous Material into or
onto, or (except in accordance with applicable law) from, any real property
owned or operated by the Borrower or any of its Subsidiaries, nor allow any Lien
imposed pursuant to any Requirement of Law relating to Hazardous Materials or
the disposal thereof to be imposed or to remain on such real property, which
violation or Lien would have a Material Adverse Effect.
10.23 Warehousemen's Waivers. As soon as available, but in any event no
later than sixty (60) days from the date hereof, deliver to the Agent warehouse
lien waivers, in form and substance acceptable to the Agent, from each warehouse
where the Borrower or Guarantor warehouses inventory at each location set forth
on Schedule 8.4 hereto (other than those locations set forth on Schedule 8.4(A),
which are excluded from the Borrowing Base),
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subordinating the warehouseman's lien to the lien of the Agent. At any time
after sixty (60) days from the date hereof, neither Borrower nor Guarantor shall
keep any Assets at any leased or warehouse location other than those locations
set forth on Schedule 8.4 hereto (other than those locations set forth on
Schedule 8.4(A), which shall continue to be excluded from the Borrowing
Base,unless an acceptable waiver is obtained), without obtaining, prior to the
locating of any Assets at any leased or warehouse location, a Landlord's Waiver
of Lien or a Warehousemen's Notification of Security Interest and Waiver of Lien
Letter (in form and substance satisfactory to the Agent, as applicable, from the
landlord or warehouseman, as the case may be.
10.24 Collateral. Maintain the Collateral, as the same is constituted from
time to time, free and clear of all Liens, except those in favor of the Agent
and the Permitted Liens; defend the Collateral against all claims and demands of
all Persons at any time claiming the same or any interest therein and pay all
costs and expenses incurred in connection with such defense.
10.25 Intentionally Omitted.
10.26 Trademarks. Not grant any Person any exclusive license to use the
Trademarks.
10.27 Limitation on Capital Expenditures. Expend in the aggregate, for the
Borrower and all Subsidiaries, in excess of the amount set forth opposite the
Fiscal Year ending the date set forth below for Capital Expenditures including
payments made on account of Capitalized Leases and Equipment Operating Lease
Obligations, to be tested on a quarterly basis. For purposes of the foregoing,
Capital Expenditures shall include equipment acquired under direct purchases,
bank financing, Equipment Operating Leases and payments made on account of any
deferred purchase price or on account of any indebtedness incurred to finance
any such purchase price:
Fiscal Year End Capital Expenditures
--------------- --------------------
6/30/00 $8,000,000
6/30/01 $2,000,000
For each Fiscal
Year thereafter $5,000,000
provided, however, if the Capital Expenditure limit for Fiscal Year 2000 is not
fully utilized in such Fiscal Year, the unused balance may be carried forward to
Fiscal Year 2001.
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10.28 Marketing Services Agreement. Not enter into any Marketing Services
Agreement.
10.29 Maintain Operating Accounts. Maintain all of their primary operating
accounts with the Agent.
10.30 Regarding the New Senior Subordinated Notes. (a) Without the express
written consent of the Required Banks: (i) the Borrower shall not directly or
indirectly, amend, modify, supplement, waive compliance with, or assent to
noncompliance with, any term, provision or condition of any of the documents
evidencing or governing the New Senior Subordinated Notes or (ii) repurchase,
redeem or voluntarily prepay in whole or in part, any principal, interest or
other amounts payable in respect of the New Senior Subordinated Notes, or take
any action, or set aside any reserves, in furtherance of the foregoing. For
purposes of this Section 10.30, the performance by the Borrower of its
obligations in respect of, and payment of amounts required to be paid under the
provisions of the New Senior Subordinated Notes and of Section 1.1, Section 1.2,
Section 1.3, Section 1.5, Section 1.6 and Section 6.2(a) of the Note Agreement,
as in effect on the closing date of the Note Agreement, shall not be deemed to
be a repurchase, redemption or voluntary prepayment of principal, interest or
other amounts in respect of the New Senior Subordinated Notes within the meaning
of Section 10.30 of this Agreement. The foregoing, however, shall in no event be
construed by the Borrower or any other Person as a consent to, waiver of, or
other form of forbearance of, any right or remedy that the Agent or any Bank may
have hereunder, or any right of the Agent or any Bank may have as a third party
beneficiary under the Note Agreement insofar as such rights or remedies arise
out of the facts or circumstances related to the specific sections of the New
Senior Subordinated Notes and Note Agreement referred to above.
(b) Simultaneously with delivery of the same to any holder of the New
Senior Subordinated Notes, the Borrower shall furnish to each Bank any notice,
report, financial statement, certificates, projections or other forms of
information (financial or otherwise) required to be delivered by or on behalf of
the Borrower to such holder pursuant to the documents evidencing or governing
such notes; provided, however, that the Borrower shall have no such obligation
to furnish information pursuant to this clause (b) to the extent that such
information (or substantially the same information) has been furnished to the
Agent pursuant to Section 10.01, 10.02, or 10.06, as the case may be.
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SECTION 11: CONDITIONS OF LENDING
11.1 Initial Loan. The effectiveness of this Agreement and the availability
of Loans hereunder is subject to the receipt of an executed counterpart of this
Agreement by the Borrower and the Guarantor and the following additional
documents prior to the Closing:
(1) the Note to Mellon;
(2) the other Loan Documents, if any;
(3) evidence of insurance naming the Agent as loss payee under a lender's
loss payable endorsement and evidence of payment of the most recently due
premium;
(4) an opinion of counsel for Borrower and Guarantor in form and substance
satisfactory to the Agent;
(5) Good Standing Certificates of the Borrower and Guarantor from the
Secretary of States of New Jersey, New York and California, respectively;
(6) Secretary's Certificates of the Borrower and the Guarantor attaching
incumbency certificate, Certificate of Incorporation, by-laws and resolutions of
the Board of Directors authorizing the transaction;
(7) Borrowing Base Certificate; and
(8) Such other documents as may be reasonably requested by the Agent.
11.2 Conditions to Each Loan. The obligation of the Agent to make any Loan
is subject to the satisfaction of the following conditions precedent on the
relevant borrowing date:
(a) Representations and Warranties. The representations and warranties made
by the Borrower and the Guarantor herein or which are contained in any
certificate, document or financial or other statement furnished by the Borrower
at any time under or in connection herewith shall be correct in all material
respects on and as of such Borrowing Date as if made on and as of such date.
(b) No Default or Event of Default. No Default or Event of Default shall
have occurred and be continuing on such Borrowing Date or after giving effect to
the Loan to be made on such borrowing date. Each borrowing by the Borrower
hereunder shall
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constitute a representation and warranty by the Borrower as of the date of such
borrowing that the conditions in clause (a) and (b) of this Section 11.2 have
been satisfied.
(c) Borrowing Notice. The Agent shall have received a Borrowing Notice.
(d) No Federal Tax or ERISA Liens. No notice of or any other document or
instrument creating any federal tax Lien or Lien under Section 412 of the Code
or Section 4068 of ERISA shall have been issued, recorded or filed with respect
to the assets of the Borrower or any of its Subsidiaries and no Bank shall have
informed the Agent or the Borrower that such Bank has processed any such Lien or
has notice thereof.
SECTION 12: EVENTS OF DEFAULT AND REMEDIES
12.1 Events of Default. Each of the following shall constitute an Event of
Default under this Agreement.
(a) Non-Payment of Principal or Interest. Nonpayment when due of any
principal of or interest due on the Notes, non-payment of any of Borrower's
Obligations when due and payable or declared due and payable or the non-payment
of any of the Guaranteed Obligations when due and payable or declared due and
payable; provided, however, that defaults with respect to payments of fees and
expense shall not constitute an Event of Default hereunder unless such default
shall continue for ten(10) days after notice thereof is given by the Agent to
the Borrower; or
(b) Bankruptcy or Insolvency. The Borrower or the Guarantor becomes
insolvent or generally fails to pay, or admits in writing its inability to pay,
debts as they become due; or the Borrower or the Guarantor applies for, consents
to, or acquiesces in the appointment of, a trustee, receiver, guardian,
conservator or other custodian for the Borrower or the Guarantor or any of the
Borrower's or Guarantor's property, or the Borrower or the Guarantor makes a
general assignment for the benefit of creditors; or, in the absence of such
application, consent or acquiescence, a trustee, receiver, guardian, conservator
or other custodian is appointed for the Borrower or any Guarantor or for a
substantial part of the Borrower's or such Guarantor's property and is not
discharged within 30 days; or any bankruptcy, reorganization, debt arrangement
or other case or proceeding under any bankruptcy or insolvency law, or any
liquidation proceeding, is commenced in respect of the Borrower or any
Guarantor, and if such case or proceeding is not commenced by the Borrower or
such Guarantor, it
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is consented to or acquiesced in by the Borrower or such Guarantor or remains
undismissed for 60 days; or
(c) Non-Compliance with Certain Covenants. The Borrower or the Guarantor
shall fail in the observance or performance of any covenant or agreement set
forth in Sections 10.4, 10.14, 10.15, 10.16, 10.17, 10.19, 10.20, 10.21(c),
10.22, 10.24, 10.26, 10.27, 10.28 or 10.30(a); or
(d) Non-Compliance with Other Terms of this Agreement or any of the other
Loan Documents. Failure by the Borrower or the Guarantor to comply with or to
perform any provision of this Agreement or the other Loan Documents (and not
constituting an Event of Default under any of the preceding or following
provisions of this Section 12 or under any specific provision set forth in the
other Loan Documents) and continuance of such failure for thirty (30) days after
notice thereof to the Borrower from the Agent; or
(e) Warranties. Any representation or warranty made by the Borrower and/or
the Guarantor herein is breached or is false or misleading in any material
respect or omits to state a material fact when made, or any schedule,
certificate, financial statement, report, notice, or other writing furnished by
the Borrower and/or the Guarantor to the Agent is false or misleading in any
material respect or omits to state a material fact on the date as of which the
facts therein set forth are stated or certified; or
(f) Defaults under other Agreements. The Borrower or the Guarantor defaults
under (i) any Contingent Obligation, loan, extension of credit, security
agreement, mortgage or other agreement with respect to Indebtedness to a third
party (including, but not limited to, the New Senior Subordinated Notes) other
than the Notes, or (ii) any Contingent Obligation, loan, extension of credit,
security agreement, mortgage or other agreement with respect to Indebtedness to
any Bank, other than as such is evidenced by the Loan Documents, including but
not limited to, the Fleet Mortgage Loan, and such default is declared and is not
cured within the time, if any, specified therefor in any agreement covering
same; or
(g) Collateral. If any portion of the Collateral or any other assets of
Borrower or the Guarantor are attached, seized, subjected to a writ or distress
or warrant, or are levied upon or come within the possession of any receiver,
trustee, custodian or assignee for the benefit of creditors and the same is not
terminated or dismissed within thirty (30) days or if a notice of lien, levy or
assessment of record is filed against the Collateral; or
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(h) Guaranty. If the Guarantor terminates, purports to terminate or takes
any steps which have the effect of decreasing its liability hereunder; or
(i) Ownership. If (i) the Guarantor ceases to be a wholly owned subsidiary
of the Borrower, or (ii) either Mark Cocchiola or Paul Lauriero is no longer
actively involved in the day to day management of the Borrower and the Guarantor
as President and Executive Vice President, respectively, in substantially the
same manner as presently exist; or
(j) Judgements. One or more judgements, decrees, arbitration awards or
rulings shall be entered against the Borrower and/or the Guarantor involving in
the aggregate a liability (not paid or in the opinion of the applicable insurer,
fully covered by insurance) of $100,000 or more and all such judgements,
decrees, awards and rulings shall not have been vacated, paid, discharged,
stayed or bonded pending appeal within sixty(60) days from the entry thereof; or
(k) ERISA. (i) if any Person shall engage in any "prohibited transaction"
(as defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) 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 Multiemployer Plan, which Reportable Event or
institution of proceedings or appointment of a trustee is likely to result in
the termination of such Multiemployer Plan for purposes of Title IV of ERISA,
and, in the case of a Reportable Event, the continuance of such Reportable Event
unremedied for ten days after notice of such Reportable Event pursuant to
Section 4043(a), (c) or (d) of ERISA is given and, in the case of the
institution of proceedings, the continuance of such proceedings for ten days
after commencement thereof, (iii) the Borrower or an ERISA Affiliate incurs a
partial or complete withdrawal from a Multiemployer Plan or (iv) any other event
or condition shall occur or exist, with respect to a Plan or Multiemployer Plan;
and in each case in clauses (i) through (iv) above, such event or condition,
together with all other such events or conditions, if any, could subject the
Borrower or any of its Subsidiaries to any tax, penalty or other liabilities in
the aggregate material in relation to the business, operations, property or
financial or other condition of the Borrower; or
(l) Farm Products. If the Borrower and/or Guarantor shall be notified of a
security interest created by the seller of any farm products in any farm
products sold to Borrower or Guarantor or a financing statement shall have been
filed in respect
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of any of the farm products sold to Borrower or Guarantor and such security
interest has not been terminated or waived within thirty (30) days of Borrower's
or Guarantor's receipt of notification thereof; or
(m) Registration. Failure of the Borrower and/or Guarantor to register with
the Secretary of State of each State in which it purchases farm products that
has an established "central filing system" (as such quoted term is defined in
U.S.C.A. 7 ss. 1631(c)) on or before January 15, 1995.
12.2 Effect of Event of Default. If any Event of Default described in
Section 12.1(b) shall occur, the Commitment (if not theretofore terminated)
shall automatically and immediately terminate, and the Notes and the Obligations
and all other amounts payable under the Loan Documents shall become
automatically and immediately due and payable, all without presentment, demand,
protest or notice of any kind. Upon the occurrence of any Event of Default and
during the continuance thereof (other than the event described in Section
12.1(b)), the Agent may (and shall, at the direction of the Required Banks)
declare the Commitment (if not theretofore terminated) to be terminated and may
also declare the Notes, the Obligations, all other amounts payable under the
Loan Documents to be due and payable, whereupon the Commitment shall immediately
terminate and the Notes and the Obligations shall become immediately due and
payable, all without presentment, demand, protest or other notice of any kind.
The Agent shall promptly advise the Borrower of any such declaration, but
failure to do so shall not impair the effect of such declaration. Except as
expressly provided above in this Section presentment, demand, protest and all
other notices of any kind are hereby expressly waived by the Borrower. Upon the
occurrence of any Event of Default and during the continuance thereof, the
Agent, may, at its option (and shall, at the direction of the Required Banks),
exercise any of its rights under this Agreement, the other Loan Documents or any
rights and remedies of a secured party under the Uniform Commercial Code.
12.3 Remedies. (a) Without limiting the generality of the remedies
available to the Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon the Borrower (all and each of
which demands, presentments, protests, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
lease, assign, give option or options to purchase, or otherwise dispose of and
deliver the Collateral or any part
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thereof (or contract to do any of the foregoing) in one or more parcels at
public or private sale or sales, at any exchange, broker's board or office of
the Agent or elsewhere upon such terms and conditions as it may deem advisable
and at such prices as it may deem best, for cash or on credit or for future
delivery without assumption of any credit risk. The Agent shall have the right
upon any such public sale or sales, and, to the extent permitted by law, upon
any such private sale or sales, to purchase the whole or any part of the
Collateral so sold. The Borrower further agrees, at the Agent's request, to
assemble the Collateral and make it available to the Agent at places which the
Agent shall reasonably select, whether at the Borrower's premises or elsewhere.
The Agent shall apply the net proceeds of any such collection, recovery,
receipt, appropriation, realization or sale, after deducting all reasonable
costs and expenses of every kind incurred therein or incidental to the care or
safekeeping of any of the Collateral or in any way relating to the Collateral or
the rights of the Agent hereunder, including, without limitation, reasonable
attorneys' fees and disbursements, to the payment in whole or in part of the
Obligations, in such order as the Agent may elect; and only after such
application and after the payment by the Agent of any other amount required by
any provision of law, including, without limitation, any provision of the
Uniform Commercial Code, need the Agent account for the surplus, if any, to the
Borrower. To the extent permitted by applicable law, the Borrower waives all
claims, damages and demands it may acquire against the Agent arising out of the
exercise by the Agent of any of its rights hereunder. If any notice of a
proposed sale or other disposition of Collateral shall be required by law, such
notice shall be deemed reasonable and proper if given at least 10 days before
such sale or other disposition. The Borrower shall remain liable for any
deficiency if the proceeds of any sale or other disposition of the Collateral
are insufficient to pay the Obligations and the reasonable fees and
disbursements of any attorneys employed by the Agent to collect such deficiency.
(b) In addition to any rights now or hereafter granted under applicable law
and not by way of limitation of any such rights the Borrower and the Guarantor
hereby grant to each Bank, a lien, security interest and right of setoff as
security for all Obligations whether now existing or hereafter arising, upon and
against all deposits, credits, collateral and property, now or hereafter in the
possession, custody, safekeeping or control of any Bank, including any entity
under the control of Fleet Financial Group, Inc., or in transit to any of them.
At any time, without demand or notice to the Borrower or the Guarantor (but with
notice to the Agent), any Bank may set off the same or any part thereof and
apply the same to any Obligation of the Borrower and the
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Guarantor even though unmatured and regardless of the adequacy of any other
collateral securing the Loan. ANY AND ALL RIGHTS TO REQUIRE ANY BANK TO EXERCISE
ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE
OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH
DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER OR THE GUARANTOR ARE HEREBY
KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
12.4 Limitation on Duties Regarding Preservation of Collateral. The Agent's
sole duty with respect to the custody, safekeeping and physical preservation of
the Collateral in its possession, under the Uniform Commercial Code or
otherwise, shall be to deal with it in the same manner as the Agent deals with
similar property for its own account. Neither the Agent, any Bank nor any of
their directors, officers, employees or agents shall be liable for failure to
demand, collect or realize upon all or any part of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of the Borrower or otherwise.
12.5 No Waiver; Cumulative Remedies. The Agent and the Banks shall not by
any act (except by a written instrument pursuant to Section 15.1 hereof), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Event of Default or in any breach of any
of the terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Agent, of any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A waiver by the
Agent of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Agent would otherwise have
on any future occasion. The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any rights or
remedies provided by law.
SECTION 13: BORROWER'S AND GUARANTOR'S INDEMNITY
13.1 Indemnification by Borrower and Guarantor. (a) The Borrower and the
Guarantor, jointly and severally, agree to, and hereby do, indemnify, hold
harmless, protect and defend the Agent and each Bank and each of their
directors, officers, employees, Affiliates (each an "Indemnitee" and,
collectively, the "Indemnitees") from and against any and all liabilities
(including, without limitation, all Environmental Liabilities), obligations,
losses, damages, claims, suits, actions, judgments, demands,
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penalties, fines, attorneys' and consultants' fees, investigation and laboratory
fees, settlements, court costs, damages, costs and expenses of whatever kind or
nature, known or unknown, contingent or otherwise, arising out of, or in any way
related to, any investigative, administrative or judicial proceeding (whether or
not any Indemnitee shall be designated a party thereto) which may be imposed on,
incurred by or asserted against any Indemnitee (whether direct, indirect or
consequential and whether based on any including, without limitation, securities
and commercial laws and regulations, Environmental Laws, under common law or
equity, or on contract or otherwise) in any manner relating to or arising out of
(i) this Agreement, any other Loan Document, or any act, event or transaction
related or attendant thereto, including without limitation, the negotiation,
preparation, execution, delivery, enforcement, performance and administration of
this Agreement, any other Loan Document and any amendment, supplement or other
modification and/or restatement hereof or thereof, (ii) the making or management
of the Loans or the use or intended use of the proceeds of the Loans, (iii) any
present or future acquisition or proposed acquisition by the Borrower or by the
Guarantor of all or any portion of the stock or the assets of any Person whether
or not the Agent or any Bank is a party thereto, (iv) any violation of any
Environmental Law by the Borrower or the Guarantor or any of their respective
agents, tenants, subtenants or invitees, and (v) any violation of the
representations and warranties set forth in Section 9.5 hereof or the covenant
set forth in Section 10.23 or Section 10.4 hereof (collectively, the
"Indemnified Matters").
(b) To the extent that (i) the undertaking to indemnify, pay, hold
harmless, protect and defend set forth in this Section 13 may be unenforceable
because it is violative of any Requirement of Law, Borrower and Guarantor,
jointly and severally, shall contribute to the payment and satisfaction of all
Indemnified Matters incurred by the Indemnitees the maximum portion which the
Borrower and/or the Guarantor are permitted to pay and satisfy under such
applicable Requirement of Law, and (ii) the Borrower, the Guarantor or any of
their respective agents, tenants, subtenants or invitees is strictly liable
under any applicable Requirement of Law, the Borrower's and/or the Guarantor's
obligation to each Indemnitee under this Section 13 shall be without regard to
fault on the part of the Borrower, the Guarantor or any of their respective
agents, tenants, subtenants or invitees with respect to such Requirement of Law
which results in liability to, or for which a claim has been asserted against,
any Indemnitee. Neither the Borrower nor the Guarantor shall have an obligation
to an Indemnitee under this Section 13 with respect to (A) taxes on or measured
by any Indemnitee's net income or (B) Indemnified Matters
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to the extent such Indemnified Matters were caused by or resulted from the gross
negligence or willful misconduct of such Indemnitee.
SECTION 14: AGENCY PROVISIONS
14.1 Authorization and Action. Each Bank hereby irrevocably appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement and the other Loan Documents as are delegated
to the Agent by the terms hereof, together with such powers as are reasonably
incidental thereto. The duties of the Agent shall be mechanical and
administrative in nature and the Agent shall not by reason of this Agreement be
a trustee or fiduciary for any Bank. The Agent shall have no duties or
responsibilities except those expressly set forth in the Loan Documents, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be imposed on the Agent under this Agreement or the other Loan
Documents. As to any matters not expressly provided for by this Agreement or the
other Loan Documents (including, without limitation, enforcement or collection
of the Notes), the Agent shall not be required to exercise any discretion or
take any action, but shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the
instructions of the Required Banks, and such instructions shall be binding upon
all Banks and all holders of Notes; provided, however, that the Agent shall not
be required to take any action which is not in writing, exposes the Agent to
personal liability or which is contrary to this Agreement or the other Loan
Documents or applicable law.
14.2 Liability of Agent. Neither the Agent nor any of its directors,
officers, agents or employees shall be liable for any action taken or omitted to
be taken by it or them under or in connection with any Loan Documents in the
absence of its or their own gross negligence or wilful misconduct. Without
limitation of the generality of the foregoing, the Agent (1) may treat the
payees of any Notes as the holder thereof until the Agent receives written
notice of the assignment or transfer thereof signed by such payee and in form
satisfactory to the Agent; (2) may consult with legal counsel (including counsel
for any Bank or the Borrower), independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (3) makes no warranty or representation to any Bank and
shall not be responsible to any Bank for any statements, warranties or
representations made in or in connection with any Loan Document; (4) shall not
have any duty to ascertain or to inquire as to the performance or observance of
any of the terms,
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covenants or conditions of any Loan Document on the part of the Borrower or the
Guarantor or any other Person or to inspect the property (including the books
and records) of the Borrower; (5) shall not be responsible to any Bank for the
due execution, (other than its execution of any applicable Loan Document)
legality, validity, enforceability, genuineness, perfection, sufficiency or
value of any of the Loan Documents or any other instrument or document furnished
pursuant thereto; (6) shall not have any duty to provide notice of any action or
the happening of any event, to the Borrower, the Guarantor or any Bank, except
as specifically set forth herein; and (7) shall incur no liability under or in
respect of any Loan Document by acting upon any notice, consent, certificate or
other instrument or writing (which may be by telegram, cable or telex) believed
by it to be genuine and signed or sent by the proper party or parties.
14.3 Rights of Agent as a Bank. With respect to its Commitment, the Loans
made by it and the Note issued to it, the Agent shall have the same rights and
powers under the Loan Documents as any other Bank and may exercise the same as
though it were not the Agent; and the term "Bank" or "Banks" shall, unless
otherwise expressly indicated, include the Agent in its individual capacity. The
Agent and its Affiliates may accept deposits from, lend money to, act as trustee
under indentures of, and generally engage in any kind of business with, the
Borrower, any of its Subsidiaries and any Person who may do business with or own
securities of the Borrower or any Subsidiary, all as if the Agent were not the
Agent and without any duty to account therefor to the Banks.
14.4 Independent Credit Decisions. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank and based on
such documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Bank also acknowledges
that it will, independently and without reliance upon the Agent or any other
Bank and based on such documents and information as it shall deem appropriate at
the time, continue to make its own credit decisions in taking or not taking
action under the Loan Documents. Except for notices, reports and other documents
and information expressly required to be furnished to the Banks by the Agent
under the terms of any of the Loan Documents, the Agent shall have no duty or
responsibility to provide any Bank with any credit or other information
concerning the affairs, financial condition or business of the Borrower or any
Subsidiary (or any of their Affiliates) which may come into the possession of
the Agent or any of its Affiliates.
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14.5 Indemnification. The Banks agree to indemnify the Agent (to the extent
not reimbursed by the Borrower), pro-rata, according to the respective amounts
of their Commitments, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by, or asserted against the Agent in any way relating to or arising out of any
of the Loan Documents or any action taken or omitted by the Agent under any of
the Loan Documents, provided that no Bank shall be liable for any portion of any
of the foregoing resulting from the Agent's gross negligence or wilful
misconduct. Without limitation of the foregoing, each Bank agrees to reimburse
the Agent (to the extent not reimbursed by the Borrower) promptly upon demand
for its pro-rata share of any out-of-pocket expenses (including counsel fees)
incurred by the Agent in connection with the preparation, administration, or
enforcement of, or legal advice in respect of rights or responsibilities under,
any of the Loan Documents.
14.6 Successor Agent. The Agent may resign at any time by giving at least
sixty (60) days prior written notice thereof to the Banks and the Borrower and
may be removed at any time with or without cause by the Required Banks. Upon any
such resignation or removal, the Required Banks shall have the right to appoint
a successor Agent. If no successor Agent shall have been so appointed by the
Required Banks, and shall have accepted such appointment, within thirty (30)
days after the retiring Agent's giving of notice of resignation or the Required
Banks' removal of the retiring Agent, then the retiring Agent may, on behalf of
the Banks, appoint a successor Agent, which shall be a commercial bank organized
under the laws of the United States of America or of any State thereof. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations under this Agreement.
After any retiring Agent's resignation or removal hereunder as Agent, the
provisions of this Section 14 shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Agent under any of the Loan Documents.
14.7 Sharing of Payments, Etc. If any Bank shall obtain any payment
(whether voluntary, involuntary, through the exercise of any right of set-off,
or otherwise) on account of the Notes held by all the Banks, such Bank shall
purchase from the other Banks such participations in the Notes held by them as
shall be necessary to cause such purchasing Bank to share the excess payment
pro-rata with each of them, provided, however, that if all or any portion of
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such excess payment is thereafter recovered from such purchasing Bank, such
purchase from each Bank shall be rescinded and each Bank shall repay to the
purchasing Bank the purchase price to the extent of such recovery together with
an amount equal to such Bank's pro-rata share (according to the proportion of
(i) the amount of such Bank's required repayment to (ii) the total amount so
recovered from the purchasing Bank) of any interest or other amount paid or
payable by the purchasing Bank in respect of the total amount so recovered. The
Borrower agrees that any Bank so purchasing a participation from another Bank
pursuant to this Section 14.7 may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of set-off) with respect
to such participation as fully as if such Bank were the direct creditor of the
Borrower in the amount of such participation.
14.8 Pro-Rata Treatment of Loans, Etc. (a) Except to the extent otherwise
provided, each borrowing under Section 2.2 shall be made from the Banks and each
reduction or termination of the amount of the Commitment pursuant to Section 5
shall be applied to the respective Commitments of each Bank, pro-rata according
to the amounts of their respective unused Commitments; and each prepayment and
payment of principal of or interest on Loans shall be made to the Agent for the
account of the Banks holding Loans pro-rata in accordance with the respective
unpaid principal amounts of such Loans held be such Banks.
(b) Following the occurrence of an Event of Default, any payments on the
Loans or interest thereon received by the Agent from the Borrower or the
Guarantors or from its realization on the Collateral shall (subject to Section
14.5) be allocated among the Banks holding the Loans and the Master Agreement
Obligations in accordance with the outstanding principal balance, or amounts due
under, the Loans and the Master Agreement Obligations held by the Banks
respectively.
14.9 Agency Fee. In consideration of services rendered hereunder and
pursuant to the other Loan Document in its capacity as Agent hereunder and
thereunder, the Borrower shall pay to the Agent an annual agency fee equal to
$15,000, with the next such payment being due and payable on December 16, 1999,
and subsequent payments due and payable on the anniversary date thereof.
14.10 Agent as Lender under Fleet Mortgage Loan. It is hereby acknowledged
that Fleet is the Lender under the Fleet Mortgage Loan and the Fleet Mortgage
may constitute a Lien on certain of the Collateral given hereunder (the "Fleet
Mortgage UCC Collateral"). Therefore, to the extent that any Fleet Mortgage UCC
Collateral would also be among the assets that are part of the Borrowing Base,
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Fleet hereby acknowledges that its Lien on any such collateral will be inferior
and subordinate to the Lien of the Agent for the ratable benefit of the Banks
hereunder. It is further acknowledged that any General Intangible specifically
related to the real property encumbered by the Fleet Mortgage (including,
without limitation, any insurance proceeds related to a casualty on such
property, condemnation awards or proceeds from the sale of said real property)
would not constitute part of the Borrowing Base and therefore not subject to the
subordination set forth above.
SECTION 15: GENERAL
15.1 Waiver; Amendments. No delay on the part of the Agent in the exercise
of any right, power or remedy shall operate as a waiver thereof, nor shall any
single or partial exercise by the Agent of any right, power or remedy preclude
other or further exercise thereof, or the exercise of any other right, power or
remedy. No amendment, modification or waiver of, or consent with respect to, any
provision of the Loan Documents shall in any event be effective unless the same
shall be in writing and signed and delivered by the Required Banks and the
Borrower (in the case of a document to which the Borrower is a party) and then
any such amendment, modification, waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given; provided,
however, that no amendment, modification, waiver or consent, shall, unless in
writing and signed by all Banks, do any of the following: (i) change the
Commitments of the Banks; (ii) reduce or increase the principal of, or interest
on, the Loan or any fees hereunder; (iii) extend any date fixed for any payment
of principal of, or interest on, or fees with respect to, the Loan; (iv) amend
the definition of the term "Required Banks" or "Borrowing Base"; (v) release any
Collateral (collectively, the "Material Changes"); or (vi) a general release of
the Borrower or any Guarantor from any of their respective obligations
hereunder. No Material Change shall, unless in writing and signed by the Agent
in addition to the Banks required above to take such action, affect the rights
or duties of the Agent under any of the Loan Documents. Notwithstanding the
foregoing or any other term or provision of this Agreement, in the event that
the Agent provides the Banks with written notice of any event, circumstance or
proposed amendment, modification or waiver of any provision of any Loan
Documents requiring the consent of the Required Banks hereunder, together with a
written statement of Fleet, as a Bank, of the action proposed to be taken with
respect to such consent, then if each other Bank fails to respond in writing to
any such notice by no later than fifteen (15) days after receipt thereof, then
each such other Bank shall be deemed to have consented to the action proposed
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to be taken by Fleet, and the Agent may unconditionally rely on any such deemed
consent in taking any action in furtherance thereof.
15.2 WAIVER OF TRIAL BY JURY. THE BORROWER, GUARANTOR, AGENT AND THE BANKS
MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A
TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE
EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS WAIVER
CONSTITUTES A MATERIAL INDUCEMENT FOR THE AGENT TO ACT AS AGENT HEREUNDER AND TO
ACCEPT THIS AGREEMENT AND FOR THE BANKS TO ACCEPT THIS AGREEMENT AND MAKE THE
LOANS.
15.3 Notices. Except as otherwise expressly provided herein, all notices
hereunder shall be in writing and shall be delivered by telecopier, hand,
overnight delivery or by mail. Notices given by mail shall be deemed to have
been given three (3) days after the date sent if sent by registered or certified
mail, postage prepaid, and:
(i) if to the Borrower and/or the Guarantor, to:
Suprema Specialties, Inc.
510 East 35th Street
Paterson, New Jersey 07543
Attn: President
(ii) if to the Agent or Fleet, to:
Fleet Bank, N.A.
208 Harrison Road
Glen Rock, New Jersey 07452
Attn: Edward J. Waterfield, Senior Vice President
(iii) if to Sovereign, to:
Sovereign Bank
901 West Park Avenue
Ocean, New Jersey 07712
Attn: Edward C. Gurskis, Senior Vice President
(iv) if to Mellon, to:
Mellon Bank, N.A.
Raritan Plaza I
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Raritan Center
Edison, New Jersey 08837
Attn: Russ J. Lopinto, Vice President
or in the case of any party, such other address as such party may, by written
notice, received by the other party to this Agreement, have designated as its
address for notices. Notices given by (i) telecopier shall be deemed to have
been given when sent, (ii) hand shall be deemed to have been given the same day
they have been sent and (iii) overnight delivery shall be deemed to have been
given the day after they have been sent, in each case if properly addressed to
the party to whom sent, at its address, as aforesaid. The Agent shall be
entitled to reasonably rely upon any telephonic notices purportedly given
pursuant to the terms of this Agreement and the Borrower and the Guarantor shall
hold the Agent harmless from any loss, cost or expense ensuing from any such
reliance.
15.4 Appointment as Attorney-in-Fact.
(a) Powers. In addition to the power of attorney granted to the Agent in
Section 10.12 hereof, the Borrower and the Guarantor, jointly and severally,
hereby irrevocably constitute and appoint the Agent with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Borrower and/or the Guarantor
and in the name of the Borrower and/or the Guarantor or in its own name, from
time to time in the Agent's discretion, for the purpose of carrying out the
terms of this Agreement, upon the occurrence and during the continuance of any
Event of Default to take any and all appropriate action and to execute any and
all documents and instruments which may be necessary or desirable to accomplish
the purposes of this Agreement and the security interests granted herein, and
without limiting the generality of the foregoing, the Borrower hereby gives the
Agent the power and right (but not the obligation), on behalf of the Borrower,
without notice to or assent by the Borrower, to do the following:
(i) in the case of any Account or any other Collateral in the name of the
Borrower or its own name, or otherwise, to open mail addressed to the Borrower,
to take possession of and endorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
Account, Instrument, General Intangible or contract right or with respect to any
other Collateral and to file any claim or to take any other action or proceeding
in any court of law or equity or otherwise deemed appropriate by the Agent for
the purpose of collecting any and all such moneys due under any such Account,
Instrument, General
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Intangible or contract right or with respect to any other Collateral whenever
payable;
(ii) to pay or discharge taxes and liens levied or placed on or threatened
against the Collateral, to effect any repairs or any insurance called for by the
terms of this Agreement and to pay all or any part of the premiums therefor and
the costs thereof; and
(iii) (A) to direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due thereunder
directly to the Agent or as the Agent shall direct; (B) to ask or demand for,
collect, receive payment of and receipt for, any and all moneys, claims and
other amounts due or to become due at any time in respect of or arising out of
any Collateral; (C) to sign and endorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications, notices and other documents in connection with any
of the Collateral; (D) to commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
collect the Collateral or any thereof and to enforce any other right in respect
of any Collateral; (E) to defend any suit, action or proceeding brought against
the Borrower and/or the Guarantor with respect to any Collateral; (F) to settle,
compromise or adjust any suit, action or proceeding described in clause (E)
above and in connection therewith, to give such discharges or releases as the
Agent may deem appropriate; and (G) generally, to sell, transfer, pledge and
make any agreement with respect to or otherwise deal with any of the Collateral
as fully and completely as though the Agent was the absolute owner thereof for
all purposes, and to do at the Agent's option and the Borrower's and/or the
Guarantor's expense, at any time, or from time to time, all acts and things
which the Agent deems necessary to protect, preserve or realize upon the
Collateral and the Liens granted hereunder and to effect the intent of this
Agreement, all as fully and effectively as the Borrower might do.
The Borrower and the Guarantor, jointly and severally, hereby ratify all that
said attorney shall lawfully do or cause to be done by virtue hereof. This power
of attorney is a power coupled with an interest and shall be irrevocable.
(b) Other Powers. The Borrower and the Guarantor, jointly and severally,
also authorize the Agent, at any time and from time to time, to execute, in
connection with the sale provided for in Section 12.3 hereof, any endorsements,
assignments or other
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instruments of conveyance or transfer with respect to the Collateral.
(c) No Duty on Agent's Part. The powers conferred on the Agent hereunder
are solely to protect its interests in the Collateral and shall not impose any
duty upon the Agent to exercise any such powers. Neither the Agent nor any of
its officers, directors, employees or agents shall be responsible to the
Borrower or the Guarantor for any act or failure to act hereunder, except for
their own gross negligence or willful misconduct.
15.5 Costs, Expenses and Taxes. The Borrower agrees to pay on demand all
out-of-pocket costs and expenses of the Agent and the Banks (including the
reasonable fees and out-of-pocket expenses of legal counsel for the Agent and
the Banks) in connection with the preparation, execution and delivery of the
Loan Documents, and all out-of-pocket costs and expenses (including reasonable
attorneys' fees and legal expenses) incurred by the Agent in connection with the
administration of this Agreement and the other Loan Documents and the
enforcement of the Loan Documents or any Collateral for any of the foregoing. In
addition, the Borrower agrees to pay, and to save the Agent harmless from all
liability for, any stamp or other taxes which may be payable in connection with
the execution or delivery of this Agreement, or the execution and delivery of
the Loan Documents. All obligations provided for in this Section 15.5 shall
survive any termination of this Agreement.
15.6 Captions; Section References. Section captions used in this Agreement
are for convenience only, and shall not be deemed to be a part of this
Agreement. Unless the context clearly indicates otherwise, all section reference
contained herein shall refer to the applicable section hereof.
15.7 Venue; Governing Law. The Loan Documents have been delivered to the
Agent, accepted by the Agent and executed in New Jersey and the Loan Documents
shall be governed by and construed by the laws of the State of New Jersey. The
Borrower and the Guarantor, jointly and severally, hereby irrevocably consent
and agree to the jurisdiction of the state and federal courts of New Jersey, and
further waive any and all obligations the Borrower may have to the venue of any
action, claim, proceeding or counterclaim in connection with the Loans being
paid or the Loan Documents in the Courts of New Jersey. The Borrower and the
Guarantor, jointly and severally, further agree that any such suit, claim or
other legal proceeding shall be brought in the courts of the State of New
Jersey. The provisions of this paragraph are a material inducement for the Agent
entering into this Agreement.
80
<PAGE>
15.8 Remedies. All obligations of the Borrower and rights of the Agent and
the Banks expressed herein, and in the Loan Documents, shall be in addition to
and not in limitation of those provided by applicable law.
15.9 Successors and Assigns. This Agreement shall be binding upon the
Borrower and the Guarantor and their respective successors, and assigns, and
upon the Agent and the Banks and their successors and assigns, and shall inure
to the benefit of the Borrower, the Guarantor, the Agent and the Banks and their
respective successors and assigns. However, neither the Borrower nor the
Guarantor may assign its rights or obligations under the Loan Documents and no
third party shall have any interest therein. Any Bank shall have the
unrestricted right at any time or from time to time, with the consent of the
Agent, not unreasonably withheld, and without the Borrower's or any Guarantor's
consent, to assign all or any portion of its rights and obligations hereunder to
one or more banks or other financial institutions (each, an "Assignee"), and the
Borrower and Guarantor agrees that they shall execute, or cause to be executed,
such documents, including without limitation, amendments to this Agreement and
to any other documents, instruments and agreements executed in connection
herewith as the Agent and/or the Banks shall deem necessary to effect the
foregoing. In addition, at the request of any Bank and any such Assignee, the
Borrower shall issue one or more new promissory notes, as applicable to any such
Assignee and, if such Bank has retained any of its rights and obligations
hereunder following such assignment, to such Bank, which new promissory notes
shall be issued in replacement of, but not in discharge of, the liability
evidenced by the Note held by such Bank prior to such assignment and shall
reflect the amount of the Loan held by such Assignee and such Bank after giving
effect to such assignment. Upon the execution and delivery of appropriate
assignment documentation, amendments and any other documentation required by any
Bank in connection with such assignment, and the payment by Assignee of the
purchase price agreed to by such Bank and such Assignee, such Assignee shall be
a party to this Agreement and shall have all of the rights and obligations of
such Bank hereunder (and under any and all other guaranties, documents,
instruments, and agreements executed in connection herewith) to the extent that
such rights and obligations have been assigned by such Bank pursuant to the
assignment documentation between the Bank and such Assignee, and such Bank shall
be released from its obligations hereunder and thereunder to a corresponding
extent. Any Bank may at any time pledge all or any portion of its rights under
the Loan Documents including any portion of the Note to any of the twelve (12)
Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12
U.S.C. Section 341. No such pledge or enforcement
81
<PAGE>
thereof shall release such Bank from its obligations under any of the Loan
Documents.
15.10 Participants. Any Bank shall have the right at any time and from time
to time, without the consent of or notice to the Borrower or Guarantor, but only
with the consent of the Agent, not unreasonably withheld, to grant to one or
more banks or other financial institutions (each, a "Participant") participating
interests in the Loans hereunder. In the event of any such grant by any Bank of
a participating interest to a Participant, whether or not upon notice to the
Borrower, such Bank shall remain responsible for the performance of its
obligations hereunder and the Borrower shall continue to deal solely and
directly with such Bank in connection with such Bank's rights and obligations
hereunder.
Any Bank may furnish any information concerning the Borrower in its
possession from time to time to prospective Assignees and Participants, provided
that such Bank shall require any such prospective Assignee or Participant to
agree in writing to maintain the confidentiality of such information.
15.11 Counterparts. This Agreement may be signed in counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
15.12 Survival. All representations and warranties of Borrower shall
survive the execution and delivery of this Agreement.
15.13 Most-Favored Status. In the event that the definitive documentation
executed and delivered in connection with the issuance and sale of the New
Senior Subordinated Notes or the incurrence of any other Indebtedness permitted
to be incurred pursuant to Section 10.20(vi) (such indebtedness, the "Specified
Indebtedness") (i) contain covenants or events of default that are more
restrictive or onerous on the Borrower than those covenants or events of default
contained in this Agreement; (ii) provide for, or permits the exercise of,
remedies upon the occurrence of an event of default thereunder (including,
without limitation, any direct or indirect acceleration of the obligations of
the Borrower thereunder) which are not provided for in, or permitted to be
exercised under of in respect of, this Agreement, or (iii) provide security or
other sources of payment for obligations of the Borrower under the Specified
Indebtedness which have not been provided hereunder or in connection herewith
(each such covenant, event of default and provision described in the preceding
clauses
82
<PAGE>
(i) through (iii) being herein called a "More Favorable Provision"), then prior
to or simultaneously with the Borrower entering into or becoming bound by any of
the documentation pertaining to the Specified Indebtedness or any amendment,
modification or supplement thereto containing a More Favorable Provision, the
Borrower shall execute and deliver to the Agent an amendment to this Agreement
and such other documents and instruments as the Agent shall reasonably request,
in each case satisfactory in form and substance to the Agent, which modify the
provisions of this Agreement so as to give the Agent and each Bank the benefit
of each More Favorable Provision.
15.14 Replacement Note. Upon receipt of an affidavit of an officer of any
Bank as to the loss, theft, destruction or mutilation of a Note or any other
security document which is not of public record, and, in the case of any such
loss, theft, destruction or mutilation, upon surrender and cancellation of such
Note or other security document, the Borrower will issue, in lieu thereof, a
replacement Note or other security document in the same principal amount thereof
and otherwise of like tenor.
15.16 Amended and Restated Agreement. This Agreement does not constitute a
cancellation or termination of the Original Loan Agreement as amended and
restated by the First Restated Loan Agreement and as further amended and
restated by the Second Restated Loan Agreement, as amended and modified. This
Agreement restates in its entirety those loan agreements, and the terms and
conditions of this Agreement supersede and replace the terms and conditions of
those loan agreements as of the date hereof.
15.17 References in Other Loan Documents. The Borrower and Guarantor
acknowledge and agree that any reference in any Loan Document to "the
Agreement", or words of like import shall mean this Agreement, and any reference
in any Loan Document to the Notes, the Loans, the loans in the amount of
$35,000,000 (or any other amount) or words of like import shall mean the Notes
and the Loans in the aggregate principal amount of $55,000,000, as such amount
may hereinafter be increased, extended, amended, modified or restated.
83
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first written above.
SUPREMA SPECIALTIES, INC.
("Borrower")
By: /s/ Mark Cocchiola
-------------------------------------
Name: Mark Cocchiola
Title: President
SUPREMA SPECIALTIES WEST, INC.
("Guarantor")
By: /s/ Mark Cocchiola
-------------------------------------
Name: Mark Cocchiola
Title: President
SUPREMA SPECIALITIES NORTHEAST,
INC. ("Guarantor")
By: /s/ Mark Cocchiola
-------------------------------------
Name: Mark Cocchiola
Title: President
FLEET BANK, N.A. ("Agent")
By: /s/ Edward J. Waterfield
-------------------------------------
Name: Edward J. Waterfield
Title: Senior Vice President
84
<PAGE>
FLEET BANK, N.A. ("Fleet")
By: /s/ Edward J. Waterfield
-------------------------------------
Name: Edward J. Waterfield
Title: Senior Vice President
SOVEREIGN BANK ("Sovereign")
By:
-------------------------------------
Name: Owen P. McKenna
Title: Vice President
MELLON BANK, N.A. ("Mellon")
By: /s/ Russ J. Lopinto
-------------------------------------
Name: Russ J. Lopinto
Title: Vice President
85
EXHIBIT 10.2
SECURED REVOLVING NOTE
$15,000,000 September 23, 1999
FOR VALUE RECEIVED, the undersigned, SUPREMA SPECIALTIES, INC., a
corporation duly organized and existing under the laws of the State of New York
(the "Borrower"), hereby unconditionally promises to pay to the order of Mellon
Bank, N.A. (the "Bank"), at the office of Fleet Bank, N.A., as Agent (the
"Agent"), having an address at 208 Harristown Road, Glen Rock, New Jersey 07452,
for the account of the Bank, on the Termination Date, the principal amount of up
to FIFTEEN MILLION 00/00 DOLLARS ($15,000,000.00) or, if less, the aggregate
unpaid principal amount of the Loans made by the Bank to the Borrower pursuant
to the Loan Agreement (as such term is defined below), together with interest on
the aggregate unpaid principal amount thereof.
This Note shall be governed by the terms and provisions of that certain
Third Amended and Restated Revolving Loan, Guaranty and Security Agreement dated
as of the date hereof between the Borrower, Suprema Specialties West, Inc., as a
guarantor, Suprema Specialties Northeast, Inc. as a guarantor (collectively,
Suprema Specialties West, Inc. and Suprema Specialties Northeast, Inc. are
referred to herein as the "Guarantors"), the Agent, the Bank, and certain other
banks parties thereto, as the same may be amended, supplemented, restated or
otherwise modified from time to time (the "Loan Agreement"). This Note shall be
entitled to the benefits of all of the terms and conditions of, and the security
of all security interests, liens and rights granted by Borrower and Guarantors
to the Agent for the benefit of the Bank under the Loan Agreement and the other
Loan Documents. All capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed to such terms in the Loan Agreement.
The Borrower shall pay interest to the Bank on the outstanding principal
balance of this Note at the Lending Rate. During any period in which an Event of
Default shall have occurred and be continuing, whether or not the maturity of
the Loans shall be accelerated, or after the Termination Date, the rate of
interest payable hereunder shall be the Default Rate, which is a per annum rate
equal to the Lending Rate plus an additional three percent (3%); provided, that
in no event shall any interest paid hereunder exceed the maximum rate permitted
by law.
<PAGE>
The Borrower shall pay the Bank all interest accrued on the Loans in
accordance with the Loan Agreement. Any payment not received within ten (10)
days of its due date shall be accompanied by a late charge of five percent (5%)
of the amount of such payment. The entire unpaid principal balance of this Note,
plus any accrued and unpaid interest, shall be due and payable on the
Termination Date. All such principal and interest shall be payable in lawful
currency of the United States of America in immediately available funds.
The Bank shall maintain in accordance with its usual practice an account or
accounts evidencing the indebtedness of the Borrower hereunder and the amount of
principal and interest payable and paid from time to time under the Loans. In
any legal proceeding relating to the Loans, the entries made in such account
shall be presumptive evidence of the existence and amounts of the obligations of
the Borrower therein recorded.
Upon the receipt of an affidavit of an officer of the Bank as to the loss,
theft, destruction or mutilation of this Note, and, in the case of any loss,
theft, destruction or mutilation, upon surrender and cancellation of this Note,
the Borrower will issue, in lieu thereof, a replacement note in the same
principal amount thereof and otherwise of like tenor.
In the event that any date for payment of interest or principal hereunder
is not a Business Day, such payment shall be due on the next succeeding day
which is a Business Day and interest shall accrue for such extension of time.
The Borrower shall further reimburse the Bank or any holder of this Note
for any loss or expense (including reasonable attorney's fees) which they may
sustain or incur as a consequence of the failure by the Borrower to honor its
obligations hereunder.
<PAGE>
No course of dealing between the Borrower and the Bank or any delay on the
part of the Bank in exercising any rights hereunder shall operate as a waiver of
any rights of any holder hereof. All the covenants, stipulations, promises and
agreements in this Note contained by or on behalf of the Borrower shall bind its
successors and assigns, whether so expressed or not. This Note shall be
construed in accordance with and be governed by the laws of the State of New
Jersey.
SUPREMA SPECIALTIES, INC.
By: /s/ Mark Cocchiola
----------------------------------
Name: Mark Cocchiola
Title: President
<PAGE>
SUPREMA SPECIALTIES, INC.
Schedule Attached to the Restated Secured Revolving Note of
Suprema Specialties, Inc. payable to the order of
___________
LOANS, INTEREST AND PRINCIPAL PAYMENTS
Loan Principal Interest Interest Paid Notation
Date Amount Balance Rate to Date Made By
- ---- ------ ------- ---- ------- -------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The aggregate unpaid principal amount shown on this schedule shall be rebuttable
presumptive evidence of the principal amount owing and unpaid on this Note. The
failure to record the date and amount of any Loan on this schedule shall not
however, limit or otherwise affect the obligations of the Borrower under the
Loan Agreement or under this Note to repay the principal amount of the Loans
evidenced by this Note together with all interest accruing thereon.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q AT
SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> SEP-30-1999
<CASH> 428,267
<SECURITIES> 0
<RECEIVABLES> 45,590,060
<ALLOWANCES> 570,290
<INVENTORY> 38,281,722
<CURRENT-ASSETS> 84,803,968
<PP&E> 7,172,751
<DEPRECIATION> 0
<TOTAL-ASSETS> 93,409,722
<CURRENT-LIABILITIES> 20,976,852
<BONDS> 0
<COMMON> 46,022
0
0
<OTHER-SE> 20,842,632
<TOTAL-LIABILITY-AND-EQUITY> 93,409,722
<SALES> 61,381,116
<TOTAL-REVENUES> 61,381,116
<CGS> 51,397,315
<TOTAL-COSTS> 51,397,315
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,259,690
<INCOME-PRETAX> 2,353,409
<INCOME-TAX> 940,000
<INCOME-CONTINUING> 2,540,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,413,409
<EPS-BASIC> .31
<EPS-DILUTED> .27
</TABLE>
